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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
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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 0-25456
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GLOBALSTAR TELECOMMUNICATIONS LIMITED
Cedar House
41 Cedar Avenue
Hamilton HM12, Bermuda
Telephone: (441) 295-2244
Jurisdiction of incorporation: Bermuda
IRS identification number: 13-3795510
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Securities registered pursuant to Section 12(g) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common stock, $1.00 par value....................................... Nasdaq National Market
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The registrant 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 and
has been subject to such filing requirements for the past 90 days.
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
contained in the registrant's 1997 definitive proxy statement.
As of February 21, 1997, there were 10,000,000 shares of Globalstar
Telecommunications Limited Common Stock outstanding, and the aggregate market
value of such shares (based on the closing price on the Nasdaq National Market)
held by non-affiliates of the registrant was approximately $522 million.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 1997 definitive proxy statement are
incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
GENERAL DESCRIPTION OF BUSINESS
On November 23, 1994, Globalstar Telecommunications Limited ("GTL" or the
"Company") was incorporated as an exempted company under the Companies Act 1981
of Bermuda. On February 14, 1995, GTL completed an initial public offering of
10,000,000 shares of common stock. Effective February 22, 1995, GTL purchased
10,000,000 ordinary partnership interests from Globalstar, L.P. ("Globalstar"),
a development stage limited partnership. At December 31, 1996, GTL had a 21.3%
ownership interest in the ordinary partnership interests of Globalstar, and its
sole business is acting as a general partner in Globalstar.
Globalstar was founded by Loral Corporation ("Old Loral") and QUALCOMM
Incorporated ("Qualcomm"). Effective April 23, 1996, a merger between Old Loral
and Lockheed Martin Corporation ("Lockheed Martin") was completed. In
conjunction with the merger, Old Loral's space and communications businesses,
including its direct and indirect interests in Globalstar, GTL, Space
Systems/Loral, Inc. ("SS/L") and other affiliated businesses, as well as certain
other assets and liabilities, have been transferred to Loral Space &
Communications Ltd. ("Loral"), a Bermuda company. Globalstar is a Delaware
limited partnership whose managing general partner is Loral/QUALCOMM Satellite
Services, L.P. ("LQSS"); the general partner of LQSS is Loral/QUALCOMM
Partnership, L.P. ("LQP"), a Delaware limited partnership comprised of
subsidiaries of Loral and Qualcomm. The managing general partner of LQP is Loral
General Partner, Inc., a Loral subsidiary.
Recent Developments
On February 13, 1997, Globalstar and GTL sold units consisting of $500
million aggregate principal amount of Globalstar's 11 3/8% Senior Notes due 2004
and warrants to purchase 1,032,250 shares of GTL common stock in a private
offering. The net proceeds of approximately $484 million will be used for the
construction and deployment of Globalstar's low-earth orbit satellite-based
digital telecommunications system (the "Globalstar System(TM)").
On February 12, 1997, GTL and the holders of warrants issued to guarantors
of Globalstar's Credit Agreement entered into an arrangement under which GTL
agreed to accelerate the vesting and exercisability of the warrants to purchase
4,185,318 shares of GTL common stock at $26.50 per share and the holders agreed
to exercise such warrants. GTL also agreed to register for resale the GTL common
stock issuable upon exercise of the warrants. In addition, GTL announced its
intention to distribute to the holders of its common stock rights to subscribe
for and purchase 1,131,168 GTL shares for a price of $26.50 per share. Loral
agreed to purchase all shares not purchased upon exercise of the rights. Upon
the exercise of the warrants and the rights, GTL will receive proceeds of
approximately $140.9 million, which it will use to exercise warrants to purchase
5,316,486 Globalstar ordinary partnership interests at $26.50 per interest.
Globalstar will use such proceeds for the construction of the Globalstar System.
BUSINESS SEGMENT
Globalstar plans to operate in one industry segment, telecommunications.
BUSINESS
BUSINESS OVERVIEW
The Globalstar System is designed to enable local service providers to
offer low-cost, high quality wireless voice telephony and data services in
virtually every populated area of the world. To date, Globalstar's designated
service providers have agreed to offer Globalstar service and seek to obtain all
necessary local regulatory approvals in more than 100 different nations,
accounting for approximately 88% of the world's population.
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The Globalstar System's worldwide coverage is designed to enable its
service providers to extend modern telecommunications services to millions of
people who currently lack basic telephone service and to enhance wireless
telecommunications in areas underserved or not served by existing or future
cellular systems, providing a telecommunications solution in parts of the world
where the build-out of terrestrial systems cannot be economically justified. The
Globalstar System has been designed to provide services at prices comparable to
today's cellular service and substantially lower than the prices announced by
Globalstar's anticipated satellite-based competitors. Globalstar service
providers will set their own retail pricing in their assigned service
territories and will pay Globalstar approximately $0.35 to $0.55 per minute on a
wholesale basis.
Globalstar users will make and receive calls through a variety of
Globalstar phones, including hand-held and vehicle-mounted units similar to
today's cellular telephones, fixed telephones similar either to phone booths or
ordinary wireline telephones, and data terminals and facsimile machines.
Dual-mode and tri-mode Globalstar Phones will provide access to both the
Globalstar System and the subscriber's land-based cellular service. Each
Globalstar Phone will communicate through one or more satellites to a local
Globalstar service provider's interconnection point (known as a gateway) which
will, in turn, connect into existing telecommunications networks.
As of February 1997, each of the elements of the Globalstar System -- space
and ground segments, digital communications technology, handset supply, service
provider arrangements and licensing -- is on schedule to begin launching
satellites in the second half of 1997, to commence commercial operations in the
second half of 1998 and to have a full constellation of 48 operational
satellites, plus eight in-orbit spares, launched by the end of 1998:
Space Segment. The first Globalstar satellite has been
fully-assembled and is now in pre-flight testing, and another four
satellites are currently being assembled. Production is proceeding on
schedule for the remaining satellites. Three different launch providers
have signed definitive agreements for the launch of the Globalstar
satellite constellation, providing a variety of launch options and
considerable launch flexibility. Mission operations preparations and launch
vehicle production and dispenser development are on schedule.
Ground Segment. The first four Globalstar gateways, which are
currently in advanced development and are to be located in Australia,
France, South Korea and the United States, are currently under
construction. These gateways will support Globalstar's data network,
monitor the initial launch and orbital placement of Globalstar's first
satellites, and serve as prototypes for production gateways that will
support Globalstar service. In addition, Globalstar's Satellite Operations
Control Center ("SOCC") facility has been completed.
Digital Communications Technology. Qualcomm's Code Division Multiple
Access ("CDMA") technology has now been successfully deployed in South
Korea, Hong Kong and cities in the United States supporting terrestrial
personal communications services ("PCS") and digital cellular service, and
its CDMA implementation for Globalstar has been successfully demonstrated
in a simulated satellite environment. This demonstration validated
Globalstar's encoding, modulation, control software, time and frequency
distribution and up/down links between satellites and handsets.
Handset Supply. Qualcomm and two other manufacturers, Ericsson and
TELITAL, are on schedule in their design and development of Globalstar's
handset.
Service Providers. Globalstar and its partners have been seeking
alliances with service providers throughout the world and have entered into
a number of agreements in specific territories. For example, in November
1996, ChinaSat, a subsidiary of China's Ministry of Posts and
Telecommunications, agreed to act as the exclusive distributor of
Globalstar services in China and to support four Globalstar gateways, the
first of which is expected to be operational by 1998. Globalstar has also
formed a joint venture with the principal Russian long distance carrier,
Rostelecom, to provide Globalstar service in that country and is
negotiating a service provider agreement with that joint venture.
Globalstar believes that these relationships with in-country service
providers will facilitate the granting of local regulatory
approvals--particularly where, as is the case in China, the service
provider and the licensing authority are one and the same--as well as
providing local marketing and technical expertise.
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Licensing. In January 1995, the Federal Communications Commission
("FCC") granted authority for the construction, launch and operation of the
Globalstar System and assigned spectrum for its user links. Later that
year, the 1995 World Radiocommunication Conference ("WRC95") allocated
feeder link spectrum on an international basis for mobile satellite
services ("MSS") systems such as Globalstar, and in November 1996 the FCC
authorized Globalstar's feeder links.
Globalstar has raised or received commitments for approximately $2.0
billion in equity, debt and vendor financing, representing 78% of the total
financing currently expected to be required to complete the system and to
achieve worldwide operations. As a result of several recent decisions designed
to assure and upgrade system performance and maintain schedule -- including
procurement of three launches on the Starsem Soyuz launch vehicle, additional
communications system integration testing procedures, development of additional
and enhanced service features, cost growth and other factors -- Globalstar
currently estimates the cost for the design, construction and deployment of the
Globalstar System, including working capital, cash interest on anticipated
borrowings and operating expenses, to be approximately $2.5 billion, as compared
with approximately $2.2 billion estimated at December 31, 1995. In addition,
Globalstar will purchase from SS/L eight additional spare satellites at a cost
of approximately $175 million.
The Globalstar System has been designed to address the substantial and
growing demand for telecommunications services worldwide, particularly in
developing countries. More than three billion people today live without
residential telephone service, many of them in rural areas where the cost of
installing wireline service is prohibitively high. Moreover, even where
telephone infrastructure is available in developing countries, outdated
equipment often leads to unreliable local service and limited international
access. The number of worldwide fixed phone lines has increased from 469 million
in 1988 to 753 million in 1996 and is projected to increase to 1.2 billion by
2002. Nonetheless, during the same period, waiting lists for fixed service have
increased from 30 million to 45 million, resulting in an average waiting time
before installation of approximately one and a half years. Similarly, the
cellular market has grown from four million worldwide subscribers in 1988 to an
estimated 123 million in 1996 and is projected to increase to 334 million by
2001. At that time, it is projected that only 40% of the world's population will
live in areas with cellular coverage. The remaining 60% of the world's
population will have access to wireless telephone service principally through
satellite-based systems like the Globalstar System. Globalstar believes that its
addressable market exceeds 30 million people.
The Globalstar System has been designed with attributes which Globalstar
believes compare favorably to other proposed global MSS systems including: (i)
Globalstar's unique combination of CDMA technology and path diversity through
multiple satellite coverage, which will reduce call interruptions and signal
blockage from obstructions and will use satellite power more efficiently; (ii) a
proven space segment design without complex intersatellite links or on-board
call processing and a ground segment with flexible, low-cost gateways and
competitively priced Globalstar Phones; (iii) lower average wholesale prices
than other proposed MSS systems; and (iv) gateways installed in most major
countries, minimizing tail charges (i.e. amounts charged by carriers other than
the Globalstar service provider for connecting a Globalstar call through its
network), resulting in low costs for domestic and regional calls, which will
account for the vast majority of Globalstar's anticipated usage.
Loral is a principal founder of Globalstar and, through a subsidiary, is
its managing general partner. Following the exercise of the warrants issued to
guarantors of Globalstar's credit agreement, Loral will have invested $269
million directly and indirectly in Globalstar and will own, directly or
indirectly, 33.8% of Globalstar, on a fully diluted basis.
Other Globalstar strategic partners include leading domestic and
international telecommunications service providers and space and
telecommunications equipment manufacturers who have invested an additional $210
million in equity and, together with Loral, committed or obtained $310 million
in vendor financing for Globalstar. In addition, Loral, Lockheed Martin and
certain strategic partners have guaranteed Globalstar's obligations under the
Globalstar credit agreement for which they received warrants to purchase GTL
common stock.
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GLOBALSTAR STRATEGIC PARTNERS
Globalstar has selected strategic partners whose marketing, operating and
technical expertise will enhance Globalstar's capabilities. These partners are
playing key roles in the construction, operation and marketing of the Globalstar
System. Globalstar's founding partners are Loral and Qualcomm, the leading
supplier of CDMA digital telecommunications technology. Globalstar's other
strategic partners are:
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TELECOMMUNICATIONS TELECOMMUNICATIONS EQUIPMENT
SERVICE PROVIDERS AND AEROSPACE SYSTEMS MANUFACTURERS
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- AirTouch - Alcatel
- Dacom - Alenia
- France Telecom - DASA
- Vodafone - Finmeccanica
- Hyundai
- SS/L
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SS/L is providing the system's satellites under a fixed-price contract that
also requires SS/L to obtain launch services and launch insurance. Qualcomm is
designing and will manufacture Globalstar Phones and gateways and certain ground
support equipment.
BUSINESS STRATEGY
Globalstar's strategy for successful operation is based upon: (i) providing
potential users worldwide with high quality telecommunications services, (ii)
employing a system architecture designed to minimize cost and technological
risks and (iii) leveraging the marketing, operating and technical capabilities
of its strategic partners.
WORLDWIDE HIGH QUALITY SERVICE
To achieve rapid and sustained customer acceptance of the system, the
Globalstar System has been designed to provide a high quality, worldwide service
that combines the best of existing cellular service with the technological
advantages of the Globalstar System as described herein to meet the needs of
individual end users.
Worldwide Coverage and Access. The Globalstar System's worldwide coverage
has been designed to enable its service providers to extend modern
telecommunications services rapidly and economically to significant numbers of
people who currently lack basic telephone services and to enhance wireless
telecommunications in areas underserved or not served by existing or
contemplated cellular systems. Globalstar expects to provide a communications
solution in parts of the world where the build-out of terrestrial systems cannot
be economically justified. The Globalstar System has also been designed to
enable international travelers to make and receive calls at a unique telephone
number through their mobile Globalstar Phone anywhere in the world where
Globalstar service is authorized by local regulatory authorities.
Multiple Satellite Coverage; Soft Handoff. CDMA digital communications
technology combined with continuous multiple satellite coverage and signal path
diversity (a patented SS/L method of signal reception not available to competing
systems) will enable the Globalstar System to provide service to a wide variety
of locations, with less potential for signal blockage from buildings, terrain or
other natural features. Globalstar Phones have been designed to operate with a
single satellite in view, although typically signals from two to four satellites
overhead will be combined to provide service. Therefore, the loss of an
individual satellite is not expected to result in any gap in global coverage.
Each mobile Globalstar Phone has been designed to communicate with as many as
three satellites simultaneously, combining the signals received to ensure
maximum service quality. As satellites are constantly moving in and out of view,
they will be seamlessly added to and removed from the calls in progress, thereby
reducing the risk of call interruption.
Superior Call Quality; Increased Privacy. Based on terrestrial simulations
of the Globalstar System, Globalstar expects that Qualcomm's CDMA digital
technology will enable Globalstar to provide digital voice
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services which will have clarity, quality and privacy similar to those of
existing digital land-based cellular systems. Qualcomm's CDMA technology, which
is available to Globalstar on an exclusive basis for commercial MSS
applications, has also been selected for digital cellular service by 12 of the
15 largest U.S. cellular service providers and the two largest holders of PCS
services in the U.S. (by population served).
Efficient Use of Satellite Resources. The Globalstar System's use of
multiple satellites to communicate with each Globalstar Phone (a patented SS/L
method of signal reception not available to competing systems) has been designed
to allow its communications signals to bypass obstructions. Path diversity is
expected to permit Globalstar to maintain its desired level of service quality
while using less power and satellite resources than would be required in a
system using single path satellites, which attempt to penetrate obstructions by
using higher single satellite power and overall higher link margins.
No Voice Delay. Globalstar satellites' low-earth orbit ("LEO") of 750
nautical miles is expected to result in no perceptible voice delay, as compared
with the noticeable time delay of calls utilizing geosynchronous satellites,
which orbit at an altitude of 22,500 nautical miles. Globalstar believes that
its system will also entail noticeably less voice delay than medium orbit MSS
systems and, in many cases, than LEO systems requiring on-board satellite call
processing to support satellite-to-satellite switching systems.
EMPLOYING A SYSTEM ARCHITECTURE DESIGNED TO MINIMIZE COST AND RISK
Simple, Cost-Effective System Architecture. To achieve low cost, reduce
technological risk and accelerate its deployment, Globalstar has devised a
system architecture using small satellites incorporating well-established design
features, and located the system's call processing and switching operations on
the ground, where they are accessible for maintenance and can benefit from
continuing technological advances. Hand-held and vehicle-mounted Globalstar
Phones are anticipated to be priced comparably and will be similar in function
to current digital cellular telephones. Dual-mode and tri-mode Globalstar Phones
will be able to access both Globalstar and a variety of local land-based analog
and digital cellular services, where available. Multiple manufacturers will be
licensed to manufacture Globalstar Phones in order to promote competition and
reduce prices. Globalstar gateways have been competitively priced in order to
encourage the placement of one or more gateways in each country served, thus
reducing tail charges for the terrestrial portion of each call.
Low-Cost Service. Globalstar intends to offer its service providers
effective average prices substantially lower than those announced by its
anticipated principal competitors. Globalstar's service providers will set their
own retail pricing and will pay to Globalstar wholesale prices generally
expected to range between $0.35 and $0.55 per minute. Another proposed
satellite-based system has proposed retail pricing of more than $3.00 per
minute. As a result of its pricing commitments to its service providers or as a
result of competitive pressures, Globalstar may not be in a position to pass on
to its service providers unexpected increases in the cost of constructing the
Globalstar System. However, Globalstar believes that its low system and
operating costs and high gross margins at target pricing and usage levels
provide it with substantial additional pricing flexibility if necessary to meet
competition.
Simple Space Segment of Proven Design. Globalstar believes its system will
cost less to design and construct and may be the first of the proposed worldwide
systems to provide commercial service. To achieve low cost, reduce technological
risk and accelerate deployment of the Globalstar System, Globalstar's system
architecture uses small satellites incorporating a well-established repeater
design that acts essentially as a simple "bent pipe," relaying signals received
directly to the ground. All of the system's call processing and switching
operations are on the ground, where they are accessible for maintenance and can
benefit from continuing technological advances. The Globalstar space segment is
being manufactured under a fixed-price contract with SS/L. The contract provides
for the construction of 56 satellites meeting designated performance
specifications and for SS/L to obtain launch services and launch insurance.
Flexible, Low-Cost Ground Segment. Globalstar has been designed to offer
local governments and service providers affordable telephone infrastructure
where the cost of build-out of land-based wireline or wireless telephone systems
is either too great or not economically justifiable. By purchasing a single
gateway for approximately $3 million to $8 million (depending on the capacity
desired), a service provider can extend basic telephone service to fixed
terminals on a national basis in countries as large as Saudi Arabia and mobile
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service to cover an area almost as large as Western Europe. As a result of the
low cost of its gateways, Globalstar expects that its service providers will
install gateways in most of the major countries in which they offer service.
Each country with a Globalstar gateway will have access to domestic service
without the imposition of international tail charges on in-country calls,
thereby offering subscribers the lowest possible cost for domestic calls, which
account for the vast majority of all cellular calls today.
Competitively Priced Globalstar Phones. Hand-held and vehicle-mounted
Globalstar Phones are anticipated to be priced comparably and will be similar in
function to current digital cellular telephones. Moreover, mobile Globalstar
Phones will use less power on average than conventional analog cellular
telephones and are therefore expected to enjoy longer battery life. Dual-mode
and tri-mode Globalstar Phones will be able to access both Globalstar and a
variety of local land-based analog and digital cellular services, where
available. Mobile and fixed Globalstar Phones are expected to cost less than
$750 each, and Globalstar public telephone booths are expected to cost between
$1,000 and $2,500, depending upon desired capacity and the number of units
sharing a fixed antenna. Qualcomm is required to license three additional
manufacturers of Globalstar Phones and has recently granted a license to each of
Ericsson and TELITAL for such purpose; Globalstar believes that licensing
multiple manufacturers will spur competition, which will reduce prices. As is
the case with many cellular systems today, service providers may subsidize the
cost of Globalstar Phones to generate additional usage revenue. In addition,
national and local governments may subsidize some or all elements of system
cost, particularly in rural areas, thereby reducing the cost of access to
subscribers.
LEVERAGING THE CAPABILITIES OF GLOBALSTAR'S STRATEGIC PARTNERS
Loral has overall management responsibility for the design, construction,
deployment and operation of the Globalstar System. Globalstar's strategic
partners will play key roles in the design, construction, operation and
marketing of the Globalstar System.
Telecommunications service providers AirTouch, Dacom, France Telecom and
Vodafone are providing in-country marketing and telephony expertise to
Globalstar. Globalstar's strategic partner service providers have been granted
exclusive rights to provide Globalstar service in 71 countries around the world
in which they have particular marketing strength and experience and access to an
established customer base of 60 million subscribers. Six additional service
providers have agreed to offer Globalstar service in 32 additional countries. To
maintain their service provider rights on an exclusive basis, these service
providers and additional service providers are required to make minimum payments
to Globalstar equal to 50% of target revenues. Based upon current targets (which
are subject to adjustment in 1998 based upon an updated market analysis), such
minimum payments total approximately $5 billion through 2005. In order to
accelerate the deployment of gateways around the world prior to the In-Service
Date, Globalstar and the service providers intend to jointly finance the
procurement of 33 gateways for resale to service providers. Globalstar expects
to recover its investment in this gateway financing program from such resales.
There can be no assurance that the service providers will elect to retain their
exclusivity and make such payments or place such orders for Globalstar Phones
and gateways.
Globalstar expects to add additional service providers in order to provide
coverage throughout the world. Each service provider will, subject to obtaining
required local regulatory approvals, market and distribute Globalstar service in
its designated territories and own and operate the gateways necessary to serve
its markets.
Telecommunications equipment and aerospace systems manufacturers SS/L,
Alcatel, Alenia, DASA, Finmeccanica and Hyundai have contracted to design, build
and deploy the Globalstar System. Qualcomm, using its CDMA technology, is
designing and will manufacture Globalstar Phones and gateways and has primary
responsibility, along with Globalstar, for the design and implementation of the
ground operations control centers ("GOCCs"). Qualcomm's CDMA technology is
available to Globalstar on an exclusive basis for commercial MSS satellite
applications. SS/L is performing under a fixed-price contract for the
construction of Globalstar's satellites in conjunction with its alliance
partners, Aerospatiale, Alcatel, DASA and Finmeccanica, and with Hyundai.
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THE GLOBALSTAR SYSTEM
Globalstar intends to offer low-cost, high quality telecommunications
services throughout the world. The Globalstar System will be comprised of its
48-satellite LEO constellation (together with eight in-orbit spare satellites)
and a Ground Segment consisting of two SOCCs and two GOCCs, Globalstar gateways
in each region served, and mobile and fixed Globalstar Phones. Globalstar will
own and operate the satellite constellation, the SOCCs and the GOCCs, as well as
four gateways; the remaining elements of the system will be owned by
Globalstar's service providers and their subscribers. The descriptions of the
Globalstar System are based upon current design and are subject to modification
in light of future technical and regulatory developments.
Globalstar Services and Globalstar Phones. Globalstar's most important
service will be voice telephony service, which Globalstar is expected to offer
through telephone booth-like installations and other fixed telephones located in
areas without any landline or cellular telephone coverage, and through hand-held
and vehicle-mounted Globalstar Phones, similar to existing cellular telephones.
Globalstar is also expected to offer paging, facsimile and messaging services
and position location capabilities, which may be integrated with its voice
services or marketed separately, as well as environmental and asset monitoring
from remote locations and other forms of data transmission.
Voice Services
Based on terrestrial simulations of the Globalstar System, Globalstar
expects that its digital voice services will have clarity, quality and privacy
similar to those of existing digital land-based cellular systems. Moreover, the
system has been designed to minimize call interruptions ("dropped calls")
resulting from movements on the part of the user or the satellites. Globalstar
is expected to offer the full range of voice services provided by modern
land-based telephone networks, including options such as call forwarding,
conferencing, call waiting, call transfer and reverse charging ("collect
calls"). Globalstar's voice services will be digital in nature and therefore
difficult for unauthorized listeners to intercept and decode and, as a result,
will be more secure than those offered by analog systems such as existing
cellular telephones. The Globalstar System will function best when there is an
unobstructed line-of-sight between the user and one or more of the Globalstar
satellites overhead. Competing systems without Globalstar's path diversity
depend on each user maintaining contact with a single satellite. Obstacles such
as buildings, trees or mountainous terrain may degrade service quality, more so
than would be the case with terrestrial cellular systems, and service may not be
available in the core of high-rise buildings.
By planning for volume production and utilizing commercially available
off-the-shelf components where possible, Globalstar expects that its Globalstar
Phones, unlike those of certain other proposed MSS systems, will be priced
comparably to current state-of-the-art digital cellular telephones. Qualcomm has
agreed to design and manufacture a number of versions of Globalstar Phones. It
has granted a license to manufacture Globalstar Phones to each of Ericsson and
TELITAL and has agreed to license at commercially reasonable royalty rates at
least one additional qualified Globalstar Phone manufacturer.
Fixed Globalstar Phones for No-Telephone Areas. The majority of the
world's population does not have access to any of the basic telephone services
that are available to most residents of developed nations. Public installations
of one or more Globalstar Phones, configured as telephone booths and powered by
local generators or solar panels connected to a directional antenna aimed at the
satellites overhead, would be important resources for remote villages currently
lacking basic telephone service. Government officials, among other individuals,
as well as commercial enterprises in remote areas such as mining and logging
operations, are expected to utilize fixed Globalstar Phones which will operate
like landline telephones, but will be connected to directional Globalstar
antennas. Directional antennae also provide for more efficient use of the
system's capacity.
Mobile Globalstar Phones for No-Cellular Areas. In certain regions,
land-based cellular systems cannot be economically justified because of their
population density or geographic characteristics. As a satellite-based system
with worldwide coverage, Globalstar can efficiently offer both hand-held and
vehicle-mounted mobile service in these areas through its single-mode mobile
Globalstar Phones. These units are expected to be
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similar in function and cost to today's full-featured cellular telephones.
Unlike any cellular telephone in existence today, however, these units will have
the ability to operate (both for making and receiving calls) in virtually every
inhabited area of the world where Globalstar service is authorized.
Globalstar mobile terminals will all be equipped with omnidirectional
antennas, similar to cellular telephone antennas, that connect equally well
regardless of the direction in which they are pointed. Each mobile terminal will
communicate with all satellites in view and will have the built-in signal
processing intelligence to constantly seek out and select the strongest signal
transmitted from overhead, combining the signals received to ensure maximum
service quality. Further, Globalstar Phones will automatically vary their power
output as necessary to maintain call quality and connectivity. As a result of
this efficiently-managed power system, mobile Globalstar Phones are expected to
draw less power, on average, than conventional cellular telephones and are
therefore expected to enjoy longer battery life.
Dual-Mode and Tri-Mode Globalstar Phones for Local and Global
Roaming. Current cellular system subscribers who need a mobile telephone that
also works when they travel to areas without compatible cellular coverage (or
that have no cellular coverage at all) will be offered Globalstar service
through dual-mode and tri-mode handsets and vehicle-mounted units. Dual-mode and
tri-mode telephones will also permit the user to access Globalstar service when
cellular access is temporarily blocked by interference, terrain or
over-capacity. Like Globalstar's single-mode mobile telephones, dual-mode and
tri-mode telephones will enable the user to make and receive calls through a
unique access number anywhere in the world where service is authorized.
Dual-mode and tri-mode Globalstar Phones can be programmed by the service
provider to automatically utilize the chosen land-based cellular service
whenever it is available and to otherwise process the call through Globalstar;
they can also be programmed for manual selection between Globalstar and the
land-based cellular system. Dual-mode and tri-mode Globalstar Phones are being
developed for the most widely-based conventional cellular modulation. The
dual-mode pairs are expected to include: Globalstar/CDMA, Globalstar/Advanced
Mobile Phone Systems (AMPS) and Globalstar/Global System for Mobile
Communications (GSM).
Other Services
Messaging and Paging Services. In addition to supporting voice services,
the Globalstar System is also expected to function as a worldwide paging and
alphanumeric messaging service. Hand-held or vehicle-mounted Globalstar Phones
are currently being designed with a built-in paging and messaging feature that
allows the user to receive a page or a short alphanumeric message while the unit
is in a very-low-power "quiet listening only" mode. Separate Globalstar
messaging and paging units may also be developed by Globalstar or by third party
vendors. The Globalstar System can readily support these functions without
taxing system resources since, as compared with voice services, messages and
pages have a relatively low data content and do not require instantaneous,
two-way transmission.
Remote Monitoring. Globalstar data terminals integrated with automatic
sensing equipment of various kinds can provide a continuous stream of valuable
information concerning natural events such as weather conditions, seismic shifts
and forest fires, as well as the condition of remote assets, such as oil and gas
pipelines and electric utility transmission lines.
Facsimile and Other Data Services. The Globalstar System is expected to
support fax traffic, as well as transmissions of digital computer data.
Position Location. Frequent, accurate readings of position location for
large numbers of vehicles is critical information for the efficient management
of fleets of trucks and railcars. Qualcomm's OmniTRACS system, which relays
position location information to a central location and offers messaging
capabilities, is expected to be deployed on the Globalstar System and offered to
Globalstar service providers to address this need.
8
<PAGE> 10
SATELLITE CONSTELLATION
Globalstar service will be delivered through a constellation of 48 small,
low-cost LEO satellites orbiting the earth in eight circular inclined planes
with six satellites per plane which will provide a clear communications link
with the Globalstar Phones and gateways below. Each satellite will transmit 16
spot beams, which will generate coverage cells on the surface of the Earth for
links between users and gateways via the satellites. Each satellite's coverage
area will have a typical diameter of 3,600 miles on the Earth's surface,
resulting in an average area covered per satellite of approximately ten million
square miles, an area larger than the area of China or the United States. Each
spot beam will cover an average area of approximately 600,000 square miles, an
area larger than that of any state in the United States or any country in
Western Europe.
Path Diversity from Multiple Satellites. The satellite constellation will
orbit the Earth in a coordinated pattern 750 nautical miles above the surface of
the Earth designed to provide users with continuous overlapping coverage from
multiple satellites with diverse angles of view or "path diversity." The
satellites will provide multiple-satellite global coverage in all areas of the
world except for a small portion of the polar regions. This constellation and
orbital plane design is expected to improve service quality significantly
relative to current analog systems.
LEO satellites are in constant motion overhead, relative to a user on the
Earth's surface, and, as a result, the beam from the satellite transmitting a
call could be blocked at any time by a building or natural obstruction, placing
the user in the beam's shadow and interfering with or interrupting the call.
Similar effects may occur when a mobile user changes position. Globalstar Phones
can operate with a single satellite in view, although typically two to four
satellites will be overhead. This supports the benefits of path diversity for
mobile terminals and also means that, in contrast to medium-earth orbit ("MEO")
systems with fewer satellites and competing LEO systems lacking this feature,
the loss of individual satellites will usually not result in gaps in global
coverage. Globalstar's mobile terminals are designed to communicate with as many
as three satellites simultaneously, combining the signals received to provide
improved call quality and, when another satellite moves into an optimal
position, reliably "handing off" the call to such satellite without
interruption. This combination of path diversity and CDMA is a patented SS/L
technology designed to minimize call fading, resulting in fewer dropped calls
and higher overall call quality.
Low-Cost Satellites. Globalstar has chosen a satellite architecture
designed to offer reliable, high quality service and minimize technological
risks. Globalstar's satellites will incorporate a repeater design which will act
essentially as a "bent pipe," relaying received signals directly to the ground.
This design follows the proven philosophy used in all commercial communications
satellites currently in operation. Globalstar's call processing and switching
operations are on the ground, where they are accessible for maintenance and can
benefit from continuing technological advances. By contrast, competing systems
whose satellites switch calls in space from satellite to satellite require
on-board digital signal processing. Globalstar believes that this design results
in higher system costs and precludes the accessible maintenance and easy upgrade
to reflect technological advances which Globalstar can accomplish on the ground
without a need to launch replacement satellites. Globalstar also believes that
such systems' inherent ability to switch international calls in space, bypassing
local service providers, many of which are state-owned, may limit their
desirability in the eyes of some local regulatory authorities.
In addition to improving Globalstar's service quality, CDMA technology has
enabled Globalstar to reduce satellite costs. Because Globalstar's spectrum
modulation technology uses code division, rather than time division, to identify
and process signals, its transmission timing and orbital pathways need not be so
precisely controlled. Globalstar believes that the novel satellite crosslink and
time division multiple access ("TDMA") duplexing technology proposed by a
competitor requires additional power, transmission, timing and station-keeping
capabilities which Globalstar believes have contributed to that competitor's
higher total system cost.
No Perceptible Voice Delay. Globalstar expects that its combination of a
low-earth orbit and simple repeaters will reduce voice delays over its system to
between 150 and 200 milliseconds, a delay which is not perceptible to the
subscriber in a normal phone conversation. Voice delays are comprised of a
propagation delay, as signals move from the Earth to the satellite and back, and
processing delays on-board the satellite. By
9
<PAGE> 11
contrast, geosynchronous satellite communications entail a noticeable voice
delay of approximately 600 milliseconds. Globalstar expects, based on its own
analysis, that MEO systems such as TRW, Inc.'s Odyssey system ("Odyssey") and
Global Communications' ICO system ("ICO") may entail voice delays of between 250
and 300 milliseconds. Although a proposed TDMA system will have an orbit lower
than Globalstar's, thus reducing propagation delay somewhat, Globalstar believes
that in most cases this advantage will be more than offset by the additional
processing delay entailed by the proposed TDMA system's need to decode, recode,
perform echo cancellation and otherwise process signals in space and the need,
in many cases, for satellite-to-satellite linkages, with additional on-board
processing at each step. However, quality differentials may not be of
significant competitive importance in communications markets in developing
countries that currently lack even basic telephone coverage.
Constellation Life. The satellites in the first-generation constellation
are designed to operate at full performance for a minimum of 7 1/2 years, after
which time the cumulative effects of the space environment are expected to
gradually reduce operating performance. The constellation has been designed so
that the loss of a few satellites will, in most cases, not result in gaps in
global coverage. In order to provide additional assurance of system integrity in
the event of premature satellite failure, however, Globalstar plans to launch
eight spare satellites to be relocated in space as required.
Depending on the level of demand for services and the remaining effective
capacity of the first-generation constellation, a second generation of
satellites will be designed, built and launched. Globalstar currently expects to
place a second-generation constellation in service in 2004 and 2005. While the
precise technical capabilities and costs of the second generation of Globalstar
satellites cannot be currently foreseen, the second-generation constellation may
be designed with significantly greater call capacity than the first. In
connection with such an increase in call capacity, Globalstar may be required to
seek additional spectrum allocations from the applicable regulatory authorities.
There is no assurance that such spectrum, if requested, would be obtained.
Implementation and operation of a second-generation system will also require
obtaining U.S. and other regulatory authorizations, and there is no assurance
that these authorizations, if requested, would be obtained.
The Ground Segment
Globalstar's SOCCs will track and control the satellite constellation using
telemetry and command units located in various gateways around the world and
telemetry stations in two locations, at least one of which will be in the United
States. The SOCCs will control satellite orbit positioning, maneuvers and
station keeping, and will monitor satellite health and status in all subsystems.
The SOCCs will also plan and implement satellite lifecycle maintenance
procedures, including orbit adjustment maneuvers.
The GOCCs, which will be in continuous operation 24 hours a day, will be
responsible for planning and controlling satellite utilization by gateway
terminals and coordinating information received from the SOCCs. In addition to
these planning functions, the GOCCs will be responsible for monitoring system
performance, collecting information for billings to service providers and
ensuring that the gateways do not exceed allocated system capacity. The GOCCs
will be responsible for dynamically allocating system capacity among nearby
regions to optimally service changing patterns of demand. The primary SOCC and
primary GOCC will be located at Globalstar's headquarters, with backup
facilities at another location.
The gateway stations are the interconnection points between the Globalstar
satellite constellation and existing land-based telecommunications networks.
Each gateway will contain up to four tracking antennas and radio frequency front
ends that track the satellites orbiting in their view. A typical gateway is
expected to cost between $3 million and $8 million, depending upon the number of
subscribers being serviced by the gateway and assuming that the gateway will be
located at the site of an existing cellular or other appropriate
telecommunications switch. Each nation with at least one gateway within its
borders will have complete control over system access by users within its
territory. A single gateway is expected to be able to provide fixed coverage
over an area larger than Saudi Arabia and mobile coverage over an area almost as
large as Western Europe. As a result of the low cost of its gateways, Globalstar
expects that its service providers will install gateways in most of the major
countries in which they offer service. Each country with a Globalstar gateway
10
<PAGE> 12
will have access to domestic service without the imposition of international
tail charges, thereby offering subscribers the lowest possible cost for domestic
calls, which account for the vast majority of all cellular calls today. Full
global land-based coverage of virtually all inhabited areas of the globe could
theoretically be achieved with as few as 80 gateways. Globalstar believes,
however, that as many as 100 gateways may be required to minimize land-based
long-distance charges and to respect national boundaries.
Although Globalstar has commissioned the design of the gateways to be used
with the Globalstar System, ownership and operation of the gateways will be the
responsibility of service providers in each country or region in which
Globalstar operations are authorized. The gateway stations will be designed for
Globalstar by Qualcomm and manufacturing rights will be licensed by Qualcomm to
at least one third-party telecommunications equipment manufacturer. Globalstar
will acquire four pre-production gateways from Qualcomm. Further, in order to
accelerate the deployment of gateways around the world prior to the In-Service
Date, Globalstar, Qualcomm and the strategic service providers jointly intend to
finance 33 gateways for resale to service providers.
GLOBALSTAR SYSTEM CAPACITY
The estimated capacity of the Globalstar System is anticipated to be in the
range of approximately 800 million to 1 billion call minutes per month assuming
equal fixed and mobile usage. However, Globalstar's total effective system
capacity will depend on a number of variables. The number of call minutes per
month the system can support will depend primarily on (i) the total bandwidth
available to CDMA MSS systems, (ii) the number of systems sharing that
bandwidth, (iii) the total number of subscribers, (iv) the type of Globalstar
Phones (fixed or mobile) they use and (v) the level of average system
availability required. Capacity will also depend upon a number of other
variables, including (i) the peak hour system utilization pattern, (ii) average
call length and (iii) the distribution of Globalstar Phones in use over the
surface of the Earth.
COMPETITION
Competition in the telecommunications industry is intense, fueled by rapid
and continuous technological advances and alliances between industry
participants on an international scale. Although no present participant is
currently providing the same global personal telecommunications service proposed
by Globalstar, it is anticipated that one or more additional competing MSS
systems will be launched and that the success, or anticipated success, of
Globalstar and its competitors could attract other entrants. If any of
Globalstar's competitors succeed in marketing and deploying its system
substantially earlier than Globalstar, Globalstar's ability to compete in areas
served by such competitor may be adversely affected. A number of satellite-based
telecommunications systems not involved in the MSS proceeding have also been
proposed using geosynchronous satellites and, in one case, the 2 GHz band for a
MEO system.
Globalstar's most direct competitors are the two other MSS applicants which
received FCC licenses, Iridium and Odyssey. ICO was not an applicant or a
licensee in the MSS Proceeding or any other proceedings before the FCC; it is
seeking to operate in a different frequency band not available for use by MSS
systems under current international guidelines in place until 2000. Comsat, the
U.S. signatory to Inmarsat, has applied to the FCC to participate in the
procurement of facilities of the system proposed by ICO. It has also sought FCC
approval of a proposal to extend the scope of services provided by Inmarsat,
currently limited to maritime services, to include telecommunication services to
land-based mobile units. These applications are currently pending before the
FCC. Comsat has been instructed in the past by the U.S. government to seek to
ensure that ICO does not receive preferred access to any market and that
nondiscriminatory access to such areas for all mobile satellite communications
networks be established, subject to spectrum coordination and availability.
Nonetheless, because ICO is affiliated with Inmarsat and because its investors
include the state-owned telecommunications monopolies in a number of countries,
there can be no assurance that ICO might not be given preferential treatment in
the local licensing process in those countries. It is also possible that one or
more of the two pending MSS applicants will demonstrate financial qualifications
sufficient to obtain an FCC license and become a competitor of Globalstar.
Although Iridium has announced plans to launch its first
11
<PAGE> 13
satellites within the upcoming months, Globalstar does not believe that Iridium
will be in service substantially earlier than Globalstar's In-Service Date.
Geostationary-based satellite systems, including American Mobile Satellite
Corporation ("AMSC"), Asia Pacific Mobile Telecom ("APMT"), Afro-Asia Satellite
("ASC"), PTAsia Cellular Satellite ("ACeS"), Lockheed Martin's Satphone and
Comsat's Planet-1, plan to provide satellite-based telecommunications services
in areas proposed to be serviced by Globalstar. Certain of these systems are
being proposed by governmental entities. Because some of these systems involve
relatively simple ground control requirements and are expected to deploy no more
than two satellites, they may succeed in deploying and marketing their systems
before Globalstar. In addition, coordination of standards among regional
geostationary systems could enable these systems to provide worldwide service to
their subscriber base, thereby increasing the competition to Globalstar.
It is expected that as land-based telecommunications service expands to
regions currently not served by wireline or cellular services, demand for
Globalstar service in those regions may be reduced. If such systems are
constructed at a more rapid rate than that anticipated by Globalstar, the demand
for Globalstar service may be reduced at rates higher than those assumed by
Globalstar. Globalstar may also face competition in the future from companies
using new technologies and new satellite systems. New technology could render
Globalstar obsolete or less competitive by satisfying consumer demand in
alternative ways, or through the introduction of incompatible telecommunications
standards. A number of these new technologies, even if they are not ultimately
successful, could have an adverse effect on Globalstar as a result of their
initial marketing efforts. Globalstar's business would be adversely affected if
competitors began operations or expanded existing operations in Globalstar's
target markets before completion of its system.
RESEARCH AND DEVELOPMENT
Globalstar has entered into a contract with Qualcomm whereby Qualcomm is
performing certain development tasks related to the Globalstar System. In
addition, Globalstar is performing certain in-house engineering tasks that are
classified as development costs. Total development expenses incurred for the
years ended December 31, 1996 and 1995 and the period from March 23
(commencement of operations) to December 31, 1994 were $42 million, $63 million
and $21 million, respectively.
PATENTS AND PROPRIETARY RIGHTS
In connection with the Globalstar System, Globalstar's design and
development efforts have yielded ten patents issued and 22 patents pending in
the United States, as well as four patents issued and more than 130 patents
pending internationally for various aspects of communication satellite system
design and implementation of CDMA technology relating to the Globalstar System.
Qualcomm has obtained 87 issued patents and 251 patents pending in the United
States applicable to Qualcomm's implementation of CDMA. The issued patents
cover, among other things, Globalstar's process of combining signals received
from multiple satellites to improve the signal received and minimize call
fading.
There can be no assurance that any of the pending patent applications by
Globalstar will be issued. Moreover, because the U.S. patent application process
is confidential, there can be no assurance that third parties, including
competitors of Globalstar, do not have patents pending that could result in
issued patents which Globalstar would infringe. In such an event, Globalstar
could be required to redesign its system or satellite, as the case may be, or
pay royalties to obtain a license, which could increase cost or delay
implementation of the system or construction of the satellite, as the case may
be.
EMPLOYEES
As of December 31, 1996, Globalstar had approximately 140 full-time
employees, none of whom is subject to any collective bargaining agreement.
12
<PAGE> 14
ITEM 2. PROPERTIES
Globalstar leases approximately 56,000 square feet of office space in San
Jose, California. The lease expires in August 2000, and has options to renew for
up to an additional ten years. In addition, Globalstar leases 12,000 square feet
for its back-up GOCC in El Dorado Hills, California. The lease expires in
November 2006 and has options to renew for up to an additional six years.
Globalstar believes that its facilities are adequate for its current level of
business.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
(A) MARKET PRICE AND DIVIDEND INFORMATION
GTL's common stock is traded on the Nasdaq National Market ("NNM") under
the symbol "GSTRF". The following table sets forth, for each of the periods
indicated, the high and low sales prices per share of common stock as reported
on the NNM.
<TABLE>
<CAPTION>
MARKET PRICE
-----------------------------
1996 1995
------------ ------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
Quarter ended:
March 31, (February 14, 1995 to March 31, 1995)........ $65 3/4 $32 $20 1/2 $14 1/4
June 30,............................................... 59 3/4 41 7/8 16 11 1/2
September 30,.......................................... 52 31 24 13 1/8
December 31,........................................... 72 47 1/4 38 1/2 17 3/4
</TABLE>
GTL has not declared or paid any cash dividends on its common stock, and
Globalstar has not made any distributions on its ordinary partnership interests.
Except for interest payments by GTL on its Convertible Preferred Equivalent
Obligations and distributions by Globalstar on its redeemable preferred
partnership interests, GTL and Globalstar do not currently anticipate paying any
such dividends or distributions (other than to the extent that Globalstar's
payment of GTL's operating expenses related to Globalstar would be treated as a
distribution) prior to Globalstar's Full Constellation Date and achievement of
positive cash flow, which is not expected to occur until 1999. GTL is prohibited
from paying dividends on its common stock as long as any interest arrears remain
outstanding on its Convertible Preferred Equivalent Obligations. GTL is a
holding company, the sole asset of which is its partnership interests in
Globalstar; GTL has no independent means of generating revenues. Globalstar will
pay GTL's operating expenses related to Globalstar; such expenses are not
expected to be material. To the extent permitted by applicable law and
agreements relating to indebtedness, Globalstar intends to distribute to its
partners, including GTL, its net cash received from operations, less amounts
required to repay outstanding indebtedness, satisfy other liabilities and fund
capital expenditures and contingencies (including funds required for design,
construction and deployment of the second-generation satellite constellation).
The Globalstar Credit Agreement and the indenture related to the $500 million
Senior Notes restrict the ability of Globalstar to pay cash distributions on its
ordinary partnership interests. Cash distributions by Globalstar may also be
restricted by future debt covenants. GTL intends to promptly distribute as
dividends to the holders of its common stock the distributions made to it by
Globalstar, less any amounts required to be retained for the payment of taxes,
for repayment of any liabilities, and to fund contingencies.
(B) APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK
At February 21, 1997, there were approximately 390 holders of record of
GTL's common stock.
13
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data has been derived from, and should be read in
conjunction with the related financial statements.
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Equity in net loss of Globalstar, L.P................ $ 15,080 $ 12,632
Net loss............................................. 15,080 12,632
Net loss per share................................... 1.51 1.26
CASH FLOW DATA:
Used in operating activities......................... -- --
Used in investing activities......................... (299,500) (185,750)
Provided by equity transactions...................... -- 185,750
Provided by borrowings............................... 299,500 --
Ratio of Earnings to Fixed Charges..................... 1x N/A
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995 1994
---------- ---------- ------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Investment in Globalstar, L.P........................ $ 482,676 $ 173,118 $ --
Total assets......................................... 482,676 173,118 190
Convertible preferred equivalent obligations......... 300,358 -- --
Shareholders' equity................................. 180,639 173,118 124
Shareholders' equity per share....................... 18.06 17.31 10.33
</TABLE>
14
<PAGE> 16
GLOBALSTAR, L.P.
(In thousands, except per partnership interest amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 CUMULATIVE
---------------------------------
PRE-CAPITAL
SUBSCRIPTION PERIOD(1) MARCH 23 MARCH 23, 1994
--------------------------- (COMMENCEMENT YEARS ENDED DECEMBER (COMMENCEMENT
YEAR ENDED JANUARY 1 TO OF OPERATIONS) TO 31, OF OPERATIONS) TO
DECEMBER 31, MARCH 22, DECEMBER 31, --------------------- DECEMBER 31,
1993 1994 1994 1995 1996 1996
------------ ------------ ----------------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................ -- $ -- $ -- $ -- $ -- $ --
Operating expenses.............. 11.510 6,872 28,027 80,226 61,025 169,278
Interest income................. -- -- 1,783 11,989 6,379 20,151
Net loss applicable to ordinary
partnership interests......... 11,510 6,872 26,244 68,237 71,969 166,450
Net loss per weighted average
ordinary partnership
interest outstanding.......... 0.73 1.50 1.53
Cash distributions per ordinary
partnership interest.......... -- -- --
OTHER DATA:
Deficiency of earnings to cover
fixed charges(2).............. N/A N/A 71,969
CASH FLOW DATA:
Used in operating activities.... -- -- (23,052) (38,368) (46,622) (108,042)
Used in investing activities.... -- -- (50,549) (280,345) (384,264) (715,158)
Provided by partners' capital
transactions.................. -- -- 147,161 318,630 284,714 750,505
Provided by (used in) other
financing activities.......... -- -- -- (1,875) 95,750 93,875
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................................. $ 21,180 $ 71,602 $ 73,560
Working capital............................................................ (53,481) 17,687 35,423
Globalstar System under construction....................................... 891,033 400,257 71,996
Total assets............................................................... 942,913 505,391 151,271
Vendor financing liability................................................. 130,694 42,219 --
Borrowings under long-term revolving credit facility....................... 96,077 -- --
Redeemable preferred partnership interests................................. 302,037 -- --
Ordinary partners' capital................................................. 315,186 386,838 112,944
</TABLE>
- ---------------
(1) Reflects certain costs incurred by Loral and Qualcomm prior to March 23,
1994, which were reimbursed by Globalstar through a capital subscription
credit or agreement for repayment in connection with the $275.0 million
capital subscription and commencement of Globalstar's operations on March
23, 1994.
(2) The ratio of earnings to fixed charges is not meaningful as Globalstar is in
the development stage and, accordingly, has incurred operating losses.
15
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
GTL is a holding company that acts as a general partner of Globalstar and
has no other business. The Company's sole asset is its investment in Globalstar
and GTL's results of operations reflect its share of the results of operations
of Globalstar on an equity accounting basis. Accordingly, management's
discussion and analysis addresses the financial condition and results of
operations of Globalstar. In its annual and quarterly reports, GTL presents
separate financial statements for GTL and Globalstar.
Except for the historical information contained herein, the matters
discussed in this Management's Discussion and Analysis of Results of Operations
and Financial Condition, and elsewhere in this Form 10-K, are forward-looking
statements that involve risks and uncertainties, many of which may be beyond
Globalstar's control. These may include, but are not limited to, problems
relating to technical development of the system, testing, regulatory compliance,
manufacturing and assembly, the competitive and regulatory environment in which
Globalstar will operate, marketing problems and costs and expenses that may
exceed current estimates. The actual results that Globalstar achieves may differ
materially from any forward-looking projections due to such risks and
uncertainties.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, cash and cash equivalents decreased to $21.2 million
from $71.6 million at December 31, 1995. The net decrease is primarily a result
of expenditures for the Globalstar System Under Construction of $381.7 million,
the net cash used in operating activities of $46.6 million and distributions on
redeemable preferred partnership interests of $14.8 million, offset by cash
receipts during the year, which consisted of $299.5 million from the sale of
redeemable preferred partnership interests and $96.0 from net borrowings under
the long-term revolving credit facility.
Accounts payable, payables to affiliates and accrued expenses increased by
$20.8 to $75.3 million at December 31, 1996, as compared to the prior year,
reflecting the increased level of activity by Globalstar's contractors and
timing of payments.
Through December 31, 1996, Globalstar incurred costs of approximately $1.0
billion for the design and construction of the space and ground segments. Costs
incurred during fiscal year 1996 were approximately $535 million.
As of February 1997, Globalstar estimates the cost for the design,
construction and deployment of the Globalstar System, including working capital,
cash interest on anticipated borrowings and operating expenses, to be
approximately $2.5 billion, as compared with approximately $2.2 billion
estimated at December 31, 1995. This increase arose primarily from a change in
launch vehicles and additional integration testing procedures to support system
readiness on schedule, scope changes to add features, capabilities and
functions, cost growth and other factors. Actual amounts may vary from this
estimate and additional funds would be required in the event of unforeseen
delays, cost overruns, launch failures, technological risks, adverse regulatory
developments, or to meet unanticipated expenses and for system enhancements and
measures to assure system performance and readiness for the space and ground
segments.
Globalstar and its service provider partners intend to jointly finance the
procurement of 33 gateways for resale to service providers, thereby accelerating
the deployment of gateways around the world prior to the In-Service Date.
Globalstar has agreed to finance approximately $80 million of the cost of these
gateways and expects to recover its cost from the resale of these gateways to
service providers.
In addition, Globalstar has agreed to purchase from SS/L eight additional
spare satellites that will increase Globalstar's ability to have at least 40
satellites in service during 1999, even in the event of launch failures. If the
launch program is successful, the additional satellites will serve as ground
spares, readily available for launch to replenish the constellation as needed to
respond to satellite attrition during the first generation, or to increase
system capacity as required. If Globalstar were to experience a launch failure,
the costs associated with the construction and launch of replacements would be
substantially covered by insurance, and in that event the cost of the additional
satellites used as replacements, currently estimated at $175 million, would be
reimbursed to Globalstar.
16
<PAGE> 18
On February 12, 1997, GTL and the holders of the warrants issued in
connection with the Globalstar Credit Agreement, entered into an arrangement
under which GTL agreed to accelerate the vesting and exercisability of the
warrants to purchase 4,185,318 shares of GTL common stock at $26.50 per share
and the holders agreed to exercise such warrants. GTL also agreed to register
for resale the GTL common stock issuable upon exercise of the warrants. In
addition, GTL announced its intention to distribute to the holders of its common
stock rights to subscribe for and purchase 1,131,168 GTL shares for a price of
$26.50 per share. Loral agreed to purchase all GTL shares not purchased upon
exercise of the rights. Upon the exercise of the warrants and the rights, GTL
will receive proceeds of approximately $140.9 million, which it will use to
exercise warrants to purchase 5,316,486 Globalstar ordinary partnership
interests at $26.50 per interest. Globalstar will use such proceeds for the
construction of the Globalstar System.
On February 13, 1997, Globalstar and GTL sold units consisting of $500
million aggregate principal amount of Globalstar's 11 3/8% Senior Notes due 2004
and warrants to purchase 1,032,500 shares of GTL common stock in a private
offering. Net proceeds were approximately $484 million.
As of February 13, 1997, Globalstar had raised or received commitments for
approximately $2.0 billion. Globalstar believes that its current capital, vendor
financing commitments, the availability of the Globalstar Credit Agreement ($154
million available at December 31, 1996) and proceeds from the exercise of the
warrants, issued in connection with the Globalstar Credit Agreement, are
sufficient to fund its requirements into the first quarter 1998. Globalstar
intends to raise the remaining funds required to complete the Globalstar System
from a combination of sources, including debt issuance (which may include an
equity component), financial support from the Globalstar partners, projected
service provider payments, projected net service revenues from initial
operations, anticipated payments from the sale of gateways and Globalstar Phones
and placement of partnership interests with new and existing strategic
investors. Although Globalstar believes it will be able to obtain these
additional funds, there can be no assurance that such funds will be available on
favorable terms or on a timely basis, if at all.
RESULTS OF OPERATIONS
Comparison of Results for the Years Ended December 31, 1996 and 1995
Globalstar is a development stage partnership and has not commenced
commercial operations. For the period March 23, 1994 (commencement of
operations) to December 31, 1996, Globalstar has recorded cumulative net losses
of $166.5 million. The net loss for the year ended December 31, 1996 decreased
to $54.6 million as compared to $68.2 million for the year ended December 31,
1995 due to a decrease in development costs partially offset by a decrease in
interest income. The net loss applicable to ordinary partnership interests was
$72.0 million during the current period reflecting $17.3 million of preferred
distributions on the redeemable preferred partnership interests. Globalstar is
expending significant funds for the design, construction, testing and deployment
of the Globalstar System and expects such losses to continue until commencement
of commercial operations.
Globalstar has earned interest income of $20.2 million on cash balances and
short term investments since commencement of operations. Interest income during
the year ended December 31, 1996 was $6.4 million as compared to $12.0 million
for the year ended December 31, 1995. Interest income for the current period
decreased as a result of lower average cash balances outstanding during 1996.
Operating Expenses. Development costs of $42.2 million for the year ended
December 31, 1996, represent the development of certain technologies under a
cost sharing arrangement in Globalstar's contract with Qualcomm, the development
of Globalstar Phones and Globalstar's continuing in-house engineering. This
compares with $62.9 million of development costs incurred during 1995. The
decline during the current year is primarily the result of the cost sharing
arrangement in Globalstar's contract with Qualcomm reaching its funding limit in
April 1996.
Marketing, general and administrative expenses were $18.9 million for the
year ended December 31, 1996 as compared to $17.4 million incurred during the
year ended December 31, 1995.
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Depreciation. Globalstar intends to capitalize all costs, including
interest as applicable, associated with the design, construction and deployment
of the Globalstar System, except costs associated with the development of the
Globalstar Phones and certain technologies under a cost sharing arrangement with
Qualcomm. Globalstar will not record depreciation expense on the Globalstar
System Under Construction until the commencement of commercial operations, as
assets are placed into service.
Income Taxes. Globalstar was organized as a limited partnership. As such,
no income tax provision (benefit) is included in the accompanying consolidated
financial statements since U.S. income taxes are the responsibility of its
partners. Generally, taxable income (loss), deductions and credits of Globalstar
will be passed through to its partners.
Comparison of Results for the Year Ended December 31, 1995 to the Period March
23, 1994 (commencement of operations) to December 31, 1994
The net loss for the year ended December 31, 1995 increased to $68.2
million from $26.2 million in the period March 23, 1994 (commencement of
operations) to December 31, 1994 (the "Prior Period"), primarily due to
increased operating expenses partially offset by increased interest income.
Interest income for the year ended December 31, 1995 was $12.0 million as
compared to $1.8 million earned during the Prior Period. Interest income
increased significantly from the Prior Period as a result of higher cash
balances invested due to the sale of 10,000,000 partnership interests to GTL for
$185.8 million during the first quarter and the receipt of payments against
capital subscriptions of $133.8 million.
Operating Expenses. Development costs of $62.9 million for the year ended
December 31, 1995, represent the development of certain technologies under a
cost sharing arrangement in Globalstar's contract with Qualcomm, the development
of Globalstar Phones and Globalstar's continuing in-house engineering. This
compares with $21.3 million of development costs incurred during the Prior
Period. The increase as compared to the Prior Period is primarily related to the
technologies being developed under the cost sharing arrangement with Qualcomm.
Marketing, general and administrative expenses were $17.4 million for the
year ended December 31, 1995 as compared to $6.7 million incurred during the
Prior Period. The increase from the Prior Period is a result of both increased
marketing and personnel costs consistent with the higher level of activity at
Globalstar.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This annual report of Form 10-K contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. In addition,
from time to time, Globalstar, GTL or their representatives have made or may
make forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but are not limited to, various filings made by
GTL with the Securities and Exchange Commission, press releases or oral
statements made by or with the approval of an authorized executive officer of
GTL or Globalstar. Actual results could differ materially from those projected
or suggested in any forward-looking statements as a result of a wide variety of
factors and conditions, including, but not limited to, the factors summarized
below.
Development Stage Company
Globalstar is a development stage company and has no operating history.
From its inception, Globalstar has incurred net losses and expects such losses
to continue. Globalstar will require expenditures of significant funds for
development, construction, testing and deployment before commercialization of
the Globalstar System. Globalstar does not expect to launch satellites until the
second half of 1997, to commence operations before the second half of 1998 or to
have positive cash flow before 1999. There can be no assurance that Globalstar
will achieve its objectives by the targeted dates.
As of February 1997, Globalstar estimates the cost for the design,
construction and deployment of the Globalstar System, including working capital,
cash interest on anticipated borrowings and operating expenses, to be
approximately $2.5 billion. Actual amounts may vary from this estimate.
Additional funds would be
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required in the event of unforeseen delays, cost overruns, launch failures,
technological risks, adverse regulatory developments, or to meet unanticipated
expenses and for system enhancements and measures to assure system performance
and readiness for the space and ground segments. As of February 13, 1997,
Globalstar had raised or received commitments for approximately $2.0 billion.
Globalstar believes that its current capital, vendor financing commitments, the
availability of the Globalstar credit agreement and the proceeds from the
exercise of the warrants, are sufficient to fund its requirements into the first
quarter of 1998. Globalstar intends to raise the remaining funds required from a
combination of sources including debt issuance (which may include an equity
component), financial support from the Globalstar partners, projected service
provider payments, projected net service revenues from initial operations,
anticipated payments received from the sale of gateways and Globalstar Phones
and placement of partnership interests with new and existing strategic
investors. Although Globalstar believes it will be able to obtain these
additional funds, there can be no assurance that such funds will be available on
favorable terms or on a timely basis, if at all. If there are unforeseen delays,
if technical or regulatory developments result in a need to modify the design of
all or a portion of the Globalstar System, if service provider agreements for
additional territories are not entered into at the times or on the terms
anticipated by Globalstar or if other additional costs are incurred, the risk of
which is substantial, additional capital will be required. The ability of
Globalstar to achieve positive cash flow will depend upon the successful and
timely design, construction and deployment of the Globalstar System, the
successful marketing of its services by service providers and the ability of the
Globalstar System to successfully compete against other satellite-based
telecommunications systems, as to which there can be no assurance. If Globalstar
fails to commence commercial operations in the second half of 1998 or achieve
positive cash flow in 1999, additional capital will be needed.
Globalstar believes it will be able to obtain the additional financing it
requires, but there can be no assurance that the capital required to complete
the Globalstar System will be available from public or private capital markets
or from its existing partners on favorable terms or on a timely basis, if at
all. A substantial shortfall in meeting its capital needs would prevent
completion of the Globalstar System.
Many of the problems, delays and expenses encountered by an enterprise in
Globalstar's stage of development may be beyond Globalstar's control. These may
include, but are not limited to, problems related to technical development of
the system, testing, regulatory compliance, manufacturing and assembly, the
competitive and regulatory environment in which Globalstar will operate,
marketing problems and costs and expenses that may exceed current estimates.
Delay in the timely design, construction, deployment, commercial operation and
achievement of positive cash flow of the Globalstar System could result from a
variety of causes. These include delays in the regulatory process in various
jurisdictions, delay in the integration of the Globalstar System into the
land-based network, changes in the technical specifications of the Globalstar
System made to enhance its features, performance or marketability or in response
to regulatory developments or otherwise, delays encountered in the construction,
integration or testing of the Globalstar System by Globalstar vendors, delayed
or unsuccessful launches, delays in financing, insufficient or ineffective
service provider marketing efforts, slower-than-anticipated consumer acceptance
of Globalstar service and other events beyond Globalstar's control. Substantial
delays in any of the foregoing matters would delay Globalstar's achievement of
profitable operations.
Regulation
The operations of the Globalstar System are and will continue to be subject
to United States and foreign regulation. In order to operate in the United
States and on an international basis, the Globalstar System must be authorized
to provide MSS in each of the markets in which its service providers intend to
operate. Even though a Globalstar affiliate has received a FCC authorization,
there can be no assurance that the further regulatory approvals required for
worldwide operations will be obtained, or that they will be obtained in a timely
manner or in the form necessary to implement Globalstar's proposed operations.
Globalstar's business may also be significantly affected by regulatory changes
resulting from judicial decisions and/or adoption of treaties, legislation or
regulation by the national authorities where the Globalstar System plans to
operate.
Globalstar's FCC license, as modified on November 19, 1996, authorizes the
construction, launch and operation of the satellite constellation and assigns
the system user links and feeder links in the United States.
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Globalstar's feeder link frequencies were allocated internationally at WRC95,
and have been assigned by the FCC for use in the United States in accordance
with the international allocation. However, use of the feeder link frequencies
remains subject to restrictions that may be adopted in a potential FCC
proceeding to adopt the international allocations into the U.S. Table of
Frequency Allocations. The FCC recently adopted rules for the use of a portion
of the frequencies allocated at WRC95 for MSS feeder links (such as
Globalstar's) to a proposed high-speed wireless data service. Although these
rules are intended to preclude harmful interference with other uses of these
bands, they may ultimately permit uses of these frequencies that could diminish
their usefulness for MSS feeder links. Separate licenses must also be obtained
from the FCC for operation of gateways and Globalstar Phones in the United
States.
To the extent that additional MSS systems are authorized by the FCC or
other national regulatory bodies to use the spectrum for which Globalstar has
been authorized, the Globalstar System's capacity would be reduced. In addition,
Globalstar's FCC license is subject to two pending judicial appeals. While
Globalstar believes that these appeals are without merit, there can be no
assurance that these appeals would not result in either reversal or stay of the
FCC's decision to grant Globalstar's FCC license to LQP or ultimately result in
the granting of additional licenses by the FCC or its adoption of an auction
procedure to award licenses, which might materially increase the cost of
obtaining such licenses.
Authorization will be required in each country in which Globalstar Phones
are used and in which Globalstar's gateways are located. Local regulatory
approval for operation of the Globalstar System is the responsibility of the
service providers in each territory. Although many countries have moved to
privatize the provision of telecommunications service and to permit competition
in the provision of such service, some countries continue to require that all
telecommunications service be provided by a government-owned entity. While
service providers have been selected, in part, based upon their perceived
qualifications to obtain the requisite local approvals, there can be no
assurance that they will be successful in doing so, and if they are not
successful, Globalstar service will not be available in such territories. In
that event, depending upon geographical and market considerations, Globalstar
may or may not have the ability to redirect the system capacity that such
territories would have otherwise used to serve markets in which service is
authorized.
Regulatory schemes in countries in which Globalstar or its service
providers seek to operate may impose impediments on Globalstar's operations.
There can be no assurance that such restrictions would not be unduly burdensome.
Glonass, the Russian Global Navigation Satellite System, operates worldwide
in a portion of the frequency band proposed to be used by Globalstar and other
MSS systems for user uplinks. Although Glonass has proposed to migrate to lower
frequencies, interference protection requirements for Glonass receivers are
under consideration, which, if adopted, may render a segment of the MSS spectrum
unusable for MSS user uplinks. While this is not expected to have an adverse
effect on Globalstar's capacity in the United States, a decision to protect
Glonass on the part of regulatory authorities in nations making extensive use of
Globalstar fixed services, could reduce Globalstar's effective system capacity
in such markets.
European Union competition law proscribes agreements that restrict or
distort competition in the European Union. Globalstar and others have responded
to an inquiry from the Commission of the European Union requesting information
regarding their activities. A violation of European Union competition law could
subject Globalstar to fines or enforcement actions that could delay service in
western Europe, and/or depending on the circumstances, adversely affect
Globalstar's contractual rights vis-a-vis its European strategic partners. In
addition, the Commission has proposed legislation which, if adopted, would give
the Commission broad regulatory authority over satellite telecommunications
systems such as the Globalstar System.
Technological Factors
The Globalstar System is exposed to the risks inherent in a large-scale
complex telecommunications system employing advanced technologies which must be
adapted to the Globalstar application and which have never been used as a
commercial whole. Deployment of the Globalstar satellite constellation will
involve volume production and testing of satellites in quantities significantly
higher than those previously prevailing in
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the industry. The integration of a worldwide LEO satellite-based system like
Globalstar has never occurred; there is no assurance that such integration will
be successfully implemented. The operation of the Globalstar System will require
the detailed design and integration of advanced digital communications
technologies in devices from personal handsets and public telephone networks to
gateways in remote regions of the globe and satellites operating in space. The
failure to develop, produce and implement the system, or any of its diverse and
dispersed elements, as required, could delay the In-Service or Full
Constellation Date of the Globalstar System or render it unable to perform at
levels required for commercial success.
Satellite launches are subject to significant risks, including disabling
damage to or loss of the satellites. Historically, launch failure ("hot
failure") rates on low-earth orbit and geostationary satellite launches have
been approximately 10%. However, launch failure rates may vary depending on the
particular launch vehicle. The McDonnell-Douglas Delta launch vehicle, scheduled
to launch the first eight satellites (four per launch) of the Globalstar
satellite constellation, suffered a launch failure on January 17, 1997. The
United States government is currently investigating the cause of this launch
failure, the second in this rocket's last 62 launches. Globalstar's first
launch, which is currently scheduled for September 1997 aboard a Delta II
rocket, could be delayed by this investigation. Nevertheless, Globalstar does
not expect that such delay, if any, in the initial launch date would result in a
delay in the In-Service Date or the Full Constellation Date. The Ukrainian Zenit
launch vehicle, which is proposed to launch 36 Globalstar satellites (12 per
launch), has never been used in commercial applications. Satellite launches of
groups of more than eight commercial satellites have not been attempted before.
Globalstar intends to launch the last 12 satellites of its constellation in
groups of four on three separate launches of the Russian Starsem Soyuz rocket.
There is no assurance that Globalstar satellite launches will be successful or
that its launch failure rate will not exceed the industry average.
Globalstar's Zenit launch contracts provide for relaunches at no additional
charge in the event of a hot failure. However, the launch provider may, because
of financial reasons or otherwise, be unable to provide such relaunches. A
single launch failure would result in a loss of either four or 12 Globalstar
satellites. Although the cost of replacing such satellites and launch vehicles
will in most cases be covered by insurance, a launch failure could result in
delays in the In-Service or the Full Constellation Date.
SS/L has agreed to obtain launch vehicles for Globalstar and arrange for
the launch of all 56 satellites, subject to pricing adjustments in light of
future market conditions, which may, in turn, be influenced by international
political developments. An adverse change in launch vehicle market conditions
which prohibits Globalstar from utilizing the launch vehicles for which it has
contracted could result in an increase in the launch cost payable by Globalstar,
which may be substantial. In addition, there can be no assurance that
replacement launch vehicles will be available in the future at a cost or on
terms acceptable to Globalstar.
Two of Globalstar's launch operators are subject to U.S. export control
regulations. Yuzhnoye, based in Ukraine, has certain ties with Russia and
intends to launch the Zenit rocket from the Baikonur launch site in Kazakhstan.
Arianespace, which will be providing the Soyuz rockets, also intends to launch
from Baikonur. Changes in governmental policies or political leadership in the
United States, Ukraine, Russia or Kazakhstan could affect the cost,
availability, timing or overall advisability of utilizing these launch
providers. While there is no assurance that the necessary export licenses will
be obtained, Globalstar has provided against the risk that such licenses will
not be granted or that the deterioration in the relationships between the United
States and these countries may make the use of such launch providers inadvisable
by procuring options on sufficient launches with a U.S.-based launch provider to
launch all the remaining satellites of the Globalstar constellation. If
Globalstar were to exercise these options for U.S. launches in the wake of the
failure to obtain any necessary export licenses or as a result of adverse
developments in U.S. relations with these countries, the cost of launching the
Globalstar satellite constellation would be significantly increased.
A number of factors will affect the useful lives of Globalstar's
satellites, including the quality of construction, expected gradual
environmental degradation of solar panels and the durability of component parts.
Random failure of satellite components could result in damage to or loss of a
satellite ("cold failures"). In rare cases, satellites could also be damaged or
destroyed by electrostatic storms or collisions with other objects. As a result
of these factors, the first-generation satellite constellation (including
spares) is designed to
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operate at full performance for a minimum of 7 1/2 years, after which
performance is expected to gradually decline. However, there can be no assurance
of the constellation's specific longevity. Globalstar's operating results would
be adversely affected in the event the useful life of the satellites were
significantly shorter than 7 1/2 years. Globalstar anticipates using funds
generated from operations to develop a second generation of satellites. If
sufficient funds from operations are not available and Globalstar is unable to
obtain external financing for the second-generation constellation, Globalstar
will not be able to deploy a second-generation satellite constellation to
replace first-generation satellites at the end of their useful lives. In that
event, the Globalstar System would cease operations at that time.
Globalstar intends to obtain insurance against launch failure which would
cover the cost of relaunch and the replacement cost of lost satellites in the
event of hot failures for 56 satellites in its constellation. SS/L has agreed to
obtain on Globalstar's behalf insurance for the cost of replacing satellites
lost in hot failures, and for any relaunch costs not covered by the applicable
launch contract, in certain circumstances subject to pricing adjustments in
light of future market conditions. An adverse change in insurance market
conditions may result in an increase in the insurance premium paid by
Globalstar, which may be substantial. In addition, there is no assurance that
launch insurance will be available or that, if available, would be at a cost or
on terms acceptable to Globalstar.
Globalstar may self-insure for hot failures for up to 12 such satellites.
Globalstar's contract with SS/L provides for the construction and launch of
eight spare satellites to minimize the effect of any launch or orbital failures.
However, there can be no assurance that additional satellites and launches will
not be required. In such an event, in addition to the replacement costs incurred
by Globalstar, Globalstar's In-Service or Full Constellation Date may be
delayed. In addition, unless otherwise required, Globalstar does not currently
intend to purchase insurance to cover cold failures that may occur once the
satellites have been successfully deployed from the launch vehicle.
The space and communications industries are characterized by rapid
technological advances and innovations. There is no assurance that one or more
of the technologies utilized or under development by Globalstar may not become
obsolete, or that its services will be in demand by the time they are offered.
Globalstar will be dependent upon technologies developed by third parties to
implement key aspects of its strategy to integrate its satellite systems with
terrestrial networks, and there can be no assurance that such technologies will
be available to Globalstar on a timely basis or on reasonable terms.
Future Operating Factors
The availability of Globalstar service in each region or country will
depend upon the cooperation, operational and marketing efficiency,
competitiveness, finances and regulatory status of Globalstar's service provider
in that region or country. The willingness of companies to become service
providers will depend upon a variety of factors, including pricing, local
regulations and Globalstar's competitiveness with other satellite-based
telecommunications systems. Globalstar believes that enlisting the support of
established telecommunications service providers, some of which are the dominant
carriers in their markets, will be essential both to obtaining necessary local
regulatory approvals and to rapidly accessing a broad market of potential users.
Globalstar's strategic service providers have agreed to act as exclusive service
providers in 71 countries although it is anticipated that in many cases these
partners will enter into strategic alliances with local service providers to
provide Globalstar service in these countries. In addition, Globalstar expects
to raise additional funds prior to the Full Constellation Date in the form of
service provider payments from prospective service providers in other
territories throughout the world. Globalstar's business plan assumes that
Globalstar will contract with service providers to provide service in the
remaining territories of the world, in certain cases, on terms more favorable to
Globalstar than those contained in its founding service provider agreements.
There can be no assurance that additional service provider agreements will be
entered into in the future or that this plan will be achieved. If such service
provider payments are not realized, Globalstar will be required to obtain other
sources of financing in order to complete the Globalstar System.
If the service providers fail to obtain the necessary local regulatory
approval or to adequately market and distribute Globalstar's services,
Globalstar's business could be adversely affected. There can be no assurance
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that enough service providers will contract for Globalstar service and procure
and install the gateways and obtain the regulatory licenses necessary for
complete global service. Failure to offer service in any particular region will
eliminate that area's market potential and reduce Globalstar's ability to
service its global roamer market.
Certain strategic partners and other third parties are designing and
constructing the component parts of the Globalstar System. In the event such
parties are unable to perform their obligations, Globalstar's In-Service and
Full Constellation Date may be delayed and its costs may be increased.
Globalstar expects that a substantial portion of its business will be
conducted outside of the United States. Such operations are subject to certain
risks such as changes in domestic and foreign government regulations and
telecommunications standards, tariffs or taxes and other trade barriers.
Accordingly, government actions in foreign countries could have a significant
effect on Globalstar's operations. Political, economic or social instability or
other developments in such countries, including currency fluctuations, could
also adversely affect Globalstar's operations. In addition, Globalstar's
agreements relating to local operations may be governed by foreign law or
enforceable only in foreign jurisdictions. As a result, in the event of a
dispute, it may be difficult for Globalstar to enforce its rights under such
agreements.
Globalstar's largest potential markets are in developing countries or
regions that are substantially underserved and not expected to be served by
existing telecommunications systems. In doing business in such markets,
Globalstar and its local service providers may face market, inflation, interest
rate and currency fluctuation, government policy, price and wage, exchange
control, taxation and social instability, expropriation and other economic,
political or diplomatic conditions that are significantly more volatile than
those commonly experienced in the United States and other industrialized
countries. Although Globalstar anticipates that it will receive payments from
its service providers in U.S. dollars, limited availability of U.S. currency in
these local markets may prevent a service provider from making payments in U.S.
dollars. Moreover, exchange rate fluctuations may affect the price Globalstar
will be entitled to receive for its services.
Globalstar's pricing to service providers will, under certain
circumstances, not be automatically adjusted for inflation; in such cases,
Globalstar will be able to increase its pricing to service providers only if the
service provider increases its prices to subscribers, and it may be required to
lower its pricing if the service provider lowers its prices to subscribers. In
recent years, pricing in the telecommunications industry has trended downward,
in some cases making it difficult for service providers to raise their prices to
compensate for cost inflation. Although Globalstar expects future service
provider agreements to contain pricing terms more favorable to Globalstar than
those contained in its agreements with founding service providers, there can be
no assurance that such terms will be achieved.
Globalstar has entered into an agreement with a bank syndicate for a $250
million credit facility expiring December 15, 2000, and also expects to utilize
$310 million of committed vendor financing. The Globalstar credit agreement
permits Globalstar to incur up to $950 million of indebtedness on a senior
basis, including $500 million aggregate principal amount of Globalstar's 11 3/8%
Senior Notes, to finance the build-out of the Globalstar System; an unlimited
amount of indebtedness may be incurred by Globalstar on a subordinated basis.
Significant additional debt is expected to be incurred in the future. As a
result, Globalstar is expected to become highly leveraged. Globalstar will be
dependent on its cash flow from operations to service this debt. Any delay in
the commencement of Globalstar operations will adversely affect Globalstar's
ability to service its debt obligations. The discretion of Globalstar's
management with respect to certain business matters will be limited by covenants
contained in the Globalstar credit agreement, and future debt instruments. Among
other things, the covenants contained in the Globalstar credit agreement
restrict, condition or prohibit Globalstar from paying cash distributions on its
ordinary partnership interests, creating liens on its assets, making certain
asset dispositions, conducting certain other business and entering into
transactions with affiliates and related persons. In the event the Globalstar
credit agreement ceases to be guaranteed, it will also contain certain financial
covenants limiting the ability of Globalstar to incur additional indebtedness.
There can be no assurance that Globalstar's leverage and such restrictions will
not materially and adversely affect Globalstar's ability to finance its future
operations or capital needs or to engage in other business activities. Moreover,
a failure to comply with the obligations contained in the Globalstar credit
agreement and or any agreements
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with respect to additional financing could result in an event of default under
such agreements, which could permit acceleration of the related debt and
acceleration of debt under future debt agreements that may contain
cross-acceleration or cross-default provisions.
Competition in the telecommunications industry is intense, fueled by rapid
and continuous technological advances and alliances between industry
participants on an international scale. Although no present participant is
currently providing the same global personal telecommunications service proposed
by Globalstar, it is anticipated that one or more additional competing MSS
systems will be launched and that the success, or anticipated success, of
Globalstar and its competitors could attract other entrants. If any of
Globalstar's competitors succeeds in marketing and deploying its system
substantially earlier than Globalstar, Globalstar's ability to compete in areas
served by such competitor may be adversely affected. A number of satellite-based
telecommunications systems not involved in the MSS Proceeding have also been
proposed using geostationary satellites and, in one case, the 2 GHz band for an
MEO system.
Globalstar's most direct competitors are the two other MSS applicants which
received FCC licenses, Iridium and Odyssey. ICO was not an applicant or a
licensee in the MSS Proceeding or any other proceedings before the FCC; it is
seeking to operate in a different frequency band not available for use by MSS
systems under current international guidelines in place until 2000. Comsat, the
U.S. signatory to Inmarsat, has applied to the FCC to participate in the
procurement of facilities of the system proposed by ICO. It has also sought FCC
approval of a proposal to extend the scope of services provided by Inmarsat,
currently limited to maritime services, to include telecommunications services
to land-based mobile units. These applications are currently pending before the
FCC. Comsat has been instructed in the past by the U.S. government to seek to
ensure that ICO does not receive preferred access to any market and that
non-discriminatory access to such areas for all mobile satellite communications
networks be established, subject to spectrum coordination and availability.
Nonetheless, because ICO is affiliated with Inmarsat and because its investors
include state-owned telecommunications monopolies in a number of countries,
there can be no assurance that ICO might not be given preferential treatment in
the local licensing process in those countries. It is also possible that one or
more of the two pending MSS applicants will demonstrate financial qualification
sufficient to obtain an FCC license and become a competitor of Globalstar.
In addition to competing for investment capital, subscribers and service
providers in markets all over the world, the MSS systems, including Globalstar,
also compete with each other for the limited spectrum available for MSS
operations. Unlike CDMA systems such as Globalstar and Odyssey, which permit
multiple systems to operate within the same band, the design of Iridium's TDMA
system requires a separate frequency segment dedicated specifically for its use.
If more than two CDMA systems become operational, CDMA systems like Globalstar
will effectively have a smaller spectrum segment within which to operate their
user uplinks in the U.S. While CDMA does permit spectrum sharing among competing
systems, the capacity of the systems operating within that spectrum will
decrease as the number of systems operating in the band increases. For example,
Globalstar's capacity over a given area would decrease by approximately 25% if
the total number of licensed MSS systems increased from three to four, assuming
that Iridium is one of the licensed systems and the two other CDMA systems
receiving licenses have technical characteristics similar to Globalstar's and
experience the same level of usage.
The FCC has no authorization to extend the U.S. band plan for CDMA and TDMA
Big LEO systems to other countries. However, it has stated that it plans to
express the view in discussions with other administrations that global satellite
systems are more likely to succeed if individual administrations adopt
complementary systems for licensing them.
Geostationary-based satellite systems, including AMSC, APMT, ASC, ACeS,
Lockheed Martin's Satphone and Comsat's Planet-1, plan to provide
satellite-based telecommunications services in areas proposed to be serviced by
Globalstar. Because some of these systems involve relatively simple ground
control requirements and are expected to deploy no more than two satellites,
they may succeed in deploying and marketing their systems before Globalstar. In
addition, coordination of standards among regional geostationary systems could
enable these systems to provide worldwide service to their subscriber bases,
thereby increasing the competition to Globalstar. For example, Comsat has
announced a global mobile satellite service
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(Planet-1) using existing Inmarsat satellites, a six-pound, laptop-size phone,
costing $3,000 with an expected per-minute usage rate of $3.00.
Some of these potential competitors have financial, personnel and other
resources substantially greater than those of Globalstar. Many of these
competitors are raising capital and may compete with Globalstar for service
providers and financing. Technological advances and a continuing trend toward
strategic alliances in the telecommunications industry could give rise to
significant new competitors. There can be no assurance that some of these
competitors will not provide a more efficient or less expensive service.
However, Globalstar believes that based upon the public statements and other
publicly available information of the other MSS applicants, Globalstar will be a
low-cost provider. Depending on the competitive environment, however, pricing
competition could require Globalstar to reduce its anticipated pricing to
service providers, thus adversely affecting its financial performance.
Satellite-based telecommunications systems are characterized by high
up-front costs and relatively low marginal costs of providing service. Several
systems are being proposed and, while the proponents of these systems foresee
substantial demand for the services they will provide, the actual level of
demand will not become known until such systems are constructed, launched and
operational. If the capacity of Globalstar and any competing systems exceeds
demand, price competition could be particularly intense.
Teledesic, Spaceway and Cyberstar have each applied to the FCC for licenses
to operate satellite-based telecommunications and video transmission systems in
the 28 GHz Ka-band. Certain MSS applicants, not including Globalstar, have
applied to use this band for their feeder uplinks, as have proponents of
land-based local multipoint distribution system ("LMDS") for cellular television
services. The FCC is in the process of developing a band-width allocation plan
for use of the available Ka-band spectrum by these services. Globalstar's
primary business will be voice telephony, and its data transmission business
will be focused on small data packet services such as paging and messaging. It
therefore does not regard the television or broadband data services to fixed
terminals proposed by Teledesic, Spaceway and Cyberstar or the wireless cable
and fixed telephony services proposed by the LMDS applicants as competing
services.
It is expected that as land-based telecommunications services expand to
regions currently underserved or not served by wireline or cellular services,
demand for Globalstar service in those regions may be reduced. If such systems
are constructed at a more rapid rate than that anticipated by Globalstar, the
demand for Globalstar service may be reduced at rates higher than those assumed
in Globalstar's market analysis. Globalstar may also face competition in the
future from companies using new technologies and new satellite systems. New
technology could render Globalstar obsolete or less competitive by satisfying
consumer demand in alternative ways or through the introduction of incompatible
telecommunications standards. A number of these new technologies, even if they
are not ultimately successful, could have an adverse effect on Globalstar as a
result of their initial marketing efforts. Globalstar's business would be
adversely affected if competitors begin operations or existing or new
telecommunications service providers penetrate Globalstar's target markets
before completion of the Globalstar System.
Subscriber acceptance of the Globalstar System (both in terms of placement
of Globalstar Phones and subscriber usage thereof) will depend upon a number of
factors, including price, demand for service and the extent of availability of
alternative telecommunications systems. If the level of actual subscriber demand
and usage for Globalstar service is below that expected by Globalstar,
Globalstar's cash flow will be adversely affected. Globalstar's hand-held phone
is expected to be larger and heavier for the same talk time than today's smaller
and lighter pocket-sized, hand-held cellular telephones and is expected to have
a significantly longer and thicker antenna than hand-held cellular telephones.
The Globalstar System will function best when there is an unobstructed
line-of-sight between the user and one or more of the Globalstar satellites.
Obstacles such as buildings, trees or mountainous terrain may degrade service
quality, more so than would be the case with terrestrial cellular systems, and
service may not be available in the core of high-rise buildings. There is no
assurance that these characteristics of the hand-held Globalstar Phone will not
adversely affect subscriber demand for Globalstar service.
There has been adverse publicity concerning alleged health risks associated
with the use of portable hand-held telephones with transmitting antennas
integrated into handsets. On August 1, 1996, the FCC announced
25
<PAGE> 27
new guidelines for evaluating environmental radio frequency radiation from
FCC-regulated transmitters based primarily on the exposure criteria recommended
in 1986 by the National Council on Radiation Protection Measurements ("NCRP").
Guidelines applicable to certain portable transmitting devices are based on the
NCRP criteria and the exposure criteria developed by the Institute of Electrical
and Electronic Engineers and recommended in 1992 by the American National
Standards Institute. These guidelines were to become effective as to
applications filed after January 1, 1997; the FCC, however, has deferred the
effective date until September 1, 1997. The handsets Globalstar has contracted
with Qualcomm to develop for use by mobile subscribers will have antennas for
communication with the satellites and, in the case of the dual-mode and tri-mode
hand-held Globalstar Phones, with the land-based cellular system. Because
hand-held Globalstar Phones will use on average lower power to transmit signals
than traditional cellular units, Globalstar does not believe that the proposed
new guidelines will require any significant modifications of the Globalstar
System or of the mobile hand-held Globalstar Phones designed to be used with the
Globalstar System. There can, however, be no assurance that the guidelines, as
adopted, or any associated health concerns, would not have an adverse effect on
Globalstar's mobile handset business.
The success of Globalstar's business will be partially dependent upon the
ability of Globalstar to attract and retain highly qualified technical and
management personnel. None of the employees of Globalstar has an employment
contract with Globalstar nor does Globalstar expect to maintain "key man"
insurance with respect to any such individuals. The loss of any of these
individuals and the subsequent effect on business relationships could have a
material adverse effect on Globalstar's business.
Other Factors
Partners of LQSS, the managing general partner of Globalstar, or their
affiliates are principal suppliers to Globalstar of the major components of the
Globalstar System, and are also expected to engage in the manufacture of system
elements to be sold to service providers and subscribers. During the design,
development and deployment of the Globalstar System, Globalstar will be
substantially dependent upon the management skills of Loral and certain
technologies developed by Loral, Qualcomm and SS/L to design and manufacture the
Globalstar satellite constellation, SOCCs, GOCCs, gateways and Globalstar
Phones. Globalstar has entered into contracts for the design of various segments
of the Globalstar System with affiliates of LQSS, including a fixed-price
satellite production contract with SS/L and a cost-plus-fee contract with
Qualcomm to design the gateways, GOCCs and Globalstar Phones. To the extent that
such contracts have been or will be awarded to partners of Globalstar or LQSS or
their affiliates, such parties will have a conflict of interest with respect to
the terms thereof.
Partners and affiliates of Globalstar, including companies affiliated with
or controlled by Loral, will be among Globalstar's principal service provider
customers and may therefore have conflicts of interest with respect to the terms
of Globalstar's service provider agreements and any proposed amendments thereto.
In addition, if Globalstar is unable to offer Globalstar service to a service
provider on competitive terms in a particular country or region, such a service
provider, which may be a partner of Globalstar, can act as a service provider to
a competing MSS system in such region or country while at the same time serving
as a Globalstar service provider in other markets.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
26
<PAGE> 28
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
Information required for this item is set forth in the Company's 1997
definitive proxy statement which is incorporated herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Bernard L. Schwartz.................. 71 Chairman and Chief Executive Officer of GTL; Chief
Executive Officer and Chairman of the General
Partners' Committee of Globalstar
Michael B. Targoff................... 52 President, Chief Operating Officer and Director of
GTL; Chief Operating Officer of Globalstar
Michael P. DeBlasio.................. 60 Senior Vice President, Chief Financial Officer and
Director of GTL; Senior Vice President of Globalstar
Nicholas C. Moren.................... 50 Vice President and Treasurer of GTL; Vice President
and Treasurer of Globalstar
Eric J. Zahler....................... 46 Vice President and Secretary of GTL; Vice President
and Secretary of Globalstar
Thomas B. Ross....................... 66 Vice President, Government Relations of GTL; Vice
President, Government Relations of Globalstar
Harvey B. Rein....................... 43 Vice President and Controller of GTL; Vice President
of Globalstar
Douglas G. Dwyre..................... 64 Senior Vice President of GTL; President of
Globalstar
Anthony J. Navarra................... 49 Vice President of GTL; Executive Vice President,
Business Development of Globalstar
Robert A. Hicks...................... 52 Vice President of GTL; Vice President, Operations of
Globalstar
Edward Hirshfield.................... 59 Vice President of GTL; Vice President, Development
and Production of Globalstar
Robert A. Wiedeman................... 59 Vice President of GTL; Vice President, Engineering
of Globalstar
Terry R. Evans....................... 49 Vice President of GTL; Vice President, Business
Planning and Administration of Globalstar
Stephen C. Wright.................... 40 Vice President of GTL; Vice President and Chief
Financial Officer of Globalstar
Joel Schindall....................... 55 Vice President of GTL; Vice President of Systems
Applications for Globalstar
William Adler........................ 50 Assistant Secretary of GTL; Vice President and
General Counsel of Globalstar
</TABLE>
Mr. Schwartz has been the Chairman and Chief Executive Officer of GTL since
its initial public offering in 1995 and Chief Executive Officer and Chairman of
the General Partners' Committee of Globalstar since 1994. Mr. Schwartz has been
the Chairman and Chief Executive Officer of Loral since March 1996 and had been
Chairman and Chief Executive Officer of Old Loral since 1972. He has been
Chairman of the Board of Directors of SS/L since February 1991. Mr. Schwartz has
been Vice Chairman and a director of Lockheed Martin since April 1996.
Mr. Targoff has been President and Chief Operating Officer and a director
of GTL and Chief Operating Officer of Globalstar since May 1996. From GTL's
initial public offering in 1995 until May 1996, Mr. Targoff was Senior Vice
President, Secretary and director of GTL, and from 1994 until May 1996, Mr.
Targoff was
27
<PAGE> 29
Senior Vice President and Secretary of Globalstar. Mr. Targoff has been
President and Chief Operating Officer of Loral since March 1996 and had been
Senior Vice President and Secretary of Old Loral since 1992. Prior thereto, he
held other executive officer positions with Old Loral. Mr. Targoff is also a
director of SS/L.
Mr. DeBlasio has been Senior Vice President, Chief Financial Officer and
Director of GTL since May 1996 and Senior Vice President of Globalstar since
1994. Mr. DeBlasio has been Senior Vice President and Chief Financial Officer of
Loral since March 1996 and had been Senior Vice President, Finance and Chief
Financial Officer of Old Loral since 1979. Mr. DeBlasio is also a director of
SS/L.
Mr. Moren has been Vice President and Treasurer of GTL since its initial
public offering in 1995 and Vice President and Treasurer of Globalstar since
1994. Mr. Moren has been Vice President and Treasurer of Loral since March 1996
and had been Vice President and Treasurer of Old Loral since April 1991.
Mr. Zahler has been Vice President and Secretary of GTL and Globalstar
since May 1996. From 1994 to May 1996, Mr. Zahler had been Vice President and
Assistant Secretary of Globalstar. Mr. Zahler has been Vice President, Secretary
and General Counsel of Loral since March 1996 and had been Vice President and
General Counsel of Old Loral since 1992. Prior to that time, he was a partner in
the law firm of Fried, Frank, Harris, Shriver & Jacobson.
Mr. Ross has been Vice President, Government Relations of GTL and
Globalstar since November 1996. From June 1995 to November 1996, Mr. Ross was
Vice President, Communications of GTL and Globalstar. Mr. Ross has also been
Vice President, Government Relations of Loral since November 1996. From March
1996 to November 1996, Mr. Ross was Vice President, Communications of Loral.
From April 1994 to May 1995, he served at the White House as Special Assistant
to the President and Senior Director of Public Affairs for the National Security
Council. From January 1992 to April 1994, he was Senior Vice President and
Director of Media Relations for Hill & Knowlton.
Mr. Rein has been Vice President and Controller of GTL and Vice President
of Globalstar since May 1996. Mr. Rein has been Vice President and Controller of
Loral since June 1996 and had been Assistant Controller of Old Loral since 1985.
Mr. Dwyre has been President of Globalstar since March 1994. Mr. Dwyre has
been Senior Vice President of GTL since May 1996 and, prior thereto, had been
Vice President of GTL since its initial public offering in 1995. Mr. Dwyre was
President of Northern Telecom's STC Submarine Systems from 1988 to 1992.
Mr. Navarra has been Executive Vice President, Business Development of
Globalstar since March 1994 and Vice President of GTL since its initial public
offering in 1995. He was Executive Vice President, Business Development at Loral
Aerospace Corp. from 1992 to 1994. He was Vice President of Marketing at
Loral/ROLM MilSpec Corp., a subsidiary of Old Loral, from 1987 to 1992.
Mr. Hicks has been Vice President, Operations of Globalstar and Vice
President of GTL since June 1996. Prior to that time he was Chief Technical
Officer at PacTel and AirTouch.
Mr. Hirshfield has been Vice President, Development and Production of
Globalstar since March 1994 and Vice President of GTL since May 1996. Prior to
that time, he was Manager of Communications Sciences at SS/L.
Mr. Wiedeman has been Vice President, Engineering of Globalstar since March
1994 and Vice President of GTL since May 1996. Prior to that time, he was Vice
President of Loral Aerospace Corp.
Mr. Evans has been Vice President, Business Planning and Administration of
Globalstar since January 1996 and Vice President of GTL since May 1996. From
March 1994 to December 1995, Mr. Evans was Vice President, Finance and
Administration of Globalstar. Prior to that time, he was Manager of Business
Planning and Analysis for SS/L.
Mr. Wright has been Vice President and Chief Financial Officer of
Globalstar since January 1996 and Vice President of GTL since May 1996. He was a
Production Director from April 1995 to December 1995 at SS/L. Prior to that
time, he was a Business Manager at SS/L.
28
<PAGE> 30
Mr. Schindall has been Vice President of Systems Applications for
Globalstar since May 1994 and Vice President of GTL since May 1996. Prior to
that time, he was President of Conic, a division of Old Loral.
Mr. Adler has been Vice President and General Counsel of Globalstar since
January 1996 and Assistant Secretary of GTL since May 1996. He was a partner
with Fleschman and Walsh, L.L.P. from May 1994 to November 1995, specializing in
domestic and international telecommunications law, regulation legislation and
policy. Prior to that time, he was the Executive Director of Federal Regulatory
Relations with Pacific Telesis Group.
ITEM 11: EXECUTIVE COMPENSATION
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under Items 11, 12 and 13 is set forth in the
Company's 1997 definitive proxy statement which is incorporated herein by
reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Index to Financial Statements................................................ F-1
Globalstar Telecommunications Limited
Independent Auditors' Report............................................... F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Shareholders' Equity......................................... F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
Globalstar, L.P. (A development stage limited partnership)
Independent Auditors' Report............................................... F-12
Consolidated Balance Sheets................................................ F-13
Consolidated Statements of Operations...................................... F-14
Consolidated Statements of Cash Flows...................................... F-15
Consolidated Statements of Ordinary Partners' Capital and Subscriptions
Receivable.............................................................. F-16
Notes to Consolidated Financial Statements................................. F-17
</TABLE>
29
<PAGE> 31
(a) 3. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ------------------------------------------------------------------------------------
<S> <C>
3.1 Memorandum of Association of Globalstar Telecommunications Limited*
3.2 Bye-Laws of Globalstar Telecommunications Limited*
4.1 Indenture dated as of March 6, 1996 relating the Company's 6 1/2% Convertible
Preferred Equivalent Obligations due 2006**
4.2 Indenture dated as of February 15, 1997 relating to Globalstar's 11 3/8% Senior
Notes due 2004+
10.1 Amended and Restated Agreement of Limited Partnership of Globalstar, L.P., dated as
of March 6, 1996, among Loral/Qualcomm Satellite Services, L.P., Globalstar
Telecommunications Limited, AirTouch Satellite Services, San Giorgio S.p.A.,
Hyundai/Dacom, Loral/DASA Globalstar, L.P., Loral Globalstar, L.P., TE.S.A.M. and
Vodastar Limited+
10.2 Subscription Agreements by and between Globalstar, L.P., and each of AirTouch
Communications, Alcatel Spacecom, Loral General Partner, Inc., Hyundai/Dacom and
Vodastar Limited*
10.3 Subscription Agreement by and between Globalstar, L.P. and Loral/Qualcomm Satellite
Services, L.P.*
10.4 Satellite Procurement Letter Agreement by and among Globalstar, L.P., Hyundai
Electronics Industries Co., Ltd. and Space Systems/Loral, Inc.*
10.5 Contract for OmniTRACS Like Services Agreement between Globalstar, L.P. and Qualcomm
Incorporated*
10.6 Support Agreement by and among Qualcomm Incorporated, Globalstar, L.P. and
Loral/Qualcomm Satellite Services, Inc.*
10.7 Qualcomm Licensee Letter Agreement by and among Globalstar, L.P., Hyundai
Electronics Industries Co., Ltd. and Qualcomm Incorporated.*
10.8 Contract between Globalstar, L.P. and Space Systems/Loral, Inc.*
10.9 Contract for the Development of Certain Portions of the Ground Operations Control
Center between Globalstar and Loral Western Development Laboratories.*
10.10 Contract for the Development of Satellite Orbital Operations Centers between
Globalstar and Loral Aerosys, a division of Loral Aerospace Corporation.*
10.11 1994 Stock Option Plan.*++
10.12 Revolving Credit Agreement dated as of December 15, 1995, as amended on March 25,
1996, among Globalstar, certain banks parties thereto and Chemical Bank, as
Administrative Agent+
10.13 Registration Rights Agreement dated March 6, 1996 relating to the Company's 6 1/2%
Convertible Preferred Equivalent Obligations due 2006**
10.14 Warrant Agreement dated as of February 19, 1997 relating to Warrants to purchase
1,032,250 shares of Common Stock+
10.15 Registration Rights Agreement dated February 19, 1997 relating to Globalstar's
11 3/8% Senior Notes due 2004 and the Company's Warrants to purchase 1,032,250
shares of Common Stock issued in connection therewith+
12 Statement Regarding Computation of Ratios+
23.1 Consent of Deloitte & Touche LLP+
27 Financial Data Schedule (EDGAR only)+
</TABLE>
- ---------------
* Incorporated by reference to the Company's Registration Statement on Form S-1
(No. 33-86808).
** Incorporated by reference to the Company's Registration Statement on Form S-3
(No. 333-6477).
+ Filed herewith.
++ Management compensation plan.
(b) Reports on Form 8-K
None
30
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Globalstar Telecommunications Limited
By: BERNARD L. SCHWARTZ
------------------------------------
Bernard L. Schwartz
(Chairman of the Board and
Chief Executive Officer)
Date: March 7, 1997
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------ ------------------------------- ------------------
<C> <S> <C>
BERNARD L. SCHWARTZ Chairman of the Board and Chief March 7, 1997
- ------------------------------------------ Executive Officer
Bernard L. Schwartz
MICHAEL B. TARGOFF Director and President March 7, 1997
- ------------------------------------------
Michael B. Targoff
SIR RONALD GRIERSON Director March 7, 1997
- ------------------------------------------
Sir Ronald Grierson
ROBERT B. HODES Director March 7, 1997
- ------------------------------------------
Robert B. Hodes
E. JOHN PEETT Director March 7, 1997
- ------------------------------------------
E. John Peett
A. ROBERT TOWBIN Director March 7, 1997
- ------------------------------------------
A. Robert Towbin
MICHAEL P. DEBLASIO Director and Principal March 7, 1997
- ------------------------------------------ Financial Officer
Michael P. DeBlasio
HARVEY B. REIN Principal Accounting Officer March 7, 1997
- ------------------------------------------
Harvey B. Rein
</TABLE>
31
<PAGE> 33
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------------
<S> <C>
GLOBALSTAR TELECOMMUNICATIONS LIMITED
Independent Auditors' Report............................................... F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Shareholders' Equity......................................... F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
GLOBALSTAR, L.P. (A development stage limited partnership)
Independent Auditors' Report............................................... F-12
Consolidated Balance Sheets................................................ F-13
Consolidated Statements of Operations...................................... F-14
Consolidated Statements of Cash Flows...................................... F-15
Consolidated Statements of Ordinary Partners' Capital and Subscriptions
Receivable.............................................................. F-16
Notes Consolidated to Financial Statements................................. F-17
</TABLE>
F-1
<PAGE> 34
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Globalstar Telecommunications Limited:
We have audited the accompanying balance sheets of Globalstar
Telecommunications Limited (a Bermuda company) as of December 31, 1996 and 1995
and the related statements of operations, shareholders' equity and cash flows
for the years ended December 31, 1996 and 1995 and for the period November 23,
1994 (date of incorporation) to December 31, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, such financial statements present fairly, in all material
respects, the financial position of Globalstar Telecommunications Limited as of
December 31, 1996 and 1995 and the results of its operations and its cash flows
for the years ended December 31, 1996 and 1995, and for the period November 23,
1994 to December 31, 1994 in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
San Jose, California
February 24, 1997
F-2
<PAGE> 35
GLOBALSTAR TELECOMMUNICATIONS LIMITED
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Investment in Globalstar, L.P.:
Redeemable preferred partnership interests........................... $302,037 $ --
Ordinary partnership interests....................................... 158,038 173,118
Ordinary partnership warrants........................................ 22,601 --
-------- --------
Total assets...................................................... $482,676 $173,118
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Interest payable..................................................... $ 1,679 $ --
Convertible preferred equivalent obligations ($310,000 principal
amount).............................................................. 300,358 --
Commitments and contingencies (Note 4)
Shareholders' equity:
Common stock, $1.00 par value, 60,000,000 shares authorized;
10,000,000 issued and outstanding................................. 10,000 10,000
Paid-in capital...................................................... 175,750 175,750
Warrants............................................................. 22,601 --
Accumulated deficit.................................................. (27,712) (12,632)
-------- --------
Total shareholders' equity............................................. 180,639 173,118
-------- --------
Total liabilities and shareholders' equity........................ $482,676 $173,118
======== ========
</TABLE>
See notes to financial statements.
F-3
<PAGE> 36
GLOBALSTAR TELECOMMUNICATIONS LIMITED
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1996 1995
------- --------
<S> <C> <C>
Equity in net loss applicable to ordinary partnership interests of
Globalstar, L.P. ....................................................... $15,080 $ 12,632
Dividend income on Globalstar, L.P. redeemable preferred partnership
interests............................................................... (17,370) --
Interest expense on convertible preferred equivalent obligations.......... 17,370 --
------- --------
Net loss.................................................................. $15,080 $ 12,632
======= ========
Net loss per share........................................................ $ 1.51 $ 1.26
======= ========
Shares used in computing net loss per share............................... 10,000 10,000
======= ========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 37
GLOBALSTAR TELECOMMUNICATIONS LIMITED
STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
COMMON STOCK
----------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL WARRANTS DEFICIT TOTAL
------ ------- ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Incorporation by Globalstar,
L.P., November 23, 1994... 12 $ 12 $ 112 $ 124
------ ------- -------- --------
Balance, December 31,
1994...................... 12 12 112 124
Sale of common stock, net of
offering costs of
$14,250................ 10,000 10,000 175,750 185,750
Repurchase of common stock
from Globalstar, L.P. .... (12) (12) (112) (124)
Net loss.................... $ (12,632) (12,632)
------ ------- -------- -------- --------
Balance, December 31,
1995...................... 10,000 10,000 175,750 (12,632) 173,118
Warrants issued in
connection with the
Globalstar Credit
Agreement................. $ 22,601 22,601
Net loss.................... (15,080) (15,080)
------ ------- -------- ------- -------- --------
Balance, December 31,
1996...................... 10,000 $10,000 $175,750 $ 22,601 $ (27,712) $180,639
====== ======= ======== ======= ======== ========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 38
GLOBALSTAR TELECOMMUNICATIONS LIMITED
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31, NOVEMBER 23, 1994
----------------------- (DATE OF INCORPORATION) TO
1996 1995 DECEMBER 31, 1994
--------- --------- --------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss..................................... $ (15,080) $ (12,632) $ --
Equity in net loss of Globalstar, L.P........ 15,080 12,632 --
Increase in redemption value of redeemable
preferred partnership interests........... (858) -- --
Dividends accrued on redeemable preferred
interests in excess of cash received...... (1,679) -- --
Amortization of convertible preferred
equivalent obligations issue costs........ 858 -- --
Change in operating liability:
Interest payable.......................... 1,679 -- --
--------- --------- -------
Net cash provided by (used in) operating
activities................................... -- -- --
--------- --------- -------
Investing activities:
Purchase of general partnership interests in
Globalstar, L.P........................... -- (185,750) --
Purchase of redeemable preferred partnership
interests in Globalstar, L.P.............. (299,500) -- --
--------- --------- -------
Net cash used in investing activities.......... (299,500) (185,750) --
--------- --------- -------
Financing activities:
Net proceeds from sale of common stock....... -- 185,750 --
Payment of debt offering costs............... (10,500) -- --
Sale of convertible preferred equivalent
obligations............................... 310,000 -- --
Sale of common stock to Globalstar, L.P...... -- -- 124
Repurchase of common stock from
Globalstar, L.P........................... -- (124) --
Advances from (repayment to) Globalstar,
L.P....................................... -- (66) 66
Deferred costs of initial public offering.... -- -- (190)
Offering proceeds used to repay initial
public offering costs deferred in prior
period.................................... -- 190 --
--------- --------- -------
Net cash provided by financing activities...... 299,500 185,750 --
--------- --------- -------
Net increase (decrease) in cash and cash
equivalents.................................. -- -- --
Cash and cash equivalents, beginning of
period....................................... -- -- --
--------- --------- -------
Cash and cash equivalents, end of period....... $ -- $ -- $ --
========= ========= ==================
Noncash transaction:
Warrants issued in connection with the
Globalstar Credit Agreement............... $ 22,601
=========
Supplemental information:
Interest paid during the year................ $ 14,833
=========
</TABLE>
See notes to financial statements.
F-6
<PAGE> 39
GLOBALSTAR TELECOMMUNICATIONS LIMITED
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
On November 23, 1994, Globalstar Telecommunications Limited ("GTL") was
incorporated as an exempted company under the Companies Act 1981 of Bermuda.
GTL's financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America.
GTL's sole business is acting as a general partner of Globalstar, L.P.
("Globalstar"), a development stage limited partnership, which is designing,
constructing and will operate a worldwide, low-earth orbit satellite-based
digital telecommunications system (the "Globalstar System"). The Globalstar
System's world-wide coverage is designed to enable its service providers to
extend modern telecommunications services to millions of people who currently
lack basic telephone service and to enhance wireless communications in areas
underserved or not served by existing or future cellular systems, providing a
telecommunications solution in parts of the world where the build-out of
terrestrial systems cannot be economically justified.
Loral Space & Communications Ltd. ("Loral"), through a subsidiary and
intermediate limited partnerships, is the managing general partner of
Globalstar. At December 31, 1996, Loral had an effective 33.8% interest in the
ordinary partnership interests of Globalstar, including 1,407,144 shares of
GTL's outstanding common stock.
On April 23, 1996, a merger between Loral Corporation ("Old Loral") and
Lockheed Martin Corporation ("Lockheed Martin") was completed. In conjunction
with the merger, Old Loral's direct and indirect interests in GTL and Globalstar
were transferred to Loral.
At December 31, 1996, GTL owns 21.3% of Globalstar's ordinary partnership
interests and 100% of Globalstar's redeemable preferred partnership interests.
As GTL's investment in Globalstar is GTL's only asset, GTL is dependent upon
Globalstar's success and achievement of profitable operations for the recovery
of its investment. Globalstar is a development stage limited partnership which
may encounter problems, delays and expenses, many of which may be beyond
Globalstar's control. These may include, but are not limited to, problems
related to technical development of the system, testing, regulatory compliance,
manufacturing and assembly, the competitive and regulatory environment in which
Globalstar will operate, marketing problems and costs and expenses that may
exceed current estimates. There can be no assurance that substantial delays in
any of the foregoing matters would not delay Globalstar's achievement of
profitable operations and effect the recoverability of GTL's investment. All
expenses necessary to maintain GTL's operations are borne by Globalstar.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment in Globalstar, L.P.
GTL accounts for its investment in Globalstar's ordinary partnership
interests on the equity basis, recognizing its allocated share of net loss for
each period since its initial investment on February 22, 1995. This investment
includes the fair value of warrants received from Globalstar in 1996 (see Note
4). The excess carrying value of this investment over GTL's interest in
Globalstar's ordinary partners' capital is attributable to the Globalstar System
Under Construction. Amortization of this excess will begin upon Globalstar's
commencement of commercial service. Dividend income on GTL's investment in
Globalstar's redeemable preferred partnership interests includes accretion of
the carrying amount of the investment to redemption value.
Convertible Preferred Equivalent Obligations (CPEOs)
Costs incurred in connection with the issuance of the CPEOs have been
netted against the proceeds of the offering. Interest expense includes accretion
of the carrying value of the CPEOs to redemption value.
F-7
<PAGE> 40
GLOBALSTAR TELECOMMUNICATIONS LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock Based Compensation
As permitted by Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation," GTL accounts for stock-based awards
to employees using the intrinsic value method in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees".
Income Taxes
GTL was incorporated in Bermuda. Bermuda does not have an income, profits
or capital gains tax. As a partner in Globalstar, however, GTL will be subject
to U.S. tax on its share of Globalstar's U.S. source income and may be subject
to tax in some foreign jurisdictions on portions of its share of the
partnership's foreign source income. Commencing with its investment in
Globalstar, GTL has been allocated its proportionate share of partnership tax
losses. The ultimate realizability of these tax loss carryforwards is dependent
upon the ability of Globalstar to generate U.S. source income, subject to
certain other restrictions imposed by the U.S. Internal Revenue Code.
Accordingly, no provision for Bermuda or U.S. income tax expense or benefit is
included in GTL's Statements of Operations.
3. SALE OF CONVERTIBLE PREFERRED EQUIVALENT OBLIGATIONS AND PURCHASE OF
REDEEMABLE PREFERRED PARTNERSHIP INTERESTS
On March 6, 1996 and April 3, 1996, GTL issued 6,000,000 shares and 200,000
shares, respectively, of its 6 1/2% Convertible Preferred Equivalent Obligations
due 2006, par value $50 per share (the "CPEOs"), for net proceeds of
$299,500,000. As of December 31, 1996, 6,200,000 shares of the CPEOs were
outstanding, of which Loral holds 2,050,000 shares. The fair value of the CPEOs,
based on quoted market prices, was approximately $329 million on December 31,
1996.
The CPEOs are subordinated to existing and future debt obligations of GTL,
are convertible into 4,769,230 shares of GTL Common Stock at a conversion price
of $65.00 per share, subject to adjustment for certain antidilution events, bear
interest at 6 1/2% per annum payable quarterly, are redeemable (at a premium
which declines over time) by GTL beginning in 2000 (or beginning in 1997 if
GTL's stock price exceeds certain defined price ranges), and, if still
outstanding, must be redeemed by GTL on March 1, 2006. Interest and redemption
payments may be made in cash or shares of common stock. In certain limited
circumstances involving a change of control of GTL, as defined, holders may
elect to convert their CPEOs into GTL common stock based on the then average
market price, subject to GTL's option to redeem the CPEOs. The CPEOs are shown
in the accompanying financial statements net of discounts and other offering
costs and are being increased to their redemption value over the term of the
CPEOs.
The net proceeds of $299,500,000 were used by GTL to purchase 4,769,230
redeemable preferred partnership interests in Globalstar. The redeemable
preferred partnership interests will convert to ordinary partnership interests
on a one-for-one basis upon any conversion of the CPEOs into GTL common stock,
will pay a quarterly preferred distribution to GTL of 6 1/2% per annum, will be
allocated losses of the partnership only after all adjusted capital accounts of
the ordinary partnership interests have been reduced to zero, and are redeemable
on terms comparable to the CPEOs. Globalstar may elect to make the quarterly
preferred distribution or redemption payments to GTL in cash or general
partnership interests. If such distribution is made in cash, GTL must make its
interest payment on the CPEOs in cash. Globalstar may elect to defer payment of
the preferred distribution; in such case, GTL may also elect to defer interest
payment on the CPEOs. However, holders of the CPEOs are entitled to certain
representation rights on the General Partners' Committee of Globalstar in the
event six consecutive interest payments are deferred.
F-8
<PAGE> 41
GLOBALSTAR TELECOMMUNICATIONS LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. SHAREHOLDERS' EQUITY
On February 14, 1995, GTL completed an initial public offering of
10,000,000 shares of common stock resulting in net proceeds of $185,750,000.
Effective February 22, 1995, GTL purchased 10,000,000 partnership interests from
Globalstar with the net proceeds of the initial public offering. Also on
February 22, 1995, GTL repurchased at original cost, the 12,000 shares of common
stock representing the initial capitalization it had sold to Globalstar in 1994.
Partners in Globalstar have the right to convert their partnership
interests into shares of GTL on a one-for-one basis following the Full
Constellation Date, as defined, of the Globalstar System and after at least two
consecutive quarters of positive net income, subject to certain annual
limitations. GTL has reserved 37,000,000 shares for this purpose.
Stock Option Arrangements
Officers, directors and employees of Globalstar are eligible to participate
in GTL's 1994 Stock Option Plan (the "Plan"), which provides for nonqualified
and incentive stock options. The plan is administered by a stock option
committee (the "Committee"), appointed by the GTL Board of Directors. The
Committee determines the option price, the option's exercise date and the
expiration date of each option (provided no option shall be exercisable after
the expiration of ten years from the date of grant). Proceeds received by GTL
for options exercised will in turn be used to purchase Globalstar ordinary
partnership interests under a one-for-one exchange arrangement.
As described in Note 2, GTL accounts for its stock-based compensation using
the intrinsic value method in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and its related
interpretations. Accordingly, no compensation expense has been recognized in
GTL's financial statements for stock-based compensation.
Statement of Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" ("SFAS 123") requires the disclosure of pro forma net
income and earnings per share had GTL adopted the fair value method as of the
beginning of 1995. Under SFAS 123, the fair value of stock-based awards to
employees is calculated through the use of option pricing models, even though
such models were developed to estimate the fair value of freely tradable, fully
transferable options without vesting restrictions, which significantly differ
from GTL's stock option awards. These models also require subjective
assumptions, including future stock price volatility and expected time to
exercise, which greatly affect the calculated values. GTL's calculations were
made using the Black-Scholes option pricing model with the following
assumptions: expected life, six months following vesting; stock volatility, 30%;
risk free interest rates, 6.25% in 1996 and 6% in 1995; and no dividends during
the expected term. GTL's calculations are based on a multiple option valuation
approach and forfeitures are recognized as they occur. If the computed fair
values of the 1996 and 1995 awards had been amortized to Globalstar's expense
over the vesting period of the awards, GTL's pro forma net loss would have
increased by $374,000 ($.04 per share) to $15,454,000 ($1.55 per share) in 1996
and would have increased by $33,000 ($.01 per share) to $12,665,000 ($1.27 per
share) in 1995.
F-9
<PAGE> 42
GLOBALSTAR TELECOMMUNICATIONS LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. SHAREHOLDERS' EQUITY (CONTINUED)
A summary of the status of the GTL stock option plan at December 31, 1996
and changes during the year then ended is presented below:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
EXERCISE
SHARES PRICE
------- -------
<S> <C> <C>
Granted in 1995 (weighted average fair value of $5.33 per
share)......................................................... 110,400 $16.625
-------
Outstanding at December 31, 1995................................. 110,400 16.625
Granted (weighted average fair value of $18.04 per share)........ 122,000 54.90
Forfeited........................................................ (1,200) 16.625
-------
Outstanding at December 31, 1996................................. 231,200 36.824
=======
</TABLE>
The options generally expire ten years from the date of grant and become
exercisable over the period stated in each option, generally ratably over a
five-year period. All options granted during the year were non-qualified stock
options with an exercise price equal to fair market value at the date of grant.
As of December 31, 1996, 18,800 shares of common stock were available for future
grant under the Plan. The GTL Board of Directors has approved, subject to
shareholder approval, a 375,000 increase in the number of shares available for
grant under the Plan.
The following table summarizes information about GTL's outstanding stock
options at December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING
NUMBER CONTRACTUAL
EXERCISE PRICE OUTSTANDING LIFE-YEARS
- ------------------------------------------------------------------ ----------- ----------------
<S> <C> <C>
$16.625........................................................... 109,200 8.7
50.375........................................................... 80,000 9.4
63.5313.......................................................... 42,000 9.9
</TABLE>
Guarantee Warrants
On December 15, 1995, Globalstar entered into a $250 million credit
agreement (the "Credit Agreement") with a group of banks. Lockheed Martin and
certain Globalstar partners guaranteed $206.3 million and $43.7 million of the
Credit Agreement, respectively. In addition, Loral agreed to indemnify Lockheed
Martin for any liability in excess of $150 million. In exchange for the
guarantee and indemnity, GTL, upon shareholder approval, issued warrants to
purchase 4,185,318 shares of GTL common stock at $26.50 per share as follows:
Loral 942,428 warrants, Lockheed Martin 2,511,190 warrants and certain
Globalstar partners 731,700 warrants. Proceeds received from the exercise of the
warrants will be used to purchase Globalstar ordinary partnership interests
under a one-for-one exchange arrangement. As part of this transaction,
Globalstar issued GTL warrants to purchase an additional 1,131,168 ordinary
partnership interests of Globalstar.
On February 12, 1997, GTL and the holders of the warrants entered into an
arrangement under which GTL agreed to accelerate the vesting and exercisability
of the warrants to purchase 4,185,318 shares of GTL common stock at $26.50 per
share and the holders agreed to exercise such warrants. GTL agreed to register
for resale the GTL common stock issuable upon exercise of the warrants. In
addition, GTL announced its intention to distribute to the holders of its common
stock rights to subscribe for and purchase 1,131,168 GTL shares for a price of
$26.50 per share of which Loral will receive rights to purchase 159,172 shares.
Loral agreed to purchase all shares not purchased upon exercise of the rights.
Upon the exercise of the warrants and the rights, GTL will receive proceeds of
approximately $140.9 million, which it will use to exercise its warrants to
purchase 5,316,486 Globalstar ordinary partnership interests at $26.50 per
interest.
F-10
<PAGE> 43
GLOBALSTAR TELECOMMUNICATIONS LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. SUBSEQUENT EVENT
On February 13, 1997, Globalstar and GTL sold units consisting of $500
million principal amount of Globalstar's 11 3/8% Senior Notes due 2004 and
warrants to purchase 1,032,250 shares of GTL common stock in a private offering.
The notes are senior in right of payment to the redeemable preferred partnership
interests, and may not be redeemed prior to February 2002 and are subject to a
prepayment premium prior to 2004. Interest on the notes is payable
semi-annually.
The indenture for the notes contains certain covenants that among other
things limit the ability of Globalstar to incur additional debt, issue preferred
stock, or pay dividends and certain distributions. In certain limited
circumstances involving a change of control of Globalstar, as defined, each note
is redeemable at the option of the holder for 101% of the principal amount plus
accrued interest.
The warrants are exercisable on February 19, 1998 at a price of $69.575 per
share. The warrants represent approximately 1.7% of Globalstar's total
partnership interests on a fully diluted basis. Any proceeds from the exercise
of the warrants will be used to purchase Globalstar ordinary partnership
interests.
Globalstar will use the net proceeds of approximately $484 million from the
offering for the construction and deployment of the Globalstar System.
6. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------
JUNE
MARCH 31, 30, SEPTEMBER 30, DECEMBER 31,
--------- ------- ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1996:
Equity in loss of Globalstar, L.P............ $(3,282) $(3,942) $(3,345) $ (4,511)
Net loss..................................... (3,282) (3,942) (3,345) (4,511)
Loss per share............................... (0.33) (0.39) (0.33) (0.45)
1995:
Equity in loss of Globalstar, L.P............ $(1,548) $(2,712) $(3,695) $ (4,677)
Net loss..................................... (1,548) (2,712) (3,695) (4,677)
Loss per share............................... (0.15) (0.27) (0.37) (0.47)
</TABLE>
F-11
<PAGE> 44
INDEPENDENT AUDITORS' REPORT
To the Partners of Globalstar, L.P.:
We have audited the accompanying consolidated balance sheets of Globalstar,
L.P. (a development stage limited partnership) and its subsidiary as of December
31, 1996 and 1995, and the related consolidated statements of operations,
partners' capital and subscriptions receivable and cash flows for the period
from March 23, 1994 (commencement of operations) to December 31, 1994, the years
ended December 31, 1995 and 1996 and cumulative. We have also audited the
accompanying consolidated statement of operations for the period from January 1,
1994 to March 22, 1994 (the pre-capital subscription period). These consolidated
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Globalstar, L.P. and its
subsidiary at December 31, 1996 and 1995, and the results of their operations
and their cash flows for the periods stated above in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
San Jose, California
February 24, 1997
F-12
<PAGE> 45
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS
(In thousands, except partnership interests)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 21,180 $ 71,602
Other current assets................................................. 606 506
------- --------
Total current assets............................................ 21,786 72,108
Property and equipment, net............................................ 1,720 1,509
Globalstar System Under Construction:
Space segment........................................................ 730,513 348,434
Ground segment....................................................... 160,520 51,823
------- --------
891,033 400,257
Deferred FCC license costs............................................. 8,690 7,056
Deferred financing costs............................................... 19,577 24,461
Other assets........................................................... 107 --
------- --------
Total assets.................................................... $942,913 $505,391
======= ========
LIABILITIES and PARTNERS' CAPITAL
Current liabilities:
Accounts payable..................................................... $ 4,401 $ 2,070
Payable to affiliates................................................ 63,937 47,569
Accrued expenses..................................................... 6,929 4,782
------- --------
Total current liabilities....................................... 75,267 54,421
Deferred revenues...................................................... 23,652 21,913
Vendor financing liability............................................. 130,694 42,219
Borrowings under long-term revolving credit facility................... 96,077 --
Commitments and contingencies (Notes 4,6,7,9,10,11 and 12)
Redeemable preferred partnership interests (4,769,230 outstanding at
December 31, 1996, $310,000 redemption value)........................ 302,037 --
Ordinary partners' capital:
Ordinary partnership interests (47,000,000 outstanding).............. 292,585 364,237
Warrants............................................................. 22,601 22,601
------- --------
Total ordinary partners' capital................................ 315,186 386,838
------- --------
Total liabilities and partners' capital......................... $942,913 $505,391
======= ========
</TABLE>
See notes to consolidated financial statements.
F-13
<PAGE> 46
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
---------------------------------------
PRE-CAPITAL CUMULATIVE
SUBSCRIPTION PERIOD MARCH 23 YEARS ENDED MARCH 23, 1994
-------------------- (COMMENCEMENT OF DECEMBER 31, (COMMENCEMENT OF
JANUARY 1 TO OPERATIONS) TO ---------------- OPERATIONS) TO
MARCH 22, 1994 DECEMBER 31, 1994 1995 1996 DECEMBER 31, 1996
-------------------- ----------------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C>
Operating expenses:
Development costs........................ $4,057 $21,279 $62,854 $42,152 $ 126,285
Marketing, general and administrative.... 2,815 6,748 17,372 18,873 42,993
------ ------- ------ ------ -------
Total operating expenses................... 6,872 28,027 80,226 61,025 169,278
Interest income............................ -- 1,783 11,989 6,379 20,151
------ ------- ------ ------ -------
Net loss................................... 6,872 26,244 68,237 54,646 149,127
Preferred distributions and related
increase in redeemable preferred
partnership interests.................... -- -- -- 17,323 17,323
------ ------- ------ ------ -------
Net loss applicable to ordinary partnership
interests................................ $6,872 $26,244 $68,237 $71,969 $ 166,450
====== ======= ====== ====== =======
</TABLE>
See notes to consolidated financial statements.
F-14
<PAGE> 47
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
MARCH 23, 1994 CUMULATIVE
(COMMENCEMENT OF YEARS ENDED MARCH 23, 1994
OPERATIONS) TO DECEMBER 31, (COMMENCEMENT OF
DECEMBER 31, ---------------------- OPERATIONS) TO
1994 1995 1996 DECEMBER 31, 1996
---------------- --------- --------- -------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(26,244) $ (68,237) $ (54,646) $(149,127)
Deferred revenues......................................... -- 21,913 1,739 23,652
Stock compensation transactions........................... -- -- 317 317
Depreciation and amortization............................. 115 398 5,858 6,371
Changes in operating assets and liabilities:
Other current assets.................................... -- (506) (100) (606)
Other assets............................................ -- -- (107) (107)
Accounts payable........................................ 638 857 1,723 3,218
Payable to affiliates................................... (1) 4,865 (3,553) 1,311
Accrued expenses........................................ 2,440 2,342 2,147 6,929
-------- --------- --------- ---------
Net cash used in operating activities...................... (23,052) (38,368) (46,622) (108,042)
-------- --------- --------- ---------
Investing activities:
Globalstar System under construction...................... (71,996) (328,261) (490,776) (891,033)
Payable to affiliates for Globalstar System under
construction............................................ 25,042 8,863 19,921 53,826
Capitalized interest payable on long-term revolving credit
facility................................................ -- -- 77 77
Accounts payable.......................................... -- 67 608 675
Vendor financing liability................................ -- 42,219 88,475 130,694
-------- --------- --------- ---------
Cash used for Globalstar System....................... (46,954) (277,112) (381,695) (705,761)
Purchases of property and equipment....................... (1,119) (888) (935) (2,942)
Deferred FCC license costs................................ (2,286) (2,535) (1,634) (6,455)
Purchases of investments.................................. -- (126,923) -- (126,923)
Maturity of investments................................... -- 126,923 -- 126,923
Other current assets...................................... (190) 190 -- --
-------- --------- --------- ---------
Net cash used in investing activities...................... (50,549) (280,345) (384,264) (715,158)
-------- --------- --------- ---------
Financing activities:
Deferred line of credit fees.............................. -- (1,875) (250) (2,125)
Proceeds from capital subscriptions receivable............ 148,661 133,780 -- 282,441
Payment of accrued capital raising costs.................. (1,500) (900) -- (2,400)
Sale of partnership interests to GTL...................... -- 185,750 -- 185,750
Sale of redeemable preferred partnership interests to
GTL..................................................... -- -- 299,500 299,500
Distributions on redeemable preferred partnership
interests............................................... -- -- (14,833) (14,833)
Prepaid interest on redeemable preferred partnership
interests............................................... -- -- 47 47
Borrowings under long-term revolving credit facility...... -- -- 106,000 106,000
Repayment of borrowings under long-term revolving credit
facility................................................ -- -- (10,000) (10,000)
-------- --------- --------- ---------
Net cash provided by financing activities.................. 147,161 316,755 380,464 844,380
-------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents....... 73,560 (1,958) (50,422) 21,180
Cash and cash equivalents, beginning of period............. -- 73,560 71,602 --
-------- --------- --------- ---------
Cash and cash equivalents, end of period................... $ 73,560 $ 71,602 $ 21,180 $ 21,180
======== ========= ========= =========
Noncash transactions:
Payable to affiliates..................................... $ 9,308 $ 9,308
======== =========
Accrual of capital raising costs.......................... $ 2,400 $ 2,400
======== =========
Deferred FCC license costs................................ $ 2,235 $ 2,235
======== =========
Warrants issued in exchange for debt guarantee............ $ 22,601 $ 22,601
========= =========
Increase in redemption value of preferred partnership
interests............................................... $ 2,537 $ 2,537
========= =========
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE> 48
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF ORDINARY PARTNERS' CAPITAL AND SUBSCRIPTIONS
RECEIVABLE
(In thousands)
ORDINARY PARTNERS' CAPITAL
<TABLE>
<CAPTION>
ORDINARY
PARTNERSHIP
INTERESTS WARRANTS TOTAL
----------- -------- --------
<S> <C> <C> <C>
Capital subscription, March 23, 1994
General partner (18,000 interests)...................... $ 50,000 $ 50,000
Limited partners (18,000 interests)..................... 225,000 225,000
Cost of raising capital................................... (2,400) (2,400)
Net losses -- pre-capital subscription period:
Year ended December 31, 1993............................ (11,510) (11,510)
January 1, 1994 to March 22, 1994....................... (6,872) (6,872)
Net loss applicable to ordinary partnership
interests -- March 23, 1994 (commencement of operations)
to December 31, 1994.................................... (26,244) (26,244)
Capital subscription, December 31, 1994
(1,000 limited partnership interests)................... 18,750 18,750
----------- --------
Capital balances, December 31, 1994....................... 246,724 246,724
Sale of 10,000 general partnership interests to GTL,
February 22, 1995....................................... 185,750 185,750
Warrant agreement in connection with debt
guarantee............................................... -- $ 22,601 22,601
Net loss applicable to ordinary partnership
interests -- Year ended December 31, 1995............... (68,237) (68,237)
----------- -------- --------
Capital balances -- December 31, 1995..................... 364,237 22,601 386,838
Stock compensation transactions by managing general
partner for the benefit of Globalstar................... 317 317
Net loss applicable to ordinary partnership
interests -- Year ended December 31, 1996............... (71,969) (71,969)
----------- -------- --------
Capital balances -- December 31, 1996..................... $ 292,585 $ 22,601 $315,186
======== ======= ========
</TABLE>
SUBSCRIPTIONS RECEIVABLE
<TABLE>
<S> <C> <C> <C>
Capital subscriptions:
March 23, 1994.......................................... $ 275,000 $275,000
December 31, 1994....................................... 18,750 18,750
----------- --------
Total subscriptions..................................... 293,750 293,750
----------- --------
Cash received........................................... (148,661) (148,661)
Credit for pre-capital subscription costs............... (11,309) (11,309)
----------- --------
(159,970) (159,970)
----------- --------
Subscriptions receivable, December 31, 1994............... 133,780 133,780
Cash received........................................... (133,780) (133,780)
----------- --------
Subscriptions receivable, December 31, 1995 and 1996...... $ -- $ --
======== ========
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE> 49
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Globalstar, L.P. ("Globalstar"), a Delaware limited partnership with a
December 31 fiscal year end, was formed in November 1993. It had no activities
until March 23, 1994, when it received capital subscriptions for $275 million
and commenced operations. The accompanying financial statements reflect the
operations of the Partnership from that date. In addition, the statements of
operations for the period January 1, 1994 to March 22, 1994 (the "Pre-Capital
Subscription Period") reflect certain costs incurred by Loral Corporation ("Old
Loral") and QUALCOMM Incorporated ("Qualcomm") and reimbursed by Globalstar
through a capital subscription credit or agreement for reimbursement, as
described in Note 9.
Effective April 23, 1996, a merger between Old Loral and Lockheed Martin
Corporation ("Lockheed Martin") was completed. In conjunction with the merger,
Old Loral's space and communications businesses, including its direct and
indirect interests in Globalstar, Globalstar Telecommunications Limited ("GTL"),
Space Systems/Loral, Inc. ("SS/L") and other affiliated businesses, as well as
certain other assets and liabilities, have been transferred to Loral Space &
Communications Ltd. ("Loral"), a Bermuda company.
The managing general partner of Globalstar is Loral/QUALCOMM Satellite
Services, L.P. ("LQSS"). The general partner of LQSS is Loral/QUALCOMM
Partnership, L.P. ("LQP"), a Delaware limited partnership comprised of
subsidiaries of Loral and Qualcomm. The managing general partner of LQP is Loral
General Partner, Inc. ("LGP"), a subsidiary of Loral.
Globalstar was founded to design, construct and operate a worldwide,
low-earth orbit ("LEO") satellite-based digital telecommunications system (the
"Globalstar System"). The Globalstar System's worldwide coverage is designed to
enable its service providers to extend modern telecommunications services to
millions of people who currently lack basic telephone service and to enhance
wireless communications in areas underserved or not served by existing or future
cellular systems, providing a telecommunications solution in parts of the world
where the build-out of terrestrial systems cannot be economically justified. On
January 31, 1995, the U.S. Federal Communications Commission ("FCC") granted the
necessary license to a wholly-owned subsidiary of LQP to construct, launch and
operate the Globalstar System. LQP has agreed to use such license for the
exclusive benefit of Globalstar.
On November 23, 1994, GTL was incorporated as an exempted company under the
Companies Act 1981 of Bermuda. GTL's sole business is acting as a general
partner of Globalstar. On February 14, 1995, GTL completed an initial public
offering of 10,000,000 shares of common stock resulting in net proceeds of
$185,750,000. Effective February 22, 1995, GTL purchased 10,000,000 partnership
interests from Globalstar with the net proceeds of the initial public offering.
The partners in Globalstar have the right to convert their partnership interests
into shares of GTL common stock on a one-for-one basis following the Full
Coverage Date, as defined, of the Globalstar System and after at least two
consecutive reported fiscal quarters of positive net income, subject to certain
annual limitations.
At December 31, 1996, Loral had an effective 33.8% interest in the ordinary
partnership interests of Globalstar, including 1,407,144 shares of GTL's common
stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development Stage Company
Globalstar is devoting substantially all of its present efforts to the
design, licensing, construction, testing, and financing of the Globalstar
System, and establishing its business. Its planned principal operations have not
commenced. Accordingly, Globalstar is a development stage company as defined in
Statement of Financial Accounting Standards ("SFAS") No. 7 "Accounting and
Reporting by Development Stage Enterprises."
F-17
<PAGE> 50
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Globalstar may encounter problems, delays and expenses, many of which may
be beyond Globalstar's control. These may include, but are not limited to,
problems related to technical development of the system, testing, regulatory
compliance, manufacturing and assembly, the competitive and regulatory
environment in which Globalstar will operate, marketing problems and costs and
expenses that may exceed current estimates. There can be no assurance that
substantial delays in any of the foregoing matters would not delay Globalstar's
achievement of profitable operations.
Use of Estimates in Preparation of Financial Statements
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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the amounts of expenses reported for the period. Actual results
could differ from estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of Globalstar
and its wholly-owned subsidiary, Globalstar Capital Corporation. All
intercompany accounts and transactions are eliminated.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and highly liquid
investments with original maturities of three months or less.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the respective
assets, generally three to eight years. Leasehold improvements are amortized
over the shorter of the lease term or the estimated useful lives of the
improvements.
Globalstar System Under Construction
Globalstar System Under Construction expenditures include and will include
progress payments and costs for the design, manufacture, test, launch and launch
insurance for 48 low-earth orbit satellites, plus additional spare satellites
(the "Space Segment"), and ground and satellite operations control centers,
gateways and subscriber terminals (handsets) (the "Ground Segment").
Globalstar intends to depreciate the Space Segment over 7 1/2 years and to
depreciate the Ground Segment over eight years as assets are placed in service.
Service is currently anticipated to commence in 1998.
Costs incurred related to the development of certain technologies, pursuant
to a cost sharing arrangement included in Globalstar's contract with Qualcomm,
and for the engineering and development of subscriber terminals, are being
charged to operations as incurred.
Financing Costs and Interest
Deferred financing costs represent costs incurred in obtaining a long-term
credit facility and the estimated fair value of a warrant agreement in
connection with a guarantee of this facility (see Note 6-Credit Facility). Such
costs are being amortized over the term of the credit facility as interest.
Total amortization of deferred financing costs for the years ended December 31,
1996 and 1995 was approximately $5,134,000 and $15,000, respectively.
F-18
<PAGE> 51
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Interest costs incurred during the construction of the Globalstar System
are capitalized. Total interest costs capitalized for the years ended December
31, 1996 and 1995 was approximately $9,900,000 and $300,000, respectively. No
interest was capitalized for the period ending December 31, 1994.
FCC License Costs
Expenditures, including license fees, legal fees and direct engineering and
other technical support, for obtaining the required FCC licenses are capitalized
and will be amortized over 7 1/2 years, the expected life of the first
generation satellites.
Deferred Revenues
Advance payments from Globalstar strategic partners to secure exclusive
rights to Globalstar service territories are deferred. These advance payments
are recoverable by the service providers through credits against a portion of
the service fees payable to Globalstar after the commencement of services.
Vendor Financing
Globalstar's contract with SS/L calls for a portion of the contract price
to be deferred as vendor financing and to be repaid, over as long as a five-year
period, commencing upon the initial service and full coverage dates of the
Globalstar System. Amounts deferred as vendor financing are capitalized as costs
of the Globalstar System Under Construction as incurred.
Preferred Partnership Distributions
Distributions accrue on the redeemable preferred partnership interests at
6 1/2% per annum. Globalstar is increasing the carrying value of the redeemable
preferred partnership interests to their ultimate redemption value. The
distributions are recorded as reductions against the ordinary partnership
capital accounts.
Stock-Based Compensation
As permitted by Statement of Financial Standards No. 123, "Accounting for
Stock-Based Compensation," Globalstar accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees".
Net (Loss) Income Allocation
Net losses are allocated among the partners in proportion to their
percentage interests until the adjusted capital account of a partner is reduced
to zero, then in proportion to, and to the extent of, positive adjusted capital
account balances and then to the general partners.
Net income is allocated among the partners in proportion to, and to the
extent of, the distributions made to the partners from distributable cash flow
for the period, as defined, then in proportion to and to the extent of negative
adjusted capital account balances and then in accordance with percentage
interests.
Under the terms of the Partnership Agreement, adjusted partners' capital
accounts are calculated in accordance with the principles of U.S. Treasury
Regulations governing the allocation of taxable income and loss including
adjustments to reflect the fair market value (including intangibles) of
partnership assets upon certain capital transactions including a sale of
partnership interests. Such adjustments are not permitted under generally
accepted accounting principles and, accordingly, are not reflected in the
accompanying consolidated financial statements.
F-19
<PAGE> 52
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Globalstar was organized as a Delaware limited partnership. As such, no
income tax provision (benefit) is included in the accompanying financial
statements since U.S. income taxes are the responsibility of its partners.
Generally, taxable income (loss), deductions and credits of Globalstar will be
passed proportionately through to its partners.
Reclassifications
Certain reclassifications have been made to conform prior-year amounts to
the current-year presentation.
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
------- ------
(IN THOUSANDS)
<S> <C> <C>
Property and equipment consists of:
Leasehold improvements.......................................... $ 473 $ 401
Furniture and office equipment.................................. 2,469 1,606
------- ------
2,942 2,007
Accumulated depreciation and amortization....................... (1,222) (498)
------- ------
$ 1,720 $1,509
======= ======
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1996
and 1995, and for the period March 23 to December 31, 1994, was $724,000,
$383,000 and $115,000, respectively.
4. GLOBALSTAR SYSTEM UNDER CONSTRUCTION
Total System Cost
As of February 1997, Globalstar estimates the cost for the design,
construction and deployment of the Globalstar System including working capital,
cash interest on anticipated borrowings and operating expenses to be
approximately $2.5 billion, as compared with approximately $2.2 billion
estimated at December 31, 1995. Actual amounts may vary from this estimate and
additional funds would be required in the event of unforeseen delays, cost
overruns, launch failures, technological risks, adverse regulatory developments,
or to meet unanticipated expenses and for system enhancements and measures to
assure system performance and readiness for the space and ground segments.
In addition, Globalstar has agreed to purchase from SS/L eight additional
spare satellites that will increase Globalstar's ability to have at least 40
satellites in service during 1999, even in the event of launch failures. If the
launch program is successful, the additional satellites will serve as ground
spares, readily available for launch to replenish the constellation as needed to
respond to satellite attrition during the first generation, or to increase
system capacity as required. If Globalstar were to experience a launch failure,
the costs associated with the construction and launch of replacements would be
substantially covered by insurance, and in that event the cost of the additional
satellites used as replacements, currently estimated at $175 million, would be
reimbursed to Globalstar.
As of February 13, 1997, Globalstar had raised or received commitments for
approximately $2.0 billion, including the vendor financing arrangements.
Globalstar intends to raise the remaining funds required for the Globalstar
System from a combination of sources, including debt issuance (which may include
an equity
F-20
<PAGE> 53
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. GLOBALSTAR SYSTEM UNDER CONSTRUCTION (CONTINUED)
component), financial support from the Globalstar partners, projected service
provider payments, projected net service revenues from initial operations,
anticipated payments from the sale of gateways and Globalstar phones and
placement of partnership interests with new and existing strategic investors.
Although Globalstar believes it will be able to obtain these additional funds,
there can be no assurance that such funds will be available on favorable terms
or on a timely basis, if at all.
The Space Segment
Globalstar has entered into a contract with SS/L, an affiliate of Loral and
a limited partner of LQSS, to design, manufacture, test and launch its 56
satellite constellation. The price of the contract consists of three parts, the
first for non-recurring work at a price not to exceed $117.1 million, the second
for recurring work at a fixed price of $15.6 million per satellite (including
certain performance incentives of up to approximately $1.9 million per
satellite) and the third for launch services and insurance. SS/L has agreed to
obtain launch vehicles and arrange for the launch of Globalstar's satellites on
Globalstar's behalf for all 56 satellites, and obtain insurance to cover the
replacement cost of satellites or launch vehicles lost in the event of a launch
failure. In certain circumstances these amounts are subject to equitable
adjustment in light of future market conditions, which may, in turn, be
influenced by international political developments. Any change in such
assumptions may result in an increase in the costs paid by Globalstar, which may
be substantial. Termination by Globalstar of this contract would result in
termination fees, which may be substantial.
During 1996, Globalstar authorized SS/L to alter its original launch plans
and procure three launches of the Starsem Soyuz launch vehicle, which will
launch four Globalstar satellites each. The selection of these launch vehicles
is part of a strategy to place on-orbit a constellation of at least 40
satellites by the first quarter of 1999 even in the event of launch failures. As
a result of this decision, total costs for launch vehicles and insurance are
expected to be approximately $455 million.
SS/L has entered into fixed-price subcontracts aggregating approximately
$650 million, with certain of Globalstar's direct or indirect limited partners.
Some of these contracts are subject to adjustment.
Globalstar's space segment contract with SS/L calls for a portion of the
contract price to be deferred as vendor financing (see Note 5.).
The Ground Segment
Globalstar has entered into a contract with Qualcomm providing for the
design, development, manufacture, installation, testing and maintenance of four
gateways, two ground operations control centers and 100 pre-production
subscriber terminals. The contract provides for reimbursement to Qualcomm,
subject to a cap for certain joint development efforts, for contract costs
incurred, plus a 12% fee thereon. Termination by Globalstar of its contract with
Qualcomm would result in delays and termination fees, which may be substantial.
A portion of the ground operations control center software is being developed by
Globalstar.
Qualcomm is currently preparing a revised estimate of costs under its
contract with Globalstar and has given Globalstar indication that, due to
additional integration testing procedures to support system readiness on
schedule, scope changes to add features, capabilities and functions, cost growth
and other factors, the total cost may increase to $545 million. The Qualcomm
estimate is subject to further review by Globalstar. In addition, Globalstar has
authorized the expenditure of $25 million for the development of additional
service features and $30 million to fund development efforts of additional
handset suppliers.
Globalstar and its strategic service providers intend to jointly finance
the procurement of 33 gateways for resale to service providers, thereby
accelerating the deployment of gateways around the world prior to the
F-21
<PAGE> 54
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. GLOBALSTAR SYSTEM UNDER CONSTRUCTION (CONTINUED)
In-Service Date. Globalstar has agreed to finance approximately $80 million of
the cost of these gateways and expects to recover its cost from the resale of
these gateways to service providers.
Globalstar will receive from Qualcomm or its licensee(s) a payment of
approximately $400,000 for each installed gateway sold to a Globalstar service
provider. In addition, Globalstar will receive a payment of up to $10 on each
Globalstar subscriber terminal sold, until Globalstar funding of that design has
been recovered.
Globalstar has entered into an agreement with Lockheed Martin for the
development and delivery of two satellite operations control centers and 33
telemetry and command units for the Globalstar System. The maximum contract
price is $25.1 million and provides for reimbursement to Lockheed Martin for
contract costs incurred such as labor, materials, travel, license fees,
royalties and general and administrative expenses. Lockheed Martin will receive
a 12% fee under the contract, 6% of which is payable at the time the costs are
incurred, with the remainder payable upon achievement of certain milestones.
Globalstar will own any intellectual property produced under the contract.
5. VENDOR FINANCING LIABILITY
Globalstar's space segment contract with SS/L calls for approximately $310
million of the contract price to be deferred as vendor financing. Of the $310
million, $90 million is interest bearing at the 30-day LIBOR rate plus 3% per
annum. The remaining $220 million of vendor financing is non-interest bearing.
Globalstar will repay the non-interest bearing portions as follows: $49 million
following the launch and acceptance of 24 or more satellites (the "Preliminary
Constellation"), $61 million upon the launch and acceptance of 48 or more
satellites (the "Full Constellation"), and the remainder in equal installments
over the five-year period following acceptance of the Preliminary and Full
Constellations. Payment of the $90 million interest bearing vendor financing
will be deferred until December 31, 1998 or the Full Constellation Date,
whichever is earlier. Thereafter, interest and principal will be repaid in
twenty equal quarterly installments over the next five years. At December 31,
1996 and 1995, approximately $72.0 million and $21.5 million, respectively, of
the vendor financing liability was interest bearing.
6. CREDIT FACILITY
On December 15, 1995, Globalstar entered into a $250 million credit
agreement (the "Credit Agreement") with a group of banks. Lockheed Martin,
Qualcomm, SS/L and another Globalstar partner have guaranteed $206.3 million,
$21.9 million, $11.7 million and $10.1 million of the Credit Agreement,
respectively. In addition, Loral agreed to indemnify Lockheed Martin for any
liability in excess of $150 million. The Credit Agreement provides that
Globalstar may select loans at varying interest rates, including the Eurodollar
rate plus 5/8%. Globalstar pays a commitment fee on the unused portion. The
Credit Agreement contains covenants requiring Globalstar to meet certain
financial ratios including minimum net worth of $200 million and limits
additional indebtedness and the payment of cash distributions. The Credit
Agreement expires on December 15, 2000.
In exchange for the guarantee and indemnity, GTL issued warrants to
purchase 4,185,318 shares of GTL common stock at $26.50 as follows: Loral
942,428 warrants, Lockheed Martin 2,511,190 warrants, Qualcomm 367,131 warrants,
SS/L 195,094 warrants and another Globalstar partner 169,475 warrants. Proceeds
from the exercise of the warrants will be used to purchase Globalstar ordinary
partnership interests under a one-for-one exchange arrangement. As part of this
transaction, Globalstar issued GTL warrants to purchase an additional 1,131,168
ordinary partnership interests of Globalstar. The estimated fair value of the
warrant agreement has been recorded as a deferred financing cost in the
accompanying financial statements. Globalstar has also agreed to pay the
guarantors, other than Lockheed Martin, a fee equal to 1.5% per annum of the
average
F-22
<PAGE> 55
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. CREDIT FACILITY (CONTINUED)
guaranteed amount outstanding under the Credit Agreement. Such fee will be
deferred and will be paid with interest commencing 90 days after the expiration
of the Credit Agreement.
On February 12, 1997, GTL and the holders of the warrants entered into an
arrangement under which GTL agreed to accelerate the vesting and exercisability
of the warrants to purchase 4,185,318 shares of GTL common stock at $26.50 per
share and the holders agreed to exercise such warrants. GTL also agreed to
register for resale the GTL shares issuable upon exercise of the warrants. In
addition, GTL announced its intention to distribute to the holders of its common
stock rights to subscribe for and purchase 1,131,168 GTL shares for a price of
$26.50 per share of which Loral will receive 159,172 rights. Loral agreed to
purchase all GTL shares not purchased upon exercise of the rights. Upon the
exercise of the warrants and the rights, GTL will receive proceeds of
approximately $140.9 million, which it will use to exercise warrants to purchase
5,316,486 Globalstar ordinary partnership interests at $26.50 per interest.
Globalstar will use such proceeds for the construction of the Globalstar System.
7. COMMITMENTS
The following table presents the future minimum lease payments required
under operating leases that have an initial lease term in excess of one year (in
thousands):
<TABLE>
<S> <C>
1997................................................ $1,045
1998................................................ 1,067
1999................................................ 1,090
2000................................................ 789
2001................................................ 156
Thereafter.......................................... 767
------
Total minimum payments required..................... $4,914
======
</TABLE>
Rent expense for the years ended December 31, 1996 and 1995, and the period
March 23 to December 31, 1994, was approximately $1,067,000, $934,000, and
$373,000, respectively.
8. SALE OF REDEEMABLE PREFERRED PARTNERSHIP INTERESTS
On March 6, 1996 and April 3, 1996, GTL purchased 4,615,385 and 153,845
redeemable preferred partnership interests ("RPPIs"), respectively, in
Globalstar using the net proceeds of $299,500,000 from GTL's sale of its
Convertible Preferred Equivalent Obligations (the "CPEOs"). The RPPIs will
convert to ordinary general partnership interests on a one-for-one basis upon
any conversion of the CPEOs, will pay a quarterly preferred distribution to GTL
of 6 1/2% per annum, will be allocated losses of the partnership only after all
adjusted capital accounts of the ordinary partnership interests have been
reduced to zero, and are redeemable on terms comparable to the CPEOs. If still
outstanding, the RPPIs must be redeemed by Globalstar on March 1, 2006 for the
aggregate amount of $310,000,000 plus all unpaid distributions. Globalstar may
elect to make the quarterly preferred distribution and redemption payments to
GTL in cash or general partnership interests. If such distribution is made in
cash, GTL must make its interest payment on the CPEOs in cash. Globalstar may
elect to defer payment of the preferred distribution; in such case, GTL may also
elect to defer interest payment on the CPEOs, however, holders of the CPEOs are
entitled to certain representation rights on the General Partners' Committee of
Globalstar in the event six consecutive interest payments are deferred. Through
December 31, 1996, all payments have been made in cash on a timely basis.
F-23
<PAGE> 56
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. ORDINARY PARTNERS' CAPITAL
Initial Capital Subscriptions
Prior to the commencement of Globalstar's operations on March 23, 1994,
Loral and Qualcomm undertook independent efforts at their own risk to explore
the feasibility of a Globalstar-type system. Efforts to develop the Globalstar
System were formalized with the initial funding of Globalstar on March 23, 1994
through capital subscriptions of $50,000,000 for 18,000,000 general partner
interests and $225,000,000 for an aggregate of 18,000,000 limited partner
interests. In connection with the initial capital subscriptions, the partners of
Globalstar agreed to reimburse Loral and Qualcomm for certain expenditures
totaling $18,382,000, incurred related to such efforts from January 1, 1993
through March 22, 1994. These expenditures included development costs and
marketing, general and administrative expenses related to the Globalstar System.
The statements of operations include the costs for these periods under the
heading Pre-Capital Subscription Period.
In addition, costs of $2,235,000 were incurred in connection with the FCC
license application. The aggregate expenditures by Loral and Qualcomm of
$20,617,000 were reimbursed through a credit of $11,309,000 issued to the
general partner as a reduction of its required capital subscription payment and
a payment to Qualcomm of $9,308,000. The reimbursed expenses of $18,382,000 have
been charged to partners' capital as of the date of the capital subscription
agreement and allocated to the partners' capital accounts in accordance with the
partnership agreement. The $2,235,000 of costs relating to the FCC license
application are included in the balance sheet.
Other Arrangements
In connection with service provider arrangements in China, under which
China Telecommunications Broadcast Satellite Corporation ("China Sat") will act
as the sole distributor of Globalstar services in China, China Sat has the
right, under certain circumstances, to acquire up to 1,875,000 ordinary
partnership interests at $20 per partnership interest. China Sat may purchase
one-half of this amount currently and one-half upon reaching certain target
revenue levels.
Stock Option Arrangements
Officers and employees of Globalstar are eligible to participate in GTL's
1994 Stock Option Plan (the "Plan"), which provides for nonqualified and
incentive stock options. The plan is administered by a stock option committee
(the "Committee"), appointed by the GTL Board of Directors. The Committee
determines the option price, the option's exercise date and the expiration date
of each option (provided no option shall be exercisable after the expiration of
ten years from the date of grant). Proceeds received by GTL for options
exercised will in turn be used to purchase Globalstar ordinary partnership
interests under a one-for-one exchange arrangement.
In 1995, options to purchase 110,400 shares of GTL common stock and in
1996, options to purchase 122,000 shares of GTL common stock were granted under
the Plan. The options generally expire ten years from the date of grant and
become exercisable over the period stated in each option, generally ratably over
a five-year period. All options granted in 1995 and 1996 were non-qualified
stock options with a price equal to fair market value at the date of grant. As
of December 31, 1996, 18,800 shares of common stock were available for future
grant under the Plan, no options were exercised or are exercisable and 1,200
have been cancelled.
On September 14, 1995, Loral, in its capacity as managing general partner,
granted certain of its officers options to purchase 140,000 shares of the GTL
common stock owned by Loral at an exercise price of $20.00 per share. On
December 12, 1995 Loral, in its capacity as managing general partner, granted
non-employee
F-24
<PAGE> 57
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. ORDINARY PARTNER'S CAPITAL (CONTINUED)
directors of Loral options to purchase 200,000 shares of the GTL common stock
owned by Loral at an exercise price of $33.375 per share. Such exercise prices
were greater than or equal to the market price at grant date. These options are
immediately exercisable, and expire 12 years from date of grant; no options were
exercised or cancelled during the year.
On October 9, 1996, Loral, in its capacity as managing general partner,
granted certain of its officers options to purchase 152,000 shares of the GTL
common stock owned by Loral at a price $25.375 below market price on the grant
date. Such options vest over a three year period and expire 10 years from date
of grant; no options were exercised or cancelled during the year.
In April and December 1996, Loral granted certain officers and employees of
Globalstar options to purchase 99,000 shares of Loral common stock at $10.50 per
share and 5,000 shares of Loral common stock at $18.9375 per share,
respectively. Such exercise prices were equal to the market price at grant date.
These options expire ten years from the date of grant and become exercisable
ratably over a five year period.
As described in Note 2, Globalstar accounts for its stock-based
compensation using the intrinsic value method in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
its related interpretations. Except for $317,000 of compensation expense in 1996
related to the below market option grant, no compensation expense has been
recognized in Globalstar's financial statements for stock-based compensation.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123") requires the disclosure of pro forma net
income and earnings per share had Globalstar adopted the fair value method as of
the beginning of 1995. Under SFAS 123, the fair value of stock-based awards to
employees is calculated through the use of option pricing models, even though
such models were developed to estimate the fair value of freely tradable, fully
transferable options without vesting restrictions, which significantly differ
from Globalstar's stock option awards. These models also require subjective
assumptions, including future stock price volatility and expected time to
exercise, which greatly affect the calculated values. Globalstar's calculations
were made using the Black-Scholes option pricing model with the following
weighted average assumptions: expected life, six months following vesting; stock
volatility, 30%; risk free interest rates, 6.25% in 1996 and 6% in 1995; and no
dividends during the expected term. Globalstar's calculations are based on a
multiple option valuation approach and forfeitures are recognized as they occur.
If the computed fair values of the 1996 and 1995 awards (including the
stock-based awards made by Loral to its officers and directors on Globalstar's
behalf) had been amortized to expense over the vesting period of the awards, the
pro forma net loss applicable to ordinary partnership interests would have
increased by $1,755,000 to $73,724,000 in 1996 and would have increased by
$156,000 to $68,393,000 in 1995.
A summary of the status of the GTL stock option plan at December 31, 1996
and changes during the year then ended is presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
------- --------
<S> <C> <C>
Granted in 1995 (weighted average fair value $5.33 per share).... 110,400 $ 16.625
Outstanding at December 31, 1995................................. 110,400 16.625
Granted (weighted average fair value $18.04 per share)........... 122,000 54.90
Forfeited........................................................ (1,200) 16.625
--------
-
Outstanding at December 31, 1996................................. 231,200 36.824
=========
</TABLE>
F-25
<PAGE> 58
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. ORDINARY PARTNER'S CAPITAL (CONTINUED)
The following table summarizes information about the stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER REMAINING
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE-YEARS
------------------------------------------------------- ----------- ----------------------
<S> <C> <C>
$16.625 ............................................... 109,200 8.7
50.375 ............................................... 80,000 9.4
63.5313............................................... 42,000 9.9
</TABLE>
10. PENSIONS AND OTHER EMPLOYEE BENEFITS
Prior to April 23, 1996, Globalstar employees were eligible to participate
in the employee benefit plans of Old Loral. Globalstar was charged for the
actual costs of these benefits which for the period March 23 through December
31, 1994, amounted to $321,000, including $55,000 relating to pensions and
retiree health care and life insurance benefits. The costs incurred for the year
ended December 31, 1995 amounted to $710,000, including $121,000 relating to
pensions and retiree health care and life insurance benefits. In April 1996,
separate pension, postretirement health care and life insurance and employee
savings plans were established by Globalstar.
Pensions: Globalstar maintains a noncontributory pension plan and a
supplemental pension plan covering certain employees. Eligibility for
participation in these plans vary and benefits are generally based on members'
compensation and years of service. Plan assets are generally invested in U.S.
government and agency obligations and listed stocks and bonds.
Pension cost for the year ended December 31, 1996 includes the following
components (in thousands):
<TABLE>
<S> <C>
Service cost-benefits earned during the period............................ $ 213
Interest cost on projected benefit obligation............................. 195
Actual return on plan assets.............................................. (134)
Net amortization and deferral............................................. (151)
--------
Total pension cost.............................................. $ 123
========
</TABLE>
The following presents the plan's funded status and amounts recognized in
the balance sheet at December 31, 1996 (in thousands):
<TABLE>
<S> <C>
Actuarial present value of benefit obligations:
Vested benefits......................................................... $ 2,944
========
Accumulated benefits.................................................... $ 3,129
Effect of projected future salary increases............................. 764
--------
Projected benefits...................................................... 3,893
Plan assets at fair value................................................. 4,156
--------
Plan assets in excess of projected benefit obligation..................... 263
Unrecognized net gain..................................................... 386
--------
Pension liability......................................................... $ 123
========
</TABLE>
F-26
<PAGE> 59
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. PENSIONS AND OTHER EMPLOYEE BENEFITS (CONTINUED)
The principal actuarial assumptions were:
<TABLE>
<S> <C>
Discount rate............................................................... 7.75%
Rate of increase in compensation levels..................................... 4.50%
Expected long-term rate of return on plan assets............................ 9.50%
</TABLE>
Postretirement Health Care and Life Insurance Benefits: In addition to
providing pension benefits, Globalstar provides certain health care and life
insurance benefits for retired employees and dependents. Participants are
eligible for these benefits when they retire from active service and meet the
eligibility requirements for Globalstar's pension plan. These benefits are
funded primarily on a pay-as-you-go basis with the retiree generally paying a
portion of the cost through contributions, deductibles and coinsurance
provisions.
Postretirement health care and life insurance costs for the year ended
December 31, 1996 include the following components (in thousands):
<TABLE>
<S> <C>
Service cost -- benefits earned during the period......................... $ 29
Interest cost on accumulated postretirement benefit obligation............ 32
Net amortization and deferral............................................. 26
Return on assets.......................................................... (2)
--------
Total postretirement health care and life insurance costs....... $ 85
========
</TABLE>
At December 31, 1996, the total accumulated postretirement benefit
obligation was $641,000. Actuarial assumptions used in determining the
accumulated postretirement benefit obligation include a discount rate of 7.75%
at December 31, 1996, and an assumed health care cost trend rate of 10.6%
decreasing gradually to an ultimate rate of 5.5% by the year 2004. Changing the
assumed health care cost trend by 1% in each year would change the accumulated
postretirement benefit obligation at December 31, 1996 by $110,000 and the
aggregate service and interest cost components by $12,000 for the year ended
December 31, 1996.
11. RELATED PARTY TRANSACTIONS
In addition to the transactions described in Notes 4, 5, 6, 8 and 9,
Globalstar has a number of other transactions with its affiliates. Globalstar
believes that the arrangements are as favorable to Globalstar as could be
obtained from unaffiliated parties. The following describes these related-party
transactions.
Globalstar has granted to SS/L an irrevocable, royalty-free, non-exclusive
license to use certain intellectual property expressly developed in connection
with the SS/L agreement provided that SS/L will not use, or permit others to
use, such license for the purpose of engaging in any business activity that
would be in material competition with Globalstar. Globalstar has similarly
agreed that it will not license such intellectual property if it will be used
for the purpose of designing or building satellites that would be in competition
with SS/L.
Globalstar has granted to Qualcomm an irrevocable, non-exclusive, worldwide
perpetual license to intellectual property owned by Globalstar in the Ground
Segment and developed pursuant to the Qualcomm agreement. Qualcomm may, pursuant
to such grant, use the intellectual property for applications other than the
Globalstar System provided that Qualcomm may not for a period of three years
after its withdrawal as a strategic partner or prior to the third anniversary of
the Full Constellation Date, whichever is earlier, engage in any business
activity that would be in competition with the Globalstar System. The grant of
intellectual property to Qualcomm described above is generally royalty free.
Under certain specified circumstances, however, Qualcomm will be required to pay
a 3% royalty fee on such intellectual property.
F-27
<PAGE> 60
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. RELATED PARTY TRANSACTIONS (CONTINUED)
A support agreement was entered into among Qualcomm, Loral and Globalstar
pursuant to which Qualcomm agreed to (i) assist Globalstar and SS/L with
Globalstar's system design, (ii) support Globalstar and Loral with respect to
various regulatory matters, including the FCC application and (iii) assist
Globalstar and Loral in their marketing efforts with respect to Globalstar. For
the years ended December 31, 1996 and 1995, and for the period March 23 through
December 31, 1994, Qualcomm has received approximately $1,823,000, $2,712,000
and $2,431,000, respectively, for costs incurred in rendering such support and
assistance.
Certain of Globalstar's limited partners have signed agreements granting
them the right to provide Globalstar System services to users in specific
countries on an exclusive basis, as long as specified minimum levels of
subscribers are met. These service providers will receive certain discounts from
Globalstar's expected pricing schedule generally over a five-year period.
Globalstar has entered into consulting agreements with certain limited
partners. Costs incurred under these arrangements for the years ended December
31, 1996 and 1995, and for the period March 23 through December 31, 1994, were
$496,000, $1,411,000 and $471,000, respectively. Globalstar anticipates that
similar agreements may be entered into with other strategic partners in the
future.
Current payable to affiliates consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
SS/L................................................... $22,572 $26,126
Qualcomm............................................... 40,903 21,443
Loral.................................................. 462 --
------- -------
Total.................................................. $63,937 $47,569
======= =======
</TABLE>
Commencing after the initiation of Globalstar services, LQP, the general
partner of LQSS, will be paid an annual management fee equal to 2.5% of
Globalstar's revenues up to $500 million plus 3.5% of revenues in excess of $500
million. Should Globalstar incur a net loss in any year following commencement
of services, the management fee for that year will be reduced by 50% and LQP
will reimburse Globalstar for management fee payments, if any, received in any
prior quarter of such year, sufficient to reduce its management fee for the year
to 50%. No management fees have been paid to date.
12. REGULATORY MATTERS
Globalstar and its operations are, and will be, subject to substantial U.S.
and international regulation, including required regulatory approvals in each
country in which Globalstar intends to provide service. Globalstar's business
may be significantly affected by regulatory activities.
13. SUBSEQUENT EVENT
On February 13, 1997, Globalstar and GTL sold units consisting of $500
million principal amount of Globalstar's 11 3/8% Senior Notes due 2004 and
warrants to purchase 1,032,250 shares of GTL common stock in a private offering.
The notes are senior in right of payment to the redeemable preferred partnership
interests, may not be redeemed prior to February 2002 and are subject to a
prepayment premium prior to 2004. Interest on the notes is payable
semi-annually.
The indenture for the notes contains certain covenants that among other
things limit the ability of Globalstar to incur additional debt, issue preferred
stock, or pay dividends and certain distributions. In certain
F-28
<PAGE> 61
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. SUBSEQUENT EVENT (CONTINUED)
limited circumstances involving a change of control of Globalstar, as defined,
each note is redeemable at the option of the holder for 101% of the principal
amount plus accrued interest.
The warrants are exercisable on February 19, 1998 at a price of $69.575 per
share. The warrants represent approximately 1.7% of Globalstar's total
partnership interests on a fully diluted basis.
Globalstar will use the net proceeds of approximately $484 million from the
offering for the construction and deployment of the Globalstar System.
F-29
<PAGE> 62
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ------------------------------------------------------------------------------------
<S> <C>
3.1 Memorandum of Association of Globalstar Telecommunications Limited*
3.2 Bye-Laws of Globalstar Telecommunications Limited*
4.1 Indenture dated as of March 6, 1996 relating the Company's 6 1/2% Convertible
Preferred Equivalent Obligations due 2006**
4.2 Indenture dated as of February 15, 1997 relating to Globalstar's 11 3/8% Senior
Notes due 2004+
10.1 Amended and Restated Agreement of Limited Partnership of Globalstar, L.P., dated as
of March 6, 1996, among Loral/Qualcomm Satellite Services, L.P., Globalstar
Telecommunications Limited, AirTouch Satellite Services, San Giorgio S.p.A.,
Hyundai/Dacom, Loral/DASA Globalstar, L.P., Loral Globalstar, L.P., TE.S.A.M. and
Vodastar Limited+
10.2 Subscription Agreements by and between Globalstar, L.P., and each of AirTouch
Communications, Alcatel Spacecom, Loral General Partner, Inc., Hyundai/Dacom and
Vodastar Limited*
10.3 Subscription Agreement by and between Globalstar, L.P. and Loral/Qualcomm Satellite
Services, L.P.*
10.4 Satellite Procurement Letter Agreement by and among Globalstar, L.P., Hyundai
Electronics Industries Co., Ltd. and Space Systems/Loral, Inc.*
10.5 Contract for OmniTRACS Like Services Agreement between Globalstar, L.P. and Qualcomm
Incorporated*
10.6 Support Agreement by and among Qualcomm Incorporated, Globalstar, L.P. and
Loral/Qualcomm Satellite Services, Inc.*
10.7 Qualcomm Licensee Letter Agreement by and among Globalstar, L.P., Hyundai
Electronics Industries Co., Ltd. and Qualcomm Incorporated.*
10.8 Contract between Globalstar, L.P. and Space Systems/Loral, Inc.*
10.9 Contract for the Development of Certain Portions of the Ground Operations Control
Center between Globalstar and Loral Western Development Laboratories.*
10.10 Contract for the Development of Satellite Orbital Operations Centers between
Globalstar and Loral Aerosys, a division of Loral Aerospace Corporation.*
10.11 1994 Stock Option Plan.*++
10.12 Revolving Credit Agreement dated as of December 15, 1995, as amended on March 25,
1996, among Globalstar, certain banks parties thereto and Chemical Bank, as
Administrative Agent+
10.13 Registration Rights Agreement dated March 6, 1996 relating to the Company's 6 1/2%
Convertible Preferred Equivalent Obligations due 2006**
10.14 Warrant Agreement dated as of February 19, 1997 relating to Warrants to purchase
1,032,250 shares of Common Stock+
10.15 Registration Rights Agreement dated February 19, 1997 relating to Globalstar's
11 3/8% Senior Notes due 2004 and the Company's Warrants to purchase 1,032,250
shares of Common Stock issued in connection therewith+
12 Statement Regarding Computation of Ratios+
23.1 Consent of Deloitte & Touche LLP+
27 Financial Data Schedule (EDGAR only)+
</TABLE>
- ---------------
* Incorporated by reference to the Company's Registration Statement on Form S-1
(No. 33-86808).
** Incorporated by reference to the Company's Registration Statement on Form S-3
(No. 333-6477).
+ Filed herewith.
++ Management compensation plan.
(b) Reports on Form 8-K
None
F-30
<PAGE> 1
EXHIBIT 4.2
CONFORMED COPY
===========================================================
GLOBALSTAR, L.P.
GLOBALSTAR CAPITAL CORPORATION,
Issuers
11 3/8% Senior Notes due 2004
INDENTURE
Dated as of February 15, 1997
THE BANK OF NEW YORK,
Trustee
===========================================================
<PAGE> 2
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1) .............................. 7.10
(a)(2) .............................. 7.10
(a)(3) .............................. N.A.
(a)(4) .............................. N.A.
(b) .............................. 7.08; 7.10
(c) .............................. N.A.
311(a) .............................. 7.11
(b) .............................. 7.11
(c) .............................. N.A.
312(a) .............................. 2.05
(b) .............................. 11.03
(c) .............................. 11.03
313(a) .............................. 7.06
(b)(1) .............................. N.A.
(b)(2) .............................. 7.06
(c) .............................. 11.02
(d) .............................. 7.06
314(a) .............................. 4.02;
4.15; 11.02
(b) .............................. N.A.
(c)(1) .............................. 11.04
(c)(2) .............................. 11.04
(c)(3) .............................. N.A.
(d) .............................. N.A.
(e) .............................. 11.05
(f) .............................. 4.15
315(a) .............................. 7.01
(b) .............................. 7.05; 11.02
(c) .............................. 7.01
(d) .............................. 7.01
(e) .............................. 6.11
316(a)(last sentence).............................. 11.06
(a)(1)(A) .............................. 6.05
(a)(1)(B) .............................. 6.04
(a)(2) .............................. N.A.
(b) .............................. 6.07
317(a)(1) .............................. 6.08
(a)(2) .............................. 6.09
(b) .............................. 2.04
318(a) .............................. 11.01
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
ARTICLE 1 Page
----
Definitions and Incorporation by Reference
SECTION 1.01. Definitions ............................ 1
SECTION 1.02. Other Definitions ...................... 24
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act ........................ 24
SECTION 1.04. Rules of Construction .................. 25
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating ........................ 26
SECTION 2.02. Execution and Authentication ........... 26
SECTION 2.03. Registrar and Paying Agent ............. 27
SECTION 2.04. Paying Agent To Hold Money in Trust..... 27
SECTION 2.05. Securityholder Lists ................... 28
SECTION 2.06. Transfer and Exchange .................. 28
SECTION 2.07. Replacement Securities ................. 29
SECTION 2.08. Outstanding Securities ................. 29
SECTION 2.09. Temporary Securities ................... 30
SECTION 2.10. Cancellation ........................... 30
SECTION 2.11. Defaulted Interest ..................... 30
SECTION 2.12. CUSIP Number ........................... 31
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee ..................... 31
SECTION 3.02. Selection of Securities To Be
Redeemed ............................. 31
SECTION 3.03. Notice of Redemption ................... 32
SECTION 3.04. Effect of Notice of Redemption ......... 33
SECTION 3.05. Deposit of Redemption Price ............ 33
SECTION 3.06. Securities Redeemed in Part ............ 33
<PAGE> 4
2
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities .................. 34
SECTION 4.02. SEC Reports ............................ 34
SECTION 4.03. Limitation on Consolidated Debt ........ 35
SECTION 4.04. Future Guarantors ...................... 37
SECTION 4.05. Limitation on Restricted Payments....... 37
SECTION 4.06. Dividend and Other Payment Restrictions
Affecting Subsidiaries ................ 40
SECTION 4.07. Asset Dispositions ..................... 41
SECTION 4.08. Transactions with Affiliates ........... 42
SECTION 4.09. Limitation on the Issuance and Sales
of Capital Stock of Restricted
Subsidiaries ......................... 45
SECTION 4.10. Change of Control ...................... 45
SECTION 4.11. Limitation on Liens .................... 46
SECTION 4.12. Business Activities .................... 48
SECTION 4.13. Maintenance of Insurance ............... 48
SECTION 4.14. Compliance Certificates; Statement by
Officers as to Default ................ 50
SECTION 4.15. Further Acts and Instruments ........... 51
SECTION 4.16. Business Activities of GlobalStar....... 51
SECTION 4.17. Calculation of Original Issue Discount.. 51
ARTICLE 5
Successor Company
SECTION 5.01. When Issuers May Merge or Transfer
Assets ............................... 51
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default ...................... 53
SECTION 6.02. Acceleration ........................... 56
SECTION 6.03. Other Remedies ......................... 56
SECTION 6.04. Waiver of Past Defaults ................ 56
SECTION 6.05. Control by Majority .................... 57
SECTION 6.06. Limitation on Suits .................... 57
<PAGE> 5
3
SECTION 6.07. Rights of Holders to Receive Payment ... 58
SECTION 6.08. Collection Suit by Trustee ............. 58
SECTION 6.09. Trustee May File Proofs of Claim ....... 58
SECTION 6.10. Priorities ............................. 59
SECTION 6.11. Undertaking for Costs .................. 59
SECTION 6.12. Waiver of Stay or Extension Laws ....... 59
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee ...................... 60
SECTION 7.02. Rights of Trustee ...................... 61
SECTION 7.03. Individual Rights of Trustee ........... 62
SECTION 7.04. Trustee's Disclaimer ................... 62
SECTION 7.05. Notice of Defaults ..................... 62
SECTION 7.06. Reports by Trustee to Holders .......... 63
SECTION 7.07. Compensation and Indemnity ............. 63
SECTION 7.08. Replacement of Trustee ................. 64
SECTION 7.09. Successor Trustee by Merger ............ 65
SECTION 7.10. Eligibility; Disqualification .......... 65
SECTION 7.11. Preferential Collection of Claims
Against Issuers ...................... 66
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance ........................... 66
SECTION 8.02. Conditions to Defeasance ............... 67
SECTION 8.03. Application of Trust Money ............. 69
SECTION 8.04. Repayment to Issuers ................... 69
SECTION 8.05. Indemnity for Government Obligations ... 69
SECTION 8.06. Reinstatement .......................... 69
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders ............. 70
SECTION 9.02. With Consent of Holders ................ 71
<PAGE> 6
4
SECTION 9.03. Compliance with Trust Indenture ........ 72
SECTION 9.04. Revocation and Effect of Consents
and Waivers .......................... 72
SECTION 9.05. Notation on or Exchange of Securities .. 72
SECTION 9.06. Trustee To Sign Amendments ............. 73
SECTION 9.07. Payment for Consent .................... 73
ARTICLE 10
Subsidiary Guaranties
SECTION 10.01. Guaranties ............................ 73
SECTION 10.02. Limitation on Liability ............... 76
SECTION 10.03. Successors and Assigns ................ 76
SECTION 10.04. No Waiver ............................. 76
SECTION 10.05. Modification .......................... 76
SECTION 10.06. Release of Subsidiary Guarantor ....... 76
ARTICLE 11
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls .......... 77
SECTION 11.02. Notices ............................... 77
SECTION 11.03. Communication by Holders with Other
Holders .............................. 78
SECTION 11.04. Certificate and Opinion as to
Conditions Precedent ................. 78
SECTION 11.05. Statements Required in Certificate
or Opinion ........................... 78
SECTION 11.06. When Securities Disregarded ........... 79
SECTION 11.07. Rules by Trustee, Paying Agent and
Registrar ............................ 79
SECTION 11.08. Legal Holidays ........................ 79
SECTION 11.09. Governing Law ......................... 79
SECTION 11.10. No Recourse Against Others ............ 79
SECTION 11.11. Successors ............................ 80
SECTION 11.12. Multiple Originals .................... 80
SECTION 11.13. Table of Contents; Headings ........... 80
Exhibit A - Form of Security
Rule 144A/Regulation S Appendix
<PAGE> 7
INDENTURE dated as of February 15, 1997, among
Globalstar, L.P., a Delaware Limited Partnership
("Globalstar"), Globalstar Capital Corporation, a
Delaware corporation ("Globalstar Capital" and,
together with Globalstar, the "Issuers") and The Bank
of New York, a New York banking corporation (the
"Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Issuers' 11
3/8% Senior Notes due 2004 (the "Initial Securities") and, if and when issued
pursuant to a registered exchange for Initial Securities, the Issuers' 11 3/8%
Senior Notes due 2004 (the "Exchange Securities") and if and when issued
pursuant to a private exchange for Initial Securities, the Issuers' 11 3/8%
Senior Notes due 2004 (the "Private Exchange Securities", together with the
Exchange Securities and the Initial Securities, the "Securities"):
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Acquired Debt" means, with respect to any specified Person,
(i) Debt of any other Person existing at the time such Person merges with or
into or consolidates with or becomes a Restricted Subsidiary of such specified
Person and (ii) Debt secured by a Lien encumbering any asset acquired by such
specified Person, which Debt or Lien was not Incurred in anticipation of, and
was outstanding prior to, such merger, consolidation or acquisition.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting
<PAGE> 8
2
securities of a Person shall be decreed to be control. The terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any transfer, conveyance, sale,
lease or other disposition (collectively, any "disposition") by the Issuers or
any Restricted Subsidiary (including any disposition by means of a
consolidation, merger or similar transaction) but excluding a disposition by a
Restricted Subsidiary to the Issuers or a Wholly-Owned Restricted Subsidiary or
by the Issuers to a Wholly-Owned Restricted Subsidiary of (i) shares of Capital
Stock or other ownership interests of a Restricted Subsidiary, (ii) all or
substantially all of the assets of the Issuers or any Restricted Subsidiary
representing a division or line of business or (iii) other assets or rights of
such Person or any of its Restricted Subsidiaries other than a disposition (a)
in the ordinary course of business, (b) that constitutes a Restricted Payment
which is permitted pursuant to Section 4.05 or (c) that is subject to the
provisions set forth in Section 5.01(a); provided, however, that a transaction
described in clauses (i), (ii) and (iii) shall constitute an Asset Disposition
only to the extent that the aggregate consideration for all such transfers,
conveyances, sales, leases or other disposition exceeds $5 million in any
12-month period.
"Attributable Debt" in respect of a Sale and Leaseback
Transaction means, as at the time of determination, the present value
(discounted at the interest rate borne by the Securities, compounded annually)
of the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale and Leaseback Transaction (including any
period for which such lease has been extended).
"Average Life" means, as of the date of determination, with
respect to any Debt or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of determination
to the dates of each successive scheduled principal payment of such Debt or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Credit Agreement" means any one or more credit
agreements (which may include or consist of revolving credits) between
Globalstar, Globalstar Capital or any
<PAGE> 9
3
Restricted Subsidiary and one or more banks or other financial institutions
providing financing for the business of Globalstar and its Restricted
Subsidiaries.
"Build-out" means the construction, acquisition, improvement,
operation and development (including all costs related thereto) of the
Globalstar System, until such time as Globalstar shall have (i) constructed at
least 64 satellites for use in the Globalstar System; (ii) launched or attempted
to launch (through "intentional ignition") at least 56 satellites for use in the
Globalstar System; and (iii) commenced commercial service of the Globalstar
System with at least 44 satellites in orbit and Operating.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" of any Person means an obligation
that is required to be classified and accounted for as a capital lease or a
liability on the face of a balance sheet of such Person in accordance with GAAP
(a "Capital Lease"). The Stated Maturity of such obligation shall be the date of
the last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without payment
of a penalty. The amount of such Debt represented by such obligation shall be
the capitalized amount thereof that would appear on the face of a balance sheet
of such Person in accordance with GAAP.
"Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock or other equity participations, including partnership interests, whether
general or limited, of such Person and shall (i) include any Special Preferred
Obligations and other preferred equivalent obligations and (ii) exclude debt
securities convertible into Capital Stock.
"Change of Control" means:
(i) the sale, lease or transfer, in one transaction or a
series of related transactions, of all or substantially all the assets
of Globalstar and the Restricted Subsidiaries;
<PAGE> 10
4
(ii) the adoption of a plan relating to the liquidation or
dissolution of Globalstar or Globalstar Capital;
(iii) one or more Dispositions which cause Loral's direct and
indirect equity interest in Globalstar to be reduced by more than 30%
as compared to its direct and indirect equity interest in Globalstar as
of December 31, 1996; or
(iv) the first day on which:
(a) Globalstar fails to own, of record and
beneficially, 100% of the equity interests and voting stock of
Globalstar Capital; or
(b) Loral fails to be, or, directly or indirectly,
fails solely to control, the sole managing general partner of
Globalstar.
Notwithstanding clauses (i), (ii) and (iv)(b) above, neither
the acquisition by GTL, Loral or any wholly owned subsidiary of Loral of a
majority of the partnership interests in, or substantially all the assets of,
Globalstar, nor the merger of Globalstar with and into GTL, Loral or any wholly
owned subsidiary of Loral shall constitute a change in control; provided,
however, that with respect to clause (iv)(b), Loral continues to control, or is
the corporate successor to, Globalstar.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission and
any survivor agency.
"Consolidated Cash Flow Available for Fixed Charges" for any
period means the Consolidated Net Income of Globalstar and its Restricted
Subsidiaries for such period plus Consolidated Interest Expense of Globalstar
and its Restricted Subsidiaries for such period, plus the following to the
extent deducted in calculating such Consolidated Net Income: (i) Consolidated
Income Tax Expense of Globalstar and its Restricted Subsidiaries for such
period, (ii) the consolidated depreciation and amortization expense included in
the income statement of Globalstar and its Restricted Subsidiaries for such
period and (iii) any non-cash expense related to the issuance to employees of
Globalstar or any
<PAGE> 11
5
Restricted Subsidiary of Globalstar of options to purchase Capital Stock of
Globalstar or such Restricted Subsidiary; provided, however, that there shall be
excluded therefrom the Consolidated Cash Flow Available for Fixed Charges (if
positive) of any Restricted Subsidiary (calculated separately, for such
Restricted Subsidiary in the same manner as provided above for Globalstar) that
is subject to a restriction which prevents the payment of dividends or the
making of distributions to Globalstar or another Restricted Subsidiary to the
extent of such restriction; provided further, however, that if Consolidated Cash
Flow Available For Fixed Charges for any period shall be less than $1,
Consolidated Cash Flow For Fixed Charges for such period shall be deemed to be
$1.
"Consolidated Income Tax Expense" for any period means the
consolidated provision for income taxes of Globalstar and the Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" means, for any period, the
consolidated interest expense included in a consolidated income statement
(excluding interest income) of Globalstar and the Restricted Subsidiaries for
such period calculated on a consolidated basis in accordance with GAAP, plus, to
the extent not so included, cash dividends paid during such period on Special
Preferred Obligations.
"Consolidated Net Income" means, for any period, the
consolidated net income (or loss) of Globalstar and the Restricted Subsidiaries
for such period determined on a consolidated basis in accordance with GAAP, less
the amount of any cash dividends paid during such period on Special Preferred
Obligations; provided, however, that there shall be excluded therefrom (i) the
net income (or loss) of any Person acquired by Globalstar or a Restricted
Subsidiary in a pooling-of-interests transaction for any period prior to the
date of such transaction, (ii) the net income (and loss) of any Person that is
not a Restricted Subsidiary except to the extent of the amount of dividends or
other distributions actually paid to Globalstar or a Restricted Subsidiary by
such Person during such period, (iii) gains (but not losses) on Asset
Dispositions by Globalstar or any Restricted Subsidiary, (iv) all extraordinary
gains and losses, (v) the cumulative effect of changes in accounting principles,
(vi) non-cash gains or losses resulting from fluctuations in currency exchange
rates, (vii) any noncash gain or loss realized on the termination of any
employee pension benefit
<PAGE> 12
6
plan and (viii) the tax effect of any of the items described in clauses (i)
through (vii) above; provided further, however, that for purposes of any
determination pursuant to the provisions of Section 4.05, (a) there shall
further be excluded therefrom the net income (but not net loss) of any
Restricted Subsidiary that is subject to a restriction which prevents the
payment of dividends or the making of distributions to Globalstar or another
Restricted Subsidiary of Globalstar to the extent of such restriction and (b)
there shall further be deducted therefrom an amount equal to the Tax Amount paid
by Globalstar during such period.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less amounts attributable to Disqualified Stock of such
Person; provided, however, that, with respect to Globalstar, adjustments
following the date of this Indenture to the accounting books and records of
Globalstar in accordance with Accounting Principles Board Opinions Nos. 16 and
17 (or successor opinions thereto) or otherwise resulting from the acquisition
of control of Globalstar by another Person shall not be given effect to.
"Debt" means (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including any such obligations Incurred in
connection with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business which are not overdue or which are being
contested in good faith), (v) every Capital Lease Obligation of such Person,
(vi) all Receivables Sales of such Person, together with any obligation of such
Person to pay any discount, interest, fees, indemnities, penalties, recourse,
expenses or other amounts in connection therewith, (vii) all obligations to
redeem Disqualified Stock issued by such Person, (viii) all Attributable Debt,
(ix) every obligation
<PAGE> 13
7
under Interest Rate and Currency Protection Agreements of such Person, (x) every
obligation of the type referred to in clauses (i) through (ix) of another Person
secured by any Lien on any property or asset of such Person (whether or not such
obligation is assumed by such Person), the amount of such obligation being
deemed to be the lesser of the fair market value of such property or assets and
the amount of the obligation so secured and (xi) every obligation of the type
referred to in clauses (i) through (x) of another Person and all dividends of
another Person the payment of which, in either case, such Person has Guaranteed.
The "amount" or "principal amount" of Debt at any time of determination as used
herein represented by (a) any Debt issued at a price that is less than the
principal amount at maturity thereof, shall be the amount of the liability in
respect thereof determined in accordance with GAAP, (b) any Receivables Sales
shall be the amount of the unrecovered capital or principal investment of the
purchaser (other than Globalstar or a Wholly-Owned Restricted Subsidiary)
thereof, excluding amounts representative of yield or interest earned on such
investment, (c) any Disqualified Stock, shall be the maximum fixed redemption or
repurchase price in respect thereof, (d) any Capital Lease Obligation, shall be
determined in accordance with the definition thereof and (e) any Permitted
Interest Rate or Currency Protection Agreement shall be zero. In no event shall
Debt include any liability for taxes. For purposes of determining any particular
amount of Debt, Guarantees or Liens with respect to letters of credit supporting
Debt otherwise included in the determination of a particular amount shall not be
included.
"Default" means an event that is, or after the passing of time
or the giving of notice both would be, an Event of Default.
"Disposition" means (i) the sale, transfer or other conveyance
by Loral or any of its Subsidiaries (other than to a wholly owned subsidiary, of
Loral) of (a) Globalstar partnership interests or (b) equity interests in any
entity (an "intermediate entity") which owns, directly or indirectly, Globalstar
partnership interests or (ii) the issue and sale by any such intermediate entity
of its equity securities to one or more third parties if and to the extent the
proceeds of such issue and sale are distributed by such intermediate entity to
Loral or any of its Subsidiaries.
<PAGE> 14
8
"Disqualified Stock" of any Person means any Capital Stock of
such Person which, by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
first anniversary of the final Stated Maturity of the Securities; provided,
however, that any Preferred Stock which would not constitute Disqualified Stock
but for provisions thereof giving holders thereof the right to require
Globalstar to repurchase or redeem such Preferred Stock upon the occurrence of a
change of control occurring prior to the first anniversary of the final Stated
Maturity of the Securities shall not constitute Disqualified Stock if the change
of control provisions applicable to such Preferred Stock are no more favorable
to the holders of such Preferred Stock than the provisions applicable to the
Securities contained in Section 4.10 and such Preferred Stock specifically
provides that Globalstar will not repurchase or redeem any such stock pursuant
to such provisions prior to Globalstar's repurchase of such Securities as are
required to be repurchased pursuant to Section 4.10; provided further, however,
that all Special Preferred Obligations shall be deemed to be Disqualified Stock.
"Eligible Institution" means a commercial banking institution
that has combined capital and surplus of not less than $500 million or its
equivalent in foreign currency, whose debt is rated "A-3" or higher or "A-" or
higher according to Moody's Investors Service, Inc. or Standard & Poor's Ratings
Group (or such similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the Securities
Act)) respectively, at the time as of which any investment or rollover therein
is made.
"Event of Default" has the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended (or any successor act) and the rules and regulations thereunder.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as
<PAGE> 15
9
of the Issue Date, including those set forth in (i) the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants, (ii) statements and pronouncements of the
Financial Accounting Standards Board, (iii) such other statements by such other
entity as approved by a significant segment of the accounting profession and
(iv) the rules and regulations of the Commission governing the inclusion of
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and similar
written statements from the accounting staff of the Commission.
"General Partners' Committee" means the committee consisting
of representatives of the general partners of Globalstar that governs the
activities of Globalstar.
"Globalstar System" means Globalstar's worldwide, low-earth
orbit, satellite-based digital telecommunications system as described in
Globalstar's Offering Memorandum dated February 13, 1997 with respect to the
Securities.
"Globaltel Russia" means Globalstar-Space Telecommunications,
a Russian closed joint stock company.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
obligations or guarantee the full faith and credit of the United States is
pledged and which have a remaining weighted Average Life to maturity of not more
than one year from the date of Investment therein.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing, or having the economic effect of
guaranteeing, any Debt of any other Person, (the "primary obligor") in any
manner, whether directly or indirectly, and including, without limitation, any
obligation of such Person, (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Debt or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such Debt,
(ii) to purchase property, securities or services for the purposes of assuring
the holder of such Debt of the payment of such Debt, or (iii) to maintain
working capital, equity capital or other financial statement condition or
liquidity
<PAGE> 16
10
of the primary obligor so as to enable the primary obligor to pay such Debt (and
"Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings correlative to
the foregoing); provided, however, that the Guarantee by any Person shall not
include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business.
"Holders" means the registered holders from time to time of
the Securities.
"Incur" means, with respect to any Debt or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, Guarantee or otherwise become liable in respect of such Debt or other
obligation including by acquisition of Subsidiaries or the recording, as
required pursuant to GAAP or otherwise, of any such Debt or other obligation on
the balance sheet of such Person (and "Incurrence", "Incurred" and "Incurring"
shall have the meanings correlative to the foregoing); provided, however, that a
change in GAAP that results in an obligation of such Person that exists at such
time becoming Debt shall not be deemed an Incurrence of such Debt and that
neither the accrual of interest nor the accretion of original issue discount
shall be deemed an Incurrence of Debt. Notwithstanding the foregoing, Globalstar
may elect to treat all or any portion of revolving credit debt of Globalstar or
a Subsidiary as being Incurred from and after any date beginning the date the
revolving credit commitment is extended to Globalstar or a Subsidiary, by
furnishing notice thereof to the Trustee, and any borrowings or reborrowings by
Globalstar or a Subsidiary under such commitment up to the amount of such
commitment designated by Globalstar as Incurred shall not be deemed to be new
Incurrence of Debt by Globalstar or such Subsidiary; provided, however, that the
undrawn portion of any such revolving credit debt shall be deemed to be
outstanding Debt until such time as the commitment thereunder is terminated. The
accretion of principal of a non-interest bearing or other discount security
shall not be deemed the Incurrence of Debt.
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Independent Financial Advisor" means an accounting, appraisal
or investment banking firm of nationally recognized standing that is, in the
judgement of the General Partners' Committee of Globalstar, qualified to
<PAGE> 17
11
perform the task for which it has been engaged and disinterested and independent
with respect to the Issuers and their Subsidiaries and Affiliates.
"Interest Rate or Currency Protection Agreement" of any Person
means any forward contract, futures contract, swap, option or other financial,
agreement or arrangement (including, without limitation, caps, floors, collars
and similar agreements) relating to, or the value of which is dependent upon,
interest rates or currency exchange rates or indices.
"Investment" by any Person means any direct or indirect loan,
advance or other extension of credit or capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) to, or purchase or
acquisition of Capital Stock, bonds, notes, debentures or other securities or
evidence of Debt issued by, any other Person, including any payment on a
Guarantee of any obligation of such other Person, but excluding any loan,
advance or extension of credit to an employee of Globalstar or any Restricted
Subsidiary in the ordinary course of business, accounts receivables and other
commercially reasonable extensions of trade credit.
"Issue Date" means the date on which the Securities are first
issued and delivered.
"Lien" means, with respect to any property or assets, any
mortgage or deed of trust, pledge, hypothecation, assignment, Receivables Sale,
deposit arrangement, security interest, lien, charge, easement (other than any
easement not materially impairing usefulness or marketability), encumbrance,
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or assets
(including, without limitation, any conditional sale or other title retention
agreement having substantially the same economic effect as any of the foregoing
or any Sale and Leaseback Transaction).
"Liquidated Damages" means additional cash interest with
respect to the Securities payable upon the occurrence of certain events as
specified in the Registration Rights Agreement dated as of February 19, 1997,
among Globalstar, Globalstar Capital, and Lehman Brothers Inc., Bear, Stearns &
Co. Inc., Donaldson, Lufkin & Jenrette
<PAGE> 18
12
Securities Corporation and Unterberg Harris, as initial purchasers.
"Loral" means Loral Space & Communications Ltd., a Bermuda
company.
"Marketable Securities" means: (i) Government Securities; (ii)
any time deposit account, money market deposit and certificate of deposit
maturing not more than 270 days after the date of acquisition issued by, or time
deposit of, an Eligible Institution; (iii) commercial paper maturing not more
than 270 days after the date of acquisition issued by a corporation (other than
an Affiliate of Globalstar) with a rating, at the time as of which any
investment therein is made, of "P-1" or higher according to Moody's Investors
Service, Inc. or "A-1" or higher according to Standard & Poor's Ratings Group
(or such similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the Securities
Act)); (iv) any banker's acceptances or money market deposit accounts issued or
offered by an Eligible Institution; (v) repurchase obligations with a term of
not more than 7 days for Government Securities entered into with an Eligible
Institution; and (vi) any fund investing exclusively in investments of the types
described in clauses (i) through (v) above.
"Net Available Proceeds" from any Asset Disposition by any
Person means cash or Marketable Securities received (including by way of sale or
discounting of a note, installment receivable or other receivable, but excluding
any other consideration received in the form of assumption by the acquiror of
Debt or other obligations relating to such properties or assets) therefrom by
such Person, net of (i) all legal, title and recording tax expenses, commissions
and other fees and expenses Incurred and all federal, state, provincial, foreign
and local taxes (including taxes payable upon payment or other distribution of
funds from a foreign subsidiary to Globalstar or another Subsidiary of
Globalstar) required to be accrued as a liability as a consequence of such Asset
Disposition, (ii) all payments made by such Person or its Restricted
Subsidiaries on any Debt which is secured by such assets in accordance with the
terms of any Lien upon or with respect to such assets or which must by the terms
of such Lien, or in order to obtain a necessary consent to such Asset
Disposition or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all
<PAGE> 19
13
distributions and other payments made to minority interest holders in Restricted
Subsidiaries of such Person or joint ventures as a result of such Asset
Disposition, (iv) appropriate amounts to be provided by such Person or any
Restricted Subsidiary thereof, as the case may be, as a reserve in accordance
with GAAP against any liabilities associated with such assets and retained by
such Person or any Restricted Subsidiary thereof, as the case may be, after such
Asset Disposition, including, without limitation, liabilities under any
indemnification obligations and severance and other employee termination costs
associated with such Asset Disposition, in each case as determined by the
General Partners' Committee of Globalstar, in its reasonable good faith judgment
evidenced by a board resolution filed with the Trustee; provided, however, that
any reduction in such reserve within twelve months following the consummation of
such Asset Disposition will be treated for all purposes of this Indenture and
the Securities as a new Asset Disposition at the time of such reduction with Net
Available Proceeds equal to the amount of such reduction, and (v) any
consideration for an Asset Disposition (which would otherwise constitute Net
Available Proceeds) that is required to be held in escrow pending determination
of whether a purchase price adjustment will be made, but amounts under this
clause (v) shall become Net Available Proceeds at such time and to the extent
such amounts are released to such Person.
"Net Cash Proceeds", with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Non-Recourse Debt" means Debt:
(i) as to which neither the Issuers nor any Restricted
Subsidiary:
(a) provides credit support of any kind (including
any undertaking, agreement or instrument that would constitute
Debt);
(b) is directly or indirectly liable (as a guarantor
or otherwise); or
<PAGE> 20
14
(c) constitutes the lender;
(ii) no default with respect to which (including any rights
that the holders thereof may have to take enforcement action against an
Issuer or any Unrestricted Subsidiary) would permit (upon notice, lapse
of time or both) any holder of any other Debt of the Issuers or any
Restricted Subsidiary to declare a default on such other Debt or cause
the payment thereof to be accelerated or payable prior to its stated
maturity; and
(iii) as to which the lenders have been notified in writing
that they will not have any recourse to the stock or assets of the
Issuers or any of their Restricted Subsidiaries.
"Offer to Purchase" means a written offer (the "Offer") sent
by Globalstar by first class mail, postage prepaid, to each holder at his
address appearing in the Securities register on the date of the Offer offering
to purchase up to the principal amount of Securities specified in such Offer at
the purchase price specified in such Offer (as determined pursuant to this
Indenture). Unless otherwise required by applicable law, the Offer shall specify
an expiration date (the "Expiration Date") of the Offer to Purchase which shall
be, subject to any contrary requirements of applicable law, not less than 30
days or more than 60 days after the date of such Offer and a settlement date for
purchase of Securities within five Business Days after the Expiration Date. The
Issuers shall notify the Trustee at least 15 Business Days (or such shorter
period as is acceptable to the Trustee) prior to the mailing of the Offer of
Globalstar's obligation to make an Offer to Purchase, and the Offer shall be
mailed by Globalstar or, at Globalstar's request, by the Trustee in the name and
at the expense of Globalstar. The Offer shall contain information concerning the
business of Globalstar and its Subsidiaries which Globalstar in good faith
believes will enable such holders to make an informed decision with respect to
the Offer to Purchase (which at a minimum will include (i) the most recent
annual and quarterly financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
documents required to be filed with the Trustee pursuant to this Indenture
(which requirements may be satisfied by delivery of such documents together with
the Offer), (ii) a description of material developments in Globalstar's
<PAGE> 21
15
business subsequent to the date of the latest of such financial statements
referred to in clause (i) (including a description of the events requiring
Globalstar to make the Offer to Purchase), (iii) if applicable, appropriate pro
forma financial information concerning the Offer to Purchase and the events
requiring Globalstar to make the Offer to Purchase and (iv) any other
information required by applicable law to be included therein). The Offer shall
contain all instructions and materials necessary to enable such holders to
tender Securities pursuant to the Offer to Purchase.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Issuers.
"Officers' Certificate" means a certificate signed by two
Officers.
"Operating" means, with respect to any satellite, that at
least 50% of the call circuits of such satellite are operating at design
performance specifications.
"Opinion of Counsel" means an opinion from legal counsel who
is acceptable to the Trustee. The counsel may be an employee of, or counsel to,
the Issuers or the Trustee.
"Permitted Interest Rate or Currency Protection Agreement" of
any Person means any Interest Rate or Currency Protection Agreement entered into
with one or more financial institutions in the ordinary course of business that
is designed to protect such Person against fluctuations in interest rates or
currency exchange rates with respect to Debt Incurred and which shall have a
notional amount no greater than the payments due with respect to the Debt being
hedged thereby and not for purposes of speculation.
"Permitted Investment" means an Investment by an Issuer or any
Restricted Subsidiary (i) in any Person as a result of which such Person becomes
a Restricted Subsidiary, (ii) in Marketable Securities, (iii) in Permitted
Interest Rate or Currency Protection Agreements, (iv) made as a result of the
receipt of noncash consideration from an Asset Disposition that was made
pursuant to and in compliance with Section 4.07 and (v) consisting of loans or
advances to employees made in the ordinary course of business not to
<PAGE> 22
16
exceed $3 million in the aggregate outstanding at any one time.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization, government or agency or political
subdivision thereof or any other entity.
"Preferred Stock" of any Person means Capital Stock of such
Person of any class or classes (however designated) that ranks prior, as to the
payment of dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares of
Capital Stock of any other class of such Person.
"principal" of a Security means the principal of the Security
plus the premium, if any, payable on the Security which is due or overdue or is
to become due at the relevant time.
"Receivables" means receivables, chattel paper, instruments,
documents or intangibles evidencing or relating to the right to payment of money
in respect of the sale of goods or services.
"Receivables Sale" of any Person means any sale of Receivables
of such Person (pursuant to a purchase facility or otherwise), other than in
connection with a disposition of the business operations of such Person relating
thereto or a disposition of defaulted Receivables for purpose of collection and
not as a financing arrangement.
"Refinance" means in respect of any Debt, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Debt in exchange or replacement for, such Debt. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Debt" means Debt that Refinances any Debt of the
Issuers or any Restricted Subsidiary existing on the Issue Date or Incurred in
compliance with this Indenture, including Debt that Refinances Refinancing Debt;
provided, however, that (i) such Refinancing Debt has a Stated Maturity no
earlier than the Stated Maturity of the Debt being Refinanced, (ii) such
Refinancing Debt has an Average Life at the time such Refinancing Debt is
Incurred
<PAGE> 23
17
that is equal to or greater than the Average Life of the Debt being Refinanced,
(iii) such Refinancing Debt has an aggregate principal amount (or if Incurred
with original issue discount, an aggregate issue price) that is equal to or less
than the aggregate principal amount (or if Incurred with original issue
discount, the aggregate accreted value) then outstanding or committed (plus fees
and expenses, including any premium and defeasance costs) under the Debt being
Refinanced, (iv) in the event the Debt being Refinanced constitutes a
Subordinated Obligation, the Refinancing Debt is subordinated to the Securities
to at least the same extent as the Debt being Refinanced and (v) Special
Preferred Obligations may only be Refinanced with Preferred Stock (other than
Preferred Stock that is Disqualified Stock), other Special Preferred Obligations
or Subordinated Obligations; provided, further, however, that Refinancing Debt
shall not include (x) Debt of a Subsidiary that Refinances Debt of the Issuers
or (y) Debt of the Issuers or a Restricted Subsidiary that Refinances Debt of an
Unrestricted Subsidiary.
"Related Person" of any Person means any other Person directly
or indirectly owning (a) 10% or more of the outstanding common equity of such
Person (or, in the case of a Person that is not a corporation, 10% or more of
the equity interest in such Person) or (b) 10% or more of the combined voting
power of the Voting Stock of such Person.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Issuers or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Restricted Subsidiary to minority
stockholders (or owners of an equivalent interest in the case of a Subsidiary
that is an entity other than a corporation)), (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock of an Issuer held
by any Person or of any Capital Stock of a Restricted Subsidiary held by any
Affiliate of the Issuers (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into
<PAGE> 24
18
Capital Stock of the Issuers that is not Disqualified Stock), (iii) the
purchase, repurchase, redemption, defeasance or other acquisition or retirement
for value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment of any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition) or
(iv) the making of any Investment in any Person (other than a Permitted
Investment).
"Restricted Subsidiary" means any Subsidiary of Globalstar,
whether existing on or after the Issue Date, unless such Subsidiary is an
Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means an arrangement relating
to property now owned or hereafter acquired whereby an Issuer or a Restricted
Subsidiary transfers such property to a Person and an Issuer or a Restricted
Subsidiary leases it from such Person.
"Securities" means the Securities issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended
(or any successor act) and the rules and regulations thereunder.
"Significant Subsidiary" means a Restricted Subsidiary that is
a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under
the Securities Act and the Exchange Act.
"Special Preferred Obligations" means (i) preferred
partnership interests of Globalstar existing as of the Issue Date and (ii) any
preferred partnership interests, convertible preferred equivalent obligations or
similar preferred obligations of Globalstar issued after the Issue Date to
finance the Build-out; provided, however, that any such preferred partnership
interests, convertible preferred equivalent obligations or similar preferred
obligations of Globalstar issued after the Issue Date shall not constitute
Special Preferred Obligations if such interest or obligation, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable at the option of the Holders), or upon the
<PAGE> 25
19
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof, in whole or in part, on or prior to the final Stated Maturity of
the Securities; provided further, however, that any such interest or obligation
which would constitute Special Preferred Obligations but for provisions thereof
giving holders thereof the right to require Globalstar to repurchase or redeem
such interest or obligation upon the occurrence of a change of control occurring
prior to the final Stated Maturity of the Securities shall constitute Special
Preferred Obligations if the change of control provisions applicable to such
interest or obligation are no more favorable to the holders of such interest or
obligation than the provisions applicable to the Securities contained in Section
4.10 and such interest or obligation specifically provides that Globalstar will
not repurchase or redeem any such interest or obligation pursuant to such
provisions prior to Globalstar's repurchase of such Securities as are required
to be repurchased pursuant to Section 4.10. Notwithstanding the foregoing,
preferred partnership interests, convertible preferred equivalent obligations or
similar preferred obligations of Globalstar issued after the Issue Date shall
not be Special Preferred Obligations unless, at the time of their issuance,
Globalstar shall certify to the Trustee that such interests or obligations shall
be designated Special Preferred Obligations.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means any Debt of the Issuers
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement to that effect.
"Subsidiary" of any Person means (i) a corporation more than
50% of the combined voting power of the outstanding Voting Stock of which is
owned, directly or indirectly, by such Person or by one or more other
<PAGE> 26
20
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person or (ii) any other Person (other than a corporation) in which such
Person, or one or more other Subsidiaries of such Person or such Person and one
or more other Subsidiaries of such Person, directly or indirectly, has at least
a majority ownership and power to direct the policies, management and affairs
thereof.
"Subsidiary Guaranty" means the Guarantee by a Subsidiary
Guarantor of the Issuers' obligations with respect to the Securities contained
in Article 10 hereof.
"Subsidiary Guarantor" means any Subsidiary which, pursuant to
the terms hereof, has executed a supplemental indenture in a form reasonably
satisfactory to the Trustee and become bound by the terms hereof, including
Article 10 hereof.
"Tax Amount" means, with respect to any year, an amount not to
exceed the sum of the ordinary income from trade or business activities and
other items of income, loss and deduction reported by Globalstar for that year
for United States federal income tax purposes multiplied by a percentage equal
to the sum of (a) the highest applicable federal corporation income tax rate for
that year (expressed as a percentage) plus (b) 8% multiplied by the excess of
100% over the highest applicable federal corporate income tax for that year
(expressed as a percentage).
"Temporary Cash Investments" means any of the following: (i)
any investment in direct obligations of the United States of America or any
agency thereof or obligations guaranteed by the United States of America or any
agency thereof, (ii) investments in time deposit accounts, certificates of
deposit and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States of America, and which bank or trust
company has capital, surplus and undivided profits aggregating in excess of
$50,000,000 (or the foreign currency equivalent thereof) and has outstanding
debt that is rated "A" (or such similar equivalent rating) or higher by at least
one nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a registered
broker dealer or mutual fund distributor, (iii) repurchase obligations with a
term of not
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21
more than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an Affiliate
of the Issuers) organized and in existence under the laws of the United States
of America or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is made of "P-1"
(or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher)
according to Standard and Poor's Ratings Group, and (v) investments in
securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by Standard & Poor's Ratings Group or "A" by Moody's
Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of this Indenture, except as
provided by Section 9.03.
"Transitory Equipment Subsidiary" means a Subsidiary of
Globalstar whose only business activity is acquiring equipment from Globalstar
for the sole purpose of selling such equipment to a service provider to
Globalstar; provided, however, that Globalstar retains a security interest in
such equipment so long as it is owned by such Subsidiary; provided further,
however, that such Subsidiary has no Debt outstanding at any time other than
Debt represented by such security interest.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer its corporate trust matters.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of
Globalstar designated as such by the General Partner's Committee as set forth
below where (a) neither Globalstar
<PAGE> 28
22
nor any of its other Subsidiaries (other than another Unrestricted Subsidiary)
(1) provides credit support for, or Guarantee of, any Debt of such Subsidiary or
any Subsidiary of such Subsidiary (including any undertaking, agreement or
instrument evidencing such Debt), (2) is directly or indirectly liable for any
Debt of such Subsidiary or any Subsidiary of such Subsidiary, or (3) has any
obligation to make additional Investments in such Subsidiary or any Subsidiary
of such Subsidiary, (b) such Subsidiary has no Debt other than Non-Recourse
Debt; provided, however, that if any Unrestricted Subsidiary Incurs any Debt
other than Non-Recourse Debt or any Non-Recourse Debt Incurred by such
Unrestricted Subsidiary shall thereafter cease for any reason to be Non-Recourse
Debt, such event shall be deemed to constitute an Incurrence of such Debt by
Globalstar and such Unrestricted Subsidiary shall be deemed to be a Restricted
Subsidiary for purposes of Section 4.04 and (c) such Subsidiary and each
Subsidiary of such Subsidiary has at least one director on its board of
directors that is not a director or executive officer of Globalstar or any
Restricted Subsidiary and (ii) any Subsidiary of an Unrestricted Subsidiary. The
General Partner's Committee may designate any Subsidiary to be an Unrestricted
Subsidiary unless such Subsidiary or any Subsidiary of such Subsidiary owns any
Capital Stock or Debt of, or owns or holds any Lien on any property of,
Globalstar or any other Subsidiary of Globalstar which is not a Subsidiary of
the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary;
provided, however, that either (A) the Subsidiary to be so designated has total
assets of $1,000 or less or (B) immediately after giving effect to such
designation, Globalstar could incur an additional $1.00 of Debt pursuant to
Section 4.03(a) and provided further, however, that Globalstar could make a
Restricted Payment in an amount equal to the greater of the fair market value
and the book value of such Subsidiary pursuant to Section 4.05 and such amount
is thereafter treated as a Restricted Payment for the purpose of calculating the
aggregate amount available for Restricted Payments thereunder. The General
Partners' Committee may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary, provided that, immediately after giving effect to such designation,
Globalstar could incur an additional $1.00 of Debt pursuant to Section 4.03(a).
Notwithstanding the foregoing, neither Globalstar Capital nor any of its
Subsidiaries shall be Unrestricted Subsidiaries.
<PAGE> 29
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"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is Pledged and which are not callable or redeemable at the issuer's option.
"Vendor Financing Facility" means any agreements between
Globalstar, Globalstar Capital and/or any Restricted Subsidiary and one or more
vendors or lessors of equipment to Globalstar, Globalstar Capital and/or any
Restricted Subsidiary (or any affiliate of any such vendor or lessor) providing
financing for the acquisition by Globalstar or any such Restricted Subsidiary of
equipment from any such vendor or lessor.
"Voting Stock" of any Person means Capital Stock of such
Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
"Wholly-Owned Restricted Subsidiary" means a Restricted
Subsidiary 99% or more of the outstanding Capital Stock or other ownership
interests of which (other than directors' qualifying shares) shall at the time
be owned by Globalstar or by one or more Wholly-Owned Restricted Subsidiaries of
Globalstar or by Globalstar and one or more Wholly-Owned Restricted Subsidiaries
of Globalstar.
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SECTION 1.02. Other Definitions.
Defined in
Term Section
---- ----------
"Affiliate Transaction" ................ 4.08
"Appendix" ............................. 2.01
"Bankruptcy Law" ....................... 6.01
"Cash Insurance" ....................... 4.13
"covenant defeasance option" ........... 8.01(b)
"Custodian" ............................ 6.01
"Debt Coverage Ratio" .................. 4.03
"Event of Default" ..................... 6.01
"Exchange Securities" .................. Recital
"Globalstar" ........................... Preamble
"Globalstar Capital" ................... Preamble
"Initial Securities" ................... Recital
"In-orbit Insurance Event" ............. 4.13
"Insurance Account" .................... 4.13
"Insurance Proceeds" ................... 4.13
"Issuers" .............................. Preamble
"legal defeasance option" .............. 8.01(b)
"Legal Holiday" ........................ 11.08
"Notice of Default" .................... 6.01
"Obligations" .......................... 10.01
"Paying Agent" ......................... 2.03
"Permitted Lien" ....................... 4.11
"Private Exchange Securities" .......... Recital
"Registrar"............................. 2.03
"Securities" ........................... Recital
"Successor Issuers" .................... 5.01
"Trustee" .............................. Preamble
SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the Commission;
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
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"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means the Issuers and
any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by Commission
rule have the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the
plural include the singular;
(6) unsecured Debt shall not be deemed to be subordinate or
junior to secured Debt merely by virtue of its nature as unsecured
Debt;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown on a balance sheet of the issuer dated such date
prepared in accordance with GAAP but accretion of principal on such
security shall not be deemed to be the Incurrence of Indebtedness;
(8) the principal amount of any Preferred Stock shall be (i)
the maximum liquidation value of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with respect
to such Preferred Stock, whichever is greater; and
(9) all references to the date the Securities were originally
issued shall refer to the date the Initial Securities were originally
issued.
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ARTICLE 2
The Securities
SECTION 2.01. Form and Dating. Provisions relating to the
Initial Securities, the Private Exchange Securities and the Exchange Securities
are set forth in the Rule 144A/Regulation S Appendix attached hereto (the
"Appendix") which is hereby incorporated in and expressly made part of this
Indenture. The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit 1 to the Appendix
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Securities, the Private Exchange Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A,
which is hereby incorporated in and expressly made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Issuers are subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Issuers). Each Security shall be dated the date of its authentication.
The terms of the Securities set forth in the Appendix and Exhibit A are part of
the terms of this Indenture.
SECTION 2.02. Execution and Authentication. Two Officers shall
sign the Securities for the Issuers by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate and deliver Securities for
original issue upon a written order of the Issuers signed by two Officers or by
an Officer and either an Assistant Treasurer or an Assistant Secretary of the
Issuers. Such order shall specify the amount of the
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Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated. The aggregate principal amount of Securities
outstanding at any time may not exceed that amount except as provided in Section
2.07.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Issuers to authenticate the Securities. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Issuers shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange.
The Issuers may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Issuers shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Issuers shall notify
the Trustee of the name and address of any such agent. If the Issuers fail to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Issuers or any of their domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar, co-registrar or transfer agent.
The Issuers initially appoint the Trustee as Registrar and
Paying Agent in connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to
each due date of the principal and interest and Liquidated Damages (if any) on
any Security, the Issuers shall deposit with the Paying Agent a sum sufficient
to pay
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such principal and interest and Liquidated Damages (if any) when so becoming
due. The Issuers shall require each Paying Agent (other than the Trustee) to
agree in writing that the Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest and Liquidated Damages (if any) on the
Securities and shall notify the Trustee of any default by the Issuers in making
any such payment. If either Issuer or a Subsidiary acts as Paying Agent, it
shall segregate the money held by it as Paying Agent and hold it as a separate
trust fund. The Issuers at any time may require a Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed by the Paying
Agent. Upon complying with this Section , the Paying Agent shall have no further
liability for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Issuers shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be
issued in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar or a co-registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of Section 8-401(1)
(or any successor provision thereto) of the Uniform Commercial Code are met.
When Securities are presented to the Registrar or a co-registrar with a request
to exchange them for an equal principal amount of Securities of other
denominations, the Registrar shall make the exchange as requested if the same
requirements are met. To permit registration of transfers and exchanges, the
Issuers shall execute and the Trustee shall authenticate Securities at the
Registrar's or coregistrar's request. The Issuers may require payment of a sum
sufficient to pay all taxes, assessments or other governmental charges in
connection with any transfer or exchange pursuant to this Section . The Issuers
shall not be required to make and the Registrar need not register
<PAGE> 35
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transfers or exchanges of Securities selected for redemption (except, in the
case of Securities to be redeemed in part, the portion thereof not to be
redeemed) or any Securities for a period of 15 days before a selection of
Securities to be redeemed or 15 days before an interest payment date.
Prior to the due presentation for registration of transfer of
any Security, the Issuers, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest and Liquidated Damages (if any) on such
Security and for all other purposes whatsoever, whether or not such Security is
overdue, and none of the Issuers, the Trustee, the Paying Agent, the Registrar
or any co-registrar shall be affected by notice to the contrary.
All Securities issued upon any transfer or exchange pursuant
to the terms of this Indenture will evidence the same debt and will be entitled
to the same benefits under this Indenture as the Securities surrendered upon
such transfer or exchange.
SECTION 2.07. Replacement Securities. If a mutilated Security
is surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Issuers shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 (or any successor provision thereto) of the Uniform Commercial
Code are met and the Holder satisfies any other reasonable requirements of the
Trustee. Such Holder shall furnish an indemnity bond sufficient in the judgment
of the Issuers and the Trustee to protect the Issuers, the Trustee, the Paying
Agent, the Registrar and any co-registrar from any loss which any of them may
suffer if a Security is replaced. The Issuers and the Trustee may charge the
Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Issuers.
SECTION 2.08. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A Security does not cease to be
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30
outstanding because the Issuers or an Affiliate of the Issuers holds the
Security.
If a Security is replaced pursuant to Section 2.07, it ceases
to be outstanding unless the Trustee and the Issuers receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest and Liquidated Damages (if any)
payable on that date with respect to the Securities (or portions thereof) to be
redeemed or maturing, as the case may be, then on and after that date such
Securities (or portions thereof) cease to be outstanding and interest and
Liquidated Damages (if any) on them ceases to accrue.
SECTION 2.09. Temporary Securities. Until definitive
Securities are ready for delivery, the Issuers may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Issuers
consider appropriate for temporary Securities. Without unreasonable delay, the
Issuers shall prepare and the Trustee shall authenticate definitive Securities
and deliver them in exchange for temporary Securities.
SECTION 2.10 Cancellation. The Issuers at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
may, but shall not be required to, destroy (subject to the record retention
requirements of the Exchange Act) all Securities surrendered for registration of
transfer, exchange, payment or cancellation unless the Issuers direct the
Trustee to deliver canceled Securities to the Issuers. The Issuers may not issue
new Securities to replace Securities they have redeemed, paid or delivered to
the Trustee for cancellation.
SECTION 2.11. Defaulted Interest. If the Issuers default in a
payment of interest and Liquidated Damages (if any) on the Securities, the
Issuers shall pay defaulted interest and Liquidated Damages (if any) (plus
interest on such defaulted interest and Liquidated Damages (if any) to
<PAGE> 37
31
the extent lawful) in any lawful manner. The Issuers may pay the defaulted
interest and Liquidated Damages (if any) to the persons who are Securityholders
on a subsequent special record date. The Issuers shall fix or cause to be fixed
any such special record date and payment date to the reasonable satisfaction of
the Trustee and shall promptly mail to each Securityholder a notice that states
the special record date, the payment date and the amount of defaulted interest
and Liquidated Damages (if any) to be paid.
SECTION 2.12. CUSIP Numbers. The Issuers in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Issuers shall promptly notify the Trustee of any
change in the CUSIP numbers.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Issuers elect to
redeem Securities pursuant to paragraph 5 of the Securities, they shall notify
the Trustee in writing of the redemption date, the principal amount of
Securities to be redeemed and the paragraph of the Securities pursuant to which
the redemption will occur.
The Issuers shall give each notice to the Trustee provided for
in this Section at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Issuers to the effect that such
redemption will comply with the conditions herein.
SECTION 3.02. Selection of Securities To Be Redeemed. If less
than all the Securities are to be redeemed at any time, the Trustee shall select
the
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Securities to be redeemed by a method that complies with the requirements of the
principal national securities exchange, if any, on which the Securities are
listed, or if the Securities are not listed, on a pro rata basis, by lot or by
such method as the Trustee in its sole discretion shall deem to be fair and
appropriate and in accordance with methods generally used at the time of
selection by fiduciaries in similar circumstances. The Trustee shall make the
selection from outstanding Securities not previously called for redemption. The
Trustee may select for redemption portions of the principal of Securities that
have denominations larger than $1,000. Securities and portions of them the
Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000.
Provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption. The Trustee shall notify
the Issuers promptly of the Securities or portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not
more than 60 days before a date for redemption of Securities, the Issuers shall
mail a notice of redemption by first-class mail to each Holder of Securities to
be redeemed at such Holder's registered address.
The notice shall identify the Securities (including CUSIP
number(s), if any) to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed;
(6) that, unless the Issuers default in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest and Liquidated
Damages (if any) on Securities (or portion thereof) called for
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redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Securities pursuant to which the
Securities called for redemption are being redeemed; and
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Securities.
At the Issuers' request, the Trustee shall give the notice of
redemption in the Issuers' name and at the Issuers' expense. In such event, the
Issuers shall provide the Trustee with the information required by this Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest and Liquidated Damages (if
any) to the redemption date. Failure to give notice or any defect in the notice
to any Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. On or prior to the
redemption date, the Issuers shall deposit with the Paying Agent (or, if an
Issuer or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest and
Liquidated Damages (if any) on all Securities to be redeemed on that date other
than Securities or portions of Securities called for redemption which have been
delivered by the Issuers to the Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Issuers shall execute and the Trustee
shall authenticate for the Holder (at the Issuers' expense) a new Security equal
in principal amount to the unredeemed portion of the Security surrendered.
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ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities. The Issuers shall
promptly pay the principal of and interest and Liquidated Damages (if any) on
the Securities on the dates and in the manner provided in the Securities and in
this Indenture. Principal, interest and Liquidated Damages (if any) shall be
considered paid on the date due if on such date the Trustee or the Paying Agent
holds in accordance with this Indenture money sufficient to pay all principal,
interest and Liquidated Damages (if any) then due.
The Issuers shall pay interest on overdue principal at the
rate specified therefor in the Securities, and shall pay interest on overdue
installments of interest and Liquidated Damages (if any) at the same rate to the
extent lawful.
SECTION 4.02. SEC Reports. Notwithstanding that the Issuers
may not be, or may not be required to remain, subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Issuers shall file
with the Commission (unless the Commission will not accept such filing) and
provide the Trustee and Holders of the Securities with such annual reports and
such information, documents and other reports as are specified in Sections 13
and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to
such Sections , such information, documents and other reports to be so filed and
provided at the times specified for the filing of such information, documents
and reports under such Sections.
In addition, for so long as any Securities remain outstanding,
the Issuers shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Issuers'
compliance with any of their covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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SECTION 4.03. Limitation on Consolidated Debt. (a) The Issuers
may not, and may not permit any Restricted Subsidiary to, Incur any Debt;
provided, however, that the Issuers or any Restricted Subsidiary may Incur Debt
so long as the ratio of (i) the aggregate consolidated principal amount of Debt
of the Issuers and the Restricted Subsidiaries outstanding as of the most recent
available quarterly or annual balance sheet, after giving pro forma effect to
the Incurrence of such Debt and any other Debt Incurred since such balance sheet
date and the receipt and application of the proceeds thereof to (ii)
Consolidated Cash Flow Available for Fixed Charges for the four full fiscal
quarters ending on the date of such balance sheet determined on a pro forma
basis as if any such Debt had been Incurred and the proceeds thereof had been
applied at the beginning of such four fiscal quarters, would be less than 4.0 to
1.0 (the "Debt Coverage Ratio").
(b) Notwithstanding the foregoing limitation, the Issuers and
any Restricted Subsidiary may Incur the following:
(i) Debt Incurred under any one or more Bank Credit
Agreements, Vendor Financing Facilities or other agreements or
arrangements to finance the Build-out; provided, however, that Debt
Incurred pursuant to this clause (i), other than Debt Incurred pursuant
to a Bank Credit Agreement or a Vendor Financing Facility, shall not
have a Stated Maturity on or earlier than the Stated Maturity of the
Securities, and shall not be mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or be redeemable at the option of
the holder thereof, in whole or in part, on or prior to the Stated
Maturity of the Securities;
(ii) Debt under any one or more Bank Credit Agreements or
other agreements or arrangements to finance working capital
requirements of Globalstar and any Refinancing Debt in respect of such
Debt; provided, however, at the time of the Incurrence of such Debt and
after giving effect thereto, the aggregate principal amount of all Debt
Incurred pursuant to this clause (ii) and then outstanding shall not
exceed $100 million;
(iii) Debt owed by the Issuers to any Wholly-Owned Restricted
Subsidiary or Debt owed by any Wholly-Owned Restricted Subsidiary to
the Issuers or to
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36
another Wholly-Owned Restricted Subsidiary; provided, however, that
upon either (x) the transfer or other disposition by such Wholly-Owned
Restricted Subsidiary or the Issuers of any Debt so permitted to a
Person other than the Issuers or another Wholly-Owned Restricted
Subsidiary or (y) the issuance (other than directors' qualifying
shares), sale, lease, transfer or other disposition of shares of
Capital Stock (including by consolidation or merger) of such
Wholly-Owned Restricted Subsidiary to a Person other than the Issuers
or another such Wholly-Owned Restricted Subsidiary, the provisions of
this clause (iii) shall no longer be applicable to such Debt and such
Debt shall be deemed to have been Incurred by the Issuers thereof at
the time of such issuance, sale, lease, transfer or other disposition;
(iv) Refinancing Debt Incurred to Refinance Debt Incurred
pursuant to the first paragraph of this covenant or pursuant to clause
(i), (vi) or (vii) or this clause (iv) of this paragraph;
(v) Debt consisting of Permitted Interest Rate and Currency
Protection Agreements;
(vi) Debt represented by the Securities;
(vii) Debt outstanding on the Issue Date (other than Debt
described in clause (i), (ii), (iii), (vi) or (viii) of this
paragraph);
(viii) Debt (including Capital Lease Obligations) of
Globalstar or any Restricted Subsidiary financing the purchase, lease
or improvement of property (real or personal) or equipment (whether
through the direct purchase of assets or the Capital Stock of any
Person owning such assets), in each case Incurred no more than 180 days
after such purchase, lease or improvement of such property and any
Refinancing Debt in respect of such Debt, provided, however, that (x)
the amount of such Debt (net of original issue discount) does not
exceed, at the time initially Incurred, 90% of the fair market value of
such acquired property or equipment and (y) at the time of the
Incurrence of such Debt and after giving effect thereto, the aggregate
amount of all Debt Incurred pursuant to this clause (viii) and then
outstanding shall not exceed $100 million;
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37
(ix) Debt consisting of performance and other similar bonds
and reimbursement obligations Incurred in the ordinary course of
business securing the performance of contractual, franchise or license
obligations of the Issuers or a Restricted Subsidiary, or in respect of
a letter of credit obtained to secure such performance; and
(x) Debt in an aggregate principal amount which, together with
all other Debt of the Issuers and the Restricted Subsidiaries
outstanding on the date of such Incurrence (other than Debt permitted
by clauses (i) through (ix) above or Section 4.03(a)) does not exceed
$50 million.
(c) For purposes of determining compliance with this Section
4.03, in the event that an item of Debt meets the criteria of more than one of
the types of Debt the Issuers and the Restricted Subsidiaries are permitted to
Incur, the Issuers or such Restricted Subsidiary, as the case may be, shall have
the right, in their sole discretion, to classify such item of Debt at the time
of its Incurrence and shall only be required to include the amount and type of
such Debt under the clause permitting the Debt as so classified.
SECTION 4.04. Future Guarantors. In the event that, after the
Issue Date, Globalstar shall acquire or create a Subsidiary, Globalstar shall
cause such Subsidiary (unless such Subsidiary is a Transitory Equipment
Subsidiary or is an Unrestricted Subsidiary) to become a Subsidiary Guarantor
and to Guarantee the Securities pursuant to a Subsidiary Guaranty.
SECTION 4.05. Limitation on Restricted Payments. (a) The
Issuers may not, and may not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment if at the time such Issuers or such
Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would
result therefrom);
(2) Globalstar is not able to Incur an additional $1.00 of
Debt pursuant to Section 4.03(a); or
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(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income of Globalstar
accrued during the period (treated as one accounting period)
from the beginning of the fiscal quarter immediately following
the fiscal quarter during which the Issue Date occurs to the
end of the most recent fiscal quarter for which internal
financial statements are available at the time of such
Restricted Payment (or, in case such Consolidated Net Income
shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by
Globalstar from the issuance or sale of its Capital Stock
(other than Disqualified Stock) subsequent to the Issue Date
(other than an issuance or sale to a Subsidiary of Globalstar
and other than an issuance or sale to an employee stock
ownership plan or to a trust established by Globalstar or any
of its Subsidiaries for the benefit of their employees);
(C) the amount by which Debt of Globalstar is reduced
on the balance sheet of Globalstar upon the conversion or
exchange (other than by a Subsidiary of Globalstar) subsequent
to the Issue Date of any Debt of Globalstar convertible or
exchangeable for Capital Stock (other than Disqualified Stock)
of Globalstar (less the amount of any cash, or the fair value
of any other property, distributed by Globalstar upon such
conversion or exchange); and
(D) an amount equal to the sum of (i) the net
reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans or advances or
other transfers of assets, in each case to Globalstar or any
Restricted Subsidiary from Unrestricted Subsidiaries, and (ii)
the portion (proportionate to Globalstar's equity interest in
such Subsidiary) of the fair market value of the net assets of
an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided,
however, that the foregoing sum shall
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not exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made (and treated as a
Restricted Payment) by Globalstar or any Restricted Subsidiary
in such Unrestricted Subsidiary.
(b) Notwithstanding the foregoing, Globalstar may (i) subject
to clause (vi) below, pay any dividend on Capital Stock of any class within 60
days after the declaration thereof if, on the date when the dividend was
declared, Globalstar could have paid such dividend in accordance with the
foregoing provisions; (ii) repurchase any shares of its Capital Stock or options
to acquire its Capital Stock from Persons who were formerly officers or
employees of Globalstar; provided, however, that the aggregate amount of all
such repurchases made pursuant to this clause (ii) shall not exceed $2 million,
plus the aggregate cash proceeds received by Globalstar since the Issue Date on
sale of its Capital Stock or options to acquire its Capital Stock to members,
officers, managers and employees of Globalstar or any of its Subsidiaries; (iii)
Refinance, and permit its Restricted Subsidiaries to Refinance, any Debt
otherwise permitted to be Refinanced by clause (iv) of Section 4.03(b); (iv) so
long as Globalstar is treated as a partnership for U.S. federal income tax
purposes, make distributions in respect of members' or partners' income tax
liability with respect to Globalstar in an amount not to exceed the Tax Amount;
(v) make distributions to GTL to pay GTL's ordinary and reasonable operating
expenses related to Globalstar, as set forth in an Officers' Certificate
delivered to the Trustee; (vi) pay any scheduled dividend on Special Preferred
Obligations; provided, however, that at the time of payment of any such dividend
(other than a dividend paid only by distributions of additional Special
Preferred Obligations), no Default shall have occurred and be continuing (or
result therefrom); (vii) make any Restricted Payment by exchange for, or out of
the proceeds of the substantially concurrent sale of, or capital contribution in
respect of, Capital Stock of Globalstar (other than Disqualified Stock and other
than Capital Stock issued or sold to a Subsidiary of Globalstar or an employee
stock ownership plan or to a trust established by Globalstar or any of its
Subsidiaries for the benefit of their employees); (viii) contribute its
Investment in Globaltel Russia to an Unrestricted Subsidiary; and (ix) make
other Restricted Payments in an aggregate amount not to exceed $10 million.
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(c) Any Restricted Payment made pursuant to clauses (ii),
(iii), (iv), (vi), (vii), (viii) and (ix) of Section 4.05(b) shall be excluded
from the calculation of the aggregate amount of Restricted Payments made since
the Issue Date; provided, however, that the Net Cash Proceeds from the issuance
of Capital Stock pursuant to clauses (ii) and (vii) of Section 4.05(b) shall be
excluded from the calculation of amounts under clause (B) of Section 4.05(a)(3).
SECTION 4.06. Dividend and Other Payment Restrictions
Affecting Subsidiaries. (a) The Issuers may not, and may not permit any
Restricted Subsidiary, directly or indirectly, to create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions to the
Issuers or any of their Restricted Subsidiaries on its Capital Stock or
with respect to any other interest or participation in, or measured by,
its profits;
(ii) pay any indebtedness owed to the Issuers or any
Restricted Subsidiary;
(iii) make loans or advances to the Issuers or any Restricted
Subsidiary; or
(iv) transfer any of its properties or assets to the Issuers
or any Restricted Subsidiary.
(b) Notwithstanding the foregoing, the Issuers may, and may
permit any Restricted Subsidiary to, suffer to exist any such encumbrance or
restriction (i) pursuant to any agreement in effect on the Issue Date; (ii)
pursuant to an agreement relating to any Acquired Debt, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person so acquired and its Subsidiaries; (iii) pursuant
to an agreement effecting a Refinancing of Debt Incurred pursuant to an
agreement referred to in clause (i) or (ii) above or clause (iv) below,
provided, however, that the provisions contained in such Refinancing agreement
relating to such encumbrance or restriction are no more restrictive taken as a
whole (as determined in good faith by the Chief Financial Officer of Globalstar)
than the provisions contained in the predecessor agreement the subject thereof;
(iv) in the case of clause (iii) of Section 4.06(a),
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consisting of restrictions contained in any security agreement (including a
Capital Lease Obligation) securing Debt of the Issuers or a Restricted
Subsidiary otherwise permitted under this Indenture, but only to the extent such
encumbrances or restrictions restrict the transfer of the property subject to
such security agreement; (v) in the case of clause (iv) of Section 4.06(a),
consisting of customary nonassignment provisions entered into in the ordinary
course of business in leases governing leasehold interests, but only to the
extent such provisions restrict the transfer of the lease or the property
thereunder; (vi) with respect to a Restricted Subsidiary, imposed pursuant to an
agreement which has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Restricted Subsidiary;
provided, however, that after giving effect to such transaction no Default shall
have occurred or be continuing, that such restriction terminates if such
transaction is not consummated and that such consummation or abandonment of such
transaction occurs within one year of the date such agreement was entered into;
(vii) imposed pursuant to applicable law or regulations; (viii) imposed pursuant
to this Indenture and the Securities; or (ix) consisting of any restriction on
the sale or other disposition of assets or property securing Debt as a result of
a Permitted Lien on such assets or property.
SECTION 4.07. Asset Dispositions. (a) The Issuers may not, and
may not permit any Restricted Subsidiary to, directly or indirectly, make any
Asset Disposition unless: (i) Globalstar, Globalstar Capital or such Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Disposition at least equal to the fair market value (including as to the value
of all non-cash consideration) of the shares and assets subject to such Asset
Disposition, as determined by the General Partners' Committee of Globalstar in
good faith and evidenced by a resolution filed with the Trustee; (ii) at least
80% of the consideration thereof received by Globalstar, Globalstar Capital or
such Restricted Subsidiary, as the case may be, consists of (a) cash or
Marketable Securities or (b) the assumption of Debt (other than Subordinated
Obligations) of Globalstar, Globalstar Capital or such Restricted Subsidiary and
the release of the Issuers and the Restricted Subsidiaries, as applicable, from
all liability on the Debt assumed; and (iii) all Net Available Proceeds, less
any amounts invested within 180 days of such disposition in assets that comply
with
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Section 4.12, are applied within 180 days of such disposition (A) first, to the
permanent repayment or reduction of Debt then outstanding under any Bank Credit
Agreement or Vendor Financing Facility, to the extent such agreement or facility
would require such application or prohibit payments pursuant to the following
clause (B), (B) second, to the extent of remaining Net Available Proceeds, to
make an Offer to Purchase outstanding Securities at 100% of their principal
amount plus accrued and unpaid interest and Liquidated Damages (if any) to the
date of purchase thereon and, to the extent required by the terms thereof, any
other Debt of Globalstar, Globalstar Capital or a Restricted Subsidiary that
ranks pari passu with the Securities at a price no greater than 100% of the
principal amount thereof plus accrued and unpaid interest to the date of
purchase and (C) third, to the extent of any remaining Net Available Proceeds
following the completion of the Offer to Purchase, to the repayment of other
Debt of Globalstar or Debt of a Restricted Subsidiary, to the extent permitted
under the terms thereof. To the extent any Net Available Proceeds remain after
such uses, Globalstar and the Restricted Subsidiaries may use such amounts for
any purposes not prohibited by this Indenture. Notwithstanding the foregoing,
these provisions shall not apply to any Asset Disposition which constitutes a
transfer, conveyance, sale, lease or other disposition of all or substantially
all of Globalstar's properties or assets pursuant to Section 5.01(a).
(b) The Issuers shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section 4.07. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.07, the Issuers shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached their obligations under this Section 4.07 by virtue
thereof.
SECTION 4.08. Transactions with Affiliates. (a) The Issuers
may not, and may not permit any Restricted Subsidiary, directly or indirectly,
to enter into any transactions (or series of related transactions) with an
Affiliate or Related Person of the Issuers (other than the Issuers or a
Wholly-Owned Restricted Subsidiary) (an "Affiliate Transaction") unless:
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(i) such Affiliate Transaction is on terms that are no less
favorable to Globalstar, Globalstar Capital or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable
transaction by Globalstar, Globalstar Capital or such Restricted
Subsidiary, as the case may be, with an unrelated Person; and
(ii) Globalstar delivers to the Trustee:
(A) with respect to any Affiliate Transaction
involving aggregate consideration in excess of $1 million
(other than financing transactions that are not vendor
financing transactions pursuant to a Vendor Financing
Facility) and entered into in connection with the Build-out, a
certificate of the Chief Executive Officer of Globalstar to
the effect that a majority of the disinterested limited
partners of Globalstar have approved such Affiliate
Transaction; provided, however, that there is at least one
disinterested limited partner at the time of such Affiliate
Transaction; provided further, however, that any limited
partner receiving any compensation in respect of its approval
shall be deemed not to be a disinterested limited partner; or
(B) (1) with respect to any Affiliate Transaction
involving aggregate consideration in excess of $1 million, a
certificate of the Chief Executive Officer of Globalstar to
the effect that such Affiliate Transaction complies with
clause (i) above; and (2) with respect to any Affiliate
Transaction involving aggregate consideration in excess of $10
million, an opinion as to the fairness to Globalstar,
Globalstar Capital or such Restricted Subsidiary, as the case
may be, of such Affiliate Transaction from a financial point
of view issued by an Independent Financial Advisor or, with
respect to telecommunications-related matters, a recognized
expert in the satellite telecommunications industry.
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(b) Notwithstanding the foregoing Section 4.08(a), the
following shall be deemed not to be Affiliate Transactions:
(i) employee compensation arrangements entered into in the
ordinary course of business and approved by the General Partners'
Committee of Globalstar;
(ii) transactions solely between or among the Issuers and the
Restricted Subsidiaries;
(iii) Restricted Payments permitted by Section 4.05;
(iv) Investments by an Affiliate or Related person of
Globalstar or Globalstar Capital in the Capital Stock (other than
Disqualified Stock) of Globalstar or any Restricted Subsidiary; and
(v) an Affiliate or Related Person of the Issuers acting as
agent for the placement or acquisition of launch services or insurance
on behalf of the Issuers or any Restricted Subsidiary.
SECTION 4.09. Limitation on Issuances and Sales of Capital
Stock of Restricted Subsidiaries. The Issuers may not, and may not permit any
Restricted Subsidiary to, issue, transfer, convey, sell or otherwise dispose of
any shares of Capital Stock of a Restricted Subsidiary or securities convertible
or exchangeable into, or options, warrants, rights or any other interest with
respect to, Capital Stock of a Restricted Subsidiary to any person other than
Globalstar, Globalstar Capital or a Wholly-Owned Restricted Subsidiary except
(i) in a transaction consisting of a sale of all the Capital Stock of such
Restricted Subsidiary and that complies with the provisions of Section 4.07 to
the extent such provisions apply; (ii) if required, the issuance, transfer,
conveyance, sale or other disposition of directors' qualifying shares; (iii) in
a transaction in which, or in connection with which, an Issuer or a Restricted
Subsidiary acquires at the same time sufficient Capital Stock of such Restricted
Subsidiary to at least maintain the same percentage ownership interest it had
prior to such transaction; and (iv) Disqualified Stock of a Restricted
Subsidiary Incurred to Refinance Disqualified Stock of such Restricted
Subsidiary; provided, however, that the amounts of the redemption obligations of
such Disqualified Stock shall not exceed the amounts of the
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redemption obligations of, and such Disqualified Stock shall have redemption
obligations no earlier than those required by, the Disqualified Stock being
Refinanced.
SECTION 4.10. Change of Control. (a) Upon the occurrence of a
Change of Control, each Holder of Securities shall have the right to require
that the Issuers repurchase such Holder's Securities at a purchase price in cash
equal to 101% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages (if any) to the date of purchase (subject to the right of
Holders of record on the relevant record date to receive interest and Liquidated
Damages (if any) due on the relevant interest payment date).
(b) Within 30 days following any Change of Control, the
Issuers shall mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder
has the right to require the Issuers to purchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages
(if any) to the date of purchase (subject to the right of Holders of
record on the relevant record date to receive interest and Liquidated
Damages (if any) on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change
of Control (including information with respect to pro forma historical
income, cash flow and capitalization, each after giving effect to such
Change of Control);
(3) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Issuers, consistent
with this Section 4.10, that a Holder must follow in order to have its
Securities purchased.
(c) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate form duly completed, to
the Issuers at the address specified in the notice at least three Business Days
prior to the purchase date. Holders will be entitled to withdraw their election
if the Trustee or the Issuers receive not
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later than one Business Day prior to the purchase date, a facsimile transmission
or letter setting forth the name of the Holder, the principal amount of the
Security which was delivered for purchase by the Holder and a statement that
such Holder is withdrawing his election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the
Issuers under this Section shall be delivered by the Trustee for cancellation,
and the Issuers shall pay the purchase price plus accrued and unpaid interest
and Liquidated Damages (if any), if any, to the Holders entitled thereto.
(e) The Issuers shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section , the Issuers shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached their obligations under this Section by virtue thereof.
SECTION 4.11. Limitation on Liens. The Issuers may not, and
may not permit any Restricted Subsidiary, directly or indirectly, to Incur or
permit to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except for the following Liens (each, a "Permitted Lien"):
(i) Liens to secure up to $500 million of Debt permitted to be
Incurred under this Indenture so long as effective provision is made to
secure the Securities equally and ratably with (or prior to) the
obligation so secured;
(ii) Liens in favor of Holders of the Securities;
(iii) Liens in favor of the Issuers;
(iv) Liens on property or shares of Capital Stock of another
Person at the time such other Person becomes a Subsidiary of such
Person; provided, however, that such Liens are not created, incurred or
assumed in connection with, or in contemplation of, such other
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Person becoming such a Subsidiary; provided further, however, that such
Lien may not extend to any other property owned by such Person or any
of its Subsidiaries (other than inventory and receivables generated in
the ordinary course of business and substitute property);
(v) Liens on property at the time such Person or any of its
Subsidiaries acquires such property, including any acquisition by means
of a merger or consolidation with or into such Person or a Subsidiary
of such Person; provided, however, that such Liens are not created,
incurred or assumed in connection with, or in contemplation of, such
acquisition; provided further, however, that the Liens may not extend
to any other property owned by such Person or any of its Subsidiaries;
(vi) Liens securing Debt Incurred pursuant to clause (viii) of
Section 4.03(b); provided, however, that the Lien may not extend to any
assets owned by an Issuer or any Restricted Subsidiary other than (a)
the assets being financed or refinanced and income and proceeds
therefrom and (b) any other assets of such obligor securing other Debt
of such obligor to the same secured party;
(vii) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of
business;
(viii) Liens existing on the Issue Date;
(ix) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good
faith by appropriate proceedings promptly instituted and diligently
concluded; provided, however, that any reserve or other appropriate
provision as shall be required in conformity with GAAP shall have been
made therefor;
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(x) Liens incurred in the ordinary course of business of the
Issuers and the Restricted Subsidiaries with respect to obligations
that do not exceed $10.0 million at any one time outstanding and that:
(A) are not incurred in connection with the borrowing
of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business); and
(B) do not in the aggregate materially detract from
the value of the property or materially impair the use thereof
in the operation of business by the Issuers and the Restricted
Subsidiaries.
SECTION 4.12. Business Activities. The Issuers may not, and
may not permit any Restricted Subsidiary to, engage in any business other than
that which is related to the design, development, procurement, installation,
operation and ownership of telecommunications systems and businesses.
SECTION 4.13. Maintenance of Insurance.
(a) The Issuers shall:
(i) maintain, with respect to each satellite in the Globalstar
System, for the period beginning at least 45 days prior to, and at all
times up to and including, the launch of such satellite, launch
insurance with respect to such satellite in an amount sufficient to
provide for the construction, launch and insurance of a replacement
satellite to be payable in the event of a launch failure; and
(ii) in the event that more than 16 of Globalstar's satellites
have ceased Operating for 90 consecutive days and fewer than 44
satellites are Operating as part of the Globalstar System (such an
event, an "In-orbit Insurance Event"), obtain (within 60 days of such
In-orbit Insurance Event), and thereafter maintain, in-orbit insurance
in an amount sufficient to provide for the construction, launch and
insurance of replacement satellites for at least 16 of Globalstar's
satellites still operating or, if such in-orbit insurance in such
amount is not then
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49
commercially available from traditional insurance providers, such
lesser amount as is so available.
(b) The obligation of the Issuers to maintain insurance
pursuant to this covenant may be satisfied by any combination of:
(i) insurance commitments obtained from any recognized
insurance provider;
(ii) insurance commitments obtained from any other entity if
the General Partners' Committee of Globalstar determines in good faith
that such entity is creditworthy and otherwise capable of bearing the
financial risk of providing such insurance;
(iii) unrestricted cash segregated and maintained by
Globalstar in a segregated account (the "Insurance Account") solely for
disbursement in accordance with Section 4.13(d) ("Cash Insurance"); and
(iv) in respect of the insurance described in clause (i) of
Section 4.13(a), self-insurance for the launch of up to 12 satellites;
provided, however, that no earlier than 60 days prior to the scheduled
launch of any such satellites:
(a) the Issuers deliver an Officers' Certificate to
the Trustee certifying that they have sufficient committed
capital to construct, launch and insure at least 44
satellites, in addition to the satellites with respect to
which the Issuers are self-insuring; and
(b) the Issuers obtain an opinion from an investment
banking firm that is an Independent Financial Advisor to the
effect that the Issuers would be able to raise sufficient
capital in the capital markets to replace, relaunch and insure
such satellites in the event of a failure to successfully
launch such satellites.
(c) Within 30 days following any date on which the Issuers are
required to obtain insurance pursuant to this Indenture, the Issuers will
deliver to the Trustee an insurance certificate certifying the amount of
insurance then carried and an Officers' Certificate stating that such insurance,
together with any other insurance or Cash
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Insurance maintained by the Issuers, complies with this Indenture. In addition,
the Issuers will cause to be delivered to the Trustee no less than once each
year an insurance certificate setting forth the amount of insurance then
carried, which insurance certificate shall entitle the Trustee to:
(i) notice of any claim under any such insurance policy; and
(ii) at least 30 days' notice from the provider of such
insurance prior to the cancellation of any such insurance.
In the event that the Issuers maintain any Cash Insurance in satisfaction of any
part of their obligation to maintain insurance pursuant to this Section 4.13,
the Issuers shall deliver an Officers' Certificate to the Trustee in lieu of any
insurance certificate otherwise required by this Section 4.13.
(d) In the event that the Issuers receive any proceeds of any
launch or in-orbit insurance that they are required to maintain pursuant to this
Section 4.13, such proceeds shall constitute "Insurance Proceeds". In addition,
if the Issuers maintain any Cash Insurance in satisfaction of any part of their
obligations to maintain in-orbit insurance pursuant to this Section 4.13, then
upon the occurrence of the event (i.e., the in-orbit failure) that would have
entitled the Issuers to the payment of insurance had the Issuers purchased
insurance from an insurance provider, the cash maintained in the Insurance
Account shall constitute "Insurance Proceeds". Promptly following the receipt of
any Insurance Proceeds, the Issuers shall apply such Insurance Proceeds in
accordance with the provisions of Section 4.07; provided, however, that
Insurance Proceeds shall only be required to be so applied to the extent that
the aggregate amount of all Insurance Proceeds received by the Issuers exceeds
$5 million in any 12-month period.
SECTION 4.14. Compliance Certificate; Statement by Officers as
to Default. The Issuers shall deliver to the Trustee within 120 days after the
end of each fiscal year of the Issuers an Officers' Certificate stating that in
the course of the performance by the signers of their duties as Officers of the
Issuers they would normally have knowledge of any Default and whether or not the
signers know of any
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Default that occurred during such period. If they do, the certificate shall
describe the Default, its status and what action the Issuers are taking or
propose to take with respect thereto. The Issuers also shall comply with TIA
Section 314(a)(4).
SECTION 4.15. Further Instruments and Acts. Upon request of
the Trustee, the Issuers will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.16. Business Activities of Globalstar Capital.
Globalstar Capital shall not engage in any trade or business, and shall conduct
no business activity, other than the Incurrence of Debt permitted by Section
4.03 and the issuance of Capital Stock to Globalstar or any Wholly-Owned
Restricted Subsidiary and activities incidental thereto.
SECTION 4.17. Calculation of Original Issue Discount. The
Issuers shall file with the Trustee promptly at the end of each calendar year
(i) a written notice specifying the amount of original issue discount (including
daily rates and accrual periods) accrued on outstanding Securities as of the end
of such year and (ii) such other specific information relating to such original
issue discount as may then be relevant under the Code, as amended from time to
time.
ARTICLE 5
Successor Issuers
SECTION 5.01. When Issuers May Merge or Transfer Assets. (a)
Neither Globalstar nor Globalstar Capital may consolidate with or merge with or
into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all its assets to any Person; provided,
however, that Globalstar may consolidate with or merge with or into, or convey,
transfer or lease, in one transaction or a series of transactions, all or
substantially all its assets to any Person, if:
(i) the resulting, surviving or transferee Person (the
"Successor Issuer") shall be a Person organized and existing under the
laws of the United States of
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America, any State thereof or the District of Columbia and the
Successor Issuer (if not Globalstar) shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, all the obligations of Globalstar
under the Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Debt which becomes an obligation of the Successor Issuer
or any Subsidiary as a result of such transaction as having been
Incurred by the Successor Issuer or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Issuer would be able to Incur an additional $1.00 of Debt
pursuant to Section 4.03(a);
(iv) immediately after giving effect to such transaction, the
Successor Issuer shall have Consolidated Net Worth in an amount that is
not less than the Consolidated Net Worth of Globalstar immediately
prior to such transaction; and
(v) Globalstar shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
transaction and such supplemental indenture (if any) comply with this
Indenture.
The Successor Issuer shall be the successor to Globalstar and
shall succeed to, and be substituted for, and may exercise every right and power
of, Globalstar under this Indenture, and Globalstar (other than in the case of a
lease) shall be released from the obligation to pay the principal of and
interest and Liquidated Damages (if any) on the Securities.
(b) Globalstar shall not permit any Subsidiary Guarantor to
consolidate with or merge with or into, or convey, transfer or lease, in one
transaction or a series of transactions, all or substantially all of its assets
to any Person unless: (i) the resulting, surviving or transferee Person (if not
such Subsidiary) shall be a Person organized and existing under the laws of the
jurisdiction under which such Subsidiary was organized or under the laws of the
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United States of America, or any State thereof or the District of Columbia, and
such Person shall expressly assume, by a guaranty agreement in a form acceptable
to the Trustee, all the obligations of such Subsidiary, if any, under its
Subsidiary Guaranty; (ii) immediately after giving effect to such transaction or
transactions on a pro forma basis (and treating any Debt which becomes an
obligation of the resulting, surviving or transferee Person as a result of such
transaction as having been issued by such Person at the time of such
transaction), no Default shall have occurred and be continuing; and (iii)
Globalstar delivers to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer and such
guaranty agreement, if any, complies with this Indenture.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs
if:
(1) the Issuers default in any payment of interest or
Liquidated Damages (if any) on any Security when the same becomes due
and payable, and such default continues for a period of 30 days;
(2) the Issuers (i) default in the payment of the principal of
any Security when the same becomes due and payable at its Stated
Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise, or (ii) fail to redeem or purchase Securities
when required pursuant to this Indenture or the Securities;
(3) the Issuers fail to comply with Section 5.01;
(4) the Issuers fail to comply with Section 4.02, 4.03, 4.04,
4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13 or 4.16 (other
than a failure to purchase Securities when required under Section 4.07
or 4.10) and such failure continues for 30 days after the notice
specified below;
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(5) the Issuers fail to comply with any of their agreements in
the Securities or this Indenture (other than those referred to in
clause (1), (2), (3) or (4) above) and such failure continues for 60
days after the notice specified below;
(6) Debt of the Issuers or any Significant Subsidiary is not
paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total
amount of such Debt unpaid or accelerated exceeds $10.0 million, or its
foreign currency equivalent at the time and such failure continues for
10 days after the notice specified below;
(7) any Issuer or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of
it or for any substantial part of its property; or
(D) makes a general assignment for the benefit of
its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Issuers or any
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Issuers or any
Significant Subsidiary or for any substantial part of its
property; or
(C) orders the winding up or liquidation of the
Issuers or any Significant Subsidiary;
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or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in excess
of $10.0 million or its foreign currency equivalent at the time is
entered against the Issuers or any Significant Subsidiary, remains
outstanding for a period of 60 days following the entry of such
judgment or decree and is not discharged, waived or the execution
thereof stayed within 10 days after the notice specified below; or
(10) a Subsidiary Guaranty ceases to be in full force and effect
(other than in accordance with the terms of such Subsidiary Guaranty)
or a Subsidiary Guarantor denies or disaffirms its obligations under
its Subsidiary Guaranty.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clauses (4), (5), or (9) is not an Event of
Default until the Trustee or the holders of at least 25% in principal amount of
the outstanding Securities notify the Issuers of the Default and the Issuers do
not cure such Default within the time specified after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default".
The Issuers shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Event of Default under clause (6) or (10) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5) or (9), its status and what
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action the Issuers are taking or propose to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than
an Event of Default specified in Section 6.01(7) or (8) with respect to the
Issuers) occurs and is continuing, the Trustee by notice to the Issuers, or the
Holders of at least 25% in principal amount of the Securities by notice to the
Issuers and the Trustee, may declare the principal of and accrued but unpaid
interest and Liquidated Damages (if any) on all the Securities to be due and
payable. Upon such a declaration, such principal, interest and Liquidated
Damages (if any) shall be due and payable immediately. If an Event of Default
specified in Section 6.01(7) or (8) with respect to the Issuers occurs, the
principal of and interest and Liquidated Damages (if any) on all the Securities
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Securityholders. The
Holders of a majority in principal amount of the Securities by notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest and
Liquidated Damages (if any) that has become due solely because of acceleration.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest and Liquidated Damages (if any) on the
Securities or to enforce the performance of any provision of the Securities or
this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
waive an existing Default and
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its consequences except (i) a Default in the payment of the principal of or
interest and Liquidated Damages (if any) on a Security or (ii) a Default in
respect of a provision that under Section 9.02 cannot be amended without the
consent of each Securityholder affected. When a Default is waived, it is deemed
cured, but no such waiver shall extend to any subsequent or other Default or
impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority
in principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to reasonable
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right
to receive payment of principal, premium (if any) or interest and Liquidated
Damages (if any) when due, no Securityholder may pursue any remedy with respect
to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction
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inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest and Liquidated Damages (if any)
on the Securities held by such Holder, on or after the respective due dates
expressed in the Securities, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default specified in Section 6.01(1) or (2) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Issuers for the whole amount then due and owing (together with
interest on any unpaid interest and Liquidated Damages (if any) to the extent
lawful) and the amounts provided for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Issuers, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.07.
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SECTION 6.10. Priorities. If the Trustee collects any money
or property pursuant to this Article 6, it shall pay out the money or property
in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal, interest and Liquidated Damages (if any),
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal, interest and
Liquidated Damages (if any), respectively; and
THIRD: to the Issuers.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section . At least 15 days before
such record date, the Issuers shall mail to each Securityholder and the Trustee
a notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07
or a suit by Holders of more than 10% in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Issuers
(to the extent they may lawfully do so) shall not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Issuers (to the extent that they may lawfully do so) hereby expressly waive
all benefit or advantage of any such law, and shall not
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hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements
of this Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b)
of this Section ;
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(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on
any document believed by it to be genuine and to have been signed or presented
by the proper person. The Trustee need not investigate any fact or matter
stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.
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(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and
the advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.
(f) The Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Trust Officer has actual knowledge thereof
or unless written notice of any event which is in fact such a default is
received by the Trustee at the principal corporate trust office of the Trustee,
and such notice references the Securities and this Indenture.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Issuers or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Issuers'
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Issuers in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the
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Default within 90 days after it occurs. Except in the case of a Default in
payment of principal of or interest and Liquidated Damages (if any) on any
Security (including payments pursuant to the mandatory redemption provisions of
such Security, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. If required by
TIA Section 313(a), as promptly as practicable after each May 15 beginning with
the May 15, 1998, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of May 15 that
complies with such TIA Section 313(a). The Trustee also shall comply with TIA
Section 313(b).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the Commission and each stock exchange (if
any) on which the Securities are listed. The Issuers agree to notify promptly
the Trustee whenever the Securities become listed on any stock exchange and of
any delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Issuers shall
pay to the Trustee from time to time such compensation as shall be agreed in
writing between the Issuers and the Trustee for its services. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Issuers shall reimburse the Trustee upon request for all
reasonable out-of- pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Trustee's agents, counsel, accountants and experts. The Issuers
shall indemnify the Trustee against any and all loss, liability or reasonable
expense (including reasonable attorneys' fees) incurred by it in connection with
the administration of this trust and the performance of its duties hereunder.
The Trustee shall notify the Issuers promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Issuers shall not relieve the
Issuers of their obligations hereunder. The Issuers shall defend the claim and
the Trustee may have separate counsel and the Issuers shall pay the reasonable
fees and expenses of such counsel. The Issuers need not reimburse any expense or
indemnify against any loss,
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liability or expense incurred by the Trustee through the Trustee's own wilful
misconduct, negligence or bad faith.
To secure the Issuers' payment obligations in this Section,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee other than money or property held in trust to
pay principal of and interest and Liquidated Damages (if any) on particular
Securities.
The Issuers' payment obligations pursuant to this Section
shall survive the discharge of this Indenture. When the Trustee incurs expenses
after the occurrence of a Default specified in Section 6.01(7) or (8) with
respect to the Issuers, the expenses are intended to constitute expenses of
administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Issuers. The Holders of a majority in principal
amount of the Securities may remove the Trustee by so notifying the Trustee and
may appoint a successor Trustee. The Issuers shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Issuers or by the
Holders of a majority in principal amount of the Securities and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Issuers shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall
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mail a notice of its succession to Securityholders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee,
subject to the lien provided for in Section 7.07.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in principal amount of the Securities may petition, at the
expense of the Issuers, any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to
this Section, the Issuers' obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall
at all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most
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recent published annual report of condition. The Trustee shall comply with TIA
Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Issuers are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against
Issuers. The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Issuers deliver to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.07) for
cancellation or (ii) all outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article 3 hereof and the Issuers irrevocably deposit with the
Trustee funds sufficient to pay at maturity or upon redemption all outstanding
Securities, including interest and Liquidated Damages (if any) thereon to
maturity or such redemption date (other than Securities replaced pursuant to
Section 2.07), and if in either case the Issuers pay all other sums payable
hereunder by the Issuers, then this Indenture shall, subject to Sections
8.01(c), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Issuers
accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Issuers.
(b) Subject to Sections 8.01(c) and 8.02, the Issuers at any
time may terminate (i) all their obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) their obligations under Sections
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13 and 4.16
and the operation of Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8), 6.01(9) and
6.01(10) (but, in the case of Sections 6.01(7) and (8), with respect only to
<PAGE> 73
67
Significant Subsidiaries) and the limitations contained in Sections 5.01(a)(iii)
and (iv) ("covenant defeasance option"). The Issuers may exercise their legal
defeasance option notwithstanding their prior exercise of their covenant
defeasance option.
If the Issuers exercise their legal defeasance option, payment
of the Securities may not be accelerated because of an Event of Default with
respect thereto. If the Issuers exercise their covenant defeasance option,
payment of the Securities may not be accelerated because of an Event of Default
specified in Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8), 6.01(9) and 6.01(10)
(but, in the case of Sections 6.01(7) and (8), with respect only to Significant
Subsidiaries) or because of the failure of the Issuers to comply with Section
5.01(a)(iii) or (iv). If the Issuers exercise their legal defeasance option or
their covenant defeasance option, each Subsidiary Guarantor, if any, shall be
released from all its obligations with respect to its Subsidiary Guaranty.
Upon satisfaction of the conditions set forth herein and upon
request of the Issuers, the Trustee shall acknowledge in writing the discharge
of those obligations that the Issuers terminate.
(c) Notwithstanding clauses (a) and (b) above, the Issuers'
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Issuers' obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
SECTION 8.02. Conditions to Defeasance. The Issuers may
exercise their legal defeasance option or their covenant defeasance option only
if:
(1) the Issuers irrevocably deposit in trust with the Trustee
money or U.S. Government Obligations for the payment of principal of
and interest and Liquidated Damages (if any) on the Securities to
maturity or redemption, as the case may be;
(2) the Issuers deliver to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest and Liquidated
Damages (if any) when due and without reinvestment on the
<PAGE> 74
68
deposited U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts as will
be sufficient to pay principal and interest and Liquidated Damages (if
any) when due on all the Securities to maturity or redemption, as the
case may be;
(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Sections 6.01(7) or (8) with
respect to the Issuers occurs which is continuing at the end of the
period;
(4) the deposit does not constitute a default under any other
agreement binding on the Issuers;
(5) the Issuers deliver to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under
the Investment Issuers Act of 1940;
(6) in the case of the legal defeasance option, the Issuers
shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Issuers have received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the Issue Date there
has been a change in the applicable Federal income tax law, in either
case to the effect that, and based thereon such Opinion of Counsel
shall confirm that, the Securityholders will not recognize income, gain
or loss for Federal income tax purposes as a result of such defeasance
and will be subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
defeasance had not occurred;
(7) in the case of the covenant defeasance option, the Issuers
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
covenant defeasance had not occurred; and
(8) the Issuers deliver to the Trustee an Officers'
Certificate and an Opinion of Counsel, each
<PAGE> 75
69
stating that all conditions precedent to the defeasance and discharge
of the Securities as contemplated by this Article 8 have been complied
with.
Before or after a deposit, the Issuers may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant
to this Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest and Liquidated Damages (if
any) on the Securities.
SECTION 8.04. Repayment to Issuers. The Trustee and the Paying
Agent shall promptly turn over to the Issuers upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Issuers upon request any money held by
them for the payment of principal or interest and Liquidated Damages (if any)
that remains unclaimed for two years, and, thereafter, Securityholders entitled
to the money must look to the Issuers for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The
Issuers shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Issuers' obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8;
<PAGE> 76
70
provided, however, that, if the Issuers have made any payment of interest and
Liquidated Damages (if any) on or principal of any Securities because of the
reinstatement of their obligations, the Issuers shall be subrogated to the
rights of the Holders of such Securities to receive such payment from the money
or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. The Issuers and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Security- holder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to add guarantees with respect to the Securities,
including any Subsidiary Guaranties, or to secure the Securities or to
release such guaranties in accordance with the terms of Section 4.04;
(5) to add to the covenants of the Issuers for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Issuers;
(6) to comply with any requirements of the Commission in
connection with qualifying, or maintaining the qualification of, this
Indenture under the TIA; or
(7) to make any change that does not adversely affect the
rights of any Securityholder.
<PAGE> 77
71
After an amendment under this Section becomes effective, the
Issuers shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.02. With Consent of Holders. The Issuers and the
Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the Securities then outstanding (including
consents obtained in connection with a tender offer or exchange for the
Securities). However, without the consent of each Securityholder affected
thereby, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent
to an amendment;
(2) reduce the rate of or extend the time for payment of
interest and Liquidated Damages (if any) on any Security;
(3) reduce the principal of or extend the Stated Maturity of
any Security;
(4) reduce the premium payable upon the redemption of any
Security or change the time at which any Security may be redeemed in
accordance with Article 3;
(5) make any Security payable in money other than that stated
in the Security;
(6) make any change in Section 6.04 or 6.07 or the second
sentence of this Section; or
(7) make any change in any Subsidiary Guaranty that would
adversely affect the Securityholders.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the
Issuers shall mail to Securityholders a notice briefly describing such
amendment. The failure to
<PAGE> 78
72
give such notice to all Securityholders, or any defect therein, shall not impair
or affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Securityholder. An
amendment or waiver becomes effective upon the execution of such amendment or
waiver by the Trustee.
The Issuers may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Issuers or the Trustee so determines, the Issuers
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
<PAGE> 79
73
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article 9 if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture.
SECTION 9.07. Payment for Consent. Neither the Issuers nor any
Affiliate of the Issuers shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend (and,
if appropriate, tender their Securities) in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement.
ARTICLE 10
Subsidiary Guaranties
SECTION 10.01. Guaranties. Each Subsidiary Guarantor hereby
unconditionally and irrevocably guarantees, jointly and severally, to each
Holder and to the Trustee and its successors and assigns (a) the full and
punctual payment of principal of and interest and Liquidated Damages (if any) on
the Securities when due, whether at maturity, by acceleration, by redemption or
otherwise, and all other monetary obligations of the Issuers under this
Indenture and the Securities and (b) the full and punctual performance within
applicable grace periods of all other obligations of the Issuers under this
Indenture and the Securities (all the foregoing being hereinafter collectively
called the "Obligations"). Each Subsidiary Guarantor further agrees that the
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from such Subsidiary Guarantor and that such Subsidiary Guarantor
will remain bound under this Article 10 notwithstanding any extension or renewal
of any Obligation.
<PAGE> 80
74
Each Subsidiary Guarantor waives presentation to, demand of,
payment from and protest to the Issuers of any of the Obligations and also
waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice
of any default under the Securities or the Obligations. The Obligations of each
Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Issuers or any other Person under this Indenture, the
Securities or any other agreement or otherwise; (b) any extension or renewal of
any thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Indenture, the Securities or any other agreement;
(d) the release of any security held by any Holder or the Trustee for the
Obligations or any of them; (e) the failure of any Holder or the Trustee to
exercise any right or remedy against any other guarantor of the Obligations; or
(f) any change in the ownership of such Subsidiary Guarantor.
Each Subsidiary Guarantor further agrees that its Subsidiary
Guaranty herein constitutes a guarantee of payment, performance and compliance
when due (and not a guarantee of collection) and waives any right to require
that any resort be had by any Holder or the Trustee to any security held for
payment of the Obligations.
Except as expressly set forth in Sections 8.01(b), 10.02 and
10.06, the obligations of each Subsidiary Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the Obligations of each Subsidiary Guarantor herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Securities or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the obligations, or by any other act or thing
or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of such Subsidiary Guarantor or would
otherwise operate as a
<PAGE> 81
75
discharge of such Subsidiary Guarantor as a matter of law or equity.
Each Subsidiary Guarantor further agrees that its Guarantee
herein shall continue to be effective or be reinstated, as the case may be, if
at any time payment, or any part thereof, of principal of or interest and
Liquidated Damages (if any) on any Obligation is rescinded or must otherwise be
restored by any Holder or the Trustee upon the bankruptcy or reorganization of
the Issuers or otherwise.
In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against any
Subsidiary Guarantor by virtue hereof, upon the failure of the Issuers to pay
the principal of or interest and Liquidated Damages (if any) on any Obligation
when and as the same shall become due, whether at maturity, by acceleration, by
redemption or otherwise, or to perform or comply with any other Obligation, each
Subsidiary Guarantor hereby promises to and will, upon receipt of written demand
by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or
the Trustee an amount equal to the sum of (i) the unpaid amount of such
Obligations, (ii) accrued and unpaid interest and Liquidated Damages (if any) on
such Obligations (but only to the extent not prohibited by law) and (iii) all
other monetary Obligations of the Issuers to the Holders and the Trustee.
Each Subsidiary Guarantor agrees that, as between it, on the
one hand, and the Holders and the Trustee, on the other hand, (x) the maturity
of the Obligations Guaranteed hereby may be accelerated as provided in Article 6
for the purposes of such Subsidiary Guarantor's Subsidiary Guaranty herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such Obligations as provided in
Article 6, such Obligations (whether or not due and payable) shall forthwith
become due and payable by such Subsidiary Guarantor for the purposes of this
Section.
Each Subsidiary Guarantor also agrees to pay any and all costs
and expenses (including reasonable attorneys' fees) incurred by the Trustee or
any Holder in enforcing any rights under this Section.
<PAGE> 82
76
SECTION 10.02. Limitation on Liability. Any term or provision
of this Indenture to the contrary notwithstanding, the maximum, aggregate amount
of the Obligations guaranteed hereunder by any Subsidiary Guarantor shall not
exceed the maximum amount that can be hereby guaranteed without rendering this
Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
SECTION 10.03. Successors and Assigns. This Article 10 shall
be binding upon each Subsidiary Guarantor and its successors and assigns and
shall enure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.
SECTION 10.04. No Waiver. Neither a failure nor a delay on the
part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article 10 shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Trustee and
the Holders herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Article 10
at law, in equity, by statute or otherwise.
SECTION 10.05. Modification. No modification, amendment or
waiver of any provision of this Article 10, nor the consent to any departure by
any Subsidiary Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Trustee, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on any Subsidiary Guarantor in any case
shall entitle such Subsidiary Guarantor to any other or further notice or demand
in the same, similar or other circumstances.
SECTION 10.06. Release of Subsidiary Guarantor. Upon the sale
or other disposition (including by way of consolidation or merger) of a
Subsidiary Guarantor or the
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77
sale or disposition of all or substantially all the assets of such Subsidiary
Guarantor (in each case other than to the Issuers or an Affiliate of the
Issuers), such Subsidiary Guarantor shall be deemed released from all
Obligations under this Article 10 without any further action required on the
part of the Trustee or any Holder. At the request of the Issuers, the Trustee
shall execute and deliver an appropriate instrument evidencing such release.
ARTICLE 11
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls. If any provision
of this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 11.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Issuers:
Globalstar, L.P.
Globalstar Capital Corporation
3200 Zinker Road
San Jose, California 95164-0670
Attention: Michael B. Targoff
Facsimile: (408) 473-5040
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, NY 10286
Attention: Corporate Trust Administration
Facsimile: (212) 815-5915
The Issuers or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall
be mailed to the Securityholder at the Secu-
<PAGE> 84
78
rityholder's address as it appears on the registration books of the Registrar
and shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Issuers, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Issuers to the Trustee to take
or refrain from taking any action under this Indenture, the Issuers shall
furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
<PAGE> 85
79
(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.06. When Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Issuers
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Issuers shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which a Trust Officer of the Trustee actually knows
are so owned shall be so disregarded. Also, subject to the foregoing, only
Securities outstanding at the time shall be considered in any such
determination.
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 11.08. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not required to be
open in the State of New York. If a payment date is a Legal Holiday, payment
shall be made on the next succeeding day that is not a Legal Holiday, and no
interest and Liquidated Damages (if any) shall accrue for the intervening
period. If a regular record date is a Legal Holiday, the record date shall not
be affected.
SECTION 11.09. Governing Law. This Indenture and the
Securities shall be governed by, and construed in accordance with, the laws of
the State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
SECTION 11.10. No Recourse Against Others. Any past, present
or future director, officer, partner (including any general partner) employee,
incorporator or
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80
stockholder, as such, of the Issuers shall not have any liability for any
obligations of the Issuers under the Securities or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 11.11. Successors. All agreements of the Issuers in
this Indenture and the Securities shall bind their successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 11.12. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.
<PAGE> 87
81
SECTION 11.13. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
GLOBALSTAR, L.P.,
by
LORAL/QUALCOMM SATELLITE
SERVICES, L.P., its managing
general partner,
by
LORAL/QUALCOMM PARTNERSHIP,
L.P. its general partner,
by
LORAL GENERAL PARTNER, INC.,
its general partner,
by
/s/ Eric J. Zahler
----------------------------
Name: Eric J. Zahler
Title: Secretary
GLOBALSTAR CAPITAL CORPORATION,
by
/s/ Eric J. Zahler
----------------------------
Name: Eric J. Zahler
Title: Secretary
THE BANK OF NEW YORK, as Trustee
by
/s/ Walter Gitlin
----------------------------
Name: Walter Gitlin
Title: Vice President
<PAGE> 88
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE
SECURITY]
*/
**/
No. R- $
11 3/8% Senior Notes due 2004 CUSIP:
Globalstar, L.P., a Delaware limited partnership, and Globalstar Capital
Corporation, a Delaware corporation, each promise to pay to ,
or registered assigns, the principal sum of Dollars on
February 15, 2004.
Interest Payment Dates: February 15 and August 15.
Record Dates: February 1 and August 1.
Additional provisions of this Security are set forth on the other side of this
Security.
GLOBALSTAR, L.P., by
LORAL/QUALCOMM SATELLITE
SERVICES, L.P., its managing
general partner, by
LORAL/QUALCOMM PARTNERSHIP, L.P.
its general partner, by LORAL
GENERAL PARTNER, INC. its
general partner,
by
_____________________
President
_____________________
Secretary
GLOBALSTAR CAPITAL CORPORATION,
by
_____________________
President
_____________________
Secretary
<PAGE> 89
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Dated: , 1997
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
_____________________________
Authorized Signatory
*/ If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to the Rule 144A/Regulation S Appendix and the attachment
from such Exhibit 1 captioned "[TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF
INCREASES OR DECREASES IN GLOBAL SECURITY".
**/ If the Security is a Private Exchange Security issued in a Private Exchange
to an Initial Purchaser holding an unsold portion of its initial allotment, add
the Restricted Securities Legend from Exhibit 1 to the
<PAGE> 90
3
Rule 144A/Regulation S Appendix and replace the Assignment Form included in this
Exhibit A with the Assignment Form included in such Exhibit 1.
<PAGE> 91
4
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY OR PRIVATE
EXCHANGE SECURITY]
11 3/8% Senior Note due 2004
1. Interest and Liquidated Damages
Globalstar, L.P., a Delaware limited partnership and
Globalstar Capital Corporation, a Delaware corporation (such limited partnership
and such corporation, and their successors and assigns under the Indenture
hereinafter referred to, being herein called the "Issuers"), promise to pay
interest on the principal amount of this Security at the rate per annum shown
above; provided, however, that if a Registration Default (as defined in the
Registration Rights Agreement) occurs, Liquidated Damages (as defined in the
Registration Rights Agreement) shall accrue on this Security in an amount equal
to $.05 per week per $1,000 principal amount of Securities held by each Holder
(over and above the interest set forth in the title of this Security) from and
including the date on which any such Registration Default shall occur until the
earlier of (i) the date on which all such Registration Defaults have been cured
or (ii) the date which is 90 days after the date such Registration Default
occurred. The Liquidated Damages will increase by an additional $.05 per week
per $1,000 principal amount of the Securities held by each Holder during each
subsequent 90-day period until the date on which all such Registration Defaults
have been cured; provided, however, that the aggregate amount of Liquidated
Damages shall not exceed a maximum of $.50 per week per $1,000 principal amount
of the Securities held by each Holder. The Issuers will pay interest hereon, if
any, semiannually on February 15 and August 15 of each year; provided, however,
that except for any Liquidated Damages payable pursuant to the two immediately
preceding sentences, the first such interest payment date shall be August 15,
1997. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid or provided for, (i) in
the case of Liquidated Damages as described above, and (ii) in the case of
interest, from February 19, 1997. Interest will be computed on the basis of a
360-day year of twelve 30-day months. The Issuers shall pay interest on overdue
principal at the rate borne by the Securities plus 1% per annum, and it shall
pay interest on overdue installments of cash interest at such higher rate to the
extent lawful.
<PAGE> 92
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2. Method of Payment
The Issuers will pay interest and Liquidated Damages (if any)
on the Securities (except defaulted interest) to the Persons who are registered
holders of Securities at the close of business on the February 1 or August 1
next preceding the interest payment date even if Securities are canceled after
the record date and on or before the interest payment date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Issuers will pay principal and interest and Liquidated Damages (if any) in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. Payments in respect of Securities (including
principal, premium, interest and Liquidated Damages (if any) will be made by
wire transfer of immediately available funds to the accounts specified by the
holders thereof or, if no U.S. dollar account maintained by the payee with a
bank in the United States is designated by any holder to the Trustee or the
Paying Agent at least 30 days prior to the relevant due date for payment (or
such other date as the Trustee may accept in its discretion), by mailing a check
to the registered address of such holder.
3. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Issuers may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Issuers or any of their domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Issuers issued the Securities under an Indenture dated as
of February 15, 1997 ("Indenture"), between the Issuers and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Section 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act").
Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the Act for a statement of
those terms.
<PAGE> 93
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The Securities are unsecured senior obligations of the Issuers
limited to $500,000,000 aggregate principal amount (subject to Section 2.07 of
the Indenture). The Indenture contains certain covenants which, among other
things, limit (a) the incurrence of additional debt by the Issuers and certain
of its subsidiaries and the issuance of capital stock by such subsidiaries, (b)
the payment of dividends on capital stock of certain subsidiaries and the
purchase, redemption or retirement of capital stock or subordinated
indebtedness, (c) certain investments, (d) certain transactions with affiliates,
(e) the incurrence of liens, (f) sales of assets, including capital stock of
subsidiaries, (g) certain consolidations and mergers, (h) the Issuers' and
certain of their subsidiaries' lines of business and (i) the Issuers' ability to
operate without certain insurance coverage. The Indenture also will prohibit
certain restrictions on distributions from subsidiaries. In addition, the
Issuers may be obligated, under certain circumstances, to offer to repurchase
Securities at a purchase price equal to 101% of the principal amount of the
Securities plus accrued and unpaid interest and Liquidated Damages (if any) to
the date of repurchase.
5. Optional Redemption
The Securities may not be redeemed prior to February 15, 2002.
On and after that date, the Issuers may redeem the Securities in whole or in
part, at any time or from time to time at the following redemption prices
(expressed in percentages of principal amount), plus accrued and unpaid interest
and Liquidated Damages (if any) to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest and Liquidated
Damages (if any) due on the related interest payment date):
If redeemed during the 12-month period commencing February 15
of the years set forth below:
Period Percentage
------ ----------
2002...................................... 105.688%
2003...................................... 102.844%
<PAGE> 94
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6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest and Liquidated Damages (if any) on all Securities (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have
the right to cause the Issuers to repurchase all or any part of the Securities
of such Holder at a repurchase price equal to 101% of the principal amount of
the Securities plus accrued and unpaid interest and Liquidated Damages (if any)
to be repurchased (subject to the right of holders of record on the relevant
record date to receive interest and Liquidated Damages (if any) due on the
relevant interest payment date) as provided in, and subject to the terms of, the
Indenture.
8. Guarantees
This Security may be jointly and severally guaranteed by
certain Subsidiaries of the Issuers to the extent provided in the Indenture. The
Issuers have covenanted pursuant to the Indenture to cause any Subsidiary
created or acquired after the date of the Indenture (unless such Subsidiary is a
Transitory Equipment Subsidiary or is an Unrestricted Subsidiary), to execute
and deliver to the Trustee a Subsidiary Guaranty pursuant to which such
Subsidiary will guaranty this Security on the same terms and conditions as those
set forth in the Indenture.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorse-
<PAGE> 95
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ments or transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture. The Issuers are not required to transfer or exchange
any Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Issuers and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Issuers at any time may
terminate some or all of their obligations under the Securities and the
Indenture if the Issuers deposit with the Trustee money or U.S. Government
Obligations for the payment of principal and interest and Liquidated Damages (if
any) on the Securities to redemption or maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Issuers and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of Globalstar under the Indenture, to provide for uncertificated
Securities in addition to or in place of
<PAGE> 96
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certificated Securities, to add guarantees with respect to the Securities, to
release such guarantees, to secure the Securities, to add to the covenants of
the Issuers for the benefit of the Holders of the Securities or to surrender any
right or power conferred upon the Issuers, to make any change that does not
adversely affect the rights of any Holder of the Securities or to comply with
any requirement of the SEC in connection with the qualification of the Indenture
under the Trust Indenture Act.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest or Liquidated Damages (if any) on the Securities;
(ii) default in payment of principal on the Securities, upon redemption pursuant
to paragraph 5 of the Securities, upon required repurchase upon declaration or
otherwise, or failure by the Issuers to redeem or purchase Securities when
required; (iii) failure by the Issuers to comply with other agreements in the
Indenture or the Securities, in certain cases subject to notice and lapse of
time; (iv) certain accelerations (including failure to pay within any grace
period after final maturity) of other Debt of the Issuers if the amount
accelerated (or so unpaid) exceeds $10 million; (v) certain events of bankruptcy
or insolvency with respect to the Issuers and the Significant Subsidiaries; (vi)
certain judgments or decrees for the payment of money in excess of $10 million,
subject to lapse of time and notice; and (vii) certain events with respect to
the guarantees of the Issuers' obligations under the Securities by certain of
their subsidiaries. However, a default under clauses (iii) and (vi) will not
constitute an Event of Default until the Trustee or the Holders of at least 25%
in principal amount of the Securities outstanding notify the Issuers of the
default and the Issuers do not cure such default within the time specified after
receipt of such notice. If an Event of Default occurs and is continuing, the
Trustees or the Holders of at least 25% in principal amount of the Securities
outstanding may declare the principal of and all accrued but unpaid interest and
Liquidated Damages (if any) on all the Securities to be due and payable
immediately. Certain events of bankruptcy, insolvency or reorganization are
Events of Default which will result in the Securities being due and payable
immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The
<PAGE> 97
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Trustee may refuse to enforce the Indenture or the Securities unless it receives
reasonable indemnity or security. Subject to certain limitations, Holders of a
majority in principal amount of the Securities may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Securityholders
notice of any continuing Default (except a Default in payment of principal or
interest or Liquidated Damages (if any)) if it determines that withholding
notice is in the interest of the Holders.
15. Trustee Dealings with the Issuers
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with the Issuers or their
Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
Any past, present or future director, officer, partner
(including general partners), employee, incorporator or stockholder, as such, of
the Issuers or the Trustee shall not have any liability for any obligations of
the Issuers under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
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19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Issuers have caused CUSIP
numbers to be printed on the Securities and have directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
20. Holders' Compliance with Registration Rights Agreement
Each Holder of a Security, by acceptance hereof, acknowledges
and agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Issuers to the extent provided
therein.
21. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
THE ISSUERS WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE.
REQUESTS MAY BE MADE TO:
GLOBALSTAR, L.P.
3200 ZANKER ROAD
BOX 640670
SAN JOSE, CA 95164-0670
ATTENTION OF STEPHEN C. WRIGHT
<PAGE> 99
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- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of Globalstar. The agent may substitute another to act for
him.
- --------------------------------------------------------------------------------
Date: _____________________ Your Signature: ______________________________
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
<PAGE> 100
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Issuers pursuant to Section 4.07 or 4.10 of the Indenture, check the box:
/ /
If you want to elect to have only part of this Security
purchased by the Issuers pursuant to Section 4.07 or 4.10 of the Indenture,
state the amount:
Date: __________________ Your Signature: __________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:_______________________________________
[Signature must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved guarantee
medallion program pursuant to Securities
and Exchange Commission Rule 17Ad-15]
<PAGE> 101
RULE 144A/REGULATION S APPENDIX
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO
RULE 144A, INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED
IN RULE 501(A)(1), (2), (3) OR (7)) AND TO CERTAIN
PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON
REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES
1. Definitions
1.1 Definitions. For the purposes of this Appendix the following terms
shall have the meanings indicated below:
"Definitive Security" means a certificated Initial Security
bearing the restricted securities legend set forth in Section 2.3(d) and which
is held by an IAI in accordance with Section 2.1(c).
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Exchange Securities" means the 11 3/8% Senior Notes due 2004
to be issued pursuant to this Indenture in connection with a Registered Exchange
Offer pursuant to the Registration Rights Agreement.
"Globalstar Parties" means each of Globalstar, L.P.,
Globalstar Capital Corporation and Globalstar Telecommunications Limited.
"IAI" means an institutional "accredited investor" as
described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Lehman Brothers Inc., Bear, Stearns
& Co., Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Unterberg
Harris.
"Initial Securities" means the 11 3/8% Senior Notes due 2004,
issued under this Indenture on or about the date hereof.
"Private Exchange" means the offer by the Issuers, pursuant to
the Registration Rights Agreement, to the Initial Purchasers to issue and
deliver to each Initial Purchaser, in exchange for the Initial Securities held
by the Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.
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"Private Exchange Securities" means the 11 3/8% Senior Notes
due 2004 to be issued pursuant to this Indenture to the Initial Purchasers in a
Private Exchange.
"Purchase Agreement" means the Purchase Agreement dated
February 13, 1997, among the Globalstar Parties and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registered Exchange Offer" means the offer by the Issuers,
pursuant to the Registration Rights Agreement, to certain Holders of Initial
Securities, to issue and deliver to such Holders, in exchange for the Initial
Securities, a like aggregate principal amount of Exchange Securities registered
under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement dated February 19, 1997, among the Issuers and the Initial Purchasers.
"Securities" means the Initial Securities, the Exchange
Securities and the Private Exchange Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933.
"Securities Custodian" means the custodian with respect to a
Global Security (as appointed by the Depositary), or any successor person
thereto and shall initially be the Trustee.
"Shelf Registration Statement" means the registration
statement issued by the Issuers, in connection with the offer and sale of
Initial Securities or Private Exchange Securities, pursuant to the Registration
Rights Agreement.
"Transfer Restricted Securities" means Definitive Securities
and Securities that bear or are required to bear the legend set forth in Section
2.3(d) hereto.
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1.2 Other Definitions
Defined in
Term Section :
"Agent Members"........................... 2.1(b)
"Global Security"......................... 2.1(a)
"Regulation S"............................ 2.1(a)
"Rule 144A"............................... 2.1(a)
2. The Securities
2.1 Form and Dating. The Initial Securities are being offered and sold
by the Issuers pursuant to the Purchase Agreement.
(a) Global Securities. Initial Securities offered and sold to
a QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") or in
reliance on Regulation S under the Securities Act ("Regulation S"), in each case
as provided in the Purchase Agreement, shall be issued initially in the form of
one or more permanent global Securities in definitive, fully registered form
without interest coupons with the global securities legend and restricted
securities legend set forth in Exhibit 1 hereto (each, a "Global Security"),
which shall be deposited on behalf of the purchasers of the Initial Securities
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary (or with such other custodian as the Depositary may direct), and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Issuers and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Global Securities may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply
only to a Global Security deposited with or on behalf of the Depositary.
The Issuers shall execute and the Trustee shall, in accordance
with this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depositary for such
Global Security or Global Securities or the nominee of such Depositary and (b)
shall be delivered by the Trustee to such
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Depositary or pursuant to such Depositary's instructions or held by the Trustee
as custodian for the Depositary.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depositary or by the Trustee as the
custodian of the Depositary or under such Global Security, and the Depositary
may be treated by the Issuers, the Trustee and any agent of the Issuers or the
Trustee as the absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Issuers, the Trustee or any agent of the Issuers or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices of such Depositary governing the exercise of
the rights of a holder of a beneficial interest in any Global Security.
(c) Certificated Securities. Except as provided in this
Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in Global
Securities will not be entitled to receive physical delivery of certificated
Securities. Purchasers of Initial Securities who are IAIs and are not QIBs and
did not purchase Initial Securities sold in reliance on Regulation S will
receive Definitive Securities; provided, however, that upon transfer of such
Definitive Securities to a QIB, such Definitive Securities will, unless the
Global Security has previously been exchanged, be exchanged for an interest in a
Global Security pursuant to the provisions of Section 2.3.
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue in an aggregate principal amount of
$500,000,000 and (2) Exchange Securities or Private Exchange Securities for
issue only in a Registered Exchange Offer or a Private Exchange, respectively,
pursuant to the Registration Rights Agreement, for a like principal amount of
Initial Securities, in each case upon a written order of the Company signed by
two Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of each of the Issuers. Such order shall specify the amount of the
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated and whether the Securities are to be Initial
Securities, Exchange Securities or Private Exchange Securities. The aggregate
principal amount of Securities outstanding at any time may not exceed
$500,000,000 except as provided in Section 2.07 of this Indenture.
<PAGE> 105
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2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized
denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Issuers
and the Registrar or co-registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section
2.3(b) or pursuant to clause (A), (B) or (C) below, and are accompanied
by the following additional information and documents, as applicable:
(A) if such Definitive Securities are being delivered
to the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from such
Holder to that effect (in the form set forth on the reverse of
the Security); or
(B) if such Definitive Securities are being
transferred to any of the Globalstar Parties, a certification
to that effect (in the form set forth on the reverse of the
Security); or
(C) if such Definitive Securities are being
transferred (w) pursuant to an exemption from registration in
accordance with Rule 144; or (x) in reliance on another
exemption from the registration requirements of the Securities
Act: (i) a certification to that effect (in the form set forth
on the reverse of the Security) and (ii) if the Issuers or
Registrar so requests, an opinion of
<PAGE> 106
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counsel or other evidence reasonably satisfactory to them as
to the compliance with the restrictions set forth in the
legend set forth in Section 2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Trustee, together with:
(i) certification, in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred (A) to a
QIB in accordance with Rule 144A, or (B) outside the United States in
an offshore transaction within the meaning of Regulation S and in
compliance with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an adjustment on its books and
records with respect to such Global Security to reflect an increase in
the aggregate principal amount of the Securities represented by the
Global Security, such instructions to contain information regarding the
Depositary account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so cancelled. If no
Global Securities are then outstanding, the Company shall issue and the Trustee
shall authenticate, upon written order of the Company in the form of an
Officers' Certificate, a new Global Security in the appropriate aggregate
principal amount.
(c) Transfer and Exchange of Global Securities. (i) The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the
<PAGE> 107
7
Depositary, in accordance with this Indenture (including applicable restrictions
on transfer set forth herein, if any) and the procedures of the Depositary
therefor. A transferor of a beneficial interest in a Global Security shall
deliver to the Registrar a written order given in accordance with the
Depositary's procedures containing information regarding the participant account
of the Depositary to be credited with a beneficial interest in the Global
Security. The Registrar shall, in accordance with such instructions, instruct
the Depositary to credit to the account of the Person specified in such
instructions a beneficial interest in the Global Security and to debit the
account of the Person making the transfer of the beneficial interest in the
Global Security being transferred.
(ii) Notwithstanding any other provisions of this Rule
144A/Regulation S Appendix (other than the provisions set forth in
Section 2.4), a Global Security may not be transferred as a whole
except by the Depositary to a nominee of the Depositary or by a nominee
of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary.
(iii) In the event that a Global Security is exchanged for
Securities in definitive registered form pursuant to Section 2.4 or
Section 2.09 of the Indenture prior to the consummation of a Registered
Exchange Offer or the effectiveness of a Shelf Registration Statement
with respect to such Securities, such Securities may be exchanged only
in accordance with such procedures as are substantially consistent with
the provisions of this Section 2.3 (including the certification
requirements set forth on the reverse of the Initial Securities
intended to ensure that such transfers comply with Rule 144A or
Regulation S, as the case may be) and such other procedures as may from
time to time be adopted by the Company.
(d) Legends.
(i) Except as permitted by the following paragraphs (ii),
(iii) and (iv), each Security certificate evidencing the Global
Securities and the Definitive Securities (and all Securities issued in
<PAGE> 108
8
exchange therefor or in substitution thereof) shall bear a legend in
substantially the following form:
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO
"U.S. PERSONS" (AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS
SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF
THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS,
ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE GLOBALSTAR
PARTIES THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY
WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II)
IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY,
PRIOR TO THE DATE WHEN THIS SECURITY NO LONGER CONSTITUTES A
"RESTRICTED" SECURITY UNDER RULE 144(K) OF THE SECURITIES ACT
EXCEPT (A) TO ANY OF THE GLOBALSTAR PARTIES, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (D) OUTSIDE
THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT
OF THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II)
ABOVE. ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE
FOREGOING CLAUSES (II)(D) AND (E) IS SUBJECT TO THE RIGHT OF
THE ISSUERS OF THIS SECURITY AND THE TRUSTEE OR TRANSFER AGENT
FOR SUCH SECURITIES TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATIONS OR
<PAGE> 109
9
OTHER INFORMATION ACCEPTABLE TO THEM IN FORM AND SUBSTANCE.
[THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.]
BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" AS DEFINED
IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH REGULATION S.
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a
Global Security) pursuant to Rule 144 under the Securities Act:
(A) in the case of any Transfer Restricted Security
that is a Definitive Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security
for a certificated Security that does not bear the legend set
forth above and rescind any restriction on the transfer of
such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security
that is represented by a Global Security, the Registrar shall
permit the Holder thereof to exchange such Transfer Restricted
Security for a certificated Security that does not bear the
legend set forth above and rescind any restriction on the
transfer of such Transfer Restricted Security, if the Holder
certifies in writing to the Registrar that its request for
such exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse of
the Security).
(iii) After a transfer of any Initial Securities or Private
Exchange Securities during the period of the effectiveness of a Shelf
Registration Statement with respect to such Initial Securities or
Private Exchange Securities, as the case may be, all requirements
pertaining to legends on such Initial Security or such Private Exchange
Security will cease to apply, the requirements requiring any such
Initial Security or such Private Exchange Security issued to certain
Holders to be issued in global form will cease to apply, and a
certificated Initial Security or Private Exchange
<PAGE> 110
10
Security without legends will be available to the transferee of the
Holder of such Initial Securities or Private Exchange Securities upon
exchange of such transferring Holder's certificated Initial Security or
Private Exchange Security or directions to transfer such Holder's
interest in the Global Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which Holders of such
Initial Securities are offered Exchange Securities in exchange for
their Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued
in global form will cease to apply and certificated Initial Securities
with the Restricted Securities Legend set forth in Exhibit 1 hereto
will be available to Holders of such Initial Securities that do not
exchange their Initial Securities, and Exchange Securities in
certificated or global form will be available to Holders that exchange
such Initial Securities in such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect
to the Initial Securities pursuant to which Holders of such Initial
Securities are offered Private Exchange Securities in exchange for
their Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued
in global form will still apply, and Private Exchange Securities in
global form with the Restricted Securities Legend set forth in Exhibit
1 hereto will be available to Holders that exchange such Initial
Securities in such Private Exchange.
(e) Cancellation or Adjustment of Global Security. At such
time as all beneficial interests in a Global Security have either been exchanged
for certificated or Definitive Securities, redeemed, repurchased or canceled,
such Global Security shall be returned to the Depositary for cancellation or
retained and canceled by the Trustee. At any time prior to such cancellation, if
any beneficial interest in a Global Security is exchanged for certificated or
Definitive Securities, redeemed, repurchased or canceled, the principal amount
of Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Securities Custodian for such Global Security) with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect such reduction.
<PAGE> 111
11
(f) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges, the
Issuers shall execute and the Trustee shall authenticate certificated
Securities, Definitive Securities and Global Securities at the
Registrar's or co-registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Issuers may require payment of a sum
sufficient to cover any transfer tax, assessments or similar
governmental charge payable in connection therewith (other than any
such transfer taxes, assessments or similar governmental charge payable
upon exchange or transfer pursuant to Sections 3.06, 4.10 and 9.05 of
the Indenture).
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) any certificated or
Definitive Security selected for redemption in whole or in part
pursuant to Article 3 of this Indenture, except the unredeemed portion
of any certificated or Definitive Security being redeemed in part, or
(b) any Security for a period beginning 15 Business Days before the
mailing of a notice of an offer to repurchase or redeem Securities or
15 Business Days before an interest payment date.
(iv) Prior to the due presentation for registration of transfer
of any Security, the Issuers, the Trustee, the Paying Agent, the
Registrar or any co-registrar may deem and treat the person in whose
name a Security is registered as the absolute owner of such Security
for the purpose of receiving payment of principal of and interest on
such Security and for all other purposes whatsoever, whether or not
such Security is overdue, and none of the Issuers, the Trustee, the
Paying Agent, the Registrar or any co-registrar shall be affected by
notice to the contrary.
(v) All Securities issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt
and shall be entitled to the same benefits under this Indenture as the
Securities surrendered upon such transfer or exchange.
<PAGE> 112
12
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of a Global Security, a member of or a participant
in the Depositary or other Person with respect to the accuracy of the
records of the Depositary or its nominee or of any participant or
member thereof with respect to any ownership interest in the Securities
or with respect to the delivery to any participant, member, beneficial
owner or other Person (other than the Depositary) of any notice
(including any notice of redemption) or the payment of any amount under
or with respect to such Securities. All notices and communications to
be given to the Holders and all payments to be made to Holders under
the Securities shall be given or made only to or upon the order of the
registered Holders (which shall be the Depositary or its nominee in the
case of a Global Security). The rights of beneficial owners in any
Global Security shall be exercised only through the Depositary subject
to the applicable rules and procedures of the Depositary. The Trustee
may rely and shall be fully protected in relying upon information
furnished by the Depositary with respect to its members, participants
and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to
any transfer of any interest in any Security (including any transfers
between or among Depositary participants, members or beneficial owners
in any Global Security) other than to require delivery of such
certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by, the terms
of this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
2.4 Certificated Securities.
(a) A Global Security deposited with the Depositary or with
the Trustee as custodian for the Depositary pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depositary notifies the Issuers
that it is unwilling or unable to
<PAGE> 113
13
continue as Depositary for such Global Security or if at any time such
Depositary ceases to be a "clearing agency" registered under the Exchange Act
and a successor depositary is not appointed by the Issuers within 90 days of
such notice, or (ii) an Event of Default has occurred and is continuing or (iii)
the Issuers, in their sole discretion, notify the Trustee in writing that they
elect to cause the issuance of certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section shall be surrendered by the Depositary
to the Trustee located in the Borough of Manhattan, The City of New York, to be
so transferred, in whole or from time to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such transfer of each portion of
such Global Security, an equal aggregate principal amount of certificated
Initial Securities of authorized denominations. Any portion of a Global Security
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 principal amount and any integral
multiple thereof and registered in such names as the Depositary shall direct.
Any certificated Initial Security delivered in exchange for an interest in the
Global Security shall, except as otherwise provided by Section 2.3(d), bear the
Restricted Securities Legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Security may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of either of the events
specified in Section 2.4(a), the Issuers will promptly make available to the
Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
<PAGE> 114
EXHIBIT 1
to
RULE 144A/REGULATION S APPENDIX
[FORM OF FACE OF INITIAL SECURITY]
THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE INITIALLY ISSUED AS PART OF AN
ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF THE SECURITIES AND WARRANTS (EACH,
A "WARRANT") ENTITLING THE HOLDERS THEREOF TO PURCHASE AN AGGREGATE OF SHARES OF
COMMON STOCK, PAR VALUE OF $1.00 PER SHARE, OF GLOBALSTAR TELECOMMUNICATIONS
LIMITED, AT A PRICE OF $69.575 PER SHARE. THE SECURITIES AND WARRANTS WILL NOT
TRADE SEPARATELY UNTIL THE EARLIER OF (I) THE COMMENCEMENT OF AN EXCHANGE OFFER
OR THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT FOR THE SECURITIES OR
(II) SUCH DATE AFTER AUGUST 15, 1997, AS LEHMAN BROTHERS INC. MAY DETERMINE.
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE ISSUERS OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO "U.S. PERSONS"
(AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS
SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER
<PAGE> 115
2
OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES
FOR THE BENEFIT OF THE GLOBALSTAR PARTIES THAT: (I) IT HAS ACQUIRED A
"RESTRICTED" SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT;
(II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE
DATE WHEN THIS SECURITY NO LONGER CONSTITUTES A "RESTRICTED" SECURITY UNDER RULE
144(K) OF THE SECURITIES ACT EXCEPT (A) TO ANY OF THE GLOBALSTAR PARTIES, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT,
OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY APPLICABLE
JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE RESTRICTIONS SET
FORTH IN (II) ABOVE. ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE
FOREGOING CLAUSES (II)(D) AND (E) IS SUBJECT TO THE RIGHT OF THE ISSUERS OF THIS
SECURITY AND THE TRUSTEE OR TRANSFER AGENT FOR SUCH SECURITIES TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION
ACCEPTABLE TO THEM IN FORM AND SUBSTANCE. [THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.]
BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B)
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION
S.
<PAGE> 116
3
No. $
CUSIP:
11 3/8% Senior Notes due 2004
Globalstar, L.P., a Delaware limited partnership and Globalstar Capital
Corporation, a Delaware corporation, promise to pay to ,
or registered assigns, the principal sum of Dollars on February
15, 2004.
Interest Payment Dates: February 15 and August 15.
Record Dates: February 1 and August 1.
Additional provisions of this Security are set forth on the
other side of this Security.
GLOBALSTAR, L.P., by
LORAL/QUALCOMM SATELLITE
SERVICES, L.P., its managing
general partner, by
LORAL/QUALCOMM PARTNERSHIP, L.P.
its general partner, by LORAL
GENERAL PARTNER, INC. its
general partner,
by
____________________________
President
____________________________
Secretary
GLOBALSTAR CAPITAL CORPORATION
by
____________________________
President
____________________________
Secretary
<PAGE> 117
4
Dated: February 19, 1997
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
___________________________________
Authorized Signatory
<PAGE> 118
5
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
11 3/8% Senior Note due 2004
1. Interest and Liquidated Damages
Globalstar, L.P., a Delaware limited partnership and
Globalstar Capital Corporation, a Delaware corporation (such limited partnership
and such corporation, and their successors and assigns under the Indenture
hereinafter referred to, being herein called the "Issuers"), promise to pay
interest on the principal amount of this Security at the rate per annum shown
above; provided, however, that if a Registration Default (as defined in the
Registration Rights Agreement) occurs, Liquidated Damages (as defined in the
Registration Rights Agreement) shall accrue on this Security in an amount equal
to $.05 per week per $1,000 principal amount of Securities held by each Holder
(over and above the interest set forth in the title of this Security) from and
including the date on which any such Registration Default shall occur until the
earlier of (i) the date on which all such Registration Defaults have been cured
or (ii) the date which is 90 days after the date such Registration Default
occurred. The Liquidated Damages will increase by an additional $.05 per week
per $1,000 principal amount of the Securities held by each Holder during each
subsequent 90-day period until the date on which all such Registration Defaults
have been cured; provided, however, that the aggregate amount of Liquidated
Damages shall not exceed a maximum of $.50 per week per $1,000 principal amount
of the Securities held by each Holder. The Issuers will pay interest hereon, if
any, semiannually on February 15 and August 15 of each year; provided, however,
that except for any Liquidated Damages payable pursuant to the two immediately
preceding sentences, the first such interest payment date shall be August 15,
1997. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid or provided for, (i) in
the case of Liquidated Damages as described above, and (ii) in the case of
interest, from February 19, 1997. Interest will be computed on the basis of a
360-day year of twelve 30-day months. The Issuers shall pay interest on overdue
principal at the rate borne by the Securities plus 1% per annum, and it shall
pay interest
<PAGE> 119
6
on overdue installments of cash interest at such higher rate to the extent
lawful.
2. Method of Payment
The Issuers will pay interest and Liquidated Damages (if any)
on the Securities (except defaulted interest) to the Persons who are registered
holders of Securities at the close of business on the February 1 or August 1
next preceding the interest payment date even if Securities are canceled after
the record date and on or before the interest payment date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Issuers will pay principal and interest and Liquidated Damages (if any) in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. Payments in respect of Securities (including
principal, premium, interest and Liquidated Damages (if any)) will be made by
wire transfer of immediately available funds to the accounts specified by the
holders thereof or, if no U.S. dollar account maintained by the payee with a
bank in the United States is designated by any holder to the Trustee or the
Paying Agent at least 30 days prior to the relevant due date for payment (or
such other date as the Trustee may accept in its discretion), by mailing a check
to the registered address of such holder.
3. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Issuers may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Issuers or any of their domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Issuers issued the Securities under an Indenture dated as
of February 15, 1997 ("Indenture"), between the Issuers and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Section 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act").
Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such
<PAGE> 120
7
terms, and Securityholders are referred to the Indenture and the Act for a
statement of those terms.
The Securities are unsecured senior obligations of the Issuers
limited to $500,000,000 aggregate principal amount (subject to Section 2.07 of
the Indenture). The Indenture contains certain covenants which, among other
things, limit (a) the incurrence of additional debt by the Issuers and certain
of its subsidiaries and the issuance of capital stock by such subsidiaries, (b)
the payment of dividends on capital stock of certain subsidiaries and the
purchase, redemption or retirement of capital stock or subordinated
indebtedness, (c) certain investments, (d) certain transactions with affiliates,
(e) the incurrence of liens, (f) sales of assets, including capital stock of
subsidiaries, (g) certain consolidations and mergers, (h) the Issuers' and
certain of their subsidiaries' lines of business and (i) the Issuers' ability to
operate without certain insurance coverage. The Indenture also will prohibit
certain restrictions on distributions from subsidiaries. In addition, the
Issuers may be obligated, under certain circumstances, to offer to repurchase
Securities at a purchase price equal to 101% of the principal amount of the
Securities plus accrued and unpaid interest and Liquidated Damages (if any) to
the date of repurchase.
5. Optional Redemption
The Securities may not be redeemed prior to February 15, 2002.
On and after that date, the Issuers may redeem the Securities in whole or in
part, at any time or from time to time at the following redemption prices
(expressed in percentages of principal amount), plus accrued and unpaid interest
and Liquidated Damages (if any) to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest and Liquidated
Damages (if any) due on the related interest payment date):
if redeemed during the 12-month period commencing
February 15 of the years set forth below:
Period Percentage
------ ----------
2002....................................... 105.688%
2003....................................... 102.844%
<PAGE> 121
8
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest and Liquidated Damages (if any) on all Securities (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have
the right to cause the Issuers to repurchase all or any part of the Securities
of such Holder at a repurchase price equal to 101% of the principal amount of
the Securities plus accrued and unpaid interest and Liquidated Damages (if any)
to be repurchased (subject to the right of holders of record on the relevant
record date to receive interest and Liquidated Damages (if any) due on the
relevant interest payment date) as provided in, and subject to the terms of, the
Indenture.
8. Guarantees
This Security may be jointly and severally guaranteed by
certain Subsidiaries of the Issuers to the extent provided in the Indenture. The
Issuers have covenanted pursuant to the Indenture to cause any Subsidiary
created or acquired after the date of the Indenture (unless such Subsidiary is a
Transitory Equipment Subsidiary or is an Unrestricted Subsidiary), to execute
and deliver to the Trustee a Subsidiary Guaranty pursuant to which such
Subsidiary will guaranty this Security on the same terms and conditions as those
set forth in the Indenture.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorse-
<PAGE> 122
9
ments or transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture. The Issuers are not required to transfer or exchange
any Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Issuers and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Issuers at any time may
terminate some or all of their obligations under the Securities and the
Indenture if the Issuers deposit with the Trustee money or U.S. Government
Obligations for the payment of principal and interest and Liquidated Damages (if
any) on the Securities to redemption or maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Issuers and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of Globalstar under the Indenture, to provide for uncertificated
Securities in addition to or in place of
<PAGE> 123
10
certificated Securities, to add guarantees with respect to the Securities, to
release such guarantees, to secure the Securities, to add to the covenants of
the Issuers for the benefit of the Holders of the Securities or to surrender any
right or power conferred upon the Issuers, to make any change that does not
adversely affect the rights of any Holder of the Securities or to comply with
any requirement of the SEC in connection with the qualification of the Indenture
under the Trust Indenture Act.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest or Liquidated Damages (if any) on the Securities;
(ii) default in payment of principal on the Securities, upon redemption pursuant
to paragraph 5 of the Securities, upon required repurchase upon declaration or
otherwise, or failure by the Issuers to redeem or purchase Securities when
required; (iii) failure by the Issuers to comply with other agreements in the
Indenture or the Securities, in certain cases subject to notice and lapse of
time; (iv) certain accelerations (including failure to pay within any grace
period after final maturity) of other Debt of the Issuers if the amount
accelerated (or so unpaid) exceeds $10 million; (v) certain events of bankruptcy
or insolvency with respect to the Issuers and the Significant Subsidiaries; (vi)
certain judgments or decrees for the payment of money in excess of $10 million,
subject to lapse of time and notice; and (vii) certain events with respect to
the guarantees of the Issuers' obligations under the Securities by certain of
their subsidiaries. However, a default under clauses (iii) and (vi) will not
constitute an Event of Default until the Trustee or the Holders of at least 25%
in principal amount of the Securities outstanding notify the Issuers of the
default and the Issuers do not cure such default within the time specified after
receipt of such notice. If an Event of Default occurs and is continuing, the
Trustees or the Holders of at least 25% in principal amount of the Securities
outstanding may declare the principal of and all accrued but unpaid interest and
Liquidated Damages (if any) on all the Securities to be due and payable
immediately. Certain events of bankruptcy, insolvency or reorganization are
Events of Default which will result in the Securities being due and payable
immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The
<PAGE> 124
11
Trustee may refuse to enforce the Indenture or the Securities unless it receives
reasonable indemnity or security. Subject to certain limitations, Holders of a
majority in principal amount of the Securities may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Securityholders
notice of any continuing Default (except a Default in payment of principal or
interest or Liquidated Damages (if any)) if it determines that withholding
notice is in the interest of the Holders.
15. Trustee Dealings with the Issuers
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with the Issuers or their
Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
Any past, present or future director, officer, partner
(including general partners), employee, incorporator or stockholder, as such, of
the Issuers or the Trustee shall not have any liability for any obligations of
the Issuers under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
<PAGE> 125
12
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Issuers have caused CUSIP
numbers to be printed on the Securities and have directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
20. Holders' Compliance with Registration Rights Agreement
Each Holder of a Security, by acceptance hereof, acknowledges
and agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Issuers to the extent provided
therein.
21. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
THE ISSUERS WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE.
REQUESTS MAY BE MADE TO:
GLOBALSTAR, L.P.
3200 ZANKER ROAD
BOX 640670
SAN JOSE, CA 95164-0670
ATTENTION OF: STEPHEN C. WRIGHT
------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
<PAGE> 126
13
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of Globalstar. The agent may substitute another to act for
him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
____________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE> 127
14
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by any of the Globalstar Parties or any Affiliate of any of the Globalstar
Parties, the undersigned confirms that such Securities are being transferred in
accordance with its terms:
CHECK ONE BOX BELOW
(1) [ ] to any of the Globalstar Parties; or
(2) [ ] pursuant to an effective registration statement under
the Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified
institutional buyer" (as defined in Rule 144A under
the Securities Act of 1933) that purchases for its
own account or for the account of a qualified
institutional buyer to whom notice is given that such
transfer is being made in reliance on Rule 144A, in
each case pursuant to and in compliance with Rule
144A under the Securities Act of 1933; or
(4) [ ] outside the United States in an offshore transaction
within the meaning of Regulation S under the
Securities Act in compliance with Rule 904 under the
Securities Act of 1933; or
(5) [ ] pursuant to another available exemption from
registration provided by Rule 144 under the
Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however,
that if box (4) or (5) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Issuers have reasonably
requested to confirm that such transfer is being made
<PAGE> 128
15
pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of
1933, such as the exemption provided by Rule 144 under such Act.
___________________________
Signature
Signature Guarantee:
______________________ ___________________________
[Signature must be guaranteed Signature
by an eligible Guarantor
Institution (banks, stock
brokers, savings and loan
associations and credit
unions) with membership in
an approved guarantee
medallion program pursuant
to Securities and Exchange
Commission Rule 17Ad-15]
________________________________________________________________________________
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Issuers as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE> 129
16
<PAGE> 130
17
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security
have been made:
<TABLE>
<S> <C> <C> <C> <C>
Date of Amount of decrease Amount of increase Principal amount Signature of
Exchange in Principal in Principal of this Global authorized
- -------- Amount of this Amount of this Security following signatory of
Global Security Global Security such decrease or Trustee or
--------------- --------------- ---------------- Securities
increase) ----------
--------- Custodian
---------
</TABLE>
<PAGE> 131
17
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased
by any of the Issuers pursuant to Section 4.07 or 4.10 of the
Indenture, check the box:
[ ]
If you want to elect to have only part of this Security
purchased by any of the pursuant to Section 4.07 or 4.10 of the Indenture, state
the amount in principal amount: $
Date: _______________ Your Signature: ______________________
(Sign exactly as your name
appears on the other side
of this Security)
Signature Guarantee: _______________________________________
[Signature must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved guarantee
medallion program pursuant to Securities
and Exchange Commission Rule 17Ad-15]
<PAGE> 1
Exhibit 10.1
CONFORMED COPY
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
GLOBALSTAR, L.P.
Dated as of
March 6, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I. ORGANIZATIONAL MATTERS
<S> <C>
SECTION 1.1. Continuation....................................................2
SECTION 1.2. Name ...........................................................2
SECTION 1.3. Registered Office; Principal Office.............................2
SECTION 1.4. Power of Attorney...............................................2
SECTION 1.5. Term ...........................................................4
SECTION 1.6. Title to Partnership Property...................................4
SECTION 1.7. Effectiveness of Partnership Agreement..........................4
ARTICLE II. DEFINITIONS
SECTION 2.1. Definitions.....................................................4
ARTICLE III. PURPOSE
SECTION 3.1. Purpose........................................................19
ARTICLE IV. CAPITAL CONTRIBUTIONS
SECTION 4.1. General Partners...............................................19
SECTION 4.2. Limited Partners...............................................20
SECTION 4.3. Additional Contribution........................................20
SECTION 4.4. Additional Limited Partners....................................21
SECTION 4.5. Capital Accounts...............................................21
SECTION 4.6. Interest.......................................................22
SECTION 4.7. No Withdrawal..................................................22
SECTION 4.8. Loans..........................................................23
SECTION 4.9. Preemptive Rights..............................................23
SECTION 4.10. Sale of Partnership Interests and Partnership
Securities................................................24
SECTION 4.11. Business Plans................................................25
SECTION 4.12. Limitation on a Limited Partner's Ownership..................26
ARTICLE V. ALLOCATIONS, DISTRIBUTIONS AND SERVICE PROVIDER AGREEMENTS
SECTION 5.1. Allocations Generally..........................................26
SECTION 5.2. Regulatory Allocations.........................................29
SECTION 5.3. Other Allocations When Book Value Differs from Tax Basis.......31
SECTION 5.4. Special Allocation of Foreign Taxes............................31
SECTION 5.5. Distributions..................................................31
SECTION 5.6. Service Provider Agreements....................................34
SECTION 5.7. Terms of PPIs..................................................34
</TABLE>
<PAGE> 3
ARTICLE VI. MANAGEMENT AND OPERATION OF BUSINESS
SECTION 6.1. Management.....................................................34
SECTION 6.2. Limitations on Authority of Committee and the General
Partners..................................................38
SECTION 6.3. Change of Control and Reduction in Interest....................42
SECTION 6.4. Certificate of Limited Partnership.............................43
SECTION 6.5. Reliance by Third Parties......................................43
SECTION 6.6. Compensation, Expenses and Reimbursement of General
Partners..................................................44
SECTION 6.7. Outside Activities.............................................45
SECTION 6.8. Partnership Funds..............................................46
SECTION 6.9. Loans from the General Partners................................46
SECTION 6.10. Indemnification of Partners...................................46
SECTION 6.11. Liability of General Partners.................................48
SECTION 6.12. Other Matters Concerning the General Partners.................49
SECTION 6.13. Conversion to Corporate Form..................................50
SECTION 6.14. FCC Compliance................................................51
ARTICLE VII. RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
SECTION 7.1. Limitation of Liability........................................51
SECTION 7.2. Management of Business.........................................51
ARTICLE VIII. BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 8.1. Records and Accounting.........................................51
SECTION 8.2. Fiscal Year....................................................52
SECTION 8.3. Reports and Annual Meeting.....................................52
SECTION 8.4. Disclosure to Limited Partners.................................53
SECTION 8.5. Determination of Book Value of Partnership Assets..............53
ARTICLE IX. TAX MATTERS
SECTION 9.1. Preparation of Tax Returns.....................................55
SECTION 9.2. Tax Elections..................................................55
SECTION 9.3. Tax Controversies..............................................55
SECTION 9.4. Taxation as a Partnership......................................55
ARTICLE X. TRANSFER OF INTERESTS
SECTION 10.1. Transfer......................................................56
SECTION 10.2. Transfer of Interests of General Partners.....................57
SECTION 10.3. Transfer of Interests of Limited Partners.....................58
SECTION 10.4. Certain Transfers.............................................60
ARTICLE XI. ADMISSION OF SUBSTITUTE PARTNERS
SECTION 11.1. Admission of Successor Limited Partner........................61
SECTION 11.2. Admission of Successor General Partner........................62
SECTION 11.3. Amendment of Agreement and of Certificate of Limited
Partnership...............................................63
(ii)
<PAGE> 4
ARTICLE XII. WITHDRAWAL OR REMOVAL
SECTION 12.1. Withdrawal or Removal of the General Partners.................63
SECTION 12.2. Right of the Managing General Partner to Become a
Limited Partner...........................................64
SECTION 12.3. Withdrawal of Limited Partner.................................65
ARTICLE XIII. DISSOLUTION AND LIQUIDATION
SECTION 13.1. Dissolution...................................................65
SECTION 13.2. Continuation of the Business of the Partnership after
Dissolution...............................................66
SECTION 13.3. Winding Up and Liquidation....................................66
SECTION 13.4. Cancellation of Certificate of Limited Partnership............68
SECTION 13.5. Return of Capital.............................................68
SECTION 13.6. Waiver of Partition...........................................69
SECTION 13.7. Deficit Upon Liquidation......................................69
ARTICLE XIV. AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
SECTION 14.1. Amendments to be Adopted Without Consent of the
Partners..................................................69
SECTION 14.2. Amendment Procedures..........................................70
ARTICLE XV. GENERAL PROVISIONS
SECTION 15.1. Addresses and Notices.........................................70
SECTION 15.2. Titles and Captions...........................................70
SECTION 15.3. Pronouns and Plurals..........................................70
SECTION 15.4. Further Action................................................70
SECTION 15.5. Binding Effect................................................71
SECTION 15.6. Integration...................................................71
SECTION 15.7. Creditors.....................................................71
SECTION 15.8. Waiver........................................................71
SECTION 15.9. Counterparts..................................................71
SECTION 15.10. Dispute Resolution...........................................71
SECTION 15.11. Applicable Law..............................................73
SECTION 15.12. Confidentiality..............................................73
SECTION 15.13. Invalidity of Provisions.....................................75
SCHEDULE A -- Schedule of Partners
SCHEDULE B -- Related Party Transactions
SCHEDULE C -- Provisions Relating to Preferred Partnership Interests
(iii)
<PAGE> 5
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
GLOBALSTAR, L.P.
This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is entered into
and shall be effective as of the 6th day of March, 1996, by and among
Loral/QUALCOMM Satellite Services, L.P., a Delaware limited partnership ("LQSS"
or the "Managing General Partner"), Globalstar Telecommunications Limited, a
company organized under the laws of Bermuda ("GTL", together with LQSS, the
"General Partners"), and all of the limited partners set forth on the signature
page hereto (collectively referred to herein as the "Limited Partners"),
pursuant to the provisions of the Delaware Revised Uniform Limited Partnership
Act (the "Delaware Act"), on the following terms and conditions:
WHEREAS, LQSS formed Globalstar, L.P. (the "Partnership"), a Delaware
limited partnership, pursuant to that certain Certificate of Limited Partnership
of Globalstar, L.P., filed November 19, 1993, with the Secretary of State of the
State of Delaware;
WHEREAS, the Limited Partners (other than Finmeccanica) or their
predecessors were admitted into the Partnership on March 23, 1994, pursuant to
that certain Amended and Restated Agreement of Limited Partnership of
Globalstar, L.P., dated as of March 23, 1994, by and among LQSS and the Limited
Partners (the "Original Partnership Agreement");
WHEREAS, GTL had filed a registration statement on Form S-1, No. 33-86808,
pursuant to which it made offerings (the "GTL Offerings") of shares of its
common stock;
WHEREAS, in contemplation of the GTL Offerings, the Partnership had
pursuant to Section 4.10 of the Original Partnership Agreement, effected a
recapitalization in November 1994 to provide for a 6-for-1 split of its
Partnership Interests (as defined below);
WHEREAS, Finmeccanica S.p.A. ("Finmeccanica") was admitted into the
Partnership as a Limited Partner and GTL was admitted into the Partnership as a
General Partner on December 31, 1994 and the Original Partnership Agreement was
amended on December 31, 1994 to provide for such admission, the contribution of
the proceeds from the GTL Offerings to the Partnership and the creation of a
committee (the "Committee") comprised of representatives of LQSS and GTL to
manage the Partnership;
WHEREAS, GTL has made an offering (the "CPEO Offering") of 6-1/2%
Convertible Preferred Equivalent Obligations due 2006 (the "CPEOs");
<PAGE> 6
WHEREAS, the Partnership requires additional capital to accomplish its
purposes; and
WHEREAS, it is in the best interest of the Partnership to acquire such
additional capital by contribution from GTL and to issue to GTL preferred
partnership interests;
NOW, THEREFORE, the Partners, in consideration of the premises and their
mutual agreements as hereinafter set forth, do hereby agree to amend and restate
the Prior Partnership Agreement as follows:
ARTICLE I.
ORGANIZATIONAL MATTERS
SECTION 1.1. Continuation. Subject to the provisions of this Agreement,
the Partnership hereby continues as a limited partnership pursuant to the
provisions of the Delaware Act. The rights and obligations of the Partners and
the administration and termination of the Partnership shall be governed by this
Agreement and the Delaware Act.
SECTION 1.2. Name. The name of the Partnership shall be, and the business
of the Partnership shall be conducted under the name of, "Globalstar, L.P." The
Partnership's business may be conducted under any other name or names deemed
advisable by the Committee, including the name of a General Partner or any
Affiliate (as defined below) of a General Partner. The Committee, upon the
Consent of the Partners (as defined below), may change the name of the
Partnership at any time and from time to time. Notice will be given to the
Limited Partners within ten (10) days after any change in the name of the
Partnership.
SECTION 1.3. Registered Office; Principal Office. The registered office of
the Partnership in the State of Delaware shall be located at c/o Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801, and the
registered agent for service of process on the Partnership at such registered
office shall be Corporation Trust Company. The principal office of the
Partnership shall be 3200 Zanker Road, San Jose, CA 95164, or such other place
as the Partnership may from time to time designate to the Partners. Notice will
be given to the Limited Partners within ten (10) days after any change in the
principal office of the Partnership. The Partnership may maintain offices at
such other place as it deems advisable unless such offices create undue adverse
tax consequences for the Partners.
SECTION 1.4. Power of Attorney. (a) Each Limited Partner hereby
irrevocably appoints and empowers each General Partner and each of the General
Partner's authorized officers and attorneys-in-fact with full power of
substitution as its true and lawful agent and attorney-in-fact (the "Attorney"),
with full
-2-
<PAGE> 7
power and authority in its name, place and stead, for so long as such Attorney
is a General Partner or an authorized officer or attorney-in-fact of a General
Partner, to:
(i) make, execute, acknowledge, publish and file in the appropriate
public offices (A) any duly approved amendments to this Agreement or to
the Certificate of Limited Partnership pursuant to the Delaware Act and to
the laws of any state in which such documents are required to be filed;
(B) any certificates, instruments or documents as may be required by, or
may be appropriate under, the laws of any state or other jurisdiction in
which the Partnership is doing or intends to do business; (C) any other
instrument which may be required to be filed by the Partnership under the
laws of any state or other jurisdiction or by any governmental agency, or
which the Committee deems advisable to file; (D) any documents which may
be required to effect the continuation of the Partnership, the admission,
withdrawal or substitution of any Partner pursuant to Article XI or
Article XII hereof, the dissolution and termination of the Partnership
pursuant to the terms of this Agreement, or the surrender of any rights or
the assumption of any additional responsibilities by the General Partners
or the Committee; and (E) any document which may be required to effect an
amendment to this Agreement to correct any mistake, omission or
inconsistency, or to cure any ambiguity herein, to the extent such
amendment is permitted by Section 14.1 hereof; and
(ii) sign, execute, swear to and acknowledge all ballots, consents,
approvals, waivers, certificates and other instruments appropriate or
necessary, to make, evidence, give, confirm or ratify any vote, consent,
approval, agreement or other action which is made or given by the Partners
hereunder or is consistent with the terms of this Agreement and/or
appropriate or necessary to effectuate the terms or intent of this
Agreement; provided, however, that when the consent or approval of the
Partners is required under the terms of this Agreement, an Attorney may
exercise the power of attorney made in this subsection (ii) only after the
necessary consent or approval has been received.
(b) To the maximum extent permitted by applicable law, the foregoing grant
of authority (i) is a special power of attorney, coupled with an interest, and
it shall survive the death, incompetency, disability, liquidation, dissolution,
bankruptcy or termination of any Partner and shall extend to such Partner's
heirs, successors, assigns and personal representatives; (ii) may be exercised
by an Attorney for each and every Limited Partner acting as attorney-in-fact for
each and every Limited Partner; and (iii) shall survive the assignment by any
Limited Partner of all or any portion of its Partnership Interest and shall be
fully binding upon such assignee but not on the assignor. Each Limited Partner
-3-
<PAGE> 8
hereby agrees to be bound by any representations made by an Attorney acting in
good faith pursuant to such power of attorney in furtherance of the
Partnership's business. Each Limited Partner shall execute and deliver to either
General Partner, within fifteen (15) days after receipt of a request therefor,
such further designations, powers of attorney and other instruments as the
Committee deems necessary to effectuate this Agreement and the purposes of the
Partnership.
SECTION 1.5. Term. The Partnership commenced upon the completion of filing
for record of the Certificate of Limited Partnership for the Partnership in
accordance with the Delaware Act and shall continue in existence until the
earlier termination of the Partnership in accordance with the provisions of
Article XIII hereof.
SECTION 1.6. Title to Partnership Property. All property owned by the
Partnership, whether real or personal, tangible or intangible, shall be deemed
to be owned by the Partnership as an entity, and no Partner, individually, shall
have any ownership of such property. The Partnership shall hold all of its
assets in its own name; provided, however, that it may hold marketable
securities in street name.
SECTION 1.7. Effectiveness of Partnership Agreement. This Agreement shall
become effective as of the date hereof.
ARTICLE II.
DEFINITIONS
SECTION 2.1. Definitions. Any capitalized terms used herein and not
otherwise defined shall have the meaning ascribed to such term in this Article
II. For purposes of this Agreement, the following terms shall have the following
meanings:
"Accounting Period" means a period beginning on the first day after the
end of the prior Accounting Period and ending on the earlier of (i) the end of
the Partnership's fiscal year, (ii) the end of the Partnership's tax year, (iii)
the day prior to the day on which there is a material adjustment to the Book
Values of the Partnership's assets under Section 8.5(c), or (iv) such other date
as determined by the Committee.
"Additional Closing" means any closing, following the Initial Closing, at
which Additional Partnership Interests are issued.
"Additional Limited Partner" shall mean the Limited Partners admitted to
the Partnership pursuant to Section 4.4.
"Additional Partnership Interests" means any Partnership Interests issued
by the Partnership after the GTL Effective Date.
-4-
<PAGE> 9
"Adjusted Capital Account" means, for any Partner, its Capital Account
balance (after deducting the amount of expected distributions of Distributable
Cash Flow and Distributable Capital Proceeds on hand on the date as of which the
computation is made) plus (a) its share of Partnership Minimum Gain, (b) its
share of Partner Minimum Gain and (c) the amount, if any, by which a deficit
Capital Account balance exceeds the sum of (a) and (b) and which, due to an
unpaid Capital Commitment, a Partner is obligated to restore (or is treated as
obligated to restore under Treasury Regulation Section 1.704-1(b)(2)(ii)(c)).
"Adjusted Income" means the excess, if any, of the sum of (a) Operating
Income plus (b) Capital Transaction Gain plus (c) the deductions for
depreciation and amortization taken into account in computing Operating Loss
over the sum of (d) Operating Loss and (e) Capital Transaction Loss. All the
elements of Adjusted Income are reduced by the amounts thereof allocated under
Sections 5.2, 5.4 and Section 8.5(c).
"Affiliate" means any Person that directly or indirectly controls, is
controlled by, or is under common control with the Person in question, provided
that (i) in the case of Hyundai/DACOM, such term shall refer to any of Hyundai
Electronics Industries Co., Ltd. ("Hyundai"), DACOM Corporation ("Dacom") or an
Affiliate of Hyundai or Dacom, (ii) in the case of TE.SA.M. ("TESAM"), such term
shall refer to any of Alcatel, NV, Alcatel France, France Telecom or any Persons
controlled, directly or indirectly, by any of them, (iii) in the case of
Finmeccanica, the term "Affiliate" shall only include any other Person
controlled by Finmeccanica and (iv) in the case of Loral SpaceCom or LQSS, GTL
shall not be deemed to be an Affiliate of Loral SpaceCom or LQSS with respect to
any matter brought before the Partners for a vote in accordance with the terms
of this Agreement when the vote of GTL with respect to the transaction in
question is determined by directors who are not employed by, or otherwise
affiliated with Loral SpaceCom. Upon a GTL Change of Control or Reduction in
Interest as described in Section 6.3, the exception with respect to GTL set
forth in the preceding sentence shall not apply in determining whether GTL is an
Affiliate of Loral SpaceCom or LQSS. As used in this definition of "Affiliate,"
the term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise. The
terms "controlled" and "common control" shall have correlative meanings.
"Affiliate Successor" has the meaning specified in Section 10.2 hereto.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership, as it may be amended or supplemented from time to time.
"Annual Budget" has the meaning specified in Section 4.11 hereto.
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"Authorized Partnership Interests" means the sum of (i) 55,448,837
Partnership Interests, (ii) 4,769,231 Partnership Interests and (iii) the number
of Ordinary Partnership Interests issuable upon exercise of the warrants
issuable to certain Partners or Affiliates thereof and to GTL in connection with
the guarantee of the Partnership's obligations under the Globalstar Credit
Agreement, provided that any greater number of Authorized Partnership Interests
may be authorized from time to time with the Consent of the Partners.
"Average Market Value" means the arithmetic average of the Current Market
Value of the GTL Common Stock for the ten Trading Days ending on the second
Business Day prior to the applicable date of payment.
"Baseline Business Plan" means (i) as to the first generation satellite
constellation, the Original Business Plan, insofar as it pertains to that
generation, (ii) as to the second generation satellite constellation, the
Original Business Plan, but only if the actual total revenues and net income of
the Partnership for the 12-month period prior to the month in which a proposed
Baseline Business Plan would otherwise be required to be submitted to the
Partners pursuant to Section 4.11(b) equal or exceed the projected amounts
thereof for such period set forth in the Original Business Plan or, if such
12-month period is not set forth separately therein, the projected amount for
such 12-month period implicit in the annual projected amounts set forth therein,
(iii) as to the second generation satellite constellation if clause (ii) does
not apply, and for all subsequent generations of satellite constellations, a new
Baseline Business Plan adopted in accordance with Section 4.11(b) for such
generation and all previous generations still in operation, or (iv) as to any
generation satellite constellation, a business plan adopted in accordance with
Section 4.11(b) expressly intended as a superseding replacement for any of the
foregoing.
"Book Value" has the meaning determined under Section 8.5.
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States shall
not be regarded as a Business Day.
"Business Plan" means a business plan prepared in accordance with Section
4.11, with only such amendments and modifications thereto adopted from time to
time by the Committee as are not inconsistent with the provisions of Sections
4.11, 5.5(c) and 6.2.
"CPE Representative" means the representative on the Committee designated
by the holders of CPEOs following a GTL Deferral Trigger Event.
"CPEO Effective Date" means the date on which the CPEOs are issued and GTL
contributes the net proceeds from the sale of such CPEOs to the Partnership.
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"CSO" means Council of Service Operators as defined in the Service
Provider Agreements.
"Capital Account" means each capital account maintained pursuant to
Section 4.5 hereof.
"Capital Commitment" means the aggregate Capital Contribution which a
Partner has made and is committed to make pursuant to a Subscription Agreement
for the acquisition of Partnership Interests from the Partnership.
"Capital Contribution" means any cash or property which a Partner
contributes to the Partnership pursuant to Sections 4.1, 4.2, 4.4 or 4.10.
"Capital Transaction" means a sale or disposition of all, or a substantial
part, of the Partnership's property in one transaction or in a series of
transactions pursuant to the same plan. The term includes a borrowing effected
by the Partnership to obtain proceeds for distribution to Partners and a
transfer of Partnership assets to a corporation pursuant to Section 6.13, but
does not include the rights granted to a Service Provider under a Service
Provider Agreement or other dispositions in the ordinary course of a continuing
business.
"Capital Transaction Gain" means the gross income and gain realized by the
Partnership for federal income tax purposes on a Capital Transaction, plus (a)
income and gain of the Partnership exempt from tax, described in Code Section
705(a)(1)(B) and realized by the Partnership on a Capital Transaction, (b) on a
distribution of a substantial part of the Partnership's property (other than
cash and cash equivalents) to Partners, the excess, if any, of the fair market
value of the distributed property over its Book Value and (c) the amount of any
increase in the Book Value of Partnership property pursuant to Section 8.5(c).
The term does not include COD Income or Operating Income. In Computing Capital
Transaction Gain, items of income and gain relating to Partnership assets shall
be computed based upon the Book Values of the Partnership's assets rather than
upon the assets' adjusted basis for federal income tax purposes.
"Capital Transaction Loss" means the deductions and loss realized by the
Partnership for federal income tax purposes on a Capital Transaction, plus (a)
deduction and loss of the Partnership described in Code Section 705(a)(2)(B) and
realized by the Partnership on a Capital Transaction, (b) on a distribution of a
substantial part of the Partnership's property (other than cash and cash
equivalents) to Partners, the excess, if any, of the Book Value of the
distributed property over its fair market value and (c) the amount of any
decrease in the Book Value of Partnership property pursuant to Section 8.5(c).
The term does not include Operating Loss. In Computing Capital Transaction Loss,
items of deduction and loss relating to Partnership assets shall be computed
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based upon the Book Values of the Partnership's assets rather than upon the
assets' adjusted basis for federal income tax purposes.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of Globalstar, L.P. filed with the Secretary of State of the State
of Delaware on November 19, 1993, as amended on December 31, 1994 pursuant to
the Delaware Act, as it may be further amended from time to time.
"COD Income" means income realized by the Partnership on the cancellation
of recourse indebtedness under federal income tax principles whether or not the
income is excluded from taxable income under Section 108 of the Code or under
common law principles of federal income taxation. For this purpose, indebtedness
is recourse if it is treated as recourse for purposes of the Treasury
Regulations under Code Section 704(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" has the meaning specified in the recitals.
"Communications Act" means the Communications Act of 1934, as amended.
"Confidential Information" has the meaning specified in Section 15.12.
"Consent of Disinterested Partners" means the votes at a Representatives
Meeting held in accordance with Section 6.2(g) representing a majority of the
Partnership Interests present and qualified to vote at a meeting or represented
by a qualifying proxy or written consent. Partnership Interests held on behalf
of any Delinquent Partner or any Partner or Partners having a direct or indirect
financial interest in the transaction in question shall not be qualified to
vote. For these purposes, it is to be specifically noted that without limiting
the foregoing, that (i) the Partnership Interests held by LQSS will be deemed to
be owned and voted by the Upper Tier Partner having the right to direct the vote
thereof pursuant to the LQSS Partnership Agreement, (ii) in respect of contracts
to supply goods or services to the Partnership (including employment agreements)
or other such related matters, Loral SpaceCom and its Affiliates, SS/L and the
strategic equity investors in SS/L (as hereinafter described in Section 6.2(a))
and their respective Affiliates shall be deemed to have a direct or indirect
financial interest in any transaction to which any of them is a party, and (iii)
Loral SpaceCom and its Affiliates, SS/L and Qualcomm Incorporated ("Qualcomm")
and their respective Affiliates shall be deemed to have a direct or indirect
financial interest in any transaction or event to which any of Loral SpaceCom,
SS/L or Qualcomm is a party.
"Consent of the Partners" means, as to any action or proposed action by
the Partnership, approval of such action by a majority of votes cast at a
Representatives Meeting held in accordance with
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Section 6.2(g), unless 9,000,000 (adjusted to reflect any recapitalizations of
the Partnership in the nature of a subdivision or combination of Partnership
Interests into a greater or lesser number thereof but not adjusted to reflect
dilution caused simply by the issuance of additional Partnership Interests) or
more qualifying votes are cast against such action, in which event the Consent
of the Partners will be deemed denied, provided that neither any single Limited
Partner, any limited partner in any Upper Tier Partnership nor GTL shall be
entitled to cast more than 6,000,000 qualifying votes against any such action,
regardless of the number of Partnership Interests it holds, and provided further
that no more than 3,000,000 qualifying votes shall be cast by GTL in respect of
partnership interests acquired using the proceeds of the GTL Offerings or
pursuant to the exercise of Exchange Rights. Solely for purposes of determining
the number of qualifying votes a Partner who has exercised its Exchange Right in
whole or in part, may cast against an action as set forth above, a Partner shall
be deemed to continue to own the number of Partnership Interests equal to the
amount of GTL Common Stock acquired by such Partner pursuant to its Exchange
Right and which have not theretofore been disposed of.
"Consumer Price Index" has the meaning of "Index" specified in Article 5.4
of the Service Provider Agreements.
"Conversion Ratio" has the meaning ascribed to such term in Section 3.1 of
Schedule C to this Agreement.
"Current Market Value" means the average of the high and low sales prices
of the GTL Common Stock as reported on the Nasdaq National Market or any
national securities exchange upon which the GTL Common Stock is then listed for
the Trading Day in question.
"Debt Securities" means notes, bonds, debentures, loans, capitalized lease
obligations and any other debt obligation issued by the Partnership.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
as it may be amended from time to time, and any successor to such Act.
"Delinquent Partner" means a Partner who has failed to pay any installment
of its Remaining Contribution when due, and such delinquency has not been cured.
"Descriptive Memorandum" has the meaning specified in Section 3.1.
"Distributable Capital Proceeds" means the amount received by the
Partnership on a Capital Transaction (including amounts realized on an
installment obligation received in a Capital Transaction) minus the costs of
that transaction and the amount of any proceeds applied by the Partnership, in
its reasonable
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discretion, towards Partnership expenditures or reserves for Partnership
purposes other than distributions to Partners.
"Distributable Cash Flow" means the amount by which the sum of (i) the
Partnership's receipts (from all sources including borrowings and Capital
Contributions, but excluding Distributable Capital Proceeds) and (ii) the
amounts released from reserves by the Partnership exceeds the sum of (iii) the
Partnership's cash expenditures (including debt service on Partnership
borrowings) and (iv) any increase in reserves that the Partnership, in
accordance with Section 5.5, determined to be necessary or appropriate for
accrued or anticipated Partnership liabilities or expenditures.
"Distribution Arrearages" means the amount of Scheduled Distributions that
the Partnership has elected to defer that remain unpaid.
"Distribution Make-Whole Payment" means the payment due to GTL with
respect to the PPIs called for redemption pursuant to a Provisional Redemption,
which payment shall be equal to the present value of the aggregate amount of
Scheduled Distributions thereafter payable on such PPIs during the Distribution
Make-Whole Period, which shall be calculated using the bond equivalent yield on
U.S. Treasury Notes or Bills having a term nearest in length to that of the
Distribution Make-Whole Period as of the Notice Date.
"Distribution Make-Whole Period" means the period of time from the
Provisional Redemption Date to the third anniversary of the date on which CPEOs
are first issued by GTL.
"Effective Date" means December 31, 1994.
"Equity Rights" has the meaning specified in Section 6.13(a).
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement among Globalstar, GTL, LQSS and the Limited
Partner signatories thereto.
"Exchange Right" means the right of LQSS and the Limited Partners
signatories thereto to exchange Partnership Interests for shares of GTL Common
Stock pursuant to the Exchange and Registration Rights Agreement.
"FCC" means the U.S. Federal Communications Commission.
"FCC Applications" means the applications relating to the Globalstar
System dated June 3, 1991, bearing the file numbers 19 DSS P91C48 and CSS 91
014.
"Fiscal Year" has the meaning specified in Section 8.2.
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"Foreign Taxing Jurisdiction" means a jurisdiction outside the United
States that imposes a tax upon the Partnership or a subsidiary of the
Partnership.
"GAAP" has the meaning specified in Section 5.5(c).
"GTL" has the meaning specified in the recitals.
"GTL Change of Control" has the meaning specified in Section 6.3.
"GTL Common Stock" means the common stock, par value $1.00 per share, of
GTL.
"GTL Conversion Price" shall mean the conversion price of the CPEOs,
adjusted upon the occurrence of certain dilutive events as set forth in the
Indenture.
"GTL Deferral Election" means the election of the Board of Directors of
GTL to defer the payment of an installment of interest due on the CPEOs on an
interest payment date, or any portion due thereof.
"GTL Deferral Trigger Event" means the deferral by GTL of the payment of
interest due on the CPEOs in an aggregate equal to six quarterly interest
payments.
"GTL Effective Date" means the date on which the GTL Offerings were
consummated and GTL purchased Partnership Interests in connection therewith.
"GTL Independent Directors" means the directors of GTL who are not
employed by, or otherwise affiliated with Loral SpaceCom, a Strategic Partner,
or any of their respective Affiliates, and who are GTL's representatives on the
Committee.
"GTL Interest Payment Notice" means written notice delivered to the
holders of the CPEOs and the Partnership notifying them (i) whether GTL has
elected to defer the payment of an interest payment pursuant to a GTL Deferral
Election and (ii) if it has not elected to defer such interest, whether GTL is
paying the installment of interest due on the applicable interest payment date
in (A) cash, (B) GTL Common Stock or (C) through any combination of the
foregoing. Such Notice shall be delivered at least 12 Business Days prior to the
applicable interest payment date and shall contain any information pertinent to
such payment.
"GTL Offerings" has the meaning specified in the recitals.
"GTL Response Redemption Notice" means written notice delivered to the
holders of the CPEOs and the Partnership, with a copy to the Trustee, notifying
them of whether GTL is paying the redemption price of and interest (including
any applicable interest make-whole payment) on such CPEOs in (i) cash, (ii) GTL
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<PAGE> 16
Common Stock or (iii) through any combination of the foregoing. Such Notice
shall be delivered at least 12 Business Days prior to the applicable redemption
date and shall contain any information pertinent to such redemption.
"General Partner" means LQSS or GTL or both, as the context may require,
or any successor general partners admitted as such.
"Global Service Date" has the meaning specified in the Service Provider
Agreements.
"Globalstar Credit Agreement" means that certain Credit Agreement dated as
of December 15, 1995, among the Partnership, Chemical Bank and the banks
signatories thereto.
"Globalstar Interest Payment Notice" means written notice delivered to
GTL, with a copy to the Trustee, by the Partnership notifying GTL of (i) whether
the Partnership has elected to defer the applicable Scheduled Distribution
pursuant to the provisions of this Agreement and (ii) if it has not elected to
defer such Scheduled Distribution, whether it will pay such Scheduled
Distribution (A) in cash, (B) by delivery of Ordinary Partnership Interests or
(C) through any combination of the foregoing. Such Notice shall be delivered at
least 20 Business Days prior to the applicable Scheduled Distribution Payment
Date and shall contain any other information required by Section 2.3 of Schedule
C to this Agreement.
"Globalstar Redemption Notice" means written notice delivered to GTL by
the Partnership notifying GTL of (i) the Partnership's election to redeem any
Preferred Partnership Interests pursuant to the provisions of this Agreement and
(ii) whether it will make such redemption (A) in cash, (B) by delivery of
Ordinary Partnership Interests or (C) through any combination of the foregoing.
Such Notice shall be delivered at least 20 Business Days prior to the applicable
Redemption Date and shall contain the information required by Section 2.3 of
Schedule C to this Agreement.
"Globalstar System" has the meaning specified in Section 3.1.
"Governing Documents" has the meaning specified in Section 6.13(b).
"Indebtedness" means the principal amount of all secured or unsecured
indebtedness for borrowed money of the Partnership, the amount of all guarantees
of such indebtedness, the amount of the purchase price in any sale and leaseback
transaction accounted for as a capital lease under GAAP, and any
interest-bearing vendor financing treated as debt under GAAP.
"Indenture" means that certain Indenture, dated as of March 6, 1996,
between GTL and the Trustee.
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"Initial Closing" means the closing at which GTL was first admitted to the
Partnership pursuant to Section 4.1(c) hereof.
"Initial Purchasers" means the initial purchasers of the CPEOs set
forth in the Purchase Agreement.
"In-Service Year" means a period of twelve consecutive calendar months,
beginning on the Global Service Date, or beginning on any anniversary of such
date.
"Joint Venture Company" has the meaning specified in the Service
Provider Agreements.
"Limited Partners" means all of the limited partners listed on the
signature page hereto and any Additional Limited Partners admitted as such
pursuant to Section 4.4 hereof, or any successor limited partners admitted as
such pursuant to the terms of this Agreement.
"Liquidator" has the meaning specified in Section 13.3.
"Loral SpaceCom" means, if prior to April 22, 1996, Loral Corporation,
a New York corporation, and if thereafter, Loral Space & Communications Ltd, a
Bermuda company.
"Losses" has the meaning specified in Section 6.10.
"LQP" means Loral/QUALCOMM Partnership, L.P., the general partner of
LQSS.
"LQSS" means Loral/QUALCOMM Satellite Services, L.P. or an Affiliate
thereof.
"LQSS Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of LQSS, dated March 23, 1994, as modified, supplemented or
amended in accordance with the terms thereof.
"Majority in Interest of the Partners" means, as to any action or proposed
action by the Partnership, approval of such action by a majority of votes cast
at a Representatives Meeting held in accordance with Section 6.2(g).
"Managing General Partner" means LQSS or any successor to LQSS continuing
the business of the Partnership as a managing general partner.
"Mandatory Redemption Date" means March 1, 2006; provided, however, that,
if such date shall not be a Business Day, then the Mandatory Redemption Date
shall be the next Business Day.
"Minimum Gain" has the meaning specified in Treasury Regulation Section
1.704-2(b)(2) for "partnership minimum gain".
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"Mutual Non-Disclosure Agreement" has the meaning specified in Section
15.6.
"Nonperformance" means the substantial and continuing failure by a General
Partner to perform its material obligations under the Agreement and/or such
continued negligence or misconduct by the General Partner resulting in a
material adverse effect upon the assets or business of the Partnership that is
not otherwise cured by the General Partner and/or knowing breach of specific
provisions of this Agreement and/or fraud or willful misconduct on the part of
the General Partner.
"Notice Date" means the date of mailing of a notice of provisional
redemption of CPEOs by GTL to the holders of CPEOs.
"Offerees" has the meaning specified in Section 10.3.
"Offering Memorandum" means the offering memorandum, dated February 29,
1996, relating to the CPEOs.
"Operating Expenses" means operating expenses of the Partnership,
excluding only Project related items as detailed in the Sources and Uses of
Funds Statement of the Original Business Plan and the compensation referred to
in Section 6.6.
"Operating Income" means the gross income and gains of the Partnership for
federal income tax purposes plus, (a) income of the Partnership exempt from
taxation and described in Code Section 705(a)(1)(B) and (b) the excess, if any,
of the fair market value of distributed property (other than distributed
property taken into account in computing Capital Transaction Gain or Capital
Transaction Loss) over its Book Value. The term does not include COD Income or
Capital Transaction Gain. In computing Operating Income, items of income and
gain relating to Partnership assets shall be computed based upon the Book Values
of the Partnership's assets rather than upon the assets' adjusted basis for
federal income tax purposes.
"Operating Loss" means the deductions and losses of the Partnership for
federal income tax purposes, plus (a) items of expenditure described in Code
Section 705(a)(2)(B), (b) the amount referred to in Section 4.1(b)(iii) and (c)
the excess, if any, of the Book Value of distributed property (other than
distributed property taken into account in computing Capital Transaction Gain or
Capital Transaction Loss) over its fair market value. The term does not include
Capital Transaction Loss. In computing Operating Loss, items of deduction and
loss relating to the Partnership's assets shall be computed based upon the Book
Values of the Partnership's assets rather than upon the assets' adjusted basis
for federal income tax purposes.
"Optional Redemption" has the meaning specified in Section 2.7 of Schedule
C to this Agreement.
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"Optional Redemption Date" means the Redemption Date for an Optional
Redemption as specified in Section 2.7 of Schedule C to this Agreement.
"Ordinary Partnership Interests" or "OPIs" means partnership interests,
general or limited, as the case may be, in the Partnership, which interests are
not entitled to the preferential allocation of profits and losses set forth in
Section 5.1(a).
"Original Business Plan" means the business plan of the Partnership for
the construction, launch and operation of the first and second generations of
satellite constellations (including forecasts of operating expenses, capital
expenditures, revenues, cash balances (including cash balances set aside in
reserve for capital expenditures) and financial structure (i.e. debt and equity
capital requirements)), dated March 15, 1994, as restated to the same or a
greater level of detail (with a full reconciliation, but not otherwise modified
or amended) consistent with GAAP, and including a capital expenditure budget
consistent therewith prepared on a cash basis.
"Outstanding" when used with respect to PPIs means, as of the date of
determination, all PPIs issued pursuant to this Agreement except PPIs
theretofore canceled by the Partnership or delivered to the Partnership for
cancellation, pursuant to redemption or conversion.
"Partner" means the General Partners or the Limited Partners, or both,
as the context may require.
"Partner Minimum Gain" means "partner nonrecourse debt minimum gain" as
defined in Treasury Regulation Section 1.704-2(i)(2).
"Partnership" means the limited partnership established by this
Agreement.
"Partnership Agreement" or this "Agreement" means this Amended and
Restated Agreement of Limited Partnership of Globalstar, L.P., as the same may
be modified, supplemented, or amended in accordance with the terms hereof.
"Partnership Interest" means an interest (whether ordinary or preferred as
the context may require) in the Partnership of a General Partner, a Limited
Partner, or both, as the context may require, provided, however, that with
respect to matters relating to the voting of Partnership Interests, except as
provided in Section 13.2, the term shall refer only to Ordinary Partnership
Interests. The Partners' respective equity interests in the Partnership are
represented by the Partnership Interests they hold, as set forth on Schedule A
of this Agreement.
"Percentage Interest" means the ratio, expressed as a percentage, that the
number of Ordinary Partnership Interests held
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by a Partner bears to the total number of Ordinary Partnership Interests
outstanding.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Preemptive Securities" has the meaning specified in Section 4.9.
"Preferred Partnership Interests" or "PPIs" means general partnership
interests in the Partnership, the capital contributions for which are set forth
in Section 4.1(d) and for which separate Capital Accounts will be maintained and
that have the right to convert into Ordinary Partnership Interests as set forth
in Article III of Schedule C hereto, the right to distributions set forth in
Section 5.5(a) and the right to allocations set forth in Section 5.1(a) and that
are subject to redemption under Article II of Schedule C hereto.
"Preliminary Service Date" has the meaning specified in the Service
Provider Agreement.
"Project" means each of the following: for each generation of satellites,
each line item detailed in the Sources and Uses of Funds Statement of the
Original Business Plan under the Use of Funds Heading, except those under S/T
Operations).
"Provisional Redemption" has the meaning specified in Section 2.6 of
Schedule C to this Agreement.
"Provisional Redemption Date" means the Redemption Date for a Provisional
Redemption as specified in Section 2.6 of Schedule C to this Agreement.
"Purchase Agreement" means that certain Purchase Agreement, dated
February 29, 1996, among GTL, the Partnership and Lehman Brothers Inc., Bear,
Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation and
Unterberg Harris as the Initial Purchasers.
"Qualcomm" means QUALCOMM Incorporated.
"Redemption Date", when used with respect to any PPI to be redeemed, means
the date fixed for such redemption by or pursuant to this Agreement and includes
the Provisional Redemption Date, the Optional Redemption Date and Mandatory
Redemption Date, as the case may be.
"Redemption Price", when used with respect to any PPI to be redeemed,
means the price at which it is to be redeemed pursuant to this Agreement.
"Regular Record Date" for the distribution payable on any Scheduled
Distribution Payment Date means February 15, May 15,
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August 15 or November 15 (whether or not a Business Day), as the case may be,
next preceding such Scheduled Distribution Payment Date.
"Remaining Contribution" has the meaning specified in Section 4.5(c)
hereof.
"Representatives Meeting" has the meaning specified in Section 6.2(g).
"SS/L" means Space Systems/Loral, Inc., a Delaware corporation.
"Scheduled Distribution" means the distribution payable on a Scheduled
Distribution Date by the Partnership in respect of the PPIs, which payment,
subject to Section 5.5(d), may be deferred by the Committee in its sole
discretion.
"Scheduled Distribution Payment Date" means March 1, June 1, September 1
and December 1, commencing June 1, 1996; provided, however, that if such date
shall not be a Business Day, then such date shall be the next Business Day.
"Significant Variance" means, as applicable:
(i) a cumulative adverse variance (net of any favorable variances) in
capital expenditures for any Project:
(x) in the case of any Business Plan, as measured over such
Project's planned remaining life from the beginning of such Business
Plan plus the actual capital expenditures from the beginning of such
Project until the beginning of the period to which such Business
Plan relates;
(y) in the case of any Annual Budget, as measured by the actual
capital expenditure from the beginning of such Project until the
beginning of the year to which such Annual Budget relates plus the
amount of such expenditure as projected in such Annual Budget;
compared in each case with the then current Baseline Business Plan, which
exceeds 10% of the total cumulative capital expenditure for such Project over
such Project's planned life as shown in such Baseline Business Plan; or
(ii) an adverse variance in total Operating Expenses in any fiscal year
that exceeds 10% of the amount set forth in the then current Baseline Business
Plan for such year;
provided that the amount of each Significant Variance will be subject to
adjustment to account for increases in the Consumer Price Index which are in
excess of the inflation assumptions, if any, used in the preparation of the
applicable Baseline Business
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<PAGE> 22
Plan, it being understood and agreed that the Original Business Plan used a 4%
per annum inflation assumption, compounded annually and such increases for
inflation will apply to expenses or expenditures for Projects set forth in the
then current Baseline Business Plan which are fixed by contractual terms from
and after the date of the applicable contracts only to the extent provided for
in such contracts.
"Sale Notice" has the meaning specified in Section 4.9.
"Section 704(c) Asset" has the meaning specified in Section 5.3.
"Securities Act" means the Securities Act of 1933, as from time to time
amended, and any successor to such statute.
"Service Provider" has the meaning specified in the Service Provider
Agreement.
"Service Provider Agreement" means each of the agreements between the
Partnership and a Partner or its Affiliate or Joint Venture Company, pursuant to
which such Person provides to its subscribers the services of the Globalstar
System.
"Similar Satellite Service" has the meaning specified in the Service
Provider Agreement.
"Stated Value" shall equal $310,000,000 in the aggregate.
"Strategic Partners" means the limited partners in any of Globalstar,
LQSS or LQP.
"Subscription Agreement" means the agreement entered into by each General
Partner and each Limited Partner prior to becoming a Partner or, in the case of
TESAM, Loral SpaceCom and Loral/DASA Globalstar, L.P., the agreement entered
into by the assignor of their respective Partnership Interests.
"System Specification" means the specifications for the Globalstar System
dated February 1, 1994, No. LQSS/SS/94-0001, heretofore delivered to the
Partners.
"Trading Day" means (a) if the GTL Common Stock is listed or admitted for
trading on the New York Stock Exchange or another national securities exchange,
a day on which such GTL Common Stock actually trades on the New York Stock
Exchange or another national securities exchange, (b) if the GTL Common Stock is
quoted on the Nasdaq National Market, a day on which the GTL Common Stock
actually trades or (c) if the GTL Common Stock is not so listed, admitted for
trading or quoted, any Business Day on which the GTL Common Stock actually
trades.
"Transferor" has the meaning specified in Section 10.3.
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"Trigger Percentages" means the percentages set forth in Section 2.6 of
Schedule C to this Agreement that triggers the Partnership's option to redeem
the PPIs pursuant to a Provisional Redemption.
"Trustee" means the Person named as the "Trustee" in the Indenture and
any successor Trustee.
"Upper Tier Partner" means any Partner in either LQSS or LQP.
"Upper Tier Partnership" means LQP or LQSS.
"Usage Fees" has the meaning specified in the Service Provider
Agreements.
ARTICLE III.
PURPOSE
SECTION 3.1. Purpose. The purpose and business of the Partnership shall
be:
(a) to develop, design, deploy, own and operate a worldwide low-earth
orbit satellite-based digital telecommunication system (the "Globalstar System")
which is more fully described in the Globalstar Descriptive Memorandum, dated
March 1993, as supplemented by the Supplement thereto, dated March 1994 (the
"Descriptive Memorandum") and to engage in the business of providing satellite
communications and communications related services, including but not limited to
voice, data, paging and geolocation services, and search and rescue, disaster
relief and environmental and industrial monitoring and control services through
the Globalstar System to Service Providers;
(b) to acquire, hold, own, operate, lease, manage, maintain, improve,
repair, replace, reconstruct, sell or otherwise dispose of and use the assets of
the Partnership; and
(c) to enter into any lawful transaction and engage in any lawful activity
incidental to or in furtherance of the foregoing purposes.
ARTICLE IV.
CAPITAL CONTRIBUTIONS
SECTION 4.1. General Partners. (a) LQSS has made, or will make, at the
times and in the amounts set forth in its Subscription Agreement, cash Capital
Contributions to the Partnership in the amount set forth in Schedule A hereto in
return for 18,000,000 Ordinary Partnership Interests.
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(b) The amount of cash LQSS is required to contribute pursuant to Section
4.1(a) shall be reduced by the amount of expenditures designated by LQSS and
paid or incurred strictly on the Partnership's behalf after December 31, 1992
and prior to March 23, 1994, provided that any property or rights produced by
such expenditures shall be contributed to the Partnership. Credit will only be
given for expenditures for preexisting goodwill and intangibles of LQSS and its
Affiliates if such goodwill or intangibles are purchased from parties other than
LQSS, Upper Tier Partners or their Affiliates or created in connection with the
business to be conducted by the Partnership. The amount of this reduction shall
be allocated by the Partnership on its books and records to (i) the right (which
LQSS shall cause to be transferred to the Partnership) to cause LQP to utilize
the FCC Applications and, when granted, the FCC licenses, to operate the
Globalstar System, exclusively through, and for the exclusive benefit of, the
Partnership, (ii) any other property or rights contributed to the Partnership
under this Section 4.1(b) and (iii) other expenditures described in this Section
4.1(b) that did not produce property to be contributed to the Partnership under
this Section . Nothing in this provision shall alter the ownership of
intellectual property as provided in the Contract for Development of Globalstar
Ground Communication Segment Equipment between Globalstar and Qualcomm dated
March 18, 1994.
(c) GTL has made cash Capital Contributions to the Partnership in the
amount of $186 million in return for 10,000,000 Ordinary Partnership Interests.
(d) On the CPEO Effective Date, GTL will contribute the net proceeds of
the CPEO Offering to the Partnership as described in the Offering Memorandum in
return for PPIs with an aggregate face amount equal to the principal amount of
the CPEOs issued by GTL in the CPEO Offering. The face amount of each PPI shall
be $65. The aggregate contribution and face amount of the PPIs shall be set
forth in Schedule A. If on or after the CPEO Effective Date, the over-allotment
option granted to the Initial Purchasers is exercised (as described in the
Offering Memorandum), in full or in part, then GTL shall contribute the
additional net proceeds from the exercise of such option to the Partnership in
return for additional PPIs which shall be reflected in a similar manner in
Schedule A.
SECTION 4.2. Limited Partners. Each Limited Partner has made, or will make
at the times and in the amounts set forth in its Subscription Agreement, cash
Capital Contributions to the Partnership in the amount set forth on Schedule A
hereto in return for the number of Ordinary Partnership Interests set forth on
such Schedule A. The total number of such Partnership Interests is 19,000,000.
SECTION 4.3. Additional Contribution. No Partner is required to make any
additional Capital Contribution to the
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Partnership beyond its capital commitment set forth in Sections 4.1 and 4.2
above.
SECTION 4.4. Additional Limited Partners. Subject to Sections 4.9 and
4.10, the Partnership is hereby authorized to offer Additional Partnership
Interests, and to admit as Limited Partners those Persons who subscribe to
purchase Additional Partnership Interests and who are acceptable to the
Committee. At each Additional Closing, the Capital Contributions of those
Persons then being admitted as Additional Limited Partners shall be transferred
to the Partnership, which amounts shall be credited to their respective Capital
Accounts pursuant to Section 4.5 hereof. Upon acceptance by the Committee of the
subscription agreement of a Person subscribing to Additional Partnership
Interests, the schedule of Partners as set forth on Schedule A hereto shall be
amended to reflect such Person's name and Capital Contribution and such Person
will be admitted as an Additional Limited Partner.
SECTION 4.5. Capital Accounts. (a) The Partnership shall maintain a
separate account for each class of Partnership Interests held by a Partner as
part of its books and records. A Partner's "Capital Account" for a class of
Partnership Interests shall be credited with (a) the amount of cash contributed
to the Partnership by the Partner, and, in addition in the case of LQSS, the
Book Value of any property contributed and the amount referred to in Section
4.1(b)(iii), (b) allocations of Adjusted Income, Operating Income, Capital
Transaction Gain and COD Income to the Partner and (c) the amount of any
Partnership liabilities assumed (or taken subject to) by such Partner and shall
be debited with (d) allocations of Operating Loss and Capital Transaction Loss
to the Partner and (e) the amount of cash distributions and the fair market
value of any property distributed to the Partner and (f) the amount of any
Partner liabilities assumed (or taken subject to) by the Partnership. The
foregoing provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Treasury Regulations
under Section 704(b) of the Code and, to the extent not inconsistent with the
provisions of this Agreement, shall be interpreted and applied in a manner
consistent with such Regulations.
(b) A transferee of a Partnership Interest will succeed to the portion of
the Capital Account of the Partner transferring such Partnership Interest which
relates to the Partnership Interest transferred.
(c) If the Partnership distributes OPIs with respect to PPIs under Section
5.5(a)(iii), a portion of the Adjusted Capital Account for such PPIs will be
transferred to such OPIs. The transferred amount shall be equal to the lesser
of: (i) the amount of the cash distribution obligation on the PPIs discharged by
the distribution of such OPIs, (ii) the excess, if any, of the prior allocations
of Adjusted Income to such PPIs under Sections
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5.1(a)(i) and (iii) over the sum of the prior allocations of Loss to such PPIs
under Section 5.1(c)(iii), prior and current distributions on such PPIs under
Section 5.5(a)(ii) not paid in OPIs and the initial Adjusted Capital Accounts of
OPIs previously issued in payment of distributions under Section 5.5(a)(ii) or
(iii) an amount per distributed OPI equal to the Adjusted Capital Account for
outstanding OPI with the highest Adjusted Capital Account. Any excess of (ii)
over the lesser of (i) or (iii), shall be transferred among the Partnership
Interests as provided in Subsection (e).
(d) If the Partnership distributes OPIs in connection with a redemption or
conversion of PPIs under Article II or III of Schedule C hereto, the Adjusted
Capital Account of the redeemed or converted PPIs (after reduction for any cash
or the fair market value of other property paid by the Partnership as part of
the redemption or conversion) shall be transferred to such distributed OPIs;
provided, however, that the amount transferred shall not exceed an amount per
distributed OPI equal to the Adjusted Capital Account for the outstanding OPI
with the highest Adjusted Capital Account. Any portion of the Adjusted Capital
Account of the redeemed or converted PPI that cannot be transferred to the
distributed OPIs, shall be transferred among the Partnership Interests as
provided in Subsection (e).
(e) The excess amounts described in Subsections (c) and (d) shall be
transferred first to the PPIs as if it were Adjusted Income to the extent
provided for in the allocation of Adjusted Income under Section 5.1(a), then
under Section 5.1(b) and then to all OPIs (including the OPIs being distributed)
in accordance with their Percentage Interests.
SECTION 4.6. Interest. No interest shall be paid by the Partnership on
Capital Contributions, on balances in Partners' Capital Accounts or on any other
funds distributed or distributable under this Agreement.
SECTION 4.7. No Withdrawal. No Partner shall have the right to the
withdrawal or reduction of any part of its Capital Contribution. It is the
intent of the Partners that no distribution to the Limited Partners of cash
pursuant to Section 5.5 shall be deemed a return or withdrawal of capital, even
if such return or distribution represents, for federal income tax purposes or
otherwise (in whole or in part), a distribution of depreciation or any other
non-cash item accounted for as a loss or deduction from or offset to the
Partnership's income, and that the Limited Partners shall not be obligated to
pay any such amount to, or for the account of, the Partnership or any creditor
of the Partnership; provided, however, that if any court of competent
jurisdiction holds that, notwithstanding the provisions of this Agreement, any
Limited Partner is obligated to make any such payment, such obligation shall be
the obligation of such Limited Partner and not of the General Partners.
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SECTION 4.8. Loans. Loans by a Partner to the Partnership shall not be
considered Capital Contributions.
SECTION 4.9. Preemptive Rights. The Partnership hereby grants to the
Partners a preemptive right, in accordance with the procedures set forth in this
Section 4.9, with respect to the issuance and sale by the Partnership of
Additional Partnership Interests or Debt Securities (each referred to
hereinafter as "Preemptive Securities"); provided, however, the Partners shall
have no preemptive rights with respect to Preemptive Securities issued pursuant
to Section 4.10(a)(i) in connection with the execution of a Service Provider
Agreement or pursuant to or in connection with an underwritten public offering.
(a) At least 30 days prior to the sale of Preemptive Securities to which
this preemptive right applies, the Partnership shall deliver a written notice (a
"Sale Notice") to each Partner setting forth (i) the number of Preemptive
Securities to be sold, (ii) the price for which and other terms and conditions
upon which such Preemptive Securities are to be sold, and (iii) all written
information distributed to offerees of such Preemptive Securities, together with
the following irrevocable offer from the Partnership:
to issue and sell to each Partner, at the same price per Preemptive
Security and on the same other terms and conditions set forth in the Sale
Notice: (i) in the case of Additional Partnership Interests, the number of
Additional Partnership Interests which shall equal the sum of (A) the
product of the total number of Additional Partnership Interests set forth
in the Sale Notice multiplied by the Partner's Percentage Interest,
calculated at the time of the Sale Notice and (B) such Partner's pro rata
share (calculated as set forth above) of any such Additional Partnership
Interests offered to, but not purchased by, other Partners and (ii) in the
case of Debt Securities, the sum of (I) the total principal amount of Debt
Securities being issued multiplied by such Partner's Percentage Interest
and (II) such Partner's pro rata share (calculated as set forth above) of
any such Debt Securities offered to, but not purchased by, other Partners.
(b) The Partners shall have absolute discretion to accept or decline such
offers. If a Partner wishes to accept any of the offers made pursuant to this
Section 4.9, it shall give the Partnership irrevocable written notice of its
election to accept such offer within 15 days of its receipt of the applicable
Sale Notice (which notice may specify acceptance of all securities offered in
the Sale Notice, or acceptance of up to a number or principal amount thereof as
specified therein) and the closing thereunder shall occur five days thereafter
(or, if not a Business Day, on the next Business Day thereafter) at the offices
of the Partnership or at such other time and place as the parties
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shall agree. Promptly after expiration of the acceptance period, the Partnership
will give accepting Partners notice of the actual number of Preemptive
Securities to be purchased by them pursuant to the Sale Notice.
(c) In connection with any proposed or contemplated sale of Preemptive
Securities, upon the request of the Partnership, each Partner shall indicate to
the Partnership its good faith intentions (which indications shall not be
binding) with respect to whether or not it will exercise the preemptive rights
described herein.
SECTION 4.10. Sale of Partnership Interests and Partnership Securities.
(a) Subject to the provisions of Section 4.9 and this Section 4.10, the
Partnership may, upon the determination of the Committee, issue or sell, on such
terms as the Committee deems appropriate and in the best interests of the
Partnership:
(i) Additional Partnership Interests to Additional Limited Partners
or Partners from time to time or to other Persons and to admit them to the
Partnership as Additional Limited Partners pursuant to Section 4.4 hereof,
without being required to obtain the approval of the Limited Partners or
any other persons who may acquire an interest in the Partnership
Interests, provided, that such Additional Partnership Interests may not be
issued at a price that is less than $12.50 per Partnership Interest
without the Consent of the Partners, provided further that no additional
Partner shall be admitted to the Partnership without the Consent of the
Partners, which consent shall not be unreasonably withheld. In addition,
if any Partner shall have specified to the Partnership on or prior to
March 31, 1994 the names of any third parties, no such third party, nor
any of its Affiliates, will be admitted as an Additional Limited Partner
without the prior, written consent of the specifying Partner.
(ii) Subject to Sections 4.9 and 4.10(b) hereof, any other type of
security of the Partnership from time to time to Partners or other persons
on terms and conditions established in the sole and complete discretion of
the Committee, all without the approval of the Partners or any other
person who may acquire any other type of security of the Partnership,
including, without limitation, unsecured and secured debt obligations of
the Partnership, debt obligations of the Partnership convertible into any
class or series of Partnership Interests that may be issued by the
Partnership, options, rights or warrants to purchase any such class or
series of Partnership Interests or any combination of any of the
foregoing. The Partnership is also authorized to enter into sale and
leaseback transactions with respect to all or any part of the assets of
the Partnership. Subject to subsection (b) below, there
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shall be no limit on the number of Partnership Interests or other
securities that may be so issued, and except as set forth in Section
4.10(a)(i) hereto, the Committee shall have the sole and complete
discretion in determining the consideration and terms and conditions with
respect to any future issuance of Partnership Interests or other
securities.
(b) The Partnership shall not at any time issue or reserve for issuance
Additional Partnership Interests or other equity interests if, immediately after
such issuance, the number of Partnership Interests outstanding or reserved for
issuance would exceed the Authorized Partnership Interests.
(c) The Partnership shall not incur any Indebtedness if, immediately after
the incurrence thereof, the Partnership's outstanding Indebtedness would exceed
110% of the maximum amount of debt obligations contemplated over the life of the
then current Baseline Business Plan.
SECTION 4.11. Business Plans. (a) The Committee shall annually prepare a
Business Plan which contains the following elements: (i) a budget for the
forthcoming financial year on a quarterly basis (the "Annual Budget")
substantially in the same level of detail as the then current Baseline Business
Plan and (ii) for the design and operational lifetime of each generation of
satellites at the time under active development or design, or currently in
orbit:
(A) Schedules of estimated capital expenditures for each year, segregated
by Project and showing the estimated cost for each year until completion
of the Project;
(B) Schedules of sources and uses of funds for each such year;
(C) a projected income and expense statement for each such year; and
(D) projected year-end balance sheet for each such year.
Unless it shall have first obtained the Consent of the Partners, the
Committee shall not adopt or otherwise approve any Business Plan or Annual
Budget containing any Significant Variance from the then-current Baseline
Business Plan, provided that where Consent of the Partners is obtained with
respect to any Significant Variance, further Consent of the Partners will be
required for any subsequent unfavorable variance from the amounts so approved.
Where any Business Plan and/or any Annual Budget contains more than one
Significant Variance, then a separate Consent of the Partners shall be sought
for each such Significant Variance. The Business Plan and the Annual Budget will
not otherwise require the approval of the Partners. Except as otherwise provided
in this Agreement, the General Partners will not be liable to the Partnership or
any
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Limited Partner solely for any failure to achieve any Business Plan or Annual
Budget, or any element thereof which does not amount to Nonperformance.
(b) At least 90 days prior to the beginning of the year in which
expenditures (excluding cumulative expenditures of $1,500,000 or less pertaining
to the preparation of the new Baseline Business Plan) relating to a new
generation of satellites are anticipated (except, insofar as the second
generation is concerned, in the case that the Original Business Plan is in
effect as the Baseline Business Plan therefor), the Committee will submit to the
Partners for their approval a proposed new Baseline Business Plan for the
Partnership covering the period through the expected useful life of such next
generation which, if approved with the consent of a Majority in Interest of the
Partners, will constitute a new Baseline Business Plan, provided that, for
purposes of such approval, the votes of the Managing General Partner will be
cast in favor of such approval if the proposed Baseline Business Plan in
question meets the return on investment criteria set forth in Section 6.2(f),
and, unless GTL is the Managing General Partner, the vote of GTL will be
determined by the GTL Independent Directors. In the event a proposed Baseline
Business Plan is submitted for such a vote and is not so approved, no Limited
Partner voting against such approval or any of its Affiliates or Joint Venture
Companies will have rights under Article 6.1 of the applicable Founding Service
Provider Agreement (as such term is defined in the Service Provider Agreements)
to purchase the assets of the Partnership.
SECTION 4.12. Limitation on a Limited Partner's Ownership. No individual
Limited Partner (other than a corporation formed solely for the purpose of
holding Partnership Interests, all of whose shares are offered to the public in
an underwritten public offering) may acquire more than 20% of the Partnership
Interests in the Partnership without the consent of the Committee and the
Consent of the Disinterested Partners.
ARTICLE V.
ALLOCATIONS, DISTRIBUTIONS AND SERVICE
PROVIDER AGREEMENTS
SECTION 5.1. Allocations Generally. After the allocations in Sections 5.2
and 5.4 at the end of each Accounting Period, Adjusted Income, Operating Income,
Operating Loss, Capital Transaction Gain and Capital Transaction Loss will be
allocated as follows:
(a) Allocation of Adjusted Income to PPIs. Adjusted Income will be
allocated to the Capital Account maintained for the outstanding PPIs:
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(i) in the amount equal to the excess of prior allocations of
Operating Loss and Capital Transaction Loss to currently outstanding PPIs
under subsections (c)(iii) over prior allocations to them under this
subsection (a)(i);
(ii) then in the amount necessary to bring the Capital Account of
each outstanding PPI to $65;
(iii) then in an amount equal to a cumulative 6 and 1/2% per annum
simple interest return on the face amount of each outstanding PPI; this
return shall be computed on the basis of a 360-day year with twelve 30-day
months;
(iv) then in an amount equal to the excess of (x) the cumulative
United States federal, state and local income taxes imposed on the
cumulative excess of the amounts of income allocated to PPIs under this
Agreement (including allocations under this Subsection (a)(iv) and
Subsection (a)(v) that are subject to tax by those jurisdictions over the
amounts of tax losses allocated to the PPIs pursuant to this Agreement
that, under the laws of the particular jurisdiction, could be carried back
or carried over to offset such taxable income by a Bermuda company holding
the PPIs that was not engaged in business in the United States otherwise
than by being a Partner in the Partnership over (y) prior allocations
under this Section 5.1(a)(iv);
(v) then in an amount equal to the excess of the sum of (x) the
cumulative amounts of branch profits taxes that were imposed on the holder
of each outstanding PPI under Section 884 of the Code for prior and
current actual or deemed distributions with respect to such interest and
(y) the branch profits tax that will be imposed on the holder of such
interest under Code section 884 upon the future actual or deemed
distribution of taxable amounts allocated to such interests under this
Agreement (including allocations under Subsection (a)(iv) (excluding
allocations for federal income taxes) and this Subsection (a)(v)) over (z)
prior allocations under this Section 5.1(a)(v).
(b) Allocation of Adjusted Income to OPIs. Adjusted Income will then be
allocated to OPIs that were issued under Section 5.5(a)(iii), Section 1.2(b) of
Schedule C or Article III of Schedule C, in proportion to, and to the extent
that, the Adjusted Capital Account for each such OPI is less than the Adjusted
Capital Account for the outstanding OPI with the highest Adjusted Capital
Account.
(c) Operating Loss and Capital Transaction Loss. Operating Loss in excess
of any remaining Operating Income after the allocations set forth above and then
Capital Transaction Loss in excess of any remaining Capital Transaction Gain
after the allocations set forth above shall be allocated:
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(i) among the Partners holding OPIs in accordance with their
Percentage Interests until the Adjusted Capital Account for the OPIs of
such a Partner is reduced to zero;
(ii) then, among such Partners in proportion to, and to the
extent of, their Adjusted Capital Accounts for their OPIs;
(iii) then, to the holders of outstanding PPIs in proportion to,
and to the extent of, the Adjusted Capital Accounts for their PPIs;
and
(iv) then, among the General Partners in proportion to their
Percentage Interests.
(d) Operating Income. Any Operating Income remaining after the allocations
set forth above in excess of Operating Loss will be allocated among the Partners
holding Ordinary Partnership Interests in proportion to, and to the extent of,
distributions to be made with respect to such OPIs under Section 5.5(b), then in
proportion to, and to the extent of, negative Adjusted Capital Account balances
for one or more OPIs, and then in accordance with Percentage Interests.
(e) Capital Transaction Gain. Any Capital Transaction Gain remaining
after the allocations set forth above in excess of Capital Transaction Loss
will be allocated among the Partners holding OPIs (other than a Delinquent
Partner);
(i) In proportion to, and to the extent of, negative Adjusted
Capital Account balances for one or more OPIs;
(ii) Then, in proportion to the relative amount for each holder of
an OPI that is equal to the excess of its Capital Commitment for that OPI
over the sum of its Adjusted Capital Account balance for that OPI and
prior distributions to it under Section 5.5 until the Adjusted Capital
Accounts of the Limited Partners and GTL with respect to OPIs acquired on
or prior to the GTL Effective Date are equal to the excess of their
Capital Commitments with respect to such OPIs over prior distributions to
them with respect to such OPIs under Section 5.5;
(iii) Then, to LQSS until the Adjusted Capital Account of LQSS with
respect to its OPIs acquired prior to the GTL Effective Date is equal to
the excess of its Capital Commitment with respect to such Partnership
Interests over prior distributions to it with respect to such OPIs under
Section 5.5;
(iv) Then, 75% to LQSS and 25% to the other Partners until the ratio
of LQSS's Adjusted Capital Account for its OPIs to the Adjusted Capital
Accounts of all OPIs is equal to the ratio of LQSS's OPIs to outstanding
OPIs; and
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(v) Then, in accordance with Percentage Interests.
SECTION 5.2. Regulatory Allocations.
(a) Partnership Nonrecourse Deductions. Operating Loss and Capital
Transaction Loss attributable (under Treasury Regulation Section 1.704-2(c)) to
"partnership nonrecourse liabilities" (within the meaning of Treasury Regulation
Section 1.704-2(b)(3)) shall be allocated among the Partners in accordance with
Percentage Interests. As the allocation of partnership nonrecourse deductions
will increase the potential minimum gain chargeback under Section 5.2(d), an
allocation of partnership nonrecourse deductions under this provision will not
reduce a Partner's Adjusted Capital Account.
(b) Partner Nonrecourse Deductions. Operating Loss and Capital Transaction
Loss attributable (under Treasury Regulation Section 1.704-2(i)(2)) to "partner
nonrecourse debt" (within the meaning of Treasury Regulation Section
1.704-2(b)(4)) shall be allocated, in accordance with Treasury Regulation
Section 1.704-2(i)(1), to the Partner who bears the economic risk of loss with
respect to the debt to which the Loss is attributable. As the allocation of
partner nonrecourse deductions will increase the potential minimum gain
chargeback under Section 5.2(e), an allocation of partner nonrecourse deductions
under this provision will not reduce a Partner's Adjusted Capital Account.
(c) COD Income. COD Income shall be allocated among the Partners in
proportion to the deemed distribution each is deemed to receive pursuant to Code
Section 752(b) with respect to the canceled debt.
(d) Minimum Gain Chargeback. If, in any year there is a net decrease in
Minimum Gain (other than a decrease attributable to a "book up" in the Book
Value of the Partnership's assets, a decrease offset by an increase in Partner
Minimum Gain or any other decrease for which a minimum gain chargeback is not
required under Treasury Regulation Section 1.704-2(f)), then each Partner will
be allocated Capital Transaction Gain and Operating Income equal to that
Partner's share of the net decrease in minimum gain for the year, as determined
by Treasury Regulation Section 1.704-2(g)(2). The items of Capital Transaction
Gain and Operating Income to be allocated under this section are determined
under Treasury Regulation Section 1.704-2(j)(2). In the event there is
insufficient Capital Transaction Gain and Operating Income for the year to fully
chargeback each Partner's share of the decrease in Minimum Gain, then the
chargeback for the year shall be in proportion to each Partner's share of the
decrease and any decrease that has not been charged back shall be carried over
and be treated as a decrease in Minimum Gain in the following year. This
subsection is intended to comply with the minimum gain chargeback requirement of
Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently
therewith.
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(e) Partner Minimum Gain Chargeback. If, in any year there is a net
decrease in Partner Minimum Gain (other than a decrease attributable to a "book
up" in the Book Value of the Partnership's assets, a decrease offset by an
increase in Minimum Gain or any other decrease for which a Partner Minimum Gain
chargeback is not required under Treasury Regulation Section 1.704-2(i)(4)),
then, after the allocation set forth above in Section 5.2(d), each Partner will
be allocated Capital Transaction Gain and Operating Income equal to that
Partner's share of the net decrease in Partner Minimum Gain for the year, as
determined by Treasury Regulation Section 1.704-2(i)(5). The items of Capital
Transaction Gain and Operating Income to be allocated under this section are
determined under Treasury Regulation Section 1.704-2(j)(2). In the event there
is insufficient Capital Transaction Gain and Operating Income for the year to
fully chargeback each Partner's share of the decrease in Partner Minimum Gain,
then the chargeback for the year shall be in proportion to each Partner's share
of the decrease and any decrease that has not been charged back shall be carried
over and be treated as a decrease in Partner Minimum Gain in the following year.
This subsection is intended to comply with the requirement of Treasury
Regulation Section 1.704-2(i)(4) that there be a chargeback of partner
nonrecourse debt minimum gain and shall be interpreted consistently therewith.
(f) Qualified Income Offset. In the event any Partner received any
adjustment, allocation or distribution described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) that was not reasonably expected at the end
of the preceding year and that causes, or increases, a deficit in the Partner's
Capital Account, Capital Transaction Gain and Operating Income (composed of a
pro rata portion of each element remaining after the allocations in earlier
subsections of this section) shall be allocated to that Partner in an amount and
manner sufficient to eliminate any portion of the deficit balance in the
Partner's Capital Account that is attributable to the adjustment, allocation, or
distribution referred to above. If there is insufficient Capital Transaction
Gain and Operating Income in any year to make the allocation called for under
this subsection, then the shortfall shall be carried over to subsequent years
and will be treated as items to be offset in those years. Allocations under this
subsection will only be made to the extent that a Partner has a deficit in his
Capital Account after all other allocations provided in Article V have been
tentatively made as if this subsection were not in the Agreement. For purposes
of this subsection, a Partner's Capital Account balance shall be (a) increased
by (i) its share of Minimum Gain plus (ii) its share of Partner Minimum Gain
plus (iii) the amount, if any, by which its deficit Capital Account balance
exceeds the sum of (i) and (ii) and which the Partner is obligated to restore
(or is treated as obligated to restore under Treasury Regulation Section
1.704-1(b)(2)(ii)(c)) and (b) decreased by (i) the amount of expected
distributions in the next year from the current year's earnings plus (ii) to the
extent not previously taken into
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account, the items described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6).
SECTION 5.3. Other Allocations When Book Value Differs from Tax Basis.
When the Book Value of a Partnership asset is different from its adjusted tax
basis for income tax purposes, then, solely for federal, state and local income
tax purposes and not for purposes of computing Capital Accounts, income, gain,
loss, deduction and credit with respect to such assets ("Section 704(c) Assets")
shall be allocated among the Partners to take this difference into account in
accordance with the principles of Code Section 704(c), as set forth in the
Treasury Regulation thereunder. In addition, under the principles of Treasury
Regulation Section 1.704-3(b)(2) Example 2(ii)(C), in order to prevent the
shifting of tax consequences with respect to built-in gain or built-in loss
prior to the contribution or revaluation of an item of Section 704(c) Property,
tax gain on the sale of that Section 704(c) Property shall be allocated among
the Partners to offset the ceiling rule limitation of Treasury Regulation
Section 1.704-3(b)(1).
SECTION 5.4. Special Allocation of Foreign Taxes. If a Foreign Taxing
Jurisdiction imposes a tax upon the Partnership, upon a subsidiary of the
Partnership or upon payments to one of the foregoing and such tax is not borne
by a third party as a result of a "gross up" provision, tax indemnity or
otherwise, then, to the extent that such tax would not have been imposed on
income allocated with respect to an Ordinary Partnership Interest if any Partner
holding such Partnership Interests or a direct or indirect partner in such
Partner were subject only to United States income taxes on the income or
payments subject to tax by the Foreign Taxing Jurisdiction:
(a) the amount of such tax shall be charged against the Capital Account of
such Partner for such Ordinary Partnership Interest and shall reduce the amounts
distributable to it under Section 5.5;
(b) the amounts distributable to each Partner under Section 5.5 shall be
increased by an amount equal to the Partner's Percentage Interest times the
aggregate amounts specially allocated to all Partners under subsection (a)
above; and
(c) the Partnership shall use its best efforts to provide documentation to
assist a Partner in recovering from a Foreign Taxing Jurisdiction any applicable
tax credit for taxes incurred by that Partner with respect to Globalstar income
or allocated to that Partner under this Agreement.
SECTION 5.5. Distributions.
(a) Distributions to Holders of PPIs.
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(i) The Partnership shall distribute pro rata on the PPIs an amount
such that the cumulative distributions under this Subsection (a)(i) equal
the sum of (x) the cumulative United States federal, state and local
income taxes imposed on the cumulative excess of the amounts of income
allocated to the PPIs under this Agreement that are subject to tax by
those jurisdictions over the amounts of tax losses allocated to the PPIs
pursuant to this Agreement that, under the laws of the particular
jurisdiction, could be carried back or carried over to offset such taxable
income by a Bermuda company holding the PPIs that was not engaged in
business in the United States otherwise than by being a Partner in the
Partnership and (y) the cumulative branch profits taxes imposed with
respect to PPIs under Section 884 of the Code. Distributions under this
Subsection (a)(i) shall be made prior to the time that the holder of the
PPI is required to make payments to the relevant taxing authority.
(ii) Then, on each Scheduled Distribution Payment Date,
Distributable Cash Flow and Distributable Capital Proceeds shall be
distributed to the holder of each outstanding PPI, until cumulative
distributions under this Subsection (a)(ii) give each such holder a
cumulative return in an amount equal to a cumulative 6 and 1/2% per annum
simple interest return on the face amount of each outstanding PPI; this
return shall be computed on the basis of a 360-day year with twelve 30-day
months.
(iii) The Committee may determine to pay all or any portion of the
amount of the distributions described above in OPIs, under the procedures
set forth in Section 1.2 of Schedule C hereto. Cash distributions under
this Section (a) shall first be made from Distributable Cash Flow and then
from Distributable Capital Proceeds.
(iv) Each holder of a PPI must receive the amount described in
Subsection (a)(i) prior to, or contemporaneously with, any distributions
with respect to the OPIs and, except for distributions to permit the
payment of taxes imposed on the Partners by the jurisdictions in which the
Partnership does business, each holder of a PPI must receive the amount
described in Subsection (a)(ii) prior to, or contemporaneously with, any
other distributions with respect to the OPIs.
(b) Distributions of Remaining Distributable Capital Cash Flow.
Distributions of any remaining Distributable Cash Flow shall be made among the
Partners holding OPIs in accordance with their Percentage Interests.
(c) Distributions of Remaining Distributable Capital Proceeds.
Distributions of any Distributable Capital Proceeds remaining after the
distributions set forth above shall be made after making the allocations under
Article V through the date of
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distribution among the Partners holding OPIs in accordance with their Percentage
Interests until the Adjusted Capital Account of a Partner with respect to its
OPIs is reduced to zero and then in proportion to, and to the extent of, any
positive Adjusted Capital Account balances for OPIs held by the other Partners
and then, in accordance with Percentage Interests.
(d) Reserves. For any year, the Partnership shall distribute all
Distributable Cash Flow, provided that, except as contemplated in the following
sentence, without the Consent of the Partners, the Partnership will not
establish any reserves more than 10% in excess of the amount of reserves for
expenditures contemplated by the Business Plan currently in effect for such
period unless the establishment of reserves in a greater amount is required in
accordance with generally accepted accounting principles in the United States
("GAAP"), as confirmed in writing by the Partnership's independent accountants,
the Partnership specifies in writing to the Partners the contingency for which
such reserve is required and undertakes to release the reserve at such time as
it is no longer required in respect of such contingency. If the Partnership
shall seek to establish reserves at a level that exceeds either the 10% or the
GAAP level described above and such reserves shall not have been approved by the
Consent of the Partners ("Excess Reserve"), the Partnership may require, as a
condition to the distribution of such Excess Reserve, the indemnification of the
Partnership by each of the Partners for their share of such Excess Reserve by an
18-month surety bond or other instrument or security reasonably acceptable to
the Partnership. In order to trigger such indemnification, the Partnership must
(1) have itemized the liabilities which prompted its call for the Excess Reserve
and (2) existing reserves must be exhausted. Only then and only to the extent
necessary may such indemnification be called upon. In any event, the period of
such indemnification or the term of any surety bond purchased pursuant to this
Section shall not exceed eighteen months.
(e) Prohibited Distributions. No distribution shall be made to a Partner
with respect to either a PPI or an OPI under this Section or a payment or
redemption under Article I and II of Schedule C hereto, if such distribution or
payment would reduce the Adjusted Capital Account for such Partnership Interest
to less than zero or such distribution is otherwise prohibited by the Globalstar
Credit Agreement or any other applicable indenture or credit agreement that the
Partnership may enter into from time to time.
(g) Withholding Taxes. Each Partner authorizes the Partnership to withhold
and pay over any withholding or other tax payable by the Partnership as a result
of such Partner holding an interest in the Partnership. Such amounts, if
withheld from distributions to a Partner, shall be treated as a distribution to
the Partner and a payment of the withheld tax by such Partner to the appropriate
taxing authorities. In the event that current
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distributions to GTL or any Limited Partner are not sufficient to cover the
withheld tax, the amount withheld in excess of the amount covered by
distributions to such Partner shall be a loan to such Partner with respect to
whom such withholding has been undertaken and such Partner hereby grants the
Partnership a security interest in its entire interest in the Partnership at the
time any such loan is made to it to secure the repayment of such loan. Such
loans shall bear interest at the rate publicly announced by Chemical Bank from
time to time in New York City as its prime rate, shall be compounded monthly,
and shall be payable on demand. The Partnership may apply future distributions
to such Partner against amounts due under the loan. In the event that such
excess amounts are withheld on behalf of the Managing General Partner and
current distributions to the Managing General Partner are not sufficient to
cover the withheld tax, the Managing General Partner shall promptly reimburse
the Partnership for the amount of such excess.
In the event that the Internal Revenue Service shall determine that the
amount of taxes that should have been withheld with respect to a Partner is in
excess of the amount withheld by the Partnership, that Partner shall indemnify
the Partnership for the amount of any such shortfall.
SECTION 5.6. Service Provider Agreements. For federal income tax purposes,
each Partner will report as its initial tax basis in the rights it acquires
under its Service Provider Agreement the Partnership's basis in such rights. The
transfer of rights to the Partner shall not be treated as a distribution under
Article V and future transactions between the Partnership and that Partner under
the Service Provider Agreement shall be treated for purposes of Articles IV and
V as if occurring between the Partnership and the Partner acting other than in
its capacity as a partner.
SECTION 5.7. Terms of PPIs. The PPIs shall have the additional terms set
forth in Schedule C hereto.
ARTICLE VI.
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 6.1. Management. (a) The Partnership will be managed by the
General Partners through the Committee, which will consist of five to seven
members, as determined by LQSS. GTL will appoint two members to the Committee
and the remaining members will be appointed by LQSS. The members serve on the
Committee at the discretion of the General Partner appointing them to the
Committee and may be removed and replaced at any time by such General Partner,
provided that in the case of GTL's representatives to the Committee, GTL must at
all times appoint
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as representatives GTL Independent Directors. The Committee will be responsible
for managing the affairs of Globalstar. The Committee shall have complete and
exclusive discretion in the management and control of the affairs and business
of the Partnership and shall possess all powers necessary, convenient or
appropriate to carrying out the purposes and business of the Partnership;
provided however, that the day to day activities of the Partnership will be
managed by its officers, subject to the supervision of the Committee. Regular
meetings of the Committee shall be held each quarter. Action by the Committee
may be taken only with a concurrence of a majority of the members, whether
present in person at a meeting or by written consent; provided however, that
written notice of any proposed action by the Committee shall be given to all
members prior to the taking of any such action, unless waived by any such
member. Notwithstanding the foregoing, and any other provision contained in this
Agreement, all matters relating to the FCC Applications, compliance with the
Communications Act, and all compliance and regulatory matters related thereto
will be under the exclusive control of LQP, acting in its capacity as the sole
general partner of LQSS. As provided in Section 4.1(b), LQP will use the FCC
Applications and any license granted thereunder for the exclusive benefit of the
Partnership.
(b) The General Partners shall, through their appointed representatives on
the Committee, use their best efforts to carry out the purposes of the
Partnership through implementation of the Business Plan and shall devote to the
management of the business and affairs of the Partnership such time as shall be
required for the operation thereof. Without limiting the generality of the
foregoing, the General Partners, through their appointed representatives on the
Committee, shall be responsible for arranging for the development, design,
launch and placement in service of the Globalstar satellite constellation and
operations control centers and for ensuring that the Globalstar System will
function substantially as anticipated. The General Partners shall be under a
fiduciary duty and obligation to conduct the affairs of the Partnership in the
best interests of the Partnership and of the Limited Partners, including the
safekeeping of all Partnership fund and assets (whether or not in the immediate
possession or control of the General Partners) and the use thereof for the
exclusive benefit of the Partnership and shall not permit the Partnership to
enter into any transactions with any interested Partner on terms less favorable
to the Partnership than those which would have been achievable in a transaction
negotiated on an arm's length basis. Without delegating the substance of their
responsibilities and obligations hereunder, the General Partners may, subject to
the provisions of Section 6.2(a), contract or otherwise deal with any Person,
including employees of Affiliates of the General Partners, to perform any acts
or services for the Partnership as such General Partners shall approve.
Notwithstanding any such delegation, the General Partners shall remain liable to
the extent provided herein for any action or omission of any such
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delegee. Any such delegee having access to confidential information shall be
deemed to be bound by a confidentiality agreement containing substantially the
same terms as Section 15.12 hereof. Without limitation on any power that may be
conferred upon it hereunder or by law, and except as hereinafter stated and
subject to the limitations in Sections 6.1(a) and 6.2, the Committee shall have
the power to authorize the Partnership to:
(i) make and enter into such contracts and incur expenses on behalf
of the Partnership, as the Committee deems necessary or appropriate for
the efficient conduct and operation of the Partnership's business;
(ii) compromise, submit to arbitration, sue on or defend all claims
in favor of or against the Partnership; commence or defend litigation that
pertains to the Partnership or any Partnership assets, and arrange for the
settlement of any pending or threatened litigation, by or against the
Partnership, through compromise, arbitration or otherwise;
(iii) make and revoke any election permitted the Partnership by any
taxing authority (having due regard for the interests of any Partners that
may be adversely affected thereby);
(iv) do all acts the Committee deems necessary or appropriate
for the protection and preservation of the Partnership's assets;
(v) make distributions and allocations to the Partners in
accordance with Article V hereof;
(vi) designate such officers of the Partnership as authorized
signatories with the authority to execute on behalf of the Partnership,
any documents or instruments of any kind that the Committee may deem
appropriate or advisable to carry out the purposes of the Partnership
taking into consideration the terms and conditions of such document or
instrument;
(vii) prepare, execute and file federal, state and local income
tax returns and pay any taxes on behalf of the Partnership and the
Partners;
(viii) make all payments required of the Partnership under the terms
of this Agreement, including such payments, fees and reimbursements as the
General Partners, or any of their respective Affiliates, may be entitled
to receive under the terms of this Agreement;
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(ix) contest any determination by the Internal Revenue Service
which the Committee deems to be adverse to the best interests of the
Partnership;
(x) invest Partnership funds on a temporary basis pending
distribution in such investments (other than investments in Affiliates of
a General Partner) as the Committee determines appropriate, provided that
the Committee shall not invest Partnership funds in such a manner that the
Partnership will be considered to be holding itself out as being engaged
primarily in the business of investing, reinvesting, or trading in
securities or will otherwise be deemed to be an investment company under
the Investment Company Act of 1940, as amended;
(xi) employ Persons (including any Affiliate of a General Partner)
for the operation and management of the Partnership and engage such other
experts and advisers as the Committee may deem necessary or advisable, in
each case, on such terms and for such compensation as the Committee may
determine, (subject, as applicable, to the requirements of Sections
6.1(d), 6.1(e) and 6.2(a));
(xii) borrow money on behalf of the Partnership as the Committee
deems necessary or appropriate and in the best interests of the
Partnership and make, accept, endorse and execute promissory notes,
drafts, bills of exchange and other instruments and evidences of
indebtedness in connection therewith and secure the payment of any such
Partnership indebtedness by mortgage, pledge or assignment of or security
interest in all or any part of the property then owned or thereafter
acquired by the Partnership, (subject, as applicable, to the requirements
of Sections 4.9 and 4.10); and
(xiii) call a meeting of Partners from time to time as the Committee
deems necessary or advisable.
(c) The Committee may delegate any of such foregoing powers and any
additional powers conferred upon it under this Agreement or by law to officers
of the Partnership; provided however, that transactions involving amounts in
excess of $100,000, other than transactions in the ordinary course of business
or actions taken to implement any Business Plan previously approved by the
Committee, shall require the prior approval of the Committee. Subject to the
foregoing provision, the Partners hereby agree that each such authorized officer
of the Partnership is authorized to execute, deliver and perform any agreements,
acts, transactions and matters in connection with the exercise of power
hereunder on behalf of the Partnership without any further act, approval or vote
of the Partners or the Partnership, except in connection with acts otherwise
prohibited by this Agreement, the Delaware Act or any applicable law, rule or
regulation.
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(d) The Committee will ensure that the business of the Partnership is
conducted under the supervision of a qualified senior executive who shall serve
on a full-time basis as the President of Globalstar (with or without the title
of Chief Executive Officer) (the "President"). In the event that the President
is to be replaced, the Committee will as promptly as practicable seek a
qualified replacement, and, prior to offering the position formally to any
candidate, will present such candidate, his or her qualifications and proposed
compensation and employee benefits arrangements to the Partners, and shall not
make any such offer without the Consent of the Partners, provided, that, pending
receipt of such consent, and following any failure to obtain the Consent of the
Partners to the appointment of any candidate for the office of President, the
Committee may appoint as interim President an officer or employee of the
Partnership (other than any such officer or employee previously rejected by the
Partners as President). The Committee shall diligently and in good faith seek
out a suitable candidate for such office and shall present such a candidate to
the Partners at a Representatives Meeting within two months of such appointment.
Prior to terminating the employment of the President, the Committee will call a
Representatives Meeting to explain the reasons for such action and to consult
with the representatives of the Limited Partners, unless the Committee certifies
to the Limited Partners in writing that immediate action is necessary,
specifying the exigent circumstances in question.
(e) In addition to the limitations set forth in Section 6.1(d) above, the
Committee will not dismiss any officer of the Partnership with a rank of senior
vice president or above or appoint any person to serve as an officer of the
Partnership with a rank of senior vice president or above, without the consent
of at least one GTL Independent Director. If the GTL Independent Directors shall
have vetoed the appointment of the Committee's candidate for a position as set
forth above, and upon submission by the Committee of a second candidate for such
position, shall have also vetoed such candidate, then, notwithstanding the lack
of approval by a GTL Independent Director, the Committee shall be authorized to
appoint its second candidate to serve in the designated office if it shall have
submitted such candidate to the Limited Partners and such selection shall have
received the Consent of the Partners. Pending the receipt of the consent
required under this Section 6.1(e), the Committee may appoint a person to serve
as interim officer of the Partnership (other than any such person previously
rejected by the GTL Independent Directors).
SECTION 6.2. Limitations on Authority of Committee and the General
Partners. (a) Notwithstanding anything herein to the contrary, the Partnership
shall not, after the date hereof, sign or enter into any agreement or agreements
between the Partnership and any Partner, any Upper Tier Partner, any direct or
indirect corporate parent thereof, any strategic equity investor in SS/L
(currently consisting of Aerospatiale Societe Nationale Industrielle, Alcatel
Espace, Finmeccanica and Daimler-Benz
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Aerospace AG) or any of their respective Affiliates which, in the aggregate,
involve payments or receipts in excess of $1,000,000 unless the terms and
conditions thereof have been approved with the Consent of the Disinterested
Partners. The Partnership hereby warrants that it has not entered into any such
contracts during the period from March 23, 1994 to December 31, 1994, except for
the agreements itemized in the Subscription Agreements and those contracts set
forth on Schedule B hereto, which are hereby authorized and approved and, if
required, are consented to. The Partnership shall report to the Partners no less
frequently than annually on the terms and conditions of any such contracts that
would, but for the $1,000,000 limitation referred to above, require such
approval.
(b) Notwithstanding anything herein to the contrary, the Partnership shall
not undertake any of the actions specified in this Section 6.2(b) without the
Consent of the Partners and in the case of clauses (i) through (vi), will not
bring such actions before a vote of the Partners without the consent of at least
one GTL Independent Director:
(i) Make any material amendments or modifications to this Agreement,
except as otherwise provided in Section 14.1;
(ii) Approve any business plan of the Partnership that would result
in any material change in the purpose of the Partnership as set forth in
this Agreement or otherwise change the Partnership's business so that it
varies materially from the business set forth in this Agreement;
(iii) Acquire (x) a controlling interest in, or a majority of the
voting stock or equity of, any corporation or other entity or (y) any
other assets not in the ordinary course of business of the Partnership, in
either case if the aggregate fair market value thereof is greater than $10
million;
(iv) Sell, lease (as lessor), exchange or otherwise dispose of
material assets of the Partnership (other than to a Person controlled by
the Partnership); provided, however that in the event of a sale of all or
substantially all of the assets of the Partnership (other than to a Person
controlled by the Partnership), the Partnership shall distribute the
proceeds of such sale to the Partners as soon as practicable thereafter;
(v) Except as provided in Section 6.13 hereof, cause or permit the
dissolution and/or liquidation of the Partnership;
(vi) Take any action for the (A) commencement of a voluntary case
under any applicable bankruptcy, insolvency or similar law now or
hereafter in effect, (B) consent to
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the entry of any order for relief in an involuntary case under any such
law to the extent that the giving or withholding of such consent is within
the Partnership's discretion, (C) consent to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of it or of any substantial part of its
property or (D) making by it of a general assignment for the benefit of
creditors;
(vii) Initiate or settle any litigation, arbitration or other
proceeding if such litigation, arbitration or other proceeding is against,
or names as an adverse party, a Partner;
(viii) Enter into any material business outside the scope
contemplated in this Agreement;
(ix) Commence any litigation or arbitration that pertains to the
Partnership or any Partnership assets, or arrange for the settlement of
any pending or threatened litigation, by or against the Partnership,
through compromise, arbitration or otherwise if the damages claimed for
such lawsuit or arbitration shall exceed $100,000; or
(x) Adopt any modification to the System Specification that would
change any major parameter by more than 10% of the amount set forth in the
System Specification or otherwise result in a material adverse effect on
any Service Provider and the Partnership shall give the Limited Partners
reasonable notice of any such proposed modification.
(c) Notwithstanding the foregoing, in the event that any of the decisions
set forth in paragraph (b) above would result in the Partnership being engaged
in a business entirely unrelated to that disclosed in the Descriptive
Memorandum, such actions shall require the prior, written consent of all the
Partners.
(d) Unless it shall have received the prior consent of the affected
Partner or Partners, the Partnership shall not enter into contracts or
agreements with any Person or Persons which conflict with or prejudice in any
material respect the rights of any Partner under (i) the provisions of this
Agreement or (ii) any contract or agreement between the Partnership and a
Partner or its Affiliates except as otherwise disclosed in the Subscription
Agreement. LQSS warrants that neither it nor the Partnership has entered into
any such contract or agreement as of December 31, 1994 without such consent.
(e) The Partnership shall submit to the Partners for their review and
comment the material elements of its proposed launch strategy for the Globalstar
System, including the selection of launch vehicles, cost, and risk allocation
(including issues of space risk management and related insurance coverage and
self-insurance), and shall consider in good faith any alternative
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launch strategies proposed by any Partner. If the Partnership's proposed
strategy does not obtain the Consent of the Partners, the Partnership shall
promptly undertake a detailed review of such strategy, especially addressing any
particular issues identified by the dissenting Partner representatives, and
analyze any alternative launch strategies proposed by any of them, and shall not
undertake any material commitments with respect to its launch strategy until it
has made a written report to the Partners of the results of such review, and
called a Representatives Meeting to discuss such report.
(f) Any decision on the part of the Committee not to undertake either
action set forth below shall require the consent of a Majority in Interest of
the Partners: (i) construction and launch of additional first-generation
satellites, or in the event a second or subsequent generation constellation has
been launched, additional second generation or subsequent generation satellites,
as the case may be, that can be financed by the Partnership without additional
Capital Contributions from its Partners, if such satellites are anticipated to
produce a compound return on investment of 25% per annum or more or (ii) the
design, development, construction and launch of a second or subsequent
generation satellite constellation that can be financed by the Partnership
without additional Capital Contributions from its Partners if such system is
anticipated to produce a rate of return on investment greater than the rates
applicable to 30-year U.S. Treasury obligations.
The Partnership shall give each Partner prompt written notice of any
decision not to launch a second or subsequent generation of satellites at least
48 months in advance of the termination or significant degradation of service
from the satellite constellation then in operation, and will discuss any such
decision with the CSO within a period of two months after such notification.
(g) The Partnership shall give notice of a proposed action calling for the
Consent of the Partners, the Consent of the Disinterested Partners, or the
consent of a Majority in Interest of the Partners or such other matters
requiring the action of Partners as set forth herein or pursuant to the
Subscription Agreements. The Partnership shall give such notice to each of the
Partners in the manner set forth in Section 15.1 hereto as soon as practicable
but in no event less than 15 days prior to the date called for a meeting of
senior management representatives (the "Representatives") of the Partners (a
"Representatives Meeting") regarding such proposal.
The quorum for a Representatives Meeting shall be as follows: (x) with
respect to a matter requiring the Consent of the Partners or a Majority in
Interest of the Partners, Representatives present in person, by proxy or written
consent, representing a majority of the Partnership Interests outstanding and
(y) with respect to a matter requiring Consent of the Disinterested Partners,
Representatives present in person, by proxy or written consent,
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representing a majority of the Partnership Interests outstanding held by the
disinterested Partners. Each Partner (in the case of a matter requiring the
Consent of the Partners or the consent of a Majority in Interest of the
Partners) or each disinterested Partner (in the case of a matter requiring the
Consent of the Disinterested Partners) (and in all cases other than a Delinquent
Partner), shall have the right to designate one Representative to attend each
Representatives Meeting, who will have the right to cast at the meeting a number
of votes equal to the number of Partnership Interests such Partner holds,
provided that LQSS shall in all instances vote in accordance with Section 6.4 of
the LQSS Partnership Agreement, or, in lieu of voting in such a manner, may
assign any Upper Tier Partner the right to designate a Representative to cast at
the Representatives Meeting a number of votes equal to the number of Partnership
Interests LQSS's Representative is required to cast on its behalf in accordance
with such Section 6.4, provided, however, that in no event shall such votes
exceed the total number of Partnership Interests held by LQSS. In the event of
such an assignment, the Upper Tier Partners' Representatives shall have the same
right to attend and vote at Partners' meetings as Representatives of Partners in
the Partnership.
SECTION 6.3. Change of Control and Reduction in Interest. (i) For purposes
of this Section 6.3, "GTL Change of Control" shall mean an event or series of
events not approved either by the Managing General Partner or by the Consent of
the Partners, at a time when GTL owns less than 50% of the Partnership Interests
outstanding, by which (i) any "person" or "group" (as such terms are defined in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange
Act")) becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act), directly or indirectly, of more than 30% of the GTL Common
Stock then outstanding, (ii) GTL consolidates with or merges into another
corporation or conveys, transfers or leases all or substantially all of its
assets to any Person, or any corporation consolidates with or merges into GTL,
in either event pursuant to a transaction in which the outstanding GTL Common
Stock is changed into or exchanged for cash, securities or other property, other
than any transaction (A) between GTL and either Loral SpaceCom, an Affiliate of
Loral SpaceCom or a wholly-owned subsidiary of Loral SpaceCom or (B) after which
the shareholders who beneficially owned GTL Common Stock immediately before such
transaction beneficially own at least 50% of the outstanding voting stock of the
surviving entity and no Person beneficially owns more than 30% of the
outstanding voting stock of the surviving entity, (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of GTL (together with any new directors whose election by
the Board of Directors or whose nomination for election was approved by a vote
of 66 2/3% of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to
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constitute a majority of the directors then in office, or (iv) GTL makes on any
day any distribution or distributions of cash, property or securities (other
than regular dividends, common stock or rights to acquire common stock) to its
shareholders, or purchases or otherwise acquires GTL Common Stock, and the sum
of the fair market value of such distribution or purchase, plus the fair market
value of all other such distributions and purchases which have occurred during
the preceding twelve months, exceeds 30% of the fair market value of GTL Common
Stock outstanding.
(b) A "Reduction in Interest" shall have occurred upon the sale or other
disposition of Partnership Interests by GTL after which GTL's Percentage
Interest is reduced to less than 5% and such reduction was not previously
approved either by the Managing General Partner or by the Consent of the
Partners.
(c) Upon a GTL Change of Control or a Reduction in Interest, GTL will
become a Limited Partner and will lose all of its rights as a General Partner
under this Agreement, including the right to appoint representatives to serve on
the Committee and, through the GTL Independent Directors, to veto certain
actions of the Partnership. The Committee will thereby dissolve and all actions
previously authorized to be taken by the Committee will thereupon be taken by
the Managing General Partner as the sole General Partner. In addition, upon a
GTL Change of Control or a Reduction in Interest, any PPIs then held by GTL
would automatically convert into preferred limited partnership interests and any
OPIs then held by GTL would automatically convert into limited OPIs. GTL's
preferred limited partnership interests will have the same terms as the PPIs
except that they will convert into, and payments of any OPIs with respect
thereto, would be made in limited OPIs rather than general OPIs.
SECTION 6.4. Certificate of Limited Partnership. The Partnership has filed
the Certificate of Limited Partnership with the Secretary of State of the State
of Delaware as required by the Delaware Act and shall file such other
certificates or documents as may be deemed by the Partnership to be reasonable
and necessary or appropriate for the formation or qualification and operation of
a limited partnership (or a partnership in which the limited partners have
limited liability) in the State of Delaware or any other state in which the
Partnership may elect to do business. To the extent that the Committee in its
discretion determines such action to be reasonable and necessary or appropriate
and to the extent consistent with this Agreement, the Committee shall file
amendments to the Certificate of Limited Partnership and do all the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of Delaware
or any other state in which the Partnership may elect to do business.
SECTION 6.5. Reliance by Third Parties. Notwithstanding any other
provision of this Agreement to the contrary, no lender
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or purchaser, including any purchaser of property from the Partnership or any
other Person dealing with the Partnership, shall be required to look to the
application of proceeds hereunder or to verify any representation by the
Managing General Partner as to the extent of the interest in the assets of the
Partnership that the Managing General Partner is entitled to encumber, sell or
otherwise use, and any such lender or purchaser shall be entitled to rely
exclusively on the representations of the Managing General Partner as to its
authority to enter into such financing or sale arrangements and shall be
entitled to deal with the Managing General Partner as if it were the sole party
in interest therein, both legally and beneficially. In no event shall any Person
dealing with the Managing General Partner or the Managing General Partner's
representative with respect to any business or property of the Partnership be
obligated to ascertain that the terms of this Agreement have been complied with,
or be obligated to inquire into the necessity or expedience of any act or action
of the Managing General Partner or the Managing General Partner's
representative; and every contract, agreement, deed, mortgage, security
agreement, promissory note or other instrument or document executed by the
Managing General Partner or the Managing General Partner's representative with
respect to any business or property of the Partnership shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (a) at the time of the execution and/or delivery thereof this Agreement was
in full force and effect, (b) such instrument or document was duly executed in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership, and (c) the Managing General Partner or the Managing General
Partner's representative was duly authorized and empowered to execute and
deliver any and every such instrument or document for and on behalf of the
Partnership.
SECTION 6.6. Compensation, Expenses and Reimbursement of General Partners.
(a) Commencing from and after the time in which Globalstar receives revenue from
Usage Fees, the Partnership shall pay to the Managing General Partner in cash
for each quarter during the period the Partnership is in existence, as payment
in connection with services rendered by the Managing General Partner,
compensation equal to 2.5% of the Partnership's gross operating revenue up to
$500 million per annum, based upon revenues through the end of the quarter in
question plus 3.5% of the Partnership's gross operating revenue in excess of
$500 million per annum (the "Management Fee"). All quarterly payments are
subject to adjustment based on year-end audit. The Management Fee shall be paid
quarterly during each In-Service Year, provided that for any In-Service Year in
which there is a net loss to the Partnership computed under GAAP, the Management
Fee shall be reduced by 50% and the Managing General Partner will reimburse the
Partnership for Management Fee payments, if any, received in any prior quarter
of such In-Service Year, sufficient to reduce its Management Fee by 50%. To the
extent the year-to-date result through the first, second or third quarter of an
In-Service Year is a net loss, no Management Fee will be paid
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with respect to such quarter to the extent it would (together with any
Management Fee payments with respect to any earlier quarter in such In-Service
Year) exceed 50% of the Management Fee otherwise payable (but for such net
loss). No further Management Fee payments shall be required to be paid after the
date that distribution of all of the Partnership's assets to the Partners has
been completed. In any quarter in which the Partnership would report negative
cash flow from operations if the Management Fee for such quarter is paid in full
in cash, payment of the Management Fee (or such lesser portion thereof as shall
equal the amount of such negative cash flow) shall be deferred with interest at
a rate equal to 4% per annum and shall be payable at such time as the
Partnership shall have sufficient cash flow. No Management Fee or other
compensation shall be owing to GTL in connection with its services as a General
Partner.
(b) All expenses incurred in connection with the organization of the
Partnership (other than expenses borne by LQSS or any Upper Tier Partner for
which capital contribution credit is received pursuant to Section 4.1) will be
borne by the Partnership and, to the extent not otherwise allocated by Article
V, charged to the Partners' Capital Accounts according to their Percentage
Interests. Such expenses, including legal and investment banking fees, are
approximately $3,728,000.
(c) The General Partners shall be reimbursed on a monthly basis for all
fair and reasonable expenses they incur or make on behalf of the Partnership
(including amounts paid to any Person to perform services for the Partnership or
the General Partners or who is an employee of the Partnership or the General
Partners). Such reimbursement shall be in addition to any reimbursement to a
General Partner as a result of indemnification pursuant to Section 6.10 hereof,
but shall only be in respect of reasonable out-of-pocket expenses incurred
solely on behalf of Globalstar, and shall not include any amounts in respect of
compensation of persons who are officers, directors or employees of GTL, the
Upper Tier Partners or their Affiliates or any other corporate overhead of such
persons.
SECTION 6.7. Outside Activities. (a) Subject to Section 6.7(b), each
Partner agrees, subject to the requirements of applicable law, that the Partners
and their respective subsidiaries, partners, associates, employees, Affiliates
and agents may engage in other business activities or possess interests in other
business activities of every kind and description, independently or with others,
except that no Partner or any of its subsidiaries or Affiliates shall possess an
interest, directly or indirectly, in any business activity operating Similar
Satellite Service until the earlier of (i) the third anniversary of the date
such Partner (including its Affiliates) ceases to be a Partner of the
Partnership, (ii) the beginning of the third In-Service Year and (iii) the date
183 days following the date that such Partner (including its Affiliates) ceases
to be or have equity interest in a Service
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Provider; provided, however, that (i) a passive investment representing not more
than 5% of the equity securities of a company in direct competition with the
Partnership whose equity securities are listed on a nationally recognized
securities exchange or (ii) the sale or provision of goods or services (except
as may otherwise be specifically agreed to between the Partnership and the
Partner) in the ordinary course of business of a Partner or its Affiliates shall
not violate this provision. For purposes of this Section 6.7, governmental and
military systems and satellite systems such as OmniTRACS or Euteltracs, and,
insofar as France Telecom is concerned, intergovernmental systems, such as
INMARSAT and EUTELSAT, and their respective logical extensions, shall not be
considered Similar Satellite Service. This paragraph may not be amended without
the consent of TESAM.
(b) The General Partners shall not engage in any business other than
management of the business and affairs of the Partnership, and shall not own any
assets other than Partnership Interests, Partnership capital contributions and
distributions, and related assets, without the Consent of the Disinterested
Partners.
(c) The General Partners shall not, and shall not permit any of their
respective Affiliates, including SS/L, to, act as prime contractor or systems
integrator for any Similar Satellite Service.
SECTION 6.8. Partnership Funds. The funds of the Partnership shall be
deposited in such account or accounts as are designated by the Partnership and
shall not be commingled with any other funds. All withdrawals from or charges
against such accounts shall be made by duly authorized officers or agents of the
Partnership. Funds of the Partnership may be invested as determined by the
Committee, except in connection with acts otherwise prohibited by this
Agreement.
SECTION 6.9. Loans from the General Partners. A General Partner or any
Affiliate of the General Partner may lend to the Partnership funds needed by the
Partnership for such periods of time as the General Partner may determine;
provided, however, that such loan is approved in advance with the Consent of the
Disinterested Partners. The Partnership shall reimburse the General Partner or
its Affiliate, as the case may be, for any additional costs incurred by the
General Partner or such Affiliate in connection with the borrowing of funds
obtained by the General Partner or such Affiliate and loaned to the Partnership.
SECTION 6.10. Indemnification of Partners. (a) The Partnership shall
indemnify and hold harmless the Partners, the Upper Tier Partners, their
respective Affiliates, and all of their respective officers, directors,
partners, controlling shareholders, employees, and agents (individually, an
"Indemnitee"), from and against any and all losses, claims, demands, costs,
damages, liabilities, joint and several, expenses
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of any nature (including attorneys' fees and disbursements), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
in which an Indemnitee may be involved, or threatened to be involved, as a party
or otherwise ("Losses"), arising out of or incidental to the business of the
Partnership, regardless of whether an Indemnitee continues to be a Partner, an
Affiliate, or an officer, director, partner, controlling shareholder, employee,
or agent of a Partner or of an Affiliate at the time any such Loss is paid or
incurred, if the Indemnitee's conduct did not constitute actual fraud, gross
negligence, knowing breach of specific provisions of this Agreement or willful
or wanton misconduct. The termination of any action, suit, or proceeding by
settlement or upon a plea of nolo contendere, or its equivalent, shall not, in
and of itself, create a presumption or otherwise constitute evidence that the
Indemnitee's actions constituted actual fraud, gross negligence or willful or
wanton misconduct.
(b) Expenses (including legal fees and expenses) incurred in defending any
proceeding subject to subsection (a) of this Section 6.10 shall be paid by the
Partnership in advance of the final disposition of such proceeding upon receipt
of an undertaking (which need not be secured) by or on behalf of the Indemnitee
to repay such amount if it shall ultimately be determined, by a court of
competent jurisdiction or otherwise, that the Indemnitee is not entitled to be
indemnified by the Partnership as authorized hereunder.
(c) The indemnification provided by this Section 6.10 shall be in addition
to any other rights to which each Indemnitee may be entitled under any agreement
or vote of the Partners, as a matter of law or otherwise, both as to action in
the Indemnitee's capacity as a Partner or as a partner, controlling shareholder,
officer, director, employee or agent of a Partner, or as to action in the
Indemnitee's capacity as a Person serving at the request of the Partnership as
set forth above, and shall continue as to an Indemnitee who has ceased to serve
in such capacity and shall inure to the benefit of the heirs, successors,
assigns, administrators and personal representatives of the Indemnitee. Such
indemnification, however, shall only apply to Losses incurred by virtue of the
Indemnitee's status as a Partner, the Upper Tier Partner, Affiliate or officer,
director, partner, controlling shareholder, employee or agent thereof, and not
as to Losses incurred in other capacities (for example, by virtue of being a
Service Provider or otherwise contracting with the Partnership).
(d) The Partnership may purchase and maintain insurance on behalf of any
one or more Indemnitees and other such Persons as the Partnership shall
determine against any liability which may be asserted against or expense which
may be incurred by such Person in connection with the Partnership's activities,
whether or not the Partnership would have the power to indemnify such Person
against such liability under the provisions of this Agreement.
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(e) Any indemnification hereunder shall be satisfied only out of the
assets of the Partnership and no Partner shall be subject to personal liability
by reason of these indemnification provisions.
(f) An Indemnitee shall not be denied indemnification in whole or in part
under this Section 6.10 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(g) The provisions of this Section 6.10 are for the benefit of the
Indemnitees and the heirs, successors, assigns, administrators and personal
representatives of the Indemnitees and shall not be deemed to create any rights
for the benefit of any other Persons.
(h) Any Person that proposes to assert the right to be indemnified under
this Article VI shall, promptly after receipt of notice of any action which is
subject to indemnification hereunder, notify the Partnership of the commencement
of such action, enclosing a copy of all papers served. The failure so to notify
the Partnership of any such action shall not relieve it from any liability that
it may have to any indemnified party hereunder, unless such party is prejudiced
thereby. In case any such action shall be brought and notice given to the
Partnership of the commencement thereof, the Partnership shall be entitled to
participate in, and to assume the defense thereof, with counsel reasonably
satisfactory to the indemnified party, and after notice from the Partnership to
such indemnified party of its election so to assume the defense thereof, the
Partnership shall not be liable to such indemnified party for any legal or other
expenses, except as provided below and except for the reasonable costs of
investigation subsequently incurred by such indemnified party at the request of
the Partnership in connection with the defense thereof. The indemnified party
shall have the right to employ separate counsel and to participate in (but not
control) any such action, but the fees and expenses of such counsel shall be the
expense of such indemnified party unless (i) the employment of counsel by such
indemnified party has been authorized by the Partnership, (ii) the employment of
separate counsel is necessitated by a conflicting interest among indemnified
parties, or (iii) the Partnership shall not in fact have employed counsel to
assume the defense of such action. In each such case, the fees and expenses of
counsel shall be at the expense of the Partnership. The Partnership shall not be
liable for any settlement of any action or claims effected without its written
consent unless the Partnership has failed to assume the defense of any such
action or claims.
SECTION 6.11. Liability of General Partners. (a) The General Partners, the
Upper Tier Partners and their respective Affiliates and all officers, directors,
partners, controlling shareholders, employees and agents of the General
Partners, the
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Upper Tier Partner and their respective Affiliates shall not be liable to the
Partnership or to the Limited Partners for any losses sustained or liabilities
incurred as a result of any act or omission of the General Partners, their
Affiliates or any such officers, directors, partners, controlling shareholders,
employees or agents if (i) the General Partner, such Affiliate, or such officer,
director, partner, controlling shareholder, employee or agent acted in good
faith and in a manner it or he reasonably believed to be in, or not opposed to,
the best interests of the Partnership, and (ii) the conduct of the General
Partner, such Affiliate or such officer, director, partner, shareholder,
employee or agent did not constitute gross negligence or Nonperformance. For
purposes of this Agreement, any act or omission, if done or omitted to be done
in reliance upon the advice of legal counsel or public accountants (the
"Professionals") selected with reasonable care, will be conclusively presumed to
have been done or omitted to be done in good faith and not to constitute willful
or wanton misconduct, gross negligence or Nonperformance; provided, however,
that the reliance was reasonable and the General Partner had disclosed all
relevant facts to the Professionals.
(b) Each General Partner shall fully indemnify and hold harmless the
Limited Partners and their Affiliates and their respective partners, officers,
directors, employees and agents to the fullest extent permitted by law from and
against any and all losses, claims, demands, costs, damages, liabilities (joint
or several), expenses of any nature (including attorney's fees and
disbursements), judgments, fines, settlements and other amounts including, but
not limited to, those arising directly or indirectly from or relating to any
civil, criminal, administrative or investigative proceeding, arising out of or
incidental to conduct by such General Partner or one of its Affiliates with
respect to the business or activities of or relating to the Partnership which
constituted bad faith, gross negligence or Nonperformance. The obligations of a
General Partner under this Section 6.11 shall extend only to its own acts or
omissions or acts or omissions by one of its Affiliates and not with respect to
acts or omissions of the other General Partner or its Affiliates. For purposes
of the preceding sentence, actions by the Committee shall be deemed to be
actions of LQSS only. GTL shall not be deemed to be an Affiliate of LQSS and
LQSS shall not be deemed to be an Affiliate of GTL, for purposes of this Section
6.11(b) with respect to any action determined solely by directors who are not
employed by, or otherwise affiliated with Loral SpaceCom.
SECTION 6.12. Other Matters Concerning the General Partners. (a) Each
General Partner may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties.
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(b) A General Partner may consult with legal counsel, Service Providers,
and other consultants and advisers selected by it, and any advice of such Person
as to matters which the General Partner believes to be within such Person's
professional experience shall be full and complete authorization and protection
in respect of any action taken or suffered or omitted by the General Partner
hereunder in good faith and in accordance with such advice. Any such Person
receiving confidential information shall be deemed to be bound by a
confidentiality agreement containing substantially the same terms as Section
15.12 hereof.
SECTION 6.13. Conversion to Corporate Form. (a) In the event that the
Committee shall determine that it is desirable or helpful for the business of
the Partnership to be conducted in a corporate rather than in a partnership
form, the Committee may incorporate the Partnership or take such other action as
it may deem advisable in light of such changed conditions, including, without
limitation, dissolving the Partnership, provided that, the Committee may not
incorporate the Partnership without the Consent of the Partners. In connection
with any such incorporation of the Partnership, the Partners shall receive, in
exchange for their Partnership Interests, shares of capital stock of such
corporation having the same relative rights and preferences as to dividends and
distributions and the same voting and transfer rights, subject in each case to
any modifications required solely as a result of the conversion to corporate
form (all such rights and preferences being referred to, collectively, as
"Equity Rights"), as are set forth in this Agreement as among the holders of
interests in the Partnership.
(b) Prior to taking any such action to incorporate the Partnership, the
Committee shall submit to the Partners the proposed forms of a certificate or
articles of incorporation, by-laws, shareholders' agreement and any other
governing documents proposed to be established for such corporation (the
"Governing Documents"). If Limited Partners holding Partnership Interests
representing at least 20% (or 15% in the event GTL becomes a Limited Partner
pursuant to Section 6.3 hereof) of the total number of outstanding Partnership
Interests held by all Limited Partners (not including any Partnership Interest
held by LQSS or its Affiliates) notify the Committee within 15 days of the date
the proposed forms of Governing Documents are submitted to the Limited Partners
that they have concluded in good faith that, based upon such Governing
Documents, the shares of capital stock of such corporation proposed to be issued
to them in exchange for such Partnership Interests do not have the same Equity
Rights as are set forth in this Agreement, the Committee and such Limited
Partners shall negotiate in good faith to resolve any differences with respect
thereto. If the Committee and such Limited Partners do not resolve such
differences, the Committee may appoint an investment banking firm of
internationally recognized standing reasonably acceptable to such Limited
Partners to advise the Partnership as to such dispute, and the conclusion of
such firm shall be binding on the parties, and any modification recommended by
such investment
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banking firm in the Equity Rights shall be incorporated into the Governing
Documents. Nothing contained herein shall be construed to give the Limited
Partners any right to cause the business of the Partnership to be conducted in
corporate form or to limit the right of the Committee to elect, at any time, to
continue such business as a partnership.
SECTION 6.14. FCC Compliance. The Partners hereby understand, agree and
acknowledge that the rights described in Section 4.1(b)(i) of this Agreement are
subject to the Communications Act, and the rules and regulations promulgated
thereunder.
ARTICLE VII.
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
SECTION 7.1. Limitation of Liability. No Limited Partner shall be
personally liable for any debts, liabilities or obligations of the Partnership,
whether to the Partnership, to the General Partners, or to creditors of the
Partnership, beyond the amount contributed by such Limited Partner to the
capital of the Partnership and such Limited Partner's share of the accumulated
but undistributed profits of the Partnership and the amount of any distribution
(including the return of any Capital Contribution) made to such Limited Partner
that must be returned to the Partnership pursuant to applicable state law. The
General Partners shall use reasonable efforts, in the conduct of the
Partnership's business, to put all Persons with whom the Partnership does
business on notice that the Limited Partners and their Affiliates are not liable
for Partnership obligations, and all material agreements to which the
Partnership is a party shall include a statement to the effect that the
Partnership is a limited partnership organized under the laws of Delaware.
SECTION 7.2. Management of Business. The Limited Partners shall not take
part in the operation, management or control (within the meaning of the Delaware
Act) of the Partnership's business, transact any business in the Partnership's
name or have the power to sign documents for or otherwise bind the Partnership.
No Limited Partner has the right to require the partition of Partnership
property or compel any sale or appraisal of Partnership assets or sale of a
deceased Partner's interest therein.
ARTICLE VIII.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 8.1. Records and Accounting. The Partnership shall keep or cause
to be kept appropriate books and records with respect to the Partnership's
business, which books shall at all times be kept at the principal office of the
Partnership. Any
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records maintained by the Partnership in the regular course of its business,
books of account and records of Partnership proceedings, may be kept on, or be
in the form of, punch cards, magnetic tape, photographs, micrographics or any
other information storage device, provided that the records so kept are
convertible into clearly legible written form within a reasonable period of
time. The records and books of account of the Partnership will be audited as of
the end of each Fiscal Year by Deloitte & Touche LLP ("Deloitte & Touche"). In
the event the Partnership shall seek to replace Deloitte & Touche, the
Partnership shall select as Deloitte & Touche's successor independent certified
public accountants of recognized international standing (other than the
principal auditors of Loral SpaceCom or Qualcomm), provided that such choice may
be disapproved once, but only once, by a vote requiring the Consent of the
Partners, and thereafter such accountants may be selected by the Partnership in
its sole discretion (other than the principal auditors of Loral SpaceCom or of
Qualcomm).
SECTION 8.2. Fiscal Year. The fiscal year (the "Fiscal Year") of the
Partnership shall be the calendar year, unless otherwise determined by the
Partnership in its sole discretion.
SECTION 8.3. Reports and Annual Meeting. (a) As soon as practicable, but
in no event later than 90 days after the close of each fiscal year, the
Partnership shall deliver to the Partners reports containing financial
statements of the Partnership for the fiscal year, presented in accordance with
GAAP, including a balance sheet, a statement of income, a statement of Partners'
equity and a statement of changes in cash flow, such statements to be audited by
the firm of independent certified public accountants selected in accordance with
Section 8.1.
(b) As soon as practicable, but in no event later than 45 days after the
close of each calendar quarter, including the last calendar quarter of each
fiscal year, the Partnership shall deliver to the Partners a quarterly report
containing a balance sheet and statements of income and changes in financial
position for such calendar quarter.
(c) In addition to any meetings of the Partners called pursuant to Section
6.1(b)(xiii) or any Representatives Meeting called pursuant to Section 6.2(g),
the Partnership shall hold an annual meeting of the Partners ("Annual Meeting")
on fifteen (15) days prior written notice to the Partners, such Annual Meeting
to be held no sooner than thirty (30) days and no later than sixty (60) days
after delivery to the Partners of the annual financial statements for the
preceding fiscal year pursuant to Section 8.3(a). At the Annual Meeting,
officers of the Partnership will review the operations of the Partnership during
the preceding year, discuss the plans and operating budget for the current year
and any amendments to the Business Plan and answer whatever questions may be
raised by representatives of the Partners at the Annual Meeting.
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SECTION 8.4. Disclosure to Limited Partners. (a) The Limited Partners
shall have full access to all financial and other information directly related
to the business and affairs of the Partnership. In particular, the following
will be open for examination, by any Limited Partner or his duly authorized
representatives:
(i) books and records pertaining to the Partnership's business
showing all of its assets and liabilities, receipts and disbursements,
realized profits and losses, and all transactions (including all contracts
and commitments) entered into by the Partnership;
(ii) a current list of the full name and last known mailing address
of each Partner set out in alphabetical order, together with a list
showing the Capital Contributions and Capital Account of each Partner;
(iii) a copy of the Certificate of Limited Partnership and all
amendments to it, together with executed copies of any powers of attorney
pursuant to which the Certificate and any amendments to it have been
executed;
(iv) copies of all the Partnership's U.S. Federal, state, local and
foreign income tax returns and reports, if any; and
(v) copies of this Agreement as may be amended from time to time.
(b) The Partnership shall make available, on a reasonable basis, its
financial officers and auditors to the Limited Partners for consultation and to
respond to questions of the Limited Partners relating to the financial condition
of the Partnership. The Partnership will prepare and mail to each Limited
Partner promptly upon the request of any Limited Partner such further
information concerning the business, affairs and financial conditions of the
Partnership, as any Limited Partner may reasonably request.
(c) Notwithstanding the provisions set forth in this Section 8.4, the
Partnership may keep confidential from the Limited Partners for a period of time
deemed reasonable by it information (excluding any matters required to be
disclosed pursuant to Section 8.3 or clause (ii)-(v) of Section 8.4) to the
extent the Partnership, in good faith, determines (i) that disclosure is not in
the best interests of the Partnership, (ii) that disclosure could damage the
Partnership or its business or (iii) that the Partnership is required by law or
by a third party to keep the information confidential.
SECTION 8.5. Determination of Book Value of Partnership Assets. (a) Except
as set forth below, Book Value of any
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Partnership asset is its adjusted basis for federal income tax purposes.
(a)(b) The initial Book Value of any assets contributed by a Partner to
the Partnership shall be the gross fair market value of such assets. The Book
Value of property and property rights contributed by LQSS and described in
Section 4.1(b)(i) and (ii) shall be the amount allocated to them pursuant to
Section 4.1(b).
(c) The Book Values of all of the Partnership's assets shall be adjusted
by the Partnership to equal their respective gross fair market values as of the
following times: (a) the admission of a new Partner to the Partnership or
acquisition by an existing Partner of an additional interest in the Partnership
from the Partnership (including the acquisition of PPIs as set forth in Section
4.1(d)); (b) the distribution by the Partnership of money or property to a
withdrawing, retiring or continuing Partner in consideration for the retirement
of all or a portion of such Partner's interest in the Partnership; and (c) the
termination of the Partnership for Federal income tax purposes pursuant to
section 708(b)(1)(B) of the Code; provided, however, that no adjustment shall be
made upon the issue of an OPI pursuant to Section 5.5(a)(iii) or Section 1.2(b)
of Schedule C. The Partnership will not be required to make an adjustment upon
the exercise of a warrant to acquire an OPI or upon a conversion of a PPI
pursuant to Article III of Schedule C until the sum of the cumulative face
amount of PPIs converted and the exercise price of warrants exercised since the
last adjustment exceeds $15,000,000. In such case, the Partnership shall make at
least one adjustment during the year and, if no other adjustment event occurs
during the year and after the $15,000,000 threshold was reached, a required
adjustment shall be made as of the date of the last PPI conversion or warrant
exercise during the year. Upon a conversion of a PPI and an adjustment to the
Book Values of Partnership assets under this Section , any resulting Capital
Transaction Loss shall be first allocated to holders of OPIs whose Adjusted
Capital Accounts are higher than the Adjusted Capital Accounts of the OPIs
acquired on exercise of a warrant or on conversion in amounts and proportions to
reduce the differences between such Adjusted Capital Accounts and any resulting
Capital Transaction Gain shall first be allocated to the Capital Account of the
OPIs acquired on exercise of a warrant and on conversion in an amount to reduce
or eliminate the amount by which the Adjusted Capital Accounts for such OPIs are
less than the Capital Account for the outstanding OPI with the highest Adjusted
Capital Account. Any remaining Capital Transaction Gain or Loss shall be
allocated under Section 5.1. The Partnership will promptly report any such
adjustment to the Partners.
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ARTICLE IX.
TAX MATTERS
SECTION 9.1. Preparation of Tax Returns. (a) The Partnership shall arrange
for the preparation and timely filing of all returns of Partnership income,
gains, deductions, losses and other items necessary for federal and state income
tax purposes. The Partnership shall use all reasonable efforts to furnish to the
Partners within 90 days of the close of the taxable year the tax information
reasonably required for federal, state and foreign income tax reporting
purposes. Subject to the provisions of Section 9.2, the classification,
realization and recognition of income, gain, losses and deductions and other
items shall be on the accrual method of accounting for federal income tax
purposes, to the extent permitted by applicable law. The taxable year of the
Partnership shall be the calendar year, unless otherwise required by the federal
income tax laws and the Treasury Regulations thereunder or unless otherwise
determined by the Partnership.
(b) The Partnership will prepare the state and local tax returns for those
non-U.S. Limited Partners who are not otherwise engaged in business in the
United States.
SECTION 9.2. Tax Elections. Except as otherwise provided herein, the
Partnership shall, in its sole discretion, determine whether to make any
available election, including but not limited to an election under Code Section
709 to amortize organization and start-up expenditures over a sixty month
period, and an election under Code Section 754 to adjust the bases of
Partnership property with respect to the Partnership or with respect to a
transferee Partner. In the event a Section 754 election is made, the Partnership
may in its sole discretion charge transferees for the additional costs incurred
in preparing their tax information under such election.
SECTION 9.3. Tax Controversies. Subject to the provisions hereof, the
Managing General Partner is designated the Tax Matters Partner (as defined in
Section 6231 of the Code), and is authorized and required to represent the
Partnership (at the Partnership's expense) in connection with all examinations
of the Partnership's affairs by tax authorities, including resulting
administrative and judicial proceedings, and to expend Partnership funds for
professional services and costs associated therewith. The Partners agree to
cooperate with the Managing General Partner and to do or refrain from doing any
or all things reasonably required by the Managing General Partner to conduct
such proceedings, provided that the foregoing shall not be construed to prevent
a Partner from taking steps reasonably necessary to protect and defend its own
interests.
SECTION 9.4. Taxation as a Partnership. No election shall be made by the
Partnership or any Partner for the Partnership to be excluded from the
application of any of the provisions of
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Subchapter K, Chapter 1 of Subtitle A of the Code or from any similar provisions
of any state tax laws.
ARTICLE X.
TRANSFER OF INTERESTS
SECTION 10.1. Transfer. (a) The term "transfer," when used in this Article
X with respect to a Partnership Interest, includes a sale, assignment, gift,
pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition;
provided however, that an exchange of Partnership Interests by LQSS or the
Limited Partners pursuant to the terms of the Exchange and Registration Rights
Agreement shall not, other than with respect to Section 10.4(c) hereof, be
deemed to be a "transfer" for purposes of this Article X.
(b) Any Partnership Interest may be transferred, in whole or in part,
provided that such transfer shall be made, where applicable, in accordance with
the terms and conditions set forth in this Article X. Any transfer or purported
transfer of any Partnership Interest not made in accordance with this Article X
shall be null and void.
(c) Notwithstanding anything contained herein to the contrary, no transfer
of a Partnership Interest may be made if such transfer (i) would violate the
then applicable federal or state securities laws or rules and regulations of the
Securities and Exchange Commission, state securities commissions, the
Communications Act, or rules and regulations of the FCC and any other government
agencies with jurisdiction over such transfer or (ii) would affect the
Partnership's existence or qualification under the Delaware Act. In the event a
transfer of a Partnership Interest is otherwise permitted hereunder,
notwithstanding any provision hereof, no Partner shall transfer all or any
portion of such Partner's Partnership Interest unless and until such Partner,
upon the request of the Partnership, delivers to the Partnership an opinion of
counsel, addressed to the Partnership, reasonably satisfactory to the
Partnership, to the effect that (1) such Partnership Interest has been
registered under the Securities Act and any applicable state securities laws, or
that the proposed transfer of such Partnership Interest is exempt from any
registration requirements imposed by such laws and that the proposed transfer
does not violate any other applicable requirements of federal or state
securities laws and (2) that such transfer will not adversely affect the tax
status of the Partnership. Such opinion shall not be deemed delivered until the
Partnership confirms to such Partner that such opinion is acceptable, which
confirmation will not be unreasonably withheld.
(d) For so long as the Exchange Right is in effect, each of the Partners
hereby agrees that it will not (i) make a public offering of its Partnership
Interests, or (ii) transfer any of
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their Partnership Interests to a Person, other than to GTL, if (x) such
Partnership Interests would constitute all or substantially all of the assets of
such transferee and (y) the purpose of the transfer is to enable the transferee
Person make a public offering of its equity interests.
SECTION 10.2. Transfer of Interests of General Partners. (a) Subject to
Section 12.1 hereof, a General Partner shall not transfer all or any part of its
Partnership Interests without the Consent of the Disinterested Partners;
provided, that a transfer by GTL is further subject to the provisions of Section
6.3 hereof. A General Partner may transfer any or all of its Partnership
Interests to an Affiliate of the General Partner ("Affiliate Successor") without
such approval; provided however, that in the case of GTL, GTL may transfer only
to an Affiliate that is 100% owned by GTL and any such transfer shall be subject
to the consent of the Managing General Partner, which consent may be granted or
withheld in the Managing General Partner's sole discretion. Such transfer to an
Affiliate Successor shall not relieve the General Partner of any of its
obligations hereunder unless the Affiliate Successor has been adjudged by the
Consent of the Disinterested Partners (which consent shall not be unreasonably
withheld) to be a Person that has at least such comparable financial strength
and technical and managerial capabilities and know-how sufficient for it to
perform its duties and obligations hereunder. The Partners hereby consent to any
such approved transfer or any transfer to an Affiliate Successor, subject to the
provisos set forth above. The Affiliate Successor of a General Partner pursuant
to this Section 10.2 shall be admitted to the Partnership as General Partner
immediately prior to the effective date of transfer of the General Partner's
Partnership Interests and the Affiliate Successor shall continue the business
and operations of the Partnership without dissolution provided that prior to
such effective date the Affiliate Successor shall have furnished to (a) the
Partnership (i) acceptance in form satisfactory to counsel to the Partnership of
all the terms and conditions of this Agreement and (ii) such other documents or
instruments as may be required by such counsel in order to effect such transfer
and (b) to the other Partners an opinion of counsel to the effect that such
transfer will not adversely affect the tax status of the Partnership. Such
opinion will not be deemed furnished until approved by the Consent of the
Partners, which consent will not be unreasonably withheld. The transferring
General Partner hereby further agrees to hold the Partnership and each other
Partner wholly and completely harmless from any cost, liability or damage
(including, without limitation, liabilities for income taxes and costs of
enforcing this indemnity) incurred by any of such indemnified Persons as a
result of a transfer or attempted transfer by it in violation of this Agreement.
(b) Notwithstanding anything to the contrary contained herein, a General
Partner will not take any action which would constitute or result in the
transfer of control of the
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Partnership if such transfer would require, under existing law (including,
without limitation, the written rules and regulations promulgated by the FCC),
the prior approval of the FCC, without first obtaining such approval of the FCC.
(c) A General Partner shall diligently prosecute its application for
approval of the transfer identified in Section 10.2(b) hereof and shall
immediately provide to the FCC all information requested by the FCC in
connection with the application.
(d) Prior to the FCC's grant of the approval of the transfer application
identified in Section 10.2(b) hereof, a General Partner seeking to transfer its
Partnership Interests shall continue to act in a manner consistent with the
provisions of Article VI of this Agreement.
(e) Any transfer by GTL, other than to an Affiliate, shall be further
subject to a right of first offer as set forth in Section 10.3(b) hereof fully
as though it were a Limited Partner.
SECTION 10.3. Transfer of Interests of Limited Partners.
(a) Restrictions on Transfers. Except as expressly permitted or required
by this Agreement or by the Limited Partner's Subscription Agreement, absent a
Change of Control, as defined below, no Limited Partner shall transfer all or
any portion of its Partnership Interests or any rights therein within the three
year period following March 23, 1994 without the consent of the General Partners
acting through the Committee (which consent shall not be unreasonably withheld
or delayed), and provided that if such consent is given, any such transfer shall
be subject to Section 10.3(b) and (c) hereof; provided, however, that a Limited
Partner may transfer any or all of its Partnership Interests to an Affiliate of
such Limited Partner without such approval. Any transfer or attempted transfer
by any Limited Partner in violation of the preceding sentence shall be null and
void and of no effect whatsoever. Each Limited Partner hereby acknowledges the
reasonableness of the restrictions on transfer imposed by this Agreement in view
of the Partnership purposes and the relationship of the Partners. Accordingly,
the restrictions on transfer contained herein shall be specifically enforceable.
Each Limited Partner hereby further agrees to hold the Partnership and each
Partner (and each Partner's successors and assigns) wholly and completely
harmless from any cost, liability, or damage (including, without limitation,
liabilities for income taxes and costs of enforcing this indemnity) incurred by
any of such indemnified Persons as a result of a transfer or an attempted
transfer in violation of this Agreement. As used in this Section 10.3, a "Change
of Control" shall be deemed to have occurred if (i) any person or group (as
defined in Section 13(d)(3) of the Exchange Act) shall have acquired ownership
of a majority of the voting stock of Loral SpaceCom, or (ii) Loral
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SpaceCom shall no longer be in control, directly or indirectly, of LQSS.
(b) Rights of First Offer. Except as expressly permitted or required by
this Agreement or by the Limited Partner's Subscription Agreement, absent a
Change of Control, no Limited Partner shall transfer any or all of its
Partnership Interests unless the Limited Partner desiring to make the transfer
(the "Transferor") shall have first made the offers to sell to the other
Partners and, as hereinafter provided, to the Partnership (the "Offerees") and
such offers shall not have been accepted.
(i) Copies of the Transferor's offer (the "Offer Notice") shall be
given to the Offerees and shall consist of an offer to sell to the
Offerees such number of Partnership Interests (the "Offered Interests")
then proposed to be transferred by the Transferor, at a cash price
designated by the Transferor ("Stated Price"), upon only customary terms
and conditions, representations, warranties, covenants and conditions.
(ii) Within 15 days after the receipt of the offer described in
Section 10.3(b)(i) above, each Partner Offeree may, at its option, by
written notice elect to purchase some or all the Offered Interests, as
specified in such notice, provided that in the event of an
oversubscription, purchases will be pro rated according to the relative
Percentage Interest of all Partners Offerees electing to exercise their
rights of first offer, subject to the 20% ownership limitation set forth
in Section 4.12 hereof. The Partner Offerees shall exercise such option by
giving notice thereof to the Transferor within such 15-day period. The
Partnership will promptly inform each Partner Offeree in the event that
fewer than all of the Offered Interests are subscribed for, and each
Partner Offeree may, within 48 hours thereafter, increase the amount of
its requested maximum subscription.
(iii) Within 10 days after the expiration of the Partners' exercise
period set forth in Section 10.3(b)(ii), if the Partners choose not to
exercise all their rights of first offer under Section 10.3(b)(ii), the
Partnership may, at its option, with the Consent of the Partners, elect to
purchase some or all of the remaining Offered Interests, unless it shall
have refused a request to waive the provisions of Section 4.12 with
respect to a proposed purchase by one or more Limited Partners pursuant to
Section 10.3(b)(ii) above. The Partnership shall exercise such option by
giving notice thereof to the Transferor within such 10-day period.
(iv) If the Transferor's offer shall not be fully subscribed by the
Partners and/or the Partnership at the end of the twenty-five day period
described above, the
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Transferor shall terminate its offer to the Offerees on the twenty-sixth
day after receipt by the Offerees of the Transferor's Offer Notice (the
"Termination Date") and the Transferor shall be free to solicit offers for
its Offered Interests from third parties for a period of three months
following the Termination Date; provided, however, that the Transferor
shall not offer the Offered Interests at a price that is less than 95% of
the Stated Price, and provided further that if the sale to the third party
is other than entirely for cash on terms described in clause (a) above,
the Transferor shall certify to each of the other Partners as to the cash
value of any noncash consideration. In the event that the Transferor shall
have offered the Offered Interests to third parties at a price that is
less than 95% of the Stated Price or the three month period shall have
lapsed and no bona fide sale of the Offered Interests shall have been made
by the Transferor to a third party, the restrictions provided for herein
shall again become effective, and no transfer of Offered Interests may be
made thereafter without again offering the same in accordance with this
Section 10.3.
(v) The above-described right of first offer will apply following
any public offering of Partnership Interests, provided that once the
Partners shall have declined to accept an offer at the then-prevailing
market price of the Partnership Interests, the Transferor shall have the
right to sell at any price equal to or in excess of 95% of the prevailing
market price at the time it is permitted to sell hereunder.
(c) Permitted Transfers of Limited Partner Interests. Sections 10.3(a) and
(b) hereof shall not apply to any transfer by a Limited Partner of all or any
portion of its Partnership Interests to any Affiliate of such Limited Partner
and will not apply to any of the transactions contemplated by such Memorandum of
Agreement, dated as of January 1, 1995, by and between AirTouch and Loral
Corporation, a New York corporation. Prior to such transfer, such Affiliate
shall affirm in writing that it shall be subject to the terms and conditions of
this Agreement and, if such Affiliate is not controlled by the Limited Partner
transferring its Partnership Interest, the Person who controls such Affiliate
shall agree in writing not to transfer control of such Affiliate for so long as
such Affiliate remains a Limited Partner. If the Limited Partner transferring
its interest controls such Affiliate, the Limited Partner hereby agrees that it
shall not transfer control of such Affiliate for so long as such Affiliate
remains a Limited Partner.
SECTION 10.4. Certain Transfers.
(a) Change of Control. A Partner, substantially all of whose assets shall
consist of Partnership Interests of the Partnership, shall not offer to sell its
securities, or permit
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its securities or the securities of any controlling Affiliate to be sold, to
another party if such sale would result in a "Change in Control" of that Partner
until and unless such Partner shall have first made a right of first offer with
respect to such securities to the other Partners and the Partnership in the same
manner as that set forth in Section 10.3(a)-(b) above. For purposes of this
paragraph, a "Change of Control" shall be defined as the acquisition of a
majority of the voting stock or analogous equity interest of a Partner by a
party other than an Affiliate of the Partner.
(b) Pre-Approved Transfers. The provisions of Section 10.3(a) and (b)
shall not apply to any transfer of Partnership Interests contemplated by
Schedule X to the Subscription Agreements.
(c) Prior to the third anniversary of the Global Service Date, LQSS (i)
will not withdraw, (ii) will not permit LQSS to be controlled by any Person
other than Loral SpaceCom and (iii) will not, and will not permit any of its
Affiliates to sell, assign or otherwise transfer securities or Partnership
Interests such that, immediately following such transfer, Loral SpaceCom's
direct and indirect interest in the Partnership is reduced to less than 23% of
the total number of Partnership Interests outstanding. Thereafter, unless it
shall have received the Consent of the Disinterested Partners, Loral SpaceCom's
interest in the Partnership held through a General Partner (including GTL for so
long as there has been no GTL Change of Control), whether direct or indirect,
shall not be reduced to less than 15% of the total number of Partnership
Interests outstanding.
ARTICLE XI.
ADMISSION OF SUBSTITUTE PARTNERS
SECTION 11.1. Admission of Successor Limited Partner. (a) A transferee of
a Limited Partner's Partnership Interest shall not be admitted to the
Partnership as a substituted Limited Partner, until the transferee shall have
furnished the Partnership with an agreement, in form reasonably satisfactory to
the Partnership, to be bound by all the terms and conditions of this Agreement
and such other documents or instruments as may be required by the Partnership in
order to effect such transferee's admission as a Limited Partner. Prior to the
time that any transferee of Partnership Interests is admitted to the Partnership
as a Partner, it will have only the rights of a transferee under Delaware law,
shall have no right to require any information or account of the Partnership
transactions constituting Confidential Information or to inspect the
Partnership's books.
(b) Any transferee of a Limited Partner's Partnership Interest who meets
the requirements of subsection (a) may be
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admitted as a substituted Limited Partner in the Committee's sole discretion.
(c) For a transferee of a Limited Partner's Partnership Interest to be
admitted as a substituted Limited Partner under subsection (d) or (e) below, the
transferee must deliver to the Partnership an opinion of counsel, addressed to
the Partnership and in form and substance satisfactory to the Partnership, to
the effect that, assuming the Partnership has the corporate characteristic of
free transferability of interests and that the transferee is admitted as a
substituted Limited Partner, the Partnership would be classified as a
partnership for federal income tax purposes and would not be classified as an
association taxable as a corporation.
(d) Any transferee of a Limited Partner's Partnership Interest who meets
the requirements of subsections (a) and (c) and who is an Affiliate of the
transferor will be admitted as a substituted Limited Partner.
(e) Any transferee of a Limited Partner's Partnership Interest who meets
the requirements of subsections (a) and (c) will be admitted as a substituted
Limited Partner with the consent of the Committee, which consent will not be
unreasonably withheld.
SECTION 11.2. Admission of Successor General Partner. A successor General
Partner selected pursuant to Section 12.1 or the transferee of or successor to
the entire Partnership Interest of a General Partner pursuant to Section 10.2
shall be admitted to the Partnership as a General Partner, effective immediately
prior to the withdrawal of the withdrawing General Partner and upon the receipt
of proper FCC approval pursuant to Section 10.2(b), and shall continue the
business of the Partnership without dissolution. Notwithstanding the foregoing,
the provisions of Section 11.1 shall govern the admission of a transferee in a
transfer resulting in a GTL Change of Control or a Reduction in Interest as
though GTL were a Limited Partner. The successor General Partner shall furnish
to the Partnership (a) acceptance in form satisfactory to counsel to the
Partnership of all the terms and conditions of this Agreement and (b) such other
documents or instruments as may be required by such counsel in order to effect
its admission as a General Partner. No such admission shall be effected until
the General Partner delivers to the Partnership an opinion of counsel, addressed
to the Partnership and its Partners to the effect that such admission will not
adversely affect the tax status of the Partnership. Such opinion will not be
deemed delivered until approved by the Consent of the Disinterested Partners,
which consent will not be unreasonably withheld. Any transferee of less than all
of the Partnership Interests of a General Partner pursuant to Section 10.2 shall
have only the rights of an assignee under Delaware law, shall have no right to
require any information or account of the Partnership transactions constituting
Confidential Informa-
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tion or to inspect the Partnership's books and shall not be admitted to the
Partnership as a successor General Partner.
SECTION 11.3. Amendment of Agreement and of Certificate of Limited
Partnership. For the admission to the Partnership of any successor Partner, the
Partnership shall take all steps necessary and appropriate to prepare and record
or file as soon as practicable an amendment of this Agreement and the
Certificate of Limited Partnership and may for this purpose exercise the power
of attorney granted pursuant to Section 1.4.
ARTICLE XII.
WITHDRAWAL OR REMOVAL
SECTION 12.1. Withdrawal or Removal of the General Partners. (a) Any
transfer by a General Partner of all of its Partnership Interests as a General
Partner pursuant to Section 10.2 or the conversion of all of its Partnership
Interests pursuant to the Exchange and Registration Rights Agreement shall
constitute the withdrawal of the General Partner for purposes of, and may be
effected only in accordance with, this Section 12.1 and in the case of GTL,
shall be further subject to the provisions of Section 6.3 and in the case of
LQSS, 10.4(c) hereof. A General Partner may not withdraw from the Partnership as
General Partner unless it gives at least 90 days prior written notice of such
withdrawal to the other Partners, such withdrawal shall have been approved by
Consent of the Disinterested Partners and a successor General Partner shall have
been elected by Consent of the Disinterested Partners; provided, however, that
such transfer shall not relieve the General Partner of any of its obligations
hereunder unless the transferee has been adjudged by the Consent of the
Disinterested Partners (which consent shall not be unreasonably withheld) to be
a Person that has at least such comparable financial strength and technical and
managerial capabilities and know-how sufficient for it to perform its duties and
obligations hereunder and it has assumed all preexisting liabilities and
obligations of the General Partner. The notice and election described above
shall not be required in connection with a withdrawal resulting from a transfer
of all of the General Partner's Partnership Interest to an Affiliate Successor,
but the General Partner shall not be relieved of any of its obligations
hereunder without the Consent of the Disinterested Partners required under the
third sentence of Section 10.2(a).
(b) A General Partner may be removed if such removal is for Nonperformance
and if such removal is approved with the Consent of the Disinterested Partners.
Such removal shall be effective immediately subsequent to the admission of the
successor general partner who shall be subject to the qualifications of Section
12.1(a) hereto. The right to remove a General Partner shall not exist or be
exercised unless the Partnership has received an opinion of counsel (which may
be counsel selected by Consent of the
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Disinterested Partners) that the removal of the General Partner and the
selection of a successor general partner (a) would not cause the loss of limited
liability pursuant to Delaware law of the Limited Partners under this Agreement,
and (b) would not cause the Partnership to be treated as an association taxable
as a corporation for federal income tax purposes.
(c) A General Partner will be discharged from, and the Partnership or any
Person or Persons continuing the business of the Partnership in the event it has
dissolved, shall assume and pay, as they mature, all Partnership obligations and
liabilities that exist on the date of a General Partner's removal or Approved
Withdrawal from the Partnership and, except as otherwise expressly provided
herein, will hold the General Partner harmless from any action or claim arising
or alleged to arise from such assumed obligations and liabilities accruing after
such date. The Partnership or any such Person or Persons continuing the business
of the Partnership will promptly pay all creditors as of such date or notify
such creditors (i) of the withdrawal or removal of such General Partner, as the
case may be, (ii) of the discharge of such General Partner from all of the
Partnership's obligations and liabilities, and (iii) of the assumption thereof
by the Partnership or such Person or Persons continuing the business of the
Partnership. The Partnership or such Person or Persons continuing the business
of the Partnership if the Partnership has dissolved will use reasonable efforts
to procure and execute an agreement from creditors of the Partnership
discharging such General Partner from liability to such creditors as of the date
of such removal or Approved Withdrawal of such General Partner. Nothing
contained in this Section 12.1 shall relieve a General Partner of any liability
it may have as of the date of its withdrawal under Section 6.11(b). As used in
this Section 12.1(c), the term "Approved Withdrawal" shall mean a withdrawal of
a General Partner following the election of a successor General Partner by
Consent of the Disinterested Partners pursuant to the second sentence of Section
12.1(a) and approval by Consent of the Disinterested Partners of such successor
General Partner's financial strength and technical and managerial capabilities
and know-how pursuant to the proviso to the second sentence of Section 12.1(a)
or, in the case of an Affiliate Successor, approval by Consent of the
Disinterested Partners of such Affiliate Successor's financial strength and
technical and managerial capabilities and know-how pursuant to the third
sentence of Section 10.2(a).
(d) Upon such removal, and the election of a successor General Partner,
the interest of a General Partner in the Partnership shall be converted into
limited Partnership Interests, provided that, no representative of such Limited
Partner will be entitled to a vote with respect to such Partnership Interests to
the extent the voting thereof is controlled by Loral SpaceCom pursuant to
Section 6.4 of the LQSS Partnership Agreement.
SECTION 12.2. Right of the Managing General Partner to Become a Limited
Partner. The Managing General Partner may
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become a Limited Partner by either (i) converting some but not all of its
Partnership Interests to limited Partnership Interests or (ii) acquiring limited
Partnership Interests and thereby become entitled to all of the rights of a
Limited Partner to the extent of the limited Partnership Interest so converted
or acquired, and the Consent of the Partners need not be obtained. Such event
shall not be deemed to reduce any of the Managing General Partner's liability
hereunder and will not prevent the Managing General Partner from continuing to
act as a General Partner. Any transfer by the Managing General Partner of such
limited Partnership Interests shall be subject to the provisions of Section
10.2(b)-(d). The Managing General Partner's Capital Contribution referred to in
Section 4.1 hereof will be made in its capacity as General Partner and such
Capital Contribution will not entitle the Managing General Partner to any rights
of a Limited Partner, including those set forth in Article VII hereof.
SECTION 12.3. Withdrawal of Limited Partner. A Limited Partner who shall
have withdrawn from the Partnership shall have no further rights hereunder.
ARTICLE XIII.
DISSOLUTION AND LIQUIDATION
SECTION 13.1. Dissolution. The Partnership shall dissolve upon:
(a) December 31, 2044;
(b) the withdrawal of a General Partner, or any other event that results
in its ceasing to be a General Partner such as the removal, bankruptcy or
dissolution of the General Partner (other than by reason of a transfer pursuant
to Section 10.2 or withdrawal effective following selection of a successor
pursuant to Section 12.1) unless at the time LQSS or a successor to LQSS remains
a general partner of the Partnership;
(c) a sale of all or substantially all of the assets of the Partnership;
(d) the bankruptcy or the dissolution (and commencement of winding up) of
the Managing General Partner;
(e) any other event that under the Delaware Act would cause its
dissolution, except as otherwise provided herein; or
(f) with the Consent of the Partners, as set forth in Section 6.2(b)(v).
For purposes of this Section 13.1, bankruptcy of the Managing General
Partner shall be deemed to have occurred when (i) it commences in good faith and
under appropriate circumstances a
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voluntary proceeding or files in good faith and under appropriate circumstances
an answer or other pleading admitting or failing to contest the material
allegations of a petition filed against it in any involuntary proceeding, which
voluntary or involuntary proceeding seeks a liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect, (ii) it is adjudged bankrupt or insolvent, or has entered against it a
final and non-appealable order for relief under any bankruptcy, insolvency or
similar law now or hereafter in effect, (iii) it executes and delivers a general
assignment for the benefit of its creditors, (iv) it seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for it or for
all or any substantial part of its properties, or (v) (1) any proceeding of the
nature described in clause (i) above has not been dismissed 120 days after the
commencement thereof or (2) the appointment without its consent or acquiescence
of a trustee, receiver or liquidator appointed pursuant to clause (ii) above has
not been vacated or stayed within 90 days of such appointment, or (3) such
appointment is not vacated within 90 days after the expiration of any such stay.
SECTION 13.2. Continuation of the Business of the Partnership after
Dissolution. To the extent permitted by the Delaware Act, upon dissolution of
the Partnership in accordance with Section 13.1(b), (d) or (e), the remaining
Partners may elect to reconstitute the Partnership and continue its business on
the same terms and conditions set forth in this Agreement if holders of a
majority of the outstanding PPIs and a Majority in Interest of the Partners
agree in writing (1) to continue the business of the Partnership and (2) to the
appointment, if necessary, effective as of the date of withdrawal, of a
successor Managing General Partner. Unless such an election is made within 90
days after dissolution, the Partnership shall conduct only activities necessary
to wind up its affairs. If such an election is made within 90 days after
dissolution, then:
(a) the reconstituted Partnership shall continue unless earlier dissolved
in accordance with this Article XIII; and
(b) all necessary steps shall be taken to cancel this Agreement and the
Certificate of Limited Partnership and to enter into a new partnership agreement
and certificate of limited partnership, and the successor Managing General
Partner or GTL, as the case may be, may for this purpose exercise the powers of
attorney granted pursuant to Section 1.4 or such similar provision in the new
partnership agreement.
SECTION 13.3. Winding Up and Liquidation. (a) Upon dissolution of the
Partnership other than pursuant to Section 6.13, unless the Partnership is
continued under an election to reconstitute and continue the Partnership
pursuant to Section 13.2, the Managing General Partner or, in the event the
Managing General Partner has been dissolved or removed, has become bankrupt as
defined in Section 13.1 or has withdrawn from the
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Partnership, a liquidator or liquidating committee selected by Consent of the
Partners, shall be responsible for the winding up of the affairs of the
Partnership and the distribution of its assets. The Person or Persons who assume
such responsibility (whether they be the Managing General Partner or not) are
referred to herein as the "Liquidator." In connection with a winding up of the
affairs of the Partnership, the Liquidator shall cause an accounting to be made
of the assets and liabilities of the Partnership. If any liability is contingent
or uncertain in amount, a reserve will be established in such amount as the
Liquidator deems reasonably necessary. Upon satisfaction or other discharge of
such contingency, the amount of the reserve not required, if any, will be
distributed as provided in this Section 13.3.
(b) The Liquidator (if other than the Managing General Partner) shall be
entitled to receive such compensation for its services as may be approved by
Consent of the Partners. The Liquidator shall agree not to resign at any time
without fifteen (15) days' prior written notice and (if other than the Managing
General Partner) may be removed at any time, with or without cause, by notice of
removal signed by Consent of the Partners. Upon dissolution, removal or
resignation of the Liquidator, a successor and substitute Liquidator (who shall
have and succeed to all rights, powers and duties of the original Liquidator)
shall within thirty (30) days thereafter be selected by Consent of the Partners.
The right to appoint a successor or substitute Liquidator in the manner provided
herein shall be recurring and continuing for so long as the functions and
services of the Liquidator are authorized to continue under the provisions
hereof, and every reference herein to the Liquidator will be deemed to refer
also to any such successor or substitute Liquidator appointed in the manner
herein provided. Except as expressly provided in this Article XIII, the
Liquidator appointed in the manner provided herein shall have and may exercise,
without further authorization or consent of any of the parties hereto, all of
the powers conferred upon the Committee under the terms of this Agreement (but
subject to all of the applicable limitations, contractual and otherwise, upon
the exercise of such powers) to the extent necessary or desirable in the good
faith judgment of the Liquidator to carry out the duties and functions of the
Liquidator hereunder for and during such period of time as shall be reasonably
required in the good faith judgment of the Liquidator to complete the winding up
and liquidation of the Partnership as provided for herein.
(c) The Liquidator shall liquidate the assets of the Partnership, and
apply and distribute the proceeds of such liquidation in the following order of
priority, unless otherwise required by mandatory provisions of applicable law:
(i) to the payment of Partnership creditors, including Partners in
respect of loans or guaranteed payments, in order of priority provided by
law;
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(ii) to the establishment of reasonable reserves for contingencies;
and
(iii) to the Partners in proportion and to the extent of the
positive balances in their respective Capital Accounts (determined after
applying the provisions of Article V).
(d) The Liquidator shall be authorized to sell any, all or substantially
all of the assets of the Partnership for deferred payment obligations, and to
hold, collect and otherwise administer any such obligations or any other
deferred payment obligations held or acquired as assets of the Partnership,
regardless of the terms of such obligations.
(e) A reasonable time, including, without limitation, any time required to
collect deferred payment obligations, shall be allowed for the orderly
liquidation of the assets of the Partnership and the discharge of liabilities to
creditors so as to enable the Liquidator to minimize the normal losses attendant
upon the liquidation. Upon the Liquidator's compliance with the foregoing
distribution plan, the Partners shall execute, acknowledge, swear to and cause
to be filed a Certificate of Cancellation of the Partnership. Except as
otherwise expressly provided herein, the General Partners shall not be
personally liable for the return of the original investment or contributions of
the Limited Partners, or any portion thereof. Any such return shall be made
solely from Partnership assets and in accordance with the express provisions
hereof.
(f) If, in the process of collecting any deferred payment obligation
generated by a sale of assets of the Partnership, the Partnership reacquires any
such assets, and if, at such time, there is a Managing General Partner and the
same so determines, the Partnership shall be reconstituted with the Consent of
the Partners upon the terms and conditions hereof.
SECTION 13.4. Cancellation of Certificate of Limited Partnership. Upon the
completion of the distribution provided for in Section 13.3, the Partnership
shall be terminated, and the Liquidator (or the General Partners and the Limited
Partners if necessary) shall cause the cancellation of the Certificate of
Limited Partnership and all qualifications of the Partnership as a foreign
limited partnership in jurisdictions other than the State of Delaware and shall
take such other actions as may be necessary to terminate the Partnership.
SECTION 13.5. Return of Capital. Except as otherwise expressly provided
herein, the General Partners shall not be personally liable for the return of
the Capital Contribution of the Limited Partners, or any portion thereof, it
being expressly understood that any such return shall be made solely from
Partnership assets.
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SECTION 13.6. Waiver of Partition. Each Partner hereby waives any rights
to partition of Partnership property.
SECTION 13.7. Deficit Upon Liquidation. Upon liquidation, the Partners
shall not be obligated to the Partnership for any deficit in their Capital
Accounts.
ARTICLE XIV.
AMENDMENT OF PARTNERSHIP AGREEMENT;
MEETINGS; RECORD DATE
SECTION 14.1. Amendments to be Adopted Without Consent of the Partners.
The Partnership (pursuant to powers of attorney granted under Section 1.4
hereof), without the Consent of the Partners, may amend any provision of this
Agreement, and execute, swear to, acknowledge, deliver, file and record whatever
documents may be required in connection therewith, to reflect:
(a) a change in the name of the Partnership approved with the Consent of
the Partners or a change in the location of the principal place of business of
the Partnership;
(b) a change that the Partnership, based upon the opinion of outside
counsel, furnished to all the Partners, has determined to be reasonable and
necessary or advisable (i) to qualify or continue the qualification of the
Partnership as a limited partnership or a partnership in which the limited
partners have limited liability under the laws of any state or (ii) to ensure
that the Partnership will not be treated other than as a partnership for federal
income tax purposes;
(c) a change (i) that the Partnership, based upon the opinion of outside
counsel, furnished to all the Partners, has determined is necessary or desirable
to satisfy any requirements, conditions or guidelines contained in any opinion,
directive, order, ruling or regulation of any federal or state agency or
judicial authority or contained in any federal or state statute, compliance with
any of which the Partnership deems to be in the best interests of the Partners,
or (ii) that is expressly required or expressly contemplated by this Agreement
or is otherwise herein expressly permitted to be made by the Partnership;
(d) immaterial amendments to correct any mistake or clear omission or to
reflect the surrender of any rights or the assumption of any additional
responsibilities by the General Partners; or
(e) any amendment necessary to give effect to the issuance and sale of
Additional Partnership Interests permitted by Sections 4.4 and 4.10 hereof or to
give effect to the admission of any Additional Limited Partners pursuant
thereto, including
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such amendments to Article V hereof as are necessary to give effect to any
allocations of Income or Loss to the holder of such Additional Partnership
Interests and any distributions to be made to such holders and do not adversely
affect the other Partners.
SECTION 14.2. Amendment Procedures. Except as provided in Section 14.1,
all amendments to this Agreement shall be made in accordance with the following
requirements. Subject to Sections 6.2(b)(i) and 14.1, any proposed amendment
shall be effective only upon the consent of the Committee and the Consent of the
Partners, provided, that no amendment adversely affecting the capital account or
other economic rights of any Partner shall be made without such Partner's
consent. Promptly after the adoption of an amendment to this Agreement as
provided hereunder, the Partnership shall forward a copy of such amendment to
each Partner.
ARTICLE XV.
GENERAL PROVISIONS
SECTION 15.1. Addresses and Notices. The address of each Partner for all
purposes shall be the address as set forth on the signature page of this
Agreement or such other address of which each other Partner has received written
notice. All notices, requests, demands and other communications required or
permitted to be given under this Agreement shall be sent to the party to whom
the notice is to be given, by telex, fax (confirmed by first class mail, postage
prepaid), telegram or first class mail, postage prepaid and properly addressed
as provided in this Agreement (in each case such notice shall be deemed to have
been duly given on the day the notice is first received by that party) or to
such other address or Person as may be designated by a party, by notice given in
accordance with this Section.
SECTION 15.2. Titles and Captions. All article or section titles or
captions in this Agreement are for convenience only. They shall not be deemed
part of this Agreement and in no way define, limit, extend or describe the scope
or intent of any provisions hereof. Except as specifically provided otherwise,
references to "Articles" and "Sections" are to Articles and Sections of this
Agreement.
SECTION 15.3. Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
SECTION 15.4. Further Action. (a) The parties shall execute and deliver
all documents, provide all information and take or refrain from taking action as
may be necessary or appropriate to achieve the purposes of this Agreement.
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(b) At any time or times, upon the request of the Partnership, the
Partners hereby agree to sign and swear to any certificate required by Delaware
or other applicable law, to sign and swear to any amendment to or cancellation
of any such certificate whenever such amendment or cancellation is required by
or appropriate under law, to sign and swear to or acknowledge similar
certificates or affidavits or certificates of fictitious firm name, trade name
or the like (and any amendments or cancellations thereof) required by or
appropriate under the laws of Delaware or any other jurisdiction in which the
Partnership does or proposes to do business, and cause the filing of any of the
same for record wherever such filing shall be required by law.
SECTION 15.5. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.
SECTION 15.6. Integration. This Agreement together with the Subscription
Agreement entered into by each Partner or the assignor of its Partnership
Interests and the Mutual Non-Disclosure Agreement dated January 11, 1994,
entered into by and among the Partnership and certain of its Partners (the
"Mutual Non-Disclosure Agreement"), constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
SECTION 15.7. Creditors. None of the provisions of this Agreement shall be
for the benefit of or enforceable by any creditors of the Partnership.
SECTION 15.8. Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
SECTION 15.9. Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute one agreement binding on
all the parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart. Each party shall become
bound by this Agreement immediately upon affixing its signature hereto
independently of the signature of any other party.
SECTION 15.10. Dispute Resolution. (a) The Parties shall attempt to
resolve by good faith and diligent negotiation any dispute, controversy or claim
between them arising out of or relating to this Agreement, or the breach,
termination or invalidity thereof. If such negotiations are not concluded within
30 days of a Party's request for negotiations, a Party may (other than with
respect to a controversy arising pursuant to Section 12.1 hereof) initiate
arbitration as provided for below.
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(b) International Arbitration. Any dispute, controversy or claim arising
out of or relating to this Agreement, or the breach, termination or invalidity
thereof, that involves a non-U.S. Party and that has not been amicably resolved
pursuant to the procedures of Section 15.10(a), shall be settled by arbitration
in accordance with the UNCITRAL Arbitration Rules as at present in force. The
language of the arbitration proceedings shall be English. The number of
arbitrators shall be one. If such an international arbitration is initiated by
the Partnership, the place of arbitration shall be Geneva, Switzerland, the
appointing authority shall be the Chamber of Commerce and Industry of Geneva;
and any arbitrator appointed by the appointing authority shall be a retired
Swiss federal or cantonal judge of a federal or cantonal court of general
jurisdiction or any court having appellate jurisdiction over such a court. If
the arbitration is initiated by GTL or the Limited Partners, the place of
arbitration shall be New York, New York; the appointing authority shall be the
American Arbitration Association; and any arbitrator appointed by the appointing
authority shall be a retired United States federal judge or a retired state
court judge of a federal or state court of general jurisdiction or any court
having appellate jurisdiction over such a court.
(c) U.S. Arbitration. Any dispute, controversy or claim arising out of or
related to this Agreement, or the breach, termination or invalidity thereof,
that involves only U.S. Parties and that has not been amicably resolved pursuant
to the procedures of Section 15.10(a), shall be settled by arbitration in
accordance with the UNCITRAL Arbitration Rules as at present in force. The
language of the arbitration proceedings shall be English. The number of
arbitrators shall be one. If the arbitration is initiated by the Partnership,
the place of arbitration shall be San Francisco, California. If the arbitration
is initiated by the Limited Partners, the place of arbitration shall be New
York, New York. The appointing authority shall be the American Arbitration
Association. Any arbitrator appointed by the appointing authority shall be a
retired United States federal judge or a retired state court judge of a federal
or state court of general jurisdiction or any court having appellate
jurisdiction over such a court.
(d) Resolution of Common Issues. If at any time there is pending an
arbitration under this Section 15.10 and such arbitration involves one or more
significant issues of law or fact the resolution of which a Partner desires
binding on some or all its Partners, the Partnership may give written notice to
such Partners identifying the issue of law or fact the resolution of which the
Partnership desires to be so binding and inviting each Partner to join in such
arbitration as provided in this Section 15.10(d). Each Partner which shall have
received such a notice shall have the right (but shall not be obligated) to
become a party to such arbitration for the limited purpose of the resolution of
such issue of law or fact. The arbitrator in such arbitration may supplement and
alter the UNCITRAL Rules in their application to such arbitration as may be
necessary or appropriate to accommodate
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the multi-party nature of the arbitration and to ensure the just, expeditious,
economical and final determination of the dispute. The award in any such
arbitration shall be final and binding, as to resolution of the issues of fact
and law decided therein and identified in the notice from the Partnership given
pursuant to this Section 15.10(d), on all of the Partners who were given notice
of such arbitration and an opportunity to participate as parties therein,
whether or not they participated in such arbitration.
(e) Enforcement. Arbitral awards under this Section 15.10 shall be final
and binding, and shall be enforceable in any court having jurisdiction.
SECTION 15.11. Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW. REFERENCES HEREIN TO TEMPORARY OR
FINAL TREASURY REGULATIONS ALSO REFER TO CORRESPONDING PROVISIONS OF SUCCESSOR
AND SUPERSEDING REGULATIONS.
SECTION 15.12. Confidentiality. (a) For purposes of this Agreement,
"Confidential Information" shall mean all oral, written and/or tangible
technical, financial, business and/or any other information of whatever kind
created by the Partnership or disclosed by a Partner or its Affiliate or the
Partnership (in any case "Owner") to a receiving party ("Recipient") which is
confidential, proprietary and/or not generally available to the public,
including, but not limited to, information relating, in whole or in part, to
present and future services related to the Partnership's business, business
plans and strategies, marketing ideas and concepts, pricing, volume estimates,
financial data, market testing information, development plans, specifications,
configurations, designs, plans, drawings, apparatus, sketches, software,
hardware, data, connecting requirements or other technical and business
information. Confidential Information provided by Owner shall remain the sole
and exclusive property of Owner.
(b) During the term of this Agreement, and until the fifth anniversary of
the termination thereof, or in the event of the transfer by a Partner of all of
its Partnership Interests prior to the termination of this Agreement, until the
fifth anniversary of such transfer, Confidential Information:
(i) shall be treated in confidence by Recipient and shall be used
only for purposes of Recipient's performance of its obligations under this
Agreement, or any other written agreement between Owner and Recipient
entered into subsequent to the Effective Date or the GTL Effective Date,
as the case may be, in connection with the Partnership's business;
(ii) shall not be reproduced or copied in whole or in part, except
as necessary for use as authorized herein; and
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(iii) shall be disseminated only to those of its and its Affiliates'
employees, agents and subcontractors who have a need to know it (and such
employees, agents and subcontractors shall be advised of the obligations
assumed herein). Recipient shall ensure by appropriate procedures that
those employees, agents and subcontractors to whom Confidential
Information is disseminated or disclosed treat such Confidential
Information in confidence pursuant to this paragraph.
(c) Notwithstanding the foregoing, information shall not be deemed
Confidential Information and Recipient shall have no obligation with respect to
any such information which:
(i) is or was in the possession of the Recipient at the time
of disclosure by Owner, and was not previously acquired by the Recipient
directly or indirectly from Owner under an obligation to keep such
information confidential; or
(ii) is or becomes publicly known, through no negligence or
other wrongful act of Recipient; or
(iii) is received by Recipient from a third party having, to
the best knowledge of the Recipient, a lawful right to disclose, subject
to, as to disclosed information, any restriction as to use, imposed by
such third party; or
(iv) is independently developed by Recipient, as evidenced by
its records.
(d) Upon the termination of this Agreement, or upon a transfer by a
Partner of its Partnership Interest, written Confidential Information will be
returned to Owner or destroyed immediately upon the request of Owner, and no
copies, extracts or other reproductions shall be retained by Recipient. All
documents, memoranda, notes and other writings whatsoever prepared by Recipient
which contain the Confidential Information shall be returned to Owner or
destroyed at Owner's request. The redelivery or destruction of such materials
shall not relieve Recipient of its obligation of confidentiality or other
obligations hereunder.
(e) If Recipient (or its Affiliate) is required by order of any competent
authority (by oral questions, interrogatories, directions, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any Confidential Information, Recipient will promptly
notify Owner of such order or requirement and shall cooperate with Owner in
seeking appropriate protective arrangements requested by Owner. If, in the
absence of a protective order or the receipt of a waiver hereunder, Recipient
(or any of its Affiliates) is in the written opinion of Recipient's counsel
compelled to disclose the Confidential Information or else stand liable for
contempt or suffer other censure or significant penalty, Recipient (or its
Affiliate) may disclose only so much of the Confidential Information to the
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<PAGE> 79
authority compelling disclosure as is required by law. Recipient will exercise
(and will cause its Affiliate to exercise) reasonable efforts to obtain
appropriate protective arrangements or other reliable assurance that
confidential treatment will be accorded to Confidential Information.
(f) The terms and conditions of this Agreement and all exhibits,
attachments and amendments hereto and thereto shall be considered Confidential
Information protected under this Section 15.12.
(g) Notwithstanding anything in this Section 15.12 to the contrary, in the
event that any Confidential Information is also subject to a limitation on
disclosure or use contained in another written agreement between Owner and
Recipient which is more restrictive than the limitations contained in this
Section 15.12, then the limitation in such agreement shall supersede this
Section 15.12.
(h) The Partners hereby agree that within six months of the date of this
Agreement, they shall conform the provisions set forth in this Section 15.12
with those contained in the Mutual Non-Disclosure Agreement and any other
agreement relating to confidentiality that may be in effect among the parties
hereto.
SECTION 15.13. Invalidity of Provisions. If any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby, unless the effect would be to materially
and adversely affect the economic rights of any Partner.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
LORAL/QUALCOMM SATELLITE SERVICES, L.P.
Managing General Partner
By: /s/ Michael B. Targoff
---------------------------------
Name: Michael B. Targoff
Title: Senior Vice President
GLOBALSTAR TELECOMMUNICATIONS LIMITED
General Partner
By: /s/ Michael B. Targoff
---------------------------------
Name: Michael B. Targoff
Title: Senior Vice President
AIRTOUCH SATELLITE SERVICES
Limited Partner
By: /s/ Eric J. Zahler
---------------------------------
Eric J. Zahler as
Attorney-In Fact
Address for Notices:
One California Street
San Francisco, CA 94105
SAN GIORGIO S.p.A.
Limited Partner
By: /s/ Eric J. Zahler
---------------------------------
Eric J. Zahler as
Attorney-In Fact
Address for Notices:
Viale Maresciallo Pilsudski 92
00197 Roma, Italy
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<PAGE> 81
HYUNDAI/DACOM
Limited Partner
By: /s/ Eric J. Zahler
---------------------------------
Eric J. Zahler as
Attorney-In Fact
Address for Notices:
c/o Hyundai Electronics Industries Co., Ltd.
San 136-1, Ami-ri, Bubal-eub
Ichon-Kun, Kyungki-do 467-860 Korea
LORAL/DASA GLOBALSTAR, L.P.
by LORAL GLOBALSTAR, L.P., its
general partner
by LORAL GENERAL PARTNER, INC.,
its general partner
Limited Partner
By: /s/ Michael B. Targoff
---------------------------------
Name: Michael B. Targoff
Title: Vice President
Address for Notices:
3825 Fabian Way
Palo Alto, CA 94303
LORAL GLOBALSTAR, L.P.
by LORAL GENERAL PARTNER, INC.,
its general partner
Limited Partner
By: /s/ Michael B. Targoff
---------------------------------
Name: Michael B. Targoff
Title: Vice President
Address for Notices:
3200 Zanker Road
San Jose, CA 95164
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<PAGE> 82
TE.SA.M.
Limited Partner
By: /s/ Eric J. Zahler
---------------------------------
Eric J. Zahler as
Attorney-In Fact
Address for Notices:
66, avenue du Maine
75014 Paris
France
VODASTAR LIMITED
Limited Partner
By: /s/ Eric J. Zahler
---------------------------------
Eric J. Zahler as
Attorney-In Fact
Address for Notices:
c/o Vodafone Group PLC
The Courtyard
2-4 London Road
Newbury, Berkshire RG13 1JL
United Kingdom
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<PAGE> 83
SCHEDULE A
SCHEDULE OF PARTNERS
<TABLE>
<CAPTION>
Partner Capital Contribution Interests
------- -------------------- ---------
<S> <C> <C>
AirTouch Satellite $ 37,500,000 3,000,000 OPIs
Services
San Giorgio S.A. $ 18,750,000 1,000,000 OPIs
GTL $186,000,000* 10,000,000 OPIs
4,769,231 PPIs
HyunCorp see Footnote No. 1 300,000 OPIs
HyunElect see Footnote No. 1 2,100,000 OPIs
DACOM see Footnote No. 1 450,000 OPIs
DACOM International see Footnote No. 1 150,000 OPIs
Loral/DASA $ 37,500,000 3,000,000 OPIs
GlobalStar, L.P.
Loral Space & $ 37,500,000 3,000,000 OPIs
Communications
Ltd.
LQSS $ 50,000,000 18,000,000 OPIs
TESAM $ 37,500,000 3,000,000 OPIs
Vodastar Limited $ 37,500,000 3,000,000 OPIs
</TABLE>
- --------------------
* Plus the net proceeds from the CPEO Offering as described in the
Offering Memorandum.
1. The initial contribution of $ 37,500,000 was made by Hyundai/DACOM.
<PAGE> 84
SCHEDULE B
RELATED PARTY TRANSACTIONS
1. Contract for the Development of Certain Portions of the Ground Operations
Control Center between Globalstar and Loral Western Development
Laboratories, a division of Loral Aerospace Corp. as outlined in the
request for Consent of Disinterested Partners, dated May 2, 1994.
2. Contract for the Development of Satellite Orbital Operations Centers
between Globalstar and Loral Aerosys, a division of Loral Aerospace Corp.
3. Office Lease between Globalstar and Loral Western Development
Laboratories.
4. Subcontract Providing Work for Hyundai, dated April 29, 1994, between
Globalstar, SS/L and Hyundai.
5. Support Agreement (completed), dated August 26, 1994, between Globalstar
and AirTouch.
<PAGE> 85
SCHEDULE C
ARTICLE I
Covenants
SECTION 1.1. Distributions on PPIs. Cumulative accrued distributions shall
be payable on the PPIs as set forth in Section 5.5(a)(ii) of this Agreement on
each Scheduled Distribution Payment Date commencing on June 1, 1996 (or, if such
date is not a Business Day, on the next succeeding Business Day). Subject to
Section 5.5 of this Agreement, distributions on the PPIs shall occur, as and if
designated by the Committee in its sole discretion. Distributions on the PPIs
will accrue on a daily basis (360 day year and twelve 30-day months) (without
interest or compounding) whether or not there are unrestricted funds legally
available for the payment of such distributions and whether or not such
distributions are declared. Distribution Arrearages shall also not accrue
interest.
SECTION 1.2. Payment of Redemption Price and Distributions. (a) The
Partnership will duly and punctually pay or cause to be paid by no later than
one Business Day prior to the date such payment is due the Redemption Price of,
and Scheduled Distributions, including any Distribution Make-Whole Payment, on
the PPIs, in accordance with the terms of this Agreement; provided, however,
that the Partnership may defer paying Scheduled Distributions on any Scheduled
Distribution Payment Date if the Committee so determines in its sole discretion,
but so long as any Distribution Arrearage remains outstanding, except as set
forth in Section 5.5(a)(iv) of this Agreement and Section 4.1 of this Schedule
C, the Partnership will be prohibited from paying distributions on (i) its OPIs
or (ii) preferred partnership interests that may be issued in the future other
than pro rata based on the redemption amount of such preferred partnership
interests.
(b) The Partnership may elect, at its option, to pay the Redemption Price
of, and Scheduled Distributions, including any Distribution Make-Whole Payment,
on the PPIs, (i) in cash, (ii) by delivery of OPIs (in the manner described in
paragraph (c) of this Section 1.2) or (iii) through any combination of the
foregoing forms of consideration elected by the Committee in its sole
discretion.
(c) If the Partnership elects to deliver any OPIs in lieu of a cash
payment on the applicable date of payment, the Partnership shall deliver, in the
aggregate, the number of OPIs equal to (i) the amount of payment that is not
being paid in cash, (ii) divided by: (A) in the case of Scheduled Distributions
and any Distribution Make-Whole Payment, 90% of the Average Market Value of the
GTL Common Stock; (B) in the case of all other payments, 100% of the Average
Market Value of the GTL Common Stock; provided, however, if the Partnership
shall have
<PAGE> 86
received a GTL Interest Payment Notice or a GTL Response Redemption Notice which
indicates that GTL shall have elected to make its corresponding payment from the
proceeds from the sale of any issuance of GTL Common Stock, then the valuation
of the OPIs to be issued by the Partnership pursuant to Section 1.2(b)(ii) shall
be based upon the actual price at which such GTL Common Stock is sold.
(d) The Partnership shall deliver a Globalstar Interest Notice to GTL 20
Business Days prior to the applicable Scheduled Distribution Payment Date.
SECTION 1.3. Certain Accompanying Payments. PPIs surrendered for
conversion during the period from the close of business on any Regular Record
Date next preceding any Distribution Payment Date to the opening of business on
such Distribution Payment Date (except PPIs called for redemption on a
Redemption Date within such period) must be accompanied by payment in cash of an
amount equal to the distribution thereon which GTL is entitled to receive;
provided, that no payment shall be owed or payable to GTL if the Committee shall
have elected to defer the distribution to be made on such Distribution Payment
Date. No other adjustment for distributions, including any Distribution
Arrearages, is to be made upon conversion.
ARTICLE II
Redemption of PPIs
SECTION 2.1. Right of Redemption; Mechanics of Redemption. (a) The PPIs
may be redeemed, pursuant to either a Provisional Redemption (as described in
Section 2.6 of this Schedule C, any such Provisional Redemption shall include
the Distribution Make-Whole Payment) or Optional Redemption (as described in
Section 2.7 of this Schedule C), at the election of the Partnership, in whole or
from time to time in part and shall be redeemed at the Mandatory Redemption
Date, at the Redemption Prices specified in this Article II, together with
accrued Scheduled Distributions to the Redemption Date.
(b) The Partnership shall deliver a Globalstar Redemption Notice to GTL 20
Business Days prior to any such Redemption Date.
SECTION 2.2. Selection by the Managing General Partner of PPIs to be
Redeemed. If any PPI selected for partial redemption is converted in part before
termination of the conversion right with respect to the portion of the PPI so
selected, the converted portion of such PPI shall be deemed (so far as may be)
to be the portion selected for redemption. PPIs which have been converted during
a selection of PPIs to be redeemed shall be treated by the Managing General
Partner as Outstanding for the purpose of such selection, but not for the
purpose of paying the Redemption Price thereof.
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<PAGE> 87
For all purposes of this Agreement, unless the context otherwise requires,
all provisions relating to the redemption of PPIs shall relate, in the case of
any PPIs redeemed or to be redeemed only in part, to the portion of the
redemption amount of such PPI which has been or is to be redeemed.
SECTION 2.3. Notice of Redemption. Whenever a Globalstar Redemption
Notice is required to be delivered to GTL, such Notice shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if less than all the Outstanding PPIs are to be redeemed, the
identification (and, in the case of partial redemption, the redemption
amounts) of the particular PPIs to be redeemed;
(4) that on the Redemption Date the Redemption Price, together with
(unless the Redemption Date shall be a Scheduled Distribution Payment
Date) distributions accrued and unpaid to the Redemption Date, will become
due and payable upon each such PPI to be redeemed and that distributions
thereon will cease to accrue on and after said date;
(5) the Conversion Ratio, the date on which the right to convert the
Stated Value of the PPIs to be redeemed will terminate and the place or
places where such PPIs may be surrendered for conversion; and
(6) the place or places where such PPIs are to be surrendered for
payment of the Redemption Price.
SECTION 2.4. Deposit of Redemption Price. Prior to any Redemption Date,
the Partnership shall deposit with the Trustee or with GTL's paying agent (or,
to GTL if GTL is acting as its own paying agent with respect to the CPEOs) an
amount of consideration sufficient to pay, in the case of a cash payment, or
deliver, in the case of delivery of OPIs, the Redemption Price of and (except if
the Redemption Date shall be a Scheduled Distribution Payment Date) the accrued
Scheduled Distribution on all the PPIs which are to be redeemed on that date
(other than any PPIs called for redemption on that date which have been
converted prior to the date of such deposit, except with respect to any
applicable Distribution Make-Whole Payment).
If any PPI called for redemption is converted, any cash or OPIs deposited
with the Trustee, GTL's paying agent or with GTL shall (subject to any right of
GTL to receive distributions as provided in Section 1.3 of this Schedule C) be
paid or delivered to the Partnership upon its request. Any Distribution
Make-Whole
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<PAGE> 88
Payment will be paid to GTL on the date of conversion or Redemption Date, as the
case may be.
SECTION 2.5. PPIs Payable on Redemption Date. Notice of redemption having
been given as aforesaid, the PPIs so to be redeemed shall, on the Redemption
Date, become due and payable at the Redemption Price therein specified, and from
and after such date (unless the Partnership shall default in the payment of the
Redemption Price and accrued Scheduled Distributions, including any Distribution
Make-Whole Payment) no further distributions shall be payable or accrue with
respect to such PPIs. Upon surrender of any such PPI for redemption in
accordance with said notice, such PPI shall be paid, subject to Section 1.3, by
the Partnership at the Redemption Price, together with accrued Scheduled
Distributions to the Redemption Date.
If any PPI called for redemption shall not be so paid upon surrender
thereof for redemption, the Redemption Price (but not any unpaid Scheduled
Distributions or any Distribution Make-Whole Payment) shall, until paid, bear
interest from the Redemption Date at 6 1/2% per annum.
SECTION 2.6. Provisional Redemption. The Partnership may redeem, in whole
or in part (a "Provisional Redemption"), at any time prior to March 2, 1999, at
the Redemption Price of 103% of the aggregate Stated Value of the PPIs to be
redeemed plus accrued and unpaid Scheduled Distributions, if any, to the date of
Provisional Redemption (the "Provisional Redemption Date"), in the event that
the Current Market Value of the GTL Common Stock equals or exceeds the following
Trigger Percentages of the GTL Conversion Price for at least 20 Trading Days in
any consecutive 30 Trading Day period ending on the Trading Day prior to the
date of mailing of the Globalstar Redemption Notice if called for Provisional
Redemption in the 12-month period ending March 1 of the following years:
Year Trigger Percentage
---- ------------------
1997 170%
1998 160%
1999 150%
Upon any Provisional Redemption, the Partnership shall make the
Distribution Make-Whole Payment with respect to the PPIs called for redemption.
The Partnership shall make the Distribution Make-Whole Payment on all PPIs
called for Redemption, regardless of whether such PPIs are converted prior to
the Provisional Redemption Date.
SECTION 2.7. Optional Redemption. Commencing March 2, 1999, the PPIs will
be redeemable at any time, in whole or in part, at the election of the
Partnership (the "Optional Redemption"), at a Redemption Price equal to the
percentage of the Stated Value set forth below plus accrued and unpaid Scheduled
Distributions, if any, to the date of Optional
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<PAGE> 89
Redemption (the "Optional Redemption Date") if redeemed in the 12-month period
ending March 1 of the following years:
Year Redemption Price
---- ----------------
2000 103%
2001 102%
2002 101%
and thereafter at a Redemption Price equal to 100% of the Stated Value plus
accrued and unpaid Scheduled Distributions, if any, to the Optional Redemption
Date.
SECTION 2.8. Mandatory Redemption. Each PPI (if not earlier redeemed or
converted) will be mandatorily redeemed by the Partnership on the Mandatory
Redemption Date at a Redemption Price of 100% of the Stated Value plus accrued
and unpaid Scheduled Distributions, if any (including all Distribution
Arrearages), to the Mandatory Redemption Date.
ARTICLE III
Conversion of PPIs
SECTION 3.1. Conversion Privilege and Conversion Price. Subject to and
upon compliance with the provisions of this Article, one PPI shall be
convertible into one OPI (the "Conversion Ratio") which Conversion Ratio shall
be adjusted in certain circumstances as provided in Section 3.4. Upon any
conversion of CPEOs by a holder thereof, GTL shall convert a proportionate
amount of PPIs into OPIs. Such conversion right shall expire at the close of
business on the Business Day preceding the Mandatory Redemption Date. In case a
PPI or portion thereof is called for redemption, such conversion right in
respect of the PPI or portion so called shall expire at the close of business on
the Business Day preceding the Redemption Date, unless the Partnership defaults
in making the payment due upon redemption.
SECTION 3.2. Exercise of Conversion Privilege. PPIs surrendered for
conversion during the period from the close of business on any Regular Record
Date next preceding any Scheduled Distribution Payment Date to the opening of
business on such Scheduled Distribution Payment Date shall (except in the case
of PPIs or portions thereof which have been called for redemption on a
Redemption Date within such period) be accompanied by payment in New York
Clearing House funds or other funds acceptable to the Partnership of an amount
equal to the Scheduled Distribution payable on such Scheduled Distribution
Payment Date on the Stated Value of PPIs being surrendered for conversion.
Except as provided in the preceding sentence and subject to Section 1.3 of this
Schedule, no payment or adjustment shall be made upon any conversion on account
of any Scheduled Distribution accrued on the PPIs surrendered for conversion or
on account of any Scheduled Distributions on the OPIs issued upon conversion. In
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<PAGE> 90
no event shall the Partnership be obligated to pay any converting Holder any
unpaid Distribution Arrearages upon conversion.
PPIs shall be deemed to have been converted immediately prior to the close
of business on the day of surrender of such PPIs for conversion in accordance
with the foregoing provisions, and at such time the rights of GTL with respect
to such PPIs shall cease, and OPIs issuable upon conversion shall be treated for
all purposes as having been issued at such time.
SECTION 3.3. Fractions of Interests. In the event that GTL shall be
required to pay a cash adjustment in lieu of any issuance of fractional
interests in GTL Common Stock as provided in the Indenture and GTL shall not
have cash available to make such payment, then the Partnership shall make a cash
distribution to GTL, in lieu of a payment of such amount in OPIs under this
Agreement and to the extent that funds shall be legally available thereof, to
allow GTL to make such cash adjustments.
SECTION 3.4. Adjustment of Conversion Ratio. Upon an adjustment of the GTL
Conversion Price (a "GTL Adjustment Event"), the Conversion Ratio shall be
adjusted so that the ratio of the number of OPIs issuable upon conversion of a
PPI after the GTL Adjustment Event to the number of shares of Common Stock
issuable upon conversion of a CPEO after the GTL Adjustment Event shall equal
the ratio of the number of OPIs issuable upon conversion of a PPI immediately
prior to the GTL Adjustment Event to the number of shares of Common Stock
issuable upon conversion of a CPEO immediately prior to the GTL Adjustment
Event.
SECTION 3.5. Provisions in Case of Consolidation, Merger or Conveyance or
Transfer of Properties and Assets. In case of any consolidation of the
Partnership with, or merger of the Partnership into, any other partnership or
other business entity, or in case of any merger of another partnership or other
business entity into the Partnership (other than a merger which does not result
in any reclassification, conversion, exchange or cancellation of outstanding
Partnership Interests or a transaction governed by Section 6.13 of this
Agreement), or in case of any conveyance or transfer of the properties and
assets of the Partnership substantially as an entirety, the partnership,
corporation, or other business entity formed by such consolidation or resulting
from such merger or which acquires by conveyance or transfer such properties and
assets, as the case may be, shall execute and deliver to GTL an agreement
providing that GTL shall have the right thereafter, during the period PPIs shall
be convertible as specified in this Article III, to convert such PPIs only into
the kind and amount of securities, cash and other property receivable upon such
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<PAGE> 91
consolidation, merger, conveyance or transfer by a Partner holding OPIs
immediately prior to such consolidation, merger, conveyance or transfer,
assuming such Partner failed to exercise its rights of election, if any, as to
the kind or amount of partnership interests, securities, cash and other property
receivable upon such consolidation, merger, conveyance or transfer (provided
that, if the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance or transfer is not the same for each
unit of Ordinary Partnership Interests in respect of which such rights of
election shall not have been exercised ("nonelecting share"), then for the
purpose of this Section the kind and amount of partnership interests, cash and
other property receivable upon such consolidation, merger, conveyance or
transfer by each nonelecting OPI shall be deemed to be the kind and amount so
receivable per share by a plurality of the nonelecting OPIs). Such agreement
shall provide for adjustments which, for events subsequent to the effective date
of such agreement, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article. The above provisions of this Section
shall similarly apply to successive consolidations, mergers, conveyances or
transfers. The Partnership will not become a party to any consolidation or
merger unless the terms of such consolidation or merger are consistent with this
Section.
SECTION 3.6. Taxes on Conversions. The Partnership will pay any and
all taxes that may be payable in respect of the issue or delivery of OPIs on
conversion of PPIs pursuant hereto.
ARTICLE IV
Subordination of PPIs
SECTION 4.1. PPIs Subordinate to All Liabilities. The PPIs shall be
subordinated and subject, to the extent and in the manner herein set forth, in
right of payment to the prior payment in full of all existing and future
liabilities of the Partnership, including without limitation: (i) certain
distributions made to partners in respect of taxes levied upon the operations of
Globalstar; (ii) distributions of the Management Fee; and (iii) guarantee fees
to be made to partners and other persons in connection with their guarantee of
the Partnership's obligations under the Globalstar Credit Agreement.
SECTION 4.2. No Payments When Liabilities in Default; Payment Over of
Proceeds upon Dissolution, etc. In the event the Partnership shall default in
the payment of any liabilities of the Partnership when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by declaration
or otherwise, then, unless and until such default shall have been cured or
waived or shall have ceased to exist, no direct or indirect payment (in cash or
property, by setoff or otherwise) need be made or agreed to be made on account
of the PPIs (excepting cash payment for fractional interests as set forth in
Section 3.3 above).
Upon the happening of an event of default with respect to any liability,
as defined therein or in the instrument under which the same is outstanding,
permitting the holders thereof to
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<PAGE> 92
accelerate the maturity thereof (under circumstances when the terms of the
preceding paragraph are not applicable), unless and until such event of default
shall have been cured or waived or shall have ceased to exist, no direct or
indirect payment (in cash or property, by setoff or otherwise) need be made or
agreed to be made on account of the PPIs (excepting cash payment for fractional
interests as set forth in Section 3.3 above).
In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Partnership or its property;
(b) any proceeding for the liquidation, dissolution or other winding up
of the Partnership or its property;
(c) any assignment by the Partnership for the benefit of creditors; or
(d) any other marshaling of the assets of the Partnership;
all liabilities (including any interest thereon accruing after the commencement
of any such proceedings) shall first be paid in full before any payment or
distribution (direct or indirect), whether in cash or property, by setoff or
otherwise, need be made on account of any PPIs.
SECTION 4.3. Voting Rights. Except as required by law, the PPIs will not
have any voting rights. Upon a GTL Deferral Trigger Event, (i) the number of
members of the Committee will be increased by one and the holders of the CPEOs,
voting separately as a class with the holders of any other securities upon which
similar voting rights have been conferred and are exercisable, will be entitled
to elect one representative to the Committee (the "CPE Representative"). The CPE
Representative will promptly resign upon receipt of notice from GTL that all
Distribution Arrearages with respect to the PPIs have been paid.
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<PAGE> 1
EXHIBIT 10.12
[Conformed As Amended]
REVOLVING CREDIT AGREEMENT
among
GLOBALSTAR, L.P.,
CERTAIN BANKS,
and
CHEMICAL BANK,
as Administrative Agent
Dated as of December 15, 1995
As Amended on March 25, 1996
<PAGE> 2
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS......................................................1
1.1 Defined Terms.............................................1
1.2 Other Definitional Provisions............................19
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS.................................20
2.1 Revolving Credit Commitments.............................20
2.2 Commitment/Loan Support..................................20
2.3 Procedure for Revolving Credit Borrowing.................23
2.4 Repayment of Loans; Evidence of Debt.....................24
2.5 Commitment Fees..........................................25
2.6 Termination, Reduction or Increase of
Commitments..........................................25
2.7 Prepayments..............................................26
2.8 Conversion and Continuation Options......................28
2.9 Minimum Amounts of Tranches..............................28
2.10 Interest Rates and Payment Dates.........................29
2.11 Computation of Interest and Fees.........................29
2.12 Inability to Determine Interest Rate.....................30
2.13 Pro Rata Treatment and Payments..........................30
2.14 Illegality...............................................31
2.15 Other Costs; Increased Costs.............................32
2.16 Taxes....................................................34
2.17 Indemnity................................................36
2.18 Purpose..................................................36
SECTION 3. REPRESENTATIONS AND WARRANTIES..................................36
3.1 Financial Condition......................................36
3.2 No Change................................................37
3.3 Existence; Compliance with Law...........................37
3.4 Power; Authorization; Enforceable Obligations............37
3.5 No Legal Bar.............................................38
3.6 No Material Litigation...................................38
3.7 No Default...............................................38
3.8 Ownership of Property; Liens.............................38
3.9 Intellectual Property....................................39
3.10 No Burdensome Restrictions...............................39
3.11 Taxes....................................................39
3.12 Federal Regulations......................................39
3.13 ERISA....................................................40
3.14 Investment Company Act; Other Regulations................40
3.15 Subsidiaries.............................................40
3.16 Environmental Matters....................................40
3.17 Full Disclosure..........................................41
3.18 Solvency.................................................41
3.19 Security Interests; Guarantees...........................42
(i)
<PAGE> 3
SECTION 4. CONDITIONS PRECEDENT............................................42
4.1 Conditions of Initial Loans...............................42
4.2 Conditions to all Loans...................................45
SECTION 5. AFFIRMATIVE COVENANTS...........................................46
5.1 Financial Statements......................................46
5.2 Certificates; Other Information...........................46
5.3 Payment of Obligations....................................47
5.4 Conduct of Business and Maintenance of Existence..........48
5.5 Maintenance of Property; Insurance........................48
5.6 Inspection of Property; Books and Records;
Discussions..........................................48
5.7 Notices...................................................48
5.8 Environmental Laws........................................49
5.9 Additional Subsidiary Guarantors..........................50
5.10 Material Terms of Other Agreements Being More
Restrictive..........................................50
SECTION 6. NEGATIVE COVENANTS..............................................50
6.1 Financial Condition Covenants.............................51
6.2 Indebtedness..............................................51
6.3 Limitation on Liens.......................................52
6.4 Limitation on Contingent Obligations.......................53
6.5 Limitation on Fundamental Changes.........................53
6.6 Limitation on Restricted Payments.........................54
6.7 Investments...............................................55
6.8 Limitation on Optional Payments and
Modifications of Subordinated Debt and
Other Debt Instruments...............................55
6.9 Affiliates................................................56
6.10 Partnership Documents....................................56
6.11 Restrictions on Subsidiaries.............................56
6.12 Restrictive Agreements...................................57
SECTION 7. ADDITIONAL NEGATIVE COVENANTS...................................57
7.2 Financial Condition Covenants.............................57
7.2 Sale and Leaseback........................................58
7.3 Limitation on Changes in Fiscal Year......................58
SECTION 8. EVENTS OF DEFAULT...............................................58
SECTION 9. THE ADMINISTRATIVE AGENT........................................62
9.1 Appointment...............................................62
9.2 Delegation of Duties......................................62
9.3 Exculpatory Provisions....................................62
9.4 Reliance by the Administrative Agent......................63
9.5 Notice of Default.........................................63
9.6 Non-Reliance on the Administrative Agent and
Other Banks..........................................63
9.7 Indemnification...........................................64
9.8 The Administrative Agent in Its Individual
Capacity.............................................65
(ii)
<PAGE> 4
9.9 Successor Administrative Agent............................65
SECTION 10. MISCELLANEOUS..................................................65
10.1 Amendments and Waivers...................................65
10.2 Notices..................................................66
10.3 No Waiver; Cumulative Remedies...........................67
10.4 Survival of Representations and Warranties...............68
10.5 Payment of Expenses and Taxes............................68
10.6 Successors and Assigns; Participations;
Purchasing Banks.....................................69
10.7 Adjustments; Set-off.....................................72
10.8 Severability..............................................73
10.9 Counterparts.............................................73
10.10 GOVERNING LAW...........................................73
10.11 Submission To Jurisdiction; Waivers.....................73
10.12 WAIVERS OF JURY TRIAL...................................74
10.13 Integration.............................................74
10.14 Confidentiality.........................................74
Schedules:
SCHEDULE I - Commitments and Commitment Percentages
SCHEDULE 5.5 - Insurance
SCHEDULE 6.2 - Committed Vendor Financing
SCHEDULE 6.9 - Affiliate Transactions
(iii)
<PAGE> 5
REVOLVING CREDIT AGREEMENT dated as of December 15, 1995, as amended
on March 25, 1996, among GLOBALSTAR, L.P., a Delaware limited partnership (the
"Borrower"), the several financial institutions parties from time to time to
this Agreement (collectively, the "Banks"; individually, a "Bank") and CHEMICAL
BANK, a New York banking corporation ("Chemical"), as administrative agent for
the Banks hereunder (in such capacity, the "Administrative Agent").
W I T N E S S E T H :
WHEREAS, the Borrower has requested the Banks to make revolving
credit loans to the Borrower, the proceeds of which will be used to finance (i)
the buildout of a global satellite communications system by the Borrower, (ii)
interest payments when due on the Loans made pursuant to this Agreement and
(iii) working capital needs; and
WHEREAS, the Banks are willing to make such Loans to the Borrower
upon the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms have the following meanings:
"ABR Loans": Loans the rate of interest applicable to which is
based upon the ABR.
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on
such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof:
"Prime Rate" shall mean the rate of interest per annum publicly announced from
time to time by Chemical as its prime rate in effect at its principal office in
New York City (the Prime Rate not being intended to be the lowest rate of
interest charged by Chemical in connection with extensions of credit to
debtors); "Base CD Rate" shall mean the sum of (a) the product of (i) the
Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is one
and the denominator of which is one minus the CD Reserve Percentage and (b) the
CD Assessment Rate; "Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board of Governors of the Federal Reserve System
(the "Board") through the public information telephone line of the Federal
Reserve Bank of New
<PAGE> 6
York (which rate will, under the current practices of the Board, be published in
Federal Reserve Statistical Release H.15(519) during the week following such
day), or, if such rate shall not be so reported on such day or such next
preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 A.M., New York City time, on such day (or, if
such day shall not be a Business Day, on the next preceding Business Day) by the
Administrative Agent from three New York City negotiable certificate of deposit
dealers of recognized standing selected by it; "CD Assessment Rate" shall mean,
for any day, the annual assessment rate in effect on such day which is payable
by a member of the Bank Insurance Fund maintained by the FDIC classified as
well-capitalized and within supervisory subgroup "A" (or a comparable successor
assessment risk classification) within the meaning of 12 C.F.R. Section 327.3(d)
(or any successor provision) to the FDIC for the FDIC's insuring time deposits
at offices of such institution in the United States; "CD Reserve Percentage"
shall mean, for any day, that percentage (expressed as a decimal) which is in
effect on such day, as prescribed by the Board, for determining the maximum
reserve requirement for a Depositary Institution (as defined in Regulation D of
the Board) in respect of new non-personal time deposits in Dollars having a
maturity of 30 days or more; and "Federal Funds Effective Rate" shall mean, for
any day, the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Base CD
Rate or the Federal Funds Effective Rate, or both, for any reason, including the
inability or failure of the Administrative Agent to obtain sufficient quotations
in accordance with the terms thereof, the ABR shall be determined without regard
to clause (b) or (c), or both, of the first sentence of this definition, as
appropriate, until the circumstances giving rise to such inability no longer
exist. Any change in the ABR due to a change in the Prime Rate, the Three-Month
Secondary CD Rate, the CD Reserve Percentage, the CD Assessment Rate or the
Federal Funds Effective Rate shall be effective as of the opening of business on
the effective day of such change in the Prime Rate, the Three-Month Secondary CD
Rate, the CD Reserve Percentage, the CD Assessment Rate or the Federal Funds
Effective Rate, respectively.
"Acceptable Letter of Credit": a letter of credit, substantially in
the form of Exhibit G hereto, which satisfies the following conditions: (A) such
letter of credit supports a fixed amount of principal of the Loans plus up to
120 days of
2
<PAGE> 7
accrued interest on such principal amount calculated at a rate equal to 8% per
annum and based on an assumed year of 360 days, (B) such letter of credit is
issued by a bank which has an unsecured senior long-term debt rating of at least
A from S&P and A2 from Moody's, (C) the issuer of such letter of credit is
approved by the Majority Banks at the time of issuance, which approval shall not
be unreasonably withheld, (D) such letter of credit is issued for the account of
one or more Partners, (E) such letter of credit is issued in favor of the
Administrative Agent for the benefit of the Banks and (F) at the time of its
delivery to the Administrative Agent (i) such letter of credit is accompanied by
legal opinions, resolutions and comparable documents with respect to such letter
of credit and the issuer thereof requested by the Administrative Agent and (ii)
the Applicable Partner delivers to the Administrative Agent a Partner Cash
Collateral Agreement, legal opinions, resolutions, financing statements and
comparable documents with respect to such Applicable Partner and Partner Cash
Collateral Agreement. A letter of credit shall not be an Acceptable Letter of
Credit during any time that the condition set forth in clause (B) of the
preceding sentence is not satisfied.
"Additional Buildout Indebtedness": Indebtedness (including senior
and subordinated debt securities and bank financing) of the Borrower or any of
its Wholly-Owned Subsidiaries that is a Guarantor incurred or issued to finance
the buildout of the Satellite Project and related costs which satisfies the
following criteria:
(i) none of such Indebtedness will mature (by scheduled
payment or mandatory payment or prepayment) prior to the Termination Date; and
(ii) such Indebtedness bears interest at a market rate of
interest.
Additional Buildout Indebtedness shall not include the vendor
financing permitted under Sections 6.2(f) and (g). The Borrower shall designate
Indebtedness as Additional Buildout Indebtedness at the time it is created or
incurred.
"Affiliate": with respect to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. For purposes of this definition, a Person shall be
deemed to be "controlled by" any other Person which possesses, directly or
indirectly, power either to (i) vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person or (ii)
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Agreement": this Revolving Credit Agreement, as amended,
supplemented or modified from time to time.
3
<PAGE> 8
"Applicable Margin": with respect to each day for each Eurodollar
Loan, the rate of 0.625%.
"Applicable Partner": with respect to (i) a Letter of Credit, the
Partner Guarantor for whose account such Letter of Credit is issued and (ii) a
Partner Collateral Account, the Partner Guarantor for whose separate account
such Partner Collateral Account is established.
"Arranger": Chemical Securities Inc. in its capacity as arranger of
the Commitments.
"Available Commitment": as to any Bank, at a particular time, an
amount equal to such Bank's Commitment Percentage of the excess, if any, of (a)
the aggregate Commitments at such time over (b) the aggregate outstanding
principal amount of the Loans at such time; collectively, as to all the Banks,
the "Available Commitments".
"Borrowing Date": any day specified by the Borrower in a notice
pursuant to Section 2.3 as a date on which the Borrower requests the Banks to
make Loans hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.
"Cash Equivalents": (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than twelve months from
the date of acquisition, (ii) time deposits and certificates of deposit of any
Bank or any domestic commercial bank having capital and surplus in excess of
$500,000,000 the holding company of which has a commercial paper rating meeting
the requirements specified in clause (iv) below having maturities of not more
than twelve months from the date of acquisition, (iii) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (i) and (ii) entered into with any Bank or bank meeting the
qualifications specified in clause (ii) above, (iv) commercial paper rated at
least A-1 or the equivalent thereof by S&P or P-1 or the equivalent thereof by
Moody's and in either case maturing within twelve months after the date of
acquisition, (v) tax exempt obligations rated at least A2 or the equivalent
thereof by Moody's and A or the equivalent thereof by S&P, (vi) money market
mutual funds, and (vii) commercial paper (other than commercial paper referred
to in the preceding clause (iv)) rated at least A-2 or the equivalent thereof by
S&P or P-2 or the equivalent thereof by Moody's in an aggregate principal amount
not in excess of 25% of the liquid assets of the Borrower and its consolidated
Subsidiaries and in either case maturing within twelve months after the date of
acquisition.
"Change of Control":
4
<PAGE> 9
(i) the sale, lease or transfer, in one transaction or a
series of related transactions, of all or substantially all of the assets of the
Borrower and its Subsidiaries;
(ii) the adoption of a plan relating to the liquidation or
dissolution of the Borrower or of one or more Subsidiaries which in the
aggregate represent more than 50% of the total assets of the Borrower and its
Subsidiaries;
(iii) the failure of Loral Space & Communications Ltd. to own
at least 70% of the equity interests in the Borrower that it owned, directly or
indirectly, as of the date the Tender Offer (as defined in the Lockheed Martin
Credit Agreement) is consummated, free and clear of Liens and other
encumbrances; or
(iv) the first day on which Loral Space & Communications Ltd.
fails to be, or, directly or indirectly, fails solely to control, the sole
managing general partner of the Borrower.
"Closing Date": December 15, 1995.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all assets and property, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security Document.
"Collateral Cash Equivalents": Cash Equivalents having a maturity of
one year or less at the time of acquisition.
"Commitment": as to any Bank, its obligation to make Loans to the
Borrower in an aggregate principal amount not to exceed at any one time
outstanding the amount set forth opposite such Bank's name in Schedule I hereto,
as such amount may be reduced or increased from time to time as provided herein;
collectively, as to all the Banks, the "Commitments".
"Commitment Fee Rate": the rate of 0.25% per annum.
"Commitment Increase Supplement:" a Commitment Increase Supplement,
substantially in the form of Exhibit D-2.
"Commitment Percentage": as to any Bank, the percentage of the
aggregate Commitments constituted by such Bank's Commitment.
"Commitment Period": the period from and including the date hereof
to but not including the Termination Date.
"Commitment Transfer Supplement": a Commitment Transfer Supplement,
substantially in the form of Exhibit D-1.
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<PAGE> 10
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.
"Consolidated EBITDA": with respect to the Borrower and its
Subsidiaries for any period, the sum of the Consolidated Net Income for such
period plus, to the extent deducted in computing such Consolidated Net Income,
the sum of (i) income tax expense, (ii) interest expense (exclusive of interest
income), (iii) depreciation and amortization expense and any other non-cash
charges, and (iv) any extraordinary losses (minus extraordinary gains), all as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Fixed Charges": for any period, the sum of:
(a) Consolidated Cash Interest Expense;
(b) Required amortization of Indebtedness, determined on a
consolidated basis in accordance with GAAP, for the period involved and discount
or premium relating to any such Indebtedness for any period involved, whether
expensed or capitalized; and
(c) Consolidated Lease Expense, determined without duplication of
items included in Consolidated Cash Interest Expense, in each case of the
Borrower and its Subsidiaries.
"Consolidated Cash Interest Expense": for any period the amount of
interest expense, both expensed and capitalized, of the Borrower and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, for
such period on the aggregate principal amount of their Indebtedness, determined
on a consolidated basis in accordance with GAAP, excluding any such interest
which is paid-in-kind or accreted and not paid in cash.
"Consolidated Lease Expense": for any period, the aggregate amount
of fixed and contingent rentals payable by the Borrower and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP, for such period with
respect to leases of real and personal property.
"Consolidated Net Income": for any period, the consolidated net
income (or deficit) of the Borrower and its Subsidiaries for such period (taken
as a cumulative whole), determined in accordance with GAAP.
"Consolidated Net Worth": at a particular date, all amounts which
would be included under partners' equity on a consolidated balance sheet of the
Borrower and its Subsidiaries
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<PAGE> 11
determined on a consolidated basis in accordance with GAAP as at such date.
"Contingent Obligation": as to any Person, any obligation of such
Person guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends or other obligations quantified in accordance with the last sentence
of this definition (the "primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; provided, however, that the
term Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the amount
reasonably anticipated to be payable by the Borrower in respect of such
Contingent Obligation as determined by the Borrower in good faith.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.
"Default": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied, provided, however, that Section 6.1 shall
not be the basis for a Default prior to the Release Date.
"Dollars" and "$": dollars in lawful currency of the United States
of America.
"Domestic Lending Office": initially, the office of each Bank
designated as such in Schedule I; thereafter, such other office of such Bank, if
any, located within the United States which shall be making or maintaining ABR
Loans.
"Downgraded Letter of Credit": a Letter of Credit, the issuer of
which no longer meets the minimum unsecured senior
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<PAGE> 12
long-term debt rating set forth in clause (B) of the definition of Acceptable
Letter of Credit.
"Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or requirements of any Governmental Authority regulating, relating to or
imposing liability or standards of conduct concerning environmental protection
matters, including without limitation, Hazardous Materials, as now or may at any
time hereafter be in effect.
"Equity Interests": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all partnership interests (general or limited) of a partnership, any and all
equivalent ownership interests in a Person (other than a corporation or
partnership) and any and all warrants or options to purchase any of the
foregoing.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Cash Collateral": as defined in Section 2.7(c).
"Eurodollar Cash Collateral Account": as defined in Section 2.7(c).
"Eurodollar Business Day": any Business Day on which dealings in
foreign currencies and exchange between banks may be carried on in London,
England.
"Eurodollar Lending Office": initially, the office of each Bank
designated as such in Schedule I; thereafter, such other office of such Bank, if
any, which shall be making or maintaining Eurodollar Loans.
"Eurodollar Loans": Loans hereunder at such time as they are made
and/or being maintained at a rate of interest based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each Eurodollar Loan during a
specified Interest Period, the rate of interest determined on the basis of the
rate for deposits in Dollars for a period equal to such Interest Period,
commencing on the first day of such Interest Period, appearing on Page 3750 of
the Telerate Service as of 11:00 A.M., London time, two Eurodollar Business Days
prior to the beginning of such Interest Period. In the event that such rate does
not appear on Page 3750 of the Telerate Service (or otherwise on such service),
the "Eurodollar Rate" shall be determined by reference to such other publicly
available service for displaying eurodollar rates as may be agreed upon by the
Administrative Agent and the Borrower or, in the absence of such agreement, the
"Eurodollar Rate" shall instead be the rate
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<PAGE> 13
per annum equal to the rate at which Chemical is offered Dollar deposits at or
about 11:00 A.M., New York City time, two Eurodollar Business Days prior to the
beginning of such Interest Period, in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations in respect of its
Eurodollar Loans are then being conducted for delivery on the first day of such
Interest Period, for a period equal to such Interest Period, and in an amount
comparable to the amount of its Eurodollar Loan to be outstanding during such
Interest Period.
"Event of Default": any of the events specified in Section 8;
provided, that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, event or act has been satisfied.
"Exchange Act": the Securities and Exchange Act of 1934, as amended.
"Excluded Employee Loans": loans or advances to directors, officers
or employees of the Borrower or any Wholly Owned Subsidiary the principal amount
of which, when added to the principal amount of existing such loans or advances,
would not exceed $1,000,000.
Expiring Letter of Credit": an Acceptable Letter of Credit, the
issuer of which has not notified the Administrative Agent at least 60 days prior
to the then scheduled expiration date that such Acceptable Letter of Credit will
be renewed.
"Feeder Link Licenses": the authorizations granted or to be granted
by the Federal Communications Commission to the Borrower for feeder links
(frequencies used for links between the gateways and the satellites) to be used
in the Satellite Project.
"Financing Lease": (a) any lease of property, real or personal, the
then present value of the minimum rental commitment thereunder of which should,
in accordance with GAAP, be capitalized on a balance sheet of the lessee, and
(b) any other such lease the obligations under which are capitalized on a
consolidated balance sheet of the Borrower and its Subsidiaries.
"Foreign Subsidiary": any Subsidiary organized or incorporated
outside the United States.
"Funded Debt": of a Person, at a particular date, the sum (without
duplication) at such date of (a) all indebtedness of such Person (i) for
borrowed money or (ii) for the deferred purchase price of property or services
(excluding trade payables in the ordinary course of business) or (iii) which is
evidenced by a note, bond, debenture or similar instrument, and (b) the
capitalized portion of obligations under Financing Leases.
"GAAP": generally accepted accounting principles in the United
States of America in effect on the date hereof,
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<PAGE> 14
provided that for purposes of preparation of the financial statements to be
delivered pursuant to Section 5.1, "GAAP" shall mean generally accepted
accounting principles in the United States in effect from time to time.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantee Release": the release by the Administrative Agent and the
Banks of the Guarantees, including the return to each Applicable Partner of all
Letters of Credit issued for its account and its Partner Cash Collateral and the
termination of the Partner Cash Collateral Agreements.
"Guaranteed Obligations": the collective reference to the unpaid
principal of and interest on the Loans and all other obligations and liabilities
of the Borrower to the Administrative Agent and the Banks (including, without
limitation, interest accruing at the then applicable rate provided in this
Agreement after the maturity of the Loans and interest accruing at the then
applicable rate provided in this Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, this
Agreement or the Notes, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the
Administrative Agent or to the Banks that are required to be paid by the
Borrower or pursuant to the terms of this Agreement).
"Guarantees": the collective reference to the Partner Guarantees and
the Subsidiary Guarantees.
"Guarantor": any Person delivering a Guarantee pursuant to this
Agreement.
"Hazardous Materials": any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances, and petroleum products
(including crude oil or any fraction thereof), defined or regulated as such in
or under any Environmental Law.
"Indebtedness": of a Person, at a particular date, the sum (without
duplication) at such date of (a) Funded Debt, (b) all obligations of such Person
in respect of letters of credit, acceptances, or similar obligations issued or
created for the account of such Person and (c) all indebtedness or other
10
<PAGE> 15
liabilities (excluding taxes and assessments) secured by any Lien on any
property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof.
"Insolvency" or "Insolvent": at any particular time, the condition
that a Multiemployer Plan is insolvent within the meaning of Section 4245 of
ERISA.
"Intellectual Property": as defined in Section 3.9.
"Interest Payment Date": (a) as to any ABR Loan, the last day of
each March, June, September and December and the Termination Date and (b) as to
any Eurodollar Loan in respect of which the Borrower has selected an Interest
Period of one, two or three months, the last day of such Interest Period, and
(c) as to any Eurodollar Loan having an Interest Period longer than three
months, each day which is three months, or a whole multiple thereof, after the
first day of such Interest Period and the last day of such Interest Period.
"Interest Period": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar Loan and
ending one, two, three or six months thereafter, as selected by the Borrower in
its notice of borrowing or notice of conversion, as the case may be, given with
respect thereto; and
(ii) thereafter, each period commencing on the last day
of the next preceding Interest Period applicable to such Eurodollar Loan and
ending one, two, three or six months thereafter, as selected by the Borrower by
irrevocable notice to the Administrative Agent not less than three Eurodollar
Business Days prior to the last day of the then current Interest Period with
respect thereto;
provided, that all of the foregoing provisions relating to Interest Periods
are subject to the following:
(a) if any Interest Period would otherwise end on a day that
is not a Eurodollar Business Day, such Interest Period shall be extended to the
next succeeding Eurodollar Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding Eurodollar
Business Day;
(b) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date;
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<PAGE> 16
(c) any Interest Period that begins on the last Eurodollar
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Eurodollar Business Day of a calendar month; and
(d) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an Interest Period
for such Loan.
"Investment": any advance, loan, extension of credit or capital
contribution to, or purchase of any stock, bonds, notes, debentures, ownership
interests or other securities of, or other investment in, any Person.
"Letter of Credit": any Acceptable Letter of Credit or Downgraded
Letter of Credit.
"Leverage Ratio": on the last day of any fiscal quarter, the ratio
of (a) Funded Debt of the Borrower and its Subsidiaries on such day to (b)
Consolidated EBITDA for the period of four consecutive fiscal quarters ending on
such day.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any Financing Lease having substantially the same economic
effect as any of the foregoing).
"Loan": as defined in Section 2.1.
"Loan Documents": this Agreement, the Notes and, prior to the
Release Date, the Guarantees and the Partner Cash Collateral Agreements.
"Loan Parties": the Borrower and, prior to the Release Date, (i)
each Subsidiary of the Borrower which is a party to a Loan Document, (ii) from
the Closing Date through the date on which the Original Loral Guarantee is
released, Loral, and, thereafter, Lockheed Martin and (iii) the other Partner
Guarantors.
"Lockheed Martin": Lockheed Martin Corporation, a Maryland
corporation.
"Lockheed Martin Credit Agreement": the Revolving Credit Agreement
(Five Year) to be dated as of a date in April 1996, and substantially in the
form delivered to the Banks on March 25, 1996, among Lockheed Martin, LAC
Acquisition Corporation, as guarantor thereunder, the several financial
institutions parties from time to time thereto, Morgan Guaranty Trust Company of
New York, as Documentation Agent, and Bank of
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<PAGE> 17
America National Trust and Savings Association, as Administrative Agent, as
amended, modified and supplemented from time to time in accordance with the
terms thereof but without giving effect to any cancellation or termination
thereof.
"Lockheed Martin Guarantee": the Guarantee to be executed and
delivered by Lockheed Martin, substantially in the form of Exhibit A to the
First Amendment dated as of March 25, 1996 to this Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"Loral": Loral Corporation, a New York corporation.
"Majority Banks": at any date, Banks whose Commitments aggregate not
less than 66-2/3% of the total Commitments or, if the Commitments have been
terminated, of the outstanding Loans.
"Managing General Partner": Loral/QUALCOMM Satellite Services, L.P.,
a Delaware limited partnership.
"Material Adverse Effect": a material adverse effect on (a) the
Satellite Project, (b) the business, assets, property, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole
and the ability of the Borrower and its Subsidiaries to perform their respective
obligations under the Loan Documents or (c) the validity or enforceability of
any of the Loan Documents or the material rights or remedies of the
Administrative Agent or the Banks hereunder or thereunder.
"Moody's": Moody's Investors Service, Inc.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) the gross cash proceeds received by the
Borrower or any Subsidiary (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment receivable or
purchase price adjustment receivable or otherwise and including casualty
insurance settlements and condemnation awards, but only as and when received),
net of (i) attorneys' fees, accountants' fees, investment banking fees, transfer
taxes, deed or mortgage recording taxes, required debt payments of debt secured
by the applicable asset (other than pursuant hereto) or required to be paid in
connection with such sale, transfer or disposition and other customary fees
actually incurred in connection therewith and (ii) taxes paid or payable as a
result thereof (including taxes estimated by the Borrower to be payable as a
result thereof), from any loss, damage, destruction or condemnation of, or any
sale, transfer or other disposition (including any sale and leaseback of assets
and any mortgage or lease of real property) to any Person of any asset or assets
of the Borrower or any Subsidiary, and (b) the gross cash proceeds from the
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<PAGE> 18
incurrence, issuance or sale by the Borrower or any Subsidiary of any
Indebtedness, net of all taxes (including taxes estimated by the Borrower to be
payable as a result thereof or as a result of such transactions) and fees
(including investment banking fees), commissions, costs and other expenses
incurred in connection with such issuance or sale.
"Notes": as defined in Section 2.4.
"Obligations": the collective reference to the unpaid principal of
and interest on the Loans and all other obligations and liabilities of the
Borrower to the Administrative Agent and the Banks (including, without
limitation, interest accruing at the then applicable rate provided in this
Agreement after the maturity of the Loans and interest accruing at the then
applicable rate provided in this Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, this
Agreement, any Notes, the other Loan Documents or any other document made,
delivered or given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the Administrative Agent or to the Banks that are required to be
paid by the Borrower pursuant to the terms of this Agreement or any other Loan
Document).
"Original Loral Guarantee": the guarantee executed and delivered by
Loral, substantially in the form of Exhibit E, dated as of December 15, 1995.
"Participants": as defined in Section 10.6(b).
"Partner": each general or limited partner in the Borrower from time
to time.
"Partner Cash Collateral": cash and/or Collateral Cash Equivalents,
held in a Partner Collateral Account derived from a drawing upon a Letter of
Credit issued for the account of a Partner Guarantor. Partner Cash Collateral
constitutes assets of the Applicable Partner that are pledged to secure the
Obligations pursuant to a Partner Cash Collateral Agreement.
"Partner Cash Collateral Agreement": each cash collateral agreement
executed and delivered by a Partner Guarantor in favor of the Administrative
Agent with respect to its Partner Collateral Account and Partner Cash
Collateral, such agreement to be satisfactory in form and substance to the
Administrative Agent in its sole discretion.
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"Partner Collateral Account": a pledged collateral account
established at the principal office of the Person acting as Administrative Agent
by an Applicable Partner in the name of the Administrative Agent and subject to
the sole dominion and control of the Administrative Agent. A separate Partner
Collateral Account will be established for each Partner Guarantor other than
Loral Space & Communications Ltd. at the time an Acceptable Letter of Credit is
delivered for the account of such Partner Guarantor. The proceeds of each
drawing under a Letter of Credit issued for the account of such Applicable
Partner shall be deposited in such Partner Collateral Account.
"Partner Guarantee": in the case of Loral Space & Communications
Ltd., the Lockheed Martin Guarantee; and in the case of any other Partner
Guarantor, a Letter of Credit and, upon a drawing by the Administrative Agent
under such Letter of Credit, Partner Cash Collateral.
"Partner Guarantor": Loral Space & Communications Ltd. and any
partner that owns, directly or indirectly, an interest in the Borrower.
"Partner Guarantor Fee Arrangement": an arrangement to be entered
into among the Borrower, the Partner Guarantor(s) (or their Affiliates), Loral
and/or another Partner and certain other parties pursuant to which the Borrower
agrees to:
(i) issue warrants to purchase partnership interests of the
Borrower; and
(ii) pay to the Partner Guarantor(s) (or their Affiliates) a
quarterly fee equal to a percentage per annum of the amount of the Loans
outstanding, the payment of which shall be deferred on a subordinated basis
until after the Termination Date, at which time, the fee, together with interest
thereon shall be paid upon an amortization schedule to be determined.
Notwithstanding the foregoing, in lieu of paying the fees described in
clause (ii) above, the Borrower may issue its subordinated notes in an amount
equal to the fees otherwise payable, including without limitation deferral of
interest, providing payment terms as described in clause (ii) above. The terms
of the subordination referred to in clause (ii) above and of such subordinated
notes shall be satisfactory to the Administrative Agent.
"Partnership Agreement": the Amended and Restated Agreement of
Limited Partnership of Globalstar, L.P. dated as of December 31, 1994 among the
Partners, as amended, modified or supplemented from time to time in accordance
with Section 6.10.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
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"Person": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan": at any particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Preferred Equity Interests": any Equity Interests of the Borrower
that are preferred or senior in right of payment to any other Equity Interests
of the Borrower and which have the following characteristics:
(d) such Equity Interests are not mandatorily redeemable or
redeemable at the option of the holder thereof prior to 90
days after the Termination Date;
(e) dividends thereon are payable no more frequently than
quarterly;
(f) the dividend rate thereon is a market rate at the time of
issuance; and
(g) such Equity Interests have other terms satisfactory to the
Administrative Agent (the Banks hereby acknowledging that the
terms of the Preferred Equity Interests to be issued by the
Borrower to Globalstar Telecommunications, Ltd. ("GTL") in
connection with the issuance by GTL of its $300,000,000 __%
Convertible Preferred Equivalent Obligation due 2006 are
satisfactory).
"Properties": as defined in Section 3.16.
"Purchasing Banks": as defined in Section 10.6(c).
"Qualified Equity Interests:" Equity Interests in the Borrower which
are not mandatorily redeemable and which do not require any mandatory payments
or distributions with respect thereto.
"Rating": the senior unsecured debt rating of the Borrower (or its
status as unrated) from time to time in effect from S&P or Moody's, as the case
may be.
"Register": as defined in Section 10.6(d).
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"Release Date": the date on which the Release Date Conditions
Precedent are satisfied and the Guarantee Release occurs.
"Release Date Conditions Precedent": the Guarantees shall be
released by the Administrative Agent and the Banks upon the satisfaction of the
following conditions precedent and only upon receipt by the Administrative Agent
of a certificate from a Responsible Officer of the Borrower certifying that: (i)
the Borrower's senior unsecured debt rating (without consideration of any
third-party credit support) from (A) S&P is at least BBB- or (B) Moody's is at
least Baa3, (ii) (A) the Obligations (and, if applicable, the obligations of a
Subsidiary under any guarantee referred to in clause (B) below) are secured on
at least a pari passu and equal and ratable basis by the collateral securing all
outstanding Additional Buildout Indebtedness and (B) insofar as any of such
outstanding Additional Buildout Indebtedness is owed by or guaranteed by a
Subsidiary of the Borrower, such Subsidiary has guaranteed payment of the
Obligations, in all cases under the preceding clauses (A) and (B) on terms and
conditions relating to such collateral and guarantees (including intercreditor
arrangements) satisfactory to the Required Banks, (iii) no Default or Event of
Default has occurred and is continuing or would exist after giving effect to the
Guarantee Release and (iv) all representations and warranties set forth in
Section 3, when made on the Release Date and after giving effect to the
Guarantee Release, shall be true and correct. On and after the Release Date the
Borrower shall not be required to deliver the Lockheed Martin Guarantee, any
Acceptable Letter of Credit or any Subsidiary Guarantee.
"Reorganization": at any particular time, the condition that a
Multiemployer Plan is in reorganization within the meaning of Section 4241 of
ERISA.
"Reportable Event": any of the events set forth in Section 4043(b)
of ERISA or the regulations thereunder, other than those events as to which the
thirty day notice period is waived under subsections .13, .14, .16, .18, .19 or
.20 of PBGC Reg. Section 2615.
"Required Banks": at any date, Banks whose Commitments aggregate not
less than 51% of the total Commitments or, if the Commitments have been
terminated, of the outstanding Loans.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
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<PAGE> 22
"Responsible Officer": an officer of the Managing General Partner of
the Borrower.
"Restricted Payments": as defined in Section 6.6.
"S&P": Standard & Poor's Ratings Group.
"Satellite Project": the building, launching and operation by the
Borrower of a worldwide, low-earth orbit satellite based digital
telecommunications system which will provide wireless voice telephony and other
services.
"Security Documents": the collective reference to all assignments,
cash collateral agreements, security agreements, mortgages, deeds of trust,
pledge agreements, guarantees and all other security documents hereafter
delivered to the Administrative Agent granting a Lien on any asset or assets of
any Person to directly or indirectly secure any Additional Buildout Indebtedness
of the Borrower or to secure any guarantee of any such obligations and
liabilities.
"Service Provider Agreements": the Founding Service Provider
Agreements dated as of January 1, 1995, between the Borrower and each of
AirTouch Satellite Services, Finmeccanica S.p.A., Hyundai/DACOM, Loral/DASA
Globalstar, L.P., Loral Globalstar, L.P., TE.SA.M. and Vodastar Limited and any
agreements which the Borrower may enter into in the future with a service
provider to provide voice, fax, data, messaging, paging, geolocation,
information or other services using the Borrower's satellite constellation.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA but which is not a Multiemployer Plan.
"Subordinated Debt": any unsecured Indebtedness of the Borrower, no
part of the principal of which is required to be paid (whether by way of
mandatory sinking fund, mandatory redemption or mandatory prepayment or
otherwise) prior to the date which is 90 days after the Termination Date, and
the payment of principal of and interest on which, and the payment of any other
obligations of the Borrower to the holders of such Subordinated Debt, are
subordinated to the prior payment in full of the Obligations (including, without
limitation, obligations in respect of post-petition interest, whether or not
allowed) on terms satisfactory to the Administrative Agent.
"Subsidiary": as to any Person, a corporation, partnership or other
entity (a) of which Equity Interests having ordinary voting power (other than
Equity Interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such
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Person and (b) which is consolidated on such Person's financial statements.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Borrower.
"Subsidiary Guarantee": the Guarantees to be executed and delivered
by each Subsidiary (other than Foreign Subsidiaries) of the Borrower existing on
the date hereof, if any, or created or acquired after the date hereof,
substantially in the form of Exhibit F, as the same may be amended, supplemented
or otherwise modified from time to time.
"Subsidiary Guarantor": each Subsidiary that is a guarantor of the
Obligations pursuant to a Subsidiary Guarantee, provided that from and after the
Release Date "Subsidiary Guarantor" shall mean (i) each Subsidiary that is an
obligor, whether as borrower, issuer, guarantor or otherwise, of outstanding
Additional Buildout Indebtedness and has guaranteed payment of the Obligations
in a form substantially equivalent to the Subsidiary Guarantee and (ii) each
Subsidiary which is not an obligor, whether as borrower, issuer, guarantor or
otherwise, of outstanding Additional Buildout Indebtedness. A Subsidiary may be
a Subsidiary Guarantor under the preceding clause (ii) notwithstanding that it
has not guaranteed payment of the Obligations.
"Termination Date": the fifth anniversary of the Closing Date or
such earlier date as the Commitments shall terminate as provided herein,
provided, however, that if the Borrower does not comply with Section 6.1(a) then
the Termination Date shall automatically be moved forward to June 30, 2000
unless the Commitments shall terminate earlier as provided herein.
"Tranche": the reference to Eurodollar Loans the Interest Periods
with respect to all of which begin on the same date and end on the same later
date (whether or not such Loans shall originally have been made on the same
day).
"Transfer Effective Date": as defined in each Commitment Transfer
Supplement.
"Transferees": as defined in Section 10.6(f).
"Type": as to any Loan, its nature as an ABR Loan or a Eurodollar
Loan.
"Wholly Owned Subsidiary": any Subsidiary of the Borrower to the
extent at least 99% of the Equity Interests of such Subsidiary, other than
directors' or nominees' qualifying shares, are owned directly or indirectly by
the Borrower.
1.2 Other Definitional Provisions.
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(a) Unless otherwise specified herein, all terms defined in this
Agreement shall have the defined meanings when used in the Notes or any other
Loan Document certificate or other document made or delivered pursuant hereto.
(b) As used herein and in the Notes, the other Loan Documents and
any certificate or other document made or delivered pursuant hereto, accounting
terms relating to the Borrower and its Subsidiaries not defined in Section 1.1
and accounting terms partly defined in Section 1.1, to the extent not defined,
shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section ,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meaning given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Bank severally agrees to make revolving credit loans
(the "Loans") to the Borrower from time to time during the Commitment Period in
an aggregate principal amount at any one time outstanding not to exceed such
Bank's Commitment. During the Commitment Period the Borrower may use the
Commitments by borrowing, prepaying the Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof.
(b) The Loans may from time to time be (i) Eurodollar Loans, (ii)
ABR Loans or (iii) a combination thereof, as determined by the Borrower and
notified to the Administrative Agent in accordance with Sections 2.3 and 2.8;
provided, that no Loan shall be made as a Eurodollar Loan after the day that is
one month prior to the Termination Date.
2.2 Commitment/Loan Support. (a) Payment of all of the Guaranteed
Obligations shall be, prior to the Release Date, supported by the Lockheed
Martin Guarantee or, in lieu thereof, by Acceptable Letters of Credit (and,
after a drawing on an Acceptable Letter of Credit or Downgraded Letter of
Credit, by Partner Cash Collateral), provided that (a) no more than 60% of the
Guaranteed Obligations shall be supported at any time by Partner Guarantees
(other than the Lockheed Martin Guarantee) and (b) no less than 40% of the
Guaranteed Obligations shall be supported at any time by the Lockheed Martin
Guarantee. In addition, at all times prior to the Release Date, payment of all
of the Guaranteed Obligations will be supported by the Subsidiary
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Guarantee executed by each domestic Subsidiary in existence prior to the Release
Date.
(b) Subject to the provisions of paragraph (a) above and the other
provisions of this Section 2.2, the maximum liability of Lockheed Martin under
the Lockheed Martin Guarantee in respect of principal of and interest on the
Loans shall be reduced by the available amount (i.e., at any time, the amount
that may be drawn under each Letter of Credit at such time and, if a drawing has
been made by the Administrative Agent under such Letter of Credit, the sum of
the amount of principal of the Loans in respect of which such drawing was made
plus the amount of unpaid accrued interest on such principal amount at such time
deposited in a Partner Collateral Account) of each Acceptable Letter of Credit
(and, if such Acceptable Letter of Credit becomes a Downgraded Letter of Credit,
such Downgraded Letter of Credit) delivered to the Administrative Agent by
another Partner Guarantor. In the event that (i) any Partner Guarantor shall be
insolvent or bankrupt or any of the events of the type described in clause (vi)
of paragraph (a) of Section 8 shall occur with respect to such Partner Guarantor
and (ii) such Partner Guarantor has delivered any Partner Cash Collateral
pursuant to a drawing by the Administrative Agent under a Letter of Credit
issued for the account of such Partner Guarantor, then upon the occurrence of
any of the events described in clause (i) the maximum liability of Lockheed
Martin under the Lockheed Martin Guarantee shall be increased by an amount equal
to the aggregate amount of the drawing made by the Administrative Agent under
such Letter of Credit.
(c) Upon the termination or expiration of the Commitments or
acceleration of the Loans under Section 8 or maturity of the Loans on the
Termination Date, the Administrative Agent shall use reasonable efforts to call
on the Partner Guarantees, whether by notice or demand in the case of the
Lockheed Martin Guarantee, or, in the case of a Letter of Credit, by drawing
thereunder in conformity with the terms and conditions thereof, or, in the case
of Partner Cash Collateral, by withdrawal from the applicable Partner Collateral
Account (unless the Administrative Agent is prohibited from doing so because
such Partner is the subject of insolvency proceedings) (x) at approximately the
same time, to the extent practical and to the extent permitted by law, provided
that the failure to so call or draw at approximately the same time shall not
affect the obligations of the Loan Parties (including Lockheed Martin) under the
Loan Documents or of any issuer of a Letter of Credit thereunder or of any other
Partner Guarantor with respect to its Partner Cash Collateral, and (y) to the
extent practical and to the extent permitted by law, on a pro rata basis based
on the respective principal amounts of the Loans supported by each such
Guarantee (which, in the case of Partner Cash Collateral, shall be the principal
amount of the Loans supported by the Letter of Credit which funded such Partner
Cash Collateral), provided that this clause (y) shall not apply to calls made on
the Lockheed
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Martin Guarantee for amounts in respect of which the other Partner Guarantees
are inapplicable, and provided that the failure to so call or draw on a pro rata
basis shall not affect the obligations of the Loan Parties (including Lockheed
Martin) under the Loan Documents or of any issuer of an Acceptable Letter of
Credit thereunder. The preceding sentence shall not apply with respect to
drawings made pursuant to paragraphs (d) and (e) below.
(d) Unless any Expiring Letter of Credit is replaced by the
Applicable Partner with one or more Acceptable Letters of Credit with an equal
aggregate stated amount at least 30 days prior to the then scheduled expiration
date thereof, the Administrative Agent shall use reasonable efforts to draw upon
such Expiring Letter of Credit. All proceeds thereof shall be deposited to a
Partner Collateral Account established for the Applicable Partner.
(e) The Administrative Agent shall use reasonable efforts to draw
the full amount of each Downgraded Letter of Credit promptly following its
actual knowledge that an Acceptable Letter of Credit has become a Downgraded
Letter of Credit unless such Downgraded Letter of Credit is replaced by the
Applicable Partner prior to such draw with one or more Acceptable Letters of
Credit with an equal aggregate stated amount; provided that the Administrative
Agent shall not draw on such Downgraded Letter of Credit during the 45 day
period after it obtains such knowledge (unless Obligations are otherwise due) if
the Borrower or the Applicable Partner notifies the Administrative Agent that it
is attempting to provide replacement Acceptable Letters of Credit (unless such
Letter of Credit will expire within 30 days). All proceeds of any such drawing
shall be deposited to a Partner Collateral Account established for the
Applicable Partner. If (i) the issuer of such Downgraded Letter of Credit is
insolvent or bankrupt or any of the events described in clause (vi) of paragraph
(a) of Section 8 shall occur with respect to such issuer, (ii) such issuer fails
to honor such drawing, (iii) the Administrative Agent is prevented by applicable
law from making such a drawing or (iv) amounts drawn under such Downgraded
Letter of Credit are required to be restored or returned by the Administrative
Agent or any Bank as a result of the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the issuer of such Downgraded Letter of Credit
or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, such issuer or any
substantial part of its property, or otherwise, then the maximum liability of
Lockheed Martin under the Lockheed Martin Guarantee shall be increased by an
amount equal to the stated amount of such Downgraded Letter of Credit.
(f) All amounts, if any, credited to the Partner Collateral Accounts
shall be invested by the Administrative Agent in Collateral Cash Equivalents
(all such investments to be made in the name of the Administrative Agent) as
directed by the
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Applicable Partner unless a Default or Event of Default has occurred and is
continuing. Unless a Default or an Event of Default has occurred and is
continuing, the Administrative Agent is authorized to:
(i) release net earnings on such investments, if any,
quarterly on the last day of each March, June, September and December, provided
that the Administrative Agent shall not release any earnings at any time unless
the balance of the Partner Cash Collateral remaining in such Partner Collateral
Account after giving effect to such release is at least equal to the proceeds of
the Administrative Agent's drawing(s) under the Letters of Credit delivered to
it for the account of the Applicable Partner;
(ii) release all Partner Cash Collateral to the Applicable
Partner upon delivery of one or more Acceptable Letters of Credit with an equal
aggregate stated amount to that of the Letters of Credit drawn upon by the
Administrative Agent to fund the related Partner Collateral Account;
(iii) release all Partner Cash Collateral to the Applicable
Partner upon the Guarantee Release; and
(iv) release the applicable Partner Cash Collateral to
Lockheed Martin (to the extent permitted by applicable law and applicable
Contractual Obligations) upon increase of liability of Lockheed Martin under the
Lockheed Martin Guarantee in accordance with this Section 2.2.
The Administrative Agent shall not be liable for any losses or decreases in
value with respect to the Partner Cash Collateral, other than those occurring as
a result of its gross negligence or willful misconduct.
2.3 Procedure for Revolving Credit Borrowing. The Borrower may
borrow under the Commitments during the Commitment Period on any Eurodollar
Business Day, if all or any part of the requested Loans are to be initially
Eurodollar Loans, or on any Business Day, otherwise; provided, that the Borrower
shall give the Administrative Agent irrevocable notice (which notice must be
received by the Administrative Agent prior to 10:00 A.M., New York City time,
(a) with respect to any of the requested Loans that are to be initially
Eurodollar Loans, three Eurodollar Business Days prior to the requested
Borrowing Date or (b) with respect to any of the requested Loans that are to be
initially ABR Loans, on the requested Borrowing Date), specifying (i) the amount
to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing
is to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the
borrowing is to be entirely or partly of Eurodollar Loans, the respective
amounts of each such Loan and the respective lengths of the initial Interest
Periods therefor. Each borrowing under the Commitments shall be in an amount
equal to $10,000,000 or a whole multiple of
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$1,000,000 in excess thereof or in the remaining amount of the Available
Commitments. Upon receipt of any such notice from the Borrower, the
Administrative Agent shall promptly notify each Bank thereof. Each Bank will
make the amount of its pro rata share of each borrowing available to the
Administrative Agent for the account of the Borrower at the office of the
Administrative Agent specified in Section 10.2 prior to 12:00 Noon, New York
City time, on the Borrowing Date requested by the Borrower in funds immediately
available to the Administrative Agent. Such borrowing will then be made
available to the Borrower by the Administrative Agent's crediting the account of
the Borrower on the books of such office with the aggregate of the amounts made
available to the Administrative Agent by the Banks and in like funds as received
by the Administrative Agent.
2.4 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Bank the then unpaid principal amount of each Loan of the Borrower on the
Termination Date (or such earlier date on which the Loans become due and payable
pursuant to Section 2.6, 2.7 or 8). The Borrower hereby further agrees to pay
interest on the unpaid principal amount of the Loans from time to time
outstanding from the date hereof until payment in full thereof at the rates per
annum, and on the dates, set forth in subsection 2.10.
(b) Each Bank shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrower to such Bank
resulting from each Loan of such Bank from time to time, including the amounts
of principal and interest payable and paid to such Bank from time to time under
this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant to
subsection 10.6(d), and a subaccount therein for each Bank, in which shall be
recorded (i) the amount of each Loan made hereunder, the Type thereof and each
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Bank
hereunder and (iii) both the amount of any sum received by the Administrative
Agent hereunder from or for the account of the Borrower and each Bank's share
thereof.
(d) The entries made in the Register and the accounts of each Bank
maintained pursuant to Section 2.4(b) shall, to the extent permitted by
applicable law, be conclusive evidence, in the absence of manifest error, of the
existence and amounts of the obligations of the Borrower therein recorded;
provided, however, that the failure of any Bank or the Administrative Agent to
maintain the Register or any such account, or any error therein, shall not in
any manner affect the obligation of the Borrower to repay (with applicable
interest) the Loans made to such Borrower by such Bank in accordance with the
terms of this Agreement.
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(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Bank, the Borrower will execute and deliver to such Bank a
promissory note of the Borrower evidencing the Loans of such Bank, substantially
in the form of Exhibit A with appropriate insertions as to date and principal
amount (a "Note").
2.5 Commitment Fees. The Borrower agrees to pay to the
Administrative Agent for the account of each Bank a commitment fee for the
period from and including the Closing Date, computed at the Commitment Fee Rate
on the average daily amount of the Available Commitment of such Bank during the
period for which payment is made, payable quarterly in arrears on the last day
of each March, June, September and December and on the Termination Date,
commencing on the first of such dates to occur after the date hereof.
2.6 Termination, Reduction or Increase of Commitments. (a) The
Borrower shall have the right, upon not less than three Business Days' notice to
the Administrative Agent (which shall give prompt notice thereof to the Banks),
to terminate the Commitments or, from time to time, to reduce the amount of the
Commitments; provided, that no such termination or reduction shall be permitted
if, after giving effect thereto and to any payments or prepayments of the Loans
made on the effective date thereof, the aggregate principal amount of the Loans
then outstanding would exceed the aggregate Commitments then in effect. Any such
reduction shall be in an amount equal to $10,000,000 or a whole multiple of
$1,000,000 in excess thereof and shall reduce permanently the Commitments then
in effect.
(b) The Commitments shall be automatically reduced in the following
amounts at the following times by an amount equal to:
(i) 100% of the Net Cash Proceeds of the issuance or
incurrence of Additional Buildout Indebtedness after the Closing Date, except
for the proceeds of not more than $950,000,000 (or such higher amount as may be
approved by the Required Banks) in the aggregate of Additional Buildout
Indebtedness, net of interest accretion on non-cash pay issuances and escrowed
interest on overfunded issuances related to such Additional Buildout
Indebtedness; and
(ii) 100% of the Net Cash Proceeds of any sale or other
disposition by the Borrower or any of its Subsidiaries of any assets except for
sales and dispositions permitted by Section 6.5(b).
(c) Upon the request of the Borrower to the Administrative Agent and
the Banks, the Commitments hereunder may be increased by not more than
$150,000,000 or such lesser amount as may be agreed upon by the parties as
referred to below; provided that (i) each Bank whose Commitment is increased
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consents, (ii) the Required Banks consent, (iii) such increases are supported by
either the Lockheed Martin Guarantee or by Acceptable Letters of Credit or by
other guarantees, collateral or credit support satisfactory to the Required
Banks and (iv) if the Commitments would exceed $250,000,000 after giving effect
to such increase, Lockheed, Martin consents to such increase.
(d) In the event of such a requested increase in the Commitments,
(i) each of the Banks shall be given the opportunity to participate in the
increased Commitments ratably in the proportions that their respective
Commitments bear to the aggregate Commitments, and (ii) to the extent that the
Banks do not elect so to participate in such increased Commitments after being
afforded an opportunity to do so, then the Borrower shall consult with the
Administrative Agent as to the number, identity and requested Commitments of
additional financial institutions which the Borrower may upon the written
consent of the Administrative Agent (which consent shall not be unreasonably
withheld) invite to participate in the Commitments.
(e) In the event that the Borrower and one or more of the Banks (or
other financial institutions which may elect to participate) shall agree, in
accordance with Section 2.6(c), upon such an increase in the aggregate
Commitments, the Borrower, the Administrative Agent and the financial
institution in question shall enter into a Commitment Increase Supplement
setting forth the amounts of the increase in Commitments and providing that the
additional financial institutions participating shall be deemed to be included
as Banks for all purposes of this Agreement. Upon the execution and delivery of
such Commitment Increase Supplement as provided above, and upon satisfaction of
such other conditions as the Administrative Agent may specify (including the
delivery of certificates and legal opinions on behalf of the Borrower relating
to the amendment and, if applicable, new Notes), this Agreement shall be deemed
to be amended accordingly.
(f) No Bank shall have any obligation to increase its Commitment in
the event of such a request by the Borrower hereunder.
2.7 Prepayments. (a) The Borrower may at any time and from time to
time prepay the Loans, in whole or in part, without premium or penalty, upon at
least three Business Days' irrevocable notice to the Administrative Agent in the
case of ABR Loans and at least three Eurodollar Business Days' irrevocable
notice to the Administrative Agent in the case of Eurodollar Loans, which notice
shall specify the date and amount of prepayment and whether the prepayment is of
Eurodollar Loans, ABR Loans or a combination thereof, and, if of a combination
thereof, the amount allocable to each. Upon receipt of any such notice the
Administrative Agent shall promptly notify each Bank thereof. If any such notice
is given, the amount specified in such notice shall be due and payable on the
date specified therein, together with accrued interest to such date on the
amount prepaid.
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Partial prepayments shall be in an aggregate principal amount of $10,000,000 or
a whole multiple of $1,000,000 in excess thereof. Each prepayment of Eurodollar
Loans shall be subject to compliance with the provisions of Sections 2.9 and
2.17.
(b) If at any time the principal amount of Loans then outstanding
shall exceed the Commitments, the Borrower shall immediately prepay or at its
option cash collateralize the Loans as provided in Section 2.7(c) in an amount
equal to such excess. Amounts payable pursuant to this Section 2.7(b) shall be
applied, first, to prepay any ABR Loans then outstanding and second, to prepay
or cash collateralize (at the Borrower's option) any Eurodollar Loans then
outstanding (provided, that any Eurodollar Loans so cash collateralized shall be
prepaid no later than the last day of the respective Interest Periods therefor).
Each prepayment pursuant to this Section 2.7(b) shall be accompanied by accrued
interest on the amount prepaid and any amounts payable pursuant to Section 2.17.
(c) The Borrower shall cash collateralize Eurodollar Loans pursuant
to Section 2.7(b) by depositing in an account with the Administrative Agent (the
"Eurodollar Cash Collateral Account"), to be established and maintained pursuant
to such terms and conditions as shall be specified by the Administrative Agent
in its discretion, an amount determined pursuant to the second sentence of
Section 2.7(b). Such deposited monies shall be held by the Administrative Agent
as cash collateral (the "Eurodollar Cash Collateral") for the outstanding
Eurodollar Loans on a pro rata basis; provided, that if any ABR Loans shall be
made while there is Eurodollar Cash Collateral on deposit in the Eurodollar Cash
Collateral Account, the Administrative Agent shall apply such Eurodollar Cash
Collateral to the immediate prepayment of such ABR Loans and only the Eurodollar
Cash Collateral remaining after such prepayment, if any, shall be retained in
the Eurodollar Cash Collateral Account. The Eurodollar Cash Collateral Account
and the Eurodollar Cash Collateral shall be subject to the sole dominion and
control of the Administrative Agent and, except as set forth above, the
Eurodollar Cash Collateral shall be retained in the Eurodollar Cash Collateral
Account and applied to the repayment of Eurodollar Loans on the last day of the
respective Interest Periods therefor, with the Borrower being obligated to repay
the balance of such Eurodollar Loans in the event the Eurodollar Cash Collateral
is insufficient therefor. Any amounts remaining in the Eurodollar Cash
Collateral Account after repayment of such Eurodollar Loans will be released to
the Borrower provided no Default or Event of Default exists. The Administrative
Agent shall invest the Eurodollar Cash Collateral in Cash Equivalents, and shall
pay over to the Borrower any interest earned on such investments quarterly on
the last day of each March, June, September and December; provided, that no
Default or Event of Default shall have occurred and be continuing (in which case
such interest shall be retained as Eurodollar Cash Collateral). The
Administrative Agent shall not be liable for any losses or
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<PAGE> 32
decreases in value with respect to the Eurodollar Cash Collateral, other than
those occurring as a result of its gross negligence or willful misconduct.
2.8 Conversion and Continuation Options. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to ABR Loans, by giving the
Administrative Agent at least two Business Days' prior irrevocable notice of
such election; provided, that any such conversion of Eurodollar Loans may only
be made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Eurodollar Business Days' prior
irrevocable notice of such election. Any such notice of conversion to Eurodollar
Loans shall specify the length of the initial Interest Period or Interest
Periods therefor. Upon receipt of any such notice the Administrative Agent shall
promptly notify each Bank thereof. All or any part of outstanding Eurodollar
Loans or ABR Loans may be converted as provided herein; provided, that (i) no
Loan may be converted into a Eurodollar Loan when any Event of Default (upon
notice from the Administrative Agent, on behalf of the Required Banks, except
such notice shall not be required in the case of the Event of Default described
in clause (a)(vi) of Section 8) has occurred and is continuing, (ii) any such
conversion may only be made if, after giving effect thereto, Section 2.9 shall
not have been contravened and (iii) no Loan may be converted into a Eurodollar
Loan after the date that is one month prior to the Termination Date.
(b) Any Eurodollar Loan may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower's
giving notice to the Administrative Agent, in accordance with the applicable
provisions of the term "Interest Period" set forth in Section 1.1, of the length
of the next Interest Period to be applicable to such Loans; provided, that no
Eurodollar Loan may be continued as such (i) when any Event of Default (upon
notice from the Administrative Agent, on behalf of the Required Banks, except
such notice shall not be required in the case of an Event of Default described
in clause (a)(vi) of Section 8) has occurred and is continuing, (ii) if, after
giving effect thereto, Section 2.9 would be contravened or (iii) after the date
that is one month prior to the Termination Date; provided further, that if the
Borrower shall fail to give any required notice as described above in this
paragraph or if such continuation is not permitted pursuant to the preceding
proviso such Loans shall be automatically converted to ABR Loans on the last day
of such then expiring Interest Period.
2.9 Minimum Amounts of Tranches. All borrowings, conversions and
continuations of Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto (a) the aggregate principal amount of the
Loans comprising each Tranche shall be equal to $10,000,000 or a whole
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<PAGE> 33
multiple of $1,000,000 in excess thereof and (b) there shall be no more than ten
different Tranches outstanding at any one time.
2.10 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such
Interest Period plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to
the ABR.
(c) If all or a portion of (i) the principal amount of any Loan,
(ii) any interest payable thereon or (iii) any fee or other amount payable
pursuant to this Agreement shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at a rate per annum which is (y) in the case of overdue principal, the rate that
would otherwise be applicable thereto pursuant to the foregoing provisions of
this Section 2.10 plus 2% or (z) in the case of overdue interest (to the extent
permitted by applicable law), fees or other amounts, the rate described in
paragraph (b) of this Section 2.10 plus 2%, in each case from the date of such
non-payment until such amount is paid in full (whether before or, to the extent
permitted by applicable law, after judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date; provided, that interest accruing pursuant to paragraph (c) of this Section
2.10 shall be payable on demand, or, in the absence of demand, weekly on Friday
of each week.
2.11 Computation of Interest and Fees. (a) Interest on Loans and
fees (other than interest calculated on the basis of the Prime Rate) shall be
calculated on the basis of a 360-day year for the actual days elapsed; provided,
that interest calculated on the basis of the Prime Rate shall be calculated on
the basis of a 365- or 366- (as the case may be) day year for the actual days
elapsed. The Administrative Agent shall as soon as practicable notify in writing
the Borrower and the Banks of each determination of a Eurodollar Rate. Any
change in the interest rate on a Loan resulting from a change in the ABR shall
become effective as of the opening of business on the day on which such change
becomes effective. The Administrative Agent shall as soon as practicable notify
in writing the Borrower and the Banks of the effective date and the amount of
each such change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Banks in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower or a Bank, deliver to
the Borrower or such Bank, as the case may be, a statement showing the
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quotations used by the Administrative Agent in determining any interest rate
pursuant to Section 2.10(a).
2.12 Inability to Determine Interest Rate. In the event that prior
to the first day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by reason
of circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Required Banks that the Eurodollar Rate determined or to be determined for such
Interest Period will not adequately and fairly reflect the cost to such Banks
(as conclusively certified in writing by such Banks) of making or maintaining
their affected Eurodollar Loans during such Interest Period, the Administrative
Agent shall give telecopy or telephonic notice (confirmed in writing) thereof to
the Borrower and the Banks as soon as practicable thereafter. If such notice is
given (x) any Eurodollar Loans requested to be made on the first day of such
Interest Period shall be made as ABR Loans, (y) any Loans that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be
continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be
converted, on the first day of such Interest Period, to ABR Loans. The
Administrative Agent shall promptly notify the Borrower at such time as the
conditions set forth in (a) and (b) above are no longer in effect, and until
such notice has been delivered by the Administrative Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Loans to Eurodollar Loans.
2.13 Pro Rata Treatment and Payments. (a) Each borrowing by the
Borrower from the Banks of Loans, each payment by the Borrower on account of any
commitment fee hereunder and any reduction of the Commitments of the Banks shall
be made pro rata according to the respective Commitment Percentages of the
Banks. Each payment (including each prepayment) by the Borrower on account of
principal of and interest on the Loans shall be made pro rata according to the
respective outstanding principal amounts of the Loans then held by the Banks
except to the extent any other provision of this Agreement provides for non pro
rata payments. All payments (including prepayments) to be made by the Borrower
hereunder and under the Notes, whether on account of principal, interest, fees
or otherwise, shall be made without set-off or counterclaim and shall be made
prior to 12:00 Noon, New York City time, on the due date thereof to the
Administrative Agent, for the account of the Banks, at the Administrative
Agent's office specified in Section 10.2, in Dollars and in immediately
available funds. The Administrative Agent shall distribute such payments to the
Banks promptly upon receipt in like funds as received. If any payment hereunder
(other than
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payments on the Eurodollar Loans) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day, and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension. If any payment on a
Eurodollar Loan becomes due and payable on a day other than a Eurodollar
Business Day, the maturity thereof shall be extended to the next succeeding
Eurodollar Business Day unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Eurodollar Business Day.
(b) Unless the Administrative Agent shall have been notified in
writing by any Bank prior to a Borrowing Date that such Bank will not make the
amount that would constitute its portion of the borrowing to be made on such
date available to the Administrative Agent, the Administrative Agent may assume
that such Bank has made such amount available to the Administrative Agent on
such Borrowing Date, and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
amount is made available to the Administrative Agent on a date after such
Borrowing Date, such Bank shall pay to the Administrative Agent on demand an
amount equal to the product of (i) the daily average Federal funds rate during
such period as quoted by the Administrative Agent, times (ii) the amount of such
Bank's portion of such borrowing, times (iii) a fraction the numerator of which
is the number of days that elapse from and including such Borrowing Date to the
date on which such Bank's portion of such borrowing shall have become
immediately available to the Administrative Agent and the denominator of which
is 360. A certificate of the Administrative Agent submitted to any Bank with
respect to any amounts owing under this Section 2.13(b) shall be conclusive in
the absence of manifest error. If such Bank's portion of such borrowing is not
in fact made available to the Administrative Agent by such Bank within three
Business Days of such Borrowing Date, the Administrative Agent shall be entitled
to recover such amount with interest thereon at the rate per annum applicable to
ABR Loans hereunder, on demand, from the Borrower. If the Borrower returns to
the Administrative Agent any amount with interest thereon as described in the
immediately preceding sentence, such Bank shall indemnify the Borrower for the
difference, if any, between (i) the aggregate interest paid by the Borrower to
the Administrative Agent in accordance with the immediately preceding sentence
less (ii) the aggregate interest which actually accrued on such amount prior to
its return to the Administrative Agent.
2.14 Illegality. Notwithstanding any other provision herein, if any
change in any Requirement of Law or in the interpretation or application thereof
shall make it unlawful for any Bank to make or maintain Eurodollar Loans as
contemplated by this Agreement, (a) the commitment of such Bank hereunder to
make Eurodollar Loans, continue Eurodollar Loans as such and convert ABR Loans
to Eurodollar Loans shall forthwith be cancelled and
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(b) such Bank's Loans then outstanding as Eurodollar Loans, if any, shall be
converted automatically to ABR Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a Eurodollar Loan occurs on
a day which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to such Bank such amounts, if any, as may be
required pursuant to Section 2.17.
2.15 Other Costs; Increased Costs. (a) The Borrower agrees to pay
to each Bank which requests compensation under this Section 2.15(a) (by written
notice to the Borrower through the Administrative Agent), on the last day of
each Interest Period with respect to any Eurodollar Loan made by such Bank, so
long as such Bank shall be required to maintain reserves against "Eurocurrency
liabilities" under Regulation D of the Board of Governors of the Federal Reserve
System (or, so long as such Bank may be required by such Board of Governors or
by any other Governmental Authority to maintain reserves against any category of
liabilities which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or against any
category of extensions of credit or other assets of such Bank which includes any
Eurodollar Loans), an additional amount (determined by such Bank and promptly
notified to the Borrower) representing such Bank's calculation or, if an
accurate calculation is impracticable, reasonable estimate (using such
reasonable means of allocation as such Bank shall determine) of the actual
costs, if any, incurred by such Bank while such Eurodollar Loans were
outstanding as a result of the applicability of the foregoing reserves to such
Eurodollar Loans, which amount in any event shall not exceed the product of the
following for each day while such Eurodollar Loans were outstanding:
(i) the principal amount of the relevant Eurodollar Loans made
by such Bank outstanding on such day; and
(ii) the difference between (x) a fraction the numerator of
which is the Eurodollar Rate (expressed as a decimal) applicable to such
Eurodollar Loans, and the denominator of which is one minus the maximum rate
(expressed as a decimal) at which such reserve requirements are imposed by such
Board of Governors or other Governmental Authority on such date minus (y) such
numerator; and
(iii) a fraction the numerator of which is one and the
denominator of which is 360.
(b) In the event that any change in any Requirement of Law or in the
interpretation or application thereof or compliance by any Bank with any request
or directive (whether or not having the force of law) from any central bank or
other Governmental Authority made subsequent to the date hereof:
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(i) shall subject any Bank to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Eurodollar Loan made by it, or
change the basis of taxation of payments to such Bank in respect thereof (except
for taxes covered by Section 2.16 and changes in the rate of tax on the overall
net income of such Bank);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by, any office of
such Bank which is not otherwise described in Section 2.15(a); or
(iii) shall impose on such Bank any other condition;
and the result of any of the foregoing is to increase the cost to such Bank, by
an amount which such Bank deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then the Borrower shall pay such Bank within 15
Business Days following demand therefor any additional amounts necessary to
compensate such Bank for such increased cost or reduced amount receivable. If
any Bank becomes entitled to claim any additional amounts pursuant to this
Section 2.15(b), it shall promptly notify the Borrower, through the
Administrative Agent, of the event by reason of which it has become so entitled.
(c) In the event that any Bank shall have determined that any change
in any Requirement of Law regarding capital adequacy or in the interpretation or
application thereof or compliance by such Bank or any corporation controlling
such Bank with any request or directive regarding capital adequacy (whether or
not having the force of law) from any Governmental Authority made subsequent to
the date hereof does or shall have the effect of reducing the rate of return on
such Bank's or such corporation's capital as a consequence of its obligations
hereunder to a level below that which such Bank or such corporation could have
achieved but for such change or compliance (taking into consideration such
Bank's or such corporation's policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from time to time, after prompt
submission by such Bank to the Borrower (with a copy to the Administrative
Agent) of a written request therefor, the Borrower shall pay to such Bank within
15 Business Days following demand therefor such additional amount or amounts as
will compensate such Bank or such corporation for such reduction.
(d) A certificate as to any additional amounts payable pursuant to
this Section 2.15 submitted by the relevant Bank, through the Administrative
Agent, to the Borrower shall be conclusive in the absence of manifest error. The
covenants contained in this Section 2.15 shall survive the termination of
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this Agreement and the payment of the Notes and all other amounts payable
hereunder. Any notice to be given by a Bank under this Section 2.15 after
termination of this Agreement shall be effective only if given within 120 days
after such Bank becomes aware or should have become aware of the events giving
rise to such notice.
2.16 Taxes. (a) All payments made by the Borrower under this
Agreement and the Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings
imposed, levied, collected, withheld or assessed by any Governmental Authority,
excluding, in the case of the Administrative Agent and each Bank, (i) net income
taxes, franchise and branch profit taxes (imposed in lieu of net income taxes)
imposed on the Administrative Agent or such Bank, as the case may be, as a
result of a present or former connection between the jurisdiction of the
government or taxing authority imposing such tax and the Administrative Agent or
such Bank (excluding a connection arising solely from the Administrative Agent
or such Bank having executed, delivered or performed its obligations or received
a payment under, or enforced, this Agreement or the Notes) or any political
subdivision or taxing authority thereof or therein, (ii) any taxes, levies,
imposts, duties, charges, fees, deductions or withholdings arising after the
Closing Date, solely as a result of or attributable to the Administrative Agent
or Bank (x) changing its designated lending office as of the Closing Date to a
lending office located in any other jurisdiction or (y) designating an
additional lending office located in any other jurisdiction and (iii) any taxes,
levies, imposts, duties, charges, fees, deductions or withholdings in effect on
the Closing Date (all such non-excluded taxes, levies, imposts, duties, charges,
fees, deductions and withholdings being hereinafter called "Taxes"). If any
Taxes are required to be withheld from any amounts payable to the Administrative
Agent or any Bank hereunder or under the Notes, the amounts so payable to the
Administrative Agent or such Bank shall be increased to the extent necessary to
yield to the Administrative Agent or such Bank (after payment of all Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement and the Notes. Whenever any Taxes are
payable by the Borrower, as promptly as possible thereafter the Borrower shall
send to the Administrative Agent for its own account or for the account of the
Administrative Agent or such Bank, as the case may be, a copy of any original
official receipt that may be received by the Borrower showing payment thereof.
If the Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the receipts that may be
received or other available documentary evidence, the Borrower shall indemnify
the Administrative Agent and the Banks for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Bank to the
United States or
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other Governmental Authority as a result of any such failure. The agreements in
this Section 2.16(a) shall survive the termination of this Agreement and the
payment of the Notes and all other amounts payable hereunder. If any Taxes
constituting a withholding tax of the United States of America or any other
Governmental Authority shall be or become applicable, after the Closing Date, to
such payments by the Borrower to the Administrative Agent or Bank, the
Administrative Agent or such Bank shall use its best efforts to make, fund and
maintain its Loans through another lending office of the Administrative Agent or
such Bank in another jurisdiction so as to reduce, to the fullest extent
possible, the Borrower's liability hereunder, if the making, funding or
maintenance of such Loans through such other office does not otherwise
materially adversely affect such Loans or the Administrative Agent or such Bank.
(b) Prior to the first Interest Payment Date, each Bank that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to the Borrower and the Administrative Agent (i) two
duly completed copies of United States Internal Revenue Service Form 1001 or
4224 or successor applicable form, as the case may be, and (ii) an Internal
Revenue Service Form W-8 or W-9 or successor applicable form. Each such Bank
also agrees to deliver to the Borrower and the Administrative Agent two further
copies of the said Form 1001 or 4224 and Form W-8 or W-9, or successor
applicable forms or other manner of certification, as the case may be, on or
before the date that any such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to the Borrower, and such extensions or renewals thereof as may
reasonably be requested by the Borrower or the Administrative Agent, unless in
any such case an event (including, without limitation, any change in treaty, law
or regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Bank from duly completing and delivering any such form with respect
to it and such Bank so advises the Borrower and the Administrative Agent. Such
Bank shall certify (i) in the case of a Form 1001 or 4224, that it is entitled
to receive payments under this Agreement without deduction or withholding of any
United States federal income taxes and (ii) in the case of a Form W-8 or W-9,
that it is entitled to an exemption from United States backup withholding tax.
The Borrower shall not be required to pay any increased amount on account of
Taxes pursuant to this Section 2.16 to the Administrative Agent or any Bank that
fails to furnish any form or statement that it is required to furnish in
accordance with this Section 2.16(b) and, to the extent required by law, the
Borrower shall be entitled to deduct Taxes from the payments owed to such Bank
or the Administrative Agent. In the event that the Borrower is required to pay
any Bank any additional amount or indemnify any Bank pursuant to Section 2.16(a)
(subject to the provisions of Section 2.17) and no change in lending office is
made in accordance with the last
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sentence of Section 2.16(a), after the Borrower makes such payment, such Bank
shall transfer, in accordance with the procedures set forth in Section 11.6(c),
its Loans and Commitment to a Bank selected by the Borrower with the approval of
such transferor Bank and the Administrative Agent (not to be unreasonably
withheld).
2.17 Indemnity. The Borrower agrees to indemnify each Bank and to
hold each Bank harmless from any loss or expense which such Bank may sustain or
incur as a consequence of (a) default by the Borrower in payment when due of the
principal amount of or interest on any Eurodollar Loan, (b) default by the
Borrower in making a borrowing of, conversion into or continuation of Eurodollar
Loans after the Borrower has given a notice requesting the same in accordance
with the provisions of this Agreement, (c) default by the Borrower in making any
prepayment after the Borrower has given a notice thereof in accordance with the
provisions of this Agreement, (d) the making of a voluntary or involuntary
prepayment of Eurodollar Loans on a day which is not the last day of an Interest
Period with respect thereto or (e) the conversion of Eurodollar Loans to ABR
Loans pursuant to Section 2.12 or 2.14 on a day which is not the last day of the
Interest Period with respect thereto, including, without limitation, in each
case, any such loss or expense arising from the reemployment of funds obtained
by it or from fees payable to terminate the deposits from which such funds were
obtained. A certificate setting forth the computation of any amount payable
pursuant to the foregoing sentence submitted by a Bank, through the
Administrative Agent, to the Borrower shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Notes and all other amounts payable hereunder.
2.18 Purpose. The proceeds of the Loans shall be used by the
Borrower solely to finance (i) the buildout of the Satellite Project and (ii)
interest payments on the Loans and (iii) working capital needs.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to enter into this Agreement and to
make the Loans herein provided for, the Borrower hereby represents and warrants
to the Administrative Agent and to each Bank that:
3.1 Financial Condition. (a) The consolidated balance sheet of the
Borrower as at December 31, 1994 and the related consolidated statements of
operations, of partners' capital and of cash flows for the fiscal period ended
on such date, reported on by Deloitte & Touche and (b) the unaudited
consolidated balance sheet of the Borrower as at September 30, 1995 and the
related unaudited consolidated statements of operations and of cash flows for
the fiscal quarter ended on such date, copies of which have heretofore been
furnished to each
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Bank, are complete and correct in all material respects and present fairly
(except, with respect to interim reports, for normal year-end adjustments) the
consolidated financial condition of the Borrower as at such date, and the
consolidated results of their operations and cash flows for the fiscal period
then ended. All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such accountants and as
disclosed therein). Such financial statements, taken together, disclose, in
accordance with GAAP, all material contingent liabilities and liability for
taxes, long-term leases and unusual forward or long-term commitments of the
Borrower and its Subsidiaries.
3.2 No Change. Since December 31, 1994 (a) there has been no change
in the business, operations, property or financial or other condition of the
Borrower or any of its Subsidiaries which has or could reasonably be expected to
have a Material Adverse Effect, and (b) no dividends or distributions have been
declared, paid or made upon any Equity Interests of the Borrower nor have any
shares or other units of Equity Interests of the Borrower been redeemed,
retired, purchased or otherwise acquired for value by the Borrower or any of its
Subsidiaries except as permitted by Section 6.6.
3.3 Existence; Compliance with Law. Each of the Borrower and its
Subsidiaries (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization, (b) has the
partnership or corporate power and authority and the legal right to own and
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is currently engaged, (c) is duly qualified as a
foreign partnership or corporation, as the case may be, and in good standing
under the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification, except to
the extent that the failure to be so qualified could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect, and (d) is in
compliance with all Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
3.4 Power; Authorization; Enforceable Obligations. Each of the
Borrower and its Subsidiaries has the partnership or corporate, as the case may
be, power and authority and the legal right to make, deliver and perform the
Loan Documents to which it is a party and, in the case of the Borrower, to
borrow hereunder and has taken all necessary partnership or corporate action to
authorize the execution, delivery and performance of the Loan Documents to which
it is a party and, in the case of the Borrower, the borrowings hereunder on the
terms and conditions of this Agreement. No consent or authorization of, filing
with or other act by or in respect of any Governmental Authority is
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required in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of the Loan Documents, other
than those which have been obtained or made and are in full force and effect,
including, but not limited to, the license granted on January 31, 1995 by the
Federal Communications Commission authorizing the construction, launch and
operation of the Satellite Project in the United States, provided that this
sentence shall not apply to the Feeder Link Licenses. This Agreement has been,
and each other Loan Document will be, duly executed and delivered on behalf of
each Loan Party (other than Lockheed Martin) party thereto. This Agreement
constitutes and each other Loan Document (other than the Lockheed Martin
Guarantee), when executed and delivered will constitute, a legal, valid and
binding obligation of each Loan Party thereto enforceable against such Loan
Party in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
3.5 No Legal Bar. The execution, delivery and performance of the
Loan Documents to which the Borrower or a Subsidiary is a party, the borrowings
hereunder and the use of the proceeds thereof, will not violate any Requirement
of Law or any Contractual Obligation applicable to the Borrower or of any of the
Subsidiaries, and will not result in, or require, the creation or imposition of
any Lien on any of its or their respective properties or revenues pursuant to
any Requirement of Law or Contractual Obligation.
3.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
of the Subsidiaries or against any of its or their respective properties or
revenues (a) with respect to any of the Loan Documents or any of the
transactions contemplated hereby or thereby, or (b) which could reasonably be
expected to have a Material Adverse Effect.
3.7 No Default. Neither the Borrower nor any of the Subsidiaries is
in default under or with respect to any Contractual Obligation in any respect
which could reasonably be expected to have a Material Adverse Effect. No Default
or Event of Default has occurred and is continuing.
3.8 Ownership of Property; Liens. Each of the Borrower and the
Subsidiaries has good record and marketable title in fee simple to or valid
leasehold interests in all its real property, and good title to all its other
property, and none of such property is subject to any Lien, except as permitted
in Section 7.3 and except where the failure to have such title could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
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3.9 Intellectual Property. The Borrower and each of its
Subsidiaries owns, or are licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes (the "Intellectual Property"),
necessary for the conduct of its business as currently contemplated except for
those the failure to own or license which could not reasonably be expected to
have a Material Adverse Effect. No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does the
Borrower know of any valid basis for any such claim. The use of such
Intellectual Property by the Borrower and its Subsidiaries does not infringe on
the rights of any Person, except for such claims and infringements that, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
3.10 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of the Borrower or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.
3.11 Taxes. Each of the Borrower and the Subsidiaries has filed or
caused to be filed all tax returns which to the knowledge of the Borrower are
required to be filed and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than those the amount or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower or the Subsidiaries, as the case may be, and other than
those the non-payment of which could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect); and no federal income tax liens
have been filed and, to the knowledge of the Borrower, no claims are being
asserted with respect to any such taxes, fees or other charges, except any such
claims which could not reasonably be expected to have a Material Adverse Effect.
3.12 Federal Regulations. No part of the proceeds of any Loans
hereunder will be used for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect or for any purpose which violates the
provisions of the Regulations of such Board of Governors. If requested by any
Bank or the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Bank a statement to the foregoing effect in
conformity with the requirements of Federal Reserve Form U-1 referred to in said
Regulation U.
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3.13 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan which has
resulted or could reasonably be expected to result in a liability to the
Borrower or any Subsidiary in excess of $1,000,000, and each Plan has complied
in all material respects with the applicable provisions of ERISA and the Code.
No termination of a Single Employer Plan has occurred, and no Lien in favor of
the PBGC or a Plan has arisen, during such five-year period. The present value
of all accrued benefits under each Single Employer Plan (based on those
assumptions used to fund such Plans) did not, as of the last annual valuation
date prior to the date on which this representation is made or deemed made,
exceed, by more than $5,000,000, the value of the assets of such Plan allocable
to such accrued benefits. Neither the Borrower nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan, and
neither the Borrower nor any Commonly Controlled Entity would become subject to
any liability under ERISA if the Borrower or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made, where such liability could, in the aggregate, reasonably be
expected to have a Material Adverse Effect. No such Multiemployer Plan is in
Reorganization or Insolvent.
3.14 Investment Company Act; Other Regulations. The Borrower is not
an "investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. The
Borrower is not subject to regulation under any Federal or State statute or
regulation which limits its ability to incur Indebtedness.
3.15 Subsidiaries. The Borrower has no Subsidiaries other than
Foreign Subsidiaries and other than Subsidiaries which are Guarantors.
3.16 Environmental Matters. Each of the representations and
warranties set forth in paragraphs (a) through (e) of this Section 3.16 is true
and correct with respect to each parcel of real property owned or operated by
the Borrower or any Subsidiary (the "Properties"), except to the extent that (i)
the facts and circumstances giving rise to such failure to be so true and
correct could not reasonably be expected to have a Material Adverse Effect or
(ii) the Borrower and the Subsidiaries are fully indemnified against any
liabilities which may result from any such failure to be so true and correct:
(a) The Properties do not contain, and have not previously
contained, in, on, or under, including, without limitation, the soil and
groundwater thereunder, any Hazardous Materials in concentrations which violate
Environmental Laws.
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(b) The Properties and all operations and facilities at the
Properties are in compliance with all Environmental Laws, and there is no
Hazardous Materials contamination or violation of any Environmental Law which
could interfere with the continued operation of any of the Properties or impair
the fair saleable value of any thereof.
(c) Neither the Borrower nor any of the Subsidiaries has received
any written complaint, notice of violation, alleged violation, investigation or
advisory action or of potential liability or of potential responsibility
regarding environmental protection matters or permit compliance with regard to
the Properties, nor is the Borrower aware that any Governmental Authority is
threatening to deliver to the Borrower or any of the Subsidiaries any such
notice.
(d) Hazardous Materials have not been generated, treated, stored,
disposed of, at, on or under any of the Properties, nor have any Hazardous
Materials been transferred from the Properties to any other location in
violation of any Environmental Law.
(e) There are no governmental, administrative actions or judicial
proceedings pending or (to the knowledge of the Borrower) contemplated under any
Environmental Laws to which the Borrower or any of the Subsidiaries is or (to
the knowledge of the Borrower) will be named as a party with respect to the
Properties, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to any of the
Properties.
3.17 Full Disclosure. All information (other than projections)
heretofore furnished by or on behalf of the Borrower to the Administrative Agent
or any Bank for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information hereafter furnished
by or on behalf of the Borrower to the Administrative Agent or any Bank will be,
true and accurate in all material respects on the date as of which such
information is stated or certified. All projections heretofore furnished by or
on behalf of the Borrower to the Administrative Agent or any Bank for purposes
of or in connection with this Agreement or any transaction contemplated hereby
is, and all such projections hereafter furnished by or on behalf of the Borrower
to the Administrative Agent or any Bank will be, prepared in good faith based
upon reasonable assumptions. The Borrower has disclosed to the Banks in writing
any and all facts which could reasonably be expected to have a Material Adverse
Effect.
3.18 Solvency. (a) Immediately following the making of each Loan
made on the Closing Date and after giving effect to the application of the
proceeds thereof, the Borrower will be
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solvent, as defined under applicable creditors' rights and fraudulent conveyance
laws.
(b) The Borrower does not intend to, and does not believe that it or
any Subsidiary will, incur debts beyond its ability to pay such debts as they
mature, taking into account the timing and amounts of cash to be received by it
or any such Subsidiary and the timing and amounts of cash to be payable on or in
respect of its Indebtedness or the Indebtedness of any such Subsidiary.
3.19 Security Interests; Guarantees. All Obligations (and, if
applicable, the obligations of a Subsidiary under any guarantee referred to in
the last sentence of this Section ) are secured on at least a pari passu and
equal and ratable basis by all collateral securing all outstanding Additional
Buildout Indebtedness. The Security Documents are effective to create a
perfected security interest in, and enforceable Lien on, all such collateral to
the extent permitted under applicable law for the benefit of the Administrative
Agent and the Banks. Insofar as any of such outstanding Additional Buildout
Indebtedness is owed by or guaranteed by a Subsidiary of the Borrower, such
Subsidiary has guaranteed payment of the Obligations.
Notwithstanding the foregoing, the representations and warranties
set forth in clause (a) of Section 3.2 and in this Section 3.19 shall not be
required to be made prior to the Release Date and shall be deemed to be made on
the Release Date and on each Borrowing Date thereafter.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions of Initial Loans. The obligation of each Bank to make
its initial Loan hereunder and the effectiveness of this Agreement are subject
to the satisfaction of the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received (i)
counterparts of this Agreement duly executed and delivered by the Borrower, the
Administrative Agent and each Bank, (ii) for the account of each Bank requesting
the same, a Note conforming to the requirements hereof and executed by a duly
authorized officer of the Borrower, and (iii) each of the Original Loral
Guarantee and the Subsidiary Guarantees, each executed by a duly authorized
officer of each Loan Party party thereto.
(b) Legal Opinions. The Administrative Agent shall have received,
with a photocopy counterpart for each Bank, (i) an opinion of Willkie, Farr &
Gallagher, counsel to the Loan Parties, dated the Closing Date and addressed to
the Administrative Agent and the Banks, substantially in the form of Exhibit
B-1, (ii) an opinion of Eric J. Zahler, Esq., General Counsel of Loral, dated
the Closing Date and addressed to the
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Administrative Agent and the Banks, substantially in the form of Exhibit B-2,
and given on the express instructions of Loral and (iii) an opinion of Michael
B. Targoff, Esq., Senior Vice President and Secretary, acting as counsel to the
Borrower, dated the Closing Date and addressed to the Agents and the Banks,
substantially in the form of Exhibit B-3, and given on the express instructions
of the Borrower.
(c) Closing Certificate. The Administrative Agent shall have
received, with a photocopy counterpart for each Bank, a Closing Certificate of
each Loan Party, dated the Closing Date, substantially in the form of Exhibit
C-1 with respect to the Borrower and its Subsidiaries and C-2 with respect to
Loral, with appropriate insertions and attachments, satisfactory in form and
substance to the Administrative Agent and its counsel, executed by a Responsible
Officer of such Loan Party.
(d) Projections. The Administrative Agent shall have received, with
a photocopy counterpart for each Bank, financial projections and assumptions
with respect to the business and prospects of the Borrower and its Subsidiaries
for the period from the Closing Date through the Termination Date, all in a form
satisfactory to the Administrative Agent.
(e) No Proceeding or Litigation; No Injunctive Relief. No action,
suit or proceeding before any arbitrator or any Governmental Authority shall
have been commenced, no investigation by any Governmental Authority shall have
been commenced, no action, suit, proceeding or investigation by any Governmental
Authority shall have been threatened and no Requirement of Law shall have been
enacted or proposed, in each case as of the Closing Date (i) seeking to
restrain, prevent or change the transactions contemplated by this Agreement
(including the Satellite Project) in whole or in part or questioning the
validity or legality of the transactions contemplated by this Agreement or
seeking damages in connection with such transactions or (ii) which could
reasonably be expected to have a Material Adverse Effect.
(f) Consents, Licenses, Approvals, etc. The Administrative Agent
shall have received true copies (certified to be such by a Responsible Officer
of the Borrower or other appropriate Person) of all consents, licenses and
governmental and third party approvals (excluding the Feeder Link Licenses) (i)
required as of the Closing Date in accordance with applicable law in connection
with the execution, delivery, performance, validity and enforceability of this
Agreement and the other Loan Documents and the borrowings contemplated
hereunder, or (ii) required in connection with the Satellite Project if the
failure to obtain such consents, licenses or approvals, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect. Such
consents, licenses and approvals shall be in full force and effect and all
applicable waiting periods shall have expired without any action being taken or
threatened by any
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competent authority which would restrain, prevent or otherwise impose adverse
conditions on the Satellite Project or the financing thereof.
(g) Audited Financial Statements of the Borrower. The Administrative
Agent shall have received, with a copy for each Bank, the audited financial
statements described in Section 3.1(a) and the audited financial statements of
Loral and its Subsidiaries as at March 31, 1995 described (by reference) in
Section 9 of the Original Loral Guarantee, which financial statements shall have
been reported on without a "going concern" or like qualification or exception,
or qualification arising out of the scope of the audit.
(h) Unaudited Financial Statements. The Administrative Agent shall
have received, with a copy for each Bank, (i) the unaudited consolidated
financial statements of the Borrower and its Subsidiaries described in Section
3.1(b), and (ii) the unaudited consolidated financial statements of Loral and
its Subsidiaries described (by reference) in Section 9 of the Original Loral
Guarantee, which financial statements shall have been prepared in accordance
with GAAP.
(i) Lien Searches. The Administrative Agent shall have received,
with a copy for each Bank, the results of a recent lien search in each of the
jurisdictions and offices where assets of the Borrower are located or recorded
and such searches shall reveal no Liens on any of the assets of the Borrower or
its Subsidiaries except for liens permitted under Section 6.3 hereunder.
(j) Indebtedness; Restrictions. The terms and conditions of any
Indebtedness and Contingent Obligations (including, without limitation,
maturities, interest rates, prepayment and redemption requirements, covenants,
defaults, remedies, security provisions and subordination provisions) of the
Borrower or any of the Subsidiaries to remain outstanding after the Closing Date
shall be satisfactory to the Banks in all respects as of the Closing Date, and
the Banks shall be satisfied as of the Closing Date that the Borrower and its
Subsidiaries are not subject to contractual or other restrictions that would be
violated by this Agreement or the transactions contemplated hereby.
(k) New Developments. As of the Closing Date there shall not have
occurred any change, or development or event involving a prospective change,
which in either case in the opinion of the Banks could reasonably be expected to
have a Material Adverse Effect.
(l) Undisclosed Information. As of the Closing Date the Banks shall
not have become aware of any previously undisclosed materially adverse
information with respect to (i) the business, operations, properties, condition
(financial or
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otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole or
of Loral and its Subsidiaries taken as a whole, (ii) the Satellite Project,
(iii) the ability of any Loan Party to perform its obligations under this
Agreement, the Notes or any other Loan Document or (iv) the rights or remedies
of the Administrative Agent or the Banks hereunder or thereunder.
(m) Fees. The Administrative Agent and the Banks shall have received
all fees and expenses required to be paid on or before the Closing Date.
(n) Representations and Warranties. Each of the representations and
warranties made by the Loan Parties in or pursuant to this Agreement shall be
true and correct on and as of the Closing Date as if made on and as of such
date.
(o) No Default. No Default or Event of Default shall have occurred
and be continuing on the Closing Date or after giving effect to the Loans
requested to be made on such date, if any.
(p) Additional Documents. The Administrative Agent shall have
received each additional document, instrument, legal opinion or item of
information reasonably requested by it on or prior to the Closing Date,
including, without limitation, a copy of any debt instrument, security agreement
or other material contract to which any Loan Party or any Subsidiaries may then
be a party.
(q) Additional Matters. All partnership, corporate and other
proceedings and all documents, instruments and other legal matters in connection
with the transactions contemplated by this Agreement shall be satisfactory in
form and substance to the Administrative Agent as of the Closing Date, and the
Administrative Agent shall have received such other documents and legal opinions
in respect of any aspect or consequence of the transactions contemplated hereby
or thereby as it shall reasonably request on or prior to the Closing Date.
4.2 Conditions to all Loans. The obligation of each Bank to make any
Loan to be made by it hereunder is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date:
(a) Representations and Warranties. Each of the representations and
warranties made by each Loan Party in or pursuant to each Loan Document shall be
true and correct on and as of such date as if made on and as of such date except
to the extent they expressly relate to an earlier date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Loans requested to
be made on such date.
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Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by each Loan Party as of the date of such borrowing that the conditions
contained in this Section 4.2 have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain
in effect, any Loan remains outstanding and unpaid or any other amount is owing
to any Bank or the Administrative Agent hereunder, the Borrower shall and
(except in the case of delivery of financial information, reports and notices)
shall cause each of the Subsidiaries to:
5.1 Financial Statements. Furnish to each Bank:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the audited consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at the end of
such year and the related audited consolidated statements of operations, of
partners' capital and of cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, reported on without
qualification arising out of the scope of the audit or, after commencement of
operation of the Satellite Project, a "going concern" or like qualification or
exception, by independent certified public accountants of nationally recognized
standing; and
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal year
of the Borrower, the unaudited consolidated balance sheet of the Borrower and
its consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of operations and cash flows of the Borrower
and its consolidated Subsidiaries for such quarter (except as to statements of
cash flow) and the portion of the fiscal year through such date, setting forth
in each case in comparative form the figures for the previous periods, certified
by a Responsible Officer (subject to normal year-end audit adjustments); all
such financial statements to be complete and correct in all material respects
and to be prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein (except as approved by
such accountants or officer, as the case may be, and disclosed therein).
5.2 Certificates; Other Information. Furnish to each Bank:
(a) concurrently with the delivery of the financial statements
referred to in Section 5.1(a) above, a certificate of the independent certified
public accountants reporting on such financial statements stating that in making
the examination
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necessary therefor no knowledge was obtained of any Default or Event of Default,
except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in Sections 5.1(a) and (b) above, a certificate of a Responsible
Officer (i) stating that, to the best of such officer's knowledge, the Borrower
during such period has observed or performed all of its covenants and other
agreements, and satisfied every condition contained in this Agreement and in the
other Loan Documents to be observed, performed or satisfied by it, and that such
officer has obtained no knowledge of any Default or Event of Default except as
specified in such certificate, and (ii) showing in detail the calculations
supporting such statement in respect of Sections 6.1, 6.2, 6.6 and, if
applicable, 7.1;
(c) within five days after the same are sent, copies of all
financial statements and reports which are sent to shareholders of Globalstar
Telecommunications Limited, and within five days after the same are filed,
copies of all financial statements and reports which the Borrower may make to,
or file with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority;
(d) annually a report as to the status of the buildout of the
Satellite Project, including the actual costs and projected costs to completion
of the Satellite Project, the number of subscribers to the Satellite Project and
a comparison of such costs against the Borrower's projections delivered pursuant
to subsection 4.1(d), such report to be in a form satisfactory to the
Administrative Agent;
(e) at least annually, a report prepared by the chief financial
officer of the Borrower updating the projections provided pursuant to Section
4.1(d);
(f) promptly after execution thereof, copies of each amendment,
waiver, supplement or other modification of or affecting those provisions of the
Lockheed Martin Credit Agreement incorporated by reference in Sections 9 and 10
of the Lockheed Martin Guarantee; and
(g) promptly, such additional financial and other information as any
Bank may from time to time reasonably request.
5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature (other than Indebtedness and Contingent
Obligations, which shall be beyond the scope of this Section 5.3), except when
the amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been
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provided on the books of the Borrower or its Subsidiaries, as the case may be.
5.4 Conduct of Business and Maintenance of Existence. Engage solely
in activities directly related to the Satellite Project and preserve, renew and
keep in full force and effect its partnership or corporate, as the case may be,
existence and maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business and comply in all material
respects with all material Contractual Obligations (other than Indebtedness and
Contingent Obligations, which shall be beyond the scope of this Section 5.4) and
material Requirements of Law (except for Environmental Laws, which shall be
governed by Section 5.8), except as otherwise expressly permitted by this
Agreement; and obtain and maintain in full force and effect all material
consents, licenses and approvals necessary for the completion and operations of
the Satellite Project and for the continuing operations of the Borrower and its
Subsidiaries.
5.5 Maintenance of Property; Insurance. Keep all property useful and
necessary in its business in good working order and condition; maintain with
financially sound and reputable insurance companies or through a formal
self-insurance program insurance on all its property in at least such amounts
and against at least such risks as are usually insured against in the same
general area by companies engaged in the same or a similar business, provided
that in any event the Borrower will maintain at least the insurance coverage set
forth in Schedule 5.5; and furnish to each Bank, upon written request, full
information as to the insurance carried.
5.6 Inspection of Property; Books and Records; Discussions. Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and, subject to
applicable governmental security and secrecy regulations and Section 10.14,
permit representatives of the Administrative Agent to visit and inspect any of
its properties and examine and make abstracts from any of its books and records
at any reasonable time and as often as may reasonably be desired with prior
notice to the Borrower (which can have a representative present if it so
chooses), and to discuss the business, operations, properties and financial and
other condition of the Borrower and its Subsidiaries with Responsible Officers
of the Borrower and its Subsidiaries and with its independent certified public
accountants.
5.7 Notices. Promptly give notice (to be confirmed promptly in
writing) to the Administrative Agent and each Bank:
(a) of the occurrence of any Default or Event of Default;
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(b) of any (i) default or event of default under any Contractual
Obligation of the Borrower or any Subsidiary or (ii) litigation, investigation
or proceeding which may exist at any time between the Borrower or any Subsidiary
and any Governmental Authority, which in either case, if not cured or if
adversely determined, as the case may be, could reasonably be expected to have a
Material Adverse Effect;
(c) of any litigation or proceeding affecting the Borrower or any
Subsidiary in which the amount involved is $5,000,000 or more and not covered by
insurance; or in which injunctive or similar relief is sought and which could
reasonably be expected to have a Material Adverse Effect;
(d) as soon as possible and in any event within 30 days after the
Borrower knows or has reason to know of the following events: (i) the occurrence
or expected occurrence of any Reportable Event with respect to any Plan which
could reasonably be expected to result in any liability to the Borrower or any
Subsidiary in excess of $1,000,000 or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan, or (ii) the institution
of proceedings or the taking or expected taking of any other action by PBGC or
the Borrower or any Commonly Controlled Entity with respect to the withdrawal
from, or the terminating, Reorganization or Insolvency of, any Plan. The
Borrower shall deliver to the Administrative Agent and each Bank a certificate
of the chief financial officer of the Borrower setting forth the details thereof
and the action that the Borrower or Commonly Controlled Entity proposes to take
with respect thereto;
(e) of any change in a Rating; and
(f) of any material change in the business, operations, property or
financial or other condition of the Borrower or any of its Subsidiaries.
Each notice pursuant to this Section 5.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower proposes to take with respect
thereto.
5.8 Environmental Laws.
(a) Comply with, and require compliance by all tenants and
subtenants, if any, with, all Environmental Laws and obtain and comply with and
maintain, and insure that all tenants and subtenants obtain and comply with and
maintain, any and all licenses, approvals, registrations or permits required by
Environmental Laws, except to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect;
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(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required by a Governmental
Authority under Environmental Laws and promptly comply with all lawful orders
and directives of all Governmental Authorities respecting Environmental Laws,
except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings could not
reasonably be expected to have a Material Adverse Effect; and
(c) Defend, indemnify and hold harmless the Administrative Agent and
the Banks, and their respective employees, agents, officers and directors, from
and against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the violation
of or noncompliance with any Environmental Laws applicable to the Properties, or
any orders, requirements or demands of Governmental Authorities related thereto,
including, without limitation, attorney's and consultant's fees, investigation
and laboratory fees, court costs and litigation expenses, except to the extent
that any of the foregoing arise out of the gross negligence or willful
misconduct of the party seeking indemnification therefor. The agreements in this
paragraph shall survive termination of the Commitments and repayment of the
Loans and all other amounts payable hereunder.
5.9 Additional Subsidiary Guarantors. If any Person shall become a
Subsidiary of the Borrower, cause such Subsidiary (other than a Foreign
Subsidiary) to promptly thereafter execute and deliver a Guarantee in favor of
the Administrative Agent in substantially the form of Exhibit F, each of which
Guarantees shall be accompanied by such resolutions, incumbency certificates and
legal opinions as are reasonably requested by the Administrative Agent and its
counsel.
5.10 Material Terms of Other Agreements Being More Restrictive. If
the Borrower or any Subsidiary enters into any agreement which contains
provisions that are materially more restrictive when taken as a whole than the
comparable provisions of this Agreement and the other Loan Documents, such more
restrictive provisions shall automatically be incorporated by reference in this
subsection 5.10, mutatis mutandis, and the Borrower and its Subsidiaries shall
deliver such confirmatory amendments to the Loan Documents to incorporate such
more restrictive provisions in the Loan Documents, on terms satisfactory to the
Administrative Agent.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that so long as the Commitments remain in
effect, any Loan remains outstanding and unpaid or any other amount is owing to
any Bank or the
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Administrative Agent hereunder, the Borrower shall not, nor shall it permit any
Subsidiary to, directly or indirectly:
6.1 Financial Condition Covenants. (a) Revenues. Permit the
Borrower's consolidated revenues for fiscal year 1999 to be less than
$100,000,000.
(b) Maintenance of Consolidated Net Worth. Permit Consolidated Net
Worth on the last day of any fiscal quarter prior to the Release Date to be less
than $200,000,000.
(c) Fixed Charge Coverage. Permit for any period of four consecutive
fiscal quarters ending prior to the Release Date (and commencing June 30, 1998)
the ratio of (i) the sum of Consolidated Net Income for such period plus income
taxes deducted in determining such Consolidated Net Income plus Consolidated
Fixed Charges for such period to (ii) Consolidated Fixed Charges for such period
to be less than 2.0 to 1.0, provided that for the Borrower's fiscal quarter
ending on (A) June 30, 1998, such ratio shall be calculated for the fiscal
quarter then ended, (B) September 30, 1998, such ratio shall be calculated for
the two consecutive fiscal quarters then ended and (iii) December 31, 1998, such
ratio shall be calculated for the three consecutive fiscal quarter then ended
and provided further that for the fiscal quarter ending on June 30, 1998, such
ratio shall not be less than 1.5 to 1.0.
(d) Maximum Leverage. Permit the aggregate of the Additional
Buildout Indebtedness outstanding, the Loans outstanding and the unused
Commitments under this Agreement to be greater than $1,200,000,000 (net of
interest accretion on non-cash pay Additional Buildout Indebtedness and escrowed
interest on overfunded issuances relating to Additional Buildout Indebtedness).
6.2 Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness under this Agreement;
(b) Subordinated Debt;
(c) unsecured Indebtedness incurred in the ordinary course of
business consistent with prior practice in respect of commercial and standby
letters of credit issued by any financial institution to secure contractual
commitments to its customers;
(d) Indebtedness owed by a Wholly Owned Subsidiary Guarantor to
another Wholly Owned Subsidiary that is a Subsidiary Guarantor; and Indebtedness
owed to the Borrower by a Wholly Owned Subsidiary that is a Subsidiary
Guarantor; and Indebtedness owed by the Borrower to a Wholly-Owned Subsidiary
that is a Subsidiary Guarantor or a Foreign Subsidiary;
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(e) unsecured Indebtedness of the Borrower and its Subsidiaries in
an aggregate principal amount not to exceed $5,000,000 outstanding at any time;
(f) unsecured vendor financing committed to the Borrower on the date
hereof and set forth on Schedule 6.2;
(g) additional unsecured vendor financing having terms satisfactory
to the Administrative Agent;
(h) Additional Buildout Indebtedness, provided that on and after the
Release Date the representation and warranty contained in Section 3.19 is true
with respect to such Additional Buildout Indebtedness;
(i) Indebtedness of a Subsidiary Guarantor which is acquired after
the Closing Date which Indebtedness exists at the time of such acquisition and
is not created in anticipation of such acquisition; and
(j) Indebtedness consisting of obligations under Financing Leases of
the Borrower incurred to finance the acquisition of fixed or capital assets in
an aggregate principal amount not exceeding $25,000,000 at any time outstanding.
6.3 Limitation on Liens. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except:
(a) Liens for taxes not yet due or which are being contested in good
faith and by appropriate proceedings if adequate reserves with respect thereto
are maintained on the books of the Borrower or the appropriate Subsidiary, as
the case may be, in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
are not overdue for a period of more than 60 days or which are being contested
in good faith and by appropriate proceedings;
(c) pledges or deposits in connection with workmen's compensation,
unemployment insurance and other social security legislation and deposits
securing liabilities to insurance carriers under insurance and self-insurance
agreements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other Liens incurred
in the ordinary course of business which do not
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secure Indebtedness and which do not in any case materially detract from the
value of the property subject thereto or materially interfere with the ordinary
conduct of the business of the Borrower or any Subsidiaries;
(f) Liens upon real and/or personal property, which property was
acquired after the Closing Date by the Borrower or any Subsidiary in the
ordinary course of business, each of which Liens was created solely for the
purpose of securing Indebtedness incurred for the purpose of financing such
acquisition or for the purpose of securing any refinancings or renewals thereof;
provided, that no such Lien shall extend to or cover any property of the
Borrower or any such Subsidiary other than the respective property so acquired
and improvements thereon, and the principal amount of Indebtedness secured by
any such Lien shall at no time exceed 100% of the fair market value (as
determined in good faith by the board of directors of the Borrower) of the
respective property at the time it was acquired;
(g) Liens created pursuant to Section 2.7(c);
(h) Liens which secure Additional Buildout Indebtedness, provided
that from and after the Release Date the representation and warranty contained
in Section 3.19 is true with respect to such Additional Buildout Indebtedness;
and
(i) Liens securing Indebtedness of the Borrower permitted by Section
6.2(j) incurred to finance the acquisition of fixed or capital assets, provided
that (i) such Liens shall be created substantially simultaneously with the
acquisition of such fixed or capital assets, (ii) such Liens do not at any time
encumber any property other than the property financed by such Indebtedness,
(iii) the amount of Indebtedness secured thereby is not increased and (iv) the
principal amount of Indebtedness secured by any such Lien shall at no time
exceed the original purchase price of such property.
6.4 Limitation on Contingent Obligations. Create, incur, assume or
suffer to exist any Contingent Obligation, except:
(a) the Subsidiary Guarantees;
(b) the Borrower may guarantee the obligations of each Subsidiary
Guarantor;
(c) Subsidiary Guarantors may guarantee Additional Buildout
Indebtedness of the Borrower; and
(d) Subsidiaries may guarantee payment of the Obligations.
6.5 Limitation on Fundamental Changes. (a) Enter into any
transaction of merger or consolidation or amalgamation,
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or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution) except that any Subsidiary may be merged or consolidated (i) with
or into the Borrower (provided that the Borrower shall be the continuing or
surviving Person) or (ii) with or into any one or more Wholly Owned Subsidiaries
(including any entity that, after giving effect to such merger or consolidation,
is a Wholly Owned Subsidiary) other than a Wholly Owned Subsidiary domiciled
outside the United States of America (provided that the Wholly Owned Subsidiary
shall be the continuing or surviving corporation); or
(b) convey, sell, lease, transfer or otherwise dispose of any assets
in a transaction or series of related transactions, except that:
(i) any Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or otherwise) to
the Borrower or a Wholly Owned Subsidiary (other than a Wholly Owned Subsidiary
domiciled outside the United States of America);
(ii) the Borrower or any Subsidiary may sell, lease, transfer
or otherwise dispose of inventory in the ordinary course of business;
(iii) the Borrower or any Subsidiary may sell, transfer or
otherwise dispose of Cash Equivalents in exchange for a comparable amount of
cash and/or Cash Equivalents; and
(iv) the Borrower or any Subsidiary may sell or otherwise
dispose of obsolete or worn out property in the ordinary course of business
having an aggregate value not to exceed $5,000,000 for all such transactions.
Notwithstanding the foregoing, the Borrower may transfer assets to Subsidiary
Guarantors and may transfer the Service Provider Agreements to Foreign
Subsidiaries.
6.6 Limitation on Restricted Payments. Declare or make any
distributions on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for the purchase, redemption, retirement or
other acquisition of, any Equity Interests of the Borrower or any Subsidiary,
whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of the Borrower or any Subsidiary, or permit any Subsidiary to make
any payment on account of, or purchase or otherwise acquire, any Equity
Interests of the Borrower or any Subsidiary from any Person or pay any interest
on the Borrower's subordinated obligations described in the definition of
"Partner Guarantor Fee Agreement" (all of the foregoing shall collectively be
referred to as "Restricted Payments"), except that, so long as no Default or
Event of Default has occurred and is continuing or would result from the
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making of such Restricted Payment, the Borrower may make a Restricted Payment
(a) if the sum of (i) such Restricted Payment plus (ii) the Restricted Payments
made from the Closing Date through any date of determination, shall not exceed
an amount equal to 50% of the aggregate Consolidated Net Income from January 1,
1996, through the end of the fiscal quarter immediately preceding such date of
determination, (b) consisting of Qualified Equity Interests. The value of any
distributions made other than of cash and the value of any Investments made
other than in cash shall be the value determined in good faith by the General
Partners' Committee of the Borrower and evidenced by a resolution of such
Committee or (c) in respect of Preferred Equity Interests.
6.7 Investments. Make, commit to make or maintain any Investment,
except:
(a) Investments by the Borrower or Subsidiaries in Wholly Owned
Subsidiary Guarantors and in the Borrower;
(b) Investments in accounts, contract rights and chattel paper (as
defined in the Uniform Commercial Code), and notes receivable, arising or
acquired in the ordinary course of business;
(c) Investments in Cash Equivalents; and
(d) Excluded Employee Loans;
(e) the Borrower may transfer the Service Provider Agreements to the
Foreign Subsidiaries;
(f) Investments in Foreign Subsidiaries; provided that the aggregate
amount of all such investments (whether cash or property, as valued at the time
each such investment is made) shall not exceed (net of any return representing
return of capital of (but not return on) any such investment) $15,000,000 at any
time; and
(g) Investments in Persons other than Subsidiaries made in
connection with the Satellite Project; provided that the aggregate amount of all
such investments (whether cash or property, as valued at the time each such
investment is made) shall not exceed (net of any return representing return of
capital of (but not return on) any such investment) $15,000,000 at any time.
6.8 Limitation on Optional Payments and Modifications of
Subordinated Debt and Other Debt Instruments. (a) Make any optional payment or
prepayment prior to scheduled maturity on or optional redemption or purchase
prior to scheduled maturity of any Subordinated Debt or other Indebtedness
(other than the Loans and the Additional Buildout Indebtedness), provided that
this clause (a) shall not prohibit the Borrower from consummating any
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such transactions if the sole consideration therefor is Qualified Equity
Interests, or (b) amend, modify or change, or consent or agree to any amendment,
modification or change to any of the terms of, any Subordinated Debt or other
Indebtedness (other than any such amendment, modification or change which would
extend the maturity or reduce the amount of any payment of principal thereof or
which would reduce the rate or extend the date for payment of interest thereon),
provided that this subsection shall not prohibit the refinancing of any
Subordinated Debt or Additional Buildout Indebtedness (the "Original Debt") with
other Subordinated Debt or Additional Buildout Indebtedness (the "Replacement
Debt"), respectively, as long as (i) the terms of the Replacement Debt are not
more restrictive than the comparable provisions of the Original Debt, (ii) the
Replacement Debt shall mature no earlier than the maturity date of the Original
Debt, (iii) the interest rate on the Replacement Debt shall be a market rate
determined on the date of issuance of the Replacement Debt and (iv) Subordinated
Debt may only be replaced with other Subordinated Debt.
6.9 Affiliates. Enter into any transaction, including, without
limitation, the purchase, sale or exchange of property or the rendering of any
services, with any Affiliate (other than a Wholly Owned Subsidiary) or enter
into, assume or suffer to exist any employment or consulting contract with any
such Affiliate, except any transaction or contract disclosed on Schedule 6.9
(including any modification or amendment to any such transaction or contract
that, in the reasonable judgment of the Borrower, is no less favorable to the
Borrower than such transaction or contract) and any transaction or contract
which is in the ordinary course of the Borrower's business and which is upon
fair and reasonable terms no less favorable to the Borrower than it would obtain
in a comparable arm's length transaction with a Person not an Affiliate (which,
prior to the Release Date, shall be determined in the reasonable judgment of the
Borrower), provided that this Section shall not prohibit the Partner Guarantor
Fee Arrangement.
6.10 Partnership Documents. Amend or terminate, or permit the
amendment or termination of, the Partnership Agreement or other organizational
documents of the Borrower and its Subsidiaries in any material respect adverse
to the Banks.
6.11 Restrictions on Subsidiaries. Permit any Wholly Owned
Subsidiary to enter into any agreement which prohibits or restricts the ability
of such Subsidiary to (i) pay dividends or make any other distributions on its
Equity Interests or any other interest or participation in, or measured by, its
profits, owned by the Borrower or any of its Subsidiaries, or pay any
Indebtedness owed to the Borrower or any of its Subsidiaries, (ii) make loans or
advances to the Borrower or any of its Subsidiaries or (iii) transfer any of its
properties or assets to the Borrower or any of its Wholly Owned Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of:
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(A) the terms of this Agreement and the terms of Additional Buildout
Indebtedness provided that such terms are no more restrictive than those set
forth in this Agreement, (B) applicable law, (C) customary non-assignment
provisions entered into in the ordinary course of business and consistent with
past practices, (D) the terms of purchase money obligations for property
acquired in the ordinary course of business, but only to the extent that such
purchase money obligations restrict or prohibit the transfer of the property so
acquired and (E) any encumbrance or restriction existing under any agreement
which refinances or replaces the agreements for Additional Buildout Indebtedness
described in clause (A); provided, that the terms and conditions of any such
encumbrances or restrictions contained in any such agreement referred to in this
clause (E) constitute no greater encumbrance or restriction on the ability of
any Subsidiary to pay dividends or make distributions, make loans or advances or
transfer properties or assets other than those under or pursuant to the
agreement evidencing the Indebtedness or obligations refinanced.
6.12 Restrictive Agreements. Enter into or with any Person any
agreement which restricts the ability of the Borrower or its Subsidiaries to
perform any of their obligations under the Loan Documents.
SECTION 7. ADDITIONAL NEGATIVE COVENANTS
The Borrower hereby agrees that on and after the Release Date, so
long as the Commitments remain in effect, any Loan remains outstanding and
unpaid or any other amount is owing to any Bank or any Administrative Agent
hereunder, that in addition to compliance with the covenants contained in
Section 6, the Borrower shall not, nor shall it permit any Subsidiary to,
directly or indirectly:
7.1 Financial Condition Covenants. (a) Maintenance of Consolidated
Net Worth.
(b) Maintenance of Consolidated Net Worth Permit Consolidated Net
Worth on the last day of any fiscal quarter on or after the Release Date to be
less than the sum of (X) $300,000,000 plus (Y) 50% of Consolidated Net Income,
if positive, for the period from January 1, 1996 to the last day of such fiscal
quarter.
(c) Fixed Charge Coverage. Permit for any period of four consecutive
fiscal quarters ending after the Release Date the ratio of (i) the sum of
Consolidated Net Income for such period plus income taxes deducted in
determining such Consolidated Net Income plus Consolidated Fixed Charges for
such period to (ii) Consolidated Fixed Charges for such period to be less than
3.0 to 1.0.
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(d) Maximum Leverage. Permit the Leverage Ratio on the last day of
any fiscal quarter on or after the Release Date to be greater than (i) 5.0 to
1.0 during 1999 and (ii) 4.0 to 1.0 thereafter.
7.2 Sale and Leaseback. Enter into any arrangement with any Person
providing for the leasing by the Borrower or any Subsidiary of real or personal
property which has been or is to be sold or transferred by the Borrower or any
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of the Borrower or such Subsidiary, except for such transactions
occurring after the Closing Date with respect to property having an aggregate
value for all such transactions not in excess of $5,000,000.
7.3 Limitation on Changes in Fiscal Year. Permit the fiscal year of
the Borrower to end on a day other than December 31.
SECTION 8. EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) Prior to the Release Date:
(i) The Borrower shall fail to pay any principal of any Loans
when due in accordance with the terms thereof or hereof; or the Borrower shall
fail to pay any interest on any Loans, or any fee or other amount payable
hereunder, within five days after any such amount becomes due in accordance with
the terms thereof or hereof; or
(ii) Any representation or warranty made or deemed made by or
on behalf of any Loan Party herein or in any other Loan Document or which is
contained in any certificate, document or financial or other statement furnished
at any time under or in connection with this Agreement shall prove to have been
incorrect in any material respect on or as of the date made or deemed made; or
(iii) The Borrower shall default in the observance or
performance of any agreement contained in Section 6 (other than Section 6.1
prior to the Release Date) or 7;
(iv) The Borrower shall default in the observance or
performance of any other agreement contained in this Agreement (other than
Section 6.1 prior to the Release Date), and such default shall continue
unremedied for a period of 30 days; or
(v) The Borrower or any of its Subsidiaries shall (A) default
in any payment of principal of or interest on any Indebtedness (other than the
Loans) or in the payment of any Contingent Obligation, beyond the period of
grace, if any,
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provided in the instrument or agreement under which such Indebtedness or
Contingent Obligation was created and (I) the aggregate principal amount of (x)
all such Indebtedness equals or exceeds $1,000,000 or (y) all such Contingent
Obligations equal or exceed $5,000,000 and (II) (a) the effect of such default
is to cause such Indebtedness to become due prior to its stated maturity or such
Contingent Obligation to become payable or (b) such Indebtedness is otherwise
due or such Contingent Obligation is otherwise payable; or (B) default in the
observance or performance of any other agreement or condition relating to any
such Indebtedness or such Contingent Obligation or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause such Indebtedness to become due prior to its stated
maturity or such Contingent Obligation to become payable; or
(vi) (A) The Borrower or any of its Subsidiaries shall
commence any case, proceeding or other action (I) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (II) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets, or the
Borrower or any of its Subsidiaries shall make a general assignment for the
benefit of its creditors; or (B) there shall be commenced against the Borrower
or any of its Subsidiaries any case, proceeding or other action of a nature
referred to in clause (A) above which (I) results in the entry of an order for
relief or any such adjudication or appointment or (II) remains undismissed,
undischarged or unbonded for a period of 60 days; or (C) there shall be
commenced against the Borrower or any of its Subsidiaries any case, proceeding
or other action seeking issuance of a warrant of attachment, execution,
restraint or similar process against all or any substantial part of its assets
which results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days from
the entry thereof; or (D) the Borrower or any of its Subsidiaries shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (A), (B), or (C) above; or
(E) the Borrower or any of its Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
(vii) (A) Any Guarantee (including any Partner Cash Collateral
Agreement) shall cease, for any reason, to be in full force and effect (except
for the Guarantee Release) or any Guarantor shall so assert or (B) the Lien
created by any of the Partner Cash Collateral Agreements shall cease to be
enforceable
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and of the same effect and priority purported to be created thereby; or
(viii) A Change in Control shall occur; or
(ix) An Event of Default under Section 11 of the Lockheed
Martin Guarantee shall occur.
(b) From and After the Release Date:
(i) Any of the events described in the preceding paragraph (a)
shall have occurred other than (A) any of such events described in paragraph
(a)(ii) relating to Lockheed Martin or (B) an event described in paragraph
(a)(vii) or (a)(ix); or
(ii) The Borrower or any of its Subsidiaries shall (A) default
in any payment of principal of or interest on any Indebtedness (other than the
Loans) or in the payment of any Contingent Obligation, beyond the period of
grace, if any, provided in the instrument or agreement under which such
Indebtedness or Contingent Obligation was created and (I) the aggregate
principal amount of (x) all such Indebtedness equals or exceeds $1,000,000 or
(y) all such Contingent Obligations equal or exceed $5,000,000 and (II) the
effect of such default is to cause, or permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Contingent Obligation (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or such Contingent
Obligation to become payable or (B) default in the observance or performance of
any other agreement or condition relating to any such Indebtedness or such
Contingent Obligation or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Contingent Obligation (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to become due prior to its
stated maturity or such Contingent Obligation to become payable; or
(iii) (A) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (B) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan, (C) a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee is, in the reasonable
opinion of the Required Banks, likely to result in the
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termination of such Plan for purposes of Title IV of ERISA, (D) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (E) the Company
or any Commonly Controlled Entity shall, or is, in the reasonable opinion of the
Required Banks, likely to, incur any liability in connection with a withdrawal
from, or the Insolvency or Reorganization of, a Multiemployer Plan, or (F) any
other event or condition shall occur or exist with respect to a Plan; and in
each case in clauses (A) through (F) above, such event or condition, together
with all other such events or conditions, if any, could subject the Borrower or
any of its Subsidiaries to any tax, penalty or other liabilities in the
aggregate material in relation to the business, operations, property or
financial or other condition of the Borrower and its Subsidiaries taken as a
whole; or
(iv) One or more judgments or decrees shall be entered against
the Borrower or any of its Subsidiaries involving in the aggregate a liability
(to the extent not paid or covered by insurance) of $5,000,000 or more and all
such judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from the entry thereof; or
(v) The Borrower or its Subsidiaries shall cease to hold or
fail to obtain on any date required any material consent, license or
authorization (other than the Feeder Link Licenses) required for the continued
operation of their business or for the construction, completion and operation of
the Satellite Project; or
(vi) (A) Any of the Security Documents shall cease, for any
reason, to be in full force and effect, or the Borrower or any other Loan Party
which is a party to any of the Security Documents shall so assert or (B) the
Lien created by any of the Security Documents shall cease to be enforceable and
of the same effect and priority purported to be created thereby or (C) on and
after the Release Date the representation and warranty contained in Section 3.19
shall not be true.
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (a)(vi) above, both prior to and after the Release Date,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the Notes shall immediately become due and payable, and (B) if
such event is any other Event of Default, either or both of the following
actions may be taken, without prejudice to the rights of any Bank to enforce its
claims against the Borrower: (i) with the consent of the Majority Banks, the
Administrative Agent may, or upon the request of the Majority Banks, the
Administrative Agent
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shall, by notice to the Borrower, declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii) with
the consent of the Majority Banks, the Administrative Agent may, or upon the
request of the Majority Banks, the Administrative Agent shall, by notice of
default to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the Notes to be
due and payable forthwith, whereupon the same shall immediately become due and
payable. Except as expressly provided above in this Section 8, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 9. THE ADMINISTRATIVE AGENT
9.1 Appointment. Each Bank hereby irrevocably designates and
appoints Chemical as the Administrative Agent of such Bank under this Agreement
and the other Loan Documents, and each such Bank irrevocably authorizes
Chemical, as the Administrative Agent for such Bank, to take such action on its
behalf under the provisions of this Agreement and the other Loan Documents, and
to exercise such powers and perform such duties as are expressly delegated to
the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement and
the other Loan Documents, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Administrative Agent.
9.2 Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by any of them with reasonable care.
9.3 Exculpatory Provisions. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement and the
other Loan Documents (except for its or such Person's own gross negligence or
willful misconduct), or (ii) responsible in any manner to any of the Banks for
any recitals, statements, representations or warranties made by any Loan Party
or any officer thereof contained in this Agreement or in the other Loan
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by the Administrative Agent under or in
connection with, the Loan Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of any Loan Party to perform its obligations
hereunder or thereunder. The Administrative Agent shall not be under any
obligation to any Bank to ascertain or to
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inquire as to the observance or performance of any of the agreements contained
in, or conditions of, any Loan Document, or to inspect the properties, books or
records of any Loan Party.
9.4 Reliance by the Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Loan Parties), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement unless it shall
first receive such advice or concurrence of the Majority Banks or the Required
Banks, as the case may be, as it deems appropriate or it shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Majority Banks or the Required
Banks, as the case may be, and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Banks and all future holders
of the Notes.
9.5 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Bank or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Banks. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Majority Banks; provided, that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Banks.
9.6 Non-Reliance on the Administrative Agent and Other Banks. Each
Bank expressly acknowledges that neither the Administrative Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any
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representations or warranties to it and that no act by the Administrative Agent
hereafter taken, including any review of the affairs of any Loan Party, shall be
deemed to constitute any representation or warranty by the Administrative Agent
to any Bank. Each Bank represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, operations,
property, financial and other condition and creditworthiness of each Loan Party,
and made its own decision to make its Loans hereunder and enter into this
Agreement. Each Bank also represents that it will, independently and without
reliance upon the Administrative Agent or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and/or decisions in taking or not
taking action under this Agreement, and to make such investigation as it deems
necessary to inform itself as to the business, operations, property, financial
and/or other condition and creditworthiness of each Loan Party. Except for
notices, reports and other documents expressly required to be furnished to the
Banks by the Administrative Agent hereunder, the Administrative Agent shall not
have any duty or responsibility to provide any Bank with any credit or other
information concerning the business, operations, property, financial and other
condition or creditworthiness any Loan Party which may come into the possession
of such Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
9.7 Indemnification. The Banks agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Commitment Percentages, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including without limitation at any time following the payment
of the Loans) be imposed on, incurred by or asserted against the Administrative
Agent in any way relating to or arising out of this Agreement and the other Loan
Documents, or any documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided,
that no Bank shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Administrative Agent's gross
negligence or willful misconduct. If any such amount with respect to which the
Banks have indemnified the Administrative Agent is recovered from the Borrower,
the Administrative Agent shall return the amount so recovered to the Banks which
so indemnified the Administrative Agent, but without interest, unless the
Borrower has paid
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interest. The agreements in this Section shall survive the payment of the Loans
and all other amounts payable hereunder.
9.8 The Administrative Agent in Its Individual Capacity. The
Administrative Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower and the other
Loan Parties as though the Administrative Agent were not the Administrative
Agent hereunder. With respect to its Loans made or renewed by it and any Note
issued to it, the Administrative Agent shall have the same rights and powers
under this Agreement as any Bank and may exercise the same as though it were not
the Administrative Agent, and the terms "Bank" and "Banks" shall include the
Administrative Agent in its individual capacity.
9.9 Successor Administrative Agent. The Administrative Agent may
resign as such upon 10 days' notice to the Banks and the Borrower; provided,
that such resignation shall not become effective until a successor
Administrative Agent is appointed in accordance with this Section 9.9. If the
Administrative Agent shall resign as Administrative Agent under this Agreement,
then the Majority Banks shall appoint from among the Banks a successor agent for
the Banks which successor agent shall be approved by the Borrower, whereupon
such successor agent shall succeed to the rights, powers and duties of the
Administrative Agent, and any references to the Administrative Agent herein or
any other Loan Document shall mean such successor agent effective upon its
appointment, and the former Administrative Agent's rights, powers and duties as
such shall be terminated, without any other or further act or deed on the part
of such former Administrative Agent or any of the parties to this Agreement or
any holders of the Notes. After any retiring Administrative Agent's resignation
as such, the provisions of this Section 10.9 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was the Administrative
Agent under this Agreement.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. None of this Agreement, any Note or
any other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
Section 10.1. With the written consent of the Required Banks, the Administrative
Agent, on behalf of the Banks, and the applicable Loan Party may, from time to
time, enter into written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement and the other Loan Documents or changing in any manner the rights of
the Banks or of the applicable Loan Party hereunder or thereunder or waiving, on
such terms and conditions as the Administrative Agent may specify in such
instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, that no such
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waiver and no such amendment, supplement or modification shall (a) reduce the
amount or extend the scheduled maturity of any Loan, or reduce the rate or
extend the time of payment of interest thereon, or reduce any fee payable to any
Bank hereunder, or reduce the principal amount of any Loan, or increase the
amount or extend the expiry date of any Bank's Commitment, in each case without
the written consent of each Bank affected thereby, and in the case of any
extension of the Termination Date, the written extension of the time of payment
of interest on any Loan in an aggregate amount exceeding $15,000,000 for more
than six months or the extension of the Commitment Period, without the written
consent of Lockheed Martin or (b) [INTENTIONALLY OMITTED], or (c) approve a
financial institution as an issuer of an Acceptable Letter of Credit without the
written consent of the Majority Banks or (d) amend, modify or waive any
provision of this Section 10.1, or reduce the percentage specified in the
definitions of Required Banks or Majority Banks, or consent to the assignment or
transfer by any Loan Party of any of its rights and obligations under the Loan
Documents, or release amounts in the Cash Collateral Account other than in
accordance with Section 2.7, in each case without the written consent of all the
Banks, or amend, modify or waive any provision of this Section 10.1 that
requires the consent of Lockheed Martin without the written consent of Lockheed
Martin or (e) amend, modify or waive any provision of Section 9 without the
written consent of the then Administrative Agent or (f) increase the Commitments
hereunder except in accordance with Section 2.6 or (g) amend the definition of
Release Date, release the Lockheed Martin Guarantee, the Subsidiary Guarantee,
any Letter of Credit (except on the Release Date and, with respect to any Letter
of Credit only, except if such Letter of Credit is being replaced by an
Acceptable Letter of Credit in an equal stated amount) or all or substantially
all of the Collateral, in each case without the written consent of all of the
Banks and Lockheed Martin or (h) amend Section 2.2 or Section 2.6(a) or Section
2.6(c) without the written consent of Lockheed Martin. Any such waiver and any
such amendment, supplement or modification shall apply equally to each of the
Banks and shall be binding upon the Loan Parties, the Banks, the Administrative
Agent and all future holders of the Notes. In the case of any waiver, the Loan
Parties, the Banks and the Administrative Agent shall be restored to their
former position and rights hereunder and under the other Loan Documents, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy or telex), and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered by hand, or three Business
Days after being deposited in the mail, postage prepaid, or, in the case of
telecopy notice, when received, or, in the case of telex
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<PAGE> 71
notice, when sent, answerback received, addressed as follows in the case of the
Borrower and the Administrative Agent, and as set forth in Schedule I in the
case of the other parties hereto, or to such other address as may be hereafter
notified by the respective parties hereto and any future holders of the Notes:
The Borrower:
Globalstar, L.P.
3200 Zanker Road
P.O. Box 640670
San Jose, California 95164
Attention: Vice President-Finance
Telecopy: 408-473-5548
with a copy to:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Treasurer
The Administrative
Agent:
Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: James Treger
Telecopy: 212-270-7138
with a copy to:
Chemical Bank Agent
Bank Services Group
Grand Central Tower
140 East 45th Street, 29th Floor
New York, New York 10017
Attention: Sandra Miklave
Telecopy: 212-622-0002
; provided, that any notice, request or demand to or upon the Administrative
Agent or the Banks pursuant to Sections 2.3, 2.6, 2.7 and 2.8 shall not be
effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Bank, any
right, remedy, power or privilege hereunder or under any Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided or
provided in
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<PAGE> 72
the other Loan Documents are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the other Loan Documents.
10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay
all fees and expenses of the Arranger and the Agent as set forth in the separate
letter agreement dated October 16, 1995 with the Borrower, (b) to pay or
reimburse the Administrative Agent for all its reasonable out-of-pocket costs
and expenses incurred in connection with the preparation, execution and delivery
of, and any amendment, supplement or modification to, this Agreement, the other
Loan Documents and any other documents prepared in connection herewith or
therewith, the consummation of the transactions contemplated hereby and thereby,
including, without limitation, the reasonable fees and disbursements of counsel
to the Administrative Agent, (c) to pay or reimburse each Bank and the
Administrative Agent for all their reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the other Loan Documents and any such other documents, including,
without limitation, fees and disbursements of counsel to the Administrative
Agent and to the several Banks (including, without limitation, the allocated
costs of in-house counsel), (d) to pay, indemnify, and hold each Bank and the
Administrative Agent harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation of any
of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement, the other Loan Documents and any such other documents, (e) to pay or
reimburse the Administrative Agent for all its reasonable costs, expenses and
charges in connection with the opening and administration of the Partner
Collateral Accounts, and (f) to pay, indemnify, and hold each Bank, the Arranger
and the Administrative Agent (and their respective directors, officers,
employees and agents) harmless from and against, any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to or
arising out of the execution, delivery, enforcement, performance, syndication
and administration of this Agreement, the other Loan Documents and any such
other documents and the use or proposed use of proceeds of the Loans (all the
foregoing, collectively, the "indemnified liabilities"); provided, that the
Borrower shall have no obligation hereunder to the Administrative Agent, the
Arranger or any Bank with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of the
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<PAGE> 73
Administrative Agent, the Arranger or any such Bank, as the case may be. The
agreements in this Section 10.5 shall survive repayment of the Loans and all
other amounts payable hereunder.
10.6 Successors and Assigns; Participations; Purchasing Banks. (a)
This Agreement shall be binding upon and inure to the benefit of the Borrower,
the Banks, the Administrative Agent, all future holders of the Notes, and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Bank. Sections 2.2 and 2.6 and Clauses (a), (d) (g) and
(h) of Section 10.1 shall inure to the benefit of and be enforceable by Lockheed
Martin to the extent provided therein.
(b) Any Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
owing to such Bank, any Note held by such Bank, the Commitment of such Bank or
any other interest of such Bank hereunder; provided, that if the Participant is
not an Affiliate of such Bank or another Bank, such Bank shall obtain the prior
consent of the Borrower and the Administrative Agent to such sale of
participating interests (which consent shall not be unreasonably withheld or
delayed); and provided further, that such Bank shall reserve solely unto itself,
and shall not grant to any Participant, any part or all of its right to agree to
the amendment, modification or waiver of any of the terms of this Agreement, its
Note, any other Loan Document or any document related thereto, except to the
extent that such amendment, modification or waiver would reduce the principal
of, or interest on, the Loans or any fees payable hereunder, in each case to the
extent subject to such participation, or postpone the date of the final maturity
of, or any date fixed for any payment of interest on, the Loans, in each case to
the extent subject to such participation. In the event of any such sale by a
Bank of a participating interest to a Participant, such Bank's obligations under
this Agreement to the other parties to this Agreement shall remain unchanged,
such Bank shall remain solely responsible for the performance thereof, such Bank
shall remain the holder of any such Note for all purposes under this Agreement
and the Borrower, and the Administrative Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement. The Borrower agrees that if amounts outstanding under this
Agreement and the Notes are due and unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and any Note to the
same extent as if the amount of its participating interest were owing directly
to it as a Bank under this Agreement or any Note; provided, that such right of
setoff shall be subject to the obligation of such Participant to share with the
Banks,
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<PAGE> 74
and the Banks agree to share with such Participant, as provided in Section 10.7.
The Borrower also agrees that each Participant shall be entitled to the benefits
of Sections 2.15, 2.16, 2.17 and 10.5 with respect to its participation in the
Commitments and the Loans outstanding from time to time; provided, that no
Participant shall be entitled to receive any greater amount pursuant to such
Sections than the transferor Bank would have been entitled to receive in respect
of the amount of the participation transferred by such transferor Bank to such
Participant had no such transfer occurred.
(c) Any Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, and (if the Purchasing Bank is
not an Affiliate of such Bank or an existing Bank) with the prior consent of the
Borrower and the Administrative Agent (which shall not be unreasonably withheld
or delayed), at any time sell to one or more banks or financial institutions
("Purchasing Banks") all or any part of its rights and obligations under this
Agreement and the Notes, pursuant to a Commitment Transfer Supplement, executed
by such Purchasing Bank and such transferor Bank, and delivered to the
Administrative Agent for its acceptance and recording in the Register; provided,
that (i) if the Purchasing Bank is not an Affiliate of such Bank or an existing
Bank any sale of Loans shall be in an amount equal to at least $7,500,000 (pro
rated downward ratably in connection with permanent reductions of the aggregate
Commitments) and (ii) after giving effect thereto, such Bank shall have
Commitments and Loans aggregating at least $7,500,000 (pro rated downward
ratably in connection with permanent reductions of the aggregate Commitments)
unless all of such Bank's Commitments and Loans are sold. Upon such execution,
delivery, acceptance and recording, from and after the Transfer Effective Date
determined pursuant to such Commitment Transfer Supplement, (x) the Purchasing
Bank thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Bank
hereunder with a Commitment as set forth therein, and (y) the transferor Bank
thereunder shall, to the extent provided in such Commitment Transfer
Supplement, to be released from its obligations under this Agreement (and, in
the case of a Commitment Transfer Supplement covering all or the remaining
portion of a transferor Bank's rights and obligations under this Agreement,
such transferor Bank shall cease to be a party hereto). Such Commitment
Transfer Supplement shall be deemed to amend this Agreement to the extent, and
only to the extent, necessary to reflect the addition of such Purchasing Bank
and the resulting adjustment of Commitment Percentages arising from the
purchase by such Purchasing Bank of all or a portion of the rights and
obligations of such transferor Bank under this Agreement and the Notes. If
requested by the Purchasing Bank and/or the transferor Bank, on or prior to the
Transfer Effective Date determined pursuant to such Commitment Transfer
Supplement, the Borrower, at its own expense, shall execute and deliver to
the Administrative Agent in exchange for the surrendered Note a new Note to the
order of such Purchasing
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<PAGE> 75
Bank in an amount equal to the Commitment assumed by it pursuant to such
Commitment Transfer Supplement and, if the transferor Bank has retained a
Commitment hereunder, a new Note to the order of the transferor Bank in an
amount equal to the Commitment retained by it hereunder. Such new Notes shall
be dated the Closing Date and shall otherwise be in the form of the Notes
replaced thereby. The Note surrendered by the transferor Bank shall be returned
by the Administrative Agent to the Borrower marked "cancelled". Notwithstanding
any provision of this paragraph (c) and paragraph (e) of this Section, the
consent of the Borrower shall not be required, and, unless requested by the
assignee and/or the assigning Bank, new Notes shall not be required to be
executed and delivered by the Borrower, for any assignment which occurs at any
time when any of the events described in paragraph (a)(vi) of Section 8 shall
have occurred and be continuing.
(d) The Administrative Agent shall maintain at its address referred
to in Section 10.2 a copy of each Commitment Transfer Supplement delivered to it
and a register (the "Register") for the recordation of the names and addresses
of the Banks and the Commitment of, and principal amount of the Loans owing to,
each Bank from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrower, the Administrative Agent and
the Banks may (and, in the case of any Loan or other obligation hereunder not
evidenced by a Note, shall) treat each Person whose name is recorded in the
Register as the owner of the Loan recorded therein for all purposes of this
Agreement. Any assignment of a Loan or other obligation hereunder not evidenced
by a Note shall be effective only upon appropriate entries with respect thereto
being made in the Register. The Register shall be available for inspection by
the Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of a Commitment Transfer Supplement executed by
a transferor Bank and a Purchasing Bank together with payment to the
Administrative Agent of a registration and processing fee of $4,000, the
Administrative Agent shall (i) promptly accept such Commitment Transfer
Supplement and (ii) on the Transfer Effective Date determined pursuant thereto
record the information contained therein in the Register and give notice of such
acceptance and recordation to the Administrative Agent, the Banks and the
Borrower.
(f) The Borrower authorizes each Bank to disclose to any Participant
or Purchasing Bank (each, a "Transferee") and any prospective Transferee any and
all financial information in such Bank's possession concerning the Loan Parties
and their affiliates which has been delivered to such Bank by or on behalf of
any such Loan Party pursuant to this Agreement or the other Loan Documents or
which has been delivered to such Bank by or on behalf of any Loan Party in
connection with such Bank's credit evaluation of the Borrower and its affiliates
prior to becoming a
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party to this Agreement; provided, that such Transferee or prospective
Transferee agrees in writing to be bound by the confidentiality provisions set
forth in Section 10.14 hereof.
(g) If, pursuant to this Section 10.6, any interest in this
Agreement or any Note is transferred to any Transferee which is organized under
the laws of any jurisdiction other than the United States or any State thereof,
the transferor Bank shall cause such Transferee, concurrently with the
effectiveness of such transfer, (i) to represent to the transferor Bank (for the
benefit of the transferor Bank, the Administrative Agent and the Borrower) that
under applicable law and treaties no taxes will be required to be withheld by
the Administrative Agent, the Borrower or the transferor Bank with respect to
any payments to be made to such Transferee in respect of the Loans, (ii) to
furnish to the transferor Bank (and, in the case of any Purchasing Bank
registered in the Register, the Administrative Agent and the Borrower) either
U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form
1001 (wherein such Transferee claims entitlement to complete exemption from U.S.
federal withholding tax on all interest payments hereunder) and an Internal
Revenue Service Form W-8 or W-9 or successor applicable form (wherein such
Transferee claims exemption from United States backup withholding tax) and (iii)
to agree (for the benefit of the transferor Bank, the Administrative Agent and
the Borrower) to provide the transferor Bank (and, in the case of any Purchasing
Bank registered in the Register, the Administrative Agent and the Borrower) a
new Form 4224 or 1001 or Form W-8 or W-9 upon the expiration or obsolescence of
any previously delivered form and comparable statements in accordance with
applicable U.S. laws and regulations and amendments duly executed and completed
by such Transferee, and to comply from time to time with all applicable U.S.
laws and regulations with regard to such withholding and backup withholding tax
exemptions.
(h) Nothing herein shall prohibit any Bank from pledging or
assigning any Loan, either directly or through the principal banking subsidiary
of the bank holding company which owns such Bank, to any Federal Reserve Bank in
accordance with applicable law.
10.7 Adjustments; Set-off. (a) If any Bank (a "benefitted Bank")
shall receive any payment of all or part of its Loans or interest thereon, or
receive any collateral in respect of its Loans (in each case whether voluntarily
or involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in clause (a)(vi) of Section 8, or otherwise) in a greater
proportion than any such payment to and collateral received by any other Bank,
if any, in respect of such other Bank's Loans or interest thereon, or Loans or
interest thereon, such benefitted Bank shall purchase for cash from the other
Banks such portion of each such other Bank's Loans, or shall provide such other
Banks with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to
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<PAGE> 77
cause such benefitted Bank to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Banks; provided, however, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such benefitted Bank, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. The Borrower agrees that each Bank so purchasing a portion of another
Bank's Loans may exercise all rights of payment (including, without limitation,
rights of set-off) with respect to such portion as fully as if such Bank were
the direct holder of such portion.
(b) In addition to any rights and remedies of the Banks provided by
law, each Bank (and its Affiliates, to the extent permitted by law) shall have
the right, without prior notice to the Borrower, any such notice being expressly
waived by the Borrower to the extent permitted by applicable law, upon any
amount becoming due and payable by the Borrower hereunder or under the Notes
(whether at the stated maturity, by acceleration or otherwise) to set off and
appropriate and apply against such amount any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Bank (or any such Affiliate) to or for the credit or the account
of the Borrower. Each Bank agrees promptly to notify the Borrower and the
Administrative Agent after any such set-off and application made by such Bank;
provided, that the failure to give such notice shall not affect the validity of
such set-off and application.
10.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.9 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Borrower and the Agent.
10.10 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
10.11 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
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<PAGE> 78
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Loan Documents, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to the Borrower at its
address set forth in Section 10.2 or at such other address of which the Agent
shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred to in
this Section any special, exemplary, punitive or consequential damages.
10.12 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE BANKS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES AND FOR ANY
COUNTERCLAIM THEREIN.
10.13 Integration. This Agreement represents the agreement of the
Borrower, the Administrative Agent and the Banks with respect to the subject
matter hereof, and there are no promises, undertakings, representations or
warranties by the Administrative Agent or any Bank relative to the subject
matter hereof not expressly set forth or referred to herein or in the other Loan
Documents.
10.14 Confidentiality. The Banks shall hold all non-public
information obtained pursuant to the requirements of this Agreement or any other
Loan Document which has been identified as such by a Loan Party in accordance
with their customary procedures for handling confidential information of this
nature and in accordance with safe and sound banking practices but in any event
may make disclosure reasonably required by a bona fide prospective Purchasing
Bank or Participant in connection with the contemplated transfer of any Note or
participation therein
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<PAGE> 79
(subject to such prospective Purchasing Bank's or Participant's compliance with
Section 10.6(f) hereof) or as required or requested by any Governmental
Authority or representative thereof or pursuant to legal process.
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<PAGE> 80
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
GLOBALSTAR, L.P.
By: LORAL/QUALCOMM SATELLITE
SERVICES L.P., as Managing
General Partner
By: LORAL/QUALCOMM PARTNERSHIP,
L.P., as General Partner
By: LORAL GENERAL PARTNER, INC.,
as General Partner
By: /s/ Nicholas Moren
-----------------------------------
Title: Vice President
CHEMICAL BANK, as
Administrative Agent and as
a Bank
By: /s/ Richard C. Swith
-----------------------------------
Title: Vice President
BANK OF AMERICA ILLINOIS
By: /s/ Steve Aronowitz
-----------------------------------
Title: Vice President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ Diana H. Imhof
-----------------------------------
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Ken Sneider
-----------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ J. Alan Edwards
-----------------------------------
Title: Authorized Signatory
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<PAGE> 81
BARCLAYS BANK PLC
By: /s/ John C. Livingston
-----------------------------------
Title: Director
BAYERISCHE LANDESBANK
GIROZENTRALE
By: /s/ Peter Obermann
-----------------------------------
Title: Senior Vice President
By: /s/ Wilfried Freudenberger
-----------------------------------
Title: Executive Vice President
BANQUE NATIONALE de PARIS
By: /s/ Richard L. Sted
-----------------------------------
Title: Senior Vice President
By: /s/ Thomas N. George
-----------------------------------
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Richard C. Smith
-----------------------------------
Title: Vice President
CIBC INC.
By: /s/ Marisa Harney
-----------------------------------
Title: Director
CITICORP USA, INC.
By: /s/ Marjorie Futornick
-----------------------------------
Title: Vice President
CREDIT LYONNAIS CREDIT LYONNAIS
CAYMAN ISLAND BRANCH NEW YORK BRANCH
By: /s/ Credit Lyonnais By: /s/ Credit Lyonnais
--------------------------- -----------------------------------
Title: Title:
CREDIT SUISSE
By: /s/ J. Hamilton Crawford
-----------------------------------
Title: Associate
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<PAGE> 82
By: /s/ Michael C. Mast
-----------------------------------
Title: Member of Senior
Management
THE DAI-ICHI KANGYO BANK,
LIMITED, NEW YORK BRANCH
By: /s/ Kim P. Lehry
-----------------------------------
Title: Vice President
THE FUJI BANK, LIMITED
NEW YORK BRANCH
By: /s/ Teiji Teramoto
-----------------------------------
Title: Vice President
BAYERISCHE HYPOTHEKEN-UND WECHSEL-
BANK AKTIENGESELLSCHAFT, NEW YORK
BRANCH
By: /s/ Christine Eleik
-----------------------------------
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED - NEW YORK BRANCH
By: /s/ John V. Veltri
-----------------------------------
Title: Senior Vice President
LTCB TRUST COMPANY
By: /s/ Rene O. LeBlanc
-----------------------------------
Title: Senior Vice President
MELLON BANK, N.A.
By: /s/ David N. Smith
-----------------------------------
Title: Vice President
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By: /s/ Patricia Loret de Mola
-----------------------------------
Title: Senior Vice President
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<PAGE> 83
NATIONAL CITY BANK
By: /s/ Joseph D. Robinson
-----------------------------------
Title: Vice President
NATIONSBANK, N.A.
By: /s/ Mary E. Mandanas
-----------------------------------
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ PNC Bank
-----------------------------------
Title:
ROYAL BANK OF CANADA
By: /s/ John D. Page
-----------------------------------
Title: Senior Manager
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.P.A.
By: Wendell Jones
-----------------------------------
Title: Vice President
By: Roberto Gorlier
-----------------------------------
Title: First Vice President
THE SANWA BANK, LIMITED
By: /s/ Dominic J. Sorresso
-----------------------------------
Title: Vice President
SOCIETE GENERALE
By: /s/ Bruce Drossman
-----------------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ The Sumitomo Bank
-----------------------------------
Title:
By: /s/ Herman White, Jr.
-----------------------------------
Title: Vice President
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<PAGE> 84
TORONTO DOMINION (TEXAS), INC.
By: /s/ Toronto Dominion
-----------------------------------
Title:
THE YASUDA TRUST & BANKING
COMPANY, LIMITED
By: /s/ Ron Longinswater
-----------------------------------
Title: Joint General Manager
80
<PAGE> 1
Exhibit 10.14
CONFORMED COPY
WARRANT AGREEMENT
Dated as of
February 19, 1997
between
GLOBALSTAR TELECOMMUNICATIONS LIMITED
and
THE BANK OF NEW YORK
as the Warrant Agent
---------------------------------------------
Warrants for
Common Stock of
Globalstar Telecommunications Limited
---------------------------------------------
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C> <C>
ARTICLE 1
Definitions
SECTION 1.01. Definitions........................................... 2
SECTION 1.02. Other Definitions..................................... 4
SECTION 1.03. Rules of Construction................................. 5
ARTICLE 2
Warrant Certificates
SECTION 2.01. Form and Dating....................................... 5
SECTION 2.02. Legends............................................... 5
SECTION 2.03. Execution and Countersignature........................ 8
SECTION 2.04. Certificate Register.................................. 8
SECTION 2.05 Separation of Warrants and
Notes............................................. 9
SECTION 2.06. Transfer and Exchange................................. 9
SECTION 2.07. Replacement Certificates.............................. 10
SECTION 2.08. Temporary Certificates................................ 10
SECTION 2.09. Cancellation.......................................... 10
ARTICLE 3
Exercise Terms
SECTION 3.01. Exercise Price........................................ 11
SECTION 3.02. Exercise Periods...................................... 11
SECTION 3.03. Expiration............................................ 11
SECTION 3.04. Manner of Exercise.................................... 11
SECTION 3.05. Issuance of Warrant Shares............................ 12
SECTION 3.06. Fractional Warrant Shares............................. 13
SECTION 3.07. Reservation of Warrant Shares......................... 13
SECTION 3.08. Compliance with Law................................... 14
</TABLE>
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ARTICLE 4
Antidilution Provisions
<TABLE>
<S> <C> <C>
SECTION 4.01. Changes in Common Stock............................... 15
SECTION 4.02. Cash Dividends and Other
Distributions....................................... 15
SECTION 4.03. Rights Issue To All Holders of
Common Stock........................................ 16
SECTION 4.04. Other Issuances of Common Stock or
Rights.............................................. 18
SECTION 4.05. Combination; Liquidation.............................. 19
SECTION 4.06. Other Events.......................................... 20
SECTION 4.07. Superseding Adjustment................................ 21
SECTION 4.08. Minimum Adjustment.................................... 21
SECTION 4.09. Notice of Adjustment.................................. 22
SECTION 4.10. Notice of Certain Transactions........................ 22
SECTION 4.11. Adjustment to Warrant
Certificate......................................... 23
ARTICLE 5
Registration Rights
SECTION 5.01. Effectiveness of Registration
Statements........................................ 24
SECTION 5.02. Suspension............................................ 25
SECTION 5.03. Blue Sky.............................................. 25
SECTION 5.04. Accuracy of Disclosure................................ 25
SECTION 5.05. Indemnification....................................... 26
SECTION 5.06. Additional Acts....................................... 31
SECTION 5.07. Expenses.............................................. 31
ARTICLE 6
Warrant Agent
SECTION 6.01. Appointment of Warrant Agent.......................... 32
SECTION 6.02. Rights and Duties of
Warrant Agent....................................... 32
SECTION 6.03. Individual Rights of
Warrant Agent....................................... 33
SECTION 6.04. Warrant Agent's Disclaimer............................ 34
SECTION 6.05. Compensation and Indemnity............................ 34
SECTION 6.06. Successor Warrant Agent............................... 34
</TABLE>
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ARTICLE 7
Miscellaneous
<TABLE>
<S> <C> <C>
SECTION 7.01. SEC Reports and Other Information..................... 36
SECTION 7.02. Persons Benefitting................................... 37
SECTION 7.03. Rights of Holders..................................... 37
SECTION 7.04. Amendment............................................. 37
SECTION 7.05. Notices............................................... 38
SECTION 7.06. Governing Law......................................... 39
SECTION 7.07. Successors............................................ 39
SECTION 7.08. Multiple Originals.................................... 39
SECTION 7.09. Table of Contents..................................... 39
SECTION 7.10. Severability.......................................... 39
SECTION 7.11. Use of Proceeds....................................... 39
EXHIBIT A Form of Face of Warrant Certificate
EXHIBIT B Certificate to be Delivered upon
Exchange or Registration of
Transfer of Warrants
</TABLE>
iii
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WARRANT AGREEMENT dated as of February 19, 1997
(this "Agreement"), between GLOBALSTAR TELECOMMUNICATIONS
LIMITED, a Bermuda corporation ("GTL"), and THE BANK OF
NEW YORK, as Warrant Agent (the "Warrant Agent").
GTL desires to issue the warrants (the "Warrants") described
herein and to purchase with the proceeds therefrom Partnership Warrants (as
defined herein) of Globalstar, L.P., a Delaware limited partnership
("Globalstar"). The Warrants will initially entitle the holders thereof (the
"Holders") to purchase in the aggregate 1,032,250 shares of common stock, par
value $1.00 per share, of GTL (the "Common Stock") in connection with an
offering by GTL, Globalstar and Globalstar Capital Corporation, a Delaware
corporation ("Globalstar Capital") (the "Units Offering") of 500,000 units (the
"Units"). Each Unit will consist of (i) $1,000 aggregate principal amount of
11-3/8% Senior Notes due 2004 (collectively, the "Notes") issued by Globalstar
and Globalstar Capital, as joint and several obligors, and (ii) a Warrant issued
by GTL. Each Warrant will entitle the Holder to purchase 2.0645 shares of Common
Stock, subject to adjustment as provided herein. In connection with the sale of
the Units, 500,000 Warrants will be issued to the purchasers of the Units.
The Warrants will not trade separately from the Notes until the
earlier of commencement of an exchange offer or the effectiveness of a shelf
registration statement for the Notes or such earlier date after August 15, 1997,
as Lehman Brothers, Inc. shall determine (the "Separation Date").
GTL further desires the Warrant Agent to act on behalf of GTL in
connection with the issuance of the Warrants as provided herein and the Warrant
Agent is willing to so act.
Each party agrees as follows for the benefit of the other party
and for the equal and ratable benefit of the holders of Warrants:
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2
ARTICLE 1
Definitions
SECTION 1.01. Definitions.
"Affiliate" of any Person means any other Person, directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; provided, however, that
beneficial ownership of 10% or more of the voting securities of a Person shall
be decreed to be control. The terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Board" means the Board of Directors of GTL or any committee
thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" means each day that is not a Saturday, a Sunday or
a day on which banking institutions are not required to be open in the State of
New York.
"Cashless Exercise Ratio" means a fraction, the numerator of
which is the excess of the Current Market Value per share of Common Stock on the
Exercise Date over the Exercise Price per share as of the Exercise Date and the
denominator of which is the Current Market Value per share of the Common Stock
on the Exercise Date.
"Combination" means an event in which GTL consolidates with,
merges with or into, or sells all or substantially all of its assets to another
Person.
"Current Market Value" per share of Common Stock or any other
security at any date means: (i) if the security is not registered under the
Exchange Act, (a) the value of the security, determined in good faith by the
Board and certified in a board resolution, based on the most recently completed
arm's-length transaction between GTL and a Person other than an Affiliate of
GTL, the closing of which occurred on such date or within the six-month period
preceding such date, or (b) if no such transaction shall have occurred on such
date or within such six-month period,
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3
the value of the security as determined by an independent financial expert; or
(ii) if the security is registered under the Exchange Act, the average of the
last reported sale price of the Common Stock (or the equivalent in an
over-the-counter market) for each Business Day during the period commencing 15
Business Days before such date and ending on the date one day prior to such
date, or if the security has been registered under the Exchange Act for less
than 15 consecutive Business Days before such date, the average of the daily
closing bid prices (or such equivalent) for all of the Business Days before such
date for which daily closing bid prices are available (provided, however, that
if the closing bid price is not determinable for at least 10 Business Days in
such period, the "Current Market Value" of the security shall be determined as
if the security were not registered under the Exchange Act).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Date" means, for a given Warrant, the day on which such
Warrant is exercised pursuant to Section 3.04.
"GTL Guarantee Warrants" means warrants to purchase 4,185,318
shares of Common Stock of GTL, at a price per share of $26.50, issued by GTL to
certain founding and strategic partners of Globalstar.
"GTL Rights" means rights to subscribe for and purchase 1,131,168
share of Common Stock of GTL, at a price per share of $26.50, to be distributed
by GTL to holders of its Common Stock.
"Indenture" means the Indenture dated as of February 15, 1997,
among Globalstar and Globalstar Capital, as joint and several obligors, and the
Trustee, with respect to the Notes, as it may be amended or supplemented from
time to time.
"Issue Date" means the date on which Warrants are initially
issued.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer, or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of GTL.
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"Partnership Warrants" means the warrants to purchase limited
partnership interests in Globalstar having the same terms and tenor as the
Warrants issued hereby.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"SEC" means the Securities and Exchange Commission, or any
successor agency or body performing substantially similar functions.
"Securities Act" means the Securities Act of 1933, as amended.
"Trustee" means The Bank of New York, or any successor trustee
under the Indenture.
"Warrant Certificates" mean the registered certificates
(including without limitation, the global certificates) issued by GTL under this
Agreement representing the Warrants.
"Warrant Shares" mean the shares of Common Stock (and any other
securities) for which the Warrants are exercisable.
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
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<S> <C>
"Agreement"............................................. Recitals
"Cashless Exercise"..................................... 3.04
"Certificate Register".................................. 2.04
"Common Shelf Registration
Statement"............................................. 5.01
"Common Stock".......................................... Recitals
"Company"............................................... Recitals
"Exercise Price"........................................ 3.01
"Expiration Date"....................................... 3.02(b)
"Holders"............................................... Recitals
"Notes"................................................. Recitals
"Registrar"............................................. 3.07
"Separability Legend"................................... 2.02(b)
"Separation Date"....................................... Recitals
</TABLE>
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5
<TABLE>
<S> <C>
"Successor Company"..................................... 4.05(a)
"Transfer Agent"........................................ 3.05
"Units"................................................. Recitals
"Units Offering"........................................ Recitals
"Warrant Agent"......................................... Recitals
"Warrants".............................................. Recitals
"Warrant Shelf Registration
Statement"............................................. 5.01
</TABLE>
SECTION 1.03. Rules of Construction. Unless the text otherwise
requires:
(i) a defined term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
ARTICLE 2
Warrant Certificates
SECTION 2.01. Form and Dating. Each Warrant Certificate shall be
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Agreement. The Warrant Certificates may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which GTL is subject, if any, or usage (provided that any such
notation, legend or endorsement is in a form acceptable to GTL) and shall bear
the legends required by Section 2.02. Each Warrant Certificate shall be dated
the date of its countersignature. The terms of the Warrant Certificate set forth
in Exhibit A are part of the terms of this Agreement.
SECTION 2.02. Legends. (a) Each Warrant Certificate shall bear
the following legend:
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6
THE COMMON STOCK, PAR VALUE $1.00 PER SHARE, OF GTL FOR WHICH
THIS WARRANT IS EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ANY APPLICABLE STATE
SECURITIES LAWS, OR AN APPLICABLE EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS. ACCORDINGLY, NO HOLDER SHALL BE
ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY TIME UNLESS,
AT THE TIME OF EXERCISE, (i) A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT RELATING TO THE SHARES OF COMMON STOCK ISSUABLE
UPON THE EXERCISE OF THIS WARRANT HAS BEEN FILED WITH, AND
DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION
(THE "SEC"), AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF
SUCH REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC, OR (ii)
THE ISSUANCE OF SUCH SHARES IS PERMITTED PURSUANT TO AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
(b) Each Warrant Certificate issued prior to the Separation Date
shall bear the following legend (the "Separability Legend"):
THE WARRANTS REPRESENTED BY THIS CERTIFICATE WERE INITIALLY
ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF
$1,000 AGGREGATE PRINCIPAL AMOUNT OF 11-3/8% SENIOR NOTES DUE
2004 OF GLOBALSTAR, L.P. AND GLOBALSTAR CAPITAL CORPORATION (THE
"NOTES") AND A WARRANT. THE WARRANTS AND THE NOTES WILL NOT TRADE
SEPARATELY UNTIL THE EARLIER OF (I) THE COMMENCEMENT OF AN
EXCHANGE OFFER OR THE EFFECTIVENESS OF A SHELF REGISTRATION
STATEMENT FOR THE NOTES OR (II) SUCH DATE AFTER AUGUST 15, 1997,
AS LEHMAN BROTHERS INC. MAY DETERMINE.
(c) Each Warrant Certificate issued prior to the third
anniversary of the original issuance of the Units, unless otherwise agreed by
GTL and the Holder thereof, shall bear the following legend:
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR
<PAGE> 11
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PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
WITHIN THE "UNITED STATES" OR TO "U.S. PERSONS" (AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT) IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS
ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT
OF THE GLOBALSTAR PARTIES THAT: (I) IT HAS ACQUIRED A "RESTRICTED"
SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT
WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE
DATE WHEN THIS SECURITY NO LONGER CONSTITUTES A "RESTRICTED" SECURITY
UNDER RULE 144(K) OF THE SECURITIES ACT EXCEPT (A) TO ANY OF THE
GLOBALSTAR PARTIES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY
OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSES
(II)(D) AND (E) IS SUBJECT TO THE RIGHT OF THE ISSUER OF THIS SECURITY
AND THE TRUSTEE OR TRANSFER AGENT FOR SUCH SECURITIES TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION
ACCEPTABLE TO THEM IN FORM AND SUBSTANCE. [THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.]
BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN
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RULE 501(A)(1),(2),(3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH REGULATION S.
(d) Each Warrant Certificate issued in global form and deposited
with DTC shall bear the following legend:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO GTL OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
WARRANT AGREEMENT REFERRED TO HEREIN.
SECTION 2.03. Execution and Countersignature. Two Officers shall
sign the Warrant Certificates for GTL by manual or facsimile signature. If an
Officer whose signature is on a Warrant Certificate no longer holds that office
at the time the Warrant Agent countersigns the Warrant Certificate, the Warrant
Certificate shall nevertheless be valid. A Warrant Certificate shall not be
valid until an authorized signatory of the Warrant Agent manually countersigns
the Warrant Certificate. Such authorized signature shall be conclusive evidence
that the Warrant Certificate has been countersigned under this Agreement.
The Warrant Agent shall initially countersign and deliver Warrant
Certificates entitling the Holders thereof to purchase in the aggregate not more
than 1,032,250 Warrant Shares upon a written order of GTL signed by two Officers
or by an Officer and either an Assistant Treasurer or an Assistant Secretary of
GTL.
<PAGE> 13
9
The Warrant Agent may appoint an agent reasonably acceptable to
GTL to countersign the Warrant Certificates. Unless limited by the terms of such
appointment, such agent may countersign Warrant Certificates whenever the
Warrant Agent may do so. Each reference in this Agreement to countersignature by
the Warrant Agent includes countersignature by such agent. Such agent will have
the same rights as the Warrant Agent for service of notices and demands.
SECTION 2.04. Certificate Register. The Warrant Agent shall keep
a register ("Certificate Register") of the Warrant Certificates and of their
transfer and exchange. The Certificate Register shall show the names and
addresses of the respective Holders and the date and number of Warrants
represented on the face of each Warrant Certificate. GTL and the Warrant Agent
may deem and treat the Person in whose name a Warrant Certificate is registered
as the absolute owner of such Warrant Certificate for all purposes whatsoever
and neither GTL nor the Warrant Agent shall be affected by notice to the
contrary.
SECTION 2.05. Separation of Warrants and Notes. (a) Prior to the
Separation Date no Warrant may be sold, assigned or otherwise transferred to any
Person unless, simultaneously with such transfer, the Warrant Agent receives
confirmation from the Trustee for the Notes that the Holder thereof has
requested a transfer of the related Notes to the same transferee.
(b) On or after the Separation Date, the holder of a Warrant
Certificate containing a Separability Legend may surrender such Warrant
Certificate accompanied by a written application to the Warrant Agent, duly
executed by the Holder thereof, for a new Warrant Certificate or certificates
not containing the Separability Legend.
SECTION 2.06. Transfer and Exchange. The Warrant Certificates
shall be issued in registered form only and shall be transferable only upon the
surrender of such Warrant Certificate for registration of transfer. When a
Warrant Certificate is presented to the Warrant Agent with a request to register
a transfer, the Warrant Agent shall register the transfer as requested if the
reasonable requirements of the Warrant Agent and of Section 8-401(1) of the
Uniform Commercial Code as in effect in the State of New York are met; provided,
however, that prior to the Separation Date the Warrant Agent shall not register
a
<PAGE> 14
10
transfer of a Warrant Certificate and such transfer will be void and of no
effect unless the Notes that are a part of the same Unit as the Warrants
represented by the Warrant Certificate to be transferred are simultaneously
transferred to the same transferee. To permit the registration of transfers and
exchanges, GTL shall execute and the Warrant Agent shall countersign Warrant
Certificates at the Warrant Agent's request. All Warrant Certificates issued
upon any registration of transfer or exchange of Warrant Certificates shall be
valid obligations of GTL, entitled to the same benefits under this Agreement as
the Warrant Certificates surrendered upon such registration of transfer or
exchange. No service charge will be made to a Holder for any registration of
transfer or exchange upon surrender of any Warrant Certificate at the office of
the Warrant Agent maintained for that purpose. However, GTL may require payment
of a sum sufficient to cover any tax, assessment or other governmental charge
that may be imposed in connection with any registration of transfer or exchange
of Warrant Certificates but not for any exchange or original issuance (not
involving a transfer) pursuant to Section 2.08, 3.04 or 3.05.
SECTION 2.07. Replacement Certificates. If a mutilated Warrant
Certificate is surrendered to the Warrant Agent or if the Holder of a Warrant
Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, GTL shall issue and the Warrant Agent shall countersign a
replacement Warrant Certificate if the reasonable requirements of the Warrant
Agent and of Section 8-405 of the Uniform Commercial Code as in effect in the
State of New York are met. Such Holder shall furnish an indemnity bond
sufficient in the judgment of GTL and the Warrant Agent to protect GTL and the
Warrant Agent from any loss which either of them may suffer if a Warrant
Certificate is replaced. GTL and the Warrant Agent may charge the Holder for
their expenses in replacing a Warrant Certificate. Every replacement Warrant
Certificate is an additional obligation of GTL.
SECTION 2.08. Temporary Certificates. Until definitive Warrant
Certificates are ready for delivery, GTL may prepare and the Warrant Agent shall
countersign temporary Warrant Certificates. Temporary Warrant Certificates shall
be substantially in the form of definitive Warrant Certificates but may have
variations that GTL considers appropriate for temporary Warrant Certificates.
Without unreasonable delay, GTL shall prepare
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11
and the Warrant Agent shall countersign definitive Warrant Certificates and
deliver them in exchange for temporary Warrant Certificates.
SECTION 2.09. Cancellation. (a) In the event GTL shall purchase
or otherwise acquire Warrant Certificates, the same shall thereupon be delivered
to the Warrant Agent for cancellation.
(b) The Warrant Agent and no one else shall cancel and may, but
shall not be required to, destroy all Warrant Certificates surrendered for
transfer, exchange, replacement, exercise or cancellation unless GTL directs the
Warrant Agent to deliver canceled Warrant Certificates to GTL. GTL may not issue
new Warrant Certificates to replace Warrant Certificates to the extent they
represent Warrants which have been exercised or Warrants which GTL has purchased
or otherwise acquired.
ARTICLE 3
Exercise Terms
SECTION 3.01. Exercise Price. Each Warrant shall initially
entitle the Holder thereof, subject to adjustment pursuant to the terms of this
Agreement, to purchase 2.0645 shares of Common Stock for a per share exercise
price (the "Exercise Price") of $69.575.
SECTION 3.02. Exercise Periods. (a) Subject to the terms and
conditions set forth herein, the Warrants shall be exercisable at any time or
from time to time after February 19, 1998; provided, however, that holders of
Warrants will be able to exercise their Warrants only if (i) the Common Shelf
Registration Statement relating to the Warrant Shares is effective, or (ii) the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act, and the Warrant Shares are qualified for sale or exempt from
qualification under the applicable securities laws of the states or other
jurisdictions in which such holders reside.
(b) No Warrant shall be exercisable after February 15, 2004 (the
"Expiration Date").
SECTION 3.03. Expiration. Each Warrant shall terminate and become
void as of the earlier of (i) the close
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of business on the Expiration Date or (ii) the date such Warrant is exercised.
GTL shall give notice not less than 90 and not more than 120 days prior to the
Expiration Date to the Holders of all then outstanding Warrants to the effect
that the Warrants will terminate and become void as of the close of business on
the Expiration Date; provided, however, that if GTL fails to give notice as
provided in this Section 3.03, the Warrants will nevertheless expire and become
void on the Expiration Date.
SECTION 3.04. Manner of Exercise. Warrants may be exercised upon
(i) surrender to the Warrant Agent at the principal corporate trust office of
the Warrant Agent of the related Warrant Certificate, together with the form of
election to purchase Common Stock on the reverse thereof duly filled in and
signed by the Holder thereof, and (ii) payment to the Warrant Agent, for the
account of GTL, of the Exercise Price for each Warrant Share issuable upon the
exercise of such Warrants then exercised. Such payment shall be made (i) in cash
or by certified or official bank check payable to the order of GTL or by wire
transfer of funds to an account designated by GTL for such purpose or (ii)
without the payment of cash, by reducing the number of shares of Common Stock
obtainable upon the exercise of a Warrant so as to yield a number of shares of
Common Stock upon the exercise of such Warrant equal to the product of (a) the
number of shares of Common Stock issuable as of the Exercise Date upon the
exercise of such Warrant (if payment of the Exercise Price were being made in
cash) and (b) the Cashless Exercise Ratio. An exercise of a Warrant in
accordance with the immediately preceding sentence is herein called a "Cashless
Exercise". Upon surrender of a Warrant Certificate representing more than one
Warrant in connection with the holder's option to elect a Cashless Exercise, the
number of shares of Common Stock deliverable upon a Cashless Exercise shall be
equal to the number of shares of Common Stock issuable upon the exercise of
Warrants that the holder specifies are to be exercised pursuant to a Cashless
Exercise multiplied by the Cashless Exercise Ratio. All provisions of this
Agreement shall be applicable with respect to a surrender of a Warrant
Certificate pursuant to a Cashless Exercise for less than the full number of
Warrants represented thereby. Subject to Section 3.02, the rights represented by
the Warrants shall be exercisable at the election of the Holders thereof either
in full at any time or from time to time in part and in the event that a Warrant
Certificate is surrendered for exercise of less than all the Warrants
represented by such Warrant Certificate at
<PAGE> 17
13
any time prior to the Expiration Date, a new Warrant Certificate representing
the remaining Warrants shall be issued. The Warrant Agent shall countersign and
deliver the required new Warrant Certificates, and GTL, at the Warrant Agent's
request, shall supply the Warrant Agent with Warrant Certificates duly signed on
behalf of GTL for such purpose.
SECTION 3.05. Issuance of Warrant Shares. Subject to Section
2.07, upon the surrender of Warrant Certificates and payment of the per share
Exercise Price, as set forth in Section 3.04, GTL shall issue and cause the
Warrant Agent or, if appointed, a transfer agent for the Common Stock ("Transfer
Agent") to countersign and deliver to or upon the written order of the Holder
and in such name or names as the Holder may designate a certificate or
certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrants or other securities or property to which it is
entitled, registered or otherwise, to the Person or Persons entitled to receive
the same, together with cash as provided in Section 3.06 in respect of any
fractional Warrant Shares otherwise issuable upon such exercise. Such
certificate or certificates shall be deemed to have been issued and any Person
so designated to be named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrant
Certificates and payment of the per share Exercise Price, as aforesaid;
provided, however, that if, at such date, the transfer books for the Warrant
Shares shall be closed, the certificates for the Warrant Shares in respect of
which such Warrants are then exercised shall be issuable as of the date on which
such books shall next be opened and until such date GTL shall be under no duty
to deliver any certificates for such Warrant Shares; provided further, however,
that such transfer books, unless otherwise required by law, shall not be closed
at any one time for a period longer than 20 calendar days.
SECTION 3.06. Fractional Warrant Shares. GTL shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be exercised in full at the same time by the same Holder,
the number of full Warrant Shares which shall be issuable upon such exercise
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable pursuant thereto. If any fraction of a Warrant Share would, except
for the provisions of this Section 3.06, be issuable on the exercise of any
Warrant (or specified portion thereof), GTL shall pay at the time of exercise an
amount in cash equal to
<PAGE> 18
14
the Current Market Value per Warrant Share, as determined on the day immediately
preceding the date the Warrant is exercised, multiplied by such fraction,
computed to the nearest whole cent.
SECTION 3.07. Reservation of Warrant Shares. GTL shall at all
times keep reserved out of its authorized shares of Common Stock a number of
shares of Common Stock sufficient to provide for the exercise of all outstanding
Warrants. The registrar for the Common Stock (the "Registrar") shall at all
times until the Expiration Date reserve such number of authorized shares as
shall be required for such purpose. GTL will keep a copy of this Agreement on
file with the Transfer Agent. All Warrant Shares which may be issued upon
exercise of Warrants shall, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof. GTL will supply such Transfer Agent with duly
executed stock certificates for such purpose and will itself provide or
otherwise make available any cash which may be payable as provided in Section
3.06. GTL will furnish to such Transfer Agent a copy of all notices of
adjustments (and certificates related thereto) transmitted to each Holder.
Before taking any action which would cause an adjustment pursuant
to Article 4 to reduce the Exercise Price below the then par value (if any) of
the Common Stock, GTL shall take any and all corporate action which may, in the
opinion of its counsel, be necessary in order that GTL may validly and legally
issue fully paid and nonassessable shares of Common Stock at the Exercise Price
as so adjusted.
GTL covenants that all shares of Common Stock which may be issued
upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free
of preemptive rights, free from all taxes and free from all liens, charges and
security interests, created by or through GTL, with respect to the issue
thereof.
SECTION 3.08. Compliance with Law. Notwithstanding anything in
this Agreement to the contrary, in no event shall a Holder be entitled to
exercise a Warrant unless (i) a registration statement filed under the
Securities Act in respect of the issuance of the Warrant Shares is then
effective or (ii) in the opinion of counsel to GTL addressed to the Warrant
Agent the exercise of such Warrants is exempt from the registration requirements
of the
<PAGE> 19
15
Securities Act and such securities are qualified for sale or exempt from
qualification under the applicable securities laws of the States or other
jurisdictions in which such holders reside.
ARTICLE 4
Antidilution Provisions
SECTION 4.01. Changes in Common Stock. In the event that at any
time or from time to time GTL shall (i) pay a dividend or make a distribution on
its Common Stock in shares of its Common Stock or other shares of its capital
stock, (ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock or (iv) increase or
decrease the number of shares of Common Stock outstanding by reclassification of
its Common Stock, then the number of shares of Common Stock issuable upon
exercise of each Warrant immediately after the happening of such event shall be
adjusted to a number determined by multiplying the number of shares of Common
Stock that such holder would have owned or have been entitled to receive upon
exercise had such Warrants been exercised immediately prior to the happening of
the events described above (or, in the case of a dividend or distribution of
Common Stock or other shares of capital stock, immediately prior to the record
date therefor) by a fraction, the numerator of which shall be the total number
of shares of Common Stock outstanding immediately after the happening of the
events described above and the denominator of which shall be the total number of
shares of Common Stock outstanding immediately prior to the happening of the
events described above; and subject to Section 4.08, the Exercise Price for each
Warrant shall be adjusted to a number determined by dividing the Exercise Price
immediately prior to such event by such fraction. An adjustment made pursuant to
this Section 4.01 shall become effective immediately after the effective date of
such event, retroactive to the record date therefor in the case of a dividend or
distribution in shares of Common Stock or other shares of GTL's capital stock.
SECTION 4.02. Cash Dividends and Other Distributions. In the
event that at any time or from time to time GTL shall distribute to all holders
of Common Stock (i) any dividend or other distribution of cash, evidences of
<PAGE> 20
16
its indebtedness, shares of its capital stock or any other assets, properties or
securities or (ii) any options, warrants or other rights to subscribe for or
purchase any of the foregoing (other than, in each case, (w) the issuance of any
rights under a shareholder rights plan, (x) any dividend or distribution
described in Section 4.01, (y) any rights, options, warrants or securities
described in Section 4.03 and (z) any cash dividends or other cash distributions
from current or retained earnings), then the number of shares of Common Stock
issuable upon the exercise of each Warrant shall be increased to a number
determined by multiplying the number of shares of Common Stock issuable upon the
exercise of such Warrant immediately prior to the record date for any such
dividend or distribution by a fraction, the numerator of which shall be the
Current Market Value per share of Common Stock on the record date for such
dividend or distribution and the denominator of which shall be such Current
Market Value per share of Common Stock on the record date for such dividend or
distribution less the sum of (x) the amount of cash, if any, distributed per
share of Common Stock and (y) the fair value (as determined in good faith by the
Board, whose determination shall be evidenced by a board resolution filed with
the Warrant Agent, a copy of which will be sent to Holders upon request) of the
portion, if any, of the distribution applicable to one share of Common Stock
consisting of evidences of indebtedness, shares of stock, securities, other
assets or property, warrants, options or subscription or purchase rights; and,
subject to Section 4.08, the Exercise Price shall be adjusted to a number
determined by dividing the Exercise Price immediately prior to such record date
by the above fraction. Such adjustments shall be made whenever any distribution
is made and shall become effective as of the date of distribution, retroactive
to the record date for any such distribution; provided, however, that GTL is not
required to make an adjustment pursuant to this Section 4.02 if at the time of
such distribution GTL makes the same distribution to Holders of Warrants as it
makes to holders of Common Stock pro rata based on the number of shares of
Common Stock for which such Warrants are exercisable (whether or not currently
exercisable). No adjustment shall be made pursuant to this Section 4.02 which
shall have the effect of decreasing the number of shares of Common Stock
issuable upon exercise of each Warrant or increasing the Exercise Price.
SECTION 4.03. Rights Issue To All Holders of Common Stock. In the
event that at any time or from time to
<PAGE> 21
17
time GTL shall issue to all holders of Common Stock without any charge, rights,
options or warrants entitling the holders thereof to subscribe for shares of
Common Stock, or securities convertible into or exchangeable or exercisable for
Common Stock, entitling such holders to subscribe for or purchase shares of
Common Stock at a price per share that is lower at the record date for such
issuance than the then Current Market Value per share of Common Stock other than
in connection with the adoption of a shareholder rights plan by GTL, then the
number of shares of Common Stock issuable upon the exercise of each Warrant
shall be increased to a number determined by multiplying the number of shares of
Common Stock theretofore issuable upon exercise of each Warrant by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options, warrants or securities plus the
number of additional shares of Common Stock offered for subscription or purchase
or into or for which such securities that are issued are convertible,
exchangeable or exercisable, and the denominator of which shall be the number of
shares of Common Stock outstanding on the date of issuance of such rights,
options, warrants or securities plus the total number of shares of Common Stock
which the aggregate consideration expected to be received by GTL (assuming the
exercise or conversion of all such rights, options, warrants or securities)
would purchase at the then Current Market Value per share of Common Stock.
Subject to Section 4.08, in the event of any such adjustment, the Exercise Price
shall be adjusted to a number determined by dividing the Exercise Price
immediately prior to such date of issuance by the aforementioned fraction. Such
adjustment shall be made immediately after such rights, options or warrants are
issued and shall become effective, retroactive to the record date for the
determination of stockholders entitled to receive such rights, options, warrants
or securities. Notwithstanding anything to the contrary in this Article IV, no
adjustment to the number of Warrant Shares issuable upon exercise of the
Warrants or to the Exercise Price shall be made as a result of the offering by
GTL to all holders of its Common Stock of the GTL Rights (or as a result of any
exercise of the GTL Rights), including as a result of the issuance of additional
shares of Common Stock, or securities convertible into or exchangeable or
exercisable for shares of Common Stock, resulting from the operation of any
anti-dilution provision in any warrant or other security of GTL convertible
into, exercisable or exchangeable for Common Stock of GTL, which such warrant or
security is outstanding on the date of this Agreement. No
<PAGE> 22
18
adjustment shall be made pursuant to this Section 4.03 which shall have the
effect of decreasing the number of shares of Common Stock purchasable upon
exercise of each Warrant or of increasing the Exercise Price.
SECTION 4.04 Other Issuances of Common Stock or Rights. (a) In
the event that at any time or from time to time GTL shall issue (i) shares of
Common Stock (subject to the provisions below), (ii) rights, options or warrants
entitling the holders thereof to subscribe for shares of Common Stock (provided,
however that no adjustment shall be made upon the exercise of such rights,
options or warrants), or (iii) securities convertible into or exchangeable or
exercisable for Common Stock (provided, however, that no adjustment shall be
made upon the conversion, exchange or exercise of such securities (other than
issuances specified in (i), (ii) or (iii) which are made as the result of
anti-dilution adjustments in such securities)), at a price per share at the
record date of such issuance that is less than the then Current Market Value per
share of Common Stock, then the number of shares of Common Stock issuable upon
the exercise of each Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock theretofore issuable upon
exercise of each Warrant by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately after such sale or
issuance plus the number of additional shares of Common Stock offered for
subscription or purchase or into or for which such securities that are issued
are convertible, exchangeable or exercisable, and the denominator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
sale or issuance plus the total number of shares of Common Stock which the
aggregate consideration expected to be received by GTL (assuming the exercise or
conversion of all such rights, options, warrants or securities, if any) would
purchase at the then Current Market Value per share of Common Stock; and subject
to Section 4.08 the Exercise Price shall be adjusted to a number determined by
dividing the Exercise Price immediately prior to such date of issuance by the
aforementioned fraction; provided, however, that no adjustment to the number of
Warrant Shares issuable upon the exercise of the Warrants or to the Exercise
Price shall be made as a result of (i) the issuance of shares of Common Stock
under any warrants, options or other rights existing on the date hereof, (ii)
the issuance of shares of Common Stock in bona fide public offerings that are
underwritten or in which a placement agent is retained by GTL or (iii) the
issuance of
<PAGE> 23
19
options, or shares of Common Stock pursuant to any option, under any employee
benefit plans approved by the Board of Directors. Such adjustments shall be made
whenever such rights, options or warrants or convertible securities are issued.
No adjustment shall be made pursuant to this Section 4.04 which shall have the
effect of decreasing the number of shares of Common Stock issuable upon exercise
of each warrant or of increasing the Exercise Price. For purposes of Section
4.04 only, any issuance of Common Stock, or rights, options or warrants to
subscribe for, or other securities convertible into or exercisable or
exchangeable for, Common Stock, which issuance (or agreement to issue) (A) is in
exchange for or otherwise in connection with the acquisition of the property
(excluding any such exchange exclusively for cash) of any Person and (B) is at a
price per share equal to the lower of the Current Market Value at the time an
agreement in principle is reached or at the time a definitive agreement is
entered into, shall be deemed to have been made at a price per share equal to
the Current Market Value per share at the record date with respect to such
issuance (the time of closing or consummation of such exchange or acquisition)
if such definitive agreement is entered into within 90 days of the date of such
agreement in principle.
(b) Notwithstanding anything to the contrary in this Article IV,
no adjustment to the number of Warrant Shares issuable upon exercise of the
Warrants or to the Exercise Price shall be made as a result of the acceleration
of the vesting or exercise of the GTL Guarantee Warrants, including as a result
of the issuance of additional shares of Common Stock, or securities convertible
into or exchangeable or exercisable for shares of Common Stock, resulting from
the operation of any anti-dilution provision in any warrant or other security of
GTL convertible into, exercisable or exchangeable for Common Stock of GTL, which
such warrant or security is outstanding on the date of this Agreement. In
addition, no adjustment to the number of Warrant Shares issuable upon exercise
of the Warrants or to the Exercise Price shall be made upon or as a result of
the issuance or distribution by Globalstar of any partnership interest in
Globalstar.
SECTION 4.05. Combination; Liquidation. (a) Except as provided in
Section 4.05(b), in the event of a Combination, each Holder shall have the right
to receive upon exercise of the Warrants the kind and amount of shares of
capital stock or other securities or property which such
<PAGE> 24
20
Holder would have been entitled to receive upon or as a result of such
Combination had such Warrant been exercised immediately prior to such event.
Unless paragraph (b) is applicable to a Combination, GTL shall provide that the
surviving or acquiring Person (the "Successor Company") in such Combination will
enter into an agreement with the Warrant Agent confirming the Holders' rights
pursuant to this Section 4.05(a) and providing for adjustments, which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Article 4. The provisions of this Section 4.05(a) shall similarly apply to
successive Combinations involving any Successor Company.
(b) In the event of (i) a Combination where consideration to the
holders of Common Stock in exchange for their shares is payable solely in cash
or (ii) the dissolution, liquidation or winding-up of GTL, the holders of the
Warrants shall be entitled to receive, upon surrender of their Warrant
Certificates, distributions on an equal basis with the holders of Common Stock
or other securities issuable upon exercise of the Warrants, as if the Warrants
had been exercised immediately prior to such event, less the Exercise Price.
In case of any Combination described in this Section 4.05(b), the
surviving or acquiring Person and, in the event of any dissolution, liquidation
or winding-up of GTL, GTL, shall deposit promptly with the Warrant Agent the
funds, if any, necessary to pay to the holders of the Warrants the amounts to
which they are entitled as described above. After such funds and the surrendered
Warrant Certificates are received, the Warrant Agent is required to deliver a
check in such amount as is appropriate (or, in the case of consideration other
than cash, such other consideration as is appropriate) to such Person or Persons
as it may be directed in writing by the Holders surrendering such Warrants.
SECTION 4.06. Other Events. If any event occurs as to which the
foregoing provisions of this Article 4 are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
and adequately protect the purchase rights of the Warrants in accordance with
the essential intent and principles of such provisions, then such Board shall
make such adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of such Board, to
<PAGE> 25
21
protect such purchase rights as aforesaid, but in no event shall any such
adjustment have the effect of increasing the Exercise Price or decreasing the
number of shares of Common Stock issuable upon exercise of any Warrant.
SECTION 4.07. Superseding Adjustment. Upon the expiration of any
rights, options, warrants or conversion or exchange privileges which resulted in
adjustments pursuant to this Article 4, if any thereof shall not have been
exercised, the number of Warrant Shares issuable upon the exercise of each
Warrant shall be readjusted pursuant to the applicable section of Article 4 as
if (A) the only shares of Common Stock issuable upon exercise of such rights,
options, warrants, conversion or exchange privileges were the shares of Common
Stock, if any, actually issued upon the exercise of such rights, options,
warrants or conversion or exchange privileges and (B) shares of Common Stock
actually issued, if any, were issuable for the consideration actually received
by GTL upon such exercise plus the aggregate consideration, if any, actually
received by GTL for the issuance, sale or grant of all such rights, options,
warrants or conversion or exchange privileges whether or not exercised and the
Exercise Price shall be readjusted inversely; provided, however, that no such
readjustment shall (except by reason of an intervening adjustment under Section
4.01) have the effect of decreasing the number of Warrant Shares purchasable
upon the exercise of each Warrant or increase the Exercise Price by an amount in
excess of the amount of the adjustment initially made in respect of the
issuance, sale or grant of such rights, options, warrants or conversion or
exchange privileges.
SECTION 4.08. Minimum Adjustment. The adjustments required by the
preceding Sections of this Article 4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that no adjustment
of the Exercise Price or the number of shares of Common Stock issuable upon
exercise of Warrants that would otherwise be required shall be made unless and
until such adjustment either by itself or with other adjustments not previously
made increases or decreases by at least 1% the Exercise Price or the number of
shares of Common Stock issuable upon exercise of Warrants immediately prior to
the making of such adjustment. Any adjustment representing a change of less than
such minimum amount shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Article 4 and not
previously made, would result in a minimum adjustment. For
<PAGE> 26
22
the purpose of any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence. In computing
adjustments under this Article 4, fractional interests in Common Stock shall be
taken into account to the nearest one-hundredth of a share.
SECTION 4.09. Notice of Adjustment. Whenever the Exercise Price
or the number of shares of Common Stock and other property, if any, issuable
upon exercise of the Warrants is adjusted, as herein provided, GTL shall deliver
to the Warrant Agent a certificate of a firm of independent accountants selected
by the Board (who may be the regular accountants employed by GTL) setting forth,
in reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which
(i) the Board determined the fair value of any evidences of indebtedness, other
securities or property or warrants, options or other subscription or purchase
rights and (ii) the Current Market Value of the Common Stock was determined, if
either of such determinations were required), and specifying the Exercise Price
and the number of shares of Common Stock issuable upon exercise of Warrants
after giving effect to such adjustment. GTL shall promptly cause the Warrant
Agent to mail a copy of such certificate to each Holder in accordance with
Section 7.06. The Warrant Agent shall be entitled to rely on such certificate
and shall be under no duty or responsibility with respect to any such
certificate, except to exhibit the same from time to time, to any Holder
desiring an inspection thereof during reasonable business hours. The Warrant
Agent shall not at any time be under any duty or responsibility to any Holder to
determine whether any facts exist which may require any adjustment of the
Exercise Price or the number of shares of Common Stock or other stock or
property issuable on exercise of the Warrants, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed
in making such adjustment or the validity or value of any shares of Common
Stock, evidences of indebtedness, warrants, options, or other securities or
property.
SECTION 4.10. Notice of Certain Transactions. In the event that
GTL shall propose to (a) pay any dividend payable in securities of any class to
the holders of its Common Stock or to make any other non-cash dividend or
distribution to the holders of its Common Stock, (b) offer the holders of its
Common Stock rights to subscribe for or to purchase any securities convertible
into shares of Common
<PAGE> 27
23
Stock or shares of stock of any class or any other securities, rights or
options, (c) issue any (i) shares of Common Stock, (ii) rights, options or
warrants entitling the holders thereof to subscribe for shares of Common Stock,
or (iii) securities convertible into or exchangeable or exercisable for Common
Stock (in the case of (i), (ii) and (iii), if such issuance or adjustment would
result in an adjustment hereunder), (d) effect any capital reorganization,
reclassification, consolidation or merger, (e) effect the voluntary or
involuntary dissolution, liquidation or winding-up of GTL or (f) make a tender
offer or exchange offer with respect to the Common Stock, GTL shall within 5
days send to the Warrant Agent and the Warrant Agent shall within 5 days send
the Holders a notice (in such form as shall be furnished to the Warrant Agent by
GTL) of such proposed action or offer. Such notice shall be mailed by the
Warrant Agent to the Holders at their addresses as they appear in the
Certificate Register, which shall specify the record date for the purposes of
such dividend, distribution or rights, or the date such issuance or event is to
take place and the date of participation therein by the holders of Common Stock,
if any such date is to be fixed, and shall briefly indicate the effect of such
action on the Common Stock and on the number and kind of any other shares of
stock and on other property, if any, and the number of shares of Common Stock
and other property, if any, issuable upon exercise of each Warrant and the
Exercise Price after giving effect to any adjustment pursuant to Article 4 which
will be required as a result of such action. Such notice shall be given as
promptly as possible and (x) in the case of any action covered by clause (a) or
(b) above, at least 10 days prior to the record date for determining holders of
the Common Stock for purposes of such action or (y) in the case of any other
such action, at least 20 days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of Common Stock,
whichever shall be the earlier.
SECTION 4.11. Adjustment to Warrant Certificate. The form of
Warrant Certificate need not be changed because of any adjustment made pursuant
to this Article 4, and Warrant Certificates issued after such adjustment may
state the same Exercise Price and the same number of shares of Common Stock
issuable upon exercise of the Warrants as are stated in the Warrant Certificates
initially issued pursuant to this Agreement. GTL, however, may at any time in
its sole discretion make any change in the form of Warrant Certificate that it
may deem appropriate to give effect to
<PAGE> 28
24
such adjustments and that does not affect the substance of the Warrant
Certificate, and any Warrant Certificate thereafter issued or countersigned,
whether in exchange or substitution for an outstanding Warrant Certificate or
otherwise, may be in the form as so changed.
ARTICLE 5
Registration Rights
SECTION 5.01. Effectiveness of Registration Statement. Subject to
Section 5.02, GTL shall cause to be filed pursuant to Rule 415 (or any successor
provision) of the Securities Act not later than 60 days after the Issue Date, a
shelf registration statement relating to the offer and sale of the Warrants by
the Holders from time to time in accordance with the methods of distribution
elected by such holders and set forth in such registration statement (the
"Warrant Shelf Registration Statement"), and shall use its reasonable efforts to
cause the Warrant Shelf Registration Statement to be declared effective on or
before 150 days after the Issue Date. Subject to Section 5.02, GTL shall cause
to be filed pursuant to Rule 415 (or any successor provision) of the Securities
Act a shelf registration statement covering the issuance of Warrant Shares to
the Holders upon exercise of the Warrants by the Holders thereof (the "Common
Shelf Registration Statement", and together with the Warrant Shelf Registration
Statement, the "Registration Statements") and shall use its reasonable efforts
to cause the Common Shelf Registration Statement to be declared effective on or
before 365 days after the Issue Date. Subject to Section 5.02, GTL shall cause
each of the Registration Statements to remain effective until (A) in the case of
the Common Shelf Registration Statement, the earliest of (i) such time as all
Warrants have been exercised and (ii) the Expiration Date and (B) in the case of
the Warrant Shelf Registration Statement, the earliest of (i) such time as all
the Warrants have been sold thereunder, (ii) three years after its effective
date and (iii) until all Warrants can be sold without restriction under the
Securities Act. In connection with any Registration Statement, (i) GTL shall
furnish to the Warrant Agent, prior to the filing with the Commission, a copy of
any Registration Statement, and each amendment thereof and each amendment or
supplement, if any, to the prospectus included therein and shall use its
reasonable best efforts to reflect in each such document, when filed with the
Commission, such
<PAGE> 29
25
comments as the Warrant Agent may reasonably propose, (ii) GTL shall furnish to
each Holder, without charge, at least one copy of any Registration Statement and
any post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits thereto
(including those incorporated by reference), (iii) GTL shall, for so long as any
Registration Statement is effective, deliver to each Holder, without charge, as
many copies of the prospectus (including each preliminary prospectus) included
in such Registration Statement and any amendment or supplement thereto as such
Holder may reasonably request, and GTL consents to the proper use of the
prospectus therein and any amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the Warrants or the
Warrant Shares, as the case may be, covered by such prospectus and any amendment
or supplement thereto, (iv) GTL may require each Holder of Warrants to be sold
pursuant to the Warrant Shelf Registration Statement or to be exercised in
connection with the Common Shelf Registration Statement to furnish to GTL such
information regarding the Holder and the distribution of such Warrants or
Warrant Shares as GTL may from time to time reasonably request for inclusion in
such Registration Statement, (v) GTL shall, if requested, promptly incorporate
in a prospectus supplement or post-effective amendment to such Registration
Statement such information as a majority in interest of the Holders reasonably
agree should be included therein and shall make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment, (vi) GTL shall enter into such agreements (including underwriting
agreements) as are appropriate, customary and reasonably necessary in connection
with any such Registration Statement and (vii) GTL shall (A) make available all
material customary for reasonable due diligence examinations in connection with
such Registration Statements, (B) make such representations and warranties to
the Holders of Warrants as are customary and reasonable in connection with such
Registration Statements, (C) obtain such opinions of counsel to GTL addressed to
and reasonably satisfactory to the Holders as are customary and reasonable in
connection with such Registration Statements and (D) obtain such "comfort"
letters and updates thereof from the independent certified public accountants of
GTL addressed to the Holders as are customary and reasonable in connection with
such Registration Statements. GTL will furnish the Warrant Agent with current
prospectuses meeting the
<PAGE> 30
26
requirements of the Securities Act in sufficient quantity to permit the Warrant
Agent to deliver, at GTL's expense, a prospectus to each holder of a Warrant
upon the exercise thereof. GTL shall promptly inform the Warrant Agent of any
change in the status of the effectiveness or availability of any Registration
Statement.
SECTION 5.02. Suspension. During any consecutive 365-day period,
GTL shall be entitled to suspend the availability of each of the Warrant Shelf
Registration Statement and the Common Shelf Registration Statement for up to two
45 consecutive-day periods (except during the 45 consecutive-day period
immediately prior to the Expiration Date) if GTL's Board determines in the
exercise of its reasonable judgement that there is a valid business purpose for
such suspension and provides notice that such determination was made by GTL's
board to the holders of the Warrants; provided, however, that in no event shall
GTL be required to disclose the business purpose for such suspension if GTL
determines in good faith that such business purpose must remain confidential.
SECTION 5.03. Blue Sky. GTL shall use its reasonable efforts to
register or qualify the Warrants and the Warrant Shares under all applicable
securities laws, blue sky laws or similar laws of all jurisdictions in the
United States and Canada in which any holder of Warrants may or may be deemed to
purchase Warrants or Warrant Shares upon the exercise of Warrants and shall use
its reasonable efforts to maintain such registration or qualification through
the earliest of (A) in the case of the Common Shelf Registration Statement, (i)
such time as all Warrants have been exercised and (ii) the Expiration Date and
(B) in the case of the Warrant Shelf Registration Statement, until the earliest
of (i) such time as all the Warrants have been sold thereunder, (ii) such time
as the Warrants can be sold without restriction under the Securities Act and
(iii) three years after the Issue Date; provided, however, that GTL shall not be
required to qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 5.03 or to take any
action which would subject it to general service of process or to taxation in
any such jurisdiction where it is not then so subject.
SECTION 5.04. Accuracy of Disclosure. GTL represents and warrants
to each Holder and agrees for the benefit of each Holder that (i) each of the
Warrant Shelf
<PAGE> 31
27
Registration Statement and the Common Shelf Registration Statement and any
amendment thereto will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements contained therein not misleading; and (ii) each of the prospectus
furnished to such Holder for delivery in connection with the sale of Warrants
and the prospectus delivered to such Holder upon the exercise of Warrants and
the documents incorporated by reference therein will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading; provided,
however, that GTL shall have no liability under clauses (i) or (ii) of this
Section 5.04 with respect to any such untrue statement or omission made in any
Registration Statement in reliance upon and in conformity with information
furnished to GTL by or on behalf of the Holders specifically for inclusion
therein.
SECTION 5.05. Indemnification. (a) In connection with any
Registration Statement, GTL agrees to indemnify and hold harmless each Holder of
the Warrants and each person, if any, who controls such Holder within the
meaning of the Securities Act or the Exchange Act (each Holder and such
controlling persons being referred to collectively as the "Indemnified Parties")
from and against any losses, claims, damages or liabilities, joint or several,
or any actions in respect thereof (including but not limited to any losses,
claims, damages, liabilities or actions relating to purchases and sales of the
Warrants or the Warrant Shares) to which each Indemnified Party may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
such Registration Statement or prospectus or in any amendment or supplement
thereto, or arise out of, or are based upon, the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and shall reimburse, as incurred, the Indemnified Parties
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action in
respect thereof; provided, however, that (i) GTL shall not be liable in any such
case to the extent that such loss, claim, damage or
<PAGE> 32
28
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement or
any preliminary or final prospectus or in any amendment or supplement thereto in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to GTL by or on behalf of such Holder specifically for
inclusion therein, (ii) with respect to any untrue statement or omission or
alleged untrue statement or omission made in any prospectus relating to such
Registration Statement, the indemnity agreement contained in this subsection (a)
shall not inure to the benefit of any person as to which there is a prospectus
delivery requirement (a "Delivering Seller") that sold the Securities to the
person asserting any such losses, claims, damages or liabilities to the extent
that any such loss, claim, damage or liability of such Delivering Seller results
from the fact that there was not sent or given to such person, on or prior to
the written confirmation of such sale, a copy of the relevant prospectus, as
amended and supplemented, provided that (I) GTL shall have previously furnished
copies thereof to such Delivering Seller in accordance with this Agreement and
(II) such furnished prospectus, as amended and supplemented, would have
corrected any such untrue statement or omission or alleged untrue statement or
omission, and (iii) this indemnity agreement will be in addition to any
liability which GTL may otherwise have to such Indemnified Party.
(b) In connection with any Registration Statement, each Holder of
the Warrants, severally and not jointly, will indemnify and hold harmless GTL
and each person, if any, who controls GTL within the meaning of the Securities
Act or the Exchange Act and the directors, officers, agents and employees of
such controlling persons from and against any losses, claims, damages or
liabilities or any actions in respect thereof to which GTL or any such
controlling person or director, officers, agent or employee of such controlling
person may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages, liabilities or actions arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in such Registration Statement or preliminary or final
prospectus or in any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, but in each case only to the extent
<PAGE> 33
29
that the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
pertaining to such Holder and furnished to GTL by or on behalf of such Holder
specifically for inclusion therein; and, subject to the limitation set forth
immediately preceding this clause, shall reimburse, as incurred, GTL for any
legal or other expenses reasonably incurred by GTL or any such controlling
person in connection with investigating or defending any loss, claim, damage,
liability or action in respect thereof. This indemnity agreement will be in
addition to any liability which such Holder may otherwise have to GTL or any of
its controlling persons.
(c) Promptly after receipt by an indemnified party under this
section of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this section, notify
the indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above, except to the
extent that it is prejudiced or harmed in any material respect by failure to
give such prompt notice. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with one counsel (and local counsel as
necessary) reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof the indemnifying party will not
be liable to such indemnified party under this section for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred by
such indemnified party in connection with the defense thereof. No indemnifying
party shall, without the prior written consent of the indemnified party, not to
be unreasonably withheld, effect any settlement of any pending or threatened
action in respect of which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified party unless
such
<PAGE> 34
30
settlement includes an unconditional release of such indemnified party from all
liability on any claims that are the subject matter of such action. No
indemnifying party shall be liable for any amounts paid in settlement of any
action or claim without its written consent, which consent shall not be
unreasonably withheld, but if settled in accordance with its written consent or
if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this section is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above for any reason other than as provided in subsection
(c) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the indemnifying party or parties on
the one hand and the indemnified party on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by GTL on the one hand or such
Holder or such other indemnified person, as the case may be, on the other, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding any other provision of this
Section 5(d),
<PAGE> 35
31
the Holders shall not be required to contribute any amount in excess of the
amount by which the net proceeds received by such Holders from the sale of the
Warrants pursuant to the Warrant Shelf Registration Statement or the Warrant
Shares pursuant to the Common Shelf Registration Statement exceeds the amount of
damages which such Holders would have otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
paragraph (d), each officer, director, employee, representative and agent of an
indemnified party and each person, if any, who controls such indemnified party
within the meaning of the Securities Act or the Exchange Act shall have the same
rights to contribution as such indemnified party, and each officer, director,
employee, representative and agent of GTL and each person, if any, who controls
GTL within the meaning of the Securities Act or the Exchange Act shall have the
same rights to contribution as GTL.
(e) The agreements contained in this section shall survive the
sale of the Warrants pursuant to the Warrant Shelf Registration Statement and
the sale of the Warrant Shares pursuant to the Common Shelf Registration
Statement, as the case may be, and shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any indemnified party.
SECTION 5.06. Additional Acts. If the sale of Warrants or the
issuance or sale of any Common Stock or other securities issuable upon the
exercise of the Warrants requires registration or approval of any governmental
authority (other than the registration requirements under the Securities Act),
or the taking of any other action under the laws of the United States of America
or any political subdivision thereof before such securities may be validly
offered or sold in compliance with such laws, then GTL covenants that it will,
in good faith and as expeditiously as reasonably possible, use all reasonable
efforts to secure and maintain such registration or approval or to take such
other action, as the case may be.
SECTION 5.07. Expenses. All expenses incident to GTL's
performance of or compliance with its obligations under this Article 5 will be
borne by GTL, including without
<PAGE> 36
32
limitation: (i) all SEC, stock exchange or National Association of Securities
Dealers, Inc. registration and filing fees, (ii) all reasonable fees and
expenses incurred in connection with compliance with state securities or blue
sky laws, (iii) all reasonable expenses of any Persons incurred by or on behalf
of GTL in preparing or assisting in preparing, printing and distributing the
Warrant Shelf Registration Statement, the Common Shelf Registration Statement or
any other registration statement, prospectus, any amendments or supplements
thereto and other documents relating to the performance of and compliance with
this Article 5, (iv) the fees and disbursements of the Warrant Agent, (v) the
fees and disbursements of counsel for GTL and the Warrant Agent and (vi) the
fees and disbursements of the independent public accountants of GTL, including
the expenses of any special audits or comfort letters required by or incident to
such performance and compliance.
ARTICLE 6
Warrant Agent
SECTION 6.01. Appointment of Warrant Agent. GTL hereby appoints
the Warrant Agent to act as agent for GTL in accordance with the express
provisions of this Agreement and the Warrant Agent hereby accepts such
appointment.
SECTION 6.02. Rights and Duties of Warrant Agent. (a) Agent for
GTL. In acting under this Warrant Agreement and in connection with the Warrant
Certificates, the Warrant Agent is acting solely as agent of GTL and does not
assume any obligation or relationship or agency or trust for or with any of the
holders of Warrant Certificates or beneficial owners of Warrants.
(b) Counsel. The Warrant Agent may consult with counsel
satisfactory to it (who may be counsel to GTL), and the advice of such counsel
shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in accordance with
the advice of such counsel.
(c) Documents. The Warrant Agent shall be protected and shall
incur no liability for or in respect of any action taken or thing suffered by it
in reliance upon any Warrant Certificate, notice, direction, consent,
certificate, affidavit, statement, opinion or other paper or
<PAGE> 37
33
document reasonably believed by it to be genuine and to have been presented or
signed by the proper parties.
(d) No Implied Obligations. The Warrant Agent shall be obligated
to perform only such duties as are specifically set forth herein and in the
Warrant Certificates, and no implied duties or obligations of the Warrant Agent
shall be read into this Agreement or the Warrant Certificates. The Warrant Agent
shall not be under any obligation to take any action hereunder which may tend to
involve it in any expense or liability for which it does not receive indemnity
if such indemnity is reasonably requested. The Warrant Agent shall not be
accountable or under any duty or responsibility for the use by GTL of any of the
Warrant Certificates countersigned by the Warrant Agent and delivered by it to
the Holders or on behalf of the Holders pursuant to this Agreement or for the
application by GTL of the proceeds of the Warrants. The Warrant Agent shall have
no duty or responsibility in case of any default by GTL in the performance of
its covenants or agreements contained herein or in the Warrant Certificates or
in the case of the receipt of any written demand from a Holder with respect to
such default, including any duty or responsibility to initiate or attempt to
initiate any proceedings at law or otherwise.
(e) Not Responsible for Adjustments or Validity of Stock. The
Warrant Agent shall not at any time be under any duty or responsibility to any
Holder to determine whether any facts exist that may require an adjustment of
the number of shares of Common Stock issuable upon exercise of each Warrant or
the Exercise Price, or with respect to the nature or extent of any adjustment
when made or with respect to the method employed or provided to be employed
herein or in any supplemental agreement in making the same. The Warrant Agent
shall not be accountable with respect to the validity or value of any shares of
Common Stock or of any securities or property which may at any time be issued or
delivered upon the exercise of any Warrant or upon any adjustment pursuant to
Article 4, and it makes no representation with respect thereto. The Warrant
Agent shall not be responsible for any failure of GTL to make any cash payment
or to issue, transfer or deliver any shares of Common Stock or stock
certificates upon the surrender of any Warrant Certificate for the purpose of
exercise or upon any adjustment pursuant to Article 4, or to comply with any of
the covenants of GTL contained in Article 4.
<PAGE> 38
34
SECTION 6.03. Individual Rights of Warrant Agent. The Warrant
Agent and any stockholder, director, officer or employee of the Warrant Agent
may buy, sell or deal in any of the Warrants or other securities of GTL or its
affiliates or become pecuniarily interested in transactions in which GTL or its
affiliates may be interested, or contract with or lend money to GTL or its
affiliates or otherwise act as fully and freely as though it were not the
Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for GTL or for any other legal entity.
SECTION 6.04. Warrant Agent's Disclaimer. The Warrant Agent shall
not be responsible for and makes no representation as to the validity or
adequacy of this Agreement or the Warrant Certificates and it shall not be
responsible for any statement in this Agreement or the Warrant Certificates
other than its countersignature thereon.
SECTION 6.05. Compensation and Indemnity. GTL and the Warrant
Agent have entered into an agreement pursuant to which GTL agrees to pay the
Warrant Agent from time to time compensation for its services and to reimburse
the Warrant Agent upon request for all reasonable out-of-pocket expenses
incurred by it, including the reasonable compensation and expenses of the
Warrant Agent's agents and counsel. GTL shall indemnify the Warrant Agent
against any and all loss, liability, damage, claim or expense (including agents'
and attorneys' fees and expenses) incurred by it without gross negligence or bad
faith on its part arising out of or in connection with the acceptance or
performance of its duties under this Agreement. The Warrant Agent shall notify
GTL promptly of any claim for which it may seek indemnity. GTL need not
reimburse any expense or indemnify against any loss or liability incurred by the
Warrant Agent through wilful misconduct, negligence or bad faith. GTL's payment
obligations pursuant to this Section 6.05 shall survive the termination of this
Agreement.
To secure GTL's payment obligations under this Agreement, the
Warrant Agent shall have a lien prior to the Holders on all money or property
held or collected by the Warrant Agent.
SECTION 6.06. Successor Warrant Agent. (a) GTL to Provide Warrant
Agent. GTL agrees for the benefit of the Holders that there shall at all times
be a Warrant Agent
<PAGE> 39
35
hereunder until all the Warrants have been exercised or are no longer
exercisable.
(b) Resignation and Removal. The Warrant Agent may at any time
resign by giving written notice to GTL of such intention on its part, specifying
the date on which its desired resignation shall become effective; provided,
however, that such date shall not be less than 60 days after the date on which
such notice is given unless GTL otherwise agrees. The Warrant Agent hereunder
may be removed at any time by the filing with it of an instrument in writing
signed by or on behalf of GTL and specifying such removal and the date when it
shall become effective, which date shall not be less than 60 days after such
notice is given unless the Warrant Agent otherwise agrees. Any removal under
this Section 6.06 shall take effect upon the appointment by GTL as hereinafter
provided of a successor Warrant Agent (which shall be a bank or trust company
authorized under the laws of the jurisdiction of its organization to exercise
corporate trust powers) and the acceptance of such appointment by such successor
Warrant Agent. If a successor Warrant Agent does not take office within 60 days
after the retiring Warrant Agent resigns or is removed, the retiring Warrant
Agent or the Holders of 10% of the Warrants may petition, at the expense of GTL,
any court of competent jurisdiction for the appointment of a successor.
(c) GTL to Appoint Successor. In the event that at any time the
Warrant Agent shall resign, or shall be removed, or shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent, or shall commence a
voluntary case under Federal bankruptcy laws, as now or hereafter constituted,
or under any other applicable Federal or state bankruptcy, insolvency or similar
law, or shall consent to the appointment of or taking possession by a receiver,
custodian, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Warrant Agent or its property or affairs, or shall make an
assignment for the benefit of creditors, or shall admit in writing its inability
to pay its debts generally as they become due, or shall take corporate action in
furtherance of any such action, or a decree or order for relief by a court
having jurisdiction in the premises shall have been entered in respect of the
Warrant Agent in an involuntary case under the Federal bankruptcy laws, as now
or hereafter constituted, or any other applicable Federal or State bankruptcy,
insolvency or similar law, or a decree order by a court having jurisdic-
<PAGE> 40
36
tion in the premises shall have been entered for the appointment of a receiver,
custodian, liquidator, assignee, trustee, sequestrator (or similar official) of
the Warrant Agent or of its property or affairs, or any public officer shall
take charge or control of the Warrant Agent or of its property or affairs for
the purpose of rehabilitation, conservation, winding up or liquidation, a
successor Warrant Agent, qualified as aforesaid, shall be appointed by GTL by an
instrument in writing filed with the successor Warrant Agent. Upon the
appointment as aforesaid of a successor Warrant Agent and acceptance by the
successor Warrant Agent of such appointment, the Warrant Agent shall cease to be
the Warrant Agent hereunder; provided, however, that in the event of the
resignation of the Warrant Agent hereunder, such resignation shall be effective
on the earlier of (i) the date specified in the Warrant Agent's notice of
resignation and (ii) the appointment and acceptance of a successor Warrant Agent
hereunder.
(d) Successor To Expressly Assume Duties. Any successor Warrant
Agent appointed hereunder shall execute, acknowledge and deliver to its
predecessor and to GTL an instrument accepting such appointment hereunder, and
thereupon such successor Warrant Agent, without any further act, deed or
conveyance, shall become vested with all the rights and obligations of such
predecessor with like effect as if originally named as Warrant Agent hereunder,
and such predecessor, upon payment of its charges and disbursements then unpaid,
shall thereupon become obligated to transfer, deliver and pay over, and such
successor Warrant Agent shall be entitled to receive, all monies, securities and
other property on deposit with or held by such predecessor, as Warrant Agent
hereunder.
(e) Successor by Merger. Any corporation into which the Warrant
Agent hereunder may be merged or consolidated, or any corporation resulting from
any merger or consolidation to which the Warrant Agent shall be a party, or any
corporation to which the Warrant Agent shall sell or otherwise transfer all or
substantially all the corporate trust or stock transfer assets and business of
the Warrant Agent, provided that it shall be qualified as aforesaid, shall be
the successor Warrant Agent under this Agreement without the execution or filing
of any paper or any further act on the part of any of the parties hereto.
<PAGE> 41
37
ARTICLE 7
Miscellaneous
SECTION 7.01. SEC Reports and Other Information. Notwithstanding
that GTL may not be subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, GTL shall file with the SEC and thereupon provide the
Warrant Agent and Holders with such annual reports and such information,
documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections ,
such information, documents and other reports to be so filed and provided at the
times specified for the filing of such information, documents and reports under
such Sections . Delivery of such reports, information and documents to the
Warrant Agent is for informational purposes only and the Warrant Agent's receipt
of such shall not constitute constructive notice of any information contained
therein or determinable from information contained therein, including GTL's
compliance with any of its covenants hereunder.
SECTION 7.02. Persons Benefitting. Nothing in this Agreement is
intended or shall be construed to confer upon any Person other than GTL, the
Warrant Agent and the Holders any right, remedy or claim under or by reason of
this agreement or any part hereof.
SECTION 7.03. Rights of Holders. Holders of unexercised Warrants
are not entitled to (i) receive dividends or other distributions, (ii) receive
notice of or vote at any meeting of the stockholders, (iii) consent to any
action of the stockholders, (iv) receive notice as stockholders of any other
proceedings of GTL, (v) exercise any preemptive rights or (vi) exercise any
other rights whatsoever as stockholders of GTL.
SECTION 7.04. Amendment. This Agreement may be amended by the
parties hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or adding or changing any other provisions with respect to
matters or questions arising under this Agreement as GTL and the Warrant Agent
may deem necessary or desirable (including without limitation any addition or
modification to provide for compliance with the transfer restrictions set forth
herein); provided, however, that such action shall not adversely affect the
rights of any of the
<PAGE> 42
38
Holders. Any amendment or supplement to this Agreement that has an adverse
effect on the interests of the Holders shall require the written consent of the
Holders of a majority of the then outstanding Warrants. The consent of each
Holder affected shall be required for any amendment pursuant to which the
Exercise Price would be increased or the number of Warrant Shares issuable upon
exercise of Warrants would be decreased (other than pursuant to adjustments
provided herein) or the exercise period with respect to the Warrants would be
shortened. In determining whether the Holders of the required number of Warrants
have concurred in any direction, waiver or consent, Warrants owned by GTL or by
any Person directly or indirectly controlling or controlled by or under direct
or indirect common control with GTL shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Warrant
Agent shall be protected in relying on any such direction, waiver or consent,
only Warrants which the Warrant Agent actually knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Warrants outstanding at the
time shall be considered in any such determination.
SECTION 7.05. Notices. Any notice or communication shall be
in writing and delivered in Person or mailed by first-class mail addressed as
follows:
if to GTL:
Cedar House
41 Cedar Avenue
Hamilton HMIZ
Bermuda
Attention: Michael B. Targoff
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street, 46th Floor
New York, New York 10022
Attention: Bruce R. Kraus
<PAGE> 43
39
if to the Warrant Agent:
The Bank of New York
Corporate Trust Office
101 Barclay Street
New York, NY 10286
Attention: Corporate Trust Administration
Facsimile: (212) 815-5915
GTL or the Warrant Agent by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to
the Holder at the Holder's address as it appears on the Certificate Register and
shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 7.06. Governing Law. The laws of the State of New York
shall govern this Agreement and the Warrant Certificates.
SECTION 7.07. Successors. All agreements of GTL in this Agreement
and the Warrant Certificates shall bind its successors. All agreements of the
Warrant Agent in this Agreement shall bind its successors.
SECTION 7.08. Multiple Originals. The parties may sign any number
of copies of this Agreement. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Agreement.
SECTION 7.09. Table of Contents. The table of contents and
headings of the Articles and Sections of this Agreement have been inserted for
convenience of reference only, are not intended to be considered a part hereof
and shall not modify or restrict any of the terms or provisions hereof.
SECTION 7.10. Severability. The provisions of this Agreement are
severable, and if any clause or provision
<PAGE> 44
40
shall be held invalid, illegal or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect in that
jurisdiction only such clause or provision, or part thereof, and shall not in
any manner affect such clause or provision in any other jurisdiction or any
other clause or provision of this Agreement in any jurisdiction.
SECTION 7.11. Use of Proceeds. GTL agrees, for the benefit of the
Holders of the Warrants from time to time and of the Common Stock underlying
such Warrants upon exercise thereof, to use the proceeds from the issuance and
sale of the Warrants (net of any expenses of the offering of the Units allocable
to GTL) to purchase Partnership Warrants from Globalstar.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
GLOBALSTAR TELECOMMUNICATIONS
LIMITED,
by
/s/ Eric J. Zahler
--------------------------
Name: Eric J. Zahler
Title: Secretary
THE BANK OF NEW YORK, as
Warrant Agent,
by /s/ Walter Gitlin
--------------------------
Name: Walter Gitlin
Title: Vice President
<PAGE> 45
1
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE WERE INITIALLY
ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000
AGGREGATE PRINCIPAL AMOUNT OF 11-3/8% SENIOR NOTES DUE 2004 OF GLOBALSTAR, L.P.
AND GLOBALSTAR CAPITAL CORPORATION (THE "NOTES") AND A WARRANT. THE WARRANTS AND
THE NOTES WILL NOT TRADE SEPARATELY UNTIL THE EARLIER OF (I) THE COMMENCEMENT OF
AN EXCHANGE OFFER OR THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT FOR THE
NOTES OR (II) SUCH DATE AFTER AUGUST 15, 1997, AS LEHMAN BROTHERS INC. MAY
DETERMINE.
THE COMMON STOCK, PAR VALUE $1.00 PER SHARE, OF GLOBALSTAR
TELECOMMUNICATIONS LIMITED ("GTL") FOR WHICH THIS WARRANT IS EXERCISABLE MAY NOT
BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ANY APPLICABLE STATE
SECURITIES LAWS, OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
ACCORDINGLY, NO HOLDER SHALL BE ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT
ANY TIME UNLESS, AT THE TIME OF EXERCISE, (i) A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT RELATING TO THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAS BEEN FILED WITH, AND DECLARED EFFECTIVE BY, THE SECURITIES
AND EXCHANGE COMMISSION (THE "SEC"), AND NO STOP ORDER SUSPENDING THE
EFFECTIVENESS OF SUCH REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC, OR (ii)
THE ISSUANCE OF SUCH SHARES IS PERMITTED PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO GTL OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES"
OR TO "U.S. PERSONS" (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF,
REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE GLOBALSTAR PARTIES
THAT: (I) IT HAS ACQUIRED A "RESTRICTED"
<PAGE> 46
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SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL
NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHEN THIS
SECURITY NO LONGER CONSTITUTES A "RESTRICTED" SECURITY UNDER RULE 144(K) OF THE
SECURITIES ACT EXCEPT (A) TO ANY OF THE GLOBALSTAR PARTIES, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT,
OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY APPLICABLE
JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE RESTRICTIONS SET
FORTH IN (II) ABOVE. ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE
FOREGOING CLAUSES (II)(D) AND (E) IS SUBJECT TO THE RIGHT OF THE ISSUER OF THIS
SECURITY AND THE TRUSTEE OR TRANSFER AGENT FOR SUCH SECURITIES TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION
ACCEPTABLE TO THEM IN FORM AND SUBSTANCE. [THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.]
BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1),(2),(3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THE SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH REGULATION S.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.
No. [ ] Certificate for ______ Warrants
WARRANTS TO PURCHASE COMMON STOCK OF
GLOBALSTAR TELECOMMUNICATIONS LIMITED
THIS CERTIFIES THAT _____________, or its registered assigns, is
the registered holder of the number of Warrants set forth above (the
"Warrants"). Each Warrant entitles the holder thereof (the "Holder"), at its
option and subject to the provisions contained herein and in the Warrant
Agreement referred to below, to purchase from Globalstar Telecommunications
Limited, a Bermuda corporation ("GTL"), 2.0645 shares of Common Stock, par value
of $1.00 per share, of GTL (the "Common Stock") at the per share exercise price
of $69.575 (the "Exercise Price"), or by Cashless Exercise referred to below.
This Warrant Certificate shall terminate and become void as of the close of
business on February 15, 2004 (the "Expiration Date") or upon the exercise
hereof as to all the shares of Common Stock subject hereto. The number of shares
issuable upon exercise of the Warrants and
<PAGE> 47
3
the Exercise Price per share shall be subject to adjustment from time to time as
set forth in the Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of February 19, 1997 (the "Warrant Agreement"),
between GTL and The Bank of New York (the "Warrant Agent", which term includes
any successor Warrant Agent under the Warrant Agreement), and is subject to the
terms and provisions contained in the Warrant Agreement, to all of which terms
and provisions the Holder of this Warrant Certificate consents by acceptance
hereof. The Warrant Agreement is hereby incorporated herein by reference and
made a part hereof. Reference is hereby made to the Warrant Agreement for a full
statement of the respective rights, limitations of rights, duties and
obligations of GTL, the Warrant Agent and the Holders of the Warrants.
Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in the Warrant Agreement. A copy of the Warrant Agreement may be
obtained for inspection by the Holder hereof upon written request to the Warrant
Agent at 101 Barclay Street, New York, NY 10286 attention of Corporate Trust
Administration.
Subject to the terms of the Warrant Agreement, the Warrants may
be exercised in whole or in part (i) by presentation of this Warrant Certificate
with the Election to Purchase attached hereto duly executed and with the
simultaneous payment of the Exercise Price in cash (subject to adjustment) to
the Warrant Agent for the account of GTL at the office of the Warrant Agent or
(ii) by Cashless Exercise. Payment of the Exercise Price in cash shall be made
by certified or official bank check payable to the order of GTL or by wire
transfer of funds to an account designated by GTL for such purpose. Payment by
Cashless Exercise shall be made without the payment of cash by reducing the
amount of Common Stock that would be obtainable upon the exercise of a Warrant
and payment of the Exercise Price in cash so as to yield a number of shares of
Common Stock upon the exercise of such Warrant equal to the product of (1) the
number of shares of Common Stock for which such Warrant is exercisable as of the
Exercise Date (if the Exercise Price were being paid in cash) and (2) a
fraction, the numerator of which is the excess of the Current Market Value per
share of Common Stock on the Exercise Date over the Exercise Price per share as
of the Exercise Date and the denominator of which is the Current Market Value
per share of the Common Stock on the Exercise Date.
As provided in the Warrant Agreement and subject to the terms and
conditions therein set forth, the Warrants shall be exercisable at any time on
or after February 19, 1998; provided, however, that Holders of Warrants will be
able to exercise their Warrants only if a shelf registration statement relating
to the Common Stock underlying the Warrants is effective or the exercise of such
Warrants is exempt from the registration requirements of the Securities Act of
1933 and such securities are qualified for sale or exempt from qualification
under the applicable securities laws of the states or other jurisdictions in
which such Holders reside; provided further, however, that no Warrant shall be
exercisable after February 15, 2004.
In the event GTL enters into a Combination, the Holder hereof
will be entitled to receive upon exercise of the Warrants the kind and amount of
shares of capital stock or other securities or other property of such surviving
entity as the Holder would have been entitled to receive upon or as a result of
the combination had the Holder
<PAGE> 48
4
exercised its Warrants immediately prior to such Combination; provided, however,
that in the event that, in connection with such Combination, consideration to
holders of Common Stock in exchange for their shares is payable solely in cash
or in the event of the dissolution, liquidation or winding-up of GTL, the Holder
hereof will be entitled to receive such cash distributions as the Holder would
have received had the Holder exercised its Warrants immediately prior to such
Combination, less the Exercise Price.
As provided in the Warrant Agreement, the number of shares of
Common Stock issuable upon the exercise of the Warrants and the Exercise Price
are subject to adjustment upon the happening of certain events.
GTL may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to Section 2.06 of the Warrant
Agreement, but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the issuance of the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate
representing those Warrants which were not exercised. This Warrant Certificate
may be exchanged at the office of the Warrant Agent by presenting this Warrant
Certificate properly endorsed with a request to exchange this Warrant
Certificate for other Warrant Certificates evidencing an equal number of
Warrants. No fractional Warrant Shares will be issued upon the exercise of the
Warrants, but GTL shall pay an amount in cash equal to the Current Market Value
per Warrant Share on the day immediately preceding the date the Warrant is
exercised, multiplied by the fraction of a Warrant Share that would be issuable
on the exercise of any Warrant.
All shares of Common Stock issuable by GTL upon the exercise of
the Warrants shall, upon such issue, be duly and validly issued and fully paid
and non-assessable.
The holder in whose name the Warrant Certificate is registered
may be deemed and treated by GTL and the Warrant Agent as the absolute owner of
the Warrant Certificate for all purposes whatsoever and neither GTL nor the
Warrant Agent shall be affected by notice to the contrary.
<PAGE> 49
5
The Warrants do not entitle any holder hereof to any of the
rights of a shareholder of GTL.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
GLOBALSTAR TELECOMMUNICATIONS
LIMITED
by
-----------------------------------
by
-----------------------------------
DATED:
Countersigned:
- --------------------------------
THE BANK OF NEW YORK,
as Warrant Agent,
by
-----------------------------
Authorized Signatory
<PAGE> 50
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FORM OF ELECTION TO PURCHASE WARRANT SHARES (to be
executed only upon exercise of Warrants)
GLOBALSTAR TELECOMMUNICATIONS LIMITED
The undersigned hereby irrevocably elects to exercise
Warrants at an exercise price per Warrant (subject to adjustment) of $69.575 to
acquire shares of Common Stock, par value $1.00 per share, of Globalstar
Telecommunications Limited on the terms and conditions specified within the
Warrant Certificate and the Warrant Agreement therein referred to, surrenders
this Warrant Certificate and all right, title and interest therein to Globalstar
Telecommunications Limited and directs that the shares of Common Stock
deliverable upon the exercise of such Warrants be registered or placed in the
name and at the address specified below and delivered thereto.
Date: , 19
-------------------------------
(Signature of Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
-------------------------------
[Signature must be guaranteed
by an eligible Guarantor
Institution (banks, stock
brokers, savings and loan
associations and credit
unions) with membership in an
approved guarantee medallion
program pursuant to Securities
and Exchange Commission Rule
17Ad-5]
- --------
1. The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed.
<PAGE> 51
7
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:____________________________________________________________
Street Address:__________________________________________________
City, State and Zip Code:________________________________________
Any unexercised Warrants represented by the Warrant Certificate to be issued to:
Please insert social security or identifying number:
Name:____________________________________________________________
Street Address:__________________________________________________
City, State and Zip Code:________________________________________
<PAGE> 52
8
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of
Globalstar Telecommunications Limited ("GTL")
This Certificate relates to Warrants held in definitive form by
_______________ (the "Transferor").
The Transferor has requested the Warrant Agent by written order
to exchange or register the transfer of a Warrant or Warrants. In connection
with such request and in respect of each such Warrant, the Transferor does
hereby certify that the Transferor is familiar with the Warrant Agreement
relating to the above captioned Warrants and that the transfer of this Warrant
does not require registration under the Securities Act of 1933, (the "Securities
Act") because */:
|_| Such Warrant is being transferred to GTL.
|_| Such Warrant is being transferred pursuant to an effective
Registration Statement under the Securities Act.
|_| Such Warrant is being transferred to a qualified institutional buyer
(as defined in Rule 144A under the Securities Act) in reliance on Rule 144A.
|_| Such Warrant is being transferred pursuant to an offshore
transaction in accordance with Rule 904 under the Securities Act.
|_| Such Warrant is being transferred in a transaction meeting the
requirements of Rule 144 under the Securities Act.
The Warrant Agent and GTL are entitled to rely upon this
Certificate and are irrevocably authorized to produce this Certificate or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
----------------------------------------
[INSERT NAME OF TRANSFEROR]
by
Date:
------------------------------- -------------------------------------
- --------
*---/Please check applicable box.
<PAGE> 1
CONFORMED COPY
GLOBALSTAR, L.P.
GLOBALSTAR CAPITAL CORPORATION
$500,000,000
11 % Senior Notes due 2004
REGISTRATION RIGHTS AGREEMENT
February 19, 1997
Lehman Brothers Inc.
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
Unterberg Harris
In care of Lehman Brothers Inc.
As Representative of the Several Initial Purchasers
3 World Financial Center
200 Vesey Street
New York, New York 10285
Ladies and Gentlemen:
Globalstar, L.P., a Delaware limited partnership
("Globalstar"), and Globalstar Capital Corporation, a Delaware corporation
("Globalstar Capital" and, together with Globalstar, the "Issuers"), propose,
subject to the terms and conditions stated in a purchase agreement of even date
herewith (the "Purchase Agreement"), to jointly and severally issue and sell to
Lehman Brothers Inc., Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation and Unterberg Harris (collectively, the "Initial
Purchasers"), 500,000 Units, each consisting of $1,000 aggregate principal
amount of 11 3/8% Senior Notes due 2004 (collectively the "Notes") and a
warrant (collectively, the "Warrants") to purchase 2.0645 shares of the common
stock, par value $1.00 per share ("Common Stock"), of Globalstar
Telecommunications Limited ("GTL"). The Notes will be issued pursuant to an
indenture dated as of February 15, 1997 (the "Indenture"), among the Issuers
and The Bank of New York, as trustee (the "Trustee"). This Agreement will have
no force and effect until the Notes are issued. As an inducement to the
Initial Purchasers, the Issuers hereby
<PAGE> 2
2
agree with the several Initial Purchasers, for the benefit of the holders of
the Notes (including, without limitation, the Initial Purchasers), the Exchange
Notes (as defined below) and the Private Exchange Notes (as defined below)
(collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Issuers shall, at their
cost and expense, prepare and, not later than 60 days after (or if the 60th day
is not a business day, the first business day thereafter) the Issue Date (as
defined in the Indenture) of the Notes, file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Exchange Offer
Registration Statement") on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act"), with respect to a proposed offer (the
"Registered Exchange Offer") to the Holders of Transfer Restricted Notes (as
defined in Section 6(d)), who are not prohibited by any law or policy of the
Commission from participating in the Registered Exchange Offer, to issue and
deliver to such Holders, in exchange for the Notes, a like aggregate principal
amount of debt securities (the "Exchange Notes") of the Issuers issued under
the Indenture and identical in all material respects to the Notes (except for
the transfer restrictions relating to the Notes) that would be registered under
the Securities Act. The Issuers shall use reasonable efforts to cause such
Exchange Offer Registration Statement to become effective under the Securities
Act within 150 days (or if the 150th day is not a business day, the first
business day thereafter) after the Issue Date of the Notes and shall keep the
Exchange Offer Registration Statement effective for not less than 30 days (or
longer if required by applicable law or the policy of the Commission) after the
date on which notice of the Registered Exchange Offer is mailed to the Holders
(such period being called the "Exchange Offer Registration Period").
If the Issuers effect the Registered Exchange Offer, the
Issuers will be entitled to close the Registered Exchange Offer 30 days after
the commencement thereof; provided, however, that the Issuers have accepted all
the Notes theretofore validly tendered in accordance with the terms of the
Registered Exchange Offer.
<PAGE> 3
3
Following the declaration of the effectiveness of the Exchange
Offer Registration Statement, unless the Registered Exchange Offer would not be
permitted by applicable law or the Commission's policy, the Issuers shall
promptly commence the Registered Exchange Offer, it being the objective of such
Registered Exchange Offer to enable each Holder of Transfer Restricted Notes
electing to exchange the Notes for Exchange Notes (assuming that such Holder is
not an affiliate of either the Issuers within the meaning of the Securities
Act, acquires the Exchange Notes in the ordinary course of such Holder's
business, has no arrangements with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes
and is not prohibited by any law or policy of the Commission from participating
in the Registered Exchange Offer) to trade such Exchange Notes from and after
their receipt without any limitations or restrictions under the Securities Act
and without material restrictions under the securities laws of the several
states of the United States. In connection with such Registered Exchange
Offer, the Issuers shall take all such reasonable further action, including,
without limitation, appropriate filings under state securities laws, as may be
necessary to realize the foregoing objective subject to the proviso of Section
3(h).
The Issuers and the Initial Purchasers acknowledge that the
foregoing statement of the objective of the Registered Exchange Offer is based
upon current interpretations by the staff of the Commission's Division of
Corporation Finance, which interpretations are subject to change without
notice, and further acknowledge that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder that is a broker-dealer
electing to exchange Notes, acquired for its own account as a result of market
making activities or other trading activities, for Exchange Notes (an
"Exchanging Dealer"), is required to deliver a prospectus containing the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and in Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Notes received by
such Exchanging Dealer pursuant to the
<PAGE> 4
4
Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell
Exchange Notes acquired in exchange for Notes constituting any portion of an
unsold allotment is required to deliver a prospectus containing the information
required by Items 507 or 508 of Regulation S-K under the Securities Act, as
applicable, in connection with such sale.
The Issuers shall use their reasonable efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Notes; provided, however, that (i)
in the case where such prospectus and any amendment or supplement thereto must
be delivered by an Exchanging Dealer or an Initial Purchaser, such period shall
be the lesser of 180 days after the expiration date of the Registered Exchange
Offer and the date on which all Exchanging Dealers and the Initial Purchasers
have sold all Exchange Notes held by them (unless such period is extended
pursuant to Section 3(j) below), and (ii) the Issuers shall make such
prospectus and any amendment or supplement thereto available to any
broker-dealer for use in connection with any resale of any Exchange Notes for a
period not less than 90 days after the consummation of the Registered Exchange
Offer.
If, upon consummation of the Registered Exchange Offer, any
Initial Purchaser holds Transfer Restricted Notes acquired by it as part of its
initial distribution, the Issuers, simultaneously with the delivery of the
Exchange Notes pursuant to the Registered Exchange Offer, shall issue and
deliver to such Initial Purchaser upon the written request of such Initial
Purchaser, in exchange (the "Private Exchange") for the Transfer Restricted
Notes held by such Initial Purchaser, a like principal amount of debt
securities of the Issuers issued under the Indenture and identical in all
material respects (including the existence of restrictions on transfer under
the Securities Act and the securities laws of the several states of the United
States) to the Transfer Restricted Notes (the "Private Exchange Notes");
provided, however, that the Issuers shall not be required to effect such
exchange if, in the opinion of counsel to the Issuers, such exchange cannot be
effected
<PAGE> 5
5
without registration under the Securities Act. The Private Exchange Notes
shall bear the same CUSIP number as the Exchange Notes. The Transfer
Restricted Notes, the Exchange Notes and the Private Exchange Notes are herein
collectively called the "Securities".
In connection with the Registered Exchange Offer, the Issuers
shall:
(a) mail, or cause to be mailed, to each Holder a copy of the
prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related
documents;
(b) keep the Registered Exchange Offer open for not less than
30 calendar days (or longer, if required by applicable law or policy
of the Commission) after the date notice thereof is mailed to the
Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City
of New York, which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Transfer Restricted
Notes at any time prior to the close of business, New York time, on
the last Business Day (as defined in the Indenture) on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all material respects with all
applicable law.
As soon as practicable after the close of the Registered
Exchange Offer or the Private Exchange, as the case may be, the Issuers shall:
(i) accept for exchange all the Transfer Restricted Notes
validly tendered and not validly withdrawn pursuant to the Registered
Exchange Offer or the Private Exchange, as the case may be;
<PAGE> 6
6
(ii) deliver, or cause to be delivered to, the Trustee for
cancellation all the Transfer Restricted Notes so accepted for
exchange; and
(iii) cause the Trustee to authenticate and promptly deliver
to each Holder of the Transfer Restricted Notes, Exchange Notes or
Private Exchange Notes, as the case may be, equal in principal amount
to the Transfer Restricted Notes of each Holder so accepted for
exchange.
The Exchange Notes and the Private Exchange Notes may be
issued under the Indenture, which will provide that the Exchange Notes will not
be subject to the transfer restrictions set forth in the Indenture and that all
the Securities will vote and consent together on all matters as one class and
that none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on the Exchange Notes and the Private Exchange Notes
will accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Securities surrendered in the exchange therefor or
(ii) if the Securities are surrendered for exchange on a date in a period which
includes the record date for an interest payment date to occur on or after the
date of such exchange and as to which interest will be paid, the date of such
interest payment date or (B) if no interest has been paid on such Securities,
from the date of original issue of the Securities.
Each Holder participating in the Registered Exchange Offer
shall be required to represent to the Issuers that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Notes received
by such Holder will be acquired in the ordinary course of business, (ii) such
Holder will have no arrangements or understanding with any person to
participate in the distribution of the Notes or the Exchange Notes within the
meaning of the Securities Act, (iii) such Holder is not an "affiliate", as
defined in Rule 405 of the Securities Act, of either of the Issuers or, if it
is an affiliate, such Holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable, (iv) if
such
<PAGE> 7
7
Holder is not a broker-dealer, that it is not engaged in, and does not intend
to engage in, the distribution of the Exchange Notes, and (v) if such Holder is
a broker-dealer, that it will receive Exchange Notes for its own account in
exchange for Notes that were acquired as a result of market-making activities
or other trading activities and that it will deliver a prospectus in connection
with any resale of such Exchange Notes.
Notwithstanding any other provisions hereof, the Issuers will
ensure that (i) any Exchange Offer Registration Statement and any amendment
thereto and any prospectus forming part thereof and any supplement thereto will
comply in all material respects with the Securities Act and the rules and
regulations thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, will not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that in no such case shall the Issuers be responsible for information
concerning any Initial Purchaser of the Securities included in the Exchange
Offer Registration Statement, the prospectus contained therein, or any
amendment or supplement thereto, as the case may be.
2. Shelf Registration. If (i) because of any change in law
or Commission policy or in applicable interpretations thereof by the staff of
the Commission, the Issuers are not permitted to effect a Registered Exchange
Offer, as contemplated by Section 1 hereof, (ii) the Registered Exchange Offer
is not consummated within 180 days of the Issue Date, (iii) any Initial
Purchaser so requests within 90 days after the consummation of the Registered
Exchange Offer with respect to the Transfer Restricted Notes (or the Private
Exchange Notes) not eligible to be exchanged for Exchange Notes in the
Registered Exchange Offer and held by it following consummation of the
Registered Exchange Offer or (iv) any Holder (other than an Exchanging Dealer)
<PAGE> 8
8
is not eligible to participate in the Registered Exchange Offer or, in the case
of any Holder (other than an Exchanging Dealer) that participates in the
Registered Exchange Offer, such Holder does not receive freely tradeable
Exchange Notes on the date of the exchange, the Issuers shall take the
following actions:
(a) The Issuers shall, at their cost, use reasonable efforts
to file, as promptly as practicable (but in no event later than the
earlier of (i) 150 days after the Issue Date and (ii) 60 days after so
required or requested pursuant to this Section 2 with the Commission
and shall thereafter use their reasonable efforts to cause to be
declared effective a registration statement (the "Shelf Registration
Statement" and, together with the Exchange Offer Registration
Statement, a "Registration Statement") on an appropriate form under
the Securities Act relating to the offer and sale of the Transfer
Restricted Notes by the Holders thereof from time to time in
accordance with the methods of distribution set forth in the Shelf
Registration Statement and Rule 415 under the Securities Act
(hereinafter, the "Shelf Registration"); provided, however, that no
Holder (other than an Initial Purchaser) shall be entitled to have the
Securities held by it covered by such Shelf Registration Statement
unless such Holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such Holder (including certain
indemnification obligations).
(b) The Issuers shall use their reasonable efforts to keep
the Shelf Registration Statement continuously effective in order to
permit the prospectus included therein to be lawfully delivered by the
Holders of the relevant Securities, until the principal of, and
interest and Liquidated Damages (if any) on, the Securities have been
paid in full or such shorter period that will terminate when all the
Securities covered by the Shelf Registration Statement (i) have been
sold pursuant thereto or (ii) are distributed to the public pursuant
to Rule 144 under the Securities Act or are saleable pursuant to Rule
144(k) under the Securities Act (in any such case, such period being
called the "Shelf Registration Period").
<PAGE> 9
9
Subject to Section 6(b), the Issuers shall be deemed not to have used
their reasonable efforts to keep the Shelf Registration Statement
effective during the requisite period if either of the Issuers
voluntarily takes any action that would result in Holders of
Securities covered thereby not being able to offer and sell such
Securities during that period, unless such action is required by
applicable law; provided, however, that the Issuers shall not be
deemed to have voluntarily taken any such action if either of the
Issuers enters, in good faith, into negotiations concerning, or
executes and delivers any agreement or other document relating to, any
business combination, acquisition or disposition.
(c) Notwithstanding any other provisions of this Agreement to
the contrary, the Issuers shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the effective
date of the Shelf Registration Statement, amendment or supplement, (i) to
comply in all material respects with the applicable requirements of the
Securities Act and the rules and regulations of the Commission and (ii) not to
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3. Registration Procedures. In connection with any Shelf
Registration contemplated by Section 2 hereof and, to the extent applicable,
any Registered Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:
(a) The Issuers shall (i) furnish to each Initial Purchaser,
prior to the filing thereof with the Commission, a copy of each
Registration Statement and each amendment thereof and each supplement,
if any, to the prospectus included therein and, in the event that an
Initial Purchaser (with respect to any portion of an unsold allotment
from the original offering) is participating in the Registered
Exchange Offer or the Shelf Registration Statement, shall use its
reasonable efforts to reflect in each such document, when so filed
with the Commission, such comments as such Initial
<PAGE> 10
10
Purchaser reasonably may propose; (ii) include the information set
forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange
Offer" section and in Annex C hereto in the "Plan of Distribution"
section of the prospectus forming a part of the Exchange Offer
Registration Statement and include the information set forth in Annex
D hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; (iii) if requested by an Initial Purchaser,
include the information required by Items 507 or 508 of Regulation S-K
under the Securities Act, as applicable, in the prospectus forming a
part of the Exchange Offer Registration Statement; (iv) include within
the prospectus contained in the Exchange Offer Registration Statement
a section entitled "Plan of Distribution", reasonably acceptable to
the Initial Purchasers, which shall contain a summary statement of the
positions taken or policies made by the staff of the Commission with
respect to the potential "underwriter" status of any broker-dealer
that is the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
Exchange Notes received by such broker-dealer in the Registered
Exchange Offer (a "Exchanging Dealer"), whether such positions or
policies have been publicly disseminated by the staff of the
Commission or such positions or policies, in the reasonable judgment
of the Initial Purchasers based upon advice of counsel (which may be
in-house counsel), represent the prevailing views of the staff of the
Commission; and (v) in the case of a Shelf Registration Statement,
include the names of the Holders who propose to sell Securities
pursuant to the Shelf Registration Statement as selling
securityholders.
(b) The Issuers shall give written notice to the Initial
Purchasers and the Holders of the Securities from whom the Issuers
have received prior written notice that it will be a Exchanging Dealer
in the Registered Exchange Offer (which notice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the
use of the prospectus until the requisite changes have been made):
<PAGE> 11
11
(i) when the Registration Statement or any
amendment thereto has been filed with the Commission and when
the Registration Statement or any post-effective amendment
thereto has become effective;
(ii) of any request by the Commission for
amendments or supplements to the Registration Statement or the
prospectus included therein or for additional information
(provided, however, that with respect to any requests prior to
the effectiveness of the Registration Statement, the Issuers
shall be required to give written notice only to the Initial
Purchasers and their counsel, Cravath, Swaine & Moore);
(iii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that
purpose;
(iv) of the receipt by either of the Issuers of
any notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event that requires
the Issuers to make changes in the Registration Statement or
the prospectus in order that the Registration Statement or the
prospectus does not contain an untrue statement of a material
fact nor omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not
misleading.
(c) The Issuers shall make every reasonable effort to obtain
the withdrawal at the earliest possible time of any order suspending
the effectiveness of the Registration Statement.
(d) The Issuers shall furnish to each Holder of Securities
included within the coverage of the Shelf
<PAGE> 12
12
Registration, without charge, at least one copy of the Shelf
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so
requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
(e) The Issuers shall deliver to each Exchanging Dealer and
each Initial Purchaser, and to any other Holder who so requests,
without charge, at least one copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if any Initial Purchaser or
any such Holder requests, all exhibits thereto (including those
incorporated by reference).
(f) The Issuers shall deliver to each Holder of Securities
included within the coverage of the Shelf Registration, without
charge, as many copies of the prospectus (including each preliminary
prospectus) included in the Shelf Registration Statement and any
amendment or supplement thereto as such person may reasonably request.
The Issuers consent, subject to the provisions of this Agreement, to
the use of the prospectus or any amendment or supplement thereto
included in the Shelf Registration Statement by each of the selling
Holders of the Securities in connection with the offering and sale of
the Securities covered by such prospectus, or any such amendment or
supplement.
(g) The Issuers shall deliver to each Initial Purchaser, any
Exchanging Dealer and such other persons required to deliver a
prospectus during the Exchange Offer Registration Period and/or Shelf
Registration Period, as applicable, without charge, as many copies of
the final prospectus included in the Exchange Offer Registration
Statement and any amendment or supplement thereto as such persons may
reasonably request. The Issuers consent, subject to the provisions of
this Agreement, to the use of the prospectus or any amendment or
supplement thereto by any Initial Purchaser, if necessary, any
Exchanging Dealer and such other persons required to deliver a
prospectus following the Registered Exchange Offer in connection with
the offering and sale of the Exchange Notes
<PAGE> 13
13
covered by the prospectus, or any amendment or supplement thereto,
included in such Exchange Offer Registration Statement, in each case
in the form most recently provided to each party by the Issuers.
(h) Prior to any public offering of the Securities, pursuant
to any Registration Statement, the Issuers shall use their reasonable
efforts to register or qualify or cooperate with the Holders of the
Securities included therein and their respective counsel in connection
with the registration or qualification of the Securities for offer and
sale under the securities or "blue sky" laws of such states of the
United States as any Holder of the Securities reasonably requests in
writing and do any and all other acts or things necessary or advisable
to enable the offer and sale in such jurisdictions of the Securities
covered by such Registration Statement; provided, however, that none
of the Issuers shall be required to (i) qualify generally to do
business in any jurisdiction where it is not then so qualified, (ii)
take any action which would subject it to general service of process
or to taxation in any jurisdiction where it is not then so subject,
(iii) register or qualify Securities or take any other action under
the securities or "blue sky" laws of any jurisdiction if, in the
judgment of the Board of Directors or such other governing body of the
Issuers, the consequences of such registration, qualification or other
action would be unduly burdensome to the Issuers or (iv) make any
changes to their respective organizational documents or any agreement
with their respective equity holders.
(i) The Issuers shall cooperate with the Holders of the
Securities to facilitate the timely preparation and delivery of
certificates representing the Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders may request
a reasonable period of time prior to sales of the Securities pursuant
to such Registration Statement.
(j) Upon the occurrence of any event contemplated by
paragraphs (ii) through (v) of Section 3(b) above
<PAGE> 14
14
during the period for which the Issuers are required to maintain an
effective Registration Statement, the Issuers shall promptly prepare
and file a post-effective amendment to the Registration Statement or a
supplement to the related prospectus and any other required document
so that, as thereafter delivered to Holders of the Notes or purchasers
of Securities, the prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. If
the Issuers notify the Initial Purchasers, the Holders of the
Securities and any known Exchanging Dealer in accordance with
paragraphs (ii) through (v) of Section 3(b) above to suspend the use
of the prospectus until the requisite changes to the prospectus have
been made, then the Initial Purchasers, the Holders of the Securities
and any such Exchanging Dealers shall suspend use of such prospectus,
and the period of effectiveness of the Shelf Registration Statement
provided for in Section 2(b) above and the Exchange Offer Registration
Statement provided for in Section 1 above shall each be extended (i)
by the number of days from and including the date of the giving of
such notice to and including the date when the Initial Purchasers, the
Holders of the Securities and any known Exchanging Dealer shall have
received such amended or supplemented prospectus pursuant to this
Section 3(j) or (ii) if earlier, until the date when none of the
Securities represent Transfer Restricted Notes (as defined in Section
6(d)).
(k) Not later than the effective date of the applicable
Registration Statement, the Issuers will provide a CUSIP number for
the Transfer Restricted Notes, the Exchange Notes or the Private
Exchange Notes, as the case may be, and provide the applicable trustee
with printed certificates for the Notes, the Exchange Notes or the
Private Exchange Notes, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) The Issuers will comply with all rules and regulations of
the Commission to the extent and so long
<PAGE> 15
15
as they are applicable to the Registered Exchange Offer or the Shelf
Registration, and Globalstar will make generally available to its
security holders (or otherwise provide in accordance with Section
11(a) of the Securities Act) an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act, no later than 45
days after the end of a 12-month period (or 90 days, if such period is
a fiscal year) beginning with the first month of its first fiscal
quarter commencing after the effective date of the Registration
Statement, which statement shall cover such 12-month period.
(m) The Issuers shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended, in a timely manner
and containing such changes, if any, as shall be necessary for such
qualification. In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Issuers shall
appoint a new trustee thereunder pursuant to the applicable provisions
of the Indenture.
(n) The Issuers may require each Holder of Securities to be
sold pursuant to the Shelf Registration Statement to furnish to the
Issuers such information regarding the Holder and the distribution of
the Securities as the Issuers may from time to time reasonably require
for inclusion in the Shelf Registration Statement, and the Issuers may
exclude from such registration the Securities of any Holder that
unreasonably fails to furnish such information within a reasonable
time after receiving such request. Each such Holder agrees to notify
the Issuers as promptly as practicable of any inaccuracy or change in
information previously furnished by such Holder to the Issuers or of
the occurrence of any event, in either case, as a result of which any
prospectus relating to such registration contains or would contain an
untrue statement of a material fact regarding such Holder or such
Holder's intended method of distribution of such Securities, or omits
to state a material fact regarding such Holder or such Holder's
intended method of distribution of such Securities, required to be
stated therein or necessary to make the statements therein not
<PAGE> 16
16
misleading in light of the circumstances then existing, and promptly
to furnish to the Issuers any additional information required to
correct and update any previously furnished information or required so
that such prospectus shall not contain, with respect to such Holder or
the distribution of such Securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances then existing. Each such Holder shall comply with
the provisions of the Securities Act applicable to such Holder with
respect to the disposition by such Holder of Securities, covered by
such registration statement in accordance with the intended methods of
disposition by such Holder set forth in such registration statement.
(o) The Issuers shall enter into such customary agreements
(including if requested an underwriting agreement in customary form)
and take all such other action, if any, as Holders of a majority in
aggregate principal amount of Securities being sold or the managing
underwriters shall reasonably request in order to facilitate the
disposition of the Securities pursuant to any Shelf Registration;
provided, however, that in the case of actions that facilitate the
disposition of a particular Holder's Securities, only such Holders
request is required; provided further, that the Issuers shall not be
required to enter into any such agreement more than once with respect
to all of the Securities and may delay entering into such agreement
until the consummation of any underwritten public offering which such
Issuers shall have then undertaken.
(p) In the case of any Shelf Registration, each of the
Issuers shall (i) make reasonably available for inspection by the
Holders of the Securities, any underwriter participating in any
disposition pursuant to the Shelf Registration Statement and any
attorney, accountant or other agent retained by the Holders of the
Securities or any such underwriter all relevant financial and other
records, pertinent corporate documents and properties of such Issuers
and (ii) cause such Issuers' officers, directors, employees,
<PAGE> 17
17
accountants and auditors to supply all relevant information reasonably
requested by the Holders of the Securities or any such underwriter,
attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be reasonably
necessary, in the judgment of the Holder or any such underwriter,
attorney, accountant or agent referred to in this paragraph, to
conduct a reasonable investigation within the meaning of Section 11 of
the Securities Act; provided, however, that the foregoing inspection
and information gathering shall be coordinated on behalf of the
Initial Purchasers by you and on behalf of the other parties by one
counsel designated by and on behalf of such other parties as described
in Section 4 hereof and shall be expressly subject to the confidential
treatment by such parties as to all proprietary information of the
Issuers.
(q) In the case of any Shelf Registration, each of the
Issuers, if requested by (i) Holders of a majority in aggregate
principal amount of Securities, (ii) such Holder's counsel, or (iii)
the managing underwriter (if any), covered thereby, shall use
reasonable efforts to cause (x) its counsel to deliver an opinion and
updates thereof relating to the Registration Statement and the
Securities in customary form addressed to such Holders and the
managing underwriters, if any, thereof and dated the effective date of
such Shelf Registration Statement covering the matters customarily
covered in opinions of counsel requested in underwritten offerings and
such other matters as may be reasonably requested by the managing
underwriter or underwriters; (y) its officers to execute and deliver
all customary documents and certificates and updates thereof
reasonably requested by any underwriters of the applicable Securities;
and (z) its independent public accountants to provide to the selling
Holders of the applicable Securities and any underwriter therefor a
comfort letter in customary form and covering matters of the type
customarily covered in comfort letters in connection with primary
underwritten offerings, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement of
Auditing Standards No. 72.
<PAGE> 18
18
(r) In the case of the Registered Exchange Offer, if
requested by any Initial Purchaser or any known Exchanging Dealer,
each of the Issuers shall use reasonable efforts to cause (i) its
counsel to deliver to such Initial Purchaser or such Exchanging Dealer
a signed opinion in the form as is customary in connection with such a
Registration Statement and (ii) its independent public accountants to
deliver to such Initial Purchaser or such Exchanging Dealer a comfort
letter, in customary form.
(s) If a Registered Exchange Offer or a Private Exchange is
to be consummated, upon delivery of the Transfer Restricted Notes by
Holders to the Issuers (or to such other Person as directed by the
Issuers) in exchange for the Exchange Notes or the Private Exchange
Notes, as the case may be, the Issuers shall mark, or cause to be
marked, on the Transfer Restricted Notes so exchanged that such
Transfer Restricted Notes are being canceled in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be; in
no event shall the Transfer Restricted Notes be marked as paid or
otherwise satisfied.
(t) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Securities or participate as a
member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Conduct Rules of the By-Laws
of the National Association of Securities Dealers, Inc. ("NASD"))
thereof, whether as a Holder of such Securities or as an underwriter,
a placement or sales agent or a broker or dealer in respect thereof,
or otherwise, the Issuers shall assist such broker-dealer in
complying with the requirements of such Rules and By-Laws.
(u) The Issuers will use their reasonable efforts to cause
the Securities or the Exchange Securities, as applicable, covered by a
Registration Statement to continue to be rated, during the period for
which such Registration Statement is required to be effective, by the
rating agencies that initially rated the Securities, if so requested
by Holders of a majority in aggregate principal amount of Securities
covered by
<PAGE> 19
19
such Registration Statement or the Exchange Securities, as the case
may be, or the managing underwriters, if any.
(v) The Issuers shall use their reasonable efforts to take
all other steps reasonably necessary to effect the registration of the
Securities covered by a Registration Statement contemplated hereby.
4. Registration Expenses. The Issuers shall bear all fees
and expenses incurred in connection with the performance of the Issuers'
obligations under Sections 1 through 3 hereof (including the reasonable fees
and expenses of one counsel to the Initial Purchasers, incurred in connection
with the Registered Exchange Offer), whether or not the Registered Exchange
Offer or a Shelf Registration is filed or becomes effective, and, in the event
of a Shelf Registration, shall bear, or reimburse the Holders of the Securities
covered thereby for, the reasonable fees and disbursements of one firm of
counsel designated by the Holders of a majority in principal amount of the
Securities covered thereby to act as counsel for the Holders of the Securities
in connection therewith, it being understood that the Issuers shall not be
responsible for the fees and expenses of more than one counsel employed at any
one time; provided, however, that in an underwritten offering, the Issuers
shall not be responsible for any fees or expenses of any underwriter, including
any underwriting discounts or commissions, or any legal fees or expenses of
counsel to any underwriter. Notwithstanding the foregoing, the Holders of
Securities being registered shall pay all agency or brokerage fees and
commissions and underwriting discounts and commissions attributable to the sale
of such Securities and the fees and disbursements of any counsel or other
advisors or experts retained by such Holders (severally or jointly), other than
the one counsel specifically referred to above.
5. Indemnification. (a) The Issuers agree, jointly and
severally, to indemnify and hold harmless each Holder of the Securities and
each person, if any, who controls such Holder or such Exchanging Dealer within
the meaning of the Securities Act or the Exchange Act (each Holder, any
Exchanging Dealer and such controlling persons being referred to collectively
as the "Indemnified Parties")
<PAGE> 20
20
from and against any losses, claims, damages or liabilities, joint or several,
or any actions in respect thereof (including, but not limited to, any losses,
claims, damages, liabilities or actions relating to purchases and sales of the
Securities) to which each Indemnified Party may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto,
or arise out of, or are based upon, the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and shall reimburse, as incurred, the Indemnified Parties for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action in
respect thereof; provided, however, that (i) the Issuers shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in a Registration Statement or prospectus or
in any amendment or supplement thereto or in any preliminary prospectus
relating to a Shelf Registration in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Issuers by
or on behalf of such Holder specifically for inclusion therein, (ii) with
respect to any untrue statement or omission or alleged untrue statement or
omission made in any prospectus relating to the registration statement, the
indemnity agreement contained in this subsection (a) shall not inure to the
benefit of any person as to which there is a prospectus delivery requirement (a
"Delivering Seller") that sold the Securities to the person asserting any such
losses, claims, damages or liabilities to the extent that any such loss, claim,
damage or liability of such Delivering Seller results from the fact that there
was not sent or given to such person, on or prior to the written confirmation
of such sale, a copy of the relevant prospectus, as amended and supplemented,
provided that (A) the Issuers shall have previously furnished copies thereof to
such Delivering Seller in accordance with this Agreement and (B) such furnished
prospectus, as amended and supplemented, would
<PAGE> 21
21
have corrected any such untrue statement or omission or alleged untrue
statement or omission, and (iii) this indemnity agreement will be in addition
to any liability which the Issuers may otherwise have to such Indemnified
Party. The Issuers shall also indemnify underwriters, their officers and
directors and each person who controls such persons within the meaning of the
Securities Act or the Exchange Act to the same extent as provided above with
respect to the indemnification of the Holders of the Securities if requested by
such Holders; provided, however, that the Issuers shall not indemnify any such
party to the extent its liability arises from its failure to comply with the
requirements described in Annexes A, B, C and D hereto, as updated.
(a) Each Holder of the Securities (and, if requested by the
Issuers, each placement agent or underwriter in connection with the
registration), severally and not jointly, will indemnify and hold harmless the
Issuers and each person, if any, who controls Globalstar within the meaning of
the Securities Act or the Exchange Act and the directors, officers, agents and
employees of such controlling persons from and against any losses, claims,
damages or liabilities or any actions in respect thereof to which the Issuers,
any such controlling person or director, officer, agent or employee of such
controlling person may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement or
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus relating to a Shelf Registration, or arise out of or are based upon
the omission or alleged omission to state therein a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information pertaining to such
Holder or such underwriter, as the case may be, and furnished to the Issuers by
or on behalf of such Holder or such underwriter, as the case may be,
specifically for inclusion therein; and, subject to the limitation set forth
immediately preceding this clause, shall reimburse, as
<PAGE> 22
22
incurred, the Issuers for any legal or other expenses reasonably incurred by
the Issuers or any such controlling person in connection with investigating or
defending any loss, claim, damage, liability or action in respect thereof.
This indemnity agreement will be in addition to any liability which such Holder
or such underwriter, as the case may be, may otherwise have to the Issuers or
any such controlling persons.
(b) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action or proceeding (including
a governmental investigation), such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this Section
5, notify the indemnifying party of the commencement thereof; but the omission
so to notify the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above, except to
the extent that it is prejudiced or harmed in any material respect by failure
to give such prompt notice. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with one counsel (and local
counsel as necessary) reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without the prior
written consent of the indemnified party, not to be unreasonably withheld,
effect any settlement of any pending or threatened action in respect of which
any indemnified party is or could have been a party and indemnity could have
been sought hereunder by such indemnified party unless such settlement includes
an unconditional release of such indemnified party from all liability on any
claims that are
<PAGE> 23
23
the subject matter of such action. No indemnifying party shall be liable for
any amounts paid in settlement of any action or claim without its written
consent, which consent shall not be unreasonably withheld, but if settled in
accordance with its written consent or if there be a final judgment of the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(c) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above for any reason other than as provided in
subsection (c) above, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party or parties on the other from the exchange of the
Notes, pursuant to the Registered Exchange Offer, or (ii) if the allocation
provided by the foregoing clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the indemnifying
party or parties on the one hand and the indemnified party or parties on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof) as well
as any other relevant equitable considerations. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Issuers on the one hand or such Holder or such other indemnified person, as
the case may be, on the other, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in
<PAGE> 24
24
connection with investigating or defending any action or claim which is the
subject of this subsection (d). Notwithstanding any other provision of this
Section 5(d), the Holders of the Securities shall not be required to contribute
any amount in excess of the amount by which the net proceeds received by such
Holders from the sale of the Securities pursuant to a Registration Statement
exceeds the amount of damages which such Holders have otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each officer, director,
employee, representative and agent of an indemnified party and each person, if
any, who controls such indemnified party within the meaning of the Securities
Act or the Exchange Act shall have the same rights to contribution as such
indemnified party, and each officer, director, employee, representative and
agent of the Issuers and each person, if any, who controls Globalstar within
the meaning of the Securities Act or the Exchange Act shall have the same
rights to contribution as the Issuers.
(d) The agreements contained in this Section 5 shall survive
the sale of the Securities pursuant to a Registration Statement and shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation made by or on behalf of any indemnified
party.
6. Liquidated Damages Under Certain Circumstances. (a)
Additional cash interest (the "Liquidated Damages") with respect to the
Securities shall be assessed against the Issuers as follows if any of the
following events occurs (each such event in clauses (i) through (iv) below a
"Registration Default"):
(i) if the Issuers fail to file either the Exchange Offer
Registration Statement or Shelf Registration Statement on or before
the date specified for the filing thereof in Sections 1 and 2 hereof,
respectively;
<PAGE> 25
25
(ii) if any such Registration Statement so required to be
filed is not declared effective by the Commission on or before, in the
case of the Exchange Offer Registration Statement, the date that is
150 days after the Issue Date, and in the case of the Shelf
Registration Statement, the date that is 180 days after the Issue Date
(each such date being hereinafter referred to as an "Effectiveness
Target Date");
(iii) if the Issuers fail to consummate the Registered
Exchange Offer within 30 days after the Effectiveness Target Date with
respect to such Registered Exchange Offer; or
(iv) if after either the Exchange Offer Registration Statement
or the Shelf Registration Statement is declared effective (A) such
Registration Statement thereafter ceases to be effective; or (B) such
Registration Statement or the related prospectus ceases to be usable
(except as permitted in paragraph (b)) in connection with resales of
Transfer Restricted Notes during the periods specified herein because
either (1) any event occurs as a result of which the related
prospectus forming part of such Registration Statement would include
any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or (2) it
shall be necessary to amend such Registration Statement or supplement
the related prospectus, to comply with the Securities Act or the
Exchange Act or the respective rules thereunder.
Liquidated Damages shall accrue on the Transfer Restricted Notes in an amount
equal to $.05 per week per $1,000 principal amount of Transfer Restricted Notes
held by each Holder (over and above the interest set forth in the title of the
Transfer Restricted Notes) from and including the date on which any such
Registration Default shall occur until the earlier of (i) the date on which all
such Registration Defaults have been cured or (ii) the date which is 90 days
after the date such Registration Default occurred. The Liquidated Damages will
increase by an additional $.05 per week per $1,000 principal amount of the
Notes held by each Holder during each subsequent 90-day
<PAGE> 26
26
period until the date on which all such Registration Defaults have been cured;
provided, however, that the aggregate amount of Liquidated Damages shall not
exceed a maximum of $.50 per week per $1,000 principal amount of the Notes held
by each Holder
(b) A Registration Default referred to in Section
6(a)(iii)(B) shall be deemed not to have occurred and be continuing in relation
to a Shelf Registration Statement or the related prospectus if (i) such
Registration Default has occurred solely as a result of (x) the filing of a
post-effective amendment to such Shelf Registration Statement to incorporate
annual audited or, if required by the rules and regulations under the
Securities Act, quarterly unaudited financial information with respect to the
Issuers where such post-effective amendment is not yet effective and needs to
be declared effective to permit Holders to use the related prospectus or (y)
other material events or developments with respect to the Issuers that would
need to be described in such Shelf Registration Statement or the related
prospectus and (ii) in the case of clause (y), the Issuers are proceeding
promptly and in good faith to amend or supplement such Shelf Registration
Statement and related prospectus to describe such events; provided, however,
that in no event shall the Issuers be required to disclose the business purpose
for such suspension if the Issuers determines in good faith that such business
purpose must remain confidential. Notwithstanding the foregoing, the Issuers
shall not be required to pay Liquidated Damages with respect to the Securities
of a Holder if the failure arises from the Issuers' failure to file, or cause
to become effective, a Shelf Registration Statement within the time periods
specified in this Section 6 by reason of the failure of such Holder to provide
such information as (i) the Issuers may reasonably request, with reasonable
prior written notice, for use in the Shelf Registration Statement or any
prospectus included therein to the extent the Issuers reasonably determine that
such information is required to be included therein by applicable law, (ii) the
NASD or the Commission may request in connection with such Shelf Registration
Statement or (iii) is required to comply with the agreements of such Holder as
contained in Section 3(n) to the extent compliance thereof is necessary for the
Shelf Registration Statement to be declared effective.
<PAGE> 27
27
(c) The parties hereto agree that the Liquidated Damages
provided for in this Section constitute a reasonable estimate of and are
intended to constitute the sole damages that will be suffered by Holders of
Securities by reason of the failure of the applicable Registration Statement to
be filed, to be declared effective or to remain effective, or of the Exchange
Offer to be consummated, as the case may be, to the extent required by this
Agreement.
(d) Any Liquidated Damages accruing on the Transfer
Restricted Notes prior to August 15, 1997, will be payable in cash on the next
succeeding February 15 or August 15 to holders of record on the immediately
preceding February 1 or August 1, respectively. Any such Liquidated Damages
accruing on the Transfer Restricted Notes thereafter will be payable in cash on
the regular interest payment dates with respect to the Transfer Restricted
Notes to the holders of record on the applicable record date.
(e) "Transfer Restricted Notes" means each Security until (i)
the date on which such Transfer Restricted Note has been exchanged by a person
other than a broker-dealer for a freely transferrable Exchange Note in the
Registered Exchange Offer, (ii) following the exchange by a broker-dealer in
the Registered Exchange Offer of a Transfer Restricted Note for an Exchange
Note, the date on which such Exchange Note is sold to a purchaser who receives
from such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Transfer Restricted Note has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Transfer Restricted Note
is distributed to the public pursuant to Rule 144 under the Securities Act or
is saleable pursuant to Rule 144(k) under the Securities Act.
7. Rules 144 and 144A. The Issuers shall use their
reasonable efforts to file the reports required to be filed by each of them,
respectively, under the Securities Act and the Exchange Act in a timely manner
and, if at any time the Issuers are not required to file such reports, each
will, upon the request of any Holder of Transfer Restricted Notes, make
publicly available other information so long as
<PAGE> 28
28
necessary to permit sales of their securities pursuant to Rules 144 and 144A.
The Issuers covenant that they will take such further action as any Holder of
Transfer Restricted Notes may reasonably request, all to the extent required
from time to time to enable such Holder to sell Transfer Restricted Notes
without registration under the Securities Act within the limitation of the
exemptions provided by Rules 144 and 144A (including the requirements of Rule
144A(d)(4)). The Issuers will provide a copy of this Agreement to prospective
purchasers of Notes identified to the Issuers by the Initial Purchasers upon
request. Upon the request of any Holder of Transfer Restricted Notes, each of
the Issuers shall deliver to such Holder a written statement as to whether it
has complied with such requirements. Notwithstanding the foregoing, nothing in
this Section 7 shall be deemed to require the Issuers to register any of its
securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer
Restricted Notes covered by any Shelf Registration are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering ("Managing Underwriters") will be
selected by the Holders of a majority in aggregate principal amount of such
Transfer Restricted Notes to be included in such offering (subject to the
approval (which approval shall not be unreasonably withheld) of the Issuers,
provided, however, that the Issuers shall not be obligated to arrange for more
than one underwritten offering during the period that such Shelf Registration
is required to be effective pursuant to this Agreement).
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Notes on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, lock-up
agreements, powers of attorney, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting
arrangements.
<PAGE> 29
29
9. Miscellaneous. (a) Amendments and Waivers. The
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
except by the Issuers and the written consent of the Holders of a majority in
principal amount of the Securities affected by such amendment, modification,
supplement, waiver or consents.
(b) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand delivery,
first-class mail, facsimile transmission, or air courier which guarantees
overnight delivery:
(1) if to a Holder of the Securities, at the most
current address given by such Holder to the Issuers in
accordance with the provisions of this Section 9(b), which
address initially is, with respect to each Holder, the address
of such Holder to which confirmation of the sale of the Notes
to such Holder was first sent by the Initial Purchasers, with
a copy in like manner to you as follows:
Lehman Brothers Inc.
3 World Financial Center
200 Vesey Street
New York, NY 10010
Fax No.: (212) 526-3738
Attention: Syndicate Department
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Fax No.: (212) 474-3700
Attention: Robert Rosenman
(2) if to the Initial Purchasers, at the addresses specified
in Section 9(b)(1);
<PAGE> 30
30
(3) if to the Issuers, at its address as follows:
Globalstar, L.P.
3200 Zanker Road
San Jose, CA 95164
Attention: Michael B. Targoff
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street 46th Floor
New York, NY 10022
Fax No: (212) 821-8111
Attention: Bruce R. Kraus
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged by recipient's facsimile machine operator, if sent
by facsimile transmission; and on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Issuers have not, as of
the date hereof, entered into, nor shall they, on or after the date hereof,
enter into, any agreement with respect to their securities that is inconsistent
with the rights granted to the Holders herein or otherwise conflicts with the
provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding
upon the Issuers and their successors and assigns.
(e) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
<PAGE> 31
31
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(i) Securities Held by the Issuers. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
is required hereunder, Securities held by the Issuers or their affiliates
(other than subsequent Holders of Securities if such subsequent Holders are
deemed to be affiliates solely by reason of their holdings of such Securities)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.
<PAGE> 32
32
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to Lehman Brother Inc. a counterpart
hereof, whereupon this Agreement will become a binding agreement among
Globalstar, Globalstar Capital and the several Initial Purchasers in accordance
with its terms.
Very truly yours,
GLOBALSTAR, L.P. by LORAL/QUALCOMM SATELLITE SERVICES, L.P., its managing
general partner, by LORAL/QUALCOMM PARTNERSHIP, L.P. its general partner, by
LORAL GENERAL PARTNER, INC. its general partner,
by
/s/ Eric J. Zahler
---------------------------
Name: Eric J. Zahler
Title: Secretary
GLOBALSTAR CAPITAL CORPORATION,
by
/s/ Eric J. Zahler
---------------------------
Name: Eric J. Zahler
Title: Secretary
<PAGE> 33
33
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
LEHMAN BROTHERS INC.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
UNTERBERG HARRIS
by LEHMAN BROTHERS, INC.
by
/s/ David Sullivan
--------------------------
Name: David Sullivan
Title: Authorized Signatory
<PAGE> 34
ANNEX A
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Issuers have agreed that, for a period of 180
days after the Expiration Date (as defined herein), they will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
<PAGE> 35
ANNEX B
Each broker-dealer that receives Exchange Notes for its own
account in exchange for Notes, where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
<PAGE> 36
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for existing Notes where such existing Notes were acquired as a result
of market-making activities or other trading activities. The Issuers have
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until ,
199 , all dealers effecting transactions in the Exchange Notes may be required
to deliver a prospectus. */
The Issuers will not receive any proceeds from any sale of
Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the- counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer for the purchasers of any such Exchange
Notes. Any broker-dealer that resells Exchange Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Notes may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange
________________
*/ In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE> 37
2
Notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Issuers
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Issuers have agreed to pay all expenses
incident to the Exchange Offer (including the reasonable expenses of one
counsel for the Holders of the Notes) other than commissions or concessions of
any brokers or dealers and will indemnify the Holders of the Securities
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
<PAGE> 38
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND
10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
--------------------------------------------
Address:
-----------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that it
is not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
<PAGE> 1
EXHIBIT 12
STATEMENT REGARDING COMPUTATION OF RATIOS
(IN THOUSANDS, EXCEPT RATIOS)
GLOBALSTAR TELECOMMUNICATIONS LIMITED
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Earnings:
Net loss...................................................................... $(15,080)
Add:
Equity in loss of Globalstar, L.P........................................ 15,080
Interest expense......................................................... 17,370
------------
Earnings available to cover fixed charges(1).................................... $ 17,370
==========
Fixed charges -- interest expense............................................... $ 17,370
==========
Ratio of earnings to fixed charges.............................................. 1x
==========
</TABLE>
- ---------------
(1) The earnings of GTL available to cover fixed charges, consist solely of
dividends from Globalstar, L.P. on the Redeemable Preferred Partnership
Interests held by GTL.
GLOBALSTAR, L.P.
DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Net loss......................................................................... $(54,646)
Dividends on Redeemable Preferred Partnership Interests.......................... (17,323)
------------
Deficiency of earnings to cover fixed charges.................................... $(71,969)
==========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Globalstar Telecommunications Limited:
We consent to the incorporation by reference in Registration Statements No.
333-6477 and 333-22063 on Form S-3 of Globalstar Telecommunications Limited of
our reports dated February 24, 1997 appearing in this Annual Report on Form 10-K
of Globalstar Telecommunications Limited for the year ended December 31, 1996.
Deloitte & Touche LLP
San Jose, California
March 6, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Globalstar Telecommunications Limited for the year ended
December 31, 1996, and is qualified in its entirety by reference to such
financial statements
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 482,676
<CURRENT-LIABILITIES> 1,679
<BONDS> 300,358
0
0
<COMMON> 10,000
<OTHER-SE> 170,639
<TOTAL-LIABILITY-AND-EQUITY> 482,676
<SALES> 0
<TOTAL-REVENUES> 15,080
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 15,080
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,080
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 0
</TABLE>
