-----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, KTI8wLSvkwWDXLFkPaLluEktNt4+o1EwlFjonpQMPgKMRWyQu83a1M8QkVcYzNdm 4gV39XFbcsu8gr3bAp3/ww== 0000950123-97-002055.txt : 19970311 0000950123-97-002055.hdr.sgml : 19970311 ACCESSION NUMBER: 0000950123-97-002055 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970310 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOBALSTAR TELECOMMUNICATIONS LTD CENTRAL INDEX KEY: 0000933401 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 133795510 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-25456 FILM NUMBER: 97553794 BUSINESS ADDRESS: STREET 1: 600 THIRD AVENUE STREET 2: 36TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126971105 MAIL ADDRESS: STREET 1: 600 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10016 10-K 1 GLOBALSTAR TELECOMUNICATIONS LIMITED 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ------------------------ FORM 10-K ------------------------ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 Commission File Number 0-25456 ------------------------ GLOBALSTAR TELECOMMUNICATIONS LIMITED Cedar House 41 Cedar Avenue Hamilton HM12, Bermuda Telephone: (441) 295-2244 Jurisdiction of incorporation: Bermuda IRS identification number: 13-3795510 ------------------------ Securities registered pursuant to Section 12(g) of the Act:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ----------------------------------------- ---------------------- Common stock, $1.00 par value....................................... Nasdaq National Market
------------------------ The registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days. Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is contained in the registrant's 1997 definitive proxy statement. As of February 21, 1997, there were 10,000,000 shares of Globalstar Telecommunications Limited Common Stock outstanding, and the aggregate market value of such shares (based on the closing price on the Nasdaq National Market) held by non-affiliates of the registrant was approximately $522 million. ------------------------ DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's 1997 definitive proxy statement are incorporated by reference into Part III. ================================================================================ 2 PART I ITEM 1. BUSINESS GENERAL DESCRIPTION OF BUSINESS On November 23, 1994, Globalstar Telecommunications Limited ("GTL" or the "Company") was incorporated as an exempted company under the Companies Act 1981 of Bermuda. On February 14, 1995, GTL completed an initial public offering of 10,000,000 shares of common stock. Effective February 22, 1995, GTL purchased 10,000,000 ordinary partnership interests from Globalstar, L.P. ("Globalstar"), a development stage limited partnership. At December 31, 1996, GTL had a 21.3% ownership interest in the ordinary partnership interests of Globalstar, and its sole business is acting as a general partner in Globalstar. Globalstar was founded by Loral Corporation ("Old Loral") and QUALCOMM Incorporated ("Qualcomm"). Effective April 23, 1996, a merger between Old Loral and Lockheed Martin Corporation ("Lockheed Martin") was completed. In conjunction with the merger, Old Loral's space and communications businesses, including its direct and indirect interests in Globalstar, GTL, Space Systems/Loral, Inc. ("SS/L") and other affiliated businesses, as well as certain other assets and liabilities, have been transferred to Loral Space & Communications Ltd. ("Loral"), a Bermuda company. Globalstar is a Delaware limited partnership whose managing general partner is Loral/QUALCOMM Satellite Services, L.P. ("LQSS"); the general partner of LQSS is Loral/QUALCOMM Partnership, L.P. ("LQP"), a Delaware limited partnership comprised of subsidiaries of Loral and Qualcomm. The managing general partner of LQP is Loral General Partner, Inc., a Loral subsidiary. Recent Developments On February 13, 1997, Globalstar and GTL sold units consisting of $500 million aggregate principal amount of Globalstar's 11 3/8% Senior Notes due 2004 and warrants to purchase 1,032,250 shares of GTL common stock in a private offering. The net proceeds of approximately $484 million will be used for the construction and deployment of Globalstar's low-earth orbit satellite-based digital telecommunications system (the "Globalstar System(TM)"). On February 12, 1997, GTL and the holders of warrants issued to guarantors of Globalstar's Credit Agreement entered into an arrangement under which GTL agreed to accelerate the vesting and exercisability of the warrants to purchase 4,185,318 shares of GTL common stock at $26.50 per share and the holders agreed to exercise such warrants. GTL also agreed to register for resale the GTL common stock issuable upon exercise of the warrants. In addition, GTL announced its intention to distribute to the holders of its common stock rights to subscribe for and purchase 1,131,168 GTL shares for a price of $26.50 per share. Loral agreed to purchase all shares not purchased upon exercise of the rights. Upon the exercise of the warrants and the rights, GTL will receive proceeds of approximately $140.9 million, which it will use to exercise warrants to purchase 5,316,486 Globalstar ordinary partnership interests at $26.50 per interest. Globalstar will use such proceeds for the construction of the Globalstar System. BUSINESS SEGMENT Globalstar plans to operate in one industry segment, telecommunications. BUSINESS BUSINESS OVERVIEW The Globalstar System is designed to enable local service providers to offer low-cost, high quality wireless voice telephony and data services in virtually every populated area of the world. To date, Globalstar's designated service providers have agreed to offer Globalstar service and seek to obtain all necessary local regulatory approvals in more than 100 different nations, accounting for approximately 88% of the world's population. 1 3 The Globalstar System's worldwide coverage is designed to enable its service providers to extend modern telecommunications services to millions of people who currently lack basic telephone service and to enhance wireless telecommunications in areas underserved or not served by existing or future cellular systems, providing a telecommunications solution in parts of the world where the build-out of terrestrial systems cannot be economically justified. The Globalstar System has been designed to provide services at prices comparable to today's cellular service and substantially lower than the prices announced by Globalstar's anticipated satellite-based competitors. Globalstar service providers will set their own retail pricing in their assigned service territories and will pay Globalstar approximately $0.35 to $0.55 per minute on a wholesale basis. Globalstar users will make and receive calls through a variety of Globalstar phones, including hand-held and vehicle-mounted units similar to today's cellular telephones, fixed telephones similar either to phone booths or ordinary wireline telephones, and data terminals and facsimile machines. Dual-mode and tri-mode Globalstar Phones will provide access to both the Globalstar System and the subscriber's land-based cellular service. Each Globalstar Phone will communicate through one or more satellites to a local Globalstar service provider's interconnection point (known as a gateway) which will, in turn, connect into existing telecommunications networks. As of February 1997, each of the elements of the Globalstar System -- space and ground segments, digital communications technology, handset supply, service provider arrangements and licensing -- is on schedule to begin launching satellites in the second half of 1997, to commence commercial operations in the second half of 1998 and to have a full constellation of 48 operational satellites, plus eight in-orbit spares, launched by the end of 1998: Space Segment. The first Globalstar satellite has been fully-assembled and is now in pre-flight testing, and another four satellites are currently being assembled. Production is proceeding on schedule for the remaining satellites. Three different launch providers have signed definitive agreements for the launch of the Globalstar satellite constellation, providing a variety of launch options and considerable launch flexibility. Mission operations preparations and launch vehicle production and dispenser development are on schedule. Ground Segment. The first four Globalstar gateways, which are currently in advanced development and are to be located in Australia, France, South Korea and the United States, are currently under construction. These gateways will support Globalstar's data network, monitor the initial launch and orbital placement of Globalstar's first satellites, and serve as prototypes for production gateways that will support Globalstar service. In addition, Globalstar's Satellite Operations Control Center ("SOCC") facility has been completed. Digital Communications Technology. Qualcomm's Code Division Multiple Access ("CDMA") technology has now been successfully deployed in South Korea, Hong Kong and cities in the United States supporting terrestrial personal communications services ("PCS") and digital cellular service, and its CDMA implementation for Globalstar has been successfully demonstrated in a simulated satellite environment. This demonstration validated Globalstar's encoding, modulation, control software, time and frequency distribution and up/down links between satellites and handsets. Handset Supply. Qualcomm and two other manufacturers, Ericsson and TELITAL, are on schedule in their design and development of Globalstar's handset. Service Providers. Globalstar and its partners have been seeking alliances with service providers throughout the world and have entered into a number of agreements in specific territories. For example, in November 1996, ChinaSat, a subsidiary of China's Ministry of Posts and Telecommunications, agreed to act as the exclusive distributor of Globalstar services in China and to support four Globalstar gateways, the first of which is expected to be operational by 1998. Globalstar has also formed a joint venture with the principal Russian long distance carrier, Rostelecom, to provide Globalstar service in that country and is negotiating a service provider agreement with that joint venture. Globalstar believes that these relationships with in-country service providers will facilitate the granting of local regulatory approvals--particularly where, as is the case in China, the service provider and the licensing authority are one and the same--as well as providing local marketing and technical expertise. 2 4 Licensing. In January 1995, the Federal Communications Commission ("FCC") granted authority for the construction, launch and operation of the Globalstar System and assigned spectrum for its user links. Later that year, the 1995 World Radiocommunication Conference ("WRC95") allocated feeder link spectrum on an international basis for mobile satellite services ("MSS") systems such as Globalstar, and in November 1996 the FCC authorized Globalstar's feeder links. Globalstar has raised or received commitments for approximately $2.0 billion in equity, debt and vendor financing, representing 78% of the total financing currently expected to be required to complete the system and to achieve worldwide operations. As a result of several recent decisions designed to assure and upgrade system performance and maintain schedule -- including procurement of three launches on the Starsem Soyuz launch vehicle, additional communications system integration testing procedures, development of additional and enhanced service features, cost growth and other factors -- Globalstar currently estimates the cost for the design, construction and deployment of the Globalstar System, including working capital, cash interest on anticipated borrowings and operating expenses, to be approximately $2.5 billion, as compared with approximately $2.2 billion estimated at December 31, 1995. In addition, Globalstar will purchase from SS/L eight additional spare satellites at a cost of approximately $175 million. The Globalstar System has been designed to address the substantial and growing demand for telecommunications services worldwide, particularly in developing countries. More than three billion people today live without residential telephone service, many of them in rural areas where the cost of installing wireline service is prohibitively high. Moreover, even where telephone infrastructure is available in developing countries, outdated equipment often leads to unreliable local service and limited international access. The number of worldwide fixed phone lines has increased from 469 million in 1988 to 753 million in 1996 and is projected to increase to 1.2 billion by 2002. Nonetheless, during the same period, waiting lists for fixed service have increased from 30 million to 45 million, resulting in an average waiting time before installation of approximately one and a half years. Similarly, the cellular market has grown from four million worldwide subscribers in 1988 to an estimated 123 million in 1996 and is projected to increase to 334 million by 2001. At that time, it is projected that only 40% of the world's population will live in areas with cellular coverage. The remaining 60% of the world's population will have access to wireless telephone service principally through satellite-based systems like the Globalstar System. Globalstar believes that its addressable market exceeds 30 million people. The Globalstar System has been designed with attributes which Globalstar believes compare favorably to other proposed global MSS systems including: (i) Globalstar's unique combination of CDMA technology and path diversity through multiple satellite coverage, which will reduce call interruptions and signal blockage from obstructions and will use satellite power more efficiently; (ii) a proven space segment design without complex intersatellite links or on-board call processing and a ground segment with flexible, low-cost gateways and competitively priced Globalstar Phones; (iii) lower average wholesale prices than other proposed MSS systems; and (iv) gateways installed in most major countries, minimizing tail charges (i.e. amounts charged by carriers other than the Globalstar service provider for connecting a Globalstar call through its network), resulting in low costs for domestic and regional calls, which will account for the vast majority of Globalstar's anticipated usage. Loral is a principal founder of Globalstar and, through a subsidiary, is its managing general partner. Following the exercise of the warrants issued to guarantors of Globalstar's credit agreement, Loral will have invested $269 million directly and indirectly in Globalstar and will own, directly or indirectly, 33.8% of Globalstar, on a fully diluted basis. Other Globalstar strategic partners include leading domestic and international telecommunications service providers and space and telecommunications equipment manufacturers who have invested an additional $210 million in equity and, together with Loral, committed or obtained $310 million in vendor financing for Globalstar. In addition, Loral, Lockheed Martin and certain strategic partners have guaranteed Globalstar's obligations under the Globalstar credit agreement for which they received warrants to purchase GTL common stock. 3 5 GLOBALSTAR STRATEGIC PARTNERS Globalstar has selected strategic partners whose marketing, operating and technical expertise will enhance Globalstar's capabilities. These partners are playing key roles in the construction, operation and marketing of the Globalstar System. Globalstar's founding partners are Loral and Qualcomm, the leading supplier of CDMA digital telecommunications technology. Globalstar's other strategic partners are:
TELECOMMUNICATIONS TELECOMMUNICATIONS EQUIPMENT SERVICE PROVIDERS AND AEROSPACE SYSTEMS MANUFACTURERS ----------------------------------------------- --------------------------------------- - AirTouch - Alcatel - Dacom - Alenia - France Telecom - DASA - Vodafone - Finmeccanica - Hyundai - SS/L
SS/L is providing the system's satellites under a fixed-price contract that also requires SS/L to obtain launch services and launch insurance. Qualcomm is designing and will manufacture Globalstar Phones and gateways and certain ground support equipment. BUSINESS STRATEGY Globalstar's strategy for successful operation is based upon: (i) providing potential users worldwide with high quality telecommunications services, (ii) employing a system architecture designed to minimize cost and technological risks and (iii) leveraging the marketing, operating and technical capabilities of its strategic partners. WORLDWIDE HIGH QUALITY SERVICE To achieve rapid and sustained customer acceptance of the system, the Globalstar System has been designed to provide a high quality, worldwide service that combines the best of existing cellular service with the technological advantages of the Globalstar System as described herein to meet the needs of individual end users. Worldwide Coverage and Access. The Globalstar System's worldwide coverage has been designed to enable its service providers to extend modern telecommunications services rapidly and economically to significant numbers of people who currently lack basic telephone services and to enhance wireless telecommunications in areas underserved or not served by existing or contemplated cellular systems. Globalstar expects to provide a communications solution in parts of the world where the build-out of terrestrial systems cannot be economically justified. The Globalstar System has also been designed to enable international travelers to make and receive calls at a unique telephone number through their mobile Globalstar Phone anywhere in the world where Globalstar service is authorized by local regulatory authorities. Multiple Satellite Coverage; Soft Handoff. CDMA digital communications technology combined with continuous multiple satellite coverage and signal path diversity (a patented SS/L method of signal reception not available to competing systems) will enable the Globalstar System to provide service to a wide variety of locations, with less potential for signal blockage from buildings, terrain or other natural features. Globalstar Phones have been designed to operate with a single satellite in view, although typically signals from two to four satellites overhead will be combined to provide service. Therefore, the loss of an individual satellite is not expected to result in any gap in global coverage. Each mobile Globalstar Phone has been designed to communicate with as many as three satellites simultaneously, combining the signals received to ensure maximum service quality. As satellites are constantly moving in and out of view, they will be seamlessly added to and removed from the calls in progress, thereby reducing the risk of call interruption. Superior Call Quality; Increased Privacy. Based on terrestrial simulations of the Globalstar System, Globalstar expects that Qualcomm's CDMA digital technology will enable Globalstar to provide digital voice 4 6 services which will have clarity, quality and privacy similar to those of existing digital land-based cellular systems. Qualcomm's CDMA technology, which is available to Globalstar on an exclusive basis for commercial MSS applications, has also been selected for digital cellular service by 12 of the 15 largest U.S. cellular service providers and the two largest holders of PCS services in the U.S. (by population served). Efficient Use of Satellite Resources. The Globalstar System's use of multiple satellites to communicate with each Globalstar Phone (a patented SS/L method of signal reception not available to competing systems) has been designed to allow its communications signals to bypass obstructions. Path diversity is expected to permit Globalstar to maintain its desired level of service quality while using less power and satellite resources than would be required in a system using single path satellites, which attempt to penetrate obstructions by using higher single satellite power and overall higher link margins. No Voice Delay. Globalstar satellites' low-earth orbit ("LEO") of 750 nautical miles is expected to result in no perceptible voice delay, as compared with the noticeable time delay of calls utilizing geosynchronous satellites, which orbit at an altitude of 22,500 nautical miles. Globalstar believes that its system will also entail noticeably less voice delay than medium orbit MSS systems and, in many cases, than LEO systems requiring on-board satellite call processing to support satellite-to-satellite switching systems. EMPLOYING A SYSTEM ARCHITECTURE DESIGNED TO MINIMIZE COST AND RISK Simple, Cost-Effective System Architecture. To achieve low cost, reduce technological risk and accelerate its deployment, Globalstar has devised a system architecture using small satellites incorporating well-established design features, and located the system's call processing and switching operations on the ground, where they are accessible for maintenance and can benefit from continuing technological advances. Hand-held and vehicle-mounted Globalstar Phones are anticipated to be priced comparably and will be similar in function to current digital cellular telephones. Dual-mode and tri-mode Globalstar Phones will be able to access both Globalstar and a variety of local land-based analog and digital cellular services, where available. Multiple manufacturers will be licensed to manufacture Globalstar Phones in order to promote competition and reduce prices. Globalstar gateways have been competitively priced in order to encourage the placement of one or more gateways in each country served, thus reducing tail charges for the terrestrial portion of each call. Low-Cost Service. Globalstar intends to offer its service providers effective average prices substantially lower than those announced by its anticipated principal competitors. Globalstar's service providers will set their own retail pricing and will pay to Globalstar wholesale prices generally expected to range between $0.35 and $0.55 per minute. Another proposed satellite-based system has proposed retail pricing of more than $3.00 per minute. As a result of its pricing commitments to its service providers or as a result of competitive pressures, Globalstar may not be in a position to pass on to its service providers unexpected increases in the cost of constructing the Globalstar System. However, Globalstar believes that its low system and operating costs and high gross margins at target pricing and usage levels provide it with substantial additional pricing flexibility if necessary to meet competition. Simple Space Segment of Proven Design. Globalstar believes its system will cost less to design and construct and may be the first of the proposed worldwide systems to provide commercial service. To achieve low cost, reduce technological risk and accelerate deployment of the Globalstar System, Globalstar's system architecture uses small satellites incorporating a well-established repeater design that acts essentially as a simple "bent pipe," relaying signals received directly to the ground. All of the system's call processing and switching operations are on the ground, where they are accessible for maintenance and can benefit from continuing technological advances. The Globalstar space segment is being manufactured under a fixed-price contract with SS/L. The contract provides for the construction of 56 satellites meeting designated performance specifications and for SS/L to obtain launch services and launch insurance. Flexible, Low-Cost Ground Segment. Globalstar has been designed to offer local governments and service providers affordable telephone infrastructure where the cost of build-out of land-based wireline or wireless telephone systems is either too great or not economically justifiable. By purchasing a single gateway for approximately $3 million to $8 million (depending on the capacity desired), a service provider can extend basic telephone service to fixed terminals on a national basis in countries as large as Saudi Arabia and mobile 5 7 service to cover an area almost as large as Western Europe. As a result of the low cost of its gateways, Globalstar expects that its service providers will install gateways in most of the major countries in which they offer service. Each country with a Globalstar gateway will have access to domestic service without the imposition of international tail charges on in-country calls, thereby offering subscribers the lowest possible cost for domestic calls, which account for the vast majority of all cellular calls today. Competitively Priced Globalstar Phones. Hand-held and vehicle-mounted Globalstar Phones are anticipated to be priced comparably and will be similar in function to current digital cellular telephones. Moreover, mobile Globalstar Phones will use less power on average than conventional analog cellular telephones and are therefore expected to enjoy longer battery life. Dual-mode and tri-mode Globalstar Phones will be able to access both Globalstar and a variety of local land-based analog and digital cellular services, where available. Mobile and fixed Globalstar Phones are expected to cost less than $750 each, and Globalstar public telephone booths are expected to cost between $1,000 and $2,500, depending upon desired capacity and the number of units sharing a fixed antenna. Qualcomm is required to license three additional manufacturers of Globalstar Phones and has recently granted a license to each of Ericsson and TELITAL for such purpose; Globalstar believes that licensing multiple manufacturers will spur competition, which will reduce prices. As is the case with many cellular systems today, service providers may subsidize the cost of Globalstar Phones to generate additional usage revenue. In addition, national and local governments may subsidize some or all elements of system cost, particularly in rural areas, thereby reducing the cost of access to subscribers. LEVERAGING THE CAPABILITIES OF GLOBALSTAR'S STRATEGIC PARTNERS Loral has overall management responsibility for the design, construction, deployment and operation of the Globalstar System. Globalstar's strategic partners will play key roles in the design, construction, operation and marketing of the Globalstar System. Telecommunications service providers AirTouch, Dacom, France Telecom and Vodafone are providing in-country marketing and telephony expertise to Globalstar. Globalstar's strategic partner service providers have been granted exclusive rights to provide Globalstar service in 71 countries around the world in which they have particular marketing strength and experience and access to an established customer base of 60 million subscribers. Six additional service providers have agreed to offer Globalstar service in 32 additional countries. To maintain their service provider rights on an exclusive basis, these service providers and additional service providers are required to make minimum payments to Globalstar equal to 50% of target revenues. Based upon current targets (which are subject to adjustment in 1998 based upon an updated market analysis), such minimum payments total approximately $5 billion through 2005. In order to accelerate the deployment of gateways around the world prior to the In-Service Date, Globalstar and the service providers intend to jointly finance the procurement of 33 gateways for resale to service providers. Globalstar expects to recover its investment in this gateway financing program from such resales. There can be no assurance that the service providers will elect to retain their exclusivity and make such payments or place such orders for Globalstar Phones and gateways. Globalstar expects to add additional service providers in order to provide coverage throughout the world. Each service provider will, subject to obtaining required local regulatory approvals, market and distribute Globalstar service in its designated territories and own and operate the gateways necessary to serve its markets. Telecommunications equipment and aerospace systems manufacturers SS/L, Alcatel, Alenia, DASA, Finmeccanica and Hyundai have contracted to design, build and deploy the Globalstar System. Qualcomm, using its CDMA technology, is designing and will manufacture Globalstar Phones and gateways and has primary responsibility, along with Globalstar, for the design and implementation of the ground operations control centers ("GOCCs"). Qualcomm's CDMA technology is available to Globalstar on an exclusive basis for commercial MSS satellite applications. SS/L is performing under a fixed-price contract for the construction of Globalstar's satellites in conjunction with its alliance partners, Aerospatiale, Alcatel, DASA and Finmeccanica, and with Hyundai. 6 8 THE GLOBALSTAR SYSTEM Globalstar intends to offer low-cost, high quality telecommunications services throughout the world. The Globalstar System will be comprised of its 48-satellite LEO constellation (together with eight in-orbit spare satellites) and a Ground Segment consisting of two SOCCs and two GOCCs, Globalstar gateways in each region served, and mobile and fixed Globalstar Phones. Globalstar will own and operate the satellite constellation, the SOCCs and the GOCCs, as well as four gateways; the remaining elements of the system will be owned by Globalstar's service providers and their subscribers. The descriptions of the Globalstar System are based upon current design and are subject to modification in light of future technical and regulatory developments. Globalstar Services and Globalstar Phones. Globalstar's most important service will be voice telephony service, which Globalstar is expected to offer through telephone booth-like installations and other fixed telephones located in areas without any landline or cellular telephone coverage, and through hand-held and vehicle-mounted Globalstar Phones, similar to existing cellular telephones. Globalstar is also expected to offer paging, facsimile and messaging services and position location capabilities, which may be integrated with its voice services or marketed separately, as well as environmental and asset monitoring from remote locations and other forms of data transmission. Voice Services Based on terrestrial simulations of the Globalstar System, Globalstar expects that its digital voice services will have clarity, quality and privacy similar to those of existing digital land-based cellular systems. Moreover, the system has been designed to minimize call interruptions ("dropped calls") resulting from movements on the part of the user or the satellites. Globalstar is expected to offer the full range of voice services provided by modern land-based telephone networks, including options such as call forwarding, conferencing, call waiting, call transfer and reverse charging ("collect calls"). Globalstar's voice services will be digital in nature and therefore difficult for unauthorized listeners to intercept and decode and, as a result, will be more secure than those offered by analog systems such as existing cellular telephones. The Globalstar System will function best when there is an unobstructed line-of-sight between the user and one or more of the Globalstar satellites overhead. Competing systems without Globalstar's path diversity depend on each user maintaining contact with a single satellite. Obstacles such as buildings, trees or mountainous terrain may degrade service quality, more so than would be the case with terrestrial cellular systems, and service may not be available in the core of high-rise buildings. By planning for volume production and utilizing commercially available off-the-shelf components where possible, Globalstar expects that its Globalstar Phones, unlike those of certain other proposed MSS systems, will be priced comparably to current state-of-the-art digital cellular telephones. Qualcomm has agreed to design and manufacture a number of versions of Globalstar Phones. It has granted a license to manufacture Globalstar Phones to each of Ericsson and TELITAL and has agreed to license at commercially reasonable royalty rates at least one additional qualified Globalstar Phone manufacturer. Fixed Globalstar Phones for No-Telephone Areas. The majority of the world's population does not have access to any of the basic telephone services that are available to most residents of developed nations. Public installations of one or more Globalstar Phones, configured as telephone booths and powered by local generators or solar panels connected to a directional antenna aimed at the satellites overhead, would be important resources for remote villages currently lacking basic telephone service. Government officials, among other individuals, as well as commercial enterprises in remote areas such as mining and logging operations, are expected to utilize fixed Globalstar Phones which will operate like landline telephones, but will be connected to directional Globalstar antennas. Directional antennae also provide for more efficient use of the system's capacity. Mobile Globalstar Phones for No-Cellular Areas. In certain regions, land-based cellular systems cannot be economically justified because of their population density or geographic characteristics. As a satellite-based system with worldwide coverage, Globalstar can efficiently offer both hand-held and vehicle-mounted mobile service in these areas through its single-mode mobile Globalstar Phones. These units are expected to be 7 9 similar in function and cost to today's full-featured cellular telephones. Unlike any cellular telephone in existence today, however, these units will have the ability to operate (both for making and receiving calls) in virtually every inhabited area of the world where Globalstar service is authorized. Globalstar mobile terminals will all be equipped with omnidirectional antennas, similar to cellular telephone antennas, that connect equally well regardless of the direction in which they are pointed. Each mobile terminal will communicate with all satellites in view and will have the built-in signal processing intelligence to constantly seek out and select the strongest signal transmitted from overhead, combining the signals received to ensure maximum service quality. Further, Globalstar Phones will automatically vary their power output as necessary to maintain call quality and connectivity. As a result of this efficiently-managed power system, mobile Globalstar Phones are expected to draw less power, on average, than conventional cellular telephones and are therefore expected to enjoy longer battery life. Dual-Mode and Tri-Mode Globalstar Phones for Local and Global Roaming. Current cellular system subscribers who need a mobile telephone that also works when they travel to areas without compatible cellular coverage (or that have no cellular coverage at all) will be offered Globalstar service through dual-mode and tri-mode handsets and vehicle-mounted units. Dual-mode and tri-mode telephones will also permit the user to access Globalstar service when cellular access is temporarily blocked by interference, terrain or over-capacity. Like Globalstar's single-mode mobile telephones, dual-mode and tri-mode telephones will enable the user to make and receive calls through a unique access number anywhere in the world where service is authorized. Dual-mode and tri-mode Globalstar Phones can be programmed by the service provider to automatically utilize the chosen land-based cellular service whenever it is available and to otherwise process the call through Globalstar; they can also be programmed for manual selection between Globalstar and the land-based cellular system. Dual-mode and tri-mode Globalstar Phones are being developed for the most widely-based conventional cellular modulation. The dual-mode pairs are expected to include: Globalstar/CDMA, Globalstar/Advanced Mobile Phone Systems (AMPS) and Globalstar/Global System for Mobile Communications (GSM). Other Services Messaging and Paging Services. In addition to supporting voice services, the Globalstar System is also expected to function as a worldwide paging and alphanumeric messaging service. Hand-held or vehicle-mounted Globalstar Phones are currently being designed with a built-in paging and messaging feature that allows the user to receive a page or a short alphanumeric message while the unit is in a very-low-power "quiet listening only" mode. Separate Globalstar messaging and paging units may also be developed by Globalstar or by third party vendors. The Globalstar System can readily support these functions without taxing system resources since, as compared with voice services, messages and pages have a relatively low data content and do not require instantaneous, two-way transmission. Remote Monitoring. Globalstar data terminals integrated with automatic sensing equipment of various kinds can provide a continuous stream of valuable information concerning natural events such as weather conditions, seismic shifts and forest fires, as well as the condition of remote assets, such as oil and gas pipelines and electric utility transmission lines. Facsimile and Other Data Services. The Globalstar System is expected to support fax traffic, as well as transmissions of digital computer data. Position Location. Frequent, accurate readings of position location for large numbers of vehicles is critical information for the efficient management of fleets of trucks and railcars. Qualcomm's OmniTRACS system, which relays position location information to a central location and offers messaging capabilities, is expected to be deployed on the Globalstar System and offered to Globalstar service providers to address this need. 8 10 SATELLITE CONSTELLATION Globalstar service will be delivered through a constellation of 48 small, low-cost LEO satellites orbiting the earth in eight circular inclined planes with six satellites per plane which will provide a clear communications link with the Globalstar Phones and gateways below. Each satellite will transmit 16 spot beams, which will generate coverage cells on the surface of the Earth for links between users and gateways via the satellites. Each satellite's coverage area will have a typical diameter of 3,600 miles on the Earth's surface, resulting in an average area covered per satellite of approximately ten million square miles, an area larger than the area of China or the United States. Each spot beam will cover an average area of approximately 600,000 square miles, an area larger than that of any state in the United States or any country in Western Europe. Path Diversity from Multiple Satellites. The satellite constellation will orbit the Earth in a coordinated pattern 750 nautical miles above the surface of the Earth designed to provide users with continuous overlapping coverage from multiple satellites with diverse angles of view or "path diversity." The satellites will provide multiple-satellite global coverage in all areas of the world except for a small portion of the polar regions. This constellation and orbital plane design is expected to improve service quality significantly relative to current analog systems. LEO satellites are in constant motion overhead, relative to a user on the Earth's surface, and, as a result, the beam from the satellite transmitting a call could be blocked at any time by a building or natural obstruction, placing the user in the beam's shadow and interfering with or interrupting the call. Similar effects may occur when a mobile user changes position. Globalstar Phones can operate with a single satellite in view, although typically two to four satellites will be overhead. This supports the benefits of path diversity for mobile terminals and also means that, in contrast to medium-earth orbit ("MEO") systems with fewer satellites and competing LEO systems lacking this feature, the loss of individual satellites will usually not result in gaps in global coverage. Globalstar's mobile terminals are designed to communicate with as many as three satellites simultaneously, combining the signals received to provide improved call quality and, when another satellite moves into an optimal position, reliably "handing off" the call to such satellite without interruption. This combination of path diversity and CDMA is a patented SS/L technology designed to minimize call fading, resulting in fewer dropped calls and higher overall call quality. Low-Cost Satellites. Globalstar has chosen a satellite architecture designed to offer reliable, high quality service and minimize technological risks. Globalstar's satellites will incorporate a repeater design which will act essentially as a "bent pipe," relaying received signals directly to the ground. This design follows the proven philosophy used in all commercial communications satellites currently in operation. Globalstar's call processing and switching operations are on the ground, where they are accessible for maintenance and can benefit from continuing technological advances. By contrast, competing systems whose satellites switch calls in space from satellite to satellite require on-board digital signal processing. Globalstar believes that this design results in higher system costs and precludes the accessible maintenance and easy upgrade to reflect technological advances which Globalstar can accomplish on the ground without a need to launch replacement satellites. Globalstar also believes that such systems' inherent ability to switch international calls in space, bypassing local service providers, many of which are state-owned, may limit their desirability in the eyes of some local regulatory authorities. In addition to improving Globalstar's service quality, CDMA technology has enabled Globalstar to reduce satellite costs. Because Globalstar's spectrum modulation technology uses code division, rather than time division, to identify and process signals, its transmission timing and orbital pathways need not be so precisely controlled. Globalstar believes that the novel satellite crosslink and time division multiple access ("TDMA") duplexing technology proposed by a competitor requires additional power, transmission, timing and station-keeping capabilities which Globalstar believes have contributed to that competitor's higher total system cost. No Perceptible Voice Delay. Globalstar expects that its combination of a low-earth orbit and simple repeaters will reduce voice delays over its system to between 150 and 200 milliseconds, a delay which is not perceptible to the subscriber in a normal phone conversation. Voice delays are comprised of a propagation delay, as signals move from the Earth to the satellite and back, and processing delays on-board the satellite. By 9 11 contrast, geosynchronous satellite communications entail a noticeable voice delay of approximately 600 milliseconds. Globalstar expects, based on its own analysis, that MEO systems such as TRW, Inc.'s Odyssey system ("Odyssey") and Global Communications' ICO system ("ICO") may entail voice delays of between 250 and 300 milliseconds. Although a proposed TDMA system will have an orbit lower than Globalstar's, thus reducing propagation delay somewhat, Globalstar believes that in most cases this advantage will be more than offset by the additional processing delay entailed by the proposed TDMA system's need to decode, recode, perform echo cancellation and otherwise process signals in space and the need, in many cases, for satellite-to-satellite linkages, with additional on-board processing at each step. However, quality differentials may not be of significant competitive importance in communications markets in developing countries that currently lack even basic telephone coverage. Constellation Life. The satellites in the first-generation constellation are designed to operate at full performance for a minimum of 7 1/2 years, after which time the cumulative effects of the space environment are expected to gradually reduce operating performance. The constellation has been designed so that the loss of a few satellites will, in most cases, not result in gaps in global coverage. In order to provide additional assurance of system integrity in the event of premature satellite failure, however, Globalstar plans to launch eight spare satellites to be relocated in space as required. Depending on the level of demand for services and the remaining effective capacity of the first-generation constellation, a second generation of satellites will be designed, built and launched. Globalstar currently expects to place a second-generation constellation in service in 2004 and 2005. While the precise technical capabilities and costs of the second generation of Globalstar satellites cannot be currently foreseen, the second-generation constellation may be designed with significantly greater call capacity than the first. In connection with such an increase in call capacity, Globalstar may be required to seek additional spectrum allocations from the applicable regulatory authorities. There is no assurance that such spectrum, if requested, would be obtained. Implementation and operation of a second-generation system will also require obtaining U.S. and other regulatory authorizations, and there is no assurance that these authorizations, if requested, would be obtained. The Ground Segment Globalstar's SOCCs will track and control the satellite constellation using telemetry and command units located in various gateways around the world and telemetry stations in two locations, at least one of which will be in the United States. The SOCCs will control satellite orbit positioning, maneuvers and station keeping, and will monitor satellite health and status in all subsystems. The SOCCs will also plan and implement satellite lifecycle maintenance procedures, including orbit adjustment maneuvers. The GOCCs, which will be in continuous operation 24 hours a day, will be responsible for planning and controlling satellite utilization by gateway terminals and coordinating information received from the SOCCs. In addition to these planning functions, the GOCCs will be responsible for monitoring system performance, collecting information for billings to service providers and ensuring that the gateways do not exceed allocated system capacity. The GOCCs will be responsible for dynamically allocating system capacity among nearby regions to optimally service changing patterns of demand. The primary SOCC and primary GOCC will be located at Globalstar's headquarters, with backup facilities at another location. The gateway stations are the interconnection points between the Globalstar satellite constellation and existing land-based telecommunications networks. Each gateway will contain up to four tracking antennas and radio frequency front ends that track the satellites orbiting in their view. A typical gateway is expected to cost between $3 million and $8 million, depending upon the number of subscribers being serviced by the gateway and assuming that the gateway will be located at the site of an existing cellular or other appropriate telecommunications switch. Each nation with at least one gateway within its borders will have complete control over system access by users within its territory. A single gateway is expected to be able to provide fixed coverage over an area larger than Saudi Arabia and mobile coverage over an area almost as large as Western Europe. As a result of the low cost of its gateways, Globalstar expects that its service providers will install gateways in most of the major countries in which they offer service. Each country with a Globalstar gateway 10 12 will have access to domestic service without the imposition of international tail charges, thereby offering subscribers the lowest possible cost for domestic calls, which account for the vast majority of all cellular calls today. Full global land-based coverage of virtually all inhabited areas of the globe could theoretically be achieved with as few as 80 gateways. Globalstar believes, however, that as many as 100 gateways may be required to minimize land-based long-distance charges and to respect national boundaries. Although Globalstar has commissioned the design of the gateways to be used with the Globalstar System, ownership and operation of the gateways will be the responsibility of service providers in each country or region in which Globalstar operations are authorized. The gateway stations will be designed for Globalstar by Qualcomm and manufacturing rights will be licensed by Qualcomm to at least one third-party telecommunications equipment manufacturer. Globalstar will acquire four pre-production gateways from Qualcomm. Further, in order to accelerate the deployment of gateways around the world prior to the In-Service Date, Globalstar, Qualcomm and the strategic service providers jointly intend to finance 33 gateways for resale to service providers. GLOBALSTAR SYSTEM CAPACITY The estimated capacity of the Globalstar System is anticipated to be in the range of approximately 800 million to 1 billion call minutes per month assuming equal fixed and mobile usage. However, Globalstar's total effective system capacity will depend on a number of variables. The number of call minutes per month the system can support will depend primarily on (i) the total bandwidth available to CDMA MSS systems, (ii) the number of systems sharing that bandwidth, (iii) the total number of subscribers, (iv) the type of Globalstar Phones (fixed or mobile) they use and (v) the level of average system availability required. Capacity will also depend upon a number of other variables, including (i) the peak hour system utilization pattern, (ii) average call length and (iii) the distribution of Globalstar Phones in use over the surface of the Earth. COMPETITION Competition in the telecommunications industry is intense, fueled by rapid and continuous technological advances and alliances between industry participants on an international scale. Although no present participant is currently providing the same global personal telecommunications service proposed by Globalstar, it is anticipated that one or more additional competing MSS systems will be launched and that the success, or anticipated success, of Globalstar and its competitors could attract other entrants. If any of Globalstar's competitors succeed in marketing and deploying its system substantially earlier than Globalstar, Globalstar's ability to compete in areas served by such competitor may be adversely affected. A number of satellite-based telecommunications systems not involved in the MSS proceeding have also been proposed using geosynchronous satellites and, in one case, the 2 GHz band for a MEO system. Globalstar's most direct competitors are the two other MSS applicants which received FCC licenses, Iridium and Odyssey. ICO was not an applicant or a licensee in the MSS Proceeding or any other proceedings before the FCC; it is seeking to operate in a different frequency band not available for use by MSS systems under current international guidelines in place until 2000. Comsat, the U.S. signatory to Inmarsat, has applied to the FCC to participate in the procurement of facilities of the system proposed by ICO. It has also sought FCC approval of a proposal to extend the scope of services provided by Inmarsat, currently limited to maritime services, to include telecommunication services to land-based mobile units. These applications are currently pending before the FCC. Comsat has been instructed in the past by the U.S. government to seek to ensure that ICO does not receive preferred access to any market and that nondiscriminatory access to such areas for all mobile satellite communications networks be established, subject to spectrum coordination and availability. Nonetheless, because ICO is affiliated with Inmarsat and because its investors include the state-owned telecommunications monopolies in a number of countries, there can be no assurance that ICO might not be given preferential treatment in the local licensing process in those countries. It is also possible that one or more of the two pending MSS applicants will demonstrate financial qualifications sufficient to obtain an FCC license and become a competitor of Globalstar. Although Iridium has announced plans to launch its first 11 13 satellites within the upcoming months, Globalstar does not believe that Iridium will be in service substantially earlier than Globalstar's In-Service Date. Geostationary-based satellite systems, including American Mobile Satellite Corporation ("AMSC"), Asia Pacific Mobile Telecom ("APMT"), Afro-Asia Satellite ("ASC"), PTAsia Cellular Satellite ("ACeS"), Lockheed Martin's Satphone and Comsat's Planet-1, plan to provide satellite-based telecommunications services in areas proposed to be serviced by Globalstar. Certain of these systems are being proposed by governmental entities. Because some of these systems involve relatively simple ground control requirements and are expected to deploy no more than two satellites, they may succeed in deploying and marketing their systems before Globalstar. In addition, coordination of standards among regional geostationary systems could enable these systems to provide worldwide service to their subscriber base, thereby increasing the competition to Globalstar. It is expected that as land-based telecommunications service expands to regions currently not served by wireline or cellular services, demand for Globalstar service in those regions may be reduced. If such systems are constructed at a more rapid rate than that anticipated by Globalstar, the demand for Globalstar service may be reduced at rates higher than those assumed by Globalstar. Globalstar may also face competition in the future from companies using new technologies and new satellite systems. New technology could render Globalstar obsolete or less competitive by satisfying consumer demand in alternative ways, or through the introduction of incompatible telecommunications standards. A number of these new technologies, even if they are not ultimately successful, could have an adverse effect on Globalstar as a result of their initial marketing efforts. Globalstar's business would be adversely affected if competitors began operations or expanded existing operations in Globalstar's target markets before completion of its system. RESEARCH AND DEVELOPMENT Globalstar has entered into a contract with Qualcomm whereby Qualcomm is performing certain development tasks related to the Globalstar System. In addition, Globalstar is performing certain in-house engineering tasks that are classified as development costs. Total development expenses incurred for the years ended December 31, 1996 and 1995 and the period from March 23 (commencement of operations) to December 31, 1994 were $42 million, $63 million and $21 million, respectively. PATENTS AND PROPRIETARY RIGHTS In connection with the Globalstar System, Globalstar's design and development efforts have yielded ten patents issued and 22 patents pending in the United States, as well as four patents issued and more than 130 patents pending internationally for various aspects of communication satellite system design and implementation of CDMA technology relating to the Globalstar System. Qualcomm has obtained 87 issued patents and 251 patents pending in the United States applicable to Qualcomm's implementation of CDMA. The issued patents cover, among other things, Globalstar's process of combining signals received from multiple satellites to improve the signal received and minimize call fading. There can be no assurance that any of the pending patent applications by Globalstar will be issued. Moreover, because the U.S. patent application process is confidential, there can be no assurance that third parties, including competitors of Globalstar, do not have patents pending that could result in issued patents which Globalstar would infringe. In such an event, Globalstar could be required to redesign its system or satellite, as the case may be, or pay royalties to obtain a license, which could increase cost or delay implementation of the system or construction of the satellite, as the case may be. EMPLOYEES As of December 31, 1996, Globalstar had approximately 140 full-time employees, none of whom is subject to any collective bargaining agreement. 12 14 ITEM 2. PROPERTIES Globalstar leases approximately 56,000 square feet of office space in San Jose, California. The lease expires in August 2000, and has options to renew for up to an additional ten years. In addition, Globalstar leases 12,000 square feet for its back-up GOCC in El Dorado Hills, California. The lease expires in November 2006 and has options to renew for up to an additional six years. Globalstar believes that its facilities are adequate for its current level of business. ITEM 3. LEGAL PROCEEDINGS None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS (A) MARKET PRICE AND DIVIDEND INFORMATION GTL's common stock is traded on the Nasdaq National Market ("NNM") under the symbol "GSTRF". The following table sets forth, for each of the periods indicated, the high and low sales prices per share of common stock as reported on the NNM.
MARKET PRICE ----------------------------- 1996 1995 ------------ ------------ HIGH LOW HIGH LOW ---- --- ---- --- Quarter ended: March 31, (February 14, 1995 to March 31, 1995)........ $65 3/4 $32 $20 1/2 $14 1/4 June 30,............................................... 59 3/4 41 7/8 16 11 1/2 September 30,.......................................... 52 31 24 13 1/8 December 31,........................................... 72 47 1/4 38 1/2 17 3/4
GTL has not declared or paid any cash dividends on its common stock, and Globalstar has not made any distributions on its ordinary partnership interests. Except for interest payments by GTL on its Convertible Preferred Equivalent Obligations and distributions by Globalstar on its redeemable preferred partnership interests, GTL and Globalstar do not currently anticipate paying any such dividends or distributions (other than to the extent that Globalstar's payment of GTL's operating expenses related to Globalstar would be treated as a distribution) prior to Globalstar's Full Constellation Date and achievement of positive cash flow, which is not expected to occur until 1999. GTL is prohibited from paying dividends on its common stock as long as any interest arrears remain outstanding on its Convertible Preferred Equivalent Obligations. GTL is a holding company, the sole asset of which is its partnership interests in Globalstar; GTL has no independent means of generating revenues. Globalstar will pay GTL's operating expenses related to Globalstar; such expenses are not expected to be material. To the extent permitted by applicable law and agreements relating to indebtedness, Globalstar intends to distribute to its partners, including GTL, its net cash received from operations, less amounts required to repay outstanding indebtedness, satisfy other liabilities and fund capital expenditures and contingencies (including funds required for design, construction and deployment of the second-generation satellite constellation). The Globalstar Credit Agreement and the indenture related to the $500 million Senior Notes restrict the ability of Globalstar to pay cash distributions on its ordinary partnership interests. Cash distributions by Globalstar may also be restricted by future debt covenants. GTL intends to promptly distribute as dividends to the holders of its common stock the distributions made to it by Globalstar, less any amounts required to be retained for the payment of taxes, for repayment of any liabilities, and to fund contingencies. (B) APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK At February 21, 1997, there were approximately 390 holders of record of GTL's common stock. 13 15 ITEM 6. SELECTED FINANCIAL DATA The selected financial data has been derived from, and should be read in conjunction with the related financial statements. GLOBALSTAR TELECOMMUNICATIONS LIMITED (In thousands, except per share data)
YEARS ENDED DECEMBER 31, ------------------------- 1996 1995 ---------- ---------- STATEMENT OF OPERATIONS DATA: Equity in net loss of Globalstar, L.P................ $ 15,080 $ 12,632 Net loss............................................. 15,080 12,632 Net loss per share................................... 1.51 1.26 CASH FLOW DATA: Used in operating activities......................... -- -- Used in investing activities......................... (299,500) (185,750) Provided by equity transactions...................... -- 185,750 Provided by borrowings............................... 299,500 -- Ratio of Earnings to Fixed Charges..................... 1x N/A
DECEMBER 31, ------------------------------------ 1996 1995 1994 ---------- ---------- ------ BALANCE SHEET DATA: Investment in Globalstar, L.P........................ $ 482,676 $ 173,118 $ -- Total assets......................................... 482,676 173,118 190 Convertible preferred equivalent obligations......... 300,358 -- -- Shareholders' equity................................. 180,639 173,118 124 Shareholders' equity per share....................... 18.06 17.31 10.33
14 16 GLOBALSTAR, L.P. (In thousands, except per partnership interest amounts)
YEAR ENDED DECEMBER 31, 1994 CUMULATIVE --------------------------------- PRE-CAPITAL SUBSCRIPTION PERIOD(1) MARCH 23 MARCH 23, 1994 --------------------------- (COMMENCEMENT YEARS ENDED DECEMBER (COMMENCEMENT YEAR ENDED JANUARY 1 TO OF OPERATIONS) TO 31, OF OPERATIONS) TO DECEMBER 31, MARCH 22, DECEMBER 31, --------------------- DECEMBER 31, 1993 1994 1994 1995 1996 1996 ------------ ------------ ----------------- --------- --------- ----------------- STATEMENT OF OPERATIONS DATA: Revenues........................ -- $ -- $ -- $ -- $ -- $ -- Operating expenses.............. 11.510 6,872 28,027 80,226 61,025 169,278 Interest income................. -- -- 1,783 11,989 6,379 20,151 Net loss applicable to ordinary partnership interests......... 11,510 6,872 26,244 68,237 71,969 166,450 Net loss per weighted average ordinary partnership interest outstanding.......... 0.73 1.50 1.53 Cash distributions per ordinary partnership interest.......... -- -- -- OTHER DATA: Deficiency of earnings to cover fixed charges(2).............. N/A N/A 71,969 CASH FLOW DATA: Used in operating activities.... -- -- (23,052) (38,368) (46,622) (108,042) Used in investing activities.... -- -- (50,549) (280,345) (384,264) (715,158) Provided by partners' capital transactions.................. -- -- 147,161 318,630 284,714 750,505 Provided by (used in) other financing activities.......... -- -- -- (1,875) 95,750 93,875
DECEMBER 31, ---------------------------------- 1996 1995 1994 -------- -------- -------- BALANCE SHEET DATA: Cash and cash equivalents.................................................. $ 21,180 $ 71,602 $ 73,560 Working capital............................................................ (53,481) 17,687 35,423 Globalstar System under construction....................................... 891,033 400,257 71,996 Total assets............................................................... 942,913 505,391 151,271 Vendor financing liability................................................. 130,694 42,219 -- Borrowings under long-term revolving credit facility....................... 96,077 -- -- Redeemable preferred partnership interests................................. 302,037 -- -- Ordinary partners' capital................................................. 315,186 386,838 112,944
- --------------- (1) Reflects certain costs incurred by Loral and Qualcomm prior to March 23, 1994, which were reimbursed by Globalstar through a capital subscription credit or agreement for repayment in connection with the $275.0 million capital subscription and commencement of Globalstar's operations on March 23, 1994. (2) The ratio of earnings to fixed charges is not meaningful as Globalstar is in the development stage and, accordingly, has incurred operating losses. 15 17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION GTL is a holding company that acts as a general partner of Globalstar and has no other business. The Company's sole asset is its investment in Globalstar and GTL's results of operations reflect its share of the results of operations of Globalstar on an equity accounting basis. Accordingly, management's discussion and analysis addresses the financial condition and results of operations of Globalstar. In its annual and quarterly reports, GTL presents separate financial statements for GTL and Globalstar. Except for the historical information contained herein, the matters discussed in this Management's Discussion and Analysis of Results of Operations and Financial Condition, and elsewhere in this Form 10-K, are forward-looking statements that involve risks and uncertainties, many of which may be beyond Globalstar's control. These may include, but are not limited to, problems relating to technical development of the system, testing, regulatory compliance, manufacturing and assembly, the competitive and regulatory environment in which Globalstar will operate, marketing problems and costs and expenses that may exceed current estimates. The actual results that Globalstar achieves may differ materially from any forward-looking projections due to such risks and uncertainties. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1996, cash and cash equivalents decreased to $21.2 million from $71.6 million at December 31, 1995. The net decrease is primarily a result of expenditures for the Globalstar System Under Construction of $381.7 million, the net cash used in operating activities of $46.6 million and distributions on redeemable preferred partnership interests of $14.8 million, offset by cash receipts during the year, which consisted of $299.5 million from the sale of redeemable preferred partnership interests and $96.0 from net borrowings under the long-term revolving credit facility. Accounts payable, payables to affiliates and accrued expenses increased by $20.8 to $75.3 million at December 31, 1996, as compared to the prior year, reflecting the increased level of activity by Globalstar's contractors and timing of payments. Through December 31, 1996, Globalstar incurred costs of approximately $1.0 billion for the design and construction of the space and ground segments. Costs incurred during fiscal year 1996 were approximately $535 million. As of February 1997, Globalstar estimates the cost for the design, construction and deployment of the Globalstar System, including working capital, cash interest on anticipated borrowings and operating expenses, to be approximately $2.5 billion, as compared with approximately $2.2 billion estimated at December 31, 1995. This increase arose primarily from a change in launch vehicles and additional integration testing procedures to support system readiness on schedule, scope changes to add features, capabilities and functions, cost growth and other factors. Actual amounts may vary from this estimate and additional funds would be required in the event of unforeseen delays, cost overruns, launch failures, technological risks, adverse regulatory developments, or to meet unanticipated expenses and for system enhancements and measures to assure system performance and readiness for the space and ground segments. Globalstar and its service provider partners intend to jointly finance the procurement of 33 gateways for resale to service providers, thereby accelerating the deployment of gateways around the world prior to the In-Service Date. Globalstar has agreed to finance approximately $80 million of the cost of these gateways and expects to recover its cost from the resale of these gateways to service providers. In addition, Globalstar has agreed to purchase from SS/L eight additional spare satellites that will increase Globalstar's ability to have at least 40 satellites in service during 1999, even in the event of launch failures. If the launch program is successful, the additional satellites will serve as ground spares, readily available for launch to replenish the constellation as needed to respond to satellite attrition during the first generation, or to increase system capacity as required. If Globalstar were to experience a launch failure, the costs associated with the construction and launch of replacements would be substantially covered by insurance, and in that event the cost of the additional satellites used as replacements, currently estimated at $175 million, would be reimbursed to Globalstar. 16 18 On February 12, 1997, GTL and the holders of the warrants issued in connection with the Globalstar Credit Agreement, entered into an arrangement under which GTL agreed to accelerate the vesting and exercisability of the warrants to purchase 4,185,318 shares of GTL common stock at $26.50 per share and the holders agreed to exercise such warrants. GTL also agreed to register for resale the GTL common stock issuable upon exercise of the warrants. In addition, GTL announced its intention to distribute to the holders of its common stock rights to subscribe for and purchase 1,131,168 GTL shares for a price of $26.50 per share. Loral agreed to purchase all GTL shares not purchased upon exercise of the rights. Upon the exercise of the warrants and the rights, GTL will receive proceeds of approximately $140.9 million, which it will use to exercise warrants to purchase 5,316,486 Globalstar ordinary partnership interests at $26.50 per interest. Globalstar will use such proceeds for the construction of the Globalstar System. On February 13, 1997, Globalstar and GTL sold units consisting of $500 million aggregate principal amount of Globalstar's 11 3/8% Senior Notes due 2004 and warrants to purchase 1,032,500 shares of GTL common stock in a private offering. Net proceeds were approximately $484 million. As of February 13, 1997, Globalstar had raised or received commitments for approximately $2.0 billion. Globalstar believes that its current capital, vendor financing commitments, the availability of the Globalstar Credit Agreement ($154 million available at December 31, 1996) and proceeds from the exercise of the warrants, issued in connection with the Globalstar Credit Agreement, are sufficient to fund its requirements into the first quarter 1998. Globalstar intends to raise the remaining funds required to complete the Globalstar System from a combination of sources, including debt issuance (which may include an equity component), financial support from the Globalstar partners, projected service provider payments, projected net service revenues from initial operations, anticipated payments from the sale of gateways and Globalstar Phones and placement of partnership interests with new and existing strategic investors. Although Globalstar believes it will be able to obtain these additional funds, there can be no assurance that such funds will be available on favorable terms or on a timely basis, if at all. RESULTS OF OPERATIONS Comparison of Results for the Years Ended December 31, 1996 and 1995 Globalstar is a development stage partnership and has not commenced commercial operations. For the period March 23, 1994 (commencement of operations) to December 31, 1996, Globalstar has recorded cumulative net losses of $166.5 million. The net loss for the year ended December 31, 1996 decreased to $54.6 million as compared to $68.2 million for the year ended December 31, 1995 due to a decrease in development costs partially offset by a decrease in interest income. The net loss applicable to ordinary partnership interests was $72.0 million during the current period reflecting $17.3 million of preferred distributions on the redeemable preferred partnership interests. Globalstar is expending significant funds for the design, construction, testing and deployment of the Globalstar System and expects such losses to continue until commencement of commercial operations. Globalstar has earned interest income of $20.2 million on cash balances and short term investments since commencement of operations. Interest income during the year ended December 31, 1996 was $6.4 million as compared to $12.0 million for the year ended December 31, 1995. Interest income for the current period decreased as a result of lower average cash balances outstanding during 1996. Operating Expenses. Development costs of $42.2 million for the year ended December 31, 1996, represent the development of certain technologies under a cost sharing arrangement in Globalstar's contract with Qualcomm, the development of Globalstar Phones and Globalstar's continuing in-house engineering. This compares with $62.9 million of development costs incurred during 1995. The decline during the current year is primarily the result of the cost sharing arrangement in Globalstar's contract with Qualcomm reaching its funding limit in April 1996. Marketing, general and administrative expenses were $18.9 million for the year ended December 31, 1996 as compared to $17.4 million incurred during the year ended December 31, 1995. 17 19 Depreciation. Globalstar intends to capitalize all costs, including interest as applicable, associated with the design, construction and deployment of the Globalstar System, except costs associated with the development of the Globalstar Phones and certain technologies under a cost sharing arrangement with Qualcomm. Globalstar will not record depreciation expense on the Globalstar System Under Construction until the commencement of commercial operations, as assets are placed into service. Income Taxes. Globalstar was organized as a limited partnership. As such, no income tax provision (benefit) is included in the accompanying consolidated financial statements since U.S. income taxes are the responsibility of its partners. Generally, taxable income (loss), deductions and credits of Globalstar will be passed through to its partners. Comparison of Results for the Year Ended December 31, 1995 to the Period March 23, 1994 (commencement of operations) to December 31, 1994 The net loss for the year ended December 31, 1995 increased to $68.2 million from $26.2 million in the period March 23, 1994 (commencement of operations) to December 31, 1994 (the "Prior Period"), primarily due to increased operating expenses partially offset by increased interest income. Interest income for the year ended December 31, 1995 was $12.0 million as compared to $1.8 million earned during the Prior Period. Interest income increased significantly from the Prior Period as a result of higher cash balances invested due to the sale of 10,000,000 partnership interests to GTL for $185.8 million during the first quarter and the receipt of payments against capital subscriptions of $133.8 million. Operating Expenses. Development costs of $62.9 million for the year ended December 31, 1995, represent the development of certain technologies under a cost sharing arrangement in Globalstar's contract with Qualcomm, the development of Globalstar Phones and Globalstar's continuing in-house engineering. This compares with $21.3 million of development costs incurred during the Prior Period. The increase as compared to the Prior Period is primarily related to the technologies being developed under the cost sharing arrangement with Qualcomm. Marketing, general and administrative expenses were $17.4 million for the year ended December 31, 1995 as compared to $6.7 million incurred during the Prior Period. The increase from the Prior Period is a result of both increased marketing and personnel costs consistent with the higher level of activity at Globalstar. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS This annual report of Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, from time to time, Globalstar, GTL or their representatives have made or may make forward-looking statements, orally or in writing. Such forward-looking statements may be included in, but are not limited to, various filings made by GTL with the Securities and Exchange Commission, press releases or oral statements made by or with the approval of an authorized executive officer of GTL or Globalstar. Actual results could differ materially from those projected or suggested in any forward-looking statements as a result of a wide variety of factors and conditions, including, but not limited to, the factors summarized below. Development Stage Company Globalstar is a development stage company and has no operating history. From its inception, Globalstar has incurred net losses and expects such losses to continue. Globalstar will require expenditures of significant funds for development, construction, testing and deployment before commercialization of the Globalstar System. Globalstar does not expect to launch satellites until the second half of 1997, to commence operations before the second half of 1998 or to have positive cash flow before 1999. There can be no assurance that Globalstar will achieve its objectives by the targeted dates. As of February 1997, Globalstar estimates the cost for the design, construction and deployment of the Globalstar System, including working capital, cash interest on anticipated borrowings and operating expenses, to be approximately $2.5 billion. Actual amounts may vary from this estimate. Additional funds would be 18 20 required in the event of unforeseen delays, cost overruns, launch failures, technological risks, adverse regulatory developments, or to meet unanticipated expenses and for system enhancements and measures to assure system performance and readiness for the space and ground segments. As of February 13, 1997, Globalstar had raised or received commitments for approximately $2.0 billion. Globalstar believes that its current capital, vendor financing commitments, the availability of the Globalstar credit agreement and the proceeds from the exercise of the warrants, are sufficient to fund its requirements into the first quarter of 1998. Globalstar intends to raise the remaining funds required from a combination of sources including debt issuance (which may include an equity component), financial support from the Globalstar partners, projected service provider payments, projected net service revenues from initial operations, anticipated payments received from the sale of gateways and Globalstar Phones and placement of partnership interests with new and existing strategic investors. Although Globalstar believes it will be able to obtain these additional funds, there can be no assurance that such funds will be available on favorable terms or on a timely basis, if at all. If there are unforeseen delays, if technical or regulatory developments result in a need to modify the design of all or a portion of the Globalstar System, if service provider agreements for additional territories are not entered into at the times or on the terms anticipated by Globalstar or if other additional costs are incurred, the risk of which is substantial, additional capital will be required. The ability of Globalstar to achieve positive cash flow will depend upon the successful and timely design, construction and deployment of the Globalstar System, the successful marketing of its services by service providers and the ability of the Globalstar System to successfully compete against other satellite-based telecommunications systems, as to which there can be no assurance. If Globalstar fails to commence commercial operations in the second half of 1998 or achieve positive cash flow in 1999, additional capital will be needed. Globalstar believes it will be able to obtain the additional financing it requires, but there can be no assurance that the capital required to complete the Globalstar System will be available from public or private capital markets or from its existing partners on favorable terms or on a timely basis, if at all. A substantial shortfall in meeting its capital needs would prevent completion of the Globalstar System. Many of the problems, delays and expenses encountered by an enterprise in Globalstar's stage of development may be beyond Globalstar's control. These may include, but are not limited to, problems related to technical development of the system, testing, regulatory compliance, manufacturing and assembly, the competitive and regulatory environment in which Globalstar will operate, marketing problems and costs and expenses that may exceed current estimates. Delay in the timely design, construction, deployment, commercial operation and achievement of positive cash flow of the Globalstar System could result from a variety of causes. These include delays in the regulatory process in various jurisdictions, delay in the integration of the Globalstar System into the land-based network, changes in the technical specifications of the Globalstar System made to enhance its features, performance or marketability or in response to regulatory developments or otherwise, delays encountered in the construction, integration or testing of the Globalstar System by Globalstar vendors, delayed or unsuccessful launches, delays in financing, insufficient or ineffective service provider marketing efforts, slower-than-anticipated consumer acceptance of Globalstar service and other events beyond Globalstar's control. Substantial delays in any of the foregoing matters would delay Globalstar's achievement of profitable operations. Regulation The operations of the Globalstar System are and will continue to be subject to United States and foreign regulation. In order to operate in the United States and on an international basis, the Globalstar System must be authorized to provide MSS in each of the markets in which its service providers intend to operate. Even though a Globalstar affiliate has received a FCC authorization, there can be no assurance that the further regulatory approvals required for worldwide operations will be obtained, or that they will be obtained in a timely manner or in the form necessary to implement Globalstar's proposed operations. Globalstar's business may also be significantly affected by regulatory changes resulting from judicial decisions and/or adoption of treaties, legislation or regulation by the national authorities where the Globalstar System plans to operate. Globalstar's FCC license, as modified on November 19, 1996, authorizes the construction, launch and operation of the satellite constellation and assigns the system user links and feeder links in the United States. 19 21 Globalstar's feeder link frequencies were allocated internationally at WRC95, and have been assigned by the FCC for use in the United States in accordance with the international allocation. However, use of the feeder link frequencies remains subject to restrictions that may be adopted in a potential FCC proceeding to adopt the international allocations into the U.S. Table of Frequency Allocations. The FCC recently adopted rules for the use of a portion of the frequencies allocated at WRC95 for MSS feeder links (such as Globalstar's) to a proposed high-speed wireless data service. Although these rules are intended to preclude harmful interference with other uses of these bands, they may ultimately permit uses of these frequencies that could diminish their usefulness for MSS feeder links. Separate licenses must also be obtained from the FCC for operation of gateways and Globalstar Phones in the United States. To the extent that additional MSS systems are authorized by the FCC or other national regulatory bodies to use the spectrum for which Globalstar has been authorized, the Globalstar System's capacity would be reduced. In addition, Globalstar's FCC license is subject to two pending judicial appeals. While Globalstar believes that these appeals are without merit, there can be no assurance that these appeals would not result in either reversal or stay of the FCC's decision to grant Globalstar's FCC license to LQP or ultimately result in the granting of additional licenses by the FCC or its adoption of an auction procedure to award licenses, which might materially increase the cost of obtaining such licenses. Authorization will be required in each country in which Globalstar Phones are used and in which Globalstar's gateways are located. Local regulatory approval for operation of the Globalstar System is the responsibility of the service providers in each territory. Although many countries have moved to privatize the provision of telecommunications service and to permit competition in the provision of such service, some countries continue to require that all telecommunications service be provided by a government-owned entity. While service providers have been selected, in part, based upon their perceived qualifications to obtain the requisite local approvals, there can be no assurance that they will be successful in doing so, and if they are not successful, Globalstar service will not be available in such territories. In that event, depending upon geographical and market considerations, Globalstar may or may not have the ability to redirect the system capacity that such territories would have otherwise used to serve markets in which service is authorized. Regulatory schemes in countries in which Globalstar or its service providers seek to operate may impose impediments on Globalstar's operations. There can be no assurance that such restrictions would not be unduly burdensome. Glonass, the Russian Global Navigation Satellite System, operates worldwide in a portion of the frequency band proposed to be used by Globalstar and other MSS systems for user uplinks. Although Glonass has proposed to migrate to lower frequencies, interference protection requirements for Glonass receivers are under consideration, which, if adopted, may render a segment of the MSS spectrum unusable for MSS user uplinks. While this is not expected to have an adverse effect on Globalstar's capacity in the United States, a decision to protect Glonass on the part of regulatory authorities in nations making extensive use of Globalstar fixed services, could reduce Globalstar's effective system capacity in such markets. European Union competition law proscribes agreements that restrict or distort competition in the European Union. Globalstar and others have responded to an inquiry from the Commission of the European Union requesting information regarding their activities. A violation of European Union competition law could subject Globalstar to fines or enforcement actions that could delay service in western Europe, and/or depending on the circumstances, adversely affect Globalstar's contractual rights vis-a-vis its European strategic partners. In addition, the Commission has proposed legislation which, if adopted, would give the Commission broad regulatory authority over satellite telecommunications systems such as the Globalstar System. Technological Factors The Globalstar System is exposed to the risks inherent in a large-scale complex telecommunications system employing advanced technologies which must be adapted to the Globalstar application and which have never been used as a commercial whole. Deployment of the Globalstar satellite constellation will involve volume production and testing of satellites in quantities significantly higher than those previously prevailing in 20 22 the industry. The integration of a worldwide LEO satellite-based system like Globalstar has never occurred; there is no assurance that such integration will be successfully implemented. The operation of the Globalstar System will require the detailed design and integration of advanced digital communications technologies in devices from personal handsets and public telephone networks to gateways in remote regions of the globe and satellites operating in space. The failure to develop, produce and implement the system, or any of its diverse and dispersed elements, as required, could delay the In-Service or Full Constellation Date of the Globalstar System or render it unable to perform at levels required for commercial success. Satellite launches are subject to significant risks, including disabling damage to or loss of the satellites. Historically, launch failure ("hot failure") rates on low-earth orbit and geostationary satellite launches have been approximately 10%. However, launch failure rates may vary depending on the particular launch vehicle. The McDonnell-Douglas Delta launch vehicle, scheduled to launch the first eight satellites (four per launch) of the Globalstar satellite constellation, suffered a launch failure on January 17, 1997. The United States government is currently investigating the cause of this launch failure, the second in this rocket's last 62 launches. Globalstar's first launch, which is currently scheduled for September 1997 aboard a Delta II rocket, could be delayed by this investigation. Nevertheless, Globalstar does not expect that such delay, if any, in the initial launch date would result in a delay in the In-Service Date or the Full Constellation Date. The Ukrainian Zenit launch vehicle, which is proposed to launch 36 Globalstar satellites (12 per launch), has never been used in commercial applications. Satellite launches of groups of more than eight commercial satellites have not been attempted before. Globalstar intends to launch the last 12 satellites of its constellation in groups of four on three separate launches of the Russian Starsem Soyuz rocket. There is no assurance that Globalstar satellite launches will be successful or that its launch failure rate will not exceed the industry average. Globalstar's Zenit launch contracts provide for relaunches at no additional charge in the event of a hot failure. However, the launch provider may, because of financial reasons or otherwise, be unable to provide such relaunches. A single launch failure would result in a loss of either four or 12 Globalstar satellites. Although the cost of replacing such satellites and launch vehicles will in most cases be covered by insurance, a launch failure could result in delays in the In-Service or the Full Constellation Date. SS/L has agreed to obtain launch vehicles for Globalstar and arrange for the launch of all 56 satellites, subject to pricing adjustments in light of future market conditions, which may, in turn, be influenced by international political developments. An adverse change in launch vehicle market conditions which prohibits Globalstar from utilizing the launch vehicles for which it has contracted could result in an increase in the launch cost payable by Globalstar, which may be substantial. In addition, there can be no assurance that replacement launch vehicles will be available in the future at a cost or on terms acceptable to Globalstar. Two of Globalstar's launch operators are subject to U.S. export control regulations. Yuzhnoye, based in Ukraine, has certain ties with Russia and intends to launch the Zenit rocket from the Baikonur launch site in Kazakhstan. Arianespace, which will be providing the Soyuz rockets, also intends to launch from Baikonur. Changes in governmental policies or political leadership in the United States, Ukraine, Russia or Kazakhstan could affect the cost, availability, timing or overall advisability of utilizing these launch providers. While there is no assurance that the necessary export licenses will be obtained, Globalstar has provided against the risk that such licenses will not be granted or that the deterioration in the relationships between the United States and these countries may make the use of such launch providers inadvisable by procuring options on sufficient launches with a U.S.-based launch provider to launch all the remaining satellites of the Globalstar constellation. If Globalstar were to exercise these options for U.S. launches in the wake of the failure to obtain any necessary export licenses or as a result of adverse developments in U.S. relations with these countries, the cost of launching the Globalstar satellite constellation would be significantly increased. A number of factors will affect the useful lives of Globalstar's satellites, including the quality of construction, expected gradual environmental degradation of solar panels and the durability of component parts. Random failure of satellite components could result in damage to or loss of a satellite ("cold failures"). In rare cases, satellites could also be damaged or destroyed by electrostatic storms or collisions with other objects. As a result of these factors, the first-generation satellite constellation (including spares) is designed to 21 23 operate at full performance for a minimum of 7 1/2 years, after which performance is expected to gradually decline. However, there can be no assurance of the constellation's specific longevity. Globalstar's operating results would be adversely affected in the event the useful life of the satellites were significantly shorter than 7 1/2 years. Globalstar anticipates using funds generated from operations to develop a second generation of satellites. If sufficient funds from operations are not available and Globalstar is unable to obtain external financing for the second-generation constellation, Globalstar will not be able to deploy a second-generation satellite constellation to replace first-generation satellites at the end of their useful lives. In that event, the Globalstar System would cease operations at that time. Globalstar intends to obtain insurance against launch failure which would cover the cost of relaunch and the replacement cost of lost satellites in the event of hot failures for 56 satellites in its constellation. SS/L has agreed to obtain on Globalstar's behalf insurance for the cost of replacing satellites lost in hot failures, and for any relaunch costs not covered by the applicable launch contract, in certain circumstances subject to pricing adjustments in light of future market conditions. An adverse change in insurance market conditions may result in an increase in the insurance premium paid by Globalstar, which may be substantial. In addition, there is no assurance that launch insurance will be available or that, if available, would be at a cost or on terms acceptable to Globalstar. Globalstar may self-insure for hot failures for up to 12 such satellites. Globalstar's contract with SS/L provides for the construction and launch of eight spare satellites to minimize the effect of any launch or orbital failures. However, there can be no assurance that additional satellites and launches will not be required. In such an event, in addition to the replacement costs incurred by Globalstar, Globalstar's In-Service or Full Constellation Date may be delayed. In addition, unless otherwise required, Globalstar does not currently intend to purchase insurance to cover cold failures that may occur once the satellites have been successfully deployed from the launch vehicle. The space and communications industries are characterized by rapid technological advances and innovations. There is no assurance that one or more of the technologies utilized or under development by Globalstar may not become obsolete, or that its services will be in demand by the time they are offered. Globalstar will be dependent upon technologies developed by third parties to implement key aspects of its strategy to integrate its satellite systems with terrestrial networks, and there can be no assurance that such technologies will be available to Globalstar on a timely basis or on reasonable terms. Future Operating Factors The availability of Globalstar service in each region or country will depend upon the cooperation, operational and marketing efficiency, competitiveness, finances and regulatory status of Globalstar's service provider in that region or country. The willingness of companies to become service providers will depend upon a variety of factors, including pricing, local regulations and Globalstar's competitiveness with other satellite-based telecommunications systems. Globalstar believes that enlisting the support of established telecommunications service providers, some of which are the dominant carriers in their markets, will be essential both to obtaining necessary local regulatory approvals and to rapidly accessing a broad market of potential users. Globalstar's strategic service providers have agreed to act as exclusive service providers in 71 countries although it is anticipated that in many cases these partners will enter into strategic alliances with local service providers to provide Globalstar service in these countries. In addition, Globalstar expects to raise additional funds prior to the Full Constellation Date in the form of service provider payments from prospective service providers in other territories throughout the world. Globalstar's business plan assumes that Globalstar will contract with service providers to provide service in the remaining territories of the world, in certain cases, on terms more favorable to Globalstar than those contained in its founding service provider agreements. There can be no assurance that additional service provider agreements will be entered into in the future or that this plan will be achieved. If such service provider payments are not realized, Globalstar will be required to obtain other sources of financing in order to complete the Globalstar System. If the service providers fail to obtain the necessary local regulatory approval or to adequately market and distribute Globalstar's services, Globalstar's business could be adversely affected. There can be no assurance 22 24 that enough service providers will contract for Globalstar service and procure and install the gateways and obtain the regulatory licenses necessary for complete global service. Failure to offer service in any particular region will eliminate that area's market potential and reduce Globalstar's ability to service its global roamer market. Certain strategic partners and other third parties are designing and constructing the component parts of the Globalstar System. In the event such parties are unable to perform their obligations, Globalstar's In-Service and Full Constellation Date may be delayed and its costs may be increased. Globalstar expects that a substantial portion of its business will be conducted outside of the United States. Such operations are subject to certain risks such as changes in domestic and foreign government regulations and telecommunications standards, tariffs or taxes and other trade barriers. Accordingly, government actions in foreign countries could have a significant effect on Globalstar's operations. Political, economic or social instability or other developments in such countries, including currency fluctuations, could also adversely affect Globalstar's operations. In addition, Globalstar's agreements relating to local operations may be governed by foreign law or enforceable only in foreign jurisdictions. As a result, in the event of a dispute, it may be difficult for Globalstar to enforce its rights under such agreements. Globalstar's largest potential markets are in developing countries or regions that are substantially underserved and not expected to be served by existing telecommunications systems. In doing business in such markets, Globalstar and its local service providers may face market, inflation, interest rate and currency fluctuation, government policy, price and wage, exchange control, taxation and social instability, expropriation and other economic, political or diplomatic conditions that are significantly more volatile than those commonly experienced in the United States and other industrialized countries. Although Globalstar anticipates that it will receive payments from its service providers in U.S. dollars, limited availability of U.S. currency in these local markets may prevent a service provider from making payments in U.S. dollars. Moreover, exchange rate fluctuations may affect the price Globalstar will be entitled to receive for its services. Globalstar's pricing to service providers will, under certain circumstances, not be automatically adjusted for inflation; in such cases, Globalstar will be able to increase its pricing to service providers only if the service provider increases its prices to subscribers, and it may be required to lower its pricing if the service provider lowers its prices to subscribers. In recent years, pricing in the telecommunications industry has trended downward, in some cases making it difficult for service providers to raise their prices to compensate for cost inflation. Although Globalstar expects future service provider agreements to contain pricing terms more favorable to Globalstar than those contained in its agreements with founding service providers, there can be no assurance that such terms will be achieved. Globalstar has entered into an agreement with a bank syndicate for a $250 million credit facility expiring December 15, 2000, and also expects to utilize $310 million of committed vendor financing. The Globalstar credit agreement permits Globalstar to incur up to $950 million of indebtedness on a senior basis, including $500 million aggregate principal amount of Globalstar's 11 3/8% Senior Notes, to finance the build-out of the Globalstar System; an unlimited amount of indebtedness may be incurred by Globalstar on a subordinated basis. Significant additional debt is expected to be incurred in the future. As a result, Globalstar is expected to become highly leveraged. Globalstar will be dependent on its cash flow from operations to service this debt. Any delay in the commencement of Globalstar operations will adversely affect Globalstar's ability to service its debt obligations. The discretion of Globalstar's management with respect to certain business matters will be limited by covenants contained in the Globalstar credit agreement, and future debt instruments. Among other things, the covenants contained in the Globalstar credit agreement restrict, condition or prohibit Globalstar from paying cash distributions on its ordinary partnership interests, creating liens on its assets, making certain asset dispositions, conducting certain other business and entering into transactions with affiliates and related persons. In the event the Globalstar credit agreement ceases to be guaranteed, it will also contain certain financial covenants limiting the ability of Globalstar to incur additional indebtedness. There can be no assurance that Globalstar's leverage and such restrictions will not materially and adversely affect Globalstar's ability to finance its future operations or capital needs or to engage in other business activities. Moreover, a failure to comply with the obligations contained in the Globalstar credit agreement and or any agreements 23 25 with respect to additional financing could result in an event of default under such agreements, which could permit acceleration of the related debt and acceleration of debt under future debt agreements that may contain cross-acceleration or cross-default provisions. Competition in the telecommunications industry is intense, fueled by rapid and continuous technological advances and alliances between industry participants on an international scale. Although no present participant is currently providing the same global personal telecommunications service proposed by Globalstar, it is anticipated that one or more additional competing MSS systems will be launched and that the success, or anticipated success, of Globalstar and its competitors could attract other entrants. If any of Globalstar's competitors succeeds in marketing and deploying its system substantially earlier than Globalstar, Globalstar's ability to compete in areas served by such competitor may be adversely affected. A number of satellite-based telecommunications systems not involved in the MSS Proceeding have also been proposed using geostationary satellites and, in one case, the 2 GHz band for an MEO system. Globalstar's most direct competitors are the two other MSS applicants which received FCC licenses, Iridium and Odyssey. ICO was not an applicant or a licensee in the MSS Proceeding or any other proceedings before the FCC; it is seeking to operate in a different frequency band not available for use by MSS systems under current international guidelines in place until 2000. Comsat, the U.S. signatory to Inmarsat, has applied to the FCC to participate in the procurement of facilities of the system proposed by ICO. It has also sought FCC approval of a proposal to extend the scope of services provided by Inmarsat, currently limited to maritime services, to include telecommunications services to land-based mobile units. These applications are currently pending before the FCC. Comsat has been instructed in the past by the U.S. government to seek to ensure that ICO does not receive preferred access to any market and that non-discriminatory access to such areas for all mobile satellite communications networks be established, subject to spectrum coordination and availability. Nonetheless, because ICO is affiliated with Inmarsat and because its investors include state-owned telecommunications monopolies in a number of countries, there can be no assurance that ICO might not be given preferential treatment in the local licensing process in those countries. It is also possible that one or more of the two pending MSS applicants will demonstrate financial qualification sufficient to obtain an FCC license and become a competitor of Globalstar. In addition to competing for investment capital, subscribers and service providers in markets all over the world, the MSS systems, including Globalstar, also compete with each other for the limited spectrum available for MSS operations. Unlike CDMA systems such as Globalstar and Odyssey, which permit multiple systems to operate within the same band, the design of Iridium's TDMA system requires a separate frequency segment dedicated specifically for its use. If more than two CDMA systems become operational, CDMA systems like Globalstar will effectively have a smaller spectrum segment within which to operate their user uplinks in the U.S. While CDMA does permit spectrum sharing among competing systems, the capacity of the systems operating within that spectrum will decrease as the number of systems operating in the band increases. For example, Globalstar's capacity over a given area would decrease by approximately 25% if the total number of licensed MSS systems increased from three to four, assuming that Iridium is one of the licensed systems and the two other CDMA systems receiving licenses have technical characteristics similar to Globalstar's and experience the same level of usage. The FCC has no authorization to extend the U.S. band plan for CDMA and TDMA Big LEO systems to other countries. However, it has stated that it plans to express the view in discussions with other administrations that global satellite systems are more likely to succeed if individual administrations adopt complementary systems for licensing them. Geostationary-based satellite systems, including AMSC, APMT, ASC, ACeS, Lockheed Martin's Satphone and Comsat's Planet-1, plan to provide satellite-based telecommunications services in areas proposed to be serviced by Globalstar. Because some of these systems involve relatively simple ground control requirements and are expected to deploy no more than two satellites, they may succeed in deploying and marketing their systems before Globalstar. In addition, coordination of standards among regional geostationary systems could enable these systems to provide worldwide service to their subscriber bases, thereby increasing the competition to Globalstar. For example, Comsat has announced a global mobile satellite service 24 26 (Planet-1) using existing Inmarsat satellites, a six-pound, laptop-size phone, costing $3,000 with an expected per-minute usage rate of $3.00. Some of these potential competitors have financial, personnel and other resources substantially greater than those of Globalstar. Many of these competitors are raising capital and may compete with Globalstar for service providers and financing. Technological advances and a continuing trend toward strategic alliances in the telecommunications industry could give rise to significant new competitors. There can be no assurance that some of these competitors will not provide a more efficient or less expensive service. However, Globalstar believes that based upon the public statements and other publicly available information of the other MSS applicants, Globalstar will be a low-cost provider. Depending on the competitive environment, however, pricing competition could require Globalstar to reduce its anticipated pricing to service providers, thus adversely affecting its financial performance. Satellite-based telecommunications systems are characterized by high up-front costs and relatively low marginal costs of providing service. Several systems are being proposed and, while the proponents of these systems foresee substantial demand for the services they will provide, the actual level of demand will not become known until such systems are constructed, launched and operational. If the capacity of Globalstar and any competing systems exceeds demand, price competition could be particularly intense. Teledesic, Spaceway and Cyberstar have each applied to the FCC for licenses to operate satellite-based telecommunications and video transmission systems in the 28 GHz Ka-band. Certain MSS applicants, not including Globalstar, have applied to use this band for their feeder uplinks, as have proponents of land-based local multipoint distribution system ("LMDS") for cellular television services. The FCC is in the process of developing a band-width allocation plan for use of the available Ka-band spectrum by these services. Globalstar's primary business will be voice telephony, and its data transmission business will be focused on small data packet services such as paging and messaging. It therefore does not regard the television or broadband data services to fixed terminals proposed by Teledesic, Spaceway and Cyberstar or the wireless cable and fixed telephony services proposed by the LMDS applicants as competing services. It is expected that as land-based telecommunications services expand to regions currently underserved or not served by wireline or cellular services, demand for Globalstar service in those regions may be reduced. If such systems are constructed at a more rapid rate than that anticipated by Globalstar, the demand for Globalstar service may be reduced at rates higher than those assumed in Globalstar's market analysis. Globalstar may also face competition in the future from companies using new technologies and new satellite systems. New technology could render Globalstar obsolete or less competitive by satisfying consumer demand in alternative ways or through the introduction of incompatible telecommunications standards. A number of these new technologies, even if they are not ultimately successful, could have an adverse effect on Globalstar as a result of their initial marketing efforts. Globalstar's business would be adversely affected if competitors begin operations or existing or new telecommunications service providers penetrate Globalstar's target markets before completion of the Globalstar System. Subscriber acceptance of the Globalstar System (both in terms of placement of Globalstar Phones and subscriber usage thereof) will depend upon a number of factors, including price, demand for service and the extent of availability of alternative telecommunications systems. If the level of actual subscriber demand and usage for Globalstar service is below that expected by Globalstar, Globalstar's cash flow will be adversely affected. Globalstar's hand-held phone is expected to be larger and heavier for the same talk time than today's smaller and lighter pocket-sized, hand-held cellular telephones and is expected to have a significantly longer and thicker antenna than hand-held cellular telephones. The Globalstar System will function best when there is an unobstructed line-of-sight between the user and one or more of the Globalstar satellites. Obstacles such as buildings, trees or mountainous terrain may degrade service quality, more so than would be the case with terrestrial cellular systems, and service may not be available in the core of high-rise buildings. There is no assurance that these characteristics of the hand-held Globalstar Phone will not adversely affect subscriber demand for Globalstar service. There has been adverse publicity concerning alleged health risks associated with the use of portable hand-held telephones with transmitting antennas integrated into handsets. On August 1, 1996, the FCC announced 25 27 new guidelines for evaluating environmental radio frequency radiation from FCC-regulated transmitters based primarily on the exposure criteria recommended in 1986 by the National Council on Radiation Protection Measurements ("NCRP"). Guidelines applicable to certain portable transmitting devices are based on the NCRP criteria and the exposure criteria developed by the Institute of Electrical and Electronic Engineers and recommended in 1992 by the American National Standards Institute. These guidelines were to become effective as to applications filed after January 1, 1997; the FCC, however, has deferred the effective date until September 1, 1997. The handsets Globalstar has contracted with Qualcomm to develop for use by mobile subscribers will have antennas for communication with the satellites and, in the case of the dual-mode and tri-mode hand-held Globalstar Phones, with the land-based cellular system. Because hand-held Globalstar Phones will use on average lower power to transmit signals than traditional cellular units, Globalstar does not believe that the proposed new guidelines will require any significant modifications of the Globalstar System or of the mobile hand-held Globalstar Phones designed to be used with the Globalstar System. There can, however, be no assurance that the guidelines, as adopted, or any associated health concerns, would not have an adverse effect on Globalstar's mobile handset business. The success of Globalstar's business will be partially dependent upon the ability of Globalstar to attract and retain highly qualified technical and management personnel. None of the employees of Globalstar has an employment contract with Globalstar nor does Globalstar expect to maintain "key man" insurance with respect to any such individuals. The loss of any of these individuals and the subsequent effect on business relationships could have a material adverse effect on Globalstar's business. Other Factors Partners of LQSS, the managing general partner of Globalstar, or their affiliates are principal suppliers to Globalstar of the major components of the Globalstar System, and are also expected to engage in the manufacture of system elements to be sold to service providers and subscribers. During the design, development and deployment of the Globalstar System, Globalstar will be substantially dependent upon the management skills of Loral and certain technologies developed by Loral, Qualcomm and SS/L to design and manufacture the Globalstar satellite constellation, SOCCs, GOCCs, gateways and Globalstar Phones. Globalstar has entered into contracts for the design of various segments of the Globalstar System with affiliates of LQSS, including a fixed-price satellite production contract with SS/L and a cost-plus-fee contract with Qualcomm to design the gateways, GOCCs and Globalstar Phones. To the extent that such contracts have been or will be awarded to partners of Globalstar or LQSS or their affiliates, such parties will have a conflict of interest with respect to the terms thereof. Partners and affiliates of Globalstar, including companies affiliated with or controlled by Loral, will be among Globalstar's principal service provider customers and may therefore have conflicts of interest with respect to the terms of Globalstar's service provider agreements and any proposed amendments thereto. In addition, if Globalstar is unable to offer Globalstar service to a service provider on competitive terms in a particular country or region, such a service provider, which may be a partner of Globalstar, can act as a service provider to a competing MSS system in such region or country while at the same time serving as a Globalstar service provider in other markets. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Index to Financial Statements on page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 26 28 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS Information required for this item is set forth in the Company's 1997 definitive proxy statement which is incorporated herein by reference. EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITION - ------------------------------------- --- ---------------------------------------------------- Bernard L. Schwartz.................. 71 Chairman and Chief Executive Officer of GTL; Chief Executive Officer and Chairman of the General Partners' Committee of Globalstar Michael B. Targoff................... 52 President, Chief Operating Officer and Director of GTL; Chief Operating Officer of Globalstar Michael P. DeBlasio.................. 60 Senior Vice President, Chief Financial Officer and Director of GTL; Senior Vice President of Globalstar Nicholas C. Moren.................... 50 Vice President and Treasurer of GTL; Vice President and Treasurer of Globalstar Eric J. Zahler....................... 46 Vice President and Secretary of GTL; Vice President and Secretary of Globalstar Thomas B. Ross....................... 66 Vice President, Government Relations of GTL; Vice President, Government Relations of Globalstar Harvey B. Rein....................... 43 Vice President and Controller of GTL; Vice President of Globalstar Douglas G. Dwyre..................... 64 Senior Vice President of GTL; President of Globalstar Anthony J. Navarra................... 49 Vice President of GTL; Executive Vice President, Business Development of Globalstar Robert A. Hicks...................... 52 Vice President of GTL; Vice President, Operations of Globalstar Edward Hirshfield.................... 59 Vice President of GTL; Vice President, Development and Production of Globalstar Robert A. Wiedeman................... 59 Vice President of GTL; Vice President, Engineering of Globalstar Terry R. Evans....................... 49 Vice President of GTL; Vice President, Business Planning and Administration of Globalstar Stephen C. Wright.................... 40 Vice President of GTL; Vice President and Chief Financial Officer of Globalstar Joel Schindall....................... 55 Vice President of GTL; Vice President of Systems Applications for Globalstar William Adler........................ 50 Assistant Secretary of GTL; Vice President and General Counsel of Globalstar
Mr. Schwartz has been the Chairman and Chief Executive Officer of GTL since its initial public offering in 1995 and Chief Executive Officer and Chairman of the General Partners' Committee of Globalstar since 1994. Mr. Schwartz has been the Chairman and Chief Executive Officer of Loral since March 1996 and had been Chairman and Chief Executive Officer of Old Loral since 1972. He has been Chairman of the Board of Directors of SS/L since February 1991. Mr. Schwartz has been Vice Chairman and a director of Lockheed Martin since April 1996. Mr. Targoff has been President and Chief Operating Officer and a director of GTL and Chief Operating Officer of Globalstar since May 1996. From GTL's initial public offering in 1995 until May 1996, Mr. Targoff was Senior Vice President, Secretary and director of GTL, and from 1994 until May 1996, Mr. Targoff was 27 29 Senior Vice President and Secretary of Globalstar. Mr. Targoff has been President and Chief Operating Officer of Loral since March 1996 and had been Senior Vice President and Secretary of Old Loral since 1992. Prior thereto, he held other executive officer positions with Old Loral. Mr. Targoff is also a director of SS/L. Mr. DeBlasio has been Senior Vice President, Chief Financial Officer and Director of GTL since May 1996 and Senior Vice President of Globalstar since 1994. Mr. DeBlasio has been Senior Vice President and Chief Financial Officer of Loral since March 1996 and had been Senior Vice President, Finance and Chief Financial Officer of Old Loral since 1979. Mr. DeBlasio is also a director of SS/L. Mr. Moren has been Vice President and Treasurer of GTL since its initial public offering in 1995 and Vice President and Treasurer of Globalstar since 1994. Mr. Moren has been Vice President and Treasurer of Loral since March 1996 and had been Vice President and Treasurer of Old Loral since April 1991. Mr. Zahler has been Vice President and Secretary of GTL and Globalstar since May 1996. From 1994 to May 1996, Mr. Zahler had been Vice President and Assistant Secretary of Globalstar. Mr. Zahler has been Vice President, Secretary and General Counsel of Loral since March 1996 and had been Vice President and General Counsel of Old Loral since 1992. Prior to that time, he was a partner in the law firm of Fried, Frank, Harris, Shriver & Jacobson. Mr. Ross has been Vice President, Government Relations of GTL and Globalstar since November 1996. From June 1995 to November 1996, Mr. Ross was Vice President, Communications of GTL and Globalstar. Mr. Ross has also been Vice President, Government Relations of Loral since November 1996. From March 1996 to November 1996, Mr. Ross was Vice President, Communications of Loral. From April 1994 to May 1995, he served at the White House as Special Assistant to the President and Senior Director of Public Affairs for the National Security Council. From January 1992 to April 1994, he was Senior Vice President and Director of Media Relations for Hill & Knowlton. Mr. Rein has been Vice President and Controller of GTL and Vice President of Globalstar since May 1996. Mr. Rein has been Vice President and Controller of Loral since June 1996 and had been Assistant Controller of Old Loral since 1985. Mr. Dwyre has been President of Globalstar since March 1994. Mr. Dwyre has been Senior Vice President of GTL since May 1996 and, prior thereto, had been Vice President of GTL since its initial public offering in 1995. Mr. Dwyre was President of Northern Telecom's STC Submarine Systems from 1988 to 1992. Mr. Navarra has been Executive Vice President, Business Development of Globalstar since March 1994 and Vice President of GTL since its initial public offering in 1995. He was Executive Vice President, Business Development at Loral Aerospace Corp. from 1992 to 1994. He was Vice President of Marketing at Loral/ROLM MilSpec Corp., a subsidiary of Old Loral, from 1987 to 1992. Mr. Hicks has been Vice President, Operations of Globalstar and Vice President of GTL since June 1996. Prior to that time he was Chief Technical Officer at PacTel and AirTouch. Mr. Hirshfield has been Vice President, Development and Production of Globalstar since March 1994 and Vice President of GTL since May 1996. Prior to that time, he was Manager of Communications Sciences at SS/L. Mr. Wiedeman has been Vice President, Engineering of Globalstar since March 1994 and Vice President of GTL since May 1996. Prior to that time, he was Vice President of Loral Aerospace Corp. Mr. Evans has been Vice President, Business Planning and Administration of Globalstar since January 1996 and Vice President of GTL since May 1996. From March 1994 to December 1995, Mr. Evans was Vice President, Finance and Administration of Globalstar. Prior to that time, he was Manager of Business Planning and Analysis for SS/L. Mr. Wright has been Vice President and Chief Financial Officer of Globalstar since January 1996 and Vice President of GTL since May 1996. He was a Production Director from April 1995 to December 1995 at SS/L. Prior to that time, he was a Business Manager at SS/L. 28 30 Mr. Schindall has been Vice President of Systems Applications for Globalstar since May 1994 and Vice President of GTL since May 1996. Prior to that time, he was President of Conic, a division of Old Loral. Mr. Adler has been Vice President and General Counsel of Globalstar since January 1996 and Assistant Secretary of GTL since May 1996. He was a partner with Fleschman and Walsh, L.L.P. from May 1994 to November 1995, specializing in domestic and international telecommunications law, regulation legislation and policy. Prior to that time, he was the Executive Director of Federal Regulatory Relations with Pacific Telesis Group. ITEM 11: EXECUTIVE COMPENSATION ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required under Items 11, 12 and 13 is set forth in the Company's 1997 definitive proxy statement which is incorporated herein by reference. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) 1. Financial Statements
PAGE ----- Index to Financial Statements................................................ F-1 Globalstar Telecommunications Limited Independent Auditors' Report............................................... F-2 Balance Sheets............................................................. F-3 Statements of Operations................................................... F-4 Statements of Shareholders' Equity......................................... F-5 Statements of Cash Flows................................................... F-6 Notes to Financial Statements.............................................. F-7 Globalstar, L.P. (A development stage limited partnership) Independent Auditors' Report............................................... F-12 Consolidated Balance Sheets................................................ F-13 Consolidated Statements of Operations...................................... F-14 Consolidated Statements of Cash Flows...................................... F-15 Consolidated Statements of Ordinary Partners' Capital and Subscriptions Receivable.............................................................. F-16 Notes to Consolidated Financial Statements................................. F-17
29 31 (a) 3. Exhibits
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ------------------------------------------------------------------------------------ 3.1 Memorandum of Association of Globalstar Telecommunications Limited* 3.2 Bye-Laws of Globalstar Telecommunications Limited* 4.1 Indenture dated as of March 6, 1996 relating the Company's 6 1/2% Convertible Preferred Equivalent Obligations due 2006** 4.2 Indenture dated as of February 15, 1997 relating to Globalstar's 11 3/8% Senior Notes due 2004+ 10.1 Amended and Restated Agreement of Limited Partnership of Globalstar, L.P., dated as of March 6, 1996, among Loral/Qualcomm Satellite Services, L.P., Globalstar Telecommunications Limited, AirTouch Satellite Services, San Giorgio S.p.A., Hyundai/Dacom, Loral/DASA Globalstar, L.P., Loral Globalstar, L.P., TE.S.A.M. and Vodastar Limited+ 10.2 Subscription Agreements by and between Globalstar, L.P., and each of AirTouch Communications, Alcatel Spacecom, Loral General Partner, Inc., Hyundai/Dacom and Vodastar Limited* 10.3 Subscription Agreement by and between Globalstar, L.P. and Loral/Qualcomm Satellite Services, L.P.* 10.4 Satellite Procurement Letter Agreement by and among Globalstar, L.P., Hyundai Electronics Industries Co., Ltd. and Space Systems/Loral, Inc.* 10.5 Contract for OmniTRACS Like Services Agreement between Globalstar, L.P. and Qualcomm Incorporated* 10.6 Support Agreement by and among Qualcomm Incorporated, Globalstar, L.P. and Loral/Qualcomm Satellite Services, Inc.* 10.7 Qualcomm Licensee Letter Agreement by and among Globalstar, L.P., Hyundai Electronics Industries Co., Ltd. and Qualcomm Incorporated.* 10.8 Contract between Globalstar, L.P. and Space Systems/Loral, Inc.* 10.9 Contract for the Development of Certain Portions of the Ground Operations Control Center between Globalstar and Loral Western Development Laboratories.* 10.10 Contract for the Development of Satellite Orbital Operations Centers between Globalstar and Loral Aerosys, a division of Loral Aerospace Corporation.* 10.11 1994 Stock Option Plan.*++ 10.12 Revolving Credit Agreement dated as of December 15, 1995, as amended on March 25, 1996, among Globalstar, certain banks parties thereto and Chemical Bank, as Administrative Agent+ 10.13 Registration Rights Agreement dated March 6, 1996 relating to the Company's 6 1/2% Convertible Preferred Equivalent Obligations due 2006** 10.14 Warrant Agreement dated as of February 19, 1997 relating to Warrants to purchase 1,032,250 shares of Common Stock+ 10.15 Registration Rights Agreement dated February 19, 1997 relating to Globalstar's 11 3/8% Senior Notes due 2004 and the Company's Warrants to purchase 1,032,250 shares of Common Stock issued in connection therewith+ 12 Statement Regarding Computation of Ratios+ 23.1 Consent of Deloitte & Touche LLP+ 27 Financial Data Schedule (EDGAR only)+
- --------------- * Incorporated by reference to the Company's Registration Statement on Form S-1 (No. 33-86808). ** Incorporated by reference to the Company's Registration Statement on Form S-3 (No. 333-6477). + Filed herewith. ++ Management compensation plan. (b) Reports on Form 8-K None 30 32 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Globalstar Telecommunications Limited By: BERNARD L. SCHWARTZ ------------------------------------ Bernard L. Schwartz (Chairman of the Board and Chief Executive Officer) Date: March 7, 1997 Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE - ------------------------------------------ ------------------------------- ------------------ BERNARD L. SCHWARTZ Chairman of the Board and Chief March 7, 1997 - ------------------------------------------ Executive Officer Bernard L. Schwartz MICHAEL B. TARGOFF Director and President March 7, 1997 - ------------------------------------------ Michael B. Targoff SIR RONALD GRIERSON Director March 7, 1997 - ------------------------------------------ Sir Ronald Grierson ROBERT B. HODES Director March 7, 1997 - ------------------------------------------ Robert B. Hodes E. JOHN PEETT Director March 7, 1997 - ------------------------------------------ E. John Peett A. ROBERT TOWBIN Director March 7, 1997 - ------------------------------------------ A. Robert Towbin MICHAEL P. DEBLASIO Director and Principal March 7, 1997 - ------------------------------------------ Financial Officer Michael P. DeBlasio HARVEY B. REIN Principal Accounting Officer March 7, 1997 - ------------------------------------------ Harvey B. Rein
31 33 INDEX TO FINANCIAL STATEMENTS
PAGE -------------- GLOBALSTAR TELECOMMUNICATIONS LIMITED Independent Auditors' Report............................................... F-2 Balance Sheets............................................................. F-3 Statements of Operations................................................... F-4 Statements of Shareholders' Equity......................................... F-5 Statements of Cash Flows................................................... F-6 Notes to Financial Statements.............................................. F-7 GLOBALSTAR, L.P. (A development stage limited partnership) Independent Auditors' Report............................................... F-12 Consolidated Balance Sheets................................................ F-13 Consolidated Statements of Operations...................................... F-14 Consolidated Statements of Cash Flows...................................... F-15 Consolidated Statements of Ordinary Partners' Capital and Subscriptions Receivable.............................................................. F-16 Notes Consolidated to Financial Statements................................. F-17
F-1 34 INDEPENDENT AUDITORS' REPORT To the Shareholders of Globalstar Telecommunications Limited: We have audited the accompanying balance sheets of Globalstar Telecommunications Limited (a Bermuda company) as of December 31, 1996 and 1995 and the related statements of operations, shareholders' equity and cash flows for the years ended December 31, 1996 and 1995 and for the period November 23, 1994 (date of incorporation) to December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Globalstar Telecommunications Limited as of December 31, 1996 and 1995 and the results of its operations and its cash flows for the years ended December 31, 1996 and 1995, and for the period November 23, 1994 to December 31, 1994 in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP San Jose, California February 24, 1997 F-2 35 GLOBALSTAR TELECOMMUNICATIONS LIMITED BALANCE SHEETS (In thousands, except share data)
DECEMBER 31, --------------------- 1996 1995 -------- -------- ASSETS Investment in Globalstar, L.P.: Redeemable preferred partnership interests........................... $302,037 $ -- Ordinary partnership interests....................................... 158,038 173,118 Ordinary partnership warrants........................................ 22,601 -- -------- -------- Total assets...................................................... $482,676 $173,118 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Interest payable..................................................... $ 1,679 $ -- Convertible preferred equivalent obligations ($310,000 principal amount).............................................................. 300,358 -- Commitments and contingencies (Note 4) Shareholders' equity: Common stock, $1.00 par value, 60,000,000 shares authorized; 10,000,000 issued and outstanding................................. 10,000 10,000 Paid-in capital...................................................... 175,750 175,750 Warrants............................................................. 22,601 -- Accumulated deficit.................................................. (27,712) (12,632) -------- -------- Total shareholders' equity............................................. 180,639 173,118 -------- -------- Total liabilities and shareholders' equity........................ $482,676 $173,118 ======== ========
See notes to financial statements. F-3 36 GLOBALSTAR TELECOMMUNICATIONS LIMITED STATEMENTS OF OPERATIONS (In thousands, except per share data)
YEARS ENDED DECEMBER 31, ------------------ 1996 1995 ------- -------- Equity in net loss applicable to ordinary partnership interests of Globalstar, L.P. ....................................................... $15,080 $ 12,632 Dividend income on Globalstar, L.P. redeemable preferred partnership interests............................................................... (17,370) -- Interest expense on convertible preferred equivalent obligations.......... 17,370 -- ------- -------- Net loss.................................................................. $15,080 $ 12,632 ======= ======== Net loss per share........................................................ $ 1.51 $ 1.26 ======= ======== Shares used in computing net loss per share............................... 10,000 10,000 ======= ========
See notes to financial statements. F-4 37 GLOBALSTAR TELECOMMUNICATIONS LIMITED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands)
COMMON STOCK ----------------- PAID-IN ACCUMULATED SHARES AMOUNT CAPITAL WARRANTS DEFICIT TOTAL ------ ------- ---------- -------- ----------- -------- Incorporation by Globalstar, L.P., November 23, 1994... 12 $ 12 $ 112 $ 124 ------ ------- -------- -------- Balance, December 31, 1994...................... 12 12 112 124 Sale of common stock, net of offering costs of $14,250................ 10,000 10,000 175,750 185,750 Repurchase of common stock from Globalstar, L.P. .... (12) (12) (112) (124) Net loss.................... $ (12,632) (12,632) ------ ------- -------- -------- -------- Balance, December 31, 1995...................... 10,000 10,000 175,750 (12,632) 173,118 Warrants issued in connection with the Globalstar Credit Agreement................. $ 22,601 22,601 Net loss.................... (15,080) (15,080) ------ ------- -------- ------- -------- -------- Balance, December 31, 1996...................... 10,000 $10,000 $175,750 $ 22,601 $ (27,712) $180,639 ====== ======= ======== ======= ======== ========
See notes to financial statements. F-5 38 GLOBALSTAR TELECOMMUNICATIONS LIMITED STATEMENTS OF CASH FLOWS (In thousands)
YEARS ENDED DECEMBER 31, NOVEMBER 23, 1994 ----------------------- (DATE OF INCORPORATION) TO 1996 1995 DECEMBER 31, 1994 --------- --------- -------------------------- Cash flows from operating activities: Net loss..................................... $ (15,080) $ (12,632) $ -- Equity in net loss of Globalstar, L.P........ 15,080 12,632 -- Increase in redemption value of redeemable preferred partnership interests........... (858) -- -- Dividends accrued on redeemable preferred interests in excess of cash received...... (1,679) -- -- Amortization of convertible preferred equivalent obligations issue costs........ 858 -- -- Change in operating liability: Interest payable.......................... 1,679 -- -- --------- --------- ------- Net cash provided by (used in) operating activities................................... -- -- -- --------- --------- ------- Investing activities: Purchase of general partnership interests in Globalstar, L.P........................... -- (185,750) -- Purchase of redeemable preferred partnership interests in Globalstar, L.P.............. (299,500) -- -- --------- --------- ------- Net cash used in investing activities.......... (299,500) (185,750) -- --------- --------- ------- Financing activities: Net proceeds from sale of common stock....... -- 185,750 -- Payment of debt offering costs............... (10,500) -- -- Sale of convertible preferred equivalent obligations............................... 310,000 -- -- Sale of common stock to Globalstar, L.P...... -- -- 124 Repurchase of common stock from Globalstar, L.P........................... -- (124) -- Advances from (repayment to) Globalstar, L.P....................................... -- (66) 66 Deferred costs of initial public offering.... -- -- (190) Offering proceeds used to repay initial public offering costs deferred in prior period.................................... -- 190 -- --------- --------- ------- Net cash provided by financing activities...... 299,500 185,750 -- --------- --------- ------- Net increase (decrease) in cash and cash equivalents.................................. -- -- -- Cash and cash equivalents, beginning of period....................................... -- -- -- --------- --------- ------- Cash and cash equivalents, end of period....... $ -- $ -- $ -- ========= ========= ================== Noncash transaction: Warrants issued in connection with the Globalstar Credit Agreement............... $ 22,601 ========= Supplemental information: Interest paid during the year................ $ 14,833 =========
See notes to financial statements. F-6 39 GLOBALSTAR TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND BUSINESS On November 23, 1994, Globalstar Telecommunications Limited ("GTL") was incorporated as an exempted company under the Companies Act 1981 of Bermuda. GTL's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. GTL's sole business is acting as a general partner of Globalstar, L.P. ("Globalstar"), a development stage limited partnership, which is designing, constructing and will operate a worldwide, low-earth orbit satellite-based digital telecommunications system (the "Globalstar System"). The Globalstar System's world-wide coverage is designed to enable its service providers to extend modern telecommunications services to millions of people who currently lack basic telephone service and to enhance wireless communications in areas underserved or not served by existing or future cellular systems, providing a telecommunications solution in parts of the world where the build-out of terrestrial systems cannot be economically justified. Loral Space & Communications Ltd. ("Loral"), through a subsidiary and intermediate limited partnerships, is the managing general partner of Globalstar. At December 31, 1996, Loral had an effective 33.8% interest in the ordinary partnership interests of Globalstar, including 1,407,144 shares of GTL's outstanding common stock. On April 23, 1996, a merger between Loral Corporation ("Old Loral") and Lockheed Martin Corporation ("Lockheed Martin") was completed. In conjunction with the merger, Old Loral's direct and indirect interests in GTL and Globalstar were transferred to Loral. At December 31, 1996, GTL owns 21.3% of Globalstar's ordinary partnership interests and 100% of Globalstar's redeemable preferred partnership interests. As GTL's investment in Globalstar is GTL's only asset, GTL is dependent upon Globalstar's success and achievement of profitable operations for the recovery of its investment. Globalstar is a development stage limited partnership which may encounter problems, delays and expenses, many of which may be beyond Globalstar's control. These may include, but are not limited to, problems related to technical development of the system, testing, regulatory compliance, manufacturing and assembly, the competitive and regulatory environment in which Globalstar will operate, marketing problems and costs and expenses that may exceed current estimates. There can be no assurance that substantial delays in any of the foregoing matters would not delay Globalstar's achievement of profitable operations and effect the recoverability of GTL's investment. All expenses necessary to maintain GTL's operations are borne by Globalstar. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Investment in Globalstar, L.P. GTL accounts for its investment in Globalstar's ordinary partnership interests on the equity basis, recognizing its allocated share of net loss for each period since its initial investment on February 22, 1995. This investment includes the fair value of warrants received from Globalstar in 1996 (see Note 4). The excess carrying value of this investment over GTL's interest in Globalstar's ordinary partners' capital is attributable to the Globalstar System Under Construction. Amortization of this excess will begin upon Globalstar's commencement of commercial service. Dividend income on GTL's investment in Globalstar's redeemable preferred partnership interests includes accretion of the carrying amount of the investment to redemption value. Convertible Preferred Equivalent Obligations (CPEOs) Costs incurred in connection with the issuance of the CPEOs have been netted against the proceeds of the offering. Interest expense includes accretion of the carrying value of the CPEOs to redemption value. F-7 40 GLOBALSTAR TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Stock Based Compensation As permitted by Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation," GTL accounts for stock-based awards to employees using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". Income Taxes GTL was incorporated in Bermuda. Bermuda does not have an income, profits or capital gains tax. As a partner in Globalstar, however, GTL will be subject to U.S. tax on its share of Globalstar's U.S. source income and may be subject to tax in some foreign jurisdictions on portions of its share of the partnership's foreign source income. Commencing with its investment in Globalstar, GTL has been allocated its proportionate share of partnership tax losses. The ultimate realizability of these tax loss carryforwards is dependent upon the ability of Globalstar to generate U.S. source income, subject to certain other restrictions imposed by the U.S. Internal Revenue Code. Accordingly, no provision for Bermuda or U.S. income tax expense or benefit is included in GTL's Statements of Operations. 3. SALE OF CONVERTIBLE PREFERRED EQUIVALENT OBLIGATIONS AND PURCHASE OF REDEEMABLE PREFERRED PARTNERSHIP INTERESTS On March 6, 1996 and April 3, 1996, GTL issued 6,000,000 shares and 200,000 shares, respectively, of its 6 1/2% Convertible Preferred Equivalent Obligations due 2006, par value $50 per share (the "CPEOs"), for net proceeds of $299,500,000. As of December 31, 1996, 6,200,000 shares of the CPEOs were outstanding, of which Loral holds 2,050,000 shares. The fair value of the CPEOs, based on quoted market prices, was approximately $329 million on December 31, 1996. The CPEOs are subordinated to existing and future debt obligations of GTL, are convertible into 4,769,230 shares of GTL Common Stock at a conversion price of $65.00 per share, subject to adjustment for certain antidilution events, bear interest at 6 1/2% per annum payable quarterly, are redeemable (at a premium which declines over time) by GTL beginning in 2000 (or beginning in 1997 if GTL's stock price exceeds certain defined price ranges), and, if still outstanding, must be redeemed by GTL on March 1, 2006. Interest and redemption payments may be made in cash or shares of common stock. In certain limited circumstances involving a change of control of GTL, as defined, holders may elect to convert their CPEOs into GTL common stock based on the then average market price, subject to GTL's option to redeem the CPEOs. The CPEOs are shown in the accompanying financial statements net of discounts and other offering costs and are being increased to their redemption value over the term of the CPEOs. The net proceeds of $299,500,000 were used by GTL to purchase 4,769,230 redeemable preferred partnership interests in Globalstar. The redeemable preferred partnership interests will convert to ordinary partnership interests on a one-for-one basis upon any conversion of the CPEOs into GTL common stock, will pay a quarterly preferred distribution to GTL of 6 1/2% per annum, will be allocated losses of the partnership only after all adjusted capital accounts of the ordinary partnership interests have been reduced to zero, and are redeemable on terms comparable to the CPEOs. Globalstar may elect to make the quarterly preferred distribution or redemption payments to GTL in cash or general partnership interests. If such distribution is made in cash, GTL must make its interest payment on the CPEOs in cash. Globalstar may elect to defer payment of the preferred distribution; in such case, GTL may also elect to defer interest payment on the CPEOs. However, holders of the CPEOs are entitled to certain representation rights on the General Partners' Committee of Globalstar in the event six consecutive interest payments are deferred. F-8 41 GLOBALSTAR TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 4. SHAREHOLDERS' EQUITY On February 14, 1995, GTL completed an initial public offering of 10,000,000 shares of common stock resulting in net proceeds of $185,750,000. Effective February 22, 1995, GTL purchased 10,000,000 partnership interests from Globalstar with the net proceeds of the initial public offering. Also on February 22, 1995, GTL repurchased at original cost, the 12,000 shares of common stock representing the initial capitalization it had sold to Globalstar in 1994. Partners in Globalstar have the right to convert their partnership interests into shares of GTL on a one-for-one basis following the Full Constellation Date, as defined, of the Globalstar System and after at least two consecutive quarters of positive net income, subject to certain annual limitations. GTL has reserved 37,000,000 shares for this purpose. Stock Option Arrangements Officers, directors and employees of Globalstar are eligible to participate in GTL's 1994 Stock Option Plan (the "Plan"), which provides for nonqualified and incentive stock options. The plan is administered by a stock option committee (the "Committee"), appointed by the GTL Board of Directors. The Committee determines the option price, the option's exercise date and the expiration date of each option (provided no option shall be exercisable after the expiration of ten years from the date of grant). Proceeds received by GTL for options exercised will in turn be used to purchase Globalstar ordinary partnership interests under a one-for-one exchange arrangement. As described in Note 2, GTL accounts for its stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and its related interpretations. Accordingly, no compensation expense has been recognized in GTL's financial statements for stock-based compensation. Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123") requires the disclosure of pro forma net income and earnings per share had GTL adopted the fair value method as of the beginning of 1995. Under SFAS 123, the fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from GTL's stock option awards. These models also require subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. GTL's calculations were made using the Black-Scholes option pricing model with the following assumptions: expected life, six months following vesting; stock volatility, 30%; risk free interest rates, 6.25% in 1996 and 6% in 1995; and no dividends during the expected term. GTL's calculations are based on a multiple option valuation approach and forfeitures are recognized as they occur. If the computed fair values of the 1996 and 1995 awards had been amortized to Globalstar's expense over the vesting period of the awards, GTL's pro forma net loss would have increased by $374,000 ($.04 per share) to $15,454,000 ($1.55 per share) in 1996 and would have increased by $33,000 ($.01 per share) to $12,665,000 ($1.27 per share) in 1995. F-9 42 GLOBALSTAR TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 4. SHAREHOLDERS' EQUITY (CONTINUED) A summary of the status of the GTL stock option plan at December 31, 1996 and changes during the year then ended is presented below:
WEIGHTED- AVERAGE EXERCISE SHARES PRICE ------- ------- Granted in 1995 (weighted average fair value of $5.33 per share)......................................................... 110,400 $16.625 ------- Outstanding at December 31, 1995................................. 110,400 16.625 Granted (weighted average fair value of $18.04 per share)........ 122,000 54.90 Forfeited........................................................ (1,200) 16.625 ------- Outstanding at December 31, 1996................................. 231,200 36.824 =======
The options generally expire ten years from the date of grant and become exercisable over the period stated in each option, generally ratably over a five-year period. All options granted during the year were non-qualified stock options with an exercise price equal to fair market value at the date of grant. As of December 31, 1996, 18,800 shares of common stock were available for future grant under the Plan. The GTL Board of Directors has approved, subject to shareholder approval, a 375,000 increase in the number of shares available for grant under the Plan. The following table summarizes information about GTL's outstanding stock options at December 31, 1996:
WEIGHTED AVERAGE REMAINING NUMBER CONTRACTUAL EXERCISE PRICE OUTSTANDING LIFE-YEARS - ------------------------------------------------------------------ ----------- ---------------- $16.625........................................................... 109,200 8.7 50.375........................................................... 80,000 9.4 63.5313.......................................................... 42,000 9.9
Guarantee Warrants On December 15, 1995, Globalstar entered into a $250 million credit agreement (the "Credit Agreement") with a group of banks. Lockheed Martin and certain Globalstar partners guaranteed $206.3 million and $43.7 million of the Credit Agreement, respectively. In addition, Loral agreed to indemnify Lockheed Martin for any liability in excess of $150 million. In exchange for the guarantee and indemnity, GTL, upon shareholder approval, issued warrants to purchase 4,185,318 shares of GTL common stock at $26.50 per share as follows: Loral 942,428 warrants, Lockheed Martin 2,511,190 warrants and certain Globalstar partners 731,700 warrants. Proceeds received from the exercise of the warrants will be used to purchase Globalstar ordinary partnership interests under a one-for-one exchange arrangement. As part of this transaction, Globalstar issued GTL warrants to purchase an additional 1,131,168 ordinary partnership interests of Globalstar. On February 12, 1997, GTL and the holders of the warrants entered into an arrangement under which GTL agreed to accelerate the vesting and exercisability of the warrants to purchase 4,185,318 shares of GTL common stock at $26.50 per share and the holders agreed to exercise such warrants. GTL agreed to register for resale the GTL common stock issuable upon exercise of the warrants. In addition, GTL announced its intention to distribute to the holders of its common stock rights to subscribe for and purchase 1,131,168 GTL shares for a price of $26.50 per share of which Loral will receive rights to purchase 159,172 shares. Loral agreed to purchase all shares not purchased upon exercise of the rights. Upon the exercise of the warrants and the rights, GTL will receive proceeds of approximately $140.9 million, which it will use to exercise its warrants to purchase 5,316,486 Globalstar ordinary partnership interests at $26.50 per interest. F-10 43 GLOBALSTAR TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. SUBSEQUENT EVENT On February 13, 1997, Globalstar and GTL sold units consisting of $500 million principal amount of Globalstar's 11 3/8% Senior Notes due 2004 and warrants to purchase 1,032,250 shares of GTL common stock in a private offering. The notes are senior in right of payment to the redeemable preferred partnership interests, and may not be redeemed prior to February 2002 and are subject to a prepayment premium prior to 2004. Interest on the notes is payable semi-annually. The indenture for the notes contains certain covenants that among other things limit the ability of Globalstar to incur additional debt, issue preferred stock, or pay dividends and certain distributions. In certain limited circumstances involving a change of control of Globalstar, as defined, each note is redeemable at the option of the holder for 101% of the principal amount plus accrued interest. The warrants are exercisable on February 19, 1998 at a price of $69.575 per share. The warrants represent approximately 1.7% of Globalstar's total partnership interests on a fully diluted basis. Any proceeds from the exercise of the warrants will be used to purchase Globalstar ordinary partnership interests. Globalstar will use the net proceeds of approximately $484 million from the offering for the construction and deployment of the Globalstar System. 6. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
QUARTER ENDED -------------------------------------------------------- JUNE MARCH 31, 30, SEPTEMBER 30, DECEMBER 31, --------- ------- ------------- ------------ (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1996: Equity in loss of Globalstar, L.P............ $(3,282) $(3,942) $(3,345) $ (4,511) Net loss..................................... (3,282) (3,942) (3,345) (4,511) Loss per share............................... (0.33) (0.39) (0.33) (0.45) 1995: Equity in loss of Globalstar, L.P............ $(1,548) $(2,712) $(3,695) $ (4,677) Net loss..................................... (1,548) (2,712) (3,695) (4,677) Loss per share............................... (0.15) (0.27) (0.37) (0.47)
F-11 44 INDEPENDENT AUDITORS' REPORT To the Partners of Globalstar, L.P.: We have audited the accompanying consolidated balance sheets of Globalstar, L.P. (a development stage limited partnership) and its subsidiary as of December 31, 1996 and 1995, and the related consolidated statements of operations, partners' capital and subscriptions receivable and cash flows for the period from March 23, 1994 (commencement of operations) to December 31, 1994, the years ended December 31, 1995 and 1996 and cumulative. We have also audited the accompanying consolidated statement of operations for the period from January 1, 1994 to March 22, 1994 (the pre-capital subscription period). These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Globalstar, L.P. and its subsidiary at December 31, 1996 and 1995, and the results of their operations and their cash flows for the periods stated above in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP San Jose, California February 24, 1997 F-12 45 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) CONSOLIDATED BALANCE SHEETS (In thousands, except partnership interests)
DECEMBER 31, --------------------- 1996 1995 -------- -------- ASSETS Current assets: Cash and cash equivalents............................................ $ 21,180 $ 71,602 Other current assets................................................. 606 506 ------- -------- Total current assets............................................ 21,786 72,108 Property and equipment, net............................................ 1,720 1,509 Globalstar System Under Construction: Space segment........................................................ 730,513 348,434 Ground segment....................................................... 160,520 51,823 ------- -------- 891,033 400,257 Deferred FCC license costs............................................. 8,690 7,056 Deferred financing costs............................................... 19,577 24,461 Other assets........................................................... 107 -- ------- -------- Total assets.................................................... $942,913 $505,391 ======= ======== LIABILITIES and PARTNERS' CAPITAL Current liabilities: Accounts payable..................................................... $ 4,401 $ 2,070 Payable to affiliates................................................ 63,937 47,569 Accrued expenses..................................................... 6,929 4,782 ------- -------- Total current liabilities....................................... 75,267 54,421 Deferred revenues...................................................... 23,652 21,913 Vendor financing liability............................................. 130,694 42,219 Borrowings under long-term revolving credit facility................... 96,077 -- Commitments and contingencies (Notes 4,6,7,9,10,11 and 12) Redeemable preferred partnership interests (4,769,230 outstanding at December 31, 1996, $310,000 redemption value)........................ 302,037 -- Ordinary partners' capital: Ordinary partnership interests (47,000,000 outstanding).............. 292,585 364,237 Warrants............................................................. 22,601 22,601 ------- -------- Total ordinary partners' capital................................ 315,186 386,838 ------- -------- Total liabilities and partners' capital......................... $942,913 $505,391 ======= ========
See notes to consolidated financial statements. F-13 46 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands)
YEAR ENDED DECEMBER 31, 1994 --------------------------------------- PRE-CAPITAL CUMULATIVE SUBSCRIPTION PERIOD MARCH 23 YEARS ENDED MARCH 23, 1994 -------------------- (COMMENCEMENT OF DECEMBER 31, (COMMENCEMENT OF JANUARY 1 TO OPERATIONS) TO ---------------- OPERATIONS) TO MARCH 22, 1994 DECEMBER 31, 1994 1995 1996 DECEMBER 31, 1996 -------------------- ----------------- ------- ------- ----------------- Operating expenses: Development costs........................ $4,057 $21,279 $62,854 $42,152 $ 126,285 Marketing, general and administrative.... 2,815 6,748 17,372 18,873 42,993 ------ ------- ------ ------ ------- Total operating expenses................... 6,872 28,027 80,226 61,025 169,278 Interest income............................ -- 1,783 11,989 6,379 20,151 ------ ------- ------ ------ ------- Net loss................................... 6,872 26,244 68,237 54,646 149,127 Preferred distributions and related increase in redeemable preferred partnership interests.................... -- -- -- 17,323 17,323 ------ ------- ------ ------ ------- Net loss applicable to ordinary partnership interests................................ $6,872 $26,244 $68,237 $71,969 $ 166,450 ====== ======= ====== ====== =======
See notes to consolidated financial statements. F-14 47 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
MARCH 23, 1994 CUMULATIVE (COMMENCEMENT OF YEARS ENDED MARCH 23, 1994 OPERATIONS) TO DECEMBER 31, (COMMENCEMENT OF DECEMBER 31, ---------------------- OPERATIONS) TO 1994 1995 1996 DECEMBER 31, 1996 ---------------- --------- --------- ------------------------- Cash flows from operating activities: Net loss.................................................. $(26,244) $ (68,237) $ (54,646) $(149,127) Deferred revenues......................................... -- 21,913 1,739 23,652 Stock compensation transactions........................... -- -- 317 317 Depreciation and amortization............................. 115 398 5,858 6,371 Changes in operating assets and liabilities: Other current assets.................................... -- (506) (100) (606) Other assets............................................ -- -- (107) (107) Accounts payable........................................ 638 857 1,723 3,218 Payable to affiliates................................... (1) 4,865 (3,553) 1,311 Accrued expenses........................................ 2,440 2,342 2,147 6,929 -------- --------- --------- --------- Net cash used in operating activities...................... (23,052) (38,368) (46,622) (108,042) -------- --------- --------- --------- Investing activities: Globalstar System under construction...................... (71,996) (328,261) (490,776) (891,033) Payable to affiliates for Globalstar System under construction............................................ 25,042 8,863 19,921 53,826 Capitalized interest payable on long-term revolving credit facility................................................ -- -- 77 77 Accounts payable.......................................... -- 67 608 675 Vendor financing liability................................ -- 42,219 88,475 130,694 -------- --------- --------- --------- Cash used for Globalstar System....................... (46,954) (277,112) (381,695) (705,761) Purchases of property and equipment....................... (1,119) (888) (935) (2,942) Deferred FCC license costs................................ (2,286) (2,535) (1,634) (6,455) Purchases of investments.................................. -- (126,923) -- (126,923) Maturity of investments................................... -- 126,923 -- 126,923 Other current assets...................................... (190) 190 -- -- -------- --------- --------- --------- Net cash used in investing activities...................... (50,549) (280,345) (384,264) (715,158) -------- --------- --------- --------- Financing activities: Deferred line of credit fees.............................. -- (1,875) (250) (2,125) Proceeds from capital subscriptions receivable............ 148,661 133,780 -- 282,441 Payment of accrued capital raising costs.................. (1,500) (900) -- (2,400) Sale of partnership interests to GTL...................... -- 185,750 -- 185,750 Sale of redeemable preferred partnership interests to GTL..................................................... -- -- 299,500 299,500 Distributions on redeemable preferred partnership interests............................................... -- -- (14,833) (14,833) Prepaid interest on redeemable preferred partnership interests............................................... -- -- 47 47 Borrowings under long-term revolving credit facility...... -- -- 106,000 106,000 Repayment of borrowings under long-term revolving credit facility................................................ -- -- (10,000) (10,000) -------- --------- --------- --------- Net cash provided by financing activities.................. 147,161 316,755 380,464 844,380 -------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents....... 73,560 (1,958) (50,422) 21,180 Cash and cash equivalents, beginning of period............. -- 73,560 71,602 -- -------- --------- --------- --------- Cash and cash equivalents, end of period................... $ 73,560 $ 71,602 $ 21,180 $ 21,180 ======== ========= ========= ========= Noncash transactions: Payable to affiliates..................................... $ 9,308 $ 9,308 ======== ========= Accrual of capital raising costs.......................... $ 2,400 $ 2,400 ======== ========= Deferred FCC license costs................................ $ 2,235 $ 2,235 ======== ========= Warrants issued in exchange for debt guarantee............ $ 22,601 $ 22,601 ========= ========= Increase in redemption value of preferred partnership interests............................................... $ 2,537 $ 2,537 ========= =========
See notes to consolidated financial statements. F-15 48 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF ORDINARY PARTNERS' CAPITAL AND SUBSCRIPTIONS RECEIVABLE (In thousands) ORDINARY PARTNERS' CAPITAL
ORDINARY PARTNERSHIP INTERESTS WARRANTS TOTAL ----------- -------- -------- Capital subscription, March 23, 1994 General partner (18,000 interests)...................... $ 50,000 $ 50,000 Limited partners (18,000 interests)..................... 225,000 225,000 Cost of raising capital................................... (2,400) (2,400) Net losses -- pre-capital subscription period: Year ended December 31, 1993............................ (11,510) (11,510) January 1, 1994 to March 22, 1994....................... (6,872) (6,872) Net loss applicable to ordinary partnership interests -- March 23, 1994 (commencement of operations) to December 31, 1994.................................... (26,244) (26,244) Capital subscription, December 31, 1994 (1,000 limited partnership interests)................... 18,750 18,750 ----------- -------- Capital balances, December 31, 1994....................... 246,724 246,724 Sale of 10,000 general partnership interests to GTL, February 22, 1995....................................... 185,750 185,750 Warrant agreement in connection with debt guarantee............................................... -- $ 22,601 22,601 Net loss applicable to ordinary partnership interests -- Year ended December 31, 1995............... (68,237) (68,237) ----------- -------- -------- Capital balances -- December 31, 1995..................... 364,237 22,601 386,838 Stock compensation transactions by managing general partner for the benefit of Globalstar................... 317 317 Net loss applicable to ordinary partnership interests -- Year ended December 31, 1996............... (71,969) (71,969) ----------- -------- -------- Capital balances -- December 31, 1996..................... $ 292,585 $ 22,601 $315,186 ======== ======= ========
SUBSCRIPTIONS RECEIVABLE Capital subscriptions: March 23, 1994.......................................... $ 275,000 $275,000 December 31, 1994....................................... 18,750 18,750 ----------- -------- Total subscriptions..................................... 293,750 293,750 ----------- -------- Cash received........................................... (148,661) (148,661) Credit for pre-capital subscription costs............... (11,309) (11,309) ----------- -------- (159,970) (159,970) ----------- -------- Subscriptions receivable, December 31, 1994............... 133,780 133,780 Cash received........................................... (133,780) (133,780) ----------- -------- Subscriptions receivable, December 31, 1995 and 1996...... $ -- $ -- ======== ========
See notes to consolidated financial statements. F-16 49 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND BUSINESS Globalstar, L.P. ("Globalstar"), a Delaware limited partnership with a December 31 fiscal year end, was formed in November 1993. It had no activities until March 23, 1994, when it received capital subscriptions for $275 million and commenced operations. The accompanying financial statements reflect the operations of the Partnership from that date. In addition, the statements of operations for the period January 1, 1994 to March 22, 1994 (the "Pre-Capital Subscription Period") reflect certain costs incurred by Loral Corporation ("Old Loral") and QUALCOMM Incorporated ("Qualcomm") and reimbursed by Globalstar through a capital subscription credit or agreement for reimbursement, as described in Note 9. Effective April 23, 1996, a merger between Old Loral and Lockheed Martin Corporation ("Lockheed Martin") was completed. In conjunction with the merger, Old Loral's space and communications businesses, including its direct and indirect interests in Globalstar, Globalstar Telecommunications Limited ("GTL"), Space Systems/Loral, Inc. ("SS/L") and other affiliated businesses, as well as certain other assets and liabilities, have been transferred to Loral Space & Communications Ltd. ("Loral"), a Bermuda company. The managing general partner of Globalstar is Loral/QUALCOMM Satellite Services, L.P. ("LQSS"). The general partner of LQSS is Loral/QUALCOMM Partnership, L.P. ("LQP"), a Delaware limited partnership comprised of subsidiaries of Loral and Qualcomm. The managing general partner of LQP is Loral General Partner, Inc. ("LGP"), a subsidiary of Loral. Globalstar was founded to design, construct and operate a worldwide, low-earth orbit ("LEO") satellite-based digital telecommunications system (the "Globalstar System"). The Globalstar System's worldwide coverage is designed to enable its service providers to extend modern telecommunications services to millions of people who currently lack basic telephone service and to enhance wireless communications in areas underserved or not served by existing or future cellular systems, providing a telecommunications solution in parts of the world where the build-out of terrestrial systems cannot be economically justified. On January 31, 1995, the U.S. Federal Communications Commission ("FCC") granted the necessary license to a wholly-owned subsidiary of LQP to construct, launch and operate the Globalstar System. LQP has agreed to use such license for the exclusive benefit of Globalstar. On November 23, 1994, GTL was incorporated as an exempted company under the Companies Act 1981 of Bermuda. GTL's sole business is acting as a general partner of Globalstar. On February 14, 1995, GTL completed an initial public offering of 10,000,000 shares of common stock resulting in net proceeds of $185,750,000. Effective February 22, 1995, GTL purchased 10,000,000 partnership interests from Globalstar with the net proceeds of the initial public offering. The partners in Globalstar have the right to convert their partnership interests into shares of GTL common stock on a one-for-one basis following the Full Coverage Date, as defined, of the Globalstar System and after at least two consecutive reported fiscal quarters of positive net income, subject to certain annual limitations. At December 31, 1996, Loral had an effective 33.8% interest in the ordinary partnership interests of Globalstar, including 1,407,144 shares of GTL's common stock. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Development Stage Company Globalstar is devoting substantially all of its present efforts to the design, licensing, construction, testing, and financing of the Globalstar System, and establishing its business. Its planned principal operations have not commenced. Accordingly, Globalstar is a development stage company as defined in Statement of Financial Accounting Standards ("SFAS") No. 7 "Accounting and Reporting by Development Stage Enterprises." F-17 50 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Globalstar may encounter problems, delays and expenses, many of which may be beyond Globalstar's control. These may include, but are not limited to, problems related to technical development of the system, testing, regulatory compliance, manufacturing and assembly, the competitive and regulatory environment in which Globalstar will operate, marketing problems and costs and expenses that may exceed current estimates. There can be no assurance that substantial delays in any of the foregoing matters would not delay Globalstar's achievement of profitable operations. Use of Estimates in Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of expenses reported for the period. Actual results could differ from estimates. Principles of Consolidation The consolidated financial statements include the accounts of Globalstar and its wholly-owned subsidiary, Globalstar Capital Corporation. All intercompany accounts and transactions are eliminated. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less. Property and Equipment Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets, generally three to eight years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the improvements. Globalstar System Under Construction Globalstar System Under Construction expenditures include and will include progress payments and costs for the design, manufacture, test, launch and launch insurance for 48 low-earth orbit satellites, plus additional spare satellites (the "Space Segment"), and ground and satellite operations control centers, gateways and subscriber terminals (handsets) (the "Ground Segment"). Globalstar intends to depreciate the Space Segment over 7 1/2 years and to depreciate the Ground Segment over eight years as assets are placed in service. Service is currently anticipated to commence in 1998. Costs incurred related to the development of certain technologies, pursuant to a cost sharing arrangement included in Globalstar's contract with Qualcomm, and for the engineering and development of subscriber terminals, are being charged to operations as incurred. Financing Costs and Interest Deferred financing costs represent costs incurred in obtaining a long-term credit facility and the estimated fair value of a warrant agreement in connection with a guarantee of this facility (see Note 6-Credit Facility). Such costs are being amortized over the term of the credit facility as interest. Total amortization of deferred financing costs for the years ended December 31, 1996 and 1995 was approximately $5,134,000 and $15,000, respectively. F-18 51 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Interest costs incurred during the construction of the Globalstar System are capitalized. Total interest costs capitalized for the years ended December 31, 1996 and 1995 was approximately $9,900,000 and $300,000, respectively. No interest was capitalized for the period ending December 31, 1994. FCC License Costs Expenditures, including license fees, legal fees and direct engineering and other technical support, for obtaining the required FCC licenses are capitalized and will be amortized over 7 1/2 years, the expected life of the first generation satellites. Deferred Revenues Advance payments from Globalstar strategic partners to secure exclusive rights to Globalstar service territories are deferred. These advance payments are recoverable by the service providers through credits against a portion of the service fees payable to Globalstar after the commencement of services. Vendor Financing Globalstar's contract with SS/L calls for a portion of the contract price to be deferred as vendor financing and to be repaid, over as long as a five-year period, commencing upon the initial service and full coverage dates of the Globalstar System. Amounts deferred as vendor financing are capitalized as costs of the Globalstar System Under Construction as incurred. Preferred Partnership Distributions Distributions accrue on the redeemable preferred partnership interests at 6 1/2% per annum. Globalstar is increasing the carrying value of the redeemable preferred partnership interests to their ultimate redemption value. The distributions are recorded as reductions against the ordinary partnership capital accounts. Stock-Based Compensation As permitted by Statement of Financial Standards No. 123, "Accounting for Stock-Based Compensation," Globalstar accounts for stock-based awards to employees using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". Net (Loss) Income Allocation Net losses are allocated among the partners in proportion to their percentage interests until the adjusted capital account of a partner is reduced to zero, then in proportion to, and to the extent of, positive adjusted capital account balances and then to the general partners. Net income is allocated among the partners in proportion to, and to the extent of, the distributions made to the partners from distributable cash flow for the period, as defined, then in proportion to and to the extent of negative adjusted capital account balances and then in accordance with percentage interests. Under the terms of the Partnership Agreement, adjusted partners' capital accounts are calculated in accordance with the principles of U.S. Treasury Regulations governing the allocation of taxable income and loss including adjustments to reflect the fair market value (including intangibles) of partnership assets upon certain capital transactions including a sale of partnership interests. Such adjustments are not permitted under generally accepted accounting principles and, accordingly, are not reflected in the accompanying consolidated financial statements. F-19 52 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes Globalstar was organized as a Delaware limited partnership. As such, no income tax provision (benefit) is included in the accompanying financial statements since U.S. income taxes are the responsibility of its partners. Generally, taxable income (loss), deductions and credits of Globalstar will be passed proportionately through to its partners. Reclassifications Certain reclassifications have been made to conform prior-year amounts to the current-year presentation. 3. PROPERTY AND EQUIPMENT
DECEMBER 31, ------------------ 1996 1995 ------- ------ (IN THOUSANDS) Property and equipment consists of: Leasehold improvements.......................................... $ 473 $ 401 Furniture and office equipment.................................. 2,469 1,606 ------- ------ 2,942 2,007 Accumulated depreciation and amortization....................... (1,222) (498) ------- ------ $ 1,720 $1,509 ======= ======
Depreciation and amortization expense for the years ended December 31, 1996 and 1995, and for the period March 23 to December 31, 1994, was $724,000, $383,000 and $115,000, respectively. 4. GLOBALSTAR SYSTEM UNDER CONSTRUCTION Total System Cost As of February 1997, Globalstar estimates the cost for the design, construction and deployment of the Globalstar System including working capital, cash interest on anticipated borrowings and operating expenses to be approximately $2.5 billion, as compared with approximately $2.2 billion estimated at December 31, 1995. Actual amounts may vary from this estimate and additional funds would be required in the event of unforeseen delays, cost overruns, launch failures, technological risks, adverse regulatory developments, or to meet unanticipated expenses and for system enhancements and measures to assure system performance and readiness for the space and ground segments. In addition, Globalstar has agreed to purchase from SS/L eight additional spare satellites that will increase Globalstar's ability to have at least 40 satellites in service during 1999, even in the event of launch failures. If the launch program is successful, the additional satellites will serve as ground spares, readily available for launch to replenish the constellation as needed to respond to satellite attrition during the first generation, or to increase system capacity as required. If Globalstar were to experience a launch failure, the costs associated with the construction and launch of replacements would be substantially covered by insurance, and in that event the cost of the additional satellites used as replacements, currently estimated at $175 million, would be reimbursed to Globalstar. As of February 13, 1997, Globalstar had raised or received commitments for approximately $2.0 billion, including the vendor financing arrangements. Globalstar intends to raise the remaining funds required for the Globalstar System from a combination of sources, including debt issuance (which may include an equity F-20 53 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. GLOBALSTAR SYSTEM UNDER CONSTRUCTION (CONTINUED) component), financial support from the Globalstar partners, projected service provider payments, projected net service revenues from initial operations, anticipated payments from the sale of gateways and Globalstar phones and placement of partnership interests with new and existing strategic investors. Although Globalstar believes it will be able to obtain these additional funds, there can be no assurance that such funds will be available on favorable terms or on a timely basis, if at all. The Space Segment Globalstar has entered into a contract with SS/L, an affiliate of Loral and a limited partner of LQSS, to design, manufacture, test and launch its 56 satellite constellation. The price of the contract consists of three parts, the first for non-recurring work at a price not to exceed $117.1 million, the second for recurring work at a fixed price of $15.6 million per satellite (including certain performance incentives of up to approximately $1.9 million per satellite) and the third for launch services and insurance. SS/L has agreed to obtain launch vehicles and arrange for the launch of Globalstar's satellites on Globalstar's behalf for all 56 satellites, and obtain insurance to cover the replacement cost of satellites or launch vehicles lost in the event of a launch failure. In certain circumstances these amounts are subject to equitable adjustment in light of future market conditions, which may, in turn, be influenced by international political developments. Any change in such assumptions may result in an increase in the costs paid by Globalstar, which may be substantial. Termination by Globalstar of this contract would result in termination fees, which may be substantial. During 1996, Globalstar authorized SS/L to alter its original launch plans and procure three launches of the Starsem Soyuz launch vehicle, which will launch four Globalstar satellites each. The selection of these launch vehicles is part of a strategy to place on-orbit a constellation of at least 40 satellites by the first quarter of 1999 even in the event of launch failures. As a result of this decision, total costs for launch vehicles and insurance are expected to be approximately $455 million. SS/L has entered into fixed-price subcontracts aggregating approximately $650 million, with certain of Globalstar's direct or indirect limited partners. Some of these contracts are subject to adjustment. Globalstar's space segment contract with SS/L calls for a portion of the contract price to be deferred as vendor financing (see Note 5.). The Ground Segment Globalstar has entered into a contract with Qualcomm providing for the design, development, manufacture, installation, testing and maintenance of four gateways, two ground operations control centers and 100 pre-production subscriber terminals. The contract provides for reimbursement to Qualcomm, subject to a cap for certain joint development efforts, for contract costs incurred, plus a 12% fee thereon. Termination by Globalstar of its contract with Qualcomm would result in delays and termination fees, which may be substantial. A portion of the ground operations control center software is being developed by Globalstar. Qualcomm is currently preparing a revised estimate of costs under its contract with Globalstar and has given Globalstar indication that, due to additional integration testing procedures to support system readiness on schedule, scope changes to add features, capabilities and functions, cost growth and other factors, the total cost may increase to $545 million. The Qualcomm estimate is subject to further review by Globalstar. In addition, Globalstar has authorized the expenditure of $25 million for the development of additional service features and $30 million to fund development efforts of additional handset suppliers. Globalstar and its strategic service providers intend to jointly finance the procurement of 33 gateways for resale to service providers, thereby accelerating the deployment of gateways around the world prior to the F-21 54 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. GLOBALSTAR SYSTEM UNDER CONSTRUCTION (CONTINUED) In-Service Date. Globalstar has agreed to finance approximately $80 million of the cost of these gateways and expects to recover its cost from the resale of these gateways to service providers. Globalstar will receive from Qualcomm or its licensee(s) a payment of approximately $400,000 for each installed gateway sold to a Globalstar service provider. In addition, Globalstar will receive a payment of up to $10 on each Globalstar subscriber terminal sold, until Globalstar funding of that design has been recovered. Globalstar has entered into an agreement with Lockheed Martin for the development and delivery of two satellite operations control centers and 33 telemetry and command units for the Globalstar System. The maximum contract price is $25.1 million and provides for reimbursement to Lockheed Martin for contract costs incurred such as labor, materials, travel, license fees, royalties and general and administrative expenses. Lockheed Martin will receive a 12% fee under the contract, 6% of which is payable at the time the costs are incurred, with the remainder payable upon achievement of certain milestones. Globalstar will own any intellectual property produced under the contract. 5. VENDOR FINANCING LIABILITY Globalstar's space segment contract with SS/L calls for approximately $310 million of the contract price to be deferred as vendor financing. Of the $310 million, $90 million is interest bearing at the 30-day LIBOR rate plus 3% per annum. The remaining $220 million of vendor financing is non-interest bearing. Globalstar will repay the non-interest bearing portions as follows: $49 million following the launch and acceptance of 24 or more satellites (the "Preliminary Constellation"), $61 million upon the launch and acceptance of 48 or more satellites (the "Full Constellation"), and the remainder in equal installments over the five-year period following acceptance of the Preliminary and Full Constellations. Payment of the $90 million interest bearing vendor financing will be deferred until December 31, 1998 or the Full Constellation Date, whichever is earlier. Thereafter, interest and principal will be repaid in twenty equal quarterly installments over the next five years. At December 31, 1996 and 1995, approximately $72.0 million and $21.5 million, respectively, of the vendor financing liability was interest bearing. 6. CREDIT FACILITY On December 15, 1995, Globalstar entered into a $250 million credit agreement (the "Credit Agreement") with a group of banks. Lockheed Martin, Qualcomm, SS/L and another Globalstar partner have guaranteed $206.3 million, $21.9 million, $11.7 million and $10.1 million of the Credit Agreement, respectively. In addition, Loral agreed to indemnify Lockheed Martin for any liability in excess of $150 million. The Credit Agreement provides that Globalstar may select loans at varying interest rates, including the Eurodollar rate plus 5/8%. Globalstar pays a commitment fee on the unused portion. The Credit Agreement contains covenants requiring Globalstar to meet certain financial ratios including minimum net worth of $200 million and limits additional indebtedness and the payment of cash distributions. The Credit Agreement expires on December 15, 2000. In exchange for the guarantee and indemnity, GTL issued warrants to purchase 4,185,318 shares of GTL common stock at $26.50 as follows: Loral 942,428 warrants, Lockheed Martin 2,511,190 warrants, Qualcomm 367,131 warrants, SS/L 195,094 warrants and another Globalstar partner 169,475 warrants. Proceeds from the exercise of the warrants will be used to purchase Globalstar ordinary partnership interests under a one-for-one exchange arrangement. As part of this transaction, Globalstar issued GTL warrants to purchase an additional 1,131,168 ordinary partnership interests of Globalstar. The estimated fair value of the warrant agreement has been recorded as a deferred financing cost in the accompanying financial statements. Globalstar has also agreed to pay the guarantors, other than Lockheed Martin, a fee equal to 1.5% per annum of the average F-22 55 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 6. CREDIT FACILITY (CONTINUED) guaranteed amount outstanding under the Credit Agreement. Such fee will be deferred and will be paid with interest commencing 90 days after the expiration of the Credit Agreement. On February 12, 1997, GTL and the holders of the warrants entered into an arrangement under which GTL agreed to accelerate the vesting and exercisability of the warrants to purchase 4,185,318 shares of GTL common stock at $26.50 per share and the holders agreed to exercise such warrants. GTL also agreed to register for resale the GTL shares issuable upon exercise of the warrants. In addition, GTL announced its intention to distribute to the holders of its common stock rights to subscribe for and purchase 1,131,168 GTL shares for a price of $26.50 per share of which Loral will receive 159,172 rights. Loral agreed to purchase all GTL shares not purchased upon exercise of the rights. Upon the exercise of the warrants and the rights, GTL will receive proceeds of approximately $140.9 million, which it will use to exercise warrants to purchase 5,316,486 Globalstar ordinary partnership interests at $26.50 per interest. Globalstar will use such proceeds for the construction of the Globalstar System. 7. COMMITMENTS The following table presents the future minimum lease payments required under operating leases that have an initial lease term in excess of one year (in thousands): 1997................................................ $1,045 1998................................................ 1,067 1999................................................ 1,090 2000................................................ 789 2001................................................ 156 Thereafter.......................................... 767 ------ Total minimum payments required..................... $4,914 ======
Rent expense for the years ended December 31, 1996 and 1995, and the period March 23 to December 31, 1994, was approximately $1,067,000, $934,000, and $373,000, respectively. 8. SALE OF REDEEMABLE PREFERRED PARTNERSHIP INTERESTS On March 6, 1996 and April 3, 1996, GTL purchased 4,615,385 and 153,845 redeemable preferred partnership interests ("RPPIs"), respectively, in Globalstar using the net proceeds of $299,500,000 from GTL's sale of its Convertible Preferred Equivalent Obligations (the "CPEOs"). The RPPIs will convert to ordinary general partnership interests on a one-for-one basis upon any conversion of the CPEOs, will pay a quarterly preferred distribution to GTL of 6 1/2% per annum, will be allocated losses of the partnership only after all adjusted capital accounts of the ordinary partnership interests have been reduced to zero, and are redeemable on terms comparable to the CPEOs. If still outstanding, the RPPIs must be redeemed by Globalstar on March 1, 2006 for the aggregate amount of $310,000,000 plus all unpaid distributions. Globalstar may elect to make the quarterly preferred distribution and redemption payments to GTL in cash or general partnership interests. If such distribution is made in cash, GTL must make its interest payment on the CPEOs in cash. Globalstar may elect to defer payment of the preferred distribution; in such case, GTL may also elect to defer interest payment on the CPEOs, however, holders of the CPEOs are entitled to certain representation rights on the General Partners' Committee of Globalstar in the event six consecutive interest payments are deferred. Through December 31, 1996, all payments have been made in cash on a timely basis. F-23 56 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9. ORDINARY PARTNERS' CAPITAL Initial Capital Subscriptions Prior to the commencement of Globalstar's operations on March 23, 1994, Loral and Qualcomm undertook independent efforts at their own risk to explore the feasibility of a Globalstar-type system. Efforts to develop the Globalstar System were formalized with the initial funding of Globalstar on March 23, 1994 through capital subscriptions of $50,000,000 for 18,000,000 general partner interests and $225,000,000 for an aggregate of 18,000,000 limited partner interests. In connection with the initial capital subscriptions, the partners of Globalstar agreed to reimburse Loral and Qualcomm for certain expenditures totaling $18,382,000, incurred related to such efforts from January 1, 1993 through March 22, 1994. These expenditures included development costs and marketing, general and administrative expenses related to the Globalstar System. The statements of operations include the costs for these periods under the heading Pre-Capital Subscription Period. In addition, costs of $2,235,000 were incurred in connection with the FCC license application. The aggregate expenditures by Loral and Qualcomm of $20,617,000 were reimbursed through a credit of $11,309,000 issued to the general partner as a reduction of its required capital subscription payment and a payment to Qualcomm of $9,308,000. The reimbursed expenses of $18,382,000 have been charged to partners' capital as of the date of the capital subscription agreement and allocated to the partners' capital accounts in accordance with the partnership agreement. The $2,235,000 of costs relating to the FCC license application are included in the balance sheet. Other Arrangements In connection with service provider arrangements in China, under which China Telecommunications Broadcast Satellite Corporation ("China Sat") will act as the sole distributor of Globalstar services in China, China Sat has the right, under certain circumstances, to acquire up to 1,875,000 ordinary partnership interests at $20 per partnership interest. China Sat may purchase one-half of this amount currently and one-half upon reaching certain target revenue levels. Stock Option Arrangements Officers and employees of Globalstar are eligible to participate in GTL's 1994 Stock Option Plan (the "Plan"), which provides for nonqualified and incentive stock options. The plan is administered by a stock option committee (the "Committee"), appointed by the GTL Board of Directors. The Committee determines the option price, the option's exercise date and the expiration date of each option (provided no option shall be exercisable after the expiration of ten years from the date of grant). Proceeds received by GTL for options exercised will in turn be used to purchase Globalstar ordinary partnership interests under a one-for-one exchange arrangement. In 1995, options to purchase 110,400 shares of GTL common stock and in 1996, options to purchase 122,000 shares of GTL common stock were granted under the Plan. The options generally expire ten years from the date of grant and become exercisable over the period stated in each option, generally ratably over a five-year period. All options granted in 1995 and 1996 were non-qualified stock options with a price equal to fair market value at the date of grant. As of December 31, 1996, 18,800 shares of common stock were available for future grant under the Plan, no options were exercised or are exercisable and 1,200 have been cancelled. On September 14, 1995, Loral, in its capacity as managing general partner, granted certain of its officers options to purchase 140,000 shares of the GTL common stock owned by Loral at an exercise price of $20.00 per share. On December 12, 1995 Loral, in its capacity as managing general partner, granted non-employee F-24 57 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9. ORDINARY PARTNER'S CAPITAL (CONTINUED) directors of Loral options to purchase 200,000 shares of the GTL common stock owned by Loral at an exercise price of $33.375 per share. Such exercise prices were greater than or equal to the market price at grant date. These options are immediately exercisable, and expire 12 years from date of grant; no options were exercised or cancelled during the year. On October 9, 1996, Loral, in its capacity as managing general partner, granted certain of its officers options to purchase 152,000 shares of the GTL common stock owned by Loral at a price $25.375 below market price on the grant date. Such options vest over a three year period and expire 10 years from date of grant; no options were exercised or cancelled during the year. In April and December 1996, Loral granted certain officers and employees of Globalstar options to purchase 99,000 shares of Loral common stock at $10.50 per share and 5,000 shares of Loral common stock at $18.9375 per share, respectively. Such exercise prices were equal to the market price at grant date. These options expire ten years from the date of grant and become exercisable ratably over a five year period. As described in Note 2, Globalstar accounts for its stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and its related interpretations. Except for $317,000 of compensation expense in 1996 related to the below market option grant, no compensation expense has been recognized in Globalstar's financial statements for stock-based compensation. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") requires the disclosure of pro forma net income and earnings per share had Globalstar adopted the fair value method as of the beginning of 1995. Under SFAS 123, the fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from Globalstar's stock option awards. These models also require subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. Globalstar's calculations were made using the Black-Scholes option pricing model with the following weighted average assumptions: expected life, six months following vesting; stock volatility, 30%; risk free interest rates, 6.25% in 1996 and 6% in 1995; and no dividends during the expected term. Globalstar's calculations are based on a multiple option valuation approach and forfeitures are recognized as they occur. If the computed fair values of the 1996 and 1995 awards (including the stock-based awards made by Loral to its officers and directors on Globalstar's behalf) had been amortized to expense over the vesting period of the awards, the pro forma net loss applicable to ordinary partnership interests would have increased by $1,755,000 to $73,724,000 in 1996 and would have increased by $156,000 to $68,393,000 in 1995. A summary of the status of the GTL stock option plan at December 31, 1996 and changes during the year then ended is presented below:
WEIGHTED AVERAGE EXERCISE SHARES PRICE ------- -------- Granted in 1995 (weighted average fair value $5.33 per share).... 110,400 $ 16.625 Outstanding at December 31, 1995................................. 110,400 16.625 Granted (weighted average fair value $18.04 per share)........... 122,000 54.90 Forfeited........................................................ (1,200) 16.625 -------- - Outstanding at December 31, 1996................................. 231,200 36.824 =========
F-25 58 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9. ORDINARY PARTNER'S CAPITAL (CONTINUED) The following table summarizes information about the stock options outstanding at December 31, 1996:
WEIGHTED AVERAGE NUMBER REMAINING EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE-YEARS ------------------------------------------------------- ----------- ---------------------- $16.625 ............................................... 109,200 8.7 50.375 ............................................... 80,000 9.4 63.5313............................................... 42,000 9.9
10. PENSIONS AND OTHER EMPLOYEE BENEFITS Prior to April 23, 1996, Globalstar employees were eligible to participate in the employee benefit plans of Old Loral. Globalstar was charged for the actual costs of these benefits which for the period March 23 through December 31, 1994, amounted to $321,000, including $55,000 relating to pensions and retiree health care and life insurance benefits. The costs incurred for the year ended December 31, 1995 amounted to $710,000, including $121,000 relating to pensions and retiree health care and life insurance benefits. In April 1996, separate pension, postretirement health care and life insurance and employee savings plans were established by Globalstar. Pensions: Globalstar maintains a noncontributory pension plan and a supplemental pension plan covering certain employees. Eligibility for participation in these plans vary and benefits are generally based on members' compensation and years of service. Plan assets are generally invested in U.S. government and agency obligations and listed stocks and bonds. Pension cost for the year ended December 31, 1996 includes the following components (in thousands): Service cost-benefits earned during the period............................ $ 213 Interest cost on projected benefit obligation............................. 195 Actual return on plan assets.............................................. (134) Net amortization and deferral............................................. (151) -------- Total pension cost.............................................. $ 123 ========
The following presents the plan's funded status and amounts recognized in the balance sheet at December 31, 1996 (in thousands): Actuarial present value of benefit obligations: Vested benefits......................................................... $ 2,944 ======== Accumulated benefits.................................................... $ 3,129 Effect of projected future salary increases............................. 764 -------- Projected benefits...................................................... 3,893 Plan assets at fair value................................................. 4,156 -------- Plan assets in excess of projected benefit obligation..................... 263 Unrecognized net gain..................................................... 386 -------- Pension liability......................................................... $ 123 ========
F-26 59 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 10. PENSIONS AND OTHER EMPLOYEE BENEFITS (CONTINUED) The principal actuarial assumptions were: Discount rate............................................................... 7.75% Rate of increase in compensation levels..................................... 4.50% Expected long-term rate of return on plan assets............................ 9.50%
Postretirement Health Care and Life Insurance Benefits: In addition to providing pension benefits, Globalstar provides certain health care and life insurance benefits for retired employees and dependents. Participants are eligible for these benefits when they retire from active service and meet the eligibility requirements for Globalstar's pension plan. These benefits are funded primarily on a pay-as-you-go basis with the retiree generally paying a portion of the cost through contributions, deductibles and coinsurance provisions. Postretirement health care and life insurance costs for the year ended December 31, 1996 include the following components (in thousands): Service cost -- benefits earned during the period......................... $ 29 Interest cost on accumulated postretirement benefit obligation............ 32 Net amortization and deferral............................................. 26 Return on assets.......................................................... (2) -------- Total postretirement health care and life insurance costs....... $ 85 ========
At December 31, 1996, the total accumulated postretirement benefit obligation was $641,000. Actuarial assumptions used in determining the accumulated postretirement benefit obligation include a discount rate of 7.75% at December 31, 1996, and an assumed health care cost trend rate of 10.6% decreasing gradually to an ultimate rate of 5.5% by the year 2004. Changing the assumed health care cost trend by 1% in each year would change the accumulated postretirement benefit obligation at December 31, 1996 by $110,000 and the aggregate service and interest cost components by $12,000 for the year ended December 31, 1996. 11. RELATED PARTY TRANSACTIONS In addition to the transactions described in Notes 4, 5, 6, 8 and 9, Globalstar has a number of other transactions with its affiliates. Globalstar believes that the arrangements are as favorable to Globalstar as could be obtained from unaffiliated parties. The following describes these related-party transactions. Globalstar has granted to SS/L an irrevocable, royalty-free, non-exclusive license to use certain intellectual property expressly developed in connection with the SS/L agreement provided that SS/L will not use, or permit others to use, such license for the purpose of engaging in any business activity that would be in material competition with Globalstar. Globalstar has similarly agreed that it will not license such intellectual property if it will be used for the purpose of designing or building satellites that would be in competition with SS/L. Globalstar has granted to Qualcomm an irrevocable, non-exclusive, worldwide perpetual license to intellectual property owned by Globalstar in the Ground Segment and developed pursuant to the Qualcomm agreement. Qualcomm may, pursuant to such grant, use the intellectual property for applications other than the Globalstar System provided that Qualcomm may not for a period of three years after its withdrawal as a strategic partner or prior to the third anniversary of the Full Constellation Date, whichever is earlier, engage in any business activity that would be in competition with the Globalstar System. The grant of intellectual property to Qualcomm described above is generally royalty free. Under certain specified circumstances, however, Qualcomm will be required to pay a 3% royalty fee on such intellectual property. F-27 60 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 11. RELATED PARTY TRANSACTIONS (CONTINUED) A support agreement was entered into among Qualcomm, Loral and Globalstar pursuant to which Qualcomm agreed to (i) assist Globalstar and SS/L with Globalstar's system design, (ii) support Globalstar and Loral with respect to various regulatory matters, including the FCC application and (iii) assist Globalstar and Loral in their marketing efforts with respect to Globalstar. For the years ended December 31, 1996 and 1995, and for the period March 23 through December 31, 1994, Qualcomm has received approximately $1,823,000, $2,712,000 and $2,431,000, respectively, for costs incurred in rendering such support and assistance. Certain of Globalstar's limited partners have signed agreements granting them the right to provide Globalstar System services to users in specific countries on an exclusive basis, as long as specified minimum levels of subscribers are met. These service providers will receive certain discounts from Globalstar's expected pricing schedule generally over a five-year period. Globalstar has entered into consulting agreements with certain limited partners. Costs incurred under these arrangements for the years ended December 31, 1996 and 1995, and for the period March 23 through December 31, 1994, were $496,000, $1,411,000 and $471,000, respectively. Globalstar anticipates that similar agreements may be entered into with other strategic partners in the future. Current payable to affiliates consists of:
DECEMBER 31, --------------------- 1996 1995 ------- ------- (IN THOUSANDS) SS/L................................................... $22,572 $26,126 Qualcomm............................................... 40,903 21,443 Loral.................................................. 462 -- ------- ------- Total.................................................. $63,937 $47,569 ======= =======
Commencing after the initiation of Globalstar services, LQP, the general partner of LQSS, will be paid an annual management fee equal to 2.5% of Globalstar's revenues up to $500 million plus 3.5% of revenues in excess of $500 million. Should Globalstar incur a net loss in any year following commencement of services, the management fee for that year will be reduced by 50% and LQP will reimburse Globalstar for management fee payments, if any, received in any prior quarter of such year, sufficient to reduce its management fee for the year to 50%. No management fees have been paid to date. 12. REGULATORY MATTERS Globalstar and its operations are, and will be, subject to substantial U.S. and international regulation, including required regulatory approvals in each country in which Globalstar intends to provide service. Globalstar's business may be significantly affected by regulatory activities. 13. SUBSEQUENT EVENT On February 13, 1997, Globalstar and GTL sold units consisting of $500 million principal amount of Globalstar's 11 3/8% Senior Notes due 2004 and warrants to purchase 1,032,250 shares of GTL common stock in a private offering. The notes are senior in right of payment to the redeemable preferred partnership interests, may not be redeemed prior to February 2002 and are subject to a prepayment premium prior to 2004. Interest on the notes is payable semi-annually. The indenture for the notes contains certain covenants that among other things limit the ability of Globalstar to incur additional debt, issue preferred stock, or pay dividends and certain distributions. In certain F-28 61 GLOBALSTAR, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. SUBSEQUENT EVENT (CONTINUED) limited circumstances involving a change of control of Globalstar, as defined, each note is redeemable at the option of the holder for 101% of the principal amount plus accrued interest. The warrants are exercisable on February 19, 1998 at a price of $69.575 per share. The warrants represent approximately 1.7% of Globalstar's total partnership interests on a fully diluted basis. Globalstar will use the net proceeds of approximately $484 million from the offering for the construction and deployment of the Globalstar System. F-29 62 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ------------------------------------------------------------------------------------ 3.1 Memorandum of Association of Globalstar Telecommunications Limited* 3.2 Bye-Laws of Globalstar Telecommunications Limited* 4.1 Indenture dated as of March 6, 1996 relating the Company's 6 1/2% Convertible Preferred Equivalent Obligations due 2006** 4.2 Indenture dated as of February 15, 1997 relating to Globalstar's 11 3/8% Senior Notes due 2004+ 10.1 Amended and Restated Agreement of Limited Partnership of Globalstar, L.P., dated as of March 6, 1996, among Loral/Qualcomm Satellite Services, L.P., Globalstar Telecommunications Limited, AirTouch Satellite Services, San Giorgio S.p.A., Hyundai/Dacom, Loral/DASA Globalstar, L.P., Loral Globalstar, L.P., TE.S.A.M. and Vodastar Limited+ 10.2 Subscription Agreements by and between Globalstar, L.P., and each of AirTouch Communications, Alcatel Spacecom, Loral General Partner, Inc., Hyundai/Dacom and Vodastar Limited* 10.3 Subscription Agreement by and between Globalstar, L.P. and Loral/Qualcomm Satellite Services, L.P.* 10.4 Satellite Procurement Letter Agreement by and among Globalstar, L.P., Hyundai Electronics Industries Co., Ltd. and Space Systems/Loral, Inc.* 10.5 Contract for OmniTRACS Like Services Agreement between Globalstar, L.P. and Qualcomm Incorporated* 10.6 Support Agreement by and among Qualcomm Incorporated, Globalstar, L.P. and Loral/Qualcomm Satellite Services, Inc.* 10.7 Qualcomm Licensee Letter Agreement by and among Globalstar, L.P., Hyundai Electronics Industries Co., Ltd. and Qualcomm Incorporated.* 10.8 Contract between Globalstar, L.P. and Space Systems/Loral, Inc.* 10.9 Contract for the Development of Certain Portions of the Ground Operations Control Center between Globalstar and Loral Western Development Laboratories.* 10.10 Contract for the Development of Satellite Orbital Operations Centers between Globalstar and Loral Aerosys, a division of Loral Aerospace Corporation.* 10.11 1994 Stock Option Plan.*++ 10.12 Revolving Credit Agreement dated as of December 15, 1995, as amended on March 25, 1996, among Globalstar, certain banks parties thereto and Chemical Bank, as Administrative Agent+ 10.13 Registration Rights Agreement dated March 6, 1996 relating to the Company's 6 1/2% Convertible Preferred Equivalent Obligations due 2006** 10.14 Warrant Agreement dated as of February 19, 1997 relating to Warrants to purchase 1,032,250 shares of Common Stock+ 10.15 Registration Rights Agreement dated February 19, 1997 relating to Globalstar's 11 3/8% Senior Notes due 2004 and the Company's Warrants to purchase 1,032,250 shares of Common Stock issued in connection therewith+ 12 Statement Regarding Computation of Ratios+ 23.1 Consent of Deloitte & Touche LLP+ 27 Financial Data Schedule (EDGAR only)+
- --------------- * Incorporated by reference to the Company's Registration Statement on Form S-1 (No. 33-86808). ** Incorporated by reference to the Company's Registration Statement on Form S-3 (No. 333-6477). + Filed herewith. ++ Management compensation plan. (b) Reports on Form 8-K None F-30 EX-4.2 2 INDENTURE 1 EXHIBIT 4.2 CONFORMED COPY =========================================================== GLOBALSTAR, L.P. GLOBALSTAR CAPITAL CORPORATION, Issuers 11 3/8% Senior Notes due 2004 INDENTURE Dated as of February 15, 1997 THE BANK OF NEW YORK, Trustee =========================================================== 2 CROSS-REFERENCE TABLE TIA Indenture Section Section - ------- --------- 310(a)(1) .............................. 7.10 (a)(2) .............................. 7.10 (a)(3) .............................. N.A. (a)(4) .............................. N.A. (b) .............................. 7.08; 7.10 (c) .............................. N.A. 311(a) .............................. 7.11 (b) .............................. 7.11 (c) .............................. N.A. 312(a) .............................. 2.05 (b) .............................. 11.03 (c) .............................. 11.03 313(a) .............................. 7.06 (b)(1) .............................. N.A. (b)(2) .............................. 7.06 (c) .............................. 11.02 (d) .............................. 7.06 314(a) .............................. 4.02; 4.15; 11.02 (b) .............................. N.A. (c)(1) .............................. 11.04 (c)(2) .............................. 11.04 (c)(3) .............................. N.A. (d) .............................. N.A. (e) .............................. 11.05 (f) .............................. 4.15 315(a) .............................. 7.01 (b) .............................. 7.05; 11.02 (c) .............................. 7.01 (d) .............................. 7.01 (e) .............................. 6.11 316(a)(last sentence).............................. 11.06 (a)(1)(A) .............................. 6.05 (a)(1)(B) .............................. 6.04 (a)(2) .............................. N.A. (b) .............................. 6.07 317(a)(1) .............................. 6.08 (a)(2) .............................. 6.09 (b) .............................. 2.04 318(a) .............................. 11.01 N.A. means Not Applicable. Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of this Indenture. 3 TABLE OF CONTENTS ARTICLE 1 Page ---- Definitions and Incorporation by Reference SECTION 1.01. Definitions ............................ 1 SECTION 1.02. Other Definitions ...................... 24 SECTION 1.03. Incorporation by Reference of Trust Indenture Act ........................ 24 SECTION 1.04. Rules of Construction .................. 25 ARTICLE 2 The Securities SECTION 2.01. Form and Dating ........................ 26 SECTION 2.02. Execution and Authentication ........... 26 SECTION 2.03. Registrar and Paying Agent ............. 27 SECTION 2.04. Paying Agent To Hold Money in Trust..... 27 SECTION 2.05. Securityholder Lists ................... 28 SECTION 2.06. Transfer and Exchange .................. 28 SECTION 2.07. Replacement Securities ................. 29 SECTION 2.08. Outstanding Securities ................. 29 SECTION 2.09. Temporary Securities ................... 30 SECTION 2.10. Cancellation ........................... 30 SECTION 2.11. Defaulted Interest ..................... 30 SECTION 2.12. CUSIP Number ........................... 31 ARTICLE 3 Redemption SECTION 3.01. Notices to Trustee ..................... 31 SECTION 3.02. Selection of Securities To Be Redeemed ............................. 31 SECTION 3.03. Notice of Redemption ................... 32 SECTION 3.04. Effect of Notice of Redemption ......... 33 SECTION 3.05. Deposit of Redemption Price ............ 33 SECTION 3.06. Securities Redeemed in Part ............ 33 4 2 ARTICLE 4 Covenants SECTION 4.01. Payment of Securities .................. 34 SECTION 4.02. SEC Reports ............................ 34 SECTION 4.03. Limitation on Consolidated Debt ........ 35 SECTION 4.04. Future Guarantors ...................... 37 SECTION 4.05. Limitation on Restricted Payments....... 37 SECTION 4.06. Dividend and Other Payment Restrictions Affecting Subsidiaries ................ 40 SECTION 4.07. Asset Dispositions ..................... 41 SECTION 4.08. Transactions with Affiliates ........... 42 SECTION 4.09. Limitation on the Issuance and Sales of Capital Stock of Restricted Subsidiaries ......................... 45 SECTION 4.10. Change of Control ...................... 45 SECTION 4.11. Limitation on Liens .................... 46 SECTION 4.12. Business Activities .................... 48 SECTION 4.13. Maintenance of Insurance ............... 48 SECTION 4.14. Compliance Certificates; Statement by Officers as to Default ................ 50 SECTION 4.15. Further Acts and Instruments ........... 51 SECTION 4.16. Business Activities of GlobalStar....... 51 SECTION 4.17. Calculation of Original Issue Discount.. 51 ARTICLE 5 Successor Company SECTION 5.01. When Issuers May Merge or Transfer Assets ............................... 51 ARTICLE 6 Defaults and Remedies SECTION 6.01. Events of Default ...................... 53 SECTION 6.02. Acceleration ........................... 56 SECTION 6.03. Other Remedies ......................... 56 SECTION 6.04. Waiver of Past Defaults ................ 56 SECTION 6.05. Control by Majority .................... 57 SECTION 6.06. Limitation on Suits .................... 57 5 3 SECTION 6.07. Rights of Holders to Receive Payment ... 58 SECTION 6.08. Collection Suit by Trustee ............. 58 SECTION 6.09. Trustee May File Proofs of Claim ....... 58 SECTION 6.10. Priorities ............................. 59 SECTION 6.11. Undertaking for Costs .................. 59 SECTION 6.12. Waiver of Stay or Extension Laws ....... 59 ARTICLE 7 Trustee SECTION 7.01. Duties of Trustee ...................... 60 SECTION 7.02. Rights of Trustee ...................... 61 SECTION 7.03. Individual Rights of Trustee ........... 62 SECTION 7.04. Trustee's Disclaimer ................... 62 SECTION 7.05. Notice of Defaults ..................... 62 SECTION 7.06. Reports by Trustee to Holders .......... 63 SECTION 7.07. Compensation and Indemnity ............. 63 SECTION 7.08. Replacement of Trustee ................. 64 SECTION 7.09. Successor Trustee by Merger ............ 65 SECTION 7.10. Eligibility; Disqualification .......... 65 SECTION 7.11. Preferential Collection of Claims Against Issuers ...................... 66 ARTICLE 8 Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance ........................... 66 SECTION 8.02. Conditions to Defeasance ............... 67 SECTION 8.03. Application of Trust Money ............. 69 SECTION 8.04. Repayment to Issuers ................... 69 SECTION 8.05. Indemnity for Government Obligations ... 69 SECTION 8.06. Reinstatement .......................... 69 ARTICLE 9 Amendments SECTION 9.01. Without Consent of Holders ............. 70 SECTION 9.02. With Consent of Holders ................ 71 6 4 SECTION 9.03. Compliance with Trust Indenture ........ 72 SECTION 9.04. Revocation and Effect of Consents and Waivers .......................... 72 SECTION 9.05. Notation on or Exchange of Securities .. 72 SECTION 9.06. Trustee To Sign Amendments ............. 73 SECTION 9.07. Payment for Consent .................... 73 ARTICLE 10 Subsidiary Guaranties SECTION 10.01. Guaranties ............................ 73 SECTION 10.02. Limitation on Liability ............... 76 SECTION 10.03. Successors and Assigns ................ 76 SECTION 10.04. No Waiver ............................. 76 SECTION 10.05. Modification .......................... 76 SECTION 10.06. Release of Subsidiary Guarantor ....... 76 ARTICLE 11 Miscellaneous SECTION 11.01. Trust Indenture Act Controls .......... 77 SECTION 11.02. Notices ............................... 77 SECTION 11.03. Communication by Holders with Other Holders .............................. 78 SECTION 11.04. Certificate and Opinion as to Conditions Precedent ................. 78 SECTION 11.05. Statements Required in Certificate or Opinion ........................... 78 SECTION 11.06. When Securities Disregarded ........... 79 SECTION 11.07. Rules by Trustee, Paying Agent and Registrar ............................ 79 SECTION 11.08. Legal Holidays ........................ 79 SECTION 11.09. Governing Law ......................... 79 SECTION 11.10. No Recourse Against Others ............ 79 SECTION 11.11. Successors ............................ 80 SECTION 11.12. Multiple Originals .................... 80 SECTION 11.13. Table of Contents; Headings ........... 80 Exhibit A - Form of Security Rule 144A/Regulation S Appendix 7 INDENTURE dated as of February 15, 1997, among Globalstar, L.P., a Delaware Limited Partnership ("Globalstar"), Globalstar Capital Corporation, a Delaware corporation ("Globalstar Capital" and, together with Globalstar, the "Issuers") and The Bank of New York, a New York banking corporation (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Issuers' 11 3/8% Senior Notes due 2004 (the "Initial Securities") and, if and when issued pursuant to a registered exchange for Initial Securities, the Issuers' 11 3/8% Senior Notes due 2004 (the "Exchange Securities") and if and when issued pursuant to a private exchange for Initial Securities, the Issuers' 11 3/8% Senior Notes due 2004 (the "Private Exchange Securities", together with the Exchange Securities and the Initial Securities, the "Securities"): ARTICLE 1 Definitions and Incorporation by Reference SECTION 1.01. Definitions. "Acquired Debt" means, with respect to any specified Person, (i) Debt of any other Person existing at the time such Person merges with or into or consolidates with or becomes a Restricted Subsidiary of such specified Person and (ii) Debt secured by a Lien encumbering any asset acquired by such specified Person, which Debt or Lien was not Incurred in anticipation of, and was outstanding prior to, such merger, consolidation or acquisition. "Affiliate" of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; provided, however, that beneficial ownership of 10% or more of the voting 8 2 securities of a Person shall be decreed to be control. The terms "controlling" and "controlled" have meanings correlative to the foregoing. "Asset Disposition" means any transfer, conveyance, sale, lease or other disposition (collectively, any "disposition") by the Issuers or any Restricted Subsidiary (including any disposition by means of a consolidation, merger or similar transaction) but excluding a disposition by a Restricted Subsidiary to the Issuers or a Wholly-Owned Restricted Subsidiary or by the Issuers to a Wholly-Owned Restricted Subsidiary of (i) shares of Capital Stock or other ownership interests of a Restricted Subsidiary, (ii) all or substantially all of the assets of the Issuers or any Restricted Subsidiary representing a division or line of business or (iii) other assets or rights of such Person or any of its Restricted Subsidiaries other than a disposition (a) in the ordinary course of business, (b) that constitutes a Restricted Payment which is permitted pursuant to Section 4.05 or (c) that is subject to the provisions set forth in Section 5.01(a); provided, however, that a transaction described in clauses (i), (ii) and (iii) shall constitute an Asset Disposition only to the extent that the aggregate consideration for all such transfers, conveyances, sales, leases or other disposition exceeds $5 million in any 12-month period. "Attributable Debt" in respect of a Sale and Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Debt or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Debt or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "Bank Credit Agreement" means any one or more credit agreements (which may include or consist of revolving credits) between Globalstar, Globalstar Capital or any 9 3 Restricted Subsidiary and one or more banks or other financial institutions providing financing for the business of Globalstar and its Restricted Subsidiaries. "Build-out" means the construction, acquisition, improvement, operation and development (including all costs related thereto) of the Globalstar System, until such time as Globalstar shall have (i) constructed at least 64 satellites for use in the Globalstar System; (ii) launched or attempted to launch (through "intentional ignition") at least 56 satellites for use in the Globalstar System; and (iii) commenced commercial service of the Globalstar System with at least 44 satellites in orbit and Operating. "Business Day" means each day which is not a Legal Holiday. "Capital Lease Obligation" of any Person means an obligation that is required to be classified and accounted for as a capital lease or a liability on the face of a balance sheet of such Person in accordance with GAAP (a "Capital Lease"). The Stated Maturity of such obligation shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. The amount of such Debt represented by such obligation shall be the capitalized amount thereof that would appear on the face of a balance sheet of such Person in accordance with GAAP. "Capital Stock" of any Person means any and all shares, interests, participations or other equivalents (however designated) of corporate stock or other equity participations, including partnership interests, whether general or limited, of such Person and shall (i) include any Special Preferred Obligations and other preferred equivalent obligations and (ii) exclude debt securities convertible into Capital Stock. "Change of Control" means: (i) the sale, lease or transfer, in one transaction or a series of related transactions, of all or substantially all the assets of Globalstar and the Restricted Subsidiaries; 10 4 (ii) the adoption of a plan relating to the liquidation or dissolution of Globalstar or Globalstar Capital; (iii) one or more Dispositions which cause Loral's direct and indirect equity interest in Globalstar to be reduced by more than 30% as compared to its direct and indirect equity interest in Globalstar as of December 31, 1996; or (iv) the first day on which: (a) Globalstar fails to own, of record and beneficially, 100% of the equity interests and voting stock of Globalstar Capital; or (b) Loral fails to be, or, directly or indirectly, fails solely to control, the sole managing general partner of Globalstar. Notwithstanding clauses (i), (ii) and (iv)(b) above, neither the acquisition by GTL, Loral or any wholly owned subsidiary of Loral of a majority of the partnership interests in, or substantially all the assets of, Globalstar, nor the merger of Globalstar with and into GTL, Loral or any wholly owned subsidiary of Loral shall constitute a change in control; provided, however, that with respect to clause (iv)(b), Loral continues to control, or is the corporate successor to, Globalstar. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission and any survivor agency. "Consolidated Cash Flow Available for Fixed Charges" for any period means the Consolidated Net Income of Globalstar and its Restricted Subsidiaries for such period plus Consolidated Interest Expense of Globalstar and its Restricted Subsidiaries for such period, plus the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Income Tax Expense of Globalstar and its Restricted Subsidiaries for such period, (ii) the consolidated depreciation and amortization expense included in the income statement of Globalstar and its Restricted Subsidiaries for such period and (iii) any non-cash expense related to the issuance to employees of Globalstar or any 11 5 Restricted Subsidiary of Globalstar of options to purchase Capital Stock of Globalstar or such Restricted Subsidiary; provided, however, that there shall be excluded therefrom the Consolidated Cash Flow Available for Fixed Charges (if positive) of any Restricted Subsidiary (calculated separately, for such Restricted Subsidiary in the same manner as provided above for Globalstar) that is subject to a restriction which prevents the payment of dividends or the making of distributions to Globalstar or another Restricted Subsidiary to the extent of such restriction; provided further, however, that if Consolidated Cash Flow Available For Fixed Charges for any period shall be less than $1, Consolidated Cash Flow For Fixed Charges for such period shall be deemed to be $1. "Consolidated Income Tax Expense" for any period means the consolidated provision for income taxes of Globalstar and the Restricted Subsidiaries for such period calculated on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, for any period, the consolidated interest expense included in a consolidated income statement (excluding interest income) of Globalstar and the Restricted Subsidiaries for such period calculated on a consolidated basis in accordance with GAAP, plus, to the extent not so included, cash dividends paid during such period on Special Preferred Obligations. "Consolidated Net Income" means, for any period, the consolidated net income (or loss) of Globalstar and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, less the amount of any cash dividends paid during such period on Special Preferred Obligations; provided, however, that there shall be excluded therefrom (i) the net income (or loss) of any Person acquired by Globalstar or a Restricted Subsidiary in a pooling-of-interests transaction for any period prior to the date of such transaction, (ii) the net income (and loss) of any Person that is not a Restricted Subsidiary except to the extent of the amount of dividends or other distributions actually paid to Globalstar or a Restricted Subsidiary by such Person during such period, (iii) gains (but not losses) on Asset Dispositions by Globalstar or any Restricted Subsidiary, (iv) all extraordinary gains and losses, (v) the cumulative effect of changes in accounting principles, (vi) non-cash gains or losses resulting from fluctuations in currency exchange rates, (vii) any noncash gain or loss realized on the termination of any employee pension benefit 12 6 plan and (viii) the tax effect of any of the items described in clauses (i) through (vii) above; provided further, however, that for purposes of any determination pursuant to the provisions of Section 4.05, (a) there shall further be excluded therefrom the net income (but not net loss) of any Restricted Subsidiary that is subject to a restriction which prevents the payment of dividends or the making of distributions to Globalstar or another Restricted Subsidiary of Globalstar to the extent of such restriction and (b) there shall further be deducted therefrom an amount equal to the Tax Amount paid by Globalstar during such period. "Consolidated Net Worth" of any Person means the consolidated stockholders' equity of such Person, determined on a consolidated basis in accordance with GAAP, less amounts attributable to Disqualified Stock of such Person; provided, however, that, with respect to Globalstar, adjustments following the date of this Indenture to the accounting books and records of Globalstar in accordance with Accounting Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting from the acquisition of control of Globalstar by another Person shall not be given effect to. "Debt" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed, (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including any such obligations Incurred in connection with the acquisition of property, assets or businesses, (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (including securities repurchase agreements but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith), (v) every Capital Lease Obligation of such Person, (vi) all Receivables Sales of such Person, together with any obligation of such Person to pay any discount, interest, fees, indemnities, penalties, recourse, expenses or other amounts in connection therewith, (vii) all obligations to redeem Disqualified Stock issued by such Person, (viii) all Attributable Debt, (ix) every obligation 13 7 under Interest Rate and Currency Protection Agreements of such Person, (x) every obligation of the type referred to in clauses (i) through (ix) of another Person secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the fair market value of such property or assets and the amount of the obligation so secured and (xi) every obligation of the type referred to in clauses (i) through (x) of another Person and all dividends of another Person the payment of which, in either case, such Person has Guaranteed. The "amount" or "principal amount" of Debt at any time of determination as used herein represented by (a) any Debt issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with GAAP, (b) any Receivables Sales shall be the amount of the unrecovered capital or principal investment of the purchaser (other than Globalstar or a Wholly-Owned Restricted Subsidiary) thereof, excluding amounts representative of yield or interest earned on such investment, (c) any Disqualified Stock, shall be the maximum fixed redemption or repurchase price in respect thereof, (d) any Capital Lease Obligation, shall be determined in accordance with the definition thereof and (e) any Permitted Interest Rate or Currency Protection Agreement shall be zero. In no event shall Debt include any liability for taxes. For purposes of determining any particular amount of Debt, Guarantees or Liens with respect to letters of credit supporting Debt otherwise included in the determination of a particular amount shall not be included. "Default" means an event that is, or after the passing of time or the giving of notice both would be, an Event of Default. "Disposition" means (i) the sale, transfer or other conveyance by Loral or any of its Subsidiaries (other than to a wholly owned subsidiary, of Loral) of (a) Globalstar partnership interests or (b) equity interests in any entity (an "intermediate entity") which owns, directly or indirectly, Globalstar partnership interests or (ii) the issue and sale by any such intermediate entity of its equity securities to one or more third parties if and to the extent the proceeds of such issue and sale are distributed by such intermediate entity to Loral or any of its Subsidiaries. 14 8 "Disqualified Stock" of any Person means any Capital Stock of such Person which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the first anniversary of the final Stated Maturity of the Securities; provided, however, that any Preferred Stock which would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require Globalstar to repurchase or redeem such Preferred Stock upon the occurrence of a change of control occurring prior to the first anniversary of the final Stated Maturity of the Securities shall not constitute Disqualified Stock if the change of control provisions applicable to such Preferred Stock are no more favorable to the holders of such Preferred Stock than the provisions applicable to the Securities contained in Section 4.10 and such Preferred Stock specifically provides that Globalstar will not repurchase or redeem any such stock pursuant to such provisions prior to Globalstar's repurchase of such Securities as are required to be repurchased pursuant to Section 4.10; provided further, however, that all Special Preferred Obligations shall be deemed to be Disqualified Stock. "Eligible Institution" means a commercial banking institution that has combined capital and surplus of not less than $500 million or its equivalent in foreign currency, whose debt is rated "A-3" or higher or "A-" or higher according to Moody's Investors Service, Inc. or Standard & Poor's Ratings Group (or such similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)) respectively, at the time as of which any investment or rollover therein is made. "Event of Default" has the meaning set forth in Section 6.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended (or any successor act) and the rules and regulations thereunder. "GAAP" means generally accepted accounting principles in the United States of America as in effect as 15 9 of the Issue Date, including those set forth in (i) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board, (iii) such other statements by such other entity as approved by a significant segment of the accounting profession and (iv) the rules and regulations of the Commission governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the Commission. "General Partners' Committee" means the committee consisting of representatives of the general partners of Globalstar that governs the activities of Globalstar. "Globalstar System" means Globalstar's worldwide, low-earth orbit, satellite-based digital telecommunications system as described in Globalstar's Offering Memorandum dated February 13, 1997 with respect to the Securities. "Globaltel Russia" means Globalstar-Space Telecommunications, a Russian closed joint stock company. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which obligations or guarantee the full faith and credit of the United States is pledged and which have a remaining weighted Average Life to maturity of not more than one year from the date of Investment therein. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person guaranteeing, or having the economic effect of guaranteeing, any Debt of any other Person, (the "primary obligor") in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Debt, (ii) to purchase property, securities or services for the purposes of assuring the holder of such Debt of the payment of such Debt, or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity 16 10 of the primary obligor so as to enable the primary obligor to pay such Debt (and "Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings correlative to the foregoing); provided, however, that the Guarantee by any Person shall not include endorsements by such Person for collection or deposit, in either case, in the ordinary course of business. "Holders" means the registered holders from time to time of the Securities. "Incur" means, with respect to any Debt or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, Guarantee or otherwise become liable in respect of such Debt or other obligation including by acquisition of Subsidiaries or the recording, as required pursuant to GAAP or otherwise, of any such Debt or other obligation on the balance sheet of such Person (and "Incurrence", "Incurred" and "Incurring" shall have the meanings correlative to the foregoing); provided, however, that a change in GAAP that results in an obligation of such Person that exists at such time becoming Debt shall not be deemed an Incurrence of such Debt and that neither the accrual of interest nor the accretion of original issue discount shall be deemed an Incurrence of Debt. Notwithstanding the foregoing, Globalstar may elect to treat all or any portion of revolving credit debt of Globalstar or a Subsidiary as being Incurred from and after any date beginning the date the revolving credit commitment is extended to Globalstar or a Subsidiary, by furnishing notice thereof to the Trustee, and any borrowings or reborrowings by Globalstar or a Subsidiary under such commitment up to the amount of such commitment designated by Globalstar as Incurred shall not be deemed to be new Incurrence of Debt by Globalstar or such Subsidiary; provided, however, that the undrawn portion of any such revolving credit debt shall be deemed to be outstanding Debt until such time as the commitment thereunder is terminated. The accretion of principal of a non-interest bearing or other discount security shall not be deemed the Incurrence of Debt. "Indenture" means this Indenture as amended or supplemented from time to time. "Independent Financial Advisor" means an accounting, appraisal or investment banking firm of nationally recognized standing that is, in the judgement of the General Partners' Committee of Globalstar, qualified to 17 11 perform the task for which it has been engaged and disinterested and independent with respect to the Issuers and their Subsidiaries and Affiliates. "Interest Rate or Currency Protection Agreement" of any Person means any forward contract, futures contract, swap, option or other financial, agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements) relating to, or the value of which is dependent upon, interest rates or currency exchange rates or indices. "Investment" by any Person means any direct or indirect loan, advance or other extension of credit or capital contribution (by means of transfers of cash or other property to others or payments for property or services for the account or use of others, or otherwise) to, or purchase or acquisition of Capital Stock, bonds, notes, debentures or other securities or evidence of Debt issued by, any other Person, including any payment on a Guarantee of any obligation of such other Person, but excluding any loan, advance or extension of credit to an employee of Globalstar or any Restricted Subsidiary in the ordinary course of business, accounts receivables and other commercially reasonable extensions of trade credit. "Issue Date" means the date on which the Securities are first issued and delivered. "Lien" means, with respect to any property or assets, any mortgage or deed of trust, pledge, hypothecation, assignment, Receivables Sale, deposit arrangement, security interest, lien, charge, easement (other than any easement not materially impairing usefulness or marketability), encumbrance, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing or any Sale and Leaseback Transaction). "Liquidated Damages" means additional cash interest with respect to the Securities payable upon the occurrence of certain events as specified in the Registration Rights Agreement dated as of February 19, 1997, among Globalstar, Globalstar Capital, and Lehman Brothers Inc., Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette 18 12 Securities Corporation and Unterberg Harris, as initial purchasers. "Loral" means Loral Space & Communications Ltd., a Bermuda company. "Marketable Securities" means: (i) Government Securities; (ii) any time deposit account, money market deposit and certificate of deposit maturing not more than 270 days after the date of acquisition issued by, or time deposit of, an Eligible Institution; (iii) commercial paper maturing not more than 270 days after the date of acquisition issued by a corporation (other than an Affiliate of Globalstar) with a rating, at the time as of which any investment therein is made, of "P-1" or higher according to Moody's Investors Service, Inc. or "A-1" or higher according to Standard & Poor's Ratings Group (or such similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)); (iv) any banker's acceptances or money market deposit accounts issued or offered by an Eligible Institution; (v) repurchase obligations with a term of not more than 7 days for Government Securities entered into with an Eligible Institution; and (vi) any fund investing exclusively in investments of the types described in clauses (i) through (v) above. "Net Available Proceeds" from any Asset Disposition by any Person means cash or Marketable Securities received (including by way of sale or discounting of a note, installment receivable or other receivable, but excluding any other consideration received in the form of assumption by the acquiror of Debt or other obligations relating to such properties or assets) therefrom by such Person, net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses Incurred and all federal, state, provincial, foreign and local taxes (including taxes payable upon payment or other distribution of funds from a foreign subsidiary to Globalstar or another Subsidiary of Globalstar) required to be accrued as a liability as a consequence of such Asset Disposition, (ii) all payments made by such Person or its Restricted Subsidiaries on any Debt which is secured by such assets in accordance with the terms of any Lien upon or with respect to such assets or which must by the terms of such Lien, or in order to obtain a necessary consent to such Asset Disposition or by applicable law, be repaid out of the proceeds from such Asset Disposition, (iii) all 19 13 distributions and other payments made to minority interest holders in Restricted Subsidiaries of such Person or joint ventures as a result of such Asset Disposition, (iv) appropriate amounts to be provided by such Person or any Restricted Subsidiary thereof, as the case may be, as a reserve in accordance with GAAP against any liabilities associated with such assets and retained by such Person or any Restricted Subsidiary thereof, as the case may be, after such Asset Disposition, including, without limitation, liabilities under any indemnification obligations and severance and other employee termination costs associated with such Asset Disposition, in each case as determined by the General Partners' Committee of Globalstar, in its reasonable good faith judgment evidenced by a board resolution filed with the Trustee; provided, however, that any reduction in such reserve within twelve months following the consummation of such Asset Disposition will be treated for all purposes of this Indenture and the Securities as a new Asset Disposition at the time of such reduction with Net Available Proceeds equal to the amount of such reduction, and (v) any consideration for an Asset Disposition (which would otherwise constitute Net Available Proceeds) that is required to be held in escrow pending determination of whether a purchase price adjustment will be made, but amounts under this clause (v) shall become Net Available Proceeds at such time and to the extent such amounts are released to such Person. "Net Cash Proceeds", with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Non-Recourse Debt" means Debt: (i) as to which neither the Issuers nor any Restricted Subsidiary: (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Debt); (b) is directly or indirectly liable (as a guarantor or otherwise); or 20 14 (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Issuer or any Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Debt of the Issuers or any Restricted Subsidiary to declare a default on such other Debt or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Issuers or any of their Restricted Subsidiaries. "Offer to Purchase" means a written offer (the "Offer") sent by Globalstar by first class mail, postage prepaid, to each holder at his address appearing in the Securities register on the date of the Offer offering to purchase up to the principal amount of Securities specified in such Offer at the purchase price specified in such Offer (as determined pursuant to this Indenture). Unless otherwise required by applicable law, the Offer shall specify an expiration date (the "Expiration Date") of the Offer to Purchase which shall be, subject to any contrary requirements of applicable law, not less than 30 days or more than 60 days after the date of such Offer and a settlement date for purchase of Securities within five Business Days after the Expiration Date. The Issuers shall notify the Trustee at least 15 Business Days (or such shorter period as is acceptable to the Trustee) prior to the mailing of the Offer of Globalstar's obligation to make an Offer to Purchase, and the Offer shall be mailed by Globalstar or, at Globalstar's request, by the Trustee in the name and at the expense of Globalstar. The Offer shall contain information concerning the business of Globalstar and its Subsidiaries which Globalstar in good faith believes will enable such holders to make an informed decision with respect to the Offer to Purchase (which at a minimum will include (i) the most recent annual and quarterly financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the documents required to be filed with the Trustee pursuant to this Indenture (which requirements may be satisfied by delivery of such documents together with the Offer), (ii) a description of material developments in Globalstar's 21 15 business subsequent to the date of the latest of such financial statements referred to in clause (i) (including a description of the events requiring Globalstar to make the Offer to Purchase), (iii) if applicable, appropriate pro forma financial information concerning the Offer to Purchase and the events requiring Globalstar to make the Offer to Purchase and (iv) any other information required by applicable law to be included therein). The Offer shall contain all instructions and materials necessary to enable such holders to tender Securities pursuant to the Offer to Purchase. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Issuers. "Officers' Certificate" means a certificate signed by two Officers. "Operating" means, with respect to any satellite, that at least 50% of the call circuits of such satellite are operating at design performance specifications. "Opinion of Counsel" means an opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of, or counsel to, the Issuers or the Trustee. "Permitted Interest Rate or Currency Protection Agreement" of any Person means any Interest Rate or Currency Protection Agreement entered into with one or more financial institutions in the ordinary course of business that is designed to protect such Person against fluctuations in interest rates or currency exchange rates with respect to Debt Incurred and which shall have a notional amount no greater than the payments due with respect to the Debt being hedged thereby and not for purposes of speculation. "Permitted Investment" means an Investment by an Issuer or any Restricted Subsidiary (i) in any Person as a result of which such Person becomes a Restricted Subsidiary, (ii) in Marketable Securities, (iii) in Permitted Interest Rate or Currency Protection Agreements, (iv) made as a result of the receipt of noncash consideration from an Asset Disposition that was made pursuant to and in compliance with Section 4.07 and (v) consisting of loans or advances to employees made in the ordinary course of business not to 22 16 exceed $3 million in the aggregate outstanding at any one time. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, government or agency or political subdivision thereof or any other entity. "Preferred Stock" of any Person means Capital Stock of such Person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person. "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time. "Receivables" means receivables, chattel paper, instruments, documents or intangibles evidencing or relating to the right to payment of money in respect of the sale of goods or services. "Receivables Sale" of any Person means any sale of Receivables of such Person (pursuant to a purchase facility or otherwise), other than in connection with a disposition of the business operations of such Person relating thereto or a disposition of defaulted Receivables for purpose of collection and not as a financing arrangement. "Refinance" means in respect of any Debt, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Debt in exchange or replacement for, such Debt. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Debt" means Debt that Refinances any Debt of the Issuers or any Restricted Subsidiary existing on the Issue Date or Incurred in compliance with this Indenture, including Debt that Refinances Refinancing Debt; provided, however, that (i) such Refinancing Debt has a Stated Maturity no earlier than the Stated Maturity of the Debt being Refinanced, (ii) such Refinancing Debt has an Average Life at the time such Refinancing Debt is Incurred 23 17 that is equal to or greater than the Average Life of the Debt being Refinanced, (iii) such Refinancing Debt has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Debt being Refinanced, (iv) in the event the Debt being Refinanced constitutes a Subordinated Obligation, the Refinancing Debt is subordinated to the Securities to at least the same extent as the Debt being Refinanced and (v) Special Preferred Obligations may only be Refinanced with Preferred Stock (other than Preferred Stock that is Disqualified Stock), other Special Preferred Obligations or Subordinated Obligations; provided, further, however, that Refinancing Debt shall not include (x) Debt of a Subsidiary that Refinances Debt of the Issuers or (y) Debt of the Issuers or a Restricted Subsidiary that Refinances Debt of an Unrestricted Subsidiary. "Related Person" of any Person means any other Person directly or indirectly owning (a) 10% or more of the outstanding common equity of such Person (or, in the case of a Person that is not a corporation, 10% or more of the equity interest in such Person) or (b) 10% or more of the combined voting power of the Voting Stock of such Person. "Restricted Payment" with respect to any Person means (i) the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and dividends or distributions payable solely to the Issuers or a Restricted Subsidiary, and other than pro rata dividends or other distributions made by a Subsidiary that is not a Wholly Owned Restricted Subsidiary to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation)), (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of an Issuer held by any Person or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the Issuers (other than a Restricted Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into 24 18 Capital Stock of the Issuers that is not Disqualified Stock), (iii) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (iv) the making of any Investment in any Person (other than a Permitted Investment). "Restricted Subsidiary" means any Subsidiary of Globalstar, whether existing on or after the Issue Date, unless such Subsidiary is an Unrestricted Subsidiary. "Sale and Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired whereby an Issuer or a Restricted Subsidiary transfers such property to a Person and an Issuer or a Restricted Subsidiary leases it from such Person. "Securities" means the Securities issued under this Indenture. "Securities Act" means the Securities Act of 1933, as amended (or any successor act) and the rules and regulations thereunder. "Significant Subsidiary" means a Restricted Subsidiary that is a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the Securities Act and the Exchange Act. "Special Preferred Obligations" means (i) preferred partnership interests of Globalstar existing as of the Issue Date and (ii) any preferred partnership interests, convertible preferred equivalent obligations or similar preferred obligations of Globalstar issued after the Issue Date to finance the Build-out; provided, however, that any such preferred partnership interests, convertible preferred equivalent obligations or similar preferred obligations of Globalstar issued after the Issue Date shall not constitute Special Preferred Obligations if such interest or obligation, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the Holders), or upon the 25 19 happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the final Stated Maturity of the Securities; provided further, however, that any such interest or obligation which would constitute Special Preferred Obligations but for provisions thereof giving holders thereof the right to require Globalstar to repurchase or redeem such interest or obligation upon the occurrence of a change of control occurring prior to the final Stated Maturity of the Securities shall constitute Special Preferred Obligations if the change of control provisions applicable to such interest or obligation are no more favorable to the holders of such interest or obligation than the provisions applicable to the Securities contained in Section 4.10 and such interest or obligation specifically provides that Globalstar will not repurchase or redeem any such interest or obligation pursuant to such provisions prior to Globalstar's repurchase of such Securities as are required to be repurchased pursuant to Section 4.10. Notwithstanding the foregoing, preferred partnership interests, convertible preferred equivalent obligations or similar preferred obligations of Globalstar issued after the Issue Date shall not be Special Preferred Obligations unless, at the time of their issuance, Globalstar shall certify to the Trustee that such interests or obligations shall be designated Special Preferred Obligations. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subordinated Obligation" means any Debt of the Issuers (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Securities pursuant to a written agreement to that effect. "Subsidiary" of any Person means (i) a corporation more than 50% of the combined voting power of the outstanding Voting Stock of which is owned, directly or indirectly, by such Person or by one or more other 26 20 Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person or (ii) any other Person (other than a corporation) in which such Person, or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries of such Person, directly or indirectly, has at least a majority ownership and power to direct the policies, management and affairs thereof. "Subsidiary Guaranty" means the Guarantee by a Subsidiary Guarantor of the Issuers' obligations with respect to the Securities contained in Article 10 hereof. "Subsidiary Guarantor" means any Subsidiary which, pursuant to the terms hereof, has executed a supplemental indenture in a form reasonably satisfactory to the Trustee and become bound by the terms hereof, including Article 10 hereof. "Tax Amount" means, with respect to any year, an amount not to exceed the sum of the ordinary income from trade or business activities and other items of income, loss and deduction reported by Globalstar for that year for United States federal income tax purposes multiplied by a percentage equal to the sum of (a) the highest applicable federal corporation income tax rate for that year (expressed as a percentage) plus (b) 8% multiplied by the excess of 100% over the highest applicable federal corporate income tax for that year (expressed as a percentage). "Temporary Cash Investments" means any of the following: (i) any investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof, (ii) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50,000,000 (or the foreign currency equivalent thereof) and has outstanding debt that is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor, (iii) repurchase obligations with a term of not 27 21 more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Issuers) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings Group, and (v) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of this Indenture, except as provided by Section 9.03. "Transitory Equipment Subsidiary" means a Subsidiary of Globalstar whose only business activity is acquiring equipment from Globalstar for the sole purpose of selling such equipment to a service provider to Globalstar; provided, however, that Globalstar retains a security interest in such equipment so long as it is owned by such Subsidiary; provided further, however, that such Subsidiary has no Debt outstanding at any time other than Debt represented by such security interest. "Trust Officer" means any officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means (i) any Subsidiary of Globalstar designated as such by the General Partner's Committee as set forth below where (a) neither Globalstar 28 22 nor any of its other Subsidiaries (other than another Unrestricted Subsidiary) (1) provides credit support for, or Guarantee of, any Debt of such Subsidiary or any Subsidiary of such Subsidiary (including any undertaking, agreement or instrument evidencing such Debt), (2) is directly or indirectly liable for any Debt of such Subsidiary or any Subsidiary of such Subsidiary, or (3) has any obligation to make additional Investments in such Subsidiary or any Subsidiary of such Subsidiary, (b) such Subsidiary has no Debt other than Non-Recourse Debt; provided, however, that if any Unrestricted Subsidiary Incurs any Debt other than Non-Recourse Debt or any Non-Recourse Debt Incurred by such Unrestricted Subsidiary shall thereafter cease for any reason to be Non-Recourse Debt, such event shall be deemed to constitute an Incurrence of such Debt by Globalstar and such Unrestricted Subsidiary shall be deemed to be a Restricted Subsidiary for purposes of Section 4.04 and (c) such Subsidiary and each Subsidiary of such Subsidiary has at least one director on its board of directors that is not a director or executive officer of Globalstar or any Restricted Subsidiary and (ii) any Subsidiary of an Unrestricted Subsidiary. The General Partner's Committee may designate any Subsidiary to be an Unrestricted Subsidiary unless such Subsidiary or any Subsidiary of such Subsidiary owns any Capital Stock or Debt of, or owns or holds any Lien on any property of, Globalstar or any other Subsidiary of Globalstar which is not a Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary; provided, however, that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) immediately after giving effect to such designation, Globalstar could incur an additional $1.00 of Debt pursuant to Section 4.03(a) and provided further, however, that Globalstar could make a Restricted Payment in an amount equal to the greater of the fair market value and the book value of such Subsidiary pursuant to Section 4.05 and such amount is thereafter treated as a Restricted Payment for the purpose of calculating the aggregate amount available for Restricted Payments thereunder. The General Partners' Committee may designate any Unrestricted Subsidiary to be a Restricted Subsidiary, provided that, immediately after giving effect to such designation, Globalstar could incur an additional $1.00 of Debt pursuant to Section 4.03(a). Notwithstanding the foregoing, neither Globalstar Capital nor any of its Subsidiaries shall be Unrestricted Subsidiaries. 29 23 "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is Pledged and which are not callable or redeemable at the issuer's option. "Vendor Financing Facility" means any agreements between Globalstar, Globalstar Capital and/or any Restricted Subsidiary and one or more vendors or lessors of equipment to Globalstar, Globalstar Capital and/or any Restricted Subsidiary (or any affiliate of any such vendor or lessor) providing financing for the acquisition by Globalstar or any such Restricted Subsidiary of equipment from any such vendor or lessor. "Voting Stock" of any Person means Capital Stock of such Person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. "Wholly-Owned Restricted Subsidiary" means a Restricted Subsidiary 99% or more of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by Globalstar or by one or more Wholly-Owned Restricted Subsidiaries of Globalstar or by Globalstar and one or more Wholly-Owned Restricted Subsidiaries of Globalstar. 30 24 SECTION 1.02. Other Definitions. Defined in Term Section ---- ---------- "Affiliate Transaction" ................ 4.08 "Appendix" ............................. 2.01 "Bankruptcy Law" ....................... 6.01 "Cash Insurance" ....................... 4.13 "covenant defeasance option" ........... 8.01(b) "Custodian" ............................ 6.01 "Debt Coverage Ratio" .................. 4.03 "Event of Default" ..................... 6.01 "Exchange Securities" .................. Recital "Globalstar" ........................... Preamble "Globalstar Capital" ................... Preamble "Initial Securities" ................... Recital "In-orbit Insurance Event" ............. 4.13 "Insurance Account" .................... 4.13 "Insurance Proceeds" ................... 4.13 "Issuers" .............................. Preamble "legal defeasance option" .............. 8.01(b) "Legal Holiday" ........................ 11.08 "Notice of Default" .................... 6.01 "Obligations" .......................... 10.01 "Paying Agent" ......................... 2.03 "Permitted Lien" ....................... 4.11 "Private Exchange Securities" .......... Recital "Registrar"............................. 2.03 "Securities" ........................... Recital "Successor Issuers" .................... 5.01 "Trustee" .............................. Preamble SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the Commission; "indenture securities" means the Securities; "indenture security holder" means a Securityholder; "indenture to be qualified" means this Indenture; 31 25 "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Issuers and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Debt shall not be deemed to be subordinate or junior to secured Debt merely by virtue of its nature as unsecured Debt; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP but accretion of principal on such security shall not be deemed to be the Incurrence of Indebtedness; (8) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater; and (9) all references to the date the Securities were originally issued shall refer to the date the Initial Securities were originally issued. 32 26 ARTICLE 2 The Securities SECTION 2.01. Form and Dating. Provisions relating to the Initial Securities, the Private Exchange Securities and the Exchange Securities are set forth in the Rule 144A/Regulation S Appendix attached hereto (the "Appendix") which is hereby incorporated in and expressly made part of this Indenture. The Initial Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit 1 to the Appendix which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities, the Private Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Issuers are subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Issuers). Each Security shall be dated the date of its authentication. The terms of the Securities set forth in the Appendix and Exhibit A are part of the terms of this Indenture. SECTION 2.02. Execution and Authentication. Two Officers shall sign the Securities for the Issuers by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate and deliver Securities for original issue upon a written order of the Issuers signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Issuers. Such order shall specify the amount of the 33 27 Securities to be authenticated and the date on which the original issue of Securities is to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed that amount except as provided in Section 2.07. The Trustee may appoint an authenticating agent reasonably acceptable to the Issuers to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.03. Registrar and Paying Agent. The Issuers shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Issuers may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Issuers shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Issuers shall notify the Trustee of the name and address of any such agent. If the Issuers fail to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Issuers or any of their domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Issuers initially appoint the Trustee as Registrar and Paying Agent in connection with the Securities. SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due date of the principal and interest and Liquidated Damages (if any) on any Security, the Issuers shall deposit with the Paying Agent a sum sufficient to pay 34 28 such principal and interest and Liquidated Damages (if any) when so becoming due. The Issuers shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest and Liquidated Damages (if any) on the Securities and shall notify the Trustee of any default by the Issuers in making any such payment. If either Issuer or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Issuers at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section , the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Issuers shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.06. Transfer and Exchange. The Securities shall be issued in registered form and shall be transferable only upon the surrender of a Security for registration of transfer. When a Security is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of Section 8-401(1) (or any successor provision thereto) of the Uniform Commercial Code are met. When Securities are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Issuers shall execute and the Trustee shall authenticate Securities at the Registrar's or coregistrar's request. The Issuers may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section . The Issuers shall not be required to make and the Registrar need not register 35 29 transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. Prior to the due presentation for registration of transfer of any Security, the Issuers, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest and Liquidated Damages (if any) on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Issuers, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture will evidence the same debt and will be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Issuers shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 (or any successor provision thereto) of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. Such Holder shall furnish an indemnity bond sufficient in the judgment of the Issuers and the Trustee to protect the Issuers, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Issuers and the Trustee may charge the Holder for their expenses in replacing a Security. Every replacement Security is an additional obligation of the Issuers. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be 36 30 outstanding because the Issuers or an Affiliate of the Issuers holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Issuers receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest and Liquidated Damages (if any) payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest and Liquidated Damages (if any) on them ceases to accrue. SECTION 2.09. Temporary Securities. Until definitive Securities are ready for delivery, the Issuers may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Issuers consider appropriate for temporary Securities. Without unreasonable delay, the Issuers shall prepare and the Trustee shall authenticate definitive Securities and deliver them in exchange for temporary Securities. SECTION 2.10 Cancellation. The Issuers at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and may, but shall not be required to, destroy (subject to the record retention requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange, payment or cancellation unless the Issuers direct the Trustee to deliver canceled Securities to the Issuers. The Issuers may not issue new Securities to replace Securities they have redeemed, paid or delivered to the Trustee for cancellation. SECTION 2.11. Defaulted Interest. If the Issuers default in a payment of interest and Liquidated Damages (if any) on the Securities, the Issuers shall pay defaulted interest and Liquidated Damages (if any) (plus interest on such defaulted interest and Liquidated Damages (if any) to 37 31 the extent lawful) in any lawful manner. The Issuers may pay the defaulted interest and Liquidated Damages (if any) to the persons who are Securityholders on a subsequent special record date. The Issuers shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest and Liquidated Damages (if any) to be paid. SECTION 2.12. CUSIP Numbers. The Issuers in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuers shall promptly notify the Trustee of any change in the CUSIP numbers. ARTICLE 3 Redemption SECTION 3.01. Notices to Trustee. If the Issuers elect to redeem Securities pursuant to paragraph 5 of the Securities, they shall notify the Trustee in writing of the redemption date, the principal amount of Securities to be redeemed and the paragraph of the Securities pursuant to which the redemption will occur. The Issuers shall give each notice to the Trustee provided for in this Section at least 60 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Issuers to the effect that such redemption will comply with the conditions herein. SECTION 3.02. Selection of Securities To Be Redeemed. If less than all the Securities are to be redeemed at any time, the Trustee shall select the 38 32 Securities to be redeemed by a method that complies with the requirements of the principal national securities exchange, if any, on which the Securities are listed, or if the Securities are not listed, on a pro rata basis, by lot or by such method as the Trustee in its sole discretion shall deem to be fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Issuers promptly of the Securities or portions of Securities to be redeemed. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a date for redemption of Securities, the Issuers shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed at such Holder's registered address. The notice shall identify the Securities (including CUSIP number(s), if any) to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed; (6) that, unless the Issuers default in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest and Liquidated Damages (if any) on Securities (or portion thereof) called for 39 33 redemption ceases to accrue on and after the redemption date; (7) the paragraph of the Securities pursuant to which the Securities called for redemption are being redeemed; and (8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. At the Issuers' request, the Trustee shall give the notice of redemption in the Issuers' name and at the Issuers' expense. In such event, the Issuers shall provide the Trustee with the information required by this Section. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest and Liquidated Damages (if any) to the redemption date. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. On or prior to the redemption date, the Issuers shall deposit with the Paying Agent (or, if an Issuer or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest and Liquidated Damages (if any) on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which have been delivered by the Issuers to the Trustee for cancellation. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Issuers shall execute and the Trustee shall authenticate for the Holder (at the Issuers' expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. 40 34 ARTICLE 4 Covenants SECTION 4.01. Payment of Securities. The Issuers shall promptly pay the principal of and interest and Liquidated Damages (if any) on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal, interest and Liquidated Damages (if any) shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal, interest and Liquidated Damages (if any) then due. The Issuers shall pay interest on overdue principal at the rate specified therefor in the Securities, and shall pay interest on overdue installments of interest and Liquidated Damages (if any) at the same rate to the extent lawful. SECTION 4.02. SEC Reports. Notwithstanding that the Issuers may not be, or may not be required to remain, subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Issuers shall file with the Commission (unless the Commission will not accept such filing) and provide the Trustee and Holders of the Securities with such annual reports and such information, documents and other reports as are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to such Sections , such information, documents and other reports to be so filed and provided at the times specified for the filing of such information, documents and reports under such Sections. In addition, for so long as any Securities remain outstanding, the Issuers shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuers' compliance with any of their covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). 41 35 SECTION 4.03. Limitation on Consolidated Debt. (a) The Issuers may not, and may not permit any Restricted Subsidiary to, Incur any Debt; provided, however, that the Issuers or any Restricted Subsidiary may Incur Debt so long as the ratio of (i) the aggregate consolidated principal amount of Debt of the Issuers and the Restricted Subsidiaries outstanding as of the most recent available quarterly or annual balance sheet, after giving pro forma effect to the Incurrence of such Debt and any other Debt Incurred since such balance sheet date and the receipt and application of the proceeds thereof to (ii) Consolidated Cash Flow Available for Fixed Charges for the four full fiscal quarters ending on the date of such balance sheet determined on a pro forma basis as if any such Debt had been Incurred and the proceeds thereof had been applied at the beginning of such four fiscal quarters, would be less than 4.0 to 1.0 (the "Debt Coverage Ratio"). (b) Notwithstanding the foregoing limitation, the Issuers and any Restricted Subsidiary may Incur the following: (i) Debt Incurred under any one or more Bank Credit Agreements, Vendor Financing Facilities or other agreements or arrangements to finance the Build-out; provided, however, that Debt Incurred pursuant to this clause (i), other than Debt Incurred pursuant to a Bank Credit Agreement or a Vendor Financing Facility, shall not have a Stated Maturity on or earlier than the Stated Maturity of the Securities, and shall not be mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or be redeemable at the option of the holder thereof, in whole or in part, on or prior to the Stated Maturity of the Securities; (ii) Debt under any one or more Bank Credit Agreements or other agreements or arrangements to finance working capital requirements of Globalstar and any Refinancing Debt in respect of such Debt; provided, however, at the time of the Incurrence of such Debt and after giving effect thereto, the aggregate principal amount of all Debt Incurred pursuant to this clause (ii) and then outstanding shall not exceed $100 million; (iii) Debt owed by the Issuers to any Wholly-Owned Restricted Subsidiary or Debt owed by any Wholly-Owned Restricted Subsidiary to the Issuers or to 42 36 another Wholly-Owned Restricted Subsidiary; provided, however, that upon either (x) the transfer or other disposition by such Wholly-Owned Restricted Subsidiary or the Issuers of any Debt so permitted to a Person other than the Issuers or another Wholly-Owned Restricted Subsidiary or (y) the issuance (other than directors' qualifying shares), sale, lease, transfer or other disposition of shares of Capital Stock (including by consolidation or merger) of such Wholly-Owned Restricted Subsidiary to a Person other than the Issuers or another such Wholly-Owned Restricted Subsidiary, the provisions of this clause (iii) shall no longer be applicable to such Debt and such Debt shall be deemed to have been Incurred by the Issuers thereof at the time of such issuance, sale, lease, transfer or other disposition; (iv) Refinancing Debt Incurred to Refinance Debt Incurred pursuant to the first paragraph of this covenant or pursuant to clause (i), (vi) or (vii) or this clause (iv) of this paragraph; (v) Debt consisting of Permitted Interest Rate and Currency Protection Agreements; (vi) Debt represented by the Securities; (vii) Debt outstanding on the Issue Date (other than Debt described in clause (i), (ii), (iii), (vi) or (viii) of this paragraph); (viii) Debt (including Capital Lease Obligations) of Globalstar or any Restricted Subsidiary financing the purchase, lease or improvement of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets), in each case Incurred no more than 180 days after such purchase, lease or improvement of such property and any Refinancing Debt in respect of such Debt, provided, however, that (x) the amount of such Debt (net of original issue discount) does not exceed, at the time initially Incurred, 90% of the fair market value of such acquired property or equipment and (y) at the time of the Incurrence of such Debt and after giving effect thereto, the aggregate amount of all Debt Incurred pursuant to this clause (viii) and then outstanding shall not exceed $100 million; 43 37 (ix) Debt consisting of performance and other similar bonds and reimbursement obligations Incurred in the ordinary course of business securing the performance of contractual, franchise or license obligations of the Issuers or a Restricted Subsidiary, or in respect of a letter of credit obtained to secure such performance; and (x) Debt in an aggregate principal amount which, together with all other Debt of the Issuers and the Restricted Subsidiaries outstanding on the date of such Incurrence (other than Debt permitted by clauses (i) through (ix) above or Section 4.03(a)) does not exceed $50 million. (c) For purposes of determining compliance with this Section 4.03, in the event that an item of Debt meets the criteria of more than one of the types of Debt the Issuers and the Restricted Subsidiaries are permitted to Incur, the Issuers or such Restricted Subsidiary, as the case may be, shall have the right, in their sole discretion, to classify such item of Debt at the time of its Incurrence and shall only be required to include the amount and type of such Debt under the clause permitting the Debt as so classified. SECTION 4.04. Future Guarantors. In the event that, after the Issue Date, Globalstar shall acquire or create a Subsidiary, Globalstar shall cause such Subsidiary (unless such Subsidiary is a Transitory Equipment Subsidiary or is an Unrestricted Subsidiary) to become a Subsidiary Guarantor and to Guarantee the Securities pursuant to a Subsidiary Guaranty. SECTION 4.05. Limitation on Restricted Payments. (a) The Issuers may not, and may not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if at the time such Issuers or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); (2) Globalstar is not able to Incur an additional $1.00 of Debt pursuant to Section 4.03(a); or 44 38 (3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income of Globalstar accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the Issue Date occurs to the end of the most recent fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received by Globalstar from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of Globalstar and other than an issuance or sale to an employee stock ownership plan or to a trust established by Globalstar or any of its Subsidiaries for the benefit of their employees); (C) the amount by which Debt of Globalstar is reduced on the balance sheet of Globalstar upon the conversion or exchange (other than by a Subsidiary of Globalstar) subsequent to the Issue Date of any Debt of Globalstar convertible or exchangeable for Capital Stock (other than Disqualified Stock) of Globalstar (less the amount of any cash, or the fair value of any other property, distributed by Globalstar upon such conversion or exchange); and (D) an amount equal to the sum of (i) the net reduction in Investments in Unrestricted Subsidiaries resulting from dividends, repayments of loans or advances or other transfers of assets, in each case to Globalstar or any Restricted Subsidiary from Unrestricted Subsidiaries, and (ii) the portion (proportionate to Globalstar's equity interest in such Subsidiary) of the fair market value of the net assets of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the foregoing sum shall 45 39 not exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made (and treated as a Restricted Payment) by Globalstar or any Restricted Subsidiary in such Unrestricted Subsidiary. (b) Notwithstanding the foregoing, Globalstar may (i) subject to clause (vi) below, pay any dividend on Capital Stock of any class within 60 days after the declaration thereof if, on the date when the dividend was declared, Globalstar could have paid such dividend in accordance with the foregoing provisions; (ii) repurchase any shares of its Capital Stock or options to acquire its Capital Stock from Persons who were formerly officers or employees of Globalstar; provided, however, that the aggregate amount of all such repurchases made pursuant to this clause (ii) shall not exceed $2 million, plus the aggregate cash proceeds received by Globalstar since the Issue Date on sale of its Capital Stock or options to acquire its Capital Stock to members, officers, managers and employees of Globalstar or any of its Subsidiaries; (iii) Refinance, and permit its Restricted Subsidiaries to Refinance, any Debt otherwise permitted to be Refinanced by clause (iv) of Section 4.03(b); (iv) so long as Globalstar is treated as a partnership for U.S. federal income tax purposes, make distributions in respect of members' or partners' income tax liability with respect to Globalstar in an amount not to exceed the Tax Amount; (v) make distributions to GTL to pay GTL's ordinary and reasonable operating expenses related to Globalstar, as set forth in an Officers' Certificate delivered to the Trustee; (vi) pay any scheduled dividend on Special Preferred Obligations; provided, however, that at the time of payment of any such dividend (other than a dividend paid only by distributions of additional Special Preferred Obligations), no Default shall have occurred and be continuing (or result therefrom); (vii) make any Restricted Payment by exchange for, or out of the proceeds of the substantially concurrent sale of, or capital contribution in respect of, Capital Stock of Globalstar (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of Globalstar or an employee stock ownership plan or to a trust established by Globalstar or any of its Subsidiaries for the benefit of their employees); (viii) contribute its Investment in Globaltel Russia to an Unrestricted Subsidiary; and (ix) make other Restricted Payments in an aggregate amount not to exceed $10 million. 46 40 (c) Any Restricted Payment made pursuant to clauses (ii), (iii), (iv), (vi), (vii), (viii) and (ix) of Section 4.05(b) shall be excluded from the calculation of the aggregate amount of Restricted Payments made since the Issue Date; provided, however, that the Net Cash Proceeds from the issuance of Capital Stock pursuant to clauses (ii) and (vii) of Section 4.05(b) shall be excluded from the calculation of amounts under clause (B) of Section 4.05(a)(3). SECTION 4.06. Dividend and Other Payment Restrictions Affecting Subsidiaries. (a) The Issuers may not, and may not permit any Restricted Subsidiary, directly or indirectly, to create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (i) pay dividends or make any other distributions to the Issuers or any of their Restricted Subsidiaries on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits; (ii) pay any indebtedness owed to the Issuers or any Restricted Subsidiary; (iii) make loans or advances to the Issuers or any Restricted Subsidiary; or (iv) transfer any of its properties or assets to the Issuers or any Restricted Subsidiary. (b) Notwithstanding the foregoing, the Issuers may, and may permit any Restricted Subsidiary to, suffer to exist any such encumbrance or restriction (i) pursuant to any agreement in effect on the Issue Date; (ii) pursuant to an agreement relating to any Acquired Debt, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired and its Subsidiaries; (iii) pursuant to an agreement effecting a Refinancing of Debt Incurred pursuant to an agreement referred to in clause (i) or (ii) above or clause (iv) below, provided, however, that the provisions contained in such Refinancing agreement relating to such encumbrance or restriction are no more restrictive taken as a whole (as determined in good faith by the Chief Financial Officer of Globalstar) than the provisions contained in the predecessor agreement the subject thereof; (iv) in the case of clause (iii) of Section 4.06(a), 47 41 consisting of restrictions contained in any security agreement (including a Capital Lease Obligation) securing Debt of the Issuers or a Restricted Subsidiary otherwise permitted under this Indenture, but only to the extent such encumbrances or restrictions restrict the transfer of the property subject to such security agreement; (v) in the case of clause (iv) of Section 4.06(a), consisting of customary nonassignment provisions entered into in the ordinary course of business in leases governing leasehold interests, but only to the extent such provisions restrict the transfer of the lease or the property thereunder; (vi) with respect to a Restricted Subsidiary, imposed pursuant to an agreement which has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Restricted Subsidiary; provided, however, that after giving effect to such transaction no Default shall have occurred or be continuing, that such restriction terminates if such transaction is not consummated and that such consummation or abandonment of such transaction occurs within one year of the date such agreement was entered into; (vii) imposed pursuant to applicable law or regulations; (viii) imposed pursuant to this Indenture and the Securities; or (ix) consisting of any restriction on the sale or other disposition of assets or property securing Debt as a result of a Permitted Lien on such assets or property. SECTION 4.07. Asset Dispositions. (a) The Issuers may not, and may not permit any Restricted Subsidiary to, directly or indirectly, make any Asset Disposition unless: (i) Globalstar, Globalstar Capital or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all non-cash consideration) of the shares and assets subject to such Asset Disposition, as determined by the General Partners' Committee of Globalstar in good faith and evidenced by a resolution filed with the Trustee; (ii) at least 80% of the consideration thereof received by Globalstar, Globalstar Capital or such Restricted Subsidiary, as the case may be, consists of (a) cash or Marketable Securities or (b) the assumption of Debt (other than Subordinated Obligations) of Globalstar, Globalstar Capital or such Restricted Subsidiary and the release of the Issuers and the Restricted Subsidiaries, as applicable, from all liability on the Debt assumed; and (iii) all Net Available Proceeds, less any amounts invested within 180 days of such disposition in assets that comply with 48 42 Section 4.12, are applied within 180 days of such disposition (A) first, to the permanent repayment or reduction of Debt then outstanding under any Bank Credit Agreement or Vendor Financing Facility, to the extent such agreement or facility would require such application or prohibit payments pursuant to the following clause (B), (B) second, to the extent of remaining Net Available Proceeds, to make an Offer to Purchase outstanding Securities at 100% of their principal amount plus accrued and unpaid interest and Liquidated Damages (if any) to the date of purchase thereon and, to the extent required by the terms thereof, any other Debt of Globalstar, Globalstar Capital or a Restricted Subsidiary that ranks pari passu with the Securities at a price no greater than 100% of the principal amount thereof plus accrued and unpaid interest to the date of purchase and (C) third, to the extent of any remaining Net Available Proceeds following the completion of the Offer to Purchase, to the repayment of other Debt of Globalstar or Debt of a Restricted Subsidiary, to the extent permitted under the terms thereof. To the extent any Net Available Proceeds remain after such uses, Globalstar and the Restricted Subsidiaries may use such amounts for any purposes not prohibited by this Indenture. Notwithstanding the foregoing, these provisions shall not apply to any Asset Disposition which constitutes a transfer, conveyance, sale, lease or other disposition of all or substantially all of Globalstar's properties or assets pursuant to Section 5.01(a). (b) The Issuers shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section 4.07. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.07, the Issuers shall comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations under this Section 4.07 by virtue thereof. SECTION 4.08. Transactions with Affiliates. (a) The Issuers may not, and may not permit any Restricted Subsidiary, directly or indirectly, to enter into any transactions (or series of related transactions) with an Affiliate or Related Person of the Issuers (other than the Issuers or a Wholly-Owned Restricted Subsidiary) (an "Affiliate Transaction") unless: 49 43 (i) such Affiliate Transaction is on terms that are no less favorable to Globalstar, Globalstar Capital or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by Globalstar, Globalstar Capital or such Restricted Subsidiary, as the case may be, with an unrelated Person; and (ii) Globalstar delivers to the Trustee: (A) with respect to any Affiliate Transaction involving aggregate consideration in excess of $1 million (other than financing transactions that are not vendor financing transactions pursuant to a Vendor Financing Facility) and entered into in connection with the Build-out, a certificate of the Chief Executive Officer of Globalstar to the effect that a majority of the disinterested limited partners of Globalstar have approved such Affiliate Transaction; provided, however, that there is at least one disinterested limited partner at the time of such Affiliate Transaction; provided further, however, that any limited partner receiving any compensation in respect of its approval shall be deemed not to be a disinterested limited partner; or (B) (1) with respect to any Affiliate Transaction involving aggregate consideration in excess of $1 million, a certificate of the Chief Executive Officer of Globalstar to the effect that such Affiliate Transaction complies with clause (i) above; and (2) with respect to any Affiliate Transaction involving aggregate consideration in excess of $10 million, an opinion as to the fairness to Globalstar, Globalstar Capital or such Restricted Subsidiary, as the case may be, of such Affiliate Transaction from a financial point of view issued by an Independent Financial Advisor or, with respect to telecommunications-related matters, a recognized expert in the satellite telecommunications industry. 50 44 (b) Notwithstanding the foregoing Section 4.08(a), the following shall be deemed not to be Affiliate Transactions: (i) employee compensation arrangements entered into in the ordinary course of business and approved by the General Partners' Committee of Globalstar; (ii) transactions solely between or among the Issuers and the Restricted Subsidiaries; (iii) Restricted Payments permitted by Section 4.05; (iv) Investments by an Affiliate or Related person of Globalstar or Globalstar Capital in the Capital Stock (other than Disqualified Stock) of Globalstar or any Restricted Subsidiary; and (v) an Affiliate or Related Person of the Issuers acting as agent for the placement or acquisition of launch services or insurance on behalf of the Issuers or any Restricted Subsidiary. SECTION 4.09. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries. The Issuers may not, and may not permit any Restricted Subsidiary to, issue, transfer, convey, sell or otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary or securities convertible or exchangeable into, or options, warrants, rights or any other interest with respect to, Capital Stock of a Restricted Subsidiary to any person other than Globalstar, Globalstar Capital or a Wholly-Owned Restricted Subsidiary except (i) in a transaction consisting of a sale of all the Capital Stock of such Restricted Subsidiary and that complies with the provisions of Section 4.07 to the extent such provisions apply; (ii) if required, the issuance, transfer, conveyance, sale or other disposition of directors' qualifying shares; (iii) in a transaction in which, or in connection with which, an Issuer or a Restricted Subsidiary acquires at the same time sufficient Capital Stock of such Restricted Subsidiary to at least maintain the same percentage ownership interest it had prior to such transaction; and (iv) Disqualified Stock of a Restricted Subsidiary Incurred to Refinance Disqualified Stock of such Restricted Subsidiary; provided, however, that the amounts of the redemption obligations of such Disqualified Stock shall not exceed the amounts of the 51 45 redemption obligations of, and such Disqualified Stock shall have redemption obligations no earlier than those required by, the Disqualified Stock being Refinanced. SECTION 4.10. Change of Control. (a) Upon the occurrence of a Change of Control, each Holder of Securities shall have the right to require that the Issuers repurchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages (if any) to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest and Liquidated Damages (if any) due on the relevant interest payment date). (b) Within 30 days following any Change of Control, the Issuers shall mail a notice to each Holder with a copy to the Trustee stating: (1) that a Change of Control has occurred and that such Holder has the right to require the Issuers to purchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages (if any) to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest and Liquidated Damages (if any) on the relevant interest payment date); (2) the circumstances and relevant facts regarding such Change of Control (including information with respect to pro forma historical income, cash flow and capitalization, each after giving effect to such Change of Control); (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Issuers, consistent with this Section 4.10, that a Holder must follow in order to have its Securities purchased. (c) Holders electing to have a Security purchased will be required to surrender the Security, with an appropriate form duly completed, to the Issuers at the address specified in the notice at least three Business Days prior to the purchase date. Holders will be entitled to withdraw their election if the Trustee or the Issuers receive not 52 46 later than one Business Day prior to the purchase date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. (d) On the purchase date, all Securities purchased by the Issuers under this Section shall be delivered by the Trustee for cancellation, and the Issuers shall pay the purchase price plus accrued and unpaid interest and Liquidated Damages (if any), if any, to the Holders entitled thereto. (e) The Issuers shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section , the Issuers shall comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations under this Section by virtue thereof. SECTION 4.11. Limitation on Liens. The Issuers may not, and may not permit any Restricted Subsidiary, directly or indirectly, to Incur or permit to exist any Lien on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except for the following Liens (each, a "Permitted Lien"): (i) Liens to secure up to $500 million of Debt permitted to be Incurred under this Indenture so long as effective provision is made to secure the Securities equally and ratably with (or prior to) the obligation so secured; (ii) Liens in favor of Holders of the Securities; (iii) Liens in favor of the Issuers; (iv) Liens on property or shares of Capital Stock of another Person at the time such other Person becomes a Subsidiary of such Person; provided, however, that such Liens are not created, incurred or assumed in connection with, or in contemplation of, such other 53 47 Person becoming such a Subsidiary; provided further, however, that such Lien may not extend to any other property owned by such Person or any of its Subsidiaries (other than inventory and receivables generated in the ordinary course of business and substitute property); (v) Liens on property at the time such Person or any of its Subsidiaries acquires such property, including any acquisition by means of a merger or consolidation with or into such Person or a Subsidiary of such Person; provided, however, that such Liens are not created, incurred or assumed in connection with, or in contemplation of, such acquisition; provided further, however, that the Liens may not extend to any other property owned by such Person or any of its Subsidiaries; (vi) Liens securing Debt Incurred pursuant to clause (viii) of Section 4.03(b); provided, however, that the Lien may not extend to any assets owned by an Issuer or any Restricted Subsidiary other than (a) the assets being financed or refinanced and income and proceeds therefrom and (b) any other assets of such obligor securing other Debt of such obligor to the same secured party; (vii) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (viii) Liens existing on the Issue Date; (ix) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided, however, that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; 54 48 (x) Liens incurred in the ordinary course of business of the Issuers and the Restricted Subsidiaries with respect to obligations that do not exceed $10.0 million at any one time outstanding and that: (A) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business); and (B) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by the Issuers and the Restricted Subsidiaries. SECTION 4.12. Business Activities. The Issuers may not, and may not permit any Restricted Subsidiary to, engage in any business other than that which is related to the design, development, procurement, installation, operation and ownership of telecommunications systems and businesses. SECTION 4.13. Maintenance of Insurance. (a) The Issuers shall: (i) maintain, with respect to each satellite in the Globalstar System, for the period beginning at least 45 days prior to, and at all times up to and including, the launch of such satellite, launch insurance with respect to such satellite in an amount sufficient to provide for the construction, launch and insurance of a replacement satellite to be payable in the event of a launch failure; and (ii) in the event that more than 16 of Globalstar's satellites have ceased Operating for 90 consecutive days and fewer than 44 satellites are Operating as part of the Globalstar System (such an event, an "In-orbit Insurance Event"), obtain (within 60 days of such In-orbit Insurance Event), and thereafter maintain, in-orbit insurance in an amount sufficient to provide for the construction, launch and insurance of replacement satellites for at least 16 of Globalstar's satellites still operating or, if such in-orbit insurance in such amount is not then 55 49 commercially available from traditional insurance providers, such lesser amount as is so available. (b) The obligation of the Issuers to maintain insurance pursuant to this covenant may be satisfied by any combination of: (i) insurance commitments obtained from any recognized insurance provider; (ii) insurance commitments obtained from any other entity if the General Partners' Committee of Globalstar determines in good faith that such entity is creditworthy and otherwise capable of bearing the financial risk of providing such insurance; (iii) unrestricted cash segregated and maintained by Globalstar in a segregated account (the "Insurance Account") solely for disbursement in accordance with Section 4.13(d) ("Cash Insurance"); and (iv) in respect of the insurance described in clause (i) of Section 4.13(a), self-insurance for the launch of up to 12 satellites; provided, however, that no earlier than 60 days prior to the scheduled launch of any such satellites: (a) the Issuers deliver an Officers' Certificate to the Trustee certifying that they have sufficient committed capital to construct, launch and insure at least 44 satellites, in addition to the satellites with respect to which the Issuers are self-insuring; and (b) the Issuers obtain an opinion from an investment banking firm that is an Independent Financial Advisor to the effect that the Issuers would be able to raise sufficient capital in the capital markets to replace, relaunch and insure such satellites in the event of a failure to successfully launch such satellites. (c) Within 30 days following any date on which the Issuers are required to obtain insurance pursuant to this Indenture, the Issuers will deliver to the Trustee an insurance certificate certifying the amount of insurance then carried and an Officers' Certificate stating that such insurance, together with any other insurance or Cash 56 50 Insurance maintained by the Issuers, complies with this Indenture. In addition, the Issuers will cause to be delivered to the Trustee no less than once each year an insurance certificate setting forth the amount of insurance then carried, which insurance certificate shall entitle the Trustee to: (i) notice of any claim under any such insurance policy; and (ii) at least 30 days' notice from the provider of such insurance prior to the cancellation of any such insurance. In the event that the Issuers maintain any Cash Insurance in satisfaction of any part of their obligation to maintain insurance pursuant to this Section 4.13, the Issuers shall deliver an Officers' Certificate to the Trustee in lieu of any insurance certificate otherwise required by this Section 4.13. (d) In the event that the Issuers receive any proceeds of any launch or in-orbit insurance that they are required to maintain pursuant to this Section 4.13, such proceeds shall constitute "Insurance Proceeds". In addition, if the Issuers maintain any Cash Insurance in satisfaction of any part of their obligations to maintain in-orbit insurance pursuant to this Section 4.13, then upon the occurrence of the event (i.e., the in-orbit failure) that would have entitled the Issuers to the payment of insurance had the Issuers purchased insurance from an insurance provider, the cash maintained in the Insurance Account shall constitute "Insurance Proceeds". Promptly following the receipt of any Insurance Proceeds, the Issuers shall apply such Insurance Proceeds in accordance with the provisions of Section 4.07; provided, however, that Insurance Proceeds shall only be required to be so applied to the extent that the aggregate amount of all Insurance Proceeds received by the Issuers exceeds $5 million in any 12-month period. SECTION 4.14. Compliance Certificate; Statement by Officers as to Default. The Issuers shall deliver to the Trustee within 120 days after the end of each fiscal year of the Issuers an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Issuers they would normally have knowledge of any Default and whether or not the signers know of any 57 51 Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Issuers are taking or propose to take with respect thereto. The Issuers also shall comply with TIA Section 314(a)(4). SECTION 4.15. Further Instruments and Acts. Upon request of the Trustee, the Issuers will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 4.16. Business Activities of Globalstar Capital. Globalstar Capital shall not engage in any trade or business, and shall conduct no business activity, other than the Incurrence of Debt permitted by Section 4.03 and the issuance of Capital Stock to Globalstar or any Wholly-Owned Restricted Subsidiary and activities incidental thereto. SECTION 4.17. Calculation of Original Issue Discount. The Issuers shall file with the Trustee promptly at the end of each calendar year (i) a written notice specifying the amount of original issue discount (including daily rates and accrual periods) accrued on outstanding Securities as of the end of such year and (ii) such other specific information relating to such original issue discount as may then be relevant under the Code, as amended from time to time. ARTICLE 5 Successor Issuers SECTION 5.01. When Issuers May Merge or Transfer Assets. (a) Neither Globalstar nor Globalstar Capital may consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all its assets to any Person; provided, however, that Globalstar may consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all its assets to any Person, if: (i) the resulting, surviving or transferee Person (the "Successor Issuer") shall be a Person organized and existing under the laws of the United States of 58 52 America, any State thereof or the District of Columbia and the Successor Issuer (if not Globalstar) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of Globalstar under the Securities and this Indenture; (ii) immediately after giving effect to such transaction (and treating any Debt which becomes an obligation of the Successor Issuer or any Subsidiary as a result of such transaction as having been Incurred by the Successor Issuer or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction, the Successor Issuer would be able to Incur an additional $1.00 of Debt pursuant to Section 4.03(a); (iv) immediately after giving effect to such transaction, the Successor Issuer shall have Consolidated Net Worth in an amount that is not less than the Consolidated Net Worth of Globalstar immediately prior to such transaction; and (v) Globalstar shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such transaction and such supplemental indenture (if any) comply with this Indenture. The Successor Issuer shall be the successor to Globalstar and shall succeed to, and be substituted for, and may exercise every right and power of, Globalstar under this Indenture, and Globalstar (other than in the case of a lease) shall be released from the obligation to pay the principal of and interest and Liquidated Damages (if any) on the Securities. (b) Globalstar shall not permit any Subsidiary Guarantor to consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to any Person unless: (i) the resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of the 59 53 United States of America, or any State thereof or the District of Columbia, and such Person shall expressly assume, by a guaranty agreement in a form acceptable to the Trustee, all the obligations of such Subsidiary, if any, under its Subsidiary Guaranty; (ii) immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Debt which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and (iii) Globalstar delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such guaranty agreement, if any, complies with this Indenture. ARTICLE 6 Defaults and Remedies SECTION 6.01. Events of Default. An "Event of Default" occurs if: (1) the Issuers default in any payment of interest or Liquidated Damages (if any) on any Security when the same becomes due and payable, and such default continues for a period of 30 days; (2) the Issuers (i) default in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, or (ii) fail to redeem or purchase Securities when required pursuant to this Indenture or the Securities; (3) the Issuers fail to comply with Section 5.01; (4) the Issuers fail to comply with Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13 or 4.16 (other than a failure to purchase Securities when required under Section 4.07 or 4.10) and such failure continues for 30 days after the notice specified below; 60 54 (5) the Issuers fail to comply with any of their agreements in the Securities or this Indenture (other than those referred to in clause (1), (2), (3) or (4) above) and such failure continues for 60 days after the notice specified below; (6) Debt of the Issuers or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Debt unpaid or accelerated exceeds $10.0 million, or its foreign currency equivalent at the time and such failure continues for 10 days after the notice specified below; (7) any Issuer or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Issuers or any Significant Subsidiary in an involuntary case; (B) appoints a Custodian of the Issuers or any Significant Subsidiary or for any substantial part of its property; or (C) orders the winding up or liquidation of the Issuers or any Significant Subsidiary; 61 55 or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days; (9) any judgment or decree for the payment of money in excess of $10.0 million or its foreign currency equivalent at the time is entered against the Issuers or any Significant Subsidiary, remains outstanding for a period of 60 days following the entry of such judgment or decree and is not discharged, waived or the execution thereof stayed within 10 days after the notice specified below; or (10) a Subsidiary Guaranty ceases to be in full force and effect (other than in accordance with the terms of such Subsidiary Guaranty) or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guaranty. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clauses (4), (5), or (9) is not an Event of Default until the Trustee or the holders of at least 25% in principal amount of the outstanding Securities notify the Issuers of the Default and the Issuers do not cure such Default within the time specified after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Issuers shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default under clause (6) or (10) and any event which with the giving of notice or the lapse of time would become an Event of Default under clause (4), (5) or (9), its status and what 62 56 action the Issuers are taking or propose to take with respect thereto. SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.01(7) or (8) with respect to the Issuers) occurs and is continuing, the Trustee by notice to the Issuers, or the Holders of at least 25% in principal amount of the Securities by notice to the Issuers and the Trustee, may declare the principal of and accrued but unpaid interest and Liquidated Damages (if any) on all the Securities to be due and payable. Upon such a declaration, such principal, interest and Liquidated Damages (if any) shall be due and payable immediately. If an Event of Default specified in Section 6.01(7) or (8) with respect to the Issuers occurs, the principal of and interest and Liquidated Damages (if any) on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest and Liquidated Damages (if any) that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest and Liquidated Damages (if any) on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in principal amount of the Securities by notice to the Trustee may waive an existing Default and 63 57 its consequences except (i) a Default in the payment of the principal of or interest and Liquidated Damages (if any) on a Security or (ii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority in principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to reasonable indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. Except to enforce the right to receive payment of principal, premium (if any) or interest and Liquidated Damages (if any) when due, no Securityholder may pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in principal amount of the Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (5) the Holders of a majority in principal amount of the Securities do not give the Trustee a direction 64 58 inconsistent with the request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest and Liquidated Damages (if any) on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuers for the whole amount then due and owing (together with interest on any unpaid interest and Liquidated Damages (if any) to the extent lawful) and the amounts provided for in Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Issuers, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. 65 59 SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to Securityholders for amounts due and unpaid on the Securities for principal, interest and Liquidated Damages (if any), ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal, interest and Liquidated Damages (if any), respectively; and THIRD: to the Issuers. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section . At least 15 days before such record date, the Issuers shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. The Issuers (to the extent they may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Issuers (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and shall not 66 60 hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 Trustee SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section ; 67 61 (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuers. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. 68 62 (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the principal corporate trust office of the Trustee, and such notice references the Securities and this Indenture. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Issuers or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Issuers' use of the proceeds from the Securities, and it shall not be responsible for any statement of the Issuers in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the 69 63 Default within 90 days after it occurs. Except in the case of a Default in payment of principal of or interest and Liquidated Damages (if any) on any Security (including payments pursuant to the mandatory redemption provisions of such Security, if any), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. Reports by Trustee to Holders. If required by TIA Section 313(a), as promptly as practicable after each May 15 beginning with the May 15, 1998, and in any event prior to July 15 in each year, the Trustee shall mail to each Securityholder a brief report dated as of May 15 that complies with such TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b). A copy of each report at the time of its mailing to Securityholders shall be filed with the Commission and each stock exchange (if any) on which the Securities are listed. The Issuers agree to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Issuers shall pay to the Trustee from time to time such compensation as shall be agreed in writing between the Issuers and the Trustee for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuers shall reimburse the Trustee upon request for all reasonable out-of- pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Issuers shall indemnify the Trustee against any and all loss, liability or reasonable expense (including reasonable attorneys' fees) incurred by it in connection with the administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Issuers promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Issuers shall not relieve the Issuers of their obligations hereunder. The Issuers shall defend the claim and the Trustee may have separate counsel and the Issuers shall pay the reasonable fees and expenses of such counsel. The Issuers need not reimburse any expense or indemnify against any loss, 70 64 liability or expense incurred by the Trustee through the Trustee's own wilful misconduct, negligence or bad faith. To secure the Issuers' payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest and Liquidated Damages (if any) on particular Securities. The Issuers' payment obligations pursuant to this Section shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(7) or (8) with respect to the Issuers, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Issuers. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Issuers shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Issuers or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Issuers shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuers. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall 71 65 mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Securities may petition, at the expense of the Issuers, any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Issuers' obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Section 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most 72 66 recent published annual report of condition. The Trustee shall comply with TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Issuers are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Issuers. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. ARTICLE 8 Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) When (i) the Issuers deliver to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancellation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article 3 hereof and the Issuers irrevocably deposit with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Securities, including interest and Liquidated Damages (if any) thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Issuers pay all other sums payable hereunder by the Issuers, then this Indenture shall, subject to Sections 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Issuers accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Issuers. (b) Subject to Sections 8.01(c) and 8.02, the Issuers at any time may terminate (i) all their obligations under the Securities and this Indenture ("legal defeasance option") or (ii) their obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13 and 4.16 and the operation of Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8), 6.01(9) and 6.01(10) (but, in the case of Sections 6.01(7) and (8), with respect only to 73 67 Significant Subsidiaries) and the limitations contained in Sections 5.01(a)(iii) and (iv) ("covenant defeasance option"). The Issuers may exercise their legal defeasance option notwithstanding their prior exercise of their covenant defeasance option. If the Issuers exercise their legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default with respect thereto. If the Issuers exercise their covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8), 6.01(9) and 6.01(10) (but, in the case of Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) or because of the failure of the Issuers to comply with Section 5.01(a)(iii) or (iv). If the Issuers exercise their legal defeasance option or their covenant defeasance option, each Subsidiary Guarantor, if any, shall be released from all its obligations with respect to its Subsidiary Guaranty. Upon satisfaction of the conditions set forth herein and upon request of the Issuers, the Trustee shall acknowledge in writing the discharge of those obligations that the Issuers terminate. (c) Notwithstanding clauses (a) and (b) above, the Issuers' obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in this Article 8 shall survive until the Securities have been paid in full. Thereafter, the Issuers' obligations in Sections 7.07, 8.04 and 8.05 shall survive. SECTION 8.02. Conditions to Defeasance. The Issuers may exercise their legal defeasance option or their covenant defeasance option only if: (1) the Issuers irrevocably deposit in trust with the Trustee money or U.S. Government Obligations for the payment of principal of and interest and Liquidated Damages (if any) on the Securities to maturity or redemption, as the case may be; (2) the Issuers deliver to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest and Liquidated Damages (if any) when due and without reinvestment on the 74 68 deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest and Liquidated Damages (if any) when due on all the Securities to maturity or redemption, as the case may be; (3) 123 days pass after the deposit is made and during the 123-day period no Default specified in Sections 6.01(7) or (8) with respect to the Issuers occurs which is continuing at the end of the period; (4) the deposit does not constitute a default under any other agreement binding on the Issuers; (5) the Issuers deliver to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Issuers Act of 1940; (6) in the case of the legal defeasance option, the Issuers shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Issuers have received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the Issue Date there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (7) in the case of the covenant defeasance option, the Issuers shall have delivered to the Trustee an Opinion of Counsel to the effect that the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (8) the Issuers deliver to the Trustee an Officers' Certificate and an Opinion of Counsel, each 75 69 stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article 8 have been complied with. Before or after a deposit, the Issuers may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article 3. SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest and Liquidated Damages (if any) on the Securities. SECTION 8.04. Repayment to Issuers. The Trustee and the Paying Agent shall promptly turn over to the Issuers upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Issuers upon request any money held by them for the payment of principal or interest and Liquidated Damages (if any) that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Issuers for payment as general creditors. SECTION 8.05. Indemnity for Government Obligations. The Issuers shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuers' obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article 8; 76 70 provided, however, that, if the Issuers have made any payment of interest and Liquidated Damages (if any) on or principal of any Securities because of the reinstatement of their obligations, the Issuers shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 9 Amendments SECTION 9.01. Without Consent of Holders. The Issuers and the Trustee may amend this Indenture or the Securities without notice to or consent of any Security- holder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Article 5; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to add guarantees with respect to the Securities, including any Subsidiary Guaranties, or to secure the Securities or to release such guaranties in accordance with the terms of Section 4.04; (5) to add to the covenants of the Issuers for the benefit of the Holders or to surrender any right or power herein conferred upon the Issuers; (6) to comply with any requirements of the Commission in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA; or (7) to make any change that does not adversely affect the rights of any Securityholder. 77 71 After an amendment under this Section becomes effective, the Issuers shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. The Issuers and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange for the Securities). However, without the consent of each Securityholder affected thereby, an amendment may not: (1) reduce the amount of Securities whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest and Liquidated Damages (if any) on any Security; (3) reduce the principal of or extend the Stated Maturity of any Security; (4) reduce the premium payable upon the redemption of any Security or change the time at which any Security may be redeemed in accordance with Article 3; (5) make any Security payable in money other than that stated in the Security; (6) make any change in Section 6.04 or 6.07 or the second sentence of this Section; or (7) make any change in any Subsidiary Guaranty that would adversely affect the Securityholders. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section becomes effective, the Issuers shall mail to Securityholders a notice briefly describing such amendment. The failure to 78 72 give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee. The Issuers may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Issuers or the Trustee so determines, the Issuers in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. 79 73 SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. SECTION 9.07. Payment for Consent. Neither the Issuers nor any Affiliate of the Issuers shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend (and, if appropriate, tender their Securities) in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE 10 Subsidiary Guaranties SECTION 10.01. Guaranties. Each Subsidiary Guarantor hereby unconditionally and irrevocably guarantees, jointly and severally, to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of and interest and Liquidated Damages (if any) on the Securities when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Issuers under this Indenture and the Securities and (b) the full and punctual performance within applicable grace periods of all other obligations of the Issuers under this Indenture and the Securities (all the foregoing being hereinafter collectively called the "Obligations"). Each Subsidiary Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from such Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under this Article 10 notwithstanding any extension or renewal of any Obligation. 80 74 Each Subsidiary Guarantor waives presentation to, demand of, payment from and protest to the Issuers of any of the Obligations and also waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of any default under the Securities or the Obligations. The Obligations of each Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Issuers or any other Person under this Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Obligations or any of them; (e) the failure of any Holder or the Trustee to exercise any right or remedy against any other guarantor of the Obligations; or (f) any change in the ownership of such Subsidiary Guarantor. Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Obligations. Except as expressly set forth in Sections 8.01(b), 10.02 and 10.06, the obligations of each Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the Obligations of each Subsidiary Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of such Subsidiary Guarantor or would otherwise operate as a 81 75 discharge of such Subsidiary Guarantor as a matter of law or equity. Each Subsidiary Guarantor further agrees that its Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest and Liquidated Damages (if any) on any Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Issuers or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the failure of the Issuers to pay the principal of or interest and Liquidated Damages (if any) on any Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, each Subsidiary Guarantor hereby promises to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid amount of such Obligations, (ii) accrued and unpaid interest and Liquidated Damages (if any) on such Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Obligations of the Issuers to the Holders and the Trustee. Each Subsidiary Guarantor agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations Guaranteed hereby may be accelerated as provided in Article 6 for the purposes of such Subsidiary Guarantor's Subsidiary Guaranty herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Obligations as provided in Article 6, such Obligations (whether or not due and payable) shall forthwith become due and payable by such Subsidiary Guarantor for the purposes of this Section. Each Subsidiary Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights under this Section. 82 76 SECTION 10.02. Limitation on Liability. Any term or provision of this Indenture to the contrary notwithstanding, the maximum, aggregate amount of the Obligations guaranteed hereunder by any Subsidiary Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. SECTION 10.03. Successors and Assigns. This Article 10 shall be binding upon each Subsidiary Guarantor and its successors and assigns and shall enure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture. SECTION 10.04. No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article 10 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 10 at law, in equity, by statute or otherwise. SECTION 10.05. Modification. No modification, amendment or waiver of any provision of this Article 10, nor the consent to any departure by any Subsidiary Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Subsidiary Guarantor in any case shall entitle such Subsidiary Guarantor to any other or further notice or demand in the same, similar or other circumstances. SECTION 10.06. Release of Subsidiary Guarantor. Upon the sale or other disposition (including by way of consolidation or merger) of a Subsidiary Guarantor or the 83 77 sale or disposition of all or substantially all the assets of such Subsidiary Guarantor (in each case other than to the Issuers or an Affiliate of the Issuers), such Subsidiary Guarantor shall be deemed released from all Obligations under this Article 10 without any further action required on the part of the Trustee or any Holder. At the request of the Issuers, the Trustee shall execute and deliver an appropriate instrument evidencing such release. ARTICLE 11 Miscellaneous SECTION 11.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 11.02. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Issuers: Globalstar, L.P. Globalstar Capital Corporation 3200 Zinker Road San Jose, California 95164-0670 Attention: Michael B. Targoff Facsimile: (408) 473-5040 if to the Trustee: The Bank of New York 101 Barclay Street, Floor 21 West New York, NY 10286 Attention: Corporate Trust Administration Facsimile: (212) 815-5915 The Issuers or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Secu- 84 78 rityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 11.03. Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Issuers, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Issuers to the Trustee to take or refrain from taking any action under this Indenture, the Issuers shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 11.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; 85 79 (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 11.06. When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Issuers or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuers shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which a Trust Officer of the Trustee actually knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 11.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest and Liquidated Damages (if any) shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 11.09. Governing Law. This Indenture and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. SECTION 11.10. No Recourse Against Others. Any past, present or future director, officer, partner (including any general partner) employee, incorporator or 86 80 stockholder, as such, of the Issuers shall not have any liability for any obligations of the Issuers under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 11.11. Successors. All agreements of the Issuers in this Indenture and the Securities shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. 87 81 SECTION 11.13. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. GLOBALSTAR, L.P., by LORAL/QUALCOMM SATELLITE SERVICES, L.P., its managing general partner, by LORAL/QUALCOMM PARTNERSHIP, L.P. its general partner, by LORAL GENERAL PARTNER, INC., its general partner, by /s/ Eric J. Zahler ---------------------------- Name: Eric J. Zahler Title: Secretary GLOBALSTAR CAPITAL CORPORATION, by /s/ Eric J. Zahler ---------------------------- Name: Eric J. Zahler Title: Secretary THE BANK OF NEW YORK, as Trustee by /s/ Walter Gitlin ---------------------------- Name: Walter Gitlin Title: Vice President 88 EXHIBIT A [FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY] */ **/ No. R- $ 11 3/8% Senior Notes due 2004 CUSIP: Globalstar, L.P., a Delaware limited partnership, and Globalstar Capital Corporation, a Delaware corporation, each promise to pay to , or registered assigns, the principal sum of Dollars on February 15, 2004. Interest Payment Dates: February 15 and August 15. Record Dates: February 1 and August 1. Additional provisions of this Security are set forth on the other side of this Security. GLOBALSTAR, L.P., by LORAL/QUALCOMM SATELLITE SERVICES, L.P., its managing general partner, by LORAL/QUALCOMM PARTNERSHIP, L.P. its general partner, by LORAL GENERAL PARTNER, INC. its general partner, by _____________________ President _____________________ Secretary GLOBALSTAR CAPITAL CORPORATION, by _____________________ President _____________________ Secretary 89 2 Dated: , 1997 TRUSTEE'S CERTIFICATE OF AUTHENTICATION THE BANK OF NEW YORK, as Trustee, certifies that this is one of the Securities referred to in the Indenture. by _____________________________ Authorized Signatory */ If the Security is to be issued in global form add the Global Securities Legend from Exhibit 1 to the Rule 144A/Regulation S Appendix and the attachment from such Exhibit 1 captioned "[TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY". **/ If the Security is a Private Exchange Security issued in a Private Exchange to an Initial Purchaser holding an unsold portion of its initial allotment, add the Restricted Securities Legend from Exhibit 1 to the 90 3 Rule 144A/Regulation S Appendix and replace the Assignment Form included in this Exhibit A with the Assignment Form included in such Exhibit 1. 91 4 [FORM OF REVERSE SIDE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY] 11 3/8% Senior Note due 2004 1. Interest and Liquidated Damages Globalstar, L.P., a Delaware limited partnership and Globalstar Capital Corporation, a Delaware corporation (such limited partnership and such corporation, and their successors and assigns under the Indenture hereinafter referred to, being herein called the "Issuers"), promise to pay interest on the principal amount of this Security at the rate per annum shown above; provided, however, that if a Registration Default (as defined in the Registration Rights Agreement) occurs, Liquidated Damages (as defined in the Registration Rights Agreement) shall accrue on this Security in an amount equal to $.05 per week per $1,000 principal amount of Securities held by each Holder (over and above the interest set forth in the title of this Security) from and including the date on which any such Registration Default shall occur until the earlier of (i) the date on which all such Registration Defaults have been cured or (ii) the date which is 90 days after the date such Registration Default occurred. The Liquidated Damages will increase by an additional $.05 per week per $1,000 principal amount of the Securities held by each Holder during each subsequent 90-day period until the date on which all such Registration Defaults have been cured; provided, however, that the aggregate amount of Liquidated Damages shall not exceed a maximum of $.50 per week per $1,000 principal amount of the Securities held by each Holder. The Issuers will pay interest hereon, if any, semiannually on February 15 and August 15 of each year; provided, however, that except for any Liquidated Damages payable pursuant to the two immediately preceding sentences, the first such interest payment date shall be August 15, 1997. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid or provided for, (i) in the case of Liquidated Damages as described above, and (ii) in the case of interest, from February 19, 1997. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Issuers shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of cash interest at such higher rate to the extent lawful. 92 5 2. Method of Payment The Issuers will pay interest and Liquidated Damages (if any) on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the February 1 or August 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Issuers will pay principal and interest and Liquidated Damages (if any) in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of Securities (including principal, premium, interest and Liquidated Damages (if any) will be made by wire transfer of immediately available funds to the accounts specified by the holders thereof or, if no U.S. dollar account maintained by the payee with a bank in the United States is designated by any holder to the Trustee or the Paying Agent at least 30 days prior to the relevant due date for payment (or such other date as the Trustee may accept in its discretion), by mailing a check to the registered address of such holder. 3. Paying Agent and Registrar Initially, The Bank of New York, a New York banking corporation ("Trustee"), will act as Paying Agent and Registrar. The Issuers may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Issuers or any of their domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Issuers issued the Securities under an Indenture dated as of February 15, 1997 ("Indenture"), between the Issuers and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. 93 6 The Securities are unsecured senior obligations of the Issuers limited to $500,000,000 aggregate principal amount (subject to Section 2.07 of the Indenture). The Indenture contains certain covenants which, among other things, limit (a) the incurrence of additional debt by the Issuers and certain of its subsidiaries and the issuance of capital stock by such subsidiaries, (b) the payment of dividends on capital stock of certain subsidiaries and the purchase, redemption or retirement of capital stock or subordinated indebtedness, (c) certain investments, (d) certain transactions with affiliates, (e) the incurrence of liens, (f) sales of assets, including capital stock of subsidiaries, (g) certain consolidations and mergers, (h) the Issuers' and certain of their subsidiaries' lines of business and (i) the Issuers' ability to operate without certain insurance coverage. The Indenture also will prohibit certain restrictions on distributions from subsidiaries. In addition, the Issuers may be obligated, under certain circumstances, to offer to repurchase Securities at a purchase price equal to 101% of the principal amount of the Securities plus accrued and unpaid interest and Liquidated Damages (if any) to the date of repurchase. 5. Optional Redemption The Securities may not be redeemed prior to February 15, 2002. On and after that date, the Issuers may redeem the Securities in whole or in part, at any time or from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest and Liquidated Damages (if any) to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest and Liquidated Damages (if any) due on the related interest payment date): If redeemed during the 12-month period commencing February 15 of the years set forth below: Period Percentage ------ ---------- 2002...................................... 105.688% 2003...................................... 102.844% 94 7 6. Notice of Redemption Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest and Liquidated Damages (if any) on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions Upon a Change of Control, any Holder of Securities will have the right to cause the Issuers to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities plus accrued and unpaid interest and Liquidated Damages (if any) to be repurchased (subject to the right of holders of record on the relevant record date to receive interest and Liquidated Damages (if any) due on the relevant interest payment date) as provided in, and subject to the terms of, the Indenture. 8. Guarantees This Security may be jointly and severally guaranteed by certain Subsidiaries of the Issuers to the extent provided in the Indenture. The Issuers have covenanted pursuant to the Indenture to cause any Subsidiary created or acquired after the date of the Indenture (unless such Subsidiary is a Transitory Equipment Subsidiary or is an Unrestricted Subsidiary), to execute and deliver to the Trustee a Subsidiary Guaranty pursuant to which such Subsidiary will guaranty this Security on the same terms and conditions as those set forth in the Indenture. 9. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorse- 95 8 ments or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Issuers are not required to transfer or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed. 10. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Issuers and not to the Trustee for payment. 12. Discharge and Defeasance Subject to certain conditions, the Issuers at any time may terminate some or all of their obligations under the Securities and the Indenture if the Issuers deposit with the Trustee money or U.S. Government Obligations for the payment of principal and interest and Liquidated Damages (if any) on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Issuers and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, to provide for the assumption by a successor corporation of the obligations of Globalstar under the Indenture, to provide for uncertificated Securities in addition to or in place of 96 9 certificated Securities, to add guarantees with respect to the Securities, to release such guarantees, to secure the Securities, to add to the covenants of the Issuers for the benefit of the Holders of the Securities or to surrender any right or power conferred upon the Issuers, to make any change that does not adversely affect the rights of any Holder of the Securities or to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act. 14. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest or Liquidated Damages (if any) on the Securities; (ii) default in payment of principal on the Securities, upon redemption pursuant to paragraph 5 of the Securities, upon required repurchase upon declaration or otherwise, or failure by the Issuers to redeem or purchase Securities when required; (iii) failure by the Issuers to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Debt of the Issuers if the amount accelerated (or so unpaid) exceeds $10 million; (v) certain events of bankruptcy or insolvency with respect to the Issuers and the Significant Subsidiaries; (vi) certain judgments or decrees for the payment of money in excess of $10 million, subject to lapse of time and notice; and (vii) certain events with respect to the guarantees of the Issuers' obligations under the Securities by certain of their subsidiaries. However, a default under clauses (iii) and (vi) will not constitute an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the Securities outstanding notify the Issuers of the default and the Issuers do not cure such default within the time specified after receipt of such notice. If an Event of Default occurs and is continuing, the Trustees or the Holders of at least 25% in principal amount of the Securities outstanding may declare the principal of and all accrued but unpaid interest and Liquidated Damages (if any) on all the Securities to be due and payable immediately. Certain events of bankruptcy, insolvency or reorganization are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The 97 10 Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest or Liquidated Damages (if any)) if it determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Issuers Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Issuers or their Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others Any past, present or future director, officer, partner (including general partners), employee, incorporator or stockholder, as such, of the Issuers or the Trustee shall not have any liability for any obligations of the Issuers under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 18. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 98 11 19. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuers have caused CUSIP numbers to be printed on the Securities and have directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 20. Holders' Compliance with Registration Rights Agreement Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Issuers to the extent provided therein. 21. Governing Law THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. THE ISSUERS WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO: GLOBALSTAR, L.P. 3200 ZANKER ROAD BOX 640670 SAN JOSE, CA 95164-0670 ATTENTION OF STEPHEN C. WRIGHT 99 12 - -------------------------------------------------------------------------------- ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of Globalstar. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: _____________________ Your Signature: ______________________________ - -------------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. 100 13 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Issuers pursuant to Section 4.07 or 4.10 of the Indenture, check the box: / / If you want to elect to have only part of this Security purchased by the Issuers pursuant to Section 4.07 or 4.10 of the Indenture, state the amount: Date: __________________ Your Signature: __________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:_______________________________________ [Signature must be guaranteed by an eligible Guarantor Institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15] 101 RULE 144A/REGULATION S APPENDIX FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A, INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7)) AND TO CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S. PROVISIONS RELATING TO INITIAL SECURITIES, PRIVATE EXCHANGE SECURITIES AND EXCHANGE SECURITIES 1. Definitions 1.1 Definitions. For the purposes of this Appendix the following terms shall have the meanings indicated below: "Definitive Security" means a certificated Initial Security bearing the restricted securities legend set forth in Section 2.3(d) and which is held by an IAI in accordance with Section 2.1(c). "Depositary" means The Depository Trust Company, its nominees and their respective successors. "Exchange Securities" means the 11 3/8% Senior Notes due 2004 to be issued pursuant to this Indenture in connection with a Registered Exchange Offer pursuant to the Registration Rights Agreement. "Globalstar Parties" means each of Globalstar, L.P., Globalstar Capital Corporation and Globalstar Telecommunications Limited. "IAI" means an institutional "accredited investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Initial Purchasers" means Lehman Brothers Inc., Bear, Stearns & Co., Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Unterberg Harris. "Initial Securities" means the 11 3/8% Senior Notes due 2004, issued under this Indenture on or about the date hereof. "Private Exchange" means the offer by the Issuers, pursuant to the Registration Rights Agreement, to the Initial Purchasers to issue and deliver to each Initial Purchaser, in exchange for the Initial Securities held by the Initial Purchaser as part of its initial distribution, a like aggregate principal amount of Private Exchange Securities. 102 2 "Private Exchange Securities" means the 11 3/8% Senior Notes due 2004 to be issued pursuant to this Indenture to the Initial Purchasers in a Private Exchange. "Purchase Agreement" means the Purchase Agreement dated February 13, 1997, among the Globalstar Parties and the Initial Purchasers. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registered Exchange Offer" means the offer by the Issuers, pursuant to the Registration Rights Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act. "Registration Rights Agreement" means the Registration Rights Agreement dated February 19, 1997, among the Issuers and the Initial Purchasers. "Securities" means the Initial Securities, the Exchange Securities and the Private Exchange Securities, treated as a single class. "Securities Act" means the Securities Act of 1933. "Securities Custodian" means the custodian with respect to a Global Security (as appointed by the Depositary), or any successor person thereto and shall initially be the Trustee. "Shelf Registration Statement" means the registration statement issued by the Issuers, in connection with the offer and sale of Initial Securities or Private Exchange Securities, pursuant to the Registration Rights Agreement. "Transfer Restricted Securities" means Definitive Securities and Securities that bear or are required to bear the legend set forth in Section 2.3(d) hereto. 103 3 1.2 Other Definitions Defined in Term Section : "Agent Members"........................... 2.1(b) "Global Security"......................... 2.1(a) "Regulation S"............................ 2.1(a) "Rule 144A"............................... 2.1(a) 2. The Securities 2.1 Form and Dating. The Initial Securities are being offered and sold by the Issuers pursuant to the Purchase Agreement. (a) Global Securities. Initial Securities offered and sold to a QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") or in reliance on Regulation S under the Securities Act ("Regulation S"), in each case as provided in the Purchase Agreement, shall be issued initially in the form of one or more permanent global Securities in definitive, fully registered form without interest coupons with the global securities legend and restricted securities legend set forth in Exhibit 1 hereto (each, a "Global Security"), which shall be deposited on behalf of the purchasers of the Initial Securities represented thereby with the Trustee, at its New York office, as custodian for the Depositary (or with such other custodian as the Depositary may direct), and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Issuers and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global Security deposited with or on behalf of the Depositary. The Issuers shall execute and the Trustee shall, in accordance with this Section 2.1(b), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depositary for such Global Security or Global Securities or the nominee of such Depositary and (b) shall be delivered by the Trustee to such 104 4 Depositary or pursuant to such Depositary's instructions or held by the Trustee as custodian for the Depositary. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Security, and the Depositary may be treated by the Issuers, the Trustee and any agent of the Issuers or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuers, the Trustee or any agent of the Issuers or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (c) Certificated Securities. Except as provided in this Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of certificated Securities. Purchasers of Initial Securities who are IAIs and are not QIBs and did not purchase Initial Securities sold in reliance on Regulation S will receive Definitive Securities; provided, however, that upon transfer of such Definitive Securities to a QIB, such Definitive Securities will, unless the Global Security has previously been exchanged, be exchanged for an interest in a Global Security pursuant to the provisions of Section 2.3. 2.2 Authentication. The Trustee shall authenticate and deliver: (1) Initial Securities for original issue in an aggregate principal amount of $500,000,000 and (2) Exchange Securities or Private Exchange Securities for issue only in a Registered Exchange Offer or a Private Exchange, respectively, pursuant to the Registration Rights Agreement, for a like principal amount of Initial Securities, in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of each of the Issuers. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities, Exchange Securities or Private Exchange Securities. The aggregate principal amount of Securities outstanding at any time may not exceed $500,000,000 except as provided in Section 2.07 of this Indenture. 105 5 2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive Securities. When Definitive Securities are presented to the Registrar or a co-registrar with a request: (x) to register the transfer of such Definitive Securities; or (y) to exchange such Definitive Securities for an equal principal amount of Definitive Securities of other authorized denominations, the Registrar or co-registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Securities surrendered for transfer or exchange: (i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Issuers and the Registrar or co-registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (ii) are being transferred or exchanged pursuant to an effective registration statement under the Securities Act, pursuant to Section 2.3(b) or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable: (A) if such Definitive Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in the form set forth on the reverse of the Security); or (B) if such Definitive Securities are being transferred to any of the Globalstar Parties, a certification to that effect (in the form set forth on the reverse of the Security); or (C) if such Definitive Securities are being transferred (w) pursuant to an exemption from registration in accordance with Rule 144; or (x) in reliance on another exemption from the registration requirements of the Securities Act: (i) a certification to that effect (in the form set forth on the reverse of the Security) and (ii) if the Issuers or Registrar so requests, an opinion of 106 6 counsel or other evidence reasonably satisfactory to them as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(d)(i). (b) Restrictions on Transfer of a Definitive Security for a Beneficial Interest in a Global Security. A Definitive Security may not be exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with: (i) certification, in the form set forth on the reverse of the Security, that such Definitive Security is being transferred (A) to a QIB in accordance with Rule 144A, or (B) outside the United States in an offshore transaction within the meaning of Regulation S and in compliance with Rule 904 under the Securities Act; and (ii) written instructions directing the Trustee to make, or to direct the Securities Custodian to make, an adjustment on its books and records with respect to such Global Security to reflect an increase in the aggregate principal amount of the Securities represented by the Global Security, such instructions to contain information regarding the Depositary account to be credited with such increase, then the Trustee shall cancel such Definitive Security and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Securities Custodian, the aggregate principal amount of Securities represented by the Global Security to be increased by the aggregate principal amount of the Definitive Security to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Global Security equal to the principal amount of the Definitive Security so cancelled. If no Global Securities are then outstanding, the Company shall issue and the Trustee shall authenticate, upon written order of the Company in the form of an Officers' Certificate, a new Global Security in the appropriate aggregate principal amount. (c) Transfer and Exchange of Global Securities. (i) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the 107 7 Depositary, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depositary therefor. A transferor of a beneficial interest in a Global Security shall deliver to the Registrar a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary to be credited with a beneficial interest in the Global Security. The Registrar shall, in accordance with such instructions, instruct the Depositary to credit to the account of the Person specified in such instructions a beneficial interest in the Global Security and to debit the account of the Person making the transfer of the beneficial interest in the Global Security being transferred. (ii) Notwithstanding any other provisions of this Rule 144A/Regulation S Appendix (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. (iii) In the event that a Global Security is exchanged for Securities in definitive registered form pursuant to Section 2.4 or Section 2.09 of the Indenture prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A or Regulation S, as the case may be) and such other procedures as may from time to time be adopted by the Company. (d) Legends. (i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each Security certificate evidencing the Global Securities and the Definitive Securities (and all Securities issued in 108 8 exchange therefor or in substitution thereof) shall bear a legend in substantially the following form: THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO "U.S. PERSONS" (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE GLOBALSTAR PARTIES THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHEN THIS SECURITY NO LONGER CONSTITUTES A "RESTRICTED" SECURITY UNDER RULE 144(K) OF THE SECURITIES ACT EXCEPT (A) TO ANY OF THE GLOBALSTAR PARTIES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSES (II)(D) AND (E) IS SUBJECT TO THE RIGHT OF THE ISSUERS OF THIS SECURITY AND THE TRUSTEE OR TRANSFER AGENT FOR SUCH SECURITIES TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR 109 9 OTHER INFORMATION ACCEPTABLE TO THEM IN FORM AND SUBSTANCE. [THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.] BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S. (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act: (A) in the case of any Transfer Restricted Security that is a Definitive Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a certificated Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) in the case of any Transfer Restricted Security that is represented by a Global Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a certificated Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Security). (iii) After a transfer of any Initial Securities or Private Exchange Securities during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, as the case may be, all requirements pertaining to legends on such Initial Security or such Private Exchange Security will cease to apply, the requirements requiring any such Initial Security or such Private Exchange Security issued to certain Holders to be issued in global form will cease to apply, and a certificated Initial Security or Private Exchange 110 10 Security without legends will be available to the transferee of the Holder of such Initial Securities or Private Exchange Securities upon exchange of such transferring Holder's certificated Initial Security or Private Exchange Security or directions to transfer such Holder's interest in the Global Security, as applicable. (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will cease to apply and certificated Initial Securities with the Restricted Securities Legend set forth in Exhibit 1 hereto will be available to Holders of such Initial Securities that do not exchange their Initial Securities, and Exchange Securities in certificated or global form will be available to Holders that exchange such Initial Securities in such Registered Exchange Offer. (v) Upon the consummation of a Private Exchange with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Private Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will still apply, and Private Exchange Securities in global form with the Restricted Securities Legend set forth in Exhibit 1 hereto will be available to Holders that exchange such Initial Securities in such Private Exchange. (e) Cancellation or Adjustment of Global Security. At such time as all beneficial interests in a Global Security have either been exchanged for certificated or Definitive Securities, redeemed, repurchased or canceled, such Global Security shall be returned to the Depositary for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for certificated or Definitive Securities, redeemed, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction. 111 11 (f) Obligations with Respect to Transfers and Exchanges of Securities. (i) To permit registrations of transfers and exchanges, the Issuers shall execute and the Trustee shall authenticate certificated Securities, Definitive Securities and Global Securities at the Registrar's or co-registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Issuers may require payment of a sum sufficient to cover any transfer tax, assessments or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.06, 4.10 and 9.05 of the Indenture). (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of (a) any certificated or Definitive Security selected for redemption in whole or in part pursuant to Article 3 of this Indenture, except the unredeemed portion of any certificated or Definitive Security being redeemed in part, or (b) any Security for a period beginning 15 Business Days before the mailing of a notice of an offer to repurchase or redeem Securities or 15 Business Days before an interest payment date. (iv) Prior to the due presentation for registration of transfer of any Security, the Issuers, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Issuers, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. 112 12 (g) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of or a participant in the Depositary or other Person with respect to the accuracy of the records of the Depositary or its nominee or of any participant or member thereof with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice (including any notice of redemption) or the payment of any amount under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depositary or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 2.4 Certificated Securities. (a) A Global Security deposited with the Depositary or with the Trustee as custodian for the Depositary pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of certificated Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if such transfer complies with Section 2.3 and (i) the Depositary notifies the Issuers that it is unwilling or unable to 113 13 continue as Depositary for such Global Security or if at any time such Depositary ceases to be a "clearing agency" registered under the Exchange Act and a successor depositary is not appointed by the Issuers within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing or (iii) the Issuers, in their sole discretion, notify the Trustee in writing that they elect to cause the issuance of certificated Securities under this Indenture. (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section shall be surrendered by the Depositary to the Trustee located in the Borough of Manhattan, The City of New York, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of certificated Initial Securities of authorized denominations. Any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 principal amount and any integral multiple thereof and registered in such names as the Depositary shall direct. Any certificated Initial Security delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.3(d), bear the Restricted Securities Legend set forth in Exhibit 1 hereto. (c) Subject to the provisions of Section 2.4(b), the registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. (d) In the event of the occurrence of either of the events specified in Section 2.4(a), the Issuers will promptly make available to the Trustee a reasonable supply of certificated Securities in definitive, fully registered form without interest coupons. 114 EXHIBIT 1 to RULE 144A/REGULATION S APPENDIX [FORM OF FACE OF INITIAL SECURITY] THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF THE SECURITIES AND WARRANTS (EACH, A "WARRANT") ENTITLING THE HOLDERS THEREOF TO PURCHASE AN AGGREGATE OF SHARES OF COMMON STOCK, PAR VALUE OF $1.00 PER SHARE, OF GLOBALSTAR TELECOMMUNICATIONS LIMITED, AT A PRICE OF $69.575 PER SHARE. THE SECURITIES AND WARRANTS WILL NOT TRADE SEPARATELY UNTIL THE EARLIER OF (I) THE COMMENCEMENT OF AN EXCHANGE OFFER OR THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT FOR THE SECURITIES OR (II) SUCH DATE AFTER AUGUST 15, 1997, AS LEHMAN BROTHERS INC. MAY DETERMINE. [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE ISSUERS OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Securities Legend] THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO "U.S. PERSONS" (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER 115 2 OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE GLOBALSTAR PARTIES THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHEN THIS SECURITY NO LONGER CONSTITUTES A "RESTRICTED" SECURITY UNDER RULE 144(K) OF THE SECURITIES ACT EXCEPT (A) TO ANY OF THE GLOBALSTAR PARTIES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSES (II)(D) AND (E) IS SUBJECT TO THE RIGHT OF THE ISSUERS OF THIS SECURITY AND THE TRUSTEE OR TRANSFER AGENT FOR SUCH SECURITIES TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN FORM AND SUBSTANCE. [THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.] BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S. 116 3 No. $ CUSIP: 11 3/8% Senior Notes due 2004 Globalstar, L.P., a Delaware limited partnership and Globalstar Capital Corporation, a Delaware corporation, promise to pay to , or registered assigns, the principal sum of Dollars on February 15, 2004. Interest Payment Dates: February 15 and August 15. Record Dates: February 1 and August 1. Additional provisions of this Security are set forth on the other side of this Security. GLOBALSTAR, L.P., by LORAL/QUALCOMM SATELLITE SERVICES, L.P., its managing general partner, by LORAL/QUALCOMM PARTNERSHIP, L.P. its general partner, by LORAL GENERAL PARTNER, INC. its general partner, by ____________________________ President ____________________________ Secretary GLOBALSTAR CAPITAL CORPORATION by ____________________________ President ____________________________ Secretary 117 4 Dated: February 19, 1997 TRUSTEE'S CERTIFICATE OF AUTHENTICATION THE BANK OF NEW YORK, as Trustee, certifies that this is one of the Securities referred to in the Indenture. by ___________________________________ Authorized Signatory 118 5 [FORM OF REVERSE SIDE OF INITIAL SECURITY] 11 3/8% Senior Note due 2004 1. Interest and Liquidated Damages Globalstar, L.P., a Delaware limited partnership and Globalstar Capital Corporation, a Delaware corporation (such limited partnership and such corporation, and their successors and assigns under the Indenture hereinafter referred to, being herein called the "Issuers"), promise to pay interest on the principal amount of this Security at the rate per annum shown above; provided, however, that if a Registration Default (as defined in the Registration Rights Agreement) occurs, Liquidated Damages (as defined in the Registration Rights Agreement) shall accrue on this Security in an amount equal to $.05 per week per $1,000 principal amount of Securities held by each Holder (over and above the interest set forth in the title of this Security) from and including the date on which any such Registration Default shall occur until the earlier of (i) the date on which all such Registration Defaults have been cured or (ii) the date which is 90 days after the date such Registration Default occurred. The Liquidated Damages will increase by an additional $.05 per week per $1,000 principal amount of the Securities held by each Holder during each subsequent 90-day period until the date on which all such Registration Defaults have been cured; provided, however, that the aggregate amount of Liquidated Damages shall not exceed a maximum of $.50 per week per $1,000 principal amount of the Securities held by each Holder. The Issuers will pay interest hereon, if any, semiannually on February 15 and August 15 of each year; provided, however, that except for any Liquidated Damages payable pursuant to the two immediately preceding sentences, the first such interest payment date shall be August 15, 1997. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid or provided for, (i) in the case of Liquidated Damages as described above, and (ii) in the case of interest, from February 19, 1997. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Issuers shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest 119 6 on overdue installments of cash interest at such higher rate to the extent lawful. 2. Method of Payment The Issuers will pay interest and Liquidated Damages (if any) on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the February 1 or August 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Issuers will pay principal and interest and Liquidated Damages (if any) in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of Securities (including principal, premium, interest and Liquidated Damages (if any)) will be made by wire transfer of immediately available funds to the accounts specified by the holders thereof or, if no U.S. dollar account maintained by the payee with a bank in the United States is designated by any holder to the Trustee or the Paying Agent at least 30 days prior to the relevant due date for payment (or such other date as the Trustee may accept in its discretion), by mailing a check to the registered address of such holder. 3. Paying Agent and Registrar Initially, The Bank of New York, a New York banking corporation ("Trustee"), will act as Paying Agent and Registrar. The Issuers may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Issuers or any of their domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Issuers issued the Securities under an Indenture dated as of February 15, 1997 ("Indenture"), between the Issuers and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such 120 7 terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are unsecured senior obligations of the Issuers limited to $500,000,000 aggregate principal amount (subject to Section 2.07 of the Indenture). The Indenture contains certain covenants which, among other things, limit (a) the incurrence of additional debt by the Issuers and certain of its subsidiaries and the issuance of capital stock by such subsidiaries, (b) the payment of dividends on capital stock of certain subsidiaries and the purchase, redemption or retirement of capital stock or subordinated indebtedness, (c) certain investments, (d) certain transactions with affiliates, (e) the incurrence of liens, (f) sales of assets, including capital stock of subsidiaries, (g) certain consolidations and mergers, (h) the Issuers' and certain of their subsidiaries' lines of business and (i) the Issuers' ability to operate without certain insurance coverage. The Indenture also will prohibit certain restrictions on distributions from subsidiaries. In addition, the Issuers may be obligated, under certain circumstances, to offer to repurchase Securities at a purchase price equal to 101% of the principal amount of the Securities plus accrued and unpaid interest and Liquidated Damages (if any) to the date of repurchase. 5. Optional Redemption The Securities may not be redeemed prior to February 15, 2002. On and after that date, the Issuers may redeem the Securities in whole or in part, at any time or from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest and Liquidated Damages (if any) to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest and Liquidated Damages (if any) due on the related interest payment date): if redeemed during the 12-month period commencing February 15 of the years set forth below: Period Percentage ------ ---------- 2002....................................... 105.688% 2003....................................... 102.844% 121 8 6. Notice of Redemption Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest and Liquidated Damages (if any) on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions Upon a Change of Control, any Holder of Securities will have the right to cause the Issuers to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities plus accrued and unpaid interest and Liquidated Damages (if any) to be repurchased (subject to the right of holders of record on the relevant record date to receive interest and Liquidated Damages (if any) due on the relevant interest payment date) as provided in, and subject to the terms of, the Indenture. 8. Guarantees This Security may be jointly and severally guaranteed by certain Subsidiaries of the Issuers to the extent provided in the Indenture. The Issuers have covenanted pursuant to the Indenture to cause any Subsidiary created or acquired after the date of the Indenture (unless such Subsidiary is a Transitory Equipment Subsidiary or is an Unrestricted Subsidiary), to execute and deliver to the Trustee a Subsidiary Guaranty pursuant to which such Subsidiary will guaranty this Security on the same terms and conditions as those set forth in the Indenture. 9. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorse- 122 9 ments or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Issuers are not required to transfer or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed. 10. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Issuers and not to the Trustee for payment. 12. Discharge and Defeasance Subject to certain conditions, the Issuers at any time may terminate some or all of their obligations under the Securities and the Indenture if the Issuers deposit with the Trustee money or U.S. Government Obligations for the payment of principal and interest and Liquidated Damages (if any) on the Securities to redemption or maturity, as the case may be. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Issuers and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, to provide for the assumption by a successor corporation of the obligations of Globalstar under the Indenture, to provide for uncertificated Securities in addition to or in place of 123 10 certificated Securities, to add guarantees with respect to the Securities, to release such guarantees, to secure the Securities, to add to the covenants of the Issuers for the benefit of the Holders of the Securities or to surrender any right or power conferred upon the Issuers, to make any change that does not adversely affect the rights of any Holder of the Securities or to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act. 14. Defaults and Remedies Under the Indenture, Events of Default include (i) default for 30 days in payment of interest or Liquidated Damages (if any) on the Securities; (ii) default in payment of principal on the Securities, upon redemption pursuant to paragraph 5 of the Securities, upon required repurchase upon declaration or otherwise, or failure by the Issuers to redeem or purchase Securities when required; (iii) failure by the Issuers to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Debt of the Issuers if the amount accelerated (or so unpaid) exceeds $10 million; (v) certain events of bankruptcy or insolvency with respect to the Issuers and the Significant Subsidiaries; (vi) certain judgments or decrees for the payment of money in excess of $10 million, subject to lapse of time and notice; and (vii) certain events with respect to the guarantees of the Issuers' obligations under the Securities by certain of their subsidiaries. However, a default under clauses (iii) and (vi) will not constitute an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the Securities outstanding notify the Issuers of the default and the Issuers do not cure such default within the time specified after receipt of such notice. If an Event of Default occurs and is continuing, the Trustees or the Holders of at least 25% in principal amount of the Securities outstanding may declare the principal of and all accrued but unpaid interest and Liquidated Damages (if any) on all the Securities to be due and payable immediately. Certain events of bankruptcy, insolvency or reorganization are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The 124 11 Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest or Liquidated Damages (if any)) if it determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Issuers Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Issuers or their Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others Any past, present or future director, officer, partner (including general partners), employee, incorporator or stockholder, as such, of the Issuers or the Trustee shall not have any liability for any obligations of the Issuers under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 18. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 125 12 19. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuers have caused CUSIP numbers to be printed on the Securities and have directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 20. Holders' Compliance with Registration Rights Agreement Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Issuers to the extent provided therein. 21. Governing Law THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. THE ISSUERS WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO: GLOBALSTAR, L.P. 3200 ZANKER ROAD BOX 640670 SAN JOSE, CA 95164-0670 ATTENTION OF: STEPHEN C. WRIGHT ------------------------------------------------------------ ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to 126 13 (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of Globalstar. The agent may substitute another to act for him. ____________________________________________________________ Date: ________________ Your Signature: _____________________ ____________________________________________________________ Sign exactly as your name appears on the other side of this Security. 127 14 In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by any of the Globalstar Parties or any Affiliate of any of the Globalstar Parties, the undersigned confirms that such Securities are being transferred in accordance with its terms: CHECK ONE BOX BELOW (1) [ ] to any of the Globalstar Parties; or (2) [ ] pursuant to an effective registration statement under the Securities Act of 1933; or (3) [ ] inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (4) [ ] outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (5) [ ] pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4) or (5) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Issuers have reasonably requested to confirm that such transfer is being made 128 15 pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. ___________________________ Signature Signature Guarantee: ______________________ ___________________________ [Signature must be guaranteed Signature by an eligible Guarantor Institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15] ________________________________________________________________________________ TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuers as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ________________ ______________________________ NOTICE: To be executed by an executive officer 129 16 130 17 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made: Date of Amount of decrease Amount of increase Principal amount Signature of Exchange in Principal in Principal of this Global authorized - -------- Amount of this Amount of this Security following signatory of Global Security Global Security such decrease or Trustee or --------------- --------------- ---------------- Securities increase) ---------- --------- Custodian ---------
131 17 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by any of the Issuers pursuant to Section 4.07 or 4.10 of the Indenture, check the box: [ ] If you want to elect to have only part of this Security purchased by any of the pursuant to Section 4.07 or 4.10 of the Indenture, state the amount in principal amount: $ Date: _______________ Your Signature: ______________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: _______________________________________ [Signature must be guaranteed by an eligible Guarantor Institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15] EX-10.1 3 LIMITED PARTNERSHIP AGREEMENT 1 Exhibit 10.1 CONFORMED COPY AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF GLOBALSTAR, L.P. Dated as of March 6, 1996 2 TABLE OF CONTENTS
Page ---- ARTICLE I. ORGANIZATIONAL MATTERS SECTION 1.1. Continuation....................................................2 SECTION 1.2. Name ...........................................................2 SECTION 1.3. Registered Office; Principal Office.............................2 SECTION 1.4. Power of Attorney...............................................2 SECTION 1.5. Term ...........................................................4 SECTION 1.6. Title to Partnership Property...................................4 SECTION 1.7. Effectiveness of Partnership Agreement..........................4 ARTICLE II. DEFINITIONS SECTION 2.1. Definitions.....................................................4 ARTICLE III. PURPOSE SECTION 3.1. Purpose........................................................19 ARTICLE IV. CAPITAL CONTRIBUTIONS SECTION 4.1. General Partners...............................................19 SECTION 4.2. Limited Partners...............................................20 SECTION 4.3. Additional Contribution........................................20 SECTION 4.4. Additional Limited Partners....................................21 SECTION 4.5. Capital Accounts...............................................21 SECTION 4.6. Interest.......................................................22 SECTION 4.7. No Withdrawal..................................................22 SECTION 4.8. Loans..........................................................23 SECTION 4.9. Preemptive Rights..............................................23 SECTION 4.10. Sale of Partnership Interests and Partnership Securities................................................24 SECTION 4.11. Business Plans................................................25 SECTION 4.12. Limitation on a Limited Partner's Ownership..................26 ARTICLE V. ALLOCATIONS, DISTRIBUTIONS AND SERVICE PROVIDER AGREEMENTS SECTION 5.1. Allocations Generally..........................................26 SECTION 5.2. Regulatory Allocations.........................................29 SECTION 5.3. Other Allocations When Book Value Differs from Tax Basis.......31 SECTION 5.4. Special Allocation of Foreign Taxes............................31 SECTION 5.5. Distributions..................................................31 SECTION 5.6. Service Provider Agreements....................................34 SECTION 5.7. Terms of PPIs..................................................34
3 ARTICLE VI. MANAGEMENT AND OPERATION OF BUSINESS SECTION 6.1. Management.....................................................34 SECTION 6.2. Limitations on Authority of Committee and the General Partners..................................................38 SECTION 6.3. Change of Control and Reduction in Interest....................42 SECTION 6.4. Certificate of Limited Partnership.............................43 SECTION 6.5. Reliance by Third Parties......................................43 SECTION 6.6. Compensation, Expenses and Reimbursement of General Partners..................................................44 SECTION 6.7. Outside Activities.............................................45 SECTION 6.8. Partnership Funds..............................................46 SECTION 6.9. Loans from the General Partners................................46 SECTION 6.10. Indemnification of Partners...................................46 SECTION 6.11. Liability of General Partners.................................48 SECTION 6.12. Other Matters Concerning the General Partners.................49 SECTION 6.13. Conversion to Corporate Form..................................50 SECTION 6.14. FCC Compliance................................................51 ARTICLE VII. RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS SECTION 7.1. Limitation of Liability........................................51 SECTION 7.2. Management of Business.........................................51 ARTICLE VIII. BOOKS, RECORDS, ACCOUNTING AND REPORTS SECTION 8.1. Records and Accounting.........................................51 SECTION 8.2. Fiscal Year....................................................52 SECTION 8.3. Reports and Annual Meeting.....................................52 SECTION 8.4. Disclosure to Limited Partners.................................53 SECTION 8.5. Determination of Book Value of Partnership Assets..............53 ARTICLE IX. TAX MATTERS SECTION 9.1. Preparation of Tax Returns.....................................55 SECTION 9.2. Tax Elections..................................................55 SECTION 9.3. Tax Controversies..............................................55 SECTION 9.4. Taxation as a Partnership......................................55 ARTICLE X. TRANSFER OF INTERESTS SECTION 10.1. Transfer......................................................56 SECTION 10.2. Transfer of Interests of General Partners.....................57 SECTION 10.3. Transfer of Interests of Limited Partners.....................58 SECTION 10.4. Certain Transfers.............................................60 ARTICLE XI. ADMISSION OF SUBSTITUTE PARTNERS SECTION 11.1. Admission of Successor Limited Partner........................61 SECTION 11.2. Admission of Successor General Partner........................62 SECTION 11.3. Amendment of Agreement and of Certificate of Limited Partnership...............................................63 (ii) 4 ARTICLE XII. WITHDRAWAL OR REMOVAL SECTION 12.1. Withdrawal or Removal of the General Partners.................63 SECTION 12.2. Right of the Managing General Partner to Become a Limited Partner...........................................64 SECTION 12.3. Withdrawal of Limited Partner.................................65 ARTICLE XIII. DISSOLUTION AND LIQUIDATION SECTION 13.1. Dissolution...................................................65 SECTION 13.2. Continuation of the Business of the Partnership after Dissolution...............................................66 SECTION 13.3. Winding Up and Liquidation....................................66 SECTION 13.4. Cancellation of Certificate of Limited Partnership............68 SECTION 13.5. Return of Capital.............................................68 SECTION 13.6. Waiver of Partition...........................................69 SECTION 13.7. Deficit Upon Liquidation......................................69 ARTICLE XIV. AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE SECTION 14.1. Amendments to be Adopted Without Consent of the Partners..................................................69 SECTION 14.2. Amendment Procedures..........................................70 ARTICLE XV. GENERAL PROVISIONS SECTION 15.1. Addresses and Notices.........................................70 SECTION 15.2. Titles and Captions...........................................70 SECTION 15.3. Pronouns and Plurals..........................................70 SECTION 15.4. Further Action................................................70 SECTION 15.5. Binding Effect................................................71 SECTION 15.6. Integration...................................................71 SECTION 15.7. Creditors.....................................................71 SECTION 15.8. Waiver........................................................71 SECTION 15.9. Counterparts..................................................71 SECTION 15.10. Dispute Resolution...........................................71 SECTION 15.11. Applicable Law..............................................73 SECTION 15.12. Confidentiality..............................................73 SECTION 15.13. Invalidity of Provisions.....................................75 SCHEDULE A -- Schedule of Partners SCHEDULE B -- Related Party Transactions SCHEDULE C -- Provisions Relating to Preferred Partnership Interests (iii) 5 AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF GLOBALSTAR, L.P. This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is entered into and shall be effective as of the 6th day of March, 1996, by and among Loral/QUALCOMM Satellite Services, L.P., a Delaware limited partnership ("LQSS" or the "Managing General Partner"), Globalstar Telecommunications Limited, a company organized under the laws of Bermuda ("GTL", together with LQSS, the "General Partners"), and all of the limited partners set forth on the signature page hereto (collectively referred to herein as the "Limited Partners"), pursuant to the provisions of the Delaware Revised Uniform Limited Partnership Act (the "Delaware Act"), on the following terms and conditions: WHEREAS, LQSS formed Globalstar, L.P. (the "Partnership"), a Delaware limited partnership, pursuant to that certain Certificate of Limited Partnership of Globalstar, L.P., filed November 19, 1993, with the Secretary of State of the State of Delaware; WHEREAS, the Limited Partners (other than Finmeccanica) or their predecessors were admitted into the Partnership on March 23, 1994, pursuant to that certain Amended and Restated Agreement of Limited Partnership of Globalstar, L.P., dated as of March 23, 1994, by and among LQSS and the Limited Partners (the "Original Partnership Agreement"); WHEREAS, GTL had filed a registration statement on Form S-1, No. 33-86808, pursuant to which it made offerings (the "GTL Offerings") of shares of its common stock; WHEREAS, in contemplation of the GTL Offerings, the Partnership had pursuant to Section 4.10 of the Original Partnership Agreement, effected a recapitalization in November 1994 to provide for a 6-for-1 split of its Partnership Interests (as defined below); WHEREAS, Finmeccanica S.p.A. ("Finmeccanica") was admitted into the Partnership as a Limited Partner and GTL was admitted into the Partnership as a General Partner on December 31, 1994 and the Original Partnership Agreement was amended on December 31, 1994 to provide for such admission, the contribution of the proceeds from the GTL Offerings to the Partnership and the creation of a committee (the "Committee") comprised of representatives of LQSS and GTL to manage the Partnership; WHEREAS, GTL has made an offering (the "CPEO Offering") of 6-1/2% Convertible Preferred Equivalent Obligations due 2006 (the "CPEOs"); 6 WHEREAS, the Partnership requires additional capital to accomplish its purposes; and WHEREAS, it is in the best interest of the Partnership to acquire such additional capital by contribution from GTL and to issue to GTL preferred partnership interests; NOW, THEREFORE, the Partners, in consideration of the premises and their mutual agreements as hereinafter set forth, do hereby agree to amend and restate the Prior Partnership Agreement as follows: ARTICLE I. ORGANIZATIONAL MATTERS SECTION 1.1. Continuation. Subject to the provisions of this Agreement, the Partnership hereby continues as a limited partnership pursuant to the provisions of the Delaware Act. The rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by this Agreement and the Delaware Act. SECTION 1.2. Name. The name of the Partnership shall be, and the business of the Partnership shall be conducted under the name of, "Globalstar, L.P." The Partnership's business may be conducted under any other name or names deemed advisable by the Committee, including the name of a General Partner or any Affiliate (as defined below) of a General Partner. The Committee, upon the Consent of the Partners (as defined below), may change the name of the Partnership at any time and from time to time. Notice will be given to the Limited Partners within ten (10) days after any change in the name of the Partnership. SECTION 1.3. Registered Office; Principal Office. The registered office of the Partnership in the State of Delaware shall be located at c/o Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801, and the registered agent for service of process on the Partnership at such registered office shall be Corporation Trust Company. The principal office of the Partnership shall be 3200 Zanker Road, San Jose, CA 95164, or such other place as the Partnership may from time to time designate to the Partners. Notice will be given to the Limited Partners within ten (10) days after any change in the principal office of the Partnership. The Partnership may maintain offices at such other place as it deems advisable unless such offices create undue adverse tax consequences for the Partners. SECTION 1.4. Power of Attorney. (a) Each Limited Partner hereby irrevocably appoints and empowers each General Partner and each of the General Partner's authorized officers and attorneys-in-fact with full power of substitution as its true and lawful agent and attorney-in-fact (the "Attorney"), with full -2- 7 power and authority in its name, place and stead, for so long as such Attorney is a General Partner or an authorized officer or attorney-in-fact of a General Partner, to: (i) make, execute, acknowledge, publish and file in the appropriate public offices (A) any duly approved amendments to this Agreement or to the Certificate of Limited Partnership pursuant to the Delaware Act and to the laws of any state in which such documents are required to be filed; (B) any certificates, instruments or documents as may be required by, or may be appropriate under, the laws of any state or other jurisdiction in which the Partnership is doing or intends to do business; (C) any other instrument which may be required to be filed by the Partnership under the laws of any state or other jurisdiction or by any governmental agency, or which the Committee deems advisable to file; (D) any documents which may be required to effect the continuation of the Partnership, the admission, withdrawal or substitution of any Partner pursuant to Article XI or Article XII hereof, the dissolution and termination of the Partnership pursuant to the terms of this Agreement, or the surrender of any rights or the assumption of any additional responsibilities by the General Partners or the Committee; and (E) any document which may be required to effect an amendment to this Agreement to correct any mistake, omission or inconsistency, or to cure any ambiguity herein, to the extent such amendment is permitted by Section 14.1 hereof; and (ii) sign, execute, swear to and acknowledge all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement and/or appropriate or necessary to effectuate the terms or intent of this Agreement; provided, however, that when the consent or approval of the Partners is required under the terms of this Agreement, an Attorney may exercise the power of attorney made in this subsection (ii) only after the necessary consent or approval has been received. (b) To the maximum extent permitted by applicable law, the foregoing grant of authority (i) is a special power of attorney, coupled with an interest, and it shall survive the death, incompetency, disability, liquidation, dissolution, bankruptcy or termination of any Partner and shall extend to such Partner's heirs, successors, assigns and personal representatives; (ii) may be exercised by an Attorney for each and every Limited Partner acting as attorney-in-fact for each and every Limited Partner; and (iii) shall survive the assignment by any Limited Partner of all or any portion of its Partnership Interest and shall be fully binding upon such assignee but not on the assignor. Each Limited Partner -3- 8 hereby agrees to be bound by any representations made by an Attorney acting in good faith pursuant to such power of attorney in furtherance of the Partnership's business. Each Limited Partner shall execute and deliver to either General Partner, within fifteen (15) days after receipt of a request therefor, such further designations, powers of attorney and other instruments as the Committee deems necessary to effectuate this Agreement and the purposes of the Partnership. SECTION 1.5. Term. The Partnership commenced upon the completion of filing for record of the Certificate of Limited Partnership for the Partnership in accordance with the Delaware Act and shall continue in existence until the earlier termination of the Partnership in accordance with the provisions of Article XIII hereof. SECTION 1.6. Title to Partnership Property. All property owned by the Partnership, whether real or personal, tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually, shall have any ownership of such property. The Partnership shall hold all of its assets in its own name; provided, however, that it may hold marketable securities in street name. SECTION 1.7. Effectiveness of Partnership Agreement. This Agreement shall become effective as of the date hereof. ARTICLE II. DEFINITIONS SECTION 2.1. Definitions. Any capitalized terms used herein and not otherwise defined shall have the meaning ascribed to such term in this Article II. For purposes of this Agreement, the following terms shall have the following meanings: "Accounting Period" means a period beginning on the first day after the end of the prior Accounting Period and ending on the earlier of (i) the end of the Partnership's fiscal year, (ii) the end of the Partnership's tax year, (iii) the day prior to the day on which there is a material adjustment to the Book Values of the Partnership's assets under Section 8.5(c), or (iv) such other date as determined by the Committee. "Additional Closing" means any closing, following the Initial Closing, at which Additional Partnership Interests are issued. "Additional Limited Partner" shall mean the Limited Partners admitted to the Partnership pursuant to Section 4.4. "Additional Partnership Interests" means any Partnership Interests issued by the Partnership after the GTL Effective Date. -4- 9 "Adjusted Capital Account" means, for any Partner, its Capital Account balance (after deducting the amount of expected distributions of Distributable Cash Flow and Distributable Capital Proceeds on hand on the date as of which the computation is made) plus (a) its share of Partnership Minimum Gain, (b) its share of Partner Minimum Gain and (c) the amount, if any, by which a deficit Capital Account balance exceeds the sum of (a) and (b) and which, due to an unpaid Capital Commitment, a Partner is obligated to restore (or is treated as obligated to restore under Treasury Regulation Section 1.704-1(b)(2)(ii)(c)). "Adjusted Income" means the excess, if any, of the sum of (a) Operating Income plus (b) Capital Transaction Gain plus (c) the deductions for depreciation and amortization taken into account in computing Operating Loss over the sum of (d) Operating Loss and (e) Capital Transaction Loss. All the elements of Adjusted Income are reduced by the amounts thereof allocated under Sections 5.2, 5.4 and Section 8.5(c). "Affiliate" means any Person that directly or indirectly controls, is controlled by, or is under common control with the Person in question, provided that (i) in the case of Hyundai/DACOM, such term shall refer to any of Hyundai Electronics Industries Co., Ltd. ("Hyundai"), DACOM Corporation ("Dacom") or an Affiliate of Hyundai or Dacom, (ii) in the case of TE.SA.M. ("TESAM"), such term shall refer to any of Alcatel, NV, Alcatel France, France Telecom or any Persons controlled, directly or indirectly, by any of them, (iii) in the case of Finmeccanica, the term "Affiliate" shall only include any other Person controlled by Finmeccanica and (iv) in the case of Loral SpaceCom or LQSS, GTL shall not be deemed to be an Affiliate of Loral SpaceCom or LQSS with respect to any matter brought before the Partners for a vote in accordance with the terms of this Agreement when the vote of GTL with respect to the transaction in question is determined by directors who are not employed by, or otherwise affiliated with Loral SpaceCom. Upon a GTL Change of Control or Reduction in Interest as described in Section 6.3, the exception with respect to GTL set forth in the preceding sentence shall not apply in determining whether GTL is an Affiliate of Loral SpaceCom or LQSS. As used in this definition of "Affiliate," the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. The terms "controlled" and "common control" shall have correlative meanings. "Affiliate Successor" has the meaning specified in Section 10.2 hereto. "Agreement" means this Amended and Restated Agreement of Limited Partnership, as it may be amended or supplemented from time to time. "Annual Budget" has the meaning specified in Section 4.11 hereto. -5- 10 "Authorized Partnership Interests" means the sum of (i) 55,448,837 Partnership Interests, (ii) 4,769,231 Partnership Interests and (iii) the number of Ordinary Partnership Interests issuable upon exercise of the warrants issuable to certain Partners or Affiliates thereof and to GTL in connection with the guarantee of the Partnership's obligations under the Globalstar Credit Agreement, provided that any greater number of Authorized Partnership Interests may be authorized from time to time with the Consent of the Partners. "Average Market Value" means the arithmetic average of the Current Market Value of the GTL Common Stock for the ten Trading Days ending on the second Business Day prior to the applicable date of payment. "Baseline Business Plan" means (i) as to the first generation satellite constellation, the Original Business Plan, insofar as it pertains to that generation, (ii) as to the second generation satellite constellation, the Original Business Plan, but only if the actual total revenues and net income of the Partnership for the 12-month period prior to the month in which a proposed Baseline Business Plan would otherwise be required to be submitted to the Partners pursuant to Section 4.11(b) equal or exceed the projected amounts thereof for such period set forth in the Original Business Plan or, if such 12-month period is not set forth separately therein, the projected amount for such 12-month period implicit in the annual projected amounts set forth therein, (iii) as to the second generation satellite constellation if clause (ii) does not apply, and for all subsequent generations of satellite constellations, a new Baseline Business Plan adopted in accordance with Section 4.11(b) for such generation and all previous generations still in operation, or (iv) as to any generation satellite constellation, a business plan adopted in accordance with Section 4.11(b) expressly intended as a superseding replacement for any of the foregoing. "Book Value" has the meaning determined under Section 8.5. "Business Day" means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States shall not be regarded as a Business Day. "Business Plan" means a business plan prepared in accordance with Section 4.11, with only such amendments and modifications thereto adopted from time to time by the Committee as are not inconsistent with the provisions of Sections 4.11, 5.5(c) and 6.2. "CPE Representative" means the representative on the Committee designated by the holders of CPEOs following a GTL Deferral Trigger Event. "CPEO Effective Date" means the date on which the CPEOs are issued and GTL contributes the net proceeds from the sale of such CPEOs to the Partnership. -6- 11 "CSO" means Council of Service Operators as defined in the Service Provider Agreements. "Capital Account" means each capital account maintained pursuant to Section 4.5 hereof. "Capital Commitment" means the aggregate Capital Contribution which a Partner has made and is committed to make pursuant to a Subscription Agreement for the acquisition of Partnership Interests from the Partnership. "Capital Contribution" means any cash or property which a Partner contributes to the Partnership pursuant to Sections 4.1, 4.2, 4.4 or 4.10. "Capital Transaction" means a sale or disposition of all, or a substantial part, of the Partnership's property in one transaction or in a series of transactions pursuant to the same plan. The term includes a borrowing effected by the Partnership to obtain proceeds for distribution to Partners and a transfer of Partnership assets to a corporation pursuant to Section 6.13, but does not include the rights granted to a Service Provider under a Service Provider Agreement or other dispositions in the ordinary course of a continuing business. "Capital Transaction Gain" means the gross income and gain realized by the Partnership for federal income tax purposes on a Capital Transaction, plus (a) income and gain of the Partnership exempt from tax, described in Code Section 705(a)(1)(B) and realized by the Partnership on a Capital Transaction, (b) on a distribution of a substantial part of the Partnership's property (other than cash and cash equivalents) to Partners, the excess, if any, of the fair market value of the distributed property over its Book Value and (c) the amount of any increase in the Book Value of Partnership property pursuant to Section 8.5(c). The term does not include COD Income or Operating Income. In Computing Capital Transaction Gain, items of income and gain relating to Partnership assets shall be computed based upon the Book Values of the Partnership's assets rather than upon the assets' adjusted basis for federal income tax purposes. "Capital Transaction Loss" means the deductions and loss realized by the Partnership for federal income tax purposes on a Capital Transaction, plus (a) deduction and loss of the Partnership described in Code Section 705(a)(2)(B) and realized by the Partnership on a Capital Transaction, (b) on a distribution of a substantial part of the Partnership's property (other than cash and cash equivalents) to Partners, the excess, if any, of the Book Value of the distributed property over its fair market value and (c) the amount of any decrease in the Book Value of Partnership property pursuant to Section 8.5(c). The term does not include Operating Loss. In Computing Capital Transaction Loss, items of deduction and loss relating to Partnership assets shall be computed -7- 12 based upon the Book Values of the Partnership's assets rather than upon the assets' adjusted basis for federal income tax purposes. "Certificate of Limited Partnership" means the Certificate of Limited Partnership of Globalstar, L.P. filed with the Secretary of State of the State of Delaware on November 19, 1993, as amended on December 31, 1994 pursuant to the Delaware Act, as it may be further amended from time to time. "COD Income" means income realized by the Partnership on the cancellation of recourse indebtedness under federal income tax principles whether or not the income is excluded from taxable income under Section 108 of the Code or under common law principles of federal income taxation. For this purpose, indebtedness is recourse if it is treated as recourse for purposes of the Treasury Regulations under Code Section 704(b). "Code" means the Internal Revenue Code of 1986, as amended. "Committee" has the meaning specified in the recitals. "Communications Act" means the Communications Act of 1934, as amended. "Confidential Information" has the meaning specified in Section 15.12. "Consent of Disinterested Partners" means the votes at a Representatives Meeting held in accordance with Section 6.2(g) representing a majority of the Partnership Interests present and qualified to vote at a meeting or represented by a qualifying proxy or written consent. Partnership Interests held on behalf of any Delinquent Partner or any Partner or Partners having a direct or indirect financial interest in the transaction in question shall not be qualified to vote. For these purposes, it is to be specifically noted that without limiting the foregoing, that (i) the Partnership Interests held by LQSS will be deemed to be owned and voted by the Upper Tier Partner having the right to direct the vote thereof pursuant to the LQSS Partnership Agreement, (ii) in respect of contracts to supply goods or services to the Partnership (including employment agreements) or other such related matters, Loral SpaceCom and its Affiliates, SS/L and the strategic equity investors in SS/L (as hereinafter described in Section 6.2(a)) and their respective Affiliates shall be deemed to have a direct or indirect financial interest in any transaction to which any of them is a party, and (iii) Loral SpaceCom and its Affiliates, SS/L and Qualcomm Incorporated ("Qualcomm") and their respective Affiliates shall be deemed to have a direct or indirect financial interest in any transaction or event to which any of Loral SpaceCom, SS/L or Qualcomm is a party. "Consent of the Partners" means, as to any action or proposed action by the Partnership, approval of such action by a majority of votes cast at a Representatives Meeting held in accordance with -8- 13 Section 6.2(g), unless 9,000,000 (adjusted to reflect any recapitalizations of the Partnership in the nature of a subdivision or combination of Partnership Interests into a greater or lesser number thereof but not adjusted to reflect dilution caused simply by the issuance of additional Partnership Interests) or more qualifying votes are cast against such action, in which event the Consent of the Partners will be deemed denied, provided that neither any single Limited Partner, any limited partner in any Upper Tier Partnership nor GTL shall be entitled to cast more than 6,000,000 qualifying votes against any such action, regardless of the number of Partnership Interests it holds, and provided further that no more than 3,000,000 qualifying votes shall be cast by GTL in respect of partnership interests acquired using the proceeds of the GTL Offerings or pursuant to the exercise of Exchange Rights. Solely for purposes of determining the number of qualifying votes a Partner who has exercised its Exchange Right in whole or in part, may cast against an action as set forth above, a Partner shall be deemed to continue to own the number of Partnership Interests equal to the amount of GTL Common Stock acquired by such Partner pursuant to its Exchange Right and which have not theretofore been disposed of. "Consumer Price Index" has the meaning of "Index" specified in Article 5.4 of the Service Provider Agreements. "Conversion Ratio" has the meaning ascribed to such term in Section 3.1 of Schedule C to this Agreement. "Current Market Value" means the average of the high and low sales prices of the GTL Common Stock as reported on the Nasdaq National Market or any national securities exchange upon which the GTL Common Stock is then listed for the Trading Day in question. "Debt Securities" means notes, bonds, debentures, loans, capitalized lease obligations and any other debt obligation issued by the Partnership. "Delaware Act" means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time, and any successor to such Act. "Delinquent Partner" means a Partner who has failed to pay any installment of its Remaining Contribution when due, and such delinquency has not been cured. "Descriptive Memorandum" has the meaning specified in Section 3.1. "Distributable Capital Proceeds" means the amount received by the Partnership on a Capital Transaction (including amounts realized on an installment obligation received in a Capital Transaction) minus the costs of that transaction and the amount of any proceeds applied by the Partnership, in its reasonable -9- 14 discretion, towards Partnership expenditures or reserves for Partnership purposes other than distributions to Partners. "Distributable Cash Flow" means the amount by which the sum of (i) the Partnership's receipts (from all sources including borrowings and Capital Contributions, but excluding Distributable Capital Proceeds) and (ii) the amounts released from reserves by the Partnership exceeds the sum of (iii) the Partnership's cash expenditures (including debt service on Partnership borrowings) and (iv) any increase in reserves that the Partnership, in accordance with Section 5.5, determined to be necessary or appropriate for accrued or anticipated Partnership liabilities or expenditures. "Distribution Arrearages" means the amount of Scheduled Distributions that the Partnership has elected to defer that remain unpaid. "Distribution Make-Whole Payment" means the payment due to GTL with respect to the PPIs called for redemption pursuant to a Provisional Redemption, which payment shall be equal to the present value of the aggregate amount of Scheduled Distributions thereafter payable on such PPIs during the Distribution Make-Whole Period, which shall be calculated using the bond equivalent yield on U.S. Treasury Notes or Bills having a term nearest in length to that of the Distribution Make-Whole Period as of the Notice Date. "Distribution Make-Whole Period" means the period of time from the Provisional Redemption Date to the third anniversary of the date on which CPEOs are first issued by GTL. "Effective Date" means December 31, 1994. "Equity Rights" has the meaning specified in Section 6.13(a). "Exchange and Registration Rights Agreement" means the Exchange and Registration Rights Agreement among Globalstar, GTL, LQSS and the Limited Partner signatories thereto. "Exchange Right" means the right of LQSS and the Limited Partners signatories thereto to exchange Partnership Interests for shares of GTL Common Stock pursuant to the Exchange and Registration Rights Agreement. "FCC" means the U.S. Federal Communications Commission. "FCC Applications" means the applications relating to the Globalstar System dated June 3, 1991, bearing the file numbers 19 DSS P91C48 and CSS 91 014. "Fiscal Year" has the meaning specified in Section 8.2. -10- 15 "Foreign Taxing Jurisdiction" means a jurisdiction outside the United States that imposes a tax upon the Partnership or a subsidiary of the Partnership. "GAAP" has the meaning specified in Section 5.5(c). "GTL" has the meaning specified in the recitals. "GTL Change of Control" has the meaning specified in Section 6.3. "GTL Common Stock" means the common stock, par value $1.00 per share, of GTL. "GTL Conversion Price" shall mean the conversion price of the CPEOs, adjusted upon the occurrence of certain dilutive events as set forth in the Indenture. "GTL Deferral Election" means the election of the Board of Directors of GTL to defer the payment of an installment of interest due on the CPEOs on an interest payment date, or any portion due thereof. "GTL Deferral Trigger Event" means the deferral by GTL of the payment of interest due on the CPEOs in an aggregate equal to six quarterly interest payments. "GTL Effective Date" means the date on which the GTL Offerings were consummated and GTL purchased Partnership Interests in connection therewith. "GTL Independent Directors" means the directors of GTL who are not employed by, or otherwise affiliated with Loral SpaceCom, a Strategic Partner, or any of their respective Affiliates, and who are GTL's representatives on the Committee. "GTL Interest Payment Notice" means written notice delivered to the holders of the CPEOs and the Partnership notifying them (i) whether GTL has elected to defer the payment of an interest payment pursuant to a GTL Deferral Election and (ii) if it has not elected to defer such interest, whether GTL is paying the installment of interest due on the applicable interest payment date in (A) cash, (B) GTL Common Stock or (C) through any combination of the foregoing. Such Notice shall be delivered at least 12 Business Days prior to the applicable interest payment date and shall contain any information pertinent to such payment. "GTL Offerings" has the meaning specified in the recitals. "GTL Response Redemption Notice" means written notice delivered to the holders of the CPEOs and the Partnership, with a copy to the Trustee, notifying them of whether GTL is paying the redemption price of and interest (including any applicable interest make-whole payment) on such CPEOs in (i) cash, (ii) GTL -11- 16 Common Stock or (iii) through any combination of the foregoing. Such Notice shall be delivered at least 12 Business Days prior to the applicable redemption date and shall contain any information pertinent to such redemption. "General Partner" means LQSS or GTL or both, as the context may require, or any successor general partners admitted as such. "Global Service Date" has the meaning specified in the Service Provider Agreements. "Globalstar Credit Agreement" means that certain Credit Agreement dated as of December 15, 1995, among the Partnership, Chemical Bank and the banks signatories thereto. "Globalstar Interest Payment Notice" means written notice delivered to GTL, with a copy to the Trustee, by the Partnership notifying GTL of (i) whether the Partnership has elected to defer the applicable Scheduled Distribution pursuant to the provisions of this Agreement and (ii) if it has not elected to defer such Scheduled Distribution, whether it will pay such Scheduled Distribution (A) in cash, (B) by delivery of Ordinary Partnership Interests or (C) through any combination of the foregoing. Such Notice shall be delivered at least 20 Business Days prior to the applicable Scheduled Distribution Payment Date and shall contain any other information required by Section 2.3 of Schedule C to this Agreement. "Globalstar Redemption Notice" means written notice delivered to GTL by the Partnership notifying GTL of (i) the Partnership's election to redeem any Preferred Partnership Interests pursuant to the provisions of this Agreement and (ii) whether it will make such redemption (A) in cash, (B) by delivery of Ordinary Partnership Interests or (C) through any combination of the foregoing. Such Notice shall be delivered at least 20 Business Days prior to the applicable Redemption Date and shall contain the information required by Section 2.3 of Schedule C to this Agreement. "Globalstar System" has the meaning specified in Section 3.1. "Governing Documents" has the meaning specified in Section 6.13(b). "Indebtedness" means the principal amount of all secured or unsecured indebtedness for borrowed money of the Partnership, the amount of all guarantees of such indebtedness, the amount of the purchase price in any sale and leaseback transaction accounted for as a capital lease under GAAP, and any interest-bearing vendor financing treated as debt under GAAP. "Indenture" means that certain Indenture, dated as of March 6, 1996, between GTL and the Trustee. -12- 17 "Initial Closing" means the closing at which GTL was first admitted to the Partnership pursuant to Section 4.1(c) hereof. "Initial Purchasers" means the initial purchasers of the CPEOs set forth in the Purchase Agreement. "In-Service Year" means a period of twelve consecutive calendar months, beginning on the Global Service Date, or beginning on any anniversary of such date. "Joint Venture Company" has the meaning specified in the Service Provider Agreements. "Limited Partners" means all of the limited partners listed on the signature page hereto and any Additional Limited Partners admitted as such pursuant to Section 4.4 hereof, or any successor limited partners admitted as such pursuant to the terms of this Agreement. "Liquidator" has the meaning specified in Section 13.3. "Loral SpaceCom" means, if prior to April 22, 1996, Loral Corporation, a New York corporation, and if thereafter, Loral Space & Communications Ltd, a Bermuda company. "Losses" has the meaning specified in Section 6.10. "LQP" means Loral/QUALCOMM Partnership, L.P., the general partner of LQSS. "LQSS" means Loral/QUALCOMM Satellite Services, L.P. or an Affiliate thereof. "LQSS Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership of LQSS, dated March 23, 1994, as modified, supplemented or amended in accordance with the terms thereof. "Majority in Interest of the Partners" means, as to any action or proposed action by the Partnership, approval of such action by a majority of votes cast at a Representatives Meeting held in accordance with Section 6.2(g). "Managing General Partner" means LQSS or any successor to LQSS continuing the business of the Partnership as a managing general partner. "Mandatory Redemption Date" means March 1, 2006; provided, however, that, if such date shall not be a Business Day, then the Mandatory Redemption Date shall be the next Business Day. "Minimum Gain" has the meaning specified in Treasury Regulation Section 1.704-2(b)(2) for "partnership minimum gain". -13- 18 "Mutual Non-Disclosure Agreement" has the meaning specified in Section 15.6. "Nonperformance" means the substantial and continuing failure by a General Partner to perform its material obligations under the Agreement and/or such continued negligence or misconduct by the General Partner resulting in a material adverse effect upon the assets or business of the Partnership that is not otherwise cured by the General Partner and/or knowing breach of specific provisions of this Agreement and/or fraud or willful misconduct on the part of the General Partner. "Notice Date" means the date of mailing of a notice of provisional redemption of CPEOs by GTL to the holders of CPEOs. "Offerees" has the meaning specified in Section 10.3. "Offering Memorandum" means the offering memorandum, dated February 29, 1996, relating to the CPEOs. "Operating Expenses" means operating expenses of the Partnership, excluding only Project related items as detailed in the Sources and Uses of Funds Statement of the Original Business Plan and the compensation referred to in Section 6.6. "Operating Income" means the gross income and gains of the Partnership for federal income tax purposes plus, (a) income of the Partnership exempt from taxation and described in Code Section 705(a)(1)(B) and (b) the excess, if any, of the fair market value of distributed property (other than distributed property taken into account in computing Capital Transaction Gain or Capital Transaction Loss) over its Book Value. The term does not include COD Income or Capital Transaction Gain. In computing Operating Income, items of income and gain relating to Partnership assets shall be computed based upon the Book Values of the Partnership's assets rather than upon the assets' adjusted basis for federal income tax purposes. "Operating Loss" means the deductions and losses of the Partnership for federal income tax purposes, plus (a) items of expenditure described in Code Section 705(a)(2)(B), (b) the amount referred to in Section 4.1(b)(iii) and (c) the excess, if any, of the Book Value of distributed property (other than distributed property taken into account in computing Capital Transaction Gain or Capital Transaction Loss) over its fair market value. The term does not include Capital Transaction Loss. In computing Operating Loss, items of deduction and loss relating to the Partnership's assets shall be computed based upon the Book Values of the Partnership's assets rather than upon the assets' adjusted basis for federal income tax purposes. "Optional Redemption" has the meaning specified in Section 2.7 of Schedule C to this Agreement. -14- 19 "Optional Redemption Date" means the Redemption Date for an Optional Redemption as specified in Section 2.7 of Schedule C to this Agreement. "Ordinary Partnership Interests" or "OPIs" means partnership interests, general or limited, as the case may be, in the Partnership, which interests are not entitled to the preferential allocation of profits and losses set forth in Section 5.1(a). "Original Business Plan" means the business plan of the Partnership for the construction, launch and operation of the first and second generations of satellite constellations (including forecasts of operating expenses, capital expenditures, revenues, cash balances (including cash balances set aside in reserve for capital expenditures) and financial structure (i.e. debt and equity capital requirements)), dated March 15, 1994, as restated to the same or a greater level of detail (with a full reconciliation, but not otherwise modified or amended) consistent with GAAP, and including a capital expenditure budget consistent therewith prepared on a cash basis. "Outstanding" when used with respect to PPIs means, as of the date of determination, all PPIs issued pursuant to this Agreement except PPIs theretofore canceled by the Partnership or delivered to the Partnership for cancellation, pursuant to redemption or conversion. "Partner" means the General Partners or the Limited Partners, or both, as the context may require. "Partner Minimum Gain" means "partner nonrecourse debt minimum gain" as defined in Treasury Regulation Section 1.704-2(i)(2). "Partnership" means the limited partnership established by this Agreement. "Partnership Agreement" or this "Agreement" means this Amended and Restated Agreement of Limited Partnership of Globalstar, L.P., as the same may be modified, supplemented, or amended in accordance with the terms hereof. "Partnership Interest" means an interest (whether ordinary or preferred as the context may require) in the Partnership of a General Partner, a Limited Partner, or both, as the context may require, provided, however, that with respect to matters relating to the voting of Partnership Interests, except as provided in Section 13.2, the term shall refer only to Ordinary Partnership Interests. The Partners' respective equity interests in the Partnership are represented by the Partnership Interests they hold, as set forth on Schedule A of this Agreement. "Percentage Interest" means the ratio, expressed as a percentage, that the number of Ordinary Partnership Interests held -15- 20 by a Partner bears to the total number of Ordinary Partnership Interests outstanding. "Person" means an individual or a corporation, partnership, trust, unincorporated organization, association or other entity. "Preemptive Securities" has the meaning specified in Section 4.9. "Preferred Partnership Interests" or "PPIs" means general partnership interests in the Partnership, the capital contributions for which are set forth in Section 4.1(d) and for which separate Capital Accounts will be maintained and that have the right to convert into Ordinary Partnership Interests as set forth in Article III of Schedule C hereto, the right to distributions set forth in Section 5.5(a) and the right to allocations set forth in Section 5.1(a) and that are subject to redemption under Article II of Schedule C hereto. "Preliminary Service Date" has the meaning specified in the Service Provider Agreement. "Project" means each of the following: for each generation of satellites, each line item detailed in the Sources and Uses of Funds Statement of the Original Business Plan under the Use of Funds Heading, except those under S/T Operations). "Provisional Redemption" has the meaning specified in Section 2.6 of Schedule C to this Agreement. "Provisional Redemption Date" means the Redemption Date for a Provisional Redemption as specified in Section 2.6 of Schedule C to this Agreement. "Purchase Agreement" means that certain Purchase Agreement, dated February 29, 1996, among GTL, the Partnership and Lehman Brothers Inc., Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Unterberg Harris as the Initial Purchasers. "Qualcomm" means QUALCOMM Incorporated. "Redemption Date", when used with respect to any PPI to be redeemed, means the date fixed for such redemption by or pursuant to this Agreement and includes the Provisional Redemption Date, the Optional Redemption Date and Mandatory Redemption Date, as the case may be. "Redemption Price", when used with respect to any PPI to be redeemed, means the price at which it is to be redeemed pursuant to this Agreement. "Regular Record Date" for the distribution payable on any Scheduled Distribution Payment Date means February 15, May 15, -16- 21 August 15 or November 15 (whether or not a Business Day), as the case may be, next preceding such Scheduled Distribution Payment Date. "Remaining Contribution" has the meaning specified in Section 4.5(c) hereof. "Representatives Meeting" has the meaning specified in Section 6.2(g). "SS/L" means Space Systems/Loral, Inc., a Delaware corporation. "Scheduled Distribution" means the distribution payable on a Scheduled Distribution Date by the Partnership in respect of the PPIs, which payment, subject to Section 5.5(d), may be deferred by the Committee in its sole discretion. "Scheduled Distribution Payment Date" means March 1, June 1, September 1 and December 1, commencing June 1, 1996; provided, however, that if such date shall not be a Business Day, then such date shall be the next Business Day. "Significant Variance" means, as applicable: (i) a cumulative adverse variance (net of any favorable variances) in capital expenditures for any Project: (x) in the case of any Business Plan, as measured over such Project's planned remaining life from the beginning of such Business Plan plus the actual capital expenditures from the beginning of such Project until the beginning of the period to which such Business Plan relates; (y) in the case of any Annual Budget, as measured by the actual capital expenditure from the beginning of such Project until the beginning of the year to which such Annual Budget relates plus the amount of such expenditure as projected in such Annual Budget; compared in each case with the then current Baseline Business Plan, which exceeds 10% of the total cumulative capital expenditure for such Project over such Project's planned life as shown in such Baseline Business Plan; or (ii) an adverse variance in total Operating Expenses in any fiscal year that exceeds 10% of the amount set forth in the then current Baseline Business Plan for such year; provided that the amount of each Significant Variance will be subject to adjustment to account for increases in the Consumer Price Index which are in excess of the inflation assumptions, if any, used in the preparation of the applicable Baseline Business -17- 22 Plan, it being understood and agreed that the Original Business Plan used a 4% per annum inflation assumption, compounded annually and such increases for inflation will apply to expenses or expenditures for Projects set forth in the then current Baseline Business Plan which are fixed by contractual terms from and after the date of the applicable contracts only to the extent provided for in such contracts. "Sale Notice" has the meaning specified in Section 4.9. "Section 704(c) Asset" has the meaning specified in Section 5.3. "Securities Act" means the Securities Act of 1933, as from time to time amended, and any successor to such statute. "Service Provider" has the meaning specified in the Service Provider Agreement. "Service Provider Agreement" means each of the agreements between the Partnership and a Partner or its Affiliate or Joint Venture Company, pursuant to which such Person provides to its subscribers the services of the Globalstar System. "Similar Satellite Service" has the meaning specified in the Service Provider Agreement. "Stated Value" shall equal $310,000,000 in the aggregate. "Strategic Partners" means the limited partners in any of Globalstar, LQSS or LQP. "Subscription Agreement" means the agreement entered into by each General Partner and each Limited Partner prior to becoming a Partner or, in the case of TESAM, Loral SpaceCom and Loral/DASA Globalstar, L.P., the agreement entered into by the assignor of their respective Partnership Interests. "System Specification" means the specifications for the Globalstar System dated February 1, 1994, No. LQSS/SS/94-0001, heretofore delivered to the Partners. "Trading Day" means (a) if the GTL Common Stock is listed or admitted for trading on the New York Stock Exchange or another national securities exchange, a day on which such GTL Common Stock actually trades on the New York Stock Exchange or another national securities exchange, (b) if the GTL Common Stock is quoted on the Nasdaq National Market, a day on which the GTL Common Stock actually trades or (c) if the GTL Common Stock is not so listed, admitted for trading or quoted, any Business Day on which the GTL Common Stock actually trades. "Transferor" has the meaning specified in Section 10.3. -18- 23 "Trigger Percentages" means the percentages set forth in Section 2.6 of Schedule C to this Agreement that triggers the Partnership's option to redeem the PPIs pursuant to a Provisional Redemption. "Trustee" means the Person named as the "Trustee" in the Indenture and any successor Trustee. "Upper Tier Partner" means any Partner in either LQSS or LQP. "Upper Tier Partnership" means LQP or LQSS. "Usage Fees" has the meaning specified in the Service Provider Agreements. ARTICLE III. PURPOSE SECTION 3.1. Purpose. The purpose and business of the Partnership shall be: (a) to develop, design, deploy, own and operate a worldwide low-earth orbit satellite-based digital telecommunication system (the "Globalstar System") which is more fully described in the Globalstar Descriptive Memorandum, dated March 1993, as supplemented by the Supplement thereto, dated March 1994 (the "Descriptive Memorandum") and to engage in the business of providing satellite communications and communications related services, including but not limited to voice, data, paging and geolocation services, and search and rescue, disaster relief and environmental and industrial monitoring and control services through the Globalstar System to Service Providers; (b) to acquire, hold, own, operate, lease, manage, maintain, improve, repair, replace, reconstruct, sell or otherwise dispose of and use the assets of the Partnership; and (c) to enter into any lawful transaction and engage in any lawful activity incidental to or in furtherance of the foregoing purposes. ARTICLE IV. CAPITAL CONTRIBUTIONS SECTION 4.1. General Partners. (a) LQSS has made, or will make, at the times and in the amounts set forth in its Subscription Agreement, cash Capital Contributions to the Partnership in the amount set forth in Schedule A hereto in return for 18,000,000 Ordinary Partnership Interests. -19- 24 (b) The amount of cash LQSS is required to contribute pursuant to Section 4.1(a) shall be reduced by the amount of expenditures designated by LQSS and paid or incurred strictly on the Partnership's behalf after December 31, 1992 and prior to March 23, 1994, provided that any property or rights produced by such expenditures shall be contributed to the Partnership. Credit will only be given for expenditures for preexisting goodwill and intangibles of LQSS and its Affiliates if such goodwill or intangibles are purchased from parties other than LQSS, Upper Tier Partners or their Affiliates or created in connection with the business to be conducted by the Partnership. The amount of this reduction shall be allocated by the Partnership on its books and records to (i) the right (which LQSS shall cause to be transferred to the Partnership) to cause LQP to utilize the FCC Applications and, when granted, the FCC licenses, to operate the Globalstar System, exclusively through, and for the exclusive benefit of, the Partnership, (ii) any other property or rights contributed to the Partnership under this Section 4.1(b) and (iii) other expenditures described in this Section 4.1(b) that did not produce property to be contributed to the Partnership under this Section . Nothing in this provision shall alter the ownership of intellectual property as provided in the Contract for Development of Globalstar Ground Communication Segment Equipment between Globalstar and Qualcomm dated March 18, 1994. (c) GTL has made cash Capital Contributions to the Partnership in the amount of $186 million in return for 10,000,000 Ordinary Partnership Interests. (d) On the CPEO Effective Date, GTL will contribute the net proceeds of the CPEO Offering to the Partnership as described in the Offering Memorandum in return for PPIs with an aggregate face amount equal to the principal amount of the CPEOs issued by GTL in the CPEO Offering. The face amount of each PPI shall be $65. The aggregate contribution and face amount of the PPIs shall be set forth in Schedule A. If on or after the CPEO Effective Date, the over-allotment option granted to the Initial Purchasers is exercised (as described in the Offering Memorandum), in full or in part, then GTL shall contribute the additional net proceeds from the exercise of such option to the Partnership in return for additional PPIs which shall be reflected in a similar manner in Schedule A. SECTION 4.2. Limited Partners. Each Limited Partner has made, or will make at the times and in the amounts set forth in its Subscription Agreement, cash Capital Contributions to the Partnership in the amount set forth on Schedule A hereto in return for the number of Ordinary Partnership Interests set forth on such Schedule A. The total number of such Partnership Interests is 19,000,000. SECTION 4.3. Additional Contribution. No Partner is required to make any additional Capital Contribution to the -20- 25 Partnership beyond its capital commitment set forth in Sections 4.1 and 4.2 above. SECTION 4.4. Additional Limited Partners. Subject to Sections 4.9 and 4.10, the Partnership is hereby authorized to offer Additional Partnership Interests, and to admit as Limited Partners those Persons who subscribe to purchase Additional Partnership Interests and who are acceptable to the Committee. At each Additional Closing, the Capital Contributions of those Persons then being admitted as Additional Limited Partners shall be transferred to the Partnership, which amounts shall be credited to their respective Capital Accounts pursuant to Section 4.5 hereof. Upon acceptance by the Committee of the subscription agreement of a Person subscribing to Additional Partnership Interests, the schedule of Partners as set forth on Schedule A hereto shall be amended to reflect such Person's name and Capital Contribution and such Person will be admitted as an Additional Limited Partner. SECTION 4.5. Capital Accounts. (a) The Partnership shall maintain a separate account for each class of Partnership Interests held by a Partner as part of its books and records. A Partner's "Capital Account" for a class of Partnership Interests shall be credited with (a) the amount of cash contributed to the Partnership by the Partner, and, in addition in the case of LQSS, the Book Value of any property contributed and the amount referred to in Section 4.1(b)(iii), (b) allocations of Adjusted Income, Operating Income, Capital Transaction Gain and COD Income to the Partner and (c) the amount of any Partnership liabilities assumed (or taken subject to) by such Partner and shall be debited with (d) allocations of Operating Loss and Capital Transaction Loss to the Partner and (e) the amount of cash distributions and the fair market value of any property distributed to the Partner and (f) the amount of any Partner liabilities assumed (or taken subject to) by the Partnership. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations under Section 704(b) of the Code and, to the extent not inconsistent with the provisions of this Agreement, shall be interpreted and applied in a manner consistent with such Regulations. (b) A transferee of a Partnership Interest will succeed to the portion of the Capital Account of the Partner transferring such Partnership Interest which relates to the Partnership Interest transferred. (c) If the Partnership distributes OPIs with respect to PPIs under Section 5.5(a)(iii), a portion of the Adjusted Capital Account for such PPIs will be transferred to such OPIs. The transferred amount shall be equal to the lesser of: (i) the amount of the cash distribution obligation on the PPIs discharged by the distribution of such OPIs, (ii) the excess, if any, of the prior allocations of Adjusted Income to such PPIs under Sections -21- 26 5.1(a)(i) and (iii) over the sum of the prior allocations of Loss to such PPIs under Section 5.1(c)(iii), prior and current distributions on such PPIs under Section 5.5(a)(ii) not paid in OPIs and the initial Adjusted Capital Accounts of OPIs previously issued in payment of distributions under Section 5.5(a)(ii) or (iii) an amount per distributed OPI equal to the Adjusted Capital Account for outstanding OPI with the highest Adjusted Capital Account. Any excess of (ii) over the lesser of (i) or (iii), shall be transferred among the Partnership Interests as provided in Subsection (e). (d) If the Partnership distributes OPIs in connection with a redemption or conversion of PPIs under Article II or III of Schedule C hereto, the Adjusted Capital Account of the redeemed or converted PPIs (after reduction for any cash or the fair market value of other property paid by the Partnership as part of the redemption or conversion) shall be transferred to such distributed OPIs; provided, however, that the amount transferred shall not exceed an amount per distributed OPI equal to the Adjusted Capital Account for the outstanding OPI with the highest Adjusted Capital Account. Any portion of the Adjusted Capital Account of the redeemed or converted PPI that cannot be transferred to the distributed OPIs, shall be transferred among the Partnership Interests as provided in Subsection (e). (e) The excess amounts described in Subsections (c) and (d) shall be transferred first to the PPIs as if it were Adjusted Income to the extent provided for in the allocation of Adjusted Income under Section 5.1(a), then under Section 5.1(b) and then to all OPIs (including the OPIs being distributed) in accordance with their Percentage Interests. SECTION 4.6. Interest. No interest shall be paid by the Partnership on Capital Contributions, on balances in Partners' Capital Accounts or on any other funds distributed or distributable under this Agreement. SECTION 4.7. No Withdrawal. No Partner shall have the right to the withdrawal or reduction of any part of its Capital Contribution. It is the intent of the Partners that no distribution to the Limited Partners of cash pursuant to Section 5.5 shall be deemed a return or withdrawal of capital, even if such return or distribution represents, for federal income tax purposes or otherwise (in whole or in part), a distribution of depreciation or any other non-cash item accounted for as a loss or deduction from or offset to the Partnership's income, and that the Limited Partners shall not be obligated to pay any such amount to, or for the account of, the Partnership or any creditor of the Partnership; provided, however, that if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Limited Partner is obligated to make any such payment, such obligation shall be the obligation of such Limited Partner and not of the General Partners. -22- 27 SECTION 4.8. Loans. Loans by a Partner to the Partnership shall not be considered Capital Contributions. SECTION 4.9. Preemptive Rights. The Partnership hereby grants to the Partners a preemptive right, in accordance with the procedures set forth in this Section 4.9, with respect to the issuance and sale by the Partnership of Additional Partnership Interests or Debt Securities (each referred to hereinafter as "Preemptive Securities"); provided, however, the Partners shall have no preemptive rights with respect to Preemptive Securities issued pursuant to Section 4.10(a)(i) in connection with the execution of a Service Provider Agreement or pursuant to or in connection with an underwritten public offering. (a) At least 30 days prior to the sale of Preemptive Securities to which this preemptive right applies, the Partnership shall deliver a written notice (a "Sale Notice") to each Partner setting forth (i) the number of Preemptive Securities to be sold, (ii) the price for which and other terms and conditions upon which such Preemptive Securities are to be sold, and (iii) all written information distributed to offerees of such Preemptive Securities, together with the following irrevocable offer from the Partnership: to issue and sell to each Partner, at the same price per Preemptive Security and on the same other terms and conditions set forth in the Sale Notice: (i) in the case of Additional Partnership Interests, the number of Additional Partnership Interests which shall equal the sum of (A) the product of the total number of Additional Partnership Interests set forth in the Sale Notice multiplied by the Partner's Percentage Interest, calculated at the time of the Sale Notice and (B) such Partner's pro rata share (calculated as set forth above) of any such Additional Partnership Interests offered to, but not purchased by, other Partners and (ii) in the case of Debt Securities, the sum of (I) the total principal amount of Debt Securities being issued multiplied by such Partner's Percentage Interest and (II) such Partner's pro rata share (calculated as set forth above) of any such Debt Securities offered to, but not purchased by, other Partners. (b) The Partners shall have absolute discretion to accept or decline such offers. If a Partner wishes to accept any of the offers made pursuant to this Section 4.9, it shall give the Partnership irrevocable written notice of its election to accept such offer within 15 days of its receipt of the applicable Sale Notice (which notice may specify acceptance of all securities offered in the Sale Notice, or acceptance of up to a number or principal amount thereof as specified therein) and the closing thereunder shall occur five days thereafter (or, if not a Business Day, on the next Business Day thereafter) at the offices of the Partnership or at such other time and place as the parties -23- 28 shall agree. Promptly after expiration of the acceptance period, the Partnership will give accepting Partners notice of the actual number of Preemptive Securities to be purchased by them pursuant to the Sale Notice. (c) In connection with any proposed or contemplated sale of Preemptive Securities, upon the request of the Partnership, each Partner shall indicate to the Partnership its good faith intentions (which indications shall not be binding) with respect to whether or not it will exercise the preemptive rights described herein. SECTION 4.10. Sale of Partnership Interests and Partnership Securities. (a) Subject to the provisions of Section 4.9 and this Section 4.10, the Partnership may, upon the determination of the Committee, issue or sell, on such terms as the Committee deems appropriate and in the best interests of the Partnership: (i) Additional Partnership Interests to Additional Limited Partners or Partners from time to time or to other Persons and to admit them to the Partnership as Additional Limited Partners pursuant to Section 4.4 hereof, without being required to obtain the approval of the Limited Partners or any other persons who may acquire an interest in the Partnership Interests, provided, that such Additional Partnership Interests may not be issued at a price that is less than $12.50 per Partnership Interest without the Consent of the Partners, provided further that no additional Partner shall be admitted to the Partnership without the Consent of the Partners, which consent shall not be unreasonably withheld. In addition, if any Partner shall have specified to the Partnership on or prior to March 31, 1994 the names of any third parties, no such third party, nor any of its Affiliates, will be admitted as an Additional Limited Partner without the prior, written consent of the specifying Partner. (ii) Subject to Sections 4.9 and 4.10(b) hereof, any other type of security of the Partnership from time to time to Partners or other persons on terms and conditions established in the sole and complete discretion of the Committee, all without the approval of the Partners or any other person who may acquire any other type of security of the Partnership, including, without limitation, unsecured and secured debt obligations of the Partnership, debt obligations of the Partnership convertible into any class or series of Partnership Interests that may be issued by the Partnership, options, rights or warrants to purchase any such class or series of Partnership Interests or any combination of any of the foregoing. The Partnership is also authorized to enter into sale and leaseback transactions with respect to all or any part of the assets of the Partnership. Subject to subsection (b) below, there -24- 29 shall be no limit on the number of Partnership Interests or other securities that may be so issued, and except as set forth in Section 4.10(a)(i) hereto, the Committee shall have the sole and complete discretion in determining the consideration and terms and conditions with respect to any future issuance of Partnership Interests or other securities. (b) The Partnership shall not at any time issue or reserve for issuance Additional Partnership Interests or other equity interests if, immediately after such issuance, the number of Partnership Interests outstanding or reserved for issuance would exceed the Authorized Partnership Interests. (c) The Partnership shall not incur any Indebtedness if, immediately after the incurrence thereof, the Partnership's outstanding Indebtedness would exceed 110% of the maximum amount of debt obligations contemplated over the life of the then current Baseline Business Plan. SECTION 4.11. Business Plans. (a) The Committee shall annually prepare a Business Plan which contains the following elements: (i) a budget for the forthcoming financial year on a quarterly basis (the "Annual Budget") substantially in the same level of detail as the then current Baseline Business Plan and (ii) for the design and operational lifetime of each generation of satellites at the time under active development or design, or currently in orbit: (A) Schedules of estimated capital expenditures for each year, segregated by Project and showing the estimated cost for each year until completion of the Project; (B) Schedules of sources and uses of funds for each such year; (C) a projected income and expense statement for each such year; and (D) projected year-end balance sheet for each such year. Unless it shall have first obtained the Consent of the Partners, the Committee shall not adopt or otherwise approve any Business Plan or Annual Budget containing any Significant Variance from the then-current Baseline Business Plan, provided that where Consent of the Partners is obtained with respect to any Significant Variance, further Consent of the Partners will be required for any subsequent unfavorable variance from the amounts so approved. Where any Business Plan and/or any Annual Budget contains more than one Significant Variance, then a separate Consent of the Partners shall be sought for each such Significant Variance. The Business Plan and the Annual Budget will not otherwise require the approval of the Partners. Except as otherwise provided in this Agreement, the General Partners will not be liable to the Partnership or any -25- 30 Limited Partner solely for any failure to achieve any Business Plan or Annual Budget, or any element thereof which does not amount to Nonperformance. (b) At least 90 days prior to the beginning of the year in which expenditures (excluding cumulative expenditures of $1,500,000 or less pertaining to the preparation of the new Baseline Business Plan) relating to a new generation of satellites are anticipated (except, insofar as the second generation is concerned, in the case that the Original Business Plan is in effect as the Baseline Business Plan therefor), the Committee will submit to the Partners for their approval a proposed new Baseline Business Plan for the Partnership covering the period through the expected useful life of such next generation which, if approved with the consent of a Majority in Interest of the Partners, will constitute a new Baseline Business Plan, provided that, for purposes of such approval, the votes of the Managing General Partner will be cast in favor of such approval if the proposed Baseline Business Plan in question meets the return on investment criteria set forth in Section 6.2(f), and, unless GTL is the Managing General Partner, the vote of GTL will be determined by the GTL Independent Directors. In the event a proposed Baseline Business Plan is submitted for such a vote and is not so approved, no Limited Partner voting against such approval or any of its Affiliates or Joint Venture Companies will have rights under Article 6.1 of the applicable Founding Service Provider Agreement (as such term is defined in the Service Provider Agreements) to purchase the assets of the Partnership. SECTION 4.12. Limitation on a Limited Partner's Ownership. No individual Limited Partner (other than a corporation formed solely for the purpose of holding Partnership Interests, all of whose shares are offered to the public in an underwritten public offering) may acquire more than 20% of the Partnership Interests in the Partnership without the consent of the Committee and the Consent of the Disinterested Partners. ARTICLE V. ALLOCATIONS, DISTRIBUTIONS AND SERVICE PROVIDER AGREEMENTS SECTION 5.1. Allocations Generally. After the allocations in Sections 5.2 and 5.4 at the end of each Accounting Period, Adjusted Income, Operating Income, Operating Loss, Capital Transaction Gain and Capital Transaction Loss will be allocated as follows: (a) Allocation of Adjusted Income to PPIs. Adjusted Income will be allocated to the Capital Account maintained for the outstanding PPIs: -26- 31 (i) in the amount equal to the excess of prior allocations of Operating Loss and Capital Transaction Loss to currently outstanding PPIs under subsections (c)(iii) over prior allocations to them under this subsection (a)(i); (ii) then in the amount necessary to bring the Capital Account of each outstanding PPI to $65; (iii) then in an amount equal to a cumulative 6 and 1/2% per annum simple interest return on the face amount of each outstanding PPI; this return shall be computed on the basis of a 360-day year with twelve 30-day months; (iv) then in an amount equal to the excess of (x) the cumulative United States federal, state and local income taxes imposed on the cumulative excess of the amounts of income allocated to PPIs under this Agreement (including allocations under this Subsection (a)(iv) and Subsection (a)(v) that are subject to tax by those jurisdictions over the amounts of tax losses allocated to the PPIs pursuant to this Agreement that, under the laws of the particular jurisdiction, could be carried back or carried over to offset such taxable income by a Bermuda company holding the PPIs that was not engaged in business in the United States otherwise than by being a Partner in the Partnership over (y) prior allocations under this Section 5.1(a)(iv); (v) then in an amount equal to the excess of the sum of (x) the cumulative amounts of branch profits taxes that were imposed on the holder of each outstanding PPI under Section 884 of the Code for prior and current actual or deemed distributions with respect to such interest and (y) the branch profits tax that will be imposed on the holder of such interest under Code section 884 upon the future actual or deemed distribution of taxable amounts allocated to such interests under this Agreement (including allocations under Subsection (a)(iv) (excluding allocations for federal income taxes) and this Subsection (a)(v)) over (z) prior allocations under this Section 5.1(a)(v). (b) Allocation of Adjusted Income to OPIs. Adjusted Income will then be allocated to OPIs that were issued under Section 5.5(a)(iii), Section 1.2(b) of Schedule C or Article III of Schedule C, in proportion to, and to the extent that, the Adjusted Capital Account for each such OPI is less than the Adjusted Capital Account for the outstanding OPI with the highest Adjusted Capital Account. (c) Operating Loss and Capital Transaction Loss. Operating Loss in excess of any remaining Operating Income after the allocations set forth above and then Capital Transaction Loss in excess of any remaining Capital Transaction Gain after the allocations set forth above shall be allocated: -27- 32 (i) among the Partners holding OPIs in accordance with their Percentage Interests until the Adjusted Capital Account for the OPIs of such a Partner is reduced to zero; (ii) then, among such Partners in proportion to, and to the extent of, their Adjusted Capital Accounts for their OPIs; (iii) then, to the holders of outstanding PPIs in proportion to, and to the extent of, the Adjusted Capital Accounts for their PPIs; and (iv) then, among the General Partners in proportion to their Percentage Interests. (d) Operating Income. Any Operating Income remaining after the allocations set forth above in excess of Operating Loss will be allocated among the Partners holding Ordinary Partnership Interests in proportion to, and to the extent of, distributions to be made with respect to such OPIs under Section 5.5(b), then in proportion to, and to the extent of, negative Adjusted Capital Account balances for one or more OPIs, and then in accordance with Percentage Interests. (e) Capital Transaction Gain. Any Capital Transaction Gain remaining after the allocations set forth above in excess of Capital Transaction Loss will be allocated among the Partners holding OPIs (other than a Delinquent Partner); (i) In proportion to, and to the extent of, negative Adjusted Capital Account balances for one or more OPIs; (ii) Then, in proportion to the relative amount for each holder of an OPI that is equal to the excess of its Capital Commitment for that OPI over the sum of its Adjusted Capital Account balance for that OPI and prior distributions to it under Section 5.5 until the Adjusted Capital Accounts of the Limited Partners and GTL with respect to OPIs acquired on or prior to the GTL Effective Date are equal to the excess of their Capital Commitments with respect to such OPIs over prior distributions to them with respect to such OPIs under Section 5.5; (iii) Then, to LQSS until the Adjusted Capital Account of LQSS with respect to its OPIs acquired prior to the GTL Effective Date is equal to the excess of its Capital Commitment with respect to such Partnership Interests over prior distributions to it with respect to such OPIs under Section 5.5; (iv) Then, 75% to LQSS and 25% to the other Partners until the ratio of LQSS's Adjusted Capital Account for its OPIs to the Adjusted Capital Accounts of all OPIs is equal to the ratio of LQSS's OPIs to outstanding OPIs; and -28- 33 (v) Then, in accordance with Percentage Interests. SECTION 5.2. Regulatory Allocations. (a) Partnership Nonrecourse Deductions. Operating Loss and Capital Transaction Loss attributable (under Treasury Regulation Section 1.704-2(c)) to "partnership nonrecourse liabilities" (within the meaning of Treasury Regulation Section 1.704-2(b)(3)) shall be allocated among the Partners in accordance with Percentage Interests. As the allocation of partnership nonrecourse deductions will increase the potential minimum gain chargeback under Section 5.2(d), an allocation of partnership nonrecourse deductions under this provision will not reduce a Partner's Adjusted Capital Account. (b) Partner Nonrecourse Deductions. Operating Loss and Capital Transaction Loss attributable (under Treasury Regulation Section 1.704-2(i)(2)) to "partner nonrecourse debt" (within the meaning of Treasury Regulation Section 1.704-2(b)(4)) shall be allocated, in accordance with Treasury Regulation Section 1.704-2(i)(1), to the Partner who bears the economic risk of loss with respect to the debt to which the Loss is attributable. As the allocation of partner nonrecourse deductions will increase the potential minimum gain chargeback under Section 5.2(e), an allocation of partner nonrecourse deductions under this provision will not reduce a Partner's Adjusted Capital Account. (c) COD Income. COD Income shall be allocated among the Partners in proportion to the deemed distribution each is deemed to receive pursuant to Code Section 752(b) with respect to the canceled debt. (d) Minimum Gain Chargeback. If, in any year there is a net decrease in Minimum Gain (other than a decrease attributable to a "book up" in the Book Value of the Partnership's assets, a decrease offset by an increase in Partner Minimum Gain or any other decrease for which a minimum gain chargeback is not required under Treasury Regulation Section 1.704-2(f)), then each Partner will be allocated Capital Transaction Gain and Operating Income equal to that Partner's share of the net decrease in minimum gain for the year, as determined by Treasury Regulation Section 1.704-2(g)(2). The items of Capital Transaction Gain and Operating Income to be allocated under this section are determined under Treasury Regulation Section 1.704-2(j)(2). In the event there is insufficient Capital Transaction Gain and Operating Income for the year to fully chargeback each Partner's share of the decrease in Minimum Gain, then the chargeback for the year shall be in proportion to each Partner's share of the decrease and any decrease that has not been charged back shall be carried over and be treated as a decrease in Minimum Gain in the following year. This subsection is intended to comply with the minimum gain chargeback requirement of Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith. -29- 34 (e) Partner Minimum Gain Chargeback. If, in any year there is a net decrease in Partner Minimum Gain (other than a decrease attributable to a "book up" in the Book Value of the Partnership's assets, a decrease offset by an increase in Minimum Gain or any other decrease for which a Partner Minimum Gain chargeback is not required under Treasury Regulation Section 1.704-2(i)(4)), then, after the allocation set forth above in Section 5.2(d), each Partner will be allocated Capital Transaction Gain and Operating Income equal to that Partner's share of the net decrease in Partner Minimum Gain for the year, as determined by Treasury Regulation Section 1.704-2(i)(5). The items of Capital Transaction Gain and Operating Income to be allocated under this section are determined under Treasury Regulation Section 1.704-2(j)(2). In the event there is insufficient Capital Transaction Gain and Operating Income for the year to fully chargeback each Partner's share of the decrease in Partner Minimum Gain, then the chargeback for the year shall be in proportion to each Partner's share of the decrease and any decrease that has not been charged back shall be carried over and be treated as a decrease in Partner Minimum Gain in the following year. This subsection is intended to comply with the requirement of Treasury Regulation Section 1.704-2(i)(4) that there be a chargeback of partner nonrecourse debt minimum gain and shall be interpreted consistently therewith. (f) Qualified Income Offset. In the event any Partner received any adjustment, allocation or distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) that was not reasonably expected at the end of the preceding year and that causes, or increases, a deficit in the Partner's Capital Account, Capital Transaction Gain and Operating Income (composed of a pro rata portion of each element remaining after the allocations in earlier subsections of this section) shall be allocated to that Partner in an amount and manner sufficient to eliminate any portion of the deficit balance in the Partner's Capital Account that is attributable to the adjustment, allocation, or distribution referred to above. If there is insufficient Capital Transaction Gain and Operating Income in any year to make the allocation called for under this subsection, then the shortfall shall be carried over to subsequent years and will be treated as items to be offset in those years. Allocations under this subsection will only be made to the extent that a Partner has a deficit in his Capital Account after all other allocations provided in Article V have been tentatively made as if this subsection were not in the Agreement. For purposes of this subsection, a Partner's Capital Account balance shall be (a) increased by (i) its share of Minimum Gain plus (ii) its share of Partner Minimum Gain plus (iii) the amount, if any, by which its deficit Capital Account balance exceeds the sum of (i) and (ii) and which the Partner is obligated to restore (or is treated as obligated to restore under Treasury Regulation Section 1.704-1(b)(2)(ii)(c)) and (b) decreased by (i) the amount of expected distributions in the next year from the current year's earnings plus (ii) to the extent not previously taken into -30- 35 account, the items described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6). SECTION 5.3. Other Allocations When Book Value Differs from Tax Basis. When the Book Value of a Partnership asset is different from its adjusted tax basis for income tax purposes, then, solely for federal, state and local income tax purposes and not for purposes of computing Capital Accounts, income, gain, loss, deduction and credit with respect to such assets ("Section 704(c) Assets") shall be allocated among the Partners to take this difference into account in accordance with the principles of Code Section 704(c), as set forth in the Treasury Regulation thereunder. In addition, under the principles of Treasury Regulation Section 1.704-3(b)(2) Example 2(ii)(C), in order to prevent the shifting of tax consequences with respect to built-in gain or built-in loss prior to the contribution or revaluation of an item of Section 704(c) Property, tax gain on the sale of that Section 704(c) Property shall be allocated among the Partners to offset the ceiling rule limitation of Treasury Regulation Section 1.704-3(b)(1). SECTION 5.4. Special Allocation of Foreign Taxes. If a Foreign Taxing Jurisdiction imposes a tax upon the Partnership, upon a subsidiary of the Partnership or upon payments to one of the foregoing and such tax is not borne by a third party as a result of a "gross up" provision, tax indemnity or otherwise, then, to the extent that such tax would not have been imposed on income allocated with respect to an Ordinary Partnership Interest if any Partner holding such Partnership Interests or a direct or indirect partner in such Partner were subject only to United States income taxes on the income or payments subject to tax by the Foreign Taxing Jurisdiction: (a) the amount of such tax shall be charged against the Capital Account of such Partner for such Ordinary Partnership Interest and shall reduce the amounts distributable to it under Section 5.5; (b) the amounts distributable to each Partner under Section 5.5 shall be increased by an amount equal to the Partner's Percentage Interest times the aggregate amounts specially allocated to all Partners under subsection (a) above; and (c) the Partnership shall use its best efforts to provide documentation to assist a Partner in recovering from a Foreign Taxing Jurisdiction any applicable tax credit for taxes incurred by that Partner with respect to Globalstar income or allocated to that Partner under this Agreement. SECTION 5.5. Distributions. (a) Distributions to Holders of PPIs. -31- 36 (i) The Partnership shall distribute pro rata on the PPIs an amount such that the cumulative distributions under this Subsection (a)(i) equal the sum of (x) the cumulative United States federal, state and local income taxes imposed on the cumulative excess of the amounts of income allocated to the PPIs under this Agreement that are subject to tax by those jurisdictions over the amounts of tax losses allocated to the PPIs pursuant to this Agreement that, under the laws of the particular jurisdiction, could be carried back or carried over to offset such taxable income by a Bermuda company holding the PPIs that was not engaged in business in the United States otherwise than by being a Partner in the Partnership and (y) the cumulative branch profits taxes imposed with respect to PPIs under Section 884 of the Code. Distributions under this Subsection (a)(i) shall be made prior to the time that the holder of the PPI is required to make payments to the relevant taxing authority. (ii) Then, on each Scheduled Distribution Payment Date, Distributable Cash Flow and Distributable Capital Proceeds shall be distributed to the holder of each outstanding PPI, until cumulative distributions under this Subsection (a)(ii) give each such holder a cumulative return in an amount equal to a cumulative 6 and 1/2% per annum simple interest return on the face amount of each outstanding PPI; this return shall be computed on the basis of a 360-day year with twelve 30-day months. (iii) The Committee may determine to pay all or any portion of the amount of the distributions described above in OPIs, under the procedures set forth in Section 1.2 of Schedule C hereto. Cash distributions under this Section (a) shall first be made from Distributable Cash Flow and then from Distributable Capital Proceeds. (iv) Each holder of a PPI must receive the amount described in Subsection (a)(i) prior to, or contemporaneously with, any distributions with respect to the OPIs and, except for distributions to permit the payment of taxes imposed on the Partners by the jurisdictions in which the Partnership does business, each holder of a PPI must receive the amount described in Subsection (a)(ii) prior to, or contemporaneously with, any other distributions with respect to the OPIs. (b) Distributions of Remaining Distributable Capital Cash Flow. Distributions of any remaining Distributable Cash Flow shall be made among the Partners holding OPIs in accordance with their Percentage Interests. (c) Distributions of Remaining Distributable Capital Proceeds. Distributions of any Distributable Capital Proceeds remaining after the distributions set forth above shall be made after making the allocations under Article V through the date of -32- 37 distribution among the Partners holding OPIs in accordance with their Percentage Interests until the Adjusted Capital Account of a Partner with respect to its OPIs is reduced to zero and then in proportion to, and to the extent of, any positive Adjusted Capital Account balances for OPIs held by the other Partners and then, in accordance with Percentage Interests. (d) Reserves. For any year, the Partnership shall distribute all Distributable Cash Flow, provided that, except as contemplated in the following sentence, without the Consent of the Partners, the Partnership will not establish any reserves more than 10% in excess of the amount of reserves for expenditures contemplated by the Business Plan currently in effect for such period unless the establishment of reserves in a greater amount is required in accordance with generally accepted accounting principles in the United States ("GAAP"), as confirmed in writing by the Partnership's independent accountants, the Partnership specifies in writing to the Partners the contingency for which such reserve is required and undertakes to release the reserve at such time as it is no longer required in respect of such contingency. If the Partnership shall seek to establish reserves at a level that exceeds either the 10% or the GAAP level described above and such reserves shall not have been approved by the Consent of the Partners ("Excess Reserve"), the Partnership may require, as a condition to the distribution of such Excess Reserve, the indemnification of the Partnership by each of the Partners for their share of such Excess Reserve by an 18-month surety bond or other instrument or security reasonably acceptable to the Partnership. In order to trigger such indemnification, the Partnership must (1) have itemized the liabilities which prompted its call for the Excess Reserve and (2) existing reserves must be exhausted. Only then and only to the extent necessary may such indemnification be called upon. In any event, the period of such indemnification or the term of any surety bond purchased pursuant to this Section shall not exceed eighteen months. (e) Prohibited Distributions. No distribution shall be made to a Partner with respect to either a PPI or an OPI under this Section or a payment or redemption under Article I and II of Schedule C hereto, if such distribution or payment would reduce the Adjusted Capital Account for such Partnership Interest to less than zero or such distribution is otherwise prohibited by the Globalstar Credit Agreement or any other applicable indenture or credit agreement that the Partnership may enter into from time to time. (g) Withholding Taxes. Each Partner authorizes the Partnership to withhold and pay over any withholding or other tax payable by the Partnership as a result of such Partner holding an interest in the Partnership. Such amounts, if withheld from distributions to a Partner, shall be treated as a distribution to the Partner and a payment of the withheld tax by such Partner to the appropriate taxing authorities. In the event that current -33- 38 distributions to GTL or any Limited Partner are not sufficient to cover the withheld tax, the amount withheld in excess of the amount covered by distributions to such Partner shall be a loan to such Partner with respect to whom such withholding has been undertaken and such Partner hereby grants the Partnership a security interest in its entire interest in the Partnership at the time any such loan is made to it to secure the repayment of such loan. Such loans shall bear interest at the rate publicly announced by Chemical Bank from time to time in New York City as its prime rate, shall be compounded monthly, and shall be payable on demand. The Partnership may apply future distributions to such Partner against amounts due under the loan. In the event that such excess amounts are withheld on behalf of the Managing General Partner and current distributions to the Managing General Partner are not sufficient to cover the withheld tax, the Managing General Partner shall promptly reimburse the Partnership for the amount of such excess. In the event that the Internal Revenue Service shall determine that the amount of taxes that should have been withheld with respect to a Partner is in excess of the amount withheld by the Partnership, that Partner shall indemnify the Partnership for the amount of any such shortfall. SECTION 5.6. Service Provider Agreements. For federal income tax purposes, each Partner will report as its initial tax basis in the rights it acquires under its Service Provider Agreement the Partnership's basis in such rights. The transfer of rights to the Partner shall not be treated as a distribution under Article V and future transactions between the Partnership and that Partner under the Service Provider Agreement shall be treated for purposes of Articles IV and V as if occurring between the Partnership and the Partner acting other than in its capacity as a partner. SECTION 5.7. Terms of PPIs. The PPIs shall have the additional terms set forth in Schedule C hereto. ARTICLE VI. MANAGEMENT AND OPERATION OF BUSINESS SECTION 6.1. Management. (a) The Partnership will be managed by the General Partners through the Committee, which will consist of five to seven members, as determined by LQSS. GTL will appoint two members to the Committee and the remaining members will be appointed by LQSS. The members serve on the Committee at the discretion of the General Partner appointing them to the Committee and may be removed and replaced at any time by such General Partner, provided that in the case of GTL's representatives to the Committee, GTL must at all times appoint -34- 39 as representatives GTL Independent Directors. The Committee will be responsible for managing the affairs of Globalstar. The Committee shall have complete and exclusive discretion in the management and control of the affairs and business of the Partnership and shall possess all powers necessary, convenient or appropriate to carrying out the purposes and business of the Partnership; provided however, that the day to day activities of the Partnership will be managed by its officers, subject to the supervision of the Committee. Regular meetings of the Committee shall be held each quarter. Action by the Committee may be taken only with a concurrence of a majority of the members, whether present in person at a meeting or by written consent; provided however, that written notice of any proposed action by the Committee shall be given to all members prior to the taking of any such action, unless waived by any such member. Notwithstanding the foregoing, and any other provision contained in this Agreement, all matters relating to the FCC Applications, compliance with the Communications Act, and all compliance and regulatory matters related thereto will be under the exclusive control of LQP, acting in its capacity as the sole general partner of LQSS. As provided in Section 4.1(b), LQP will use the FCC Applications and any license granted thereunder for the exclusive benefit of the Partnership. (b) The General Partners shall, through their appointed representatives on the Committee, use their best efforts to carry out the purposes of the Partnership through implementation of the Business Plan and shall devote to the management of the business and affairs of the Partnership such time as shall be required for the operation thereof. Without limiting the generality of the foregoing, the General Partners, through their appointed representatives on the Committee, shall be responsible for arranging for the development, design, launch and placement in service of the Globalstar satellite constellation and operations control centers and for ensuring that the Globalstar System will function substantially as anticipated. The General Partners shall be under a fiduciary duty and obligation to conduct the affairs of the Partnership in the best interests of the Partnership and of the Limited Partners, including the safekeeping of all Partnership fund and assets (whether or not in the immediate possession or control of the General Partners) and the use thereof for the exclusive benefit of the Partnership and shall not permit the Partnership to enter into any transactions with any interested Partner on terms less favorable to the Partnership than those which would have been achievable in a transaction negotiated on an arm's length basis. Without delegating the substance of their responsibilities and obligations hereunder, the General Partners may, subject to the provisions of Section 6.2(a), contract or otherwise deal with any Person, including employees of Affiliates of the General Partners, to perform any acts or services for the Partnership as such General Partners shall approve. Notwithstanding any such delegation, the General Partners shall remain liable to the extent provided herein for any action or omission of any such -35- 40 delegee. Any such delegee having access to confidential information shall be deemed to be bound by a confidentiality agreement containing substantially the same terms as Section 15.12 hereof. Without limitation on any power that may be conferred upon it hereunder or by law, and except as hereinafter stated and subject to the limitations in Sections 6.1(a) and 6.2, the Committee shall have the power to authorize the Partnership to: (i) make and enter into such contracts and incur expenses on behalf of the Partnership, as the Committee deems necessary or appropriate for the efficient conduct and operation of the Partnership's business; (ii) compromise, submit to arbitration, sue on or defend all claims in favor of or against the Partnership; commence or defend litigation that pertains to the Partnership or any Partnership assets, and arrange for the settlement of any pending or threatened litigation, by or against the Partnership, through compromise, arbitration or otherwise; (iii) make and revoke any election permitted the Partnership by any taxing authority (having due regard for the interests of any Partners that may be adversely affected thereby); (iv) do all acts the Committee deems necessary or appropriate for the protection and preservation of the Partnership's assets; (v) make distributions and allocations to the Partners in accordance with Article V hereof; (vi) designate such officers of the Partnership as authorized signatories with the authority to execute on behalf of the Partnership, any documents or instruments of any kind that the Committee may deem appropriate or advisable to carry out the purposes of the Partnership taking into consideration the terms and conditions of such document or instrument; (vii) prepare, execute and file federal, state and local income tax returns and pay any taxes on behalf of the Partnership and the Partners; (viii) make all payments required of the Partnership under the terms of this Agreement, including such payments, fees and reimbursements as the General Partners, or any of their respective Affiliates, may be entitled to receive under the terms of this Agreement; -36- 41 (ix) contest any determination by the Internal Revenue Service which the Committee deems to be adverse to the best interests of the Partnership; (x) invest Partnership funds on a temporary basis pending distribution in such investments (other than investments in Affiliates of a General Partner) as the Committee determines appropriate, provided that the Committee shall not invest Partnership funds in such a manner that the Partnership will be considered to be holding itself out as being engaged primarily in the business of investing, reinvesting, or trading in securities or will otherwise be deemed to be an investment company under the Investment Company Act of 1940, as amended; (xi) employ Persons (including any Affiliate of a General Partner) for the operation and management of the Partnership and engage such other experts and advisers as the Committee may deem necessary or advisable, in each case, on such terms and for such compensation as the Committee may determine, (subject, as applicable, to the requirements of Sections 6.1(d), 6.1(e) and 6.2(a)); (xii) borrow money on behalf of the Partnership as the Committee deems necessary or appropriate and in the best interests of the Partnership and make, accept, endorse and execute promissory notes, drafts, bills of exchange and other instruments and evidences of indebtedness in connection therewith and secure the payment of any such Partnership indebtedness by mortgage, pledge or assignment of or security interest in all or any part of the property then owned or thereafter acquired by the Partnership, (subject, as applicable, to the requirements of Sections 4.9 and 4.10); and (xiii) call a meeting of Partners from time to time as the Committee deems necessary or advisable. (c) The Committee may delegate any of such foregoing powers and any additional powers conferred upon it under this Agreement or by law to officers of the Partnership; provided however, that transactions involving amounts in excess of $100,000, other than transactions in the ordinary course of business or actions taken to implement any Business Plan previously approved by the Committee, shall require the prior approval of the Committee. Subject to the foregoing provision, the Partners hereby agree that each such authorized officer of the Partnership is authorized to execute, deliver and perform any agreements, acts, transactions and matters in connection with the exercise of power hereunder on behalf of the Partnership without any further act, approval or vote of the Partners or the Partnership, except in connection with acts otherwise prohibited by this Agreement, the Delaware Act or any applicable law, rule or regulation. -37- 42 (d) The Committee will ensure that the business of the Partnership is conducted under the supervision of a qualified senior executive who shall serve on a full-time basis as the President of Globalstar (with or without the title of Chief Executive Officer) (the "President"). In the event that the President is to be replaced, the Committee will as promptly as practicable seek a qualified replacement, and, prior to offering the position formally to any candidate, will present such candidate, his or her qualifications and proposed compensation and employee benefits arrangements to the Partners, and shall not make any such offer without the Consent of the Partners, provided, that, pending receipt of such consent, and following any failure to obtain the Consent of the Partners to the appointment of any candidate for the office of President, the Committee may appoint as interim President an officer or employee of the Partnership (other than any such officer or employee previously rejected by the Partners as President). The Committee shall diligently and in good faith seek out a suitable candidate for such office and shall present such a candidate to the Partners at a Representatives Meeting within two months of such appointment. Prior to terminating the employment of the President, the Committee will call a Representatives Meeting to explain the reasons for such action and to consult with the representatives of the Limited Partners, unless the Committee certifies to the Limited Partners in writing that immediate action is necessary, specifying the exigent circumstances in question. (e) In addition to the limitations set forth in Section 6.1(d) above, the Committee will not dismiss any officer of the Partnership with a rank of senior vice president or above or appoint any person to serve as an officer of the Partnership with a rank of senior vice president or above, without the consent of at least one GTL Independent Director. If the GTL Independent Directors shall have vetoed the appointment of the Committee's candidate for a position as set forth above, and upon submission by the Committee of a second candidate for such position, shall have also vetoed such candidate, then, notwithstanding the lack of approval by a GTL Independent Director, the Committee shall be authorized to appoint its second candidate to serve in the designated office if it shall have submitted such candidate to the Limited Partners and such selection shall have received the Consent of the Partners. Pending the receipt of the consent required under this Section 6.1(e), the Committee may appoint a person to serve as interim officer of the Partnership (other than any such person previously rejected by the GTL Independent Directors). SECTION 6.2. Limitations on Authority of Committee and the General Partners. (a) Notwithstanding anything herein to the contrary, the Partnership shall not, after the date hereof, sign or enter into any agreement or agreements between the Partnership and any Partner, any Upper Tier Partner, any direct or indirect corporate parent thereof, any strategic equity investor in SS/L (currently consisting of Aerospatiale Societe Nationale Industrielle, Alcatel Espace, Finmeccanica and Daimler-Benz -38- 43 Aerospace AG) or any of their respective Affiliates which, in the aggregate, involve payments or receipts in excess of $1,000,000 unless the terms and conditions thereof have been approved with the Consent of the Disinterested Partners. The Partnership hereby warrants that it has not entered into any such contracts during the period from March 23, 1994 to December 31, 1994, except for the agreements itemized in the Subscription Agreements and those contracts set forth on Schedule B hereto, which are hereby authorized and approved and, if required, are consented to. The Partnership shall report to the Partners no less frequently than annually on the terms and conditions of any such contracts that would, but for the $1,000,000 limitation referred to above, require such approval. (b) Notwithstanding anything herein to the contrary, the Partnership shall not undertake any of the actions specified in this Section 6.2(b) without the Consent of the Partners and in the case of clauses (i) through (vi), will not bring such actions before a vote of the Partners without the consent of at least one GTL Independent Director: (i) Make any material amendments or modifications to this Agreement, except as otherwise provided in Section 14.1; (ii) Approve any business plan of the Partnership that would result in any material change in the purpose of the Partnership as set forth in this Agreement or otherwise change the Partnership's business so that it varies materially from the business set forth in this Agreement; (iii) Acquire (x) a controlling interest in, or a majority of the voting stock or equity of, any corporation or other entity or (y) any other assets not in the ordinary course of business of the Partnership, in either case if the aggregate fair market value thereof is greater than $10 million; (iv) Sell, lease (as lessor), exchange or otherwise dispose of material assets of the Partnership (other than to a Person controlled by the Partnership); provided, however that in the event of a sale of all or substantially all of the assets of the Partnership (other than to a Person controlled by the Partnership), the Partnership shall distribute the proceeds of such sale to the Partners as soon as practicable thereafter; (v) Except as provided in Section 6.13 hereof, cause or permit the dissolution and/or liquidation of the Partnership; (vi) Take any action for the (A) commencement of a voluntary case under any applicable bankruptcy, insolvency or similar law now or hereafter in effect, (B) consent to -39- 44 the entry of any order for relief in an involuntary case under any such law to the extent that the giving or withholding of such consent is within the Partnership's discretion, (C) consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of it or of any substantial part of its property or (D) making by it of a general assignment for the benefit of creditors; (vii) Initiate or settle any litigation, arbitration or other proceeding if such litigation, arbitration or other proceeding is against, or names as an adverse party, a Partner; (viii) Enter into any material business outside the scope contemplated in this Agreement; (ix) Commence any litigation or arbitration that pertains to the Partnership or any Partnership assets, or arrange for the settlement of any pending or threatened litigation, by or against the Partnership, through compromise, arbitration or otherwise if the damages claimed for such lawsuit or arbitration shall exceed $100,000; or (x) Adopt any modification to the System Specification that would change any major parameter by more than 10% of the amount set forth in the System Specification or otherwise result in a material adverse effect on any Service Provider and the Partnership shall give the Limited Partners reasonable notice of any such proposed modification. (c) Notwithstanding the foregoing, in the event that any of the decisions set forth in paragraph (b) above would result in the Partnership being engaged in a business entirely unrelated to that disclosed in the Descriptive Memorandum, such actions shall require the prior, written consent of all the Partners. (d) Unless it shall have received the prior consent of the affected Partner or Partners, the Partnership shall not enter into contracts or agreements with any Person or Persons which conflict with or prejudice in any material respect the rights of any Partner under (i) the provisions of this Agreement or (ii) any contract or agreement between the Partnership and a Partner or its Affiliates except as otherwise disclosed in the Subscription Agreement. LQSS warrants that neither it nor the Partnership has entered into any such contract or agreement as of December 31, 1994 without such consent. (e) The Partnership shall submit to the Partners for their review and comment the material elements of its proposed launch strategy for the Globalstar System, including the selection of launch vehicles, cost, and risk allocation (including issues of space risk management and related insurance coverage and self-insurance), and shall consider in good faith any alternative -40- 45 launch strategies proposed by any Partner. If the Partnership's proposed strategy does not obtain the Consent of the Partners, the Partnership shall promptly undertake a detailed review of such strategy, especially addressing any particular issues identified by the dissenting Partner representatives, and analyze any alternative launch strategies proposed by any of them, and shall not undertake any material commitments with respect to its launch strategy until it has made a written report to the Partners of the results of such review, and called a Representatives Meeting to discuss such report. (f) Any decision on the part of the Committee not to undertake either action set forth below shall require the consent of a Majority in Interest of the Partners: (i) construction and launch of additional first-generation satellites, or in the event a second or subsequent generation constellation has been launched, additional second generation or subsequent generation satellites, as the case may be, that can be financed by the Partnership without additional Capital Contributions from its Partners, if such satellites are anticipated to produce a compound return on investment of 25% per annum or more or (ii) the design, development, construction and launch of a second or subsequent generation satellite constellation that can be financed by the Partnership without additional Capital Contributions from its Partners if such system is anticipated to produce a rate of return on investment greater than the rates applicable to 30-year U.S. Treasury obligations. The Partnership shall give each Partner prompt written notice of any decision not to launch a second or subsequent generation of satellites at least 48 months in advance of the termination or significant degradation of service from the satellite constellation then in operation, and will discuss any such decision with the CSO within a period of two months after such notification. (g) The Partnership shall give notice of a proposed action calling for the Consent of the Partners, the Consent of the Disinterested Partners, or the consent of a Majority in Interest of the Partners or such other matters requiring the action of Partners as set forth herein or pursuant to the Subscription Agreements. The Partnership shall give such notice to each of the Partners in the manner set forth in Section 15.1 hereto as soon as practicable but in no event less than 15 days prior to the date called for a meeting of senior management representatives (the "Representatives") of the Partners (a "Representatives Meeting") regarding such proposal. The quorum for a Representatives Meeting shall be as follows: (x) with respect to a matter requiring the Consent of the Partners or a Majority in Interest of the Partners, Representatives present in person, by proxy or written consent, representing a majority of the Partnership Interests outstanding and (y) with respect to a matter requiring Consent of the Disinterested Partners, Representatives present in person, by proxy or written consent, -41- 46 representing a majority of the Partnership Interests outstanding held by the disinterested Partners. Each Partner (in the case of a matter requiring the Consent of the Partners or the consent of a Majority in Interest of the Partners) or each disinterested Partner (in the case of a matter requiring the Consent of the Disinterested Partners) (and in all cases other than a Delinquent Partner), shall have the right to designate one Representative to attend each Representatives Meeting, who will have the right to cast at the meeting a number of votes equal to the number of Partnership Interests such Partner holds, provided that LQSS shall in all instances vote in accordance with Section 6.4 of the LQSS Partnership Agreement, or, in lieu of voting in such a manner, may assign any Upper Tier Partner the right to designate a Representative to cast at the Representatives Meeting a number of votes equal to the number of Partnership Interests LQSS's Representative is required to cast on its behalf in accordance with such Section 6.4, provided, however, that in no event shall such votes exceed the total number of Partnership Interests held by LQSS. In the event of such an assignment, the Upper Tier Partners' Representatives shall have the same right to attend and vote at Partners' meetings as Representatives of Partners in the Partnership. SECTION 6.3. Change of Control and Reduction in Interest. (i) For purposes of this Section 6.3, "GTL Change of Control" shall mean an event or series of events not approved either by the Managing General Partner or by the Consent of the Partners, at a time when GTL owns less than 50% of the Partnership Interests outstanding, by which (i) any "person" or "group" (as such terms are defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")) becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 30% of the GTL Common Stock then outstanding, (ii) GTL consolidates with or merges into another corporation or conveys, transfers or leases all or substantially all of its assets to any Person, or any corporation consolidates with or merges into GTL, in either event pursuant to a transaction in which the outstanding GTL Common Stock is changed into or exchanged for cash, securities or other property, other than any transaction (A) between GTL and either Loral SpaceCom, an Affiliate of Loral SpaceCom or a wholly-owned subsidiary of Loral SpaceCom or (B) after which the shareholders who beneficially owned GTL Common Stock immediately before such transaction beneficially own at least 50% of the outstanding voting stock of the surviving entity and no Person beneficially owns more than 30% of the outstanding voting stock of the surviving entity, (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of GTL (together with any new directors whose election by the Board of Directors or whose nomination for election was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to -42- 47 constitute a majority of the directors then in office, or (iv) GTL makes on any day any distribution or distributions of cash, property or securities (other than regular dividends, common stock or rights to acquire common stock) to its shareholders, or purchases or otherwise acquires GTL Common Stock, and the sum of the fair market value of such distribution or purchase, plus the fair market value of all other such distributions and purchases which have occurred during the preceding twelve months, exceeds 30% of the fair market value of GTL Common Stock outstanding. (b) A "Reduction in Interest" shall have occurred upon the sale or other disposition of Partnership Interests by GTL after which GTL's Percentage Interest is reduced to less than 5% and such reduction was not previously approved either by the Managing General Partner or by the Consent of the Partners. (c) Upon a GTL Change of Control or a Reduction in Interest, GTL will become a Limited Partner and will lose all of its rights as a General Partner under this Agreement, including the right to appoint representatives to serve on the Committee and, through the GTL Independent Directors, to veto certain actions of the Partnership. The Committee will thereby dissolve and all actions previously authorized to be taken by the Committee will thereupon be taken by the Managing General Partner as the sole General Partner. In addition, upon a GTL Change of Control or a Reduction in Interest, any PPIs then held by GTL would automatically convert into preferred limited partnership interests and any OPIs then held by GTL would automatically convert into limited OPIs. GTL's preferred limited partnership interests will have the same terms as the PPIs except that they will convert into, and payments of any OPIs with respect thereto, would be made in limited OPIs rather than general OPIs. SECTION 6.4. Certificate of Limited Partnership. The Partnership has filed the Certificate of Limited Partnership with the Secretary of State of the State of Delaware as required by the Delaware Act and shall file such other certificates or documents as may be deemed by the Partnership to be reasonable and necessary or appropriate for the formation or qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware or any other state in which the Partnership may elect to do business. To the extent that the Committee in its discretion determines such action to be reasonable and necessary or appropriate and to the extent consistent with this Agreement, the Committee shall file amendments to the Certificate of Limited Partnership and do all the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware or any other state in which the Partnership may elect to do business. SECTION 6.5. Reliance by Third Parties. Notwithstanding any other provision of this Agreement to the contrary, no lender -43- 48 or purchaser, including any purchaser of property from the Partnership or any other Person dealing with the Partnership, shall be required to look to the application of proceeds hereunder or to verify any representation by the Managing General Partner as to the extent of the interest in the assets of the Partnership that the Managing General Partner is entitled to encumber, sell or otherwise use, and any such lender or purchaser shall be entitled to rely exclusively on the representations of the Managing General Partner as to its authority to enter into such financing or sale arrangements and shall be entitled to deal with the Managing General Partner as if it were the sole party in interest therein, both legally and beneficially. In no event shall any Person dealing with the Managing General Partner or the Managing General Partner's representative with respect to any business or property of the Partnership be obligated to ascertain that the terms of this Agreement have been complied with, or be obligated to inquire into the necessity or expedience of any act or action of the Managing General Partner or the Managing General Partner's representative; and every contract, agreement, deed, mortgage, security agreement, promissory note or other instrument or document executed by the Managing General Partner or the Managing General Partner's representative with respect to any business or property of the Partnership shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and/or delivery thereof this Agreement was in full force and effect, (b) such instrument or document was duly executed in accordance with the terms and provisions of this Agreement and is binding upon the Partnership, and (c) the Managing General Partner or the Managing General Partner's representative was duly authorized and empowered to execute and deliver any and every such instrument or document for and on behalf of the Partnership. SECTION 6.6. Compensation, Expenses and Reimbursement of General Partners. (a) Commencing from and after the time in which Globalstar receives revenue from Usage Fees, the Partnership shall pay to the Managing General Partner in cash for each quarter during the period the Partnership is in existence, as payment in connection with services rendered by the Managing General Partner, compensation equal to 2.5% of the Partnership's gross operating revenue up to $500 million per annum, based upon revenues through the end of the quarter in question plus 3.5% of the Partnership's gross operating revenue in excess of $500 million per annum (the "Management Fee"). All quarterly payments are subject to adjustment based on year-end audit. The Management Fee shall be paid quarterly during each In-Service Year, provided that for any In-Service Year in which there is a net loss to the Partnership computed under GAAP, the Management Fee shall be reduced by 50% and the Managing General Partner will reimburse the Partnership for Management Fee payments, if any, received in any prior quarter of such In-Service Year, sufficient to reduce its Management Fee by 50%. To the extent the year-to-date result through the first, second or third quarter of an In-Service Year is a net loss, no Management Fee will be paid -44- 49 with respect to such quarter to the extent it would (together with any Management Fee payments with respect to any earlier quarter in such In-Service Year) exceed 50% of the Management Fee otherwise payable (but for such net loss). No further Management Fee payments shall be required to be paid after the date that distribution of all of the Partnership's assets to the Partners has been completed. In any quarter in which the Partnership would report negative cash flow from operations if the Management Fee for such quarter is paid in full in cash, payment of the Management Fee (or such lesser portion thereof as shall equal the amount of such negative cash flow) shall be deferred with interest at a rate equal to 4% per annum and shall be payable at such time as the Partnership shall have sufficient cash flow. No Management Fee or other compensation shall be owing to GTL in connection with its services as a General Partner. (b) All expenses incurred in connection with the organization of the Partnership (other than expenses borne by LQSS or any Upper Tier Partner for which capital contribution credit is received pursuant to Section 4.1) will be borne by the Partnership and, to the extent not otherwise allocated by Article V, charged to the Partners' Capital Accounts according to their Percentage Interests. Such expenses, including legal and investment banking fees, are approximately $3,728,000. (c) The General Partners shall be reimbursed on a monthly basis for all fair and reasonable expenses they incur or make on behalf of the Partnership (including amounts paid to any Person to perform services for the Partnership or the General Partners or who is an employee of the Partnership or the General Partners). Such reimbursement shall be in addition to any reimbursement to a General Partner as a result of indemnification pursuant to Section 6.10 hereof, but shall only be in respect of reasonable out-of-pocket expenses incurred solely on behalf of Globalstar, and shall not include any amounts in respect of compensation of persons who are officers, directors or employees of GTL, the Upper Tier Partners or their Affiliates or any other corporate overhead of such persons. SECTION 6.7. Outside Activities. (a) Subject to Section 6.7(b), each Partner agrees, subject to the requirements of applicable law, that the Partners and their respective subsidiaries, partners, associates, employees, Affiliates and agents may engage in other business activities or possess interests in other business activities of every kind and description, independently or with others, except that no Partner or any of its subsidiaries or Affiliates shall possess an interest, directly or indirectly, in any business activity operating Similar Satellite Service until the earlier of (i) the third anniversary of the date such Partner (including its Affiliates) ceases to be a Partner of the Partnership, (ii) the beginning of the third In-Service Year and (iii) the date 183 days following the date that such Partner (including its Affiliates) ceases to be or have equity interest in a Service -45- 50 Provider; provided, however, that (i) a passive investment representing not more than 5% of the equity securities of a company in direct competition with the Partnership whose equity securities are listed on a nationally recognized securities exchange or (ii) the sale or provision of goods or services (except as may otherwise be specifically agreed to between the Partnership and the Partner) in the ordinary course of business of a Partner or its Affiliates shall not violate this provision. For purposes of this Section 6.7, governmental and military systems and satellite systems such as OmniTRACS or Euteltracs, and, insofar as France Telecom is concerned, intergovernmental systems, such as INMARSAT and EUTELSAT, and their respective logical extensions, shall not be considered Similar Satellite Service. This paragraph may not be amended without the consent of TESAM. (b) The General Partners shall not engage in any business other than management of the business and affairs of the Partnership, and shall not own any assets other than Partnership Interests, Partnership capital contributions and distributions, and related assets, without the Consent of the Disinterested Partners. (c) The General Partners shall not, and shall not permit any of their respective Affiliates, including SS/L, to, act as prime contractor or systems integrator for any Similar Satellite Service. SECTION 6.8. Partnership Funds. The funds of the Partnership shall be deposited in such account or accounts as are designated by the Partnership and shall not be commingled with any other funds. All withdrawals from or charges against such accounts shall be made by duly authorized officers or agents of the Partnership. Funds of the Partnership may be invested as determined by the Committee, except in connection with acts otherwise prohibited by this Agreement. SECTION 6.9. Loans from the General Partners. A General Partner or any Affiliate of the General Partner may lend to the Partnership funds needed by the Partnership for such periods of time as the General Partner may determine; provided, however, that such loan is approved in advance with the Consent of the Disinterested Partners. The Partnership shall reimburse the General Partner or its Affiliate, as the case may be, for any additional costs incurred by the General Partner or such Affiliate in connection with the borrowing of funds obtained by the General Partner or such Affiliate and loaned to the Partnership. SECTION 6.10. Indemnification of Partners. (a) The Partnership shall indemnify and hold harmless the Partners, the Upper Tier Partners, their respective Affiliates, and all of their respective officers, directors, partners, controlling shareholders, employees, and agents (individually, an "Indemnitee"), from and against any and all losses, claims, demands, costs, damages, liabilities, joint and several, expenses -46- 51 of any nature (including attorneys' fees and disbursements), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, in which an Indemnitee may be involved, or threatened to be involved, as a party or otherwise ("Losses"), arising out of or incidental to the business of the Partnership, regardless of whether an Indemnitee continues to be a Partner, an Affiliate, or an officer, director, partner, controlling shareholder, employee, or agent of a Partner or of an Affiliate at the time any such Loss is paid or incurred, if the Indemnitee's conduct did not constitute actual fraud, gross negligence, knowing breach of specific provisions of this Agreement or willful or wanton misconduct. The termination of any action, suit, or proceeding by settlement or upon a plea of nolo contendere, or its equivalent, shall not, in and of itself, create a presumption or otherwise constitute evidence that the Indemnitee's actions constituted actual fraud, gross negligence or willful or wanton misconduct. (b) Expenses (including legal fees and expenses) incurred in defending any proceeding subject to subsection (a) of this Section 6.10 shall be paid by the Partnership in advance of the final disposition of such proceeding upon receipt of an undertaking (which need not be secured) by or on behalf of the Indemnitee to repay such amount if it shall ultimately be determined, by a court of competent jurisdiction or otherwise, that the Indemnitee is not entitled to be indemnified by the Partnership as authorized hereunder. (c) The indemnification provided by this Section 6.10 shall be in addition to any other rights to which each Indemnitee may be entitled under any agreement or vote of the Partners, as a matter of law or otherwise, both as to action in the Indemnitee's capacity as a Partner or as a partner, controlling shareholder, officer, director, employee or agent of a Partner, or as to action in the Indemnitee's capacity as a Person serving at the request of the Partnership as set forth above, and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns, administrators and personal representatives of the Indemnitee. Such indemnification, however, shall only apply to Losses incurred by virtue of the Indemnitee's status as a Partner, the Upper Tier Partner, Affiliate or officer, director, partner, controlling shareholder, employee or agent thereof, and not as to Losses incurred in other capacities (for example, by virtue of being a Service Provider or otherwise contracting with the Partnership). (d) The Partnership may purchase and maintain insurance on behalf of any one or more Indemnitees and other such Persons as the Partnership shall determine against any liability which may be asserted against or expense which may be incurred by such Person in connection with the Partnership's activities, whether or not the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement. -47- 52 (e) Any indemnification hereunder shall be satisfied only out of the assets of the Partnership and no Partner shall be subject to personal liability by reason of these indemnification provisions. (f) An Indemnitee shall not be denied indemnification in whole or in part under this Section 6.10 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement. (g) The provisions of this Section 6.10 are for the benefit of the Indemnitees and the heirs, successors, assigns, administrators and personal representatives of the Indemnitees and shall not be deemed to create any rights for the benefit of any other Persons. (h) Any Person that proposes to assert the right to be indemnified under this Article VI shall, promptly after receipt of notice of any action which is subject to indemnification hereunder, notify the Partnership of the commencement of such action, enclosing a copy of all papers served. The failure so to notify the Partnership of any such action shall not relieve it from any liability that it may have to any indemnified party hereunder, unless such party is prejudiced thereby. In case any such action shall be brought and notice given to the Partnership of the commencement thereof, the Partnership shall be entitled to participate in, and to assume the defense thereof, with counsel reasonably satisfactory to the indemnified party, and after notice from the Partnership to such indemnified party of its election so to assume the defense thereof, the Partnership shall not be liable to such indemnified party for any legal or other expenses, except as provided below and except for the reasonable costs of investigation subsequently incurred by such indemnified party at the request of the Partnership in connection with the defense thereof. The indemnified party shall have the right to employ separate counsel and to participate in (but not control) any such action, but the fees and expenses of such counsel shall be the expense of such indemnified party unless (i) the employment of counsel by such indemnified party has been authorized by the Partnership, (ii) the employment of separate counsel is necessitated by a conflicting interest among indemnified parties, or (iii) the Partnership shall not in fact have employed counsel to assume the defense of such action. In each such case, the fees and expenses of counsel shall be at the expense of the Partnership. The Partnership shall not be liable for any settlement of any action or claims effected without its written consent unless the Partnership has failed to assume the defense of any such action or claims. SECTION 6.11. Liability of General Partners. (a) The General Partners, the Upper Tier Partners and their respective Affiliates and all officers, directors, partners, controlling shareholders, employees and agents of the General Partners, the -48- 53 Upper Tier Partner and their respective Affiliates shall not be liable to the Partnership or to the Limited Partners for any losses sustained or liabilities incurred as a result of any act or omission of the General Partners, their Affiliates or any such officers, directors, partners, controlling shareholders, employees or agents if (i) the General Partner, such Affiliate, or such officer, director, partner, controlling shareholder, employee or agent acted in good faith and in a manner it or he reasonably believed to be in, or not opposed to, the best interests of the Partnership, and (ii) the conduct of the General Partner, such Affiliate or such officer, director, partner, shareholder, employee or agent did not constitute gross negligence or Nonperformance. For purposes of this Agreement, any act or omission, if done or omitted to be done in reliance upon the advice of legal counsel or public accountants (the "Professionals") selected with reasonable care, will be conclusively presumed to have been done or omitted to be done in good faith and not to constitute willful or wanton misconduct, gross negligence or Nonperformance; provided, however, that the reliance was reasonable and the General Partner had disclosed all relevant facts to the Professionals. (b) Each General Partner shall fully indemnify and hold harmless the Limited Partners and their Affiliates and their respective partners, officers, directors, employees and agents to the fullest extent permitted by law from and against any and all losses, claims, demands, costs, damages, liabilities (joint or several), expenses of any nature (including attorney's fees and disbursements), judgments, fines, settlements and other amounts including, but not limited to, those arising directly or indirectly from or relating to any civil, criminal, administrative or investigative proceeding, arising out of or incidental to conduct by such General Partner or one of its Affiliates with respect to the business or activities of or relating to the Partnership which constituted bad faith, gross negligence or Nonperformance. The obligations of a General Partner under this Section 6.11 shall extend only to its own acts or omissions or acts or omissions by one of its Affiliates and not with respect to acts or omissions of the other General Partner or its Affiliates. For purposes of the preceding sentence, actions by the Committee shall be deemed to be actions of LQSS only. GTL shall not be deemed to be an Affiliate of LQSS and LQSS shall not be deemed to be an Affiliate of GTL, for purposes of this Section 6.11(b) with respect to any action determined solely by directors who are not employed by, or otherwise affiliated with Loral SpaceCom. SECTION 6.12. Other Matters Concerning the General Partners. (a) Each General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. -49- 54 (b) A General Partner may consult with legal counsel, Service Providers, and other consultants and advisers selected by it, and any advice of such Person as to matters which the General Partner believes to be within such Person's professional experience shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by the General Partner hereunder in good faith and in accordance with such advice. Any such Person receiving confidential information shall be deemed to be bound by a confidentiality agreement containing substantially the same terms as Section 15.12 hereof. SECTION 6.13. Conversion to Corporate Form. (a) In the event that the Committee shall determine that it is desirable or helpful for the business of the Partnership to be conducted in a corporate rather than in a partnership form, the Committee may incorporate the Partnership or take such other action as it may deem advisable in light of such changed conditions, including, without limitation, dissolving the Partnership, provided that, the Committee may not incorporate the Partnership without the Consent of the Partners. In connection with any such incorporation of the Partnership, the Partners shall receive, in exchange for their Partnership Interests, shares of capital stock of such corporation having the same relative rights and preferences as to dividends and distributions and the same voting and transfer rights, subject in each case to any modifications required solely as a result of the conversion to corporate form (all such rights and preferences being referred to, collectively, as "Equity Rights"), as are set forth in this Agreement as among the holders of interests in the Partnership. (b) Prior to taking any such action to incorporate the Partnership, the Committee shall submit to the Partners the proposed forms of a certificate or articles of incorporation, by-laws, shareholders' agreement and any other governing documents proposed to be established for such corporation (the "Governing Documents"). If Limited Partners holding Partnership Interests representing at least 20% (or 15% in the event GTL becomes a Limited Partner pursuant to Section 6.3 hereof) of the total number of outstanding Partnership Interests held by all Limited Partners (not including any Partnership Interest held by LQSS or its Affiliates) notify the Committee within 15 days of the date the proposed forms of Governing Documents are submitted to the Limited Partners that they have concluded in good faith that, based upon such Governing Documents, the shares of capital stock of such corporation proposed to be issued to them in exchange for such Partnership Interests do not have the same Equity Rights as are set forth in this Agreement, the Committee and such Limited Partners shall negotiate in good faith to resolve any differences with respect thereto. If the Committee and such Limited Partners do not resolve such differences, the Committee may appoint an investment banking firm of internationally recognized standing reasonably acceptable to such Limited Partners to advise the Partnership as to such dispute, and the conclusion of such firm shall be binding on the parties, and any modification recommended by such investment -50- 55 banking firm in the Equity Rights shall be incorporated into the Governing Documents. Nothing contained herein shall be construed to give the Limited Partners any right to cause the business of the Partnership to be conducted in corporate form or to limit the right of the Committee to elect, at any time, to continue such business as a partnership. SECTION 6.14. FCC Compliance. The Partners hereby understand, agree and acknowledge that the rights described in Section 4.1(b)(i) of this Agreement are subject to the Communications Act, and the rules and regulations promulgated thereunder. ARTICLE VII. RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS SECTION 7.1. Limitation of Liability. No Limited Partner shall be personally liable for any debts, liabilities or obligations of the Partnership, whether to the Partnership, to the General Partners, or to creditors of the Partnership, beyond the amount contributed by such Limited Partner to the capital of the Partnership and such Limited Partner's share of the accumulated but undistributed profits of the Partnership and the amount of any distribution (including the return of any Capital Contribution) made to such Limited Partner that must be returned to the Partnership pursuant to applicable state law. The General Partners shall use reasonable efforts, in the conduct of the Partnership's business, to put all Persons with whom the Partnership does business on notice that the Limited Partners and their Affiliates are not liable for Partnership obligations, and all material agreements to which the Partnership is a party shall include a statement to the effect that the Partnership is a limited partnership organized under the laws of Delaware. SECTION 7.2. Management of Business. The Limited Partners shall not take part in the operation, management or control (within the meaning of the Delaware Act) of the Partnership's business, transact any business in the Partnership's name or have the power to sign documents for or otherwise bind the Partnership. No Limited Partner has the right to require the partition of Partnership property or compel any sale or appraisal of Partnership assets or sale of a deceased Partner's interest therein. ARTICLE VIII. BOOKS, RECORDS, ACCOUNTING AND REPORTS SECTION 8.1. Records and Accounting. The Partnership shall keep or cause to be kept appropriate books and records with respect to the Partnership's business, which books shall at all times be kept at the principal office of the Partnership. Any -51- 56 records maintained by the Partnership in the regular course of its business, books of account and records of Partnership proceedings, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micrographics or any other information storage device, provided that the records so kept are convertible into clearly legible written form within a reasonable period of time. The records and books of account of the Partnership will be audited as of the end of each Fiscal Year by Deloitte & Touche LLP ("Deloitte & Touche"). In the event the Partnership shall seek to replace Deloitte & Touche, the Partnership shall select as Deloitte & Touche's successor independent certified public accountants of recognized international standing (other than the principal auditors of Loral SpaceCom or Qualcomm), provided that such choice may be disapproved once, but only once, by a vote requiring the Consent of the Partners, and thereafter such accountants may be selected by the Partnership in its sole discretion (other than the principal auditors of Loral SpaceCom or of Qualcomm). SECTION 8.2. Fiscal Year. The fiscal year (the "Fiscal Year") of the Partnership shall be the calendar year, unless otherwise determined by the Partnership in its sole discretion. SECTION 8.3. Reports and Annual Meeting. (a) As soon as practicable, but in no event later than 90 days after the close of each fiscal year, the Partnership shall deliver to the Partners reports containing financial statements of the Partnership for the fiscal year, presented in accordance with GAAP, including a balance sheet, a statement of income, a statement of Partners' equity and a statement of changes in cash flow, such statements to be audited by the firm of independent certified public accountants selected in accordance with Section 8.1. (b) As soon as practicable, but in no event later than 45 days after the close of each calendar quarter, including the last calendar quarter of each fiscal year, the Partnership shall deliver to the Partners a quarterly report containing a balance sheet and statements of income and changes in financial position for such calendar quarter. (c) In addition to any meetings of the Partners called pursuant to Section 6.1(b)(xiii) or any Representatives Meeting called pursuant to Section 6.2(g), the Partnership shall hold an annual meeting of the Partners ("Annual Meeting") on fifteen (15) days prior written notice to the Partners, such Annual Meeting to be held no sooner than thirty (30) days and no later than sixty (60) days after delivery to the Partners of the annual financial statements for the preceding fiscal year pursuant to Section 8.3(a). At the Annual Meeting, officers of the Partnership will review the operations of the Partnership during the preceding year, discuss the plans and operating budget for the current year and any amendments to the Business Plan and answer whatever questions may be raised by representatives of the Partners at the Annual Meeting. -52- 57 SECTION 8.4. Disclosure to Limited Partners. (a) The Limited Partners shall have full access to all financial and other information directly related to the business and affairs of the Partnership. In particular, the following will be open for examination, by any Limited Partner or his duly authorized representatives: (i) books and records pertaining to the Partnership's business showing all of its assets and liabilities, receipts and disbursements, realized profits and losses, and all transactions (including all contracts and commitments) entered into by the Partnership; (ii) a current list of the full name and last known mailing address of each Partner set out in alphabetical order, together with a list showing the Capital Contributions and Capital Account of each Partner; (iii) a copy of the Certificate of Limited Partnership and all amendments to it, together with executed copies of any powers of attorney pursuant to which the Certificate and any amendments to it have been executed; (iv) copies of all the Partnership's U.S. Federal, state, local and foreign income tax returns and reports, if any; and (v) copies of this Agreement as may be amended from time to time. (b) The Partnership shall make available, on a reasonable basis, its financial officers and auditors to the Limited Partners for consultation and to respond to questions of the Limited Partners relating to the financial condition of the Partnership. The Partnership will prepare and mail to each Limited Partner promptly upon the request of any Limited Partner such further information concerning the business, affairs and financial conditions of the Partnership, as any Limited Partner may reasonably request. (c) Notwithstanding the provisions set forth in this Section 8.4, the Partnership may keep confidential from the Limited Partners for a period of time deemed reasonable by it information (excluding any matters required to be disclosed pursuant to Section 8.3 or clause (ii)-(v) of Section 8.4) to the extent the Partnership, in good faith, determines (i) that disclosure is not in the best interests of the Partnership, (ii) that disclosure could damage the Partnership or its business or (iii) that the Partnership is required by law or by a third party to keep the information confidential. SECTION 8.5. Determination of Book Value of Partnership Assets. (a) Except as set forth below, Book Value of any -53- 58 Partnership asset is its adjusted basis for federal income tax purposes. (a)(b) The initial Book Value of any assets contributed by a Partner to the Partnership shall be the gross fair market value of such assets. The Book Value of property and property rights contributed by LQSS and described in Section 4.1(b)(i) and (ii) shall be the amount allocated to them pursuant to Section 4.1(b). (c) The Book Values of all of the Partnership's assets shall be adjusted by the Partnership to equal their respective gross fair market values as of the following times: (a) the admission of a new Partner to the Partnership or acquisition by an existing Partner of an additional interest in the Partnership from the Partnership (including the acquisition of PPIs as set forth in Section 4.1(d)); (b) the distribution by the Partnership of money or property to a withdrawing, retiring or continuing Partner in consideration for the retirement of all or a portion of such Partner's interest in the Partnership; and (c) the termination of the Partnership for Federal income tax purposes pursuant to section 708(b)(1)(B) of the Code; provided, however, that no adjustment shall be made upon the issue of an OPI pursuant to Section 5.5(a)(iii) or Section 1.2(b) of Schedule C. The Partnership will not be required to make an adjustment upon the exercise of a warrant to acquire an OPI or upon a conversion of a PPI pursuant to Article III of Schedule C until the sum of the cumulative face amount of PPIs converted and the exercise price of warrants exercised since the last adjustment exceeds $15,000,000. In such case, the Partnership shall make at least one adjustment during the year and, if no other adjustment event occurs during the year and after the $15,000,000 threshold was reached, a required adjustment shall be made as of the date of the last PPI conversion or warrant exercise during the year. Upon a conversion of a PPI and an adjustment to the Book Values of Partnership assets under this Section , any resulting Capital Transaction Loss shall be first allocated to holders of OPIs whose Adjusted Capital Accounts are higher than the Adjusted Capital Accounts of the OPIs acquired on exercise of a warrant or on conversion in amounts and proportions to reduce the differences between such Adjusted Capital Accounts and any resulting Capital Transaction Gain shall first be allocated to the Capital Account of the OPIs acquired on exercise of a warrant and on conversion in an amount to reduce or eliminate the amount by which the Adjusted Capital Accounts for such OPIs are less than the Capital Account for the outstanding OPI with the highest Adjusted Capital Account. Any remaining Capital Transaction Gain or Loss shall be allocated under Section 5.1. The Partnership will promptly report any such adjustment to the Partners. -54- 59 ARTICLE IX. TAX MATTERS SECTION 9.1. Preparation of Tax Returns. (a) The Partnership shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items necessary for federal and state income tax purposes. The Partnership shall use all reasonable efforts to furnish to the Partners within 90 days of the close of the taxable year the tax information reasonably required for federal, state and foreign income tax reporting purposes. Subject to the provisions of Section 9.2, the classification, realization and recognition of income, gain, losses and deductions and other items shall be on the accrual method of accounting for federal income tax purposes, to the extent permitted by applicable law. The taxable year of the Partnership shall be the calendar year, unless otherwise required by the federal income tax laws and the Treasury Regulations thereunder or unless otherwise determined by the Partnership. (b) The Partnership will prepare the state and local tax returns for those non-U.S. Limited Partners who are not otherwise engaged in business in the United States. SECTION 9.2. Tax Elections. Except as otherwise provided herein, the Partnership shall, in its sole discretion, determine whether to make any available election, including but not limited to an election under Code Section 709 to amortize organization and start-up expenditures over a sixty month period, and an election under Code Section 754 to adjust the bases of Partnership property with respect to the Partnership or with respect to a transferee Partner. In the event a Section 754 election is made, the Partnership may in its sole discretion charge transferees for the additional costs incurred in preparing their tax information under such election. SECTION 9.3. Tax Controversies. Subject to the provisions hereof, the Managing General Partner is designated the Tax Matters Partner (as defined in Section 6231 of the Code), and is authorized and required to represent the Partnership (at the Partnership's expense) in connection with all examinations of the Partnership's affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. The Partners agree to cooperate with the Managing General Partner and to do or refrain from doing any or all things reasonably required by the Managing General Partner to conduct such proceedings, provided that the foregoing shall not be construed to prevent a Partner from taking steps reasonably necessary to protect and defend its own interests. SECTION 9.4. Taxation as a Partnership. No election shall be made by the Partnership or any Partner for the Partnership to be excluded from the application of any of the provisions of -55- 60 Subchapter K, Chapter 1 of Subtitle A of the Code or from any similar provisions of any state tax laws. ARTICLE X. TRANSFER OF INTERESTS SECTION 10.1. Transfer. (a) The term "transfer," when used in this Article X with respect to a Partnership Interest, includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition; provided however, that an exchange of Partnership Interests by LQSS or the Limited Partners pursuant to the terms of the Exchange and Registration Rights Agreement shall not, other than with respect to Section 10.4(c) hereof, be deemed to be a "transfer" for purposes of this Article X. (b) Any Partnership Interest may be transferred, in whole or in part, provided that such transfer shall be made, where applicable, in accordance with the terms and conditions set forth in this Article X. Any transfer or purported transfer of any Partnership Interest not made in accordance with this Article X shall be null and void. (c) Notwithstanding anything contained herein to the contrary, no transfer of a Partnership Interest may be made if such transfer (i) would violate the then applicable federal or state securities laws or rules and regulations of the Securities and Exchange Commission, state securities commissions, the Communications Act, or rules and regulations of the FCC and any other government agencies with jurisdiction over such transfer or (ii) would affect the Partnership's existence or qualification under the Delaware Act. In the event a transfer of a Partnership Interest is otherwise permitted hereunder, notwithstanding any provision hereof, no Partner shall transfer all or any portion of such Partner's Partnership Interest unless and until such Partner, upon the request of the Partnership, delivers to the Partnership an opinion of counsel, addressed to the Partnership, reasonably satisfactory to the Partnership, to the effect that (1) such Partnership Interest has been registered under the Securities Act and any applicable state securities laws, or that the proposed transfer of such Partnership Interest is exempt from any registration requirements imposed by such laws and that the proposed transfer does not violate any other applicable requirements of federal or state securities laws and (2) that such transfer will not adversely affect the tax status of the Partnership. Such opinion shall not be deemed delivered until the Partnership confirms to such Partner that such opinion is acceptable, which confirmation will not be unreasonably withheld. (d) For so long as the Exchange Right is in effect, each of the Partners hereby agrees that it will not (i) make a public offering of its Partnership Interests, or (ii) transfer any of -56- 61 their Partnership Interests to a Person, other than to GTL, if (x) such Partnership Interests would constitute all or substantially all of the assets of such transferee and (y) the purpose of the transfer is to enable the transferee Person make a public offering of its equity interests. SECTION 10.2. Transfer of Interests of General Partners. (a) Subject to Section 12.1 hereof, a General Partner shall not transfer all or any part of its Partnership Interests without the Consent of the Disinterested Partners; provided, that a transfer by GTL is further subject to the provisions of Section 6.3 hereof. A General Partner may transfer any or all of its Partnership Interests to an Affiliate of the General Partner ("Affiliate Successor") without such approval; provided however, that in the case of GTL, GTL may transfer only to an Affiliate that is 100% owned by GTL and any such transfer shall be subject to the consent of the Managing General Partner, which consent may be granted or withheld in the Managing General Partner's sole discretion. Such transfer to an Affiliate Successor shall not relieve the General Partner of any of its obligations hereunder unless the Affiliate Successor has been adjudged by the Consent of the Disinterested Partners (which consent shall not be unreasonably withheld) to be a Person that has at least such comparable financial strength and technical and managerial capabilities and know-how sufficient for it to perform its duties and obligations hereunder. The Partners hereby consent to any such approved transfer or any transfer to an Affiliate Successor, subject to the provisos set forth above. The Affiliate Successor of a General Partner pursuant to this Section 10.2 shall be admitted to the Partnership as General Partner immediately prior to the effective date of transfer of the General Partner's Partnership Interests and the Affiliate Successor shall continue the business and operations of the Partnership without dissolution provided that prior to such effective date the Affiliate Successor shall have furnished to (a) the Partnership (i) acceptance in form satisfactory to counsel to the Partnership of all the terms and conditions of this Agreement and (ii) such other documents or instruments as may be required by such counsel in order to effect such transfer and (b) to the other Partners an opinion of counsel to the effect that such transfer will not adversely affect the tax status of the Partnership. Such opinion will not be deemed furnished until approved by the Consent of the Partners, which consent will not be unreasonably withheld. The transferring General Partner hereby further agrees to hold the Partnership and each other Partner wholly and completely harmless from any cost, liability or damage (including, without limitation, liabilities for income taxes and costs of enforcing this indemnity) incurred by any of such indemnified Persons as a result of a transfer or attempted transfer by it in violation of this Agreement. (b) Notwithstanding anything to the contrary contained herein, a General Partner will not take any action which would constitute or result in the transfer of control of the -57- 62 Partnership if such transfer would require, under existing law (including, without limitation, the written rules and regulations promulgated by the FCC), the prior approval of the FCC, without first obtaining such approval of the FCC. (c) A General Partner shall diligently prosecute its application for approval of the transfer identified in Section 10.2(b) hereof and shall immediately provide to the FCC all information requested by the FCC in connection with the application. (d) Prior to the FCC's grant of the approval of the transfer application identified in Section 10.2(b) hereof, a General Partner seeking to transfer its Partnership Interests shall continue to act in a manner consistent with the provisions of Article VI of this Agreement. (e) Any transfer by GTL, other than to an Affiliate, shall be further subject to a right of first offer as set forth in Section 10.3(b) hereof fully as though it were a Limited Partner. SECTION 10.3. Transfer of Interests of Limited Partners. (a) Restrictions on Transfers. Except as expressly permitted or required by this Agreement or by the Limited Partner's Subscription Agreement, absent a Change of Control, as defined below, no Limited Partner shall transfer all or any portion of its Partnership Interests or any rights therein within the three year period following March 23, 1994 without the consent of the General Partners acting through the Committee (which consent shall not be unreasonably withheld or delayed), and provided that if such consent is given, any such transfer shall be subject to Section 10.3(b) and (c) hereof; provided, however, that a Limited Partner may transfer any or all of its Partnership Interests to an Affiliate of such Limited Partner without such approval. Any transfer or attempted transfer by any Limited Partner in violation of the preceding sentence shall be null and void and of no effect whatsoever. Each Limited Partner hereby acknowledges the reasonableness of the restrictions on transfer imposed by this Agreement in view of the Partnership purposes and the relationship of the Partners. Accordingly, the restrictions on transfer contained herein shall be specifically enforceable. Each Limited Partner hereby further agrees to hold the Partnership and each Partner (and each Partner's successors and assigns) wholly and completely harmless from any cost, liability, or damage (including, without limitation, liabilities for income taxes and costs of enforcing this indemnity) incurred by any of such indemnified Persons as a result of a transfer or an attempted transfer in violation of this Agreement. As used in this Section 10.3, a "Change of Control" shall be deemed to have occurred if (i) any person or group (as defined in Section 13(d)(3) of the Exchange Act) shall have acquired ownership of a majority of the voting stock of Loral SpaceCom, or (ii) Loral -58- 63 SpaceCom shall no longer be in control, directly or indirectly, of LQSS. (b) Rights of First Offer. Except as expressly permitted or required by this Agreement or by the Limited Partner's Subscription Agreement, absent a Change of Control, no Limited Partner shall transfer any or all of its Partnership Interests unless the Limited Partner desiring to make the transfer (the "Transferor") shall have first made the offers to sell to the other Partners and, as hereinafter provided, to the Partnership (the "Offerees") and such offers shall not have been accepted. (i) Copies of the Transferor's offer (the "Offer Notice") shall be given to the Offerees and shall consist of an offer to sell to the Offerees such number of Partnership Interests (the "Offered Interests") then proposed to be transferred by the Transferor, at a cash price designated by the Transferor ("Stated Price"), upon only customary terms and conditions, representations, warranties, covenants and conditions. (ii) Within 15 days after the receipt of the offer described in Section 10.3(b)(i) above, each Partner Offeree may, at its option, by written notice elect to purchase some or all the Offered Interests, as specified in such notice, provided that in the event of an oversubscription, purchases will be pro rated according to the relative Percentage Interest of all Partners Offerees electing to exercise their rights of first offer, subject to the 20% ownership limitation set forth in Section 4.12 hereof. The Partner Offerees shall exercise such option by giving notice thereof to the Transferor within such 15-day period. The Partnership will promptly inform each Partner Offeree in the event that fewer than all of the Offered Interests are subscribed for, and each Partner Offeree may, within 48 hours thereafter, increase the amount of its requested maximum subscription. (iii) Within 10 days after the expiration of the Partners' exercise period set forth in Section 10.3(b)(ii), if the Partners choose not to exercise all their rights of first offer under Section 10.3(b)(ii), the Partnership may, at its option, with the Consent of the Partners, elect to purchase some or all of the remaining Offered Interests, unless it shall have refused a request to waive the provisions of Section 4.12 with respect to a proposed purchase by one or more Limited Partners pursuant to Section 10.3(b)(ii) above. The Partnership shall exercise such option by giving notice thereof to the Transferor within such 10-day period. (iv) If the Transferor's offer shall not be fully subscribed by the Partners and/or the Partnership at the end of the twenty-five day period described above, the -59- 64 Transferor shall terminate its offer to the Offerees on the twenty-sixth day after receipt by the Offerees of the Transferor's Offer Notice (the "Termination Date") and the Transferor shall be free to solicit offers for its Offered Interests from third parties for a period of three months following the Termination Date; provided, however, that the Transferor shall not offer the Offered Interests at a price that is less than 95% of the Stated Price, and provided further that if the sale to the third party is other than entirely for cash on terms described in clause (a) above, the Transferor shall certify to each of the other Partners as to the cash value of any noncash consideration. In the event that the Transferor shall have offered the Offered Interests to third parties at a price that is less than 95% of the Stated Price or the three month period shall have lapsed and no bona fide sale of the Offered Interests shall have been made by the Transferor to a third party, the restrictions provided for herein shall again become effective, and no transfer of Offered Interests may be made thereafter without again offering the same in accordance with this Section 10.3. (v) The above-described right of first offer will apply following any public offering of Partnership Interests, provided that once the Partners shall have declined to accept an offer at the then-prevailing market price of the Partnership Interests, the Transferor shall have the right to sell at any price equal to or in excess of 95% of the prevailing market price at the time it is permitted to sell hereunder. (c) Permitted Transfers of Limited Partner Interests. Sections 10.3(a) and (b) hereof shall not apply to any transfer by a Limited Partner of all or any portion of its Partnership Interests to any Affiliate of such Limited Partner and will not apply to any of the transactions contemplated by such Memorandum of Agreement, dated as of January 1, 1995, by and between AirTouch and Loral Corporation, a New York corporation. Prior to such transfer, such Affiliate shall affirm in writing that it shall be subject to the terms and conditions of this Agreement and, if such Affiliate is not controlled by the Limited Partner transferring its Partnership Interest, the Person who controls such Affiliate shall agree in writing not to transfer control of such Affiliate for so long as such Affiliate remains a Limited Partner. If the Limited Partner transferring its interest controls such Affiliate, the Limited Partner hereby agrees that it shall not transfer control of such Affiliate for so long as such Affiliate remains a Limited Partner. SECTION 10.4. Certain Transfers. (a) Change of Control. A Partner, substantially all of whose assets shall consist of Partnership Interests of the Partnership, shall not offer to sell its securities, or permit -60- 65 its securities or the securities of any controlling Affiliate to be sold, to another party if such sale would result in a "Change in Control" of that Partner until and unless such Partner shall have first made a right of first offer with respect to such securities to the other Partners and the Partnership in the same manner as that set forth in Section 10.3(a)-(b) above. For purposes of this paragraph, a "Change of Control" shall be defined as the acquisition of a majority of the voting stock or analogous equity interest of a Partner by a party other than an Affiliate of the Partner. (b) Pre-Approved Transfers. The provisions of Section 10.3(a) and (b) shall not apply to any transfer of Partnership Interests contemplated by Schedule X to the Subscription Agreements. (c) Prior to the third anniversary of the Global Service Date, LQSS (i) will not withdraw, (ii) will not permit LQSS to be controlled by any Person other than Loral SpaceCom and (iii) will not, and will not permit any of its Affiliates to sell, assign or otherwise transfer securities or Partnership Interests such that, immediately following such transfer, Loral SpaceCom's direct and indirect interest in the Partnership is reduced to less than 23% of the total number of Partnership Interests outstanding. Thereafter, unless it shall have received the Consent of the Disinterested Partners, Loral SpaceCom's interest in the Partnership held through a General Partner (including GTL for so long as there has been no GTL Change of Control), whether direct or indirect, shall not be reduced to less than 15% of the total number of Partnership Interests outstanding. ARTICLE XI. ADMISSION OF SUBSTITUTE PARTNERS SECTION 11.1. Admission of Successor Limited Partner. (a) A transferee of a Limited Partner's Partnership Interest shall not be admitted to the Partnership as a substituted Limited Partner, until the transferee shall have furnished the Partnership with an agreement, in form reasonably satisfactory to the Partnership, to be bound by all the terms and conditions of this Agreement and such other documents or instruments as may be required by the Partnership in order to effect such transferee's admission as a Limited Partner. Prior to the time that any transferee of Partnership Interests is admitted to the Partnership as a Partner, it will have only the rights of a transferee under Delaware law, shall have no right to require any information or account of the Partnership transactions constituting Confidential Information or to inspect the Partnership's books. (b) Any transferee of a Limited Partner's Partnership Interest who meets the requirements of subsection (a) may be -61- 66 admitted as a substituted Limited Partner in the Committee's sole discretion. (c) For a transferee of a Limited Partner's Partnership Interest to be admitted as a substituted Limited Partner under subsection (d) or (e) below, the transferee must deliver to the Partnership an opinion of counsel, addressed to the Partnership and in form and substance satisfactory to the Partnership, to the effect that, assuming the Partnership has the corporate characteristic of free transferability of interests and that the transferee is admitted as a substituted Limited Partner, the Partnership would be classified as a partnership for federal income tax purposes and would not be classified as an association taxable as a corporation. (d) Any transferee of a Limited Partner's Partnership Interest who meets the requirements of subsections (a) and (c) and who is an Affiliate of the transferor will be admitted as a substituted Limited Partner. (e) Any transferee of a Limited Partner's Partnership Interest who meets the requirements of subsections (a) and (c) will be admitted as a substituted Limited Partner with the consent of the Committee, which consent will not be unreasonably withheld. SECTION 11.2. Admission of Successor General Partner. A successor General Partner selected pursuant to Section 12.1 or the transferee of or successor to the entire Partnership Interest of a General Partner pursuant to Section 10.2 shall be admitted to the Partnership as a General Partner, effective immediately prior to the withdrawal of the withdrawing General Partner and upon the receipt of proper FCC approval pursuant to Section 10.2(b), and shall continue the business of the Partnership without dissolution. Notwithstanding the foregoing, the provisions of Section 11.1 shall govern the admission of a transferee in a transfer resulting in a GTL Change of Control or a Reduction in Interest as though GTL were a Limited Partner. The successor General Partner shall furnish to the Partnership (a) acceptance in form satisfactory to counsel to the Partnership of all the terms and conditions of this Agreement and (b) such other documents or instruments as may be required by such counsel in order to effect its admission as a General Partner. No such admission shall be effected until the General Partner delivers to the Partnership an opinion of counsel, addressed to the Partnership and its Partners to the effect that such admission will not adversely affect the tax status of the Partnership. Such opinion will not be deemed delivered until approved by the Consent of the Disinterested Partners, which consent will not be unreasonably withheld. Any transferee of less than all of the Partnership Interests of a General Partner pursuant to Section 10.2 shall have only the rights of an assignee under Delaware law, shall have no right to require any information or account of the Partnership transactions constituting Confidential Informa- -62- 67 tion or to inspect the Partnership's books and shall not be admitted to the Partnership as a successor General Partner. SECTION 11.3. Amendment of Agreement and of Certificate of Limited Partnership. For the admission to the Partnership of any successor Partner, the Partnership shall take all steps necessary and appropriate to prepare and record or file as soon as practicable an amendment of this Agreement and the Certificate of Limited Partnership and may for this purpose exercise the power of attorney granted pursuant to Section 1.4. ARTICLE XII. WITHDRAWAL OR REMOVAL SECTION 12.1. Withdrawal or Removal of the General Partners. (a) Any transfer by a General Partner of all of its Partnership Interests as a General Partner pursuant to Section 10.2 or the conversion of all of its Partnership Interests pursuant to the Exchange and Registration Rights Agreement shall constitute the withdrawal of the General Partner for purposes of, and may be effected only in accordance with, this Section 12.1 and in the case of GTL, shall be further subject to the provisions of Section 6.3 and in the case of LQSS, 10.4(c) hereof. A General Partner may not withdraw from the Partnership as General Partner unless it gives at least 90 days prior written notice of such withdrawal to the other Partners, such withdrawal shall have been approved by Consent of the Disinterested Partners and a successor General Partner shall have been elected by Consent of the Disinterested Partners; provided, however, that such transfer shall not relieve the General Partner of any of its obligations hereunder unless the transferee has been adjudged by the Consent of the Disinterested Partners (which consent shall not be unreasonably withheld) to be a Person that has at least such comparable financial strength and technical and managerial capabilities and know-how sufficient for it to perform its duties and obligations hereunder and it has assumed all preexisting liabilities and obligations of the General Partner. The notice and election described above shall not be required in connection with a withdrawal resulting from a transfer of all of the General Partner's Partnership Interest to an Affiliate Successor, but the General Partner shall not be relieved of any of its obligations hereunder without the Consent of the Disinterested Partners required under the third sentence of Section 10.2(a). (b) A General Partner may be removed if such removal is for Nonperformance and if such removal is approved with the Consent of the Disinterested Partners. Such removal shall be effective immediately subsequent to the admission of the successor general partner who shall be subject to the qualifications of Section 12.1(a) hereto. The right to remove a General Partner shall not exist or be exercised unless the Partnership has received an opinion of counsel (which may be counsel selected by Consent of the -63- 68 Disinterested Partners) that the removal of the General Partner and the selection of a successor general partner (a) would not cause the loss of limited liability pursuant to Delaware law of the Limited Partners under this Agreement, and (b) would not cause the Partnership to be treated as an association taxable as a corporation for federal income tax purposes. (c) A General Partner will be discharged from, and the Partnership or any Person or Persons continuing the business of the Partnership in the event it has dissolved, shall assume and pay, as they mature, all Partnership obligations and liabilities that exist on the date of a General Partner's removal or Approved Withdrawal from the Partnership and, except as otherwise expressly provided herein, will hold the General Partner harmless from any action or claim arising or alleged to arise from such assumed obligations and liabilities accruing after such date. The Partnership or any such Person or Persons continuing the business of the Partnership will promptly pay all creditors as of such date or notify such creditors (i) of the withdrawal or removal of such General Partner, as the case may be, (ii) of the discharge of such General Partner from all of the Partnership's obligations and liabilities, and (iii) of the assumption thereof by the Partnership or such Person or Persons continuing the business of the Partnership. The Partnership or such Person or Persons continuing the business of the Partnership if the Partnership has dissolved will use reasonable efforts to procure and execute an agreement from creditors of the Partnership discharging such General Partner from liability to such creditors as of the date of such removal or Approved Withdrawal of such General Partner. Nothing contained in this Section 12.1 shall relieve a General Partner of any liability it may have as of the date of its withdrawal under Section 6.11(b). As used in this Section 12.1(c), the term "Approved Withdrawal" shall mean a withdrawal of a General Partner following the election of a successor General Partner by Consent of the Disinterested Partners pursuant to the second sentence of Section 12.1(a) and approval by Consent of the Disinterested Partners of such successor General Partner's financial strength and technical and managerial capabilities and know-how pursuant to the proviso to the second sentence of Section 12.1(a) or, in the case of an Affiliate Successor, approval by Consent of the Disinterested Partners of such Affiliate Successor's financial strength and technical and managerial capabilities and know-how pursuant to the third sentence of Section 10.2(a). (d) Upon such removal, and the election of a successor General Partner, the interest of a General Partner in the Partnership shall be converted into limited Partnership Interests, provided that, no representative of such Limited Partner will be entitled to a vote with respect to such Partnership Interests to the extent the voting thereof is controlled by Loral SpaceCom pursuant to Section 6.4 of the LQSS Partnership Agreement. SECTION 12.2. Right of the Managing General Partner to Become a Limited Partner. The Managing General Partner may -64- 69 become a Limited Partner by either (i) converting some but not all of its Partnership Interests to limited Partnership Interests or (ii) acquiring limited Partnership Interests and thereby become entitled to all of the rights of a Limited Partner to the extent of the limited Partnership Interest so converted or acquired, and the Consent of the Partners need not be obtained. Such event shall not be deemed to reduce any of the Managing General Partner's liability hereunder and will not prevent the Managing General Partner from continuing to act as a General Partner. Any transfer by the Managing General Partner of such limited Partnership Interests shall be subject to the provisions of Section 10.2(b)-(d). The Managing General Partner's Capital Contribution referred to in Section 4.1 hereof will be made in its capacity as General Partner and such Capital Contribution will not entitle the Managing General Partner to any rights of a Limited Partner, including those set forth in Article VII hereof. SECTION 12.3. Withdrawal of Limited Partner. A Limited Partner who shall have withdrawn from the Partnership shall have no further rights hereunder. ARTICLE XIII. DISSOLUTION AND LIQUIDATION SECTION 13.1. Dissolution. The Partnership shall dissolve upon: (a) December 31, 2044; (b) the withdrawal of a General Partner, or any other event that results in its ceasing to be a General Partner such as the removal, bankruptcy or dissolution of the General Partner (other than by reason of a transfer pursuant to Section 10.2 or withdrawal effective following selection of a successor pursuant to Section 12.1) unless at the time LQSS or a successor to LQSS remains a general partner of the Partnership; (c) a sale of all or substantially all of the assets of the Partnership; (d) the bankruptcy or the dissolution (and commencement of winding up) of the Managing General Partner; (e) any other event that under the Delaware Act would cause its dissolution, except as otherwise provided herein; or (f) with the Consent of the Partners, as set forth in Section 6.2(b)(v). For purposes of this Section 13.1, bankruptcy of the Managing General Partner shall be deemed to have occurred when (i) it commences in good faith and under appropriate circumstances a -65- 70 voluntary proceeding or files in good faith and under appropriate circumstances an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any involuntary proceeding, which voluntary or involuntary proceeding seeks a liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect, (ii) it is adjudged bankrupt or insolvent, or has entered against it a final and non-appealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect, (iii) it executes and delivers a general assignment for the benefit of its creditors, (iv) it seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for it or for all or any substantial part of its properties, or (v) (1) any proceeding of the nature described in clause (i) above has not been dismissed 120 days after the commencement thereof or (2) the appointment without its consent or acquiescence of a trustee, receiver or liquidator appointed pursuant to clause (ii) above has not been vacated or stayed within 90 days of such appointment, or (3) such appointment is not vacated within 90 days after the expiration of any such stay. SECTION 13.2. Continuation of the Business of the Partnership after Dissolution. To the extent permitted by the Delaware Act, upon dissolution of the Partnership in accordance with Section 13.1(b), (d) or (e), the remaining Partners may elect to reconstitute the Partnership and continue its business on the same terms and conditions set forth in this Agreement if holders of a majority of the outstanding PPIs and a Majority in Interest of the Partners agree in writing (1) to continue the business of the Partnership and (2) to the appointment, if necessary, effective as of the date of withdrawal, of a successor Managing General Partner. Unless such an election is made within 90 days after dissolution, the Partnership shall conduct only activities necessary to wind up its affairs. If such an election is made within 90 days after dissolution, then: (a) the reconstituted Partnership shall continue unless earlier dissolved in accordance with this Article XIII; and (b) all necessary steps shall be taken to cancel this Agreement and the Certificate of Limited Partnership and to enter into a new partnership agreement and certificate of limited partnership, and the successor Managing General Partner or GTL, as the case may be, may for this purpose exercise the powers of attorney granted pursuant to Section 1.4 or such similar provision in the new partnership agreement. SECTION 13.3. Winding Up and Liquidation. (a) Upon dissolution of the Partnership other than pursuant to Section 6.13, unless the Partnership is continued under an election to reconstitute and continue the Partnership pursuant to Section 13.2, the Managing General Partner or, in the event the Managing General Partner has been dissolved or removed, has become bankrupt as defined in Section 13.1 or has withdrawn from the -66- 71 Partnership, a liquidator or liquidating committee selected by Consent of the Partners, shall be responsible for the winding up of the affairs of the Partnership and the distribution of its assets. The Person or Persons who assume such responsibility (whether they be the Managing General Partner or not) are referred to herein as the "Liquidator." In connection with a winding up of the affairs of the Partnership, the Liquidator shall cause an accounting to be made of the assets and liabilities of the Partnership. If any liability is contingent or uncertain in amount, a reserve will be established in such amount as the Liquidator deems reasonably necessary. Upon satisfaction or other discharge of such contingency, the amount of the reserve not required, if any, will be distributed as provided in this Section 13.3. (b) The Liquidator (if other than the Managing General Partner) shall be entitled to receive such compensation for its services as may be approved by Consent of the Partners. The Liquidator shall agree not to resign at any time without fifteen (15) days' prior written notice and (if other than the Managing General Partner) may be removed at any time, with or without cause, by notice of removal signed by Consent of the Partners. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within thirty (30) days thereafter be selected by Consent of the Partners. The right to appoint a successor or substitute Liquidator in the manner provided herein shall be recurring and continuing for so long as the functions and services of the Liquidator are authorized to continue under the provisions hereof, and every reference herein to the Liquidator will be deemed to refer also to any such successor or substitute Liquidator appointed in the manner herein provided. Except as expressly provided in this Article XIII, the Liquidator appointed in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the Committee under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers) to the extent necessary or desirable in the good faith judgment of the Liquidator to carry out the duties and functions of the Liquidator hereunder for and during such period of time as shall be reasonably required in the good faith judgment of the Liquidator to complete the winding up and liquidation of the Partnership as provided for herein. (c) The Liquidator shall liquidate the assets of the Partnership, and apply and distribute the proceeds of such liquidation in the following order of priority, unless otherwise required by mandatory provisions of applicable law: (i) to the payment of Partnership creditors, including Partners in respect of loans or guaranteed payments, in order of priority provided by law; -67- 72 (ii) to the establishment of reasonable reserves for contingencies; and (iii) to the Partners in proportion and to the extent of the positive balances in their respective Capital Accounts (determined after applying the provisions of Article V). (d) The Liquidator shall be authorized to sell any, all or substantially all of the assets of the Partnership for deferred payment obligations, and to hold, collect and otherwise administer any such obligations or any other deferred payment obligations held or acquired as assets of the Partnership, regardless of the terms of such obligations. (e) A reasonable time, including, without limitation, any time required to collect deferred payment obligations, shall be allowed for the orderly liquidation of the assets of the Partnership and the discharge of liabilities to creditors so as to enable the Liquidator to minimize the normal losses attendant upon the liquidation. Upon the Liquidator's compliance with the foregoing distribution plan, the Partners shall execute, acknowledge, swear to and cause to be filed a Certificate of Cancellation of the Partnership. Except as otherwise expressly provided herein, the General Partners shall not be personally liable for the return of the original investment or contributions of the Limited Partners, or any portion thereof. Any such return shall be made solely from Partnership assets and in accordance with the express provisions hereof. (f) If, in the process of collecting any deferred payment obligation generated by a sale of assets of the Partnership, the Partnership reacquires any such assets, and if, at such time, there is a Managing General Partner and the same so determines, the Partnership shall be reconstituted with the Consent of the Partners upon the terms and conditions hereof. SECTION 13.4. Cancellation of Certificate of Limited Partnership. Upon the completion of the distribution provided for in Section 13.3, the Partnership shall be terminated, and the Liquidator (or the General Partners and the Limited Partners if necessary) shall cause the cancellation of the Certificate of Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware and shall take such other actions as may be necessary to terminate the Partnership. SECTION 13.5. Return of Capital. Except as otherwise expressly provided herein, the General Partners shall not be personally liable for the return of the Capital Contribution of the Limited Partners, or any portion thereof, it being expressly understood that any such return shall be made solely from Partnership assets. -68- 73 SECTION 13.6. Waiver of Partition. Each Partner hereby waives any rights to partition of Partnership property. SECTION 13.7. Deficit Upon Liquidation. Upon liquidation, the Partners shall not be obligated to the Partnership for any deficit in their Capital Accounts. ARTICLE XIV. AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE SECTION 14.1. Amendments to be Adopted Without Consent of the Partners. The Partnership (pursuant to powers of attorney granted under Section 1.4 hereof), without the Consent of the Partners, may amend any provision of this Agreement, and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect: (a) a change in the name of the Partnership approved with the Consent of the Partners or a change in the location of the principal place of business of the Partnership; (b) a change that the Partnership, based upon the opinion of outside counsel, furnished to all the Partners, has determined to be reasonable and necessary or advisable (i) to qualify or continue the qualification of the Partnership as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or (ii) to ensure that the Partnership will not be treated other than as a partnership for federal income tax purposes; (c) a change (i) that the Partnership, based upon the opinion of outside counsel, furnished to all the Partners, has determined is necessary or desirable to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute, compliance with any of which the Partnership deems to be in the best interests of the Partners, or (ii) that is expressly required or expressly contemplated by this Agreement or is otherwise herein expressly permitted to be made by the Partnership; (d) immaterial amendments to correct any mistake or clear omission or to reflect the surrender of any rights or the assumption of any additional responsibilities by the General Partners; or (e) any amendment necessary to give effect to the issuance and sale of Additional Partnership Interests permitted by Sections 4.4 and 4.10 hereof or to give effect to the admission of any Additional Limited Partners pursuant thereto, including -69- 74 such amendments to Article V hereof as are necessary to give effect to any allocations of Income or Loss to the holder of such Additional Partnership Interests and any distributions to be made to such holders and do not adversely affect the other Partners. SECTION 14.2. Amendment Procedures. Except as provided in Section 14.1, all amendments to this Agreement shall be made in accordance with the following requirements. Subject to Sections 6.2(b)(i) and 14.1, any proposed amendment shall be effective only upon the consent of the Committee and the Consent of the Partners, provided, that no amendment adversely affecting the capital account or other economic rights of any Partner shall be made without such Partner's consent. Promptly after the adoption of an amendment to this Agreement as provided hereunder, the Partnership shall forward a copy of such amendment to each Partner. ARTICLE XV. GENERAL PROVISIONS SECTION 15.1. Addresses and Notices. The address of each Partner for all purposes shall be the address as set forth on the signature page of this Agreement or such other address of which each other Partner has received written notice. All notices, requests, demands and other communications required or permitted to be given under this Agreement shall be sent to the party to whom the notice is to be given, by telex, fax (confirmed by first class mail, postage prepaid), telegram or first class mail, postage prepaid and properly addressed as provided in this Agreement (in each case such notice shall be deemed to have been duly given on the day the notice is first received by that party) or to such other address or Person as may be designated by a party, by notice given in accordance with this Section. SECTION 15.2. Titles and Captions. All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to "Articles" and "Sections" are to Articles and Sections of this Agreement. SECTION 15.3. Pronouns and Plurals. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. SECTION 15.4. Further Action. (a) The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement. -70- 75 (b) At any time or times, upon the request of the Partnership, the Partners hereby agree to sign and swear to any certificate required by Delaware or other applicable law, to sign and swear to any amendment to or cancellation of any such certificate whenever such amendment or cancellation is required by or appropriate under law, to sign and swear to or acknowledge similar certificates or affidavits or certificates of fictitious firm name, trade name or the like (and any amendments or cancellations thereof) required by or appropriate under the laws of Delaware or any other jurisdiction in which the Partnership does or proposes to do business, and cause the filing of any of the same for record wherever such filing shall be required by law. SECTION 15.5. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns. SECTION 15.6. Integration. This Agreement together with the Subscription Agreement entered into by each Partner or the assignor of its Partnership Interests and the Mutual Non-Disclosure Agreement dated January 11, 1994, entered into by and among the Partnership and certain of its Partners (the "Mutual Non-Disclosure Agreement"), constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto. SECTION 15.7. Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Partnership. SECTION 15.8. Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition. SECTION 15.9. Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto independently of the signature of any other party. SECTION 15.10. Dispute Resolution. (a) The Parties shall attempt to resolve by good faith and diligent negotiation any dispute, controversy or claim between them arising out of or relating to this Agreement, or the breach, termination or invalidity thereof. If such negotiations are not concluded within 30 days of a Party's request for negotiations, a Party may (other than with respect to a controversy arising pursuant to Section 12.1 hereof) initiate arbitration as provided for below. -71- 76 (b) International Arbitration. Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, that involves a non-U.S. Party and that has not been amicably resolved pursuant to the procedures of Section 15.10(a), shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force. The language of the arbitration proceedings shall be English. The number of arbitrators shall be one. If such an international arbitration is initiated by the Partnership, the place of arbitration shall be Geneva, Switzerland, the appointing authority shall be the Chamber of Commerce and Industry of Geneva; and any arbitrator appointed by the appointing authority shall be a retired Swiss federal or cantonal judge of a federal or cantonal court of general jurisdiction or any court having appellate jurisdiction over such a court. If the arbitration is initiated by GTL or the Limited Partners, the place of arbitration shall be New York, New York; the appointing authority shall be the American Arbitration Association; and any arbitrator appointed by the appointing authority shall be a retired United States federal judge or a retired state court judge of a federal or state court of general jurisdiction or any court having appellate jurisdiction over such a court. (c) U.S. Arbitration. Any dispute, controversy or claim arising out of or related to this Agreement, or the breach, termination or invalidity thereof, that involves only U.S. Parties and that has not been amicably resolved pursuant to the procedures of Section 15.10(a), shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force. The language of the arbitration proceedings shall be English. The number of arbitrators shall be one. If the arbitration is initiated by the Partnership, the place of arbitration shall be San Francisco, California. If the arbitration is initiated by the Limited Partners, the place of arbitration shall be New York, New York. The appointing authority shall be the American Arbitration Association. Any arbitrator appointed by the appointing authority shall be a retired United States federal judge or a retired state court judge of a federal or state court of general jurisdiction or any court having appellate jurisdiction over such a court. (d) Resolution of Common Issues. If at any time there is pending an arbitration under this Section 15.10 and such arbitration involves one or more significant issues of law or fact the resolution of which a Partner desires binding on some or all its Partners, the Partnership may give written notice to such Partners identifying the issue of law or fact the resolution of which the Partnership desires to be so binding and inviting each Partner to join in such arbitration as provided in this Section 15.10(d). Each Partner which shall have received such a notice shall have the right (but shall not be obligated) to become a party to such arbitration for the limited purpose of the resolution of such issue of law or fact. The arbitrator in such arbitration may supplement and alter the UNCITRAL Rules in their application to such arbitration as may be necessary or appropriate to accommodate -72- 77 the multi-party nature of the arbitration and to ensure the just, expeditious, economical and final determination of the dispute. The award in any such arbitration shall be final and binding, as to resolution of the issues of fact and law decided therein and identified in the notice from the Partnership given pursuant to this Section 15.10(d), on all of the Partners who were given notice of such arbitration and an opportunity to participate as parties therein, whether or not they participated in such arbitration. (e) Enforcement. Arbitral awards under this Section 15.10 shall be final and binding, and shall be enforceable in any court having jurisdiction. SECTION 15.11. Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW. REFERENCES HEREIN TO TEMPORARY OR FINAL TREASURY REGULATIONS ALSO REFER TO CORRESPONDING PROVISIONS OF SUCCESSOR AND SUPERSEDING REGULATIONS. SECTION 15.12. Confidentiality. (a) For purposes of this Agreement, "Confidential Information" shall mean all oral, written and/or tangible technical, financial, business and/or any other information of whatever kind created by the Partnership or disclosed by a Partner or its Affiliate or the Partnership (in any case "Owner") to a receiving party ("Recipient") which is confidential, proprietary and/or not generally available to the public, including, but not limited to, information relating, in whole or in part, to present and future services related to the Partnership's business, business plans and strategies, marketing ideas and concepts, pricing, volume estimates, financial data, market testing information, development plans, specifications, configurations, designs, plans, drawings, apparatus, sketches, software, hardware, data, connecting requirements or other technical and business information. Confidential Information provided by Owner shall remain the sole and exclusive property of Owner. (b) During the term of this Agreement, and until the fifth anniversary of the termination thereof, or in the event of the transfer by a Partner of all of its Partnership Interests prior to the termination of this Agreement, until the fifth anniversary of such transfer, Confidential Information: (i) shall be treated in confidence by Recipient and shall be used only for purposes of Recipient's performance of its obligations under this Agreement, or any other written agreement between Owner and Recipient entered into subsequent to the Effective Date or the GTL Effective Date, as the case may be, in connection with the Partnership's business; (ii) shall not be reproduced or copied in whole or in part, except as necessary for use as authorized herein; and -73- 78 (iii) shall be disseminated only to those of its and its Affiliates' employees, agents and subcontractors who have a need to know it (and such employees, agents and subcontractors shall be advised of the obligations assumed herein). Recipient shall ensure by appropriate procedures that those employees, agents and subcontractors to whom Confidential Information is disseminated or disclosed treat such Confidential Information in confidence pursuant to this paragraph. (c) Notwithstanding the foregoing, information shall not be deemed Confidential Information and Recipient shall have no obligation with respect to any such information which: (i) is or was in the possession of the Recipient at the time of disclosure by Owner, and was not previously acquired by the Recipient directly or indirectly from Owner under an obligation to keep such information confidential; or (ii) is or becomes publicly known, through no negligence or other wrongful act of Recipient; or (iii) is received by Recipient from a third party having, to the best knowledge of the Recipient, a lawful right to disclose, subject to, as to disclosed information, any restriction as to use, imposed by such third party; or (iv) is independently developed by Recipient, as evidenced by its records. (d) Upon the termination of this Agreement, or upon a transfer by a Partner of its Partnership Interest, written Confidential Information will be returned to Owner or destroyed immediately upon the request of Owner, and no copies, extracts or other reproductions shall be retained by Recipient. All documents, memoranda, notes and other writings whatsoever prepared by Recipient which contain the Confidential Information shall be returned to Owner or destroyed at Owner's request. The redelivery or destruction of such materials shall not relieve Recipient of its obligation of confidentiality or other obligations hereunder. (e) If Recipient (or its Affiliate) is required by order of any competent authority (by oral questions, interrogatories, directions, requests for information or documents, subpoena, civil investigative demand or similar process) to disclose any Confidential Information, Recipient will promptly notify Owner of such order or requirement and shall cooperate with Owner in seeking appropriate protective arrangements requested by Owner. If, in the absence of a protective order or the receipt of a waiver hereunder, Recipient (or any of its Affiliates) is in the written opinion of Recipient's counsel compelled to disclose the Confidential Information or else stand liable for contempt or suffer other censure or significant penalty, Recipient (or its Affiliate) may disclose only so much of the Confidential Information to the -74- 79 authority compelling disclosure as is required by law. Recipient will exercise (and will cause its Affiliate to exercise) reasonable efforts to obtain appropriate protective arrangements or other reliable assurance that confidential treatment will be accorded to Confidential Information. (f) The terms and conditions of this Agreement and all exhibits, attachments and amendments hereto and thereto shall be considered Confidential Information protected under this Section 15.12. (g) Notwithstanding anything in this Section 15.12 to the contrary, in the event that any Confidential Information is also subject to a limitation on disclosure or use contained in another written agreement between Owner and Recipient which is more restrictive than the limitations contained in this Section 15.12, then the limitation in such agreement shall supersede this Section 15.12. (h) The Partners hereby agree that within six months of the date of this Agreement, they shall conform the provisions set forth in this Section 15.12 with those contained in the Mutual Non-Disclosure Agreement and any other agreement relating to confidentiality that may be in effect among the parties hereto. SECTION 15.13. Invalidity of Provisions. If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby, unless the effect would be to materially and adversely affect the economic rights of any Partner. -75- 80 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. LORAL/QUALCOMM SATELLITE SERVICES, L.P. Managing General Partner By: /s/ Michael B. Targoff --------------------------------- Name: Michael B. Targoff Title: Senior Vice President GLOBALSTAR TELECOMMUNICATIONS LIMITED General Partner By: /s/ Michael B. Targoff --------------------------------- Name: Michael B. Targoff Title: Senior Vice President AIRTOUCH SATELLITE SERVICES Limited Partner By: /s/ Eric J. Zahler --------------------------------- Eric J. Zahler as Attorney-In Fact Address for Notices: One California Street San Francisco, CA 94105 SAN GIORGIO S.p.A. Limited Partner By: /s/ Eric J. Zahler --------------------------------- Eric J. Zahler as Attorney-In Fact Address for Notices: Viale Maresciallo Pilsudski 92 00197 Roma, Italy -76- 81 HYUNDAI/DACOM Limited Partner By: /s/ Eric J. Zahler --------------------------------- Eric J. Zahler as Attorney-In Fact Address for Notices: c/o Hyundai Electronics Industries Co., Ltd. San 136-1, Ami-ri, Bubal-eub Ichon-Kun, Kyungki-do 467-860 Korea LORAL/DASA GLOBALSTAR, L.P. by LORAL GLOBALSTAR, L.P., its general partner by LORAL GENERAL PARTNER, INC., its general partner Limited Partner By: /s/ Michael B. Targoff --------------------------------- Name: Michael B. Targoff Title: Vice President Address for Notices: 3825 Fabian Way Palo Alto, CA 94303 LORAL GLOBALSTAR, L.P. by LORAL GENERAL PARTNER, INC., its general partner Limited Partner By: /s/ Michael B. Targoff --------------------------------- Name: Michael B. Targoff Title: Vice President Address for Notices: 3200 Zanker Road San Jose, CA 95164 -77- 82 TE.SA.M. Limited Partner By: /s/ Eric J. Zahler --------------------------------- Eric J. Zahler as Attorney-In Fact Address for Notices: 66, avenue du Maine 75014 Paris France VODASTAR LIMITED Limited Partner By: /s/ Eric J. Zahler --------------------------------- Eric J. Zahler as Attorney-In Fact Address for Notices: c/o Vodafone Group PLC The Courtyard 2-4 London Road Newbury, Berkshire RG13 1JL United Kingdom -78- 83 SCHEDULE A SCHEDULE OF PARTNERS
Partner Capital Contribution Interests ------- -------------------- --------- AirTouch Satellite $ 37,500,000 3,000,000 OPIs Services San Giorgio S.A. $ 18,750,000 1,000,000 OPIs GTL $186,000,000* 10,000,000 OPIs 4,769,231 PPIs HyunCorp see Footnote No. 1 300,000 OPIs HyunElect see Footnote No. 1 2,100,000 OPIs DACOM see Footnote No. 1 450,000 OPIs DACOM International see Footnote No. 1 150,000 OPIs Loral/DASA $ 37,500,000 3,000,000 OPIs GlobalStar, L.P. Loral Space & $ 37,500,000 3,000,000 OPIs Communications Ltd. LQSS $ 50,000,000 18,000,000 OPIs TESAM $ 37,500,000 3,000,000 OPIs Vodastar Limited $ 37,500,000 3,000,000 OPIs
- -------------------- * Plus the net proceeds from the CPEO Offering as described in the Offering Memorandum. 1. The initial contribution of $ 37,500,000 was made by Hyundai/DACOM. 84 SCHEDULE B RELATED PARTY TRANSACTIONS 1. Contract for the Development of Certain Portions of the Ground Operations Control Center between Globalstar and Loral Western Development Laboratories, a division of Loral Aerospace Corp. as outlined in the request for Consent of Disinterested Partners, dated May 2, 1994. 2. Contract for the Development of Satellite Orbital Operations Centers between Globalstar and Loral Aerosys, a division of Loral Aerospace Corp. 3. Office Lease between Globalstar and Loral Western Development Laboratories. 4. Subcontract Providing Work for Hyundai, dated April 29, 1994, between Globalstar, SS/L and Hyundai. 5. Support Agreement (completed), dated August 26, 1994, between Globalstar and AirTouch. 85 SCHEDULE C ARTICLE I Covenants SECTION 1.1. Distributions on PPIs. Cumulative accrued distributions shall be payable on the PPIs as set forth in Section 5.5(a)(ii) of this Agreement on each Scheduled Distribution Payment Date commencing on June 1, 1996 (or, if such date is not a Business Day, on the next succeeding Business Day). Subject to Section 5.5 of this Agreement, distributions on the PPIs shall occur, as and if designated by the Committee in its sole discretion. Distributions on the PPIs will accrue on a daily basis (360 day year and twelve 30-day months) (without interest or compounding) whether or not there are unrestricted funds legally available for the payment of such distributions and whether or not such distributions are declared. Distribution Arrearages shall also not accrue interest. SECTION 1.2. Payment of Redemption Price and Distributions. (a) The Partnership will duly and punctually pay or cause to be paid by no later than one Business Day prior to the date such payment is due the Redemption Price of, and Scheduled Distributions, including any Distribution Make-Whole Payment, on the PPIs, in accordance with the terms of this Agreement; provided, however, that the Partnership may defer paying Scheduled Distributions on any Scheduled Distribution Payment Date if the Committee so determines in its sole discretion, but so long as any Distribution Arrearage remains outstanding, except as set forth in Section 5.5(a)(iv) of this Agreement and Section 4.1 of this Schedule C, the Partnership will be prohibited from paying distributions on (i) its OPIs or (ii) preferred partnership interests that may be issued in the future other than pro rata based on the redemption amount of such preferred partnership interests. (b) The Partnership may elect, at its option, to pay the Redemption Price of, and Scheduled Distributions, including any Distribution Make-Whole Payment, on the PPIs, (i) in cash, (ii) by delivery of OPIs (in the manner described in paragraph (c) of this Section 1.2) or (iii) through any combination of the foregoing forms of consideration elected by the Committee in its sole discretion. (c) If the Partnership elects to deliver any OPIs in lieu of a cash payment on the applicable date of payment, the Partnership shall deliver, in the aggregate, the number of OPIs equal to (i) the amount of payment that is not being paid in cash, (ii) divided by: (A) in the case of Scheduled Distributions and any Distribution Make-Whole Payment, 90% of the Average Market Value of the GTL Common Stock; (B) in the case of all other payments, 100% of the Average Market Value of the GTL Common Stock; provided, however, if the Partnership shall have 86 received a GTL Interest Payment Notice or a GTL Response Redemption Notice which indicates that GTL shall have elected to make its corresponding payment from the proceeds from the sale of any issuance of GTL Common Stock, then the valuation of the OPIs to be issued by the Partnership pursuant to Section 1.2(b)(ii) shall be based upon the actual price at which such GTL Common Stock is sold. (d) The Partnership shall deliver a Globalstar Interest Notice to GTL 20 Business Days prior to the applicable Scheduled Distribution Payment Date. SECTION 1.3. Certain Accompanying Payments. PPIs surrendered for conversion during the period from the close of business on any Regular Record Date next preceding any Distribution Payment Date to the opening of business on such Distribution Payment Date (except PPIs called for redemption on a Redemption Date within such period) must be accompanied by payment in cash of an amount equal to the distribution thereon which GTL is entitled to receive; provided, that no payment shall be owed or payable to GTL if the Committee shall have elected to defer the distribution to be made on such Distribution Payment Date. No other adjustment for distributions, including any Distribution Arrearages, is to be made upon conversion. ARTICLE II Redemption of PPIs SECTION 2.1. Right of Redemption; Mechanics of Redemption. (a) The PPIs may be redeemed, pursuant to either a Provisional Redemption (as described in Section 2.6 of this Schedule C, any such Provisional Redemption shall include the Distribution Make-Whole Payment) or Optional Redemption (as described in Section 2.7 of this Schedule C), at the election of the Partnership, in whole or from time to time in part and shall be redeemed at the Mandatory Redemption Date, at the Redemption Prices specified in this Article II, together with accrued Scheduled Distributions to the Redemption Date. (b) The Partnership shall deliver a Globalstar Redemption Notice to GTL 20 Business Days prior to any such Redemption Date. SECTION 2.2. Selection by the Managing General Partner of PPIs to be Redeemed. If any PPI selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the PPI so selected, the converted portion of such PPI shall be deemed (so far as may be) to be the portion selected for redemption. PPIs which have been converted during a selection of PPIs to be redeemed shall be treated by the Managing General Partner as Outstanding for the purpose of such selection, but not for the purpose of paying the Redemption Price thereof. -2- 87 For all purposes of this Agreement, unless the context otherwise requires, all provisions relating to the redemption of PPIs shall relate, in the case of any PPIs redeemed or to be redeemed only in part, to the portion of the redemption amount of such PPI which has been or is to be redeemed. SECTION 2.3. Notice of Redemption. Whenever a Globalstar Redemption Notice is required to be delivered to GTL, such Notice shall state: (1) the Redemption Date; (2) the Redemption Price; (3) if less than all the Outstanding PPIs are to be redeemed, the identification (and, in the case of partial redemption, the redemption amounts) of the particular PPIs to be redeemed; (4) that on the Redemption Date the Redemption Price, together with (unless the Redemption Date shall be a Scheduled Distribution Payment Date) distributions accrued and unpaid to the Redemption Date, will become due and payable upon each such PPI to be redeemed and that distributions thereon will cease to accrue on and after said date; (5) the Conversion Ratio, the date on which the right to convert the Stated Value of the PPIs to be redeemed will terminate and the place or places where such PPIs may be surrendered for conversion; and (6) the place or places where such PPIs are to be surrendered for payment of the Redemption Price. SECTION 2.4. Deposit of Redemption Price. Prior to any Redemption Date, the Partnership shall deposit with the Trustee or with GTL's paying agent (or, to GTL if GTL is acting as its own paying agent with respect to the CPEOs) an amount of consideration sufficient to pay, in the case of a cash payment, or deliver, in the case of delivery of OPIs, the Redemption Price of and (except if the Redemption Date shall be a Scheduled Distribution Payment Date) the accrued Scheduled Distribution on all the PPIs which are to be redeemed on that date (other than any PPIs called for redemption on that date which have been converted prior to the date of such deposit, except with respect to any applicable Distribution Make-Whole Payment). If any PPI called for redemption is converted, any cash or OPIs deposited with the Trustee, GTL's paying agent or with GTL shall (subject to any right of GTL to receive distributions as provided in Section 1.3 of this Schedule C) be paid or delivered to the Partnership upon its request. Any Distribution Make-Whole -3- 88 Payment will be paid to GTL on the date of conversion or Redemption Date, as the case may be. SECTION 2.5. PPIs Payable on Redemption Date. Notice of redemption having been given as aforesaid, the PPIs so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Partnership shall default in the payment of the Redemption Price and accrued Scheduled Distributions, including any Distribution Make-Whole Payment) no further distributions shall be payable or accrue with respect to such PPIs. Upon surrender of any such PPI for redemption in accordance with said notice, such PPI shall be paid, subject to Section 1.3, by the Partnership at the Redemption Price, together with accrued Scheduled Distributions to the Redemption Date. If any PPI called for redemption shall not be so paid upon surrender thereof for redemption, the Redemption Price (but not any unpaid Scheduled Distributions or any Distribution Make-Whole Payment) shall, until paid, bear interest from the Redemption Date at 6 1/2% per annum. SECTION 2.6. Provisional Redemption. The Partnership may redeem, in whole or in part (a "Provisional Redemption"), at any time prior to March 2, 1999, at the Redemption Price of 103% of the aggregate Stated Value of the PPIs to be redeemed plus accrued and unpaid Scheduled Distributions, if any, to the date of Provisional Redemption (the "Provisional Redemption Date"), in the event that the Current Market Value of the GTL Common Stock equals or exceeds the following Trigger Percentages of the GTL Conversion Price for at least 20 Trading Days in any consecutive 30 Trading Day period ending on the Trading Day prior to the date of mailing of the Globalstar Redemption Notice if called for Provisional Redemption in the 12-month period ending March 1 of the following years: Year Trigger Percentage ---- ------------------ 1997 170% 1998 160% 1999 150% Upon any Provisional Redemption, the Partnership shall make the Distribution Make-Whole Payment with respect to the PPIs called for redemption. The Partnership shall make the Distribution Make-Whole Payment on all PPIs called for Redemption, regardless of whether such PPIs are converted prior to the Provisional Redemption Date. SECTION 2.7. Optional Redemption. Commencing March 2, 1999, the PPIs will be redeemable at any time, in whole or in part, at the election of the Partnership (the "Optional Redemption"), at a Redemption Price equal to the percentage of the Stated Value set forth below plus accrued and unpaid Scheduled Distributions, if any, to the date of Optional -4- 89 Redemption (the "Optional Redemption Date") if redeemed in the 12-month period ending March 1 of the following years: Year Redemption Price ---- ---------------- 2000 103% 2001 102% 2002 101% and thereafter at a Redemption Price equal to 100% of the Stated Value plus accrued and unpaid Scheduled Distributions, if any, to the Optional Redemption Date. SECTION 2.8. Mandatory Redemption. Each PPI (if not earlier redeemed or converted) will be mandatorily redeemed by the Partnership on the Mandatory Redemption Date at a Redemption Price of 100% of the Stated Value plus accrued and unpaid Scheduled Distributions, if any (including all Distribution Arrearages), to the Mandatory Redemption Date. ARTICLE III Conversion of PPIs SECTION 3.1. Conversion Privilege and Conversion Price. Subject to and upon compliance with the provisions of this Article, one PPI shall be convertible into one OPI (the "Conversion Ratio") which Conversion Ratio shall be adjusted in certain circumstances as provided in Section 3.4. Upon any conversion of CPEOs by a holder thereof, GTL shall convert a proportionate amount of PPIs into OPIs. Such conversion right shall expire at the close of business on the Business Day preceding the Mandatory Redemption Date. In case a PPI or portion thereof is called for redemption, such conversion right in respect of the PPI or portion so called shall expire at the close of business on the Business Day preceding the Redemption Date, unless the Partnership defaults in making the payment due upon redemption. SECTION 3.2. Exercise of Conversion Privilege. PPIs surrendered for conversion during the period from the close of business on any Regular Record Date next preceding any Scheduled Distribution Payment Date to the opening of business on such Scheduled Distribution Payment Date shall (except in the case of PPIs or portions thereof which have been called for redemption on a Redemption Date within such period) be accompanied by payment in New York Clearing House funds or other funds acceptable to the Partnership of an amount equal to the Scheduled Distribution payable on such Scheduled Distribution Payment Date on the Stated Value of PPIs being surrendered for conversion. Except as provided in the preceding sentence and subject to Section 1.3 of this Schedule, no payment or adjustment shall be made upon any conversion on account of any Scheduled Distribution accrued on the PPIs surrendered for conversion or on account of any Scheduled Distributions on the OPIs issued upon conversion. In -5- 90 no event shall the Partnership be obligated to pay any converting Holder any unpaid Distribution Arrearages upon conversion. PPIs shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such PPIs for conversion in accordance with the foregoing provisions, and at such time the rights of GTL with respect to such PPIs shall cease, and OPIs issuable upon conversion shall be treated for all purposes as having been issued at such time. SECTION 3.3. Fractions of Interests. In the event that GTL shall be required to pay a cash adjustment in lieu of any issuance of fractional interests in GTL Common Stock as provided in the Indenture and GTL shall not have cash available to make such payment, then the Partnership shall make a cash distribution to GTL, in lieu of a payment of such amount in OPIs under this Agreement and to the extent that funds shall be legally available thereof, to allow GTL to make such cash adjustments. SECTION 3.4. Adjustment of Conversion Ratio. Upon an adjustment of the GTL Conversion Price (a "GTL Adjustment Event"), the Conversion Ratio shall be adjusted so that the ratio of the number of OPIs issuable upon conversion of a PPI after the GTL Adjustment Event to the number of shares of Common Stock issuable upon conversion of a CPEO after the GTL Adjustment Event shall equal the ratio of the number of OPIs issuable upon conversion of a PPI immediately prior to the GTL Adjustment Event to the number of shares of Common Stock issuable upon conversion of a CPEO immediately prior to the GTL Adjustment Event. SECTION 3.5. Provisions in Case of Consolidation, Merger or Conveyance or Transfer of Properties and Assets. In case of any consolidation of the Partnership with, or merger of the Partnership into, any other partnership or other business entity, or in case of any merger of another partnership or other business entity into the Partnership (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding Partnership Interests or a transaction governed by Section 6.13 of this Agreement), or in case of any conveyance or transfer of the properties and assets of the Partnership substantially as an entirety, the partnership, corporation, or other business entity formed by such consolidation or resulting from such merger or which acquires by conveyance or transfer such properties and assets, as the case may be, shall execute and deliver to GTL an agreement providing that GTL shall have the right thereafter, during the period PPIs shall be convertible as specified in this Article III, to convert such PPIs only into the kind and amount of securities, cash and other property receivable upon such -6- 91 consolidation, merger, conveyance or transfer by a Partner holding OPIs immediately prior to such consolidation, merger, conveyance or transfer, assuming such Partner failed to exercise its rights of election, if any, as to the kind or amount of partnership interests, securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer (provided that, if the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer is not the same for each unit of Ordinary Partnership Interests in respect of which such rights of election shall not have been exercised ("nonelecting share"), then for the purpose of this Section the kind and amount of partnership interests, cash and other property receivable upon such consolidation, merger, conveyance or transfer by each nonelecting OPI shall be deemed to be the kind and amount so receivable per share by a plurality of the nonelecting OPIs). Such agreement shall provide for adjustments which, for events subsequent to the effective date of such agreement, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article. The above provisions of this Section shall similarly apply to successive consolidations, mergers, conveyances or transfers. The Partnership will not become a party to any consolidation or merger unless the terms of such consolidation or merger are consistent with this Section. SECTION 3.6. Taxes on Conversions. The Partnership will pay any and all taxes that may be payable in respect of the issue or delivery of OPIs on conversion of PPIs pursuant hereto. ARTICLE IV Subordination of PPIs SECTION 4.1. PPIs Subordinate to All Liabilities. The PPIs shall be subordinated and subject, to the extent and in the manner herein set forth, in right of payment to the prior payment in full of all existing and future liabilities of the Partnership, including without limitation: (i) certain distributions made to partners in respect of taxes levied upon the operations of Globalstar; (ii) distributions of the Management Fee; and (iii) guarantee fees to be made to partners and other persons in connection with their guarantee of the Partnership's obligations under the Globalstar Credit Agreement. SECTION 4.2. No Payments When Liabilities in Default; Payment Over of Proceeds upon Dissolution, etc. In the event the Partnership shall default in the payment of any liabilities of the Partnership when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise, then, unless and until such default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash or property, by setoff or otherwise) need be made or agreed to be made on account of the PPIs (excepting cash payment for fractional interests as set forth in Section 3.3 above). Upon the happening of an event of default with respect to any liability, as defined therein or in the instrument under which the same is outstanding, permitting the holders thereof to -7- 92 accelerate the maturity thereof (under circumstances when the terms of the preceding paragraph are not applicable), unless and until such event of default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash or property, by setoff or otherwise) need be made or agreed to be made on account of the PPIs (excepting cash payment for fractional interests as set forth in Section 3.3 above). In the event of: (a) any insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition or other similar proceeding relating to the Partnership or its property; (b) any proceeding for the liquidation, dissolution or other winding up of the Partnership or its property; (c) any assignment by the Partnership for the benefit of creditors; or (d) any other marshaling of the assets of the Partnership; all liabilities (including any interest thereon accruing after the commencement of any such proceedings) shall first be paid in full before any payment or distribution (direct or indirect), whether in cash or property, by setoff or otherwise, need be made on account of any PPIs. SECTION 4.3. Voting Rights. Except as required by law, the PPIs will not have any voting rights. Upon a GTL Deferral Trigger Event, (i) the number of members of the Committee will be increased by one and the holders of the CPEOs, voting separately as a class with the holders of any other securities upon which similar voting rights have been conferred and are exercisable, will be entitled to elect one representative to the Committee (the "CPE Representative"). The CPE Representative will promptly resign upon receipt of notice from GTL that all Distribution Arrearages with respect to the PPIs have been paid. -8- EX-10.12 4 CREDIT AGREEMENT 1 EXHIBIT 10.12 [Conformed As Amended] REVOLVING CREDIT AGREEMENT among GLOBALSTAR, L.P., CERTAIN BANKS, and CHEMICAL BANK, as Administrative Agent Dated as of December 15, 1995 As Amended on March 25, 1996 2 TABLE OF CONTENTS Page ---- SECTION 1. DEFINITIONS......................................................1 1.1 Defined Terms.............................................1 1.2 Other Definitional Provisions............................19 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS.................................20 2.1 Revolving Credit Commitments.............................20 2.2 Commitment/Loan Support..................................20 2.3 Procedure for Revolving Credit Borrowing.................23 2.4 Repayment of Loans; Evidence of Debt.....................24 2.5 Commitment Fees..........................................25 2.6 Termination, Reduction or Increase of Commitments..........................................25 2.7 Prepayments..............................................26 2.8 Conversion and Continuation Options......................28 2.9 Minimum Amounts of Tranches..............................28 2.10 Interest Rates and Payment Dates.........................29 2.11 Computation of Interest and Fees.........................29 2.12 Inability to Determine Interest Rate.....................30 2.13 Pro Rata Treatment and Payments..........................30 2.14 Illegality...............................................31 2.15 Other Costs; Increased Costs.............................32 2.16 Taxes....................................................34 2.17 Indemnity................................................36 2.18 Purpose..................................................36 SECTION 3. REPRESENTATIONS AND WARRANTIES..................................36 3.1 Financial Condition......................................36 3.2 No Change................................................37 3.3 Existence; Compliance with Law...........................37 3.4 Power; Authorization; Enforceable Obligations............37 3.5 No Legal Bar.............................................38 3.6 No Material Litigation...................................38 3.7 No Default...............................................38 3.8 Ownership of Property; Liens.............................38 3.9 Intellectual Property....................................39 3.10 No Burdensome Restrictions...............................39 3.11 Taxes....................................................39 3.12 Federal Regulations......................................39 3.13 ERISA....................................................40 3.14 Investment Company Act; Other Regulations................40 3.15 Subsidiaries.............................................40 3.16 Environmental Matters....................................40 3.17 Full Disclosure..........................................41 3.18 Solvency.................................................41 3.19 Security Interests; Guarantees...........................42 (i) 3 SECTION 4. CONDITIONS PRECEDENT............................................42 4.1 Conditions of Initial Loans...............................42 4.2 Conditions to all Loans...................................45 SECTION 5. AFFIRMATIVE COVENANTS...........................................46 5.1 Financial Statements......................................46 5.2 Certificates; Other Information...........................46 5.3 Payment of Obligations....................................47 5.4 Conduct of Business and Maintenance of Existence..........48 5.5 Maintenance of Property; Insurance........................48 5.6 Inspection of Property; Books and Records; Discussions..........................................48 5.7 Notices...................................................48 5.8 Environmental Laws........................................49 5.9 Additional Subsidiary Guarantors..........................50 5.10 Material Terms of Other Agreements Being More Restrictive..........................................50 SECTION 6. NEGATIVE COVENANTS..............................................50 6.1 Financial Condition Covenants.............................51 6.2 Indebtedness..............................................51 6.3 Limitation on Liens.......................................52 6.4 Limitation on Contingent Obligations.......................53 6.5 Limitation on Fundamental Changes.........................53 6.6 Limitation on Restricted Payments.........................54 6.7 Investments...............................................55 6.8 Limitation on Optional Payments and Modifications of Subordinated Debt and Other Debt Instruments...............................55 6.9 Affiliates................................................56 6.10 Partnership Documents....................................56 6.11 Restrictions on Subsidiaries.............................56 6.12 Restrictive Agreements...................................57 SECTION 7. ADDITIONAL NEGATIVE COVENANTS...................................57 7.2 Financial Condition Covenants.............................57 7.2 Sale and Leaseback........................................58 7.3 Limitation on Changes in Fiscal Year......................58 SECTION 8. EVENTS OF DEFAULT...............................................58 SECTION 9. THE ADMINISTRATIVE AGENT........................................62 9.1 Appointment...............................................62 9.2 Delegation of Duties......................................62 9.3 Exculpatory Provisions....................................62 9.4 Reliance by the Administrative Agent......................63 9.5 Notice of Default.........................................63 9.6 Non-Reliance on the Administrative Agent and Other Banks..........................................63 9.7 Indemnification...........................................64 9.8 The Administrative Agent in Its Individual Capacity.............................................65 (ii) 4 9.9 Successor Administrative Agent............................65 SECTION 10. MISCELLANEOUS..................................................65 10.1 Amendments and Waivers...................................65 10.2 Notices..................................................66 10.3 No Waiver; Cumulative Remedies...........................67 10.4 Survival of Representations and Warranties...............68 10.5 Payment of Expenses and Taxes............................68 10.6 Successors and Assigns; Participations; Purchasing Banks.....................................69 10.7 Adjustments; Set-off.....................................72 10.8 Severability..............................................73 10.9 Counterparts.............................................73 10.10 GOVERNING LAW...........................................73 10.11 Submission To Jurisdiction; Waivers.....................73 10.12 WAIVERS OF JURY TRIAL...................................74 10.13 Integration.............................................74 10.14 Confidentiality.........................................74 Schedules: SCHEDULE I - Commitments and Commitment Percentages SCHEDULE 5.5 - Insurance SCHEDULE 6.2 - Committed Vendor Financing SCHEDULE 6.9 - Affiliate Transactions (iii) 5 REVOLVING CREDIT AGREEMENT dated as of December 15, 1995, as amended on March 25, 1996, among GLOBALSTAR, L.P., a Delaware limited partnership (the "Borrower"), the several financial institutions parties from time to time to this Agreement (collectively, the "Banks"; individually, a "Bank") and CHEMICAL BANK, a New York banking corporation ("Chemical"), as administrative agent for the Banks hereunder (in such capacity, the "Administrative Agent"). W I T N E S S E T H : WHEREAS, the Borrower has requested the Banks to make revolving credit loans to the Borrower, the proceeds of which will be used to finance (i) the buildout of a global satellite communications system by the Borrower, (ii) interest payments when due on the Loans made pursuant to this Agreement and (iii) working capital needs; and WHEREAS, the Banks are willing to make such Loans to the Borrower upon the terms and subject to the conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms have the following meanings: "ABR Loans": Loans the rate of interest applicable to which is based upon the ABR. "ABR": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by Chemical as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by Chemical in connection with extensions of credit to debtors); "Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is one and the denominator of which is one minus the CD Reserve Percentage and (b) the CD Assessment Rate; "Three-Month Secondary CD Rate" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board of Governors of the Federal Reserve System (the "Board") through the public information telephone line of the Federal Reserve Bank of New 6 York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Administrative Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it; "CD Assessment Rate" shall mean, for any day, the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund maintained by the FDIC classified as well-capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. Section 327.3(d) (or any successor provision) to the FDIC for the FDIC's insuring time deposits at offices of such institution in the United States; "CD Reserve Percentage" shall mean, for any day, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board, for determining the maximum reserve requirement for a Depositary Institution (as defined in Regulation D of the Board) in respect of new non-personal time deposits in Dollars having a maturity of 30 days or more; and "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate, or both, for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms thereof, the ABR shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the ABR due to a change in the Prime Rate, the Three-Month Secondary CD Rate, the CD Reserve Percentage, the CD Assessment Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate, the Three-Month Secondary CD Rate, the CD Reserve Percentage, the CD Assessment Rate or the Federal Funds Effective Rate, respectively. "Acceptable Letter of Credit": a letter of credit, substantially in the form of Exhibit G hereto, which satisfies the following conditions: (A) such letter of credit supports a fixed amount of principal of the Loans plus up to 120 days of 2 7 accrued interest on such principal amount calculated at a rate equal to 8% per annum and based on an assumed year of 360 days, (B) such letter of credit is issued by a bank which has an unsecured senior long-term debt rating of at least A from S&P and A2 from Moody's, (C) the issuer of such letter of credit is approved by the Majority Banks at the time of issuance, which approval shall not be unreasonably withheld, (D) such letter of credit is issued for the account of one or more Partners, (E) such letter of credit is issued in favor of the Administrative Agent for the benefit of the Banks and (F) at the time of its delivery to the Administrative Agent (i) such letter of credit is accompanied by legal opinions, resolutions and comparable documents with respect to such letter of credit and the issuer thereof requested by the Administrative Agent and (ii) the Applicable Partner delivers to the Administrative Agent a Partner Cash Collateral Agreement, legal opinions, resolutions, financing statements and comparable documents with respect to such Applicable Partner and Partner Cash Collateral Agreement. A letter of credit shall not be an Acceptable Letter of Credit during any time that the condition set forth in clause (B) of the preceding sentence is not satisfied. "Additional Buildout Indebtedness": Indebtedness (including senior and subordinated debt securities and bank financing) of the Borrower or any of its Wholly-Owned Subsidiaries that is a Guarantor incurred or issued to finance the buildout of the Satellite Project and related costs which satisfies the following criteria: (i) none of such Indebtedness will mature (by scheduled payment or mandatory payment or prepayment) prior to the Termination Date; and (ii) such Indebtedness bears interest at a market rate of interest. Additional Buildout Indebtedness shall not include the vendor financing permitted under Sections 6.2(f) and (g). The Borrower shall designate Indebtedness as Additional Buildout Indebtedness at the time it is created or incurred. "Affiliate": with respect to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, a Person shall be deemed to be "controlled by" any other Person which possesses, directly or indirectly, power either to (i) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (ii) direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Agreement": this Revolving Credit Agreement, as amended, supplemented or modified from time to time. 3 8 "Applicable Margin": with respect to each day for each Eurodollar Loan, the rate of 0.625%. "Applicable Partner": with respect to (i) a Letter of Credit, the Partner Guarantor for whose account such Letter of Credit is issued and (ii) a Partner Collateral Account, the Partner Guarantor for whose separate account such Partner Collateral Account is established. "Arranger": Chemical Securities Inc. in its capacity as arranger of the Commitments. "Available Commitment": as to any Bank, at a particular time, an amount equal to such Bank's Commitment Percentage of the excess, if any, of (a) the aggregate Commitments at such time over (b) the aggregate outstanding principal amount of the Loans at such time; collectively, as to all the Banks, the "Available Commitments". "Borrowing Date": any day specified by the Borrower in a notice pursuant to Section 2.3 as a date on which the Borrower requests the Banks to make Loans hereunder. "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. "Cash Equivalents": (i) securities issued or directly and fully guaranteed or insured by the United States Government or any agency or instrumentality thereof having maturities of not more than twelve months from the date of acquisition, (ii) time deposits and certificates of deposit of any Bank or any domestic commercial bank having capital and surplus in excess of $500,000,000 the holding company of which has a commercial paper rating meeting the requirements specified in clause (iv) below having maturities of not more than twelve months from the date of acquisition, (iii) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (i) and (ii) entered into with any Bank or bank meeting the qualifications specified in clause (ii) above, (iv) commercial paper rated at least A-1 or the equivalent thereof by S&P or P-1 or the equivalent thereof by Moody's and in either case maturing within twelve months after the date of acquisition, (v) tax exempt obligations rated at least A2 or the equivalent thereof by Moody's and A or the equivalent thereof by S&P, (vi) money market mutual funds, and (vii) commercial paper (other than commercial paper referred to in the preceding clause (iv)) rated at least A-2 or the equivalent thereof by S&P or P-2 or the equivalent thereof by Moody's in an aggregate principal amount not in excess of 25% of the liquid assets of the Borrower and its consolidated Subsidiaries and in either case maturing within twelve months after the date of acquisition. "Change of Control": 4 9 (i) the sale, lease or transfer, in one transaction or a series of related transactions, of all or substantially all of the assets of the Borrower and its Subsidiaries; (ii) the adoption of a plan relating to the liquidation or dissolution of the Borrower or of one or more Subsidiaries which in the aggregate represent more than 50% of the total assets of the Borrower and its Subsidiaries; (iii) the failure of Loral Space & Communications Ltd. to own at least 70% of the equity interests in the Borrower that it owned, directly or indirectly, as of the date the Tender Offer (as defined in the Lockheed Martin Credit Agreement) is consummated, free and clear of Liens and other encumbrances; or (iv) the first day on which Loral Space & Communications Ltd. fails to be, or, directly or indirectly, fails solely to control, the sole managing general partner of the Borrower. "Closing Date": December 15, 1995. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all assets and property, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document. "Collateral Cash Equivalents": Cash Equivalents having a maturity of one year or less at the time of acquisition. "Commitment": as to any Bank, its obligation to make Loans to the Borrower in an aggregate principal amount not to exceed at any one time outstanding the amount set forth opposite such Bank's name in Schedule I hereto, as such amount may be reduced or increased from time to time as provided herein; collectively, as to all the Banks, the "Commitments". "Commitment Fee Rate": the rate of 0.25% per annum. "Commitment Increase Supplement:" a Commitment Increase Supplement, substantially in the form of Exhibit D-2. "Commitment Percentage": as to any Bank, the percentage of the aggregate Commitments constituted by such Bank's Commitment. "Commitment Period": the period from and including the date hereof to but not including the Termination Date. "Commitment Transfer Supplement": a Commitment Transfer Supplement, substantially in the form of Exhibit D-1. 5 10 "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 of the Code. "Consolidated EBITDA": with respect to the Borrower and its Subsidiaries for any period, the sum of the Consolidated Net Income for such period plus, to the extent deducted in computing such Consolidated Net Income, the sum of (i) income tax expense, (ii) interest expense (exclusive of interest income), (iii) depreciation and amortization expense and any other non-cash charges, and (iv) any extraordinary losses (minus extraordinary gains), all as determined on a consolidated basis in accordance with GAAP. "Consolidated Fixed Charges": for any period, the sum of: (a) Consolidated Cash Interest Expense; (b) Required amortization of Indebtedness, determined on a consolidated basis in accordance with GAAP, for the period involved and discount or premium relating to any such Indebtedness for any period involved, whether expensed or capitalized; and (c) Consolidated Lease Expense, determined without duplication of items included in Consolidated Cash Interest Expense, in each case of the Borrower and its Subsidiaries. "Consolidated Cash Interest Expense": for any period the amount of interest expense, both expensed and capitalized, of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, for such period on the aggregate principal amount of their Indebtedness, determined on a consolidated basis in accordance with GAAP, excluding any such interest which is paid-in-kind or accreted and not paid in cash. "Consolidated Lease Expense": for any period, the aggregate amount of fixed and contingent rentals payable by the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, for such period with respect to leases of real and personal property. "Consolidated Net Income": for any period, the consolidated net income (or deficit) of the Borrower and its Subsidiaries for such period (taken as a cumulative whole), determined in accordance with GAAP. "Consolidated Net Worth": at a particular date, all amounts which would be included under partners' equity on a consolidated balance sheet of the Borrower and its Subsidiaries 6 11 determined on a consolidated basis in accordance with GAAP as at such date. "Contingent Obligation": as to any Person, any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations quantified in accordance with the last sentence of this definition (the "primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the amount reasonably anticipated to be payable by the Borrower in respect of such Contingent Obligation as determined by the Borrower in good faith. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied, provided, however, that Section 6.1 shall not be the basis for a Default prior to the Release Date. "Dollars" and "$": dollars in lawful currency of the United States of America. "Domestic Lending Office": initially, the office of each Bank designated as such in Schedule I; thereafter, such other office of such Bank, if any, located within the United States which shall be making or maintaining ABR Loans. "Downgraded Letter of Credit": a Letter of Credit, the issuer of which no longer meets the minimum unsecured senior 7 12 long-term debt rating set forth in clause (B) of the definition of Acceptable Letter of Credit. "Environmental Laws": any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees or requirements of any Governmental Authority regulating, relating to or imposing liability or standards of conduct concerning environmental protection matters, including without limitation, Hazardous Materials, as now or may at any time hereafter be in effect. "Equity Interests": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all partnership interests (general or limited) of a partnership, any and all equivalent ownership interests in a Person (other than a corporation or partnership) and any and all warrants or options to purchase any of the foregoing. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurodollar Cash Collateral": as defined in Section 2.7(c). "Eurodollar Cash Collateral Account": as defined in Section 2.7(c). "Eurodollar Business Day": any Business Day on which dealings in foreign currencies and exchange between banks may be carried on in London, England. "Eurodollar Lending Office": initially, the office of each Bank designated as such in Schedule I; thereafter, such other office of such Bank, if any, which shall be making or maintaining Eurodollar Loans. "Eurodollar Loans": Loans hereunder at such time as they are made and/or being maintained at a rate of interest based upon the Eurodollar Rate. "Eurodollar Rate": with respect to each Eurodollar Loan during a specified Interest Period, the rate of interest determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period, commencing on the first day of such Interest Period, appearing on Page 3750 of the Telerate Service as of 11:00 A.M., London time, two Eurodollar Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate Service (or otherwise on such service), the "Eurodollar Rate" shall be determined by reference to such other publicly available service for displaying eurodollar rates as may be agreed upon by the Administrative Agent and the Borrower or, in the absence of such agreement, the "Eurodollar Rate" shall instead be the rate 8 13 per annum equal to the rate at which Chemical is offered Dollar deposits at or about 11:00 A.M., New York City time, two Eurodollar Business Days prior to the beginning of such Interest Period, in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its Eurodollar Loans are then being conducted for delivery on the first day of such Interest Period, for a period equal to such Interest Period, and in an amount comparable to the amount of its Eurodollar Loan to be outstanding during such Interest Period. "Event of Default": any of the events specified in Section 8; provided, that any requirement for the giving of notice, the lapse of time, or both, or any other condition, event or act has been satisfied. "Exchange Act": the Securities and Exchange Act of 1934, as amended. "Excluded Employee Loans": loans or advances to directors, officers or employees of the Borrower or any Wholly Owned Subsidiary the principal amount of which, when added to the principal amount of existing such loans or advances, would not exceed $1,000,000. Expiring Letter of Credit": an Acceptable Letter of Credit, the issuer of which has not notified the Administrative Agent at least 60 days prior to the then scheduled expiration date that such Acceptable Letter of Credit will be renewed. "Feeder Link Licenses": the authorizations granted or to be granted by the Federal Communications Commission to the Borrower for feeder links (frequencies used for links between the gateways and the satellites) to be used in the Satellite Project. "Financing Lease": (a) any lease of property, real or personal, the then present value of the minimum rental commitment thereunder of which should, in accordance with GAAP, be capitalized on a balance sheet of the lessee, and (b) any other such lease the obligations under which are capitalized on a consolidated balance sheet of the Borrower and its Subsidiaries. "Foreign Subsidiary": any Subsidiary organized or incorporated outside the United States. "Funded Debt": of a Person, at a particular date, the sum (without duplication) at such date of (a) all indebtedness of such Person (i) for borrowed money or (ii) for the deferred purchase price of property or services (excluding trade payables in the ordinary course of business) or (iii) which is evidenced by a note, bond, debenture or similar instrument, and (b) the capitalized portion of obligations under Financing Leases. "GAAP": generally accepted accounting principles in the United States of America in effect on the date hereof, 9 14 provided that for purposes of preparation of the financial statements to be delivered pursuant to Section 5.1, "GAAP" shall mean generally accepted accounting principles in the United States in effect from time to time. "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee Release": the release by the Administrative Agent and the Banks of the Guarantees, including the return to each Applicable Partner of all Letters of Credit issued for its account and its Partner Cash Collateral and the termination of the Partner Cash Collateral Agreements. "Guaranteed Obligations": the collective reference to the unpaid principal of and interest on the Loans and all other obligations and liabilities of the Borrower to the Administrative Agent and the Banks (including, without limitation, interest accruing at the then applicable rate provided in this Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in this Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement or the Notes, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Banks that are required to be paid by the Borrower or pursuant to the terms of this Agreement). "Guarantees": the collective reference to the Partner Guarantees and the Subsidiary Guarantees. "Guarantor": any Person delivering a Guarantee pursuant to this Agreement. "Hazardous Materials": any hazardous materials, hazardous wastes, hazardous constituents, hazardous or toxic substances, and petroleum products (including crude oil or any fraction thereof), defined or regulated as such in or under any Environmental Law. "Indebtedness": of a Person, at a particular date, the sum (without duplication) at such date of (a) Funded Debt, (b) all obligations of such Person in respect of letters of credit, acceptances, or similar obligations issued or created for the account of such Person and (c) all indebtedness or other 10 15 liabilities (excluding taxes and assessments) secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof. "Insolvency" or "Insolvent": at any particular time, the condition that a Multiemployer Plan is insolvent within the meaning of Section 4245 of ERISA. "Intellectual Property": as defined in Section 3.9. "Interest Payment Date": (a) as to any ABR Loan, the last day of each March, June, September and December and the Termination Date and (b) as to any Eurodollar Loan in respect of which the Borrower has selected an Interest Period of one, two or three months, the last day of such Interest Period, and (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day which is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period. "Interest Period": with respect to any Eurodollar Loan: (i) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Eurodollar Business Days prior to the last day of the then current Interest Period with respect thereto; provided, that all of the foregoing provisions relating to Interest Periods are subject to the following: (a) if any Interest Period would otherwise end on a day that is not a Eurodollar Business Day, such Interest Period shall be extended to the next succeeding Eurodollar Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Eurodollar Business Day; (b) any Interest Period that would otherwise extend beyond the Termination Date shall end on the Termination Date; 11 16 (c) any Interest Period that begins on the last Eurodollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Eurodollar Business Day of a calendar month; and (d) the Borrower shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan. "Investment": any advance, loan, extension of credit or capital contribution to, or purchase of any stock, bonds, notes, debentures, ownership interests or other securities of, or other investment in, any Person. "Letter of Credit": any Acceptable Letter of Credit or Downgraded Letter of Credit. "Leverage Ratio": on the last day of any fiscal quarter, the ratio of (a) Funded Debt of the Borrower and its Subsidiaries on such day to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters ending on such day. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any Financing Lease having substantially the same economic effect as any of the foregoing). "Loan": as defined in Section 2.1. "Loan Documents": this Agreement, the Notes and, prior to the Release Date, the Guarantees and the Partner Cash Collateral Agreements. "Loan Parties": the Borrower and, prior to the Release Date, (i) each Subsidiary of the Borrower which is a party to a Loan Document, (ii) from the Closing Date through the date on which the Original Loral Guarantee is released, Loral, and, thereafter, Lockheed Martin and (iii) the other Partner Guarantors. "Lockheed Martin": Lockheed Martin Corporation, a Maryland corporation. "Lockheed Martin Credit Agreement": the Revolving Credit Agreement (Five Year) to be dated as of a date in April 1996, and substantially in the form delivered to the Banks on March 25, 1996, among Lockheed Martin, LAC Acquisition Corporation, as guarantor thereunder, the several financial institutions parties from time to time thereto, Morgan Guaranty Trust Company of New York, as Documentation Agent, and Bank of 12 17 America National Trust and Savings Association, as Administrative Agent, as amended, modified and supplemented from time to time in accordance with the terms thereof but without giving effect to any cancellation or termination thereof. "Lockheed Martin Guarantee": the Guarantee to be executed and delivered by Lockheed Martin, substantially in the form of Exhibit A to the First Amendment dated as of March 25, 1996 to this Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Loral": Loral Corporation, a New York corporation. "Majority Banks": at any date, Banks whose Commitments aggregate not less than 66-2/3% of the total Commitments or, if the Commitments have been terminated, of the outstanding Loans. "Managing General Partner": Loral/QUALCOMM Satellite Services, L.P., a Delaware limited partnership. "Material Adverse Effect": a material adverse effect on (a) the Satellite Project, (b) the business, assets, property, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole and the ability of the Borrower and its Subsidiaries to perform their respective obligations under the Loan Documents or (c) the validity or enforceability of any of the Loan Documents or the material rights or remedies of the Administrative Agent or the Banks hereunder or thereunder. "Moody's": Moody's Investors Service, Inc. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds": (a) the gross cash proceeds received by the Borrower or any Subsidiary (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise and including casualty insurance settlements and condemnation awards, but only as and when received), net of (i) attorneys' fees, accountants' fees, investment banking fees, transfer taxes, deed or mortgage recording taxes, required debt payments of debt secured by the applicable asset (other than pursuant hereto) or required to be paid in connection with such sale, transfer or disposition and other customary fees actually incurred in connection therewith and (ii) taxes paid or payable as a result thereof (including taxes estimated by the Borrower to be payable as a result thereof), from any loss, damage, destruction or condemnation of, or any sale, transfer or other disposition (including any sale and leaseback of assets and any mortgage or lease of real property) to any Person of any asset or assets of the Borrower or any Subsidiary, and (b) the gross cash proceeds from the 13 18 incurrence, issuance or sale by the Borrower or any Subsidiary of any Indebtedness, net of all taxes (including taxes estimated by the Borrower to be payable as a result thereof or as a result of such transactions) and fees (including investment banking fees), commissions, costs and other expenses incurred in connection with such issuance or sale. "Notes": as defined in Section 2.4. "Obligations": the collective reference to the unpaid principal of and interest on the Loans and all other obligations and liabilities of the Borrower to the Administrative Agent and the Banks (including, without limitation, interest accruing at the then applicable rate provided in this Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in this Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any Notes, the other Loan Documents or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Banks that are required to be paid by the Borrower pursuant to the terms of this Agreement or any other Loan Document). "Original Loral Guarantee": the guarantee executed and delivered by Loral, substantially in the form of Exhibit E, dated as of December 15, 1995. "Participants": as defined in Section 10.6(b). "Partner": each general or limited partner in the Borrower from time to time. "Partner Cash Collateral": cash and/or Collateral Cash Equivalents, held in a Partner Collateral Account derived from a drawing upon a Letter of Credit issued for the account of a Partner Guarantor. Partner Cash Collateral constitutes assets of the Applicable Partner that are pledged to secure the Obligations pursuant to a Partner Cash Collateral Agreement. "Partner Cash Collateral Agreement": each cash collateral agreement executed and delivered by a Partner Guarantor in favor of the Administrative Agent with respect to its Partner Collateral Account and Partner Cash Collateral, such agreement to be satisfactory in form and substance to the Administrative Agent in its sole discretion. 14 19 "Partner Collateral Account": a pledged collateral account established at the principal office of the Person acting as Administrative Agent by an Applicable Partner in the name of the Administrative Agent and subject to the sole dominion and control of the Administrative Agent. A separate Partner Collateral Account will be established for each Partner Guarantor other than Loral Space & Communications Ltd. at the time an Acceptable Letter of Credit is delivered for the account of such Partner Guarantor. The proceeds of each drawing under a Letter of Credit issued for the account of such Applicable Partner shall be deposited in such Partner Collateral Account. "Partner Guarantee": in the case of Loral Space & Communications Ltd., the Lockheed Martin Guarantee; and in the case of any other Partner Guarantor, a Letter of Credit and, upon a drawing by the Administrative Agent under such Letter of Credit, Partner Cash Collateral. "Partner Guarantor": Loral Space & Communications Ltd. and any partner that owns, directly or indirectly, an interest in the Borrower. "Partner Guarantor Fee Arrangement": an arrangement to be entered into among the Borrower, the Partner Guarantor(s) (or their Affiliates), Loral and/or another Partner and certain other parties pursuant to which the Borrower agrees to: (i) issue warrants to purchase partnership interests of the Borrower; and (ii) pay to the Partner Guarantor(s) (or their Affiliates) a quarterly fee equal to a percentage per annum of the amount of the Loans outstanding, the payment of which shall be deferred on a subordinated basis until after the Termination Date, at which time, the fee, together with interest thereon shall be paid upon an amortization schedule to be determined. Notwithstanding the foregoing, in lieu of paying the fees described in clause (ii) above, the Borrower may issue its subordinated notes in an amount equal to the fees otherwise payable, including without limitation deferral of interest, providing payment terms as described in clause (ii) above. The terms of the subordination referred to in clause (ii) above and of such subordinated notes shall be satisfactory to the Administrative Agent. "Partnership Agreement": the Amended and Restated Agreement of Limited Partnership of Globalstar, L.P. dated as of December 31, 1994 among the Partners, as amended, modified or supplemented from time to time in accordance with Section 6.10. "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. 15 20 "Person": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at any particular time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Preferred Equity Interests": any Equity Interests of the Borrower that are preferred or senior in right of payment to any other Equity Interests of the Borrower and which have the following characteristics: (d) such Equity Interests are not mandatorily redeemable or redeemable at the option of the holder thereof prior to 90 days after the Termination Date; (e) dividends thereon are payable no more frequently than quarterly; (f) the dividend rate thereon is a market rate at the time of issuance; and (g) such Equity Interests have other terms satisfactory to the Administrative Agent (the Banks hereby acknowledging that the terms of the Preferred Equity Interests to be issued by the Borrower to Globalstar Telecommunications, Ltd. ("GTL") in connection with the issuance by GTL of its $300,000,000 __% Convertible Preferred Equivalent Obligation due 2006 are satisfactory). "Properties": as defined in Section 3.16. "Purchasing Banks": as defined in Section 10.6(c). "Qualified Equity Interests:" Equity Interests in the Borrower which are not mandatorily redeemable and which do not require any mandatory payments or distributions with respect thereto. "Rating": the senior unsecured debt rating of the Borrower (or its status as unrated) from time to time in effect from S&P or Moody's, as the case may be. "Register": as defined in Section 10.6(d). 16 21 "Release Date": the date on which the Release Date Conditions Precedent are satisfied and the Guarantee Release occurs. "Release Date Conditions Precedent": the Guarantees shall be released by the Administrative Agent and the Banks upon the satisfaction of the following conditions precedent and only upon receipt by the Administrative Agent of a certificate from a Responsible Officer of the Borrower certifying that: (i) the Borrower's senior unsecured debt rating (without consideration of any third-party credit support) from (A) S&P is at least BBB- or (B) Moody's is at least Baa3, (ii) (A) the Obligations (and, if applicable, the obligations of a Subsidiary under any guarantee referred to in clause (B) below) are secured on at least a pari passu and equal and ratable basis by the collateral securing all outstanding Additional Buildout Indebtedness and (B) insofar as any of such outstanding Additional Buildout Indebtedness is owed by or guaranteed by a Subsidiary of the Borrower, such Subsidiary has guaranteed payment of the Obligations, in all cases under the preceding clauses (A) and (B) on terms and conditions relating to such collateral and guarantees (including intercreditor arrangements) satisfactory to the Required Banks, (iii) no Default or Event of Default has occurred and is continuing or would exist after giving effect to the Guarantee Release and (iv) all representations and warranties set forth in Section 3, when made on the Release Date and after giving effect to the Guarantee Release, shall be true and correct. On and after the Release Date the Borrower shall not be required to deliver the Lockheed Martin Guarantee, any Acceptable Letter of Credit or any Subsidiary Guarantee. "Reorganization": at any particular time, the condition that a Multiemployer Plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than those events as to which the thirty day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section 2615. "Required Banks": at any date, Banks whose Commitments aggregate not less than 51% of the total Commitments or, if the Commitments have been terminated, of the outstanding Loans. "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. 17 22 "Responsible Officer": an officer of the Managing General Partner of the Borrower. "Restricted Payments": as defined in Section 6.6. "S&P": Standard & Poor's Ratings Group. "Satellite Project": the building, launching and operation by the Borrower of a worldwide, low-earth orbit satellite based digital telecommunications system which will provide wireless voice telephony and other services. "Security Documents": the collective reference to all assignments, cash collateral agreements, security agreements, mortgages, deeds of trust, pledge agreements, guarantees and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any asset or assets of any Person to directly or indirectly secure any Additional Buildout Indebtedness of the Borrower or to secure any guarantee of any such obligations and liabilities. "Service Provider Agreements": the Founding Service Provider Agreements dated as of January 1, 1995, between the Borrower and each of AirTouch Satellite Services, Finmeccanica S.p.A., Hyundai/DACOM, Loral/DASA Globalstar, L.P., Loral Globalstar, L.P., TE.SA.M. and Vodastar Limited and any agreements which the Borrower may enter into in the future with a service provider to provide voice, fax, data, messaging, paging, geolocation, information or other services using the Borrower's satellite constellation. "Single Employer Plan": any Plan which is covered by Title IV of ERISA but which is not a Multiemployer Plan. "Subordinated Debt": any unsecured Indebtedness of the Borrower, no part of the principal of which is required to be paid (whether by way of mandatory sinking fund, mandatory redemption or mandatory prepayment or otherwise) prior to the date which is 90 days after the Termination Date, and the payment of principal of and interest on which, and the payment of any other obligations of the Borrower to the holders of such Subordinated Debt, are subordinated to the prior payment in full of the Obligations (including, without limitation, obligations in respect of post-petition interest, whether or not allowed) on terms satisfactory to the Administrative Agent. "Subsidiary": as to any Person, a corporation, partnership or other entity (a) of which Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such 18 23 Person and (b) which is consolidated on such Person's financial statements. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Subsidiary Guarantee": the Guarantees to be executed and delivered by each Subsidiary (other than Foreign Subsidiaries) of the Borrower existing on the date hereof, if any, or created or acquired after the date hereof, substantially in the form of Exhibit F, as the same may be amended, supplemented or otherwise modified from time to time. "Subsidiary Guarantor": each Subsidiary that is a guarantor of the Obligations pursuant to a Subsidiary Guarantee, provided that from and after the Release Date "Subsidiary Guarantor" shall mean (i) each Subsidiary that is an obligor, whether as borrower, issuer, guarantor or otherwise, of outstanding Additional Buildout Indebtedness and has guaranteed payment of the Obligations in a form substantially equivalent to the Subsidiary Guarantee and (ii) each Subsidiary which is not an obligor, whether as borrower, issuer, guarantor or otherwise, of outstanding Additional Buildout Indebtedness. A Subsidiary may be a Subsidiary Guarantor under the preceding clause (ii) notwithstanding that it has not guaranteed payment of the Obligations. "Termination Date": the fifth anniversary of the Closing Date or such earlier date as the Commitments shall terminate as provided herein, provided, however, that if the Borrower does not comply with Section 6.1(a) then the Termination Date shall automatically be moved forward to June 30, 2000 unless the Commitments shall terminate earlier as provided herein. "Tranche": the reference to Eurodollar Loans the Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day). "Transfer Effective Date": as defined in each Commitment Transfer Supplement. "Transferees": as defined in Section 10.6(f). "Type": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan. "Wholly Owned Subsidiary": any Subsidiary of the Borrower to the extent at least 99% of the Equity Interests of such Subsidiary, other than directors' or nominees' qualifying shares, are owned directly or indirectly by the Borrower. 1.2 Other Definitional Provisions. 19 24 (a) Unless otherwise specified herein, all terms defined in this Agreement shall have the defined meanings when used in the Notes or any other Loan Document certificate or other document made or delivered pursuant hereto. (b) As used herein and in the Notes, the other Loan Documents and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section , Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meaning given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 2.1 Revolving Credit Commitments. (a) Subject to the terms and conditions hereof, each Bank severally agrees to make revolving credit loans (the "Loans") to the Borrower from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding not to exceed such Bank's Commitment. During the Commitment Period the Borrower may use the Commitments by borrowing, prepaying the Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. (b) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.3 and 2.8; provided, that no Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Termination Date. 2.2 Commitment/Loan Support. (a) Payment of all of the Guaranteed Obligations shall be, prior to the Release Date, supported by the Lockheed Martin Guarantee or, in lieu thereof, by Acceptable Letters of Credit (and, after a drawing on an Acceptable Letter of Credit or Downgraded Letter of Credit, by Partner Cash Collateral), provided that (a) no more than 60% of the Guaranteed Obligations shall be supported at any time by Partner Guarantees (other than the Lockheed Martin Guarantee) and (b) no less than 40% of the Guaranteed Obligations shall be supported at any time by the Lockheed Martin Guarantee. In addition, at all times prior to the Release Date, payment of all of the Guaranteed Obligations will be supported by the Subsidiary 20 25 Guarantee executed by each domestic Subsidiary in existence prior to the Release Date. (b) Subject to the provisions of paragraph (a) above and the other provisions of this Section 2.2, the maximum liability of Lockheed Martin under the Lockheed Martin Guarantee in respect of principal of and interest on the Loans shall be reduced by the available amount (i.e., at any time, the amount that may be drawn under each Letter of Credit at such time and, if a drawing has been made by the Administrative Agent under such Letter of Credit, the sum of the amount of principal of the Loans in respect of which such drawing was made plus the amount of unpaid accrued interest on such principal amount at such time deposited in a Partner Collateral Account) of each Acceptable Letter of Credit (and, if such Acceptable Letter of Credit becomes a Downgraded Letter of Credit, such Downgraded Letter of Credit) delivered to the Administrative Agent by another Partner Guarantor. In the event that (i) any Partner Guarantor shall be insolvent or bankrupt or any of the events of the type described in clause (vi) of paragraph (a) of Section 8 shall occur with respect to such Partner Guarantor and (ii) such Partner Guarantor has delivered any Partner Cash Collateral pursuant to a drawing by the Administrative Agent under a Letter of Credit issued for the account of such Partner Guarantor, then upon the occurrence of any of the events described in clause (i) the maximum liability of Lockheed Martin under the Lockheed Martin Guarantee shall be increased by an amount equal to the aggregate amount of the drawing made by the Administrative Agent under such Letter of Credit. (c) Upon the termination or expiration of the Commitments or acceleration of the Loans under Section 8 or maturity of the Loans on the Termination Date, the Administrative Agent shall use reasonable efforts to call on the Partner Guarantees, whether by notice or demand in the case of the Lockheed Martin Guarantee, or, in the case of a Letter of Credit, by drawing thereunder in conformity with the terms and conditions thereof, or, in the case of Partner Cash Collateral, by withdrawal from the applicable Partner Collateral Account (unless the Administrative Agent is prohibited from doing so because such Partner is the subject of insolvency proceedings) (x) at approximately the same time, to the extent practical and to the extent permitted by law, provided that the failure to so call or draw at approximately the same time shall not affect the obligations of the Loan Parties (including Lockheed Martin) under the Loan Documents or of any issuer of a Letter of Credit thereunder or of any other Partner Guarantor with respect to its Partner Cash Collateral, and (y) to the extent practical and to the extent permitted by law, on a pro rata basis based on the respective principal amounts of the Loans supported by each such Guarantee (which, in the case of Partner Cash Collateral, shall be the principal amount of the Loans supported by the Letter of Credit which funded such Partner Cash Collateral), provided that this clause (y) shall not apply to calls made on the Lockheed 21 26 Martin Guarantee for amounts in respect of which the other Partner Guarantees are inapplicable, and provided that the failure to so call or draw on a pro rata basis shall not affect the obligations of the Loan Parties (including Lockheed Martin) under the Loan Documents or of any issuer of an Acceptable Letter of Credit thereunder. The preceding sentence shall not apply with respect to drawings made pursuant to paragraphs (d) and (e) below. (d) Unless any Expiring Letter of Credit is replaced by the Applicable Partner with one or more Acceptable Letters of Credit with an equal aggregate stated amount at least 30 days prior to the then scheduled expiration date thereof, the Administrative Agent shall use reasonable efforts to draw upon such Expiring Letter of Credit. All proceeds thereof shall be deposited to a Partner Collateral Account established for the Applicable Partner. (e) The Administrative Agent shall use reasonable efforts to draw the full amount of each Downgraded Letter of Credit promptly following its actual knowledge that an Acceptable Letter of Credit has become a Downgraded Letter of Credit unless such Downgraded Letter of Credit is replaced by the Applicable Partner prior to such draw with one or more Acceptable Letters of Credit with an equal aggregate stated amount; provided that the Administrative Agent shall not draw on such Downgraded Letter of Credit during the 45 day period after it obtains such knowledge (unless Obligations are otherwise due) if the Borrower or the Applicable Partner notifies the Administrative Agent that it is attempting to provide replacement Acceptable Letters of Credit (unless such Letter of Credit will expire within 30 days). All proceeds of any such drawing shall be deposited to a Partner Collateral Account established for the Applicable Partner. If (i) the issuer of such Downgraded Letter of Credit is insolvent or bankrupt or any of the events described in clause (vi) of paragraph (a) of Section 8 shall occur with respect to such issuer, (ii) such issuer fails to honor such drawing, (iii) the Administrative Agent is prevented by applicable law from making such a drawing or (iv) amounts drawn under such Downgraded Letter of Credit are required to be restored or returned by the Administrative Agent or any Bank as a result of the insolvency, bankruptcy, dissolution, liquidation or reorganization of the issuer of such Downgraded Letter of Credit or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, such issuer or any substantial part of its property, or otherwise, then the maximum liability of Lockheed Martin under the Lockheed Martin Guarantee shall be increased by an amount equal to the stated amount of such Downgraded Letter of Credit. (f) All amounts, if any, credited to the Partner Collateral Accounts shall be invested by the Administrative Agent in Collateral Cash Equivalents (all such investments to be made in the name of the Administrative Agent) as directed by the 22 27 Applicable Partner unless a Default or Event of Default has occurred and is continuing. Unless a Default or an Event of Default has occurred and is continuing, the Administrative Agent is authorized to: (i) release net earnings on such investments, if any, quarterly on the last day of each March, June, September and December, provided that the Administrative Agent shall not release any earnings at any time unless the balance of the Partner Cash Collateral remaining in such Partner Collateral Account after giving effect to such release is at least equal to the proceeds of the Administrative Agent's drawing(s) under the Letters of Credit delivered to it for the account of the Applicable Partner; (ii) release all Partner Cash Collateral to the Applicable Partner upon delivery of one or more Acceptable Letters of Credit with an equal aggregate stated amount to that of the Letters of Credit drawn upon by the Administrative Agent to fund the related Partner Collateral Account; (iii) release all Partner Cash Collateral to the Applicable Partner upon the Guarantee Release; and (iv) release the applicable Partner Cash Collateral to Lockheed Martin (to the extent permitted by applicable law and applicable Contractual Obligations) upon increase of liability of Lockheed Martin under the Lockheed Martin Guarantee in accordance with this Section 2.2. The Administrative Agent shall not be liable for any losses or decreases in value with respect to the Partner Cash Collateral, other than those occurring as a result of its gross negligence or willful misconduct. 2.3 Procedure for Revolving Credit Borrowing. The Borrower may borrow under the Commitments during the Commitment Period on any Eurodollar Business Day, if all or any part of the requested Loans are to be initially Eurodollar Loans, or on any Business Day, otherwise; provided, that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, (a) with respect to any of the requested Loans that are to be initially Eurodollar Loans, three Eurodollar Business Days prior to the requested Borrowing Date or (b) with respect to any of the requested Loans that are to be initially ABR Loans, on the requested Borrowing Date), specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the respective amounts of each such Loan and the respective lengths of the initial Interest Periods therefor. Each borrowing under the Commitments shall be in an amount equal to $10,000,000 or a whole multiple of 23 28 $1,000,000 in excess thereof or in the remaining amount of the Available Commitments. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Bank thereof. Each Bank will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in Section 10.2 prior to 12:00 Noon, New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent's crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Banks and in like funds as received by the Administrative Agent. 2.4 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Bank the then unpaid principal amount of each Loan of the Borrower on the Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 2.6, 2.7 or 8). The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 2.10. (b) Each Bank shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Bank resulting from each Loan of such Bank from time to time, including the amounts of principal and interest payable and paid to such Bank from time to time under this Agreement. (c) The Administrative Agent shall maintain the Register pursuant to subsection 10.6(d), and a subaccount therein for each Bank, in which shall be recorded (i) the amount of each Loan made hereunder, the Type thereof and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Bank hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from or for the account of the Borrower and each Bank's share thereof. (d) The entries made in the Register and the accounts of each Bank maintained pursuant to Section 2.4(b) shall, to the extent permitted by applicable law, be conclusive evidence, in the absence of manifest error, of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Bank or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to such Borrower by such Bank in accordance with the terms of this Agreement. 24 29 (e) The Borrower agrees that, upon the request to the Administrative Agent by any Bank, the Borrower will execute and deliver to such Bank a promissory note of the Borrower evidencing the Loans of such Bank, substantially in the form of Exhibit A with appropriate insertions as to date and principal amount (a "Note"). 2.5 Commitment Fees. The Borrower agrees to pay to the Administrative Agent for the account of each Bank a commitment fee for the period from and including the Closing Date, computed at the Commitment Fee Rate on the average daily amount of the Available Commitment of such Bank during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the Termination Date, commencing on the first of such dates to occur after the date hereof. 2.6 Termination, Reduction or Increase of Commitments. (a) The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent (which shall give prompt notice thereof to the Banks), to terminate the Commitments or, from time to time, to reduce the amount of the Commitments; provided, that no such termination or reduction shall be permitted if, after giving effect thereto and to any payments or prepayments of the Loans made on the effective date thereof, the aggregate principal amount of the Loans then outstanding would exceed the aggregate Commitments then in effect. Any such reduction shall be in an amount equal to $10,000,000 or a whole multiple of $1,000,000 in excess thereof and shall reduce permanently the Commitments then in effect. (b) The Commitments shall be automatically reduced in the following amounts at the following times by an amount equal to: (i) 100% of the Net Cash Proceeds of the issuance or incurrence of Additional Buildout Indebtedness after the Closing Date, except for the proceeds of not more than $950,000,000 (or such higher amount as may be approved by the Required Banks) in the aggregate of Additional Buildout Indebtedness, net of interest accretion on non-cash pay issuances and escrowed interest on overfunded issuances related to such Additional Buildout Indebtedness; and (ii) 100% of the Net Cash Proceeds of any sale or other disposition by the Borrower or any of its Subsidiaries of any assets except for sales and dispositions permitted by Section 6.5(b). (c) Upon the request of the Borrower to the Administrative Agent and the Banks, the Commitments hereunder may be increased by not more than $150,000,000 or such lesser amount as may be agreed upon by the parties as referred to below; provided that (i) each Bank whose Commitment is increased 25 30 consents, (ii) the Required Banks consent, (iii) such increases are supported by either the Lockheed Martin Guarantee or by Acceptable Letters of Credit or by other guarantees, collateral or credit support satisfactory to the Required Banks and (iv) if the Commitments would exceed $250,000,000 after giving effect to such increase, Lockheed, Martin consents to such increase. (d) In the event of such a requested increase in the Commitments, (i) each of the Banks shall be given the opportunity to participate in the increased Commitments ratably in the proportions that their respective Commitments bear to the aggregate Commitments, and (ii) to the extent that the Banks do not elect so to participate in such increased Commitments after being afforded an opportunity to do so, then the Borrower shall consult with the Administrative Agent as to the number, identity and requested Commitments of additional financial institutions which the Borrower may upon the written consent of the Administrative Agent (which consent shall not be unreasonably withheld) invite to participate in the Commitments. (e) In the event that the Borrower and one or more of the Banks (or other financial institutions which may elect to participate) shall agree, in accordance with Section 2.6(c), upon such an increase in the aggregate Commitments, the Borrower, the Administrative Agent and the financial institution in question shall enter into a Commitment Increase Supplement setting forth the amounts of the increase in Commitments and providing that the additional financial institutions participating shall be deemed to be included as Banks for all purposes of this Agreement. Upon the execution and delivery of such Commitment Increase Supplement as provided above, and upon satisfaction of such other conditions as the Administrative Agent may specify (including the delivery of certificates and legal opinions on behalf of the Borrower relating to the amendment and, if applicable, new Notes), this Agreement shall be deemed to be amended accordingly. (f) No Bank shall have any obligation to increase its Commitment in the event of such a request by the Borrower hereunder. 2.7 Prepayments. (a) The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty, upon at least three Business Days' irrevocable notice to the Administrative Agent in the case of ABR Loans and at least three Eurodollar Business Days' irrevocable notice to the Administrative Agent in the case of Eurodollar Loans, which notice shall specify the date and amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice the Administrative Agent shall promptly notify each Bank thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. 26 31 Partial prepayments shall be in an aggregate principal amount of $10,000,000 or a whole multiple of $1,000,000 in excess thereof. Each prepayment of Eurodollar Loans shall be subject to compliance with the provisions of Sections 2.9 and 2.17. (b) If at any time the principal amount of Loans then outstanding shall exceed the Commitments, the Borrower shall immediately prepay or at its option cash collateralize the Loans as provided in Section 2.7(c) in an amount equal to such excess. Amounts payable pursuant to this Section 2.7(b) shall be applied, first, to prepay any ABR Loans then outstanding and second, to prepay or cash collateralize (at the Borrower's option) any Eurodollar Loans then outstanding (provided, that any Eurodollar Loans so cash collateralized shall be prepaid no later than the last day of the respective Interest Periods therefor). Each prepayment pursuant to this Section 2.7(b) shall be accompanied by accrued interest on the amount prepaid and any amounts payable pursuant to Section 2.17. (c) The Borrower shall cash collateralize Eurodollar Loans pursuant to Section 2.7(b) by depositing in an account with the Administrative Agent (the "Eurodollar Cash Collateral Account"), to be established and maintained pursuant to such terms and conditions as shall be specified by the Administrative Agent in its discretion, an amount determined pursuant to the second sentence of Section 2.7(b). Such deposited monies shall be held by the Administrative Agent as cash collateral (the "Eurodollar Cash Collateral") for the outstanding Eurodollar Loans on a pro rata basis; provided, that if any ABR Loans shall be made while there is Eurodollar Cash Collateral on deposit in the Eurodollar Cash Collateral Account, the Administrative Agent shall apply such Eurodollar Cash Collateral to the immediate prepayment of such ABR Loans and only the Eurodollar Cash Collateral remaining after such prepayment, if any, shall be retained in the Eurodollar Cash Collateral Account. The Eurodollar Cash Collateral Account and the Eurodollar Cash Collateral shall be subject to the sole dominion and control of the Administrative Agent and, except as set forth above, the Eurodollar Cash Collateral shall be retained in the Eurodollar Cash Collateral Account and applied to the repayment of Eurodollar Loans on the last day of the respective Interest Periods therefor, with the Borrower being obligated to repay the balance of such Eurodollar Loans in the event the Eurodollar Cash Collateral is insufficient therefor. Any amounts remaining in the Eurodollar Cash Collateral Account after repayment of such Eurodollar Loans will be released to the Borrower provided no Default or Event of Default exists. The Administrative Agent shall invest the Eurodollar Cash Collateral in Cash Equivalents, and shall pay over to the Borrower any interest earned on such investments quarterly on the last day of each March, June, September and December; provided, that no Default or Event of Default shall have occurred and be continuing (in which case such interest shall be retained as Eurodollar Cash Collateral). The Administrative Agent shall not be liable for any losses or 27 32 decreases in value with respect to the Eurodollar Cash Collateral, other than those occurring as a result of its gross negligence or willful misconduct. 2.8 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Loans to ABR Loans, by giving the Administrative Agent at least two Business Days' prior irrevocable notice of such election; provided, that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans by giving the Administrative Agent at least three Eurodollar Business Days' prior irrevocable notice of such election. Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each Bank thereof. All or any part of outstanding Eurodollar Loans or ABR Loans may be converted as provided herein; provided, that (i) no Loan may be converted into a Eurodollar Loan when any Event of Default (upon notice from the Administrative Agent, on behalf of the Required Banks, except such notice shall not be required in the case of the Event of Default described in clause (a)(vi) of Section 8) has occurred and is continuing, (ii) any such conversion may only be made if, after giving effect thereto, Section 2.9 shall not have been contravened and (iii) no Loan may be converted into a Eurodollar Loan after the date that is one month prior to the Termination Date. (b) Any Eurodollar Loan may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower's giving notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loans; provided, that no Eurodollar Loan may be continued as such (i) when any Event of Default (upon notice from the Administrative Agent, on behalf of the Required Banks, except such notice shall not be required in the case of an Event of Default described in clause (a)(vi) of Section 8) has occurred and is continuing, (ii) if, after giving effect thereto, Section 2.9 would be contravened or (iii) after the date that is one month prior to the Termination Date; provided further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period. 2.9 Minimum Amounts of Tranches. All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto (a) the aggregate principal amount of the Loans comprising each Tranche shall be equal to $10,000,000 or a whole 28 33 multiple of $1,000,000 in excess thereof and (b) there shall be no more than ten different Tranches outstanding at any one time. 2.10 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such Interest Period plus the Applicable Margin. (b) Each ABR Loan shall bear interest at a rate per annum equal to the ABR. (c) If all or a portion of (i) the principal amount of any Loan, (ii) any interest payable thereon or (iii) any fee or other amount payable pursuant to this Agreement shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is (y) in the case of overdue principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section 2.10 plus 2% or (z) in the case of overdue interest (to the extent permitted by applicable law), fees or other amounts, the rate described in paragraph (b) of this Section 2.10 plus 2%, in each case from the date of such non-payment until such amount is paid in full (whether before or, to the extent permitted by applicable law, after judgment). (d) Interest shall be payable in arrears on each Interest Payment Date; provided, that interest accruing pursuant to paragraph (c) of this Section 2.10 shall be payable on demand, or, in the absence of demand, weekly on Friday of each week. 2.11 Computation of Interest and Fees. (a) Interest on Loans and fees (other than interest calculated on the basis of the Prime Rate) shall be calculated on the basis of a 360-day year for the actual days elapsed; provided, that interest calculated on the basis of the Prime Rate shall be calculated on the basis of a 365- or 366- (as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify in writing the Borrower and the Banks of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the ABR shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify in writing the Borrower and the Banks of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Banks in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower or a Bank, deliver to the Borrower or such Bank, as the case may be, a statement showing the 29 34 quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.10(a). 2.12 Inability to Determine Interest Rate. In the event that prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (b) the Administrative Agent shall have received notice from the Required Banks that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Banks (as conclusively certified in writing by such Banks) of making or maintaining their affected Eurodollar Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice (confirmed in writing) thereof to the Borrower and the Banks as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to ABR Loans. The Administrative Agent shall promptly notify the Borrower at such time as the conditions set forth in (a) and (b) above are no longer in effect, and until such notice has been delivered by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Loans to Eurodollar Loans. 2.13 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Banks of Loans, each payment by the Borrower on account of any commitment fee hereunder and any reduction of the Commitments of the Banks shall be made pro rata according to the respective Commitment Percentages of the Banks. Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Loans shall be made pro rata according to the respective outstanding principal amounts of the Loans then held by the Banks except to the extent any other provision of this Agreement provides for non pro rata payments. All payments (including prepayments) to be made by the Borrower hereunder and under the Notes, whether on account of principal, interest, fees or otherwise, shall be made without set-off or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the Banks, at the Administrative Agent's office specified in Section 10.2, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Banks promptly upon receipt in like funds as received. If any payment hereunder (other than 30 35 payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Eurodollar Business Day, the maturity thereof shall be extended to the next succeeding Eurodollar Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Eurodollar Business Day. (b) Unless the Administrative Agent shall have been notified in writing by any Bank prior to a Borrowing Date that such Bank will not make the amount that would constitute its portion of the borrowing to be made on such date available to the Administrative Agent, the Administrative Agent may assume that such Bank has made such amount available to the Administrative Agent on such Borrowing Date, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is made available to the Administrative Agent on a date after such Borrowing Date, such Bank shall pay to the Administrative Agent on demand an amount equal to the product of (i) the daily average Federal funds rate during such period as quoted by the Administrative Agent, times (ii) the amount of such Bank's portion of such borrowing, times (iii) a fraction the numerator of which is the number of days that elapse from and including such Borrowing Date to the date on which such Bank's portion of such borrowing shall have become immediately available to the Administrative Agent and the denominator of which is 360. A certificate of the Administrative Agent submitted to any Bank with respect to any amounts owing under this Section 2.13(b) shall be conclusive in the absence of manifest error. If such Bank's portion of such borrowing is not in fact made available to the Administrative Agent by such Bank within three Business Days of such Borrowing Date, the Administrative Agent shall be entitled to recover such amount with interest thereon at the rate per annum applicable to ABR Loans hereunder, on demand, from the Borrower. If the Borrower returns to the Administrative Agent any amount with interest thereon as described in the immediately preceding sentence, such Bank shall indemnify the Borrower for the difference, if any, between (i) the aggregate interest paid by the Borrower to the Administrative Agent in accordance with the immediately preceding sentence less (ii) the aggregate interest which actually accrued on such amount prior to its return to the Administrative Agent. 2.14 Illegality. Notwithstanding any other provision herein, if any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Bank to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Bank hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and 31 36 (b) such Bank's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to ABR Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Bank such amounts, if any, as may be required pursuant to Section 2.17. 2.15 Other Costs; Increased Costs. (a) The Borrower agrees to pay to each Bank which requests compensation under this Section 2.15(a) (by written notice to the Borrower through the Administrative Agent), on the last day of each Interest Period with respect to any Eurodollar Loan made by such Bank, so long as such Bank shall be required to maintain reserves against "Eurocurrency liabilities" under Regulation D of the Board of Governors of the Federal Reserve System (or, so long as such Bank may be required by such Board of Governors or by any other Governmental Authority to maintain reserves against any category of liabilities which includes deposits by reference to which the interest rate on Eurodollar Loans is determined as provided in this Agreement or against any category of extensions of credit or other assets of such Bank which includes any Eurodollar Loans), an additional amount (determined by such Bank and promptly notified to the Borrower) representing such Bank's calculation or, if an accurate calculation is impracticable, reasonable estimate (using such reasonable means of allocation as such Bank shall determine) of the actual costs, if any, incurred by such Bank while such Eurodollar Loans were outstanding as a result of the applicability of the foregoing reserves to such Eurodollar Loans, which amount in any event shall not exceed the product of the following for each day while such Eurodollar Loans were outstanding: (i) the principal amount of the relevant Eurodollar Loans made by such Bank outstanding on such day; and (ii) the difference between (x) a fraction the numerator of which is the Eurodollar Rate (expressed as a decimal) applicable to such Eurodollar Loans, and the denominator of which is one minus the maximum rate (expressed as a decimal) at which such reserve requirements are imposed by such Board of Governors or other Governmental Authority on such date minus (y) such numerator; and (iii) a fraction the numerator of which is one and the denominator of which is 360. (b) In the event that any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Bank with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: 32 37 (i) shall subject any Bank to any tax of any kind whatsoever with respect to this Agreement, any Note or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Bank in respect thereof (except for taxes covered by Section 2.16 and changes in the rate of tax on the overall net income of such Bank); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Bank which is not otherwise described in Section 2.15(a); or (iii) shall impose on such Bank any other condition; and the result of any of the foregoing is to increase the cost to such Bank, by an amount which such Bank deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or to reduce any amount receivable hereunder in respect thereof, then the Borrower shall pay such Bank within 15 Business Days following demand therefor any additional amounts necessary to compensate such Bank for such increased cost or reduced amount receivable. If any Bank becomes entitled to claim any additional amounts pursuant to this Section 2.15(b), it shall promptly notify the Borrower, through the Administrative Agent, of the event by reason of which it has become so entitled. (c) In the event that any Bank shall have determined that any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Bank or any corporation controlling such Bank with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof does or shall have the effect of reducing the rate of return on such Bank's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Bank or such corporation could have achieved but for such change or compliance (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, after prompt submission by such Bank to the Borrower (with a copy to the Administrative Agent) of a written request therefor, the Borrower shall pay to such Bank within 15 Business Days following demand therefor such additional amount or amounts as will compensate such Bank or such corporation for such reduction. (d) A certificate as to any additional amounts payable pursuant to this Section 2.15 submitted by the relevant Bank, through the Administrative Agent, to the Borrower shall be conclusive in the absence of manifest error. The covenants contained in this Section 2.15 shall survive the termination of 33 38 this Agreement and the payment of the Notes and all other amounts payable hereunder. Any notice to be given by a Bank under this Section 2.15 after termination of this Agreement shall be effective only if given within 120 days after such Bank becomes aware or should have become aware of the events giving rise to such notice. 2.16 Taxes. (a) All payments made by the Borrower under this Agreement and the Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding, in the case of the Administrative Agent and each Bank, (i) net income taxes, franchise and branch profit taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or such Bank, as the case may be, as a result of a present or former connection between the jurisdiction of the government or taxing authority imposing such tax and the Administrative Agent or such Bank (excluding a connection arising solely from the Administrative Agent or such Bank having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or the Notes) or any political subdivision or taxing authority thereof or therein, (ii) any taxes, levies, imposts, duties, charges, fees, deductions or withholdings arising after the Closing Date, solely as a result of or attributable to the Administrative Agent or Bank (x) changing its designated lending office as of the Closing Date to a lending office located in any other jurisdiction or (y) designating an additional lending office located in any other jurisdiction and (iii) any taxes, levies, imposts, duties, charges, fees, deductions or withholdings in effect on the Closing Date (all such non-excluded taxes, levies, imposts, duties, charges, fees, deductions and withholdings being hereinafter called "Taxes"). If any Taxes are required to be withheld from any amounts payable to the Administrative Agent or any Bank hereunder or under the Notes, the amounts so payable to the Administrative Agent or such Bank shall be increased to the extent necessary to yield to the Administrative Agent or such Bank (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the Notes. Whenever any Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of the Administrative Agent or such Bank, as the case may be, a copy of any original official receipt that may be received by the Borrower showing payment thereof. If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the receipts that may be received or other available documentary evidence, the Borrower shall indemnify the Administrative Agent and the Banks for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Bank to the United States or 34 39 other Governmental Authority as a result of any such failure. The agreements in this Section 2.16(a) shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. If any Taxes constituting a withholding tax of the United States of America or any other Governmental Authority shall be or become applicable, after the Closing Date, to such payments by the Borrower to the Administrative Agent or Bank, the Administrative Agent or such Bank shall use its best efforts to make, fund and maintain its Loans through another lending office of the Administrative Agent or such Bank in another jurisdiction so as to reduce, to the fullest extent possible, the Borrower's liability hereunder, if the making, funding or maintenance of such Loans through such other office does not otherwise materially adversely affect such Loans or the Administrative Agent or such Bank. (b) Prior to the first Interest Payment Date, each Bank that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to the Borrower and the Administrative Agent (i) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the case may be, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form. Each such Bank also agrees to deliver to the Borrower and the Administrative Agent two further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower, and such extensions or renewals thereof as may reasonably be requested by the Borrower or the Administrative Agent, unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such form with respect to it and such Bank so advises the Borrower and the Administrative Agent. Such Bank shall certify (i) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes and (ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. The Borrower shall not be required to pay any increased amount on account of Taxes pursuant to this Section 2.16 to the Administrative Agent or any Bank that fails to furnish any form or statement that it is required to furnish in accordance with this Section 2.16(b) and, to the extent required by law, the Borrower shall be entitled to deduct Taxes from the payments owed to such Bank or the Administrative Agent. In the event that the Borrower is required to pay any Bank any additional amount or indemnify any Bank pursuant to Section 2.16(a) (subject to the provisions of Section 2.17) and no change in lending office is made in accordance with the last 35 40 sentence of Section 2.16(a), after the Borrower makes such payment, such Bank shall transfer, in accordance with the procedures set forth in Section 11.6(c), its Loans and Commitment to a Bank selected by the Borrower with the approval of such transferor Bank and the Administrative Agent (not to be unreasonably withheld). 2.17 Indemnity. The Borrower agrees to indemnify each Bank and to hold each Bank harmless from any loss or expense which such Bank may sustain or incur as a consequence of (a) default by the Borrower in payment when due of the principal amount of or interest on any Eurodollar Loan, (b) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (c) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement, (d) the making of a voluntary or involuntary prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto or (e) the conversion of Eurodollar Loans to ABR Loans pursuant to Section 2.12 or 2.14 on a day which is not the last day of the Interest Period with respect thereto, including, without limitation, in each case, any such loss or expense arising from the reemployment of funds obtained by it or from fees payable to terminate the deposits from which such funds were obtained. A certificate setting forth the computation of any amount payable pursuant to the foregoing sentence submitted by a Bank, through the Administrative Agent, to the Borrower shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. 2.18 Purpose. The proceeds of the Loans shall be used by the Borrower solely to finance (i) the buildout of the Satellite Project and (ii) interest payments on the Loans and (iii) working capital needs. SECTION 3. REPRESENTATIONS AND WARRANTIES In order to induce the Banks to enter into this Agreement and to make the Loans herein provided for, the Borrower hereby represents and warrants to the Administrative Agent and to each Bank that: 3.1 Financial Condition. (a) The consolidated balance sheet of the Borrower as at December 31, 1994 and the related consolidated statements of operations, of partners' capital and of cash flows for the fiscal period ended on such date, reported on by Deloitte & Touche and (b) the unaudited consolidated balance sheet of the Borrower as at September 30, 1995 and the related unaudited consolidated statements of operations and of cash flows for the fiscal quarter ended on such date, copies of which have heretofore been furnished to each 36 41 Bank, are complete and correct in all material respects and present fairly (except, with respect to interim reports, for normal year-end adjustments) the consolidated financial condition of the Borrower as at such date, and the consolidated results of their operations and cash flows for the fiscal period then ended. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants and as disclosed therein). Such financial statements, taken together, disclose, in accordance with GAAP, all material contingent liabilities and liability for taxes, long-term leases and unusual forward or long-term commitments of the Borrower and its Subsidiaries. 3.2 No Change. Since December 31, 1994 (a) there has been no change in the business, operations, property or financial or other condition of the Borrower or any of its Subsidiaries which has or could reasonably be expected to have a Material Adverse Effect, and (b) no dividends or distributions have been declared, paid or made upon any Equity Interests of the Borrower nor have any shares or other units of Equity Interests of the Borrower been redeemed, retired, purchased or otherwise acquired for value by the Borrower or any of its Subsidiaries except as permitted by Section 6.6. 3.3 Existence; Compliance with Law. Each of the Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, (b) has the partnership or corporate power and authority and the legal right to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign partnership or corporation, as the case may be, and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to be so qualified could not, in the aggregate, reasonably be expected to have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 3.4 Power; Authorization; Enforceable Obligations. Each of the Borrower and its Subsidiaries has the partnership or corporate, as the case may be, power and authority and the legal right to make, deliver and perform the Loan Documents to which it is a party and, in the case of the Borrower, to borrow hereunder and has taken all necessary partnership or corporate action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, the borrowings hereunder on the terms and conditions of this Agreement. No consent or authorization of, filing with or other act by or in respect of any Governmental Authority is 37 42 required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Loan Documents, other than those which have been obtained or made and are in full force and effect, including, but not limited to, the license granted on January 31, 1995 by the Federal Communications Commission authorizing the construction, launch and operation of the Satellite Project in the United States, provided that this sentence shall not apply to the Feeder Link Licenses. This Agreement has been, and each other Loan Document will be, duly executed and delivered on behalf of each Loan Party (other than Lockheed Martin) party thereto. This Agreement constitutes and each other Loan Document (other than the Lockheed Martin Guarantee), when executed and delivered will constitute, a legal, valid and binding obligation of each Loan Party thereto enforceable against such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 3.5 No Legal Bar. The execution, delivery and performance of the Loan Documents to which the Borrower or a Subsidiary is a party, the borrowings hereunder and the use of the proceeds thereof, will not violate any Requirement of Law or any Contractual Obligation applicable to the Borrower or of any of the Subsidiaries, and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any Requirement of Law or Contractual Obligation. 3.6 No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of the Subsidiaries or against any of its or their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) which could reasonably be expected to have a Material Adverse Effect. 3.7 No Default. Neither the Borrower nor any of the Subsidiaries is in default under or with respect to any Contractual Obligation in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 3.8 Ownership of Property; Liens. Each of the Borrower and the Subsidiaries has good record and marketable title in fee simple to or valid leasehold interests in all its real property, and good title to all its other property, and none of such property is subject to any Lien, except as permitted in Section 7.3 and except where the failure to have such title could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 38 43 3.9 Intellectual Property. The Borrower and each of its Subsidiaries owns, or are licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes (the "Intellectual Property"), necessary for the conduct of its business as currently contemplated except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect. No claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any valid basis for any such claim. The use of such Intellectual Property by the Borrower and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 3.10 No Burdensome Restrictions. No Requirement of Law or Contractual Obligation of the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect. 3.11 Taxes. Each of the Borrower and the Subsidiaries has filed or caused to be filed all tax returns which to the knowledge of the Borrower are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than those the amount or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or the Subsidiaries, as the case may be, and other than those the non-payment of which could not, in the aggregate, reasonably be expected to have a Material Adverse Effect); and no federal income tax liens have been filed and, to the knowledge of the Borrower, no claims are being asserted with respect to any such taxes, fees or other charges, except any such claims which could not reasonably be expected to have a Material Adverse Effect. 3.12 Federal Regulations. No part of the proceeds of any Loans hereunder will be used for the purpose of "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect or for any purpose which violates the provisions of the Regulations of such Board of Governors. If requested by any Bank or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Bank a statement to the foregoing effect in conformity with the requirements of Federal Reserve Form U-1 referred to in said Regulation U. 39 44 3.13 ERISA. Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan which has resulted or could reasonably be expected to result in a liability to the Borrower or any Subsidiary in excess of $1,000,000, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed, by more than $5,000,000, the value of the assets of such Plan allocable to such accrued benefits. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, and neither the Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made, where such liability could, in the aggregate, reasonably be expected to have a Material Adverse Effect. No such Multiemployer Plan is in Reorganization or Insolvent. 3.14 Investment Company Act; Other Regulations. The Borrower is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. The Borrower is not subject to regulation under any Federal or State statute or regulation which limits its ability to incur Indebtedness. 3.15 Subsidiaries. The Borrower has no Subsidiaries other than Foreign Subsidiaries and other than Subsidiaries which are Guarantors. 3.16 Environmental Matters. Each of the representations and warranties set forth in paragraphs (a) through (e) of this Section 3.16 is true and correct with respect to each parcel of real property owned or operated by the Borrower or any Subsidiary (the "Properties"), except to the extent that (i) the facts and circumstances giving rise to such failure to be so true and correct could not reasonably be expected to have a Material Adverse Effect or (ii) the Borrower and the Subsidiaries are fully indemnified against any liabilities which may result from any such failure to be so true and correct: (a) The Properties do not contain, and have not previously contained, in, on, or under, including, without limitation, the soil and groundwater thereunder, any Hazardous Materials in concentrations which violate Environmental Laws. 40 45 (b) The Properties and all operations and facilities at the Properties are in compliance with all Environmental Laws, and there is no Hazardous Materials contamination or violation of any Environmental Law which could interfere with the continued operation of any of the Properties or impair the fair saleable value of any thereof. (c) Neither the Borrower nor any of the Subsidiaries has received any written complaint, notice of violation, alleged violation, investigation or advisory action or of potential liability or of potential responsibility regarding environmental protection matters or permit compliance with regard to the Properties, nor is the Borrower aware that any Governmental Authority is threatening to deliver to the Borrower or any of the Subsidiaries any such notice. (d) Hazardous Materials have not been generated, treated, stored, disposed of, at, on or under any of the Properties, nor have any Hazardous Materials been transferred from the Properties to any other location in violation of any Environmental Law. (e) There are no governmental, administrative actions or judicial proceedings pending or (to the knowledge of the Borrower) contemplated under any Environmental Laws to which the Borrower or any of the Subsidiaries is or (to the knowledge of the Borrower) will be named as a party with respect to the Properties, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to any of the Properties. 3.17 Full Disclosure. All information (other than projections) heretofore furnished by or on behalf of the Borrower to the Administrative Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by or on behalf of the Borrower to the Administrative Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified. All projections heretofore furnished by or on behalf of the Borrower to the Administrative Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such projections hereafter furnished by or on behalf of the Borrower to the Administrative Agent or any Bank will be, prepared in good faith based upon reasonable assumptions. The Borrower has disclosed to the Banks in writing any and all facts which could reasonably be expected to have a Material Adverse Effect. 3.18 Solvency. (a) Immediately following the making of each Loan made on the Closing Date and after giving effect to the application of the proceeds thereof, the Borrower will be 41 46 solvent, as defined under applicable creditors' rights and fraudulent conveyance laws. (b) The Borrower does not intend to, and does not believe that it or any Subsidiary will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by it or any such Subsidiary and the timing and amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary. 3.19 Security Interests; Guarantees. All Obligations (and, if applicable, the obligations of a Subsidiary under any guarantee referred to in the last sentence of this Section ) are secured on at least a pari passu and equal and ratable basis by all collateral securing all outstanding Additional Buildout Indebtedness. The Security Documents are effective to create a perfected security interest in, and enforceable Lien on, all such collateral to the extent permitted under applicable law for the benefit of the Administrative Agent and the Banks. Insofar as any of such outstanding Additional Buildout Indebtedness is owed by or guaranteed by a Subsidiary of the Borrower, such Subsidiary has guaranteed payment of the Obligations. Notwithstanding the foregoing, the representations and warranties set forth in clause (a) of Section 3.2 and in this Section 3.19 shall not be required to be made prior to the Release Date and shall be deemed to be made on the Release Date and on each Borrowing Date thereafter. SECTION 4. CONDITIONS PRECEDENT 4.1 Conditions of Initial Loans. The obligation of each Bank to make its initial Loan hereunder and the effectiveness of this Agreement are subject to the satisfaction of the following conditions precedent: (a) Loan Documents. The Administrative Agent shall have received (i) counterparts of this Agreement duly executed and delivered by the Borrower, the Administrative Agent and each Bank, (ii) for the account of each Bank requesting the same, a Note conforming to the requirements hereof and executed by a duly authorized officer of the Borrower, and (iii) each of the Original Loral Guarantee and the Subsidiary Guarantees, each executed by a duly authorized officer of each Loan Party party thereto. (b) Legal Opinions. The Administrative Agent shall have received, with a photocopy counterpart for each Bank, (i) an opinion of Willkie, Farr & Gallagher, counsel to the Loan Parties, dated the Closing Date and addressed to the Administrative Agent and the Banks, substantially in the form of Exhibit B-1, (ii) an opinion of Eric J. Zahler, Esq., General Counsel of Loral, dated the Closing Date and addressed to the 42 47 Administrative Agent and the Banks, substantially in the form of Exhibit B-2, and given on the express instructions of Loral and (iii) an opinion of Michael B. Targoff, Esq., Senior Vice President and Secretary, acting as counsel to the Borrower, dated the Closing Date and addressed to the Agents and the Banks, substantially in the form of Exhibit B-3, and given on the express instructions of the Borrower. (c) Closing Certificate. The Administrative Agent shall have received, with a photocopy counterpart for each Bank, a Closing Certificate of each Loan Party, dated the Closing Date, substantially in the form of Exhibit C-1 with respect to the Borrower and its Subsidiaries and C-2 with respect to Loral, with appropriate insertions and attachments, satisfactory in form and substance to the Administrative Agent and its counsel, executed by a Responsible Officer of such Loan Party. (d) Projections. The Administrative Agent shall have received, with a photocopy counterpart for each Bank, financial projections and assumptions with respect to the business and prospects of the Borrower and its Subsidiaries for the period from the Closing Date through the Termination Date, all in a form satisfactory to the Administrative Agent. (e) No Proceeding or Litigation; No Injunctive Relief. No action, suit or proceeding before any arbitrator or any Governmental Authority shall have been commenced, no investigation by any Governmental Authority shall have been commenced, no action, suit, proceeding or investigation by any Governmental Authority shall have been threatened and no Requirement of Law shall have been enacted or proposed, in each case as of the Closing Date (i) seeking to restrain, prevent or change the transactions contemplated by this Agreement (including the Satellite Project) in whole or in part or questioning the validity or legality of the transactions contemplated by this Agreement or seeking damages in connection with such transactions or (ii) which could reasonably be expected to have a Material Adverse Effect. (f) Consents, Licenses, Approvals, etc. The Administrative Agent shall have received true copies (certified to be such by a Responsible Officer of the Borrower or other appropriate Person) of all consents, licenses and governmental and third party approvals (excluding the Feeder Link Licenses) (i) required as of the Closing Date in accordance with applicable law in connection with the execution, delivery, performance, validity and enforceability of this Agreement and the other Loan Documents and the borrowings contemplated hereunder, or (ii) required in connection with the Satellite Project if the failure to obtain such consents, licenses or approvals, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Such consents, licenses and approvals shall be in full force and effect and all applicable waiting periods shall have expired without any action being taken or threatened by any 43 48 competent authority which would restrain, prevent or otherwise impose adverse conditions on the Satellite Project or the financing thereof. (g) Audited Financial Statements of the Borrower. The Administrative Agent shall have received, with a copy for each Bank, the audited financial statements described in Section 3.1(a) and the audited financial statements of Loral and its Subsidiaries as at March 31, 1995 described (by reference) in Section 9 of the Original Loral Guarantee, which financial statements shall have been reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit. (h) Unaudited Financial Statements. The Administrative Agent shall have received, with a copy for each Bank, (i) the unaudited consolidated financial statements of the Borrower and its Subsidiaries described in Section 3.1(b), and (ii) the unaudited consolidated financial statements of Loral and its Subsidiaries described (by reference) in Section 9 of the Original Loral Guarantee, which financial statements shall have been prepared in accordance with GAAP. (i) Lien Searches. The Administrative Agent shall have received, with a copy for each Bank, the results of a recent lien search in each of the jurisdictions and offices where assets of the Borrower are located or recorded and such searches shall reveal no Liens on any of the assets of the Borrower or its Subsidiaries except for liens permitted under Section 6.3 hereunder. (j) Indebtedness; Restrictions. The terms and conditions of any Indebtedness and Contingent Obligations (including, without limitation, maturities, interest rates, prepayment and redemption requirements, covenants, defaults, remedies, security provisions and subordination provisions) of the Borrower or any of the Subsidiaries to remain outstanding after the Closing Date shall be satisfactory to the Banks in all respects as of the Closing Date, and the Banks shall be satisfied as of the Closing Date that the Borrower and its Subsidiaries are not subject to contractual or other restrictions that would be violated by this Agreement or the transactions contemplated hereby. (k) New Developments. As of the Closing Date there shall not have occurred any change, or development or event involving a prospective change, which in either case in the opinion of the Banks could reasonably be expected to have a Material Adverse Effect. (l) Undisclosed Information. As of the Closing Date the Banks shall not have become aware of any previously undisclosed materially adverse information with respect to (i) the business, operations, properties, condition (financial or 44 49 otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole or of Loral and its Subsidiaries taken as a whole, (ii) the Satellite Project, (iii) the ability of any Loan Party to perform its obligations under this Agreement, the Notes or any other Loan Document or (iv) the rights or remedies of the Administrative Agent or the Banks hereunder or thereunder. (m) Fees. The Administrative Agent and the Banks shall have received all fees and expenses required to be paid on or before the Closing Date. (n) Representations and Warranties. Each of the representations and warranties made by the Loan Parties in or pursuant to this Agreement shall be true and correct on and as of the Closing Date as if made on and as of such date. (o) No Default. No Default or Event of Default shall have occurred and be continuing on the Closing Date or after giving effect to the Loans requested to be made on such date, if any. (p) Additional Documents. The Administrative Agent shall have received each additional document, instrument, legal opinion or item of information reasonably requested by it on or prior to the Closing Date, including, without limitation, a copy of any debt instrument, security agreement or other material contract to which any Loan Party or any Subsidiaries may then be a party. (q) Additional Matters. All partnership, corporate and other proceedings and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to the Administrative Agent as of the Closing Date, and the Administrative Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request on or prior to the Closing Date. 4.2 Conditions to all Loans. The obligation of each Bank to make any Loan to be made by it hereunder is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date: (a) Representations and Warranties. Each of the representations and warranties made by each Loan Party in or pursuant to each Loan Document shall be true and correct on and as of such date as if made on and as of such date except to the extent they expressly relate to an earlier date. (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made on such date. 45 50 Each borrowing by the Borrower hereunder shall constitute a representation and warranty by each Loan Party as of the date of such borrowing that the conditions contained in this Section 4.2 have been satisfied. SECTION 5. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect, any Loan remains outstanding and unpaid or any other amount is owing to any Bank or the Administrative Agent hereunder, the Borrower shall and (except in the case of delivery of financial information, reports and notices) shall cause each of the Subsidiaries to: 5.1 Financial Statements. Furnish to each Bank: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of operations, of partners' capital and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without qualification arising out of the scope of the audit or, after commencement of operation of the Satellite Project, a "going concern" or like qualification or exception, by independent certified public accountants of nationally recognized standing; and (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of operations and cash flows of the Borrower and its consolidated Subsidiaries for such quarter (except as to statements of cash flow) and the portion of the fiscal year through such date, setting forth in each case in comparative form the figures for the previous periods, certified by a Responsible Officer (subject to normal year-end audit adjustments); all such financial statements to be complete and correct in all material respects and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as approved by such accountants or officer, as the case may be, and disclosed therein). 5.2 Certificates; Other Information. Furnish to each Bank: (a) concurrently with the delivery of the financial statements referred to in Section 5.1(a) above, a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination 46 51 necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in Sections 5.1(a) and (b) above, a certificate of a Responsible Officer (i) stating that, to the best of such officer's knowledge, the Borrower during such period has observed or performed all of its covenants and other agreements, and satisfied every condition contained in this Agreement and in the other Loan Documents to be observed, performed or satisfied by it, and that such officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate, and (ii) showing in detail the calculations supporting such statement in respect of Sections 6.1, 6.2, 6.6 and, if applicable, 7.1; (c) within five days after the same are sent, copies of all financial statements and reports which are sent to shareholders of Globalstar Telecommunications Limited, and within five days after the same are filed, copies of all financial statements and reports which the Borrower may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; (d) annually a report as to the status of the buildout of the Satellite Project, including the actual costs and projected costs to completion of the Satellite Project, the number of subscribers to the Satellite Project and a comparison of such costs against the Borrower's projections delivered pursuant to subsection 4.1(d), such report to be in a form satisfactory to the Administrative Agent; (e) at least annually, a report prepared by the chief financial officer of the Borrower updating the projections provided pursuant to Section 4.1(d); (f) promptly after execution thereof, copies of each amendment, waiver, supplement or other modification of or affecting those provisions of the Lockheed Martin Credit Agreement incorporated by reference in Sections 9 and 10 of the Lockheed Martin Guarantee; and (g) promptly, such additional financial and other information as any Bank may from time to time reasonably request. 5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature (other than Indebtedness and Contingent Obligations, which shall be beyond the scope of this Section 5.3), except when the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been 47 52 provided on the books of the Borrower or its Subsidiaries, as the case may be. 5.4 Conduct of Business and Maintenance of Existence. Engage solely in activities directly related to the Satellite Project and preserve, renew and keep in full force and effect its partnership or corporate, as the case may be, existence and maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business and comply in all material respects with all material Contractual Obligations (other than Indebtedness and Contingent Obligations, which shall be beyond the scope of this Section 5.4) and material Requirements of Law (except for Environmental Laws, which shall be governed by Section 5.8), except as otherwise expressly permitted by this Agreement; and obtain and maintain in full force and effect all material consents, licenses and approvals necessary for the completion and operations of the Satellite Project and for the continuing operations of the Borrower and its Subsidiaries. 5.5 Maintenance of Property; Insurance. Keep all property useful and necessary in its business in good working order and condition; maintain with financially sound and reputable insurance companies or through a formal self-insurance program insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies engaged in the same or a similar business, provided that in any event the Borrower will maintain at least the insurance coverage set forth in Schedule 5.5; and furnish to each Bank, upon written request, full information as to the insurance carried. 5.6 Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and, subject to applicable governmental security and secrecy regulations and Section 10.14, permit representatives of the Administrative Agent to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired with prior notice to the Borrower (which can have a representative present if it so chooses), and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with Responsible Officers of the Borrower and its Subsidiaries and with its independent certified public accountants. 5.7 Notices. Promptly give notice (to be confirmed promptly in writing) to the Administrative Agent and each Bank: (a) of the occurrence of any Default or Event of Default; 48 53 (b) of any (i) default or event of default under any Contractual Obligation of the Borrower or any Subsidiary or (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any Subsidiary and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; (c) of any litigation or proceeding affecting the Borrower or any Subsidiary in which the amount involved is $5,000,000 or more and not covered by insurance; or in which injunctive or similar relief is sought and which could reasonably be expected to have a Material Adverse Effect; (d) as soon as possible and in any event within 30 days after the Borrower knows or has reason to know of the following events: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan which could reasonably be expected to result in any liability to the Borrower or any Subsidiary in excess of $1,000,000 or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan, or (ii) the institution of proceedings or the taking or expected taking of any other action by PBGC or the Borrower or any Commonly Controlled Entity with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan. The Borrower shall deliver to the Administrative Agent and each Bank a certificate of the chief financial officer of the Borrower setting forth the details thereof and the action that the Borrower or Commonly Controlled Entity proposes to take with respect thereto; (e) of any change in a Rating; and (f) of any material change in the business, operations, property or financial or other condition of the Borrower or any of its Subsidiaries. Each notice pursuant to this Section 5.7 shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. 5.8 Environmental Laws. (a) Comply with, and require compliance by all tenants and subtenants, if any, with, all Environmental Laws and obtain and comply with and maintain, and insure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, registrations or permits required by Environmental Laws, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; 49 54 (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required by a Governmental Authority under Environmental Laws and promptly comply with all lawful orders and directives of all Governmental Authorities respecting Environmental Laws, except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not reasonably be expected to have a Material Adverse Effect; and (c) Defend, indemnify and hold harmless the Administrative Agent and the Banks, and their respective employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of or noncompliance with any Environmental Laws applicable to the Properties, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, attorney's and consultant's fees, investigation and laboratory fees, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefor. The agreements in this paragraph shall survive termination of the Commitments and repayment of the Loans and all other amounts payable hereunder. 5.9 Additional Subsidiary Guarantors. If any Person shall become a Subsidiary of the Borrower, cause such Subsidiary (other than a Foreign Subsidiary) to promptly thereafter execute and deliver a Guarantee in favor of the Administrative Agent in substantially the form of Exhibit F, each of which Guarantees shall be accompanied by such resolutions, incumbency certificates and legal opinions as are reasonably requested by the Administrative Agent and its counsel. 5.10 Material Terms of Other Agreements Being More Restrictive. If the Borrower or any Subsidiary enters into any agreement which contains provisions that are materially more restrictive when taken as a whole than the comparable provisions of this Agreement and the other Loan Documents, such more restrictive provisions shall automatically be incorporated by reference in this subsection 5.10, mutatis mutandis, and the Borrower and its Subsidiaries shall deliver such confirmatory amendments to the Loan Documents to incorporate such more restrictive provisions in the Loan Documents, on terms satisfactory to the Administrative Agent. SECTION 6. NEGATIVE COVENANTS The Borrower hereby agrees that so long as the Commitments remain in effect, any Loan remains outstanding and unpaid or any other amount is owing to any Bank or the 50 55 Administrative Agent hereunder, the Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly: 6.1 Financial Condition Covenants. (a) Revenues. Permit the Borrower's consolidated revenues for fiscal year 1999 to be less than $100,000,000. (b) Maintenance of Consolidated Net Worth. Permit Consolidated Net Worth on the last day of any fiscal quarter prior to the Release Date to be less than $200,000,000. (c) Fixed Charge Coverage. Permit for any period of four consecutive fiscal quarters ending prior to the Release Date (and commencing June 30, 1998) the ratio of (i) the sum of Consolidated Net Income for such period plus income taxes deducted in determining such Consolidated Net Income plus Consolidated Fixed Charges for such period to (ii) Consolidated Fixed Charges for such period to be less than 2.0 to 1.0, provided that for the Borrower's fiscal quarter ending on (A) June 30, 1998, such ratio shall be calculated for the fiscal quarter then ended, (B) September 30, 1998, such ratio shall be calculated for the two consecutive fiscal quarters then ended and (iii) December 31, 1998, such ratio shall be calculated for the three consecutive fiscal quarter then ended and provided further that for the fiscal quarter ending on June 30, 1998, such ratio shall not be less than 1.5 to 1.0. (d) Maximum Leverage. Permit the aggregate of the Additional Buildout Indebtedness outstanding, the Loans outstanding and the unused Commitments under this Agreement to be greater than $1,200,000,000 (net of interest accretion on non-cash pay Additional Buildout Indebtedness and escrowed interest on overfunded issuances relating to Additional Buildout Indebtedness). 6.2 Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness under this Agreement; (b) Subordinated Debt; (c) unsecured Indebtedness incurred in the ordinary course of business consistent with prior practice in respect of commercial and standby letters of credit issued by any financial institution to secure contractual commitments to its customers; (d) Indebtedness owed by a Wholly Owned Subsidiary Guarantor to another Wholly Owned Subsidiary that is a Subsidiary Guarantor; and Indebtedness owed to the Borrower by a Wholly Owned Subsidiary that is a Subsidiary Guarantor; and Indebtedness owed by the Borrower to a Wholly-Owned Subsidiary that is a Subsidiary Guarantor or a Foreign Subsidiary; 51 56 (e) unsecured Indebtedness of the Borrower and its Subsidiaries in an aggregate principal amount not to exceed $5,000,000 outstanding at any time; (f) unsecured vendor financing committed to the Borrower on the date hereof and set forth on Schedule 6.2; (g) additional unsecured vendor financing having terms satisfactory to the Administrative Agent; (h) Additional Buildout Indebtedness, provided that on and after the Release Date the representation and warranty contained in Section 3.19 is true with respect to such Additional Buildout Indebtedness; (i) Indebtedness of a Subsidiary Guarantor which is acquired after the Closing Date which Indebtedness exists at the time of such acquisition and is not created in anticipation of such acquisition; and (j) Indebtedness consisting of obligations under Financing Leases of the Borrower incurred to finance the acquisition of fixed or capital assets in an aggregate principal amount not exceeding $25,000,000 at any time outstanding. 6.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except: (a) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Borrower or the appropriate Subsidiary, as the case may be, in accordance with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith and by appropriate proceedings; (c) pledges or deposits in connection with workmen's compensation, unemployment insurance and other social security legislation and deposits securing liabilities to insurance carriers under insurance and self-insurance agreements; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, restrictions and other Liens incurred in the ordinary course of business which do not 52 57 secure Indebtedness and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any Subsidiaries; (f) Liens upon real and/or personal property, which property was acquired after the Closing Date by the Borrower or any Subsidiary in the ordinary course of business, each of which Liens was created solely for the purpose of securing Indebtedness incurred for the purpose of financing such acquisition or for the purpose of securing any refinancings or renewals thereof; provided, that no such Lien shall extend to or cover any property of the Borrower or any such Subsidiary other than the respective property so acquired and improvements thereon, and the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the fair market value (as determined in good faith by the board of directors of the Borrower) of the respective property at the time it was acquired; (g) Liens created pursuant to Section 2.7(c); (h) Liens which secure Additional Buildout Indebtedness, provided that from and after the Release Date the representation and warranty contained in Section 3.19 is true with respect to such Additional Buildout Indebtedness; and (i) Liens securing Indebtedness of the Borrower permitted by Section 6.2(j) incurred to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (iii) the amount of Indebtedness secured thereby is not increased and (iv) the principal amount of Indebtedness secured by any such Lien shall at no time exceed the original purchase price of such property. 6.4 Limitation on Contingent Obligations. Create, incur, assume or suffer to exist any Contingent Obligation, except: (a) the Subsidiary Guarantees; (b) the Borrower may guarantee the obligations of each Subsidiary Guarantor; (c) Subsidiary Guarantors may guarantee Additional Buildout Indebtedness of the Borrower; and (d) Subsidiaries may guarantee payment of the Obligations. 6.5 Limitation on Fundamental Changes. (a) Enter into any transaction of merger or consolidation or amalgamation, 53 58 or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution) except that any Subsidiary may be merged or consolidated (i) with or into the Borrower (provided that the Borrower shall be the continuing or surviving Person) or (ii) with or into any one or more Wholly Owned Subsidiaries (including any entity that, after giving effect to such merger or consolidation, is a Wholly Owned Subsidiary) other than a Wholly Owned Subsidiary domiciled outside the United States of America (provided that the Wholly Owned Subsidiary shall be the continuing or surviving corporation); or (b) convey, sell, lease, transfer or otherwise dispose of any assets in a transaction or series of related transactions, except that: (i) any Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or a Wholly Owned Subsidiary (other than a Wholly Owned Subsidiary domiciled outside the United States of America); (ii) the Borrower or any Subsidiary may sell, lease, transfer or otherwise dispose of inventory in the ordinary course of business; (iii) the Borrower or any Subsidiary may sell, transfer or otherwise dispose of Cash Equivalents in exchange for a comparable amount of cash and/or Cash Equivalents; and (iv) the Borrower or any Subsidiary may sell or otherwise dispose of obsolete or worn out property in the ordinary course of business having an aggregate value not to exceed $5,000,000 for all such transactions. Notwithstanding the foregoing, the Borrower may transfer assets to Subsidiary Guarantors and may transfer the Service Provider Agreements to Foreign Subsidiaries. 6.6 Limitation on Restricted Payments. Declare or make any distributions on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for the purchase, redemption, retirement or other acquisition of, any Equity Interests of the Borrower or any Subsidiary, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary, or permit any Subsidiary to make any payment on account of, or purchase or otherwise acquire, any Equity Interests of the Borrower or any Subsidiary from any Person or pay any interest on the Borrower's subordinated obligations described in the definition of "Partner Guarantor Fee Agreement" (all of the foregoing shall collectively be referred to as "Restricted Payments"), except that, so long as no Default or Event of Default has occurred and is continuing or would result from the 54 59 making of such Restricted Payment, the Borrower may make a Restricted Payment (a) if the sum of (i) such Restricted Payment plus (ii) the Restricted Payments made from the Closing Date through any date of determination, shall not exceed an amount equal to 50% of the aggregate Consolidated Net Income from January 1, 1996, through the end of the fiscal quarter immediately preceding such date of determination, (b) consisting of Qualified Equity Interests. The value of any distributions made other than of cash and the value of any Investments made other than in cash shall be the value determined in good faith by the General Partners' Committee of the Borrower and evidenced by a resolution of such Committee or (c) in respect of Preferred Equity Interests. 6.7 Investments. Make, commit to make or maintain any Investment, except: (a) Investments by the Borrower or Subsidiaries in Wholly Owned Subsidiary Guarantors and in the Borrower; (b) Investments in accounts, contract rights and chattel paper (as defined in the Uniform Commercial Code), and notes receivable, arising or acquired in the ordinary course of business; (c) Investments in Cash Equivalents; and (d) Excluded Employee Loans; (e) the Borrower may transfer the Service Provider Agreements to the Foreign Subsidiaries; (f) Investments in Foreign Subsidiaries; provided that the aggregate amount of all such investments (whether cash or property, as valued at the time each such investment is made) shall not exceed (net of any return representing return of capital of (but not return on) any such investment) $15,000,000 at any time; and (g) Investments in Persons other than Subsidiaries made in connection with the Satellite Project; provided that the aggregate amount of all such investments (whether cash or property, as valued at the time each such investment is made) shall not exceed (net of any return representing return of capital of (but not return on) any such investment) $15,000,000 at any time. 6.8 Limitation on Optional Payments and Modifications of Subordinated Debt and Other Debt Instruments. (a) Make any optional payment or prepayment prior to scheduled maturity on or optional redemption or purchase prior to scheduled maturity of any Subordinated Debt or other Indebtedness (other than the Loans and the Additional Buildout Indebtedness), provided that this clause (a) shall not prohibit the Borrower from consummating any 55 60 such transactions if the sole consideration therefor is Qualified Equity Interests, or (b) amend, modify or change, or consent or agree to any amendment, modification or change to any of the terms of, any Subordinated Debt or other Indebtedness (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon), provided that this subsection shall not prohibit the refinancing of any Subordinated Debt or Additional Buildout Indebtedness (the "Original Debt") with other Subordinated Debt or Additional Buildout Indebtedness (the "Replacement Debt"), respectively, as long as (i) the terms of the Replacement Debt are not more restrictive than the comparable provisions of the Original Debt, (ii) the Replacement Debt shall mature no earlier than the maturity date of the Original Debt, (iii) the interest rate on the Replacement Debt shall be a market rate determined on the date of issuance of the Replacement Debt and (iv) Subordinated Debt may only be replaced with other Subordinated Debt. 6.9 Affiliates. Enter into any transaction, including, without limitation, the purchase, sale or exchange of property or the rendering of any services, with any Affiliate (other than a Wholly Owned Subsidiary) or enter into, assume or suffer to exist any employment or consulting contract with any such Affiliate, except any transaction or contract disclosed on Schedule 6.9 (including any modification or amendment to any such transaction or contract that, in the reasonable judgment of the Borrower, is no less favorable to the Borrower than such transaction or contract) and any transaction or contract which is in the ordinary course of the Borrower's business and which is upon fair and reasonable terms no less favorable to the Borrower than it would obtain in a comparable arm's length transaction with a Person not an Affiliate (which, prior to the Release Date, shall be determined in the reasonable judgment of the Borrower), provided that this Section shall not prohibit the Partner Guarantor Fee Arrangement. 6.10 Partnership Documents. Amend or terminate, or permit the amendment or termination of, the Partnership Agreement or other organizational documents of the Borrower and its Subsidiaries in any material respect adverse to the Banks. 6.11 Restrictions on Subsidiaries. Permit any Wholly Owned Subsidiary to enter into any agreement which prohibits or restricts the ability of such Subsidiary to (i) pay dividends or make any other distributions on its Equity Interests or any other interest or participation in, or measured by, its profits, owned by the Borrower or any of its Subsidiaries, or pay any Indebtedness owed to the Borrower or any of its Subsidiaries, (ii) make loans or advances to the Borrower or any of its Subsidiaries or (iii) transfer any of its properties or assets to the Borrower or any of its Wholly Owned Subsidiaries, except for such encumbrances or restrictions existing under or by reason of: 56 61 (A) the terms of this Agreement and the terms of Additional Buildout Indebtedness provided that such terms are no more restrictive than those set forth in this Agreement, (B) applicable law, (C) customary non-assignment provisions entered into in the ordinary course of business and consistent with past practices, (D) the terms of purchase money obligations for property acquired in the ordinary course of business, but only to the extent that such purchase money obligations restrict or prohibit the transfer of the property so acquired and (E) any encumbrance or restriction existing under any agreement which refinances or replaces the agreements for Additional Buildout Indebtedness described in clause (A); provided, that the terms and conditions of any such encumbrances or restrictions contained in any such agreement referred to in this clause (E) constitute no greater encumbrance or restriction on the ability of any Subsidiary to pay dividends or make distributions, make loans or advances or transfer properties or assets other than those under or pursuant to the agreement evidencing the Indebtedness or obligations refinanced. 6.12 Restrictive Agreements. Enter into or with any Person any agreement which restricts the ability of the Borrower or its Subsidiaries to perform any of their obligations under the Loan Documents. SECTION 7. ADDITIONAL NEGATIVE COVENANTS The Borrower hereby agrees that on and after the Release Date, so long as the Commitments remain in effect, any Loan remains outstanding and unpaid or any other amount is owing to any Bank or any Administrative Agent hereunder, that in addition to compliance with the covenants contained in Section 6, the Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly: 7.1 Financial Condition Covenants. (a) Maintenance of Consolidated Net Worth. (b) Maintenance of Consolidated Net Worth Permit Consolidated Net Worth on the last day of any fiscal quarter on or after the Release Date to be less than the sum of (X) $300,000,000 plus (Y) 50% of Consolidated Net Income, if positive, for the period from January 1, 1996 to the last day of such fiscal quarter. (c) Fixed Charge Coverage. Permit for any period of four consecutive fiscal quarters ending after the Release Date the ratio of (i) the sum of Consolidated Net Income for such period plus income taxes deducted in determining such Consolidated Net Income plus Consolidated Fixed Charges for such period to (ii) Consolidated Fixed Charges for such period to be less than 3.0 to 1.0. 57 62 (d) Maximum Leverage. Permit the Leverage Ratio on the last day of any fiscal quarter on or after the Release Date to be greater than (i) 5.0 to 1.0 during 1999 and (ii) 4.0 to 1.0 thereafter. 7.2 Sale and Leaseback. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or any Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary, except for such transactions occurring after the Closing Date with respect to property having an aggregate value for all such transactions not in excess of $5,000,000. 7.3 Limitation on Changes in Fiscal Year. Permit the fiscal year of the Borrower to end on a day other than December 31. SECTION 8. EVENTS OF DEFAULT Upon the occurrence of any of the following events: (a) Prior to the Release Date: (i) The Borrower shall fail to pay any principal of any Loans when due in accordance with the terms thereof or hereof; or the Borrower shall fail to pay any interest on any Loans, or any fee or other amount payable hereunder, within five days after any such amount becomes due in accordance with the terms thereof or hereof; or (ii) Any representation or warranty made or deemed made by or on behalf of any Loan Party herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (iii) The Borrower shall default in the observance or performance of any agreement contained in Section 6 (other than Section 6.1 prior to the Release Date) or 7; (iv) The Borrower shall default in the observance or performance of any other agreement contained in this Agreement (other than Section 6.1 prior to the Release Date), and such default shall continue unremedied for a period of 30 days; or (v) The Borrower or any of its Subsidiaries shall (A) default in any payment of principal of or interest on any Indebtedness (other than the Loans) or in the payment of any Contingent Obligation, beyond the period of grace, if any, 58 63 provided in the instrument or agreement under which such Indebtedness or Contingent Obligation was created and (I) the aggregate principal amount of (x) all such Indebtedness equals or exceeds $1,000,000 or (y) all such Contingent Obligations equal or exceed $5,000,000 and (II) (a) the effect of such default is to cause such Indebtedness to become due prior to its stated maturity or such Contingent Obligation to become payable or (b) such Indebtedness is otherwise due or such Contingent Obligation is otherwise payable; or (B) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or such Contingent Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause such Indebtedness to become due prior to its stated maturity or such Contingent Obligation to become payable; or (vi) (A) The Borrower or any of its Subsidiaries shall commence any case, proceeding or other action (I) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (II) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (B) there shall be commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (A) above which (I) results in the entry of an order for relief or any such adjudication or appointment or (II) remains undismissed, undischarged or unbonded for a period of 60 days; or (C) there shall be commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, restraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (D) the Borrower or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (A), (B), or (C) above; or (E) the Borrower or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (vii) (A) Any Guarantee (including any Partner Cash Collateral Agreement) shall cease, for any reason, to be in full force and effect (except for the Guarantee Release) or any Guarantor shall so assert or (B) the Lien created by any of the Partner Cash Collateral Agreements shall cease to be enforceable 59 64 and of the same effect and priority purported to be created thereby; or (viii) A Change in Control shall occur; or (ix) An Event of Default under Section 11 of the Lockheed Martin Guarantee shall occur. (b) From and After the Release Date: (i) Any of the events described in the preceding paragraph (a) shall have occurred other than (A) any of such events described in paragraph (a)(ii) relating to Lockheed Martin or (B) an event described in paragraph (a)(vii) or (a)(ix); or (ii) The Borrower or any of its Subsidiaries shall (A) default in any payment of principal of or interest on any Indebtedness (other than the Loans) or in the payment of any Contingent Obligation, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Contingent Obligation was created and (I) the aggregate principal amount of (x) all such Indebtedness equals or exceeds $1,000,000 or (y) all such Contingent Obligations equal or exceed $5,000,000 and (II) the effect of such default is to cause, or permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Contingent Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Contingent Obligation to become payable or (B) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or such Contingent Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Contingent Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Contingent Obligation to become payable; or (iii) (A) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (B) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan, (C) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Banks, likely to result in the 60 65 termination of such Plan for purposes of Title IV of ERISA, (D) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (E) the Company or any Commonly Controlled Entity shall, or is, in the reasonable opinion of the Required Banks, likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan, or (F) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (A) through (F) above, such event or condition, together with all other such events or conditions, if any, could subject the Borrower or any of its Subsidiaries to any tax, penalty or other liabilities in the aggregate material in relation to the business, operations, property or financial or other condition of the Borrower and its Subsidiaries taken as a whole; or (iv) One or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate a liability (to the extent not paid or covered by insurance) of $5,000,000 or more and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or (v) The Borrower or its Subsidiaries shall cease to hold or fail to obtain on any date required any material consent, license or authorization (other than the Feeder Link Licenses) required for the continued operation of their business or for the construction, completion and operation of the Satellite Project; or (vi) (A) Any of the Security Documents shall cease, for any reason, to be in full force and effect, or the Borrower or any other Loan Party which is a party to any of the Security Documents shall so assert or (B) the Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby or (C) on and after the Release Date the representation and warranty contained in Section 3.19 shall not be true. then, and in any such event, (A) if such event is an Event of Default specified in paragraph (a)(vi) above, both prior to and after the Release Date, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken, without prejudice to the rights of any Bank to enforce its claims against the Borrower: (i) with the consent of the Majority Banks, the Administrative Agent may, or upon the request of the Majority Banks, the Administrative Agent 61 66 shall, by notice to the Borrower, declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Majority Banks, the Administrative Agent may, or upon the request of the Majority Banks, the Administrative Agent shall, by notice of default to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section 8, presentment, demand, protest and all other notices of any kind are hereby expressly waived. SECTION 9. THE ADMINISTRATIVE AGENT 9.1 Appointment. Each Bank hereby irrevocably designates and appoints Chemical as the Administrative Agent of such Bank under this Agreement and the other Loan Documents, and each such Bank irrevocably authorizes Chemical, as the Administrative Agent for such Bank, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents, and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement and the other Loan Documents, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent. 9.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by any of them with reasonable care. 9.3 Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement and the other Loan Documents (except for its or such Person's own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or in the other Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, the Loan Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Bank to ascertain or to 62 67 inquire as to the observance or performance of any of the agreements contained in, or conditions of, any Loan Document, or to inspect the properties, books or records of any Loan Party. 9.4 Reliance by the Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Loan Parties), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first receive such advice or concurrence of the Majority Banks or the Required Banks, as the case may be, as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Majority Banks or the Required Banks, as the case may be, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks and all future holders of the Notes. 9.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Bank or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Banks. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Banks; provided, that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. 9.6 Non-Reliance on the Administrative Agent and Other Banks. Each Bank expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any 63 68 representations or warranties to it and that no act by the Administrative Agent hereafter taken, including any review of the affairs of any Loan Party, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Bank. Each Bank represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of each Loan Party, and made its own decision to make its Loans hereunder and enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and/or decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and/or other condition and creditworthiness of each Loan Party. Except for notices, reports and other documents expressly required to be furnished to the Banks by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness any Loan Party which may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 9.7 Indemnification. The Banks agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitment Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement and the other Loan Documents, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided, that no Bank shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Administrative Agent's gross negligence or willful misconduct. If any such amount with respect to which the Banks have indemnified the Administrative Agent is recovered from the Borrower, the Administrative Agent shall return the amount so recovered to the Banks which so indemnified the Administrative Agent, but without interest, unless the Borrower has paid 64 69 interest. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder. 9.8 The Administrative Agent in Its Individual Capacity. The Administrative Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower and the other Loan Parties as though the Administrative Agent were not the Administrative Agent hereunder. With respect to its Loans made or renewed by it and any Note issued to it, the Administrative Agent shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were not the Administrative Agent, and the terms "Bank" and "Banks" shall include the Administrative Agent in its individual capacity. 9.9 Successor Administrative Agent. The Administrative Agent may resign as such upon 10 days' notice to the Banks and the Borrower; provided, that such resignation shall not become effective until a successor Administrative Agent is appointed in accordance with this Section 9.9. If the Administrative Agent shall resign as Administrative Agent under this Agreement, then the Majority Banks shall appoint from among the Banks a successor agent for the Banks which successor agent shall be approved by the Borrower, whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and any references to the Administrative Agent herein or any other Loan Document shall mean such successor agent effective upon its appointment, and the former Administrative Agent's rights, powers and duties as such shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Notes. After any retiring Administrative Agent's resignation as such, the provisions of this Section 10.9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement. SECTION 10. MISCELLANEOUS 10.1 Amendments and Waivers. None of this Agreement, any Note or any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 10.1. With the written consent of the Required Banks, the Administrative Agent, on behalf of the Banks, and the applicable Loan Party may, from time to time, enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement and the other Loan Documents or changing in any manner the rights of the Banks or of the applicable Loan Party hereunder or thereunder or waiving, on such terms and conditions as the Administrative Agent may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such 65 70 waiver and no such amendment, supplement or modification shall (a) reduce the amount or extend the scheduled maturity of any Loan, or reduce the rate or extend the time of payment of interest thereon, or reduce any fee payable to any Bank hereunder, or reduce the principal amount of any Loan, or increase the amount or extend the expiry date of any Bank's Commitment, in each case without the written consent of each Bank affected thereby, and in the case of any extension of the Termination Date, the written extension of the time of payment of interest on any Loan in an aggregate amount exceeding $15,000,000 for more than six months or the extension of the Commitment Period, without the written consent of Lockheed Martin or (b) [INTENTIONALLY OMITTED], or (c) approve a financial institution as an issuer of an Acceptable Letter of Credit without the written consent of the Majority Banks or (d) amend, modify or waive any provision of this Section 10.1, or reduce the percentage specified in the definitions of Required Banks or Majority Banks, or consent to the assignment or transfer by any Loan Party of any of its rights and obligations under the Loan Documents, or release amounts in the Cash Collateral Account other than in accordance with Section 2.7, in each case without the written consent of all the Banks, or amend, modify or waive any provision of this Section 10.1 that requires the consent of Lockheed Martin without the written consent of Lockheed Martin or (e) amend, modify or waive any provision of Section 9 without the written consent of the then Administrative Agent or (f) increase the Commitments hereunder except in accordance with Section 2.6 or (g) amend the definition of Release Date, release the Lockheed Martin Guarantee, the Subsidiary Guarantee, any Letter of Credit (except on the Release Date and, with respect to any Letter of Credit only, except if such Letter of Credit is being replaced by an Acceptable Letter of Credit in an equal stated amount) or all or substantially all of the Collateral, in each case without the written consent of all of the Banks and Lockheed Martin or (h) amend Section 2.2 or Section 2.6(a) or Section 2.6(c) without the written consent of Lockheed Martin. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Banks and shall be binding upon the Loan Parties, the Banks, the Administrative Agent and all future holders of the Notes. In the case of any waiver, the Loan Parties, the Banks and the Administrative Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy or telex), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, or, in the case of telex 66 71 notice, when sent, answerback received, addressed as follows in the case of the Borrower and the Administrative Agent, and as set forth in Schedule I in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Notes: The Borrower: Globalstar, L.P. 3200 Zanker Road P.O. Box 640670 San Jose, California 95164 Attention: Vice President-Finance Telecopy: 408-473-5548 with a copy to: Lockheed Martin Corporation 6801 Rockledge Drive Bethesda, Maryland 20817 Attention: Treasurer The Administrative Agent: Chemical Bank 270 Park Avenue New York, New York 10017 Attention: James Treger Telecopy: 212-270-7138 with a copy to: Chemical Bank Agent Bank Services Group Grand Central Tower 140 East 45th Street, 29th Floor New York, New York 10017 Attention: Sandra Miklave Telecopy: 212-622-0002 ; provided, that any notice, request or demand to or upon the Administrative Agent or the Banks pursuant to Sections 2.3, 2.6, 2.7 and 2.8 shall not be effective until received. 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Bank, any right, remedy, power or privilege hereunder or under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided or provided in 67 72 the other Loan Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.4 Survival of Representations and Warranties. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the other Loan Documents. 10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay all fees and expenses of the Arranger and the Agent as set forth in the separate letter agreement dated October 16, 1995 with the Borrower, (b) to pay or reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the preparation, execution and delivery of, and any amendment, supplement or modification to, this Agreement, the other Loan Documents and any other documents prepared in connection herewith or therewith, the consummation of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent, (c) to pay or reimburse each Bank and the Administrative Agent for all their reasonable costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, fees and disbursements of counsel to the Administrative Agent and to the several Banks (including, without limitation, the allocated costs of in-house counsel), (d) to pay, indemnify, and hold each Bank and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, (e) to pay or reimburse the Administrative Agent for all its reasonable costs, expenses and charges in connection with the opening and administration of the Partner Collateral Accounts, and (f) to pay, indemnify, and hold each Bank, the Arranger and the Administrative Agent (and their respective directors, officers, employees and agents) harmless from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to or arising out of the execution, delivery, enforcement, performance, syndication and administration of this Agreement, the other Loan Documents and any such other documents and the use or proposed use of proceeds of the Loans (all the foregoing, collectively, the "indemnified liabilities"); provided, that the Borrower shall have no obligation hereunder to the Administrative Agent, the Arranger or any Bank with respect to indemnified liabilities arising from the gross negligence or willful misconduct of the 68 73 Administrative Agent, the Arranger or any such Bank, as the case may be. The agreements in this Section 10.5 shall survive repayment of the Loans and all other amounts payable hereunder. 10.6 Successors and Assigns; Participations; Purchasing Banks. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Banks, the Administrative Agent, all future holders of the Notes, and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Bank. Sections 2.2 and 2.6 and Clauses (a), (d) (g) and (h) of Section 10.1 shall inure to the benefit of and be enforceable by Lockheed Martin to the extent provided therein. (b) Any Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Bank, any Note held by such Bank, the Commitment of such Bank or any other interest of such Bank hereunder; provided, that if the Participant is not an Affiliate of such Bank or another Bank, such Bank shall obtain the prior consent of the Borrower and the Administrative Agent to such sale of participating interests (which consent shall not be unreasonably withheld or delayed); and provided further, that such Bank shall reserve solely unto itself, and shall not grant to any Participant, any part or all of its right to agree to the amendment, modification or waiver of any of the terms of this Agreement, its Note, any other Loan Document or any document related thereto, except to the extent that such amendment, modification or waiver would reduce the principal of, or interest on, the Loans or any fees payable hereunder, in each case to the extent subject to such participation, or postpone the date of the final maturity of, or any date fixed for any payment of interest on, the Loans, in each case to the extent subject to such participation. In the event of any such sale by a Bank of a participating interest to a Participant, such Bank's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, such Bank shall remain the holder of any such Note for all purposes under this Agreement and the Borrower, and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. The Borrower agrees that if amounts outstanding under this Agreement and the Notes are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement and any Note to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement or any Note; provided, that such right of setoff shall be subject to the obligation of such Participant to share with the Banks, 69 74 and the Banks agree to share with such Participant, as provided in Section 10.7. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 10.5 with respect to its participation in the Commitments and the Loans outstanding from time to time; provided, that no Participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Bank would have been entitled to receive in respect of the amount of the participation transferred by such transferor Bank to such Participant had no such transfer occurred. (c) Any Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law, and (if the Purchasing Bank is not an Affiliate of such Bank or an existing Bank) with the prior consent of the Borrower and the Administrative Agent (which shall not be unreasonably withheld or delayed), at any time sell to one or more banks or financial institutions ("Purchasing Banks") all or any part of its rights and obligations under this Agreement and the Notes, pursuant to a Commitment Transfer Supplement, executed by such Purchasing Bank and such transferor Bank, and delivered to the Administrative Agent for its acceptance and recording in the Register; provided, that (i) if the Purchasing Bank is not an Affiliate of such Bank or an existing Bank any sale of Loans shall be in an amount equal to at least $7,500,000 (pro rated downward ratably in connection with permanent reductions of the aggregate Commitments) and (ii) after giving effect thereto, such Bank shall have Commitments and Loans aggregating at least $7,500,000 (pro rated downward ratably in connection with permanent reductions of the aggregate Commitments) unless all of such Bank's Commitments and Loans are sold. Upon such execution, delivery, acceptance and recording, from and after the Transfer Effective Date determined pursuant to such Commitment Transfer Supplement, (x) the Purchasing Bank thereunder shall be a party hereto and, to the extent provided in such Commitment Transfer Supplement, have the rights and obligations of a Bank hereunder with a Commitment as set forth therein, and (y) the transferor Bank thereunder shall, to the extent provided in such Commitment Transfer Supplement, to be released from its obligations under this Agreement (and, in the case of a Commitment Transfer Supplement covering all or the remaining portion of a transferor Bank's rights and obligations under this Agreement, such transferor Bank shall cease to be a party hereto). Such Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Bank and the resulting adjustment of Commitment Percentages arising from the purchase by such Purchasing Bank of all or a portion of the rights and obligations of such transferor Bank under this Agreement and the Notes. If requested by the Purchasing Bank and/or the transferor Bank, on or prior to the Transfer Effective Date determined pursuant to such Commitment Transfer Supplement, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for the surrendered Note a new Note to the order of such Purchasing 70 75 Bank in an amount equal to the Commitment assumed by it pursuant to such Commitment Transfer Supplement and, if the transferor Bank has retained a Commitment hereunder, a new Note to the order of the transferor Bank in an amount equal to the Commitment retained by it hereunder. Such new Notes shall be dated the Closing Date and shall otherwise be in the form of the Notes replaced thereby. The Note surrendered by the transferor Bank shall be returned by the Administrative Agent to the Borrower marked "cancelled". Notwithstanding any provision of this paragraph (c) and paragraph (e) of this Section, the consent of the Borrower shall not be required, and, unless requested by the assignee and/or the assigning Bank, new Notes shall not be required to be executed and delivered by the Borrower, for any assignment which occurs at any time when any of the events described in paragraph (a)(vi) of Section 8 shall have occurred and be continuing. (d) The Administrative Agent shall maintain at its address referred to in Section 10.2 a copy of each Commitment Transfer Supplement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Banks and the Commitment of, and principal amount of the Loans owing to, each Bank from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Banks may (and, in the case of any Loan or other obligation hereunder not evidenced by a Note, shall) treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. Any assignment of a Loan or other obligation hereunder not evidenced by a Note shall be effective only upon appropriate entries with respect thereto being made in the Register. The Register shall be available for inspection by the Borrower or any Bank at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a Commitment Transfer Supplement executed by a transferor Bank and a Purchasing Bank together with payment to the Administrative Agent of a registration and processing fee of $4,000, the Administrative Agent shall (i) promptly accept such Commitment Transfer Supplement and (ii) on the Transfer Effective Date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Administrative Agent, the Banks and the Borrower. (f) The Borrower authorizes each Bank to disclose to any Participant or Purchasing Bank (each, a "Transferee") and any prospective Transferee any and all financial information in such Bank's possession concerning the Loan Parties and their affiliates which has been delivered to such Bank by or on behalf of any such Loan Party pursuant to this Agreement or the other Loan Documents or which has been delivered to such Bank by or on behalf of any Loan Party in connection with such Bank's credit evaluation of the Borrower and its affiliates prior to becoming a 71 76 party to this Agreement; provided, that such Transferee or prospective Transferee agrees in writing to be bound by the confidentiality provisions set forth in Section 10.14 hereof. (g) If, pursuant to this Section 10.6, any interest in this Agreement or any Note is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Bank shall cause such Transferee, concurrently with the effectiveness of such transfer, (i) to represent to the transferor Bank (for the benefit of the transferor Bank, the Administrative Agent and the Borrower) that under applicable law and treaties no taxes will be required to be withheld by the Administrative Agent, the Borrower or the transferor Bank with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the transferor Bank (and, in the case of any Purchasing Bank registered in the Register, the Administrative Agent and the Borrower) either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such Transferee claims entitlement to complete exemption from U.S. federal withholding tax on all interest payments hereunder) and an Internal Revenue Service Form W-8 or W-9 or successor applicable form (wherein such Transferee claims exemption from United States backup withholding tax) and (iii) to agree (for the benefit of the transferor Bank, the Administrative Agent and the Borrower) to provide the transferor Bank (and, in the case of any Purchasing Bank registered in the Register, the Administrative Agent and the Borrower) a new Form 4224 or 1001 or Form W-8 or W-9 upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such Transferee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding and backup withholding tax exemptions. (h) Nothing herein shall prohibit any Bank from pledging or assigning any Loan, either directly or through the principal banking subsidiary of the bank holding company which owns such Bank, to any Federal Reserve Bank in accordance with applicable law. 10.7 Adjustments; Set-off. (a) If any Bank (a "benefitted Bank") shall receive any payment of all or part of its Loans or interest thereon, or receive any collateral in respect of its Loans (in each case whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in clause (a)(vi) of Section 8, or otherwise) in a greater proportion than any such payment to and collateral received by any other Bank, if any, in respect of such other Bank's Loans or interest thereon, or Loans or interest thereon, such benefitted Bank shall purchase for cash from the other Banks such portion of each such other Bank's Loans, or shall provide such other Banks with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to 72 77 cause such benefitted Bank to share the excess payment or benefits of such collateral or proceeds ratably with each of the Banks; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Bank, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Borrower agrees that each Bank so purchasing a portion of another Bank's Loans may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Bank were the direct holder of such portion. (b) In addition to any rights and remedies of the Banks provided by law, each Bank (and its Affiliates, to the extent permitted by law) shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder or under the Notes (whether at the stated maturity, by acceleration or otherwise) to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Bank (or any such Affiliate) to or for the credit or the account of the Borrower. Each Bank agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Bank; provided, that the failure to give such notice shall not affect the validity of such set-off and application. 10.8 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.9 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Agent. 10.10 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.11 Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally: 73 78 (a) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Loan Documents, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in Section 10.2 or at such other address of which the Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 10.12 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES AND FOR ANY COUNTERCLAIM THEREIN. 10.13 Integration. This Agreement represents the agreement of the Borrower, the Administrative Agent and the Banks with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Bank relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 10.14 Confidentiality. The Banks shall hold all non-public information obtained pursuant to the requirements of this Agreement or any other Loan Document which has been identified as such by a Loan Party in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices but in any event may make disclosure reasonably required by a bona fide prospective Purchasing Bank or Participant in connection with the contemplated transfer of any Note or participation therein 74 79 (subject to such prospective Purchasing Bank's or Participant's compliance with Section 10.6(f) hereof) or as required or requested by any Governmental Authority or representative thereof or pursuant to legal process. 75 80 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in New York, New York by their proper and duly authorized officers as of the day and year first above written. GLOBALSTAR, L.P. By: LORAL/QUALCOMM SATELLITE SERVICES L.P., as Managing General Partner By: LORAL/QUALCOMM PARTNERSHIP, L.P., as General Partner By: LORAL GENERAL PARTNER, INC., as General Partner By: /s/ Nicholas Moren ----------------------------------- Title: Vice President CHEMICAL BANK, as Administrative Agent and as a Bank By: /s/ Richard C. Swith ----------------------------------- Title: Vice President BANK OF AMERICA ILLINOIS By: /s/ Steve Aronowitz ----------------------------------- Title: Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Diana H. Imhof ----------------------------------- Title: Vice President THE BANK OF NEW YORK By: /s/ Ken Sneider ----------------------------------- Title: Vice President THE BANK OF NOVA SCOTIA By: /s/ J. Alan Edwards ----------------------------------- Title: Authorized Signatory 76 81 BARCLAYS BANK PLC By: /s/ John C. Livingston ----------------------------------- Title: Director BAYERISCHE LANDESBANK GIROZENTRALE By: /s/ Peter Obermann ----------------------------------- Title: Senior Vice President By: /s/ Wilfried Freudenberger ----------------------------------- Title: Executive Vice President BANQUE NATIONALE de PARIS By: /s/ Richard L. Sted ----------------------------------- Title: Senior Vice President By: /s/ Thomas N. George ----------------------------------- Title: Vice President THE CHASE MANHATTAN BANK, N.A. By: /s/ Richard C. Smith ----------------------------------- Title: Vice President CIBC INC. By: /s/ Marisa Harney ----------------------------------- Title: Director CITICORP USA, INC. By: /s/ Marjorie Futornick ----------------------------------- Title: Vice President CREDIT LYONNAIS CREDIT LYONNAIS CAYMAN ISLAND BRANCH NEW YORK BRANCH By: /s/ Credit Lyonnais By: /s/ Credit Lyonnais --------------------------- ----------------------------------- Title: Title: CREDIT SUISSE By: /s/ J. Hamilton Crawford ----------------------------------- Title: Associate 77 82 By: /s/ Michael C. Mast ----------------------------------- Title: Member of Senior Management THE DAI-ICHI KANGYO BANK, LIMITED, NEW YORK BRANCH By: /s/ Kim P. Lehry ----------------------------------- Title: Vice President THE FUJI BANK, LIMITED NEW YORK BRANCH By: /s/ Teiji Teramoto ----------------------------------- Title: Vice President BAYERISCHE HYPOTHEKEN-UND WECHSEL- BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH By: /s/ Christine Eleik ----------------------------------- Title: Vice President THE INDUSTRIAL BANK OF JAPAN, LIMITED - NEW YORK BRANCH By: /s/ John V. Veltri ----------------------------------- Title: Senior Vice President LTCB TRUST COMPANY By: /s/ Rene O. LeBlanc ----------------------------------- Title: Senior Vice President MELLON BANK, N.A. By: /s/ David N. Smith ----------------------------------- Title: Vice President THE MITSUBISHI TRUST AND BANKING CORPORATION By: /s/ Patricia Loret de Mola ----------------------------------- Title: Senior Vice President 78 83 NATIONAL CITY BANK By: /s/ Joseph D. Robinson ----------------------------------- Title: Vice President NATIONSBANK, N.A. By: /s/ Mary E. Mandanas ----------------------------------- Title: Vice President PNC BANK, NATIONAL ASSOCIATION By: /s/ PNC Bank ----------------------------------- Title: ROYAL BANK OF CANADA By: /s/ John D. Page ----------------------------------- Title: Senior Manager ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A. By: Wendell Jones ----------------------------------- Title: Vice President By: Roberto Gorlier ----------------------------------- Title: First Vice President THE SANWA BANK, LIMITED By: /s/ Dominic J. Sorresso ----------------------------------- Title: Vice President SOCIETE GENERALE By: /s/ Bruce Drossman ----------------------------------- Title: Vice President THE SUMITOMO BANK, LIMITED By: /s/ The Sumitomo Bank ----------------------------------- Title: By: /s/ Herman White, Jr. ----------------------------------- Title: Vice President 79 84 TORONTO DOMINION (TEXAS), INC. By: /s/ Toronto Dominion ----------------------------------- Title: THE YASUDA TRUST & BANKING COMPANY, LIMITED By: /s/ Ron Longinswater ----------------------------------- Title: Joint General Manager 80 EX-10.14 5 WARRANT AGREEMENT 1 Exhibit 10.14 CONFORMED COPY WARRANT AGREEMENT Dated as of February 19, 1997 between GLOBALSTAR TELECOMMUNICATIONS LIMITED and THE BANK OF NEW YORK as the Warrant Agent --------------------------------------------- Warrants for Common Stock of Globalstar Telecommunications Limited --------------------------------------------- 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 Definitions SECTION 1.01. Definitions........................................... 2 SECTION 1.02. Other Definitions..................................... 4 SECTION 1.03. Rules of Construction................................. 5 ARTICLE 2 Warrant Certificates SECTION 2.01. Form and Dating....................................... 5 SECTION 2.02. Legends............................................... 5 SECTION 2.03. Execution and Countersignature........................ 8 SECTION 2.04. Certificate Register.................................. 8 SECTION 2.05 Separation of Warrants and Notes............................................. 9 SECTION 2.06. Transfer and Exchange................................. 9 SECTION 2.07. Replacement Certificates.............................. 10 SECTION 2.08. Temporary Certificates................................ 10 SECTION 2.09. Cancellation.......................................... 10 ARTICLE 3 Exercise Terms SECTION 3.01. Exercise Price........................................ 11 SECTION 3.02. Exercise Periods...................................... 11 SECTION 3.03. Expiration............................................ 11 SECTION 3.04. Manner of Exercise.................................... 11 SECTION 3.05. Issuance of Warrant Shares............................ 12 SECTION 3.06. Fractional Warrant Shares............................. 13 SECTION 3.07. Reservation of Warrant Shares......................... 13 SECTION 3.08. Compliance with Law................................... 14
3 ARTICLE 4 Antidilution Provisions SECTION 4.01. Changes in Common Stock............................... 15 SECTION 4.02. Cash Dividends and Other Distributions....................................... 15 SECTION 4.03. Rights Issue To All Holders of Common Stock........................................ 16 SECTION 4.04. Other Issuances of Common Stock or Rights.............................................. 18 SECTION 4.05. Combination; Liquidation.............................. 19 SECTION 4.06. Other Events.......................................... 20 SECTION 4.07. Superseding Adjustment................................ 21 SECTION 4.08. Minimum Adjustment.................................... 21 SECTION 4.09. Notice of Adjustment.................................. 22 SECTION 4.10. Notice of Certain Transactions........................ 22 SECTION 4.11. Adjustment to Warrant Certificate......................................... 23 ARTICLE 5 Registration Rights SECTION 5.01. Effectiveness of Registration Statements........................................ 24 SECTION 5.02. Suspension............................................ 25 SECTION 5.03. Blue Sky.............................................. 25 SECTION 5.04. Accuracy of Disclosure................................ 25 SECTION 5.05. Indemnification....................................... 26 SECTION 5.06. Additional Acts....................................... 31 SECTION 5.07. Expenses.............................................. 31 ARTICLE 6 Warrant Agent SECTION 6.01. Appointment of Warrant Agent.......................... 32 SECTION 6.02. Rights and Duties of Warrant Agent....................................... 32 SECTION 6.03. Individual Rights of Warrant Agent....................................... 33 SECTION 6.04. Warrant Agent's Disclaimer............................ 34 SECTION 6.05. Compensation and Indemnity............................ 34 SECTION 6.06. Successor Warrant Agent............................... 34
ii 4 ARTICLE 7 Miscellaneous SECTION 7.01. SEC Reports and Other Information..................... 36 SECTION 7.02. Persons Benefitting................................... 37 SECTION 7.03. Rights of Holders..................................... 37 SECTION 7.04. Amendment............................................. 37 SECTION 7.05. Notices............................................... 38 SECTION 7.06. Governing Law......................................... 39 SECTION 7.07. Successors............................................ 39 SECTION 7.08. Multiple Originals.................................... 39 SECTION 7.09. Table of Contents..................................... 39 SECTION 7.10. Severability.......................................... 39 SECTION 7.11. Use of Proceeds....................................... 39 EXHIBIT A Form of Face of Warrant Certificate EXHIBIT B Certificate to be Delivered upon Exchange or Registration of Transfer of Warrants
iii 5 WARRANT AGREEMENT dated as of February 19, 1997 (this "Agreement"), between GLOBALSTAR TELECOMMUNICATIONS LIMITED, a Bermuda corporation ("GTL"), and THE BANK OF NEW YORK, as Warrant Agent (the "Warrant Agent"). GTL desires to issue the warrants (the "Warrants") described herein and to purchase with the proceeds therefrom Partnership Warrants (as defined herein) of Globalstar, L.P., a Delaware limited partnership ("Globalstar"). The Warrants will initially entitle the holders thereof (the "Holders") to purchase in the aggregate 1,032,250 shares of common stock, par value $1.00 per share, of GTL (the "Common Stock") in connection with an offering by GTL, Globalstar and Globalstar Capital Corporation, a Delaware corporation ("Globalstar Capital") (the "Units Offering") of 500,000 units (the "Units"). Each Unit will consist of (i) $1,000 aggregate principal amount of 11-3/8% Senior Notes due 2004 (collectively, the "Notes") issued by Globalstar and Globalstar Capital, as joint and several obligors, and (ii) a Warrant issued by GTL. Each Warrant will entitle the Holder to purchase 2.0645 shares of Common Stock, subject to adjustment as provided herein. In connection with the sale of the Units, 500,000 Warrants will be issued to the purchasers of the Units. The Warrants will not trade separately from the Notes until the earlier of commencement of an exchange offer or the effectiveness of a shelf registration statement for the Notes or such earlier date after August 15, 1997, as Lehman Brothers, Inc. shall determine (the "Separation Date"). GTL further desires the Warrant Agent to act on behalf of GTL in connection with the issuance of the Warrants as provided herein and the Warrant Agent is willing to so act. Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the holders of Warrants: 6 2 ARTICLE 1 Definitions SECTION 1.01. Definitions. "Affiliate" of any Person means any other Person, directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; provided, however, that beneficial ownership of 10% or more of the voting securities of a Person shall be decreed to be control. The terms "controlling" and "controlled" have meanings correlative to the foregoing. "Board" means the Board of Directors of GTL or any committee thereof duly authorized to act on behalf of such Board of Directors. "Business Day" means each day that is not a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. "Cashless Exercise Ratio" means a fraction, the numerator of which is the excess of the Current Market Value per share of Common Stock on the Exercise Date over the Exercise Price per share as of the Exercise Date and the denominator of which is the Current Market Value per share of the Common Stock on the Exercise Date. "Combination" means an event in which GTL consolidates with, merges with or into, or sells all or substantially all of its assets to another Person. "Current Market Value" per share of Common Stock or any other security at any date means: (i) if the security is not registered under the Exchange Act, (a) the value of the security, determined in good faith by the Board and certified in a board resolution, based on the most recently completed arm's-length transaction between GTL and a Person other than an Affiliate of GTL, the closing of which occurred on such date or within the six-month period preceding such date, or (b) if no such transaction shall have occurred on such date or within such six-month period, 7 3 the value of the security as determined by an independent financial expert; or (ii) if the security is registered under the Exchange Act, the average of the last reported sale price of the Common Stock (or the equivalent in an over-the-counter market) for each Business Day during the period commencing 15 Business Days before such date and ending on the date one day prior to such date, or if the security has been registered under the Exchange Act for less than 15 consecutive Business Days before such date, the average of the daily closing bid prices (or such equivalent) for all of the Business Days before such date for which daily closing bid prices are available (provided, however, that if the closing bid price is not determinable for at least 10 Business Days in such period, the "Current Market Value" of the security shall be determined as if the security were not registered under the Exchange Act). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exercise Date" means, for a given Warrant, the day on which such Warrant is exercised pursuant to Section 3.04. "GTL Guarantee Warrants" means warrants to purchase 4,185,318 shares of Common Stock of GTL, at a price per share of $26.50, issued by GTL to certain founding and strategic partners of Globalstar. "GTL Rights" means rights to subscribe for and purchase 1,131,168 share of Common Stock of GTL, at a price per share of $26.50, to be distributed by GTL to holders of its Common Stock. "Indenture" means the Indenture dated as of February 15, 1997, among Globalstar and Globalstar Capital, as joint and several obligors, and the Trustee, with respect to the Notes, as it may be amended or supplemented from time to time. "Issue Date" means the date on which Warrants are initially issued. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer, or an Assistant Treasurer, or the Secretary or an Assistant Secretary of GTL. 8 4 "Partnership Warrants" means the warrants to purchase limited partnership interests in Globalstar having the same terms and tenor as the Warrants issued hereby. "Person" means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "SEC" means the Securities and Exchange Commission, or any successor agency or body performing substantially similar functions. "Securities Act" means the Securities Act of 1933, as amended. "Trustee" means The Bank of New York, or any successor trustee under the Indenture. "Warrant Certificates" mean the registered certificates (including without limitation, the global certificates) issued by GTL under this Agreement representing the Warrants. "Warrant Shares" mean the shares of Common Stock (and any other securities) for which the Warrants are exercisable. SECTION 1.02. Other Definitions.
Defined in Term Section ---- ---------- "Agreement"............................................. Recitals "Cashless Exercise"..................................... 3.04 "Certificate Register".................................. 2.04 "Common Shelf Registration Statement"............................................. 5.01 "Common Stock".......................................... Recitals "Company"............................................... Recitals "Exercise Price"........................................ 3.01 "Expiration Date"....................................... 3.02(b) "Holders"............................................... Recitals "Notes"................................................. Recitals "Registrar"............................................. 3.07 "Separability Legend"................................... 2.02(b) "Separation Date"....................................... Recitals
9 5 "Successor Company"..................................... 4.05(a) "Transfer Agent"........................................ 3.05 "Units"................................................. Recitals "Units Offering"........................................ Recitals "Warrant Agent"......................................... Recitals "Warrants".............................................. Recitals "Warrant Shelf Registration Statement"............................................. 5.01
SECTION 1.03. Rules of Construction. Unless the text otherwise requires: (i) a defined term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect from time to time; (iii) "or" is not exclusive; (iv) "including" means including without limitation; and (v) words in the singular include the plural and words in the plural include the singular. ARTICLE 2 Warrant Certificates SECTION 2.01. Form and Dating. Each Warrant Certificate shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Agreement. The Warrant Certificates may have notations, legends or endorsements required by law, stock exchange rule, agreements to which GTL is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to GTL) and shall bear the legends required by Section 2.02. Each Warrant Certificate shall be dated the date of its countersignature. The terms of the Warrant Certificate set forth in Exhibit A are part of the terms of this Agreement. SECTION 2.02. Legends. (a) Each Warrant Certificate shall bear the following legend: 10 6 THE COMMON STOCK, PAR VALUE $1.00 PER SHARE, OF GTL FOR WHICH THIS WARRANT IS EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. ACCORDINGLY, NO HOLDER SHALL BE ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY TIME UNLESS, AT THE TIME OF EXERCISE, (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT RELATING TO THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAS BEEN FILED WITH, AND DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC, OR (ii) THE ISSUANCE OF SUCH SHARES IS PERMITTED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. (b) Each Warrant Certificate issued prior to the Separation Date shall bear the following legend (the "Separability Legend"): THE WARRANTS REPRESENTED BY THIS CERTIFICATE WERE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000 AGGREGATE PRINCIPAL AMOUNT OF 11-3/8% SENIOR NOTES DUE 2004 OF GLOBALSTAR, L.P. AND GLOBALSTAR CAPITAL CORPORATION (THE "NOTES") AND A WARRANT. THE WARRANTS AND THE NOTES WILL NOT TRADE SEPARATELY UNTIL THE EARLIER OF (I) THE COMMENCEMENT OF AN EXCHANGE OFFER OR THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT FOR THE NOTES OR (II) SUCH DATE AFTER AUGUST 15, 1997, AS LEHMAN BROTHERS INC. MAY DETERMINE. (c) Each Warrant Certificate issued prior to the third anniversary of the original issuance of the Units, unless otherwise agreed by GTL and the Holder thereof, shall bear the following legend: THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR 11 7 PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO "U.S. PERSONS" (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE GLOBALSTAR PARTIES THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHEN THIS SECURITY NO LONGER CONSTITUTES A "RESTRICTED" SECURITY UNDER RULE 144(K) OF THE SECURITIES ACT EXCEPT (A) TO ANY OF THE GLOBALSTAR PARTIES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSES (II)(D) AND (E) IS SUBJECT TO THE RIGHT OF THE ISSUER OF THIS SECURITY AND THE TRUSTEE OR TRANSFER AGENT FOR SUCH SECURITIES TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN FORM AND SUBSTANCE. [THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.] BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN 12 8 RULE 501(A)(1),(2),(3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S. (d) Each Warrant Certificate issued in global form and deposited with DTC shall bear the following legend: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO GTL OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE WARRANT AGREEMENT REFERRED TO HEREIN. SECTION 2.03. Execution and Countersignature. Two Officers shall sign the Warrant Certificates for GTL by manual or facsimile signature. If an Officer whose signature is on a Warrant Certificate no longer holds that office at the time the Warrant Agent countersigns the Warrant Certificate, the Warrant Certificate shall nevertheless be valid. A Warrant Certificate shall not be valid until an authorized signatory of the Warrant Agent manually countersigns the Warrant Certificate. Such authorized signature shall be conclusive evidence that the Warrant Certificate has been countersigned under this Agreement. The Warrant Agent shall initially countersign and deliver Warrant Certificates entitling the Holders thereof to purchase in the aggregate not more than 1,032,250 Warrant Shares upon a written order of GTL signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of GTL. 13 9 The Warrant Agent may appoint an agent reasonably acceptable to GTL to countersign the Warrant Certificates. Unless limited by the terms of such appointment, such agent may countersign Warrant Certificates whenever the Warrant Agent may do so. Each reference in this Agreement to countersignature by the Warrant Agent includes countersignature by such agent. Such agent will have the same rights as the Warrant Agent for service of notices and demands. SECTION 2.04. Certificate Register. The Warrant Agent shall keep a register ("Certificate Register") of the Warrant Certificates and of their transfer and exchange. The Certificate Register shall show the names and addresses of the respective Holders and the date and number of Warrants represented on the face of each Warrant Certificate. GTL and the Warrant Agent may deem and treat the Person in whose name a Warrant Certificate is registered as the absolute owner of such Warrant Certificate for all purposes whatsoever and neither GTL nor the Warrant Agent shall be affected by notice to the contrary. SECTION 2.05. Separation of Warrants and Notes. (a) Prior to the Separation Date no Warrant may be sold, assigned or otherwise transferred to any Person unless, simultaneously with such transfer, the Warrant Agent receives confirmation from the Trustee for the Notes that the Holder thereof has requested a transfer of the related Notes to the same transferee. (b) On or after the Separation Date, the holder of a Warrant Certificate containing a Separability Legend may surrender such Warrant Certificate accompanied by a written application to the Warrant Agent, duly executed by the Holder thereof, for a new Warrant Certificate or certificates not containing the Separability Legend. SECTION 2.06. Transfer and Exchange. The Warrant Certificates shall be issued in registered form only and shall be transferable only upon the surrender of such Warrant Certificate for registration of transfer. When a Warrant Certificate is presented to the Warrant Agent with a request to register a transfer, the Warrant Agent shall register the transfer as requested if the reasonable requirements of the Warrant Agent and of Section 8-401(1) of the Uniform Commercial Code as in effect in the State of New York are met; provided, however, that prior to the Separation Date the Warrant Agent shall not register a 14 10 transfer of a Warrant Certificate and such transfer will be void and of no effect unless the Notes that are a part of the same Unit as the Warrants represented by the Warrant Certificate to be transferred are simultaneously transferred to the same transferee. To permit the registration of transfers and exchanges, GTL shall execute and the Warrant Agent shall countersign Warrant Certificates at the Warrant Agent's request. All Warrant Certificates issued upon any registration of transfer or exchange of Warrant Certificates shall be valid obligations of GTL, entitled to the same benefits under this Agreement as the Warrant Certificates surrendered upon such registration of transfer or exchange. No service charge will be made to a Holder for any registration of transfer or exchange upon surrender of any Warrant Certificate at the office of the Warrant Agent maintained for that purpose. However, GTL may require payment of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Warrant Certificates but not for any exchange or original issuance (not involving a transfer) pursuant to Section 2.08, 3.04 or 3.05. SECTION 2.07. Replacement Certificates. If a mutilated Warrant Certificate is surrendered to the Warrant Agent or if the Holder of a Warrant Certificate claims that the Warrant Certificate has been lost, destroyed or wrongfully taken, GTL shall issue and the Warrant Agent shall countersign a replacement Warrant Certificate if the reasonable requirements of the Warrant Agent and of Section 8-405 of the Uniform Commercial Code as in effect in the State of New York are met. Such Holder shall furnish an indemnity bond sufficient in the judgment of GTL and the Warrant Agent to protect GTL and the Warrant Agent from any loss which either of them may suffer if a Warrant Certificate is replaced. GTL and the Warrant Agent may charge the Holder for their expenses in replacing a Warrant Certificate. Every replacement Warrant Certificate is an additional obligation of GTL. SECTION 2.08. Temporary Certificates. Until definitive Warrant Certificates are ready for delivery, GTL may prepare and the Warrant Agent shall countersign temporary Warrant Certificates. Temporary Warrant Certificates shall be substantially in the form of definitive Warrant Certificates but may have variations that GTL considers appropriate for temporary Warrant Certificates. Without unreasonable delay, GTL shall prepare 15 11 and the Warrant Agent shall countersign definitive Warrant Certificates and deliver them in exchange for temporary Warrant Certificates. SECTION 2.09. Cancellation. (a) In the event GTL shall purchase or otherwise acquire Warrant Certificates, the same shall thereupon be delivered to the Warrant Agent for cancellation. (b) The Warrant Agent and no one else shall cancel and may, but shall not be required to, destroy all Warrant Certificates surrendered for transfer, exchange, replacement, exercise or cancellation unless GTL directs the Warrant Agent to deliver canceled Warrant Certificates to GTL. GTL may not issue new Warrant Certificates to replace Warrant Certificates to the extent they represent Warrants which have been exercised or Warrants which GTL has purchased or otherwise acquired. ARTICLE 3 Exercise Terms SECTION 3.01. Exercise Price. Each Warrant shall initially entitle the Holder thereof, subject to adjustment pursuant to the terms of this Agreement, to purchase 2.0645 shares of Common Stock for a per share exercise price (the "Exercise Price") of $69.575. SECTION 3.02. Exercise Periods. (a) Subject to the terms and conditions set forth herein, the Warrants shall be exercisable at any time or from time to time after February 19, 1998; provided, however, that holders of Warrants will be able to exercise their Warrants only if (i) the Common Shelf Registration Statement relating to the Warrant Shares is effective, or (ii) the exercise of such Warrants is exempt from the registration requirements of the Securities Act, and the Warrant Shares are qualified for sale or exempt from qualification under the applicable securities laws of the states or other jurisdictions in which such holders reside. (b) No Warrant shall be exercisable after February 15, 2004 (the "Expiration Date"). SECTION 3.03. Expiration. Each Warrant shall terminate and become void as of the earlier of (i) the close 16 12 of business on the Expiration Date or (ii) the date such Warrant is exercised. GTL shall give notice not less than 90 and not more than 120 days prior to the Expiration Date to the Holders of all then outstanding Warrants to the effect that the Warrants will terminate and become void as of the close of business on the Expiration Date; provided, however, that if GTL fails to give notice as provided in this Section 3.03, the Warrants will nevertheless expire and become void on the Expiration Date. SECTION 3.04. Manner of Exercise. Warrants may be exercised upon (i) surrender to the Warrant Agent at the principal corporate trust office of the Warrant Agent of the related Warrant Certificate, together with the form of election to purchase Common Stock on the reverse thereof duly filled in and signed by the Holder thereof, and (ii) payment to the Warrant Agent, for the account of GTL, of the Exercise Price for each Warrant Share issuable upon the exercise of such Warrants then exercised. Such payment shall be made (i) in cash or by certified or official bank check payable to the order of GTL or by wire transfer of funds to an account designated by GTL for such purpose or (ii) without the payment of cash, by reducing the number of shares of Common Stock obtainable upon the exercise of a Warrant so as to yield a number of shares of Common Stock upon the exercise of such Warrant equal to the product of (a) the number of shares of Common Stock issuable as of the Exercise Date upon the exercise of such Warrant (if payment of the Exercise Price were being made in cash) and (b) the Cashless Exercise Ratio. An exercise of a Warrant in accordance with the immediately preceding sentence is herein called a "Cashless Exercise". Upon surrender of a Warrant Certificate representing more than one Warrant in connection with the holder's option to elect a Cashless Exercise, the number of shares of Common Stock deliverable upon a Cashless Exercise shall be equal to the number of shares of Common Stock issuable upon the exercise of Warrants that the holder specifies are to be exercised pursuant to a Cashless Exercise multiplied by the Cashless Exercise Ratio. All provisions of this Agreement shall be applicable with respect to a surrender of a Warrant Certificate pursuant to a Cashless Exercise for less than the full number of Warrants represented thereby. Subject to Section 3.02, the rights represented by the Warrants shall be exercisable at the election of the Holders thereof either in full at any time or from time to time in part and in the event that a Warrant Certificate is surrendered for exercise of less than all the Warrants represented by such Warrant Certificate at 17 13 any time prior to the Expiration Date, a new Warrant Certificate representing the remaining Warrants shall be issued. The Warrant Agent shall countersign and deliver the required new Warrant Certificates, and GTL, at the Warrant Agent's request, shall supply the Warrant Agent with Warrant Certificates duly signed on behalf of GTL for such purpose. SECTION 3.05. Issuance of Warrant Shares. Subject to Section 2.07, upon the surrender of Warrant Certificates and payment of the per share Exercise Price, as set forth in Section 3.04, GTL shall issue and cause the Warrant Agent or, if appointed, a transfer agent for the Common Stock ("Transfer Agent") to countersign and deliver to or upon the written order of the Holder and in such name or names as the Holder may designate a certificate or certificates for the number of full Warrant Shares so purchased upon the exercise of such Warrants or other securities or property to which it is entitled, registered or otherwise, to the Person or Persons entitled to receive the same, together with cash as provided in Section 3.06 in respect of any fractional Warrant Shares otherwise issuable upon such exercise. Such certificate or certificates shall be deemed to have been issued and any Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrant Certificates and payment of the per share Exercise Price, as aforesaid; provided, however, that if, at such date, the transfer books for the Warrant Shares shall be closed, the certificates for the Warrant Shares in respect of which such Warrants are then exercised shall be issuable as of the date on which such books shall next be opened and until such date GTL shall be under no duty to deliver any certificates for such Warrant Shares; provided further, however, that such transfer books, unless otherwise required by law, shall not be closed at any one time for a period longer than 20 calendar days. SECTION 3.06. Fractional Warrant Shares. GTL shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be exercised in full at the same time by the same Holder, the number of full Warrant Shares which shall be issuable upon such exercise shall be computed on the basis of the aggregate number of Warrant Shares purchasable pursuant thereto. If any fraction of a Warrant Share would, except for the provisions of this Section 3.06, be issuable on the exercise of any Warrant (or specified portion thereof), GTL shall pay at the time of exercise an amount in cash equal to 18 14 the Current Market Value per Warrant Share, as determined on the day immediately preceding the date the Warrant is exercised, multiplied by such fraction, computed to the nearest whole cent. SECTION 3.07. Reservation of Warrant Shares. GTL shall at all times keep reserved out of its authorized shares of Common Stock a number of shares of Common Stock sufficient to provide for the exercise of all outstanding Warrants. The registrar for the Common Stock (the "Registrar") shall at all times until the Expiration Date reserve such number of authorized shares as shall be required for such purpose. GTL will keep a copy of this Agreement on file with the Transfer Agent. All Warrant Shares which may be issued upon exercise of Warrants shall, upon issue, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof. GTL will supply such Transfer Agent with duly executed stock certificates for such purpose and will itself provide or otherwise make available any cash which may be payable as provided in Section 3.06. GTL will furnish to such Transfer Agent a copy of all notices of adjustments (and certificates related thereto) transmitted to each Holder. Before taking any action which would cause an adjustment pursuant to Article 4 to reduce the Exercise Price below the then par value (if any) of the Common Stock, GTL shall take any and all corporate action which may, in the opinion of its counsel, be necessary in order that GTL may validly and legally issue fully paid and nonassessable shares of Common Stock at the Exercise Price as so adjusted. GTL covenants that all shares of Common Stock which may be issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free of preemptive rights, free from all taxes and free from all liens, charges and security interests, created by or through GTL, with respect to the issue thereof. SECTION 3.08. Compliance with Law. Notwithstanding anything in this Agreement to the contrary, in no event shall a Holder be entitled to exercise a Warrant unless (i) a registration statement filed under the Securities Act in respect of the issuance of the Warrant Shares is then effective or (ii) in the opinion of counsel to GTL addressed to the Warrant Agent the exercise of such Warrants is exempt from the registration requirements of the 19 15 Securities Act and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the States or other jurisdictions in which such holders reside. ARTICLE 4 Antidilution Provisions SECTION 4.01. Changes in Common Stock. In the event that at any time or from time to time GTL shall (i) pay a dividend or make a distribution on its Common Stock in shares of its Common Stock or other shares of its capital stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) increase or decrease the number of shares of Common Stock outstanding by reclassification of its Common Stock, then the number of shares of Common Stock issuable upon exercise of each Warrant immediately after the happening of such event shall be adjusted to a number determined by multiplying the number of shares of Common Stock that such holder would have owned or have been entitled to receive upon exercise had such Warrants been exercised immediately prior to the happening of the events described above (or, in the case of a dividend or distribution of Common Stock or other shares of capital stock, immediately prior to the record date therefor) by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding immediately after the happening of the events described above and the denominator of which shall be the total number of shares of Common Stock outstanding immediately prior to the happening of the events described above; and subject to Section 4.08, the Exercise Price for each Warrant shall be adjusted to a number determined by dividing the Exercise Price immediately prior to such event by such fraction. An adjustment made pursuant to this Section 4.01 shall become effective immediately after the effective date of such event, retroactive to the record date therefor in the case of a dividend or distribution in shares of Common Stock or other shares of GTL's capital stock. SECTION 4.02. Cash Dividends and Other Distributions. In the event that at any time or from time to time GTL shall distribute to all holders of Common Stock (i) any dividend or other distribution of cash, evidences of 20 16 its indebtedness, shares of its capital stock or any other assets, properties or securities or (ii) any options, warrants or other rights to subscribe for or purchase any of the foregoing (other than, in each case, (w) the issuance of any rights under a shareholder rights plan, (x) any dividend or distribution described in Section 4.01, (y) any rights, options, warrants or securities described in Section 4.03 and (z) any cash dividends or other cash distributions from current or retained earnings), then the number of shares of Common Stock issuable upon the exercise of each Warrant shall be increased to a number determined by multiplying the number of shares of Common Stock issuable upon the exercise of such Warrant immediately prior to the record date for any such dividend or distribution by a fraction, the numerator of which shall be the Current Market Value per share of Common Stock on the record date for such dividend or distribution and the denominator of which shall be such Current Market Value per share of Common Stock on the record date for such dividend or distribution less the sum of (x) the amount of cash, if any, distributed per share of Common Stock and (y) the fair value (as determined in good faith by the Board, whose determination shall be evidenced by a board resolution filed with the Warrant Agent, a copy of which will be sent to Holders upon request) of the portion, if any, of the distribution applicable to one share of Common Stock consisting of evidences of indebtedness, shares of stock, securities, other assets or property, warrants, options or subscription or purchase rights; and, subject to Section 4.08, the Exercise Price shall be adjusted to a number determined by dividing the Exercise Price immediately prior to such record date by the above fraction. Such adjustments shall be made whenever any distribution is made and shall become effective as of the date of distribution, retroactive to the record date for any such distribution; provided, however, that GTL is not required to make an adjustment pursuant to this Section 4.02 if at the time of such distribution GTL makes the same distribution to Holders of Warrants as it makes to holders of Common Stock pro rata based on the number of shares of Common Stock for which such Warrants are exercisable (whether or not currently exercisable). No adjustment shall be made pursuant to this Section 4.02 which shall have the effect of decreasing the number of shares of Common Stock issuable upon exercise of each Warrant or increasing the Exercise Price. SECTION 4.03. Rights Issue To All Holders of Common Stock. In the event that at any time or from time to 21 17 time GTL shall issue to all holders of Common Stock without any charge, rights, options or warrants entitling the holders thereof to subscribe for shares of Common Stock, or securities convertible into or exchangeable or exercisable for Common Stock, entitling such holders to subscribe for or purchase shares of Common Stock at a price per share that is lower at the record date for such issuance than the then Current Market Value per share of Common Stock other than in connection with the adoption of a shareholder rights plan by GTL, then the number of shares of Common Stock issuable upon the exercise of each Warrant shall be increased to a number determined by multiplying the number of shares of Common Stock theretofore issuable upon exercise of each Warrant by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights, options, warrants or securities plus the number of additional shares of Common Stock offered for subscription or purchase or into or for which such securities that are issued are convertible, exchangeable or exercisable, and the denominator of which shall be the number of shares of Common Stock outstanding on the date of issuance of such rights, options, warrants or securities plus the total number of shares of Common Stock which the aggregate consideration expected to be received by GTL (assuming the exercise or conversion of all such rights, options, warrants or securities) would purchase at the then Current Market Value per share of Common Stock. Subject to Section 4.08, in the event of any such adjustment, the Exercise Price shall be adjusted to a number determined by dividing the Exercise Price immediately prior to such date of issuance by the aforementioned fraction. Such adjustment shall be made immediately after such rights, options or warrants are issued and shall become effective, retroactive to the record date for the determination of stockholders entitled to receive such rights, options, warrants or securities. Notwithstanding anything to the contrary in this Article IV, no adjustment to the number of Warrant Shares issuable upon exercise of the Warrants or to the Exercise Price shall be made as a result of the offering by GTL to all holders of its Common Stock of the GTL Rights (or as a result of any exercise of the GTL Rights), including as a result of the issuance of additional shares of Common Stock, or securities convertible into or exchangeable or exercisable for shares of Common Stock, resulting from the operation of any anti-dilution provision in any warrant or other security of GTL convertible into, exercisable or exchangeable for Common Stock of GTL, which such warrant or security is outstanding on the date of this Agreement. No 22 18 adjustment shall be made pursuant to this Section 4.03 which shall have the effect of decreasing the number of shares of Common Stock purchasable upon exercise of each Warrant or of increasing the Exercise Price. SECTION 4.04 Other Issuances of Common Stock or Rights. (a) In the event that at any time or from time to time GTL shall issue (i) shares of Common Stock (subject to the provisions below), (ii) rights, options or warrants entitling the holders thereof to subscribe for shares of Common Stock (provided, however that no adjustment shall be made upon the exercise of such rights, options or warrants), or (iii) securities convertible into or exchangeable or exercisable for Common Stock (provided, however, that no adjustment shall be made upon the conversion, exchange or exercise of such securities (other than issuances specified in (i), (ii) or (iii) which are made as the result of anti-dilution adjustments in such securities)), at a price per share at the record date of such issuance that is less than the then Current Market Value per share of Common Stock, then the number of shares of Common Stock issuable upon the exercise of each Warrant shall be increased to a number determined by multiplying the number of shares of Common Stock theretofore issuable upon exercise of each Warrant by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately after such sale or issuance plus the number of additional shares of Common Stock offered for subscription or purchase or into or for which such securities that are issued are convertible, exchangeable or exercisable, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such sale or issuance plus the total number of shares of Common Stock which the aggregate consideration expected to be received by GTL (assuming the exercise or conversion of all such rights, options, warrants or securities, if any) would purchase at the then Current Market Value per share of Common Stock; and subject to Section 4.08 the Exercise Price shall be adjusted to a number determined by dividing the Exercise Price immediately prior to such date of issuance by the aforementioned fraction; provided, however, that no adjustment to the number of Warrant Shares issuable upon the exercise of the Warrants or to the Exercise Price shall be made as a result of (i) the issuance of shares of Common Stock under any warrants, options or other rights existing on the date hereof, (ii) the issuance of shares of Common Stock in bona fide public offerings that are underwritten or in which a placement agent is retained by GTL or (iii) the issuance of 23 19 options, or shares of Common Stock pursuant to any option, under any employee benefit plans approved by the Board of Directors. Such adjustments shall be made whenever such rights, options or warrants or convertible securities are issued. No adjustment shall be made pursuant to this Section 4.04 which shall have the effect of decreasing the number of shares of Common Stock issuable upon exercise of each warrant or of increasing the Exercise Price. For purposes of Section 4.04 only, any issuance of Common Stock, or rights, options or warrants to subscribe for, or other securities convertible into or exercisable or exchangeable for, Common Stock, which issuance (or agreement to issue) (A) is in exchange for or otherwise in connection with the acquisition of the property (excluding any such exchange exclusively for cash) of any Person and (B) is at a price per share equal to the lower of the Current Market Value at the time an agreement in principle is reached or at the time a definitive agreement is entered into, shall be deemed to have been made at a price per share equal to the Current Market Value per share at the record date with respect to such issuance (the time of closing or consummation of such exchange or acquisition) if such definitive agreement is entered into within 90 days of the date of such agreement in principle. (b) Notwithstanding anything to the contrary in this Article IV, no adjustment to the number of Warrant Shares issuable upon exercise of the Warrants or to the Exercise Price shall be made as a result of the acceleration of the vesting or exercise of the GTL Guarantee Warrants, including as a result of the issuance of additional shares of Common Stock, or securities convertible into or exchangeable or exercisable for shares of Common Stock, resulting from the operation of any anti-dilution provision in any warrant or other security of GTL convertible into, exercisable or exchangeable for Common Stock of GTL, which such warrant or security is outstanding on the date of this Agreement. In addition, no adjustment to the number of Warrant Shares issuable upon exercise of the Warrants or to the Exercise Price shall be made upon or as a result of the issuance or distribution by Globalstar of any partnership interest in Globalstar. SECTION 4.05. Combination; Liquidation. (a) Except as provided in Section 4.05(b), in the event of a Combination, each Holder shall have the right to receive upon exercise of the Warrants the kind and amount of shares of capital stock or other securities or property which such 24 20 Holder would have been entitled to receive upon or as a result of such Combination had such Warrant been exercised immediately prior to such event. Unless paragraph (b) is applicable to a Combination, GTL shall provide that the surviving or acquiring Person (the "Successor Company") in such Combination will enter into an agreement with the Warrant Agent confirming the Holders' rights pursuant to this Section 4.05(a) and providing for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 4. The provisions of this Section 4.05(a) shall similarly apply to successive Combinations involving any Successor Company. (b) In the event of (i) a Combination where consideration to the holders of Common Stock in exchange for their shares is payable solely in cash or (ii) the dissolution, liquidation or winding-up of GTL, the holders of the Warrants shall be entitled to receive, upon surrender of their Warrant Certificates, distributions on an equal basis with the holders of Common Stock or other securities issuable upon exercise of the Warrants, as if the Warrants had been exercised immediately prior to such event, less the Exercise Price. In case of any Combination described in this Section 4.05(b), the surviving or acquiring Person and, in the event of any dissolution, liquidation or winding-up of GTL, GTL, shall deposit promptly with the Warrant Agent the funds, if any, necessary to pay to the holders of the Warrants the amounts to which they are entitled as described above. After such funds and the surrendered Warrant Certificates are received, the Warrant Agent is required to deliver a check in such amount as is appropriate (or, in the case of consideration other than cash, such other consideration as is appropriate) to such Person or Persons as it may be directed in writing by the Holders surrendering such Warrants. SECTION 4.06. Other Events. If any event occurs as to which the foregoing provisions of this Article 4 are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the Board, fairly and adequately protect the purchase rights of the Warrants in accordance with the essential intent and principles of such provisions, then such Board shall make such adjustments in the application of such provisions, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of such Board, to 25 21 protect such purchase rights as aforesaid, but in no event shall any such adjustment have the effect of increasing the Exercise Price or decreasing the number of shares of Common Stock issuable upon exercise of any Warrant. SECTION 4.07. Superseding Adjustment. Upon the expiration of any rights, options, warrants or conversion or exchange privileges which resulted in adjustments pursuant to this Article 4, if any thereof shall not have been exercised, the number of Warrant Shares issuable upon the exercise of each Warrant shall be readjusted pursuant to the applicable section of Article 4 as if (A) the only shares of Common Stock issuable upon exercise of such rights, options, warrants, conversion or exchange privileges were the shares of Common Stock, if any, actually issued upon the exercise of such rights, options, warrants or conversion or exchange privileges and (B) shares of Common Stock actually issued, if any, were issuable for the consideration actually received by GTL upon such exercise plus the aggregate consideration, if any, actually received by GTL for the issuance, sale or grant of all such rights, options, warrants or conversion or exchange privileges whether or not exercised and the Exercise Price shall be readjusted inversely; provided, however, that no such readjustment shall (except by reason of an intervening adjustment under Section 4.01) have the effect of decreasing the number of Warrant Shares purchasable upon the exercise of each Warrant or increase the Exercise Price by an amount in excess of the amount of the adjustment initially made in respect of the issuance, sale or grant of such rights, options, warrants or conversion or exchange privileges. SECTION 4.08. Minimum Adjustment. The adjustments required by the preceding Sections of this Article 4 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that no adjustment of the Exercise Price or the number of shares of Common Stock issuable upon exercise of Warrants that would otherwise be required shall be made unless and until such adjustment either by itself or with other adjustments not previously made increases or decreases by at least 1% the Exercise Price or the number of shares of Common Stock issuable upon exercise of Warrants immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Article 4 and not previously made, would result in a minimum adjustment. For 26 22 the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. In computing adjustments under this Article 4, fractional interests in Common Stock shall be taken into account to the nearest one-hundredth of a share. SECTION 4.09. Notice of Adjustment. Whenever the Exercise Price or the number of shares of Common Stock and other property, if any, issuable upon exercise of the Warrants is adjusted, as herein provided, GTL shall deliver to the Warrant Agent a certificate of a firm of independent accountants selected by the Board (who may be the regular accountants employed by GTL) setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated (including a description of the basis on which (i) the Board determined the fair value of any evidences of indebtedness, other securities or property or warrants, options or other subscription or purchase rights and (ii) the Current Market Value of the Common Stock was determined, if either of such determinations were required), and specifying the Exercise Price and the number of shares of Common Stock issuable upon exercise of Warrants after giving effect to such adjustment. GTL shall promptly cause the Warrant Agent to mail a copy of such certificate to each Holder in accordance with Section 7.06. The Warrant Agent shall be entitled to rely on such certificate and shall be under no duty or responsibility with respect to any such certificate, except to exhibit the same from time to time, to any Holder desiring an inspection thereof during reasonable business hours. The Warrant Agent shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist which may require any adjustment of the Exercise Price or the number of shares of Common Stock or other stock or property issuable on exercise of the Warrants, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed in making such adjustment or the validity or value of any shares of Common Stock, evidences of indebtedness, warrants, options, or other securities or property. SECTION 4.10. Notice of Certain Transactions. In the event that GTL shall propose to (a) pay any dividend payable in securities of any class to the holders of its Common Stock or to make any other non-cash dividend or distribution to the holders of its Common Stock, (b) offer the holders of its Common Stock rights to subscribe for or to purchase any securities convertible into shares of Common 27 23 Stock or shares of stock of any class or any other securities, rights or options, (c) issue any (i) shares of Common Stock, (ii) rights, options or warrants entitling the holders thereof to subscribe for shares of Common Stock, or (iii) securities convertible into or exchangeable or exercisable for Common Stock (in the case of (i), (ii) and (iii), if such issuance or adjustment would result in an adjustment hereunder), (d) effect any capital reorganization, reclassification, consolidation or merger, (e) effect the voluntary or involuntary dissolution, liquidation or winding-up of GTL or (f) make a tender offer or exchange offer with respect to the Common Stock, GTL shall within 5 days send to the Warrant Agent and the Warrant Agent shall within 5 days send the Holders a notice (in such form as shall be furnished to the Warrant Agent by GTL) of such proposed action or offer. Such notice shall be mailed by the Warrant Agent to the Holders at their addresses as they appear in the Certificate Register, which shall specify the record date for the purposes of such dividend, distribution or rights, or the date such issuance or event is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed, and shall briefly indicate the effect of such action on the Common Stock and on the number and kind of any other shares of stock and on other property, if any, and the number of shares of Common Stock and other property, if any, issuable upon exercise of each Warrant and the Exercise Price after giving effect to any adjustment pursuant to Article 4 which will be required as a result of such action. Such notice shall be given as promptly as possible and (x) in the case of any action covered by clause (a) or (b) above, at least 10 days prior to the record date for determining holders of the Common Stock for purposes of such action or (y) in the case of any other such action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be the earlier. SECTION 4.11. Adjustment to Warrant Certificate. The form of Warrant Certificate need not be changed because of any adjustment made pursuant to this Article 4, and Warrant Certificates issued after such adjustment may state the same Exercise Price and the same number of shares of Common Stock issuable upon exercise of the Warrants as are stated in the Warrant Certificates initially issued pursuant to this Agreement. GTL, however, may at any time in its sole discretion make any change in the form of Warrant Certificate that it may deem appropriate to give effect to 28 24 such adjustments and that does not affect the substance of the Warrant Certificate, and any Warrant Certificate thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant Certificate or otherwise, may be in the form as so changed. ARTICLE 5 Registration Rights SECTION 5.01. Effectiveness of Registration Statement. Subject to Section 5.02, GTL shall cause to be filed pursuant to Rule 415 (or any successor provision) of the Securities Act not later than 60 days after the Issue Date, a shelf registration statement relating to the offer and sale of the Warrants by the Holders from time to time in accordance with the methods of distribution elected by such holders and set forth in such registration statement (the "Warrant Shelf Registration Statement"), and shall use its reasonable efforts to cause the Warrant Shelf Registration Statement to be declared effective on or before 150 days after the Issue Date. Subject to Section 5.02, GTL shall cause to be filed pursuant to Rule 415 (or any successor provision) of the Securities Act a shelf registration statement covering the issuance of Warrant Shares to the Holders upon exercise of the Warrants by the Holders thereof (the "Common Shelf Registration Statement", and together with the Warrant Shelf Registration Statement, the "Registration Statements") and shall use its reasonable efforts to cause the Common Shelf Registration Statement to be declared effective on or before 365 days after the Issue Date. Subject to Section 5.02, GTL shall cause each of the Registration Statements to remain effective until (A) in the case of the Common Shelf Registration Statement, the earliest of (i) such time as all Warrants have been exercised and (ii) the Expiration Date and (B) in the case of the Warrant Shelf Registration Statement, the earliest of (i) such time as all the Warrants have been sold thereunder, (ii) three years after its effective date and (iii) until all Warrants can be sold without restriction under the Securities Act. In connection with any Registration Statement, (i) GTL shall furnish to the Warrant Agent, prior to the filing with the Commission, a copy of any Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the prospectus included therein and shall use its reasonable best efforts to reflect in each such document, when filed with the Commission, such 29 25 comments as the Warrant Agent may reasonably propose, (ii) GTL shall furnish to each Holder, without charge, at least one copy of any Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those incorporated by reference), (iii) GTL shall, for so long as any Registration Statement is effective, deliver to each Holder, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Registration Statement and any amendment or supplement thereto as such Holder may reasonably request, and GTL consents to the proper use of the prospectus therein and any amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Warrants or the Warrant Shares, as the case may be, covered by such prospectus and any amendment or supplement thereto, (iv) GTL may require each Holder of Warrants to be sold pursuant to the Warrant Shelf Registration Statement or to be exercised in connection with the Common Shelf Registration Statement to furnish to GTL such information regarding the Holder and the distribution of such Warrants or Warrant Shares as GTL may from time to time reasonably request for inclusion in such Registration Statement, (v) GTL shall, if requested, promptly incorporate in a prospectus supplement or post-effective amendment to such Registration Statement such information as a majority in interest of the Holders reasonably agree should be included therein and shall make all required filings of such prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such prospectus supplement or post-effective amendment, (vi) GTL shall enter into such agreements (including underwriting agreements) as are appropriate, customary and reasonably necessary in connection with any such Registration Statement and (vii) GTL shall (A) make available all material customary for reasonable due diligence examinations in connection with such Registration Statements, (B) make such representations and warranties to the Holders of Warrants as are customary and reasonable in connection with such Registration Statements, (C) obtain such opinions of counsel to GTL addressed to and reasonably satisfactory to the Holders as are customary and reasonable in connection with such Registration Statements and (D) obtain such "comfort" letters and updates thereof from the independent certified public accountants of GTL addressed to the Holders as are customary and reasonable in connection with such Registration Statements. GTL will furnish the Warrant Agent with current prospectuses meeting the 30 26 requirements of the Securities Act in sufficient quantity to permit the Warrant Agent to deliver, at GTL's expense, a prospectus to each holder of a Warrant upon the exercise thereof. GTL shall promptly inform the Warrant Agent of any change in the status of the effectiveness or availability of any Registration Statement. SECTION 5.02. Suspension. During any consecutive 365-day period, GTL shall be entitled to suspend the availability of each of the Warrant Shelf Registration Statement and the Common Shelf Registration Statement for up to two 45 consecutive-day periods (except during the 45 consecutive-day period immediately prior to the Expiration Date) if GTL's Board determines in the exercise of its reasonable judgement that there is a valid business purpose for such suspension and provides notice that such determination was made by GTL's board to the holders of the Warrants; provided, however, that in no event shall GTL be required to disclose the business purpose for such suspension if GTL determines in good faith that such business purpose must remain confidential. SECTION 5.03. Blue Sky. GTL shall use its reasonable efforts to register or qualify the Warrants and the Warrant Shares under all applicable securities laws, blue sky laws or similar laws of all jurisdictions in the United States and Canada in which any holder of Warrants may or may be deemed to purchase Warrants or Warrant Shares upon the exercise of Warrants and shall use its reasonable efforts to maintain such registration or qualification through the earliest of (A) in the case of the Common Shelf Registration Statement, (i) such time as all Warrants have been exercised and (ii) the Expiration Date and (B) in the case of the Warrant Shelf Registration Statement, until the earliest of (i) such time as all the Warrants have been sold thereunder, (ii) such time as the Warrants can be sold without restriction under the Securities Act and (iii) three years after the Issue Date; provided, however, that GTL shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 5.03 or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. SECTION 5.04. Accuracy of Disclosure. GTL represents and warrants to each Holder and agrees for the benefit of each Holder that (i) each of the Warrant Shelf 31 27 Registration Statement and the Common Shelf Registration Statement and any amendment thereto will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading; and (ii) each of the prospectus furnished to such Holder for delivery in connection with the sale of Warrants and the prospectus delivered to such Holder upon the exercise of Warrants and the documents incorporated by reference therein will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading; provided, however, that GTL shall have no liability under clauses (i) or (ii) of this Section 5.04 with respect to any such untrue statement or omission made in any Registration Statement in reliance upon and in conformity with information furnished to GTL by or on behalf of the Holders specifically for inclusion therein. SECTION 5.05. Indemnification. (a) In connection with any Registration Statement, GTL agrees to indemnify and hold harmless each Holder of the Warrants and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (each Holder and such controlling persons being referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including but not limited to any losses, claims, damages, liabilities or actions relating to purchases and sales of the Warrants or the Warrant Shares) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement or prospectus or in any amendment or supplement thereto, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) GTL shall not be liable in any such case to the extent that such loss, claim, damage or 32 28 liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement or any preliminary or final prospectus or in any amendment or supplement thereto in reliance upon and in conformity with written information pertaining to such Holder and furnished to GTL by or on behalf of such Holder specifically for inclusion therein, (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any prospectus relating to such Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any person as to which there is a prospectus delivery requirement (a "Delivering Seller") that sold the Securities to the person asserting any such losses, claims, damages or liabilities to the extent that any such loss, claim, damage or liability of such Delivering Seller results from the fact that there was not sent or given to such person, on or prior to the written confirmation of such sale, a copy of the relevant prospectus, as amended and supplemented, provided that (I) GTL shall have previously furnished copies thereof to such Delivering Seller in accordance with this Agreement and (II) such furnished prospectus, as amended and supplemented, would have corrected any such untrue statement or omission or alleged untrue statement or omission, and (iii) this indemnity agreement will be in addition to any liability which GTL may otherwise have to such Indemnified Party. (b) In connection with any Registration Statement, each Holder of the Warrants, severally and not jointly, will indemnify and hold harmless GTL and each person, if any, who controls GTL within the meaning of the Securities Act or the Exchange Act and the directors, officers, agents and employees of such controlling persons from and against any losses, claims, damages or liabilities or any actions in respect thereof to which GTL or any such controlling person or director, officers, agent or employee of such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement or preliminary or final prospectus or in any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but in each case only to the extent 33 29 that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to GTL by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, GTL for any legal or other expenses reasonably incurred by GTL or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to GTL or any of its controlling persons. (c) Promptly after receipt by an indemnified party under this section of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this section, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above, except to the extent that it is prejudiced or harmed in any material respect by failure to give such prompt notice. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with one counsel (and local counsel as necessary) reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this section for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, not to be unreasonably withheld, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such 34 30 settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action. No indemnifying party shall be liable for any amounts paid in settlement of any action or claim without its written consent, which consent shall not be unreasonably withheld, but if settled in accordance with its written consent or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this section is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above for any reason other than as provided in subsection (c) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by GTL on the one hand or such Holder or such other indemnified person, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 5(d), 35 31 the Holders shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Warrants pursuant to the Warrant Shelf Registration Statement or the Warrant Shares pursuant to the Common Shelf Registration Statement exceeds the amount of damages which such Holders would have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each officer, director, employee, representative and agent of an indemnified party and each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party, and each officer, director, employee, representative and agent of GTL and each person, if any, who controls GTL within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as GTL. (e) The agreements contained in this section shall survive the sale of the Warrants pursuant to the Warrant Shelf Registration Statement and the sale of the Warrant Shares pursuant to the Common Shelf Registration Statement, as the case may be, and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. SECTION 5.06. Additional Acts. If the sale of Warrants or the issuance or sale of any Common Stock or other securities issuable upon the exercise of the Warrants requires registration or approval of any governmental authority (other than the registration requirements under the Securities Act), or the taking of any other action under the laws of the United States of America or any political subdivision thereof before such securities may be validly offered or sold in compliance with such laws, then GTL covenants that it will, in good faith and as expeditiously as reasonably possible, use all reasonable efforts to secure and maintain such registration or approval or to take such other action, as the case may be. SECTION 5.07. Expenses. All expenses incident to GTL's performance of or compliance with its obligations under this Article 5 will be borne by GTL, including without 36 32 limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all reasonable fees and expenses incurred in connection with compliance with state securities or blue sky laws, (iii) all reasonable expenses of any Persons incurred by or on behalf of GTL in preparing or assisting in preparing, printing and distributing the Warrant Shelf Registration Statement, the Common Shelf Registration Statement or any other registration statement, prospectus, any amendments or supplements thereto and other documents relating to the performance of and compliance with this Article 5, (iv) the fees and disbursements of the Warrant Agent, (v) the fees and disbursements of counsel for GTL and the Warrant Agent and (vi) the fees and disbursements of the independent public accountants of GTL, including the expenses of any special audits or comfort letters required by or incident to such performance and compliance. ARTICLE 6 Warrant Agent SECTION 6.01. Appointment of Warrant Agent. GTL hereby appoints the Warrant Agent to act as agent for GTL in accordance with the express provisions of this Agreement and the Warrant Agent hereby accepts such appointment. SECTION 6.02. Rights and Duties of Warrant Agent. (a) Agent for GTL. In acting under this Warrant Agreement and in connection with the Warrant Certificates, the Warrant Agent is acting solely as agent of GTL and does not assume any obligation or relationship or agency or trust for or with any of the holders of Warrant Certificates or beneficial owners of Warrants. (b) Counsel. The Warrant Agent may consult with counsel satisfactory to it (who may be counsel to GTL), and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice of such counsel. (c) Documents. The Warrant Agent shall be protected and shall incur no liability for or in respect of any action taken or thing suffered by it in reliance upon any Warrant Certificate, notice, direction, consent, certificate, affidavit, statement, opinion or other paper or 37 33 document reasonably believed by it to be genuine and to have been presented or signed by the proper parties. (d) No Implied Obligations. The Warrant Agent shall be obligated to perform only such duties as are specifically set forth herein and in the Warrant Certificates, and no implied duties or obligations of the Warrant Agent shall be read into this Agreement or the Warrant Certificates. The Warrant Agent shall not be under any obligation to take any action hereunder which may tend to involve it in any expense or liability for which it does not receive indemnity if such indemnity is reasonably requested. The Warrant Agent shall not be accountable or under any duty or responsibility for the use by GTL of any of the Warrant Certificates countersigned by the Warrant Agent and delivered by it to the Holders or on behalf of the Holders pursuant to this Agreement or for the application by GTL of the proceeds of the Warrants. The Warrant Agent shall have no duty or responsibility in case of any default by GTL in the performance of its covenants or agreements contained herein or in the Warrant Certificates or in the case of the receipt of any written demand from a Holder with respect to such default, including any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise. (e) Not Responsible for Adjustments or Validity of Stock. The Warrant Agent shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist that may require an adjustment of the number of shares of Common Stock issuable upon exercise of each Warrant or the Exercise Price, or with respect to the nature or extent of any adjustment when made or with respect to the method employed or provided to be employed herein or in any supplemental agreement in making the same. The Warrant Agent shall not be accountable with respect to the validity or value of any shares of Common Stock or of any securities or property which may at any time be issued or delivered upon the exercise of any Warrant or upon any adjustment pursuant to Article 4, and it makes no representation with respect thereto. The Warrant Agent shall not be responsible for any failure of GTL to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates upon the surrender of any Warrant Certificate for the purpose of exercise or upon any adjustment pursuant to Article 4, or to comply with any of the covenants of GTL contained in Article 4. 38 34 SECTION 6.03. Individual Rights of Warrant Agent. The Warrant Agent and any stockholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of GTL or its affiliates or become pecuniarily interested in transactions in which GTL or its affiliates may be interested, or contract with or lend money to GTL or its affiliates or otherwise act as fully and freely as though it were not the Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for GTL or for any other legal entity. SECTION 6.04. Warrant Agent's Disclaimer. The Warrant Agent shall not be responsible for and makes no representation as to the validity or adequacy of this Agreement or the Warrant Certificates and it shall not be responsible for any statement in this Agreement or the Warrant Certificates other than its countersignature thereon. SECTION 6.05. Compensation and Indemnity. GTL and the Warrant Agent have entered into an agreement pursuant to which GTL agrees to pay the Warrant Agent from time to time compensation for its services and to reimburse the Warrant Agent upon request for all reasonable out-of-pocket expenses incurred by it, including the reasonable compensation and expenses of the Warrant Agent's agents and counsel. GTL shall indemnify the Warrant Agent against any and all loss, liability, damage, claim or expense (including agents' and attorneys' fees and expenses) incurred by it without gross negligence or bad faith on its part arising out of or in connection with the acceptance or performance of its duties under this Agreement. The Warrant Agent shall notify GTL promptly of any claim for which it may seek indemnity. GTL need not reimburse any expense or indemnify against any loss or liability incurred by the Warrant Agent through wilful misconduct, negligence or bad faith. GTL's payment obligations pursuant to this Section 6.05 shall survive the termination of this Agreement. To secure GTL's payment obligations under this Agreement, the Warrant Agent shall have a lien prior to the Holders on all money or property held or collected by the Warrant Agent. SECTION 6.06. Successor Warrant Agent. (a) GTL to Provide Warrant Agent. GTL agrees for the benefit of the Holders that there shall at all times be a Warrant Agent 39 35 hereunder until all the Warrants have been exercised or are no longer exercisable. (b) Resignation and Removal. The Warrant Agent may at any time resign by giving written notice to GTL of such intention on its part, specifying the date on which its desired resignation shall become effective; provided, however, that such date shall not be less than 60 days after the date on which such notice is given unless GTL otherwise agrees. The Warrant Agent hereunder may be removed at any time by the filing with it of an instrument in writing signed by or on behalf of GTL and specifying such removal and the date when it shall become effective, which date shall not be less than 60 days after such notice is given unless the Warrant Agent otherwise agrees. Any removal under this Section 6.06 shall take effect upon the appointment by GTL as hereinafter provided of a successor Warrant Agent (which shall be a bank or trust company authorized under the laws of the jurisdiction of its organization to exercise corporate trust powers) and the acceptance of such appointment by such successor Warrant Agent. If a successor Warrant Agent does not take office within 60 days after the retiring Warrant Agent resigns or is removed, the retiring Warrant Agent or the Holders of 10% of the Warrants may petition, at the expense of GTL, any court of competent jurisdiction for the appointment of a successor. (c) GTL to Appoint Successor. In the event that at any time the Warrant Agent shall resign, or shall be removed, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or shall commence a voluntary case under Federal bankruptcy laws, as now or hereafter constituted, or under any other applicable Federal or state bankruptcy, insolvency or similar law, or shall consent to the appointment of or taking possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator (or other similar official) of the Warrant Agent or its property or affairs, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or shall take corporate action in furtherance of any such action, or a decree or order for relief by a court having jurisdiction in the premises shall have been entered in respect of the Warrant Agent in an involuntary case under the Federal bankruptcy laws, as now or hereafter constituted, or any other applicable Federal or State bankruptcy, insolvency or similar law, or a decree order by a court having jurisdic- 40 36 tion in the premises shall have been entered for the appointment of a receiver, custodian, liquidator, assignee, trustee, sequestrator (or similar official) of the Warrant Agent or of its property or affairs, or any public officer shall take charge or control of the Warrant Agent or of its property or affairs for the purpose of rehabilitation, conservation, winding up or liquidation, a successor Warrant Agent, qualified as aforesaid, shall be appointed by GTL by an instrument in writing filed with the successor Warrant Agent. Upon the appointment as aforesaid of a successor Warrant Agent and acceptance by the successor Warrant Agent of such appointment, the Warrant Agent shall cease to be the Warrant Agent hereunder; provided, however, that in the event of the resignation of the Warrant Agent hereunder, such resignation shall be effective on the earlier of (i) the date specified in the Warrant Agent's notice of resignation and (ii) the appointment and acceptance of a successor Warrant Agent hereunder. (d) Successor To Expressly Assume Duties. Any successor Warrant Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to GTL an instrument accepting such appointment hereunder, and thereupon such successor Warrant Agent, without any further act, deed or conveyance, shall become vested with all the rights and obligations of such predecessor with like effect as if originally named as Warrant Agent hereunder, and such predecessor, upon payment of its charges and disbursements then unpaid, shall thereupon become obligated to transfer, deliver and pay over, and such successor Warrant Agent shall be entitled to receive, all monies, securities and other property on deposit with or held by such predecessor, as Warrant Agent hereunder. (e) Successor by Merger. Any corporation into which the Warrant Agent hereunder may be merged or consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any corporation to which the Warrant Agent shall sell or otherwise transfer all or substantially all the corporate trust or stock transfer assets and business of the Warrant Agent, provided that it shall be qualified as aforesaid, shall be the successor Warrant Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto. 41 37 ARTICLE 7 Miscellaneous SECTION 7.01. SEC Reports and Other Information. Notwithstanding that GTL may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, GTL shall file with the SEC and thereupon provide the Warrant Agent and Holders with such annual reports and such information, documents and other reports as are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to such Sections , such information, documents and other reports to be so filed and provided at the times specified for the filing of such information, documents and reports under such Sections . Delivery of such reports, information and documents to the Warrant Agent is for informational purposes only and the Warrant Agent's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including GTL's compliance with any of its covenants hereunder. SECTION 7.02. Persons Benefitting. Nothing in this Agreement is intended or shall be construed to confer upon any Person other than GTL, the Warrant Agent and the Holders any right, remedy or claim under or by reason of this agreement or any part hereof. SECTION 7.03. Rights of Holders. Holders of unexercised Warrants are not entitled to (i) receive dividends or other distributions, (ii) receive notice of or vote at any meeting of the stockholders, (iii) consent to any action of the stockholders, (iv) receive notice as stockholders of any other proceedings of GTL, (v) exercise any preemptive rights or (vi) exercise any other rights whatsoever as stockholders of GTL. SECTION 7.04. Amendment. This Agreement may be amended by the parties hereto without the consent of any Holder for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions with respect to matters or questions arising under this Agreement as GTL and the Warrant Agent may deem necessary or desirable (including without limitation any addition or modification to provide for compliance with the transfer restrictions set forth herein); provided, however, that such action shall not adversely affect the rights of any of the 42 38 Holders. Any amendment or supplement to this Agreement that has an adverse effect on the interests of the Holders shall require the written consent of the Holders of a majority of the then outstanding Warrants. The consent of each Holder affected shall be required for any amendment pursuant to which the Exercise Price would be increased or the number of Warrant Shares issuable upon exercise of Warrants would be decreased (other than pursuant to adjustments provided herein) or the exercise period with respect to the Warrants would be shortened. In determining whether the Holders of the required number of Warrants have concurred in any direction, waiver or consent, Warrants owned by GTL or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with GTL shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Warrant Agent shall be protected in relying on any such direction, waiver or consent, only Warrants which the Warrant Agent actually knows are so owned shall be so disregarded. Also, subject to the foregoing, only Warrants outstanding at the time shall be considered in any such determination. SECTION 7.05. Notices. Any notice or communication shall be in writing and delivered in Person or mailed by first-class mail addressed as follows: if to GTL: Cedar House 41 Cedar Avenue Hamilton HMIZ Bermuda Attention: Michael B. Targoff with a copy to: Willkie Farr & Gallagher One Citicorp Center 153 East 53rd Street, 46th Floor New York, New York 10022 Attention: Bruce R. Kraus 43 39 if to the Warrant Agent: The Bank of New York Corporate Trust Office 101 Barclay Street New York, NY 10286 Attention: Corporate Trust Administration Facsimile: (212) 815-5915 GTL or the Warrant Agent by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Holder shall be mailed to the Holder at the Holder's address as it appears on the Certificate Register and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 7.06. Governing Law. The laws of the State of New York shall govern this Agreement and the Warrant Certificates. SECTION 7.07. Successors. All agreements of GTL in this Agreement and the Warrant Certificates shall bind its successors. All agreements of the Warrant Agent in this Agreement shall bind its successors. SECTION 7.08. Multiple Originals. The parties may sign any number of copies of this Agreement. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Agreement. SECTION 7.09. Table of Contents. The table of contents and headings of the Articles and Sections of this Agreement have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. SECTION 7.10. Severability. The provisions of this Agreement are severable, and if any clause or provision 44 40 shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction. SECTION 7.11. Use of Proceeds. GTL agrees, for the benefit of the Holders of the Warrants from time to time and of the Common Stock underlying such Warrants upon exercise thereof, to use the proceeds from the issuance and sale of the Warrants (net of any expenses of the offering of the Units allocable to GTL) to purchase Partnership Warrants from Globalstar. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above. GLOBALSTAR TELECOMMUNICATIONS LIMITED, by /s/ Eric J. Zahler -------------------------- Name: Eric J. Zahler Title: Secretary THE BANK OF NEW YORK, as Warrant Agent, by /s/ Walter Gitlin -------------------------- Name: Walter Gitlin Title: Vice President 45 1 EXHIBIT A [FORM OF FACE OF WARRANT CERTIFICATE] THE WARRANTS REPRESENTED BY THIS CERTIFICATE WERE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000 AGGREGATE PRINCIPAL AMOUNT OF 11-3/8% SENIOR NOTES DUE 2004 OF GLOBALSTAR, L.P. AND GLOBALSTAR CAPITAL CORPORATION (THE "NOTES") AND A WARRANT. THE WARRANTS AND THE NOTES WILL NOT TRADE SEPARATELY UNTIL THE EARLIER OF (I) THE COMMENCEMENT OF AN EXCHANGE OFFER OR THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT FOR THE NOTES OR (II) SUCH DATE AFTER AUGUST 15, 1997, AS LEHMAN BROTHERS INC. MAY DETERMINE. THE COMMON STOCK, PAR VALUE $1.00 PER SHARE, OF GLOBALSTAR TELECOMMUNICATIONS LIMITED ("GTL") FOR WHICH THIS WARRANT IS EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. ACCORDINGLY, NO HOLDER SHALL BE ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY TIME UNLESS, AT THE TIME OF EXERCISE, (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT RELATING TO THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAS BEEN FILED WITH, AND DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC, OR (ii) THE ISSUANCE OF SUCH SHARES IS PERMITTED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO GTL OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO "U.S. PERSONS" (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE GLOBALSTAR PARTIES THAT: (I) IT HAS ACQUIRED A "RESTRICTED" 46 2 SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHEN THIS SECURITY NO LONGER CONSTITUTES A "RESTRICTED" SECURITY UNDER RULE 144(K) OF THE SECURITIES ACT EXCEPT (A) TO ANY OF THE GLOBALSTAR PARTIES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSES (II)(D) AND (E) IS SUBJECT TO THE RIGHT OF THE ISSUER OF THIS SECURITY AND THE TRUSTEE OR TRANSFER AGENT FOR SUCH SECURITIES TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN FORM AND SUBSTANCE. [THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.] BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1),(2),(3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S. IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. No. [ ] Certificate for ______ Warrants WARRANTS TO PURCHASE COMMON STOCK OF GLOBALSTAR TELECOMMUNICATIONS LIMITED THIS CERTIFIES THAT _____________, or its registered assigns, is the registered holder of the number of Warrants set forth above (the "Warrants"). Each Warrant entitles the holder thereof (the "Holder"), at its option and subject to the provisions contained herein and in the Warrant Agreement referred to below, to purchase from Globalstar Telecommunications Limited, a Bermuda corporation ("GTL"), 2.0645 shares of Common Stock, par value of $1.00 per share, of GTL (the "Common Stock") at the per share exercise price of $69.575 (the "Exercise Price"), or by Cashless Exercise referred to below. This Warrant Certificate shall terminate and become void as of the close of business on February 15, 2004 (the "Expiration Date") or upon the exercise hereof as to all the shares of Common Stock subject hereto. The number of shares issuable upon exercise of the Warrants and 47 3 the Exercise Price per share shall be subject to adjustment from time to time as set forth in the Warrant Agreement. This Warrant Certificate is issued under and in accordance with a Warrant Agreement dated as of February 19, 1997 (the "Warrant Agreement"), between GTL and The Bank of New York (the "Warrant Agent", which term includes any successor Warrant Agent under the Warrant Agreement), and is subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and provisions the Holder of this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Warrant Agreement for a full statement of the respective rights, limitations of rights, duties and obligations of GTL, the Warrant Agent and the Holders of the Warrants. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Warrant Agreement. A copy of the Warrant Agreement may be obtained for inspection by the Holder hereof upon written request to the Warrant Agent at 101 Barclay Street, New York, NY 10286 attention of Corporate Trust Administration. Subject to the terms of the Warrant Agreement, the Warrants may be exercised in whole or in part (i) by presentation of this Warrant Certificate with the Election to Purchase attached hereto duly executed and with the simultaneous payment of the Exercise Price in cash (subject to adjustment) to the Warrant Agent for the account of GTL at the office of the Warrant Agent or (ii) by Cashless Exercise. Payment of the Exercise Price in cash shall be made by certified or official bank check payable to the order of GTL or by wire transfer of funds to an account designated by GTL for such purpose. Payment by Cashless Exercise shall be made without the payment of cash by reducing the amount of Common Stock that would be obtainable upon the exercise of a Warrant and payment of the Exercise Price in cash so as to yield a number of shares of Common Stock upon the exercise of such Warrant equal to the product of (1) the number of shares of Common Stock for which such Warrant is exercisable as of the Exercise Date (if the Exercise Price were being paid in cash) and (2) a fraction, the numerator of which is the excess of the Current Market Value per share of Common Stock on the Exercise Date over the Exercise Price per share as of the Exercise Date and the denominator of which is the Current Market Value per share of the Common Stock on the Exercise Date. As provided in the Warrant Agreement and subject to the terms and conditions therein set forth, the Warrants shall be exercisable at any time on or after February 19, 1998; provided, however, that Holders of Warrants will be able to exercise their Warrants only if a shelf registration statement relating to the Common Stock underlying the Warrants is effective or the exercise of such Warrants is exempt from the registration requirements of the Securities Act of 1933 and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states or other jurisdictions in which such Holders reside; provided further, however, that no Warrant shall be exercisable after February 15, 2004. In the event GTL enters into a Combination, the Holder hereof will be entitled to receive upon exercise of the Warrants the kind and amount of shares of capital stock or other securities or other property of such surviving entity as the Holder would have been entitled to receive upon or as a result of the combination had the Holder 48 4 exercised its Warrants immediately prior to such Combination; provided, however, that in the event that, in connection with such Combination, consideration to holders of Common Stock in exchange for their shares is payable solely in cash or in the event of the dissolution, liquidation or winding-up of GTL, the Holder hereof will be entitled to receive such cash distributions as the Holder would have received had the Holder exercised its Warrants immediately prior to such Combination, less the Exercise Price. As provided in the Warrant Agreement, the number of shares of Common Stock issuable upon the exercise of the Warrants and the Exercise Price are subject to adjustment upon the happening of certain events. GTL may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with the transfer or exchange of the Warrant Certificates pursuant to Section 2.06 of the Warrant Agreement, but not for any exchange or original issuance (not involving a transfer) with respect to temporary Warrant Certificates, the exercise of the Warrants or the issuance of the Warrant Shares. Upon any partial exercise of the Warrants, there shall be countersigned and issued to the Holder hereof a new Warrant Certificate representing those Warrants which were not exercised. This Warrant Certificate may be exchanged at the office of the Warrant Agent by presenting this Warrant Certificate properly endorsed with a request to exchange this Warrant Certificate for other Warrant Certificates evidencing an equal number of Warrants. No fractional Warrant Shares will be issued upon the exercise of the Warrants, but GTL shall pay an amount in cash equal to the Current Market Value per Warrant Share on the day immediately preceding the date the Warrant is exercised, multiplied by the fraction of a Warrant Share that would be issuable on the exercise of any Warrant. All shares of Common Stock issuable by GTL upon the exercise of the Warrants shall, upon such issue, be duly and validly issued and fully paid and non-assessable. The holder in whose name the Warrant Certificate is registered may be deemed and treated by GTL and the Warrant Agent as the absolute owner of the Warrant Certificate for all purposes whatsoever and neither GTL nor the Warrant Agent shall be affected by notice to the contrary. 49 5 The Warrants do not entitle any holder hereof to any of the rights of a shareholder of GTL. This Warrant Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Warrant Agent. GLOBALSTAR TELECOMMUNICATIONS LIMITED by ----------------------------------- by ----------------------------------- DATED: Countersigned: - -------------------------------- THE BANK OF NEW YORK, as Warrant Agent, by ----------------------------- Authorized Signatory 50 6 FORM OF ELECTION TO PURCHASE WARRANT SHARES (to be executed only upon exercise of Warrants) GLOBALSTAR TELECOMMUNICATIONS LIMITED The undersigned hereby irrevocably elects to exercise Warrants at an exercise price per Warrant (subject to adjustment) of $69.575 to acquire shares of Common Stock, par value $1.00 per share, of Globalstar Telecommunications Limited on the terms and conditions specified within the Warrant Certificate and the Warrant Agreement therein referred to, surrenders this Warrant Certificate and all right, title and interest therein to Globalstar Telecommunications Limited and directs that the shares of Common Stock deliverable upon the exercise of such Warrants be registered or placed in the name and at the address specified below and delivered thereto. Date: , 19 ------------------------------- (Signature of Owner) ------------------------------- (Street Address) ------------------------------- (City) (State) (Zip Code) Signature Guaranteed by: ------------------------------- [Signature must be guaranteed by an eligible Guarantor Institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-5] - -------- 1. The signature must correspond with the name as written upon the face of the within Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever, and must be guaranteed. 51 7 Securities and/or check to be issued to: Please insert social security or identifying number: Name:____________________________________________________________ Street Address:__________________________________________________ City, State and Zip Code:________________________________________ Any unexercised Warrants represented by the Warrant Certificate to be issued to: Please insert social security or identifying number: Name:____________________________________________________________ Street Address:__________________________________________________ City, State and Zip Code:________________________________________ 52 8 EXHIBIT B CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF WARRANTS Re: Warrants to Purchase Common Stock (the "Warrants") of Globalstar Telecommunications Limited ("GTL") This Certificate relates to Warrants held in definitive form by _______________ (the "Transferor"). The Transferor has requested the Warrant Agent by written order to exchange or register the transfer of a Warrant or Warrants. In connection with such request and in respect of each such Warrant, the Transferor does hereby certify that the Transferor is familiar with the Warrant Agreement relating to the above captioned Warrants and that the transfer of this Warrant does not require registration under the Securities Act of 1933, (the "Securities Act") because */: |_| Such Warrant is being transferred to GTL. |_| Such Warrant is being transferred pursuant to an effective Registration Statement under the Securities Act. |_| Such Warrant is being transferred to a qualified institutional buyer (as defined in Rule 144A under the Securities Act) in reliance on Rule 144A. |_| Such Warrant is being transferred pursuant to an offshore transaction in accordance with Rule 904 under the Securities Act. |_| Such Warrant is being transferred in a transaction meeting the requirements of Rule 144 under the Securities Act. The Warrant Agent and GTL are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ---------------------------------------- [INSERT NAME OF TRANSFEROR] by Date: ------------------------------- ------------------------------------- - -------- *---/Please check applicable box. EX-10.15 6 REGISTRATION RIGHTS AGREEMENT 1 CONFORMED COPY GLOBALSTAR, L.P. GLOBALSTAR CAPITAL CORPORATION $500,000,000 11 % Senior Notes due 2004 REGISTRATION RIGHTS AGREEMENT February 19, 1997 Lehman Brothers Inc. Bear, Stearns & Co. Inc. Donaldson, Lufkin & Jenrette Securities Corporation Unterberg Harris In care of Lehman Brothers Inc. As Representative of the Several Initial Purchasers 3 World Financial Center 200 Vesey Street New York, New York 10285 Ladies and Gentlemen: Globalstar, L.P., a Delaware limited partnership ("Globalstar"), and Globalstar Capital Corporation, a Delaware corporation ("Globalstar Capital" and, together with Globalstar, the "Issuers"), propose, subject to the terms and conditions stated in a purchase agreement of even date herewith (the "Purchase Agreement"), to jointly and severally issue and sell to Lehman Brothers Inc., Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Unterberg Harris (collectively, the "Initial Purchasers"), 500,000 Units, each consisting of $1,000 aggregate principal amount of 11 3/8% Senior Notes due 2004 (collectively the "Notes") and a warrant (collectively, the "Warrants") to purchase 2.0645 shares of the common stock, par value $1.00 per share ("Common Stock"), of Globalstar Telecommunications Limited ("GTL"). The Notes will be issued pursuant to an indenture dated as of February 15, 1997 (the "Indenture"), among the Issuers and The Bank of New York, as trustee (the "Trustee"). This Agreement will have no force and effect until the Notes are issued. As an inducement to the Initial Purchasers, the Issuers hereby 2 2 agree with the several Initial Purchasers, for the benefit of the holders of the Notes (including, without limitation, the Initial Purchasers), the Exchange Notes (as defined below) and the Private Exchange Notes (as defined below) (collectively, the "Holders"), as follows: 1. Registered Exchange Offer. The Issuers shall, at their cost and expense, prepare and, not later than 60 days after (or if the 60th day is not a business day, the first business day thereafter) the Issue Date (as defined in the Indenture) of the Notes, file with the Securities and Exchange Commission (the "Commission") a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), with respect to a proposed offer (the "Registered Exchange Offer") to the Holders of Transfer Restricted Notes (as defined in Section 6(d)), who are not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer, to issue and deliver to such Holders, in exchange for the Notes, a like aggregate principal amount of debt securities (the "Exchange Notes") of the Issuers issued under the Indenture and identical in all material respects to the Notes (except for the transfer restrictions relating to the Notes) that would be registered under the Securities Act. The Issuers shall use reasonable efforts to cause such Exchange Offer Registration Statement to become effective under the Securities Act within 150 days (or if the 150th day is not a business day, the first business day thereafter) after the Issue Date of the Notes and shall keep the Exchange Offer Registration Statement effective for not less than 30 days (or longer if required by applicable law or the policy of the Commission) after the date on which notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). If the Issuers effect the Registered Exchange Offer, the Issuers will be entitled to close the Registered Exchange Offer 30 days after the commencement thereof; provided, however, that the Issuers have accepted all the Notes theretofore validly tendered in accordance with the terms of the Registered Exchange Offer. 3 3 Following the declaration of the effectiveness of the Exchange Offer Registration Statement, unless the Registered Exchange Offer would not be permitted by applicable law or the Commission's policy, the Issuers shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder of Transfer Restricted Notes electing to exchange the Notes for Exchange Notes (assuming that such Holder is not an affiliate of either the Issuers within the meaning of the Securities Act, acquires the Exchange Notes in the ordinary course of such Holder's business, has no arrangements with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Notes from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. In connection with such Registered Exchange Offer, the Issuers shall take all such reasonable further action, including, without limitation, appropriate filings under state securities laws, as may be necessary to realize the foregoing objective subject to the proviso of Section 3(h). The Issuers and the Initial Purchasers acknowledge that the foregoing statement of the objective of the Registered Exchange Offer is based upon current interpretations by the staff of the Commission's Division of Corporation Finance, which interpretations are subject to change without notice, and further acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder that is a broker-dealer electing to exchange Notes, acquired for its own account as a result of market making activities or other trading activities, for Exchange Notes (an "Exchanging Dealer"), is required to deliver a prospectus containing the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section, and in Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Notes received by such Exchanging Dealer pursuant to the 4 4 Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell Exchange Notes acquired in exchange for Notes constituting any portion of an unsold allotment is required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale. The Issuers shall use their reasonable efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Notes; provided, however, that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be the lesser of 180 days after the expiration date of the Registered Exchange Offer and the date on which all Exchanging Dealers and the Initial Purchasers have sold all Exchange Notes held by them (unless such period is extended pursuant to Section 3(j) below), and (ii) the Issuers shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Notes for a period not less than 90 days after the consummation of the Registered Exchange Offer. If, upon consummation of the Registered Exchange Offer, any Initial Purchaser holds Transfer Restricted Notes acquired by it as part of its initial distribution, the Issuers, simultaneously with the delivery of the Exchange Notes pursuant to the Registered Exchange Offer, shall issue and deliver to such Initial Purchaser upon the written request of such Initial Purchaser, in exchange (the "Private Exchange") for the Transfer Restricted Notes held by such Initial Purchaser, a like principal amount of debt securities of the Issuers issued under the Indenture and identical in all material respects (including the existence of restrictions on transfer under the Securities Act and the securities laws of the several states of the United States) to the Transfer Restricted Notes (the "Private Exchange Notes"); provided, however, that the Issuers shall not be required to effect such exchange if, in the opinion of counsel to the Issuers, such exchange cannot be effected 5 5 without registration under the Securities Act. The Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes. The Transfer Restricted Notes, the Exchange Notes and the Private Exchange Notes are herein collectively called the "Securities". In connection with the Registered Exchange Offer, the Issuers shall: (a) mail, or cause to be mailed, to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 30 calendar days (or longer, if required by applicable law or policy of the Commission) after the date notice thereof is mailed to the Holders; (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York, which may be the Trustee or an affiliate of the Trustee; (d) permit Holders to withdraw tendered Transfer Restricted Notes at any time prior to the close of business, New York time, on the last Business Day (as defined in the Indenture) on which the Registered Exchange Offer shall remain open; and (e) otherwise comply in all material respects with all applicable law. As soon as practicable after the close of the Registered Exchange Offer or the Private Exchange, as the case may be, the Issuers shall: (i) accept for exchange all the Transfer Restricted Notes validly tendered and not validly withdrawn pursuant to the Registered Exchange Offer or the Private Exchange, as the case may be; 6 6 (ii) deliver, or cause to be delivered to, the Trustee for cancellation all the Transfer Restricted Notes so accepted for exchange; and (iii) cause the Trustee to authenticate and promptly deliver to each Holder of the Transfer Restricted Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Transfer Restricted Notes of each Holder so accepted for exchange. The Exchange Notes and the Private Exchange Notes may be issued under the Indenture, which will provide that the Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture and that all the Securities will vote and consent together on all matters as one class and that none of the Securities will have the right to vote or consent as a class separate from one another on any matter. Interest on the Exchange Notes and the Private Exchange Notes will accrue from (A) the later of (i) the last interest payment date on which interest was paid on the Securities surrendered in the exchange therefor or (ii) if the Securities are surrendered for exchange on a date in a period which includes the record date for an interest payment date to occur on or after the date of such exchange and as to which interest will be paid, the date of such interest payment date or (B) if no interest has been paid on such Securities, from the date of original issue of the Securities. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Issuers that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Notes received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Notes or the Exchange Notes within the meaning of the Securities Act, (iii) such Holder is not an "affiliate", as defined in Rule 405 of the Securities Act, of either of the Issuers or, if it is an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such 7 7 Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Notes, and (v) if such Holder is a broker-dealer, that it will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making activities or other trading activities and that it will deliver a prospectus in connection with any resale of such Exchange Notes. Notwithstanding any other provisions hereof, the Issuers will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto will comply in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that in no such case shall the Issuers be responsible for information concerning any Initial Purchaser of the Securities included in the Exchange Offer Registration Statement, the prospectus contained therein, or any amendment or supplement thereto, as the case may be. 2. Shelf Registration. If (i) because of any change in law or Commission policy or in applicable interpretations thereof by the staff of the Commission, the Issuers are not permitted to effect a Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within 180 days of the Issue Date, (iii) any Initial Purchaser so requests within 90 days after the consummation of the Registered Exchange Offer with respect to the Transfer Restricted Notes (or the Private Exchange Notes) not eligible to be exchanged for Exchange Notes in the Registered Exchange Offer and held by it following consummation of the Registered Exchange Offer or (iv) any Holder (other than an Exchanging Dealer) 8 8 is not eligible to participate in the Registered Exchange Offer or, in the case of any Holder (other than an Exchanging Dealer) that participates in the Registered Exchange Offer, such Holder does not receive freely tradeable Exchange Notes on the date of the exchange, the Issuers shall take the following actions: (a) The Issuers shall, at their cost, use reasonable efforts to file, as promptly as practicable (but in no event later than the earlier of (i) 150 days after the Issue Date and (ii) 60 days after so required or requested pursuant to this Section 2 with the Commission and shall thereafter use their reasonable efforts to cause to be declared effective a registration statement (the "Shelf Registration Statement" and, together with the Exchange Offer Registration Statement, a "Registration Statement") on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Notes by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration"); provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder (including certain indemnification obligations). (b) The Issuers shall use their reasonable efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, until the principal of, and interest and Liquidated Damages (if any) on, the Securities have been paid in full or such shorter period that will terminate when all the Securities covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are distributed to the public pursuant to Rule 144 under the Securities Act or are saleable pursuant to Rule 144(k) under the Securities Act (in any such case, such period being called the "Shelf Registration Period"). 9 9 Subject to Section 6(b), the Issuers shall be deemed not to have used their reasonable efforts to keep the Shelf Registration Statement effective during the requisite period if either of the Issuers voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is required by applicable law; provided, however, that the Issuers shall not be deemed to have voluntarily taken any such action if either of the Issuers enters, in good faith, into negotiations concerning, or executes and delivers any agreement or other document relating to, any business combination, acquisition or disposition. (c) Notwithstanding any other provisions of this Agreement to the contrary, the Issuers shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 3. Registration Procedures. In connection with any Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply: (a) The Issuers shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of each Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Registered Exchange Offer or the Shelf Registration Statement, shall use its reasonable efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial 10 10 Purchaser reasonably may propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement; (iv) include within the prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution", reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange Notes received by such broker-dealer in the Registered Exchange Offer (a "Exchanging Dealer"), whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchasers based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of the Commission; and (v) in the case of a Shelf Registration Statement, include the names of the Holders who propose to sell Securities pursuant to the Shelf Registration Statement as selling securityholders. (b) The Issuers shall give written notice to the Initial Purchasers and the Holders of the Securities from whom the Issuers have received prior written notice that it will be a Exchanging Dealer in the Registered Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): 11 11 (i) when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information (provided, however, that with respect to any requests prior to the effectiveness of the Registration Statement, the Issuers shall be required to give written notice only to the Initial Purchasers and their counsel, Cravath, Swaine & Moore); (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by either of the Issuers of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the Issuers to make changes in the Registration Statement or the prospectus in order that the Registration Statement or the prospectus does not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (c) The Issuers shall make every reasonable effort to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of the Registration Statement. (d) The Issuers shall furnish to each Holder of Securities included within the coverage of the Shelf 12 12 Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Issuers shall deliver to each Exchanging Dealer and each Initial Purchaser, and to any other Holder who so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if any Initial Purchaser or any such Holder requests, all exhibits thereto (including those incorporated by reference). (f) The Issuers shall deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Issuers consent, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto included in the Shelf Registration Statement by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by such prospectus, or any such amendment or supplement. (g) The Issuers shall deliver to each Initial Purchaser, any Exchanging Dealer and such other persons required to deliver a prospectus during the Exchange Offer Registration Period and/or Shelf Registration Period, as applicable, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request. The Issuers consent, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by any Initial Purchaser, if necessary, any Exchanging Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Notes 13 13 covered by the prospectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement, in each case in the form most recently provided to each party by the Issuers. (h) Prior to any public offering of the Securities, pursuant to any Registration Statement, the Issuers shall use their reasonable efforts to register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that none of the Issuers shall be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified, (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject, (iii) register or qualify Securities or take any other action under the securities or "blue sky" laws of any jurisdiction if, in the judgment of the Board of Directors or such other governing body of the Issuers, the consequences of such registration, qualification or other action would be unduly burdensome to the Issuers or (iv) make any changes to their respective organizational documents or any agreement with their respective equity holders. (i) The Issuers shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to such Registration Statement. (j) Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 3(b) above 14 14 during the period for which the Issuers are required to maintain an effective Registration Statement, the Issuers shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Notes or purchasers of Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Issuers notify the Initial Purchasers, the Holders of the Securities and any known Exchanging Dealer in accordance with paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial Purchasers, the Holders of the Securities and any such Exchanging Dealers shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2(b) above and the Exchange Offer Registration Statement provided for in Section 1 above shall each be extended (i) by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers, the Holders of the Securities and any known Exchanging Dealer shall have received such amended or supplemented prospectus pursuant to this Section 3(j) or (ii) if earlier, until the date when none of the Securities represent Transfer Restricted Notes (as defined in Section 6(d)). (k) Not later than the effective date of the applicable Registration Statement, the Issuers will provide a CUSIP number for the Transfer Restricted Notes, the Exchange Notes or the Private Exchange Notes, as the case may be, and provide the applicable trustee with printed certificates for the Notes, the Exchange Notes or the Private Exchange Notes, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Issuers will comply with all rules and regulations of the Commission to the extent and so long 15 15 as they are applicable to the Registered Exchange Offer or the Shelf Registration, and Globalstar will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of its first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period. (m) The Issuers shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Issuers shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (n) The Issuers may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Issuers such information regarding the Holder and the distribution of the Securities as the Issuers may from time to time reasonably require for inclusion in the Shelf Registration Statement, and the Issuers may exclude from such registration the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. Each such Holder agrees to notify the Issuers as promptly as practicable of any inaccuracy or change in information previously furnished by such Holder to the Issuers or of the occurrence of any event, in either case, as a result of which any prospectus relating to such registration contains or would contain an untrue statement of a material fact regarding such Holder or such Holder's intended method of distribution of such Securities, or omits to state a material fact regarding such Holder or such Holder's intended method of distribution of such Securities, required to be stated therein or necessary to make the statements therein not 16 16 misleading in light of the circumstances then existing, and promptly to furnish to the Issuers any additional information required to correct and update any previously furnished information or required so that such prospectus shall not contain, with respect to such Holder or the distribution of such Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. Each such Holder shall comply with the provisions of the Securities Act applicable to such Holder with respect to the disposition by such Holder of Securities, covered by such registration statement in accordance with the intended methods of disposition by such Holder set forth in such registration statement. (o) The Issuers shall enter into such customary agreements (including if requested an underwriting agreement in customary form) and take all such other action, if any, as Holders of a majority in aggregate principal amount of Securities being sold or the managing underwriters shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration; provided, however, that in the case of actions that facilitate the disposition of a particular Holder's Securities, only such Holders request is required; provided further, that the Issuers shall not be required to enter into any such agreement more than once with respect to all of the Securities and may delay entering into such agreement until the consummation of any underwritten public offering which such Issuers shall have then undertaken. (p) In the case of any Shelf Registration, each of the Issuers shall (i) make reasonably available for inspection by the Holders of the Securities, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of the Securities or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of such Issuers and (ii) cause such Issuers' officers, directors, employees, 17 17 accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary, in the judgment of the Holder or any such underwriter, attorney, accountant or agent referred to in this paragraph, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by you and on behalf of the other parties by one counsel designated by and on behalf of such other parties as described in Section 4 hereof and shall be expressly subject to the confidential treatment by such parties as to all proprietary information of the Issuers. (q) In the case of any Shelf Registration, each of the Issuers, if requested by (i) Holders of a majority in aggregate principal amount of Securities, (ii) such Holder's counsel, or (iii) the managing underwriter (if any), covered thereby, shall use reasonable efforts to cause (x) its counsel to deliver an opinion and updates thereof relating to the Registration Statement and the Securities in customary form addressed to such Holders and the managing underwriters, if any, thereof and dated the effective date of such Shelf Registration Statement covering the matters customarily covered in opinions of counsel requested in underwritten offerings and such other matters as may be reasonably requested by the managing underwriter or underwriters; (y) its officers to execute and deliver all customary documents and certificates and updates thereof reasonably requested by any underwriters of the applicable Securities; and (z) its independent public accountants to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. 18 18 (r) In the case of the Registered Exchange Offer, if requested by any Initial Purchaser or any known Exchanging Dealer, each of the Issuers shall use reasonable efforts to cause (i) its counsel to deliver to such Initial Purchaser or such Exchanging Dealer a signed opinion in the form as is customary in connection with such a Registration Statement and (ii) its independent public accountants to deliver to such Initial Purchaser or such Exchanging Dealer a comfort letter, in customary form. (s) If a Registered Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Transfer Restricted Notes by Holders to the Issuers (or to such other Person as directed by the Issuers) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Issuers shall mark, or cause to be marked, on the Transfer Restricted Notes so exchanged that such Transfer Restricted Notes are being canceled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall the Transfer Restricted Notes be marked as paid or otherwise satisfied. (t) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules of the By-Laws of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Issuers shall assist such broker-dealer in complying with the requirements of such Rules and By-Laws. (u) The Issuers will use their reasonable efforts to cause the Securities or the Exchange Securities, as applicable, covered by a Registration Statement to continue to be rated, during the period for which such Registration Statement is required to be effective, by the rating agencies that initially rated the Securities, if so requested by Holders of a majority in aggregate principal amount of Securities covered by 19 19 such Registration Statement or the Exchange Securities, as the case may be, or the managing underwriters, if any. (v) The Issuers shall use their reasonable efforts to take all other steps reasonably necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby. 4. Registration Expenses. The Issuers shall bear all fees and expenses incurred in connection with the performance of the Issuers' obligations under Sections 1 through 3 hereof (including the reasonable fees and expenses of one counsel to the Initial Purchasers, incurred in connection with the Registered Exchange Offer), whether or not the Registered Exchange Offer or a Shelf Registration is filed or becomes effective, and, in the event of a Shelf Registration, shall bear, or reimburse the Holders of the Securities covered thereby for, the reasonable fees and disbursements of one firm of counsel designated by the Holders of a majority in principal amount of the Securities covered thereby to act as counsel for the Holders of the Securities in connection therewith, it being understood that the Issuers shall not be responsible for the fees and expenses of more than one counsel employed at any one time; provided, however, that in an underwritten offering, the Issuers shall not be responsible for any fees or expenses of any underwriter, including any underwriting discounts or commissions, or any legal fees or expenses of counsel to any underwriter. Notwithstanding the foregoing, the Holders of Securities being registered shall pay all agency or brokerage fees and commissions and underwriting discounts and commissions attributable to the sale of such Securities and the fees and disbursements of any counsel or other advisors or experts retained by such Holders (severally or jointly), other than the one counsel specifically referred to above. 5. Indemnification. (a) The Issuers agree, jointly and severally, to indemnify and hold harmless each Holder of the Securities and each person, if any, who controls such Holder or such Exchanging Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Exchanging Dealer and such controlling persons being referred to collectively as the "Indemnified Parties") 20 20 from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Issuers shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Issuers by or on behalf of such Holder specifically for inclusion therein, (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any prospectus relating to the registration statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any person as to which there is a prospectus delivery requirement (a "Delivering Seller") that sold the Securities to the person asserting any such losses, claims, damages or liabilities to the extent that any such loss, claim, damage or liability of such Delivering Seller results from the fact that there was not sent or given to such person, on or prior to the written confirmation of such sale, a copy of the relevant prospectus, as amended and supplemented, provided that (A) the Issuers shall have previously furnished copies thereof to such Delivering Seller in accordance with this Agreement and (B) such furnished prospectus, as amended and supplemented, would 21 21 have corrected any such untrue statement or omission or alleged untrue statement or omission, and (iii) this indemnity agreement will be in addition to any liability which the Issuers may otherwise have to such Indemnified Party. The Issuers shall also indemnify underwriters, their officers and directors and each person who controls such persons within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders; provided, however, that the Issuers shall not indemnify any such party to the extent its liability arises from its failure to comply with the requirements described in Annexes A, B, C and D hereto, as updated. (a) Each Holder of the Securities (and, if requested by the Issuers, each placement agent or underwriter in connection with the registration), severally and not jointly, will indemnify and hold harmless the Issuers and each person, if any, who controls Globalstar within the meaning of the Securities Act or the Exchange Act and the directors, officers, agents and employees of such controlling persons from and against any losses, claims, damages or liabilities or any actions in respect thereof to which the Issuers, any such controlling person or director, officer, agent or employee of such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information pertaining to such Holder or such underwriter, as the case may be, and furnished to the Issuers by or on behalf of such Holder or such underwriter, as the case may be, specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as 22 22 incurred, the Issuers for any legal or other expenses reasonably incurred by the Issuers or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder or such underwriter, as the case may be, may otherwise have to the Issuers or any such controlling persons. (b) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above, except to the extent that it is prejudiced or harmed in any material respect by failure to give such prompt notice. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with one counsel (and local counsel as necessary) reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, not to be unreasonably withheld, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are 23 23 the subject matter of such action. No indemnifying party shall be liable for any amounts paid in settlement of any action or claim without its written consent, which consent shall not be unreasonably withheld, but if settled in accordance with its written consent or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (c) If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above for any reason other than as provided in subsection (c) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other from the exchange of the Notes, pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party or parties on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers on the one hand or such Holder or such other indemnified person, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in 24 24 connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 5(d), the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each officer, director, employee, representative and agent of an indemnified party and each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party, and each officer, director, employee, representative and agent of the Issuers and each person, if any, who controls Globalstar within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Issuers. (d) The agreements contained in this Section 5 shall survive the sale of the Securities pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. 6. Liquidated Damages Under Certain Circumstances. (a) Additional cash interest (the "Liquidated Damages") with respect to the Securities shall be assessed against the Issuers as follows if any of the following events occurs (each such event in clauses (i) through (iv) below a "Registration Default"): (i) if the Issuers fail to file either the Exchange Offer Registration Statement or Shelf Registration Statement on or before the date specified for the filing thereof in Sections 1 and 2 hereof, respectively; 25 25 (ii) if any such Registration Statement so required to be filed is not declared effective by the Commission on or before, in the case of the Exchange Offer Registration Statement, the date that is 150 days after the Issue Date, and in the case of the Shelf Registration Statement, the date that is 180 days after the Issue Date (each such date being hereinafter referred to as an "Effectiveness Target Date"); (iii) if the Issuers fail to consummate the Registered Exchange Offer within 30 days after the Effectiveness Target Date with respect to such Registered Exchange Offer; or (iv) if after either the Exchange Offer Registration Statement or the Shelf Registration Statement is declared effective (A) such Registration Statement thereafter ceases to be effective; or (B) such Registration Statement or the related prospectus ceases to be usable (except as permitted in paragraph (b)) in connection with resales of Transfer Restricted Notes during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (2) it shall be necessary to amend such Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder. Liquidated Damages shall accrue on the Transfer Restricted Notes in an amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted Notes held by each Holder (over and above the interest set forth in the title of the Transfer Restricted Notes) from and including the date on which any such Registration Default shall occur until the earlier of (i) the date on which all such Registration Defaults have been cured or (ii) the date which is 90 days after the date such Registration Default occurred. The Liquidated Damages will increase by an additional $.05 per week per $1,000 principal amount of the Notes held by each Holder during each subsequent 90-day 26 26 period until the date on which all such Registration Defaults have been cured; provided, however, that the aggregate amount of Liquidated Damages shall not exceed a maximum of $.50 per week per $1,000 principal amount of the Notes held by each Holder (b) A Registration Default referred to in Section 6(a)(iii)(B) shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited or, if required by the rules and regulations under the Securities Act, quarterly unaudited financial information with respect to the Issuers where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material events or developments with respect to the Issuers that would need to be described in such Shelf Registration Statement or the related prospectus and (ii) in the case of clause (y), the Issuers are proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that in no event shall the Issuers be required to disclose the business purpose for such suspension if the Issuers determines in good faith that such business purpose must remain confidential. Notwithstanding the foregoing, the Issuers shall not be required to pay Liquidated Damages with respect to the Securities of a Holder if the failure arises from the Issuers' failure to file, or cause to become effective, a Shelf Registration Statement within the time periods specified in this Section 6 by reason of the failure of such Holder to provide such information as (i) the Issuers may reasonably request, with reasonable prior written notice, for use in the Shelf Registration Statement or any prospectus included therein to the extent the Issuers reasonably determine that such information is required to be included therein by applicable law, (ii) the NASD or the Commission may request in connection with such Shelf Registration Statement or (iii) is required to comply with the agreements of such Holder as contained in Section 3(n) to the extent compliance thereof is necessary for the Shelf Registration Statement to be declared effective. 27 27 (c) The parties hereto agree that the Liquidated Damages provided for in this Section constitute a reasonable estimate of and are intended to constitute the sole damages that will be suffered by Holders of Securities by reason of the failure of the applicable Registration Statement to be filed, to be declared effective or to remain effective, or of the Exchange Offer to be consummated, as the case may be, to the extent required by this Agreement. (d) Any Liquidated Damages accruing on the Transfer Restricted Notes prior to August 15, 1997, will be payable in cash on the next succeeding February 15 or August 15 to holders of record on the immediately preceding February 1 or August 1, respectively. Any such Liquidated Damages accruing on the Transfer Restricted Notes thereafter will be payable in cash on the regular interest payment dates with respect to the Transfer Restricted Notes to the holders of record on the applicable record date. (e) "Transfer Restricted Notes" means each Security until (i) the date on which such Transfer Restricted Note has been exchanged by a person other than a broker-dealer for a freely transferrable Exchange Note in the Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered Exchange Offer of a Transfer Restricted Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Transfer Restricted Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Transfer Restricted Note is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. 7. Rules 144 and 144A. The Issuers shall use their reasonable efforts to file the reports required to be filed by each of them, respectively, under the Securities Act and the Exchange Act in a timely manner and, if at any time the Issuers are not required to file such reports, each will, upon the request of any Holder of Transfer Restricted Notes, make publicly available other information so long as 28 28 necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Issuers covenant that they will take such further action as any Holder of Transfer Restricted Notes may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Notes without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Issuers will provide a copy of this Agreement to prospective purchasers of Notes identified to the Issuers by the Initial Purchasers upon request. Upon the request of any Holder of Transfer Restricted Notes, each of the Issuers shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Issuers to register any of its securities pursuant to the Exchange Act. 8. Underwritten Registrations. If any of the Transfer Restricted Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering ("Managing Underwriters") will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Notes to be included in such offering (subject to the approval (which approval shall not be unreasonably withheld) of the Issuers, provided, however, that the Issuers shall not be obligated to arrange for more than one underwritten offering during the period that such Shelf Registration is required to be effective pursuant to this Agreement). No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Notes on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, lock-up agreements, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 29 29 9. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Issuers and the written consent of the Holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consents. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery: (1) if to a Holder of the Securities, at the most current address given by such Holder to the Issuers in accordance with the provisions of this Section 9(b), which address initially is, with respect to each Holder, the address of such Holder to which confirmation of the sale of the Notes to such Holder was first sent by the Initial Purchasers, with a copy in like manner to you as follows: Lehman Brothers Inc. 3 World Financial Center 200 Vesey Street New York, NY 10010 Fax No.: (212) 526-3738 Attention: Syndicate Department with a copy to: Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, New York 10019 Fax No.: (212) 474-3700 Attention: Robert Rosenman (2) if to the Initial Purchasers, at the addresses specified in Section 9(b)(1); 30 30 (3) if to the Issuers, at its address as follows: Globalstar, L.P. 3200 Zanker Road San Jose, CA 95164 Attention: Michael B. Targoff with a copy to: Willkie Farr & Gallagher One Citicorp Center 153 East 53rd Street 46th Floor New York, NY 10022 Fax No: (212) 821-8111 Attention: Bruce R. Kraus All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery. (c) No Inconsistent Agreements. The Issuers have not, as of the date hereof, entered into, nor shall they, on or after the date hereof, enter into, any agreement with respect to their securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. (d) Successors and Assigns. This Agreement shall be binding upon the Issuers and their successors and assigns. (e) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 31 31 (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. (h) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (i) Securities Held by the Issuers. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Issuers or their affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 32 32 If the foregoing is in accordance with your understanding of our agreement, please sign and return to Lehman Brother Inc. a counterpart hereof, whereupon this Agreement will become a binding agreement among Globalstar, Globalstar Capital and the several Initial Purchasers in accordance with its terms. Very truly yours, GLOBALSTAR, L.P. by LORAL/QUALCOMM SATELLITE SERVICES, L.P., its managing general partner, by LORAL/QUALCOMM PARTNERSHIP, L.P. its general partner, by LORAL GENERAL PARTNER, INC. its general partner, by /s/ Eric J. Zahler --------------------------- Name: Eric J. Zahler Title: Secretary GLOBALSTAR CAPITAL CORPORATION, by /s/ Eric J. Zahler --------------------------- Name: Eric J. Zahler Title: Secretary 33 33 The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. LEHMAN BROTHERS INC. BEAR, STEARNS & CO. INC. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION UNTERBERG HARRIS by LEHMAN BROTHERS, INC. by /s/ David Sullivan -------------------------- Name: David Sullivan Title: Authorized Signatory 34 ANNEX A Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Notes where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Issuers have agreed that, for a period of 180 days after the Expiration Date (as defined herein), they will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." 35 ANNEX B Each broker-dealer that receives Exchange Notes for its own account in exchange for Notes, where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." 36 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for existing Notes where such existing Notes were acquired as a result of market-making activities or other trading activities. The Issuers have agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 199 , all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. */ The Issuers will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the- counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer for the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange ________________ */ In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Exchange Offer prospectus. 37 2 Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Issuers will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Issuers have agreed to pay all expenses incident to the Exchange Offer (including the reasonable expenses of one counsel for the Holders of the Notes) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. 38 ANNEX D [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: -------------------------------------------- Address: ----------------------------------------- If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. EX-12 7 STATEMENT REGARDING COMPUTATION OF RATIOS 1 EXHIBIT 12 STATEMENT REGARDING COMPUTATION OF RATIOS (IN THOUSANDS, EXCEPT RATIOS) GLOBALSTAR TELECOMMUNICATIONS LIMITED RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31, 1996 ------------ Earnings: Net loss...................................................................... $(15,080) Add: Equity in loss of Globalstar, L.P........................................ 15,080 Interest expense......................................................... 17,370 ------------ Earnings available to cover fixed charges(1).................................... $ 17,370 ========== Fixed charges -- interest expense............................................... $ 17,370 ========== Ratio of earnings to fixed charges.............................................. 1x ==========
- --------------- (1) The earnings of GTL available to cover fixed charges, consist solely of dividends from Globalstar, L.P. on the Redeemable Preferred Partnership Interests held by GTL. GLOBALSTAR, L.P. DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES
YEAR ENDED DECEMBER 31, 1996 ------------ Net loss......................................................................... $(54,646) Dividends on Redeemable Preferred Partnership Interests.......................... (17,323) ------------ Deficiency of earnings to cover fixed charges.................................... $(71,969) ==========
EX-23.1 8 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT 23.1 Globalstar Telecommunications Limited: We consent to the incorporation by reference in Registration Statements No. 333-6477 and 333-22063 on Form S-3 of Globalstar Telecommunications Limited of our reports dated February 24, 1997 appearing in this Annual Report on Form 10-K of Globalstar Telecommunications Limited for the year ended December 31, 1996. Deloitte & Touche LLP San Jose, California March 6, 1997 EX-27 9 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the financial statements of Globalstar Telecommunications Limited for the year ended December 31, 1996, and is qualified in its entirety by reference to such financial statements 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 0 0 0 0 0 0 0 0 482,676 1,679 300,358 0 0 10,000 170,639 482,676 0 15,080 0 0 0 0 0 15,080 0 0 0 0 0 15,080 1.51 0
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