Globalstar Inc.

11/01/2024 | Press release | Distributed by Public on 11/01/2024 05:01

Material Agreement Form 8 K

Item 1.01 Entry into a Material Definitive Agreement.
Services Agreements
As previously disclosed, Globalstar, Inc. (the "Company" or "Globalstar") is party to a terms agreement (as amended, the "Terms Agreement") with its customer, Apple Inc. (together with its Related Entities (as defined in the Terms Agreement), "Customer"), which Terms Agreement (together with certain related ancillary agreements, the "Services Agreements") contains terms and conditions governing the development, launch and operation of Satellite Services (as defined in the Terms Agreement).
Reference is made to the prior disclosures with respect to the Services Agreements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 and the Company's Current Reports on Form 8-K filed with the Securities and Exchange Commission (the "SEC") on February 28, 2023 and September 7, 2022 (collectively, the "Prior Disclosures").
Extended MSS Network
On October 29, 2024, the Company and Customer agreed to make certain amendments to the Services Agreements and entered into other related agreements (collectively, the "Updated Services Agreements") for Globalstar to deliver expanded services to Customer over a new mobile satellite services ("MSS") network, including a new satellite constellation, expanded ground infrastructure, and increased global MSS licensing (the "Extended MSS Network"). The Extended MSS Network will be owned by Globalstar Licensee, LLC, together with its subsidiaries (collectively, the "Globalstar SPE"), and operated by the Company.
As set forth below, Customer will prepay for certain services to be delivered by the Company to Customer's end users utilizing the Extended MSS Network and will be a passive equity holder in Globalstar SPE.
The Globalstar SPE will hold certain network assets necessary for the Extended MSS Network and will not have commercial operations.
The Company will retain control of the board of managers of the Globalstar SPE and continue to operate and maintain the assets owned by and licenses granted to the Globalstar SPE. Globalstar will retain 100% of all terrestrial, MSS and other revenue and will continue to allocate 85% of its network capacity to render the Satellite Services to Customer across existing and new satellites as well as use the remaining capacity to service its other MSS customers.
Network Assets and Funding
The Updated Services Agreements provide that Customer will make cash prepayments to the Company, including for approved capital expenditures in connection with the Extended MSS Network. These prepayments consist of: (1) an infrastructure prepayment (the "Infrastructure Prepayment") of up to $1.1 billion as further described under Item 2.03 below, which is to be funded over the construction period on a quarterly basis, the proceeds of which the Globalstar SPE will use, together with the proceeds from the sale of the Customer Class B Units described below to pay amounts due for the Extended MSS Network (including, but not limited to, construction and launch costs) and (2) an amount necessary for the Company to retire at closing its outstanding 13.00% Senior Notes due 2029 (the "2029 Notes") as further described under Item 1.02 below (the "Current Debt Repayment"). The Infrastructure Prepayment and the funds used for the Current Debt Repayment are contained within one prepayment agreement (the "2024 Prepay Agreement"), as further detailed below.
Customer has agreed to purchase 400,000 Class B Units in the Globalstar SPE (the "Customer Class B Units"), representing a 20% equity interest, for $400 million to be paid upon the closing which is currently expected to occur on or about November 5, 2024, subject to satisfaction of closing conditions.
Service Fees
As consideration for the Satellite Services as set forth in the Updated Services Agreements, the incremental service fees due from Customer to the Company include fees tied to the cost of the Extended MSS Network, fees for providing additional related services, fees tied to expenses incurred for the provision of such services, and performance bonuses. A portion of these payments is subject to the satisfaction of certain licensing, service levels and milestone achievements. Additionally, the Updated Services Agreements also provide for certain service fees of $30 million annually to be accelerated.
Certain Obligations of Globalstar
Refer to Item 2.03 below for a discussion of the repayment of amounts due under the 2024 Prepay Agreement.
The parties have agreed to certain equity repurchase provisions with respect to the Customer Class B Units, including the right of the Company to call the Customer Class B Units, and the right of Customer to cause the Company or the Globalstar SPE to purchase or redeem, as applicable, a portion of the Customer Class B Units on a quarterly basis beginning in the first full quarter following recovery by Customer of all amounts due under the 2024 Prepay Agreement. Redemption may occur earlier in the event of certain Company breaches as described in Item 2.03 below, in each case subject to the terms and conditions of the Updated Services Agreements.
In addition, the parties agreed to certain amendments to the 2023 Funding Agreement (as defined in Prior Disclosures) and certain related agreements, including: (1) elimination of cash sweeps; (2) relaxation of certain covenant levels; (3) a one-year deferral of the start of the repayment period from the third quarter of 2025 to the third quarter of 2026; and (4) an amendment to the existing security agreement to provide first lien security with respect to the Company's obligations under the 2024 Prepay Agreement.
Termination and Breaches
The Updated Services Agreements may be terminated by either party subject to certain notice requirements and, in some cases, other conditions and, depending on the type of termination, certain limitations on the Company's ability to take certain actions, in each case as further set forth in Item 2.03 below. In the event of a breach by the Company of certain material obligations, the Updated Services Agreements provide for certain remedies for Customer, including, among other things, additional rights until a cure is effected.
The information set forth in Item 2.03 below is incorporated in this Item 1.01 by reference.
The descriptions of the Terms Agreement, the 2024 Prepay Agreement and the other Updated Services Agreements are qualified in their respective entireties by reference to such agreements which the Company expects to file with its Form 10-K for the year ending December 31, 2024.