<PAGE> 1
MARKED TO SHOW CHANGES
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 10, 1996
REGISTRATION NO. 333-11149
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
ORBCOMM GLOBAL, L.P.
(EXACT NAME OF CO-REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4812 54-1698039
(STATE OR OTHER JURISDICTION OF (PRIMARY INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
AFFILIATE REGISTRANTS
<TABLE>
<S> <C> <C> <C>
ORBCOMM GLOBAL CAPITAL CORP. DELAWARE 4812 N/A
ORBCOMM USA, L.P. DELAWARE 4812 54-1689429
ORBCOMM INTERNATIONAL PARTNERS, L.P. DELAWARE 4812 54-1690862
ORBITAL COMMUNICATIONS CORPORATION DELAWARE 4812 54-1535585
TELEGLOBE MOBILE PARTNERS DELAWARE 4812 98-0135820
(EXACT NAME OF CO-REGISTRANT AS (STATES OR OTHER (PRIMARY INDUSTRIAL (IRS EMPLOYER
SPECIFIES IN THEIR CHARTERS) JURISDICTIONS CLASSIFICATION CODE IDENTIFICATION NOS.)
OF INCORPORATION OR NUMBERS)
ORGANIZATION)
MARY ELLEN SERAVALLI
21700 ATLANTIC BOULEVARD 21700 ATLANTIC BOULEVARD
DULLES, VIRGINIA 20166 DULLES, VIRGINIA 20166
(703) 406-6000 (703) 406-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL INCLUDING AREA CODE, OF AGENT FOR SERVICE)
EXECUTIVE OFFICES)
</TABLE>
PLEASE SEND COPIES OF COMMUNICATIONS TO:
R. RONALD HOPKINSON, ESQ.
LATHAM & WATKINS
885 THIRD AVENUE, SUITE 1000
NEW YORK, NEW YORK 10022-4802
(212) 906-1200
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as possible after the Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
THE REGISTRANTS HEREBY AMEND THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
ORBCOMM GLOBAL, L.P.
------------------
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-4
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION OR HEADING IN THE PROSPECTUS
------------------------------------------------- -------------------------------------
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Forepart of Registration Statement;
Front Cover Page of Prospectus................. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover
of Prospectus.................................. Pages; Available Information
3. Risk Factors, Ratio of Earnings to Fixed Charges Prospectus Summary; Risk Factors; The
and Other Information.......................... Company; The Exchange Offer;
Financial Statements; Selected
Financial Data
4. Terms of the Transaction......................... Prospectus Summary; The Exchange
Offer; Description of Senior Notes;
Certain Federal Income Tax
Considerations
5. Pro Forma Financial Information.................. Prospectus Summary; Financial
Statements
6. Material Contacts with the Company Being
Acquired....................................... Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be
Underwriters................................... Not Applicable
8. Interest of Named Experts and Counsel............ Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants...... Not Applicable
11. Incorporation of Certain Information by
Reference...................................... Not Applicable
12. Information with Respect to S-2 or S-3
Registrants.................................... Not Applicable
13. Incorporation of Certain Information by
Reference...................................... Not Applicable
14. Information with Respect to Registrants other Inside Front Cover; Prospectus
than S-2 or S-3 Registrants.................... Summary; Risk Factors;
Capitalization; Financial
Statements; Selected Financial
Data; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Relationships Among the
ORBCOMM Parties; Description of
Senior Notes
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies........ Not Applicable
16. Information with Respect to S-2 or S-3
Companies...................................... Not Applicable
17. Information with Respect to Companies Other than
S-2 or S-3 Companies........................... Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION OR HEADING IN THE PROSPECTUS
------------------------------------------------- -------------------------------------
<C> <S> <C>
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited............. Not Applicable
Information if Proxies, Consents or
Authorizations are Not to be Solicited or in an Management; Relationships Among the
Exchange Offer................................. ORBCOMM Parties
</TABLE>
<PAGE> 4
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. The prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED DECEMBER 10, 1996
PROSPECTUS
[ORBCOMM LOGO]
OFFER TO EXCHANGE
14% SERIES B SENIOR NOTES DUE 2004 WITH REVENUE PARTICIPATION INTEREST
FOR ALL OUTSTANDING
14% SENIOR NOTES DUE 2004 WITH REVENUE PARTICIPATION INTEREST
OF
ORBCOMM GLOBAL, L.P.
ORBCOMM GLOBAL CAPITAL CORP
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON JANUARY 16,
1997, UNLESS EXTENDED.
------------------------
ORBCOMM Global, L.P., a Delaware limited partnership (the "Company"), and
its wholly owned subsidiary ORBCOMM Global Capital Corp. (the "Co-Obligor"), as
joint and several obligors, are offering on the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (the "Letter of Transmittal" which together with the Prospectus
constitute the "Exchange Offer"), to exchange $1,000 principal amount of
registered 14% Series B Senior Notes due 2004 with Revenue Participation
Interest (the "Exchange Notes"), for an equal principal amount of 14% Senior
Notes due 2004 with Revenue Participation Interest (the "Old Notes") of which an
aggregate of $170 million principal amount is outstanding as of the date hereof.
The Company and the Co-Obligor are herein collectively referred to as the
"Issuers." The form and terms of the Exchange Notes will be substantially
identical to the form and terms of the Old Notes except that the Exchange Notes
are registered under the Securities Act of 1933, as amended (the "Securities
Act") and will not bear legends restricting the transfer thereof. The Exchange
Notes will evidence the same debt as the Old Notes and will be entitled to the
benefits of an Indenture dated as of August 7, 1996, governing the Old Notes and
the Exchange Notes (the "Indenture"). The Indenture provides for the issuance of
both the Exchange Notes and the Old Notes. The Exchange Notes and the Old Notes
are sometimes referred to herein collectively as the "Senior Notes." The holders
of the Senior Notes are sometimes referred to herein collectively as the
"Holders." The Exchange Offer is being made to satisfy certain contractual
obligations of the Issuers.
SEE "RISK FACTORS" ON PAGE 16 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS WHICH HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH
THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
THE COMPANY WILL ACCEPT FOR EXCHANGE ANY AND ALL VALIDLY TENDERED OLD NOTES ON
OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON JANUARY 16, 1997 (IF AND AS
EXTENDED, THE "EXPIRATION DATE"). TENDERS OF OLD NOTES MAY BE WITHDRAWN AT ANY
TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. THE
EXCHANGE OFFER IS NOT CONDITIONED UPON ANY MINIMUM PRINCIPAL AMOUNT OF OLD
NOTES BEING TENDERED FOR EXCHANGE. OLD NOTES MAY BE TENDERED ONLY IN INTEGRAL
MULTIPLES OF $1,000. IN THE EVENT THE COMPANY TERMINATES THE EXCHANGE OFFER
AND DOES NOT ACCEPT FOR EXCHANGE ANY OLD NOTES, THE COMPANY WILL PROMPTLY
RETURN ALL PREVIOUSLY TENDERED OLD NOTES TO THE HOLDERS THEREOF.
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------------------------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 5
The Exchange Notes will mature on August 15, 2004 and will bear fixed
interest at the rate of 14% per annum from their date of issuance. Interest on
the Exchange Notes will be payable semi-annually in arrears on February 15 and
August 15 of each year, commencing February 15, 1997. Revenue Participation
Interest (as defined herein) is payable on the Senior Notes, on each such
interest payment date, in an aggregate amount equal to 5.0% of System Revenue
(as defined herein) for the six-month period ending on December 31 or June 30
most recently completed prior to such interest payment date. Holders of Exchange
Notes will receive interest on February 15, 1997 from the date of initial
issuance of the Exchange Notes, plus an amount equal to the accrued interest on
the Old Notes from the date of original issuance of the Old Notes to the date of
exchange thereof for the Exchange Notes. Such interest will be paid with the
first interest payment on the Exchange Notes. Interest on the Old Notes accepted
for exchange will cease to accrue upon issuance of the Exchange Notes.
The Issuers will not be required to make any mandatory redemption or
sinking fund payments with respect to the Senior Notes. The Senior Notes will be
redeemable at the option of the Issuers, in whole or in part, at any time on or
after August 15, 2001 at the redemption prices set forth herein plus accrued and
unpaid interest, if any, to the date of redemption. In the event of a Change of
Control (as defined herein), the Issuers will be required to make an offer to
repurchase the Senior Notes, at a price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages (if any)
thereon to the date of purchase. See "Description of Senior Notes -- Certain
Covenants -- Repurchase at the Option of Holders -- Change of Control."
The Senior Notes are senior obligations of the Issuers and rank pari passu
in right of payment with all existing and future senior Indebtedness (as defined
herein) of the Issuers and will rank senior in right of payment to any future
subordinated Indebtedness of the Issuers; provided, however, that certain
Indebtedness of the Issuers and their subsidiaries may be secured by assets held
by the Issuers or their subsidiaries subject to certain restrictions described
herein. See "Description of Senior Notes -- Certain Covenants -- Liens." As of
September 30, 1996, the aggregate amount of outstanding liabilities (including
trade payables) of the Issuers, on a consolidated basis, was approximately $187
million. The Senior Notes will be fully and unconditionally guaranteed (except
that the guarantees are non-recourse to the shareholders and partners of the
Guarantors), limited only to the extent necessary to avoid such Guarantees being
considered a fraudulent conveyance under applicable law, on a joint and several
basis (the "Guarantees") by ORBCOMM USA, L.P., ORBCOMM International Partners,
L.P., Orbital Communications Corporation and Teleglobe Mobile Partners (the
"Guarantors"). The Guarantees of each of the Guarantors will rank pari passu in
right of payment with all senior Indebtedness of the Guarantors and senior in
right of payment to all Indebtedness expressly subordinated to the guarantee of
such Guarantor. The guarantees are non-recourse to the shareholders and/or
partners of such Guarantors (including Orbital Sciences Corporation, Teleglobe
Inc. and Technology Resources Industries Bhd.) and no shareholder or partner of
such Guarantors will have any liability for any claim under the Senior Notes.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old 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. 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 Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Old Notes are designated for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market. To
the extent Old Notes are tendered and accepted in the Exchange Offer, the
principal amount of outstanding Old Notes will decrease with a resulting
decrease in the liquidity of the market therefor. Following consummation of the
Exchange Offer, holders of Old Notes who were eligible to participate in the
Exchange Offer but who did not tender their Old Notes will not be entitled to
certain rights under the Registration Rights Agreement (as defined herein), and
such Old Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity in the market for the Old Notes could be adversely
affected. No assurance can be given as to the liquidity of the trading market
for either the Old Notes or the Exchange Notes.
i
<PAGE> 6
The Issuers will not receive any proceeds from this Exchange Offer. The
Issuers have agreed to bear the expenses of the Exchange Offer. No underwriter
is being used in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUERS ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the Exchange Notes offered hereby.
As permitted by the rules and regulations of the Commission, this Prospectus
omits certain information, exhibits and undertakings contained in the
Registration Statement. For further information with respect to the Company and
the Exchange Notes offered hereby, reference is made to the Registration
Statement, including the exhibits thereto and the financial statements, notes
and schedules filed as a part thereof. As a result of this offering, the Issuers
will become subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The Registration Statement (and
the exhibits and schedules thereto) of which this Prospectus is a part, as well
as the periodic reports and other information required to be filed by the
Issuers with the Commission in the future, may be inspected and copied at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at Seven World Trade Center, Suite 1300, New York, New York
10048 and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661-2511. Copies of such materials may be obtained from the Public
Reference Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and its public reference facilities in New
York, New York, and Chicago, Illinois at the prescribed rates. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
the copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. The Commission also maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's Web site is
http://www.sec.gov.
Pursuant to the Indenture, the Issuers have agreed to furnish to the
Trustee (as defined herein) and to registered holders of the Senior Notes,
without cost to the Trustee or such registered holders, copies of all reports
and other information required to be filed by the Issuers with the Commission
under the Exchange Act, whether or not the Issuers are then required by the
rules and regulations of the Commission to file reports with the Commission. The
Issuers will file a copy of such information and reports with the Commission for
public availability. The Issuers will also furnish such other reports as they
may determine or as may be required by law.
ii
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the Notes thereto, appearing elsewhere in this Prospectus. Unless the
context otherwise requires, the terms "Company" or "ORBCOMM" refer to ORBCOMM
Global, L.P., ORBCOMM USA, L.P. ("ORBCOMM USA") and ORBCOMM International
Partners, L.P. ("ORBCOMM International"). Certain capitalized terms used in this
Prospectus are defined in the Glossary. All references in this Prospectus to "$"
or "dollars" are to U.S. dollars. Holders of the Senior Notes should carefully
consider the specific matters set forth under "Risk Factors" beginning on page
16 as well as the other information and data included in this Prospectus.
THE COMPANY
The Company is establishing the first commercial low-Earth orbit ("LEO")
satellite-based mobile data and messaging communications system that will be
available on a global basis (the "ORBCOMM System"). The ORBCOMM System, planned
to be fully deployed in early 1998, is designed to provide reliable, low-cost,
two-way global data and messaging communications through a constellation of 28
LEO satellites and a complement of associated ground infrastructure situated
around the world. The Company believes that there is significant global demand
for its low-cost data and messaging communications services. Major target
markets include worldwide mobile asset tracking; remote industrial monitoring
and control applications; environmental data collection; and real time
person-to-person and machine-to-machine communications, including two-way
Internet electronic mail ("email") communications and recreational and business
messaging. The Company anticipates that the ORBCOMM System will be used: (i) as
a complement to existing or proposed tower-based services such as paging and
other narrowband personal communications services ("PCS"), providing geographic
coverage in areas these systems are unable to reach; and (ii) to enhance data
applications currently being provided through the public switched telephone
network ("PSTN") and the public switched data network ("PSDN"). In addition, the
Company expects that the introduction of its low-cost, reliable data and
messaging communications will lead to the development of new applications and
services.
The Company currently offers commercial intermittent data communications
services in the United States through its existing network, which consists of
two LEO satellites launched in April 1995 and related U.S. ground
infrastructure. When fully deployed, the ORBCOMM System is designed to provide
data and short, alphanumeric paging-like messaging communications coverage
virtually anywhere on the Earth's surface in a reliable and cost-effective
manner. In contrast to "Big LEO" systems, which are designed primarily for voice
applications and require satellite communications systems that are estimated to
cost in excess of $2 billion to construct and deploy, the ORBCOMM System, which
is a "Little LEO" system, is focused on data communications and messaging
applications and will be constructed and deployed for approximately $258 million
(with additional amounts needed to fund initial operation of the ORBCOMM System
and certain debt service obligations). The ORBCOMM System is designed to address
the substantial existing and growing demand for communications services
worldwide, without the high cost and geographic and technical limitations
imposed by other communications systems.
In October 1994, a subsidiary of Orbital Sciences Corporation ("Orbital")
became the first company to be awarded Federal Communications Commission ("FCC")
authority to construct, launch and operate a LEO satellite-based data and
messaging communications system in the United States. Today, the ORBCOMM System
is the only commercial Little LEO system that is fully licensed for all segments
of its system in the United States. Certain portions of the radio spectrum were
allocated by the International Telecommunications Union ("ITU") for use by
Little LEO systems, such as the ORBCOMM System, on an international basis in
1992. The Company intends to enter into agreements with International Licensees,
who will pursue the requisite local regulatory approvals for each foreign
country in which the ORBCOMM System will operate and who will pay fees for
access to the ORBCOMM System in their territory.
In 1995, in addition to the successful launch of the first two ORBCOMM
System satellites, the Company: (i) completed initial development and
construction of the ground infrastructure located in the
1
<PAGE> 8
United States and associated network control systems; and (ii) tested prototype
Subscriber Communicators. The two ORBCOMM System satellites and four U.S. Earth
stations currently are providing data communications services, focused on
monitoring applications, to the U.S. environmental and oil and gas industries,
with tracking and positioning applications targeted for the near future. As of
September 30, 1996, the ORBCOMM System had transmitted in excess of one million
messages and successfully completed extensive internal and third-party testing,
including a rigorous demonstration program conducted by the U.S. Department of
Defense ("DoD") as part of its Joint Warrior Interoperability Demonstration '95.
To use the ORBCOMM System, a user creates a text message utilizing a
computer or Subscriber Communicator device, which message is sent to the nearest
ORBCOMM System satellite and delivered to an ORBCOMM Earth station, which
supports communication with the satellites, and then to the Gateway Switching
System, which processes the messages. Within the Gateway, the message is
processed using a combination of ORBCOMM-developed and commercial email
software, and sent on to its ultimate destination. If desired, an
acknowledgement message is returned to the sender. The final delivery may be to
another Subscriber Communicator or may make use of public/private X.25 data
networks, the Internet, or text-to-fax conversion.
The Company intends to distribute its services globally in a cost-effective
manner through the use of Resellers in the United States and International
Licensees around the world. The Company is in the process of negotiating and
signing agreements with Resellers, each of whom will be responsible for
marketing to end customers in a specific industry and/or market and generally is
expected to develop software applications to facilitate use of ORBCOMM System
services by such industry or market segment. To date, 27 reseller agreements
have been signed with companies including Arinc, Inc., Boatracs, Inc., Corexco
Consulting Services, Inc., Globitrac, Inc., IWL Communications, Inc., QUALCOMM,
Incorporated and the Stevens Water Monitoring Division of Leupold & Stevens,
Inc. The Company has signed six Memoranda of Understanding with potential
International Licensees and is in active negotiations with twelve other
potential International Licensees; taken together, these 18 potential
International Licensees represent approximately 38 countries around the world.
The Company intends to convert substantially all its existing Memoranda of
Understanding into Service License Agreements during the next three to 18
months. In addition, the Company has signed Service License Agreements with four
International Licensees. ORBCOMM has signed a Service License Agreement with
European Company for Mobile Communicator Services, B.V., ORBCOMM Europe
("ORBCOMM Europe"), a consortium of European companies, which was given the
exclusive right to market services using the ORBCOMM System to approximately 40
European countries. ORBCOMM has also executed a Service License Agreement with
ORBCOMM Canada Inc. ("ORBCOMM Canada"), which is controlled by Teleglobe Inc.
("Teleglobe"), a Service License Agreement with Cellular Communications Network
(Malaysia) Sdn. Bhd. ("Celcom"), a wholly owned subsidiary of Technology
Resources Industries Bhd. ("TRI"), and a Service License Agreement with ORBCOMM
Maghreb, S.A. ("ORBCOMM Maghreb"). ORBCOMM Canada, Celcom and ORBCOMM Maghreb
were granted the exclusive right to market ORBCOMM System services in Canada;
Malaysia, Singapore and Brunei; and Morocco, Tunisia, Algeria and Mauritania,
respectively.
ORBCOMM is a limited partnership formed in 1993 to develop, construct,
operate and market the ORBCOMM System. The general and limited partnership
interests in ORBCOMM are held by each of Orbital Communications Corporation
("OCC"), a subsidiary of Orbital, and Teleglobe Mobile Partners ("Teleglobe
Mobile"), a Delaware general partnership whose interests are wholly owned on an
indirect basis by Teleglobe and TRI, a Malaysian holding company that controls
the largest cellular operator in Malaysia. OCC and Teleglobe Mobile have
invested approximately $160 million in the ORBCOMM project. The Company believes
that such equity contributions, together with the proceeds of the Old Notes
Offering (as defined below) and cash expected to be generated from operations,
will be sufficient to fund the ORBCOMM System, including: (i) all capital
expenditures necessary to deploy the ORBCOMM System; and (ii) all required
working capital until at least the first quarter of 1998, when full deployment
of the ORBCOMM System is planned to have occurred. There can be no assurance,
however, that additional capital will not be necessary.
2
<PAGE> 9
BUSINESS STRATEGY
The principal elements of the Company's business strategy include:
Real Time, Reliable Worldwide Coverage. The fully deployed ORBCOMM System
has been designed to provide for the delivery and receipt of data communications
and short, alphanumeric paging-like messages anywhere in the world on a highly
efficient and cost-effective basis. The ORBCOMM System's worldwide coverage will
enable it to provide tracking, monitoring and messaging services, including
Internet email capability, to customers that are currently beyond the geographic
reach of existing terrestrial wireline or wireless systems. The ORBCOMM System
is designed to deliver reliable communications services through the use of
acknowledgment and store-and-forward capabilities. ORBCOMM expects that, with a
planned constellation of 28 satellites, the ORBCOMM System will provide
communications availability generally exceeding 95% of each 24-hour period in
the United States and other temperate zones in the Northern and Southern
Hemispheres and averaging 75% of each 24-hour period in the equatorial region.
On full deployment, the ORBCOMM System is designed to transmit a U.S.-initiated
message ranging in length from six bytes to 100 bytes, depending on system
loading, in from approximately three to 25 seconds.
First-to-Market. The ORBCOMM System began providing commercial
intermittent service in February 1996. Prior to commencing commercial
operations, the space segment, network and management control systems, U.S.
Gateway and prototype Subscriber Communicators were tested extensively to ensure
technical viability. The Company believes that the existence of an in-service,
commercially operational system provides substantial "first-to-market" benefits,
including: (i) reducing technical risk; (ii) increasing the attractiveness of
the ORBCOMM System to potential Resellers, International Licensees and
Subscriber Communicator manufacturers; (iii) facilitating and encouraging the
development of software by Resellers and other application developers for a
variety of market applications because of the ability to test the hardware and
software in an actual operating environment; and (iv) developing a customer base
before other competing Little LEO systems are fully deployed, which the Company
believes will not occur before 2000. There can be no assurance, however, that
there will be no delays in the existing schedule associated with the
construction or deployment of the ORBCOMM System.
Global Distribution of Services. The Company believes the ORBCOMM System
can rapidly achieve a global presence in a cost-effective manner by capitalizing
on the significant resources of Resellers and International Licensees worldwide.
The Company plans to provide services in the United States through Resellers,
many of whom have an existing, well-established market presence through their
existing customer bases, market-specific brand name recognition and distribution
networks. Outside the United States, the Company will enter into Service License
Agreements with International Licensees who will be responsible in their
territory for, among other things, procuring and installing the necessary
Gateways, obtaining all regulatory approvals to provide services using the
ORBCOMM System and operating and marketing services using the ORBCOMM System.
The Company intends to select its International Licensees primarily by
evaluating the ability of the International Licensee to distribute and market
successfully the Company's services. Key components of such an evaluation
include the prospective International Licensee's: (i) reputation in the
marketplace; (ii) existing distribution capabilities and infrastructure; (iii)
financial condition and other resources; and (iv) ability to obtain the
requisite local regulatory approvals.
Low-Cost Subscriber Communicators. The Company is committed to promoting
the production of lightweight Subscriber Communicators that have a long battery
life and are widely available at prices attractive to a broad customer base. The
Company has provided extensive design specifications and technical and
engineering support to its various Subscriber Communicator manufacturers. The
Company currently has a development agreement with Kyushu Matsushita Electric
Company, Ltd. (also known as "Panasonic"). The Company is in the process of
finalizing manufacturing and sales support agreements with Panasonic and has
executed Subscriber Communicator Manufacturing Agreements, which include terms
regarding the development, manufacture and sales support for Subscriber
Communicators, with Scientific-Atlanta, Inc. ("Scientific-Atlanta"), Magellan
Corporation ("Magellan"), Torrey Science Corporation ("Torrey Science") and
Stellar Electronics Ltd. ("Stellar"), an Israeli company that is a subsidiary of
Tadiran Ltd., a leading Israeli electronics company. Panasonic has received
authorization from the Company to manufacture
3
<PAGE> 10
two basic Subscriber Communicators, one with and one without the ability to
receive positioning signals from the Global Positioning Satellite ("GPS")
system, both of which are now commercially available. Torrey Science received
authorization from the Company in August 1996 to manufacture a basic Subscriber
Communicator and in September 1996, Stellar received authorization from the
Company to manufacture a basic subscriber communicator specifically designed for
mobile, outdoor, industrial and/or power sensitive applications. The Company
expects that both Torrey Science and Stellar will have units commercially
available in the first half of 1997. The Company believes that once its other
Subscriber Communicator manufacturers have units that are commercially available
and once the overall production volume for Subscriber Communicators increases,
the price for Subscriber Communicators will decline substantially. Panasonic and
Stellar have informed the Company that, in lots of at least several thousand,
the price for their respective Subscriber Communicators will be approximately
$550 per unit.
Expertise of Strategic Partners. Orbital and Teleglobe, the Company's
partners, have invested approximately $160 million in the ORBCOMM project. The
Company has used and will continue to use its partners' expertise and
capabilities to enhance the ORBCOMM System, including expertise in the design,
construction and deployment of satellites and the operation of international
wireline and wireless telecommunication services.
Orbital, a Delaware corporation headquartered in Dulles, Virginia and with
offices in five countries, is the founder of the ORBCOMM project, and through
its subsidiary, OCC, has a 50% Participation Percentage interest in ORBCOMM.
Orbital is a space technology and satellite services company, with annual
revenues in 1995 of approximately $364 million, that designs, manufactures,
operates and markets a broad range of space products and services, including
launch systems, satellites, space sensors and electronics, ground systems and
software products, satellite access products and communications and information
services. Under the terms of the Procurement Agreement between Orbital and
ORBCOMM, Orbital will, among other things, construct 34 satellites (including
eight ground spares), launch 26 satellites and, on an optional basis, launch the
eight ground spares. The satellites and launch services are provided on a
fixed-priced basis, although the Procurement Agreement contains certain
performance incentives with respect to the satellites.
Teleglobe, a Canadian corporation with 1995 revenues of approximately C$1.6
billion, provides international telecommunications services to over 240
countries worldwide through a network of submarine cables and satellite Earth
stations. Teleglobe currently has offices in ten countries. Teleglobe is owned
approximately 22% by BCE Inc., which is the largest public corporate entity in
Canada, and indirectly approximately 20% by Telesystem Ltd., which also has an
interest in Telesystem International Wireless Corporation N.V. ("TIW"). TIW has
paging and cellular interests in several countries around the world, including
China, Mexico and India. Teleglobe has substantial experience as an
intercontinental provider of telecommunication services and has played and
continues to play an important advisory role in the ORBCOMM project generally
and in the Company's marketing and distribution strategy in particular.
Teleglobe has formed a partnership, Teleglobe Mobile, with TRI to hold its
interest in the ORBCOMM project. TRI operates the largest and one of the
fastest-growing cellular networks in Malaysia, with over 800,000 subscribers.
TRI also has cellular and paging joint ventures in five countries.
The Company's principal executive offices are located at 21700 Atlantic
Boulevard, Dulles, Virginia 20166, and the Company's telephone number is (703)
406-6000. The Company's Web site is located at http://www.orbcomm.net.
SIGNIFICANT MILESTONES
MILESTONES ACHIEVED TO DATE
Through October 31, 1996, the Company has achieved the following
milestones:
- FCC Authorization. In October 1994, OCC was granted authority by the FCC
to construct, launch and operate 36 LEO satellites in the United States
(the "FCC License"). In May and June 1995, OCC received FCC authority to
operate its four U.S. Earth stations and to provide services in the
United States to Subscriber Communicators.
4
<PAGE> 11
- Deployment of First Two Satellites. In April 1995, the first two of the
28 satellites expected to comprise the ORBCOMM System were deployed.
These two satellites are operational.
- Equity Commitments. In September 1995, the partners increased their
committed equity in the ORBCOMM project to a total of approximately $160
million.
- Gateways. As of December 1995, the U.S. Gateway, including three of the
four Earth stations and key portions of the ORBCOMM System's control
segments, was operational. In May 1996, the fourth Earth station became
operational.
- Commercial Service. In February 1996, after extensive testing, the
ORBCOMM System commenced commercial service.
- Subscriber Communicators. The Company has reached agreements with
several manufacturers for the development and manufacture of various
types of Subscriber Communicators. Subscriber Communicators became
commercially available from Panasonic in March 1996, in August 1996 a
Torrey Science Subscriber Communicator passed type acceptance testing and
in September 1996, a Stellar Subscriber Communicator passed type
acceptance testing.
- Resellers. The Company has signed agreements with 27 Resellers in the
United States who will provide services for, among others, the trucking,
marine, oil and gas and environmental industries.
- International Licensees. The Company has signed Memoranda of
Understanding with six potential International Licensees and is in active
discussions with twelve additional potential International Licensees;
taken together, these 18 potential International Licensees represent
approximately 38 countries around the world. On October 15, 1996, the
Company signed a Service License Agreement with ORBCOMM Europe that
authorizes ORBCOMM Europe on an exclusive basis to offer services using
the ORBCOMM System in approximately 40 European countries. The Company
has also signed three additional Service License Agreements, one with
ORBCOMM Canada, one with Celcom, and one with ORBCOMM Maghreb.
FUTURE MILESTONES
The Company expects to achieve the following future milestones:
- Deployment of Additional Satellites. By the first quarter of 1998, the
Company plans to have launched an additional 26 satellites, for a total
constellation of 28 satellites. The Company has an option to launch an
additional eight ground spare satellites that, if launched as a fourth
plane, would complete deployment of the 36 LEO satellites authorized by
the FCC License.
- Subscriber Communicators. By the first quarter of 1997, the Company
expects that Subscriber Communicators will be commercially available from
Torrey Science and Stellar.
- Resellers. The Company is currently in negotiations with approximately
14 additional potential Resellers who will provide services for, among
others, the utility, rail carrier and law enforcement industries.
- International Licensees. By December 1997, the Company plans to have
converted substantially all its six existing Memoranda of Understanding
into definitive Service License Agreements with International Licensees.
- Commencement of Global, Real Time Service. In 1998, following the launch
and deployment of an additional 26 satellites and extensive review of the
fully deployed ORBCOMM System, the Company plans to be able to offer real
time communications services.
CONSTELLATION DESIGN AND IMPLEMENTATION STRATEGIES
The ORBCOMM System has been designed to provide for the delivery and
receipt of short messages anywhere in the world on a highly efficient and
cost-effective basis. The Company believes that multiple
5
<PAGE> 12
aspects of the ORBCOMM System design will result in a low-cost product offering
worldwide and that the implementation plan for the ORBCOMM System should reduce
the risk of cost overruns, system performance shortfalls and system deployment
delays. Important components of the ORBCOMM System design and implementation
strategies include: (i) the design, development and deployment of a low-cost
satellite system; (ii) the development of a communications protocol specifically
designed for data and messaging communications; (iii) the use of contractual and
other means to mitigate the risk of delays and system failures; and (iv) the use
of advantageous radio frequencies. See "Business -- Constellation Design and
Implementation Strategies."
RECENT DEVELOPMENTS
On August 7, 1996, the Issuers and Guarantors engaged in an offering (the
"Old Notes Offering") of the Old Notes pursuant to exemptions from registration
under the Securities Act.
The net proceeds from the sale of the Old Notes Offering were approximately
$164 million (after deducting discounts and commissions to the initial
purchasers thereof and expenses of the Old Notes Offering). The Company will
apply all the net proceeds of the Old Notes Offering to: (i) the design,
construction, launch, operation and marketing of the ORBCOMM System through the
date of full deployment of the ORBCOMM System, including the procurement of
satellites, launch services, launch insurance and U.S. ground segment
components; (ii) related development, operating and marketing expenses; (iii)
the purchase of the Pledged Securities; and (iv) the deposit into a segregated
account of an amount sufficient to pay when due all remaining interest and
principal payments on the Company's Loan and Security Agreement with MetLife
Capital Corporation ("MetLife") (the "MetLife Note"). Pending such uses, the net
proceeds will be invested in short-term, investment-grade securities.
The table on the following page summarizes the estimated sources and uses
of capital by ORBCOMM for the period from June 30, 1993 (date of inception)
through the first quarter of 1998, when full deployment of the ORBCOMM System is
planned to have occurred.
6
<PAGE> 13
SOURCES AND USES OF FUNDING FOR THE ORBCOMM SYSTEM
<TABLE>
<CAPTION>
(IN MILLIONS)
- --------------------------------------------------------------------------------------------
<S> <C>
USES:
ORBCOMM System:
Satellite constellation, ground spares and launch services...................... $202
U.S. ground segment(1).......................................................... 30
Insurance....................................................................... 8
Other system costs(2)........................................................... 18
----
Total system costs.............................................................. 258
Operating expenses and working capital(3)............................................ 36
Excess proceeds of the Old Notes Offering(4)......................................... 7
Debt repayment and interest expense(5)............................................... 41
Pledged Securities(6)................................................................ 12
----
Total uses...................................................................... $354
====
SOURCES:
Capital contributions................................................................ $160
Other indebtedness................................................................... 5
Net proceeds of the Old Notes Offering(7)............................................ 164
Necessary cash from operations(8).................................................... 25
----
Total sources................................................................... $354
====
</TABLE>
- ---------------
(1) Construction of a substantial number of Gateways located outside of the
United States will be necessary to provide real time services on a global
basis. Procurement of such Gateways will be the responsibility of the
International Licensees and is not reflected in the above table. There can
be no assurance that such International Licensees will be able to fund the
purchase and deployment of such Gateways. See "Risk Factors -- Reliance on
Resellers and International Licensees."
(2) Represents certain project management costs.
(3) Consists of estimated project development and operating and other related
expenses through the first quarter of 1998.
(4) Represents cash proceeds of the Old Notes Offering in excess of amounts the
Company anticipates will be required through at least the first quarter of
1998. This cash will be available to deploy the ORBCOMM System.
(5) Represents required fixed interest payments on the Senior Notes and
scheduled payments of principal and interest (at an interest rate of 9.20%
per annum) on the Company's other indebtedness, in each case through the
first quarter of 1998. For purposes of this table, the Pledged Securities
will be used to make three semi-annual interest payments on the Senior Notes
required to be made prior to the first quarter of 1998.
(6) Represents the estimated remaining principal amount of Pledged Securities as
of the first quarter of 1998 pledged as security for repayment of principal
on the Senior Notes.
(7) Represents $170 million of gross proceeds of the Old Notes Offering
(including funds used to purchase the Pledged Securities), less discounts
and commissions and other expenses of the Old Notes Offering of $6 million.
(8) Represents the additional cash needed through the date of full deployment of
the ORBCOMM System, which is expected to be funded by cash from operations.
It is expected that a significant portion of such cash from operations
through the first quarter of 1998 will come from license fees payable by
International Licensees.
ORBCOMM believes that the net proceeds of the Old Notes Offering and the
capital contributions of the ORBCOMM partners, together with expected cash from
operations, will be sufficient to fund the Company's operations through at least
the first quarter of 1998, when full deployment of the ORBCOMM System is planned
to have occurred. Additional funds may be necessary in the event of delay, cost
overruns or any shortfall in estimated levels of operating cash flow, or to meet
unanticipated expenses. There can be no assurance that ORBCOMM will be able to
obtain any such additional financing on favorable terms or on a timely basis.
See "Risk Factors -- Potential Additional Capital Requirements."
7
<PAGE> 14
THE EXCHANGE OFFER
The Exchange Offer applies to $170 million aggregate principal amount of
the Old Notes. The form and terms of the Exchange Notes are substantially the
same as the form and terms of the Old Notes except that the Exchange Notes will
be registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The Exchange Notes will evidence the same debt
as the Old Notes and both series of Senior Notes will be entitled to the
benefits of the Indenture and treated as a single class of debt securities
thereunder. See "Description of Senior Notes."
THE EXCHANGE OFFER............ The Issuers are offering to exchange $170
million principal amount of Exchange Notes
for a like principal amount of Old Notes.
Exchange Notes may be exchanged only in
multiples of $1,000 principal amount. The
Issuers will issue the Exchange Notes on or
promptly after the Expiration Date. The terms
of the Exchange Notes and Old Notes are
substantially identical. See "The Exchange
Offer."
Based on an interpretation by the staff of the
Commission set forth in no-action letters
issued to third parties, the Issuers believe
that, with the exceptions discussed herein,
Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may
be offered for resale, resold and otherwise
transferred by any holder thereof (other than
(i) a broker-dealer who purchases such
Exchange Notes directly from the Issuers to
resell pursuant to Rule 144A or any other
available exemption under the Securities Act
or (ii) a person that is an "affiliate" of
the Issuers within the meaning of Rule 405
under the Securities Act) without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided
that (i) the Holder is acquiring the Exchange
Notes in the ordinary course of its business
and (ii) that such Holder is not
participating, and has no arrangement or
understanding with any person to participate,
in the distribution of such Exchange Notes.
However, the Issuers have not sought, and do
not intend to seek, their own no-action
letter, and there can be no assurance that
the Commission's staff would make a similar
determination with respect to the Exchange
Offer. Each broker-dealer that receives
Exchange Notes for its own account in
exchange for Old Notes must acknowledge that
it will deliver a prospectus in connection
with any resale of such Exchange Notes. See
"Plan of Distribution."
RECORD DATE................... The Issuers have fixed the close of business on
December , 1996 as the record date for the
Exchange Offer (the "Record Date") for the
purpose of determining the persons to whom
this Prospectus, together with the
accompanying letter of transmittal (the
"Letter of Transmittal") will initially be
sent.
EXPIRATION DATE............... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on January 16, 1997,
unless extended, in which case the term
"Expiration Date" shall mean the latest date
and time to which the Exchange Offer is so
extended.
CONDITIONS TO THE EXCHANGE
OFFER......................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Issuers in whole or in part and from time
to time in its sole discretion. See "The
Exchange Offer -- Certain Conditions to the
Exchange Offer." The Exchange Offer
8
<PAGE> 15
is not conditioned on any minimum aggregate
principal amount of Old Notes being tendered
for exchange.
PROCEDURES FOR TENDERING OLD
NOTES......................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile, together with the Old
Notes and any other required documentation,
to the Exchange Agent (as defined herein) at
the address set forth herein. By executing or
agreeing to be bound by the Letter of
Transmittal, each Holder (other than
participating broker-dealers) will represent
to the Issuers that, among other things, (i)
the Exchange Notes acquired pursuant to the
Exchange Offer are being acquired in the
ordinary course of business of such Holder or
such other person receiving such Exchange
Notes, (ii) neither such Holder nor any such
other person has an arrangement or
understanding with any person to participate
in the distribution of such Exchange Notes,
(iii) such Holder or any such other person
acknowledges and agrees that any person who
is a broker-dealer registered under the
Exchange Act or is participating in the
Exchange Offer for the purposes of
distributing the Exchange Notes must comply
with the registration and prospectus delivery
requirements of the Securities Act in
connection with a secondary resale
transaction of the Exchange Notes acquired by
such person and cannot rely on the position
of the staff of the Commission set forth in
certain no-action letters (see "The Exchange
Offer -- Resale of the Exchange Notes"), (iv)
the holder or any such other person
understands that a resale transaction
described in clause (iii) above and any
resales of Exchange Notes obtained by such
Holder or such other person in exchange for
Notes acquired by such Holder or such other
person directly from the Issuers should be
covered by an effective registration
statement containing the selling
securityholder information required by Item
507 or Item 508, as applicable, of Regulation
S-K of the Commission and (v) neither the
Holder nor any such other person is an
"affiliate," as defined in Rule 405 under the
Securities Act, of the Issuers.
SPECIAL PROCEDURES FOR
BENEFICIAL HOLDERS............ Any beneficial Holder whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender such Old
Notes should contact such registered holder
promptly and instruct such registered holder
to tender on its behalf. If such beneficial
holder wishes to tender on its own behalf,
such holder must, prior to completing and
executing the Letter of Transmittal and
delivering such Old Notes, either make
appropriate arrangements to register
ownership of such Old Notes in such holder's
name or obtain a properly completed bond
power from the record holder. The transfer of
registered ownership may take considerable
time and may not be able to be completed
prior to the Expiration Date. See "The
Exchange Offer -- Procedures for Tendering
Old Notes."
9
<PAGE> 16
GUARANTEED DELIVERY
PROCEDURES.................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes and the Letter of Transmittal
or any other documents required by the Letter
of Transmittal to the Exchange Agent prior to
the Expiration Date, must tender their Old
Notes according to the guaranteed delivery
procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS............. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time,
on the Expiration Date. See "The Exchange
Offer -- Withdrawal Rights." Any Old Note not
accepted for exchange for any reason will be
returned without expense to the tendering
Holder thereof as promptly as practicable
after the expiration or termination of the
Exchange Offer. See "The Exchange
Offer -- Procedures for Tendering Old Notes."
ACCEPTANCE OF NOTES AND
DELIVERY OF EXCHANGE NOTES.... Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Issuers
will accept for exchange any and all Old
Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The
Exchange Notes issued pursuant to the
Exchange Offer will be delivered promptly
following the Exchange Date. See "The
Exchange Offer -- Terms of the Exchange
Offer."
CONSEQUENCES OF FAILURE TO
EXCHANGE...................... Holders of Old Notes who do not exchange their
Old Notes for Exchange Notes pursuant to the
Exchange Offer will continue to be subject to
the restrictions on transfer of such Old
Notes as set forth in the legend thereon. In
general, Old Notes that are not exchanged
pursuant to the Exchange Offer may not be
offered or sold except pursuant to a
registration statement under the Securities
Act or an exemption from registration
thereunder and in compliance with applicable
state securities laws. In the event the
Issuers complete the Exchange Offer, the
interest rate on Old Notes will remain as
stated thereon and Holders of Old Notes will
have no further rights under the Registration
Rights Agreement (as defined herein).
CERTAIN TAX CONSIDERATIONS.... Latham & Watkins, counsel to the Company, has
advised the Company that because the Exchange
Notes should not be considered to differ
materially from the Old Notes, the exchange
of Exchange Notes for Old Notes should not
result in any material federal income tax
consequences to Holders exchanging Old Notes
for Exchange Notes. For a full description of
the basis of, and limitations on, this
opinion, see "Certain Federal Income Tax
Considerations."
EXCHANGE OFFER; REGISTRATION
RIGHTS........................ The Old Notes were sold by the Issuers on
August 7, 1996. In connection with the sale,
the Issuers and the Guarantors entered into a
Registration Rights Agreement (the
"Registration Rights Agreement") with the
initial purchasers of the Old Notes (the
10
<PAGE> 17
"Initial Purchasers"), providing for the
Exchange Offer. See "The Exchange
Offer -- Purpose of the Exchange Offer."
Pursuant to the Registration Rights Agreement,
the Issuers and Guarantors under certain
circumstances will be required to file as
promptly as practicable a shelf registration
statement (the "Shelf Registration
Statement") to cover resales of the Old Notes
by the holders thereof. See "The Exchange
Offer -- Purpose of the Exchange Offer."
EXCHANGE AGENT................ Marine Midland Bank is the Exchange Agent. The
address and telephone number of the Exchange
Agent are set forth in "The Exchange
Offer -- Exchange Agent."
11
<PAGE> 18
SUMMARY OF TERMS OF THE EXCHANGE NOTES
ISSUERS....................... ORBCOMM Global, L.P. and ORBCOMM Global Capital
Corp.
SECURITIES OFFERED............ $170 million in aggregate principal amount of
14% Senior Series B Notes due 2004 with
Revenue Participation Interest.
INTEREST...................... The Exchange Notes will bear fixed interest at
a rate of 14% per annum from their date of
issuance. Revenue Participation Interest is
payable on the Senior Notes, on each interest
payment date, in an aggregate amount equal to
5.0% of System Revenue for the six-month
period ending on December 31 or June 30 most
recently completed prior to such interest
payment date.
MATURITY...................... August 15, 2004.
INTEREST PAYMENT DATES........ February 15 and August 15, commencing February
15, 1997.
RANKING....................... The Exchange Notes will be senior obligations
of the Issuers and will rank pari passu in
right of payment with all existing and future
senior Indebtedness of the Issuers and will
rank senior in right of payment to any future
subordinated Indebtedness of the Issuers;
provided, however, that certain Indebtedness
incurred by the Issuers and their
subsidiaries in the future may be secured by
assets held by the Issuers or their
subsidiaries subject to certain restrictions
described herein. As of September 30, 1996,
the aggregate amount of outstanding
liabilities (including trade payables) of the
Issuers, on a consolidated basis, was
approximately $187 million. The Indenture
permits the Issuers to incur additional
Indebtedness, including senior Indebtedness,
subject to certain limitations.
GUARANTEES.................... The Exchange Notes will be fully and
unconditionally guaranteed on a joint and
several basis by the Guarantors, except that
the Guarantees are non-recourse to the
shareholders and partners of the Guarantors,
limited only to the extent necessary for each
such Guarantee to not constitute a fraudulent
conveyance under applicable law. The
Guarantee of each Guarantor will rank pari
passu in right of payment with all senior
Indebtedness of the Guarantors and senior in
right of payment to all Indebtedness
expressly subordinated to the guarantee of
such Guarantor. The guarantees are
non-recourse to the shareholders and/or
partners of such Guarantors (including
Orbital, Teleglobe and TRI) and no
shareholder or partner of such Guarantors
will have any liability for any claim under
the Notes. See "Description of Senior
Notes -- Guarantees."
OPTIONAL REDEMPTION........... The Exchange Notes may be redeemed at the
option of the Issuers, in whole or in part,
at any time on or after August 15, 2001, at a
premium declining to par in 2003, plus
accrued and unpaid interest, if any, to the
date of redemption. See "Description of
Senior Notes -- Optional Redemption."
CHANGE OF CONTROL............. In the event of a Change of Control (as defined
herein), the Issuers will be required to make
an offer to repurchase the Exchange Notes, at
a price equal to 101% of the aggregate
principal amount thereof, plus accrued and
unpaid interest, if
12
<PAGE> 19
any, to the date of repurchase. See
"Description of Senior Notes -- Certain
Covenants -- Repurchase at the Option of
Holders -- Change of Control."
CERTAIN COVENANTS............. The Indenture governing the Senior Notes (the
"Indenture") contains certain covenants that
limit the ability of the Issuers, the
Guarantors and their Restricted Subsidiaries
(as defined) to incur additional Indebtedness
(as defined), pay dividends or make other
additional distributions, repurchase Equity
Interests (as defined) or subordinated
Indebtedness, make certain other Restricted
Payments (as defined), create certain liens,
enter into certain transactions with
affiliates, sell assets, issue or sell Equity
Interests of the Issuers' Restricted
Subsidiaries or enter into certain mergers
and consolidations. The Indenture also
requires the Company to obtain launch vehicle
and in-orbit insurance under certain
circumstances. See "Description of Senior
Notes -- Certain Covenants."
RISK FACTORS
Holders of Senior Notes should carefully consider the factors set forth
under "Risk Factors," as well as other information and data included elsewhere
in this Prospectus.
13
<PAGE> 20
SUMMARY FINANCIAL DATA
The following summary financial data of ORBCOMM have been derived from the
financial statements of ORBCOMM contained herein. The financial data of ORBCOMM
as of and for the nine months ended September 30, 1995 and 1996 are unaudited
but have been prepared on the same basis as the audited financial statements
and, in the opinion of management, contain all normal recurring adjustments
necessary for the fair presentation of the results of operations for such
periods. The selected financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements of ORBCOMM, and notes
thereto included elsewhere in this Prospectus. SINCE THE COMPANY ACCOUNTS FOR
ITS OWNERSHIP IN BOTH ORBCOMM USA AND ORBCOMM INTERNATIONAL USING THE EQUITY
METHOD, REFERENCE IS MADE TO THE FINANCIAL STATEMENTS OF ORBCOMM USA AND ORBCOMM
INTERNATIONAL LOCATED ELSEWHERE IN THIS PROSPECTUS.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
----------------- --------------------
1994 1995 1995 1996
---- -------- ---- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME AND EXPENSE DATA:(1)
Total income........................................... $ 0(2) $ 958(2)(3) $941(2)(3) $ 1,317
Cost of product sales.................................. 0 0 0 204
Engineering expenses................................... 0 0 0 3,477
Administrative expenses................................ 9 50 0 4,146
Depreciation and amortization.......................... 0 0 0 4,685
Equity in earnings (losses) of affiliates(4)........... 0 (853) 0 (2,860)
Excess (deficiency) of income over expenses............ (9) 55 941 (14,054)
OTHER DATA:
Ratio of earnings to fixed charges(5).................. -- -- 2.9x --
---- -------- ---- --------
Deficiency of earnings to fixed charges................ N/A(6) (371) -- (17,950)
---- -------- ---- --------
Pro forma deficiency of earnings to fixed charges(7)... (25,011) (32,704)
-------- --------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 38,424
Investments............................................ 132,900(8)
Mobile Communications Satellite System, net(9)......... 151,904
Investments in and advances to affiliates(4)........... (292)
Total assets........................................... 331,196
Long-term debt......................................... 173,504
Partners' capital...................................... 143,707
</TABLE>
- ---------------
(1) For the period June 30, 1993 (date of inception) through December 31, 1993,
there were no income and expense transactions.
(2) The Company is a development stage company and had no system revenue.
(3) Comprises interest income and a non-refundable fee received from a potential
International Licensee.
(4) The Company accounts for its investments in ORBCOMM USA and ORBCOMM
International using the equity method of accounting.
(5) For purposes of determining the ratio of earnings to fixed charges,
"earnings" includes excess (deficiency) of income over expenses adjusted for
fixed charges.
(6) Ratio of earnings to fixed charges is not applicable as there were no fixed
charges during this period.
(7) Pro forma deficiency of earnings to fixed charges is calculated based upon
an interest rate on the Senior Notes of 14% per annum plus the Revenue
Participation Interest and the amortization of deferred financing fees as of
the beginning of the period.
(8) Includes $13 million of the net proceeds of the Old Notes Offering deposited
by the Issuers into a segregated account and to be used solely for purposes
of funding the development and deployment of the ORBCOMM System and related
operating expenses. See "Description of Senior Notes -- Certain
Covenants -- Contingency Fund." Also includes the aggregate principal amount
of the Pledged Securities, at approximately $44.8 million, and the amount in
the segregated account related to the MetLife Note, at approximately $4.2
million. See "Description of Senior Notes -- Security."
(9) Represents the ORBCOMM System.
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<PAGE> 21
THE ORBCOMM SYSTEM
SUMMARY SATELLITE DATA
The ORBCOMM System is a global satellite communications system comprising a
constellation of LEO satellites, certain terrestrial facilities including
Gateways, network control systems and Subscriber Communicators that is intended
to provide two-way data and messaging communications services throughout the
world. The most significant characteristics of the satellites that comprise the
ORBCOMM System, such as their design specifications, coverage and design life,
as well as licensing and launch information for the satellites, are summarized
in the following table.
<TABLE>
<CAPTION>
NUMBER OF LAUNCH
SATELLITES(1) PLANE LAUNCH DATE VEHICLE LICENSED DESIGN LIFE
------------- ----- ---------------------- ---------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
A. Operational(2)
1. FM 1-2 2 70 degrees April 1995 Pegasus(R) October 20, 1994(3) 4 Years
B. Licensed
1. FM 3-4 2 70 degrees Second Quarter 1997(4) Taurus(R)(5) October 20, 1994 5 Years
2. FM 5-12 8 45 degrees Third Quarter 1997(4) Pegasus XL October 20, 1994 5 Years
3. FM 13-20 8 45 degrees Fourth Quarter 1997(4) Pegasus XL October 20, 1994 5 Years
4. FM 21-28 8 45 degrees First Quarter 1998(4) Pegasus XL October 20, 1994 5 Years
5. FM 29-36(6) 8 45 degrees Optional Pegasus XL October 20, 1994 5 Years
</TABLE>
- ---------------
(1) Each of the satellites that comprise the ORBCOMM System is an Orbital
MicroStar(TM) satellite, weighing approximately 95 pounds and measuring
approximately 41 inches in diameter, 6.5 inches in height, 170 inches in
deployed length and 88 inches in "deployed width at solar arrays." Each of
the ORBCOMM System satellites is currently authorized to operate in the
137.0-138.0 MHz band with a power flux density ("PFD") limit of -125 dB
(W/m(2)/4 kHz) for (satellite-to-subscriber and -Earth station)
transmissions. Also, each satellite currently is authorized to operate at
400.1 MHz (P 25 kHz) for satellite-to-subscriber transmissions with no PFD
limit. Each of the ORBCOMM System satellites also is currently authorized to
operate in the 148.0-149.9 MHz band for uplink (subscriber- and Earth
station-to-satellite) transmissions at five watts. OCC has requested that
the FCC allocate additional frequency located at 137.0-138.0 MHz and
149.9-150.05 MHz for use by Little LEO systems. See "Regulation -- United
States FCC Regulations -- Second Processing Round."
(2) The two ORBCOMM System satellites that are currently in orbit provide
communications availability in the United States for approximately 10% of
each 24-hour period (eight to ten passes over a fixed point on the Earth's
surface each day), with maximum outages of approximately nine hours. ORBCOMM
expects that, with a planned constellation of 28 satellites, the ORBCOMM
System will provide communications availability generally exceeding 95% of
each 24-hour period in the United States and other temperate zones in the
Northern and Southern hemispheres and averaging 75% of each 24-hour period
in the equatorial region.
(3) The license for the ORBCOMM System issued to OCC by the FCC on October 20,
1994 supersedes the earlier experimental licenses granted to OCC and
includes the two satellites launched by OCC in April 1995. The October 20,
1994 license grants OCC the authority to construct, launch and operate 36
LEO satellites in the United States.
(4) Each of the future launch dates identified represents the currently targeted
launch date.
(5) These two satellites are intended to be launched as a secondary payload on a
Taurus launch vehicle, also manufactured by Orbital.
(6) These eight satellites represent ground spares that may be deployed as a
fourth plane by the Company, provided that, subject to FCC approval, the
Company may determine not to so deploy such satellites.
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<PAGE> 22
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Exchange Notes offered hereby.
DEVELOPMENT STAGE COMPANY
Expectation of Continued Losses and Accumulated Deficits. ORBCOMM is a
development stage company that commenced commercial service in the United States
with its first two satellites on February 1, 1996 and, therefore, has generated
only nominal revenues from its limited operations to date. ORBCOMM's activities
have focused primarily on acquisition of U.S. regulatory approvals for operation
of the ORBCOMM System, design, construction and deployment of its initial
satellites and associated network systems, negotiation of reseller agreements,
execution of Service License Agreements with International Licenses,
identification of potential International Licensees in countries outside the
United States, identification of Subscriber Communicator manufacturers and
hiring of management and other key personnel.
The continued development of ORBCOMM's business and deployment of the
ORBCOMM System will require significant capital expenditures, a substantial
portion of which will need to be incurred prior to the realization of
significant revenues from the ORBCOMM System. Together with ORBCOMM's operating
expenses, these capital expenditures will result in a negative cash flow until
an adequate revenue-generating customer base is established. ORBCOMM has
incurred cumulative deficiency of income over expenses of approximately $14.0
million through September 30, 1996 and it expects such losses to continue for
the foreseeable future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The Company does not expect that the
ORBCOMM System will generate positive cash flow until the ORBCOMM System is
fully deployed and operational, which is expected to occur in 1998. There can be
no assurance that the Company will achieve its objectives by the targeted dates.
See "Business."
Limited Operating and Financial Data. Prospective investors have limited
operating and financial data about the ORBCOMM System on which to base an
evaluation of the ORBCOMM System's performance and an investment in the Senior
Notes. ORBCOMM's ability to provide commercial service on a worldwide basis and
to generate positive operating cash flow will depend on its ability to, among
other things: (i) successfully construct and deploy the remaining satellites in
the ORBCOMM System in a timely manner; (ii) develop Reseller capabilities within
the United States and license arrangements outside the United States sufficient
to capture and retain an adequate customer base; and (iii) through its existing
or proposed International Licensees, obtain the necessary foreign regulatory
authority and construct the necessary ground infrastructure outside the United
States. Given ORBCOMM's limited operating history, there can be no assurance
that it will be able to overcome these barriers, to develop a sufficiently large
revenue-generating customer base to service its indebtedness or to compete
successfully in the communications industry.
Potential Additional Capital Requirements. The Company currently expects
to require approximately $354 million for capital expenditures, development and
operating costs of the ORBCOMM System and the purchase of the Pledged Securities
from June 30, 1993 (date of inception) through at least the first quarter of
1998, when full deployment of the ORBCOMM System is expected to have occurred.
Through September 1996, the Company had expended approximately $156 million for
the design, construction, deployment and/or procurement of satellites, launch
vehicles, portions of the network control elements and the U.S. ground segment
and for market development and regulatory activities. To finance such
expenditures, the Company has obtained approximately $160 million in equity
contributions from its partners and received net proceeds of approximately $164
million from the Old Notes Offering and approximately $5 million from proceeds
of the Company's senior secured debt. The Company believes that the net proceeds
of the Old Notes Offering and the capital contributions of the ORBCOMM partners,
together with expected cash from operations, will be sufficient to fund the
Company's operations through at least the first quarter of 1998, when full
deployment of the ORBCOMM System is planned to have occurred. There can be no
assurance that the Company will generate sufficient cash from operations, or
that expenses will not exceed the Company's estimates, such that additional
capital will not be required. In particular, additional capital would be
required in the event that: (i) there are delays in the deployment of the
ORBCOMM System as a result of launch or
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<PAGE> 23
satellite failure or otherwise; (ii) the Company incurs additional costs in
completing the ORBCOMM System including as a result of modifying the design of
all or a portion of the ORBCOMM System in the event of any technical
difficulties or regulatory requirements; (iii) there is an increase in the
Company's estimated net operating deficit indirectly as a result of the
Company's incurring significant unanticipated expenses; or (iv) reseller and
international licensee agreements for additional markets or territories are not
entered into at the times or on the terms anticipated by ORBCOMM. See
"Business -- Development Milestones." There can be no assurance that additional
capital will be available for any of the foregoing purposes from the public or
private markets or from ORBCOMM's existing partners on favorable terms or on a
timely basis, if at all. A substantial shortfall in funding would delay or
prevent completion of the ORBCOMM System. In view of the Company's current stage
of development, the risk of any of the aforementioned occurrences is
substantial. The Company's ability to achieve positive cash flow will depend on
successful and timely design, construction and deployment of the ORBCOMM System,
the successful marketing of its services by Resellers and International
Licensees, and the ability of the ORBCOMM System to compete successfully against
its competitors, as to which there can be no assurance.
SUBSTANTIAL LEVERAGE; RESTRICTIVE COVENANTS
As of September 30, 1996, the Company's total indebtedness was
approximately $174 million and its partners' capital accounts totaled
approximately $144 million. On a pro forma basis, the Company's deficiency of
earnings before fixed charges to cover fixed charges for the nine months ended
September 30, 1996 and the year ended December 31, 1995 was $32.7 million and
$25.0 million, respectively.
The Indenture contains, and any additional financing agreements may
contain, certain restrictive covenants. The restrictions contained in the
Indenture affect, and in some cases significantly limit or prohibit, among other
things, the ability of the Company to incur indebtedness, make prepayments of
certain indebtedness, pay dividends, make investments, engage in transactions
with affiliates, issue capital stock, create liens, sell assets and engage in
mergers and consolidations. If the Company fails to comply with the restrictive
covenants in the Indenture, the Company's obligation to repay such obligations
may be accelerated.
The successful implementation of the Company's strategy, among other
things, is necessary for the Company to be able to meet its debt service. The
Company currently has no significant sources of revenue. In addition, the
Company's ability to satisfy its obligations once the ORBCOMM System is
operational will depend on the Company's future performance, which is subject to
a number of factors, many of which are beyond the Company's control. There can
be no assurance that the Company can complete the ORBCOMM System or that, once
completed, the Company will generate sufficient cash flow from operating
activities to meet its debt service and working capital requirements. Any
failure or delay in deployment of the ORBCOMM System could have a material
adverse effect on the Company's business, results of operations and financial
condition, including failure to meet these debt service requirements.
The Company's high degree of leverage could have important consequences to
the Holders of the Senior Notes, including that: (i) a substantial portion of
the Company's net cash provided by operations will be committed to the payment
of the Company's interest expense and principal repayment obligations and will
not be available to the Company for its operations, capital expenditures,
acquisitions or other purposes; (ii) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures or
acquisitions may be limited; (iii) the Company will be highly leveraged, which
may place it at a competitive disadvantage and limit the Company's flexibility
in reacting to changes in its business; and (iv) the Company's borrowings under
any Bank Credit Facility may be at variable rates of interest, which would
result in higher interest expense in the event of an increase in interest rates.
See "Description of Senior Notes."
LAUNCH RISKS
For the ORBCOMM System to be fully deployed and offer real time data and
messaging services under the Company's current schedule, ORBCOMM plans to launch
26 satellites by the first quarter of 1998. The Company has contracted with
Orbital to provide three separate Pegasus XL launch vehicles to deploy the
satellites eight at a time, and one Taurus launch vehicle to deploy two
satellites. Satellite launches are subject
17
<PAGE> 24
to significant risks, including failure of the launch vehicle, which may result
in disabling damage to or loss of the satellites, or failure of the satellites
to achieve their proper orbit. There can be no assurance that any of the
proposed ORBCOMM System satellite launches will be successful. To date, Orbital
has conducted a total of eight standard Pegasus missions, all of which were
fully or partially successful. Whether a mission is fully or partially
successful depends on the particular mission requirements designated by the
customer. In the two partially successful standard Pegasus missions, the
satellites achieved useful orbits and were able to be operated by the customer
and performed at least part of their intended missions. Prior to its successful
flights in March, July, and August 1996, the modified Pegasus XL, an enhanced
version of the standard Pegasus, had two unsuccessful flights, one occurring in
June 1994 and the other in June 1995. The first Pegasus XL failure was caused by
inaccurate aerodynamic modeling of the vehicle. The second Pegasus XL failure
resulted from human assembly error involving the improper installation of a
small component that prevented the Stage 1/Stage 2 interstage from properly
separating from Stage 2. Following a comprehensive review of design, assembly,
test and operations procedures, the Pegasus XL returned to flight on March 8,
1996, successfully launching a satellite for the U.S. Air Force to its intended
orbit, and had successful flights on July 2, 1996 and August 21, in each case
delivering a National Aeronautics and Space Administration ("NASA") satellite to
its designated orbit. On a sixth Pegasus XL launch, which occurred in November
1996, two NASA scientific satellites were delivered to their designated orbit,
but the satellites failed to separate from the launch vehicle. The Pegasus and
Pegasus XL separation system has worked properly on 11 previous launches.
Orbital is currently reviewing the cause of the separation problem, but does not
currently expect that it will result in significant delays in its launch
schedule. There are four additional Pegasus XL launches currently planned before
the scheduled deployment of the remaining ORBCOMM satellites using this launch
vehicle. The failure of any one of these launch vehicles could result in a delay
in the deployment of the ORBCOMM System satellites. For the ORBCOMM System to
function at maximum design efficiency, each individual plane of satellites
comprising the constellation must be deployed into its proper orbit.
Orbital's Pegasus XL vehicle is launched from beneath a modified Lockheed
L-1011 aircraft. In 1992, Orbital entered into a ten-year lease for the Lockheed
L-1011. In the event the L-1011 is unavailable for any reason, the Company would
experience significant timing delays as a result of Orbital having to acquire
and modify a new launch vehicle or the Company having to arrange for deployment
of the satellites using an alternative launch vehicle or by means of a ground
launch. There can be no assurance that another aircraft could be obtained and
properly modified or that alternate launch services could be obtained on a
timely or cost-effective basis, if at all.
ORBCOMM intends to launch two additional satellites in 1997 as a secondary
payload on a Taurus launch vehicle, also manufactured by Orbital. The Taurus
launch vehicle, the design and technology of which is derived largely from the
Pegasus launch vehicle, had a successful first launch in 1994. Because these two
satellites will be launched as a secondary payload, they are subject to the
scheduling restrictions imposed by the availability of the primary payload.
Accordingly, it may not be possible to launch the two satellites at the time
currently planned, if at all.
TECHNOLOGICAL RISKS
Integration and Operation Risks. The ORBCOMM System is exposed to the
risks inherent in a large-scale complex communications system employing advanced
technology. The operation of the ORBCOMM System will require the detailed design
and integration of communications technologies and devices ranging from
satellites operating in space and Subscriber Communicators to Gateways located
around the globe. There can be no assurance that, even if built to
specifications, the ORBCOMM System will function as expected in a timely and
cost-effective manner. The failure of any of the diverse and dispersed elements
to function and coordinate as required could delay the full deployment of the
ORBCOMM System or render it unable to perform at the quality and capacity levels
required for success.
The ORBCOMM satellites have limited redundancy against technical failure
and there can be no assurance of a particular satellite's longevity. A number of
factors will affect the useful lives of the ORBCOMM System satellites, including
quality of construction, expected gradual environmental degradation of solar
panels and durability of component parts. Random failure of satellite components
could result in
18
<PAGE> 25
damage to or loss of a satellite. In rare cases, satellites could also be
damaged or destroyed by electrostatic storms or collisions with other objects.
ORBCOMM's operating results would be adversely affected in the event the useful
life of the satellites were significantly shorter than five years.
The Company has experienced and continues to experience, from time to time,
certain technical difficulties with its initial two satellites, including
outages of certain electronic systems and subsystems resulting in the temporary
inability to process subscriber communications. While the Company believes these
technical difficulties have been addressed as experienced, and that none of the
difficulties has resulted or will result in a significant degradation of
satellite performance, there can be no assurance that performance degradation in
these two satellites will not occur in the future.
In addition, the Company is modifying the existing satellite design to
enhance overall satellite performance. For example, the Company is redesigning
the satellite antenna to increase satellite availability to subscribers and to
increase satellite capacity. While such design modifications will be subject to
extensive design reviews and testing prior to deployment of the satellites,
there can be no assurance that the modifications will be successful or that the
modified satellites will operate as intended.
Development of Subscriber Communicators. The successful operation of the
ORBCOMM System depends on the design, construction and commercial availability
of Subscriber Communicators designed to support the specific needs of users. See
"Business -- The ORBCOMM System -- System Architecture -- Subscriber Segment."
To ensure availability of Subscriber Communicators having different functional
capabilities in sufficient quantities to meet demand, the Company has entered
into a development agreement with Panasonic and is in the process of finalizing
manufacturing and sales support agreements with Panasonic. The Company also has
executed Subscriber Communicator Manufacturing Agreements with Scientific-
Atlanta, Magellan, Torrey Science and Stellar. Panasonic has received
authorization from the Company to manufacture two basic Subscriber
Communicators, one with and one without GPS functionality, both of which are now
commercially available. Torrey Science received authorization from the Company
in August 1996 and Stellar received authorization from the Company in September
1996 to manufacture a basic Subscriber Communicator. The Company expects that
both Torrey Science and Stellar will have units commercially available in the
first quarter of 1997. Realization of the full market potential for the
Company's communications services depends upon the availability of Subscriber
Communicators at prices attractive to customers. There can be no assurance that
the Company's Subscriber Communicator manufacturers will successfully design and
manufacture Subscriber Communicators to the Company's specifications or in
sufficient quantities to satisfy the expected needs of the ORBCOMM System, or
that the price of such Subscriber Communicators will decline so as to make them
affordable to the broad customer base intended by the Company.
SCHEDULE DELAYS
Delay in the timely construction, deployment and implementation of full
commercial operation of the ORBCOMM System could result from a variety of
causes, including delays encountered in the construction, integration and
testing of the ORBCOMM System, a delayed or unsuccessful launch, delays caused
by design reviews in the event of a launch vehicle failure or a loss of
satellites, or as the result of a delay in the FCC's approval of OCC's request
for modification of its FCC license filed in October 1995 (the "Modification
Request") or other events beyond the control of ORBCOMM. The construction
schedule for the satellites in the ORBCOMM System requires a rate for satellite
production and testing that is unprecedented for commercial communications
systems. The schedule set forth under the Procurement Agreement has been delayed
as a result of, among other things, enhancements made to the design of the
satellites and delays in certain subcontractor deliveries. Such delays have
reduced the contingency period within the overall schedule for the development
and deployment of the ORBCOMM System. A significant delay in the deployment of
satellites from the Company's current schedule could materially and adversely
affect the Company's operations. In addition, a significant delay in the
manufacture of Subscriber Communicators could have a material adverse effect on
the Company's results of operations. The success of the ORBCOMM System depends
on Subscriber Communicators being available to potential subscribers on a timely
basis to take advantage of the intermittent data communications services
currently available and the real time data and
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<PAGE> 26
messaging services that will be available on full deployment of the ORBCOMM
System. There can be no assurance that the satellites or the Subscriber
Communicators will be available on a timely basis.
REGULATORY RISKS
Licensing Risks; Domestic. ORBCOMM's business may be affected by the
regulatory activities of various U.S. government agencies, primarily the FCC. On
October 20, 1994, the FCC granted to OCC the FCC License, authorizing OCC to
construct, launch and operate the ORBCOMM System for the purpose of providing
two-way data and message communications and position determination services in
the United States. Although the FCC License is currently valid, it is subject to
revocation if OCC fails to satisfy certain conditions or to meet certain
prescribed milestones, including the December 2000 milestone by which OCC must
launch 36 satellites, although OCC may determine, subject to FCC approval, to
launch fewer than 36 satellites by such date. While the FCC License is valid for
a period of ten years from the operational date of the first ORBCOMM satellite,
OCC is required, three years prior to expiration of the FCC License, to apply
for a license renewal with the FCC. Although the FCC has indicated that it is
generally inclined to grant renewal applications of existing Little LEO
licensees, there can be no assurance that the FCC will in fact renew the FCC
License. Should the FCC revoke the FCC License or fail to renew the FCC License
on application by OCC, or if OCC fails to satisfy any of the conditions of the
FCC License, such action would have a material adverse impact on ORBCOMM's
business. Finally, the business of ORBCOMM could be adversely affected by the
adoption of new laws, policies or regulations, or changes in the interpretation
or application of existing laws, policies and regulations, that modify the
present regulatory environment. See "Regulation."
ORBCOMM's authorization to provide services is subject to the Modification
Request. This request seeks to modify the frequency plan to permit the ORBCOMM
System to use fewer, higher data rate subscriber downlink channels, which
should, among other things, enable it to avoid interfering with other existing
and proposed systems. The Modification Request has been opposed by numerous
other Little LEO systems. OCC recently reached an agreement with Starsys Global
Positioning, Inc. ("Starsys") and the National Oceanic and Atmospheric
Administration ("NOAA") with respect to technical matters raised by the
Modification Request. While OCC expects that the FCC will grant the Modification
Request in the near future, should the Modification Request be denied or
significantly delayed by the FCC, it could have a material adverse effect on
ORBCOMM's business in the event the number and usage patterns of subscribers
mandates increased capacity. The Company believes that the failure of the FCC to
grant the Modification Request would not, however, affect the constellation
deployment schedule or materially adversely affect the Company's planned
revenues through December 31, 1997 because such revenues are generally planned
to be derived from license fees from International Licensees and Gateway sales.
There are currently eight applicants (including OCC) in the second
processing round before the FCC for non-voice, non-geostationary systems. On
October 29, 1996, the FCC released for public comment a Notice of Proposed
Rulemaking relating to licensing second round applications in which the FCC
proposes to limit eligibility in the second round to new applicants only. If
adopted, these rules would exclude from consideration in the second round any
entity that is already a licensee or affiliated with a licensee. This would
result in the dismissal of OCC's second round application for additional
spectrum.
As a private carrier, OCC currently is not subject to the restrictions that
apply to common carriers or to providers of Commercial Mobile Radio Services
("CMRS"). There can be no assurance, however, that in the future, OCC will not
engage in business of a type such that the FCC would deem it a common carrier or
a CMRS provider or that the FCC will not in the future exercise its
discretionary authority to apply the CMRS or common carrier rules to MSS
providers. See "Regulation." The application of these rules could have an
adverse effect on OCC's business by, for instance, requiring OCC to offer all
customers just, reasonable and non-discriminatory rates, by subjecting OCC to
certain tariff filing requirements, by subjecting OCC to state regulation (if
OCC were deemed to be a common carrier) and by subjecting OCC to various alien
ownership and control restrictions applicable to common carriers and CMRS
providers.
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<PAGE> 27
Licensing Risks; International. ORBCOMM's business is affected by the
regulatory authorities of the countries in which it or its International
Licensees will operate. Obtaining local regulatory approval for operation of the
ORBCOMM System will be the responsibility of the International Licensee in each
territory. While International Licensees will be selected, in part, based on
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, service will not be available in such territories. Although many
countries have moved to privatize the provision of communications service and to
permit competition in the provision of such services, some countries continue to
require that all communications service be provided by a government-owned
entity. The Company anticipates that most of its International Licensees will be
private entities. Therefore, in those countries that require services to be
provided by a government-owned entity, the Company may be unable to offer
services using the ORBCOMM System. ORBCOMM's inability to offer service in a
foreign country or countries could have a material adverse effect on ORBCOMM's
business. Regulatory provisions in countries in which the Company or its
International Licensees seek to operate may impose impediments on the Company's
or the International Licensees' operations and there can be no assurance that
such restrictions would not be unduly burdensome. ORBCOMM's business may also be
adversely affected by regulatory changes resulting from judicial decisions
and/or adoption of treaties, legislation or regulation by the national
authorities where the ORBCOMM System plans to operate.
The United States, on behalf of OCC, is required to coordinate the
frequencies used by the ORBCOMM System through the ITU. ITU frequency
coordination is a necessary prerequisite to obtaining interference protection
from other satellite systems. There is no penalty for launching a satellite
system prior to completion of the ITU coordination process, although protection
from interference through this process is only afforded as of the date of
successful completion of the process and notification of the system by ITU.
Although the United States has substantially completed the ITU coordination
process with respect to the ORBCOMM System, it is still required to coordinate
the ORBCOMM System with Russia and France. Although the Company believes that
approval of the Modification Request would facilitate its coordination efforts
with Russia and could facilitate its coordination efforts with France, failure
of the FCC to approve the Modification Request would not preclude successful
coordination with Russia or France. There can be no assurance that the FCC will
grant the Modification Request. There also can be no assurance that, even if the
Modification Request is granted, OCC will be successful in coordinating the
ORBCOMM System with the Russian and French systems. Any delay in or failure to
successfully complete the ITU coordination process may result in potential
interference to the ORBCOMM System by other mobile satellite systems operating
internationally, which could have a material adverse effect on ORBCOMM's
business.
LIMITED INSURANCE
The Company expects to obtain launch insurance for each scheduled Pegasus
XL launch that would provide it with the necessary funds to procure a
replacement launch vehicle in the event of a launch vehicle failure. The Company
also expects to procure in-orbit satellite insurance against the failure of
satellites after placement of satellites into commercial service. The foregoing
insurance would not cover the cost to construct replacement satellites in the
event of a launch failure, or the cost to construct and launch satellites in the
event of the loss of satellites after a successful launch but prior to the time
satellites are placed into commercial service. Pursuant to the terms of the
Procurement Agreement, the Company is purchasing eight additional satellites to
be used as ground spares. Such ground spares represent self-insurance against
the risk of a loss of satellites. Until such time as the Company is required to
use its ground spare satellites, ORBCOMM does not intend to obtain insurance to
cover the cost of obtaining replacement satellites in the event of a launch
vehicle failure or an in-orbit failure prior to placement of such satellites
into commercial service. In the event that the Company is required to use its
ground spare satellites, ORBCOMM will be obligated under the terms of the
Indenture to procure insurance for subsequent missions covering a loss of
satellites as a result of a launch vehicle failure or an in-orbit failure prior
to placement of such satellites into commercial service. The Company does not
have in-orbit insurance for the two satellites currently operational and does
not intend to procure launch or in-orbit insurance for the two satellites
currently planned to be launched as a secondary payload on a Taurus launch
vehicle.
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<PAGE> 28
Based on current market conditions, the Company expects that premiums for
launch insurance would be less than ten percent for Pegasus XL launches and that
in-orbit satellite insurance after placement of the satellites into commercial
service would be approximately 1.5% to 2% per year. An adverse change in
insurance market conditions or other factors outside the Company's control at
the time the Company seeks to procure such insurance may, however, cause
premiums to be significantly higher than current estimates. The Company believes
that its procurement of the spare satellites will offset in part the risk of a
launch failure. There can be no assurance, however, that launch or satellite
failures will not occur and that launch or in-orbit satellite insurance will be
available to the Company in the future or, if available, at a cost or on terms
acceptable to the Company.
LIMITED LIFE OF SATELLITES
The ORBCOMM System satellites, which constitute a substantial portion of
the Company's total assets, will have a limited useful life. The additional
first-generation satellites are designed to operate for five years. ORBCOMM
anticipates using funds generated from operations to develop a second generation
of satellites. If sufficient funds from operations are not available and ORBCOMM
is unable to obtain financing for the second-generation constellation, ORBCOMM
will not be able to deploy a second-generation satellite constellation to
replace first-generation satellites at the end of their useful lives. There can
be no assurance that additional capital will be available to develop the second
generation of satellites on favorable terms or on a timely basis, if at all.
MARKET ACCEPTANCE
The success of the ORBCOMM System and the Company's ability to pay interest
and principal on the Senior Notes will depend on subscriber acceptance of
ORBCOMM System services. Subscriber acceptance of ORBCOMM System services will
depend on a number of factors, including the technical capabilities of the
ORBCOMM System, the cost of Subscriber Communicators, the price of ORBCOMM
System services and the extent, availability and price of alternative
communications services. There can be no assurance that price, service
limitations or Subscriber Communicator size, weight or cost will not result in
more significant limitations on customer acceptance than the Company
anticipates. The ORBCOMM System will provide a new data transfer and messaging
capacity to certain markets where the Company has identified a demand for such
types of communications services. The Company expects that introduction of the
ORBCOMM System will lead to the development of new applications and services
that will use the capacity provided by the ORBCOMM System. As with any new
service, however, there can be no assurance that development of such
applications will occur.
Realization of the full market potential for the Company's services will
depend on the availability of Subscriber Communicators that are reasonably
priced and that have certain features attractive to the market. One of the
Company's Subscriber Communicator manufacturers, Panasonic, currently has
Subscriber Communicators that are commercially available. The Company expects
that once its other Subscriber Communicator manufacturers have units that are
commercially available and once the overall production volume for Subscriber
Communicators begins to increase, the price for Subscriber Communicators will
decline substantially. Panasonic and Stellar have informed the Company that, in
lots of at least several thousand, the price for their respective Subscriber
Communicators will be approximately $550 per unit. There can be no assurance,
however, that the price of such Subscriber Communicators will decline so as to
make them affordable to a broad customer base. Also, many Subscriber
Communicators are currently being designed to offer particular features the
Company believes will be attractive to potential end-users, such as GPS. There
can be no assurance, however, that the market will demand the types of features
currently offered by or proposed to be offered by these Subscriber
Communicators, that the Company's Subscriber Communicator manufacturers will
continue to manufacture Subscriber Communicators or that technological or other
design developments over the years will not render these Subscriber
Communicators obsolete.
The success of the ORBCOMM System depends in part on the ability of the
Company to offer its data and messaging communications services at rates
attractive to the market. Although the Company believes that its pricing
structure will make the ORBCOMM System an affordable and thus attractive option
for the
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provision of such services to the industries and markets it has targeted, the
cost to end-users for ORBCOMM System services is largely beyond the control of
the Company.
RELIANCE ON RESELLERS AND INTERNATIONAL LICENSEES
In the United States, ORBCOMM intends to rely on Resellers to market and
distribute its services to retail customers. The willingness of companies to
become Resellers will depend on a variety of factors, including regulatory
restrictions, whether potential Resellers perceive the ORBCOMM System services
to be compatible with their own and whether the proposed compensation provides
an adequate return. ORBCOMM's reseller agreements provide that the Resellers
will use all reasonable commercial efforts to market and distribute ORBCOMM
System services, but in most cases do not require the Resellers to meet
established sales objectives. There can be no assurance that ORBCOMM's Resellers
will successfully develop a retail market and distribute ORBCOMM System
services.
Outside the United States, the Company will enter into Service License
Agreements with International Licensees who will be responsible in their
territory for, among other things, procuring and installing the necessary
Gateways, obtaining all regulatory approvals to provide services using the
ORBCOMM System, and operating and marketing services using the ORBCOMM System.
The Company intends to select its International Licensees primarily by
evaluating the ability of the International Licensee to distribute and market
successfully the Company's services. Key components of such an evaluation
include the prospective International Licensee's: (i) reputation in the
marketplace; (ii) existing distribution capabilities and infrastructure; (iii)
financial condition and other resources; and (iv) ability to obtain the
requisite local regulatory approvals to operate the ORBCOMM System. There can be
no assurance that the Company's International Licensees will be successful in
obtaining the requisite foreign regulatory approvals or, even if successful,
that they will successfully develop a retail market and distribute ORBCOMM
System services.
Although the foregoing factors will be considered by the Company in
evaluating potential International Licensees, there can be no assurance that
each International Licensee will satisfy any one or more of the foregoing
factors. For example, certain of such Resellers and International Licensees are
or are likely to be start-up ventures with limited financial resources, and
there can be no assurance that any such entities will be successful in their
efforts to market effectively the ORBCOMM System or, in the case of
International Licensees, to procure and install the necessary Gateways and
obtain the necessary foreign regulatory authority to operate their systems.
Neither the Company's form of Memorandum of Understanding nor its form of
Service License Agreement obligates or gives the Company the option to construct
the necessary Gateway in the event an International Licensee is unable to do so
on its own. In the future and if an International Licensee is unable to do so,
the Company may decide to construct, or to finance the construction of, the
necessary Gateway. Should the Company make such a decision, there can be no
assurance that the International Licensee or the relevant governmental authority
will permit the construction of such Gateway or that such Gateway will actually
be successfully constructed. There can also be no assurance that the Company
would be able to bear the cost of construction of such Gateway or that the
Company would be able to secure financing for such construction. Although the
costs of constructing a Gateway is uncertain and dependent on a number of
factors, the Company believes that the cost for a Gateway would likely be at
least $3,500,000.
COMPETITION
Competition in the communications industry is intense, fueled by rapid and
continuous technological advances and alliances between industry participants
seeking to use such advances on an international scale to capture significant
market share. Although no present participant is currently providing the same
global commercial communications services to be provided by the Company, it is
anticipated that the ORBCOMM System will face competition from numerous existing
and potential alternative communications products and services provided by
various large and small companies, including sophisticated two-way
satellite-based data and voice communication services. The Company expects that
potential competitors will include other Little LEO satellite systems and may
include Big LEO and GEO satellite systems and, in some cases, terrestrial
messaging and data systems. If any of the Company's competitors succeed in
marketing and deploying systems with services similar to those expected to be
offered through the ORBCOMM System substantially
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earlier than the scheduled full deployment of the ORBCOMM System, the Company's
ability to compete in markets served by such competitors may be adversely
affected.
Some of the Company's potential competitors have financial, personnel and
other resources substantially greater than those of the Company. Many of these
competitors are raising capital and may compete with the Company. In addition, a
continuing trend toward consolidation and strategic alliances in the
communications industry could give rise to significant new competitors, and any
foreign competitor may benefit from subsidies from, or other protective measures
by, its home country. There can be no assurance that some of these competitors
will not provide more efficient or less expensive services.
Satellite-based communications systems are characterized by high up-front
costs and relatively low marginal costs of providing service. A number of Big
LEO and GEO systems are presently 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 begin operations. Big LEO and GEO systems are designed primarily to
provide two-way voice services that require larger, more complex satellites and
require a circuit-oriented connection over their network to transmit even short
messages, which significantly increases their per-message cost. If, however, the
operators of these systems seek to offer services similar to those offered by
the ORBCOMM System, price competition could be intense.
Two other Little LEO systems currently are licensed by the FCC to provide
data and messaging communications services. One system currently expects to
deploy a two-satellite system to transmit health, research and scientific data
on a delayed basis between developing countries and the United States. The
second system expects to construct and operate a multiple-satellite
constellation that could compete with the ORBCOMM System. This system, which is
now owned 80% by GE American Communications Corporation, could have
significantly greater resources than the Company. There are currently eight
applicants (including OCC) before the FCC in a second processing round for
Little LEO systems, the filing period for which closed on November 16, 1994. The
FCC recently released for Public Comment a Notice of Proposed Rulemaking in
which the FCC proposes to limit eligibility in the second licensing round to new
applicants only. If adopted, these rules would exclude from consideration in the
second round any entity that is already a licensee or affiliated with a
licensee, such as OCC. Should the FCC approve any one of the competing second
round applications, however, such licensee could compete with the Company.
Terrestrial wireless services have certain key advantages over
satellite-based systems, particularly in urban or densely populated areas, in
terms of signal strength and the ability to penetrate various environments (such
as buildings). By contrast, the ORBCOMM System is unable to penetrate buildings
and has limited application in densely populated areas currently serviced by
terrestrial wireless systems. The ORBCOMM System is not intended to compete with
existing and planned terrestrial data and messaging systems. It is expected,
however, that as terrestrial communications services expand to regions currently
underserved or not served by wireline or wireless systems, demand for ORBCOMM
System services in these regions may be reduced. ORBCOMM may also face
competition in the future from companies using new technologies and new
satellite systems. A number of these new technologies, even if they are not
ultimately successful, could have an adverse effect on ORBCOMM as a result of
their marketing efforts. ORBCOMM's business would be adversely affected if
competitors begin operations or existing or new communication service providers
penetrate ORBCOMM's target markets.
RELIANCE ON SINGLE SUPPLIER; POTENTIAL CONFLICT OF INTEREST
The Company does not independently have, and does not intend to acquire,
except by contracting with other parties, the ability to design, develop,
construct or launch the satellites in the ORBCOMM System. ORBCOMM has contracted
with Orbital to provide these services under the Procurement Agreement. ORBCOMM
may terminate the Procurement Agreement on the failure of Orbital to achieve
certain milestones within 56 weeks after the contracted completion date or on
Orbital's noncompliance with material terms of the Agreement. In the event that
Orbital fails to perform its obligations under the Procurement Agreement, the
deployment of the ORBCOMM System may be delayed until ORBCOMM is able to locate
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<PAGE> 31
an alternative provider of necessary services to replace Orbital. In addition, a
material adverse impact on Orbital and its business may adversely affect
Orbital's ability to perform under the Procurement Agreement. The Company has
not identified any alternate provider of the services currently being provided
by Orbital, and there can be no assurance that such an alternative service
provider would be available or, if available, would be available at a cost or on
terms favorable to the Company.
Orbital, through OCC, has a substantial interest in the Company.
Accordingly, a conflict of interest may exist between the Company and Orbital
under the Procurement Agreement and other related agreements between Orbital and
OCC. Pursuant to the ORBCOMM Partnership Agreement, significant amendments to
the Procurement Agreement, or other transactions between the Company and
Orbital, are subject to the approval of Teleglobe Mobile. There can be no
assurance, however, that the potential conflict of interest between the Company
and Orbital would not have a material adverse effect on the Company.
DEPENDENCE ON INTELLECTUAL PROPERTY RIGHTS
The Company's success and ability to compete are dependent to a certain
degree on its proprietary technology. The Company relies primarily on copyright
and trade secret law to protect its technology. The Company holds no patents.
The Company's policy is to enter into confidentiality agreements with its
employees, consultants and vendors, which, where appropriate, also contain an
agreement to assign proprietary technology developed during performance
thereunder, and generally to control access to and distribution of its software,
documentation and other proprietary information. Notwithstanding these
precautions, it may be possible for a third party to copy or otherwise obtain
and use the Company's software or other proprietary information without
authorization or to develop similar software independently. In addition, the
laws of countries outside the United States may afford the Company little or no
effective protection of its intellectual property.
There can be no assurance that the steps taken by the Company will prevent
misappropriation of its technology or that agreements entered into for that
purpose will be enforceable. In addition, litigation may be necessary in the
future to enforce the Company's intellectual property rights, to protect the
Company's trade secrets, to determine the validity and scope of the proprietary
rights of others or to defend against claims of infringement or invalidity. Such
litigation, whether successful or unsuccessful, could result in substantial
costs and diversions of resources, either of which could have a material adverse
effect on the Company's business, financial condition and operating results.
MARKET ESTIMATES
The Company's description of potential markets for its mobile data and
messaging communications service offerings and estimates of the Company's
addressable markets that are discussed in this Prospectus under the caption
"Business -- The ORBCOMM System" represent the Company's estimates as of the
date hereof with respect to such markets. Such market descriptions and estimates
are based on a number of assumptions, some of which may be incorrect or may not
materialize, and unanticipated events may occur that could affect actual
business realized for ORBCOMM System services. Consequently, actual markets
should be expected to vary from the addressable markets discussed herein, and
these variations may be material.
DEPENDENCE ON KEY MANAGEMENT AND QUALIFIED PERSONNEL
The Company's success will depend on the efforts of its management team and
its ability to attract and retain qualified management and personnel in the
future. The Company has no employment contract with any employee and is subject
to the loss of one or more key employees at any time. In addition, the Company
must rely on several employees of Orbital who play a key role in the performance
of Orbital's obligations under the Procurement Agreement. The Company has no
control over the relationship between Orbital and such employees. The Company
could be materially and adversely affected by the loss of one or more key
employees.
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RELATIONSHIP BETWEEN STRATEGIC PARTNERS
ORBCOMM is a partnership whose two partners, OCC and Teleglobe Mobile, each
hold a 50% Participation Percentage in the Company. Under the terms of the
ORBCOMM Partnership Agreement, substantially all actions by the Company require
the approval of at least a majority-in-interest (i.e., partners holding a
majority of the Participation Percentage in the Company). Therefore, under the
current ownership structure, if OCC and Teleglobe Mobile do not agree on a
course of action for the Company, a deadlock would occur. Generally, there is no
mechanism in the ORBCOMM Partnership Agreement or any other agreement for
resolving such a deadlock. The result of a deadlock between the strategic
partners could have a material adverse effect on the Company.
RISKS OF INTERNATIONAL OPERATIONS
ORBCOMM expects to derive substantial revenues by providing international
communications services. Such operations are subject to certain risks such as
changes in domestic and foreign government regulations and communications
standards, licensing requirements, tariffs or taxes and other trade barriers,
exchange controls, and political and economic instability, including
fluctuations in the value of foreign currencies that may make payment in U.S.
dollars more expensive for foreign customers.
RISK THAT THE COMPANY IS TREATED AS A PUBLICLY TRADED PARTNERSHIP
In general, a partnership is not a taxable entity for United States federal
income tax purposes. Certain partnerships ("publicly traded partnerships"),
however, are treated as corporations for federal tax purposes if interests in
the partnership are traded on an established securities market or on a secondary
market (or a substantial equivalent thereof). Treasury Regulations provide
generally that, for this purpose, an "interest in a partnership" includes any
financial instrument or contract the value of which is determined in whole or in
part by reference to the partnership (including the results of partnership
operations). The Regulations make an exception to this rule, however, for any
financial instrument or contract that (i) is treated as debt for federal tax
purposes and (ii) is not convertible into or exchangeable for an interest in the
capital or profits of the partnership and does not provide for a payment of
equivalent value. Such an instrument is not treated as an "interest in the
partnership" for purposes of these rules. The Company believes that the Senior
Notes are properly treated as debt for federal tax purposes because the Senior
Notes have a fixed maturity date, call for payment of interest on fixed payment
dates, are denominated as debt (rather than equity) of the Company, and
represent a claim on the Company's assets that is senior to that of certain
creditors, as well as that of the equity holders of the Company. Although the
Senior Notes provide for contingent interest that is based on the gross revenues
of the Company, the Company believes that such payments are not equivalent in
value to an interest in the capital or profits of the Company. Therefore, the
Company intends to report as a partnership, rather than as a publicly traded
partnership taxable as a corporation, for federal income tax purposes. If,
however, the Internal Revenue Service successfully took a contrary position, the
Company would be treated as a corporation for federal tax purposes, which would
reduce the amount of the Company's after-tax income available to meet its
obligations under the Senior Notes.
FRAUDULENT CONVEYANCE CONSIDERATIONS -- SUBSIDIARY GUARANTEES
The obligations of the Company under the Senior Notes are guaranteed,
jointly and severally, by the Guarantors, including the Guarantees (the
"Subsidiary Guarantees") by ORBCOMM USA and ORBCOMM International (the
"Subsidiary Guarantors"). It is possible that creditors of the Subsidiary
Guarantors may challenge the Subsidiary Guarantees as a fraudulent conveyance
under relevant federal and state statutes, and, under certain circumstances
(including a finding that a Subsidiary Guarantor was insolvent at the time its
Subsidiary Guarantee was issued), a court could hold that the obligations of a
Subsidiary Guarantor under a Subsidiary Guarantee may be voided or are
subordinate to other obligations of a Subsidiary Guarantor. In addition, it is
possible that the amount for which a Subsidiary Guarantor is liable under a
Subsidiary Guarantee may be limited. The measure of insolvency for purposes of
the foregoing may vary depending on the law of the jurisdiction that is being
applied. Generally, however, a company would be considered insolvent if the sum
of its debts is greater than all of its property at a fair valuation or if the
present
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fair saleable value of its assets is less than the amount that will be required
to pay its probable liability on its existing debts as they become absolute and
mature. The Indenture provides that the obligations of the Subsidiary Guarantors
under the Subsidiary Guarantees will be limited to amounts that will not result
in the Subsidiary Guarantees being a fraudulent conveyance under the applicable
law. See "Description of Senior Notes -- Guarantees."
ABSENCE OF A PUBLIC MARKET
The Old Notes are designated for trading in the PORTAL market, the National
Association of Securities Dealers Inc.'s screen-based automated market for
trading of securities eligible for resale under Rule 144A. The Exchange Notes
are a new issue of securities with no established trading market. Although the
Initial Purchasers of the Old Notes have advised the Issuers that they currently
intend to make a market in the Exchange Notes, they are not obligated to do so
and any market-making activities with respect to the Exchange Notes may be
discontinued at any time without notice. The Issuers do not intend to list the
Exchange Notes on any national securities exchange or to seek admission thereof
to trading in the National Association of Securities Dealers Automated Quotation
System. Accordingly, there can be no assurance as to the development of any
market, or the liquidity of any market that may develop, for the Exchange Notes.
If such a market were to exist, no assurance can be given as to the trading
prices of the Exchange Notes. Future trading prices of Exchange Notes will
depend on many factors, including, among other things, prevailing interest
rates, the Company's results of operations and the market for similar
securities, and, accordingly, the Exchange Notes may trade at a discount from
their principal amount.
FAILURE TO EXCHANGE NOTES
The Exchange Notes will be issued in exchange for Old Notes only after
timely receipt by the Exchange Agent of such Old Notes, a properly completed and
duly executed Letter of Transmittal and all other required documents. Therefore,
holders of Old Notes desiring to tender such Old Notes in exchange for Exchange
Notes should allow sufficient time to ensure timely delivery. Neither the
Exchange Agent nor the Issuers is under any duty to give notification of defects
or irregularities with respect to tenders of Old Notes for exchange. Old Notes
that are not tendered, or are tendered but not accepted, will, following
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof. In addition, any holder of Old Notes who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the Exchange Notes will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or any other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution." To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes could be
adversely affected. See "The Exchange Offer."
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Old Notes were sold by the Issuers on August 7, 1996 (the "Closing
Date") to the Initial Purchasers. The Initial Purchasers subsequently placed the
Old Notes with qualified institutional buyers and institutional accredited
investors in transactions not requiring registration under the Securities Act or
applicable state securities laws, including sales pursuant to Rule 144A under
the Securities Act. As a condition to the sale of the Old Notes, the Issuers,
Guarantors and the Initial Purchasers entered into the Registration Rights
Agreement on August 7, 1996. Pursuant to the Registration Rights Agreement, the
Issuers agreed that, unless the Exchange Offer is not permitted by applicable
law or Commission policy, they would (i) file with the Commission a Registration
Statement under the Securities Act with respect to the Old Notes within 30 days
after the Closing Date, (ii) use their reasonable best efforts to cause such
Registration Statement to become effective under the Securities Act within 150
days after the Closing Date, and (iii) upon
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<PAGE> 34
effectiveness of the Registration Statement, commence the Exchange Offer,
maintain the effectiveness of the Registration Statement for at least 30 days
(or a longer period if required by law) and deliver to the Exchange Agent
Exchange Notes in the same aggregate principal amount as the Old Notes that were
properly tendered by holders thereof pursuant to the Exchange Offer. A copy of
the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The Registration
Statement of which this Prospectus is a part is intended to satisfy certain of
the Issuers' obligations under the Registration Rights Agreement.
RESALE OF THE EXCHANGE NOTES
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third parties unrelated to the Issuers, the Issuers believe
that, with the exceptions discussed herein, Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by any person receiving the Exchange Notes, whether or
not that person is the holder (other than any such holder or such other person
that is an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act; provided that (i) the Exchange Notes
are acquired in the ordinary course of business of that holder or such other
person, (ii) neither the holder nor such other person is engaging in or intends
to engage in a distribution of the Exchange Notes, and (iii) neither the holder
nor such other person has an arrangement or understanding with any person to
participate in the distribution of the Exchange Notes. However, the Issuers have
not sought, and do not intend to seek, their own no-action letter, and there can
be no assurance that the Commission's staff would make a similar determination
with respect to the Exchange Offer.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old 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. 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 Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making or other trading activities. Pursuant to the
Registration Rights Agreement, the Company has agreed to make this Prospectus,
as it may be amended or supplemented from time to time, available to
broker-dealers for use in connection with any resale for a period of 180 days
after the Expiration Date. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Issuers will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000.
The Exchange Notes will evidence the same debt as the Old Notes for which
they are exchanged, and are entitled to the benefits of the Indenture. The form
and terms of the Exchange Notes are substantially the same as the form and terms
of the Old Notes except that the Exchange Notes have been registered under the
Securities Act and hence will not bear legends restricting the transfer thereof.
As of the date of this Prospectus, $170,000,000 aggregate principal amount
of Old Notes were outstanding. The Issuers have fixed the close of business on
December 12, 1996, as the Record Date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus, together with the Letter of
Transmittal, will initially be sent. As of the Record Date, there was one
registered holder of Old Notes. Holders of Old Notes do not have any appraisal
or dissenters' rights under the Delaware General Corporation Law or the
Indenture in connection with the Exchange Offer. The Issuers intend to conduct
the Exchange
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<PAGE> 35
Offer in accordance with the provisions of the Registration Rights Agreement and
the applicable requirements of the Securities Act, the Exchange Act and the
rules and regulations of the Commission thereunder.
The Issuers shall be deemed to have accepted validly tendered Old Notes
when, as and if the Issuers have given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
for the purpose of receiving the Exchange Notes from the Issuers. If any
tendered Old Notes are not accepted for exchange because of an invalid tender,
the occurrence of certain other events set forth herein or otherwise,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering Holder thereof as promptly as practicable after the
Expiration Date.
Holders whose Old Notes are not tendered or are tendered but not accepted
in the Exchange Offer will continue to hold such Old Notes and will be entitled
to all the rights and preferences and subject to the limitations applicable
thereto under the Indenture. Following consummation of the Exchange Offer, the
Holders of Old Notes will continue to be subject to the existing restrictions
upon transfer thereof and the Issuers will have no other obligation to such
Holders of Old Notes to provide for the registration under the Securities Act of
the Old Notes held by them. The Old Notes are designated for trading in the
PORTAL market. To the extent Old Notes are tendered and accepted on the Exchange
Offer, the principal amount of outstanding Old Notes will decrease with a
resulting decrease in the liquidity of the market therefor. Following
consummation of the Exchange Offer, holders of Old Notes who were eligible to
participate in the Exchange Offer but who did not tender their Old Notes will
not be entitled to certain rights under the Registration Rights Agreement, and
such Old Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity in the market for the Old Notes could be adversely
affected. No assurance can be given as to the liquidity of the trading market
for either the Old Notes or the Exchange Notes.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Issuers will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"-- Fees and Expenses; Solicitation of Tenders."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean January 16, 1997, unless the Issuers,
in their sole discretion, extend the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
To extend the Expiration Date, the Issuers will notify the Exchange Agent
of any extension by oral or written notice and will issue a press release or
other public announcement, each prior to 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Such
announcement may state that the Issuers are extending the Exchange Offer for a
specified period of time or on a daily basis until 5:00 p.m., New York City
time, on the date on which a specified percentage of Notes are tendered.
The Issuers reserve the right (i) to delay accepting any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and not accept Old
Notes not previously accepted if any of the conditions set forth below under
"-- Certain Conditions to the Exchange Offer" shall not have been satisfied and
shall not have been waived by the Issuers, by giving oral or written notice of
such delay, extension or termination to the Exchange Agent, or (ii) to amend the
terms of the Exchange Offer in any manner deemed by it to be advantageous to the
Holders. Any such delay in acceptance, extension, termination or amendment will
be followed as promptly as practicable by oral or written notice thereof to the
Holders. If the Exchange Offer is amended in a manner determined by the Issuers
to constitute a material change, the Issuers will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to all
Holders, and the Issuers will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the amendment and the
manner of disclosure to Holders, if the Exchange Offer would otherwise expire
during such five to ten business day period. During any extension of the
Expiration Date, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Issuers.
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Without limiting the manner in which the Issuers may choose to make public
announcement of any extension, amendment or termination of the Exchange Offer,
the Issuers shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE SENIOR NOTES
Fixed interest accrues on the Senior Notes at the rate of 14% per annum.
Fixed Interest and Revenue Participation Interest will be payable in cash
semiannually in arrears on each February 15 and August 15, commencing on
February 15, 1997. No interest will be payable on the Old Notes on the date of
the exchange for the Exchange Notes and therefore no interest will be paid
thereon to the Holders at such time.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a Holder thereof as set forth
below and the acceptance thereof by the Issuers will constitute a binding
agreement between the tendering Holder and the Issuers upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a Holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to the Exchange Agent at the address set
forth below under "-- Exchange Agent" on or prior to the Expiration Date. In
addition, either (i) certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal, (ii) a timely confirmation
of a book-entry transfer (a "Book-Entry Confirmation") of such Old Notes, if
such procedure is available, into the Exchange Agent's account at the Depositary
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date, or (iii) the Holder
must comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE ISSUERS.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes surrendered for exchange pursuant thereto are tendered (i)
by a registered Holder of the Old Notes who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the Letter
of Transmittal or (ii) for the account of an Eligible Institution (as defined
below). In the event that signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantee
must be made by a firm which is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc. or
by a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act which is a member of one of the recognized
signature guarantee programs identified in the Letter of Transmittal
(collectively, "Eligible Institutions"). If Old Notes are registered in the name
of a person other than the person signing the Letter of Transmittal, the Old
Notes surrendered for exchange must be endorsed by, or be accompanied by a
written instrument or instruments of transfer or exchange, in satisfactory form
as determined by the Issuers in their sole discretion, duly executed by the
registered Holder with the signature thereon guaranteed by an Eligible
Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Issuers in their sole discretion, which determination shall be
30
<PAGE> 37
final and binding. The Issuers reserve the absolute right to reject any and all
tenders of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Issuers or
their counsel, be unlawful. The Issuers also reserve the absolute right in their
sole discretion to waive any defects of irregularities or conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the right to waive the ineligibility of any Holder
who seeks to tender Old Notes in the Exchange Offer). The interpretation of the
terms and conditions of the Exchange Offer as to any particular Old Notes either
before or after the Expiration Date (including the Letter of Transmittal and
instructions thereto) by the Issuers shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with the tenders of
Old Notes for exchange must be cured within such reasonable period of time as
the Issuers shall determine. Neither the Issuers, the Exchange Agent nor any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Notes for exchange, nor shall any of
them incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered Holder or Holders of Old Notes, such Old Notes must be endorsed
or accompanied by an appropriate bond power, in either case signed exactly as
the names of the registered Holder or Holders that appear on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond power is signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
person should so indicate when signing and, unless waived by the Issuers, proper
evidence satisfactory to the Issuers of their authority to so act must be
submitted.
By tendering, each Holder (other than participating broker-dealers) will
represent to the Issuers that, among other things, (i) the Exchange Notes to be
acquired in exchange for Old Notes tendered in the Exchange Offer will have been
acquired in the ordinary course of business of such Holder or such other person
receiving such Exchange Notes, (ii) neither such Holder nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, (iii) such Holder or any such other person
acknowledges and agrees that any person who is a broker-dealer registered under
the Exchange Act or is participating in the Exchange Offer for the purposes of
distributing the Exchange Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction of the Exchange Notes acquired by such person and cannot rely
on the position of the staff of the Commission set forth in certain no-action
letters, (iv) the Holder or any such other person understands that a secondary
resale transaction described in clause (iii) above and any resales of Exchange
Notes obtained by such Holder or such other person in exchange for Notes
acquired by such Holder or such other person directly from the Issuers should be
covered by an effective registration statement containing the selling
securityholder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and (v) neither the Holder nor any such other
person is an "affiliate," as defined in Rule 405 under the Securities Act, of
the Issuers. If the Holder or such other person receiving the Exchange Notes 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, the Holder or such other person is required to acknowledge
in the Letter of Transmittal 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 Holder or such other person will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES; RETURN OF OLD
NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Issuers will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the Exchange Notes promptly after acceptance of
the Old Notes. See "-- Certain Conditions to the Exchange Offer" below. For
purposes of the Exchange Offer, the Issuers shall be deemed to have accepted
properly tendered Old Notes for exchange when and if the Issuers have given oral
or written notice thereof to the Exchange Agent.
In all cases, issuance of Exchange Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old
31
<PAGE> 38
Notes or a timely Book-Entry Confirmation of transfer of such Notes into the
Exchange Agent's account at the Depositary, a properly completed and duly
executed Letter of Transmittal and all other required documents. If any tendered
Old Notes are not accepted for any reason set forth in the terms and conditions
of the Exchange Offer or if certificates representing Old Notes are submitted
for a greater principal amount than the Holder desires to exchange, such
unaccepted, withdrawn or non-exchanged Old Notes will be returned without
expense to the tendering Holder thereof (or, in the case of Old Notes tendered
by book-entry transfer into the Exchange Agent's account at the Depositary
pursuant to the book-entry transfer procedures described below, such
non-exchanged Old Notes will be credited to an account maintained with the
Depositary) as promptly as practicable after the expiration or termination of
the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Depositary for purposes of the Exchange Offer within two
business days after the date of this Prospectus, and any financial institution
that is a participant in the Depositary's systems may make book-entry delivery
of Old Notes by causing the Depositary to transfer such Old Notes into the
Exchange Agent's account at the Depositary in accordance with the Depositary's
procedure for transfer. However, although delivery of Old Notes may be effected
through book-entry transfer at the Depositary, the Letter of Transmittal or a
facsimile thereof, with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at the address set forth below under "-- Exchange Agent" on or prior to
the Expiration Date or the guaranteed delivery procedures described below must
be complied with.
The DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through the DTC. To accept the Exchange Offer through
ATOP, participants in DTC must send electronic instructions to the DTC through
the DTC's communication system in place of sending a signed, hard copy Letter of
Transmittal. The DTC is obligated to communicate those electronic instructions
to the Exchange Agent. To tender Old Notes through ATOP, the electronic
instructions sent to the DTC and transmitted by the DTC to the Exchange Agent
must contain the character by which the participant acknowledges its receipt of
and agrees to be bound by the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Issuers (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the Holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within three
business days after the date of execution of the Notice of Guaranteed Delivery,
the certificates of all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent and (iii) the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal, are received by the Exchange Agent within three business days
after the date of execution of the Notice of Guaranteed Delivery.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
32
<PAGE> 39
For a withdrawal to be effective, a written or facsimile notice of
withdrawal must be received by the Exchange Agent at the address set forth below
under "-- Exchange Agent." Any such notice of withdrawal must (i) specify the
name of the person having tendered the Old Notes to be withdrawn, (ii) identify
the Old Notes to be withdrawn (including the certificate number or numbers and
the principal amount of Old Notes to be withdrawn), (iii) be signed by the
Holder in the same manner as the signature on the Letter of Transmittal by which
such Old Notes were tendered (including any required signature guarantees) and
(iv) specify the name in which such Notes are to be registered if different from
that of the withdrawing Holder. If Old Notes have been tendered pursuant to the
procedure for book-entry described above, any notice of withdrawal must specify,
in lieu of certificate numbers, the name and number of the account at the
Depositary to be credited with the withdrawn Old Notes and otherwise comply with
the procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Issuers, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the Holder thereof without cost to such Holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Depositary pursuant to the book-entry transfer procedures described above,
such Old Notes will be credited to an account maintained with the Depositary for
the Old Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "-- Procedures for
Tendering Old Notes" above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Issuers'
obligation to accept for exchange, or exchange Exchange Notes for, any Old Notes
not theretofore accepted for exchange is subject to the following conditions:
(a) no action or proceeding having been instituted or threatened in
any court or by or before any governmental agency with respect to the
Exchange Offer which, in the judgment of the Issuers, might impair the
ability of the Issuers to proceed with the Exchange Offer or have a
material adverse effect on the Issuers and there shall not have occurred
any material adverse development in any existing action or proceeding with
respect to the Issuers or any of their subsidiaries; and
(b) there shall not have been any material change, or development
involving a prospective change, in the business or financial affairs of the
Issuers or any of their subsidiaries which, in the judgment of the Issuers,
would materially impair the Issuers' ability to consummate the Exchange
Offer or have a material adverse impact on the Issuers if the Exchange
Offer is consummated; and
(c) there shall not have been proposed, adopted or enacted any law,
statute, rule or regulation which, in the judgment of the Issuers, might
materially impair the ability of the Issuers to proceed with the Exchange
Offer or have a material adverse effect on the Issuers if the Exchange
Offer is consummated; and
(d) all governmental approvals which the Issuers shall deem necessary
for the consummation of the Exchange Offer as contemplated hereby shall
have been obtained.
If the Issuers determine in good faith that any of the conditions are not
met, the Issuers may (i) refuse to accept any Old Notes and return all tendered
Old Notes to exchanging Holders, (ii) extend the Exchange Offer and retain all
Old Notes tendered prior to the expiration of the Exchange Offer, subject,
however, to the rights of Holders to withdraw such Old Notes (see "-- Withdrawal
Rights") or (iii) waive certain of such unsatisfied conditions with respect to
the Exchange Offer and accept all properly tendered Old Notes which have not
been withdrawn. If such waiver constitutes a material change to the Exchange
Offer, the Issuers will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to all Holders.
Holders have certain rights and remedies against the Issuers under the
Registration Rights Agreement, including the right to receive liquidated
damages, in the event that (i) an Exchange Offer Registration
33
<PAGE> 40
Statement has not been filed with the Commission on or prior to 30 days
following the Old Notes Offering, (ii) on or prior to 150 days prior to the Old
Notes Offering such Exchange Offer Registration Statement is not declared
effective, (iii) on or prior to 180 days following the Old Notes Offering the
Exchange Offer is not consummated, or (iv) applicable law or interpretations of
the Commission prohibit a Holder from participating in the Exchange Offer or for
any reason the Exchange Offer is not consummated within 180 days of the Old
Notes Offering and a Shelf Registration Statement is not filed or declared
effective within the time provided by the Registration Rights Agreement for such
filing or declaration, such liquidated damages to be payable in cash
semiannually in arrears, and to accrue at a rate per annum equal to an
additional one quarter of one percent (0.25%) of the principal amount of the
Senior Notes, which rate will increase by one quarter of one percent (0.25%) for
each 90-day period that such Liquidated Damages continue to accrue, with an
aggregate maximum increase in the interest rate per annum equal to one percent
(1.00%).
EXCHANGE AGENT
Marine Midland Bank has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
BY REGISTERED OR CERTIFIED MAIL; BY OVERNIGHT COURIER; OR BY HAND
MARINE MIDLAND BANK
140 BROADWAY
12TH FLOOR
NEW YORK, NEW YORK 10005
(212) 658-6084
ATTENTION: CORPORATE TRUST DEPARTMENT
BY FACSIMILE:
(212) 658-6425
ATTENTION: CORPORATE TRUST DEPARTMENT
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES; SOLICITATION OF TENDERS
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Issuers and their affiliates.
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers and are estimated in the aggregate to be approximately
$137,000 and include registration fees, fees and expenses of the Exchange Agent
and Trustee, accounting and legal fees and printing costs, among others.
The Issuers will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any
34
<PAGE> 41
such other taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering Holder.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Issuers. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Issuers since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) Holders in any jurisdiction in which the making
of the Exchange Offer or the acceptance thereof would not be in compliance with
the laws of such jurisdiction.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in the Issuers' accounting records on
the date of the exchange. Accordingly, no gain or loss for
accounting purposes will be recognized. The costs of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
the Old Notes may not be offered or sold, unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. The Issuers do not
intend to register the Old Notes under the Securities Act.
35
<PAGE> 42
USE OF PROCEEDS
The Issuers will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Issuers will receive in Exchange Notes
in like principal amount, the terms of which are identical to the Exchange Notes
except that the Exchange Notes will be registered under the Securities Act and,
therefore, will not bear legends restricting the transfer thereof. The Old Notes
surrendered in exchange for Exchange Notes will be retained by the Issuers and
the Exchange Offer will not result in any increase in the indebtedness of the
Issuers.
CAPITALIZATION
The following table sets forth the capitalization of ORBCOMM at September
30, 1996 including the effect of the Old Notes Offering and the application of
the net proceeds therefrom, and the contribution of the remaining balance of the
ORBCOMM partners' capital commitments.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents........................................... $ 38,424
Investments......................................................... 132,900(1)
--------
Total cash and cash equivalents and investments........... 171,324
========
Long-term debt:
Senior Notes................................................... 170,000(2)
Other debt(3).................................................. 3,504
--------
Total long-term indebtedness.............................. 173,504
Partners' capital................................................... 143,707
--------
Total capitalization...................................... $317,211
========
</TABLE>
- ---------------
(1) Includes $13 million of the net proceeds of the Old Notes Offering deposited
by the Issuers into a segregated account and used solely for the purposes of
funding the development and deployment of the ORBCOMM System and related
operating expenses. See "Description of Senior Notes -- Certain
Covenants -- Contingency Fund." Also includes the aggregate principal amount
of the Pledged Securities, at approximately $44.8 million, and the amount in
the segregated account related to the MetLife Note, at approximately $4.2
million. See "Description of Senior Notes -- Security."
(2) Approximately $44.8 million of the debt proceeds were used to purchase the
Pledged Securities, which will, in turn, be used to service interest
payments on the Senior Notes through August 15, 1998.
(3) Represents the outstanding balance as of September 30, 1996 of the MetLife
Note, which is secured and bears interest at 9.2% per annum.
36
<PAGE> 43
SELECTED FINANCIAL DATA
The following selected income and expense data of ORBCOMM for the years
ended December 31, 1994 and 1995 and the selected balance sheet data of ORBCOMM
at December 31, 1993, 1994 and 1995 have been derived from the audited financial
statements of ORBCOMM. The selected financial data of ORBCOMM as of and for the
nine months ended September 30, 1995 and 1996 are unaudited but have been
prepared on the same basis as the audited financial statements and, in the
opinion of management, contain all normal recurring adjustments necessary for
the fair presentation of the financial position and results of operations for
such periods. The selected financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements of ORBCOMM and notes
thereto included elsewhere in this Prospectus. SINCE THE COMPANY ACCOUNTS FOR
ITS OWNERSHIP IN BOTH ORBCOMM USA AND ORBCOMM INTERNATIONAL USING THE EQUITY
METHOD, REFERENCE IS MADE TO THE FINANCIAL STATEMENTS OF ORBCOMM USA AND ORBCOMM
INTERNATIONAL LOCATED ELSEWHERE IN THIS PROSPECTUS.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------- ----------------------
1994 1995 1995 1996
---- -------- ---- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME AND EXPENSE DATA:(1)
Total income................................ $ 0(2) $ 958(2)(3) $941(2)(3) $ 1,317
Cost of product sales....................... 0 0 0 204
Engineering expenses........................ 0 0 0 3,477
Administrative expenses..................... 9 50 0 4,146
Depreciation and amortization............... 0 0 0 4,685
Equity in earnings (losses) of
affiliates(4)............................. 0 (853) 0 (2,860)
Excess (deficiency) of income over
expenses.................................. (9) 55 941 (14,054)
OTHER DATA:
Ratio of earnings to fixed charges(5)....... -- -- 2.9x --
---- -------- ---- --------
Deficiency of earnings to fixed charges..... N/A(6) (371) -- (17,950)
---- -------- ---- --------
Pro forma deficiency of earnings to fixed
charges(7)................................ (25,011) (32,704)
-------- --------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1996
------------ ------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 0 $ 5,000 $ 1,785 $ 38,424
Investments................................ 0 0 0 132,900(8)
Mobile Communications Satellite System,
net(9)................................... 43,925 68,647 106,990 151,904
Investments in and advances to
affiliates(4)............................ 0 0 (192) (292)
Total assets............................... 47,666 73,647 109,030 331,196
Long-term debt............................. 0 5,000 4,174 173,504
Partners' capital.......................... 47,666 58,509 94,601 143,707
</TABLE>
- ---------------
(1) For the period June 30, 1993 (the date of inception) through December 31,
1993, there were no income and expense transactions.
(2) The Company is a development stage company and had no system revenue.
(3) Comprises interest income and a non-refundable fee received from a
potential International Licensee.
(4) The Company accounts for its investments in ORBCOMM USA and ORBCOMM
International using the equity method of accounting.
(5) For purposes of determining the ratio of earnings to fixed charges,
"earnings" includes excess (deficiency) of income over expenses adjusted
for fixed charges.
(6) Ratio of earnings to fixed charges is not applicable as there were no fixed
charges during this period.
(7) Pro forma deficiency of earnings to fixed charges is calculated based upon
an interest rate on the Notes of 14% per annum plus the Revenue
Participation Interest and the amortization of deferred financing fees as
of the beginning of the period.
(8) Includes $13 million of the net proceeds of the Old Notes Offering
deposited by the Issuers into a segregated account and to be used solely
for purposes of funding the development and deployment of the ORBCOMM
System and related operating expenses. See "Description of Senior
Notes -- Certain Covenants -- Contingency Fund." Also includes the
aggregate principal amount of the Pledged Securities, at approximately
$44.8 million, and the amount in the segregated account related to the
MetLife Note, at approximately $4.2 million. See "Description of Senior
Notes -- Security."
(9) Represents the ORBCOMM System.
37
<PAGE> 44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
In 1990, Orbital formed OCC to develop and operate the first global two-way
data and messaging communications system. In March 1992 and May 1993, the FCC
awarded OCC experimental licenses to develop and test a limited Little LEO
service. These licenses permitted the launch of two satellites, the construction
of two Earth stations and the provision of service to up to 1,000 Subscriber
Communicators. Following receipt of these experimental licenses, OCC sought a
strategic equity partner who could offer both financial and communications
experience, and in 1993, formed ORBCOMM with Teleglobe Mobile, an affiliate of
Teleglobe. Teleglobe Mobile agreed to acquire 50% of ORBCOMM in a two-stage
transaction. Teleglobe subsequently sold 30% of its interest in Teleglobe Mobile
to TRI for $43.9 million. In September 1995, Teleglobe Mobile agreed to invest
an additional $75 million, bringing its total capital commitment to
approximately $85 million. At that time, OCC committed approximately an
additional $10 million to the project, bringing its total investment commitment
to approximately $75 million. Teleglobe Mobile and OCC have invested an
aggregate of approximately $160 million in the ORBCOMM project.
On October 20, 1994, OCC was granted authority by the FCC to construct,
launch and operate 36 satellites for the purpose of providing two-way data and
message communications and position determination services. In May and June
1995, OCC received FCC authority to operate four gateway Earth stations and to
provide services in the United States to up to 200,000 subscriber communicators.
In April 1995, the first two satellites comprising the ORBCOMM System were
deployed. After experiencing initial operating anomalies related to satellite
positioning and gateway-to-satellite communications, the satellites are
functional. By December 1995, ORBCOMM had completed construction and testing of
various network operating systems, substantially completed the U.S. Gateway and
transmitted test messages via prototype Subscriber Communicators. On February 1,
1996, the ORBCOMM System commenced commercial intermittent operations in the
United States using its first two satellites. The ORBCOMM System is currently
providing commercial intermittent data communications services to the
environmental and oil and gas industries in the United States.
On August 7, 1996, ORBCOMM completed the Old Notes Offering.
ORGANIZATIONAL STRUCTURE; FINANCIAL REPORTING
Simultaneous with the formation of ORBCOMM, OCC and Teleglobe Mobile formed
two marketing partnerships, ORBCOMM USA and ORBCOMM International (collectively,
the "Marketing Partnerships"), with the exclusive right to market the ORBCOMM
System in the United States and internationally, respectively. ORBCOMM is a 98%
general partner in each of the Marketing Partnerships, while OCC and Teleglobe
Mobile control the remaining 2% of ORBCOMM USA and ORBCOMM International,
respectively. OCC retains control over the applicable FCC licenses and the
ORBCOMM System, consistent with FCC regulations.
Pursuant to the terms of the Partnership Agreements: (i) OCC and Teleglobe
Mobile share equal responsibility for the operational and financial affairs of
ORBCOMM; (ii) OCC generally controls the operational and financial affairs of
ORBCOMM USA; and (iii) Teleglobe Mobile generally controls the operational and
financial affairs of ORBCOMM International. Since OCC and Teleglobe Mobile have
effective control over ORBCOMM USA and ORBCOMM International, respectively,
ORBCOMM accounts for the Marketing Partnerships using the equity method of
accounting. ORBCOMM does not consolidate, and therefore does not report on its
financial statements, ORBCOMM USA's and ORBCOMM International's actual assets,
liabilities and operating revenues and expenses. Instead, ORBCOMM's pro rata
share of the excess (deficiency) of income over expenses of the Marketing
Partnerships is recorded under the caption "Equity in Earnings (Losses) of
Affiliates" in ORBCOMM's financial statements. Correspondingly, ORBCOMM's
investment in the Marketing Partnerships is carried at cost, subsequently
adjusted for the pro rata share of net income and losses, additional capital
contributions and distributions under the caption
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"Investments in and Advances to Affiliates." Holders of Senior Notes are also
encouraged to refer to the financial statements of both ORBCOMM USA and ORBCOMM
International included elsewhere in this Prospectus.
ORBCOMM USA pays to OCC an Output Capacity Charge that is a quarterly fee
equal to 23% of its total service revenues for such calendar quarter in exchange
for the exclusive right to market, sell, lease and franchise all ORBCOMM System
output capacity in the United States and exclusive use of the System Assets
located in the United States. In consideration of the construction and financing
of the System Assets, OCC, in turn, pays to the Company a System Charge that is
a quarterly fee equal to the Output Capacity Charge minus 1.15% of Total
Aggregate Revenues, defined as the total of ORBCOMM USA and ORBCOMM
International total system service revenues.
ORBCOMM International pays to Teleglobe Mobile an International Output
Capacity Charge equal to 23% of its total service revenues for a calendar
quarter in exchange for the exclusive right to market, sell, lease and franchise
all ORBCOMM System output capacity outside the United States. In consideration
of the grant to Teleglobe Mobile of the exclusive right to market, sell, lease
and franchise all ORBCOMM System output capacity outside the United States,
Teleglobe Mobile, in turn, pays to the Company an International System Charge
that is a quarterly fee equal to the International Output Capacity Charge minus
1.15% of Total Aggregate Revenues as defined above.
SERVICE ROLL-OUT
The roll-out of ORBCOMM System services will occur in two stages. In the
United States, it is currently possible to serve several market segments that
can benefit from intermittent service, such as oil and gas pipeline monitoring,
certain environmental monitoring, and tracking and positioning applications. As
additional satellites are added to the constellation, it will become possible to
serve additional market segments such as certain messaging applications that
require real time services.
Commercial intermittent service commenced in the United States in February
1996. Service outside the United States will be provided as International
Licensees receive regulatory approval and build network ground systems.
REVENUE
Currently, during the period of commercial intermittent service, ORBCOMM
USA is building an initial base of subscribers in the United States through the
negotiation and execution of agreements with Resellers. The Resellers purchase
ORBCOMM System services directly from ORBCOMM USA and resell these services to
end-users in a specific industry and/or market.
In the United States, service pricing is based on many variables, including
the availability and cost of substitute services, the cost of providing service
and the nature of the user application. Pricing generally incorporates an
initial registration charge, a recurring monthly charge for access to the
ORBCOMM System and usage charges based on the customer's activity. In charging
for usage, the Company has developed a pricing structure in the United States
that suits the usage patterns for the initial vertical markets addressed by the
existing two-satellite system. Priority and other real time messaging pricing
will be developed as the full deployment of satellites in the ORBCOMM System
occurs. It is likely that multiple pricing alternatives will be offered in the
United States including peak/off-peak, volume discounts, and annual contract
commitment options.
The Company has a standard Service License Agreement for execution by
International Licensees outside the United States. The International Licensees
will be responsible for obtaining all necessary licenses and approvals for use
of the ORBCOMM System in their territory. Certain International Licensees will
pay to ORBCOMM International a fixed fee in exchange for the exclusive right to
use the ORBCOMM System in a specified service territory. In addition,
International Licensees will pay a monthly Satellite Usage Fee based on the
greater of a percentage of gross operating revenues and a data throughput fee.
On the execution of a Service License Agreement, International Licensees will be
required to purchase a Gateway from
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<PAGE> 46
ORBCOMM or share a closely located Gateway operated by ORBCOMM USA or another
International Licensee.
Retail pricing in their respective territories will be at the discretion of
the International Licensees, and is expected to vary from country to country to
reflect variations in economic conditions, the availability of substitute
services, local customs and government policy as required to be competitive with
other services.
OPERATING EXPENSES
As discussed above, the Company owns and operates the assets that comprise
the ORBCOMM System. Satellite-based communications systems are characterized by
high up-front capital expenditures and relatively low marginal costs for
providing service. ORBCOMM has been depreciating the assets, recording a
depreciation charge in its statement of income and expenses, beginning in
January 1996. Additionally, ORBCOMM incurs, and reports in its financial
statements, engineering and other operating expenses associated with the actual
operation of the ORBCOMM System.
RESULTS OF OPERATIONS -- ORBCOMM
ORBCOMM commenced commercial intermittent service in the United States on
February 1, 1996 and has generated nominal revenues and negative cash flow to
date. ORBCOMM's activities have focused primarily on the acquisition of
regulatory approvals for operation of the ORBCOMM System, design, construction
and deployment of its initial satellites and associated network systems,
negotiation of agreements with domestic Resellers, the execution of Service
License Agreements with International Licensees, identification of potential
International Licensees in countries outside the United States, identification
and authorization of Subscriber Communicator manufacturers and hiring of
management and other key personnel. ORBCOMM expects to continue to generate
negative cash flow until the system is fully operational, planned for 1998.
Income. In 1995, ORBCOMM received a nonrefundable fee from a potential
International Licensee. The Company recognized this nonrefundable fee ratably
over the term of the relevant agreement. No such fees were received in earlier
periods or in the nine months ended September 30, 1996.
In late 1994, the Company received the MetLife Loan to help finance a
portion of the ORBCOMM System. In addition, in August 1996, ORBCOMM closed the
Old Notes Offering. The proceeds from the sale of the Old Notes are primarily
invested in short term government securities, with certain restrictions attached
to all of the investment portfolio. The Company recognized interest income on
the invested portion of the MetLife Loan and the Old Notes Offering proceeds of
approximately $41,000 and $1,112,000 for the nine-month periods ended September
30, 1995 and 1996, respectively, and approximately $58,000 for the year ended
December 31, 1995 (none for the year ended December 31, 1994).
Expenses. As discussed above, ORBCOMM is in its development stage and does
not anticipate emerging from the development stage until early 1998. During the
construction phase of the ORBCOMM System, ORBCOMM has capitalized all
construction costs, consisting primarily of satellites, launch vehicles and the
U.S. ground segment acquired from Orbital. Research and development expenses and
selling, general and administrative costs have been expensed in the period
incurred. Interest expense related to the MetLife Loan and the Old Notes has
been capitalized as part of the historical cost of the ORBCOMM System.
Once the ORBCOMM System began commercial operations on February 1, 1996,
ORBCOMM incurred approximately $4,146,000 of administrative expenses in the nine
months ended September 30, 1996 (none during the nine months ended September 30,
1995). ORBCOMM incurred approximately $9,000 and $50,000 of administrative
expenses during the years ended December 31, 1994 and 1995, respectively (none
during 1993).
ORBCOMM incurred approximately $3,477,000 of ORBCOMM System engineering
expenses in the nine months ended September 30, 1996 as commercial service in
the United States began (none during the 1995 nine-month period). ORBCOMM also
incurred approximately $4,579,000 in ORBCOMM System
40
<PAGE> 47
depreciation expense during the 1996 nine-month period, as the ORBCOMM System
became available for service in early 1996 (none during the 1995 nine-month
period).
Equity in Earnings (Losses) of Affiliates. ORBCOMM recognized its share of
ORBCOMM USA's and ORBCOMM International's losses, consisting primarily of
marketing expenses, of approximately $2,860,000 in the first nine months of 1996
(none in the first nine months of 1995) and approximately $853,000 for the year
ended December 31, 1995 (none in earlier years). Each of ORBCOMM USA and ORBCOMM
International formally began their marketing efforts in 1995 in anticipation of
commercial service in 1996.
RESULTS OF OPERATIONS -- ORBCOMM USA
Income. In 1993, 1994 and 1995, ORBCOMM USA performed marketing activities
for the U.S. market pursuant to a contract with OCC (the "Marketing Agreement"),
whereby OCC reimbursed ORBCOMM USA for all marketing costs incurred.
Accordingly, ORBCOMM USA recognized contract revenues of approximately $749,000,
$2,093,000 and $1,360,000 from June 30, 1993 (date of inception) through
December 31, 1993 and the years ended 1994 and 1995, respectively and $1,360,000
during the nine months ended September 30, 1995 (none during the nine months
ended September 30, 1996). The U.S. marketing service portion of the Marketing
Agreement expired on September 12, 1995. During the first nine months of 1996,
ORBCOMM USA recognized its first revenues relating to the provision of services
through the ORBCOMM System, approximately $205,000.
Expenses. ORBCOMM USA incurred approximately $2,042,000 of marketing and
administrative expenses and $192,000 of cost of service and product sales in the
nine months ended September 30, 1996, once the ORBCOMM System began operations.
Pursuant to the Marketing Agreement, ORBCOMM USA incurred contract marketing
costs of approximately $749,000, $2,093,000 and $2,231,000 from June 30, 1993
(date of inception) through December 31, 1993 and the years ended December 31,
1994 and 1995, respectively and $1,360,000 during the nine months ended
September 30, 1995.
RESULTS OF OPERATIONS -- ORBCOMM INTERNATIONAL
Expenses. ORBCOMM International incurred approximately $890,000 of
marketing and administrative expenses in the nine months ended September 30,
1996 (none during the 1995 nine-month period or earlier years). International
marketing efforts are expected to increase during the remainder of 1996 and 1997
in anticipation of the completion of the ORBCOMM System.
Subsequent Events. During October 1996, ORBCOMM International signed three
Service License Agreements with International Licensees covering Europe, the
Malaysian Region and a portion of North Africa to market satellite-based,
two-way message and data communications services using the ORBCOMM System. The
Company generally recognizes fees from Service License Agreements ratably over
the term of the agreement, or when the Company's obligations thereunder are
substantially complete.
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SUPPLEMENTAL DATA
Set forth below is certain supplemental data for the ORBCOMM System
comprising data of ORBCOMM, ORBCOMM USA and ORBCOMM International for the nine
months ended September 30, 1996. Such supplemental data should be read in
conjunction with the financial statements of ORBCOMM, ORBCOMM USA and ORBCOMM
International contained elsewhere herein.
SUPPLEMENTAL DATA
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ORBCOMM ORBCOMM ELIMINATION
ORBCOMM USA INTERNATIONAL ENTRIES TOTAL
------------- ------------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Income(1).............. $ 1,317,462 $ 205,085 $ 4,160 $ (204,251) $ 1,322,456
Expenses............... 12,511,460(2) 2,233,425 894,352 204,251 15,434,986
Earnings (loss) before
Interest and Taxes... (11,193,998)(3) (2,028,340) (890,192) (14,112,530)
Net Income (loss)...... (11,193,998)(3) (2,028,340) (890,192) (14,112,530)
Capital Expenditures... 49,492,240(4) 49,492,240
<CAPTION>
SUPPLEMENTAL DATA
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash and Cash
Equivalents.......... $ 38,423,950 $ 32,873 $ 28,105 $ 38,484,928
Mobile Communications
Satellite System,
net.................. 151,903,626(4) 151,903,626
Total Debt............. 173,503,654 173,503,654
Subscriber
Communicators
(units).............. 218 41 259
</TABLE>
- ---------------
(1) As development-stage companies, none of ORBCOMM, ORBCOMM USA and ORBCOMM
International had any significant operating revenues for the nine months
ended September 30, 1996.
(2) Includes depreciation and amortization expenses of $4,684,941.
(3) Excludes equity in losses of affiliates of $(2,860,162).
(4) Represents capital expenditures, principally for the construction of the
space and ground network system elements.
LIQUIDITY AND CAPITAL RESOURCES
The development of the Company's business, launch of the initial two
satellites and construction of the network operations center and U.S. Gateway
have resulted in substantial capital expenditures during the past several years.
Capital expenditures by the Company were approximately $23 million and $49
million during the nine months ended September 1995 and 1996, respectively, and
$44 million, $25 million and $38 million from June 30, 1993 (date of inception)
through December 31, 1993 and the years ended December 31, 1994 and 1995,
respectively. The Company expects that it will continue to have substantial
capital expenditure requirements in the future, including approximately $16
million during the remainder of 1996 expected to be payable under the
Procurement Agreement.
A combination of operating losses and substantial capital expenditures
related to the development of the ORBCOMM System has resulted in negative cash
flow since 1994. Funding of this cash flow deficiency has been accomplished
through capital contributions from OCC and Teleglobe Mobile, the proceeds from
the Old Notes Offering and the MetLife Note. ORBCOMM expects to have to continue
to fund operating losses as the Company develops and expands its business.
Following August 15, 1998, interest expense on the Senior Notes will represent a
significant cash requirement for the Company. OCC and Teleglobe Mobile have
invested approximately $75 million and $85 million, respectively, in exchange
for their Participation Percentage in ORBCOMM, ORBCOMM USA and ORBCOMM
International.
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<PAGE> 49
The total cost of the construction and deployment of the ORBCOMM System is
estimated to be approximately $258 million. Of this amount, approximately $202
million will be used for the satellite constellation, ground spares and launch
services, approximately $30 million will be used for the U.S. ground segment,
approximately $8 million will be used for insurance and approximately $18
million will be used for other costs. As of September 30, 1996, approximately
$156 million of this amount had been expended. The Company believes that the net
proceeds of the Old Notes Offering and the capital contributions of its
partners, together with expected cash from operations, will be sufficient to
fund the Company's operations through at least the first quarter of 1998, when
full deployment of the ORBCOMM System is planned to have occurred. The Company
believes that a significant portion of cash from operations through the first
quarter of 1998 will be generated through international license fees obtained by
converting a number of its existing and anticipated Memoranda of Understanding
into Service License Agreements. Additional funds may be necessary in the event
of a delay with respect to the deployment of the full constellation or market
acceptance of ORBCOMM System services, including as a result of delays in the
receipt of international license fees or a sales cycle longer than anticipated,
cost overruns or any shortfall in estimated levels of estimated cash flow, or to
meet unanticipated expenses. There can be no assurance that additional capital
will be available for any of the foregoing purposes on favorable terms or on a
timely basis, if at all.
The Senior Notes contain a revenue participation feature providing for
payment by the Company, on each interest payment date, of interest in an
aggregate amount equal to 5.0% of System Revenue for the six-month period ending
on December 31 or June 30 most recently completed prior to such interest payment
date. See "The Exchange Offer -- Summary of Terms of the Exchange Notes." The
Company is not required to pay any Revenue Participation Interest, however,
until the Credit Parties' Fixed Charge Coverage Ratio for the four consecutive
fiscal quarters last completed prior to such interest payment date equals or
exceeds 2.0:1. See "Description of Notes -- Principal, Maturity and Interest."
Once this ratio is exceeded, the Company will have to pay additional interest on
the Senior Notes beyond the base rate of 14%, which will negatively impact the
Company's liquidity.
There are no distributions required to be made to the Partners of the
Company other than a minimum annual distribution required by the ORBCOMM
Partnership Agreement in the amount of (i) 40%, multiplied by the lesser of (a)
such Partner's distributive share of the Partnership's taxable income for the
preceding year, and (b) the excess, if any, of cumulative Net Income (as
defined) over cumulative Net Loss (as defined) allocated to such Partner since
the inception of the Partnership. All other distributions are to be made at the
discretion of the Partners. See "The Partnership Agreement -- Allocations and
Distributions." Pursuant to the covenants contained in the Indenture, no
additional cash distributions are permitted to be made to the Partners of the
Company other than those distributions that satisfy the requirements of the
various limitations on Restricted Payments contained in the Indenture. To the
extent that such requirements are met and the Partners receive additional cash
distributions from the Company beyond that required by the ORBCOMM Partnership
Agreement, this could negatively impact the Company's liquidity.
LOAN AGREEMENT WITH METLIFE CAPITAL CORPORATION
Under the terms of the MetLife Note, MetLife loaned $5 million to the
Company, and in connection therewith the Company granted to MetLife a security
interest in certain equipment of the Company. The MetLife Note is guaranteed by
Orbital. As of September 30, 1996, approximately $3.5 million was outstanding
under the MetLife Note. The Senior Notes rank pari passu in right and priority
of payment with the MetLife Note, except to the extent of the collateral
securing such MetLife Note. See "Description of Notes -- General."
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<PAGE> 50
BUSINESS
The Company is establishing the first commercial LEO satellite-based mobile
data and messaging communications system that will be available on a global
basis. The ORBCOMM System, planned to be fully deployed in early 1998, is
designed to provide reliable, low-cost, two-way global data and messaging
communications through a constellation of 28 LEO satellites and a complement of
associated ground infrastructure situated around the world. The Company believes
that there is significant global demand for its low-cost data and messaging
communications services. Major target markets include worldwide mobile asset
tracking; remote industrial monitoring and control applications; environmental
data collection; and real time person-to-person and machine-to-machine
communications, including two-way Internet email communications and recreational
and business messaging. The Company anticipates that the ORBCOMM System will be
used: (i) as a complement to existing or proposed tower-based services such as
paging and other narrowband PCS services, providing geographic coverage in areas
these systems are unable to reach; and (ii) to enhance data applications
currently being provided through the PSTN and the PSDN. In addition, the Company
expects that the introduction of its low-cost, reliable data and messaging
communications will lead to the development of new applications and services.
The Company currently offers commercial intermittent data communications
services in the United States through its existing network, which consists of
two LEO satellites launched in April 1995 and related U.S. ground
infrastructure. When fully deployed, the ORBCOMM System is designed to provide
data and short, alphanumeric paging-like messaging communications coverage
virtually anywhere on the Earth's surface in a reliable and cost-effective
manner. In contrast to Big LEO systems, which are designed primarily for voice
applications and require satellite communications systems that are estimated to
cost in excess of $2 billion to construct and deploy, the ORBCOMM System, which
is a Little LEO system, is focused on data communications and messaging
applications and will be constructed and deployed for approximately $258 million
(with additional amounts needed to fund initial operation of the ORBCOMM System
and certain debt service obligations). The ORBCOMM System is designed to address
the substantial existing and growing demand for communications services
worldwide, without the high cost and geographic and technical limitations
imposed by other communications systems.
In October 1994, a subsidiary of Orbital became the first company to be
awarded FCC authority to construct, launch and operate a LEO satellite-based
data and messaging communications system in the United States. Today, the
ORBCOMM System is the only commercial Little LEO system that is fully licensed
for all segments of its system in the United States. Certain portions of the
radio spectrum were allocated by the ITU for use by Little LEO satellite
systems, such as the ORBCOMM System, on an international basis in 1992. The
Company intends to enter into agreements with International Licensees, who will
pursue the requisite local regulatory approvals for each foreign country in
which the ORBCOMM System will operate and who will pay fees for access to the
ORBCOMM System in their territory.
In 1995, in addition to the successful launch of the first two ORBCOMM
System satellites, the Company: (i) completed initial development and
construction of the ground infrastructure located in the United States and
associated network control systems; and (ii) tested prototype Subscriber
Communicators. The two ORBCOMM System satellites and four U.S. Earth stations
currently are providing data communications services, focused on environmental
and industrial monitoring applications for the U.S. environmental and oil and
gas industries and asset and cargo tracking applications for the U.S. government
and commercial entities, with additional tracking and positioning applications
targeted for the near future. As of September 30, 1996, the ORBCOMM System had
transmitted during testing and commercial operations in excess of one million
messages and successfully completed extensive internal and third-party testing,
including a rigorous demonstration program conducted by the DoD as part of its
Joint Warrior Interoperability Demonstration '95 ("JWID"). This demonstration,
sponsored annually by the Department of Defense, is designed to demonstrate new
technologies in a simulated operational environment. During JWID '95, Army Space
Command successfully used the ORBCOMM System to demonstrate remote tracking of
vehicles and email messaging capabilities, with over one thousand messages,
emails and faxes sent over a four-week period.
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<PAGE> 51
To use the ORBCOMM System, a user creates a text message utilizing a
computer or Subscriber Communicator device, which message is sent to the nearest
ORBCOMM System satellite and delivered to an ORBCOMM Earth station, which
supports communication with the satellites, and then to the Gateway Switching
System, which processes the messages. Within the Gateway, the message is
processed using a combination of ORBCOMM-developed and commercial email
software, and sent on to its ultimate destination. If desired, an
acknowledgement message is returned to the sender. The final delivery may be to
another Subscriber Communicator or may make use of public/private X.25 data
networks, the Internet, or text-to-fax conversion.
The Company intends to distribute its services globally in a cost-effective
manner through the use of Resellers in the United States and International
Licensees around the world. The Company is in the process of negotiating and
signing agreements with Resellers, each of whom will be responsible for
marketing to end customers in a specific industry and/or market and generally is
expected to develop software applications to facilitate use of ORBCOMM System
services by such industry or market segment. To date, 27 reseller agreements
have been signed with companies including Arinc, Inc., Boatracs, Inc., Corexco
Consulting Services, Inc., Globitrac, Inc., IWL Communications, Inc., QUALCOMM,
Incorporated and the Stevens Water Monitoring Division of Leupold & Stevens,
Inc. The Company has signed six Memoranda of Understanding with potential
International Licensees and is in active negotiations with twelve other
potential International Licensees; taken together, these 18 potential
International Licensees represent approximately 38 countries around the world.
The Company intends to convert substantially all its existing Memoranda of
Understanding into Service License Agreements during the next three to 18
months. In addition, the Company has signed four Service License Agreements with
International Licensees. On October 15, 1996, ORBCOMM signed a Service License
Agreement with ORBCOMM Europe, a consortium of European companies, which has
been given the exclusive right to market services using the ORBCOMM System to
approximately 40 European countries. ORBCOMM has also executed a Service License
Agreement with ORBCOMM Canada, which is controlled by Teleglobe, a Service
License Agreement with Celcom, a wholly owned subsidiary of TRI, and a Service
License Agreement with ORBCOMM Maghreb. ORBCOMM Canada, Celcom and ORBCOMM
Maghreb were granted the exclusive right to market ORBCOMM System services in
Canada; Malaysia, Singapore and Brunei; and Morocco, Tunisia, Algeria and
Mauritania, respectively.
ORBCOMM is a limited partnership formed in 1993 to develop, construct,
operate and market the ORBCOMM System. The general and limited partnership
interests in ORBCOMM are held by each of OCC, a subsidiary of Orbital, and
Teleglobe Mobile, a Delaware general partnership whose interests are wholly
owned on an indirect basis by Teleglobe and TRI. OCC and Teleglobe Mobile have
invested approximately $160 million in the ORBCOMM project. The Company believes
that such equity investment, together with the proceeds of the Old Notes
Offering and cash expected to be generated from operations, will be sufficient
to fund the ORBCOMM System, including: (i) all capital expenditures necessary to
deploy the ORBCOMM System; and (ii) all required working capital until at least
the first quarter 1998, when full deployment of the ORBCOMM System is planned to
have occurred. There can be no assurance, however, that additional capital will
not be necessary.
BUSINESS STRATEGY
The principal elements of the Company's business strategy include:
Real Time, Reliable Worldwide Coverage. The fully deployed ORBCOMM System
is designed to provide real time global data and messaging communications
services in a reliable and cost-effective manner. The ORBCOMM System's worldwide
coverage will enable it to provide tracking, monitoring and messaging services,
including Internet email capability, to customers that are currently beyond the
geographic reach of existing terrestrial wireline or wireless systems. The
ORBCOMM System is designed to deliver reliable communications services through
the use of acknowledgment and store-and-forward capabilities. ORBCOMM expects
that, with a planned constellation of 28 satellites, the ORBCOMM System will
provide communications availability generally exceeding 95% of each 24-hour
period in the United States and other temperate zones in the Northern and
Southern Hemispheres and exceeding 75% of each 24-hour period in the
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<PAGE> 52
equatorial region. On full deployment, the ORBCOMM System is designed to
transmit a U.S.-initiated message ranging in length from six bytes to 100 bytes,
depending on system loading, in from approximately three to 25 seconds.
First-to-Market. The ORBCOMM System began providing commercial
intermittent service in February 1996. Prior to commencing commercial
operations, the space segment, network and management control systems, U.S.
Gateway and prototype Subscriber Communicators were tested extensively to ensure
technical viability. The Company believes that the existence of an in-service,
commercially operational system provides substantial "first-to-market" benefits,
including: (i) reducing technical risk; (ii) increasing the attractiveness of
the ORBCOMM System to potential Resellers, International Licensees and
Subscriber Communicator manufacturers; (iii) facilitating and encouraging the
development of software by Resellers and other application developers for a
variety of market applications because of the ability to test the hardware and
software in an actual operating environment; and (iv) developing a customer base
before other competing Little LEO systems are fully deployed, which the Company
believes will not occur before 2000. There can be no assurance, however, that
there will be no delays in the existing schedule associated with the
construction or deployment of the ORBCOMM System.
Global Distribution of Services. The Company believes the ORBCOMM System
can rapidly achieve a global presence in a cost-effective manner by capitalizing
on the significant resources of Resellers and International Licensees worldwide.
The Company plans to provide services in the United States through Resellers,
many of whom have an existing, well-established market presence through their
existing customer bases, market-specific brand name recognition and distribution
networks. Outside the United States, the Company will enter into Service License
Agreements with International Licensees who will be responsible in their
territory for, among other things, procuring and installing the necessary
Gateways, obtaining all regulatory approvals to provide services using the
ORBCOMM System and operating and marketing services using the ORBCOMM System.
The Company intends to select its International Licensees primarily by
evaluating the ability of the International Licensee to distribute and market
successfully the Company's services. Key components of such an evaluation
include the prospective International Licensee's: (i) reputation in the
marketplace; (ii) existing distribution capabilities and infrastructure; (iii)
financial condition and other resources; and (iv) ability to obtain the
requisite local regulatory approvals.
Low-Cost Subscriber Communicators. The Company is committed to promoting
the production of lightweight Subscriber Communicators that have a long battery
life and are widely available at prices attractive to a broad customer base. The
Company has provided extensive design specifications and technical and
engineering support to its various Subscriber Communicator manufacturers. The
Company currently has a development agreement with Panasonic and is in the
process of finalizing manufacturing and sales support agreements with Panasonic.
The Company has also executed Subscriber Communicator Manufacturing Agreements,
which include terms regarding the development, manufacture and sales support for
Subscriber Communicators, with Scientific-Atlanta, Magellan, Torrey Science and
Stellar. Panasonic has received authorization from the Company to manufacture
two basic Subscriber Communicators, one with and one without the ability to
receive positioning signals from the GPS system, both of which are now
commercially available. Torrey Science received authorization from the Company
in August 1996 and Stellar received authorization from the Company in September
1996 to manufacture a basic Subscriber Communicator. The Company expects that
both Torrey Science and Stellar will have units commercially available in the
first half of 1997. The Company believes that once its other Subscriber
Communicator manufacturers have units that are commercially available and once
the overall production volume for Subscriber Communicators increases, the price
for Subscriber Communicators will decline substantially. Panasonic and Stellar
have informed the Company that, in lots of at least several thousand, the price
for their respective Subscriber Communicators will be approximately $550 per
unit.
Expertise of Strategic Partners. Orbital and Teleglobe, the Company's
partners, have invested approximately $160 million in the ORBCOMM project. The
Company has used and will continue to use its partners' expertise and
capabilities to enhance the ORBCOMM System, including expertise in the design,
construction and deployment of satellites and the operation of international
wireline and wireless telecommunication services.
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Orbital, a Delaware corporation headquartered in Dulles, Virginia and with
offices in five countries is the founder of the ORBCOMM project, and through its
subsidiary, OCC, has a 50% Participation Percentage interest in ORBCOMM. Orbital
is a space technology and satellite services company, with annual revenues in
1995 of approximately $364 million, that designs, manufactures, operates and
markets a broad range of space products and services, including launch systems,
satellites, space sensors and electronics, ground systems and software products,
satellite access products and communications and information services. Under the
terms of the Procurement Agreement between Orbital and ORBCOMM, Orbital will,
among other things, construct 34 satellites (including eight ground spares),
launch 26 satellites and, on an optional basis, launch the eight ground spares.
The satellites and launch services are provided on a fixed-priced basis,
although the Procurement Agreement contains certain performance incentives with
respect to the satellites.
Teleglobe, a Canadian corporation with 1995 revenues of approximately C$1.6
billion, provides international telecommunications services to over 240
countries worldwide through a network of submarine cables and satellite Earth
stations. Teleglobe currently has offices in ten countries. Teleglobe is owned
approximately 22% by BCE Inc., which is the largest public corporate entity in
Canada, and indirectly approximately 20% by Telesystem Ltd., a Canadian company,
which also has an interest in TIW. TIW has paging and cellular interests in
several countries around the world, including China, Mexico and India. Teleglobe
has substantial experience as an intercontinental provider of telecommunication
services and has played and continues to play an important advisory role in the
ORBCOMM project generally and in the Company's marketing and distribution
strategy in particular.
Teleglobe has formed a partnership, Teleglobe Mobile, with TRI to hold its
interest in the ORBCOMM project. TRI operates the largest and one of the
fastest-growing cellular networks in Malaysia, with over 800,000 subscribers.
TRI also has cellular and paging joint ventures in five countries.
The Company does not believe that its services will compete with the
existing cellular and paging operations of either TIW or TRI. The Company
expects that its services will complement the services currently provided by TIW
and TRI in the same manner that its services are intended to complement those
provided by other domestic cellular and paging service providers, primarily by
acting as a "gap-filler" that will expand the geographic reach of such services
and provide low-cost, seamless coverage. See "Business -- The ORBCOMM
System -- Future Applications."
CONSTELLATION DESIGN AND IMPLEMENTATION STRATEGIES
The ORBCOMM System has been designed to provide for the delivery and
receipt of data communications and short, alphanumeric paging-like messages
anywhere in the world on a highly efficient and cost-effective basis. The
Company believes that multiple aspects of the ORBCOMM System design will result
in a low-cost product offering worldwide. The implementation plan for the
ORBCOMM System is intended to reduce the risk of cost overruns, system
performance shortfalls and system deployment delays. Important components of the
ORBCOMM System design and implementation strategies include:
Low-Cost Satellite System. The ORBCOMM System will consist of 28 LEO
satellites. Each satellite is designed specifically for the transmission of
short messages. This design focus eliminates a number of complex and expensive
components such as customized spot beams, on-board switching and high-powered
amplifiers that are required on larger, more complex satellites designed to
carry voice, video and data traffic. The less complex and more compact design of
the ORBCOMM System satellites (approximately 95 pounds) reduces the cost and
time of production and enables the Company to launch multiple satellites using a
single, relatively low-cost launch vehicle. The Company has sought to reduce the
risk of cost overruns by entering into the Procurement Agreement, a firm
fixed-price contract that covers the purchase of satellites, the provision of
launch services and the completion of the satellite control center. The
Procurement Agreement provides for the construction of 34 LEO satellites and the
launch of 26 LEO satellites for a total cost of approximately $163 million
(which amount excludes the cost of construction and launch of the Company's
first two satellites, which are already in operation). Because of the
architecture of the ORBCOMM System, the fixed costs to construct and deploy the
system are relatively low compared to the cost to construct and deploy a Big LEO
system. In addition, the marginal cost per message is very low as a result of
the design of the ORBCOMM
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System. As a result, the Company believes that it will be able to offer low-cost
services to subscribers. See "Relationships Among the ORBCOMM
Parties -- Procurement Agreement."
Communications Protocol Specifically Designed for Data and Messaging
Communications. The ORBCOMM System uses a packet-switched communications
protocol. This design is well suited to ORBCOMM's goal of economic and efficient
delivery of short messages because it maximizes the amount of network capacity
available, while minimizing the overhead associated with sending each packet or
message, thereby lowering the per-message cost. The Company believes this design
will provide ORBCOMM with a substantial cost advantage versus the communications
protocols to be used by the proposed Big LEO systems such as Iridium and
Globalstar. Unlike the ORBCOMM System, Big LEO systems, which are designed
primarily for two-way voice traffic, are required to establish a
circuit-oriented connection over their network to transmit even short messages,
which significantly increases the per-message transmission cost for short
messages.
Contractual and Other Means to Mitigate Delays and System Failures. The
Company believes that the ORBCOMM System's design will reduce the Company's
exposure to cost overruns and delays associated with the production and
deployment of the ORBCOMM System due to launch or in-orbit satellite failure.
The principal elements that will contribute to this reduced exposure include:
(i) integration of existing technologies into the ORBCOMM System; (ii) use of
launch vehicles that will provide the Company with flexible launch schedules;
(iii) conduct of early development and prototyping; (iv) relatively simple,
lightweight design of the satellites, which will enable new satellites to be
ordered, constructed and launched in a shorter time frame than conventional LEO
and GEO satellites; and (v) procurement of nearly all components of the ORBCOMM
System (other than certain communications software) from a single contractor
(Orbital) that is responsible for end-to-end satellite performance and
integration. The redundant coverage provided by the ORBCOMM System also reduces
the ORBCOMM System's exposure to adverse events, which will enable ORBCOMM to
operate the ORBCOMM System with less than the full complement of satellites, if
necessary. See "Risk Factors -- Technological Risks; -- Limited
Insurance; -- Schedule Delays."
In addition, the Company has adopted risk management policies designed to
reduce its exposure to cost overruns and to delays associated with deployment of
the ORBCOMM System, including: (i) establishment of fee holdbacks under the
Procurement Agreement to the extent that certain milestones identified in the
Procurement Agreement are not met by Orbital; and (ii) procurement of satellite
ground spares, which is expected to enable the Company to launch more quickly up
to eight satellites following an in-orbit or launch failure as soon as a launch
vehicle is available.
Although the Company believes it has taken appropriate measures to mitigate
the risks associated with delays or cost overruns in connection with deployment
of the ORBCOMM System, there can be no assurance that such delays or cost
overruns will not occur. See "Risk Factors -- Limited Insurance; -- Schedule
Delays."
Insurance Strategy. The Company's insurance strategy implements a risk
management plan for the protection of the ORBCOMM System. First, to protect
against launch costs that may be incurred as a result of launch vehicle
failures, ORBCOMM intends to obtain launch insurance for each launch. This
insurance will provide ORBCOMM with the funds necessary to procure a replacement
launch vehicle in the event of a launch vehicle failure. Second, ORBCOMM will be
obligated to procure in-orbit satellite insurance against a satellite failure
after placement of such satellites into commercial service. Third, the
Procurement Agreement provides for the construction of eight spare satellites,
which represent self-insurance against the loss of up to eight satellites.
Therefore, until such time as the Company is required to use its ground spare
satellites, ORBCOMM does not intend to obtain insurance to cover the cost of
obtaining replacement satellites in the event of a launch vehicle failure or an
in-orbit failure prior to placement of such satellites into commercial service.
In the event that the Company is required to use its ground spare satellites,
ORBCOMM is obligated under the terms of the Indenture to procure insurance for
subsequent missions covering a loss of satellites as a result of a launch
vehicle failure or an in-orbit failure prior to placement of such satellites
into commercial service. In addition, in the event that: (i) the Company is
required to use its ground spare satellites as a result of an in-orbit failure
of satellites prior to placement of such satellites into commercial operation;
and (ii) there
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are not sufficient insurance proceeds to cover the cost of a launch vehicle for
such ground spare satellites, the partners of the Company have agreed, under
certain circumstances, to contribute up to $15 million of equity or subordinated
debt financing to the Company, if needed, to fund the cost of such launch
vehicle. The Company does not have in-orbit insurance for the two satellites
currently operational and does not intend to procure launch or in-orbit
insurance for the two satellites to be launched as a secondary payload on a
Taurus launch vehicle.
Early Demonstration of End-to-End Functionality. ORBCOMM has made
significant progress in the development of the ORBCOMM System and currently
offers commercial intermittent service in the United States. After the launch of
the first two satellites, ORBCOMM successfully conducted "beta tests" of the
entire ORBCOMM System and United States ground network with selected major
customers in the second half of 1995, using prototype Subscriber Communicators
to demonstrate the ORBCOMM System's two-way global messaging and positioning
capabilities. ORBCOMM's operation of the two-satellite system during 1995
provided an opportunity to validate the performance of the end-to-end network.
Similarly, ORBCOMM demonstrated its ability to control the satellites and the
ground infrastructure, and to process messages using its computer network. As of
September 30, 1996, the ORBCOMM System had transmitted during testing and
commercial operations in excess of one million messages and had successfully
completed extensive internal and third-party testing, including a rigorous
demonstration program conducted by the DoD as part of JWID '95.
The Company continues to experience, from time to time, certain technical
difficulties with its initial two satellites, including unplanned outages of
certain electronic systems and subsystems resulting in the temporary inability
to process subscriber communications. While the Company believes these technical
difficulties have been addressed as experienced, and that none of these
difficulties has resulted in a significant degradation of satellite performance,
there can be no assurance that performance degradation in these two satellites
will not occur in the future.
The two ORBCOMM System satellites currently operational have provided the
Company with significant information regarding actual satellite performance in a
space environment. As a result of analyzing this information, as well as
information obtained prior to launch, ORBCOMM, in conjunction with Orbital, has
undertaken a redesign of certain system elements of the satellites.
Use of Advantageous Radio Frequencies. The ORBCOMM System has been granted
FCC approval to use radio frequencies in the 148.0-149.9 MHz band, and the
137.0-138.0 MHz and 400.075-400.125 MHz band for its uplink and downlink feeds,
respectively. The VHF frequencies are located just above those used for FM radio
broadcasts and just below those used for VHF marine push-to-talk radios. By
contrast, all of the Big LEOs are currently planned to be licensed in
frequencies above 1 GHz. The Company believes that the use of its allocated
frequencies will provide significant advantages for packet messaging and data
services compared to the use of frequencies above 1 GHz, including: (i) lower
power requirements to achieve acceptable link margins, which enhances battery
life and reduces ground and space segment costs due to the use of less complex
components; and (ii) better signal penetration, which decreases signal
degradation due to atmospheric interference such as rain and blockage by
foliage. The Company also believes that the substantial technical and
manufacturing base that already exists for a wide variety of communication
devices that operate near the frequency ranges used by the ORBCOMM System will
facilitate the development of low-cost Subscriber Communicators for the ORBCOMM
System.
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PROJECT MILESTONES
The ORBCOMM System is expected to be fully deployed with a 28 satellite
constellation in early 1998, although this estimate does not take account of
potential delays. The timeline below sets forth ORBCOMM's actual and planned
development milestones. See "Risk Factors -- Development Stage Company;
- -- Technological Risks; -- Schedule Delays; -- Reliance on Single Supplier; and
- -- Potential Conflicts of Interest."
ORBCOMM MILESTONES
<TABLE>
<CAPTION>
ACTIVITIES 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REGULATORY LICENSING
Initial FCC License -----------------------------------------------------
Modification ------------------------------
ITU Spectrum Allocation --------------------------------------------------------------------------
In-Country Int'l Regulatory Approvals(1) ------------------------------
SATELLITE CONSTELLATION
Satellite Design -- Initial ----------------------------------
Satellite Design -- Advanced ----------------------------
Satellite Production(2) -----------------
Satellite Launch:
Initial Two /\
Full Constellation(3) --------------
GROUND SEGMENT
U.S. Gateway Installation(4) ---------------------
Int'l Gateway Installation ---------------------
CONTROL SEGMENT
Network Management System(5) /\
Space Vehicle Management System(5) /\
DISTRIBUTION AGREEMENTS
Resellers -----------------------------------------------------
International Licensees ----------------------------------------
SUBSCRIBER COMMUNICATORS
Prototypes(6) ---------------------------------------------------
Production -----------------------------------
ORBCOMM COMMERCIAL SERVICE
Intermittent Service ------------------------
Real Time Coverage -----------
</TABLE>
(1) Obtaining the requisite foreign regulatory approvals will primarily be the
responsibility of the International Licensee in each country.
(2) Represents production of the 26 additional satellites and eight ground
spares pursuant to the Procurement Agreement.
(3) Full constellation consists of 28 satellites. An additional eight ground
spare satellites may be deployed as a fourth plane, provided that, subject
to FCC approval, the Company may determine not to so deploy such satellites.
(4) Represents installation of at least one operational radome at each U.S.
Earth station.
(5) Enhanced systems are expected to be completed during the first half of 1997.
(6) Assumes ongoing development efforts to access new market applications.
THE ORBCOMM SYSTEM
SERVICES
ORBCOMM System service offerings for mobile data and messaging
communications will fall into two broad categories with variations based on
market requirements: tracking and monitoring; and message and high-priority
communications.
Tracking and Monitoring. The Company believes that tracking and monitoring
users will include a broad group of industries that require a means of regularly
collecting data from, or in some cases controlling
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equipment in, multiple remote locations. Major target markets include: (i)
worldwide mobile asset tracking; (ii) industrial monitoring and control
applications; and (iii) environmental data collection. Many of these users
manage numerous, widely dispersed sites in remote areas out of reach of the PSTN
or terrestrial-based wireless systems, and often accomplish data collection and
equipment control functions manually with on-site personnel. These methods can
be expensive, inaccurate or difficult to perform. The Company believes that
significant demand exists for a low-cost means of remotely performing these
tasks.
Message and Priority Communications. The Company believes that message
communications users will include a broad range of commercial and consumer users
who require a means of communicating with locations such as their office,
dispatch center or home or who require the ability to send priority messages or
positioning information. Examples include professionals who work away from their
office, fleet operators who require reliable messaging between a central office
and mobile assets, and individuals who desire a means of communicating short
messages or positioning information from an automobile, boat or other remote
locations. These users currently rely on pagers, cellular phones, fleet dispatch
systems and public pay phones, all of which can be unavailable, inconvenient or
expensive in certain geographic locations. In remote geographic regions outside
the United States, these PSTN and terrestrial-based wireless systems are not
always available or cost-effective. As a satellite-based system with coverage
available virtually anywhere on the Earth's surface, the Company can offer
messaging services through the ORBCOMM System.
CURRENT ADDRESSABLE MARKETS
The Company has identified a number of industries and industry segments in
the United States where there currently exists a demand for mobile data and
messaging communications services for tracking and monitoring, which the Company
views as the initial primary target applications for its services. These
existing tracking and monitoring applications include: (i) tracking and
monitoring of transportation assets and cargo; (ii) monitoring of assets in the
energy industry; (iii) environmental monitoring; and (iv) certain governmental
applications. The Company believes that certain portions of these industries or
industry segments possess characteristics or requirements that are particularly
well-suited to the services offered by Little LEO systems. The Company refers to
these portions as "addressable markets." The Company's description of potential
markets for its data and messaging communications service offerings and
estimates of the Company's addressable markets represent only the Company's
estimates as of the date hereof with respect to such markets. See "Risk
Factors -- Market Estimates."
Transportation Assets and Cargo. Transportation companies require a
cost-effective means of regularly and reliably monitoring the location and the
status of cargo globally to reduce cargo losses, improve service, and better use
transportation assets. Small ORBCOMM Subscriber Communicators could be installed
on trailers and programmed to monitor and transmit, on command or at regular
intervals, information regarding trailer status and location, and could be
specially designated for priority reporting and response. The transportation
assets and cargo market can be separated into four transportation categories:
trailers; long-haul trucking; containers; and rail cars.
Based on industry data such as published in The Structure of the U.S.
Trucking Industry, The Outlook for Truck Trailers and 1994 Private Fleet
Directory, the Company believes the overall trailer segment, which includes full
truckload, less-than-full truckload and private trucking, aggregates
approximately 2.3 million trailers. The Company believes that the addressable
market for full truckloads comprises non-refrigerated trailers belonging to
large trucking fleets that need to improve trailer utilization. The addressable
market for less-than-full truckload comprises non-refrigerated trailers that
carry high-value goods and travel longer, less-than-full truckload routes
(greater than 400 miles) between regional centers. The addressable market for
private fleet trucks are those used in "just-in-time" manufacturing and
distribution systems and which, therefore, typically require high levels of
efficiency due to competition from for-hire companies. The Company expects the
addressable market for refrigerated trailers to comprise those trailers for
which cargo monitoring and trailer utilization are required. Trailers (both
refrigerated and non-refrigerated) are currently being tracked by geostationary
satellite-based systems (such as those offered by QUALCOMM and AMSC) that offer
seamless coverage, but depend on larger power sources that require the trailer
to be attached to the main engine of the tractor. As a result, when the trailer
is detached from the tractor, it can no longer be tracked. A low-power cellular
system (such as the system offered by Highwaymaster) can be used to track
untethered
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trailers; however, the geographic coverage is limited and the Company believes
that the cost of cellular roaming may make this service cost-prohibitive.
Private trucking fleets typically use systems internal to their companies where
each trailer's number is manually recorded as trailers enter and leave a point
of distribution.
Based on industry data published in 1994 Private Fleet Directory, Fleet
Owner Magazine and Report: Structure of the U.S. Trucking Industry, the Company
believes that the U.S. long-haul trucking industry comprises approximately
435,000 trucks. The Company's addressable market is characterized by smaller
fleets (typically less than 50 trucks) that need mobile communications to
compete with larger fleets but have been unable to afford the current service
offerings where equipment costs are approximately $4,000 per unit. A low-cost
alternative for these smaller fleets has been paging; however, paging currently
offers only a one-way short data link to the vehicle. The Company believes that
the addressable market for the owner-operated transportation vehicle sub-segment
comprises those vehicles contracted to larger, long-haul carriers. While these
larger carriers resist installing $4,000 mobile communications units on vehicles
they do not own, many are still requiring owner-operators to equip their
vehicles with mobile communications.
Based on data contained in Intermodal Marine Container Report, the Company
estimates the industry segment representing containers (intermodal) that are
either refrigerated or designed to hold high-value, non-perishable cargo
comprises approximately 1.9 million containers. The Company expects that its
addressable market in this industry segment will comprise those containers
carrying the most valuable items subject to theft (e.g. electronics and
cigarettes). Currently, intermodal container transportation systems use manual
systems to record containers as they enter and leave yards. Unlike the ORBCOMM
System, these passive systems record where a trailer has been, but not where it
is, its status or the condition of its contents.
Based on published data from Outlook for Freight Cars, the Company
estimates there are approximately 150,000 rail cars in the United States. The
Company believes that the addressable market for rail transportation comprises
those rail cars used to transport high-value cargo (e.g., automobiles,
refrigerated goods and paper rolls) or hazardous cargo comprising bulk
materials. The American Association of Railroads has mandated the use of
automatic equipment identifiers ("AEI") on rail cars. AEI systems consist of a
radio tag mounted on the rail car and a reader that records the identity of the
car as it passes by. AEIs therefore share the same limitations as bar code
systems because they only record where the trailer has been, not its current
location, status or the condition of its contents.
Energy. The Company believes that the ORBCOMM System can provide an
effective means of monitoring various assets used in the energy industry.
According to recent statistical abstracts of the United States, there are over
170,000 miles of oil pipelines and 250,000 miles of natural gas pipelines in the
United States, much of which is located in remote areas inaccessible to existing
communication networks. Pipeline operators take active measures to monitor lines
and limit pipeline corrosion to comply with laws by installing cathodic
protection systems that include a device called a rectifier. Protection systems
also are required by federal regulations on storage tanks, utility systems and
injection wells. The majority of protection system records are now compiled from
data collected by personnel who travel to the site and record the readings.
Conventional industry practice is to install one rectifier per mile of pipeline
with generally one transceiver (subscriber communication device) per rectifier.
However, several pipelines can be laid along one right-of-way, with a common
rectifier system, meaning that multiple rectifiers can feed into one transceiver
unit. The Company believes that the addressable market comprises the aggregate
number of rectifiers currently deployed on U.S. pipelines.
The Company expects that another LEO satellite system can support the
collection of data from remote sites, with service and equipment costs
comparable to those of the ORBCOMM System; however, this system only supports
one-way service. Terrestrial wireless systems offer similar services at
comparable service costs to the ORBCOMM System, but geographic coverage is
limited. For very remote and hard-to-read meters, manual systems are typically
used, but they require that personnel travel to the site to read the meter on
the transceiver. The Company believes that pipeline operators would benefit
significantly from the ORBCOMM System. Subscriber Communicators powered by
batteries, solar cells or power sources already installed along the pipeline,
could be programmed to transmit required data at regular intervals to allow for
monitoring the status of pipelines in remote locations. In addition to recording
data, Subscriber Communicators could be commanded to shut pipeline valves in the
event of a leak or other emergency.
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According to recent statistical abstracts of the United States, there are
approximately 853,000 wells producing natural gas and crude oil, and
approximately 164 million gas and electric utility meters in the United States.
The Company believes that its addressable market will be those production wells
and utility meters located in remote geographic locations. Private radio systems
based on VHF radio frequency, multiple-address radio and microwave are being
used to collect data in moderately remote areas. These systems have been
installed primarily for other communications purposes and so the incremental
cost of monitoring wells is low. However, private radio systems are not
cost-effective in locations where monitoring cannot be combined with other
communications functions.
Environmental Monitoring. Many industrial companies and government
agencies have a need to monitor meteorological, hydrological and environmental
data such as rainfall, water levels and water quality at remote sites. The U.S.
Environmental Protection Agency ("EPA") is responsible for establishing and
monitoring national air quality standards, water quality activities, solid and
hazardous waste disposal and control of toxic substances. The EPA has
established standards for air and water quality that require pollution abatement
procedures, which procedures rely heavily on the automated logging and
collection of data from remote sites. Based on discussions with existing
Resellers targeting the environmental monitoring market, the Company believes
that there are approximately 250,000 sites in the U.S. that require water
quality monitoring devices to measure bacteria, dissolved oxygen, phosphorus,
lead and cadmium. In addition to pollutants, water monitoring devices are used
to measure flow rate, temperature and water level. Based on discussions with
Resellers for the environmental monitoring market, the Company believes there
are approximately 125,000 sites dedicated to the collection of data on air
pollution, concentrations of carbon monoxide, ozone and sulfur dioxide, as well
as meteorological data on wind speed and barometric pressure. The Company
believes that the addressable market comprises those sites that are located in
highly remote areas not served by terrestrial systems, which can use Subscriber
Communicators to transmit small amounts of data relatively infrequently and on
an exception basis.
The retrieval of data from remote environmental monitoring sites is
presently conducted using three methods: site visits; PSTN service; or
terrestrial wireless systems such as cellular telephone and specialized mobile
radio. The Company believes that ORBCOMM offers an attractive alternative to the
existing methods. Site visits are costly, time consuming and result in
significant data latency. Terrestrial wireline and wireless systems are limited
in coverage, particularly in remote areas where much of the environmental
monitoring takes place.
Marine. The Company has identified two marine industry segments, Fisheries
and Barges and Workboats, for which the total market is estimated at 246,000
vessels. Fisheries Product News and the National Fisheries Service count 200,000
fishing vessels in the U.S. commercial fleet. The Company's addressable market
is expected to be those fishing vessels that operate primarily in the Gulf of
Alaska, the Northwest United States and the Northwestern Atlantic. These vessels
usually remain at sea for extended periods and operate on extremely tight
margins with operating costs that are carefully controlled. As a result, they
need low-cost communications systems to meet safety and regulatory requirements
and to exchange commercial and operational information with their offices, fuel
providers, provisioners and packing houses.
The American Waterways Council estimates that there are 46,000 barges and
workboats that operate in U.S. rivers and on coastal waters. The Company expects
that its addressable market will comprise barges that operate without
independent sources of power and carry grain, coal and other commodities. They
traverse U.S. waterways in groups of barges that are "fleeted" together and
pushed by towboats and require energy-efficient monitoring and communications
devices to transmit position reports, cargo status reports and security
information. Tugs, towboats and supply/service boats also need low-cost two-way
communications to send operational and service-related data to their land-based
headquarters and receive dispatch instructions in return.
For long-haul communications, commercial fishing vessels use either HF
radio or one of the Inmarsat services. HF radio is considered unreliable, not
cost-effective and difficult to use, while Inmarsat requires a considerable
upfront investment of capital. The Company expects that some commercial fishing
vessels may acquire service from AMSC. Currently, there is no technology that
provides for the tracking of barges. Since barges have no independent power
source, only a system that is both ubiquitous and energy efficient is feasible.
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Most barge tracking is presently conducted using paper records that are usually
several days old. Workboats frequently use cellular telephones, particularly in
the Gulf of Mexico. Given the high cost of cellular roaming and the potential
for unauthorized use, the ORBCOMM System may provide a more efficient,
cost-effective tracking service.
U.S. Government Applications. The Company believes U.S. Government
applications represent a major target market for its services. Pressures to
contain Federal spending and specific acts of Congress have resulted in a major
change in the procurement practices in the DoD and civil agencies, causing them,
where possible, to purchase satellite-based services from commercial providers.
The Company believes that use of LEO systems like the ORBCOMM System will
provide Government users with low-cost solutions, low probability of intercept
and detection, and worldwide availability. The Company expects to compete to
provide LEO service to the U.S. Government, including in connection with certain
programs already announced by the U.S. Government.
The DoD is developing the Global Transportation Network ("GTN") to track
personnel, aircraft and weapon systems anywhere in the world. Effective military
logistics requires location identification and the ability to communicate
tasking instructions. Control is required at all locations from rear depots to
front-line combat elements, with integrated communications providing the
essential link. The GTN is a $230 million program with an annual operating
budget of $45 to $50 million. GTN is being developed because no global system
currently exists to satisfy the requirements for monitoring status. Lacking a
technology that provides cost-effective tracking and monitoring on a global
basis, the U.S. military has been relying on manual record keeping, which has
recently been supplemented by distributed database systems communicating over
DoD-owned and/or leased lines. Asset tracking is currently performed at the
endpoints of the distribution chain. For this reason, a misdirected shipment can
only be relocated by tracing forward from its most recent known location, and
this can take weeks to accomplish. The Company believes the ORBCOMM System will
provide data on demand or on a scheduled basis for use by the government.
The Defense Messaging System ("DMS") is a $1.5 billion project with an
annual operating budget of $45 million to provide messaging for the DoD, NATO
and certain civilian agencies. The Company believes that Little LEO systems
would complement existing and planned terrestrial wireless and wireline services
by providing service in geographic locations where such services are not
available or are not cost-effective. Today, numerous independent email systems
provide messaging throughout the military, with Autodin currently processing 35
million messages per month. Autodin messages are sent between fixed terminals in
locations throughout the world. The Company believes that in the DMS
implementation, the ORBCOMM System could offer users the ability to send and
receive messages regardless of their physical location.
The Company believes that there are additional DoD programs that may use
the services of Little LEO systems including the Global Command and Control
System, budgeted for $500 million; the Air Mobility Command and Control
Information Processing System, budgeted for $210 million; the Combat Search and
Rescue program to locate downed pilots, budgeted for $220 million; the Mobile
Satellite Service program, budgeted for $87 million; the Joint Surveillance
System budgeted for $85 million; and the Commercial Satellite Communications
Initiative, budgeted for $1.6 billion.
There are also a number of civil government applications suitable for
Little LEO systems. The Post-FTS 2000 is a program to provide long distance
domestic and international wireless Internet access, data and email to U.S.
government civilian agencies. It is a ten-year contract providing an estimated
$300 to $400 million in revenues to service providers. The U.S. Departments of
State, Justice and Transportation are also developing wireless email and
messaging programs. The existing FTS2000 provides domestic long distance calling
service to the federal government only. The new contract for service includes
wireless, mobile and international services.
The Company believes that these new programs have requirements currently
unfulfilled by existing systems. Each program promotes the vision of extending
communications down to individual soldiers and system operators. Currently,
there is no dedicated DoD system available using inexpensive, small, lightweight
user terminals. The Company believes that Little LEO systems like the ORBCOMM
System can provide such service on a global basis.
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Foreign Government Applications. Use of Little LEO systems such as the
ORBCOMM System is expected to provide foreign governments with low-cost
applications, low probability of intercept and detection and worldwide
availability. Potential defense applications include transmission of
GPS-determined position data for maneuvering units and downed pilots and
transmission of air defense, fire support data, asset tracking and tactical
messaging. Potential civil government applications include wide-area clandestine
communications, monitoring and control of natural resources and search and
rescue functions. For foreign governments, the Company anticipates that the
ORBCOMM System could improve coverage and reliability and reduce the cost of
such applications.
With respect to the provision by the Company of services using the ORBCOMM
System on an international basis, the Company believes that certain of its
international business activities, including its provision of services through
International Licensees to foreign end-users, public or private, will be
governed primarily by the internal laws of the relevant foreign countries or
regions. The provision of such services may also be subject to U.S. laws,
regulations and treaties regarding the export or sale of technology, products or
services by U.S. companies to foreign governments or private foreign entities,
including those U.S. laws, regulations and treaties that restrict or regulate
the export by U.S. companies of certain sensitive technologies, products or
services having military or other applications.
FUTURE APPLICATIONS
In addition to the markets and applications (such as those described above)
that have already displayed a demand for mobile data and messaging
communications services, the Company believes that with the full deployment of
the constellation, the ORBCOMM System's combination of capabilities will
stimulate new demand, especially among potential messaging users. The explosive
growth of communication services is being fueled in part by the need for both
consumer and business users to improve their productivity by being in constant
contact with information sources. The growth is particularly evident in the
wireless segment of the industry. Terrestrial cellular systems only began
operation in the United States in 1982 and by the end of 1995 there were more
than 33 million subscribers in the United States. According to Malarkey-Taylor
Associates, Inc./Economic and Management Consultants International, Inc., there
will be approximately 334 million cellular/PCS subscribers globally by 2001. The
paging industry, which began in the 1950s, also continues to grow at least 20%
per annum and currently there are more than 34 million one-way paging
subscribers in the United States alone. Additionally, the Internet is growing at
20% per month and there are expected to be over 300 million Internet users by
2000. This need is also being fueled by an increasingly mobile society that
desires to be reachable anywhere, anytime and the growth of a global
marketplace.
The Company expects that in the United States, the ORBCOMM System will
complement existing and planned terrestrial wireless communications systems, by
providing coverage in geographic areas where such services are not offered or by
enhancing data applications currently being provided through the PSTN or the
PSDN. Internationally, the Company believes that the ORBCOMM System can offer
services in developing countries or remote regions where basic telephone service
or data and messaging services are not available. As a satellite-based system
with coverage of virtually all of the Earth's surface, the Company can
efficiently and cost-effectively offer communications services in these
geographic areas through the ORBCOMM System.
The ORBCOMM System's combination of low-cost Subscriber Communicators and
seamless coverage is expected to provide a range of new personally portable
services and gap-filler capabilities such as: (i) stand-alone messaging; and
(ii) hybrid messaging.
Stand-Alone Messaging. In certain communications applications, the major
requirements are low-cost handsets and ubiquitous coverage. The handsets must
also be easy to use, provide long battery life, and be readily carried in a
purse, briefcase or suit pocket. Typically, use will be infrequent and the
length of the message short. Potential user requirements include: (i) persons
who want the standby ability to notify someone at the office or at home; and
(ii) pleasure boaters, other recreational users, and motorists who may find the
system useful for priority communications and for convenience.
Based on data published by the National Marine Manufacturers Association,
the Company believes that approximately 77 million Americans participate in
boating activities and that its addressable market comprises those owners who
enjoy traveling a considerable distance outside the range of terrestrial
communications
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systems. Their boats are generally designed to provide overnight accommodations
for extended periods and are usually 26 feet or longer. There are approximately
two million households with powerboats and 900,000 with sailboats in this size
category. The primary market requirements are concern with safety and the
availability of a low-cost, lightweight, personally portable unit.
Recreational boaters typically use VHF radio and/or cellular telephone
where tower-based systems are available. Some individuals rely on HF radio and a
very small number employ Inmarsat services. Due to the significant geographic
coverage and expense limitations of these alternatives, however, there are few
viable communications alternatives available to outdoorsmen.
Based on market research conducted on behalf of the Company, the Company
estimates there are approximately 22 million American households whose members
frequently engage in one or more of the following "back-country" activities:
hunting; hiking; overnight camping; and backpacking. The Company believes that a
portion of these households form an addressable market for the ORBCOMM System
due to the frequency of their activities and the likelihood that they will
travel outside the range of terrestrial communications.
Hybrid Messaging. The advent of corporate email systems and small,
lightweight personal computers is creating a large body of users who want the
convenience and flexibility to communicate information without being bound by
wireline or the limits of wireless systems. The ORBCOMM System, due to its
low-cost Subscriber Communicators and global availability, could serve as a
gap-filler for end-users, and appeal to terrestrial wireless system operators
currently offering such services in metropolitan areas. The ORBCOMM System could
provide extended coverage with minimal investment in new infrastructure and
could expand vertical market opportunities for terrestrial operators.
A recent industry report indicated that the volume of messages carried over
the Internet is currently 300 billion per year, of which 70% are messages of
1,000 characters or less. It is estimated that 40% of U.S. territory will remain
uncovered by terrestrial communications due to sparse population density. The
Company therefore believes there is a potential niche market for email and
personal messaging in addition to messaging used primarily for business or
industrial reasons. The Company believes that companies that currently provide
terrestrial wireless communications services may use the ORBCOMM System as a
service area gap-filler and extend their networks to remote areas.
MARKETING
Domestic. The exclusive right to market the ORBCOMM System in the United
States is held by ORBCOMM USA. See "Relationships Among the ORBCOMM Parties."
ORBCOMM USA has developed a comprehensive marketing plan that includes
distribution, applications development, customer service and pricing strategies.
The Company's overall goal is to penetrate rapidly specifically targeted markets
to promote efficient use of system capacity. Currently, while offering
commercial intermittent service, ORBCOMM USA is seeking to build an initial base
of subscribers in the United States, and expand on its agreements with key
channels of distribution. During the fully operational stage, the Company
expects that ORBCOMM USA's sales and marketing staff will primarily support
indirect channels of distribution.
ORBCOMM USA is in the process of negotiating and signing agreements with
Resellers who purchase ORBCOMM System services directly from the Company and
resell these services to end-users in a specific industry and/or market as part
of a package that may include other products or services. ORBCOMM USA's
relationship with a Reseller is governed by a reseller agreement that details
each party's rights and responsibilities with respect to developing and
maintaining customer relationships, as well as the cost of service to the
Reseller. In soliciting customers, the Reseller "adds value" to the basic
service offering by bundling related applications software, hardware or product
packaging for its respective industry or market segment. Existing mobile data
carriers are expected to offer ORBCOMM System services by taking advantage of
the ORBCOMM System's "gap-filler" properties as well as its geolocation and
acknowledgment features. Such additional ORBCOMM partners are likely to come
from such areas as paging, PCS, mobile data, cellular, and intelligent
transportation systems.
In the United States, service pricing is based on many variables, including
the availability and cost of substitute services, the cost of providing service
and the nature of the user application. Pricing generally
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incorporates an initial registration charge, a recurring monthly charge for
access to the ORBCOMM System and usage charges based on end-user activity. In
charging for usage, the Company has developed a pricing structure in the United
States that suits the usage patterns for the initial vertical markets addressed
by the existing two satellite system. Prices for priority and other real time
messaging will be developed as the full deployment of satellites in the ORBCOMM
System occurs. It is likely that multiple pricing alternatives will be offered
in the United States including peak/off-peak, volume discounts, and annual
contract commitment options.
To date, ORBCOMM USA has signed 27 reseller agreements with the following
companies:
<TABLE>
<CAPTION>
SERVICES
RESELLER(1) INDUSTRIES PROVIDED
----------------------------------------------- ----------------- -----------
<S> <C> <C>
Advanced Research Corporation.................. T TR
Arco Global Tracking Systems, Inc. ............ OT MO
Arinc, Inc. ................................... M, T, R, C, E, G ME, MO, TR
BETA Corporation............................... OG MO
Boatracs, Inc. ................................ M ME, MO, TR
Caribbean Satellite Services, Inc. ............ M MO, TR
Corexco Consulting Services, Inc. ............. OG ME, MO
Electronic Marine Services, Inc. .............. M ME
Geotechnology Development, Inc. ............... T, C MO, TR
GlobalKey, Inc. ............................... G ME
Globitrac, Inc. ............................... I, A, OT MO, TR
IDB Mobile Communications, Inc. ............... M TR
IWL Communications, Inc. ...................... OG ME, MO
Innovative Computing Corporation............... T ME, MO, TR
Intrex Data Communications Corp. .............. OG, I MO, TR
Leupold & Stevens, Inc., Stevens Water
Monitoring Division.......................... E, OD ME, MO, TR
LoadLink, International........................ T, R ME, MO, TR
MCQ Associates, Inc. .......................... G ME, MO, TR
Metocean Data Systems, Inc. ................... E, G, OT ME, MO, TR
National Systems & Research Co., Inc. ......... G ME, MO, TR
QUALCOMM, Incorporated ........................ T MO, TR
Science Applications International
Corporation.................................. R MO, TR
Sky-Eye Railway Services, Inc. ................ R MO
Smartboat, Inc. ............................... M ME, TR
The Sutron Corporation......................... E MO
Transportation Communication Services, Inc. ... T, C ME, MO, TR
Winnet, Inc. .................................. T, C ME, MO, TR
</TABLE>
- ---------------
(1) Reseller agreements generally have a term of one year, although the Company
generally expects these agreements to be renewed on substantially the same
terms as currently exist.
<TABLE>
<CAPTION>
Key -- INDUSTRIES SERVICES PROVIDED
------------------------------------------------ ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A = Agriculture OG = Oil & Gas ME = Messaging
C = Containers OD = Outdoor MO = Monitoring
E = Environment R = Rail TR = Tracking
G = Government T = Trucking
I = Industrial OT = Other
M = Marine
</TABLE>
International. The Company holds the exclusive right to market the ORBCOMM
System outside the United States, and has licensed this right to ORBCOMM
International. See "Relationships Among the ORBCOMM Parties." Provision of
communication services using the ORBCOMM System outside the United States is
expected to be achieved through International Licensees authorized by ORBCOMM
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International. ORBCOMM International is in the process of negotiating and
signing agreements with International Licensees within various countries or
regions of planned service outside of the United States.
The Company has a standard Service License Agreement for International
Licensees, although there may be variations in the terms of specific agreements.
The Service License Agreement authorizes, among other things, the exclusive
access by the International Licensee to the ORBCOMM System satellites in a
designated geographic area and permits the limited use of certain ORBCOMM
proprietary technologies and intellectual property. While the Agreement contains
specific obligations on both parties, it also contains express provisions that
are intended to disclaim all system performance warranties and includes broad
limitation of liability clauses. The Agreement will have a ten-year term,
although it may be terminated earlier under certain conditions including in the
event of a default.
International Licensees will be responsible for obtaining all necessary
licenses and approvals for the use of the ORBCOMM System and the construction
and operation of the Gateways in the designated territories. Accordingly, in
selecting authorized International Licensees for a particular country, ORBCOMM
International considers such factors as an International Licensee's: (i)
reputation in the marketplace; (ii) existing distribution capabilities and
infrastructure; (iii) financial condition and other resources; and (iv) ability
to obtain the requisite local regulatory approvals. International Licensees will
pay fees for access to the ORBCOMM System in their territory, including a
monthly Satellite Usage Fee. The Satellite Usage Fee is calculated as the
greater of a percentage of gross operating revenues and a data throughput fee,
which percentage and dollar amount may be increased by the Company in accordance
with the terms of the Agreement.
In conjunction with the execution of a Service License Agreement, an
International Licensee will be required to purchase from ORBCOMM an ORBCOMM
Gateway, which will include a specific number of Earth stations. In certain
defined circumstances, an International Licensee may be permitted by the Company
to share a Gateway with another International Licensee in an adjacent territory,
thereby reducing the initial out-of-pocket start-up costs for an ORBCOMM System
franchise. For example, ORBCOMM has executed a Ground Segment Facilities Use
Agreement with ORBCOMM Canada, pursuant to which ORBCOMM Canada is authorized
for a fee to access and use the U.S. Gateway on a shared basis with ORBCOMM USA.
Retail pricing in international markets will be at the discretion of the
International Licensees, and is expected to vary from country to country to
reflect variations in economic conditions, the availability of substitute
services, local customs, and government policy as required to be competitive
with other services.
As of October 31, 1996, ORBCOMM International has signed six Memoranda of
Understanding with potential International Licensees and is in active
negotiations with twelve other potential International Licensees; taken
together, these 18 potential International Licensees represent approximately 38
countries around the world. The Company intends to convert substantially all its
existing Memoranda of Understanding into Service License Agreements during the
next three to 18 months, although there can be no assurance the Company will be
successful in each case. In addition, ORBCOMM International has signed Service
License Agreements with four International Licensees. On October 15, 1996,
ORBCOMM signed a Service License Agreement with ORBCOMM Europe, a consortium of
European companies, which has been given the exclusive right to market services
using the ORBCOMM System to approximately 40 European countries. ORBCOMM has
also executed a Service License Agreement with ORBCOMM Canada, which is
controlled by Teleglobe, a Service License Agreement with Celcom, a wholly owned
subsidiary of TRI, and a Service License Agreement with ORBCOMM Maghreb. ORBCOMM
Canada, Celcom and ORBCOMM Maghreb were granted the exclusive right to market
ORBCOMM System services in Canada; Malaysia, Singapore and Brunei; and Morocco,
Tunisia, Algeria and Mauritania, respectively.
SYSTEM ARCHITECTURE
The ORBCOMM System consists of four operational segments: (i) a space
segment consisting of a constellation of 28 LEO satellites; (ii) a ground
segment consisting of Gateways, the major elements of which include Earth
stations sending and receiving signals and a message switching system that
processes the message traffic; (iii) a control segment to monitor and manage the
flow of information through the system;
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and (iv) a subscriber segment consisting of communicators used by subscribers to
transmit and receive messages to and from nearby satellites.
Overview. To use the ORBCOMM System, a user creates a text message using a
computer or Subscriber Communicator device, which message is sent to the nearest
ORBCOMM System satellite and delivered to an ORBCOMM Earth station, which
supports communication with the satellites, and then to the Gateway Switching
System, which processes the messages. Within the Gateway, the message is
processed using a combination of ORBCOMM-developed and commercial email
software, and sent on to its ultimate destination. If desired, an
acknowledgement message is returned to the sender. The final delivery may be to
another Subscriber Communicator, or may make use of public/private X.25 data
networks, the Internet, or even text-to-fax conversion.
To control costs and design and implementation risks, the ORBCOMM System
architecture, where possible, makes use of existing, mature technologies and
conforms to internationally accepted standards. The ORBCOMM System network
architecture comprises a multi-nodal packet network using X.400 messaging and
Time Division Multiple Access (TDMA) as the enabling technologies.
As shown below, the ORBCOMM System is divided into four operational
segments: the space segment; the ground segment; the control segment; and the
subscriber segment.
[GRAPHIC MATERIAL DELETED AND FILED SEPARATELY WITH THE COMMISSION]
Space Segment. The Space Segment will consist of a constellation of 28
satellites comprising three planes of eight satellites and two planes of two
satellites in highly inclined orbits (of which one plane of two satellites has
been launched), all at approximately 775 kilometers above the Earth. The two
in-orbit satellites are in a 70 degrees inclined plane at an altitude of
approximately 740 kilometers. Weighing approximately 95 pounds, the MicroStar
satellites are produced by Orbital and generally will be deployed in groups of
eight using Orbital's Pegasus XL launch vehicle. Two satellites are to be placed
in a high-inclination orbit using an Orbital Taurus launch vehicle. The design
of the remaining 26 satellites (as well as the eight ground spares) is expected
to be identical.
The satellites, each of which is a self-contained node of the ORBCOMM
System, are equipped with a VHF communications infrastructure capable of
operation in the 137.0-150.05 MHz and the 400.075-400.125 MHz bands. The use of
the spectrum is managed by an on-board computer that employs an
ORBCOMM-developed Dynamic Channel Activity Assignment System ("DCAAS"). The
DCAAS contin-
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uously scans the authorized spectrum, identifies frequencies in use and assigns
channels to minimize the possibility of interference. DCAAS is expected to
change the frequency of the uplink random access channels every five to 15
seconds. The ORBCOMM System satellites can also transmit a UHF beacon that
provides Subscriber Communicator manufacturers with the ability to supply
enhanced, low-cost, Doppler positioning.
Under the terms of the Procurement Agreement, the Company is purchasing an
additional eight satellites that may be used as ground spares and launched in
the event of the loss of satellites as a result of a launch failure or in-orbit
satellite failure. In the event such satellites are not needed for such purpose,
ORBCOMM currently intends to launch these satellites as an additional plane of
eight, as authorized by the FCC License. This would increase global coverage and
provide additional system redundancy. In addition, the Company has an option to
procure a second generation satellite system that would replace the system it is
now deploying at the end of the system's expected life. The option, currently
priced at $166.1 million (subject to adjustment for inflation and excluding
taxes, if any, and the cost of launch and satellite insurance) can be exercised
by the Company at any time.
The Procurement Agreement requires Orbital to demonstrate compliance with
the detailed technical satellite performance requirements defined in the ORBCOMM
System Specifications, which specifications describe the end-to-end satellite
performance. Except for the communication software, which is the responsibility
of ORBCOMM, Orbital is responsible for the performance of the satellites, the
U.S. Earth stations and the satellite management functionality of the Network
Operations Center ("NOC"). Orbital must comply with a verification and test
plan, which defines the detailed verification tests and acceptance criteria for
each of the ORBCOMM System elements.
The Procurement Agreement with Orbital provides for the launch of 24
satellites on the Pegasus XL. Orbital's Pegasus XL vehicle is launched from
beneath Orbital's leased, modified Lockheed L-1011 and is capable of deploying
satellites weighing up to 1,000 pounds into low-Earth orbit. Through June 30,
1996, Orbital has conducted a total of eight standard Pegasus missions, all of
which were fully or partially successful. Whether a mission is fully or
partially successful depends on the particular mission requirements designated
by the customer. In the two partially successful missions, the satellites
achieved useful orbits and were able to be operated by the customer and
performed at least part of their intended missions. Prior to its successful
flights in March, July and August 1996, the modified Pegasus XL, an enhanced
version of the standard Pegasus, had two unsuccessful flights, one occurring in
June 1994 and the other in June 1995. The first Pegasus XL failure was caused by
inaccurate aerodynamic modeling of the vehicle. The second Pegasus XL failure
resulted from human assembly error involving the improper installation of a
small component that prevented the Stage 1/Stage 2 interstage from properly
separating from Stage 2. After the Pegasus XL failure in June 1995, Orbital led
a comprehensive internal review and commissioned an independent assessment of
the Pegasus XL's design, manufacturing and assembly methods and launch
procedures. Orbital also conducted extensive engineering analyses and subsystem
testing to characterize flight margins and to implement appropriate design
changes. All analyses and tests were conducted with broad customer input from
NASA, the U.S. Air Force, the Ballistic Missile Defense Organization and the
Aerospace Corporation. These reviews, carried out by members of the aerospace
industry and government experts, recommended 88 engineering and procedural
changes to enhance product robustness, all of which were implemented by Orbital.
Pegasus XL returned to flight on March 8, 1996, successfully launching a
satellite for the U.S. Air Force to its intended orbit and had successful
flights in July and August 1996, in each case delivering a NASA satellite to its
designated orbit. On a sixth Pegasus XL launch, which occurred in November 1996,
two NASA scientific satellites were delivered to their designated orbit, but the
satellites failed to separate from the launch vehicle. The Pegasus and Pegasus
XL separation system has worked properly on 11 previous launches. Orbital is
currently reviewing the cause of the separation problem, but does not currently
expect that it will result in significant delays in its launch schedule.
In addition, the Company expects to launch two additional satellites as a
secondary payload on Orbital's Taurus launch vehicle. Taurus is a four-stage,
ground-launched derivative of Pegasus that can carry up to 3,000 pounds to
low-Earth orbit. In March 1994, Orbital successfully launched the first Taurus
vehicle, deploying two satellites for the Defense Advanced Research Projects
Agency into their target orbits.
The ORBCOMM network is unique in that both the Ground Segment and the
Subscriber Segment (described below) communicate with the satellite in the same
band, thus eliminating the design complexity,
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as well as the associated mass, power and cost, of supporting multiple radio
payloads on a single satellite. The satellite also contains an intelligent
packet-routing capability, including a limited store-and-forward capability.
Ground Segment. The Ground Segment consists of Gateways strategically
located throughout the world. The role of the Gateway is to provide access to
the Space Segment and interface to public and private data networks. The major
elements of a Gateway include:
- Earth stations, each of which is composed of two radomes, with enclosed
VHF tracking antennae, one of which is redundant, associated pedestal,
controller, and radio equipment;
- Gateway Message Switching System, which processes the message traffic and
provides the interconnection to the terrestrial networks; and
- Gateway Management System, which manages the Gateway elements.
To provide services using the ORBCOMM System in a particular geographic
region, an appropriately located Gateway is required. Substantially all elements
of the U.S. Gateway have been constructed, including four Earth stations located
in New York, Arizona, Georgia and Washington. ORBCOMM expects to enter into
agreements with International Licensees for the construction of Gateways outside
the United States. The cost and implementation of these Gateways is expected to
be borne by the International Licensees.
Each Earth station comprises two radomes set on top of a sandwich-walled
cinderblock support structure. The radome, which weighs approximately 3,300
pounds, is approximately 28 feet in diameter. The total height of the structure,
measured from the top of the radome to the foot of the base, is approximately 33
feet. Each Earth station is unmanned, and contains a freestanding shelter and an
optional fuel tank and power generator. The Gateway satellite links have been
designed to make use of single uplink and downlink channels for all ORBCOMM
System satellites by using a TDMA protocol. This protocol will permit several
Gateways to communicate simultaneously with a single satellite. The TDMA
protocol has several advantages, including the ability to provide a virtually
seamless handover of a satellite from Earth station to Earth station under the
centralized control of the NOC.
Control Segment. The Control Segment monitors and manages all network
elements to ensure continuous, consistent operations in the provision of quality
service. The Control Segment is housed at the NOC.
The Control Segment systems include a network management system that
presents the status of all network elements and a space vehicle management
system. Through the U.S. Gateway, managed from the NOC, ORBCOMM has access to
the Space Segment for command and control purposes, although, consistent with
the rules and regulations of the FCC, OCC maintains ultimate control over the
ORBCOMM System.
Subscriber Segment. The Subscriber Segment consists of various models of
Subscriber Communicators that are generally designed to support specific
application needs of users. The Subscriber Communicator models will include: (i)
vehicular-powered Subscriber Communicators that could be used in asset tracking,
cargo monitoring, or vehicular operation monitoring; (ii) externally powered
Subscriber Communicators for fixed applications such as pipeline monitoring,
remote device control, or environmental monitoring; and (iii) self-contained,
battery- and/or solar-powered Subscriber Communicators that would support
applications where commercial or other external power is not available,
including personal messaging applications.
Subscriber Communicators targeted for industrial or telemetric applications
are designed to interface with sensors or control devices through an
industry-standard serial interface using a proprietary communications protocol,
developed to take advantage of the packet nature of the ORBCOMM System.
Subscriber Communicators targeted for personal use will incorporate interfaces
such as integrated keyboards or touch-sensitive screens. Additionally, while the
ORBCOMM System satellites are designed to support Doppler position determination
in the Subscriber Communicators, certain Subscriber Communicator models will
also be equipped with GPS receivers, permitting more rapid and more accurate
location determination.
To ensure the availability of Subscriber Communicators having different
functional capabilities in sufficient quantities to meet demand, the Company has
provided extensive design specifications and technical and engineering support
to various Subscriber Communicator manufacturers. The Company currently has a
development and initial supply agreement with Panasonic, which has received
authorization from the Company for a basic Subscriber Communicator and has units
that are now commercially available. The
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Company is in the process of finalizing a manufacturing and a sales support
agreement with Panasonic. The Company has also executed Subscriber Communicator
Manufacturing Agreements, which include terms regarding the development,
manufacture and sales support for Subscriber Communicators, with Scientific-
Atlanta, Magellan, Torrey Science and Stellar. Both Torrey Science and Stellar
have received authorization from the Company to manufacture a basic Subscriber
Communicator and the Company expects that both companies will have units
commercially available by the first half 1997. Panasonic and Stellar have
informed the Company that, in lots of at least several thousand, the price for
their respective Subscriber Communicators will be approximately $550 per unit.
COMPETITION
Competition in the communications industry is intense, fueled by rapid and
continuous technological advances and alliances between industry participants
seeking to use such advances on an international scale to capture significant
market share. At this time, the ORBCOMM System is the only commercial Little LEO
system to be licensed fully for all segments of its system within the United
States. ORBCOMM inaugurated commercial service on February 1, 1996, becoming the
first commercial Little LEO mobile satellite service provider. The Company
believes that commencement of commercial service provides it with a substantial
head start in developing markets, distribution systems, applications and
customers globally. The Company expects that potential competitors will include
other Little LEO systems, such as Starsys, and Big LEO systems, such as the
Iridium and Globalstar systems.
Starsys is licensed to construct and operate a multiple-satellite
constellation that, if deployed, could compete directly with the ORBCOMM System.
Starsys employs code division multiple access ("CDMA") modulation (spread
spectrum) that must operate in spectrum that is allocated on both a "primary"
and "secondary" basis to Little LEO services. As a result, Starsys will operate
at low power levels to avoid interference to other services. The low power
levels result in a maximum transmission rate of 600 bps from Subscriber
Communicators compared with 2,400 bps for the ORBCOMM System. In addition, the
U.S. Government has imposed a channel occupancy limit on Starsys of 25% of that
permitted for the ORBCOMM System to prevent interference to existing U.S.
Government systems. The Company believes that no operational Starsys satellites
will be launched until 1997 at the earliest, and that completion of the network
will not be accomplished before 2000.
One other entity has been licensed by the FCC in the first processing round
to provide Little LEO satellite services in the United States. Volunteers in
Technical Assistance ("VITA"), a not-for-profit organization, has been licensed
for one of the two satellites for which it applied. VITA will use a small amount
of uplink and downlink spectrum to transmit health, research and scientific data
on a delayed basis between developing countries and the United States. VITA's
first satellite was destroyed in 1995 as a result of a launch vehicle failure.
VITA has requested that the FCC authorize it to launch a replacement satellite.
It is expected that the FCC will authorize VITA to launch a replacement
satellite. See "Regulation -- United States FCC Regulation."
The Company does not expect that any of the other proposed Little LEO
systems currently participating in the second licensing round before the FCC
will be in a position to offer competing data and messaging communications
services before the year 2000. Even if the FCC were to license one or more of
these other applicants, the Company holds a substantial advantage over these
potential competitors by virtue of its having already obtained FCC licensing for
all elements of its system in the United States, by achieving, in large part,
international coordination of its designated frequencies through the ITU, and
having already designed, constructed and deployed a fully functional, end-to-end
system. Over the course of the next several years, the Company is expected to
obtain further advantages over these potential competitors by launching the
remaining satellites in the ORBCOMM System, by signing agreements with
additional Subscriber Communicator manufacturers, by signing reseller and
Service License Agreements with additional marketing entities and by expanding
its marketing activities generally as the ORBCOMM System matures. The FCC
recently released for public comment a Notice of Proposed Rulemaking in which
the FCC proposes to limit eligibility in the second licensing round to new
applicants only. If adopted, these rules would exclude from consideration in the
second round any entity, such as OCC, that is already a licensee or affiliated
with a licensee.
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Plans for Little LEO systems have been announced in Russia, France, Tonga,
Brazil, Uganda, Australia and Korea. However, with the sole exception of the
French candidate system, the ORBCOMM System and those of the other United States
first round licensees are expected to occupy all but a small portion of the
currently allocated spectrum and are protected from harmful interference from
all other systems.
The Big LEO systems, which will operate LEO mobile satellite systems using
radio frequencies above 1 GHz, are not expected to be ready for real time,
uninterrupted service before 1998. In addition, all the Big LEO systems are
designed primarily to provide two-way voice services which require larger, more
complex satellites than the ORBCOMM System satellites, and larger constellations
to provide coverage. As a result, the cost of the Big LEO systems is
significantly greater than those of the ORBCOMM System. Based on filings with
the FCC, Iridium anticipates an initial service date in 1998 for a proposed
66-satellite constellation to provide voice and other communications services at
usage charges of approximately $3.00 per minute plus tail charges (land-line
extension charges). The total system cost is expected to be approximately $4.7
billion. The Globalstar system is expected to cost approximately $2 billion and
consists of a constellation of 48 satellites with usage charges of approximately
$0.55 per minute. The initial service date for the Globalstar system is
anticipated to be in 1998. Another satellite system designed to provide
primarily voice communications is the Odyssey system, a project in which
Teleglobe has an interest. Odyssey is a medium-Earth orbit system, which will be
composed of 12 satellites operating at an altitude of 10,355 kilometers above
the Earth. Odyssey proposes to begin operations and to become fully operational
by 2001. The total system cost is expected to be approximately $2.5 billion.
Satellite-based communications systems are characterized by high up-front
costs and relatively low marginal costs of providing service. A number of Big
LEO and Little LEO systems are presently 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 begin operations. In addition, the ORBCOMM
System will compete with several existing and planned GEO systems such as the
AMSC system. Big LEO and GEO systems are designed primarily to provide two-way
voice services, which require larger, more complex satellites and require a
circuit-oriented connection over their network to transmit even short messages,
which significantly increases their per-message cost for such short messages.
However, these systems could seek to offer services similar to those offered by
the ORBCOMM System. In such case, price competition could be intense.
The ORBCOMM System is not intended to compete with existing and planned
terrestrial messaging and data systems. Rather, the Company believes that the
ORBCOMM System will complement these systems, which provide low-cost services
primarily in metropolitan areas where subscriber densities justify construction
of radio towers. Such systems generally do not have sufficient coverage outside
metropolitan areas, making them less attractive to vertical markets such as
field service operations and trucking, where assets spend large portions of
their operating time outside terrestrial system coverage areas. The ORBCOMM
System presents an attractive complement to tower-based services because it can
provide geographic gap-filler service at affordable costs without the need for
additional infrastructure investment.
It is expected that as terrestrial communications services expand to
regions currently underserved or not served by wireline or cellular services,
demand for ORBCOMM System service in these regions may be reduced. ORBCOMM may
also face competition in the future from companies using new technologies and
new satellite systems. A number of these new technologies, even if they are not
ultimately successful, could have an adverse effect on ORBCOMM as a result of
their initial marketing efforts. ORBCOMM's business would be adversely affected
if competitors begin operations or existing or new communications service
providers penetrate ORBCOMM's target markets before completion of the ORBCOMM
System. Additionally, as with any satellite-based system, the ORBCOMM System
will function best when there is an unobstructed line-of-sight between the user
and one or more of the ORBCOMM System satellites overhead, and services will not
be available inside buildings or other similar structures. There can be no
assurance that these characteristics will not adversely affect subscriber demand
for the ORBCOMM System.
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EMPLOYEES
As of September 30, 1996, ORBCOMM had 82 full-time employees, none of whom
is subject to any collective bargaining agreement. The Company's management
considers its relations with employees to be good.
PROPERTIES
The Company currently leases approximately 23,000 square feet of office
space in Dulles, Virginia from Orbital. See "Relationships Among the ORBCOMM
Parties -- Administrative Services Agreement." The Company currently operates
four Earth stations. The Company owns the properties on which the St. Johns,
Arizona and Arcade, New York Earth stations are located and leases, subject to
long-term lease agreements, the properties on which the Ocilla, Georgia and East
Wenatchee, Washington Earth stations are located.
LEGAL PROCEEDINGS
The Issuers are not a party to any pending legal proceedings material to
their financial condition or results of operations. For a discussion of
regulatory issues affecting the Company, see "Regulation."
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REGULATION
UNITED STATES FCC REGULATION
REGULATION OF NVNG SYSTEMS
All commercial non-voice, non-geosynchronous ("NVNG") satellite systems, or
Little LEO systems such as the ORBCOMM System, in the United States are subject
to the regulatory authority of the FCC, which is the U.S. agency with
jurisdiction over commercial uses of the radio spectrum. Little LEOs must obtain
an authorization from the FCC to construct and launch their satellites and to
operate their satellites to provide services in assigned spectrum segments.
In January 1993, the FCC allocated spectrum for NVNG mobile-satellite
services ("MSS") and issued a Notice of Proposed Rulemaking to govern the NVNG
application process. On October 21, 1993, the FCC formally adopted its rules
pertaining to NVNG MSS systems. These rules included provisions regarding
financial qualifications, system size, intersystem coordination and reporting
requirements. These rules were applied to the three applications in the initial
NVNG processing round. Each of these three applications (including OCC's) was
approved by the FCC; however, the ORBCOMM System is the only commercial Little
LEO System to be fully licensed for all segments of its system, including four
Earth stations and its Subscriber Communicators, within the United States.
On November 16, 1994, the FCC closed the application filing period for a
second processing round for NVNG applications, and the FCC has received
applications from eight Little LEO systems (including OCC). The FCC has
indicated that there is insufficient spectrum available to grant each of the
pending applications. On October 29, 1996, the FCC released for public comment a
Notice of Proposed Rulemaking relating to licensing second round applications
for Little LEO systems in which the FCC proposes to limit eligibility in the
second licensing round to new applicants only. If adopted, these rules would
exclude from consideration in the second round any entity that is already a
licensee or affiliated with a licensee. This would result in the dismissal of
OCC's second round application for additional spectrum. See "-- Second
Processing Round."
REGULATORY HISTORY OF THE ORBCOMM SYSTEM
On February 28, 1990, nearly two years before the ITU allocated spectrum to
NVNG systems, OCC filed an application with the FCC for a Little LEO system. See
"International Regulation -- ITU Spectrum Allocations." Starsys filed a Little
LEO system application with the FCC several months later, whereupon the FCC
established a cut-off date for the filing of applications to be considered
concurrently with these proposals. A third applicant, VITA, also filed a Little
LEO system application in this initial processing round.
On March 13, 1992 and May 28, 1993, the FCC awarded OCC experimental
licenses to develop and test a limited Little LEO service. These licenses, plus
other licenses previously granted to OCC, permitted the launch of two
satellites, the construction of two ground stations and the development and
production of 1,000 customer terminals and the marketing of revenue-producing
services.
On October 20, 1994, OCC was granted authority by the FCC to construct,
launch and operate an additional 34 satellites located 775 kilometers above
Earth, in four inclined orbital and two near-polar planes, for the purpose of
providing two-way data and message communications and position determination
services in certain specified segments of the radio frequency spectrum (the "FCC
License"). The FCC License grants OCC the authority to operate in certain
segments of the radio frequency spectrum for its uplink and downlink functions.
See "International Regulation -- ITU Spectrum Allocation." The frequency bands
in which the ORBCOMM System is authorized to operate are as follows:
<TABLE>
<S> <C>
Uplink: 148.0 - 149.9 MHz
Downlink: 137.0 - 138.0 MHz and 400.075 - 400.125 MHz
</TABLE>
The FCC License is for private carriage and extends ten years from the
operational date of the first ORBCOMM satellite, FM1, which was April 3, 1995.
The milestone requirements of the FCC License mandate that OCC launch its first
two satellites by December 1998 and its remaining 34 authorized satellites by
December 2000. OCC has already met the first milestone with the launch of its
first two satellites, FM1 and FM2, in April 1995. OCC has set an aggressive
launch schedule for 26 satellites that, if successful, will
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result in OCC reaching the second milestone by the end of 1997, subject to
receipt of FCC approval by such date in the event ORBCOMM determines not to
deploy the eight ground spares as a fourth plane. In addition, OCC is required,
three years prior to the expiration of the FCC license, to apply for a license
renewal. Although the FCC has indicated that it is inclined to grant license
renewals to existing NVNG licensees, it is not certain that OCC's license would
be renewed should it apply. See "Risk Factors -- Regulatory Risks -- Licensing
Risks -- Domestic."
At the time the FCC closed the first round of processing for NVNG
applications, ORBCOMM's application was mutually exclusive with Starsys. In an
effort to resolve this mutual exclusivity, the three first round applicants met
and negotiated a Joint Sharing Agreement, executed on August 7, 1992. Using this
Joint Sharing Agreement as a guide, the three first round applicants, the FCC,
existing users of the same frequency bands and adjacent bands and other
interested parties met as a Negotiated Rulemaking Committee to address and
resolve operational and sharing concerns and to propose technical rules to
resolve them. The final rules, based on the proposals of this committee, were
adopted by the FCC and codified in its October 1993 NVNG order. OCC, as well as
the other first round applicants, was permitted to modify its license
application in response to the October 1993 NVNG order. See "-- Regulation of
NVNG Systems."
Under the terms of a coordination agreement between Starsys and OCC, which
was incorporated into the terms of its FCC License, OCC is required to shut down
its left-hand circular polarization ("LHCP") satellite-to-subscriber downlink
channels under certain circumstances when operation of such channels would
interfere with the Starsys system. To further lessen the possibility of
co-polarization interference, OCC also agreed to modify its frequency plan to
locate its LHCP channels in the lower portion of the 137.0-138.0 MHz band. The
FCC imposed these restrictions on OCC's domestic operations but reserved the
right to consider extending these restrictions to OCC's international operations
if notified of actual sharing difficulties between the ORBCOMM System and
Starsys.
The FCC License also provides that the ORBCOMM System is permitted to
operate throughout the 148.0-149.9 MHz band until such time as Starsys is
prepared to launch its first satellite. Once Starsys so notifies the FCC, or
earlier if the FCC requires, OCC has agreed to limit its operations to the upper
half of the 148.0-149.9 MHz band, permitting Starsys to operate its spread
spectrum system in the lower half of the band.
In 1995, the FCC granted OCC licenses to operate four Earth stations in the
continental United States and granted OCC a blanket license to deploy up to
200,000 Subscriber Communicators. Thus, the ORBCOMM System is the only
commercial Little LEO system to be licensed fully for all segments of its system
within the United States.
REQUEST FOR MODIFICATION OF FCC LICENSE
On October 20, 1995, OCC submitted to the FCC the Modification Request,
proposing to reduce each of the ORBCOMM System satellites' subscriber downlinks
operating in the 137-138 MHz band from two to one, while changing the downlink
data rate to a selectable rate of either 4.8 or 9.6 kbps, which would reduce
ORBCOMM's overall bandwidth requirements by 40 kHz. OCC also proposed to
continue to operate at 4.8 kbps in high-inclination planes, and at 56 kbps in
the gateway downlink on all satellites. Although several of the other second
round applicants have filed comments with the FCC opposing the Modification
Request, the Modification Request has several advantages for OCC's opponents, as
well as OCC. The Modification Request would eliminate the need for OCC to shut
down its LHCP when in view of a Starsys Earth station and thus obviate many of
the restrictions imposed on the ORBCOMM System under the terms of the FCC
License. The Modification Request also would free a certain portion of the
allocated spectrum for use by other Little LEO applicants. The Modification
Request would facilitate coordination of the ORBCOMM System with Russian
meteorological satellites currently operating in this bandwidth and could
facilitate OCC's coordination efforts with the proposed French S/80-1 satellite
system. See "-- International Regulation -- ITU Coordination." The Modification
Request has now completed the public comment cycle and OCC recently reached an
agreement with Starsys and NOAA with respect to technical matters raised by the
Modification Request. While OCC believes that the Modification Request will be
granted within the next several months, should the FCC fail to grant the
Modification Request, it could have a material adverse effect on the ORBCOMM
System.
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SECOND PROCESSING ROUND
On November 16, 1994, the FCC closed the application filing period for
applications from other proposed NVNG satellite systems. Currently, there are
eight NVNG applicants in the second processing round (including OCC), each of
which proposes to operate in all or part of the same frequencies as the ORBCOMM
System in the United States.
In its own second round application, OCC seeks authorization to construct
12 more satellites to improve its high-latitude coverage over Alaska, Canada and
Europe as well as to provide additional capacity and greater in-orbit
redundancy. This proposal would require the FCC to allocate an additional 90 kHz
of spectrum in the 137-138 MHz downlink to OCC. OCC also has requested use of an
additional 50 kHz in the 149.9-150.05 MHz band for a worldwide gateway uplink.
This spectrum, while registered at the ITU, has not yet been allocated for use
by Little LEO systems, and is currently occupied by U.S. and Russian military
satellite downlinks. OCC anticipates that once this bandwidth is freed by the
United States in 1997, it will be made available by the FCC for use by Little
LEO systems, including the ORBCOMM System, subject to coordination with Russia.
Although the FCC has closed the second processing round for NVNG systems,
it has not yet licensed any of the second round applicants. Prior to the World
Radiocommunication Conference scheduled for November 1995 ("WRC-95"), the FCC
noted that there was insufficient spectrum available to license all of the
second round NVNG applicants, and declined to issue any additional Little LEO
system licenses pending its request for additional spectrum for the Little LEOs
at WRC-95. Significant additional spectrum was not allocated for use by NVNG
services at WRC-95, and, on October 29, 1996, the FCC issued a Notice of
Proposed Rulemaking (the "Notice") that sets forth proposed rules for the second
licensing round for Little LEO systems. In the Notice, the FCC indicated that
there was sufficient spectrum available for only one to three additional
licensees. Due to the scarcity of spectrum, the FCC proposed to limit the second
processing round to applications who were not licensed in the first processing
round and are not affiliated with companies licensed in the first processing
round. In addition, to the extent there are mutually exclusive applicants in the
second round, the FCC has sought comments on whether it should conduct an
auction for the available licenses. The FCC anticipates that it will issue a
final order on licensing rules before the end of 1996 and that it will proceed
to licensing immediately thereafter. If the FCC's proposal to limit the second
licensing round to "new" applicants is adopted, it would exclude OCC from
participation in the second round. If OCC is in fact excluded from the second
licensing round, OCC would likely only obtain additional spectrum to provide
expansion capacity for the ORBCOMM System if additional spectrum is subsequently
allocated for use by Little LEO systems. See "-- International Regulation."
INTERNATIONAL REGULATION
The ORBCOMM System operates in frequencies which were allocated on an
international basis for use by Little LEO systems at the World Administrative
Radio Conference held in 1992 ("WARC-92"). The United States, on behalf of
various Little LEO service providers, including OCC, pursued international
allocations of additional frequencies for use of Little LEOs at WRC-95 with
limited success, as described above. The United States likely will present a
request for additional frequencies for use by the Little LEOs at WRC-97. See
"-- ITU Spectrum Allocations." In addition to cooperating with these efforts by
the United States to secure additional spectrum for Little LEO systems, OCC is
required to and has in fact, through the FCC, engaged in international
coordination procedures with other countries with respect to other satellite
systems under the aegis of the ITU. OCC also was required, through the FCC and
the U.S. Department of State, to engage in economic and/or technical
coordination with two international satellite systems, Intelsat and Inmarsat.
These coordinations have been completed successfully. Finally, the ORBCOMM
System must receive operational authority from each of the foreign countries in
which it proposes to provide service. It will be the responsibility of the
International Licensee in each country to obtain such authority.
ITU SPECTRUM ALLOCATIONS
The ORBCOMM System operates both in the United States and internationally
using frequencies allocated for Little LEO systems in the International Table of
Frequency Allocations (the "International Table"). The International Table
identifies radio frequency segments that have been designated for specific
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radio services by the member nations of the ITU. The International Table is
revised periodically at WRCs. Between WRCs, the member nations of the ITU, in
connection with private industry, prepare and propose recommendations for
international allocations to be considered at the next WRC. Preparatory analyses
and recommendations are considered in appropriate technical study groups for
specific topics.
Little LEO systems require use of radio spectrum on a global basis to reach
their full commercial potential. At WARC-92, with the sponsorship of the U.S.
government and a number of other key administrations, major portions of the 137
to 150 MHz band and a narrow portion of the spectrum band at 400 MHz were
allocated on a global basis to Little LEO systems. The specific frequency
allocations for uplink and downlink operations included the following:
<TABLE>
<S> <C>
Uplink: 148.0 - 149.9 MHz (1.9 MHz on a primary basis)
Downlink: 137.0 - 138.0 (675 kHz on a primary basis; 325 kHz on a
secondary basis)
400.15 - 401.00 MHz (850 kHz on a primary basis)
</TABLE>
In addition, 3 MHz of uplink and 3 MHz of downlink frequencies were
allocated on a secondary basis. The band 400.075 - 400.125 MHz licensed for use
by the ORBCOMM System already was allocated previously on a global basis to Time
and Frequency Standard service and, therefore, was not subject to consideration
at WARC-92. The Company's planned use of this bandwidth complies with the
regulations governing its use.
A designation of "primary" places the Little LEO systems on an equal
footing with existing users of these frequencies, subject to the provision that
they not interfere with those services or constrain their growth and, with
respect to certain countries and certain frequency bands, that the Little LEO
systems not claim protection from those other services. A "secondary"
designation means that the other users of the same frequencies have priority
over the Little LEO systems and are not required to accommodate or avoid
interference with them. The procedures for "coordinating" Little LEO services
with other registered users of the band were also established at WARC-92.
At WRC-95, the U.S. government and other administrations sought an
additional allocation of 6.65 MHz of spectrum for Little LEO systems. This
proposal was largely unsuccessful due to the late identification of candidate
bands. Consideration of additional bandwidth allocations is currently scheduled
to be on the agenda for the next WRC scheduled for November 1997.
ITU COORDINATION
The United States, on behalf of OCC, is required to coordinate the
frequencies used by the ORBCOMM System through the ITU. ITU frequency
coordination is a necessary prerequisite to obtaining interference protection
from other NVNG satellite systems. There is no penalty for launching a satellite
system prior to completion of the ITU coordination process, although protection
from interference through this process is only afforded as of the date of
successful completion of the process and notification of the satellite by the
ITU.
The United States through the FCC, on behalf of OCC, notified the ITU that
the ORBCOMM System was placed in service on April 3, 1995 and that it has
operated without complaints of interference since that time. The FCC also
informed the ITU that OCC has successfully completed its coordination with all
other administrations except Russia and France. The Company believes that the
Modification Request would facilitate its coordination efforts with Russia and
could facilitate its coordination efforts with France. OCC expects that it will
successfully complete the ITU coordination process with Russia and with France
in the first quarter of 1997, at which time the ORBCOMM System will be
registered with the ITU and accorded protection from interference from any other
subsequently developed system.
ITU coordination is also required for the uplink ground segment of the
ORBCOMM System, but is the responsibility of individual administrations.
Depending on the location of particular ground stations, the applicable
coordination distance specified in the ITU procedures may extend across
international boundaries and require coordination by more than one government
authority. For example, two of the four U.S. Earth stations have a coordination
distance that extends into Canada, and thus require coordination with Canada
prior to ITU notification or registration.
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At WRC-95, France proposed a reduction in the threshold for coordination
with terrestrial services, which would require additional coordination of mobile
satellite systems. This proposed change was not adopted at WRC-95, but there can
be no assurance that it will not be proposed and adopted at the next WRC
scheduled for 1997, or that, if adopted, additional coordination requirements
would not be imposed on the ORBCOMM System, to the extent that OCC may not have
completed the ITU coordination process.
COORDINATION WITH INTELSAT AND INMARSAT
Pursuant to the Intelsat treaty, international satellite operators are
required to demonstrate that they will not cause economic or technical harm to
Intelsat. OCC was notified in March 1995 that this coordination with Intelsat
has been completed successfully.
The Inmarsat treaty similarly requires both technical and economic harm
coordination. OCC was notified in October 1995 that it had successfully
completed both technical and economic coordination with Inmarsat.
REGULATION OF SERVICE PROVIDERS
Primary responsibility for obtaining local regulatory approval to offer
ORBCOMM System services in countries outside the United States will reside with
the various International Licensees. In all cases, the proposed International
Licensees are private companies, reflecting the expectation that the ORBCOMM
System will be licensed as a value-added service rather than as a regulated
basic service. The Company's proposed International Licensees have had
discussions with regulators in the major target countries and have advised the
Company that such discussions indicate that favorable regulatory treatment can
be anticipated.
The process for obtaining operating approval in foreign countries generally
conforms to the following process. The International Licensee requests operating
authority from the appropriate national regulatory body, which has the sole
authority to grant an operating license. Obtaining such local regulatory
approvals normally requires, among other things, that the International Licensee
demonstrate the absence of interference to other authorized uses of the spectrum
in each country. In some countries, this process may take longer due to heavier
shared use of the applicable frequencies and, in certain other countries, may
require reassignment of some existing users. The national regulatory authority
will be required to associate with the ORBCOMM ITU submission. The national
regulatory authority also will be required to submit so-called Appendix 3
information to the ITU in order to coordinate and protect ORBCOMM Earth stations
in the territory or region from interference by other ground systems.
ORBCOMM International has to date executed four Service License Agreements
with International Licensees, ORBCOMM Europe, ORBCOMM Canada, Celcom and ORBCOMM
Maghreb. The International Licensees or proposed International Licensees in
Canada, Venezuela, Chile, Japan and Morocco are in the process of seeking
authority to operate. The Company has been advised by its proposed International
Licensees that experimental or preliminary operating authority for the ORBCOMM
System has been granted in Canada, Japan, Italy, Venezuela and Colombia.
The Company provides technical and regulatory assistance to its proposed
International Licensees in pursuing operating authority. The assistance provided
by the Company includes actual in-country demonstrations that the ORBCOMM System
can share use of the allocated spectrum with existing users while causing no
harmful interference or constraining operations and growth of those systems.
While International Licensees have been selected, in part, based upon their
perceived qualifications to obtain the requisite foreign regulatory
authorizations, there can be no assurance that they will be successful in doing
so, and if they are not successful, service on the ORBCOMM System will not be
available in such countries. In addition, the continued operations of the
International Licensees may be subject to other regulatory requirements and
changes in each foreign jurisdiction.
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MANAGEMENT
The ORBCOMM Partnership Agreement provides that the management of the
Company is the exclusive responsibility of the General Partners. Officers of the
Company are nominated by the President of the Company and elected by the General
Partners and exercise such authority as they are granted by the General
Partners. See "The Partnership Agreements."
EXECUTIVE OFFICERS
The following table sets forth the executive officers of ORBCOMM and the
directors and executive officers of Capital as of the date of this Prospectus.
<TABLE>
<CAPTION>
NAME AGE POSITION TERM
- ------------------------- --- -------------------------------------------------- --------
<S> <C> <C> <C>
Alan L. Parker........... 57 President and Chief Executive Officer of ORBCOMM; 1 year;
President and Director of Capital 1 year
W. Bartlett Snell........ 44 Senior Vice President, Finance and Administration 1 year;
and Chief Financial Officer of ORBCOMM; Vice 1 year
President, Treasurer and Director of Capital
Robert J. Pizzimenti..... 47 Executive Vice President, Marketing and Business 1 year
Development
Paul J. Locke............ 55 Acting Senior Vice President, Engineering and 1 year
Operations
Mary Ellen Seravalli..... 38 Vice President and General Counsel of ORBCOMM; 1 year;
Vice President and Secretary of Capital 1 year
</TABLE>
Alan L. Parker has been the President of ORBCOMM since its inception on
June 30, 1993 and Chief Executive Officer since February 1996. Mr. Parker has
been President and Director of Capital since July 1996. Mr. Parker was
previously, and continues to be, the President of OCC. Mr. Parker was a member
of the U.S. delegation to WARC-92 and the 1993 and 1995 WRCs. Mr. Parker's
experience includes 25 years with Ford Aerospace and Ford Motor Company. Mr.
Parker served as Chairman and CEO of Ford Aerospace Satellite Services
Corporation from 1982 to 1986 and was Vice President of Marketing and Business
Planning of Ford Aerospace Corporation from 1976 to 1986. Prior to 1976, Mr.
Parker held several marketing and product planning positions at Ford, including
Car Product Development, Ford of Europe and Corporate Product Planning and
Research.
W. Bartlett Snell has been the Senior Vice President, Finance and
Administration and the Chief Financial Officer at ORBCOMM since February 1996.
Mr. Snell has been Vice President, Treasurer and Director of Capital since July
1996. From 1993 to 1996, Mr. Snell was President and Chief Executive Officer of
PowerSource Solutions, Inc., a company specializing in assisting organizations
undertaking strategic corporate change. From 1992 to 1993, Mr. Snell was Senior
Vice President and General Manager of People Karch International, an
international provider of work-site health promotion services, health and
fitness software and corporate child care programs. Prior to 1992, Mr. Snell
worked for IBM Corporation. Mr. Snell is a member of both the Northern Virginia
Business RoundTable and the Northern Virginia Technology Council.
Robert J. Pizzimenti has been the Executive Vice President for Marketing
and Business Development at ORBCOMM since April 1994. Prior to April 1994, Mr.
Pizzimenti was Vice President of Marketing for Iridium, Inc. Mr. Pizzimenti has
over 20 years of experience in wireless communications and international
business development. During the 1980s, Mr. Pizzimenti served as Ericsson Radio
Systems' North American Marketing Manager, and as President of Ericsson Paging
Systems, North America. Mr. Pizzimenti also has served as Vice President of
Marketing for Metro One, the non-wireline cellular system serving New York and
New Jersey. Mr. Pizzimenti has participated in a variety of industry
associations and committees, including the Telocator POCSAG Coordination
Initiative.
Paul J. Locke has been Acting Senior Vice President, Engineering and
Operations at ORBCOMM since August 1996, and has been Senior Director Space
Segment Engineering at ORBCOMM since June 1992.
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From April 1991 to June 1992, Mr. Locke was a regulatory and satellite system
engineering consultant for a number of satellite-based projects. Mr. Locke
participated in the first FCC Negotiated Rule Making for Little LEOs and has
participated in a variety of preparatory meetings for WRC '95.
Mary Ellen Seravalli has been the Vice President and General Counsel at
ORBCOMM since January 1996. Ms. Seravalli has been Vice President and Secretary
of Capital since July 1996. From 1991 to 1995, Ms. Seravalli was Vice President
and Assistant General Counsel of Orbital. Prior to 1991, Ms. Seravalli was an
associate in the law firm of Jones, Day, Reavis & Pogue, where she worked on
mergers and acquisitions, with an emphasis on the telecommunications industry,
and where she gained significant experience representing both lenders and
borrowers in connection with the establishment of various types of credit
facilities.
PARTNER REPRESENTATION
Pursuant to the Partnership Agreements of ORBCOMM, ORBCOMM USA and ORBCOMM
International, each General Partner is represented at the meetings of the
General Partners by up to three authorized representatives. Each General Partner
may by notice to the other change its designated authorized representatives. Set
forth below are each of the General Partners' current representatives.
OCC:
David W. Thompson, 42, is a director of OCC. Mr. Thompson also is a
co-founder of Orbital and has been its Chairman, President and Chief Executive
Officer since 1982. Prior to that, Mr. Thompson was Special Assistant to the
President of Hughes Aircraft Company's Missile Systems Group and was a NASA
project manager and engineer on advanced rocket engines at Marshall Space Flight
Center and on the Viking Mars landing missions at the Jet Propulsion Laboratory.
Bruce W. Ferguson, 42, is the Chairman and is a director of OCC. Mr.
Ferguson also is a co-founder of Orbital and has been Executive Vice President
and General Manager, Communications and Information Services Group since 1993.
Mr. Ferguson was Executive Vice President and Chief Operating Officer of Orbital
from 1989 to 1993, Senior Vice President, Finance and Administration and General
Counsel from 1985 to 1989 and Vice President, Finance and General Counsel from
1982 to 1985. Before co-founding Orbital, Mr. Ferguson was an attorney in the
corporate and securities department of the law firm of Kirkland & Ellis. Mr.
Ferguson is a Director of Superconducting Core Technologies, Inc.
Jeffrey V. Pirone, 36, is the Vice President and Chief Financial Officer of
OCC. Mr. Pirone also is the Senior Vice President and Chief Financial Officer of
Orbital. Mr. Pirone came to Orbital in 1991, and prior to that was a Senior
Manager at KPMG Peat Marwick LLP.
TELEGLOBE MOBILE:
Guthrie J. Stewart, 41, is Executive Vice President, Canadian Market and
Network Activities of Teleglobe and Chief Executive Officer of Teleglobe's
Enterprises and World Mobility Divisions. From 1987 until he joined Teleglobe in
1992, Mr. Stewart was Vice President, General Counsel and Corporate Secretary of
BCE Mobile Communications Inc., a company co-founded in 1987 by BCE Inc. and
Teleglobe's current Chairman and Chief Executive Officer, Charles Sirois. Prior
to that, Mr. Stewart practiced law for several years in the Toronto office of
Osler, Hoskins & Harcourt. Mr. Stewart sits on the Board of several Teleglobe
subsidiaries.
Marc J.E. Leroux, 45, is Vice President, Technology of Teleglobe and
President and Chief Operating Officer of Teleglobe's World Mobility Division.
Prior to joining Teleglobe in 1992, Mr. Leroux directed a wide range of research
and development projects at Bell-Northern Research, a subsidiary of Northern
Telecom.
Jean-Paul Tardif, 36, is Director, Financial Planning and Projects at
Teleglobe. From 1990 until he joined Teleglobe in early 1996, Mr. Tardif held
the position of Director, Planning and Special Projects Group at Telesystem
Ltd., a private holding company of which Charles Sirois is the founder and
principal shareholder, and the position of Treasurer at Telesystem International
Wireless Services Ltd., a paging and
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cellular operator with businesses in several countries around the world. Prior
to that, Mr. Tardif was a management consultant specialized in financial
analysis and business valuation with Raymond, Chabot, Martin, Pare, a
Quebec-based accounting firm.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Company during
1995 to its chief executive officer and the Company's four most highly
compensated executive officers other than the chief executive officer in all
capacities in which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND ---------------------
PRINCIPAL POSITION YEAR SALARY($) BONUS($)
- ------------------------------------------------------------------- ---- --------- --------
<S> <C> <C> <C>
Alan L. Parker..................................................... 1995 167,846 44,250
W. Bartlett Snell(1)............................................... -- --
Robert J. Pizzimenti............................................... 1995 152,408 20,500
Paul A. Locke(1)................................................... -- --
Mary Ellen Seravalli(1)............................................ -- --
</TABLE>
- ------------------
(1) No compensation is reported for persons not serving as executive officers of
ORBCOMM at the end of 1995.
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RELATIONSHIPS AMONG THE ORBCOMM PARTIES
STRUCTURE
ORBCOMM is a Delaware limited partnership formed in 1993 to develop,
construct, operate and market the ORBCOMM System. The general and limited
partnership interests in ORBCOMM are held by OCC, a Delaware corporation and
subsidiary of Orbital, a Delaware corporation, and Teleglobe Mobile, a Delaware
general partnership that is controlled by Teleglobe, a Canadian corporation.
ORBCOMM holds general and limited partnership interests with a 98% Participation
Percentage in each of ORBCOMM USA, a Delaware limited partnership, and ORBCOMM
International, a Delaware limited partnership. OCC holds general and limited
partnership interests in ORBCOMM USA with a 2% Participation Percentage and, by
virtue of its control of one-half of the Participation Percentage held by
ORBCOMM, controls the operational and financial affairs of ORBCOMM USA. See "The
Partnership Agreements." Teleglobe Mobile holds general and limited partnership
interests in ORBCOMM International with a 2% Participation Percentage and, by
virtue of its control of one-half of the Participation Percentage held by
ORBCOMM, controls the operational and financial affairs of ORBCOMM
International. See "The Partnership Agreements." ORBCOMM, Orbital, OCC,
Teleglobe and Teleglobe Mobile are sometimes referred to herein as the "ORBCOMM
Parties."
Capital, a Delaware corporation formed in July 1996, is acting as co-Issuer
for the Senior Notes. Capital is a wholly owned subsidiary of ORBCOMM, has
nominal assets and will not conduct any operations. Certain institutional
investors that might otherwise be limited in their ability to invest in
securities issued by partnerships by reason of the investment laws of their
states of organization or their charter documents, may be able to invest in the
Senior Notes because Capital is a co-issuer.
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The following is a chart of the ownership and structure of the ORBCOMM
Parties:
ORBCOMM SYSTEM STRUCTURE
[GRAPHIC MATERIAL DELETED AND FILED SEPARATELY WITH THE COMMISSION]
- ---------------
(1) Represents current ownership by Orbital in OCC, with the remaining interests
acquired pursuant to the exercise of stock options. Upon exercise of all
currently outstanding options, Orbital would hold an 87% interest in OCC on
a fully diluted basis.
(2) Represents general and limited partnership interests in ORBCOMM.
(3) Each of OCC and Teleglobe Mobile, as general partners of ORBCOMM, is
entitled to exercise directly its proportionate share of ORBCOMM's voting
rights in ORBCOMM USA and ORBCOMM International, respectively.
(4) Each of OCC, Teleglobe Mobile, ORBCOMM USA and ORBCOMM International is a
Guarantor of the Notes.
(5) OCC holds the FCC License.
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The ORBCOMM Parties have entered into a series of agreements or
arrangements for the development, construction, operation and marketing of the
ORBCOMM System. The following paragraphs are a summary of the material
provisions of certain of these agreements and are qualified in their entirety by
reference to the actual agreements, copies of which are available from ORBCOMM.
MASTER AGREEMENT
As of June 30, 1993, Orbital, OCC, Teleglobe and Teleglobe Mobile entered
into the Master Agreement that sets forth the principles upon which the parties
have agreed to develop, construct and operate the ORBCOMM System. The Master
Agreement subsequently has been amended and restated and currently provides for
the following:
Covenants Relating to OCC. Orbital and OCC have agreed: (i) to preserve
OCC's corporate existence; (ii) to use all commercially reasonable efforts to
obtain and maintain all material U.S. operating licenses and permits necessary
for the construction, operation and marketing of the ORBCOMM System; (iii) so
long as OCC holds any FCC authorizations, that OCC will (a) remain a subsidiary
of Orbital, other than as a result of options granted under the Orbital
Communications Corporation 1992 Stock Option Plan; (b) carry on no business
other than the construction, operation and marketing of the ORBCOMM System or
business that is in furtherance, or in connection with the expansion of the
ORBCOMM System; (c) remain the sole holder of all FCC authorizations required
for the construction, launch and operation of the ORBCOMM System (other than FCC
authorization for individual user transceivers and FCC authorizations held by
ORBCOMM and ORBCOMM USA); (d) subject to certain exceptions in accordance with
the Definitive Agreements, not grant, create, assume, incur or suffer to exist
any lien affecting OCC or any of its property, rights, revenues or assets; (e)
subject to certain exceptions in accordance with the Definitive Agreements, not
sell, transfer, convey, lease or otherwise dispose of any assets; (f) not
consolidate, merge or amalgamate with any other person; (g) subject to certain
exceptions in accordance with the Definitive Agreements, not create, amend or
repeal any by-laws or modify the OCC certificate of incorporation; (h) subject
to certain exceptions in accordance with the Definitive Agreements, not make any
loans or give any financial guarantees for the obligations of any other party;
and (i) not make any assignment for the benefit of creditors or subject OCC to
any bankruptcy or insolvency law or take steps to wind up or terminate OCC's
corporate existence or engage in any financial restructuring. Additionally,
Orbital has agreed, as long as OCC holds the FCC License, not to dispose of any
debt interest in OCC.
Guarantees. Orbital has unconditionally and absolutely guaranteed the full
and punctual payment of all of OCC's payment obligations under the Definitive
Agreements to which OCC is a party. Teleglobe has unconditionally and absolutely
guaranteed the full and punctual payment of all of Teleglobe Mobile's payment
obligations under the Definitive Agreements to which Teleglobe Mobile is a
party.
Change of Control. In the event of a Change in Control of Orbital or
Teleglobe (a "Change of Control Party"), Teleglobe Mobile or OCC, as the case
may be (the "Non-Change of Control Party"), has the option: (i) for a period of
180 days from the Change of Control to require the Change of Control Party to
purchase the Non-Change of Control Party's interest in each of ORBCOMM, ORBCOMM
USA and ORBCOMM International at an aggregate price equal to the greater of (a)
the Non-Change of Control Party's aggregate Unrecouped Capital Preferences in
such partnerships and (b) the Non-Change of Control Party's direct Participation
Percentage in each such partnership multiplied by the fair market value (as
defined) of each such partnership; or (ii) to cause the general partners of
ORBCOMM to adopt a resolution providing that, in the event there is a deadlock
on a matter requiring the approval of a Majority in Interest of the partners,
the President of ORBCOMM shall be entitled to decide on such matter by way of
casting a vote or otherwise, as deemed appropriate by the Non-Change of Control
Party, notwithstanding any contrary provision set forth in the ORBCOMM
Partnership Agreement. Subject to the receipt of all necessary government
approvals, upon a Change of Control of Orbital, Orbital agrees to cause OCC to
transfer to ORBCOMM USA all FCC licenses then held by OCC relating to the
construction, launch or operation of the ORBCOMM System.
In the event that OCC should become a common carrier or a CMRS
provider -- either by virtue of a change in the ORBCOMM System's regulatory
classification by the FCC from private-carrier to common-
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carrier or CMRS status, or by virtue of a change in its service offerings that
would convert OCC from a private carrier to a common carrier or a CMRS
provider -- ORBCOMM USA might be precluded from acquiring the FCC licenses from
OCC, due to the extent of alien ownership in ORBCOMM USA as a result of
Teleglobe Mobile's indirect interest in ORBCOMM USA.
SYSTEM CONSTRUCTION AGREEMENT
Under the terms of the System Construction Agreement, ORBCOMM has agreed to
develop, construct, deploy, manage and operate, subject to OCC's ultimate
control, the ORBCOMM System satellites and the System Assets, in consideration
for which OCC is obligated to remit to ORBCOMM, on a quarterly basis, OCC's
allocated portion of the System Charge, provided, however, that, if the Output
Capacity Charge for any quarter is less than 1.15% of Total Aggregate Revenues,
then OCC shall not be required to pay any portion of the System Charge for such
calendar quarter. For a description of the System Charge, see "The Partnership
Agreements -- System Charge." For a description of the Output Capacity Charge,
see "-- System Charge Agreement."
OCC has granted to ORBCOMM under the System Construction Agreement the
right to market, sell, lease and franchise all output capacity outside the
United States.
ORBCOMM has agreed to indemnify OCC from and against any claim with respect
to an infringement or other violation of any copyright, trademark or patent or
other validly registered enforceable intellectual property right of any third
party for any items constructed by ORBCOMM pursuant to the authority granted in
the System Construction Agreement, but only to the same extent as the
indemnification received by ORBCOMM from Orbital pursuant to the Procurement
Agreement.
PROCUREMENT AGREEMENT
ORBCOMM and Orbital have entered into the Procurement Agreement pursuant to
which Orbital has undertaken the overall design, development, construction,
integration, test and operation of the ORBCOMM System. The Procurement Agreement
was the result of arm's length negotiations between Orbital and Teleglobe Mobile
that took place prior to Teleglobe Mobile's decision to exercise an option to
invest an approximately $75 million in additional equity in the ORBCOMM project.
Under the Procurement Agreement, Orbital will develop, construct and deliver to
ORBCOMM 34 satellites and complete the construction and design of the Satellite
Control Center and of the four Earth stations comprising the U.S. ground segment
of the ORBCOMM System. Orbital will also provide to ORBCOMM launch services for
24 satellites using three Pegasus XL launch vehicles. Orbital will also provide
in-orbit check-out support for up to 120 days after each of the three satellite
launches.
ORBCOMM has agreed to pay Orbital approximately $163 million for satellite
construction, launch services and other work specified in the Procurement
Agreement plus certain incentive fees. Upon execution of the Procurement
Agreement, ORBCOMM paid to Orbital approximately $17.2 million representing
reimbursement for costs incurred through the date thereof. Following execution
of the Procurement Agreement, Orbital invoices ORBCOMM monthly for a maximum of
90% of its costs incurred during such month. The remaining ten percent of costs
incurred in any month, as well as the remaining balance of the fixed-price
contract amount, may be invoiced only upon completion of certain specified
project milestones.
Optional Work. The Procurement Agreement provides for additional work and
services to be performed at the option of ORBCOMM, including: (i) launch
services for an additional plane of eight satellites using one additional
Pegasus XL launch vehicle, and in-orbit check-out support for up to 120 days
after such optional launch; (ii) a replacement constellation of 32 satellites
(including launch services using four Pegasus XL launch vehicles) in accordance
with the specifications contained in the Procurement Agreement at a cost of
$166.1 million (subject to adjustment for inflation and excluding taxes, if any,
and the cost of launch and satellite insurance); and (iii) a one-time option to
request Orbital to provide a standard Taurus launch vehicle rather than a
Pegasus XL launch vehicle for any launch procured pursuant to the Procurement
Agreement; this option may be exercised by ORBCOMM on or prior to September 12,
1998 at a price to be negotiated, but which will not exceed $21 million.
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Regulatory Matters. Under the terms of the Procurement Agreement, Orbital
is required to use all commercially reasonable efforts directly or through OCC:
(i) to obtain and maintain the required U.S. regulatory authority needed to
construct, launch and operate the satellites and operate the ORBCOMM System;
(ii) obtain and maintain FCC regulatory authority for the operation of
Subscriber Communicators for use in connection with the ORBCOMM System; and
(iii) to take reasonable actions in any regulatory proceedings to defend any
claims against any regulatory authority granted to Orbital or OCC in connection
with the ORBCOMM System or to oppose any application by competing systems that
use frequencies below 1 GHz. ORBCOMM has agreed to pay or reimburse Orbital or
OCC for all out-of-pocket expenses and internal costs incurred in connection
with Orbital's or OCC's efforts.
Delivery; Title and Risk of Loss. Under the Procurement Agreement,
delivery of the launch vehicle and satellites occurs on separation of the launch
vehicle from Orbital's L-1011 aircraft. At such time, title to and risk of loss
or damage passes to ORBCOMM and ORBCOMM's sole remedy for launch failure,
defects or failures to conform to applicable specifications is limited to: (i)
non-payment to Orbital of the specified milestone payment and any satellite
performance incentive payment; and (ii) termination of the Procurement
Agreement.
Delivery of the remaining Earth station and Satellite Control Center
efforts set forth in the Procurement Agreement occurs in accordance with the
terms of the Procurement Agreement. Title to, and risk of loss of or damage,
passes to ORBCOMM on successful completion of the acceptance test procedures for
such work as set forth in the Procurement Agreement.
Incentive Payments. In addition to the above prices for work and service,
Orbital is entitled to receive under the Procurement Agreement certain
performance incentive payments. Payments are to be made on a per-plane basis
with the incentive to be earned monthly for each complete month that there are a
specified minimum number of working satellites in the plane. The minimum number
of working satellites in a plane is seven during the first 30 months of the
on-orbit performance incentive period and six during the second 30 months of the
on-orbit performance period.
SYSTEM CHARGE AGREEMENT
OCC and ORBCOMM USA have entered into the System Charge Agreement for the
purpose of providing for the use by ORBCOMM USA of all of the output capacity of
the ORBCOMM System within the United States and for the exclusive use by ORBCOMM
USA of certain System Assets located within the United States. The term of the
System Charge Agreement commenced on June 30, 1993 and continues until June 30,
2013.
Exclusive Use of U.S. System Capacity. OCC has granted to ORBCOMM USA the
exclusive right in the United States to market, sell, lease and franchise all
ORBCOMM System output capacity and exclusive use of the System Assets located in
the United States. ORBCOMM USA is permitted to grant ORBCOMM International use
of the U.S. Gateway for the limited purpose of operating the ORBCOMM System in
Canada, Mexico and any other country proximate to the United States.
Notwithstanding these provisions of the System Charge Agreement, OCC has
retained all rights in and to, and ORBCOMM USA has been granted no rights to,
the ORBCOMM System.
Output Capacity Charge. In consideration of the grant by OCC to ORBCOMM
USA of the exclusive right to market, sell, lease and franchise all ORBCOMM
System output capacity in the United States, ORBCOMM USA agrees: (i) within 30
days of the end of each calendar quarter, to notify OCC of the total aggregate
revenues invoiced by it during such calendar quarter; and (ii) to remit to OCC
23% of the total aggregate revenues invoiced by it during each calendar quarter.
ORBCOMM USA retains sole discretion to set the fees to be paid by its
subscribers, Resellers and licensees for use of the ORBCOMM System.
Indemnification. OCC and ORBCOMM USA agree to indemnify, defend and hold
harmless each other and their respective successors and assigns against any
liability, damage, loss or expense incurred by or imposed upon them in
connection with any claims, suits, actions, demands or judgments arising out of
any breach of the party's obligations under the System Charge Agreement. In
addition, OCC agrees to indemnify
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and hold harmless ORBCOMM USA and its respective successors and assigns from and
against any claim with respect to an infringement or other violation of any
copyright, trademark or patent or other validly registered enforceable
intellectual property right of any third party for any items OCC has authorized
ORBCOMM USA to use under the System Charge Agreement (but only to the same
extent as the indemnification received by OCC from ORBCOMM, if any, under the
terms of the System Construction Agreement).
INTERNATIONAL SYSTEM CHARGE AGREEMENT
ORBCOMM, ORBCOMM International and Teleglobe Mobile have entered into the
International System Charge Agreement for the purpose of: (i) providing for the
use by Teleglobe Mobile of all of the ORBCOMM System output capacity and
exclusive use of the System Assets located in all areas of the world outside of
the United States (the "Non-U.S. Area"); and (ii) providing the means by which
Teleglobe Mobile will grant to ORBCOMM International an exclusive right in the
Non-U.S. Area to market, sell, lease and franchise all ORBCOMM System output
capacity. The term of the International System Charge Agreement commenced on
June 30, 1993 and continues until the earlier of June 30, 2013 and the date on
which Teleglobe Mobile ceases to be a general and limited partner of ORBCOMM.
Exclusive Use of System Capacity Outside the United States. ORBCOMM has
granted to Teleglobe Mobile the exclusive right in the Non-U.S. Area to market,
sell, lease and franchise all ORBCOMM System output capacity and exclusive use
of the System Assets located in the Non-U.S. Area. Teleglobe Mobile, in turn,
has granted to ORBCOMM International the exclusive right in the Non-U.S. Area to
market, sell, lease and franchise all ORBCOMM System output capacity and
exclusive use of the System Assets located in the Non-U.S. Area. OCC ultimately
has retained all rights in and to, and neither Teleglobe Mobile nor ORBCOMM
International has been granted rights to, the ORBCOMM System.
System Charge. In consideration of the grant to Teleglobe Mobile of the
exclusive right to market, sell, lease and franchise all ORBCOMM System output
capacity in the Non-U.S. Area, Teleglobe Mobile agrees to remit to ORBCOMM
Teleglobe Mobile's allocated portion of the System Charge for that calendar
quarter calculated in accordance with the ORBCOMM Partnership Agreement. If the
International Output Capacity Charge for such calendar quarter is less than
1.15% of Total Aggregate Revenues, then Teleglobe Mobile is not required to pay
any portion of the System Charge for such calendar quarter.
International Output Capacity Charge. In consideration of the grant by
Teleglobe Mobile to ORBCOMM International of the exclusive right to market,
sell, lease and franchise all ORBCOMM System output capacity in the Non-U.S.
Area, ORBCOMM International agrees: (i) within 30 days of the end of each
calendar quarter, to notify ORBCOMM of the total aggregate revenues invoiced by
it during such calendar quarter; and (ii) to remit to Teleglobe Mobile 23% of
the total aggregate revenues invoiced by it during each calendar quarter.
ORBCOMM International retains sole discretion to set the fees to be paid by its
subscribers, Resellers and International Licensees for use of the ORBCOMM
System.
Indemnification. With regard to patent infringement claims, ORBCOMM agrees
to defend, indemnify and hold harmless Teleglobe Mobile and ORBCOMM
International and their respective successors and assigns from and against any
claim with respect to an infringement or other violation of any copyright,
trademark or patent or other validly registered enforceable intellectual
property right of any third party for any items ORBCOMM has authorized Teleglobe
Mobile and ORBCOMM International to use under the International System Charge
Agreement but only to the same extent as the indemnification received by ORBCOMM
from Orbital, if any, under the Procurement Agreement.
PROPRIETARY INFORMATION AND NON-COMPETITION AGREEMENT
ORBCOMM, Orbital, OCC, Teleglobe, Teleglobe Mobile, ORBCOMM USA and ORBCOMM
International have entered into the Proprietary Information and Non-Competition
Agreement to protect any confidential and proprietary information that may be
disclosed to one another in connection with the development, construction,
operation and marketing of the ORBCOMM System. Orbital and Teleglobe entered
into the agreement for the additional purpose of prohibiting direct competition
between the two
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entities in the provision of certain LEO satellite services during the term of
the agreement and for a period of one year thereafter.
Orbital and Teleglobe agree that for the duration of the agreement and for
one year thereafter, they will not, directly or indirectly or in any capacity,
except in connection with the fulfillment of their respective obligations under
any of the Definitive Agreements: (i) carry on, engage, participate, invest or
have an equity or any financial interest in the marketing, construction,
development or management of any business or enterprise that competes with
Orbital or Teleglobe or their respective affiliates in offering commercial, LEO
non-voice satellite communications services operating in the 137-150 MHz band or
such other frequency allocated to the Little LEO mobile satellite service below
1 GHz, provided, however, OCC and Orbital are permitted to: (a) sell satellites,
launch vehicles, launch services and communications services to non-commercial
entities without limitation; and (b) provide all other entities up to two
satellites every two years and launch vehicles or launch services for up to two
satellites every two years; (ii) assist in or influence the hiring by any person
who competes with Orbital or Teleglobe or their respective affiliates of any
salesman, distributor, or employee of Orbital or Teleglobe or their respective
affiliates, or otherwise cause any person having a business relationship with
Orbital or Teleglobe or their respective affiliates to sever such relationship;
or (iii) employ any person to work on or represent the ORBCOMM System who will
also work on or represent another mobile communications system, without first
notifying the President of ORBCOMM.
Neither of Orbital or Teleglobe will be in default of its obligations under
this portion of the Proprietary Information and Non-Competition Agreement by
virtue of holding for portfolio purposes as a passive investor no more than 5%
of the issued and outstanding public equity securities of a corporation.
Indemnification. Orbital and Teleglobe agree to indemnify and save
harmless one another and their respective affiliates (an "Indemnified Party")
from and against any claims, demands, actions, causes of action, judgments,
damages, losses, liabilities, costs or expenses that may be made against any of
them as a result of, arising out of or relating to any violation, contravention
or breach of the Proprietary Information and Non-Competition Agreement by a
party who is not an Indemnified Party.
Termination. The Proprietary Information and Non-Competition Agreement
shall terminate upon the earlier of OCC or Teleglobe Mobile ceasing to be both a
general and a limited partner of ORBCOMM.
ADMINISTRATIVE SERVICES AGREEMENT
Under the terms of the Administrative Services Agreement, Orbital has
agreed to provide to the Company, ORBCOMM USA and ORBCOMM International defined
office space for a total price of $15,200 per month. Orbital also has agreed to
provide ORBCOMM with certain occupancy services for a fixed monthly price of
$50,000. The services includes security and facilities support, MIS, telephone
switchboard and communication services and other support services. Orbital
provides various administrative services to ORBCOMM for a fixed monthly fee of
$15,000, including accounting support, payroll processing, miscellaneous
purchasing services and personnel services. Orbital also extends to ORBCOMM
employees (to the extent possible) participation in various benefit and
insurance plans. Orbital also has agreed to provide to ORBCOMM executive
management services payable on a time and materials basis, limited to $9,000 per
month.
The Administrative Services Agreement continues in effect so long as any
category of services are being provided by Orbital, provided that ORBCOMM has
the right to terminate all or part of the services being provided upon 90 days
prior notice to Orbital, subject, in a case of a termination of services within
a specific category of services, to an agreement on the price to perform the
remaining services. The prices for the services are fixed through the end of
1996. The parties will negotiate the prices for such services and office space
for subsequent years, provided that prices for 1997 will not be more than 10%
higher than the prices in effect in 1996.
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THE PARTNERSHIP AGREEMENTS
The following paragraphs are a summary of certain provisions of the
Partnership Agreements of each of ORBCOMM, ORBCOMM USA and ORBCOMM International
and such summary is qualified in its entirety by reference to such Partnership
Agreements. Each of the Partnership Agreements are substantially identical.
Unless otherwise described herein, references to the "Partnership" constitute
references to ORBCOMM, ORBCOMM USA and ORBCOMM International, collectively, and
references to the "Partnership Agreement" constitute references to the
Partnership Agreements of ORBCOMM, ORBCOMM USA and ORBCOMM International,
collectively.
Organization and Duration. The Partnership will dissolve on December 31,
2013, unless sooner dissolved on the written consent of all of the General
Partners or upon removal, withdrawal, resignation, liquidation or bankruptcy of
the last remaining General Partner (unless a new General Partner is appointed
within 90 days with the unanimous consent of the remaining partners).
General Partners; Management. OCC and Teleglobe Mobile are the general
partners of ORBCOMM. ORBCOMM and OCC are the general partners of ORBCOMM USA and
ORBCOMM and Teleglobe Mobile are the general partners of ORBCOMM International.
The management of the Partnership is the exclusive responsibility of the General
Partners and, except as provided by law or except as specified in the
Partnership Agreement and summarized below, the act of the General Partners
holding a majority of the Participation Percentages of the Partnership (a
"Majority in Interest") is the act of the Partnership.
The Partnership Agreement provides for meetings of the General Partners to
be called by any General Partner. It is the current practice of the Partnerships
to hold regular meetings of the General Partners on at least a quarterly basis.
Each General Partner is represented at the meetings by up to three authorized
representatives, although one representative of each general partner is entitled
to vote such General Partner's Participation Percentage.
The Partnership Agreement provides for the election of officers to provide
for the day-to-day operation of the Partnership. Officers are nominated by the
President of the Partnership and elected by the General Partners. Officers
exercise the authority granted to such officers by the General Partners. Under
the terms of the ORBCOMM Partnership Agreement, the General Partners are
required to appoint one or more officers to have authority to act for the
Partnership with respect to the Procurement Agreement. For a description of the
Procurement Agreement, see "Relationships Among the ORBCOMM
Parties -- Procurement Agreement." Officers are subject to removal for any
reason by approval of the General Partners. For a description of the current
officers of the Partnership, see "Management."
Certain Actions. Under the Partnership Agreement, the approval of at least
86% of the Participation Percentages held by the General Partners is required
to: (i) transfer all or substantially all the assets of the Partnership; (ii)
merge or consolidate the Partnership with any other person; (iii) permit the
entry by the Partnership into any additional lines of business; (iv) admit any
new Partner to the Partnership; (v) subject to certain exceptions in furtherance
of the business of the Partnership, cause the Partnership to borrow any amount
on a recourse basis or any amount in excess of $5 million on a non-recourse
basis; (vi) subject to certain exceptions set forth in the Partnership
Agreement, enter into any transaction with an affiliate of a General Partner
(excluding the Definitive Agreements); (vii) select or remove the independent
certified public accountant for the Partnership or adopt, or modify in any
material respect, any significant accounting policy or tax policy; (viii) make
on behalf of the Partnership an assignment for the benefit of creditors, decide
on behalf of the Partnership to subject the Partnership to any proceedings under
any bankruptcy or insolvency law, decide to avail the Partnership of the benefit
of any other legislation for the benefit of debtors, or take steps to wind up or
terminate the existence of the Partnership; (ix) delegate any of the powers of
the Partnership; (x) determine the value of the Partnership for purposes of the
Master Agreement; and (xi) amend any provision of the Partnership Agreement. No
amendment to the Partnership Agreement may: (i) decrease the capital account or
increase the amount required to be contributed by a Partner without the consent
of such Partner; or (ii) amend the provisions of, or adopt any provisions
inconsistent with, Sections 6.2, 6.3 and 6.4 of the Partnership Agreement, which
provisions regard super-majority approval
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requirements for certain actions of the Company, enforcement of the Definitive
Agreements and meetings of the General Partners, respectively.
The Partnership Agreement also provides that: (i) any action of the
Partnership with respect to the enforcement by it of its rights under any
Definitive Agreement or other contract or agreement to which any General Partner
or any affiliate thereof is a party with respect to a breach, default or dispute
by such General Partner or affiliate, requires the approval of General Partners
having a majority of the Participation Percentages held by the General Partners
other than such General Partner; and (ii) subject to the limitations set forth
in (i) above, in the event that a Majority in Interest of the General Partners,
each acting in the best interests of the Partnership, shall be unable to agree
on exercising or enforcing the rights of the Partnership under the Procurement
Agreement including, without limitation, the rights to exercise the options
thereunder, to stop work, to request changes and to send notices to preserve or
exercise any such rights, then the President of the Partnership shall decide on
the appropriate action with respect to such rights, and the Partnership shall
then act upon such decision. The ORBCOMM Partnership Agreement also provides
that so long as ORBCOMM holds voting rights in either of ORBCOMM USA or ORBCOMM
International, each General Partner shall be entitled to exercise directly a
fraction of ORBCOMM's rights determined by dividing such General Partner's
Participation Percentage by the total Participation Percentages held by all
General Partners.
Capital Contributions. Pursuant to the terms of the ORBCOMM Partnership
Agreement, OCC is obligated to contribute up to approximately $75 million, and
Teleglobe Mobile is obligated to contribute up to approximately $85 million, of
capital to ORBCOMM, all of which was contributed prior to the consummation of
the Old Notes Offering.
Under the terms of the ORBCOMM USA Partnership Agreement, OCC and the
Company together were obligated to contribute nominal capital to ORBCOMM USA in
the amount of $10,000. Under the terms of the ORBCOMM International Partnership
Agreement, Teleglobe Mobile and the Company together were obligated to
contribute nominal capital to ORBCOMM International in the amount of $10,000.
Pursuant to a resolution adopted by the General Partners of ORBCOMM on September
12, 1995, ORBCOMM agreed that until December 31, 1996, ORBCOMM would provide
interest-free loans to each of ORBCOMM USA and ORBCOMM International in an
amount equal to their monthly net cash requirements so long as such cash
requirements are generally in accordance with a budget approved by ORBCOMM or
the executive management of ORBCOMM.
System Charge. The ORBCOMM Partnership Agreement provides for the
remittance of the System Charge by OCC and Teleglobe to ORBCOMM each calendar
quarter. OCC's allocated portion of the System Charge for a calendar quarter is
equal to the Output Capacity Charge for such calendar quarter minus 1.15% of the
Total Aggregate Revenues. Teleglobe Mobile's allocated portion of the System
Charge for a calendar quarter is equal to the International Output Capacity
Charge for such calendar quarter minus 1.15% of the Total Aggregate Revenues.
Indemnification. The Partnership has agreed to indemnify its General
Partners and all of their respective officers, directors, partners, employees,
and agents (each an "Indemnitee") from and against any and all claims or
liabilities arising out of or in connection with any action taken or omitted by
the General Partners or the officers of the Partnership pursuant to authority
granted by the Partnership Agreement so long as such Indemnitee's conduct did
not constitute gross negligence, willful or wanton misconduct or bad faith. The
Partnership Agreement further provides that the General Partners and all of
their respective officers, directors, partners, employees and agents (each a
"General Partner Person") will not be liable to the Partnership or the limited
partners for any act or omission by such General Partner Person, except as such
act or omission results from gross negligence, willful or wanton misconduct or
bad faith.
Liquidation and Distribution of Proceeds. Upon the dissolution of the
Partnership, the General Partners, or, in the case of the removal, withdrawal,
resignation, liquidation or bankruptcy of the last remaining General Partner,
one of the limited partners elected by a majority vote of the limited partners,
shall act as liquidator to wind up the Partnership. The liquidator shall have
full power and authority to sell, assign and encumber any or all of the
Partnership's assets and to wind up and liquidate the affairs of the Partnership
in an orderly and business-like manner. All proceeds from liquidation shall be
distributed in the following
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order of priority: (i) to the payment of the debts and liabilities of the
Partnership and expenses of liquidation; (ii) to the setting up of such reserves
as the liquidator may reasonably deem necessary for any contingent liability of
the Partnership; and (iii) the balance to the Partners in the proportions of
their positive capital account balances, if any (determined after taking into
account all allocations of Net Income and Net Loss for the year of liquidation).
Allocations and Distributions. Allocations of Net Income and Net Loss of
the Partners shall generally be allocated to the capital accounts of Partners in
proportion to their Participation Percentage. Except as set forth below, or in
the case of liquidating distributions, the amount and timing of distributions by
the Partnership are determined in the discretion of the General Partners. All
distributions will be made to Partners first to return to the Partners their
Capital Preference and, thereafter, to the Partners in proportion to their
Participation Percentages. The Partnership Agreement provides for a minimum
distribution each year in an amount sufficient to ensure that each Partner shall
have received at least an amount equal to the product of: (i) 40% multiplied by
(ii) the lesser of (a) such Partner's distributive share of the Partnership's
taxable income for the preceding year, and (b) the excess, if any, of cumulative
Net Income over cumulative Net Loss allocated to such Partner since the
inception of the Partnership.
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DESCRIPTION OF SENIOR NOTES
GENERAL
The Old Notes were, and the Exchange Notes will be, issued pursuant to the
Indenture among the Company, Capital, the Guarantors and Marine Midland Bank, as
trustee (the "Trustee"). The terms of the Exchange Notes are identical in all
material respects to the Old Notes, except that the Exchange Notes have been
registered under the Securities Act, and therefore will not bear legends
restricting their transfer. The Senior Notes are secured pursuant to a Pledge
Agreement (the "Pledge Agreement") between the Issuers and the Trustee as
Collateral Agent (the "Collateral Agent"). Upon the issuance of the Exchange
Notes, the Indenture will be subject to and governed by the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act").
The terms of the Exchange Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act as an
effect on the date of the Indenture. The Exchange Notes are subject to all such
terms, and Holders of Exchange Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture and the Pledge Agreement do not purport to be
complete and are qualified in their entirety by reference to all the provisions
of the Indenture and the Pledge Agreement, including the definitions in each of
such instruments and agreements of certain terms used below.
The Senior Notes are the joint and several obligations of the Issuers. The
Senior Notes are senior obligations of the Issuers, rank senior in right and
priority of payment to all subordinated indebtedness of the Issuers and rank
pari passu in right and priority of payment with all other indebtedness of the
Issuers that is not expressly so subordinated, including indebtedness under the
MetLife Note (which aggregated approximately $3.5 million as of September 30,
1996), except to the extent of the collateral securing such MetLife Note. The
Senior Notes are secured to the extent set forth below under "-- Security." The
Issuers have no indebtedness that is expressly subordinated in right and
priority of payment to the Senior Notes.
The obligations of the Issuers under the Senior Notes are jointly and
severally guaranteed by OCC, Teleglobe Mobile, ORBCOMM USA and ORBCOMM
International (collectively, the "Guarantors"), provided that the Guarantees are
non-recourse to the shareholders and partners of the Guarantors. See
"-- Guarantees." The guarantee of each of the Guarantors rank senior in right
and priority of payment to all subordinated indebtedness of such Guarantor and
rank pari passu in right and priority of payment with all other indebtedness of
such Guarantor that is not expressly so subordinated to such guarantee, except
to the extent of any collateral securing such other indebtedness. The guarantees
by the Guarantors are non-recourse to the shareholders and/or partners of such
Guarantors (including Orbital, Teleglobe and TRI) and no shareholder or partner
of such Guarantors will have any liability for any claim under the Senior Notes.
The only assets of Teleglobe Mobile are such entity's investments in the Company
and ORBCOMM International; the only significant assets of OCC are such entity's
investments in the Company and ORBCOMM USA and the FCC License.
As of the date of the Indenture, the Company has no Subsidiaries other than
Capital, which is a wholly owned Subsidiary of the Company, has nominal assets
and does not conduct any operations. Under certain circumstances, the Credit
Parties will be able to designate future Subsidiaries that they create or
acquire as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be
subject to the restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes are limited in an aggregate principal amount to $170
million. The Senior Notes will mature on August 15, 2004. Interest on the Senior
Notes will accrue at the rate of 14% per annum (the "Fixed Interest") and will
be payable semi-annually in arrears on February 15 and August 15 of each year,
commencing on February 15, 1997, to Holders of record on the immediately
preceding February 1 and August 1. Fixed Interest on the Senior Notes will
accrue from the most recent date to which interest has been
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paid or, if no Fixed Interest has been paid, from August 7, 1996 (the "Issue
Date"). Fixed Interest on the Senior Notes will be computed on the basis of a
360-day year comprised of twelve 30-day months.
In addition, the Senior Notes bear Revenue Participation Interest,
calculated as described below, from the Issue Date to the date of payment of the
Senior Notes. Installments of accrued or deferred Revenue Participation Interest
accrued through the Accrual Period (as defined herein) last ended will become
due and payable semi-annually on each February 15 and August 15 after the Issue
Date, commencing on February 15, 1997, to the Holders of record at the close of
business on the preceding February 1 or August 1. Additionally, all installments
of accrued or deferred Revenue Participation Interest will become due and
payable (and may not be further deferred) with respect to any principal amount
of the Senior Notes that matures (whether at stated maturity, upon acceleration,
maturity of repurchase obligation or otherwise) upon such maturity of such
principal amount of the Senior Notes.
The Issuers, at their option, may defer payment of all or a portion of
Revenue Participation Interest then otherwise due if, and only to the extent
that, (a) the payment of such portion of Revenue Participation Interest will
cause the Credit Parties' Fixed Charge Coverage Ratio for the four consecutive
fiscal quarters last completed prior to such interest payment date to be less
than 2.0:1 on a pro forma basis after giving effect to the assumed payment of
such Revenue Participation Interest (but may not defer such portion which, if
paid, will not cause such Credit Parties' Fixed Charge Coverage Ratio to be less
than 2.0:1); provided, however, that for purposes of calculating such Credit
Parties' Fixed Charge Coverage Ratio for any period, the amount representing
Revenue Participation Interest that has been deferred or will be deferred for
such period shall not be included in the calculation of Credit Parties' Fixed
Charges for such period and (b) the principal of the Senior Notes corresponding
to such Revenue Participation Interest has not then matured and become due and
payable (at stated maturity, upon acceleration, upon maturity of repurchase
obligation or otherwise). Revenue Participation Interest that is deferred shall
become due and payable on the earlier of (i) the next succeeding interest
payment date on which such Revenue Participation Interest is not permitted to be
deferred, and (ii) upon the maturity of the corresponding principal of the
Senior Notes (whether at stated maturity, upon acceleration, upon maturity of
repurchase obligation or otherwise). No interest will accrue on any Revenue
Participation Interest deferred and which has not yet become due and payable. To
the extent permitted by law, interest will accrue on overdue Fixed Interest or
Revenue Participation Interest at the same rate as the Fixed Interest plus one
percent (1%) per annum.
Each installment of Revenue Participation Interest will be calculated to
accrue (an "Accrual Period") from, but not including, the most recent date
through which Revenue Participation Interest has been paid or provided for or
through which Revenue Participation Interest has been calculated and deferred
(or from and including the Issue Date if no installment of Revenue Participation
Interest has been paid, provided for or deferred) to, and including, either (a)
the last day of the next Semi-annual Period if the corresponding principal of
the Senior Notes has not become due and payable (or December 31, 1996 if no
installment of Revenue Participation Interest has been paid, provided for or
deferred) or (b) the date of payment if the corresponding principal of the
Senior Notes has become due and payable (whether at stated maturity, upon
acceleration, upon maturity of repurchase obligation or otherwise). With respect
to each Accrual Period, Revenue Participation Interest will accrue daily on the
principal of each Senior Note outstanding during such period as follows: (i) for
each day during each month that ends during such Accrual Period and which month
ends at least 25 days prior to the date of payment, an amount equal to 1/30th of
the Monthly Revenue Participation Interest on the Senior Note for such month
until all of such Monthly Revenue Participation Interest on the Note shall be
accrued (and all of such month's Monthly Revenue Participation Interest on the
Senior Note shall be accrued by the last day of such month) and (ii) for any day
in any remaining period, 1/30th of the prior month's Monthly Revenue
Participation Interest on the Senior Notes.
Any reference in this Prospectus to "accrued and unpaid interest" on the
Senior Notes includes the amount of Fixed Interest, unpaid Revenue Participation
Interest and Liquidated Damages, if any, due and payable thereon.
Principal of, premium (if any), interest and Liquidated Damages (if any)
on, the Senior Notes will be payable at the office or agency of the Issuers
maintained for such purpose or, at the option of the Issuers,
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payment of interest and Liquidated Damages (if any) may be made by check mailed
to the Holders of the Senior Notes at their respective addresses set forth in
the register of Holders of the Senior Notes; provided that if the Holder of any
Senior Notes has given wire transfer instructions to the Company, the Issuers
will be required to make all payments with respect to such Senior Notes by wire
transfer of immediately available funds to the account specified by such Holder.
Until otherwise designated by the Issuers, the Issuers' office or agency will be
the office of the Trustee maintained for such purpose. The Exchange Notes will
be issued in denominations of $1,000 and integral multiples thereof.
OPTIONAL REDEMPTION
The Senior Notes will not be redeemable prior to August 15, 2001.
Thereafter, the Senior Notes will be subject to redemption at the option of the
Issuers, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest (including Revenue
Participation Interest, if any) and Liquidated Damages (if any) thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on August 15 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
----------------------------------------------------------------- ----------
<S> <C>
2001............................................................. 115.00%
2002............................................................. 107.50%
2003 and thereafter.............................................. 100.00%
</TABLE>
Notwithstanding the foregoing, prior to August 15, 1999, the Issuers may
redeem outstanding Senior Notes with the net proceeds of one or more sales of
Capital Stock (other than Disqualified Stock) of OCC, Teleglobe Mobile or the
Company to one or more Persons at a redemption price equal to 115% of the
principal amount thereof, plus accrued and unpaid interest (including Revenue
Participation Interest, if any) and Liquidated Damages (if any) thereon to the
redemption date; provided, however, that: (i) not less than $127.5 million
aggregate principal amount of Senior Notes remain outstanding immediately after
any such redemption; and (ii) such redemption shall occur within 30 days after
the date of closing of such sale of Capital Stock.
MANDATORY REDEMPTION
The Issuers will not be required to make mandatory redemption or sinking
fund payments with respect to the Senior Notes. However, as described below, the
Issuers may be obligated, under certain circumstances, to make an offer to
purchase: (i) all outstanding Senior Notes at a redemption price of 101% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages (if any) to the date of purchase, upon a Change of Control; and (ii)
outstanding Senior Notes with a portion of the Net Proceeds of Asset Sales at a
redemption price of 100% of the principal amount thereof, plus accrued and
unpaid interest (including Revenue Participation Interest, if any) and
Liquidated Damages (if any) to the date of purchase. See "-- Repurchase at the
Option of Holders -- Change of Control" and "-- Limitation on Sales of Assets
and Subsidiary Interests."
SECURITY
The Indenture provided that upon the closing of the Old Notes Offering, the
Company purchase and pledge to the Collateral Agent for the benefit of the
Holders of the Senior Notes the Pledged Securities in such amount as will be
sufficient upon receipt of scheduled interest and principal payments of such
securities, in the opinion of a nationally recognized firm of independent
certified public accountants selected by the Company, to provide for payment in
full of the first four scheduled interest payments due on the Senior Notes. The
Company used approximately $44.8 million of the net proceeds of the Old Notes
Offering to acquire the Pledged Securities. The Pledged Securities are pledged
by the Company to the Collateral Agent for the benefit of the Holders of Senior
Notes pursuant to the Pledge Agreement and will be held by the Collateral Agent
in the Pledge Account. Pursuant to the Pledge Agreement, immediately prior to an
interest payment
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date on the Senior Notes, the Company may either deposit with the Collateral
Agent from funds otherwise available to the Company cash sufficient to pay the
interest scheduled to be paid on such date or the Company may direct the
Collateral Agent to release from the Pledge Account proceeds sufficient to pay
interest then due. In the event that the Company exercises the former option,
the Company may thereafter direct the Collateral Agent to release to the Company
from the Pledge Account proceeds or Pledged Securities in like amount.
Interest earned on the Pledged Securities will be added to the Pledge
Account. In the event that the funds or Pledged Securities held in the Pledge
Account exceed the amount sufficient, in the opinion of a nationally recognized
firm of independent certified public accountants selected by the Company, to
provide for payment in full of the first four scheduled interest payments due on
the Senior Notes (or, in the event an interest payment or payments have been
made, an amount sufficient to provide for payment in full of any interest
payments remaining, up to and including the fourth scheduled interest payment)
the Collateral Agent will be permitted to release to the Company at the
Company's request any such excess amount. The Senior Notes are secured by a
first priority security interest in the Pledged Securities and in the Pledge
Account and, accordingly, the Pledged Securities and the Pledge Account also
secure repayment of the principal amount of the Senior Notes to the extent of
such security.
Under the terms of the Pledge Agreement, assuming that the Company makes
the first four scheduled interest payments on the Senior Notes in a timely
manner, all the Pledged Securities will be released from the Pledge Account.
GUARANTEES
The obligations of the Issuers under the Senior Notes are guaranteed,
jointly and severally, by OCC, Teleglobe Mobile, ORBCOMM USA and ORBCOMM
International (except that the Guarantees are non-recourse to the shareholders
and partners of the Guarantors) and such other persons that become Subsidiary
Guarantors after the Issue Date (as described below) and each of their
respective successors. The guarantee issued by each Guarantor ranks senior in
right and priority of payment to all other indebtedness of such Guarantor that
is expressly subordinated to the guarantee of the Senior Notes and ranks pari
passu in right and priority of payment with all other indebtedness of such
Guarantor that is not expressly so subordinated to such guarantee, except to the
extent of any collateral securing such other indebtedness.
The Indenture contains provisions the intent of which is to provide that
the obligations of each Subsidiary Guarantor will be limited to the maximum
amount that will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from, rights to receive contribution from, or payments made by or on
behalf of any other Subsidiary Guarantor in respect of the obligations of such
other Subsidiary Guarantor under its Guarantee or pursuant to its contribution
obligations under the Indenture, result in the obligations of such Subsidiary
Guarantor under its Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under any applicable federal, state or foreign law. Each
Subsidiary Guarantor that makes a payment or distribution under a Guarantee
shall be entitled to contribution from each other Subsidiary Guarantor so long
as the exercise of such right does not impair the rights of the Holders of the
Senior Notes under the Guarantees. See "Risk Factors -- Fraudulent Conveyance
Considerations -- Subsidiary Guarantees."
The Indenture provides that in the event of: (i) a sale or other
disposition of all or substantially all of the assets of any Subsidiary
Guarantor or the sale of a Subsidiary Guarantor, by way of merger, consolidation
or otherwise; (ii) a Subsidiary Guarantor becoming an Unrestricted Subsidiary
pursuant to the terms of the Indenture; or (iii) a sale or other disposition of
all of the Capital Stock of any Subsidiary Guarantor, then such Subsidiary
Guarantor or the corporation acquiring the property, as applicable, shall be
released and relieved of any obligations under its guarantee, provided that the
Company complies with the provisions of the covenant entitled "Limitation on
Sales of Assets and Subsidiary Interests."
The Indenture provides that in the event: (i) the Credit Parties or any
other Guarantor shall transfer or cause to be transferred, in one transaction or
a series of related transactions, any assets, businesses, divisions or other
property having a book value determined in accordance with GAAP or a Fair Market
Value which,
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when aggregated with all Investments described in clause (vi) of the definition
of "Permitted Investment," would be in excess of the greater of (x) $5 million
or (y) 5% of the System Consolidated Net Worth as of the date of transfer to any
Subsidiary that is not a Subsidiary Guarantor; (ii) the Credit Parties or any
other Guarantor shall acquire another Subsidiary with assets having either a
book value determined in accordance with GAAP or a Fair Market Value which, when
aggregated with all Investments described in clause (vi) of the definition of
"Permitted Investment," would be in excess of the greater of (x) $5 million or
(y) 5% of the System Consolidated Net Worth as of the date on which any such
acquisition is consummated; or (iii) at any time after the Issue Date,
Restricted Subsidiaries of the Credit Parties and any Guarantors which are not
Subsidiary Guarantors shall, in the aggregate, hold, own or otherwise control
assets, businesses, divisions or property having either a book value determined
in accordance with GAAP or a Fair Market Value which, when aggregated with all
Investments described in clause (vi) of the definition of "Permitted
Investment," would be in excess of the greater of (x) $5 million or (y) 5% of
the System Consolidated Net Worth as of any date, then, in each such case, the
Credit Parties or the Guarantor shall cause such Restricted Subsidiary or any
number of Restricted Subsidiaries, as the case may be, to execute a supplemental
indenture for purposes of guaranteeing the Issuers' obligations under the
Indenture and the Senior Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Senior Notes has
the right to require the Issuers to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Senior Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest (including Revenue Participation Interest, if any) and Liquidated
Damages (if any) thereon to the date of purchase (the "Change of Control
Payment"). Within ten days following any Change of Control, the Issuers will
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Senior Notes
pursuant to the procedures required by the Indenture and described in such
notice. The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Senior Notes as a result of a Change of Control.
On the Change of Control Payment date, the Issuers will, to the extent
lawful:
(i) accept for payment all Senior Notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(ii) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Senior Notes or portions thereof so
tendered; and
(iii) deliver or cause to be delivered to the Trustee the Senior Notes
so accepted together with an Officers' Certificate stating the aggregate
principal amount of Senior Notes or portions thereof being purchased by the
Issuers.
The Paying Agent will promptly mail to each Holder of Senior Notes so
tendered the Change of Control Payment for such Senior Notes, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new Senior Note equal in principal amount to any unpurchased
portion of the Senior Note surrendered; provided that each such new Note will be
in a principal amount of $1,000 or an integral multiple thereof. The Issuers
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment date.
The Issuers will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the time and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Senior Notes validly tendered and not withdrawn under such Change
of Control Offer.
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Subject to the limitations discussed below, the Issuers could in the future
enter into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect the Issuers' capital structure or credit ratings.
Due to the highly leveraged structure of the Issuers, the Issuers may not have
sufficient funds to be able to repurchase all of the Senior Notes tendered in a
Change of Control Offer. The failure of the Issuers to purchase any Senior Notes
tendered in a Change of Control Offer will constitute an Event of Default under
the Indenture. See "-- Events of Default and Remedies."
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of any of the Credit Parties' assets. Although there is a developing body of
case law interpreting the phrase "substantially all," there is no precise
established definition of the phrase under applicable law. Accordingly, the
ability of a Holder of Senior Notes to require the Issuers to repurchase such
Notes as a result of a sale, lease, transfer, conveyance or other disposition of
less than all of the assets of the Issuers to another Person may be uncertain.
Limitation on Sales of Assets and Subsidiary Interests
The Indenture provides that the Credit Parties will not, and will not
permit any of their Restricted Subsidiaries to, engage in an Asset Sale unless:
(i) the Credit Party or such Restricted Subsidiary, as the case may
be, engaging in such Asset Sale receives consideration at the time of such
Asset Sale at least equal to the Fair Market Value of the assets sold or
otherwise disposed of; and
(ii) the aggregate Fair Market Value of all non-Cash Consideration
received therefor by such Credit Party or Restricted Subsidiary, as the
case may be, when aggregated with the Fair Market Value of all other
non-Cash Consideration received by the Credit Parties and their Restricted
Subsidiaries from all other Asset Sales since the Issue Date that has not
yet been converted into cash or Cash Equivalents (in either case, in U.S.
dollars or freely convertible into U.S. dollars), does not exceed the sum
of (without duplication) 5% of the aggregate Consolidated Tangible Net
Assets of all of the Credit Parties at the time of such Asset Sale;
provided, however, that any notes or similar obligations received by any of
the Credit Parties or such Restricted Subsidiaries from such transferees
that are immediately converted by the Credit Parties or such Restricted
Subsidiaries into cash, shall be deemed to be cash (to the extent of the
net cash received) for purposes of this clause (ii).
Within 270 days after the receipt of any Net Proceeds, the Issuers may
apply such Net Proceeds to: (i) repay, and thereby permanently reduce the
commitments or amounts available to be reborrowed under the Bank Credit Facility
pursuant to clause (vii) of the covenant entitled "Incurrence of Indebtedness or
Issuance of Restricted Subsidiary Disqualified Stock" or to repay the Senior
Notes or the MetLife Note; or (ii) an investment in Related Assets or a Related
Business. Pending the final application of any such Net Proceeds, the Issuers
may temporarily invest such Net Proceeds in any manner that is not prohibited by
the Indenture. Any Net Proceeds that are not applied or invested as provided in
the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate cumulative amount of Excess Proceeds exceeds $5
million, the Issuers will be required to make an offer to all Holders of Senior
Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Senior
Notes that may be purchased out of the Excess Proceeds (and not solely the
amount in excess of $5 million), at an offer price in cash in an amount equal to
100% of the principal amount thereof, plus accrued and unpaid interest
(including Revenue Participation Interest, if any) and Liquidated Damages (if
any) thereon to the date of purchase, in accordance with the procedures set
forth in the Indenture. To the extent that the aggregate amount of Senior Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Issuers may use any remaining Excess Proceeds for general business purposes. If
the aggregate amount of Senior Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee will select the Senior Notes to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds will be reset at zero.
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The Asset Sale Offer shall remain open for a period of 20 business days or such
longer period as may be required by law.
The foregoing provisions do not apply to the sale, lease, conveyance or
other disposition of all or substantially all of the assets of either of the
Issuers, OCC or Teleglobe Mobile, which is governed by the provisions of the
Indenture described below in "-- Merger, Consolidation or Sale of Assets."
SELECTION AND NOTICE OF SENIOR NOTES FOR REDEMPTION OR REPURCHASE
If less than all of the Senior Notes are to be redeemed or repurchased
pursuant to any purchase offer required under the Indenture at any time,
selection of Senior Notes for redemption or repurchase will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Senior Notes are listed or, if the Senior Notes
are not so listed, on a pro rata basis, selected by lot or by such method as the
Trustee shall deem fair and appropriate; provided that no Senior Note with a
principal amount of $1,000 or less shall be redeemed or repurchased in part.
Notices of redemption or repurchase shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption or repurchase date to
each Holder of Senior Notes to be redeemed or repurchased at its registered
address. If any Senior Note is to be redeemed or repurchased in part only, the
notice that relates to such Senior Note shall state the portion of the principal
amount thereof to be redeemed or repurchased. A new Senior Note in principal
amount equal to the unredeemed or unrepurchased portion will be issued in the
name of the Holder thereof upon cancellation of the original Senior Note. On and
after the redemption or repurchase date, interest will cease to accrue on the
Senior Notes or portions thereof called for redemption or repurchase.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Credit Parties will not, and will not
permit any of their Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on account of
the Equity Interests of any Credit Party (including, without limitation,
any payment in connection with any merger or consolidation involving the
Credit Parties or any of their Restricted Subsidiaries), other than
dividends or distributions payable (a) in Equity Interests (other than
Disqualified Stock) of the Credit Parties or any of their Restricted
Subsidiaries or (b) to any Credit Party or to any Restricted Subsidiary of
a Credit Party;
(ii) purchase, redeem, defease, retire or otherwise acquire or return
for value any Equity Interests of any Credit Party, other than any such
Equity Interests owned by a Credit Party or any Wholly Owned Restricted
Subsidiary of a Credit Party;
(iii) make any principal payment on (including at maturity) or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated (whether pursuant to its terms, by
operation of law, structurally or otherwise) to the Senior Notes; or
(iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Issuers would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the immediately preceding fiscal quarter,
have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Indebtedness to Cash Flow Ratio test set forth in the first
paragraph of the covenant entitled "Incurrence of Indebtedness or Issuance
of Restricted Subsidiary Disqualified Stock"; and
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(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Credit Parties and their Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (iii) through (v) of the next succeeding paragraph), is less
than the sum of:
(1) the sum of (without duplication) 50% of the Consolidated Net
Income of each of the Credit Parties after elimination of any intercompany
items and in each case for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing after the Issue Date
to the end of the Company's most recently ended fiscal quarter for which
financial statements are available at the time of such Restricted Payment
(or, if such aggregate Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus
(2) 100% of the aggregate net cash proceeds received by the Credit
Parties from the issue or sale since the Issue Date of Equity Interests of
any Credit Party or of debt securities of any Credit Party that have been
converted into such Equity Interests (other than (A) Equity Interests (or
convertible debt securities) sold to a Subsidiary of any Credit Party, (B)
Disqualified Stock or debt securities that have been converted into
Disqualified Stock, (C) Disqualified Capital Contributions and (D) equity
capital contributions described in clause (vii) of the definition of
"Permitted Investment"), plus
(3) to the extent that any Restricted Investment that was made after
the Issue Date is sold for cash or otherwise liquidated or repaid for cash,
the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment.
The foregoing provisions do not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture;
(ii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of any Credit Party in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Subsidiary
of any Credit Party) of other Equity Interests of any Credit Party (other
than any Disqualified Stock and Disqualified Capital Contributions);
provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement or other acquisition shall
be excluded from clause (2) of the preceding paragraph;
(iii) the repayment, defeasance, redemption or repurchase of
Intercompany Indebtedness (as defined in clause (v) of the covenant
entitled "Incurrence of Indebtedness or Issuance of Restricted Subsidiary
Disqualified Stock") or Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness or the substantially
concurrent sale (other than to a Subsidiary of any Credit Party) of Equity
Interests of any Credit Party (other than Disqualified Stock and
Disqualified Capital Contributions); provided that the amount of any such
net cash proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from clause (2) of the
preceding paragraph;
(iv) the payment of cash dividends on preferred partnership interests
of any Credit Party that is a partnership if, at the time such preferred
partnership interests were issued, such Credit Party delivered to the
Trustee an Officers' Certificate certifying that (a) the aggregate
liquidation preference of the preferred partnership interest so issued does
not exceed the aggregate amount of Indebtedness that the Company is then
permitted to incur pursuant to clauses (vii) and (x) of the exceptions to
the covenant entitled "Incurrence of Indebtedness or Issuance of Restricted
Subsidiary Disqualified Stock" and (b) the Company is electing to reduce
permanently the amount of Indebtedness that any Person is permitted to
incur pursuant to such clauses (vii) and (x) by the amount of such
aggregate liquidation preference;
(v) the purchase, redemption or retirement by OCC of shares of its
common stock held by an employee or former employee of one of the Credit
Parties or their Subsidiaries or Orbital issued under the OCC Stock Option
Plan pursuant to the terms of such OCC Stock Option Plan; provided that (1)
the
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aggregate number of shares of common stock purchased, redeemed or retired
from and after the Issue Date does not exceed 900,000 shares, and (2) the
amount of any such payments in any fiscal year does not exceed $1,000,000;
and provided, further, that the limitations set forth in clauses (1) and
(2) of the foregoing proviso do not apply to the purchase, redemption or
retirement of shares of common stock with funds or other property
(including common stock of Orbital) contributed by partners of OCC,
Teleglobe Mobile or the Company (other than Disqualified Capital
Contributions) or amounts paid by any of the Credit Parties for which any
of the Credit Parties receives concurrent reimbursement from any other
Person (other than the Credit Parties or their Subsidiaries);
(vi) payments and/or distributions (1) by OCC to its shareholders
pursuant to the Tax Sharing Agreement and (2) by Teleglobe Mobile to its
partners to the extent necessary to pay income tax liabilities of such
partners (determined on a hypothetical basis using the highest marginal
income tax rate applicable to such partners at the time of such payment)
arising from income of Teleglobe Mobile allocable to such partners and
attributable to Teleglobe Mobile's investment in the Company, but only to
the extent Teleglobe Mobile is not subject to income tax on such income;
and
(vii) distributions made to Orbital and Teleglobe of unused portions
of any amount drawn under the Partners' Insurance Contingent Commitment (as
described under "-- Maintenance of Insurance") and Partners' Contingent
Commitment (as described under "-- Partners' Contingent Commitment").
A Credit Party may designate any Restricted Subsidiary of such Credit Party
to be an Unrestricted Subsidiary if such designation would not cause a Default
and, at the time of and after giving effect to such designation, the Issuers
could incur $1.00 of additional Indebtedness under the applicable provisions of
the first paragraph of the covenant entitled "Incurrence of Indebtedness or
Issuance of Restricted Subsidiary Disqualified Stock"; provided that in no event
shall all or any portion of the material assets or properties (other than cash)
owned by the Credit Parties on the Issue Date be transferred to or held by an
Unrestricted Subsidiary of any of the Credit Parties; and provided, further,
that such ability to incur $1.00 of additional Indebtedness shall not be
required in the case of any newly created Unrestricted Subsidiary funded solely
with an Investment described in clause (vii) of the definition of "Permitted
Investment." For purposes of making such determination, all outstanding
Investments by the Credit Parties and their Restricted Subsidiaries (except to
the extent repaid in cash and except for Investments described in clause (vii)
of the definition of "Permitted Investment") in the Subsidiary so designated
will be deemed to be Restricted Payments at the time of such designation and
will reduce the amount available for Restricted Payments under the first
paragraph of this covenant. All such outstanding Investments will be deemed to
constitute Investments in an amount equal to the greatest of:
(i) the net book value of such Investments at the time of such
designation;
(ii) the Fair Market Value of such Investments at the time of such
designation; and
(iii) the original Fair Market Value of such Investments at the time
they were made.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments, if not made in cash, shall be the
Fair Market Value on the date of the Restricted Payment of the asset(s) proposed
to be transferred by the Credit Party or such Restricted Subsidiary, as the case
may be, pursuant to the Restricted Payment. Not later than the date of making
any Restricted Payment, the Issuers shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this covenant were computed,
which calculations may be based upon the latest available financial statements
of the Company, ORBCOMM USA and ORBCOMM International.
Incurrence of Indebtedness or Issuance of Restricted Subsidiary Disqualified
Stock
The Indenture provides that the Credit Parties will not, and will not
permit any of their Restricted Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guaranty or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including
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Acquired Debt) or any Disqualified Stock of any Restricted Subsidiary; provided,
however, that the Issuers, ORBCOMM USA or ORBCOMM International or any of their
Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) if,
after giving pro forma effect to the incurrence of such Indebtedness and the use
of proceeds thereof, the aggregate Indebtedness to Cash Flow Ratio of the Credit
Parties does not exceed 4.0 to 1. For purposes of the foregoing, the total
amount of funds available under any Bank Credit Facility will be deemed to have
been incurred at the time that the Company entered into the instruments or
agreements providing therefor.
The foregoing provisions do not apply to:
(i) the incurrence by the Issuers of Indebtedness represented by the
Notes and the Indenture or the incurrence by the Guarantors of Indebtedness
represented by the Guarantees;
(ii) Existing Indebtedness;
(iii) Indebtedness under (A) Hedging Obligations, provided that (1)
the notional principal amount of any interest rate protection agreement
does not significantly exceed the principal amount of the Indebtedness to
which such interest rate protection agreement relates and (2) any
agreements related to fluctuations in currency rates do not increase the
outstanding Indebtedness other than as result of fluctuations in foreign
currency exchange rates, and (B) performance, surety and workers'
compensation bonds or other obligations of a like nature incurred in the
ordinary course of business;
(iv) the incurrence by any Unrestricted Subsidiary of any of the
Credit Parties of Non-Recourse Debt; provided that if any such Indebtedness
ceases to be Non-Recourse Debt of an Unrestricted Subsidiary such event
shall be deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary;
(v) Indebtedness of any of the Credit Parties or any of their
Restricted Subsidiaries owed to and held by any of the Credit Parties or
any of their Wholly Owned Restricted Subsidiaries or a Guarantor's
obligations under a guarantee thereof, as the case may be (the Indebtedness
incurred pursuant to this clause (v) being hereafter referred to as
"Intercompany Indebtedness"); provided that an incurrence of Indebtedness
shall be deemed to have occurred upon (i) any sale or other disposition of
Intercompany Indebtedness to a Person other than any of the Credit Parties
or any of their Restricted Subsidiaries, (ii) any sale or other disposition
of Equity Interests of any of the Credit Parties' Restricted Subsidiaries
which holds Intercompany Indebtedness such that such Restricted Subsidiary
ceases to be a Restricted Subsidiary after such sale or other disposition
or (iii) designation of a Restricted Subsidiary as an Unrestricted
Subsidiary;
(vi) Non-Recourse Debt to finance purchase money obligations;
(vii) the incurrence by any of the Issuers, ORBCOMM USA or ORBCOMM
International or any of their Restricted Subsidiaries (or by OCC or
Teleglobe Mobile as a guarantor of such Indebtedness) of Indebtedness under
a Bank Credit Facility, provided that the aggregate principal amount at any
time outstanding under this clause (vii) does not exceed $35 million, less
the aggregate liquidation preference of any preferred partnership interests
issued in reliance on clause (iv) of the exceptions to the covenant
entitled "Restricted Payments" and less the aggregate principal amount of
Indebtedness under this clause (vii) which is refinanced under clause
(viii) below;
(viii) Indebtedness of any of the Issuers, ORBCOMM USA or ORBCOMM
International or any of their Restricted Subsidiaries ("Permitted
Refinancing Indebtedness") incurred to refinance, replace or refund
Indebtedness ("Refinanced Indebtedness") incurred pursuant to the
Indebtedness to Cash Flow Ratio test set forth in the first paragraph of
this covenant or pursuant to clauses (i), (ii), (vii) or (x) of this
covenant; provided that:
(a) the aggregate principal amount of such Permitted Refinancing
Indebtedness does not exceed the aggregate principal amount of the
Refinanced Indebtedness (including accrued and unpaid interest thereon);
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(b) such Permitted Refinancing Indebtedness shall have a final
maturity equal to or later than, and a Weighted Average Life to Maturity
equal to or greater than, the final maturity and Weighted Average Life
to Maturity of the Refinanced Indebtedness, respectively;
(c) such Permitted Refinancing Indebtedness shall rank no higher
relative to the Senior Notes than the Refinanced Indebtedness and in no
event may any Indebtedness of any of the Issuers, ORBCOMM USA or ORBCOMM
International or any of their Restricted Subsidiaries be refinanced with
Indebtedness of any Restricted Subsidiary under this clause (viii)
(except to the extent that any such Restricted Subsidiary was, prior to
such refinancing, a guarantor of such Refinanced Indebtedness); and
(d) in no event shall any Permitted Refinancing Indebtedness
refinance, replace or refund the MetLife Note unless the Liens securing
such MetLife Note are released in full;
(ix) the incurrence by any of the Issuers, ORBCOMM USA or ORBCOMM
International or any of their Restricted Subsidiaries of Capital Lease
Obligations in an aggregate amount for all such Persons not to exceed $5
million at any one time outstanding;
(x) the incurrence by any of the Issuers, ORBCOMM USA or ORBCOMM
International or any of their Restricted Subsidiaries of Indebtedness to
finance the acquisition, construction or development, either alone or
together with third Persons, of domestic and/or international gateways,
related ground systems and associated costs and expenses in an aggregate
amount not to exceed $10 million at any one time outstanding for all such
Persons less the aggregate liquidation preference of any preferred
partnership interests issued in reliance on clause (iv) of the exceptions
to the covenant entitled "Restricted Payments" and less the aggregate
principal amount of Indebtedness under this clause (x) which is refinanced
under clause (viii) above;
(xi) the incurrence by OCC and/or Teleglobe Mobile of Indebtedness in
an aggregate amount (for OCC and Teleglobe Mobile, taken together as a
whole) at any one time outstanding not to exceed $10 million; provided that
such Indebtedness could then otherwise have been incurred by the Issuers,
ORBCOMM USA or ORBCOMM International under the Indebtedness to Cash Flow
Ratio test set forth under the first paragraph of this covenant; and
(xii) the incurrence of Indebtedness under the Partners' Contingent
Commitment pursuant to the "Maintenance of Insurance Covenant."
Liens
The Indenture provides that the Credit Parties will not, and will not
permit any of their Restricted Subsidiaries to, directly or indirectly, create,
incur, assume or suffer 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 Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Credit Parties will not, and will not
permit any of their Restricted Subsidiaries to, directly or indirectly, 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 any Credit Party
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 any Credit Party or any of their
Restricted Subsidiaries;
(iii) make loans or advances to any Credit Party or any of their
Restricted Subsidiaries; or
(iv) transfer any of its properties or assets to any Credit Party or
any of their Restricted Subsidiaries,
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except for such encumbrances or restrictions existing under or by reason of:
(a) the Indenture, the Pledge Agreement, the Notes and the
Guarantees;
(b) Existing Indebtedness;
(c) applicable law;
(d) any instrument governing Indebtedness or Capital Stock of a
Person acquired by any of the Credit Parties or any of their Restricted
Subsidiaries as in effect at the time of such acquisition (except to the
extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so
acquired;
(e) customary non-assignment provisions in leases or other
agreements entered into in the ordinary course of business;
(f) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature
described in clause (iv) above on the property so acquired;
(g) Permitted Refinancing Indebtedness; provided that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in
the agreements governing the Refinanced Indebtedness;
(h) any instrument governing Indebtedness of a Subsidiary
Guarantor, provided such Indebtedness is incurred in accordance with the
Indenture; or
(i) in the case of clauses (a), (b), (d), (e), (f), (g) and (h)
above, any amendments, modifications, restatements, renewals, increases,
supplements, modifications, restatements or refinancings thereof,
provided that such amendments, modifications, restatements or
refinancings are not materially more restrictive with respect to such
dividend and other payment restrictions than those contained in such
instruments as in effect on the date of their incurrence.
Merger, Consolidation or Sale of Assets
The Indenture provides that neither the Credit Parties nor any Guarantor
(to the extent not permitted by the sale provisions under "-- Guarantees" above)
may consolidate or merge with or into (whether or not any such Credit Party or
such Guarantor, as the case may be, is the surviving Person), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another Person
(other than any consolidation or merger of a Credit Party or a Guarantor with or
into, or the sale, assignment, transfer, lease, conveyance or disposal by a
Credit Party or a Guarantor to, any other Credit Party or Guarantor) unless:
(i) the Credit Party or such Guarantor, as the case may be, is the
surviving Person or the Person formed by or surviving any such
consolidation or merger (if other than the Credit Party or such Guarantor,
as the case may be) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States, any state
thereof or the District of Columbia;
(ii) the Person formed by or surviving any such consolidation or
merger (if other than the Credit Party or such Guarantor, as the case may
be) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Credit Party or such Guarantor, as the case may be,
under the Notes, the Indenture, the Pledge Agreement and the Guarantees
pursuant to a supplemental indenture in form reasonably satisfactory to the
Trustee;
(iii) immediately after such transaction, no Default or Event of
Default exists;
(iv) the Credit Party or such Guarantor, as the case may be, or the
Person formed by or surviving any such consolidation or merger (if other
than the Credit Party or such Guarantor, as the case may be)
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or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated
Net Worth of such Credit Party or such Guarantor immediately preceding the
transaction; and
(v) the Issuers will, at the time of such transaction and after giving
pro forma effect thereto as if such transaction had occurred at the
beginning of the immediately preceding fiscal quarter, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the
Indebtedness to Cash Flow Ratio test set forth in the first paragraph of
the covenant entitled "Incurrence of Indebtedness or Issuance of Restricted
Subsidiary Disqualified Stock."
Transactions with Affiliates
The Indenture provides that the Credit Parties will not, and will not
permit any of their Restricted Subsidiaries to, sell, lease transfer or
otherwise dispose of any of their properties or assets to, or purchase any
property or assets from, or enter into or make any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless:
(i) such Affiliate Transaction is on terms that are no less favorable
to the Credit Party or such Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Credit Party or such
Restricted Subsidiary with an unrelated Person;
(ii) such Credit Party delivers to the Trustee:
(a) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $1 million, an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i)
above; and
(b) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $5 million, an opinion as to the fairness of
such Affiliate Transaction to the Credit Party or Restricted Subsidiary
involved in such Affiliate Transaction from a financial point of view
issued by an Independent Financial Advisor or, with respect to
communications-related matters, a recognized expert in the
communications industry;
provided that the following are deemed not to be Affiliate Transactions:
(1) any employment agreement, stock option or stock purchase
agreement (including the OCC Stock Option Plan) entered into by any
Credit Party or any of their Restricted Subsidiaries with any of their
respective employees in the ordinary course of business;
(2) transactions between or among the Credit Parties and/or their
Wholly Owned Restricted Subsidiaries;
(3) Restricted Payments permitted by clauses (i), (ii), (iv), (v),
(vi) and (vii) of the second paragraph of the covenant entitled
"Restricted Payments" and Permitted Investments of a type referred to in
clauses (i), (iii), (vi) and (vii) of the definition of Permitted
Investments;
(4) the sale of common Equity Interests (other than Disqualified
Stock) of any Credit Party for cash to an Affiliate of any of the Credit
Parties;
(5) transactions pursuant to agreements entered into with resellers
of the Company's products and services, manufacturers of Subscriber
Communicators and International Licensees on terms substantially the
same as the Company's standard agreements entered into with such parties
in the ordinary course of business, and transactions pursuant to a
Service License Agreement for Malaysia or a region including Malaysia
with TRI or any Person in which TRI holds an interest, provided that
such agreement is approved by the unanimous consent of the partners of
the Company;
(6) transactions pursuant to the Procurement Agreement, the
Administrative Services Agreement, the Canada Service License Agreement,
the Teleglobe Administrative Services Agreement,
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the Gateway Maintenance Contract and the Magellan Agreement, in each
case as in effect on the Issue Date, including the exercise of any
option specified in Sections 2.2, 2.6, 2.8, 2.9 or 2.10 of the
Procurement Agreement (including entering into time and materials
agreements thereunder pursuant to the terms of the Procurement
Agreement) and amendments, supplements or other modifications to the
Procurement Agreement required to effectuate the exercise of such
options;
(7) amendments, supplements or other modifications effecting design
or other technical specifications changes to the Procurement Agreement
that do not involve the payment of cash by any of the Credit Parties or
any of their Restricted Subsidiaries in connection therewith; provided
that any such amendment, supplement or modification shall have been
approved by the unanimous consent of all the General Partners of the
Company;
(8) the sale of securities (other than common Equity Interests) of
any of the Credit Parties for cash to an Affiliate of any of the Credit
Parties; provided that:
(A) an amount of such securities at least equal to the amount
sold to such Affiliate have been or are being sold substantially
simultaneously to Persons that are not Affiliates of any of the
Credit Parties;
(B) the price per security paid by such Affiliate is no less
than the price paid by such non-Affiliates; and
(C) none of the Credit Parties shall have entered into any other
arrangement with such non-Affiliates to induce such non-Affiliates to
purchase such securities; and
(9) the procurement of a launch vehicle from an Affiliate of the
Company, if required to launch the "ground spare" or replacement
satellites, provided such procurement is on terms substantially similar
to those contained in the Procurement Agreement.
Maintenance of Insurance
The Indenture provides that the Issuers shall maintain in full force and
effect:
(i) on or prior to the date on which at least 26 satellites have been
launched and tested and, together with the related ground systems, are
reasonably believed by the Company to be ready for commercial operation as
part of the ORBCOMM System, at the time of the launch of each such
satellite, launch insurance in an amount sufficient to provide for the
procurement of a launch vehicle in the event of a launch failure;
(ii) at all times following the date a satellite has been successfully
launched and deployed and is placed in commercial service, in-orbit
insurance with respect to such satellite representing the value of such
failed satellite (taking into account the foregone useful life of such
satellite) and the pro rata cost of a launch vehicle, payable in the event
that such satellite ceases to be used for commercial revenue producing
service (provided that such insurance may contain customary provisions for
deductible payments and minimum thresholds for satellite failure); and
(iii) in the event (a) the Company is required to use four or more of
the Company's "ground spare" satellites available under the Procurement
Agreement, or (b) the Company loses four or more satellites within any
plane of eight satellites, or six or more satellites within any two planes
of eight satellites, as a result of a launch failure or in-orbit failure
prior to the placement of satellites into commercial service, for the time
periods specified in clause (i) above, insurance sufficient to provide for
the construction and launch of replacement satellites of equivalent
capacity and functionality payable in the event of a loss of four or more
satellites within any plane of eight satellites, or six or more satellites
within any two planes of eight satellites, as a result of a launch failure
or in-orbit failure prior to placement of such satellites into commercial
service.
Notwithstanding the foregoing, the Company is not obligated to obtain
launch or in-orbit insurance with respect to the two satellites currently
operational and the two satellites currently planned to be launched on a
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secondary basis on a Taurus launch vehicle and launch insurance with respect to
other launches of up to an aggregate of three additional satellites on a
secondary basis.
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 entity other than an
entity referred to in clause (i) if the General Partners of the Company
determine in good faith (evidenced by a unanimous resolution of the General
Partners of the Company and set forth in an Officers' Certificate delivered
to the Trustee) that such entity is creditworthy and otherwise capable of
bearing the financial risk of providing such insurance and making payments
in respect of any claims on a timely basis; and
(iii) unrestricted cash segregated and maintained by the Company in a
segregated account established with an Eligible Institution (the "Insurance
Account") solely for disbursement in accordance with the terms of this
covenant ("Cash Insurance"), and to be held in trust for the sole and
express benefit of the Holders of the Senior Notes.
Within 30 days following any date on which the Issuers are required to
obtain insurance pursuant to the Indenture, the Company will deliver to the
Trustee an insurance certificate certifying the amount of insurance then
carried, and in full force and effect, and an Officers' Certificate stating that
such insurance, together with any other insurance or Cash Insurance maintained
by the Issuers, complies with the 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 covenant,
the Issuers shall deliver, in lieu of any insurance certificate otherwise
required by this covenant, an Officers' Certificate to the Trustee certifying
the amount of such Cash Insurance.
In the event that the Issuers receive any proceeds of any insurance that
they are required to maintain pursuant to this covenant, the Issuers shall
promptly deposit such proceeds into an escrow account established with an
Eligible Institution for such purpose. If the Issuers maintain any Cash
Insurance in satisfaction of any part of their obligation to maintain insurance
pursuant to this covenant, the Issuers shall transfer the cash maintained in the
Insurance Account to such escrow account upon the occurrence of the event (e.g.,
a launch failure) that would have entitled the Issuers to the payment of
insurance had the Issuers purchased insurance from a recognized insurance
provider. The Company may use monies on deposit in such escrow account for the
design, development, construction, procurement, launch and insurance of
replacement satellites if: (i) the Company delivers to the Trustee a certificate
of the Company's President certifying that such replacement satellites are of
comparable or superior technological capability as compared with the satellites
being replaced, (ii) within 30 days following the receipt of such insurance
proceeds, the Company delivers to the Trustee an Officers' Certificate
certifying that (A) such replacement satellites are scheduled to be launched
within 18 months following delivery from the escrow account of such insurance
proceeds; and (B) the Company will have sufficient funds to service the
Company's projected debt service requirements until the scheduled launch of such
replacement satellite and to develop, construct, launch and insure such
replacement satellite.
In the event (an "Insurance Contingency Event") that (i) four or more
satellites within any plane of eight satellites, or six or more satellites
within any two planes of satellites, suffer an in-orbit failure prior to such
satellites being placed in commercial service, and, as a result thereof, the
Company is required to launch its ground spare satellites and (ii) there are not
sufficient insurance proceeds to procure a launch vehicle for the launch of such
ground spare satellites (the amount of any such insufficiency being referred to
as the "Launch Deficiency Amount"), then the Company shall be required to
draw-down on the Partners' Insurance
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Contingent Commitment (as defined below) prior to any further borrowings under
the Bank Credit Facility if, but only to the extent that, the Company's existing
levels of cash and cash equivalents are less than $15 million at any time after
the Insurance Contingency Event through the date the Company has 26 satellites
in commercial operation (the "Full Deployment Date"). "Partners' Insurance
Contingent Commitment" shall mean a commitment by Orbital and Teleglobe to
provide in the aggregate up to the lesser of (x) $15 million less any amounts
drawn under the Partners' Contingent Commitment or (y) the Launch Deficiency
Amount in capital contributions or debt financing expressly subordinated to the
Senior Notes (at then prevailing interest rates, which subordinated debt
financing shall not mature or be subject to acceleration prior to maturity of
the Senior Notes and which shall not provide for cash interest payments prior to
maturity of the Notes) from and after an Insurance Contingency Event through the
Full Deployment Date. The Company shall have the Partners' Insurance Contingent
Commitment in full force and effect from the Issue Date through the Full
Deployment Date. Notwithstanding the restrictions contained in the covenant
entitled "Restricted Payments," following the Full Deployment Date, Teleglobe
and Orbital are permitted to receive a distribution equal to the unused portions
of any amounts drawn under the Partners' Insurance Contingent Commitment.
Repayment of Existing Indebtedness
The Indenture provides that the Company establish a segregated account with
a recognized financial institution and deposit into such account from the
proceeds of the Old Notes Offering an amount sufficient to pay in full when due
all remaining scheduled interest and principal payments on the MetLife Note.
Interest earned on such account shall be payable to the Company. In the event
the funds held in such segregated account exceed the amount sufficient to
provide for payment in full of the principal of and interest on the MetLife
Note, the Company is permitted to receive from such segregated account any such
excess amount. At all times that the Company is complying with the terms of this
covenant, amounts outstanding under the MetLife Note shall not constitute
"Indebtedness" under the Indenture and amounts held in such segregated account
shall not constitute assets of any Credit Party under the Indenture.
Business Activities
The Indenture provides that the Credit Parties will not, and will not
permit any of their Restricted Subsidiaries to, engage in any business other
than that which is related to the design, development, procurement,
installation, operation or marketing of communications systems and businesses.
The Indenture will also provide that Capital shall not own any operating assets
or other property or conduct any business other than to serve as an Issuer and
obligor with respect to the Senior Notes.
Partners' Contingent Commitment
In the event (a "Contingency Event") that (i) at least 20 satellites have
not been placed in commercial service by December 31, 1998 and (ii) the
Company's existing levels of cash and cash equivalents are less than $25 million
(the amount of any such shortfall at any time prior to the Initial Deployment
Date (as defined below) being referred to as the "Deficiency Amount"), then the
Company shall be required to draw-down on the Partners' Contingent Commitment
(as defined below) from time to time after the Contingency Event through the
date the Company has 20 satellites in commercial operation (the "Initial
Deployment Date"). "Partners' Contingent Commitment" shall mean a commitment by
Orbital and Teleglobe to provide in the aggregate to the Company up to the
lesser of (x) $30 million less amounts drawn under the Partners' Insurance
Contingent Commitment, (y) the Deficiency Amount or (z) the amount required to
complete deployment of such 20 satellites, in capital contributions or debt
financing expressly subordinated to the Notes (at then prevailing interest
rates, which subordinated debt financing shall not mature or be subject to
acceleration prior to maturity of the Senior Notes and which shall not provide
for cash interest payments prior to maturity of the Senior Notes) from and after
a Contingency Event through the Initial Deployment Date, and the Partners'
Contingent Commitment shall thereafter expire. The Company shall have the
Partners' Contingent Commitment in full force and effect from the Issue Date
through the Initial Deployment Date. Notwithstanding the restrictions contained
in the covenant entitled "Restricted Payments," following the
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Initial Deployment Date, Teleglobe and Orbital are permitted to receive a
distribution equal to the unused portion of any amounts drawn under the
Partners' Contingent Commitment.
Contingency Fund
The Indenture provides that the Company establish a segregated account with
a recognized financial institution and shall deposit $13 million into such
account from the proceeds of the Old Notes Offering (the "Contingency Fund").
The Company has agreed that it will not expend monies in the Contingency Fund
unless and until it has already expended all of the remaining proceeds of the
Offering, and will only expend monies in the Contingency Fund to fund
development and deployment of the ORBCOMM System and related operating expenses.
Amounts in such segregated account comprising the Contingency Fund may be
invested by the Company in cash or Cash Equivalents in accordance with the terms
of the Indenture.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Senior Notes are outstanding, the
Issuers will furnish to the Holders of Senior Notes:
(i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Issuers were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of
operations of the Issuers and their Restricted Subsidiaries and, with
respect to the annual information only, a report thereon by the Issuers'
independent certified public accountants; and
(ii) all information that would be required to be filed with the
Commission on Form 8-K if the Issuers were required to file such reports.
In addition, together with the information provided in clauses (i) and (ii)
above, the Issuers have agreed to provide supplemental financial information to
the extent permitted by the Commission in the Management's Discussion and
Analysis of Financial Condition and Results of Operations section of such
reports or other section of such reports as appropriate consisting of revenue
(allocated between domestic and international operations), expense, earnings
before interest and taxes, net income, capital expenditures, cash, debt,
depreciation and amortization and subscriber data for the Company, ORBCOMM USA
and ORBCOMM International and reflecting elimination of intercompany
transactions. In the event the Commission does not permit such supplemental
financial information to be included in such reports, then the Issuers will
supply such information supplementally to the registered Holders, unless
providing such information supplementally would, in the reasonable judgment of
counsel to the Company, violate applicable law.
The Indenture also provides that the Issuers will furnish to the Holders of
Senior Notes all information that OCC, Teleglobe Mobile, ORBCOMM USA and ORBCOMM
International would be required to file with the Commission if the Issuers were
required to file the public reports described above.
In addition, whether or not required by the rules and regulations of the
Commission, but only if then permitted by the Commission, the Issuers and, to
the extent set forth in the preceding paragraph, OCC, Teleglobe Mobile, ORBCOMM
USA and ORBCOMM International have agreed to file a copy of all such information
and reports with the Commission for public availability and make such
information available to securities analysts and prospective investors upon
request. In addition, for so long as any Senior Notes remain outstanding, the
Issuers will 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.
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EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event
of Default:
(i) default for 30 days in the payment when due of interest (including
Revenue Participation Interest, if any) on, or Liquidated Damages (if any)
with respect to, the Senior Notes;
(ii) default in payment when due (whether at maturity, upon redemption
or repurchase, or otherwise) of the principal of or premium (if any) on the
Senior Notes;
(iii) default in the payment of principal and interest (including
Revenue Participation Interest, if any) or Liquidated Damages (if any) on
Senior Notes required to be purchased pursuant to the provisions described
under the captions "-- Repurchase at the Option of Holders -- Change of
Control," "-- Repurchase at the Option of Holders -- Limitations on Sales
of Assets and Subsidiary Interests," or failure by the Credit Parties to
comply with the provisions described under "-- Certain Covenants -- Merger,
Consolidation or Sale of Assets;"
(iv) failure by the Credit Parties or any of their Restricted
Subsidiaries for 30 days after notice to comply with any of their other
covenants in the Indenture or the Senior Notes;
(v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Credit Parties or any of their
Restricted Subsidiaries (or the payment of which is guaranteed by the
Credit Parties or any of their Restricted Subsidiaries), whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default:
(a) is caused by a failure to pay principal of, or premium, if any,
or interest on, such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
"Payment Default"); or
(b) results in the acceleration (which acceleration has not been
rescinded) of such Indebtedness prior to its express maturity, and, in
each case described in clauses (a) and (b) of this paragraph, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated,
aggregates $5 million or more;
(vi) failure by the Credit Parties or any of their Restricted
Subsidiaries to pay final judgments (other than any judgments as to which a
reputable insurance company has accepted full liability and whose bond,
premium or similar charge therefor is not in excess of $5 million)
aggregating in excess of $5 million, which judgments are not paid,
discharged or stayed within 60 days after their entry;
(vii) breach by the Issuers of any representation or warranty set
forth in the Pledge Agreement, or default by the Issuers in the performance
of any covenant set forth in the Pledge Agreement, or repudiation by the
Issuers of any of their obligations under the Pledge Agreement or the
unenforceability of the Pledge Agreement against the Issuers for any reason
which in any one case or in the aggregate results in a material impairment
of the rights intended to be afforded thereby;
(viii) termination or loss, for any reason, of the FCC License;
(ix) certain events of bankruptcy or insolvency with respect to the
Credit Parties or any of their Restricted Subsidiaries; and
(x) any Guarantee of the Senior Notes shall be held in a judicial
proceeding to be unenforceable or invalid or shall cease for any reason to
be in full force and effect, or any Guarantor, or any person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under its
Guarantee of any Notes.
If any Event of Default occurs and is continuing with respect to the Senior
Notes, the Trustee or the Holders of at least 25% of the aggregate principal
amount of the then outstanding Senior Notes may declare all the Senior Notes to
be due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency with
respect to the Issuers, any
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Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Senior
Notes will become due and payable without further action or notice. Holders of
the Senior Notes may not enforce the Indenture or the Senior Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Senior Notes may direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from Holders of
the Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest) if
it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuers with
the intention of avoiding payment of the premium that the Issuers would have had
to pay if the Issuers then had elected to redeem the Senior Notes pursuant to
the optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable upon the acceleration of the
Senior Notes. If an Event of Default occurs prior to August 15, 2001 by reason
of any such willful action (or inaction), by or on behalf of the Issuers with
the intention of avoiding the prohibition on redemption of the Senior Notes
prior to August 15, 2001, then the premium specified in the Indenture shall also
become immediately due and payable to the extent permitted by law upon the
acceleration of the Senior Notes.
The Holders of a majority in aggregate principal amount of the Senior Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture, except a continuing Default or Event of
Default in the payment of interest (including Revenue Participation Interest, if
any) on, or the principal of, the Senior Notes.
The Credit Parties are required to deliver to the Trustee quarterly a
statement regarding compliance with the Indenture, and the Credit Parties are
required, upon becoming aware of any Default or Event of Default, to deliver to
the Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, PARTNERS, OFFICERS, EMPLOYEES, INCORPORATORS
AND STOCKHOLDERS
No director, general or limited partner of any Credit Party, authorized
representative of a general partner of any Credit Party, or officer, employee,
incorporator or stockholder of any Credit Party, as such, shall have any
liability for any obligations of the Credit Parties under the Senior Notes, the
Indenture or the Pledge Agreement or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each Holder of Senior Notes,
by accepting a Senior Note, waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Senior Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuers may, at their option and at any time, elect to have all of
their obligations discharged with respect to the outstanding Senior Notes
("Legal Defeasance") except for:
(i) the rights of Holders of outstanding Senior Notes to receive
payments in respect of the principal of, and premium (if any), interest and
Liquidated Damages (if any) on, such Senior Notes when such payments are
due from the trust referred to below;
(ii) the Issuers' obligations with respect to the Senior Notes
concerning issuing temporary Senior Notes, registration of Senior Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office
or agency for payment and money for security payments held in trust;
(iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Issuers' obligations in connection therewith; and
(iv) the Legal Defeasance provisions of the Indenture.
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In addition, the Issuers may, at their option and at any time, elect to
have the obligations of the Issuers released with respect to certain covenants
that are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Senior Notes. In the event Covenant Defeasance
occurs, certain events (other than non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "-- Events of Default"
will no longer constitute an Event of Default with respect to the Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance with
respect to the Senior Notes:
(i) the Issuers must irrevocably deposit with the Trustee, in trust
for the benefit of the Holders of the Senior Notes, cash in U.S. dollars,
non-callable Government Securities or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent certified public accountants, to pay the principal of,
and premium (if any), interest (including Revenue Participation Interest)
and Liquidated Damages (if any) on, the outstanding Senior Notes on the
stated maturity or on the applicable redemption date, as the case may be,
and the Company must specify whether the Senior Notes are being defeased to
maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, the Issuers shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that:
(A) the Issuers have received from, or there has been published by,
the Internal Revenue Service a ruling, or
(B) since the date of the Indenture, there has been a change in the
applicable federal income tax law,
in either case to the effect, and based thereon such opinion of counsel
shall confirm, that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Legal 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 Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Issuers shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Senior Notes 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;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute default under any material agreement
or instrument (other than the Indenture) to which the Issuers or any of
their Restricted Subsidiaries is a party or by which the Issuers or any of
their Restricted Subsidiaries is bound;
(vi) the Issuers shall have delivered to the Trustee an opinion of
counsel to the effect that after the 91st day (or such other applicable
date) following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally;
(vii) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the
intent of preferring the Holders of Senior Notes over the other creditors
of the Issuers with the intent of defeating, hindering, delaying or
defrauding creditors of the Issuers or others; and
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(viii) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Senior Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuers may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuers are not required to transfer or exchange
any Senior Notes selected for redemption. Also, the Issuers are not required to
transfer or exchange any Senior Notes for a period of 15 days before a selection
of Senior Notes to be redeemed.
The registered Holder of a Senior Note will be treated as the owner of such
Senior Note for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, the Indenture, the
Senior Notes and the Pledge Agreement may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Senior
Notes then outstanding (including consents obtained in connection with a
purchase of, or tender offer or exchange offer for, Senior Notes), and any
existing default or compliance with any provision of the Indenture, the Senior
Notes or the Pledge Agreement may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Senior Notes (including
consents obtained in connection with a tender offer or exchange offer for Senior
Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Note held by a non-consenting Holder):
(i) reduce the principal amount of Senior Notes whose Holders must
consent to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any
Senior Note or alter the provisions with respect to the redemption of the
Senior Notes (other than provisions relating to the covenants described
above under the caption "-- Repurchase at the Option of Holders");
(iii) reduce the rate of or change the time for payment of interest
(including Revenue Participation Interest, if any) on any Senior Note;
(iv) waive a Default or Event of Default in the payment of principal
of, premium (if any), interest or Liquidated Damages (if any) on, the
Senior Notes (except a rescission of acceleration of the Senior Notes by
the Holders of at least a majority in aggregate principal amount of the
Senior Notes and a waiver of the payment default that resulted from such
acceleration);
(v) make any Senior Note payable in money other than that stated in
the Senior Notes;
(vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Senior Notes to
receive payments of principal of, premium (if any), interest (including
Revenue Participation Interest, if any) or Liquidated Damages on, the
Senior Notes;
(vii) waive a redemption payment with respect to any Senior Note
(other than a payment required by one of the covenants described above
under the caption "-- Repurchase at the Option of Holders"); or
(viii) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any Holder of Senior
Notes, the Credit Parties and the Trustee may amend or supplement the Indenture,
the Senior Notes or the Pledge Agreement to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes, to provide for the assumption of the Credit
Parties' obligations to Holders of Senior Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
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benefits to the Holders of Senior Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuers, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if the Trustee acquires any conflicting interest, it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Senior Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Senior Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(i) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Restricted Subsidiary of such
specified Person, including, without limitation, Indebtedness incurred in
connection with, or in contemplation of, such other Person merging with or
into or becoming a Restricted Subsidiary of such specified Person; and
(ii) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Administrative Services Agreement" means the Administrative Services
Agreement dated as of September 12, 1995 between Orbital and the Company.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities (or the equivalent)
of a Person shall be deemed to be control.
"Asset Sale" means:
(i) the sale, lease, conveyance or other disposition of any assets,
other than the sale or other disposition by a Credit Party of an Equity
Interest in any other Credit Party (including, without limitation, by way
of a sale and leaseback) (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Credit
Parties and their Restricted Subsidiaries taken as a whole will be governed
by the provisions of the Indenture described above under the caption
"-- Repurchase at the Option of Holders -- Change of Control" and/or the
provisions described above under the caption "-- Certain
Covenants -- Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant); and
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(ii) except to the extent excluded by clause (i) above, the issuance
by any of the Credit Parties' Restricted Subsidiaries of Equity Interests
or the sale by the Credit Parties or any of their Restricted Subsidiaries
of Equity Interests of any of their Subsidiaries,
in the case of either clause (i) or (ii) above, whether in a single transaction
or a series of related transactions: (a) that have a Fair Market Value in excess
of $5 million; or (b) for net proceeds in excess of $5 million.
Notwithstanding the foregoing: (i) sales of territory and ORBCOMM System
rights to resellers, grants of licenses and other associated rights to use the
ORBCOMM System to international licensees and sales of services, products or
inventory in the ordinary course of business; (ii) a transfer of assets by any
of the Credit Parties to any other Credit Party or to a Restricted Subsidiary of
any of the Credit Parties or by a Restricted Subsidiary to any of the Credit
Parties or to a Restricted Subsidiary of any of the Credit Parties; (iii) an
issuance of Equity Interests by a Restricted Subsidiary of any of the Credit
Parties to any of the Credit Parties or to a Wholly Owned Restricted Subsidiary
of any Credit Party; and (iv) a Restricted Payment that is permitted by the
covenant entitled "Restricted Payments" will be deemed not to be Asset Sales.
"Bank Credit Facility" means one or more credit facilities (whether a term
or a revolving facility) of the type customarily entered into with commercial
banks, between the Company and any of the other Credit Parties, on the one hand,
and any commercial banks, financial institutions or other lenders, on the other
hand, which Bank Credit Facilities are by their terms designated as a "Bank
Credit Facility" for purposes of the Indenture.
"Canada Service License Agreement" means the Service License Agreement
dated as of December 19, 1995 between ORBCOMM International and ORBCOMM Canada
Inc.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(iii) in the case of a partnership, partnership interests (whether
general or limited); and
(iv) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Consideration" means any consideration received from an Asset Sale in
the form of cash or Cash Equivalents, in either case in U.S. dollars or freely
convertible into U.S. dollars.
"Cash Equivalents" means:
(i) United States dollars;
(ii) Government Securities;
(iii) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any Eligible Institution;
(iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any Eligible Institution;
(v) commercial paper having the highest rating obtainable from Moody's
or S&P and in each case maturing within six months after the date of
acquisition; and
(vi) mutual funds or other pooled investment vehicles investing solely
in investment of the types described in (i) through (v) above.
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"Change of Control" means:
(i) the sale, lease, transfer, conveyance or other disposition, in one
transaction or a series of related transactions, directly or indirectly,
including through a liquidation or dissolution, of all or substantially all
of the assets of the Credit Parties and their Restricted Subsidiaries
(other than any such transfer to any other Credit Party or any Wholly Owned
Restricted Subsidiary of a Credit Party);
(ii) the adoption of a plan relating to the liquidation or dissolution
of any of the Credit Parties (other than any such liquidation or
dissolution to or for the benefit of any other Credit Party or any Wholly
Owned Restricted Subsidiary of a Credit Party);
(iii) at any time prior to the date on which at least 20 satellites
have been launched and tested and, together with the related ground
systems, are reasonably believed by the Company to be ready for commercial
operation as part of the ORBCOMM System, such time as Orbital ceases,
directly or indirectly, including by way of a consolidation or merger,
either (a) to be the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of (1) at least 70% of the total Voting Equity Interests of
OCC or (2) at least 50% of the total Voting Equity Interests of the Company
or (b) to be the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of (1) at least 70% of the total Equity Interests of OCC or
(2) at least 50% of the total Equity Interests of the Company; provided,
however, that in the event Orbital beneficially owns more than 50% of the
total Voting Equity Interests of OCC, then Orbital shall be deemed to
beneficially own 100% of OCC's interest in the Company; and provided,
further, that notwithstanding the foregoing provisions of this clause
(iii), it shall not constitute a Change of Control in the event OCC sells,
transfers, conveys or otherwise disposes of Equity Interests in the Company
to a Strategic Investor, or the Company issues Equity Interests to a
Strategic Investor, in each case such that, following such sale or
issuance, OCC owns not less than 35% of the fully diluted Equity Interests
of the Company (provided that prior to any such sale or issuance the
partners shall amend the Company's limited partnership agreement so that
all actions taken by or on behalf of the Company that require the approval
of OCC pursuant to the terms of the Company's limited partnership agreement
as in effect on the Issue Date shall continue to require the approval of
OCC following such sale or issuance);
(iv) at any time after the date on which at least 20 satellites have
been launched and tested and, together with the related ground systems, are
reasonably believed by the Company to be ready for commercial operation as
part of the ORBCOMM System, such time as Orbital and Teleglobe,
collectively, cease, directly or indirectly, including by way of a
consolidation or merger, either (a) to be the "beneficial owners" (as
defined in Rule 13d-3 under the Exchange Act) of at least 40% of the total
Voting Equity Interests of the Company or (b) to be the "beneficial owners"
(as defined in Rule 13d-3 under the Exchange Act) of at least 40% of the
total Equity Interests of the Company; provided, however, that in the event
Orbital or Teleglobe, as the case may be, beneficially owns more than 50%
of the total Voting Equity Interests of OCC or Teleglobe Mobile,
respectively, then Orbital or Teleglobe, as the case may be, shall be
deemed to beneficially own 100% of OCC's or Teleglobe Mobile's,
respectively, interest in the Company; or
(v) at any time prior to the date on which at least 20 satellites have
been launched and tested and, together with the related ground systems, are
reasonably believed by the Company to be ready for commercial operation as
part of the ORBCOMM System, the admission of any Person as a general
partner of the Company after which OCC and Teleglobe Mobile do not,
collectively, retain the exclusive power to take all of the actions which
they are entitled to take under the limited partnership agreement of the
Company as in effect on the Issue Date by vote of a Majority-in-Interest or
a Super-Majority in Interest (as such terms are defined in the Company's
limited partnership agreement as in effect on the Issue Date);
provided, however, that for purposes of all of the foregoing calculations, all
options to acquire common stock of OCC under the OCC Stock Option Plan and
shares of common stock issued upon exercise thereof shall be deemed to be held
by OCC as treasury shares.
"Collateral Agent" means the collateral agent under the Pledge Agreement.
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"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period, plus, to the extent
deducted or otherwise excluded in computing such Consolidated Net Income:
(i) an amount equal to any extraordinary loss plus any net loss
realized in connection with a sale of assets;
(ii) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period;
(iii) Consolidated Interest Expense less consolidated interest income
of such Person and its Restricted Subsidiaries for such period; and
(iv) depreciation, amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash charges (excluding any
such non-cash charge to the extent that it represents an accrual of or
reserve for cash charges in any future period or amortization of a prepaid
cash expense that was paid in a prior period) of such Person and its
Restricted Subsidiaries for such period;
in each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization and other non-cash charges of, a
Restricted Subsidiary that is not a Subsidiary Guarantor of any such Person
shall be added to Consolidated Net Income to compute Consolidated Cash Flow only
to the extent (and in the same proportion) that the Net Income of such
Restricted Subsidiary was included in calculating the Consolidated Net Income of
such Person and only if a corresponding amount would be permitted at the date of
determination to be distributed by dividend to such Person by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP, whether paid or accrued and whether or not capitalized (including,
without limitation, Revenue Participation Interest on the Senior Notes,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financing, and net payments (if any) pursuant to Hedging
Obligations).
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that:
(i) the Net Income of any Person that is not a Subsidiary Guarantor or
that is accounted for by the equity method of accounting shall be included
only to the extent of the amount of dividends or distributions actually
paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary
thereof;
(ii) the Net Income of any Restricted Subsidiary that is not a
Subsidiary Guarantor shall be excluded to the extent that the declaration
or payment of dividends or similar distributions by such Restricted
Subsidiary of such Net Income is not at the date of determination permitted
without any prior governmental approval (which has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary or its
stockholders;
(iii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded;
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(iv) the cumulative effect of a change in accounting principles shall
be excluded; and
(v) the Net Income of any Unrestricted Subsidiary shall be included
only to the extent of the amount of dividends or distributions actually
paid in cash to the referent Person or a Restricted Subsidiary thereof.
"Consolidated Net Worth" means, with respect to any Person as of any date:
(i) the consolidated equity of the equity holders of such Person and
its consolidated Restricted Subsidiaries as of such date; plus
(ii) the respective amounts reported on such Person's balance sheet as
of such date with respect to any series of preferred Equity Interests
(other than Disqualified Stock) that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and paid only
out of net earnings in respect of the year of such declaration and payment,
but only to the extent of any cash received by such Person upon issuance of
such preferred stock; minus
(iii) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going-concern
business made within 12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person; minus
(iv) all investments as of such date in unconsolidated Subsidiaries
and in Persons that are not Restricted Subsidiaries; minus
(v) all unamortized debt discount and expense and unamortized deferred
charges as of such date.
"Consolidated Tangible Net Assets" means, with respect to any Person, the
Consolidated Net Worth of such Person less goodwill and any other intangible
assets shown on the consolidated balance sheet of such Person and its Restricted
Subsidiaries.
"Credit Parties" means, collectively, the Issuers and any Guarantor other
than any Subsidiary Guarantor established after the Issue Date, and any of their
respective successors.
"Credit Parties' Fixed Charge Coverage Ratio" means, for any period, the
ratio of (A) the sum of (without duplication) (1) Consolidated Cash Flow of the
Company (excluding the Consolidated Cash Flow of ORBCOMM USA and ORBCOMM
International), plus (2) Consolidated Cash Flow of ORBCOMM USA, plus (3)
Consolidated Cash Flow of ORBCOMM International to (B) the Credit Parties' Fixed
Charges for such period.
"Credit Parties' Fixed Charges" means, for any period, the sum of (i) the
sum of (without duplication) Consolidated Interest Expense of each of the Credit
Parties for such period, plus (ii) the sum of (without duplication) Consolidated
Interest Expense of each of the Credit Parties that was capitalized during such
period, plus (iii) to the extent not included above, any Consolidated Interest
Expense on Indebtedness of another Person that is Guaranteed by any of the
Credit Parties or secured by a Lien on assets of any of the Credit Parties
(whether or not such Guarantee or Lien is called upon).
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Capital Contribution" means, with respect to any of the
Credit Parties, any contribution to the equity capital of such Person which: (i)
when added to all prior contributions to any of the Credit Parties, results in
total contributed capital equal to or less than $160 million, without
duplication; or (ii) in the case of the Company, comprises proceeds of any
transaction other than (x) a contribution to the equity capital of OCC and/or
Teleglobe Mobile or (y) a contribution to the equity capital of the Company from
a party other than OCC and Teleglobe Mobile.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
that, by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable), or upon the happening of any event: (i)
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise; or (ii) is
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redeemable or is convertible or exchangeable for Indebtedness at the option of
the Holder thereof, in whole or in part, on or prior to the date on which the
Senior Notes are repaid, redeemed or retired in full.
"Eligible Institution" means a domestic 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" or higher according to S&P or
Moody's at the time as of which any investment or rollover therein is made.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company in existence on
the Issue Date, until such amounts are repaid.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction; provided that the Fair Market Value of
any such asset or assets shall be determined by the General Partners of the
Company, acting in good faith and by unanimous resolution, and which
determination shall be evidenced by an Officers' Certificate delivered to the
Trustee.
"FCC License" means the FCC authorization granted to OCC on October 20,
1994 to construct, launch and operate 36 satellites for the purpose of providing
two-way data and messaging communications and position determination services in
the United States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession and which are in effect on the Issue Date.
"Gateway Maintenance Contract" means the Gateway Maintenance Contract
between the Company and Orbital entered into on August 1, 1996.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" or "guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Guarantor" means each of ORBCOMM USA, ORBCOMM International, OCC and
Teleglobe Mobile, and any other entity that executes a Guarantee of the
obligations of the Issuers under the Senior Notes and the Indenture in
accordance with the provisions of the Indenture, and their respective successors
and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under: (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements; (ii) foreign currency hedge
obligations; and (iii) other agreements or arrangements designed to protect such
Person against fluctuations in interest and foreign currency rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or bankers' acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable to the
extent that any such accrued expense or trade payable is not more than 90 days
overdue or is otherwise being contested in good faith by appropriate proceedings
promptly instituted and diligently
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conducted, if and to the extent any of the foregoing indebtedness (other than
letters of credit and Hedging Obligations) would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether or
not such indebtedness is assumed by such Person and, in the event such
indebtedness is not assumed by, and is otherwise non-recourse to, such Person,
the amount of such indebtedness shall be deemed to equal the greater of book
value or Fair Market Value) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person; provided that
amounts outstanding under the MetLife Note shall not constitute "Indebtedness";
and provided, further, that "Indebtedness" shall be calculated without
duplication and after elimination of Intercompany Indebtedness (as defined in
clause (v) of the covenant entitled "Incurrence of Indebtedness or Issuance of
Restricted Subsidiary Disqualified Stock").
"Indebtedness to Cash Flow Ratio" means, with respect to any Person as of
any date of determination, the ratio of:
(i) total Indebtedness of such Person and its Restricted Subsidiaries
as of such date to;
(ii) four times Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for the most recently ended fiscal quarter for
which financial statements of such Person are available (the "Measurement
Period");
provided, however, that: (a) in making such computation, the total Indebtedness
of such Person and its Restricted Subsidiaries shall include the total amount of
funds outstanding and available under any credit facilities; (b) in the event
such Person or any of its Restricted Subsidiaries consummates a material
acquisition or sale of assets subsequent to the commencement of the Measurement
Period, then the Indebtedness to Cash Flow Ratio shall be calculated giving pro
forma effect to such material acquisition or sale of assets as if the same had
occurred at the beginning of the Measurement Period; and (c) in making such
calculation for the Credit Parties, total Indebtedness shall include total
Indebtedness of the Credit Parties and their respective Restricted Subsidiaries
and Consolidated Cash Flow shall include only the sum of (without duplication)
(1) Consolidated Cash Flow of the Company (excluding the Consolidated Cash Flow
of ORBCOMM USA and ORBCOMM International), plus (2) Consolidated Cash Flow of
ORBCOMM USA, plus (3) Consolidated Cash Flow of ORBCOMM International.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the good
faith judgment of the General Partners of the Company (evidenced by a unanimous
resolution of the General Partners of the Company as set forth in an Officers'
Certificate delivered to the Trustee), qualified to perform the task for which
it has been engaged and is disinterested and independent with respect to the
Credit Parties and their Affiliates.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans, Guarantees, advances or capital contributions (excluding
commission, travel and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities and all other items that
are or would be classified as investments on a balance sheet prepared in
accordance with GAAP; provided that an acquisition of assets, Equity Interests
or other securities by the Company for consideration consisting of common Equity
Interests (other than Disqualified Stock) of any Credit Party shall not be
deemed to be an Investment.
"Joint Venture" means a Person in a Related Business in which any Credit
Party holds 50% or less of the Voting Equity Interests.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
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"Magellan Agreement" means the Subscriber Communicator Manufacturing
Agreement between the Company and Magellan Corporation entered into on July 31,
1996.
"Marketable Securities" means:
(i) Government Securities;
(ii) any 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 any of
the Credit Parties) with a rating, at the time as of which any investment
therein is made, of "A-1" (or higher) according to S&P or "P-1" (or higher)
according to Moody's;
(iv) any banker's acceptances or money market deposit accounts issued
or offered by an Eligible Institution; and
(v) any fund investing exclusively in investments of the types
described in clauses (i) through (iv) above.
"MetLife Note" means the Loan and Security Agreement dated December 22,
1994 between the Company and MetLife, which loan is guaranteed by Orbital.
"Monthly Revenue Participation Interest" means, with respect to any month
and any Senior Note, the product of 5.0% of System Revenue for such month times
a fraction, the numerator of which is the principal amount outstanding on such
Senior Note and the denominator of which is $170,000,000.
"Moody's" means Moody's Investors Service, Inc.
"Net Income" means, with respect to any Person, the net income (or loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however;
(i) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with:
(a) any sale of assets (including, without limitation, dispositions
pursuant to sale and leaseback transactions); or
(b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(ii) any extraordinary or nonrecurring gain (but not loss), together
with any related provision for taxes on such extraordinary or nonrecurring
gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by any of the
Credit Parties or any of their Restricted Subsidiaries in respect of any Asset
Sale (including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements and provided that any such amount
not so required to be paid for taxes shall be deemed to constitute Net Proceeds
at the time such amount is not retained for such purpose), amounts required to
be applied to the repayment of Indebtedness secured by a Lien on the asset or
assets (including Equity Interests) that were the subject of such Asset Sale and
any reserve for adjustment in respect of the sale price of such asset or asset
(including Equity Interests) established in accordance with GAAP (provided that
the amount of any such reserve shall be deemed to constitute Net Proceeds at the
time such reserve shall have been released or is not otherwise required to be
retained for such purpose).
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"Non-Recourse Debt" means Indebtedness:
(i) as to which neither any of the Credit Parties nor any of their
Restricted Subsidiaries:
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness);
(b) is directly or indirectly liable (as a guarantor or otherwise);
or
(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 Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of any of the Credit Parties or any of their
Restricted Subsidiaries to declare a default on such other Indebtedness 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 any of the Credit
Parties or any of their Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OCC Stock Option Plan" means the Orbital Communications Corporation 1992
Stock Option Plan, as may be amended from time to time.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer or President and the chief financial and
accounting officer of such Person.
"ORBCOMM System" means ORBCOMM's global digital satellite communications
system of LEO satellites and certain terrestrial facilities intended to provide
two-way data and messaging communications services throughout the world.
"Permitted Investment" means:
(i) any Investment in any Credit Party or in any Wholly Owned
Restricted Subsidiary of any Credit Party;
(ii) any Investments in cash or Cash Equivalents;
(iii) Investments by any of the Credit Parties or any of their
Restricted Subsidiaries in a Person if, as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of any Credit
Party; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, any Credit Party or any Restricted Subsidiary of any
Credit Party;
(iv) any Investment made as a result of the receipt of non-Cash
Consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "Repurchase
at the Option of Holders -- Limitation on Sales of Assets and Subsidiary
Interests;"
(v) any Investment made with Excess Proceeds remaining after the
consummation of an Asset Sale Offer as described above under the caption
"Repurchase at the Option of Holders -- Limitation on Sales of Assets and
Subsidiary Interests;"
(vi) Investments in any Joint Venture; provided that at the time any
such Investment is made, such Investment will not cause the sum of (a) the
aggregate amount of Investments at any one time outstanding under this
clause (vi) and (b) the book value or Fair Market Value of all assets,
businesses, divisions or other property of all Subsidiaries that are not
Subsidiary Guarantors to exceed the greater of (x) $5 million or (y) 5% of
the System Consolidated Net Worth;
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(vii) any Investment made by the Credit Parties or any of their
Restricted Subsidiaries in any Unrestricted Subsidiary using the proceeds
of a substantially concurrent contribution to the equity capital (other
than a Disqualified Capital Contribution) of the Company, OCC and/or
Teleglobe Mobile; and
(viii) any Investment made by the Credit Parties or any of their
Restricted Subsidiaries in a Related Business; provided that at the time
any such Investment is made, such Investment will not cause the aggregate
amount of Investments at any one time outstanding under this clause (viii)
to exceed $5 million.
"Permitted Liens" means:
(i) Liens securing the Senior Notes;
(ii) Liens in favor of the Credit Parties;
(iii) Liens on property of a Person existing at the time such Person
is merged into or consolidated with any of the Credit Parties or any of
their Restricted Subsidiaries; provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or
consolidated with such Credit Party or its Restricted Subsidiary;
(iv) Liens on property existing at the time of acquisition thereof by
any of the Credit Parties or any of their Restricted Subsidiaries, provided
that such Liens were in existence prior to the contemplation of such
acquisition;
(v) Liens to secure the performance of statutory obligations, surety,
appeal or performance bonds or other obligations of a like nature or
mechanics' or purchase money Liens incurred in the ordinary course of
business;
(vi) Liens existing on the Issue Date;
(vii) Liens on inventory, accounts receivable or domestic and/or
international gateways and related ground systems securing Indebtedness
incurred under clause (vii) or (x) of the covenant entitled "Incurrence of
Indebtedness or Issuance of Restricted Subsidiary Disqualified Stock", or
securing Permitted Refinancing Indebtedness incurred pursuant to the
Indenture to refinance Indebtedness incurred under clause (vii) or (x) of
the covenant entitled "Incurrence of Indebtedness or Issuance of Restricted
Subsidiary Disqualified Stock";
(viii) 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 that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; and
(ix) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Pledge Account" means the account established with the Collateral Agent
pursuant to the terms of the Pledge Agreement for the deposit of the Pledged
Securities.
"Pledge Agreement" means the Pledge Agreement dated as of the date of the
Indenture by and between the Issuers and the Collateral Agent governing the
Pledge Account.
"Pledged Securities" means the U.S. government securities purchased by the
Issuers with a portion of the net proceeds from the Offering to be deposited in
the Pledge Account and pledged as security for the Senior Notes.
"Procurement Agreement" means the ORBCOMM System Procurement Agreement
dated as of September 12, 1995, as the same may be amended, supplemented or
otherwise modified from time to time.
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<PAGE> 120
"Related Assets" means all assets used in connection with the design,
development, procurement, installation, operation or marketing of
satellite-based messaging and data communications systems and any activities or
assets ancillary thereto.
"Related Business" means any business relating to the design, procurement,
installation and operation of satellite-based mobile messaging and data
communications systems.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such Person
that is not an Unrestricted Subsidiary.
"Revenue Participation Interest" means, as of any payment date, Revenue
Participation Interest on the Notes accrued through the Accrual Period last
ended (including any Accrual Period that ends on such payment date) and any
Revenue Participation Interest previously accrued and the payment of which has
been permitted to be deferred.
"Semi-annual Period " means each period that begins on January 1 and ends
on the next succeeding June 30 or each period that begins on July 1 and ends on
the next succeeding December 31.
"S&P" means Standard & Poor's Ratings Group.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article I, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Strategic Investor" shall mean for purposes of clause (iii) of the
definition of "Change of Control" a Person (x) having a total market
capitalization of at least $750 million and (y) having a long-term debt rating
assigned by either of Moody's or S&P of investment grade.
"Subsidiary" means, with respect to any Person:
(i) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of such Person (or a combination thereof); and
(ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means any Guarantee of the Issuers' obligations
under the Indenture and the Senior Notes given by a Subsidiary Guarantor.
"Subsidiary Guarantor" means ORBCOMM USA, ORBCOMM International and any
Restricted Subsidiary of a Credit Party that has issued a Guarantee of the
Issuers' obligations under the Indenture and the Senior Notes.
"System Consolidated Net Worth" means the sum of (without duplication) the
Consolidated Net Worth of each of the Credit Parties and reflecting the
elimination of intercompany transactions.
"System Revenue" means, for any period, the sum of (without duplication)
the gross revenue of each of the Credit Parties and their Restricted
Subsidiaries for such period and reflecting the elimination of intercompany
transactions.
"Tax Sharing Agreement" means the Tax Sharing Agreement between Orbital and
OCC entered into on August 1, 1996.
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<PAGE> 121
"Teleglobe Administrative Services Agreement" means the Administrative
Services Agreement between the Company and Teleglobe to be entered into prior to
the Issue Date.
"Unrestricted Subsidiary" of a Person means any Subsidiary of such Person
that is designated by such Person as an Unrestricted Subsidiary, but only if and
for so long as such Subsidiary:
(i) has no Indebtedness other than Non-Recourse Debt;
(ii) is not party to any agreement, contract, arrangement or
understanding with any of the Credit Parties or any Restricted Subsidiary
of any of the Credit Parties unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to such Credit
Party or such Restricted Subsidiary than those that might be obtained at
the time from Persons who are not Affiliates of any of the Credit Parties;
(iii) is a Person with respect to which neither any Credit Party nor
any of their Restricted Subsidiaries has any direct or indirect obligation:
(1) to subscribe for additional Equity Interests; or
(2) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results;
(iv) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of any of the Credit Parties or any of
their Restricted Subsidiaries (other than Subsidiary Guarantees under the
Indenture); and
(v) in the case of a corporate entity or limited liability company,
has at least one director on its board of directors and at least one
executive officer, in each case who is not a director or executive officer
of any of the Credit Parties or any their Restricted Subsidiaries.
"Voting Equity Interests" means the Equity Interest in a corporation or
other Person with voting power under ordinary circumstances entitling the
holders thereof to elect or appoint the board of directors, executive committee
or other governing body of such corporation or Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(i) the sum of the products obtained by multiplying: (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by
(ii) the then outstanding principal of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person and one or more other Wholly Owned Restricted
Subsidiaries of such Person; provided, however, that with respect to any Credit
Party, the term "Wholly Owned Restricted Subsidiary" shall mean any Restricted
Subsidiary of such Credit Party all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned, directly or indirectly, by all of the Credit Parties,
considered as one enterprise.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Exchange Notes to be issued
as set forth herein will initially be issued in the form of one Global Note (the
"Global Note"). The Global Note will be deposited on the date of the closing of
the exchange of the Exchange Notes offered hereby (the "Closing Date") with, or
on behalf of, the Depositary and registered in the name of Cede & Co., as
nominee of the Depositary (such nominee being referred to herein as the "Global
Note Holder").
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<PAGE> 122
Exchange Notes that are issued as described below under "-- Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Upon the transfer of Certificated Securities,
such Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Issuers expect that pursuant to procedures established by the
Depositary: (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Exchange Agent with portions of the
principal amount of the Global Note; and (ii) ownership of the Exchange Notes
evidenced by the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants. The laws
of some states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer Exchange
Notes evidenced by the Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Senior
Notes, the Global Note Holder will be considered the sole Holder under the
Indenture of any Senior Notes evidenced by the Global Note. Beneficial owners of
Senior Notes evidenced by the Global Note will not be considered the owners or
Holders thereof under the Indenture for any purpose, including with respect to
the giving of any directions, instructions or approvals to the Trustee
thereunder. Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records of the Depositary or for maintaining,
supervising or reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of, and premium, interest on, any
Senior Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered Holder under the Indenture. Under
the terms of the Indenture, the Issuers and the Trustee may treat the persons in
whose names Senior Notes, including the Global Note, are registered as the
owners thereof for the purpose of receiving such payments. Consequently, neither
the Issuers nor the Trustee has or will have any responsibility or liability for
the payment of such amounts to beneficial owners of Senior Notes. The Issuers
believe, however, that it is currently the policy of the Depositary to credit
immediately the accounts of the relevant Participants with such payments, in
amounts proportionate to their respective holdings of beneficial interests in
the relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Senior Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Senior Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). All such certificated Senior Notes would be subject
to the legend requirements described herein under "Notice to
116
<PAGE> 123
Investors." In addition, if: (i) the Issuers notify the Trustee in writing that
the Depositary is no longer willing or able to act as a depositary and the
Issuers are unable to locate a qualified successor within 90 days; or (ii) the
Issuers, at their option, notify the Trustee in writing that they elect to cause
the issuance of Senior Notes in the form of Certificated Securities under the
Indenture, then, upon surrender by the Global Note Holder of its Global Note,
Senior Notes in such form will be issued to each person that the Global Note
Holder and the Depositary identify as being the beneficial owner of the related
Senior Notes.
Neither the Issuers nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Senior Notes and the Issuers and the Trustee may conclusively rely on, and will
be protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Senior Notes
represented by the Global Note be made by wire transfer of immediately available
funds to the accounts specified by the Global Note Holder. With respect to
Certificated Securities, the Issuers will make all payments of principal,
premium, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. Secondary trading in long-term notes and debentures of
corporate issuers is generally settled in clearing-house or next-day funds. In
contrast, the Notes represented by the Global Note are expected to be eligible
to trade in the PORTAL Market and to trade in the Depositary's Same-Day Funds
Settlement System, and any permitted secondary market trading activity in such
Notes will, therefore, be required by the Depositary to be settled in
immediately available funds. The Issuers expect that secondary trading in the
Certificated Securities also will be settled in immediately available funds.
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<PAGE> 124
PLAN OF DISTRIBUTION
Each broker-dealer that participates in the Exchange Offer (a
"Participating Broker-Dealer") and 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 Participating Broker-Dealer in connection with the resale of Exchange Notes
received in exchange for Old Notes where such Old 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, they will make
this Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
March 12, 1997, 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 Participating Broker-Dealers. Exchange Notes received by Participating
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 Participating Broker-Dealer and/or the purchasers of any
such Exchange Notes. Any Participating 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 sale of Exchange Notes and any commissions 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
Participating 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 Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
The Issuers have agreed in the Registration Rights Agreement to indemnify
each Participating Broker-Dealer reselling Exchange Notes pursuant to this
Prospectus, and their officers, directors and controlling persons, against
certain liabilities in connection with the offer and sale of the Exchange Notes,
including liabilities under the Securities Act, or to contribute to payments
that such Participating Broker-Dealers may be required to make in respect
thereof. The Issuers have agreed to pay all of the expenses incurred in this
Exchange Offer, other than commissions or concessions of any participating
Brokers-Dealers.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Latham & Watkins, counsel to the Company, has advised the Company that the
following discussion expresses its opinion as to the material federal income tax
consequences expected to result to holders whose Old Notes are exchanged for
Exchange Notes in the Exchange Offer. The signed opinion of Latham & Watkins is
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part. Such opinion is based upon current provisions of the Internal Revenue
Code of 1986, as amended, applicable Treasury Regulations, judicial authority
and administrative rulings and practice. There can be no assurance that the
Internal Revenue Service (the "Service") will not take a contrary view, and no
ruling from the Service has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain Holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United States)
may be subject to special rules not discussed below. EACH HOLDER OF OLD NOTES
SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
OF EXCHANG-
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ING OLD NOTES FOR EXCHANGE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN TAX LAWS.
The exchange of Old Notes for Exchange Notes will be treated as a
"non-event" for federal income tax purposes because the Notes will not be
considered to differ materially in kind or extent from the Old Notes. As a
result, no material federal income tax consequences will result to holders
exchanging Old Notes for Exchange Notes.
LEGAL MATTERS
The legality of the Exchange Notes offered hereby will be passed upon for
the Issuers by Latham & Watkins, Washington, D.C.
EXPERTS
The financial statements of ORBCOMM Global, L.P., ORBCOMM USA, L.P. and
ORBCOMM International Partners, L.P. (development stage enterprises) as of
December 31, 1995 and 1994, and for the years then ended and for the period from
June 30, 1993 (date of inception) to December 31, 1993 and for the period from
June 30, 1993 (date of inception) through December 31, 1995 and the financial
statements of OCC as of December 31, 1995 and 1994, and for each of the years in
the three year period ended December 31, 1995, have been included herein and in
the Registration Statement in reliance upon the reports by KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein and in
the Registration Statement, and upon the authority of said firm in accounting
and auditing. The financial statements of Teleglobe Mobile Partners as of
December 31, 1995 and 1994, and for each of the years in the three year period
ended December 31, 1995 have been included herein and in the Registration
Statement in reliance upon the reports by Grant Thornton General Partnership
Chartered Accountants appearing elsewhere herein and in the Registration
Statement, and upon authority of said firm in accounting and auditing.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
ORBCOMM Global, L.P.
Independent Auditors' Report....................................................... F-3
Statements of Assets, Liabilities and Partners' Capital, as of December 31, 1994
and 1995 and September 30, 1996 (unaudited)..................................... F-4
Statements of Income and Expenses for the period June 30, 1993 (date of inception)
through December 31, 1993, Years Ended December 31, 1994 and 1995, Total
Accumulated During Development Stage through December 31, 1995, the Nine Months
Ended September 30, 1995 and 1996 (unaudited) and Total Accumulated During
Development Stage through September 30, 1996 (unaudited)........................ F-5
Statements of Cash Flows for the period June 30, 1993 (date of inception) through
December 31, 1993, Years Ended December 31, 1994 and 1995, Total Cash Flows
During Development Stage through December 31, 1995, the Nine Months Ended
September 30, 1995 and 1996 (unaudited) and Total Cash Flows During Development
Stage through September 30, 1996 (unaudited).................................... F-6
Statements of Partners' Capital for the period June 30, 1993 (date of inception) to
December 31, 1993, the Years Ended December 31, 1994 and 1995 and the Nine
Months Ended September 30, 1996 (unaudited)..................................... F-7
Notes to Financial Statements...................................................... F-8
ORBCOMM USA, L.P.
Independent Auditors' Report....................................................... F-13
Statements of Assets, Liabilities and Partners' Capital, as of December 31, 1994
and 1995 and September 30, 1996 (unaudited)..................................... F-14
Statements of Income and Expenses for the period June 30, 1993 (date of inception)
through December 31, 1993, Years Ended December 31, 1994 and 1995, Total
Accumulated During Development Stage through December 31, 1995, the Nine Months
Ended September 30, 1995 and 1996 (unaudited) and Total Accumulated During
Development Stage through September 30, 1996 (unaudited)........................ F-15
Statements of Cash Flows for the period June 30, 1993 (date of inception) through
December 31, 1993, Years Ended December 31, 1994 and 1995, Total Cash Flows
During Development Stage through December 31, 1995, the Nine Months Ended
September 30, 1995 and 1996 (unaudited) and Total Cash Flows During Development
Stage through September 30, 1996 (unaudited).................................... F-16
Statements of Partners' Capital for the period June 30, 1993 (date of inception) to
December 31, 1993, Years Ended December 31, 1994 and 1995 and the Nine Months
Ended September 30, 1996 (unaudited)............................................ F-17
Notes to Financial Statements...................................................... F-18
ORBCOMM International Partners, L.P.
Independent Auditors' Report....................................................... F-21
Statements of Assets, Liabilities and Partners' Capital, as of December 31, 1994
and 1995 and September 30, 1996 (unaudited)..................................... F-22
Statements of Income and Expenses for the period June 30, 1993 (date of inception)
through December 31, 1993, Years Ended December 31, 1994 and 1995, Total
Accumulated During Development Stage through December 31, 1995, the Nine Months
Ended September 30, 1995 and 1996 (unaudited) and Total Accumulated During
Development Stage through September 30, 1996 (unaudited)........................ F-23
Statements of Cash Flows for the period June 30, 1993 (date of inception) through
December 31, 1993, Years Ended December 31, 1994 and 1995, Total Cash Flows
During Development Stage through December 31, 1995, the Nine Months Ended
September 30, 1995 and 1996 (unaudited) and Total Cash Flows During Development
Stage through September 30, 1996 (unaudited).................................... F-24
</TABLE>
F-1
<PAGE> 127
<TABLE>
<S> <C>
Statements of Partners' Capital for the period June 30, 1993 (date of inception) to
December 31, 1993, Years Ended December 31, 1994 and 1995 and the Nine Months
Ended September 30, 1996 (unaudited)............................................ F-25
Notes to Financial Statements...................................................... F-26
Orbital Communications Corporation
Independent Auditors' Report....................................................... F-29
Consolidated Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996
(unaudited)..................................................................... F-30
Consolidated Statements of Operations for the Years Ended December 31, 1993, 1994
and 1995, and the Nine Months Ended September 30, 1995 and 1996 (unaudited)..... F-31
Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended
December 31, 1993, 1994 and 1995, and the Nine Months Ended September 30, 1996
(unaudited)..................................................................... F-32
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1994
and 1995, and the Nine Months Ended September 30, 1995 and 1996 (unaudited)..... F-33
Notes to Consolidated Financial Statements......................................... F-34
Teleglobe Mobile Partners
Auditors' Report................................................................... F-41
Consolidated Balance Sheet as of December 31, 1994 and 1995 and September 30, 1996
(unaudited)..................................................................... F-42
Consolidated Income for the period July 21, 1993 (date of inception) through
December 31, 1993, Years Ended December 31, 1994 and 1995, Total Accumulated
During Development Stage through December 31, 1995, the Nine Months Ended
September 30, 1995 and 1996 (unaudited) and Total Accumulated During Development
Stage through September 30, 1996 (unaudited).................................... F-43
Consolidated Partners' Capital for the period July 21, 1993 (date of inception) to
December 31, 1993, Years Ended December 31, 1994 and 1995 and the Nine Months
Ended September 30, 1996 (unaudited)............................................ F-44
Changes in Financial Position for the period July 21, 1993 (date of inception)
through December 31, 1993, Years Ended December 31, 1994 and 1995, Total Changes
During Development Stage through December 31, 1995, the Nine Months Ended
September 30, 1995 and 1996 (unaudited) and Total Changes During Development
Stage through September 30, 1996 (unaudited).................................... F-45
Notes to Consolidated Financial Statements......................................... F-46
</TABLE>
F-2
<PAGE> 128
INDEPENDENT AUDITORS' REPORT
The Partners
ORBCOMM Global, L.P.:
We have audited the accompanying statements of assets, liabilities and
partners' capital of ORBCOMM Global, L.P. (the "Company") (a development stage
enterprise) as of December 31, 1995 and 1994, and the related statements of
income and expenses, partners' capital, and cash flows for each of the years
then ended and for the period from June 30, 1993 (date of inception) to December
31, 1993 and for the period from June 30, 1993 (date of inception) through
December 31, 1995. 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 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, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company (a development
stage enterprise) as of December 31, 1995 and 1994, and the results of its
income and expenses, partners' capital and cash flows for each of the years then
ended and for the period from June 30, 1993 (date of inception) through December
31, 1993 and for the period from June 30, 1993 (date of inception) through
December 31, 1995, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Washington, DC
January 26, 1996
F-3
<PAGE> 129
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
--------------------------- 30,
1994 1995 1996
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents...................... $ 5,000,000 $ 1,784,950 $ 38,423,950
Short-Term available-for-sale investments (Note
3)........................................... 0 0 77,942,098
Short-Term held-to-maturity investments (Note
3)........................................... 0 0 23,335,992
Receivable -- Orbital Communications
Corporation.................................. 0 0 112,374
Receivable -- Other............................ 0 0 921,932
Inventory...................................... 0 446,684 1,146,440
----------- ------------ ------------
Total Current Assets...................... 5,000,000 2,231,634 141,882,786
LONG TERM ASSETS:
Long-Term available-for-sale investments (Note
3)........................................... 0 0 10,143,809
Long-Term held-to-maturity investments (Note
3)........................................... 0 0 21,478,072
Mobile Communications Satellite System, less
accumulated depreciation of $4,578,554 at
September 30, 1996 and none as of December
31, 1995 and 1994............................ 68,646,861 106,989,940 151,903,626
Other Assets................................... 6,079,812
Investments in and advances to affiliates...... 0 (191,916) (291,677)
----------- ------------ ------------
TOTAL ASSETS.............................. 73,646,861 109,029,658 331,196,428
========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Current Portion of Long-Term Debt.............. 825,572 904,811 969,190
Accounts Payable............................... 2,270,775 4,037,675 3,610,807
Accrued Expenses............................... 7,866,668 6,116,314 10,275,027
Deferred Revenue............................... 0 100,000 100,000
----------- ------------ ------------
Total Current Liabilities................. 10,963,015 11,158,800 14,955,024
Long-Term Debt (Note 6)........................ 4,174,428 3,269,619 172,534,464
----------- ------------ ------------
Total Liabilities......................... 15,137,443 14,428,419 187,489,488
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
General Partners:
Teleglobe Mobile Partners................. 9,753,730 8,767,008 1,953,470
Orbital Communications Corporation........ 9,753,730 8,767,008 1,953,470
----------- ------------ ------------
Total General Partners' Capital........... 19,507,460 17,534,016 3,906,940
Limited Partners:
Teleglobe Mobile Partners................. 0 24,750,000 74,525,000
Orbital Communications Corporation........ 39,001,958 52,317,223 65,275,000
----------- ------------ ------------
Total Limited Partners' Capital........... 39,001,958 77,067,223 139,800,000
----------- ------------ ------------
Total Partners' Capital................... 58,509,418 94,601,239 143,706,940
----------- ------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL... $73,646,861 $109,029,658 $331,196,428
========== =========== ===========
</TABLE>
(See accompanying notes to the financial statements)
F-4
<PAGE> 130
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF INCOME AND EXPENSES
<TABLE>
<CAPTION>
TOTAL TOTAL
ACCUMULATED ACCUMULATED
JUNE 30, 1993 DURING DURING
(DATE OF DEVELOPMENT DEVELOPMENT
INCEPTION) YEAR ENDED STAGE NINE MONTHS STAGE
THROUGH DECEMBER 31, THROUGH ENDED SEPTEMBER 30, THROUGH
DECEMBER 31, ------------------------------- DECEMBER 31, --------------------------- SEPTEMBER 30,
1993 1994 1995 1995 1995 1996 1996
-------------- -------------- -------------- ------------ ------------ ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Product
Sales....... $0 $ 0 $ 0 $ 0 $ 0 $ 204,251 $ 204,251
Distribution
Fees........ 0 0 900,000 900,000 900,000 0 900,000
Interest
Income...... 0 0 58,415 58,415 41,351 1,113,211 1,171,626
-- ------- ---------- ---------- ---------- ------------ ------------
Total
Income.. 0 0 958,415 958,415 941,351 1,317,462 2,275,877
EXPENSES:
Cost of
Product
Sales....... 0 0 0 0 0 204,251 204,251
Engineering
Expenses.... 0 0 0 0 0 3,476,713 3,476,713
Administrative
Expenses.... 0 9,062 49,943 59,005 0 4,145,555 4,204,560
Depreciation
and
Amortization... 0 0 0 0 0 4,684,941 4,684,941
Equity in Earnings
(Losses) of
Affiliates....... 0 0 (853,270) (853,270) 0 (2,860,162) (3,713,432)
-- ------- ---------- ---------- ---------- ------------ ------------
EXCESS (DEFICIENCY)
OF INCOME OVER
EXPENSES......... $0 $(9,062) $ 55,202 $ 46,140 $ 941,351 $(14,054,160) $(14,008,020)
== ======= ========== ========== ========== ============ ============
</TABLE>
(See accompanying notes to the financial statements)
F-5
<PAGE> 131
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JUNE 30, 1993
(DATE OF
INCEPTION) YEAR ENDED
THROUGH DECEMBER 31,
DECEMBER 31, --------------------------
1993 1994 1995
------------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Excess (deficiency) of income
over expenses................ $ 0 $ (9,062) $ 55,202
ADJUSTMENTS TO RECONCILE
EXCESS (DEFICIENCY) OF INCOME
OVER EXPENSES TO NET CASH
PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Depreciation and
amortization............. 0 0 0
Equity in losses of
affiliate................ 0 0 853,270
(Increase) in receivable --
Orbital Communication
Corporation.............. 0 0 0
(Increase) in
receivable -- Other...... 0 0 0
(Increase) in inventory.... 0 0 (446,684)
Increase (decrease) in
accounts payable......... 0 2,270,775 1,766,900
Increase in deferred
revenue.................. 0 0 100,000
Increase (decrease) in
accrued expenses......... 0 7,866,668 (1,750,354)
(Increase) decrease in
prepaid contract costs... (3,740,802) 3,740,802 0
------------ ------------ ------------
NET CASH PROVIDED BY
(USED IN) OPERATING
ACTIVITIES........... (3,740,802) 13,869,183 578,334
------------ ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures....... (43,924,717) (24,722,144) (38,343,079)
(Increase) in amount due
from affiliates.......... 0 0 (661,354)
Purchase of
available-for-sale
investments.............. 0 0 0
Purchase of
held-to-maturity
investments.............. 0 0 0
------------ ------------ ------------
NET CASH PROVIDED BY
(USED IN) INVESTING
ACTIVITIES........... (43,924,717) (24,722,144) (39,004,433)
------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of
long-term debt........... 0 5,000,000 0
Repayment of long-term
debt..................... 0 0 (825,570)
Partners' contributions.... 48,148,997 10,852,961 38,065,265
Financing fees paid........ (483,478) 0 (2,028,646)
------------ ------------ ------------
NET CASH PROVIDED BY
(USED IN) FINANCING
ACTIVITIES........... 47,665,519 15,852,961 35,211,049
------------ ------------ ------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS.... 0 5,000,000 (3,215,050)
CASH AND CASH EQUIVALENTS
Beginning of period........ 0 0 5,000,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS
End of period.............. $ 0 $ 5,000,000 $ 1,784,950
============ ============ ============
SUPPLEMENTAL CASH FLOW
DISCLOSURE:
Interest paid.............. $ 0 $ 0 $ 425,765
============ ============ ============
<CAPTION>
TOTAL TOTAL
CASH FLOWS CASH FLOWS
DURING DURING
DEVELOPMENT DEVELOPMENT
STAGE NINE MONTHS STAGE
THROUGH ENDED SEPTEMBER 30, THROUGH
DECEMBER 31, -------------------------- SEPTEMBER 30,
1995 1995 1996 1996
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Excess (deficiency) of income
over expenses................ $ 46,140 $ 941,351 $(14,054,160) $ (14,008,020)
ADJUSTMENTS TO RECONCILE
EXCESS (DEFICIENCY) OF INCOME
OVER EXPENSES TO NET CASH
PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Depreciation and
amortization............. 0 0 4,684,941 4,684,941
Equity in losses of
affiliate................ 853,270 0 2,860,162 3,713,432
(Increase) in receivable --
Orbital Communication
Corporation.............. 0 0 (112,374) (112,374)
(Increase) in
receivable -- Other...... 0 0 (921,932) (921,932)
(Increase) in inventory.... (446,684) 0 (699,756) (1,146,440)
Increase (decrease) in
accounts payable......... 4,037,675 (1,400,293) (426,868) 3,610,807
Increase in deferred
revenue.................. 100,000 100,000 0 100,000
Increase (decrease) in
accrued expenses......... 6,116,314 (7,854,349) 4,158,713 10,275,027
(Increase) decrease in
prepaid contract costs... 0 0 0 0
------------- ------------ ------------ -------------
NET CASH PROVIDED BY
(USED IN) OPERATING
ACTIVITIES........... 10,706,715 (8,213,291) (4,511,274) 6,195,441
------------- ------------ ------------ -------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures....... (106,989,940) (22,691,376) (49,492,240) (156,482,180)
(Increase) in amount due
from affiliates.......... (661,354) 0 (2,760,398) (3,421,752)
Purchase of
available-for-sale
investments.............. 0 0 (87,658,823) (87,658,823)
Purchase of
held-to-maturity
investments.............. 0 0 (44,814,064) (44,814,064)
------------- ------------ ------------ -------------
NET CASH PROVIDED BY
(USED IN) INVESTING
ACTIVITIES........... (107,651,294) (22,691,376) (184,725,525) (292,376,819)
------------- ------------ ------------ -------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of
long-term debt........... 5,000,000 0 164,475,000 169,475,000
Repayment of long-term
debt..................... (825,570) (612,032) (670,776) (1,496,346)
Partners' contributions.... 97,067,223 28,565,266 62,732,777 159,800,000
Financing fees paid........ (2,512,124) 0 (661,202) (3,173,326)
------------- ------------ ------------ -------------
NET CASH PROVIDED BY
(USED IN) FINANCING
ACTIVITIES........... 98,729,529 27,953,234 225,875,799 324,605,328
------------- ------------ ------------ -------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS.... 1,784,950 (2,951,433) 36,639,000 38,423,950
CASH AND CASH EQUIVALENTS
Beginning of period........ 0 5,000,000 1,784,950 0
------------- ------------ ------------ -------------
CASH AND CASH EQUIVALENTS
End of period.............. $ 1,784,950 $ 2,048,567 $ 38,423,950 $ 38,423,950
============= ============ ============ =============
SUPPLEMENTAL CASH FLOW
DISCLOSURE:
Interest paid.............. $ 425,765 $ 326,471 $ 267,728 $ 693,493
============= ============ ============ =============
</TABLE>
(See accompanying notes to the financial statements)
F-6
<PAGE> 132
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS
----------------------------- -----------------------------
TELEGLOBE ORBITAL TELEGLOBE ORBITAL
MOBILE COMMUNICATIONS MOBILE COMMUNICATIONS
PARTNERS CORPORATION PARTNERS CORPORATION TOTAL
----------- -------------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Capital contributions..... $10,000,000 $ 10,000,000 $ 0 $ 28,148,997 $ 48,148,997
Excess (deficiency) of
income over expenses.... 0 0 0 0 0
Financing fees............ (241,739) (241,739) 0 0 (483,478)
----------- -------------- ----------- -------------- ------------
PARTNERS' CAPITAL,
DECEMBER 31, 1993....... 9,758,261 9,758,261 0 28,148,997 47,665,519
Capital contributions..... 0 0 0 10,852,961 10,852,961
Excess (deficiency) of
income over expenses.... (4,531) (4,531) 0 0 (9,062)
----------- -------------- ----------- -------------- ------------
PARTNERS' CAPITAL,
DECEMBER 31, 1994....... 9,753,730 9,753,730 0 39,001,958 58,509,418
Capital contributions..... 0 0 24,750,000 13,315,265 38,065,265
Excess (deficiency) of
income over expenses.... 27,601 27,601 0 0 55,202
Financing fees............ (1,014,323) (1,014,323) 0 0 (2,028,646)
----------- -------------- ----------- -------------- ------------
PARTNERS' CAPITAL,
DECEMBER 31, 1995....... 8,767,008 8,767,008 24,750,000 52,317,223 94,601,239
Capital contributions..... 0 0 49,775,000 12,957,777 62,732,777
Excess (deficiency) of
income over expenses.... (7,027,080) (7,027,080) 0 0 (14,054,160)
Unrealized gains on
available-for-sale
investments............. 213,542 213,542 0 0 427,084
----------- -------------- ----------- -------------- ------------
PARTNERS' CAPITAL,
SEPTEMBER 30, 1996
(UNAUDITED)............. $ 1,953,470 $ 1,953,470 $74,525,000 $ 65,275,000 $143,706,940
========== ============ ========== ============ ===========
</TABLE>
(See accompanying notes to the financial statements)
F-7
<PAGE> 133
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(1) THE ORBCOMM SYSTEM
Organization
In 1993, Orbital Communications Corporation ("OCC"), a majority owned
subsidiary of Orbital Sciences Corporation ("Orbital"), and Teleglobe Mobile
Partners ("Teleglobe Mobile"), a partnership established by affiliates of
Teleglobe Inc. ("Teleglobe"), formed ORBCOMM Global, L.P. ("ORBCOMM" or "the
Company"), a Delaware limited partnership.
Pursuant to the terms of the Agreement of Limited Partnership of the
Company, action by the Company generally requires the approval of General
Partners holding a majority of the Participation Percentages held by the General
Partners. OCC and Teleglobe Mobile each holds 50% of the Participation
Percentages in the Company, with the result that the approval of both OCC and
Teleglobe Mobile is generally necessary for the Company to act.
The Company is a 98% noncontrolling General Partner in ORBCOMM USA, L.P.
("ORBCOMM USA") and ORBCOMM International Partners, L.P. ("ORBCOMM
International"), two partnerships formed to market the ORBCOMM System services
in the United States and internationally, respectively.
The ORBCOMM System Description
The Company was created for the design, development, construction,
integration, testing and operation of the ORBCOMM System. The Company intends to
construct and implement the initial 28-satellite ORBCOMM System in two phases:
the ORBCOMM Phase 1A System, consisting of the worldwide network operations
center (including the satellite management system), the U.S. Gateway control
center, four U.S. Earth stations and two satellites; and the ORBCOMM Phase 1B
System consisting of the ORBCOMM Phase 1A System, three additional planes each
consisting of eight satellites and one plane consisting of two high-inclination
satellites.
Orbital is the primary supplier of the communications satellites, launch
vehicles and U.S. ground systems and successfully launched the Phase 1A
satellites in April 1995. The Phase 1A System began commercial intermittent
service in 1996.
The System Charge
OCC is obligated to pay to the Company a System Charge in consideration of
the construction and financing of the ORBCOMM System Assets by the Company.
Teleglobe Mobile is obligated to pay to the Company a System Charge in
consideration of the Company's grant to Teleglobe Mobile of the right to market,
sell, lease and franchise all ORBCOMM System output capacity outside the United
States.
Regulatory Status
Construction and operation of communications satellites in the United
States requires licenses from the Federal Communications Commission ("FCC"). OCC
has been granted full operational authority for the ORBCOMM System by the FCC.
Similar licenses are required from foreign regulatory authorities to permit
ORBCOMM System services to be offered outside the United States. Primary
responsibility for obtaining licenses outside the United States will reside with
entities who become International Licensees.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company is in its development stage, devoting substantially all of its
efforts to establishing a new communications business. The Company's planned
principal operations are expected to commence in 1998.
F-8
<PAGE> 134
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The accompanying financial statements have been prepared on the accrual basis of
accounting in conformity with generally accepted accounting principles in the
United States.
In the opinion of management, the accompanying unaudited interim financial
information reflects all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation thereof. Operating results for the nine-month
periods ended September 30, 1995 (unaudited) and 1996 (unaudited) are not
necessarily indicative of the results expected for the full year.
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 reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Depreciation and Recoverability of Long-Lived Assets
Depreciation is provided over an asset's estimated economic useful life
using the straight-line method as follows:
<TABLE>
<S> <C>
Space Segment Assets: lesser of five years or estimated life of the satellite
Ground Segment Assets: 10 years
Furniture and Equipment: 3 to 10 years
</TABLE>
The Company anticipates depreciating the ORBCOMM System over the estimated
economic useful lives of the various ORBCOMM System components once the ORBCOMM
System is placed in service. The Phase 1A System, which includes the worldwide
network operations center (including the satellite management system), the U.S.
Gateway control center, four U.S. Earth stations and two satellites, was placed
in service at the beginning of 1996, at which time the Company began
depreciating those assets. The Company anticipates that the ORBCOMM Phase 1B
System will become fully operational in 1998.
The Company's policy is to review its long-lived assets, including its
satellite systems, for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company recognizes an impairment loss when the sum of the expected future cash
flows is less than the carrying amount of the asset. Given the inherent
technical and commercial risks within the space communications industry, it is
reasonably possible that the Company's current estimate that it will recover the
carrying amount of its long-lived assets from future operations may change.
Investments in Affiliates
Pursuant to the terms of ORBCOMM USA's and ORBCOMM International's
partnership agreements, OCC controls the operational and financial affairs of
ORBCOMM USA and Teleglobe Mobile controls the operational and financial affairs
of ORBCOMM International. The Company, however, significantly influences both
marketing partnerships. Accordingly, the Company is accounting for its
investments in ORBCOMM USA and ORBCOMM International using the equity method.
Pursuant to the equity method of accounting, the Company's carrying amount
of an investment is initially recorded at cost and is increased to reflect its
share of the affiliate's income, and is reduced to reflect its share of the
affiliate's losses. The Company's investment is also increased to reflect
contributions to, and reduced to reflect distributions from, such affiliates.
F-9
<PAGE> 135
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Income Taxes
As a partnership, Federal and state income taxes are the direct
responsibility of each partner. Accordingly, no income taxes have been recorded
in the accompanying financial statements.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Investments
The Company maintains two investment portfolios characterized by
management's intentions as to future investment activity. Investments classified
as "held-to-maturity" are not intended to be sold prior to maturity and are
carried at cost. Investments not intended to be held until maturity are
classified as "available-for-sale" and carried at fair value with temporary
unrealized gains (losses) charged directly to partners' capital. Investments
with maturities of less than one year are classified as short term investments.
Investments maturing after one year are classified as long term investments. The
Company uses the average cost method in determining the basis of investment sold
when computing realized gains and (losses).
Inventory
Inventory is stated at lower of cost, determined on the specific
identification basis, or market and generally represents amounts paid to
subcontractors for subscriber communicators.
Fair Value of Financial Instruments
The carrying value of the Company's cash and cash equivalents, receivables,
and accounts payables approximates fair value since all such instruments are
short-term in nature. Fair value for the Company's long-term debt is determined
based on current rates offered for debt of similar remaining maturities. At
December 31, 1994 and 1995 and September 30, 1996 (unaudited), the fair value
for the long-term debt approximated carrying value.
Mobile Communications Satellite System Under Construction
During the construction of the ORBCOMM low-Earth orbit satellite
communication system (the "ORBCOMM System"), the Company is capitalizing
substantially all such construction costs. Additionally, interest costs of
approximately $426,000 and approximately $3,896,000 has been capitalized as a
part of the historical cost of the ORBCOMM System at December 31, 1995 and
September 30, 1996 (unaudited), respectively (none in 1994). (See "Long-Term
Debt").
Revenue Recognition
The Company provides subscriber communicator hardware to ORBCOMM USA and
ORBCOMM International at cost. Revenue is recognized when products are shipped
or when clients have accepted the products or services, depending on contractual
terms. Contract revenues and receivables are recognized and accrued as contract
costs are incurred. Related contract expenses incurred in providing U.S.
Marketing Services are recognized on the accrual basis of accounting.
The Company generally recognizes fees from international service license
agreements ratably over the term of the agreement, or when the Company's
obligations under the agreement are substantially complete.
F-10
<PAGE> 136
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) INVESTMENTS
The following table sets forth the aggregate fair and cost values and gross
unrealized gains of available-for-sale securities as of September 30, 1996
(unaudited) (none for the period ended December 31, 1994 and 1995):
<TABLE>
<CAPTION>
UNREALIZED
SECURITIES COST GAINS FAIR VALUE
------------------------------------------------- ----------- -------- -----------
<S> <C> <C> <C>
SHORT-TERM
U.S. Treasury Notes......................... $36,309,727 $176,905 $36,486,632
Commercial Paper............................ 41,254,469 200,997 41,455,466
----------- -------- -----------
Total short-term investments..................... $77,564,196 $377,902 $77,942,098
----------- -------- -----------
LONG-TERM
U.S. Treasury Notes, maturing 1-5 years..... 10,094,627 49,182 10,143,809
----------- -------- -----------
Total available-for-sale investments............. $87,658,823 $427,084 $88,085,907
========== ======== ==========
</TABLE>
The following table sets forth the aggregate fair and cost values of
held-to-maturity as of September 30, 1996 (unaudited) (none for the period ended
December 31, 1994 and 1995):
<TABLE>
<CAPTION>
UNREALIZED
SECURITIES COST GAINS FAIR VALUE
------------------------------------------------- ----------- -------- -----------
<S> <C> <C> <C>
SHORT-TERM
U.S. Treasury Notes......................... $23,335,992 $187,450 $23,523,442
LONG-TERM
U.S. Treasury Notes, maturing 1-5 years..... 21,478,072 189,459 21,667,531
----------- -------- -----------
Total held-to-maturity investments............... $44,814,064 $376,909 $45,190,973
========== ======== ==========
</TABLE>
Unrealized gains on held-to-maturity investments represent accrued interest
income and unrealized holding gains (losses).
(4) MOBILE COMMUNICATIONS SATELLITE SYSTEM
The Company's Mobile Communications Satellite System comprises the
following assets:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
<S> <C> <C>
1994 1995
----------- ------------
Space Segment.................................. $44,764,506 $ 76,643,128
Ground Segment................................. 23,882,355 29,799,853
Software....................................... -- 546,959
----------- ------------
$68,646,861 $106,989,940
========== ===========
</TABLE>
(5) RELATED PARTY TRANSACTIONS
The Company paid Orbital approximately $49,000,000 and $23,000,000 for the
period ended September 30, 1995 (unaudited) and 1996 (unaudited) and
approximately $48,000,000, $11,000,000, and $38,000,000 for the period June 30,
1993 (date of inception) through December 31, 1993 and the years ended December
31, 1994 and 1995, respectively. Payments were made for work performed pursuant
to the
F-11
<PAGE> 137
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(5) RELATED PARTY TRANSACTIONS -- (CONTINUED)
ORBCOMM System Design, Development, and Operations Agreement (for the Phase 1A
System), the ORBCOMM System Procurement Agreement (for the Phase 1B System) and
the Administrative Services Agreement (for provision of ongoing support to the
Company).
In 1995, pursuant to the terms of the ORBCOMM System Design, Development
and Operations Agreement, the Company reimbursed OCC $1,375,000 for previous
costs incurred in obtaining the FCC License and other related costs. The Company
capitalized such costs as part of its mobile communications satellite system.
(See Note 3)
At September 30, 1996 (unaudited), the Company has a receivable of
approximately $112,000 for a bonus payment to the Company's employees paid on
behalf of OCC for employees previously employed by OCC (none for the periods
ended December 31, 1994 and 1995).
(6) LONG-TERM DEBT
In August 1996, ORBCOMM and ORBCOMM Global Capital Corp. (the "Issuers")
issued $170,000,000 of Senior Notes due in 2004 with Revenue Participation
Interest (the "Old Notes"). Revenue Participation Interest represents an
aggregate amount equal to 5.0% of the ORBCOMM System revenue and is payable on
the Old Notes on each interest payment date subject to certain covenant
restrictions. Interest on the Old Notes accrues at the rate of 14% per annum and
will be payable semi-annually in arrears on February 15 and August 15 each year,
commencing on February 15, 1997.
The Old Notes are exchangeable for an equal principal amount of registered
14% Series B Senior Notes due 2004 with Revenue Participation Interest (the
"Exchange Notes"). The Exchange Notes are substantially identical in form and
term to the Old Notes except that the Exchange Notes have been registered under
the Securities Act of 1933, as amended, and do not bear legends restricting the
transfer thereof. The Exchange Notes and the Old Notes are collectively referred
to as the "Notes." The Notes are fully and unconditionally guaranteed on a joint
and several basis by OCC, Teleglobe Mobile, ORBCOMM USA and ORBCOMM
International (each a "Guarantor" and collectively the "Guarantors"), except
that the guarantees are non-recourse to the shareholders and partners of the
Guarantors, limited only to the extent necessary for each such guarantee to not
constitute a fraudulent conveyance under applicable law. The guarantee of each
Guarantor ranks pari passu in right of payment with all senior indebtedness of
such a Guarantor and senior in right of payment to all indebtedness expressly
subordinated to the guarantee of such Guarantor. The guarantees are non-recourse
to the shareholders and/or partners of each Guarantor and no shareholders or
partners of any Guarantors will have any liability for any claim under the
Notes.
Upon closing, the Company used a portion of the net proceeds from the sale
of the Old Notes, estimated at approximately $44.8 million, to purchase a
portfolio of United States Government securities to provide for payment in full
of interest on the Notes through August 15, 1998 (the "Pledged Account").
The Company also has a $5,000,000 secured note outstanding with a financial
institution, which bears interest at 9.2% per annum and is due in monthly
principal and interest installments of $104,278 through December 1999. The note
is secured by equipment located at certain of the U.S. Earth stations, network
operations center and satellite control center, and is guaranteed by Orbital.
F-12
<PAGE> 138
INDEPENDENT AUDITORS' REPORT
The Partners
ORBCOMM USA, L.P.:
We have audited the accompanying statements of assets, liabilities and
partners' capital of ORBCOMM USA, L.P. ("ORBCOMM USA") (a development stage
enterprise) as of December 31, 1995 and 1994, and the related statements of
income and expenses, partners' capital, and cash flows for each of the years
then ended and for the period from June 30, 1993 (date of inception) to December
31, 1993 and for the period from June 30, 1993 (date of inception) through
December 31, 1995. These financial statements are the responsibility of ORBCOMM
USA's management. Our responsibility is to express an opinion on these 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, the financial statements referred to above present fairly,
in all material respects, the financial position of ORBCOMM USA (a development
stage enterprise) as of December 31, 1995 and 1994, and the results of its
income and expenses, partners' capital and cash flows for each of the years then
ended and for the period from June 30, 1993 (date of inception) to December 31,
1993 and for the period June 30, 1993 (date of inception) through December 31,
1995, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Washington, DC
January 26, 1996
F-13
<PAGE> 139
ORBCOMM USA, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
-------------------- 30,
1994 1995 1996
------- --------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents............................. $10,000 $ 10,000 $ 32,873
Receivable -- Orbital Communications Corporation...... 0 0 9,427
Receivable -- Trade................................... 0 0 151,020
------- --------- ------------
TOTAL ASSETS..................................... 10,000 10,000 193,320
======= ========= ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts Payable...................................... 0 177,100 108,355
Other Current Liabilities............................. 0 32,230 183,057
------- --------- ------------
Total Current Liabilities........................ 0 209,330 291,412
Amount Due to ORBCOMM Global, L.P..................... 0 661,354 2,790,932
------- --------- ------------
Total Liabilities................................ 0 870,684 3,082,344
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
General Partners:
Teleglobe Mobile Partners........................ 1,500 0 0
Orbital Communications Corporation............... 8,500 (17,214) (57,781)
ORBCOMM Global, L.P.............................. 0 (843,470) (2,831,243)
------- --------- ------------
Total General Partners' Capital............. 10,000 (860,684) (2,889,024)
------- --------- ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL.......... $10,000 $ 10,000 $ 193,320
======= ========= ==========
</TABLE>
(See accompanying notes to the financial statements)
F-14
<PAGE> 140
ORBCOMM USA, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF INCOME AND EXPENSES
<TABLE>
<CAPTION>
TOTAL TOTAL
JUNE 30, ACCUMULATED ACCUMULATED
1993 DURING DURING
(DATE OF DEVELOPMENT DEVELOPMENT
INCEPTION) YEAR ENDED STAGE NINE MONTHS STAGE
THROUGH DECEMBER 31, THROUGH ENDED SEPTEMBER 30, THROUGH
DECEMBER 31, ---------------------------- DECEMBER 31, ---------------------------- SEPTEMBER 30,
1993 1994 1995 1995 1995 1996 1996
------------ ------------ ------------ ------------ ------------ ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Product
Sales...... $ 0 $ 0 $ 0 $ 0 $ 0 $ 201,926 $ 201,926
Contract
Revenues... 749,262 2,093,289 1,360,328 4,202,879 1,360,328 0 4,202,879
Service
Revenues... 0 0 0 0 0 3,159 3,159
---------- ----------- ------------ ------------ ---------- ------------ -------------
Total
Income... 749,262 2,093,289 1,360,328 4,202,879 1,360,328 205,085 4,407,964
EXPENSES:
Cost of
product
sales...... 0 0 0 0 0 191,821 191,821
Marketing and
Administrative
Expenses... 749,262 2,093,289 2,231,012 5,073,563 1,360,328 2,041,604 7,115,167
---------- ----------- ------------ ------------ ---------- ------------ -------------
Total
Expenses... 749,262 2,093,289 2,231,012 5,073,563 1,360,328 2,233,425 7,306,988
---------- ----------- ------------ ------------ ---------- ------------ -------------
EXCESS
(DEFICIENCY) OF
INCOME OVER
EXPENSES....... $ 0 $ 0 $ (870,684) $ (870,684) $ 0 $ (2,028,340) $(2,899,024)
======== =========== =========== ========== ========== ============ ===========
</TABLE>
(See accompanying notes to the financial statements)
F-15
<PAGE> 141
ORBCOMM USA, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JUNE 30, 1993
(DATE OF
INCEPTION) YEAR ENDED
THROUGH DECEMBER 31,
DECEMBER 31, ------------------
1993 1994 1995
-------------- ------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Excess (deficiency) of income
over expenses............... $ 0 $ 0 $(870,684)
ADJUSTMENTS TO RECONCILE
EXCESS (DEFICIENCY) OF
INCOME OVER EXPENSES TO NET
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
(Increase) in
receivable -- Orbital
Communications
Corporation............. 0 0 0
(Increase) in
receivable -- Trade..... 0 0 0
Increase (decrease) in
accounts payable........ 0 0 177,100
Increase in other current
liabilities............. 0 0 32,230
------- ------- ---------
NET CASH USED IN
OPERATING
ACTIVITIES.......... 0 0 (661,354)
------- ------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Partners' Contribution.... 10,000 0 0
Increase in amount due to
ORBCOMM Global L.P...... 0 0 661,354
------- ------- ---------
NET CASH PROVIDED BY
FINANCING
ACTIVITIES.......... 10,000 0 661,354
------- ------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS... 10,000 0 0
CASH AND CASH EQUIVALENTS
Beginning of period....... 0 10,000 10,000
------- ------- ---------
CASH AND CASH EQUIVALENTS
End of period............. $10,000 $10,000 $ 10,000
======= ======= =========
<CAPTION>
TOTAL
TOTAL CASH FLOWS
CASH FLOWS DURING
DURING DEVELOPMENT
DEVELOPMENT STAGE
STAGE NINE MONTHS THROUGH
THROUGH ENDED SEPTEMBER 30, SEPTEMBER
DECEMBER 31, -------------------- 30,
1995 1995 1996 1996
------------ ------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Excess (deficiency) of income
over expenses............... $(870,684) $ 0 $(2,028,340) $(2,899,024)
ADJUSTMENTS TO RECONCILE
EXCESS (DEFICIENCY) OF
INCOME OVER EXPENSES TO NET
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
(Increase) in
receivable -- Orbital
Communications
Corporation............. 0 0 (9,427) (9,427)
(Increase) in
receivable -- Trade..... 0 0 (151,020) (151,020)
Increase (decrease) in
accounts payable........ 177,100 0 (68,745) 108,355
Increase in other current
liabilities............. 32,230 0 150,827 183,057
--------- ------- ----------- ----------
NET CASH USED IN
OPERATING
ACTIVITIES.......... (661,354) 0 (2,106,705) (2,768,059)
--------- ------- ----------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Partners' Contribution.... 10,000 0 0 10,000
Increase in amount due to
ORBCOMM Global L.P...... 661,354 0 2,129,578 2,790,932
--------- ------- ----------- ----------
NET CASH PROVIDED BY
FINANCING
ACTIVITIES.......... 671,354 0 2,129,578 2,800,932
--------- ------- ----------- ----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS... 10,000 0 22,873 32,873
CASH AND CASH EQUIVALENTS
Beginning of period....... 0 10,000 10,000 0
--------- ------- ----------- ----------
CASH AND CASH EQUIVALENTS
End of period............. $ 10,000 $10,000 $ 32,873 $ 32,873
========= ======= =========== ==========
</TABLE>
(See accompanying notes to the financial statements)
F-16
<PAGE> 142
ORBCOMM USA, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL PARTNERS
-------------------------------------------
TELEGLOBE ORBITAL ORBCOMM
MOBILE COMMUNICATIONS GLOBAL
PARTNERS CORPORATION L.P. TOTAL
--------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Capital contributions....................... $ 1,500 $ 8,500 $ 0 $ 10,000
Excess (deficiency) of income over
expenses.................................. 0 0 0 0
--------- --------------- ----------- -----------
PARTNERS' CAPITAL, DECEMBER 31, 1993........ 1,500 8,500 0 10,000
Capital contributions....................... 0 0 0 0
Excess (deficiency) of income over
expenses.................................. 0 0 0 0
--------- --------------- ----------- -----------
PARTNERS' CAPITAL, DECEMBER 31, 1994........ 1,500 8,500 0 10,000
Capital transfer............................ (1,500) (8,300) 9,800 0
Excess (deficiency) of income over
expenses.................................. 0 (17,414) (853,270) (870,684)
--------- --------------- ----------- -----------
PARTNERS' CAPITAL, DECEMBER 31, 1995........ 0 (17,214) (843,470) (860,684)
Excess (deficiency) of income over
expenses.................................. 0 (40,567) (1,987,773) (2,028,340)
--------- --------------- ----------- -----------
PARTNERS' CAPITAL, SEPTEMBER 30, 1996
(UNAUDITED)............................... $ 0 $ (57,781) $(2,831,243) $(2,889,024)
======= ============ ========== ==========
</TABLE>
(See accompanying notes to the financial statements)
F-17
<PAGE> 143
ORBCOMM USA, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(1) THE ORBCOMM SYSTEM
Organization
In 1993, Orbital Communications Corporation ("OCC"), a majority owned
subsidiary of Orbital Sciences Corporation ("Orbital"), and Teleglobe Mobile
Partners ("Teleglobe Mobile"), a partnership established by affiliates of
Teleglobe Inc. ("Teleglobe"), formed ORBCOMM Global, L.P. ("ORBCOMM"), a
Delaware limited partnership.
OCC and Teleglobe Mobile also formed two marketing partnerships, ORBCOMM
USA, L.P. ("ORBCOMM USA") and ORBCOMM International Partners, L.P. ("ORBCOMM
International"), to market the ORBCOMM System services in the United States and
internationally, respectively. In 1995, ORBCOMM became a 98% General Partner in
ORBCOMM USA, reducing OCC's General Partner interest to 2% and eliminating
Teleglobe Mobile's interest entirely.
Pursuant to the terms of the Agreement of Limited Partnership of ORBCOMM
USA between OCC and ORBCOMM, action by ORBCOMM USA generally requires the
approval of General Partners holding a majority of the participating interests
held by the General Partners, with OCC and Teleglobe Mobile each voting their
direct and indirect Participation Percentages as a whole. OCC and Teleglobe
Mobile each currently holds 51% and 49%, respectively, of the direct and
indirect participating interests in ORBCOMM USA.
The ORBCOMM System Description
ORBCOMM was created for the design, development, construction, integration,
testing and operation of a global digital satellite communications system of
low-Earth orbiting mobile satellites and certain terrestrial facilities intended
to provide two-way data and messaging communications services throughout the
world ("the ORBCOMM System"). ORBCOMM intends to construct and implement the
initial 28-satellite ORBCOMM System in two phases: the ORBCOMM Phase 1A System,
consisting of the worldwide network operations center (including the satellite
management system), the U.S. Gateway control center, four U.S. Earth stations
and two satellites ("the ORBCOMM Phase 1A System"); and the ORBCOMM Phase 1B
System, consisting of the ORBCOMM Phase 1A System, three additional planes each
consisting of eight additional satellites and one plane consisting of two
high-inclination satellites ("the ORBCOMM Phase 1B System").
Orbital is the primary supplier of the communications satellites, launch
vehicles and U.S. ground systems and successfully launched the satellites of the
ORBCOMM Phase 1A in April 1995. The ORBCOMM Phase 1A System began commercial
intermittent service in 1996.
The Output Capacity Charge and the U.S. Marketing Services
Pursuant to the terms of the System Charge Agreement between OCC and
ORBCOMM USA, ORBCOMM USA has agreed to pay OCC an Output Capacity Charge that is
a quarterly fee equal to 23% of its total aggregate service revenues for such
calendar quarter in exchange for the exclusive right to market, sell, lease and
franchise all ORBCOMM System output capacity in the United States and for the
exclusive use of the System Assets in the United States.
Additionally, pursuant to the terms of the System Charge Agreement, through
September 12, 1995, ORBCOMM USA furnished all management, labor, facilities and
materials necessary to perform, on a best efforts basis, certain marketing
services in the United States (the "U.S. Marketing Services"), on a cost-
reimbursable basis. The U.S. Marketing Services portion of the Marketing
Agreement expired on September 12, 1995.
F-18
<PAGE> 144
ORBCOMM USA, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(1) THE ORBCOMM SYSTEM -- (CONTINUED)
Regulatory Status
Construction and operation of communications satellites in the United
States requires licenses from the Federal Communications Commission ("FCC"). OCC
has been granted full operational authority for the ORBCOMM System by the FCC.
Similar licenses are required from foreign regulatory authorities to permit
ORBCOMM System services to be offered outside the United States. Primary
responsibility for obtaining licenses outside the United States will reside with
the various International Licensees.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
ORBCOMM USA is in its development stage, devoting substantially all of its
efforts to establishing commercial and governmental markets in the United States
for the ORBCOMM System. ORBCOMM USA's planned principal operations are expected
to commence in 1998. The accompanying financial statements of ORBCOMM USA have
been prepared on the accrual basis of accounting in conformity with generally
accepted accounting principles in the United States.
In the opinion of management, the accompanying unaudited interim financial
information reflects all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation thereof. Operating results for the nine-month
periods ended September 30, 1995 (unaudited) and 1996 (unaudited) are not
necessarily indicative of the results expected for the full year.
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 reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Income Taxes
As a partnership, Federal and state income taxes are the direct
responsibility of each partner. Accordingly, no income taxes have been recorded
in the accompanying financial statements.
Cash and Cash Equivalents
ORBCOMM USA considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Revenue Recognition
ORBCOMM USA provides subscriber communicator hardware to commercial
companies. Revenue is recognized when products are shipped or when clients have
accepted the products or services, depending on contractual terms. Through
September 1995, ORBCOMM USA provided U.S. Marketing Services to OCC on a
cost-reimbursable basis.
(3) RELATED PARTY TRANSACTIONS
Payments by OCC to ORBCOMM USA for U.S. Marketing Services were based on
ORBCOMM USA's monthly costs incurred. For the period June 30, 1993 (date of
inception) through December 31, 1993, the years ended December 31, 1994, and
1995 and the periods September 30, 1995 (unaudited) and 1996
F-19
<PAGE> 145
ORBCOMM USA, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) RELATED PARTY TRANSACTIONS -- (CONTINUED)
(unaudited), ORBCOMM USA received approximately $749,000, $2,093,000,
$1,360,000, $1,360,000, and $0, respectively, from OCC as reimbursement of costs
for U.S. Marketing Services.
At December 31, 1994 and 1995 and September 30, 1996 (unaudited), ORBCOMM
USA had a payable of approximately $0, $661,000, and $2,791,000, respectively to
ORBCOMM for amounts advanced to support ORBCOMM USA establish commercial and
government markets. ORBCOMM USA is currently in development stage and obtains
funds to support operations through advances from ORBCOMM.
At September 30, 1996 (unaudited), the Company had a receivable of
approximately $9,400 for bonus payments to ORBCOMM USA employees paid on behalf
of OCC for employees previously employed by OCC (none for the period ending
December 31, 1994 and 1995).
(4) COMMITMENTS AND CONTINGENCIES
In August 1996, ORBCOMM and ORBCOMM Global Capital Corp. (the "Issuers")
issued $170,000,000 of Senior Notes due in 2004 with Revenue Participation
Interest (the "Old Notes"). Revenue Participation Interest represents an
aggregate amount equal to 5.0% of the ORBCOMM System revenue and is payable on
the Old Notes on each interest payment date subject to certain covenant
restrictions. Interest on the Old Notes accrues at a rate of 14% per annum and
will be payable semi-annually in arrears on February 15 and August 15 of each
year, commencing on February 15, 1997.
The Old Notes are exchangeable for an equal principal amount of registered
14% Series B Senior Notes due 2004 with Revenue Participation Interest (the
"Exchange Notes"). The Exchange Notes are substantially identical in form and
term to the Old Notes except that the Exchange Notes have been registered under
the Securities Act of 1993, as amended, and do not bear legends restricting the
transfer thereof. The Exchange Notes and the Old Notes are collectively referred
to as the "Notes." The Notes are fully and unconditionally guaranteed on a joint
and several basis by OCC, Teleglobe Mobile, ORBCOMM USA and ORBCOMM
International (each a "Guarantor" and collectively the "Guarantors"), except
that the guarantees are non-recourse to the shareholders and partners of the
Guarantors, limited only to the extent necessary for each such guarantee to not
constitute a fraudulent conveyance under applicable law. The guarantee of each
Guarantor ranks pari passu in right of payment with all senior indebtedness of
such a Guarantor and senior in right of payment to all indebtedness expressly
subordinated to the guarantee of such Guarantor. The guarantees are non-recourse
to the shareholders and/or partners of each Guarantors and no shareholders or
partners of any Guarantors will have any liability for any claim under the
Notes.
Upon closing, ORBCOMM used a portion of the net proceeds from the sale of
the Old Notes, estimated at approximately $44.8 million, to purchase a portfolio
of United States Government securities to provide for payment in full of
interest on the Notes through August 15, 1998 (the "Pledged Account").
F-20
<PAGE> 146
INDEPENDENT AUDITORS' REPORT
The Partners
ORBCOMM International Partners, L.P.:
We have audited the accompanying statements of assets, liabilities and
partners' capital of ORBCOMM International Partners, L.P. ("ORBCOMM
International") (a development stage enterprise) as of December 31, 1995 and
1994, and the related statements of income and expenses, partners' capital, and
cash flows for each of the years then ended and for the period from June 30,
1993 (date of inception) to December 31, 1993 and for the period from June 30,
1993 (date of inception) through December 31, 1995. These financial statements
are the responsibility of ORBCOMM International's management. Our responsibility
is to express an opinion on these 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, the financial statements referred to above present fairly,
in all material respects, the financial position of ORBCOMM International (a
development stage enterprise) as of December 31, 1995 and 1994, and the results
of its income and expenses, partners' capital and cash flows for each of the
years then ended and for the period from June 30, 1993 (date of inception) to
December 31, 1993 and for the period June 30, 1993 (date of inception) through
December 31, 1995, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Washington, DC
May 29, 1996
F-21
<PAGE> 147
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents............................... $10,000 $10,000 $ 28,105
Receivable -- Orbital Communications Corporation........ 0 0 6,613
Receivable -- Trade..................................... 0 0 4,056
------- ------- --------
TOTAL ASSETS....................................... 10,000 10,000 38,774
======= ======= ========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Other Current Liabilities............................... 0 0 288,146
Amount Due to ORBCOMM Global, L.P....................... 0 0 630,820
------- ------- --------
Total Liabilities.................................. 0 0 918,966
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
GENERAL PARTNERS:
Teleglobe Mobile Partners.......................... 1,500 200 (17,604)
Orbital Communications Corporation................. 8,500 0 0
ORBCOMM Global, L.P................................ 0 9,800 (862,588)
------- ------- --------
Total Partners' Capital............................ 10,000 10,000 (880,192)
------- ------- --------
TOTAL LIABILITIES AND PARTNERS' CAPITAL............ $10,000 $10,000 $ 38,774
======= ======= ========
</TABLE>
(See accompanying notes to the financial statements)
F-22
<PAGE> 148
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF INCOME AND EXPENSES
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED TOTAL
DURING ACCUMULATED
JUNE 30, 1993 DEVELOPMENT DURING
(DATE OF STAGE DEVELOPMENT
INCEPTION) YEAR ENDED THROUGH NINE MONTHS STAGE
THROUGH DECEMBER 31, DECEMBER ENDED SEPTEMBER 30, THROUGH
DECEMBER 31, ------------------ 31, -------------------- SEPTEMBER 30,
1993 1994 1995 1995 1995 1996 1996
------------- ------- ------- ----------- ------- --------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Product sales.................. $ 0 $ 0 $ 0 $ 0 $ 0 $ 4,160 $ 4,160
EXPENSES:
Cost of Product sales.......... $ 0 $ 0 $ 0 $ 0 $ 0 $ 4,160 $ 4,160
Marketing and Administrative
Expenses..................... 0 0 0 0 0 890,192 890,192
------- ------- ------- ------- ------- ------- -------
Total Expenses............. 0 0 0 0 0 894,352 894,352
------- ------- ------- ------- ------- ------- -------
EXCESS (DEFICIENCY) OF INCOME OVER
EXPENSES......................... $ 0 $ 0 $ 0 $ 0 $ 0 $(890,192) $(890,192)
======= ======= ======= ======= ======= ======= =======
</TABLE>
(See accompanying notes to the financial statements)
F-23
<PAGE> 149
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TOTAL TOTAL
CASH FLOWS CASH FLOWS
JUNE 30, 1993 DURING DURING
(DATE OF DEVELOPMENT DEVELOPMENT
INCEPTION) YEAR ENDED STAGE NINE MONTHS STAGE
THROUGH DECEMBER 31, THROUGH ENDED SEPTEMBER 30, THROUGH
DECEMBER 31, ------------------ DECEMBER 31, -------------------- SEPTEMBER 30,
1993 1994 1995 1995 1995 1996 1996
------------- ------- ------- ------------ ------- --------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Excess (deficiency) of income over
expenses........................ $ 0 $ 0 $ 0 $ 0 $ 0 $(890,192) $(890,192)
ADJUSTMENTS TO RECONCILE EXCESS
(DEFICIENCY) OF INCOME OVER
EXPENSES TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES:
(Increase) in receivable --
Orbital Communications
Corporation............. 0 0 0 0 0 (6,613) (6,613)
(Increase) in Receivable
Trade....................... 0 0 0 0 0 (4,056) (4,056)
Increase in other current
liabilities................. 0 0 0 0 0 288,146 288,146
------- ------- ------- -------- ------- --------- ---------
NET CASH USED IN OPERATING
ACTIVITIES.............. 0 0 0 0 0 (612,715) (612,715)
------- ------- ------- -------- ------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Partners' Contribution........ 10,000 0 0 10,000 0 0 10,000
Increase in amount due to
ORBCOMM Global, L.P. ....... 0 0 0 0 0 630,820 630,820
------- ------- ------- -------- ------- --------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES.... 10,000 0 0 10,000 0 630,820 640,820
------- ------- ------- -------- ------- --------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS..................... 10,000 0 0 10,000 0 18,105 28,105
CASH AND CASH EQUIVALENTS
Beginning of period........... 0 10,000 10,000 0 10,000 10,000 0
------- ------- ------- -------- ------- --------- ---------
CASH AND CASH EQUIVALENTS
End of period................. $10,000 $10,000 $10,000 $ 10,000 $10,000 $ 28,105 $ 28,105
======= ======= ======= ======== ======= ========= =========
</TABLE>
(See accompanying notes to the financial statements)
F-24
<PAGE> 150
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL PARTNERS
----------------------------------------
TELEGLOBE ORBITAL ORBCOMM
MOBILE COMMUNICATIONS GLOBAL
PARTNERS CORPORATION L.P. TOTAL
--------- -------------- --------- ---------
<S> <C> <C> <C> <C>
Capital contributions......................... $ 1,500 $ 8,500 $ 0 $ 10,000
Excess (deficiency) of income over expenses... 0 0 0 0
--------- -------------- --------- ---------
PARTNERS' CAPITAL, DECEMBER 31, 1993.......... 1,500 8,500 0 10,000
Capital contributions......................... 0 0 0 0
Excess (deficiency) of income over expenses... 0 0 0 0
--------- -------------- --------- ---------
PARTNERS' CAPITAL, DECEMBER 31, 1994.......... 1,500 8,500 0 10,000
Capital transfer.............................. (1,300) (8,500) 9,800 0
Excess (deficiency) of income over expenses... 0 0 0 0
--------- -------------- --------- ---------
PARTNERS' CAPITAL, DECEMBER 31, 1995.......... 200 0 9,800 10,000
Excess (deficiency) of income over expenses... (17,804) 0 (872,388) (890,192)
--------- -------------- --------- ---------
PARTNERS' CAPITAL, SEPTEMBER 30, 1996
(UNAUDITED)................................. $ (17,604) $ 0 $(862,588) $(880,192)
======== ============ ========= =========
</TABLE>
(See accompanying notes to the financial statements)
F-25
<PAGE> 151
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(1) THE ORBCOMM SYSTEM
Organization
In 1993, Orbital Communications Corporation ("OCC"), a majority owned
subsidiary of Orbital Sciences Corporation ("Orbital"), and Teleglobe Mobile
Partners ("Teleglobe Mobile"), a partnership established by affiliates of
Teleglobe Inc. ("Teleglobe"), formed ORBCOMM Global, L.P. ("ORBCOMM"), a
Delaware limited partnership.
OCC and Teleglobe Mobile also formed two marketing partnerships, ORBCOMM
USA, L.P. ("ORBCOMM USA") and ORBCOMM International Partners, L.P. ("ORBCOMM
International"), to market the ORBCOMM System services in the United States and
internationally, respectively. In 1995, ORBCOMM became a 98% General Partner in
ORBCOMM International, reducing Teleglobe Mobile's General Partner interest to
2% and eliminating OCC's interest entirely.
Pursuant to the terms of the Agreement of Limited Partnership of ORBCOMM
International between Teleglobe Mobile and ORBCOMM, action by ORBCOMM
International generally requires the approval of General Partners holding a
majority of the participating interests held by the General Partners, with OCC
and Teleglobe Mobile each voting their direct and indirect participating
interests as a whole. OCC and Teleglobe Mobile each currently holds 49% and 51%,
respectively, of the direct and indirect Participation Percentages in ORBCOMM
International.
The ORBCOMM System Description
ORBCOMM was created for the design, development, construction, integration,
testing and operation of a global digital satellite communications system of
low-Earth orbiting mobile satellites and certain terrestrial facilities intended
to provide two-way data and messaging communications services throughout the
world ("the ORBCOMM System"). ORBCOMM intends to construct and implement the
initial 28-satellite ORBCOMM System in two phases: the ORBCOMM Phase 1A System,
consisting of the worldwide network operations center (including the satellite
management system), the U.S. Gateway control center, four U.S. Earth stations
and two satellites ("the ORBCOMM Phase 1A System"); and the ORBCOMM Phase 1B
System, consisting of the ORBCOMM Phase 1A System, three additional planes each
consisting of eight additional satellites and one plane consisting of two
high-inclination satellites ("the ORBCOMM Phase 1B System").
Orbital is the primary supplier of the communications satellites, launch
vehicles and U.S. ground systems and successfully launched the satellites of the
ORBCOMM Phase 1A in April 1995. The ORBCOMM Phase 1A System began commercial
intermittent service in 1996.
The Output Capacity Charge
Pursuant to the terms of the International System Charge Agreement (the
"International System Charge Agreement") among ORBCOMM, Teleglobe Mobile and
ORBCOMM International, ORBCOMM International has agreed to pay to Teleglobe
Mobile an International Output Capacity Charge that is equal to 23% of its total
aggregate service revenues for a calendar quarter in exchange for the exclusive
right to market, sell, lease and franchise all ORBCOMM System output capacity
outside the United States.
Regulatory Status
Construction and operation of communications satellites in the United
States requires licenses from the Federal Communications Commission ("FCC"). OCC
has been granted full operational authority for the ORBCOMM System by the FCC.
Similar licenses are required from foreign regulatory authorities to permit
F-26
<PAGE> 152
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(1) THE ORBCOMM SYSTEM -- (CONTINUED)
ORBCOMM System services to be offered outside the United States. Primary
responsibility for obtaining licenses outside the United States will reside with
the various International Licensees.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
ORBCOMM International is in its development stage, devoting substantially
all of its efforts to establishing commercial and governmental markets, through
international licensees, for the ORBCOMM System internationally. ORBCOMM
International's planned principal operations are expected to commence in 1998.
The accompanying financial statements of ORBCOMM International have been
prepared on the accrual basis of accounting in conformity with generally
accepted accounting principles in the United States.
In the opinion of management, the accompanying unaudited interim financial
information reflects all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation thereof. Operating results for the nine-month
periods ended September 30, 1995 (unaudited) and 1996 (unaudited) are not
necessarily indicative of the results expected for the full year.
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 reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Income Taxes
As a partnership, Federal and state income taxes are the direct
responsibility of each partner. Accordingly, no income taxes have been recorded
in the accompanying financial statements.
Cash and Cash Equivalents
ORBCOMM International considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents.
Related Party Transactions
At September 30, 1996 (unaudited), ORBCOMM International had a payable of
approximately $631,000 to ORBCOMM for amounts advanced to support ORBCOMM
International establish commercial and government markets (none for the periods
ended December 31, 1995 and 1994). ORBCOMM International is currently in
development stage and obtains funds to support operations through advances for
ORBCOMM.
At September 30, 1996, ORBCOMM International had a receivable of
approximately $6,600 for bonus payments to ORBCOMM International employees paid
on behalf of OCC for employees previously employed by OCC (none for the periods
ended December 31, 1994 and 1995).
(3) COMMITMENTS AND CONTINGENCIES
In August 1996, ORBCOMM and ORBCOMM Global Capital Corp. (the "Issuers")
issued $170,000,000 of Senior Notes due in 2004 with Revenue Participation
Interest (the "Old Notes"). Revenue Participation Interest represents an
aggregate amount equal to 5.0% of the ORBCOMM System revenue and
F-27
<PAGE> 153
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
is payable on the Old Notes on each interest payment date subject to certain
covenant restrictions. Interest on the Old Notes accrues at the rate of 14% per
annum and will be payable semi-annually in arrears on February 15 and August 15
of each year, commencing on February 15, 1997.
The Old Notes are exchangeable for an equal principal amount of registered
14% Series B Senior Notes due 2004 with Revenue Participation Interest (the
"Exchange Notes"). The Exchange Notes are substantially identical in form and
term to the Old Notes except that the Exchange Notes have been registered under
the Securities Act of 1933, as amended, and do not bear legends restricting the
transfer thereof. The Exchange Notes and the Old Notes are collectively referred
to as the "Notes." The Notes are fully and unconditionally guaranteed on a joint
and several basis by OCC, Teleglobe Mobile, ORBCOMM USA and ORBCOMM
International (each a "Guarantor" and collectively the "Guarantors"), except
that the guarantees are non-recourse to the shareholders and partners of the
Guarantors, limited only to the extent necessary for each such guarantee to not
constitute a fraudulent conveyance under applicable law. The guarantee of each
Guarantor ranks pari passu in right of payment with all senior indebtedness of
such a Guarantor and senior in right of payment to all indebtedness expressly
subordinated to the guarantee of such Guarantor. The guarantees are non-recourse
to the shareholders and/or partners of each Guarantors and no shareholders or
partners of any Guarantors will have any liability for any claim under the
Notes.
Upon closing, ORBCOMM used a portion of the net proceeds from the sale of
the Old Notes, estimated at approximately $44.8 million, to purchase a portfolio
of United States Government securities to provide for payment in full of
interest on the Notes through August 15, 1998 (the "Pledged Account").
(4) SUBSEQUENT EVENTS
During October 1996, ORBCOMM International signed three Service License
Agreements with International Licensees covering Europe, the Malaysian Region
and a portion of North Africa to market satellite-based, two-way message and
data communication services using the ORBCOMM System. ORBCOMM International
generally recognizes fees from Services License Agreements ratably over the term
of the agreement, or when the Company's obligations thereunder are substantially
complete.
F-28
<PAGE> 154
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Orbital Communications Corporation:
We have audited the accompanying consolidated balance sheets of Orbital
Communications Corporation and subsidiary as of December 31, 1995 and 1994, and
the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for each of the years in the three-year period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company'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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Orbital
Communications Corporation and subsidiary as of December 31, 1995 and 1994, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Washington, DC
July 5, 1996
F-29
<PAGE> 155
ORBITAL COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
-------------------------- 30,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents........................ $ -- $ -- $ 200,468
Contract Receivables............................. 11,892,278 900,296 122,186
Other Current Assets............................. 19,342 927 --
----------- ----------- -----------
Total Current Assets........................ 11,911,620 901,223 322,654
INVESTMENTS IN AFFILIATES............................. 49,204,239 62,977,126 69,901,509
DEPOSITS, LICENSES AND OTHER ASSETS
FCC and Other License Costs...................... 1,308,643 -- --
Deposits and Other Assets........................ 66,352 -- --
----------- ----------- -----------
Total Deposits, Licenses and Other Assets... 1,374,995 -- --
----------- ----------- -----------
TOTAL ASSETS................................ $62,490,854 $63,878,349 $70,224,163
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts Payable................................. $ 15,654 $ 3,592 $ 106,857
Accrued Contract Expenses........................ 493,089 -- --
Other Current Liabilities........................ 539,738 685,131 880,974
----------- ----------- -----------
Total Current Liabilities................... 1,048,481 688,723 987,831
LONG TERM LIABILITIES
Due to Orbital Sciences Corporation.............. 61,386,256 62,857,673 74,701,451
Due to Affiliates................................ -- 661,354 2,813,637
----------- ----------- -----------
Total Liabilities........................... 62,434,737 64,207,750 78,502,919
NON-CONTROLLING INTEREST IN NET ASSETS OF ORBCOMM USA,
L.P................................................. -- (421,735) (1,415,622)
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Common Stock, par value $.01; 8,000,000 shares
authorized, 4,654,186, 4,660,110 and 4,723,505
shares outstanding, after deducting 3,012
shares held in treasury........................ 46,542 46,601 47,265
Additional Paid-In Capital....................... 9,575 35,561 144,690
Retained Earnings (Deficit)...................... -- 10,172 (7,055,089)
----------- ----------- -----------
Total Stockholders' Equity (Deficit)........ 56,117 92,334 (6,863,134)
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)........................................... $62,490,854 $63,878,349 $70,224,163
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-30
<PAGE> 156
ORBITAL COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues......................... $43,924,715 $24,700,170 $15,652,114 $13,369,000 $ 192,573
Direct Expenses.................. 40,259,868 19,230,148 10,851,433 9,175,000 182,920
----------- ----------- ----------- ----------- -----------
Gross Profit (Loss)......... 3,664,847 5,470,022 4,800,681 4,194,000 9,653
General and Administrative
Expenses....................... 2,288,546 5,470,022 5,671,366 4,194,000 2,035,407
----------- ----------- ----------- ----------- -----------
Operating Income (Loss)..... 1,376,301 -- (870,685) -- (2,025,754)
Equity in Earnings (Losses) of
Affiliates..................... -- -- 454,222 470,676 (6,033,394)
Non-controlling Interest in Net
Loss of ORBCOMM USA, L.P. ..... -- -- 426,635 -- 993,887
----------- ----------- ----------- ----------- -----------
Income (Loss) Before
Provision for Income
Taxes..................... 1,376,301 -- 10,172 470,676 (7,065,261)
Provision for Income Taxes....... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Income (Loss)........... $ 1,376,301 $ -- $ 10,172 $ 470,676 $(7,065,261)
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-31
<PAGE> 157
ORBITAL COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
------------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
--------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992.............. 4,650,000 $46,500 $ 999 $(1,376,301) $(1,328,802)
Net Income......................... -- -- -- 1,376,301 1,376,301
--------- ------- ---------- ----------- -----------
BALANCE, DECEMBER 31, 1993.............. 4,650,000 46,500 999 -- 47,499
Shares Issued to Employees......... 4,186 42 8,576 -- 8,618
Net Income......................... -- -- -- -- --
--------- ------- ---------- ----------- -----------
BALANCE, DECEMBER 31, 1994.............. 4,654,186 46,542 9,575 -- 56,117
Shares Issued to Employees......... 8,936 89 37,635 -- 37,724
Treasury Stock Purchased........... (3,012) (30) (11,649) -- (11,679)
Net Income......................... -- -- -- 10,172 10,172
--------- ------- ---------- ----------- -----------
BALANCE, DECEMBER 31, 1995.............. 4,660,110 46,601 35,561 10,172 92,334
Shares Issued to Employees......... 63,395 664 109,129 -- 109,793
Net Loss........................... -- -- -- (7,065,261) (7,065,261)
--------- ------- ---------- ----------- -----------
BALANCE, SEPTEMBER 30, 1996
(UNAUDITED)........................... 4,723,505 $47,265 $ 144,690 $(7,055,089) $(6,863,134)
======== ======= ======== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-32
<PAGE> 158
ORBITAL COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------------ -------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS)....................... $ 1,376,301 $ -- $ 10,172 $ 470,676 $(7,065,261)
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES:
Depreciation................... 52,521 -- -- -- --
Equity in (earnings) losses of
affiliates................... -- -- (454,222) (470,676) 6,033,394
Non-controlling interest in net
loss of ORBCOMM USA, L.P. ... -- -- (426,635) -- (993,887)
CHANGES IN ASSETS AND LIABILITIES:
Decrease (increase) in current
assets....................... (237,848) (10,765,532) 11,010,397 10,988,000 779,037
Increase (decrease) in current
liabilities.................. 3,258,239 (4,027,316) (354,858) (369,000) 299,108
Decrease (increase) in
deposits, licenses, and
other........................ (811,829) (36,419) 1,374,995 1,348,000 0
------------ ------------ ------------ ----------- -----------
NET CASH PROVIDED BY (USED
IN) OPERATING
ACTIVITIES............... 3,637,384 (14,829,267) 11,159,849 11,967,000 (947,609)
------------ ------------ ------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................ (2,671,630) -- -- -- --
Proceeds from sale of assets........ 9,587,193 -- -- -- --
Investments in affiliates........... (38,426,279) (10,777,960) (13,318,665) (8,565,000) (12,957,777)
------------ ------------ ------------ ----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES............... (31,510,716) (10,777,960) (13,318,665) (8,565,000) (12,957,777)
------------ ------------ ------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock
to employees...................... -- 8,618 37,724 32,000 109,793
Purchases of treasury stock......... -- -- (11,679) -- --
Net borrowings from Affiliates...... -- -- 661,354 -- 2,152,283
Net borrowings from (repayments to)
Orbital Sciences Corporation...... 27,873,332 25,598,609 1,471,417 (3,312,000) 11,843,778
------------ ------------ ------------ ----------- -----------
NET CASH PROVIDED BY (USED
IN) FINANCING
ACTIVITIES............... 27,873,332 25,607,227 2,158,816 (3,280,000) 14,105,854
------------ ------------ ------------ ----------- -----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................... -- -- -- 122,000 200,468
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD................................ -- -- -- -- --
------------ ------------ ------------ ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD......................... $ -- $ -- $ -- $ 122,000 $ 200,468
============= ============= ============= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-33
<PAGE> 159
ORBITAL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) THE ORBCOMM SYSTEM
Organization
In 1990, Orbital Sciences Corporation ("Orbital") formed Orbital
Communications Corporation ("OCC") to develop and operate the first
satellite-based global two-way data and messaging communications system. In
1993, OCC formed ORBCOMM Global, L.P. ("ORBCOMM") with Teleglobe Mobile Partners
("Teleglobe Mobile"), an affiliate of Teleglobe Inc.
OCC and Teleglobe Mobile are each 50% general partners in ORBCOMM.
Additionally, OCC is a 2% general partner in ORBCOMM USA, L.P. ("ORBCOMM USA"),
and Teleglobe Mobile is a 2% general partner in ORBCOMM International Partners,
L.P. ("ORBCOMM International"), two partnerships formed to market the ORBCOMM
System. ORBCOMM is a 98% non-controlling general partner in each of the two
marketing partnerships. Directly and indirectly, OCC currently holds 51% and 49%
of ORBCOMM USA and ORBCOMM International, respectively.
OCC, a Delaware corporation, is a majority owned subsidiary of Orbital and
is included in Orbital's Consolidated Financial Statements. From inception
through December 1995, OCC was an operating company with employees working under
contract to ORBCOMM. At the beginning of 1996, all OCC employees transferred to
ORBCOMM, ORBCOMM USA or ORBCOMM International. Currently, OCC operates as a
holding company.
The ORBCOMM System Description
ORBCOMM was formed for the design, development, construction, integration,
test and operation of the ORBCOMM low-Earth orbit satellite communications
system (the "ORBCOMM System"). ORBCOMM intends to construct and implement the
initial 28-satellite ORBCOMM System in two phases: the ORBCOMM Phase 1A System,
consisting of the worldwide network operations center (including the satellite
management system), the United States gateway control center, four United States
gateway Earth stations and two satellites; and the ORBCOMM Phase 1B System
consisting of the ORBCOMM Phase 1A System, three additional planes each
consisting of eight satellites and one plane consisting of two high-inclination
satellites.
ORBCOMM USA, a subsidiary of OCC, has been granted the exclusive right to
market, sell, lease and franchise the ORBCOMM System output capacity in the
United States and the exclusive use of the ORBCOMM System Assets in the United
States.
System Charge
In consideration of the construction and financing of the ORBCOMM System
Assets by ORBCOMM, OCC is obligated to pay ORBCOMM a System Charge equal to 23%
of ORBCOMM USA's total aggregate revenues (the "Output Capacity Charge") minus
1.15% of aggregate system service revenues, defined as the total of ORBCOMM USA
and ORBCOMM International total system service revenues. If the Output Capacity
Charge is less than 1.15% of aggregate system service revenues as described
above, then OCC is not required to pay any portion of the System Charge to
ORBCOMM. Through September 30, 1996, no such charges have been incurred.
Regulatory Status
Construction and operation of communications satellites in the United
States requires licenses from the Federal Communications Commission (the "FCC").
OCC has been granted full operational authority for the ORBCOMM System by the
FCC. Similar licenses are required from foreign regulatory authorities to permit
F-34
<PAGE> 160
ORBITAL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) THE ORBCOMM SYSTEM -- (CONTINUED)
ORBCOMM System services to be offered outside the United States. Primary
responsibility for obtaining licenses outside the United States will reside with
the various International Licensees.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Preparation of Consolidated Financial Statements
The preparation of consolidated 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of OCC and the
partnership in which OCC directly or indirectly controls the general partner
interests. All material transactions and accounts among consolidated entities
have been eliminated in consolidation.
Revenue Recognition
OCC recognizes revenues on long-term contracts using the percentage of
completion method of accounting. Accordingly, revenues on long-term fixed-price
contracts are recognized based on costs incurred in relation to total estimated
costs, or based on specific delivery terms and conditions. Anticipated contract
losses are recognized as they become known.
OCC currently has no long-term contracts, but was the primary supplier of
the ORBCOMM Phase 1A System through completion of the system in April 1995.
Presentation of Interim Financial Information (Unaudited)
In the opinion of management, the accompanying unaudited interim
consolidated financial information reflects all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation thereof. Operating
results for the nine-month periods ended September 30, 1996 and 1995 are not
necessarily indicative of the results expected for the full year.
Income Taxes
OCC is included in Orbital's consolidated Federal income tax returns. OCC
determines its provision for income taxes as if it were filing on a separate
return basis.
OCC recognizes income taxes using the asset and liability method. Under the
asset and liability method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
F-35
<PAGE> 161
ORBITAL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Cash and Cash Equivalents
OCC considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
Investments in Affiliates
OCC uses the equity method of accounting for its investments in and
earnings of affiliates in which OCC has the ability to significantly influence,
but not control, such affiliate's operations. In accordance with the equity
method of accounting, OCC's carrying amount of an investment in an affiliate is
initially recorded at cost and is increased to reflect its share of the
affiliate's income and is reduced to reflect its share of the affiliate's
losses. OCC's investment is also increased to reflect contributions to, and
decreased to reflect distributions received from, the affiliate. Any difference
between the amount of OCC's investment and the amount of the underlying equity
in each affiliate's net assets is amortized over a period of twenty years.
Fair Value of Financial Instruments
The carrying value of OCC's cash and cash equivalents, receivables, and
accounts payable approximates fair value since all such instruments are
short-term in nature.
(3) RECEIVABLES
The components of receivables are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
----------- --------
<S> <C> <C>
Billed and billable.......................................... $ 2,277,290 $900,296
Recoverable costs and accrued profit not billed.............. 9,614,988 --
----------- --------
$11,892,278 $900,296
========== ========
</TABLE>
(4) INVESTMENTS IN AFFILIATES
ORBCOMM Partnerships. OCC's and Teleglobe Mobile's total capital
commitments to ORBCOMM are approximately $75,000,000 and $85,000,000,
respectively, all of which had been contributed through September 30, 1996
(unaudited). Capital contributions by OCC and Teleglobe Mobile through December
31, 1995 were approximately $62,000,000 and $35,000,000, respectively.
Pursuant to the terms of the relevant partnership agreements, (i) OCC and
Teleglobe Mobile share equal responsibility for the operational and financial
affairs of ORBCOMM; (ii) OCC controls the operational and financial affairs of
ORBCOMM USA; and (iii) Teleglobe Mobile controls the operational and financial
affairs of ORBCOMM International. Since OCC is unable to control, but is able to
exercise significant influence over, ORBCOMM's and ORBCOMM International's
operating and financial policies, OCC is accounting for its investment in
ORBCOMM and ORBCOMM International using the equity method of accounting. Since
OCC is able to control the operational and financial affairs of ORBCOMM USA, the
Company consolidates the accounts of ORBCOMM USA.
At September 30, 1996 (unaudited), ORBCOMM had total assets, total
liabilities and total partners' capital of approximately $331,196,000,
$187,489,000 and $143,707,000, respectively. At December 31, 1995, ORBCOMM had
total assets, total liabilities and total partners' capital of approximately
$109,030,000, $14,428,000 and $94,602,000, respectively. ORBCOMM collected a
non-refundable fee in the amount of approximately $900,000 from a potential
international licensee in 1995 (none in prior years) and net income
F-36
<PAGE> 162
ORBITAL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INVESTMENT IN AFFILIATES -- (CONTINUED)
(loss) of approximately $55,000, ($9,000), and $0 for the years ended December
31, 1995, 1994, and 1993, respectively.
Based on its current assessment of the overall business prospects of the
ORBCOMM partnerships and the ORBCOMM System, OCC currently believes its
investment of approximately $69,902,000 at September 30, 1996 (unaudited) in
ORBCOMM is fully recoverable. If, in the future, implementation of the ORBCOMM
System is significantly delayed, significantly restricted or abandoned, OCC may
be required to write-off part or all of its investment.
(5) RELATED PARTY TRANSACTIONS
OCC was the prime contractor of the ORBCOMM Phase 1A System communications
satellites, launch vehicles and ground systems to ORBCOMM, and successfully
launched the ORBCOMM Phase 1A System satellites in April 1995. During the fiscal
years 1995, 1994, and 1993, OCC recorded contract revenues on sales to ORBCOMM
of approximately $15,652,000, $24,700,000 and $43,925,000, respectively.
Pursuant to the ORBCOMM Phase 1A System contract with ORBCOMM, OCC
subcontracted with Orbital to procure a majority of the communications
satellites, launch vehicles, and ground systems. During the fiscal years 1995,
1994, and 1993, OCC purchased hardware and services totaling approximately
$4,477,000, $14,660,000 and $32,902,000, respectively, from Orbital.
Pursuant to the ORBCOMM System Procurement Agreement (for the ORBCOMM Phase
1B System), ORBCOMM contracted with Orbital to procure additional communications
satellites and launch services. During the first nine months of 1996, and during
fiscal year 1995, ORBCOMM purchased hardware and services totaling approximately
$42,500,000 (unaudited) and $23,672,000, respectively, from Orbital.
In 1995, pursuant to the terms of the ORBCOMM System Design, Development
and Operation Agreement between OCC and ORBCOMM, ORBCOMM reimbursed OCC for
previous costs incurred in obtaining the FCC License and related costs. Such
costs and reimbursements were reported as revenues and expenses in the period
incurred.
OCC procured U.S. Marketing Services from ORBCOMM USA on a cost
reimbursable basis. During the fiscal years 1995, 1994, and 1993, OCC purchased
marketing services totaling approximately $1,360,000, $2,093,000 and $749,000,
respectively. OCC ceased procuring U.S. Marketing Services from ORBCOMM USA at
the end of September 1995.
OCC obtains virtually all of its funding for operations and for its capital
investments in ORBCOMM from Orbital via a non-interest bearing intercompany
borrowing agreement. As of September 30, 1996 (unaudited) and December 31, 1995
and 1994, OCC owed Orbital approximately $74,701,000, $62,858,000, and
$61,386,000, respectively, none of which is currently payable.
ORBCOMM USA currently obtains all of its funding from ORBCOMM and ORBCOMM
International via non-interest bearing intercompany borrowing agreements. As of
September 30, 1996 (unaudited) and December 31, 1995 and 1994, ORBCOMM USA owed
ORBCOMM approximately $2,791,000, $661,000, and $0, respectively, none of which
is currently due. As of September 30, 1996 (unaudited) and December 31, 1995 and
1994, ORBCOMM USA owed ORBCOMM International approximately $23,000, $0, and $0,
respectively, none of which is currently due.
As of September 30, 1996 (unaudited), OCC owes approximately $112,000 and
$6,600 to ORBCOMM and ORBCOMM International, respectively, for employee bonus
payments paid on behalf of OCC for employees previously employed by OCC (none
for the years ended December 31, 1995 and 1994).
F-37
<PAGE> 163
ORBITAL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) INCOME TAXES
OCC had no current or deferred provision for income taxes for the years
ended December 31, 1995, 1994, and 1993. The primary difference between pre-tax
financial statement income and taxable income in 1993 relates to the utilization
of net operating losses generated in 1992. There are no significant differences
between pre-tax financial statement income and taxable income in 1995 and 1994.
The differences between the actual taxes and taxes computed at the U.S.
Federal income tax rate of 34% are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1994 1995
----- ----- ----
<S> <C> <C> <C>
U.S. Federal statutory rate..................................... 34.0% -- 34%
Utilization of net operating loss carryforward.................. (34.1) -- (34)
Other, net...................................................... 0.1 -- --
----- ----- ----
Effective Rate............................................. -- -- --
===== ===== ====
</TABLE>
The tax effects of significant temporary differences at December 31, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
-------- --------
<S> <C> <C>
Deferred Tax Assets:
Accrued expenses and other................................. $ 62,000 $ 78,000
Valuation allowance............................................. (62,000) (78,000)
-------- --------
$ -- $ --
======== ========
</TABLE>
(7) STOCK OPTION PLAN
OCC adopted a stock option plan in 1992 (the "ORBCOMM Plan"). The ORBCOMM
Plan provides for grants of incentive and non-qualified stock options to
purchase OCC common stock to officers and employees of OCC, ORBCOMM, ORBCOMM
USA, ORBCOMM International, and Orbital. Under the terms of the ORBCOMM Plan,
incentive stock options may not be granted at less than 100% of the fair market
value at the date of grant and non-qualified options may not be granted at less
than 85% of the fair market value of OCC common stock at the date of grant as
determined by a committee consisting of two OCC Board members and two members
appointed by Teleglobe Mobile. The options vest at a rate set forth by the Board
of Directors in each individual option agreement, generally in one-fourth
increments over a four-year period. Certain provisions of the ORBCOMM Plan and
the Restated Agreement of Limited Partnership of ORBCOMM Global, L.P. ("Limited
Partnership Agreement") may require OCC to repurchase the common stock acquired
pursuant to the options beginning in 1995 if a public market for OCC common
stock has not been established. Pursuant to the terms of the Limited Partnership
Agreement, ORBCOMM is required to reimburse OCC for the costs of repurchasing
the common stock from employees of ORBCOMM,
F-38
<PAGE> 164
ORBITAL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) STOCK OPTION PLAN -- (CONTINUED)
ORBCOMM USA, and ORBCOMM International. The following table summarizes the
option activity under the ORBCOMM Plan for the last three years:
<TABLE>
<CAPTION>
OUTSTANDING
NUMBER OF OPTION PRICE AND
SHARES PER SHARE EXERCISABLE
--------- ------------- -----------
<S> <C> <C> <C>
OUTSTANDING, DECEMBER 31, 1992.................. 413,650 $1.50 - $12.50
Grants..................................... 99,500 $5.25 - $12.50
Exercised.................................. --
Canceled or Expired........................ (16,876) $1.50 - $ 4.00
--------- -------------
OUTSTANDING, DECEMBER 31, 1993.................. 496,274 $1.50 - $12.50 184,966
Grants..................................... 118,650 $13.00 - $14.00
Exercised.................................. (4,186) $1.50 - $ 4.00
Canceled or Expired........................ (11,664) $1.50 - $13.00
--------- -------------
OUTSTANDING, DECEMBER 31, 1994.................. 599,074 $1.50 - $14.00 298,657
Grants..................................... -- --
Exercised.................................. (8,936) $1.50 - $13.00
Canceled or Expired........................ (44,238) $1.50 - $13.00
--------- -------------
OUTSTANDING, DECEMBER 31, 1995.................. 545,900 $1.50 - $14.00 411,086
Grants..................................... 154,500 $17.00
Exercised.................................. (63,395) $1.50 - $12.50
Canceled or Expired........................ (63,900) $1.50 - $13.00
--------- -------------
OUTSTANDING, SEPTEMBER 30, 1996................. 573,105 $1.50 - $17.00 383,655
======== =============
</TABLE>
OCC recorded compensation expense related to the ORBCOMM Plan of
approximately $32,000, $47,000, and $50,000 for the years ended December 31,
1995, 1994, and 1993, respectively. In 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"), which is effective for OCC's year
ending December 31, 1996. SFAS 123 recommends, but does not require, the
adoption of fair value accounting for stock-based compensation, including common
stock options issued to employees. OCC does not currently intend to adopt fair
value accounting for stock-based compensation issued to employees as recommended
by SFAS 123.
(8) COMMITMENTS AND CONTINGENCIES
In August 1996, ORBCOMM and ORBCOMM Global Capital Corp. (the "Issuers")
issued $170,000,000 of Senior Notes due in 2004 with Revenue Participation
Interest (the "Old Notes"). Revenue Participation Interest represents an
aggregate amount equal to 5.0% of the ORBCOMM System revenue and is payable on
the Old Notes on each interest payment date subject to certain covenant
restrictions. Interest on the Old Notes will accrue at a rate of 14% per annum
and will be payable semi-annually in arrears on February 15 and August 15 of
each year, commencing on February 15, 1997.
The Old Notes are exchangeable for an equal principal amount of registered
14% Series B Senior Notes due 2004 with Revenue Participation Interest (the
"Exchange Notes"). The Exchange Notes are substantially identical in form and
term to the Old Notes except that the Exchange Notes have been registered under
the Securities Act of 1933, as amended, and do not bear legends restricting the
transfer thereof. The Exchange Notes and the Old Notes are collectively referred
to as the "Notes." The Notes are fully and unconditionally
F-39
<PAGE> 165
ORBITAL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
guaranteed on a joint and several basis by OCC, Teleglobe Mobile, ORBCOMM USA,
and ORBCOMM International (each, a "Guarantor" and collectively, the
"Guarantors"), except that the Guarantees are non-recourse to the shareholders
and partners of the Guarantors, limited only to the extent necessary for each
such guarantee to not constitute a fraudulent conveyance under applicable law.
The guarantee of each Guarantor ranks pari passu in right of payment with all
senior indebtedness of such Guarantor and senior in right of payment to all
indebtedness expressly subordinated to the guarantee of such Guarantor. The
guarantees are nonrecourse to the shareholders and/or partners of each Guarantor
and no shareholder or partner of any Guarantor will have any liability for any
claim under the Notes.
F-40
<PAGE> 166
AUDITORS' REPORT
To the Partners of
Teleglobe Mobile Partners
We have audited the consolidated balance sheet of Teleglobe Mobile Partners
(a development stage enterprise) as at December 31, 1995 and 1994 and the
consolidated statements of income, partners' capital and changes in financial
position for the years then ended and for the period from July 21, 1993 (date of
inception) through December 31, 1993. These consolidated financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Partnership as at December
31, 1995 and 1994 and the results of its operations and the changes in its
financial position for the years then ended and for the period from July 21,
1993 (date of inception) through December 31, 1993 in accordance with generally
accepted accounting principles in the United States of America.
Grant Thornton
General Partnership
Chartered Accountants
Montreal, Canada
June 25, 1996
F-41
<PAGE> 167
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and short-term deposits.................................. $ 0 $34,168 $ 1,627
Accounts receivable........................................... 0 0 12
Joint venture investment (Note 3)............................. 10,003 33,512 76,701
------- ------- ----------
10,003 67,680 78,340
======= ======= ==========
LIABILITIES
Due to affiliates, without interest and repayment terms....... 938 271 647
Minority interest............................................. 0 5 0
Other liabilities............................................. 0 0 293
------- ------- ----------
938 276 940
------- ------- ----------
PARTNERS' CAPITAL
Teleglobe Mobile, L.P. ....................................... 8,974 46,711 53,638
TR (U.S.A.) Ltd. ............................................. 0 20,221 23,220
Teleglobe Mobile Investment Inc. ............................. 91 472 542
------- ------- ----------
9,065 67,404 77,400
------- ------- ----------
$10,003 $67,680 $78,340
======= ======= ==========
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements)
F-42
<PAGE> 168
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED INCOME
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
TOTAL TOTAL
JULY 21, ACCUMULATED ACCUMULATED
1993 DURING DURING
(DATE OF DEVELOPMENT NINE MONTHS DEVELOPMENT
INCEPTION) YEARS ENDED STAGE ENDED SEPTEMBER STAGE
THROUGH DECEMBER 31, THROUGH 30, THROUGH
DECEMBER 31, --------------- DECEMBER 31, ----------------- SEPTEMBER 30,
1993 1994 1995 1995 1995 1996 1996
------------ ----- ------ ------------ ------ ------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Interest income.............. $ 0 $ 0 $1,253 $1,253 $1,045 $ 884 $ 2,137
Share in net loss of a joint
venture.................... 0 0 (219) (219) 0 (6,591) (6,810)
------ ----- ------ ---------- ------ ------- -----------
0 0 1,034 1,034 1,045 (5,707) (4,673)
EXPENSES
Operating expenses........... 485 453 743 1,681 584 1,302 2,983
------ ----- ------ ---------- ------ ------- -----------
Income (loss) before minority
interest................... (485) (453) 291 (647) 461 (7,009) (7,656)
Minority interest............ 0 0 0 0 0 (5) (5)
------ ----- ------ ---------- ------ ------- -----------
NET INCOME (LOSS)............ $ (485) $(453) $ 291 $ (647) $ 461 $(7,004) $(7,651)
========= ====== ====== ========== ====== ======== ===========
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements)
F-43
<PAGE> 169
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED PARTNERS' CAPITAL
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
GENERAL PARTNERS
----------------------------------------------------
TELEGLOBE TELEGLOBE MOBILE
MOBILE, L.P. INVESTMENT INC. TR (U.S.A.) LTD. TOTAL
------------ ---------------- ---------------- -------
<S> <C> <C> <C> <C>
Initial capital contributions............. $ 9,903 $100 $ 0 $10,003
Net loss.................................. (480) (5) 0 (485)
---------- ------ --------- -------
PARTNERS' CAPITAL, DECEMBER 31, 1993...... 9,423 95 0 9,518
Net loss.................................. (449) (4) 0 (453)
---------- ------ --------- -------
PARTNERS' CAPITAL, DECEMBER 31, 1994...... 8,974 91 0 9,065
Capital contributions..................... 27,719 281 31,062 59,062
Excess of contributions from new Partner
to the existing Partners................ 10,587 106 (10,693) 0
Net income................................ 134 1 156 291
Share of financing fees of a joint
venture................................. (703) (7) (304) (1,014)
---------- ------ --------- -------
PARTNERS' CAPITAL, DECEMBER 31, 1995...... 46,711 472 20,221 67,404
Capital contributions (unaudited)......... 9,256 94 7,650 17,000
Excess of contributions from new Partner
to the existing Partners (unaudited).... 2,525 25 (2,550) 0
Net loss (unaudited)...................... (4,854) (49) (2,101) (7,004)
---------- ------ --------- -------
PARTNERS' CAPITAL, SEPTEMBER 30, 1996
(UNAUDITED)............................. $ 53,638 $542 $ 23,220 $77,400
========= ============ ========= =======
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements)
F-44
<PAGE> 170
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
CHANGES IN FINANCIAL POSITION
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
TOTAL
TOTAL CHANGES
JULY 21, CHANGES DURING
1993 DURING DEVELOPMENT
(DATE OF DEVELOPMENT STAGE
INCEPTION) YEARS ENDED STAGE NINE MONTHS THROUGH
THROUGH DECEMBER 31, THROUGH ENDED SEPTEMBER 30, SEPTEMBER
DECEMBER 31, ---------------- DECEMBER 31, ------------------- 30,
1993 1994 1995 1995 1995 1996 1996
------------ ----- -------- ------------ -------- -------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............ $ (485) $(453) $ 291 $ (647) $ 461 $ (7,004) $ (7,651)
Non-cash items
Share in net loss of a
joint venture.......... 0 0 219 219 0 6,591 6,810
Minority interest........ 0 0 0 0 0 (5) (5)
Changes in non-cash operating
balances
Accounts receivable...... 0 0 0 0 0 (12) (12)
Other liabilities........ 0 0 0 0 5 293 293
------------ ----- -------- ------------ -------- -------- ------------
Cash provided by (applied to)
operating activities....... (485) (453) 510 (428) 466 (137) (565)
------------ ----- -------- ------------ -------- -------- ------------
INVESTING ACTIVITIES
Net increase in a joint
venture investment and cash
applied to investing
activities................. (10,003) 0 (23,728) (33,731) (20,000) (49,780) (83,511)
------------ ----- -------- ------------ -------- -------- ------------
FINANCING ACTIVITIES
Due to affiliates............ 485 453 (667) 271 (839) 376 647
Share of financing fees of a
joint venture.............. 0 0 (1,014) (1,014) 0 0 (1,014)
Partners' contributions...... 10,003 0 59,062 69,065 24,270 17,000 86,065
Minority interest............ 0 0 5 5 5 0 5
------------ ----- -------- ------------ -------- -------- ------------
Cash provided by financing
activities................. 10,488 453 57,386 68,327 23,436 17,376 85,703
------------ ----- -------- ------------ -------- -------- ------------
INCREASE (DECREASE) IN
CASH....................... 0 0 34,168 34,168 3,902 (32,541) 1,627
Cash, beginning of the
period..................... 0 0 0 0 0 34,168 0
------------ ----- -------- ------------ -------- -------- ------------
CASH, END OF THE PERIOD...... $ 0 $ 0 $ 34,168 $ 34,168 $ 3,902 $ 1,627 $ 1,627
============ ====== ========= ============ ========= ========= ============
Cash represents cash and short-term deposits
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements)
F-45
<PAGE> 171
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS)
(1) GOVERNING STATUTES AND NATURE OF OPERATIONS
Teleglobe Mobile Partners, a Delaware general partnership (the
"Partnership") was originally formed July 21, 1993, in accordance with the
provisions of the Delaware Uniform Partnership Law for purposes of being a
general and a limited partner in ORBCOMM Global, L.P. ("ORBCOMM Global" formerly
known as ORBCOMM Development Partners, L.P.), a Delaware limited partnership
providing international wireless data communications services. As well the
Partnership carries on marketing activities through its subsidiary, ORBCOMM
International Partners, L.P. ("ORBCOMM International"). As of June 29, 1994, the
original Partnership was amended and restated by admitting a new partner to the
Partnership. The Partnership's term commenced on June 29, 1994 and shall
terminate on December 31, 2015.
(2) SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Partnership holds a 50% participating interest in ORBCOMM Global, which
in turn holds a 98% non-controlling interest in ORBCOMM USA, L.P. ("ORBCOMM
USA") and ORBCOMM International, two other partnerships formed to market the
ORBCOMM system.
The Partnership also directly holds a 2% participating interest in ORBCOMM
International bringing its direct and indirect participation to 51%. Teleglobe
Mobile Partners controls the operations and financial affairs of ORBCOMM
International.
The Partnership is in its development stage, devoting substantially all of
its efforts to establishing a new communications business through ORBCOMM
Global. Operations are expected to commence fully in 1997. The consolidated
financial statements of the Partnership are prepared on the accrual basis of
accounting, in conformity with generally accepted accounting principles in the
United States of America and, where applicable, are in general conformity with
practices prevailing in the telecommunications industry. They include the
accounts of the Partnership and its subsidiary, ORBCOMM International.
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 reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Joint venture investment
The investment in ORBCOMM Global is accounted for using the equity method.
Goodwill, consisting of the excess of the cost of the Partnership's
investment over its equity in the underlying net assets of ORBCOMM Global at the
acquisition dates, is included in the Joint venture investment. Beginning on
October 1, 1996, goodwill will be amortized on a straight-line basis, over the
remaining period of the Partnership's terms (December 31, 2015). Every year, the
Partnership determines the underlying value of the asset by comparing its
carrying amount to its net recoverable amount. Any impairment is charged to
income.
Income taxes
As a partnership, Federal and State income taxes are the direct
responsibility of each partner. Accordingly, no income taxes have been recorded
in the consolidated financial statements.
F-46
<PAGE> 172
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
(3) JOINT VENTURE INVESTMENT
As at September 30, 1996, goodwill included in the joint venture investment
amounts to $4,625 (none in 1995).
The table below summarizes the information concerning the assets,
liabilities and income of ORBCOMM Global.
<TABLE>
<CAPTION>
TOTAL TOTAL
JULY 21, ACCUMULATED ACCUMULATED
1993 DURING DURING
(DATE OF DEVELOPMENT NINE MONTHS DEVELOPMENT
INCEPTION) YEARS ENDED STAGE ENDED SEPTEMBER STAGE
THROUGH DECEMBER 31, THROUGH 30, THROUGH
DECEMBER 31, ------------- DECEMBER 31, ---------------- SEPTEMBER 30,
1993 1994 1995 1995 1995 1996 1996
------------ ---- ---- ------------ ---- ------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
- - Income statement data
Income.................. 0 0 958 958 941 1,317 2,275
Net income (loss)....... 0 (9) 55 46 941 (14,054) (14,008)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
- - Balance sheet data
Total assets............................................ $73,647 $109,029 $ 331,196
Total liabilities....................................... 15,137 14,428 187,489
Partners' capital
General partners
Teleglobe Mobile Partners..................... 9,754 8,767 1,740
Orbital Communications Corporation............ 9,754 8,767 1,740
Limited partners
Teleglobe Mobile Partners..................... 0 24,750 74,525
Orbital Communications Corporation............ 39,002 52,317 65,275
Unrealized gains on short-term investments......... 0 0 427
</TABLE>
(4) COMMITMENTS AND CONTINGENCIES
In August 1996, ORBCOMM Global and ORBCOMM Global Capital Corp., a wholly
owned subsidiary of ORBCOMM Global, (the "Issuers") issued $170,000 of Senior
Notes due in 2004 with Revenue Participation Interest (the "Old Notes"). Revenue
Participation Interest represents an aggregate amount equal to 5.0% of the
ORBCOMM System revenue and is payable on the Notes on each interest payment date
subject to certain covenant restrictions. Interest on the Old Notes will accrue
at a rate of 14% per annum and will be payable semi-annually in arrears on
February 15 and August 15 of each year, commencing on February 15, 1997.
The Old Notes are exchangeable for an equal principal amount of registered
14% Series B Senior Notes due 2004 with Revenue Participation Interest (the
"Exchange Notes"). The Exchange Notes are substantially identical in form and
term to the Old Notes except that the Exchange Notes have been registered under
the Securities Act of 1933, as amended, and do not bear legends restricting the
transfer thereof. The Exchange Notes and the Old Notes are collectively referred
to as the "Notes". The Notes are fully and unconditionally guaranteed on a joint
and several basis by Teleglobe Mobile Partners, Orbital Communications
Corporation, a
F-47
<PAGE> 173
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
(4) COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
majority owned subsidiary of Orbital Sciences Corporation, ORBCOMM USA and
ORBCOMM International (each a "Guarantor" and collectively, the "Guarantors"),
except that the Guarantees are non-recourse to the shareholders and the partners
of the Guarantors, limited only to the extent necessary for each such guarantee
to not constitute a fraudulent conveyance under applicable law. The guarantee of
each Guarantor ranks pari passu in right of payment with all senior indebtedness
of such Guarantor and senior in right of payment to all indebtedness expressly
subordinated to the guarantee of such Guarantor. The guarantees are non-recourse
to the shareholders and/or partners of each Guarantor and no shareholder or
partner of any Guarantor will have any liability for any claim under the Notes.
Upon closing, ORBCOMM Global used a portion of the net proceeds from the
sale of the Old Notes to purchase a portfolio of United States government
securities to provide for payment in full of interest on the Notes through
August 15, 1998 (estimated at approximately $44.8 million).
Teleglobe Mobile Partners is obligated to pay to ORBCOMM Global a System
Charge in consideration of ORBCOMM Global's grant to the Partnership of the
right to market, sell, lease and franchise all ORBCOMM System Output Capacity
outside the United States. Such System Charge is calculated as 23% of ORBCOMM
International's total service revenues ("International Output Capacity Charge")
minus 1.15% of aggregate system service revenues, defined as the total of
ORBCOMM International and ORBCOMM USA total system service revenues. If the
International Output Capacity Charge is less than 1.15% of aggregate system
service revenues as described above, then Teleglobe Mobile Partners is not
required to pay and does not owe any portion of the System Charge to ORBCOMM
Global. Teleglobe Mobile Partners in turn has granted to ORBCOMM International,
these same privileges and the exclusive use of the ORBCOMM System Assets located
outside the United States for a period of 20 years. In consideration for this
grant, the subsidiary has agreed to pay to the Partnership an International
Output Capacity Charge.
Teleglobe Mobile Partners is committed to invest approximately $85,000 in
the ORBCOMM project. As at September 30, 1996 this amount has already been
invested entirely ($30,003 in 1995) and as at December 31, 1995, 1994 and 1993,
cumulative amounts of $34,753, $10,003 and $10,003 respectively were already
invested.
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GLOSSARY OF TERMS
ADMINISTRATIVE SERVICES AGREEMENT -- dated as of September 12, 1995 between
Orbital and ORBCOMM pursuant to which Orbital provides ORBCOMM with office
space, certain occupancy services and certain administrative and management
services as specified therein.
AMERICAN MOBILE SATELLITE CORPORATION (AMSC) -- the only company in the
United States authorized to provide mobile satellite services using GEO
satellites.
bps -- bits per second. The rate at which digital data are transmitted over
a communications path.
BAND -- a range of frequencies in the radio spectrum.
BANDWIDTH -- the range of frequencies, expressed in Hertz (Hz), that can
pass over a given transmission channel. The bandwidth determines the rate at
which information can be transmitted through the circuit. The greater the
bandwidth, the more information can be sent through the circuit in a given
amount of time at a given accuracy level.
BIG LEOS -- networks of LEO satellites operating above 1 GHz, such as the
Iridium or Globalstar systems, which are designed to provide voice and data
services to portable or fixed receivers globally.
CAPITAL PREFERENCE -- for each partner of ORBCOMM, ORBCOMM USA or ORBCOMM
International, as the context requires, the sum of the amounts actually
contributed by such partner to such partnership in cash or immediately available
funds since the date of inception thereof through a relevant date, plus, with
respect to the partners of ORBCOMM, the amount of any Unrecouped Capital
Preference in ORBCOMM USA or ORBCOMM International contributed by such partner.
CODE DIVISION MULTIPLE ACCESS (CDMA) -- a transmission system that
superimposes audio or data information onto a specified coded address waveform.
CDMA allows a large number of wireless users simultaneously to access a single
radio frequency band without interference. As each wireless communicator gains
access, a gateway assigns it a unique sequence of frequency shifts that serves
as a code to distinguish that particular transmission from others on the air.
DEFINITIVE AGREEMENTS -- the Master Agreement, the ORBCOMM Partnership
Agreement, the ORBCOMM USA Partnership Agreement, the ORBCOMM International
Partnership Agreement, the System Construction Agreement, the System Charge
Agreement, the International System Charge Agreement, the Procurement Agreement
and the Proprietary Information and Non-Competition Agreement.
DYNAMIC CHANNEL ACTIVITY ASSIGNMENT SYSTEM (DCAAS) -- an interference
avoidance technique system developed by OCC and enhanced by ORBCOMM to avoid
interfering with other users in the band in which the ORBCOMM System is designed
to operate.
EARTH STATION -- the antennae, receivers, transmitters and other equipment
needed on the ground to transmit and receive and process satellite
communications signals.
EXCHANGE NOTES -- The registered 14% Series B Senior Notes due 2004, with
Revenue Participation Interest.
EXCHANGE AGENT -- Marine Midland Bank.
FCC LICENSE -- the FCC authorization granted to OCC on October 20, 1994 to
construct, launch and operate 36 satellites for the purpose of providing two-way
data and messaging communications and position determination services in the
United States.
FEDERAL COMMUNICATIONS COMMISSION (FCC) -- a U.S. independent regulatory
agency established by the Communications Act of 1934, charged with regulating
all electronic interstate communications, including telephone, cable television,
broadcasting and LEO systems. The FCC also is responsible for assigning the
radio frequencies used by all non-federal users of the spectrum.
FREQUENCY -- an expression of how frequently a periodic (repetitious) wave
form or signal regenerates itself at a given amplitude.
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GATEWAY -- the facilities consisting of Earth stations, computers,
displays, control consoles, communications equipment and other hardware that
transport and control the flow of data and messaging communications and other
information for the ORBCOMM System.
GEOSYNCHRONOUS ORBIT OR GEOSTATIONARY ORBIT (GEO) -- an orbit directly over
the equator, approximately 22,300 nautical miles above the Earth.
GEOSYNCHRONOUS OR GEOSTATIONARY SATELLITE (GEO SATELLITE) -- a satellite
using a geosynchronous orbit. When positioned in this orbit above the equator, a
satellite appears to hover over the same spot on the Earth because it is moving
at a rate that matches the speed of the Earth's rotation on its axis.
GIGAHERTZ (GHz) -- a measure of radio frequency equal to one billion cycles
per second.
GLOBALSTAR, L.P. -- a partnership formed by, among others, Loral
Corporation and QUALCOMM, Incorporated, that intends to provide mobile
communications services using LEO satellites.
GLOBAL POSITIONING SYSTEM (GPS) -- a network of satellites that provides
precise location determination to receivers. Portable or vehicle-mounted GPS
devices receive signals from the satellites and calculate the user's position to
within 100 yards for civilian purposes and more precisely for the military.
GROUND SEGMENT FACILITIES USE AGREEMENT -- dated as of December 19, 1995
between ORBCOMM International and ORBCOMM Canada pursuant to which ORBCOMM
Canada is authorized for a fee to access and use the U.S. Gateway on a shared
basis with ORBCOMM USA.
HF -- High frequency. The portion of the electromagnetic spectrum between 3
and 30 MHz.
INMARSAT -- International Maritime Satellite Organization, a body that
handles international maritime satellite telephone traffic via satellites. The
Inmarsat system was originally established to provide communications to ships,
but now also provides land mobile communication.
INTELSAT -- International Telecommunications Satellite Organization, formed
in 1964 with the purpose of creating a worldwide communications satellite
system.
INTERFERENCE -- the effect of unwanted energy due to one or a combination
of emissions, radiations or inductions on the quality of reception in a
radiocommunication system.
INTERNATIONAL LICENSEES -- third-party entities that will execute Service
License Agreements under which, among other things, they will generally be
obligated to procure and install a Gateway in their territory, and will be
obligated to obtain the necessary regulatory approvals to provide services using
the ORBCOMM System in their territory.
INTERNATIONAL OUTPUT CAPACITY CHARGE -- a quarterly fee paid by ORBCOMM
International to Teleglobe Mobile in exchange for the exclusive right to market,
sell, lease and franchise all ORBCOMM System output capacity outside the United
States and for exclusive use of the System Assets outside the United States.
INTERNATIONAL SYSTEM CHARGE AGREEMENT -- restated as of September 12, 1995
among ORBCOMM Global, Teleglobe Mobile and ORBCOMM International setting forth
each of their respective responsibilities regarding use of the ORBCOMM System
and granting to Teleglobe Mobile, which has passed along to ORBCOMM
International, the exclusive right in the Non-U.S. Area to market, sell, lease
and franchise all ORBCOMM System output capacity and the exclusive use of the
System Assets outside the United States.
INTERNATIONAL TABLE OF FREQUENCY ALLOCATIONS -- identifies radio frequency
segments that have been designated for specific radio services by the member
nations of the ITU.
INTERNATIONAL TELECOMMUNICATIONS UNION (ITU) -- the telecommunications
agency of the United Nations, established to provide standardized communications
procedures and practices including frequency allocation and radio regulations on
a worldwide basis.
INTERNET -- refers to a large collection of interconnected computer
networks that use a common transmission protocol allowing users to communicate
across networks.
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IRIDIUM SYSTEM -- a LEO satellite-based telecommunications system proposed
by a consortium headed by Motorola, Inc. to provide mobile satellite services
using radio frequencies above 1 GHz.
ISSUERS -- The Company and/or Capital.
JOINT SHARING AGREEMENT -- dated August 7, 1992 by and among OCC, Starsys
and VITA to resolve issues relating to the mutual exclusivity of their Little
LEO systems.
kBYTE -- a measure for volume of data equal to one-thousand eight-bit
alphanumeric characters or numbers.
kbps -- thousands of bits per second. The rate at which digital data are
transmitted over a communications path.
KILOHERTZ (kHz) -- a measure of radio frequency equal to one thousand
cycles per second.
LEO SATELLITE -- a low-Earth orbit satellite located approximately 800
kilometers above the Earth. Because a LEO satellite orbits close to the Earth, a
LEO satellite uses less power than satellites operating at a higher orbit.
LEO SYSTEM -- a constellation of many satellites in low-Earth orbit. LEO
systems may be of two types: Little LEOs and Big LEOs.
LEFT-HAND CIRCULAR POLARIZATION (LHCP) -- an elliptically or
circularly-polarized wave, in which the electric field vector, observed in the
fixed plane, normal to the direction of propagation, while looking in the
direction of propagation, rotates with time in a left-hand or counter clockwise
direction.
LITTLE LEOS -- networks of LEO satellites operating below 1 GHz, such as
the ORBCOMM System, providing non-voice services and designed to provide global
data and messaging services.
MAGELLAN -- Magellan Corporation, a subsidiary of Orbital. Magellan is the
world's largest producer of hand-held satellite GPS navigators and is a
potential manufacturer of ORBCOMM Subscriber Communicators.
MASTER AGREEMENT -- restated as of September 12, 1995 between Orbital,
ORBCOMM, Teleglobe Mobile and Teleglobe.
MEGAHERTZ (MHz) -- a measure of radio frequency equal to one million cycles
per second.
METLIFE NOTE -- the Loan and Security Agreement dated December 22, 1994
between the Company and MetLife.
MICROSTAR(TM) -- a satellite designed and manufactured by Orbital for use
in the ORBCOMM System and for a variety of small space science and satellite
imagery projects.
MOBILE SATELLITE SERVICE (MSS) -- a generic term meaning an ITU-defined
service in which satellites are used to deliver communications services (voice
or data, one- or two-way) to mobile users such as cars, trucks, ships and
planes.
MODIFICATION REQUEST -- request for modification of the FCC License filed
by OCC on October 20, 1995.
MONTHLY CASH REQUIREMENT -- the total cash amounts that the Company
anticipates it will be obligated to pay for the next succeeding month, net of
any anticipated cash receipts of the Company for such succeeding month.
NET INCOME -- an amount equal to the Company's, ORBCOMM USA's or ORBCOMM
International's, as the context requires, taxable income for a relevant period,
adjusted as provided in the relevant partnership agreement.
NET LOSS -- an amount equal to the Company's, ORBCOMM USA's or ORBCOMM
International's, as the context requires, taxable loss for a relevant period,
adjusted as provided in the relevant partnership agreement.
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NETWORK OPERATIONS CENTER (NOC) -- the facility that houses the control
segments of the ORBCOMM System. ORBCOMM's NOC is located at Orbital's Dulles,
Virginia headquarters. Messages are routed from a U.S. Earth station to the U.S.
Gateway located in the NOC, where the message is processed and directed to its
destination.
NON-VOICE, NON-GEOSTATIONARY (NVNG) -- LEO satellites operating below 1
GHz, such as the ORBCOMM System, providing non-voice services and designed to
provide global data and messaging communications services.
OCC -- Orbital Communications Corporation, a Delaware corporation and a
majority owned subsidiary of Orbital and a 50% general and limited partner of
ORBCOMM.
OLD NOTES -- the unregistered 14% Senior Notes due 2004, with Revenue
Participation Interest, issued by ORBCOMM and Capital in the Old Notes Offering.
OLD NOTES OFFERING -- the offering of the unregistered 14% Senior Notes due
2004, with Revenue Participation Interest, issued by ORBCOMM and Capital and
consummated on August 7, 1996.
ORBCOMM CANADA -- ORBCOMM Canada Inc., a Canadian corporation holding
exclusive rights to market services using the ORBCOMM System in Canada.
ORBCOMM GLOBAL -- ORBCOMM Global Capital Corp., a Delaware corporation
and, together with ORBCOMM, an Issuer of the Notes.
ORBCOMM -- ORBCOMM Global, L.P., a Delaware limited partnership owned by
OCC and Teleglobe Mobile that is engaged in the development, construction,
operation and marketing of the ORBCOMM System. ORBCOMM, together with Capital,
is an Issuer of the Notes.
ORBCOMM INTERNATIONAL -- ORBCOMM International Partners, L.P., a Delaware
limited partnership owned by ORBCOMM and Teleglobe Mobile that markets the
ORBCOMM System outside the United States.
ORBCOMM INTERNATIONAL PARTNERSHIP AGREEMENT -- the limited partnership
agreement of ORBCOMM International restated as of September 12, 1995, by and
between ORBCOMM and Teleglobe Mobile, as such partnership agreement may be
amended from time to time.
ORBCOMM PARTNERSHIP AGREEMENT -- the limited partnership agreement of
ORBCOMM restated as of September 12, 1995, by and between OCC and Teleglobe
Mobile, as such partnership agreement may be amended from time to time.
ORBCOMM SYSTEM -- a global digital satellite communications system of up to
28 LEO satellites and certain terrestrial facilities intended to provide two-way
data and messaging communications services throughout the world.
ORBCOMM USA -- ORBCOMM USA, L.P., a Delaware limited partnership owned by
OCC and ORBCOMM that markets the ORBCOMM System in the United States.
ORBCOMM USA PARTNERSHIP AGREEMENT -- the limited partnership agreement of
ORBCOMM USA restated as of September 12, 1995, by and between OCC and ORBCOMM,
as such partnership agreement may be amended from time to time.
ORBITAL PLANE -- the plane defined by the flight path of a satellite.
ORBITAL -- Orbital Sciences Corporation, a Delaware corporation and parent
of OCC. Orbital is a publicly traded space and information systems company
providing space-related technologies, products, systems and services.
OUTPUT CAPACITY CHARGE -- a quarterly fee paid by ORBCOMM USA to OCC in
exchange for the exclusive right to market, sell, lease and franchise all
ORBCOMM System output capacity in the United States and for exclusive use of the
System Assets in the United States.
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PAGING -- a service designed to deliver a message to a person whose
location is unknown, which messages may be received via an alphanumeric display
or small speaker.
PARTICIPATION PERCENTAGE -- represents the portion of a partner's interest
in the Company, ORBCOMM USA or ORBCOMM International as the context requires.
PEGASUS -- Orbital's air-launched space booster vehicle used to launch
small satellites into low-Earth orbit. Both Pegasus and Taurus are used by
governmental, commercial and university customers to launch communications,
remote sensing and scientific research satellites or payloads.
PERSONAL COMMUNICATIONS SERVICES (PCS) -- terrestrial wireless
telecommunications services similar to cellular telephone service but operating
in a different set of frequencies.
PROCUREMENT AGREEMENT -- dated as of September 12, 1995 between ORBCOMM and
Orbital pursuant to which ORBCOMM is procuring, among other things, 34
satellites, launch services for 26 satellites and completion of certain
satellite control elements on a fixed-price basis.
PROPRIETARY INFORMATION -- includes written or oral information of any kind
disclosed to a party by another party and designated as proprietary information
and clearly identified as such. Proprietary information does not include
information: (i) that becomes publicly available through no wrongful act of the
party receiving the information; (ii) is known by the party receiving the
information without any proprietary restrictions at the time of receipt; (iii)
is independently developed by another party who did not directly or indirectly
have access to the Proprietary Information; (iv) is obligated to be produced
under court order or demand; or (v) is required to be disclosed pursuant to
applicable law, rule or regulation.
PROPRIETARY INFORMATION AND NON-COMPETITION AGREEMENT -- restated as of
September 12, 1995 among Orbital, OCC, Teleglobe, Teleglobe Mobile, ORBCOMM,
ORBCOMM USA and ORBCOMM International regarding the protection of Proprietary
Information that may be disclosed in connection with the ORBCOMM System and
containing certain non-competition provisions.
RADIO FREQUENCY -- a frequency that is higher than the audio frequencies
but below the infrared frequencies, usually above 20 kHz.
RESELLERS -- entities marketing and selling ORBCOMM System services on a
value-added basis in a territory or to a particular market segment.
SATELLITE -- a spacecraft that is in orbit around a planet (usually the
Earth) intended for observation, research or communications in space.
SATELLITE CONTROL CENTER -- the facilities that process and display the
telemetry data for the ORBCOMM System satellites, monitor the operational status
of such satellites and control the operation of the satellites power subsystems,
altitude control subsystems and all other subsystems.
SATELLITE USAGE FEE -- a fee paid by an International Licensee for use of
the satellites in the ORBCOMM System as described in the Service License
Agreement.
SERVICE LICENSE AGREEMENT -- an agreement to be entered into between
ORBCOMM International and an International Licensee authorizing the
International Licensee to access the satellites in the ORBCOMM System to offer
on an exclusive basis communication services using the ORBCOMM System in the
territory specified therein.
SPECTRUM -- consists of all the radio frequencies that are used for radio
communications.
STARSYS -- Starsys Global Positioning, Inc., a subsidiary of GE American
Communications Corporation. Starsys intends to operate a competing Little LEO
system.
SUBSCRIBER COMMUNICATOR -- the equipment used by a Subscriber to access the
ORBCOMM System that has been type approved by or on behalf of ORBCOMM.
SYSTEM AGREEMENT -- the ORBCOMM System Design, Development, Construction,
Integration, Test and Operations Agreement dated as of June 30, 1993 between OCC
and the Company.
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SYSTEM ASSETS -- the tangible property (including software) to be delivered
to ORBCOMM pursuant to the System Agreement and the Procurement Agreement.
SYSTEM CHARGE -- OCC's quarterly fee remitted to ORBCOMM by OCC in
consideration of the construction and financing of the System Assets and
Teleglobe Mobile's quarterly fee remitted to ORBCOMM in consideration of the
grant of the exclusive right to market, sell, lease and franchise all ORBCOMM
System output capacity outside the United States and for exclusive use of the
ORBCOMM System Assets outside the United States.
SYSTEM CHARGE AGREEMENT -- restated as of September 12, 1995, by and
between OCC and ORBCOMM USA setting forth OCC's and ORBCOMM USA's
responsibilities regarding the use of the ORBCOMM System and granting to ORBCOMM
USA the exclusive right in the United States to market, sell, lease and
franchise all ORBCOMM System output capacity and exclusive use of certain System
Assets located in the United States.
SYSTEM CONSTRUCTION AGREEMENT -- restated as of September 12, 1995 between
OCC and ORBCOMM pursuant to which ORBCOMM is developing and constructing the
System Assets comprising the ORBCOMM System.
TAURUS -- Orbital's ground-launched space booster vehicle, derived from the
Pegasus launch vehicle, used to launch satellites into low-Earth orbit. Taurus
has been used or selected for use by governmental and commercial customers to
launch communications and remote sensing satellites.
TECHNOLOGY RESOURCES INDUSTRIES BHD. (TRI) -- a Malaysian holding company
that controls the largest cellular operator in Malaysia.
TELEGLOBE -- Teleglobe Inc., a Canadian corporation that provides
intercontinental telecommunications services to over 240 countries worldwide
through a network of submarine cables and satellite Earth stations.
TELEGLOBE MOBILE -- Teleglobe Mobile Partners, a Delaware general
partnership owned by Teleglobe and TRI and a 50% general and limited partner of
ORBCOMM.
TIME DIVISION MULTIPLE ACCESS (TDMA) -- a digital method of multiplexing
that combines a number of signals through a common point by organizing them
sequentially and transmitting each in bursts at different instants of time.
Communicating devices at different geographical locations share a multipoint or
broadcast channel by means of a technique that allocates different time slots to
different users.
TOTAL AGGREGATE REVENUES -- the total aggregate revenues invoiced by
ORBCOMM USA and ORBCOMM International to its subscribers, Resellers and
International Licensees in connection with the operation, marketing and use of
the ORBCOMM System during a calendar quarter (excluding revenues invoiced by
ORBCOMM USA and ORBCOMM International in connection with the sale of network
control centers, Gateway Earth stations and Subscriber Communicators).
TRANSIT BAND -- that portion of the radio spectrum between 149.9-150.05 MHz
and 399.9-400.050 MHz allocated for radio-navigation satellite service downlink
transmissions. The Transit Band currently is occupied by the U.S. Navy Transit
System and a similar Russian system.
UHF -- Ultra high frequency. The portion of the electromagnetic spectrum
with frequencies between 300 MHz and 3 GHz.
UNRECOUPED CAPITAL PREFERENCE -- the amount, if any, by which a partner's
Capital Preference in ORBCOMM, ORBCOMM USA or ORBCOMM International, as the
context requires, exceeds cumulative distributions by such partnership to such
partner pursuant to the relevant partnership agreement since the inception of
such partnership (but excluding deemed distributions).
U.S. EARTH STATION -- any or one of the four Earth stations constructed
pursuant to the System Agreement or the Procurement Agreement in St. Johns,
Arizona; Ocilla, Georgia; Arcade, New York and East Wenatchee, Washington.
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VHF -- Very high frequency. The portion of the electromagnetic spectrum
with frequencies between 30 and 300 MHz.
VOLUNTEERS IN TECHNICAL ASSISTANCE (VITA) -- an international
not-for-profit organization licensed by the FCC to provide Little LEO satellite
services including educational, health, environmental, disaster relief, and
fundamental technical assistance communications services for the benefit of
recipients in developing countries.
WIRELESS -- operating with electromagnetic waves and not with conducting
wire or fiber optic cable.
WIRELINE -- communications systems that use terrestrial fixed facilities
(e.g., copper wires, fiber optic cable or microwave) for transmission of voice,
data and video.
WORLD ADMINISTRATIVE RADIO CONFERENCE (WARC) -- an ITU conference for
adopting international allocations for radio frequencies and satellite orbit
locations, which has been succeeded by the World Radiocommunication Conference.
WORLD RADIOCOMMUNICATION CONFERENCE (WRC) -- the successor to the World
Administrative Radio Conference.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY
OFFER TO BUY, ANY OR THE SENIOR NOTES OFFERED HEREBY, TO ANY PERSON OR BY ANYONE
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OR THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE SUCH
DATE.
------------------
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 16
The Exchange Offer.................... 27
Use of Proceeds....................... 36
Capitalization........................ 36
Selected Financial Data............... 37
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 38
Business.............................. 44
Regulation............................ 65
Management............................ 70
Relationships Among the ORBCOMM
Parties............................. 73
The Partnership Agreements............ 80
Description of Senior Notes........... 83
Plan of Distribution.................. 118
Certain Federal Income Tax
Considerations...................... 118
Legal Matters......................... 119
Experts............................... 119
Index to Financial Statements......... F-1
Glossary of Terms..................... G-1
Form of Letter to be Delivered by
Accredited Investors................ A-1
</TABLE>
UNTIL MARCH 12, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES,
WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A
PROSPECTUS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[ORBCOMM LOGO]
$170,000,000
ORBCOMM GLOBAL, L.P.
ORBCOMM GLOBAL CAPITAL CORP.
14% SERIES B SENIOR NOTES
DUE 2004, WITH
REVENUE PARTICIPATION INTEREST
------------------------
PROSPECTUS
------------------------
, 1996
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<PAGE> 182
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Capital is a Delaware corporation and its Certificate of Incorporation and
Bylaws provide for indemnification of its officers and directors to the fullest
extent permitted by law. Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL") permits a corporation in its certificate of incorporation to
eliminate the liability of a corporation's directors to a corporation or its
stockholders, except for liabilities related to breach of duty of loyalty,
actions not in good faith and certain other liabilities.
Section 145 of the DGCL provides for indemnification by a Delaware
corporation of its directors, officers, employees and agents in connection with
actions, suits or proceedings brought against them by a third party or in right
of the corporation, by reason of the fact that they were directors, officers,
employees or agents, against liabilities and expenses incurred in such action,
suit or proceeding.
The ORBCOMM Global Partnership Agreement generally provides that the
General Partners and any of their officers, employees, partners or agents will
not be liable to ORBCOMM Global or to any limited partner for any act or
omission by such party pursuant to authority granted under the Partnership
Agreement except if such action or omission results from gross negligence,
willful misconduct or bad faith. The Partnership Agreement also provides for
indemnification of any General Partner and any of their officers, employees,
partners or agents from and against any and all claims or liabilities of any
nature whatsoever arising out of or in connection with any action taken or
omitted by such party pursuant to authority granted by the Partnership
Agreement, except where attributable to gross negligence, willful or wanton
misconduct or bad faith.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
2 Purchase Agreement, dated as of August 2, 1996, by and among the Company, ORBCOMM
Global Capital Corp., ORBCOMM USA, L.P., ORBCOMM International Partners, L.P.,
Orbital Communications Corporation, Teleglobe Mobile Partners, Bear Stearns & Co.
Inc.,
J.P. Morgan Securities Inc. and RBC Dominion Securities Company.
3 Organizational Documents.
3.1 Certificate of Limited Partnership of the Company.
3.2 Restated Agreement of Limited Partnership of the Company.
3.3 Certificate of Limited Partnership of ORBCOMM USA, L.P.
3.4 Restated Agreement of Limited Partnership of ORBCOMM USA, L.P.
3.5 Certificate of Limited Partnership of ORBCOMM International Partners, L.P.
3.6 Restated Agreement of Limited Partnership of ORBCOMM International Partners, L.P.
4 Indenture, dated as of August 7, 1996, by and among the Company, ORBCOMM Global
Capital Corp., ORBCOMM USA, L.P., ORBCOMM International Partners, L.P., Orbital
Communications Corporation, Teleglobe Mobile Partners and Marine Midland Bank.
5 Opinion of Latham & Watkins regarding the validity of the Exchange Notes, including
consent.
8 Opinion of Latham & Watkins regarding certain federal income tax matters, including
consent.
10 Material Contracts.
10.1 Registration Rights Agreement, dated as of August 7, 1996, by and among the
Company, ORBCOMM Global Capital Corp., ORBCOMM USA, L.P., ORBCOMM International
Partners, L.P., Orbital Communications Corporation, Teleglobe Mobile Partners,
Bear, Stearns & Co. Inc., J.P. Morgan Securities Inc. and RBC Dominion Securities
Corporation.
10.2 Pledge Agreement, dated as of August 7, 1996, by and among the Company, ORBCOMM
Global Capital Corp. and Marine Midland Bank as Collateral Agent.
10.3 International System Charge Agreement, restated as of September 12, 1995, by and
among the Company, Teleglobe Mobile Partners and ORBCOMM International Partners,
L.P.
10.4 Master Agreement, restated as of September 12, 1995, by and among the Company,
Orbital Sciences Corporation, Teleglobe Inc. and Teleglobe Mobile Partners.
</TABLE>
II-1
<PAGE> 183
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
10.5+ Procurement Agreement, dated as of September 12, 1995, by and between the Company
and Orbital Sciences Corporation (provided that Appendix I is incorporated by
reference to Exhibit 10.24.6 to the Quarterly Report on Form 10-Q for the Quarter
Ended June 30, 1993 filed by Orbital Sciences Corporation on August 13, 1993).
10.6 Proprietary Information and Non-Competition Agreement, restated as of September 12,
1995, by and among the Company, Orbital Sciences Corporation, Orbital
Communications Corporation, Teleglobe Inc., Teleglobe Mobile Partners, ORBCOMM USA,
L.P. and ORBCOMM International Partners, L.P.
10.7 System Charge Agreement, restated as of September 12, 1995, by and between Orbital
Communications Corporation and ORBCOMM USA, L.P.
10.8 System Construction Agreement, restated as of September 12, 1995, by and between
the Company and Orbital Communications Corporation.
10.9 Amendment No. 1 to System Construction Agreement, dated as of July 1, 1996, by and
between the Company and Orbital Communications Corporation.
10.10+ Service License Agreement, dated as of December 19, 1995, between ORBCOMM
International Partners, L.P. and ORBCOMM Canada Inc.
10.11+ Service License Agreement, dated as of October 10, 1996 between ORBCOMM
International Partners, L.P. and Cellular Communications Network (Malaysia) Sdn.
Bhd.
10.12+ Service License Agreement, dated as of October 15, 1996, between ORBCOMM
International Partners, L.P. and European Company for Mobile Communicator Services,
B.V., ORBCOMM Europe.
10.13+ Ground Segment Procurement Contract, dated as of October 10, 1996, between ORBCOMM
International Partners, L.P. and Cellular Communications Network (Malaysia) Sdn.
Bhd.
10.14+ Ground Segment Facilities Use Agreement, dated as of December 19, 1995, between
ORBCOMM International Partners, L.P. and ORBCOMM Canada Inc.
10.15+ Ground Segment Procurement Contract, dated as of October 15, 1996, between ORBCOMM
International Partners, L.P. and European Company for Mobile Communicator Services,
B.V., ORBCOMM Europe.
12 Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Company.
23 Consents of Experts.
23.1* Consent of KPMG Peat Marwick LLP, independent auditors, to ORBCOMM Global, L.P.
23.2* Consent of KPMG Peat Marwick LLP, independent auditors, to ORBCOMM USA, L.P.
23.3* Consent of KPMG Peat Marwick LLP, independent auditors, to ORBCOMM International
Partners, L.P.
23.4* Consent of KPMG Peat Marwick LLP, independent auditors, to Orbital Communications
Corporation.
23.5* Consent of Grant Thornton General Partnership Chartered Accountants.
23.6 Consent of Latham & Watkins (included in the opinion filed as Exhibit 5 to the
Registration Statement).
24 Powers of Attorney of the Company, ORBCOMM USA, ORBCOMM International, OCC,
Teleglobe Mobile, and ORBCOMM Global Capital Corp. (included on pages II-5 to II-11
of the Registration Statement).
25 Statement of Eligibility and Qualifications on Form T-1 of Marine Midland Bank, as
Trustee, under the Indenture (No. 22-27318).
27 Financial Data Schedule.
99 Other Exhibits.
99.1 Form of Letter of Transmittal with respect to the Exchange Offer.
99.2 Form of Notice of Guaranteed Delivery with respect to the Exchange Offer.
</TABLE>
- ---------------
* Filed Herewith.
+ Confidential Treatment Requested.
II-2
<PAGE> 184
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
registrant undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
The registrant undertakes that every prospectus: (i) that is filed pursuant
to the immediately preceding paragraph, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933, and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the Registration Statement to include any
financial statements required by Rule 3-19 of Regulation S-K at the start
of any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the
Act need not be furnished, provided, that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (a)(4) and other information necessary
to ensure that all other information in the prospectus is at least as
current as the date of those financial statements. Notwithstanding the
foregoing, with respect
II-3
<PAGE> 185
to registration statements on Form F-3, a post-effective amendment need not
be filed to include financial statements and information required by
Section 10(a)(3) of the Act of Rule 3-19 of Regulation S-K if such
financial statements and information are contained in periodic reports
filed with or furnished to the Commission by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Form F-3.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE> 186
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DULLES,
COMMONWEALTH OF VIRGINIA, ON DECEMBER 10, 1996.
ORBCOMM GLOBAL, L.P.
By: ORBITAL COMMUNICATIONS
CORPORATION, a general partner
By: /s/ ALAN L. PARKER
------------------------------------
ALAN L. PARKER
PRESIDENT OF ORBITAL COMMUNICATIONS
CORPORATION
By: TELEGLOBE MOBILE PARTNERS,
a general partner
By: TELEGLOBE MOBILE
INVESTMENT INC.,
its managing partner
By: /s/ GUTHRIE J. STEWART
---------------------------------
GUTHRIE J. STEWART
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
OF TELEGLOBE MOBILE INVESTMENT
INC.
POWER OF ATTORNEY
Each person whose signature appears below appoints Alan L. Parker as his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing, requisite and
necessary to be done in and about the foregoing, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or his substitute, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ ALAN L. PARKER President and Chief Executive December 10, 1996
- ------------------------------------------ Officer
ALAN L. PARKER of ORBCOMM Global, L.P.
(Principal Executive Officer)
* Senior Vice President, Finance and December 10, 1996
- ------------------------------------------ Administration and Chief Financial
W. BARTLETT SNELL Officer of ORBCOMM Global, L.P.
(Principal Financial Officer)
* Vice President, Controller and December 10, 1996
- ------------------------------------------ Financial Planning
DENIS PRONE (Principal Accounting Officer)
* Director, Orbital December 10, 1996
- ------------------------------------------ Communications Corporation
DAVID W. THOMPSON
* Director, Orbital December 10, 1996
- ------------------------------------------ Communications Corporation
BRUCE FERGUSON
</TABLE>
II-5
<PAGE> 187
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
* Director, Teleglobe December 10, 1996
- ------------------------------------------ Mobile Investment Inc.
CLAUDE SEGUIN
* Director, Teleglobe December 10, 1996
- ------------------------------------------ Mobile Investment Inc.
GUTHRIE J. STEWART
* Director, Teleglobe December 10, 1996
- ------------------------------------------ Mobile Investment Inc.
WAN AISHAH WAN HAMID
*By: /s/ ALAN L. PARKER
--------------------------------------
ALAN L. PARKER
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE> 188
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DULLES,
COMMONWEALTH OF VIRGINIA, ON DECEMBER 10, 1996.
ORBCOMM USA, L.P.
By: ORBITAL COMMUNICATIONS
CORPORATION, its general partner
By: /s/ ALAN L. PARKER
------------------------------------
ALAN L. PARKER
PRESIDENT
POWER OF ATTORNEY
Each person whose signature appears below appoints Alan L. Parker as his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing, requisite and
necessary to be done in and about the foregoing, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or his substitute, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ ALAN L. PARKER President, ORBCOMM USA, L.P. December 10, 1996
- ------------------------------------------ (Principal Executive Officer)
ALAN L. PARKER
* Vice President and Treasurer, December 10, 1996
- ------------------------------------------ ORBCOMM USA, L.P.
W. BARTLETT SNELL (Principal Financial Officer)
* Assistant Treasurer and Controller December 10, 1996
- ------------------------------------------ ORBCOMM USA, L.P.
DENIS PRONE (Principal Accounting Officer)
* Director, Orbital December 10, 1996
- ------------------------------------------ Communications Corporation
DAVID W. THOMPSON
* Director, Orbital December 10, 1996
- ------------------------------------------ Communications Corporation
BRUCE FERGUSON
*By: /s/ ALAN L. PARKER
--------------------------------------
ALAN L. PARKER
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE> 189
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DULLES,
COMMONWEALTH OF VIRGINIA, ON DECEMBER 10, 1996.
ORBITAL COMMUNICATIONS CORPORATION
By: /s/ ALAN L. PARKER
------------------------------------
ALAN L. PARKER, PRESIDENT
POWER OF ATTORNEY
Each person whose signature appears below appoints Jeffrey V. Pirone as his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing, requisite and
necessary to be done in and about the foregoing, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or his substitute, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
* President of Orbital December 10, 1996
- ---------------------------------------- Communications Corporation
ALAN L. PARKER (Principal Executive Officer)
* Vice President and December 10, 1996
- ---------------------------------------- Chief Financial Officer of
JEFFREY V. PIRONE Orbital Communications Corporation
(Principal Financial and
Accounting Officer)
* Director of Orbital December 10, 1996
- ---------------------------------------- Communications Corporation
DAVID W. THOMPSON
* Director of Orbital December 10, 1996
- ---------------------------------------- Communications Corporation
BRUCE FERGUSON
*By: /s/ JEFFREY V. PIRONE
------------------------------------
JEFFREY V. PIRONE
ATTORNEY-IN-FACT
</TABLE>
II-8
<PAGE> 190
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MONTREAL,
PROVINCE OF QUEBEC, COUNTRY OF CANADA, ON DECEMBER 10, 1996.
TELEGLOBE MOBILE PARTNERS
By: TELEGLOBE MOBILE INVESTMENT INC.,
its managing partner
By: /s/ GUTHRIE J. STEWART
------------------------------------
GUTHRIE J. STEWART
CHIEF EXECUTIVE OFFICER
OF TELEGLOBE MOBILE INVESTMENT INC.
POWER OF ATTORNEY
Each person whose signature appears below appoints Guthrie J. Stewart as
his true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing, requisite and
necessary to be done in and about the foregoing, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or his substitute, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ GUTHRIE J. STEWART Chairman of the Board and Director December 10, 1996
- ------------------------------------- of Teleglobe Mobile Investment
GUTHRIE J. STEWART Inc.
* Director of Teleglobe Mobile December 10, 1996
- ------------------------------------- Investment Inc.
CLAUDE SEGUIN
* Director of Teleglobe Mobile December 10, 1996
- ------------------------------------- Investment Inc.
WAN AISHAH WAN HAMID
*By: /s/ GUTHRIE J. STEWART
---------------------------------
GUTHRIE J. STEWART
ATTORNEY-IN-FACT
</TABLE>
II-9
<PAGE> 191
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DULLES,
COMMONWEALTH OF VIRGINIA, ON DECEMBER 10, 1996.
ORBCOMM GLOBAL CAPITAL CORP.
By: /s/ ALAN L. PARKER
------------------------------------
ALAN L. PARKER
PRESIDENT OF ORBCOMM GLOBAL CAPITAL
CORP.
POWER OF ATTORNEY
Each person whose signature appears below appoints Alan L. Parker as his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing, requisite and
necessary to be done in and about the foregoing, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or his substitute, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ ALAN L. PARKER President and Director of December 10, 1996
- ---------------------------------------- ORBCOMM Global Capital Corp.
ALAN L. PARKER (Principal Executive Officer)
* Vice President, Treasurer and December 10, 1996
- ---------------------------------------- Director of ORBCOMM Global Capital
W. BARTLETT SNELL Corp.
(Principal Financial Officer and
Principal Accounting Officer)
*By: /s/ ALAN L. PARKER
------------------------------------
ALAN L. PARKER
ATTORNEY-IN-FACT
</TABLE>
II-10
<PAGE> 192
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MONTREAL,
PROVINCE OF QUEBEC, COUNTRY OF CANADA, ON DECEMBER 10, 1996.
ORBCOMM INTERNATIONAL
PARTNERS, L.P.
By: TELEGLOBE MOBILE PARTNERS,
its general partner
By: TELEGLOBE MOBILE
INVESTMENT INC.,
its managing partner
By: /s/ GUTHRIE J. STEWART
---------------------------------
GUTHRIE J. STEWART
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
OF TELEGLOBE MOBILE INVESTMENT
INC.
POWER OF ATTORNEY
Each person whose signature appears below appoints Alan L. Parker as his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing, requisite and
necessary to be done in and about the foregoing, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or his substitute, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ ALAN L. PARKER President, ORBCOMM December 10, 1996
- ------------------------------------------ International Partners, L.P.
ALAN L. PARKER (Principal Executive Officer)
* Vice President and Treasurer, December 10, 1996
- ------------------------------------------ ORBCOMM International Partners, L.P.
W. BARTLETT SNELL (Principal Financial Officer)
* Assistant Treasurer and Controller, December 10, 1996
- ------------------------------------------ ORBCOMM International Partners, L.P.
DENIS PRONE (Principal Accounting Officer)
* Director, December 10, 1996
- ------------------------------------------ Teleglobe Mobile Investment Inc.
GUTHRIE J. STEWART
* Director, December 10, 1996
- ------------------------------------------ Teleglobe Mobile Investment Inc.
CLAUDE SEGUIN
* Director, December 10, 1996
- ------------------------------------------ Teleglobe Mobile Investment Inc.
WAN AISHAH WAN HAMID
*By: /s/ ALAN L. PARKER
--------------------------------------
ALAN L. PARKER
ATTORNEY-IN-FACT
</TABLE>
II-11
<PAGE> 193
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<S> <C>
2 Purchase Agreement, dated as of August 2, 1996, by and among the Company, ORBCOMM
Global Capital Corp., ORBCOMM USA, L.P., ORBCOMM International Partners, L.P.,
Orbital Communications Corporation, Teleglobe Mobile Partners, Bear Stearns & Co.
Inc., J.P. Morgan Securities Inc. and RBC Dominion Securities Company.
3 Organizational Documents.
3.1 Certificate of Limited Partnership of the Company.
3.2 Restated Agreement of Limited Partnership of the Company
3.3 Certificate of Limited Partnership of ORBCOMM USA, L.P.
3.4 Restated Agreement of Limited Partnership of ORBCOMM USA, L.P.
3.5 Certificate of Limited Partnership of ORBCOMM International Partners, L.P.
3.6 Restated Agreement of Limited Partnership of ORBCOMM International
Partners, L.P.
4 Indenture, dated as of August 7, 1996, by and among the Company, ORBCOMM Global
Capital Corp., ORBCOMM USA, L.P., ORBCOMM International Partners, L.P., Orbital
Communications Corporation, Teleglobe Mobile Partners and Marine Midland Bank.
5 Opinion of Latham & Watkins regarding the validity of the Exchange Notes, including
consent.
8 Opinion of Latham & Watkins regarding certain federal income tax matters, including
consent.
10 Material Contracts.
10.1 Registration Rights Agreement, dated as of August 7, 1996, by and among the
Company, ORBCOMM Global Capital Corp., ORBCOMM USA, L.P., ORBCOMM International
Partners, L.P., Orbital Communications Corporation, Teleglobe Mobile Partners,
Bear, Stearns & Co. Inc., J.P. Morgan Securities Inc. and RBC Dominion Securities
Corporation.
10.2 Pledge Agreement, dated as of August 7, 1996, by and among the Company, ORBCOMM
Global Capital Corp. and Marine Midland Bank as Collateral Agent.
10.3 International System Charge Agreement, restated as of September 12, 1995, by and
among
the Company, Teleglobe Mobile Partners and ORBCOMM International Partners, L.P.
10.4 Master Agreement, restated as of September 12, 1995, by and among the Company,
Orbital Sciences Corporation, Teleglobe Inc. and Teleglobe Mobile Partners.
10.5+ Procurement Agreement, dated as of September 12, 1995, by and between the Company
and Orbital Sciences Corporation (provided that Appendix I is incorporated by
reference to Exhibit 10.24.6 to the Quarterly Report on Form 10-Q for the Quarter
Ended June 30, 1993 filed by Orbital Sciences Corporation on August 13, 1993).
10.6 Proprietary Information and Non-Competition Agreement, restated as of September 12,
1995, by and among the Company, Orbital Sciences Corporation, Orbital
Communications Corporation, Teleglobe Inc., Teleglobe Mobile Partners, ORBCOMM USA,
L.P. and ORBCOMM International Partners, L.P.
10.7 System Charge Agreement, restated as of September 12, 1995, by and between Orbital
Communications Corporation and ORBCOMM USA, L.P.
10.8 System Construction Agreement, restated as of September 12, 1995, by and between
the Company and Orbital Communications Corporation.
10.9 Amendment No. 1 to System Construction Agreement, dated as of July 1, 1996, by and
between the Company and Orbital Communications Corporation
10.10+ Service License Agreement, dated as of December 19, 1995, between ORBCOMM
International Partners, L.P. and ORBCOMM Canada Inc.
10.11+ Service License Agreement, dated as of October 10, 1996, between ORBCOMM
International Partners, L.P. and Cellular Communications Network (Malaysia) Sdn.
Bhd.
10.12+ Service License Agreement, dated as of October 15, 1996, between ORBCOMM
International Partners, L.P. and European Company for Mobile Communicator Services,
B.V., ORBCOMM Europe.
</TABLE>
<PAGE> 194
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<S> <C>
10.13+ Ground Segment Procurement Contract, dated as of October 10, 1996, between ORBCOMM
International Partners, L.P. and Cellular Communications Network (Malaysia) Sdn.
Bhd.
10.14+ Ground Segment Facilities Use Agreement, dated as of December 19, 1995, between
ORBCOMM International Partners, L.P. and ORBCOMM Canada Inc.
10.15+ Ground Segment Procurement Contract, dated as of October 15, 1996, between ORBCOMM
International Partners, L.P. and European Company for Mobile Communicator Services,
B.V., ORBCOMM Europe.
12 Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Company.
23 Consents of Experts.
23.1* Consent of KPMG Peat Marwick LLP, independent auditors, to ORBCOMM Global, L.P.
23.2* Consent of KPMG Peat Marwick LLP, independent auditors, to ORBCOMM
USA, L.P.
23.3* Consent of KPMG Peat Marwick LLP, independent auditors, to ORBCOMM International
Partners, L.P.
23.4* Consent of KPMG Peat Marwick LLP, independent auditors, to Orbital Communications
Corporation
23.5* Consent of Grant Thornton General Partnership Chartered Accountants
23.6 Consent of Latham & Watkins (included in the opinion filed as Exhibit 5 to the
Registration Statement)
24 Powers of Attorney of the Company, ORBCOMM USA, ORBCOMM International, OCC,
Teleglobe Mobile, and ORBCOMM Global Capital Corp. (included on pages II-5 to II-11
of the Registration Statement)
25 Statement of Eligibility and Qualifications on Form T-1 of Marine Midland Bank, as
Trustee, under the Indenture (No. 22-27318).
27 Financial Data Schedule.
99 Other Exhibits.
99.1 Form of Letter of Transmittal with respect to the Exchange Offer.
99.2 Form of Notice of Guaranteed Delivery with respect to the Exchange Offer
</TABLE>
- ---------------
* Filed Herewith.
+ Confidential Treatment Requested.
<PAGE> 195
EDGAR APPENDIX
<TABLE>
<CAPTION>
PAGE DESCRIPTION
- ---- --------------------------------------------------------------------
<C> <S>
59 -- Segments of ORBCOMM system
74 -- Diagram of ORBCOMM system structure
</TABLE>
<PAGE> 1
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Partners
ORBCOMM Global, L.P.:
We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Washington, DC
December 10, 1996
<PAGE> 1
EXHIBIT 23.2
ACCOUNTANTS' CONSENT
The Partners
ORBCOMM USA, L.P.:
We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Washington, DC
December 10, 1996
<PAGE> 1
EXHIBIT 23.3
ACCOUNTANTS' CONSENT
The Partners
ORBCOMM International Partners, L.P.:
We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Washington, DC
December 10, 1996
<PAGE> 1
EXHIBIT 23.4
ACCOUNTANTS' CONSENT
The Board of Directors
Orbital Communications Corporation:
We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Washington, DC
December 10, 1996
<PAGE> 1
EXHIBIT 23.5
CONSENT OF AUDITORS
We consent to the inclusion of our report dated June 25, 1996 in
Amendment number 3 to the Registration Statement on Form S-4 and the related
prospectus of Orbcomm Global, L.P. and Orbcomm Global Capital Corp. for the
registration of the Offer to Exchange 14% Series B Senior Notes due 2004 with
Revenue Participation Interest for all outstanding 14% Senior Notes due 2004
with Revenue Participation Interest. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
GRANT THORNTON
GENERAL PARTNERSHIP
CHARTERED ACCOUNTANTS
MONTREAL, QUEBEC
DECEMBER 10, 1996
