Execution Version
RIGHT OF FIRST OFFER AGREEMENT
February 5, 2008
This Right of First Offer Agreement is made and entered into by and
between TerreStar Corporation, a Delaware corporation (the "Parent"), TerreStar
Networks Inc., a Delaware corporation (the "Company"), Harbinger Capital
Partners Master Fund I, Ltd. ("Harbinger Master Fund"), and Harbinger Capital
Partners Special Situations Fund ("Harbinger Special Situations Fund" and
together with Harbinger Master Fund, "Harbinger"), pursuant to the Master
Investment Agreement, dated as of February 5, 2008, by and among Parent, the
Company and Harbinger (the "Master Investment Agreement").
As an inducement to Harbinger to enter into the Master Investment
Agreement and in satisfaction of a condition to the obligations of Harbinger
thereunder, each of Parent and the Company agrees with Harbinger as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. For the purposes of this Agreement, the
following terms shall have the following meanings:
"Agreement" means this Right of First Offer Agreement.
The "Company" has the meaning assigned to such term in the preamble to
this Agreement.
"Company Excluded Securities" means (i) equity securities issued as
dividends payable in kind, (ii) securities issued as interest payable-in-kind,
(ii) equity securities issued in connection with a stock split or
reclassification, (iii) securities issued as direct consideration in connection
with a bona fide acquisition of another corporation or entity by the Company (or
a wholly-owned subsidiary thereof) by consolidation, merger, purchase of all or
substantially all of the assets of such other corporation or entity or 50% or
more of the equity ownership of such other entity, or other similar transaction,
not resulting in the holders of voting common stock of the Company owning less
than 50% of the voting securities of the Company or the entity resulting from
such transaction; provided that such transaction or series of transactions has
been approved by the Board of Directors of the Company and such transaction is
not being done in breach of any approval rights of Harbinger, (iv) shares of
Company Common Stock issuable upon conversion or exercise of any options,
warrants or other rights to purchase Company Common Stock outstanding as of the
date hereof or approved by the Board of Directors of the Company after the date
hereof, and (v) Company Common Stock (or options, warrants or rights therefor)
issuable to employees, officers, directors, contractors, consultants or advisors
of the Company (or any subsidiary) pursuant to incentive agreements, stock
purchase or stock option plans, stock bonuses or awards, warrants, contracts or
other similar arrangements in each case for other than primarily equity
financing purposes, as approved by the Board of Directors of the Company.
"EchoStar" means EchoStar Corporation.
"Harbinger" has the meaning assigned to such term in the preamble to
this Agreement.
The "Harbinger Proportionate Number" is, at any given time and with
respect to a particular Offering, the product of (i) a number equal to (A) the
aggregate principal amount of Exchangeable Notes held by Harbinger and its
affiliates at such time, divided by (B) the aggregate principal amount of all
Exchangeable Notes held by EchoStar, Harbinger and their respective affiliates
and (ii) the total amount of securities proposed to be sold, issued or otherwise
transferred in such Offering; provided, however, that the number referred to in
clause (i)(B) above shall include those Exchangeable Notes held by EchoStar only
if EchoStar and its affiliates, at the time of the relevant Right of First Offer
Notice, hold at least 50% of the aggregate principal amount of the Exchangeable
Notes initially purchased by EchoStar pursuant to the terms of the Master
Investment Agreement between Parent, the Company and EchoStar.
"Master Investment Agreement" has the meaning assigned to such term in
the preamble to this Agreement.
"Offering" has the meaning assigned to such term in Section 2.01 of
this Agreement.
"Parent" has the meaning assigned to such term in the preamble to this
Agreement.
"Parent Excluded Securities" means (i) equity securities issued as
dividends payable in kind, (ii) securities issued as interest payable-in-kind,
(iii) equity securities issued in connection with a stock split or
reclassification, (iii) securities issued as direct consideration in connection
with a bona fide acquisition of another corporation or entity by Parent (or a
wholly-owned subsidiary thereof) by consolidation, merger, purchase of all or
substantially all of the assets of such other corporation or entity or 50% or
more of the equity ownership of such other entity, or other similar transaction,
not resulting in the holders of voting common stock of Parent owning less than
50% of the voting securities of Parent or the entity resulting from such
transaction; provided that such transaction or series of transactions has been
approved by the Board of Directors of Parent and such transaction is not being
done in breach of any approval rights of Harbinger, (iv) shares of Parent Common
Stock issuable upon conversion or exercise of any options, warrants or other
rights to purchase Parent Common Stock outstanding as of the date hereof or
approved by the Board of Directors of Parent after the date hereof, and (vi)
Parent Common Stock (or options, warrants or rights therefor) to employees,
officers, directors, contractors, consultants or advisors of the Company (or any
subsidiary) pursuant to incentive agreements, stock purchase or stock option
plans, stock bonuses or awards, warrants, contracts or other similar
arrangements in each case for other than primarily equity financing purposes, as
approved by the Board of Directors of Parent.
"Right of First Offer Notice" has the meaning assigned to such term in
Section 2.01 of this Agreement.
Section 1.02 Other Terms. Capitalized terms used herein but not
defined shall have the meanings assigned to such terms in the Master Investment
Agreement.
ARTICLE II
LIMITED PREEMPTIVE RIGHTS
Section 2.01 Right of First Offer. In the event that either the
Company or Parent proposes to sell, issue or otherwise transfer any equity or
debt securities (other than Company Excluded Securities and Parent Excluded
Securities) of the Company or Parent (each such transaction, an "Offering"), it
shall provide Harbinger written notice (the "Right of First Offer Notice") of
such Offering, specifying the proposed price (it being understood that the form
of consideration shall be cash or tangible assets only) and the material terms
upon which the Company or Parent proposes to sell, issue or otherwise transfer
the same. Any such Right of First Offer Notice shall contain, as applicable, the
term, maturity, amortization, interest rate and payment terms (including cash
and Paid-in-Kind components, as applicable), fees, discount, equity component,
security, terms of credit support (including, but not limited to, collateral and
guarantees), subordination (including contractual and structural) and governance
rights of such securities. Harbinger shall have ten (10) Business Days from the
delivery date of any Right of First Offer Notice to agree to purchase (if the
form of consideration is tangible assets, at Harbinger's option, for cash and/or
the same type of tangible assets of equal value), an amount of equity or debt
securities of Parent or the Company up to the Harbinger Proportionate Number (in
each case calculated prior to the issuance) for the price and upon the terms
specified in the Right of First Offer Notice by giving written notice to the
Company or Parent, as applicable, and stating therein the amount of such equity
or debt securities to be purchased. If a definitive agreement for the purchase
of such equity or debt securities is not provided along with the Right of First
Offer Notice, Harbinger's election to purchase such equity or debt securities
pursuant to such Right of First Offer Notice shall not be binding until a
definitive agreement is executed (but, subject to Section 2.03, an election not
to purchase shall be binding).
Section 2.02 Extension Right. To the extent that Harbinger has agreed
to purchase all of the Harbinger Proportionate Number of securities with respect
to an Offering and any other person with a similar right (i) does not elect to
purchase all of the securities with respect to such Offering which such other
person has a right to acquire or (ii) is otherwise unable to reach agreement
with the Company or Parent, as applicable, with regard to the terms of the
definitive agreements related thereto, Harbinger shall have the option to
purchase any or all of such securities not so purchased in addition to the
Harbinger Proportionate Number of securities with respect to such Offering.
Section 2.03 Right to Sell. In the event that Harbinger does not elect
to purchase all of the equity or debt securities to be offered in an Offering,
or to the extent that Harbinger is not able to reach agreement with the Company
or Parent, as applicable, with regard to the terms of the definitive agreements
related thereto, the Company or Parent, as applicable, shall have 120 days after
the date of the Right of First Offer Notice to consummate the sale, issuance or
transfer of any or all of the amount of equity or debt securities with respect
to which Harbinger's preemptive rights hereunder were not exercised, at or above
the price and upon terms not less favorable to the Company or Parent in any
material respect (it being understood and agreed that any increase in the number
of equity or debt securities or any decrease in the price thereof shall be
deemed material for this purpose) than the terms specified in the initial Right
of First Offer Notice given in connection with such sale, issuance or other
transfer.
ARTICLE III
MISCELLANEOUS
Section 3.01 Term. This Agreement shall terminate at such time when
Harbinger and its affiliates collectively own less than 50% of the aggregate
principal amount of the Exchangeable Notes initially purchased by Harbinger
pursuant to the terms of the Master Investment Agreement.
Section 3.02 Most Favored Nation. Each of the Company and Parent agree
not to grant to any third party any preemptive rights or rights similar to the
rights granted to Harbinger hereunder (i) on any terms more favorable to such
third party or (ii) to the extent that such third party's rights would interfere
with or impair Harbinger's rights hereunder.
Section 3.03 Termination by Mutual Consent. This Agreement may be
terminated and the sale and purchase of the Purchased Securities hereunder may
be abandoned at any time prior to the Closing, by mutual written consent of (a)
the Company, (b) Parent and (c) Harbinger.
Section 3.04 Interpretation; Severability. Article, Section, Schedule,
and Exhibit references are to this Agreement, unless otherwise specified. All
references to instruments, documents, contracts, and agreements are references
to such instruments, documents, contracts, and agreements as the same may be
amended, supplemented, and otherwise modified from time to time, unless
otherwise specified. The word "including" shall mean "including but not limited
to." Whenever any party has an obligation under this Agreement, the expense of
complying with that obligation shall be an expense of such party unless
otherwise specified. If any provision of this Agreement is held to be illegal,
invalid, not binding, or unenforceable, such provision shall be fully severable
and this Agreement shall be construed and enforced as if such illegal, invalid,
not binding, or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions shall remain in full force and effect.
Section 3.05 Waivers; Remedies; Amendments.
(a) No Waiver; Remedies Cumulative. No failure or delay on the
part of any party in exercising any right, power, or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power, or remedy preclude any other or
further exercise thereof or the exercise of any right, power, or
remedy. The remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available to a party at law or
in equity or otherwise.
(b) Amendments and Modifications. Except as otherwise provided
herein, no amendment, waiver, consent or modification of any provision
of this Agreement shall be effective unless signed by each of the
parties hereto affected by such amendment, waiver, consent or
modification. Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by any party hereto from
the terms of any provision of this Agreement shall be effective only
in the specific instance and for the specific purpose for which made
or given. Except where notice is specifically required by this
Agreement, no notice to or demand on any party hereto in any case
shall entitle any party hereto to any other or further notice or
demand in similar or other circumstances.
Section 3.06 Binding Effect; Assignment. This Agreement shall be
binding upon the Company, Parent, Harbinger, and their respective successors and
permitted assigns. Except as expressly provided in this Agreement, this
Agreement shall not be construed so as to confer any right or benefit upon any
Person other than the parties to this Agreement and their respective successors
and permitted assigns.
Section 3.07 Non-Disclosure. Notwithstanding anything herein to the
contrary, the Confidentiality Agreement shall remain in full force and effect
according to its terms regardless of any termination of this Agreement.
Section 3.08 Communications. All notices and demands to be delivered
to any party hereto shall be in writing and shall be given by registered or
certified mail, return receipt requested, telecopy, air courier guaranteeing
overnight delivery or personal delivery to the address of such party specified
in the Master Investment Agreement or to such other address as such party may
designate in writing. All notices and communications shall be deemed to have
been duly given at the time delivered by hand, if personally delivered; upon
actual receipt if sent by certified mail, return receipt requested, or regular
mail, if mailed; when receipt acknowledged, if sent via facsimile; and upon
actual receipt when delivered to an air courier guaranteeing overnight delivery.
Section 3.09 Entire Agreement. This Agreement and the other agreements
and documents referred to herein are intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other than
those set forth or referred to herein or therein with respect to the rights
granted by the Company, Parent or any of their Affiliates or each of the
Purchasers or any of their Affiliates set forth herein or therein. This
Agreement and the other agreements and documents referred to herein supersede
all prior agreements and understandings between the parties with respect to such
subject matter.
Section 3.10 Governing Law. This Agreement will be construed in
accordance with and governed by the laws of the State of New York without regard
to principles of conflicts of laws.
Section 3.11 Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Agreement.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
as of the date first written above.
TERRESTAR NETWORKS INC.
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By:
Title:
TERRESTAR CORPORATION
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By:
Title:
HARBINGER CAPITAL PARTNERS
MASTER FUND I, LTD.
By: Harbinger Capital Partners Offshore
Manager, L.L.C., as investment manager
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By:
Title:
HARBINGER CAPITAL PARTNERS SPECIAL
SITUATIONS FUND, L.P.
By: Harbinger Capital Partners Special
Situations GP, LLC, as general partner
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By:
Title:
[Signature Page to Harbinger Right of First Offer Agreement]
