-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PoaSb3W4RwS73oS6gz80TzCvZY8xBVY/LNiu3+yX2Mj2V1CTmz9vgTwcUzatWUo7 YJaM9GnQr6PwTA/Z0rUljg== 0000927356-01-500163.txt : 20010516 0000927356-01-500163.hdr.sgml : 20010516 ACCESSION NUMBER: 0000927356-01-500163 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EARTHWATCH INC CENTRAL INDEX KEY: 0001014852 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 331420852 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-39202 FILM NUMBER: 1637986 BUSINESS ADDRESS: STREET 1: 1900 PIKE ROAD CITY: LONGMONT STATE: CO ZIP: 80501 BUSINESS PHONE: 3036823800 MAIL ADDRESS: STREET 1: 1900 PIKE ROAD CITY: LONGEMONT STATE: CO ZIP: 80501 10-Q 1 d10q.txt FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 Commission file number 333-39202 EarthWatch Incorporated (Exact Name of Registrant as Specified in Its Charter) Delaware 31-1420852 (State or other jurisdiction of (I.R.S. Employer Identification Incorporation or organization) Number) EarthWatch Incorporated 1900 Pike Road Longmont, Colorado 80501 (Address of principal executive offices, including zip code) (303) 682-3800 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] The registrant had 217,901 shares of common stock outstanding as of April 30, 2001. ================================================================================ Table of Contents PART I. FINANCIAL INFORMATION Item 1. Financial Statements. Consolidated Balance Sheet. 1 Consolidated Statement of Operations. 2 Consolidated Statement of Cash Flows. 3 Consolidated Statement of Stockholders' Equity (Deficit). 4 Notes to Consolidated Financial Statements. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk. 9 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds. 10 Item 4. Submission of Matters to a Vote of Security Holders. 10 Item 6. Exhibits and Reports on Form 8-K. 11 Signatures 13
- -------------------------------------------------------------------------------- Reference is made in this document to Digital Globe(R) and Your Planet Online(R), which are registered trademarks owned by the Company, and Seconds on Orbit(TM), which is a trademark of the Company. EarthWatch Incorporated (A Development Stage Company)
Consolidated Balance Sheet - --------------------------------------------------------------------------------------------------------------------------------- December 31, March 31, 2000 2001 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 5,725,779 $ 27,780,718 Accounts receivable, net of allowance for doubtful accounts of zero and $81,148, respectively 251,408 1,512,061 Insurance proceeds receivable - restricted 265,000,000 - Investment securities - - Investment securities - restricted 6,295,382 236,760,935 Other current assets 398,101 568,722 ------------- ------------- Total current assets 277,670,670 266,622,436 ------------- ------------- Property, plant, and equipment: Construction in progress 89,716,474 94,881,022 Computer equipment and software 15,365,444 15,370,977 Machinery and equipment 5,770,640 5,770,640 Furniture and fixtures 1,281,911 1,281,474 ------------- ------------- Total property, plant, and equipment 112,134,469 117,304,113 Accumulated depreciation and amortization (15,419,714) (16,162,614) ------------- ------------- Net property, plant, and equipment 96,714,755 101,141,499 ------------- ------------- Debt issuance costs, net 4,682,127 4,504,223 Other assets 310,664 281,591 ------------- ------------- TOTAL ASSETS $ 379,378,216 $ 372,549,749 ============= ============= LIABILITIES, MANDATORY REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY (DEFICIT) Liabilities Current liabilities: Accounts payable $ 11,289,385 $ 3,721,184 Accounts payable to related parties 982,232 690,149 Accrued expenses 3,988,060 4,070,551 Debt 195,484,650 203,591,898 ------------- ------------- Total current liabilities 211,744,327 212,073,782 ------------- ------------- Commitments and contingencies Mandatorily redeemable preferred stock due 2009: 7% Cumulative convertible - Series A; $.001 par value; 10,000,000 shares authorized; 8,051,273 and 8,192,170 shares issued and outstanding as of December 31, 2000 and March 31, 2001, respectively; aggregate liquidation preference of $28,672,595 as of March 31, 2001 27,473,699 27,987,928 7% Cumulative convertible - Series B; $.001 par value; 10,000,000 shares authorized; 8,051,273 and 8,192,170 shares issued and outstanding as of December 31, 2000 and March 31, 2001, respectively; aggregate liquidation preference of $28,672,595 as of March 31, 2001 27,473,699 27,987,928 8.5% Cumulative convertible - Series C; $.001 par value; 25,000,000 shares authorized, issued and outstanding as of December 31, 2000 and March 31, 2001; aggregate liquidation preference of $89,440,001 as of March 31, 2001 86,298,993 88,199,432 ------------- ------------- Total mandatorily redeemable preferred stock 141,246,391 144,175,288 ------------- ------------- Stockholders' equity (deficit): Common stock; $.001 par value; 100,000,000 shares authorized; 195,420, and 215,438 shares issued and outstanding at December 31, 2000 and March 31, 2001, respectively 195 215 Additional paid-in capital 61,824,829 58,902,055 Deferred stock compensation (534,600) (493,375) Deficit accumulated during the development stage (34,902,926) (42,108,216) ------------- ------------- Total stockholders' equity (deficit) 26,387,498 16,300,679 ------------- ------------- TOTAL LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY (DEFICIT) $ 379,378,216 $ 372,549,749 ============= =============
The accompanying notes are an integral part of these consolidated financial statements. 1 EarthWatch Incorporated (A Development Stage Company)
Consolidated Statement of Operations - -------------------------------------------------------------------------------------------------------------------------- Period from January 1, 1995 Three Months Ended March 31, (Inception) to ------------- ------------- March 31, 2000 2001 2001 ------------ ------------- ------------- Revenue $ 2,019,248 $ 3,817,744 $ 20,205,235 Cost of goods sold 1,343,535 2,970,050 16,110,289 ------------ ------------- ------------- Gross profit 675,713 847,694 4,094,946 ------------ ------------- ------------- Expenses: Selling, general, and administrative 3,015,742 2,794,366 52,874,881 Research and development 2,379,624 2,158,457 74,094,239 Loss from impairment of fixed assets, net of insurance recoveries - - (81,489,890) Gain from arbitration settlement - - (1,514,776) ------------ ------------- ------------- Total expenses 5,395,366 4,952,823 43,964,454 ------------ ------------- ------------- Loss from operations (4,719,653) (4,105,129) (39,869,508) Interest expense (1,984,390) (4,726,377) (16,215,287) Interest income 1,332,397 1,626,216 16,976,579 ------------ ------------- ------------- Loss before provision for income taxes (5,371,646) (7,205,290) (39,108,216) Provision for income taxes - - (3,000,000) ------------ -------------- ------------- Net loss (5,371,646) (7,205,290) (42,108,216) Mandatorily redeemable preferred stock dividends and accretion (2,809,259) (2,927,755) (20,886,350) ------------ ------------- ------------- Net loss attributable to common stockholders $ (8,180,905) $ (10,133,045) $ (62,994,566) ============ ============= =============
The accompanying notes are an integral part of these consolidated financial statements. 2 EarthWatch Incorporated (A Development Stage Company)
Consolidated Statement of Cash Flows - ------------------------------------------------------------------------------------------------------------------------------------ Period from January 1, 1995 (Inception) to Three Months Ended March 31, March 31, ------------------------------ 2000 2001 2001 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (5,371,646) $ (7,205,290) $(42,108,216) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation expense 894,225 742,900 17,744,645 Non-cash interest expense 1,980,668 4,725,976 14,823,356 Non-cash loss from disposals and impairments of property plant, and equipment, net of insurance recoveries - - (50,886,959) Non-cash stock compensation - 41,225 962,625 Changes in assets and liabilities: Accounts receivable, net 684,691 (1,260,653) (512,936) Insurance proceeds receivable - restricted - 265,000,000 265,000,000 Other assets 562,068 (141,548) (627,939) Accounts payable (4,379,717) (7,568,201) 3,208,575 Accounts payable - related parties (489,884) (292,083) 690,149 Accrued expenses 49,872 83,633 1,944,903 ------------ ------------- ------------ Net cash provided (used) by operating activities (6,069,723) 254,125,959 210,238,203 ------------ ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investment securities - (236,760,935) (281,909,267) Proceeds from maturities of investment securities 2,814,866 6,295,382 44,990,238 Proceeds from sales of property, plant, and equipment - - 4,216,978 Constuction in progress additions (14,207,685) (1,586,106) (267,440,060) Other property, plant, and equipment additions (1,592,802) (5,096) (15,566,564) ------------ ------------- ------------ Net cash used by investing activities (12,985,621) (232,056,755) (515,708,675) ------------ ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of long-term notes, net - - 145,718,374 Proceeds from issuance of preferred and common stock, net 11,260 5,001 191,177,335 Cash acquired in merger - - 916,457 Principal payments on debt (30,164) (19,266) (4,560,976) ------------ ------------- ------------ Net cash provided (used) by financing activities (18,904) (14,265) 333,251,190 ------------ ------------- ------------ Net increase (decrease) in cash and cash equivalents (19,074,248) 22,054,939 27,780,718 Cash and cash equivalents, beginning of period 82,193,314 5,725,779 - ------------ ------------- ------------ Cash and cash equivalents, end of period $ 63,119,066 $ 27,780,718 $ 27,780,718 ============ ============= ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid $ 3,481 $ 401 $ 12,672,062 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Assets acquired pursuant to capital-lease and financing obligations $ - $ - $ 4,599,935 Net book value of assets acquired in merger - - 4,290,496 Liabilities assumed in merger - - 3,738,588 Stockholder advances converted to equity - - 1,030,000 Property in-kind contributed by stockholder - - 7,521,028 Non-cash interest capitalized in construction in progress 5,295,655 3,578,442 51,118,378 Issuance of mandatorily redeemable preferred stock 2,727,967 - 50,706,266
The accompanying notes are an integral part of these consolidated financial statements. 3 EarthWatch Incorporated (A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit) - ----------------------------------------------------------------------------------------------------------------------------------- Convertible Convertible Convertible Series A Series B Series C Preferred Stock Preferred Stock Preferred Stock ------------------------- ------------------------ ----------------------- Shares Amount Shares Amount Shares Amount ---------- ------------ -------- ------------ ---------- -------- Balance at January 1, 1995 (inception) - $ - - $ - - $ - Issuance of stock in exchange for future cash contributions and contributions of property in-kind 8,000,000 14,400,000 - - - - Contribution of net assets in merger 5,362,285 551,908 - - - - Issuance of common stock for services and for stock options exercised - - - - - - Issuance of preferred stock 5,475,001 21,712,635 189,040 1,890,400 - - Property in-kind, conversion of debt, and cash contributions from stockholder - - - - - - Net and comprehensive income (loss) - - - - - - ---------- ------------ -------- ----------- ---------- -------- Balance at December 31, 1995 18,837,286 36,664,543 189,040 1,890,400 - - Restatement of capital stock and additional paid-in capital for reincorporation as of January 1, 1996 - (36,645,706) - (1,890,211) - - Issuance of stock in exchange for property in-kind and other, net 513,124 513 22,260 22 - - Issuance of preferred stock - - 100,000 100 7,000,000 7,000 Property in-kind contributed by stockholder - - - - - - Net and comprehensive income (loss) - - - - - - ---------- ------------ -------- ----------- ---------- -------- Balance at December 31, 1996 19,350,410 19,350 311,300 311 7,000,000 7,000 Issuance of common stock - - - - - - Issuance of common stock for services and for stock options exercised - - - - - - Issuance of preferred stock - - - - - - Other - - - - - - Net and comprehensive income (loss) - - - - - - ---------- ------------ -------- ----------- ---------- -------- Balance at December 31, 1997 19,350,410 19,350 311,300 311 7,000,000 7,000 Issuance of preferred and common stock for stock options exercised 17,916 18 - - - - Net and comprehensive income (loss) - - - - - - ---------- ------------ -------- ----------- ---------- -------- Balance at December 31, 1998 19,368,326 19,368 311,300 311 7,000,000 7,000 Issuance of preferred and common stock for stock options exercised - - - - - - Issuance of common stock for warrants exercised - - - - - - Surrender and cancellation of shares from Ball Technologies Holdings Corp. (2,761,983) (2,762) - - - - Reclassification of preferred and common stock into Series C 8.5% Cumulative Convertible Redeemable Preferred Stock Due 2009 in connection with the recapitalization (16,606,343) (16,606) (311,300) (311) (7,000,000) (7,000) Issuance of preferred and common stock in connection with the recapitalization - - - - - - Mandatorily redeemable preferred stock dividends and accretion - - - - - - Net and comprehensive income (loss) - - - - - - ---------- ------------ -------- ----------- ---------- -------- Balance at December 31, 1999 - - - - - - Issuance of preferred and common stock for stock options exercised - - - - - - Deferred stock compensation - - - - - - Amortization of deferred stock compensation - - - - - - Mandatorily redeemable preferred stock dividends and accretion - - - - - - Net and comprehensive income (loss) - - - - - - ---------- ------------ -------- ----------- ---------- -------- Balance at December 31, 2000 - - - - - - Issuance of preferred and common stock for stock options exercised (unaudited) - - - - - - Amortization of deferred stock compensation (unaudited) - - - - - - Mandatorily redeemable preferred stock dividends and accretion (unaudited) - - - - - - Net and comprehensive income (loss) (unaudited) - - - - - - ---------- ------------ -------- ----------- ---------- -------- Balance at March 31, 2001 (unaudited) - $ - - $ - - $ - ========== ============ ======== =========== ========== ======== - ---------------------------------------------------------------------------------------------------------------------------------- Convertible Series D Additional Preferred Stock Common Stock Paid-in ---------------------------- ----------------------------- Shares Amount Shares Amount Capital ---------- ----------- ---------- ------------ ------------ Balance at January 1, 1995 (inception) - $ - $ - $ - $ - Issuance of stock in exchange for future cash contributions and contributions of property in-kind - - 1 - - Contribution of net assets in merger - - - - - Issuance of common stock for services and for stock options exercised - - 79,500 63,600 - Issuance of preferred stock - - - - - Property in-kind, conversion of debt, and cash contributions from stockholder - - - - - Net and comprehensive income (loss) - - - - - ---------- ----------- ---------- ------------ ------------ Balance at December 31, 1995 - - 79,501 63,600 - Restatement of capital stock and additional paid-in capital for reincorporation as of January 1, 1996 - - - (63,521) 38,599,438 Issuance of stock in exchange for property in-kind and other, net - - - - 2,288,561 Issuance of preferred stock 400,000 400 - - 69,833,305 Property in-kind contributed by stockholder - - - - (25,944) Net and comprehensive income (loss) - - - - - ---------- ----------- ---------- ------------ ------------ Balance at December 31, 1996 400,000 400 79,501 79 110,695,360 Issuance of common stock - - - - 1,229,240 Issuance of common stock for services and for stock options exercised - - 69,416 70 55,463 Issuance of preferred stock 600,000 600 - - 5,999,400 Other - - - - (4,773) Net and comprehensive income (loss) - - - - - ---------- ----------- ---------- ------------ ------------ Balance at December 31, 1997 1,000,000 1,000 148,917 149 117,974,690 Issuance of preferred and common stock for stock options exercised - - 54,631 55 50,799 Net and comprehensive income (loss) - - - - - ---------- ----------- ---------- ------------ ------------ Balance at December 31, 1998 1,000,000 1,000 203,548 204 118,025,489 Issuance of preferred and common stock for stock options exercised - - 1,000 1 799 Issuance of common stock for warrants exercised - - 1,556,000 1,556 14,004 Surrender and cancellation of shares from Ball Technologies Holdings Corp. - - - - 2,762 Reclassification of preferred and common stock into Series C 8.5% Cumulative Convertible Redeemable Preferred Stock Due 2009 in connection with the recapitalization (1,000,000) (1,000) (1,760,548) (1,761) (39,765,364) Issuance of preferred and common stock in connection with the recapitalization - - 1 - - Mandatorily redeemable preferred stock dividends and accretion - - - - (6,690,537) Net and comprehensive income (loss) - - - - - ---------- ----------- ---------- ------------ ------------ Balance at December 31, 1999 - - 1 - 71,587,153 Issuance of preferred and common stock for stock options exercised - - 195,419 195 49,734 Deferred stock compensation - - - - 1,456,000 Amortization of deferred stock compensation - - - - - Mandatorily redeemable preferred stock dividends and accretion - - - - (11,268,058) Net and comprehensive income (loss) - - - - - ---------- ----------- ---------- ------------ ------------ Balance at December 31, 2000 - - 195,420 195 61,824,829 Issuance of preferred and common stock for stock options exercised (unaudited) - - 20,018 20 4,981 Amortization of deferred stock compensation (unaudited) - - - - - Mandatorily redeemable preferred stock dividends and accretion (unaudited) - - - - (2,927,755) Net and comprehensive income (loss) (unaudited) - - - - - ---------- ----------- ---------- ------------ ------------ Balance at March 31, 2001 (unaudited) - $ - 215,438 $ 215 $ 58,902,055 ========== =========== =========== ============ ============ - -------------------------------------------------------------------------------------------------------------------------------- Accumulated Deficit Accumulated Other During the Total Comprehensive Development Stockholders' Other Income (Loss) Stage Equity (Deficit) ------------ ------------- ------------------- ---------------- Balance at January 1, 1995 (inception) $ - $ - $ - $ - Issuance of stock in exchange for future cash contributions and contributions of property in-kind (14,400,000) - - - Contribution of net assets in merger - - - 551,908 Issuance of common stock for services and for stock options exercised - - - 63,600 Issuance of preferred stock - - - 23,603,035 Property in-kind, conversion of debt, and cash contributions from stockholder 13,381,523 - - 13,381,523 Net and comprehensive income (loss) - - (3,909,208) (3,909,208) ------------ ------------- ------------------- ---------------- Balance at December 31, 1995 (1,018,477) - (3,909,208) 33,690,858 Restatement of capital stock and additional paid-in capital for reincorporation as of January 1, 1996 - - - - Issuance of stock in exchange for property in-kind and other, net - - - 2,289,096 Issuance of preferred stock - - - 69,840,805 Property in-kind contributed by stockholder 1,018,477 - - 992,533 Net and comprehensive income (loss) - - (23,706,344) (23,706,344) ------------ ------------- ------------------- ---------------- Balance at December 31, 1996 - - (27,615,552) 83,106,948 Issuance of common stock - - - 1,229,240 Issuance of common stock for services and for stock options exercised - - - 55,533 Issuance of preferred stock - - - 6,000,000 Other - - - (4,773) Net and comprehensive income (loss) - 80,400 (50,730,985) (50,650,585) ------------ ------------- ------------------- ---------------- Balance at December 31, 1997 - 80,400 (78,346,537) 39,736,363 Issuance of preferred and common stock for stock options exercised - - - 50,872 Net and comprehensive income (loss) - (36,971) (12,919,555) (12,956,526) ------------ ------------- ------------------- ---------------- Balance at December 31, 1998 - 43,429 (91,266,092) 26,830,709 Issuance of preferred and common stock for stock options exercised - - - 800 Issuance of common stock for warrants exercised - - - 15,560 Surrender and cancellation of shares from Ball Technologies Holdings Corp. - - - - Reclassification of preferred and common stock into Series C 8.5% Cumulative Convertible Redeemable Preferred Stock Due 2009 in connection with the recapitalization - - - (39,792,042) Issuance of preferred and common stock in connection with the recapitalization - - - - Mandatorily redeemable preferred stock dividends and accretion - - - (6,690,537) Net and comprehensive income (loss) - (159,382) (20,318,766) (20,478,148) ------------ ------------- ------------------- ---------------- Balance at December 31, 1999 - (115,953) (111,584,858) (40,113,658) Issuance of preferred and common stock for stock options exercised - - - 49,929 Deferred stock compensation (1,456,000) - - - Amortization of deferred stock compensation 921,400 - - 921,400 Mandatorily redeemable preferred stock dividends and accretion - - - (11,268,058) Net and comprehensive income (loss) - 115,953 76,681,932 76,797,885 ------------ ------------- ------------------- ---------------- Balance at December 31, 2000 (534,600) - (34,902,926) 26,387,498 Issuance of preferred and common stock for stock options exercised (unaudited) - - - 5,001 Amortization of deferred stock compensation (unaudited) 41,225 - - 41,225 Mandatorily redeemable preferred stock dividends and accretion (unaudited) - - - (2,927,755) Net and comprehensive income (loss) (unaudited) - (7,205,290) (7,205,290) ------------ ------------- ------------------- ---------------- Balance at March 31, 2001 (unaudited) $ (493,375) $ - $ (42,108,216) $ 16,300,679 ============ ============= =================== ================
4 EarthWatch Incorporated (A Development Stage Company) Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- 1. Basis of Presentation The consolidated financial statements have been prepared by EarthWatch Incorporated and its subsidiaries without an audit, except for the December 31, 2000 balance sheet, which has been derived from audited financial statements. The statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and reflect all adjustments, consisting of only normal recurring accruals which are, in the opinion of management, necessary for a fair statement of the results of operations for the periods shown. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto filed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2000. The results of operations for the three months ended March 31, 2001 are not necessarily indicative of the results to be expected for the full year ending December 31, 2001. 2. Construction in Progress Construction in progress consists primarily of satellite construction and launch costs, ground station construction costs, and third-party developed software. Construction in progress consisted of the following:
December 31, 2000 March 31, 2001 ----------------- -------------- QuickBird 2 satellite $55,952,495 $59,590,775 Digital Globe software 26,570,191 27,623,902 Ground station equipment 7,193,788 7,666,345 ----------- ----------- $89,716,474 $94,881,022 =========== ===========
3. Debt On February 28, 2001, as required by the indentures governing our 12 1/2% Senior Notes due 2005 and our 13% Senior Discount Notes due 2007, respectively, we offered to purchase all of our outstanding notes at their accreted value on the date of purchase, using the insurance proceeds relating to the loss of our QuickBird 1 satellite in November 2000. The offer expired on April 2, 2001 and we repurchased $127.4 million in principal amount at maturity of outstanding 13% notes and all outstanding 12 1/2% notes on April 3, 2001, resulting in an extraordinary loss on early extinguishment of debt of approximately $23.0 million. In connection with the offer, we entered into a Recapitalization Agreement and Consent dated as of April 2, 2001 ("Recapitalization Agreement") with certain holders of our 13% notes. Pursuant to the Recapitalization Agreement, these noteholders agreed to refrain from tendering their notes in the offer, thus allowing us to have the use of the funds that would otherwise be used to repurchase their notes. We also granted registration rights to certain holders of 13% notes and Series C preferred stock and pledged government securities to secure certain repurchase rights of the noteholders. Furthermore, we obtained the consent of these noteholders and amended the indenture governing the notes in certain respects. In the Recapitalization Agreement, we also agreed, among other things, that we would, by no later than June 15, 2001: . obtain at least $9 million of vendor financing from Ball Aerospace & Technologies Corp.; . amend our certificate of incorporation to (a) require that we purchase, at each holder's option, that holder's shares of our Series A and B preferred stock, if an insurable event occurs under the QuickBird 2 insurance policy, (b) increase the number of authorized shares of our common stock and each series of our preferred stock, and (c) extend the time period by one year during which holders of our preferred stock may convert their shares into shares of our common stock; . issue 10,843,297 additional shares of our Series C preferred stock to the holders of 13% notes that signed the Recapitalization Agreement; 5 EarthWatch Incorporated (A Development Stage Company) Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- . purchase at least $155 million of insurance covering the launch and in-orbit operations of our QuickBird 2 satellite; and . pledge the QuickBird 2 insurance in favor of The Bank of New York, as collateral agent for (a) the holders of notes and for Ball Aerospace, and (b) the holders of our Series A preferred stock and Series B preferred stock. In April 2001, we secured a $9.0 million borrowing facility with Ball Aerospace & Technologies Corp., one of our stockholders, which we intend to use to fund the completion of QuickBird 2. This vendor financing facility will accrue interest at an annual rate of 11%, which will become payable seven months following the launch of QuickBird 2. Beginning with the eighth month and ending with the eighteenth month following the launch of QuickBird 2, principal, in equal monthly amounts, and interest are payable in cash each month. In conjunction with this arrangement, we agreed to issue to Ball Aerospace & Technologies Corp. 903,608 shares of Series C preferred stock. We cannot assure you that the remaining contemplated transactions will be completed. If we do not, among other things, consummate the transactions required to be consummated by June 15, 2001, we must commence on the next business day and complete within 20 business days thereafter an offer to purchase all of the then-outstanding notes for a purchase price equal to their accreted value as of the date of purchase. We have incurred transaction costs associated with the Recapitalization Agreement of approximately $1.2 million. The estimated fair value of our debt instruments was approximately $233,192,000 at March 31, 2000. Based on our current operating plan and provided we can complete the other contemplated transactions in the Recapitalization Agreement prior to June 15, 2001, we believe that existing capital resources will meet our anticipated cash needs for the foreseeable future. If we face any launch delays, if our satellite system takes longer to become operational, if technical or regulatory developments require that we modify the design of our satellite system, if we are unable to complete the other contemplated transactions by June 15, 2001, if we are unable to achieve our revenue targets, or if we incur other additional unforeseen costs, we may require additional capital. We do not have a revolving credit facility or other source of readily available capital. Therefore, any shortfall in funds available for our operations or to service our debt would cause us serious liquidity problems. In such case, we would need to seek additional financing which we may not be able to obtain on commercially reasonable terms or at all. Failure to obtain such additional financing may result in a material adverse effect on our business and would significantly increase existing doubt about our ability to continue as a going concern.
The Company's debt is comprised of the following at: December 31, March 31, 2000 2001 ------------- ------------- 13% Senior Discount Notes, net of unamortized discount of $64,852,862 and $58,669,609, respectively, effective rate of 15.9% $ 134,147,138 $ 140,330,391 12 1/2% Senior Notes, net of unamortized discount of $10,731,089 and $8,777,514, respectively, effective rate of 12.9% 61,268,911 63,222,486 Capital-lease obligations 68,601 39,021 ------------- ------------ 195,484,650 203,591,898 Less: current portion (195,484,650) (203,591,898) ------------- ------------- $ -- $ -- ============= =============
4. Commitments Effective March 2001, we entered into a launch services agreement for our QuickBird 2 satellite. This agreement increases our remaining noncancelable contract commitments, excluding the purchase of launch and in-orbit insurance discussed above, through launch to $27.4 million. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Some of the statements in this Quarterly Report on Form 10-Q constitute forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry's results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. These factors include, among others, those listed under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Quarterly Report on Form 10-Q and in the other documents we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2000. In some cases, you can identify forward-looking statements by terminology, such as "may," "will," "should," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these terms or comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance, or achievements. Our actual results and the timing of certain events could differ materially from those anticipated in the forward-looking statements. Results of Operations Three months ended March 31, 2000 compared to three months ended March 31, 2001 Revenue. Our revenue has been generated primarily from the processing and sale of geographic imagery purchased from third-party suppliers. These sources of revenue increased from $2.0 million for the three-month period ended March 31, 2000 to $3.8 million for the three-month period ended March 31, 2001. Varying delivery dates within new and existing contracts have resulted in significant revenue fluctuations for these two periods. Revenue for the remainder of fiscal 2000 decreased substantially in anticipation of the launch of QuickBird 1. A similar decrease is not expected in fiscal 2001. Cost of Goods Sold. Our cost of goods sold includes third party geographic imagery sold under contract. As a result of our increased revenue, our cost of goods sold consequently increased from $1.3 million for the three-month period ended March 31, 2000 to $3.0 million for the three-month period ended March 31, 2001. Costs for both periods were primarily the direct costs associated with obtaining third-party geographic imagery for resale. Selling, General, and Administrative Expenses. Selling, general, and administrative expenses were $3.0 million and $2.8 million for the three-month periods ended March 31, 2000 and 2001, respectively. These expenses decreased due to staff reductions and reduced operating activities following the loss of QuickBird 1. We expect these costs to increase in the future as we increase staff levels and implement new procedures in preparation for full-scale operations and market entry of our products and services. Research and Development. Our research and development costs were $2.4 million and $2.2 million for the three-month periods ended March 31, 2000 and 2001, respectively. These expenses decreased due to staff reductions and reduced operating activities following the loss of QuickBird 1. Interest Expense. Interest expense increased significantly from $2.0 million for the three-month period ended March 31, 2000 to $4.7 million for the three-month period ended March 31, 2001. This increase was the result of higher average debt balances outstanding during the three-month period ended March 31, 2001 and lower capitalization of interest due to the completion of QuickBird 1 in 2000. Interest Income. Interest income increased from $1.3 million for the three-month period ended March 31, 2000 to $1.6 million for the three-month period ended March 31, 2001. This increase was the result of higher average investment balances outstanding during the three-month period ended March 31, 2001. Net Loss. We had net losses of $5.4 million and $7.2 million for the three- month periods ended March 31, 2000 and 2001, respectively. 7 Liquidity and Capital Resources On February 28, 2001, as required by the indentures governing our 12 1/2% Senior Notes due 2005 and our 13% Senior Discount Notes due 2007, respectively, we offered to purchase all of our outstanding notes at their accreted value on the date of purchase, using the insurance proceeds relating to the loss of our QuickBird 1 satellite in November 2000. The offer expired on April 2, 2001 and we repurchased $127.4 million in principal amount at maturity of outstanding 13% notes and all outstanding 12 1/2% notes on April 3, 2001, resulting in an extraordinary loss on early extinguishment of debt of approximately $23.0 million. In connection with the offer, we entered into a Recapitalization Agreement and Consent dated as of April 2, 2001 ("Recapitalization Agreement") with certain holders of our 13% notes. Pursuant to the Recapitalization Agreement, these noteholders agreed to refrain from tendering their notes in the offer, thus allowing us to have the use of the funds that would otherwise be used to repurchase their notes. We also granted registration rights to certain holders of notes and Series C preferred stock and pledged government securities to secure certain repurchase rights of the noteholders. Furthermore, we obtained the consent of these noteholders and amended the indenture governing the notes in certain respects. In the Recapitalization Agreement, we also agreed, among other things, that we would, by no later than June 15, 2001: . obtain at least $9 million of vendor financing from Ball Aerospace & Technologies Corp.; . amend our certificate of incorporation to (a) require that we purchase, at each holder's option, that holder's shares of our Series A and B preferred stock, if an insurable event occurs under the QuickBird 2 insurance policy, (b) increase the number of authorized shares of our common stock and each series of our preferred stock, and (c) extend the time period by one year during which holders of our preferred stock may convert their shares into shares of our common stock; . issue 10,843,297 additional shares of our Series C preferred stock to the holders of 13% notes that signed the Recapitalization Agreement; . issue 903,608 additional shares of our Series C preferred stock to the Ball Technologies Holding Corporation; . purchase at least $155 million of insurance covering the launch and in-orbit operations of our QuickBird 2 satellite; and . pledge the QuickBird 2 insurance in favor of The Bank of New York, as collateral agent for (a) the holders of notes and for Ball Aerospace, and (b) the holders of our Series A preferred stock and Series B preferred stock. In April 2001, we secured a $9.0 million borrowing facility with Ball Aerospace & Technologies Corp., one of our stockholders, which we intend to use to fund the completion of QuickBird 2. This vendor financing facility will accrue interest at an annual rate of 11%, which will become payable seven months following the launch of QuickBird 2. Beginning with the eighth month and ending with the eighteenth month following the launch of QuickBird 2, principal, in equal monthly amounts, and interest are payable in cash each month. In conjunction with this arrangement, we agreed to issue to Ball Aerospace & Technologies Corp. 903,608 shares of Series C preferred stock. We cannot assure you that the remaining contemplated transactions will be completed. If we do not, among other things, consummate the transactions required to be consummated by June 15, 2001, we must commence on the next business day and complete within 20 business days thereafter an offer to purchase all of the then-outstanding notes for a purchase price equal to their accreted value as of the date of purchase. As a result of receiving $265 million of insurance proceeds, we had net cash provided by operating activities of $254.1 million for the three-month period ended March 31, 2001. As a result of our collateral agreement with our note holders, $236.8 million of these proceeds were deposited into a restricted escrow account for the repurchase of notes submitted in our tender offer. Excluding the insurance proceeds, we had net cash used by operating activities of $10.9 million and $6.1 million for the three-month periods ended March 31, 2001 and 8 2000, respectively. This difference was primarily the result of a reduction in accounts payable outstanding, resulting from the finalization of our Recapitalization Agreement. As a result of $236.8 million of the insurance proceeds being deposited in a restricted escrow account, we had net cash used by investing activities of $232.1 million for the three-month period ended March 31, 2001. Excluding this amount, we had $4.7 million of cash provided by investing activities in 2001 as compared to $13.0 million used by investing activities during the same period in 2000. This increase was primarily the result of the release of restricted investments for final payment of the QuickBird 1 insurance premiums during the three-month period ended March 31, 2001. Based on our current operating plan and provided we can complete the other contemplated transactions in the Recapitalization Agreement prior to June 15, 2001, we believe that existing capital resources will meet our anticipated cash needs for the foreseeable future. If we face any launch delays, if our satellite system takes longer to become operational, if technical or regulatory developments require that we modify the design of our satellite system, if we are unable to complete the other contemplated transactions by June 15, 2001, if we are unable to achieve our revenue targets, or if we incur other additional unforeseen costs, we may require additional capital. We do not have a revolving credit facility or other source of readily available capital. Therefore, any shortfall in funds available for our operations or to service our debt would cause us serious liquidity problems. In such case, we would need to seek additional financing which we may not be able to obtain on commercially reasonable terms or at all. Failure to obtain such additional financing may result in a material adverse effect on our business and would significantly increase existing doubt about our ability to continue as a going concern. Item 3. Quantitative and Qualitative Disclosures About Market Risk. We invest our cash and cash equivalents and restricted investments in short-term, U.S. dollar interest-bearing, investment grade securities with maturities less than 90 days. As of March 31, 2001, the interest rates on these investments have not fluctuated more than one percentage point since they were purchased. We do not currently hold any derivative instruments and do not engage in hedging activities. Also, we currently do not hold any variable interest rate debt or lines of credit, and currently do not generally enter into any transactions denominated in a foreign currency. Therefore, our exposure to interest rate and foreign exchange fluctuations is minimal. As of March 31, 2001, we estimate the fair value of our debt to be approximately $233.2 million using its accreted value plus accrued and unpaid interest as of that date. This methodology was utilized as a result of our tender offer in effect on that date and our requirement to make a repurchase offer for the untendered notes in the event qualifying insurance for QuickBird 2 is not obtained by the required date. Upon the resolution of the insurance contingency, the fair value of the untendered notes will depend upon rates for similar instruments at that time. To the extent interest rates increase, our costs of financing would increase at such time as we are required to refinance our debt. 9 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds. During the three-months ended March 31, 2001, we granted stock options to purchase 26,400 shares of our common stock with a price of $0.25 per share to our employees, consultants, directors, and other service providers under our 1999 Equity Incentive Plan. During the period covered by this report, we also issued and sold an aggregate of 25,260 shares of our common stock for $0.25 per share to employees, consultants, directors, and other service providers under direct issuances and exercises of stock options under our 1999 Equity Incentive Plan and 1995 Stock Option/Stock Issuance Plan, respectively. These securities were not registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the exemption provided by Section 4(2) of the Securities Act and/or Rule 701 promulgated thereunder for transactions by an issuer not involving a public offering. In April 2001, pursuant to the Recapitalization Agreement, we entered into the First Supplemental Indenture to the Indenture, which governs our 13% notes and requires us, among other things, to (a) obtain launch and in-orbit operations insurance in respect of our anticipated QuickBird 2 satellite and (b) make an offer to repurchase the 13% notes at their accreted value on the date of repurchase (i) in the event all of the contemplated transactions are not completed by June 15, 2001 and to consummate the offer to repurchase no later than August 1, 2001, and (ii) within 30 days of receipt by the collateral trustee of any proceeds under the QuickBird 2 insurance policy and to consummate such offer to repurchase no later than 60 days after the commencement of the offer. Item 4. Submission of Matters to a Vote of Security Holders. (a) The annual meeting of our stockholders was held on December 12, 2000. (b) The annual meeting included the election of directors. The names of the directors and the results of the vote for such directors are described in (c) below. (c) The matters voted upon at the annual meeting are as follows: (1) Election of Directors ---------------------
Director Votes Received Votes Withheld -------- -------------- -------------- Paul M. Albert, Jr. 7,912,798 0 Donald E. Foley 7,912,798 0 Anne Karalekas 7,912,798 0 Takatoshi Kodaira 22,378,612 2,125,808 Alexander S. Lushtak 22,377,365 2,127,055 Michael J. Petrick 7,912,798 0 Dr. Marvin R. Sambur 7,912,798 0 Herbert F. Satterlee, III 22,577,202 1,927,218 Walter S. Scott 22,579,669 1,924,751 Donald W. Vanlandingham 22,305,493 2,198,927
Based upon these voting results, each of the aforementioned persons was elected as a director. In March, 2001, Dr. Sambur informed us that he was resigning from the board of directors, effective the last day of March, to devote his time to other matters. On May 7, the board elected Henry J. Driesse, Vice President of ITT Industries, Inc. and President of ITT Defense, to serve the remainder of Dr. Sambur's term. (2) Approval of 1999 Equity Incentive Plan -------------------------------------- At the annual meeting, the stockholders were asked to approve the 1999 Equity Incentive Plan. Under the plan, 10,000,000 shares of common stock have been reserved for issuance. The plan provides for the grant of incentive stock options to employees and nonstatutory stock options, stock bonuses, and restricted stock awards to employees, directors, and consultants to purchase common stock. The purpose of 10 the plan is to secure and retain qualified personnel and to provide incentives to such personnel to achieve success for the company. The plan is administered by the board or a committee appointed by the board, which determines recipients and types of awards to be granted, including the exercise price, number of shares subject to the award, and the exercisability thereof. The results of the vote for the approval of the 1999 Equity Incentive Plan are as follows: Votes For Votes Against Votes Abstained --------- ------------- --------------- 35,107,807 12,194 237 Our current Amended and Restated Certificate of Incorporation contains provisions that may conflict with respect to the ability of our stockholders to grant proxies or powers of attorney at any annual or special meeting of stockholders. As a result, there is some issue with respect to the ability of such stockholders to grant proxies or powers of attorney. However, many of our stockholders have purported to use proxies in connection with the 2000 annual meeting of stockholders to approve the actions above. Therefore, there may be uncertainty with respect to the validity of actions that have been approved by the stockholders at the annual meeting. Accordingly, we plan to solicit the stockholders by written consent to, among other things, ratify the actions of the stockholders at the 2000 annual meeting. However, we cannot assure you that the consent solicitation will be consummated, or if it is consummated, that the stockholders will ratify the actions taken at the 2000 annual meeting. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description ---------- ----------- 2.2* Recapitalization Agreement and Consent dated as of April 2, 2001 by and among EarthWatch Incorporated, Morgan Stanley & Co. Incorporated, Post Balanced Fund, Post High Yield LP, Post Total Return Fund, Opportunity Fund, Dickstein & Co., L.P., Dickstein International Limited, Hitachi Software Engineering Co., Ltd., Sun America High Income Fund and Sun America Series Trust High Yield Portfolio. 4.10* Notes Registration Rights Agreement dated as of April 3, 2001 by and among EarthWatch Incorporated, The Bank of New York and Morgan Stanley & Co. Incorporated. 4.11* Series C Preferred Registration Rights Agreement dated as of April 3, 2001 by and among EarthWatch Incorporated, Morgan Stanley & Co. Incorporated, Post Balanced Fund, Post High Yield LP, Post Total Return Fund, Opportunity Fund, Dickstein & Co., L.P., Dickstein International Limited, Sun America High Income Fund, Sun America Series Trust High Yield Portfolio, Hitachi Software Engineering Co., Ltd. and Ball Technologies Holdings Corp. 4.12* Pledge Agreement dated as of April 3, 2001 by and among EarthWatch Incorporated, The Bank of New York, as trustee, and The Bank of New York, as securities intermediary. 4.13* First Supplemental Indenture to the Indenture dated as of April 16, 2001 by and between EarthWatch Incorporated and The Bank of New York, as trustee. 10.12+ Launch Services Agreement dated February 2, 2001 between EarthWatch and Delta Launch Services, Inc. 10.12(a)+ Amendment 1 to Launch Services Agreement dated March 15, 2001 between EarthWatch and Delta Launch Services, Inc. 10.13 Credit Agreement dated as of April 20, 2001 by and between EarthWatch Incorporated and Ball Aerospace & Technologies Corp. * Incorporated by reference to the exhibits with the corresponding exhibit numbers in our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 25, 2001. 11 + Portions of this exhibit have been omitted pursuant to a request for confidential treatment, and the omitted portions have been filed separately with the Securities and Exchange Commission. (b) Reports on Form 8-K A report on Form 8-K was filed on March 21, 2001 to report preliminary unaudited financial information for the year ended December 31, 2000. 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Longmont, State of Colorado. EARTHWATCH INCORPORATED (Registrant) Date: May 15, 2001 By: /s/ Henry E. Dubois ---------------------------- ------------------------------ Henry E. Dubois Chief Financial Officer, Chief Operating Officer, Executive Vice President (Principal Financial and Accounting Officer) 13 EX-10.12 2 dex1012.txt LAUNCH SERVICES AGREEMENT DATED 02/02/01 CONFIDENTIAL TREATMENT ---------------------- Exhibit 10.12 ------------- - -------------------------------------------------------------------------------- *CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL, MARKED BY AN ASTERISK, HAS BEEN FILED SEPARATELY WITH THE COMMISSION. - -------------------------------------------------------------------------------- DELTA II LAUNCH SERVICES AGREEMENT BETWEEN EARTHWATCH INCORPORATED AND DELTA LAUNCH SERVICES, INC. LAUNCH SERVICES AGREEMENT No. DLS-01-1305C ------------ Delta Launch Services, Inc. (DLS) proprietary rights are included in the information disclosed herein. Recipient, by accepting this document agrees that neither this document nor the information disclosed herein nor any part hereof shall be reproduced or transferred to other documents or used or disclosed to others for manufacturing, or for any other purpose except as specifically authorized in writing by DLS, a wholly-owned subsidiary of the McDonnell Douglas Corporation. Copyright by Delta Launch Services, Inc., a wholly-owned subsidiary of the McDonnell Douglas Corporation, which is a wholly-owned subsidiary of The Boeing Company. All Rights Reserved. This is an unpublished work of Delta Launch Services, Inc. CONFIDENTIAL TREATMENT ---------------------- TABLE OF CONTENTS -----------------
ARTICLE TITLE PAGE - ------- ----- ---- ARTICLE 1. DEFINITIONS 4 ARTICLE 2. SERVICES TO BE PROVIDED BY SELLER 6 ARTICLE 3. SCHEDULE FOR PERFORMANCE OF SERVICES BY SELLER 6 ARTICLE 4. PRICES AND TERMS OF PAYMENT 6 ARTICLE 5. LAUNCH SCHEDULE CHANGES 8 ARTICLE 6. BUYER DELIVERABLES 10 ARTICLE 7. RESERVED 10 ARTICLE 8. LAUNCH MANIFEST GUIDELINES 10 ARTICLE 9. CHANGES 11 ARTICLE 10. ALLOCATION OF RISKS AND LIABILITIES (LICENSED ACTIVITY) 11 ARTICLE 11. COMMERCIAL SPACE OPERATIONS SUPPORT AGREEMENT (CSOSA) 13 ARTICLE 12. EXCUSABLE DELAYS 18 ARTICLE 13. TERMINATION 18 ARTICLE 14. WARRANTY DISCLAIMER 21 ARTICLE 15. RISK TO SPACECRAFT 21 ARTICLE 16. LIMITATION OF LIABILITY 21 ARTICLE 17. INFORMATION 22 ARTICLE 18. INFRINGEMENT 23
-2- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- TABLE OF CONTENTS (continued) -----------------
ARTICLE TITLE PAGE - ------- ----- ---- ARTICLE 19. BAILED EQUIPMENT 23 ARTICLE 20. OPTIONAL LAUNCH 23 ARTICLE 21. GOVERNING LAW 24 ARTICLE 22. LICENSES, PERMITS AND REGISTRATIONS 24 ARTICLE 23. REGISTRATION OF LAUNCH VEHICLE AND SPACECRAFT 24 ARTICLE 24. SECURITY 25 ARTICLE 25. TAXES 25 ARTICLE 26. NATURE OF RELATIONSHIP 25 ARTICLE 27. NOTICES 26 ARTICLE 28. ASSIGNMENT 26 ARTICLE 29. PUBLIC RELEASE OF INFORMATION 27 ARTICLE 30. ORDER OF PRECEDENCE 27 ARTICLE 31. U.S. GOVERNMENT APPROVAL AND REQUIREMENTS. 27 ARTICLE 32. PARTIAL INVALIDITY 28 ARTICLE 33. ENTIRE LAUNCH SERVICES AGREEMENT 28 ARTICLE 34. EFFECTIVITY 28
-3- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- As of the date of last signature hereof, EarthWatch Incorporated (herein referred to as the "Buyer"), a corporation organized under the laws of Delaware, and DELTA LAUNCH SERVICES, INC. (herein referred to as the "Seller"), a corporation organized under the laws of the State of Delaware, U.S.A., have agreed as follows: ARTICLE 1. DEFINITIONS. ----------- Unless the context shall otherwise require, capitalized terms used herein shall have the following meanings: Launch Services Agreement: (LSA) This document and all attachments described herein and all amendments agreed to in accordance with Article 33. Launch: The intentional ignition of the Launch Vehicle, more specifically: the intentional ignition of any strap-on Solid Rocket Motor (SRM). Launch Date: The calendar date within the Launch Slot during which a Launch will occur as determined by Article 3. Launch Period: A three (3) month period of time within a Launch Semester during which the Launch will occur, as determined by Article 3. Launch Semester: Launch Semester is equivalent to the Launch Period. Launch Services: Services provided by Seller as described in Article 2. Launch Site: The Delta launch site located at Vandenberg Air Force Base in California, United States of America, or another mutually agreed upon launch site including its installations, facilities, and equipment. Launch Slot: A thirty (30) day period of time within a Launch Period during which the Launch will occur, as determined by Article 3. Launch Term: The Launch Semester, Launch Period, Launch Slot or Launch Date, whichever is in effect at the time as determined by Article 3. Launch Vehicle: The Delta Launch Vehicle, as more fully described in Attachment 1, Statement of Work, or other equivalent launch vehicle system, required to perform the relevant Launch Services under this LSA. Launch Window: A period of time within the Launch Date during which the Launch can occur and meet mission requirements. Party or Parties: Means the Seller or the Buyer or both, according to the context. -4- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- Spacecraft: The Buyer-furnished satellite, payload, or equivalent that meets the criteria of Attachment 2, Interface Requirements Document (IRD), and Attachment 3, Delta II Payload Planners Guide, which is designated for transportation and release into space under this LSA. Third Party: Any person or entity other than the Seller, Buyer, and the United States and its agencies or its contractors and subcontractors involved in the Launch Services. Written Notification: In accordance with Article 27 of this Launch Service Agreement Paragraph titles and headings contained herein are for convenience and serve only to introduce the general subject matter contained within the paragraph following such title or heading. Titles and headings are not to be construed, either wholly or in part, to have any unique legal significance beyond their stated purpose. Furthermore, where the context so requires, words in the singular include the plural and vice-versa. -5- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- ARTICLE 2. SERVICES TO BE PROVIDED BY SELLER. ---------------------------------- Seller shall provide Launch Services to Buyer from the Launch Site using a Launch Vehicle. These services are as set forth in Attachment 1, Statement of Work, dated February 2, 2001, which is attached to and made part of this LSA. Seller shall provide the additional services related to the Launch Services as set forth in Attachment 1, Statement of Work. ARTICLE 3. SCHEDULE FOR PERFORMANCE OF SERVICES BY SELLER. ----------------------------------------------- A. Identification of Launch Semester. Seller shall effect the Launch ------------------------------------ within the Launch Semester commencing on 15 October 2001. B. Determination of Launch Period, Launch Slot, and Launch Date. -------------------------------------------------------------- Seller and Buyer shall agree, giving due consideration to Seller's other commitments and available resources: (1) to a one (1) month Launch Slot at least two (2) months before the Launch Period begins; and (2) to a Launch Date at least forty-five days before the Launch Slot begins. ARTICLE 4. PRICES AND TERMS OF PAYMENT. ---------------------------- A. Price. Buyer shall pay to Seller, as consideration for the ----- Launch Service(s), a price of $ * (United States Dollars), subject to --- adjustment as provided elsewhere in this LSA. B. Payment Schedule. The price referred to in Paragraph A above ----------------- of any set-offs, taxes, duties or other deductions. -6- *Confidential treatment requested. The omitted material has been filed separately with the Commission. PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation CONFIDENTIAL TREATMENT ---------------------- Table 4-1 Payment Schedule for Launch Services Incremental Cumulative Payment Due Date Due Date Payment % Payment % - ---------------- -------- ----------- ---------- * - C. Definition of Launch for Payment Purposes. For payment purposes, --------------------------------------------- "L" is defined as the first calendar day of the Launch Term, in effect at the time the payment is due. D. Manner of Payment. All payments shall be in United States dollars ------------------ in immediately available funds to Seller's account as follows: * - E. Past Due Payments. Past due payments shall bear interest ----------------- until paid at a rate that is * . A payment(s) not received within sixty (60) --- days of the applicable payment due date shall constitute the Buyer's material breach of this LSA. *Confidential treatment requested. The omitted material has been filed separately with the Commission. PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. -7- CONFIDENTIAL TREATMENT ---------------------- F. Reserved -------- ARTICLE 5. LAUNCH SCHEDULE CHANGES. ------------------------ A. Launch Schedule Acceleration. At any time prior to sixty (60) days ---------------------------- before the first day of the Launch Term, the requesting Party, by written notice to the other Party, may request an acceleration of the Launch to a date specified in the notice. In the event that the requested acceleration is unacceptable to the other Party, the Parties shall work together to establish a mutually acceptable date which shall be as close as possible to the date requested, giving due consideration to the Seller's other commitments and available resources. The payment terms shall be adjusted on a day for day basis consistent with the accelerated launch schedule. B. Launch Schedule Postponements within the Grace Period(s). Either -------------------------------------------------------- Party shall have the right to postpone any Launch Service without assessment of postponement fees, for up to the applicable grace periods as reflected in Table 5-1 and subject to Launch Service availability. The postponing Party shall provide due notice to the other Party in accordance with Table 5-1. Postponements under Article 5 do not include excusable delays as defined under Article 12. In the event the requested postponement is not acceptable to the other Party, the Parties will work together to establish a mutually acceptable date which shall be as close as possible to the date requested by the postponing Party, giving due consideration to the other Party's commitments and available resources. Table 5-1 Launch Schedule Postponements ----------------------------- --------------------------------------------------------------------------- Notification Period Grace Period (Months prior to Launch) --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- * - *Confidential treatment requested. The omitted material has been filed separately with the Commission. -8- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation CONFIDENTIAL TREATMENT ---------------------- The cumulative total of all postponements within a given notification period shall not exceed the corresponding grace period. The maximum grace period for postponement(s) is cumulative and shall not exceed * in total for all --- notification periods taken together. C. Launch Schedule Postponements beyond the Grace Period(s). Either -------------------------------------------------------- Party, by written notice, may request a postponement of a Launch to a date exceeding the grace period(s) as set forth in Table 5-1. Requests which exceed the grace period(s) shall be subject to payment, as liquidated damages and not as a penalty, of postponement fees for those days of delay exceeding the grace period(s). Postponement fees shall equal the amounts shown in Table 5-2 as determined by the notification date, to a maximum of * . Postponement fees shall be the sole remedy available to the Parties for any and all impacts associated with the applicable Launch postponements. No launch postponement fees will be assessed for excusable delays as defined under Article 12 of this Launch Services Agreement. Unless mutually agreed to by the Parties, in no event shall a Launch Service be postponed for more than * beyond the Grace Period(s) reflected in Table 5-1, for reasons other than excusable delay. Table 5-2 Delta II Launch Schedule Postponement Fees (U.S. Dollars) --------------------------------------------------------------------------- Notification Buyer Delays Seller Delays --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- * - D. For postponement purposes, "L" is defined as the first calendar day of the Launch Term, which is in effect at the time the postponement is requested. E. Payment Adjustments for Launch Schedule Changes. Except for the final payment due * , the payment schedule shall not be adjusted for * . -9- *Confidential treatment requested. The omitted material has been filed separately with the Commission. PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation CONFIDENTIAL TREATMENT ---------------------- The payment schedule for * , shall not be modified as to payments already made --- or due, but shall be modified on a day for day basis consistent with the revised Launch schedule for all remaining payments. For * , which do not exceed * --- --- cumulative, there will be no payment schedule adjustment. * shall be credited to --- the remaining buyer payments; if no additional payments are due, * shall be made --- within * of the * . If * , future payments shall be adjusted to accommodate the --- --- --- * ; if no additional payment(s) required, * will be paid within * of * . In any - --- --- --- --- event, all payments and fees shall be paid * . --- ARTICLE 6. BUYER'S DELIVERABLES. -------------------- A. Tasks to be Performed by Buyer. Buyer shall seasonably deliver to ------------------------------ Seller the data described in Attachment 1, Statement of Work and shall ensure that the Spacecraft when tendered for launch is compatible with the requirements specified in Attachments 1, 2 and 3. B. Conditions Precedent. Buyer's seasonable delivery of data, -------------------- obtaining required licenses and demonstrating compatibility of the Spacecraft with Attachments 2 and 3 shall each be conditions precedent to Seller's obligation to effect any and all of the Launches contemplated herein. An equitable adjustment will be afforded to Seller in delivery, price or other contractual terms that are affected if Buyer delays or fails to perform. ARTICLE 7. RESERVED. -------- ARTICLE 8. LAUNCH MANIFEST GUIDELINES. -------------------------- The following guidelines shall govern the establishment of launch schedule priorities between Seller and Buyer: (1) In the event of a Seller launch delay, the launching order shall remain in effect as of the date of Seller's delay. (2) Launches will have priority in the following order: -10- *Confidential treatment requested. The omitted material has been filed separately with the Commission. PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation CONFIDENTIAL TREATMENT ---------------------- A. Time critical scientific missions and DPAS rated military missions; B. Reflight or replacement launches due to previous mission failures. ARTICLE 9. CHANGES. -------- During the performance of this LSA, either Party shall have the right to request changes to this LSA. Any such requests for changes must be made in accordance with Article 27. The receiving Party shall provide notification to the requesting Party of any price, schedule, or other terms affected by the requested change. For any such change which affects price, schedule or other terms, an equitable adjustment, will be negotiated in good faith between the Parties. If the Parties reach agreement, this LSA shall be amended in accordance with Article 33. Neither Party shall be obligated to proceed with a change unless the LSA has been amended. ARTICLE 10. ALLOCATION OF RISKS AND LIABILITIES. ------------------------------------ A. Third Party Liability. Consistent with Chapter 701, Title 49 of --------------------- U.S. Code, Commercial Space Launch Activities, 49 U.S.C. App. ss.ss. 70101- 70119, and its regulations, Seller shall indemnify, defend and hold harmless Buyer, its officers, employees, agents, contractors, subcontractors and suppliers and their respective governments, at every tier and Buyer's financiers (first tier only) against liability for damage to the property of Third Parties (including the U.S. Government) or bodily injury to any persons, including death, proximately caused by the Launch of the Spacecraft hereunder, except for such liability, damage or injury caused by Buyer's willful misconduct and/or negligence. Buyer shall give Seller prompt written notice of any claim of such damage or injury and shall cooperate with Seller and its insurers in every reasonable way in defending against such claim. Seller shall obtain and maintain the insurance required by the United States Federal Aviation Administration, Office of the Associate Administrator for Commercial Space Transportation (AST), formerly known as Office of Commercial Space Transportation (OCST), issued launch license in accordance with the Commercial Space Launch Act (CSLA) in connection with any and all of the Launch Services hereunder. B. Interparty Waiver of Liability. Each Party agrees to waive its ------------------------------ right to make claim for, and be responsible for, any property damage or loss it sustains, or for any personal -11- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation CONFIDENTIAL TREATMENT ---------------------- injury to, death of, or property damage or loss sustained by its own employees resulting from the performance of this LSA. Each Party agrees to execute and submit to AST, at least thirty (30) days before commencement of licensed Launch activities, the three (3) party reciprocal waiver of claims agreement required under CSLA Section 440.17(c). In addition, the Parties agree to execute reciprocal waivers of claims at least thirty (30) days before commencement of licensed launch activity with its customers, contractors, subcontractors and suppliers at any tier, necessary to implement the reciprocal waiver provisions contemplated by United States Federal Aviation Administration, AST (CSLA, 49 U.S.C. App. ss.ss. 70101-70119) in connection with any and all of the Launch Services hereunder. C. Definitions. For purposes of this Article, the following ----------- definitions shall apply: (1) Contractors and subcontractors means those entities that are involved at any tier, directly or indirectly, in licensed launch activities, and includes suppliers of property and services, and the component manufacturers of a Launch Vehicle or payload. (2) Customer means the person who procures Launch Services from the licensee, any person to whom the customer has sold, leased, assigned, or otherwise transferred its rights in the payload (or any part thereof) to be launched by the licensee, including a conditional sale, lease, assignment, or transfer of rights, any person who has placed property on board the payload for launch or payload services, and any person to whom the customer has transferred it rights to the Launch Services. (3) Third Party means: (a) Any person other than: (i) The United States, its agencies, and its contractors and subcontractors involved in Launch Services for licensed Launch activities; (ii) The licensee and its contractors and subcontractors involved in Launch Services for licensed Launch activities; and -12- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation CONFIDENTIAL TREATMENT ---------------------- (iii) The customer and its contractors and subcontractors involved in Launch Services for licensed Launch activities. (b) Government personnel. D. Buyer Assumption of Risk and Indemnity for Spacecraft. Buyer ----------------------------------------------------- assumes the risk of any actual or constructive loss of or damage to the Spacecraft prior to, during, and after Launch, and of any loss or damage caused to Buyer or Buyer's customers as a result of the non-availability of or inability to use the Spacecraft following Launch. Buyer shall indemnify, defend, and hold harmless Seller, its officers, agents, employees, contractors, subcontractors and suppliers at every tier and the U.S. Government against all claims and actions, including claims and actions by Buyer's customers, contractors and subcontractors, Buyer's insurers and other Third Parties, based in whole or in part on loss or damage resulting from the non-availability of or inability to use the Spacecraft, except for loss or damage caused by willful misconduct, whether or not caused by the negligence of Seller, its officers, agents, employees, contractors, subcontractors or suppliers at any tier or any Third Party involved in payload processing activities, or the U.S. Government. Buyer agrees to flow down the aforementioned provisions to its customers, contractors, subcontractors and other Third Parties. ARTICLE 11. COMMERCIAL SPACE OPERATIONS SUPPORT AGREEMENT (CSOSA) ----------------------------------------------------- A. Allocation of Risks and Insurance. The following Articles shall --------------------------------- apply with respect to the performance of this Agreement involving commercial launch activities, not covered by a Department of Transportation license, which are being conducted at facilities owned or controlled by the Government. B. Definitions. For the purposes of these Articles the following ----------- definitions shall apply: 1. Damage: Bodily injury to or death of any person, damage to or loss of any property, real or personal, loss of revenue or profits or other direct, indirect or consequential damages therefrom. Such damage shall include that caused by a -13- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- release of or exposure to a hazardous substance, as that term is defined in the Comprehensive Environmental Response, Compensation, and Liability Act. 2. Liability: Any legal or equitable obligation, debt, or duty to any person, including, but not limited to (a) obligations pursuant to any Government treaty or imposed by any judgment by a court or other body of competent jurisdiction, (b) administrative costs, (c) litigation costs, including, but not limited to, attorney fees, and (d) settlement payments. Liability includes legal obligations that are the result of an accident or environmental incident, legal obligations pursuant to any Government treaty, and any judgment by a court of competent jurisdiction. C. Allocation of Risk. ------------------ 1. Buyer agrees that the government, its contractors and subcontractors, and the employees of any of them, are not responsible to Buyer, its contractors or subcontractors, or the employees of either of them, regardless of fault or causation for any damage, liability, or financial loss that is incurred by Buyer, its contractors or subcontractors or the employees of either of them, that arises from, or relates to, the performance of this Agreement. 2. Buyer agrees to indemnify and hold Seller, the government, their contractors and subcontractors, and the employees of any of them, harmless from all suits, claims, or demands by any person for any damage or liability that is incurred by Seller, the government, their contractors and subcontractors, or the employees of any of them, caused by Buyer, its contractors or subcontractors, or the employees of any of them. 3. The Buyer expressly waives any immunity under industrial insurance, whether arising from any statute or other source, to the extent of the indemnity set forth above. 4. Buyer agrees that, in lieu of requiring Buyer to pay for damage to government property caused by Buyer, its contractors or subcontractors, or the employees of any of them, the government may require Buyer to repair or replace the damaged government property at no cost to the government. -14- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- 5. Buyer agrees that, for the purpose of enforcing Buyer's obligations herein, the government, its contractors and subcontractors are third-party beneficiaries. D. Insurance. --------- 1. Buyer, at no additional cost to Seller or the government, shall carry and maintain insurance throughout the period of performance to protect Seller and the government, their contractors and subcontractors, and the employees of any of them from the damage or liability for which Buyer is liable or agrees to indemnify and hold Seller, the government, their contractors and subcontractors, and the employees of any of them, harmless under this Agreement. In addition to the above requirement, at a minimum, the Buyer shall carry and maintain, and ensure that all its contractors and subcontractors carry and maintain, insurance of the types and minimum amounts set forth below: 2. Commercial General Liability insurance with available limits of not less than five hundred thousand dollars ($500,000) per occurrence for bodily injury and property damage combined. Such insurance shall contain coverage for all premises and operations, broad form property damage and contractual liability. 3. Workers' Compensation insurance in accordance with the applicable laws relating to workers' compensation with respect to all their respective employees working on or about the premises. If Seller is required by applicable law to pay any workers' compensation premiums with respect to any employee of Buyer, or any of its contractors or subcontractors, Buyer shall reimburse Seller for such payment. 4. If licensed vehicles will be used in connection with this Agreement, Business Automobile Liability insurance covering all vehicles, whether owned, hired, rented, borrowed, or otherwise, with available limits of not less than two hundred thousand dollars ($200,000) per person and five hundred thousand dollars ($500,000) per accident and twenty thousand dollars ($20,000) property damage. -15- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- 5. Certificates of Insurance. Buyer shall provide, within 30 days from commencement of this Agreement, insurance certificates for Seller's review and approval reflecting full compliance with the requirements set forth in paragraphs D.2 through D.4 above. Certificates shall be kept current and in compliance throughout the period of this Agreement and shall provide for thirty (30) days advance written notice to Seller in the event of cancellation or a material change in policy coverage. Failure of Buyer or any of its contractors or subcontractors, thereof, to furnish Certificates of Insurance, or to procure and maintain the insurance required herein, or failure of Seller to request such certificates, endorsements, or other proof of coverage shall not constitute a waiver of the respective Buyer's, contractors, or subcontractor's obligations hereunder . 6. Self-Assumption. Any self-insured retention, deductibles, and exclusions in coverage in the policies required hereunder shall be assumed by, for the account of, and at the sole risk of Buyer, its contractor or subcontractor which provides the insurance, and to the extent applicable shall be paid by the Buyer, contractor, or subcontractor. In no event shall the liability of Buyer, its contractor or subcontractor, thereof be limited to the extent of any of the minimum limits of insurance required herein. 7. Protection of Property. Buyer assumes, and shall ensure that all contractors and subcontractors thereof, and their respective employees, assume the risk of loss or destruction of, or damage to any property of such parties whether owned, hired, rented, borrowed, or otherwise. Buyer waives, and shall ensure that any contractor or subcontractor thereof, and their respective employees, waive all rights of recovery against Seller or the government for any such loss or destruction of, or damage to any property of Buyer, contractor or subcontractor, or their respective employees, except for loss or destruction of, or damage to any such property caused by intentional misconduct on the part of seller. 8. Each insurance policy required under this Article D (except for workers' compensation) shall be endorsed to name Seller and the government as additional insured and shall renounce all rights of subrogation against Seller and the government, except for: -16- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- a) any damage, liability, or financial loss incurred by Buyer, its contractors or subcontractors, or the employees of any of them, caused by intentional misconduct on the part of Seller or government managerial personnel, or b) any damage or liability incurred by Seller or the government, or their contractors and subcontractors, or the employees of any of them, caused by intentional misconduct on the part of Seller or government managerial personnel. 9. Buyer agrees that all proceeds of insurance for a claim under the indemnity in Article C above shall be first applied to satisfy Buyer's obligations to the indemnitees. Further, each such policy shall renounce all rights of subrogation against employees of the Seller or the government, except for any damage, liability, or financial loss incurred by Buyer, its contractors or subcontractors, or the employees of any of them, that is caused by the intentional misconduct of employees of Seller or the government. Any such policy right of subrogation against employees of Seller or the government shall not limit the obligation of the Buyer to indemnify and hold Seller and the government harmless. 10. Any right of subrogation against contractors or subcontractors of Seller or the government, or their respective employees shall not limit the obligation of Buyer under this Article to indemnify and hold harmless Seller or the government and their employees. Further, any right of subrogation against government contractors or subcontractors is limited to any insurance that they carry, unless the damage or liability is caused by intentional misconduct. 11. Notice - Buyer shall immediately notify Seller of any claim or action against, or damage suffered or incurred by Buyer, arising from or related to performance of this Agreement and provide Seller with copies of all pertinent papers Buyer receives regarding such claim, action or damage. 12. Cooperation - Buyer and Seller agree to cooperate in obtaining relevant reports and other information in connection with the presentations by either party of any claim under insurance required by this Agreement. -17- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- ARTICLE 12. EXCUSABLE DELAYS. ----------------- Neither Party shall be held responsible for delays in completion of, or failure to complete services caused by excusable delay. For purposes of this LSA, excusable delay shall include, but is not limited to: acts of God or of the public enemy, fire, flood, earthquake, inclement weather, epidemic, quarantine restriction, war, lockout, strike, walkout, freight embargo, environmental issues, launch anomaly(ies), acts or omissions of the U.S. government whether in its sovereign or contractual capacity, including government priorities, allocations, export restrictions, regulations, or orders affecting materials, facilities, or completed spacecraft; or any other event, whether or not foreseeable, which is beyond the reasonable control of the Party claiming excuse, including any such event affecting a subcontractor of said Party. In addition to the foregoing, any interference by the U. S. Government or other Government with Seller's use of the Launch Site, the Delta Launch Vehicle program, or any explosions associated with any launch or launch vehicle processing, or environmental or safety issue which interferes with or interrupts Seller's use of the Launch Site, shall be conclusively presumed to be excusable delay. Each Party shall promptly notify the other Party of a potential excusable delay event. ARTICLE 13. TERMINATION. ------------ A. Termination by Buyer for Buyer's Convenience. Buyer, for its -------------------------------------------- convenience, may terminate the Launch under this LSA at any time by written notice to Seller thirty (30) days in advance of the effective date of termination. In the event of such a termination, Buyer agrees to pay to Seller, as liquidated damages and not as penalty, the sums set forth in Table 13-1 below, unless the termination for convenience is to launch on another launch provider. For such a termination (to launch on another provider) Buyer will pay to Seller, as liquidated damages and not as penalty, the sums set forth in Table 13-2 below. Liquidated damages shall be the sole remedy available to the Parties for any and all impacts associated with such a termination. -18- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- Table 13-1 Termination for Buyer's Convenience - Liquidated Damages -------------------------------------------------------- Liquidated Damages expressed as a percentage of Launch Service Price Effective Date Incremental Liquidated Cumulative Liquidated of Termination Damages Due % Damages Due % - -------------- ---------------------- --------------------- * Table 13-2 Termination for Buyer's Convenience - Liquidated Damages -------------------------------------------------------- Liquidated Damages expressed as a percentage of Launch Service Price Effective Date Incremental Liquidated Cumulative Liquidated of Termination Damages Due % Damages Due % - -------------- ---------------------- --------------------- * Should the buyer terminate for any reason, Boeing Capital Corporation (BCC) is relieved of any and all financing obligations as well as those set forth herein. -19- *Confidential treatment requested. The omitted material has been filed separately with the Commission. PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- If the date of termination falls on a date intermediate to the effective date of termination as set forth in Table 13-1 or Table 13-2 above, *. B. Termination by Buyer For Cause. Buyer shall have the right to ------------------------------ terminate this LSA for default if Seller commits a material breach and fails to commence curing such breach within thirty (30) days following written notice by Buyer specifying the breach or if such breach cannot be cured within 60 days. Buyer, by written notice to Seller, may terminate a Launch Service for cause if Seller, for reasons other than excusable delay or Buyer's changes or postponements, has failed or notifies Buyer by written notice that it believes it will fail to effect the Launch within six (6) months beyond the Grace Period(s) as specified in Table 5-1. Buyer shall provide Seller with such termination notice within 45 days after notice of such delay from Seller. Upon such termination for cause, Seller shall refund to Buyer all payments theretofore received by Seller for the terminated Launch Service and this shall be Buyer's sole remedy for any and all impacts associated with such termination. The rights and remedies of Buyer provided in this LSA shall be the exclusive remedies of Buyer in the event of a default or breach by Seller of this LSA. C. Termination Notice. Termination by Buyer of any applicable -------------------- Launch Service or this entire LSA shall take place only if Buyer gives written notice of termination by an authorized agent to Seller in accordance with Article 27. D. Termination Date. For any termination by Buyer, the effective ------------------ termination date of the applicable Launch Service, or the entire LSA, shall be the later of either the termination date specified in Buyer's written notice of termination, or the date of Seller's receipt of Buyer's written notice of termination. E. Termination by Seller for Cause. Seller shall have the right to ------------------------------- terminate this LSA for default if Buyer commits a material breach and fails to cure such breach within thirty (30) days following written notice by Seller specifying the breach and its intent to terminate the LSA. In the event of such termination, Seller shall be entitled to retain, as liquidated damages and not as a penalty: 1) all payments previously received by the Seller; 2) those payments due and owing as of the effective date of termination; 3) those partial payments determined by linear interpolation for a termination(s) falling on a date(s) intermediate to the payment due date(s); 4) -20- *Confidential treatment requested. The omitted material has been filed separately with the Commission. PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- and all interest payments which may be due pursuant to Article 4.E. Liquidated damages shall be the sole remedy available to the Parties for any and all impacts associated with such a termination. The rights and remedies of Seller provided in this LSA shall be the exclusive remedies of Seller in the event of a default or breach by Buyer of this LSA. ARTICLE 14. WARRANTY DISCLAIMER. ------------------- SELLER MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE LAUNCH OR ANY SERVICES PROVIDED TO OR ON BEHALF OF BUYER. NOTHING IN THIS LSA SHALL BE CONSTRUED AS AN EXPRESS OR AN IMPLIED WARRANTY. BUYER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THIS ARTICLE AND THE EXCLUSION OF ALL WARRANTIES HAS BEEN BARGAINED FOR IN THIS LSA. ARTICLE 15. RISK TO SPACECRAFT. ------------------ The Parties to this LSA are aware that the use of expendable launch vehicles involves a degree of risk to the Spacecraft. The Parties have made a deliberate, knowing allocation between them of that risk, it being their intent that Buyer, its insurers and customers shall bear the risk of loss of the Spacecraft. Buyer shall ensure that its insurers shall waive all rights of subrogation against the Seller. ARTICLE 16. LIMITATION OF LIABILITY. ----------------------- In no event shall either Party be liable under or in connection with this LSA under any theory of contract, tort, negligence, strict liability or any other legal or equitable theory for direct, indirect, special, consequential, incidental damages or indemnities except as expressly provided in this LSA. Seller's sole liability with respect to the failure of the Launch following its commencement shall be as stated in Article 10 of this LSA. It is the intent of the Parties that the public interest is not involved in the subject matter of this LSA. -21- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- ARTICLE 17. INFORMATION. ----------- A. Neither Party shall use, other than for the performance of this LSA, nor disclose to others any proprietary information obtained by one Party ("Receiver") from the other ("Discloser") under or in connection with this LSA and identified by an appropriate legend as being Proprietary Information. When disclosed orally, Proprietary Information will be immediately identified as Proprietary Information within 30 days of disclosure, the Discloser will reduce the oral disclosure to written form, mark it as proprietary, and deliver it to recipient. B. Proprietary Information is defined as technical data and other information (including but not limited to descriptions, drawings, compositions, business and financial information, and computer software) which is related to the subject matter set forth in this LSA, and which is identified as proprietary by the Discloser in accordance with the following guidelines: these limitations shall not apply to any such information, which, if established by written existing documentation can be shown to be (i) information in the public domain, other than through the act of the Receiver, (ii) information that is the same as information previously or subsequently acquired by the Receiver independently of the Discloser, (iii) disclosure by the Receiver to its customers, contractors, auditors and insurers (and, by Buyer, to its customers) to permit performance of this LSA who have a reasonable need for the information under restrictions substantially identical to those contained in this Article 17, (iv) disclosure or use after ten years following the completion of all Launch Services, or (v) a disclosure that occurs notwithstanding the exercise by the Receiver of the same degree of care that it normally exercises to prevent the unauthorized disclosure of its own proprietary information. C. The terms and price(s) set forth in this LSA are Proprietary Information of the Parties, whether marked or noted. Neither Party may disclose these terms or prices to anyone without the prior consent of the other, except as required to comply with applicable security laws for the registration or offering of securities. In the event disclosure is required to comply with applicable securities laws as described above, the party that is being required to make the disclosure shall notify the other party at least 30 days prior to disclosure and shall cooperate with the other party to (1) minimize the disclosed information to only that which is necessary to satisfy such applicable laws, excluding any form of technical data, as defined in the International -22- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- Traffic in Arms Regulations (ITAR), 22 CFR 120-130 and (2) seek confidential treatment of the disclosed information by the applicable government agency. ARTICLE 18. INFRINGEMENT. ------------ A. Each Party shall indemnify, hold harmless and defend the other from any claim that any performance of this LSA by the indemnifying Party infringes any patent, trademark, copyright or similar industrial property right of a Third Party, provided that the indemnitee shall have given prompt notice of the claim to the indemnitor, shall have given the indemnitor the full right to defend and settle the claim and shall have cooperated fully with the indemnitor in such defense and settlement. It is expressly understood that neither Party by entry into this LSA nor the performance by either Party or any acts required by this LSA grant any rights to or under any of either Party's respective patents, proprietary information, or other intellectual property rights to each other or to any Third Party, unless such grant is expressly recited in a separate written document duly executed by or on behalf of the granting Party. B. Seller shall not be liable if the alleged infringement arises from Seller's compliance with Buyer's designs, specifications, or interface instructions. ARTICLE 19. BAILED EQUIPMENT. ---------------- The Parties contemplate that Seller shall provide to Buyer certain items for Buyer's use in connection with this LSA. Buyer shall assume the risk of and indemnify Seller against loss of or damage to such items until returned to Seller. ARTICLE 20. OPTIONAL LAUNCH --------------- The Seller grants to the Buyer the right to an optional launch of essentially the same performance and interface requirements. The launch shall take place no later than * . The schedule shall be determined in accordance with ARTICLE 3. B. upon exercise of the option, except that the Launch Semester shall be * . Buyer shall pay to Seller, as consideration for the Launch Service(s), a price of $ * (United States Dollars) that shall be * . -23- *Confidential treatment requested. The omitted material has been filed separately with the Commission. PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- A non-refundable down payment of $ * , which will be credited to the optional launch service price, is due * under this LSA but no later than * . Should payment not be received by Seller as required, the optional launch, this article 20, shall become void. The exercise date for the optional launch shall be not later than * prior to the requested launch date within the period indicated above. Articles 4, 5 and 13 shall be modified as required. ARTICLE 21. GOVERNING LAW. ------------- This LSA shall be governed by and construed in accordance with the laws of the State of Colorado, U. S. A, excluding its rules as to conflicts of laws. The state and federal courts situated in Colorado shall have exclusive jurisdiction and venue to hear all disputes arising out of or related to this Agreement. ARTICLE 22. LICENSES, PERMITS AND REGISTRATIONS. ----------------------------------- Seller shall be responsible for obtaining and maintaining all U.S. governmental licenses or authorizations necessary for the Launch Services, except that Buyer shall be responsible for obtaining any license required for radio telecommunication with the Spacecraft after separation from the Launch Vehicle. ARTICLE 23. REGISTRATION OF LAUNCH VEHICLE AND SPACECRAFT. --------------------------------------------- Pursuant to the Convention on Registration of Objects Launched into Outer Space (TIAS 8480), Buyer shall be responsible for registration of the Spacecraft and Seller shall be responsible for registration of the Launch Vehicle. ARTICLE 24. SECURITY. -------- Buyer shall abide by and require its employees, agents and subcontractors to abide by all applicable U.S. Government and Seller security rules and regulations while they are on U.S. Government or Seller premises in connection with this LSA. -24- *Confidential treatment requested. The omitted material has been filed separately with the Commission. PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- ARTICLE 25. TAXES ----- The total price as of the date this LSA is signed and as it may be subsequently amended, does not include any amount for the following: (1) any type of sales tax, use tax, Value Added Tax, or other similar transfer tax, (including any additions to tax, interest, and/or penalties) now or later arising under the laws, rule or regulations of any competent authority in any state or local government of the United States or the U.S. Federal Government; and The Parties agree that the Buyer is liable for all amounts described above (collectively referred to as "Taxes"). Seller shall promptly notify Buyer if a claim is made by any jurisdiction against Seller for any Taxes. If reasonably requested by Buyer in writing, Seller, at Buyer's expense, shall contest the validity, applicability amount of Taxes by actions to which Seller and Buyer jointly agree. If Buyer fails to take such written request to Seller, Seller shall promptly pay all Taxes then due and owing and Buyer shall immediately reimburse Seller for such Taxes upon Seller's presentation to Buyer of proof of payment of such Taxes. ARTICLE 26. NATURE OF RELATIONSHIP. ---------------------- For the purposes of this LSA, Seller and Buyer are independent entities. Nothing contained in this LSA shall create or be deemed or construed to create a joint venture, teaming agreement, partnership, agency relationship, or other form of joint business enterprise or undertaking between the Buyer and Seller. ARTICLE 27. NOTICES. ------- Notices under or in connection with this LSA shall be effective upon receipt and shall be sent in writing, addressed as follows: Notices to Seller: Delta Launch Services, Inc. -25- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- 5301 Bolsa Avenue Huntington Beach, CA 92647-2048 U. S. A. Attention: Contracts Department, Dept. BC32 Mail Code: H014-C457 Notices to Buyer: EarthWatch Incorporated 1900 Pike Road Longmont, CO 80501 Attention: Shawn Thompson, Director of Contracts Either Party, by written notice to the other, may change its address. ARTICLE 28. ASSIGNMENT. ---------- Neither Party may assign or delegate any of these rights or obligations without the prior written consent of the other Party which will not be unreasonably withheld. However, Seller may assign this LSA, without Buyer's consent, to any entity which acquires, by merger, acquisition, purchase or reorganization, all or substantially all of its assets contemplated to be used by Seller to perform this LSA. Buyer may assign this LSA, without Seller's consent, to any entity which acquires, by merger, acquisition, purchase or reorganization, all or substantially all of its assets contemplated to be used by Buyer to perform this LSA provided that Seller does not have justifiable concern for: (1) the assignee's financial security and its ability to make timely payments. Proper assignments shall bind and benefit any successors or assigns. ARTICLE 29. PUBLIC RELEASE OF INFORMATION. ------------------------------ Except as required by law or regulation, no news release, public announcement, or advertising material concerned with this LSA shall be issued by either Party without prior written consent of the other Party. Such consent shall not be unreasonably withheld. All releases shall be coordinated between both Parties. ARTICLE 30. ORDER OF PRECEDENCE. ------------------- -26- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- All Articles and Attachments in this LSA shall be read so as to be consistent to the extent practicable. In the event of any inconsistency between the Articles and Attachments of this LSA, the order of precedence shall be: 1. The Articles of this LSA; 2. Attachment 1, Statement of Work; 3. Attachment 2, Interface Control Document; 4. Attachment 3, Delta II Payload Planners Guide ARTICLE 31. U.S. GOVERNMENT APPROVAL AND REQUIREMENTS. ----------------------------------------- This Launch Services Agreement is subject to all United States laws and regulations relating to exports and to all administrative acts of the U.S. Government pursuant to such laws and regulations including all applicable U.S. Government security regulations. The Parties agree that the obligations contained in this Agreement shall not affect the performance of any obligations created by prior contracts or subcontracts which the Parties may have individually or collectively with the U.S. Government. The technical data exported from the United States in furtherance of this Agreement and any defense article which may be produced or manufactured from such technical data may not be transferred to a person in a third country or to a national of a third country except as specifically authorized in this LSA. ARTICLE 32. PARTIAL INVALIDITY. ------------------ Should any provision of this LSA be found to be invalid, illegal, or unenforceable, in whole or in part, the Parties agree to continue performance on the remaining provisions of the LSA not so affected, unless the ineffectiveness of such provision would result in such a material change as to cause completion of the performance contemplated to be unreasonable. ARTICLE 33. ENTIRE LAUNCH SERVICES AGREEMENT. -------------------------------- This is the entire Launch Services Agreement between the Parties as agreed to in Huntington Beach, California, U. S. A. There are no prior or contemporaneous different or additional agreements. This LSA shall not be modified in any way other than by a subsequent writing signed by both Parties. -27- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. CONFIDENTIAL TREATMENT ---------------------- ARTICLE 34. EFFECTIVITY. ------------ This Launch Service Agreement becomes effective immediately upon execution by both parties and the approval of the EarthWatch Incorporated Board of Directors. Buyer shall provide written notice to Seller of board approval pursuant to Article 27 and shall remit payment in accordance with Article 4 of this LSA. Should notice not be received by Seller by 16 February 2001, this LSA shall become void and both parties are relieved of all obligation set forth herein. DELTA LAUNCH SERVICES, INC. EarthWatch Incorporated BY: /s/ Renee L. Hunter BY: /s/ Shawn Thompson ------------------------------------ -------------------------------- TYPED NAME: Renee L. Hunter TYPED NAME: Shawn Thompson TITLE: Director, DLS Contracts TITLE: Director of Contracts DATE: February 2, 2001 DATE: February 2, 2001 ---------------------------------- ------------------------------ -28- PROPRIETARY Use or disclosure of data contained on this sheet is subject to the restriction on the title page of this proposal or quotation. EX-10.12(A) 3 dex1012a.txt AMENDMENT #1 BETWEEN EARTHWATCH AND DELTA CONFIDENTIAL TREATMENT Exhibit 10.12(a) LSA DLS-01-1305C Amendment 1 Effective 15 March 2001, Delta Launch Services Inc. (DLS) and EarthWatch Incorporated a corporation organized under the laws of Delaware, hereby amend Agreement DLS-01-1305C, entered into as of 2 February 2001, in the following particulars: I. In Article 13 "Termination", Tables 13-1 and 13-2 "Termination for Buyer's Convenience-Liquidated Damages", the Incremental and Cumulative Liquidated Damages Due percentages apply only if the conversion to post launch financing takes place at L-2. In the event that post launch financing takes place at L-1 the termination schedules shown in Table 13-3 and 13-4 added with amendment shall apply. Table 13-3 Termination for Buyer's Convenience - Liquidated Damages -------------------------------------------------------- Liquidated Damages expressed as a percentage of Launch Service Price Effective Date Incremental Liquidated Cumulative Liquidated of Termination Damages Due % Damages Due % - -------------- ---------------------- --------------------- * Table 13-4 Termination for Buyer's Convenience - Liquidated Damages -------------------------------------------------------- Liquidated Damages expressed as a percentage of Launch Service Price Effective Date Incremental Liquidated Cumulative Liquidated of Termination Damages Due % Damages Due % - -------------- ---------------------- --------------------- * II. In Article 10 "Allocation of Risks and Liabilities", Paragraph A. "Third Party Liability", revise the first sentence as follows: "Consistent with Chapter 701, Title 49 of U.S. Code, Commercial Space Launch Activities, 49 U.S.C. App. (S)(S) 70101-70119, and its regulations, Seller shall indemnify, defend and hold harmless Buyer, its officers, employees, agents, contractors, subcontractors and suppliers and their respective governments, at every tier and Buyer's financiers against liability for damage to the property of Third Parties (including the U.S. Government) or bodily injury to any persons, including death, proximately caused by the Launch of the Spacecraft hereunder, except for such liability, damage or injury caused by Buyer's willful misconduct and/or negligence." Except as amended hereby, all other terms and conditions of the Agreement No. DLS-01-1305C shall remain unchanged. In witness hereof, this Amendment No. 1 has been executed by the parties: Delta Launch Services Inc., EarthWatch Incorporated - --------------------------- ----------------------- By: /s/ Renee L. Hunter By: /s/Shawn Thompson ------------------------- ----------------------- Name: Renee L. Hunter Name: Shawn Thompson Title: Director, DLS Contracts Title: Director of Contracts Date: March 22, 2001 Date: March 22, 2001 ------------------------- ----------------------- *Confidential treatment requested. The omitted material has been filed separately with the Commission. EX-10.13 4 dex1013.txt CREDIT AGREEMENT DATED 04/20/01 Exhibit 10.13 CREDIT AGREEMENT dated as of April 20, 2001 by and between EARTHWATCH INCORPORATED as Borrower and BALL AEROSPACE & TECHNOLOGIES CORP. as Lender $9,000,000 ADVANCING TERM LOAN FACILITY TABLE OF CONTENTS Page RECITALS 1 ARTICLE 1 Definitions 2 Section 1.1 Definitions, etc 2 Section 1.2 Other Definitional Provisions 10 Section 1.3 Accounting Terms and Determinations 10 ARTICLE 2 Loans 11 Section 2.1 Commitments 11 Section 2.2 Intentionally Omitted 11 Section 2.3 Repayment of Term Loans 11 Section 2.4 Interest 11 Section 2.5 Borrowing Procedure 12 Section 2.6 Optional Prepayments of Term Loans 12 Section 2.7 Mandatory Prepayments 12 Section 2.8 Minimum Amounts 13 Section 2.9 Certain Notices 13 Section 2.10 Computations 13 Section 2.11 Termination or Reduction of Term Loans Commitment 13 ARTICLE 3 Payments 14 Section 3.1 Method of Payment 14 Section 3.2 Taxes 14 Section 3.3 Reinstatement of Obligations 15 Section 3.4 No Force Majeure, Disputes 15 ARTICLE 4 Yield Protection and Illegality 15 Section 4.1 [Intentionally Omitted] 15 Section 4.2 Capital Adequacy 15 ARTICLE 5 Security 16 Section 5.1 Collateral 16 Section 5.2 [Intentionally Omitted] 16 ARTICLE 6 Conditions Precedent 16 Section 6.1 Initial Extension of Credit 16 Section 6.2 All Extensions of Credit 17 Section 6.3 Closing Certificates 18 ARTICLE 7 Representations and Warranties 18 Section 7.1 Incorporation and Authority of the Borrower 18 Section 7.2 Capital Stock 19 Section 7.3 Subsidiaries 19 Section 7.4 Stockholder Approvals Required 20 Section 7.5 No Conflict 20 Section 7.6 Consents and Approvals 20 Section 7.7 Financial Statements 20 Section 7.8 Absence of Undisclosed Liabilities and Liens 20 Section 7.9 Absence of Certain Changes or Events 21 Section 7.10 Absence of Litigation 21 Section 7.11 Compliance with Laws 21 Section 7.12 Licenses and Permits 21 Section 7.13 Sufficiency and Condition of Assets 21 Section 7.14 Real Property 21 Section 7.15 Employee and Benefit and Labor Matters 22 Section 7.16 Labor Matters 23 Section 7.17 Taxes 24 Section 7.18 Environmental, Health and Safety 24 Section 7.19 Intellectual Property 25 Section 7.20 Material Contracts 27 Section 7.21 No Solicitation; Exemption from Registration 27 Section 7.22 Insurance 28 Section 7.23 Brokers 28 Section 7.24 Indenture 28 Section 7.25 Transactions with Affiliates 28 Section 7.26 Debt 28 Section 7.27 Margin Securities 28 Section 7.28 Disclosure 28 Section 7,29 Investment Company Act 28 Section 7.30 Public Utility Holding Company Act 29 Section 7.31 Security Interest Issues 29 ARTICLE 8 Affirmative Covenants 29 Section 8.1 Reporting Requirements 29 Section 8.2 Maintenance of Existence; Conduct of Business 30 Section 8.3 Maintenance of Properties and Permits 30 Section 8.4 Taxes and Claims 31 Section 8.5 Insurance 31 Section 8.6 Inspection Rights 31 Section 8.7 Keeping Books and Records 31 Section 8.8 Compliance with Laws 31 Section 8.9 Compliance with Agreements 31 Section 8.10 Further Assurances 31 Section 8.11 ERISA 31 Section 8.12 Charter Amendments 32 Section 8.13 Issuance of New Series C Preferred Stock 32 Section 8.14 Satellite Insurance 32 ARTICLE 9 Negative Covenants 33 Section 9.1 Limitation on Liens 33 Section 9.2 Mergers, Etc. 33 Section 9.3 Intercompany Transactions 33 Section 9.4 Security Interest Issues 33 Section 9.5 Transactions with Affiliates 33 Section 9.6 Limitation on Collateral Asset Dispositions 33 Section 9.7 Dividends and Distributions 34 ARTICLE 10 Default 34 Section 10.1 Events of Default 34 Section 10.2 Remedies 35 Section 10.3 Performance by the Lender, etc. 36 ARTICLE 11 Miscellaneous 36 Section 11.1 Expenses 36 Section 11.2 Indemnification 36 Section 11.3 Limitation of Liability 37 Section 11.4 No Duty 37 Section 11.5 No Fiduciary Relationship 37 Section 11.6 Equitable Relief 37 Section 11.7 No Waiver; Cumulative Remedies 37 Section 11.8 Successors and Assigns 38 Section 11.9 Survival 39 Section 11.10 Entire Agreement 39 Section 11.11 Amendments 40 Section 11.12 Maximum Interest Rate 40 Section 11.13 Notices 40 Section 11.14 Governing Law; Submission To Jurisdiction; Service Of Process 41 Section 11.15 Counterparts 41 Section 11.16 Severability 41 Section 11.17 Headings 41 Section 11.18 Construction 41 Section 11.19 Independence of Covenants 41 Section 11.20 [Intentionally Omitted] 41 Section 11.21 WAIVER OF JURY TRIAL 41 Section 11.22 Approvals and Consent 41 Section 11.23 Agent for Services of Process 42 INDEX TO EXHIBITS ----------------- Exhibit Description of Exhibit Section - ------- ---------------------- ------- G. Charter Amendments INDEX TO SCHEDULES ------------------ Schedule - -------- Disclosure Schedule: Description of Schedule - ------------------- ----------------------- 3.2 3.3 3.4 3.5 3.6 3.8 3.9 3.10 3.11 3.12 3.13 3.14 3.17 3.18 3.19 3.22 3.25 3.31 CREDIT AGREEMENT THIS CREDIT AGREEMENT (this "Agreement"), dated as of April 20, 2001, is by and between EARTHWATCH INCORPORATED (the "Borrower"), a Delaware corporation, -------- and BALL AEROSPACE & TECHNOLOGIES CORP., a Delaware corporation (the "Lender" or ------ "Vendor"). RECITALS: -------- A. On November 21, 2000, the Borrower announced the failure of its QuickBird 1 remote sensing satellite ("QuickBird 1") to reach the proper orbit. ----------- B. As required under the terms of the Indenture, dated as of July 12, 1999 (the "13% Notes Indenture"), between the Borrower and The Bank of New York ------------------- (the "Trustee"), for the Borrower's 13% Senior Discount Notes due 2007 (the "13% ------- --- Notes") and the Amended and Restated Indenture, dated as of April 8, 1999 as - ----- supplemented by the Supplemental Indenture, dated as of July 7, 1999 (the "12 -- 1/2% Notes Indenture"), between the Borrower and The Bank of New York, for the - -------------------- Borrower's 12 1/2% Senior Notes due 2005 (the "12 1/2% Notes"), the Borrower, ------------- pursuant to an Offer to Purchase for Cash dated February 28, 2001 (the "Tender ------ Offer") has purchased a portion of the outstanding 13% Notes and all outstanding - ----- 12 1/2% Notes at their accreted value on the date of repurchase with the approximately $265 million of proceeds from the insurance relating to the QuickBird 1 launch. All 13% Notes and 12 1/2% Notes validly tendered were repurchased on April 3, 2001. C. Each of the Borrower and the Lender are party to Contract SE.1M.PRJ.0004.A effective as of June 9, 1998 (as amended, the "Project ------- Contract"), pursuant to which the Lender, in its capacity as the vendor under the Project Contract (together with its affiliates or assigns, the "Vendor") ------ agrees to construct and deliver to the Borrower the QuickBird 2 remote sensing satellite ("QuickBird 2" or "Satellite"). ----------- --------- D. In order to finance the future operations of the Borrower, including the construction, launch and operation of QuickBird 2, the Borrower has induced certain holders of the 13% Notes (the "Noteholders") to refrain from tendering their 13% Notes in the Tender Offer and has requested that the Lender provide the Borrower with $9 million of financing for the construction and delivery of QuickBird 2 in accordance with the terms set forth in the Amendment 40 to the Project Contract and this Agreement. E. The Borrower has agreed to obtain launch and on-orbit operations insurance in respect of QuickBird 2 ("QuickBird 2 Launch Insurance") in accordance with the terms of the First Supplemental Indenture to the Indenture, dated as of April 16, 2001, between the Borrower and the Trustee (the "First ----- Supplemental Indenture"). - ---------------------- F. The Borrower shall issue 903,608 shares of Series C Preferred Stock to Ball Technologies Holdings Corp. ("BTHC"), the owner of Lender in accordance ---- with Amendment 40 to the Project Contract, this Agreement and a Series C Preferred Stock Registration Rights Agreement, dated as of April 3, 2001, among the Borrower, BHTC and the Noteholders (the "Series C Registration Rights ---------------------------- Agreement"). - --------- G. The Borrower shall purchase or cause to be purchased (by paying the initial deposit therefor), (i) as of the date identified in the Recapitalization Transactions (as defined below), QuickBird 2 Launch Insurance in an amount no less than $155 million, it being understood that the remaining insurance premiums are to be paid in accordance with the payment schedule under the terms of the QuickBird 2 Launch Insurance, and (ii) 30 days prior to Preliminary Tender Date QuickBird 2 Prelaunch Insurance for the full repair or replacement value of the QuickBird 2 satellite and all other deliverable Property in accordance with the payment schedule under the terms of the QuickBird 2 Prelaunch Insurance. H. The Borrower shall Pledge the QuickBird 2 Launch Insurance in favor of Trustee, as collateral agent for (i) the Noteholders and for the Lender, pursuant to a Senior Collateral Pledge and Security Agreement as defined in the Recapitalization Agreement (the "Senior P&SA"), and (ii) the holders of the Series A Preferred Stock 1 and the Series B Preferred Stock, pursuant to a Junior Collateral Pledge and Security Agreement (the "Junior P&SA") as defined in the Recapitalization Agreement and Consent. I. Pursuant to the provisions of the Loan Documents, the Indenture, the Intercreditor Agreement and related documents, the Borrower is permitted to grant, and shall grant, a first priority purchase money security interest in the QuickBird 2 Satellite, the QuickBird 2 Prelaunch Insurance, and the proceeds of the QuickBird 2 Satellite as defined by NY UCC (S)9-306(1). Except as otherwise provided in this Agreement, proceeds of QuickBird 2 shall not include proceeds from the QuickBird 2 Launch Insurance policy. AGREEMENT: --------- NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows: ARTICLE 1 Definitions ----------- Section 1.1 Definitions, etc. As used in this Agreement, the following ---------------- terms shall have the following meanings: "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; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agreement" means this Agreement and any and all amendments, modifications, --------- supplements, renewals, extensions or restatements hereof. "Assignee" means as specified in Section 11.8(b). -------- --------------- "Assignment and Acceptance" means an assignment and acceptance entered into ------------------------- by the Lender and its Assignee pursuant to Section 11.8(e). --------------- "Bankruptcy Code" means as specified in Section 10.1(e). --------------- --------------- "Board of Directors" means the board of directors of the Borrower. ------------------ "Board Resolution" means a copy of a resolution certified by the Secretary ---------------- or an Assistant Secretary of the Borrower to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification. "Borrower" means Earth Watch Incorporated as specified in the initial -------- paragraph of this Agreement. "BTHC" means Ball Technologies Holdings Corp., the owner of Lender as ---- specified in F. above. "Business" means the business of commercial remote sensing as conducted and -------- as currently intended to be conducted by the Borrower and its Subsidiaries. "Business Day" means any day other than a Saturday, Sunday or other day on ------------ which commercial banks are authorized or required by law to close in Denver, Colorado. 2 "Capital Lease" means as to any Person, any lease of any Property of which ------------- the discounted present value of rental obligations thereunder are required to be capitalized on the balance sheet of such Person in accordance with GAAP. "Capital Lease Obligations" means, as to any Person, obligations under a ------------------------- Capital Lease, which obligations are required to be classified as a capital lease obligations on a balance sheet of such Person under GAAP. For purposes of this Agreement, the amount of such Capital Lease Obligations shall be the capitalized amount thereof, determined in accordance with GAAP. "Capital Stock" of any Person means corporate stock and any and all shares, ------------- partnership interests (whether general, limited, special or other), limited partnership interests, limited liability company interests, membership interests, equity interests, participations, rights or other equivalents (however designated) of corporate stock or any of the foregoing issued by such Person. "Change of Control" means any transaction or series of transactions ----------------- referred to as a Change of Control under the Notes Indenture, as amended. "Charter Amendment" means a certificate of amendment to the Amended and Restated Certificate of Incorporation of EarthWatch Incorporated, substantially in the form attached as Exhibit G to and effected in accordance with the Recapitalization Agreement. "Closing Date" means the date of the initial advance under this Agreement. ------------ "Code" means the Internal Revenue Code of 1986, as amended through the date ---- hereof. "Collateral" means (a) the Satellite, all other property delivered by the Vendor to the Borrower under the Project Contract and proceeds of the foregoing other than proceeds from the QuickBird 2 Launch Insurance, upon which a Lien is created or purported to be created in favor of the Lender by any Loan Document as security for the Obligations or any portion thereof and (ii) the "Collateral" as defined in the Senior P&SA, to the extent of the Lender's interest therein as provided in the Senior P&SA. "Collateral Asset Disposition" means the disposition of any or all of the ---------------------------- Collateral, whether by sale, lease, transfer, conveyance, assignment, condemnation or otherwise, but excluding any involuntary disposition resulting from casualty damage to Property. "Common Stock" means the Common Stock, par value $.001 per share, of the ------------ Borrower. "Communications Act" means the Communications Act of 1934, as amended. ------------------ "Controlled Group Liability" means any and all liabilities (i) under Title -------------------------- IV of ERISA, (ii) under section 302 of ERISA, (iii) under sections 412 and 4971 of the Code, (iv) as a result of a failure to comply with the continuation coverage requirements of section 601 et seq. of ERISA and section 4980B of the Code, and (v) under corresponding or similar provisions of foreign laws or regulations, other than such liabilities that arise solely out of, or relate solely to, the Employee Benefit Plans. "Contract Rate" means as specified in Section 11.12(a). ------------- ---------------- "Copyrights" has the meaning set forth in Section 7.19. ---------- ------------ "Debt" means (a) indebtedness for borrowed money, (b) obligations evidenced ---- by bonds, notes, debentures or other similar instruments or by letters of credit, including without limitation purchase money obligations or other obligations relating to the deferred purchase price of Property (other than trade payables incurred in the ordinary course of business consistent with past practice), (c) obligations as lessee under leases which have been or should have been, in accordance with GAAP, recorded as Capital Leases, (d) obligations under direct or indirect guaranties in respect of indebtedness or obligations of others of the kind referred to in clauses (a) through (c) above, 3 (e) obligations in respect of outstanding or unpaid checks or drafts or overdraft obligations and (f) accrued interest, if any, on any of the foregoing. "Default" means an Event of Default or the occurrence of an event or ------- condition which with notice or lapse of time or both would become an Event of Default. "Default Rate" means, in respect of any principal of or interest on any ------------ Term Loan at all times during which any Default has occurred and is continuing or in respect of or any other amount payable by the Borrower under this Agreement or any other Loan Document which is not paid when due (whether at stated maturity, by acceleration or otherwise), a rate per annum during the period of such Default or during the period commencing on such due date of such other amount until such other amount is paid in full, respectively, equal to the lesser of (a) fifteen percent (15%) per annum or (b) the Maximum Rate. "DGCL" means the Delaware General Corporation Law. ---- "Disclosure Schedule" means the Disclosure Schedule to the Recapitalization ------------------- Agreement. "Dollars" and "$" mean lawful money of the U.S. ------- - "Employee Benefit Plan" means any employee benefit plan, program, policy, --------------------- practices, or other arrangement providing benefits to any current or former employee, officer or director of the Borrower or any of its Subsidiaries or any beneficiary or dependent thereof that is sponsored or maintained by the Borrower or any of its Subsidiaries or to which the Borrower, or any of its Subsidiaries is a party, contributes or is obligated to contribute, whether or not written, including, without limitation, any employee welfare benefit plan within the meaning of Section 3(1) of ERISA (whether or not such plan is subject to ERISA), any employee pension benefit plan within the meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA) and any bonus, incentive, deferred compensation, vacation, stock purchase, restricted stock, stock option, severance, employment, change of control or fringe benefit plan, program or agreement. "Eligible Assignee" means (a) any Affiliate of the Lender, (b) any ----------------- commercial bank, savings and loan association, savings bank, finance company, insurance company, pension fund, mutual fund or other financial institution (whether a corporation, partnership or other entity) approved by the Lender or (c) any other entity approved by the Lender which is (or which is managed by a manager which manages funds which are) primarily engaged in making, purchasing or otherwise investing in commercial loans or extending, or investing in extensions of, credit for its own account in the ordinary course of its business; provided, however, that Eligible Assignee shall not include any -------- ------- Affiliate of the Borrower. "Environmental Law" means any federal, state, provincial, local or foreign ----------------- law, statute, code or ordinance, principle of common law, rule or regulation, as well as any Permit, order, decree, judgment or injunction issued, promulgated, approved or entered thereunder, relating to pollution or the protection, cleanup or restoration of the environment or natural resources, or to the public health or safety, or otherwise governing the generation, use, handling, collection, treatment, storage, transportation, recovery, recycling, discharge or disposal of Hazardous Materials, including, without limitation as to U.S. laws, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. 9601 et seq., the Superfund Amendment and Reauthorization Act of 1986, ------ 99-499, 100 Stat. 1613, the Resource Conservation and Recovery Act of 1976, 42 U. S. C. 6901 et seq., the Occupational Safety and Health Act, 29 U S.C. 651 et ------ -- seq., the Clean Air Act, 42 U.S.C. 7401 et seq., the Clean Water Act, 33 U.S.C. - --- ------ 1251 et seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C. ------ C. 11001 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 ------ U.S.C. 136 et seq., and the Toxic Substances Control Act, 15 U.S.C. 2601 et ------ -- seq., and any state or local counterparts. "Environmental Liabilities" means, as to any Person, all liabilities, ------------------------- obligations, responsibilities, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including, without limitation, all reasonable fees, disbursements and expenses of counsel, expert and consulting fees and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand, by any Person, whether based in contract, tort, implied or express warranty, strict liability or criminal, 4 penal or civil statute, including, without limitation, any Environmental Law, Permit, order or agreement with any Governmental Authority or other Person, arising from environmental, health or safety conditions or the Release or threatened Release of a Hazardous Material into the environment. "Environmental Permits" has the meaning set forth in Section 7.18. --------------------- ------------ "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended and any regulations promulgated or proposed thereunder. "ERISA Affiliate" means, with respect to any entity, trade or business, any --------------- other entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first entity, trade or business, or that is a member of the same "controlled group" as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA. "Event of Default" has the meaning specified in Section 10.1. ---------------- ------------ "Excess QuickBird 2 Prelaunch Insurance Proceeds" means any and all ----------------------------------------------- proceeds of any QuickBird 2 Prelaunch Insurance Recovery which the Borrower has neither (i) elected to apply to the repair, restoration or replacement (with other equipment) of the Satellite affected or to the purchase of other, similar Property from the Vendor for use in lieu thereof in its business within 90 days of the event giving rise to such insurance recovery nor (ii) actually applied to such repair, restoration or purchase within 180 days after the date of such insurance recovery. "First Supplemental Indenture" has the meaning set forth in the Recitals. ---------------------------- "GAAP" means generally accepted accounting principles in the United States ---- applied on a consistent basis (subject to changes in accounting policies permitted by such generally accepted accounting principles which have been described in the most recent Report 10-K filed by Borrower with the SEC). "Governmental Authority" means any nation or government, any state, ---------------------- provincial or political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Governmental Order" means any order, writ, judgment, injunction, decree, ------------------ stipulation, determination or award entered by or with any Governmental Authority. "Governmental Requirement" means any law, statute, code, ordinance, order, ------------------------ rule, regulation, judgment, decree, injunction, franchise, Permit, certificate, license, authorization or other directive or requirement of any federal, state, county, municipal, parish, provincial or other Governmental Authority or any department, commission, board, court, agency or any other instrumentality of any of them. "Hazardous Material" means any substance, product, liquid, waste, ------------------ pollutant, chemical, contaminant, insecticide, pesticide, gaseous or solid matter, organic or inorganic matter, fuel, micro-organisms, ray, odor, radiation, energy, vector, plasma, constituent or material which (a) is or becomes listed, regulated or addressed under any Environmental Law or (b) is, or is deemed to be, alone or in any combination, hazardous, hazardous waste, toxic, a pollutant, a deleterious substance, a contaminant or a source of pollution or contamination under any Environmental Law, including, without limitation, asbestos, petroleum, underground storage tanks (whether empty or containing any substance) and polychlorinated biphenyls. "Indenture" means the 13% Notes Indenture dated as of July 13, 1999 as --------- amended by the First Supplemental Indenture dated as of April 16, 2001; provided, however, that such term shall mean and refer to such Indenture as - -------- ------- [contemplated to be] amended by the parties thereto as of April 25, 2001, without giving effect to any subsequent amendment, modification or supplement thereof or thereto except as may be expressly approved by the Lender in writing. "Intellectual Property Assets" has the meaning set forth in Section 7.19. ---------------------------- ------------ 5 "Intercreditor Acknowledgement" means that certain Intercreditor ----------------------------- Acknowledgement, dated as of April 2, 2001, among the Lender and the 13% Notes Trustee. "Interest Rate" means the rate of interest per annum equal to eleven ------------- percent (11.0%), except as otherwise provided in Section 2.7(d). "Leased Real Property" means the real property leased by the Borrower or -------------------- any of its Subsidiaries, as tenant, together with, to the extent leased by the Borrower or any of its Subsidiaries, all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, equipment and items of personal property of the Borrower or any of its Subsidiaries attached or appurtenant thereto, and all easements, licenses, rights and appurtenances relating to the foregoing. "Lender" means Ball Aerospace & Technologies Corp. as specified in the ------ initial paragraph of this Agreement. "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), encumbrance, preference, priority or other loan document 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). "Loan Documents" means this Agreement, Amendment 40 to Contract SE -------------- 1M.PRJ.0004.A for the QuickBird Spacecraft, the Senior P&SA, the Junior P&SA, and all other agreements, documents, instruments and certificates now or hereafter executed and/or delivered pursuant to or in connection with any of the foregoing. "Loans" means any of the Term Loans authorized to be issued pursuant hereto ----- and "Loan" means any of such loans. ---- "Loan Repayment Commencement Date" means the last day of the seven-month -------------------------------- period following the launch of the satellite, or the next Business Day thereafter. "Marks" has the meaning set forth in Section 7.19. ----- ------------ "Material Adverse Effect" means any material adverse effect on (a) the ----------------------- financial condition, results of operations, businesses, operations or Properties of the Borrower and its Subsidiaries, taken as a whole, or of the Borrower on an individual basis, (b) the ability of the Borrower to pay the Obligations when due, (c) the validity or enforceability of any of the Loan Documents, (d) the perfection or priority of any Lien granted for the benefit of the Lender under any of the Loan Documents or (e) the Collateral. "Material Contracts" has the meaning set forth in Section 7.20. ------------------ ------------ "Maturity Date" means the earlier of (a) the date upon which the ------------- Obligations hereunder and under the Loan Documents are paid in full or (b) the date that is the last day of the twelve-month period following the Loan Repayment Commencement Date or the next Business Day thereafter. "Maximum Rate" means the maximum non-usurious interest rate or an amount ------------ computed in reference to such rate (as applicable), if any, that any time or from time to time may be contracted for, taken, reserved, charged or received with respect to the particular Obligations as to which such rate is to be determined, payable to the Lender pursuant to this Agreement or any other Loan Document, under laws applicable to the Lender or the Borrower which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum non-usurious interest rate than applicable laws now allow. The Maximum Rate shall be calculated in a manner that takes into account any and all fees, payments and other charges in respect of the Loan Documents that constitute interest under applicable law. Each change in any interest rate provided for herein 6 based upon the Maximum Rate resulting from a change in the Maximum Rate shall take effect without notice to the Borrower at the time of such change in the Maximum Rate. "Net Proceeds" means, with respect to any Collateral Asset Disposition, (a) ------------ the gross amount of cash received by the Borrower or any of its Subsidiaries from such Collateral Asset Disposition, minus (b) the amount, if any, of all ----- taxes paid or payable by the Borrower or any of its Subsidiaries directly resulting from such Collateral Asset Disposition (including the amount, if any, estimated by the Borrower in good faith at the time of such Collateral Asset Disposition for taxes payable by the Borrower or any of its Subsidiaries on or measured by net income or gain resulting from such Collateral Asset Disposition), minus (c) the reasonable out-of-pocket costs and expenses incurred ----- by the Borrower or such Subsidiary in connection with such Collateral Asset Disposition (including all legal, title and recording tax expenses, all commissions and reasonable brokerage fees paid to a Person other than an Affiliate of the Borrower). "Net Proceeds" with respect to any Collateral Asset ------------ Disposition shall also include proceeds (after deducting any amounts specified in clauses (b) and (c) of the preceding sentence) of an agreed or compromised ----------- --- loss of Property or the taking of any Property under the power of eminent domain and condemnation awards and awards in lieu of condemnation for the taking of Property under the power of eminent domain. "Obligations" means any and all indebtedness, liabilities and obligations ----------- of the Borrower to the Lender, or any of them, evidenced by and/or arising pursuant to any of the Loan Documents (including, without limitation, this Agreement), now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several or joint and several, including, without limitation, (i) the obligations of the Borrower to repay the Term Loans, to pay interest on the Term Loans (including, without limitation, interest accruing after any, if any, bankruptcy, insolvency, reorganization or other similar filing) and to pay all fees, indemnities, costs and expenses (including attorneys' fees) provided for in the Loan Documents and (ii) the indebtedness constituting the Term Loans and such interest, fees, indemnities, costs and expenses. "Owned Real Property" means the real property owned by the Borrower or any ------------------- of its Subsidiaries, together with all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, equipment and items of personal property of the Borrower or any of its Subsidiaries attached or appurtenant thereto and all easements, licenses, rights and appurtenances relating to the foregoing. "Patents" has the meaning set forth in Section 7.19. ------- ------------ "PBGC" means the Pension Benefit Guaranty Corporation or any entity ---- succeeding to all or any of its functions under ERISA. "Permit" means any permit, certificate, approval, order, license, right-of- ------ way (whether an easement, contract or other agreement in any form) or other authorization. "Permitted Liens" means "Permitted Liens" as defined in the Indenture. --------------- "Person" means any individual, corporation, trust, association, company, ------ partnership, joint venture, limited liability company, joint stock company, Governmental Authority or other entity. "Plan" means any employee benefit plan as defined in Section 3(3) of ERISA ---- established or maintained or contributed to by any party hereto or any ERISA Affiliate, including any Pension Plan. "Preferred Stock" means the Series A Preferred Stock, the Series B --------------- Preferred Stock and the Series C Preferred Stock. "Preliminary Tender Date" means the date the QuickBird 2 Satellite is ----------------------- tendered for acceptance by Vendor to Borrower under the Project Contract. "Principal Office" means the office of the Lender in Broomfield, Colorado, ---------------- presently located at 10 Longs Peak Drive, Broomfield, Colorado 80021-2519. 7 "Prohibited Transaction" means any transaction set forth in Section 406 of ---------------------- ERISA or Section 4975 of the Code. "Project Contract" means as specified in the recitals hereto. ---------------- "Property" means property of all kinds, real, personal or mixed, tangible -------- or intangible (including, without limitation, all rights relating thereto), whether owned or acquired on or after the Closing Date. "QuickBird 2 Launch Insurance" means launch and on-orbit operations ---------------------------- insurance in respect of QuickBird 2 having the terms and provisions described in Section 4.10(b) of the Indenture (including, without limitation, terms naming the 13% Notes Trustee, as collateral trustee under the Senior P&SA on behalf of the holders of the 13% Notes and Lender, as sole loss payee thereon) in an amount not less than $155,000,000, and being in form and substance reasonably acceptable to the 13% Notes Trustee, as collateral trustee. The terms of the QuickBird 2 Launch Insurance shall be substantially the same as the terms of the First QuickBird Launch Insurance (as defined in the 13% Notes Indenture), except (i) for such differences as may be required due to the differences in construction, launch or in-orbit operation between QuickBird 1 and QuickBird 2, (ii) that the QuickBird 2 Launch Insurance shall only be required to cover at least one year of operations after launch of QuickBird 2, (iii) as is acceptable to the Lender and the holders of a majority of the 13% Notes in their absolute discretion and (iv) for such differences that do not adversely affect the Lender and the holders of 13% Notes "QuickBird 2 Prelaunch Insurance" means transit and prelaunch insurance in ------------------------------- a form acceptable to the Lender covering full repair or replacement costs for QuickBird 2 from the Preliminary Tender Date identified in the Project Contract until lift off, with Lender being named as an additional insured and first priority loss payee as its interests may appear up to an amount not less than the Obligations owed by the Borrower to the Lender. "QuickBird 2 Prelaunch Insurance Recovery" means, with respect to the ---------------------------------------- Satellite and any single occurrence or related occurrences with respect thereto, the receipt or constructive receipt by the Borrower, or the payment by an insurance company to the Lender, of proceeds of any such Property or casualty insurance. "Recapitalization Agreement" means the Recapitalization Agreement and -------------------------- Consent dated as of April 2, 2001 among the Borrower and the Noteholders. "Recapitalization Transactions" means "Transactions" as defined in the ----------------------------- Recapitalization Agreement. "Register" means as specified in Section 11.8(d). -------- --------------- "Related Transactions" means, collectively, (a) the purchase of the -------------------- Satellite and related engineering and construction services from the Vendor pursuant to the Project Contract, and (b) the payment of all fees, costs and expenses associated with the foregoing. "Release" means, as to any Person, any release, spill, emission, leaking, ------- pumping, injection, deposit, discharge, disposal, disbursement, leaching or migration of Hazardous Materials into the indoor or outdoor environment or into or out of Property owned by such Person, including, without limitation, the movement of Hazardous Materials through or in the air, soil, surface water or ground water. "Remedial Action" means all actions required to (a) cleanup, remove, --------------- respond to, treat or otherwise address Hazardous Materials in the indoor or outdoor environment, (b) prevent the Release or threat of Release or minimize the further Release of Hazardous Materials so that they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (c) perform studies and investigations on the extent and nature of any actual or suspected contamination, the remedy or remedies to be used or health effects or risks of such contamination, or (d) perform post- remedial monitoring, care or remedy of a contaminated site. 8 "Responsible Officer" means, as to the Borrower, the chief executive ------------------- officer, the president, any vice president, the chief financial officer, the chief operating officer or the treasurer of such Person. "Securities Act" means the Securities Act of 1933, as amended. -------------- "Series A Preferred Stock" means the 7% Cumulative Convertible Redeemable ------------------------ Preferred Stock due 2009, Series A, par value $.001 per share, of the Borrower. "Series B Preferred Stock" means the 7% Cumulative Convertible Redeemable ------------------------ Preferred Stock due 2009, Series B, par value $.001 per share, of the Borrower. "Series C Preferred Stock" means the 8.5% Cumulative Convertible Redeemable ------------------------ Preferred Stock due 2009, Series C, par value $.001 per share, of the Borrower. "Subordinated Debt" means Debt of the Borrower as to which the payment of ----------------- principal of (and premium, if any) and interest and other payment obligations in respect of such Debt shall be subordinate to the prior payment in full of the Obligations to at least the following extent: (a) no payments of principal of (or premium, if any) or interest on or otherwise due in respect of such Debt may be permitted for so long as any Default in the payment of principal (or premium, if any) or interest on the Obligations exists; and (b) such Debt may not (i) provide for payments of principal of such Debt at the stated maturity thereof or by way of a sinking fund applicable thereto or by way of any mandatory redemption, defeasance, retirement or repurchase thereof by the Borrower (including any redemption, retirement or repurchase which is contingent upon events or circumstances but excluding any retirement required by virtue of acceleration of such Debt upon any event of default thereunder), in each case prior to the final stated maturity of the Term Loans or (ii) permit redemption or other retirement (including pursuant to an offer to purchase made by the Borrower or any Restricted Subsidiary) of such other Debt at the option of the holder thereof prior to the final stated maturity of the Term Loans, other than a redemption or other retirement at the option of the holder of such Debt (including pursuant to an offer to purchase made by the Borrower or any Restricted Subsidiary) which is conditioned upon a change of control of the Borrower pursuant to provisions set forth in the instruments evidencing such Debt. "Subordinated Debt Documents" means any and all agreements, documents and --------------------------- instruments now or hereafter evidencing or governing any Subordinated Debt. "Subsidiary" of any Person means (a) 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 Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof or (b) 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 thereof, directly or indirectly, has at least a majority ownership and power to direct the policies, management and affairs thereof. "Tangible Property" has the meaning set forth in Section 7.14. ----------------- ------------ "Tax" or "Taxes" means any and all taxes, fees, assessments, levies, --- ----- duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any governmental taxing authority including without limitation: taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, assets, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation, severance, occupation, or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, estimated, value added, or gains taxes; license, registration and documentation fees; and customs' duties, tariffs, and similar charges. "Tax Return" means any return, declaration, report, claim for refund, ---------- information statement, schedule or other document (including any related or supporting information and including any Form 1099 or other document or report required to be provided by the Borrower or any of its Subsidiaries to third parties) relating to Taxes, including any document required to be retained or provided to any governmental authority relating to the Borrower or any of 9 its Subsidiaries or any consolidated group of which any such entity was a member at the applicable time, and any amended Tax Returns. "Taxing Authority" means any Governmental Authority having jurisdiction ---------------- over the assessment, determination, collection or other imposition of any Tax. "Term Loans" means as such term is defined in Section 2.1(a). ---------- -------------- "Term Loans Commitment" means the obligation of the Lender to make or --------------------- continue Term Loans hereunder in an aggregate principal amount up to but not exceeding the aggregate principal amount of $9,000,000. "Trade Secrets" has the meaning set forth in Section 7.19. ------------- ------------ "UCC" means the Uniform Commercial Code as in effect from time to time in --- the State of Colorado or any other jurisdiction including New York, the laws of which may be applicable to or in connection with the creation, perfection or priority of any Lien on any Property created pursuant to any Loan Documents. "U.S." means the United States of America. ---- "U.S. Person" means a citizen or resident of the U.S., a corporation, ----------- partnership or other entity created or organized in or under any laws of the U.S. or any estate or trust that is subject to U.S. Federal income taxation regardless of the source of its income. "U.S. Taxes" means any present or future tax, assessment or other charge or ---------- levy imposed by or on behalf of the U.S. or any taxing authority thereof. "Vendor" means Ball Aerospace & Technologies Corp. as specified in the ------ recitals hereto. "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 for so long as no senior class of securities has such voting power by reason of any contingency. "2000 Balance Sheet" means the audited consolidated balance sheet of the ------------------ Borrower and its Subsidiaries, including the related schedules and notes thereto, as of December 31, 2000. "2000 Balance Sheet Date" means December 31, 2000. ----------------------- Section 1.2 Other Definitional Provisions. Other defined terms used in ----------------------------- this Agreement will defined in the relevant sections of this Agreement. All definitions contained in this Agreement are equally applicable to the singular and plural forms of the terms defined. The words "hereof", "herein" and "hereunder" and words of similar import referring to this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all Article and Section references pertain to this Agreement. Terms used herein that are defined in the UCC, unless otherwise defined herein, shall have the meanings specified in the UCC. Section 1.3 Accounting Terms and Determinations. (a) All accounting terms not specifically defined herein shall be construed in accordance with GAAP (subject to year end adjustments, if applicable) consistent with such accounting principles applied in the preparation of the audited financial statements referred to in Section 7.7. All ----------- financial information delivered to the Lender pursuant to Section 8.1 shall be ----------- prepared in accordance with GAAP (subject to year end adjustments, if applicable) applied on a basis consistent with such accounting principles applied in the preparation of the audited financial statements referred to in Section 7.7 or in accordance with Section 8.7. - ----------- ----------- 10 (b) Unless otherwise expressly provided herein to the contrary, all references herein to the Closing Date shall be deemed to mean and refer to the Closing Date after giving effect to all Related Transactions that occur on or before such date. ARTICLE 2 Loans ----- Section 2.1 Commitments. ----------- (a) Term Loans. Subject to the terms and conditions of this Agreement ---------- (including, without limitation, Section 2.11(a)), the Lender agrees to make one --------------- or more Loans to the Borrower from time to time from and including the Closing Date up to and including the Preliminary Tender Date in an aggregate principal amount up to but not exceeding the amount of the Term Loans Commitment. (Such Loans referred to in this Section 2.1(a) now or hereafter made by the Lender to -------------- the Borrower which are outstanding at any given time, are herein collectively referred to as the "Term Loans".) The Borrower may not re-borrow any principal ---------- amounts under the Term Loans that have been repaid. (b) Limitation Regarding the Amount of each Borrowing. Notwithstanding ------------------------------------------------- anything to the contrary contained in this Agreement, in no event shall the aggregate amount of the Term Loans advanced to or for the account of the Borrower on any date exceed the aggregate amount due and payable by the Borrower to the Vendor on such date in accordance with the payment schedule set forth in the Project Contract, which aggregate amount due and payable shall be exclusive of sales taxes and other taxes and freight charges and other delivery charges. (c) Limitation Regarding Number of Borrowings. Notwithstanding anything ----------------------------------------- to the contrary contained in this Agreement, the Lender shall not be obligated to make Loans except on the dates specified in the payment schedule set forth in the Project Contract on or before the Preliminary Tender Date. Section 2.2 Intentionally Omitted. --------------------- Section 2.3 Repayment of Principal on Term Loans. In addition to the ------------------------------------ payment of accrued interest as set forth in Section 2.4 below, the Borrower shall pay to the Lender the principal of each of the Term Loans outstanding as of the launch date of the Satellite (and the principal of each of the Term Loans outstanding as of such date shall be due and payable) in 11 equal monthly installments, commencing one month after the Loan Repayment Commencement Date, and on each monthly anniversary thereafter (each, a "Payment Date") through and ------------ including the Maturity Date, each of which installments shall be in an amount equal to 1/11th of the principal amount of the Term Loans outstanding as of the Loan Repayment Commencement Date. Notwithstanding anything herein to the contrary, all outstanding principal of and interest on the Term Loans shall be due and payable on the Maturity Date. Section 2.4 Payment of Interest on Term Loans. ---------------------- (a) Payment of Interest. The Borrower shall pay to the Lender for its ------------------- account interest on the unpaid principal amount of Term Loans made by the Lender to the Borrower for the period commencing on the date of such Loan to but excluding the date such Loan shall be paid in full, at the Interest Rate. (b) Payment Dates. Accrued interest on the Term Loans shall be due and ------------- payable as follows: (i) On the Loan Repayment Commencement Date; (ii) Upon the payment or prepayment (whether mandatory or optional) of the Term Loans (but only on the principal amount so paid or prepaid); and (iii) On the Maturity Date. 11 (c) Default Interest. Notwithstanding the foregoing, the Borrower shall ---------------- pay to the Lender for its account interest at the applicable Default Rate to the fullest extent permitted by law, on any amount payable by the Borrower under this Agreement or any other Loan Document which is not paid in full when due (whether at stated maturity, by acceleration or otherwise) for the period from and including the due date thereof to but excluding the date the same is paid in full. Interest payable at the Default Rate shall be payable from time to time on demand by the Lender. Section 2.5 Borrowing Procedure. The Borrower shall give the Lender ------------------- notice of each borrowing hereunder in accordance with Section 2.9. Each Loan shall be effectively disbursed on the date set forth in the borrowing notice for such disbursement to the Borrower by virtue of a receivable in the amount of such Loan from the Borrower to the Lender under the Project Contract. Section 2.6 Optional Prepayments of Term Loans. Subject to Section 2.8, ---------------------------------- the Borrower shall have the right from time to time to prepay all or part of any Term Loan without premium or penalty; provided that the Borrower shall give the Lender notice of each such prepayment as provided in Section 2.9 and such prepayments shall be applied to the then remaining installments of such Term Loan in the inverse order of the maturities of such installments. Section 2.7 Mandatory Prepayments. --------------------- (a) Collateral Asset Dispositions. The Borrower shall, concurrently with ----------------------------- any Collateral Asset Disposition (which is subject to the prior written consent of the Lender in accordance with Section 9.6), pay to the Lender, as a prepayment of the Term Loans and other outstanding Obligations, an aggregate amount equal to the lesser of (A) all related Net Proceeds and (B) all then outstanding amounts under the Term Loans. (b) Insurance Recovery. (i) If any insurance proceeds are paid pursuant ------------------ to QuickBird 2 Launch Insurance policies, such insurance proceeds shall be shared with the Lender and the holders of 13% Notes in accordance with the terms of the Loan Documents and the Intercreditor Acknowledgement, and (ii) if the Excess QuickBird 2 Prelaunch Insurance Proceeds are paid pursuant to QuickBird2 Prelaunch Insurance policies covering transit and prelaunch operations of the Satellite, such Excess QuickBird 2 Prelaunch Insurance Proceeds shall be paid to the Lender. (c) Change of Control. The Borrower shall, within 30 days after the ----------------- occurrence of any Change of Control, pay to the Lender, as a prepayment of the Term Loans and all other Obligations then outstanding, an amount equal to the sum of (i) the aggregate unpaid principal amount of the Term Loans and (ii) the aggregate unpaid amount of all other Obligations (including, without limitation, interest accrued on the Term Loans and fees and costs and expenses accrued or payable in accordance with this Agreement or any other Loan Document) then outstanding. (d) Launch Failure. If either QuickBird 2 shall (i) fail to launch on or -------------- before November 30, 2001, other than as a result of the failure of the Vendor to deliver the Satellite in material compliance with the terms, conditions and specifications set forth in the Project Contract, or (ii) fail to launch for any reason on or before October 15, 2002, then the Borrower shall prepay all of the Term Loans and all other Obligations then outstanding on the date specified by the Lender. Further, if QuickBird 2 shall fail to launch on or before April 15, 2002, the Interest Rate after that date shall be equal to the lesser of (a) fifteen percent (15%) per annum or (b) the Maximum Rate. (e) Application of Mandatory Prepayments. All prepayments pursuant to ------------------------------------ Section 2.7(a), 2.7(b), 2.7(c) or 2.7(d) shall be applied to the Term Loans to the then remaining installments of principal of the Term Loans in inverse order of the maturities of such installments. Section 2.8 Minimum Amounts. Except for prepayments pursuant to Section --------------- ------- 2.7, each optional prepayment of principal of the Term Loans shall be in an - --- amount at least equal to $200,000.00 or an integral multiple of $200,000.00 in excess thereof. 12 Section 2.9 Certain Notices. Notices by the Borrower to the Lender of --------------- borrowings per Section 2.5, and terminations or reductions of the Term Loans Commitment, of borrowings, and prepayments of Term Loans shall be irrevocable and shall be effective only if received by the Lender not later than 1:00 p.m. Denver, Colorado on the Business Day prior to the date of the relevant borrowing, termination, reduction, borrowing, or prepayment specified below:
Number of Notice Business Days Prior ------ ------------------- Terminations or Reductions of Term Loans Commitments 1 Borrowings of Loans 2 Prepayments of Term Loans 2
Each such notice of termination or reduction shall specify the amount of the Term Loans Commitment to be terminated or reduced. Each such notice of borrowing or prepayment shall specify the Loans to be borrowed or prepaid and the amount (subject to Section 2.8 hereof) to be borrowed or prepaid and the ----------- date of borrowing or prepayment (which shall be a Business Day). Section 2.10 Computations. Interest payable by the Borrower hereunder and ------------ under the other Loan Documents on all Term Loans shall be computed on the basis of a year of 365 days and the actual number of days elapsed (including the first day but excluding the last day) occurring in the period for which payable. With respect to each Term Loan, interest accrued during the period from the making of such Loan to the first interest payment date therefore provided in Section 2.4(b)(i) shall be compounded on a monthly basis. Section 2.11 Termination or Reduction of Term Loans Commitment. ------------------------------------------------- (a) Notwithstanding anything to the contrary contained in this Agreement, the Term Loans Commitment shall automatically terminate upon the occurrence of any Change of Control, and the Term Loans Commitment shall automatically terminate if no Loans have been advanced under this Agreement on or before August 28, 2001. (b) The Borrower shall have the right to terminate or reduce in part the unused portion of the Term Loans Commitment at any time and from time to time, provided that (i) the Borrower shall give notice of each such termination or - -------- reduction as provided in Section 2.9, and (ii) each partial reduction shall be ----------- in an aggregate amount at least equal to $200,000.00 or an integral multiple of $200,000.00 in excess thereof. (c) The Term Loans Commitment may not be reinstated after they have been terminated or increased after they have been reduced. ARTICLE 3 Payments -------- Section 3.1 Method of Payment. Until further notice from Lender all ----------------- payments of principal, interest, fees and other amounts to be made by the Borrower under this Agreement and the other Loan Documents shall be made to the Lender at the address specified in Section 4.4 of the Project Contract for its account in Dollars and in immediately available funds, without setoff, deduction or counterclaim, not later than 1:00 p.m. local time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). If an Event of Default has occurred and is continuing, the Lender may apply such payment to the Obligations in such order and manner as the Lender may elect, subject to Section 3.2. Upon the occurrence and during the continuation of an ----------- Event of Default, all proceeds of any Collateral, and all other funds of the Borrower in the possession of the Lender, may be applied to the 13 Obligations in such order and manner as the Lender may elect. Each payment received by the Lender under this Agreement or any other Loan Document for its account shall be paid promptly, in immediately available funds. Whenever any payment under this Agreement or any other Loan Document shall be stated to be due on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of the payment of interest. Section 3.2 Taxes. ----- (a) All payments by the Borrower of principal of and interest on the Term Loans and other amounts payable under the Loan Documents shall be made free and clear of, and without deduction or withholding by reason of, any present or future taxes, levies, duties, imposts, assessments or other charges levied or imposed by any Governmental Authority (other than franchise taxes and taxes on the overall net income of the Lender). If the Borrower shall be required by law to deduct or withhold any such taxes, levies, duties, imposts, assessments or other charges from or in respect of any sum payable hereunder to the Lender, the Borrower will (i) make additional payments in such amounts so that every net payment of principal of and interest on the Term Loans and of all other amounts payable by it under the Loan Documents, after withholding or deduction for or on account of any such present or future taxes, levies, duties, imposts, assessments or other charges, will not be less than the amount provided for herein or therein absent such withholding or deduction, (ii) make such withholding or deduction and (iii) remit the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law. (b) The Borrower will indemnify the Lender against, and reimburse the Lender for, all present and future taxes, levies, duties, imposts, assessments or other charges (including interest and penalties) levied or collected (whether or not legally or correctly imposed, assessed, levied or collected), excluding, however, any taxes imposed on the overall net income of the Lender or any lending office of the Lender by any jurisdiction in which the Lender or any such lending office is located, on or in respect of this Agreement, any of the Loan Documents or the Obligations or any portion thereof (the "Reimbursable Taxes"). ------------------ Any such indemnification shall be on an after-tax basis, taking into account any such reimbursable taxes imposed on the amounts paid as indemnity. (c) Without prejudice to the survival of any other term or provision of this Agreement, the obligations of the Borrower under this Section 3.2 shall ----------- survive the payment of the Term Loans and the other Obligations and termination of the Term Loans Commitment. Section 3.3 Reinstatement of Obligations. Notwithstanding anything to the ---------------------------- contrary contained in this Agreement or any other Loan Document, if the payment of any amount of principal of or interest with respect to the Term Loans or any other amount of the Obligations, or any portion thereof, is rescinded, voided or must otherwise be refunded by the Lender upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise for any reason whatsoever, then each of (a) the Obligations, (b) the Loan Documents (including, without limitation, this Agreement and the Loan Documents), (c) the indebtedness, liabilities and obligations of the Borrower and any other Persons under the Loan Documents and (d) all Liens for the benefit of the Lender created under or evidenced by the Loan Documents, will be automatically reinstated and become automatically effective and in full force and effect, all to the extent that and as though such payment so rescinded, voided or otherwise refunded had never been made. Section 3.4 Additional Consideration. As additional consideration for ------------------------ this Agreement, the Borrower shall issue 903,608 shares of Series C Preferred Stock to BHTC, the owner of the Lender, in accordance with the provisions of the Series C Registration Rights Agreement. Section 3.5 No Force Majeure, Disputes. The Borrower's obligation to pay -------------------------- all amounts due under the Term Loans and the other Obligations shall not be affected by (a) any set-off, counterclaim, recoupment, deduction, abatement, suspension, diminution, reduction, defense or other right which the Borrower may have against the Vendor for any reason whatsoever arising under or pursuant to the Project Contract or otherwise relating to the purchase of goods or services from the Vendor, (b) any defect in the condition, design, operation or fitness for use of, or any damage to or loss or destruction of, any equipment or material or service provided by the Vendor, (c) any insolvency, bankruptcy, reorganization or similar proceedings by or against the Borrower or affecting any of its Properties, (d) any action of any Governmental Authority or any damage to or destruction of or any taking of the 14 Borrower's Property or any part thereof, (e) any change, waiver, extension, indulgence or failure to perform or comply with, or other action or omission herein or in the other Loan Documents (except for express written modifications to this Agreement or other Loan Documents as and in the manner permitted under this Agreement or the other Loan Documents), (f) any dissolution of the Borrower, (g) any inability or illegality with respect to the use or ownership of the Borrower's Property, (h) any failure to obtain, or expiration, suspension or other termination of, or interruption to, any required licenses, permits, consents, authorizations, approvals or other legal requirements, or (i) any lack of power or authority of the Lender or the Borrower, or (j) any other event or circumstance whatsoever, whether or not similar to any of the foregoing and whether or not the Borrower shall have notice or knowledge of any of the foregoing, it being the intention of the Lender and the Borrower that the Obligations of the Borrower shall be absolute and unconditional and shall be separate and independent covenants and agreements and shall continue unaffected unless the requirements to pay or perform the same shall have been terminated pursuant to an express provision thereof or of any of the other Loan Documents. ARTICLE 4 Yield Protection and Illegality Section 4.1 [Intentionally Omitted.] Section 4.2 Capital Adequacy. This provision is only applicable in the event ---------------- that the Lender assigns or sells participations in all or a part of this Agreement. If, after the date of the assignment or purchase of participations, the assignee or purchaser of the participations shall have determined that the adoption or implementation of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or compliance by the assignee or purchaser (or its parent) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any central bank or other Governmental Authority affects or would affect the amount of capital required or expected to be maintained by the assignee or purchaser or any Person controlling the assignee or purchaser and (taking into consideration the Lender's or such Person's policies with respect to capital adequacy and the assignee's or purchaser's desired return on capital) and the Lender determines that the amount of such capital is increased as a consequence of its obligations under this Agreement, then, within ten Business Days after demand by the assignee or purchaser, the Borrower shall pay to the assignee or purchaser, additional amounts sufficient to compensate the assignee or purchaser for such increase. A certificate of the assignee or purchaser claiming compensation under this Section 4.2 and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive absent manifest error, provided that the determination thereof is made on a reasonable basis. In determining such amount or amounts, the assignee or purchaser may use any reasonable averaging and attribution methods. ARTICLE 5 Security -------- Section 5.1 Collateral. To secure the full and complete payment and ---------- performance of the Obligations, the Lender shall retain title to the QuickBird2 Satellite, and all the Deliverables in accordance with the provisions of the Project Contract The Borrower hereby grants to the Lender a perfected, first priority purchase money Lien on all of its right, title and interest in and to the Satellite and the Deliverables, as defined by the Project Contract, and any and all other Property associated with the Satellite previously sold or concurrently therewith being sold by the Vendor pursuant to the Project Contract (the purchase price for which Satellite, Deliverables and other Property is intended to be partially financed by the Lender under this Agreement), and the proceeds (as such term is defined by Section 9-306(1) of the New York UCC), whether such Satellite, Deliverables or other Property is now owned or hereafter acquired including but not limited to all QuickBird 2 Prelaunch Insurance policies. The Borrower will further grant the Lender a security interest as set forth in the Senior P&SA and the Launch Insurance Policies. 15 Section 5.2 Intentionally Omitted. --------------------- ARTICLE 6 Conditions Precedent -------------------- Section 6.1 Initial Extension of Credit. The obligation of Lender to make --------------------------- its initial Loan under this Agreement is subject to the conditions precedent that Lender shall have received, on or before the Closing Date, all of the following in form and substance satisfactory to Lender and, in the case of actions to be taken, evidence that the following required actions have been taken to the satisfaction of Lender: (a) Board Resolutions. Board Resolutions which authorize the execution, ----------------- delivery and performance by the Borrower of the Loan Documents to which it is or is to be a party; (b) Incumbency Certificate. A certificate of incumbency certified by the ---------------------- Secretary or an Assistant Secretary of the Borrower certifying as to the name of each officer or other representative of the Borrower (i) who is authorized to sign the Loan Documents to which it is or is to be a party (including any certificates contemplated therein), together with specimen signatures of each such officer or other representative, and (ii) who will, until replaced by other officers or representatives duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with the Loan Documents and the transactions contemplated thereby; (c) Articles or Certificates of Incorporation. The certificate of ----------------------------------------- incorporation of the Borrower certified by the Secretary of State of Delaware and dated as of a recent date; (d) Bylaws. The bylaws of the Borrower certified by its Secretary or an ------ Assistant Secretary; (e) Governmental Certificates. (i) A certificate of appropriate officials ------------------------- as to the existence and good standing of the Borrower in Delaware and (ii) due qualification to transact business in Colorado; (f) Financing Statements. Financing Statements requested by Lender; -------------------- (g) Senior P&SA. The Senior P&SA executed by Borrower. ----------- (h) Lien Searches. Lien searches in the name of the Borrower (and in all ------------- names under which the Borrower has done business within the last five years) in the States of Colorado, Delaware and California, showing no financing statements or other Lien instruments of record except for Permitted Liens; (i) Project Contract. Certificate of an officer of Borrower that the ---------------- Project Contract, as amended, remains in full force, including, but not limited to Amendments 39 and 40 thereto. (j) First Supplemental Indenture. The First Supplemental Indenture to the ---------------------------- Indenture shall have been executed and delivered by all parties thereto, and the Lender shall have received a photocopy of the First Supplemental Indenture as so executed and delivered, certified by a Responsible Officer of the Borrower as being a true and correct copy of such document as of the Closing Date; (k) Compliance with Laws. As of the Closing Date, the Borrower shall have -------------------- complied in all material respects with all Governmental Requirements necessary to consummate the transactions contemplated by this Agreement and the other Loan Documents; (l) No Prohibitions. No Governmental Requirement shall prohibit the --------------- consummation of the transactions contemplated by this Agreement or any other Loan Document, and no order, judgment or decree of any Governmental Authority or arbitrator shall, and no litigation or other proceeding shall be pending or to the Borrower's knowledge, threatened which would, enjoin, prohibit, restrain or otherwise adversely affect in any 16 material manner the consummation of the transactions contemplated by this Agreement or the other Loan Documents or otherwise have a Material Adverse Effect; (m) Legal Matters and Loan Documents. All matters of a legal nature -------------------------------- material to the Borrower, the Loan Documents and the Related Transactions shall be reasonably satisfactory to the Lender and its counsel, and the Lender shall have received all such other agreements, documents and instruments, each in form and substance and executed and delivered by all parties, as the Lender may have reasonably requested to receive; and (n) The Trustee shall have executed the Intercreditor Acknowledgement. Section 6.2 All Extensions of Credit. The obligation of Lender to make ------------------------ any Loan (including the initial Loan for all conditions except 6.2(i)) under this Agreement is subject to the satisfaction of each of the following additional conditions precedent: (a) No Default or Material Adverse Effect. No Default or Material Adverse ------------------------------------- Effect shall have occurred and be continuing, or would result from such Loan; (b) Representations and Warranties. All of the representations and ------------------------------ warranties of the Borrower contained in this Agreement and in the other Loan Documents shall be true and correct on and as of the date of such Loan with the same force and effect as if such representations and warranties had been made on and as of such date unless they relate solely to an earlier date; (c) Current and Other Amount Due. The Borrower shall have no past due ---------------------------- amounts due Lender for products or services provided to Borrower and its subsidiaries other than amounts legitimately disputed by Borrower. (d) Consents. All consents necessary for the execution, delivery and -------- performance by the Borrower of the Loan Documents to which it is a party, including, without limitation, any consents or waivers in connection with the Project Contract and the First Supplemental Indenture, shall have been received by the Borrower and shall be in full force and effect; (e) Permits. All material Permits affecting the Borrower or any of its ------- Subsidiaries necessary in connection with its businesses or any of the Properties then owned or leased by it and in connection with its businesses to be conducted and Properties to be owned or leased shall have been received by the Borrower and shall be in full force and effect, and the Lender shall have received evidence satisfactory to it that the Borrower and its Subsidiaries are able to conduct their businesses conducted and to be conducted with the use of such Permits in full force and effect; and the Lender shall be satisfied that (i) the Borrower holds such Permits and such Permits are in form and substance reasonably satisfactory to the Lender and (ii) the Borrower has complied with all initial and on-going conditions of the issuance and use of all such Permits; (f) Regulatory Approvals. Evidence satisfactory to the Lender that all -------------------- filings, consents or approvals with or of Governmental Authorities necessary to consummate the transactions contemplated by the Loan Documents and to operate have been made and obtained, as applicable; (g) Financing Statements. Financing Statements and all other requisite -------------------- filing documents executed by the Borrower as may be necessary to perfect, and ensure the required priority of, the Liens created pursuant to the Loan Documents with respect to the Collateral which has been sold, and is to be sold after giving effect to the requested Loan, to the Borrower, which financing statements, other filing documents and waivers and consents shall have been filed; (h) Additional Documentation. The Lender shall have received such ------------------------ additional approvals, agreements, documents and instruments as the Lender may reasonably request; (i) Insurance Proof. Borrower shall provide Lender with appropriate --------------- evidence of (i) the QuickBird 2 Launch Insurance naming the 13% Note Trustee as an additional insured and the sole loss payee, and (ii) 30 days 17 prior to the Preliminary Tender Date appropriate evidence of the QuickBird 2 Prelaunch Insurance naming the Lender as an additional insured and first priority loss payee as its interests may appear up to an amount not less than the Obligations owed by the Borrower to the Creditor. Each notice of borrowing by the Borrower hereunder shall constitute a representation and warranty by the Borrower that the conditions precedent set forth in this Section 6.2, have been satisfied (both as of the date of such ----------- notice and, unless the Borrower otherwise notifies the Lender prior to the date of such borrowing, as of the date of such borrowing). Section 6.3 Closing Certificates. The Borrower shall, concurrently with -------------------- the Closing Date (with respect to the conditions precedent set forth in Section 6.1) and concurrently with the date of the making of each other Loan, execute and deliver to the Lender a certificate in form and substance satisfactory to the Lender certifying as to the satisfaction of each of the conditions precedent set forth in this Article 6 which are required to be satisfied on or before the such date. ARTICLE 7 Representations and Warranties ------------------------------ The Borrower represents and warrants to the Lender that the following statements are and, after giving effect to the Related Transactions and the funding of the initial Loans on the Closing Date, will be true, correct and complete: Section 7.1 Incorporation and Authority of the Borrower. The Borrower is ------------------------------------------- a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all necessary corporate power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, to enter into this Agreement and other Loan Documents, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The Borrower is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except for such failures which, when taken together with all other such failures, would not have a Material Adverse Effect. Except for the approval of the Charter Amendments by the stockholders as described in Section 7.4, the execution and delivery of this Agreement and the Loan Documents by the Borrower, the performance by the Borrower of its obligations hereunder and thereunder and the consummation by the Borrower of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of the Borrower. Each of this Agreement and the Loan Document has been duly executed and delivered by the Borrower and (assuming due authorization, execution and delivery by the Lender) constitutes a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its respective terms. The Borrower has made available to Lender correct and complete copies of the Certificate of Incorporation and the Bylaws of the Borrower and each Subsidiary, as currently in effect. Section 7.2 Capital Stock. ------------- (a) Except as set forth in Section 3.2 of the Disclosure Schedule, there are no options, warrants, convertible securities or other rights, agreements or arrangements relating to the capital stock of, or other equity interest in, the Borrower obligating the Borrower to issue, sell, transfer or otherwise dispose of or sell any shares of capital stock of, or other equity interest in, the Borrower. As of April 2, 2001, the Borrower has issued and has outstanding (a) 213,696 shares of common stock, par value $.001 per share (100,000,000 shares authorized) (the "Existing Common Stock"); (b) 8,051,273 shares of Series A --------------------- Preferred Stock (10,000,000 shares authorized); (c) 8,051,273 shares of Series B Preferred Stock (10,000,000 shares authorized); and (d) 25,022,561 shares of Series C Preferred Stock (25,000,000 shares authorized) (together with the series of preferred stock referred to in (b) through (c) above, the "Existing -------- Preferred Stock"), which constitute all the issued and outstanding shares of - --------------- capital stock of the Borrower and are owned of record and beneficially solely by the individuals and entities and in the amounts and proportions set forth in Section 3.2 of such Disclosure Schedule. The shares of Existing Common 18 Stock and Existing Preferred Stock have been duly authorized and validly issued and are fully paid and non-assessable and were not issued in violation of any preemptive rights. Except as set forth in Section 3.2 of such Disclosure Schedule, there are no voting trusts, stockholders' agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Existing Common Stock or the Existing Preferred Stock. (b) The 903,608 shares of new Series C Preferred Stock which are being issued to BTHC, when issued and delivered in accordance with the terms of this Agreement and the Series C Registration Rights Agreement, will have been duly and validly authorized and will be fully paid and non-assessable and will not have been issued in violation of any preemptive rights. Section 7.3 Subsidiaries. Section 3.3 of the Disclosure Schedule sets ------------ forth, with respect to each Subsidiary of the Borrower, its type of entity, the jurisdiction of its incorporation or organization, its authorized capital stock, partnership capital or equivalent, the number and type of its issued and outstanding shares of capital stock, partnership interests or similar ownership interests and the Borrower's current ownership of such shares, partnership interests or similar ownership interests. Except as set forth in Section 3.3 of such Disclosure Schedule, all of the outstanding equity securities and other securities of each Subsidiary are owned by the Borrower or any of its Subsidiaries, free and clear of all liens and encumbrances. Each such Subsidiary is duly organized and validly existing under the laws of its respective jurisdiction of incorporation and has the requisite power and authority to own, operate or lease the properties and assets owned, operated or leased by such Subsidiary and to carry on its business in all material respects as currently conducted by such Subsidiary and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except for such failures which, when taken together with all other such failures, would not have a Material Adverse Effect. Section 7.4 Stockholder Approvals Required. ------------------------------ (a) Set forth in Section 3.2 of the Disclosure Schedule is a correct and complete list of holders of each series of the Existing Preferred Stock as of March 31, 2001. Set forth in Section 3.4(a) of the Disclosure Schedule is, as of such date, the correct proportion of such holders by series of Existing Preferred Stock whose approval is required to affect the Charter Amendments. (b) Set forth in Section 3.2 of the Disclosure Schedule is a correct and complete list of holders of the Existing Common Stock as of March 31, 2001. Set forth in Section 3.4(b) of the Disclosure Schedule is, as of such date, the correct proportion of such holders whose approval is required to effect the Charter Amendments. Section 7.5 No Conflict. Assuming that all consents, approvals, ----------- authorizations and other actions described in Section 3.6 of the Disclosure Schedule have been obtained and all filings and notifications listed in Section 3.6 of the Disclosure Schedule have been made, and except as described in Section 3.5 of the Disclosure Schedule, the execution, delivery and performance of this Agreement and the Loan Documents by the Borrower do not and shall not (a) violate or conflict with the Certificate of Incorporation or the Bylaws of the Borrower or any of its Subsidiaries, (b) conflict with or violate any law, rule, regulation order, writ, judgment, injunction, decree, determination or award or threaten any governmental authorization applicable to the Borrower, any of its Subsidiaries or the Business, or (c) result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or, except for liens or other encumbrances imposed in connection with the Loan Documents, result in the creation of any lien or other encumbrance on any of the assets or properties of the Borrower or any of its Subsidiaries pursuant to, any note, bond, mortgage, indenture (other than the 12 1/2% Notes Indenture), contract, agreement, lease, license, permit, franchise or other instrument relating to such assets or properties to which the Borrower or any of its Subsidiaries is a party or by which any of such assets or properties is bound or affected, except, in the case of clause (b) or (c), as would not, in the aggregate, have a Material Adverse Effect or prevent or materially delay the consummation by the Borrower of the transactions contemplated hereby. The Borrower has obtained a waiver from Section 5.18 of the Recapitalization Agreement, dated as of April 8, 1999, 19 among the Borrower and the other parties thereto with respect to the negotiation, execution, delivery and performance of this Agreement and the transactions contemplated hereby. Section 7.6 Consents and Approvals. The execution, delivery and ---------------------- performance of this Agreement and the Loan Documents by the Borrower do not and shall not require any consent, approval, authorization or other order of, action by, filing with or notification to, any Governmental Authority, except (a) for the consent of the Noteholders to approve the First Supplemental Indenture, (b) as described in Section 3.6 of the Disclosure Schedule and (c) where failure to obtain such consent, approval, authorization or action, or to make such filing or notification, would not prevent or materially delay the consummation by the Borrower of the transactions contemplated by this Agreement and would not, in the aggregate, have a Material Adverse Effect. Section 7.7 Financial Statements. The Borrower has delivered to the -------------------- Lender a true, correct and complete copies of the 2000 Balance Sheets and the related audited consolidated statements of income and cash flows (all such financial statements, including without limitation any and all notes thereto, referred to as the "Financial Statements"). The Financial Statements present -------------------- fairly and accurately the consolidated financial condition and results of operations of the Borrower and its Subsidiaries as of the 2000 Balance Sheet Date or for the periods covered thereby and have been prepared in accordance with GAAP applied on a basis consistent with the past practices of the Borrower with only such deviations from GAAP as are referred to in the notes thereto. Section 7.8 Absence of Undisclosed Liabilities and Liens. -------------------------------------------- (a) There are no liabilities of the Borrower or any of its Subsidiaries, other than liabilities (i) reflected or reserved against on the 2000 Balance Sheet, or (ii) incurred since the 2000 Balance Sheet Date in the ordinary course of business consistent with past practice and disclosed in the balance sheet included with the Form 10K filed by Borrower with the SEC for the period ended December 31, 2000. (b) Except as set forth in Section 3.8 of the Disclosure Schedule, there are no Liens, security interests or other encumbrances with respect to any assets of the Borrower or any of its Subsidiaries, other than Permitted Liens. Section 7.9 Absence of Certain Changes or Events. Since the 2000 Balance ------------------------------------ Sheet Date, except as disclosed in Section 3.9 of the Disclosure Schedule, the Business has been conducted in the ordinary course consistent with past practice, and there has not been any circumstance, development or event which has had or would reasonably be expected to have, in the aggregate, a Material Adverse Effect. Section 7.10 Absence of Litigation. Except as set forth in Section 3.10 --------------------- of the Disclosure Schedule, (a) there are no claims, actions, proceedings or investigations pending or, to the knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries or any of the assets or properties of the Borrower or any of its Subsidiaries, before any Governmental Authority that, if determined adversely to the Borrower or any of its Subsidiaries, in the aggregate, would have a Material Adverse Effect or would prevent, restrict or materially delay the consummation by the Borrower of the transactions contemplated hereby and (b) the Borrower, its Subsidiaries and their respective assets and properties are not subject to any Governmental Order having a Material Adverse Effect. Section 7.11 Compliance with Laws. -------------------- (a) None of the Borrower or any of its Subsidiaries is in violation of any law, rule, regulation, order, judgment or decree applicable to the Borrower or any of its Subsidiaries relating to the Business or by which any of the properties of the Borrower or any of its Subsidiaries is bound, except (a) as set forth in Section 3.11 of the Disclosure Schedule and (b) where such violations, in the aggregate, would not have a Material Adverse Effect. Except as set forth in Section 3.11 of the Disclosure Schedule, none of the Borrower or any of its Subsidiaries has, in the last three years, received any written communication from any Governmental Authority that alleges that the Borrower or any of its Subsidiaries is not in compliance in any material respect with any material law, rule, regulation, ordinance, order, judgment or decree that has not been resolved. 20 (b) The Borrower and its Subsidiaries are in compliance with all applicable provisions under the Communications Act and all applicable rules and regulations promulgated thereunder. Section 7.12 Licenses and Permits. Except as set forth in Section 3.12 of -------------------- the Disclosure Schedule, the Borrower and its Subsidiaries have all governmental licenses, permits and authorizations necessary to conduct the Business and to perform the transactions contemplated hereby, including without limitation all governmental licenses, permits and authorizations necessary to export and launch QuickBird 2, except for such governmental licenses, permits and authorizations the absence of which, in the aggregate, would not have a Material Adverse Effect. None of the Borrower or any of its Subsidiaries has, within the last two years, received written notice or otherwise has knowledge that any Governmental Authority has the right or intends to suspend, modify, cancel or terminate any material license, permit, certificate or other authorization relating to the Business as currently conducted. Section 7.13 Sufficiency and Condition of Assets. Except as set forth in ----------------------------------- Section 3.13 of the Disclosure Schedule, the Borrower and its Subsidiaries own or have valid rights to use all of the assets, rights and interests which are used in, and are sufficient for, the operation of the Business as it is currently being conducted. The tangible assets of the Borrower and its Subsidiaries are in good working order, reasonable wear and tear excepted, and are suitable for the use for which they are intended in all material respects. Section 7.14 Real Property. ------------- (a) The Borrower and its Subsidiaries have good, valid, marketable and insurable title in fee simple to all the Owned Real Property, free and clear of all Liens, security interests and other encumbrances, except (i) as disclosed in Section 3.14(a) of the Disclosure Schedule and (ii) Permitted Liens. (b) The Borrower and its Subsidiaries have good marketable and insurable leasehold estates in the Leased Real Property, free and clear of all liens, security interests and other encumbrances, except Permitted Liens. Except as disclosed in Section 3.14(b) of the Disclosure Schedule or as would not have a Material Adverse Effect, each such lease or sublease is legal, valid, binding and enforceable and in full force and effect, and shall not cease to be legal, valid, binding and enforceable and in full force and effect as a result of the consummation of the transactions contemplated by this Agreement. To the knowledge of the Borrower, no party to any such lease or sublease is in material breach or default thereunder. (c) Except as set forth on Section 3.14(c) of the Disclosure Schedule, (i) none of the Borrower or any, of its Subsidiaries has, within the last two years, received written notice of any pending or threatened condemnation or eminent domain proceedings or their local equivalent that would materially affect the Owned Real Property or the Leased Real Property, (ii) the Owned Real Property and Leased Real Property, the use and occupancy thereof by the Borrower and its Subsidiaries, and the conduct of the Business thereon and therein does not violate in any material respect any deed restrictions, or applicable building codes, zoning, subdivision or other land use or similar laws the violation of which would materially adversely affect the use, value or occupancy of any such property or the conduct of the Business thereon, (iii) none of the Borrower or any, of its Subsidiaries has, within the last two years, received written notice of a material violation of the restrictions or Laws described in the foregoing clause (ii), and (iv) none of the structures or improvements on any of the Leased Real Property or Owned Real Property encroaches upon real property of another person, and no structure or improvement of another person encroaches upon any of the Leased Real Property or Owned Real Property, except for any such encroachment that would not materially adversely affect the use, value or occupancy of any such property. (d) Except as set forth in Section 3.14(d) of the Disclosure Schedule, the buildings, facilities, machinery, equipment, furniture, leasehold and their improvement, fixtures, vehicles, structures, and related capitalized items and other tangible property relating to the Business (the "Tangible Property") are in good operating condition and repair, free (in the case of buildings or structures located on the Owned Real Property or Leased Real Property) of any material structural or engineering defects, and, subject to normal wear and tear and. continued repair and replacement in accordance with past practice, are substantially suitable for their intended use. During the past five years there has not been any significant interruption of the operations of the Business due to inadequate maintenance of the Tangible Property. 21 Section 7.15 Employee Benefit and Labor Matters. ---------------------------------- (a) The Borrower has made available to the Lender a true, correct and complete copy of each Employee Benefit Plan, other than Employee Benefit Plans maintained solely to provide legally mandated benefits to employees located in jurisdictions outside of the United States. Except as specifically provided in the foregoing documents delivered to the Lender, there are no amendments to any Employee Benefit Plan that have been adopted or approved nor has the Borrower or any of its Subsidiaries undertaken to make any such amendments or to adopt or approve any new Employee Benefit Plan. (b) The Internal Revenue Service has issued a favorable determination letter with respect to each Employee Benefit Plan that is intended to be a "qualified plan" within the meaning of Section 401(a) of the Code ("Qualified Plans") and the related trust that has not been revoked, and there are no existing circumstances nor any events that have occurred that could adversely affect the qualified status of any Qualified Plan or the related trust. No Employee Benefit Plan is intended to meet the requirements of Code Section 501(c)(9). (c) All contributions required to be made to any Employee Benefit Plan by applicable law or regulation or by any plan document or other contractual undertaking, and all premiums due or payable with respect to insurance policies funding any Employee Benefit Plan, for any period through the date hereof have been timely made or paid in full or, to the extent not required to be made or paid on or before the date hereof, have been fully reflected on the financial statements of the Company provided to Lender to the extent required by GAAP. Each Employee Benefit Plan that is an employee welfare benefit plan under Section 3(1) of ERISA is either (i) funded through an insurance Borrower contract and is not a "welfare benefit fund" within the meaning of Section 419 of the Code or (ii) unfunded. (d) With respect to each Employee Benefit Plan, the Borrower and its Subsidiaries have complied, and are now in compliance, in all material respects with all provisions of ERISA, the Code and all laws and regulations applicable to such Employee Benefit Plans and each Employee Benefit Plan has been and is now administered in all material respects in accordance with its terms. There is not now, nor do any circumstances exist that could give rise to, any requirement for the posting of security with respect to an Employee Benefit Plan or the imposition of any lien on the assets of the Borrower or any of its Subsidiaries under ERISA or the Code. (e) No Employee Benefit Plan is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code. (f) There never existed and does not now exist any Controlled Group Liability that would be a liability of the Borrower. Without limiting the generality of the foregoing, neither the Borrower nor any ERISA Affiliate of the Borrower has engaged in any transaction described in Section 4069 or Section 4204 or 4212 of ERISA. (g) The Borrower has no liability for life, health, medical or other welfare benefits to former employees or beneficiaries or dependents thereof, except for health continuation coverage as required by Section 4980B of the Code or Part 6 of Title I of ERISA and at no expense to the Borrower. There has been no communication to employees by the Borrower or any of its Subsidiaries that could reasonably be interpreted to promise or guarantee such employees retiree health or life insurance or other retiree death benefits on a permanent basis. (h) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event) result in, cause the accelerated vesting or delivery of, or increase the amount or value of, any payment or benefit to any employee, officer or director of the Borrower or any of its Subsidiaries. Without limiting the generality of the foregoing, no amount paid or payable by the Borrower or any of its Subsidiaries in connection with the transactions contemplated hereby (either solely as a result thereof or as a result of such transactions in conjunction with any other event) will be an "excess parachute payment" within the meaning of Section 280G of the Code. 22 (i) None of the Borrower or any of its Subsidiaries nor any other person, including any fiduciary, has engaged in any "prohibited transaction" (as defined in Section 4975 of the Code or Section 406 of ERISA), which could subject any of the Employee Benefit Plans or their related trusts, the Borrower, any of its Subsidiaries or any person that the Borrower or any of its Subsidiaries has an obligation to indemnify, to any tax or penalty imposed under Section 4975 of the Code or Section 502 of ERISA. (j) There are no pending or threatened claims (other than claims for benefits in the ordinary course), lawsuits or arbitrations which have been asserted or instituted, or to Borrower's knowledge, no set of circumstances exists which may reasonably give rise to a claim or lawsuit, against the Employee Benefit Plans, any fiduciaries thereof with respect to their duties to the Employee Benefit Plans or the assets of any of the trusts under any of the Employee Benefit Plans which could reasonably be expected to result in any material liability of the Borrower or any of its Subsidiaries to the Department of Treasury, the Department of Labor, any Employee Benefit Plan or any participant, beneficiary or dependent in an Employee Benefit Plan. (k) The Borrower, its Subsidiaries and each member of their respective business enterprise has complied with the Worker Adjustment and Retraining Notification Act. (l) All Employee Benefit Plans subject to the laws of any jurisdiction outside of the United States (i)have been maintained in accordance with all applicable requirements and are in good standing with applicable regulatory authorities, (ii)if they are intended to qualify for special tax treatment meet all requirements for such treatment, and (iii)if they are intended to be funded and/or book-reserved are fully funded and/or book reserved, as appropriate, based upon reasonable actuarial assumptions. (m) For purposes of this Section 7.15, the term "employee" shall be considered to include individuals rendering personal services to the Borrower or any of its Subsidiaries as independent contractors. Section 7.16 Labor Matters. Neither the Borrower nor any Subsidiary is a ------------- party to a collective bargaining or union agreement. No labor organization or group of employees of the Borrower or any of its Subsidiaries has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened to be brought or filed, with the National Labor Relations Board or any other labor relations tribunal or authority. There are no organizing activities, strikes, work stoppages, slowdowns, lockouts, material arbitrations or material grievances, or other material labor disputes pending or threatened against or involving the Borrower or any of its Subsidiaries. Each of the Borrower and its Subsidiaries is in compliance with all applicable laws and collective bargaining agreements respecting employment and employment practices, terms and conditions of employment, wages and hours and occupational safety and health. Section 7.17 Taxes. Except as set forth in Disclosure Schedule 3.17: (i) ----- all material Tax Returns required to be filed (taking into account extensions) by, or with respect to any activities of, or property owned by, the Borrower, its Subsidiaries, and each affiliated, consolidated, combined or unitary group that included or includes the Borrower or any of its Subsidiaries (a "Tax Group"), have been or will be timely filed in accordance with all applicable laws, such Tax Returns are true, correct and complete in all material respects as filed, all Taxes shown as due on such Tax Returns have been or will be timely paid, and reserves reflected on the most recent balance sheet of the Borrower are sufficient to cover all Taxes (whether or not shown as due on any Tax Return) accrued as of such date and, adjusted for the passage of time, are sufficient to cover all Taxes; (ii) all Taxes required to be withheld by the Borrower or any of its Subsidiaries have been withheld, and such withheld Taxes have either been duly and timely paid to the proper Government Authorities or set aside in accounts for such purpose if not yet due; (iii) no Tax Return filed by the Borrower or any of its Subsidiaries is currently under audit by any Taxing Authority or is the subject of any judicial or administrative proceeding, and to the knowledge of the Borrower, no Taxing Authority is threatening to commence any such audit; (iv) no Taxing Authority is now asserting against the Borrower or any of its Subsidiaries any deficiency or claim for Taxes or any adjustment of Taxes; (v) other than any Tax sharing or indemnification agreement between the Borrower, on the one hand, and any of its Subsidiaries, on the other hand, neither the Borrower nor any of its Subsidiaries is subject to or bound by any Tax sharing agreement (or other arrangement or practice for the sharing of Taxes); (vi) neither the Borrower nor any of its Subsidiaries has waived any statute of limitations with respect to any Tax or agreed to any extension of time for filing any Tax Return that 23 has not been filed, and neither the Borrower nor any of its Subsidiaries has consented to extend the period in which any Tax may be assessed or collected by any Taxing Authority; (vii) there are no Liens for Taxes (other than Taxes not yet due) upon any of the assets of the Borrower or any of its Subsidiaries; (viii) the Borrower has no liability for the Taxes of any person other than the Borrower and its Subsidiaries; (ix) there are no outstanding powers of attorney enabling any party to represent the Borrower or any of its Subsidiaries with respect to Tax matters; and (x) neither the Borrower nor any of its Subsidiaries has been a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Section 7.18 Environmental, Health and Safety. -------------------------------- (a) Except as set forth in Section 3.18 of the Disclosure Schedule or except as would not have a Material Adverse Effect: (i) the Borrower and its Subsidiaries currently hold all the environmental and health and safety permits, licenses and approvals of Governmental Authorities and agencies necessary for the current use, occupancy or operation of the Business and required by any Environmental Law ("Environmental Permits") and are in compliance with all such Environmental Permits; (ii) the Borrower and its Subsidiaries are in compliance with all applicable Environmental Laws; (iii) neither the Borrower nor any of its Subsidiaries is currently in receipt of any written claim, demand, notice or complaint alleging violation of, or liability under, any Environmental Laws; (iv) except as permitted by or as would not result in any liability under applicable Environmental Laws, there are no underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being treated, stored or disposed on any of the Owned Real Property or Leased Real Property or, with respect to the period of the Borrower's or any of its Subsidiaries' ownership, tenancy or operation of such property, on any real property formerly owned, leased or operated by the Borrower or any of its Subsidiaries; (v) there is no asbestos or asbestos- containing material on any of the Owned Real Property or Leased Real Property, except to the extent not prohibited by, or as would not result in any liability under, applicable Environmental Laws; (vi) neither the Borrower nor any of its Subsidiaries has released, discharged or disposed of Hazardous Materials on any of the Owned Real Property or Leased Real Property or on any real property formerly owned, leased or operated by the Borrower or any of its Subsidiaries; (vii) neither the Borrower nor any of its Subsidiaries is undertaking any investigation or assessment or remedial or response action relating to any release, discharge or disposal of or contamination with Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law; and (viii) there are no past, pending or threatened in writing Environmental Claims against the Borrower, any of its Subsidiaries or any Real Property and, to the Borrower's knowledge, there are no facts that are reasonably expected to form the basis of any such Environmental Claim. (b) For purposes of this Agreement, the following terms have the meanings set forth below: (i) "Environmental Claims" means any and all actions, suits, demands, demand letters, claims, complaints, liens, written notices of noncompliance or violation, written notices of liability or potential liability, investigations, proceedings, consent orders or consent agreements relating in any way to any Environmental Law, any Environmental Permit or any Hazardous Material or arising from any actual or alleged injury or threat of injury to health, safety or the environment. Section 7.19 Intellectual Property. --------------------- (a) Intellectual Property Assets. For purposes of this Agreement, the term "Intellectual Property Assets" includes without limitation the following tangible and intangible assets of the Borrower: (i) the name "EarthWatch Incorporated," all fictional business names, trading names, registered and unregistered trademarks, service marks, trade dress and applications (collectively, "Marks"); (ii) all patents, patent applications, and inventions and discoveries that may be patentable (collectively, "Patents"); (iii) all copyrights in both published works and unpublished works (collectively, "Copyrights"); and 24 (iv) All know-how, trade secrets, confidential information, customer lists, software, technical information, data, process technology, plans, drawings, and blue prints (collectively, "Trade Secrets") owned, used, or licensed by the Borrower or any of its Subsidiaries as licensee or licensor. (b) Agreements. There are no outstanding and, to the Borrower's knowledge, no threatened disputes or disagreements with respect to any material contract relating to the Intellectual Property Assets to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any of its Subsidiaries is bound. (c) Know-How Necessary for the Business. (i) The Intellectual Property Assets are all those necessary for the operation of the Borrower's and its Subsidiaries' businesses as they are currently conducted. The Borrower and its Subsidiaries are the owners or licensee, of all right, title, and interest in and to each of the Intellectual Property Assets, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims, and have the right to use without payment to a third party all of the Intellectual Property Assets, except as a license of Intellectual Property Assets. (ii) Except as set forth in Section 3.19(c) of the Disclosure Schedule, all former and current employees of the Borrower and its Subsidiaries have executed written contracts with the Borrower or its Subsidiaries that assign to the Borrower all rights to any inventions, improvements, discoveries, or information relating to the business of the Borrower or any of its Subsidiaries. No employee of the Borrower or any of its Subsidiaries has entered into any contract that materially restricts or limits in any way the scope or type of work for the Borrower in which the employee may be engaged or requires the employee to transfer, assign, or disclose information concerning his work for the Borrower to anyone other than the Borrower or its Subsidiaries. (d) Patents. (i) The Borrower and its Subsidiaries are the owners of all right, title, and interest in and to each of the Patents, free and clear of all liens, security interests, charges, encumbrances, entities, and other adverse claims. (ii) All of the issued Patents are currently in compliance with formal legal requirements (including without limitation payment of filing, examination, and maintenance fees and proofs of working or use), are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety days after the date of this Agreement. (iii) No Patent has been or is now involved in any interference, reissue, reexamination, or opposition proceeding. To the Borrower's knowledge, there is no potentially interfering patent or patent application of any third party. (iv) To the knowledge of the Borrower, no Patent is infringed or, to the Borrower's knowledge, has been challenged or threatened in any way. To the knowledge of the Borrower, none of the products manufactured and sold, nor any process or know-how used, by the Borrower or any of its Subsidiaries infringes or is alleged to infringe any patent or other proprietary right of any other person. (v) All products made, used, or sold under the Patents have been marked with the proper patent notice. (e) Trademarks. (i) The Borrower and its Subsidiaries are the owners of all right, title, and interest in and to each of the Marks, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims. (ii) All Marks that have been registered with the United States Patent and Trademark Office are currently in compliance with all formal legal requirements (including without limitation the timely post-registration filing of affidavits of use and incontestability and renewal applications), are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety days after the date of this Agreement. 25 (iii) No Mark has been or is now involved in any opposition, invalidation, or cancellation and, to the Borrower's knowledge, no such action is threatened with the respect to any of the Marks. (iv) To the Borrower's knowledge, there is no potentially interfering trademark or trademark application of any third party. (v) To the Borrower's knowledge, no Mark is infringed or, to the Borrower's knowledge, has been challenged or threatened in any way. To the Borrower's knowledge, none of the Marks used by the Borrower or any of its Subsidiaries infringes or is alleged to infringe any trade name, trademark, or service mark of any third party. (vi) All products and materials containing a Mark bear the proper federal registration notice where permitted by law. (f) Copyrights. (i) The Borrower and its Subsidiaries are the owners of all right, title, and interest in and to each of the Copyrights, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims. (ii) All the Copyrights have been registered and are currently in compliance with formal legal requirements, are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety days after the date of this Agreement. (iii) To the Borrower's knowledge, no Copyright is infringed or, to the Borrower's knowledge, has been challenged or threatened in any way. To the Borrower's knowledge, none of the subject matter of any of the Copyrights infringes or is alleged to infringe any copyright of any third party or is a derivative work based on the work of a third party. (iv) All works encompassed by the Copyrights have been marked with the proper copyright notice. (g) Trade Secrets. (i) With respect to each Trade Secret, the documentation relating to such Trade Secret is current, accurate, and sufficient in detail and content to identify and explain it and to allow its full and proper use without material reliance on the knowledge or memory of any individual. (ii) The Borrower and its Subsidiaries have taken all reasonable precautions to protect the secrecy, confidentiality, and value of its Trade Secrets. (iii) The Borrower and its Subsidiaries have good title and the right (not necessarily exclusive) to use the Trade Secrets. The Trade Secrets are not part of the public knowledge or literature, and, to the Borrower's knowledge, have not been used, divulged, or appropriated either for the benefit of any person (other than the Borrower and its Subsidiaries) or to the detriment of the Borrower or any of its Subsidiaries. No Trade Secret is subject to any adverse claim or has been challenged or threatened in any way. Section 7.20 Material Contracts. ------------------ (a) None of the Borrower or any of its Subsidiaries is (and, to the knowledge of the Borrower, no other party is) in breach or violation of, or default under, any of the Material Contracts, where such breach or violation or default would have a Material Adverse Effect. Each Material Contract is a valid agreement, arrangement or Term Loans Commitment of the Borrower or any of its Subsidiaries that is a party thereto, enforceable against the Borrower or any such Subsidiary, as the case may be, in accordance with its terms and, to the knowledge of the Borrower, is a valid agreement, arrangement or Term Loans Commitment of each other party thereto, enforceable against such party in accordance with its terms, except in each case as would not have a Material Adverse Effect. 26 (b) For purposes of this Agreement, the term "Material Contracts" means the following contracts in effect as of the date of this Agreement to which the Borrower or any of its Subsidiaries is a party: (i) Any commitment, contract, agreement or purchase order that the Borrower reasonably anticipates shall, in accordance with its terms, involve aggregate payments or receipts by the Borrower or any of its Subsidiaries of more than $1,000,000 within the 12-month period following the date of this Agreement; (ii) Any lease of personal property involving any annual expense in excess of $10,000 that is not cancelable without liability within 30 days; (iii) Any contracts or agreements containing covenants limiting the freedom of the Borrower or any of its Subsidiaries to engage in any line of business or compete with any person; (iv) Any material license agreement, assignment or contract (whether as licensor or licensee, assignor or assignee) relating to any patents, trademarks, copyrights or other intellectual property; (v) Any contract that creates a joint venture or partnership or other sharing of profits, losses, costs or liabilities; (vi) Any contract or agreement relating to clean-up, abatement or other actions in connection with the remediation of any liabilities relating to Hazardous Substances; (vii) Any contract with an Affiliate; (viii) Any credit agreement, loan agreement, guarantee, note or other evidence of Indebtedness or agreement providing for [Indebtedness]; and (ix) Any amendment, supplement and modification (whether oral or written) in respect of any of the foregoing. (c) There are no material contracts as defined by the SEC rules that have not been filed with the SEC. Section 7.21 No Solicitation; Exemption from Registration. -------------------------------------------- (a) The Borrower has not and will not solicit any offer for, or offer or sell any securities subject to the Transactions (as defined in the [First Supplemental Indenture]) by any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act and Rule 506 thereunder. (b) The issuance of Series C Preferred Stock to BTHC and the issuance of Common Stock upon conversion of such Series C Preferred Stock, individually and in the aggregate, shall be exempt from registration under the Securities Act, including the rules and regulations promulgated thereunder. Section 7.22 Insurance. Except as set forth in Section 3.22 of the --------- Disclosure Schedule, each of the Borrower and its Subsidiaries and all of their assets are covered by valid and currently effective insurance policies issued in favor or the Borrower and/or its Subsidiaries that are customary and appropriate under the circumstances. All such policies are in full force and effect, all premiums due thereon have been paid and the Borrower and its Subsidiaries have complied with the provisions of such policies (except for failures in full force and effect, to pay premiums and comply which, in the aggregate, would not have a Material Adverse Effect). Section 7.23 Brokers. Except for Morgan Stanley (as financial advisor to ------- the Borrower, the "Advisor"), no broker, finder or investment banker is entitled ------- to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby or by the Loan Documents based upon arrangements made 27 by or on behalf of the Borrower or any of its Subsidiaries. The Borrower is solely responsible for the fees and expenses of the Advisor. Section 7.24 Indenture. As of the date hereof, there exists no "Default" --------- or "Event of Default" under and as defined in the Indenture. Section 7.25 Transactions with Affiliates. (a) Except as set forth in ---------------------------- Section 3.25 of the Disclosure Schedule, none of the Borrower or any of its Subsidiaries has any outstanding contract, agreement or other arrangement with any of its Affiliates or provides or receives goods or services to or from any of its Affiliates or (b) has engaged in any transaction outside the ordinary course of business consistent with past practice with any of its Affiliates (other than the Borrower or any of its Subsidiaries and Affiliates) since January 1, 1998. Section 7.26 Debt. As of the Closing Date (and after giving effect to the ---- Related Transactions which will occur on or before such date), the Borrower does not have any Debt other than (a) the Obligations, and (b) the Debt disclosed on Schedule 3.26 hereto. Section 7.27 Margin Securities. Neither the Borrower nor any of its ----------------- Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any Loan will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying margin stock. The Loans will not violate any of Regulations T, U or X. Section 7.28 Disclosure. No written statement, information, report, ---------- representation or warranty made by the Borrower or any of its Subsidiaries in any Loan Document or Related Transaction Document or furnished to the Lender by or on behalf of the Borrower in connection with the Loan Documents or the Related Transactions Documents or any transaction contemplated hereby or thereby contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading. There is no fact known to the Borrower that has had a Material Adverse Effect, and there is no fact known to the Borrower that might in the future have a Material Adverse Effect, except as may have been disclosed in writing to the Lender. Section 7.29 Investment Company Act. Neither the Borrower nor any of its ---------------------- Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Section 7.30 Public Utility Holding Company Act. Neither the Borrower nor ---------------------------------- any of its Subsidiaries is a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company" or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. Section 7.31 Security Interest Issues. Except as set forth in Section ------------------------ 3.31 of the Disclosure Schedule, the Borrower is (or will be, as the case may be) the legal and beneficial owner of the Collateral (or, in the case of Collateral provided or to be provided by the Vendor pursuant to the Project Contract, the Borrower is (or will be, as the case may be, the legal and beneficial owner of whatever title to such Collateral was (or will have been, as the case may be) passed to the Borrower by the Vendor) free and clear of any Lien except for retention of title and the security interest created by the Loan Documents and any other Permitted Liens. No effective financing statement or other document similar in effect covering all or any part of the Collateral is on file in any recording office, except such as may have been filed in favor of the Lender related to the Loan Documents or in favor of holders of Permitted Liens. The address of the chief place of business and chief executive office of the Borrower, and of each other location where the Borrower maintains records concerning accounts receivables or any other Collateral, are set forth in Exhibit 7.31 hereof. All Collateral is located in the State(s) of Colorado and California. The Borrower's exact full legal name is, and for the previous five years was, as set forth in the first paragraph of this Agreement. Borrower has not, during the past five (5) years, been known by or used any other corporate or fictitious name, or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its property outside of the ordinary course of business. Borrower has no trade names or styles under which Borrower will create accounts receivable, or to which instruments in payment of accounts receivable may be made payable. 28 ARTICLE 8 Affirmative Covenants The Borrower covenants and agrees that, as long as the Obligations or any part thereof are outstanding or the Lender has any Term Loans Commitment outstanding hereunder, it will perform and observe, or cause to be performed and observed, the following covenants: Section 8.1 Reporting Requirements. The Borrower will furnish to the ---------------------- Lender: (a) Annual Financial Statements. As soon as available, and in any event --------------------------- within 120 days after the end of each fiscal year of the Borrower, beginning with the fiscal year ending December 31, 2001, a copy of the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such year and the related consolidated statements of income or operations, shareholders' equity and cash flows for such fiscal year, together with unaudited consolidating schedules for the Borrower with respect to each of such financial statements, in each case setting forth in comparative form the figures for the previous fiscal year, and accompanied by the opinion of PricewaterhouseCoopers or other independent certified public accountants of recognized standing reasonably acceptable to the Lender, which opinion shall state that such consolidated financial statements present fairly the financial position and results of operations for the periods indicated in conformity with GAAP applied on a basis consistent with prior years; (b) Quarterly Financial Statements. As soon as available, and in any event ------------------------------ within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, beginning with the fiscal quarter ending March31 June 30 2001, a copy of the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such quarter and the related consolidated statements of income or operations, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such quarter, together with unaudited consolidating schedules for the Borrower with respect to each of such financial statements, in each case setting forth in comparative form the figures for the corresponding period of the preceding fiscal year, and certified by an appropriate Responsible Officer of the Borrower as fairly presenting, in accordance with GAAP, the financial position and the results of operations of the Borrower and its Subsidiaries (except for year-end adjustments and financial statement footnotes required by GAAP); (c) Compliance Certificate. Concurrently with the delivery of each of the ---------------------- financial statements referred to in Sections 8.1(a) and 8.1(b), a Compliance Certificate of a Responsible Officer of the Borrower, appropriately completed, stating that, to the best of such officer's knowledge, no Default has occurred and is continuing or, if a Default has occurred and is continuing, stating the nature thereof and the action that has been taken and is proposed to be taken with respect thereto, and a description, in reasonable detail, of any material variation between the application of GAAP employed in the preparation of the next preceding annual or quarterly financial statements and reasonable estimates of the difference between such statements arising as a consequence thereof; (d) Notice of Litigation. Promptly after the commencement thereof, notice -------------------- of all actions, suits and proceedings before any Governmental Authority or arbitrator affecting the Borrower or any of its Subsidiaries in which there is a reasonable likelihood of an adverse determination, which, if determined adversely to the Borrower or any such Subsidiary, could reasonably be expected to have a Material Adverse Effect; (e) Notice of Default, etc. As soon as possible and in any event ----------------------- immediately upon (i) the Borrower's knowledge of the occurrence of any Default, a written notice setting forth the details of such Default and the action that the Borrower has taken and, if and to the extent known, proposes to take with respect thereto and (ii) the failure of the Borrower to make any required payment of principal, premium (if any), interest or other payment of or with respect to any 13% Notes or Subordinated Debt, a written notice setting forth the details thereof and the action that the Borrower has taken or proposes to take with respect thereto; 29 (f) Proxy Statements, Etc. Unless provided to BTHC as a shareholder or ---------------------- otherwise pursuant to this Section 8.1, as soon as available, one copy of each (if any) financial statement, report, notice or proxy statement sent by Borrower to its stockholders or other security holders generally and one copy of each (if any) regular, periodic or special report (including, without limitation, reports on forms 10-K, 10-Q and 8-K), registration statement or prospectus filed by Borrower with any securities exchange or the SEC or any successor agency; (g) Insurance. Within 60 days prior to the end of each fiscal year of the --------- Borrower, a report in form and substance reasonably satisfactory to the Lender summarizing all material insurance coverage with respect to the Collateral maintained by the Borrower and its Subsidiaries as of the date of such report and all material insurance coverage with respect to the Collateral planned to be maintained by such Persons in the subsequent fiscal year; (h) General Information. Promptly, such other business, financial, ------------------- corporate affairs and other similar information concerning the Borrower and/or the Collateral as the Lender may from time to time reasonably request. Section 8.2 Maintenance of Existence; Conduct of Business. The Borrower --------------------------------------------- will, and will cause its Subsidiaries to, preserve and maintain its corporate existence and all of its leases, privileges, licenses, Permits, franchises, qualifications, Intellectual Property Assets, intangible Property and rights that are necessary in the ordinary conduct of its business except to the extent that failure to so preserve and maintain such could not reasonably be expected to have a Material Adverse Effect. The Borrower will, and will cause its Subsidiaries to, conduct its business in an orderly and efficient manner in accordance with good business practices. Section 8.3 Maintenance of Properties and Permits. The Borrower will, and ------------------------------------- will cause its Subsidiaries to, maintain, keep and preserve all of its Properties and Permits (including, without limitation, rights-of-way) necessary in the proper conduct of its businesses except to the extent that failure to so maintain, keep and preserve could not reasonably be expected to have a Material Adverse Effect, and in good repair, working order and condition (ordinary wear and tear excepted) and make all necessary repairs, renewals and replacements and improvements thereof. Without limiting the generality of the foregoing, the Borrower will, at all times except as may result from any Collateral Asset Disposition permitted in accordance with Section 9.6, possess good and marketable title to the Collateral free and clear of any Lien (other than Permitted Liens permitted to attach to the Collateral in accordance with Section 9.1). Section 8.4 Taxes and Claims. The Borrower will, and will cause its ---------------- Subsidiaries to, pay or discharge before becoming delinquent (a) all taxes, levies, assessments and governmental charges imposed on it or its income or profits or any of its Property and (b) all lawful claims for labor, material and supplies, which, if unpaid, might become a Lien upon any of its Property; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to pay or discharge any tax, levy, assessment or governmental charge, or claim for labor, material or supplies, whose amount, applicability or validity is being contested in good faith by appropriate proceedings being diligently pursued and for which adequate reserves have been established under GAAP. Section 8.5 Insurance. In addition to any insurance requirements as set --------- forth in the Loan Documents and in Section 8.14, the Borrower will, and will cause its Subsidiaries to, maintain, with financially sound and reputable independent insurers, insurance with respect to its Property and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons, including workers' compensation insurance, public liability, property and casualty insurance and comprehensive general liability insurance. In addition, the Borrower will maintain with financial sound and reputable independent insurers, insurance with respect to all of the Collateral of such types and in such amounts and otherwise as is necessary to comply with prudent business practice. The Borrower will advise the Lender promptly of any material policy cancellation, reduction or amendment. Section 8.6 Inspection Rights. The Borrower will permit representatives ----------------- and agents of the Lender, during normal business hours and upon reasonable notice to the Borrower, to examine, copy and make extracts from its books and records relating to its financial affairs, the Collateral and other matters relevant to the Loan Documents, to visit and inspect its Properties and to discuss its business, operations and financial condition with its officers. 30 Section 8.7 Keeping Books and Records. The Borrower will maintain ------------------------- appropriate books of record and account in accordance with GAAP consistently applied in which true, full and correct entries will be made of all their respective dealings and business affairs. Section 8.8 Compliance with Laws. The Borrower will, and will cause each -------------------- of its Subsidiaries to, comply with all applicable Governmental Requirements, except for instances of noncompliance that could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Section 8.9 Compliance with Agreements. The Borrower will, and will cause -------------------------- each of its Subsidiaries to, comply with all agreements, documents and instruments binding on it or affecting its Properties or business, except for instances of noncompliance that could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Section 8.10 Further Assurances. The Borrower will, and will cause each of ------------------ its Subsidiaries to, execute and deliver such further agreements, documents and instruments and take such further action as may be requested by the Lender to carry out the provisions and purposes of this Agreement and the other Loan Documents, to evidence the Obligations and to create, preserve, maintain and perfect the Liens of the Lender in and to the Collateral and the required priority of such Liens. The parties hereto acknowledge that Article 9 of the Model Uniform Commercial Code has been substantially revised in many states (the "Revised Article 9") and that the Revised Article 9 will become law by July 1, 2001 in such states. In that event amendments to the Loan Documents and additional filings may be required to continue, create, protect and perfect the security interests intended to be created under the Loan Documents, without limiting the generality of any of Borrower's obligations in any Loan Document, Borrower (x) agrees to take all action and to execute, deliver and file all documents and instruments as may be necessary in connection therewith and (y) authorizes Lender to take all such action and to execute, deliver and file all such documents and instruments (including financing statement) on the Borrower's behalf to the fullest extent permitted by applicable law. Section 8.11 ERISA. The Borrower will, and will cause each of its ERISA ----- Affiliates to, comply with all minimum-funding requirements and all other material requirements of ERISA so as not to give rise to any liability thereunder. Section 8.12 Charter Amendments. As soon as practicable following the ------------------ date of this Agreement, the Borrower shall do the following: (a) Take all action in accordance with all federal and state securities laws, the DGCL and the Certificate of Incorporation and Bylaws of the Borrower, reasonably necessary to convene a special meeting (or obtain the written consent in lieu thereof) of the holders of the Existing Common Stock and the Existing Preferred Stock, any such special meeting to be held on the earliest practical date determined by the Borrower pursuant to its obligations under subsections (b) and (c) below; (b) With respect to the Existing Preferred Stock, (i) prepare and distribute to all holders of shares of each series of Existing Preferred Stock all reasonably necessary documents for the purpose of soliciting and obtaining the approval in writing of holders of shares of each series of Existing Preferred Stock at least equal in number to the minimum number set forth for each such series in Section 3.4(a) of the Disclosure Schedule to effect the Charter Amendment, to the extent such approval is required by applicable law; (ii) recommend to holders of shares of each series of Existing Preferred Stock the approval of such Charter Amendments; (iii) use its reasonable best efforts to solicit from holders of such minimum number of shares of each series of Existing Preferred Stock, and take all other action reasonably necessary or advisable to secure, the approval of such holders required to approve such Charter Amendments; and (iv) as of or prior to the time of consummation of the Recapitalization Transactions, file with the Secretary of State of the State of Delaware all documents, and take any other action, reasonably necessary to effect such Charter Amendments; and (c) With respect to the Existing Common Stock, (i) prepare and distribute to all holders of shares of Existing Common Stock all reasonably necessary documents for the purpose of soliciting and obtaining the approval 31 in writing of holders of shares of Existing Common Stock at least equal in number to the minimum number set forth in Section 3.4(b) of the Disclosure Schedule to effect the Charter Amendments, all to the extent such approval is required by applicable law; (ii) recommend to holders of shares of Existing Common Stock the approval of such Charter Amendments; (iii) use its reasonable best efforts to solicit from holders of such minimum number of shares of Existing Common Stock, and take all other action reasonably necessary or advisable to secure, the approval of such holders required to approve such Charter Amendments; and (iv) as of or prior to the time of consummation of the Recapitalization Transactions, file with the Secretary of State of the State of Delaware all documents, and take any other action, reasonably necessary to effect such Charter Amendments. Section 8.13 Issuance of New Series C Preferred Stock. The Borrower ---------------------------------------- shall issue to BTHC or at the option of BTHC, one of its affiliates 903,608 shares of Series C Preferred Stock as of or promptly following the time of consummation of the Recapitalization Transactions. Section 8.14 Satellite Insurance. ------------------- (a) The Borrower shall use its reasonable best efforts to obtain (by paying the initial deposit therefor) the QuickBird 2 Prelaunch Insurance and the QuickBird 2 Launch Insurance as required by this Agreement. The Borrower shall pay, or shall cause to be paid, all premiums for the QuickBird 2 Prelaunch Insurance and QuickBird 2 Launch Insurance in accordance with the payment schedule under the terms of the respective insurance policies. (b) Promptly following or contemporaneously with the purchase of QuickBird 2 Launch Insurance pursuant to Section 8.14 (a), the Borrower shall (i) execute, and direct the Trustee, as collateral agent, to execute, (x) the Senior P&SA, substantially in the form attached to the Recapitalization Agreement as Exhibit H-1 and deliver, pledge and transfer to the Trustee, as collateral agent under the Senior P&SA for the Noteholders and Lender, on a pro rata basis, the QuickBird 2 Launch Insurance, (ii) execute, and cause the 13% Notes Trustee to execute, the Intercreditor Acknowledgment, and (iii) deliver to the Trustee, as collateral trustee under the Senior P&SA, (x) an opinion of Baker & McKenzie, dated as of the date of the Senior P&SA, substantially in the form of Exhibit I- 1 to the Recapitalization Agreement and (y) an opinion of counsel reasonably satisfactory to the Trustee, as collateral trustee, dated as of the date of the Senior P&SA, substantially in the form of Exhibit I-2 to the Recapitalization Agreement. ARTICLE 9 Negative Covenants The Borrower covenants and agrees that, as long as the Obligations or any part thereof are outstanding or Lender has any Term Loan, it will perform and observe, or cause to be performed and observed, the following covenants hereunder: Section 9.1 Limitation on Liens. he Borrower shall not incur or suffer to ------------------- exist any Lien on or with respect to any of the Collateral other than the Permitted Liens, all of which Permitted Liens shall be junior, as to priority, to the Liens on or with respect to the Collateral securing the Obligations. Section 9.2 Mergers, Etc. The Borrower will not (a) become a party to a ------------- merger or consolidation unless (i) the Borrower shall be the entity surviving such merger or consolidation and (ii) no Default exists at the time of such consolidation or merger, or would result therefrom, or (b) wind-up, dissolve or liquidate itself. Section 9.3 Intercompany Transactions. Except as may be expressly ------------------------- permitted or required by the Loan Documents or the Indenture, the Borrower will not, and will not permit any of its Subsidiaries to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Subsidiary to pay dividends or make any other distribution to the Borrower or any of its Subsidiaries in respect of such Subsidiary's Capital Stock or with respect to any other interest or participation in, or measured by, its profits. 32 Section 9.4 Security Interest Issues. The Borrower will not: (i) change ------------------------ its chief place of business, chief executive office or any location where the Borrower maintains records concerning any Collateral from the location identified in Exhibit 7.31 hereto, or (ii) change its legal name in any manner whatsoever or use any other corporate or fictitious name, trade name or style, without, in each case, providing to the Lender UCC amendments or other documents sufficient to protect the Lender's first priority purchase money security interests in the Collateral under the Loan Documents. Section 9.5 Transactions with Affiliates. The Borrower shall not, and ---------------------------- shall not permit any of its Subsidiaries to, enter into any transaction (or series of related transactions) with an Affiliate of the Borrower unless such transaction (or series of related transactions) is on terms no less favorable to the Borrower or such Subsidiary (as applicable) than those that could be obtained in a comparable arm's-length transaction with an entity that is not an Affiliate and is in the best interests of the Borrower or such Subsidiary (as applicable); provided, however, that any such transactions between the Borrower or any of its Subsidiaries may be on terms which are more favorable to the Borrower and such transactions, other than transactions which involve the purchase of goods or services by the Borrower or its Subsidiaries, may be undertaken on any terms so long as (a) no Event of Default exists at the time of such transaction or could reasonably be expected to occur as a result thereof and (b)such transactions, individually and in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Notwithstanding the foregoing, this Section 9.5 shall not prohibit (a) any of the Recapitalization Transactions, or (b) any matters set forth in Section 3.25 of the Disclosure Schedule. Section 9.6 Limitation on Collateral Asset Dispositions. The Borrower ------------------------------------------- shall not make any Collateral Asset Disposition (other than proceeds consisting of earnings generated from the operation of any Collateral in the ordinary course of business and other than as contemplated by any Loan Document, the Indenture, the Intercreditor Acknowledgement and related documents, in accordance with the provisions that were in effect as of June 15, 2001, without giving effect to any subsequent amendment, modification or supplement thereof or thereto except as may be expressly approved by the Lender in writing) to any Person (including, without limitation, an Affiliate of the Borrower) without the prior written consent of the Lender. Section 9.7 Dividends and Distributions. The Borrower shall not pay --------------------------- dividends or make any other distributions in respect of its Capital Stock that could reasonably be expected to impair its ability to pay the Obligations as they come due in the three-month period following such dividend or distribution. ARTICLE 10 Default Section 10.1 Events of Default. Each of the following shall be deemed an "Event of Default": ---------------- (a) The Borrower shall fail to pay, repay or prepay any amount of principal or interest of any Loan owing to the Lender pursuant to this Agreement, or the Borrower shall fail to pay, within five Business Days after the due date thereof, any fee, expense or other amount or any other Obligation owing to the Lender pursuant to this Agreement or any other Loan Document. (b) Any representation or warranty made or deemed made by or on behalf of the Borrower in any Loan Document or in any certificate, report, notice or financial statement furnished at any time in connection with this Agreement or any other Loan Document shall be false, misleading or erroneous in any material respect when made or deemed to have been made. (c) The Borrower shall fail to perform, observe or comply with any covenant, agreement or term contained in Article 8 or 9 of this Agreement or in any Loan Documents; or the Borrower shall fail to perform, observe or comply with any other covenant, agreement or term contained in this Agreement or any other Loan Document (other than covenants to pay the Obligations) and such failure is not remedied or waived within 30 days 33 (or, if a different grace period is expressly made applicable in such other Loan Documents, such applicable grace period) after notice thereof from the Lender. (d) The Borrower shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due. (e) The Borrower shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or administrator of itself or of all or a substantial part of its Property, (ii) admit in writing its inability to, or be generally unable to, pay its debts as such debts become due, subject to any applicable grace periods, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect, the "Bankruptcy Code"), (v) file a petition seeking to take advantage of any other --------------- law providing for the relief of debtors or relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or winding up, or composition or readjustment of debts, (vi) fail to controvert in a timely or appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code or other applicable Governmental Requirement, (vii) dissolve, or (viii) take any corporate action for the purpose of effecting any of the foregoing. (f) A proceeding or case shall be commenced, without the application or consent of the Borrower, in any court of competent jurisdiction, seeking (i) the liquidation, reorganization, dissolution, arrangement, winding up, or composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, examiner, liquidator, administrator or the like of it or of all or any substantial part of its Property, or (iii) similar relief in respect of it, under any law providing for the relief of debtors or relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or winding up, or composition or readjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 60 or more days; or an order for relief shall be entered in an involuntary case under the Bankruptcy Code against the Borrower and shall continue unstayed and in effect for any period of 60 consecutive days. (g) A final judgment or judgments for the payment of money in excess of $1,000,000.00 in the aggregate shall be rendered by a court or courts against the Borrower on claims not covered by insurance and the same shall not be discharged, bonded or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and the Borrower shall not, within said period of 30 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal. (h) The Borrower shall fail to pay when due any principal of or interest on any Debt of the Borrower (other than the Obligations) having (either individually or in the aggregate) a principal amount of at least $750,000, or the maturity of any such Debt shall have been accelerated, or any such Debt shall have been required to be prepaid prior to the stated maturity thereof, or any event shall have occurred (and shall not have been waived or otherwise cured) that permits (or, with the giving of notice or lapse of time or both, would permit) any holder or holders of such Debt or any Person acting on behalf of such holder or holders to accelerate the maturity thereof or require any such prepayment. (i) This Agreement or any other Loan Document shall cease to be in full force and effect otherwise than in accordance with their terms, or any Lien created by the Loan Documents in favor of the Lender shall for any reason cease to be or fail to be a valid, perfected Lien upon any of the Collateral purported to be covered thereby, with the level of priority required by the Loan Documents, otherwise than in accordance with the terms of the applicable Loan Document. (j) If, at any time, any payment or principal of or interest accrued or other amount of or with respect to any Subordinated Debt (whether by virtue of payment, redemption, purchase or otherwise) shall have been paid by the Borrower or any Subsidiary of the Borrower on or 30 days prior to the date upon which such Subordinated Debt is permitted to be paid in accordance with the Subordinated Debt Documents governing such Subordinated Debt. 34 (k) The occurrence of any breach or default under the Project Contract, or the Project Contract shall be terminated or cease to be in full force and effect (other than due to the bankruptcy or material breach by the Vendor). (l) The occurrence of an "Event of Default" as such term is defined in the Indenture that results in or has the effect of the acceleration of the maturity of the 13% Notes or any part thereof. Section 10.2 Remedies. If any Event of Default shall occur and be -------- continuing, the Lender may do any one or more of the following: (a) Acceleration. Declare all outstanding principal of and accrued and ------------ unpaid interest on the Loans and all other amounts payable by the Borrower under the Loan Documents immediately due and payable, and the same shall thereupon become immediately due and payable, without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, protest or other formalities of any kind, all of which are hereby expressly waived by the Borrower; (b) Termination of Term Loans Commitment. Terminate in whole or in part ------------------------------------ the Term Loans Commitment without notice to the Borrower; (c) Judgment. Reduce any claim to judgment; -------- (d) Foreclosure. Foreclose or otherwise enforce any Lien granted to the ----------- Lender to secure payment and performance of the Obligations in accordance with the terms of the Loan Documents; or (e) Rights. Exercise any and all rights and remedies afforded by the laws ------ of the State of Colorado (including, without limitation, all rights and remedies of a secured creditor under the UCC or any other jurisdiction, by any of the Loan Documents, by equity or otherwise; provided, however, that upon (i) the occurrence of an Event of Default under Section10.1(e) or Section 10.1(f), the Term Loans Commitment shall immediately and automatically terminate, and the outstanding principal of and accrued and unpaid interest on the Loans and all other amounts payable by the Borrower under the Loan Documents shall thereupon become immediately and automatically due and payable without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, protest or other formalities of any kind, all of which are hereby expressly waived by the Borrower. Section 10.3 Performance by the Lender, etc.. If the Borrower shall fail ------------------------------- to perform any covenant or agreement in accordance with the terms of the Loan Documents, the Lender may perform or attempt to perform such covenant or agreement on behalf of the Borrower. In such event, the Borrower shall, at the request of the Lender, promptly pay any amount expended by the Lender in connection with such performance or attempted performance to the Lender, together with interest thereon at the applicable Default Rate from and including the date of such expenditure to but excluding the date such expenditure is paid in full. Notwithstanding the foregoing, it is expressly agreed that Lender shall not have any liability or responsibility for the performance of any obligation of the Borrower or any other Person under this Agreement or any of the other Loan Documents. ARTICLE 11 Miscellaneous Section 11.1 Expenses. The Borrower hereby agrees, on demand, to pay or -------- reimburse the Lender for paying: (a) all reasonable out-of-pocket costs and expenses accrued in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents, and any and all waivers, amendments, modifications, renewals, extensions and supplements thereof and thereto requested by the Borrower, including, without limitation, the reasonable fees and expenses of legal counsel, (b) all out-of-pocket costs and expenses of the Lender in connection with any Default, the exercise of any right or remedy and the enforcement of this Agreement 35 or any other Loan Document or any term or provision hereof or thereof, including, without limitation, the fees and expenses of all legal counsel for the Lender, (c) all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any Governmental Authority in respect of this Agreement or any of the other Loan Documents, (d) all costs, expenses, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any Lien contemplated by this Agreement or any other Loan Document, and (e) all reasonable out-of-pocket costs and expenses incurred in connection with due diligence, computer services, copying, appraisals, environmental audits, collateral audits, field exams, insurance, consultants and search reports. Section 11.2 Indemnification. THE BORROWER HEREBY AGREES TO INDEMNIFY THE --------------- LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES), CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' AND CONSULTANTS' FEES) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE EXERCISE OF ANY FORECLOSURE RIGHT OR OTHER RIGHT OR REMEDY WHETHER OR NOT SUCH EXERCISE IS IN COMPLIANCE WITH LAWS AFFECTING OTHER PERSONS OR RESULTS IN DAMAGES PAYABLE TO OTHER PERSONS, (B) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY THE BORROWER OF ANY REPRESENTATION, WARRANTY, COVENANT OR OTHER AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS, (D) THE USE OR PROPOSED USE OF ANY LOAN, (E) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL OR CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN OR AFFECTING ANY OF THE PROPERTIES OF THE BORROWER OR ANY OF ITS AFFILIATES, EXCEPT TO THE EXTENT THAT THE LOSS, DAMAGE OR CLAIM IS THE DIRECT RESULT OF AN INTENTIONAL AND AFFIRMATIVE ACT BY THE PERSON TO BE INDEMNIFIED THAT CONSTITUTES GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH PERSON, OR (F) ANY INVESTIGATION, LITIGATION OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION OR OTHER PROCEEDING RELATING TO ANY OF THE FOREGOING; BUT EXCLUDING ANY OF THE FOREGOING TO THE EXTENT CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON TO BE INDEMNIFIED. WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR OF ANY OTHER LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION 11.2 SHALL BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES), CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON. WITHOUT PREJUDICE TO THE SURVIVAL OF ANY OTHER TERM OR PROVISION OF THIS AGREEMENT, THE OBLIGATIONS OF THE BORROWER UNDER THIS SECTION 11.2 SHALL SURVIVE THE REPAYMENT OF THE LOANS AND OTHER OBLIGATIONS AND TERMINATION OF THE TERM LOANS COMMITMENT. Section 11.3 Limitation of Liability. Neither the Lender nor any ----------------------- Affiliate, officer, director, employee, attorney or agent thereof shall be liable for any error of judgment or act done in good faith in relation to this Agreement or the other Loan Documents, or be otherwise liable or responsible under any circumstances whatsoever (including such Person's negligence), except for such Person's gross negligence or willful misconduct. Neither the Lender nor any Affiliate, officer, director, employee, attorney or agent thereof shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue any of them upon, any claim for any special, indirect, incidental or consequential damages suffered or incurred by the Borrower or any Affiliate of the Borrower in connection with, arising out of or in any way related to this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this 36 Agreement or any of the other Loan Documents. The Borrower hereby waives, releases and agrees not to sue the Lender or any of its Affiliates, officers, directors, employees, attorneys or agents for exemplary or punitive damages in respect of any claim in connection with, arising out of or in any way related to this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents. For the avoidance of doubt, the foregoing shall not operate to release the Lender in its capacity as the Vendor from any of its obligations, liabilities, agreements, indemnities and duties under the Project Contract. Section 11.4 No Duty. All attorneys, accountants, appraisers and other ------- professional Persons and consultants retained by the Lender shall have the right to act exclusively in the interest of the Lender and shall have no duty of disclosure, duty of loyalty, duty of care or other duty or obligation of any type or nature whatsoever to the Borrower or any of its Affiliates or any other Person. Section 11.5 No Fiduciary Relationship. The relationship between the ------------------------- Borrower and the Lender under this Agreement is solely that of debtor and creditor, and the Lender has no fiduciary or other special relationship with the Borrower or any of its Affiliates by virtue of this Agreement, and no term or condition of this Agreement shall be construed so as to deem the relationship between the Borrower and the Lender, or such Affiliate and the Lender, to be other than that of debtor and creditor. No joint venture or partnership is created by this Agreement or the Loan Documents between the Borrower or any of its Affiliates and the Lender. Section 11.6 Equitable Relief. The Borrower recognizes that, in the event ---------------- it fails to pay, perform, observe or discharge any or all of the Obligations, any remedy at law may prove to be inadequate relief to the Lender. The Borrower therefore agrees that the Lender, if the Lender so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. Section 11.7 No Waiver; Cumulative Remedies. No failure on the part of ------------------------------ the Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement or any other Loan Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided for in this Agreement and the other Loan Documents are cumulative and not exclusive of any rights and remedies provided by law. Section 11.8 Successors and Assigns. ---------------------- (a) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Except to the extent provided in Section 9.2, the Borrower may not assign or transfer any of its rights or obligations under this Agreement or any other Loan Document without the prior written consent of the Lender. The Lender may sell participations in all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of the Term Loans Commitment and the Term Loans owing to it); provided, however, that (i) the Lender's obligations under this Agreement and the other Loan Documents (including, without limitation, the Term Loans Commitment) shall remain unchanged, (ii) the Lender shall remain solely responsible to the Borrower for the performance of such obligations and (iii) the Borrower shall continue to deal solely and directly with the Lender in connection with the Lender's rights and obligations under this Agreement and the other Loan Documents. (b) The Borrower and the Lender agree that the Lender may at any time assign to one or more Eligible Assignees all, or a proportionate part of all, of its rights and/or obligations under this Agreement and the other Loan Documents (including, without limitation, the Term Loans Commitment and/or Loans) (each an "Assignee"); provided, however, that (i) each such assignment may be of a -------- varying percentage of the Lender's rights and/or obligations under this Agreement and the other Loan Documents and may relate to some but not all of such rights and/or obligations, (ii) except in the case of an assignment of all of the Lender's rights and obligations under this Agreement and the other Loan Documents, the amount of the Term Loans Commitment and/or Loans being assigned pursuant to each assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than the lesser of an amount equal to $750,000 calculated based upon the aggregate amount of the Term Loans Commitment and/or Loans assigned, (iii) the parties to each such assignment shall execute and record in the Register (as defined below), an Assignment and Acceptance and (iv) no assignment shall result in the Borrower having greater liabilities under the Loan Documents than would have been the case had no such assignment occurred. Upon such execution and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution 37 thereof or such other date as the Lender may determine, (1) the Assignee thereunder shall automatically become a party hereto and references herein to the Lender, to the extent that rights and obligations hereunder have been assigned to such Assignee pursuant to such Assignment and Acceptance, also refer to such Assignee and such Assignee shall have the rights and obligations of the Lender hereunder and under the Loan Documents, and (2) the Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement and the other Loan Documents (and, in the case of an Assignment and Acceptance covering all or the remaining portion of the Lender's rights and obligations under the Loan Documents, the Lender shall cease to be a party thereto, provided that the Lender's rights under Article 4, Section 11.1 and Section 11.2 accrued through the date of assignment shall continue). Notwithstanding anything to the contrary contained in this Section 11.8, the Lender will not assign any of the Term Loans Commitment or Loans in accordance with this Section 11.8(b) until the earliest to occur of (x) May 31, 2001, (y) the date upon which Term Loans aggregating at least $1,000,000.00 in principal amount have been advanced to the Borrower or (z) the occurrence of an Event of Default. The Borrower will provide full and prompt assistance to the Lender as it may reasonably request from time to time in connection with the Lender's efforts to assign the Term Loans Commitment and/or Loans or sell any participation interest thereinwith each party bearing its own expense in connection with the matter. Such assistance shall include, without limitation, making senior officers of the Borrower available for meetings with prospective Assignees and participants and providing (in a timely manner) such assistance as may be reasonably requested by the Lender and/or its advisors, including, without limitation, providing information to and responding to inquiries from such prospective Assignees and participants with respect to the businesses, operations, business plan, financial condition and results of operations of the Borrower and its Subsidiaries. (c) By executing and delivering an Assignment and Acceptance, the Lender and the Assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, the Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any other instrument or document furnished pursuant thereto; (ii) the Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition or results of operations of the Borrower or any of its Affiliates or the performance or observance by the Borrower or any of its Affiliates of its obligations under the Loan Documents; (iii) such Assignee confirms that it has received a copy of the Loan Documents, together with copies of the financial statements referred to in Section 7.7 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such Assignee will, independently and without reliance upon the Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents; (v) such Assignee confirms that it is an Eligible Assignee; (vi) such Assignee appoints and authorizes the Lender to take such action as agent on its behalf and exercise such powers under the Loan Documents as are delegated to the Lender by the terms thereof, together with such powers as are reasonably incidental thereto; and (vii) such Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a lender hereunder, and without limiting the generality of the foregoing, acknowledges and agrees to be bound by Section 10.8(b)(iv). (d) The Lender shall maintain at the Principal Office a copy of each Assignment and Acceptance and a register for the recordation of the names and addresses of the Assignees and the principal amount of the Term Loans owing to the Lender (the "Register"). The entries in the Register shall be conclusive -------- and binding for all purposes, absent manifest error, and the Borrower, and each Person whose name is recorded in the Register may be treated as a lender hereunder for all purposes under the Loan Documents. The Register shall be available for inspection by the Borrower or any lender at any reasonable time and from time to time upon reasonable prior notice. For purposes of Section 11.08(c) and this Section 11.08(d), the term "lender" means any assignee assuming any of the rights, privileges or obligations of the Lender hereunder. (e) Upon due execution of an Assignment and Acceptance, executed by the Lender and Assignee representing that it is an Eligible Assignee, and due delivery of such Assignment and Acceptance, the Lender shall record the information contained therein in the Register, and give prompt written notice thereof to the Borrower. 38 (f) The Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 11.8, disclose to the Assignee or participant or proposed Assignee or participant any information relating to the Borrower or any of its Affiliates furnished to the Lender by or on behalf of the Borrower or any of its Affiliates; provided that each such actual or proposed Assignee or participant shall agree to be bound by the provisions of Section 11.20. (g) The Lender may assign and pledge any Loan held by it to any Federal Reserve Bank or the U.S. Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve System and/or Federal Reserve Bank; provided, however, that any payment made by the Borrower for the benefit of the Lender in accordance with the terms of the Loan Documents shall satisfy the Borrower's obligations under the Loan Documents in respect thereof to the extent of such payment. No such assignment and/or pledge shall release the Lender from its obligations hereunder. Section 11.9 Survival. All representations and warranties made or deemed -------- made in this Agreement or any other Loan Document or in any document, statement or certificate furnished in connection with this Agreement shall survive the execution and delivery of this Agreement and the other Loan Documents and the making of the Loans, and no investigation by the Lender or any closing shall affect the representations and warranties or the right of the Lender to rely upon them. Without prejudice to the survival of any other obligation of the Borrower hereunder, the obligations of the Borrower under Article 4 and Sections 11.1 and 11.2 shall survive repayment of the Term Loans and the Reimbursement Obligations and the other Obligations. Section 11.10 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN ---------------- DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, TERM SHEETS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO. Section 11.11 Amendments. No amendment or waiver of any provision of this ---------- Agreement or any other Loan Document to which the Borrower is a party, nor any consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be agreed or consented to by the Lender and the Borrower in writing, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 11.12 Maximum Interest Rate. --------------------- (a) No interest rate specified in this Agreement or any other Loan Document shall at any time exceed the Maximum Rate. If at any time the interest rate for any Obligation (the "Contract Rate") shall exceed the Maximum Rate, ------------- thereby causing the interest accruing on such Obligation to be limited to the Maximum Rate, then any subsequent reduction in the Contract Rate for such Obligation shall not reduce the rate of interest on such Obligation below the Maximum Rate until the aggregate amount of interest accrued on such Obligation equals the aggregate amount of interest which would have accrued on such Obligation if the Contract Rate for such Obligation had at all times been in effect. (b) Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, none of the terms and provisions of this Agreement or the other Loan Documents shall ever be construed to create a contract or obligation to pay interest at a rate in excess of the Maximum Rate; and Lender shall not charge, receive, take, collect, reserve or apply, as interest on the Obligations, any amount in excess of the Maximum Rate. The parties hereto agree that any interest, charge, fee, expense or other obligation provided for in this Agreement or in the other Loan Documents which constitutes interest under applicable law shall be, ipso facto and under any and all circumstances, limited or reduced to an amount equal to the lesser of (i) the amount of such interest, charge, fee, expense or other obligation that would be payable in the absence of this Section 11.12(b) or 39 (ii) an amount, which when added to all other interest payable under this Agreement and the other Loan Documents, equals the Maximum Rate. If, notwithstanding the foregoing, the Lender ever contracts for, charges, receives, takes, collects, reserves or applies as interest any amount in excess of the Maximum Rate, such amount which would be deemed excessive interest shall be deemed a partial payment or prepayment of principal of the Obligations and treated hereunder as such; and if the Obligations, or applicable portions thereof, are paid in full, any remaining excess shall promptly be paid to the Borrower. In determining whether the interest paid or payable, under any specific contingency, exceeds the Maximum Rate, the Borrower, and the Lender shall, to the maximum extent permitted by applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as interest, (ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize, prorate, allocate and spread in equal or unequal parts the total amount of interest throughout the entire contemplated term of the Obligations, or applicable portions thereof, so that the interest rate does not exceed the Maximum Rate at any time during the term of the Obligations; provided that, if the unpaid principal balance is paid and performed in full prior to the end of the full contemplated term thereof, and if the interest received for the actual period of existence thereof exceeds the Maximum Rate, the Lender, as appropriate, shall refund to the Borrower the amount of such excess and, in such event, the Lender shall not be subject to any penalties provided by any laws for contracting for, charging, receiving, taking, collecting, reserving or applying interest in excess of the Maximum Rate. Section 11.13 Notices. All notices and other communications provided for ------- in this Agreement and the other Loan Documents to which the Borrower is a party shall be given or made by telecopy or in writing and telecopied, mailed by certified mail return receipt requested or delivered to the intended recipient at the "Address for Notices" specified in Schedule 11.3 (or, with respect to a ---- Lender that becomes a party to this Agreement pursuant to an assignment made in accordance with Section 11.8, in the Assignment and Acceptance executed by it); or, as to any party, at such other address as shall be designated by such party in a notice to each other party given in accordance with this Section 11.13. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopy or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. Section 11.14 GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF ----------------------------------------------------- PROCESS. EXCEPT AS MAY BE EXPRESSLY STATED TO THE CONTRARY IN CERTAIN LOAN - ------- DOCUMENTS, THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO (WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES) AND APPLICABLE LAWS OF THE U.S. THE BORROWER HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF EACH OF (1) THE U.S. DISTRICT COURT FOR THE DISTRICT OF COLORADO, AND (2) ANY COLORADO STATE COURT SITTING IN THE CITY AND COUNTY OF DENVER, COLORADO, FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO SUCH PERSON AT ITS ADDRESS SET FORTH IN SCHEDULE 11.3 HERETO. THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORM. Section 11.15 Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 11.16 Severability. Any provision of this Agreement held by a ------------ court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Agreement and the effect thereof shall be confined to the provision held to be invalid or illegal. Section 11.17 Headings. The headings, captions and arrangements used in -------- this Agreement are for convenience only and shall not affect the interpretation of this Agreement. 40 Section 11.18 Construction. The Borrower and the Lender each acknowledge ------------ that it has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement and the other Loan Documents with its legal counsel and that this Agreement and the other Loan Documents shall be construed as if jointly drafted by the parties hereto. Section 11.19 Independence of Covenants. All covenants hereunder shall be ------------------------- given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default if such action is taken or such condition exists. Section 11.20 [Intentionally Omitted] Section 11.21 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY -------------------- APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF THE BORROWER, THE LENDER IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT THEREOF. Section 11.22 Approvals and Consent. Except as may be expressly provided --------------------- to the contrary in this Agreement or in the other Loan Documents (as applicable), in any instance under this Agreement of the other Loan Documents where the approval, consent or exercise of judgment of the Lender is requested or required, (a) the granting or denial of such approval or consent and the exercise of such judgment shall be within the sole discretion of the Lender, respectively, and the Lender shall not, for any reason or to any extent, be required to grant such approval or consent or to exercise such judgment in any particular manner, regardless of the reasonableness of the request or the action or judgment of the Lender, and (b) no approval or consent of the Lender shall in any event be effective unless the same shall be in writing and the same shall be effective only in the specific instance and for the specific purpose for which given. Section 11.23 Agent for Services of Process. The Borrower irrevocably ----------------------------- consents to the service of process by the mailing thereof by the Lender by registered or certified mail, postage prepaid, to the Borrower at its address listed on the address for notices in Schedule __ hereof. The Borrower further agrees that the failure of the actual recipient of such service of process to give any notice of any such service of process to the Borrower shall not impair or affect the validity of such service or of any judgment based thereon. Nothing in this Section 11.23 shall affect the right of the Lender to serve legal process in any other manner permitted by law or affect the right of the Lender to bring any action or proceeding against the Borrower or its Property in the court of any jurisdiction. Signature page follows - ---------------------- 41 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. BORROWER: EARTHWATCH INCORPORATED By: /s/ Henry E. Dubois ---------------------------------------- Name: Henry E. Dubois Title: Chief Financial Officer LENDER: BALL AEROSPACE & TECHNOLOGIES CORP. By: /s/ Eugene P. Morgan ---------------------------------------- Name: Eugene P. Morgan Title: SVP of Ball Aerospace & Technologies Corp. 42 Schedule 11.3 Address for Notices: ------------------- Borrower: EarthWatch Incorporated 1900 Pike Road Longmont, Colorado 80501-6700 Telecopy No.: (303) 682-3848 Telephone No.: (303) 682-4927 Attention: Shawn Thompson Lender: Ball Aerospace & Technologies Corp. 1600 Commerce Street Boulder, CO 80301 Telecopy No.: (303) 939-6630 Telephone No.: (303) 939-4774 Attention: President with a copy of such notice to: Ball Aerospace & Technologies Corp. Ball Corporate Headquarters - Law Department 10 Longs Peak Drive Broomfield, Colorado 80021-2510 Telecopy No.: (303) 460-2691 Telephone No.: (303) 462-2586 Attention: General Counsel 43 -----END PRIVACY-ENHANCED MESSAGE-----