UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 Commission file number 0-22085
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LORAL ORION, INC.
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(Exact name of registrant as specified in its charter)
Delaware 52-2008654
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2440 Research Boulevard, Suite 400, Rockville, Maryland 20850
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(Address of principal executive offices )
301-258-8101
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
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None
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Securities registered pursuant to Section 12 (g) of the Act:
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11 1/4% Senior Notes Due 2007
12 1/2% Senior Discount Notes Due 2007
(Title of Class)
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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No_
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [Not Applicable]
The number of shares of common stock, par value $.01 per share of the registrant
outstanding as of March 15, 1999 was 100, all of which were owned, directly or
indirectly by Loral Space & Communications Ltd.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I (1)(a)
AND (b) OF FORM 10-K AND IS THEREFORE FILING WITH THE REDUCED DISCLOSURE FORMAT
PURSUANT TO GENERAL INSTRUCTION I (2) OF FORM 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
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None
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PART I
ITEM 1. BUSINESS.
GENERAL
Loral Orion, Inc. ("Orion" or the "Company"), formerly known as Orion
Network Systems, Inc. prior to its acquisition by Loral Space & Communications
Ltd. ("Loral") on March 20, 1998, is a rapidly growing provider of
satellite-based communications services, providing Satellite Capacity Services,
including video distribution and other satellite transmission services and Data
Network Services, including managed data network services, Internet services and
broadband data services. Orion believes that demand for satellite-based
communications services will continue to grow due to the expansion of businesses
beyond the limit of wide bandwidth terrestrial infrastructure, accelerating
demand for high speed data and broadband multimedia services, and for Internet
and intranet services, especially outside the United States, increased size and
scope of television programming distribution, worldwide deregulation of
telecommunications markets and continuing technological advancement. Satellites
are able to provide reliable, high bandwidth services anywhere in their coverage
areas, and Orion believes that it is well positioned to satisfy market demand
for these services.
Orion commenced operations of Orion 1, a high power Ku-band satellite with
34 Ku-band transponders, in January 1995. Orion 1 provides coverage of 34
European countries, most of the United States and parts of Canada, Mexico and
North Africa. Through arrangements with local ground operators, Orion currently
has the ability to deliver network services to and among points in most European
countries, portions of the United States and a limited number of Latin American
countries. The Orion 1 satellite's coverage reaches all locations within its
footprint, enabling the delivery of high-speed data to customers in emerging
markets and remote locations which lack the necessary infrastructure to support
these services.
Orion 2, which will be a high power satellite with 38 Ku-band transponders
for operation in the Atlantic Ocean Region, will expand Orion's European
coverage and extend coverage to portions of the Commonwealth of Independent
States, Latin America, the Middle East and South Africa. Orion 2 is being
constructed by Space Systems/Loral, Inc., a wholly owned subsidiary of Orion's
parent, Loral Space & Communications Ltd. Orion has established an early market
presence in Latin America in preparation for the launch of Orion 2 scheduled to
occur in the third quarter of 1999.
Orion 3, which will be a high power satellite with 33 Ku-band transponders
and 10 C-band transponders, will cover broad areas of the Asia Pacific region,
including China, Japan, Korea, India, Southeast Asia, Australia, New Zealand,
Eastern Russia and Hawaii. Orion 3's footprint will provide Orion with the
ability to provide its services between the United States via Hawaii and most of
the Asia Pacific region. Orion has also established an early market presence in
Asia, including entering into an $89 million contract with DACOM Corporation
("DACOM") for eight of Orion 3's transponders. Orion 3 is scheduled to be
launched in April 1999.
In the aggregate, the footprints of Orion 1, Orion 2 and Orion 3 will cover
over 85 percent of the world's population.
BUSINESS SEGMENTS
Fixed Satellite Services
Orion provides transmission capacity to cable and television programmers,
news and information networks, telecommunications companies and other carriers
for a variety of applications. A majority of Orion's transmission capacity
services consist of video services. The Company generally offers transmission
capacity services under long term contracts and also offers occasional use
services for periods of up to a few hundred hours.
Data Services
Very Small Aperture Terminal ("VSAT") Services. Orion's Digital Link
service can be designed as a "point-to-point" private network service directly
connecting customer locations or as a "point-to-multipoint" service for
customers seeking to transmit communications from a central location to numerous
remote sites. Dynalink is a service that allows the customer with occasional
bandwidth requirements to control the activation and deactivation of links
within a "point-to-point" or "point-to-multipoint" network. Orion's patented
international data networking service, "Virtual Integrated Sky Network" ("VISN")
is a fully meshed, frame relay-based satellite network service that dynamically
consolidates the full range of voice and data applications through a single
access point. The service provides seamless connectivity, not merely from a
central point to up to 254 remote sites, but also among the remote locations.
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Internet Services. Orion offers a family of innovative Internet/intranet
solutions, responding to international Internet Service Providers' (ISPs) and
multinational corporations' bandwidth and quality of service concerns. Orion's
WorldCast (patent pending) family of services are designed to provide
cost-effective, high-performance connectivity to ISPs, content providers,
carriers and multinational businesses needing access to the North American
Internet backbone. WorldCast is a multicast satellite communications technology
that takes advantage of the broadcast nature of satellites and the asymmetric
nature of Internet traffic. Worldcast can be configured to provide a hybrid
solution of terrestrial connectivity for small requests sent to the Internet and
a satellite connection for the larger, high-bandwidth files sent from the
Internet.
ACQUISITION OF THE COMPANY BY LORAL
On March 20, 1998, Orion was acquired by Loral Space & Communications Ltd.
("Loral"), through the merger (the "Merger") of a wholly owned subsidiary of
Loral, Loral Satellite Corporation, with and into Orion. Loral consummated the
acquisition by issuing 18 million shares of its common stock and assuming
existing Orion vested options and warrants to purchase 1.4 million shares of
Loral common stock representing an aggregate purchase price of $472.5 million.
Orion was the surviving corporation of the Merger and thereby became a
subsidiary of Loral. At the effective date of the Merger, Loral contributed its
investment in Orion to Loral Space & Communications Corporation, a wholly owned
subsidiary of Loral, and Orion changed its name to "Loral Orion Network Systems,
Inc." The name has since been changed to "Loral Orion, Inc."
Following the Merger, the capital stock of Orion ceased to be publicly
traded. However, the Company continues to have registered bonds outstanding and
will continue to have filing requirements with the SEC.
The foregoing description of the Merger does not purport to be complete and
is qualified in its entirety by the terms and conditions of the Merger
Agreement, filed as Exhibits 2.1 and 2.2 to Registration Statement No.
333-46407 on Form S-4.
AGREEMENTS WITH LORAL SKYNET
Orion and Loral Skynet, a division of Loral SpaceCom Corporation, which is
in turn a wholly-owned subsidiary of Loral, have entered into agreements (the
"Loral Skynet Agreements") effective on January 1, 1999, whereby Loral Skynet
provides to Orion (i) marketing and sales of Satellite Capacity Services on the
Orion satellite network and related billing and administration of customer
contracts for those services (the "Sales Services") and (ii) telemetry, tracking
and control services for the Orion satellite network (the "Technical Services",
and together with the Sales Services, the "Services"). Orion will be charged
Loral Skynet's costs for providing these services plus a 5 percent
administrative fee. Loral Skynet currently provides the Services for its own
Telstar satellite network and Technical Services for other third parties. Orion
believes that it will achieve cost savings as a result of the consolidation of
the Services with Loral Skynet pursuant to the Loral Skynet Agreements and allow
Orion to place greater resources and focus on its business of providing Data
Services.
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SUMMARY SATELLITE DATA
The following table presents a brief description of the Company's proposed
satellite network. All satellite systems are subject to international frequency
coordination requirements and must obtain appropriate authority to provide
service in a given territory.
<TABLE>
<CAPTION>
ORION 1 ORION 2 ORION 3
------- ------- -------
<S> <C> <C> <C>
Region Covered................... Europe, Southeastern Eastern U.S., Southeastern Canada China, Japan, Korea, India,
Canada, U.S., East of the Europe, Commonwealth of Independent Hawaii, Southeast Asia,
Rockies and parts of States, Middle East, North Africa, Latin Australia, New Zealand,
Mexico America and South Africa Eastern Russia and Oceania
Expected Launch.................. Operational(1) Third quarter of 1999 April 1999
Satellite Manufacturer........... MMS Space Systems Space Systems/Loral Hughes Space
(subsidiary of Matra
Marconi Space)
Transponders(2).................. 34 38 43
Ku-Band(3)....................... 28@0054 MHz 38@0054 MHz 23@0054 MHz
6@0036 MHz 2@0027 MHz
8@0036 MHz (4)
C-Band(5)........................ -- -- 10@0036 MHz
Usable Bandwidth(6).............. 1728 MHz 2052 MHz 1944 MHz
EIRP(7).......................... 47 to 52 dBW 47 to 50 dBW 44 to 52
for Ku-Band;
34 to 38
for C-band returns
Total Prime Power(8) ............ 4500 Watts 7000 Watts 8000 Watts
Expected End of Useful Life(9)... 2005 2012 2013
Approximate Percentage of World
Population Covered by
Satellite(10).................... 17.9% 27.0% 57.0%
</TABLE>
(1) Orion 1 was launched on November 29, 1994 and commenced commercial
operations on January 20, 1995.
(2) Satellite transponders receive signals up from earth stations and then
convert, amplify and transmit the signals back down to other earth
stations.
(3) Ku-band frequencies are higher than C-band frequencies and are used
worldwide for commercial satellite communications.
(4) Orion has entered into a contract with DACOM under which Orion will provide
eight dedicated transponders on Orion 3 for direct-to-home television
service and other satellite services, provided that Orion 3 is delivered in
orbit and fully operational by June 30, 1999.
(5) C-band frequencies minimize interference from atmospheric conditions such
as rain. C-band satellites share frequencies with terrestrial based
microwave systems and therefore require more on-ground coordination to
avoid interference problems and generally are lower power, requiring the
use of large earth stations to receive signals. A portion of Orion 3 is
designed to transmit over C-band frequencies, since Orion 3 is to cover
areas of Asia where satellite signals experience significant interference
from rain during several months of the year.
(6) Bandwidth is a measure of the transponder resource which determines the
information carrying capacity. The actual information carrying capacity of
a transponder is determined by a combination of the transponder's bandwidth
and radio-frequency ("RF") power.
(7) Equivalent isotropic radiated power ("EIRP") is a measure of the RF power
of each transponder. Smaller and less expensive earth terminal antennas can
be used with higher EIRP transponders.
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(8) Total prime power is the total amount of power that is required to support
all of the communications and electronics functions of the satellite.
(9) The expected end of a satellite's in-orbit useful life is based on the
period during which the satellite's on board fuel permits proper station
keeping maneuvers for the satellite. The information for Orion 1 is based
on 1998 fuel level estimates. The information for Orion 2 and Orion 3 is
based on their expected launch dates and their respective construction and
launch contracts.
(10) The approximate percentages of world population covered or to be covered by
the Orion satellites are not additive. In the aggregate, the footprints of
the Orion satellites would cover over 85 percent of the world's population.
INSURANCE
Orion has obtained satellite in-orbit insurance for Orion 1 covering the
period from August 1998 to August 2003 in an amount of approximately $195
million providing protection against partial or total loss of the satellite's
communications capability, including loss of transponders, power, fuel, or
ability to control the positioning of the satellite. Orion is in the process of
obtaining launch and in-orbit life insurance for Orion 2 and Orion 3 covering
the period from launch to five years after launch in an amount of $261,404,000
for Orion 2 and up to $265,606,000 for Orion 3. This coverage provides
protection against partial or total loss of the satellite's communications
capability, including loss of transponders, power, fuel or ability to control
the positioning of the satellite. Launch and in-orbit insurance for its
satellites will not protect the Company against business interruption, loss or
delay of revenues and similar losses and may not fully reimburse the Company for
its expenditures.
EMPLOYEES
As of December 31, 1998, Orion and its subsidiaries had 305 full-time
employees, none of whom are subject to collective bargaining agreements.
CERTAIN FACTORS THAT MAY EFFECT FUTURE RESULTS
This annual report on Form 10-K contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. In addition,
from time to time, the Company or its representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but are not limited to, various filings made by
the Company or Loral with the Securities and Exchange Commission, press releases
or oral statements made by or with the approval of an authorized executive
officer of the Company or Loral. Actual results could differ materially from
those projected or suggested in any forward-looking statements as a result of a
wide variety of factors and conditions, including, but not limited to, the
factors summarized below.
LAUNCH FAILURES MAY DELAY SOME OF OUR OPERATIONS IN THE FUTURE.
Satellite launches are risky. About 15% of launch attempts end in failure.
We ordinarily insure against launch failures, but at considerable cost. The cost
and the availability of insurance vary depending on market conditions and the
launch vehicle used. Our insurance typically does not cover business
interruption, and so both launch failures and in-orbit satellite failures result
in uninsured losses. Replacement of a lost satellite typically requires up to 18
months from the time a contract is executed until the launch date of the
replacement satellite.
Orion 3 is currently scheduled to be launched on the second flight of a
Delta 3 rocket in April 1999. A Delta 3 rocket failed in August 1998 on its
maiden flight. Although the manufacturer has assured us that the cause of that
failure has been identified and corrected, we can't be certain that the second
flight will succeed.
AFTER LAUNCH, OUR SATELLITES REMAIN VULNERABLE TO IN-ORBIT FAILURE.
Random failure of satellite components may result in damage to or loss of a
satellite before the end of its expected life. Satellites are carefully built
and tested and have certain redundant systems in case of failure. However,
in-orbit failure may result from the various causes, including they remain
vulnerable to failure and degradation from hazards in space that include:
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o component failure;
o loss of power or fuel;
o inability to control positioning of the satellite;
o solar and other astronomical events; and
o space debris.
Repair of satellites in space is not feasible. Many factors affect the
useful lives of satellites. These factors include the quality of construction,
gradual degradation of solar panels and the durability of components. Our Orion
2 and Orion 3 are expected to have useful live of approximately 16 years and 15
years, respectively. At December 31, 1998, Orion 1 has a remaining useful life
of 7 years. Although some failures may be covered in part by insurance, they may
result in uninsured losses as well.
In November 1995, a component on Orion 1 malfunctioned, resulting in a
2-hour service interruption. The malfunctioning component supported nine
transponders serving the European portion of Orion 1's footprint. Full service
was restored using a back-up component. If that back-up component fails, Orion 1
would lose a significant amount of usable capacity.
IMPACT OF A DELAY IN THE LAUNCH OR OPERATIONS OF ORION 3
DACOM has agreed to buy eight transponders on Orion 3 for $89 million. If
Orion 3 is not launched by May 31, 1999, or if the related transponders are not
ready for operation by June 30, 1999, DACOM can terminate the agreement. If
DACOM were to terminate its transponder agreement with us due to a delay in the
launch or operation of Orion 3, we will have to refund amounts received from
DACOM ($35.5 million as of December 31, 1998), we may not have enough cash to
pay our debt.
WE HAVE SUBSTANTIAL DEBT.
We have approximately $933 million of outstanding debt. Our debt is
non-recourse to Loral.
If our business plan does not succeed, our operations might not generate
enough cash to pay our obligations.
Our business is capital intensive. We are subject to substantial financial
risks from possible delays or reductions in revenue, unforeseen capital needs or
unforeseen expenses. Our ability to satisfy our obligations will depend upon our
future financial performance which is subject to:
o the successful execution of our business plan;
o general economic conditions; and
o financial, business, regulatory and other factors, including
international conditions.
These factors are to some extent beyond our control.
THERE ARE RISKS IN CONDUCTING BUSINESS INTERNATIONALLY.
Much of our business is conducted outside the United States, which imposes
more risks. We could be harmed financially and operationally by changes in
foreign regulations and telecommunications standards, tariffs or taxes and other
trade barriers. Customers outside of the developed world could have difficulty
in obtaining the U.S. dollars they owe us, as a result of exchange controls.
Additionally, exchange rate fluctuations may adversely affect the ability of our
customers to pay us in U.S. dollars. Moreover, if we ever need to pursue legal
remedies against our foreign customers and business partners, we may have to sue
them abroad, where it could be hard for us to enforce our rights.
OUR BUSINESS IS REGULATED, CAUSING UNCERTAINTY AND ADDITIONAL COSTS.
Our business is regulated by authorities in more than 100 jurisdictions,
including the FCC, the International Telecommunications Union and the European
Union. As a result, some of the activities which are important to our strategy
are beyond our control. The proposed launch and operation of Orion 2 and Orion 3
and our international service offerings are strategically important activities
which are regulated by various government and quasi-government authorities and
organizations.
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Regulatory authorities in the various jurisdictions in which we operate can
modify, withdraw or impose charges or conditions upon the licenses which we
need, and so increase our cost of doing business. The regulatory process also
requires that we negotiate with third parties operating or intending to operate
satellites at or near orbital locations where we place our satellites so that
the frequencies of the satellites do not interfere. Because we cannot guarantee
the results of negotiations with third parties, "frequency coordination" is an
additional source of uncertainty. We cannot guarantee successful frequency
coordination for our satellites. In particular, we have learned that Eutelsat,
which may claim a priority filing with the International Telecommunications
Union, has recently placed a satellite that is beyond its useful life at 12.5(0)
W.L, near the 12(0) W.L. orbital location intended for Orion 2. If Eutelsat
launches a replacement satellite into the 12.5(0) W.L. orbital location, it
would interfere with the Orion 2 satellite at 12(0) W.L. We have entered into
discussions with Eutelsat to resolve the issues relating to this orbital
location, however, we cannot guarantee a successful resolution.
Failure to successfully coordinate our satellites' frequencies or to
receive other required regulatory approvals could have a material adverse effect
on our financial condition and on our results of operations.
WE HAVE MANY COMPETITORS.
We compete with well-capitalized companies. These companies have
considerable financial resources, which they may use to gain advantages in
marketing and in technological innovation. This could have a material adverse
effect on our financial condition and on our results of operations. Each of our
businesses is subject to intense competition, including from:
o several of the world's largest corporations, such as Hughes
Space & Communications, Inc., a subsidiary of General Motors
Corporation, and Lockheed Martin Corporation;
o governments and quasi-government organizations, such as Intelsat
and Eutelsat;
o companies with competitive services, such as PanAmSat
Corporation; and
o others using alternative technologies, such as terrestrial
telecommunications and cable television, who are constantly
pursuing advanced technologies in order to enhance their
competitive positions.
We compete for customers and for market share. We also compete for local
regulatory approval in places in which both we and a competitor may want to
operate. We also compete for scarce frequency assignments and geosynchromous
orbital positions.
IMPACT OF YEAR 2000
The Company is evaluating the potential effect of the year 2000 on its
information processing systems. It is not known at this time what modifications,
if any, will be required. All costs associated with any modification will be
expensed as incurred.
The Company's Year 2000 Program is proceeding on schedule. The Year 2000
Issue is the result of computer programs which were written using two digits
rather than four to signify a year (i.e., the year 1999 is denoted as "99" and
not "1999"). Computer progra ms written using only two digits may recognize the
year 2000 as the year 1900. This could result in a system failure or
miscalculations causing disruption of operations.
The Company has implemented a Year 2000 program (the "Year 2000 Program")
for its internal products, system and equipment, as well as for key vendor and
customer supplied products, systems and equipment. As part of the Year 2000
Program, the Company is assessing the Year 2000 capabilities of, among other
things, its satellite, ground equipment, research and development activities,
and facility management systems. The Year 2000 Program consists of the following
phases: Inventory of Year 2000 items, Assessment (including prioritization),
Remediation (including modification, upgrading and replacement), Testing and
Auditing. This five-step program is divided into six major sections covering
both information and non-information technology systems: 1) business systems, 2)
technical systems, 3) products and services, 4) imbedded hardware/firmware, 5)
vendor supplied products and 6) customer provided products. As of February 28,
1999, the Company has completed approximately 95 percent of the inventory phase
and approximately 95 percent of its assessment phase. The Company expects to
complete the first four phases, through the testing phase, of the Year 2000
Program during the third quarter of 1999, which is prior to any anticipated
material impact on the operations of the Company. The fifth phase, the audit
phase, commenced in January 1999, and is expected to continue through the third
quarter of 1999 to accommodate re-audits if necessary.
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Both internal and external resources are being utilized to execute the
Company's plan. The program to address Year 2000 has been underway since July
1997. The incremental costs incurred to date for this effort by the Company were
approximately $50,000. Based on the efforts of the Company to date, the Company
anticipates additional incremental expenses of approximately $165,000 will be
incurred to substantially complete the effort.
Based upon the accomplishments to date, no contingency plans are expected
to be needed. As risks are identified, contingency plans will be developed and
implemented as necessary. However, because of the progress achieved to date and
the Company's expectations that its Year 2000 program will be substantially
complete in the third quarter of calendar 1999, the Company believes adequate
time will be available to insure alternatives can be developed, assessed and
implemented prior to a Year 2000 issue having a material negative impact on the
operations of the Company. However, there can be no assurance that such
modifications and conversions, if required, will be completed on a timely basis.
The cost of the program and the dates on which the Company believes it will
substantially complete Year 2000 modifications are based on management's best
estimates. Such estimates were derived using software surveys and programs to
evaluate calendar date exposures and numerous assumptions of future events,
including the continued availability of certain resources, third-party year 2000
readiness and other factors. Because none of these estimates can be guaranteed,
actual results could differ materially and adversely from those anticipated.
Specific factors that might cause an adjustment of costs are: number of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, the ability to validate supplier certification and similar
uncertainties.
The Company's failure to remediate a material Year 2000 problem could
result in an interruption or failure of certain basic business operations. These
failures could materially and adversely effect the Company's results of
operations, liquidity and financial condition. The Company is also assessing the
Year 2000 readiness of key third-party suppliers. Information requests have been
distributed to such suppliers and replies are being evaluated. If the risk is
deemed material, on-site visits to suppliers will be conducted to verify the
adequacy of the information received. However, due to the general uncertainty of
the Year 2000 problem, including uncertainty with regard to third-party
suppliers and customers, the Company is unable to determine at this time whether
the consequences of Year 2000 failures will have an adverse material impact on
the Company's results of operations, liquidity or financial condition. There can
be no assurance given that the Company's Year 2000 Program will be successful in
avoiding any interruption or failure of certain basic business operations, which
may have a material adverse effect on the Company's results of operations or
financial position.
THERE ARE RISKS REGARDING FORWARD-LOOKING STATEMENTS.
Some statements or information contained in this Form 10-K are not
historical facts but are "forward-looking statements" (as such term is defined
in the Private Securities Litigation Reform Act of 1995). They can be identified
by the use of forward-looking words such as "believes", "expects", "plans",
"may", "will", "should", or "anticipates" or their negatives or other variations
of these words or other comparable words, or by discussions of strategy that
involve risks and uncertainties. Some of the factors which may cause future
results and performance to differ from what we may imply here are:
o the space environment, where our satellites operate, is a harsh
environment;
o governments may change regulations or institute new rules, which
could have an impact on our operations;
o we may not successfully coordinate satellite frequencies with
third parties;
o there is severe competition in our business; and
o we owe significant amounts of money.
We warn you that forward-looking statements are only predictions. Actual
events or results may differ materially as a result of risks that we face,
including those set forth elsewhere in this section. These are representative of
factors that could affect the outcome of the forward-looking statements.
ITEM 2. PROPERTIES.
Loral Orion owns seven acres of land in Mt. Jackson, Virginia and leases
approximately 78,000 square feet for office space and its operations center.
Management believes that the facilities are sufficient for its current
operations.
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ITEM 3. LEGAL PROCEEDINGS.
While Orion is party to legal and regulatory proceedings incident to its
business, there are no material legal proceedings pending or, to the knowledge
of management, threatened against Orion or its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted pursuant to General Instruction I of Form 10-K.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
All of the Company's outstanding common stock is owned by Loral Space &
Communications Corporation, a wholly owned subsidiary of Loral. Therefore, there
is no public trading market for the Company's common stock. The Company has
never paid dividends on its common stock. Loral Orion's indentures relating to
its Senior Notes and Senior Discount Notes include certain restrictions on Loral
Orion's ability to pay dividends or make loans to Loral.
ITEM 6. SELECTED FINANCIAL DATA.
Omitted pursuant to General Instruction I of Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Except for the historical information contained herein, the matters
discussed in this Management's Discussion and Analysis of Financial Condition
and Results of Operations, and elsewhere in this Form 10-K, are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In
addition, from time to time, Loral Orion, Loral or their representatives have
made or may make forward-looking statements, orally or in writing. Such
forward-looking statements may be included in, but are not limited to, various
filings made by Loral Orion or Loral with the Securities and Exchange
Commission, press releases or oral statements made by or with the approval of an
authorized executive officer of Loral Orion or Loral. Actual results could
differ materially from those projected or suggested in any forward-looking
statements as a result of a wide variety of factors or conditions.
GENERAL
Loral Orion, Inc. (the "Company" or "Loral Orion"), formerly known as Loral
Orion Network Systems, Inc., is a holding company with no assets or operations
other than its investments in its subsidiaries. Through the operations of its
subsidiary Guarantors, the Company's principal business is providing
satellite-based communications services for private communications networks and
video distribution and other satellite transmission services. In 1998, Loral
Orion organized its business into two distinct operating segments as follows
(see Note 8 to the consolidated financial statements):
Fixed Satellite Services: Leasing transponder capacity and providing
value-added services to customers for a wide variety of applications,
including the distribution of broadcast programming, news gathering,
business television, distance learning and direct-to-home ("DTH") services.
The Company's fixed satellite services ("FSS") assets, will be managed by
Loral Skynet effective January 1, 1999, and
Data Services: Business in development, providing managed communications
networks and Internet and intranet services, using transponder capacity on
the Loral Skynet Telstar and Loral Orion fleets.
No restrictions exist on the ability of any of the subsidiaries of Loral
Orion ("Subsidiary Guarantors") other than inconsequential subsidiaries, to pay
dividends or make other distributions to the Company, except to the extent
provided by law generally (e.g., adequate capital to pay dividends under state
corporate laws).
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LORAL ORION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(CONTINUED)
OVERVIEW
The Company's revenues are principally generated from two to five year
contracts for delivery of communications services derived principally from
recurring monthly fees from its customers. The revenues from each contract vary,
depending upon the type of service, amount of capacity, data handling ability of
the network, the number of very small aperture terminals ("VSATs") (which
generally are owned by the Company), value-added services and other factors.
Substantially all of the Company's contracts are denominated in U.S. dollars.
The Company begins to record revenues under its contracts upon service
commencement to customers.
The services provided by the Company have been subject to decreasing prices
over recent years due to increased competition. This pricing pressure is
expected to continue (and may accelerate) for the foreseeable future,
particularly if, as expected, capacity continues to increase. The Company will
need to increase its volume of sales in order to compensate for such price
reductions. The Company believes that customers will increase the data speed in
their communications networks to support new applications, and that such
upgrading of customer networks will lead to increased revenues that will
mitigate the effect of price reductions. However, there can be no assurance that
this will occur. The Company expects to continue to incur net losses and have
negative cash flow (after payments for capital expenditures and interest) for
the foreseeable future.
The Company's direct cost of services includes principally (i) costs
relating to the installation, maintenance and licensing of VSAT earth stations
at its customers' premises; (ii) satellite lease payments for transponder
capacity (generally for services outside of the Orion 1 footprint); (iii)
in-orbit insurance premiums; and (iv) personnel costs and travel related to
telemetry, tracking and control facility ("TT&C"), network monitoring, network
design and similar activities. Regarding TT&C costs, the Company and Loral
Skynet, a division of Loral SpaceCom Corporation, which is in turn a
wholly-owned subsidiary of Loral, have entered into agreements (the "Loral
Skynet Agreements") effective on January 1, 1999, whereby Loral Skynet provides
to Orion (i) marketing and sales of satellite capacity services on the Orion
satellite network and related billing and administration of customer contracts
for those services (the "Sales Services") and (ii) telemetry, tracking and
control services for the Orion satellite network (the "Technical Services", and
together with the Sales Services, the "Services"). Orion will be charged Loral
Skynet's costs for providing these services plus a 5 percent administrative fee.
Loral Skynet currently provides the Services for its own Telstar satellite
network and Technical Services for other third parties. Orion believes that it
will achieve cost savings as a result of the consolidation of the Services with
Loral Skynet pursuant to the Loral Skynet Agreements and allow Orion to place
greater resources and focus on the business of providing Data Services, which
will increase as the Company's business grows. Sales and marketing expenses
consist of salaries, sales commissions (including commissions to third party
sales representatives), travel and promotional expenses. The Company commenced a
significant expansion of its marketing program in 1997 which continued in 1998.
Due to the complexity of the Company's services, and the continued expansion of
sales personnel, sales and marketing expenses increased significantly during
1998. Sales and marketing expenses are expected to decrease in 1999 as a result
of the Services agreement with Skynet. General and administrative expenses
consist of personnel costs other than for selling and engineering and include
information systems, professional services, and occupancy costs. These costs
will increase generally as the Company's operations expand. Depreciation and
amortization expenses result mainly from the depreciation of the Orion 1
satellite, amortization of goodwill and other intangibles and the depreciation
of VSATs and the related equipment to service the expansion of the private
network communication services business. Interest income is primarily the result
of interest earned on the proceeds from the Company's debt and equity offerings.
Interest costs stem primarily from the Company's outstanding Senior Notes and
Senior Discount Notes.
ORION 2 AND ORION 3
Orion 2. During the second quarter of 1998, the Company entered into a
satellite procurement contract with Space Systems/Loral ("SS/L"), a wholly owned
subsidiary of Loral SpaceCom Corporation for the construction and launch of the
Orion 2 satellite for operation in the Atlantic Ocean region at 12(degree) W.L.
(the "SS/L Contract"). The SS/L Contract provides for delivery in-orbit of the
Orion 2 aboard an Ariane 44L launch vehicle in the third quarter of 1999. The
SS/L satellite design provides for 38 Ku-band transponders with a footprint
covering the Eastern United States, Southeastern Canada, Europe, the
Commonwealth of Independent States, the Middle East, North and South Africa and
South America. The Company also notified Matra Marconi Space ("Matra") that it
cancelled its satellite procurement contract with Matra for the construction and
launch of a satellite for operation in the Atlantic Ocean region at 12(degree)
W.L. (the "Matra Contract"). As a result of the cancellation of the Matra
Contract, the Company will have no obligation to make further payments to Matra,
but Matra retained amounts previously paid by the Company of $49.1 million.
10
<PAGE>
LORAL ORION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(CONTINUED)
The Company believes that the Orion 2 satellite being procured from SS/L
offers significant benefits compared to the Matra satellite. Orion's cash will
be used to fund the SS/L Contract up to an amount that when added to the amounts
previously paid to Matra, will not exceed $202 million, the total amount that
would otherwise have been due to Matra if the Matra Contract had not been
canceled. Any requirements to SS/L in excess of $202 million for Orion 2 will be
funded with additional equity contributed from Loral. Moreover, the
SS/L-designed satellite is both larger and more powerful than the Matra-designed
satellite. The SS/L satellite will have 8 additional transponders and will
provide greater transmitted power to Orion's customers. The expected in-orbit
life of the SS/L satellite is approximately 16 years compared to 13 years for
the Matra satellite. The SS/L satellite is designed to provide enhanced
transponder switching capabilities as compared to the Matra satellite and also
allows for both uplinking and downlinking of transmissions from South Africa,
while the Matra satellite would not have allowed for uplinking.
Orion 3. The Company entered into a satellite contract with Hughes Space
and Communications International, Inc. in 1997 for the construction and launch
of Orion 3. The contract provides for delivery in orbit of Orion 3 for a firm
fixed price of $203 million excluding launch insurance. Orion 3 will cover broad
areas of the Asia Pacific region including China, Japan, Korea, Southeast Asia,
Australia, New Zealand, Eastern Russia and Hawaii.
Pre-Construction Sale of Transponders on Orion 3. The Company has entered
into a contract with DACOM Corporation, a Korean communications company
("DACOM"), under which DACOM will, subject to certain conditions, purchase eight
dedicated transponders on Orion 3 for 13 years, in return for approximately $89
million, payable over a period from December 1996 through seven months following
the lease commencement date for the transponders. Payments are subject to refund
if Orion 3 fails to commence commercial operation by June 30, 1999. Through
December 31, 1998, the Company has received $35.5 million from DACOM, including
interest earned on the investment of these payments of $1.5 million.
Satellite Launch and Operation Risk. There can be no assurance that Orion 2
or Orion 3 will be successfully launched or operate in accordance with their
design. While the Company intends to procure launch insurance for the
satellites, a total or partial loss of either satellite will involve delays and
loss of revenue which will impair the Company's ability to service its
indebtedness and such insurance will not protect the Company against business
interruption, loss or delay of revenues or similar losses and may not fully
reimburse the Company for its expenditures.
RESULTS OF OPERATIONS
On March 20, 1998, Orion Network Systems, Inc. ("Orion") was acquired by
Loral Space & Communications Ltd. ("Loral"), through the merger (the "Merger")
of a wholly owned subsidiary of Loral, Loral Satellite Corporation ("Merger
Sub"), with and into Orion. Loral consummated the acquisition by issuing 18
million shares of its common stock and assuming existing Orion vested options
and warrants to purchase 1.4 million shares of Loral common stock representing
an aggregate purchase price of $472.5 million. Orion was the surviving
corporation (the "Surviving Corporation") of the Merger and thereby became a
wholly owned subsidiary of Loral. At the effective date of the Merger, Loral
contributed its investment in Orion to Loral Space & Communications Corporation,
a wholly owned subsidiary of Loral, and Orion changed its name to "Loral Orion
Network Systems, Inc." The name has since been changed to "Loral Orion, Inc."
Following the Merger, the capital stock of Loral Orion ceased to be
publicly traded. However, the Company continued to have registered bonds
outstanding and will continue to have filing requirements with the SEC.
For accounting purposes, the Merger was accounted for as of March 31, 1998
using the purchase method. Accordingly, the consolidated balance sheet at
December 31, 1998 reflects the push-down of the purchase price allocations. The
purchase price represented $447.7 million in excess of Orion's net book value,
which was primarily allocated to costs in excess of net assets acquired of
$619.7 million and a fair value adjustment of $153.4 million to increase the
carrying value of Orion's senior notes and senior discount notes.
11
<PAGE>
LORAL ORION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(CONTINUED)
Acquisition of Teleport Europe GmbH. On March 26, 1997, the Company
acquired German-based Teleport Europe GmbH (a communications company
specializing in private satellite networks for voice and data services), whose
name was subsequently changed to Loral Orion-Europe GmbH ("Orion Europe"). The
Company has consolidated the operations of Orion Europe for the year ended
December 31, 1997, retroactively to January 1, 1997. The effect of this
consolidation on operations prior to acquisition was to increase consolidated
revenues by approximately $4.1 million, increase total operating expenses by
approximately $4.0 million and other expenses by approximately $0.7 million. The
preacquisition loss of Orion Europe of $0.6 million has been deducted from the
consolidated statement of operations for the year ended December 31, 1997.
In evaluating financial performance, management uses revenues and earnings
before interest, taxes, depreciation and amortization ("EBITDA") as a measure of
a segment's profit or loss. The following discussion of revenues and EBITDA
reflects the results of Loral Orion's operating segments for the two years
ending December 31, 1998 and 1997, on a pro forma basis. Also see Note 8 to the
consolidated financial statements for additional information on segment results.
In order to provide an understanding of the Company, the results of
operations discusses the results for the year ended December 31, 1998 and
December 31, 1997, on a pro forma basis. The following pro forma results of
operations for the years ended December 31, 1998 and 1997 have been presented to
give the effect as of January 1, 1997, of the Merger with Loral, and the
Exchange, the Orion Merger, and the Financings (the "Transactions") all as
described in Note 1 to the Company's financial statements. The pro forma results
of operations does not purport to present the actual results of operations of
the Company had the Transactions in fact occurred on January 1, 1997, nor is it
indicative of the results of operations that may be achieved in the future.
As a result of these Transactions, the pro forma adjustments resulted in an
increase in depreciation and amortization expenses of approximately $3.9 million
and $17.6 million for the years ended December 31, 1998 and 1997, respectively.
This increase primarily relates to the step up in the book value of Orion 1 and
increased amortization expenses for cost in excess of net assets acquired
associated with the Loral Merger. The pro forma results for 1998 include a $12.8
million adjustment to eliminate merger costs. Pro forma interest expense for the
years ended December 31, 1998 and 1997 was $67.1 million and $77.8 million, a
decrease of $0.4 million and $6.0 million from historical amounts, respectively.
The decrease in interest expense is primarily attributable to the additional
capitalized interest costs attributable to two satellites under construction,
amortization of bond premium relating to the fair value adjustments and the
elimination of the debentures, as a result of the Loral Merger.
12
<PAGE>
LORAL ORION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(CONTINUED)
OPERATING REVENUES (IN MILLIONS):
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED
PRO FORMA DECEMBER 31,
YEAR ENDED 1997
DECEMBER 31, PREDECESSOR
1998 COMPANY
------------ -------------
<S> <C> <C>
Fixed satellite services ................ $ 33.1 $ 31.3
Data services ........................... 50.3 41.4
------------ -------------
Operating revenues ....................... $ 83.4 $ 72.7
============= =============
EBITDA (1) (IN MILLIONS):
PRO FORMA
YEAR ENDED
PRO FORMA DECEMBER 31,
YEAR ENDED 1997
DECEMBER 31, PREDECESSOR
1998 COMPANY
------------- ------------
Fixed satellite services ................. $ 27.9 $ 26.5
Data services ........................... (18.9) (21.4)
------------ -------------
EBITDA.................................... $ 9.0 $ 5.1
============= =============
</TABLE>
- - ------------------------
(1) Pro forma EBITDA (which is equivalent to operating income (loss) before
depreciation and amortization) is provided because it is used as the measure of
segment profit or loss and because it is a measure commonly used in the
communications industry to analyze companies on the basis of operating
performance, leverage and liquidity and is presented to enhance the
understanding of Loral Orion's operating results. However, EBITDA should not be
construed as an alternative to net income as an indicator of a company's
operating performance, or cash flow from operations as a measure of a company's
liquidity. EBITDA may be calculated differently and, therefore, may not be
comparable to similarly titled measures reported by other companies.
13
<PAGE>
LORAL ORION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(CONTINUED)
Revenue and Backlog. Pro forma revenues for the year ended December 31,
1998 and 1997 were $83.4 million and $72.7 million, respectively, an increase of
$10.7 million or 15 percent. This increase is primarily attributable to private
communications network services operations, which added 159 customer sites
during 1998.
At December 31, 1998, the Company had a contracted backlog (representing
future revenues under customer contracts) of approximately $308.5 million
compared to $269.5 million at December 31, 1997, an increase of 14 percent.
Revenue from contracted backlog is typically earned over two to five years.
Direct Expenses. Direct expenses on a pro forma basis for 1998 were $26.3
million, or 32 percent of sales compared to $26.5 million, or 36 percent of
sales for the same period in 1997. This decrease was primarily attributable to
reduced Internet access and terrestrial link charges during the fourth quarter
of 1998. These costs support the Worldcast Internet access product
("Worldcast"), which provides international internet connectivity through Orion
1.
Sales and Marketing Expenses. Sales and marketing expenses on a pro forma
basis were $25.1 million for the year ended December 31, 1998, as compared to
$19.4 million for the same period in 1997, an increase of $5.7 million or 29
percent. This increase primarily relates to additional sales salaries and
commissions, independent contractor fees and advertising associated with the
growth in the private communications network service business and Worldcast.
Engineering and Technical Services Expenses. Engineering and technical
services expenses on a pro forma basis for the year ended December 31, 1998 were
$8.4 million compared to $7.8 million for the same period in 1997, an increase
of $0.6 million or 8 percent. These increases are primarily due to additional
salaries associated with support of Worldcast.
General Administrative Expenses. General and administrative expenses on a
pro forma basis were $14.5 million for the year ended December 31, 1998,
compared to $14.0 million for the same period in 1997, an increase of $0.5
million or 4 percent.
Depreciation and Amortization. Depreciation and amortization expense on a
pro forma basis for the years ended December 31, 1998 and 1997 were $67.8
million and $65.8 million, respectively, an increase of $2.0 million or 3
percent. The increase was primarily a result of depreciation of ground equipment
to service the expansion of the private network communication services business.
Merger Costs. Merger costs associated with the acquisition of the Company
by Loral were $12.8 million for the year ended December 31, 1998, which were
eliminated in the pro forma adjustments.
Interest. Pro forma interest income was $14.7 million for the year ended
December 31, 1998, compared to $24.7 million for the same period in 1997. The
decrease in interest income is due to a reduction in the balance held in the
Company's segregated and restricted funds, which were used for the construction
of satellites and to fund interest payments on the Company's senior notes. Pro
forma interest expense for the years ended December 31, 1998 and 1997 was $67.1
million and $77.8 million, respectively. The decrease in interest expense is
primarily attributable to the additional capitalized interest costs attributable
to two satellites under construction, amortization of bond premium relating to
the fair value adjustments and the elimination of the debentures, as a result of
the Loral Merger.
Income Taxes. The Company is included in the consolidated U.S. federal
income tax return of Loral. Pursuant to a tax sharing agreement for 1998 with
Loral, the Company is entitled to reimbursement for the use of its tax losses
when such losses are utilized by Loral. For the year ended December 31, 1998,
the Company recorded a receivable under this tax sharing agreement of
approximately $4.9 million and a deferred tax provision of $3.8 million. The
deferred tax asset of $53.9 million on the accompanying balance sheet arises
primarily from the tax effect of the temporary differences between the carrying
amount of the senior notes and the senior discount notes payable for financial
and income tax purposes.
Net Loss. As a result of the above, the Company's pro forma net losses for
the years ended December 31, 1998 and 1997 were $110.3 million and $113.7
million, respectively.
14
<PAGE>
LORAL ORION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(CONTINUED)
RESULTS BY OPERATING SEGMENT
Fixed Satellite Service
Revenues and EBITDA for the fixed satellite services segment increased 6
percent and 5 percent, respectively, in 1998 versus 1997. FSS revenue for 1998
was $33.1 million versus $31.3 million in 1997. EBITDA on the same basis was
$27.9 million in 1998, or 84 percent of revenues, versus EBITDA of $26.5
million, or 85 percent of revenues, in 1997. Funded backlog for the fixed
satellite services segment totaled $164.3 million at the end of 1998, versus
$163.2 million in backlog at year end 1997. Capital expenditures for 1998 were
approximately $286.9 million. In 1999, capital expenditures are expected to
decrease due to the expected launches of the Orion 2 and Orion 3 satellites.
During the fourth quarter of 1998, Loral completed its integration plan for
Loral Orion and transferred management of Loral Orion's satellite capacity
leasing and satellite operations to Loral Skynet, effective January 1, 1999. In
addition to increasing the operational efficiency, the realignment permits Loral
Orion to focus on and leverage its experience in the global data services
market.
Data Services
Revenues for the data services segment in 1998 were approximately $50.3
million versus $41.4 million in 1997, primarily from Loral Orion's corporate
data networking and Internet and Intranet services businesses. EBITDA for 1998
was a loss of approximately $18.9 million in 1998 versus a loss of $21.4 million
in 1997. At December 31, 1998, funded backlog for the segment was $144.2
million, at the end of 1998, versus $106.3 at year end 1997, which was all from
external sources. Approximately 40 percent of 1998 external funded backlog is
expected to be realized in 1999. Capital expenditures in 1998 were approximately
$15.6 and are estimated to increase in 1999.
OTHER MATTERS
IMPACT OF YEAR 2000
The Company is evaluating the potential effect of the year 2000 on its
information processing systems. It is not known at this time what modifications,
if any, will be required. All costs associated with any modification will be
expensed as incurred.
The Company's Year 2000 Program is proceeding on schedule. The Year 2000
Issue is the result of computer programs which were written using two digits
rather than four to signify a year (i.e., the year 1999 is denoted as "99" and
not "1999"). Computer programs written using only two digits may recognize the
year 2000 as the year 1900. This could result in a system failure or
miscalculations causing disruption of operations.
The Company has implemented a Year 2000 program (the "Year 2000 Program")
for its internal products, system and equipment, as well as for key vendor and
customer supplied products, systems and equipment. As part of the Year 2000
Program, the Company is assessing the Year 2000 capabilities of, among other
things, its satellite, ground equipment, research and development activities,
and facility management systems. The Year 2000 Program consists of the following
phases: Inventory of Year 2000 items, Assessment (including prioritization),
Remediation (including modification, upgrading and replacement), Testing and
Auditing. This five-step program is divided into six major sections covering
both information and non-information technology systems: 1) business systems, 2)
technical systems, 3) products and services, 4) imbedded hardware/firmware, 5)
vendor supplied products and 6) customer provided products. As of February 28,
1999, the Company completed approximately 95 percent of the inventory phase and
approximately 95 percent of its assessment phase. The Company expects to
complete the first four phases, through the testing phase, of the Year 2000
Program during the third quarter of 1999, which is prior to any anticipated
material impact on the operations of the Company. The fifth phase, the audit
phase, commenced in January 1999, and is expected continue through the third
quarter of 1999 to accommodate re-audits if necessary.
15
<PAGE>
LORAL ORION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(CONTINUED)
Both internal and external resources are being utilized to execute the
Company's plan. The program to address Year 2000 has been underway since July
1997. The incremental costs incurred to date for this effort by the Company was
approximately $50,000. Based on the efforts of the Company to date, the Company
anticipates additional incremental expenses of approximately $165,000 will be
incurred to substantially complete the effort.
Based upon the accomplishments to date, no contingency plans are expected
to be needed. As risks are identified, contingency plans will be developed and
implemented as necessary. However, because of the progress achieved to date and
the Company's expectations that its Year 2000 program will be substantially
complete in the third quarter of calendar 1999, the Company believes adequate
time will be available to insure alternatives can be developed, assessed and
implemented prior to a Year 2000 issue having a material negative impact on the
operations of the Company. However, there can be no assurance that such
modifications and conversions, if required, will be completed on a timely basis.
The cost of the program and the dates on which the Company believes it will
substantially complete Year 2000 modifications are based on management's best
estimates. Such estimates were derived using software surveys and programs to
evaluate calendar date exposures and numerous assumptions of future events,
including the continued availability of certain resources, third-party year 2000
readiness and other factors. Because none of these estimates can be guaranteed,
actual results could differ materially and adversely from those anticipated.
Specific factors that might cause an adjustment of costs are: number of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, the ability to validate supplier certification and similar
uncertainties.
The Company's failure to remediate a material Year 2000 problem could
result in an interruption or failure of certain basic business operations. These
failures could materially and adversely effect the Company's results of
operations, liquidity and financial condition. The Company is also assessing the
Year 2000 readiness of key third-party suppliers. Information requests have been
distributed to such suppliers and replies are being evaluated. If the risk is
deemed material, on-site visits to suppliers will be conducted to verify the
adequacy of the information received. However, due to the general uncertainty of
the Year 2000 problem, including uncertainty with regard to third-party
suppliers and customers, the Company is unable to determine at this time whether
the consequences of Year 2000 failures will have an adverse material impact on
the Company's results of operations, liquidity or financial condition. The
Company's Year 2000 Program is expected to have considerably reduced the
Company's level of exposure in regard to third-party supplier Year 2000
problems. There can be no assurance given that the Company's Year 2000 Program
will be successful in avoiding any interruption or failure of certain basic
business operations, which may have a material adverse effect on the Company's
results of operations or financial position.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133 Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"),
which requires that all derivative instruments be recorded on the balance sheet
at their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. The Company has not yet determined the impact that the
adoption of SFAS 133 will have on its earnings or financial position. The
Company is required to adopt SFAS 133 on January 1, 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest
As of December 31, 1998, the fair value of the Company's long-term debt is
estimated to be $761 million using quoted market prices, for the Company's
Senior Notes and Senior Discount Notes. The long-term debt carrying value
exceeded fair value by $173 million. Market risk on debt is estimated as the
potential increase in annual interest expense resulting from a hypothetical one
percent increase in the interest rates and amounts to $9 million.
16
<PAGE>
ITEM 8.
INDEPENDENT AUDITORS' REPORT
To the Shareholder of Loral Orion, Inc.:
We have audited the accompanying consolidated balance sheet of Loral Orion, Inc.
and its subsidiaries (collectively, the Successor Company), a wholly-owned
subsidiary of Loral Space & Communications Corporation, as of December 31, 1998
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the nine months ended December 31, 1998. We have also
audited the consolidated statements of operations, changes in stockholders'
equity and cash flows of Orion Network Systems, Inc. and its subsidiaries
(collectively, the Predecessor Company) for the three months ended March 31,
1998. These financial statements are the responsibility of the Successor and
Predecessor Companies' 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 our audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidences 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 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 consolidated financial position of Loral
Orion, Inc. and its subsidiaries as of December 31, 1998, and the results of
their operations and their cash flows for the nine months ended December 31,
1998 in conformity with generally accepted accounting principles. Further, in
our opinion, the Predecessor Company's consolidated financial statements
referred to above present fairly, in all material respects, the results of their
operations and their cash flows for the three months ended March 31, 1998 in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Successor
Company adopted a new accounting basis effective March 31, 1998 in connection
with a change of ownership and recorded net assets as of that date at the new
owner's acquisition cost. Accordingly, the book values of assets and liabilities
and related depreciation, amortization and interest charges in the accompanying
consolidated balance sheet as of December 31, 1998 and consolidated statement of
operations for the nine months ended December 31, 1998, are not comparable to
those of earlier periods presented.
DELOITTE & TOUCHE LLP
Washington, DC
February 16, 1999
17
<PAGE>
ITEM 8 (CONTINUED).
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors of Loral Orion, Inc. (formerly Orion Network Systems,
Inc.):
We have audited the accompanying consolidated balance sheet of Loral Orion,
Inc. (formerly Orion Network Systems, Inc.) as of December 31, 1997, and the
related consolidated statements of operations, changes in stockholders' equity
(deficit), and cash flows for each of the two years in the period ended December
31, 1997. 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 consolidated 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 consolidated financial position of Loral Orion,
Inc. at December 31, 1997, and the consolidated results of its operations and
its cash flows for each of the two years in the period ended December 31, 1997,
in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Washington, DC
February 20, 1998
18
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1997
PREDECESSOR
1998 COMPANY
---------------- ----------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 35,861 $ 70,009
Restricted assets 50,180 50,064
Accounts receivable (less allowance for doubtful
accounts of $1,019 and $734
at December 31, 1998 and 1997,
respectively) 15,292 11,781
Prepaid expenses and other current assets 4,299 6,846
-------------- ---------------
Total current assets 105,632 138,700
Restricted and segregated assets 22,675 306,826
Property and equipment, at cost:
Land 74 74
Satellite and related equipment 263,188 322,159
Telecommunications equipment 35,630 40,654
Furniture and computer equipment 8,693 8,627
307,585 371,514
-------------- ---------------
Less accumulated depreciation (38,706) (77,080)
Satellite construction in progress, including capitalized
interest of $20,198 and $7,346 at December 31, 1998
and 1997,
respectively 331,861 106,843
-------------- ---------------
Net property and equipment 600,740 401,277
Due from Loral 3,619 --
Deferred financing costs, net -- 22,510
Cost in excess of net assets acquired associated
with the Loral merger, net 608,015 --
Deferred income taxes 53,915 --
Other assets, net 22,908 27,179
-------------- ---------------
Total assets $ 1,417,504 $ 896,492
============== ===============
</TABLE>
See notes to consolidated financial statements.
19
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and par amounts)
(continued)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1997
PREDECESSOR
1998 COMPANY
---------------- ----------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt $ 1,826 $ 6,406
Accounts payable 2,035 5,231
Accrued and other current liabilities 16,162 11,604
Customer deposits 7,897 2,801
Deferred revenue 35,841 3,320
Interest payable 22,842 24,771
-------------- --------------
Total current liabilities 86,603 54,133
Long-term debt 931,669 790,671
Other long-term liabilities 141 21,803
Series A 8% Cumulative Redeemable Convertible Preferred Stock,
$.01 par value; 15,000 shares authorized; 0 and 6,933 shares
issued and outstanding at December 31, 1998 and 1997, respectively,
plus accrued dividends --
Series B 8% Cumulative Redeemable Convertible Preferred Stock,
$.01 par value; 5,000 shares authorized; 0 and 2,059 shares issued
and outstanding at December 31, 1998 and 1997, respectively,
plus accrued dividends -- 2,467
Series C 6% Cumulative Redeemable Convertible Preferred Stock,
$.01 par value; 150,000 shares authorized; 0 and 82,641 shares issued
and outstanding at December 31, 1998 and 1997,
respectively, plus accrued dividends and accretion -- 65,654
Commitments and contingencies:
Stockholders' equity (deficit):
Common stock, $.01 par value; 1,000 and 40,000,000 shares
authorized; 100 and 15,959,089 outstanding at December 31,
1998 and 1997, respectively -- 160
Capital in excess of par value 481,791 153,294
Treasury stock, 0 and 269,274 shares at December 31, 1998
and 1997, respectively -- (91)
Unearned compensation (3,347) --
Accumulated other comprehensive income (loss) 616 (956)
Accumulated deficit (79,969) (199,256)
-------------- --------------
Total stockholders' equity (deficit) 399,091 (46,849)
-------------- --------------
Total liabilities and stockholders' equity (deficit) $ 1,417,504 $ 896,492
============== ==============
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------------------------------
NINE MONTHS THREE MONTHS YEARS ENDED DECEMBER 31,
ENDED ENDED ----------------------------------
DECEMBER 31, 1998 MARCH 31, 1998 1997 1996
------------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Service revenue $ 64,608 $ 18,790 $ 72,741 $ 41,847
Operating expenses:
Direct 19,906 6,406 26,531 15,457
Sales and marketing 19,365 5,790 19,424 11,465
Engineering and technical services 6,486 1,898 7,750 5,191
General and administrative 10,834 3,707 13,956 9,139
Depreciation and amortization 51,434 12,483 48,161 36,948
Merger costs 612 12,145 -- --
------------------- --------------- --------------- ----------------
Total operating expenses 108,637 42,429 115,822 78,200
------------------- --------------- --------------- ----------------
Loss from operations (44,029) (23,639) (43,081) (36,353)
Interest (income) (9,299) (5,425) (24,711) (2,314)
Interest expense 46,439 21,190 83,769 27,764
Other (income) expense (167) 287 507 23
------------------- --------------- --------------- ----------------
Loss before income taxes, extraordinary loss
on extinguishment of debt, minority interest and
preacquisition loss of acquired subsidiary (81,002) (39,691) (102,646) (61,826)
Income tax benefit 1,033 -- -- --
Extraordinary loss on extinguishment
of debt -- -- (15,763) --
Limited Partners' interest in the net loss of
Orion Atlantic -- -- 12,043 34,631
Preacquisition loss of acquired subsidiary -- -- 626 --
------------------- --------------- --------------- ----------------
Net loss (79,969) (39,691) (105,740) (27,195)
Preferred stock dividend, net of forfeitures -- (1,387) 6,034 1,370
------------------- --------------- --------------- ----------------
Net loss attributable to common stockholders $ (79,969) $ (38,304) $ (111,774) $ (28,565)
=================== =============== =============== ================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
<TABLE>
<CAPTION>
COMMON STOCK
-------------- CAPITAL IN
NUMBER EXCESS OF ACCUMULATED TREASURY
OF SHARES AMOUNT PAR VALUE DEFICIT STOCK 1
--------- ------ --------- ------- -------
Balance December 31, 1995
<S> <C> <C> <C> <C> <C>
(Predecessor Company) 11,116 $ 111 $ 85,486 $ (58,917) $ --
Conversion of preferred stock 91 1 804 -- --
Issuance of stock warrants -- -- 300 -- --
Exercise of stock options and warrants 38 -- 342 -- --
Preferred stock dividend, net of -- -- -- (1,370) --
forfeitures
1996 net loss -- -- -- (27,195) --
------------ -------------- -------------- ---------------- ------------
Balance December 31, 1996
(Predecessor Company) 11,245 112 86,932 (87,482) --
Issuance of common stock 11 -- 142 -- --
Conversion of preferred stock 3,352 34 38,812 -- --
Conversion of debentures 735 7 10,285 -- --
Issuance of common stock for the
purchase of APSC 86 1 1,199 -- --
Issuance of common stock for
interest payments 205 2 2,623 -- --
Issuance of common stock for preferred 121 1 2,069
stock dividend payments -- --
Issuance of warrants relating to Senior
Notes and Senior -- -- 9,224 -- --
Discount Notes, net
Exercise of stock options and warrants 176 2 1,764 -- --
Employee stock purchase plan 28 1 244 -- --
Preferred stock dividend and
accretion, net of forfeitures -- -- -- (6,034) --
Purchase of treasury stock -- -- -- -- (91)
1997 net loss -- -- -- (105,740) --
Other comprehensive loss -- -- -- -- --
Comprehensive loss -- -- -- -- --
Balance December 31, 1997
(Predecessor Company) 15,959 $ 160 $ 153,294 $ (199,256) $ (91)
============ ============== ============== ================ ============
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
UNEARNED COMPREHENSIVE STOCKHOLDERS'
COMPENSATION INCOME (LOSS) EQUITY (DEFICIT)
------------ ------------- -------------------
Balance December 31, 1995
<S> <C> <C> <C>
(Predecessor Company) $ -- $ -- $ 26,680
Conversion of preferred stock -- -- 805
Issuance of stock warrants -- -- 300
Exercise of stock options and warrants -- -- 342
Preferred stock dividend, net of -- -- (1,370)
forfeitures
1996 net loss -- -- (27,195)
-------------- -------------- --------------
Balance December 31, 1996
(Predecessor Company) -- -- (438)
Issuance of common stock -- -- 142
Conversion of preferred stock -- -- 38,846
Conversion of debentures -- -- 10,292
Issuance of common stock for the
purchase of APSC -- -- 1,200
Issuance of common stock for
interest payments -- -- 2,625
Issuance of common stock for preferred 2,070
stock dividend payments -- --
Issuance of warrants relating to Senior
Notes and Senior -- -- 9,224
Discount Notes, net
Exercise of stock options and warrants -- -- 1,766
Employee stock purchase plan -- -- 245
Preferred stock dividend and
accretion, net of forfeitures -- -- (6,034)
Purchase of treasury stock -- -- (91)
1997 net loss -- --
Other comprehensive loss -- (956)
Comprehensive loss -- -- (106,696)
Balance December 31, 1997
(Predecessor Company) $ -- $ (956) $ (46,849)
=============== ============== ===============
</TABLE>
See notes to consolidated financial statements. (continued on next page)
22
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(continued)
(in thousands)
<TABLE>
<CAPTION>
COMMON STOCK
-------------- CAPITAL IN
NUMBER EXCESS OF ACCUMULATED TREASURY
OF SHARES AMOUNT PAR VALUE DEFICIT STOCK (1)
--------- ------ --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1997
(Predecessor Company) 15,959 $ 160 $ 153,294 $ (199,256) $ (91)
Issuance of common stock 14 -- 246 -- --
Conversion of preferred stock 5,739 57 69,831 -- --
Conversion of debentures 3,572 36 49,964 -- --
Issuance of common stock for interest
payments 184 2 2,577 -- --
Issuance of common stock for
preferred stock dividend payments 316 3 5,455 -- --
Exercise of stock options and warrants 165 2 1,638 -- --
Employee stock purchase plan 20 -- 292 -- --
Preferred stock dividends and
accretion, net of forfeiture -- -- -- 1,387 --
Recapitalization related to purchase by (25,969) (260) 195,215 237,560 91
Loral
Increase purchase price -- -- 3,491 -- --
Net loss for the three months ended
March 31, 1998 -- -- (39,691) --
Other comprehensive loss -- -- -- -- --
Comprehensive Loss
------------ ------------ -------------- --------------- ------------
Balance March 31, 1998 -- $ -- $ 482,003 $ -- $ --
============ ============ ============== =============== ============
Amortization of unearned compensation -- -- -- -- --
Stock option forfeitures -- -- (212) -- --
Net loss for the nine months ended
December 31, 1998 -- -- -- (79,969) --
Other comprehensive income -- -- -- -- --
Comprehensive loss -- -- -- -- --
------------ ------------ -------------- --------------- ------------
Balance December 31, 1998 -- $ -- $ 481,791 $ (79,969) $ --
============ ============ ============== =============== ============
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
UNEARNED COMPREHENSIVE STOCKHOLDERS'
COMPENSATION INCOME (LOSS) EQUITY (DEFICIT)
------------ ------------- ----------------
<S> <C> <C> <C>
Balance December 31, 1997
(Predecessor Company) ) $ -- $ (956) $ (46,849)
Issuance of common stock -- -- 246
Conversion of preferred stock -- -- 69,888
Conversion of debentures -- -- 50,000
Issuance of common stock for interest
payments -- -- 2,579
Issuance of common stock for
preferred stock dividend payments -- -- 5,458
Exercise of stock options and warrants -- -- 1,640
Employee stock purchase plan -- -- 292
Preferred stock dividends and
accretion, net of forfeiture -- -- 1,387
Recapitalization related to purchase by (4,512) 1,473 429,567
Loral
Increase purchase price -- -- 3,491
Net loss for the three months ended
March 31, 1998 -- --
Other comprehensive loss -- (517)
Comprehensive Loss (40,208)
--------------- --------------- --------------
Balance March 31, 1998 $ (4,512) $ -- $ 477,491
=============== =============== ==============
Amortization of unearned compensation 953 -- 953
Stock option forfeitures 212 -- --
Net loss for the nine months ended
December 31, 1998 -- --
Other comprehensive income -- 616
Comprehensive loss -- -- (79,353)
--------------- --------------- --------------
Balance December 31, 1998 $ (3,347) $ 616 $ 399,091
=============== =============== ==============
</TABLE>
- - --------
(1) Includes 269,274 treasury shares of which 259,515 were carried at no cost
through March 31, 1998.
See notes to consolidated financial statements.
23
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-----------------------------------------------------
NINE MONTHS THREE MONTHS YEARS ENDED DECEMBER 31,
----------- ----------- ------------------------
ENDED ENDED
DECEMBER 31, MARCH 31,
1998 1998 1997 1996
---------------- --------------- --------------- ----------------
OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net loss $ (79,969) $ (39,691) $ (105,740) $ (27,195)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Extraordinary loss on extinguishment of debt -- -- 15,763 --
Amortization of deferred taxes 3,771 -- -- --
Depreciation and amortization 51,434 12,483 48,161 36,948
Amortization of deferred financing costs -- 609 2,410 2,131
Provision for bad debts 1,325 150 1,022 919
Non-cash interest expense 24,606 11,048 34,347 2,371
Interest earned on restricted assets (6,896) (4,629) (18,203) --
Other (291) 1,644 -- (55)
Limited Partners' interest in net loss of Orion Atlantic -- -- (12,043) (34,631)
Changes in operating assets and liabilities:
Accounts receivable (3,578) (1,408) (2,923) (2,203)
Prepaid expenses and other current assets (502) 693 (2,277) (286)
Other assets (1,352) 201 (3,640) (69)
Accounts payable, accrued liabilities and other
current liabilities (1,367) (2,186) (2,393) (3,163)
Interest payable 12,403 (12,510) 16,180 579
Customer deposits 5,071 23 1,612 177
Deferred revenue 10,768 297 11,935 12,562
Due from Loral (3,619) -- -- --
-------------- -------------- --------------- ---------------
Net cash provided by (used in) operating activities 11,804 (33,276) (15,789) (11,915)
Investing activities:
Increase in restricted and segregated assets (12,000) -- (419,187) (10,000)
Uses of and transfers from restricted and segregated 273,960 35,938 90,500 --
assets
Satellite construction costs (270,429) (14,575) (102,282) (3,750)
Capital expenditures (13,667) (3,805) (11,062) (12,625)
Purchase of Teleport Europe GmbH, net of cash acquired -- -- (8,375) --
Other -- -- -- (38)
-------------- -------------- --------------- ---------------
Net cash provided by (used in) investing activities (22,136) 17,558 (450,406) (26,413)
Financing activities:
Limited Partners' capital contributions -- -- -- 30,135
Debt and equity financing costs -- -- (26,122) (2,265)
Proceeds from issuance of common stock, net of
issuance costs -- 2,117 2,153 343
Treasury stock purchase -- -- (91) --
Proceeds from issuance of debt -- -- 770,397 --
Repayment of senior notes and notes payable (2,815) (254) (216,723) (27,802)
Swap termination fee -- -- (5,288) --
Payment of satellite incentives (5,861) (1,302) (18,621) --
Other 1,068 (1,051) (1,689) 14,993
-------------- -------------- --------------- ---------------
Net cash provided by (used in) financing activities (7,608) (490) 504,016 15,404
-------------- -------------- --------------- ---------------
Net increase (decrease) in cash and cash equivalents (17,940) (16,208) 37,821 (22,924)
Cash and cash equivalents at beginning of period 53,801 70,009 32,188 55,112
-------------- -------------- --------------- ---------------
Cash and cash equivalents at end of period $ 35,861 $ 53,801 $ 70,009 $ 32,188
============== ============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands unless otherwise indicated)
1. ORGANIZATION AND BUSINESS
Loral Orion, Inc. (the "Company" or "Loral Orion"), formerly known as Loral
Orion Network Systems, Inc., is a holding company with no assets or operations
other than its investments in its subsidiaries. Through the operations of its
subsidiary Guarantors, the Company's principal business is providing
satellite-based communications services for private communications networks and
video distribution and other satellite transmission services. In 1998, Loral
Orion organized its business into two distinct operating segments as follows
(see Note 8):
Fixed Satellite Services: Leasing transponder capacity and providing
value-added services to customers for a wide variety of applications,
including the distribution of broadcast programming, news gathering,
business television, distance learning and direct-to-home ("DTH")
services. The Company's fixed satellite services ("FSS") assets, will be
managed by Loral Skynet effective January 1, 1999, and
Data Services: Business in development, providing managed communications
networks and Internet and intranet services, using transponder capacity
on the Loral Skynet Telstar and Loral Orion fleets.
ACQUISITION OF THE COMPANY BY LORAL
On March 20, 1998, Orion Network Systems, Inc. ("Orion" or the "Predecessor
Company") was acquired by Loral Space & Communications Ltd. ("Loral"), through
the merger (the "Merger") of a wholly owned subsidiary of Loral, Loral Satellite
Corporation ("Merger Sub"), with and into Orion. Loral consummated the
acquisition by issuing 18 million shares of its common stock and assuming
existing Orion vested options and warrants to purchase 1.4 million shares of
Loral common stock representing an aggregate purchase price of $472.5 million.
Orion was the surviving corporation (the "Surviving Corporation") of the Merger
and thereby became a subsidiary of Loral. At the effective date of the Merger,
Loral contributed its investment in Orion to Loral Space & Communications
Corporation, a wholly owned subsidiary of Loral, and Orion changed its name to
"Loral Orion Network Systems, Inc." The name has since been changed to "Loral
Orion, Inc."
The consolidated financial statements for the three months ended March 31,
1998 and as of and for the two years ended December 31, 1997 and 1996,
respectively, reflect the results of operations of the Predecessor Company. The
consolidated financial statements as of and for the nine months ended December
31, 1998 reflect the results of operations of Loral Orion, Inc. Hereafter,
references to the "Company" include both Loral Orion, Inc and its predecessor,
Orion Network Systems, Inc.
Following the Merger, the capital stock of Loral Orion ceased to be
publicly traded. However, the Company continues to have registered bonds
outstanding.
For accounting purposes, the Merger was accounted for as of March 31, 1998,
using the purchase method. Accordingly, the consolidated balance sheet at
December 31, 1998 reflects the push-down of the purchase price allocations to
the assets and liabilities. The purchase price represented $447.7 million in
excess of Orion's net book value, which was primarily allocated to costs in
excess of net assets acquired of $619.7 million, and a fair value adjustment of
$153.4 million to increase the carrying value of Orion's senior notes and senior
discount notes. In addition, Loral agreed to assume Orion's unvested employee
stock options, which resulted in a new measurement date and an unearned
compensation charge of $4.3 million, to be amortized over the vesting period of
the options.
Had the acquisition of the Company occurred on January 1, 1997, the
unaudited pro forma sales, operating loss and net loss for the years ended
December 31, 1998 and 1997 would have been $83.4 million and $72.7 million;
$58.8 million and $60.7 million; and $110.3 million and $113.7 million,
respectively. These results, which are based on various assumptions are not
necessarily indicative of what would have occurred had the acquisition been
consummated on January 1, 1997.
25
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1. ORGANIZATION AND BUSINESS - (CONTINUED)
LORAL ORION SUBSIDIARIES
All subsidiaries of Loral Orion ("Subsidiary Guarantors"), other than
inconsequential subsidiaries, have unconditionally guaranteed the Notes (as
defined below) on a joint and several basis. No restrictions exist on the
ability of Subsidiary Guarantors to pay dividends or make other distributions to
Loral Orion, except to the extent provided by law generally (e.g., adequate
capital to pay dividends under state corporate laws).
<TABLE>
<CAPTION>
Jurisdiction of Organization
Subsidiary Name or Incorporation
- - --------------------------------------------------------------- ----------------------------
<S> <C>
Asia Pacific Space and Communications, Ltd. Delaware
(merged with Loral Orion-Asia Pacific, Inc.)
International Private Satellite Partners, L.P. Delaware
(doing business as Orion Atlantic, L.P.)
(merged with Loral Orion Services, Inc.)
Loral Global Services, Inc. Delaware
Loral Orion-Americas, Inc. Delaware
Loral Orion-Asia Pacific, Inc. Delaware
(formerly known as Orion Asia Pacific Corporation)
Loral Orion-Europe, Inc. Delaware
(formerly known as Orion Atlantic Europe, Inc.)
Loral Orion Global Services, Inc. Delaware
Orion Oldco Services, Inc. Delaware
(formerly known as Orion Network Systems, Inc.)
OrionNet Finance Corporation Delaware
OrionNet, Inc. Delaware
Loral Orion Services, Inc. Delaware
(formerly known as Orion Satellite Corporation)
Loral Orion-Europe GmbH Federal Republic of Germany
(formerly known as Teleport Europe GmbH)
</TABLE>
Each of the Subsidiary Guarantors is a wholly owned subsidiary of the
Company. The Subsidiary Guarantors comprise all of the direct and indirect
subsidiaries of the Company (other than inconsequential subsidiaries). Separate
financial statements of the Subsidiary Guarantors are not required to be
presented.
ACQUISITION OF ORION ATLANTIC LIMITED PARTNERSHIP INTERESTS IN THE EXCHANGE
Through January 31, 1997, Orion Satellite Corporation (whose name was
previously changed to Loral Orion Services, Inc.) was the sole general partner
in Orion Atlantic L.P. ("Orion Atlantic") and Loral Orion had a combined 41 2/3
percent equity interest in Orion Atlantic. As a result of Loral Orion's control
of Orion Atlantic, Loral Orion's consolidated financial statements include the
accounts of Orion Atlantic. All of Orion Atlantic's revenues and expenses are
included in Loral Orion's consolidated financial statements, with appropriate
adjustment to reflect the interests of the Limited Partners in Orion Atlantic's
losses prior to the Exchange as described below. Loral Orion acquired all the
remaining interests in Orion Atlantic
26
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1. ORGANIZATION AND BUSINESS - (CONTINUED)
on January 31, 1997 during the Exchange as described below. Loral Orion's
consolidated financial statements also include the accounts of all other
subsidiaries of Loral Orion.
On January 31, 1997, the Company acquired all of the limited partnership
interests which it did not already own in the Company's former operating
subsidiary, Orion Atlantic, that owned the Orion 1 satellite prior to its merger
with Loral Orion Services, Inc. Specifically, the Company acquired the Orion
Atlantic limited partnership interests and other rights relating thereto held by
British Aerospace Communications, Inc., COM DEV Satellite Communications
Limited, Kingston Communications International Limited, Lockheed Martin
Commercial Launch Services, Inc., MCN Sat US, Inc., an affiliate of Matra
Hachette, and Trans-Atlantic Satellite, Inc., an affiliate of Nissho Iwai Corp.
(collectively, the "Exchanging Partners"). The Company accounted for this
transaction as an acquisition of minority interest, and as a result,
approximately $34.3 million was allocated to the cost of the Orion 1 satellite
and related equipment.
Pursuant to a Section 351 Exchange Agreement and Plan of Conversion (the
"Exchange Agreement"), the Exchanging Partners exchanged their Orion Atlantic
limited partnership interests for 123,172 shares of a newly created class of the
Company's Series C Preferred Stock (the "Exchange"). In addition, the Company
acquired certain rights held by certain of the Exchanging Partners to receive
repayment of various advances (aggregating approximately $41.6 million at
January 31, 1997. The 123,172 shares of Series C Preferred Stock issued in the
Exchange were convertible into approximately 7 million shares of the Company's
common stock. As a result of the Exchange, certain of the Exchanging Partners
became principal stockholders of the Company. The exchange is described in
greater detail under the caption "The Merger, the Exchange and the Debenture
Investments" in the Company's Registration Statement on Form S-4 (Registration
No. 333-19795).
The Exchange and the acquisition by the Company of the only outstanding
minority interest in the Company's subsidiary Asia Pacific Space and
Communications, Ltd. from British Aerospace Satellite Investments, Inc. on
January 8, 1997 (in exchange for approximately 86,000 shares of the Company's
common stock) resulted in the Company owning 100 percent of Orion Atlantic and
its other significant subsidiaries and, therefore, a greatly simplified
corporate structure.
THE ORION MERGER
The Exchange was conducted on a tax-free basis by means of an Orion Merger
(defined below) that was consummated on January 31, 1997. Pursuant to the
Exchange Agreement, Orion Oldco Services, Inc., formerly known as Orion Network
Systems, Inc. ("Old Orion"), formed the Company as a new Delaware corporation
with a certificate of incorporation, bylaws and capital structure substantially
identical in all material respects with those of Old Orion. Also pursuant to the
Exchange Agreement, the Company formed a wholly-owned subsidiary, Orion Merger
Company, Inc. ("Orion Merger Subsidiary"). Pursuant to an Agreement and Plan of
Merger, Orion Merger Subsidiary was merged with and into Old Orion, and Old
Orion became a wholly-owned subsidiary of the Company (the "Orion Merger"). On
January 31, 1997, the effective time of the Orion Merger, all of the
stockholders of Old Orion received stock in the Company with substantially
identical rights to the Old Orion stock they held prior to the effective time of
the Orion Merger. Following the Orion Merger, the Company changed its name from
Orion Newco Services, Inc. to Orion Network Systems, Inc. and the Company's
wholly-owned subsidiary Orion Network Systems, Inc. changed its name to Orion
Oldco Services, Inc. The Exchange and Orion Merger are described in greater
detail under the caption "The Merger, the Exchange and Debenture Investments" in
the Company's Registration Statement on Form S-4 (Registration No. 333-19795).
FINANCINGS
On January 31, 1997, the Company completed a $710 million bond offering
(the "Bond Offering") comprised of approximately $445 million of Senior Note
Units, each of which consists of one 11.25 percent Senior Note due 2007 (a
"Senior Note") and one Warrant to purchase 0.8463 shares of common stock, par
value $.01 per share ("Common Stock") of the Company (a "Senior Note Warrant"),
and approximately $265.4 million of Senior Discount Note Units, each of which
consists of one 12.5 percent Senior Discount Note due 2007 (a "Senior Discount
Note," and together with the Senior Notes, the "Notes") and one Warrant to
purchase 0.6628 shares of Common Stock of the Company (a "Senior Discount Note
Warrant, and together with Senior Note Warrants, the "Warrants"). Interest on
the Senior Notes will be payable semi-annually in cash on January 15 and July 15
of each year, with the first payment made on July 15, 1997. The Senior Discount
Notes will not pay cash interest prior to July 15, 2002. Thereafter, cash
interest will accrue until maturity at an annual rate of 12.5 percent payable
semi-annually on January 15 and July 15 of each year, commencing July 15, 2002.
The exercise price
27
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1. ORGANIZATION AND BUSINESS - (CONTINUED)
for the Warrants will be $.01 per share of common stock. There were 697,400
Warrants issued in connection with the Notes (see Note 6).
In addition, on January 31, 1997, the Company also completed the sale of
$60 million of its convertible junior subordinated debentures (the "Debentures")
to two investors, British Aerospace Holdings, Inc. ("British Aerospace") and
Matra Marconi Space UK Limited ("Matra Marconi Space"). British Aerospace
purchased $50 million of the Debentures and Matra Marconi Space purchased $10
million of the Debentures (collectively, the "Debentures Offering", and together
with the Bond Offering, the "Financings"). The Convertible Debentures were to
mature in 2012, and bore interest at a rate of 8.75 percent per annum payable
semi-annually in arrears solely in Common Stock of the Company. The Convertible
Debentures were subordinated to all other indebtedness of the Company, including
the Notes. Prior to the acquisition of the Company by Loral, all of the
debentures had been converted to common stock.
The net proceeds of the Bond Offering and Debentures Offering were used by
the Company to repay the Orion 1 credit facility, pre-fund the first three years
of interest payments on certain of the Notes, and will be used to build and
launch two additional satellites, Orion 2 and Orion 3.
The extraordinary loss on extinguishment of debt of $15.8 million in 1997
was the result of expensing unamortized deferred financing costs associated with
the Orion 1 credit facility which was refinanced with the proceeds from the Bond
Offering and termination of a interest rate cap agreement.
ACQUISITION OF TELEPORT EUROPE GMBH
On March 26, 1997, the Company acquired German-based Teleport Europe GmbH
(now known as Loral Orion-Europe GmbH) ("Loral Orion Europe") a communications
company specializing in private satellite networks for voice and data services.
The Company purchased the shares of Loral Orion Europe held by the German
companies, Vebacom GmbH and RWE Telliance AG, now known as o.tel.o for
approximately $9 million. In addition, the Company acquired Loral Orion Europe's
licenses and operating agreements to provide satellite network services in 40
countries, including 17 countries in which the Company previously did not
provide service. The net purchase price of Orion Europe was $8.4 million and was
allocated as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Working capital deficit, net of cash acquired.... $ (683)
Property and equipment ........................... 9,346
Other, net ...................................... (288)
-----------
$ 8,375
===========
</TABLE>
The pro forma effect on net loss assuming the acquisition took place January 1,
1997 was not material.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION POLICY
The consolidated financial statements for the nine months ended December
31, 1998, for the three months ended March 31, 1998, and for the year ended
December 31, 1997, include the accounts of Loral Orion, Inc., its wholly-owned
subsidiaries and Orion Financial Partnership (OFP), in which Loral Orion holds a
50 percent interest. The consolidated financial statements for the year ended
December 31, 1996, include the accounts of Orion, its two wholly-owned
subsidiaries OrionNet, Inc. (OrionNet) and Orion Network Services, Inc., its
former 83 percent owned subsidiary, Asia Pacific Space and Communications Ltd.
(Asia Pacific), the OFP, in which Orion holds a 50 percent interest, and Orion
Atlantic, in which Orion held a 41 2/3 percent ownership interest. Orion Network
Services, Inc. as the general partner of Orion Atlantic, exercised control of
Orion Atlantic through the provisions of the partnership agreement. All
significant intercompany accounts and transactions have been eliminated. In
January 1997, all of the outside interest in these entities, except for outside
interests of OFP, were acquired.
28
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
CASH AND CASH EQUIVALENTS
Orion considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents. Cash and cash equivalents includes
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997
PREDECESSOR
1998 COMPANY
----------- --------------
<S> <C> <C>
Cash .................. $ 3,919 $ 2,256
Money market funds .... 4,985 2,544
Commercial paper ...... 26,957 65,209
-------------- --------------
$ 35,861 $ 70,009
============== ==============
</TABLE>
RESTRICTED AND SEGREGATED ASSETS
Restricted and segregated assets are classified as held to maturity and are
recorded at cost and consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997
PREDECESSOR
1998 COMPANY
----------- --------------
<S> <C> <C>
U.S. treasury notes .................... $ 72,855 $ 117,800
Commercial paper ....................... -- 216,697
Time deposits........................... -- 22,393
Total restricted and segregated assets . 72,855 356,890
Less current portion ................... (50,180) (50,064)
-------------- --------------
Long-term portion ...................... $ 22,675 $ 306,826
============== ===============
</TABLE>
Included in restricted and segregated assets is $2.1 million and $3.7
million of accrued interest at December 31, 1998 and 1997, respectively. The
balance at December 31, 1998 is restricted for use for interest payments on the
Senior Notes through January 2000. The U.S. treasury notes held at December 31,
1998 mature between January 1999 and January 2000.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject Loral Orion to
concentrations of credit risk consist principally of cash and cash equivalents,
restricted and segregated assets and accounts receivable. The Company's cash and
cash equivalents and restricted and segregated assets are maintained with
high-credit-quality financial institutions. Management believes that its credit
evaluation, approval and monitoring processes combined with negotiated billing
arrangements mitigate potential credit risks with regard to the Company's
current customer base.
29
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost except for the Orion 1 satellite
which is recorded at estimated fair market value as of March 31, 1998, the date
of the Loral Merger. Depreciation expense is calculated using the straight-line
method over the estimated useful lives as follows:
<TABLE>
<S> <C>
Satellite and related equipment.............. 10.5 years
Telecommunications equipment................. 2-7 years
Furniture and computer equipment............. 2-7 years
</TABLE>
Costs incurred in connection with the construction and successful
deployment of the Orion 1 satellite and related equipment are capitalized. Such
costs include direct contract cost, allocated indirect costs, launch costs,
launch insurance, construction period interest and the present value of
satellite incentive payments. Similar costs for Orion 2 and Orion 3 are included
in "Satellite construction in progress." Orion began depreciating the Orion 1
satellite over its estimated useful life commencing on the date of operational
delivery in orbit, January 1995.
VALUATION OF LONG-LIVED ASSETS AND COSTS IN EXCESS OF NET ASSETS ACQUIRED
The carrying value of Loral Orion's long-lived assets and costs in excess
of net assets acquired is reviewed for impairment whenever events or changes in
circumstances indicate that an asset may not be recoverable. The Company looks
to current and future profitability, as well as current and future undiscounted
cash flows, excluding financing costs, as primary indicators of recoverability.
If an impairment is determined to exist, any related impairment loss is
calculated based on fair value.
DEFERRED FINANCING COSTS
Deferred financing costs related to a debt financing that was being
amortized over the period the debt was expected to be outstanding. The net
deferred financing costs outstanding at March 31, 1998 were written off to costs
in excess of net assets acquired associated with the Loral Merger. Accumulated
amortization at December 31, 1998 and 1997 was $0 and $2.3 million,
respectively. Deferred financing costs of $10.5 million relating to the Orion 1
Credit Facility were expensed in January 1997 in connection with the Financings
and are included in the caption "Extraordinary loss on extinguishment of debt"
for 1997.
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired associated with the Merger with Loral
amounted to $619.7 million, which is being amortized over 40 years using the
straight-line method. Accumulated amortization relating to cost in excess of net
assets acquired at December 31, 1998 was $11.7 million.
OTHER ASSETS
Intangibles assets associated with the Loral Merger in 1998 are primarily
amortized over the remaining useful life of Orion 1, which was approximately
seven years at December 31, 1998. The net goodwill at December 31, 1997 was
written off to costs in excess of net assets acquired associated with the Loral
Merger. Accumulated amortization relating to other assets at December 31, 1998
and 1997 was $2.6 million and $6.2 million, respectively. The Company amortizes
the FCC License application costs related to Orion 1 over the estimated useful
life of the satellite.
30
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Other assets, net of amortization as of December 31, 1998 and 1997, was as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997
PREDECESSOR
1998 COMPANY
----------- ------------------
<S> <C> <C>
Goodwill (related to prior acquisition).................. $ -- $ 20,332
Note receivable ......................................... 2,476 3,039
FCC license application costs ........................... 1,767 1,781
Intangible assets ....................................... 15,261 --
Other .................................................. 3,404 2,027
-------------- ---------------
$ 22,908 $ 27,179
============== ===============
</TABLE>
FOREIGN CURRENCY TRANSLATION
Results of operations for foreign entities, primarily the Company's Loral
Orion-Europe GmbH subsidiary, are translated using average exchange rates during
the period. Assets and liabilities are translated to U.S. dollars using the
exchange rate in effect at the balance sheet date. The resulting translation
adjustments are reflected in stockholders' equity (deficit) as accumulated other
comprehensive income (loss).
INTEREST RATE MODIFICATION AGREEMENT
Orion entered into an interest-rate swap and cap agreement to modify the
interest characteristics of the Orion 1 Credit Facility from a floating to a
fixed-rate basis. This agreement involved the receipt of floating rate amount in
exchange for fixed-rate interest payments over the life of the agreement without
an exchange of the underlying principal amount. The differential paid or
received was accrued as interest rates changed and was recognized as an
adjustment to interest expense. The fair value of the swap agreement was not
recognized in the financial statements. This agreement was terminated in January
1997 in connection with the Financings discussed in Note 1. The Company had no
such agreements in place at December 31, 1998 or 1997.
REVENUE RECOGNITION
Revenue is recognized as earned in the period in which telecommunications
and related services are provided.
The following summarizes the Company's domestic and foreign revenues (in
thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-----------------------------------------------
NINE MONTHS THREE MONTHS YEARS ENDED DECEMBER 31,
ENDED ENDED -----------------------------
DECEMBER 31, MARCH 31,
1998 1998 1997 1996
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Revenues from unaffiliated customers:
United States....................... $ 24,001 $ 6,895 $ 30,927 $ 21,262
Germany ........................... 14,617 4,517 15,437 --
Other foreign ...................... 25,990 7,378 22,284 14,572
Revenues from related parties........... -- -- 4,093 6,013
------------- ------------- ------------ ------------
Total services revenue.................. $ 64,608 $ 18,790 $ 72,741 $ 41,847
============= ============= ============ ============
</TABLE>
31
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
INCOME TAXES
The Company recognizes deferred tax assets and liabilities for the expected
future consequences of temporary differences between financial reporting and tax
bases of assets and liabilities using enacted tax rates that will be in effect
when the differences are expected to reverse.
Following is a summary of components of the net deferred asset balance at
December 31, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997
PREDECESSOR
1998 COMPANY
-------------- ----------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward ................. $ 78,642 $ 61,648
Amortization of premium and discount on
Senior Notes and Senior Discount Notes ........ 69,203 11,917
Amortization of intangibles ..................... (928) 2,947
Other ........................................... 4,560 3,385
-------------- --------------
151,477 79,897
Deferred tax liabilities:
Depreciation .................................... (3,678) (16,289)
Other ........................................... (351) (741)
-------------- --------------
(4,029) (17,030)
-------------- --------------
Net deferred tax asset .......................... 147,448 62,867
Valuation allowance.............................. (93,533) (62,867)
-------------- --------------
Net deferred tax asset, after
valuation allowance............................ $ 53,915 $ --
============== ==============
</TABLE>
At December 31, 1998, Loral Orion had approximately $225.9 million in net
operating loss carryforwards which expire at varying dates from 2004 through
2013. The use of these loss carryforwards, may be limited under the Internal
Revenue Code as a result of ownership changes experienced by Loral Orion. Due to
uncertainty regarding its ability to realize the benefits of such net operating
loss carryforwards and certain other net deferred tax assets, the Company
established a valuation allowance against deferred tax assets of $93.5 million.
In 1998, the Company is included in the U.S. federal income tax return for
Loral. Pursuant to a tax sharing agreement for 1998 with Loral, the Company is
entitled to reimbursement for the use of its tax losses when such losses are
utilized by Loral. For the nine months ended December 31, 1998, the Company
recorded a receivable under this tax sharing agreement of approximately $4.9
million and a deferred tax provision of approximately $3.8 million, resulting in
a net tax benefit of approximately $1.1 million. The Company's effective tax
benefit rate (1%) differs from the federal statutory rate (35%), due to the
valuation allowance established for the carryforward of the current year tax
loss (29%) and the non-deductible amortization of cost in excess of net assets
acquired (5%). The deferred tax asset of $53.9 million on the accompanying
balance sheet primarily arises from the tax effect of the temporary differences
between the carrying amount of the Senior Notes and the Senior Discount Notes
payable for financial and income tax purposes.
32
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
STATEMENTS OF CASH FLOWS
Non-cash investing and financing activities and supplemental cash flow
information is (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
---------------------------------------------------
NINE MONTHS THREE MONTHS YEARS ENDED DECEMBER 31,
ENDED ENDED -------------------------------
DECEMBER 31, MARCH 31,
1998 1998 1997 1996
------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
Property and equipment financed by
capital leases $ -- $ -- $ -- $ 482
Preferred stock dividend, net of forfeitures -- (1,387) 6,034 1,370
Conversion of redeemable preferred stock to
common stock -- 69,888 38,846 805
Conversion of subordinated debentures,
accrued interest and deferred financing
costs to common stock -- 50,000 10,292 --
Conversion of Company common stock to
Loral common stock as the result of the
Loral Merger -- 469,000 -- --
Issuance of Series C preferred stock -- -- 94,000 --
Issuance of common stock for preferred
stock dividend -- 5,458 2,070 --
Issuance of common stock and warrants -- 4,757 13,407 300
Interest paid 25,551 25,237 35,573 20,619
Acquisition of Teleport Europe, net of
cash acquired -- -- 8,375 --
</TABLE>
Included in accounts receivable and other current liabilities at December
31, 1998 and March 31, 1998 are customer deposits and up front fees of $3.4
million and in $1.1 million, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
EARNINGS PER SHARE
Earnings per share is not presented since it is not considered
meaningful due to the Loral Merger and the recapitalization of the Company.
33
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("SFAS 130"), which
established rules for the reporting and disclosure of comprehensive income and
its components. SFAS 130 requires unrealized gains or losses on the Company's
foreign currency translation adjustments to be included in other comprehensive
income (loss). Prior years amounts have been restated. The components of
accumulated other comprehensive income (loss) are as follows (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------
NINE MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED
DECEMBER 31, MARCH 31, DECEMBER 31,
1998 1998 1997
-------------- ------------- -------------
<S> <C> <C> <C>
Cumulative translation adjustment ....... $ 616 $ -- $ (956)
-------------- -------------- --------------
Accumulated other comprehensive
income (loss) ......................... $ 616 -- $ (956)
============== ============== ==============
</TABLE>
ACCOUNTING PRONOUNCEMENTS
For the year ended 1998 the Company adopted Statement of Financial
Accounting Standards No. 131, Disclosures About Segments of an Enterprise and
Related Information ("SFAS 131"), see Note 8.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133 Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"),
which requires that all derivative instruments be recorded on the balance sheet
at their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. The Company has not yet determined the impact that the
adoption of SFAS 133 will have on its earnings or financial position. The
Company is required to adopt SFAS 133 on January 1, 2000.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year presentation.
34
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. ORION ATLANTIC
Orion Atlantic was a Delaware limited partnership formed to provide
international private communications networks and basic transponder capacity and
capacity services (including ancillary ground services) to businesses and
institutions with trans-Atlantic and intra-European needs. As of December 31,
1998, Orion Atlantic merged with Loral Orion Services, Inc. The business was
organized by Orion Network Services, the general partner of Orion Atlantic. The
principal purposes of Orion Atlantic was to finance the construction, launch and
operation of up to two telecommunications satellites in geosynchronous orbit
over the Atlantic Ocean and to establish a multinational sales and service
organization. Eight international corporations, including Orion, invested a
total of $90 million in equity as limited partners in Orion Atlantic. Orion
Atlantic through January 1997, was financed by a credit facility which provided
up to $251 million for the first satellite from a syndicate of major
international banks led by Chase Manhattan Bank, N.A. In addition to their
equity investments, the Limited Partners had agreed to lease capacity on the
satellites up to an aggregate $155 million and had entered into additional
contingent capacity lease contracts ("contingent call") up to an aggregate $271
million, as support for repayment of the senior debt. The firm capacity leases
and contingent calls were payable over a seven-year period after the Orion 1
satellite was placed in service. In July 1995, January and July 1996 the Limited
Partners (excluding the Company) paid $7.6 million, $18.0 million and $12.1
million, respectively, pursuant to the contingent calls. As discussed in Note 1,
in January 1997, the Company acquired all of the limited partnership interests
it did not already own in Orion Atlantic.
Orion 1 -- The fixed base price of Orion 1, excluding obligations relating
to satellite performance, aggregated $227 million. In addition to the fixed base
price, the contract required payments in lieu of a further contract price
increase, aggregating approximately $44 million through 2007. Such payments are
due, generally, if 24 out of 34 satellite transponders are operating
satisfactorily. Shortly after acceptance of the satellite in January 1995, the
Company filed a warranty claim with the satellite manufacturer relating to one
transponder that was not performing in accordance with contract specifications.
In August 1995, Orion Atlantic received a one time refund of $2.75 million which
was applied as a mandatory prepayment to the senior notes payable -- banks. The
Company believes that since Orion 1 is properly deployed and operational, based
upon industry data and experience, payment of the satellite performance
obligation is highly probable and the Company capitalized the present value of
this obligation of approximately $14.8 million as part of the cost of the
satellite. The present value was estimated by discounting the obligation at 14
percent. As of March 31, 1998, in association with the Loral Merger, the
obligation was revalued and recorded at approximately $16.2 million using a 12
percent discount rate over the remaining expected term.
Redemption of STET Partnership Interest; Issuance of New Interest to Orion.
- - -- In November 1995 Orion Atlantic redeemed the limited partnership interest
held by STET (the "STET Redemption") for $11.5 million, including $3.5 million
of cash and $8 million in 12 percent promissory notes due through 1997. STET's
firm and contingent capacity leases remained in place until released by the
Banks under the Orion 1 Credit Facility. STET's existing contractual
arrangements with Orion Atlantic were modified in a number of respects,
including (i) a reduction of approximately $3.5 million in amounts due by Orion
Atlantic to Telespazio S.p.A., an affiliate of STET, over a ten-year period
under contracts relating to the construction of Orion 2, back-up tracking,
telemetry and command services through a facility in Italy and engineering
consulting services, (ii) the establishment of ground operations and
distribution agreements between Orion Atlantic and Telecom Italia, a subsidiary
of STET, relating to Italy, and the granting to Telecom Italia of exclusive
marketing rights relating to Italy for a period ending December 1998 conditioned
upon Telecom Italia achieving certain sales quotas, and (iii) canceling
exclusive ground operations and sales representation agreements between Orion
Atlantic and STET (or its affiliates) relating to Eastern Europe.
Orion Atlantic funded the STET Redemption by selling a new limited
partnership interest to Orion for $8 million (including $3.5 million in cash and
$4.5 million in 12 percent promissory notes due through 1997). In connection
with the STET redemption, Orion agreed to indemnify Telecom Italia for payments
which were made in July 1995 of $950,000 and which would be made in the future
under its firm and contingent capacity agreements with Orion Atlantic and posted
a $10 million letter of credit to support such indemnity. The Company accounted
for this transaction as an acquisition of a minority interest and, as a result,
approximately $3.1 million was allocated to the cost of the Orion 1 satellite
and related equipment.
35
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. ORION ATLANTIC - (CONTINUED)
During 1995, Orion Atlantic entered into agreements with certain Limited
Partners (including the Company) under which the participating Limited Partners
voluntarily gave up their rights to receive capacity under their firm capacity
agreements through January 1996. The participating Limited Partners continued to
make payments for such capacity but have the right to receive refunds from Orion
Atlantic out of cash available after operating costs and payments under the
Credit Facility. In addition, services revenue included $4.1 million and $6.0
million in 1997 and 1996 from Limited partners pursuant to the firm capacity
commitments, not subject to refund. In connection with the Exchange described in
Note 1, such rights were acquired by the Company.
4. COMMITMENTS AND CONTINGENCIES
Orion 1 -- In November 1995, a portion of the Orion 1 satellite experienced
an anomaly that resulted in a temporary service interruption, lasting
approximately two hours, in the dedicated capacity serving the European portion
of Orion Atlantic's services. Full service to all affected customers was
restored using redundant equipment on the satellite. The Company believes, based
on the data and the Telesat Report, that, because the redundant component is
functioning fully in accordance with specifications and the performance record
of similar components is strong, the anomalous behavior is unlikely to affect
the expected performance of the satellite over its useful life. Furthermore,
there has been no effect on the Company's ability to provide services to
customers. However, in the event that the currently operating component fails,
Orion 1 would experience a significant loss of usable capacity. In such event,
while the Company would be entitled to insurance proceeds of approximately $47
million as of December 1998, and could lease replacement capacity and function
as a reseller with respect to such capacity, the loss of capacity would have a
material adverse effect on the Company.
Orion 2 -- In July 1996, the Company signed a contract with Matra Marconi
Space ("Matra") for the construction and launch of Orion 2 (which was amended
and restated in January 1997) and in February 1997 Matra commenced construction
of that satellite. During the second quarter of 1998, the Company entered into a
satellite procurement contract with Space Systems/Loral ("SS/L"), a wholly owned
subsidiary of Loral, for the construction and launch of the Orion 2 satellite
for the operation in the Atlantic Ocean region at 12(0) W.L. (the "SS/L
Conract"). The SS/L Contract provides for delivery in-orbit of the Orion 2
satellite aboard an Ariane 44L launch vehicle in the third quarter of 1999. The
SS/L satellite design provides for 38 Ku-band transponder with a footprint
covering the Eastern United States, Southeastern Canada, Europe, the
Commonwealth of Independent States, the Middle East, North and South Africa and
South America.
During 1998, the Company notified Matra that it cancelled its satellite
procurement contract with Matra for the construction and launch of a satellite
for operation in the Atlantic Ocean region at 12(0) W.L. (the "Matra Contract").
As a result of the cancellation of the Matra Contract, the Company will have no
obligation to make further payments to Matra, but Matra retained amounts
previously paid by the Company of $49.1 million. As of March 31, 1998, in
association with the Loral Merger, these costs and other internal direct costs,
totaling approximately $62 million, capitalized in connection with the
construction of the Orion 2 satellite, were written off to costs in excess of
net assets acquired.
The Company believes that the Orion 2 satellite being procured from SS/L
offers significant benefits compared to the Matra satellite. Loral Orion's cash
will be used to fund the SS/L Contract up to an amount that, when added to the
amounts previously paid to Matra, will not exceed $202 million, the total amount
that would otherwise have been due to Matra if the Matra Contract had not been
canceled. Any requirements to SS/L in excess of $202 million for Orion 2 will be
funded with additional equity contributed by Loral. Through December 31, 1998,
$128.4 million has been paid to SS/L for Orion 2. Moreover, the SS/L-designed
satellite is both larger and more powerful than the Matra-designed satellite.
The SS/L satellite will have 8 additional transponders and will provide greater
transmitted power to Loral Orion's customers. The expected in-orbit life of the
SS/L satellite is approximately 16 years compared to 13 years for the Matra
satellite. The SS/L satellite is designed to provide enhanced transponder
switching capabilities as compared to the Matra satellite and also allows for
both uplinking and downlinking of transmissions from South Africa, while the
Matra satellite would not have allowed for uplinking.
Orion 3 -- In January 1997, the Company entered into a satellite
procurement contract with Hughes Space for the construction and launch of Orion
3, for which construction commenced in December 1996. The contract provides for
delivery in orbit of Orion 3, for a firm fixed price of $203 million, excluding
launch insurance and $8 million of incentive payments. Orion 3 will cover broad
areas of the Asia Pacific region including China, Japan, Korea, Southeast Asia,
Australia, New Zealand, Eastern Russia and Hawaii.
36
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
In November 1996, Orion entered into a contract with DACOM Corp. ("DACOM"),
a Korean communications company, under which, subject to certain conditions,
DACOM will purchase eight dedicated transponders on Orion 3 for 13 years, in
return for approximately $89 million, payable over a period from December 1996
through seven months following the lease commencement date for the transponders.
DACOM has deposited funds with Orion in accordance with the contract. As of
December 31, 1998, Loral Orion had received $35.5 million from DACOM including
interest of $1.5 million. As of December 31, 1997, Loral Orion had received
$22.3 million from DACOM. Loral Orion maintained a $22.3 million letter of
credit which was released on August 1, 1998. Orion had an obligation to maintain
a letter of credit for seven months beginning on the lease commencement date in
the amount of $44.8 million. Payments are subject to refund pending the
successful launch and commencement of commercial operation of Orion 3.
Agreements with Loral Skynet - During the fourth quarter of 1998, Loral
completed its integration plan for Loral Orion and transferred management of
Loral Orion's satellite capacity leasing and satellite operations to Loral
Skynet, effective January 1, 1999. Orion and Loral Skynet, a division of Loral
SpaceCom Corporation, which in turn is a wholly-owned subsidiary of Loral, have
entered into agreements (the "Loral Skynet Agreements") effective January 1,
1999, whereby Loral Skynet provides to Orion (i) marketing and sales of
satellite capacity services on the Orion satellite network and related billing
and administration of customer contracts for those services (the "Sales
Services") and (ii) telemetry, tracking and control services for the Orion
satellite network (the "Technical Services", and together with the Sales
Services, the "Services"). Orion will be charged Loral Skynet's costs for
providing these services plus a 5 percent administrative fee.
Litigation -- On November 9, 1996, Orion and Skydata Corporation
("Skydata") executed a letter with respect to the settlement in full of pending
litigation and arbitration related to a patent dispute. As part of the
settlement, Skydata granted Orion (and its affiliates) an unrestricted,
world-wide paid-up license to make, have made, use or sell products or methods
under the patent and all other corresponding continuation and reissue patents.
Orion has paid Skydata $437,000 during 1997 and 1998 as part of this settlement.
Loral Orion is party to various litigation arising in the normal course of
its operations. In the opinion of management, the ultimate liability for these
matters, if any, will not have a material adverse effect on Loral Orion's
financial position or results of operations.
Other -- Orion has entered into operating leases, principally for office
space. Rent expense was $1.9 million, $0.4 million, $1.3 million and $0.9
million for the nine months ended December 31, 1998, three months ended March
31, 1998 and years ended December 31, 1997 and 1996, respectively.
Future minimum lease payments are as follows (in thousands):
<TABLE>
<S> <C>
1999............................ $ 2,244
2000............................ 416
2001............................ 46
2002............................ 46
2003............................ 46
Thereafter...................... 506
------------
$ 3,304
------------
</TABLE>
37
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
5. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997
PREDECESSOR
1998 COMPANY
----------- ----------------
<S> <C> <C>
Senior notes (net of premium of $64.6 at December 31,
1998 and unamortized discount of $4.9 million at
December 31, 1997) .................................. $ 507,573 $ 440,100
Senior discount notes (maturity value of $484 million). 408,812 292,337
Convertible junior subordinated debentures........... -- 50,000
Notes payable - TT&C Facility.......................... 4,953 6,022
Satellite incentive obligations........................ 11,376 6,479
Other.................................................. 781 2,139
-------------- ---------------
Total long-term debt.............................. 933,495 797,077
Less: current portion.................................. (1,826) (6,406)
-------------- ---------------
Long-term debt less current portion............... $ 931,669 $ 790,671
============== ===============
</TABLE>
Total interest (including commitment fees, capitalized interest and
amortization of deferred financing costs) incurred for the nine months ended
December 31, 1998, three months ended March 31, 1998 and years ended December
31, 1997 and 1996 was $62.8 million, $24.5 million, $91.1 million and $27.8
million, respectively. Capitalized interest for the nine months ended December
31, 1998, three months ended March 31, 1998 and year ended December 31, 1997,
was $16.4 million, $3.3 million and $7.3 million, respectively. No capitalized
interest was recorded in 1996. Aggregate annual maturities of long-term debt
consist of the following (in thousands):
<TABLE>
<S> <C>
1999....................... $ 1,826
2000....................... 1,985
2001....................... 2,382
2002....................... 2,891
2003....................... 1,728
Thereafter................. 922,683
---------------
$ 933,495
===============
</TABLE>
Senior Notes and Senior Discount Notes -- On January 31, 1997, the Company
completed a $710 million bond offering (the "Bond Offering") comprised of
approximately $445 million of Senior Note Units, each of which consists of one
11.25 percent Senior Note due 2007 (a "Senior Note") and one Warrant to purchase
0.8463 shares of common stock, par value $.01 per share ("Common Stock") of the
Company (a "Senior Note Warrant"), and approximately $265.4 million of Senior
Discount Note Units, each of which consists of one 12.5 percent Senior Discount
Note due 2007 (a "Senior Discount Note," and together with the Senior Notes, the
"Notes") and one Warrant to purchase 0.6628 shares of Common Stock of the
Company (a "Senior Discount Note Warrant and together with the Senior Note
Warrants, the "Warrants"). Interest on the Senior Notes is payable semi-annually
in cash on January 15 and July 15 of each year, commencing July 15, 1997. The
Senior Discount Notes do not pay cash interest prior to January 15, 2002.
Thereafter, cash interest accrues until maturity at an annual rate of 12.5
percent payable semi-annually on January 15, and July 15 of each year,
commencing July 15, 2002. The exercise price for the Warrants is $.01 per share
of common stock of the Company. These warrants were assumed by Loral as a result
of the Loral Merger. The Company made cash interest payments of $25.0 million
and $24.9 million in January 1998 and July 1998 on the Senior Notes. The
indentures supporting the Senior Notes and the Senior Discount Notes contain
certain covenants which, among other things, restrict distributions to
stockholders of the Company, the repurchase of equity interests in the Company
and the making of certain other investments and restricted payments, the
incurrence of additional indebtedness by the Company and its restricted
subsidiaries, the creation of liens, certain asset sales, transaction with
affiliates and related parties, and mergers and consolidations. The Company is
in compliance with the requirements of such
38
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
5. LONG-TERM DEBT - (CONTINUED)
indentures. The exercise price for the Warrants will be $.01 per share of common
stock. There were 697,400 Warrants issued in connection with the Notes (see Note
6). On May 27, 1998, $2 million of Senior Notes were redeemed at 101 percent of
the principal amount of the notes plus accrued interest to the payment date, and
resulted in a gain on retirement of debt of approximately $.3 million.
Convertible Junior Subordinated Debentures -- On January 31, 1997, in
connection with the Financings discussed in Note 1, the Company completed the
sale of $60 million of its convertible junior subordinated debentures (the
"Convertible Debentures") to two investors, British Aerospace Holdings, Inc.
("British Aerospace") and Matra Marconi Space UK Limited ("Matra Marconi
Space"). British Aerospace purchased $50 million of the Convertible Debentures
and Matra Marconi Space purchased $10 million of the Convertible Debentures. The
Convertible Debentures were to mature in 2012, and bore interest at a rate of
8.75 percent per annum that was to be paid semi-annually in arrears solely in
Common Stock of the Company. The Convertible Debentures were subordinated to all
other indebtedness of the Company, including the Notes. Matra Marconi Space
converted their $10 million of Convertible Debentures and accrued interest into
735,292 shares of common stock in December 1997. In March 1998, British
Aerospace converted their $50 million of Convertible Debentures and accrued
interest into approximately 3.6 million shares of common stock. As of December
31, 1998, all of the debentures had been converted to common stock.
The net proceeds of the Bond Offering and Debentures Offering were used by
the Company to repay the Orion 1 credit facility, pre-fund the first three years
of interest payments on certain of the Notes, and will be used to build and
launch two additional satellites, Orion 2 and Orion 3.
The extraordinary loss on extinguishment of debt of $15.8 million in 1997
was the result of expensing, unamortized deferred financing costs associated
with the Orion 1 credit facility which was refinanced with the proceeds from the
Bond Offering and termination of a interest rate cap agreement.
Note Payable - TT&C Facility -- In June 1995 upon acceptance of the TT&C
Facility, the Company refinanced $9.3 million from General Electric Credit
Corporation as a seven-year term loan, payable monthly. The interest rate is
fixed at 13.5 percent. The TT&C debt is secured by the TT&C Facility, the
Satellite Control System Contract and Orion Atlantic's leasehold interest in the
TT&C Facility land. The TT&C financing agreement contains customary
representations, warranties and covenants regarding certain activities of the
Company. The Company is in compliance with the requirements of the financing
agreement.
Satellite Incentive Obligations --The obligations relating to satellite
performance have been recorded at the present value (discounted at 14 percent
for the Predecessor Company and 12 percent after the Loral Merger, the Company's
estimated incremental borrowing rate for unsecured financing) of the required
payments commencing at the originally scheduled maturity of the senior notes
payable to banks and continuing through 2007. Under the terms of the
construction contract, payment of the obligation is delayed until such time as
payment is permitted under the senior notes payable to banks. During 1998,
payments aggregating $7.2 million were made pursuant to this obligation.
Notes Payable - STET -- In connection with the STET Redemption, the Company
issued $8 million of promissory notes bearing interest at 12 percent per annum.
Payments were due as follows: $2.5 million plus accrued interest paid on
December 31, 1996; $3.5 million plus accrued interest on the earlier of December
31, 1997 or the refinancing of the senior notes payable-banks; and the remaining
$2.0 million in monthly installments of $0.2 million plus accrued interest
beginning January 1997. At December 31, 1997, the $8 million promissory notes
issued in connection with the STET Redemption had been repaid.
Notes Payable - Limited Partners -- In January 1997, the Company issued
Series C Convertible Preferred Stock in exchange for the Preferred Participation
Units (PPUs) aggregating $8.1 million due to certain former Limited Partners for
development of Orion Atlantic's network services business. Holders of PPUs
earned interest on aggregate amounts drawn at the rate of 30 percent per annum.
As of March 31, 1998, the Series C Convertible Preferred Stock issued in
exchange for the PPUs have been converted to common stock.
39
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
As of March 31, 1998, all of the redeemable convertible preferred stock
outstanding at December 31, 1997, including accrued dividends on Series C
Preferred Stock were converted to approximately 6.1 million shares of common
stock at prices ranging from $8.50 to $17.80 per share.
Redeemable Preferred Stock
In June 1994, Orion issued 11,500 shares of Series A 8 percent Cumulative
Redeemable Convertible Preferred Stock at $1,000 per share and granted an option
to purchase an additional 3,833 shares of similar preferred stock at $1,000 per
share. Dividends on preferred stock accrued at 8 percent per year and were
payable as and when declared. Orion could redeem the preferred stock at the
amount invested plus accrued and unpaid dividends. Upon such a redemption, the
preferred stockholders were to receive a warrant to acquire at $8.50 per share
the number of shares of common stock into which the preferred stock was
convertible. The 11,500 shares issued were convertible into 1,352,941 shares of
common stock ($8.50 per share). Upon conversion accrued and unpaid dividends
were forfeited. After Orion issued preferred stock (along with warrants and
options to make an additional investment) in June 1994, the Directors and
affiliates of Directors who purchased common stock in December 1993 and the
institutions and other investors who purchased common stock in June 1994 each
exercised its right to receive preferred stock (along with warrants and options
to make an additional investment) in exchange for the common stock previously
acquired and Orion issued an aggregate of 3,000 shares of Series A Preferred
Stock and related options for 1,000 shares to such persons and entities. The
3,000 shares issued were convertible into 352,941 shares of common stock ($8.50
per share). Through December 31, 1997, 7,567 shares of preferred stock were
converted into 890,235 shares of common stock. The remaining 6,933 shares
outstanding were convertible into 815,647 shares of common stock at December 31,
1997. All Series A Preferred Stock outstanding was converted into common stock
in connection with the Loral Merger.
In June 1995, certain Directors, affiliates of Directors, and certain
holders of Series A Preferred Stock purchased 4,483 shares of Series B Preferred
Stock for approximately $4.5 million. This purchase was pursuant to an option
granted in June 1995 to purchase $1 of preferred stock similar to the Series A
Preferred Stock for each $3 of Series A Preferred Stock purchased in June 1994,
except that such similar preferred stock would be convertible at any time with
Common Stock at a price within a range of $10.20 to $17.00 per share of common
stock based upon when the option is exercised. The Series B Preferred Stock had
rights, designations and preferences substantially similar to those of the
Series A Preferred Stock, and was subject to similar covenants, except that the
Series B Preferred Stock was convertible into 439,510 shares of Common Stock at
an initial price of $10.20 per share, subject to certain anti-dilution
adjustments, and purchases of Series B Preferred Stock did not result in the
purchaser receiving any rights to purchase additional preferred stock. Through
December 31, 1997, 2,424 shares of preferred stock were converted into 237,647
shares of common stock. The remaining 2,059 shares outstanding were convertible
into 201,862 shares of common stock at December 31, 1997. All Series B Preferred
Stock outstanding was converted into common stock in connection with the Loral
Merger.
In January 1997, Orion issued 123,172 shares of Series C Cumulative
Redeemable Preferred Stock to British Aerospace Communications, Inc., COM DEV
Satellite Communications Limited, Kingston Communications International Limited,
Lockheed Martin Commercial Launch Services, Inc., MCN Sat US, Inc., and
Trans-Atlantic Satellite, Inc. in exchange for their Orion Atlantic partnership
interests. Dividends on the preferred stock accrued at 6 percent per year and
were distributable in the Company's common stock calculated based on the market
price of such stock under a formula provided in the Certificate of Designations.
The shares were convertible into approximately 7 million shares ($17.50 per
share) of the Company's common stock. Through December 31, 1997, 40,531 shares
of preferred stock, including dividends, were converted into approximately 2.4
million shares of common stock. Series C Cumulative Preferred Stock was recorded
net of deferred offering costs of approximately $3.3 million. The Series C
Cumulative Preferred Stock was subject to mandatory redemption at par value in
25 years. The difference between the carrying value and par value was being
accreted over such period.
The preferred stock had a liquidation preference equal to the amount
invested plus accrued and unpaid dividends. Preferred stockholders were entitled
to vote on an as-converted basis and had the right to put the stock to Loral
Orion upon a merger, change of control or sale of substantially all assets at
the greater of liquidation value or fair value. All Series C Preferred Stock was
converted into common stock in connection with the Loral Merger.
40
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY - (CONTINUED)
Stockholders' Equity
1987 Employee Stock Option Plan - Under the 1987 Employee Stock Option
Plan, 1,470,588 shares of common stock were reserved for issuance upon exercise
of options granted. Shares of common stock were generally purchased under this
plan at prices not less than the fair market value, as determined by the Board
of Directors, on the date the option was granted.
Stock options outstanding at:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-----------------------------------------------
MARCH 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------- --------------- ---------------
<S> <C> <C> <C>
Range of exercise price.............. $8.16 - $12.29 $8.16 - $12.29 $8.16 - $12.24
Outstanding at beginning of year ... 1,174,310 911,663 971,469
Granted during year.................. -- 400,670 122,750
Exercised............................ (157,041) (81,383) (37,629)
Canceled (1,250) (56,640) (144,927)
Converted to options to acquire
Loral common stock ................ (1,016,019) -- --
------------- ------------- --------------
Outstanding at end of year........... -- 1,174,310 911,663
============= ============= ==============
</TABLE>
In November 1993, stock options for 95,588 shares of common stock were
granted to key executives which may be exercised only upon the achievement of
certain business and financial objectives. At December 31, 1995, the executives
had earned the right to exercise 40,441 of these options based on the
achievement of such objectives. The remaining options were canceled during 1996.
Stock options vested annually over a one to five-year period. All options
were exercisable up to seven years from the date of grant. The Company's 1987
Employee Stock Option Plan expired in 1997. No further shares are available for
grant under this plan. There were 506,803 and 429,265 options exercisable at
December 31, 1997 and 1996, respectively.
In July 1996, the Company granted, subject to shareholder approval, the
Chairman of the Executive Committee 100,000 options at $9.83 per share. These
options vested as follows, 50,000 on January 17, 1997 and 50,000 upon successful
completion of either a refinancing of the Orion 1 satellite, financing for
construction, launch and insurance for Orion 2 or Orion 3 or a substantial
acquisition or relationship with a strategic partner. These requirements were
met in January 1997.
In March 1998, the 1997 Employee Stock Option Plan was assumed by Loral and
all outstanding options were converted to options to acquire Loral common stock.
Non-Employee Director Stock Option Plan - In 1996, Orion adopted a
Non-Employee Director Stock Option plan. Under this plan, 380,000 shares of
common stock were reserved for issuance. During 1997, there were 80,000 options
granted pursuant to this plan at $9.60 per share. At December 31, 1997,
aggregate options outstanding pursuant to this plan totaled 270,000, of which,
180,000 were exercisable at prices ranging from $8.49 to $12.53 per share.
In March 1998, the Non-Employee Director Stock Option Plan was assumed by
Loral and all outstanding options were converted to options to acquire Loral
common stock.
1997 Employee Stock Option Plan - In 1997, Orion adopted a second stock
option plan. Under this plan, as amended, 1,300,000 shares of common stock were
reserved for issuance upon exercise of options granted. Shares of common stock
could be purchased under this plan at prices not less than the fair value as
determined by the Board of Directors, on the date the option were granted.
41
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY - (CONTINUED)
Compensation expense relating to these plans was not significant.
Stock options outstanding at:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------------------
MARCH 31, DECEMBER 31,
1998 1997
---------------- ---------------
<S> <C> <C>
Range of exercise price............. $9.30 - $17.06 $9.30 - $17.06
================ ================
Outstanding at beginning of year.... 552,000 --
Granted during year................. -- 556,000
Exercised ......................... (5,000) --
Canceled ......................... (80,000) (4,000)
Converted to options to acquire
Loral common stock ............... (467,000) --
------------- -------------
Outstanding at end of year.......... $ -- $ 552,000
============= ==============
</TABLE>
There were 62,500 options exercisable at December 31, 1997.
In March 1998, the 1997 Employee Stock Option Plan was assumed by Loral and
all outstanding options were converted to options to acquire Loral common stock.
The Company has elected to continue to follow Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25") and related
Interpretations in accounting for its employee stock based award programs,
because the alternative fair value accounting provided for under FASB Statement
No. 123, Accounting for Stock Based Compensation ("SFAS 123") which is effective
for awards after January 1, 1996, requires use of option valuation models that
were not developed for use in valuing employee stock options. Under APB 25, when
the exercise price of the employee award equals the market price of the
underlying stock on the date of grant, as has been the case historically with
the Company's awards, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share required
by SFAS 123, has been determined as if the Company had accounted for its stock
options under the fair value method of that statement. The fair value of these
options was estimated at the date of the grant using a Black-Scholes valuation
model with the following assumptions:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------------------------------
MARCH 31,
1998 1997 1996
------------- ------------- ----------
<S> <C> <C> <C>
Risk-free interest rate ............. 6.5% 6.5% 6.5%
Expected dividend yields ............ 0.0% 0.0% 0.0%
Expected life of option ............. 6.5 years 6.5 years 5.8 years
Volatility of the Company's stock ... 69% 69% 68%
</TABLE>
For purposes of adjusted pro forma disclosures, the estimated fair value of
the options is amortized to expense over the option's vesting period. The effect
of applying SFAS 123 on pro forma net loss is not necessarily representative of
the effects on reported net loss for future years due to, among other things,
(1) the vesting period of the stock options and the (2) fair value of additional
stock options in future years. The Company's adjusted pro forma information are
as follows (in thousands, except per share information):
42
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY - (CONTINUED)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------------------
THREE MONTHS
ENDED
MARCH 31,
1998 1997 1996
-------------- ------------ ----------
<S> <C> <C> <C>
Adjusted pro forma net loss ................ $ (40,777) $ (110,703) $ (28,031)
=============== ============ =============
Adjusted pro forma net loss per share ...... $ -- $ (10.03) $ (2.68)
=============== ============ =============
</TABLE>
401(k) Profit Sharing Plan -- In September 1996, Orion amended the 401(k)
profit sharing plan. Under this plan, 100,000 shares of common stock are
reserved for issuance as the Company's discretionary match of employee
contributions. The Company's matching contributions may be made in either cash
or in the equivalent amount of the Company's common stock. For the four months
ended April 30, 1998 and the year ended December 31, 1997, the Company's
matching contribution was 3,341 and 10,480 shares of the Company's common stock
with a value of approximately $60,000 and $180,000, respectively.
Effective May 1, 1998, the 401(k) Profit Sharing Plan was merged into the
Loral Space and Communications, Ltd. Savings Plan and $0.8 million of matching
contributions were incurred in this plan for the period May 1, 1998 through
December 31, 1998.
Stock Purchase Plan -- In September 1996, Orion adopted an employee stock
purchase plan. Under this plan, 500,000 shares of common stock are reserved for
issuance. Shares of common stock were purchased under this plan through payroll
deduction. The purchase price of each share of common stock purchased under the
plan was 85 percent of the fair market value of the common stock on the
measurement date. During 1998 and 1997 the Company issued 20,180 and 27,731
shares, respectively, pursuant to the Plan. In March 1998 the Stock Purchase
Plan was terminated.
Stock Warrants - In November 1996, Orion granted 50,000 warrants to DACOM
to purchase shares of common stock at $14 per share. The warrants are
exercisable for a six month period beginning six months after the commencement
date, as defined in the Joint Investment Agreement, and ending one year after
the commencement date and will terminate at that time or at any time the Joint
Investment Agreement is terminated. The fair value of the warrants at the date
of issue was $300,000 and was estimated using a Black Scholes valuation model.
Warrants outstanding at:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
---------------------------------------------------
MARCH 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
--------------- -------------- -----------------
<S> <C> <C> <C>
Range of exercise price............. $0.01 - $14.00 $0.01 - $14.00 $9.79 - $14.00
=============== ============== ==============
Outstanding at beginning of year.... 740,550 142,115 553,768
Granted during year................. -- 697,400 50,000
Exercised ......................... (2,518) (96,159) --
Canceled ......................... -- (2,806) (461,653)
Converted to warrants to acquire
Loral common stock ............... (738,032) -- --
-------------- ------------- --------------
Outstanding at end of year.......... -- 740,550 142,115
============== ============= ==============
</TABLE>
There were 690,550 and 92,115 warrants exercisable at December 31, 1997 and
1996, respectively.
43
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY - (CONTINUED)
The holders of preferred stock also hold warrants to purchase 1,017,509
shares of common stock at the conversion price of such preferred stock. These
warrants do not become exercisable unless Orion exercises its right to
repurchase the preferred stock at the liquidation value, plus accrued and unpaid
dividends. As of March 31, 1998, these warrants were forfeited as a result of
the conversion of all preferred stock to common stock.
In January 1997, the Company issued Senior Note Warrants and Senior
Discount Note Warrants to acquire 376,608 and 320,792 shares of common stock,
respectively at $.01 per share in connection with the Bond Offering. The
warrants were not exercisable prior to six months after the closing date of the
Bond Offering and became separately transferable from the Notes six months from
date of issuance. The estimated fair value of the warrants aggregating $9.6
million was allocated $5.2 million to Senior Notes and $4.4 million to Senior
Discount Notes as debt discount. At December 31, 1997, 6,850 warrants were
converted into 5,797 shares of common stock. In March 1998, the warrants were
converted to warrants to purchase Loral common stock.
Shares Reserved for Issuance - The Company had 0 shares and 14,036,809
shares of common stock at December 31, 1998 and 1997, respectively, reserved for
issuance upon conversion of debentures and preferred stock, exercise of
outstanding stock options and warrants, and common stock issued under the stock
purchase and 401(k) profit sharing plans.
Loral's 1996 Stock Option Plan - Certain employees of Loral Orion
participate in Loral's 1996 Stock Option Plan. Under this plan, options are
granted at the discretion of Loral's Board of Directors to employees of Loral
and its affiliates. Such options become exercisable as determined by the Board,
generally over five years, and generally expire no more than 10 years from the
date of grant. For the nine months ended December 31, 1998, Loral granted
certain key employees of Loral Orion options to purchase shares of Loral common
stock at a weighted average price of $24.55 per share (weighted average fair
value of $5.88 per share). No options were exercised, and at December 31, 1998,
options to purchase 513,420 shares were outstanding, 1,200 of which were
exercisable.
As described above, Loral Orion accounts for its stock-based awards using
the intrinsic value method in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and its related
interpretations. SFAS No. 123, "Accounting for Stock-Based Compensation"
requires the disclosure of pro forma net income (loss). Loral Orion adopted the
fair value method. SFAS No. 123 requires that equity instruments granted to an
employee by a principal stockholder be included as part of the disclosure. The
pro forma incremental effect on net loss required to be disclosed under SFAS No.
123 is approximately $1.9 million for the nine months ended December 31, 1998.
7. FAIR VALUES OF FINANCIAL INSTRUMENTS
Other than amounts due under the Senior Notes and Senior Discount Notes,
Orion believes that the carrying amount reported in the balance sheet of its
other financial assets and liabilities approximates their fair value at December
31, 1998. The fair value of the Company's Senior Notes and Senior Discount Notes
was estimated based on quoted market prices, at December 31, 1998 and 1997, to
be approximately $438.6 million and $304.9 million, and $511.8 million and
$377.5 million, respectively.
44
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. SEGMENTS
The Company has two reportable business segments: Fixed Satellite Services
and Data Services (see Note 1).
In evaluating financial performance, management uses revenues and earnings
before interest, taxes and depreciation and amortization ("EBITDA") as the
measure of a segment's profit or loss. The accounting policies of the reportable
segments are the same as those described in Note 2.
Summarized financial information concerning the reportable segments is as
follows:
NINE MONTHS ENDED DECEMBER 31, 1998
SEGMENT INFORMATION
(IN MILLIONS)
<TABLE>
<CAPTION>
FIXED TOTAL
SATELLITE DATA REPORTABLE
SERVICES SERVICES SEGMENTS CONSOLIDATED
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenue from external customers ...... $ 25.2 $ 39.4 $ 64.6 $ 64.6
=============== =============== ============== =============
EBITDA (1)............................ $ 21.2 $ (13.2) $ 8.0 $ 8.0
Depreciation and amortization ........ 41.6 9.8 51.4 51.4
Merger costs ......................... -- -- -- .6
--------------- --------------- -------------- -------------
Income (loss) from operations ........ $ (20.4) $ (23.0) $ (43.4) $ (44.0)
=============== =============== ============== =============
Capital expenditures ................. $ 272.1 $ 12.0 $ 284.1 $ 284.1
=============== =============== ============== =============
Total assets ......................... $ 1,355.4 $ 56.3 $ 1,411.7 $ 1,417.5
=============== =============== ============== =============
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998
SEGMENT INFORMATION
PREDECESSOR COMPANY
(IN MILLIONS)
<TABLE>
<CAPTION>
FIXED TOTAL
SATELLITE DATA REPORTABLE
SERVICES SERVICES SEGMENTS CONSOLIDATED
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenue from external customers ...... $ 7.9 $ 10.9 $ 18.8 $ 18.8
=============== =============== ============== =============
EBITDA (1)............................ $ 6.7 $ (5.7) $ 1.0 $ 1.0
Depreciation and amortization ........ 9.6 2.9 12.5 12.5
Merger costs ......................... -- -- -- 12.2
--------------- --------------- -------------- -------------
Income (loss) from operations......... $ (2.9) $ (8.6) $ (11.5) $ (23.7)
=============== =============== ============== =============
Capital expenditures ................. $ 14.8 $ 3.6 $ 18.4 $ 18.4
=============== =============== ============== =============
Total assets ......................... $ 1,381.8 $ 49.4 $ 1,431.2 $ 1,431.2
=============== =============== ============== =============
</TABLE>
With the exception of the Company's satellite in orbit, the Company's
long-lived assets are primarily located in the United States, Germany and other
foreign countries, and at December 31, 1998, amounted to approximately, $979
million, $6 million and $13 million, respectively.
45
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. SEGMENTS - (CONTINUED)
1997
SEGMENT INFORMATION
PREDECESSOR COMPANY
(in millions)
<TABLE>
<CAPTION>
FIXED TOTAL
SATELLITE DATA REPORTABLE
SERVICES SERVICES SEGMENTS CONSOLIDATED
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenue from external customers ...... $ 31.3 $ 41.4 $ 72.7 $ 72.7
=============== =============== ============== =============
EBITDA (1)............................ 21.3 (16.2) 5.1 5.1
Depreciation and amortization ........ 34.1 14.1 48.2 48.2
--------------- --------------- -------------- -------------
Income (loss) from operations......... $ (12.8) $ (30.3) $ (43.1) $ (43.1)
=============== =============== ============== =============
Capital expenditures ................. $ 102.3 $ 11.0 $ 113.3 $ 113.3
=============== =============== ============== =============
Total assets ......................... $ 849.0 $ 47.5 $ 896.5 $ 896.5
=============== =============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
1996
SEGMENT INFORMATION
PREDECESSOR COMPANY
(IN MILLIONS)
FIXED TOTAL
SATELLITE DATA REPORTABLE
SERVICES SERVICES SEGMENTS CONSOLIDATED
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenue from external customers ...... $ 24.9 $ 17.0 $ 41.9 $ 41.9
=============== =============== ============== =============
EBITDA 1.............................. 13.4 (12.8) 0.6 0.6
Depreciation and amortization ........ 30.3 6.6 36.9 36.9
--------------- --------------- -------------- -------------
Income (loss) from operations ........ $ (16.9) $ (19.4) $ (36.3) $ (36.3)
=============== =============== ============== =============
Capital expenditures ................. $ 3.8 $ 12.6 $ 16.4 $ 16.4
=============== =============== ============== =============
Total assets ......................... $ 327.8 $ 30.5 $ 358.3 $ 358.3
=============== =============== ============== =============
</TABLE>
- - ----------------------------
(1) EBITDA (which is equivalent to operating income (loss) before depreciation
and amortization and merger costs) is provided because it is a measure commonly
used in the communication industry to analyze companies on the basis of
operating performance, leverage and liquidity and is presented to enhance the
understanding of Loral Orion's operating results. However, EBITDA should not be
construed as an alternative to net income as an indicator of a company's
operating performance, or cash flow from operations as a measure of a company's
liquidity. EBITDA may be calculated differently and, therefore, may not be
comparable to similarly titled measures reported by other companies.
46
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. CONDENSED FINANCIAL INFORMATION OF LORAL ORION, INC.
Presented below are condensed balance sheets of Loral Orion, Inc. (parent
company only basis) at December 31, 1998 and 1997. All material contingencies,
obligations and guarantees of Loral Orion, Inc. have been separately disclosed
in the preceding notes to the financial statements.
CONDENSED BALANCE SHEETS OF LORAL ORION, INC.
(PARENT COMPANY ONLY BASIS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1997
PREDECESSOR
1998 COMPANY
-------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Restricted assets ..................................... $ 50,180 $ 50,064
Receivable from subsidiaries .......................... 489,384 --
------------- --------------
Total current assets.............................. 539,564 50,064
Restricted and segregated assets ........................ 22,675 284,433
Investment in and advances to subsidiaries .............. 591,421 460,572
Deferred income taxes ................................... 53,915 --
Due from Loral .......................................... 3,619 --
Costs in excess of net asset acquired associated
with the Loral merger, net ............................
Other assets, net ....................................... 15,261 42,021
------------- --------------
Total assets...................................... $ 1,834,470 $ 837,090
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Payables to subsidiaries .............................. $ 490,984 $ --
Accrued liabilities ................................... 5,166 --
Other current liabilities ............................. -- --
Interest payable senior notes and debentures .......... 22,842 24,768
------------- --------------
Total current liabilities......................... 518,992 24,768
Long term debt .......................................... 916,387 782,437
Redeemable preferred stock............................... -- 76,734
Stockholders' equity (deficit)........................... 399,091 (46,849)
------------- --------------
Total liabilities and stockholders' equity (deficit) $ 1,834,470 $ 837,090
============= ==============
</TABLE>
47
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. CONDENSED FINANCIAL INFORMATION OF LORAL ORION, INC. - (CONTINUED)
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF OPERATIONS OF LORAL ORION, INC.
(PARENT COMPANY ONLY BASIS)
PREDECESSOR COMPANY
----------------------------------------------------
NINE MONTHS THREE MONTHS YEARS ENDED DECEMBER 31,
ENDED ENDED
DECEMBER 31, MARCH 31,
1998 1998 1997 1996
---------------- ---------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Services revenue ................................... $ -- $ -- $ -- $ 34
Operating expenses and other income:
General and administrative ....................... 40 -- 2,170 3,832
Interest expense (income), net.................... 54,644 18,285 57,069 (1,884)
Depreciation and amortization .................... 14,375 -- -- --
Other (income), net .............................. (274) -- -- --
Merger costs ................................... -- 12,145 -- --
---------------- ---------------- ---------------- ---------------
Total operating expenses and other income......... 68,785 30,430 59,239 1,948
Equity in net losses of subsidiaries ................ 12,289 9,261 46,501 25,281
Income tax benefit .................................. (1,105) -- -- --
---------------- ---------------- ---------------- ---------------
Net loss ............................................ (79,969) (39,691) (105,740) (27,195)
Preferred dividends ................................. -- (1,387) -- --
---------------- ---------------- ---------------- ---------------
Net loss attributable to common stockholders ....... $ (79,969) $ (38,304) $ (105,740) $ (27,195)
=============== =============== ================ ===============
</TABLE>
48
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. CONDENSED FINANCIAL INFORMATION OF LORAL ORION, INC. - (CONTINUED)
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS OF LORAL ORION, INC.
(PARENT COMPANY ONLY BASIS)
PREDECESSOR COMPANY
------------------------------------------------------
NINE MONTHS THREE MONTHS YEARS ENDED DECEMBER 31,
ENDED ENDED
DECEMBER 31, MARCH 31,
1998 1998 1997 1996
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATIONS............ $ (24,320) $ (37,300) $ (22,806) $ (4,047)
INVESTING ACTIVITIES:
Advances to subsidiaries........................... (247,640) (755) (407,093) (15,529)
Increase in restricted and segregated assets ...... -- -- (406,938) --
Release of restricted and segregated assets ....... 273,960 35,938 90,501 --
Capital expenditures............................... -- -- -- (504)
---------------- ---------------- ---------------- ----------------
Net cash provided by (used in) investing
activities...................................... 26,320 35,183 (723,530) (16,033)
FINANCING ACTIVITIES:
Proceeds from issuance of debt, net ............... -- -- 744,275 --
Proceeds from issuance of redeemable
preferred stock.................................. -- -- 2,152 --
Proceeds from issuance of common stock............. -- 2,117 -- 343
Purchase of treasury stock ........................ -- -- (91) --
Repayment of senior notes payable.................. (2,000) -- -- (2,496)
---------------- ---------------- ---------------- ----------------
Net cash provided by (used in) financing
activities ...................................... (2,000) 2,117 746,336 (2,153)
---------------- ---------------- ---------------- ----------------
Net (decrease) increase in cash and cash
equivalents...................................... -- -- -- (22,233)
Cash and cash equivalents at beginning of year....... -- -- -- 48,798
---------------- ---------------- ---------------- ----------------
Cash and cash equivalents at end of year............. $ -- $ -- $ -- $ 26,565
================ ================ ================ ================
</TABLE>
Basis of presentation -- In these parent company-only condensed financial
statements, Orion's investment in subsidiaries is stated at cost less equity in
the losses of subsidiaries since date of inception or acquisition.
Loral Orion , Inc. ("Loral Orion"), a Delaware company, is a holding
company which is the ultimate parent of all Loral Orion subsidiaries. The
accompanying financial statements reflect the financial position, results of
operations and cash flows of Loral Orion on a separate company basis. All
subsidiaries of Loral Orion are reflected as investments accounted for under the
equity method of accounting. Accordingly intercompany payables and receivables
have not been eliminated.
Loral Orion's significant transactions with its subsidiaries other than the
investment account and related equity in net loss of unconsolidated subsidiaries
are intercompany payables and receivables resulting primarily from the funding
of operations and the construction of Loral Orion satellites.
No cash dividends were paid to Loral Orion by its affiliates during nine
months ended December 31, 1998, the three months ended March 31, 1998 and the
years ended December 31, 1997 and 1996.
49
<PAGE>
LORAL ORION, INC.
(A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
10. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the quarterly results of operations for the
years ended December 31, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
--------- -------- ------------- ------------
<S> <C> <C> <C> <C>
1998
Revenues................................... $ 18,790 $ 20,243 $ 21,153 $ 23,212
Loss from operations....................... (23,639) (15,296) (13,951) (14,782)
Loss before income taxes, extraordinary loss
on extinguishment of debt, minority
interest and preacquisition loss of (39,691) (28,000) (26,301) (26,701)
acquired subsidiary.....................
Net loss .................................. (39,691) (19,755) (29,614) (30,600)
<CAPTION>
PREDECESSOR COMPANY
-----------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
--------- -------- ------------- ------------
1997
<S> <C> <C> <C> <C>
Revenues................................... $ 20,233 $ 16,687 $ 17,619 $ 18,202
Loss from operations....................... (8,317) (10,915) (11,270) (12,579)
Loss before income taxes, extraordinary loss
on extinguishment of debt, minority
interest and preacquisition loss of (22,889) (24,745) (27,510) (27,501)
acquired subsidiary.....................
Net loss................................... (25,984) (24,745) (27,510) (27,501)
</TABLE>
50
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND ACCOUNTING AND
FINANCIAL DISCLOSURES.
As a result of the Merger, the Board of Directors of the Company appointed
Deloitte & Touche LLP ("Deloitte & Touche") as independent auditors, effective
May 13, 1998. Deloitte & Touche replaced Ernst & Young LLP ("Ernst & Young"),
which served as the Company's independent auditors for the fiscal years ended
December 31, 1997 and December 31, 1996 and was dismissed, effective May 13,
1998.
The reports issued by Ernst & Young on the Company's financial statements
for the fiscal years ended December 31, 1997 and December 31, 1996 did not
contain any adverse opinion or disclaimer of opinion, and were not qualified or
modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 1997 and December 31, 1996, and
during the interim period preceding May 13, 1998, (i) there were no
disagreements with Ernst & Young on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure and
which, if not resolved to the satisfaction of Ernst & Young, would have caused
Ernst & Young to make reference to these matters in their report and (ii) there
were no "reportable events" (as that term is described in Item 304(a)(i)(v) of
Regulation S-K).
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Omitted pursuant to General Instruction I of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
Omitted pursuant to General Instruction I of Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Omitted pursuant to General Instruction I of Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Omitted pursuant to General Instruction I of Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (1) and (2) List of Financial Statements and Financial Statement
Schedules
The following consolidated financial statements of Loral Orion, Inc. are
included in Item 8:
Consolidated Balance Sheets - December 31, 1998 and 1997 (Predecessor
Company)
Consolidated Statements of Operations - Nine months ended December 31,
1998, and for the Predecessor Company the three months ended March 31,
1998, and the years ended December 31, 1997 and 1996
Consolidated Statements of Changes in Stockholders' Equity (Deficit) -
Nine months ended December 31, 1998, and for the Predecessor Company
the three months ended March 31, 1998, and the years ended December
31, 1997 and 1996
Consolidated Statements of Cash Flows - Nine months ended December 31,
1998, and for the Predecessor Company the three months ended March 31,
1998, and the years ended December 31, 1997 and 1996
Notes to Consolidated Financial Statements
51
<PAGE>
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted, except
for Schedule I, condensed financial information which is presented in Note 9 in
the Company's consolidated financial statements.
(b) Reports on Form 8-K filed in the fourth quarter of 1998:
None.
(c) Exhibits
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- - ------ -------------------
2.1 Agreement and Plan of Merger, dated as of October 7, 1997, by
and among Orion, Loral and Loral Satellite Corporation.
(Incorporated by reference to exhibit number 2.1 in Current
Report on Form 8-K dated October 9, 1997).
2.2 Principal Stockholder Agreement among Orion, Loral, Loral
Satellite Corporation and the stockholders that are
signatories thereto, dated as of October 7, 1997.
(Incorporated by reference to exhibit number 2.2 in Current
Report on Form 8-K dated October 9, 1997).
2.3 Amendment No. 1 Agreement and Plan of Merger, dated as of
February 11, 1998, by and among Orion, Loral and Loral
Satellite Corporation. (Incorporated by reference to exhibit
number 2.2 in Registration Statement No. 333-46407 on Form
S-4).
2.4 Amendment No. 1 to Principal Stockholder Agreement among
Orion, Loral, Loral Satellite Corporation and the stockholders
that are signatories thereto, dated as of December 1, 1997.
(Incorporated by reference to Exhibit number 2.4 in Annual
Report on Form 10-K for fiscal year ended December 31, 1997).
3.1 Certificate of Merger of Loral Satellite Corporation into
Orion dated March 20, 1998 and Exhibit A thereto, Restated
Certificate of Incorporation of the Company.*
3.2 Certificate of Amendment to Certificate of Incorporation of
the Company.*
3.3 Amended and Restated Bylaws of the Company.*
4.1 Form of Senior Note Indenture and Form of Note included
therein. (Incorporated by reference to Exhibit number 4.1 to
Registration Statement No. 333-19167 on Form S-1).
4.2 Form of Senior Discount Note Indenture and Form of Note
included therein. (Incorporated by reference to Exhibit number
4.2 to Registration Statement No. 333-19167 on Form S-1).
4.3 Form of Collateral Pledge and Security Agreement.
(Incorporated by reference to Exhibit number 4.3 to
Registration Statement No. 333-19167 on Form S-1).
10.1 Second Amended and Restated Purchase Agreement, dated
September 26, 1991 ("Satellite Contract") by and between Loral
Orion Services, Inc. (formerly known as Orion Satellite
Corporation) and British Aerospace PLC and the First
Amendment, dated as of September 15, 1992, Second Amendment,
dated as of November 9, 1992, Third Amendment, dated as of
March 12, 1993, Fourth Amendment, dated as of April 15, 1993,
Fifth Amendment, dated as of September 22, 1993, Sixth
Amendment, dated as of April 6, 1994, Seventh Amendment, dated
as of August 9, 1994, Eighth Amendment, dated as of December
8, 1994, and Amendment No. 9 dated October 24, 1995, thereto.
[CONFIDENTIAL TREATMENT HAS BEEN GRANTED FOR PORTIONS OF THESE
DOCUMENTS.] (Incorporated by reference to exhibits number
10.13 and 10.14 in Registration Statement No. 33-80518 on Form
S-1).
52
<PAGE>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- - ------ -------------------
10.2 Restated Amendment No. 10 dated December 10, 1996, between
LOSI and Matra Marconi Space to the Second Amended and
Restated Purchase Agreement, dated September 16, 1991 by and
between OrionServ and British Aerospace PLC (which contract
and prior exhibits thereto were incorporated by reference as
exhibit number 10.1). (Incorporated by reference to exhibit
number 10.2 in Registration Statement No. 333-19795 on Form
S-4).
10.3 Contract for a Satellite Control System, dated December 7,
1992, by and between Loral Orion Services, Inc., Telespazio
S.p.A. and Martin Marietta Corporation. [CONFIDENTIAL
TREATMENT HAS BEEN GRANTED FOR PORTIONS OF THIS DOCUMENT.]
(Incorporated by reference to exhibit number 10.31 in
Registration Statement No. 33-80518 on Form S-1).
10.4 Credit Agreement, dated as of November 23, 1993, by and
between Loral Orion Services, Inc. (as successor in interest
to Orion Atlantic, L.P.) and General Electric Capital
Corporation (`GECC'). [CONFIDENTIAL TREATMENT HAS BEEN GRANTED
FOR PORTIONS OF THIS DOCUMENT.] (Incorporated by reference to
exhibit number 10.32 in Registration Statement No. 33-80518 on
Form S-1).
10.5 Security Agreement, dated as of November 23, 1993, by and
between Loral Orion Services, Inc. and GECC. (Incorporated by
reference to exhibit number 10.33 in Registration Statement
No. 33-80518 on Form S-1).
10.6 Assignment and Security Agreement, dated as of November 23,
1993, by and between Loral Orion Services, Inc. and GECC.
(Incorporated by reference to exhibit number 10.34 in
Registration Statement No.
33-80518 on Form S-1).
10.7 Consent and Agreement, dated as of November 23, 1993, by and
between Loral Orion Services, Inc., Martin Marietta
Corporation and GECC. (Incorporated by reference to exhibit
number 10.35 in Registration Statement No. 33-80518 on Form
S-1).
10.8 Deed of Trust, dated as of November 23, 1993, by and between
Loral Orion Services, Inc., W. Allen Ames, Jr. and Michael J.
Schwel, as Trustees, and GECC. (Incorporated by reference to
exhibit number 10.37 in Registration Statement No. 33-80518 on
Form S-1).
10.9 Lease Agreement, dated as of November 23, 1993, by and between
OrionNet, Inc. and Loral Orion Services, Inc. (as successor in
interest to Orion Atlantic, L.P.), as amended by an Amendment,
dated January 3, 1995. [CONFIDENTIAL TREATMENT HAS BEEN
GRANTED FOR PORTIONS OF THESE DOCUMENTS. (Incorporated by
reference to exhibit number 10.38 in Registration Statement
No. 33-80518 on Form S-1).
10.10 Note for Interim Loans, dated as of November 23, 1993, by and
between Loral Orion Services, Inc. (as successor in interest
to Orion Atlantic, L.P.) and GECC. (Incorporated by reference
to exhibit number 10.42 in Registration Statement No. 33-80518
on Form S-1).
10.11 Lease Agreement, dated as of October 2, 1992, by and between
OrionNet and Research Grove Associates, as amended by
Amendment No. 1 dated March 26, 1993. Amendment No. 2 dated
August 23, 1993, and Amendment No. 3 dated December 20, 1993.
(Incorporated by reference to exhibit number 10.39 in
Registration Statement No. 33-80518 on Form S-1).
10.12 Restated Definitive Agreement, dated October 29, 1998, by and
between Orion and Republic of the Marshall Islands.
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF
THIS DOCUMENT.]*
10.13 TT&C Earth Station Agreement, dated as of November 11, 1996,
by and between Loral Orion Services, Inc. (by assignment from
Loral Orion-Asia Pacific, Inc., formerly known as Orion Asia
Pacific Corporation and DACOM Corp. [CONFIDENTIAL TREATMENT
HAS BEEN GRANTED FOR PORTIONS OF THIS DOCUMENT.] (Incorporated
by reference to exhibit number 10.39 in Registration Statement
No. 333-19795 on Form S-4).
53
<PAGE>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- - ------ -------------------
10.14 Joint Investment Agreement, dated as of November 11, 1996, by
and between Loral Orion Services, Inc. (by assignment from
Loral Orion-Asia Pacific, Inc., formerly known as Orion Asia
Pacific Corporation) and DACOM Corp. [CONFIDENTIAL TREATMENT
HAS BEEN GRANTED FOR PORTIONS OF THIS DOCUMENT.] (Incorporated
by reference to exhibit number 10.40 in Registration Statement
No. 333-19795 on Form S-4).
10.15 Orion 3 Spacecraft Purchase Contract, dated January 15, 1997,
by and among Hughes Space and Communications International,
Inc., Loral Orion Services, Inc. (by assignment from Loral
Orion-Asia Pacific, Inc., formerly known as Orion Asia
Pacific, Inc.) and Orion. [CONFIDENTIAL TREATMENT HAS BEEN
GRANTED FOR PORTIONS OF THIS DOCUMENT.]. (Incorporated by
reference to Exhibit number 10.52 to Registration Statement
No. 333-19167 on Form S-1).
10.16 Letter Agreement, effective as of May 20/21, 1997, by and
between Orion and Morgan Stanley & Co. (Incorporated by
reference to Exhibit number 10.53 to Annual Report on Form
10-K for the fiscal year ended December 31, 1997).
10.17 Orion-Z Spacecraft Purchase Contract, dated May 15, 1998, by
and between Loral Orion Services, Inc. and Space
Systems/Loral, Inc. and Amendment No. 1 dated December 29,
1998. [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS
OF THIS DOCUMENT.]*
10.18 Agreement, dated January 1, 1999, by and between Loral Orion
Services, Inc. and Loral Skynet.*
10.19 Agreement, dated January 1, 1999, by and between Loral Orion
Services, Inc. and Loral Skynet.*
23 None
27 Financial Data Schedule.*
* Filed herewith.
(d) Financial statement schedule
Schedule I, see Note 9 in the Company's Consolidated Financial
Statements
54
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LORAL ORION, INC.
/s/ Benard L. Schwartz
By: Bernard L. Schwartz
(Chairman of the Board and
Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- - --------- ----- ----
<S> <C> <C>
/s/ Bernard L. Schwartz Chairman of the Board March 30, 1999
- - --------------------------- and Chief Executive Officer
Bernard L. Schwartz
/s/ George Baker Director March 30, 1999
- - ---------------------------
George Baker
/s/ Gregory J. Clark Chief Operating Officer and March 30, 1999
- - --------------------------- Director
Gregory J. Clark
/s/ Michael P. DeBlasio First Senior Vice President March 30, 1999
- - --------------------------- and Director
Michael P. DeBlasio
/s/ Daniel Hirsch Director March 30, 1999
- - ---------------------------
Daniel Hirsch
/s/ Eric J. Zahler Senior Vice President March 30, 1999
- - ---------------------------- Secretary and Director
Eric J. Zahler
/s/ Richard J. Townsend Senior Vice President March 30, 1999
- - ---------------------------- and Chief Financial Officer
Richard J. Townsend (Principal Financial Officer)
/s/ Harvey B. Rein Vice President and March 30, 1999
- - ---------------------------- Controller
Harvey B. Rein (Principal Accounting Officer)
</TABLE>
55
EXHIBIT 3.1
CERTIFICATE OF MERGER
OF
LORAL SATELLITE CORPORATION
INTO
ORION NETWORK SYSTEMS, INC.
The undersigned corporation, organized and existing under and by virtue of
the Delaware General Corporation Law, does hereby certify:
First: That the name and state of incorporation of each constituent
corporations to the Merger are as follows:
Name State of Incorporation
---- ----------------------
Loral Satellite Corporation Delaware
Orion Network Systems, Inc. Delaware
SECOND: That an Agreement and Plan of Merger dated as of October 7, 1997,
as amended (the "Merger Agreement"), by and among Loral Satellite Corporation,
Orion Network Systems, Inc., and Loral Space & Communications Ltd., a Bermuda
company, has been approved, adopted, certified, executed and acknowledged by
each of the constituent corporations in accordance with the requirements of
Section 251 of the Delaware General Corporation Law.
THIRD: That the name of the surviving corporation of the merger is Orion
Network Systems, Inc. (the "Surviving Corporation"), which name shall be changed
to Loral Orion Network Systems, Inc.
FOURTH: That the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated in its entirety as set forth on Exhibit A hereto.
FIFTH: That the executed Merger Agreement is on file at an office of the
Surviving Corporation located at 2440 Research Boulevard, Suite 400, Rockville,
Maryland 20850.
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SIXTH: That a copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of the
constituent corporations
IN WITNESS WHEREOF, Orion Network Systems, Inc. has caused this
Certificate of Merger to be signed by David J. Frear, its authorized officer,
this 20th day of March 1998.
ORION NETWORK SYSTEMS, INC.
By:
--------------------------------------
David J. Frear
Senior Vice President, Chief Financial
Officer and Treasurer
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<PAGE>
Exhibit A
RESTATED CERTIFICATE OF INCORPORATION
OF
LORAL ORION NETWORK SYSTEMS, INC.
1. The name of the corporation (the "Corporation") is Loral Orion Network
Systems, Inc.
2. The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle.
The name of the registered agent of the Corporation at such address is The
Corporation Trust Company.
3. The nature of the business of, and the purpose to be conducted or promoted
by, the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation Law.
4. The total number of shares of stock which the Corporation shall have
authority to issue is one thousand (1,000) shares of Common Stock, par value
$.01 per share.
5. In furtherance and not in limitation of the power conferred by statute, the
by-laws of the Corporation may be made, altered, amended or repealed by the
stockholders or by a majority of the entire board of directors.
6. Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting
of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization
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shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all
stockholders or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.
7. Elections of directors need not be by written ballot.
8. Indemnification.
A. Authorization of Indemnification. Each person who was or is a party or
is threatened to be made a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether by or in the right of the Corporation or otherwise (a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan, shall be (and shall be deemed to have a contractual right
to be) indemnified and held harmless by the Corporation (and any successor to
the Corporation by merger or otherwise) to the fullest extent authorized by, and
subject to the conditions and (except as provided herein) procedures set forth
in the Delaware General Corporation Law, as the same exists or may hereafter be
amended (but any such amendment shall not be deemed to limit or prohibit the
rights of indemnification hereunder for past acts or omissions of any such
person insofar as such amendment limits or prohibits the indemnification rights
that said law permitted the Corporation to provide prior to such amendment),
against all expenses, liabilities and losses (including attorney's fees,
judgments, fines, ERISA taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith; provided, however, that the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person (except for a suit or action pursuant to subsection B
only if such proceeding (or part thereof) was authorized by the board of
directors of the Corporation. Persons who are not directors or officers of the
Corporation may be similarly indemnified in respect of such service to the
extent authorized at any time by the board of directors of the Corporation. The
indemnification conferred in this subsection A also shall include the right to
be paid by the Corporation (and such successor) the expenses (including
attorney's fees) incurred in the defense of or other involvement in any such
proceeding in advance of its final disposition (including in the case of a
director or former director expenses of separate legal counsel, up to a maximum
of $50,000, but only in the event that the director or former director as the
indemnified party reasonably determines, assuming an outcome unfavorable to such
indemnified party, that there is a reasonable probability that such proceeding
may materially and adversely affect such indemnified party, or that there may be
legal defenses available to such indemnified
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<PAGE>
party that are different from or in addition to those available to the
Corporation); provided, however, that, if and to the extent the Delaware General
Corporation Law requires, the payment of such expenses (including attorney's
fees) incurred by a director or officer in advance of the final disposition of a
proceeding shall be made only upon delivery to the Corporation of an undertaking
by or on behalf of such director or officer to repay all amounts so paid in
advance if it shall ultimately be determined that such director or officer is
not entitled to be indemnified under this subsection A or otherwise; and
provided further, that, such expenses incurred by other employees and agents may
be so paid in advance upon such terms and conditions, if any, as the board of
directors deems appropriate.
B. Right of Claimant to Bring Action against the Corporation. If a claim
under subsection A of this section is not paid in full by the Corporation within
sixty days after a written claim has been received by the Corporation, the
claimant may at any time thereafter bring an action against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expenses of prosecuting such
action. It shall be a defense to any such action (other than an action brought
to enforce a claim for expenses incurred in connection with any proceeding in
advance of its final disposition whether the required undertaking, if any is
required, has been tendered to the Corporation) that the claimant has not met
the standards of conduct which make it permissible under the Delaware General
Corporation Law for the Corporation to indemnify the claimant for the amount
claimed or is otherwise not entitled to indemnification under subsection A of
this section but the burden of proving such defense shall be on the Corporation.
The failure of the Corporation (in the manner provided under the Delaware
General Corporation Law) to have made a determination prior to or after the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law shall not be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct. An actual determination by the Corporation (in the manner
provided under the Delaware General Corporation Law) after the commencement of
such action that the claimant has not met such applicable standard of conduct
shall not be a defense to the action, but shall create a presumption that the
claimant has not met the applicable standard of conduct.
C. Non-exclusivity. The rights to indemnification and advance payment of
expenses provided by subsection A of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification and advance payment
of expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
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D. Survival of Indemnification. The indemnification and advance payment of
expenses and rights thereto provided by, or granted pursuant to, subsection A of
this section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the personal representatives, heirs,
executors and administrators of such person.
E. Insurance. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, against any liability
asserted against such person or incurred by such person in any such capacity, or
arising out of such person's status as such, and related expenses, whether or
not the Corporation would have the power to indemnify such person against such
liability under the provisions of the Delaware General Corporation Law.
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EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
LORAL ORION NETWORK SYSTEMS, INC.
Loral Orion Network Systems, Inc. a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify that:
The amendment to the Certificate of Incorporation of the Corporation set
forth below has been duly adopted in accordance with the provisions of Section
242 of the General Corporation Law of the State of Delaware (the "DGCL"):
1. The Certificate of Incorporation of the Corporation is hereby amended
by striking Paragraph 1 thereof in its entirety and inserting in lieu
thereof the following:
"The name of the Corporation is Loral Orion, Inc. (hereinafter
called the "Corporation")."
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be duly executed and acknowledged in accordance with Section 103 of
the DGCL.
LORAL ORION NETWORK SYSTEMS, INC.
By:
-------------------------------
Name: Avi Katz
Title: Vice President
EXHIBIT 3.3
LORAL ORION, INC.
Incorporated Under the Laws of
the State of Delaware
BY-LAWS
ARTICLE I
OFFICES
The registered office of the Corporation in Delaware shall be at 1209
Orange Street in the City of Wilmington, County of New Castle, in the State of
Delaware, and The Corporation Trust Company shall be the resident agent of this
Corporation in charge thereof. The Corporation may also have such other offices
at such other places, within or without the State of Delaware, as the Board of
Directors may from time to time designate or the business of the Corporation may
require.
ARTICLE II
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of stockholders for the
election of directors and the transaction of any other business shall be held on
the day of each year, or as soon after such date as may be practicable, in such
city and state and at such time and place as may be designated by the Board of
Directors, and set forth in the notice of such meeting. If said day be a legal
holiday, said meeting shall be held on the next succeeding business day. At the
annual meeting any business may be transacted and any corporate action may be
taken, whether stated in the notice of meeting or not, except as otherwise
expressly provided by statute or the Certificate of Incorporation.
Section 2. Special Meetings. Special meetings of the stockholders for any
purpose may be called at any time by the Board of Directors, or by the
President, and shall be called by the President at the request of the holders of
a majority of the outstanding shares of capital stock entitled to vote. Special
meetings shall be held at such place or places within or without the State of
Delaware as shall from time to time be designated by the Board of Directors and
stated in the notice of such meeting. At a special meeting no business shall be
transacted and no corporate action shall be taken other than that stated in the
notice of the meeting.
Section 3. Notice of Meetings. Written notice of the time and place of any
stockholder's meeting, whether annual or special, shall be given to each
stockholder entitled to vote thereat, by personal delivery or by mailing the
same to him at his address as the same appears upon the records of the
Corporation at least ten (10) days but not more than sixty (60)
<PAGE>
days before the day of the meeting. Notice of any adjourned meeting need not be
given except by announcement at the meeting so adjourned, unless otherwise
ordered in connection with such adjournment. Such further notice, if any, shall
be given as may be required by law.
Section 4. Quorum. Any number of stockholders, together holding at least a
majority of the capital stock of the Corporation issued and outstanding and
entitled to vote, who shall be present in person or represented by proxy at any
meeting duly called, shall constitute a quorum for the transaction of al
business, except as otherwise provided by law, by the Certificate of
Incorporation or by these By-laws.
Section 5. Adjournment of Meetings. If less than a quorum shall attend at
the time for which a meeting shall have been called, the meeting may adjourn
from time to time by a majority vote of the stockholders present or represented
by proxy and entitled to vote without notice other than by announcement a the
meeting until a quorum shall attend. Any meeting at which a quorum is present
may also be adjourned in like manner and for such time or upon such call as may
be determined by a majority vote of the stockholders present or represented by
proxy and entitled to vote. At any adjourned meeting at which a quorum shall be
present, any business may be transacted and any corporate action may be taken
which might have been transacted at the meeting as originally called.
Section 6. Voting List. The Secretary shall prepare and make, at least ten
days before every election of directors, a complete list of the stockholders
entitled to vote, arranged in alphabetical order and showing the address of each
stockholder and the number of shares of each stockholder. Such list shall be
open at the place where the election is to be held for said ten days, to the
examination of any stockholder, and shall be produced and kept at the time and
place of election during the whole time thereof, and subject to the inspection
of any stockholder who may be present.
Section 7. Voting. Each stockholder entitled to vote at any meeting may
vote either in person or by proxy, but no proxy shall be voted on or after three
years from its date, unless said proxy provides for a longer period. Each
stockholder entitled to vote shall at every meeting of the stockholders be
entitled to one vote for each share of stock registered in his name on the
record of stockholders. At all meetings of stockholders all matters, except as
otherwise provided by statute, shall be determined by the affirmative vote of
the majority of shares present in person or by proxy and entitled to vote on the
subject matter. Voting at meetings of stockholders need not be by written
ballot.
Section 8. Record Date of Stockholders. The Board of Directors is
authorized to fix in advance a date not exceeding
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sixty days nor less than ten days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining the
consent of stockholders for any purposes, as a record date for the determination
of the stockholders entitled to notice of, and to vote at, any such meeting, and
any adjournment thereof, or entitled to receive payment of any such dividend, or
to any such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, or to give such consent,
and, in such case, such stockholders and only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to such notice of,
and to vote at, such meeting, and any adjournment thereof, or to receive payment
of such dividend, or to receive such allotment of rights, or to exercise such
rights, or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation, after such record date
fixed as aforesaid.
Section 9. Action Without Meeting. Any action required or permitted to be
taken at any annual or special meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders.
Section 10. Conduct. The Chairman of the Board of Directors or, in his
absence the President or any Vice President designated by the Chairman of the
Board, shall preside at all regular or special meetings of stockholders. To the
maximum extent permitted by law, such presiding person shall have the power to
set procedural rules, including but not limited to rules respecting the time
allotted to stockholders to speak, governing all aspects of the conduct of such
meetings.
ARTICLE III
DIRECTORS
Section 1. Number and Qualifications. The Board of Directors shall consist
initially of three directors, and thereafter shall consist of such number as may
be fixed from time
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to time by resolution of the Board. The directors need not be stockholders.
Section 2. Election of Directors. The directors shall be elected by the
stockholders at the annual meeting of stockholders.
Section 3. Duration of Office. The directors chosen at any annual meeting
shall, except as hereinafter provided, hold office until the next annual
election and until their successors are elected and qualify.
Section 4. Removal and Resignation of Directors. Any director may be
removed from the Board of Directors, with or without cause, by the holders of a
majority of the shares of capital stock entitled to vote, either by written
consent or consents or at any special meeting of the stockholders called for
that purpose, and the office of such director shall forthwith become vacant.
Any director may resign at any time. Such resignation shall take effect at
the time specified therein, and if no time be specified, at the time of its
receipt by the President or Secretary. The acceptance of a resignation shall not
be necessary to make it effective, unless so specified therein.
Section 5. Filling of Vacancies. Any vacancy among the directors, occurring
from any cause whatsoever, may be filled by a majority of the remaining
directors, though less than a quorum, provided, however, that the stockholders
removing any director may at the same meeting fill the vacancy caused by such
removal, and provided, further, that if the directors fail to fill any such
vacancy, the stockholders may at any special meeting called for that purpose
fill such vacancy. In case of any increase in the number of directors, the
additional directors may be elected by the directors in office before such
increase.
Any person elected to fill a vacancy shall hold office, subject to the
right of removal as hereinbefore provided, until the next annual election and
until his successor is elected and qualifies.
Section 6. Regular Meetings. The Board of Directors shall hold an annual
meeting for the purpose of organization and the transaction of any business
immediately after the annual meeting of the stockholders, provided a quorum of
directors is present. Other regular meetings may be held at such times as may be
determined from time to time by resolution of the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors may
be called by the Chairman of the Board of Directors or by the President.
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Section 8. Notice and Place of Meetings. Meetings of the Board of Directors
may be held at the principal office of the Corporation, or at such other place
as shall be stated in the notice of such meeting. Notice of any special meeting,
and, except as the Board of Directors may otherwise determine by resolution,
notice of any regular meeting also, shall be mailed to each director addressed
to him at his residence or usual place of business at least two days before the
day on which the meeting is to be held, or if sent to him at such place by
telegraph or cable, or delivered personally or by telephone, not later than the
day before the day on which the meeting is to be held. No notice of the annual
meeting of the Board of Directors shall be required if it is held immediately
after the annual meeting of the stockholders and if a quorum is present.
Section 9. Business Transacted at Meetings, etc. Any business may be
transacted and any corporate action may be taken at any regular or special
meeting of the Board of Directors at which a quorum shall be present, whether
such business or proposed action be stated in the notice of such meeting or not,
unless special notice of such business or proposed action shall be required by
statute.
Section 10. Quorum. A majority of the Board of Directors at any time in
office shall constitute a quorum. At any meeting at which a quorum is present,
the vote of a majority of the members present shall be the act of the Board of
Directors unless the act of a greater number is specifically required by law or
by the Certificate of Incorporation or these By-laws. The members of the Board
shall act only as the Board and the individual members thereof shall not have
any powers as such.
Section 11. Compensation. The directors shall not receive any stated salary
for their services as directors, but by resolution of the Board of Directors a
fixed fee and expenses of attendance may be allowed for attendance at each
meeting. Nothing herein contained shall preclude any director from serving the
Corporation in any other capacity, as an officer, agent or otherwise, and
receiving compensation therefor.
Section 12. Action Without a Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of the proceedings of the Board or committee.
Section 13. Meetings Through Use of Communications Equipment. Members of
the Board of Directors, or any committee designated by the Board of Directors,
shall, except as otherwise provided by law, the Certificate of Incorporation or
these By-laws, have the power to participate in a meeting of the Board of
Directors, or any committee, by means of a conference telephone
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or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and such participation shall constitute
presence in person at the meeting.
ARTICLE IV
COMMITTEES
Section 1. Executive Committee. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate two or more of their number
to constitute an Executive Committee to hold office at the pleasure of the
Board, which Committee shall, during the intervals between meetings of the Board
of Directors, have and exercise all of the powers of the Board of Directors in
the management of the business and affairs of the Corporation, subject only to
such restrictions or limitations as the Board of Directors may from time to time
specify, or as limited by the Delaware General Corporation Law, and shall have
power to authorize the seal of the Corporation to be affixed to all papers which
may require it.
Any member of the Executive Committee may be removed at any time, with or
without cause, by a resolution of a majority of the whole Board of Directors.
Any person ceasing to be a director shall ipso facto cease to be a member
of the Executive Committee.
Any vacancy in the Executive Committee occurring from any cause whatsoever
may be filled from among the directors by a resolution of a majority of the
whole Board of Directors.
Section 2. Other Committees. Other committees, whose members need not be
directors, may be appointed by the Board of Directors or the Executive
Committee, which committees shall hold office for such time and have such powers
and perform such duties as may from time to time be assigned to them by the
Board of Directors or the Executive Committee.
Any member of such a committee may be removed at any time, with or without
cause, by the Board of Directors or the Executive Committee. Any vacancy in a
committee occurring from any cause whatsoever may be filled by the Board of
Directors or the Executive Committee.
Section 3. Resignation. Any member of a committee may resign at any time.
Such resignation shall be made in writing and shall take effect at the time
specified therein, or, if no time be specified, at the time of its receipt by
the President or Secretary. The acceptance of a resignation shall not be
necessary to make it effective unless so specified therein.
Section 4. Quorum. A majority of the members of a committee shall
constitute a quorum. The act of a majority of the members of a committee present
at any meeting at which a
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quorum is present shall be the act of such committee. The members of a committee
shall act only as a committee, and the individual members thereof shall not have
any powers as such.
Section 5. Record of Proceedings, etc. Each committee shall keep a record
of its acts and proceedings, and shall report the same to the Board of Directors
when and as required by the Board of Directors.
Section 6. Organization, Meetings, Notices, etc. A committee may hold its
meetings at the principal office of the Corporation, or at any other place which
a majority of the committee may at any time agree upon. Each committee may make
such rules as it may deem expedient for the regulation and carrying on of its
meetings and proceedings. Unless otherwise ordered by the Executive Committee,
any notice of a meeting of such committee may be given by the Secretary of the
Corporation or by the chairman of the committee and shall be sufficiently given
if mailed to each member at his residence or usual place of business at least
two days before the day on which the meeting is to be held, or if sent to him at
such place by telegraph or cable, or delivered personally or by telephone not
later than 24 hours before the time at which the meeting is to be held.
Section 7. Compensation. The members of any committee shall be entitled to
such compensation as may be allowed them by resolution of the Board of
Directors.
ARTICLE V
OFFICERS
Section 1. Number. The officers of the Corporation shall be a President,
one or more Vice Presidents, a Secretary, one or more Assistant Secretaries, a
Treasurer, and one or more Assistant Treasurers, and such other officers as may
be appointed in accordance with the provisions of Section 3 of this Article V.
The Board of Directors in its discretion may also elect a Chairman of the Board
of Directors.
Section 2. Election Term of Office and Qualifications. The officers, except
as provided in Section 3 of this Article V, shall be chosen annually by the
Board of Directors. Each such officer shall, except as herein otherwise
provided, hold office until his successor shall have been chosen and shall
qualify. The Chairman of the Board of Directors, if any, and the President shall
be directors of the Corporation, and should any one of them cease to be a
director, he shall ipso facto cease to be such officer. Except as otherwise
provided by law, any number of offices may be held by the same person.
Section 3. Other Officers. Other officers, including one or more additional
vice-presidents, assistant secretaries or assistant treasurers, may from time to
time be appointed by the Board of Directors, which other officers shall have
such powers
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and perform such duties as may be assigned to them by the Board of Directors or
the officer or committee appointing them.
Section 4. Removal of Officers. Any officer of the Corporation may be
removed from office, with or without cause, by a vote of a majority of the Board
of Directors.
Section 5. Resignation. Any officer of the Corporation may resign at any
time. Such resignation shall be in writing and shall take effect at the time
specified therein, and if no time be specified, at the time of its receipt by
the President or Secretary. The acceptance of a resignation shall not be
necessary in order to make it effective, unless so specified therein.
Section 6. Fillings of Vacancies. A vacancy in any office shall be filled
by the Board of Directors or by the authority appointing the predecessor in such
office.
Section 7. Compensation. The compensation of the officers shall be fixed by
the Board of Directors, or by any committee upon whom power in that regard may
be conferred by the Board of Directors.
Section 8. Chairman of the Board of Directors. The Chairman of the Board of
Directors shall be a director and shall preside at all meetings of the Board of
Directors at which he shall be present, and shall have such power and perform
such duties as may from time to time be assigned to him by the Board of
Directors.
Section 9. President. The President shall, when present, preside at all
meetings of the stockholders, and, in the absence of the Chairman of the Board
of Directors, at meetings of the Board of Directors. He shall have power to call
special meetings of the stockholders or of the Board of Directors or of the
Executive Committee at any time. He shall be the chief executive officer of the
Corporation, and shall have the general direction of the business, affairs and
property of the Corporation, and of its several officers, and shall have and
exercise all such powers and discharge such duties as usually pertain to the
office of President.
Section 10. Vice Presidents. The Vice Presidents, or any of them, shall,
subject to the direction of the Board of Directors, at the request of the
President or in his absence, or in case of his inability to perform his duties
from any cause, perform the duties of the President, and, when so acting, shall
have all the powers of, and be subject to all restrictions upon, the President.
The Vice Presidents shall also perform such other duties as may be assigned to
them by the Board of Directors, and the Board of Directors may determine the
order of priority among them.
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Section 11. Secretary. The Secretary shall perform such duties as are
incident to the office of Secretary, or as may from time to time be assigned to
him by the Board of Directors, or as are prescribed by these By-laws.
Section 12. Treasurer. The Treasurer shall perform such duties and have
powers as are usually incident to the office of Treasurer or which may be
assigned to him by the Board of Directors.
ARTICLE VI
CAPITAL STOCK
Section 1. Issue of Certificates of Stock. Certificates of capital stock
shall be in such form as shall be approved by the Board of Directors. They shall
be numbered in the order of their issue and shall be signed by the Chairman of
the Board of Directors, the President or one of the Vice Presidents, and the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer,
and the seal of the Corporation or a facsimile thereof shall be impressed or
affixed or reproduced thereon, provided, however, that where such certificates
are signed by a transfer agent or an assistant transfer agent or by a transfer
clerk acting on behalf of the Corporation and a registrar, the signature of any
such Chairman of the Board of Directors, President, Vice President, Secretary,
Assistant Secretary, Treasurer or Assistant Treasurer may be facsimile. In case
any officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on any such certificate or certificates shall
cease to be such officer or officers of the Corporation, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Corporation, such certificate or certificates may
nevertheless be adopted by the Corporation and be issued and delivered as though
the person or persons who signed such certificate or certificates, or whose
facsimile signature or signatures shall have been used thereon have not ceased
to be such officer or officers of the Corporation.
Section 2. Registration and Transfer of Shares. The name of each person
owning a share of the capital stock of the Corporation shall be entered on the
books of the Corporation together with the number of shares held by him, the
numbers of the certificates covering such shares and the dates of issue of such
certificates. The shares of stock of the Corporation shall be transferable on
the books of the Corporation by the holders thereof in person, or by their duly
authorized attorneys or legal representatives, on surrender and cancellation of
certificates for a like number of shares, accompanied by an assignment or power
of transfer endorsed thereon or attached thereto, duly executed, and with such
proof of the authenticity of the signature as the Corporation or its agents may
reasonably require. A record shall be made of each transfer.
-9-
<PAGE>
The Board of Directors may make other and further rules and regulations
concerning the transfer and registration of certificates for stock and may
appoint a transfer agent or registrar or both and may require all certificates
of stock to bear the signature of either or both.
Section 3. Lost, Moved, Mutilated Certificates. The holder of any stock of
the Corporation shall immediately notify the Corporation of any loss, theft,
destruction or mutilation of the certificates therefor. The Corporation may
issue a new certificate of stock in the place of any certificate theretofore
issued by it alleged to have been lost, stolen or destroyed, and the Board of
Directors may, in its discretion, require the owner of the lost, stolen or
destroyed certificate, or his legal representatives, to give the Corporation a
bond, in such sum not exceeding double the value of the stock and with such
surety or sureties as they may require, to indemnify it against any claim that
may be made against it by reason of the issue of such new certificate and
against all other liability in the premises, or may remit such owner to such
remedy or remedies as he may have under the laws of the State of Delaware.
ARTICLE VII
DIVIDENDS, SURPLUS, ETC.
Section 1. General Discretion of Directors. The Board of Directors shall
have power to fix and vary the amount to be set aside or reserved as working
capital of the Corporation, or as reserves, or for other proper purposes of the
Corporation, and, subject to the requirements of the Certificate of
Incorporation, to determine whether any, if any, part of the surplus or net
profits of the Corporation shall be declared as dividends and paid to the
stockholders, and to fix the date or dates for the payment of dividends.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall commence
on the first day of January and end on the last day of December.
Section 2. Corporate Seal. The corporate seal shall be in such form as
approved by the Board of Directors and may be altered at their pleasure. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or reproduced or otherwise.
Section 3. Notices. Except as otherwise-expressly provided, any notice
required by these By-laws to be given shall be sufficient if given by depositing
the same in a post office or letter box in a sealed postpaid wrapper addressed
to the person entitled thereto at his address, as the same appears upon the
books of the Corporation, or by telegraphing or cabling the same
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<PAGE>
to such person at such addresses; and such notice shall be deemed to be given at
the time it is mailed, telegraphed or cabled.
Section 4. Waiver of Notice. Any stockholder or director may at any time,
by writing or by telegraph or by cable, waive any notice required to be given
under these By-laws, and if any stockholder or director shall be present at any
meeting his presence shall constitute a waiver of such notice.
Section 5. Checks, Drafts. etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation, shall be signed by such officer or officers, agent or agents of
the Corporation, and in such manner, as shall from time to time be designated by
resolution of the Board of Directors.
Section 6. Deposits. All funds of the Corporation shall be deposited from
time to time to the credit of the Corporation in such bank or banks, trust
companies or other depositories as the Board of Directors may select, and, for
the purpose of such deposit, checks, drafts, warrants and other orders for the
payment of money which are payable to the order of the Corporation, may be
endorsed for deposit, assigned and delivered by any officer of the Corporation,
or by such agents of the Corporation as the Board of Directors or the President
may authorize for that purpose.
Section 7. Voting Stock of Other Corporations. Except as otherwise ordered
by the Board of Directors or the Executive Committee, the President or the
Treasurer shall have full power and authority on behalf of the Corporation to
attend and to act and to vote at any meeting of the stockholders of any
corporation of which the Corporation is a stockholder and to execute a proxy to
any other person to represent the Corporation at any such meeting, and at any
such meeting the President or the Treasurer or the holder of any such proxy, as
the case may be, shall possess and may exercise any and all rights and powers
incident to ownership of such stock and which, as owner thereof, the Corporation
might have possessed and exercised if present. The Board of Directors or the
Executive Committee may from time to time confer like powers upon any other
person or persons.
Section 8. Indemnification of Officers and Directors. Indemnification of
certain persons by the Corporation shall be as specified or determined pursuant
to the Certificate of Incorporation of the Corporation as in effect from time to
time.
ARTICLE IX
AMENDMENTS
The Board of Directors shall have the power to make, rescind, alter, amend
and repeal these By-laws, provided, however, that the stockholders shall have
power to rescind,
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alter, amend or repeal any by-laws made by the Board of Directors, and to enact
by-laws which if so expressed shall not be rescinded, altered, amended or
repealed by the Board of Directors. No change of the time or place for the
annual meeting of the stockholders for the election of directors shall be made
except in accordance with the laws of the State of Delaware.
-12-
EXHIBIT 10.12
Execution Copy
RESTATED DEFINITIVE AGREEMENT BETWEEN
LORAL ORION, INC. (FORMERLY ORION NETWORK SYSTEMS, INC.) AND
THE REPUBLIC OF THE MARSHALL ISLANDS
This restated agreement is made this ____ day of October, 1998 (the
"Effective Date"), by and between Loral Orion, Inc., a Delaware Corporation,
hereinafter referred to as "LORAL ORION" and formerly known as Orion Network
Systems, Inc. ("ONS"), and the Republic of the Marshall Islands, through the
Ministry of Transportation and Communications, hereinafter referred to as the
"RMI."
WITNESSETH
WHEREAS, the RMI and Asia Pacific Space and Communications, Ltd. ("APSC")
entered into a Definitive Agreement dated April 26, 1990 (the "Definitive
Agreement");
WHERAS, the RMI and APSC agreed to the assignment of all APSC rights to and
obligations under the Definitive Agreement to ONS along with certain other
modifications to be restated herein in a Restated Amendment to the Definitive
Agreement dated May 25, 1997;
WHEREAS, ONS was acquired in a merger by Loral Space & Communications, Ltd.
("Loral SC") on March 30, 1998 (the "Merger") and as a result thereof the name
of ONS was changed to Loral Orion, Inc.;
WHEREAS, LORAL ORION is an international communications company developing
a satellite communications system to serve significant areas of the Pacific
Ocean Region, including coverage of the RMI;
WHEREAS, the RMI is a sovereign nation located in the Central Pacific Ocean
Region;
WHEREAS, the RMI desires to enhance and expand its telecommunications
capability and infrastructure;
WHEREAS, the parties desire to do those things necessary to enable LORAL
ORION to launch a satellite over the Pacific Ocean Region; and
WHEREAS, the RMI and LORAL ORION have reached certain understandings in
principle and believe there are mutual benefits to be derived by restating the
Definitive Agreement with certain modifications as this Restated Definitive
Agreement (along with the Appendices hereto, the "Agreement");
1
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NOW THEREFORE, it is mutually agreed as follows:
1. [ * ]
2. [ * ]
3. The parties acknowledge that the RMI is a member of the ITU and understand
that matters critical to the success of the Satellite System may be
significantly affected by various actions of the ITU. [ * ]
2
<PAGE>
4. The parties acknowledge that the RMI desires to enhance and expand its
communications capabilities and infrastructure. [ * ]
3
<PAGE>
5. [ * ]
6. [ *
4
<PAGE>
5
<PAGE>
]
7. The parties acknowledge that the provisions substantially in the form
contained in paragraphs 4,5,6 &7 shall be set forth in a separate agreement
between Loral Orion and NTA. Performance of the terms of such agreement by
Loral Orion shall satisfy its obligations to the RMI with respect to the
Deliverables. However, in the event that NTA declines to enter into such
agreement for any reason, such event shall not be deemed a breach or cause
for termination of this agreement. In such case, the Minister of Transport
& Communications of the RMI will become the recipient of the Deliverables.
8. [ * ]
9. Within forty-five (45) days after the Effective Date (the "Purchase
Period"), LORAL ORION shall purchase or otherwise procure such number of
shares of common stock of Loral SC equal to [
6
<PAGE>
] Within forty-five (45) days [ * ], LORAL ORION shall deliver the RMI
Stock to the RMI. [ * ]
In consideration of the foregoing, the Non-Qualified Stock Option Agreement
between LORAL ORION (formerly ONS) and the RMI, dated effective as of
December 10, 1996 [ * ] is hereby terminated without liability and shall be
deemed null and void.
10. [ * ]
11. It is understood that matters affecting the Satellite System are highly
confidential and proprietary. The RMI agrees to take all necessary and
reasonable steps to limit the information concerning the Satellite System
to the fewest number of persons possible within the RMI and to assure that
such persons do not communicate matters regarding LORAL ORION to others.
Furthermore, the existence of this Agreement or the relationship between
the parties hereto shall not be disclosed to any party except as necessary
to carry out the purposes of this Agreement or as required by applicable
law. Loral Orion acknowledges that such confidential and proprietary
information may be disclosed by the RMI to the extent reasonable and
necessary to fulfill or satisfy any obligation imposed by its constitution
or laws or in the pursuit of a free and open Government.
12. This Agreement shall become effective upon the Effective Date continue
until terminated under the terms and conditions of this Agreement.
13. In the event either party is in default in the performance of any material
provision of this Agreement, the nondefaulting party, upon written notice,
may terminate this
7
<PAGE>
Agreement; provided, however, that prior to such termination, the
non-defaulting party must notify the defaulting party, in writing, of the
specific provision which has not been performed, the conduct required to
complete performance and cure the alleged default, and a request to cure
the alleged default. Upon receipt of the notice specifying the default, the
other party shall have 45 days to submit a written Response. Said Response
shall state either that there has been no failure to perform and no default
has occurred and an explanation thereof, or that the default will be cured
and describing the actions it intends to take and a reasonable schedule to
complete these actions. If the default continues after the expiration of a
reasonable time to cure, as set forth in the Response, the non-defaulting
party, in addition to any other remedy at law or equity, may then forward
to the defaulting party a Notice of Termination
14. Neither party to this Agreement shall be in default because of its failure
to perform or delay in performance caused by actions or failures of third
parties, acts of God, acts of War, natural disasters, acts of
subcontractors beyond the control of their prime contractor, delays in
shipment of goods, or other acts or events beyond its control that
materially affect the ability of a party to perform under the terms and
conditions of this Agreement.
15. Except as otherwise provided herein, this Agreement may not be terminated
except by mutual agreement of the parties.
16. [ * ]
17. This Agreement constitutes the entire agreement between the parties in
connection with the subject matter of this Agreement and may be altered,
amended or replaced only by a duly executed written instrument. No prior
oral or written understanding or agreement with respect to the terms and
conditions agreed to in this Agreement, except the Confidentiality
Agreement or as otherwise expressly incorporated herein, shall be valid or
enforceable.
18. This Agreement may be altered or amended only by mutual agreement set forth
in writing and properly executed by the respective parties hereto.
19. This Agreement may be executed in two or more counterparts, which taken
together constitute one single contract between the parties.
{signature page follows}
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date:
Republic of the Marshall Islands Loral Orion, Inc.
------------------------- ------------------------
Kunio D. Lemari Richard H. Shay
Minister of Transportation Sr. Vice President, Law and Admin.
P.O. Box 2 2440 Research Boulevard
Majuro, Marshall Islands Rockville, Maryland
MH 96960 USA 20850
Approved as to form: Certified no current
appropriation is required:
-------------------- --------------------
Attorney General Secretary of Finance
9
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APPENDIX I
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR APPENDIX I]
10
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APPENDIX II
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR APPENDIX II]
11
<PAGE>
APPENDIX III
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR APPENDIX III]
12
EXHIBIT 10.17
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE
COMMISSION.
The portions of this Exhibit for which confidential treatment has been requested
are marked by bracket ([ ]). In addition, an asterisk ( * ) appears in the right
hand margin of each paragraph in which confidential treatment is included.
ORION-Z SPACECRAFT PURCHASE
CONTRACT
BY AND BETWEEN
LORAL ORION NETWORK SERVICES, INC.
AND
SPACE SYSTEMS/LORAL, INC.
CONTRACT NO. SS/L-TP98024
PROPRIETARY NOTICE
THIS CONTRACT AND THE INFORMATION CONTAINED HEREIN IS PROPRIETARY TO LORAL ORION
NETWORK SYSTEMS, INC. AND SPACE SYSTEMS/LORAL, INC. AND SHALL NOT BE PUBLISHED,
REPRODUCED, COPIED, DISCLOSED, OR USED FOR OTHER THAN ITS INTENDED PURPOSE
WITHOUT THE EXPRESS WRITTEN CONSENT OF A DULY AUTHORIZED REPRESENTATIVE OF LORAL
ORION NETWORK SERVICES, INC. AND SPACE SYSTEMS/LORAL, INC.
Part 1(A) Terms and Conditions
<PAGE>
PARTS
PART 1 (A) TERMS AND CONDITIONS, dated May 15, 1998
PART 1 (B) PAYMENT MILESTONE SCHEDULE AND TERMINATION LIABILITY AMOUNTS
PART 1(C) KEY CONTRACTOR POSITIONS, dated May 11, 1998
PART 2(A) ORION-Z STATEMENT OF WORK (SOW), dated May 11, 1998
PART 2(B) ORION-Z CONTRACT DOCUMENTATION REQUIREMENTS LIST (CDRL), dated
May 11, 1998
PART 3(A) TECHNICAL SPECIFICATIONS FOR ORION-Z SPACECRAFT, dated May 11,
1998
PART 3(A) ANNEX A, RADIATION ENVIRONMENT SPECIFICATION, dated May 11, 1998
PART 3(B) ORION-Z SPACECRAFT PRODUCT ASSURANCE REQUIREMENTS, dated April
14, 1998
PART 3(C) ORION-Z SPACECRAFT ON-GROUND TEST REQUIREMENTS, dated May 11,
1998
PART 3(D) ORION-Z IN-ORBIT COMMISSIONING AND ACCEPTANCE TEST REQUIREMENTS,
dated May 11, 1998
PART 3(E) DYNAMIC SPACECRAFT SIMULATOR SPECIFICATION, dated May 11, 1998
PART 3(F) ORION-Z SPACECRAFT SCF AND SOFTWARE REQUIREMENTS SPECIFICATION
(E191269), dated May 11, 1998
PART 4 RESERVED
PART 5 SATELLITE STORAGE PLAN, dated May 11, 1998
Part 1(A) Terms and Conditions
<PAGE>
ORION NETWORK SERVICES, INC.
PART 1(A)
TERMS AND CONDITIONS
Part 1(A) Terms and Conditions
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION ........................................... 1
1.1 CERTAIN DEFINITIONS .................................................... 1
1.2 OTHER TERMS ............................................................ 7
1.3 PARTS .................................................................. 8
1.4 INTEGRATION AND CONSTRUCTION ........................................... 8
1.5 HEADINGS ............................................................... 9
2. CONTRACTOR SCOPE OF WORK ............................................... 9
2.1 SCOPE OF WORK .......................................................... 9
3. ORION SCOPE OF WORK .................................................... 9
3.1 SCOPE OF WORK .......................................................... 9
4. CONTRACT PRICE AND OTHER CHARGES ....................................... 9
4.1 GENERAL ................................................................ 9
4.2 CONTRACT PRICE ......................................................... 10
5. INVOICING AND PAYMENT .................................................. 10
5.1 INVOICING .............................................................. 10
5.2 PAYMENT ................................................................ 11
5.3 METHOD OF PAYMENT ...................................................... 13
5.4 LATE PAYMENT FEE ....................................................... 13
5.5 OTHER PAYMENTS ......................................................... 13
5.6 RIGHT OF SET-OFF ....................................................... 13
5.7 DISPUTED CHARGES ....................................................... 14
6. DELIVERY ............................................................... 14
6.1 DELIVERY SCHEDULE ...................................................... 14
6.2 DELAY .................................................................. 15
6.3 EXCUSABLE DELAY ........................................................ 15
7. ACCEPTANCE TESTING AND FINAL ACCEPTANCE ................................ 16
7.1 GENERAL ................................................................ 16
7.2 ACCEPTANCE TESTING ..................................................... 16
Part 1(A) Terms and Conditions
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<PAGE>
7.3 PRE-LAUNCH CERTIFICATION ............................................... 16
7.4 FINAL ACCEPTANCE OF DATA AND DOCUMENTATION ............................. 16
7.5 FINAL ACCEPTANCE OF ORION-Z SPACECRAFT ................................. 17
8. TITLE TO DELIVERABLE ITEMS AND RISK OF LOSS ............................ 18
8.1 ORION-Z SPACECRAFT ..................................................... 18
8.2 DATA AND DOCUMENTATION ................................................. 19
8.3 OTHER DELIVERABLE ITEMS ................................................ 19
9. CHANGES IN SCOPE OF WORK ............................................... 19
9.1 CHANGES REQUESTED BY ORION ............................................. 19
9.2 CHANGES REQUESTED BY CONTRACTOR ........................................ 20
10. CORRECTIVE MEASURES IN UNLAUNCHED SATELLITES ........................... 20
10.1 CORRECTIVE MEASURES .................................................... 20
10.2 MANUFACTURERS' WARRANTIES .............................................. 22
10.3 REPLACED EQUIPMENT ..................................................... 23
10.4 IN-ORBIT DATA .......................................................... 23
11. REPRESENTATIONS AND WARRANTIES ......................................... 23
11.1 CONTRACTOR PERSONNEL ................................................... 23
11.2 SOFTWARE AND INVENTION OWNERSHIP ....................................... 23
11.3 AUTHORIZATION .......................................................... 23
11.4 INDUCEMENTS ............................................................ 23
12. IN-ORBIT PERFORMANCE WARRANTY AND INCENTIVE PAYMENTS ................... 24
12.1 IN-ORBIT PERFORMANCE WARRANTY .......................................... 24
12.2 ADVANCE INCENTIVE PAYMENT AT FINAL ACCEPTANCE .......................... 24
12.3 MONTHLY TRANSPONDER INCENTIVE AMOUNT ................................... 28
12.4 MONTHLY POWER INCENTIVE AMOUNT ......................................... 33
12.5 MEASURING IN-ORBIT PERFORMANCE ......................................... 37
12.6 ECLIPSE ................................................................ 37
12.7 DISPUTED PERFORMANCE ................................................... 37
13. INSURANCE .............................................................. 38
13.1 GENERAL ................................................................ 38
13.2 REQUIRED INSURANCE ..................................................... 38
Part 1(A) Terms and Conditions
Issue 1
<PAGE>
13.3 SUBCONTRACTS............................................................ 40
13.4 DOCUMENTARY EVIDENCE.................................................... 40
13.5 CLAIMS.................................................................. 40
14. ADDITIONAL SATELLITE OPTION............................................. 40
14.1 DELIVERY SCHEDULE....................................................... 40
14.2 PRICE................................................................... 41
14.3 ADDITIONAL SATELLITE CONTRACT PROVISIONS................................ 41
15. INDEMNIFICATION, INTER-PARTY WAIVER OF LIABILITY, AND LIMITATION
OF LIABILITY AND DISCLAIMER OF WARRANTY ................................ 41
15.1 INDEMNITY BY CONTRACTOR................................................. 41
15.2 INDEMNITY BY ORION...................................................... 42
15.3 INFRINGEMENT............................................................ 43
15.4 INDEMNIFICATION PROCEDURES.............................................. 43
15.5 INTER-PARTY WAIVER OF LIABILITY FOR LAUNCH OPERATIONS................... 44
15.6 WAIVER OF SUBROGATION................................................... 45
15.7 LIMITATION OF LIABILITY................................................. 45
15.8 DISCLAIMER OF WARRANTY.................................................. 45
16. DISPUTE RESOLUTION...................................................... 46
16.1 INFORMAL DISPUTE RESOLUTION............................................. 46
16.2 ARBITRATION............................................................. 46
16.3 LITIGATION.............................................................. 48
17. TERMINATION............................................................. 49
17.1 TERMINATION FOR CONVENIENCE............................................. 49
17.2 TERMINATION FOR CONTRACTOR'S DEFAULT.................................... 50
17.3 TERMINATION FOR EXCUSABLE DELAY......................................... 52
17.4 TERMINATION FOR ORION'S DEFAULT......................................... 53
17.5 MITIGATION OF DAMAGES................................................... 54
17.6 RESOLUTION EFFORTS...................................................... 55
17.7 CONTINUED PERFORMANCE................................................... 55
18. KEY CONTRACTOR PERSONNEL................................................ 55
18.1 KEY POSITIONS........................................................... 55
18.2 ASSIGNMENT OF KEY CONTRACTOR PERSONNEL.................................. 55
Part 1(A) Terms and Conditions
Issue 1
<PAGE>
18.3 APPROVED KEY CONTRACTOR PERSONNEL....................................... 56
19. PERMITS, LICENSES AND GOVERNMENT APPROVALS.............................. 56
19.1 CONTRACTOR RESPONSIBILITY AND EXPENSES.................................. 56
19.2 ORION REVIEW OF GOVERNMENT APPLICATIONS................................. 56
19.3 COMPLIANCE WITH GOVERNMENT REQUIREMENTS................................. 56
20. ACCESS TO WORK IN PROGRESS.............................................. 57
20.1 GENERAL................................................................. 57
20.2 OFFICE SPACE AND FACILITIES............................................. 57
20.3 DOCUMENTATION........................................................... 58
20.4 MEETINGS AND REVIEWS.................................................... 58
20.5 SUBCONTRACTS............................................................ 59
21. LICENSE RIGHTS.......................................................... 59
21.1 SOFTWARE, INVENTIONS AND DATA AND DOCUMENTATION......................... 59
21.2 TECHNICAL DATA AND INFORMATION.......................................... 60
22. CONFIDENTIALITY AND NONDISCLOSURE OF PROPRIETARY INFORMATION............ 63
22.1 DEFINITION AND EXEMPTIONS............................................... 63
22.2 PRIOR APPROVAL OF CERTAIN DISCLOSURES................................... 64
22.3 CONFIDENTIALITY OBLIGATIONS............................................. 64
22.4 COPYING................................................................. 65
23. YEAR 2000 COMPLIANCE.................................................... 65
24. CONTRACT MANAGEMENT..................................................... 65
24.1 GENERAL................................................................. 65
24.2 APPROVALS AND ACCEPTANCES............................................... 65
24.3 CONTRACT MONITORING..................................................... 66
24.4 ORION CONSULTANTS....................................................... 66
24.5 SUBCONTRACTING.......................................................... 66
25. GROUND STORAGE OPTION................................................... 69
25.1 NOTIFICATION............................................................ 69
25.2 STORAGE LOCATION........................................................ 69
25.3 STORAGE PRICES.......................................................... 69
25.4 INVOICING AND PAYMENT................................................... 69
Part 1(A) Terms and Conditions
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<PAGE>
25.5 TITLE AND RISK OF LOSS................................................. 69
25.6 NOTIFICATION OF INTENTION TO LAUNCH A STORED SPACECRAFT................ 69
25.7 IN-ORBIT PERFORMANCE WARRANTY AND PAYMENTS............................. 70
26. LAUNCH VEHICLE AGENCY.................................................. 70
26.1 INSURANCE.............................................................. 70
26.2 COMPLIANCE WITH LAWS AND REGULATIONS................................... 70
27. RESPONSIBILITY FOR THE CONTRACT........................................ 71
27.1 ABILITY TO PERFORM..................................................... 71
27.2 FIXED CONTRACT PRICE................................................... 71
27.3 INCONSISTENCIES IN CONTRACT............................................ 71
27.4 SUBCONTRACTOR COOPERATION.............................................. 72
28. GENERAL................................................................ 72
28.1 EFFECTIVE DATE OF CONTRACT............................................. 72
28.2 ASSIGNMENT............................................................. 72
28.3 ENTIRE AGREEMENT....................................................... 72
28.4 AMENDMENTS............................................................. 73
28.5 WAIVER OF BREACH OF CONTRACT........................................... 73
28.6 CUMULATIVE REMEDIES.................................................... 73
28.7 SEVERABILITY........................................................... 73
28.8 APPLICABLE LAW......................................................... 73
28.9 NOTICES................................................................ 73
28.10 CONTRACTOR NOT AGENT................................................... 74
28.11 SURVIVAL............................................................... 74
28.12 RELEASE OF INFORMATION................................................. 75
28.13 GOVERNMENT FILINGS..................................................... 75
28.14 IMPROPER PAYMENTS, KICKBACKS, GIFTS, AND GRATUITIES.................... 75
28.15 COMPLIANCE WITH APPLICABLE LAWS........................................ 76
28.16 FINANCING.............................................................. 76
Part 1(A) Terms and Conditions
Issue 1
<PAGE>
TERMS AND CONDITIONS
THIS ORION-Z SPACECRAFT PURCHASE CONTRACT (the "Contract") is made and
entered into this 15th day of May, 1998 by and between Loral Orion Network
Services, Inc., a Delaware corporation with its principal offices located at
2440 Research Boulevard, Rockville, Maryland 20850, U.S.A. ("ORION"), and Space
Systems/Loral, Inc., a company organized and existing under the laws of Delaware
with its principal offices located at 3825 Fabian Way, Palo Alto, California
94303 ("Contractor"). As used in the Contract, "Party" means either ORION or
Contractor, as appropriate, and "Parties" means ORION and Contractor.
WHEREAS, the primary object of ORION is the carrying on of the business of
providing a telecommunications system by the use of space satellites;
WHEREAS, ORION anticipates providing the business referred to above through
the ORION satellite system ("ORIONSAT System");
WHEREAS, the ORION-Z Spacecraft to be constructed pursuant to the Contract
is intended to form part of the space segment of the ORIONSAT System;
WHEREAS, ORION and Contractor have agreed that Contractor will perform the
Work as defined below and that ORION will pay for the Work on the terms and
conditions set out in the Contract;
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants and agreements contained herein, the Parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 CERTAIN DEFINITIONS.
In the Contract, the following terms shall have the meaning stated
hereunder:
(a) "ADDITIONAL SATELLITE" shall have the meaning ascribed to it in
Article 14 (Additional Satellite).
(b) "ADVANCE INCENTIVE PAYMENT" means that portion of the Transponder
Orbital Incentive Amount and Power Orbital Incentive Amount paid by ORION to
Contractor as an advance incentive payment under Article 12.2 (Advance Incentive
Payment at Final Acceptance).
(c) "AGGREGATE PREDICTED TRANSPONDER LIFE" means the sum of the
Predicted Transponder Life of each and every Serviceable Transponder embodied in
the Launched ORION-Z Spacecraft.
1
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(d) "ASSOCIATES" means with respect to an entity, its directors,
officers, employees, agents, consultants, and assigns.
(e) "BUSINESS DAY" means any day other than the following: a Saturday,
Sunday or other day on which banks are authorized to be closed in the State of
New York.
(f) "CONSTRUCTIVE TOTAL LOSS" shall have the meaning set forth in
ORION's applicable launch insurance policy.
(g) "CONSULTANT" means any third party authorized by ORION to provide
technical and program support and assistance in connection with the performance
of the Contract.
(h) "CONTRACT" means the written instrument herein dated the day and
year first written above, including any amendments made pursuant to Article 28.4
(Amendments), embodying the agreement between Contractor and ORION and including
the Parts attached hereto and made a part of the Contract.
(i) "CONTRACT DOCUMENTATION REQUIREMENTS LIST" or "CDRL" means the
documentation requirements listed in Part 2(B) to the Contract and provided to
Contractor.
(j) "CONTRACT PRICE" means the total amount set forth in Article 4.2
(Contract Price).
(k) "CORRECTION PLAN" means a plan submitted by Contractor which
details how Contractor shall correct (i) a failure to make adequate progress
towards completion of the Work or (ii) a default or breach under the Contract in
accordance with Article 17.2.
(l) "DATA AND DOCUMENTATION" means that data and documentation to be
supplied by Contractor pursuant to the requirements of Part 2(A) (Statement of
Work) and Part 2(B) (Contract Documentation Requirements List).
(m) "DEFECT" means (i) with regard to the ORION-Z Spacecraft and all
components thereof, any defect in design, material or workmanship, or failure to
perform in accordance with the specifications and requirements of the Contract
that results in , or is likely to result in , non-compliant ORION-Z Spacecraft
performance; (ii) with regard to services, a failure to conform to a high
standard consistent with industry practice; and (iii) with regard to Data and
Documentation, a failure to meet any specifications or requirements set forth in
the Contract.
(n) "DELIVERABLE ITEM" means the items listed in Table 6.1 of Article
6 (Delivery), including the ORION-Z Spacecraft delivered in-orbit, and Data and
Documentation, and other items so identified in amendments to the Contract.
(o) "DELIVER" and its derivatives (such as "Delivered" and "Delivery")
shall have the meaning set forth in Article 5.2 (Payment) and Article 6.1
(Delivery Schedule).
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(p) "DELIVERY DATES" means those dates set forth in Article 6.1.
(q) "DELIVERY SCHEDULE" means the schedule for Delivery of the Work as
set forth in Table 6.1 of Article 6 (Delivery).
(r) "DEMAND" means, in the context of Article 17.2 (Termination for
Contractor's Default), a demand by ORION made of Contractor for Contractor to
provide a Correction Plan in the event that Contractor is failing to make
adequate progress in the performance of the Contract or is in default or breach.
(s) "EFFECTIVE DATE" or "EDC" means the effective date of the Contract
as set forth in Article 28.1 (Effective Date of Contract).
(t) "EQUIPMENT" means individual assemblies, parts thereof and
complete systems.
(u) "EXCUSABLE DELAY" has the meaning set forth in Article 6.3
(Excusable Delay).
(v) "FINAL ACCEPTANCE" has the meaning set forth in Article 7.5 (Final
Acceptance of ORION-Z Spacecraft).
(w) "IN-ORBIT ACCEPTANCE REQUIREMENTS" means Part 3(D) (In-Orbit
Commissioning and Acceptance Test Requirements).
(x) "IN-ORBIT ACCEPTANCE TEST PLAN" means that document that is a
Deliverable Item under Part 2(B) (Contract Documentation Requirements List) and
as described in Part 3(D) (In-Orbit Commissioning and Acceptance Test
Requirements) of the Contract.
(y) "IN-ORBIT ACCEPTANCE TEST REPORT" or "IN-ORBIT ACCEPTANCE REPORT"
means that document that is a Deliverable Item under Part 2(B) (Contract
Documentation Requirements List) and as described in Part 2(A) (Statement of
Work) and Part 3(D) (In-Orbit Commissioning and Acceptance Test Requirements) of
the Contract.
(z) "IN-ORBIT PERFORMANCE WARRANTY PERIOD" shall have the meaning
ascribed to it in Article 12.1 (In-Orbit Performance Warranty).
(aa) "INCLUDING" and its derivatives (such as "include" and
"includes") shall mean including without limitation. This term is as defined,
whether or not capitalized in this Agreement.
(bb) "INITIAL PAYMENT" means the aggregate amount representing
cumulative Milestone Payments due to Contractor as of the Effective Date of the
Contract as determined in accordance with Part 1(B) (Payment Milestone Schedule
and Termination Liability Amounts).
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<PAGE>
(cc) "INTENTIONAL IGNITION" means the point in time in the ignition
process of an Ariane 44LP Launch Vehicle, for the purpose of Launch, when the
command signal sent from the launch control console is received by the Launch
Vehicle, which command signal is intended to and does ignite the propellant
system for the purpose of Launch.
(dd) "INVOICE" means an invoice in the form of Annex A to this Part
1(A) of the Contract.
(ee) "L-X" means x months prior to the Scheduled Launch Date. For
example, if the Scheduled Launch Date is January 1, 1999, then L-6 means July 1,
1998.
(ff) "L+X" means x months after the Scheduled Launch Date. For
example, if the Scheduled Launch Date is January 1, 1999, then L+1 means
February 1, 1999.
(gg) "LAUNCH" means Intentional Ignition followed by the opening of
the table clamps.
(hh) "LAUNCH AGENCY" means Arianespace or such other Subcontractor as
is selected to supply, integrate and launch the Launch Vehicle, and provide
other launch services until separation of the ORION-Z Spacecraft from the Launch
Vehicle.
(ii) "LAUNCH AGREEMENT" means the agreement between Contractor and the
Launch Agency to perform the launch of the ORION-Z Spacecraft.
(jj) "LAUNCH SERVICES" means the launch campaign/transportation,
launch services, mission planning and launch/early operations phase services as
more particularly set forth in Section 7 of Part 2(A) (Statement of Work).
(kk) "LAUNCH TERMINATION" means the point in time when, following
Terminated Ignition, the launch pad is officially declared safe by the Launch
Agency
(ll) "LAUNCH VEHICLE" means the Ariane 44LP.
(mm) "LAUNCHED ORION-Z SPACECRAFT" means the ORION-Z Spacecraft after
its Launch.
(nn) "LOSSES" mean all losses, liabilities, damages, royalty payments
and claims, and all related costs and expenses (including reasonable legal fees
and disbursements and costs of investigation, litigation, settlement, judgment,
interest and penalties).
(oo) "MAJOR SUBCONTRACT" means a Subcontract that is of a value
exceeding Two Million, Five Hundred Thousand Dollars ($2,500,000) or of
importance or critical in nature to
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the overall program (e.g., a Subcontract for major or critical units, subsystems
or other items or services).
(pp) "MILESTONE PAYMENT" means those payments listed as Milestone
Payments in Part l(B) (Payment Milestone Schedule and Termination Liability
Amounts) of the Contract.
(qq) "MISSION SPECIFIC HARDWARE AND SOFTWARE" means those items of
hardware and software described in Section 10 of Part 2(A) (Statement of Work)
of the Contract.
(rr) "MONTHLY POWER INCENTIVE AMOUNT" means the Power Incentive Amount
paid at Final Acceptance divided into one hundred fifty-six (156) equal monthly
amounts.
(ss) "MONTHLY TRANSPONDER INCENTIVE AMOUNT" means the Transponder
Incentive Amount paid at Final Acceptance divided into one hundred fifty-six
(156) equal monthly amounts.
(tt) "ON-GROUND TEST REQUIREMENTS" means the test plans and test
procedures set forth in Part 3(C) (On-Ground Test Requirements) of the Contract.
(uu) "ORBITAL INCENTIVE AMOUNT" means a firm fixed sum of [ ] * [ ]
equivalent to the sum of the Power Orbital Incentive Amount and the Transponder
* Orbital Incentive Amount.
(vv) "ORION PERSONNEL" mean ORION's employees or representatives, or
its Consultant's employees or representatives.
(ww) "ORION-Z SPACECRAFT" means the satellite to be constructed and
Delivered to ORION as part of the Work and as identified in Part 2(A) (Statement
of Work) of the Contract.
(xx) "PAYMENT MILESTONE" means the task to be performed or event to
occur before payment is due under Article 5 (Invoicing and Payment) and Part 1
(B) (Payment Milestone Schedule and Termination Liability Amounts).
(yy) "POWER ORBITAL INCENTIVE AMOUNT" means a firm fixed sum of [ ] *
[ ]. *
(zz) "PREDICTED TRANSPONDER LIFE" means the period of time, measured
in years and portions thereof, over which a Serviceable Transponder can be
operated, commencing from the date of Delivery of the Preliminary In-Orbit
Acceptance Report, this period of time being equal to whichever is the shortest
of:
(1) thirteen (13) years, or
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(2) the ORION-Z Spacecraft predicted propellant life calculated
in accordance with Section 5 of Part 3(D) (In-Orbit
Commissioning and Acceptance Test Requirements) of the
Contract, or
(3) the period of time over which there is predicted to be
sufficient solar array power to operate such Serviceable
Transponder co-extensively with all other Serviceable
Transponders, calculated in accordance with Section 5 of
Part 3(D) (In-Orbit Commissioning and Acceptance Test
Requirements) of the Contract.
(aaa) "PRIMARY TRANSPONDER" means a transponder where the
communication signals are received from and transmitted to the ground.
(bbb) "REVENUE" means all amounts received by ORION with respect to an
individual Primary Transponder, whether as a result of its sale, lease, license
or other disposition, it being understood that, if said amounts are not received
in equal monthly installments, the total amount received or to be received by
ORION shall be deemed received in equal monthly installments over the remainder
of the Predicted Transponder Life of such Transponder.
(ccc) "SATISFACTORILY OPERATING PRIMARY TRANSPONDER" means a Primary
Transponder which is capable of meeting (i) the requirements of Part 3(A)
(Technical Specifications for ORION-Z Spacecraft) regarding Primary Transponder
performance and (ii) the Primary Transponder Test Requirements set forth in Part
3(D) (In-Orbit Commissioning and Acceptance Test Requirements).
(ddd) "SATURATED TRANSPONDER" means a Primary Transponder whose output
power amplifier is driven at its maximum designed end-of-life RF power output
point.
(eee) "SCHEDULED LAUNCH DATE" means the calendar date on which Launch
is scheduled to occur.
(fff) "SENIOR EXECUTIVE" means each of the senior executives
designated from time to time in writing, by ORION and by Contractor,
respectively, to be their representatives for the purposes of dispute resolution
under the Contract.
(ggg) "SERVICEABLE TRANSPONDER" means a Primary Transponder that meets
the requirements set forth in Section 5 of Part 3(D) (In-Orbit Commissioning and
Acceptance Test Requirements) of the Contract and is determined, pursuant to
Section 5.2 thereof, to be capable of operation in accordance with such
requirements during a period of eclipse. In the event that the Launched ORION-Z
Spacecraft has insufficient energy to operate [ ] Serviceable * Transponders at
2.2 dB output backoff and single amplifier mode in beginning of life eclipse,
those specific Transponders, if any, which failed the testing requirements of
Section 5.2 of Part
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3(D) will only be counted once in determining the total number of Transponders
that are Serviceable Transponders.
(hhh) "STATEMENT OF WORK" or "SOW" means the Work described in Part
2(A) (Statement of Work) to the Contract and to be provided by Contractor.
(iii) "SUBCONTRACT" means a contract awarded by Contractor to a
Subcontractor or a contract awarded by a Subcontractor at any tier of
performance of any work specified in the Contract.
(jjj) "SUBCONTRACTOR" means a person, firm, corporation or business
entity that has been awarded a Subcontract by Contractor or another
Subcontractor to provide a portion of the Work covered by the Contract.
(kkk) "TECHNICAL SPECIFICATIONS" means the technical specifications
set forth in Part 3(A) (Technical Specifications for ORION-Z Spacecraft) of the
Contract.
(lll) "TERMINATED IGNITION" means, following Intentional Ignition, the
Launch sequence is shut down before Launch.
(mmm) "TERMINATION LIABILITY AMOUNTS" means the amounts listed as
Termination Liability Amounts in Part 1(B).
(nnn) "TRANSPONDER" means an individual transmission channel of
defined bandwidth providing a path, inclusive of amplification, frequency
translation and frequency channelization, from a receive antenna with defined
coverage and polarization to a transmit antenna also with defined coverage and
polarization.
(ooo) "TRANSPONDER ORBITAL INCENTIVE AMOUNT" means a firm fixed sum of
[ ] * [ ]. *
(ppp) "WORK" means the whole of the work described in Part 2(A)
(Statement of Work) and elsewhere in the Contract and where the context so
permits or requires, "Work" includes any part or parts of the Work. The Work
includes all elements and phases of delivering the operational ORION-Z
Spacecraft in-orbit from design and manufacture, through Launch, Launch Services
and in-orbit testing, including provision of all Equipment and Data and
Documentation related thereto, including Deliverable Items, as specified in the
Contract.
1.2 OTHER TERMS.
Other terms in the Contract are defined in the context in which they are
used and shall have the meanings there indicated.
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1.3 PARTS.
The following documents hereby constitute the Contract:
(a) Part 1(A) - Terms and Conditions
(b) Part 1(B) - Payment Milestone Schedule and Termination Liability
Amount
(c) Part 1(C) - Key Contractor Positions
(d) Part 2(A) - ORION-Z Statement of Work (SOW)
(e) Part 2(B) - ORION-Z Contract Documentation Requirements List
(CDRL)
(f) Part 3(A) - Technical Specifications for ORION-Z Spacecraft
(g) Part 3(A), Annex A - Radiation Environment Specification
(h) Part 3(B) - ORION-Z Spacecraft Product Assurance Requirements
(i) Part 3(C) - ORION-Z Spacecraft On-Ground Test Requirements
(j) Part 3(D) - ORION-Z In-Orbit Commissioning and Acceptance Test
Requirements
(k) Part 3(E) - Dynamic Spacecraft Simulator Specification
(l) Part 3(F) - ORION Z Spacecraft SCF and Software Requirements
Specification
(m) Part 4 - RESERVED
(n) Part 5 - Satellite Storage Plan
1.4 INTEGRATION AND CONSTRUCTION.
(a) Notwithstanding anything herein to the contrary, the documents
listed in Article 1.3 shall be deemed to constitute one fully integrated
agreement between the Parties. In the event of any ambiguity, conflict or
inconsistency among the provisions of the various parts of the Contract, such
conflict or inconsistency shall be resolved by giving a descending level of
precedence to the documents listed in Article 1.3.
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(b) In the event the Parties are unable to resolve any ambiguity, conflict
or inconsistency that affects the Work, ORION shall direct Contractor and
Contractor shall follow such direction as to the interpretation to be followed
in carrying out the Work. If Contractor disputes ORION's interpretation and such
interpretation results in delay and/or increased costs and/or risks, either
Party may proceed under Article 16 (Dispute Resolution) to resolve such dispute.
1.5 HEADINGS.
The Article headings are for convenience of reference only and shall not be
considered in interpreting the text of the Contract. Words in the singular
include the plural and vice versa and words imputing the masculine gender
include the feminine and neuter genders where the context so requires.
2. CONTRACTOR SCOPE OF WORK
2.1 SCOPE OF WORK.
Contractor shall furnish the Work in accordance with the provisions of the
Contract. In the performance of the Work, Contractor shall supply all personnel,
materials and facilities necessary therefore.
3. ORION SCOPE OF WORK
3.1 SCOPE OF WORK.
The primary ORION responsibilities necessary to enable Contractor to
perform Work in certain defined areas are identified in Part 2(A) (Statement of
Work).
Orion's failure to timely perform one or more of its responsibilities under
the Contract shall entitle Contractor to an equitable adjustment to the Contract
Price and Delivery Schedule, provided Contractor provides ORION reasonable
notice of non-performance and reasonable opportunity to cure.
4. CONTRACT PRICE AND OTHER CHARGES
4.1 GENERAL.
All charges for the Work are set forth in this Article 4 and Article 12
(In-Orbit Performance Warranty and Incentives) and, if an Additional Satellite
is ordered, Article 14 (Additional Satellite), and if ground storage is ordered,
Article 25 (Ground Storage Option), as such articles may be amended pursuant to
Articles 8 (Changes in Scope of Work) and 28.4
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(Amendments). ORION shall not be required to pay Contractor any amounts for the
Work in addition to those payable to Contractor under this Article 4, Article
12, Article 14 and Article 25.
4.2 CONTRACT PRICE.
(a) ORION shall pay to Contractor the sum of One Hundred Fifty-Five Million
Five Hundred Thirty Thousand Dollars ($155,530,000) as the Contract Price for
the performance of the Work under the Contract. Upon the full and timely
completion and delivery, as required, of the items of Work specified in the
Contract, and acceptance of such items by ORION in accordance with the
requirements of the Contract, Contractor shall be entitled to payment by ORION
in accordance with the provisions of Article 5 (Invoicing and Payment).
(b) The Contract Price shall comprise the following elements:
================================================================================
TABLE 4.2 CONTRACT PRICE
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ITEM $U.S.
<S> <C>
1. ORION-Z Spacecraft delivered in orbit (including cost of Ariane 44LP $[ ] *
Launch Vehicle, any Launch Services, Data and Documentation, Operations
Training, Mission Specific Hardware and Software, and the Dynamic
Software Simulator)
2. Orbital Incentive Amount $[ ] *
CONTRACT PRICE TOTAL $ 155,530,000
</TABLE>
(c) The Contract Price includes all charges for Data and Documentation,
operations training, interest, the insurance specified in Article 13 and 26.1,
shipping costs and all other assessments, including all applicable duties and/or
taxes. Contractor shall pay any duty and/or tax levied by any governmental
agency as may be required by law to be paid in the performance of Contractor's
obligations under the Contract. Except as expressly provided in the Contract,
the Contract Price is not subject to any escalation, or to any adjustment or
revision by reason of the actual cost incurred by Contractor in performance of
Contractor's obligations under the Contract.
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5. INVOICING AND PAYMENT
5.1 INVOICING.
(a) Upon successful performance of the Work associated with each Payment
Milestone, Contractor shall submit an Invoice in the amount specified in Part
1(B) (Payment Milestone Schedule and Termination Liability Amounts) for that
Payment Milestone. Each such Invoice shall be accompanied by a certificate in
the form of Annex A hereto together with such supporting data as Contractor
deems necessary or appropriate. This Article 5.1 shall also apply to the Initial
Payment.
(b) Except as otherwise expressly stated herein, all other amounts due to
Contractor under the Contract shall be invoiced in accordance with the
procedures set forth in this Article 5.1.
(c) Contractor shall first submit its Invoice via electronic communications
media (e.g., facsimile) to be followed by the original Invoice. Provided ORION
receives the original Invoice within five (5) days after receipt of the
electronic communication, the date of receipt of the electronic communication
shall be deemed the date of receipt of the Invoice and the start of the payment
period; otherwise, the date of receipt of the original Invoice shall be deemed
the date of receipt of the Invoice and the start of the payment period.
Contractor shall submit copies of the Invoice to:
ORION
2440 Research Boulevard
Suite 400
Rockville, Maryland 20850
United States of America
Fax: (301) 258-3360
Attention: Denise Olmsted
5.2 PAYMENT.
(a) With the exception of the Initial Payment, which shall be paid
simultaneously with the Effective Date of the Contract, ORION shall make
Milestone Payments to the Contractor in accordance with the Milestone Payment
Plan specified in Part 1(B) as adjusted by Article 28.4. Each Milestone Payment
shall be payable by the Contractor submitting to ORION a Request for Payment
accompanied by a certificate in the form of Annex A hereto together with such
supporting documentation the Contractor deems necessary or appropriate. ORION
shall pay Contractor, within thirty (30) days from the date of receipt (as
determined in accordance with Article 5.1(c)) of such Invoice, the total amount
claimed by Contractor on such Invoice; provided, however, that (i) the Work
associated with the applicable Payment Milestone has been Successfully
Completed, Conducted, or Delivered (as each term is defined in Article 5.2(e)
below), as applicable, (ii) the certificate in the form of Annex A hereto has
been executed by
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both ORION and Contractor; and (iii) for the month when such Invoice would be
due for payment, the aggregate amount (including such Invoice) paid by ORION to
that point in time would not exceed the aggregate amount scheduled to be paid to
that point in time in accordance with Part 1(B). There shall be only one (1)
payment made to Contractor per calendar month.
(b) Where the thirty-day period specified in (a) above causes a payment to
become due on a non-Business Day, such payment shall be due on the next Business
Day.
(c) In the event Contractor completes any Payment Milestone in advance of
the time scheduled for payment of such Payment Milestone as set forth in Part
1(B), Contractor shall have the right to submit an Invoice for such Payment
Milestone and ORION shall be required to pay such Invoice; provided, however,
that (i) the Work associated with the Payment Milestone has been Successfully
Completed, Conducted or Delivered, as applicable, and (ii) for the month when
such Invoice would be due for payment, the aggregate amount (including such
Invoice) paid by ORION to that point in time would not exceed the aggregate
amount scheduled to be paid to that point in time in accordance with Part 1(B).
(d) The following terms shall have the meanings stated herein, applicable
to the Payment Milestones set forth in Part l(B):
(1) "SUCCESSFULLY COMPLETED" as it pertains to test milestones means
that:
(i) test(s) shall have been conducted in accordance with the
applicable On-Ground Test Requirements;
(ii) test results shall be within the limits prescribed in
the On-Ground Test Requirements, or noncompliance with
such requirements shall have been identified, reviewed
and corrected in accordance with the Contract; and
(iii) test results shall have been provided in writing to
ORION in accordance with the Contract.
(2) "CONDUCTED" as it pertains to the conduct of design reviews means,
as applicable, that:
(i) design review data packages shall have been submitted to
ORION in accordance with the Contract;
(ii) design review meetings shall have been held, and action
items and minutes issued, in accordance with the Contract; and
(iii) design review action items have been completed.
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(3) "DELIVERED" means that the applicable item (for example,
ORION-Z Spacecraft, Launch Vehicle, Equipment, services, and Data
and Documentation) described in Part 1 (B) (Payment Milestone
Schedule and Termination Liability Amounts) conforms to the
requirements of the Contract and has been delivered to ORION in
accordance with the provisions of Article 6 (Delivery).
5.3 METHOD OF PAYMENT.
(a) Amounts payable to either Party shall be remitted by wire transfer to
the following bank accounts, as applicable:
ORION The Chase Manhattan Bank, N.A.
New York, New York
[ ] *
For the account of Orion Network Systems, Inc.
[ ] *
Contractor Bank of America, NT & SA
Chicago, Illinois
[ ] *
For the account of Space Systems/Loral, Inc.
[ ] *
(b) Any payment shall be deemed to have been made when credit for the
amount is established in the above bank account. Each Party shall notify the
other in writing within ten (10) days of a change to its respective bank
accounts.
5.4 LATE PAYMENT FEE.
Each Party shall be entitled to the interest due on any amounts properly
due but not paid to such Party for each day after the date such amount is due.
Such interest shall be paid within ten (10) days of the date of the
determination such interest is due. Interest shall be at an annual compounded
rate of LIBOR plus three percent (3%).
5.5 OTHER PAYMENTS.
Except as otherwise expressly stated herein, all other payments due and
payable to Contractor shall be made in accordance with the procedures set forth
in Article 5.3 (Method of Payment) within thirty (30) days after the date of
receipt (as determined in accordance with Article 5.1(c)) of the corresponding
Invoice.
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5.6 RIGHT OF SET-OFF.
Any amount payable or refundable by Contractor to ORION under the Contract,
including any payment due as a result of any price adjustment for late delivery
or failure to earn incentive amounts, and any finally adjudicated claim for
payment made by ORION against Contractor within the purview of the Contract, may
be deducted by ORION from any payment due, or to become due, to Contractor on
any account whatsoever under the Contract as ORION in its sole discretion may
decide.
5.7 DISPUTED CHARGES.
Subject to Article 5.6, ORION shall pay undisputed charges when such
payments are due under this Article 5, Article 12 (In-Orbit Performance Warranty
and Incentives), Article 14 (Additional Satellite) or Article 25 (Ground Storage
Option).
6. DELIVERY
6.1 DELIVERY SCHEDULE.
(a) "Delivery" shall be deemed to have occurred for each Deliverable Item
upon its Final Acceptance by ORION. The Delivery of the ORION-Z Spacecraft is to
be in orbit. Subject to Articles 6.3 and 28.4, Deliverable Items, as listed in
Table 6.1 below, shall be Delivered by Contractor to the destinations indicated,
on or before the dates ("Delivery Dates") specified in such table.
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================================================================================
TABLE 6.1
DELIVERY SCHEDULE
- - --------------------------------------------------------------------------------
DELIVERABLE ITEM DELIVERY DATE DESTINATION
1. ORION-Z Spacecraft June 30, 1999 In Orbit at 12o W.L.
2. Data & Documentation Per CDRL Per CDRL
3. Operations Training Per SOW ORION MCC
4. Mission Specific Hardware and Per SOW, Annex A MCC and TT&C
Software
5. Dynamic Spacecraft Software Per SOW Rockville, MD
Simulator
(b) Notwithstanding any other provision of the Contract, Contractor shall
advise ORION immediately by telephone and confirm in writing any event,
circumstance or development that materially threatens (i) the quality of any
ORION-Z Spacecraft or component part thereof, as well as any services, Data and
Documentation or Equipment to be provided hereunder, or (ii) the Delivery Dates
established in Table 6.1 above.
6.2 DELAY.
(a) Contractor acknowledges and agrees that failure to duly Deliver the
ORION-Z Spacecraft in orbit on or before the Delivery Date specified in Table
6.1 above may be the sole or partial cause of substantial financial loss or
damage being sustained by ORION due to the cost of alternative means of
providing service to customers and loss of continuity of service. Subject to the
provisions of Article 6.3 (Excusable Delay), if the Delivery in orbit of the
ORION-Z Spacecraft occurs later than the applicable Delivery Date due to any
reason other than Constructive Total Loss, Contractor agrees to pay to ORION on
demand liquidated damages from and including the [ ] Calendar Day of lateness up
to and including the [ ] * [ ] Calendar Day of lateness (the "Liquidated Damages
Period) in the * amount of [ ] per day for each Calendar Day in the * Liquidated
Damages Period. The remedy provided in Article 6.2(a) is not exclusive of any
other remedy provided in the Contract.
6.3 EXCUSABLE DELAY.
(a) Any delay in the performance of the Work caused by an event that is
beyond the control of Contractor or its Subcontractors, such as, but not limited
to, any acts of government in
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its contractual or sovereign capacity, fire, flood, epidemic, quarantine
restriction, freight embargo, or acts of God, or any postponement by the Launch
Agency of launch of the ORION-Z Spacecraft, or acts or omissions of ORION that
unreasonably delay or hinder Contractor's performance or failure by ORION to
meet its responsibilities under the Contract, and which delay could not have
been avoided by Contractor or Subcontractor through the exercise of reasonable
foresight or reasonable precautions and cannot be circumvented by Contractor
through the use of alternate sources, work-around plans, or other means, shall
constitute a basis for excusable delay ("Excusable Delay") if notice thereof is
given to ORION, in writing, within three (3) Business Days after Contractor
shall have first learned of an occurrence of such an event or with regard to the
Launch Vehicle, the probability of the occurrence of such event. Such notice
shall include a detailed description of the portion of the Work affected by such
a delay, as well as details of any work-around plans, alternate sources or other
means Contractor will utilize to forestall a delay to the Delivery Schedule
stated in Article 6 (Delivery). Written notice must also be given to ORION when
the event constituting an Excusable Delay appears to have ended. In all events,
Contractor shall use reasonable efforts to avoid or minimize such delay. In
addition, ORION's exercise of its rights under Article 25 (Ground Storage
Option) due to circumstances caused by ORION shall constitute an Excusable
Delay.
(b) Contractor shall be entitled to such extensions of time as are
reasonable for the Excusable Delay. In the event ORION disputes the Excusable
Delay, ORION must inform Contractor in writing within ten (10) Business Days
from the date of receipt of written notice of the event constituting an
Excusable Delay and, if the Parties have not resolved the dispute within the ten
(10) Business Days of Contractor's receipt of written notice from ORION, the
dispute shall be resolved pursuant to Article 16 (Dispute Resolution).
(c) In the event of an Excusable Delay, there shall be an equitable
adjustment to the Delivery Schedule set forth in Table 6.1, Article 6 (Delivery)
and the Delivery Schedule set forth in Article 14 (Additional Satellite) to the
extent such Excusable Delay affects such delivery schedules and to such other
terms in the Contract as applicable; provided, however, that the occurrence of
an Excusable Delay shall not entitle Contractor to an increase in the Contract
Price (unless such Excusable Delay is caused solely or substantially by ORION's
acts or omissions that unreasonably delay or hinder Contractor's performance or
ORION's failure to meet its responsibilities). Any extension of time or other
relief granted under this Article 6.3 shall be formalized by the execution of an
amendment to the Contract in accordance with Article 28.4.
7. ACCEPTANCE TESTING AND FINAL ACCEPTANCE
7.1 GENERAL.
Each Deliverable Item under the Contract shall be accepted by ORION upon
Contractor's successful demonstration of its timely compliance with the
requirements of the Contract.
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7.2 ACCEPTANCE TESTING.
Contractor agrees to notify ORION in writing ten (10) days in advance of
conducting acceptance tests for Deliverable Items and pre-launch tests of the
integrated ORION-Z Spacecraft. Upon compliance with the notification
requirement, ORION's absence at such tests shall neither be a cause of delaying
the acceptance tests nor invalidating the test results obtained therefrom.
7.3 PRE-LAUNCH CERTIFICATION.
Upon completion of the pre-launch tests at the launch site in accordance
with the requirements of the Contract, Contractor shall furnish ORION with
pre-launch certification as soon as feasible prior to Launch.
7.4 FINAL ACCEPTANCE OF DATA AND DOCUMENTATION.
(a) "Final Acceptance" (and therefore, Delivery) of Data and Documentation
shall occur only when:
(1) Contractor has fulfilled the Contract's requirements for the Data
and Documentation; and
(2) the Data and Documentation has been delivered at the place
referenced in Table 6.1 of Article 6 (Delivery) in a condition
fully conforming to the provisions of the Contract.
(b) Data and Documentation not requiring approval by ORION in accordance
with Part 2(B) shall be deemed to have achieved Final Acceptance unless rejected
by ORION in writing within ten (10) Business Days after receipt of said Data and
Documentation by ORION. If such Data and Documentation is unacceptable, ORION
shall, within the said ten (10) Business Days, notify Contractor in writing in
which respects the Data and Documentation fails to conform to applicable
requirements of the Contract. Any Data and Documentation that fails to conform
to applicable requirements of the Contract with respect to which ORION has so
notified Contractor as being non-conforming, shall be deemed under the Contract
not to have been delivered unless and until the Defects that resulted in such
rejection have been remedied or demonstrated not to exist pursuant to
verification procedures in accordance with the Contract, and the Data and
Documentation is at the destination referenced in Table 6.1 of Article 6
(Delivery) whereupon ORION shall accept the Data and Documentation in writing
and Final Acceptance shall occur.
(c) Final Acceptance of any Data and Documentation requiring approval by
ORION in accordance with Part 2(B) shall occur when such approval has been
granted by ORION in writing. ORION shall respond under this Article 7.4 within
ten (10) Business Days after receipt
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<PAGE>
of such Data and Documentation by ORION; failing such response, the Parties
shall be deemed forthwith to be in dispute and their rights shall be determined
in accordance with the provisions of Article 16 (Dispute Resolution) hereof.
(d) The provisions of this Article 7.4 shall not apply to the Final
Acceptance of a Launched ORION-Z Spacecraft or to the Preliminary In-Orbit
Acceptance Report. The Final Acceptance of the Launched ORION-Z Spacecraft and
of the In-Orbit Acceptance Report essential thereto shall be governed by Article
7.5.
7.5 FINAL ACCEPTANCE OF ORION-Z SPACECRAFT.
(a) In-Orbit Acceptance Report.
(1) Upon arrival at its designated orbital location, Contractor will
perform the tests and analyses set forth in Part 3(D) (In-Orbit
Commissioning and Acceptance Test Requirements) for the Launched
ORION-Z Spacecraft to determine the Aggregate Predicted
Transponder Life of the Launched ORION-Z Spacecraft. The results
of such tests and analyses will be furnished to ORION in
Preliminary and Final In-Orbit Acceptance Reports prepared by
Contractor for the Launched ORION-Z Spacecraft in accordance with
Part 2(A)(SOW), Part 2(B)(CDRL) and Part 3(D).
(2) Within forty-five (45) days after Launch of the ORION-Z
Spacecraft, Contractor shall furnish to ORION the Preliminary
In-Orbit Acceptance Report in full compliance with Part 2(A),
Part 2(B) and Part 3(D) in respect of the Launched ORION-Z
Spacecraft, and, within sixty (60) days after Launch, Contractor
shall furnish to ORION the Final In-Orbit Acceptance Report in
full compliance with Part 2(A), Part 2(B) and Part 3(D).
(3) Unless the ORION-Z Spacecraft is a Constructive Total Loss, Final
Acceptance (and therefore, Delivery) of the ORION-Z Spacecraft
will take place upon receipt by ORION of the Preliminary In-Orbit
Acceptance Report demonstrating that the ORION-Z Spacecraft is in
full compliance with Part 3(A) and Part 3(D).
(4) Unless ORION responds to the Preliminary In-Orbit Acceptance
Report within thirty (30) days after receipt thereof, or such
other period of time acceptable to both Parties, the report shall
be deemed acceptable.
(5) If ORION's response under Article 7.5(a)(4) contests the findings
of the Preliminary In-Orbit Acceptance Report, the Parties shall
be deemed forthwith to be in dispute and either Party may proceed
under Article 16 to have such dispute resolved.
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<PAGE>
(6) The existence of a dispute shall not affect Final Acceptance set
forth above.
8. TITLE TO DELIVERABLE ITEMS AND RISK OF LOSS
8.1 ORION-Z SPACECRAFT.
(a) Risk of loss or damage to the ORION-Z Spacecraft shall pass from
Contractor to ORION at the time of Intentional Ignition of the ORION-Z
Spacecraft. Title to the ORION-Z Spacecraft, free and clear of all liens and
encumbrances of any kind shall pass from Contractor to ORION upon Final
Acceptance of the ORION-Z Spacecraft in accordance with Article 7, (Acceptance
Testing and Final Acceptance - Deliverable Items).
(b) In the event of the occurrence of a Terminated Ignition of the Launch
Vehicle used for Launch of the ORION-Z Spacecraft to be delivered hereunder, the
Parties agree that Contractor shall re-assume risk of loss of the ORION-Z
Spacecraft upon Launch Termination and will thereafter immediately commence work
required to ready the ORION-Z Spacecraft for a Launch Vehicle re-launch
(including, as applicable, demating and defueling of the ORION-Z Spacecraft,
procurement of pre-launch/transit insurance(s), storage, shipping of the ORION-Z
Spacecraft back to Palo Alto, CA, refurbishing, retesting, re-shipping, and
re-initiation and performance of a subsequent Launch, and any other related
effort). It is agreed by the Parties that such support shall be provided at
ORION's expense and shall be subject to an equitable adjustment to the Contract
Price and schedule as mutually agreed to by the Parties. Equitable adjustment
for such work and all affected terms of this Contract, and its Parts, as
applicable, shall be negotiated within thirty (30) days of the Terminated
Ignition or as otherwise agreed to by the Parties, and the Parties agree,
pending final negotiation of an equitable adjustment, to perform their
respective obligations described elsewhere in this Contract.
(c) In the event of a Constructive Total Loss, title free and clear of all
liens and encumbrances of any kind shall pass to ORION. In such event, at
ORION's direction, Contractor shall surrender the ORION-Z Spacecraft to the
insurers obligated to cover such loss.
8.2 DATA AND DOCUMENTATION
The license rights set forth in Article 21.1 and risk of loss or damage to
Data and Documentation delivered under the Contract shall pass from Contractor
to ORION at the time of Final Acceptance in accordance with Article 7
(Acceptance Testing and Final Acceptance - Deliverable Items).
8.3 OTHER DELIVERABLE ITEMS.
Title, free and clear of all liens and encumbrances of any kind, and risk
of loss or damage to each Deliverable Item (other than the ORION-Z Spacecraft
and Data and Documentation) delivered under the Contract shall pass from
Contractor to ORION at the time of Final
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<PAGE>
Acceptance by ORION in accordance with Article 7 (Acceptance Testing and Final
Acceptance - Deliverable Items).
9. CHANGES IN SCOPE OF WORK
9.1 CHANGES REQUESTED BY ORION.
(a) ORION may, at any time after the Effective Date of the Contract, by
written change order issued by ORION make changes within the general scope of
the Contract that will add or delete Work, affect the design of the ORION-Z
Satellite, change the time or place of delivery or affect any other requirement
of the Contract.
(b) Contractor shall perform the Work in accordance with such orders and
changes as if the same had appeared in and formed part of the Contract.
(c) If any such change causes an increase or decrease in the cost of the
Work, or the time required for the completion of the Work to be provided herein,
or otherwise affects any other provision of the Contract, an equitable
adjustment shall be made to the Contract Price, the Delivery Schedule or both,
and to such other provisions as may be affected. The Parties shall consider,
negotiate and agree to such equitable adjustments in a timely manner, and the
Contract shall be amended in accordance with Article 28.4 (Amendments).
(d) ORION shall have the right to prescribe the manner in which Contractor
shall dispose of any Work made obsolete as a result of such orders,
dispensations or changes.
(e) Nothing in this Article shall excuse Contractor from promptly
proceeding with the additions, dispensations or changes specified in the change
order.
9.2 CHANGES REQUESTED BY CONTRACTOR.
(a) Contractor may, at any time after the Effective Date of the Contract,
provide ORION with a request for a change or waiver in the whole or any part of
the Work or schedules herein, provided that Contractor shall use reasonable
efforts to submit such request in writing to ORION at least sixty (60) days
prior to the proposed date of any change or waiver that would add or delete
work, affect the design of the ORION-Z Spacecraft, change the method of shipment
or packing, or place or time of delivery, or would affect any other requirement
of the Contract.
(b) If such Contractor-requested change or waiver would cause an increase
or decrease in the Contract Price or Delivery Schedule, Contractor shall submit
to ORION, concurrent with the requested change, the details of such increase or
decrease.
(c) Contractor shall not proceed with the requested change or waiver unless
and until ORION agrees with and accepts such change or waiver.
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<PAGE>
(d) ORION shall notify Contractor in writing, within thirty (30) days after
receipt of a request from Contractor for a change or waiver, whether or not it
agrees with and accepts such change or grants such waiver. If ORION agrees with
and accepts such change or grants such waiver, Contractor shall proceed with the
performance of the Contract as changed or waived and an amendment to the
Contract reflecting such change and price adjustment, if any, in accordance with
Article 28.4 (Amendments), shall be issued. If ORION does not agree with the
change or waiver as requested, the Parties shall attempt to reach agreement on
such change or waiver. In the event the Parties are unable to reach agreement on
the change or waiver, or on the applicable price adjustment, if any, or both,
Contractor shall proceed with the performance of the Contract as unchanged.
10. CORRECTIVE MEASURES IN UNLAUNCHED SATELLITES
10.1 CORRECTIVE MEASURES.
(a) Notice.
(1) ORION shall notify Contractor in writing when it believes any
Defect exists in the ORION-Z Spacecraft, the services and/or the
Data and Documentation. Contractor may from time to time advise
ORION in writing that it disagrees with ORION as to the existence
or nature of a Defect. In such event, the Parties shall negotiate
in good faith to determine what Defect exists, if any, and any
action required to remedy such Defect.
(2) Notwithstanding any other provision of the Contract, Contractor
shall advise ORION immediately by telephone and confirm in
writing any event, circumstance or development that materially
threatens the quality of the ORION-Z Spacecraft, or component
part thereof as well as any services and/or Data and
Documentation to be provided hereunder or the Delivery Dates
established.
(b) Defect in ORION-Z Spacecraft.
(1) Without limiting the obligations of Contractor or the rights of
ORION under the provisions of the Contract, prior to Launch,
Contractor shall, at its expense, use its best efforts to
promptly correct any Defect related to the ORION-Z Spacecraft
that it or ORION discovers during the course of the Work, and
notwithstanding that a payment may have been made in respect
thereof, and regardless of prior reviews, inspections, approvals
or acceptances. This provision is subject to the right of
Contractor to have any items containing a Defect returned at
Contractor's expense to Contractor's facility for Contractor to
verify the non-conformance and to correct the Defect. All
transportation costs such as packaging, shipping and insurance,
shall be paid
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<PAGE>
by Contractor, except that if it is reasonably determined after
investigation that ORION directly caused the Defects in question,
or that the item is in conformance with applicable specifications
and requirements, ORION will reimburse Contractor for the
above-described costs and will pay all costs associated with the
shipment to and from Contractor's facility.
(2) If Contractor fails to so correct such Defects within a
reasonable time after notification from ORION, and after the
Parties have followed the provisions of Article 10.1 (a)(1) above
(including agreement on the existence of such Defect), ORION may,
by separate contract or otherwise, correct or replace such items
or services, and, unless it is reasonably determined after
investigation that ORION directly caused the Defect in question,
or that the item or service is in conformance with applicable
specifications or requirements, Contractor shall pay to ORION the
direct actual cost of such correction or replacement. The amount
payable by Contractor shall be verified at Contractor's request
by an internationally recognized firm of accountants appointed by
Contractor, such appointment to be approved by ORION and such
approval not to be unreasonably withheld or delayed. The costs of
such verification shall be paid by Contractor and shall be
without prejudice to the right of either Party to seek
arbitration under Article 16.2. The report of such accountants
may be used by either Party in any arbitration proceeding but
shall not be binding upon the arbitrators.
(c) Defect in Similar Satellite.
(1) Without limiting the obligations of Contractor or the rights of
ORION under other provisions of the Contract, if the data
available from the Launched ORION-Z Spacecraft or another
spacecraft of a similar class that is being built by Contractor
indicates that the ORION-Z Spacecraft contains a Defect,
Contractor shall inform ORION of such Defect and shall, promptly
upon the request of ORION, use its best efforts to take
appropriate corrective measures with respect to the ORION-Z
Spacecraft and Additional Satellite, if ordered, so as to
satisfactorily eliminate such Defect from the ORION-Z Spacecraft
and Additional Satellite. Contractor shall fulfill the foregoing
obligations at its own cost and expense, including all costs
arising from charges for shipping, insurance, taxes and other
matters associated with the corrective measures.
(2) If Contractor fails to take such corrective measures with respect
to the ORION-Z Spacecraft within a reasonable time after request
from ORION, ORION may by separate contract or otherwise, have all
such Defects corrected in accordance with Article 10.1(b)(2).
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<PAGE>
(d) Minor Defects. For any Defect that does not adversely affect the form,
fit, useful life, reliability or function (i.e., operational performance) of a
Transponder, Contractor and ORION agree to negotiate a reasonable resolution. If
the Parties are unable to reach an agreed resolution within ten (10) days of
ORION receiving notice of the Defect from Contractor ("Notice Date"), Contractor
or ORION shall have the right to elevate the negotiations to Contractor's Senior
Executive and to ORION's Senior Executive. In the event the Parties are unable
to reach an agreed resolution within fifteen (15) days of the Notice Date, ORION
shall thereafter be able to exercise all of its rights under this Article 10.
(e) No Additional Payment. Subject to Article 6.3 (Excusable Delay),
Contractor acknowledges and agrees that it shall not be entitled to payment for
any additional costs incurred as a consequence of any Defect.
(f) Delay. Contractor shall have a reasonable time to effect corrections
required ; however, Contractor's time to correct shall not impact Customer's
rights under Article 7 (Acceptance Testing and Final Acceptance) and Article 6.2
(Delay).
(g) Waiver of Defect. After notification of a Defect to Contractor, the
Parties may jointly elect in writing, pursuant to Article 28.4 (Amendments), not
to require correction or replacement of such items or services or to waive the
Defects noted. In such event, Contractor, if required by ORION but pursuant to
the procedures set forth in Article 10.1 (b)(2), shall repay such portion of the
Contract Price as is equitable in the circumstances.
10.2 MANUFACTURERS' WARRANTIES.
Subject to the provisions of any applicable law, Contractor agrees to
enforce any manufacturer's warranty given to it in connection with any Work to
be provided under the Contract and Contractor shall provide to ORION the benefit
of any warranty protection or pledge to ORION any proceeds therefrom in respect
of that Work and other items as are given to Contractor by the manufacturers or
service providers.
10.3 REPLACED EQUIPMENT.
If Contractor, in accordance with this Article, replaces any Equipment that
was determined to be deficient, such deficient Equipment shall remain or become
the property of Contractor.
10.4 IN-ORBIT DATA.
Except to the extent required to perform its obligations under Article
10.1, nothing in this Article requires Contractor to disclose to ORION in-orbit
data from satellites owned by others, without prior written consent.
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<PAGE>
11. REPRESENTATIONS AND WARRANTIES
11.1 CONTRACTOR PERSONNEL.
Contractor represents and warrants that it shall assign properly qualified
and experienced personnel to the program contemplated by the Contract.
11.2 SOFTWARE AND INVENTION OWNERSHIP.
Contractor represents and warrants that it is either the owner of, or
authorized to use and incorporate, any software or invention utilized or
incorporated in the Work.
11.3 AUTHORIZATION.
Each Party represents and warrants to the other that:
(a) it has the requisite corporate power and authority to enter into the
Contract and to carry out the transactions contemplated by the Contract;
(b) the execution, delivery and performance of the Contract and the
consummation of the transactions contemplated by the Contract have been duly
authorized by the requisite corporate action on the part of such Party; and
(c) the Contract is a valid and binding obligation of such Party,
enforceable in accordance with its terms.
11.4 INDUCEMENTS.
Contractor represents and warrants to ORION that it has not violated any
applicable laws or regulations or any ORION policies of which Contractor has
been given notice regarding the offering of unlawful inducements in connection
with the Contract.
12. IN-ORBIT PERFORMANCE WARRANTY AND INCENTIVE PAYMENTS
12.1 IN-ORBIT PERFORMANCE WARRANTY.
Contractor warrants that the ORION-Z Spacecraft will provide the following:
(a) The ORION-Z Spacecraft will support simultaneous operation of [ ] *
Satisfactorily Operating Primary Transponders at 2.2 dB output power back-off
commencing on the date of Final Acceptance and for a period through the last day
of the [ ] year thereafter * and will support [ ] Satisfactorily Operating
Primary Transponders at 2.2 dB output * power back-off commencing with the first
day of year [ ] for a period of [ ] years *
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thereafter; and
(b) The ORION-Z Spacecraft power will support simultaneous operation of [ ]
* [ ] Satisfactorily Operating Primary Transponders with [ ] Saturated
Transponders * and [ ] Transponders at 3.0 dB output power back-off commencing
on the date of * Final Acceptance and for a period through the last day of the [
] year thereafter and will * support simultaneous operation of [ ]
Satisfactorily Operating Primary Transponders * with [ ] Saturated Transponders
and [ ] Transponders at 3.0 dB output * power back-off commencing with the first
day of year [ ] and for a period of [ ] years * thereafter. (collectively the
"In-Orbit Performance Warranty Period"). The Transponders will be configured
symmetrically on the north and south panels.
12.2 ADVANCE INCENTIVE PAYMENT AT FINAL ACCEPTANCE.
(a) If, at Final Acceptance, the ORION-Z Spacecraft has [ ] Serviceable *
Transponders operating at 2.2 dB output power back-off and a propellant lifetime
as calculated in Part 3(D) (In-Orbit Commissioning and Acceptance Test
Requirements) of at least [ ] * years, ORION shall pay Contractor the
Transponder Orbital Incentive Amount as an Advance Incentive Payment.
(b) If at Final Acceptance, the ORION-Z Spacecraft does not meet the
requirements set forth in Paragraph 12.2(a) above, then ORION shall pay
Contractor, as an Advance Incentive Payment, a percentage of the Transponder
Orbital Incentive Amount in accordance with the Aggregate Predicted Transponder
Life as provided in Table 12.2(b) below:
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----------------------------------------------------------------------
Table 12.2(b)
Schedule of Transponder Orbital Incentive
Payment at Final Acceptance
----------------------------------------------------------------------
Aggregate Predicted Percentage of Total
Transponder Life Incentive Amount
------------------- -------------------
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
(c) If, at Final Acceptance, the ORION-Z Spacecraft has sufficient
end-of-life power as calculated in Part 3(D) (In-Orbit Commissioning and
Acceptance Test Requirements) to support [ ] Serviceable Transponders with
eighteen (18) Saturated Transponders * and [ ] Transponders operating at 3.0 dB
power back-off, ORION shall pay Contractor * the Power Orbital Incentive Amount,
as an Advance Incentive Payment.
(d) If, at Final Acceptance, the ORION-Z Spacecraft does not meet the
requirements set forth in Paragraph 12.2(c), then ORION shall pay to the
Contractor, as an Advance Incentive Payment, a percentage of the Power Orbital
Incentive Amount in accordance with the number of Saturated Transponders as
provided in Table 12.2(d) below:
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----------------------------------------------------------------------
Table 12.2(d)
Schedule of Power Orbital Incentive
Payment at Final Acceptance
----------------------------------------------------------------------
No. of Saturated Percentage of Total
Transponders Incentive Amount
---------------- -------------------
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
(e) If the ORION Z Spacecraft is rendered inoperative because of a Launch
Vehicle failure or failure of the Launch Vehicle to place the Satellite in its
geostationary transfer orbit location or if the ORION-Z Spacecraft is deemed a
Constructive Total Loss through no fault of Contractor, Contractor shall receive
and be entitled to retain the full Orbital Incentive Amount payable under this
Article 12. Payment of any amount due Contractor shall be paid thirty (30) days
after ORION's receipt of invoice and in accordance with Article 5.
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12.3 MONTHLY TRANSPONDER INCENTIVE AMOUNT.
(a) Contractor shall earn and be entitled to retain a percentage of the
Monthly Transponder Incentive Amount during each calendar month of the In-Orbit
Performance Warranty Period according to the number of Satisfactorily Operating
Primary Transponders that the ORION-Z Spacecraft has, as provided in Table 12.3
below. Subject to Article 12.3(b), in the event any of the Monthly Transponder
Incentive Amount is not so earned by Contractor during any calendar month of the
In-Orbit Performance Warranty Period, Contractor shall refund to ORION all such
unearned amounts.
(b) If a Primary Transponder does not satisfy the requirements of a
Satisfactorily Operating Primary Transponder, but ORION nevertheless elects to
use such Primary Transponder for Revenue-earning purposes, then, when the
Revenue (or equivalent consideration) received by ORION for such Primary
Transponder in any one calendar monthly period is less than the proportion of
the Monthly Incentive Amount attributable to such Primary Transponder,
Contractor shall, in the succeeding month, refund to ORION the difference
between the said proportion of the Monthly Incentive Amount for such Primary
Transponder and ORION's actual monthly Transponder Revenue for such calendar
monthly period. In no event shall any one monthly payment by Contractor under
this Article 12.3(b) exceed said proportion of the Monthly Incentive Amount for
such Primary Transponder. In the event that a Primary Transponder is determined
not to be a Satisfactorily Operating Primary Transponder but is later used for
Revenue-earning purposes, ORION shall so advise Contractor within seven (7)
Business Days after commencing such use.
(c) Payment of any refund provided for under this Article 12.3 shall be due
thirty (30) days after the date of receipt by Contractor of an invoice from
ORION; interest shall be paid (at the rate specified in Article 5.4) on any
amounts not paid when due. Invoices shall be accompanied by sufficient data to
support ORION's refund claim. ORION may offset any such payments not made by
Contractor against any outstanding balance due under the Contract. Contractor
shall be deemed to have accepted the Invoice ten (10) Business Days after
receipt of the Invoice unless, within such time period, it notifies ORION of a
dispute. Contractor shall pay any undisputed part of an Invoice.
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----------------------------------------------------------------------
Table 12.3
Schedule of Monthly Transponder Orbital Incentive Amount Earned for
[ ] Transponders during years [ ] *
----------------------------------------------------------------------
Number of Satisfactorily Percentage of Monthly Transponder
Operating Primary Transponders Incentive Amount
------------------------------ ---------------------------------
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
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[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
----------------------------------------------------------------------
Table 12.3
Schedule of Monthly Transponder Orbital Incentive Amount Earned for
[ ] Transponders during years [ ] *
----------------------------------------------------------------------
Number of Satisfactorily Percentage of Monthly Transponder
Operating Primary Transponders Incentive Amount
------------------------------ ---------------------------------
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
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[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
12.4 MONTHLY POWER INCENTIVE AMOUNT.
(a) Contractor shall earn and be entitled to retain a percentage of the
Monthly Power Incentive Amount during each calendar month of the In-Orbit
Performance Warranty Period according to the number of Saturated Transponders
that the ORION-Z Spacecraft has, as provided in the applicable Table 12.4 below.
In the event any of the Monthly Power Incentive Amount is not so earned by
Contractor during any calendar month of the In-Orbit Performance Warranty
Period, Contractor shall refund to ORION all such unearned amounts.
(b) Payment of any refund provided for under this Article 12.3 shall be due
thirty (30) days after the date of receipt by Contractor of such invoice from
ORION; interest shall be paid (at the rate specified in Article 5.4) on any
amounts not paid when due. Invoices shall be accompanied by sufficient data to
support ORION's refund claim. ORION may offset any such payments not made by
Contractor against any outstanding balance due under the Contract. Contractor
shall be deemed to have accepted the Invoice ten (10) Business Days after
receipt of the Invoice unless, within such time period, it notifies ORION of a
dispute. Contractor shall pay any undisputed part of an Invoice.
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----------------------------------------------------------------------
Table 12.4
Schedule of Monthly Power Orbital Incentive Amount Earned for [ ] *
[ ] Transponders during years [ ] *
----------------------------------------------------------------------
Number of Saturated Transponders Percentage of Monthly Power
Incentive Amount
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
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----------------------------------------------------------------------
Table 12.4
Schedule of Monthly Power Orbital Incentive Amount Earned for [ ] *
[ ] Transponders during years [ ] *
----------------------------------------------------------------------
Number of Saturated Transponders Percentage of Monthly Power
Incentive Amount
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
[ ] [ ] *
12.5 MEASURING IN-ORBIT PERFORMANCE.
(a) For the purposes of this Article 12, in determining whether a Primary
Transponder is a Satisfactorily Operating Primary Transponder, no account shall
be taken of any period of unavailability:
(1) less than thirty (30) cumulative seconds per day;
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(2) attributable to ORION-Z Spacecraft maintenance activities,
station keeping maneuvers, payload reconfiguration for business
purposes or station change maneuvers;
(3) attributable to communications link fading due to external
causes, including but not limited to weather;
(4) arising directly or indirectly as a consequence of any negligent
act or omission of ORION or any of its agents, assignees,
consultants, employees, or customers; or
(5) attributable to earth station sun blinding.
(b) All measurements, computations and analyses, for the purpose of
determining whether a Primary Transponder is a Satisfactorily Operating Primary
Transponder shall be performed by ORION or its Consultants, provided that
Contractor may, at its expense, assist in determining the nature of anomalies
and corrective measures. Contractor shall for this purpose be given access to
any data collected by ORION.
12.6 ECLIPSE.
In the event the ORION-Z Spacecraft fails to meet the eclipse operations
requirements as specified in Part 2(A) (Technical Specifications), a reduction
shall be made to that portion of the Monthly Transponder Incentive Amount and
Monthly Power Incentive Amount calculated under Articles 12.3 and 12.4, as
having been earned by Contractor, with such reduction being equivalent to the
percentage of lost communications capacity determined during eclipse.
12.7 DISPUTED PERFORMANCE.
In the event ORION claims for any month of operation of the ORION-Z
Spacecraft that any of the criteria established or referred to under Articles
12.3, 12.4 and 12.5 above have not been met, ORION's claim shall be accompanied
by technical data, reports, analyses and such records as are available to
support such claim, and Contractor shall be given an opportunity to verify the
data. Should Contractor disagree with such claim and present evidence to the
contrary, then ORION shall consider such evidence and consult with Contractor.
In the event the Parties cannot resolve such disagreement, then either Party may
proceed under Article 16 (Dispute Resolution) to have such dispute resolved.
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13. INSURANCE
13.1 GENERAL.
(a) Contractor shall provide and maintain, at its expense, the insurance
required by Article 13.2. The insurers selected by Contractor shall have an A.M.
Best rating of A-XIII or foreign equivalent or better or, if such ratings are no
longer available, a comparable rating from a recognized insurance rating agency.
Such insurance coverages shall be in amounts no less than the insurance
coverages Contractor provides and maintains for Contractor's other customers.
(b) Except as otherwise specifically provided in the Contract, the
insurance required by this Article shall not limit, bar or otherwise affect the
liability and obligation of Contractor to complete the Work and deliver the
Deliverable Items in accordance with the Contract.
13.2 REQUIRED INSURANCE.
(a) Insurance of the Work.
(1) All Risks Policy.
(i) Before Contractor commences the Work, Contractor shall have
an insurance policy against all risks, loss or damage to the
ORION-Z Spacecraft occurring prior to Intentional Ignition
(including coverage against damage or loss caused by earth
movement, flood, boiler, turbine and machinery accidents)
subject to normal "All Risks Policy" exclusions. The details
of the insurer and the relevant extracts of the policy shall
be submitted to ORION.
(ii) Such insurance coverage shall be maintained by Contractor up
to the point of Intentional Ignition of the ORION-Z
Spacecraft ordered by ORION pursuant to the Contract and
shall provide (i) coverage for removal of debris, and
insuring the structures, machines, equipment, facilities,
fixtures and other properties constituting a part of the
project, (ii) transit coverage, including ocean marine
coverage (unless insured by the supplier), (iii) off-site
coverage covering any key equipment, and (iv) off-site
coverage covering any property or equipment not stored on
the construction sites.
(2) The insurance of the Work as required by this Article 13.2(a),
whether effected by Contractor or ORION, shall not limit, bar or
otherwise affect the liability and obligation of Contractor to
complete the Work and deliver the Deliverable Items in accordance
with the Contract.
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(3) Contractor shall use best efforts to require its insurers to
waive all rights of subrogation against ORION, save those for
which ORION indemnifies Contractor pursuant to Article 15.2
(Indemnity by ORION) provided that such coverage shall be at no
additional cost to the insuring Party.
(b) Commercial General Liability Insurance.
(1) Before Contractor commences the Work, Contractor shall have a
Commercial General Liability Policy of insurance. The policy
shall cover Contractor and all Subcontractors employed from time
to time in relation to the Work and performance of the ORION-Z
Contract for their respective rights and interests and cover
their liabilities to third parties.
(2) The Commercial General Liability Policy shall be maintained until
all Work pursuant to the Contract, including remedial work, is
Delivered and Final Acceptance of the ORION-Z Spacecraft has
occurred.
(3) Contractor shall require insurers to waive all rights of
subrogation against ORION, save those for which ORION indemnifies
Contractor pursuant to Article 15.2 (Indemnity by ORION) provided
that such coverage shall be at no additional cost to the insuring
Party.
(c) Insurance of Employees.
(1) Before commencing the Work, Contractor shall have Worker's
Compensation Insurance, including occupational illness or disease
coverage, or other similar social insurance in accordance with
the laws of the country, state or territory exercising
jurisdiction over the employee and Employer's Liability
Insurance. Such insurance shall be maintained until all Work
pursuant to the Contract, including remedial work, is Delivered
and Final Acceptance of the ORION-Z Spacecraft has occurred.
Contractor shall ensure that all Subcontracts contain a similar
provision.
(2) Contractor shall require its insurers to waive all rights of
subrogation against ORION, save those for which ORION indemnifies
Contractor pursuant to Article 15.2 (Indemnity by ORION) provided
that such coverage shall be at no additional cost to the insuring
Party.
(d) Comprehensive Automobile Liability Insurance.
(1) Before commencing the Work, Contractor shall self-insure or
Contractor shall insure against liability for claims of personal
injury (including bodily injury and death) and property damage
covering all owned, leased, non-owned and
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hired vehicles used at any of Contractor's facilities in the
performance of Contractor's obligations under the Contract.
13.3 SUBCONTRACTS.
Contractor shall require its Subcontractors to provide and maintain
insurance, and such insurance shall be no less in kind or amount as Contractor
requires its Subcontractors to provide and maintain for work to be provided by
such Subcontractors to other customers of Contractor.
13.4 DOCUMENTARY EVIDENCE.
(a) In respect of every insurance policy required under this Article 13,
before commencement of the Work and whenever requested by ORION in writing,
Contractor shall periodically provide documentary evidence that the coverages
and policy endorsements required under the Contract have been effected and are
being maintained in force and Contractor shall provide ORION not less than
thirty (30) days written notice prior to any modification, cancellation or
non-renewal of the policies.
(b) Contractor shall produce evidence of compliance with the insurance
obligations applicable to Contractor pursuant to this Article 13 within fourteen
(14) days of written request by ORION. In the event Contractor does not provide
such evidence within such time period, ORION shall provide Contractor written
notice thereof.
13.5 CLAIMS.
As soon as practicable after any occurrence that may give rise to a claim
under a policy of insurance required by this Article 13, Contractor shall inform
ORION in writing of such occurrence and shall thereafter keep ORION informed of
subsequent developments concerning the claim. Contractor shall ensure that
Subcontractors similarly inform ORION of any such occurrences through
Contractor. Each Party shall provide to the other Party any information that may
reasonably be required to prepare and present an insurance claim.
14. ADDITIONAL SATELLITE OPTION
14.1 DELIVERY SCHEDULE.
Contractor agrees to provide an additional satellite identical to the
ORION-Z Spacecraft design, ("Additional Satellite") for on-ground delivery to a
launch site designated by ORION and without further obligation for Contractor to
provide any launch readiness service no later than nineteen (19) months after
receipt of an order from ORION or four (4) months after delivery of ORION-Z,
whichever is later. ORION may place such order at any time after the EDC but in
no event later than two (2) months after Launch of the Satellite.
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14.2 PRICE.
(a) The firm fixed price for the Additional Satellite ("Additional
Satellite Price"), is [ ] provided ORION orders such Additional Satellite no *
later than March 30, 1999. Thereafter, the Additional Satellite Price shall
increase to [ ] * [ ] subject to ORION placing an order for the Additional
Satellite * no later than September 30, 1999. Thereafter, the price of an
Additional Satellite shall be negotiated between the Parties prior to ORION
ordering the Additional Satellite.
(b) The Additional Satellite payment plan shall be negotiated between the
Parties prior to ORION ordering the Additional Satellite; the payment plan shall
match Contractor's actual expenditure profile so as to avoid prepayments and
financing costs.
(c) Selection of the launch vehicle and launch services contractor will be
made by ORION (with the concurrence of Contractor) in sufficient time to permit
delivery of the Additional Satellite on the schedule set forth in Article 14.1.
The prices for both such items will be identified and agreed to as a part of
such process.
(d) ORION shall provide for launch insurance for the Additional Satellite.
14.3 ADDITIONAL SATELLITE CONTRACT PROVISIONS.
(a) Contractor shall furnish the Additional Satellite in accordance with
the provisions of the documents that constitute the Contract, with the dates
therein adjusted (if necessary) for the later timeframe of the Additional
Satellite.
(b) Except as otherwise required by the terms of this Article 14, contract
terms for the Additional Satellite will be identical to the Contract, with risk
elements (e.g., liquidated damages for late delivery and warranty payback
incentives) adjusted to the change in price from the ORION-Z Spacecraft so as to
represent the same percentage risk.
15. INDEMNIFICATION, INTER-PARTY WAIVER OF LIABILITY, AND LIMITATION OF
LIABILITY AND DISCLAIMER OF WARRANTY
15.1 INDEMNITY BY CONTRACTOR.
Contractor shall indemnify, defend and hold harmless ORION and its
Associates from any and all Losses arising from, in connection with, or based on
any allegations made by third parties (including employees, Consultants or
customers of ORION, Contractor, Subcontractors and all other persons performing
any of the Work hereunder) regarding any of the following:
(a) injury to persons (including sickness or death) or damage to real or
tangible personal property (excluding the ORION-Z Spacecraft after Intentional
Ignition), resulting from any act or omission, negligent or otherwise, of
Contractor or its Subcontractors in the
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performance of the Work, or any act or omission of ORION or ORION Personnel
occurring at any installation of Contractor (except acts or omissions that
constitute willful misconduct or lack of good faith);
(b) any claims of infringement of any intellectual property rights,
including patent, copyright or industrial design, or of unauthorized use or
disclosure of any proprietary technical information, alleged to have occurred
because of the Work performed under the Contract;
(c) Contractor's breach of its obligations with respect to improper
payments as set forth in Article 28.14 (Improper Payments, Kickbacks, Gifts and
Gratuities); and
(d) Contractor's breach of its obligations with respect to compliance with
applicable laws as set forth in Article 28.15 (Compliance With Applicable Laws).
15.2 INDEMNITY BY ORION.
ORION shall indemnify, defend and hold harmless Contractor and its
Associates from any and all Losses arising from, in connection with, or based on
any allegations made by third parties (including employees of Contractor and
Subcontractors, employees, Consultants and customers of ORION and all other
persons performing any of the Work hereunder) regarding any of the following:
(a) injury to persons (including sickness or death) or damage to real or
tangible personal property, resulting from any act or omission, negligent or
otherwise, of ORION or ORION Personnel relating to the Work; provided, however,
ORION shall have no obligation with respect to claims for acts or omissions of
ORION or ORION Personnel occurring at any installation of Contractor (except
acts or omissions that constitute willful misconduct or lack of good faith);
(b) any claims of infringement of any intellectual property rights,
including patent, copyright or industrial design, or of unauthorized use or
disclosure of any proprietary technical information, alleged to have occurred
because of any resource provided to Contractor for performance of the Work;
(c) ORION's breach of its obligations with respect to improper payments as
set forth in Article 28.14 (Improper Payments, Kickbacks, Gifts and Gratuities);
and
(d) ORION's breach of its obligations with respect to compliance with
applicable laws as set forth in Article 28.15 (Compliance With Applicable Laws).
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15.3 INFRINGEMENT.
(a) In the event that, as a result of any claim or action alleging
infringement as described in Article 15.1(b), the manufacture, use, lease or
sale of any item thereof is enjoined, Contractor agrees to utilize its best
efforts either:
(1) to negotiate a license or other agreement with the plaintiff so
that such item is no longer subject to such injunction; or
(2) to modify suitably such item or substitute a suitable item
therefor, which modified or substituted item is not subject to
such injunction and to extend the provisions of this Article
thereto.
(b) In the event neither of the alternatives set forth under Article
15.3(a) above is accomplished by Contractor, Contractor shall refund to ORION
all payments made by ORION to it on account of the Contract Price, plus any
orbital incentive payments. Should Contractor be required under this Article
15.3(b) to refund to ORION all payments, ORION shall retransfer title in the
enjoined item to Contractor if title has previously passed to ORION.
(c) Contractor agrees to promptly provide ORION with written notice of any
demand, claim, request, proceeding or action against Contractor or any of
Contractor's other customers alleging that technology incorporated into the Work
provided under the Contract infringes the claimant's intellectual property
rights.
15.4 INDEMNIFICATION PROCEDURES.
(a) Promptly after receipt by any entity entitled to indemnification under
Articles 15.1 and 15.2 of notice of the commencement or threatened commencement
of any civil, criminal, administrative, or investigative action or proceeding
involving a claim in respect of which the indemnitee will seek indemnification
pursuant to such Article, the indemnitee shall notify the indemnifying Party of
such claim in writing. Failure to so notify the indemnifying Party shall not
relieve the indemnifying Party of its obligations under the Contract except to
the extent that it can demonstrate damages attributable to such failure. Within
fifteen (15) days following receipt of written notice from the indemnitee
relating to any claim, but no later than ten (10) days before the date on which
any response to a complaint or summons is due, the indemnifying Party shall
notify the indemnitee in writing if the indemnifying Party elects to assume
control of the defense and settlement of that claim (a "Notice of Election")
unless the indemnifying Party received notice of the claim less than ten (10)
days before said due date, in which case the indemnifying Party shall provide
the indemnitee a Notice of Election as soon as is reasonably practicable after
receipt of notice of the claim.
(b) If the indemnifying Party delivers a Notice of Election relating to any
claim within the required notice period, the indemnifying Party shall be
entitled to have sole control
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over the defense and settlement of such claim; provided that (i) the indemnitee
shall be entitled to participate in the defense of such claim and to employ
counsel at its own expense to assist in the handling of such claim; (ii) where
the indemnitee is so represented, the indemnifying Party shall keep the
indemnitee's counsel informed of each step in the handling of any such claim;
(iii) the indemnitee shall provide, at the indemnifying Party's request and
expense, such assistance and information as is available to the indemnitee for
the defense and settlement of such claim; and (iv) the indemnifying Party shall
obtain the prior written approval of the indemnitee before entering into any
settlement of such claim or ceasing to defend against such claim. After the
indemnifying Party has delivered a Notice of Election relating to any claim in
accordance with the preceding paragraph, the indemnifying Party shall not be
liable to the indemnitee for any legal expenses incurred by the indemnitee in
connection with the defense of that claim. In addition, the indemnifying Party
shall not be required to indemnify the indemnitee for any amount paid or payable
by the indemnitee in the settlement of any claim for which the indemnifying
Party has delivered a timely Notice of Election if such amount was agreed to
without the written consent of the indemnifying Party.
(c) If the indemnifying Party does not deliver a Notice of Election
relating to any claim within the required notice period, the indemnitee shall
have the right to defend the claim in such manner as it may deem appropriate, at
the cost and expense of the indemnifying Party. The indemnifying Party shall
promptly reimburse the indemnitee for all such costs and expenses.
15.5 INTER-PARTY WAIVER OF LIABILITY FOR LAUNCH OPERATIONS.
(a) ORION and Contractor agree to a no-fault, no-subrogation, inter-party
waiver of liability under which each Party agrees to be responsible for any
damage that it sustains as a result of damage to its own property and employees,
including death, while involved in launch operations in or around the launch
site, which damage is caused by either Contractor, ORION, the Launch Agency or
any other party involved in launch operations, and whether such damage arises
through negligence or otherwise. It is the intent of the Parties that this
inter-party waiver of liability be construed broadly to achieve the intended
objectives.
(b) For purposes of this Article 15.5 only, each Party further agrees that
if it subcontracts with a third party to provide services that necessitate such
third party's presence on the launch site, then it acknowledges and agrees that
such third party shall be required to agree to a no-fault, no-subrogation,
inter-party waiver of liability and indemnity for damages it sustains, identical
to the Parties' respective undertakings under this Article.
(c) In the event that a Party fails to obtain the aforesaid inter-party
waiver of liability from its subcontractor(s), then such Party shall indemnify
and hold harmless the other Party, the Launch Agency, other users of launch
services and their respective contractors and subcontractors from claims brought
by such subcontractor(s) of the first Party for damage to such
subcontractor(s)'s property or injury to, or death of, such subcontractor(s)'s
employees with respect to matters that otherwise would have been covered by the
inter-party waiver of liability.
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(d) The Parties will take such further actions as may be required to
implement the provisions of this Article 15.5, including the execution of such
agreements and waivers as are customarily used with respect to operations at the
launch site and are consistent with the provisions of this Article 15.5.
15.6 WAIVER OF SUBROGATION.
Except as provided in Article 7.5(g)(4), if a Party insures against any
loss or damage it may suffer in respect of which such Party is required to
indemnify the other Party or an Associate of the other Party pursuant to this
Article 15, it shall be a condition that such Party shall arrange for the
insurer to waive its right of subrogation against the other Party and every
Associate of the other Party provided that such coverage shall be at no
additional cost to the insuring Party. Each Party shall be entitled to require
proof from time to time that the other Party has complied with its obligations
under this Article. In the event that a Party does not comply with such
obligations, the respective indemnities referred to in Articles 15.1 and 15.2
shall extend, as applicable, to any claim that may be made by an insurer
pursuant to an alleged right of subrogation.
15.7 LIMITATION OF LIABILITY.
(a) EXCEPT AS OTHERWISE EXPRESSLY AUTHORIZED IN THE CONTRACT IN NO EVENT
SHALL EITHER PARTY BE LIABLE DIRECTLY OR INDIRECTLY TO THE OTHER PARTY AND ITS
ASSOCIATES AND SUBCONTRACTORS OR TO ANY ASSIGNEE OR SUCCESSOR OWNERS OF THE
ORION-Z SPACECRAFT FOR ANY AMOUNT REPRESENTING LOSS OF PROFITS, LOSS OF
BUSINESS, OR INDIRECT, SPECIAL, EXEMPLARY, CONSEQUENTIAL OR PUNITIVE DAMAGES
ARISING FROM THE PERFORMANCE OR NONPERFORMANCE OF THE CONTRACT OR ANY ACTS OR
OMISSIONS ASSOCIATED THEREWITH OR RELATED TO THE USE OF ANY ITEMS OR SERVICES
FURNISHED HEREUNDER, WHETHER THE BASIS OF THE LIABILITY IS BREACH OF CONTRACT,
TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY), STATUTES OR ANY OTHER LEGAL
THEORY. EXCEPT AS OTHERWISE EXPRESSLY AUTHORIZED IN THE CONTRACT, IN NO EVENT
SHALL EITHER PARTY'S TOTAL LIABILITY TO THE OTHER PARTY FOR ANY DAMAGES CLAIMED
HEREUNDER EXCEED THE CONTRACT PRICE.
(b) The foregoing limitation of liability shall not be deemed to affect the
Contractor's duties or ORION's remedies under Article 7.5 and Article 13.
15.8 DISCLAIMER OF WARRANTY.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THE CONTRACT, CONTRACTOR MAKES NO
WARRANTY, EXPRESS OR IMPLIED, INCLUDING ANY
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WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH REGARD TO
THE ORION-Z SPACECRAFT OR ANY OTHER DELIVERABLE ITEM PROVIDED UNDER THE
CONTRACT.
16. DISPUTE RESOLUTION
Any dispute between the Parties arising out of or relating to the Contract,
including with respect to the interpretation of any provision of the Contract
and/or with respect to performance under the Contract, shall be resolved as
provided in this Article.
16.1 INFORMAL DISPUTE RESOLUTION.
Prior to the initiation of formal dispute resolution procedures, the
Parties shall first attempt to resolve their dispute informally, as follows:
(a) If, during the course of Work in progress, either Party has cause to
believe that the other Party's performance, or plan for performance, is such
that the obligations of the other Party, as stated in the Contract will not be
met, the Party shall give written notice of its objections and the reasons
therefor and may recommend corrective action by the other Party. Contractor's
Program Manager shall promptly consult with ORION's Program Manager in an effort
to reach an agreement to overcome the objections (first instance).
(b) In the event agreement cannot be reached within ten (10) days of
receipt of written notice, then either Party may request that it be escalated
and the respective positions of the Parties shall be forwarded to Contractor's
Senior Executive and ORION's Senior Executive for discussion, and an attempt
shall be made to reach agreement (second instance).
(c) In the event agreement cannot be reached in the first instance or in
the second instance within thirty (30) days of the written notice described in
Article 16.1(a), then either Party may request that it be escalated and the
positions of the Parties shall be forwarded to Contractor's President and
ORION's President for resolution of the objections (third instance). If
agreement still cannot be reached within ten (10) additional days, either Party
may commence arbitration in accordance with Article 16.2.
(d) In the event of a dispute as to the performance of the Launched ORION-Z
Spacecraft, the Parties agree to have an independent determination of the
ORION-Z Spacecraft technical status performed by a mutually acceptable
technically qualified third party. The costs incurred in retaining the third
party shall be shared equally between Contractor and ORION. Such independent
determination may be used by either Party in any arbitration under Article 16.2,
but such determination shall not be binding upon the arbitrators.
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16.2 ARBITRATION.
If the Parties are unable to resolve any dispute as contemplated by Article
16.1 and if such dispute is not subject to Article 16.3, then such dispute shall
be submitted to mandatory and binding arbitration at the election of either
Party (the "Disputing Party") pursuant to the following conditions:
(a) The Disputing Party shall notify the American Arbitration Association
("AAA") and the other Party in writing describing in reasonable detail the
nature of the dispute.
(b) The arbitration shall be conducted by a tribunal of three (3)
arbitrators. Each Party shall appoint one (1) arbitrator and the third shall be
appointed by the two (2) arbitrators so previously appointed.
(c) The arbitration shall be conducted in accordance with the AAA's
Commercial Arbitration Rules then in effect. The arbitral tribunal shall allow
reasonable discovery in the forms permitted by the Federal Rules of Civil
Procedure, to the extent consistent with the purpose of arbitration. The
arbitral tribunal shall have no power or authority to amend or disregard any
provision of this Article 16.2 or any other provision of the Contract (in
particular, the arbitral tribunal shall not have authority to exclude the right
of a Party to terminate this Agreement when a Party would otherwise have such
right). The arbitral hearing shall be commenced promptly and conducted
expeditiously, with each Party being allocated one-half of the time for the
presentation of its case. Unless otherwise agreed by the Parties, an arbitral
hearing shall be conducted on consecutive days. In respect of a default by
either Party in respect of any procedural order made by the arbitral tribunal,
the tribunal shall have power to proceed with the arbitration and make its
award.
(d) The arbitration shall be held in Washington, D.C., U.S.A. and shall be
conducted in the English language.
(e) Any arbitration proceeding held pursuant to this article shall be
governed exclusively by the United States Arbitration Act, 9 U.S.C., Section 1
et seq.
(f) The following time limits shall be observed in respect of any
arbitration held pursuant to this Article:
(1) each Party shall appoint its arbitrator within ten (10) days of
receipt of the AAA acknowledgment of a demand for arbitration;
(2) the two (2) appointed arbitrators shall appoint a third
arbitrator within a further twenty (20) days from the time
stipulated in Article 16.2(f)(1) (unless the two (2) arbitrators
agree to an extension not to exceed an additional twenty (20)
days); and
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(3) any decision by the arbitrators referred to shall be made within
six (6) months from the date on which a Party demands arbitration
or within such extended period as the arbitrators may allow.
(g) Pending a decision by the arbitral tribunal, each Party shall, unless
directed otherwise by the other Party in writing, fulfill all its obligations
under the Contract, including, if and so far as it is reasonably practicable,
the obligation to take steps necessary during the arbitration proceedings to
ensure that the Work will be delivered within the time stipulated or within such
extended time as may be allowed under the Contract. Dispute over payment shall
not relieve Contractor of its obligations under this Article 16.2(g).
(h) The arbital tribunal shall, after reaching judgment and award, prepare
and distribute to the Parties a writing describing the findings of fact and
conclusions of law relevant to such judgment and award, and containing an
opinion setting forth the reasons for the giving or denial of any award. The
award of the arbitral tribunal shall be final and binding on the Parties, and
any judgment thereon may be entered in a court of competent jurisdiction. In no
event shall the arbitral tribunal be entitled to include indirect or
consequential damages in any damage award payable by either Party.
(i) The arbitral tribunal shall award prejudgment interest on any amount
that the tribunal determines is owing from one Party to the other, such interest
to be calculated at an annual rate equal to the Chase Manhattan Prime Rate then
in effect for each day from forty-five (45) days following the date of loss or
from the date of the filing for arbitration, whichever is the earlier, until the
date full payment is made.
(j) The cost of arbitration, including fees and expenses of the
arbitrators, will be shared equally by the Parties, unless the arbitral award
otherwise provides. Each Party shall bear the cost of preparing and presenting
its own case, unless the arbitral award otherwise provides.
(k) Notwithstanding anything else contained herein, the Parties agree that
time is of the essence in resolving any dispute.
16.3 LITIGATION.
(a) The Parties agree that the only circumstances in which disputes between
them shall not be subject to the provisions of Articles 16.1 and 16.2 is where a
Party makes a good faith determination that a breach of the terms of the
Contract by the other Party is such that the damages to such Party resulting
from the breach will be so immediate, so large or severe, and so incapable of
adequate redress after the fact that a temporary restraining order or other
immediate injunctive relief is the only adequate remedy. If a Party files a
pleading with a court seeking immediate injunctive relief and this pleading is
challenged by the other Party and the injunctive relief sought is not awarded in
substantial part, the Party filing the pleading seeking immediate
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injunctive relief shall pay all the costs and attorneys' fees of the Party
successfully challenging the pleading.
(b) The Parties consent to the non-exclusive jurisdiction of competent
Maryland state courts or federal courts in the District of Maryland, for all
litigation that may be brought under Article 16.3(a) above, subject to the
requirement for arbitration hereunder, with respect to the terms of, and the
transactions and relationships contemplated by, the Contract. The Parties
further consent to the jurisdiction of any court located within a district that
encompasses assets of a Party against which a judgment has been rendered, either
through arbitration or through litigation, for the enforcement of such judgment
or award against the assets of such Party.
17. TERMINATION
17.1 TERMINATION FOR CONVENIENCE.
(a) ORION may, upon written notice to Contractor, terminate all or any part
of the Contract without cause and at any time, and Contractor shall immediately
cease work in the manner and to the extent specified and shall similarly direct
its Subcontractors and take such action as may be reasonably necessary or as
ORION may direct for the protection and preservation of the Work that is in the
possession of Contractor or any Subcontractor and in which ORION has or may
acquire an interest.
(b) In the event of such termination under this Article 17.1 and provided
the termination was not due to the default of Contractor under Article 17.2,
Contractor shall be entitled to payment of an amount equal to, (i) in the case
of termination of all of the Contract, the Termination Liability Amount as
specified in Part l(B) (Payment Milestone Schedule and Termination Liability
Amounts) corresponding to the month in which termination occurs less the sum of
the Payment Milestones received by Contractor and, (ii) in the case of
termination of a part of the Contract, such amount as applicable to such
terminated part, less the total applicable amount of the sum of the Payment
Milestones received by Contractor; provided that in either case, where such
amount is a negative number, Contractor shall pay such amount promptly to ORION
within twenty (20) days.
(c) Contractor shall submit an Invoice to ORION within sixty (60) days
after the termination date which shall specify the amount due to Contractor from
ORION pursuant to this Article 17.1, and Contractor shall be entitled to payment
by ORION of such amount within thirty (30) days thereafter. Payment of such
amount by any Financing Entity on behalf of ORION to Contractor shall relieve
ORION from its obligation to make such payment.
(d) The amount payable by ORION to Contractor pursuant to Article 17.1(b)
shall constitute a total discharge of ORION's liabilities to Contractor for
termination pursuant to this Article 17.1.
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(e) If the Contract is terminated as provided in this Article 17.1 and full
payment is made in accordance with Articles 17.1 (b) and (c), ORION may require
Contractor to transfer to ORION, in the manner and to the extent directed by
ORION and at the expense of ORION, title to and possession of any items
comprising all or any part of the Work terminated (including, without
limitation, all Work in progress and all inventories allocated to the Contract),
and Contractor shall, upon the direction and at the expense of ORION, protect
and preserve property in the possession of Contractor or its Subcontractors in
which ORION has an interest and shall facilitate access to and possession by
ORION of items comprising all or any part of the Work so terminated. If ORION so
requests or ORION has not taken delivery of property in which it has an interest
within sixty (60) days after termination, or such longer period as is agreed
between the Parties, Contractor shall make a reasonable, good faith effort to
sell such property and to remit any sales proceeds to ORION, less a deduction
for costs of disposition reasonably incurred by Contractor.
17.2 TERMINATION FOR CONTRACTOR'S DEFAULT.
(a) If at any time Contractor has failed to make adequate progress toward
the completion of the ORION-Z Spacecraft, including where such failure is due to
the unlaunched ORION-Z Spacecraft or any component being damaged or destroyed
where such damage or destruction does not constitute an Excusable Delay, such
that Contractor will not be able to Deliver the ORION-Z Spacecraft within ninety
(90) days after the ORION-Z Spacecraft Delivery Date set forth in Article 6
(Delivery) (as such date may have been modified in accordance with the
Contract), then ORION shall be entitled to deliver to Contractor a demand
("Demand") for correction of the failure within thirty (30) days after ORION
learns of such failure. Such Demand shall state full details of the failure.
Within ten (10) days after receipt of the Demand, or such longer time as the
Parties agree, Contractor shall submit to ORION a Correction Plan for achieving
Final Acceptance of the ORION-Z Spacecraft not later than one hundred and eighty
(180) days after the ORION-Z Spacecraft Delivery Date as specified in Article 6
(Delivery), provided that no Correction Plan shall ever result in a change to a
Delivery Date, unless the Parties agree in accordance with Article 28.4
(Amendments). If the Correction Plan does not reasonably correct or offset the
effect of the failure so as to demonstrate that Final Acceptance can be achieved
not later than one hundred and eighty (180) days after the ORION-Z Spacecraft
Delivery Date (as such date may have been modified in accordance with the
Contract), ORION may reject the Correction Plan within thirty (30) days after
receipt, in which case the Parties shall negotiate in good faith to develop a
Correction Plan that will be satisfactory to both Parties. If ORION does not
reject the Correction Plan within thirty (30) days after receipt, the Contract
shall be deemed modified in accordance with the Correction Plan and the failure
shall be deemed cured so long as Contractor complies with the terms of such
Correction Plan.
(b) If Contractor refuses or fails to observe or perform any material duty
or obligation in the Contract, except those obligations of Contractor for which
particular remedies are specified elsewhere in the Contract as being exclusive,
then ORION shall be entitled to deliver to Contractor a Demand that it correct
the breach within thirty (30) days. Such Demand shall state
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full details of the breach. Within ten (10) days after receipt of the Demand, or
such longer time as the Parties agree, Contractor shall submit to ORION a
Correction Plan. If the Correction Plan does not reasonably correct or offset
the effect of the breach in a timely manner, ORION may reject the Correction
Plan within thirty (30) days after receipt, in which case the Parties shall
negotiate in good faith to develop a Correction Plan that will be satisfactory
to both Parties. If ORION does not reject the Correction Plan within thirty (30)
days after receipt, the Contract shall be deemed modified in accordance with the
Correction Plan and the breach shall be deemed cured so long as Contractor
complies with the terms of such Correction Plan.
(c) ORION may, upon written notice to Contractor, terminate immediately for
cause all or any portion of the Contract if:
(1) Contractor does not submit a Correction Plan to ORION within ten
(10) days after receipt of a Demand, or the Parties cannot
develop a Correction Plan that reasonably corrects or offsets the
effects of the failure or breach or that is otherwise
satisfactory to both ORION and Contractor within twenty (20) days
after ORION's rejection of the Correction Plan; or
(2) Contractor fails to Deliver in orbit the ORION-Z Spacecraft
within one hundred and eighty (180) days after the ORION-Z
Spacecraft Delivery Date set forth in Article 6 (Delivery) (as
such date may have been modified in accordance with the
Contract); or
(3) Contractor (i) files for bankruptcy, (ii) becomes or is declared
insolvent, or is the subject of any proceedings related to its
liquidation, insolvency or the appointment of receiver or similar
officer for it, (iii) makes an assignment for the benefit of all
or substantially all of its creditors; or (iv) enters into an
agreement for the composition, extension, or readjustment of
substantially all of its obligations; or
(4) Contractor resorted to fraudulent, corrupt or unlawful practices
in connection with its securing or implementing the Contract; or
(5) Contractor breaches its obligations under Article 28.14 (Improper
Payments, Kickbacks, Gifts and Gratuities) or Article 28.15
(Compliance with Applicable Laws).
(d) In no event may ORION terminate the Contract with respect to the
ORION-Z Spacecraft after Intentional Ignition.
(e) In the event ORION terminates the Contract in whole or in part as
provided in this Article 17.2, then:
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(1) ORION may require Contractor to transfer to ORION, in the manner
and to the extent directed by ORION and at the expense of
Contractor, title to and possession of any items comprising all
or any part of the Work terminated (including, without
limitation, all Work in progress and all inventories allocated to
the Contract). The transfer to ORION of Work in progress and
inventories allocated to the Contract not associated with a
Payment Milestone that has been Successfully Completed, Conducted
or Delivered (as defined in Article 5) shall be contingent upon
Contractor being paid an amount mutually agreed upon by the
Parties for such Work in progress and inventories allocated to
the Contract, which amount shall in no event exceed Contractor's
reasonable actual cost incurred therefor. ORION also may cause
the ORION-Z Spacecraft to be completed by another party, and as
damages (in addition to any applicable liquidated damages for
delay levied pursuant to Article 6.2 up to the date of
termination) may charge Contractor for any actual and reasonable
increased cost for such completion incurred in connection
therewith in excess of the Contract Price; provided that
Contractor's liability for such additional damages shall not
exceed [ ] * [ ], as may be adjusted under Article 28.4 *
(without regard to any payments made to Contractor to the date of
termination). The amount payable by Contractor shall be verified
at Contractor's request and expense by an internationally
recognized firm of accountants appointed by Contractor for that
purpose subject to approval of ORION, such approval not to be
unreasonably withheld or delayed. A demand for any such excess
costs must be made within one (1) year after termination under
this Article 17.2 and must be paid within sixty (60) days after
receipt of such verification. Contractor's right to verification
shall be without prejudice to the rights of either Party under
Article 16 (Dispute Resolution). The report issued by the
accountants may be used by either Party during any arbitration
proceeding, but the report shall not be binding on the
arbitrator(s). By notice in writing received by ORION no later
than sixty (60) days after receipt of ORION's invoice pursuant to
this Article 17.2, Contractor may dispute the amount of said
invoice. In the event Contractor does not so notify ORION that it
disputes ORION's invoice, Contractor shall be deemed to have
accepted said invoice; or
(2) ORION shall return or dispose of any or all Work in progress (as
requested by Contractor) and Contractor shall pay ORION (i) all
amounts previously paid by ORION to Contractor, (ii) as damages,
direct reasonable re-procurement costs in excess of the Contract
Price, such damages not to exceed [ ] (as may be * adjusted under
Article 28.4), and (iii) all applicable liquidated damages for
delay levied pursuant to Article 6.2 up to the date of
termination. Title to the Work in progress shall vest or remain
vested in Contractor.
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(f) If, after termination of the Contract under this Article 17.2, it is
determined by mutual agreement of the Parties or in accordance with Article 16.2
(Arbitration) that Contractor was not in default under the provisions of this
Article 17.2 or that the default was excusable under Article 6.2 (Excusable
Delay), Contractor shall be entitled to its direct damages caused by the
wrongful default termination. Payment shall be made within 30 days of ORION's
receipt of an invoice for such damages with reasonable supporting evidence.
17.3 TERMINATION FOR EXCUSABLE DELAY.
ORION may, upon written notice to Contractor terminate immediately all or
any portion of the Contract if any Excusable Delay (other than Excusable Delay
resulting from acts or omissions of ORION that unreasonably delay or hinder
Contractor's performance or ORION's failure to meet its responsibilities under
the Contract or its exercise of its rights under Article 25 (Ground Storage
Option) due to circumstances caused by ORION) exist for a cumulative period of
time exceeding twelve (12) months. If ORION so terminates the Contract,
Contractor shall refund to ORION all amounts paid for non-Equipment Deliverable
Items (such as Data and Documentation and Operations Training and software) and
all undelivered Equipment Deliverable Items (excluding the ORION-Z Spacecraft if
Launched prior to termination pursuant to this Article 17.3).
17.4 TERMINATION FOR ORION'S DEFAULT.
(a) Contractor shall be entitled to terminate the Contract in whole or,
where severable, in part, under the following circumstances:
(1) if Contractor gives written notice to ORION of default in the
payment of any Milestone Payment when the same shall have become
due and payable and ORION fails to cure such event within thirty
(30) days after receiving such written notice; or
(2) if Contractor gives written notice to ORION that Contractor,
solely as a result of ORION's failure (for reasons that do not
constitute Excusable Delay) to perform its responsibilities as
set forth in the Contract, is unable to substantially perform its
obligations under the Contract for a period in excess of six (6)
months; provided that: (i) Contractor has used commercially
reasonable efforts to perform notwithstanding ORION's failure to
perform; and (ii) Contractor's inability to perform could not
have been prevented by reasonable precautions and cannot
reasonably be circumvented by Contractor through the use of
alternate sources, work-around plans or other means; or
(3) ORION (i) files for bankruptcy, (ii) becomes or is declared
insolvent, or is the subject of any proceedings related to its
liquidation, insolvency or the appointment of receiver or similar
officer for it, (iii) makes an assignment for
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the benefit of all or substantially all of its creditors; or (iv)
enters into an agreement for the composition, extension, or
readjustment of substantially all of its obligations; or
(4) ORION has resorted to fraudulent or corrupt practices in
connection with its securing or implementing of the Contract.
(b) Except as specified above, Contractor shall not have the right to
terminate or suspend the Contract.
(c) In the event of such termination, Contractor shall be entitled
forthwith to take any or all of the following actions:
(1) treat the Contract as terminated as to any or all of the items
then undelivered or services unperformed and cease or suspend
manufacture of any of the items to be supplied hereunder;
(2) withhold delivery of any of the items to be supplied hereunder
until Contractor has received full payment under this Article and
retain all sums then paid on account thereof,
(3) cease or suspend performance of any of the services to be
provided to ORION hereunder, except those services that are
specifically intended to be provided in connection with a
termination of the Contract; and
(4) take payment of an amount equal to the Termination Liability
Amount for the ORION-Z Spacecraft for the calendar month next
following the calendar month in which the date of termination
occurs, less the sum of the Milestone Payments actually received
by Contractor, provided that, where such amount is a negative
number, Contractor shall refund such amount promptly to ORION
within twenty (20) days. Where Contractor is owed money by ORION,
Contractor shall submit an Invoice to ORION within sixty (60)
days after the termination date which shall specify the amount
due to Contractor from ORION pursuant to this Article 17.4 and
Contractor shall immediately be entitled to full payment by ORION
immediately thereafter.
(d) To the extent that full payment has been made therefor, ORION may
require Contractor to transfer to ORION in the manner and to the extent directed
by ORION, title to and possession of any items comprising all or any part of the
Work terminated (including, without limitation, all Work in progress and all
inventories allocated to the Contract), and Contractor shall, upon direction of
ORION, protect and preserve property at ORION's expense in the possession of
Contractor or its Subcontractors in which ORION has an interest and shall
facilitate access to and possession by ORION of items comprising all or part of
the Work
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terminated. Alternatively, ORION may request Contractor to make a reasonable,
good faith effort to sell such items and to remit any sales proceeds to ORION
less a deduction for costs of disposition reasonably incurred by Contractor for
such efforts.
(e) Nothing in this Article 17.4 shall affect ORION's remedies under
Article 6.2.
17.5 MITIGATION OF DAMAGES.
In all instances, the Party terminating or claiming other remedies shall
take all reasonable steps available to it to mitigate any claim that it may have
against the defaulting Party.
17.6 RESOLUTION EFFORTS.
Except in the case of a default under Article 17.2(c)(3), Article
17.4(a)(1), and Article 17.4(a)(3), prior to either Party exercising its right
to terminate the Contract under this Article, the Parties agree that ORION's
Senior Executive and Contractor's Senior Executive, and if mutually agreed, an
independent third party, will meet within fifteen (15) days of receipt of
written notice of the dispute by one Party to the other Party to try to resolve
the said dispute. If ORION's Senior Executive and Contractor's Senior Executive
cannot agree on an appropriate resolution of the dispute within ten (10) days,
then the Parties shall resolve their dispute in accordance with the provisions
of Article 16; provided, however, in such circumstances, the Parties shall not
be required to comply with Articles 16.1(a) - (b).
17.7 CONTINUED PERFORMANCE.
Each Party shall continue the performance of its obligations under the
Contract to the extent not terminated under the provisions of this Article.
18. KEY CONTRACTOR PERSONNEL
18.1 KEY POSITIONS.
(a) "Key Contractor Positions" shall be the positions set forth as such in
Part 1(C) (Key Contractor Positions). Contractor shall cause each of the
personnel filling the Key Contractor Positions to devote such time and effort as
is necessary to provide the Work.
(b) The Contractor Program Manager shall be one of the Key Contractor
Positions. The Contractor Program Manager shall serve as the single point of
accountability for Contractor for the Work.
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18.2 ASSIGNMENT OF KEY CONTRACTOR PERSONNEL.
(a) With respect to Key Contractor Positions identified in Part 1(C) (Key
Contractor Positions) as being subject to ORION approval, before assigning an
individual to such a Key Contractor Position, whether as an initial assignment
or a subsequent assignment, Contractor shall notify ORION of the proposed
assignment, shall introduce the individual to appropriate ORION representatives
(and, upon request, provide such representatives with the opportunity to
interview the individual) and shall provide ORION with a resume and other
information about the individual reasonably requested by ORION. If ORION in good
faith objects to the proposed assignment, the Parties shall attempt to resolve
ORION's concerns on a mutually agreeable basis. If the Parties have not been
able to resolve ORION's concerns within five (5) Business Days, Contractor shall
not assign the individual to that position and shall propose to ORION the
assignment of another individual of suitable ability and qualifications.
Personnel filling such Key Contractor Positions may not be transferred or
re-assigned until a suitable replacement has been approved by ORION.
(b) With respect to Key Contractor Positions identified in Part 1(C) (Key
Contractor Positions) as being subject to ORION consultation, before assigning
an individual to such a Key Contractor Position, whether as an initial
assignment or a subsequent assignment, Contractor shall notify ORION of the
proposed assignment, shall introduce the individual to appropriate ORION
representatives (and, upon request, provide such representatives with the
opportunity to interview the individual) and shall provide ORION with a resume
and other information about the individual reasonably requested by ORION. If
ORION in good faith objects to the proposed assignment, the Parties shall
attempt to resolve ORION's concerns on a mutually agreeable basis.
18.3 APPROVED KEY CONTRACTOR PERSONNEL.
The personnel approved as of the Effective Date to fill the Key Contractor
Positions identified in Part 1(C) as subject to ORION approval, are listed in
Part 1(C).
19. PERMITS, LICENSES AND GOVERNMENT APPROVALS
19.1 CONTRACTOR RESPONSIBILITY AND EXPENSES.
(a) Contractor shall, at its own expense, secure and maintain all permits,
licenses and approvals as may be required for the performance of the Work under
the Contract, including any authorization or license relating to transfer or
export of technology or technical data and any applicable launch licenses.
Contractor shall, at its own expense, perform the Work in accordance with the
conditions of all applicable permits and licenses.
(b) Contractor shall submit an application to the appropriate United States
Government entity for a Technical Assistance Agreement. Such application shall
be made within
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thirty (30) days after EDC provided ORION supports the application in a timely
manner and shall identify ORION's Consultants.
19.2 ORION REVIEW OF GOVERNMENT APPLICATIONS.
Contractor shall review with ORION any application Contractor makes to any
government department, agency or entity for any permit, license, agreement or
approvals, as may be required to meet Contractor's contractual obligations under
the Contract, prior to the submission of such application. Contractor shall
provide ORION a minimum of ten (10) Business Days to review such applications
prior to submission to such governmental entity and Contractor shall in good
faith consider any comments made by ORION and shall incorporate in such
application all reasonable revisions to such application proposed by ORION.
19.3 COMPLIANCE WITH GOVERNMENT REQUIREMENTS.
Notwithstanding any other Article in the Contract, the Parties understand
and agree that certain restrictions, including those placed on access to
Contractor's and Subcontractor's plants and the use, sale or other disposition
of technical data, and/or Work delivered under the Contract may be imposed by
any government which has jurisdiction over the Work. The Parties at all times,
both before and after completion of the Contract, agree to be and remain bound
by any such government requirements pertaining to the technical data or Work and
shall cooperate in obtaining all required consents and approvals.
20. ACCESS TO WORK IN PROGRESS
20.1 GENERAL.
(a) The provisions of this Article 20 are subject to Article 19.3.
(b) ORION Personnel shall have reasonable access to any premises of
Contractor or Subcontractor on an "as needed" basis where Work is being
performed under the Contract and may observe all of the Work, as well as any
associated facilities and documentation, during regular business hours, or such
other times as Work is being performed under the Contract, provided that such
access does not unreasonably interfere with such Work. Contractor shall provide
ORION Personnel reasonable assistance in the performance of such inspections.
The Parties agree that non-escort badges to agreed work areas for the period
from commencement of Work through Launch where ORION activities are being
performed shall be made available to all ORION Personnel subject to adequate
notice of personnel details being provided to Contractor and security and export
clearance being granted.
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20.2 OFFICE SPACE AND FACILITIES.
(a) Contractor shall provide office space and facilities for the
accommodation of up to four (4) ORION Personnel at Contractor's facilities and
shall make reasonable work space available for such ORION Personnel at
environmental test facilities (if located off site) and shall use best efforts
to ensure that office space and facilities are provided for up to two (2) ORION
Personnel at other selected Subcontractors' plants on a temporary basis to
attend meetings or witness tests. At a minimum, Contractor shall provide desks,
chairs, office supplies, local telephone service (long distance telephone usage
to be charged to ORION), car parking facilities and access to meetings rooms,
copying machines and facsimile equipment, and, as available, access to and use
of video conferencing facilities at Contractor's facilities (in this connection,
Contractor will take reasonable measures to facilitate video conferencing
between Contractor's facilities and ORION's premises, provided the video
conferencing facilities of both Parties are fundamentally compatible).
(b) ORION Personnel visiting or resident at Contractor's or Subcontractors'
facilities will abide by the applicable security and export regulations and will
not disclose to any third party any information that is identified by Contractor
or by Subcontractors to be of a proprietary nature. All ORION Personnel having
access to Contractor's technical data or manufacturing facilities are required
to be bound by a duly executed non-disclosure agreement.
(c) Notwithstanding the fact that ORION Personnel visiting or resident at
Contractor's or Subcontractors' facilities will be in consultation with
Contractor's or Subcontractors' employees, such ORION Personnel shall remain
employees of ORION, its Consultants , as applicable, and as such, compensation
for their services and all liability for their actions remain the responsibility
of ORION Personnel, as applicable.
20.3 DOCUMENTATION.
(a) ORION Personnel will have reasonable access to (i) any drawings,
circuit diagrams/schematics, specifications, standards or process descriptions
available to Contractor and relevant to the ORION-Z Spacecraft, (ii) data and
documentation provided to Contractor by its Subcontractors and relevant to the
ORION-Z Spacecraft (to the extent permitted by the Subcontractors after
Contractor has used best efforts to obtain such permission), and (iii) Data and
Documentation. Contractor will make available to ORION Personnel copies of such
documentation, at no charge to ORION, on the reasonable request of ORION
Personnel where such documentation is necessary for evaluation of designs,
performance considerations, assessment of test plans and test results or for any
other purpose connected with the design, qualification, testing, Final
Acceptance or operation of the ORION-Z Spacecraft and its components. To
facilitate their work in this respect, Contractor will allow ORION Personnel
reasonable access to all indexes related to such drawings, circuit
diagrams/schematics, and documents.
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(b) With regard to electronically generated information, Contractor will
copy ORION and/or provide ORION electronic access to that information necessary
to keep ORION advised, on a current basis, of program issues, decisions and
problems. To the extent Contractor establishes data links for general use
between the facilities of Contractor and its customers, Contractor shall
establish data links between its and ORION's facilities such that ORION has
remote electronic access to those project related documents identified in Part
2(B) (CDRL). Contractor will also provide ORION Personnel with "real time"
access to all measured data taken at Contractor's and Subcontractors' facilities
on a non-interference basis.
(c) Subject to Article 9 (Changes in Scope of Work), the inspection,
examination, agreement to, or approval, waiver or deviation by ORION (other than
in accordance with Article 28.4 (Amendments)) with regard to any design,
drawing, specification or other documentation produced under the Contract shall
not relieve Contractor from fulfilling its contractual obligations or result in
any liability being imposed on ORION.
20.4 MEETINGS AND REVIEWS.
(a) ORION Personnel shall be entitled to attend all meetings and reviews
(including meetings and reviews held by electronic means) of Contractor and of
Contractor with any Subcontractors where such meetings and reviews are
materially related to project schedule and management, engineering, design,
manufacturing, integration, testing and launch and shall have the right to
participate in and make recommendations, but not to control, give directions or
assign actions, in all meetings and reviews at the system, subsystem and unit
level, as well as internal program reviews. The Parties agree to work
cooperatively in resolving issues that arise at the various meetings and, where
ORION has an objection to a recommended resolution/ implementation, the Parties
agree to discuss it at the Senior Executive level prior to implementation, but
the final decision concerning implementation shall remain with Contractor who
shall provide ORION with a written explanation for its decision.
(b) In the event a meeting or review is convened at Contractor's or a
Subcontractor's plant, Contractor shall provide reasonable advance notice to
ORION (e.g., one week for regularly scheduled meetings) and shall make the
necessary arrangements to facilitate the entry of ORION Personnel to the meeting
place.
20.5 SUBCONTRACTS.
Contractor shall require that any Subcontract entered into after EDC,
contains a provision substantially similar to this Article 20 to ensure
effectiveness of ORION's rights under the Contract. With respect to Subcontracts
entered into before EDC, ORION's rights under this Article 20 shall be as
permitted in such Subcontracts.
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21. LICENSE RIGHTS
21.1 SOFTWARE, INVENTIONS AND DATA AND DOCUMENTATION.
(a) License. Contractor grants to ORION an irrevocable, non-exclusive
license to use and have used throughout the world (i) any software covered by
any copyright or patent and any invention covered by any patent, now or
hereafter owned by Contractor or for which Contractor has or may acquire the
right to grant such a license, which software and/or invention is directly
incorporated in any Deliverable Item or directly employed in the use of any
Deliverable Item under the Contract, and (ii) the Data and Documentation. Such
license shall, in connection with the operation, maintenance, redesign or
modification of any Deliverable Items:
(1) permit the copying of such software; and
(2) in the event Contractor no longer elects, or is able, to maintain
such software, permit the modification of such software by ORION
(with Contractor releasing to ORION the source code for such
software upon such event); and
(3) permit the copying and modification of Data and Documentation by
ORION; and
(4) be deemed to be fully paid-up; and
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(5) be on reasonable terms and conditions for other purposes.
Such license shall be transferable to any other entity, subject to Contractor's
approval, such approval not to be unreasonably withheld. Nothing herein shall be
construed as (i) granting any rights of ownership in any intellectual property
contained in ORION-made redesigns or modifications of Deliverable Items or (ii)
conferring any liability on Contractor for such ORION-made redesigns or
modifications.
(b) No Limitation of Rights. This Article shall not be construed as
limiting any rights of ORION or obligations of Contractor under the Contract,
including specifically the right of ORION, without payment of additional
compensation to Contractor, to use, have used, deliver, lease, sell or otherwise
dispose of, any item or any part thereof, delivered under the Contract.
21.2 TECHNICAL DATA AND INFORMATION.
(a) Definitions. The following definitions shall apply to the Contract:
(1) "Technical Data and Information" includes but is not limited to
technical writings, sound recordings, computer programs,
pictorial reproductions, drawings, circuit diagrams/schematics
and other graphic representations and works of similar nature,
and any other data necessary to enable the manufacture of any
item or the practice of any process manufactured or practiced
pursuant to the Contract, whether or not copyrighted, to the
extent that the same are of the type customarily retained in the
normal course of business. The term does not include financial
reports, costs analyses, and other information incidental to
contract administration.
(2) "Foreground Data" means any Technical Data and Information
generated in the performance of the Work under the Contract or
any Subcontract.
(3) "Background Data" means Technical Data and Information, other
than Foreground Data, directly utilized in the execution of the
Work performed under the Contract or any Subcontract and
necessary for the reconstruction, establishment, maintenance or
operation of any item delivered under the Contract or any
Subcontract or for the modification of any software delivered
under the Contract (as permitted under the Contract by ORION) or
any Subcontract.
(b) Foreground Data.
(1) Upon completion of the Work or upon termination of the Contract,
and also upon written request of ORION not more often than
quarterly during the term
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of the Contract, Contractor shall notify ORION of any and all
items of Foreground Data. Notification shall be in the form of a
list setting forth the nature of the Foreground Data, the system,
subsystem, or part to which each such item of Foreground Data
relates, and the source of each such item. ORION shall be
entitled to disclose any such list of Foreground Data furnished
to it hereunder, in whole or in part, to any third party for the
purposes of reconstructing, establishing, maintaining, marketing
and operating the ORIONSAT System.
(2) At any time after the Effective Date of the Contract and until
the end of the twenty-fourth (24th) month after final payment
under, or termination of, the Contract, or at any time thereafter
so long as Contractor retains it, Contractor shall, upon written
request of ORION, disclose to ORION any and all Foreground Data
without payment of additional compensation to Contractor. ORION
shall be entitled to disclose, without payment of additional
compensation to Contractor, any and all Foreground Data disclosed
to it hereunder to any third party for the purposes of or in
connection with reconstructing, establishing, maintaining,
marketing and operating the ORIONSAT System.
(3) Contractor agrees to and does hereby grant to ORION or its
assignees pursuant to Article 28.2 (Assignment) an irrevocable,
non-exclusive, fully paid-up right and license to use and to
authorize any third party to use, throughout the world and
without payment of additional compensation to Contractor,
Foreground Data for the purposes of, or in connection with,
reconstructing, establishing, maintaining, marketing and
operating the ORIONSAT System, together with the irrevocable,
nonexclusive, fully paid-up and royalty-free right to have
Contractor grant directly to such third party such right and
license to use. As among all users under this Article 21, the
terms and conditions of the rights of the use granted shall be
nondiscriminatory.
(c) Background Data. To the extent Contractor now is or subsequently
becomes entitled to do so, Contractor agrees, at the written request of ORION,
(i) to grant to ORION an irrevocable, non-exclusive, fully paid-up right and
license to use Background Data throughout the world, and (ii) an irrevocable,
royalty-free right to have Contractor grant directly to any third party the
right and license to use Background Data throughout the world on a
non-discriminatory basis, provided that, subject to Article 21.2(e)
(Unconditional Use), such use by such third parties shall be on fair and
reasonable terms and conditions to be negotiated directly between Contractor and
such third party requesting the use of such Background Data. Any right or
license to use granted pursuant to this Article shall be limited to that use
necessary for the reconstruction, modification, establishment, maintenance and
operation of (those portions of the ORIONSAT System delivered under the
Contract).
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(d) Copying Rights.
(1) ORION and/or the person or entity to whom Technical Data and
Information is furnished under the Contract shall have the
irrevocable and non-exclusive right to copy for use authorized
under the Contract in connection with any items delivered under
the Contract, any Technical Data and Information that is required
to be furnished to ORION and such others pursuant to the
Contract; provided that if any of the foregoing Technical Data
and Information is copyrighted, Contractor hereby grants to ORION
and such others the royalty-free right to copy such copyrighted
material to the extent that Contractor now has or hereafter
acquires the authority to grant to others such right to make
copies. ORION and such others shall apply an appropriate
copyright notice to all copies of such copyrighted Technical Data
and Information.
(2) At the time that any Technical Data and Information is furnished
under the Contract to ORION and such others, Contractor shall
notify ORION and such others in writing of the inclusion in the
furnished material of any such amount of copyrighted material or
other material with respect to which Contractor is not entitled
to grant the right to make copies to others. Any such copyrighted
material that is marked by Contractor with an appropriate
proprietary legend shall be protected by ORION and such others in
the same manner as they protect their own proprietary
information.
(e) Unconditional Use. Notwithstanding any other provision of this Article,
with respect to any Technical Data and Information any person or entity is
authorized by the terms of this Article to use only under certain conditions or
limitations, such use shall be free, unconditional and unlimited from and after
the time such Technical Data and Information comes into the public domain or
becomes otherwise lawfully available to such person or entity on such other
terms.
(f) Proprietary Markings.
(1) All Foreground Data furnished pursuant to this Article shall be
marked by Contractor with the following legend:
"This document is furnished pursuant to a Contract
between ORION and Contractor dated
_________________ (adding, if appropriate, and a
subcontract thereunder between ____________ and
_____________). This document contains Foreground
Data as defined in that Contract, which may be
used only in the manner specified in that
Contract, unless such Foreground Data is or
lawfully becomes in the
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public domain or is or lawfully becomes available
to the user on other terms."
(2) All Background Data furnished pursuant to this Article shall be
marked by Contractor with the following legend:
"This document is furnished pursuant to a Contract
between ORION and Contractor dated (adding, if
appropriate, and a subcontract thereunder between
__________ and __________). This document contains
Background Data as defined in that Contract, which
may be used only in the manner specified in that
Contract, and upon such terms as are agreed upon
by _______________ and the user, unless such
Background Data is or lawfully becomes in the
public domain or is or lawfully becomes available
to the user on other terms."
(3) ORION and/or the person or entity to whom any Technical Data and
Information is furnished under the Contract shall be entitled at
any time to modify, remove, obliterate, or ignore any marking not
authorized by this Article 21 on any piece of Technical Data or
Information furnished under the Contract, but only after written
notice and reasonable opportunity has been given to Contractor to
defend such marking.
(g) Subcontracts.
Contractor shall, unless otherwise authorized or directed by ORION, use
best efforts to include in each Subcontract hereunder a license rights clause
pursuant to which each Subcontractor will grant license rights to ORION to the
same extent as the license rights granted by Contractor in this Article.
22. CONFIDENTIALITY AND NONDISCLOSURE OF PROPRIETARY INFORMATION
22.1 DEFINITION AND EXEMPTIONS.
(a) Definition. During the course of performance of the Contract each Party
may have access to or receive information from the other, such as information
concerning inventions, techniques, processes, devices, discoveries and
improvements, or regarding administrative, marketing, financial or manufacturing
activities. All such information, including any materials or documents
containing such information, whether disclosed orally or otherwise, shall be
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considered proprietary and confidential information of the disclosing Party
("Proprietary Information").
(b) Exemptions. For the purpose of this Article 22, "Proprietary
Information" shall not include any information that the receiving Party can
establish (i) was, at the time of disclosure to it, in the public domain; (ii)
after disclosure to it, is published or otherwise becomes part of the public
domain through no fault of the receiving Party; (iii) was in the possession of
the receiving party at the time of disclosure to it, as established by
documentary evidence; (iv) was received after disclosure to it from a third
party who had a lawful right to disclose such information; and (v) was
independently developed by the receiving Party without reference to the
Proprietary Information of the other, as established by documentary evidence.
22.2 PRIOR APPROVAL OF CERTAIN DISCLOSURES.
(a) Contractor agrees that it will not, for the period specified in Article
22.3(a), disclose details of the Work to be provided to ORION, to the extent
that such disclosure would reveal specific performance information regarding the
ORIONSAT System and the ORION-Z Spacecraft or any other information that would
materially affect ORION's commercial interests or the commercial use of the
ORIONSAT System without the prior written consent of ORION, which shall not be
unreasonably withheld. Notwithstanding the foregoing, the Parties expressly
agree that Contractor shall have the unrestricted right at any time to use and
to supply to third parties services or equipment similar or identical to any
Work provided hereunder.
(b) ORION agrees that it will not, for the period specified in Article 22.3
(a), disclose Proprietary Information of Contractor to the extent that such
disclosure would reveal information to a direct competitor of Contractor that
would materially affect the commercial interests of Contractor without the prior
written consent of Contractor, which shall not be unreasonably withheld.
Contractor agrees that for purposes of this Article 22, in the event that
TELESAT and/or COMSAT are engaged as Consultants to ORION for purposes of the
Contract, they shall not be deemed direct competitors of Contractor.
22.3 CONFIDENTIALITY OBLIGATIONS.
(a) Both during and for a period of three (3) years after the termination
or expiration of the Contract, each Party agrees to preserve and protect the
confidentiality of the Proprietary Information of the other and all physical
forms thereof. Neither Party shall disclose or disseminate Proprietary
Information of the other to any third party, including employees, independent
consultants, or Subcontractors unless each Party has (i) a need to know the
Proprietary Information for the purpose of establishing, maintaining, operating,
financing or marketing the ORIONSAT System, and (ii) has executed an agreement
obligating the party to maintain the confidentiality of the Proprietary
Information and limiting the use of the Proprietary Information to establishing,
maintaining, operating, financing or marketing the ORIONSAT System. Neither
Party shall use Proprietary Information of the other for its own benefit or for
the
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benefit of any third party, except as specifically provided under the terms and
conditions of the Contract.
(b) The foregoing shall not affect any right of ORION in respect of Data
and Documentation provided for under the Contract nor shall either Party be
prevented from using the general know-how and abilities gained during the
performance of the Contract for any purpose whatsoever.
22.4 COPYING.
(a) Either Party shall be entitled to make copies of any documents
containing Proprietary Information under the terms and conditions outlined
above.
(b) Either Party shall have the right at any time to remove, obliterate or
ignore any proprietary/confidential legend placed on any Data or Documentation,
or other information furnished under the Contract where the legend is not in
accordance with the Contract but only after notice to the other Party and
reasonable opportunity for such Party to defend such legend.
23. YEAR 2000 COMPLIANCE
Contractor represents and warrants that any and all software provided
hereunder will accurately process date/time data (including, but not limited to,
calculating, comparing, and sequencing) from, into, and between the twentieth
and twenty-first centuries, and the years 1999 and 2000 and leap year
calculations (hereinafter "Year 2000 Compliant"). Year 2000 Compliant
information technology, when used in combination with other information
technology, shall accurately process date/time data if the other information
technology properly exchanges date/time data (hereinafter, collectively the
"Year 2000 Warranty").
24. CONTRACT MANAGEMENT
24.1 GENERAL.
Contractor shall conduct and/or attend meetings, reviews and analyses and
shall prepare and deliver reports (including progress reports) and documentation
as required in Part 2(A) (SOW) and Part 2(B)(CDRL).
24.2 APPROVALS AND ACCEPTANCES.
No approval, acceptance, waiver or deviation prior to Final Acceptance by
ORION of any action or item under the Contract shall waive any of ORION's
contractual rights with regard to Final Acceptance of any Deliverable Item or
otherwise change or modify Contractor's obligation to meet the requirements of
the Contract except to the extent a requirement is expressly and
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specifically waived by a written instrument signed by an authorized
representative of ORION and made an Amendment to the Contract pursuant to
Article 28.4 (Amendment).
24.3 CONTRACT MONITORING.
During the performance of the Contract, Contractor and ORION shall each
designate a person to be its Contract Program Manager, whose duties shall be to
monitor the Work and to act as liaisons between the Parties. Such monitoring by
ORION shall not relieve Contractor from performing the Contract in accordance
with its terms and shall not in any way detract from Contractor's position as an
independent contractor.
24.4 ORION CONSULTANTS.
ORION's Consultants shall not be employees of any entity in direct
competition with Contractor's manufacturing operations and shall have no
authority to change any part of the Contract, or to direct Contractor or to bind
ORION. The Parties agree that TELESAT and COMSAT may be utilized by ORION as
Consultants on the ORION-Z program. Any changes to the Contract shall be made
only in accordance with Article 28.4 (Amendments), but ORION's Consultants may
participate in discussions regarding such changes. Any action taken by
Contractor prior to the resolution of any such question shall be at Contractor's
own risk and expense.
24.5 SUBCONTRACTING.
(a) Contractor shall provide ORION two (2) copies of all Subcontracts
issued, either by Contractor or by a Major Subcontractor on an "as-needed basis"
at ORION's request. Such copies shall not be required to contain any financial
information.
(b) To the extent practical, all Major Subcontracts issued at any time,
including those Subcontracts entered into before EDC shall contain the
provisions specified in the Articles of the Contract as appropriate to the
particular Major Subcontract.
(c) Major Subcontracts.
(1) Contractor has represented that in the performance of the Work
required by the Contract, it will be necessary for Contractor or
its Subcontractors to enter into Major Subcontracts. Initially,
the Major Subcontractors are as provided below:
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- - --------------------------------------------------------------------------------
TABLE 24.5
MAJOR SUBCONTRACTORS
- - --------------------------------------------------------------------------------
NAME OF MAJOR
SUBCONTRACTOR DESCRIPTION OF WORK
------------- -------------------
Arianespace Launch Vehicle
Narda Linearizers
AEG/Thomson TWT
Bosch EPC
ComDev Switches, Diplexers
Alenia Telemetry & Command RF Equipment
TecStar Solar Array Panels
MELCO Solar Array Panels
NEC Earth Sensors
Adcole Sun Sensors
Eagle-Picher Battery Cells
Sharp Solar Cells
Lockheed Martin Federal Systems SCE Processors
Pressure Systems Inc. Propellant Tanks
Lincoln Composites Pressurant Tanks
Kaiser Marquart 110 lb. Thrusters
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Atlantic Research Corp. 5 lb. Thrusters
Teldix Momentum Wheel
Ferranti Digital Integrating Rate Assy
MELCO Structural Panels, Comm Panels
(2) In the event that Contractor or a Major Subcontractor selects or
has a necessity to terminate any Major Subcontract or substitute
Major Subcontractors on any Major Subcontract, Contractor shall
consult with ORION and discuss any and all such actions prior to
implementation. The foregoing shall also apply to Subcontracts
and Subcontractors on an "as needed basis." Subject to Article
24.5(c)(3), ORION shall have no right or prior approval of
Contractor's actions.
(3) In the event that Contractor has a necessity to terminate or
substitute any Major Subcontractor, Contractor shall first
consult with and obtain the approval of ORION. If ORION does not
approve such actions and Contractor deems such actions to be
necessary to meet its performance obligations under the Contract,
then Contractor may take such action without ORION's approval.
(4) In the event that Contractor or a Subcontractor that has been
awarded a Major Subcontract has reason to waive, or to agree to,
a deviation in any of the technical requirements of any Major
Subcontract that will cause a material impact on the technical
parameters of the ORION-Z Spacecraft as set forth in Part 3(A)
(Technical Specifications), such variations shall be handled in
accordance with Part 3(A) and shall require a formal Amendment to
the Contract pursuant to Article 28.4.
(d) Nothing in the Contract shall be construed as creating any contractual
relationship between ORION and any Subcontractor. Contractor is fully
responsible to ORION for the acts and omissions of Subcontractors and of all
persons used by Contractor or a Subcontractor in connection with the performance
of the Work under the Contract. Any failure by a Subcontractor to meet its
obligations to Contractor shall not constitute a basis for excusable delay,
except as provided in Article 6.3 (Excusable Delay), and shall not relieve
Contractor from meeting any of its obligations under the Contract.
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25. GROUND STORAGE OPTION
25.1 NOTIFICATION.
ORION, at its option to be exercised no later than three (3) months prior
to the projected shipment date of the ORION-Z Spacecraft to the launch site, may
direct Contractor to provide ground storage for such Spacecraft for a period of
up to eighteen (18) months. ORION's exercise of its rights under this Article 25
shall constitute an Excusable Delay as provided in Article 6.3 (Excusable Delay)
provided ORION exercises such right due to circumstances caused by ORION.
25.2 STORAGE LOCATION.
Ground storage shall be provided at a facility controlled by Contractor and
shall be conducted in accordance with the satellite storage plan set forth in
Part 5 (Satellite Storage Plan).
25.3 STORAGE PRICES.
In the event that ORION, due to circumstances or Excusable Delay not caused
by ORION, elects to exercise the ground storage option for the ORION-Z
Spacecraft provided in this Article 25 from Contractor, then such ground storage
(and reverification of system flight assurance and reverification testing) shall
be provided at no charge to ORION. Otherwise: (i) such ground storage shall be
provided for the firm fixed price of [ ] per month while * the ORION-Z
Spacecraft is in ground storage and until ORION directs Contractor pursuant to
Article 25.6 to remove such Spacecraft from ground storage, conduct the
verification tests, and ship such Spacecraft to the launch site; and (ii) ORION
shall pay directly or reimburse Contractor for reverification of system flight
assurance and reverification testing (at [ ] * [ ] of Contractor's cost) and for
such reasonable additional costs such as taxes, * tariffs, duties,
transportation, insurance and launch-related expenses that Contractor would not
have incurred had ORION not elected ground storage for the ORION-Z Spacecraft.
25.4 INVOICING AND PAYMENT.
Contractor shall provide ORION an Invoice for amounts due under this
Article 25 in arrears in accordance with Article 5.1. ORION shall pay such
invoiced amounts in accordance with Article 5.
25.5 TITLE AND RISK OF LOSS.
Title and risk of loss or damage to the ORION-Z Spacecraft shall, as
provided in Article 8, remain with Contractor during ground storage and until
Final Acceptance.
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25.6 NOTIFICATION OF INTENTION TO LAUNCH A STORED SPACECRAFT.
ORION shall direct Contractor by written notice to remove the ORION-Z
Spacecraft from ground storage and Deliver the Spacecraft in-orbit subject to
the availability of a Launch Vehicle. This notification must be received by
Contractor no less than six (6) months prior to the revised Delivery Date for
the ORION-Z Spacecraft.
25.7 IN-ORBIT PERFORMANCE WARRANTY AND PAYMENTS.
(a) In the event that ORION, due to circumstances or Excusable Delay caused
by ORION, elects to exercise the ground storage option provided in this Article
25, upon placement of the ORION-Z Spacecraft in ground storage, ORION shall pay
to Contractor interest on the Orbital Incentive Amount at the rate specified in
Article 5.4 for the period of ground storage until ORION provides Contractor the
notice specified in Article 25.6. Upon Final Acceptance of the ORION-Z
Spacecraft, the provisions of Article 12 shall apply.
(b) In the event it is determined that the amount of the Advance Incentive
Payment to which Contractor is entitled at Final Acceptance under Article 12 is
less than one hundred percent (100%) of the Orbital Incentive Amount, then
Contractor shall pay to ORION a refund in the amount of the difference between
interest paid by ORION under (a) above and interest on the amount of the Advance
Incentive Payment to which Contractor is entitled at Final Acceptance, such
interest at the rate specified in Article 5.4 for the period specified in (a)
above.
26. LAUNCH VEHICLE AGENCY
26.1 INSURANCE.
Contractor shall require the Launch Agency to provide (and verify provision
of) insurance as required by any governmental agency, for loss or damage to its
property resulting from activities to be carried out in connection with launches
to be provided under the Contract. In consideration of and conditioned upon a
reciprocal waiver by the applicable government, both ORION and Contractor agree
to waive any claim against that government or its agencies for any property
damage or loss they sustain or for any personal injury to, death of, or any
property damage or loss sustained by their own employees.
26.2 COMPLIANCE WITH LAWS AND REGULATIONS.
The Launch Agency has executed agreements with various government agencies
for use of government-owned property and facilities relating to the production
of launch vehicles and launch operations. ORION agrees that it will comply with
the applicable government's laws and regulations as they relate to
ORION-furnished property and personnel. Contractor will request the Launch
Agency to furnish copies of such agreements to ORION upon ORION's request. ORION
will indemnify Contractor for any ORION violation of the laws, regulations or
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agreements as specified herein. In furtherance of the foregoing, the Parties
shall, before launch, execute and deliver an agreement for waiver of claims and
assumption of responsibility, if the execution of which is required by the
applicable government as a condition of granting Contractor's license to conduct
launch activities and launch the ORION-Z Spacecraft.
27. RESPONSIBILITY FOR THE CONTRACT
27.1 ABILITY TO PERFORM.
Contractor, by having submitted a tender to perform the Work and by
executing the Contract, shall be deemed to have satisfied itself as to:
(a) all the conditions and circumstances which may affect the Contract
Price, as defined in Article 5; and
(b) the feasibility of the Work to be performed in accordance with the
terms and conditions of the Contract.
Accordingly, Contractor warrants that it has the necessary skills, facilities
and capacity to perform the Work in accordance with the terms and conditions of
the Contract.
27.2 FIXED CONTRACT PRICE.
Contractor acknowledges that it has fixed the Contract Price according to
its own view and assessment of all relevant matters and no additional costs,
except as otherwise expressly provided for in the Contract, will be charged over
and above the Contract Price.
27.3 INCONSISTENCIES IN CONTRACT.
(a) By executing the Contract, the Parties acknowledge that they have
thoroughly examined all parts of the Contract, and agree that they are complete,
consistent and accurate. If Contractor decides, during the performance of the
Work, that any portion of the Contract is inaccurate or incomplete, or that
there are inconsistencies, it shall notify ORION in writing specifying full
particulars and request resolution before proceeding with the Work in question.
If Contractor proceeds before obtaining such a resolution, it does so at its own
risk and expense, and whether or not the course it has chosen is satisfactory to
ORION, it shall be entitled to no increase in the Contract Price or any
extension of the Delivery Dates set out in Article 6. If Contractor proceeds
with the Work before obtaining resolution of any inaccuracy, incomplete
information or inconsistency and the course of action it has pursued is not
chosen by ORION, it shall, upon request by ORION, promptly and at its own
expense, follow the course of action directed by ORION and make all
readjustments that may be required.
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(b) ORION shall within twenty (20) days after written notification by
Contractor pursuant to Article 27.3(a) provide a response and resolution of the
issues raised by Contractor.
27.4 SUBCONTRACTOR COOPERATION.
Contractor covenants that it will cooperate fully with all Subcontractors,
and will use reasonable efforts to ensure the full cooperation of all
Subcontractors with ORION in order to achieve due performance of the Contract.
28. GENERAL
28.1 EFFECTIVE DATE OF CONTRACT.
The effective date of the Contract ("EDC") shall be the date as of which
the Contract as been duly signed by both Parties. On the Effective Date,
Contractor will be paid the Initial Payment.
28.2 ASSIGNMENT.
(a) This Contract shall be binding on the Parties and their successors and
assigns. Assignment of this Contract shall not relieve the assigning Party of
any of its obligations nor confer upon the assigning Party any rights except as
provided in the Contract.
(b) Contractor shall not, without the prior written approval of ORION and
except on such terms and conditions as are determined in writing by ORION,
assign, mortgage, charge or encumber the Contract or any part thereof, any of
its rights, duties, or obligations hereunder, the Work or any monies payable or
to become payable under the Contract, to any person, except to a parent or a
wholly-owned direct or indirect subsidiary company of Contractor, or for the
purpose of corporate merger, recapitalization or reconstruction.
(c) ORION shall have the right to assign, mortgage, charge or encumber its
rights, duties or obligations under the Contract to any entity, including any
Financing Entity, subject to prior notice to Contractor.
28.3 ENTIRE AGREEMENT.
This Contract contains the entire Agreement between the Parties regarding
the Work hereunder and supersedes all communications, negotiations, and other
agreements either written or oral, relating to the Work and made prior to the
Effective Date of the Contract unless the same are expressly incorporated by
reference into the Contract.
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28.4 AMENDMENTS.
The Contract, including Parts, may not be modified except by written
instrument of subsequent date signed on behalf of ORION by its President (or
another person designated by the President in writing to sign such agreement)
and on behalf of Contractor by its Executive Vice President, Business or Vice
President and Chief Financial Officer (or another person designated by either in
writing to sign such agreement) which agreement expressly states that it is an
"Amendment to the ORION-Z Contract."
28.5 WAIVER OF BREACH OF CONTRACT.
A waiver of any breach of a provision of the Contract shall not be binding
upon either Party unless the waiver is in writing, signed by a duly authorized
representative of the Party, as applicable, and such waiver shall not affect the
rights of the Party not in breach with respect to any other or future breach.
28.6 CUMULATIVE REMEDIES.
Except as otherwise expressly provided herein, all remedies provided for in
the Contract shall be cumulative.
28.7 SEVERABILITY.
In the event any one or more of the provisions of the Contract shall for
any reason be held to be invalid or unenforceable, the remaining provisions of
the Contract shall be unimpaired and the invalid or unenforceable provision
shall be deemed to be restated to reflect as nearly as possible the original
intention of the Parties in accordance with applicable law.
28.8 APPLICABLE LAW.
Except as provided in Article 16.2(e), the Contract and performance under
it shall be governed by, construed and enforced in accordance with the laws in
force in the State of Maryland, U.S.A., without regard to conflict of laws
provisions thereof.
28.9 NOTICES.
(a) All notices, requests, demands, and determinations under the Contract
(other than routine operational communications), shall be in writing and shall
be deemed duly given (i) when delivered by hand, (ii) two (2) days after being
given to an express courier with a reliable system for tracking delivery, (iii)
when sent by facsimile confirmed by the specific addressee with a copy sent by
another means specified in this Article 28.9, or (iv) six (6) days after the day
of mailing, when mailed by United States mail, registered or certified, return
receipt requested, postage prepaid, and addressed as follows:
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ORION
2440 Research Boulevard
Suite 400
Rockville, Maryland 20850
United States of America
Attention: Richard Shay, Esq.
Sr. Vice President and General Counsel
Telephone No.: 301-258-8101
Facsimile No.: 301-258-3360
Attention: Dr. Denis Curtin
Senior Vice President
Telephone No.: 301-258-3210
Facsimile No.: 301-258-3330
SPACE SYSTEMS/LORAL
3825 Fabian Way
Palo Alto, California 94303
Attention: Linda Zumdahl, PS1
Contract Manager
Telephone No.: 650-852-5482
Facsimile No.: 650-852-7508
Attention: Josephine Stiles
Program Manager
Telephone No.: (650) 852-6728
Facsimile No.: (650) 852-6686
(b) A Party may from time to time change its address or designee for
notification purposes by giving the other Party prior notice of the new address
or designee and the date upon which it will be effective.
28.10 CONTRACTOR NOT AGENT.
Contractor, in performing the Work hereunder, is acting as an independent
contractor, and Contractor has the sole right and obligation to supervise,
manage, contract, direct, procure, perform or cause to be performed, all Work to
be performed by Contractor under the Contract. None of the provisions of the
Contract, including any of its Parts, shall be construed to mean that Contractor
is appointed or is in any way authorized to act as an agent of ORION.
28.11 SURVIVAL.
Any provision of the Contract that can be reasonably construed to survive
the expiration or termination of the Contract for any reason, including Article
11 (Representations and
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Warranties), Article 12 (In-Orbit Performance Warranty and Incentive Payments),
Article 13 (Insurance), and Article 15 (Indemnification) shall survive such
expiration or termination of the Contract.
28.12 RELEASE OF INFORMATION.
(a) Release of Information. Neither Contractor nor ORION, nor any of their
Associates, contractors, or Subcontractors, shall release or publish any
material (including articles, films, brochures, advertisements and photographs),
or authorize other persons to publish such material, or deliver speeches
(collectively, "Release") about the Work that is marked "Confidential",
"Proprietary", or with similar designation without the prior written approval of
the other Party, which approval shall not be unreasonably withheld. This
obligation shall not apply to (i) ORION's Release of any sort relating to
ORION's intellectual property, including the Technical Specifications and
Statement of Work, and may be Released as ORION so determines, or (ii)
information that is publicly available from any governmental agency or that is
or otherwise becomes publicly available without breach of this Agreement.
(b) The application for approval to Release material required by this
Article 28.12 shall be submitted to the other Party in writing and shall include
full particulars of any intended Release. Upon receipt of the other Party's
agreement in principle to the proposed Release, the applicant shall submit for
final approval by the other Party any material to be in the form and context in
which it is intended to be used. The other Party may then approve or decline to
approve Release in whole or in part of the material and at its discretion may
specify a time for Release.
28.13 GOVERNMENT FILINGS.
Notwithstanding any other provision of the Contract, Contractor and ORION
may make any public release or filings that Contractor or ORION considers
advisable or necessary under the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the rules applicable to the
National Market System, or the securities laws applicable to public companies in
the United States. Prior to making any such filing containing proprietary
information of the other Party, the filing Party shall provide the other Party
reasonable advance notice of the filing and cooperate with such other Party in
obtaining confidential treatment for such proprietary information. In addition,
if a Party desires for any information to be contained within such a filing to
be accorded confidential treatment and not disclosed to the public, it shall so
indicate to the other Party and such other Party shall cooperate with the first
Party in obtaining confidential treatment for such information.
28.14 IMPROPER PAYMENTS, KICKBACKS, GIFTS, AND GRATUITIES.
Each Party agrees that in carrying out its obligations under the Contract
it will not make payments of any salary, fee, commission or compensation of any
kind or the granting of any
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unlawful or improper gift or gratuity of any kind either directly or indirectly,
to any officer, employee, agent or representative of ORION.
28.15 COMPLIANCE WITH APPLICABLE LAWS.
(a) Subject to Article 19 (Permits, Licenses and Government Approvals),
each Party shall, at its own expense, comply with the requirements of any laws
of any place in which any part of the Work is to be done and with the lawful
requirements of public, municipal and other authorities in any way affecting or
applicable to any Work.
(b) Subject to Article 19 (Permits, Licenses and Government Approvals),
neither Party shall be responsible in any way for the consequences, direct or
indirect, of any violation by the other Party or its Subcontractors or
Consultants, or their officers, employees, agents or servants of any law of a
country in which the Work is performed, or of any country whatsoever.
28.16 FINANCING.
The Parties recognize that the Contract may be financed through external
sources. Contractor agrees to work cooperatively to negotiate and execute such
documents as may be reasonably required to implement such financing to the
extent it does not adversely affect Contractor's rights.
IN WITNESS WHEREOF the Contract has been issued in two (2) counterparts,
executed and sealed on behalf of ORION by persons authorized in that behalf, and
has also been executed and sealed on behalf of CONTRACTOR by persons authorized
in that behalf.
SPACE SYSTEMS/LORAL, INC LORAL ORION NETWORK SYSTEMS, INC.
BY: BY:
---------------------------------------- -------------------------------
TITLE: Executive Vice President, Business TITLE: Sr. Vice President
------------------------------------- ----------------------------
DATE: May 15, 1998 DATE: May 15, 1998
-------------------------------------- -----------------------------
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CONFIDENTIAL
ANNEX A
MILESTONE ACHIEVEMENT CERTIFICATE
[Date]
Orion Network Services, Inc.
2440 Research Boulevard
Suite 400 Rockville, Maryland 20850
United States of America
Attention: Al Ramos
RE: ORION-Z Spacecraft Purchase Contract, dated as of May 15, 1998 (as amended,
supplemented or modified from time to time, the "ORION-Z Contract"),
between Orion Network Services, Inc. ("ORION") and Space Systems/Loral,
Inc. ("Contractor")
Ladies and Gentlemen:
This Invoice is delivered to ORION pursuant to Article 5 of the ORION-Z Contract
and constitutes Contractor's Invoice for the amount of $[...] for Milestone
Payment No. ____ and $[...] for ___________________________.
We hereby certify that the above Milestone has been Successfully Completed,
Conducted, or Delivered (as each term is defined in Article 5.2(e) of the
ORION-Z Contract).
Very truly yours,
SPACE SYSTEMS/LORAL, INC. Agreed to on behalf of ORION:
By: By:
--------------------------------- ---------------------------------
Name: Name:
------------------------------- -------------------------------
Title: Title:
------------------------------ ------------------------------
Date:
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PART 1(B)
PAYMENT SCHEDULE
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THIS PART]
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PART 1(B)
TERMINATION LIABILITY
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THIS PART]
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LORAL ORION NETWORK SYSTEMS, INC.
ORION 2
STATEMENT OF WORK
PART 2(A)
DATED: 11 MAY 1998
- - --------------------------------------------------------------------------------
This document contains data and information proprietary to Space Systems/Loral.
This data shall not be disclosed, disseminated, or reproduced, in whole or in
part, without the express prior written consent of Space Systems/Loral.
- - --------------------------------------------------------------------------------
i
Use or disclosure of the data contained on this sheet is subject to the
restriction on the title page.
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CONTENTS
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SECTION PAGE
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1 --INTRODUCTION...................................................................................1-1
1.1 SCOPE.................................................................................1-1
1.2 RESPONSIBILITIES......................................................................1-1
1.3 APPLICABLE PROGRAM DOCUMENTS..........................................................1-2
2 --EQUIPMENT, DOCUMENTATION, AND SERVICES.........................................................2-1
2.1 INTRODUCTION..........................................................................2-1
2.2 DELIVERABLE EQUIPMENT.................................................................2-1
2.2.1 Flight Spacecraft..........................................................2-1
2.2.2 Mission Specific Hardware and Software.....................................2-2
2.2.3 TT&C Simulator.............................................................2-2
2.2.4 Dynamic Software Simulator.................................................2-2
2.3 DELIVERABLE DOCUMENTATION.............................................................2-2
2.4 SERVICES..............................................................................2-3
2.4.1 Launch Support Services....................................................2-3
2.4.2 Launch Services............................................................2-3
2.4.3 Insurance..................................................................2-3
2.4.4 Mission Support Services...................................................2-3
2.4.5 Operations Training........................................................2-4
2.4.6 Post Acceptance In-Orbit Support...........................................2-4
2.5 PURCHASER FURNISHED ITEMS FOR IOT.....................................................2-4
2.5.1 Equipment and Personnel....................................................2-4
2.5.2 Data.......................................................................2-5
3 --PROGRAM MANAGEMENT.............................................................................3-1
3.1 INTRODUCTION..........................................................................3-1
3.1.1 Scope......................................................................3-1
3.1.2 Responsibilities...........................................................3-1
3.1.3 Program Management Plan....................................................3-1
3.2 PROGRAM MANAGEMENT INTERFACE..........................................................3-2
3.3 DOCUMENTATION AND DATA MANAGEMENT.....................................................3-2
3.3.1 General....................................................................3-2
3.3.2 Documentation Center.......................................................3-2
3.3.3 Data Management Plan.......................................................3-2
3.3.4 Documentation Submission Criteria..........................................3-2
3.3.5 Revision and Maintenance of Documentation..................................3-2
3.3.6 Monthly Documentation Status Report........................................3-3
3.4 MEETINGS..............................................................................3-3
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3.4.1 Progress Meetings..........................................................3-3
3.4.2 Senior Management Meetings.................................................3-3
3.4.3 Quarterly Progress Meetings................................................3-3
3.4.4 Kick-Off Meeting...........................................................3-4
3.4.5 Agenda Coordination Procedure..............................................3-4
3.4.6 Minutes....................................................................3-4
3.4.7 System and Major Subsystems Integration and Test Weekly Meeting............3-4
3.4.8 Major Subcontractor Progress Meetings and Other Meetings....................-5
3.5 REVIEWS...............................................................................3-5
3.5.1 Design Reviews.............................................................3-5
3.5.1.1 Review Chairperson and Review Board............................3-5
3.5.1.2 Review Notification............................................3-6
3.5.1.3 Data Packages..................................................3-6
3.5.1.4 Review Procedures..............................................3-6
3.5.1.5 Review Summary.................................................3-6
3.5.1.6 Review Completion..............................................3-6
3.5.1.7 Spacecraft System/Subsystem CDR................................3-6
3.5.2 System/Subsystem Test Reviews..............................................3-7
3.5.3 Preshipment Review.........................................................3-8
3.5.4 Design Review Documentation................................................3-8
3.5.5 Test Review Documentation..................................................3-8
3.6 ACTION ITEM CONTROL...................................................................3-8
3.7 MANAGEMENT OF CONTRACT CHANGES........................................................3-9
3.7.1 Change Classification......................................................3-9
3.7.2 Preliminary Change Assessment.............................................3-10
3.7.3 Change Request (CR).......................................................3-10
3.7.4 Contract Change Notice (CCN)..............................................3-10
3.7.5 Review and Approval of a Change...........................................3-11
3.7.6 Change Review Board.......................................................3-12
3.7.7 Implementation of a Change by the Contractor..............................3-12
3.7.8 Directed Changes..........................................................3-12
3.7.9 Go Ahead Procedure........................................................3-12
3.7.10 CR/CCN Log...............................................................3-13
3.8 PROGRAM PLANNING AND STATUS INFORMATION..............................................3-14
3.8.1 Spacecraft Hardware Matrix................................................3-14
3.8.2 Qualification Status List.................................................3-14
3.8.3 Critical Items List.......................................................3-14
3.8.4 Program Schedules.........................................................3-14
3.8.5 Monthly Program Progress Report...........................................3-15
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3.8.6 Executive Quarterly Summary...............................................3-16
3.9 PROGRAM MONITORING AND NOTIFICATION REQUIREMENTS.....................................3-16
3.9.1 ORION Representatives.....................................................3-16
3.9.2 Office Accommodation and Facilities.......................................3-16
3.9.3 Attendance at Meetings....................................................3-17
3.9.4 Access to Data and Documentation..........................................3-17
3.9.5 ORION Presence During Development, Qualification, and Acceptance Tests....3-17
3.9.6 Notification Requirements.................................................3-17
3.9.7 Material Review Board (MRB) and Failure Review Board (FRB)................3-18
4 --DESIGN ACTIVITIES..............................................................................4-1
4.1 GENERAL...............................................................................4-1
4.2 SYSTEM SPECIFICATION..................................................................4-1
4.3 DESIGN REVIEWS........................................................................4-1
4.4 DESIGN ANALYSES.......................................................................4-2
4.4.1 Analyses at Spacecraft System Level........................................4-2
4.4.1.1 Spacecraft Failure Analysis....................................4-3
4.4.1.2 Dynamic Analysis...............................................4-3
4.4.1.3 Antenna Pointing Error Analysis................................4-3
4.4.1.4 Propellant Budget Analysis.....................................4-4
4.4.1.5 Mass Properties Analysis.......................................4-5
4.4.1.6 Power Budget Analysis..........................................4-5
4.4.1.7 Mission Analysis...............................................4-5
4.4.1.8 Environmental Effects Analyses.................................4-6
4.4.1.9 Worst Case Performance Analysis................................4-7
4.4.1.10 Autonomous Commands Analysis..................................4-8
4.4.2 Subsystem Level Analyses...................................................4-8
4.4.2.1 Communications Subsystem Analyses..............................4-8
4.4.2.2 Telemetry, Tracking, and Command (TT&C) Subsystem Analyses...4-11
4.4.2.3 Attitude and Dynamics Control Subsystem (ADCS)
Analysis.................................................4-12
4.4.2.4 Propulsion Subsystem Analyses.................................4-13
4.4.2.5 Power Subsystem Analyses......................................4-13
4.4.2.6 Thermal Subsystem Analyses....................................4-15
4.4.2.7 Structure Analyses............................................4-15
5 --PRODUCT ASSURANCE..............................................................................5-1
5.1 PRODUCT ASSURANCE REQUIREMENTS........................................................5-1
5.2 QUALITY ASSURANCE TASKS...............................................................5-1
6 --MANUFACTURING, ASSEMBLY, INTEGRATION AND TEST..................................................6-1
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6.1 GENERAL...............................................................................6-1
6.2 TEST PLAN.............................................................................6-1
6.3 TEST PROCEDURES, DATA, AND REPORTS....................................................6-2
6.3.1 Unit and Subsystem Level Test Procedures and Reports.......................6-2
6.3.2 Spacecraft Level Test Procedures and Reports...............................6-2
6.3.3 Test Data..................................................................6-2
6.3.4 Spacecraft Log Book........................................................6-3
6.4 TEST REVIEWS..........................................................................6-3
6.5 PRESHIPMENT REVIEW (PSR)..............................................................6-4
6.6 FAILURE NOTIFICATION..................................................................6-4
6.7 ELECTRICAL AND MECHANICAL GROUND SUPPORT EQUIPMENT (EGSE/MGSE)........................6-4
6.8 TEST EQUIPMENT REQUIREMENTS...........................................................6-5
6.9 SOFTWARE REQUIREMENTS.................................................................6-5
6.10 DELIVERY OF DRAWINGS AND ENGINEERING CONTROL DOCUMENTS FOR
SPACECRAFT OPERATION AND IN ORBIT CONTROL............................................6-5
6.11 SECURE COMMAND SYSTEM AND CERTIFICATION..............................................6-6
7 --LAUNCH AND MISSION SUPPORT SERVICES............................................................7-1
7.1 SCOPE.................................................................................7-1
7.2 LAUNCH VEHICLE COMPATIBILITY..........................................................7-1
7.3 LAUNCH SUPPORT SERVICES...............................................................7-2
7.3.1 Spacecraft Preparation at the Launch Sites.................................7-2
7.3.2 Spacecraft Propellant and Pressurant.......................................7-2
7.3.3 Support of Meetings and Reviews............................................7-2
7.4 SAFETY................................................................................7-3
7.5 LAUNCH SERVICES.......................................................................7-3
7.6 MISSION SUPPORT.......................................................................7-3
7.6.1 Scope......................................................................7-3
7.6.2 Mission Support Activities.................................................7-4
7.6.2.1 Preparation and Definition of Mission Support Documents........7-4
7.6.2.2 World-Wide Ground Segment......................................7-7
7.6.2.3 Mission Support Procedures and Sequence of Events..............7-7
7.6.2.4 Spacecraft/ORION SCF Compatibility.............................7-7
7.6.2.5 In Orbit Test Plan and Procedure...............................7-9
7.6.2.6 Mission Reviews................................................7-9
7.6.2.7 Spacecraft and Operations Training.............................7-9
7.6.2.8 Real-Time Mission Operations..................................7-10
7.6.2.9 Post-Mission Review...........................................7-11
7.6.2.10 In Orbit Testing and Test Report.............................7-11
7.6.2.11 Spacecraft Acceptance Review.................................7-11
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7.6.2.12 Post Acceptance Operational Support..........................7-12
7.7 LAUNCH VEHICLE.......................................................................7-12
7.7.1 Launch vehicle Program Management.........................................7-12
7.7.2 Reviews...................................................................7-12
7.7.2.1 Mission Specific Critical Design Review (CDR).................7-12
7.7.2.2 System Review.................................................7-13
7.7.2.3 Launch Vehicle Quality Review.................................7-13
7.7.2.4 Launch Readiness Review.......................................7-13
7.7.2.5 Review Summary and Action Items...............................7-13
8 --SHIPPING AND STORAGE...........................................................................8-1
8.1 SHIPPING, TRANSPORTATION, AND STORAGE PLAN............................................8-1
8.2 SPACECRAFT SHIPMENT...................................................................8-1
8.3 SPACECRAFT STORAGE....................................................................8-1
9 --MISSION SPECIFIC HARDWARE AND SOFTWARE.........................................................9-1
9.1 TT&C SIMULATOR........................................................................9-1
9.2 PROPULSION MODEL......................................................................9-1
9.3 PROPELLANT GAUGING....................................................................9-1
9.4 SENSOR BLINDING PREDICTION MODEL......................................................9-1
9.5 SATELLITE CONTROL FACILITY (SCF) UPGRADE EQUIPMENT AND SOFTWARE.......................9-1
9.6 DYNAMIC software SIMULATOR............................................................9-1
9.7 SPACECRAFT SPECIFIC CONTROL AND MONITORING SOFTWARE...................................9-1
ANNEX A -- GROUND SYSTEM STATEMENT OF WORK
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LORAL ORION NETWORK SYSTEMS, INC.
ORION 2
GROUND SYSTEM
STATEMENT OF WORK ANNEX
PART 2(A) ANNEX A
DATED: 11 MAY 1998
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This document contains data and information proprietary to Space Systems/Loral.
This data shall not be disclosed, disseminated, or reproduced, in whole or in
part, without the express prior written consent of Space Systems/Loral.
- - --------------------------------------------------------------------------------
i
Use or disclosure of the data contained on this sheet is
subject to the restriction on the title page.
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CONTENTS
SECTION PAGE
1 --PURPOSE AND SCOPE........................................................1-1
2 --DESIGN OVERVIEW..........................................................2-1
2.1 ROCKVILLE OVERVIEW..............................................2-1
2.2 MT. JACKSON OVERVIEW............................................2-2
2.3 HAWLEY OVERVIEW.................................................2-2
3 --DELIVERABLE EQUIPMENT AND SERVICES.......................................3-1
3.1 GROUND EQUIPMENT...............................................3-1
3.1.1 Design Activities....................................3-1
3.1.2 Design Reviews.......................................3-1
3.1.3 Ground Facilities Interface Coordination Meetings....3-2
3.1.4 Non-Impact to Existing Operations....................3-2
3.1.5 Acceptance Tests.....................................3-2
3.1.6 Site System Acceptance Test..........................3-2
3.1.7 Shipping and Installation............................3-3
3.1.8 Ground Equipment Documentation.......................3-3
3.1.9 Warranty.............................................3-3
3.1.10 Special Warranty....................................3-3
3.2 DOCUMENTATION...................................................3-3
4 --CUSTOMER FURNISHED EQUIPMENT AND SERVICES................................4-1
4.1 OVERALL CUSTOMER FURNISHED EQUIPMENT AND SEVICES................4-1
4.1.1 Sites................................................4-1
4.1.2 Other Support Facilities Furnished By ORION..........4-1
4.1.3 Equipment Racks......................................4-1
4.1.4 Uninterruptible Power Systems (UPS)..................4-1
4.1.5 AC power.............................................4-1
4.1.6 RF and Antenna.......................................4-1
4.1.7 Orbital Analysis and Orbit Determination.............4-2
4.1.8 Tracking Data Transfer for Orbit Raising and IOT.....4-2
4.1.9 ORION Network Responsibilities.......................4-2
4.1.10 ORION Control Center Responsibilities...............4-2
4.2 MT. JACKSON REQUIREMENTS........................................4-2
4.3 CUSTOMER FURNISHED EQUIPMENT AT HAWLEY..........................4-2
5 --DESIGN ACTIVITIES........................................................5-1
5.1 DESIGN REVIEWS..................................................5-1
5.2 DESIGN DOCUMENTATION............................................5-1
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6 --SERVICES.................................................................6-1
6.1 GROUND TT&C SERVICES............................................6-1
6.2 Equipment Installation.................................6-1
6.1.2 Spacecraft Compatibility Test........................6-1
6.2 TRAINING OF PERSONNEL...........................................6-1
6.2.1 Classroom Training...................................6-1
6.2.2 Hands-On Training....................................6-1
7 --GROUND PROGRAM MANAGEMENT................................................7-1
7.1 GROUND MANAGEMENT PROGRAM.......................................7-1
7.2 PROGRAM REVIEWS.................................................7-1
7.2.1 Monthly Review.......................................7-1
7.2.2 Ground Progress Reports..............................7-1
8 --DOCUMENTATION REQUIREMENTS...............................................8-1
9 --DELIVERY DATE............................................................9-1
ILLUSTRATIONS
FIGURE PAGE
2-1 Overview of ORION 2 System..........................................2-1
2-2 Rockville Facility..................................................2-2
2-3 Mt. Jackson Facility................................................2-3
2-4 Hawley Facility.....................................................2-4
TABLES
TABLE PAGE
3-1 Deliverable Ground Equipment........................................3-1
9-1 Ground Contract Documentation Requirement List (CDRL)...............9-2
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LORAL ORION NETWORK SYSTEMS, INC.
ORION 2
CONTRACT DOCUMENTATION REQUIREMENTS LIST (CDRL)
PART 2(B)
DATED: 11 MAY 1998
- - --------------------------------------------------------------------------------
This document contains data and information proprietary to Space Systems/Loral.
This data shall not be disclosed, disseminated, or reproduced, in whole or in
part, without the express prior written consent of Space Systems/Loral.
- - --------------------------------------------------------------------------------
Use or disclosure of the data contained on this sheet is
subject to the restriction on the title page.
<PAGE>
CONTENTS
SECTION PAGE
PART 2(B) CONTRACT DOCUMENTATION REQUIREMENTS LIST (CDRL)......................1
TABLES
TABLE PAGE
Table 1(a) Program Management Documentation....................................3
Table 1(b) Engineering Documentation...........................................4
Table 1(c) Test Documentation..................................................9
Table 1(d) Product Assurance Documentation....................................15
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LORAL ORION NETWORK SYSTEMS, INC.
ORION 2
TECHNICAL SPECIFICATIONS FOR ORION 2 SPACECRAFT
PART 3(A)
DATED: 11 MAY 1998
- - --------------------------------------------------------------------------------
This document contains data and information proprietary to Space Systems/Loral.
This data shall not be disclosed, disseminated, or reproduced, in whole or in
part, without the express prior written consent of Space Systems/Loral.
- - --------------------------------------------------------------------------------
Use or disclosure of the data contained on this sheet is
subject to the restriction on the title page.
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CONTENTS
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SECTION PAGE
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1 --INTRODUCTION....................................................................................................1-1
1.1 SCOPE AND PURPOSE......................................................................................1-1
1.2 GENERAL REQUIREMENTS...................................................................................1-1
2 --MISSION REQUIREMENTS............................................................................................2-1
2.1 LIFE 2-1
2.1.0 Propellant Life.............................................................................2-1
2.1.1 Maneuver Life...............................................................................2-1
2.1.2 Orbital Life................................................................................2-1
2.2 LAUNCH CONFIGURATION AND MASS..........................................................................2-2
2.3 AIRBORNE SUPPORT EQUIPMENT (ASE).......................................................................2-2
2.4 SPACECRAFT RELIABILITY AND QUALITY ASSURANCE
REQUIREMENTS......................................................................................2-2
2.4.1 Piece Parts, Components and Subassemblies...................................................2-2
2.4.2 Parts Locations For Testing.................................................................2-4
2.5 DESIGN REQUIREMENTS....................................................................................2-4
2.5.1 Reserved....................................................................................2-4
2.5.2 Reserved....................................................................................2-4
2.5.3 Mechanical Design Criteria for Units and Assemblies.........................................2-4
2.5.4 Thermal Design Criteria for Units and Assemblies............................................2-4
2.5.5 Design Criteria for Electronic Units and Onboard Software...................................2-5
2.5.6 Use of Connectors...........................................................................2-5
2.5.7 Spacecraft Testing Via the Telemetry System.................................................2-5
2.5.8 Hard-Line Connections for Communications and TT&C Subsystem Testing.........................2-6
2.5.9 Insulation of Conductors....................................................................2-6
2.5.10 Radiation Environment......................................................................2-6
2.5.11 Design Considerations Associated with Charging Phenomena...................................2-7
2.5.12 Zero-g Testing.............................................................................2-8
2.5.13 Operation Following Storage................................................................2-8
2.5.14 Launch Windows and Mission Profile Constraints.............................................2-8
2.5.15 Telemetry Transmitters Status During Launch................................................2-8
2.5.16 Helium Pressurant Venting (if applicable)..................................................2-9
2.5.17 Orbit Control Maneuvers....................................................................2-9
2.5.18 Operation in Inclined Orbit................................................................2-9
2.5.19 Attitude Control Failure Mode Recovery and Continued Operation.............................2-9
2.6 DEFINITION OF COORDINATE AXES AND ATTITUDE ANGLES......................................................2-9
2.7 ANTENNA BEAM POINTING ACCURACY........................................................................2-10
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3 --COMMUNICATION SUBSYSTEM.........................................................................................2-1
3.1 GENERAL................................................................................................3-1
3.1.2 Conditions for Specification................................................................3-3
3.1.3 Primary Transmission Modes (For Information Only)..........................................3-3
3.2 COVERAGE...............................................................................................3-5
3.2.1 Coverage Regions............................................................................3-5
3.3 POLARIZATION..........................................................................................3-10
3.3.1 Receive Isolation and Discrimination.......................................................3-10
3.3.2 Cross-Polar Transmit Discrimination........................................................3-11
3.4 CAPACITY..............................................................................................3-11
3.5 FREQUENCY PLAN........................................................................................3-12
3.6 COMMUNICATION SUBSYSTEM AND ANTENNA BEAM INTERCONNECTIVITY............................................3-12
3.6.1 Communications Subsystem Configuration.....................................................3-12
3.6.2 Interconnectivity..........................................................................3-14
3.7 INPUT CHARACTERISTICS.................................................................................3-16
3.7.1 Receive Sensitivity (G/T)..................................................................3-16
3.7.2 Gain and Level Control.....................................................................3-16
3.7.2.1 Fixed Gain Mode................................................................3-16
3.7.2.2 Automatic Level Control Mode...................................................3-17
3.7.3 Saturation Flux Density (SFD)..............................................................3-18
3.7.4 Drive Conditions...........................................................................3-19
3.7.4.1 Overdrive Conditions...........................................................3-19
3.7.4.2 Pulsed Transient Response......................................................3-19
3.7.5 Receive Rejection..........................................................................3-20
3.7.6 Linearity of the Common Input Section......................................................3-20
3.7.7 Interference from Command Carrier..........................................................3-20
3.8 OUTPUT CHARACTERISTICS................................................................................3-20
3.8.1 Effective Isotropic Radiated Power (EIRP)..................................................3-20
3.8.2 Spurious Outputs...........................................................................3-23
3.8.3 Spurious Modulation........................................................................3-24
3.8.4 Passive Intermodulation....................................................................3-26
3.8.5 Multipaction...............................................................................3-26
3.9 TRANSFER CHARACTERISTICS..............................................................................3-26
3.9.1 Gain Versus Frequency......................................................................3-26
3.9.2 Gain Slope.................................................................................3-26
3.9.3 Group Delay Versus Frequency...............................................................3-29
3.9.4 Group Delay Slope..........................................................................3-29
3.9.5 Group Delay Stability......................................................................3-29
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3.9.6 Group Delay Ripple.........................................................................3-29
3.9.7 Phase Linearity and AM/PM Conversion Coefficient...........................................3-29
3.9.8 AM/PM Transfer Coefficient.................................................................3-31
3.9.9 Amplitude Linearity........................................................................3-32
3.9.10 Frequency Stability.......................................................................3-32
3.9.11 Out-Of-Band Response......................................................................3-33
3.10 RESERVED.............................................................................................3-33
3.11 TRAFFIC ROUTING......................................................................................3-33
3.12 REDUNDANCY...........................................................................................3-33
3.13 HIGH POWER AMPLIFIERS................................................................................3-34
3.13.1 Linearized TWTAs..........................................................................3-34
3.13.2 TWTA Auto-Restart Capability..............................................................3-34
3.14 TT&C INTERFACE.......................................................................................3-34
3.14.1 Command Requirements......................................................................3-34
3.14.2 Telemetry Requirements....................................................................3-35
4 --TELEMETRY, TRACKING. AND COMMAND (TT&C).........................................................................4-1
4.1 TELEMETRY..............................................................................................4-1
4.1.1 Functional Requirements.....................................................................4-1
4.1.1.1 Purpose.........................................................................4-1
4.1.1.2 Function........................................................................4-1
4.1.1.3 Operation.......................................................................4-2
4.1.1.4 Interaction with the Communications Subsystem...................................4-2
4.1.1.5 Redundancy......................................................................4-2
4.1.1.6 Interfaces......................................................................4-2
4.1.1.7 Accuracy........................................................................4-7
4.1.1.8 Data Channel Dynamic Range......................................................4-8
4.1.1.9 Spare Capacity..................................................................4-8
4.1.2 RF Parameters...............................................................................4-8
4.2 COMMAND...............................................................................................4-9
4.2.1 Functional Requirements.....................................................................4-9
4.2.1.1 Purpose.........................................................................4-9
4.2.1.2 Function........................................................................4-9
4.2.1.3 Operation.......................................................................4-9
4.2.1.4 Isolation.......................................................................4-9
4.2.1.5 Redundancy.....................................................................4-10
4.2.1.6 Interfaces.....................................................................4-10
4.2.1.7 System Test Considerations.....................................................4-10
4.2.1.8 Spare Capacity.................................................................4-11
4.2.2 RF Parameters..............................................................................4-11
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4.2.3 Baseband Characteristics...................................................................4-11
4.2.3.1 Error Prevention and Detection.................................................4-12
4.2.3.2 Command Security...............................................................4-13
4.2.3.3 Command Acceptance Probability.................................................4-13
4.3 RANGING...............................................................................................4-13
4.3.1 Functional Requirement.....................................................................4-13
4.3.1.1 Purpose........................................................................4-13
4.3.1.2 Function.......................................................................4-14
4.3.13 Operation.......................................................................4-14
4.3.1.4 Isolation......................................................................4-14
4.3.1.5 Redundancy.....................................................................4-14
4.3.2 Performance Requirements...................................................................4-14
5 --ATTITUDE DYNAMICS CONTROL SUBSYSTEM (ADCS)......................................................................5-1
5.1 FUNCTIONAL DESCRIPTION.................................................................................5-1
5.2 SUBSYSTEM PERFORMANCE AND DESIGN REQUIREMENTS..........................................................5-1
5.2.1 Attitude Determination......................................................................5-1
5.2.1.1 Orbit Raising...................................................................5-1
5.2.1.2 Synchronous Orbit...............................................................5-1
5.2.2 Attitude Control............................................................................5-2
5.2.2.1 Transfer to Geosynchronous Orbit and Initial Acquisition........................5-2
5.2.2.2 On Orbit Control................................................................5-2
5.2.3 Reacquisition..............................................................................5-2
5.2.4 Ground Control Command Capability...........................................................5-2
5.2.5 Control Safety Systems......................................................................5-3
5.2.6 Special Features............................................................................5-3
5.2.6.1 Antenna Pattern Measurement Capability..........................................5-3
5.2.6.2 Control Bias Capability.........................................................5-4
5.2.6.3 ADCS Switching..................................................................5-4
5.2.6.4 Control Electronics Fault Protection............................................5-4
5.2.7 Subsystem Configuration and Interfaces......................................................5-4
5.2.7.1 Redundancy......................................................................5-4
5.2.7.2 TT&C Interfaces.................................................................5-5
5.2.7.3 Propulsion Interfaces...........................................................5-5
6 --PROPULSION SUBSYSTEM............................................................................................6-1
6.1 FUNCTIONAL DESCRIPTION.................................................................................6-1
6.2 DESIGN REQUIREMENTS....................................................................................6-1
6.3 REDUNDANCY.............................................................................................6-3
6.4 MANEUVER LIFE AND PROPELLANT LOADING...................................................................6-3
6.4.1 General Requirements........................................................................6-3
</TABLE>
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<TABLE>
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6.4.2 Propellant Budgeting Methodology............................................................6-4
6.4.2.1 Actual Hardware Performance Test Data...........................................6-4
6.4.2.2 Inefficiencies of Operation.....................................................6-4
6.4.2.3 Inflight Performance............................................................6-5
6.4.2.4 Specific Maneuver Requirements..................................................6-5
6.5 TT&C INTERFACES........................................................................................6-5
7 --POWER SUBSYSTEM.................................................................................................7-1
7.1 FUNCTIONAL DESCRIPTION.................................................................................7-1
7.2 GENERAL REQUIREMENTS...................................................................................7-1
7.3 ENERGY GENERATION......................................................................................7-2
7.3.1 Solar Cells.................................................................................7-2
7.3.2 Power Output................................................................................7-2
7.3.3 Power Transfer Assembly.....................................................................7-2
7.4 ENERGY STORAGE.........................................................................................7-3
7.4.1 Batteries...................................................................................7-3
7.4.2 Battery Charge Management...................................................................7-3
7.4.3 Cell Failure................................................................................7-4
7.4.4 Battery Removal and Storage.................................................................7-4
7.5 POWER CONDITIONING AND CONTROL.........................................................................7-5
7.5.1 Bus Configuration...........................................................................7-5
7.5.2 Failure Modes and Shutdown Sequence.........................................................7-5
7.5.3 Bus Undervoltage and Overvoltage............................................................7-6
7.5.4 Interaction Between the Communications and Power Subsystems.................................7-6
7.6 TT&C INTERFACES........................................................................................7-6
8 --THERMAL CONTROL SUBSYSTEM.......................................................................................8-1
8.1 FUNCTIONAL DESCRIPTION.................................................................................8-1
8.2 PERFORMANCE REQUIREMENTS...............................................................................8-1
8.3 SUBSYSTEM DESIGN REQUIREMENTS..........................................................................8-5
8.3.1 Junction Temperature........................................................................8-5
8.3.2 Instrumentation.............................................................................8-5
8.3.3 Materials...................................................................................8-6
8.3.4 Venting.....................................................................................8-6
8.3.5 Grounding...................................................................................8-6
8.3.6 Multi-Layer Insulating Blanket (MLI)........................................................8-6
8.3.7 Contamination Control.......................................................................8-7
8.4 TT&C INTERFACES........................................................................................8-7
9 --STRUCTURE SUBSYSTEM.............................................................................................9-1
9.1 FUNCTIONAL DESCRIPTION.................................................................................9-1
9.2 PERFORMANCE REQUIREMENTS...............................................................................9-1
</TABLE>
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9.3 DESIGN REQUIREMENTS....................................................................................9-1
10 --MECHANISMS....................................................................................................10-1
10.1 DESIGN REQUIREMENTS..................................................................................10-1
10.2 TT&C INTERFACES......................................................................................10-2
11 --PYROTECHNIC AND ELECTRO EXPLOSIVE DEVICES.....................................................................11-1
ILLUSTRATIONS
FIGURE PAGE
Figure 3-1. Illustration of Europe Coverage from 12(degree)West....................................................3-9
Figure 3-2. Illustration of American Coverage at 12(degree)West...................................................3-10
Figure 3-3. Frequency Plan........................................................................................3-14
Figure 3-4. Spurious Frequency Modulation Limits..................................................................3-25
Figure 3-5. Spurious Frequency Modulation Limits..................................................................3-25
Figure 3-6. In-Band Gain Vs. Frequency Limits For Input Section...................................................3-27
Figure 3-7. In-Band Gain Vs. Frequency Limits For Overall Transponder.............................................3-28
Figure 3-8. Group Delay Vs. Frequency Limits For Input Section....................................................3-30
Figure 3-9. Group Delay Vs. Frequency Limits For Overall Transponder..............................................3-31
Figure 8-1. Temperature Margins for Internal Mainbody and Thermally Coupled........................................8-2
Figure 8-2. Temperature Margins for Exterior Thermally Isolated Equipment..........................................8-3
</TABLE>
vii
<PAGE>
TABLES
<TABLE>
<CAPTION>
TABLE PAGE
<S> <C> <C>
Table 2-1. Estimated Probability of Survival.......................................................................2-2
Table 3-1. Definition of Europe Coverage Zones.....................................................................3-6
Table 3-2. Definition of American Coverage.........................................................................3-7
Table 3-3. The Minimum Co-Polar Receive Isolations................................................................3-11
Table 3-4. The Minimum Cross-Polar Receive Isolations.............................................................3-11
Table 3-5. The Minimum Cross-Polar Discriminations (Transmit & Receive)...........................................3-11
Table 3-6. Frequency Plan.........................................................................................3-13
Table 3-7. Transponder Cconnectivity Matrix.......................................................................3-15
Table 3-8. Minimum G/T Performance................................................................................3-17
Table 3-9. Maximum Allowable G/T Variation........................................................................3-17
Table 3-10. SFD Variation.........................................................................................3-18
Table 3-11. Receive Rejection.....................................................................................3-20
Table 3-12. Minimum EIRP Performance..............................................................................3-21
Table 3-13. Key City List.........................................................................................3-22
Table 3-14. EIRP Variation........................................................................................3-23
Table 3-15. Spurious Output Levels................................................................................3-24
Table 3-16. Maximum Gain Slope....................................................................................3-29
Table 3-17. Group Delay Slope.....................................................................................3-31
Table 3-18. Third Order Intermodulation Products..................................................................3-32
Table 3-19. Noise Power Ratio*....................................................................................3-32
Table 3-20. Out-Of-Band Response..................................................................................3-33
Table 4-1. Accuracy Requirements...................................................................................4-8
</TABLE>
<PAGE>
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PAGES 1-1
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<PAGE>
LORAL ORION NETWORK SYSTEMS, INC.
ORION 2
RADIATION ENVIRONMENT SPECIFICATION
PART 3(A) ANNEX A
DATED: 11 MAY 1998
- - --------------------------------------------------------------------------------
This document contains data and information proprietary to Space Systems/Loral.
This data shall not be disclosed, disseminated, or reproduced, in whole or in
part, without the express prior written consent of Space Systems/Loral.
- - --------------------------------------------------------------------------------
Use or disclosure of the data contained on this sheet is
subject to the restriction on the title page.
<PAGE>
CONTENTS
SECTION PAGE
1 INTRODUCTION..........................................................1
2 SYNCHRONOUS ORBIT CONDITIONS..........................................2
2.1 ELECTRONS....................................................2
2.2 PROTONS......................................................4
2.3 ALPHA PARTICLES..............................................6
2.4 COSMIC RAY RADIATION.........................................6
2.5 ULTRAVIOLET RADIATION........................................7
2.6 PLASMA.......................................................9
2.7 MICROMETEROIDS..............................................10
3 TRANSFER ORBIT CONDITIONS............................................11
3.1 TRANSFER ORBIT ELECTRON FLUX VALUES.........................11
3.2 TRANSFER ORBIT PROTON FLUX VALUES...........................11
ILLUSTRATIONS
FIGURE PAGE
3.1-1 Transfer Orbit Electron Flux....................................12
3.2-1 Transfer Orbit Proton Flux......................................13
TABLES
TABLE PAGE
2.1-1 Time - Averaged Integral Flux Spectrum...........................2
2.1-1a Time-Averaged Integral Flux Spectrum For Trapped Electrons
(For Solar Array) (12 W).........................................3
2.2-1 Time Averaged Integral Flux Spectrum For Trapped Protons.........4
2.2-2 Proton Fluence (Including solar Flares) and Alpha Particles......5
2.2-3 Solar Flare Proton Models To Use For Solar Array Designs........5
2.4-1 GCR Constants For GCR Energy Distribution........................6
2.4-2 Relative Abundance Of Cosmic Rays................................8
2.5-1 UV Spectrum......................................................9
2.7-1 Flux Of Penetrating Micrometeroids..............................10
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LORAL ORION NETWORK SYSTEMS, INC.
ORION 2
SPACECRAFT PRODUCT ASSURANCE REQUIREMENTS
PART 3(B)
Dated: 11 May 1998
- - --------------------------------------------------------------------------------
This document contains data and information proprietary to Space Systems/Loral.
This data shall not be disclosed, disseminated, or reproduced, in whole or in
part, without the express prior written consent of Space Systems/Loral.
- - --------------------------------------------------------------------------------
i
Use or disclosure of the data contained on this sheet is
subject to the restriction on the title page.
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
1 INTRODUCTION....................................................................1-1
1.1 SCOPE..................................................................1-1
1.2 PRODUCT ASSURANCE OBJECTIVES...........................................1-1
2 PRODUCT ASSURANCE REQUIREMENTS..................................................2-1
2.1 PRODUCT ASSURANCE PLAN.................................................2-1
2.2 ORGANIZATION AND MANAGEMENT............................................2-1
2.3 REPORTING..............................................................2-1
2.4 NON-CONFORMANCE........................................................2-2
2.5 WAIVERS AND DEVIATIONS.................................................2-2
3 REVIEWS AND AUDITS..............................................................3-1
3.1 MRBsAND FRBs...........................................................3-1
3.2 MRB AND FRB DOCUMENTATION..............................................3-1
3.3 PROGRAM AUDITS.........................................................3-2
3.4 ORION RIGHT OF ACCESS..................................................3-2
4 SUBCONTRACTOR AND SUPPLIER MANAGEMENT...........................................4-1
4.1 SUBCONTRACTOR/SUPPLIER PRODUCT ASSURANCE PLAN..........................4-1
4.2 REQUIREMENTS...........................................................4-1
4.3 REVIEWS AND CONTROLS...................................................4-1
5 RELIABILITY ASSURANCE...........................................................5-1
5.1 RELIABILITY ASSESSMENT.................................................5-1
5.2 PARTS DERATING AND STRESS ANALYSIS.....................................5-2
5.3 FAILURE MODES, EFFECTS, AND CRITICALITY ANALYSES.......................5-2
5.4 WORST-CASE ANALYSIS (WCA)..............................................5-2
5.5 LIFETIME...............................................................5-3
5.6 CRITICAL ITEMS CONTROL.................................................5-3
5.7 RESERVED...............................................................5-4
5.8 QUALIFICATION STATUS LIST REPORT (QSLR)................................5-4
6 QUALITY ASSURANCE...............................................................6-1
6.1 QUALITY ASSURANCE......................................................6-1
6.2 PROCUREMENT AND FABRICATION............................................6-1
6.3 TEST AND INSPECTION....................................................6-1
6.4 WORKMANSHIP STANDARDS..................................................6-2
6.5 QUALITY RECORDS AND TRACEABILITY.......................................6-2
6.6 NON-CONFORMANCE CONTROL................................................6-2
</TABLE>
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6.6.1 Non-Conformance Reporting....................................6-2
6.6.2 Non-Conformance/Failure Review and Disposition...............6-3
6.6.3 Failure Analysis and Corrective Action.......................6-3
6.6.4 Trend Analysis...............................................6-3
6.7 QUALITY PROGRESS REPORTING.............................................6-3
7 PARTS PROCUREMENT...............................................................7-1
7.1 PARTS PROCUREMENT AND CONTROL..........................................7-1
7.2 ORGANIZATION AND RESPONSIBILITIES......................................7-1
7.3 SELECTION AND APPLICATION..............................................7-1
7.4 QUALITY PROVISIONS.....................................................7-2
7.5 RADIATION..............................................................7-3
7.6 TRACEABILITY...........................................................7-3
7.7 HYBRIDS, BATTERY CELLS, TWTS, AND MAGNETICS............................7-3
7.8 PARTS DOCUMENTATION....................................................7-3
8 MATERIALS AND PROCESSES.........................................................8-1
8.1 MATERIALS AND PROCESS CONTROL..........................................8-1
8.2 ORGANIZATION...........................................................8-1
8.3 CRITICAL MATERIALS AND PROCESSES.......................................8-1
8.4 MATERIALS AND PROCESS SELECTION........................................8-1
8.5 MATERIALS AND PROCESS DOCUMENTATION....................................8-1
9 SOFTWARE QUALITY ASSURANCE......................................................9-1
9.1 SOFTWARE QUALITY ASSURANCE PLAN........................................9-1
9.2 SOFTWARE DEVELOPMENT...................................................9-1
9.3 CONFIGURATION CONTROL..................................................9-1
9.4 VERIFICATION AND ACCEPTANCE TESTING....................................9-1
9.5 NON-CONFORMANCE CONTROL................................................9-2
10 CONFIGURATION MANAGEMENT.......................................................10-1
10.1 CONFIGURATION MANAGEMENT..............................................10-1
10.2 CONFIGURATION IDENTIFICATION AND CONTROL..............................10-1
10.3 CHANGE CONTROL........................................................10-2
10.4 CONFIGURATION VERIFICATION............................................10-2
10.5 CONFIGURATION STATUS ACCOUNTING AND
DOCUMENTATION.........................................................10-2
11 SAFETY.........................................................................11-1
11.1 SYSTEM SAFETY.........................................................11-1
11.2 HAZARDOUS CONDITIONS..................................................11-1
11.3 SAFETY AND HAZARD ANALYSES............................................11-1
</TABLE>
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LORAL ORION NETWORK SYSTEMS INC.
ORION 2
SPACECRAFT ON-GROUND
TEST REQUIREMENTS
PART 3(C)
Dated: 11 May 1998
- - --------------------------------------------------------------------------------
This document contains data and information proprietary to Space Systems/Loral.
This data shall not be disclosed, disseminated, or reproduced, in whole or in
part, without the express prior written consent of Space Systems/Loral.
- - --------------------------------------------------------------------------------
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1 --INTRODUCTION....................................................................................................1-1
2 --GENERAL COMMENTS................................................................................................2-1
2.1 TEST PHILOSOPHY........................................................................................2-1
2.2 DEFINITIONS............................................................................................2-1
2.3 GENERAL TEST REQUIREMENTS..............................................................................2-2
2.3.1 Basic Requirements..........................................................................2-2
2.3.2 Test Equipment and Test Facility Requirements...............................................2-4
2.3.3 Zero-G Testing..............................................................................2-4
2.3.4 Acceptance Tests............................................................................2-4
2.3.5 Protoflight Tests...........................................................................2-5
2.3.6 Qualification Tests.........................................................................2-5
2.4 WITNESSING OF TESTS....................................................................................2-6
2.5 UNIT/SUBSYSTEM/SYSTEM TEST DATA........................................................................2-6
2.6 SUBSYSTEM/SYSTEM TEST REVIEWS..........................................................................2-7
2.7 DOCUMENTATION..........................................................................................2-7
2.8 ORGANIZATION...........................................................................................2-7
3 --UNIT, SUBSYSTEM AND SPACECRAFT TEST PROGRAM.....................................................................3-1
3.1 EQUIPMENT CATEGORIZATION...............................................................................3-1
3.2 TEST PROGRAM OVERVIEW..................................................................................3-2
4 --PROTOFLIGHT TESTS...............................................................................................4-1
4.1 UNIT PROTOFLIGHT TESTS.................................................................................4-1
4.2 SUBSYSTEM PROTOFLIGHT TESTS............................................................................4-7
4.2.1 Repeater Subsystem..........................................................................4-7
4.2.2 Antenna Subsystem...........................................................................4-7
4.2.3 Telemetry, Tracking, and Command (TT&C) Subsystem..........................................4-10
4.2.4 ADCS Subsystem Protoflight Test............................................................4-10
4.2.4.1 ADCS SCE In-the-Loop Test......................................................4-10
4.2.4.2 ADCS Servo Table Test (Already Completed)......................................4-11
4.2.5 Propulsion Subsystem.......................................................................4-11
4.2.6 Power Subsystem............................................................................4-12
4.2.6.1 Solar Array....................................................................4-12
4.2.6.2 Battery Assembly...............................................................4-12
4.2.7 Structure Subsystem Protoflight Test.......................................................4-13
4.2.8 Thermal Subsystem Protoflight Test.........................................................4-13
4.3 SPACECRAFT PROTOFLIGHT TEST...........................................................................4-14
</TABLE>
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<TABLE>
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4.3.1 Integration Tests..........................................................................4-14
4.3.2 Initial Reference Performance Test.........................................................4-14
4.3.3 Thermal Balance/Thermal Vacuum Test........................................................4-16
4.3.4 Spacecraft Alignments......................................................................4-20
4.3.5 Sinusoidal Vibration.......................................................................4-20
4.3.6 Acoustic Vibration Test....................................................................4-21
4.3.7 Shock and Deployment Tests.................................................................4-21
4.3.8 Spacecraft Mass Properties Measurements....................................................4-21
4.3.9 Final Performance Testing..................................................................4-22
4.3.10 RF Range Test.............................................................................4-22
4.3.11 Electro Magnetic Compatibility (EMC) Test.................................................4-23
5 --FLIGHT ACCEPTANCE TESTS.........................................................................................5-1
5.1 UNIT ACCEPTANCE TESTS..................................................................................5-1
5.1.1 Power Handling and Passive Intermodulation (PIM)............................................5-2
5.1.2 Traveling Wave Tube Amplifiers Burn-In......................................................5-2
5.2 SUBSYSTEM ACCEPTANCE TESTS............................................................................5-3
5.2.1 Antenna Subsystem...........................................................................5-3
5.2.2 ADCS........................................................................................5-4
5.2.3 Power Subsystem.............................................................................5-4
5.2.4 Structure Subsystem Acceptance Tests........................................................5-4
5.2.5 Thermal Subsystem...........................................................................5-4
5.2.6 Spacecraft Harness.........................................................................5-4
5.3 SPACECRAFT ACCEPTANCE TEST.............................................................................5-4
6 --LIFE TESTS......................................................................................................6-1
7 --DEVELOPMENT AND QUALIFICATION TEST..............................................................................7-1
7.1 COMMUNICATIONS SUBSYSTEM TESTS.........................................................................7-1
7.1.1 Antenna Unit and Subsystem Test.............................................................7-1
7.1.2 Thermal Distortion..........................................................................7-1
7.1.3 Repeater Tests..............................................................................7-2
7.2 STRUCTURE SUBSYSTEM QUALIFICATION TESTS................................................................7-2
7.3 ATTITUDE DETERMINATION AND CONTROL SUBSYSTEM (ADCS) QUALIFICATION TESTS................................7-2
7.4 PROPULSION SUBSYSTEM QUALIFICATION TESTS...............................................................7-2
7.4.1 General.....................................................................................7-2
7.4.2 Thrusters...................................................................................7-3
7.4.3 Main Spacecraft Thruster....................................................................7-3
7.4.4 Propellant Tanks............................................................................7-3
7.5 THERMAL SUBSYSTEM QUALIFICATION TESTING................................................................7-3
7.6 MECHANISMS.............................................................................................7-3
</TABLE>
<PAGE>
<TABLE>
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8 --INTERFACE COMPATIBILITY TEST....................................................................................8-1
8.1 GROUND CONTROL SYSTEM COMPATIBILITY....................................................................8-1
8.2 LAUNCH VEHICLE COMPATIBILITY...........................................................................8-1
9 --LAUNCH PREPARATION TEST.........................................................................................9-1
9.1 GENERAL................................................................................................9-1
9.2 LAUNCH BASE SPACECRAFT FUNCTIONAL TESTS (IN PPF).......................................................9-1
9.3 SPACECRAFT-LAUNCH VEHICLE COMBINED OPERATIONS..........................................................9-2
9.4 LAUNCH COMPLEX OPERATIONS..............................................................................9-2
10 -- COMPLIANCE MATRIX............................................................................................10-1
11 --PAYLOAD TEST CONFIGURATION MATRICES REQUIREMENT...............................................................11-1
11.1 INTRODUCTION.........................................................................................11-1
11.2 OVERALL REQUIREMENTS.................................................................................11-1
11.2.1 Payload Panel.............................................................................11-1
11.2.2 Spacecraft Level..........................................................................11-1
11.2.3 RF Link Calibrations......................................................................11-2
11.2.4 Performance Parameters....................................................................11-2
11.3 ANTENNA TEST CONFIGURATIONS..........................................................................11-3
11.3.1 Unit/Subsystem Level......................................................................11-3
11.3.2 Spacecraft Level..........................................................................11-4
ILLUSTRATIONS
FIGURE PAGE
3-1 ORION 2 Protoflight Spacecraft Assembly, Integration and Test Flow....................................3-8
4-1 ORION 2 Antenna Subsystem Test Flow...................................................................4-9
4-2 Temperature Profile during Spacecraft Level Thermal Vacuum Testing...................................4-17
TABLES
TABLE PAGE
3-1 Unit Qualification Matrix.............................................................................3-3
6-1 Unit Life Test/Orbit Life Comparison..................................................................6-2
10-1 Compliance Matrix....................................................................................10-2
10-2 System Test Matrix..................................................................................10-15
10-3 Test Procedure......................................................................................10-20
10-4 Mechanical Test Decriptions........................................................................10-29a
</TABLE>
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<PAGE>
LORAL ORION NETWORK SYSTEMS, INC.
ORION 2
IN-ORBIT COMMISSIONING AND
ACCEPTANCE TEST REQUIREMENTS
PART 3(D)
Dated: 11 May 1998
- - --------------------------------------------------------------------------------
This document contains data and information proprietary to Space Systems/Loral.
This data shall not be disclosed, disseminated, or reproduced, in whole or in
part, without the express prior written consent of Space Systems/Loral.
- - --------------------------------------------------------------------------------
Use or disclosure of the data contained on this sheet is
subject to the restriction on the title page.
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1 --SCOPE.............................................................................................................i
2 --DEFINITIONS.......................................................................................................1
3 --INTRODUCTION......................................................................................................2
4 --COMMISSIONING.....................................................................................................4
4.1 COMMISSIONING ACTIVITIES.................................................................................4
4.2 DOCUMENTATION............................................................................................5
5 --ACCEPTANCE TESTING................................................................................................6
5.1 AGGREGATE PREDICTED TRANSPONDER LIFE.....................................................................6
5.2 TRANSPONDER ACCEPTANCE TESTS.............................................................................7
5.3 DETERMINATION OF OTHER SPACECRAFT PARAMETERS............................................................10
5.3.1 Battery Capacity.............................................................................10
5.3.2 Predicted Propellant Life....................................................................11
5.3.3 Solar Array Power............................................................................11
5.4 DOCUMENTATION...........................................................................................13
5.4.1 In-Orbit Acceptance Test Plan................................................................13
5.4.2 In-Orbit Facility Definition Document........................................................13
5.4.3 In-Orbit Acceptance Test Procedure...........................................................14
5.4.4 In-Orbit Acceptance Test Report..............................................................14
5.4.5 Spacecraft In-Orbit Configuration............................................................15
6 --POST-ACCEPTANCE TRANSPONDER TESTING..............................................................................16
ANNEX A COMMISSIONING ACTIVITIES.................................................................................17
ANNEX B TRANSPONDER PERFORMANCE TESTS...........................................................................22
ILLUSTRATIONS
FIGURE PAGE
5-1 Illustration of the Assessment of the Aggregate Predicted Transponder Life.............................7
5-2 Illustration of the variation in the number of operating Transponders which the available array
power will support.....................................................................................12
TABLES
TABLE PAGE
5-1 Transponder Acceptance Test Program.....................................................................9
6-1 Post Acceptance Transponder Test Program...............................................................16
A-1 Primary Transponder Commissioning Tests................................................................18
A-2 Platform Commissioning Activities......................................................................19
</TABLE>
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<PAGE>
LORAL ORION NETWORK SYSTEMS, INC.
ORION 2
DYNAMIC SPACECRAFT SIMULATOR SPECIFICATION
PART 3(E)
DATED: 11 MAY 1998
- - --------------------------------------------------------------------------------
This document contains data and information proprietary to Space Systems/Loral.
This data shall not be disclosed, disseminated, or reproduced, in whole or in
part, without the express prior written consent of Space Systems/Loral.
- - --------------------------------------------------------------------------------
Use or disclosure of the data contained on this sheet is
subject to the restriction on the title page.
<PAGE>
CONTENTS
SECTION PAGE
1 --DYNAMIC SPACECRAFT SIMULATOR GENERAL CHARACTERISTICS.....................1-1
2 --REAL-TIME SIMULATION COMPUTER AND PERIPHERALS............................2-1
3 --GROUND STATION INTERFACE.................................................3-1
4 --SIMULATOR MODELING.......................................................4-1
4.1 ADCS PROCESSOR EMULATION........................................4-1
4.2 ATTITUDE DYNAMIC MODELING.......................................4-1
4.3 PROPULSION MODEL................................................4-2
4.4 T&C SUBSYSTEM MODEL.............................................4-2
4.4.1 Caribou Decryptor Modeling...........................4-3
4.5 ORBIT & EPHEMERIS MODEL.........................................4-3
4.6 EMULATION OF THE SECOND SPACECRAFT SCE PROCESSOR................4-4
4.7 DYNAMIC POWER MODEL.............................................4-4
4.8 DYNAMIC THERMAL MODEL...........................................4-4
4.9 COMMUNICATIONS PAYLOAD MODEL....................................4-5
4.10 FAILURE MODELS.................................................4-5
5 --FAST MODE SIMULATION.....................................................5-1
6 --SIMULATOR USER INTERFACE.................................................6-1
7 --POST-PROCESSING PLOTTING.................................................7-1
8 --DESIGN REVIEWS...........................................................8-1
9 --SIMULATOR TEST AND VALIDATION............................................9-1
10 --DOCUMENTATION..........................................................10-1
11 --DELIVERY AND INSTALLATION..............................................11-1
12 --TRAINING...............................................................12-1
13 --WARRANTY & MAINTENANCE.................................................13-1
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================================================================================
SPACE SYSTEMS/LORAL DOC CODE SE
3825 Fabian Way Specification No. E191269
Palo Alto, California 94303-4697 Revision N/C
CAGE ODJH2
PART 3 (F)
ORION 2 SPACECRAFT SCF AND SOFTWARE
REQUIREMENTS SPECIFICATION
LORAL PROPRIETARY INFORMATION
This data is being furnished pursuant to the provisions of the ORION 2 Purchase
Contract. ORION shall have the right to duplicate, use or disclose the data to
the extent specified in the Purchase Contract.
================================================================================
PROGRAM PRIME CONTRACT NUMBER
ORION 2
- - --------------------------------------------------------------------------------
TCR SIMULATOR ENGINEER TECHNICAL DIRECTOR
Kam Wong James Marshburn
- - --------------------------------------------------------------------------------
GROUND SYSTEM ENGINEER PROGRAM OFFICE
Howard Silsdorf Jo Stiles
- - --------------------------------------------------------------------------------
GROUND SYSTEMS HW SUPERVISOR PRODUCT ASSURANCE
Joe Hauser Thuy Thi Do
- - --------------------------------------------------------------------------------
GROUND SYSTEM ENG. MGR RELEASE
Rich Yarrington DATE
Page 1 of 77
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CHANGE REASON FOR CHANGE AFFECTED PAGES
NUMBER
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1-ii
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
1 SCOPE..........................................................................................1-1
1.1 STANDARDS.............................................................................1-1
2 APPLICABLE DOCUMENTS...........................................................................2-1
2.1 DATA TRANSMISSION STANDARD............................................................2-1
2.2 SPACE SYSTEMS/LORAL DOCUMENTS.........................................................2-1
2.3 TIME GENERATION AND FREQUENCY REFERENCING STANDARDS...................................2-1
2.4 PROTOCOLS.............................................................................2-1
3 TELEMETRY & COMMAND SIMULATOR..................................................................3-1
3.1 SECTION SCOPE.........................................................................3-1
3.2 REQUIREMENTS..........................................................................3-1
3.2.1 Functional Requirements.....................................................3-1
3.2.1.1 General Telemetry Simulation Functions.........................3-3
3.2.1.2 System Functions...............................................3-5
3.2.2 Interface Requirements......................................................3-5
3.2.2.1 General User Interface Requirements............................3-5
3.2.2.2 Information Organization Requirements..........................3-6
3.2.2.3 General Remote Interface Requirements.........................3-18
3.2.2.4 Local Area Network Interface Requirements.....................3-19
3.2.2.5 Signal Interface Requirements.................................3-19
3.3 CHARACTERISTICS......................................................................3-20
3.3.1 Performance Requirements...................................................3-20
3.3.1.1 IF Command and Ranging Requirements...........................3-20
3.3.1.2 IF Telemetry and Ranging Requirements.........................3-21
3.3.1.3 Baseband Telemetry Requirements...............................3-22
3.3.1.4 Command Decryptor Interface Requirements......................3-22
3.3.1.5 Ethernet Requirements.........................................3-23
3.3.1.6 Power Requirements............................................3-23
3.3.2 Physical Requirements......................................................3-24
3.3.3 Reliability................................................................3-24
3.3.4 Maintainability............................................................3-24
3.3.5 Environmental Characteristics..............................................3-24
3.3.6 Transportability...........................................................3-24
3.4 DESIGN AND CONSTRUCTION..............................................................3-24
3.4.1 Parts, Materials, and Processes............................................3-24
3.4.2 Electrical Design..........................................................3-25
3.4.3 Mechanical Design..........................................................3-25
</TABLE>
1-iii
<PAGE>
<TABLE>
<S> <C> <C>
3.4.4 Workmanship................................................................3-25
3.4.5 Safety.....................................................................3-26
3.4.6 Interchangability..........................................................3-26
3.4.7 Human Engineering..........................................................3-26
3.5 DOCUMENTATION........................................................................3-27
3.5.1 Drawings...................................................................3-27
3.5.2 Technical Manuals..........................................................3-27
3.5.3 Firmware Documentation.....................................................3-27
3.5.4 Operational Support Documentation..........................................3-27
4 BASEBAND SUBSYSTEM.............................................................................4-1
4.1 EQUIPMENT OVERVIEW....................................................................4-1
4.2 PERFORMANCE SPECIFICATIONS............................................................4-1
4.2.1 TCRU........................................................................4-1
4.2.1.1 Downlink PM Signal Reception...................................4-2
4.2.1.2 Uplink Signal Generation.......................................4-2
4.2.1.3 Normal Telemetry Processing....................................4-4
4.2.1.4 Dwell Telemetry Stream Processing..............................4-5
4.2.1.5 Satellite Telecommanding.......................................4-5
4.2.1.6 Satellite Ranging..............................................4-7
4.2.1.7 Telemetry Simulation...........................................4-7
4.2.2 Interfaces to the RF/Antenna Subsystem......................................4-9
4.2.3 Interfaces with the SCC.....................................................4-9
4.2.4 TCRU Maintainability........................................................4-9
4.2.5 GPS Receiver and Time Code Generator........................................4-9
4.2.6 Maintainability.............................................................4-9
4.3 ENVIRONMENTAL SPECIFICATIONS..........................................................4-9
4.3.1 Operating Temperature.......................................................4-9
4-4.3.2 Humidity....................................................................4-9
4.4 POWER REQUIREMENTS....................................................................4-9
5 ORION 2 COMMAND AND CONTROL SYSTEM AUGMENTATION (CCSA).........................................4-1
5.1 CCSA OVERVIEW.........................................................................5-1
5.2 TELEMETRY REQUIREMENTS................................................................5-1
5.2.1 Telemetry Overview..........................................................5-1
5.2.2 Telemetry Reception.........................................................5-1
5.2.3 Raw Telemetry Archiving and Retrieval.......................................5-2
5.2.3.1 Rockville......................................................5-2
5.2.3.2 Mt. Jackson....................................................5-2
5.2.3.3 Hawley.........................................................5-3
5.2.4 Summary Data Archival.......................................................5-3
</TABLE>
1-iv
<PAGE>
<TABLE>
<S> <C> <C>
5.2.5 Telemetry Data Conversion...................................................5-3
5.2.6 Pseudo PIDS.................................................................5-4
5.2.7 Data Export.................................................................5-4
5.3 COMMANDING............................................................................5-4
5.3.1 Automated Command Procedures................................................5-4
5.3.2 Command Execution...........................................................5-4
5.4 RANGING...............................................................................5-5
5.5 GROUND MONITOR AND CONTROL (M&C)......................................................5-5
5.6 DYNAMIC SATELLITE SIMULATOR (DSS) INTERFACE...........................................5-6
5.7 CCSA USER INTERFACE PRESENTATION......................................................5-6
5.8 PRESENTATION FUNCTIONS................................................................5-6
5.8.1 Multi-window monitor displays...............................................5-6
5.8.2 Printing Function...........................................................5-7
6 VERIFICATION OF REQUIREMENTS...................................................................6-1
6.1 FACTORY ACCEPTANCE TEST...............................................................6-1
6.2 SS/L ACCEPTANCE TEST..................................................................6-1
7 QUALITY ASSURANCE PROVISIONS...................................................................7-1
7.1 GENERAL...............................................................................7-1
7.2 TEST READINESS REVIEW.................................................................7-1
7.3 TEST NOTIFICATION.....................................................................7-1
7.4 ADJUSTMENT AND/OR REPAIR..............................................................7-1
7.5 CHANGES TO TEST PROCEDURES............................................................7-1
7.5.1 Authority...................................................................7-1
7.6 NON-CONFORMANCE REPORTING.............................................................7-2
7.6.1 Test Failures...............................................................7-2
7.6.2 Test Failure Definition.....................................................7-2
7.6.3 Test Failure Procedures.....................................................7-2
7.7 TEST ACCEPTANCE.......................................................................7-3
7.7.1 Engineering Review..........................................................7-3
7.7.2 Product Assurance Review....................................................7-3
7.8 DISPOSITION OF TEST DATA..............................................................7-3
8 PREPARATION FOR DELIVERY.......................................................................8-1
9 -- ABBREVIATIONS AND ACRONYMS LIST................................................................9-1
</TABLE>
1-v
<PAGE>
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PAGES 1-1
THROUGH 9-2 OF THIS PART]
<PAGE>
LORAL ORION NETWORK SYSTEMS, INC.
ORION 2
SATELLITE STORAGE PLAN
PART 5
Dated: 11 May 1998
- - --------------------------------------------------------------------------------
This document contains data and information proprietary to Space Systems/Loral.
This data shall not be disclosed, disseminated, or reproduced, in whole or in
part, without the express prior written consent of Space Systems/Loral.
- - --------------------------------------------------------------------------------
Use or disclosure of the data contained on this sheet is
subject to the restriction on the title page.
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
1 STORAGE AND POST-STORAGE PLAN..........................................................1-1
1.1 GENERAL REQUIREMENTS..........................................................1-1
1.2 ENVIRONMENTAL CONDITIONS......................................................1-1
1.3 ACCESS CONTROL................................................................1-2
1.4 MONITORING....................................................................1-2
1.5 DOCUMENTATION.................................................................1-2
2 FACILITIES AND EQUIPMENT...............................................................2-1
2.1 FACILITIES....................................................................2-1
2.2 STORAGE EQUIPMENT.............................................................2-1
3 STORAGE OPERATIONS.....................................................................3-1
3.1 SATELLITE CONFIGURATION FOR STORAGE...........................................3-1
3.2 SATELLITE PREPARATION FOR SHORT-TERM STORAGE..................................3-2
3.3 SATELLITE PREPARATION FOR LONG-TERM STORAGE...................................3-2
3.3.1 Satellite Preparation...............................................3-2
3.3.2 Storage Container Preparation.......................................3-2
3.3.3 Satellite Installation into Protective Cover........................3-2
3.3.4 Final Storage Preparation...........................................3-2
3.4 SATELLITE MONITORING..........................................................3-3
3.5 FLIGHT BATTERY STORAGE........................................................3-3
3.6 SOLAR ARRAY STORAGE...........................................................3-3
3.7 GROUND SUPPORT EQUIPMENT......................................................3-3
4 POST-STORAGE OPERATIONS................................................................4-1
4.1 CALLUP SCHEDULE...............................................................4-1
4.2 UNIT PREPARATION..............................................................4-1
4.3 SATELLITE PREPARATION.........................................................4-2
4.4 SATELLITE INTEGRATION AND TEST ACTIVITY.......................................4-2
4.4.1 One Month to Six Months Satellite Post Storage Operations...........4-2
4.4.2 Greater Than Six Months Satellite Post Storage Operations...........4-2
TABLES
TABLE PAGE
1 Storage Facilities................................................................1-1
2 Storage Monitoring Matrix.........................................................2-1
</TABLE>
<PAGE>
[CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PAGES 1-1
THROUGH 4-2 OF THIS PART]
<PAGE>
AMENDMENT NO. 1 TO THE
ORION-Z SPACECRAFT PURCHASE CONTRACT
BETWEEN
LORAL ORION SERVICES, INC. AND
SPACE SYSTEMS/LORAL, INC.
THIS AMENDMENT No. 1 to the ORION-Z Spacecraft Purchase Contract (the
"Amendment") effective this 29th day of December, 1998, by and between Loral
Orion Services, Inc. (formerly known as Loral Orion Network Services, Inc."), a
corporation organized and existing under the laws of Delaware, U.S.A. ("ORION")
and Space Systems/Loral, Inc., a corporation organized and existing under the
laws of Delaware, U.S.A. ("Contractor").
W I T N E S S E T H:
WHEREAS, the Parties entered into the ORION-Z Spacecraft Purchase Contract
dated May 15, 1998 (the "Contract"), for Contractor's in-orbit provision to
ORION of the ORION-Z Spacecraft consisting of thirty-either (38) 54 MHz Ku-band
transponders; and
WHEREAS, ORION and Contractor have agreed to increase the Contract Price as
set forth herein for the scope of work described in the Contract;
NOW, THEREFORE, in consideration of the foregoing, the covenants, and
agreements set forth herein and intending to be legally bound, ORION and
Contractor agree to amend the Agreement as follows:
1. Unless otherwise defined herein, all capitalized terms used herein shall have
the meanings given those terms in the Contract.
2. Paragraph 4.2, Contract Price. The Contract Price for the ORION-Z Spacecraft
delivered in-orbit (including cost of Ariane 44LP Launch Vehicle, any Launch
Services, Data and Documentation, Operations Training, Mission Specific Hardware
and Software, and the Dynamic Software Simulator) shall be increased by
Fifty-Eight Million Seven Hundred Eighty One Thousand Dollars ($58,781,000) (the
"Contract Price Increase") to a total Contract Price of Two Hundred Fourteen
Million Three Hundred Eleven Thousand Dollars ($214,311,000). The Parties agree
to negotiate in good faith a reasonable payment schedule for the Contract Price
Increase, the terms of which will thereafter be incorporated, as appropriate,
into a revised Part 1(B), Payment Schedule and Part 1(C), Termination Liability.
3. ORION and Contractor have participated jointly in the negotiation and
drafting of this Amendment. If an ambiguity or question of intent or
interpretation arises, this Amendment shall be construed as if drafted jointly
by both Parties and no presumption or burden of proof shall arise favoring or
disfavoring either Party because of the authorship
<PAGE>
of any of the provisions of this Amendment. Any reference to any law shall be
deemed also to refer to all rules, regulations, orders or decrees promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. Each representation, warranty and covenant
contained herein shall have independent significance. If either Party breaches
in any respect any representation, warranty, covenant, or other obligation
contained herein or created hereby, the fact that there exists another
representation, warranty, covenant, or obligation relating to the same subject
matter (regardless of the relative levels of specificity) which has not been
breached shall detract from or mitigate the consequences of such breach. The
Parts specified in this Amendment are incorporated herein by reference and made
a part hereof.
4. Except as amended herein, the Contract and any prior amendments thereto,
shall remain in full force and effect in all respects, including but not limited
to price, delivery, schedule, and performance.
IN WITNESS WHEREOF, ORION and Contractor have each duly executed this Amendment
No. 1 to the ORION-Z Spacecraft Purchase Contract as of the day and year first
written above.
LORAL ORION SERIVCE, INC. SPACE SYSTEMS/LORAL, INC.
By: /s/ Denis J. Curtin By: /s/ R.O. Hel
---------------------------- ----------------------------
Date: 1/27/99 Date: 1/11/99
-------------------------- --------------------------
EXHIBIT 10.18
AGREEMENT BETWEEN
LORAL ORION SERVICES, INC.
AND
LORAL SPACECOM CORPORATION
CONCERNING PROFESSIONAL SERVICES
This Agreement shall become effective on the date of its final
signature by and between Loral Orion Services, Inc., a corporation organized and
existing under the laws of the State of Delaware and having its primary place of
business at 2440 Research Boulevard, Suite 400, Rockville, MD 20850 (hereinafter
referred to as "LORAL ORION" which expression shall include its successors and
permitted assigns) and Loral SpaceCom Corporation, a corporation organized and
existing under the laws of the State of Delaware doing business as Loral
Skynet(R) 2 and having a place of business at 500 Hills Drive, Bedminster, New
Jersey 07921 (hereinafter referred to as "SKYNET" which expression shall include
its successors and permitted assigns).
WITNESSETH:
WHEREAS, SKYNET and LORAL ORION are both subsidiaries of Loral
Space & Communications Corporation;
WHEREAS, SKYNET has many years experience and expertise in the
management of communications satellite services and transponders, including
performing tracking, telemetry and control services; and
WHEREAS, LORAL ORION desires to take advantage of SKYNET'S
experience and expertise for the benefit of LORAL ORION'S business.
NOW, THEREFORE, LORAL ORION and SKYNET, in consideration of
the mutual covenants expressed herein, agree as follows:
- - ----------------
1 Skynet is a registered trademark of Loral SpaceCom Corporation.
<PAGE>
ARTICLE 1
APPOINTMENT, AUTHORITY OF
CONTRACTOR AND DUTIES OF CONTRACTOR
A. APPOINTMENT - LORAL ORION hereby engages SKYNET to perform
the services provided for herein including but not necessarily limited to
Telemetry Tracking & Control (TT&C) Services and the Program Performance Review
Services set forth in Exhibit A, Statement of Work (hereinafter referred to as
"Service" or "Services"), attached hereto and made a part hereof, in connection
with the satellites known as Orion 1, 2 and 3 and such other satellites as the
parties shall mutually agree (hereinafter referred to as "Satellite" or
"Satellites") and SKYNET accepts such engagement to render such Services for the
compensation herein provided. Notwithstanding the foregoing, Performance Review
Services are only applicable to satellites know as Orion 2 and 3.
B. AUTHORITY OF CONTRACTOR - LORAL ORION hereby engages SKYNET
on the terms and conditions set forth herein as an independent contractor.
SKYNET and LORAL ORION hereby acknowledge and agree that SKYNET is engaged
solely as an independent contractor and that SKYNET shall have no authority to
bind LORAL ORION in connection with the Services provided hereunder.
C. DUTIES OF CONTRACTOR - SKYNET shall provide the Services
set forth herein and in Exhibit A, Statement of Work, to LORAL ORION.
ARTICLE 2
COMPENSATION
The charge for providing the Services hereunder shall be
SKYNET'S cost plus five (5) percent on top of such costs per month provided that
the cost shall have been reasonably incurred by SKYNET in connection with its
performance of Services hereunder.
<PAGE>
ARTICLE 3
INVOICING, PAYMENT AND AUDIT
SKYNET shall invoice LORAL ORION for the Services provided
hereunder on the first business day of each month for the compensation for the
Services provided hereunder set forth in Article 2 and LORAL ORION shall pay
such invoice on or before thirty (30) days from the date specified on such
invoices.
SKYNET shall use reasonable commercial efforts to maintain
accurate records of all the costs billed hereunder. LORAL ORION, once per
calendar year, at its sole expense, during normal business hours, upon thirty
(30) days' prior written notice to SKYNET, shall have the right to conduct a
financial audit of all such records.
ARTICLE 4
DOCUMENTS FORMING THE CONTRACT
This Agreement consists of the following:
A. The provisions in ARTICLES 1 through 9 in Section I of this
Agreement and ARTICLES 1 through 17 in Section II of this Agreement.
B. EXHIBIT A - Statement of Work
In the event of any inconsistency among or between the parts
of this Agreement set forth above, such inconsistency shall be resolved by
giving precedence in the order of the parts set forth above.
ARTICLE 5
DURATION
This Agreement applies to all the Services performed by SKYNET
that are described in EXHIBIT A, beginning on the date of its final signature
("Effective Date"), whether performed in anticipation of or following the
execution of this Agreement, and shall, subject to the provisions of Articles 11
and 12 of the General Terms and Conditions appended hereto, continue through the
End Of Life ("EOL") of the Satellites that are the subject of this
<PAGE>
Agreement. For the purposes of this Agreement End Of Life or EOL shall mean: i)
the ejection of the Satellite from the orbital arc; or ii) the failure of the
Satellite; or (iii) the sale of the Satellite, whichever occurs first.
ARTICLE 6
PARTY REPRESENTATIVES AND NOTICES
SKYNET'S Technical Representative is:
Mr. John Brown
Vice President, Satellite Engineering and Operations
500 Hills Drive
P. O. Box 7018
Room 3A24
Bedminster, NJ 07921
Phone 908 470-2305
Fax 908 470-2457
SKYNET'S Contract Representative is:
Mr. R. J. DeMartini, C.P.M.
Director, Contracts
500 Hills Drive
P.O. Box 7018
Room 3A15
Bedminster, New Jersey 07921
Phone 908 470-2360
Fax 908 470-2453
LORAL ORION'S Technical Representative is:
Mr. Dennis Curtin
Senior Vice President, Engineering
2440 Research Boulevard
Rockville, MD 20850
Suite 400
Phone 301 258-3201
Fax 301 258-3222
<PAGE>
LORAL ORION'S Contract Representative is:
Mr. Dick Shay
Senior Vice President and General Counsel
2440 Research Boulevard
Rockville, MD 20850
Suite 400
Phone 301 258-3209
Fax 301 258-3360
Any notice or demand which under the terms of this Agreement
or under any statute must or may be given or made by LORAL ORION or SKYNET shall
be in writing and shall be given or made by telegram, tested telex, confirmed
facsimile, or similar communication or by certified or registered mail addressed
to the Contract Representatives designated in this Agreement, as amended from
time to time.
ARTICLE 7
INDEPENDENT CONTRACTORS STATUS
This Agreement is intended to create, and creates, a
contractual relationship for Services to be rendered by SKYNET acting in the
ordinary course of its business as an independent contractor and is not intended
to create, and does not create, a partnership, joint venture, agency or any like
relationship between the parties hereto. Moreover, nothing herein shall be
construed to imply a partnership, joint venture, commercial agency, or
employer/employee relationship between the parties. All persons employed by
SKYNET in connection with this Agreement shall be considered employees or agents
of SKYNET only, and shall in no way, either directly or indirectly, be
considered employees or agents of LORAL ORION. LORAL ORION shall not be
obligated to pay commissions, salaries or other payments or benefits to parties
with whom SKYNET may deal in connection with its Services hereunder, and SKYNET
hereby agrees not to make any representations, directly or by implication, that
any such obligation on the part of LORAL ORION exists or will exist.
ARTICLE 8
TAXES
A. Except as set forth in the following sentence, SKYNET shall
be financially responsible for, and shall pay, any Tax liability arising in
connection with any payment made by
<PAGE>
LORAL ORION to SKYNET pursuant to Article 3 herein. LORAL ORION shall be
financially responsible for all sales, use, transfer or similar consumption-type
tax arising in connection with any payment made by LORAL ORION to SKYNET
pursuant to Article 3 herein.
B. LORAL ORION and SKYNET shall cooperate and use their
respective best efforts in connection with contesting any Tax liability imposed
in connection with the Services or the Satellite capacity.
C. For purposes of this Section 14, the term Tax or Taxes
includes, without limitation, any federal, state, local, or foreign income
(including income tax or amounts on account of income tax required to be
deducted or withheld from or accounted for in respect of any payment), gross
receipts, corporation, advance corporation, license, payroll, employment, wage,
excise, severance, stamp, occupation, premium, windfall, profits, environmental,
customs duties, capital stock, franchise, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, capital gains, development land, inheritance, national insurance
contributions, capital duty, stamp duty, stamp duty reserve tax, duties or
customs and excise, all taxes, duties or charges replaced by or replacing any of
them, and all levies, imposts, duties, charges or withholdings of any nature
whatsoever chargeable by any Governmental Authority, together with all
penalties, charges and interest relating thereto. For purposes of this Article
8, the term Governmental Authority shall mean any federal, state, provincial,
local, tribal, foreign or other governmental agency, department, branch,
commission, board, bureau, court, instrumentality or body, including, without
limitation, any taxing or other authority (whether within or without the United
States) competent to impose any tax liability.
ARTICLE 9
ENTIRE AGREEMENT
This Agreement , shall constitute the entire agreement between
the parties with respect to the subject matter of this Agreement and shall not
be modified or rescinded, except by a writing signed by LORAL ORION and SKYNET.
Additional or different terms inserted in this Agreement by LORAL ORION, or
deletions
<PAGE>
thereto, whether by alterations, addenda, or otherwise, shall be of no force and
effect, unless expressly consented to by SKYNET in writing. The provisions of
this Agreement supersede all contemporaneous oral agreements and all prior oral
and written quotations, communications, agreements and understandings of the
parties with respect to the subject matter of this Agreement.
ACCEPTED:
LORAL ORION SERVICES, INC. LORAL SPACECOM CORPORATION
By: ________________________ By: _______________________
Name: Mr. W. Neil Bauer Name: Mr. Terry J. Hart
Title: President & CEO Title: President
Date: Date:
<PAGE>
GENERAL TERMS AND CONDITIONS
ARTICLE I
ARBITRATION
All disputes arising in connection with the present Agreement
shall be finally settled under the Rules of Conciliation and Arbitration of the
American Arbitration Association ("AAA Rules") by one or more arbitrators
appointed in accordance with said Rules. The arbitration shall take place in New
York City, United States of America, and shall be conducted in English. The
arbitrator shall apply the substantive (not the conflicts) law of the state
specified in the choice of law provision set forth elsewhere in this Agreement.
The arbitrator shall not limit, expand or modify the terms of the Agreement nor
award damages in excess of compensatory damages, and each party waives any claim
to such excess damages. The award shall be in United States dollars. Judgment
upon the award rendered in the arbitration may be entered in any court having
jurisdiction thereof. Each Party shall bear its own expenses (including
attorney's fees) and an equal share of the expenses of the arbitrator and the
fees of the arbitration. Nothing in the Agreement shall be construed to preclude
any party from seeking injunctive relief in order to protect its rights pending
arbitration. A request by a party to a court for such injunctive relief shall
not be deemed a waiver of the obligation to arbitrate.
ARTICLE 2
ASSIGNMENT
LORAL ORION acknowledges and agrees that notwithstanding
anything to the contrary contained in the Agreement, LORAL ORION shall not
transfer or assign any of its rights or obligations under the Agreement to any
third parties without SKYNET'S consent, which may be given or withheld at
SKYNET'S sole discretion. SKYNET expressly shall have the right to subcontract
any of the Services required hereunder to a third party and/or assign this
Agreement including its rights, duties and obligations hereunder, to its parent
corporation or any present or future affiliate or subsidiary of SKYNET capable
of fully providing the Services hereunder, or in connection with its merger or
acquisition. All the Services performed hereunder by SKYNET'S subcontractor(s)
at any tier shall be deemed to be Services performed by SKYNET for purposes of
this Agreement.
<PAGE>
ARTICLE 3
CAPTIONS
The captions in this Agreement are included for convenience
only and shall not be construed to define or limit any of the provisions
contained herein.
ARTICLE 4
CHANGES
LORAL ORION may at any time during the term of this Agreement
require additions to or alterations of or deductions or deviations (all
hereinafter referred to as a "Change") from the Services called for by EXHIBIT
A. No Change shall be considered as an addition or alteration to or deduction or
deviation from the Services called for by EXHIBIT A nor shall SKYNET be entitled
to any compensation for the Services done pursuant to or in contemplation of a
Change, unless made pursuant to a written Change Order issued by LORAL ORION.
Within twenty (20) days after a request for a Change, SKYNET shall submit a
proposal to LORAL ORION that includes any increases or decreases in LORAL
ORION'S costs or changes in the delivery schedule necessitated by the Change.
LORAL ORION shall, within ten (10) days of receipt of the proposal, either (i)
accept the proposal, in which event LORAL ORION shall issue a written Change
Order directing SKYNET to perform the Change or (ii) advise SKYNET not to
perform the Change in which event SKYNET shall proceed with the Services as
originally described in EXHIBIT A. SKYNET at its sole discretion reserves the
right to reject any such request for Change.
ARTICLE 5
CHOICE OF LAW
The construction, interpretation and performance of this
Agreement and all transactions under it shall be governed by the laws of the
State of New York excluding its choice of laws rules and excluding the
Convention for the International Sales of Goods.
<PAGE>
ARTICLE 6
FORCE MAJEURE
SKYNET shall not be liable for any loss, damage, or delay
caused by strikes, picketing, labor disturbances, riots, fires, insurrection, or
the elements, embargoes, failure of carriers, inability to obtain facilities or
to obtain materials, Government Regulations or requirements, acts of God or the
public enemy, or any cause beyond its control whether or not similar to the
foregoing ("Force Majeure Condition"). Notwithstanding the foregoing, SKYNET
agrees to use reasonable commercial efforts to continue to perform the
TT&CServices that it is required to furnish hereunder. Such efforts will be no
less in scope then the efforts that SKYNET will employ to perform the TT&C
Services for its own spacecraft, in the event that any such Force Majeure
Condition may occur and impede SKYNET'S ability to perform such telemetry,
tracking and control services for such spacecraft.
ARTICLE 7
PUBLICITY
LORAL ORION agrees to submit to SKYNET all advertising, sales
promotion, press releases, and other publicity matters relating to the material
furnished or the Services performed by SKYNET under this Agreement wherein
SKYNET'S names or marks are mentioned or language from which connection of said
names or marks therewith may be inferred or implied; and LORAL ORION further
agrees not to publish or use such advertising, sales promotion, press releases,
or publicity matters without SKYNET'S prior written approval.
ARTICLE 8
RELEASES VOID
Neither party shall require (i) waivers or releases of any
personal rights or (ii) execution of documents in conflict with the terms of
this Agreement, from employees, representatives of the other in connection with
visits to its premises and both parties agree that no such releases, waivers or
documents shall be pleaded by them or third persons in any action or proceeding.
<PAGE>
ARTICLE 9
RIGHT OF ENTRY AND PLANT RULES
Each party shall have the right to enter premises of the other
party during normal business hours with respect to the performance of this
Agreement, subject to all plant rules and regulations, security regulations and
procedures and U.S. Government clearance requirements if applicable.
ARTICLE 10
SEVERABILITY
In the event that any one or more of the provisions contained
herein shall for any reason be held to be unenforceable in any respect under the
law of any state or of the United States of America, such unenforceability shall
not affect any other provision of this Agreement, but this Agreement shall then
be construed as if such unenforceable provision or provisions had never been
contained herein.
ARTICLE 11
TERMINATION
[ *
<PAGE>
]
ARTICLE 12
TERMINATION FOR DEFAULT
[ *
<PAGE>
]
ARTICLE 13
NONDISCLOSURE OF INFORMATION
13.1 Each party to this Agreement may find it beneficial
to disclose to the other party documentation or
other information which the disclosing party
considers proprietary ("Information"). Such
Information may include but is not limited to, its
engineering, hardware, software or other technical
information, and financial, accounting or marketing
reports, analysis, forecasts, predictions or
projections.
13.2 It is specifically understood and agreed that
Information disclosed pursuant to this Agreement
shall be considered proprietary either because 1)
it has been developed internally by the disclosing
party, or because 2) it has been received by the
disclosing party subject to a continuing obligation
to maintain the confidentiality of the Information.
13.3 Information that is provided in a tangible form
shall be marked in a manner to indicate that it is
considered proprietary or otherwise subject to
limited distributions provided herein. If the
Information is provided orally, the disclosing
party shall clearly identify it as being
proprietary at the time of disclosure, and within
fifteen (15) working days of such disclosure,
confirm the disclosure in writing to the other
party.
With respect to Information, the party to whom the Information
is disclosed and its employees shall:
a. hold the Information in confidence and
protect it in accordance with the security
regulations by which it protects its own
proprietary or confidential information,
which it does not wish to disclose;
<PAGE>
b. restrict disclosure of the Information
solely to those employees with a need to
know and not disclose it to any other
persons;
c. advise those employees of their obligations
with respect to the Information; and
d. use the Information only in connection with
implementing this Agreement and in
continuing discussions and negotiations
between the parties concerning the Service,
except as may otherwise be agreed upon in
writing.
13.4 In the event a party to whom Information has been
disclosed proposes to disclose that Information to
an outside consultant or agent, it shall obtain the
written consent of the party from whom the
Information was originally received and arrange for
the execution by the consultant or agent for a
nondisclosure agreement in a form reasonably
satisfactory to the party from whom the Information
was originally received.
13.5 The party to whom Information is disclosed shall
have no obligations to preserve the proprietary
nature of any Information that:
a. was previously known to it free of any
obligations to keep it confidential;
b. is disclosed to third parties by the
disclosing party without restriction;
c. is or becomes publicly available by other
than unauthorized disclosure; or
d. is independently developed by the
receiving party.
The Information shall be deemed the property of the disclosing
party and, upon request the other party will promptly return all Information
that is in tangible form to the disclosing party or destroy all such
information.
<PAGE>
ARTICLE 14
LIMITATION OF LIABILITY
OTHER THAN for damages resulting from skynet's willfull
misfeasance, bad faith, or gross negligence, SKYNET SHALL HAVE NO Liability With
respect to any claim or suit, by LORAL ORION or by any others, for damages
associated with the MATERIAL or SERVICES FURNISHED HEREUNDER. FURTHER, SKYNET
WILL NOT BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL, DIRECT OR INDIRECT
DAMAGES WHETHER ARISING OUT OF BREACH OF WARRANTY, BREACH OF CONTRACT,
NEGLIGENCE, STRICT TORT LIABILITY, OR OTHERWISE. IN NO EVENT SHALL SKYNET BE
LIABLE FOR DAMAGES IN EXCESS OF THE PURCHASE PRICE STATED IN THIS AGREEMENT.
ARTICLE 15
DISCLAIMER OF WARRANTIES
SKYNET WARRANTS TO LORAL ORION THAT SKYNET WILL PERFORM THE
SERVICES DEFINED HEREIN IN ACCORDANCE WITH GENERALLY ACCEPTED INDUSTRY STANDARDS
AND THAT SUCH SERVICE SHALL BE FIT FOR ITS INTENDED PURPOSE AS IDENTIFIED IN
EXHIBIT A, STATEMENT OF WORK. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED FOR IN THIS
AGREEMENT, SKYNET, ITS PARENT, THEIR SUBSIDIARIES AND THEIR AFFILIATES,
SUBCONTRACTORS AND SUPPLIERS MAKE NO WARRANTY, EXPRESS OR IMPLIED, REGARDING THE
PERFORMANCE OF THE SERVICE OR WARRANTY AGAINST PATENT, TRADEMARK, COPYRIGHT, OR
TRADE SECRET INFRINGEMENT, AND SPECIFICALLY DISCLAIM ANY WARRANTY OF
MERCHANTABILITY.
<PAGE>
ARTICLE 16
INDEMNIFICATION
LORAL ORION shall indemnify and save harmless SKYNET and its
affiliates and its customers and their respective officers, directors,
employees, successors and assigns from and against, any and all losses, claims,
damages, liabilities or expenses (including reasonable attorneys' fees and
expenses) (collectively "Losses") resulting from any claim, demand, action, or
suit resulting from the performance of Services by SKYNET under this Agreement,
other than Losses resulting from SKYNET'S willful misfeasance, bad faith or
gross negligence.
ARTICLE 17
WAIVER
The failure of either party at any time to enforce any right
or remedy available to it under this Agreement with respect to any breach or
failure by the other party shall not be construed to be a waiver of such right
or remedy with respect to any other breach or failure by the other party.
<PAGE>
================================================================================
Statement of Work
LORAL ORION FLEET
PART 1, TRACKING, TELEMETRY & CONTROL SERVICES
================================================================================
Overview
SKYNET'S technical support is comprised of three main areas:
o Planning Support
SKYNET will perform all necessary SATELLITE coordination with the proper
regulatory authorities, including but not limited to the Federal
Communications Commission (FCC) and the International Telecommunications
Union (ITU).
o GCE/Satellite TT&C Baseband Maintenance and Support
SKYNET will provide maintenance support for the GCE hardware and SATELLITE
TT&C baseband hardware and software located on SKYNET property and at
remote earth stations used to support the TT&C services associated with
this program.
o TT&C Services & Payload Management
SKYNET will provide TT&C services upon take over of the SATELLITE(S) from
the LORAL ORION and the Spacecraft manufacturer. Primary TT&C
responsibilities will remain with SKYNET, as well as management of the
Satellite payload.
The following provides more detail on each of the three areas of SKYNET'S
support:
<PAGE>
PLANNING SUPPORT
SKYNET will, perform the payload coordination of the LORAL ORION SATELLITE fleet
with all applicable regulatory agencies, including but not limited to the FCC
and the ITU.
GCE/SATELLITE TT&C BASEBAND MAINTENANCE AND SUPPORT
Under the provisions of this Statement of Work, SKYNET will assume
responsibility for maintenance of GCE and SATELLITE TT&C baseband equipment
directly or through subcontractors. Such maintenance activities will include but
not be limited to:
o Monitor the performance of the equipment twenty-four hours per day, seven
days per week.
o Upon detection of a fault, isolate the cause of the fault and repair the GCE
and SATELLITE TT&C baseband equipment as needed.
o Perform preventative maintenance on the equipment per the manufacturer's
specifications.
SKYNET will be responsible for operating all GCE and SATELLITE TT&C baseband
equipment located on SKYNET property and at the remote TT&C stations, in an
environment that follows manufacturer specifications and/or SKYNET'S operational
guidelines. For that equipment, SKYNET will provide both protected and
unprotected electrical power and conditioned environments, that meets the needs
of the equipment.
<PAGE>
TT&C SERVICES
SKYNET will provide LORAL ORION spacecraft operations services in the form of
spacecraft payload and bus analysis and configuration management, SATELLITE
control, and orbital determination and analysis.
LORAL ORION'S Spacecraft operations will be performed on a day-by-day basis by
an experienced SKYNET staff. This staff will operate the SATELLITE(S) with the
same procedures and diligence SKYNET applies to its Telstar fleet. The entire
SATELLITE control staff from both the Hawley and Three Peaks facilities will be
trained to control the LORAL ORION fleet. The LORAL ORION SATELLITES will be
integrated into the SKYNET fleet and enjoy the same coverage, from both Hawley
and Three Peaks, that the Telstar fleet does. The demonstration of this
diligence will be through periodic health and status reports provided to LORAL
ORION.
The SKYNET satellite control staff will develop appropriate plans and procedures
for maintaining the proper Spacecraft orbits, monitoring the telemetry,
responding to alarms, investigating and resolving Spacecraft anomalies and
commanding the SATELLITE to the proper configuration for service.
SKYNET will provide TT&C services, as described below, after SKYNET takes over
LORAL ORION'S first SATELLITE and additional SATELLITE(S) from the manufacturer.
The following provides details of the TT&C service that SKYNET will initiate and
continue to provide throughout the life of the SATELLITE(S):
<PAGE>
o PAYLOAD AND BUS ANALYSIS AND CONFIGURATION MANAGEMENT
SKYNET will execute the following tasks on each of the LORAL ORION
SATELLITES:
1. ANALYSIS OF SATELLITE TELEMETRY DATA TO DETERMINE SHORT-TERM AND LONG-TERM
TRENDS IN THE PERFORMANCE OF EACH OF THE SATELLITE SUB-SYSTEMS.
2. Review and analysis of any SATELLITE anomalies. The SKYNET staff will work
with LORAL ORION and the manufacturer, if necessary, in the resolution of
any Spacecraft anomalies.
3. SKYNET will determine, establish and administer all operating limits and
deltas necessary for the quality operation of the Spacecraft(s).
o Satellite Control
SKYNET Satellite Controllers will be available on a twenty-four (24) hour
per day, seven (7) day per week basis to continually monitor the
performance of LORAL ORION'S SATELLITE(S). During the course of this
monitoring the Satellite Controller will:
1. Continually scan for Spacecraft alarms and check the health and status of
LORAL ORION'S Spacecraft by reviewing telemetry data received from the
Spacecraft.
2. Execute spacecraft procedures as designed and specified by spacecraft
engineer(s) and Orbital Analyst(s) assigned to the LORAL ORION
spacecraft(s). The LORAL ORION SATELLITE(S) will be routinely assigned to
different analysts and engineers on the SKYNET staff to ensure our entire
staff is always familiar with the configuration and operations of the LORAL
ORION SATELLITE(S).
3. Execute spacecraft procedures and payload configuration changes.
<PAGE>
4. Execute spacecraft procedures as needed in response to spacecraft alarms.
5. Generate ranging data as required.
o Maneuver Planning, Orbital Determination And Analysis
SKYNET will see that each LORAL ORION SATELLITE operated by SKYNET will
have the following activities conducted by the SKYNET orbital analysis
staff.
1. Analysis of SATELLITE ranging data and determination of all orbital
elements associated with current and projected SATELLITE positioning.
2. Design all maneuvers for the SATELLITE(S) to see that SATELLITE(S) are kept
within limits authorized per the SATELLITE operating license, FCC
requirements, ITU requirements and LORAL ORION'S reasonable and written
expectations.
3. Monitor all SATELLITE flight dynamics during maneuvers to see that maneuver
plans were executed as designed.
4. Perform post-maneuver analysis of SATELLITE(S) to determine fuel
consumption during maneuver and prepare semi-annual end of life estimates
for each SATELLITE.
5. Monitor short-term and long-term performance trends of each Spacecraft's
attitude control and propulsion subsystems.
SKYNET will also perform management of the payload including Satellite access.
Each maneuver will have a primary analyst who has the support of the entire
staff. Again, the entire orbital dynamics staff will receive all necessary
training to conduct operations for the LORAL ORION fleet. In order to provide
<PAGE>
the TT&C services described above, SKYNET will augment its present staff with
sufficient payload and bus analysis and configuration managers, orbital analysts
and satellite controllers to operate LORAL ORION'S SATELLITES in the same SKYNET
operates its satellites.
Depending upon the context, in this Part 1 of this Exhibit A "Spacecraft" shall
have the same meaning as ascribed to the term "Satellite" in Article 1. A. of
Section I of this Contract.
<PAGE>
================================================================================
PART 2, SATELLITE PROGRAM PERFORMANCE REVIEW
================================================================================
OVERVIEW
This Section 2 defines all services, data and documentation to be performed by
SKYNET on behalf of LORAL ORION for the Orion satellite(s) (depending on the
context, hereinafter referred to as "Satellite, Satellites, Spacecraft or
Spacecrafts") programs. SKYNET will be responsible for review and confirmation
of deliverance of the Satellites in accordance with the specifications agreed to
between the manufacturer and LORAL ORION.
BASIC PROGRAM CONTENT
SKYNET will provide experienced and competent personnel to review, analyze
and report to LORAL ORION via written reports concerning:
1. The acceptability of unit level performance data received directly from
the manufacturer or from the manufacturer's subcontractors for items
associated with the Spacecrafts' antenna subsystem, communications
subsystem, telemetry command and ranging subsystems, buses subsystems,
spacecraft control electronics, propulsion subsystems, electrical power
subsystems, thermal control subsystems, structures and mechanisms
subsystems.
2. Support LORAL ORION in arriving at a satisfactory resolution of any
unit level tests that suggest the Satellites will not meet performance
specifications as outlined in the technical specifications section of
the contract between the manufacturer and LORAL ORION.
3. The acceptability of subsystem level performance data received from the
manufacturer during the integration and assembly of subsystems for
items associated with the Spacecrafts' antenna subsystems,
communications subsystems, telemetry command and ranging subsystems,
buses subsystems, spacecraft control electronics, propulsion
subsystems, electrical
<PAGE>
power subsystems, thermal control subsystems, structures and mechanisms
subsystems.
4. Support LORAL ORION in arriving at a satisfactory resolution of any
subsystem level performance tests that suggest the Satellites will not
meet performance specifications as outlined in the technical
specifications section of the contract between the manufacturer and
LORAL ORION.
5. The acceptability of system level performance data received from the
manufacturer during the thermal vacuum and temperature cycling of the
Satellites for items associated with the Spacecrafts' antenna
subsystems, communications subsystems, telemetry command and ranging
subsystems, buses subsystems, spacecraft control electronics,
propulsion subsystems, electrical power subsystems, thermal control
subsystems, structures and mechanisms subsystems.
6. Support LORAL ORION in arriving at a satisfactory resolution of any
system level performance tests that suggest the Satellites will not
meet performance specifications as outlined in the technical
specifications section of the contract between the manufacturer and
LORAL ORION.
PROGRAM OPTIONS
LORAL ORION, at its option may request that SKYNET provide experienced and
competent personnel to review, analyze and report to LORAL ORION via written
report on the health and status of the Satellites:
1. During pre-launch activities.
2. During in orbit testing (IOT) of the Spacecrafts' buses and communications
payloads.
LORAL ORION, at its option may also request that SKYNET provide experienced
and competent personnel to review, analyze and report to LORAL ORION via
written report on
<PAGE>
the health and status of the Satellites' launch programs. SKYNET, in
undertaking this task would:
1. Review pre-launch plans and procedures of the launch vehicle provider and
recommend corrective actions to prevent or eliminate performance problems
and protect schedules.
2. Track activities of launch vehicle provider.
3. Review final launch vehicle readiness to launch of the LORAL ORION
Spacecrafts.
4. Review mission plans and procedures including orbit raising and deployment
of solar arrays and antennas.
DELIVERABLES
The services, data and documentation to be provided by SKYNET are provided
herein. Such services data and documentation provided by SKYNET will include but
not be limited to written reports and compliance matrices which document results
of analysis, and summary descriptions of the necessary resolution. SKYNET will
also provide written reports and compliance matrices which document results of
all scheduled testing.
o UNIT AND SUB ASSEMBLIES
SKYNET will provide in-process inspections or witness unit assembly at
subcontractor. Data, if provided by a subcontractor of the manufacturer,
would accompany the unit as an associated data package or be obtained at
the subcontractor's facility. Data for units and sub-assemblies directly
manufactured by the manufacturer would be found at the manufacturing
facility. All data for analysis must be made available through the
manufacturer's Program Office.
<PAGE>
o SPACECRAFT INTEGRATION TEST RESULTS
Such tests will be performed at the manufacturer's facility. SKYNET will be
present during the performance of such tests. SKYNET will support LORAL
ORION in reviewing test procedures and witnessing the vendors (the
manufacturer) performance of such tests and data collected. Such tests will
include but not be limited to: panel integration tests, reference
performance tests, thermal vacuum testing, sine vibration and acoustic
testing, compact antenna range testing (CATR) and final bus testing. In
addition to supporting the above tests, SKYNET will also provide the
following:
1. COMMUNICATIONS SUBSYSTEMS ANALYSIS
SKYNET will prepare a complete and comprehensive Communications Subsystems
Performance report. This report will summarize important characteristics
and parameters of the Communications Subsystems as it relates to the
performance specifications found in the contract between the manufacturer
and LORAL ORION for the construction of the Satellites.
2. ELECTRICAL POWER SYSTEMS ANALYSIS
SKYNET will prepare a complete and comprehensive Electrical Power
Subsystems Analysis report. This report will summarize important
characteristics and parameters of the electrical power subsystems as it
relates to the performance specifications found in the contract between the
manufacturer and LORAL ORION for the construction of the Satellites.
3. SPACECRAFT PRE-SHIPMENT REVIEW
SKYNET will witness pre-shipment review conducted by the manufacturer to
assure that all of the Satellites' subsystems are in conformance with all
requirements of the performance specifications found in the contract
between the manufacturer and LORAL ORION for the construction of the
Satellites.
<PAGE>
4. SATELLITE POST SHIPMENT INSPECTION
SKYNET will review or witness post-shipment validation tests conducted by
the manufacturer to demonstrate that all of the Satellites' subsystems are
in conformance with all requirements of the performance specifications
found in the contract between the manufacturer and LORAL ORION for the
construction of the Satellites and has not degraded as a result of shipment
to the launch site.
5. SATELLITE LAUNCH READINESS REVIEW
SKYNET will participate in the Launch Readiness Review of the Satellites
which will be held not later than ten (10) working days prior to the launch
date of the Satellites. SKYNET will expressly concentrate on the readiness
of satellite subsystems. SKYNET, in performance of this review along with
the manufacturer, will advise LORAL ORION on the condition of the
Spacecrafts prior to LORAL ORION giving final GO/NOGO authority to the
manufacturer.
6. IN-ORBIT TEST REVIEW/SATELLITE ACCEPTANCE
SKYNET will participate in the In-Orbit Test review of the Satellites that
will be held at a location to be selected by LORAL ORION. SKYNET will
expressly concentrate on the in orbit performance of all of the Satellites'
Subsystems. SKYNET, in performance of this review along with the
manufacturer, will advise LORAL ORION on the condition of the Spacecrafts
prior to final acceptance of the Satellites by LORAL ORION.
EXHIBIT 10.19
AGREEMENT BETWEEN
LORAL ORION SERVICES, INC.
AND
LORAL SPACECOM CORPORATION
CONCERNING PROFESSIONAL SERVICES
This Agreement shall become effective on the date of its final
signature by and between Loral Orion Services, Inc., a corporation organized and
existing under the laws of the State of Delaware and having its primary place of
business at 2440 Research Boulevard, Suite 400, Rockville, MD 20850 (hereinafter
referred to as "LORAL ORION" which expression shall include its successors and
permitted assigns) and Loral SpaceCom Corporation, a corporation organized and
existing under the laws of the State of Delaware doing business as Loral
Skynet(R) 1 and having a place of business at 500 Hills Drive, Bedminster, New
Jersey 07921 (hereinafter referred to as "SKYNET" which expression shall include
its successors and permitted assigns).
WITNESSETH:
WHEREAS, SKYNET and LORAL ORION are both subsidiaries of Loral
Space & Communications Corporation;
WHEREAS, SKYNET has many years experience and expertise in the
marketing and sales of communications satellite services and transponders; and
WHEREAS, LORAL ORION desires to take advantage of SKYNET'S
experience and expertise for the benefit of LORAL ORION'S business.
NOW, THEREFORE, LORAL ORION and SKYNET, in consideration of
the mutual covenants expressed herein, agree as follows:
- - -------------
1 Skynet is a registered trademark of Loral SpaceCom Corporation.
<PAGE>
ARTICLE 1
APPOINTMENT, AUTHORITY OF
CONTRACTOR AND DUTIES OF CONTRACTOR
A. APPOINTMENT - LORAL ORION hereby engages SKYNET to perform
the services provided for herein including but not necessarily limited to sales
and marketing set forth in Exhibit A, Statement of Work (hereinafter referred to
as "Service" or "Services"), attached hereto and made a part hereof, in
connection with the satellites known as Orion 1, 2 and 3 and such other
satellites as the parties shall mutually agree (hereinafter referred to as
"Satellite" or "Satellites") and SKYNET accepts such engagement to render such
Services for the compensation herein provided. SKYNET may, at its sole
discretion, perform the Services pursuant to this Agreement as a disclosed agent
or an undisclosed agent.
B. AUTHORITY OF CONTRACTOR - LORAL ORION hereby engages SKYNET
on the terms and conditions set forth herein as an independent contractor.
SKYNET and LORAL ORION hereby acknowledge and agree that SKYNET is engaged
solely as an independent contractor and that SKYNET shall have authority to bind
LORAL ORION and to execute contracts or other documents in the name of, or on
behalf of, LORAL ORION in connection with the Services provided hereunder,
provided that, such authority shall be exercisable by SKYNET only in the United
States.
C. DUTIES OF CONTRACTOR - SKYNET shall provide the Services
set forth herein and in Exhibit A, Statement of Work, to LORAL ORION.
ARTICLE 2
COMPENSATION
The charge to LORAL ORION for providing the Services hereunder
shall be SKYNET'S cost plus five (5) percent on top of such costs per month
provided that the cost shall have been reasonably incurred by SKYNET in
connection with its performance of Services hereunder.
<PAGE>
ARTICLE 3
INVOICING, PAYMENT AND AUDIT
SKYNET shall invoice LORAL ORION for the Services provided
hereunder on the first business day of each month for the compensation for the
Services provided hereunder set forth in Article 2 and LORAL ORION shall pay
such invoice on or before thirty (30) days from the date specified on such
invoices.
SKYNET shall use reasonable commercial efforts to maintain
accurate records of all the costs billed hereunder. LORAL ORION, once per
calendar year, at its sole expense, during normal business hours, upon thirty
(30) days' prior written notice to SKYNET, shall have the right to conduct a
financial audit of all such records.
ARTICLE 4
DOCUMENTS FORMING THE CONTRACT
This Agreement consists of the following:
A. The provisions in ARTICLES 1 through 10 in Section I of
this Agreement and ARTICLES 1 through 17 in Section II of this Agreement.
B. EXHIBIT A - Statement of Work.
In the event of any inconsistency among or between the parts
of this Agreement set forth above, such inconsistency shall be resolved by
giving precedence in the order of the parts set forth above.
ARTICLE 5
DURATION
This Agreement applies to all the Services performed by SKYNET
that are described in EXHIBIT A, beginning on the date of its final signature
(Effective Date"), whether performed in anticipation of or following the
execution of this Agreement, and shall, subject to the provisions of Articles 11
and 12 of the General Terms and Conditions appended hereto, continue through the
End Of Life ("EOL") of the Satellites that are the subject of this
<PAGE>
Agreement. For the purposes of this Agreement, End Of Life or EOL shall mean: i)
the ejection of the Satellite from the orbital arc; or ii) the failure of the
Satellite; or (iii) the sale of the Satellite, whichever occurs first.
ARTICLE 6
PARTY REPRESENTATIVES AND NOTICES
SKYNET'S Technical Representative is:
Ms. Joan Byrnes
Vice President, Sales
500 Hills Drive
P.O. Box 7018
Room 3B28
Bedminster, NJ 07921
Phone 908 470-2323
FAX 908 470-2451
SKYNET'S Contract Representative is:
Mr. R. J. DeMartini, C.P.M.
Director, Contracts
500 Hills Drive
P.O. Box 7018
Room 3A15
Bedminster, New Jersey 07921
Phone 908 470-2360
FAX 908 470-2453
LORAL ORION'S Technical Representative is:
Mr. Edward DiCarlo
Vice President, Marketing
2440 Research Boulevard
Rockville, MD 20850
Suite 400
Phone 301 670-6598
Fax 301 590-7430
LORAL ORION'S Contract Representative is:
Mr. Dick Shay
Senior Vice President and General Counsel
2440 Research Boulevard
<PAGE>
Rockville, MD 20850
Suite 400
Phone 301 258-3209
Fax 301 258-3360
Any notice or demand which under the terms of this Agreement
or under any statute must or may be given or made by LORAL ORION or SKYNET shall
be in writing and shall be given or made by telegram, tested telex, confirmed
facsimile, or similar communication or by certified or registered mail addressed
to the Contract Representatives designated in this Agreement, as amended from
time to time.
ARTICLE 7
INDEPENDENT CONTRACTORS STATUS
This Agreement is intended to create, and creates, a
contractual relationship for Services to be rendered by SKYNET acting in the
ordinary course of its business as an independent contractor and is not intended
to create, and does not create, a partnership, joint venture, agency or any like
relationship between the parties hereto. Moreover, nothing herein shall be
construed to imply a partnership, joint venture, commercial agency, or
employer/employee relationship between the parties. All persons employed by
SKYNET in connection with this Agreement shall be considered employees or agents
of SKYNET only, and shall in no way, either directly or indirectly, be
considered employees or agents of LORAL ORION. LORAL ORION shall not be
obligated to pay commissions, salaries or other payments or benefits to parties
with whom SKYNET may deal in connection with its Services hereunder, and SKYNET
hereby agrees not to make any representations, directly or by implication, that
any such obligation on the part of LORAL ORION exists or will exist.
<PAGE>
ARTICLE 8
TAXES
A. Except as set forth in the following sentence, SKYNET shall
be financially responsible for, and shall pay, any Tax liability arising in
connection with any payment made by LORAL ORION to SKYNET pursuant to Article 3
herein. LORAL ORION shall be financially responsible for all sales, use,
transfer or similar consumption-type Tax arising in connection with any payment
made by LORAL ORION to SKYNET pursuant to Article 3 herein.
B. LORAL ORION shall be financially responsible for, and shall
pay, all Taxes not payable by a customer attributable to the Satellite capacity.
Without limiting the generality of the foregoing, SKYNET shall (i) include in
all customer contracts that customer shall be financially responsible for, and
shall pay, any sales, use, transfer, VAT or other consumption-type Tax and (ii)
use its best efforts to structure customer contracts for Satellite capacity in
such a way as to minimize the potential imposition of any Taxes on LORAL ORION.
C. LORAL ORION and SKYNET shall cooperate and use their
respective best efforts in connection with contesting any Tax liability imposed
in connection with the Services or the Satellite capacity.
D. For purposes of this Section 14, the term Tax or Taxes
includes, without limitation, any federal, state, local, or foreign income
(including income tax or amounts on account of income tax required to be
deducted or withheld from or accounted for in respect of any payment), gross
receipts, corporation, advance corporation, license, payroll, employment, wage,
excise, severance, stamp, occupation, premium, windfall, profits, environmental,
customs duties, capital stock, franchise, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, capital gains, development land, inheritance, national insurance
contributions, capital duty, stamp duty, stamp duty reserve tax, duties or
customs and excise, all taxes, duties or charges replaced by or replacing any of
them, and all levies, imposts, duties, charges or withholdings of any nature
whatsoever chargeable by any Governmental Authority, together with all
penalties, charges and interest relating thereto. For purposes of
<PAGE>
this Article 8, the term Governmental Authority shall mean any federal, state,
provincial, local, tribal, foreign or other governmental agency, department,
branch, commission, board, bureau, court, instrumentality or body, including,
without limitation, any taxing or other authority (whether within or without the
United States) competent to impose any tax liability.
ARTICLE 9
CUSTOMER BILLING
SKYNET will assign a unique Master Customer/Account No. to
each LORAL ORION customer and invoice each customer monthly. Monthly charges
will be billed in advance, except where prohibited by law. For billing purposes,
each month will be considered to have thirty (30) days. Payment will be due on
or before the first day of each month for services to be provided in that month,
as specified on the bill. Service may be discontinued for nonpayment of a bill
ten (10) days beyond notice.
The bill form will contain essentially the same information as
the bills previously issued to customers by LORAL ORION.
The customer will have an option to forward their payment to a
lock box by mail or by overnight carrier or electronically by wire transfer.
LORAL ORION shall have sole authority to withdraw amounts from the lock box. Any
late payments by customer of amounts due and payable (including, but not limited
to, specified payments, damages, and indemnification) will be with interest at
the rate specified in the customer contract, or the highest legally permissible
rate of interest, whichever is lower, and all interest or discounting shall be
compounded on a monthly basis. Such late payments, including interest, will be
payable with the amount due and calculated from the date payment was due until
the date it is received in the lock box.
SKYNET will report the total amount of collected receivables
to LORAL ORION on a monthly basis.
SKYNET shall use its commercially reasonable efforts to
collect overdue invoice amounts from LORAL ORION customers provided that LORAL
ORION hereby acknowledges and agrees that SKYNET shall have no liability or
obligation to LORAL ORION or any other person for customer payment defaults.
<PAGE>
ARTICLE 10
ENTIRE AGREEMENT
This Agreement, shall constitute the entire agreement between
the parties with respect to the subject matter of this Agreement and shall not
be modified or rescinded, except by a writing signed by LORAL ORION and SKYNET.
Additional or different terms inserted in this Agreement by LORAL ORION, or
deletions thereto, whether by alterations, addenda, or otherwise, shall be of no
force and effect, unless expressly consented to by SKYNET in writing. The
provisions of this Agreement supersede all contemporaneous oral agreements and
all prior oral and written quotations, communications, agreements and
understandings of the parties with respect to the subject matter of this
Agreement.
ACCEPTED:
LORAL ORION SERVICES, INC. LORAL SPACECOM CORPORATION
By: _______________________ By: ______________________
Name: Mr. W. Neil Bauer Name: Mr. Terry J. Hart
Title: President & CEO Title: President
Date: Date:
<PAGE>
GENERAL TERMS AND CONDITIONS
ARTICLE I
ARBITRATION
All disputes arising in connection with the present Agreement
shall be finally settled under the Rules of Conciliation and Arbitration of the
American Arbitration Association ("AAA Rules") by one or more arbitrators
appointed in accordance with said Rules. The arbitration shall take place in New
York City, United States of America, and shall be conducted in English. The
arbitrator shall apply the substantive (not the conflicts) law of the state
specified in the choice of law provision set forth elsewhere in this Agreement.
The arbitrator shall not limit, expand or modify the terms of the Agreement nor
award damages in excess of compensatory damages, and each party waives any claim
to such excess damages. The award shall be in United States dollars. Judgment
upon the award rendered in the arbitration may be entered in any court having
jurisdiction thereof. Each Party shall bear its own expenses (including
attorney's fees) and an equal share of the expenses of the arbitrator and the
fees of the arbitration. Nothing in the Agreement shall be construed to preclude
any party from seeking injunctive relief in order to protect its rights pending
arbitration. A request by a party to a court for such injunctive relief shall
not be deemed a waiver of the obligation to arbitrate.
ARTICLE 2
ASSIGNMENT
LORAL ORION acknowledges and agrees that notwithstanding
anything to the contrary contained in the Agreement, LORAL ORION shall not
transfer or assign any of its rights or obligations under the Agreement to any
third parties without SKYNET'S consent, which may be given or withheld at
SKYNET'S sole discretion. SKYNET expressly shall have the right to subcontract
any of the Services required hereunder to a third party and/or assign this
Agreement including its rights, duties and obligations hereunder, to its parent
corporation or any present or future affiliate or subsidiary of SKYNET capable
of fully providing the Services hereunder, or in connection with its merger or
acquisition. All the Services performed hereunder by SKYNET'S subcontractor(s)
at any tier shall be deemed to be Services performed by SKYNET for purposes of
this Agreement.
<PAGE>
ARTICLE 3
CAPTIONS
The captions in this Agreement are included for convenience
only and shall not be construed to define or limit any of the provisions
contained herein.
ARTICLE 4
CHANGES
LORAL ORION may at any time during the term of this Agreement
require additions to or alterations of or deductions or deviations (all
hereinafter referred to as a "Change") from the Services called for by EXHIBIT
A. No Change shall be considered as an addition or alteration to or deduction or
deviation from the Services called for by EXHIBIT A nor shall SKYNET be entitled
to any compensation for the Services done pursuant to or in contemplation of a
Change, unless made pursuant to a written Change Order issued by LORAL ORION.
Within twenty (20) days after a request for a Change, SKYNET shall submit a
proposal to LORAL ORION that includes any increases or decreases in LORAL
ORION'S costs or changes in the delivery schedule necessitated by the Change.
LORAL ORION shall, within ten (10) days of receipt of the proposal, either (i)
accept the proposal, in which event LORAL ORION shall issue a written Change
Order directing SKYNET to perform the Change or (ii) advise SKYNET not to
perform the Change in which event SKYNET shall proceed with the Services as
originally described in EXHIBIT A. SKYNET at its sole discretion reserves the
right to reject any such request for Change.
ARTICLE 5
CHOICE OF LAW
The construction, interpretation and performance of this
Agreement and all transactions under it shall be governed by the laws of the
State of New York excluding its choice of laws rules and excluding the
Convention for the International Sales of Goods.
<PAGE>
ARTICLE 6
FORCE MAJEURE
SKYNET shall not be liable for any loss, damage, or delay
caused by strikes, picketing, labor disturbances, riots, fires, insurrection, or
the elements, embargoes, failure of carriers, inability to obtain facilities or
to obtain materials, Government Regulations or requirements, acts of God or the
public enemy, or any cause beyond its control whether or not similar to the
foregoing ("Force Majeure Condition").
ARTICLE 7
PUBLICITY
LORAL ORION agrees to submit to SKYNET all advertising, sales
promotion, press releases, and other publicity matters relating to the material
furnished or the Services performed by SKYNET under this Agreement wherein
SKYNET'S names or marks are mentioned or language from which connection of said
names or marks therewith may be inferred or implied; and LORAL ORION further
agrees not to publish or use such advertising, sales promotion, press releases,
or publicity matters without SKYNET'S prior written approval.
ARTICLE 8
RELEASES VOID
Neither party shall require (i) waivers or releases of any
personal rights or (ii) execution of documents in conflict with the terms of
this Agreement, from employees, representatives of the other in connection with
visits to its premises and both parties agree that no such releases, waivers or
documents shall be pleaded by them or third persons in any action or proceeding.
<PAGE>
ARTICLE 9
RIGHT OF ENTRY AND PLANT RULES
Each party shall have the right to enter premises of the other
party during normal business hours with respect to the performance of this
Agreement, subject to all plant rules and regulations, security regulations and
procedures and U.S. Government clearance requirements if applicable.
ARTICLE 10
SEVERABILITY
In the event that any one or more of the provisions contained
herein shall for any reason be held to be unenforceable in any respect under the
law of any state or of the United States of America, such unenforceability shall
not affect any other provision of this Agreement, but this Agreement shall then
be construed as if such unenforceable provision or provisions had never been
contained herein.
ARTICLE 11
TERMINATION
[ *
<PAGE>
]
ARTICLE 12
TERMINATION FOR DEFAULT
[ *
<PAGE>
]
ARTICLE 13
NONDISCLOSURE OF INFORMATION
13.1 Each party to this Agreement may find it beneficial
to disclose to the other party documentation or
other information which the disclosing party
considers proprietary ("Information"). Such
Information may include but is not limited to, its
engineering, hardware, software or other technical
information, and financial, accounting or marketing
reports, analysis, forecasts, predictions or
projections.
13.2 It is specifically understood and agreed that
Information disclosed pursuant to this Agreement
shall be considered proprietary either because 1)
it has been developed internally by the disclosing
party, or because 2) it has been received by the
disclosing party subject to a continuing obligation
to maintain the confidentiality of the Information.
13.3 Information that is provided in a tangible form
shall be marked in a manner to indicate that it is
considered proprietary or otherwise subject to
limited distributions provided herein. If the
Information is provided orally, the disclosing
party shall clearly identify it as being
proprietary at the time of disclosure, and within
fifteen (15) working days of such disclosure,
confirm the disclosure in writing to the other
party.
With respect to Information, the party to whom the Information
is disclosed and its employees shall:
a. hold the Information in confidence and
protect it in accordance with the security
regulations by which it protects its own
proprietary or confidential information,
which it does not wish to disclose;
<PAGE>
b. restrict disclosure of the Information
solely to those employees with a need to
know and not disclose it to any other
persons;
c. advise those employees of their obligations
with respect to the Information; and
d. use the Information only in connection with
implementing this Agreement and in
continuing discussions and negotiations
between the parties concerning the Service,
except as may otherwise be agreed upon in
writing.
13.4 In the event a party to whom Information has been
disclosed proposes to disclose that Information to
an outside consultant or agent, it shall obtain the
written consent of the party from whom the
Information was originally received and arrange for
the execution by the consultant or agent for a
nondisclosure agreement in a form reasonably
satisfactory to the party from whom the Information
was originally received.
13.5 The party to whom Information is disclosed shall
have no obligations to preserve the proprietary
nature of any Information that:
a. was previously known to it free of any
obligations to keep it confidential;
b. is disclosed to third parties by the
disclosing party without restriction;
c. is or becomes publicly available by other
than unauthorized disclosure; or
d. is independently developed by the receiving
party.
The Information shall be deemed the property of the disclosing
party and, upon request the other party will promptly return all Information
that is in tangible form to the disclosing party or destroy all such
information.
<PAGE>
ARTICLE 14
LIMITATION OF LIABILITY
OTHER THAN for damages resulting from skynet's willfull
misfeasance, bad faith, or gross negligence, SKYNET SHALL HAVE NO Liability With
respect to any claim or suit, by LORAL ORION or by any others, for damages
associated with the MATERIAL or SERVICES FURNISHED HEREUNDER. FURTHER, SKYNET
WILL NOT BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL, DIRECT OR INDIRECT
DAMAGES WHETHER ARISING OUT OF BREACH OF WARRANTY, BREACH OF CONTRACT,
NEGLIGENCE, STRICT TORT LIABILITY, OR OTHERWISE. IN NO EVENT SHALL SKYNET BE
LIABLE FOR DAMAGES IN EXCESS OF THE PURCHASE PRICE STATED IN THIS AGREEMENT.
ARTICLE 15
DISCLAIMER OF WARRANTIES
SKYNET WARRANTS TO LORAL ORION THAT SKYNET WILL PERFORM THE
SERVICES DEFINED HEREIN IN ACCORDANCE WITH GENERALLY ACCEPTED INDUSTRY
STANDARDS. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED FOR IN THIS AGREEMENT, SKYNET,
ITS PARENT, THEIR SUBSIDIARIES AND THEIR AFFILIATES, SUBCONTRACTORS AND
SUPPLIERS MAKE NO WARRANTY, EXPRESS OR IMPLIED, REGARDING THE PERFORMANCE OF THE
SERVICE OR WARRANTY AGAINST PATENT, TRADEMARK, COPYRIGHT, OR TRADE SECRET
INFRINGEMENT, AND SPECIFICALLY DISCLAIM ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
<PAGE>
ARTICLE 16
INDEMNIFICATION
LORAL ORION shall indemnify and save harmless SKYNET and its
affiliates and its customers and their respective officers, directors,
employees, successors and assigns from and against, any and all losses, claims,
damages, liabilities or expenses (including reasonable attorneys' fees and
expenses) (collectively "Losses") resulting from any claim, demand, action, or
suit resulting from the performance of Services by SKYNET under this Agreement,
other than Losses resulting from SKYNET'S willful misfeasance, bad faith or
gross negligence.
ARTICLE 17
WAIVER
The failure of either party at any time to enforce any right
or remedy available to it under this Agreement with respect to any breach or
failure by the other party shall not be construed to be a waiver of such right
or remedy with respect to any other breach or failure by the other party.
<PAGE>
STATEMENT OF WORK
MARKETING AND SALES FOR LORAL ORION'S SPACE SEGMENT CAPACITY ON THE SATELLITES
AS FOLLOWS:
MARKETING SUMMARY
Plans, directs, and coordinates the marketing of LORAL ORION'S organization's
products and/or services in consideration with appropriate LORAL ORION
management by performing the following duties.
ESSENTIAL DUTIES AND RESPONSIBILITIES
o Establish marketing goals to ensure share of market and profitability of
products and/or services.
o Ensure revenue commitments and customer satisfaction goals are met through
effective marketing and planning.
o Develop and execute marketing plans and programs, both short and long
range, including market segment plans and strategy, to ensure the profit
growth and expansion of company products and/or services.
o Identify and develop effective channels for distribution and sales
strategy.
o Research, analyze, and monitor financial, technological, and demographic
factors so that market opportunities may be capitalized on and the effect
of competitive activity may be minimized .
o Conduct marketing surveys on current and new product concepts.
o Develop and recommend pricing strategy for the organization which will
result in the greatest share of the market over the long run.
<PAGE>
o Define service offers from customer requirements, competitive models and
market demand.
o Achieve satisfactory profit/loss ratio and share of market performance in
relation to pre-set standards and to general and specific trends within the
industry and the economy.
o Identify and develop trade show participation globally, as required.
o Evaluate market reactions to advertising programs, merchandising policy,
and product packaging and formulation to ensure the timely adjustment of
marketing strategy and plans to meet changing market and competitive
conditions.
o Identify requirements for press releases and public messages. Prepare
external executive and marketing presentations.
o Identify opportunities for industry positioning and speaker opportunities.
o Develop and execute the communications plan for the company in concert with
other marketing team members.
o Ensure effective control of marketing results and that corrective action
takes place to be certain that the achievement of marketing objectives are
within designated budgets.
o Recommend changes in basic structure and organization of marketing group to
ensure the effective fulfillment of objectives assigned to it and provide
the flexibility to move swiftly in relation to marketing problems and
opportunities.
o Prepare marketing activity reports, revenue reports and all marketing
budgets. Act as interface to the business manager on sales and marketing
metrics.
<PAGE>
SALES SUMMARY
Manages all sales activities, after consultation with appropriate LORAL ORION
management, primarily on the LORAL ORION fleet, by performing the following
duties.
ESSENTIAL DUTIES AND RESPONSIBILITIES
o Develop and update all account plans for customers in assigned market
segment.
o Update sales funnel weekly. Ensure sales funnel adequately represents sales
opportunities and quota attainment.
o Prepare sales call plans prior to every customer meeting.
o Develop and deliver comprehensive account reviews for Loral senior
management to enhance executive positioning within the segment.
o Effectively utilize sales automation tools to ensure successful management
of sales segment.
o Prepare comprehensive proposals for sales opportunities or as responses to
formal Requests for Proposals (RFP's) or Requests for Information (RFI's).
o Prepare and present executive level proposals to clients and senior Loral
executives.
o Attain revenue commitment and sales quota.
o Lead complex negotiations and provide leadership and direction to the
customer focused team in contract completion and implementations.
o Direct the activities of the customer focused team to address customer
needs, develop customer specific offers, discuss and analyze customer and
industry trends and opportunities, and resolve issues.
o Direct staffing, training, and performance evaluations to develop and
manage sales program.
<PAGE>
o Coordinate sales distribution by establishing segments, quotas, and goals,
and work with marketing team to advise distribution channels about sales
and promotional techniques.
o Assign segment responsibility and provide sales leadership to sales
directors.
o Analyze sales statistics to formulate policy and to assist in promoting
sales.
o Review market analyses to determine customer needs, volume potential and
develop sales campaigns to accommodate goals of company.
o Articulate customer requirements to other departments in the company.
o Represent company at trade association meetings to promote satellite
services.
o Analyze and control expenditures to conform to budgetary requirements.
o Assist other departments within organization to prepare manuals and
technical publications, as well as sales tools, customer and marketing
communications documentation.
o Prepare periodic sales report showing sales volume and potential sales.
o Recommend or approve, in consultation with appropriate LORAL ORION
management, budget, expenditures, and appropriations for service
development work.
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
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0
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