<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1998
REGISTRATION NO. 333-49583
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ORBITAL IMAGING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
4899
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
54-1660268
(IRS EMPLOYER
IDENTIFICATION NUMBER)
21700 ATLANTIC BOULEVARD
DULLES, VA 20166
(703) 406-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SUSAN HERLICK, ESQ.
GENERAL COUNSEL
21700 ATLANTIC BOULEVARD
DULLES, VA 20166
(703) 406-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
With a copy to:
ERIC A. STERN, ESQ.
LATHAM & WATKINS
1001 PENNSYLVANIA AVE., N.W. SUITE 1300
WASHINGTON, D.C. 20004-2505
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO TO BE PRICE PER OFFERING AMOUNT OF
BE REGISTERED REGISTERED UNIT(1) PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------
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11 5/8% Senior Notes Due 2005......... $150,000,000 100% $150,000,000 $44,250(2)
===============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) The filing fee was paid on April 7, 1998.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
ORBITAL IMAGING CORPORATION
------------------------
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K, SHOWING THE LOCATION IN THE
PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-4.
<TABLE>
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ITEM NUMBER AND CAPTION IN FORM S-4 LOCATION OR CAPTION IN PROSPECTUS
----------------------------------- ---------------------------------
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus... Cover Page of Registration Statement; Cross
Reference Sheet; Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front Cover Page; Outside Back Cover
Page
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Prospectus Summary; Risk Factors; Business;
Selected Historical Financial Data
4. Terms of the Transaction................... Prospectus Summary; The Exchange Offer;
Description of the Exchange Notes;
Certain U.S. Federal Income Tax
Consequences
5. Pro Forma Financial Information............ Not Applicable
6. Material Contacts with the Company being
Acquired................................. Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... Not Applicable
8. Interests of Named Experts and Counsel..... Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3
Registrants.............................. Not Applicable
11. Incorporation of Certain Information by
Reference................................ Not Applicable
12. Information With Respect to S-2 or S-3
Registrants.............................. Not Applicable
13. Incorporation of Certain Information by
Reference................................ Not Applicable
14. Information With Respect to Registrants
Other Than S-2 or S-3 Registrants........ Prospectus Summary; Risk Factors;
Capitalization; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Selected
Historical Financial Data; Business;
Management; Principal Stockholders;
Description of the Exchange Notes;
Financial Statements
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3
Companies................................ Not Applicable
16. Information With Respect to S-2 or S-3
Companies................................ Not Applicable
17. Information With Respect to Companies Other
Than S-2 or S-3 Companies................ Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations Are to be Solicited....... Not Applicable
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited or
in an Exchange Offer..................... Management
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 18, 1998
PROSPECTUS
OFFER TO EXCHANGE
11 5/8% SERIES B SENIOR NOTES DUE 2005 FOR ALL ORIGINAL
11 5/8% SERIES A SENIOR NOTES DUE 2005
OF
ORBITAL IMAGING CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON JULY ,
1998, UNLESS EXTENDED.
Orbital Imaging Corporation, a Delaware corporation (the "Company" or
"ORBIMAGE") hereby offers (the "Exchange Offer"), upon the terms and subject to
the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange its outstanding 11 5/8%
Senior Notes Due 2005, Series A (the "Original Notes"), of which an aggregate of
$150 million in principal amount is outstanding as of the date hereof, for an
equal principal amount of newly issued 11 5/8% Senior Notes due 2005, Series B
(the "Exchange Notes"). The form and terms of the Exchange Notes will be the
same as the form and terms of the Original Notes except that (i) the Exchange
Notes will be registered under the Securities Act of 1933, as amended (the
"Securities Act") and hence will not bear legends restricting the transfer
thereof, and (ii) the holders of Exchange Notes will not be entitled to certain
rights of holders of Original Notes under the Registration Rights Agreement
which rights will terminate upon the consummation of the Exchange Offer. The
Exchange Notes will evidence the same debt as the Original Notes and will be
entitled to the benefits of an indenture dated as of February 25, 1998 by and
between ORBIMAGE and Marine Midland Bank, as trustee (the "Trustee") governing
the Original Notes and the Exchange Notes (the "Indenture"). The Indenture
provides for the issuance of both the Exchange Notes and the Original Notes. The
Exchange Notes and the Original Notes are sometimes referred to herein
collectively as the "Notes." Capitalized terms used in this Prospectus are
defined either within the text, within "Certain Definitions" on page 90 of the
Prospectus or within the Glossary contained in the Prospectus.
The Exchange Notes will bear interest from the most recent date on which
interest has been paid or duly provided for on such Original Notes surrendered
in exchange for such Exchange Notes or if no interest has been paid or duly
provided for on such Original Notes, from February 25, 1998, at the rate of
11 5/8% per annum, payable semi-annually in arrears on March 1 and September 1
of each year, commencing on September 1, 1998. The Exchange Notes will mature on
March 1, 2005. The Company will not be required to make any mandatory redemption
or sinking fund payments with respect to the Exchange Notes prior to maturity.
The Exchange Notes will be redeemable at the option of the Company at any time
after March 1, 2002 at the redemption prices set forth herein, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the redemption date.
In addition, the Company will be entitled, at any time on or before March 1,
2001 to redeem the Exchange Notes with the net cash proceeds of one or more
sales of Capital Stock (other than Disqualified Stock) at the redemption price
set forth herein plus accrued and unpaid interest and Liquidated Damages, if
any, to the redemption date; provided, however, that at least 65% of the
aggregate principal amount of Notes remains outstanding after giving effect to
such redemption. See "Description of Exchange Notes--Optional Redemption."
On a Change of Control, the Company will be required to offer to repurchase
all or any part of the Exchange Notes at a purchase price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase. In the event of a
Change of Control, there can be no assurance that the Company will have or be
able to acquire sufficient funds to repurchase the Exchange Notes. See
Description of Exchange Notes--Repurchase at the Option of the Holders."
The Exchange Notes are being offered hereunder in order to satisfy certain
contractual obligations of the Company. See "The Exchange Offer."
The Original Notes are and the Exchange Notes will be senior obligations of
the Company, will rank pari passu in right of payment with all existing and
future senior Indebtedness of the Company, and will rank senior in right of
payment to any future subordinated Indebtedness of the Company. As of March 31,
1998, the Company had approximately $166 million ($157 million net of debt
discount) of senior Indebtedness outstanding (including current liabilities of
approximately $16 million). As of the date of this Prospectus, the Company had
no senior Indebtedness other than the Notes. The Indenture will permit the
Company to incur additional Indebtedness, subject to certain limitations.
------------------------ (continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE EXCHANGE NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS JUNE , 1998.
<PAGE> 4
(Continued from previous page)
The Company will accept for exchange all validly tendered Original Notes on
or prior to 5:00 p.m., New York City time, on July , 1998 (if and as extended,
the "Expiration Date"). Tenders of the Original Notes in the Exchange Offer is
not conditioned upon any minimum principal amount of Original Notes being
tendered for exchange. The Original Notes may be tendered only in integral
multiples of $1,000. In the event the Company terminates the Exchange Offer and
does not accept for exchange any Original Notes, the Company will promptly
return all previously tendered Original Notes to the holders thereof.
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the Exchange Notes issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder has no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes. See "The Exchange Offer--Purpose and
Effect of the Exchange Offer" and "The Exchange Offer--Resale of Exchange
Notes." Each broker-dealer (a "Participating Broker-Dealer") that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a Participating Broker-Dealer as a result of
market-making activities or other trading activities.
Prior to the Exchange Offer, there has been no public market for the
Exchange Notes. There can be no assurance as to the liquidity of any markets
that may develop for the Exchange Notes, the ability of holders to sell the
Exchange Notes or the price at which holders would be able to sell the Exchange
Notes. The Company does not intend to list the Exchange Notes for trading on any
national securities exchange or over-the-counter market system. Future trading
prices of the Exchange Notes will depend on many factors, including among other
things, prevailing interest rates, the Company's operating results and the
market for similar securities. Historically, the market for securities similar
to the Exchange Notes, including non-investment grade debt, has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that any market for the Exchange Notes, if
such market develops, will not be subject to similar disruptions. The Initial
Purchasers have advised the Company that it currently intends to make a market
in the Exchange Notes offered hereby. However, the Initial Purchasers are not
obligated to do so and any market making may be discontinued at any time without
notice.
Any Original Notes not tendered and accepted in the Exchange Offer will
remain outstanding and will be entitled to all the rights and will be subject to
the limitations applicable thereto under the Indenture. Following consummation
of the Exchange Offer, the holders of Original Notes will continue to be subject
to the existing restrictions upon transfer thereof and the Company will have no
further obligation to such holders to provide for registration under the
Securities Act of the Original Notes held by them. To the extent that Original
Notes are tendered and accepted in the Exchange Offer, a holder's ability to
sell untendered Original Notes could be adversely affected. See "Risk
Factors--Consequences of Failure to Exchange" and "Exchange Offer--Procedures
for Tendering."
The Exchange Notes will be available initially only in book-entry form. The
Company expects that the Exchange Notes issued pursuant to this Exchange Offer
will be issued in the form of one or more Global Notes which will be deposited
with, or on behalf of, The Depository Trust Company (the "Depositary") and
registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in a Global Note representing the Exchange Notes will be shown on, and
transfers thereof will be effected through, records maintained by the Depositary
and its participants. After the initial issuance of the Global Notes, Exchange
Notes in certificated form will be issued in exchange for a Global Note only on
the terms set forth in the Indenture. See "Description of Exchange Notes--Book
Entry, Delivery and Form."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF ORIGINAL NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
ORIGINAL NOTES PURSUANT TO THE EXCHANGE OFFER.
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Original Notes as of June , 1998.
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. No dealer-manager is being used in connection
with this Exchange Offer. The Company will pay all expenses incurred by it
incident to the Exchange Offer. See "Use of Proceeds" and "Plan of
Distribution."
Until , 1998, all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER, OR A SOLICITATION
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
ii
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 15
Use of Proceeds............................................. 27
Capitalization.............................................. 28
The Exchange Offer.......................................... 29
Selected Historical Financial Data.......................... 38
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 39
Business.................................................... 43
Regulation.................................................. 56
Management.................................................. 59
Principal Stockholders...................................... 62
Certain Relationships and Related Transactions.............. 63
Description of Capital Stock................................ 68
Relationship with Orbital Sciences Corporation.............. 69
Description of Exchange Notes............................... 71
Provisions Applicable to All Securities..................... 103
Certain U.S. Federal Income Tax Consequences................ 105
Plan of Distribution........................................ 108
Legal Matters............................................... 109
Experts..................................................... 109
Index to Financial Statements............................... F-1
Glossary of Terms........................................... G-1
</TABLE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement," which term shall include all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, covering the Exchange Notes being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Copies of such material can be
obtained from the Company upon request.
The Company has agreed to file with the Commission, to the extent
permitted, and distribute to holders of the Exchange Notes reports, information
and documents specified in Section 13 and 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), so long as the Exchange Notes are
outstanding, whether or not the Company is subject to such informational
requirements of the Exchange Act. Periodic reports, proxy statements and other
information filed by the Company with the Commission may be inspected at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, or at its regional offices located at the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center, 13th Floor, New York, New York 10007. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Such Web site is located at http://www.sec.gov. While any Exchange
Notes remain outstanding, the Company will make available, upon request, to any
holder of the Exchange Notes, the information required pursuant to Rule
144A(d)(4) under the Securities Act during any period in which the Company is
not subject to Section 13 or 15(d) of the Exchange Act. Any such request should
be directed to the General Counsel of the Company at 21700 Atlantic Boulevard,
Dulles, Virginia, 20166
iii
<PAGE> 6
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS: THE STATEMENTS CONTAINED
IN THIS PROSPECTUS THAT ARE NOT HISTORICAL FACTS ARE "FORWARD-LOOKING
STATEMENTS", WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY
SUCH AS "ESTIMATES," "PROJECTS," "ANTICIPATES," "EXPECTS," "INTENDS," "PLANS,"
"BELIEVES," OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE
TERMINOLOGY, OR BY DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES.
MANAGEMENT WISHES TO CAUTION THE READER THAT THESE FORWARD-LOOKING STATEMENTS,
SUCH AS THE MARKET OPPORTUNITY PRESENTED BY THE COMPANY'S TARGET MARKETS,
STATEMENTS REGARDING DEVELOPMENT OF THE COMPANY'S BUSINESSES, THE ESTIMATE OF
MARKET SIZE AND ADDRESSABLE MARKETS FOR THE COMPANY'S PRODUCTS, CASH PROJECTED
TO BE USED IN OPERATIONS, THE ANTICIPATED CAPITAL EXPENDITURES TO DESIGN,
CONSTRUCT, AND LAUNCH THE HIGH-RESOLUTION ORBVIEW SATELLITES, EXPECTED LAUNCH
DATES, AND OTHER STATEMENTS CONTAINED IN THIS PROSPECTUS REGARDING MATTERS THAT
ARE NOT HISTORICAL FACTS, ARE ONLY ESTIMATES OR PREDICTIONS. NO ASSURANCE CAN BE
GIVEN THAT FUTURE RESULTS WILL BE ACHIEVED; ACTUAL EVENTS OR RESULTS MAY DIFFER
MATERIALLY AS A RESULT OF RISKS FACING THE COMPANY OR ACTUAL RESULTS DIFFERING
FROM THE ASSUMPTIONS UNDERLYING SUCH STATEMENTS. SUCH RISKS AND ASSUMPTIONS
INCLUDE, BUT ARE NOT LIMITED TO, RISKS ASSOCIATED WITH SCHEDULE DELAYS IN THE
CONSTRUCTION AND LAUNCH OF THE HIGH-RESOLUTION ORBVIEW SATELLITES. THE COMPANY'S
ABILITY TO SUCCESSFULLY MARKET ITS IMAGERY PRODUCTS AND SERVICES TO CURRENT AND
NEW CUSTOMERS, GENERATE CUSTOMER DEMAND FOR ITS IMAGERY PRODUCTS AND SERVICES IN
THE PARTICULAR MARKETS WHERE IT PLANS TO MARKET PRODUCTS AND SERVICES ALL IN A
TIMELY MANNER, AT REASONABLE COSTS AND ON SATISFACTORY TERMS AND CONDITIONS, AS
WELL AS REGULATORY, LEGISLATIVE AND JUDICIAL DEVELOPMENTS THAT COULD CAUSE
ACTUAL RESULTS TO VARY MATERIALLY FROM THE FUTURE RESULTS INDICATED, EXPRESSED
OR IMPLIED IN SUCH FORWARD-LOOKING STATEMENTS. ALL WRITTEN AND ORAL
FORWARD-LOOKING STATEMENTS MADE IN CONNECTION WITH THIS OFFERING WHICH ARE
ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THESE CAUTIONARY STATEMENTS.
iv
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless the
context otherwise requires, the terms "ORBIMAGE" or "Company" refer, with
respect to periods prior to May 8, 1997, to the Orbital Imaging Division of
Orbital Sciences Corporation and, with respect to periods after such date, to
Orbital Imaging Corporation. The term "Orbital" refers to Orbital Sciences
Corporation, the Company's majority shareholder, and, unless the context
otherwise requires, its subsidiaries. Certain technical and other capitalized
terms used in this Prospectus are defined either in the text of this Prospectus,
"Certain Definitions" on page 87 or in the Glossary. Holders of Original Notes
should carefully consider the specific matters set forth under "Risk Factors"
beginning on page 15 as well as the other information and data included in this
Prospectus prior to tendering their Original Notes pursuant to the Exchange
Offer.
THE COMPANY
ORBIMAGE is a leading provider of global space-based imagery. The Company
operates, and is further developing, a fleet of satellites that collect, process
and distribute digital imagery of the Earth's surface (land and oceans), the
atmosphere and weather conditions. ORBIMAGE currently has two satellites in
operation that provide imagery to a variety of scientific and commercial
customers, including NASA. The Company expects to place two additional
satellites providing high-resolution digital imagery into operation in 1999 and
2000, respectively. The Company's imagery products and services are intended to
provide ORBIMAGE customers with information concerning, among other things,
forestry and crop health, urban growth and development, the locations and
movements of troops or military assets, land and ocean-based natural resources
and weather patterns and wind conditions. ORBIMAGE intends to provide customers
with imagery at a lower price than that provided by existing or planned remote
imagery alternatives.
In April 1995, ORBIMAGE launched its first satellite, OrbView-1, which
provides dedicated weather-related imagery and meteorological products to NASA.
The Company's second satellite, OrbView-2, was launched in August 1997 and
provides images of land and ocean surfaces to commercial customers, as well as
to NASA and other scientific users. The Company believes that OrbView-2 is the
only satellite of its kind providing daily color images of the entire Earth's
surface. ORBIMAGE is in the process of completing the design of two
high-resolution imaging satellites, OrbView-3 and OrbView-4 (the
"high-resolution OrbView satellites"), which are being designed to provide
high-resolution panchromatic (black and white), multispectral (color and
infrared) and, in the case of OrbView-4, hyperspectral (enhanced color and
enhanced infrared) imagery. See "Certain Relationships and Related
Transactions -- Procurement Agreement." OrbView-3 is scheduled to be operational
during the second half of 1999, and OrbView-4 is scheduled to be operational in
mid-2000. The Company believes that OrbView-3 and OrbView-4 will be among the
first commercial satellites with high-resolution imagery capability and that
OrbView-4 will be the world's first satellite with commercially available
hyperspectral capability.
Remote imaging is the process of observing, measuring and recording
features, objects or events from a distance using a variety of sensors mounted
on satellites and aircraft. ORBIMAGE believes that the current market for global
remote imagery and related products exceeds $10 billion annually. This existing
market consists of both domestic and international commercial and government
users. It includes both satellite development, construction and operations costs
incurred by users who decide to build and operate their own satellite systems as
well as the cost of purchased imagery and related services currently addressable
by existing imagery suppliers. Historically, in the United States, the only
"commercial" operators of remote imaging satellites were quasi-governmental
programs such as the low-resolution Landsat satellite systems in operation since
the 1970s. The opportunities for commercialization of space-based imagery
expanded significantly in 1994 when the U.S. government implemented a policy
permitting the worldwide, commercial sale of high-resolution satellite imagery.
The U.S. government has estimated that the worldwide market for remote imagery
products and services addressable by commercial satellite imagery providers
(excluding hardware sales) will be approximately $2 billion by the year 2000.
ORBIMAGE believes that this worldwide
1
<PAGE> 8
commercial imagery market will grow as the availability of low-cost, high
quality satellite imagery stimulates the demand for such products and services
and encourages the development of new satellite-imaging technologies and
applications.
Customers have entered into imagery contracts providing for minimum
payments to the Company totaling approximately $100 million, of which the
Company has received approximately $48 million through March 31, 1998, and
expects to receive approximately $12 million through the end of 1998. See "Risk
Factors -- Contracts." These contracts include (i) a contract to provide NASA
with weather-related imagery and meteorological information generated by
OrbView-1, (ii) a contract to provide NASA with color ocean imagery generated by
OrbView-2, (iii) a contract to provide the U.S. Air Force with hyperspectral
imagery from OrbView-4 and (iv) a distributor agreement with Samsung Aerospace
Industries, Ltd. ("Samsung Aerospace"), which grants Samsung Aerospace an
exclusive license to receive, process and sell high-resolution imagery of the
Korean peninsula (the "Samsung Agreement"). In addition, the Company has entered
into agreements with regional distributors for OrbView-2 imagery in Canada and
Chile and is in negotiation with potential regional distributors for
high-resolution OrbView imagery in the Middle East, Europe, Asia, Southern
Africa, South America and Australia. To provide industry-specific imagery
applications, ORBIMAGE is seeking to develop strategic alliances with key
value-added resellers ("VARs") who currently provide imagery products to
customers in industries such as oil and gas exploration, mining, agriculture,
forestry, fishing and cartography.
In April, 1998, ORBIMAGE acquired substantially all the assets of TRIFID
Corporation, an image processing and product generation company. As a result,
ORBIMAGE has acquired sophisticated image processing software, experienced
technical personnel and broad geographic information database systems.
BUSINESS STRATEGY
ORBIMAGE's business strategy is to (i) penetrate existing markets, (ii)
create new markets to sustain long-term growth, (iii) provide imagery at prices
lower than other satellite and aerial-based imagery, (iv) achieve global
distribution, (v) provide worldwide coverage on a timely basis, (vi) establish
an electronic imagery archive with broad and diverse imagery products and (vii)
leverage the expertise of Orbital, including Orbital's existing satellite
imagery technology and product infrastructure, to promote rapid market
acceptance. See "Business -- Business Strategy."
Penetrate Existing Markets. The Company believes that it should rapidly be
able to gain market share in existing applications because it expects its
imagery to be priced below that of existing aerial imagery and planned satellite
imagery and to be of higher resolution than existing satellite imagery.
Create New Markets. Through the introduction of affordable,
high-resolution satellite imagery, the Company believes it will stimulate the
development of new markets. For example, ORBIMAGE's marketing efforts to date
indicate that certain market segments, such as the foreign national security
market, do not currently have access to dedicated high-resolution imagery.
Furthermore, the Company believes it can develop new commercial applications for
satellite-based imagery including, among other uses, real estate assessment,
travel planning and entertainment applications.
Provide Low Priced Imagery. The Company believes that the expected cost to
construct its high-resolution OrbView satellites and related ground systems, the
principal components of which will be furnished by Orbital under a fixed-price
contract, will be less than or competitive with the announced costs of its
competitors' high-resolution satellite systems. The Company believes that this
will afford it pricing flexibility for its imagery products and services,
allowing it to pursue a strategy of pricing aggressively while still realizing
attractive returns.
Achieve Global Distribution. The Company believes that it can expand its
market share by providing imagery to end users both directly and through third
party distribution channels. The Company intends to focus its direct
distribution efforts on larger customers in the commercial/consumer and
scientific/environmental markets and on the U.S. national security market. The
Company expects VARs will perform application-specific processing and analysis
of the Company's imagery for various commercial applications.
2
<PAGE> 9
The Company believes that utilizing these distribution channels simultaneously
will enhance the distribution of its products and services.
ORBIMAGE is working to penetrate foreign markets by entering into
relationships with strong regional partners who have existing marketing and
distribution infrastructures and are able to overcome local regulatory barriers.
The Company expects these distributors to purchase or upgrade and operate the
ground imagery receiving and processing stations in their territories and to
obtain the necessary regulatory approval to operate in their territories. With
several such arrangements already in place, the Company is also in negotiations
with potential regional distributors for high-resolution OrbView imagery around
the world.
Provide Worldwide Coverage on a Timely Basis. All the OrbView satellites
are designed to provide timely product delivery, either through real-time
imagery downlinking to a distributor's or customer's local ground receiving
station, or through delivery of processed imagery from ORBIMAGE's central U.S.
ground station by overnight courier or via the Internet. OrbView-2 provides
global imagery on a daily basis. OrbView-3 is designed to image virtually any
location on Earth with a "revisit" time of three days or less. Upon the launch
of OrbView-4, the effective "revisit" time of the high-resolution OrbView
satellites should be reduced to less than two days.
Establish Electronic Imagery Archive. The Company is developing the OrbNet
Digital Archive, a database that will collect, store and distribute imagery
derived from the OrbView satellites and aerial sources. ORBIMAGE intends to
expand its imagery catalogue with aerial and existing satellite imagery products
prior to the launch of its OrbView-3 satellite by entering into strategic
alliances with existing imaging satellite operators, aerial photography firms
and imagery VARs. The Company intends to deliver imagery to customers over the
Internet, on CD or on computer tape for a per image fee.
Leverage Expertise of Orbital. Orbital, the Company's majority
shareholder, is a space technology and satellite services company with extensive
experience in the design and construction of remote imaging satellites and
ground stations. ORBIMAGE has used, and will continue to use, the integrated
space capabilities, infrastructure and experience of Orbital to develop its
business cost effectively, including leveraging certain of Orbital's existing
customer relationships and product lines.
TARGET MARKETS
ORBIMAGE is focusing on four primary market segments in which it believes
there currently exist or will develop a significant demand for high-quality,
timely, low-cost remote imagery. See "Business -- Target Markets." These four
market segments are:
Commercial/Consumer. The Company believes that the near-term
commercial/consumer market segment will include domestic and foreign companies
and local government entities, such as municipalities, that currently use aerial
photographs and medium-resolution satellite imagery products. In the long term,
the Company also expects to market to individual businesses and consumers.
Initial applications are expected to include standardized map-making,
maintaining computer-based geographic information systems, agriculture and
forestry management, fishing, natural resource exploration and extraction and
tax assessment. In addition, as high-resolution satellite imagery becomes
available, the Company expects new consumer markets will emerge involving real
estate assessment, travel planning, education and entertainment applications.
Scientific/Environmental. The scientific/environmental market is comprised
of government entities that use satellite imagery to monitor environmental,
climate-related and meteorological phenomena, both in real-time and over
extended time periods, as well as other environmental, scientific and commercial
entities that need accurate, timely environmental information over a wide
geographic area. The Company expects that its multispectral and hyperspectral
imagery will have a variety of environmental applications, including assessing
damage from natural disasters and severe storms and the environmental impact of
industrial activities through pollution detection techniques.
U.S. National Security. Satellite imagery can supplement existing
dedicated U.S. government surveillance satellites to serve tactical
reconnaissance, wide-area mapping and other needs not fully or economically
served by existing satellites. The U.S. government has indicated that it expects
to meet a portion of its future
3
<PAGE> 10
national security imagery requirements by outsourcing to U.S. commercial
providers of high-resolution satellite imagery. Additionally, the Company
believes that potential cutbacks in the Department of Defense ("DoD") and
National Reconnaissance Office ("NRO") budgets, together with more
geographically dispersed military assets, could further increase the
government's need for commercially available high-resolution imagery and cause
it to rely on lower-cost commercial providers.
Foreign National Security. Many countries have a strong national security
interest in obtaining real-time high-resolution imagery to help monitor borders,
gather intelligence on potential adversaries, identify and target enemy troops
and assets, plan missions, deploy resources and assess battle damage. Commercial
high-resolution satellites can provide friendly foreign governments with
real-time, high-resolution imagery for national security enhancement on a
routine, regional "time-share" basis. This type of high-resolution imagery
generally has not been available to governments other than those of the United
States and the former Soviet Union.
RISK MITIGATION
ORBIMAGE has adopted a comprehensive strategy to mitigate the financial,
business and technical risks associated with market development and satellite
construction, launch and operations. See "Business -- Risk Mitigation."
Market Development. ORBIMAGE has reduced, and seeks to continue to reduce,
the financial risks associated with constructing and operating its fleet of
satellites by negotiating pre-launch contracts with customers and/or
distributors. To further facilitate market penetration, the Company is also
seeking to develop strategic alliances with VARs who currently provide imagery
products to customers in industries such as oil and gas exploration, mining,
agriculture, forestry, fishing and cartography.
Construction and Launch. ORBIMAGE has entered into a fixed-price contract
with Orbital to build and launch the high-resolution OrbView satellites, and to
construct the related ground system (the "Procurement Agreement"). The majority
of imaging technology and the sub-system components to be used in the
high-resolution OrbView satellites have been deployed in U.S. government
surveillance and space programs prior to use by ORBIMAGE. In addition, the
high-resolution OrbView satellites incorporate system redundancies for certain
critical components.
Operations. The OrbView-3 and OrbView-4 satellites have substantially
similar performance parameters, with OrbView-4 additionally having hyperspectral
imagery capability. The high-resolution OrbView satellites are expected to be
launched within a year of each other to provide a more robust satellite system
and to reduce the business risk from launch and operational failure.
RELATIONSHIP WITH ORBITAL
Orbital currently owns approximately 56% of the outstanding capital stock
of the Company on a fully diluted basis assuming conversion of the Company's
outstanding Series A Convertible Preferred Stock (the "Series A Preferred
Stock") and exercise of the Warrants and outstanding options to purchase Common
Stock. To date, Orbital has contributed approximately $88 million in capital to
ORBIMAGE. Pursuant to the Procurement Agreement, the Company has agreed to pay
Orbital a fixed price of approximately $295 million for the design, development
and launch of OrbView-1 and the high-resolution OrbView satellites, the
OrbView-2 License and the U.S. ground segment for all four OrbView satellites.
Orbital has granted the Company the exclusive worldwide license to promote,
market, sell and use OrbView-2 imagery (the "OrbView-2 License") and has
assigned to the Company all revenues received by Orbital pursuant to a contract
between Orbital and NASA. See "Certain Relationships and Related Transactions."
Orbital is a space and information systems company that designs,
manufactures, operates and markets a broad range of space-related products and
services. Orbital is a leading provider of turn-key space systems, with a
heritage of designing and building satellites and providing launch services for
various satellites operating today. All four OrbView satellites, and the related
ground systems, have been or will be designed and constructed by Orbital.
Orbital's Pegasus(R) launch vehicle has successfully launched OrbView-1 and
OrbView-2 and is expected to also launch OrbView-3.
4
<PAGE> 11
The Company's principal executive offices are located at 21700 Atlantic
Boulevard, Dulles, Virginia 20166. The Company's Internet address is
www.orbimage.com, and the Company's telephone number is (703) 406-5000.
SERIES A OFFERING
On February 25, 1998, the holders of the Series A Preferred Stock (the
"Series A Holders") exercised an option granted pursuant to a stock purchase
agreement dated May 7, 1997 by and among Orbital, the Company and the Series A
Holders, as amended (the "Stock Purchase Agreement"), to purchase an additional
$22.7 million of Series A Preferred Stock (the "Series A Offering"), which
represents the maximum number of shares of Series A Preferred Stock that Series
A Holders may purchase under the Stock Purchase Agreement. The Series A Offering
was consummated concurrently with the Units Offering. The Series A Offering
generated net proceeds of approximately $21 million.
THE UNITS OFFERING
On February 25, 1998, the Company consummated the Units Offering, pursuant
to which it sold 150,000 Units, each consisting of $1,000 principal amount of
Original Notes and one Warrant. Each Warrant, when exercised, will entitle the
holder thereof to purchase 8.75164 shares of Common Stock of the Company at an
exercise price of $.01 per share (the "Exercise Price"). The Exercise Price and
the number of Warrant Shares issuable on exercise of a Warrant are both subject
to anti-dilutive adjustments. The Warrants are exercisable at any time on or
after the earlier to occur of (i) the first anniversary of the date of issuance
and (ii) in the event a Change of Control occurs, the date the Company mails
notice thereof to holders of Notes and Warrants. Unless exercised, the Warrants
will automatically expire on March 1, 2005. The Warrants will entitle the
holders thereof to purchase in the aggregate approximately 3% of the outstanding
Common Stock of the Company on a fully-diluted basis as of the date of issuance
of the Warrants after giving effect to the exercise of certain outstanding
options and rights issued by the Company. The Original Notes and Warrants will
become separable no later than upon the commencement of the Exchange Offer.
The Company used approximately $32.9 million of the net proceeds from the
Units Offering to fund the purchase of the Pledged Securities, which will
provide funds sufficient to pay in full when due the first four scheduled
interest payments on the Notes. The Pledged Securities are pledged as security
for the repayment of principal of and interest on the Notes, Liquidated Damages,
if any, and all other obligations under the Indenture. See "Description of
Exchange Notes--Security." All remaining proceeds, including the net proceeds
from the Series A Offering, will be applied to (i) develop, construct, test,
launch and operate the high-resolution OrbView satellites, (ii) develop, upgrade
and construct the U.S. domestic ground system used in connection with
high-resolution OrbView satellites, (iii) market remote imagery products and
services and (iv) provide working capital.
The Units were sold by the Company on February 25, 1998 to Bear, Stearns &
Co. Inc., Merrill Lynch & Co. and NationsBanc Montgomery Securities LLC (the
"Initial Purchasers") pursuant to a Purchase Agreement dated February 20, 1998
(the "Purchase Agreement"). The Initial Purchasers subsequently resold the Units
to qualified institutional buyers pursuant to Rule 144A under the Securities Act
and pursuant to offers and sales that occurred outside the United States within
the meaning of Regulation S under the Securities Act. Pursuant to the Purchase
Agreement, the Company and the Initial Purchasers entered into the Registration
Rights Agreement dated February 25, 1998 (the "Registration Rights Agreement"),
which grants the holders of the Original Notes certain exchange and registration
rights. The Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement.
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<PAGE> 12
SOURCES AND USES OF FUNDING
The net proceeds to the Company from the Units Offering (after deducting
fees and expenses) were approximately $144.5 million. The Company used
approximately $32.9 million of such proceeds to fund the purchase of the Pledged
Securities. All remaining proceeds, including the net proceeds from the Series A
Offering, will be applied to (i) develop, construct, test, launch and operate
the high-resolution OrbView satellites, (ii) develop, upgrade and construct the
U.S. domestic ground system used in connection with the high-resolution OrbView
satellites, (iii) market remote imagery products and services and (iv) provide
working capital. See "Description of the Exchange Notes--Certain Covenants--Use
of Proceeds."
The table below summarizes the estimated sources and uses of funding for
the period from inception through September 30, 1999, by which date OrbView-3 is
expected to be launched.
SOURCES AND USES OF FUNDING
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SOURCES OF FUNDING (AS OF MARCH 31, 1998):
<S> <C>
Initial equity investments:
Orbital.............................. $ 88
Series A Holders, net................ 55
Net proceeds of the Units Offering..... 145
Payments from customers (2)............ 48
----
Sources........................... 336
----
FUTURE SOURCES:
Advance payments from customers (2).... 22
----
Future sources.................... 22
----
Total sources................ $358
====
</TABLE>
<TABLE>
<CAPTION>
USES OF FUNDING: (1)
<S> <C>
Satellites........................... $238
Ground systems....................... 30
Insurance............................ 11
Purchase of Pledged Securities(3).... 33
TRIFID Acquisition................... 5
Cash used in and available for
operations (4)..................... 41
----
Total uses................. $358
====
</TABLE>
- ---------------
(1) Approximately $149 million has been expended as of March 31, 1998 for
satellites, ground systems and insurance. The Company's accumulated deficit
as of March 31, 1998 was approximately $24 million.
(2) Represents cash payments received pursuant to contracts or expected to be
received prior to delivery of imagery.
(3) The Pledged Securities will be used to fund interest payments on the Notes
for the first four interest payment dates.
(4) The Company believes the above sources and cash expected to be generated
from operations will be sufficient to fund operating expenses through
September 30, 1999, by which date OrbView-3 is expected to be launched.
Approximately $9 million has been used in operations through March 31, 1998
(excluding payments from customers included in the above sources).
ORBIMAGE believes that the net proceeds of the Units Offering and the
Series A Offering, together with expected net cash from advance payments from
customers and operations, will be sufficient to fund the Company's operations
through at least September 30, 1999, by which date OrbView-3 is expected to be
launched. Additional funding may be necessary in the event of an OrbView-3
satellite launch delay, cost overruns or any shortfall in estimated levels of
operating cash flow, or to meet unanticipated expenses. See "Risk
Factors--Potential Additional Capital Requirements."
6
<PAGE> 13
THE EXCHANGE OFFER
SECURITIES OFFERED............ $150,000,000 aggregate principal; amount of
Series B 11 5/8% Senior Notes due 2005 (the
"Exchange Notes").
THE EXCHANGE OFFER............ The Company is offering to exchange up to $150
million principal amount of the Exchange Notes
for a like principal amount of the Original
Notes. The Exchange Notes may be exchanged only
in multiples of $1,000 principal amount. The
Company will issue the Exchange Notes on or
promptly after the Expiration Date. See "The
Exchange Offer."
Based on interpretations by the Staff set forth
in no-action letters issued to third parties,
the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in
exchange for the Original Notes may be offered
for resale, resold and otherwise transferred by
any holder thereof (other than any such holder
which is (i) an "affiliate" of the Company
within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who
acquired the Original Notes directly from the
Company or (iii) a broker-dealer who acquired
the Original Notes as a result of market making
or other trading activities) without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided that
such Exchange Notes are acquired in the
ordinary course of such holder's business and
such holder is not engaged in, and does not
intend to engage in, and has no arrangement or
understanding with any person to participate in
the distribution of such Exchange Notes. Each
broker-dealer that receives the Exchange Notes
for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a
prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by
delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that
it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may
be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in
connection with resales of Exchange Notes
received in exchange for Original Notes where
such Original Notes were acquired by such
Participating Broker-Dealer as a result of
market-making activities or other trading
activities (other than a resale of an unsold
allotment from the original sale of Original
Notes). The Company has agreed that, for a
period of 180 days after the Exchange Offer
Registration Statement is declared effective,
it will make this Prospectus available to any
Participating Broker-Dealer for use in
connection with any such resale.
Any holder who tenders in the Exchange Offer
with the intention to participate, or for the
purpose of participating, in a distribution of
the Exchange Notes could not rely on the
position of the staff of the Commission
enunciated in no-action letters and, in the
absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction. Failure
to comply with such requirements in such
instance may result in such holder incurring
7
<PAGE> 14
liability under the Securities Act for which
the holder is not indemnified by the Company.
See "Plan of Distribution."
To comply with the securities laws of certain
jurisdictions, it may be necessary to qualify
for sale or register the Exchange Notes prior
to offering or selling such Exchanges Notes. If
a holder of Original Notes does not exchange
such Original Notes for the Exchange Notes
pursuant to the Exchange Offer, such Original
Notes will continue to be subject to the
restrictions on transfer contained in the
legend thereon. In general, Original Notes may
not be offered or sold, unless registered under
the Securities Act, except pursuant to an
exception from, or in a transaction not subject
to the Securities Act and applicable state
securities laws. See "The Exchange
Offer--Consequences of Failure to Exchange" and
"Description of Exchange Notes."
EXPIRATION DATE............... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on July , 1998, unless
extended in which case the term "Expiration
Date" shall mean the latest date and time to
which the Exchange Offer is so extended.
ACCRUED INTEREST ON THE
EXCHANGE NOTES AND THE
ORIGINAL NOTES.............. Each Exchange Note will bear interest from the
most recent date to which interest has been
paid or duly provided for on the Original Note
surrendered in exchange for such Exchange Note
or, if no interest has been paid or duly
provided for on such Original Note, from
February 25, 1998. Interest on the Exchange
Notes is payable semi-annually on each March 1
and September 1, commencing on September 1,
1998. Holders of Original Notes whose Original
Notes are accepted for exchange will not
receive accrued interest on such Original Notes
for any period from and after the last date to
which interest has been paid or duly provided
for on the Original Notes prior to the original
issue date of the Exchange Notes or, if no such
interest has been paid or duly provided for,
will not receive any accrued interest on such
Original Notes, and will be deemed to have
waived, the right to receive any interest on
such Original Notes accrued from and after
February 25, 1998.
CONDITIONS TO THE EXCHANGE
OFFER....................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company in whole or in part and from time
to time in its sole discretion. See "The
Exchange Offer--Conditions." The Exchange Offer
is not conditioned upon any minimum aggregate
principal amount of Original Notes being
tendered for exchange.
PROCEDURES FOR TENDERING THE
ORIGINAL NOTES.............. Each holder of Original Notes wishing to accept
the Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile, together with such Original
Notes and any other required documentation, to
the Exchange Agent at the address set forth
herein. By executing the Letter of Transmittal,
each holder of the Original Notes (other than
participating broker-dealers) will represent to
the Company that, among other
8
<PAGE> 15
things, the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the
ordinary course of business of the person
receiving such Exchange Notes, whether or not
such person is the holder of the Original
Notes, that neither the holder of the Original
Notes nor any such other person has an
arrangement or understanding with any person to
participate in the distribution of such Notes
and that neither the holder nor any such person
is an "affiliate," as defined in Rule 405 under
the Securities Act of the Company. Any Original
Notes not accepted for exchange for any reason
will be returned without expense to the
tendering holder thereof as promptly as
practicable after the expiration or termination
of the Exchange Offer. See "The Exchange
Offer--Procedures for Tendering."
UNTENDERED OLD NOTES.......... Following the consummation of the Exchange
Offer, holders of Original Notes eligible to
participate but who do not tender their
Original Notes will not have any further
exchange rights and such Original Notes will
continue to be subject to certain restrictions
on transfer. Accordingly, the liquidity of the
market for such Original Notes could be
adversely affected.
SPECIAL PROCEDURES FOR
BENEFICIAL HOLDERS.......... Any beneficial holder whose Original Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered holder promptly and instruct such
registered holder to tender on its own behalf.
If such beneficial holder wishes to tender on
its owns behalf, such holder must, prior to
completing and executing the Letter of
Transmittal and delivering its Original Notes,
either make appropriate arrangements to
register ownership of the Original Notes in
such holder's name or obtain a properly
completed bond power from the record holder.
The transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the Expiration Date. See
"The Exchange Offer--Procedures for Tendering."
SHELF REGISTRATION
STATEMENT................... In the event that (i) the Exchange Offer is not
available to any holder or may not be
consummated because, in either case, it would
violate applicable securities laws or because
the applicable interpretations of the staff of
the Commission would not permit the Company to
effect the Exchange Offer, or (ii) in certain
circumstances the holder notifies the Company
that it is unable to participate in the
Exchange Offer or is unable to use this
Prospectus, the Company will cause to be filed
with the Commission, no later than 45 days
after such obligation arises, a shelf
registration statement (the "Shelf Registration
Statement"). The Company will use its best
efforts to cause the Shelf Registration
Statement to be declared effective on or before
the 150th day after such obligation arises. The
Company has agreed to maintain the
effectiveness of the Shelf Registration
Statement, under certain circumstances, for a
maximum of two years following the date of the
completion of the Units Offering.
GUARANTEED DELIVERY
PROCEDURES.................. Holders of the Original Notes who wish to
tender their Original Notes and whose Original
Notes are not immediately available or
9
<PAGE> 16
who cannot deliver their Original Notes and the
Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date,
must tender their Original Notes according to
the guaranteed delivery procedures set forth in
"The Exchange Offer--Guaranteed Delivery
Procedures."
WITHDRAWAL RIGHTS............. Tenders of Original Notes may be withdrawn at
any time prior to 5:00 p.m., New York City
time, on the Expiration Date. For a withdrawal
to be effective, a written or facsimile notice
of withdrawal must be received by the Exchange
Agent at its address set forth herein. Such
notice must (i) specify the name of the person
having tendered the Original Notes to be
withdrawn; (ii) identify the Original Notes to
be withdrawn (including the serial number or
numbers and principal amount of Original Notes
to be withdrawn); (iii) be signed by the holder
in the same manner as the original signature on
the Letter of Transmittal by which such
Original Notes were tendered; and (iv) specify
the name in which the Original Notes are to be
registered, if different from that of the
withdrawing holder. See "The Exchange
Offer--Withdrawal Rights."
ACCEPTANCE OF ORIGINAL NOTES
AND DELIVERY OF EXCHANGE
NOTES....................... The Company will accept for exchange any and
all Original Notes which are properly tendered
in the Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The
Exchange Notes issued pursuant to the Exchange
Offer will be delivered promptly following the
Expiration Date. See "The Exchange Offer--Terms
of the Exchange Offer."
CONSEQUENCES OF FAILURE
TO EXCHANGE................. Holders of Original Notes who do not exchange
their Original Notes for the Exchange Notes
pursuant to the Exchange Offer will continue to
be subject to the restrictions on transfer of
such Original Notes as set forth in the legend
thereon. In general, the Original Notes that
are not exchanged pursuant to the Exchange
Offer may not be offered or sold except
pursuant to a registration statement under
Securities Act or an exemption from
registration thereunder and in compliance with
applicable state securities laws. In the event
the Company completes the Exchange Offer, the
interest rate on Original Notes will remain as
stated thereon and holders of Original Notes
will have no further rights under the
Registration Rights Agreement.
CERTAIN TAX CONSIDERATIONS.... Latham & Watkins, counsel to the Company, has
advised the Company that because the Exchange
Notes will not be considered to differ
materially from the Original Notes, the
exchange of the Original Notes for Exchange
Notes will not result in any material federal
income tax consequences to holders exchanging
the Original Notes for the Exchange Notes. For
a full description of the basis of, and
limitations on, this opinion, see "Certain U.S.
Federal Income Tax Consequences."
REGISTRATION RIGHTS
AGREEMENT................... Pursuant to a registration rights agreement
(the "Registration Rights Agreement") among the
Company and the Initial Purchas-
10
<PAGE> 17
ers, the Company has agreed (i) to file a
registration statement with respect to an offer
to exchange the Original Notes for a like
principal amount of Exchange Notes and (ii) to
use their reasonable best efforts to cause such
registration statement to become effective
under the Securities Act. This Exchange Offer
is intended to satisfy the rights of holders of
Original Notes under the Registration Rights
Agreement, which rights terminate upon
consummation of the Exchange Offer. The holders
of the Exchange Notes are not entitled to any
exchange or registration rights with respect to
the Exchange Notes.
EXCHANGE AGENT................ Marine Midland Bank is the Exchange Agent. The
address and telephone number of the Exchange
Agent are set forth in "The Exchange
Offer--Exchange Agent."
USE OF PROCEEDS............... There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer.
11
<PAGE> 18
THE EXCHANGE NOTES
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes (which they replace) except that (i) the Exchange Notes
bear a Series B designation, (ii) the Exchange Notes have been registered under
the Securities Act and, therefore, will not bear legends restricting the
transfer thereof, and (iii) the holders of Exchange Notes will not be entitled
to certain rights under the Registration Rights Agreement, including the
provisions providing for an increase in the interest rate on the Original Notes
in certain circumstances relating to the timing of the Exchange Offer, which
rights will terminate when the Exchange Offer is consummated. See "The Exchange
Offer--Purpose and Effect of the Exchange Offer." The Exchange Notes will
evidence the same debt as the Original Notes and will be entitled to the
benefits of the Indenture. See "Description of Exchange Notes." The Warrants
issued in connection with the issuance of the Original Notes are not subject to
the Exchange Offer and will continue to be subject to the restrictions on
transfer set forth therein.
ISSUER........................ Orbital Imaging Corporation
MATURITY...................... March 1, 2005.
INTEREST...................... Interest on the Exchange Notes will accrue at
the rate of 11 5/8% per annum, payable
semi-annually in arrears on March 1 and
September 1 of each year, commencing on
September 1, 1998.
RANKING....................... The Exchange Notes will be senior obligations
of the Company, will rank pari passu in right
of payment with all existing and future senior
Indebtedness of the Company and will rank
senior in right of payment to any future
subordinated Indebtedness of the Company. As of
March 31, 1998, the total amount of senior
Indebtedness (including current liabilities) of
the Company is $166 million ($157 million net
of debt discount). As of the date of this
Prospectus, the Company had no senior
Indebtedness other than the Notes. As more
fully described herein, the Indenture permits
the Company under certain circumstances to
incur indebtedness, such as one or more fixed
asset financings, that may be secured by a
first priority lien on certain of the Company's
assets. Upon a grant of a first priority lien
in certain of its assets, the lenders under
such fixed asset financings will have a first
priority claim to such assets senior to that of
the holder of Notes.
SECURITY...................... The Company used approximately $32.9 million of
the net proceeds thereof to purchase the
Pledged Securities, representing funds
sufficient to provide for payment in full of
the first four scheduled interest payments on
the Notes. The Pledged Securities are pledged
as security for repayment of the principal of
and interest on the Notes. See "Description of
Exchange Notes--Security." When an interest
payment is due, the Company may either deposit
sufficient funds to pay the interest scheduled
to be paid or direct the Trustee to release
from the Pledge Account funds sufficient to pay
the interest scheduled. In the event the
Company exercises the former option, the Pledge
Agreement provides the Company may direct the
Trustee to release proceeds or the Pledged
Securities from the Pledge Account in a like
amount. If the Company makes the first four
scheduled interest payments on the Notes in a
timely manner and no Default or Event of
Default is then continuing, the remaining
Pledged Securities, if any, will be released
from the Pledge Account and the Notes will
thereafter be
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<PAGE> 19
unsecured obligations of the Company. See
"Description of Exchange Notes--Security."
OPTIONAL REDEMPTION........... The Exchange Notes are not redeemable prior to
March 1, 2002. Thereafter, the Exchange Notes
will be redeemable at the option of the
Company, at the redemption prices set forth
herein plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the
applicable redemption date. See "Description of
Exchange Notes--Optional Redemption."
Prior to March 1, 2001, the Company may, on any
one or more occasions, redeem outstanding
Exchange Notes with the net cash proceeds of
one or more sales of Capital Stock (other than
Disqualified Stock) of the Company to one or
more Persons (but only to the extent the
proceeds of such sales of Capital Stock consist
of cash or Cash Equivalents) at a redemption
price equal to 111.625% of the principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the
redemption date; provided, however, that: (i)
not less than 65% of the aggregate principal
amount of the Notes remains outstanding
immediately after any such redemption and (ii)
such redemption shall occur within 60 days
after the date of closing of such sale of
Capital Stock.
MANDATORY REDEMPTION.......... The Company will not be required to make
mandatory redemption or sinking fund payments
with respect to the Exchange Notes.
CHANGE OF CONTROL............. Upon the occurrence of a Change of Control,
each holder of Exchange Notes will have the
right to require the Company to purchase all or
any part of such holder's Exchange Notes at an
offer price in cash equal to 101% of the
aggregate principal amount thereof, plus
accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of
purchase. See "Description of Exchange
Notes--Repurchase at the Option of Holders."
CERTAIN COVENANTS............. The Indenture contains certain covenants that
limit the ability of the Company and its
Restricted Subsidiaries to incur additional
Indebtedness, pay dividends or make other
distributions, repurchase Equity Interests or
subordinated Indebtedness, make certain other
Restricted Payments, create certain liens,
enter into certain transactions with
affiliates, sell assets, enter into Sale and
Leaseback Transactions, issue or sell Equity
Interests of the Company's Restricted
Subsidiaries, enter into any business not
related to the remote imaging industry or enter
into certain mergers and consolidations. The
Indenture also requires the Company to obtain
launch vehicle and in-orbit insurance under
certain circumstances. See "Description of
Exchange Notes--Certain Covenants."
RISK FACTORS
For a discussion of certain risk factors that should be considered by
holders of Original Notes in evaluating a tender of Original Notes for Exchange
Notes pursuant to the Exchange Offer, see "Risk Factors."
13
<PAGE> 20
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- -------------------
1993 1994 1995 (1) 1996 1997 (2) 1997 1998
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $ -- $ -- $ 4,567 $ 1,055 $ 2,062 $ 108 $ 2,417
Direct costs............................ -- 800 7,998 4,320 6,312 1,137 4,189
Selling, general and administrative
expenses.............................. 1,702 3,156 2,371 1,630 2,844 614 987
------- ------- ------- ------- ------- ------- -------
Loss from operations.................... $(1,702) $(3,956) $(5,802) $(4,895) $(7,094) $(1,643) $(2,759)
======= ======= ======= ======= ======= ======= =======
OTHER DATA:
Capital expenditures.................... $13,749 $13,832 $18,989 $12,617 $49,029 $ 4,275 $15,737
EBITDA (3).............................. (1,702) (3,157) 1,975 (914) (1,558) (593) 703
Net cash provided by (used in) operating
activities............................ 7,142 3,111 (192) (1,008) 6,334 (801) 4,879
Ratio of earnings (losses) to fixed
charges............................... -- -- -- -- -- -- --
Deficiency of earnings (losses) to fixed
charges............................... (1,702) (3,956) (5,802) (4,895) (7,094) (1,643) (3,545)
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $143,433
Pledged Securities.......................................... 33,057
Property, equipment and satellites and related rights,
net....................................................... 129,395
Total assets................................................ 311,350
Notes....................................................... 141,074(4)
Series A Preferred Stock (5)................................ 54,865
Total stockholders' equity.................................. 115,679(4)
</TABLE>
- ------------------------------
(1) The OrbView-1 satellite was launched in April 1995.
(2) The OrbView-2 satellite was launched in August 1997.
(3) EBITDA consists of earnings (losses) before interest, income taxes,
depreciation, amortization and other non-cash charges. While EBITDA is not
an alternative to operating income as an indicator of operating performance
or an alternative to cash flows from operating activities as a measure of
liquidity, management believes that EBITDA is a measure commonly used to
analyze and compare companies on the basis of operating performance,
leverage and liquidity. EBITDA is not a measure supported by generally
accepted accounting principles and may be calculated differently by other
companies. EBITDA as defined herein may not conform to the definition of
Consolidated Cash Flow as defined in the Indenture. See "Description of
Notes--Certain Definitions--Consolidated Cash Flow."
(4) The estimated value of the Warrants, approximately $9 million, is reflected
as both a debt discount and an element of additional paid-in capital.
(5) Represents stated value of $100 per share of Series A Preferred Stock less
applicable fees and expenses.
14
<PAGE> 21
RISK FACTORS
Holders of Original Notes should carefully consider the following matters,
in addition to the other information contained in this Prospectus, in evaluating
the Company and its business in connection with the Exchange Offer.
LIMITED OPERATING HISTORY; NET LOSSES
Limited Operating and Financial Data. Holders of Original Notes have
limited operating and financial data about ORBIMAGE on which to base an
evaluation of the Company's performance in connection with tendering Original
Notes for Exchange Notes in this Exchange Offer. ORBIMAGE did not commence
commercial service until 1995 with the launch of OrbView-1. To date, the Company
has generated only limited revenues from the operations of OrbView-1 and
OrbView-2. To execute the Company's business plan, the Company will have to
complete, in a timely manner, the construction and deployment of the high-
resolution OrbView satellites, successfully develop and implement the related
ground infrastructure network, develop a customer base for the Company's
products and services, and establish distribution channels. Results of
operations may vary from quarter to quarter and year to year. Given ORBIMAGE's
limited operating history and in light of the risks, expenses, difficulties and
delays encountered with a high technology, highly regulated business such as
ORBIMAGE's, there can be no assurance that the Company will be able to overcome
these barriers, develop a sufficiently large revenue-generating customer base to
service its indebtedness, or compete successfully in the remote imaging
industry.
Expectation of Continued Losses. The continued development of ORBIMAGE's
business will require significant capital expenditures, a substantial portion of
which will be incurred prior to the realization of significant revenues.
Together with the Company's operating expenses, these capital expenditures will
result in a negative cash flow until an adequate revenue-generating customer
base is established. ORBIMAGE has incurred cumulative losses of approximately
$23.7 million through March 31, 1998 and it expects such losses to continue for
the foreseeable future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The Company does not expect to generate
net positive cash flow from operations until OrbView-3 is operational, currently
expected in the second half of 1999. There can be no assurance that OrbView-3
will become operational on this timetable, or at all, or that the Company will
achieve or sustain any positive cash flow or profitability thereafter. See
"Business."
SUBSTANTIAL LEVERAGE; RESTRICTIVE COVENANTS
As of March 31, 1998 the Company's total indebtedness is $166 million ($157
million net of debt discount), and its stockholders' equity totaled
approximately $115.7 million. On a pro forma basis after giving effect to the
Units Offering, the Company's deficiency of earnings before fixed charges to
cover fixed charges for the year ended December 31, 1997 would have been $26.6
million. The Company anticipates earnings will be insufficient to cover fixed
charges through at least September 30, 1999. The Indenture will permit the
Company to incur additional indebtedness under certain limited conditions, and
the Company expects that it may incur indebtedness, in addition to the Notes,
such as one or more fixed asset financings, to the extent it is permitted to do
so under the Indenture. Such fixed asset financing, if pursued, will be secured
by first priority security interests in certain of the Company's assets.
Accordingly, the lenders of such fixed asset financing, if pursued, will have a
claim on these assets prior to the claims of the holders of the Exchange Notes.
The successful implementation of the Company's strategy, among other
things, is necessary for the Company to be able to meet its debt service. The
Company currently has limited sources of revenue. In addition, the Company's
ability to satisfy its obligations after the OrbView-3 satellite is operational
will depend on the Company's future performance, which is subject to a number of
factors, many of which are beyond the Company's control. There can be no
assurance that OrbView-1 and OrbView-2 will continue to operate for their design
lives, or that both of the high-resolution OrbView satellites will be
successfully deployed and become fully operational or that, once the
high-resolution OrbView satellites are operational, ORBIMAGE will generate
sufficient cash flow from operating activities to meet its debt service and
working
15
<PAGE> 22
capital requirements. In the absence of such operating results, the Company
could face substantial constraints on its liquidity and may be required to seek
additional financing through the issuance of debt or equity securities. There
can be no assurance the Company would be successful in completing such
financing. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation--Liquidity and Capital Resources." Any failure of the
OrbView-2 satellite, or any failure or delay in deployment of the high-
resolution OrbView satellites could have a material adverse effect upon the
Company's business, results of operations and financial condition, including
failure to meet its debt service requirements.
The Company's degree of leverage could have adverse consequences to the
holders of the Exchange Notes, including: (i) a substantial portion of the
Company's net cash provided by operations will be committed to the payment of
the Company's debt service requirements and will not be available to the Company
for its operations, capital expenditures, or other purposes; (ii) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions or general corporate purposes may be limited;
and (iii) the Company may be placed at a competitive disadvantage and its
flexibility in reacting to changes in its business may be limited. See
"Description of Exchange Notes."
The Indenture contains, and any additional financing agreements may
contain, certain restrictive covenants. The restrictions in the Indenture will
affect, and in some cases will significantly limit or prohibit, among other
things, the ability of the Company to incur indebtedness, make prepayments of
certain indebtedness, pay cash dividends, make investments, engage in
transactions with affiliates, issue capital stock of subsidiaries, create liens,
sell assets and engage in mergers and consolidations. If the Company fails to
comply with the restrictive covenants in the Indenture, the Company's obligation
to perform its obligations under the Indenture may be accelerated.
POTENTIAL ADDITIONAL CAPITAL REQUIREMENTS
The Company currently expects to require approximately $290 million for
capital expenditures, development and initial operating costs of ORBIMAGE's
satellite system through September 30, 1999, by which date OrbView-3 is expected
to be launched. Through March 31, 1998, ORBIMAGE has expended approximately $149
million for the design, construction, deployment and/or procurement of the
OrbView satellites, and portions of the U.S. ground system. To finance such
expenditures, the Company has obtained approximately $143 million in net equity
contributions from Orbital and third party investors and approximately $48
million in imagery contract payments. See "Certain Relationships and Related
Transactions--Stock Purchase Agreement," and "Use of Proceeds." The Company
believes that the net proceeds of the Units Offering and the Series A Offering,
together with expected cash from operations, will be sufficient to fund the
Company's operations through September 30, 1999, by which date OrbView-3 is
expected to be launched. There can be no assurance that the Company will
generate sufficient cash from operations, or that expenses will not exceed the
Company's estimates. In such event, the Company will require additional capital.
A significant portion of the Company's expenses will be incurred pursuant
to the Procurement Agreement covering development, construction and launch of
the OrbView satellites and construction and activation of its U.S. ground
system. While most of ORBIMAGE's costs under the Procurement Agreement will be
fixed, certain items and services, such as launch and in-orbit insurance, launch
service costs for OrbView-4 in excess of approximately $23 million, OrbView-4's
hyperspectral sensor and related work, and ORBIMAGE-directed technological
assistance and regulatory support will be furnished by Orbital to ORBIMAGE on a
cost-plus or cost-reimbursable basis. Many factors outside the control of
ORBIMAGE may influence the costs of such items and services and the Company may
be required to raise additional capital if any material increase in costs should
occur.
Furthermore, additional capital may be required if, for example: (i) there
are significant delays in the deployment of the high-resolution OrbView
satellites, as a result of technical difficulties, launch or satellite failure
or otherwise; (ii) the Company does not enter into agreements with customers,
VARs or distributors for high-resolution imagery at the times or on the terms
anticipated by ORBIMAGE, if at all; (iii) there is an increase in the Company's
estimated net operating deficit as a result of the Company incurring significant
unanticipated expenses, such as costs related to resolving satellite operational
difficulties; or (iv) the Company
16
<PAGE> 23
incurs additional costs as a result of modifications to all or a portion of the
high-resolution OrbView satellites or ground segment designs to meet changed or
unanticipated market, regulatory or technical requirements. In the event that
these or other events occur, there can be no assurance that additional capital
would be available from public or private markets on favorable terms, on a
timely basis, or at all. A substantial shortfall in funding would delay or
prevent construction and launch of the high-resolution OrbView satellites.
SCHEDULE DELAYS
Delay in the timely construction, deployment and commercial operation of
either of the high-resolution OrbView satellites could result from a variety of
causes, including delays in the design, construction, integration and testing of
any of the satellites and related ground systems, a delayed or unsuccessful
launch, subcontractor or manufacturer delays, delays caused by technical reviews
and redesign and testing activities in the event of failures during testing or a
loss of a satellite, delays in the receipt of licenses necessary to operate the
satellite system, or other events beyond the control of ORBIMAGE. The sensors
for the high-resolution OrbView satellites, which are key components of the
satellites, are being designed and constructed by a subcontractor. Significant
delays in the launch of either of the high-resolution OrbView satellites could
increase the amount of pre-launch operating costs, delay the generation of
revenue and have a material adverse effect on the Company's results of
operations. There can be no assurance that either of the high-resolution OrbView
satellites will be launched and placed into operation on a timely basis.
Competitive posture in the satellite-based imaging industry may be affected
by perceived and actual timing of satellite launches. Significant delays, or the
perception of anticipated or potential delays, in the deployment of either of
the high-resolution OrbView satellites could increase the costs of such
satellites, delay the generation of revenue or have a material adverse effect on
the Company's business, financial condition and results of operations and its
ability to meet its debt service requirements.
LAUNCH RISKS
Satellite launches are subject to significant risks, including partial or
complete failure of the launch vehicle, which may result in disabling damage to
or loss of a satellite or failure of the launch vehicle to deliver the satellite
to its proper orbit. The Company has contracted with Orbital to launch the
high-resolution OrbView satellites. Orbital intends to launch OrbView-3 on a
Pegasus(R) launch vehicle. Orbital's Pegasus launch vehicle has experienced
launch failures from time to time, and has an approximately 90% launch success
rate. There are a number of additional Pegasus launches currently planned prior
to the launch of OrbView-3, and the failure of any one of these launch vehicles
could result in a delay in the deployment of OrbView-3. Orbital's Pegasus launch
vehicle is launched from beneath a modified Lockheed L-1011 aircraft owned by
Orbital. In the event the Orbital aircraft is unavailable for any reason, the
Company could experience significant delays as a result of Orbital having to
acquire and modify a new carrier aircraft or the Company having to arrange for
deployment of OrbView-3 using an alternative launch vehicle. There can be no
assurance that another aircraft could be obtained and properly modified or that
alternate launch services could be obtained on a timely basis, if at all.
Orbital is currently reviewing launch vehicle alternatives for OrbView-4.
Possible launch vehicles for OrbView-4 include Orbital's Taurus(R) launch
vehicle (which has had two missions, both of which were successful), other
similar class launch vehicles, or on larger launch vehicles such as the Delta or
Ariane rocket, on which OrbView-4 would be a secondary payload. There can be no
assurance that the high-resolution OrbView satellites will be successfully
deployed in a timely manner or that a launch failure will not occur. Any such
delay or occurrence of a launch failure could have a material adverse effect on
the Company's business, financial condition and results of operations and its
ability to meet its debt service requirements.
MARKET ACCEPTANCE; ESTIMATES
The success of the OrbView satellites and the Company's ability to meet its
debt service requirements on the Notes will depend on acceptance of its imagery
products and services in existing markets as well as the development of new
markets. Market acceptance in turn depends upon a number of factors, including
the
17
<PAGE> 24
spatial and spectral quality, scope, timeliness, sophistication and price of the
Company's imagery products and services and of alternative products and
services. There can be no assurance that the products and services to be offered
by ORBIMAGE will achieve market acceptance, or that the market will demand such
products and services from ORBIMAGE at prices and on terms acceptable to
ORBIMAGE.
The Company's strategy to target certain markets for its satellite imagery
products is based on a number of assumptions, some or all of which may be
incorrect, and unanticipated events may occur that could adversely affect the
Company's market results. The Company's description of potential markets for its
products and services and estimates of the Company's addressable markets that
are discussed in this Prospectus represent the Company's estimates as of the
date hereof with respect to such markets. In particular, the Company is
anticipating significant revenues from sales of imagery generated by the
OrbView-2 and the high-resolution OrbView satellites. Satellite imagery with
spatial and spectral characteristics generated by the OrbView-2 satellite, and
to be generated by the high-resolution OrbView satellites, is not now
commercially available. Consequently, it is difficult to predict accurately the
ultimate size of the market and the demand for these services and products, and
actual markets should be expected to vary from the addressable markets discussed
herein, and these variations may be material. Lack of significant market
acceptance, delays in such acceptance, or failure of certain markets to develop
could also have a material adverse effect on the Company's business, financial
condition and results of operations and its ability to meet its debt service
requirements.
TECHNOLOGICAL, DEVELOPMENT AND IMPLEMENTATION RISKS
ORBIMAGE is in the process of completing the design of the high-resolution
OrbView satellites; however, there can be no assurance that the design of the
satellites will not require modifications to achieve desired performance
criteria. For example, there were significant delays in the design, production
and testing of the OrbView-2 satellite that was launched in August 1997,
approximately two years behind schedule. The high-resolution OrbView satellites
will employ advanced technologies and sensors that will be subjected to severe
environmental stresses during launch or in space that could affect the
satellite's performance. Sometimes, human operators may also execute an improper
command that may negatively impact a satellite's performance. Employing these
technologies is further complicated by the fact that the OrbView satellites will
be in space. Correcting problems related to hardware components in space may
require premature satellite replacement, with attendant costs and revenue
losses. EarthWatch Incorporated's ("EarthWatch") three-meter remote imagery
satellite bus (not including the sensor or systems-level assembly, integration
and test) was designed and constructed by CTA Incorporated ("CTA") pursuant to a
contract awarded to CTA in 1995. Orbital acquired CTA's satellite manufacturing
business in August 1997. The EarthWatch satellite was launched in December 1997
but was declared to have experienced an on-orbit failure several months later.
There can be no assurance that the high-resolution OrbView satellites will
be successfully launched or operated, or that each of the OrbView satellites
will perform or remain in operation for the duration of its expected "design
life." Furthermore, even if the high-resolution OrbView satellites are
successfully launched, minor flaws in the satellites' sensors could
significantly degrade the satellites' performance and affect ORBIMAGE's ability
to successfully market its products.
The Company has not procured a spare satellite for OrbView-2, nor does it
maintain an inventory of long lead-time parts for a replacement OrbView-2
satellite. In the event of an OrbView-2 satellite failure, if the Company were
to decide to construct and launch a replacement, ORBIMAGE would likely
experience a delay of at least 24 months or more before it would be able to
launch the replacement satellite.
The Company also has not procured a spare high-resolution OrbView
satellite, nor does it currently maintain an inventory of long lead-time parts
for the high-resolution OrbView satellites. If there is a failure in an
OrbView-3 satellite subsystem that is common to the OrbView-4 satellite (e.g.,
the sensor), such failure may result in a delay of the OrbView-4 launch.
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<PAGE> 25
LIMITED LIFE OF SATELLITES
The OrbView satellites, which constitute a substantial portion of the
Company's total assets, will have a limited useful life. A number of factors
will affect the useful lives of the OrbView satellites, including the quality of
construction, the expected gradual environmental degradation of solar panels,
the durability of various satellite components and the orbit in which the
satellite is placed. Random failure of satellite components could result in
damage to or loss of a satellite. In rare cases, satellites could also be
damaged or destroyed by electrostatic storms or collisions with other objects.
The high-resolution OrbView satellites each have an expected "design life"
of five years, OrbView-1 had an expected "design life" of three years (but is
now expected to be operational for five years), and OrbView-2 has an expected
"design life" of seven and one-half years. At the end of its "design life", the
performance of each OrbView satellite is expected to gradually decline. The
"design life" of a satellite results from a complex calculation involving among
other factors, estimated probabilities of failure of the constituent components
of the satellite from design or manufacture defects, environmental stresses or
other causes. There can be no assurance of the longevity of any of the OrbView
satellites. A useful life of the OrbView satellites that is significantly
shorter than the design life of the satellites would have a material adverse
effect on the Company's business, financial condition, and results of operations
and its ability to meet its debt service requirements.
The Company anticipates using funds generated from operations to develop
follow-on high-resolution satellites. If sufficient funds from operations are
not available and ORBIMAGE is unable to obtain financing for additional
satellites, ORBIMAGE will not be able to deploy follow-on satellites to replace
OrbView-3 and OrbView-4 at the end of their useful lives. There can be no
assurance that additional capital will be available to develop follow-on
high-resolution OrbView satellites on favorable terms or on a timely basis, if
at all. Additionally, there can be no assurance that ORBIMAGE will be able to
contract with Orbital or any other company to design, construct or launch a
follow-on high-resolution satellite.
COMPETITION
The Company's products and services will compete with satellite and
aircraft-based imagery and other related products and services offered by a
range of private and government providers that have the technical and financial
ability to compete in these markets and applications. Certain of these entities
have greater financial, personnel and other resources than the Company.
Potential competitors include at least two companies, Space Imaging EOSAT
("Space Imaging EOSAT") and EarthWatch, each of which intends to offer satellite
imagery comparable to the imagery that the high-resolution OrbView satellites
are designed to provide. Space Imaging EOSAT has announced that it expects to
launch its first one-meter satellite in late 1998 and EarthWatch has announced
that the launch of its one-meter satellite is targeted for late 1999. In
addition, the U.S. government and foreign governments may fund the development,
construction, launch and operation of remote imaging satellites that may compete
with OrbView-2 as well as the high-resolution OrbView satellites. The U.S.
government's Earth Science Program includes the launch of a satellite next year
that will provide imagery similar to imagery provided by OrbView-2 that could be
competitive with some of the Company's imagery products and services. In
addition, the U.S. government will probably continue to rely on government-owned
and operated systems for certain highly classified satellite-based
high-resolution imagery. While the Company believes that it generally will have
a competitive advantage because it expects to have sufficient pricing
flexibility to be a low-cost commercial provider within its targeted markets and
applications, the low marginal cost of producing satellite imagery once a
satellite is operating could result in adverse pricing pressure, reductions in
anticipated profits or even losses. The Company's competitors or potential
competitors who may have greater resources than the Company could in the future
offer satellite-based imagery, or other products, having technical
characteristics or other features that could be more attractive than those of
the Company's products. Such new technologies, even if not ultimately
successful, could have a material adverse effect on OrbView's marketing efforts,
and its business could be adversely affected if competitors develop and launch
satellites with advanced capabilities and technologies compared to the OrbView
high-resolution satellites. See "Risk Factors--Potential Conflict of Interest"
and "Business--Competition."
19
<PAGE> 26
LIMITED INSURANCE; AVAILABILITY
The Company will generally be required under the Indenture to obtain
launch, in-orbit checkout and in-orbit operations insurance for risks related to
the launch and operations of the high-resolution OrbView satellites. The Company
has included estimates that it believes to be reasonable for certain of the
premiums for insurance for the high-resolution OrbView satellites in its
projected capital requirements. However, the Company has not yet determined the
amounts and types of coverage that it will obtain. Insurance market conditions
or other factors outside the Company's control at the time the Company seeks to
procure such insurance, such as failure of a satellite using similar components
or a similar launch vehicle, could cause premiums to be significantly higher
than current estimates, could cause other terms to be significantly less
favorable than those currently available, may result in limits on amounts of
coverage that are obtainable or may result in such insurance not being available
at all. In addition, certain risks, such as partial degradation of functionality
of the satellite, may be difficult to insure. The OrbView-1 satellite is not
insured. The Company has procured in-orbit insurance for OrbView-2 to cover
losses up to $12 million for its first year of operations, and which policy is
renewable in the second and third year of operations to cover losses of $10
million and $8 million, respectively. There can be no assurance that launch or
satellite failures will not occur and that insurance will be available to the
Company in the future or, if available, at a cost or on terms acceptable to the
Company. There can be no assurance that proceeds from insurance will be
sufficient to provide for a new satellite due to cost increases and other
factors beyond the Company's control.
DEPENDENCE ON ORBITAL; LIMITED RECOURSE
The Company depends on Orbital to design, develop and launch the
high-resolution OrbView satellites and to construct the U.S. ground segment for
the high-resolution OrbView satellites, and does not intend to acquire, except
by contracting with other parties, the ability to design, construct or launch
the OrbView satellites or to modify its existing ground segment to accommodate
these imagery satellites. The Company also relies upon the OrbView-2 License
from Orbital to market the OrbView-2 imagery. Under the Procurement Agreement
the Company has contracted with Orbital, and Orbital has contracted with certain
subcontractors, to provide these services. In the event that Orbital fails to
perform adequately its obligations under the Procurement Agreement, the
deployment of the high-resolution OrbView satellites would be delayed until the
Company located an alternative provider of necessary services to replace
Orbital. Orbital's liability to ORBIMAGE for claims arising under the
Procurement Agreement, such as breach of contract or patent indemnification, is
limited to $10 million. Pursuant to the Services Agreement, Orbital has agreed
to provide various administrative and operational functions on a cost
reimbursable or cost-plus fee basis. These functions include on-orbit mission
operations and anomaly resolution for the four OrbView satellites. In the event
Orbital fails to perform certain of its obligations under the Services
Agreement, the operation of the OrbView satellites may be adversely affected.
The Services Agreement terminates for each OrbView satellite three years after
the respective launch of each such satellite. There can be no assurance that the
Services Agreement will be renewed on terms favorable to ORBIMAGE if at all. In
addition, a material adverse change in Orbital or its financial condition or
that of one of its subcontractors could adversely affect Orbital's ability to
perform under the Procurement Agreement or the Services Agreement. The Company
has not identified any alternate providers, and there can be no assurance that
such alternate provider would be available or, if available, would be available
at a cost or on terms favorable to the Company or Orbital.
REGULATION; SIGNIFICANT REMAINING REGULATORY APPROVALS
Domestic. ORBIMAGE's business requires licenses from the DoC and from the
FCC. The Company currently has a license from the DoC to operate two
high-resolution satellites (the "DoC License"), and Orbital holds a license from
the DoC to operate OrbView-2. Each of these DoC licenses expires in 2004; there
can be no assurance that such licenses will be renewed. In March 1998, Orbital
filed an application with the DoC to transfer the OrbView-2 DoC license to
ORBIMAGE. Under the provisions of the DoC licenses, the U.S. government reserves
the right to interrupt service during periods of national emergency when U.S.
national security interests are affected. The threat or implementation of such
interruptions of service could adversely affect ORBIMAGE's ability to market its
products to certain foreign distributors or end-user
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<PAGE> 27
customers. In addition, the DoC has the right to review and approve the terms of
agreements with ORBIMAGE's international customers and any such review might
result in a delay in or the prohibition of the execution of such agreements.
ORBIMAGE could in the future be subjected to new laws, policies or regulations,
or changes in the interpretation or application of existing laws, policies and
regulations, that modify the present regulatory environment in the United
States. In November 1997, the DoC issued a notice of proposed rulemaking
regarding regulations governing the licensing and operation of remote imaging
satellite systems clarifying among other things, DoC oversight regarding foreign
imagery sales agreements and certain limitations on company financings. There
can be no assurances that limitations applicable to other countries will not be
imposed by U.S. regulators, and any such limitations could adversely affect the
Company's operations. See "Regulation."
ORBIMAGE has filed an application with the DoC to amend the DoC License to
permit it to distribute OrbView-4 hyperspectral imagery on a commercial basis.
There can be no assurances that such application will be approved. Failure to
gain approval of such amendment or loss of the DoC License could have a material
adverse effect on the Company's ability to market hyperspectral imagery to
non-U.S. government customers.
A FCC license is required to operate each of the OrbView satellites (other
than OrbView-1). The Company currently operates OrbView-2 under an experimental
FCC license held by Orbital. This license expires in 1999 and the Company
expects that Orbital will file an application with the FCC to renew this license
prior to that date. There can be no assurances, however, that the FCC will grant
a renewal to this license. The failure to obtain a renewal to this license, or a
revocation of this license, would have a material adverse effect on the
Company's ability to operate the OrbView-2 satellite in the United States.
ORBIMAGE has filed an application with the FCC to receive a license to launch
and operate the high-resolution OrbView satellites (the "FCC License"). The
Company cannot operate or launch the high-resolution OrbView satellites without
the FCC License. Although historically the FCC has granted licenses to systems
that conform to the technical, legal and financial requirements for such systems
as set forth by the FCC, there can be no assurance that the FCC will grant to
ORBIMAGE a license to operate either of or both the high-resolution OrbView
satellites. Certain U.S. competitors of the Company, EarthWatch and Space
Imaging EOSAT, each have obtained the required DoC and FCC licenses. See
"Regulation."
International. All satellite systems operating internationally are subject
to general international regulations and the specific laws of the countries in
which satellite imagery is downlinked. Applicable regulations include (i)
International Telecommunications Union ("ITU") regulations, which define, for
each service, the technical operating parameters (including maximum transmitter
power, maximum interference to other services and users, and the minimum
interference the user must operate under for that service), (ii) the Intelsat
and Inmarsat agreements which provide that in order to conform with
international treaties and obligations the operators of international satellite
systems must demonstrate that they will not cause economic or technical harm to
Intelsat and Inmarsat, and (iii) regulations of foreign countries that require
that satellite operators secure appropriate licenses and operational authority
for utilization of the required spectrum in each country. Obtaining local
regulatory approval for operation of the OrbView-2 and high-resolution OrbView
satellites will be the responsibility of the Company's customers or
distributors. While regional foreign distributors will be selected, in part,
based on their perceived qualifications to obtain the requisite local approvals,
there can be no assurance that they will be successful in doing so, and if they
are not successful, remote imagery service will not be made available for real
time distribution in such territories. ORBIMAGE's inability to offer service in
a significant number of foreign countries could have a material adverse effect
on ORBIMAGE's business. Regulatory provisions in countries in which the Company
or its foreign regional distributors are seeking to operate may impose
restrictions on the Company's or its foreign regional distributors' operations
and there can be no assurance that such restrictions would not be unduly
burdensome. The Company's business may also be adversely affected by regulatory
changes resulting from adoption of treaties, legislation or regulation by the
national authorities where ORBIMAGE plans to operate.
Although the Company believes that it will be able to obtain all
international licenses and authorizations necessary to operate effectively,
there can be no assurance that it will be successful in doing so. The failure of
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<PAGE> 28
the Company to obtain some or all necessary licenses or approvals could have a
material adverse effect on the Company's business.
Launch License. Commercial U.S. space launches require licenses from the
U.S. Department of Transportation ("DoT"). Under the Procurement Agreement,
Orbital is responsible for ensuring that the appropriate DoT commercial launch
license is in place for the high-resolution OrbView satellite launches. There
can be no assurance that Orbital will continue to be successful in its efforts
to obtain necessary licenses or regulatory approvals. The inability of Orbital
to secure any necessary licenses or approvals for the launch of high-resolution
OrbView satellites could delay such launches, which could have a material
adverse effect on the Company's business, financial condition and results of
operation and its ability to meet its debt service requirements.
MANAGEMENT OF GROWTH
The Company may experience periods of rapid growth. Such growth could place
a significant strain on the Company's management, operating, financial and other
resources. The Company's future performance will depend, in part, upon its
ability to manage its growth effectively, which will require it to develop its
management information systems capabilities, improve its operating, financial
and accounting systems and to expand, train and manage its employee base. The
Company's inability to manage its growth effectively could have a material
adverse effect on the Company's results of operations, and its ability to meet
its obligations as they become due.
RELIANCE ON FOREIGN DISTRIBUTORS AND VALUE ADDED RESELLERS
ORBIMAGE will rely on foreign regional distributors to market and
distribute internationally a significant portion of the Company's imagery from
its OrbView-2 and its high-resolution OrbView satellites. The existing and
potential foreign regional distributors generally are expected to be acting on
behalf of, or contracting directly with, foreign governments for the sale of
imagery for national security and related purposes, and these regional
distributors may not possess the skill or experience to develop regional
commercial markets for the Company's products and services. The failure of the
Company to enter into such agreements on a timely basis or the failure of the
Company's foreign regional distributors to successfully market the Company's
imagery products and services would have a material adverse effect on the
Company's business, financial condition and results of operations and its
ability to meet its debt service requirements.
The Company intends to rely on VARs to develop and market products and
services based on ORBIMAGE's imagery to address certain of the Company's
targeted markets. The failure of the Company's VARs to successfully develop and
market OrbView products and services would adversely affect the Company's
results of operations.
INTERNATIONAL OPERATIONS
The Company expects to derive substantial revenues from international sales
of products and services. Such operations are subject to certain risks, such as
changes in domestic and foreign governmental regulations and telecommunications
standards, maintenance of friendly foreign status with the United States,
licensing requirements, tariffs or taxes and other trade barriers, export
controls, exchange controls and political and economic stability, including
fluctuations in the value of foreign currencies which may make payment in U.S.
dollars more expensive for foreign customers.
POTENTIAL CONFLICT OF INTEREST
Orbital owns approximately 56% of the outstanding capital stock of the
Company on a fully diluted basis assuming (i) conversion of the Company's
outstanding Series A Preferred Stock and (ii) exercise of the Warrants and
outstanding options to purchase Common Stock. Certain of the Company's executive
officers and directors are also employees and/or directors of Orbital. Such
ongoing relationships may result in conflicts of interest with respect to
matters involving both the Company and Orbital. Although the Company has adopted
policies which it believes will preclude or prevent such conflicts from arising,
there can be no
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<PAGE> 29
assurance that conflicts will not arise that could adversely affect the Company.
See, "Relationship with Orbital Services Corporation -- Policies and Procedures
for Addressing Conflicts." The Company and Orbital are parties to the
Procurement Agreement, the OrbView-2 License, the Services Agreement and the
Non-Compete Agreement, each of which is material to the Company's business.
Orbital's interests as an equity holder may at times conflict with its interests
under these agreements. Under the Procurement Agreement, Orbital (or in certain
cases its subcontractors) retains ownership of the technology in all four
OrbView satellites and their common ground system. To the extent the Company has
obligations to deliver OrbView-compatible ground stations to its customers, the
Company has contracted to procure such ground stations from MacDonald, Dettwiler
and Associates Ltd. ("MDA"), a wholly owned subsidiary of Orbital, provided that
the terms are commercially competitive.
Under a Non-Competition and Teaming Agreement between Orbital and ORBIMAGE
dated May 8, 1997 (the "Non-Compete Agreement"), Orbital is prohibited from
selling turn-key satellite imaging systems (i.e., satellite, sensors, launch
vehicles and ground system), but is generally permitted to sell components of
such systems, including launch services and satellites, to current or future
customers or competitors of ORBIMAGE. The Non-Compete Agreement will terminate
on the earlier of June 30, 2003 or the occurrence of certain events. As a result
of Orbital's acquisition of the space business of CTA in August 1997, Orbital
became the supplier of the satellite bus (not including the sensor, system-level
assembly, integration and test) for the EarthWatch three-meter resolution
satellite that was launched in December 1997. As a result of an earlier
acquisition, Orbital is also building the ground system network for EarthWatch.
The Company expects EarthWatch to be a direct competitor of the Company. In
March 1998, MDA was selected by the Canadian government to develop, construct
and manage the RADARSAT-II three-meter radar satellite program. Under this
program, Orbital will provide the satellite platform and MDA will provide the
ground station. MDA will own and operate the Radarsat-2 satellite. In addition,
as a result of certain acquisitions, Orbital holds approximately a 4% equity
interest in EarthWatch, and an approximate 26% equity interest in Radarsat
International Inc. ("Radarsat"), a low-spatial resolution satellite radar
imagery provider.
CONTRACTS
At March 31, 1998, approximately 85% of the Company's total firm contract
backlog was derived from contracts with the U.S. government and its agencies.
Changes in government policies, priorities or funding levels through agency or
program budget reductions by the U.S. Congress or executive agencies or the
imposition of budgetary constraints could have a material adverse effect on the
Company's business, financial condition and results of operations and its
ability to meet its debt service requirements. Furthermore, contracts with the
U.S. government may be terminated or suspended by the U.S. government at any
time, with or without cause. There can be no assurance that these contracts will
not be terminated or suspended in the future. The U.S. Air Force has contracted
with Orbital to fund the cost of the design and construction of the
hyperspectral sensor that will be integrated on the OrbView-4 satellite. If the
Air Force terminates or suspends the contract and ORBIMAGE desires to proceed
with its hyperspectral program, ORBIMAGE would be required to incur the
remaining cost of upgrading OrbView-4 with hyperspectral capability. The Samsung
Agreement is cancelable by Samsung Aerospace for any reason (with liquidated
damages payable under certain circumstances). The termination of the Samsung
Agreement could have a material adverse effect on the Company's business,
financial condition and results of operations and its ability to meet its debt
service requirements. As of March 31, 1998, imagery contracts with remaining
value of approximately $43 million could be terminated for convenience.
CONTROL OF THE COMPANY
The holders of the Series A Preferred Stock (which represents approximately
34% of the Company's outstanding Common Stock, on a fully diluted basis assuming
conversion of the Series A Preferred Stock and the Company are parties to the
Stock Purchase Agreement and a Stockholders' Agreement dated as of May 8, 1997,
as amended and restated (the "Stockholders' Agreement"). The Stockholders'
Agreement and the Company's Second Amended and Restated Certificate of
Incorporation (the "Charter") contain provisions relating to, among other
things, the election of members of the Company's Board of Directors. In
particular,
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<PAGE> 30
the Stockholders' Agreement provides that the Board of Directors may consist of
up to five directors consisting of (i) two directors designated by Orbital (the
"Common Directors"), (ii) two directors designated by the Series A Holders (the
"Series A Directors") and (iii) a single independent director designated by both
Orbital and the Series A Holders.
Under the Charter, the Series A Holders will be entitled to designate two
additional members to the Board of Directors (i) in the event of the failure by
the Company to pay timely dividends, or to repurchase the Series A Preferred
Stock in certain circumstances or (ii) in the event of the failure by Orbital to
conduct a favorable critical design review of the OrbView-3 spacecraft by
October 31, 1998 or the failure by Orbital to have commenced by March 15, 1999
the integration and testing of the OrbView-3 spacecraft or to have commenced by
November 15, 1999 the integration and testing of the OrbView-4 spacecraft (such
dates may be extended by 30 days in the discretion of ORBIMAGE under certain
circumstances). Such additional directors shall serve until the event giving
rise to such right has been resolved. Under these circumstances, the Series A
Directors would have the ability to control the management and policies of the
Company. In addition, under the Stockholders' Agreement, certain major actions
taken by the Company require the approval of one of the Series A Directors.
BROAD DISCRETION OVER USE OF PROCEEDS
The Company's management has broad discretion in determining the specific
uses for the net proceeds of the Units Offering and the timing of the related
expenditures. Furthermore, depending on future developments in the Company's
business and other factors, it is possible that the actual use of the proceeds
may vary to some extent from the specific intended uses described herein.
Pending application of the proceeds from the sale of the Units, the Company has
invested such proceeds (other than the portion used to purchase the Pledged
Securities) in short-term investment grade securities, and the Company expects
that the interest payable on such securities will be substantially less than the
interest payable on the Exchange Notes. See "Use of Proceeds."
REPURCHASE OF NOTES AND SERIES A PREFERRED STOCK UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
offer to repurchase all of the outstanding Exchange Notes at a price equal to
101% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the repurchase date. Additionally, upon a Change
of Control, subject to the senior rights of the holders of Exchange Notes, the
Company will be required to offer to repurchase all of the outstanding Series A
Preferred Stock at the Liquidation Amount (as defined in the Stock Purchase
Agreement). There can be no assurance that the Company would have sufficient
resources to repurchase the Exchange Notes or the Series A Preferred Stock upon
the occurrence of a Change of Control. The failure to repurchase all of the
Exchange Notes tendered to the Company would constitute an Event of Default
under the Indenture. Furthermore, the repurchase of the Exchange Notes by the
Company upon a Change of Control might result in a default on the part of the
Company in respect of other future indebtedness of the Company, as a result of
the financial effect of such repurchase on the Company or otherwise. The Change
of Control repurchase feature of the Exchange Notes may have anti-takeover
effects and may delay, defer or prevent a merger, tender offer or other takeover
attempt. See "Description of Exchange Notes--Repurchase at Option of Holders,"
and "--Definitions--Change of Control."
RESTRICTION ON RESALE
The Units, Original Notes and Warrants have not been registered under the
Securities Act or any state securities laws and, unless so registered, may not
be offered or sold except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and applicable
state securities laws.
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<PAGE> 31
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of shares of Common Stock by existing stockholders under Rule
144 of the Securities Act, or through the exercise of registration rights or the
issuance of shares of Common Stock upon the exercise of options or warrants,
could have a material adverse effect on the market price of shares of Common
Stock and could materially impair the Company's future ability to raise capital
through an offering of equity securities. No predictions can be made as to the
effect, if any, market sales of such shares or the availability of such shares
for future sale will have on the market price of shares of Common Stock
prevailing from time to time.
CERTAIN TAX CONSIDERATIONS
The Original Notes were issued with original issue discount ("OID") for
U.S. federal income tax purposes. This OID will carry over to, and be treated as
OID on, the Exchange Notes received in exchange for the Original Notes, and each
U.S. holder of an Exchange Note will be required to include in taxable income
for any particular taxable year a portion of such OID in advance of the receipt
of the cash to which such OID is attributable. For additional information
regarding the OID associated with the Notes, as well as certain other federal
income tax considerations relevant to the exchange of Original Notes for
Exchange Notes and the ownership and disposition of Exchange Notes, see "Certain
U.S. Federal Income Tax Consequences."
LACK OF PUBLIC MARKET
Prior to the Exchange Offer, there has not been any public market for the
Original Notes. The Original Notes have not been registered under the Securities
Act and will be subject to restrictions on transferability to the extent that
they are not exchanged for Exchange Notes by holders who are entitled to
participate in the Exchange Offer. The holders of Original Notes (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) who are not eligible to participate in the Exchange
Offer are entitled to certain registration rights, and the Company is required
to file a Shelf Registration Statement with respect to such Original Notes. The
Exchange Notes will constitute a new issue of securities with no established
trading market. The Exchange Notes will not be listed on any securities exchange
and the Company will not seek the admission thereof to trading in the National
Association of Securities Dealers Automated Quotation System. The Company has
been advised by the Initial Purchasers that they intend to make a market in the
Exchange Notes; however, the Initial Purchasers are not obligated to do so, and
any such market making activities may be discontinued at any time without
notice. In addition, such market making activity may be subject to the limits
imposed by the Securities Act and the Exchange Act and may be limited during the
Exchange Offer and the pendency of the Shelf Registration Statement. Therefore,
there can be no assurance that an active market for the Exchange Notes will
develop or as to liquidity of a trading market for the Exchange Notes.
Depending on prevailing interest rates, the market for similar securities
and other factors, including the financial condition of the Company, the
Exchange Notes may trade at a discount from their principal amount.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such original Notes as set forth in the legend
thereon as a consequence of the issuance of the Original Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold, unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom. The Company does not intend to register the Original Notes
under the Securities Act. In addition, any holder of Original Notes who tenders
in the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes may be deemed to have received restricted securities and, if so,
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. To
the extent Original Notes are tendered and accepted in the Exchange Offer, the
trading market, if any, for the Original Notes not tendered could be adversely
affected. See "The Exchange Offer."
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<PAGE> 32
CONSEQUENCES OF FAILURE TO PROPERLY TENDER THE ORIGINAL NOTES IN THE EXCHANGE
Issuance of the Exchange Notes in exchange for the Original Notes pursuant
to the Exchange Offer will be made only after timely receipt by the Exchange
Agent of such Original Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of the Original
Notes desiring to tender such Original Notes in exchange for Exchange Notes
should allow sufficient time to ensure timely delivery. The Company is under no
duty to give notification of defects or irregularities with respect to tenders
of Original Notes for exchange. Original Notes that are not tendered or that are
tendered but not accepted by the Company for exchange, will, following
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof under the Securities Act and, upon
consummation of the Exchange Offer, certain registration rights under the
Registration Rights Agreement will terminate.
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<PAGE> 33
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. The Exchange Offer is intended to satisfy certain
of the Company's obligations under the Registration Rights Agreement.
The net proceeds to the Company from the Units Offering (after deducting
discounts, and commissions to the Initial Purchasers and estimated offering
expenses) were approximately $144.5 million. The Company used approximately
$32.9 million of such proceeds to fund the purchase of the Pledged Securities.
All remaining proceeds, including the net proceeds from the Series A Offering,
will be applied to (i) develop, construct, test, launch and operate the
high-resolution OrbView satellites, (ii) develop, upgrade and construct the U.S.
domestic ground system used in connection with high-resolution OrbView
satellites, (iii) market remote imagery products and services and (iv) provide
working capital. See "Description of the Notes--Certain Covenants--Use of
Proceeds."
The net proceeds to the Company from the Series A Offering, which was
consummated simultaneously with the Units Offering, was approximately $21
million.
Prior to the application of the net proceeds of the Units Offering, as
described above, such funds (other than amounts used to purchase the Pledged
Securities) are invested in short-term investment-grade securities.
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<PAGE> 34
CAPITALIZATION
The following table sets forth the cash, cash equivalents, short-term
investments and Pledged Securities and capitalization of the Company as of March
31, 1998. This table should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the financial
statements, including the notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------
(DOLLARS IN THOUSANDS)
<S> <C>
Cash, cash equivalents and short-term investments........... $143,433
Pledged Securities.......................................... 33,057(1)
--------
Total cash, cash equivalents and short-term investments
and Pledged Securities................................ $176,490
========
Long-term debt:
Notes (2)................................................. $141,074
--------
Total long-term debt.............................. 141,074
Stockholders' equity:
Series A Cumulative Convertible 12% Preferred Stock,
par value $.01 2,000,000 shares authorized, 620,182
shares outstanding (liquidation value
$64,248,518)(3)....................................... 6
Common Stock, par value $.01 per share, 75,000,000
shares authorized, and 25,214,000 shares outstanding
(4)................................................... 252
Additional paid-in capital (2)......................... 139,144
Accumulated deficit.................................... (23,723)
--------
Total stockholders' equity............................. 115,679
--------
Total capitalization.............................. $256,753
========
</TABLE>
- ------------------------------
(1) Represents the aggregate principal amount, of the Pledged Securities plus
accrued interest. See "Description of the Exchange Notes--Security."
(2) The estimated value of the Warrants, approximately $9 million, is reflected
as both a debt discount and an element of additional paid-in capital.
(3) Dividends are payable semi-annually on May 1 and November 1 in cash or
in-kind, subject to restrictions contained in the Indenture.
(4) Excludes 4,800,000 shares of Common Stock reserved for issuance under the
Company's 1996 Stock Option Plan (the "Stock Option Plan"), of which options
to purchase 2,424,000 shares of Common Stock were outstanding at March 31,
1998 and options to purchase 700,000 shares of Common Stock were exercisable
at March 31, 1998. See "Management--Stock Option Plan."
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<PAGE> 35
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Original Notes were originally sold by the Company on February 25, 1998
to the Initial Purchasers pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Original Notes to qualified institutional
buyers in reliance on Rule 144A under the Securities Act and pursuant to offers
and sales that occurred outside the United States within the meaning of
Regulation S under the Securities Act. As a condition to the completion of the
Units Offering, the Company entered into the Registration Rights Agreement with
the Initial Purchasers pursuant to which the Company agreed to file with the
Commission the Exchange Offer Registration Statement on the appropriate form
under the Securities Act with respect to an offer to exchange the Original Notes
for Exchange Notes. The Exchange Notes will be substantially identical to the
Original Notes, except that the Exchange Notes will bear a Series B designation
and will have been registered under the Securities Act and, therefore will not
contain terms with respect to transfer restrictions (other than those that might
be imposed by state securities laws). If (i) the Company is not required to file
the Exchange Offer Registration Statement or permitted to commence or accept
tenders pursuant to the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy, (ii) any Holder of Transfer
Restricted Securities notifies the Company within 20 business days after the
consummation of the Exchange Offer that (a) such holder was prohibited by
applicable law or Commission policy from participating in the Exchange Offer or
(b) such holder may not resell the Exchange Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and the prospectus contained
in the Exchange Offer Registration Statement is not appropriate or available for
such resales or (c) such holder is a broker-dealer and owns Original Notes
acquired directly from the Company or an affiliate of the Company or (iii) the
Exchange Offer is for any other reason not consummated within 180 days of the
issuance date of the Original Notes, the Company will file with the Commission
the Shelf Registration Statement. For purposes of the Exchange Offer, "Transfer
Restricted Securities" means each Note, until the earliest to occur of (a) the
date on which such Original Note is exchanged in the Exchange Offer and entitled
to be resold to the public by the holder thereof without complying with the
prospectus delivery requirements of the Securities Act, (b) the date on which
such Original Note has been sold pursuant to a Shelf Registration Statement, (c)
the date on which such Exchange Note is disposed of by a broker-dealer pursuant
to the "Plan of Distribution" contemplated by the Exchange Offer Registration
Statement (including delivery of the prospectus contained therein) or (d) the
date on which such Note is distributed to the public pursuant to Rule 144 under
the Securities Act.
Under existing interpretations of the staff of the Commission, the Exchange
Notes would, in general, be freely transferable after the Exchange Offer without
further registration under the Securities Act. However, any purchaser of
Original Notes who is an "affiliate" of the Company or intends to participate in
the Exchange Offer for the purpose of distributing the Exchange Notes (i) will
not be able to rely on the interpretations of the staff of the Commission, (ii)
will not be able to tender its Original Notes in the Exchange Offer and (iii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or transfer of the Original Notes,
unless such sale or transfer is made pursuant to an exemption from such
requirements.
Each holder who wishes to exchange such Original Notes for Exchange Notes
in the Exchange Offer will be required to make certain representations,
including representations that (i) it is not an affiliate of the Company, (ii)
it is not engaged in, and does not intend to engage in, and has no arrangement
or understanding with any person to participate in, a distribution of the
Exchange Notes and (iii) it is acquiring the Exchange Notes in its ordinary
course of business. In addition, broker-dealers receiving Exchange Notes in the
Exchange Offer will have a prospectus delivery requirement with respect to
resales of Exchange Notes. The Commission has taken the position that such
broker-dealers may fulfill their prospectus delivery requirements with respect
to the Exchange Notes (other than a resale of an unsold allotment from the
original sale of Original Notes) with the prospectus contained in the Exchange
Offer Registration Statement. Under the Registration Rights Agreement, the
Company is required to allow such broker-dealers to use the prospectus contained
in the Exchange Offer Registration Statement in connection with the resale of
such Exchange Notes for a period of 180 days after the Exchange Offer is
consummated.
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<PAGE> 36
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part. See "Description of the Exchange
Notes--Registration Rights; Liquidated Damages."
Following the consummation of the Exchange Offer, holders of the Original
Notes who were eligible to participate in the Exchange Offer but who did not
tender their Original Notes will not have any further registration rights and
such Original Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for such Original Notes could
be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Original
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York time, on
the Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Original Notes
accepted in the Exchange Offer. Holders may tender some or all of their Original
Notes pursuant to the Exchange Offer. However, Original Notes may be tendered
only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes except that (i) the Exchange Notes bear a Series B
designation and a different CUSIP Number from the Original Notes, (ii) the
Exchange Notes have been registered under the Securities Act and hence will not
bear legends restricting the transfer thereof and (iii) the holders of the
Exchange Notes will not be entitled to certain rights under the Registration
Rights Agreement, including the provisions providing for an increase in the
interest rate on the Original Notes in certain circumstances relating to the
timing of the Exchange Offer, all of which rights generally will terminate when
the Exchange Offer is terminated. The Exchange Notes will evidence the same debt
as the Original Notes and will be entitled to the benefits of the Indenture.
The Exchange Offer is not conditioned upon any minimum number of Original
Notes being tendered. As of the date of this Prospectus, $150 million aggregate
principal amount of Original Notes were outstanding.
Holders of Original Notes do not have any appraisal or dissenters rights
under the General Corporation Law of Delaware or the Indenture in connection
with the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Original
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders for the purpose of receiving the Exchange Notes from the Company.
If any tendered Original Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Original Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date. See "-- Procedures for Tendering,"
"-- Book-Entry Transfer," "-- Guaranteed Delivery Procedures" and
"-- Conditions."
Holders whose Original Notes are not tendered or are tendered but not
accepted in the Exchange Offer will continue to hold such Original Notes and
will be entitled to all the rights and preferences and subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the holders will continue to be subject to the existing
restrictions upon transfer thereon and the Company will have no further
obligation to such holders to provide for the registration under the Securities
Act of the Original Notes held by them. To the extent that Original Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Original Notes could be adversely affected.
Holders who tender Original Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
Original Notes pursuant to the Exchange Offer. The Company will pay all charges
and
30
<PAGE> 37
expenses, other than transfer taxes in certain circumstances, in connection with
the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSION; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York time, on July ,
1998, unless the Company, in its sole discretion, extends the Exchange Offer, in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice prior to 9:00 a.m., New York
time, on the next business day after the previously scheduled expiration date.
Any such extension will be followed as promptly as practicable by notice thereof
by press release or other public announcement (or by written notice to the
holders of the Notes).
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Original Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner.
INTEREST ON THE EXCHANGE NOTES
Interest on the Exchange Notes will accrue at the rate of 11 5/8% per annum
from the most recent date to which interest has been paid or duly provided for
on the Original Notes surrendered in exchange for such Exchange Notes or, if no
interest has been paid or duly provided for on such Original Notes, from
February 25, 1998.
Holders of Original Notes whose Original Notes are accepted for exchange
will not receive accrued interest on such Original Notes for any period from and
after the last date to which interest has been paid or duly provided for on the
Original Notes prior to the original issue date of the Exchange Notes or, if no
such interest has been paid or duly provided for, will not receive any accrued
interest on such Original Notes, and will be deemed to have waived the right to
receive any interest on such Original Notes, accrued from and after February 25,
1998.
PROCEDURES FOR TENDERING
For a holder of Original Notes to tender Original Notes validly pursuant to
the Exchange Offer, a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), with any required signature guarantee, or (in the case
of a book-entry transfer), an Agent's Message in lieu of the Letter of
Transmittal, and any other required documents, must be received by the Exchange
Agent at the address set forth in the Letter of Transmittal prior to 5:00 p.m.,
New York time, on the Expiration Date. In addition, prior to 5:00 p.m., New York
time, on the Expiration Date, either (a) certificates for tendered Original
Notes must be received by the Exchange Agent at such address or (b) such
Original Notes must be transferred pursuant to the procedures for book-entry
transfer described below (and a confirmation of such tender received by the
Exchange Agent, including an Agent's Message if the tendering holder has not
delivered a Letter of Transmittal).
The term "Agent's Message" means a message transmitted by the Depository,
received by the Exchange Agent and forming part of the confirmation of a
book-entry transfer, which states that the Depository has received an express
acknowledgment from the participant in the Depository tendering Original Notes
which are the subject of such book-entry confirmation that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Company may enforce such agreement against such participant. In the
case of an Agent's Message relating to guaranteed delivery, the term means a
message transmitted by the Depository and received by the Exchange Agent, which
states that the Depository has received an express acknowledgment from the
participant in the Depository tendering Original Notes that such participant has
received and agrees to be bound by the Notice of Guaranteed Delivery.
31
<PAGE> 38
By tendering Original Notes pursuant to the procedures set forth above,
each holder will make to the Company the representations set forth above in the
third paragraph under the heading "--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal. THE METHOD OF DELIVERY OF ORIGINAL NOTES AND THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL,
HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Original Notes, such beneficial owner
must, prior to completing and executing the Letter of Transmittal and delivering
such Original Notes in such beneficial owner's name, either make appropriate
arrangements to register ownership of the Original Notes in such beneficial
owner's name or obtain a properly completed bond power from the registered
holder of the Original Notes. The transfer of registered ownership may take
considerable time and may not be able to be completed prior to the Expiration
Date.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Original Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
recognized signature guarantee medallion program within the meaning of Rule
17Ad-15 of the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Original Notes listed therein, such Original Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Original
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Original Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
offices of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and evidence
satisfactory to the Company of their authority to so act must be submitted with
the Letter of Transmittal.
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for the DTC Automated Tender Offer Program ("ATOP"). Accordingly, DTC
participants may electronically transmit their acceptance of the Exchange Offer
by causing DTC to transfer Original Notes to the Exchange Agent in accordance
with DTC's ATOP procedures for transfer. DTC will then send an Agent's Message
to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Original Notes and withdrawal of tendered
Original Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Original Notes not properly tendered or any Original Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right in its sole discretion
to waive any defects, irregularities or conditions of tender as to particular
Original Notes. The
32
<PAGE> 39
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Original Notes must be cured within such time as the
Company shall determine. Although the Company intends, to notify holders of
defects or irregularities with respect to tenders of Original Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Original Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any Original Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
BOOK-ENTRY TRANSFER
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Original Notes at the bookentry transfer facility, The Depository Trust
Company ("DTC" or the "Book-Entry Transfer Facility"), for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Original Notes by causing such
Book-Entry Transfer Facility to transfer such Original Notes into the Exchange
Agent's account with respect to the Original Notes in accordance with the
Book-Entry Transfer Facility's procedures for such transfer. Although delivery
of the Original Notes may be effected through book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility, an appropriate
Letter of Transmittal properly completed and duly executed with any required
signature guarantee, or, in the case of a book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal and all other required documents
must in each case be transmitted to and received or confirmed by the Exchange
Agent at its address set forth in the Letter of Transmittal on or prior to the
Expiration Date, or, if the guaranteed delivery procedures described below are
complied with, within the time period provided under such procedures. Delivery
of documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a holder pursuant to the Exchange Offer if the holder does not
provide its taxpayer identification number (social security number or employer
identification number) and certify that such number is correct. Each tendering
holder should complete and sign the main signature form and the Substitute Form
W-9 included as part of the Letter of Transmittal, so as to provide the
information and certification necessary to avoid backup withholding, unless an
applicable exemption exists and is proved in a manner satisfactory to the
Company and the Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original
Notes are not immediately available, (ii) who cannot deliver their Original
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent or (iii) who cannot complete the procedures for book-entry transfer, prior
to the Expiration Date, may effect a tender if: (a) the tender is made through
an Eligible Institution; (b) prior to the Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s) of
such Original Notes and the principal amount of Original Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five New
York Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s) representing
the Original Notes (or a confirmation of book-entry transfer of such Original
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility),
and any other documents required by the Letter of Transmittal will be deposited
by the Eligible Institution with the Exchange Agent; and (c) such properly
completed and executed Letter of Transmittal (or facsimile thereof), as well as
the certificates representing all tendered Original Notes in proper form for
transfer (or a
33
<PAGE> 40
confirmation of book-entry transfer of such Original Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility), and all other documents
required by the Letter of Transmittal are received by the Exchange Agent upon
five New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to 5:00 p.m., New York time, on the Expiration Date.
To withdraw a tender of Original Notes in the Exchange Offer, a telegram,
telex, letter or facsimile transmission notice of withdrawal must be received by
the Exchange Agent at its address set forth in the Letter of Transmittal prior
to 5:00 p.m., New York time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Original
Notes to be withdrawn (the "Depositor"), (ii) identify the Original Notes to be
withdrawn (including the certificate number(s) and principal amount of such
Original Notes, or, in the case of Original Notes transferred by book-entry
transfer, the name and number of the account at the Book-Entry Transfer Facility
to be credited), (iii) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which such Original Notes
were tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the
Original Notes register the transfer of such Original Notes into the name of the
person withdrawing the tender and (iv) specify the name in which any such
Original Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Original Notes so withdrawn will
be deemed not to have been validly tendered for purposes of the Exchange Offer
and no Exchange Notes will be issued with respect thereto unless the Original
Notes so withdrawn are validly retendered. Any Original Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Original Notes may be retendered by following one of the procedures described
above under "--Procedures for Tendering" at any time prior to the Expiration
Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Original
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Original Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the Company's reasonable discretion, might materially impair the
ability of the Company to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the Company's
reasonable discretion, might materially impair the ability of the Company
to proceed with the Exchange offer or materially impair the contemplated
benefits of the Exchange offer to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in the Company's reasonable discretion, deem necessary
for the consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its reasonable discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Original
Notes and return all tendered Original Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Original Notes tendered prior to the
expiration of the
34
<PAGE> 41
Exchange Offer, subject, however, to the rights of holders to withdraw such
Original Notes (see "--Withdrawal of Tenders"), or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Original Notes which have not been withdrawn.
The foregoing conditions are solely for the benefit of the Company and may
be asserted by the Company in good faith regardless of the circumstances giving
rise to such conditions or may be waived by the Company in whole or in part at
any time and from time to time in its discretion. The failure by the Company at
any time to exercise the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. In addition, the Company has
reserved the right, notwithstanding the satisfaction of each of the foregoing,
to terminate or amend the Exchange Offer.
EXCHANGE AGENT
Marine Midland Bank (the "Exchange Agent") has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent at the address indicated in the Letter of Transmittal. DELIVERY TO AN
ADDRESS OTHER THAN AS SET FORTH IN THE LETTER OF TRANSMITTAL WILL NOT CONSTITUTE
A VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telecopy, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Original Notes as reflected in the Company's accounting records on the date of
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be expensed
over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes as set forth in the legend
thereon. In general, the Original Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not intend to register the Original Notes under the
Securities Act.
RESALE OF EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties
(for example, the letters of the commission to (i) Exxon Capital Holdings
Corporation (avail. May 13, 1988), (ii) Morgan Stanley & Co., Inc. (avail. June
5, 1991)
35
<PAGE> 42
and (iii) Shearson & Sterling (avail. July 2, 1993)), the Company believes that
a holder or other person (other than a person that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) who receives
Exchange Notes in exchange for Original Notes in the ordinary course of business
and who is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of the Exchange Notes, will be allowed to resell the Exchange Notes to the
public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the Exchange Notes, such holder cannot rely
on the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each participating broker-dealer that receives
Exchange Notes for its own account in exchange for Original Notes, where such
Original Notes were acquired by such participating broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
Each holder of Original Notes who wishes to exchange Original Notes for
Exchange Notes in the Exchange Offer will be required to represent that (i) it
is not an affiliate of the Company, (ii) it is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Exchange Notes and (iii) it is acquiring
the Exchange Notes in its ordinary course of business. Each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Original Notes for its own account as the
result of market-making activities or other trading activities and must agree
that it will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. Based on the position taken by the staff of the Division of
Corporation Finance of the Commission in the interpretive letters referred to
above, the Company believes that participating broker-dealers who acquired
Original Notes for their own accounts as a result of market-making activities or
other trading activities may fulfill their prospectus delivery requirements with
respect to the Exchange Notes received upon exchange of such Original Notes
(other than Original Notes which represent an unsold allotment from the original
sale of the Original Notes) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such Exchange Notes. Accordingly, this Prospectus, as it may be
amended or supplemented from time to time, may be used by a participating
broker-dealer during the period referred to below in connection with resales of
Exchange Notes received in exchange for Original Notes where such Original Notes
were acquired by such participating broker-dealer for its own account as a
result of market-making or such other trading activities. Subject to certain
provisions set forth in the Registration Rights Agreement, the Company has
agreed that this Prospectus, as it may be amended or supplemented from time to
time, may be used by a participating broker-dealer in connection with resales of
such Exchange Notes for a period ending 180 days after the date on which the
Exchange Offer Registration Statement is declared effective. However, a
participating broker-dealer who intends to use this Prospectus in connection
with the resale of Exchange Notes received in exchange for Original Notes
pursuant to the Exchange Offer must notify the Company, or cause the Company to
be notified, on or prior to the Expiration Date, that it is a participating
broker-dealer. Such notice may be given in the space provided for that purpose
in the Letter of Transmittal or may be delivered to the Exchange Agent at its
addresses set forth in the Letter of Transmittal. See "Plan of Distribution."
Any participating broker-dealer who is an "affiliate" of the Company may not
rely on such interpretive letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction.
36
<PAGE> 43
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Original Notes for Exchange Notes by holders should not be
a taxable exchange for federal income tax purposes, and holders should not
recognize any taxable gain or loss or any interest income as a result of such
exchange. See "Certain U.S. Federal Income Tax Consequences."
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Original Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Original Notes pursuant to the terms of this Exchange Offer,
the Company will have fulfilled a covenant contained in the terms of the
Original Notes and the Registration Rights Agreement. Holders of the Original
Notes who do not tender their certificates in the Exchange Offer will continue
to hold such certificates and will be entitled to all the rights, and
limitations applicable thereto, under the Indenture, except for any such rights
under the Registration Rights Agreement which by their terms terminate or cease
to have further effect as a result of the making of this Exchange Offer. See
"Description of Exchange Notes." All untendered Original Notes will continue to
be subject to the restriction on transfer set forth in the Indenture. To the
extent that Original Notes are tendered and accepted in the Exchange Offer, the
trading market, if any, for the Original Notes could be adversely affected. See
"Risk Factors--Consequences of Failure to Exchange."
The Company may in the future seek to acquire untendered Original Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Company has no present plan to acquire any Original
Notes which are not tendered in the Exchange Offer.
37
<PAGE> 44
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical financial data of ORBIMAGE as of and for
the years ended December 31, 1993, 1994, 1995, 1996 and 1997 have been derived
from the audited financial statements of ORBIMAGE. The following selected
historical financial data of ORBIMAGE as of and for the three months ended March
31, 1997 and March 31, 1998 have been derived from ORBIMAGE's unaudited
financial statements, included elsewhere in the Prospectus. The selected
historical financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------------------- -----------------------
1993 1994 1995 (1) 1996 1997 (2) 1997 1998
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues.............. $ -- $ -- $ 4,567 $ 1,055 $ 2,062 $ 108 $ 2,417
Direct costs.......... -- 800 7,998 4,320 6,312 1,137 4,189
------- ------- ------- ------- ------- ------- -------
Gross profit (loss)... -- (800) (3,431) (3,265) (4,250) (1,029) (1,772)
Selling, general and
administrative
expenses............ 1,702 3,156 2,371 1,630 2,844 614 987
------- ------- ------- ------- ------- ------- -------
Loss from
operations.......... (1,702) (3,956) (5,802) (4,895) (7,094) (1,643) (2,759)
Interest income....... -- -- -- -- 1,260 -- 1,043
------- ------- ------- ------- ------- ------- -------
Loss before benefit
for income taxes.... (1,702) (3,956) (5,802) (4,895) (5,834) (1,643) (1,716)
Benefit for income
taxes............... -- -- -- -- 1,752 -- 1,716
------- ------- ------- ------- ------- ------- -------
Net income (loss)..... $(1,702) $(3,956) $(5,802) $(4,895) $(4,082) $(1,643) $ --
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Capital
expenditures........ $13,749 $13,832 $18,989 $12,617 $49,029 $ 4,275 $15,737
EBITDA (3)............ (1,702) (3,157) 1,975 (914) (1,558) (593) 703
Net cash provided by
(used in) operating
activities.......... 7,142 3,111 (192) (1,008) 6,334 (801) 4,879
Ratio of earnings
(losses) to fixed
charges............. -- -- -- -- -- -- --
Deficiency of earnings
(losses) to fixed
charges............. (1,702) (3,956) (5,802) (4,895) (7,094) (1,643) (3,545)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------------------------------------------------- -----------
1993 1994 1995 1996 1997 1998
-------- -------- -------- -------- -------- -----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
short-term investments..... $ -- $ -- $ -- $ -- $ 22,220 $143,433
Pledged Securities........... -- -- -- -- -- 33,057
Property, equipment and
satellites and related
rights, net................ 38,911 51,944 63,155 71,792 115,280 129,395
Total assets................. 38,911 51,944 63,423 72,328 137,750 311,350
Total liabilities............ 31,985 40,419 43,466 46,048 52,389 195,671
Series A Preferred Stock..... -- -- -- -- 33,547(4) 54,865(4)
Total stockholders' equity... 6,926 11,525 19,957 26,280 85,361 115,679
</TABLE>
- ------------------------------
(1) The OrbView-1 satellite was launched in April 1995.
(2) The OrbView-2 satellite was launched in August 1997.
(3) EBITDA, as defined in the Indenture, consists of earnings before interest,
income taxes, depreciation, amortization and other non-cash charges. While
EBITDA is not an alternative to operating income as an indicator of
operating performance or an alternative to cash flows from operating
activities as a measure of liquidity, management believes that EBITDA is a
measure commonly used to analyze and compare companies on the basis of
operating performance, leverage and liquidity. EBITDA is not a measure
supported by generally accepted accounting principles and may be calculated
differently by other companies. EBITDA as defined herein may not conform to
the definition of Consolidated Cash Flow as defined in the Indenture. See
"Description of Notes--Certain Definitions--Consolidated Cash Flow."
(4) Represents stated value of $100 per share of Series A Preferred Stock less
applicable fees and expenses.
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<PAGE> 45
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
ORBIMAGE operates and is further developing a fleet of satellites that
collect, process and distribute digital imagery of the Earth's surface, the
atmosphere and weather conditions. ORBIMAGE has entered into a procurement
agreement with Orbital (the "Procurement Agreement") to purchase the OrbView-1,
OrbView-3 and OrbView-4 satellites (including launch services) and the U.S.
ground system necessary to operate the satellites and to collect, process and
distribute imagery. Under the Procurement Agreement, ORBIMAGE also acquired
exclusive worldwide distribution rights (the "OrbView-2 License") with respect
to OrbView-2 satellite imagery. The terms of the OrbView-2 License require
ORBIMAGE to operate and control the OrbView-2 satellite. Orbital also provides
certain administrative services to ORBIMAGE such as accounting, tax, human
resources and benefit-related services. See "Certain Relationships and Related
Transactions -- Services Agreement" and "-- Stockholders Agreements."
Prior to May 8, 1997, ORBIMAGE was an operating division of Orbital.
Orbital now owns approximately 63% of the Company (56% on a fully diluted basis)
and has the ability to exercise significant influence over the Company's
operating and financial policies. Pursuant to the terms of the Company's charter
and the Stockholders Agreement, Orbital does not have unilateral control over
ORBIMAGE's assets.
Revenue. ORBIMAGE is performing under several long-term sales contracts to
provide imagery products and, pursuant to terms thereof, receives contractual
payments in advance of product delivery. In such circumstances, ORBIMAGE
initially records deferred revenue for the total amount of the payment and
recognizes revenue over the contractual delivery period. At March 31, 1998,
ORBIMAGE had approximately $38.3 million of deferred revenue related to advance
payments for OrbView-2 imagery. See "Certain Relationships and Related
Transactions -- OrbView-2 License."
System Depreciation. ORBIMAGE depreciates its satellites over the design
life of each satellite. ORBIMAGE is amortizing the cost of the OrbView-2 License
over the design life of the OrbView-2 satellite. ORBIMAGE depreciates the ground
systems used to operate the satellites and collect, process and distribute
imagery over the estimated lives of the assets, generally eight years.
Depreciation begins when the satellites and ground system are placed in service.
Interest Expense. The portion of the proceeds of the Units Offering
representing the estimated value of the Warrants, approximately $9 million, has
been accounted for as a discount to the par value of the Notes and as an
increase to common equity, reflecting the fact that the Warrants are a separate
security of the Company. Amortization of this discount, together with the stated
interest on the Notes, is capitalized as the historical costs of assets under
construction, when appropriate. The Company expects to capitalize substantially
all its interest expense throughout 1998 and 1999 as it completes construction
of the high-resolution OrbView satellites.
Year 2000 Compliance. The Company has made a preliminary assessment of
potential "Year 2000" issues with respect to various computer-related systems.
The Company has developed an initial corrective action plan that includes
reprogramming impacted software when appropriate and feasible, obtaining vendor-
provided software upgrades when available and completely replacing impacted
systems when necessary. The Company currently expects that identified "Year
2000" impacted systems will be corrected by the end of 1998, although there can
be no assurance that the Company has identified all "Year 2000" impacted systems
or that its corrective action plan will be timely and successful. The Company
believes that the costs to correct its systems will not materially affect its
results of operations or its financial condition.
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<PAGE> 46
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 AND FOR
THE THREE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
Revenues. Revenues for the three-month periods ended March 31, 1997 and
1998 were approximately $.1 million and $2.4 million, respectively. The increase
was primarily attributable to OrbView-2 sales during 1997. The OrbView-2
satellite was placed into commercial operations in November 1997.
Revenues for the years ended December 31, 1995, 1996 and 1997 were
approximately $4.6 million, $1.1 million and $2.1 million, respectively.
Revenues in 1995 and 1996 were attributable solely to the sale of OrbView-1
imagery products to NASA and UCAR. The decline in OrbView-1 imagery sales
between 1995 and 1996 was primarily attributable to lower "per image" prices as
a result of volume discounts offered in exchange for additional imagery
purchases. Revenues for the year ended December 31, 1997 consisted of
approximately $.8 million and $1.3 million of OrbView-1 and OrbView-2 sales,
respectively.
Direct Expenses. Direct expenses include costs of operating and
depreciating the OrbView-1 satellite, the OrbView-2 License and the related
ground assets. Satellite operating costs primarily consist of labor expenses.
Direct expenses for the three-month periods ended March 31, 1997 and 1998 were
approximately $1.1 million and $4.2 million, respectively. Direct expenses
increased from the first quarter 1997 to the first quarter 1998 as a result of
the OrbView-2 License amortization, additional ground station depreciation and
increased operating expenses primarily related to OrbView-2. The Company
completed the depreciation of the OrbView-1 satellite at the end of April 1998.
Direct expenses for the years ended December 31, 1995, 1996 and 1997, were
approximately $8.0 million, $4.3 million, and $6.3 million, respectively. Direct
expenses decreased from the year ended December 31, 1995 to the year ended
December 31, 1996 primarily because 1995 expenses included the cost of launching
and placing the OrbView-1 satellite into operation and $5.0 million of an
additional depreciation charge associated with OrbView-1. See Note 2 to the
Financial Statements. Direct expenses increased from the year ended December 31,
1996 to the year ended December 31, 1997 as a result of the launch and placement
in operation of OrbView-2 in 1997. The Company expects direct expenses to
increase significantly in 1998 from 1997 levels as a result of OrbView-2 License
amortization and OrbView-2 operating expenses.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses include the costs of marketing, advertising,
promotion and other selling expenses, as well as the costs of the finance,
administrative and general management functions of the company. SG&A expenses
were approximately $.6 million and $1.0 million for the three-month periods
ended March 31, 1997 and 1998, respectively. The increase from the 1997 period
to the 1998 period was primarily attributable to the increase in salaries and
related benefits as the Company expanded its operations and workforce.
SG&A expenses were approximately $2.4 million, $1.6 million and $2.8
million for the years ended December 31, 1995, 1996 and 1997, respectively. For
the year ended December 31, 1997, approximately $2.1 million in SG&A were costs
associated with administrative and management functions and approximately $.7
million were costs associated with marketing. The increase in SG&A expenses from
the year ended December 31, 1996 to the year ended December 31, 1997 was
primarily attributable to an increase in the Company's staffing levels as the
Company expanded its operations and workforce. SG&A expenses in 1997 and 1995
included costs of approximately $600,000 and $400,000, respectively, incurred to
support the launch and initial checkout of the OrbView-1 satellite and OrbView-2
satellites, respectively. The Company expects that launch and initial checkout
costs for OrbView-3 and OrbView-4 will be incurred at levels generally
consistent with those incurred in 1997.
Interest Income. Interest income for the three-month period ended March
31, 1998 was approximately $1.0 million; no interest income was earned in the
comparable 1997 period. Interest income was approximately $1.3 million for the
year ended December 31, 1997 and none in prior years. Interest income reflects
interest earnings on short-term investments made primarily with proceeds from
the Company's financing activities. The Company expects interest income to
increase in 1998, primarily due to the increased investments arising from the
Company's 1998 financing activities.
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Interest Capitalization. Interest incurred on the Notes as of March 31,
1998 in the amount of $1.7 million, has been capitalized in connection with the
construction of the OrbView-3 and OrbView-4 satellites and related ground
segments. The capitalized interest is recorded as part of the historical cost of
the assets to which it relates and will be amortized over the assets' useful
lives when placed in service.
Benefit for Income Taxes. The Company recorded an income tax benefit of
approximately $1.7 million for the three-month period ended March 31, 1998. The
Company recorded an income tax benefit of approximately $1.8 million for the
period May 8, 1997 through December 31, 1997. The tax benefits result from a
reduction in net deferred tax liabilities based on an increase in deferred tax
assets primarily related to net operating losses generated during the period
offset by decreases in deferred tax liabilities for depreciation of satellite
assets which were previously deducted for tax purposes. The Company records its
interim income tax benefit or provision based on estimates of the Company's
effective tax rate expected to be applicable for the full fiscal year. Estimated
effective rates recorded during interim periods may be periodically revised, if
necessary, to reflect current estimates. Prior to May 8, 1997, ORBIMAGE was an
operating division of Orbital and was included in Orbital's consolidated tax
return.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998 the Company had approximately $177 million of cash and
cash equivalents, and short- and long-term investments (including approximately
$33 million of Pledged Securities) and had total debt outstanding (net of
discount) of approximately $141 million. The Company's current ratio was
approximately 10.0 at March 31, 1998.
On February 25, 1998, ORBIMAGE issued the Notes and Warrants raising gross
proceeds of approximately $150 million (the "Units Offering"). Out of net
proceeds of approximately $145 million, ORBIMAGE purchased U.S. Treasury
securities in an amount sufficient to pay the interest on the Notes for the
first four interest payment dates. These securities have maturities ranging from
six months to two years and were placed in a restricted account and pledged as
security for repayment of interest on the Notes. Interest is payable
semi-annually beginning on September 1, 1998. The total effective interest rate
on the Notes, including the discount attributable to the value of the Warrants
and issuance expenses, is approximately 14%. The Notes will rank pari passu in
right of payment with all existing and future subordinated indebtedness of the
Company. Concurrent with the issuance of the Notes, ORBIMAGE completed a private
placement of 227,295 shares of Series A Preferred Stock, generating
approximately $23 million of gross proceeds. During 1997, ORBIMAGE completed two
private equity placements in which it sold 372,705 shares of Series A Preferred
Stock, generating gross proceedings of approximately $37 million. Orbital also
increased its common equity investment in ORBIMAGE, bringing its total equity
invested to approximately $88 million.
The total cost of the OrbView-1 satellite, the high-resolution OrbView-3
and OrbView-4 satellites, the OrbView-2 License and the related U.S. ground
system, is estimated to be approximately $297,000,000 (of which $295,000,000 is
provided for under the Procurement Agreement), which amount includes all
satellite design, construction and launch costs, but excludes insurance costs.
Of this amount, as of March 31, 1998, ORBIMAGE has spent approximately $149
million and expects to spend approximately $73 million through the remainder of
1998, which amount will be funded by the Company's cash, cash equivalents,
short-term investments and net cash from operations.
Operating activities provided cash of approximately $4.8 million during the
three months ended March 31, 1998 and $6.3 million during the year ended
December 31, 1997. Operating activities used cash during the three months ended
March 31, 1997 and during the years ended December 31, 1996 and 1995 of
approximately $.8 million, $1 million and $.2 million, respectively. The
increase in operating cash flows from 1996 to 1997 is primarily attributable to
the receipt of advance customer payments for imagery purchases.
The Company expects to fund its future capital expenditures and negative
cash flows from operating activities using cash and cash equivalents and
short-term investments together with cash from advance customer payments. While
the Company believes it has sufficient resources to meet its requirements
through its positive free cash flow (expected to occur by the end of 1999, when
OrbView-3 is expected to be operational), additional funding may be necessary in
the event of an OrbView-3 or OrbView-4 launch delay,
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cost increases or any shortfall in projected levels of estimated cash flow, or
to meet unanticipated expenses. There can be no assurance that additional
capital will be available on favorable terms or on a timely basis, if at all.
SUBSEQUENT EVENT
On April 30, 1998, ORBIMAGE acquired substantially all the assets of TRIFID
Corporation ("TRIFID") for approximately $4 million. Under the terms of the
acquisition agreement, an additional $1 million earn-out is payable by ORBIMAGE
to TRIFID if certain revenue targets are achieved during the third quarter of
1998. TRIFID is a leading image processing and product generation company,
providing sophisticated image processing software, geographic information
database and production systems, imaging sensor design and related engineering
services to both governmental and commercial customers. The acquisition provides
ORBIMAGE with the technical personnel and production capability required to
generate high resolution imagery and derived products. The acquisition resulted
in excess of purchase price over net assets acquired of approximately $2
million, which amount will be amortized over 10 years.
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BUSINESS
OVERVIEW
ORBIMAGE is a leading provider of global space-based imagery. The Company
operates, and is further developing, a fleet of satellites that collect, process
and distribute digital imagery of the Earth's surface (land and oceans), the
atmosphere and weather conditions. ORBIMAGE currently has two satellites in
operation that provide imagery to a variety of scientific and commercial
customers, including NASA. The Company expects to place two additional
satellites providing high-resolution digital imagery into operation in 1999 and
2000, respectively. The Company's imagery products and services are intended to
provide ORBIMAGE customers with information concerning, among other things,
forestry and crop health, urban growth and development, the locations and
movements of troops or military assets, land and ocean-based natural resources
and weather patterns and wind conditions. ORBIMAGE intends to provide customers
with imagery at a lower price than that provided by existing or planned remote
imagery alternatives.
In 1991, the ORBIMAGE operating division of Orbital was established to
manage the development of remote imaging satellites that would collect, process
and distribute digital imagery of land areas, oceans and the atmosphere. In
1992, the Company was incorporated in Delaware as a wholly owned subsidiary of
Orbital. In 1997, ORBIMAGE consummated a private placement of Series A Preferred
Stock with financial investors to fund a significant portion of the remaining
costs of existing projects. Contemporaneously with this financing, the Company
acquired at historical cost all the assets and liabilities of the operating
division.
In April 1995, ORBIMAGE launched its first satellite, OrbView-1, which
provides dedicated weather-related imagery and meteorological products to NASA.
The Company's second satellite, OrbView-2, was launched in August 1997 and
provides images of land and ocean surfaces to commercial customers, as well as
to NASA and other scientific users. The Company believes that OrbView-2 is the
only satellite of its kind providing daily color images of the entire Earth's
surface. ORBIMAGE is in the process of completing the design of the
high-resolution OrbView satellites, which are being designed to provide
high-resolution panchromatic (black and white), multispectral (color and
infrared) and, in the case of OrbView-4, hyperspectral (enhanced color and
enhanced infrared) imagery. OrbView-3 is scheduled to be operational during the
second half of 1999, and OrbView-4 is scheduled to be operational in mid-2000.
The Company believes that OrbView-3 and OrbView-4 will be among the first
commercial satellites with high-resolution imagery capability and that OrbView-4
will be the world's first satellite with commercially available hyperspectral
capability.
Remote imaging is the process of observing, measuring and recording
features, objects or events from a distance using a variety of sensors mounted
on satellites and aircraft. ORBIMAGE believes that the current market for global
remote imagery and related market exceeds $10 billion annually. This existing
market consists of both domestic and international commercial and government
users, and includes satellite development, construction and operations costs
incurred by users who decide to build and operate their own satellite systems as
well as the cost of purchased imagery and related services currently addressable
by existing imagery suppliers. Historically, in the United States, the only
"commercial" operators of remote imaging satellites were quasi-governmental
programs such as the low-resolution Landsat satellite systems in operation since
the 1970s. The opportunities for commercialization of space-based imagery
expanded significantly in 1994 when the U.S. government implemented a policy
permitting the worldwide, commercial sale of high-resolution satellite imagery.
The U.S. government has estimated that the worldwide market for remote imagery
products and services addressable by commercial imagery providers (excluding
hardware sales) will be approximately $2 billion by the year 2000. ORBIMAGE
believes that this worldwide commercial imagery market will grow as the
availability of low-cost, high quality satellite imagery stimulates the demand
for such products and services and encourages the development of new
satellite-imaging technologies and applications.
Customers have entered into imagery contracts providing for minimum
payments to the Company totaling approximately $100 million, of which the
Company has received approximately $48 million through March 31, 1998, and
expects to receive approximately $12 million through the end of 1998. See "Risk
Factors -- Contracts." These contracts include (i) a contract to provide NASA
with weather-related imagery
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and meteorological information generated by OrbView-1, (ii) a contract to
provide NASA with color ocean imagery generated by OrbView-2, (iii) a contract
to provide the U.S. Air Force with hyperspectral imagery from OrbView-4 and (iv)
the Samsung Agreement. The Samsung Agreement requires Samsung Aerospace to pay
an annual minimum amount for high-resolution OrbView imagery for each of the
three years after OrbView-3 becomes operational. In addition, the Company has
entered into agreements with regional distributors in Canada and Chile for
OrbView-2 imagery and is in negotiation with potential regional distributors for
high-resolution OrbView imagery in the Middle East, Europe, Asia, Southern
Africa, South America and Australia. To provide industry-specific imagery
applications, ORBIMAGE is seeking to develop strategic alliances with key VARs
who currently provide imagery products to customers in industries such as oil
and gas exploration, mining, agriculture, forestry, fishing and cartography.
THE REMOTE IMAGERY INDUSTRY
Remote imaging is the process of observing, measuring and recording objects
or events from a distance using a variety of sensors mounted on satellites,
aircraft or ground-based stations. Imagery is usually processed in an electronic
or hard copy format consisting of panchromatic or multispectral images. Until
1992, all satellite imagery systems were either military surveillance platforms
or were sponsored by large national and international civil space agencies,
which used satellites to monitor meteorological conditions and environmental
changes on the Earth's surface. Currently, there are a limited number of
commercial providers of satellite imaging services, which collectively address
only a portion of the demands and opportunities in the remote imaging industry.
The majority of today's remote imagery comes from local or regional aerial
photography firms. Although aerial imaging companies are able to achieve high
spatial resolution and customize their products according to local needs, their
slow response time, limited coverage area, restricted ability to fly over
certain areas and high cost limit widespread use of such imagery. Many existing
maps are based on out-of-date imagery because they are expensive to update. The
remainder of current commercial imagery sales are generated by a few providers
of low-resolution satellite imaging services; however, these providers have
failed to satisfy the market's growing sophistication and demand segmentation.
As the market develops, primary competitive factors are expected to
include: (i) spatial and/or spectral resolution, (ii) frequency of revisit
times, (iii) pricing, (iv) timeliness of imagery distribution and (v) extent of
geographic coverage. OrbView-2 and the high-resolution OrbView satellites have
been designed to offer a number of strategic advantages over currently available
commercial remote imaging systems including increased spatial resolution and
increased spectral capability. Certain markets such as national security mapping
and surveying markets require spatial resolution of less than three meters. In
addition, increased spectral resolution, or the ability to take highly precise
color and infrared images of the Earth's surface, enables potential customers in
the agriculture and fishing industries to better detect and identify crop health
and map prime fishing locations. Spectral resolution also can be used in the
exploration of natural resources, for example, land conditions that signify the
presence of oil will be easier to identify on an infrared image than in a
conventional black and white aerial photograph.
The Company believes that a key competitive advantage that the
high-resolution OrbView satellites will have over aerial photography is their
ability to image any location on the Earth in one to three days and to make the
imagery available in real time through a broad distribution channel. Currently,
a commercial imagery customer such as a telecommunications company that wants to
map a large, fairly remote area to determine where to place cellular towers
would hire an aerial photographer to fly an airplane over the area to take
pictures, develop the film and deliver the final map to the customer. This can
be time-consuming and expensive. In contrast, the Company expects that its
OrbView-3 satellite will be able to map 20,000 square kilometers in a single
10-minute pass. Similarly, countries around the world that are unable or
unwilling to establish their own space programs can conduct complete border
surveillance only in the areas over which aerial photographers can safely fly.
The Company expects that the high-resolution OrbView satellites will be able to
image areas that are not accessible by airplanes because the air space is
restricted or they are too remote. In addition, up-to-date maps are key for
serving certain high-technology segments of the national security market, such
as digital terrain modeling for aircraft and missile guidance. ORBIMAGE believes
the real-time global imagery from the high-resolution OrbView satellites will
allow customers to efficiently and
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<PAGE> 51
cost-effectively map areas of the world that have never been photographed
commercially or for which existing maps are now obsolete, and will permit users
to frequently monitor agricultural, forestry and fishing areas to provide timely
information to enhance business and government effectiveness.
BUSINESS STRATEGY
ORBIMAGE's business strategy is to (i) penetrate existing markets, (ii)
create new markets to sustain long-term growth, (iii) provide imagery at prices
lower than other satellite and aerial-based imagery, (iv) achieve global
distribution, (v) provide worldwide coverage on a timely basis, (vi) establish
an electronic imagery archive with broad and diverse imagery products and (vii)
leverage the expertise of Orbital, including Orbital's existing satellite
imagery technology and product infrastructure, to promote rapid market
acceptance.
Penetrate Existing Markets. The Company believes that its existing
addressable markets consist of numerous applications, including new construction
site selection, oil, gas, and mineral exploration activities, utility
infrastructure monitoring, scientific and environmental monitoring and U.S.
national security applications. In each of these market applications, ORBIMAGE
believes it should be able to gain market share rapidly because it expects its
imagery to be priced below that of existing aerial imagery and planned satellite
imagery and to be of higher spatial and spectral resolution than existing
satellite imagery.
Create New Markets. Through the introduction of affordable,
high-resolution satellite imagery, the Company believes it will stimulate the
development of new markets. For example, ORBIMAGE's marketing efforts to date
indicate that certain market segments do not currently have access to dedicated
high-resolution imagery, such as the foreign national security and commercial
fishing markets. The Company believes that such markets will develop rapidly as
commercial high-resolution imagery becomes available. Furthermore, the Company
believes it can develop new commercial applications for satellite-based imagery
including, among other uses, real estate assessment, travel planning and
entertainment applications.
Provide Low Priced Imagery. The Company believes that the expected cost to
construct its high-resolution OrbView satellites and related ground systems, the
principal components of which will be furnished by Orbital under a fixed-price
contract, will be less than or competitive with the announced costs of its
competitors' high-resolution satellite systems. The Company believes that the
cost of its satellites and related ground systems will afford it pricing
flexibility for its imagery products and services, allowing it to pursue a
strategy of pricing aggressively while still realizing attractive returns.
ORBIMAGE believes that the high-resolution OrbView satellites should be able to
provide a lower-priced imagery alternative to existing aerial photography.
Achieve Global Distribution. The Company believes that it can expand its
market share by providing imagery to end users both directly and through third
party distribution channels, such as foreign regional distributors and VARs. The
Company intends to focus its direct distribution efforts on larger customers in
the commercial/consumer and scientific/environmental markets and on the U.S.
national security market. The Company expects that VARs will perform
application-specific processing and analysis of the Company's imagery for
various commercial applications. The Company believes that utilizing these
distribution channels simultaneously will enhance the distribution of its
products and services.
ORBIMAGE believes that the most effective way to penetrate foreign markets
is to enter into relationships with strong regional partners who have existing
marketing and distribution infrastructures and are able to overcome local
regulatory barriers. The Company expects these distributors to purchase or
upgrade and operate the ground imagery receiving and processing stations in
their territories and attain the necessary regulatory and approvals to operate
in their territories. ORBIMAGE has entered into distribution agreements with
regional distributors in Chile and Canada for OrbView-2 imagery and has entered
into the Samsung Agreement to distribute high-resolution imagery of the Korean
peninsula. The Company is also in negotiations with potential regional
distributors for high-resolution OrbView imagery in the Middle East, Europe,
Asia, Southern Africa, South America and Australia.
Provide Worldwide Coverage on a Timely Basis. All the OrbView satellites
are designed to provide timely product delivery, either through real-time
imagery downlinking to a distributor's or customer's local
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ground receiving station, or through delivery of processed imagery from
ORBIMAGE's central U.S. ground station by overnight courier or via the Internet.
OrbView-2 provides global imagery on a daily basis. OrbView-3 is designed to
image virtually any location on Earth with a "revisit" time of three days or
less. Upon the launch of OrbView-4, the effective "revisit" time of the
high-resolution OrbView satellites should be reduced to less than two days.
Establish Electronic Imagery Archive. The Company is developing the OrbNet
Digital Archive, a database that will collect, store and distribute imagery
derived from satellite and aerial sources. OrbView-2 imagery can be viewed on
the Company's website and is expected to become available for sale over the
Internet. ORBIMAGE intends to expand its imagery catalogue with aerial and
existing satellite imagery products prior to the launch of its OrbView-3
satellite by entering into strategic alliances with existing imaging satellite
operators, aerial photography firms and imagery VARs. The Company intends to
deliver imagery to customers over the Internet, on CD or on computer tape for a
per image fee.
Leverage Expertise of Orbital. Orbital, the Company's majority
shareholder, is a space technology and satellite services company with extensive
experience in the design and construction of remote imaging satellites and
ground stations. ORBIMAGE has used, and will continue to use, the integrated
space capabilities, infrastructure and experience of Orbital to develop its
business cost effectively, including leveraging certain of Orbital's existing
customer relationships and product lines.
PRODUCTS AND SERVICES
Through the operation of the OrbView-1, OrbView-2, and high-resolution
OrbView satellites and associated U.S. and foreign ground systems, ORBIMAGE
provides and will provide a wide range of imagery products and services.
Weather and Atmospheric Monitoring. The Company's OrbView-1 satellite
provides the U.S. government with daily atmospheric and weather conditions
images, including images showing both clouds and global lightning information
that can be used to improve tornado and hurricane forecasting, and for weather
monitoring and meteorological research. The OrbView-1 satellite also provides
information on the atmosphere near the Earth's horizon to develop atmospheric
temperature, pressure, and water vapor profiles which facilitate the efficient
gathering of worldwide atmospheric information. As a result of the radio
frequencies used by the OrbView-1 satellite, OrbView-1 imagery may only be sold
to the U.S. government.
Ocean and Land Multispectral Imagery. The OrbView-2 satellite detects
subtle color changes in the Earth's oceans and land areas. Under a five-year
contract, NASA and its researchers may directly downlink certain OrbView-2
imagery to use for their own research purposes. ORBIMAGE is also marketing
licenses to university researchers and other primarily scientific users around
the world to enable them to directly downlink OrbView-2 imagery.
In addition, OrbView-2 provides value-added products that generally can be
delivered within 24 hours of collecting the data. Such products measure
phytoplankton and sediment concentration in oceans and lakes, as well as the
vegetative health of crops and forests on land. Scientists and environmentalists
can use these and other similar imagery products to assess environmental factors
that affect the oceans (including pollution levels and toxic algae events) and
to facilitate "before and after" comparisons of land areas showing, for example,
changes in agricultural crop and forestry growth or the erosion of coastal
zones.
The Company also uses OrbView-2 imagery to generate fishing maps. ORBIMAGE
initially is offering two types of fishing maps, a coastal product targeted at
sport and coastal commercial fishing customers and a deep ocean product targeted
at larger, high seas fishing fleets.
High Spatial Resolution Imagery. High-resolution OrbView imagery will
enable a user to discern an object one-meter in size (the size of a phone booth)
from space. The Company plans to sell its high-resolution imagery products in
the form of hard copies and electronic copies that can be stored and processed
on a computer. ORBIMAGE intends to base its product pricing, in part, on the
level of processing required and the customer's delivery-time requirements.
Sales of unprocessed imagery are targeted to sophisticated end-users, such as
the U.S. and foreign national security customers or VARs who have internal
capability to perform
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their own imagery enhancement and processing. While the Company intends to make
unprocessed imagery available for sale through the OrbNet Digital Archive,
ORBIMAGE believes that military and intelligence customers will procure the
necessary software from ORBIMAGE to upgrade their ground stations so that they
can directly downlink and process such imagery from the satellite.
ORBIMAGE may also offer various value-added precision-corrected products.
The Company believes that these products will have applications in all four
target markets, discussed below. Precision-corrected imagery is processed based
upon known geographic points, terrain, elevation and topography to enable the
user to identify the position of the image on the Earth's surface. These
products will address the needs of customers who require detailed topographical
and elevation information. One example of such a product is a digital elevation
model used by military planners for aircraft flight simulation. Other examples
include maps that analyze the health of vegetation in farm and forest areas, and
land use maps that can segment land tracts based on population density,
construction projects and other land uses.
Hyperspectral Imagery. Hyperspectral imagery provides enhanced color and
enhanced infrared imagery for additional applications, including more precise
crop health analysis and analysis of the presence of minerals that will enable
mining and natural resource exploration companies to more efficiently detect the
location of precious minerals such as gold and silver, and other natural
resources such as oil. In addition, the U.S. Air Force has stated that it
intends to use hyperspectral imagery to assist in detecting, tracking and
monitoring military vehicles and assets.
TARGET MARKETS
The Company targets its imagery product and service offerings toward four
distinct markets: the commercial/consumer market, the scientific/environmental
market, the U.S. national security market and the foreign national security
market. These markets are currently serviced by aerial photography or lower-
resolution government-operated satellite imagery systems.
Commercial/Consumer Market
The Company believes that the near-term commercial/consumer market segment
will include domestic and foreign companies and local governmental entities such
as municipalities that currently use aerial photographs and medium-resolution
satellite imagery products. In the long term the Company expects this market
will also include individual consumers who will use satellite imagery from the
OrbNet Digital Archive in various consumer oriented applications such as real
estate assessment, travel planning, education and entertainment. ORBIMAGE has
already begun targeting the market applications described below, which the
Company believes represent attractive near-term marketing opportunities.
Fishing. The Company believes that fishing maps designed to assist the
commercial ocean fishing industry are among the Company's most promising
near-term commercial market applications. OrbView-2's multispectral sensor has
been specifically designed to distinguish the phytoplankton-rich oceanic regions
from the clear oceanic regions. Many commercially important surface-feeding
fish, such as tuna and swordfish, congregate at the phytoplankton/clear water
boundary. At present, fishing fleets have no means of accurately identifying
this boundary in a timely fashion. Many fishing vessels currently use on-board
helicopters to conduct aerial searches of broadly identified areas. ORBIMAGE
believes its fishing maps will significantly reduce search time and related
hardware and operating costs, will be more accurate, and will cover a broader
area than existing alternatives.
The Company's customers for fishing maps include three fishing companies,
including the largest commercial fishing operators in the Philippines and South
Korea. Fishing captains view the maps transmitted daily over a satellite link to
their vessels with a personal computer using ORBIMAGE's proprietary software, or
receive the maps in a hard copy format via facsimile. The Company is continuing
to conduct beta testing with over 50 boats in the Central and South Eastern
Pacific Ocean.
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Mapping and Surveying. The key mapping and surveying markets targeted by
the Company are new construction site selection, utility infrastructure
monitoring and local and regional tax assessment. High-resolution imagery is
used for planning the optimal location for construction projects such as
wireless communication towers, retail development, new housing developments and
highways. For example, telecommunications providers use high-resolution imagery
extensively to determine the topography and land use/land cover classifications
within a region under consideration for new wireless service. This information
enables optimal placement of new communications towers based on the radio signal
transmission characteristics of the region. The Company believes that
high-resolution imagery can also help retail businesses to select the optimal
locations for new businesses by providing valuable information such as
population density, residential versus industrial land use patterns, locations
of competitive businesses, and other factors useful in the site selection
process.
In addition, the Company believes that its high-resolution OrbView imagery
will be used by gas and electric utilities, which are among the largest current
high-resolution aerial imagery users. Spatial data, such as high-resolution maps
showing precise locations of surface features, is critical to planning, design,
construction, operation, marketing and regulatory compliance in connection with
utilities' widely dispersed networks. Finally, ORBIMAGE believes its
high-resolution imagery will be useful to city, county and state tax authorities
in monitoring taxable activities such as residential add-on construction and
tree-cutting on public and private lands.
Agricultural. ORBIMAGE expects agricultural applications to represent a
growing market opportunity, driven by large, commercial farming customers
interested in obtaining up-to-date data on the condition of their crops and
fields. Today, most agricultural customers either are unable to obtain the
requisite imagery, or must rely on direct on-site inspection or aerial
photography at substantial expense. The Company believes products based on
multispectral and hyperspectral satellite imagery will provide timely and
valuable information on the health of crops and assist in managing the
allocation of water, fertilizer and pesticides. In addition, the Company
believes its broad-area multispectral and hyperspectral imagery could increase
the accuracy of crop-yield forecasts and benefit insurance companies, commodity
traders and agricultural products brokers.
Forestry. To date, demand for aerial imagery products in the forestry
industry has been modest due to the high cost, poor resolution and lack of
appropriate revisit time of existing alternatives. The availability of
ORBIMAGE's high-resolution, low-cost imagery products is expected to drive
forestry industry demand for satellite imagery. In particular, ORBIMAGE believes
the multispectral imagery generated by OrbView-2 and the high-resolution OrbView
satellites will be beneficial in monitoring the overall health of forests, and
OrbView-4's hyperspectral imagery will be useful in distinguishing tree
plantations of different species and ages through pattern recognition
techniques. The Company believes this information will be beneficial both to
private forest product companies and to government agencies such as the U.S.
Forest Service.
Mineral Exploration. The Company believes high-resolution OrbView
satellite imagery will also be valuable for oil, gas and mineral exploration
companies for planning operations in remote regions of the world. In many
locations where such exploration occurs there is a great need for improved
mapping information for such activities as planning equipment transport, seismic
field testing and drilling operations. Also, the hyperspectral imagery from
OrbView-4 will be useful for identifying promising locations for new oil, gas
and mineral reserves. Spectral matching techniques will be used to identify
specific "pathfinder minerals" which signify high probability locations for oil,
gas and other mineral reserves.
Scientific/Environmental Market
The scientific/environmental market is comprised of government entities
that use satellite imagery to monitor environmental, climate-related and
meteorological phenomena, both in real-time and over extended time periods, as
well as commercial entities such as airlines, oil and gas companies and
insurance companies who need accurate, timely environmental information over
wide geographic areas. ORBIMAGE is marketing imagery from OrbView-2 to national
government agencies such as NASA, the U.S. Navy, and the Department of
Agriculture. All these agencies currently use aerial and satellite imagery for
diverse
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applications, including weather prediction, monitoring of ocean conditions,
natural disaster assessment, environmental impact studies and similar
applications. Since 1995, OrbView-1 has generated information that has improved
the meteorological community's ability to predict the timing and location of
severe storms including tornadoes and hurricanes. The Company believes
OrbView-2's ability to monitor phytoplankton levels in the world's oceans on a
global basis will be valuable to scientists in studying global climate change
and to coastal fisheries in tracking dangerous and costly "red tide" events. The
Company believes its high-resolution and hyperspectral imagery will be helpful
to government agencies in a variety of environmental applications including
assessment of the damage from natural disasters such as floods, forest fires,
earthquakes and severe storms and the environmental impact of industrial
activities.
U.S. National Security Market
The U.S. government has publicly stated that demand for high-resolution
imagery, especially for use by tactical military commanders in the field, far
exceeds the supply currently provided by its dedicated surveillance satellites.
The Company believes that anticipated additional cutbacks in DoD and NRO
budgets, together with the greater number of areas around the world in which the
U.S. has a military interest, may further drive government agencies' need for
commercially available high-resolution imagery and cause them to place increased
reliance on lower-cost commercial providers. Commercial satellite imagery can
augment current classified government satellite programs which use data, imagery
and related products and services for mapping, reconnaissance, surveillance,
trend analysis, mission planning, and targeting of conventional and "smart"
weapons such as the "Tomahawk" cruise missile. ORBIMAGE believes that it can
capture a significant share of this market once either of the high-resolution
OrbView satellites are operational. ORBIMAGE is performing under a $33 million
contract (with up to $8 million in contract options) to provide real-time
hyperspectral imagery from OrbView-4 to the U.S. Air Force. The U.S. Navy has
also expressed an interest in procuring OrbView-2 imagery for measuring water
clarity and for similar applications. The imagery would assist the U.S. Navy in
determining optimal times, locations and depths for performing laser and sonar
operations relating to mine detection and submarine communication.
Foreign National Security Market
Many countries have a strong national security interest in obtaining
real-time high-resolution satellite imagery to help monitor borders, gather
intelligence on potential adversaries, identify and target enemy troops and
assets, plan missions and deploy resources, and assess battle damage. Many
countries have aerial reconnaissance aircraft, but such aircraft are at risk if
they penetrate foreign air space. The vast majority of foreign countries neither
own nor have access to satellites that generate high-resolution imagery.
Therefore, these countries have only three possible options to collect
high-resolution satellite imagery: (i) develop the technology and build and
launch their own satellites, (ii) purchase and operate a turn-key satellite
system, or (iii) purchase "time-share" capacity from a satellite imagery
company. Developing the technology and manufacturing expertise and then
constructing a dedicated high-resolution satellite system and the infrastructure
to support it requires a sizable financial investment and may require a
substantial time commitment. Purchasing a turn-key high-resolution satellite
system from a company in the United States or another country may be difficult
due to export controls and safeguards relating to national security interests
and licensing requirements. Purchasing a portion of the total capacity of a
commercial satellite while it orbits a foreign government customer's area of
interest provides the same high-resolution imagery capability as other
alternatives, but is less expensive and more readily attainable. This "time
share" arrangement is the one being offered by ORBIMAGE to its regional
high-resolution OrbView imagery distributors.
ORBIMAGE is currently in discussions with several potential regional
distributors in Asia, Europe, the Middle East, Australia, South America and
Southern Africa, and has already entered into the Samsung Agreement for imagery
of the Korean peninsula. The interest expressed by potential regional
distributors during the course of these discussions strengthens ORBIMAGE's
belief that there exists substantial unmet demand for such imagery. The Company
believes that its products and services will provide an effective means for
foreign governments to acquire high-resolution imagery for national security
purposes.
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MARKETING AND DISTRIBUTION
The Company currently plans to market and distribute imagery from
ORBIMAGE's satellite network through (i) ORBIMAGE's direct sales force, (ii)
market- or application-specific VARs, (iii) foreign regional distributors, and
(iv) the OrbNet Digital Archive.
Direct Sales. ORBIMAGE's initial strategy for direct sales is to market
and sell its basic imagery products to U.S. government agencies or to companies
with internal image processing capabilities (e.g. large oil and gas producers).
Since mid-1995, ORBIMAGE has delivered OrbView-1 atmospheric imagery directly to
NASA on a daily basis. Since October 1997, NASA and its authorized researchers
have been directly downlinking OrbView-2 imagery at their own ground receiving
stations. ORBIMAGE may also directly market and will distribute its products and
services, such as fishing maps to commercial and scientific customers worldwide.
ORBIMAGE will continue to market its products and services directly to the
U.S. military services, U.S. intelligence gathering agencies, other U.S.
governmental customers and foreign governments that do not wish to purchase
imagery products through a regional distributor. The Company anticipates that
imagery for these customers will either be downlinked directly to the customers'
existing ground receiving stations (which will be upgraded to be
OrbView-compatible), or to ORBIMAGE's U.S. central ground station and then
delivered to the applicable end user.
Value-Added Resellers. While ORBIMAGE expects to perform certain
value-added services internally (as it is doing with certain OrbView-2 products
such as the fishing maps), the Company also intends to distribute its imagery to
end users through VARs who process it into complex maps and other types of
products for specific markets or applications. Currently, there are numerous
VARs located in the United States and other countries processing imagery derived
from existing satellite imagery providers and aerial photographers. The Company
intends to work with VARs who have technological expertise and know-how to
produce more complex products, and who have a strong presence within and
knowledge of a certain industry. ORBIMAGE is currently in discussion with a
number of VARs located around the world with expertise in industries such as
agriculture , mining and oil and gas exploration, as well as with several VARs
who process raw imagery into specific product types, such as digital elevation
maps, for a broad base of customers.
Foreign Regional Distributors. The Company expects to sell high-resolution
OrbView satellites imagery in the international market principally through
exclusive arrangements with various regional distributors. The Company expects
that its distribution agreements will give foreign regional distributors
priority in "tasking" the satellite's camera while the satellite is over its
geographic region. ORBIMAGE generally expects to retain the right to market and
sell imagery of a distributor's territories, although the Company will pay the
distributor a royalty for these sales. In certain cases, the Company may agree
that a distributor's approval is required for certain sales of imagery,
including sales to specified customers or of specific areas. It is anticipated
that a single geographic distribution region normally will have a maximum radius
of approximately 2,400 kilometers from the ground station (this is the maximum
range that the satellite can communicate with the ground station on a given
orbital pass), although the precise size of each region will be negotiable.
ORBIMAGE has OrbView-2 distributors in Canada and Chile, and is in
discussions with potential OrbView-2 distributors in Asia and Europe. ORBIMAGE
has entered into the Samsung Agreement for imagery of the Korean peninsula and
is in discussions with potential regional distributors in the Middle East,
Europe, Asia, Australia, South America and Southern Africa for high-resolution
OrbView imagery.
The Company anticipates that its regional distribution agreements will
generally provide for significant annual minimum guaranteed royalty payments,
additional royalties for taskings or image purchases above agreed minimums, and
the purchase of a regional ground station. ORBIMAGE will also provide training
and technical support services to regional distributors, the extent and price of
which will be negotiated on a case-by-case basis.
OrbNet Digital Archive and Database. The fourth method of marketing
imagery is an on-line electronic catalog called the OrbNet Digital Archive. The
OrbNet Digital Archive will be a comprehensive, digital-imagery database in
which the Company collects, stores and distributes imagery derived from its
satellites and
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other satellite and aerial sources. The Company may then deliver the images to
customers over the Internet, on CD or computer tape. Through strategic alliances
with existing imaging satellite operators, aerial photography firms and imagery
VARs, ORBIMAGE intends to gain early recognition as an electronic depository for
a comprehensive digital imagery catalogue consisting of a broad range of diverse
imagery products primarily targeted to the commercial/consumer and
scientific/environmental markets. The Company is in preliminary discussions with
one existing satellite company and various aerial imaging companies regarding
imagery distribution opportunities through the OrbNet Digital Archive.
Imagery will be directed from the satellites to ground receiving stations
or VARs, where images will be processed, copies made and images forwarded to the
central archive. OrbView-2 imagery is directly downlinked from the satellite to
individual satellite receiving stations strategically located around the world
and forwarded to the central OrbNet Digital Archive in Dulles, Virginia. The
Company expects the OrbNet Digital Archive will commence operation in the second
half of 1998 offering OrbView-2 imagery products.
RISK MITIGATION
ORBIMAGE has adopted a comprehensive strategy to mitigate the financial,
business and technical risks associated with market development and satellite
development, satellite construction, launch and operations.
Market Development. ORBIMAGE has reduced, and seeks to continue to reduce,
the financial risks associated with constructing and operating its fleet of
satellites by negotiating pre-launch contracts with customers and/or
distributors. Customers have entered into imagery contracts providing for
minimum payments to the Company totaling approximately $100 million, of which
the Company has received approximately $48 million to date through March 31,
1998, and expects to receive up to $12 million through the end of 1998. See
"Risk Factors -- Contracts." To further facilitate market penetration, the
Company is also seeking to develop strategic alliances with VARs who currently
provide imagery products to customers in industries such as oil and gas
exploration, mining, agriculture, forestry, fishing and cartography.
Construction and Launch. ORBIMAGE has entered into the Procurement
Agreement with Orbital to build and launch the high-resolution OrbView
satellites, and to construct the related ground system. The majority of the
imagery technology and the sub-system components to be used in the
high-resolution OrbView satellites has been deployed in U.S. government
surveillance and other space programs prior to their use by ORBIMAGE. In
addition, the high-resolution OrbView satellites incorporate system redundancies
for certain critical components. Also, with an approximate 90% launch success
rate Orbital's Pegasus launch vehicle has a proven track record of successfully
launching satellites into their target orbit.
Operations. The OrbView-3 and OrbView-4 satellite systems have
substantially similar performance parameters, with OrbView-4 additionally having
hyperspectral imagery capability. The high-resolution OrbView satellites are
expected to be launched within a year of each other, thus reducing the business
risk from launch and operational failure and resulting in a more robust
satellite system.
SATELLITE AND GROUND SYSTEM OPERATIONS
ORBIMAGE's basic system architecture consists of several major components:
(i) a fleet of low-Earth orbit, advanced-technology small imaging satellites
carrying sophisticated sensors that collect specific types of land, ocean and
atmospheric imagery; (ii) a central U.S. ground system that controls the
satellites and that receives, processes and archives their imagery, and includes
electronic cataloging and distribution capabilities; and (iii) foreign regional
receiving and distribution centers with direct downlinking capabilities. The
Company believes that its system will provide global economies of scale in image
collection, processing and distribution. In particular, the Company believes the
system design will enable it to collect, produce and sell spatial and
spectral-resolution imagery on a worldwide scale every day, as the OrbView
satellites circle the Earth every 90-100 minutes and are "time shared" over many
different geographic areas.
OrbView-1 was launched in April 1995. It has operated successfully since
then and the Company now expects it to exceed its original three-year design
life. OrbView-2 was launched in August 1997 and initiated commercial operations
in October 1997. OrbView-3 and OrbView-4 are scheduled to be operational in the
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second half of 1999 and mid-2000, respectively. The OrbView satellites represent
a progression in space imaging technology and demonstrate Orbital's use of
proven technologies and system experience. The incremental progression in both
spatial and spectral satellite imaging capabilities among the OrbView satellites
mitigates technical risks. The OrbView satellites employ lightweight structures,
advanced sensors, miniaturized electronics, and innovative technical processes
designed to provide high performance at relatively low cost. In the construction
of the high-resolution OrbView satellites, Orbital will draw upon its satellite
imaging experience not only from OrbView-1 and OrbView-2, but also from large
national satellite programs like Landsat 4 and Landsat 5 to minimize overall
program risk. The OrbView-1 and OrbView-2 satellites are, and the
high-resolution OrbView satellites will be, commanded and controlled from
ORBIMAGE's main operations center located in Dulles, Virginia.
The following table summarizes the primary technical characteristics of the
four OrbView satellites.
<TABLE>
<CAPTION>
ORBVIEW-1 ORBVIEW-2 ORBVIEW-3 ORBVIEW-4
------------------ ------------------ --------------------- ---------------------
<S> <C> <C> <C> <C>
Principal Applications Weather, Weather, Fishing, Mapping, Agriculture, Mapping, Agriculture,
Scientific Agricultural, Oil and Gas, National Oil and Gas,
Research Scientific Security Forestry, Mining,
Research National Security
Best Ground Resolution 10 km Panchromatic 1 km Multispectral 1 m Panchromatic 1 m Panchromatic
4 m Multispectral 4 m Multispectral
8 m Hyperspectral
Scene-Width 1,300 km 2,800 km 8 km Panchromatic and 8 km Panchromatic and
Multispectral Multispectral
5 km Hyperspectral
Image Area N.A. N.A. 64 km(2) 64 km(2) Panchromatic
Panchromatic and and Multispectral
Multispectral 100 km(2)
Hyperspectral
On-Board Storage 80 Megabytes 128 Megabytes 4 Gigabytes 4 Gigabytes
Revisit Time 12 Days 1 Day <3 Days(1) <3 Days(1)
Orbital Altitude 740 km 705 km 470 km 470 km
Design Life 3 Years(2) 7 1/2 Years 5 Years 5 Years
</TABLE>
- ------------------------------
(1) The combined revisit time of both the high-resolution OrbView satellites
will be less than 2 days.
(2) Based on current performance, the Company expects the satellite to exceed
its design life.
ORBVIEW-1 SATELLITE
The OrbView-l satellite contains two atmospheric sensors providing
weather-related imagery to U.S. government customers. The first sensor, a
miniaturized camera, provides daily severe weather images and global lightning
information. It also records cloud-to-cloud lightning strikes that are not
observable from the ground and which provide information that may improve
tornado and hurricane prediction accuracy. OrbView-1 also measures variations in
radio signals through various parts of the atmosphere near the Earth's horizon
to develop atmospheric temperature, pressure, and water vapor profiles. This
technique enables efficient gathering of worldwide atmospheric temperature
information for domestic and international meteorological agencies and airline
operators, among other users.
The OrbView-1 satellite weighs 167 pounds and provides about 100 watts of
power with 55 watts available to its wide-field-of-view sensors. The on-board
solid state recorder memory permits storage of a half day's imagery for
transmission at two megabits per second to ORBIMAGE's primary U.S. ground
station. The satellite has a design life of three years, but is expected to be
operable for a somewhat longer period into 1999 or 2000.
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ORBVIEW-2 SATELLITE
The OrbView-2 satellite was launched in August 1997 and is believed to be
the world's only operational satellite providing global color imagery of the
entire Earth's surface on a daily basis. OrbView-2 uses eight spectral bands in
the visible and near-infrared spectrum to detect subtle color changes on the
Earth's surface. It is expected to perform for at least 7 1/2 years due to its
advanced redundancy architecture. The 660-pound OrbView-2 was launched into a
sun-synchronous orbit at an altitude of 705 kilometers, which together with its
wide-field-of-view sensor allows for complete global coverage every day.
OrbView-2 delivers ocean and land color imagery at both one-kilometer resolution
and at four-kilometer resolution. OrbView-2 is capable of downlinking imagery to
both ORBIMAGE's primary and backup ground stations and to various regional
receiving stations around the world. Orbital owns the OrbView-2 satellite and
the Company operates the OrbView-2 satellite under the OrbView-2 License.
HIGH-RESOLUTION ORBVIEW SATELLITES (ORBVIEW-3 AND ORBVIEW-4)
The high-resolution OrbView satellites, the first of which is currently
targeted to be operational in the second half of 1999, have been designed to
provide one-meter panchromatic imagery and four-meter multispectral imagery of
the Earth's surface. OrbView-4 will have similar capabilities to OrbView-3 and,
in addition, will provide eight-meter hyperspectral imagery. The high-resolution
OrbView satellites will have substantially similar performance capabilities,
reducing the impact of a satellite failure and increasing revisit frequency,
thus improving ORBIMAGE's overall capacity to supply timely imagery to its
customers. Imagery will be either downlinked in real-time to regional ground
stations or stored on board the satellite and subsequently downlinked to the
U.S. central ground station. Copies of most imagery downlinked to regional
ground stations will be forwarded to the OrbNet Digital Archive.
The partially redundant designs of the high-resolution OrbView satellites
provide an expected life of at least five years for each satellite. This system
builds upon the technical accomplishments of earlier ORBIMAGE and other Orbital
satellites, further refining the lightweight structures and microprocessor-based
high performance electronics used in these satellites. The high-resolution
OrbView satellites are designed to provide maximum maneuvering agility together
with a stable optical platform for high quality image collection. The compact
design is expected to facilitate the satellite's maneuverability and agility,
while short solar arrays are expected to help keep unwanted satellite motion and
vibration to negligible values.
The high-resolution OrbView satellites each will have an orbital altitude
of 470 kilometers and polar inclination. This should enable each satellite to
image any point on the Earth within three days or less. Once both satellites are
in orbit, the effective revisit time is expected to be less than two days. The
polar inclination will keep the orbit sun-synchronous and will have an orbital
orientation that places the satellite over the imaging area at approximately
10:30 a.m. "solar time" every orbit. The orbital path of the high-resolution
OrbView satellites is expected to pass over the territory covered by a typical
regional ground station an average of 1.7 times each day, providing 12 1/2
minutes of imagery time (assuming 25 degrees latitude ground station location)
and producing approximately 200 images per day (assuming a certain mix of image
types per territory). While each satellite is within communications range of the
regional ground station every day, each satellite is designed to revisit any
specific target every three days or less. Revisit frequency will be reduced to
less than two days with both OrbView-3 and OrbView-4 in operation. This is
because the satellite's high-resolution "seeing" range (approximately 940
kilometers in diameter) is less than its communications range (approximately
4,800 kilometers in diameter).
The Company expects the total annual realizable capacity of each of the
high-resolution OrbView satellites to be approximately 400,000 to 500,000
images, depending on customer preferences for the various images available and
certain operating assumptions, including cloud cover of targeted areas and
availability of regional ground systems.
GROUND OPERATIONS CENTERS AND IMAGE PROCESSING FACILITIES
ORBIMAGE's central U.S. ground stations monitor the OrbView satellites
while they are in orbit and commands the satellites as required to ensure that
proper orbits are maintained, that battery power stays
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within acceptable limits and that appropriate communications links are
maintained. For the high-resolution OrbView satellites, ORBIMAGE will also
transmit commands to the sensor on board the satellite providing the longitude
and latitude of areas to be imaged on upcoming orbital passes. This latter
function involves receiving, prioritizing and uplinking to the satellite the
image requests received from ORBIMAGE's domestic customers and foreign regional
distributors.
The image receiving and processing center for the family of OrbView
satellites is also located at ORBIMAGE's U.S. facility and will consist of
several ground antennas capable of receiving down-linked imagery from the
satellites and numerous work stations where the digital imagery streams from the
satellites are processed and converted into useful imagery products. The center
is being designed to be capable of processing and archiving 6,500
high-resolution OrbView satellite images per day. It is also designed to process
a sample of each image for placement in the OrbNet Digital Archive accessible by
customers using the Internet. ORBIMAGE's ground stations and image recovery and
processing center currently operate and downlink and process imagery from the
OrbView-1 and OrbView-2 satellites. The Company expects its ground network to be
compatible with OrbView-3 and OrbView-4 by the respective time each such
satellite is launched.
The imagery collected by OrbView-2 and the high-resolution OrbView
satellites is designed to either downlink directly to a user or be stored
on-board for later downlink to an ORBIMAGE ground station located in the United
States. OrbView-2 and the high-resolution OrbView satellites have been designed
to image and downlink simultaneously, so users with a compatible ground station
can receive real-time imagery for the full time that the satellite is in view of
a ground station. With one station in Dulles, Virginia and a planned second
station in Alaska, high-resolution and hyperspectral OrbView imagery is expected
to be downlinked on three of every four passes for subsequent processing,
archiving and distribution by ORBIMAGE. This procedure ensures timely delivery
of imagery to even those customers without a dedicated ground station. The
high-gain directional antenna on board the high-resolution OrbView satellites,
which continually tracks the ground station, is expected to provide a strong
signal to the ground with resulting very low transmission errors. Even with
compression and encryption of the signal, coding and transmission errors are
expected to be insignificant.
COMPETITION
ORBIMAGE's satellite and aerial imaging competitors include (i) small,
regional aerial photography firms, (ii) a limited number of existing satellite
imagery providers, and (iii) other anticipated high-resolution satellite imagery
providers.
Existing Aerial Photography Firms. The major source of commercial
high-resolution imagery today is aerial photography. This market is very
fragmented, with numerous small, regional firms located all over the world. Most
aerial photography firms currently use film-based technology rather than the
digital camera technology used by OrbView satellites. ORBIMAGE expects that its
satellites will provide customers with higher resolution and/or lower cost
imagery than is provided by existing aerial photography firms.
Existing Satellite Imagery Providers. OrbView-1 and OrbView-2 have no
existing direct competitors for their daily panchromatic and multispectral
imagery. SPOT 4 (operated by SPOTImage) provides multispectral imagery that
could be competitive with OrbView-2 in certain markets, such as agricultural
assessment. There are four existing satellite-based providers of low-resolution
imagery: (i) SPOTImage S.A., a French-owned company, currently produces
unprocessed imagery using three satellites with resolution capability of 10
meters panchromatic and 20 meters multispectral; (ii) Space Imaging EOSAT's
Landsat 4 and Landsat 5 satellites, provide coverage in seven spectral bands
covering the visible to infrared parts of the spectrum, but, the best resolution
of these satellites is 30 meters in multispectral; (iii) Radarsat-I, operated by
the Canadian Space Agency, provides radar imagery with a resolution that varies
between 10 and 100 meters (Radarsat-II, which will provide three-meter radar
imagery, is scheduled for launch in 2001); (iv) KVR-1000, a Russian government
satellite, provides film-based, two-meter resolution panchromatic images; and
(v) IRS-IC, an Indian Space Agency satellite, provides six-meter panchromatic
and 25 meter multispectral imagery. ORBIMAGE currently views these providers as
indirect competitors to the high-resolution OrbView satellites in certain
markets. See "Risk Factors--Technological, Development and Implementation
Risks."
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Future Satellite Competitors. The high-resolution OrbView satellites are
expected to face future competition in the satellite imagery market from two
U.S. satellite competitors who are planning imaging satellites that will have
one-meter panchromatic and four-meter multispectral capability: Space Imaging
EOSAT, which is owned by Lockheed Martin Corporation, Raytheon Company and
Mitsubishi Corporation; and EarthWatch, which is owned by Ball Aerospace and
Technology Corporation, Telespazio and Hitachi, Ltd. In addition, the U.S.
government and foreign governments may fund the development, construction,
launch and operation of remote imaging satellite systems that may compete with
OrbView-2 as well as the high-resolution OrbView satellites. For example, NASA's
Earth Science Program is sponsoring a satellite scheduled for launch next year
that will provide imagery similar to that of OrbView-2.
EMPLOYEES
As of May 31, 1998, the Company had 78 employees. None of the Company's
employees is represented by a collective bargaining agreement.
PROPERTIES
The Company currently leases approximately 13,000 square feet of office and
operations space in Dulles, Virginia from Orbital, at Orbital's cost. See
"Relationship with Orbital Sciences Corporation--Services Agreement." The
Company also leases approximately 8,000 square feet of office and operations
space in St. Louis, Missouri.
LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings material to its
financial condition or results of operations. For a discussion of regulatory
issues affecting the Company, see "Regulation."
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REGULATION
The satellite remote imaging industry is a highly regulated industry, both
domestically and internationally. In the United States, remote imaging
satellites generally require licenses from the Department of Commerce ("DoC")
and from the Federal Communications Commission ("FCC"). In addition, in order to
operate internationally, remote imaging satellites generally require licenses
from the governments of foreign countries in which imagery will be directly
downlinked.
UNITED STATES REGULATION
DoC REGULATION. The DoC, through the National Oceanic and Atmospheric
Administration ("NOAA"), is responsible for granting commercial imaging
satellite operating licenses, coordinating satellite imaging applications among
several governmental agencies to ensure that any license addresses all U.S.
national security concerns and complying with all international obligations of
the United States. Under the provisions of the Company's DoC licenses, the U.S.
government reserves the right to interrupt service during periods of national
emergency when U.S. national security interests are affected. The threat of such
interruptions of service could adversely affect the Company's ability to market
its products to certain foreign distributors or end-user customers. In addition,
the DoC has the right to review and approve the terms of agreements with the
Company's international customers and distributors. The OrbView-1 satellite is
not subject to DoC-NOAA regulation since its imagery can be sold only to the
U.S. government.
Orbital currently holds the DoC license for OrbView-2 because of the terms
of its agreement with NASA. This arrangement however, does not affect the
Company's rights under the OrbView-2 License. ORBIMAGE currently has a DoC
license for two one-meter high-resolution satellites. ORBIMAGE also filed an
application with the DoC to permit the Company to make OrbView-4 hyperspectral
imagery available commercially. There can be no assurance that DoC will grant
the amendment request, or that the agency will take such action in a manner
consistent with the Company's planned schedule for launch and operation of
OrbView-4. If the DoC fails to grant the Company's amendment request regarding
its ability to sell hyperspectral imagery commercially, ORBIMAGE would be
limited to selling such imagery to U.S. government customers.
The DoC licenses for OrbView-2 and the high-resolution OrbView satellites
expire in 2004. While the Company believes that the DoC would renew its licenses
at that time, the DoC's failure to do so with respect to the high-resolution
OrbView satellites could materially affect the Company's business.
NTIA AND FCC REGULATION. The DoC also regulates federal governmental use
of certain imagery satellite systems through the National Telecommunications and
Information Administration ("NTIA"). The NTIA regulates and manages domestic use
of the radio frequency spectrum by U.S. federal agencies. An NTIA license
permits a downlink only to a federal governmental agency, although the federal
agency is not generally restricted as to subsequent distribution of its imagery.
The FCC is responsible for licensing the radio frequencies used by commercial
satellite imagery systems. In general, the FCC grants licenses to commercial
satellite systems that conform to the technical, legal and financial
requirements for such systems as set forth by the FCC.
The OrbView-1 satellite operates in a government exclusive frequency and,
accordingly, is regulated by NTIA. The NTIA license for OrbView-1 is contingent
on NASA retaining full operational control of the OrbView-1 satellite, and the
data collected from the OrbView-1 sensors are the property of the United States.
The operation of OrbView-2 is regulated by both the NTIA and the FCC.
Orbital has an FCC license to operate and receive 1-kilometer imagery from
OrbView-2. In addition, NASA has the NTIA license to downlink 4-kilometer
OrbView-2 imagery on a government-only frequency. The imagery downlinked by NASA
is used by government researchers and also is currently provided to ORBIMAGE for
ORBIMAGE's commercial customers.
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In early February 1998, the Company filed an application with the FCC for a
license to launch and operate the high-resolution OrbView satellites, and to
obtain a frequency allocation in the FCC's Earth Exploration-Satellite Service
("EESS"), in order to transmit wideband imagery directly to Earth for commercial
use and to perform telemetry, tracking and command ("TT&C") of the satellites.
Currently, two of the Company's potential satellite-based competitors,
EarthWatch and Space Imaging EOSAT, hold licenses to use the same frequency band
that the Company intends to use for such imagery transmissions, and the band is
allocated by the FCC for use by other EESS licensees, as well as terrestrial
fixed and mobile services. These other primary users of the spectrum will have
the opportunity to comment on the feasibility and public policy benefits of an
FCC approval of the Company's application. The Company believes that a spectrum
sharing arrangement among ORBIMAGE, EarthWatch, Space Imaging EOSAT and other
primary users of the requested frequency allocation may be necessary, and if so,
that successful sharing and coordination will be achievable with the other
users' systems through techniques such as time sharing and frequency diversity,
with no adverse impact on the Company's ability or plans to operate the
high-resolution OrbView satellites. There can be no assurance, however, that the
Company will be able to coordinate successfully with other spectrum users, or
more generally, that the Company will receive the necessary FCC authorization to
launch and operate the high-resolution OrbView satellites as planned. Failure of
ORBIMAGE to do so could have a material adverse effect on its business.
The Company could in the future be subjected to new laws, policies or
regulations, or changes in the interpretation or application of existing laws,
policies and regulations, that modify the present regulatory environment in the
United States. There can be no assurance that limitations applicable to other
countries, or other regulatory limitations affecting satellite remote sensing
operations, will not be imposed by U.S. regulators. Any such limitations could
adversely affect the Company's business.
INTERNATIONAL REGULATION
All satellite systems operating internationally are subject to general
international regulations and the specific laws of the countries in which
satellite imagery is downlinked. Applicable regulations include (i)
International Telecommunications Union ("ITU") regulations, which define, for
each service, the technical operating parameters (including maximum transmitter
power, maximum interference to other services and users, and the minimum
interference the user must operate under for that service), (ii) the Intelsat
and Inmarsat agreements which provide that in order to conform with
international treaties and obligations the operators of international satellite
systems must demonstrate that they will not cause technical harm to Intelsat and
Inmarsat, and (iii) regulations of foreign countries that require that satellite
operators secure appropriate licenses and operational authority for utilization
of the required spectrum in each country.
The United States government, on behalf of the Company, is required to
coordinate the frequencies used by OrbView-2 and the high-resolution OrbView
satellites, which will operate internationally. ITU frequency coordination is a
necessary prerequisite to international registration, which provides
interference protection from other international EESS satellite systems. In
addition, it is a necessary prerequisite for the issuance of approvals and
licenses from certain foreign countries. The ITU coordination process has been
completed for OrbView-2, and the Company intends to have the U.S. government
initiate the ITU coordination process for the high-resolution OrbView satellites
as quickly as possible. The Company believes that the ITU registration process
will not prevent it from obtaining necessary foreign licenses on a timely basis.
In addition to compliance with ITU regulations and coordination processes,
the Company must also demonstrate that it will not cause technical harm to
Intelsat and Inmarsat, pursuant to the Intelsat and Inmarsat Agreements signed
under international treaty. The Company has completed this process for
OrbView-2, and believes that because of the frequencies it intends to use, the
high-resolution OrbView satellites will not cause any technical harm to the
Intelsat or Inmarsat systems.
Within foreign countries, the Company expects that its regional
distributors or customers will secure appropriate licenses and operational
authority for utilization of the required spectrum in each country into which
the high-resolution OrbView satellite imagery will be downlinked. For the most
part, the Company
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anticipates that these activities will be performed by its distributors or
customers, with the Company's assistance when required.
While the Company believes that it will be able to obtain all U.S. and
international licenses and authorizations necessary to operate effectively,
there can be no assurance that it will be successful in doing so. The failure of
the Company to obtain some or all necessary licenses or approvals could have a
material adverse effect on the Company's business.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the directors and executive officers of
ORBIMAGE as of the date of this Prospectus.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- -------------------- --- -------------------------------------------------
<S> <C> <C>
David W. Thompson 44 Chairman of the Board and Chief Executive Officer
Gilbert D. Rye 56 President and Chief Operating Officer
Edward D. Nicastri 50 Vice President, Engineering and Operations
Armand D. Mancini 40 Vice President, Chief Financial Officer
James A. Abrahamson 65 Director
Bruce W. Ferguson 43 Director
Richard Reiss, Jr. 53 Director
William W. Sprague 39 Director
</TABLE>
DAVID W. THOMPSON is the Chairman and Chief Executive Officer of ORBIMAGE
and the Chairman, President and Chief Executive Officer of Orbital. Mr. Thompson
co-founded Orbital in 1982. Prior to founding Orbital, Mr. Thompson was employed
by Hughes Electronics Corporation as Special Assistant to the President of its
Missile Systems Group and by NASA at the Marshall Space Flight Center as a
project manager and engineer, and also worked at the Charles Stark Draper
Laboratory on the Space Shuttle's autopilot design.
GILBERT D. RYE is the President and Chief Operating Officer of ORBIMAGE, a
position he has held since 1993. From 1990 to 1993, he was Orbital's Senior Vice
President for Marketing and Business Development. Between 1985 and 1989, Mr. Rye
was President of Comsat Government Systems (a subsidiary of Comsat Corporation)
and Vice President and General Manager of Space and Technology for BDM
International. Mr. Rye is a retired Colonel from the U.S. Air Force with over 25
years of experience in various intelligence and space-related program management
and policy-making positions.
EDWARD D. NICASTRI has been the Vice President of Engineering and
Operations for ORBIMAGE since 1997. From 1994 to early 1997, Mr. Nicastri served
as Vice President for Advanced Projects with Orbital's Space Systems Division.
Prior to joining Orbital in 1994, Mr. Nicastri was Director of Space Systems at
the Defense Advanced Research Projects Agency (DARPA) from 1988 to 1993. Prior
to that Mr. Nicastri served as a Colonel in the U.S. Air Force, holding
positions in the development and operation of several military, satellites and
other national space systems.
ARMAND D. MANCINI was appointed Vice President, Chief Financial Officer of
the Company in March 1998. He had been the Vice President of Finance since
October 1994. From September 1991 to September 1994, Mr. Mancini was the Vice
President of Finance for Orbital's Communications and Information Systems Group
and Space Systems Division. Prior to that, Mr. Mancini worked as a senior
manager with various defense contractors who provide training and classified
weapons systems to the U.S. government.
JAMES A. ABRAHAMSON, has been a director of the Company since April 1998.
Mr. Abrahamson currently serves as Chairman and Chief Executive Officer of
StratCom, LLC and Air Safety Consultants. From 1992 to 1995, he served as
Chairman of Oracle Corporation. He served as Executive Vice President for
Corporate Development for Hughes Aircraft Company from October 1989 to April
1992 and President of the Transportation Sector for Hughes Aircraft Company from
April 1992 to September 1992. Mr. Abrahamson directed the Strategic Defense
Initiative from April 1984 until he retired from the Air Force in January 1989
at the rank of Lieutenant General. Mr. Abrahamson is also a director of Western
Digital Corporation and Stratesec Corporation.
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BRUCE W. FERGUSON has been a member of the Board of Directors since 1993.
Mr. Ferguson is a co-founder of Orbital and a member of its Board of Directors.
He has been Senior Vice President, Special Projects of Orbital since 1997.
Previously, he was Executive Vice President and General Manger/Communications
and Information Services Group of Orbital from 1993 until 1997. Mr. Ferguson was
Executive Vice President and Chief Operating Officer of Orbital from 1989 to
1993 and Senior Vice President/Finance and Administration and General Counsel of
Orbital from 1985 to 1989. Mr. Ferguson is a Fellow at the Center for
International Science and Technology Policy and Center for Space Policy at The
George Washington University.
RICHARD REISS, JR. has been a member of the Board of Directors since 1997.
Mr. Reiss founded Georgica Advisors LLC in 1997, a private investment firm, to
make both public and private investments in the communications, media and
entertainment industries. From 1982 to 1997, Mr. Reiss was the Managing Partner
of Cumberland Associates, a private investment firm, which he joined in 1978,
and Cumberland Partners and LongView Partners, both investment partnerships.
From 1969 to 1977, Mr. Reiss was Senior Vice President and Director of Research
for Shearson Lehman Brothers. Mr. Reiss is a Trustee and Treasurer of Barnard
College and a Trustee of the Manhattan Institute. He is also a Director of The
Lazard Funds, Inc., a Director of nStor Technologies and Chairman of the
Executive Committee and a Director of O'Charley's.
WILLIAM W. SPRAGUE has been a member of the Board of Directors since 1997.
Mr. Sprague is the founder and President of Crest International Holdings LLC, a
private investment firm that invests in media and communications companies. From
1989 to 1996, Mr. Sprague served in various positions at Smith Barney, Inc.,
including as a Managing Director and Head of the Media and Telecommunications
Group, as Co-head of the Mergers and Acquisitions Group and as a senior member
of Smith Barney Inc.'s high yield group. From 1985 to 1989, Mr. Sprague was a
Vice President at Kidder Peabody & Co. Incorporated in the High Yield/Merchant
Banking Group. Mr. Sprague is currently a director of Centennial Communication
Inc., Ethan Allan Interiors Inc., TelQuest Ventures LLC, Wave Transnational LLC,
and One-On-One Sports, Inc.
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned for services
rendered to the Company in the fiscal year ended December 31, 1997, by its Chief
Executive Officer and the four most highly compensated executive officers in all
capacities in which they served (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
1997 1997
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- -----------------------------
SECURITIES
UNDERLYING
OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS (#) COMPENSATION (1)
--------------------------- -------- -------- ---------- ----------------
<S> <C> <C> <C> <C>
David W. Thompson.............................. $ -- $ -- 40,000 $ --
Chairman and Chief Executive Officer (2)
Gilbert D. Rye................................. 200,000 110,000 50,000 11,658
President and Chief Operating Officer
Edward D. Nicastri............................. 116,000 64,500 90,000 8,488
Vice President, Engineering
Armand D. Mancini.............................. 115,000 39,300 15,000 6,789
Vice President, Chief Financial Officer
</TABLE>
- ------------------------------
(1) Includes matching and profit-sharing contributions earned under a 401(k)
Plan.
(2) Mr. Thompson's salary, bonus and long-term compensation (other than options)
are paid by Orbital.
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STOCK OPTION PLAN
In November 1996, the Board adopted the Stock Option Plan, which provides
for grants of either incentive or non-qualified stock options to officers,
directors and employees of ORBIMAGE and Orbital. Under the terms of the Stock
Option Plan, incentive stock options may not be granted at less than 100% of the
fair market value at the date of grant, and non-qualified options may not be
granted at less than 85% of the fair market value at the date of grant. Each
option under the Stock Option Plan vests at a rate set by the Board in each
individual's option agreement, generally in one-third increments over a
three-year period following the date of grant. Options expire no more than ten
years following the grant date.
As of March 31, 1998, there were 2,424,000 options for Common Stock
outstanding under the Stock Option Plan at exercise prices ranging from $3.60 to
$5.10 per share.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information on grants of stock options to the Named Officers
pursuant to the Stock Option Plan during the fiscal year ended December 31,
1997, which options are reflected in the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
PERCENT OF POTENTIAL REALIZED VALUE
TOTAL OPTIONS AT ASSUMED ANNUAL
NUMBER OF GRANTED RATES OF STOCK PRICE
SECURITIES TO EMPLOYEES APPRECIATION FOR OPTION
UNDERLYING IN EXERCISE OR TERM
OPTIONS FISCAL YEAR BASE PRICE EXPIRATION -------------------------
NAME GRANTED(1) 1997 PER SHARE(2) DATE 5% 10%
---- ----------- ------------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
David W. Thompson........... 40,000 8% $4.17 6/30/07 $104,900 $265,836
Gilbert D. Rye.............. 50,000 10 4.17 6/30/07 131,125 332,295
Edward D. Nicastri.......... 90,000 18 4.17 6/30/07 236,024 598,132
Armand D. Mancini........... 15,000 3 4.17 6/30/07 39,337 99,689
</TABLE>
- ------------------------------
(1) Options vest in one-third increments over a three-year period.
(2) Options are granted at the fair market value on the date of grant, as
determined by the Board of Directors.
The Board has implemented an incentive bonus plan. Members of senior
management are eligible for bonuses equal to between 10% to 50% of their base
salary, based upon their success in meeting certain team and individual
incentives that are defined by the Board.
In September 1997, the Company awarded annual compensation in the amount of
5,000 stock options to non-employee directors of ORBIMAGE.
AGGREGATED OPTIONS YEAR END OPTION VALUES
The following table sets forth the number of options and the value of
unexercised and exercised options held by them as of December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED IN-
UNEXERCISED OPTIONS AT THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David W. Thompson.............................. 100,000 140,000 $57,000 $57,000
Gilbert D. Rye................................. 125,000 175,000 71,250 71,250
Edward D. Nicastri............................. -- 90,000 -- --
Armand D. Mancini.............................. 50,000 65,000 28,500 28,500
</TABLE>
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock and Series A Preferred Stock as of May 31, 1998
(as adjusted to reflect conversion of the Series A Preferred Stock): (i) by each
person who beneficially owns more than five percent of the Series A Preferred
Stock (which votes as a class on certain matters), (ii) by each person who
beneficially owns more than five percent of the Common Stock (including the
Series A Preferred Stock on an as-converted basis), (iii) by each director and
Named Officer, and (iv) by all executive officers and directors as a group. All
persons listed below have an address in care of the Company's principal
executive offices unless otherwise noted.
<TABLE>
<CAPTION>
SHARES OF PREFERRED SHARES OF COMMON
STOCK BENEFICIALLY STOCK BENEFICIALLY
OWNED(1) OWNED(1)(2)
-------------------- ---------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
------------------------ -------- -------- ---------- -------
<S> <C> <C> <C> <C>
Orbital Sciences Corporation................................ -- 25,200,000 63%
21700 Atlantic Boulevard
Dulles, VA 20166
Crest Funding Partners, L.P................................. 184,453(3) 28.4% 4,423,333 10.8
320 Park Avenue
New York, New York 10022
Merrill Lynch KECALP L.P. 1997.............................. 151,901(4) 23.4 3,642,710(4) 8.9
225 Liberty Street
South Tower, 23rd Floor
New York, New York 10080-6123
Morgan Guaranty Trust
Company of New York....................................... 137,157(5) 21.1 3,289,137(5) 8.1
522 Fifth Avenue
New York, New York 10036
Georgica Advisors LLC....................................... 70,088(6) 10.8 1,681,583 4.1
1114 Avenue of the Americas
New York, NY 10036
Export Development Corporation.............................. 79,998 12.3 1,918,417 4.7
151 O'Connor
Ottawa, Canada KIA 1K3
David W. Thompson(7)........................................ -- -- 113,334 *
Gilbert D. Rye(7)........................................... -- -- 141,667 *
Armand D. Mancini........................................... -- -- 50,000 *
Edward D. Nicastri(7)....................................... -- -- 30,000 *
James A. Abrahamson......................................... -- -- -- --
Bruce W. Ferguson(7)(8)..................................... -- -- 114,000 *
William W. Sprague(3)....................................... -- -- -- --
Richard Reiss, Jr.(6) ...................................... -- -- -- --
All executive officers and directors as a group(7)(8)....... -- -- 449,001 *
</TABLE>
- ------------------------------
* Less than one percent.
(1) The persons named in this table have sole voting power with respect to all
shares shown as beneficially owned by them, except as indicated in other
footnotes to this table. In computing the number of shares beneficially
owned by a person and the percentage ownership of that person, shares of
Common Stock subject to options held by that person that are currently
exercisable or exercisable within 60 days after May 31, 1998, are deemed
outstanding. Such shares, however, are not deemed outstanding for the
purpose.
(2) Each of Crest Funding Partners, L.P., Merrill Lynch KECALP L.P. 1997 or
Morgan Guaranty Trust Co., Georgica Advisors LLC or their respective
affiliates, and Export Development Corporation currently own shares of
Series A Preferred Stock. Each share of Series A Preferred Stock is
convertible into approximately 23.9 shares of Common Stock. See "Description
of Capital Stock--Preferred Stock--Series A Preferred Stock--Conversion
Rights."
(3) Includes 134,119 shares owned by Crest Funding Partners, L.P., and 50,334
shares of Series A Preferred Stock. William W. Sprague, a director of the
Company, is the founder and President of Crest International Holdings LLC,
the manager of Crest Funding Partners, L.P.
(4) Includes 22,785 shares owned by KECALP, Inc. and 129,116 shares owned by
Merrill Lynch KECALP L.P. 1997.
(5) Includes 97,250 shares owned by Morgan Guaranty Trust Company of New York,
as Trustee of the Comingled Pension Trust Fund (Multi-Market Special
Investment Fund II) of Morgan Guaranty Trust Company of New York; 19,334
shares owned by Morgan Guaranty Trust Company of New York, as Trustee of the
Multi-Market Special Investment Trust Fund of Morgan Guaranty Trust Company
of New York; and 20,573 shares owned by Morgan Guaranty Trust Company of New
York, as Investment Manager and Agent for the Alfred P. Sloan Foundation
(Multi-Market Account).
(6) Includes 67,846 shares owned by Georgica Partners and 2,242 shares owned by
Georgica Advisors, LLC. Richard Reiss, a director of the Company, is the
founder and President of Georgia Advisors, LLC.
(7) Includes shares of Common Stock issuable upon the exercise of options.
(8) Includes 14,000 shares of Common Stock issued pursuant to option exercises.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCK PURCHASE AGREEMENT
On May 7, 1997 and July 3, 1997, ORBIMAGE sold a total of 372,705 shares of
its Series A Cumulative Convertible Preferred Stock ("Series A Preferred Stock")
for $100 per share to the Series A Holders pursuant to the Stock Purchase
Agreement (the "Initial Sale"). The proceeds of this sale, approximately $37
million, were used, and will be used, by ORBIMAGE for funding a portion of the
purchase of the OrbView satellite systems and the OrbView-2 License, and for
initial operating expenses and other general corporate purposes.
The Series A Holders have purchased an additional $22.7 million of Series A
Preferred Stock pursuant to their rights under the Stock Purchase Agreement.
This Series A Offering was consummated concurrently with the Units Offering,
generating net proceeds of approximately $21 million.
Capital Contributions. As part of the Initial Sale, Orbital made a $34
million payment to the Company consisting of capital contributions of
approximately $88 million plus a payment of $41 million representing payments
previously received by Orbital for OrbView-1 and OrbView-2 data, offset by
approximately $95 million owed by ORBIMAGE to Orbital under the Procurement
Agreement and the Services Agreement. See, "--Procurement Agreement," and
"--Services Agreement."
Board of Directors. Pursuant to the Stock Purchase Agreement, certain
Series A Holders are permitted to attend all meetings of the Board of Directors
as non-voting observers and advisors, and to participate in discussions.
Change of Control. Upon a Change of Control prior to the latest of (i) the
successful in-orbit checkout of OrbView-3, (ii) the closing, under certain
circumstances, of a Qualifying Public Offering, or (iii) the culmination of a
180-day period in which the average price of the Common Stock exceeds a certain
level relative to the Conversion Price, then the Company shall offer to
purchase, subject to the rights of the holders of Notes, all shares of Series A
Preferred Stock then outstanding at a purchase price per share, in cash, equal
to the sum of (x) 101% of the Liquidation Amount and (y) if such Change of
Control occurs prior to the fourth anniversary of the initial issuance of the
Series A Preferred Stock, an amount equal to the dividends that would have
accrued on the shares of Series A Preferred Stock from the date of purchase
pursuant to a Change of Control through and including the fourth anniversary of
the initial issuance of shares of Series A Preferred Stock. A Change of Control
is defined to include: (i) the failure by Orbital to hold at least 12,600,000
shares of Common Stock of the Company (being 50% of the shares of Common Stock
held by Orbital on May 8, 1997, adjusted for stock splits, stock combinations
and the like,) (ii) the failure by Orbital to hold at least thirty percent (30%)
of the Common Stock of the Company on a fully diluted basis, without giving
effect to the conversion of Capital Stock of the Company issued as a dividend
with respect to shares of Series A Preferred Stock or Capital Stock of the
Company issued pursuant to options granted under the Stock Option Plan or any
other option plan adopted for the benefit of the Company's employees or
directors; (iii) the indirect or direct acquisition of Voting Equity Interests
of the Company by any Person or group of Persons acting in concert of beneficial
ownership in an amount greater than or equal to the amount of Voting Equity
Interests held contemporaneously by Orbital, except (x) purchases by record
holders of Series A Preferred Stock as of the Issue date (and their affiliates,
to the extent that such holders are permitted to transfer their shares of Series
A Preferred Stock to affiliates under the Amended and Restated Stock Purchase
Agreement (the "Series A Affiliates") from other holders of Series A Preferred
Stock or their Series A Affiliates and (y) purchases permitted pursuant to the
Series A Holders' subscription rights under Section 4.1 of the Stockholders'
Agreement; (iv) the acquisition of the Company, or the sale, lease, transfer,
conveyance or other disposition, in one transaction or a series of related
transactions, directly or indirectly, including through a liquidation or
dissolution, of all or substantially all of the assets of the Company and its
Restricted Subsidiaries by, or the combination of the Company or all or
substantially all its assets with, another Person (other than any such transfer
to any wholly owned subsidiary of the Company) unless the acquiring or surviving
Person shall be a corporation more than fifty percent (50%) of the combined
voting power of which corporation's then outstanding Voting Equity Interests,
after such acquisition or combination, are owned,
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<PAGE> 70
immediately after such acquisition or combination, by the owners of the Voting
Equity Interests of the Company outstanding immediately prior to such
acquisition or combination; (v) the adoption of a plan relating to the
liquidation or dissolution of the Company (other than any such liquidation or
dissolution to or for the benefit of any wholly owned subsidiary of the
Company); (vi) the failure by the Company to obtain any applicable License (or
License amendment, as applicable) so that it is in full force and effect within
thirty (30) days prior to the scheduled launch of either of the OrbView
Satellites; (vii) the revocation of any License necessary to operate OrbView-2
the high-resolution OrbView satellites consistent with the Company's current and
planned commercial operations and which revocation is not cured within thirty
(30) days of the occurrence thereof or such later date when all applicable
appeals have been finally determined, if during such appeal period the Company
has received regulatory approval to continue operations under the License
pending the outcome of such appeal after exhausting all administrative remedies;
or (viii) unless consented to in writing by the holders of at least fifty
percent (50%) of the shares of Series A Preferred Stock then outstanding, the
acquisition by any Person or group of Persons acting in concert of beneficial
ownership, direct or indirect, of securities of Orbital representing thirty five
percent (35%) or more of the combined voting power of Orbital's then outstanding
equity interests and at any time thereafter either (x) less than a majority of
Orbital's board of directors shall be Continuing Directors or (y) there shall be
an announcement by Orbital or such acquiring Person or group of Persons or the
approval of a business plan by Orbital's Board of Directors, in either case that
indicates an intention to de-emphasize or curtail the relationship between the
Company and Orbital.
STOCKHOLDERS' AGREEMENT
In connection with the Initial Sale, ORBIMAGE, Orbital and the Series A
Holders agreed, pursuant to the Stockholders' Agreement, to certain voting
rights and restrictions upon transfer of the Series A Preferred Stock.
Board of Directors. The Stockholders' Agreement provides that the Board
will consist of up to five (5) members, of which the majority of the Series A
Holders have the right to elect the two Series A Directors (and, may be entitled
to elect two additional board members upon an "Election Event," as more fully
described in "Description of Capital Stock--Series A Preferred Stock--Voting")
and the majority of the holders of the Common Stock (the "Common Holders," and
together with the Series A Holders, the "Shareholders") have the right to elect
two members (the "Common Directors"). The fifth member of the Board is to be an
independent director, elected by the majority vote of the Shareholders, where
each Series A Holder is entitled to vote the number of shares of Common Stock
into which such holder's Series A Preferred Stock would be convertible.
Notwithstanding the foregoing, so long as Orbital retains ownership of fifty
percent (50%) of the voting stock of ORBIMAGE, it has the right to appoint the
final member of the Board with the consent of one of the Series A Directors, and
further, so long as Orbital retains ownership of twenty percent (20%) of the
voting stock of ORBIMAGE, it has the right to appoint one of the two Common
Directors. The majority of a quorum of the Board, including in some cases the
affirmative vote of at least one Series A Director is required before ORBIMAGE
approves certain transactions, including without limitation and subject to
certain exceptions, (i) approve any merger, consolidation or liquidation or sale
of all or substantially all the assets of ORBIMAGE; (ii) approve any
modifications to the Stock Purchase Agreement, the Stockholders' Agreement, the
Procurement Agreement, the Services Agreement or the OrbView-2 License that
affect satellite performance or increase cost by more than $1.0 million, (iii)
issue or commit to issue equity securities or securities convertible into or
exchangeable or exercisable for equity securities, (iv) incur indebtedness for
borrowed money or any capital lease in excess of $0.5 million, (v) select,
approve or remove any officer or (vi) declare any dividends on the Common Stock.
Restrictions on Transfer. Subject to limited exceptions, the Shareholders
have agreed not to transfer, pledge, mortgage, hypothecate or otherwise encumber
any shares of Common Stock or the Series A Preferred Stock. Furthermore, under
certain circumstances, any Shareholder desiring to transfer its Common Stock or
Series A Preferred Stock must give Orbital the right to purchase such shares
subject to transfer upon the same terms as proposed. Conversely, Orbital must
give the Shareholders the right to purchase a proportionate amount of the Common
Stock or Series C Preferred Stock ("Series C Preferred") in the event Orbital
offers
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or accepts an offer to transfer such Common Stock or Series C Preferred. In the
event Orbital proposes to transfer any shares of Common Stock or Series C
Preferred, the Series A Holders will have the right to sell a proportionate
amount of their Series A Preferred Stock ("Tag-Along Rights"). Additionally, if
seventy percent (70%) of the Common Holders (on a fully diluted basis) propose
to transfer seventy percent (70%) or more of the Common Stock (on a fully
diluted basis), the Series A Holders may be required to convert their Series A
Preferred Stock into Common Stock and transfer such Common Stock to the proposed
transferee ("Drag-Along Rights").
Subscription Rights. Upon certain non-public issuances of any equity
securities (including any warrants, options or other rights to acquire equity
securities) of the Company (excluding the issuance of the Warrants hereby and
subject to other certain exceptions), ORBIMAGE must first (i) give all Series A
Preferred Holders written notice of the terms of the offering and (ii) offer to
issue to such Series A Preferred Holders a proportionate amount of the offering
based upon each Series A Preferred Holders current ownership in ORBIMAGE. The
rights described in this paragraph will expire upon a public offering of the
Common Stock.
Registration Rights. Certain holders of more than thirty-five percent
(35%) of the then issued and outstanding Common Stock may demand that the
Company file up to three (3) registration statements that would permit the sale
and distribution of such Common Stock after 180 days of an initial public
offering of Common Stock or at any time after June 30, 2002 if the Company has
not consummated an initial public offering of Common Stock registered under the
Securities Act, subject to customary underwriter's cutback requirements.
Furthermore, if the Company determines to register any of its Common Stock
(excluding the registration of Common Stock incidental to the registration of
convertible securities), except for registrations on, among others, Form S-8 or
Form S-4, the Common Holders may include their Common Stock within such
registration statement, subject to customary underwriter's cutback requirements.
PROCUREMENT AGREEMENT
ORBIMAGE and Orbital have entered into the Procurement Agreement, pursuant
to which Orbital agreed to provide to ORBIMAGE: (i) the design, development,
construction and launch of the OrbView-1 satellite; (ii) the OrbView-2 License
to market OrbView-2 imagery, including the right to receive all payments
received by Orbital under Orbital's contract with NASA; (iii) the design,
development, construction and launch of the high-resolution OrbView satellites;
and (iv) the U.S. central imagery receiving, processing, and command and control
ground segment for all four OrbView satellites. Orbital (or its subcontractors)
will retain ownership of all intellectual property rights underlying the
OrbView-1, OrbView-2, the high-resolution OrbView satellites and ground systems,
and has granted ORBIMAGE a license to use the necessary intellectual property
for the operating OrbView satellites.
The total cost of the OrbView-1 and the high-resolution OrbView satellites,
the OrbView-2 License and the U.S. ground system is estimated to be
approximately $297 (of which $295 is provided for in the Procurement Agreement)
million, which includes all satellite design, construction and launch costs and
hyperspectral capability, but excludes insurance costs. Of this amount, the
Company has spent approximately $149 million as of March 31, 1998. The Company
expects to spend approximately $126 million to complete the high-resolution
OrbView satellites and $22 million to complete modifications to the U.S. ground
system. ORBIMAGE generally pays the costs under the Procurement Agreement in
accordance with a monthly schedule that is based upon Orbital's costs incurred,
with the balance of the remaining costs paid upon completion of certain
specified project milestones such as critical design review and launch events.
Furthermore, ORBIMAGE has agreed to pay Orbital an extended performance
incentive of $1 million per year (or a pro rata amount thereof) in the event the
high-resolution OrbView satellites remain operational in orbit beyond their five
year contracted life. While the modifications to OrbView-4 to add hyperspectral
capability will be paid for by ORBIMAGE under the Procurement Agreement,
ORBIMAGE's payment obligations are limited to advance contract payments it
receives from the U.S. Air Force for hyperspectral imagery. See "Risk
Factors--Contracts."
Delivery by Orbital and passing of the risk of loss from Orbital to
ORBIMAGE of the OrbView-3 satellite will occur upon separation of the Pegasus
launch vehicle from its carrier aircraft. Delivery and passing
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of the risk of loss from Orbital to ORBIMAGE of the OrbView-4 satellite will
occur upon intentional ignition of the launch vehicle. The OrbView-2 ground
command and control segment has been delivered to ORBIMAGE. The high-resolution
OrbView satellite ground receiving, processing, and command and control segments
will be delivered consistent with the high-resolution OrbView satellite launch
dates, although risk of loss of the command and control and the data processing
segments will pass to ORBIMAGE on successful completion of specified acceptance
test procedures. Under the Procurement Agreement, Orbital has no liability to
ORBIMAGE for any costs or other damages arising from schedule delays.
ORBIMAGE has the right, at any time, to make changes to the Specifications
or Statement of Work, method of packing or shipment, place or time of delivery,
quantity or type of items to be delivered or services required to be performed,
subject to Orbital's right to demand negotiations for "equitable adjustment" to
the price. However, pursuant to the Stockholders' Agreement, the Company may not
without the approval of a majority of a quorum of the Board, which majority
shall include at least one Series A Director, approve certain modifications to
the Procurement Agreement. See "Certain Relationships and Related Transactions--
Stockholders' Agreement." Price adjustments due to any changes requested by
ORBIMAGE will be negotiated between Orbital and ORBIMAGE. Failure to agree to
terms of the price adjustment will be resolved through arbitration in accordance
with the terms of the Procurement Agreement.
The Procurement Agreement may be terminated by ORBIMAGE if Orbital fails to
comply with the material terms thereof and does not cure such failure within 60
days of notice of noncompliance. Orbital may terminate the Procurement Agreement
if ORBIMAGE fails to make payments in accordance with the terms of the
Procurement Agreement.
For the high-resolution OrbView satellites, following launch, ORBIMAGE's
sole remedy for launch failure, defects, failure to conform with applicable
specifications or any other requirements is limited to insurance proceeds. In
addition, with respect to the command and control segments of the OrbView-2 and
high-resolution OrbView satellites and the ground receiving and processing
segments of the high-resolution OrbView satellites, Orbital made certain
warranties of one year in duration directly to ORBIMAGE and has assigned all
applicable third party warranties to ORBIMAGE. Orbital's liability to ORBIMAGE
under the Procurement Agreement is limited to $10 million.
SERVICES AGREEMENT
ORBIMAGE and Orbital entered into the Services Agreement under which
Orbital will provide to ORBIMAGE, to the extent requested by ORBIMAGE for a term
of three years from the date of launch of each OrbView satellite: (i) general
and administrative, accounting, tax, legal, regulatory and other similar
services on a cost-reimbursable basis with no additional fee; (ii) office and
other facilities-related services on a cost-reimbursable basis with no
additional fee; and (iii) in-orbit satellite operations for the OrbView-1,
OrbView-2, and the high-resolution OrbView satellites on a cost plus 10% fee
basis. All services will be provided upon ORBIMAGE's reasonable request and in
accordance with Orbital's customary standards at the time of delivery of the
services.
NON-COMPETITION AND TEAMING AGREEMENT
Under the Non-Compete Agreement, ORBIMAGE and Orbital have agreed that
Orbital will not enter into, and shall cause its affiliates not to enter into,
one or more contracts to construct and deliver an integrated remote sensing
satellite-based system, consisting of satellite bus, payload, launch services
and ground systems. Under certain circumstances, Orbital may respond to a
request for proposal for such an integrated system only if the response provides
that Orbital will have primary responsibility for the hardware and software
requirements, and ORBIMAGE will have primary responsibility for the provision of
imagery services. Orbital will be free to provide components for such systems or
subsystems, but under no circumstance will Orbital design, develop and/or
construct sensors capable of generating imagery substantially similar, or
technologically superior, in spatial and spectral resolution, to the imagery of
OrbView-2, the high-resolution OrbView satellites or any satellite purchased by
ORBIMAGE from Orbital or an affiliate of Orbital. Subject to certain exceptions,
Orbital has also agreed not to make, and it shall cause its affiliates not to
make, investments in
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excess of $10 million in any person engaged or proposed to be engaged in the
gathering and distributing of satellite-based imagery substantially similar, or
technologically superior, in spatial and spectral resolution, to the imagery of
OrbView-2, the high-resolution OrbView satellites, or any similar satellite
purchased by the Company from Orbital or its affiliates. In addition, Orbital
must offer to ORBIMAGE any satellite-based remote imaging project that emerges
from the research and development stage. The Non-Compete Agreement will
terminate on the earlier of June 30, 2003, the date on which the Procurement
Agreement is terminated, the first anniversary of an initial public offering by
the Company, or the end of a 180-day period in which the Company's average
Common Stock price exceeds certain thresholds.
ORBVIEW-2 LICENSE
Pursuant to the Procurement Agreement, Orbital and ORBIMAGE have entered
into a license agreement with regard to the OrbView-2 satellite. In
consideration of a license fee of approximately $63 million, Orbital has granted
an exclusive worldwide license to ORBIMAGE to use and sell OrbView-2 imagery,
and to license third parties to distribute such imagery, subject to the
limitations imposed by Orbital's contract with NASA to provide imagery from
OrbView-2 and the DoC license applicable to OrbView-2. Under this agreement,
Orbital has agreed to use reasonable commercial efforts to obtain and maintain
all material regulatory permits and licenses necessary for the continued
operation of the OrbView-2 satellite. Orbital also has assigned to ORBIMAGE all
amounts that are due or which will become due to Orbital under Orbital's
contract with NASA and ORBIMAGE has sole responsibility for operating and
controlling the satellite.
The OrbView-2 License terminates either automatically upon the assignment
of Orbital's contract with NASA to ORBIMAGE or upon any of the following: (i)
ORBIMAGE's discretionary determination that the OrbView-2 satellite has failed;
(ii) at ORBIMAGE's option, upon Orbital's uncured breach of Orbital's contract
with NASA or (iii) by either party upon the other's insolvency. In addition,
Orbital retains a special right of access to ORBIMAGE's ground station
facilities to perform certain of its obligations under Orbital's contract with
NASA in the event of ORBIMAGE's uncured failure to perform these same
obligations.
OTHER AGREEMENTS
Earth Observation Sciences, Ltd., a subsidiary of Orbital ("EOS"),
developed OrbView-2 fishing software for ORBIMAGE and provides maintenance and
support of such software on a time and materials basis. In addition to the
provisions in the Procurement Agreement, ORBIMAGE may contract in the future
with EOS or Orbital or its other subsidiaries for the development, support and
maintenance of software for processing, archiving or distributing OrbView
imagery products.
The distributorship contracts that ORBIMAGE expects to offer to foreign
high-resolution imagery distributors may include the purchase from ORBIMAGE of
an imagery ground station or an OrbView upgrade to an existing ground station.
ORBIMAGE is contractually obligated to procure such ground stations or upgrades
from MacDonald, Dettwiler and Associates Ltd., an Orbital subsidiary, provided
that the price is commercially competitive.
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DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
ORBIMAGE has authorized 75,000,000 shares of Common Stock, of which
25,214,000 shares are issued and outstanding. Subject to the powers, preferences
and rights of any holder of preferred stock, the Common Holders are entitled to
receive such dividends as may be declared from time to time by the Board from
funds legally available therefor. Upon liquidation, dissolution or winding-up of
ORBIMAGE, the Common Holders will be entitled to share ratably in all assets
available for distribution to Shareholders after payment of liabilities, subject
to prior distribution rights of holders of preferred stock then outstanding.
There are no redemption or sinking fund provisions applicable to the Common
Stock. All shares of Common Stock into which the Warrants may be converted upon
completion of the Units Offering, will be fully paid and non-assessable. The
rights, preferences and privileges of Common Holders will be subject to the
rights, preferences and privileges of any preferred stock and of any other
series of preferred stock which the Company may issue in the future.
PREFERRED STOCK
The Company has authorized 10,000,000 shares of preferred stock, $0.01 par
value per share, of which: (a) 2,000,000 shares of the Series A Preferred Stock
have been authorized, of which 648,653 shares have been issued; (b) 2,000,000 of
the Series B Preferred Stock have been authorized, none of which have been
issued; and (c) 2,000,000 of the Series C Stock Preferred have been authorized,
none of which have been issued. The Board is authorized to issue preferred stock
from time to time in one or more series, each of such series to have such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative participating, optional or other special rights, and such
qualifications, limitations or restrictions thereof, as shall be determined by
the Board in a resolution or resolutions providing for the issuance of such
preferred stock other than as a paid-in-kind dividend. Except for the Series A
Offering, the Board currently has no plans for the issuance of preferred stock.
The issuance of such stock could adversely affect the rights of holders of the
Exchange Notes.
SERIES A PREFERRED STOCK
Dividends. The Series A Preferred Stock is assigned a stated value of $100
per share (the "Series A Preferred Stated Value") and is entitled to a
cumulative dividend of 12% per annum payable semi-annually on May 1 and November
1 of each year, in cash or, in lieu thereof, payable in-kind in shares of Series
A Preferred Stock on the basis of one hundred twenty (120) shares of Series A
Preferred Stock for each one thousand (1,000) shares of Series A Preferred Stock
outstanding. On November 1, 1997, the Company declared and paid a dividend
in-kind to each Series A Holder. Upon a mandatory conversion prior to the fourth
anniversary of the issuance of any Series A Preferred Stock (see "Certain
Relationships and Related Transactions"--Series A Preferred Stock--Conversion
Rights"), a Series A Holder shall also receive the dividends with respect to the
Series A Preferred Stock that would have accrued from the date of the mandatory
conversion to the fourth anniversary of the initial issuance of the Series A
Preferred Stock.
Ranking. Series A Holders have certain preferences upon dividend
distributions, distributions upon liquidation or distributions upon merger,
consolidation or sale of assets over the holders of Series B Preferred (if and
when issued), Series C Preferred (if and when issued), the Common Holders, and
any other class of stock ranking junior to the Series A Preferred Stock.
Voting Rights. Each Series A Holder is entitled to such number (rounded to
the nearest whole number) of votes as such Series A Holder would be entitled if
such Series A Holder had converted its Series A Preferred Stock into shares of
Common Stock. See "Certain Relationships and Related Transactions--Shareholders'
Agreement." Furthermore, the Series A Holders have the right to elect two
additional
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directors to the Board upon the occurrence of an "Election Event." An "Election
Event" is the failure by ORBIMAGE: (i) to declare and pay dividends on the
Series A Preferred Stock on any May 1 or November 1 which remains uncured for
more than thirty (30) day; (ii) to repurchase the Series A Preferred Stock upon,
among other things, a Change of Control (see "Certain Relationships and Related
Transactions--Stock Purchase Agreement--Change of Control"); (iii)(a) to conduct
a critical design review of the OrbView-3 spacecraft pursuant to the Procurement
Agreement by October 31, 1998, (b) to commence by March 15, 1999 the integration
and testing of the OrbView-3 spacecraft or (c) to commence by November 15, 1999
the integration and testing of the OrbView-4 spacecraft. The dates specified in
this paragraph may be extended by up to thirty (30) days in the discretion of
the President of the Company (in consultation with the Series A Directors) that
such delay is advisable. See "Certain Relationships and Related
Transactions--Procurement Agreement." The Directors elected upon the occurrence
of an Election Event shall serve only so long as such Election Event continues.
Certain transactions, including certain additional issuances of securities by
the Company, require the consent of the holders of at least two thirds of the
outstanding Series A Preferred Stock.
Conversion Rights. The Series A Holders have the option, at any time, or
from time to time, to convert their Series A Preferred Stock into fully paid and
non-assessable shares of Common Stock. The number of shares of Common Stock
issued upon such conversion will be determined by multiplying each Series A
Holder's number of Series A Preferred Stock by a fraction, the numerator of
which is the Series A Preferred Stock Stated Value and the denominator of which
is a conversion price, subject to anti-dilutive adjustments (as adjusted, the
"Conversion Price"). The Conversion Price is currently $4.17. The Series A
Preferred Stock shall be automatically converted into shares of Common Stock
upon the earliest to occur of any one of the following events: (i) the closing,
under certain circumstances, of a public offering of the Common Stock; (ii) the
culmination of a 180-day period in which the average price of the Common Stock
exceeds a certain level relative to the Conversion Price; or (iii) the proposed
sale of no less than 70% of the Common Stock (on a fully diluted basis) as more
fully described in "Certain Relationships and Related
Transactions--Stockholders' Agreement--Restrictions on Transfer."
RELATIONSHIP WITH ORBITAL SCIENCES CORPORATION
Formed in 1982, Orbital is a space and information systems company that
designs, manufactures, operates and markets a broad range of space-related
products and services. Orbital's 1997 revenues were approximately $600 million
and Orbital and its subsidiaries employ approximately 4,000 people. Orbital's
products and services are grouped into three business sectors: (i) space and
ground infrastructure systems; (ii) satellite access products; and (iii)
satellite-delivered services. Space and ground infrastructure systems include
launch vehicles, satellites, electronics and sensor systems and ground systems.
Satellite access products include hand-held satellite-based navigation and
communications products and transportation management systems.
Satellite-delivered services include satellite-based two-way mobile data
communications. Orbital operates launch vehicle, satellite and electronics
engineering, manufacturing and test facilities in Dulles and McLean, Virginia,
Germantown and Greenbelt, Maryland and Chandler, Arizona; a launch vehicle and
satellite integration and test facility at Vandenberg Air Force Base,
California; a space sensors and instruments facility in Pomona, California; a
ground systems and software facility in Vancouver, British Columbia, and
facilities for its navigation and communications products in San Dimas and
Sunnyvale, California and in Rochester Hills, Michigan.
ORBIMAGE utilizes certain of Orbital's employees and centralized systems
for corporate and administrative services pursuant to the Services Agreement.
ORBIMAGE anticipates that each of its executive officers will generally devote a
sufficient portion of his or her time to the business of ORBIMAGE. However, any
ORBIMAGE executive officer who is an Orbital employee also may devote a
significant portion of his or her time to the business of Orbital and its other
subsidiaries.
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POLICIES AND PROCEDURES FOR ADDRESSING CONFLICTS
The ongoing relationships between ORBIMAGE and Orbital may present certain
conflict situations for David W. Thompson, who serves as Chairman of the Board
of Directors and Chief Executive Officer of ORBIMAGE, and also serves as
Chairman of the Board, President and Chief Executive Officer of Orbital. Other
officers and directors of Orbital also serve as officers and directors of the
Company. Mr. Thompson, as well as other executive officers and directors of
Orbital, own (or have options or other rights to acquire) a significant number
of shares of common stock in both ORBIMAGE and Orbital. Certain ORBIMAGE
employees including its executive officers have options to acquire Orbital
common stock. ORBIMAGE and Orbital have adopted appropriate policies and
procedures to be followed by the Board of Directors of each company to limit the
involvement of Mr. Thompson (or such other officers and directors having a
significant ownership interest in the companies or who are serving in similar
capacities for both companies) in conflict situations, including matters
relating to contractual relationships or litigation between ORBIMAGE and
Orbital. Such procedures include requiring directors of both Orbital and
ORBIMAGE to abstain from voting as directors of each company with respect to
matters that present a significant conflict of interest between the companies.
Whether or not a significant conflict of interest situation exists is determined
on a case-by-case basis depending on such factors as the dollar value of the
matter and the likelihood that resolution of the matter has significant
strategic, operational or financial implications for the businesses of ORBIMAGE
or Orbital.
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DESCRIPTION OF EXCHANGE NOTES
GENERAL
The Original Notes were issued and the Exchange Notes will be issued
pursuant to the Indenture between the Company and Marine Midland Bank, as
trustee (the "Trustee"). Upon the issuance of the Exchange Notes, or the
effectiveness of a Shelf Registration Statement, the Indenture will be subject
to and governed by the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). The terms of the Exchange Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act. The Notes are subject to all such terms, and holders of Exchange
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of certain provisions of the Exchange Notes, the
Indenture and the Registration Rights Agreement do not purport to be complete
and are qualified in their entirety by reference to the Exchange Notes, the
Indenture and the Registration Rights Agreement, including the definitions in
each of such instruments and agreements of certain terms used below. A copy of
the Indenture and the Registration Rights Agreement will be made available to
holders of Original Notes upon request.
The Exchange Notes will be senior obligations of the Company, will rank
senior in right and priority of payment to all subordinated indebtedness of the
Company and will rank pari passu in right and priority of payment with all other
indebtedness of the Company which is not expressly so subordinated. The Exchange
Notes will be secured to the extent set forth below under "--Security." Upon
consummation of the Units Offering and the application of the net proceeds
therefrom, the Company has no indebtedness that is expressly subordinated in
right and priority of payment to the Original Notes.
As of the date of the Indenture, the Company has no Subsidiaries. Under
certain circumstances, the Company will be able to designate future Subsidiaries
that it creates or acquires as Restricted Subsidiaries or Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes will be issued in an aggregate principal amount of
$150,000,000. The Exchange Notes will mature on March 1, 2005. Interest on the
Exchange Notes will accrue at the rate of 11 5/8% per annum and will be payable
semi-annually in arrears on March 1 and September 1 of each year, commencing on
September 1, 1998, to holders of record on the immediately preceding February 15
and August 15. Interest on the Exchange Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
February 25, 1998 (the "Issue Date"). Interest on the Exchange Notes will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of, premium, if any, interest and Liquidated Damages, if any, on
the Exchange Notes, will be payable at the office or agency of the Company
maintained for such purpose or, at the option of the Company, payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
holders of the Exchange Notes at their respective addresses set forth in the
register of holders of the Exchange Notes; provided that if the holder of any
Exchange Notes has given wire transfer instructions to the Company, the Company
will be required to make all payments with respect to such Exchange Notes by
wire transfer of immediately available funds to the account specified by such
holder. Until otherwise designated by the Company, the Company's office or
agency will be the office of the Trustee maintained for such purpose. The
Exchange Notes will be issued in denominations of $1,000 and integral multiples
thereof.
OPTIONAL REDEMPTION
The Notes will not be redeemable prior to March 1, 2002. Thereafter, the
Notes will be subject to redemption at the option of the Company, in whole or in
part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued
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and unpaid interest and Liquidated Damages (if any) thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on March 1
of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2002........................................................ 105.8125%
2003........................................................ 102.9063%
2004 and thereafter......................................... 100.0000%
</TABLE>
Notwithstanding the foregoing, prior to March 1, 2001, the Company may, on
one or more occasions, redeem outstanding Notes with the net cash proceeds of
one or more sales of Capital Stock (other than Disqualified Stock) of the
Company to one or more Persons (but only to the extent the proceeds of such
sales of Capital Stock consist of cash or Cash Equivalents) at a redemption
price equal to 111.625% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages (if any) thereon to the redemption date;
provided, however, that: (i) not less than 65% of the aggregate principal amount
of the Notes initially issued remains outstanding immediately after any such
redemption; and (ii) such redemption shall occur within 60 days after the date
of closing of such sale of Capital Stock.
MANDATORY REDEMPTION
The Company will not be required to make mandatory redemption or sinking
fund payments with respect to the Notes. However, as described below, the
Company may be obligated, under certain circumstances, to make an offer to
purchase: (i) all outstanding Notes at a redemption price of 101% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages (if any) to the date of purchase, upon a Change of Control; and (ii)
outstanding Notes with a portion of the Net Proceeds of Asset Sales at a
redemption price of 100% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages (if any) to the date of purchase. See
"--Repurchase at the Option of Holders--Change of Control" and "--Limitation on
Sales of Assets and Subsidiary Interests."
SECURITY
Pursuant to the Indenture, the Company purchased and pledged to the
Collateral Agent for the benefit of the holders of the Notes the Pledged
Securities in such amount as will be sufficient upon receipt of scheduled
interest and principal payments of such securities. The Company used
approximately $32.9 million of the net proceeds of the Units Offering to acquire
the Pledged Securities. The Pledged Securities are pledged by the Company to the
Trustee as Collateral Agent for the benefit of the holders of Notes pursuant to
the Pledge Agreement and will be held by the Collateral Agent in the Pledge
Account. Pursuant to the Pledge Agreement, immediately prior to an interest
payment date on the Notes, the Company may either deposit with the Collateral
Agent from funds otherwise available to the Company cash sufficient to pay the
interest scheduled to be paid on such date or the Company may direct the
Collateral Agent to release from the Pledge Account proceeds sufficient to pay
interest then due. In the event that the Company exercises the former option,
the Company may thereafter direct the Collateral Agent to release to the Company
from the Pledge Account proceeds or Pledged Securities in like amount.
Interest earned on the Pledged Securities will be added to the Pledge
Account. In the event that the funds or Pledged Securities held in the Pledge
Account exceed the amount sufficient, in the opinion of a nationally recognized
firm of independent certified public accountants selected by the Company, to
provide for payment in full of the first four scheduled interest payments due on
the Notes (or, in the event an interest payment or payments have been made, an
amount sufficient to provide for payment in full of any interest payments
remaining, up to and including the four scheduled interest payments), the
Collateral Agent will be permitted to release to the Company at the Company's
request any such excess amount. The Original Notes are and the Exchange Notes
will be secured by a first priority security interest in the Pledged Securities
and in
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the Pledge Account and, accordingly, the Pledged Securities and the Pledge
Account also secure repayment of the principal amount of the Original Notes and
will secure repayment of the principal amount of the Exchange Notes to the
extent of such security. The Pledge Agreement allows ORBIMAGE to substitute
Marketable Securities for the Government Securities originally pledged as
collateral; provided, however, that the Marketable Securities so substituted
must have a value (measured at the date of substitution), in the opinion of a
nationally recognized firm of independent public accountants selected by the
Company, at least equal to 125.0% of the amount of any of the first four
scheduled interest payments on the Notes that are unpaid (or the pro rata
portion of such interest payments equal to the percentage of such interest
payments to be secured by such Marketable Securities) as of the date such
Marketable Securities are proposed to be substituted as security for the
Company's obligation under the Pledge Agreement.
Under the terms of the Pledge Agreement, assuming that the Company makes
the first four scheduled interest payments on the Notes in a timely manner, all
of the Pledged Securities will be released from the Pledge Account.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages (if any) thereon to the date of purchase (the
"Change of Control Payment"). In the event of a Change of Control, there can be
no assurance that the Company will have or be able to acquire sufficient funds
to repurchase the Exchange Notes. Within ten days following any Change of
Control, the Company will mail a notice to each holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 40 days from the date such notice is
mailed (the "Change in Control Payment Date") pursuant to the procedures
required by the Indenture and described in such notice. The Company will comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful:
(i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(ii) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered;
and
(iii) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the
Company.
The Paying Agent will promptly mail to each holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new note equal in principal amount to any unpurchased portion of the Note
surrendered; provided that each such new Note will be in a principal amount of
$1,000 or an integral multiple thereof. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date. Except as described above with respect to a
Change of Control, the Indenture does not contain provisions that permit the
holders of the Notes to require that the Company repurchase or redeem the Notes
in the event of a takeover, recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the time and otherwise in compliance with the
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requirements set forth in the Indenture applicable to a Change of Control Offer
made by the Company and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
Subject to the limitations discussed below, the Company could in the future
enter into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect the Company's capital structure or credit ratings.
Due to the highly leveraged structure of the Company, the Company may not have
sufficient funds to be able to repurchase all of the Notes tendered in a Change
of Control Offer. The failure of the Company to purchase any Notes tendered in a
Change of Control Offer will constitute an Event of Default under the Indenture.
See "--Events of Default and Remedies."
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the Company's assets. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Notes to require the Company to repurchase such Notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of the Company to another Person may be uncertain.
Limitation on Sales of Assets and Subsidiary Interests
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to consummate an Asset Sale unless:
(i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value of the assets sold or otherwise disposed of;
(ii) at least 75% of the consideration received in the Asset Sale by
the Company or such Restricted Subsidiary, as the case may be, consists of
(a) cash or Cash Equivalents or (b) the assumption of Indebtedness (other
than Indebtedness that is subordinated) of the Company or such Restricted
Subsidiary and the release of the Company and the Restricted Subsidiaries,
as applicable, from all liability on the Indebtedness assumed; and
(iii) the aggregate Fair Market Value of all non-Cash Consideration
received therefor by the Company or such Restricted Subsidiary, as the case
may be, when aggregated with the Fair Market Value of all other non-Cash
Consideration received by the Company and its Restricted Subsidiaries from
all other Asset Sales since the Issue Date that has not yet been converted
into cash or Cash Equivalents (in either case, in U.S. dollars or freely
convertible into U.S. dollars), does not exceed (without duplication) 5% of
the aggregate Consolidated Tangible Net Assets of the Company at the time
of such Asset Sale; provided, however, that any securities, notes or
similar obligations received by any of the Company or such Restricted
Subsidiaries from such transferees that are contemporaneously (subject to
ordinary settlement periods) converted by the Company or such Restricted
Subsidiaries into cash, shall be deemed to be cash (to the extent of the
net cash received) for purposes of clauses (ii) and (iii).
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds to: (i) make capital expenditures or
acquire Business Assets, (ii) acquire 100% of the Equity Interests of a Related
Satellite Business, (iii) market imagery products and services, (iv) repay
Indebtedness under a Credit Facility, and (v) provide working capital. Pending
the final application of any such Net Proceeds, the Company may temporarily
invest such Net Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from an Asset Sale that are not applied or invested as provided
in the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $7.5 million,
the Company will be required to make an offer to all holders of Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds (and not solely the amount in excess of
$7.5 million), at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages (if any) thereon to the date of purchase, in accordance with the
procedures set forth in the
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Indenture. To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general business purposes. If the aggregate amount
of Notes surrendered by holders thereof exceeds the amount of Excess Proceeds,
the Trustee will select the Notes to be purchased on a pro rata basis in
accordance with the procedures set forth below. Upon completion of such offer to
purchase, the amount of Excess Proceeds will be reset at zero. The Asset Sale
Offer shall remain open for a period of 20 business days or such longer period
as may be required by law.
The foregoing provisions will not apply to the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company,
which will be governed by the provisions of the Indenture described below in
"--Merger, Consolidation or Sale of Assets" and "--Repurchase at the Option of
Holders."
SELECTION AND NOTICE OF NOTES FOR REDEMPTION OR REPURCHASE
If less than all of the Notes are to be redeemed or repurchased pursuant to
any purchase offer required under the Indenture at any time, selection of Notes
for redemption or repurchase will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis,
selected by lot or by such method as the Trustee shall deem fair and
appropriate; provided that no Note with a principal amount of $1,000 or less
shall be redeemed or repurchased in part.
Notices of redemption or repurchase shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption or repurchase date to
each holder of Notes to be redeemed or repurchased at its registered address. If
any Note is to be redeemed or repurchased in part only, the notice that relates
to such Note shall state the portion of the principal amount thereof to be
redeemed or repurchased. A new Note in principal amount equal to the unredeemed
or unrepurchased portion will be issued in the name of the holder thereof upon
cancellation of the original Note. On and after the redemption or repurchase
date, interest will cease to accrue on the Notes or portions thereof called for
redemption or repurchase.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on account of
the Equity Interests of the Company (including, without limitation, any
payment in connection with any merger or consolidation involving the
Company or any of its Restricted Subsidiaries), other than dividends or
distributions declared and payable (a) in Equity Interests (other than
Disqualified Stock) of the Company or any of its Restricted Subsidiaries or
(b) to the Company or to any Restricted Subsidiary of the Company;
(ii) purchase, redeem, defease, retire for value or otherwise acquire
or return for value any Equity Interests of the Company, other than any
such Equity Interests owned by the Company or any Wholly Owned Restricted
Subsidiary of the Company;
(iii) make any principal payment on (except at maturity) or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness
that is subordinated (whether pursuant to its terms, by operation of law,
structurally or otherwise) to the Notes; or
(iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
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(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the immediately preceding fiscal quarter,
have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the first paragraph set forth in the covenant entitled
"Incurrence of Indebtedness or Issuance of Disqualified Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the Issue Date (excluding Restricted Payments permitted by clauses
(ii), (iii) and (iv) of the next succeeding paragraph), is less than the
sum, without duplication, of:
(1) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the Issue Date to the end of the
Company's most recently ended fiscal quarter for which financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit); plus
(2) 100% of the aggregate net cash proceeds received by the Company
since the date of the Indenture as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Company
(other than Disqualified Stock) or from the issue of Disqualified Stock
or debt securities of the Company that have been converted into such
Equity Interests (other than (A) Equity Interests (or Disqualified Stock
or convertible debt securities) sold to a Subsidiary of the Company, (B)
Disqualified Stock or debt securities that have been converted into
Disqualified Stock, (C) equity capital contributions described in clause
(vi) of the definition of "Permitted Investment," (D) to the extent that
the net cash proceeds of the issuance of such Equity Interests are used
to redeem the Notes as permitted under the section entitled "Optional
Redemption," and (E) Series A Preferred Stock issued in the Series A
Offering); plus
(3) to the extent that any Restricted Investment that was made
after the Issue Date is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (A) the cash return of capital with respect to
such Restricted Investment (less the cost of disposition, if any) and
(B) the initial amount of such Restricted Investment; plus
(4) to the extent that any Unrestricted Subsidiary is designated by
the Company as a Restricted Subsidiary, an amount equal to the lesser of
(A) the Fair Market Value of such Restricted Investment and (B) the
Company's Investment in such Unrestricted Subsidiary at the time of such
designation.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture;
(ii) so long as no default has occurred and is continuing or will
arise therefrom, the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out
of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of other Equity Interests of the Company (other
than any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement
or other acquisition shall be excluded from clause (2) of the preceding
paragraph;
(iii) so long as no default has occurred and is continuing or will
arise therefrom, the repayment, defeasance, redemption or repurchase of
Intercompany Indebtedness (as defined in clause (vi) of the covenant
entitled "Incurrence of Indebtedness or Issuance of Disqualified Stock") or
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or the substantially concurrent sale (other than
to a Subsidiary of the Company) of Equity Interests of the Company (other
than Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any
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such redemption, repurchase, retirement or other acquisition shall be
excluded from clause (2) of the preceding paragraph;
(iv) the issuance of shares of Series A Preferred Stock as
paid-in-kind dividends in accordance with the terms of the Series A
Preferred Stock as in effect on the date of the Indenture;
(v) the purchase, redemption or retirement by the Company of shares of
its Common Stock held by an employee or former employee of the Company or
its Subsidiaries issued under the Stock Option Plan; provided that the
amount of any such payments in any fiscal year does not exceed $1,000,000;
and provided, further, that the limitation set forth in the foregoing
proviso does not apply to the purchase, redemption or retirement of shares
of common stock with funds or other property or amounts paid by the Company
for which the Company receives concurrent reimbursement from any other
Person (other than the Company's Subsidiaries); and
(vi) payments made in respect of (x) the cancellation of fractional
shares of Common Stock in connection with the conversion of the Series A
Preferred Stock and the exercise of the Warrants and (y) the repurchase or
redemption of any shares of Series A Preferred Stock in an amount not to
exceed $500,000.
In determining the amount of Restricted Payments permissible under clause
(c) above, amounts expended pursuant to clauses (i), (v) and (vi) in the
preceding paragraph shall be included as Restricted Payments. Notwithstanding
the foregoing, payments made by the Company to Orbital pursuant to the Orbital
Agreements shall not be deemed Restricted Payments.
The Company may designate any of its Restricted Subsidiaries to be an
Unrestricted Subsidiary if such designation would not cause a Default and, at
the time of and after giving effect to such designation, the Company could incur
$1.00 of additional Indebtedness under the applicable provisions of the first
paragraph of the covenant entitled "Incurrence of Indebtedness or Issuance of
Disqualified Stock"; provided, that, in no event shall all or any portion of the
material assets or properties (other than cash) owned by the Company on the
Issue Date be transferred to or held by an Unrestricted Subsidiary of the
Company; and provided, further, that such ability to incur $1.00 of additional
Indebtedness shall not be required in the case of any newly created Unrestricted
Subsidiary funded solely with an Investment described in clause (vi) of the
definition of "Permitted Investment." For purposes of making such determination,
all outstanding Investments by the Company and its Restricted Subsidiaries
(except to the extent repaid in cash and except for Investments described in
clause (vi) of the definition of "Permitted Investment") in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the greatest of:
(i) the net book value of such Investments at the time of such
designation;
(ii) the Fair Market Value of such Investments at the time of such
designation; and
(iii) the original Fair Market Value of such Investments at the time
they were made.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments, if not made in cash, shall be the
Fair Market Value on the date of the Restricted Payment of the asset(s) proposed
to be transferred by the Company or such Restricted Subsidiary, as the case may
be, pursuant to the Restricted Payment. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this covenant were computed,
which calculations may be based upon the latest available financial statements
of the Company.
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Incurrence of Indebtedness or Issuance of Disqualified Stock
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guaranty or otherwise become directly or indirectly liable, contingently
or otherwise, with respect to (collectively, "incur") any Indebtedness
(including Acquired Debt) or any Disqualified Stock; provided, however, that the
Company may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock and the Restricted Subsidiaries may incur Indebtedness if,
after giving pro forma effect to the incurrence of such Indebtedness and the use
of proceeds thereof, the aggregate Indebtedness to Cash Flow Ratio of the
Company does not exceed 4.0 to 1. Notwithstanding the foregoing, prior to June
30, 2001, the Company or any Restricted Subsidiary may incur Indebtedness if
immediately after giving pro forma effect to the incurrence of such Indebtedness
and the receipt and application of the proceeds thereof, the Indebtedness to
Capital Ratio would be less than or equal to 65.0%.
The foregoing provisions will not apply to:
(i) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness under Credit Facilities; provided that the
aggregate principal amount of all Indebtedness (with letters of credit
being deemed to have a principal amount equal to the maximum potential
liability of the Company and its Subsidiaries thereunder) outstanding under
all Credit Facilities after giving effect to such incurrence does not
exceed an amount equal to the greater of (A) $25 million and (B) 85% of
Eligible Receivables;
(ii) the incurrence by the Company of Indebtedness represented by the
Notes and the Indenture or the issuance of shares of Series A Preferred
Stock accrued or issued as paid-in-kind dividends;
(iii) Existing Indebtedness;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness under (A) Hedging Obligations, provided that
(1) the notional principal amount of any interest rate protection agreement
does not significantly exceed the principal amount of the Indebtedness to
which such interest rate protection agreement relates and (2) any
agreements related to fluctuations in currency rates do not increase the
outstanding Indebtedness other than as result of fluctuations in foreign
currency exchange rates, and (B) performance, surety and workers'
compensation bonds or other obligations of a like nature incurred in the
ordinary course of business;
(v) the incurrence by any Unrestricted Subsidiary of the Company of
Non-Recourse Debt; provided that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary such event shall be deemed
to constitute an incurrence of Indebtedness by a Restricted Subsidiary;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness owed to and held by the Company or any of its
Wholly Owned Restricted Subsidiaries (the Indebtedness incurred pursuant to
this clause (vi) being hereafter referred to as "Intercompany
Indebtedness"); provided that an incurrence of Indebtedness shall be deemed
to have occurred upon (i) any sale or other disposition of Intercompany
Indebtedness to a Person other than the Company or any of its Restricted
Subsidiaries, (ii) any sale or other disposition of Equity Interests of the
Company's Restricted Subsidiaries which holds Intercompany Indebtedness
such that such Restricted Subsidiary ceases to be a Restricted Subsidiary
after such sale or other disposition or (iii) designation of a Restricted
Subsidiary as an Unrestricted Subsidiary;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Non-Recourse Debt to finance purchase money obligations;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness ("Permitted Refinancing Indebtedness")
incurred to refinance, replace or refund Indebtedness
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("Refinanced Indebtedness") incurred pursuant to the first paragraph of
this covenant or pursuant to clause (i) or (iii) of this covenant; provided
that:
(a) the aggregate principal amount of such Permitted Refinancing
Indebtedness does not exceed the aggregate principal amount of the
Refinanced Indebtedness (including accrued and unpaid interest thereon);
(b) such Permitted Refinancing Indebtedness shall have a final
maturity equal to or later than, and a Weighted Average Life to Maturity
equal to or greater than, the final maturity and Weighted Average Life
to Maturity of the Refinanced Indebtedness, respectively; and
(c) such Permitted Refinancing Indebtedness shall rank no higher
relative to the Notes than the Refinanced Indebtedness and in no event
may any Indebtedness of the Company, or any of its Restricted
Subsidiaries be refinanced with Indebtedness of any Restricted
Subsidiary under this clause (viii);
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Capital Lease Obligations in an aggregate amount for all
such Persons not to exceed $15 million at any one time outstanding;
(x) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness not to exceed $15 million outstanding at any
time pursuant to a Fixed Asset Financing; and
(xi) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in addition to that described in clauses (i)
through (x) above, so long as the aggregate principal amount of all such
Indebtedness, including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to this
clause (xi), shall not exceed $10 million outstanding at any one time in
the aggregate.
Liens
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien on any asset or property now owned or hereafter
acquired, or any income or profits therefrom, or assign or convey any right to
receive income therefrom, unless (i) in the case of Liens securing obligations
subordinate to the Notes, the Notes are secured by a valid, perfected Lien on
such asset or property that is senior in priority to such Liens, (ii) in the
case of Liens securing obligations subordinate to a Subsidiary Guarantee, such
Subsidiary Guarantee is secured by a valid, perfected Lien on such asset or
property that is senior in priority to such Liens, and (iii) in all other cases,
the Notes (and, if such Lien secures obligations of a Restricted Subsidiary, a
Subsidiary Guarantee of such Restricted Subsidiary) are equally and ratably
secured; provided, however, that the foregoing shall not prohibit or restrict
Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions to the Company or
any of its Restricted Subsidiaries on its Capital Stock or with respect to
any other interest or participation in, or measured by, its profits;
(ii) pay any Indebtedness owed to the Company or any of its Restricted
Subsidiaries;
(iii) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
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(iv) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of:
(a) the Indenture, the Pledge Agreement or the Notes;
(b) Existing Indebtedness;
(c) applicable law;
(d) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as
in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired;
(e) customary non-assignment provisions in leases or other
agreements entered into in the ordinary course of business;
(f) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature
described in clause (iv) above on the property so acquired;
(g) Permitted Refinancing Indebtedness; provided that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in
the agreements governing the Refinanced Indebtedness; or
(h) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business;
(i) secured Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under the
caption "--Liens" that limits the right of the debtor to dispose of the
assets securing such Indebtedness; or
(j) in the case of clauses (a), (b), (d), (e), (f), (g), (h) and
(i) above, any amendments, modifications, restatements, renewals,
increases, supplements, modifications, restatements or refinancings
thereof, provided that such amendments, modifications, restatements or
refinancings are not materially more restrictive with respect to such
dividend and other payment restrictions than those contained in such
instruments as in effect on the date of their incurrence.
Merger, Consolidation or Sale of Assets
The Indenture provides the Company may not consolidate or merge with or
into (whether or not the Company is the surviving Person), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another Person
unless:
(i) the Company is the surviving Person or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or
to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized and existing
under the laws of the United States, any state thereof or the District of
Columbia;
(ii) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall
have been made assumes all the obligations of the Company under the Notes,
the Indenture and the Pledge Agreement pursuant to a supplemental indenture
in form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction, no Default or Event of
Default exists;
(iv) the Company, or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition
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shall have been made will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction; and
(v) the Company, or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have
been made, at the time of such transaction and after giving pro forma
effect thereto as if such transaction had occurred at the beginning of the
immediately preceding fiscal quarter, will be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the first paragraph of the
covenant entitled "Incurrence of Indebtedness or Issuance of Disqualified
Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, sell, lease transfer or otherwise dispose of
any of their properties or assets to, or purchase any property or assets from,
or enter into or make any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless:
(i) such Affiliate Transaction is on terms that are no less favorable
to the Company or such Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person;
(ii) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $2.5 million, (x) a determination by the
disinterested members of the Board of Directors of the Company made in
good faith (evidenced by a resolution approved by at least a majority of
the disinterested members of the Board of Directors of the Company and
set forth in an Officers' Certificate delivered to the Trustee) or (y)
an opinion as to the fairness of such Affiliate Transaction to the
Company or Restricted Subsidiary involved in such Affiliate Transaction
from a financial point of view issued by an Independent Financial
Advisor or, with respect to development, launch and operations of
satellites and remote imaging-related matters, a nationally recognized
expert in the respective applicable industry; and
(b) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $10 million, an opinion as to the fairness of
such Affiliate Transaction to the Company or Restricted Subsidiary
involved in such Affiliate Transaction from a financial point of view
issued by an Independent Financial Advisor or, with respect to
development, launch and operations of satellites and remote
imaging-related matters, a nationally recognized expert in the
respective applicable industry;
provided, however, that the following shall be deemed not to be Affiliate
Transactions:
(1) any employment agreement, stock option or stock purchase
agreement entered into by the Company or any of its Restricted
Subsidiaries with any of their respective employees in the ordinary
course of business;
(2) transactions between or among the Company and/or its Wholly
Owned Restricted Subsidiaries;
(3) Restricted Payments permitted by clauses (i), (ii), (iv), (v)
and (vi) of the second paragraph of the covenant entitled "Restricted
Payments" and Permitted Investments of a type referred to in clauses
(i), (iii) and (vi) of the definition of Permitted Investments;
(4) the sale of common Equity Interests (other than Disqualified
Stock, except as contemplated by the Stock Purchase Agreement) of the
Company for cash to an Affiliate of the Company;
(5) transactions pursuant to agreements entered into with resellers
of the Company's products and services on terms substantially the same
as the Company's standard agreements entered into with such parties in
the ordinary course of business;
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(6) transactions pursuant to the Orbital Agreements, including
transactions pursuant to any amendments to the Procurement Agreement
with respect to the selection of the launch vehicle for the satellite
designated on the Issue Date as the OrbView-4 satellite;
(7) amendments, supplements or other modifications to the Orbital
Agreements that do not involve the payment of cash by the Company or any
of its Restricted Subsidiaries;
(8) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company; and
(9) the sale of securities (other than common Equity Interests) of
the Company for cash to an Affiliate of the Company; provided that:
(A) an amount of such securities at least equal to the amount
sold to such Affiliate have been or are being sold substantially
simultaneously to Persons that are not Affiliates of the Company;
(B) the price per security paid by such Affiliate is no less
than the price paid by such non-Affiliates; and
(C) the Company shall not have entered into any other
arrangement with such non-Affiliates to induce such non-Affiliates to
purchase such securities.
Maintenance of Insurance
The Indenture provides that the Company shall obtain or maintain (as
applicable) in full force and effect:
(i) launch and in-orbit checkout insurance with respect to each
OrbView Satellite, which insurance shall be procured promptly prior to the
launch of each such satellite and shall be in effect on the launch date and
remain in effect through the launch and the initial check-out period of
such OrbView Satellite, in an amount sufficient to provide for the
construction, launch and insurance of a Replacement Satellite to be payable
in the event of a launch or satellite failure during the initial check-out
period; provided, however, that at the time the Company is required to
procure launch and in-orbit check-out insurance with respect to an OrbView
Satellite, the Company may reduce the amount to be insured if another
OrbView Satellite is fully operational, is being used in commercial service
and is insured in accordance with clause (ii) below, by (x) the amount of
cash, cash equivalents and short-term investments (excluding proceeds of
the Offering and the Series A Offering and amounts allocated or expected to
be allocated for capital expenditures) currently available to the Company
to construct a Replacement Satellite as determined in good faith by the
Board of Directors of the Company (evidenced by a resolution approved by at
least a majority of the Board of Directors of the Company and set forth in
an Officers' Certificate delivered to the Trustee), and (y) the value of
any long lead-time spare parts that the Company has procured to date for
any satellite that is comparable to the technological capability of the
OrbView Satellite being insured, as such value is determined in good faith
by the Board of Directors of the Company (evidenced by a resolution
approved by at least a majority of the Board of Directors of the Company
and set forth in an Officers' Certificate delivered to the Trustee).
(ii) in-orbit operations insurance with respect to each OrbView
Satellite, at all times following the date an OrbView Satellite is placed
in commercial service, representing the value of such satellite (taking
into account the foregone useful life of such satellite) and the pro rata
cost of a launch vehicle, payable in the event that such satellite ceases
to be used for commercial revenue producing service (provided that such
insurance may contain customary provisions for deductible payments and
minimum thresholds for satellite failure); provided, however, that at the
time the Company is required to procure or renew in-orbit operations
insurance with respect to an OrbView Satellite, the Company may reduce the
amount to be insured if another OrbView Satellite is fully operational, is
being used in commercial service, and is insured in accordance with this
clause (ii), by (x) the amount of cash, Cash Equivalents and short-term
investments (excluding proceeds of the Offering and the Series A Offering
and amounts allocated or expected to be allocated for capital
expenditures), currently available to the Company to construct a
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Replacement Satellite as determined in good faith by the Board of Directors
of the Company (evidenced by a resolution approved by at least a majority
of the Board of Directors of the Company and set forth in an Officers'
Certificate delivered to the Trustee), and (y) the value of any long
lead-time spare parts that the Company has procured to date for any
satellite that is comparable to the technological capability of the OrbView
Satellite being insured, as such value is determined in good faith by the
Board of Directors of the Company (evidenced by a resolution approved by at
least a majority of the Board of Directors of the Company and set forth in
an Officers' Certificate delivered to the Trustee).
The obligation of the Company to maintain insurance pursuant to this
covenant may be satisfied by any combination of:
(i) insurance commitments obtained from any recognized insurance
provider,
(ii) insurance commitments obtained from any entity other than an
entity referred to in clause (i) if the Board of Directors of the Company
determines in good faith (evidenced by a majority resolution of the Board
of Directors of the Company and set forth in an Officer's Certificate
delivered to the Trustee) that such entity is creditworthy and otherwise
capable of bearing the financial risk of providing such insurance and
making payments in respect of any claims on a timely basis; and
(iii) unrestricted cash segregated and maintained by the Company in a
segregated account established with an Eligible Institution (the "Insurance
Account") solely for disbursement in accordance with the terms of this
covenant ("Cash Insurance"), and to be held in trust for the sole and
express benefit of the holders of the Notes.
Within 30 days following any date on which the Company is required to
obtain insurance pursuant to the Indenture, the Company will deliver to the
Trustee an insurance certificate certifying the amount of insurance then
carried, and in full force and effect, and an Officer's Certificate stating that
such insurance, together with any other insurance or Cash Insurance maintained
by the Company, complies with the Indenture. In addition, the Company will cause
to be delivered to the Trustee no less than once each year an insurance
certificate setting forth the amount of insurance then carried, which insurance
certificate shall entitle the Trustee to:
(i) notice of any claim under any such insurance policy; and
(ii) at least 30 days' notice from the provider of such insurance
prior to the cancellation of any such insurance and an Officers'
Certificate that complies with the first sentence of this paragraph.
In the event that the Company maintains any Cash Insurance in satisfaction
of any part of their obligation to maintain insurance pursuant to this covenant,
the Company shall deliver, in lieu of any insurance certificate otherwise
required by this covenant, an Officers' Certificate to the Trustee certifying
the amount of such Cash Insurance.
In the event that the Company receives any proceeds of any insurance that
it is required to maintain pursuant to this covenant, the Company shall promptly
deposit such proceeds into an escrow account established with an Eligible
Institution for such purpose. If the Company maintains any Cash Insurance in
satisfaction of any part of its obligation to maintain insurance pursuant to
this covenant, the Company shall transfer the cash maintained in the Insurance
Account to such escrow account upon the occurrence of the event (e.g., a launch
failure) that would have entitled the Company to the payment of insurance had
the Company purchased insurance from a recognized insurance provider. The
Company may use monies on deposit in such escrow account for the design,
development, construction, procurement, launch and insurance of any Replacement
Satellite if: (i) the Company delivers to the Trustee a certificate of the
Company's President certifying that such Replacement Satellite is comparable to
the technological capability of the satellite being replaced, (ii) within 30
days following the receipt of such insurance proceeds, the Company delivers to
the Trustee an Officers' Certificate certifying that (A) the Company will use
its reasonable best efforts to ensure that such Replacement Satellites are
launched within 24 months following delivery from the escrow account of such
insurance proceeds; and (B) the Company will have sufficient funds to service
the Company's projected debt service requirements until the scheduled launch of
such Replacement Satellite and to develop, construct, launch and insure such
Replacement Satellite.
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Business Activities and Construction of OrbView Satellites
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, engage in any business other than that which
is related to the design, development and operation of remote imaging satellites
and the worldwide marketing and sales of remote imagery-based products and
services.
Limitations on Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any
Subsidiary of the Company to, directly or indirectly, enter into any Sale and
Leaseback Transaction with respect to any property or assets (whether now owned
or hereafter acquired), except for a Sale and Leaseback Transaction not
exceeding 365 days, unless (i) the sale or transfer of such property or assets
to be leased is treated as an Asset Sale and complies with the "--Limitations on
Sales of Assets and Subsidiary Interests" covenant and (ii) the Company or such
Subsidiary would be entitled under the "Incurrence of Indebtedness or Issuance
of Disqualified Stock" covenant to incur any Indebtedness (with the lease
obligations being treated as Indebtedness for purposes of ascertaining
compliance with this covenant) in respect of such Sale and Leaseback
Transaction.
Additional Guarantors
The Indenture provides that the Company shall cause each Person that
becomes a Restricted Subsidiary after the date of the Indenture, upon becoming a
Restricted Subsidiary, to become a Subsidiary Guarantor with respect to the
Notes. Any such person shall become a Subsidiary Guarantor by executing and
delivering to the Trustee (a) a supplemental indenture, in form and substance
satisfactory to the Trustee, which subjects such person to the provisions of the
Indenture as a Subsidiary Guarantor and (b) an opinion of counsel to the effect
that such supplemental indenture has been duly authorized and executed by such
Subsidiary Guarantor.
The Indenture contains provisions the intent of which is to provide that
the obligations of any Subsidiary Guarantor will be limited to the maximum
amount that will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from, rights to receive contribution from, or payments made by or on
behalf of any other Subsidiary Guarantor in respect of the obligations of such
other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to its
contribution obligations under the Indenture, result in the obligations of such
Subsidiary Guarantor under its Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under any applicable federal,
state, or foreign law. Any Subsidiary Guarantor that makes a payment or
distribution under a Subsidiary Guarantee shall be entitled to contribution from
each other Subsidiary Guarantor so long as the exercise of such right does not
impair the rights of the holders of the Notes under the Subsidiary Guarantees.
Limitation on Sale of Capital Stock of Subsidiaries
The Indenture provides that the Company may not, and may not permit any
Restricted Subsidiary to, issue, transfer, convey, lease or otherwise dispose of
any shares of Capital Stock or other ownership interests in a Restricted
Subsidiary or securities convertible or exchangeable into, or options, warrants,
rights or other interest with respect to, Capital Stock of or other ownership
interests in a Restricted Subsidiary to any Person (other than to the Company or
a Wholly Owned Restricted Subsidiary) except in a transaction that consists of a
sale of all of the Capital Stock of or other ownership interests in such
Subsidiary owned by the Company and any Subsidiary of the Company that complies
with the provisions described under "Repurchase at the Option of
Holders--Limitations on Sales of Assets and Subsidiary Interests" above to the
extent such provisions apply.
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Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the holders of Notes:
(i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of
operations of the Company and its Restricted Subsidiaries and, with respect
to the annual information only, a report thereon by the Company's
independent certified public accountants; and
(ii) all information that would be required to be filed with the
Commission on Form 8-K if the Company was required to file such reports.
In addition, following the consummation of the Exchange Offer, whether or
not required by the rules and regulations of the Commission, but only if then
permitted by the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability and make
such information available to securities analysts and prospective investors upon
request. In addition, for so long as any Notes remain outstanding, the Company
will furnish to the holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default:
(i) default for 30 days in the payment when due of interest on, or
Liquidated Damages (if any) with respect to, the Notes;
(ii) default in payment when due (whether at maturity, upon redemption
or repurchase, or otherwise) of the principal of or premium, if any, on the
Notes;
(iii) default in the payment of principal and interest or Liquidated
Damages, if any, on Notes required to be purchased pursuant to the
provisions described under the captions "--Repurchase at the Option of
Holders--Change of Control," "--Repurchase at the Option of
Holders--Limitations on Sales of Assets and Subsidiary Interests", or
failure by the Company to comply with the provisions described under
"--Certain Covenants--Merger, Consolidation or Sale of Assets,"
(iv) failure by the Company or any of its Restricted Subsidiaries for
30 days after notice to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least 25% of the outstanding principal
amount of the Notes, to comply with any of their other covenants in the
Indenture for the Notes;
(v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries), whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default:
(a) is caused by a failure to pay principal of, or premium, if any,
or interest on, such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
"Payment Default"); or
(b) results in the acceleration (which acceleration has not been
rescinded) of such Indebtedness prior to its express maturity, and, in
each case described in clauses (a) and (b) of this paragraph, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated,
aggregates $5 million or more;
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(vi) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments (other than any judgments as to which a reputable
insurance company has accepted full liability and whose bond, premium or
similar charge therefor is not in excess of $5 million) aggregating in
excess of $5 million, which judgments are not paid, discharged or stayed
within 60 days after their entry,
(vii) breach by the Company of any representation or warranty set
forth in the Pledge Agreement, or default by the Company in the performance
of any covenant set forth in the Pledge Agreement, or repudiation by the
Company of any of its obligations under the Pledge Agreement or the
unenforceability of the Pledge Agreement against the Company for any reason
which in any one case or in the aggregate results in a material impairment
of the rights intended to be afforded thereby; and
(viii) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries.
If any Event of Default occurs and is continuing with respect to the Notes,
the Trustee or the holders of at least 25% of the aggregate principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency with respect to the
Company, any Significant Subsidiary or any group of Restricted Subsidiaries
that, taken together, would constitute a Significant Subsidiary, all outstanding
Notes will become due and payable without further action or notice. Holders of
the Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable upon the acceleration of the
Notes. If an Event of Default occurs prior to March 1, 2002 by reason of any
such willful action (or inaction), by or on behalf of the Company with the
intention of avoiding the prohibition on redemption of the Notes prior to March
1, 2002, then the premium specified in the Indenture shall also become
immediately due and payable to the extent permitted by law upon the acceleration
of the Notes.
The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture, except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, PARTNERS, OFFICERS, EMPLOYEES, INCORPORATORS
AND STOCKHOLDERS
No director, officer, employee, incorporator, stockholder or authorized
representative of the Company, as such, shall have any liability for any
obligations of the Company under the Notes, the Indenture or the Pledge
Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of Notes, by accepting a Note, waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of their
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for:
(i) the rights of holders of outstanding Notes to receive payments in
respect of the principal of, and premium (if any), interest and Liquidated
Damages (if any) on, such Notes when such payments are due from the trust
referred to below;
(ii) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost
or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith; and
(iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (other than non-payment, bankruptcy, receivership, rehabilitation
and insolvency events) described under "--Events of Default" will no longer
constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance with
respect to the Notes:
(i) the Company must irrevocably deposit with the Trustee, in trust
for the benefit of the holders of the Notes, cash in U.S. dollars,
non-callable Government Securities or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent certified public accountants, to pay the principal of,
and premium if any, interest and Liquidated Damages, if any, on, the
outstanding Notes on the Stated Maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes
are being defeased to maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that:
(A) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling, or
(B) since the date of the Indenture, there has been a change in the
applicable federal income tax law,
in either case to the effect, and based thereon such opinion of counsel shall
confirm, that the holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance
had not occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day
after the date of deposit;
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(v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute default under any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound;
(vi) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that after the 91st day (or such other applicable
date) following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the holders of Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Notes
selected for redemption. Also, the Company is not required to transfer or
exchange any Notes for a period of 15 days before a selection of Notes to be
redeemed.
The registered holder of a Note will be treated as the owner of such Note
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, the Indenture, the
Notes and the Pledge Agreement may be amended or supplemented with the consent
of the holders of at least a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture, the Notes or the Pledge
Agreement may be waived with the consent of the holders of a majority in
principal amount of the then outstanding Notes (including consents obtained in
connection with a purchase of, or tender offer or exchange offer for Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Note held by a non-consenting holder):
(i) reduce the principal amount of Notes whose holders must consent to
an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other
than provisions relating to the covenants described above under the caption
"Repurchase at the Option of Holders--Change in Control" and "Limitation on
Sales of Assets and Subsidiary Interests");
(iii) reduce the rate of or change the time for payment of interest on
any Note;
(iv) waive a Default or Event of Default in the payment of principal
of, premium (if any), interest or Liquidated Damages (if any) on, the Notes
(except a rescission of acceleration of the Notes by the holders of at
least a majority in aggregate principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration);
(v) make any Note payable in money other than that stated in the
Notes;
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(vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of holders of Notes to receive
payments of principal of, premium (if any), interest or Liquidated Damages
on, the Notes;
(vii) waive a redemption payment with respect to any Note (other than
a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of holders"); or
(viii) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture, the Notes or
the Pledge Agreement to cure any ambiguity, defect or inconsistency, to provide
for uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to holders of Notes in
the case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the holders of Notes or that does not adversely
affect the legal rights under the Indenture of any such holder, or to comply
with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if the Trustee acquires any conflicting interest, it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any holder of Notes, unless such holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company entered into the Registration Rights Agreement with the Initial
Purchasers pursuant to which the Company will, at its expense, for the benefit
of the holders of the Original Notes, (i) use its best efforts to file within 45
days after the Closing Date, this Exchange Offer Registration Statement with the
Commission with respect to a registered offer to exchange the Original Notes for
the Exchange Notes, which will have terms identical in all material respects to
the Original Notes (except that the Exchange Notes will not contain terms with
respect to transfer restrictions) and (ii) unless the Exchange Offer would not
be permitted by applicable law or Commission policy, use its best efforts to
cause the Exchange Offer Registration Statement to be declared effective under
the Securities Act within 150 days after the Closing Date. Upon the Exchange
Offer Registration Statement being declared effective, the Company will offer
the Exchange Notes in exchange for surrender of the Original Notes. The Company
will keep the Exchange Offer open for not less than 30 days (or longer if
required by applicable law) after the date notice of the Exchange Offer is
mailed to the holders of the Original Notes. For each Original Note surrendered
to the Company pursuant to the Exchange Offer, the holder of such Original Note
will receive an Exchange Note having a principal amount equal to that of the
surrendered Original Note, which shall be canceled. Under existing
interpretations by the staff of the Commission, the Exchange Notes would in
general be freely transferable after the Exchange Offer without further
registration under the Securities Act; provided that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer
will have a prospectus delivery requirement with respect to resales of such
Exchange Notes. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to the Exchange Notes (other than a resale of an unsold allotment from the
original sale of the Original Notes) with
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the prospectus contained in the Exchange Offer Registration Statement. Under the
Registration Rights Agreement, the Company is required to allow Participating
Broker-Dealers and other persons, if any, with similar prospectus delivery
requirements to use the prospectus contained in the Exchange Offer Registration
Statement in connection with the resale of such Exchange Notes. The Company will
agree for a period of at least 180 days after the consummation of the Exchange
Offer to make available a prospectus meeting the requirements of the Securities
Act to any Participating Broker-Dealer for use in connection with any resale of
any such Exchange Notes.
Each holder of Original Notes (other than certain specified holders) who
wishes to exchange such Original Notes for Exchange Notes in the Exchange Offer
will be required to make certain representations, including representations that
any Exchange Notes to be received by it will be acquired in the ordinary course
of its business and that at the time of the commencement of the Exchange Offer
it has no arrangement with any person to participate in a distribution (within
the meaning of the Securities Act) with respect to the Exchange Notes.
The Company has agreed to pay all reasonable expenses incident to the
Exchange Offer (excluding the fees of counsel to the Initial Purchasers) and
will indemnify the Initial Purchasers against certain liabilities, including
liabilities under the Securities Act.
In the event that, based upon applicable interpretations of the Securities
Act by the staff of the Commission, the Company concludes that it cannot effect
the Exchange Offer, or if for any other reason the Exchange Offer is not
consummated within 180 days of the Closing Date, or if a holder of the Original
Notes is not permitted by applicable law to participate in the Exchange Offer,
the Company will use its best efforts to file a shelf registration statement
(the "Shelf Registration Statement") with the Commission on or prior to 45 days
after such filing obligation arises, cause the Shelf Registration Statement to
be declared effective by the Commission on or prior to 150 days after such
obligation arises and use their best efforts to keep such Shelf Registration
Statement continuously effective until two years after the Closing Date.
In the event that either: (i) the Exchange Offer Registration Statement or
the Shelf Registration Statement is not filed with the Commission on or prior to
the date specified for such filing; (ii) the Exchange Offer Registration
Statement or the Shelf Registration Statement has not been declared effective by
the Commission on or prior to the date specified for such effectiveness; (iii)
the Exchange Offer is not consummated on or prior to the date specified for such
consummation; or (iv) following the date such Exchange Offer Registration
Statement or Shelf Registration Statement is declared effective by the
Commission, it shall cease to be effective without being restored to
effectiveness by amendment or otherwise within the time period specified in the
Registration Rights Agreement, (each such event referred to in clauses (i)
through (iv), a "Registration Default"), the Company shall pay as liquidated
damages ("Liquidated Damages") to each holder of the Original Notes an amount
(the "Damage Amount") equal to 0.25% per annum of the face amount of the
Original Notes during the first 90-day period or any portion thereof immediately
following the occurrence of such Registration Default. The Damage Amount will be
increased by an additional 0.25% per annum of the face amount of the Original
Notes for each subsequent 90-day period that any such Damage Amount continues to
accrue, and the Damage Amount will accrue at the rate specified above until such
Registration Default is cured; provided that in no event shall the Damage Amount
be increased by more than 1% of the face amount of the Original Notes. In
certain circumstances, if the Shelf Registration Statement ceases to be
effective for certain periods, then Liquidated Damages shall be payable.
The Original Notes and the Exchange Notes will be considered collectively
to be a single class for all purposes under the Indenture, including, without
limitation, waivers, amendments, redemptions and offers to repurchase under the
circumstances described herein.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
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"Attributable Debt" means, with respect to any sale and leaseback
transaction, the present value at the time of determination (discounted at a
rate consistent with accounting guidelines, as determined in good faith by the
Company) of the payments during the remaining term of the lease (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended) or until the earliest date on which the lessee may
terminate such lease without penalty or upon payment of a penalty (in which case
the rental payments shall include such penalty, after excluding all amounts
required to be paid on account of maintenance and repairs, insurance, taxes,
assessments, water, utilities and similar charges).
"Acquired Debt" means, with respect to any specified Person:
(i) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Restricted Subsidiary of such
specified Person, including, without limitation, Indebtedness incurred in
connection with, or in contemplation of, such other Person merging with or
into or becoming a Restricted Subsidiary of such specified Person; and
(ii) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of Voting Equity Interests, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Equity Interests (or the
equivalent) of a Person shall be deemed to be control.
"Asset Sale" means:
(i) the sale, lease, license, conveyance or other disposition of any
assets or rights (including, without limitation, by way of a Sale and
Leaseback or similar arrangement) by the Company or a Restricted Subsidiary
(a "disposition"), provided that the disposition of all or substantially
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole will be governed by the provisions of the Indenture described above
under the caption "--Repurchase at the Option of Holders--Change of
Control" and/or the provisions described above under the caption "--Certain
Covenants--Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant); and
(ii) except to the extent excluded by clause (i) above, the issuance
or disposition by the Company or any of its Restricted Subsidiaries of
Equity Interests of the Company's Restricted Subsidiaries,
in the case of either clause (i) or (ii) above, whether in a single transaction
or a series of related transactions: (a) that have a Fair Market Value in excess
of $2.5 million; or (b) for net proceeds in excess of $2.5 million.
Notwithstanding the foregoing: (i) sales of imagery, imagery distribution
or satellite tasking rights, software or rights in software for processing and
storing imagery, license grants to imagery value-added resellers or distributors
and other associated rights, and sales of services, products or inventory in the
ordinary course of business; (ii) a transfer of assets by the Company to any of
its Restricted Subsidiaries or by a Restricted Subsidiary to the Company; (iii)
an issuance of Equity Interests by a Restricted Subsidiary to the Company or to
a Wholly Owned Restricted Subsidiary of the Company; (iv) an exchange of an
asset held by the Company or a Restricted Subsidiary for an asset of a third
party upon a determination by the disinterested members of the Board of
Directors of the Company made in good faith (evidenced by a resolution approved
by a majority of the disinterested members of the Board of Directors of the
Company and set forth in an Officers' Certificate delivered to the Trustee) that
the asset received by the Company or a Restricted Subsidiary in such exchange
(x) is a Related Asset, (y) has a Fair Market Value at least equal to the fair
market value of the asset transferred by the Company or such Restricted
Subsidiary and (z) is usable in the ordinary course of the Company's business to
at least the same extent as the asset transferred by the Company or such
Restricted Subsidiary; (v) sales or dispositions of damaged, worn out or other
obsolete property in the ordinary course of business so long as such property is
no longer necessary for the proper conduct of the
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business of the Company or any of its Restricted Subsidiaries; and (vi) a
Restricted Payment that is permitted by the covenant entitled "Restricted
Payments" will not be deemed to be Asset Sales.
"Business Assets" means any hardware, software, technology, intellectual
property, or other rights in or assets (or, in the case of clause (vi),
inventory) relating to (i) the remote imaging satellites owned and/or operated
by ORBIMAGE on the Issue Date, (ii) the OrbView Satellites, (iii) the
Replacement Satellites, (iv) any other remote imaging satellites developed,
constructed or acquired by ORBIMAGE, (v) the ground segment (or any components
thereof) related to the operation of, and processing of data from, the
satellites described in clauses (i)-(v) above, and (vi) the Company's imagery
catalogue and archive.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(iii) in the case of a partnership, partnership interests (whether
general or limited); and
(iv) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Consideration" means any consideration received from an Asset Sale in
the form of cash or Cash Equivalents, in either case in U.S. dollars or freely
convertible into U.S. dollars.
"Cash Equivalents" means:
(i) United States dollars;
(ii) Government Securities;
(iii) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances or money market deposit accounts with maturities not exceeding
six months and overnight bank deposits, in each case with any Eligible
Institution;
(iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any Eligible Institution;
(v) commercial paper having the highest rating obtainable from Moody's
or S&P and in each case maturing within six months after the date of
acquisition; and
(vi) mutual funds or other pooled investment vehicles investing solely
in investments of the types described in (i) through (v) above.
"Change of Control" means:
(i) the failure by Orbital to hold at least 12,600,000 shares of
Common Stock of the Company (being 50% of the shares of Common Stock held
by Orbital on May 8, 1997), adjusted for stock splits, stock combinations
and the like;
(ii) the failure by Orbital to hold at least thirty percent (30%) of
the Common Stock of the Company on a fully diluted basis, without giving
effect to the conversion of Capital Stock of the Company issued as a
dividend paid-in-kind with respect to shares of Series A Preferred Stock or
Capital Stock of the Company issued pursuant to options granted under the
Stock Option Plan or any other option plan adopted for the benefit of the
Company's employees or directors;
(iii) the direct or indirect acquisition of beneficial ownership of
Voting Equity Interests of the Company by any Person or group of Persons
acting in concert, in an amount greater than the amount of
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Voting Equity Interests held contemporaneously by Orbital except (x)
purchases by record holders of Series A Preferred Stock as of the Issue
Date (and their affiliates, to the extent that such holders are permitted
to transfer their shares of Series A Preferred Stock to affiliates under
the Amended and Restated Stock Purchase Agreement, dated February 25, 1998
("Series A Affiliates")) from other holders of Series A Preferred Stock and
their Series A Affiliates and (y) purchases permitted pursuant to the
Series A Holders' subscription rights under Section 4.1 of the
Stockholders' Agreement;
(iv) the acquisition of the Company, or the sale, lease, transfer,
conveyance or other disposition, in one transaction or a series of related
transactions, directly or indirectly, including through a liquidation or
dissolution, of all or substantially all of the assets of the Company and
its Restricted Subsidiaries or the combination of the Company or all or
substantially all its assets with another Person (other than any such
transfer to any Wholly Owned Restricted Subsidiary of the Company), unless
the acquiring or surviving Person shall be a corporation more than fifty
percent (50%) of the combined voting power of which corporation's then
outstanding Voting Equity Interests, after giving effect to such
acquisition or combination, are owned, immediately after such acquisition
or combination, by the owners of the Voting Equity Interests of the Company
outstanding immediately prior to such acquisition or combination;
(v) the adoption of a plan relating to the liquidation or dissolution
of the Company (other than any such liquidation or dissolution to or for
the benefit of any Wholly Owned Restricted Subsidiary of the Company);
(vi) the failure by the Company to obtain any applicable License (or
License amendment, as applicable) so that it is in full force and effect
within thirty (30) days prior to the scheduled launch of any of the OrbView
Satellites;
(vii) the revocation of any License necessary to operate OrbView-2 or
the OrbView Satellites consistent with the Company's current and planned
commercial operations and which revocation is not cured within thirty (30)
days of the occurrence thereof or such later date when all applicable
appeals have been finally determined, if during such appeal period the
Company has received regulatory approval to continue operations under the
License pending the outcome of such appeals; or
(viii) at any time prior to the latest to occur of (a) the successful
in-orbit checkout of the imaging satellite known as OrbView-3, (b) a
Qualifying Public Offering or (c) the business day next following the end
of a 180 consecutive day period during which the average closing price per
share of the Company's Common Stock shall have exceeded the Threshold Price
(as defined in the definition of "Qualifying Public Offering" below) then
in effect, and unless consented to in writing by the holders of at least
fifty percent (50%) of the shares of Series A Preferred Stock then
outstanding, the acquisition by any Person or group of Persons acting in
concert of beneficial ownership, direct or indirect, of securities of
Orbital representing thirty-five percent (35%) or more of the combined
voting power of Orbital's then outstanding equity securities and at any
time thereafter either (x) less than a majority of Orbital's board of
directors shall be Continuing Directors or (y) there shall be an
announcement by Orbital or such acquiring Person or group of Persons or the
approval of a business plan by Orbital's Board of Directors, in either case
that indicates an intention to de-emphasize or curtail the relationship
between the Company and Orbital.
"Collateral Agent" means the collateral agent under the Pledge Agreement.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period,
(a) plus, to the extent deducted or otherwise excluded in computing such
Consolidated Net Income:
(i) an amount equal to any extraordinary loss plus any net loss
realized in connection with a sale of assets;
(ii) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period;
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(iii) Consolidated Interest Expense; and
(iv) depreciation, amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash charges (excluding any
such non-cash charge to the extent that it represents an accrual of or
reserve for cash charges in any future period or amortization of a prepaid
cash expense that was paid in a prior period) of such Person and its
Restricted Subsidiaries for such period;
(b) minus, to the extent added or otherwise included in computing
Consolidated Net Income, consolidated interest income of such Person and its
Restricted Subsidiaries for such period and non-cash items increasing such
Consolidated Net Income (including, without limitation, (x) unrealized currency
exchange gains and (y) amortized non-cash contract revenues related to (i) cash
received prior to the Issue Date and (ii) cash received subsequent to the date
hereof that is specifically intended to fund capital expenditures, including,
but not limited to that certain contract between Orbital and the U.S. Air Force
with respect to hyperspectral imagery, in each case, on a consolidated basis and
determined in accordance with GAAP). Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Restricted Subsidiary of any such
Person shall be added to Consolidated Net Income to compute Consolidated Cash
Flow only to the extent (and in the same proportion) that the Net Income of such
Restricted Subsidiary was included in calculating the Consolidated Net Income of
such Person and only if a corresponding amount would be permitted at the date of
determination to be distributed by dividend to such Person by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Consolidated Interest Expense" means, with respect to any Person for any
period, (a) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financing, and net payments (if any) pursuant
to Hedging Obligations) plus (b) the aggregate amount for such period of cash or
non-cash dividends on any Disqualified Stock of the Company and its
Subsidiaries.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that:
(i) the Net Income of any Person that is not a Subsidiary Guarantor or
that is accounted for by the equity method of accounting shall be included
only to the extent of the amount of dividends or distributions actually
paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary
thereof;
(ii) the Net Income of any Restricted Subsidiary that is not a
Subsidiary Guarantor shall be excluded to the extent that the declaration
or payment of dividends or similar distributions by such Restricted
Subsidiary of such Net Income is not at the date of determination permitted
without any prior governmental approval (which has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary or its
stockholders;
(iii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded;
(iv) the cumulative effect of a change in accounting principles shall
be excluded; and
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(v) the Net Income of any Unrestricted Subsidiary shall be included
only to the extent of the amount of dividends or distributions actually
paid in cash to the referent Person or a Restricted Subsidiary thereof.
"Consolidated Net Worth" means, with respect to any Person as of any date:
(i) the consolidated equity of the equity holders of such Person and
its consolidated Restricted Subsidiaries as of such date; plus
(ii) the respective amounts reported on such Person's balance sheet as
of such date with respect to any series of preferred Equity Interests
(other than Disqualified Stock) that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and paid only
out of net earnings in respect of the year of such declaration and payment,
but only to the extent of any cash received by such Person upon issuance of
such preferred stock; minus
(iii) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going-concern
business made within 12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person; minus
(iv) all investments as of such date in unconsolidated Subsidiaries
and in Persons that are not Restricted Subsidiaries; minus
(v) all unamortized debt discount and expense and unamortized deferred
charges as of such date.
"Consolidated Tangible Net Assets" means, with respect to any Person, the
Consolidated Net Worth of such Person less goodwill and any other intangible
assets shown on the consolidated balance sheet of such Person and its Restricted
Subsidiaries.
"Continuing Director" means a director of Orbital that is a director on the
Issue Date or is nominated as a director by a majority of Orbital's Board of
Directors, which majority consists of directors in place for at least 12 months
(other than in connection with replacements or vacancies occurring in the
ordinary course) prior to the acquisition representing 35% or more of the
combined voting power of Orbital's outstanding equity securities.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities or commercial paper facilities with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event: (i) matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise at the option of the holder thereof; or (ii) is
redeemable or is convertible or exchangeable for Indebtedness at the option of
the holder thereof, in whole or in part, on or prior to the date on which the
Notes are repaid, redeemed or retired in full; provided however, that
Disqualified Stock shall not include any Capital Stock that would constitute
Disqualified Stock solely because the holders thereof have the right to require
the Company to repurchase such Capital Stock if the terms of such Capital Stock
provide that the Company may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
the covenant described above under the caption "--Certain Covenants--Restricted
Payments." The Series A Preferred Stock shall not be Disqualified Stock.
"Eligible Institution" means a domestic commercial banking institution that
has combined capital and surplus of not less than $500 million or its equivalent
in foreign currency, whose debt is rated "A" or higher according to S&P or
Moody's at the time as of which any investment or rollover therein is made.
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"Eligible Receivables" means the accounts receivable of the Company (net of
accounts more than 90 days past due and reserves and allowances for doubtful
accounts determined in accordance with GAAP).
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company in existence on
the Issue Date, until such amounts are repaid.
"Fair Market Value" means, with respect to any asset, the sale value that
would be obtained in an arm's-length free market transaction, between a willing
seller and a willing buyer, neither of which is under pressure or compulsion to
complete the transaction; provided that the Fair Market Value of any such asset
or assets shall be determined by the Board of Directors of the Company, acting
in good faith and by unanimous resolution, and which determination shall be
evidenced by an Officers' Certificate delivered to the Trustee.
"Fixed Asset Financing" means Indebtedness that is secured by ground-based
equipment and other tangible assets of the Company or a sale and leaseback
transaction with respect to such assets, in which case the Attributable Debt
shall be treated as Indebtedness for purposes of this definition.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession and which are in effect on the Issue Date.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" or "guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under: (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements; (ii) foreign currency hedge
obligations; and (iii) other agreements or arrangements designed to protect such
Person against fluctuations in interest and foreign currency rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or bankers' acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable to the
extent that any such accrued expense or trade payable is not more than 90 days
overdue or is otherwise being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all indebtedness of others secured by a Lien on
any asset of such Person (whether or not such indebtedness is assumed by such
Person and, in the event such indebtedness is not assumed by, and is otherwise
non-recourse to, such Person, the amount of such indebtedness shall be deemed to
equal the greater of book value or Fair Market Value), all obligations to
purchase, redeem, retire, defease or otherwise acquire for value any
Disqualified Stock or any warrants, rights or options to acquire such
Disqualified Stock valued, in the case of Disqualified Stock, at the greatest
amount payable in respect thereof on a liquidation (whether voluntary or
involuntary) plus accrued and unpaid dividends, the liquidation value of any
preferred stock issued by Subsidiaries of such Person, plus accrued and unpaid
dividends, and, to the extent not otherwise included, the Guarantee by such
Person of any indebtedness of any other Person; and provided, that
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"Indebtedness" shall be calculated without duplication and after elimination of
Intercompany Indebtedness (as defined in clause (vi) of the covenant entitled
"Incurrence of Indebtedness or Issuance of Disqualified Stock").
"Indebtedness to Capital Ratio" means, on any date of determination for the
Company and its Restricted Subsidiaries, on a consolidated basis, the ratio
(expressed as a percentage) of Indebtedness on such date to Total Invested
Capital on such date.
"Indebtedness to Cash Flow Ratio" means, with respect to any Person as of
any date of determination, the ratio of:
(i) total Indebtedness of such Person and its Restricted Subsidiaries
as of such date; to
(ii) two times Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for the two most recently ended fiscal quarters for
which financial statements of such Person are available (the "Measurement
Period");
provided, however, that: (a) in making such computation, the total Indebtedness
of such Person and its Restricted Subsidiaries shall include the total amount of
funds outstanding under any credit facilities; and (b) in the event such Person
or any of its Restricted Subsidiaries consummates a material acquisition or sale
of assets, or issues or redeems Disqualified Stock subsequent to the
commencement of the Measurement Period, then the Indebtedness to Cash Flow Ratio
shall be calculated giving pro forma effect to such material acquisition, sale
of assets or issuance or redemption of Disqualified Stock as if the same had
occurred at the beginning of the Measurement Period. For purposes of this
definition, whenever the pro forma effect is to be given to a transaction, the
pro forma calculations shall be made in good faith by a responsible financial or
accounting officer of the Company.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the good
faith judgment of the Board of Directors of the Company (evidenced by a
resolution of the majority of the Board of Directors of the Company as set forth
in an Officers' Certificate delivered to the Trustee), qualified to perform the
task for which it has been engaged and is disinterested and independent with
respect to the Company and its Affiliates.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans, guarantees, advances or capital contributions (excluding
commission, travel and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities and all other items that
are or would be classified as investments on a balance sheet prepared in
accordance with GAAP; provided that an acquisition of assets, Equity Interests
or other securities by the Company for consideration consisting of common Equity
Interests (other than Disqualified Stock) of the Company shall not be deemed to
be an Investment. Notwithstanding the foregoing, Investments shall not include
advance payments for satellite capacity or imagery related services or products
in the ordinary course of business.
"Joint Venture" means a Person in a Related Business in which the Company
or one of its Subsidiaries holds 50% or less of the Voting Equity Interests.
"License" means any Federal Communications Commission license or Department
of Commerce license issued to the Company relating to the operation of OrbView-2
or the OrbView Satellites (including the Department of Commerce license and the
Federal Communications Commission license currently owned by Orbital relating to
the operation of OrbView-2).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
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"Marketable Securities" means: (i) Government Securities or, for purpose of
determining whether such Government Securities may serve as substitute Pledged
Securities, Government Securities having a maturity date on or before the date
on which the payments of interest (or principal) on the Notes to which such
Government Securities are pledged occur; (ii) any certificate of deposit
maturing not more than 270 days after the date of acquisition issued by, or time
deposit of, an Eligible Institution; (iii) commercial paper maturing not more
than 270 days after the date of acquisition issued by a corporation (other than
an Affiliate of the Company) with a rating at the time as of which any
investment therein is made, of "A-1" (or higher) according to S&P or "P-1" (or
higher) according to Moody's; (iv) any banker's acceptances or money market
deposit accounts issued or offered by an Eligible Institution; and (v) any fund
investing exclusively in investments of the types described in clauses (i)
through (iv) above.
"Moody's" means Moody's Investors Service, Inc.
"Net Income" means, with respect to any Person, the net income (or loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however,
(i) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with:
(a) any sale of assets (including, without limitation, dispositions
pursuant to Sale and Leaseback Transactions); or
(b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(ii) any extraordinary or nonrecurring gain (but not loss), together
with any related provision for taxes on such extraordinary or nonrecurring
gain (but not loss).
"Net Proceeds" means (a) with respect to any Asset Sale, the aggregate cash
proceeds received by the Company or any of its Restricted Subsidiaries in
respect of such Asset Sale (including, without limitation, any cash received
upon the sale or other disposition of any non-cash consideration received in any
Asset Sale), net of the direct costs relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements and provided that any
such amount not so required to be paid for taxes shall be deemed to constitute
Net Proceeds at the time such amount is not retained for such purpose), amounts
required to be applied to the repayment of Indebtedness secured by a Lien on the
asset or assets (including Equity Interests) that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets (including Equity Interests) established in accordance with GAAP
(provided that the amount of any such reserve shall be deemed to constitute Net
Proceeds at the time such reserve shall have been released or is not otherwise
required to be retained for such purpose) and (b) with respect to any issuance
or sale of Capital Stock, the proceeds of such issuance or sale in the form of
cash or Cash Equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but not interest,
component thereof) when received in the form of cash or Cash Equivalents (except
to the extent such obligations are financed or sold with recourse to the Company
or any Restricted Subsidiary of the Company) and proceeds from the conversion of
other property received when converted to cash or Cash Equivalents, net of
legal, accounting and investment banking fees, discounts and sales commissions
and net of taxes paid or payable as a result thereof.
"Non-Recourse Debt" means Indebtedness:
(i) as to which neither the Company nor any of its Restricted
Subsidiaries:
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness);
(b) is directly or indirectly liable (as a guarantor or otherwise);
or
(c) constitutes the lender;
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(ii) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of the Company or any of its Restricted Subsidiaries
to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its Stated Maturity; and
(iii) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of any of the Company or
any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer or President and the chief financial and
accounting officer of such Person.
"Orbital" means Orbital Sciences Corporation, a Delaware corporation, or
any successor entity whether by merger, sale of all or substantially all its
assets or otherwise.
"Orbital Agreements" means each of the Procurement Agreement between the
Company and Orbital, dated as of November 18, 1996, as amended on May 8, 1997
and December 31, 1997, the Amended and Restated ORBIMAGE Services Agreement
between Orbital and the Company, dated as of December 31, 1997; the Non-Compete
and Teaming Agreement between the Company and Orbital, dated as of May 8, 1997;
the OrbView-2 License Agreement between the Company and Orbital, dated as of May
8, 1997; the Software License Agreement between the Company and Earth
Observation Sciences dated March 14, 1996, as amended; and the Software
Maintenance and Support Agreement between the Company and Earth Observation
Sciences, dated as of October 1, 1997; each agreement as in effect as of the
Issue Date and as amended from time to time if such amendment is not prohibited
by the Indenture.
"OrbView Satellites" means each of the high-resolution satellites currently
designated as OrbView-3 and OrbView-4 under the Procurement Agreement, and any
Replacement Satellite.
"Permitted Investment" means:
(i) any Investments in the Company or any Wholly Owned Restricted
Subsidiary of the Company;
(ii) any Investments in cash or Cash Equivalents;
(iii) Investments by the Company or any of its Restricted Subsidiaries
in a Person if, as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the Company; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or any Restricted Subsidiary of the
Company;
(iv) any Investment made as a result of the receipt of non-Cash
Consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "Repurchase
at the Option of Holders--Limitation on Sales of Assets and Subsidiary
Interests";
(v) any Investment made with Excess Proceeds remaining after the
consummation of an Asset Sale Offer as described above under the caption
"Repurchase at the Option of Holders--Limitation on Sales of Assets and
Subsidiary Interests;"
(vi) any Investment made by the Company or any of its Restricted
Subsidiaries in any Unrestricted Subsidiary using the proceeds of a
substantially concurrent contribution to the equity capital of the Company;
and
(vii) any Investment made by the Company or any of its Restricted
Subsidiaries in a Related Business, Related Satellite Business or a Joint
Venture; provided that at the time any such Investment is
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made, such Investment will not cause the aggregate amount of Investments at
any one time outstanding (x) $10 million or (y) 7.5% of the Consolidated
Net Worth of the Company.
"Permitted Liens" means:
(i) Liens securing the Notes;
(ii) Liens in favor of the Company;
(iii) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Company or any of its Restricted
Subsidiaries; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company or its Restricted Subsidiary;
(iv) Liens on property existing at the time of acquisition thereof by
the Company or any of its Restricted Subsidiaries, provided that such Liens
were in existence prior to the contemplation of such acquisition;
(v) Liens to secure the performance of statutory obligations, surety,
appeal or performance bonds or other obligations of a like nature or
mechanics' or purchase money Liens incurred in the ordinary course of
business;
(vi) Liens existing on the Issue Date;
(vii) Liens on inventory, accounts receivable or domestic and/or
international ground operation centers and related systems securing
Indebtedness incurred under clause (i), (vii), (x) or (xi) of the covenant
entitled "Incurrence of Indebtedness or Issuance of Disqualified Stock", or
securing Permitted Refinancing Indebtedness incurred pursuant to the
Indenture to refinance Indebtedness incurred under clause (i), (viii), (x)
or (xi) of the covenant entitled "Incurrence of Indebtedness or Issuance of
Disqualified Stock";
(viii) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(ix) Liens incurred in the ordinary course of business of the Company
or any Subsidiary of the Company with respect to obligations that do not
exceed $5 million at any one time outstanding and that (a) are not incurred
in connection with the borrowing of money or the obtaining of advances or
credit (other than trade credit in the ordinary course of business), (b) do
not in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the
Company or its Subsidiaries and (c) are not for the benefit of an Affiliate
of the Company; and
(x) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Pledge Account" means the account established with the Collateral Agent
pursuant to the terms of the Pledge Agreement for the deposit of the Pledged
Securities.
"Pledge Agreement" means the Pledge Agreement dated as of the date of the
Indenture by and between the Company and the Collateral Agent governing the
Pledge Account.
"Pledged Securities" means the U.S. government securities purchased by the
Company with a portion of the net proceeds from the Units Offering to be
deposited in the Pledge Account and pledged as security for the Notes.
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"Qualifying Public Offering" means a public offering of Common Stock
registered under the Securities Act (i)(a) that shall have resulted in an
aggregate price to the public of not less than $30 million or (b) that involves
the sale to the public of Common Stock constituting at least twenty percent
(20%) of the Common Stock immediately outstanding after the offering, in either
case at a price per share of Common Stock equal to or greater than the Threshold
Price and (ii) that shall have resulted in listing or admission to trading of
the Common Stock on the New York Stock Exchange, a national securities exchange,
the NASDAQ National Market System or NASDAQ over-the-counter market. For the
purposes of this definition, Threshold Price means (i) as of any date through
May 1, 1999, 100% of the then current Conversion Price, (ii) from May 2, 1999
through May 1, 2000, the then current Conversion Price, multiplied by the amount
(expressed as a percentage) equal to 100% plus the result of 30% times a
fraction, the numerator of which is the number of days after May 1, 1999 the
calculation of the Threshold Price occurs and the denominator of which is 365,
(iii) from May 2, 2000 through May 1, 2001, the then current Conversion Price,
multiplied by the amount (expressed as a percentage) equal to 130% plus the
result of 20% times a fraction, the numerator of which is the number of days
after May 1, 2000, the calculation of the Threshold Price occurs and the
denominator of which is 365, and (iv) from May 2, 2001 forward, 150% of the then
current Conversion Price.
"Related Asset" means any asset used in connection with a Related Business
or Related Satellite Business.
"Related Business" means any Related Satellite Business and any business
relating to the worldwide acquisition, marketing, processing and sales of remote
imagery-based products and services.
"Related Satellite Business" means any business relating to the design,
development, and operation of remote imaging satellites and the worldwide
marketing and sales of satellite-based remote imagery-based products and
services.
"Replacement Satellite" means any satellite constructed to replace an
OrbView Satellite in the event of a failure of such OrbView Satellite; provided,
however, that any such Replacement Satellite shall not include hyperspectral
imagery capacity, if it is determined in good faith by the Board of Directors of
the Company (evidenced by a resolution approved by at least a majority of the
Board of Directors of the Company and set forth in an Officers' Certificate
delivered to the Trustee) that hyperspectral imagery is not required to maintain
the competitiveness of the Company's satellites.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such Person
that is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
pursuant to which any property (other than Capital Stock) or assets is sold by a
Person or a Subsidiary and is thereafter leased back from the purchaser or
transferee thereof by such Person or one or more of its Subsidiaries, except a
Fixed Asset Financing.
"S&P" means Standard & Poor's Ratings Services.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" means the Series A Cumulative Convertible
Preferred Stock, $.01 par value, of the Company.
"Series A Offering" means the sale of additional shares of Series A
Preferred Stock that will be consummated concurrent with the closing of the
Units Offering.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article I, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, when used with respect to any Note, March 1, 2005.
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"Stock Purchase Agreement" means the Series A Preferred Stock Purchase
Agreement, dated May 7, 1997, as amended, by and among the Company and the
purchasers of Series A Preferred Stock, as in effect on the Issue Date.
"Stockholders' Agreement" means the agreement by and among the Company and
its stockholders, dated May 8, 1997, as amended, as in effect on the Issue Date.
"Stock Option Plan" means the Orbital Imaging Corporation 1996 Stock Option
Plan, adopted as of November 15, 1996 and any successor stock option plan
adopted for the benefit of the Company's directors and/or employees.
"Subsidiary" means, with respect to any Person:
(i) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of such Person (or a combination thereof); and
(ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means any Guarantee of the Company's obligations
under the Indenture and the Notes given by a Subsidiary Guarantor.
"Subsidiary Guarantor" means any Person that becomes a Restricted
Subsidiary after the date of the Indenture.
"Total Invested Capital" means, as of any date of determination, the sum of
(a) total Indebtedness as of such date and (b) $88 million plus the aggregate
proceeds received by the Company or any Restricted Subsidiary in respect of the
issuance of Capital Stock (other than Disqualified Stock) of the Company or such
Restricted Subsidiary, including the fair value of property other than cash (as
determined in good faith by the Board of Directors of the Company (evidenced by
a resolution approved by at least a majority of the Board of Directors of the
Company and set forth in an Officers' Certificate delivered to the Trustee),
less any redemptions of, or dividends or other distributions on, Capital Stock
of the Company made after the Issue Date and on or prior to the date of
determination.
"Unrestricted Subsidiary" of a Person means any Subsidiary of such Person
that is designated by such Person as an Unrestricted Subsidiary, but only if and
for so long as such Subsidiary:
(i) has no Indebtedness other than Non-Recourse Debt;
(ii) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary unless the
terms of any such agreement, contract, arrangement or understanding are no
less favorable to the Company or such Restricted Subsidiary than those that
might be obtained at the time from Persons who are not Affiliates of the
Company;
(iii) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation:
(1) to subscribe for additional Equity Interests; or
(2) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results;
(iv) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of any of the Company or any of its
Restricted Subsidiaries; and
(v) in the case of a corporate entity or limited liability company,
has at least one director on its board of directors and at least one
executive officer, in each case who is not a director or executive officer
of the Company or any of its Restricted Subsidiaries.
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"Voting Equity Interests" means the Equity Interest in a corporation or
other Person with voting power under ordinary circumstances entitling the
holders thereof to elect or appoint the board of directors, executive committee
or other governing body of such corporation or Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(i) the sum of the products obtained by multiplying: (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by
(ii) the then outstanding principal of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person and one or more other Wholly Owned Restricted
Subsidiaries of such Person.
PROVISIONS APPLICABLE TO ALL SECURITIES
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Exchange Notes will
initially be issued in the form of one or more Global Notes (the "Global
Notes"). The Global Notes will be deposited on the date of the closing of the
sale of the Exchange Notes offered hereby (the "Exchange Closing Date") with, or
on behalf of, the Depositary and registered in the name of Cede & Co., as
nominee for the Depositary (such nominee being referred to herein as the "Global
Note Holder").
Exchange Notes that are issued as described below under "--Certificated
Securities" will be issued in registered form (the "Certificated Securities").
Upon the transfer of Certificated Securities, such Certificated Securities may,
unless the Global Notes have previously been exchanged for Certificated
Securities, be exchanged for an interest in a Global Note representing the
principal amount of Notes being transferred.
The Depositary is a limited-purpose trust company which was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchaser), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants with portions of the principal amount of the Global
Notes and (ii) ownership of the Exchange Notes evidenced by the Global Notes
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by the Depositary (with respect to the interests of
the Depositary's Participants), the Depositary' Participants and the
Depositary's Indirect Participants. Prospective purchasers are advised that the
laws of some states require that certain Persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer Exchange Notes evidenced by the Global Notes will be limited to such
extent.
So long as the Global Note Holder is the registered owner of any Exchange
Notes, the Global Note Holder will be considered the sole owner or holder of
such Exchange Notes outstanding under the Indenture. Beneficial owners of
Exchange Notes evidenced by the Global Note will not be considered the owners or
holders thereof under the Indenture for any purpose, including with respect to
the giving of any directions,
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instructions or approvals to the Trustee thereunder. The ability of a Person
having a beneficial interest in Exchange Notes represented by a Global Note to
pledge such interest to Persons or entities that do not participate in the
Depositary's system or to otherwise take actions in respect of such interest,
may be affected by the lack of a physical certificate evidencing such interest.
None of the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of Exchange Notes by the Depositary, or for maintaining, supervising or
reviewing any records of the Depositary relating to such Exchange Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Exchange Notes registered in the name of a
Global Note Holder on the applicable record date will be payable by the Trustee
to or at the direction of such Global Note Holder in its capacity as the
registered holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee may treat the Persons in whose names the Exchange Notes,
including the Global Notes, are registered as the owners thereof for the purpose
of receiving such payments and for any and all other purposes whatsoever.
Consequently, none of the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Exchange Notes (including principal, premium, if any, interest and Liquidated
Damages, if any).
The Company believes, however, that it is currently the policy of the
Depositary to immediately credit the accounts of the relevant Participants with
such payment, in amounts proportionate to their respective holdings in principal
amount of beneficial interests in the relevant security as shown on the records
of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Exchange Notes
will be governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any Person having a beneficial interest in a
Global Note may, upon request to the Company or the Trustee, exchange such
beneficial interest for Exchange Notes in the form of Definitive Notes. Upon any
such issuance, the Trustee is required to register such Exchange Notes in the
name of, and cause the same to be delivered to, such Person or Persons. In
addition, if (i) the Company notifies the Trustee in writing that the Depositary
is no longer willing or able to act as a depositary and the Company is unable to
appoint a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Exchange
Notes in the form of Definitive Notes under the Indenture, then, upon surrender
by the relevant Global Note Holder of its Global Note, Exchange Notes in such
form will be issued to each Person that the Depositary identifies as the
beneficial owner of the related Exchange Notes.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary in identifying the beneficial owners of the related Exchange Notes
and each such Person may conclusively rely on, and shall be protected in relying
on, instructions from the Depositary for all purposes (including with respect to
the registration and delivery, and the respective principal amounts, of the
Exchange Notes to be issued).
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Exchange Notes
represented by the Global Securities (including principal, premium, if any,
interest and Liquidated Damages, if any) be made by wire transfer of immediately
available funds to the accounts specified by the Global Security Holder. With
respect to Certificated Securities, the Company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available funds to the accounts specified by the holders
thereof or, if no such account is specified, by mailing a check to each such
holder's registered address. The Exchange Notes represented by the Global Notes
are expected to trade in the Depositary's Same Day Funds Settlement System, and
any permitted secondary market trading activity in such Exchange Notes will
therefore be required by the Depositary to be settled in immediately available
funds. The Company expects that secondary trading in the Certificated Securities
will also be settled in immediately available funds.
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Latham & Walkins, counsel to the Company, the following
discussion sets forth the material U.S. federal tax consequences relevant to the
exchange of Original Notes for Exchange Notes and the ownership and disposition
of Exchange Notes by persons who (a) acquired Original Notes on original issue
for cash and (b) hold Original Notes and Exchange Notes as capital assets
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code"). The discussion is
based upon the Code, Treasury Regulations, Internal Revenue Service ("IRS")
rulings and pronouncements, and judicial decisions now in effect, all of which
are subject to change at any time by legislative, administrative, or judicial
action, possibly with retroactive effect. The discussion does not discuss every
aspect of U.S. federal taxation that may be relevant to a particular taxpayer in
light of their personal circumstances or to persons who are otherwise subject to
a special tax treatment (including, without limitation, banks, broker-dealers,
insurance companies, pension and other employee benefit plans, tax exempt
organizations and entities, persons holding Notes as a part of a hedging or
conversion transaction or a straddle, certain hybrid entities and owners of
interests therein and holders whose functional currency is not the U.S. dollar)
and it does not discuss the effect of any applicable U.S. state and local or
non-U.S. tax laws. The Company has not sought and will not seek any rulings from
the IRS concerning the tax consequences of the exchange of Original Notes for
Exchange Notes and the ownership and disposition of Exchange Notes and,
accordingly, there can be no assurance that the IRS will not successfully
challenge the tax consequences described below. EACH HOLDER IS URGED TO CONSULT
SUCH HOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL INCOME TAX
CONSEQUENCES OF EXCHANGING ORIGINAL NOTES FOR EXCHANGE NOTES AND OWNING AND
DISPOSING EXCHANGE NOTES, AS WELL AS ANY TAX CONSEQUENCES APPLICABLE UNDER THE
LAWS OF ANY U.S. STATE, LOCAL, OR NON-U.S. TAXING JURISDICTION.
U.S. HOLDERS
This Section summarizes certain U.S. federal income tax consequences of the
exchange of Original Notes for Exchange Notes and the ownership and disposition
of Exchange Notes by "U.S. Holders." The term "U.S. Holder" refers to a person
that is classified for U.S. federal tax purposes as a United States person. For
this purpose, a United States person includes (i) a citizen or resident of the
United States, (ii) a corporation, limited liability company, or partnership
created or organized in the United States or under the laws of the United States
or of any state or political subdivision thereof, unless in the case of a
partnership, Treasury Regulations provide otherwise, (iii) an estate whose
income is includible in gross income for U.S. federal income tax purposes
regardless of its source, or (iv) a trust whose administration is subject to the
primary supervision of a United States court and which has one or more United
States persons who have the authority to control all substantial decisions of
the trust. Notwithstanding the preceding sentence, to the extent provided in
Treasury Regulations, certain trusts in existence on August 20, 1996, and
treated as United States persons prior to such date that elect to continue to be
treated as United States persons, shall also be considered U.S. Holders.
Exchange of Notes. The exchange of Original Notes for the Exchange Notes
pursuant to the Exchange Offer will not be treated as an "exchange" for federal
income tax purposes, because the Exchange Notes should not be considered to
differ materially in kind or extent from the Original Notes. Accordingly, the
exchange of Original Notes for Exchange Notes should not be a taxable event to
holders for federal income tax purposes. Moreover, the Exchange Notes should
have the same tax attributes and tax consequences to holders as the Original
Notes had to holders, including, without limitation, the same issue price,
adjusted issue price, original issue discount ("OID"), adjusted tax basis and
holding period. The tax attributes and tax consequences of ownership and
disposition of the Original Notes and, thus, of the Exchange Notes
(collectively, the "Notes"), are summarized below.
Stated Interest. Stated interest paid or accrued on the Notes will be
taxable to a U.S. Holder as ordinary income in accordance with the holder's
method of accounting for federal income tax purposes.
105
<PAGE> 112
Original Issue Discount. The Original Notes were issued with OID for U.S.
federal income tax purposes. The amount of OID on an Original Note equals the
excess of the "stated redemption price at maturity" of an Original Note over its
"issue price." The "stated redemption price at maturity" of an Original Note
will equal the sum of its principal amount plus all other payments thereunder,
other than payments of "qualified stated interest" (defined generally as stated
interest that is unconditionally payable in cash or other property (other than
debt instruments of the Company) at least annually at a single fixed rate). The
Company has determined that the portion of the purchase price originally paid
for each Unit which was properly allocable to each Original Note and, thus, the
"issue price" of each $1,000 Original Notes, equaled $940. Although this
allocation is not binding on the IRS, each U.S. Holder is bound by the Company's
allocation, unless a disclosure statement is attached to the timely filed U.S.
federal income tax return of the U.S. Holder for its taxable year in which it
acquired the Original Notes.
Each U.S. Holder (whether reporting on the cash or accrual basis of
accounting for tax purposes) will be required to include in taxable income for
any particular taxable year the daily portion of the OID described in the
preceding paragraph that accrues on the Note for each day during the taxable
year on which such U.S. Holder holds the Note. Thus, a U.S. Holder will be
required to include OID in income in advance of the receipt of the cash to which
such OID is attributable. The daily portion is determined by allocating to each
day of an accrual period (generally, the period between interest payments or
compounding dates) a pro rata portion of the OID allocable to such accrual
period. The amount of OID that will accrue during an accrual period is the
product of the "adjusted issue price" of the Note at the beginning of the
accrual period multiplied by the yield to maturity of the Note less the amount
of any qualified stated interest allocable to such accrual period. The "adjusted
issue price" of a Note at the beginning of an accrual period will equal its
issue price, increased by the aggregate amount of OID that has accrued on the
Note in all prior accrual periods, and decreased by any payments made during all
prior accrual periods of amounts included in the stated redemption price at
maturity of the Note.
Sale, Retirement, or Other Taxable Disposition of Notes. Upon the sale,
retirement or other taxable disposition of a Note, a U.S. Holder will recognize
gain or loss to the extent of the difference between the sum of the cash and the
fair market value of any property received in exchange therefor (except to the
extent attributable to the payment of accrued and unpaid interest on the Notes,
which generally will be taxed as ordinary income), and the U.S. Holder's
adjusted tax basis in the Notes. A U.S. Holder's tax basis in a Note will
initially equal the price paid for such Note and will subsequently be increased
by the OID includible in such U.S. Holder's taxable income under the rules
described in "--Original Issue Discount," above, and will be reduced by any
payments received on the Note of amounts included in the stated redemption price
at maturity of the Note. Any such gain or loss recognized by a U.S. Holder upon
the sale, retirement or other taxable disposition of a Note will be capital gain
or loss. In the case of a non-corporate U.S. Holder, such capital gain will be
subject to tax at a reduced rate if the Note is held for more than one year, and
will be eligible for a further reduced rate if the Note is held more than 18
months.
Holders of Notes should be aware that the market discount rules may affect
resale of the Notes. If a subsequent purchaser of a Note purchases the Note at a
"market discount" and thereafter recognizes gain upon its disposition, such gain
will be taxable as ordinary interest income (rather than capital gain) to the
extent of the "market discount" that has accrued (and has not otherwise been
included in income pursuant to an election made by such subsequent purchaser)
during the period the subsequent purchaser held such Note. Generally, "market
discount" will exist on the purchase of a Note if the purchase price is less
than the adjusted issue price of the Note and any such market discount will
accrue over the remaining term of the Note on a straight line basis or, at the
election of the subsequent purchaser, on a constant yield to maturity basis.
Liquidated Damages. The Company intends to take the position that the
Liquidated Damages described above under "Description of the Notes and
Description of Warrants--Registration Rights; Liquidated Damages" are taxable to
U.S. Holders as ordinary income in accordance with the U.S. Holder's usual
method of income tax accounting. The IRS may take a different position, however,
which could affect the timing of a U.S. Holder's income with respect to the
Liquidated Damages.
106
<PAGE> 113
Information Reporting; Backup Withholding. The Company is required to
furnish to record holders of the Notes, other than corporations and other exempt
holders, and to the IRS, information with respect to interest paid and the
amount of OID accrued on the Notes.
Certain U.S. Holders may be subject to backup withholding at the rate of
31% with respect to interest and OID paid on the Notes or with respect to
proceeds received from a disposition of the Notes. Generally, backup withholding
applies only if (i) the payee fails to furnish a correct taxpayer identification
number ("TIN") to the payor in the manner required or fails to demonstrate that
it otherwise qualifies for an exemption, (ii) the IRS notifies the payor that
the TIN furnished by the payee is incorrect, (iii) the payee has failed to
report properly the receipt of a "reportable payment" on one or more occasions
and the IRS has notified the payor that withholding is required, or (iv) the
payee fails (in certain circumstances) to provide a certified statement, signed
under penalties of perjury, that the TIN furnished is the correct number and
that such holder is not subject to backup withholding. Backup withholding is not
an additional tax but, rather, is a method of tax collection. U.S. Holders will
be entitled to credit any amounts withheld under the backup withholding rules
against their actual tax liabilities provided the required information is
furnished to the IRS.
NON-U.S. HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the exchange of Original Notes for
Exchange Notes and the ownership and disposition of Exchange Notes by "Non-U.S.
Holders." The term "Non-U.S. Holder" refers to a person that is not classified
for U.S. federal tax purposes as a "United States person," as defined in "--U.S.
Holders," above. Prospective investors who are Non-U.S. Holders are urged to
consult their tax advisors regarding the United States federal income tax
consequences that may arise under the laws of any foreign, state, local or other
taxing jurisdiction.
Exchange of Notes. The exchange of Original Notes for the Exchange Notes
pursuant to the Exchange Offer should not be a taxable event to Non-U.S. Holders
for U.S. federal income tax purposes.
Interest and OID. In general, a Non-U.S. Holder will not be subject to
U.S. federal income tax or regular withholding tax with respect to stated
interest or OID received or accrued on the Notes so long as (a) the interest and
OID is not effectively connected with the conduct of a trade or business within
the United States, (b) the Non-U.S. Holder does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock of
the Company entitled to vote, (c) the Non-U.S. Holder is not a controlled
foreign corporation that is related to the Company actually or constructively
through stock ownership, and (d) the Non-U.S. Holder certifies, under penalties
of perjury that such Holder is not a U.S. Holder and provides such Holder's name
and address.
Gain on Disposition of Notes. Non-U.S. Holders generally will not be
subject to U.S. federal income taxation on gain recognized on a disposition of
Notes so long as (i) the gain is not effectively connected with the conduct by
the Non-U.S. Holder of a trade or business within the United States and (ii) in
the case of a Non-U.S. Holder who is an individual, such Non-U.S. Holder is not
present in the United States for 183 days or more in the taxable year of
disposition and certain other requirements are met.
Federal Estate Taxes. A Note held by an individual who, at the time of
death, is not a citizen or resident of the United States generally will not be
subject to U.S. federal estate tax as a result of such individual's death if (i)
the individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to vote
and, (ii) at the time of the individual's death, interest payments with respect
to such Note would not have been effectively connected with the conduct by such
individual of a trade or business in the United States.
U.S. Information Reporting Requirements and Backup Withholding
Tax. Generally, payments of interest, OID, premium or principal on the Notes to
Non-U.S. Holders will not be subject to information reporting or backup
withholding if the Non-U.S. Holder certifies, under penalties of perjury, that
such Holder is not a U.S. Holder and provides such Holder's name and address.
Non-U.S. Holders will not be subject to information reporting or backup
withholding with respect to the payment of proceeds from the disposition of
Notes effected by, to or through the foreign office of a broker;
107
<PAGE> 114
provided, however, that if the broker is a U.S. person or a U.S.-related person,
information reporting (but not backup withholding) would apply unless the broker
has documentary evidence in its records as to the Non-U.S. Holder's foreign
status (and has no actual knowledge to the contrary), or the Non-U.S. Holder
certifies as to its non-U.S. status under penalty of perjury or otherwise
establishes an exemption. Non-U.S. Holders will be subject to information
reporting and backup withholding at a rate of 31% with respect to the payment of
proceeds from the disposition of Notes, effected by, to or through the U.S.
office of a broker, unless the Non-U.S. Holder certifies as to its non-U.S.
status under penalty of perjury or otherwise establishes an exemption.
Amounts withheld under the backup withholding rules do not constitute a
separate U.S. federal income tax. Rather, amounts withheld under the backup
withholding rules from a payment to a Non-U.S. Holder will be allowed as a
credit against such Non-U.S. Holder's U.S. federal income tax liability and any
amounts withheld in excess of such Non-U.S. Holder's U.S. federal income tax
liability would be refunded, provided that the required information is furnished
to the IRS.
Recently, the Treasury Department promulgated final regulations regarding
the withholding and information reporting rules discussed above. In general, the
final regulations do not significantly alter the substantive withholding and
information reporting requirements but unify certain certification procedures
and forms and clarify reliance standards. Under the final regulations, special
rules apply which permit the shifting of primary responsibility for withholding
to certain financial intermediaries acting on behalf of beneficial owners. The
final regulations would generally be effective for payments made after December
31, 1999, subject to certain transition rules.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account in connection with the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by Participating Broker-Dealers during the period referred to below in
connection with resales of Exchange Notes received in exchange for Original
Notes where such Original Notes were acquired by such Participating
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities (other than a resale of an unsold allotment from the
original sale of Original Notes). The Company has agreed that this Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of such Exchange Notes
for a period ending 180 days from the date on which the Exchange Offer
Registration Statement is declared effective. However, a Participating Broker-
Dealer who intends to use this Prospectus in connection with the resale of
Exchange Notes received in exchange for Original Notes pursuant to the Exchange
Offer must notify the Company, or cause the Company to be notified, on or prior
to the Expiration Date, that it is a Participating Broker-Dealer. Such notice
may be given in the space provided for that purpose in the Letter of Transmittal
or may be delivered to the Exchange Agent at one of the addresses set forth in
the Letter of Transmittal. See "The Exchange Offer--Resales of Exchange Notes."
The Company will not receive any proceeds from the issuance of the Exchange
Notes offered hereby. Exchange Notes received by Participating Broker-Dealers
for their own accounts in connection with the Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any Participating Broker-Dealer that resells Exchange Notes that
were received by it for its own account in connection with the Exchange Offer
and any broker or dealer that participates in a distribution of such Exchange
Notes may be deemed to be an "underwriter" within the meaning of the Securities
Act, and any profit on any such resale of Exchange Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation
108
<PAGE> 115
under the Securities Act. The Letter of Transmittal states that by acknowledging
that it will deliver and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period ending 180 days from the date on which the Exchange Offer
Registration Statement is declared effective, the Company will promptly send
additional copies of this Prospectus and any amendment or supplement to this
Prospectus to any Participating Broker-Dealer that requests such documents in
the Letter of Transmittal.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Company by Latham & Watkins, Washington, D.C.
EXPERTS
The financial statements of the Company as of December 31, 1997 and 1996,
and for each of the years in the three-year period ended December 31, 1997, have
been included herein and in the registration statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
109
<PAGE> 116
INDEX TO FINANCIAL STATEMENTS
ORBITAL IMAGING CORPORATION
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-2
Statements of Operations.................................... F-3
Balance Sheets.............................................. F-4
Statements of Stockholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 117
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Orbital Imaging Corporation:
We have audited the accompanying balance sheets of Orbital Imaging
Corporation (the "Company") as of December 31, 1997 and 1996, and the related
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Orbital Imaging Corporation
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1997, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
January 16, 1998
Washington, D.C.
F-2
<PAGE> 118
ORBITAL IMAGING CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
----------------------------------------- --------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................. $ 4,566,667 $ 1,055,000 $ 2,061,655 $ 108,333 $ 2,416,725
Direct costs............. 7,997,741 4,319,914 6,311,816 1,137,014 4,188,934
----------- ----------- ----------- ----------- -----------
Gross profit (loss)...... (3,431,074) (3,264,914) (4,250,161) (1,028,681) (1,772,209)
Selling, general and
administrative
expenses............... 2,370,899 1,629,874 2,844,355 614,421 987,032
----------- ----------- ----------- ----------- -----------
Loss from operations..... (5,801,973) (4,894,788) (7,094,516) (1,643,102) (2,759,241)
Interest income.......... -- -- 1,260,762 -- 1,043,275
----------- ----------- ----------- ----------- -----------
Loss before benefit for
income taxes........... (5,801,973) (4,894,788) (5,833,754) (1,643,102) (1,715,966)
Benefit for income
taxes.................. -- -- 1,751,468 -- 1,715,966
----------- ----------- ----------- ----------- -----------
Net income (loss)........ $(5,801,973) $(4,894,788) $(4,082,286) $(1,643,102) $ --
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 119
ORBITAL IMAGING CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ -- $ 10,883,142 $128,612,710
Short-term investments, at market, which approximates
cost.................................................... -- 11,336,751 31,222,549
Receivables............................................... 50,000 134,163 1,084,773
------------ ------------ ------------
Total current assets.................................... 50,000 22,354,056 160,920,032
Property, plant and equipment, at cost, less accumulated
depreciation of $3,486,260, $5,144,194 and $5,702,972,
respectively.............................................. 9,506,629 11,053,898 10,852,378
Satellites and related rights, at cost, less accumulated
depreciation and amortization of $9,070,578 and
$12,947,213, and $15,709,234, respectively................ 62,284,878 104,226,147 118,542,460
Long-term investment, at amortized cost..................... -- -- 16,653,508
Other assets................................................ 486,468 115,416 4,381,121
------------ ------------ ------------
Total assets............................................ $ 72,327,975 $137,749,517 $311,349,499
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ -- $ 4,335,026 $ 7,316,366
Current portion of deferred revenue....................... 5,669,294 7,725,141 8,343,996
Deferred tax liabilities, net............................. 53,275 467,550 467,550
------------ ------------ ------------
Total current liabilities............................... 5,722,569 12,527,717 16,127,912
Long-term obligations....................................... 141,074,270
Deferred revenue, net of current portion.................... 29,717,769 29,667,469 29,990,949
Deferred tax liabilities, net............................... 10,607,953 10,193,678 8,477,712
------------ ------------ ------------
Total liabilities....................................... 46,048,291 52,388,864 195,670,843
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01, 10,000,000 shares
authorized;
Series A $100 cumulative convertible, 2,000,000 shares
authorized, 0 shares, 392,887 shares and 620,182
issued and outstanding, respectively (liquidation
value is $0, $40,074,474, and $64,248,518 at December
31, 1996 and 1997 and March 31, 1998, respectively)... -- 3,929 6,202
Series B cumulative, 2,000,000 shares authorized; no
shares issued and outstanding......................... -- -- --
Series C cumulative convertible, 2,000,000 shares
authorized; no shares issued and outstanding.......... -- -- --
Common stock, par value $.01, 75,000,000 shares
authorized; 25,214,000 shares issued and outstanding.... -- 252,140 252,140
Additional paid-in-capital................................ 45,920,943 108,828,129 139,143,859
Accumulated deficit....................................... (19,641,259) (23,723,545) (23,723,545)
------------ ------------ ------------
Total stockholders' equity.............................. 26,279,684 85,360,653 115,678,656
------------ ------------ ------------
Total liabilities and stockholders' equity......... $ 72,327,975 $137,749,517 $311,349,499
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 120
ORBITAL IMAGING CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES A PREFERRED
STOCK COMMON STOCK ADDITIONAL
------------------ --------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
-------- ------- ---------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994...... -- $ -- -- $ -- $ 20,470,019 $ (8,944,498) $ 11,525,521
Capital contributed........... -- -- -- -- 19,180,785 -- 19,180,785
Tax-sharing charge............ -- -- -- -- (4,947,880) -- (4,947,880)
Net income (loss)............. -- -- -- -- -- (5,801,973) (5,801,973)
------- ------ ---------- -------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1995...... -- -- -- -- 34,702,924 (14,746,471) 19,956,453
Capital contributed........... -- -- -- -- 13,624,941 -- 13,624,941
Tax-sharing charge............ -- -- -- -- (2,406,922) -- (2,406,922)
Net income (loss)............. -- -- -- -- -- (4,894,788) (4,894,788)
------- ------ ---------- -------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1996...... -- -- -- -- 45,920,943 (19,641,259) 26,279,684
Shares issued in private
offering, net............... 372,705 3,727 -- -- 33,542,767 -- 33,546,494
Issuance of common stock to
Orbital..................... -- -- 25,200,000 252,000 31,065,829 -- 31,317,829
Issuance of common stock to
director.................... -- -- 14,000 140 50,260 -- 50,400
Preferred stock dividends paid
in shares................... 20,182 202 -- -- (202) -- --
Tax-sharing charge............ -- -- -- -- (1,751,468) -- (1,751,468)
Net loss...................... -- -- -- -- -- (4,082,286) (4,082,286)
------- ------ ---------- -------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1997...... 392,887 $3,929 25,214,000 $252,140 $108,828,129 $(23,723,545) $ 85,360,653
Shares issued in private
offering, net (unaudited)... 227,295 2,273 -- -- 21,315,730 -- 21,318,003
Proceeds from issuance of
common stock warrants
(unaudited)................. -- -- -- -- 9,000,000 -- 9,000,000
Net income (loss)
(unaudited)................. -- -- -- -- -- -- --
------- ------ ---------- -------- ------------ ------------ ------------
BALANCE, MARCH 31, 1998
(UNAUDITED)................... 620,182 $6,202 25,214,000 $252,140 $139,143,859 $(23,723,545) $115,678,656
======= ====== ========== ======== ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 121
ORBITAL IMAGING CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------- --------------------------
1995 1996 1997 1997 1998
------------- ------------ ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS).......................... $ (5,801,973) $ (4,894,788) $ (4,082,286) $(1,643,102) $ --
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS)
TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Depreciation and amortization expense.... 7,777,282 3,981,176 5,536,108 1,050,476 3,451,427
Loss on disposal of fixed assets......... -- -- 4,244 -- --
Deferred tax benefit..................... -- -- (1,751,468) -- (1,715,966)
Other non-cash items..................... -- -- -- -- 10,513
CHANGES IN ASSETS AND LIABILITIES:
(Increase) decrease in receivables....... (200,000) 150,000 (84,163) -- (525,732)
(Increase) decrease in other assets...... (67,513) (418,955) 371,052 (149,653) (264,448)
Increase in accounts payable and accrued
expenses............................... -- -- 4,335,026 99,985 2,981,340
Increase (decrease) in deferred
revenue................................ (1,900,018) 175,000 2,005,547 (158,333) 942,335
------------- ------------ ------------ ----------- ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES............... (192,222) (1,007,567) 6,334,060 (800,627) 4,879,469
------------- ------------ ------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures....................... (9,869,134) (4,657,403) (40,837,560) (1,816,180) (17,435,592)
Purchase of OrbView-2 license.............. (9,119,429) (7,959,971) (8,191,330) (2,459,047) --
Purchases of held-to-maturity investment
securities............................... -- -- -- (32,896,191)
Purchases of available-for-sale investment
securities............................... -- -- (115,750,801) -- (9,801,017)
Maturities of available-for-sale investment
securities............................... -- -- 102,441,541 -- 5,400,000
Sales of available-for-sale investment
securities............................... -- -- 1,972,509 -- 998,780
------------- ------------ ------------ ----------- ------------
NET CASH USED IN INVESTING
ACTIVITIES......................... (18,988,563) (12,617,374) (60,365,641) (4,275,227) (53,734,020)
------------- ------------ ------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term
obligations, net....................... -- -- -- -- 141,000,000
Fees paid to issue long-term
obligations............................ -- -- -- -- (4,733,884)
Issuance of preferred stock in private
offering, net of offering expenses..... -- -- 33,546,494 -- 21,318,003
Issuance of common stock................. 19,180,785 13,624,941 31,368,229 5,075,854 --
------------- ------------ ------------ ----------- ------------
Proceeds from issuance of common stock
warrants............................... -- -- -- -- 9,000,000
------------- ------------ ------------ ----------- ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES......................... 19,180,785 13,624,941 64,914,723 5,075,854 166,584,119
------------- ------------ ------------ ----------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS.... -- -- 10,883,142 -- 117,729,568
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD..................................... -- -- -- -- 10,883,142
------------- ------------ ------------ ----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD..... $ -- $ -- $ 10,883,142 $ -- $128,612,710
============= ============ ============ =========== ============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 122
ORBITAL IMAGING CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) NATURE OF OPERATIONS
In 1991, the ORBIMAGE operating division of Orbital Sciences Corporation
("Orbital") was established to manage the development of remote imaging
satellites that would collect, process, and distribute digital imagery of land
areas, oceans and the atmosphere. In 1992, Orbital Imaging Corporation
("ORBIMAGE" or the "Company") was incorporated in Delaware as a wholly-owned
subsidiary of Orbital. On May 8, 1997 and July 3, 1997, ORBIMAGE issued
preferred stock to private investors to fund a significant portion of the
remaining costs of existing projects (the "Private Placement"). Orbital
purchased additional common stock, bringing its total common equity invested to
approximately $88 million. Also on May 8, 1997, ORBIMAGE executed certain
contracts with Orbital whereby all assets and liabilities of Orbital's operating
division, ORBIMAGE, were sold to the Company at the historical cost.
Accordingly, the accompanying financial statements incorporate the historical
accounts and operations of the operating division prior to May 8, 1997, as
predecessor financial statements of ORBIMAGE.
ORBIMAGE has three contracts with Orbital: the ORBIMAGE System Procurement
Agreement dated November 18, 1996, as amended (the "System Procurement
Agreement"), the OrbView-2 License Agreement dated May 8, 1997 (the "License
Agreement"), and the Amended and Restated Administrative Services Agreement
dated May 8, 1997 (the "Administrative Services Agreement"). Under the System
Procurement Agreement, ORBIMAGE is purchasing (i) the OrbView-1 satellite, (ii)
an exclusive license entitling ORBIMAGE to all of the economic rights and
benefits of the OrbView-2 satellite, (iii) the OrbView-3 satellite and launch
service, (iv) the OrbView-4 satellite and launch service, and (v) the ground
segment assets used to command and control the satellites as well as receive and
process imagery. Under the License Agreement, Orbital has granted an exclusive
worldwide license to ORBIMAGE to use and sell OrbView-2 imagery. Pursuant to the
terms of the License Agreement, Orbital has assigned to ORBIMAGE all amounts
that are due or which become due to Orbital under a contract Orbital has with
NASA to deliver OrbView-2 imagery, and ORBIMAGE has sole responsibility for
operating and controlling the satellite. Under the Administrative Services
Agreement, ORBIMAGE is reimbursing Orbital for all management, accounting,
legal, and financial services, office space, and other administrative services,
as well as certain direct operating services provided by Orbital.
The OrbView-1 satellite was launched in 1995 and provides severe weather
and atmospheric images, including global lightning information and measurements
used in analyzing atmospheric temperature information. The OrbView-2 satellite
was launched on August 1, 1997 and completed its on-orbit checkout in October
1997. The satellite provides multispectral imagery to detect changes in the
coloration of Earth's oceans and land areas. The OrbView-3 satellite is
currently scheduled to begin operations in the second half of 1999 and will
provide 1-meter panchromatic and 4-meter multispectral imagery of the Earth. The
OrbView-4 satellite will provide 1-meter and 2-meter panchromatic, 4-meter
multispectral, and 8-meter hyperspectral imagery of the Earth and is expected to
be operational in mid-2000. The imagery provided by both OrbView-3 and OrbView-4
will have a broad range of applications for U.S. and foreign national security
and many commercial and scientific markets.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
F-7
<PAGE> 123
ORBITAL IMAGING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Certain reclassifications have been made to the 1996 and 1995 financial
statements to conform to the 1997 financial statement presentation.
Revenue Recognition
ORBIMAGE's principal source of revenue is the sale of satellite imagery to
customers, value-added resellers, and distributors. Such sales often require
ORBIMAGE to provide imagery over the term of a multi-year sales contract.
Accordingly, ORBIMAGE generally recognizes revenues on imagery contracts on a
straight-line basis over the delivery term of the contract. Deferred revenue
represents contract receipts in advance of the delivery of imagery.
Unaudited Interim Information
The unaudited interim information as of March 31, 1998 and for the three
months ended March 31, 1998 and 1997, has been prepared in accordance with
generally accepted accounting principles for interim financial information. In
the opinion of management, such information contains all adjustments, consisting
only of normal recurring adjustments, considered necessary for a fair
presentation of such periods. Operating results for the three months ended March
31, 1998 are not necessarily indicative of the results expected for the full
year.
Services Provided by Orbital
A substantial part of ORBIMAGE's administrative services, including legal,
accounting, human resources, and purchasing is provided to ORBIMAGE at cost by
Orbital. Such costs include both specifically identifiable services and certain
pooled costs allocated by Orbital based on ORBIMAGE's proportional use. ORBIMAGE
believes that the cost of these services, as provided for in the accompanying
statements of operations, is reasonable and approximates the cost of similar
services if obtained directly by ORBIMAGE.
Income Taxes
ORBIMAGE recognizes income taxes using the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Stock Based Compensation
On January 1, 1996, ORBIMAGE adopted Statement of Financial Accounting
Standards 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), which
requires companies to (i) recognize as expense the fair value of all stock-based
awards on the date of grant, or (ii) continue to apply the provisions of
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" ("APB 25") and provide pro forma net income (loss) disclosures for
employee stock option grants made in 1995 and future years as if the
fair-value-based method defined in SFAS 123 had been applied. ORBIMAGE has
elected to continue to apply the provisions of APB 25 and provide the pro forma
disclosure provisions of SFAS 123 (See Note 9).
F-8
<PAGE> 124
ORBITAL IMAGING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Cash and Cash Equivalents and Short-Term Investments
ORBIMAGE considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. Investments in securities with
original maturities of more than three months but not more than one year are
classified as short-term investments and those with original maturities of more
than one year are classified as long-term investments. ORBIMAGE does not intend
to hold its investments in debt and equity securities until maturity and does
not actively trade the securities to maximize trading gains and classifies these
securities as "available for sale" and, accordingly, reports such securities at
fair value plus accrued interest. Any temporary excess (deficiency) of market
value over (under) the underlying cost of the short-term investment is excluded
from current period earnings and is reported as unrealized gains (losses) as a
separate component of stockholders' equity.
Satellites and Related Rights and Property, Plant and Equipment
ORBIMAGE is purchasing the OrbView-1, OrbView-3, and OrbView-4 satellites,
the OrbView-2 license, and the ground segment assets pursuant to the System
Procurement Agreement. ORBIMAGE is self-constructing a digital imagery archive
and processing system, which supports OrbView-2 and will support OrbView-3 and
OrbView-4 imagery processing and distribution. ORBIMAGE capitalizes certain
direct and indirect costs incurred in the construction of this system.
Amortization of the capitalized costs will begin when the system is placed in
service.
Depreciation, Amortization, and Recoverability of Long-Lived Assets
Depreciation and amortization are provided using the straight-line method
over the estimated useful lives of the satellites (three years for OrbView-1 and
seven and one-half years for OrbView-2), and generally over eight years for
ground segment assets.
In 1995, ORBIMAGE adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" ("SFAS 121"), which (i) requires that assets "to be held and
used" be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable, (ii)
requires that long-lived assets "to be disposed of" be reported at the lower of
carrying amount or fair value less cost to sell, and (iii) provides guidelines
and procedures for measuring an impairment loss that are significantly different
from previous guidelines and procedures. In 1995, ORBIMAGE recorded $5,000,000
of additional depreciation expense, which is included in direct expenses in the
accompanying statement of operations, related to the estimated fair value of the
OrbView-1 satellite.
Interest Capitalization
Interest incurred on the Notes as of March 31, 1998 in the amount of
approximately $1,698,000 (unaudited) has been capitalized in connection with the
construction of the OrbView-3 and OrbView-4 satellites and related ground
segments. The capitalized interest is recorded as a part of the historical cost
of the assets to which it relates and will be amortized over the assets' useful
lives when placed in service.
(3) RELATED PARTY TRANSACTIONS
Pursuant to the System Procurement Agreement, ORBIMAGE has committed to
purchase various satellites, rights, and ground systems for approximately $295
million over approximately three years. ORBIMAGE incurred costs of approximately
$18,989,000, $12,617,000, and $47,604,000 for the years ended December 31, 1995,
1996, and 1997, respectively, under the System Procurement Agreement. ORBIMAGE
incurred costs of approximately $2,591,000, $1,969,000, and $3,168,000 for the
years ended December 31, 1995, 1996, and 1997, respectively, under the
Administrative Services Agreement.
F-9
<PAGE> 125
ORBITAL IMAGING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) INVESTMENTS
The following table sets forth the aggregate cost and fair value and gross
unrealized gains (losses) of available-for-sale investments as of December 31,
1997 and March 31, 1998 (unaudited):
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------
UNREALIZED
GAINS
COST (LOSSES) FAIR VALUE
----------- ---------- -----------
<S> <C> <C> <C>
SHORT-TERM
Commercial Paper................................. $11,336,751 $ -- $11,336,751
----------- ---------- -----------
Total available-for-sale investments $11,336,751 $ -- $11,336,751
=========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998 (UNAUDITED)
--------------------------------------
UNREALIZED
GAINS
COST (LOSSES) FAIR VALUE
----------- ---------- -----------
<S> <C> <C> <C>
SHORT-TERM
Commercial Paper................................. $14,819,679 $ -- $14,819,679
----------- ---------- -----------
Total available-for-sale investments $14,819,679 $ -- $14,819,679
=========== ========== ===========
</TABLE>
The following table sets forth the aggregate cost and fair value of
held-to-maturity investments as of March 31, 1998 (unaudited) (none in 1997 or
prior periods):
<TABLE>
<CAPTION>
UNREALIZED
AMORTIZED GAINS
COST (LOSSES) FAIR VALUE
----------- ---------- -----------
<S> <C> <C> <C>
SHORT-TERM
U.S. Treasury Notes.............................. $16,402,870 $ -- $16,402,870
LONG-TERM
U.S. Treasury Notes, maturing 18-24 months....... $16,653,508 $ -- $16,653,508
----------- ---------- -----------
Total held-to-maturity investments.......... $33,056,378 $ -- $33,056,378
=========== ========== ===========
</TABLE>
Included in cash and cash equivalents at December 31, 1997 and March 31,
1998 were approximately $8,887,000 of commercial paper, and $76,431,000
(unaudited) of commercial paper and taxable municipal bonds, respectively.
(5) MAJOR CUSTOMER
Pursuant to imagery contracts with NASA, ORBIMAGE recognized revenues of
approximately $4,070,000, $800,000, and $1,957,000 for the years ended December
31, 1995, 1996, and 1997, respectively, representing approximately 89%, 76%, and
95%, respectively, of total revenues recognized during those periods.
F-10
<PAGE> 126
ORBITAL IMAGING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1997
----------- -----------
<S> <C> <C>
Land............................................ $ 212,684 $ 212,684
Ground segment assets........................... 12,780,205 15,985,408
Accumulated depreciation........................ (3,486,260) (5,144,194)
----------- -----------
Total................................. $ 9,506,629 $11,053,898
=========== ===========
</TABLE>
(7) SATELLITES AND RELATED RIGHTS
Satellites and related rights consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1997
----------- ------------
<S> <C> <C>
In service:
OrbView-1.................................... $12,327,040 $ 12,327,002
Accumulated depreciation..................... (9,070,578) (11,512,924)
----------- ------------
3,256,462 814,078
----------- ------------
OrbView-2 license............................ 56,351,670 64,543,000
Accumulated amortization..................... -- (1,434,289)
----------- ------------
56,351,670 63,108,711
----------- ------------
Satellites in process.......................... 2,676,746 40,303,358
----------- ------------
Total................................ $62,284,878 $104,226,147
=========== ============
</TABLE>
(8) INCOME TAXES
ORBIMAGE recorded a deferred benefit for income taxes of $1,751,468 and
$1,715,966 (unaudited) for the year ended December 31, 1997 and for the three
months ended March 31, 1998, respectively and had no current or deferred
provision or benefit for income taxes in prior periods. ORBIMAGE's losses for
income tax purposes for the period January 1 through May 7, 1997 and for the
years 1996 and 1995 (during which ORBIMAGE was an operating division, and was
included in the consolidated tax return, of Orbital) were significantly greater
than pre-tax financial statement losses, primarily due to expenses associated
with satellites and related rights deducted currently for income tax purposes.
Prior to May 8, 1997, the Company had a tax-sharing arrangement with Orbital
under which tax deductions for satellites and related rights, and the associated
net operating loss carryforwards, remained with Orbital. As a result, the
Company recorded a tax-sharing charge of $4,947,880, $2,406,922, and $1,751,468
for the years ended December 31, 1995, 1996, and 1997, respectively, as a direct
charge to additional paid-in capital.
F-11
<PAGE> 127
ORBITAL IMAGING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of significant temporary differences at December 31, 1996
and 1997 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Revenue recognition........................... $14,154,825 $14,949,332
Net operating loss carryforward............... -- 584,905
Other......................................... -- 62,367
----------- -----------
Deferred tax assets, net...................... $14,154,825 $15,596,604
=========== ===========
Deferred tax liabilities:
Differences in the tax treatment of satellites
and related rights......................... $24,816,053 $26,257,832
=========== ===========
</TABLE>
The income tax provision (benefit) for the years ended December 31, 1995,
1996, and 1997, is different from that computed using statutory U.S. Federal
income tax rates solely due to differences associated with net operating loss
carry-forwards generated prior to May 8, 1997 and state tax benefits. As of
December 31, 1997, the Company has a net operating loss carryforward for income
tax purposes of approximately $1,500,000, which will be used to offset future
taxable income over the next 15 years.
(9) LONG-TERM OBLIGATIONS (UNAUDITED)
On February 25, 1998, the Company issued 150,000 units consisting of the
Notes and 1,312,746 warrants for common stock, raising net proceedings of
approximately $145,000,000 (unaudited). Interest is payable semi-annually,
commencing September 1, 1998. ORBIMAGE purchased U.S. Treasury securities in an
amount sufficient to pay the interest on the Notes for the first four periods.
These investments have maturities ranging from six months to two years and are
pledged as security for repayment of interest on the Notes.
(10) COMMON AND PREFERRED STOCK
In 1997, ORBIMAGE consummated the Private Placement in which it sold
372,705 shares of Series A cumulative convertible preferred stock (the
"Preferred Stock") generating gross proceeds of approximately $37,000,000. In
February 1998, the Company issued an additional 227,295 shares of Preferred
Stock in a private placement, generating gross proceeds of approximately
$23,000,000 (unaudited). Each share of Preferred Stock entitles its holder to
receive annual cumulative dividends of 12% per annum. The Preferred Stock is
convertible into ORBIMAGE common stock in an amount equal to $100 per share of
Preferred Stock, divided by the Series A Conversion Price, which is $4.17 per
share of Preferred Stock. The Series A Conversion Price is subject to adjustment
under certain circumstances. Each holder of Series A Preferred Stock is entitled
to voting rights equal to that of a common stockholder; for this purpose each
share of Preferred Stock is treated as if converted to common stock (rounded to
the nearest whole number) immediately prior to a vote.
Dividends on the Preferred Stock are cumulative, have priority over
dividends on common stock, Series B preferred stock, and Series C preferred
stock, and must be paid in the event of liquidation and before any distribution
to holders of common stock or Series B preferred stock and Series C preferred
stock. Dividends are payable on a semi-annual basis in May and November, and can
be paid in either cash or additional shares of Preferred Stock. In 1997, the
Company issued 20,182 shares of Preferred Stock as dividends. At December 31,
1997, cumulative Preferred Stock dividends in arrears amounted to approximately
8,000 shares.
In addition, in 1997, Orbital increased its common equity investment in
ORBIMAGE, bringing its total equity invested to approximately $87,900,000 and
its ownership of common stock to 25,200,000 shares.
F-12
<PAGE> 128
ORBITAL IMAGING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(11) STOCK OPTION PLAN
In 1996, ORBIMAGE adopted the 1996 Stock Option Plan (the "ORBIMAGE Plan")
pursuant to which incentive or non-qualified options to purchase up to 2,800,000
shares of ORBIMAGE common stock may be granted to ORBIMAGE and Orbital
employees, consultants or advisors. Under the ORBIMAGE Plan, stock options may
not be granted with an exercise price less than 85% of the stock's fair market
value at the date of grant as determined by the Board of Directors. The ORBIMAGE
options generally vest ratably over a three-year period. The following table
summarizes the activity relating to the ORBIMAGE Plan:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF OPTION PRICE AVERAGE OUTSTANDING AND
SHARES PER SHARE EXERCISE PRICE EXERCISABLE
--------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
OUTSTANDING AT DECEMBER 31, 1995..... -- -- -- --
Granted............................ 1,408,000 $3.60 $3.60
Exercised.......................... -- -- --
Cancelled or Expired............... -- -- --
---------
OUTSTANDING AT DECEMBER 31, 1996..... 1,408,000 $3.60 $3.60 352,000
Granted............................ 498,000 $4.17 $4.17
Exercised.......................... (14,000) $3.60 $3.60
Cancelled or Expired............... (8,000) $3.60 $3.60
---------
OUTSTANDING AT DECEMBER 31, 1997..... 1,884,000 $3.60 -- $4.17 $3.75 707,250
========= ============= ===== =======
</TABLE>
ORBIMAGE applies APB No. 25 and related interpretations in accounting for
its plans. No compensation cost has been recognized in connection with stock
option grants in the accompanying statements of operations. To the extent that
the Company grants stock options to non-employee consultants or advisors, the
Company records expense equal to the fair value of the options granted as
determined by the Black-Scholes option pricing model.
Stock Based Compensation
On January 1, 1996, ORBIMAGE adopted SFAS 123 (see Note 2). ORBIMAGE uses
the Black-Scholes option-pricing model to determine the pro forma impact to its
net income. The model utilizes certain information, such as the interest rate on
a risk-free security maturing generally at the same time as the option being
valued, and requires certain assumptions, such as the expected amount of time an
option will be outstanding until it is exercised or it expires, to calculate the
weighted-average fair value per share of stock options granted. This information
and the assumptions used in the option-pricing model for 1996 and 1997,
respectively, are as follows: volatility, 30% and 30%; dividend yield, 0% and
0%; risk-free interest rate, 5.8% and 6.0%; average expected life, 4.5 years and
4.5 years; additional shares available, 1,392,000 and 902,000; and
weighted-average exercise price per share, $3.60 and $3.75.
Had ORBIMAGE determined compensation cost based on the fair value at the
grant date for its stock options in accordance with the fair value method
prescribed by SFAS 123, ORBIMAGE's net loss would have been approximately
$5,305,000 and $5,031,000 for the years ended December 31, 1996 and 1997,
respectively. The pro forma net loss reflects only options granted in 1996 and
1997 and therefore may not be representative of the effects for future periods.
(12) SUPPLEMENTAL DISCLOSURES
At December 31, 1997, ORBIMAGE employees were participating in the Deferred
Salary Profit Sharing Plan for Employees of Orbital Imaging Corporation, a
defined contribution plan (the "Plan") in accordance with Section 401(k) of the
Internal Revenue Code of 1986, as amended. Company contributions to the Plan
F-13
<PAGE> 129
ORBITAL IMAGING CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
are made based on certain plan provisions and at the discretion of the Board of
Directors, and in 1997, were approximately $28,000.
(13) SUBSEQUENT EVENTS (UNAUDITED)
On April 30, 1998, the Company acquired substantially all the assets of
TRIFID Corporation ("TRIFID") for approximately $4,000,000. Under the terms of
the acquisition agreement, an additional $1,000,000 earn-out is payable if
certain revenue targets are achieved during the third quarter of 1998. The
acquisition will provide ORBIMAGE with the technical personnel and production
capability required to generate high resolution imagery products. The
acquisition resulted in excess of purchase price over net assets acquired of
approximately $2,000,000, which amount will be amortized over 10 years.
F-14
<PAGE> 130
GLOSSARY OF TERMS
CHECK-OUT INSURANCE -- Insurance placed into effect following the deployment of
the satellite which remains in effect until the satellite is placed into
commercial service.
COMMON STOCK -- The common stock of the Company, par value $.01 per share.
COMPANY -- Orbital Imaging Corporation, a Delaware corporation.
DESIGN LIFE -- The expected functional life of a satellite based on the specific
design employed.
DoC -- The U.S. Department of Commerce.
DoD -- The U.S. Department of Defense.
EESS -- Earth Exploration-Satellite Service, a radio-communication service
between ground stations and one or more satellites which obtains information on
the Earth and its natural phenomena from active sensors or passive sensors on
satellites.
EARTHWATCH -- EarthWatch Incorporated, a commercial remote sensing company
sponsored by Ball Aerospace and Technologies Corporation, CTA Incorporated, and
Hitachi, Ltd.
FCC -- The Federal Communications Commission, an independent government agency
charged with regulating interstate and international communications by radio,
television, wire, satellite, and cable.
HIGH-RESOLUTION ORBVIEW SATELLITES -- the OrbView-3 and OrbView-4 satellites
INMARSAT -- International Maritime Satellite Organization, an organization
responsible for providing international maritime telephony via communication
satellites.
IN-ORBIT INSURANCE -- Insurance covering the period following the date a
satellite has been placed into commercial service.
INTELSAT AND INMARSAT AGREEMENT -- An international agreement requiring
coordination to the extent that any party or signatory or person within the
jurisdiction of a party intends to establish, acquire, or utilize space segment
facilities separate from the Intelsat space segment facilities to meet its
domestic public telecommunications services requirements.
IRS-1C -- India Remote Sensing Satellite.
ITU -- International Telecommunications Union, which is the telecommunications
agency of the United Nations established to provide standardized communications
procedures and practices including frequency allocation and radio regulations on
a worldwide basis.
NASA -- National Aeronautics and Space Administration.
NIMA -- National Imagery and Mapping Agency.
NOAA -- National Oceanic and Atmospheric Administration, an agency of the DoC.
NRO -- The U.S. National Reconnaissance Office.
NTIA -- National Telecommunications and Information Administration, an agency of
the DoC.
ORBIMAGE -- Orbital Imaging Corporation, a Delaware corporation (the "Company").
ORBITAL -- Orbital Sciences Corporation, a Delaware corporation.
ORBVIEW-1 -- The satellite launched in April 1995 that is providing
meteorological data on severe weather lightning strikes and measurements of
other atmospheric properties.
ORBVIEW-2 -- The satellite launched in the second quarter of 1997, that is
providing 1-kilometer resolution imagery of the Earth's surface in eight
spectral bans.
G-1
<PAGE> 131
ORBVIEW-2 LICENSE -- The OrbView-2 License Agreement between Orbital and
ORBIMAGE, which provides ORBIMAGE with the economic equivalent of ownership of
the OrbView-2 satellite.
ORBVIEW-3 -- The satellite scheduled for launch in 1999, that is designed to
provide for both one-meter resolution panchromatic imagery, and four-meter
resolution multispectral imagery in 4 spectral bands of the Earth's surface.
ORBVIEW-4 -- The satellite scheduled for launch in the second quarter of 2000,
that is designed to provide for one-meter resolution panchromatic imagery,
four-meter resolution multispectral imagery and eight-meter resolution
hyperspectral imagery.
PEGASUS -- Orbital's air-launched rocket designed to launch small satellites
into low-Earth orbit.
RADARSAT -- Radarsat International Inc., a Canadian company operating a
commercial radar imaging satellite.
SAMSUNG AEROSPACE -- Samsung Aerospace Industries, Ltd..
SPACE IMAGING EOSAT -- Space Imaging EOSAT, a commercial remote sensing company
sponsored by Lockheed Martin, Raytheon and Mitsubishi.
STOCK OPTION PLAN -- The Company's 1996 Stock Option Plan, which provides for
grants of incentive or non-qualified stock options to officers, directors and
employees of the Company.
TAURUS -- Orbital's ground launched rocket designed for launching small to
medium satellites into space.
UCAR -- University Corporation for Atmospheric Research.
VARS -- Value added resellers.
G-2
<PAGE> 132
ORBITAL IMAGING CORPORATION
All tendered Original Notes, executed Letters of Transmittal, and other
related documents should be directed to the Exchange Agent. Requests for
assistance and for additional copies of the Prospectus, the Letter of
Transmittal and other related documents should be directed to the Exchange
Agent.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS
MARINE MIDLAND BANK
by Facsimile:
(212) 658-6425
Attention: Frank J. Godino
Confirm by telephone
(212) 658-6044
By Registered or Certified Mail:
Marine Midland Bank
140 Broadway
12th Floor
New York, New York 10005-1180
Att: Corporate Trust Services
By Hand:
Marine Midland Bank
140 Broadway
12th Floor
New York, New York 10005-1180
Att: Corporate Trust Services
By Overnight Courier:
Marine Midland Bank
140 Broadway
12th Floor
New York, New York 10005-1180
Att: Corporate Trust Services
(212) 658-6084
<PAGE> 133
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Delaware corporation and its Second Amended and Restated
Certificate of Incorporation and Bylaws provide for indemnification of its
officers and directors to the fullest extent permitted by law. Section 102(b)(7)
of the Delaware General Corporation Law (the "DGCL") permits a corporation in
its certificate of incorporation to eliminate the liability of a cooperation's
directors to a corporation or its stockholders, except for liabilities related
to breach of duty of loyalty, actions not in good faith and certain other
liabilities.
Section 145 of the DGCL provides that a corporation may indemnify directors
and officers as well as other employees and individuals against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation, a "derivative action") if they acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct was
unlawful. A similar standard is applicable in the case of derivative actions,
except that indemnification only extends to expenses (including attorneys' fees)
incurred in connection with the defense or settlement of such actions, and the
status requires court approval before there can be any indemnification where the
person seeking indemnification has been found liable to the corporation. The
statute provides that it is not exclusive of other indemnification that may be
granted by a corporation's bylaws, disinterested director vote, stockholder
vote, agreement or otherwise.
Delaware law also permits a corporation to purchase and maintain insurance
on behalf of any person who is or was a director or officer against any
liability asserted against him and incurred by him in such capacity or arising
out of his status as such, whether or not the corporation has the power to
indemnify him against that liability under Section 145 of the DGCL.
The above discussion of the Company's Second Amended and Restated
Certificate of Incorporation and Bylaws is not intended to be exhaustive and is
respectively qualified in its entirety by such documents.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1+ Second Amended and Restated Certificate of Incorporation of
the Company.
3.2+ Bylaws of the Company
4.1+ Specimen certificate of 11 5/8% Series A Senior Note due
2005 (included in Exhibit 4.3 hereto).
4.2+ Specimen certificate of 11 5/8% Series B Senior Note due
2005 (substantially in the same form as Exhibit 4.1)
4.3+ Indenture dated as of February 25, 1998, by and among the
Company and Marine Midland Bank, as Trustee, with respect to
the 11 5/8% Senior Notes due 2005 of the Company.
4.4+ Warrant Agreement dated as of February 25, 1998, by and
between the Company and Marine Midland Bank as Warrant Agent
4.5+ Registration Rights Agreement, dated as of February 25, 1998
by and among the Company, Bear, Stearns & Co. Inc., Merrill
Lynch & Co. and NationsBanc Montgomery Securities LLC as the
Initial Purchasers.
4.6+ Warrant Registration Rights Agreement, dated as of February
25, 1998 by and among the Company, Bear, Stearns & Co. Inc.,
Merrill Lynch & Co. and NationsBanc Montgomery Securities
LLC as the Initial Purchasers.
4.7+ Pledge Agreement dated February 25, 1998, by and between the
Company and Marine Midland Bank as Collateral Agent.
</TABLE>
II-1
<PAGE> 134
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
4.8* Amended and Restated Stock Purchase Agreement dated as of
February 25, 1998, by and among the Company, Orbital
Sciences Corporation and the holders of Series A Preferred
Stock named therein
4.9* Amended and Restated Stockholders' Agreement dated as of
February 25, 1998, by and among the Company, Orbital
Sciences Corporation and the holders of Series A Preferred
Stock named therein
5.1* Opinion of Latham & Watkins regarding the validity of the
Exchange Notes, including consent.
8.1* Opinion of Latham & Watkins regarding certain federal income
tax matters, including consent.
10.1* Purchase Agreement, dated as of February 20, 1998 by and
among the Company, Bear, Stearns & Co. Inc., Merrill Lynch &
Co. and NationsBanc Montgomery Securities LLC as the Initial
Purchasers.
10.2* Amended and Restated Procurement Agreement dated February
26, 1998 by and between the Company and Orbital
10.3* Amended and Restated Administrative Services Agreement dated
December 31, 1997 by and between the Company and Orbital.
10.4* NonCompetition and Teaming Agreement dated as of May 8, 1997
by and between the Company and Orbital.
10.5* OrbView-2 License Agreement dated as of May 8, 1997 by and
between the Company and Orbital.
10.6* Distributor Licensee Agreement dated as of January 31, 1997,
as amended from time to time, by and between the Company and
Samsung Aerospace Industries, Ltd.
10.7* Form of Indemnification Agreement between the Company and
its directors and officers.
10.8* ORBIMAGE 1996 Stock Option Plan.
12 + Statements re Computations of Ratios
23.1* Consent of KPMG Peat Marwick, LLP, independent certified
public accountants.
23.2* Consent of Latham & Watkins (included in Exhibit 5.1)
24 + Powers of Attorney of directors and officers of the Company
(included on signature page to their Registration
Statement).
25.1+ Statement of Eligibility of Trustee on Form T-1.
27 + Financial Data Schedule
99.1+ Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
</TABLE>
- ---------------
* Filed herewith
+ Previously filed
(b) Financial Statements
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
registrant undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
The registrant undertakes that every prospectus: (i) that is filed pursuant
to the immediately preceding paragraph, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933, and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt
II-2
<PAGE> 135
means. This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding to
the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provision described under Item 20 or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 136
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Loudoun, Commonwealth of Virginia, on June 16,
1998.
ORBITAL IMAGING CORPORATION
By: *
------------------------------------
Gilbert D. Rye
President and Chief Operating
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* President and Chief Operating Officer June 16, 1998
- ------------------------------------------------ (Principal Executive Officer)
GILBERT D. RYE
ARMAND D. MANCINI Vice President, Finance (Principal June 16, 1998
- ------------------------------------------------ Financial and Accounting Officer)
ARMAND D. MANCINI
* Director June 16, 1998
- ------------------------------------------------
BRUCE W. FERGUSON
* Director June 16, 1998
- ------------------------------------------------
RICHARD REISS, JR.
* Director June 16, 1998
- ------------------------------------------------
WILLIAM W. SPRAGUE
* Director June 16, 1998
- ------------------------------------------------
DAVID W. THOMPSON
Director June 16, 1998
- ------------------------------------------------
JAMES A. ABRAHAMSON
*By: /s/ ARMAND D. MANCINI
------------------------------------------
ARMAND D. MANCINI
POWER OF ATTORNEY
</TABLE>
II-4
<PAGE> 137
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.1+ Second Amended and Restated Certificate of Incorporation of
the Company.
3.2+ Bylaws of the Company
4.1+ Specimen certificate of 11 5/8% Series A Senior Note due
2005 (included in Exhibit 4.3 hereto)
4.2+ Specimen certificate of 11 5/8% Series B Senior Note due
2005 (substantially in the form as Exhibit 4.1)
4.3+ Indenture dated as of February 25, 1998, by and among the
Company and Marine Midland Bank, as Trustee, with respect to
the 11 5/8% Senior Notes due 2005 of the Company.
4.4+ Warrant Agreement, dated as of February 25, 1998, by and
between the Company and Marine Midland Bank as Warrant
Agent.
4.5+ Registration Rights Agreement, dated as of February 25, 1998
by and among the Company, Bear, Stearns & Co. Inc., Merrill
Lynch & Co. and NationsBanc Montgomery Securities LLC as the
Initial Purchasers.
4.6+ Warrant Registration Rights Agreement, dated as of February
25, 1998 by and among the Company, Bear, Stearns & Co. Inc.,
Merrill Lynch & Co. and NationsBanc Montgomery Securities
LLC as the Initial Purchasers.
4.7+ Pledge Agreement dated February 25, 1998, by and between the
Company and Marine Midland Bank as Collateral Agent.
4.8* Amended and Restated Stock Purchase Agreement dated as of
February 25, 1998, by and among the Company, Orbital
Sciences Corporation and the holders of Series A Preferred
Stock named therein
4.9* Amended and Restated Stockholders' Agreement dated as of
February 25, 1998, by and among the Company, Orbital
Sciences Corporation and the holders of Series A Preferred
Stock named therein
5.1* Opinion of Latham & Watkins regarding the validity of the
Exchange Notes, including consent.
8.1* Opinion of Latham & Watkins regarding certain federal income
tax matters, including consent.
10.1* Purchase Agreement, dated as of February 20, 1998 by and
among the Company, Bear, Stearns & Co. Inc., Merrill Lynch &
Co. and NationsBanc Montgomery Securities LLC as the Initial
Purchasers.
10.2* Amended and Restated Procurement Agreement dated February
26, 1998 by and between the Company and Orbital
10.3* Amended and Restated Administrative Services Agreement dated
May 8, 1997 by and between the Company and Orbital.
10.4* NonCompetition and Teaming Agreement dated as of May 8, 1997
by and between the Company and Orbital.
10.5* OrbView-2 License Agreement dated as of May 8, 1997 by and
between the Company and Orbital.
10.6* Distributor Licensee Agreement dated as of January 31, 1997,
as amended from time to time, by and between the Company and
Samsung Aerospace Industries, Ltd.
10.7* Form of Indemnification Agreement between the Company and
its directors and officers.
10.8* ORB IMAGE 1996 Stock Option Plan.
12 + Statements re Computations of Ratios
23.1* Consent of KPMG Peat Marwick, LLP, independent certified
public accountants.
23.2* Consent of Latham & Watkins (included in Exhibit 5.1)
24 + Powers of Attorney of directors and officers of the Company
(included on signature page to this Registration Statement)
25.1+ Statement of Eligibility of Trustee on Form T-1.
27 + Financial Data Schedule
99.1+ Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
</TABLE>
- ---------------
* Filed herewith
+ Previously filed
<PAGE> 1
Exhibit 4.8
ORBITAL IMAGING CORPORATION
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
DATED FEBRUARY 25, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I. DEFINITIONS ....................................................................................4
ARTICLE II. ISSUE, PURCHASE AND SALE OF SERIES A PREFERRED STOCK ..........................................10
2A. Authorization of Issue of Series A Preferred Stock.........................................10
2B. Purchase and Sale of Series A Preferred Stock..............................................10
ARTICLE III. CONDITIONS OF CLOSING .........................................................................10
3A. Opinion of Purchasers' Counsel.............................................................10
3B. Opinions of Company's Counsel..............................................................10
3C. Stockholders Agreement.....................................................................11
3D. Expenses...................................................................................11
3E. Representations and Warranties.............................................................11
3F. Amendment of Certificate of Incorporation..................................................11
3G. Sale of Series A Preferred Stock...........................................................11
3H. Certain Payments...........................................................................11
3I. Certain Agreements.........................................................................11
3J. By-Laws....................................................................................11
3K. Proceedings................................................................................12
ARTICLE IV. CERTAIN COVENANTS .............................................................................12
4A. Financial Statements and Other Reports.....................................................12
4B. Board of Directors.........................................................................13
4C. Inspection of Property.....................................................................13
4D. Corporate Existence, Licenses and Permits; Maintenance of Properties.......................14
4E. Intentionally Deleted......................................................................14
4F. Series B Preferred Stock...................................................................14
4G. Series C Preferred Stock...................................................................14
4H. Additional Financing.......................................................................14
4I. Change in Control Event....................................................................16
4J. Intentionally Deleted......................................................................16
ARTICLE V. REPRESENTATIONS, COVENANTS AND WARRANTIES .....................................................16
5A. Organization, Standing and Qualification of Company and Subsidiaries; Corporate Authority..16
5B. Financial Statements.......................................................................17
5C. Actions Pending............................................................................17
5D. No Defaults................................................................................18
5E. Taxes......................................................................................18
5F. Title, Liens...............................................................................18
5G. Burdensome and Conflicting Agreements and Charter Provisions...............................18
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
5H. Leases.....................................................................................19
5I. Intellectual Property......................................................................19
5J. Offering of Series A Preferred Stock.......................................................20
5K. Broker's or Finder's Commissions...........................................................21
5L. Application of Proceeds....................................................................21
5M. Certain Limitations........................................................................21
5N. Disclosure.................................................................................21
5O. Capital Stock..............................................................................21
5P. ERISA......................................................................................22
5Q. Environmental..............................................................................24
5R. Insurance..................................................................................25
5S. Completeness of Business...................................................................25
5T. Material Contracts and Obligations.........................................................25
ARTICLE VI. REPRESENTATIONS OF THE PURCHASERS .............................................................25
6A. Investment Purpose.........................................................................25
6B. No Foreign Person..........................................................................26
ARTICLE VII. RESTRICTIONS ON TRANSFER ......................................................................26
7A. Applicability of Restrictions..............................................................26
7B. Restrictive Legends........................................................................26
7C. Notice of Proposed Transfer; Opinion of Counsel; Certain Restrictions......................26
7D. Termination of Restrictions................................................................27
ARTICLE VIII. MISCELLANEOUS .................................................................................27
8A. Dividend Payments..........................................................................27
8B. Expenses...................................................................................27
8C. Consent to Amendments......................................................................28
8D. Notices to Subsequent Holder...............................................................28
8E. Survival of Representations, Warranties and Indemnities....................................29
8F. Successors and Assigns.....................................................................29
8G. Notices....................................................................................29
8H. Accounting Terms...........................................................................29
8I. Satisfaction Requirement...................................................................29
8J. Governing Law..............................................................................29
8K. Headings; Table of Contents................................................................29
8L. Counterparts...............................................................................29
8M. Non Business Days..........................................................................30
8N. Further Assurances.........................................................................30
8O. Orbital Indemnity..........................................................................30
</TABLE>
ii
<PAGE> 4
SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Schedule I List of Purchasers, Shares Purchased and Addresses for Notice
Exhibit A Form of Second Amended and Restated Certificate of Incorporation
Exhibit III-A Form of Opinion
Exhibit III-B Forms of Opinions
Exhibit V-F Liens
Exhibit V-I Intellectual Property
Exhibit V-M Certain Limitations
Exhibit V-O Certain Reserved Shares and Agreements
Exhibit V-P ERISA Matters
Exhibit V-S Certain Extended Items
Exhibit V-T Certain Agreements
Exhibit D Form of Stockholders' Agreement
</TABLE>
iii
<PAGE> 5
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT, dated
February 25, 1998 (as the same may be amended or modified from time to time,
this "Agreement"), between ORBITAL IMAGING CORPORATION, a Delaware corporation
(the "Company"), and the Purchasers listed on Schedule I (each, a "Purchaser"
and collectively, the "Purchasers").
W I T N E S S E T H :
WHEREAS, pursuant to that Stock Purchase Agreement dated as of
May 7, 1997 (the "Original Agreement"), the Company authorized the issuance of
up to 600,000 shares of its Series A Cumulative Convertible Preferred Stock
$0.01 par value per share (the "Series A Preferred Stock");
WHEREAS, pursuant to the Original Agreement the Company sold
300,100 shares of the Series A Preferred Stock to the Purchasers, and the
Purchasers purchased severally such Series A Preferred Stock from the Company,
on the terms and subject to the conditions set forth therein;
WHEREAS, the Company has sold pursuant to Amendment No. 1 to
the Stock Purchase Agreement dated as of July 3,1997 ("Amendment No. 1") 72,605
shares of Series A Preferred Stock to Export Development Corporation;
WHEREAS, the Company and the Purchasers amended the Stock
Purchase Agreement pursuant to that Amendment No. 2 dated December 29, 1997
("Amendment No. 2") to modify, among other things, the certain obligations of
Orbital Sciences Corporation ("Orbital") thereunder; and
WHEREAS, the Company and the Purchasers desire to amend and
restate the Original Agreement, as amended, in its entirety in order to make
certain changes thereto to reflect the terms and conditions of the indenture
(the "Indenture") entered into by the Company and the trustee named therein
dated as February 25, 1998 pursuant to which the Company issued $ million
aggregate principal amount of [ ]% Senior Notes due 2005 (the "Notes").
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
For the purposes of this Agreement, the following terms shall
have the following respective meanings:
"Additional Financing" shall mean the issuance of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or other
equity or debt securities by the Company, or the sale and leaseback by the
Company of certain assets, in either case in one or more transactions
consummated on or prior to December 31, 1998, as a result of which the Company
shall have realized proceeds before expenses (other than any such expenses in
excess of amounts customary for comparable transactions) equal to or greater
than $50.0 million (less the gross proceeds of any shares of Series A Preferred
Stock issued to the Purchasers hereunder on the Closing Date in excess of
300,100 shares in the aggregate); provided, however, that the consummation of
the Fixed Asset Financing shall not be deemed to be an Additional Financing.
4
<PAGE> 6
"Affiliate" shall mean, with respect to any Person, any person
that, directly or indirectly, controls, is controlled by or is under common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Second Amended and Restated Certificate of Incorporation"
shall mean the amended and restated Certificate of Incorporation of the Company
attached hereto as Exhibit A.
"Assignment of Trademarks" shall mean the Assignment of
Trademarks, dated the Closing Date, from Orbital to the Company under the
License Agreement.
"Capital Stock" shall mean: (i) in the case of a corporation,
corporate stock; (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock; (iii) in the case of a partnership, partnership
interests (whether general or limited); and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalent" shall mean (i) direct obligations of, or
obligations which are guaranteed by the United States government, (ii)
certificates of deposit, time deposits, demand deposits and bankers acceptances
of banks or trust companies believed by the Company to be creditworthy, (iii)
commercial paper or finance company paper which is rated not less than prime-one
or A-1 or their equivalents by Moody's Investor Service, Inc. or Standard and
Poor's Corporation or their successors, (iv) repurchase agreements, secured by
any one or more of the foregoing, (v) money market funds or (vi) similar liquid
securities intended to provide for the preservation of principal.
"Change in Control Event" shall mean:
(i) the failure by Orbital to hold at least 12,600,000 shares
of Common Stock of the Company (being 50% of the shares of Common Stock held by
Orbital on May 8, 1997), adjusted for stock splits, stock combinations and the
like;
(ii) the failure by Orbital to hold at least thirty percent
(30%) of the Common Stock of the Company on a fully diluted basis without giving
effect to the conversion of Capital Stock of the Company issued as a dividend
paid-in-kind with respect to shares of Series A Preferred Stock or Capital Stock
of the Company issued pursuant to options granted under the Stock Option Plan or
any other option plan adopted for the benefit of the Company's employees or
directors;
(iii) the direct or indirect acquisition of Voting Equity
Interests of the Company by any Person or group of Persons acting in concert, in
an amount greater than the amount of Voting Equity Interests held
contemporaneously by Orbital, except (x) purchases by record holders of Series A
Preferred Stock as of the date hereof (and their affiliates, to the extent that
such holders are permitted to transfer their shares of Series A Preferred Stock
to affiliates under this Agreement (the "Series A Affiliates")) from other
holders of Series A Preferred Stock and their Series A Affiliates and (y)
purchases permitted pursuant to the Series A Holders' subscription rights under
Section 4.1 of the Stockholders' Agreement;
5
<PAGE> 7
(iv) the acquisition of the Company, or the sale, lease,
transfer, conveyance or other disposition, in one transaction or a series of
related transactions, directly or indirectly, including through a liquidation or
dissolution, of all or substantially all of the assets of the Company and its
Subsidiaries or the combination of the Company or all or substantially all it
assets with another Person (other than any such transfer to any wholly owned
Subsidiary of the Company), unless the acquiring or surviving Person shall be a
corporation more than fifty percent (50%) of the combined voting power of which
corporation's then outstanding Voting Equity Interests, after giving effect to
such acquisition or combination, are owned, immediately after such acquisition
or combination, by the owners of the Voting Equity Interests of the Company
outstanding immediately prior to such acquisition or combination;
(v) the adoption of a plan relating to the liquidation or
dissolution of the Company (other than any such liquidation or dissolution to or
for the benefit of any wholly owned Subsidiary of the Company);
(vi) the failure by the Company to obtain any applicable
License (or License amendment, as applicable) so that it is in full force and
effect within thirty (30) days prior to the scheduled launch of any of the
OrbView Satellites;
(vii) the revocation of any License necessary to operate
OrbView-2 or the OrbView Satellites consistent with the Company's current and
planned commercial operations and which revocation is not cured within thirty
(30) days of the occurrence thereof or such later date when all applicable
appeals have been finally determined, if during such appeal period the Company
has received regulatory approval to continue operations under the License
pending the outcome of such appeals; or
(viii) unless consented to in writing by the holders of at
least fifty percent (50%) of the shares of Series A Preferred Stock then
outstanding, the acquisition by any Person or group of Persons acting in concert
of beneficial ownership, direct or indirect, of securities of Orbital
representing thirty-five percent (35%) or more of the combined voting power of
Orbital's then outstanding equity securities and at any time thereafter either
(x) less than a majority of Orbital's board of directors shall be Continuing
Directors or (y) there shall be an announcement by Orbital or such acquiring
Person or group of Persons or the approval of a business plan by Orbital's Board
of Directors, in either case that indicates an intention to de-emphasize or
curtail the relationship between the Company and Orbital. For the purpose of the
foregoing, a director of Orbital shall be a Continuing Director if such director
is a director on the date hereof or is nominated as a director by a majority of
Orbital's Board of Directors, which majority consists of Directors in place at
least 12 months (other than in connection with replacements or vacancies
occurring in the ordinary course) prior to the acquisition representing 35% or
more of the combined voting power of Orbital's outstanding equity securities.
"Commission" shall mean the Securities and Exchange Commission
or any other governmental authority at the time administering the Securities Act
or the Exchange Act.
"Common Stock" shall mean and include the Company's currently
authorized common stock, $0.01 par value per share, as constituted on the date
hereof (but without regard to the amount thereof outstanding), and, when used in
Article 5 of the Stockholders' Agreement or the definition of Qualifying Public
Offering, shall also mean and include any capital stock of any class of the
Company hereafter authorized which shall not be either (i) limited to a fixed
sum or percentage of par value in respect of the rights of the holders thereof
to receive dividends and to participate in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding-up of the Company,
or (ii) redeemable at any time by the Company, or both; provided, however, that
the shares issuable upon
6
<PAGE> 8
conversion of the Series A Preferred Stock shall include only shares of capital
stock of the Company designated as Common Stock on the date hereof or, in case
of any reclassification of the outstanding shares thereof, the stock, securities
or assets provided for in the Second Amended and Restated Certificate of
Incorporation, which are not limited to any such fixed sum or percentage of par
value and are not so redeemable by the Company.
"Conversion Price" shall have the meaning set forth in Section
2, clause (vi) of the Second Amended and Restated Certificate of Incorporation.
"Crest" shall mean Crest International Holdings, LLC or any
Affiliate thereof.
"Division" shall mean the Orbital Imaging Division of Orbital.
"Equity Interests" shall mean Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar or successor Federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"Indenture" shall mean the Indenture entered into by and
between the Company and Marine Midland Bank, as trustee, dated as of February
25, 1998, pursuant to which the Company issued $100,000,000 in aggregate
principal amount of % Senior Notes due 2005.
"License" shall mean any Federal Communications Commission
License or Department of Commerce License relating to the commercial operation
of OrbView-2 and the OrbView Satellites (including the Department of Commerce
License and the Federal Communications Commission License currently owned by
Orbital relating to the operation of OrbView-2) that is material to the business
of the Company.
"License Agreement" shall mean the OrbView-2 License Agreement
between Orbital and the Company dated the Closing Date.
"Lien" shall mean any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute or contract,
and including, but not limited to, the security interest or lien arising from a
mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting real property, except any such usual or normal reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases or other title exceptions or encumbrances affecting real
property that are not disruptive to the use of such property in the ordinary
course of business. For the purposes of this Agreement, the Company or a
Subsidiary shall be deemed to be the owner of any property which it has acquired
or holds subject to a conditional sale agreement, financing lease or other
arrangement pursuant to which title to the property has been retained by or
vested in some other Person for security purposes.
"Liquidation Amount" shall have the meaning set forth in the
Second Amended and Restated Certificate of Incorporation.
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"Market Price" shall have the meaning set forth in the Second
Amended and Restated Certificate of Incorporation.
"Maximum Series A Shares" shall mean the number of shares of
Series A Preferred Stock that does not exceed the lesser of (a) 600,000 shares
less the number of shares of Series A Preferred Stock that are issued and
outstanding at the time of such determination and (b) the number of shares of
Series A Preferred Stock that, when multiplied by $100, does not exceed
$80,000,000 minus the gross proceeds of all Additional Financings (net of the
gross proceeds of the sale of any shares of Series A Preferred Stock included in
such Additional Financings).
"Morgan" shall mean Morgan Guaranty Trust Company of New York
or any Affiliate thereof.
"Non-Compete Agreement" shall mean the Noncompetition and
Teaming Agreement dated the Closing Date between Orbital and the Company.
"Notes" shall mean the % Senior Notes due 2005 issued
pursuant to the Indenture.
"Offering Memorandum" shall mean the Confidential Private
Placement Memorandum dated December 2, 1996 relating to the Company.
"Orbital" shall mean Orbital Sciences Corporation, a Delaware
corporation, or any successor entity whether by merger, sale of all or
substantially all its assets or otherwise.
"OrbView Satellites" shall mean each of the high-resolution
satellites currently designated as OrbView-3 and OrbView-4.
"Person" shall mean and include any individual, corporation,
limited liability company, partnership, joint venture, association, joint stock
company, trust or estate, unincorporated organization, government or any
department or any agency or political subdivision thereof or any other entity.
"Procurement Agreement" shall mean the Orbimage System
Procurement Agreement dated November 18, 1996 between Orbital and the Company,
as amended and restated in compliance with the provisions of Section 2.5 of the
Stockholders' Agreement.
"Qualifying Public Offering" shall mean a public offering of
Common Stock registered under the Securities Act (i)(a) that shall have resulted
in an aggregate price to the public of not less than $30,000,000 or (b) that
involves the sale to the public of Common Stock constituting at least twenty
percent (20%) of the Common Stock immediately outstanding after the offering, in
either case at a price per share of Common Stock equal to or greater than the
Threshold Price and (ii) that shall have resulted in listing or admission to
trading of the Common Stock on the New York Stock Exchange, a national
securities exchange, the NASDAQ National Market System or NASDAQ
over-the-counter market.
"Restricted Action" shall have the meaning set forth in
paragraph 7A hereof.
"Restricted Securities" shall mean at any time (i) the Common
Stock previously issued or, unless the context otherwise requires, issuable upon
conversion of the Series A Preferred Stock, (ii) any Common Stock issued
subsequent to the conversion of any of the Series A Preferred Stock as a
dividend or other distribution with respect to, or in exchange for or in
replacement of, the Common Stock issued upon such conversion, and (iii) any
Common Stock otherwise issued with respect to the
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Series A Preferred Stock; provided, however, that immediately after and
throughout the period during which the restrictions on the transferability of
such Common Stock shall have ceased and terminated in accordance with Article
VII hereof, the same shall cease to be Restricted Securities. Where the context
so requires, "holders of Restricted Securities" shall include holders of shares
of Series A Preferred Stock convertible into Restricted Securities.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and any similar or successor Federal statute, and the rules and
regulations of the Commission thereunder, all as the same may be in effect at
the time.
"Series B Preferred Stock" shall mean the Series B Cumulative
Preferred Stock, $0.01 par value per share, having the powers, designations,
preferences and relative rights and the qualifications, limitations and
restrictions set forth in the Second Amended and Restated Certificate of
Incorporation.
"Series C Preferred Stock" shall mean the Series C Cumulative
Convertible Preferred Stock, $0.01 par value per share, having the powers,
designations, preferences and relative rights and the qualifications,
limitations and restrictions set forth in the Second Amended and Restated
Certificate of Incorporation.
"Services Agreement" shall mean the Orbimage Services
Agreement dated November 18, 1996 between the Company and Orbital, as amended in
compliance with the provisions of Section 2.5 of the Stockholders' Agreement.
"Share Equivalents" of any Restricted Securities or the Series
A Preferred Stock shall mean the number of shares of Common Stock included among
such Restricted Securities or that are issuable upon conversion of the Series A
Preferred Stock.
"Shortfall" shall mean an amount equal to $42,729,500 minus
the aggregate proceeds from the consummation of any one or more of the following
transactions, as they may occur from time to time after the December 29, 1997:
(a) the sale of any shares of Series B or Series C Preferred Stock or other
equity or debt securities by the Company (but not shares of Series A Preferred
Stock) or (b) the sale and leaseback by the Company of certain assets.
Calculation of "Shortfall" shall not take into account proceeds from a Fixed
Asset Financing.
"Significant Holder" shall mean any holder of at least
1,000,000 Share Equivalents.
"Stockholders' Agreement" shall mean the Stockholders'
Agreement, dated May 8, 1997, as amended by that Amendment No. 1 dated as of
July 3, 1997, and as amended and restated on February 25, 1998, among the
Company, the Purchasers and Orbital.
"Subsidiary" shall mean a corporation of which the Company
owns, directly or indirectly, more than 50% of the shares of capital stock the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the directors.
"Threshold Price" shall mean (i) as of any date through May 1,
1999, 100% of the then current Conversion Price, (ii) from May 2, 1999 through
May 1, 2000, the then current Conversion Price, multiplied by the amount
(expressed as a percentage) equal to 100% plus the result of 30% times a
fraction, the numerator of which is the number of days after May 1, 1999 the
calculation of the Threshold Price occurs and the denominator of which is 365,
(iii) from May 2, 2000 through May 1, 2001, the then
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<PAGE> 11
current Conversion Price, multiplied by the amount (expressed as a percentage)
equal to 130% plus the result of 20% times a fraction, the numerator of which is
the number of days after May 1, 2000, the calculation of the Threshold Price
occurs and the denominator of which is 365, and (iv) from May 2, 2001 forward,
150% of the then current Conversion Price.
"Voting Equity Interests" shall mean the Equity Interest in a
corporation or other Person with voting power under ordinary circumstances
entitling the holders thereof to elect or appoint the board of directors,
executive committee or other governing body of such corporation or Person,
whether at all times or only so long as no senior class of securities has such
voting power by reason of any contingency.
ARTICLE II.
ISSUE, PURCHASE AND SALE OF SERIES A PREFERRED STOCK
2A. Authorization of Issue of Series A Preferred Stock. The
Company has authorized the issue of 600,000 shares of its Series A Preferred
Stock, having the powers, designations, preferences and relative rights and the
qualifications, limitations and restrictions set forth in the Second Amended and
Restated Certificate of Incorporation.
2B. Purchase and Sale of Series A Preferred Stock. The Company
agreed to sell to the Purchasers and, subject to the terms and conditions herein
set forth, the Purchasers severally agreed to purchase from the Company, the
number of shares of Series A Preferred Stock set forth opposite their names on
Schedule I at a purchase price of $100.00 per share. At 11:00 a.m. New York time
on May 8, 1997 (and on July 3, 1997, with respect to the Export Development
Corporation) (the "Closing Date"), the Company delivered to the Purchasers at
the offices of Dewey Ballantine, 1301 Avenue of the Americas, New York, New York
10019, or at such other location as the Purchasers and the Company may agree,
one or more stock certificates, as each Purchaser requested, registered in such
Purchaser's name or otherwise as such Purchaser may direct, evidencing such
shares to be purchased by the Purchasers, against payment of the purchase price
thereof by wire transfer of immediately available funds to or upon the order of
the Company.
ARTICLE III.
CONDITIONS OF CLOSING
The Purchasers' obligation to purchase and pay for the Series
A Preferred Stock on the Closing Date was subject to the satisfaction, on or
before the Closing Date, of the following conditions:
3A. Opinion of Purchasers' Counsel. The Purchasers shall have
received from Dewey Ballantine, who are acting as special counsel to the
Purchasers in connection with this transaction, a favorable opinion, dated the
Closing Date, substantially in the form of Exhibit III-A hereto.
3B. Opinions of Company's Counsel. The Purchasers shall have
received from each of Ropes & Gray, who are acting as special counsel to the
Company in connection with this transaction, and Richards, Layton & Finger who
are acting as special Delaware counsel to the Company, a favorable opinion,
dated the Closing Date, substantially in the form and to the effect set forth in
Exhibit III-B hereto.
3C. Stockholders' Agreement. The Company and Orbital shall
have entered into the Stockholders' Agreement.
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3D. Expenses. On the Closing Date, the Company shall have paid
(i) the reasonable out-of-pocket expenses of Crest and Morgan and (ii) the
reasonable fees and expenses of Dewey Ballantine as special counsel to the
Purchasers.
3E. Representations and Warranties. The representations and
warranties contained in Article V hereof shall be true on and as of the Closing
Date with the same effect as though made on and as of the Closing Date, except
to the extent of changes caused by the transactions herein contemplated; and the
Company shall have delivered to the Purchasers an Officer's Certificate, dated
the Closing Date, to such effect.
3F. Amendment of Certificate of Incorporation. The Company
shall have amended and restated its Certificate of Incorporation to provide for
the terms and conditions with respect to the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock.
3G. Sale of Series A Preferred Stock. The Purchasers severally
shall have purchased an aggregate of at least 300,100 shares of Series A
Preferred Stock.
3H. Certain Payments. Orbital shall have (i) made a capital
contribution to the Company in cash in the amount of $87,900,000 and (ii) paid
to the Company in cash $40,942,000 representing payments previously received by
Orbital pursuant to certain existing agreements, less offsets in the amount of
$81,000,000 and $13,355,000 representing amounts due to Orbital for work
performed pursuant to the Procurement Agreement and the Services Agreement,
respectively.
3I. Certain Agreements. Orbital shall have executed and
delivered to the Company the License Agreement, the Non-Compete Agreement,
amendment number 1 to the Procurement Agreement, amendment number 1 to the
Services Agreement and the Assignment of Trademarks, all in form and substance
satisfactory to the Purchasers.
3J. By-Laws. The Company shall have amended its By-laws in
form and substance satisfactory to the Purchasers.
3K. Proceedings. On or prior to the Closing Date, all
corporate and other proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Purchasers and their
special counsel, and the Purchasers and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
ARTICLE IV.
CERTAIN COVENANTS
4A. Financial Statements and Other Reports. Until the
consummation of a public offering of Common Stock registered under the
Securities Act, or until the registration of the Common Stock or Series A
Preferred Stock under the Exchange Act, the Company will (except to the extent
prohibited by applicable laws and regulations) deliver to each Purchaser and
each Permitted Transferee (as defined in the Stockholders' Agreement) holding
shares of Series A Preferred Stock or Share Equivalents, in duplicate:
(a) as soon as practicable and in any event within 45
days after the end of each fiscal quarter, consolidated statements of income,
stockholders' equity and cash flows of the Company and its consolidated
Subsidiaries for such fiscal period and for the period from the beginning
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of the then current fiscal year to the end of such fiscal period, and a
consolidated balance sheet of the Company and its consolidated Subsidiaries as
at the end of such fiscal period, setting forth in each case in comparative form
consolidated figures for the corresponding periods in the preceding fiscal year,
all in reasonable detail, prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods involved,
certified as to fair presentation by the principal financial officer of the
Company and accompanied by a written discussion of operations in summary form;
(b) as soon as practicable and in any event within 90
days after the end of each fiscal year of the Company, consolidated statements
of income, stockholders' equity and cash flows of the Company and its
consolidated Subsidiaries for such year, and a consolidated balance sheet of the
Company and its consolidated Subsidiaries as at the end of such year, setting
forth in each case in comparative form corresponding consolidated figures from
the preceding fiscal year, prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods involved, and
accompanied by an opinion of KPMG Peat Marwick LLP, or another firm among the
six largest independent public accountants of recognized national standing
selected by the Company, to the effect that the consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied (except for changes in application in which such
accountants concur and as are noted therein) and present fairly the financial
condition of the Company and its Subsidiaries and, unless independent public
accountants are not generally making statements substantially to the following
effect, that the examination of such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards and accordingly included such tests of the accounting records
and such other auditing procedures as were considered necessary in the
circumstances; and accompanied by a written discussion of operations in summary
form with respect to such fiscal year;
(c) promptly upon receipt thereof, copies of reports,
if any, submitted to the Company by independent accountants in connection with
each annual or interim audit of the books of the Company made by such
accountants;
(d) promptly upon transmission thereof to the Board
of Directors, copies of any intermediate financial information prepared in
addition to that described in paragraph 4A(a) or (b);
(e) promptly upon notice thereof to the Board of
Directors, notice of any material event affecting the Company, its financial
condition or its ability to achieve its then current budget or business plan;
(f) promptly upon production thereof, but in no event
later than October 31 of each year, an annual revision updating the Company's
then current budget for the immediately succeeding two years; and
(g) promptly, such additional financial and other
information as any Significant Holder may from time to time reasonably request.
Each Purchaser is hereby authorized to deliver a copy of any
financial statement delivered to it pursuant to this paragraph 4A to any
regulatory body having jurisdiction over it which requests such information.
Each Significant Holder is further authorized to request information from and to
have access to, the Company's independent public accountants, and the Company
will request such accountants to make available to any Significant Holder such
information as such Significant Holder may reasonably request.
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Each Purchaser agrees that any information obtained pursuant
to this paragraph 4A or pursuant to paragraph 4C shall be obtained and, except
as set forth in the first sentence of the immediately preceding paragraph, used
solely for purposes relating to the holding of the Series A Preferred Stock or
Share Equivalents and that any such information shall, except to the extent that
such information shall have been made public or otherwise available through no
breach hereof by such Purchaser, be held in confidence by such Purchaser.
4B. Board of Directors. So long as Crest or Morgan shall be
the beneficial owner of at least 500,000 Share Equivalents, but only until the
consummation of a public offering of Common Stock registered under the
Securities Act, the Company will permit a representative of each of Crest and
Morgan to attend all meetings of the Board of Directors of the Company or any
committee thereof as a non-voting observer and advisor and to participate in
discussions, but not to vote, and, in connection therewith, shall supply to each
of Crest and Morgan, in the manner and at the time supplied to members of the
Board of Directors or any such committee, all notices, reports and other
materials provided in connection with such meetings. The reasonable
out-of-pocket costs and expenses incurred by such representatives shall be paid
by the Company. The Company expressly acknowledges, understands and agrees (A)
that remedies at law for any breach by the Company of this paragraph 4B will be
inadequate, (B) that the damages resulting from such breach are not readily
susceptible to measurement in monetary terms and (C) that each of Crest and
Morgan shall be entitled to immediate injunctive relief and may obtain temporary
and permanent orders restraining any threatened or further breach of this
paragraph 4B by the Company.
4C. Inspection of Property. Prior to the consummation of a
public offering of Common Stock registered under the Securities Act, the Company
will (except to the extent prohibited by applicable laws and regulations) permit
any Person designated in writing by any Significant Holder to visit and inspect
any of the properties of the Company and its Subsidiaries and to discuss the
affairs, finances and accounts of the Company and, to the extent relating to the
Company, Orbital with the principal officers of the Company and its Affiliates,
all upon reasonable notice, at such reasonable times (subject to the bona fide
schedule constraints of the relevant officers) and as often as such Significant
Holder may reasonably request.
4D. Corporate Existence, Licenses and Permits; Maintenance of
Properties. So long as any Purchaser shall hold any Series A Preferred Stock,
the Company will at all times use commercially reasonable efforts to do or cause
to be done all things necessary to maintain, preserve and renew its existence as
a corporation organized under the laws of a state of the United States of
America, preserve and keep in force and effect, and cause each of its
Subsidiaries to apply for on a timely basis, preserve and keep in force and
effect, all licenses and permits necessary and material to the conduct of the
business of the Company and its consolidated Subsidiaries, taken as a whole, and
to maintain and keep, and cause each of its Subsidiaries to maintain and keep,
its and their respective properties in good repair, working order and condition
(except for normal wear and tear), and from time to time to make all needful and
proper repairs, renewals and replacements, including, without limitation, all
trade name and trademark registration renewals, in each case so that any
business material to the Company carried on in connection therewith may be
properly and advantageously conducted.
4E. Intentionally Deleted.
4F. Series B Preferred Stock. On any date that the Company's
existing level of cash and Cash Equivalents is less than $5 million and the
Shortfall exceeds $0, the Company shall authorize the issuance of and sell to
Orbital, and Orbital shall purchase from the Company, 50,000 shares of Series
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B Preferred Stock at a price of $100.00 per share. Orbital's purchase obligation
under this Section 4F shall be limited to an aggregate number of shares of
Series B Preferred Stock equal to the lesser of (A) 227,295 and (B) the
Shortfall minus $20,000,000, divided by $100. The number of shares of Series B
Preferred Stock that Orbital shall be required to purchase under this Section 4F
may be waived in whole or in party by holders of a majority of Share
Equivalents. To the extent the Shortfall is greater than $20,000,000 on December
31, 1998, then on such date, Orbital shall purchase the total maximum number of
shares of Series B Preferred Stock required pursuant to this Section 4F.
4G. Series C Preferred Stock. On any date after Orbital has
satisfied its obligation to purchase shares of Series B Preferred Stock pursuant
to Section 4F hereof and the Company's existing level of cash and Cash
Equivalents is less than $5 million and the Shortfall exceeds $0, the Company
shall authorize the issuance of and sell to Orbital, and Orbital shall purchase
from the Company, 50,000 shares of Series C Preferred Stock at a price of
$100.00 per share. Orbital's purchase obligation under this Section 4G shall be
limited to an aggregate number of shares of Series C Preferred Stock equal to
the lesser of (A) 200,000 and (B) the Shortfall divided by $100. The number of
shares of Series C Preferred Stock that Orbital shall be required to purchase
under this Section 4G may be waived in whole or in part by holders of a majority
of Share Equivalents. If Orbital has purchased the total maximum number of
shares of Series B Preferred Stock required pursuant to Section 4F and there is
still a Shortfall on December 31, 1998, then on such date, Orbital shall
purchase the total maximum number of shares of Series C Preferred Stock required
pursuant to this Section 4G.
4H. Additional Financing. (a) The Company shall use reasonable
commercial efforts to consummate one or more Additional Financings on or prior
to December 31, 1998. At any time prior to receipt of the full required amount
of the Additional Financings, other than during a Blackout Period (as
hereinafter defined), holders of Series A Preferred Stock holding twenty percent
(20%) or more of the shares of Series A Preferred Stock or Share Equivalents
then outstanding shall have the right, exercisable at any time by giving written
notice to the Company of such holder's or holders' intent, to purchase, at a
price of $100.00 per share, up to such holder's or holders' pro rata portion of
the total number of shares of Series A Preferred Stock as will not exceed the
Maximum Series A Shares (such total number of shares of Series A Preferred Stock
being hereafter referred to as the "Option Shares"). Upon receipt of any such
notice, the Company shall promptly, but in any event within three (3) business
days, give written notice (the "Company Notice") thereof to each other holder of
Series A Preferred Stock. Each such holder shall thereupon have the right,
exercisable by giving written notice thereof to the Company within five (5)
business days of receipt of the Company Notice, to purchase, at a price of
$100.00 per share, up to such number of such shares as shall be equal to its pro
rata portion of the Option Shares. The closing for the purchase of all the
Option Shares shall be on a date specified by the Company not less than
twenty-five (25) days and not more than thirty (30) days from the date of the
Company Notice relating to the Option Shares. If any of such shares of Series A
Preferred Stock shall remain unpurchased after all holders of Series A Preferred
Stock desiring to exercise such option upon receipt of the Company Notice shall
have done so, any remaining Option Shares may be purchased by one or more other
holders, pro rata to their participation in such Additional Financing.
(b) Prior to seeking purchasers for any Additional
Financing, the Company shall give written notice to the holders of Series A
Preferred Stock of its intent to secure such Additional Financing and of the
terms thereof. Each such holder shall have the right, exercisable by giving
written notice of such holder's intent to the Company within ten (10) days of
receipt of notice from the Company (the "Open Period"), to purchase, at a price
of $100.00 per share, up to such number of shares of Series A Preferred Stock as
will not exceed the Maximum Series A Shares; provided, however, that if more
than one holder of Series A Preferred Stock shall give such written notice, or
if holders of Series A Preferred
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Stock shall give such written notice for an aggregate number of shares in excess
of the Maximum Series A Shares, the Company shall issue and sell such shares of
Series A Preferred Stock to such holders in proportion to the number of shares
of Series A Preferred Stock then held by each such holder up to the amount of
the Maximum Series A Shares. If by the end of the Open Period the Company has
not received notice of intent to purchase shares of Series A Preferred Stock
yielding proceeds at least equal to the amount of the Additional Financing
described in the Company's notice, during the period beginning on the first day
after the end of the Open Period and continuing through the date of written
notice from the Company that it is no longer seeking Additional Financing (the
"Blackout Period"), the holders of Series A Preferred Stock shall not have the
right to purchase any shares of Series A Preferred Stock from the Company other
than as to any shares of Series A Preferred Stock as to which notice had been
given to the Company prior to the beginning of such Blackout Period pursuant to
clause (a) or this clause (b) of this Section 4H.
(c) The rights and benefits afforded the holders of
Series A Preferred Stock under clause (a) or clause (b) of this Section 4H may
be assigned to and exercised by any Affiliate of any such holder, who upon such
exercise shall make the representations set forth in Article VI hereof.
4I. Change in Control Event. Upon the occurrence of a Change
in Control Event occurring prior to the later to occur of (i) the successful
in-orbit checkout of the imaging satellite known as OrbView-3, (ii) a Qualifying
Public Offering, or (iii) the business day next following the end of a 180
consecutive day period during which the average closing price per share of the
Common Stock shall have exceeded the Threshold Price then in effect, the Company
shall mail within ten (10) days (x) a notice to the holders of the Notes
offering to repurchase the Notes on a date pursuant to the terms of the
Indenture (the "Note Put Date") and (y) a notice to the Series A Holders
("Series A Put Notice") specifying the Note Put Date, describing the transaction
or transactions that constitute the Change in Control Event and offering to
repurchase pro rata (to the extent then permitted by the terms of the Indenture
and by law) all shares of Series A Preferred Stock then outstanding, at a
purchase price per share, payable in cash, equal to the sum of (a) 101% of the
Liquidation Amount of such share and (b) if such Change in Control Event shall
have occurred prior to the fourth anniversary of the initial issuance of shares
of Series A Preferred Stock, an amount equal to the dividends that would have
accrued on the shares of Series A Preferred Stock subject to the offer to
purchase, calculated from the date of such date of purchase through and
including the fourth anniversary of the initial issuance of shares of Series A
Preferred Stock as if such shares of Series A Preferred Stock had remained
outstanding through such fourth anniversary. The closing date for the repurchase
of the Series A Preferred Stock shall be no later than 45 days from the date the
Series A Put Notice is mailed to the Series A Holders. The Series A Put Notice
shall also indicate the means by which and the time within which such holder may
accept such offer and any other information deemed relevant by the Company. Any
holder of Series A Preferred Stock desiring to accept such offer shall so notify
the Company in writing within the period provided, which shall in any event be
not less than thirty (30) days from the date the Series A Put Notice is mailed.
The rights of the Series A Holders to receive the Liquidation Amount and any
accrued but unpaid dividends pursuant to this Section 4I shall at all times be
subordinate to and second in priority to the rights of the holders of the Notes
so long as the Notes remain outstanding.
4J. Intentionally Deleted.
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ARTICLE V.
REPRESENTATIONS, COVENANTS AND WARRANTIES
The Company represented and warranted as of May 7, 1997 and
July 3, 1997, and where applicable, covenanted as follows:
5A. Organization, Standing and Qualification of Company and
Subsidiaries; Corporate Authority. (a) The Company and each Subsidiary, if any,
is a corporation duly organized and existing in good standing under the laws of
the jurisdiction of its incorporation, and has the corporate power to own its
respective property and to carry on its respective business as now being
conducted, is duly qualified and in good standing as a foreign corporation to do
business in every jurisdiction where the character of the properties owned or
leased by it or the nature of any business transacted by it makes such
qualification necessary and where such nonqualification or lack of good standing
would have a material adverse effect on the business of the Company and its
Subsidiaries taken as a whole. On the date hereof the Company has no
Subsidiaries. The Company has delivered to the Purchaser true, complete and
correct copies of the Second Amended and Restated Certificate of Incorporation
and its By-laws, as amended and in full force and effect on the date hereof.
(b) The execution and delivery by the Company of this
Agreement and the Stockholders' Agreement, and each other agreement contemplated
by the terms hereof, and the performance by the Company of all transactions and
obligations contemplated hereby and thereby are within its corporate authority.
The execution, delivery and performance of this Agreement and the Stockholders'
Agreement, and each other agreement contemplated by the terms hereof, and the
issuance of the Series A Preferred Stock have been duly authorized by all
necessary corporate proceedings on the part of the Company. Each of this
Agreement and the Stockholders' Agreement, and each other agreement contemplated
by the terms hereof, constitutes the legal, valid and binding obligation of the
Company enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally. The Series A Preferred Stock has been
duly authorized and, when issued against payment therefor in accordance with
this Agreement, will be fully paid and nonassessable and subject to no
preemptive rights. The shares of Common Stock issuable upon the conversion of
the Series A Preferred Stock have been duly authorized and reserved for
issuance, are subject to no preemptive rights and, when issued upon such
conversion, will be validly issued, fully paid and nonassessable.
5B. Financial Statements. Orbital has furnished the Purchasers
with balance sheets of the Division as at December 31, 1996 and the related
statements of income, stockholders' equity and cash flows of the Division for
the fiscal year ended December 31, 1996, all certified by KPMG Peat Marwick LLP,
including in each case the related schedules and notes, and an unaudited balance
sheet of the Division as at March 31, 1997 and statements of income,
stockholders' equity and cash flows of the Division for the period ended on such
date, prepared by Orbital and certified by its principal financial officer.
All such financial statements (including any related schedules
and/or notes) have been prepared in accordance with generally accepted
accounting principles consistently applied, except to the extent set forth in
the notes to such financial statements and except for the absence of footnotes
to the interim financial statements and except that the interim financial
statements are subject to adjustment made in the course of an audit that would
not in the aggregate be material, throughout the periods involved and to the
extent required by such principles show all liabilities, direct and contingent,
of the Division required to be shown thereon in accordance with generally
accepted accounting principles. The
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balance sheets and the related schedules and notes fairly present the financial
condition of the Division as at the respective dates thereof; and the net income
and stockholders' equity statements and the related schedules and notes fairly
present the results of the operations of the Division for the respective periods
indicated.
There has been no material adverse change in the condition,
financial or other, of the Division or the Company and its Subsidiaries, on a
consolidated basis, since March 31, 1997.
5C. Actions Pending. There is no action, suit, investigation
or proceeding pending or, to the knowledge of the Company, threatened against
the Division or the Company or any of its Subsidiaries before any court,
arbitrator or administrative or governmental body that (i) seeks to enjoin the
issuance of the Series A Preferred Stock or the consummation of the transactions
contemplated hereby or (ii) materially and adversely affects, or as to which
there is a reasonable possibility of an adverse decision that would materially
and adversely affect, either individually or collectively, the business or
condition of the Company and its consolidated Subsidiaries taken as a whole.
Neither the Company nor any Subsidiary is in violation of any judgment, order,
writ, injunction, decree, rule or regulation of any court or governmental
department, commission, board, bureau, agency or instrumentality, the violation
of which reasonably could be expected to, either individually or collectively,
materially and adversely affect the business, property, assets or financial
position of the Company and its consolidated Subsidiaries taken as a whole.
5D. No Defaults. Neither the Company nor any of its
Subsidiaries is, nor to the knowledge of the Company other than as set forth in
Exhibit V-T, is any other party thereto, in violation of, or in default under,
nor has there been any waiver given with respect to, any term or provision of
any charter, by-law, mortgage, indenture, agreement, instrument, statute, rule,
regulation, judgment, decree, order, writ, or injunction applicable to it, such
that such violations and defaults in the aggregate could reasonably be expected
to result in any material adverse change in the business, assets, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries taken as a whole, or materially adversely affect the ability of the
Company to perform in any material respect its obligations under this Agreement.
5E. Taxes. Orbital has timely filed all material tax returns
which are required to be filed by it on behalf of the Company on or before the
date hereof and has paid all taxes due on or before the date hereof, whether or
not reflected on such returns, including pursuant to any assessment received by
Orbital or the Company or any Subsidiary. All such returns were true, correct
and complete in all material respects. None of such returns has been audited by
the relevant taxing authority, and no taxing authority has notified (or
threatened) either Orbital or the Company, orally or in writing, that such
taxing authority will or may audit any such return. Each of Orbital and the
Company has complied with all requirements of the Code, the Treasury Regulations
and any state, local or foreign law relating to the payment and withholding of
taxes relating to the Division or the Company, and Orbital or the Company has,
within the time and in the manner prescribed by applicable law, paid over to the
proper taxing authorities all amounts required to be so withheld and paid over
relating to the Division or the Company. The charges, accruals and reserves on
the books of the Company and its Subsidiaries in respect of taxes or other
governmental charges are adequate.
5F. Title, Liens. Except as set forth in Exhibit V-F, the
Company has, and each of its Subsidiaries has, good and marketable title to its
respective properties and assets reflected in the consolidated balance sheet of
the Company and its consolidated Subsidiaries as at March 31, 1997 (other than
properties and assets disposed of in the ordinary course of business).
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<PAGE> 19
5G. Burdensome and Conflicting Agreements and Charter
Provisions. Neither the Company nor any Subsidiary is a party to any contract or
agreement or subject to any charter or other corporate restriction which
materially and adversely affects its business as currently conducted, properties
or assets or financial condition. Neither the execution nor delivery of this
Agreement or the Stockholders' Agreement or any other agreement contemplated by
the terms hereof by the Company, nor the offering, issuance and sale of the
Series A Preferred Stock by the Company, nor fulfillment of nor compliance with
the terms and provisions of this Agreement, the Stockholders' Agreement or any
other agreement contemplated by the terms hereof and of the Series A Preferred
Stock by the Company, nor the issuance by the Company of shares of Common Stock
upon conversion of the Series A Preferred Stock as provided in the Second
Amended and Restated Certificate of Incorporation, will violate, or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
or result in any violation of, or result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary pursuant to, or
require any consent, approval or other action by any court or administrative or
governmental body or any other Person pursuant to, the charter or by-laws of the
Company or any Subsidiary, any award of any arbitrator or any agreement
(including any agreement with stockholders), instrument, order, judgment,
decree, statute, law, rule or regulation to which the Company or any Subsidiary
is subject, except for such approvals as may be required in connection with
fulfillment of, or compliance with, the provisions of Article 5 of the
Stockholders' Agreement.
5H. Leases. The Company and each of its Subsidiaries enjoys
peaceful and undisturbed possession of all leases material to the Company and
its Subsidiaries taken as a whole and necessary for the operation of its
respective properties and assets, none of which contains any unusual or
burdensome provisions which materially or adversely affects or impairs the
operation of such properties or assets. All such leases are valid and subsisting
and are in full force and effect.
5I. Intellectual Property.
(a) Exhibit V-I sets forth complete and accurate
lists, as of the time immediately following the Closing, of (i) all material
Intellectual Property in which the Company or Orbital has an ownership interest
and which is used in the Company's business, indicating the owner thereof, and
all applications, registrations and grants with respect thereto (collectively,
the "Owned Property"), (ii) all material Intellectual Property (other than the
Owned Property) which is used in the Company's business, indicating the owner
thereof, and (iii) all Contracts with respect to the Intellectual Property
referred to in clauses (i) and (ii) above.
(b) Except as set forth in Exhibit V-I, the Company
or Orbital is the sole and exclusive owner of the Owned Property.
(c) Neither the Company nor Orbital has any knowledge
of any facts or claims which cause or would cause any Patent included in the
Owned Property to be invalid, and neither has received any notice that any
Person may bring such a claim.
(d) The Company owns or otherwise has the valid right
to use through a Contract listed in Exhibit V-I any and all Intellectual
Property that is used or intended to be used by it in, or is necessary or
advisable for the conduct of, its business, as currently conducted and as
contemplated to be conducted (as described in the Company's business plan),
except for such Intellectual Property as the Company will be required to develop
or acquire in the future in connection with the use of data produced by (i) the
remote imaging satellite known as "OrbView-3" and (ii) the remote imaging
satellite known as "OrbView-2", provided that the foregoing exception shall not
apply to the software referred to
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in Exhibit V-I, free and clear of any Lien, encumbrance, royalty or other
payment obligations (except for such payments in respect of Contracts listed in
Exhibit V-I or off-the-shelf Computer Software at standard commercial rates).
(e) Neither the Company, the Division or, with
respect to the business of the Division, Orbital, is in conflict with or in
violation or infringement of, nor has the Company or Orbital received any notice
of any conflict with or violation or infringement of, nor are proceedings or
claims pending, nor have any such proceedings or claims been instituted or
asserted in writing against the Company or Orbital, nor are any proceedings
threatened, alleging any such violation, nor is there any valid basis for any
such proceeding or claim, of any rights or rights asserted in writing of any
other Person with respect to any Intellectual Property of such other Person.
(f) No proceedings or claims in which the Company or
Orbital alleges that any Person is infringing upon, or otherwise violating, any
Owned Property are pending, and none have been served by, instituted or asserted
by the Company or Orbital, nor are any proceedings threatened alleging any such
violation or infringement, nor does the Company or Orbital know of any valid
basis for any such proceeding or claim.
(g) The Company and Orbital have obtained and will
obtain from all individuals who participated in any respect in the invention or
authorship of any Owned Property (as employees of the Company or Orbital, as
consultants, as employees of consultants or otherwise) effective waivers of any
and all ownership rights of such individuals in such Owned Property, and
assignments to the Company or Orbital of all rights with respect thereto, other
than from such individuals whose copyrightable works the Company and Orbital
hereby represent to be "works made for hire" within the meaning of Section 101
of the Copyright Act of 1976.
(h) The Company and Orbital have taken and will take
all commercially reasonable actions which are necessary or advisable in order to
fully protect the Owned Property.
(i) For purposes of this Section 5I, "Intellectual
Property" shall mean, collectively: (x) all U.S. and foreign registered,
unregistered and pending (i) trade names, trade dress, trademarks, service
marks, assumed names, business names and logos, and all registrations and
applications therefor, together with all goodwill symbolized thereby, (ii) all
computer software, data files, source and object codes, user interfaces, manuals
and other specifications and documentation and all know-how relating thereto
(collectively, the "Computer Software"), copyrights (including, without
limitation, those in Computer Software, and all registrations and applications
therefor), (iii) all utility and design patents, registered designs and
invention disclosures (including, without limitation, those in Computer
Software), and all grants, registrations and applications therefor
(collectively, the "Patents"), and (iv) all trade secrets, proprietary
inventions, proprietary processes, proprietary formulae, proprietary know-how,
proprietary concepts, proprietary ideas, proprietary research and development,
and proprietary designs, and (v) all other intellectual property, including,
without limitation, adequate research and development facilities; and (y) all
license, assignment, distribution or other agreements relating to any of the
items set forth in clause (x) above (collectively, the "Contracts"). For
purposes of this Section 5I, "Company" means and includes the Company and its
Subsidiaries.
5J. Offering of Series A Preferred Stock. Neither Orbital nor
the Company nor Bear, Stearns & Co. Inc. or Merrill Lynch & Co. (the only
Persons authorized by Orbital or the Company as agent, broker or dealer in
connection with the offering or sale of the Series A Preferred Stock) nor any
other agent acting on Orbital's or the Company's behalf has, directly or
indirectly, offered the Series A
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Preferred Stock or any similar security of the Company for sale to, or solicited
any offers to buy the Series A Preferred Stock or any similar security of the
Company from, or otherwise approached or negotiated with respect thereto with,
more than 160 Persons including the Purchasers (all of which Persons are
"accredited investors" within the meaning of Regulation D promulgated under the
Securities Act), and neither Orbital nor the Company nor any agent acting on
Orbital's or the Company's behalf has taken or will take any action which would
subject the issuance or sale of the Series A Preferred Stock to the provisions
of Section 5 of the Securities Act, or to the registration or qualification
requirements of any securities or Blue Sky law of any applicable jurisdiction.
5K. Broker's or Finder's Commissions. Except for any fees
payable to Bear, Stearns & Co. Inc. and Merrill Lynch & Co. in connection with
the issuance of the Series A Preferred Stock (which fees will be paid by the
Company), no broker's or finder's or placement fee or commission will be payable
with respect to the issuance of the Series A Preferred Stock or the transactions
contemplated hereby, and the Company will hold the Purchasers harmless from any
claim, demand or liability for broker's or finder's or placement fees or
commissions alleged to have been incurred in connection with the issuance of the
Series A Preferred Stock or such transactions.
5L. Application of Proceeds. The proceeds of the sale of the
Series A Preferred Stock will be used by the Company for funding a portion of
the expenses of construction and launch of the imaging satellites known as
OrbView-2 and OrbView-3 and for initial operating expenses and other general
corporate purposes.
5M. Certain Limitations. Neither the nature of the Company or
of any Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offer, issue, sale or delivery of the Series
A Preferred Stock (other than in any such case, any matter relating solely to
the Purchasers) is, except as provided in Schedule V-M, such as to require or
give rise to any limitation on any Purchaser's ownership of any equity
securities of the Company.
5N. Disclosure. Neither this Agreement, the Offering
Memorandum nor any other document, certificate or statement prepared by or on
behalf of the Company or Orbital and furnished to the Purchasers in writing by
or on behalf of the Company in connection herewith, considered as a whole,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein, in
the light of the circumstances under which made, not misleading. There is no
fact peculiar to Orbital or the Company or its Subsidiaries and known to Orbital
or the Company which materially adversely affects or reasonably could be
expected to materially adversely affect in the future the business, property or
assets, or financial condition of the Company and its Subsidiaries, taken as a
whole, which has not been set forth in this Agreement or in the other documents
described herein or furnished to the Purchasers by or on behalf of the Company
prior to the date hereof in connection with the transactions contemplated
hereby.
5O. Capital Stock. Upon the effectiveness of the filing of the
Second Amended and Restated Certificate of Incorporation, the Company has
authorized a total of 85,000,000 shares of its capital stock of all classes,
consisting of 75,000,000 authorized shares of Common Stock and 10,000,000 shares
of preferred stock. As of May 7, 1997, 25,200,000 shares of Common Stock are
issued and outstanding, and the Company does not hold any shares of its capital
stock in its treasury. Since May 7, 1997 the Company has not issued any shares
of capital stock. All of such outstanding shares have been validly issued and
are fully paid and nonassessable. The Company has reserved such number of shares
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<PAGE> 22
of Common Stock for issuance pursuant to such instruments or agreements as are
set forth in Exhibit V-O hereto.
Except as otherwise stated in this paragraph or in Exhibit V-O
and except for shares reserved for issuance in connection with this Agreement,
the Company has not granted or issued, or agreed to grant or issue, any options,
warrants or similar rights to acquire or receive any of the authorized but
unissued shares of its capital stock of any class or any securities convertible
into shares of its capital stock of any class. Except as described above, the
Company has not taken any action after May 7, 1997 which, had the provisions of
Exhibit A been in effect on and after such date and to and including the date
hereof, would have required an adjustment in the Conversion Price in accordance
with the provisions of Exhibit A.
5P. ERISA.
(a) For purposes of this Agreement, the term
"Employee Plan" shall mean each plan, agreement, arrangement or commitment which
is an employment or consulting agreement, executive or incentive compensation
plan, bonus plan, deferred compensation agreement, employee pension, profit
sharing, savings or retirement plan, employee stock option or stock purchase
plan, group life, health, or accident insurance or other employee benefit plan,
agreement, arrangement or commitment, including, without limitation, any
commitment arising under the laws of any jurisdiction, severance, holiday,
vacation, Christmas or other bonus plans (including, but not limited to,
"employee benefit plans", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), maintained by Orbital, the
Division or the Company for any present or former employees, officers or
directors of the Company ("Company Personnel") or with respect to which the
Company has liability, makes or has an obligation to make contributions
("Employee Plans"). Exhibit V-P sets forth each Employee Plan which is an
employee pension benefit plan as defined in Section 3(2) of ERISA.
(b) The Company and the Division have made available
to the Purchasers with (i) copies of all Employee Plans or in the case of an
unwritten plan, a written description thereof, (ii) copies of any annual,
financial or actuarial reports and Internal Revenue Service determination
letters relating to such Employee Plans and (iii) copies of all summary plan
descriptions (whether or not required to be furnished under ERISA) and employee
communications relating to such Employee Plans which materially modify an
existing summary plan description and distributed to Company Personnel, in each
case under this subsection (iii), existing or in effect during or within the
past five years.
(c) There are no Company Personnel who are entitled
to (x) any pension benefit that is unfunded or (y) any pension or other benefit
to be paid after termination of employment other than required by Section 601 of
ERISA or pursuant to plans intending to be qualified under Section 401(a) of the
Code and listed on the Exhibit V-P, and no other benefits whatsoever are payable
to any Company Personnel after termination of employment (including retiree
medical and death benefits). Except as set forth on Exhibit V-P, no
representation has been made by Orbital, the Division, or the Company to provide
any such benefits in the future.
(d) Each Employee Plan that is an employee welfare
benefit plan under Section 3(1) of ERISA is either (x) funded through an
insurance company contract and is not a "welfare benefit fund" within the
meaning of Section 419 of the Code or (y) is unfunded. There is no liability in
the nature of a retroactive rate adjustment or loss-sharing or similar
arrangement, with respect to any Employee Plan which is an employee welfare
benefit plan.
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(e) Each Employee Plan by its terms and operation is
in compliance in all material respects with all applicable laws (including, but
not limited to, ERISA, the Code and the Age Discrimination in Employment Act of
1967, as amended).
(f) There are no actions, suits or claims pending or
threatened (other than routine noncontested claims for benefits) or, to
Company's knowledge, no set of circumstances exist which may reasonably give
rise to such a claim against any Employee Plan or administrator or fiduciary of
any such Employee Plan. As to each Employee Plan for which an annual report is
required to be filed under ERISA or the Code, all such filings, including
schedules, have been made on a timely basis and with respect to the most recent
report regarding each such Employee Plan liabilities do not exceed assets, and
no material adverse change has occurred with respect to the financial materials
covered thereby.
(g) Neither the Company nor any entity that is or was
at any time treated as a single employer with the Company under Section 414(b),
(c), (m) or (o) of the Code has at any time (x) maintained, contributed to or
been required to contribute to any plan under which more than one employer makes
contributions (within the meaning of Section 4064(a) of ERISA) or any plan that
is a multiemployer plan, (y) incurred or expects to incur any liability to the
Pension Benefit Guaranty Corporation or otherwise under Title IV of ERISA or (z)
incurred or expects to incur liability in connection with an "accumulated
funding deficiency" within the meaning of Section 412 of the Code whether or not
waived.
(h) Orbital has received a favorable determination
letter from the Internal Revenue Service stating that the Deferred Salary &
Profit Sharing Plan for Employees of Orbital Science Corporation (the "Orbital
401(k) Plan") is qualified under Sections 401(a) and 401(k) of the Code and the
related trust is exempt from tax under Section 501(a) and to the knowledge of
the Company nothing has occurred since the date of such letter to cause the
letter to be no longer valid or effective.
(i) Neither the Company nor any other person,
including any fiduciary, has engaged in any "prohibited transaction" (as defined
in Section 4975 of the Code or Section 406 of ERISA), which could subject any of
the Employee Plans (or their trusts), the Company, or any person who the Company
has an obligation to indemnify, to any tax or penalty imposed under Section 4975
of the Code or Section 502 of ERISA.
(j) Except with respect to the Orbital 401(k) Plan,
none of the assets of the Employee Plans is invested in any property
constituting employer real property or an employer security within the meaning
of Section 407(d) of ERISA.
(k) The events contemplated by this Agreement (either
alone or together with any other event) will not (w) entitle any Company
Personnel to severance pay, unemployment compensation, or other similar payments
under any Employee Plan or law, (x) accelerate the time of payment or vesting or
increase the amount of benefits due under any Employee Plan or compensation to
any Company Personnel, (y) result in any payments (including parachute payments)
under any Employee Plan or law becoming due to any Company Personnel, or (z)
terminate or modify or give a third party a right to terminate or modify the
provisions or terms of any Employee Plan.
5Q. Environmental. (a) The Company complies, and each of the
Company and the Division at all times has complied, in all material respects
with all applicable Environmental Laws. For the purposes hereof, "Environmental
Law" shall mean any judgment, decree, order, law, permit, license, rule,
regulation, or agency requirement relating to or addressing the environment,
health or
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safety (to the extent relating to exposure to any Hazardous Substance),
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, the Resource Conservation and
Recovery Act, a amended, the Superfund Amendments and Reauthorization Act of
1986, the Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act and any federal, state, local or foreign statute,
regulation, ordinance, order or decree relating to health, safety (in the case
of health and safety to the extent relating to exposure in the workplace or
otherwise to any Hazardous Substance) or the environment.
(b) There is not now pending or threatened any
action, claim, proceeding or investigation nor has the Company or Orbital
received any notice, claim, demand letter, or request for information at any
time, alleging that the Company or the Division may be in violation of, or
liable under, any Environmental Law, nor does there exist any basis for any such
action, claim, proceeding, or investigation.
(c) There are no Hazardous Substances located on the
properties currently or formerly owned or operated by the Company or the
Division (including soil, groundwater or surface features and buildings or
structures thereon) (the "Properties") other than as permitted under applicable
Environmental Laws, and none of the Properties contain, or has contained, any
underground storage tank.
(d) Each of the Company and the Division does not
have any contingent liability in connection with a Release or threatened Release
of any Hazardous Substance at any location.
(e) There are no present or past Environmental
Conditions (as defined below) in any way relating to the Company which have, or
may have, individually or in the aggregate, a material adverse effect on the
financial condition of the Company. "Environmental Conditions" means the Release
or threatened Release of any Hazardous Substance upon, under in or about any of
the Properties, or any other circumstances involving the Company or the Division
or the Properties that could be expected to result in any claims, liability,
costs or losses, or any restriction on the ownership, use or transfer of any
Property pursuant to any Environmental Law.
(f) "Release" shall mean and include any releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leeching, dumping or disposing into the indoor or outdoor environment
of any Hazardous Substance.
(g) "Hazardous Substance" shall mean any quantity of
asbestos in any form, urea formaldehyde, PCB's, radon gas, crude oil or any
fraction thereof, natural gas, petroleum products or by-products, radioactive
substance, toxic, carcinogenic, infectious, reactive, corrosive, ignitible or
flammable substance, pollutant, medical waste, special waste, or any hazardous
or toxic constituent thereof and includes, but is not limited to, any substance,
material or waste subject to regulation, control or remediation under
Environmental Laws.
5R. Insurance. The Company maintains and/or is covered by
valid policies of workers' compensation insurance and of insurance with respect
to its properties and business. Orbital currently maintains, and the Division
for the past four years has maintained, in full force, adequate insurance
covering the respective risks of the Company and its Subsidiaries, if any, of
such types and in such amounts and with such deductibles as are customary for
other companies engaged in similar lines of business and with good and
responsible insurance companies.
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5S. Completeness of Business. Except as set forth on Exhibit
V-S, the Company owns or has a valid leasehold interest in or other sufficient
rights to use, all assets reflected on the balance sheet of the Division as of
December 31, 1996 and reflected on the balance sheet of the Division as of March
31, 1997, in each case free and clear of all Liens, claims, security interests,
charges, and encumbrances. Except as set forth on Exhibit V-S, such assets
constitute all assets the revenues derived from which and the expenses related
to which are included in the financial statements of the Division included in
the Offering Memorandum. Each of Orbital and the Company has a reasonable basis
to believe, and does believe, that the assets acquired, licensed or otherwise
made available for use and to be acquired, licensed or otherwise made available
for use by the Company pursuant to the Procurement Agreement and the License
Agreement will constitute all material assets (other than cash and other than
certain assets expected to be acquired in connection with subsequent development
of the business in accordance with, and the funding for which is included in,
the Company's business plan) necessary to the intended conduct of its business
as described in the Offering Memorandum.
5T. Material Contracts and Obligations. Exhibit V-T sets forth
a list of all material agreements or commitments of any nature to which the
Company is a party or by which it is bound, including, without limitation, (a)
each agreement which requires future expenditures by the Company in excess of
$50,000 or which might result in payments to the Company in excess of $50,000,
(b) all employment and consulting agreements, employee benefit, bonus, pension,
profit-sharing, stock option, stock purchase and similar plans and arrangements,
and distributor and sales representative agreements, (c) any agreements with any
stockholder, officer or director of the Company, or any "affiliate" or
"associate" of such persons (as such terms are defined in the rules and
regulations promulgated under the Securities Act), including, without
limitation, any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, any such person or entity and (d) any agreement relating to the
intellectual property rights described or referred to in paragraph 5S. Except as
set forth on Exhibit V-T, all of such agreements and contracts are valid,
binding and in full force and effect.
ARTICLE VI.
REPRESENTATIONS OF THE PURCHASERS
Each Purchaser represented and warranted as to itself only as
follows:
6A. Investment Purpose. Such Purchaser (i) is an "accredited
investor" within the meaning of Regulation D promulgated under the Securities
Act, and (ii) is acquiring the Series A Preferred Stock for its own account and
not with a present view to any distribution thereof, but subject, nevertheless,
to the disposition of the Series A Preferred Stock being at all times within its
control.
6B. No Foreign Person. Other than any Purchaser identified as
such on Schedule I, such Purchaser is not a foreign individual, or entity, and
is not a member of a foreign consortium, for the purposes of the Company's
Department of Commerce licenses (a "Foreign Person").
ARTICLE VII.
RESTRICTIONS ON TRANSFER
7A. Applicability of Restrictions. Notwithstanding any
provisions to the contrary contained in this Agreement, any Restricted
Securities or the Company's Second Amended and Restated Certificate of
Incorporation, the provisions of this Article VII shall apply to: (a) the
transfer of any Series A Preferred Stock and (b) the transfer of any Restricted
Security (each such transfer being herein
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<PAGE> 26
called a "Restricted Action"). The holder of any Series A Preferred Stock or
Restricted Security, by its acceptance thereof, agrees that, unless otherwise
permitted hereunder, it will not take any Restricted Action prior to the
delivery to the Company, if requested, of the opinion of counsel referred to in,
and to the effect described in, clause (iii) of paragraph 7C, or until
registration of the Restricted Action under the Securities Act has become
effective.
7B. Restrictive Legends. Each share of Series A Preferred
Stock and certificate for Restricted Securities and each share of Series A
Preferred Stock and certificate issued upon the transfer or exchange of any such
Series A Preferred Stock or certificate for Restricted Securities (except as
otherwise permitted by this Article VII), shall bear a legend in substantially
the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and neither the
securities nor any interest therein may be sold, transferred, pledged or
otherwise disposed of in the absence of such registration or an exemption under
such Act and the rules and regulations thereunder. The transfer of such
securities is subject to the restrictions set forth in Article VII of that
certain Stock Purchase Agreement, dated May 7, 1997 between Orbital Imaging
Corporation and certain Purchasers, copies of which are available for inspection
at the offices of Orbital Imaging Corporation, and such securities may be
transferred only in compliance with the terms and conditions of said Article VII
of said Stock Purchase Agreement.
7C. Notice of Proposed Transfer; Opinion of Counsel; Certain
Restrictions. Each holder of any shares of Series A Preferred Stock or of any
Restricted Securities, by its acceptance thereof, agrees that, except as
otherwise expressly provided below in this paragraph 7C, prior to the taking of
any Restricted Action, such holder will give written notice to the Company of
such holder's intention to take such Restricted Action and to comply in all
other respects with this paragraph 7C. Each such notice (i) shall describe the
manner and circumstances of the proposed Restricted Action in sufficient detail
to enable counsel to render the opinion referred to below, (ii) shall designate
counsel for the holder giving such notice (who may be house counsel for such
holder) and (iii) if requested by the Company, shall be promptly followed by an
opinion of such counsel to the effect that the proposed Restricted Action may be
effected without registration under the Securities Act or any applicable state
securities or Blue Sky laws of such Restricted Action or any shares of Series A
Preferred Stock or Restricted Securities involved in, or issuable upon
conversion of any shares of Series A Preferred Stock involved in, such
Restricted Action. Subject to the terms and conditions of the Stockholders'
Agreement, the Company will promptly effect any transfer of any shares of Series
A Preferred Stock or Restricted Securities involved in such Restricted Action
and either deliver new shares of Series A Preferred Stock or certificates for
Restricted Securities bearing (or not bearing, if in the opinion of such counsel
such legend is no longer required to insure compliance with the Securities Act)
the legend set forth in paragraph 7B, or both, as the case may be; provided,
however, that (x) each such transferee shall represent in writing that it is
acquiring such Series A Preferred Stock or Restricted Security for investment
and not with a view to the distribution thereof (subject, however, to any
requirement of law that the disposition thereof shall at all times be within the
control of such transferee) and (y) each such investor shall agree in writing to
be bound by all the restrictions on transfer of such shares of Series A
Preferred Stock or Restricted Security contained in this Article VII and the
Stockholders' Agreement. The Company will pay the reasonable fees and
disbursements of counsel (other than house counsel) for any holder of shares of
Series A Preferred Stock or Restricted Securities in connection with any opinion
requested and rendered pursuant to this paragraph 7C.
7D. Termination of Restrictions. All restrictions imposed by
this Article VII upon the transferability of Series A Preferred Stock or
Restricted Securities shall cease and terminate as to any
25
<PAGE> 27
particular shares of Series A Preferred Stock or Restricted Securities, (a) when
the offer and sale of such securities shall have been effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering such securities, or (b) when, in the reasonable opinion of
counsel for the holder thereof or counsel for the Company, such restrictions are
no longer required in order to insure compliance with the Securities Act.
Whenever such restrictions shall terminate as to any shares of Series A
Preferred Stock or Restricted Securities, the holder thereof shall be entitled
to receive from the Company without expense a new certificate or certificates
representing such securities not bearing the legend set forth in paragraph 7B
hereof.
ARTICLE VIII.
MISCELLANEOUS
8A. Instructions Regarding Dividend Payments. The Company
agrees that, so long as any Purchaser shall hold any Series A Preferred Stock,
it will make payments with respect thereto by wire transfer of immediately
available funds for credit to such Purchaser's account set forth on Schedule I,
or such other account in the United States of America as such Purchaser may
designate in writing, notwithstanding any contrary provision herein or in any
share of Series A Preferred Stock with respect to the place of payment. The
Company agrees to afford the benefits of this paragraph to any transferee of any
Series A Preferred Stock purchased by any Purchaser hereunder.
8B. Expenses. The Company agrees, whether or not the
transactions hereby contemplated shall be consummated, to pay, and save the
Purchasers harmless against liability for the payment of, (i) all taxes
(including any intangible personal property tax, together in each case with
interest and penalties, if any, and also including any filing fees payable to
any governmental authority, and any income tax payable by any Purchaser in
respect of any reimbursement for any such tax or fee) which may be payable in
respect of the execution and delivery of this Agreement or the issuance,
delivery or acquisition (but not the holding, ownership or transfer) of any
Series A Preferred Stock issued under or pursuant to this Agreement or any
Common Stock issuable upon conversion of any such Series A Preferred Stock, (ii)
the reasonable fees and expenses of Dewey Ballantine as Purchasers' special
counsel in connection with this Agreement, any subsequent modification thereof
or consent thereunder (including any proposed modification or consent, whether
or not finalized), (iii) the cost and fees and expenses of any investment banks
and advisers, if any, incurred in connection with transactions related to the
execution of this Agreement and the issuance of the Series A Preferred Stock,
and (iv) the out-of-pocket costs of Crest and Morgan and the cost and expenses,
including reasonable attorney's fees, incurred by the Purchasers in enforcing
any of their rights hereunder, including without limitation costs and expenses
incurred in any bankruptcy case. The obligations of the Company under this
paragraph shall survive transfer by any Purchaser and payment or conversion of
any Series A Preferred Stock and transfer by any Purchaser of any Common Stock
issuable upon the conversion of any shares thereof.
8C. Consent to Amendments. This Agreement may be amended, and
the Company or Orbital, as the case may be, may take any action herein
prohibited, or omit to perform any act herein required to be performed by it, if
the Company or Orbital, as the case may be, shall obtain the written consent to
such amendment, action or omission to act given by the holder or holders of at
least 66-2/3% of the shares of Series A Preferred Stock at the time outstanding,
except that, without the written consent of the holders of at least eighty
percent (80%) of the shares of Series A Preferred Stock at the time outstanding,
no amendment to this Agreement shall affect the time or amount of any required
payments, or adversely affect the conversion rights or preference rights, or
reduce the percentage of the aggregate number of shares of the Series A
Preferred Stock required with respect to any consent. Any consideration given to
any holder to obtain his consent under this Agreement, the Stockholders'
26
<PAGE> 28
Agreement or with respect to Series A Stock shall be given pro rata to all
holders of shares of Series A Preferred Stock whether or not they give consent.
Each holder of any shares of Series A Preferred Stock at the time or thereafter
outstanding (or of shares of Common Stock entitled to any rights hereunder)
shall be bound by any consent authorized by this paragraph, whether or not such
shares of Series A Preferred Stock shall have been marked to indicate such
consent, but any shares of Series A Preferred Stock issued thereafter may bear a
notation referring to any such consent. No course of dealing between the Company
and the holder of any shares of Series A Preferred Stock nor any delay in
exercising any rights hereunder or under any shares of Series A Preferred Stock
shall operate as a waiver of any rights of any holder of such shares of Series A
Preferred Stock. As used herein, the term "this Agreement" and references
thereto shall mean this Agreement as it may from time to time be amended or
supplemented.
8D. Notices to Subsequent Holder. If any shares of Series A
Preferred Stock shall have been transferred to another holder and such holder
shall have designated in writing the address to which communications with
respect to such shares of Series A Preferred Stock shall be mailed, all notices,
certificates, requests, statements and other documents required or permitted to
be delivered to the Purchaser by any provision hereof shall also be delivered to
each such holder.
8E. Survival of Representations, Warranties and Indemnities.
All representations, warranties and indemnities contained herein or made in
writing by the Company or Orbital as indicated on the signature page in
connection herewith shall survive the execution and delivery of this Agreement
and of the Series A Preferred Stock, regardless of any investigation made by any
Purchaser or on such Purchaser's behalf.
8F. Successors and Assigns. Except as otherwise provided
herein, all covenants and agreements in this Agreement contained by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
8G. Notices. All notices and other communications provided for
or given or made hereunder shall be effective upon receipt if delivered by hand
or upon receipt if delivered by first class mail, registered mail, return
receipt requested or overnight courier and, if to a Purchaser, at the address
set forth on Schedule I, if to the Company, at 21700 Atlantic Boulevard, Dulles,
Virginia 20166, Attention: President, and if to Orbital, at 21700 Atlantic
Boulevard, Dulles, Virginia 20166, Attention: Legal Department or to such other
address with respect to any party as such party shall notify the other in
writing.
8H. Accounting Terms. Unless otherwise set forth herein, all
accounting terms and provisions in this Agreement shall be construed to be as
determined in accordance with generally accepted accounting principles in the
United States then in effect.
8I. Satisfaction Requirement. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to the Purchasers, the determination of
such satisfaction shall be made by the Purchasers in their sole and exclusive
reasonable judgment exercised in good faith.
8J. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of New York. This Agreement may not be changed orally, but
(subject to the provisions of paragraph 8C) only by an agreement in writing
signed by the party against whom enforcement is sought.
27
<PAGE> 29
8K. Headings; Table of Contents. The descriptive headings of
the several paragraphs of this Agreement and the table of contents are inserted
for convenience only and do not constitute a part of this Agreement.
8L. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, all of which shall be deemed but one
and the same instrument and each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
8M. Non Business Days. If the date for making any payment or
the last date for performance of any act or the exercising of any right, as
provided in this Agreement, shall not be a business day, such payment may be
made or act performed or right exercised on the next succeeding business day,
with the same force and effect as if done on the nominal date provided in this
Agreement.
8N. Further Assurances. Each of Orbital and the Company shall
from time to time and at all times hereafter make, do, execute or cause or
procure to be made, done and executed such further acts, deeds, conveyances,
consents and assurances, without further consideration, which may reasonably be
required to effect the transactions contemplated by this Agreement.
8O. Orbital Indemnity. (a) Orbital shall indemnify, defend and
hold harmless the Company from and against, and shall reimburse the Company for,
all demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including, without limitation, interest,
penalties, court costs, costs of investigation and reasonable attorneys' fees
and expenses (collectively, "Losses"), asserted against, resulting to, imposed
upon or incurred by the Company directly or indirectly, with respect to (i) any
misrepresentation or breach of warranty by the Company or Orbital, in each case
contained in one or more of paragraphs 5B, 5C, 5E, 5I, 5J, 5K, 5N, 5O, 5P, 5Q,
5S or 8O hereof; (ii) the failure of Orbital to perform any of its obligations
under this Agreement; or (iii) any breach of contract, tort, product liability,
employment practice or other claim arising from or with respect to the business
of the Division or the Company asserted by any employee, creditor, customer,
distributor, vendor, claimant or other party arising out of or with respect to
events occurring or circumstances existing prior to the Closing Date.
(b) If the Company for any reason shall fail to
enforce or seek to enforce its rights described in clause (a) above within
thirty (30) days of being directed to do so by the Directors elected pursuant to
Section 2.1(i) of the Stockholders' Agreement, one or more Purchasers shall have
the right to enforce such rights on behalf of the Company and shall be
indemnified and held harmless by Orbital from and against, and Orbital shall
reimburse any such Purchaser for, all Losses asserted against, resulting to,
imposed upon or incurred by such Purchaser in connection therewith.
(c) No claim shall be made or proceeding instituted
pursuant to this paragraph 8O subsequent to the third anniversary of the Closing
Date; provided, however, that any claim made or proceeding instituted prior to
such date shall continue to the resolution thereof without regard to such
prohibition. Anything to the contrary in this Agreement notwithstanding, Orbital
shall not, except for any amount otherwise payable by Orbital pursuant to the
Procurement Agreement, be required to pay or reimburse the Company for any Loss
in excess of $5.0 million with respect to a breach of paragraph 5I, whether
reimbursement or payment for such Loss is sought pursuant to this paragraph 8O
or otherwise.
28
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
ORBITAL IMAGING CORPORATION
By
----------------------------------------
Title:
PURCHASERS
See signature pages attached hereto.
Acknowledged and Agreed and joined in as if made by Orbital Sciences Corporation
on its own behalf as to itself (where so named) or on behalf of the Company as
to Paragraphs 4F, 4G, 5B, 5C, 5E, 5I, 5J, 5K, 5N, 5O, 5P, 5Q, 5S, 8E, 8N and 8O
this 7th day of May 1997:
ORBITAL SCIENCES CORPORATION
By
---------------------------
Title:
29
<PAGE> 31
SCHEDULE I
As of February 25, 1998
<TABLE>
<CAPTION>
Shares of
Series A
Purchaser Preferred Stock Foreign Person
--------- --------------- --------------
<S> <C> <C>
Crest Funding Partners, L.P. 123,000 No
320 Park Avenue
New York, New York 10022
Crest International Holdings LLC 49,272 No*
320 Park Avenue
New York, New York 10022
Morgan Guaranty Trust Company of 88,250 No
New York, as Trustee of the Commingled
Pension Trust Fund (Multi-Market Special
Investment Fund II) of Morgan Guaranty
Trust Company of New York
522 Fifth Avenue
New York, New York 10036
Morgan Guaranty Trust Company of New 18,000 No
York, as Trustee of the Multi-Market
Special Investment Trust Fund of Morgan
Guaranty Trust Company of New York
522 Fifth Avenue
New York, New York 10036
Morgan Guaranty Trust Company of New 18,750 No
York, as Investment Manager and Agent
for The Alfred P. Sloan Foundation
(Multi-Market Account)
522 Fifth Avenue
New York, New York 10036
Georgica Partners 38,000 No
1114 Avenue of the Americas
New York, New York 10036
</TABLE>
*Voting controlled by U.S. persons. Non-U.S. entity has economic interest
30
<PAGE> 32
<TABLE>
<CAPTION>
Shares of
Series A
Purchaser Preferred Stock Foreign Person
--------- --------------- --------------
<S> <C> <C>
Brown University 5,250 No
c/o Georgica Partners
1114 Avenue of the Americas
New York, New York 10036
Ralco, Inc. 2,000 No.
c/o Georgica Partners
1114 Avenue of the Americas
New York, New York 10036
FTA Media Limited 9,250 No
c/o Georgica Partners
1114 Avenue of the Americas
New York, New York 10036
Georgica Advisors LLC 2,000 No
1114 Avenue of the Americas
New York, New York 10036
The Georgica International Fund 8,000 Yes
c/o Georgica Partners
1114 Avenue of the Americas
New York, New York 10036
Roaring Fork Partners LLC 500 No
c/o Georgica Partners
1114 Avenue of the Americas
New York, New York 10036
PEC Israel Economic Corporation 20,000 Yes
511 Fifth Avenue
New York, New York 10017
KECALP Inc. 21,281 No (subject to Section 3.2 of
225 Liberty Street Stockholders Agreement
South Tower, 23rd Floor
New York, New York 10080-6123
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
Shares of
Series A
Purchaser Preferred Stock Foreign Person
--------- --------------- --------------
<S> <C> <C>
Merrill Lynch KECALP L.P. 1997 120,590 No
225 Liberty Street
South Tower, 23rd Floor
New York, New York 10080-6123
Steven L. Begleiter 250 No
245 Park Avenue, 2nd Floor
New York, New York 10167
Philip E. Berney 350 No
245 Park Avenue, 4th Floor
New York, New York 10167
John A. Bugas 250 No
245 Park Avenue, 3rd Floor
New York, New York 10167
Victor A. Cohn 500 No
245 Park Avenue, 2nd Floor
New York, New York 10167
Yan Erlikh 250 No
245 Park Avenue, 2nd Floor
New York, New York 10167
Ralph Mack 250 No
245 Park Avenue, 4th Floor
New York, New York 10167
Anthony J. Magro 250 No
245 Park Avenue, 3rd Floor
New York, New York 10167
Douglas P.C. Nation 500 No
245 Park Avenue, 2nd Floor
New York, New York 10167
Stephen M. Parish 250 No
245 Park Avenue, 2nd Floor
New York, New York 10167
</TABLE>
32
<PAGE> 34
<TABLE>
<CAPTION>
Shares of
Series A
Purchaser Preferred Stock Foreign Person
--------- --------------- --------------
<S> <C> <C>
David M. Solomon 402 No
245 Park Avenue, 2nd Floor
New York, New York 10167
Export Development Corporation 72,605 Yes
151 O'Connor
Ottawa K1A 1K3
Canada
</TABLE>
33
<PAGE> 1
Exhibit 4.9
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
This Amended and Restated Stockholders Agreement dated
February 25, 1998 (this "Agreement") by and among Orbital Imaging Corporation, a
Delaware corporation (the "Company"), Orbital Sciences Corporation, a Delaware
corporation ("Orbital"), and each of the individuals or entities signatory
hereto (each a "Stockholder" and together the "Stockholders").
W I T N E S S E T H :
WHEREAS, pursuant to the terms and conditions of the Stock
Purchase Agreement dated as of May 7, 1997, as amended by the Amendment No. 1
dated July 3, 1997, by that Amendment No. 2 dated December 29, 1997 and as
amended and restated dated as of February 25, 1998 (the "Amended and Restated
Stock Purchase Agreement") between the Company and the purchasers signatory
thereto (the "Purchasers") and acknowledged and agreed and joined in by Orbital,
the Company has issued and sold, and the Purchasers have severally purchased,
shares of Series A Cumulative Convertible Preferred Stock of the Company (the
"Series A Preferred Stock") in the aggregate amount of 300,100 shares for an
aggregate purchase price of $30,010,000, which shares of Series A Preferred
Stock are convertible into shares of Common Stock of the Company;
WHEREAS, the Company has authorized the issue and sale, under
certain circumstances, of an aggregate of 600,000 shares of Series A Preferred
Stock, which shares, when and if purchased by any Stockholder, shall be subject
to the terms hereof;
WHEREAS, it was a condition precedent to the obligation of the
Purchasers to purchase the Series A Preferred Stock pursuant to the Stock
Purchase Agreement that the parties entered into the Stockholders' Agreement
dated as of May 8, 1997 (the "Original Agreement");
WHEREAS, the Company and the Purchasers amended this
Stockholders' Agreement dated as of July 3, 1997 ("Amendment No. 1") pursuant to
which Export Development Corporation agreed to the terms hereof in connection
with the sale by the Company to Export Development Corporation of 72,605 shares
of Series A Preferred Stock;
WHEREAS, the Company and the Purchasers desire to amend and
restate the Original Agreement, as amended, in its entirety in order to make
certain changes thereto to reflect the terms and conditions of the indenture
(the "Indenture") entered into by the Company and the trustee named therein
dated as the date first written above pursuant to which the Company issued $150
million aggregate principal amount of 11 5/8% Senior Notes due 2005 (the
"Notes").
NOW, THEREFORE, in consideration of the agreement of the
Purchasers to purchase the Series A Preferred Stock and other good and valuable
consideration the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
1.1. Defined Terms. All terms capitalized but not defined
herein shall have the meanings attributable to such terms in the Amended and
Restated Stock Purchase Agreement, including Exhibit A thereto, except where the
context otherwise requires. The following
<PAGE> 2
additional terms when used in this Agreement, including its preamble and
recitals, shall, except where the context otherwise requires, have the following
meanings, such meanings to be equally applicable to the singular and plural
forms thereof:
"Holder" shall mean any holder of Registrable Securities.
"Initiating Holder" shall mean any Holder or Holders who in
the aggregate are Holders of more than 35% of the then issued and outstanding
Registrable Securities.
"License" shall mean any Federal Communications Commission
License or Department of Commerce License relating to the commercial operation
of OrbView-2 and the OrbView Satellites (including the Department of Commerce
License and the Federal Communications Commission License currently owned by
Orbital relating to the operation of OrbView-2) that is material to the business
of the Company.
"Other Demand Holders" shall mean any holders of securities of
the Company having the right, granted hereafter, to demand registration thereof
as described in Section 5.1(c), including the holders of any shares of Series C
Preferred Stock.
"Permitted Transferee" shall mean any "accredited investor" as
defined in Regulation D under the Securities Act other than (i) a Specified
Competitor or (ii) a Foreign Person (unless a Transfer to such Person would not
adversely affect any License then in effect).
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (and any post-effective amendments filed or
required to be filed) and the declaration or ordering of effectiveness of such
registration statement.
"Registrable Securities" shall mean at any time (i) the Common
Stock previously issued or, unless the context otherwise requires, issuable upon
conversion of the Series A Preferred Stock, (ii) any Common Stock issued
subsequent to the conversion of any of the Series A Preferred Stock as a
dividend or other distribution with respect to, or in exchange for or in
replacement of, the Common Stock issued upon such conversion, (iii) any Common
Stock acquired pursuant to exercise of any right described in Article 3 or
Article 4, and (iv) any Common Stock otherwise issued with respect to any
securities described in clauses (i) through (iii), in each case in clauses (i)
through (iv) to the extent held by any Purchaser or such Purchaser's successors
or permitted assigns.
"Registration Expenses" shall mean all expenses incident to
the Company's performance of or compliance with its obligations under Sections
5.1 and 5.2 hereof, including without limitation, all Commission, NASD and stock
exchange or NASDAQ registration and filing fees and expenses, fees and expenses
of compliance with applicable state securities or "blue sky" laws (including,
without limitation, reasonable fees and disbursements of counsel for the
underwriters in connection with "blue sky" qualifications of the Registrable
Securities), printing expenses, messenger and delivery expenses, the fees and
expenses incurred in connection with the listing of the securities to be
registered in an initial public offering on each securities exchange or national
market system on which such securities are to be so listed and, following such
initial public offering, the fees and expenses incurred in connection with the
listing of such securities to be registered on each securities exchange or
national market system on which such securities are
<PAGE> 3
listed, fees and disbursements of counsel for the Company and all independent
certified public accountants (including the expenses of any annual audit and
"cold comfort" letters required by or incident to such performance and
compliance), the fees and disbursements of underwriters customarily paid by
issuers or sellers of securities (including the fees and expenses of any
"qualified independent underwriter" required by the NASD), the reasonable fees
of one counsel retained in connection with each such registration by the holders
of a majority of the Registrable Securities being registered, the reasonable
fees and expenses of any special experts retained by the Company in connection
with such registration, and fees and expenses of other Persons retained by the
Company (but not including any underwriting discounts or commission or transfer
taxes, if any, attributable to the sale of Registrable Securities by holders of
such Registrable Securities other than the Company).
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities.
"Specified Competitor" shall mean any of the Persons listed on
Schedule I hereto, as such Schedule may be amended or supplemented pursuant to
the following sentence; provided, however, that the aggregate number of such
Persons shall at no time exceed twenty-five (25). The Company may delete one or
more names on Schedule I and substitute another name therefor no more frequently
than annually, provided that the Company shall have given notice of such
deletion and substitution to each Stockholder no less than thirty (30) days
prior thereto; provided, further, however, that in addition the Company may make
such a deletion and substitution no more than once each year in the event that
one or more Persons shall have become a competitor by reason of merger or
acquisition.
"Voting Stock" shall mean, with respect to any corporation,
capital stock of any class or classes of such corporation the holders of which
are ordinarily, in the absence of contingencies, entitled to elect a majority of
the directors of such corporation.
ARTICLE 2.
VOTING AGREEMENT
2.1. Board of Directors of the Company. The Company, Orbital
and the Stockholders hereby agree that, subject to the terms and conditions of
this Agreement and the voting provisions applicable to the Series A Preferred
Stock set forth in the Company's Second Amended and Restated Certificate of
Incorporation, the Board of Directors shall consist of up to five members (or up
to seven members during an Election Event as defined in the Second Amended and
Restated Certificate of Incorporation) and (i) holders of a majority of the
shares of Series A Preferred Stock outstanding shall have the right to nominate
two persons (and to designate either or both of such persons to be subsequently
removed in accordance with the By-Laws of the Company and Section 2.2) as
Directors of the Company (the "Series A Directors"), (ii) holders of a majority
of the shares of Common Stock outstanding shall have the right to nominate two
persons (and to designate either or both of such persons to be subsequently
removed in accordance with the By-Laws of the Company and Section 2.2) as
Directors of the Company, and (iii) the holders of a majority of the sum of (A)
the shares of Common Stock outstanding and (B) the shares of Series A Preferred
Stock outstanding voting on an as-converted basis (i.e., as if such shares of
Series A Preferred Stock had been converted into shares of Common Stock at the
then current Conversion Price) shall have the right to nominate one person (and
to designate such person to be subsequently removed in accordance with the
By-Laws of the Company and Section
<PAGE> 4
2.2) as a Director of the Company; provided, however, that the nominee described
in clause (iii) above shall not be an Affiliate of Orbital or of any
Stockholder; provided, further, however, that so long as Orbital shall hold,
beneficially or of record, more than fifty percent (50%) of the Voting Stock of
the Company, Orbital shall have the right to designate the nominee described in
clause (iii) above with the consent of one of the Directors described in clause
(i) above, such consent not to be unreasonably withheld; provided, further,
however, that so long as Orbital shall hold twenty percent (20%) or more of the
Voting Stock, Orbital shall have the right to designate one of the nominees
described in clause (ii) above.
2.2. Covenant to Vote. Each of the Company, Orbital and each
of the Stockholders shall appear in person or by proxy at any annual or special
meeting of stockholders for the purpose of obtaining a quorum and shall vote or
cause the vote of the shares of Common Stock, Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock owned by such Stockholder or by any
Affiliate of Orbital or such Stockholder, either in person or by proxy, at any
annual or special meeting of stockholders of the Company called for the purpose
of voting on the election or removal of Directors, or by consensual action of
stockholders with respect to the election or removal of Directors, in favor of
the election (or removal) of the Directors nominated in accordance with Section
2.1 and for the replacement of the Directors in accordance with Section 2.3. In
addition, each of Orbital and the Stockholders shall appear in person or by
proxy at any annual or special meeting of stockholders for the purpose of
obtaining a quorum and shall vote or cause the vote of the shares of Common
Stock, Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock owned by such Stockholder or any Affiliate of Orbital or such Stockholder
upon any matter submitted to a vote of the stockholders of the Company in a
manner so as to be consistent and not in conflict with, and to implement, the
terms of this Agreement and of clause (v) of Article Four of the Second Amended
and Restated Certificate of Incorporation.
2.3. Vacancies. If any Director is unable to serve or, once
having commenced to serve, is removed or withdraws from the Board of Directors
of the Company, the replacement of such Director on the Board of Directors of
the Company will be nominated in accordance with the procedures described in
Section 2.1.
2.4. No Voting or Conflicting Agreements. Each of the Company,
Orbital and each of the Stockholders agrees that it will not and will not permit
any Affiliate to grant any proxy or enter into or agree to be bound by any
voting trust with respect to its shares of Common Stock, Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock or to enter into any
stockholder agreements or arrangements of any kind with any person with respect
to its shares of Common Stock, Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock in any such case in a manner that is
inconsistent with the provisions of this Agreement.
2.5. Special Board Approvals. The Company shall not, and shall
cause each of its Subsidiaries not to, without the approval of a majority of a
quorum of the Board of Directors, which majority shall include at least one
Series A Director and, unless there shall have occurred and be continuing an
Election Event, at least one Director described in Section 2.1(ii):
(a) approve any merger, consolidation, liquidation or
sale of all or substantially all of its assets;
(b) enter into any line of business not significantly
related to its currently existing or contemplated lines of business;
<PAGE> 5
(c) approve any transaction with Orbital or any of its
Affiliates, other than (i) transactions between the Company and MacDonald,
Dettwiler & Associates ("MDA") pursuant to which MDA provides ground stations to
the Company or its distributors in the normal course of business and on terms at
least as favorable as would be obtained from a third party in an arm's length
transaction, (ii) transactions pursuant to agreements existing on the Closing
Date with Earth Observation Sciences Ltd. relating to OrbNet software, and (iii)
transactions under this Agreement (except as otherwise set forth in this Section
2.5), the Amended and Restated Stock Purchase Agreement, the Procurement
Agreement, the Services Agreement or the License Agreement (collectively, the
"clause (c)(iii) agreements"), or the 1996 Orbital Imaging Corporation Stock
Option Plan, the Orbital Sciences Corporation 401(k) plan, the Orbital benefit
plans in which the Company's employees participate pursuant to the Services
Agreement, in each case as in effect on the Closing Date and including any
amendments, modifications or supplements thereto, subject to (d) below;
(d) approve any modification, supplement or amendment
of any of the clause (c)(iii) agreements (other than the instrument modification
contemplated by Article XI of the Procurement Agreement) that would materially
delay the launch, or degrade the performance, of a satellite or increase the
cost to the Company by more than $1,000,000 (reduced by the cost of any such
amendments subsequently ratified by the Directors in accordance with Section
2.5);
(e) resolve any material dispute between Orbital or any
of its Affiliates, on the one hand, and the Company, on the other hand, with
respect to any clause (c)(iii) agreement or any other material agreement;
(f) issue or commit to issue equity securities or
securities convertible into or exchangeable or exercisable for equity
securities, including any options, warrants or rights to purchase; provided,
however, that no Series A Director shall vote against an Additional Financing
having terms no more favorable to the purchaser thereof than the terms of the
Series A Preferred Stock;
(g) incur indebtedness for borrowed money or any
capital lease in excess of $500,000 for a single transaction or series of
related transactions;
(h) select, approve or remove any officer;
(i) approve compensation to any officer;
(j) approve the annual operating financial plan and
budget or any material deviation from either;
(k) declare any dividend (other than a required
dividend with respect to the Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock) or authorize any purchase, repurchase or optional
redemption of capital stock;
(l) change the independent accountants;
(m) approve any contract involving liabilities or
obligations, whether payment or performance, including the acquisition of any
capital stock or assets of any other Person, in excess of $500,000; or
<PAGE> 6
(n) file a voluntary petition seeking liquidation,
reorganization, arrangement or readjustment of its debts, make an assignment for
the benefit of creditors, permit an involuntary petition seeking liquidation,
reorganization, arrangement or readjustment of its debts or seeking appointment
of a receiver to remain unchallenged or otherwise seek or permit remedies for
insolvency.
2.6. Actions Consistent with Agreement. The Company
shall not take any action inconsistent with the provisions of this Agreement.
2.7. Voting of Series A Preferred Stock by Orbital. If Orbital
or one or more of its Affiliates shall hold, beneficially or of record, shares
of Series A Preferred Stock at the time of any vote of holders of Series A
Preferred Stock, Orbital shall vote or cause to be voted such shares of Series A
Preferred Stock or Share Equivalents for and against any proposal in the same
proportion as the shares of Series A Preferred Stock or Share Equivalents held
by the Stockholders (other than Orbital or any of its Affiliates) are voted for
and against such proposal.
2.8. Expiration of Rights. Notwithstanding any other provision
of this Agreement, the parties hereto hereby agree that the rights granted
pursuant to this Article 2 shall expire and be of no further force and effect
(i) as of the date on which there shall be no Series A Preferred Stock
outstanding or (ii) at the option of the holders of a majority of the shares of
Series A Stock outstanding, in connection with any initial public offering of
Common Stock registered under the Securities Act.
ARTICLE 3.
RESTRICTIONS ON TRANSFERS BY THE STOCKHOLDERS
3.1. Restrictions on Transfers Generally. Subject to the
provisions of Section 3.9 hereof, each Stockholder hereby agrees that such
Stockholder shall not, and shall not permit any Affiliate to, directly or
indirectly, transfer, sell or otherwise dispose of any shares of Series A
Preferred Stock or Common Stock, other than (i) pursuant to an effective
registration statement under the Securities Act or (ii) in compliance with
Article VII of the Amended and Restated Stock Purchase Agreement; provided,
however, that any transfer, sale or other disposition pursuant to clause (ii)
above shall be to a Permitted Transferee only and such Permitted Transferee
shall agree to be bound by the terms hereof and be deemed to be a Stockholder
under this Agreement. Subject to the provisions of Section 3.9 hereof, each
party hereto agrees not to pledge, mortgage, hypothecate or otherwise encumber
any shares of Series A Preferred Stock or Common Stock.
3.2. Orbital Right of First Offer. (a) Prior to offering or
soliciting any offers, or accepting any unsolicited offers, with respect to the
disposition of any shares of Series A Preferred Stock or Common Stock (other
than (i) to any Affiliate; (ii) as required by law or as required by the
partnership agreement, to any current or former (in circumstances involving
dissolution or liquidation of such Stockholder) limited or general partner of
such Stockholder, in the case of any Stockholder that is a partnership; (iii) as
required by law or as required by the trust agreement, to any trust beneficiary,
in the case of any Stockholder that is a trust; (iv) as required by law or as
required by the limited liability operating agreement, to any member in the case
of any Stockholder that is a limited liability company; (v) to any transferee
who acquires substantially all of the assets of such Stockholder; or (vi) in the
case of KECALP Inc., to one or more of: (a) Merrill Lynch KECALP L.P. 1997, a
Merrill Lynch employee limited partnership ("KECALP L.P."); or (b) one or more
offshore funds (collectively, the "ML Offshore Funds") that
<PAGE> 7
are established for foreign employees of Merrill Lynch for the purpose of
co-investing with KECALP L.P., but in the case of the ML Offshore Funds in no
event will such entities hold more than 5% of the fully diluted capital stock of
the Company after giving effect to the potential conversion rights of the
holders of the Series A Preferred Stock and the Series C Preferred Stock; or
other than in connection with a transaction described in Section 3.4 or Section
3.5), a Stockholder (the "Selling Holder") shall give written notice to Orbital
of such proposed transfer, together with such additional information as is
necessary, or reasonably requested by Orbital, to evaluate such proposed
transfer (the "First Offer Notice"). The First Offer Notice shall constitute an
invitation to Orbital to offer to purchase or otherwise acquire all, but not
less than all, of the shares of Series A Preferred Stock or Common Stock that
are the subject of such First Offer Notice.
(b) Upon receipt of a First Offer Notice pursuant to
Section 3.2(a) above, Orbital shall have a period of ten (10) business days (the
"Offer Period") within which to submit a proposal (the "Proposal") to the
Selling Shareholder to purchase all, but not less than all, of the shares of
Series A Preferred Stock or Common Stock that are the subject of such First
Offer Notice. The Selling Shareholder shall then have a period of thirty (30)
days from the end of the Offer Period within which to accept or reject the
Proposal.
(c) If the Selling Shareholder accepts the Proposal,
Orbital and the Selling Shareholder shall each use commercially reasonable
efforts to consummate the transaction in accordance with the Proposal as
promptly as practicable. If such transaction is not consummated through no fault
of the Selling Shareholder within thirty (30) days of the acceptance of the
Proposal, the Selling Shareholder shall, for a period of 180 days thereafter, be
free to sell, transfer or otherwise dispose of all, but not less than all, of
the shares of Series A Preferred Stock or Common Stock that are the subject of
such First Offer Notice in any manner and to any Person. After such 180 day
period, the Selling Shareholder shall not sell, transfer or otherwise dispose of
such shares without again complying with the provisions of this Section 3.2.
(d) In the event the Selling Shareholder in its sole
discretion rejects the Proposal, the Selling Shareholder may, within the ninety
(90) days after the expiration of the Offer Period, sell, transfer or otherwise
dispose of all, but not less than all, of the shares of Series A Preferred Stock
or Common Stock that are the subject of such First Offer Notice on terms
(including price and other terms and conditions) that (considered as a whole)
are in the Selling Shareholder's good faith reasonable judgment more favorable
to the Selling Shareholder than the terms contained in the Proposal. After such
ninety (90) day period, the Selling Shareholder shall not sell, transfer or
otherwise dispose of such shares without again complying with the provisions of
this Section 3.2.
(e) If Orbital fails to submit a Proposal during the
Offer Period, the Selling Shareholder shall be free to sell, transfer or
otherwise dispose of all, but not less than all, of the shares of Series A
Preferred Stock or Common Stock that are the subject of such First Offer Notice
in any manner and to any person for a period of ninety (90) days following the
expiration of the Offer Period. After such ninety (90) day period, the Selling
Shareholder shall not sell, transfer or otherwise dispose of such shares without
again complying with the provisions of this Section 3.2.
3.3. Stockholders' Right of First Offer. (a) Prior to offering
or soliciting any offers, or accepting any unsolicited offers, with respect to
the disposition of any shares of
<PAGE> 8
Common Stock or Series C Preferred Stock (other than to any Affiliate or other
than in connection with a transaction described in Section 3.5), Orbital shall
give written notice to each Stockholder of such proposed transfer, together with
such additional information as is necessary, or reasonably requested by any
Stockholder, to evaluate such proposed transfer (the "First Offer Notice"). The
First Offer Notice shall constitute an invitation to each Stockholder to offer
to purchase or otherwise acquire its pro rata portion of all, but not less than
all, of the shares of Common Stock or Series C Preferred Stock that are the
subject of such First Offer Notice.
(b) Upon receipt of a First Offer Notice pursuant to
Section 3.3(a) above, each Stockholder shall have a period of ten (10) business
days (the "Offer Period") within which to submit a proposal (each, a "Proposal")
to Orbital to purchase all, but not less than all, of the shares of its pro rata
portion of Common Stock or Series C Preferred Stock that are the subject of such
First Offer Notice. Orbital shall then have a period of thirty (30) days from
the end of the Offer Period within which to accept or reject such Proposal.
(c) If Orbital accepts one or more Proposals, Orbital
and the relevant Stockholder shall each use commercially reasonable efforts to
consummate the transaction in accordance with such Proposal as promptly as
practicable. If any such transaction is not consummated through no fault of
Orbital within thirty (30) days of the acceptance of the Proposal, Orbital
shall, for a period of 180 days thereafter, be free to sell, transfer or
otherwise dispose of all, but not less than all, of the shares of Common Stock
or Series C Preferred Stock that are the subject of such accepted Proposal in
any manner and to any Person. After such 180 day period, Orbital shall not sell,
transfer or otherwise dispose of such shares without again complying with the
provisions of this Section 3.3.
(d) Subject to the provisions of Section 3.3(f), in the
event Orbital in its sole discretion rejects one or more Proposals, Orbital may,
within the ninety (90) days after the expiration of the Offer Period, sell,
transfer or otherwise dispose of all, but not less than all, of the shares of
Common Stock or Series C Preferred Stock that are the subject of such rejected
Proposal or Proposals on terms (including price and other terms and conditions)
that (considered as a whole) are in Orbital's good faith reasonable judgment
more favorable to Orbital than the terms contained in such rejected Proposal or
Proposals. After such ninety (90) day period, Orbital shall not sell, transfer
or otherwise dispose of such shares without again complying with the provisions
of this Section 3.3.
(e) Subject to the provisions of Section 3.3(f), if any
Stockholder fails to submit a Proposal with respect to its pro rata portion
during the Offer Period, Orbital shall be free to sell, transfer or otherwise
dispose of all, but not less than all, of the shares of such pro rata portion of
Common Stock or Series C Preferred Stock that are the subject of the First Offer
Notice in any manner and to any person for a period of ninety (90) days
following the expiration of the Offer Period. After such ninety (90) day period,
Orbital shall not sell, transfer or otherwise dispose of such shares without
again complying with the provisions of this Section 3.3.
(f) In the event Orbital rejects one or more Proposals
or any Stockholder fails to submit a Proposal with respect to its pro rata
portion and Orbital has accepted one or more Proposals, Orbital shall notify
each Stockholder whose Proposal has been accepted of any shares of Common Stock
or Series C Preferred Stock remaining available for purchase, and each such
Stockholder shall have the right to acquire a portion of such available shares
pro rata to its participation in the accepted Proposals on the terms set forth
in its Proposal.
<PAGE> 9
3.4. Tag Along Right. If Orbital proposes to transfer any
shares of Common Stock or Series C Preferred Stock to any Person or Persons
(other than an Affiliate or other than in connection with a transfer described
in Section 3.3 or Section 3.5), Orbital shall notify each Stockholder in writing
(the "Tag Along Notice") of such proposed transfer and its terms and conditions.
Within twenty (20) days of receipt of a Tag Along Notice, each Stockholder shall
notify Orbital if it elects to participate in such transfer. Each Stockholder
that so notifies Orbital shall be obligated to sell, at the same price and on
the same terms as Orbital, such number of Share Equivalents as is equal to the
number of shares of Common Stock or Common Stock equivalents the purchaser
proposes to purchase, multiplied by a fraction, the numerator of which shall be
the number of Share Equivalents held by such Stockholder and the denominator of
which shall be the aggregate number of shares of Common Stock or Common Stock
equivalents held by Orbital and each Stockholder exercising its rights under
this Section 3.4.
3.5. Drag Along Right. (a) If at any time on or after the
fifth anniversary of the Closing Date the holders of at least seventy percent
(70%) of the Common Stock on a fully-diluted basis (the "Proposing
Shareholders") propose to transfer in a bona fide arm's length sale seventy
percent (70%) or more of the Common Stock or Common Stock equivalents on a fully
diluted basis at a price per share equal to or greater than the greater of the
Liquidation Amount or the Threshold Price corresponding to a Share Equivalent to
any Person or Persons who are not Affiliates of the Proposing Shareholders (the
"Proposed Transferee"), the Proposing Shareholders shall have the right (the
"Drag Along Right"), subject to applicable law and compliance with any other
restrictions applicable to such transfer, and subject to conversion of all but
not less than all shares of Series C Preferred Stock, if any, into Common Stock
and the purchase of such Common Stock in connection with consummation of the
purchase of each Stockholder's Share Equivalents, to require all (but not less
than all) of the Stockholders to convert all shares of Series A Preferred Stock
held by each such Stockholder and to sell, pursuant to Section 3.5(b), to the
Proposed Transferee all (but not less than all) of the shares of Common Stock
then held by such Stockholder. Each Proposing Shareholder shall, as a condition
of exercise of such Drag Along Right, agree to take all steps necessary to
enable such Stockholder to comply with the provisions of this Section 3.5.
(b) To exercise a Drag-Along Right, the Proposing
Shareholders shall give each Stockholder a written notice (the "Drag Along
Notice") containing (a) the aggregate number of shares of Common Stock or Common
Stock equivalents that the Proposed Transferee proposes to acquire from the
Proposing Shareholders and the Stockholders, (b) the name and address of the
Proposed Transferee and (c) the proposed purchase price, terms of payment and
other material terms and conditions of the Proposed Transferee's offer. Each
Stockholder shall thereafter be obligated, subject to applicable law and any
other applicable restrictions, to convert all shares of Series A Preferred Stock
held by such Stockholder and to sell all (but not less than all) of its shares
of Common Stock as provided in such Drag Along Notice, provided that the sale to
the Proposed Transferee is consummated within thirty (30) days of delivery of
the Drag Along Notice; provided, however, that such Stockholder shall agree to
enter into a purchase agreement in form and substance approved by the Proposing
Shareholders to the extent such agreement shall contain customary
representations as to ownership of the shares to be purchased and the absence of
liens thereon. If the sale is not consummated within such thirty (30) day
period, then each Stockholder (i) shall no longer be obligated to sell such
Stockholder's shares of Common Stock pursuant to such Drag Along Right but shall
remain subject to the provisions of this Section 3.5 with respect to any
subsequent proposed transfer described in this Section 3.5 and (ii) shall be
entitled to nullify the conversion of such Stockholder's shares of Series A
Preferred Stock and to
<PAGE> 10
continue to hold shares of Series A Preferred Stock as if such Drag Along Notice
had never been received.
3.6. Restrictive Legends. Each share of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Common Stock shall
bear a legend in substantially the following form:
The transfer of the securities represented by this certificate
is subject to the restrictions, including restrictions on
ownership by foreign persons, set forth in that certain
Stockholders Agreement, dated May 8, 1997 among Orbital
Imaging Corporation, Orbital Sciences Corporation and certain
Stockholders, copies of which are available for inspection at
the offices of Orbital Imaging Corporation, and such
securities may be transferred only in compliance with the
terms and conditions of said Stockholders Agreement.
3.7. Transferees Subject to Agreement. Any transferee of any
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Common Stock shall, as a condition of the consummation of such
transfer, agree to be subject to the terms of Article 2 of this Agreement.
3.8. Foreign Persons. The Company shall not register the
transfer of any shares of capital stock of the Company to a Person who has not
given a representation to the effect that such Person is not a Foreign Person
(other than (a) any Person identified as a Foreign Person on Schedule I of the
Amended and Restated Stock Purchase Agreement, (b) a transfer by KECALP Inc. in
accordance with Section 3.2(a)(vi) hereof or (c) a transfer to a Foreign Person
that is a Permitted Transferee, to the extent that the percentage of the Common
Stock on a fully diluted basis held by such Person does not exceed the lesser of
(i) 5% and (ii) the percentage that would adversely affect any License then in
effect).
3.9. Expiration of Restrictions. The parties hereto hereby
agree that the restrictions set forth in Article 3 hereof shall expire and be of
no further force and effect as of the date on which the Company shall consummate
a public offering of Common Stock registered under the Securities Act.
ARTICLE 4.
RIGHT TO ACQUIRE SECURITIES
4.1. Right to Acquire Securities. If at any time the Company
proposes to issue in any non-public offering equity securities of any kind (the
term "equity securities" including for these purposes any warrants, options or
other rights to acquire equity securities and debt securities convertible into
equity securities but excluding the issuance by the Company of the Warrants to
purchase shares of Common Stock pursuant to that certain Warrant Agreement dated
as of , 1998 between the Corporation and the Initial Purchasers named
therein) of the Company (except for issuances pursuant to the terms of any stock
option or other incentive plan duly approved by the Board of Directors,
issuances of Series B Preferred Stock or Series C Preferred Stock or additional
shares of Series A Preferred Stock after the Closing Date or issuances in
connection with (i) a conversion or exchange of any outstanding securities, (ii)
a stock dividend, (iii) an acquisition, (iv) a merger, amalgamation,
reclassification or other reorganization, or (v)
<PAGE> 11
issuances having a value of less than $500,000 in any single transaction and not
more than $1,500,000 in the aggregate, where the purchase price of a Common
Stock equivalent is equal to or greater than the then current Conversion Price
of the Series A Preferred Stock), then, as to each Stockholder at such time and
as to Orbital, the Company shall:
(a) give written notice setting forth in reasonable
detail (i) the designation and all of the terms and provisions of the equity
securities proposed to be issued (the "Proposed Securities"), including, where
applicable, the voting powers, preferences and relative participating, optional
or other special rights, and the qualification, limitations or restrictions
thereof and interest or dividend rate and maturity; (ii) the price and other
terms of the proposed sale of such securities; (iii) the amount of such
securities proposed to be issued; and (iv) such other information as may be
reasonably required or requested by any Stockholder or Orbital in order to
evaluate the proposed issuance; and
(b) offer to issue to each such Stockholder and to
Orbital a portion of the Proposed Securities equal to a percentage determined by
dividing (i) the number of shares of (A) Share Equivalents held by such
Stockholder or (B) Common Stock or Common Stock equivalents held by Orbital by
(ii) the total number of shares of Common Stock on a fully diluted basis.
Each such Stockholder that wishes to exercise its purchase
rights hereunder or Orbital shall deliver a written notice to that effect to the
Company within fifteen (15) days after its receipt of the notice specified in
Section 4.1(a) from the Company.
Upon the expiration of the offering period described above,
the Company will be free to sell Proposed Securities that the Stockholders or
Orbital have not elected to purchase during the ninety (90) days following such
expiration on terms and conditions (considered as a whole) no more favorable to
the purchasers thereof than those offered to such Stockholders and Orbital. Any
Proposed Securities offered or sold by the Company after such 90-day period must
be re-offered to the Stockholders and Orbital pursuant to this Section 4.1. The
election by any Stockholder or Orbital not to exercise its subscription rights
under this Section 4.1 in any one instance shall not affect its right (other
than in respect of a reduction in its percentage holdings) as to any subsequent
proposed issuance. Any sale of such securities by the Company without first
giving the Stockholders and Orbital the rights described in this Section 4.1
shall be void and of no force and effect, and the Company shall cause any
correction required to be effected.
4.2. Expiration of Right. The parties hereto agree that the
rights set forth in Article 4 hereof shall expire and be of no further force and
effect as of the date on which the Company shall consummate a public offering of
Common Stock registered under the Securities Act.
ARTICLE 5.
REGISTRATION RIGHTS
5.1. Demand Registration.
(a) Request for Registration. If the Company shall
receive from an Initiating Holder, at any time (i) after 180 days after an
initial public offering of Common Stock registered under the Securities Act, or
(ii) after June 30, 2002 if the Company has not
<PAGE> 12
consummated an initial public offering of Common Stock registered under the
Securities Act or has not merged with or into a public company by such date, a
written request that the Company effect any registration with respect to all or
a part of the Registrable Securities, the Company will:
(A) promptly give written notice of the
proposed registration to all other Holders of Registrable
Securities; and
(B) as soon as practicable, use its best
efforts to effect a registration statement, in accordance with
Section 5.4, as would permit or facilitate the sale and
distribution of all or such portion of such Registrable
Securities as are specified in such request in accordance with
such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by
the Company within 10 business days after written notice from
the Company is given under Section 5.1(a)(A) above; provided,
however, that the Company shall not be obligated to effect, or
take any action to effect, any such registration pursuant to
this Section 5.1(a);
(x) if the Company shall
furnish to Holders requesting the filing of a registration
statement pursuant to this Section 5.1(a) a certificate signed
by the President or Chief Executive Officer of the Company to
the effect that, in the good faith judgment of the Board of
Directors, the filing, the offering or the disclosure required
thereby would adversely affect a pending or contemplated
acquisition, financing or other material transaction of the
Company and it is therefore in the best interests of the
Company to defer the filing of such registration statement,
then the Company shall have the right to defer such filing for
a period of not more than 90 days after the date of furnishing
such certificate; provided, however, that the Company may not
exercise such right more than once in any twelve (12) month
period;
(y) if the Registrable
Securities requested by all Holders to be registered pursuant
to such request do not (I) represent at least 10% of the
Registrable Securities or (II) have an anticipated aggregate
public offering price (before any underwriting discounts and
commissions) of at least $5,000,000; or
(z) at any time subsequent to
the third such registration made pursuant to this Section
5.1(a) which shall not have been interfered with by any order
or requirement of the Commission or any other governmental
agency or any court.
<PAGE> 13
The registration statement filed pursuant to the request of
the Initiating Holders may, subject to the provisions of Section 5.1(b) below,
include other securities of the Company which are held by Persons who, by virtue
of agreements with the Company, are entitled to include their securities in any
such registration, but the right of such Persons to include any of their
securities in any such registration shall be subject to the limitations set
forth in Section 5.1(b) below.
Holders holding a majority of the Registrable Securities
requested to be registered may, at any time prior to the effective date of the
registration statement relating to such registration, revoke such request,
without liability to the Company or any of the other Holders or the Other
Shareholders (as defined below), by providing a written notice to the Company
revoking such request.
(a) Underwriting. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting (which underwriter shall be selected by such Holders and reasonably
acceptable to the Company), they shall so advise the Company as a part of their
request made pursuant to Section 5.1(a).
If holders of Common Stock other than Registrable Securities
who are entitled, by virtue of agreements with the Company or otherwise, to have
Common Stock included in such a registration (the "Other Shareholders") request
such inclusion, the Initiating Holders shall offer to include the securities of
such Other Shareholders in the underwriting and may condition such offer on the
acceptance of such Other Shareholders of the further applicable provisions of
this Article 5. The Holders whose shares are to be included in such registration
and the Company shall (together with all Other Shareholders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by the Initiating
Holders and reasonably acceptable to the Company. Notwithstanding any other
provision of this Section 5.1, if the representative advises (i) the Holders or
the Company in writing that marketing factors require a limitation on the number
of shares to be underwritten or (ii) the Holders or the Company in writing that
the inclusion of shares held by officers and directors of the Company in the
offering could, in the representative's best judgment, materially reduce the
offering price per share, then, in the case of the preceding clause (i), the
Common Stock held by Holders and Other Shareholders shall be excluded from such
underwriting in accordance with the immediately succeeding sentence to the
extent so required by such limitations and, in the case of the preceding clause
(ii), the Common Stock held by officers and directors of the Company shall be
excluded from such underwriting to the extent advised by the representative. In
connection with any exclusion pursuant to clause (i) above, the Common Stock of
all Other Shareholders (including Orbital and its Affiliates, except in its
capacity as an Other Demand Holder by virtue of its being a holder of Series C
Preferred Stock) other than Holders and Other Demand Holders will be excluded
first; if, after the exclusion of such shares, further reductions are required
to meet the limitation on the number of shares to be underwritten as advised by
the representative, the number of shares that may be included in the
underwriting by each Holder and each Other Demand Holder requesting inclusion in
the registration shall be reduced on a pro rata basis (based on the number of
Share Equivalents or Common Stock equivalents held at such time by the
respective Holders and Other Demand Holders, as the case may be, requesting
inclusion in such registration) by such minimum number of shares as is necessary
to comply with such limitation. If any Other Shareholder who has requested
inclusion in such registration as provided above disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the
<PAGE> 14
underwriter and the Initiating Holders. The securities so withdrawn shall also
be withdrawn from registration. If the underwriter has not limited the number of
Registrable Securities or other securities to be underwritten, the Company may
include its securities for its own account in such registration if the
representative so agrees and if the number of Registrable Securities and other
securities which would otherwise have been included in such registration and
underwriting will not thereby be limited. Any Registrable Securities or other
securities excluded or withdrawn from such underwriting shall not be included in
such registration.
(b) The Company shall not grant any registration rights
inconsistent with the provisions of this Section 5.1, and in granting any demand
registration rights hereafter shall provide that the Holders shall have the
right to notice of the exercise of any such demand registration right and to
participate in such registration on a pro rata basis (based on the number of
Share Equivalents or Common Stock equivalents, as the case may be, held at such
time by the respective Holders and Other Demand Holders requesting inclusion in
such registration).
5.2. Piggyback Registration.
(a) If, other than in connection with a registration
described in Section 5.1 or the registration of Common Stock incidental to the
registration of convertible securities, the Company shall determine to register
any of its Common Stock either for its own account or for the account of a
holder or holders of Common Stock (other than a registration on Form S-8 (or
similar or successor form) or a registration on Form S-4 (or similar or
successor form), or a registration on any registration form which does not
permit secondary sales or does not include substantially the same information as
would be required to be included in a registration statement covering the sale
of Registrable Securities), the Company will:
(i) promptly give to each of the Holders a
written notice thereof (which shall include a list of the
jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable blue sky or other
state securities laws); and
(ii) include in such registration (and any
related qualification under blue sky laws or other
compliance), and in any underwriting involved therein, all the
Registrable Securities specified in a written request or
requests made by the Holders within fifteen (15) days after
receipt of the written notice from the Company described in
clause 5.2(a)(i) above, except as set forth in Section 5.2(b)
below. Such written request may specify all or a part of the
Holders' Registrable Securities.
(b) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting (which underwriter shall be selected by the Company, in its sole
discretion), the Company shall so advise each of the Holders as a part of the
written notice given pursuant to Section 5.2(a)(i). In such event, the right of
each of the Holders to registration pursuant to this Section 5.2 shall be
conditioned upon such Holders' participation in such underwriting and the
inclusion of such Holders' Registrable Securities in the underwriting to the
extent provided herein. The Holders whose shares are to be included in such
registration shall (together with the Company and the Other Shareholders
distributing their Common Stock through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for underwriting by the
<PAGE> 15
Company. Notwithstanding any other provision of this Section 5.2, if the
representative advises (i) the Holders or the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten or (ii)
the Holders or the Company in writing that the inclusion of shares held by the
officers and directors of the Company in the offering could, in the
representative's best judgment, materially reduce the offering price per share,
then, in the case of the preceding clause (i), the Common Stock held by Orbital
and its Affiliates (other than in its capacity as an Other Demand Holder by
virtue of its being a holder of Series C Preferred Stock) and all Other
Shareholders (other than any Other Demand Holder) shall be excluded from such
underwriting to the extent so required by such limitations and, in the case of
the preceding clause (ii), the Common Stock held by officers and directors of
the Company shall be excluded from such underwriting to the extent so advised by
the representative. If, after exclusion of such shares, further reductions are
required to meet the limitation on the number of shares to be underwritten as
advised by the representative, the number of shares that may be included in the
underwriting by each Holder and each Other Demand Holder requesting inclusion in
such registration shall be reduced, on a pro rata basis (based on the number of
Share Equivalents or Common Stock equivalents held at such time by the
respective Holders and Other Demand Holders, as the case may be, requesting
inclusion in such registration), by such minimum number of shares as is
necessary to comply with such limitation (it being understood that the foregoing
shall not be a limitation on the number of shares of Common Stock to be
registered by the Company). If any of the Holders or any officer, director or
Other Shareholder disapproves of the terms of any such underwriting, he may
elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall not be included in such registration.
(b) Number. Each of the Holders shall be entitled to
have its shares included in an unlimited number of registrations pursuant to
this Section 5.2.
5.3. Expenses of Registration. Upon the exercise of
registration rights set forth in this Article 5, the Company shall pay all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to this Article 5; provided, however, that
such expenses shall not include Selling Expenses, which shall be borne by the
holders of the securities so registered pro rata on the basis of the number of
their shares so registered.
5.4. Registration Procedures. In the case of each registration
effected by the Company pursuant to this Article 5, the Company will keep the
Holders requesting inclusion in such registration advised in writing as to the
initiation of each registration and as to the completion thereof. In connection
with any offering of Registrable Securities registered pursuant to Section 5.1
or 5.2 of this Article 5, at its expense, the Company shall:
(i) prepare and file with the Commission, as
promptly as practical, after receipt of a request for
registration pursuant to this Article 5, a registration
statement on any form for which the Company then qualifies,
and which form shall be available for the sale of the
Registrable Securities in accordance with the intended methods
of distribution thereof, and use its best efforts to cause
such registration statement to become and remain effective as
provided herein; provided, however, that before filing with
the Commission a registration statement or prospectus or any
amendments or supplements thereto, the Company will (A)
furnish, to one counsel selected by the Holders of a majority
of
<PAGE> 16
the Registrable Securities requested to be registered, copies
of all such documents proposed to be filed for said counsel's
review and comment and (B) notify each Holder of Registrable
Securities to be registered of any stop order issued or
threatened by the Commission and take all reasonable actions
required to prevent the entry of such stop order or to remove
it if entered;
(ii) prepare and file with the Commission
such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be
necessary to keep such registration effective for a period of
one hundred and eighty (180) days and comply with the
provisions of the Securities Act with respect to the
disposition of securities covered by such registration
statement during such period in accordance with the intended
method of disposition by sellers thereof set forth in such
registration statement; provided, however, that such 180-day
period shall be extended for a period of time equal to the
period, if any, during which the Holders refrain from selling
any securities included in such registration in accordance
with provisions of the last paragraph of this Section 5.4;
(iii) furnish to each underwriter, if any,
and each Holder of Registrable Securities covered by such
registration statement such number of copies of such
registration statement, each amendment and supplement thereto
(in each case including all exhibits thereto), and the
prospectus included in such registration statement (including
each preliminary prospectus) in conformity with the
requirements of the Securities Act, and such other documents
incident thereto as each of the Holders from time to time may
reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Holder;
(iv) use its best efforts to register or
qualify such Registrable Securities under such other state
securities or "blue sky" laws of such jurisdictions as any
Holder, and underwriter, if any, of Registrable Securities
covered by such registration statement reasonably requests and
do any and all other acts and things that may be reasonably
necessary or advisable to enable such Holder and each
underwriter, if any, to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such
Holder; provided that the Company will not be required as a
result thereof to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to
qualify but for this clause (iv), (B) subject itself to
taxation in any such jurisdiction or (C) consent to general
service of process in any such jurisdiction;
(v) use its best efforts to cause the
Registrable Securities covered by such registration statement
to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Holder or
Holders thereof to consummate the disposition of such
Registrable Securities;
<PAGE> 17
(vi) immediately notify each Holder of such
Registrable Securities at any time when a prospectus relating
thereto is required to be delivered under the Securities Act
of the happening of any event that comes to the Company's
attention if as a result of such event the prospectus included
in such registration statement contains an untrue statement of
a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements
therein not misleading; and the Company will promptly prepare
and furnish to such Holder a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(vii) use its best efforts to cause all such
Registrable Securities to be listed on a national securities
exchange in the United States or NASDAQ and on each securities
exchange on which similar securities issued by the Company may
then be listed, and enter into such customary agreements
including a listing application and indemnification agreement
in customary form, and to provide a transfer agent and
registrar for such Registrable Securities covered by such
registration statement no later than the effective date of
such registration statement;
(viii) enter into such customary agreements
(including an underwriting agreement or qualified independent
underwriting agreement, in each case, in customary form) and
take all such other actions as the Holders of a majority of
the Registrable Securities being covered by such registration
statement or the underwriters retained by such Holders, if
any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities, including
customary representations, warranties, indemnities and
agreements;
(ix) make available for inspection, during
business hours of the Company, by any Holder of Registrable
Securities covered by such registration statement, any
underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other
agent retained by any such Holder or underwriter
(collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the
Company and its subsidiaries (collectively, "Records"), if
any, as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the
Company's officers, directors and employees, and those of the
Company's affiliates, if any, to supply all information and
respond to all inquiries reasonably requested by any such
Inspector in connection with such registration statement;
(x) use all commercially reasonable efforts
to obtain a "cold comfort" letter from the Company's appointed
auditors in customary form and covering such matters of the
type customarily
<PAGE> 18
covered by "cold comfort" letters as the Holders of a majority
in interest of the Registrable Securities being sold
reasonably request; and
(xi) otherwise use all commercially
reasonable efforts to comply with all applicable rules and
regulations of the Commission, and make available to the
Holders, as soon as reasonably practicable, an earnings
statement covering a period of at least twelve months
beginning after the effective date of the registration
statement (as the term "effective date" is defined in Rule
158(c) under the Securities Act) which earnings statement
shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder.
It shall be a condition precedent to the obligation of the
Company to take any action with respect to any Registrable Securities that the
Holder thereof shall furnish to the Company such information regarding the
Registrable Securities and any other Company Stock held by such Holder and the
intended method of disposition of the Registrable Securities held by such Holder
as the Company shall reasonably request and as shall be required in connection
with the action taken by the Company.
Each Holder of Registrable Securities agrees that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 5.4(vi) hereof, such Holder will forthwith discontinue
disposition of Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 5.4(vi)
hereof, and, if so directed by the Company (at the Company's expense), such
Holder will deliver to the Company all copies (including, without limitation,
any and all drafts), other than permanent file copies, then in such Holder's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice.
5.5. Indemnification.
(a) In the event of any registration of any shares of
Common Stock under the Securities Act pursuant to this Agreement, the Company
will indemnify and hold harmless each of the Holders of any Registrable
Securities covered by such registration statement, their respective directors
and officers, general partners, limited partners, members and managing
directors, each other Person who participates as an underwriter in the offering
or sale of such securities and each other Person, if any, who controls, is
controlled by or is under common control with any such Holder or any such
underwriter within the meaning of the Securities Act (and directors, officers,
controlling Persons, partners, members and managing directors of any of the
foregoing) against any and all losses, claims, damages and liabilities (or
actions in respect thereto), joint or several, and expenses (including any
amounts paid in any settlement effected with the Company's consent, which
consent will not be unreasonably withheld) to which such Holder, any such
director or officer or general or limited partner or member or managing director
or any such underwriter or controlling Person may become subject under the
Securities Act, state securities or "blue sky" laws, common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) or expenses arise out of or are based upon (A)
any untrue statement (or alleged untrue statement) of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, (B) any
omission (or alleged omission) to state therein a material fact required to be
stated therein or
<PAGE> 19
necessary to make the statements therein not misleading, or (C) any violation
(or alleged violation) by the Company of any federal, state or common law rule
or regulation applicable to the Company and relating to action required of or
inaction by the Company in connection with any such registration, qualification
or compliance. The Company will reimburse each such Holder, director, officer,
general partner, limited partner, member, managing director or underwriter and
controlling Person for any legal and any other expenses reasonably incurred in
connection with investigating or defending such claim, loss, damage, liability
or action; provided, however, that the Company shall not be liable in any such
case to the extent that any such claim, loss, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based on any
untrue statement (or alleged untrue statement) or omission (or alleged omission)
made in such registration statement or amendment or supplement thereto or in any
such preliminary, final or summary prospectus in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such Holder
in its capacity as a Holder or by any such director, officer, general or limited
partner, member, managing director, underwriter or controlling Person of such
Holder specifically stating that it is for use therein.
The indemnity provided for herein shall remain in full force
and effect regardless of any investigation made by or on behalf of such Holder
or any such director, officer, general partner, limited partner, member,
managing director, underwriter or controlling Person and shall survive the
transfer of such securities by such Holder.
(b) Each of the Holders will, if Registrable Securities
held by it are included in any registration statement filed in accordance with
the provisions hereof, (x) indemnify, on a several and not joint basis, the
Company and its directors, officers, controlling Persons and all other
prospective sellers and their respective directors, officers, general and
limited partners, members, managing directors, and their respective controlling
Persons against all claims, losses, damages and liabilities (or actions in
respect thereof) and expenses to which any such Person may become subject under
the Securities Act, state securities or "blue sky" laws, common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) or expenses arise out of or are based upon (A)
any untrue statement (or alleged untrue statement) of a material fact with
respect to such Holder contained in any such registration statement,
preliminary, final or summary prospectus contained therein, or any amendment or
supplement thereto, or (B) any omission (or alleged omission) to state therein a
material fact with respect to such Holder required to be stated therein or
necessary to make the statements made by such Holder therein not misleading and
(y) reimburse the Company and its directors, officers, controlling Persons and
all other prospective sellers and their respective directors, officers, general
and limited partners, members, managing directors, and their respective
controlling Persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in the case of both clause (x) and clause (y), to the
extent, and only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, preliminary, final or summary prospectus contained therein, or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by such Holder with respect to such Holder
and stated to be specifically for use therein; provided, however, that the
obligations of each of the Holders hereunder shall be limited to an amount equal
to the proceeds to such Holder from securities sold pursuant to such
registration statement or prospectus. The indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company
or any of the Holders of Registrable Securities, underwriters
<PAGE> 20
or any of their respective directors, officers, general or limited partners,
members, managing directors or controlling Persons and shall survive the
transfer of such securities by such Holder.
(c) Each party entitled to indemnification under this
Section 5.5 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld) and the Indemnified Party
may participate in such defense at such party's expense (unless one or more
Indemnified Parties shall have reasonably concluded that there may be a conflict
of interest between the Indemnifying Party and such Indemnified Parties in such
action, in which case the fees and expenses of one counsel for such Indemnified
Parties shall be at the expense of the Indemnifying Party and shall be
reimbursed as they are incurred); and provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 5.5 except to the
extent the Indemnifying Party is actually materially prejudiced thereby. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as a term thereof
the giving by the claimant or plaintiff to such Indemnified Party of an
unconditional release from all liability with respect to such claim or
litigation. Each Indemnified Party shall promptly furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.
(d) In order to provide for just and equitable
contribution in circumstances in which the foregoing indemnity agreements
provided for in this Section 5.5 are for any reason held to be unenforceable
although applicable in accordance with their terms, the Company and the Holders
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement in such
proportion as shall be appropriate to reflect (A) the relative benefits received
by the Company, on the one hand, and the Holders of the Registrable Securities
included in the offering on the other hand, from the offering of the Registrable
Securities and any other securities included in such offering, and (B) the
relative fault of the Company, on the one hand, and the Holders of the
Registrable Securities included in the offering, on the other, with respect to
the statements or omissions that resulted in such loss, liability, claim, damage
or expense, or action in respect thereof, as well as any other relevant
equitable considerations; provided, however, that no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company or the Holders of the Registrable
Securities, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holders of the Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this Section 5.5 were to
be determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to herein.
Notwithstanding anything to the contrary contained herein, the Company and the
Holders agree that any contribution required to be made by a Holder
<PAGE> 21
pursuant to this Section 5.5 shall not exceed the net proceeds from the offering
of Registrable Securities (before deducting expenses) received by such Holder
with respect to such offering. For purposes of this Section 5.5, each Person, if
any, who controls a Holder within the meaning of Section 15 of the Securities
Act shall have the same rights to contribution as such Holder, and each director
of the Company, each officer of the Company who signed the registration
statement, and each Person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act shall have the same rights to contribution
as the Company.
(e) The foregoing indemnity agreements of the Company
and the Holders are subject to the condition that, insofar as they relate to any
loss, claim, liability or damage made in a preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the Commission at the time
the registration statement in question becomes effective or the amended
prospectus filed with the Commission pursuant to Commission Rule 424(b) (the
"Final Prospectus"), such indemnity agreements shall not inure to the benefit of
(i) any underwriter if a copy of the Final Prospectus was furnished to the
underwriter and was not furnished to the Person asserting the loss, liability,
claim or damage at or prior to the time such action is required by the
Securities Act or (ii) in circumstances where no underwriter is acting as such
in the offer and sale in question, any Holder who (a) either directly or through
its agent provided the preliminary prospectus to the Person asserting the loss,
liability, claim or damage, (b) was furnished with a copy of the Final
Prospectus, and (c) did not furnish or cause to be furnished the Final
Prospectus to the Person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.
5.6. Information by the Holders. Each of the Holders included
in any registration shall furnish to the Company such information regarding such
Holder and the distribution proposed by such Holder as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this Article
5.
5.7. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to use all commercially reasonable efforts to:
(i) make and keep public information
available as those terms are understood and defined in Rule
144, at all times from and after the effective date of the
first registration statement under the Securities Act filed by
the Company for an offering of its securities to the general
public;
(ii) file with the Commission in a timely
manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act at any time
after it has become subject to such reporting requirements;
and
(iii) so long as any Holder owns any
Registrable Securities, furnish to such Holder upon request a
written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time from and after
the effective date of the first registration
<PAGE> 22
statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act
and the Exchange Act (at any time after it has become subject
to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other
reports and documents so filed as any Holder may reasonably
request in availing itself of any rule or regulation of the
Commission allowing such Holder to sell any such securities
without registration.
5.8. Assignability. The registration rights set forth in this
Article 5 shall be assignable by any Holder, in whole or in part, to any
transferee of Registrable Securities provided such transferee agrees to be bound
by all provisions of this Agreement.
5.9. Series C Preferred Stock. Upon issuance of any shares of
Series C Preferred Stock to Orbital, Orbital shall have registration rights
identical to those set forth in this Article 5 for holders of Registrable
Securities, mutatis mutandis, except that for all purposes of this Article 5,
Orbital shall be deemed to be an Other Demand Holder.
ARTICLE 6.
CERTAIN REPRESENTATIONS AND COVENANTS
6.1. Stockholder Representation. Each Stockholder represents
and warrants as to itself that such Stockholder is not a party with any other
Person to any other agreement with respect to the holding, voting, acquisition
or disposition of shares of Series A Preferred Stock or Common Stock, other than
the Amended and Restated Stock Purchase Agreement.
6.2. Orbital Representation. Orbital represents and warrants
that it is not a party with any other Person to any other agreement with respect
to the holding, voting, acquisition or disposition of shares of Common Stock,
other than the Amended and Restated Stock Purchase Agreement.
6.3. Company Representation. The Company represents and
warrants that (i) it is not a party with any other Person to any other agreement
with respect to the holding, voting, acquisition or disposition of shares of
Common Stock, other than the Amended and Restated Stock Purchase Agreement and
(ii) it has not granted to any other Person any other registration rights with
respect to capital stock of the Company, and no holder of any capital stock of
the Company shall have as of the date hereof any right to require registration
of any capital stock of the Company under the Securities Act or to include any
security in any registration statement filed by the Company under the Securities
Act.
6.4. Company Covenant. At any time after the consummation of a
public offering of Common Stock registered under the Securities Act or
registration of securities of the Company under the Exchange Act, the Company
will supply to each Holder promptly upon transmission thereof to its
stockholders, copies of all financial statements, proxy statements, notices and
reports including without limitation Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q in definitive form which it files or which it is or may be
required to file with the Commission.
6.5. Foreign Person Status. Each of Orbital and each of the
Stockholders (other than any Person listed on Schedule I of the Amended and
Restated Stock Purchase
<PAGE> 23
Agreement and identified as a Foreign Person or KECALP, Inc. in accordance with
Section 3.2(a)(vi) hereof) will notify the Company promptly in writing of the
acquisition of more than twenty-five percent (25%) of the voting securities of
such Person by a Foreign Person.
6.6. Certain Acknowledgments. Each Stockholder acknowledges
that it has received, and in the future it may receive, information regarding
the Company or Orbital that may be material non-public information with respect
to Orbital. Each Stockholder acknowledges that such Stockholder is aware that
the United States securities laws prohibit any person from purchasing or selling
securities of a company while in possession of and/or based on material
non-public information or from communicating such information to another person
under circumstances in which it is reasonably foreseeable that such person is
likely to purchase or sell such securities. It is agreed by the parties hereto
that this Section 6.6 shall not provide to Orbital any rights or causes of
action in addition to those otherwise available to Orbital.
ARTICLE 7.
MISCELLANEOUS
7.1. Injunctive Relief. It is acknowledged that it will be
impossible to measure in money the damages that would be suffered if the parties
fail to comply with certain of the obligations imposed on them by this
Agreement, including without limitation those obligations set forth in Article
2, Article 3 and Article 4, and that in the event of any such failure, an
aggrieved person will be irreparably damaged and will not have an adequate
remedy at law. Any such person shall, therefore, be entitled to injunctive
relief and/or specific performance to enforce such obligations, and if any
action should be brought in equity to enforce any of such provisions of this
Agreement, none of the parties hereto shall raise the defense that there is an
adequate remedy at law.
7.2. Further Assurances. Each party hereto shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as any other party hereto reasonably may request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
7.3. Governing Law. This Agreement shall be construed
and enforced in accordance with, and the rights of the parties shall be governed
by, the laws of the State of Delaware.
7.4. Entire Agreement; Amendment; Waiver. This Agreement (i)
together with the Amended and Restated Stock Purchase Agreement contains the
entire agreement among the parties hereto with respect to the subject matter
hereof, (ii) supersedes all prior written agreements and negotiations and oral
understandings, if any, with respect thereto, (iii) may not be amended or
supplemented except by an instrument or counterparts thereof in writing signed
by the Company, Orbital and the holders of at least 66-2/3% of the shares of
Series A Preferred Stock or Share Equivalents then outstanding and (iv) may not
be discharged except by such written instrument or by performance. No waiver of
any term or provision shall be effective unless in writing signed by the party
to be charged.
<PAGE> 24
7.5. Binding Effect. This Agreement shall be binding on and
inure to the benefit of the parties hereto and, subject to the terms and
provisions hereof, their respective legal representatives, successors and
assigns.
7.6. Invalidity of Provision. The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction.
7.7. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, all of which shall be deemed but one
and the same instrument and each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
7.8. Notices. All notices and other communications provided
for or given or made hereunder shall be in writing (including delivery by
facsimile transmission) and, unless otherwise provided herein, shall be deemed
to have been given when received by the party to whom such notice is to be given
at its address set forth in the Amended and Restated Stock Purchase Agreement,
or such other address for the party as shall be specified by notice given
pursuant hereto.
7.9. Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute part of this Agreement.
<PAGE> 25
IN WITNESS WHEREOF, this Agreement has been executed by or on
behalf of each of the parties hereto as of the date first above written.
ORBITAL IMAGING CORPORATION
By
--------------------------------------
Title:
----------------------------------
ORBITAL SCIENCES CORPORATION
By
--------------------------------------
Title:
----------------------------------
<PAGE> 26
SCHEDULE I
SPECIFIED COMPETITORS
Earth Watch Inc.
Ball Corporation
CTA Incorporated
Hitachi Ltd.
Space Imaging, Inc.
Lockheed-Martin
Raytheon Company
Raytheon E-Systems
Spot Image Corporation
Matra Marconi
Alcatel Alsthom
Space Imaging/EOSAT
Israeli Aircraft Industries
GDE Systems, Inc.
ITEK Optical Systems
Northrop Grumman Corporation
Eastman Kodak Company
Hughes Electronics
Mitsubishi International
Nuova Telespazio
Datron/Transco
TRW, Inc.
Core Software Technologies
GER Associates
Motorola, Inc.
The Boeing Company
Astrovision Entertainment Systems
Autometric, Inc.
<PAGE> 1
Exhibit 5.1
<TABLE>
<S> <C> <C>
LATHAM & WATKINS
ATTORNEYS AT LAW
PAUL R. WATKINS (I899 - I973) I00I PENNSYLVANIA AVE., N.W.
DANA LATHAM (I898 - I974) SUITE I300 NEW YORK OFFICE
---------------
WASHINGTON, D.C. 20004-2505 885 THIRD AVENUE, SUITE I000
TELEPHONE (202) 637-2200 NEW YORK, NEW YORK I0022-4802
CHICAGO OFFICE FAX (202) 637-220I PHONE (2I2) 906-I200, FAX 75I-4864
SEARS TOWER, SUITE 5800
CHICAGO, ILLINOIS 60606 __________ ORANGE COUNTY OFFICE
PHONE (3I2) 876-7700, FAX 993-9767 650 TOWN CENTER DRIVE, SUITE 2000
COSTA MESA, CALIFORNIA 92626-I925
HONG KONG OFFICE PHONE (7I4) 540-I235, FAX 755-8290
23RD FLOOR
STANDARD CHARTERED BANK BUILDING SAN DIEGO OFFICE
4 DES VOEUX ROAD CENTRAL, HONG KONG 70I "B" STREET, SUITE 2I00
PHONE + 852-2905-6400, FAX 2905-6940 SAN DIEGO, CALIFORNIA 92I0I-8I97
PHONE (6I9) 236-I234, FAX 696-74I9
LONDON OFFICE
ONE ANGEL COURT SAN FRANCISCO OFFICE
LONDON EC2R 7HJ ENGLAND 505 MONTGOMERY STREET, SUITE I900
PHONE + 44-I7I-374 4444, FAX 374 4460 SAN FRANCISCO, CALIFORNIA 94III-2562
PHONE (4I5) 39I-0600, FAX 395-8095
LOS ANGELES OFFICE
633 WEST FIFTH STREET, SUITE 4000 SILICON VALLEY OFFICE
LOS ANGELES, CALIFORNIA 9007I-2007 75 WILLOW ROAD
PHONE (2I3) 485-I234, FAX 89I-8763 MENLO PARK, CALIFORNIA 94025-3656
PHONE (650) 328-4600, FAX 463-2600
MOSCOW OFFICE
ULITSA GASHEKA, 7, 9th Floor SINGAPORE OFFICE
MOSCOW I25047, RUSSIA 20 CECIL STREET, #25-02/03/04
PHONE + 7-095 785-I234, FAX 785-I235 THE EXCHANGE, SINGAPORE 049705
PHONE + 65-536-II6I, FAX 536-II7I
NEW JERSEY OFFICE
ONE NEWARK CENTER, I6th FLOOR TOKYO OFFICE
NEWARK, NEW JERSEY 07I0I-3I74 INFINI AKASAKA, 8-7-I5, AKASAKA, MINATO-KU
PHONE (973) 639-I234, FAX 639-7298 TOKYO I07, JAPAN
PHONE +8I3-3423-3970, FAX 3423-397I
</TABLE>
June 18, 1998
Orbital Imaging Corporation
21700 Atlantic Boulevard
Dulles, VA 20166
Re: Offer to Exchange 11-5/8% Senior Notes due 2005, Series B
for All Outstanding 11-5/8% Senior Notes due 2005, Series A.
Ladies and Gentlemen:
In connection the registration of $150 million aggregate
principal amount of 11-5/8% Senior Notes due 2005, Series B (the "Exchange
Notes") of Orbital Imaging Corporation, a Delaware corporation (the "Company"),
on Form S-4 (Registration No. 333-49583) filed with Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), on April 7, 1998 (the "Registration Statement"), you have
requested our opinion with respect to the matters set forth below. Capitalized
terms used herein but not otherwise defined herein have the meanings ascribed to
them in the Registration Statement.
In our capacity as your counsel in connection with such
registration, we are familiar with the proceedings taken by the Company in
connection with the authorization of the Exchange Notes and the proceedings
proposed to be taken by the Company in connection with the issuance of the
Exchange Notes and, for the purposes of this opinion, have assumed such
proceedings will be timely completed in the manner presently proposed. In
addition, as such counsel, we have made such legal and factual examinations and
inquiries, including an examination of originals or copies certified or
otherwise identified to our satisfaction of such
<PAGE> 2
LATHAM & WATKINS
June 18, 1998
Page 2
documents, corporate records and instruments, as we have deemed necessary or
appropriate for purposes of this opinion.
In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity to authentic original documents of all documents submitted to us
as copies.
We are opining herein as to the effect on the subject
transaction only of the internal laws of the State of New York and we express no
opinion with respect to the applicability thereto, or the effect thereon, of the
laws of any other jurisdiction or as to the matters of municipal law or the laws
of any other local agencies within the state.
Subject to the foregoing and the other matters set forth
herein, it is our opinion that upon issuance thereof in the manner described in
the Registration Statement, the Exchange Notes will be legally valid and binding
obligations of the Company.
The opinion rendered above is subject to the following
exceptions, limitations and qualifications: (i) the effect of bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to or affecting the rights and remedies
of creditors; (ii) the effect of general principles of equity, whether
enforcement is considered in a proceeding in equity or law, and the discretion
of the court before which any proceeding therefor may be brought; (iii) the
unenforceability under certain circumstances under law or court decisions of
provisions providing for the indemnification of or contribution to a party with
respect to a liability where such indemnification or contribution is contrary to
public policy; (iv) we express no opinion concerning the enforceability of the
waiver of rights or defenses contained in Section 4.9 of the Indenture; and (v)
the manner by which the acceleration of the Exchange Notes may affect the
collectibility of that portion of the stated principal amount thereof which
might be determined to constitute unearned interest thereon.
To the extent that the obligations of the Company under the
Indenture may be dependent upon such matters, we assume for purposes of this
opinion that the Trustee under the Indenture is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization; that
the Trustee is duly qualified to engage in the activities contemplated by the
Indenture; that the Indenture has been duly authorized, executed and delivered
by the Trustee and constitutes a legally valid, binding and enforceable
obligation of the Trustee enforceable against the Trustee in accordance with its
terms; and the Trustee is in compliance, generally and with respect to acting as
trustee under the Indenture, with all applicable laws and regulations; and that
the Trustee has the requisite organizational and legal power and authority to
perform its obligations under the Indenture.
<PAGE> 3
LATHAM & WATKINS
June 18, 1998
Page 3
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement and the reference to us
under the heading "Legal Matters" in the Registration Statement. In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act or the rules and
regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ LATHAM & WATKINS
<PAGE> 1
Exhibit 8.1
<TABLE>
<S> <C> <C>
LATHAM & WATKINS
ATTORNEYS AT LAW
I00I PENNSYLVANIA AVE., N.W.
PAUL R. WATKINS (I899-I973) SUITE I300 NEW JERSEY OFFICE
DANA LATHAM (I898-I974) WASHINGTON, D.C. 20004-2505 ONE NEWARK CENTER
TELEPHONE (202) 637-2200 NEWARK, NEW JERSEY 07I0I-3I74
FAX (202) 637-220I TELEPHONE (20I) 639-I234
CHICAGO OFFICE FAX (20I) 639-7298
--------------
SEARS TOWER, SUITE 5800 ----------------------------
CHICAGO, ILLINOIS 60606 NEW YORK OFFICE
---------------
TELEPHONE (3I2) 876-7700 885 THIRD AVENUE, SUITE I000
FAX (3I2) 993-9767 NEW YORK, NEW YORK I0022-4802
TELEPHONE (2I2) 906-I200
HONG KONG OFFICE FAX (2I2) 75I-4864
23RD FLOOR
STANDARD CHARTERED BANK ORANGE COUNTY OFFICE
--------------------
BUILDING 650 TOWN CENTER DRIVE, SUITE 2000
4 DES VOEUX ROAD CENTRAL, COSTA MESA, CALIFORNIA 92626-I925
HONG KONG TELEPHONE (7I4) 540-I235
TELEPHONE + 852-2905-6400 FAX (7I4) 755-8290
FAX + 852-2905-6940
SAN DIEGO OFFICE
LONDON OFFICE 70I "B" STREET, SUITE 2I00
ONE ANGEL COURT SAN DIEGO, CALIFORNIA 92I0I-8I97
LONDON EC2R 7HJ ENGLAND TELEPHONE (6I9) 236-I234
TELEPHONE + 44-I7I-374 4444 FAX (6I9) 696-74I9
FAX + 44-I7I-374 4460
SAN FRANCISCO OFFICE
LOS ANGELES OFFICE 505 MONTGOMERY STREET, SUITE I900
633 WEST FIFTH STREET, SUITE SAN FRANCISCO, CALIFORNIA 94III-2562
4000 TELEPHONE (4I5) 39I-0600
LOS ANGELES, CALIFORNIA FAX (4I5) 395-8095
9007I-2007
TELEPHONE (2I3) 485-I234 TOKYO OFFICE
FAX (2I3) 89I-8763 INFINI AKASAKA, MINATO-KU
TOKYO I07, JAPAN
MOSCOW OFFICE TELEPHONE +8I3-3423-3970
II3/I LENINSKY PROSPECT, FAX +8I3-3423-397I
SUITE C200
MOSCOW, RUSSIA II7I98
TELEPHONE + 7-503 956-5555
FAX + 7-503 956-5556
</TABLE>
June 18, 1998
Orbital Imaging Corporation
21700 Atlantic Boulevard
Dulles, VA 20166
Re: Registration Statement on Form S-4
Dear Sir or Madam:
You have requested our opinion concerning the material federal
income tax consequences of the exchange of 11 5/8% Senior Notes due 2005, Series
B of Orbital Imaging Corporation (the "Company") which have been registered
under the Securities Act of 1933, as amended, for outstanding 11 5/8% Senior
Notes due 2005, Series A of the Company, in connection with the Registration
Statement on Form S-4 filed herewith (the "Registration Statement").
The facts, as we understand them, and upon which with your
permission we rely in rendering the opinion expressed herein, are set forth in
the Registration Statement. Based on such facts, it is our opinion that the
material federal income tax consequences are accurately set forth under the
heading "Certain U.S. Federal Income Tax Consequences" in the Registration
Statement. No opinion is expressed as to any matter not discussed therein.
This opinion is based on various statutory provisions,
regulations promulgated thereunder and interpretations thereof by the Internal
Revenue Service and the courts having jurisdiction over such matters all of
which are subject to change either prospectively or
<PAGE> 2
LATHAM & WATKINS
Orbital Imgaging Corporation
June 18, 1998
Page 2
retroactively. Also, any variation or difference in the facts from those set
forth in the Registration Statement may affect the conclusions stated herein.
This opinion is rendered to you solely for use in connection
with the Registration Statement. We consent to your filing this opinion as an
exhibit to the Registration Statement, and to the reference to our firm under
the headings "Certain U.S. Federal Income Tax Consequences" and "Legal Matters."
Very truly yours,
/s/ LATHAM & WATKINS
<PAGE> 1
Exhibit 10.1
ORBITAL IMAGING CORPORATION
$150,000,000
11 5/8% SENIOR NOTES DUE 2005
WITH WARRANTS
PURCHASE AGREEMENT
FEBRUARY 20, 1998
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES LLC
<PAGE> 2
ORBITAL IMAGING CORPORATION
$150,000,000
11 5/8% Senior Notes due 2005
with Warrants
PURCHASE AGREEMENT
February 20, 1998
New York, New York
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES LLC
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies & Gentlemen:
Orbital Imaging Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to Bear, Stearns & Co. Inc., Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and NationsBanc Montgomery
Securities LLC (together, the "Initial Purchasers") 150,000 units (the "Units")
consisting of $150,000,000 in aggregate principal amount of 11 5/8% Senior Notes
due 2005 (the "Notes") and warrants (the "Warrants") to purchase an aggregate of
1,312,746 shares (the "Warrant Shares") of common stock, $.01 par value, of the
Company (the "Common Stock"), subject to the terms and conditions set forth
herein. Each Unit will consist of $1,000 principal amount of Notes and one
Warrant. The Notes will be issued pursuant to an indenture (the "Indenture"), to
be dated the Closing Date (as defined), between the Company and Marine Midland
Bank, as trustee (the "Trustee"). The Warrants will be issued pursuant to a
warrant agreement (the "Warrant Agreement") to be dated the Closing Date,
between the Company and Marine Midland Bank, as warrant agent (the "Warrant
Agent"). The Notes and the Warrants will not trade separately until the earliest
of (i) 90 days from the date of issuance, (ii) such date as the Initial
Purchasers may, in their discretion, deem appropriate, (iii) in the event a
Change of Control occurs, the date the Company mails notice thereof to the
holders of the Notes, (iv) the date on which the Exchange Offer is consummated
(such date, the "Separation Date") and (v) the effective date of the Shelf
Registration Statement. The Units, the Notes and the Warrants are collectively
referred to herein as the "Securities." Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the
Indenture.
1. Issuance of Securities. The Company proposes, upon the terms and
subject to the conditions set forth herein, to issue and sell to the Initial
Purchasers 150,000 Units consisting of $150,000,000 in aggregate principal
amount of Notes and Warrants to purchase an aggregate of 1,372,746 shares of
Common Stock. The Notes issuable in exchange therefor are collectively referred
to herein as the "Exchange Notes."
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act of 1933,
as amended (the "Act"), the Units, the Notes, the Warrants and the Warrant
Shares (and all securities issued in exchange therefor or in substitution
thereof) shall bear the following legend:
<PAGE> 3
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF ORBITAL IMAGING CORPORATION AND ITS SUCCESSORS ("THE COMPANY")
THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE
THE UNITED STATES TO A PERSON THAT IS NOT A U.S. PERSON (AS DEFINED IN
RULE 902 UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE AND WARRANT AGENT A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE UNITS, NOTES AND
WARRANTS (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE OR
WARRANT AGENT) OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL IF THE COMPANY OR TRUSTEE, REGISTRAR OR TRANSFER AGENT FOR THE
SECURITIES SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM
IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH
IN (A) ABOVE.
2. Offering. The Units will be offered and sold to the Initial Purchasers
pursuant to an exemption from the registration requirements under the Act. The
Company has prepared a preliminary offering memorandum, dated February 5, 1998
(the "Preliminary Offering Memorandum"), and a final offering memorandum, dated
February 23, 1998 (the "Offering Memorandum"), relating to the Company, the
Units, the Notes and the Warrants.
The Initial Purchasers have advised the Company that the Initial
Purchasers will make offers (the "Exempt Resales") of the Units on the terms set
forth in the Offering Memorandum, as amended or supplemented, solely to (i)
persons whom the Initial Purchasers reasonably believe to be "qualified
institutional buyers," as defined in Rule 144A under the Act ("QIBs") and (ii)
non-U.S. persons outside the United States in reliance upon Regulation S
("Regulation S") under the Act (each, a "Regulation S Investor"). The QIBs and
the Regulation S Investors are collectively referred to herein as the "Eligible
Purchasers." The Initial Purchasers will offer the Units to such Eligible
Purchasers initially at the price set forth herein. Such price may be changed at
any time without notice.
Holders (including subsequent transferees) of the Notes will have the
registration rights set forth in the registration rights agreement relating
thereto (the "Registration Rights Agreement") in the form agreed to by the
Company and the Initial Purchasers, and holders (including subsequent
transferees) of the Warrants will have the registration rights set forth in the
registration rights agreement relating thereto (the "Warrant Registration Rights
Agreement"), in each case, to be dated the Closing Date, in the form agreed to
by the Company and the Initial Purchasers, for so long as such Notes, Warrants
or any Warrant Shares constitute "Transfer Restricted Securities" (as defined in
each such agreement, respectively). Pursuant to the Registration Rights
Agreement, the Company
-2-
<PAGE> 4
will agree to file with the Securities and Exchange Commission (the
"Commission"), under the circumstances set forth therein, (i) a registration
statement under the Act (the "Exchange Offer Registration Statement") relating
to the Exchange Notes to be offered in exchange for the Notes (the "Exchange
Offer") and (ii) a shelf registration statement pursuant to Rule 415 under the
Act (the "Shelf Registration Statement") relating to the resale by certain
holders of the Notes, and to use its best efforts to cause such registration
statements to be declared effective and consummate the Exchange Offer. Pursuant
to the Warrant Registration Rights Agreement, the Company will agree to file
with the Commission, under the circumstances set forth therein, shelf
registration statements pursuant to Rule 415 under the Act (the "Warrant Shelf
Registration Statements;" each of the Warrant Shelf Registration Statement, the
Exchange Offer Registration Statement and the Shelf Registration Statement, a
"Registration Statement") relating to the resale by certain holders of the
Warrants and the Warrant Shares, and to use its best efforts to cause such
Warrant Shelf Registration Statement to be declared effective.
The Company will use a portion of the net proceeds from the sale of the
Units to purchase a portfolio of Government Securities pursuant to the Pledge
Agreement (the "Pledged Securities") in an amount sufficient to provide for
payment in full of the first four scheduled interest payments due on the Notes.
The Pledged Securities will be pledged as security for the benefit of the
Initial Purchasers and other holders of the Notes (including subsequent
transferees) pursuant to the Pledge Agreement, in the form agreed to by the
Company and the Initial Purchasers.
This Agreement, the Notes, the Units, the Warrant Agreement, the Warrant
Shares, the Indenture and the Registration Rights Agreements, are hereinafter
sometimes referred to collectively as the "Operative Documents."
3. Purchase, Sale and Delivery. (a) On the basis of the representations,
warranties and covenants contained in this Agreement, and subject to its terms
and conditions, the Company agrees to issue and sell to each Initial Purchaser,
and each Initial Purchaser agrees, severally and not jointly, to purchase from
the Company, that amount of Units set forth opposite its name on Schedule I
hereto. The aggregate purchase price for the Units will be $145,500,000.
(b) Delivery of the Units shall be made, against payment of the
purchase price therefor, at the offices of Fried, Frank, Harris, Shriver &
Jacobson, 1001 Pennsylvania Avenue, N.W., Washington, D.C. or such other
location as may be mutually acceptable. Such delivery and payment shall be made
at 10:00 a.m., New York City time, on February 25, 1998 or at such other time as
shall be agreed upon by the Initial Purchasers and the Company. The time and
date of such delivery and payment are herein called the "Closing Date."
(c) Units sold to Regulation S Investors will initially be
represented by one or more permanent Notes and one or more permanent Warrants,
each in global form without interest coupons (a "Regulation S Global Note" and a
"Regulation S Global Warrant," respectively, and together constituting one or
more "Regulation S Global Units") registered in the name of Cede & Co., as
nominee of the Depository Trust Company ("DTC"), for the accounts of the
Euroclear System ("Euroclear") and Cedel Bank, societe anonyme ("Cedel"), having
an aggregate amount corresponding to the aggregate amount of the Units sold to
Regulation S Investors. Units sold to QIBs will be represented by one or more
permanent Notes and one or more permanent Warrants, each in global form without
interest coupons (a "Restricted Global Note" and a "Restricted Global Warrant,"
respectively, and together constituting one or more "Restricted Global Units")
registered in the name of Cede & Co., as nominee of DTC, having an aggregate
amount corresponding to the aggregate amount of the Units sold to QIBs. The
Global Units shall be delivered by the Company to the Initial Purchasers (or as
the Initial Purchasers direct), against payment by the Initial Purchasers of the
purchase price therefor, by wire transfer of immediately available funds to an
account specified by the Company or as the Company may direct in writing,
provided that the Company shall give at least two business days' prior written
notice to the Initial Purchasers of the information required to effect such wire
transfers. The Global Units, Global Notes and Global Warrants shall be made
available to the Initial Purchasers for inspection not later than 9:30 a.m., New
York City time, on the business day immediately preceding the Closing Date.
4. Agreements of the Company. The Company covenants and agrees with the
Initial Purchasers as follows:
-3-
<PAGE> 5
(a) To advise the Initial Purchasers promptly and, if requested by
the Initial Purchasers, confirm such advice in writing of; (i) the issuance by
any state securities commission of any stop order suspending the qualification
or exemption from qualification of any Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by any state
securities commission or other regulatory authority; and (ii) the happening of
any event that, in the reasonable opinion of either counsel to the Company or
counsel to the Initial Purchasers, makes any statement of a material fact made
in the Preliminary Offering Memorandum or the Offering Memorandum untrue or that
requires the making of any additions to or changes in the Preliminary Offering
Memorandum or the Offering Memorandum in order to make the statements therein,
in the light of the circumstances under which they are made, not misleading. The
Company shall use its best efforts to prevent the issuance of any stop order or
order suspending the qualification or exemption of any Securities under any
state securities or Blue Sky laws and, if at any time any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption of any Securities under any state securities or Blue
Sky laws, the Company shall use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons identified
by the Initial Purchasers to the Company, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
or supplements thereto, as the Initial Purchasers may reasonably request. The
Company consents to the use of the Preliminary Offering Memorandum and the
Offering Memorandum, and any amendments and supplements thereto required
pursuant hereto, by the Initial Purchasers in connection with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering Memorandum
or the Offering Memorandum prior to the Closing Date unless the Initial
Purchasers shall previously have been advised thereof and shall not have
reasonably objected thereto within a reasonable time after being furnished a
copy thereof. The Company shall promptly prepare, upon the Initial Purchasers'
request, any amendment or supplement to the Preliminary Offering Memorandum or
the Offering Memorandum that may be necessary or advisable in connection with
Exempt Resales.
(d) If, after the date hereof and prior to consummation of any
Exempt Resale, any event shall occur as a result of which, in the judgment of
the Company or in the reasonable opinion of either counsel to the Company or
counsel to the Initial Purchasers, it becomes necessary or advisable to amend or
supplement the Preliminary Offering Memorandum or Offering Memorandum in order
to make the statements therein, in the light of the circumstances in which they
were made, not misleading, or if it is necessary or advisable to amend or
supplement the Preliminary Offering Memorandum or Offering Memorandum to comply
with applicable law, (i) notify the Initial Purchasers and (ii) forthwith to
prepare an appropriate amendment or supplement to such Offering Memorandum so
that the statements therein as so amended or supplemented will not, in the light
of the circumstances when it is so delivered, be misleading, or so that such
Offering Memorandum will comply with applicable law.
(e) To cooperate with the Initial Purchasers and counsel to the
Initial Purchasers in connection with the qualification or registration of the
Units, the Notes and the Warrants under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may reasonably request and to continue
such qualification in effect so long as required for the Exempt Resales;
provided, however, that the Company shall not be required in connection
therewith to register or qualify as a foreign corporation where it is not now
qualified or to take any action that would subject it to service of process in
suits or taxation, in each case, other than as to matters and transactions
relating to the Preliminary Offering Memorandum, the Offering Memorandum or
Exempt Resales, in any jurisdiction where it is not now so subject.
(f) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated, to pay all
costs, expenses, fees and taxes incident to the performance of the obligations
of the Company hereunder, including in connection with: (i) the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum and the
Offering Memorandum (including, without
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<PAGE> 6
limitation, financial statements) and all amendments and supplements thereto
required pursuant hereto, (ii) the issuance, transfer and delivery by the
Company of the Securities to the Initial Purchasers, (iii) the qualification or
registration of the Securities for offer and sale under the securities or blue
sky laws of the several states (including, without limitation, the cost of
preparing, printing and mailing a preliminary and final blue sky memorandum and
the reasonable fees and disbursements of counsel to the Initial Purchasers
relating thereto), (iv) furnishing such copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and all amendments and supplements
thereto, as may be requested for use in connection with Exempt Resales, (v) the
preparation of certificates for the Securities (including, without limitation,
printing and engraving thereof), (vi) the fees, disbursements and expenses of
the Company's counsel and accountants, (vii) all expenses and listing fees in
connection with the application for quotation of the Securities in the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation System -
PORTAL ("PORTAL"), (viii) all fees and expenses (including fees and expenses of
counsel to the Company) of the Company in connection with the approval of the
Securities by DTC for "book-entry" transfer, (ix) the rating of the Securities
by rating agencies, (x) the reasonable fees and expenses of the Trustee and its
counsel in connection with the Indenture and the Notes, (xi) the reasonable fees
and expenses of the Warrant Agent and its counsel in connection with the Warrant
Agreement and the Warrants, (xii) the performance by the Company of its other
obligations under this Agreement and the other Operative Documents and (xiii)
"roadshow" travel and other expenses incurred in connection with the marketing
and sale of the Units, the Notes and the Warrants.
(g) To use the proceeds from the sale of the Units in the manner
described in the Offering Memorandum under the caption "Use of Proceeds."
(h) Not to voluntarily claim, and to resist actively any attempts to
claim, the benefit of any usury laws against the holders of any Securities.
(i) To do and perform all things required to be done and performed
under this Agreement by it prior to or after the Closing Date and to satisfy all
conditions precedent on its part to the delivery of the Units.
(j) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Units in a manner that would require
the registration under the Act of the sale to the Initial Purchasers, or the
Eligible Purchasers, of the Units, the Notes or the Warrants or to take any
other action that would result in the Exempt Resales not being exempt from
registration under the Act.
(k) For so long as any of the Securities remain outstanding and
during any period in which the Company is not subject to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
available to any beneficial owner of Units, Notes or Warrants in connection with
any sale thereof and any prospective purchaser of such Units, Notes or Warrants
from such beneficial owner, the information required by Rule 144A(d)(4) under
the Act.
(l) To cause the Exchange Offer to be made in the appropriate form
to permit registered Exchange Notes to be offered in exchange for the Notes and
to comply with all applicable federal and state securities laws in connection
with the Exchange Offer.
(m) To comply with all of its agreements set forth in the
Registration Rights Agreement, the Warrant Registration Rights Agreement and all
agreements set forth in the representation letters of the Company to DTC
relating to the approval of the Securities by DTC for "book-entry" transfer.
(n) To use its best efforts to obtain approval of the Securities by
DTC for "book-entry" transfer.
(o) During a period of five years following the Closing Date, to
deliver without charge to each of the Initial Purchasers, as they may reasonably
request, promptly upon their becoming available, copies of (i) all reports or
other publicly available information that the Company shall mail or otherwise
make available to its securityholders and (ii) all reports, financial statements
and proxy or information statements filed by the Company
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<PAGE> 7
with the Commission or any national securities exchange and such other publicly
available information concerning the Company or its subsidiaries, if any,
including without limitation, press releases.
(p) Prior to the Closing Date, to furnish to each of the Initial
Purchasers, as soon as they have been prepared in the ordinary course by the
Company, copies of any unaudited interim financial statements for any period
subsequent to the periods covered by the financial statements appearing in the
Offering Memorandum.
(q) Not to take, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities. Except as permitted by the Act, the Company will
not distribute any (i) preliminary offering memorandum, including, without
limitation, the Preliminary Offering Memorandum, (ii) offering memorandum,
including, without limitation, the Offering Memorandum, or (iii) other offering
material in connection with the offering and sale of the Securities.
(r) To perform all things required or necessary to be done and
performed under this Agreement prior to the Closing Date and to satisfy all
conditions precedent to the delivery of the Securities.
(s) To reserve and continue to reserve as long as any Warrants are
outstanding, a sufficient number of shares of Common Stock for issuance upon
exercise of the Warrants.
5. Representations and Warranties. (a) The Company represents and warrants
to the Initial Purchasers that:
(i) The Preliminary Offering Memorandum and the Offering Memorandum
do not, and any supplement or amendment to them will not, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties contained in
this paragraph shall not apply to statements in or omissions from the
Preliminary Offering Memorandum and the Offering Memorandum (or any
supplement or amendment thereto) made in reliance upon and in conformity
with information relating to the Initial Purchasers furnished to the
Company in writing by or on behalf of the Initial Purchaser expressly for
use therein. No stop order preventing the use of the Preliminary Offering
Memorandum or the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions contemplated
by this Agreement are subject to the registration requirements of the Act,
has been issued.
(ii) When the Units, the Notes and the Warrants are issued and
delivered pursuant to this Agreement, no Unit, Note or Warrant will be of
the same class (within the meaning of Rule 144A under the Act) as
securities of the Company that are listed on a national securities
exchange registered under Section 6 of the Exchange Act or that are quoted
in a United States automated inter-dealer quotation system.
(iii) The Company (A) has been duly incorporated, is validly
existing as a corporation in good standing under the laws of its
respective jurisdiction of incorporation, (B) has all requisite corporate
power and authority to carry on its business as it is currently being
conducted and as described in the Offering Memorandum and to own, lease
and operate its properties and (C) is duly qualified and in good standing
as a foreign corporation authorized to do business in each jurisdiction in
which the nature of its business or its ownership or leasing of property
requires such qualification except, with respect to this clause (C), where
the failure of the Company to be so qualified or in good standing does not
and could not reasonably be expected to individually or in the aggregate,
result in a material adverse effect on the assets, liabilities, business,
results of operations, condition (financial or otherwise), cash flows,
affairs or prospects of the Company or on the Company's ability to issue
the Securities (a "Material Adverse Effect").
(iv) The Company has no direct or indirect subsidiaries as of the
Closing Date.
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<PAGE> 8
(v) All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive or
similar rights. The Company has an authorized and outstanding consolidated
capitalization as set forth in the Offering Memorandum under the caption
"Capitalization."
(vi) Except as disclosed in the Offering Memorandum, there are not
currently, and will not be as a result of the Offering, any outstanding
subscriptions, rights, warrants, calls, commitments of sale or options to
acquire, or instruments convertible into or exchangeable for, any capital
stock or other equity interest of the Company (collectively, "Equity
Rights"). The issuance of the Units, the Notes and the Warrants, and the
Warrant Shares upon exercise of the Warrants, will not result in an
adjustment to the exercise price or number of shares issuable upon the
exercise of such Equity Rights.
(vii) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under each of this Agreement,
the Indenture, the Warrant Agreement, the Registration Rights Agreement,
the Warrant Registration Rights Agreement and the other Operative
Documents and to consummate the transactions contemplated hereby and
thereby, including, without limitation, the corporate power and authority
to issue, sell and deliver the Securities as provided herein and therein.
(viii) This Agreement has been duly and validly authorized, executed
and delivered by Company and is the legal, valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally
and subject to general principles of equity.
(ix) The Indenture has been duly and validly authorized by the
Company and, when duly executed and delivered by the Company, will be the
legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar
laws affecting the rights of creditors generally and subject to general
principles of equity. On the Closing Date, the Indenture will conform, in
all material respects, to the requirements of the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder. The Offering Memorandum contains a summary of the
terms of the Indenture, which is accurate in all material respects.
(x) The Units have been duly and validly authorized by the Company.
The Notes have been duly and validly authorized for issuance and sale to
the Initial Purchasers by the Company pursuant to this Agreement and, when
issued and authenticated in accordance with the terms of the Indenture and
delivered against payment therefor in accordance with the terms hereof and
thereof, will be the legal, valid and binding obligations of the Company.
The description of the Notes in the Offering Memorandum is accurate in all
material respects.
(xi) The Exchange Notes have been duly and validly authorized for
issuance by the Company and, when issued and authenticated in accordance
with the terms of the Exchange Offer and the Indenture, will be the legal,
valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms and entitled to the benefits of the
Indenture, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity. The
description of the Exchange Notes in the Offering Memorandum is accurate
in all material respects.
(xii) The Registration Rights Agreement has been duly and validly
authorized by the Company and, when duly executed and delivered by the
Company, will be the legal, valid and binding obligation of the Company.
The description of the Registration Rights Agreement in the Offering
Memorandum is accurate in all material respects.
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<PAGE> 9
(xiii) The Warrant Agreement has been duly and validly authorized by
the Company and, when duly executed and delivered by the Company, will be
the legal, valid and binding obligation of the Company. The description of
the Warrant Agreement in the Offering Memorandum is accurate in all
material respects.
(xiv) The Warrants have been duly and validly authorized for
issuance and sale to the Initial Purchasers by the Company pursuant to
this Agreement and, when issued and countersigned in accordance with the
terms of the Warrant Agreement and delivered against payment therefor in
accordance with the terms hereof and thereof, will be the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Warrant
Agreement, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity. The
description of the Warrants in the Offering Memorandum is accurate in all
material respects.
(xv) The Warrants are exercisable into Warrant Shares in accordance
with the terms of the Warrant Agreement. The Warrant Shares have been duly
authorized for issuance by the Company and, when issued and paid for upon
exercise of the Warrants in accordance with the terms thereof, will be
validly issued, fully paid and nonassessable, free of any preemptive or
similar rights.
(xvi) The Warrant Registration Rights Agreement has been duly and
validly authorized by the Company and, when duly executed and delivered by
the Company, will be the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally
and subject to general principles of equity. The description of the
Warrant Registration Rights Agreement in the Offering Memorandum is
accurate in all material respects.
(xvii) The Company is not and, after giving effect to the Offering
will not be (A) in violation of its charter or bylaws, (B) in default in
the performance of any bond, debenture, note, indenture, mortgage, deed of
trust or other agreement or instrument to which it is a party or by which
it is bound or to which any of its properties is subject, which singly or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect, or (C) in violation of any local, state, federal or foreign law,
statute, ordinance, rule, regulation, requirement, judgment or court
decree (including, without limitation, the Communications Act of 1934, as
amended by the Telecommunications Act of 1996 (the "Telecommunications
Act"), and the rules and regulations of the Federal Communications
Commission (the "FCC"), the Department of Commerce (the "DoC"), the
National Telecommunications and Information Administration (the "NTIA")
and the International Telecommunications Union ("ITU") and environmental
laws, statutes, ordinances, rules, regulations, judgments or court
decrees) applicable to the Company or any of its assets or properties
(whether owned or leased), which singly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. To the best
knowledge of the Company, there exists no condition that, with notice, the
passage of time or otherwise, would constitute a default under any such
document or instrument.
(xviii) None of (A) the execution, delivery or performance by the
Company of this Agreement and the other Operative Documents, (B) the
issuance and sale of the Securities and (C) consummation by the Company of
the transactions contemplated by the Operative Documents or the Offering
Memorandum described under the captions "Use of Proceeds" and "Related
Party Transactions," violates, conflicts with or constitutes a breach of
any of the terms or provisions of, or a default under (or an event that
with notice or the lapse of time, or both, would constitute a default), or
require consent under, or result in the imposition of a lien or
encumbrance on any properties of the Company, or an acceleration of any
indebtedness of the Company pursuant to, (i) the charter or bylaws of the
Company, (ii) any bond, debenture, note, indenture, mortgage, deed of
trust or other agreement or instrument to which the Company is a party or
by which it or its property is or may be bound, (iii) any local, state,
federal or foreign law, statute, ordinance, rule, regulation or
requirement (including, without limitation, the Telecommunications Act and
the rules and regulations of the FCC, the DoC, the NTIA and the ITU,
environmental laws,
-8-
<PAGE> 10
statutes, ordinances, rules or regulations) applicable to the Company, or
any of its assets or properties or (iv) any judgment, order or decree of
any court or governmental agency or authority having jurisdiction over the
Company or any of its assets or properties. Other than as described in the
Offering Memorandum, no consent, approval, authorization or order of, or
filing, registration, qualification, license or permit of or with, (A) any
court or governmental agency, body or administrative agency (including,
without limitation, the FCC, the DoC, the NTIA and the ITU) or (B) any
other person is required for (1) the execution, delivery and performance
by the Company of this Agreement and the other Operative Documents or (2)
the issuance and sale of the Securities and the transactions contemplated
hereby and thereby, except such as have been obtained and made on or prior
to the Closing Date (or, in the case of the Registration Rights Agreement
and the Warrant Registration Rights Agreement, will be obtained and made)
under the Act, the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act") and state securities or Blue Sky laws and regulations or
such as may be required by the NASD.
(xix) There is (A) no action, suit or proceeding before or by any
court, arbitrator or governmental agency, body or official, domestic or
foreign, now pending or, to the knowledge of the Company, threatened or
contemplated to which the Company is or may be a party or to which the
business, assets or property of the Company is subject, (B) no local,
state, federal or foreign law, statute, ordinance, rule, regulation,
requirement, judgment or court decree (including, without limitation, the
Telecommunications Act and the rules and regulations of the FCC, the DoC,
the NTIA and the ITU) or order that has been enacted, adopted or issued by
any governmental agency or that has been proposed by any governmental body
or (C) no injunction, restraining order or order of any nature by a
federal or state court or foreign court of competent jurisdiction to which
the Company is or may be subject or to which the business, assets, or
property of the Company is or may be subject, that, in the case of clauses
(A), (B) and (C) above, (1) is required to be disclosed in the Preliminary
Offering Memorandum or the Offering Memorandum and that is not so
disclosed, or (2) could reasonably be expected to result in a Material
Adverse Effect.
(xx) No action has been taken and no local, state, federal or
foreign law, statute, ordinance, rule, regulation, order, requirement,
judgment or court decree has been enacted, adopted or issued by any
governmental agency that prevents the issuance of the Securities or
prevents or suspends the use of the Offering Memorandum; no injunction,
restraining order or order of any nature by a federal, state or foreign
court of competent jurisdiction has been issued that prevents the issuance
of the Securities or prevents or suspends the sale of the Securities in
any jurisdiction referred to in Section 4(e) hereof; and the Company has
complied with every request of any securities authority or agency of any
jurisdiction for additional information.
(xxi) There is (i) no unfair labor practice complaint pending or, to
the knowledge of the Company, threatened against the Company, before the
National Labor Relations Board, or any state or local labor relations
board or any foreign labor relations board, and no significant grievance
or significant arbitration proceeding arising out of or under any
collective bargaining agreement is so pending or, to the knowledge of the
Company, threatened against the Company, (ii) no significant strike, labor
dispute, slowdown or stoppage pending or, to the knowledge of the Company,
threatened against the Company, and (iii) no union representation question
existing with respect to the employees of the Company. To the knowledge of
the Company, no collective bargaining organizing activities are taking
place with respect to the Company. The Company has not violated (A) any
federal, state or local law or foreign law relating to discrimination in
hiring, promotion or pay of employees, (B) any applicable wage or hour
laws, or (C) any provision of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or the rules and regulations thereunder.
(xxii) The Company has not violated any foreign, federal, state or
local law or regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), lacks any permit,
license or other approval required of it under applicable Environmental
Laws, or is violating any term or condition of such permit, license or
approval which could reasonably be expected to have a Material Adverse
Effect. There is no
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<PAGE> 11
alleged liability or potential liability (including, without limitation,
alleged or potential liability or investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damages,
personal injuries or penalties) of the Company arising out of, based on or
resulting from (a) the presence or release into the environment of any
Hazardous Material (as defined) at any location, whether or not owned by
the Company, or (b) any violation or alleged violation of any
Environmental Law, which alleged or potential liability is required to be
disclosed in the Offering Memorandum, other than as disclosed therein, or
could reasonably be expected to have a Material Adverse Effect. The term
"Hazardous Material" means (i) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, (ii) any "hazardous waste" as defined by the Resource
Conservation and Recovery Act, as amended, (iii) any petroleum or
petroleum product, (iv) any polychlorinated biphenyl, and (v) any
pollutant or contaminant or hazardous, dangerous or toxic chemical,
material, waste or substance regulated under or within the meaning of any
other law relating to protection of human health or the environment or
imposing liability or standards of conduct concerning any such chemical
material, waste or substance.
(xxiii) The Company has (i) good and marketable title to all of the
properties and assets described in the Offering Memorandum as owned by it,
free and clear of all liens, charges, encumbrances and restrictions
(except for Permitted Liens and taxes not yet payable), (ii) peaceful and
undisturbed possession under all leases to which any of them is a party as
lessee, (iii) except as disclosed in the Offering Memorandum, all
licenses, certificates, permits, authorizations, approvals, franchises and
other rights from, and has made all declarations and filings with, all
federal, foreign, state and local authorities (including, without
limitation, the FCC, the DoC, the NTIA and the ITU), all self-regulatory
authorities and all courts and other tribunals (each an "Authorization")
necessary to engage in the business conducted by any of them in the manner
described in the Offering Memorandum, and (iv) no reason to believe that
any governmental body or agency is considering limiting, suspending or
revoking any such Authorization. All such Authorizations are valid and in
full force and effect and the Company is in compliance with the terms and
conditions of all such Authorizations and with the rules and regulations
of the regulatory authorities having jurisdiction with respect thereto,
except where the failure to so comply would not have a Material Adverse
Effect. All leases to which the Company is a party are valid and binding
and no default by the Company has occurred and is continuing thereunder
and no defaults by the landlord are existing under any such lease, except
such defaults that could not reasonably be expected to have a Material
Adverse Effect. The Company is using its reasonable best efforts to obtain
all Authorizations (including, but not limited to an FCC license and a DoC
License, or amendments thereto) with respect to the high-resolution
satellites described in the Offering Memorandum.
(xxiv) The Company owns, possesses or has the right to employ all
patents, patent rights, intellectual property licenses, including the
OrbView-2 License (as defined in the Offering Memorandum), inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, software, systems or
procedures), trademarks, service marks and trade names, inventions,
computer programs, technical data and information (collectively, the
"Intellectual Property") employed by the Company in connection with its
business, free and clear of and without violating any right, claimed
right, charge, encumbrance, pledge, security interest, restriction or lien
of any kind of any other person, except where the failure to own, possess
or have the right to employ such Intellectual Property would not have a
Material Adverse Effect. The Company has not infringed and is not
infringing with asserted rights of others with respect to any such
Intellectual Property, except infringements that would not have a Material
Adverse Effect, and the Company has not received notice of the
infringement of asserted rights of others with respect to any such
Intellectual Property.
(xxv) None of the Company or any of its officers, directors,
partners, employees, agents or affiliates or any other person acting on
behalf of the Company, has, directly or indirectly, given or agreed to
give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or supplier, official
or employee of any governmental agency (domestic or foreign),
instrumentality of any government (domestic or foreign) or any political
party or candidate for office (domestic or foreign) or other person who
was, is
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<PAGE> 12
or may be in a position to help or hinder the business of the Company (or
assist the Company in connection with any actual or proposed transaction)
which (i) might subject the Company, or any other individual or entity to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (ii) if not given in the past, could
reasonably be expected to have had a Material Adverse Effect on the
assets, business or operations of the Company or (iii) if not continued in
the future, could reasonably be expected to have a Material Adverse
Effect.
(xxvi) All material tax returns required to be filed by the Company
in all jurisdictions have been so filed. All taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges due or
claimed to be due from such entities or that are due and payable have been
paid, except to the extent such taxes are (A) currently payable without
penalty or interest or (B) being contested in good faith and for which
adequate reserves have been provided. To the knowledge of the Company,
there are no material proposed additional tax assessments against the
Company or the assets or property of the Company.
(xxvii) The Company is not, and after giving effect to the Offering
will not be, an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended (the "Investment Company Act").
(xxviii) Except as set forth in the Offering Memorandum with respect
to the holders of Series A Preferred Stock, there are no holders of
securities of the Company who, by reason of the execution by the Company
of this Agreement or any other Operative Document to which it is a party
or the consummation by the Company of the transactions contemplated hereby
and thereby, have the right to request or demand that the Company register
any of its securities under the Act or analogous foreign laws and
regulations.
(xxix) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that: (i) transactions
are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect thereto.
(xxx) The Company maintains insurance covering its properties,
operations, personnel and businesses, and will maintain insurance as
required by the Indenture. Such insurance insures against such losses and
risks as are consistent with industry practice to protect the Company and
its business. The Company has not received notice from any insurer or
agent of such insurer that substantial capital improvements or other
expenditures will have to be made in order to continue such insurance. All
such insurance is outstanding and duly in force on the date hereof.
(xxxi) The Company has not (i) taken, directly or indirectly, any
action designed to, or that might reasonably be expected to, cause or
result in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Units, the Notes or
the Warrants or (ii) except as set forth in the Offering Memorandum with
respect to the Series A Offering, since the date of the Preliminary
Offering Memorandum (A) sold, bid for, purchased or paid any person any
compensation for soliciting purchases of, the Units, the Notes or the
Warrants or (B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
(xxxii) No registration under the Act of the Units, the Notes or the
Warrants is required for the sale of the Units to the Initial Purchasers
as contemplated hereby or for the Exempt Resales assuming (i) that the
purchasers who buy the Units in the Exempt Resales are either Eligible
Purchasers and (ii) the accuracy of the Initial Purchasers'
representations regarding the absence of general solicitation in
connection with the sale of Units to the Initial Purchasers and the Exempt
Resales contained herein. No form of general solicitation or general
advertising was used by the Company or any of its representatives (other
than the Initial Purchasers, as to which the Company makes no
representation or warranty) in
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<PAGE> 13
connection with the offer and sale of any of the Securities in connection
with Exempt Resales, including, but not limited to, articles, notices or
other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising. No securities of the same class as the Securities have been
issued and sold by the Company within the six-month period immediately
prior to the date hereof.
(xxxiii) Except as set forth on Schedule 5(xxxiii), there are no
employee pension or benefit plan with respect to which the Company or any
corporation considered an affiliate of the Company within the meaning of
Section 407(d)(7) of ERISA (an "ERISA Affiliate") is a party in interest
or disqualified person. The execution and delivery of this Agreement, the
other Operative Documents and the sale of the Units to be purchased by the
Eligible Purchasers will not involve any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue
Code of 1986. The representation made by the Company in the preceding
sentence is made in reliance upon and subject to the accuracy of, and
compliance with, the representations and covenants made or deemed made by
the Eligible Purchasers, as set forth in the Offering Memorandum under the
caption "Notice to Investors."
(xxxiv) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, and each amendment or supplement thereto, as
of its date, contains the information specified in, and meets the
requirements of, Rule 144A(d)(4) under the Act.
(xxxv) Subsequent to the respective dates as of which information is
given in the Offering Memorandum and up to the Closing Date, and except as
set forth in the Offering Memorandum, (A) the Company has not entered into
any amendment to or agreed to any modification of the Orbital Agreements,
the Stock Purchase Agreement or the Stockholders' Agreement, (B) the
Company has not incurred any liabilities or obligations, direct or
contingent, which are or will be material, individually or in the
aggregate, to the Company, nor entered into any transaction not in the
ordinary course of business, (C) there has not been, singly or in the
aggregate, any change or development which could reasonably be expected to
result in a Material Adverse Effect, and (D) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
class of capital stock.
(xxxvi) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Securities, the application of the
proceeds from the issuance and sale of the Securities and the consummation
of the transactions contemplated thereby as set forth in the Offering
Memorandum, will violate Regulations G, T, U or X promulgated by the Board
of Governors of the Federal Reserve System or analogous foreign laws and
regulations.
(xxxvii) The accountants who have certified or will certify the
financial statements included or to be included as part of the Offering
Memorandum are independent accountants as required by the Act. The
historical financial statements of the Company, together with related
notes thereto, comply as to form with the requirements applicable to
registration statements on Form S-4 under the Act, and the historical
financial statements of the Company present fairly the financial position
and results of operations of the Company at the dates and for the periods
indicated. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods presented except as noted therein. The other
financial and statistical information and data included in the Offering
Memorandum derived from the historical financial statements are accurately
presented and prepared on a basis consistent with the historical financial
statements included in the Offering Memorandum and the books and records
of the Company.
(xxxviii) The Company does not intend to, nor does it believe that
it will, incur debts beyond its ability to pay such debts as they mature.
Upon the issuance of the Units, the present fair saleable value of the
assets of the Company will exceed the amount that will be required to be
paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of the Company as they become absolute
and matured. Upon the issuance of the Units, the assets of the Company
will not constitute
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<PAGE> 14
unreasonably small capital to carry out its businesses as now conducted,
including the capital needs of the Company, taking into account the
projected capital requirements and capital availability.
(xxxix) Except pursuant to this Agreement, there are no contracts,
agreements or understandings between the Company and any other person that
would give rise to a valid claim against the Company or either of the
Initial Purchasers for a brokerage commission, finder's fee or like
payment in connection with the issuance, purchase and sale of the
Securities.
(xl) The Company has complied with all provisions of Section
517.075, Florida Statutes, relating to doing business with the Government
of Cuba or with any affiliate located in Cuba.
(xli) There exist no conditions that would constitute a default (or
an event which with notice or the lapse of time, or both, would constitute
a default) under any of the Operative Documents or any of the documents
relating to the Series A Preferred Stock.
(xlii) Except as disclosed in the Offering Memorandum, there are no
business relationships or related party transactions required to be
disclosed therein pursuant to Item 404 of Regulation S-K of the Commission
(assuming for purposes of this subparagraph that Regulation S-K is
applicable to the Offering Memorandum).
(xliii) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the Trust Indenture
Act.
(xliv) Each certificate signed by any officer of the Company and
delivered to the Initial Purchasers or counsel for the Initial Purchasers
pursuant to this Agreement shall be deemed to be a representation and
warranty by the Company to the Initial Purchasers as to the matters
covered thereby.
(xlv) The data relating to market size included in the Offering
Memorandum is based on or derived from sources that the Company believes
to be reliable and accurate in all material respects.
The Company acknowledges that each of the Initial Purchasers and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 8 hereof, counsel to the Company and counsel to the Initial Purchasers,
will rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.
(b) Each of the Initial Purchasers, severally and not jointly,
represents, warrants and covenants to the Company and agrees that:
(i) Offers and Sales only to Institutional Accredited Investors or
Qualified Institutional Buyers. Offers and sales of the Securities shall be made
only to Eligible Purchasers. Each Initial Purchaser agrees that it will not
offer, sell or deliver any of the Securities in any jurisdiction outside the
United States except under circumstances that will result in compliance with the
applicable laws thereof, and that it will take at its own expense whatever
action is required to permit its purchase and resale of the Securities in such
jurisdictions.
(ii) No General Solicitation. No general solicitation or general
advertising (within the meaning of Rule 502(c) under the 1933 Act) will be used
in the United States in connection with the offering or sale of the Securities.
(iii) Purchases by Non-Bank Fiduciaries. In the case of a non-bank
Eligible Purchaser of a Security acting as a fiduciary for one or more third
parties, each third party shall, in the judgment of the applicable Initial
Purchaser, be an Eligible Purchaser.
(iv) Subsequent Purchaser Notification. Each Initial Purchaser will
take reasonable steps to inform, and cause each of its U.S. affiliates to take
reasonable steps to inform, persons acquiring Securities from
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<PAGE> 15
such Initial Purchaser or affiliate, as the case may be, in the United States
that the Securities (A) have not been and will not be registered under the
Securities Act, (B) are being sold to them without registration under the
Securities Act in reliance on Rule 144A or in accordance with another exemption
from registration under the Securities Act, as the case may be, and (C) may not
be offered, sold or otherwise transferred except (1) to the Company, (2) outside
the United States in accordance with Regulation S or (3) inside the United
States in accordance with (x) Rule 144A to a person whom the Seller reasonably
believes is a QIB that is purchasing such Securities for its own account or for
the account of a QIB to whom notice is given that the offer, sale or transfer is
being made in reliance on Rule 144A or (y) pursuant to another available
exemption from registration under the 1933 Act.
(v) Minimum Principal Amount. No sale of the Securities to any one
Eligible Purchaser will be for less than U.S. $100,000 principal amount and no
Security will be issued in a smaller principal amount. If the Eligible Purchaser
is a non-bank fiduciary acting on behalf of others, each of the persons for whom
it is acting must purchase at least U.S. $100,000 principal amount of the
Securities.
(vi) Restrictions on Transfer. The transfer restrictions and the
other provisions set forth in the Offering Memorandum under the heading "Notice
to Investors," including the legend required thereby, shall apply to the
Securities except as otherwise agreed by the Company and the Initial Purchasers.
(vii) Delivery of Offering Memorandum. Each Initial Purchaser will
deliver to each purchaser of the Securities from such Initial Purchaser, in
connection with its original distribution of the Securities, a copy of the
Offering Memorandum, as amended and supplemented at the date of such delivery.
The Initial Purchasers understand that the Company and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Section 8
hereof, counsel for the Company and counsel for the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless (i) each of
the Initial Purchasers, (ii) each person, if any, who controls either of the
Initial Purchasers within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act and (iii) the respective officers, directors, partners,
employees, representatives and agents of each of the Initial Purchasers or any
controlling person to the fullest extent lawful, from and against any and all
losses, liabilities, claims, damages and expenses whatsoever (including but not
limited to reasonable attorneys' fees and any and all reasonable expenses
whatsoever incurred in investigating, preparing or defending against any
investigation or litigation, commenced or threatened, or any claim whatsoever,
and any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or the Offering Memorandum, or in any supplement
thereto or amendment thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the Company
will not be liable in any such case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with
information relating to either of the Initial Purchasers furnished to the
Company in writing by or on behalf of such Initial Purchaser expressly for use
therein; provided, further, that such indemnity with respect to the Preliminary
Offering Memorandum shall not inure to the benefit of either Initial Purchaser
(or any persons controlling such Initial Purchaser) from whom the person
asserting such loss, claim, damage or liability purchased the Units which are
the subject thereof if such person did not receive a copy of the Offering
Memorandum (or the Offering Memorandum as amended or supplemented) at or prior
to the confirmation of the sale of such Units to such person (and the Offering
Memorandum or any such amended or supplemented Offering Memorandum, as
applicable, shall have been delivered by the Company to such Initial Purchaser a
reasonable amount of time prior to the mailing or delivery, as applicable, of
such confirmation) and any such untrue statement or omission or alleged untrue
statement or omission of a material fact contained in such Preliminary
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<PAGE> 16
Offering Memorandum was corrected in the Offering Memorandum (or the Offering
Memorandum as amended or supplemented). This indemnity agreement will be in
addition to any liability which the Company may otherwise have, including under
this Agreement.
(b) Each of the Initial Purchasers, severally and not jointly,
agrees to indemnify and hold harmless (i) the Company, (ii) each person, if any,
who controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, and (iii) the officers, directors, partners,
employees, representatives and agents of the Company against any losses,
liabilities, claims, damages and expenses whatsoever (including but not limited
to reasonable attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any investigation or litigation,
commenced or threatened, or any claim whatsoever and any and all amounts paid in
settlement of any claim or litigation), joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or otherwise, insofar
as such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering Memorandum or
the Offering Memorandum, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with information
relating to such Initial Purchaser furnished to the Company in writing by or on
behalf of such Initial Purchaser expressly for use therein; provided, however,
that in no case shall either of the Initial Purchasers be liable or responsible
for any amount in excess of the discounts and commissions received by such
Initial Purchaser, as set forth on the cover page of the Offering Memorandum.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 6 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may otherwise have). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action, (ii) the indemnifying parties
shall not have employed counsel to take charge of the defense of such action
within a reasonable time after notice of commencement of the action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to one or all of the indemnifying parties (in which case the
indemnifying party or parties shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses of counsel shall be borne by the indemnifying
parties; provided, however, that the indemnifying party under subsection (a) or
(b) above shall only be liable for the legal expenses of one counsel (in
addition to any local counsel) for all indemnified parties in each jurisdiction
in which any claim or action is brought. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its prior written consent,
provided that such consent was not unreasonably withheld.
7. Contribution. In order to provide for contribution in circumstances in
which the indemnification provided for in Section 6 is for any reason held to be
unavailable to or is insufficient to hold harmless a party indemnified
thereunder, each indemnifying party shall contribute to the aggregate losses,
claims, damages, liabilities and expenses of the nature contemplated by such
indemnification provision (including any investigation, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement
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<PAGE> 17
of, any action, suit or proceeding or any claims asserted, but after deducting
in the case of losses, claims, damages, liabilities and expenses suffered by the
Company, any contribution received by the Company from persons, other than the
Initial Purchasers, who may also be liable for contribution, including persons
who control the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act) to which the Company and such Initial Purchaser may
be subject, in such proportion as is appropriate to reflect the relative
benefits received by the Company, on one hand, and such Initial Purchaser, on
the other hand, from the offering of the Units or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 6, in
such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company, on one hand, and
such Initial Purchaser, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company, on one hand, and each Initial Purchaser, on
the other hand, shall be deemed to be in the same proportion as (i) the total
proceeds from the offering of Units (net of discounts but before deducting
expenses) received by the Company and (ii) the discounts and commissions
received by such Initial Purchaser, respectively, in each case as set forth in
the table on the cover page of the Offering Memorandum. The relative fault of
the Company, on one hand, and of each Initial Purchaser, on the other hand,
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or such
Initial Purchaser and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 7, (i) in no case shall either of the Initial Purchasers be
required to contribute any amount in excess of the amount by which the discounts
and commissions applicable to the Units purchased by such Initial Purchaser
pursuant to this Agreement exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of any untrue or alleged
untrue statement or omission or alleged omission and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, (A) each person,
if any, who controls either of the Initial Purchasers within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and (B) the
respective officers, directors, partners, employees, representatives and agents
of each of the Initial Purchasers or any controlling person shall have the same
rights to contribution as such Initial Purchaser, and (A) each person, if any,
who controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and (B) the respective officers, directors, partners,
employees, representatives and agents of the Company shall have the same rights
to contribution as the Company, subject in each case to clauses (i) and (ii) of
this Section 7. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties under this Section 7, notify such party or parties from whom
contribution may be sought, but the failure to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 7 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its prior written consent, provided that such written consent was not
unreasonably withheld.
8. Conditions of Initial Purchasers' Obligations. The obligations of the
Initial Purchasers to purchase and pay for the Units, as provided herein, shall
be subject to the satisfaction of the following conditions:
(a) All of the representations and warranties of the Company
contained in this Agreement shall be true and correct on the date hereof and on
the Closing Date with the same force and effect as if made on and as of the date
hereof and the Closing Date, respectively. The Company shall have performed or
complied with all of the agreements herein contained and required to be
performed or complied with by it at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers as promptly as practicable on the day
following the date of this Agreement or at such later date and time as to which
the Initial Purchasers may agree, and no stop order suspending the qualification
or exemption from
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<PAGE> 18
qualification of the Units in any jurisdiction referred to in Section 4(e) shall
have been issued and no proceeding for that purpose shall have been commenced or
shall be pending or threatened.
(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, prevent the issuance of the Units; no
action, suit or proceeding shall have been commenced and be pending or
threatened against or affecting the Company before any court or arbitrator or
any governmental body, agency or official that, if adversely determined, would
result in a Material Adverse Effect; and no stop order shall have been issued
preventing the use of the Offering Memorandum, or any amendment or supplement
thereto, or which could reasonably be expected have a Material Adverse Effect on
the Company.
(d) Since the dates as of which information is given in the Offering
Memorandum, (i) there shall not have been any material adverse change, or any
development that is reasonably likely to result in a material adverse change, in
the capital stock or the long-term debt, or increase in the short-term debt, of
the Company from that set forth in the Offering Memorandum, (ii) no dividend or
distribution of any kind shall have been declared, paid or made by the Company
on any class of its capital stock, and (iii) the Company shall not have incurred
any liabilities or obligations, direct or contingent, that are material,
individually or in the aggregate, to the Company, and that are required to be
disclosed on a balance sheet or notes thereto in accordance with generally
accepted accounting principles and are not disclosed on the latest balance sheet
or notes thereto included in the Offering Memorandum. Since the date hereof and
since the dates as of which information is given in the Offering Memorandum,
there shall not have occurred any Material Adverse Effect.
(e) The Initial Purchasers shall have received certificates, dated
the Closing Date, signed on behalf of the Company, in form and substance
satisfactory to the Initial Purchasers, confirming, as of the Closing Date, the
matters set forth in paragraphs (a), (b), (c) and (d) of this Section 8 and
that, as of the Closing Date, the obligations of the Company to be performed
hereunder on or prior thereto have been duly performed.
(f) The Initial Purchasers shall have received on the Closing Date
an opinion, dated the Closing Date, (i) of Latham & Watkins, counsel for the
Company and (ii) of Susan Herlick, Esquire, general counsel for the Company;
each in form and substance satisfactory to the Initial Purchasers and counsel
for the Initial Purchasers, covering such matters as are customarily covered in
such opinions.
(g) The Initial Purchasers shall have received on the Closing Date
an opinion, dated the Closing Date, of Halprin, Temple, Goodman and Sugrue, in
form and substance satisfactory to the Initial Purchasers and counsel for the
Initial Purchasers, covering such matters as are customarily covered in such
opinions.
(h) At the time this Agreement is executed and at the Closing Date,
the Initial Purchasers shall have received from KPMG Peat Marwick, independent
public accountants, dated as of the date of this Agreement and as of the Closing
Date, customary comfort letters addressed to the Initial Purchasers and in form
and substance satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers with respect to the financial statements and certain financial
information of the Company contained in the Offering Memorandum and/or
incorporated therein by reference.
(i) The Initial Purchasers shall have received an opinion, dated the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers, of Fried, Frank, Harris, Shriver & Jacobson, counsel for the Initial
Purchasers, covering such matters as are customarily covered in such opinions.
(j) Fried, Frank, Harris, Shriver & Jacobson shall have been
furnished with such documents, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in this Section 8 and in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions herein contained.
(k) Prior to the Closing Date, the Company shall have furnished to
the Initial Purchasers such further information, certificates and documents as
the Initial Purchasers may reasonably request.
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<PAGE> 19
(l) The Company and the Trustee shall have entered into the
Indenture and the Initial Purchasers shall have received counterparts, conformed
as executed, thereof.
(m) The Company shall have entered into the Registration Rights
Agreement and the Initial Purchasers shall have received counterparts, conformed
as executed, thereof.
(n) The Company shall have entered into the Warrant Registration
Rights Agreements and the Initial Purchasers shall have received counterparts,
conformed as executed, thereof.
(o) The Company shall have entered into the Pledge Agreement and the
Initial Purchasers shall have received counterparts, conformed as executed,
thereof.
(p) The Company shall have given irrevocable instructions to
purchase the Pledged Securities and deposit the Pledged Securities into the
Pledge Account, and the Initial Purchasers shall have received the written
opinion of a firm of nationally recognized independent certified accountants, in
form and substance satisfactory to the Initial Purchasers, to the effect that
the Pledged Securities, upon receipt of scheduled interest and principal
payments thereon, are sufficient to provide for the payment in full of the first
four scheduled interest payments due on the Notes.
(q) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of Rule
463(g) under the Securities Act, that (i) it is downgrading its rating assigned
to any class of securities of the Company or (ii) it is reviewing its rating
assigned to any class of securities of the Company with a view to possible
downgrading, or with negative implications, or direction not determined.
(r) The Units shall have been approved for trading on PORTAL.
(s) Not later than the Closing Date, the Series A Offering shall
have been completed, upon the terms described in the Offering Memorandum.
All opinions, certificates, letters and other documents required by this
Section 8 to be delivered by the Company will be in compliance with the
provisions hereof only if they are satisfactory in form and substance to the
Initial Purchasers. The Company shall furnish the Initial Purchasers with such
conformed copies of such opinions, certificates, letters and other documents as
they shall reasonably request.
9. Initial Purchasers' Information. The Company acknowledges that the
statements with respect to the offering of the Units set forth in the first
sentence of the last paragraph of text on the cover page, the last paragraph
appearing on page iv of the Offering Memorandum and the sixth paragraph under
the caption "Plan of Distribution" in the Offering Memorandum constitute the
only information relating to any of the Initial Purchasers furnished to the
Company in writing by or on behalf of any of the Initial Purchasers expressly
for use in the Offering Memorandum.
10. Survival of Representations and Agreements. All representations and
warranties, covenants and agreements of the Initial Purchasers and the Company
contained in this Agreement, including the agreements contained in Sections 4(f)
and 11(d), the indemnity agreements contained in Section 6 and the contribution
agreements contained in Section 7, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of either of the
Initial Purchasers, any controlling person thereof, or by or on behalf of the
Company or any controlling person thereof, and shall survive delivery of and
payment for the Units to and by the Initial Purchasers. The representations
contained in Section 5 and the agreements contained in Sections 4(f), 6, 7 and
11(d) shall survive the termination of this Agreement, including any termination
pursuant to Section 11.
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<PAGE> 20
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon execution and
delivery of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate this
Agreement at any time prior to the Closing Date by notice to the Company from
the Initial Purchasers, without liability (other than with respect to Sections 6
and 7) on the Initial Purchasers' part to the Company if, on or prior to such
date, (i) the Company shall have failed, refused or been unable to perform any
agreement in any material respect on their part to be performed hereunder, (ii)
any other condition to the obligations of the Initial Purchasers hereunder as
provided in Section 8 is not fulfilled when and as required in any material
respect], (iii) in the reasonable judgment of the Initial Purchasers, any
Material Adverse Effect shall have occurred since the respective dates as of
which information is given in the Offering Memorandum, other than as set forth
in the Offering Memorandum, or (iv)(A) any domestic or international event or
act or occurrence has disrupted, or in the opinion of the Initial Purchasers
will in the immediate future materially disrupt, the market for the Company's
securities or for securities in general; (B) trading in securities generally on
the New York or American Stock Exchange, or the Nasdaq National Market, shall
have been suspended or materially limited, or minimum or maximum prices for
trading shall have been established, or maximum ranges for prices for securities
shall have been required, on such exchange, or by such exchange or other
regulatory body or governmental authority having jurisdiction; (C) a banking
moratorium shall have been declared by federal or state authorities, or a
moratorium in foreign exchange trading by major international banks or persons
shall have been declared; (D) there is an outbreak or escalation of armed
hostilities involving the United States on or after the date hereof, or if there
has been a declaration by the United States of a national emergency or war, the
effect of which shall be, in the Initial Purchasers' reasonable judgment, to
make it inadvisable or impracticable to proceed with the offering or delivery of
the Units on the terms and in the manner contemplated in the Offering
Memorandum; or (E) there shall have been such a material adverse change in
general economic, political or financial conditions or if the effect of
international conditions on the financial markets in the United States shall be
such as, in the Initial Purchasers' reasonable judgment, makes it inadvisable or
impracticable to proceed with the delivery of the Units as contemplated hereby.
(c) Any notice of termination pursuant to this Section 11 shall be
by telephone or telephonic facsimile and, in either case, confirmed in writing
by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to clause (iii) or (iv) of Section
11(b), in which case each party will be responsible for its own expenses), the
Company shall reimburse the Initial Purchasers for all out-of-pocket expenses
(including the reasonable fees and expenses of the Initial Purchasers' counsel),
reasonably incurred by the Initial Purchasers in connection herewith.
12. Notice. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the Initial
Purchasers shall be mailed, delivered, telecopied and confirmed in writing or
sent by a nationally recognized overnight courier service guaranteeing delivery
on the next business day to Bear, Stearns & Co. Inc., 245 Park Avenue, New York,
NY 10167, Attention: Corporate Finance Department, telecopy number: (212)
272-3092, with a copy to Fried, Frank, Harris, Shriver & Jacobson, 1001
Pennsylvania Avenue, N.W., Suite 800, Washington, DC 20004, Attention: Stephen
I. Glover, telecopy number: (202) 639-7008; and if sent to the Company, shall be
mailed, delivered, telecopied and confirmed in writing or sent by a nationally
recognized overnight courier service guaranteeing delivery on the next business
day to Orbital Imaging Corporation, 21700 Atlantic Boulevard, Dulles, VA 20166,
Attention: Susan Herlick, General Counsel, telecopy number: (703) 406-5552, with
a copy to Latham & Watkins, 1001 Pennsylvania Ave., NW, Suite 800, Washington,
DC 20004, Attention:
Michael A. Bell, telecopy number: (202) 637-2201.
13. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Initial Purchasers and the Company and the
controlling persons and agents referred to in Sections 6 and 7, and their
respective successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained. The
-19-
<PAGE> 21
term "successors and assigns" shall not include a purchaser, in its capacity as
such, of Units, Notes or Warrants from the Initial Purchasers.
14. Construction. This Agreement shall be construed in accordance with the
internal laws of the State of New York. TIME IS OF THE ESSENCE IN THIS
AGREEMENT.
15. Captions. The captions included in this Agreement are included solely
for convenience of reference and are not to be considered a part of this
Agreement.
16. Counterparts. This Agreement may be executed in various counterparts
which together shall constitute one and the same instrument.
[Signature Page to Follow]
-20-
<PAGE> 22
If the foregoing correctly sets forth the understanding among the Initial
Purchasers and the Company please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
ORBITAL IMAGING CORPORATION
By: ____________________________
Name:
Title:
Accepted and agreed to as of
the date first above written:
BEAR, STEARNS & CO. INC.
By: _______________________
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: _______________________
Name:
Title:
NATIONSBANC MONTGOMERY SECURITIES LLC
By: _______________________
Name:
Title:
-21-
<PAGE> 23
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Initial Purchasers Units
-------------------- ---------
<S> <C>
Bear, Stearns & Co. Inc. 67,500
Merrill Lynch, Pierce, Fenner & Smith Incorporated 67,500
NationsBanc Montgomery Securities LLC 15,000
---------
Total 150,000
</TABLE>
<PAGE> 24
SCHEDULE 5(vi)
None Disclosed
<PAGE> 25
SCHEDULE 5(xxxiii)
ORBIMAGE 401(k) plan
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED
ORBIMAGE SYSTEM PROCUREMENT AGREEMENT
This Orbimage System Procurement Agreement (this "Agreement") is made
and entered into as of the 26th day of February, 1998 between Orbital Imaging
Corporation, a Delaware corporation ("OIC"), and Orbital Sciences Corporation, a
Delaware Corporation ("Orbital").
WITNESSETH
WHEREAS, the parties have previously entered into the OIC System
Procurement Agreement dated as of November 18, 1996, as amended on May 8, 1997,
December 31, 1997 and February 25, 1998; and
WHEREAS, the parties desire to amend and restate the OIC System
Procurement Agreement to reflect all the amendments thereto (including amended
or restated attachments thereto)
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Except as otherwise specifically defined herein, capitalized terms
shall have the meanings ascribed to such terms in Appendix A attached hereto.
[Confidential Treatment] means that certain Confidential information
has been deleted from this document and filed separately with the Securities
and Exchange Commission.
ARTICLE 2.
SCOPE OF WORK
Consistent with the terms and conditions set forth herein, Orbital
shall furnish the management, labor, facilities, personnel and materials
required for the performance of the following work (collectively, the "Work"):
Section 2.1. Orbital shall provide the OrbView-1 System as described in
OrbView-1 System Statement of Work (Exhibit A).
Section 2.2. Orbital shall provide and OrbView-2 license as described
in OrbView-2 License Agreement (Exhibit B).
Section 2.3. OrbView-3 System Design, Development and Integration.
Orbital shall have responsibility for overall design, development, and
integration of the OrbView-3 System in accordance with Exhibit C, OrbView
High Resolution Imagery System Mission Requirements Document and applicable
Statements of Work.
Section 2.3.1. Provision of OrbView-3 Satellite. Orbital shall
design, construct and deliver the OrbView-3 Satellite in accordance
with the OrbView-3 Mission Requirements Document (Exhibit C, Part 1A)
and Statement of Work (Exhibit C, Part 1B).
Section 2.3.2. Provision of Launch. Orbital shall launch the
OrbView-3 Satellite using a Launch Vehicle in accordance with the
Launch Vehicle Statement of
<PAGE> 2
Work and Specifications (Exhibit C, Part 2).
Section 2.4. Provision of OrbView Command and Control Segment and
OrbView-3 Data Processing Segment. Orbital shall design, construct and deliver
the OrbView-3 and OrbView-4 Command and Control Segment ("CCS") and the Joint
OrbView-3 and OrbView-4 Data Processing Segment ("DPS") in accordance with the
Joint OrbView-3 and OrbView-4 Mission Requirements Document (Exhibit C, Part
1A), Statement of Work (Exhibit C, Part 1B) and the Joint OrbView-3 and
OrbView-4 Command and Control and Data Processing and Distribution Requirements
Specifications (Exhibit D, Part 1). Orbital shall design, construct and deliver
the OrbView-1 and OrbView-2 Command and Control Segment in accordance with the
OrbView-1 and OrbView-2 Command and Control Statement of Work (Exhibit D, Part
2).
Section 2.5. OrbView-4 System Design, Development and Integration.
Orbital shall have responsibility for overall design, development, and
integration of the OrbView-4 System in accordance with Exhibit C, OrbView High
Resolution Imagery System Mission Requirements Document and applicable Statement
of Work.
Section 2.5.1. Provision of OrbView-4 Satellite. Orbital shall
design, construct and deliver the OrbView-4 Satellite in accordance
with the OrbView High Resolution Imagery System Mission Requirements
Document (Exhibit C, Part 1A) and Statement of Work (Exhibit C,
Part 1B).
Section 2.5.2. Provision of Launch. Orbital shall launch the
OrbView-4 Satellite using a Launch Vehicle to be determined in
accordance with the Launch Vehicle Statement of Work and Specifications
(Exhibit C, Part 2). Any launch contract for OrbView-4, and subsequent
major amendments thereto affecting price or schedule, shall be subject
to OIC's prior approval, which shall not be unreasonably withheld.
Section 2.6. Insurance. Orbital shall procure launch, satellite check
out and/or on-orbit operation insurance, at OIC's expense, as requested by OIC,
subject to availability of such insurance and OIC's agreement to the price,
terms and conditions of such insurance. Orbital shall maintain, at its expense,
insurance coverage of the type and level that is customarily carried by entities
engaged in similar businesses to Orbital's, to cover losses from damage to
personal property, such as the OrbView-3 and OrbView-4 satellites, until title
has passed to ORBIMAGE.
ARTICLE 3.
CONSIDERATION
Section 3.1. The price for the work hereunder (collectively, the
"Price") is as follows:
<TABLE>
<CAPTION>
CLIN FIXED PRICE
<S> <C> <C>
0001 OrbView-1 System (2.1) $[Confidential Treatment]
0002 OrbView-2 License (2.2) [Confidential Treatment]
0003 OrbView-3 Satellite and Launch (2.3.1, 2.3.2) [Confidential Treatment]
0004 Data Processing Segment and Command and Control Segment (2.4) [Confidential Treatment]
0005 OrbView-4 Satellite and Launch (2.5.1, 2.5.2)* [Confidential Treatment]
TOTAL FIXED PRICE $262,600,000
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
CLIN FIXED PRICE
<S> <C> <C>
0006 Insurance [Confidential Treatment]
0007 OrbView-4 Launch Vehicle costs in excess of $[Confidential Treatment] [Confidential Treatment]
</TABLE>
* If the launch for the OrbView-4 satellite costs less than
$[Confidential Treatment], then the fixed price shall be adjusted downward
accordingly.
Section 3.2. Taxes. (a) The Price does not include any federal, state
or local sales, use or excise taxes levied upon or measured by the sale, the
sales price, or the use of the items to be delivered or services required to be
performed hereunder. Orbital shall list separately on its invoice any such tax
lawfully applicable to the items to be delivered or services required to be
performed hereunder and payable by OIC. The Price shall not, however, include
any taxes on property owned by the United States Government, or any U.S. or
foreign federal, state or local income taxes imposed on Orbital.
(b) In cases where Orbital and/or OIC are wholly or partially exempt
from such taxes and duties or otherwise entitled to relief by way of protest,
refund claims, litigation or other proceedings, Orbital shall take all necessary
steps to facilitate such exemption or relief by:
(i) Using reasonable efforts to bring about the exemption or
relief before submitting the invoices to OIC; and
(ii) Complying with all formalities necessary to enable OIC to
claim reimbursement with respect to taxes and duties that have been
paid. For this purpose, Orbital shall comply with the reasonable
instructions given to it by OIC and provide in due time the information
that OIC reasonably requires.
If any such tax is determined to be legally due from either Orbital or OIC, OIC
shall pay it separately. OIC shall pay, or reimburse Orbital for all
out-of-pocket expenses incurred in connection with the activities contemplated
by this Section 3.2.
ARTICLE 4.
[RESERVED]
ARTICLE 5.
PAYMENT TERMS AND INVOICING
Section 5.1 Monthly Payments Schedule for CLINs 0001 through 0005.
Exhibit F sets forth a Monthly Payment Schedule for CLINs 0001 through 0005.
No later than May 28, 1997, OIC shall remit to Orbital the aggregate amount of
$23,100,000 in payment for January through April 1997. Beginning at the end of
May 1997 and in accordance with Section 5.3 hereof, Orbital shall invoice OIC
for work performed and costs incurred each month and any amounts previously
invoiced and unpaid. OIC shall pay each invoice, provided, however, that the
amount payable by OIC shall not exceed the lesser of (a) the amount of such
invoice and (b) the sum of (i) the amount set forth in Exhibit F for the month
invoiced plus (ii) for each preceding month for which an invoice was submitted
in an amount less than the amount set forth in Exhibit F for such month, the
excess of such amount set forth in Exhibit F over the amount of the invoice
submitted for such month, but only to the
3
<PAGE> 4
extent not previously paid hereunder.
Section 5.2 CLIN 006. Payment for CLIN 006 shall be made after
negotiation of the final premium for each insurance policy and prior to the
premium due date. Orbital shall provide OIC with prompt notice of the amount of
such payments and the date on which such payments are due.
Section 5.3 Monthly Payment Schedule Invoices. Within 15 days after the
end of each month, Orbital shall submit certified invoices reflecting actual
incurred costs for the preceding month and any unpaid balance from prior months.
Orbital shall invoice OIC for payments due under CLIN 0007 as costs are incurred
by Orbital. OIC shall pay such invoices to the extent provided in Section 5.1
within 10 days from the date of receipt.
Section 5.4 Milestone Schedule Payments. Exhibit F also sets forth a
Milestone Schedule Payment for CLINs 0003 through 0005. Orbital shall invoice
OIC for the Milestones set forth in Exhibit F upon achieving such milestone.
Such invoices shall be paid within 10 days of receipt.
Section 5.5. On-Orbit Extended Performance Incentive. For both the
OrbView-3 and OrbView-4 Satellites, OIC agrees to pay Orbital an On-Orbit
Extended Performance Incentive at a fixed price of up to $1,000,000 per year per
satellite based on the level of satellite operation performance beyond the
contractual requirement of five (5) years. If in any year after the fifth year
the extended performance is for less than an entire additional year, the annual
incentive will be pro-rated for the number of days of extended operation. OIC
and Orbital shall negotiate in good faith the criteria for determining what
constitutes "satellite operation performance" for purposes of this Section 5.5.
If the parties are unable to agree on such criteria by the date three months
prior to the OrbView-3 Satellite launch, then either party shall have the right
to submit the issue for resolution by binding mediation.
ARTICLE 6.
WORK SCHEDULE AND DELIVERY
Section 6.1 Delivery.
(a) Delivery of OrbView- I System shall occur at the time of closing a
private financing contemplated by OIC.
(b) Delivery of OrbView-2 license shall occur at the time of closing a
private financing contemplated by OIC.
(c) Delivery of the OrbView-3 Satellite and Launch Vehicle shall occur
on separation of the Launch Vehicle from the carrier aircraft on the launch
date.
(d) Delivery of the OrbView Data Processing Segment required for
OrbView-3 shall coincide with the operational availability of the OrbView-3
Satellite. Delivery of the OrbView Data Processing Segment required for
OrbView-4 shall occur no later than ninety (90) days prior to the OrbView-4
Satellite's launch date.
(e) Delivery of Command and Control Segment shall be as follows:
(1) Completed work for the OrbView- I and OrbView-2 Systems
shall be delivered at the time of closing a private financing
contemplated by OIC.
(2) Remaining work for OrbView-2 shall be delivered in April,
1997.
4
<PAGE> 5
(3) OrbView Command and Control Segment for OrbView-3 and
OrbView-4 shall be delivered no later than sixty (60) days prior to
each satellite's respective launch date.
(f) Delivery of the OrbView-4 Satellite shall occur upon intentional
ignition of the launch vehicle.
Section 6.2 Schedule Delays. OIC and Orbital recognize that under this
Agreement Orbital is engaged in a technology development program involving the
design, development, construction, and integration of sophisticated and complex
technical systems, management of a number of different suppliers, and inherent
schedule uncertainties of space launch operations, and that there may be
schedule delays. Orbital shall provide OIC with regular reports of its
performance with respect to the applicable schedules and shall promptly notify
OIC when it reasonably expects that there are delays that are likely to cause a
material deviation from such schedules. In the event of such delays likely to
cause a material deviation, Orbital shall meet with OIC to discuss the cause of
such delays, the consequences of such delays and possible courses of action to
mitigate the effect of such delays. Each party shall bear its own costs with
respect to any delays, except as provided in Section 14.3.
ARTICLE 7.
ACCESS AND ACCEPTANCE
Section 7.1. Access. Subject to the receipt of any and all required
governmental approvals, OIC's authorized representatives shall have the right,
on a not-to-interfere basis, at all reasonable times during the performance of
this Agreement, to monitor the OrbView-3 Satellite and the OrbView-4 Satellite,
Command and Control and OrbView-3 and OrbView-4 Data Processing work in progress
at the plant(s) of Orbital.
Section 7.2. Progress Meetings. During the performance of this
Agreement, Orbital shall conduct reviews in accordance with the schedule
identified in the Statement of Work, as the case may be, at which Orbital shall
provide a review of milestones completed subsequent to the preceding review,
status of the upcoming milestones, and such other matters as may be mutually
agreed upon by the parties. Orbital shall also provide OIC at such meetings with
such reports and documentation as are required by such Statements of Work. The
parties may mutually agree to conduct additional interim meetings or reviews
from time to time with a mutually acceptable agenda. OIC shall determine its
appropriate manager and personnel to attend such meetings. Orbital shall be
represented by its applicable program manager and such other personnel as are
specifically required to support the particular presentation. All such meetings
shall be held at Orbital's facility in Germantown, Maryland or other mutually
agreeable location.
Section 7.3. Inspection and Acceptance, (a) Subject to the receipt of
any and all required governmental approvals, OIC's authorized representatives
shall promptly conduct a final inspection of the OrbView-3 Satellite and
OrbView-4 Satellite in accordance with the System Requirements Compliance
Document and End-Item Data Package (Exhibit G) or, at OIC's option, witness such
inspection by Orbital, and shall either approve it for launch in writing or
promptly notify Orbital in writing of the particulars of nonconformance with the
applicable Specifications. If no objections have been sent by OIC within fifteen
(15) days of the inspection, the OrbView-3 Satellite and OrbView-4 Satellite
shall be deemed to have received approval for launch by OIC. Corrections
required to render the OrbView-3 Satellite and OrbView-4 Satellite in
conformance with the applicable Specification shall be made by Orbital at its
cost. The decision as to how to make the corrections shall be at Orbital's sole
discretion and an item found to be non-conforming during or after testing
performed
5
<PAGE> 6
under this Agreement shall, at OIC's request and without charge to OIC, be
re-tested by Orbital after Orbital has remedied the nonconformance. OIC may be
assisted in all inspections by its consultants or advisors to the extent allowed
by law.
(b) The remaining work to be performed on the Command and Control
Segment as specified in Section 2.4 shall be accepted in accordance with a
Command and Control Segment Acceptance Test Procedure ("CCS ATP"), a copy of
which shall be attached to this Agreement upon completion as Schedule 7.3(b).
The CCS ATP shall take place at the facilities of Orbital at Dulles, Virginia.
Such CCS ATP shall be scheduled at a mutually convenient time within fifteen
(15) days after Orbital notifies OIC that the work on the Command and Control
Segment have been completed. Within thirty (30) days after completion of the CCS
ATP, OIC shall give written notice of any claim that the work on the Command and
Control does not conform to such Specifications. Corrections required to render
the Command and Control Segment in conformance with the applicable Specification
shall be made by Orbital at its cost. The decision as to how to make the
corrections shall be at Orbital's sole discretion and an item found to be
nonconforming during or after testing performed under this Agreement shall, at
OIC's request and without charge to OIC, be re-tested by Orbital after Orbital
has remedied the non-conformance. If OIC fails to participate in the CCS ATP or
to notify Orbital as required, OIC agrees that the Command and Control Segment
work shall be deemed accepted with all faults that inspection and test would
have revealed and to have waived all rights to revoke acceptance after such a
thirty-day period. OIC may be assisted in all inspections by its consultants or
advisors to the extent allowed by law. OIC and Orbital acknowledge that the CCS
ATP may be performed incrementally as certain portions of the CCS related to
OrbView-3 and OrbView-4, respectively, are completed. The timing for testing and
corrections, and the remedies set forth above, shall apply with respect to each
incremental test.
(c) The work to be performed on the OrbView-3 and OrbView-4 Data
Processing Segment as specified in Section 2.4 shall be accepted in accordance
with the OrbView-3 and OrbView-4 Data Processing Segment Acceptance Test
Procedure ("DPS ATP"), a copy of which shall be attached to this Agreement upon
completion as Schedule 7.3(c), The DPS ATP shall take place at the facilities of
Orbital at Dulles, Virginia. Such DPS ATP shall be scheduled at a mutually
convenient time within fifteen (15) days after Orbital notifies OIC that the
work on the OrbView-3 and OrbView-4 Data Processing Segment has been completed.
Within thirty (30) days after completion of the DPS ATP, OIC shall give written
notice of any claim that the work on the OrbView-3 and OrbView-4 Data Processing
Segment does not conform to such Specifications. Corrections required to render
the OrbView-3 and OrbView-4 Data Processing Segment in conformance with the
applicable Specification shall be made by Orbital at its cost. The decision as
to how to make the corrections shall be at Orbital's sole discretion and an item
found to be non-conforming during or after testing performed under this
Agreement shall, at OIC's request and without charge to OIC, be re-tested by
Orbital after Orbital has remedied the non-conformance. If OIC fails to
participate in the DPS ATP or to notify as required, OIC agrees that the
OrbView-3 and OrbView-4 Data Processing Segment work shall be deemed accepted
with all faults that inspection and test would have revealed and to have waived
all rights to revoke acceptance after such a thirty-day period. OIC may be
assisted in all inspections by its consultants or advisors to the extent allowed
by law. OIC and Orbital acknowledge that the DPS ATP may be performed
incrementally as certain portions of the DPS related to OrbView-3 and OrbView-4,
respectively, are completed. The timing for testing and corrections, and the
remedies set forth above, shall apply with respect to each incremental test.
(d) Failure to agree on any conformance to Specification shall be a
dispute and settled in accordance with Section 15.4.
6
<PAGE> 7
Section 7.4. On-Orbit Checkout. Orbital shall perform, at its expense,
on-orbit satellite checkout activities for OrbView-3 and OrbView-4 for a period
of thirty (30) days from launch.
ARTICLE 8.
TITLE AND RISK OF LOSS
Unless otherwise provided in this Agreement, title to, beneficial
ownership of, and right to possession to and risk of loss of or damage shall
pass to OIC, as follows:
(a) with respect to the OrbView-1 System, at the time of
closing a private financing contemplated by OIC;
(b) with respect to the OrbView-2 license, at the time of
closing a private financing contemplated by OIC;
(c) with respect to the OrbView-3 Satellite and Launch
Vehicle, upon separation of the Launch Vehicle from the carrier aircraft;
(d) with respect to the Command and Control Segment, for
completed work at the time of closing a private financing contemplated by OIC,
and for remaining work on OrbView-2 upon successful completion of the CCS ATP in
accordance with the provisions of Section 7.3(b); and
(e) with respect to the CCS and DPS for OrbView-3 and
OrbView-4, upon successful completion of the entire CCS ATP and DPS ATP for
OrbView-3 and OrbView-4, respectively, each in accordance with the provisions of
Section 7.3(b) and 7.3(c).
(f) with respect to OrbView-4 Satellite, risk of loss shall
occur and title shall pass upon intentional ignition of the launch vehicle.
ARTICLE 9.
CHANGES
Section 9.1. Changes. At any time and by written order, OIC may make
changes within the general scope of this Agreement in (a) the Specifications or
the Statement of Work, (b) the method of packing or shipment, (c) place or time
of delivery, or (d) the quantity or type of the items to be delivered or
services required to be performed hereunder.
Section 9.2. Adjustments to Agreement. (a) If any change causes an
increase or decrease in the Price, or in the time required for performance of
any part of the Work, whether or not directly changed by the order, OIC and
Orbital shall negotiate an equitable adjustment to such Price, delivery schedule
or other provision of this Agreement. Orbital shall perform the Work as changed
pending resolution of any negotiation under this Article 9, provided that OIC
provides funding for the efforts.
(b) Failure to agree to any adjustment shall be a dispute and
settled in accordance with Section 15.4.
7
<PAGE> 8
ARTICLE 10.
REPRESENTATIONS AND WARRANTIES
Section 10.1 Representations and Warranties. Orbital represents and
warrants that (a) it has, or will have, and it shall deliver to OIC at the time
of title passing pursuant to Article 8, sole and good legal and equitable title
to the items to be delivered pursuant to Article 2, free and clear of any and
all security interests, Liens, claims, charges, and encumbrances of any kind or
nature whatsoever, together with full power and lawful authority to sell,
deliver and perform the items to be delivered and to the extent applicable, the
services to be performed under Article 2, (b) subject to the provisions of
Section 10.2(a), the items to be delivered or to the extent applicable, the
services required to be performed shall be free from defects in design, material
and workmanship and shall operate and conform to the performance capabilities,
specifications, functions and other descriptions set forth in the Specifications
(as such Specifications may be modified from time to time), (c) neither the
delivery of the items nor the performance of the services required to be
performed by Orbital shall in any way constitute an infringement or other
violation of any U.S. copyright, trademark or patent or other validly registered
enforceable intellectual property right of any third party in the U.S. and
Canada, which Orbital represents are the only jurisdictions in which such
services are to be performed, and (d) the items to be delivered and the services
required to be performed hereunder shall be in compliance with all applicable
United States laws, rules and regulations.
Section 10.2. Remedies for Breach of Warranty and Warranty Period.
(a) Notwithstanding acceptance by OIC of the OrbView-3 and OrbView-4
Command and Control Segment or the OrbView-3 and OrbView-4 Data Processing
Segment, or any part thereof, or any provision of this Agreement, to the extent
permitted by the terms thereof, Orbital shall assign to OIC any warranties it
has with respect to any part of any of the Command and Control Segment and the
OrbView-3 and OrbView-4 Data Processing Segment from third parties. Orbital
warrants, with respect to the remaining work to be performed with respect to the
OrbView-2 Command and Control, the OrbView-3 and OrbView-4 Command and Control
work and for the OrbView-3 and OrbView-4 Data Processing Segment, such work, or
any part thereof, shall be free from defects in design, material and workmanship
and shall operate and conform to the performance capabilities, specifications,
functions and other descriptions set forth in the Specifications that relate
thereto. The applicable warranty periods shall be:
(i) for the segment of the OrbView Command and control Segment
relating to OrbView-3, for a period of one (1) year after the later to
occur of (A) title passing for such OrbView-3 segment or (B) launch of
the OrbView-3 Satellite.
(ii) for the segment of the OrbView Command and Control
Segment specifically related to OrbView-4, for a period of one (1) year
after the later to occur of (A) title passing for such OrbView-4
segment or (B) launch of the OrbView-4 Satellite.
(iii) for the segment of the OrbView Data Processing Segment
relating to OrbView-3, for a period of one (1) year after the later to
occur of (A) title passing for such OrbView-3 segment or (B) launch of
the OrbView-3 Satellite.
8
<PAGE> 9
(iv) for the segment of the OrbView Data Processing Segment
specifically related to OrbView-4, for a period of one (1) year after
the later to occur of (A) title passing for such OrbView-4 segment or
(B) launch of the OrbView-4 Satellite.
Orbital shall, at its expense, repair or replace such work, or
any part thereof, that do not conform to such warranty. Orbital's obligation
during the applicable Warranty Period shall be limited to repair or replacement
of the portion of the Command and Control Segment and the OrbView-3 and
OrbView-4 Data Processing Segment, or any part thereof, for which it has
provided a warranty. Notice of all claimed defects must be provided in writing
to Orbital within the applicable Warranty Period. The costs of inspection for
the Command and Control Segment and OrbView-3 and OrbView-4 Data Processing
Segment, or any part thereof, found to conform to the Specifications and
requirements of this Agreement and not defective shall be the responsibility of
OIC. Any product or part repaired or replaced shall be subject to a warranty
until the later of six months after repair or the original applicable warranty
period. The warranty set forth herein is OIC's exclusive remedy against Orbital
for any defect in the Command and Control Segment or the OrbView-3 and OrbView-4
Data Processing Segment, or any part thereof, and is in lieu of all other
warranties, express or implied.
(b) The Orbital warranty set forth herein shall not extend to
any of the Command and Control Segment or the OrbView-3 Data Processing Segment,
or any part thereof that is found, upon Orbital's or its subcontractor's
examination and not as a result of actions or omissions by Orbital or its
subcontractor, to have been (i) mishandled, misused, subjected to negligence,
accident or abuse, (ii) installed, operated or maintained contrary to Orbital's
specifications or instructions or otherwise used improperly, (iii) tampered with
or damaged, (iv) repaired or altered by anyone other than Orbital or its
subcontractors without Orbital's express advance written approval, or (v)
delivered to Orbital not in conformance with the notice requirements in the
warranty.
(c) Following the separation of the Launch Vehicle from the
carrier aircraft in the case of OrbView-3, and following intentional ignition of
the launch vehicle in the case of OrbView-4, OIC's sole remedy for launch
failure, defects, failure to conform with applicable Specifications or any other
requirements shall be limited to insurance proceeds.
Section 10.3. Limitation of Liability. (a) ORBITAL SHALL NOT BE LIABLE
FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR OTHER DAMAGES RESULTING FROM THE USE
OF ANY OF THE GOODS OR SERVICES TO BE PROVIDED HEREUNDER, OTHER THAN THE
LIABILITY EXPRESSLY STATED HEREIN. THE WARRANTY SET FORTH HEREIN IS IN LIEU OF
ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
(b) Regardless of fault, under no circumstances shall Orbital
be liable for any damages greater than Ten Million Dollars ($10,000,000) for any
claim made of any nature whatsoever, whether arising from patent indemnification
claims (see Section 10.4 below), Orbital's breach of contract, breach of express
or implied warranty, arising in tort, at law or in equity including any law
giving rise to a claim of strict liability or for any other cause.
Notwithstanding the foregoing, Orbital, its affiliates and each of their
directors, officers and employees shall not be responsible, or have any
liability, for the accuracy, incompleteness or timeliness of any advice or
service or any report, filing or other document that it or any of them provides,
prepares or assists in preparing except to the extent that any inaccuracy,
incompleteness or untimeliness arises from the gross negligence or willful
misconduct of Orbital, its affiliates and each of their directors, officers and
employees.
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Section 10.4 Patent Indemnification.
(a) In the event of a breach of the representation and warranty set
forth in Section 10. 1 (c) and subject to Section 10. 3 (b) above, Orbital
agrees to indemnify and hold Harmless OIC and its permitted successors and
assigns of its products from and against all loss, damages, claims, demands and
suits at law or in equity, for actual or alleged claims, demands and suits at
law or in equity, arising out of such breach or alleged breach.
(b) Notwithstanding the provisions of Subsections 10.1(c) and 10.4(a),
and subject to Section 10.3(b) OIC agrees that Orbital shall be relieved of its
obligations referenced in Subsection 10.4(a), unless OIC notifies Orbital in
writing promptly, but in any event, no later than sixty (60) days after OIC
becomes aware of any such claim, suit or proceeding and, at Orbital's expense,
co-operates with and gives Orbital all necessary information and assistance to
mitigate, settle and/or defend any such claim, suit or proceeding. In the event
that the actual liability of Orbital as a consequence of any loss, damages,
claim, demands and, suits or proceeding, when aggregated with any other
liability, exceeds Ten Million Dollars ($10,000,000) then OIC shall release
Orbital from any obligation for liability for copyright, trademark and patent
infringement in excess of such limit.
ARTICLE 11.
(a) HSI Contract. Pursuant to that certain contract between Orbital and
the U.S. Air Force/Philips Laboratory ("USAF") awarded August 5, 1997, (Contract
No. F29601-97-C-0110) (the "HSI Contract"), Orbital has, among other things,
undertaken to design a hyperspectral imaging sensor to be integrated onto the
OrbView-4 camera, to supply a mission data center and mobile ground station, and
to provide related work and services including certain post-launch support, all
as are further detailed in the HSI Contract. Notwithstanding anything in this
Agreement to the contrary, the terms and conditions of this Article 11 are
subject to all rights of the USAF pursuant to the HSI Contract, as it may be
amended from time to time.
(b) Orbital's Right to Modify OrbView-4. Orbital hereby agrees to pay
OIC for the right to modify the OrbView-4 Satellite in accordance with the HSI
Contract and to purchase from OIC hyperspectral data image sets that Orbital is
required to deliver under the HSI Contract. Except with the prior consent of
OIC, which shall not be unreasonably withheld, Orbital shall not make any use of
the hyperspectral data image sets delivered by OIC other than pursuant to the
HSI Contract.
(i) For the right to modify the OrbView-4 Satellite, Orbital
agrees to pay OIC a price equal to the Total Item Amounts (as modified
from time to time) set forth in CLIN 0001-0003, 0005-0006, 0008-0010,
0012-0013 of the HSI Contract (currently $31 million). The price also
shall include any award fees paid by USAF to Orbital under the HSI
Contract. Orbital shall pay OIC within ten (10) days of receiving any
payments under the HSI Contract.
(ii) For the purchase of data sets from OIC that Orbital is
required to deliver to USAF under the HSI Contract, Orbital agrees to
pay OIC a price equal to the price for Hyperspectral Data Set
deliverables set forth in the HSI Contract.
(c) OIC Procurement of HSI Modifications. OIC hereby agrees to procure
from Orbital modifications to the OrbView-4 Satellite to add hyperspectral
capability and the other work and
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services set forth as Orbital obligations under the HSI Contract (other than
data set delivery or as set forth in subparagraph (d) below).
(i) In exchange for this work and services, OIC agrees to pay
Orbital a price equal to the Total Item Amounts (as modified from time
to time) set forth in CLIN 0001-0003, 0005-0006, 0008-0010, 0012-0013
of the HSI Contract (currently $31 million). Items that are
cost-reimbursable or fixed under the HSI Contract will likewise be
cost-reimbursable or fixed to OIC. Payment for On-Orbit Support shall
be pursuant to subparagraph (d) below.
(ii) OIC shall pay Orbital within ten (10) days of invoice,
provided, however, that under no circumstances shall OIC be obligated
to pay Orbital under this Section 11 unless OIC has been paid pursuant
to subparagraph (b) above. Furthermore, under no circumstances shall
OIC be obligated to pay Orbital under this Section 11 an amount greater
than what OIC has been paid pursuant to subparagraph (b) above.
(d) On-Orbit Support. Orbital may subcontract with OIC to provide
on-orbit support to the USAF contemplated by the HSI Contract. Orbital shall pay
OIC for such on-orbit support a price equal to the relevant Total Item Amount
set forth in the HSI Contract. If OIC declines to perform such work, then
Orbital shall perform such work at no cost to OIC, provided, however, that OIC
shall grant Orbital reasonable access to the OrbView-4 Satellite and ground
segment to enable Orbital to perform such work.
(e) Hardware. Orbital agrees to deliver to OIC all hardware that is
produced or procured under the HSI Contract that is not otherwise deliverable to
USAF. Orbital shall also deliver one set of technical drawings, reports and
other documentation ("HSI Documentation") relating to such hardware. OIC shall
only be entitled to use such hardware and HSI Documentation for the purpose of
operating and maintaining the OrbView-4 Satellite system and any follow-on
systems that have similar hyperspectral capability.
(f) Software. To the extent permitted under the HSI Contract, the
Federal Acquisition Regulations and all applicable subcontracts, Orbital hereby
grants to OIC a perpetual, royalty free, non-exclusive, non-transferable license
to use the software, algorithms, and all other intellectual property (including
but not limited to any code) to be developed or purchased by Orbital under the
HSI Contract ("HSI Software"). To the extent Orbital has possession of source
code, object code, and any other code and documentation relating to the HSI
Software ("HSI Code") and is not otherwise prohibited from doing so, Orbital
shall deliver to OIC one copy of the HSI Code in a form sufficient to enable OIC
to operate and maintain the OrbView-4 Satellite and any follow-on systems that
have similar hyperspectral capability. OIC shall only be entitled to use the HSI
Software and HSI Code for the purpose of operating and maintaining the OrbView-4
Satellite and any follow-on systems that have similar hyperspectral capability.
Orbital shall use commercially reasonable efforts to cause its subcontracts to
permit sublicensing of HSI Software and HSI Code to OIC consistent with the
terms of this Section 11(f).
(g) OIC Obligations; Limitation of OIC Liability. OIC HAS NOT AND SHALL
NOT BE DEEMED TO HAVE MADE ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER WITH
RESPECT TO THE HYPERSPECTRAL DATA SETS TO BE PROVIDED TO ORBITAL UNDER THIS
SECTION OF THE PROCUREMENT AGREEMENT. OIC SHALL NOT
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BE LIABLE TO ORBITAL FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
ARISING UNDER OR RELATING TO THE HSI CONTRACT.
(h) No Third Party Beneficiary Rights. Nothing herein shall be
construed to confer any third-party beneficiary rights in the USAF under this
Procurement Agreement. Orbital agrees to indemnify OIC for any damages arising
from any claims by the USAF against OIC relating to the HSI Contract.
(i) Rights on HSI Contract Termination. In the event the HSI Contract
is terminated for any reason, whether for convenience or otherwise, then OIC
shall have the same rights with respect to the HSI Work as are set forth in
Section 12.2 of the Procurement Agreement.
(j) Modifications to HSI Contract. Orbital shall consult with OIC
regarding changes to the HSI Contract and shall not agree to any material
modifications without OIC's prior written consent, which shall not be
unreasonably withheld.
(k) Standards of Conduct. OIC agrees to use commercially reasonable
efforts to supply Orbital with data sets required to be delivered under the HSI
Contract and to ensure that such data sets conform with the specifications under
the HSI Contract (unless such failure to conform is attributable to work done by
Orbital). Orbital shall employ commercially reasonable standards of business
conduct in the performance of its obligations under the HSI Contract.
ARTICLE 12.
TERMINATION
Section 12.1. Termination. OIC may, by written notice of termination to
Orbital, terminate this Agreement upon the failure of Orbital, except for
schedule delay which is addressed in Article 6.2, to comply in any material
respect with any of the provisions of this Agreement and to correct such
failure, within sixty (60) days from the date of Orbital's receipt thereof from
OIC's authorized representative, setting forth in detail OIC's basis for
termination of the Agreement.
Section 12.2. Upon Termination. (a) In the event of termination of this
Agreement by OIC, as provided for in Section 12.1:
(i) To the extent it is permitted to do so by law, regulation
and third parties, Orbital shall deliver to OIC all completed items to
be delivered under Article 2, work-in-progress, drawings, and other
technical data associated with the Work developed as part of the
performance of the completed milestones of this Agreement along with
appropriate licenses to the intellectual property embodied in all such
items (excluding any Launch Vehicle Launch data), drawings and other
technical data to use, make and have made such items (excluding any
Launch Vehicle Launch data), provided, that such data and licenses
shall be used exclusively for purposes related to the OrbView Systems
and shall be subject to appropriate confidentiality obligations;
(ii) Orbital shall take all commercially reasonable steps to
protect and preserve the property referred to in (i) above in the
possession of Orbital until delivery to OIC;
(iii) OIC shall pay to Orbital such portion of the Price and
Cost for all due monthly invoices; and
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(iv) At OIC's request and to the fullest extent permitted by
law, and subject to applicable laws and regulations, Orbital shall
transfer the approvals, permits, and licenses relating to the OrbView
System and held by Orbital.
(b) In the event OIC terminates this Agreement because of a material
breach by Orbital of its obligations herein, Orbital shall be liable to OIC for
reasonable cost of reprocurement, subject to the limitations provided in Section
10.3 hereof.
Section 12.3. Orbital Termination. Orbital may, by written notice to
OIC, terminate this Agreement upon the failure of OIC to make any payment in
accordance with the provisions of Article 5 hereof. Upon any such termination,
Orbital shall retain all work in process and all payments made to date, and
shall be entitled to recover termination liability costs including liability to
Vendors.
Section 12.4. Any disagreement under this provision, including
disagreements with respect to OIC's right to seek a termination and the
appropriate remedies for termination, shall be resolved in accordance with
Article 15.4 of this Agreement.
ARTICLE 13.
OWNERSHIP OF INTELLECTUAL PROPERTY; LICENSE
Section 13.1. As between the parties, all designs, inventions (whether
or not patented), technical data, drawings and/or confidential information
related to the Work, including without limitation the OrbView Satellites, Launch
Vehicle, the Command and Control Center Segment and the Data Processing Segment
are the exclusive property of Orbital and its subcontractors, except with
respect to work performed under the HSI Contract, including but not limited to
the hyperspectral sensor, mission data center and mobile ground station, which
rights are governed by Article 11 above. All rights, title and interest in and
to all underlying intellectual property relating to the Work shall remain
exclusively in Orbital or its subcontractors or both, as the case may be,
notwithstanding Orbital's disclosure of any information or delivery of any data
items to OIC or OIC's payment to Orbital for engineering or non-recurring
charges. OIC shall not use or disclose such information or property to any third
party without the prior written consent of Orbital. Title to all tools, test
equipment and facilities not furnished by OIC or specifically paid for by OIC
and delivered to OIC under this Agreement shall remain in Orbital or its
subcontractors. OIC agrees that it will not directly or through any third party
reverse engineer the Work.
Section 13.2. To the extent that computer software, source codes,
programming information and other related documentation relating to the Work,
other than the Launch Vehicle (the "Background Information") are not deliverable
data under this Agreement (or to the extent that they are deliverable data, that
no ownership or license rights are being transferred to OIC), Orbital , to the
extent that it has the right to do so, shall provide to OIC, on an as needed
basis, the right to access and copy such Background Information. To the extent
permitted by law, OIC shall have the right to use such Background Information to
support its analysis of the OrbView Systems, to develop alternative solutions
for technical problems affecting the operation and management of the OrbView
Systems and to design modifications to the Background Information but in any
event, not for any reprocurement. Subject to the foregoing, such modifications
shall be the sole property of OIC; and to the extent that OIC designs
modifications to the Background Information, it shall not have the right to
implement such modifications without the prior written consent of Orbital.
Section 13.3 Orbital hereby grants to OIC a perpetual, fully paid
license to use the intellectual property described in Section 13.1 and Section
13.2 (other than intellectual property
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associated with the launch vehicle) solely for the purpose of operating the
OrbView-1, OrbView-2, OrbView-3 and OrbView-4 satellites and related ground
segments. OIC shall not copy or sell or otherwise transfer any of such
intellectual property.
ARTICLE 14.
SPECIAL PROVISIONS RELATING TO LAUNCH
Section 14.1. Cross-Waiver of Liability Relating to the Launch of the
Orbital OrbView-3 and OrbView-4 Satellites.
(a) In accordance with the applicable Department of
Transportation commercial launch license requirements, OIC agrees to enter into
an agreement with Orbital for a no-fault, no-subrogation, inter-participant
waiver of liability pursuant to which each shall not bring a claim against or
sue the employees of the other, or any of them, or the United States Government,
and each party agrees to be responsible for and to absorb the financial and any
other consequences of any Property Damage it incurs or for any Bodily Injury to,
or Property Damage incurred by, its own employees resulting from activities
carried out under this Agreement, irrespective of whether such Bodily Injury or
Property Damage is caused by OIC, Orbital or by their contractors,
subcontractors, officers, directors, agents, servants and employees and the
Government and regardless of whether such Bodily Injury or Property Damage
arises through negligence or otherwise.
(b) OIC and Orbital shall each be responsible for such
insurance as they deem necessary to protect their respective property. Any
insurance carried in accordance with this Article 14 and any policy taken out in
substitution or replacement for any such policy shall provide that the insurers
shall waive any rights of subrogation against OIC, Orbital, and the United
States Government, as the case may be, and their contractors and subcontractors
at every tier.
(c) OIC and Orbital hereby agree to obtain a similar waiver in
the form set forth above from any party with which it enters into an agreement
relating to the activities (launch of the OrbView-3 and OrbView-4 Satellites)
contemplated by this Article, including without limitation, all of its
respective contractors, subcontractors and suppliers at every tier, and all
persons and entities to whom it assigns all or any part of its rights or
obligations under this Agreement.
(d) As used herein, "Bodily Injury" means bodily injury,
sickness, disease, disability, shock, mental anguish or mental injury sustained
by any person including death and damages for care and loss of services
resulting therefrom. "Property Damage" means injury to or destruction of
tangible property including the loss of use of such injured or destroyed
property.
Section 14.2. Flight Readiness Assessment. Orbital shall conduct a
Mission Readiness Review ("MRR") to be held subsequent to Orbital 's final
launch readiness review. At the MRR, Orbital shall summarize the status of its
expendable launch vehicle ("ELV") and launch support systems and attest to its
readiness to launch the mission. If after due consideration of the status of the
ELV, spacecraft, and other launch support systems, OIC does not agree that the
total mission is ready for launch, OIC shall retain the right to direct the
delay to the launch under the terms of Article 9 of this Agreement.
Section 14.3. Final Countdown Launch Authorization. OIC shall also be
polled in the final countdown procedure during status checks and shall retain
the right to concur or not to concur in the "GO" for launch. OIC's designated
representative shall be authorized to make such a decision. If OIC
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does not concur, it may declare a "HOLD" and delay the launch. If OIC declares a
HOLD and the cause for such HOLD cannot be shown to be attributable to Orbital
's performance, or to have been within its control or due to its fault or
negligence, Orbital shall receive an equitable adjustment to the Agreement Price
and schedule.
Section 14.4. Range Support. Orbital is responsible for the range
costs, interface, and all coordination with the government agencies that control
the launch ranges required to launch each payload.
ARTICLE 15.
MISCELLANEOUS
Section 15.1. Notices. (a) Except as otherwise specified herein, all
notices, requests and other communications required to be delivered to any party
hereunder shall be in writing (including any facsimile transmission or similar
writing), and shall be sent either by certified or registered mail, return
receipt requested, by telecopy or delivered in person addressed as follows:
(i) If to Orbital, to it at:
21700 Atlantic Boulevard
Dulles, Virginia 20166
Telecopy: (703) 406-3502
Attention: Jeffrey V. Pirone
(ii) If to OIC, to it at:
21700 Atlantic Boulevard
Dulles, Virginia 20166
Telecopy: (703) 406-5516
Attention: Gilbert D. Rye
or to such other persons or addresses as any party may designate by written
notice to the others. Each such notice, request or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted and the
appropriate answerback is received, (ii) if given by reputable overnight
courier, one (1) business day after being delivered to such courier, (iii) if
given by certified mail (return receipt requested), three (3) business days
after being deposited in the mail with first class postage prepaid, or (iv) if
given by any other means, when received at the address specified in this Section
15.1.
Section 15.2. Force Majeure. Neither party shall be responsible for
failure or delay in performance or delivery if such failure or delay is the
result of an act of God, the public enemy, embargo, governmental act, fire,
accident, war, riot, strikes, inclement weather or other cause of a similar
nature that is beyond the control of the parties. In the event of such
occurrence, this Agreement shall be amended by mutual agreement to reflect an
extension in the period of performance and/or time of delivery. Failure to agree
on an equitable extension shall be considered a dispute and resolved in
accordance with Section 15.4 hereof.
Section 15.3. Licenses and Permits. Launch of the OrbView-3 and
OrbView-4 Satellites shall be accomplished under the Commercial Space Launch Act
(49 U.S.C. 2601, et seq.). OIC shall be responsible for obtaining the necessary
operating licenses, permits and clearances that may be
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required by the United States Department of Commerce, Federal Communications
Commission, or other governmental agency in order to operate as a satellite
services provider. Orbital agrees to provide OIC with such information as OIC
reasonable requests in order to obtain and comply with OIC's operating licenses.
Orbital shall be responsible for obtaining (or causing its subcontractors to
obtain) the necessary licenses, permits, and clearances, including but not
limited to launch licenses and export licenses that may be required by the
United States Department of Transportation or other governmental agency in order
to operate as a launch contractor and to perform in accordance with its
obligations under the Agreement.
Section 15.4. Resolution of Disputes. (a) Any controversy or claim that
may arise under, out of, in connection with or relating to this Agreement or any
breach hereof, shall be submitted to a representative management panel of OIC
and Orbital. Each of OIC and Orbital may appoint up to two (2) individuals to
such panel. Such appointments shall be made within ten (10) days of the receipt
by the appointing party of notice of the existence of such controversy or claim.
The unanimous decision and agreement of such panel shall resolve the controversy
or claim. If the panel is unable to resolve such matter within thirty (30) days
of the submission of such controversy or claim to such panel, it shall be
brought before the Presidents of OIC and Orbital for final resolution. If such
individuals are unable to resolve the matter within thirty (30) days of the
submission of such controversy or claim to such individuals by way of unanimous
decision, either party may remove the controversy or claim for arbitration in
accordance with Section 15.4(b).
(b) Any controversy or claim that is not resolved under
Section 15.4(a) shall be settled by final and binding arbitration in Washington,
D.C., in accordance with the then existing United States domestic rules of the
American Arbitration Association (the "AAA") (to the extent not modified by this
Section 15.4). In the event that more than one claim or controversy arises under
this Agreement, such claims or controversies may be consolidated in a single
arbitral proceeding. The arbitral tribunal shall be composed of three (3)
neutral arbitrators, selected pursuant to the rules, who are expert in the
subject matter of the dispute. Judgment upon any award rendered by the
arbitrators may be entered into any court having jurisdiction or application may
be made for judicial acceptance of the award and an order of enforcement, as the
case may be. The parties agree that if it becomes necessary for any party to
enforce an arbitral award by a legal action or additional arbitration or
judicial methods, the party against whom enforcement is sought shall pay all
reasonable costs and attorneys' fees incurred by the party seeking to enforce
the award.
Section 15.5. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth of Virginia without
giving effect to the provisions, policies or principles thereof relating to
choice or conflict of laws.
Section 15.6. Binding Effect, Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective
successors and permitted assigns. Neither this Agreement nor any interest or
obligations hereunder shall be assigned or transferred to any person without the
prior written consent of the other party, provided that any party may assign
this Agreement and its interest and obligations hereunder to any wholly owned
subsidiary of such party, and provided that Orbital may assign its right to
receive payments under this Agreement to a commercial lender to the extent such
payments are collateral for borrowings by Orbital.
Section 15.7. Governing Agreements. To the extent there is an
inconsistency between the Procurement Agreement and the HSI Contract, the HSI
Contract shall govern.
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Section 15.8. Order of Precedence. Inconsistencies between or among
Articles of Agreements and/or any attachment shall be resolved in the following
order of precedence:
(a) Article I through Article 15 of this Agreement;
(b) Mission Requirements Document;
(c) Statements of Work;
(d) Specifications;
Section 15.9. Export Regulations. OIC acknowledges that if goods or
technical data purchased, provided or produced hereunder are to be exported,
they are subject to applicable U.S. Commerce and/or State Department export
regulations. OIC accepts full responsibility for and agrees to comply fully with
such regulations, and shall request Orbital to obtain export licenses and
re-export permission, at OIC's expense.
Section 15.10. Counterparts. This Agreement may be executed in any
number of counterparts of the signature pages, each of which shall be considered
an original, but all of which together shall constitute one and the same
instrument.
Section 15.11. Headings. This section and other headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
Section 15.12. Amendment, Waiver. Except as provided otherwise herein,
this Agreement may not be amended nor may any rights hereunder be waived except
by an instrument in writing signed by the parties hereto.
ENTIRE AGREEMENT, this agreement and all attachments (which are hereby
made part of this Agreement) contain the entire understanding between Orbital
and OIC and supersede all prior written and oral understandings relating to the
subject hereof
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
ORBITAL SCIENCES CORPORATION (ORBITAL)
By: __________________________________
Name: Jeffrey V. Pirone
Title: Executive Vice President, Finance and
Chief Financial Officer
ORBITAL IMAGING CORPORATION (OIC)
By: __________________________________
Name: Armand D. Mancini
Title: Vice President and Chief Financial Officer
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LIST OF EXHIBITS AND SCHEDULES
Appendixes
Appendix A Defined Terms
Exhibits
Exhibit A OrbView-1 System Description
Exhibit B OrbView-2 License Agreement (Replaced by Amendment No. 1
Exhibit C OrbView-3 and OrbView-4 Missions Requirement Document
(Part IA), OrbView-3 and OrbView-4 Statement of Work
(Part 1B) and Launch Vehicle Statement of Work and
Specifications (Part 2)
Exhibit D OrbView-3 and OrbView-4 Command and Control and Data
Processing and Distribution Requirements Specifications
(Part 1) and OrbView-1 and OrbView-2 Command and Control
Statements of Work (Part 2)
Exhibit E Long Lead Spares Statement of Work
Exhibit F Payment Schedule
To Be Incorporated
Exhibit G System Requirements Compliance Department and End-Item Data
Package Schedules To Be Incorporated
Schedule 7.3(b) Command and Control Segment Acceptance Test Procedure
Schedule 7.3(c) Data Processing Segment Acceptance Test Procedure
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EXHIBIT F
PAYMENT SCHEDULE
($ IN THOUSANDS)
[Confidential Treatment]
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EXHIBIT 10.3
AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
This Amended and Restated Administrative Services Agreement is
made and entered into this December 31, 1997, by and between Orbital Imaging
Corporation, a Delaware corporation ("ORBIMAGE"), with its principal offices
located in Dulles, Virginia and Orbital Sciences Corporation, a Delaware
corporation ("Orbital"), with its principal offices located in Dulles, Virginia.
WHEREAS, ORBIMAGE and Orbital entered into an Administrative
Services Agreement on November 18, 1996 (the "Original Agreement");
WHEREAS, ORBIMAGE and Orbital entered into that Amended and
Restated ORBIMAGE Services Agreement dated as of May 8, 1997 whereby the parties
amended and restated their obligations under the Original Agreement (as amended
and restated the "Administrative Services Agreement"); and
WHEREAS, ORBIMAGE and Orbital hereby desire to further amend
and restated the Administrative Services Agreement in order to expand the scope
of the Administrative Services Agreement to include the Administrative Services
in connection with the OrbView-4 spacecraft (as further amended and restated,
the "Amended and Restated Administrative Services Agreement").
NOW THEREFORE, the parties hereto, for and in consideration of
the mutual understandings and obligations, hereby covenants, promise, and agree
that the Administrative Services Agreement be, and hereby is, amended and
restated in its entirety, as follows:
Scope of Work.
Administrative Services: Orbital shall provide, on a cost-reimbursable
basis, general and administrative, accounting, tax, legal, human
resources and benefits-related services, regulatory and other similar
services, health insurance, property, casualty and directors and
officers insurances, and other similar services and office space and
facility support services as are reasonably requested by ORBIMAGE.
Orbital agrees to permit ORBIMAGE employees to continue to receive
benefits under Orbital's Deferred Profit Sharing Plan until such time
as ORBIMAGE shall have adopted a defined contribution plan in
accordance with Section 401(k) (a "401(k) Plan") of the Internal
Revenue Code of 1986, as amended, provided that ORBIMAGE shall
reimburse Orbital for any matching or profit-sharing contributions that
it makes to the accounts of ORBIMAGE employees. ORBIMAGE agrees to
promptly adopt a 401(k) Plan or similar benefit plan for the benefit of
ORBIMAGE employees.
Mission Operations: Orbital shall provide on-orbit mission operations
for the OrbView-1, OrbView-2, OrbView-3, and OrbView 4 satellites as
reasonably requested by ORBIMAGE.
<PAGE> 2
Anomaly Resolution: Orbital shall provide on-orbit operations anomaly
resolution for the OrbView-1, OrbView-2, OrbView-3, and OrbView 4
satellites as reasonably requested by ORBIMAGE.
Services and Prices.
Item 001: Administrative Services through March 31, 1997 for a
firm-fixed price of $13,355,000.
Item 002: Administrative Services after September 30, 1997 as required
on a cost reimbursable basis.
Item 003: Mission operations as required on a cost plus 10% fee basis.
Item 004: On-orbit anomaly resolution as required on a cost plus 10%
fee basis.
Taxes. The prices do not include any federal, state or local sales, use
or excise taxes levied upon or measured by the sale, the sales price, or the use
of the items to be delivered or services required to be performed hereunder.
Such taxes shall be the responsibility of ORBIMAGE and ORBIMAGE shall reimburse
Orbital for any such taxes assessed against Orbital.
Invoices and Payments. Item 001 is due and payable upon execution of
this Amended and Restated Administrative Services Agreement. Items 002-004 are
billable monthly with payment due ten (10) days after invoice date. Invoices
shall be sent to:
Orbital Imaging Corporation Attention:
Vice President, Finance
21700 Atlantic Boulevard
Dulles, Virginia 20166
Manner of Furnishing Administrative Servcies. Orbital shall render and
perform the Administrative Services as an independent contractor in accordance
with its own standards for furnishing such services to itself or its
subsidiaries at the time the Administrative Services are provided, subject to
the provisions of this Amended and Restated Administrative Services Agreement
and with all applicable governmental laws, rules and regulations.
Notwithstanding the foregoing, in providing the Administrative Services, Orbital
and its directors, officers and employees shall not be responsible, or have any
liability, for the accuracy, incompleteness or timeliness of any advice or
service or any report, filing or other document that it or any of them provides,
prepares or assists in preparing except to the extent that any inaccuracy,
incompleteness or untimeliness arises from the gross negligence of willful
misconduct of Orbital or such directors, officers or employees. ORBIMAGE shall
indemnify, defend and hold harmless Orbital and its directors, officers and
employees from and against any and all damage, cost, loss, liability and expense
(including reasonable attorneys' fees) in connection with any and all actions or
threatened actions arising out of the performance of the Administrative
Services, except in the
<PAGE> 3
case of Orbital's or its directors', officers' or employees' gross negligence or
willful misconduct. In no event shall Orbital or its directors, officers or
employees be liable for any indirect, special or consequential damages in
connection with or arising out of the performance of the Services.
Term. The term shall be three (3) years with respect to the scope of
work related to OrbView-1, three (3) years from the launch of OrbView-2 with
respect to the scope of work related to OrbView-2, three (3) years from the
launch of the OrbView-3 satellite with respect to scope of work related to
OrbView-3, and three (3) years from the launch of the OrbView-4 satellite with
respect to the scope of work related to OrbView-4, and may be extended upon
mutual agreement of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the day and year set forth in the first paragraph above.
ORBITAL IMAGING CORPORATION ORBITAL SCIENCES CORPORATION
By:________________________________ By:________________________________
Name: Armand D. Mancini Name: Jeffrey V. Pirone
Title: Vice President Title: Senior Vice President and
Chief Financial Officer
<PAGE> 1
NONCOMPETITION AND TEAMING AGREEMENT
This Noncompetition and Teaming Agreement dated May 8, 1997 (this
"Agreement") is between Orbital Imaging Corporation, a Delaware corporation (the
"Company"), and Orbital Sciences Corporation, a Delaware corporation
("Orbital").
WHEREAS, pursuant to the terms and conditions of the Stock Purchase
Agreement (the "Stock Purchase Agreement") dated May 7, 1997 between the Company
and the purchasers signatory thereto (the "Purchasers"), the Company has agreed
to issue and sell, and the Purchasers have severally agreed to purchase, shares
of Series A Convertible Cumulative Preferred Stock of the Company (the "Series A
Preferred Stock") upon the terms and conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligation of the
Purchasers to purchase the Series A Preferred Stock pursuant to the Stock
Purchase Agreement that the parties hereto enter into this Agreement.
NOW, THEREFORE, in consideration of the premises, the covenants and
agreements herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms. All terms capitalized but not defined herein
shall have the meanings attributed to such terms in the Stock Purchase
Agreement, including Exhibit A thereto, except where the context otherwise
requires. The following additional terms when used in this Agreement shall have
the following meanings, such meanings to be equally applicable to the singular
and plural forms thereof.
"Cooperation and Conflicts Panel" means a three person panel
comprised of (i) the highest ranking officer of the Company who is not also an
officer of Orbital, (ii) the Chief Financial Officer of Orbital or his or her
designee, and (iii) the director of the Company described in clause (iii) of
Section 2.1 of the Stockholders Agreement.
"Integrated System" has the meaning set forth in Section 2. 1.
"Noncompetition Period" means the period from the Closing Date
through the Termination Date.
"Person" means an individual, a corporation, a limited liability
company, an association, a partnership, a trust or estate, or a government or
any department or agency thereof.
"Restricted Activity" means the gathering and distributing of
satellite-based imagery substantially similar, or technologically superior, in
spatial and spectral resolution to imagery to be provided by OrbView-2,
OrbView-3 or any other satellite purchased by the Company after the date of this
Agreement from Orbital or an Affiliate of Orbital.
"Series A Directors" means the directors of the Company elected in
accordance with clause (i) of Section 2.1 of the Stockholders Agreement and, in
the circumstances
<PAGE> 2
constituting an Election Event, by the holders of the Series A Preferred Stock
voting together as a class.
"Termination Date" has the meaning set forth in Article IV.
ARTICLE II
NON-COMPETITION
2.1. Hardware Contractor. Orbital hereby agrees that during the
Noncompetition Period, except with the prior written consent of the Series A
Directors, it shall not enter into, and it shall cause its Affiliates not to
enter into, one or more contracts to construct and deliver an integrated remote
sensing satellite-based system, consisting of satellite bus, payload, launch
service and ground system (an "Integrated System") for or on behalf of any
Person that is engaged, or proposes to use such system to engage, in a
Restricted Activity, unless such contract is entered into in compliance with
Article III hereof. Nothing herein shall prevent Orbital or its Affiliates from
providing any system or subsystem components (including satellite bus, payloads,
launch services and ground systems) to any Person that may incorporate such
systems or subsystems into a remote imaging system; provided, however, that
Orbital shall not design, develop and/or construct for any Person sensors
capable of generating imagery substantially similar, or technologically
superior, in spatial and spectral resolution to imagery of OrbView-2, OrbView-3
or any satellite purchased by the Company from Orbital or an Orbital Affiliate,
other than for a governmental entity so long as substantially all the use of
such sensor by such governmental entity is proposed to be for noncommercial
purposes.
2.2. Investments. Orbital agrees that during the Noncompetition
Period and except as permitted by Section 2.4, it shall not make, and it shall
cause its Affiliates not to make, investments in excess of $10 million in any
Person that is engaged, or proposes to be engaged, in a Restricted Activity.
Notwithstanding the foregoing, Orbital shall be permitted to make any investment
in a Person (i) pursuant to any existing commitment listed on Appendix A, or
(ii) in connection with a hardware or software contract not prohibited by
Section 2.1, provided that the terms of any such investment made in connection
with such contract (considered as a whole with any other investment in such
Person by Orbital or any Affiliate of Orbital) does not provide Orbital with the
ability to significantly influence the business affairs of such Person or result
in beneficial or record ownership of more than 10% of the voting securities of
such Person.
2.3. Projects Under Development.
2.3.1. In the event that Orbital internally develops a
satellite-based remote imaging project, Orbital shall, as
promptly as feasible but in no event later than the time
that Orbital transitions from the research and development
phase and commences to commercially implement the project,
either through an internal commitment to finance the
commercialization of the project, the sale of the project or
through a joint venture with a third party, the purpose of
which is to commercialize the project, and in any event
prior to such time as Orbital has spent more than $5
million, submit details of such project to the Cooperation
and Conflicts Panel and offer to the Company the right to
acquire and/or participate in such project on terms and
conditions no less favorable than could be obtained from an
unaffiliated third party on an
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<PAGE> 3
arm's length basis, which offer shall remain open for a
period of not less than 100 days. The offer required to be
given to the Company by this Section 2.3.1 shall be given in
written form and shall include in reasonable detail (i) the
amounts expended to date by Orbital and (ii) any analysis of
the current or addressable market for such project.
2.3.2. If the Cooperation and Conflicts Panel determines in its
good faith reasonable judgment that the proposed project
offered to the Company pursuant to Section 2.3.1 is a
Restricted Activity, and the Company determines not to
acquire or participate in such project, Orbital shall not
pursue such project. If the Cooperation and Conflicts Panel
does not make such determination, and the Company determines
not to acquire or participate in such project, Orbital or
its Affiliates may pursue such project. Any Panel
determinations shall be in writing and shall be provided to
Orbital no later than the 100-day period in 2.3.1. If as the
project develops thereafter it differs materially from the
project described in the offer made pursuant to Section
2.3.1, Orbital shall re-offer to the Company the right to
acquire its interest or participate in such project pursuant
to Section 2.3.1.
2.3.3. For the purposes of this Section 2.3, a "project" shall not
include the development of hardware or a hardware component
for sale by Orbital or its Affiliates in compliance with
Section 2. 1.
2.4. Investments of Affiliates of Orbital. Each Affiliate of
Orbital shall be subject to the provisions of this Agreement from and after the
later of (a) the Closing Date and (b) the date such Person becomes an Affiliate
of Orbital; it being understood and agreed that any contract, commitment or
investment of such Person made or in effect prior to such Person becoming an
Affiliate of Orbital shall not be subject to the provisions of this Article II.
ARTICLE III
TEAMING AGREEMENT
In the event Orbital intends to respond to a request for proposal
("RFP") for an Integrated System to be used in a Restricted Activity, Orbital
and the Company shall confer to determine in good faith whether it is
appropriate, based on the customer requirements set forth in the RFP, for
Orbital and the Company to team in the response, with Orbital having primary
responsibility for the hardware and software requirements, and the Company
having primary responsibility for the provision of imagery services. If the
Company determines in good faith that a teaming approach is appropriate, the
Company and Orbital shall cooperate fully to prepare a cost-effective and
appropriate response to such RFP and to participate in all other aspects
relating to the procurement process to ensure that Orbital submits a competitive
response in a timely manner.
If the RFP provides that substantially all Restricted Activity use
for the subject Integrated System is to be for noncommercial purposes, then
whether or not the Company and Orbital team pursuant to the above paragraph,
Orbital may respond to such RFP and, if selected act as a contractor on such
Integrated System. If a RFP provides that substantially all Restricted
3
<PAGE> 4
Activity use for the subject Integrated System is for commercial purposes,
Orbital shall not respond to such RFP unless ORBIMAGE is a team member.
ARTICLE IV
TERMINATION
This Agreement shall terminate and be of no further force and effect
upon the earlier to occur of (i) the first anniversary of the closing of a
Qualified Initial Public Offering, (ii) the first anniversary of the business
day next following the end of a period of 180 consecutive days during which the
average closing price of the Company's Common Stock shall have exceeded the
Threshold Price, (iii) the date upon which the Company terminates the
Procurement Agreement, (iv) the date upon which the Company procures an
OrbView-3 follow-on spacecraft from a provider other than Orbital or its
Affiliates, or (v) June 30, 2003, the first to occur of such dates being the
"Termination Date."
ARTICLE V
DISPUTE RESOLUTION
5.1. Exclusive Process. The dispute resolution process set forth in
this Article V shall be the exclusive process for resolving disputes arising out
of or relating to this Agreement or the breach thereof.
5.2. Initial Procedures. In the event of any dispute under this
Agreement, the Company and Orbital shall negotiate in good faith to resolve such
dispute. If members of the respective managements of Orbital and the Company are
unable to resolve such dispute within 45 days, then either party can request
(which such request must be in writing) that the Cooperation and Conflicts Panel
meet and seek to resolve the dispute. In the event that the Cooperation and
Conflicts Panel cannot present a resolution acceptable to Orbital and the
Company within 45 business days of the initial request to meet, then either
party may remove the controversy or claim to arbitration in accordance with
Section 5.3.
5.3. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by binding
arbitration in Washington, D.C. administered by the American Arbitration
Association (`AAA") in accordance with its commercial arbitration rules (to the
extent not modified by this Section 5). In the event that more than one claim or
controversy arises under this Agreement, such claims or controversies may be
consolidated in a single arbitral proceeding. The arbitral tribunal shall be
composed of three arbitrators appointed by the AAA, at least one of whom shall
be expert in contracts relating to satellite remote sensing systems. Judgment
upon any award rendered by the arbitrators may be entered in any court having
jurisdiction over the award, the parties or any of their assets. The Parties
agree that if it becomes necessary for any party to enforce an arbitral award by
a legal action or additional arbitration or judicial methods, the party against
whom an award is enforced shall pay all reasonable costs and attorneys' fees
incurred by the party seeking to enforce the award.
5.4. Remedy. The sole and exclusive remedy for any breach of a
covenant contained in this Agreement shall be specific performance and neither
party shall seek any other
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<PAGE> 5
remedy in connection with any such breach.
5.5. Consent to Jurisdiction. To the fullest extent permitted by
law, the parties waive all requirements as to personal jurisdiction with respect
to any judicial enforcement of the arbitration award or any judicial proceeding
to enforce this arbitration provision.
5.6. Continuing Obligations. The existence of any dispute between
the parties, whether the same is the subject of an arbitration proceeding or
not, shall not relieve the parties of their obligations under this Agreement.
5.7. Equitable Relief. Notwithstanding the general arbitration
provisions of Section 5.3, the parties hereto shall have the right to seek
equitable relief on an expedited basis from any court of competent jurisdiction
in the form of interim relief while pursuing resolution of any dispute in
arbitration proceedings pursuant to Section 5.3; it being agreed that no action
for such relief may be commenced during the initial dispute resolution
procedures set forth in Section 5.2.
ARTICLE VI
MISCELLANEOUS
6.1. Confidentiality. The parties hereto agree that any information
obtained pursuant to this Agreement shall, except to the extent that such
information shall have been made public or otherwise available through no breach
hereof by such party, be held in confidence by such party.
6.2. Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the laws
of the State of New York.
6.3. Entire Agreement; Amendment; Waiver. This Agreement (i)
contains the entire agreement among the parties hereto with respect to the
subject matter hereof, (ii) supersedes all prior written agreements and
negotiations and oral understandings, if any, with respect thereto, (iii) may
not be amended or supplemented except by an instrument or counterparts thereof
in writing signed by the Company and Orbital. No waiver of any term or provision
shall be effective unless in writing signed by the party to be charged. No
waiver or course of dealings between the parties shall operate as a waiver of
either party's rights under this Agreement. A waiver on any one occasion shall
not be construed as a bar to or waiver of any right or remedy on any future
occasion.
6.4. Binding Effect. This Agreement shall be binding on and inure to
the benefit of the parties hereto and, subject to the terms and provisions
hereof, their respective legal representatives, successors and assigns.
6.5. Invalidity of Provision. The invalidity or unenforceability of
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction.
6.6. Counterparts. This Agreement may be executed simultaneously in
two
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<PAGE> 6
or more counterparts, all of which shall be deemed one and the same instrument
and each of which shall be deemed an original, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.
6.7. Notices. All notices and other communications provided for or
given or made hereunder shall be in writing (including delivery by facsimile
transmission) and, unless otherwise provided herein, shall be deemed to have
been given when received by the party to whom such notice is to be given at its
address set forth in the Stock Purchase Agreement, or such other address for the
party as shall be specified by notice given pursuant hereto.
6.8. No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the parties hereto.
6.9. Headings. The descriptive headings of the several paragraphs of
this Agreement are inserted for convenience only and do not constitute part of
this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
ORBITAL SCIENCES CORPORATION
By:
--------------------------------------
Name: Jeffrey V. Pirone
Title: Senior Vice President and
Chief Financial Officer
ORBITAL IMAGING CORPORATION
By:
--------------------------------------
Name: Gilbert D. Rye
Title: President
6
<PAGE> 7
EXHIBIT A
EXCLUDED PROGRAMS
MacDonald, Dettwiler and Associates Ltd. ("MDA") has entered into a
Put and Call Agreement with the Export Development Corporation of Canada which
provides that under certain circumstances, MDA shall purchase 400,000 shares of
Series D Stock issued by EarthWatch Incorporated to the Export Development
Corporation.
<PAGE> 1
Exhibit 10.5
ORBVIEW-2 LICENSE AGREEMENT
THIS ORBVIEW-2 LICENSE AGREEMENT (this "Agreement") is entered into
this ____ day of May, 1997, between ORBITAL SCIENCES CORPORATION, a Delaware
corporation ("Orbital"), and ORBITAL IMAGING CORPORATION, a Delaware corporation
("ORBIMAGE" or "Licensee").
WHEREAS, Orbital is constructing, and intends to launch and initially
operate a satellite ocean and land surface environmental monitoring system (the
"OrbView-2 System") to gather and transmit ocean color and land surface
environmental monitoring data (the "OrbView-2 Data"); and
WHEREAS, Orbital and Licensee desire to enter into this Agreement
pursuant to which (i) Orbital will grant to Licensee the right to promote,
market and sell to customers OrbView-2 Data and products that are derived from,
based on or use the OrbView-2 Data as described in Attachment A hereto, subject
to the terms and conditions provided herein and (ii) Orbital will transfer to
ORBIMAGE certain logos, trademarks, service marks and names.
NOW THEREFORE, in consideration of the agreements and covenants
contained herein, the parties hereto agree as follows.
SECTION 1 - GRANT OF LICENSE AND TRANSFER OF MARKS
1.1 In accordance with the terms and conditions set forth in this
Agreement, Orbital grants to Licensee and its Affiliates an exclusive worldwide
License (the "License") to promote, market, sell, receive and use OrbView-2 Data
received from the OrbView-2 satellite in any form, including derivatives
thereof, for commercial and operational purposes, including, without limitation,
the right to authorize other persons to promote, market and sell the OrbView-2
Data, provided that Licensee shall remain liable for its obligations hereunder.
Notwithstanding anything herein to the contrary, the grant and terms and
conditions of the License are subject to all rights of the National Aeronautics
and Space Administration ("NASA") pursuant to that certain agreement between
NASA and Orbital dated March 29, 1991, as it may be modified from time to time
(the "NASA Agreement"), including but not limited to Section I.9 thereof.
1.2 Orbital hereby grants and conveys to ORBIMAGE all logos,
trademarks, service marks and names listed on Attachment B hereto (the "ORBIMAGE
Marks").
1.3 Orbital also hereby grants to the Licensee (including for purposes
of this Section 1.3 its wholly owned subsidiaries) a nonexclusive license to use
the tradename and trademark "Orbital" (the "Orbital Mark") solely (i) as an
integral part of the Licensee's corporate name, and (ii) as an integral part of
the trademark and tradename "Orbital Imaging Corporation" (the "Licensee's
Name"); provided, however, that (a) the Licensee shall not have the right to
<PAGE> 2
sublicense the Orbital Mark without the express prior written permission of
Orbital, and (b) the Licensee shall use the Orbital Mark only in the Licensee's
Name exactly as the Licensee's Name appears in clause (ii) above, and not in any
other similar or derivative mark without prior written permission of Orbital.
The Licensee expressly acknowledges that all right, title and interest in the
Orbital Mark, and the related goodwill, are the property of Orbital. The
Licensee shall not at any time acquire or claim any title to the Orbital Mark
adverse to Orbital by virtue of the license granted to the Licensee, or through
the Licensee's use of the Orbital Mark.
1.4 Orbital acknowledges that all copyrights, and other proprietary and
intellectual property rights relating to or based on the OrbView-2 Data, shall
be the sole and exclusive property of ORBIMAGE, subject to the NASA Agreement
and the Department of Commerce ("DoC") remote sensing License and the License
granted herein.
SECTION 2 - DUTIES OF ORBITAL
2.1 Orbital shall finish construction of, and shall use good faith
efforts to launch, the OrbView-2 satellite in accordance with the NASA Agreement
unless it is unable to do so because NASA exercises its rights under Section I.9
(c)(1)(ii) of the NASA Agreement (a "NASA Default"). If a NASA Default occurs,
then Orbital shall refund to ORBIMAGE the amount equal to $62,743,000 minus the
total revenues received by Orbital under the NASA Agreement and assigned and
paid to ORBIMAGE as of such date ($35,000,000 on the date hereof).
2.2 Following the launch of the OrbView-2 satellite, Orbital shall be
responsible for commissioning the OrbView-2 satellite and performing on-orbit
checkout of such satellite through Launch Success as defined in Section B.4 of
the NASA Agreement.
2.3. Orbital shall use commercially reasonable efforts to obtain and
maintain all material Licenses, consents, approvals or authorizations of and
declarations or filings ("Regulatory Licenses") with any United States
governmental authority required to be obtained or maintained by Orbital in order
to perform its obligations under this Agreement and to permit the launch and
operation of the OrbView-2 System. Orbital represents and warrants that (a) it
is in sole control of the Federal Communications Commission ("FCC") Licenses
granted to Orbital with respect to the OrbView-2 System effective January 1,
1997 and (b) it is the Licensee designated by the DoC to operate the OrbView-2
remote sensing satellite system. So long as the OrbView-2 System is operational,
as determined by ORBIMAGE, Orbital shall not, without the express written
consent of ORBIMAGE, which in the case of clause (a) shall not be unreasonably
withheld, (a) amend, or modify, or (b) cancel or surrender, any of said
Regulatory Licenses and shall prior to the expiration of any such Regulatory
License extend or renew same. Each party covenants and agrees that if and to the
extent any modifications or amendments are reasonably requested by the other
party with respect to such Regulatory Licenses, they shall cooperate with each
other in connection therewith.
2.4 Orbital hereby assigns to Licensee all amounts due or to become due
under the NASA Agreement and further agrees to use all commercially reasonable
efforts to cause any and all such amounts to be collected from NASA, as and when
due.
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<PAGE> 3
2.5 Orbital agrees to maintain in full force and effect the NASA
Agreement and shall not, without the express written consent of ORBIMAGE, which
in the case of clause (a) shall not be unreasonably withheld, (a) amend, or
modify, or (b) terminate, the NASA Agreement and shall not assign the NASA
Agreement to any Person. Upon the request of ORBIMAGE, Orbital shall use
commercially reasonably efforts to have the NASA Agreement assigned to ORBIMAGE,
provided that ORBIMAGE shall have the Regulatory Licenses necessary to perform
its obligations as an assignee under the NASA Agreement, and provided further
that ORBIMAGE shall indemnify Orbital for any and all costs and expenses or
damages arising under the NASA Agreement following the assignment. Orbital
acknowledges and agrees that any and all costs and expenses or damages payable
to NASA arising from or in connection with a breach under the NASA Agreement
relating to the design, development, construction and systems integration of the
OrbView-2 satellite shall be the obligation of Orbital.
SECTION 3 - DUTIES OF LICENSEE
3.1 Upon completion of on-orbit check-out pursuant to Section 2.2
above, Licensee shall manage and operate the OrbView-2 System, including the
performance of tracking, telemetry and control functions with respect to the
OrbView-2 satellite, all in accordance with the NASA Agreement.
3.2 So long as Orbital holds the Licenses referred to in Section 2.3
above, in the event Orbital is notified by the FCC or DoC of a violation of the
applicable License or related rules or regulations or has a reasonable basis to
believe based on discussions with outside counsel that such a violation may be
occurring, Orbital shall have the right to order the discontinuance or
modification of operations causing such violations and in the event ORBIMAGE
fails to cure same within a reasonable period given the nature of the violation,
the right to access to all facilities, sites and equipment used in the operation
of the OrbView-2 System. ORBIMAGE shall assist Orbital in complying with all
applicable Federal, state and local rules and regulations and License
requirements regarding the operation of the OrbView-2 System including all FCC
and DoC requirements.
3.3 Licensee agrees to provide Orbital reasonable access to its records
and facilities at no cost to Orbital for the purposes of monitoring compliance
with Licensee's obligations under this Agreement.
3.4 Licensee shall comply in all material respects with all applicable
United States and foreign laws, rules and regulations of any federal, state,
provincial or local governmental authority in the performance of its obligations
hereunder.
3.5 Licensee shall obtain and maintain all material Regulatory Licenses
with any United States or foreign governmental authority required to be obtained
or maintained by Licensee in order to perform its obligations under Section 3.1
of this Agreement and required by any such authority to be obtained by Licensee
in connection therewith. Licensee shall defend any actions brought by NASA
pursuant to the NASA Agreement and any actions relating to the FCC and DoC
Licenses to the extent they arise out of Licensee's operation of the OrbView-2
Satellite.
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<PAGE> 4
3.6 Licensee will pay all federal, state, local and other taxes,
foreign and domestic, including but not limited to sales, use, gross receipts,
and excise taxes and withholding, that arise from the performance of its duties
under this Agreement. The License Fee does not include any federal, state or
local sales, use or excise taxes which shall be the responsibility of Licensee,
if any. Orbital shall pay any U.S. or foreign federal, state or local income
taxes in connection with the License Fee.
SECTION 4 - LICENSE FEE
In consideration of the grant of the License hereunder and the other
obligations of Orbital set forth herein, Licensee shall pay to Orbital a License
fee (the "License Fee") of US $62,743,000 as contemplated under, and which shall
be payable in accordance with, the Procurement Agreement between Orbital and
ORBIMAGE dated November 18, 1996, as amended (the "ORBIMAGE Procurement
Agreement").
SECTION 5 - TERM OF LICENSE
5.1 The term of the License shall commence on the date hereof and
continue until (a) the date upon which the OrbView-2 satellite shall have
permanently and irrevocably failed such that the OrbView-2 satellite is
incapable of making OrbView-2 Data available for use by Licensee, as determined
by ORBIMAGE in its sole discretion or (b) the NASA Agreement has been assigned
to ORBIMAGE.
5.2 (a) Each of Orbital and Licensee may give the other party written
notice that such other party is in default in the observance or performance of
any of its obligations hereunder. If such default remains uncured for ninety
(90) days after the receipt of written notice of default, except that for so
long as the NASA Agreement is in effect, the cure period for a breach of Section
3.1 shall be ten (10) days or such other period as may be specified in the NASA
Agreement, in addition to any rights and remedies otherwise available at law and
except as otherwise limited in this Agreement (i) in the case of a breach by
Orbital, Licensee shall have the right to terminate this Agreement and (ii) in
the case of a breach by ORBIMAGE, then Orbital shall have the right to access to
the Satellite Operations and Control Center and the Remote Tracking Station so
as to enable Orbital to operate the OrbView-2 Satellite in accordance with the
NASA Agreement, provided, however, that ORBIMAGE shall reimburse Orbital for the
performance of such mission operations pursuant to the Amended and Restated
ORBIMAGE Services Agreement dated May ___, 1997, and Orbital shall have no
further obligations to ORBIMAGE under this Agreement except that the License and
the license granted pursuant to Section 1.3 hereof shall remain in effect.
Notwithstanding the foregoing, and except in the case of ORBIMAGE's default
under Section 3.1 above, if the default is susceptible to cure but cannot with
due diligence be wholly cured within ninety (90) days following the notice of
default and the defaulting party has made diligent efforts to cure such default
within such period and thereafter diligently pursues the curing of such default,
no remedies shall be exercisable under this Agreement during the period of such
cure efforts.
(b) Each of Orbital and Licensee may terminate this Agreement
without notice to the other party if such other party becomes insolvent, admits
in writing its inability to pay its
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<PAGE> 5
debts as they become due, makes a general assignment for the benefit of
creditors, suffers or permits the appointment of a receiver for its business or
assets, initiates or becomes subject to any proceeding under any bankruptcy,
insolvency or similar law, whether domestic or foreign, or in the case of an
involuntary petition, if such petition has not been dismissed within 60 days, or
has liquidated or wound up, voluntarily or otherwise (but not in the case of a
liquidation of Orbital into an affiliate).
SECTION 6 - REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION
6.1 Orbital represents and warrants that (a) it has full right and
authority to enter into this Agreement and to perform its obligations hereunder,
(b) it has all Licenses, permits and other authorizations from any agency or
department of the United States government necessary for Orbital to perform its
obligations under this Agreement, and to permit the launch and operation of the
OrbView-2 System, and (c) Orbital's operation of the OrbView-2 System under the
NASA Agreement will not violate any United States copyright, trade secret,
trademark, patent rights or other intellectual property rights of any third
party in the United States, which Orbital represents is the only jurisdiction in
which services are to be delivered by Orbital under the NASA Agreement.
6.2 Orbital has developed and substantially completed construction of
the OrbView-2 satellite, which is undergoing final testing. Orbital is in
compliance with the NASA Agreement and is aware of no event that has occurred
that would give rise to a default under the NASA Agreement.
6.3 Subject to the limitations set forth in Sections 10.3 and 10.4 of
the ORBIMAGE Procurement Agreement with respect to the representation and
warranty set forth in Section 6.1, clause (c) above, Orbital agrees to indemnify
and hold harmless Licensee and its officers, directors, employees, agents and
representatives against all claims, demands or liabilities (including reasonable
attorneys fees) of third parties arising out of or in connection with Orbital's
breach of any representations, warranties, covenants or agreements contained
herein. This indemnification obligation shall survive the expiration or
termination of this Agreement.
6.3 Licensee represents and warrants that it (a) has full right and
authority to enter into this Agreement and to perform its obligations hereunder
(b) it shall have all Licenses, permits and other authorizations from any United
States or foreign government agency or department necessary for Licensee to
perform its obligations under this Agreement, and (c) Licensee's use of the
OrbView-2 Data shall not violate any United States copyright, trade secret,
trademark, patent rights or other intellectual property rights of any third
party.
6.4 Licensee agrees to indemnify and hold harmless Orbital, and its
officers, directors, employees, agents and representatives against all claims,
demands or liabilities (including reasonable attorneys' fees) of third parties
arising from or in connection with Licensee's breach of any representations,
warranties, covenants or agreements contained herein. This indemnification
obligation shall survive the expiration or termination of this Agreement.
5
<PAGE> 6
SECTION 7 - DISCLAIMER OF WARRANTIES AND LIMITATION OF LIABILITY
7.1 Each of the parties acknowledges and understands that (a) the
OrbView-2 System is a new, untested system that entails a high degree of risk of
(i) delay in or cancellation of deployment and (ii) launch vehicle, satellite
and other equipment or software failure or impaired performance, and there can
be no assurance that the OrbView-2 System will be an economically viable system
even if successfully deployed, or that OrbView-2 satellite will be capable of
performing in accordance with the NASA Agreement or delivering any data
whatsoever, and (b) there may be defects or inaccuracies in the OrbView-2 Data
that may be incompatible with Licensee's hardware, software or business. Each
party shall bear all responsibility, risk and cost associated with developing
and maintaining its respective business, and except as provided in Section 2.1
above, Orbital shall not be liable to Licensee or any of its agents or customers
for costs or damages caused by any schedule delays, launch failure, failure of
the OrbView-2 Satellite or any component thereof, defects or inaccuracies in the
OrbView-2 Satellite or OrbView-2 Data or incompatibility of the OrbView-2 Data
with Licensee's hardware, software, data or business.
7.2 NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, IN NO
EVENT SHALL ORBITAL OR LICENSEE BE LIABLE TO EACH OTHER UNDER THIS AGREEMENT FOR
ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF SUCH PARTY
HAD OR SHOULD HAVE HAD KNOWLEDGE OF THE POSSIBILITY OF SUCH DAMAGES.
7.3 ORBITAL HAS NOT AND SHALL NOT BE DEEMED TO HAVE MADE ANY
REPRESENTATIONS OR WARRANTIES WHATSOEVER WITH RESPECT TO THE ORBVIEW-2
SATELLITE, THE ORBVIEW-2 SYSTEM, THE ORBVIEW-2 DATA, OR ANY SERVICES TO BE
PROVIDED UNDER THIS AGREEMENT. ORBITAL EXPRESSLY DISCLAIMS AND LICENSEE HEREBY
EXPRESSLY WAIVES, RELEASES AND RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS AND
LIABILITIES OF ORBITAL AND RIGHTS, CLAIMS AND REMEDIES OF LICENSEE AGAINST
ORBITAL, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY
FAILURE, NONCONFORMANCE OR DEFECT IN THE ORBVIEW-2 SYSTEM, THE ORBVIEW-2 DATA,
OR ANY SERVICES TO BE PROVIDED UNDER THIS AGREEMENT, INCLUDING, BUT NOT LIMITED
TO: (a) ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE; (b) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF
DEALING OR USAGE OF TRADE; (c) ANY WARRANTIES AS TO THE ACCURACY, AVAILABILITY
OR CONTENT OF THE ORBVIEW-2 DATA OR ANY SERVICES PROVIDED BY OR THROUGH ORBITAL
UNDER THIS AGREEMENT; (iv) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY
UNDER ANY TORT, NEGLIGENCE, STRICT LIABILITY, OR OTHER EQUITABLE THEORY; AND (v)
ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF USE, REVENUE OR
PROFIT OF LICENSEE OR FOR ANY OTHER INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES. NO REPRESENTATION OR OTHER AFFIRMATION OF FACT, INCLUDING, BUT NOT
LIMITED TO, STATEMENTS REGARDING CAPACITY
6
<PAGE> 7
OR SUITABILITY FOR USE, THAT IS NOT CONTAINED IN THIS AGREEMENT SHALL BE DEEMED
TO BE A WARRANTY BY ORBITAL.
7.4 Licensee and Orbital each acknowledge that the other shall perform
its obligations under this Agreement on a good faith efforts basis and that
service failures and interruptions may occur and are difficult to assess as to
cause or resulting damages. Licensee and Orbital agree that neither party shall
be liable to the other or any of their agents or customers for any liability for
damages caused or allegedly caused by any failure of performance, error,
omission, interruption, deletion, defect, delay in operation or transmission,
communications line failure, theft or destruction or unauthorized access to,
alteration of, or use of records, whether for breach of contract, tortious
behavior, negligence, or under any other cause of action.
SECTION 8 - DISPUTE RESOLUTION
8.1 Any controversy or claim in respect of this Agreement or the
performance hereunder by any party hereto shall be settled by final and binding
arbitration administered by the American Arbitration Association ("AAA") under
its Commercial Arbitration Rules. In the event that more than one claim or
controversy arises under this Agreement, such claims or controversies may be
consolidated in a single arbitral proceeding. Such arbitration shall take place
in Washington, D.C. before a panel of three (3) neutral arbitrators selected
pursuant to such Rules. The arbitrators' award shall include an allocation of
arbitration fees, expenses and compensation, and may include an award to the
prevailing party of its attorneys' fees, costs and expenses in connection with
the arbitration. A judgment on the award rendered by the arbitrators may be
entered in and enforced by any court having jurisdiction thereof, each party
hereby consenting to the jurisdiction of such court over it and waiving, to the
fullest extent permitted by law, any defense or objection relating to in
personam jurisdiction, subject matter jurisdiction, venue or convenience of the
forum. All matters arising in any action to enforce an arbitral award shall be
determined in accordance with the law and practice of the forum court.
8.2 The existence of any dispute between the parties, whether the same
is the subject of an arbitration proceeding or not, shall not relieve the
parties of their obligations under this Agreement.
SECTION 9 - ASSIGNMENT
Neither party shall assign its rights or obligations hereunder without
the prior written consent of the other party.
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<PAGE> 8
SECTION 10 - MISCELLANEOUS
10.1 All notices, requests and other communications to any party
hereunder shall be in writing (including any facsimile transmission or similar
writing), and shall be sent either by telecopy, by reputable overnight courier
or delivered in person addressed as follows:
(a) If to Orbital, to it at:
21700 Atlantic Boulevard
Dulles, VA 20166
Telecopy: (703) 406-5572
Attention: General Counsel
(b) If to Licensee, to it at:
ORBITAL IMAGING CORPORATION
21700 Atlantic Boulevard
Dulles, VA 20166
Telecopy: (703) 406-5552
Attention: Gil Rye
with a copy to General Counsel
or to such other persons or addresses as any party may designate by written
notice to any other. Each such notice, request or other communication shall be
effective (a) if given by telecopy, when such telecopy is transmitted and the
appropriate answerback is received, (b) if given by reputable overnight courier,
on one (1) business day after being delivered or (c) if given by any other
means, when received at the address specified in this Section.
10.2 This Agreement shall be binding upon the parties, their successors
and permitted assigns.
10.3 This Agreement and all attachments (which are hereby made part of
this Agreement) contain the entire understanding among Licensee and Orbital and
supersede all prior written and oral understandings relating to the subject
hereof. No representations, agreements, modifications or understandings not
contained herein shall be valid or effective unless agreed to in writing and
signed by both parties. Any modification or amendment of this Agreement must be
in writing and signed by both parties.
10.4 The construction, interpretation and performance of this
Agreement, as well as the legal relations of the parties arising hereunder,
shall be governed by and construed in accordance with the laws of the
Commonwealth of Virginia, without giving effect to the conflict or choice of law
provisions hereof. Licensee consents to the personal jurisdiction of any state
or federal court located in Virginia in any action arising under this Agreement
and agree that actions arising under this Agreement may be brought in such
jurisdiction. Licensee agrees that service of process may be made upon Licensee
in any such action in the same manner in which notice may
8
<PAGE> 9
be given pursuant to this Agreement. No party may bring any action for a claim
under this Agreement later than one (1) year after the termination of this
Agreement; provided that claims under any provision of this Agreement that
survives termination of this Agreement may be brought within one (1) year of the
later of the occurrence of the event giving rise to the claim and actual
knowledge thereof by the party asserting such claim.
10.5 It is understood and agreed that no failure or delay by either
Orbital or Licensee in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof, or the exercise of any other
right, power or privilege hereunder. No waiver of any terms or conditions of
this Agreement shall be deemed to be a waiver of any subsequent breach of any
term or condition. All waivers must be in writing and signed by the party sought
to be bound.
10.6 If any part of this Agreement shall be held unenforceable, the
remainder of this Agreement will nevertheless remain in full force and effect,
unless such unenforceability impairs the fundamental purpose or expectations of
the parties hereto.
10.7 Headings in this Agreement are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
10.8 Licensee and Orbital are independent contractors to one another,
and with respect to this Agreement, no party has the authority to bind any other
in any way or to any third party, and nothing in this Agreement shall be
construed as granting any party the right or authority to act as a
representative, agent, employee or joint venturer of any other.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
ORBITAL SCIENCES CORPORATION
By:
---------------------------------
Name: Jeffrey V. Pirone
Title: Senior Vice President and
Chief Financial Officer
ORBITAL IMAGING CORPORATION
By:
---------------------------------
Name: Gilbert D. Rye
Title: President
10
<PAGE> 11
ATTACHMENT A
Description of the OrbView-2 System
The OrbView-2 System is composed of the OrbView-2 satellite
with the SeaWiFS sensor, the OrbView-2 ground station for command and control
and multiple Licensed receiving stations. The OrbView-2 satellite, a privately
owned remote servicing satellite, will collect and transmit images in eight
spectral bands that are defined by NASA. The collection of data will generally
occur between +/-70 of solar zenith with sensor pointing specified by NASA to
avoid sun glint.
The OrbView-2 satellite will transmit the encrypted local area
coverage ("LAC") data in real time when Licensed receiving stations are within
view of the OrbView-2 satellite. The OrbView-2 satellite may store and provide
global area coverage ("GAC") data for transmission to Goddard Space Flight
Center every twelve (12) hours. The GAC data are obtained by selecting every
fourth pixel on every fourth line of the LAC data.
The data comprises eight spectral bands defined by NASA to
measure phytoplankton and chlorophyll concentrations on the ocean's surface. The
eight spectral bands are: 402-422, 433-453, 480-500, 500-520, 545-565, 660-680,
745-785 and 845-885 nm.
The LAC pixel size is 1.6 mrad (about 1.13 km at nadir). Data
are collected from +/-58.3 of nadir for LAC data and +/-45 of nadir for GAC
data.
The LAC data are transmitted at 1,702.5 MHZ in an HRPT-like
format with a data rate of 665.4 kbps. The video portion of the data are
encrypted, and the key is changed every two weeks.
In the event Orbital obtains any rights or interests to GAC
data, such data shall be included in the License.
11
<PAGE> 12
Attachment B
<TABLE>
<CAPTION>
MARK TYPE OF MARK COUNTRY STATUS
---- ------------ ------- ------
<S> <C> <C> <C>
Eyeglass sm Australia Registered
N/A Canada Allowed
sm France Registered
sm Italy Pending
sm Japan Pending
sm Saudi Arabia Registered
sm South Africa Abandoned
tm Taiwan Registered
sm United Kingdom Registered
sm United States Allowed
Orbimage sm South Korea Pending
sm Philippines Pending
sm Saudi Arabia Pending
sm United States Registered
Orbimage Int'l Global
Imaging sm South Korea Pending
sm Philippines Pending
tm Saudi Arabia Pending
sm United States Allowed
OrbNet sm United States Allowed
OrbView sm South Korea Pending
tm Philippines Pending
tm Saudi Arabia Published
tm United States Allowed
sm United States Pending
SeaStar sm United States
</TABLE>
12
<PAGE> 1
Exhibit 10.6
AMENDED AND RESTATED DISTRIBUTOR LICENSE AGREEMENT
BETWEEN
ORBITAL IMAGING CORPORATION
AND
SAMSUNG AEROSPACE INDUSTRIES, LTD.
This Restated Distributor License Agreement (the "Agreement")
is made and entered into this _______ day of November, 1996, between Orbital
Imaging Corporation ("ORBIMAGE"), whose principal place of business is 21700
Atlantic Boulevard, Dulles, Virginia, 20166, USA, and Samsung Aerospace
Industries, Ltd.. (the "Licensee"), whose principal place of business is 150,
2-ka Taepyungro, Chung-ku, Seoul, Korea. This Agreement amends and restates the
Distributor License Agreement between ORBIMAGE and the Licensee dated December
1, 1995 (the "Original Agreement").
WHEREAS, ORBIMAGE intends to construct and operate a
satellite-based, low-Earth orbit, high-resolution remote sensing system;
WHEREAS, ORBIMAGE intends to market satellite-based,
high-resolution imagery services using the OrbView-3 System in the United States
through ORBIMAGE and elsewhere in the world through distributors subject to
distributor license agreements; and
WHEREAS, ORBIMAGE and Licensee wish to amend and restate the
Original Agreement in its entirety and enter into this Agreement setting forth
their respective obligations and understanding relating to the delivery and
distribution of high-resolution imagery products using the OrbView-3 System (as
defined below).
NOW, THEREFORE, the parties agree as follows:
1. EFFECTIVE DATE OF AGREEMENT
This Agreement shall be effective as of December 1, 1995.
2. DEFINITIONS:
a. AUTHORIZED CUSTOMER:
Throughout the term of this Agreement, any person other than
(i) an entity listed on the U.S. State Department List of terrorist countries or
a citizen thereof or (ii) any other person who under U.S. laws or regulations is
prohibited from receiving OrbView-3 System imagery.
b. ORBVIEW-3 SYSTEM:
The space-based system consisting of the satellite bus, one-
and two-meter panchromatic camera, four-meter multispectral camera and an
associated ground segment consisting of the command and control station, the
ground image receive station and the image processing center.
c. LICENSEE GROUND FACILITY:
The ground image receive station and image processing center
located in the Territory.
<PAGE> 2
d. OPERATIONAL CAPABILITY DATE:
The date when the OrbView-3 System is placed into operation
following the successful launch and completion of on-orbit checkout of that
satellite, including all of its subsystems and payloads.
e. TERRITORY:
North and South Korea, to include the 200 nautical mile
fishery conservation zone of North and South Korea.
f. ORBIMAGE SYSTEM SOFTWARE:
Proprietary ORBIMAGE software that shall be developed and
provided by ORBIMAGE in order to permit Licensee to generate from the OrbView-3
System satellite raw imagery and high resolution imagery of the Territory.
g. TARGET LAUNCH DATE.
October 31, 1998.
3. GRANT OF LICENSE
a. Subject to receipt of U.S. Department of Commerce and all other
applicable U.S. agency approvals of this Agreement, ORBIMAGE grants to Licensee
an exclusive license in the Territory (the "License") to: (a) receive, process
and sell imagery of the Territory using the OrbView-3 System satellite while it
is within view of the Licensee's ground receive station, (b) use the ORBIMAGE
system methods, (c) use, if permitted by law, the ORBIMAGE logos, trademarks,
service marks and name, in accordance with the terms and conditions set forth in
this Agreement, and (d) install and use the ORBIMAGE System Software. ORBIMAGE
also hereby grants the Licensee priority use of the OrbView-3 System while the
satellites are within effective imaging range during their orbit over the
Territory.
b. ORBIMAGE will command, control and task the OrbView-3 System,
including all of its subsystems, from its ground facilities located in the
United States.
c. The Licensee acknowledges that it must abide by the terms and
conditions of the operating license granted to ORBIMAGE by the U.S. Department
of Commerce as contained in Attachment A. Licensee hereby acknowledges that it
has read, understands and will comply with the contents of Attachment A,
including any subsequent modifications imposed by the Department of Commerce.
The Licensee further acknowledges that it will not knowingly directly or
indirectly sell or provide any OrbView-3 System imagery to any person other than
an Authorized Customer. Violation of any of the terms of this paragraph will be
sufficient cause for, at ORBIMAGE's sole option, immediate cancellation or
termination of this Agreement, including the License granted hereunder.
d. Except as otherwise provided in Section 3(g), the Licensee may not
transfer the License to other users or operators without the prior written
consent of ORBIMAGE.
e. The Licensee acknowledges its responsibility to ensure that all
receivers of OrbView-3 System imagery are notified and agree that they may not
redistribute, sell or provide any OrbView-3
2
<PAGE> 3
System imagery in any form to any other entity without the prior written consent
of ORBIMAGE. Licensee shall strictly enforce such prohibitions against any and
all receivers of OrbView-3 System imagery.
f. Licensee has provided ORBIMAGE with a deposit of U.S.$ 250,000 to be
applied against payment due for the Licensee Ground Facility, or if the Licensee
does not award a Ground Facility contract to ORBIMAGE or MacDonald, Dettwiler
and Associates Ltd., against the first year payment of U.S. $[Confidential
Treatment] as provided in Section 5(c).
g. Licensee shall have the right to novate this agreement to an entity
to be incorporated under the laws of the Republic of Korea in which an entity
controlled by the Korean Government and/or the Licensee will own more than fifty
percent (50%) of the shares and the other shareholders, if any, will be persons
of the Korean nationality; and provided further that Licensee fully guarantees
the performance under this Agreement of such entity to which this Agreement is
novated.
4. SCOPE OF AGREEMENT
a. Responsibilities and Rights of Licensee. Licensee shall:
(i) Promptly obtain and at all times maintain, at its sole
expense, all governmental approvals, licenses, authorizations and permits (the
"Permits") necessary (A) to develop, construct, implement and operate the
OrbView-3 System in the Territory, including any necessary in-country
environmental impact studies, (B) to provide OrbView-3 System services in the
Territory, and (C) to use the Licensee Ground Facility to receive
high-resolution (1-2 meter panchromatic and 4 meter multi-spectral) imagery
during the term of this Agreement;
(ii) Use all commercially reasonable efforts to advertise,
promote and market the OrbView-3 System and its capabilities, products and
services to Authorized Customers. Except as otherwise provided for in this
Agreement, Licensee is responsible for actively promoting OrbView-3 System
imagery products to all Authorized Customers within the Territory and for
selling OrbView-3 System imagery products of the Territory to all Authorized
Customers located in all parts of the world;
(iii) Operate the Licensee system in a manner so as not to
injure the reputation of ORBIMAGE or otherwise adversely impact the operations
or commercial viability of the OrbView-3 System in other territories;
(iv) With the prior written approval of ORBIMAGE and to the
extent permitted by applicable law, use the OrbView logos and all OrbView
trademarks and service marks in Licensee's marketing and advertising for the
Licensee system. Such use will conform to ORBIMAGE requirements for display and
use of the OrbView logos, trademarks and service marks; and obtain all
governmental approvals, licenses, authorizations and permits necessary to use
such logos, trademarks and service marks and, to the extent not previously done
so by ORBIMAGE, to register such logos, trademarks and service marks in
OrbView's name for use by Licensee in the Territory. Any modification or partial
use of the word "OrbView" for a logo, trademark, service mark or trade name
shall also require the prior written approval of ORBIMAGE;
(v) Pay to ORBIMAGE the fees, costs and other payments set
forth in this Agreement;
(vi) Give ORBIMAGE and its representatives reasonable access
during normal
3
<PAGE> 4
business hours to Licensee's books, accounts, records, contracts and documents
concerning the Licensee system and use of the logos, trademarks and service
marks for, among other reasons, the purpose of determining compliance by
Licensee with the terms of this Agreement;
(vii) Use the ORBIMAGE System Software only to operate the
Licensee system, and shall not copy or disclose, sell, distribute or re-license
such software to any other person or entity or reverse engineer or compile or
disassemble such software; Licensee may request an extension for the use of the
ORBIMAGE System Software beyond the expiration date of this Agreement provided
both parties mutually agree to the terms and conditions of such an extension;
(viii) Establish an accounting system with books, records and
procedures sufficient to establish and maintain an adequate audit trail of all
transactions conducted by the Licensee. Licensee agrees that only one set of
accounting records will exist for the OrbView-3 System, that all transactions
applicable to the OrbView-3 System will be recorded in these records and that
such records will be updated and maintained on a current basis so as to provide
the means for ORBIMAGE to independently verify compliance with the provisions of
this Agreement ;
(ix) Use the Licensee Ground Facility [Confidential
Treatment];
(x) Have the non-exclusive right to solicit other entities in
the Territory to participate and/or invest in the Licensee's promotion and sales
of OrbView-3 System products in the Territory with prior written approval from
ORBIMAGE; and
(xi) Forward to the ORBIMAGE's ground facility in the United
States, by the most expeditious means, all requests for imagery taskings of the
satellites in the OrbView-3 System. The ORBIMAGE ground facility will
consolidate all worldwide requests for imagery taskings and will uplink these
taskings at the same time to the OrbView-3 System satellite.
b. RESPONSIBILITIES OF ORBIMAGE. ORBIMAGE SHALL:
(i) [Confidential Treatment];
(ii) Use commercially reasonable efforts to assist Licensee in
providing data relating to the OrbView-3 System required by any governmental
authority or agency in connection with Licensee obtaining any of the Permits if
Licensee cannot reasonably provide such data itself; provided that written data
shall be provided at ORBIMAGE's expense and any data required to be presented in
person or orally shall be provided at Licensee's expense; and provided further
that ORBIMAGE shall not be required to disclose any such data unless ORBIMAGE
reasonably believes that such data will be maintained by the receiving party on
a confidential basis;
(iii) Implement advertising and other promotional programs for
the OrbView-3 System, the scope and timing of which shall be at ORBIMAGE's sole
discretion;
(iv) Perform and have sole responsibility for telemetry,
tasking and control of the satellite and all of its subsystems and payloads
using ORBIMAGE facilities located in the United States and Licensee may not
perform these functions from its facilities;
(v) [Confidential Treatment];
(vi) [Confidential Treatment];
4
<PAGE> 5
(vii) Provide Licensee with periodic progress reports on a
semi-annual basis in writing; and
(viii) [Confidential Treatment].
5. REVENUE REQUIREMENTS
a. The Licensee will have the sole authority to establish the final
retail price for all OrbView-3 System imagery of the Territory sold to
Authorized Customers located either inside or outside the Territory. It is
mutually agreed that such retail prices should be established at a level so as
to maximize profits from sales of OrbView-3 System imagery of the Territory to
customers throughout the world.
b. Each request for a separate image shall be considered a "tasking";
for example, a stereo image product shall be considered two taskings. Imagery of
the Territory taken by the OrbView-3 System satellite shall be downlinked in
real-time to the Licensee Ground Facility for processing, archiving, and sale.
c. (i) Licensee agrees to pay ORBIMAGE a guaranteed amount of U.S.$
[Confidential Treatment] (the "Guaranteed Amount") per 12-month period,
beginning with the Operational Capability Date of the OrbView-3 System and
ending three years later, for a total payment of U.S.$ [Confidential Treatment],
provided that the raw imagery is transmitted in a reasonable fashion to the
Licensee. (Each 12-month period following the Operational Capability Date is
referred to herein as the "Operational Period.") Such payments shall be made
[Confidential Treatment] on a quarterly basis and shall be in the amount of
U.S.$ [Confidential Treatment], and shall be made regardless of the number of
taskings or archive sales actually ordered by Licensee. The first payment shall
be pro-rated as appropriate depending upon the Operational Capability Date.
(ii) The Guaranteed Amount shall be deemed consideration for
[Confidential Treatment] taskings and sales from the Licensee archive in each
given Operational Period. For the purpose of calculating [Confidential
Treatment] monoscopic mode taskings and sales from the Licensee archive, a
tasking and the first sale of the image from such tasking, whether the sale is
made simultaneously with the tasking or after stored in Licensee's archive,
shall be considered as one. If in the second or third Operational Period,
Licensee has requested more than [Confidential Treatment] in the aggregate,
then Licensee shall pay ORBIMAGE a royalty for each additional tasking and for
each additional sale or delivery of imagery from the Licensee archive during
such Operational Period [Confidential Treatment]. All sales/deliveries of
imagery from the Licensee archive to an [Confidential Treatment] shall be
included in the [Confidential Treatment] number. [Confidential Treatment]
(iii) It is recognized that Licensee may request imagery of
territories other than the Territory, and that ORBIMAGE will use its reasonable
efforts to meet such requests, subject to contractual or other obligations. In
the event such imagery is provided, it shall be subject to the pricing terms set
forth in the preceding paragraph (ii).
d. ORBIMAGE shall invoice Licensee on a quarterly basis for the lump
sum payment and royalties provided for in subsection (c) above. All invoices
shall be paid within 30 days of receipt. In the event Licensee fails to make
payment within the required period, ORBIMAGE, at its discretion, may assess a
finance charge at the prime rate charged by Morgan Guaranty Trust Company of New
York at the date of invoice plus 5% per annum. Annual license payments related
to subsequent satellites that may be incorporated into the OrbView-3 system will
be the subject of future negotiations.
e. [Confidential Treatment].
5
<PAGE> 6
6. LICENSEE GROUND FACILITY
Licensee shall procure a ground image receive station and
image processing center that shall be operational and capable of receiving and
processing OrbView-3 System imagery data no later than the Target Launch Date.
7. TERM OF THE AGREEMENT
a. TERM.
This Agreement shall terminate on the date three years after
the Operational Capability Date of the OrbView-3 System. The terms and other
conditions relating to it, may, by mutual agreement, be modified whenever
additional satellites or other major significant capabilities are contemplated
for addition to the OrbView-3 System. Within one year prior to the expiration of
the initial term of this Agreement, Licensee may request that this Agreement be
extended for a further period of up to ten years, which request shall be subject
to good faith negotiations by both parties.
b. TERMINATION FOR CONVENIENCE.
Each party shall have the right to terminate this Agreement
for convenience at any time by giving ten (10) days notice to the effect to the
other party and shall pay as damages the amounts set forth in Section 7(d)
below.
c. TERMINATION FOR BREACH.
This Agreement may be terminated by the non-breaching party at
any time after the occurrence of any of the following events ("Events of
Default"):
(i) Licensee shall fail to pay any amount due under this
Agreement, within the time period specified, and such payment is not made within
five days notice from ORBIMAGE of such failure;
(ii) Any representation or warranty made by Licensee or
ORBIMAGE in this Agreement or any other document delivered pursuant to this
Agreement shall be false or misleading in any material respect;
(iii) A party shall fail to observe or perform any of its
material obligations under this Agreement, and such failure to observe or
perform is not cured within sixty (60) days of notice of such failure;
(iv) A party shall become insolvent, admit in writing its
inability to pay its debts as they become due, make a general assignment for the
benefit of creditors, suffer or permit the appointment of a receiver for its
business or assets, initiate or become subject to any proceeding under any
bankruptcy or insolvency law, whether domestic or foreign, or liquidate or wind
up, voluntarily or otherwise;
(v) Currency exchange restrictions that prevent Licensee from
making its payments to ORBIMAGE in U.S. dollars shall be imposed by any
governmental authority or agency in the Territory and continue in effect for
more than 12 months;
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(vi) Licensee shall take any action or fail to take any action
that results in Licensee or ORBIMAGE contravening or violating any law in effect
in any part of the Territory or the United States;
(vii) Licensee shall fail to obtain any necessary Korean
Government permits within 60 days after the Operational Capability Date; and
(viii) [Confidential Treatment].
d. DAMAGES
(i) Damages payable by Licensee to ORBIMAGE:
(A) Except as otherwise provided herein, if
prior to the launch and initial of operations of the OrbView-3 System, Licensee
terminates this Agreement for convenience or ORBIMAGE terminates this Agreement
for breach by Licensee, then Licensee shall pay damages to ORBIMAGE
[Confidential Treatment]. The $250,000 deposit provided by Licensee shall be
credited against any payments by Licensee under this subparagraph (A).
(B) Except as otherwise provided herein, if
following the launch of the OrbView-3 System, Licensee terminates this Agreement
for convenience or ORBIMAGE terminates this Agreement for breach by Licensee,
then Licensee shall pay damages to ORBIMAGE in an amount equal to $[Confidential
Treatment] minus any payments made to ORBIMAGE for OrbView-3 services through
the date of termination. Nothing herein shall relieve Licensee of its obligation
to pay all invoices that have been delivered, or obligations otherwise accrued,
prior to such date of termination.
(ii) Damages payable by ORBIMAGE to Licensee:
(A) Except as otherwise provided herein, if
ORBIMAGE terminates this Agreement for convenience or Licensee terminates this
Agreement for breach by ORBIMAGE, then ORBIMAGE shall pay damages to Licensee
[Confidential Treatment]. If the Agreement is terminated pursuant to this
Section 7(d)(ii)(A), ORBIMAGE shall also refund to Licensee the $250,000
deposit.
(iii) All payments for damages under this Section 7 shall be
made within thirty (30) days of termination and may be conditioned upon the
execution by both parties of a mutually acceptable release.
(iv) Notwithstanding anything herein to the contrary, neither
ORBIMAGE nor Licensee shall be liable to the other for any damages, expenses,
costs, indemnification or otherwise in the event this Agreement is terminated
pursuant to Section [Confidential Treatment] or Section [Confidential
Treatment], or Section [Confidential Treatment], except that ORBIMAGE shall
refund all or any portion of the $250,000 that has not been applied against
payment for the Licensee Ground Facility or the first year Guaranteed Amount as
contemplated by Section 3(f) above.
(v) In no event shall any liability of either party exceed the
amounts provided for in this Section 7 (d).
e. USE OF SYSTEM AFTER TERMINATION.
On the effective date of termination of this Agreement,
Licensee shall cease using the
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OrbView-3 System. In the event of the occurrence of an Event of Default by
Licensee, to the extent permitted by law, ORBIMAGE shall be entitled to, in its
sole discretion, establish another Licensee in the Territory. Licensee agrees to
cooperate in ensuring continued operations and transfer of control to the new
Licensee.
8. REPRESENTATIONS AND WARRANTIES
a. Licensee represents and warrants to ORBIMAGE that (i) Licensee is a
corporation duly incorporated and validly existing under the laws of Republic of
Korea; (ii) the execution, delivery and performance of this Agreement by
Licensee has been duly authorized by all necessary action on the part of
Licensee, (iii) this Agreement has been duly executed and delivered by Licensee
and constitutes a legally valid and binding obligation of Licensee, enforceable
against Licensee in accordance with its terms, (iv) Licensee has or will have
all Permits from any governmental authority or agency necessary for Licensee to
perform its obligations under this Agreement.
b. Licensee agrees to indemnify and hold harmless ORBIMAGE and its
affiliates, officers, directors, employees, agents and representatives against
all claims, demands or liabilities (including reasonable attorneys' fees) of
third parties arising out of or in connection with Licensee's wrongful or
grossly negligent operation of the Licensee System, Licensee's misuse of the
OrbView logos, trademarks and service marks or any other intellectual property
rights of ORBIMAGE or any third parties incorporated into the OrbView-3 System,
or Licensee's breach of any representations, warranties, covenants or agreements
contained herein or of any third party rights. This indemnification obligation
shall survive the expiration or termination of this Agreement.
c. ORBIMAGE represents and warrants to Licensee that (i) ORBIMAGE is a
corporation duly incorporated and validly existing under the laws of the State
of Delaware; (ii) the execution, delivery and performance of this Agreement by
ORBIMAGE has been duly authorized by all necessary action on the part of
ORBIMAGE, (iii) this Agreement has been duly executed and delivered by ORBIMAGE
and constitutes a legally valid and binding obligation of ORBIMAGE, enforceable
against ORBIMAGE in accordance with its terms; and (iv) that the OrbView-3
System shall be capable of delivering imagery that meets the criteria set forth
in Attachment D hereto.
9. NON-COMPETITION
a. DURING TERM.
[Confidential Treatment].
b. RESERVED.
c. If ORBIMAGE declares a system failure pursuant to Section
10(c), Licensee shall have the right to participate in another commercial
remote sensing system provided that Licensee has met all of its financial
obligations under this Agreement. Licensee will have been deemed to have met
all financial obligations upon payment to ORBIMAGE for all items delivered as
of the date of system failure.
10. SYSTEM OUTAGES AND FAILURE
a. [Confidential Treatment].
b. In the event ORBIMAGE is unable to provide Licensee with access to
the OrbView-3 System due to temporary or intermittent problems with the
OrbView-3 System (not including planned periods of satellite unavailability that
result from the OrbView-3 System architecture) for a total of more
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than [Confidential Treatment] days during any one year period commencing on the
Operational Capability Date and any anniversary of such date, Licensee's sole
and exclusive remedy shall be to extend the term of this Agreement one day for
each day in excess of such [Confidential Treatment] days that ORBIMAGE is
unable to provide Licensee with access to the OrbView-3 System.
c. If ORBIMAGE determines in its sole discretion that the OrbView-3
System has permanently and irrevocably failed such that Licensee cannot access
the OrbView-3 System, ORBIMAGE shall be entitled to terminate this Agreement.
11. DISCLAIMER OF WARRANTIES AND LIMITATION OF LIABILITY
a. Each of the parties acknowledges and understands that the OrbView-3
System is a new, untested system that entails a high degree of risk of (i) delay
in or cancellation of deployment and (ii) launch vehicle, satellite and other
equipment or software failure or impaired performance, and that there can be no
assurance that the OrbView-3 System will be an economically viable system even
if successfully deployed. Each party shall bear all responsibility, risk and
cost associated with developing and maintaining its respective business. and
ORBIMAGE shall not be liable to Licensee for costs or damages caused by any
schedule delays or failure of the OrbView-3 System or any component thereof,
except as specifically provided herein.
b.
(i) Except as otherwise specifically provided in Section 8
herein, ORBIMAGE makes no representations or warranties whatsoever with respect
to any services and/or products to be provided by ORBIMAGE hereunder, whether
express or implied, including any implied warranty of merchantability or fitness
for an particular purpose, or any implied warranty arising from course of
performance, course of dealing or usage of trade. No representation or other
affirmation of fact, including, but not limited to, statements regarding
capacity or suitability for use, that is not contained in this agreement shall
be deemed to be a warranty by ORBIMAGE.
(ii) Neither ORBIMAGE nor the Licensee shall be liable to the
other for any indirect, incidental, or consequential damages in connection with
this Agreement, including loss of use, revenue or profit. Any liability of one
party to the other for direct damages shall be limited to the amounts set forth
in Section 7(d) above.
c. LICENSEE SHALL INSURE THAT ALL OF ITS AUTHORIZED CUSTOMERS AGREE TO
THE FOREGOING WAIVER OF RIGHTS AND CLAIMS.
12. DISPUTE RESOLUTION
a. In the event of a dispute regarding any matter covered by this
Agreement, ORBIMAGE and Licensee shall use all reasonable efforts to resolve
such dispute within sixty calendar days of when such parties commenced
discussion of such dispute. In the event the parties are unable to agree on the
resolution of such dispute within such period of time, either party may remove
the dispute for settlement by final and binding arbitration in London, England,
in accordance with the then rules of Arbitration of the International Chamber of
Commerce (ICC) (to the extent not modified by this Section). In the event that
more than one dispute arises under this Agreement, such disputes may be
consolidated in a single arbitral proceeding. The arbitral tribunal shall be
composed of three arbitrators, each of whom shall have experience in satellite
business and/or the subject matter of the dispute if it is different. Each of
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<PAGE> 10
ORBIMAGE and Licensee shall appoint one arbitrator. If any party shall fail to
appoint an arbitrator within thirty days from the date on which the other
party's request for arbitration has been communicated to the first party, such
appointment shall be made by the ICC. The two arbitrators so appointed shall
agree upon the third arbitrator who shall act as chairman of the arbitral
tribunal and who shall have experience in satellite business and/or the subject
matter of the dispute, if it is different. If the two appointed arbitrators fail
to nominate a chairman within ten days from the date as of which both
arbitrators shall have been appointed, such chairman shall be selected by the
ICC. In all cases, the arbitrators shall be fluent in English and the
Arbitration shall be conducted in English. Judgment upon any award rendered by
the arbitrators may be entered in any court having jurisdiction or application
may be made for judicial acceptance of the award and an order of enforcement, as
the case may be. The parties agree that if it becomes necessary for any party to
enforce an arbitral award by a legal action or additional arbitration or
judicial methods, the party against whom enforcement is sought shall pay all
reasonable costs and attorney's fees incurred by the party seeking to enforce
the award.
b. Pending a final determination by the arbitrators, both parties shall
continue to fulfill all of their obligations under this Agreement, except in the
event that this Agreement has been terminated by either party.
c. The rights of the parties under this Section 12 shall be the
exclusive remedy with respect to any dispute regarding any matter covered by
this Agreement.
13. EXPORT CONTROL AND PROHIBITED FOREIGN TRADE PRACTICES RESTRICTIONS
Any export of ORBIMAGE hardware, software, and other
information shall comply with applicable U.S. export control requirements.
Licensee agrees to comply with all applicable laws, rules, and regulations of
the United States regarding export controls and foreign corrupt practices,
including the United States Federal International Traffic in Arms Regulations
and of the Prohibited Foreign Trade Practices Act are set forth in Attachments B
and C, as they may be amended from time to time.
14. RESERVED
15. MISCELLANEOUS
a. NOTICES.
All notices given under this Agreement must be in writing and
sent by hand delivery, by facsimile transmission or by registered mail, postage
prepaid, to:
Orbital Imaging Corporation:
ORBIMAGE
21700 Atlantic Boulevard
Dulles, VA 20166
Facsimile: (703) 406-5552
Attention: President
Licensee:
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Samsung Aerospace Industries, LTD
Samsung Life Building
150, 2-Ka, Taepyoung-Ro, Choong-Ku
Seoul, Korea, 100-716
Mail Drop No. RAO/C.P.O. Box 9762
or to such other persons or addresses as either party may designate by written
notice to the other. All such notices sent to either Licensee or ORBIMAGE shall
be effective upon delivery if hand delivery, twenty-four (24) hours after
transmission, if sent by facsimile, or on the date ten (10) days from posting if
sent by mail.
b. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the parties, their
successors and permitted assigns. Except as otherwise provided in Section 3(g),
neither this Agreement nor any interests or duties of Licensee hereunder may be
assigned by Licensee without the express written consent of ORBIMAGE, which
consent shall not be unreasonably withheld, provided that either party may
assign this Agreement to any successor in interest by merger, acquisition or
otherwise, or to any parent or subsidiary entity.
c. ENTIRE AGREEMENT.
This Agreement and all attachments (which are hereby made part
of this Agreement) contain the entire understanding between Licensee and
ORBIMAGE and supersede all prior written and oral understandings relating to the
subject hereof. No representations, agreements, modifications or understandings
not contained herein shall be valid or effective unless agreed to in writing and
signed by both parties. Any modification or amendment of this Agreement must be
in writing and signed by both parties.
d. GOVERNING LAW AND JURISDICTION.
(i) The construction, interpretation and performance of this
Agreement, as well as the legal relations of the parties arising hereunder,
shall be governed by and construed in accordance with the laws of the State of
New York, without giving effect to the conflict or choice of law provisions
thereof. The United Nations Convention on Contracts for the International Sale
of Goods (1980) shall not apply to any provision of this Agreement. Neither
party may bring any action for a claim under this Agreement later than one year
after the termination of this Agreement; provided that claims under any
provision of this Agreement that survives termination of this Agreement may be
brought within one year of the later of the occurrence of the event giving rise
to the claim and actual knowledge thereof by the party asserting such claim
e. FORCE MAJEURE.
Neither party shall be held responsible for failure or delay
in performance or delivery if such failure or delay is the result of an act of
God, the public enemy, embargo, governmental act, fire, accident, war, riot,
strikes, inclement weather or other cause of a similar nature that is beyond the
control of the parties. In the event of such occurrence, this Agreement shall be
amended by mutual agreement to reflect an extension in the period of performance
and/or time of delivery. Failure to agree on an equitable extension shall be
considered a dispute and resolved in accordance with Section 12.
f. WAIVER.
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It is understood and agreed that no failure or delay by either
ORBIMAGE or Licensee in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof, or the exercise of any other
right, power or privilege hereunder. No waiver of any terms or conditions of
this Agreement shall be deemed to be a waiver of any subsequent breach of any
term or condition. All waivers must be in writing and signed by the party sought
to be bound.
g. SEVERABILITY.
If any part of this Agreement shall be held unenforceable, the
remainder of this Agreement will nevertheless remain in full force and effect.
h. HEADINGS.
Headings in this Agreement are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
i. INDEPENDENT CONTRACTORS.
Licensee and ORBIMAGE are independent contractors to one
another, neither party has the authority to bind the other in any way or to any
third party, and nothing in this Agreement shall be construed as granting either
party the right or authority to act as a representative, agent, employee or
joint venturer of the other.
j. COMMUNICATIONS IN ENGLISH.
The parties agree that all communications, notices or any
written material to be provided by ORBIMAGE to Licensee or by Licensee to
ORBIMAGE under this Agreement shall be in the English language or accompanied by
an accurate and complete translation into English.
k. CALENDAR.
The Gregorian calendar shall be used in calculating, invoicing
and paying all amounts due under this Agreement.
l. PAYMENTS.
All payments due and payable hereunder shall be paid in U.S.
Dollars in immediately available funds to the bank account specified by either
party in writing, as the case may be.
m. This Agreement is executed in English and Korean counterpart.
In the event of a conflict or discrepancy in the interpretation of this
Agreement, the English version will govern.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first above written.
ORBITAL IMAGING CORPORATION
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By:
Name: Gilbert D. Rye
Title: President
SAMSUNG AEROSPACE INDUSTRIES, LTD.
By:
Name: Chang Suk Oh
Title: Senior Director
Strategic Business
Development Division
GUARANTEE OF AGREEMENT
With respect to the subject matter of this Agreement, Orbital
Sciences Corporation, as a 100% shareholder of Orbital Imaging Corporation,
hereby guarantees the performance by Orbital Imaging Corporation of this
Agreement.
ORBITAL SCIENCES CORPORATION
By:
Name: Bruce W. Ferguson
Title: Executive Vice President
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ATTACHMENT A
U.S. DEPARTMENT OF COMMERCE OPERATING LICENSE
ISSUED TO ORBIMAGE
On May 5, 1994, the U.S. Department of Commerce issued a
license under Title II of the Land Remote Sensing Policy Act of 1992, P.L.
102-555, for Orbital Sciences Corporation (Licensee), on behalf of Eyeglass
International, to operate a private remote-sensing space system, known as
"Eyeglass". The license was subsequently amended and issued to "ORBIMAGE" to
operate the "OrbView" system. The license is valid for a period of 10 years. The
major contents of the license are outlined below. All references to "Licensee"
are to "ORBIMAGE". It is the intent of this Distribution License Agreement that
all of the requirements levied by the Department of Commerce operating license
on ORBIMAGE shall also apply to the fullest extent to Samsung Aerospace
Industries, Ltd.
A. The license is limited to the operations of a land
remote-sensing space system and subject to the following terms and conditions
that apply to the Licensee and any subsidiary, affiliate, or contractor, as
appropriate. The issuance of the license does not relieve the Licensee of the
obligation to obtain export or other licenses from appropriate U.S. Government
agencies pursuant to applicable statutes.
1. Licensee shall comply with the requirements of the
Act and any applicable regulations issued pursuant to
the Act. The Licensee shall operate the system in a
manner that preserves the national security and
observes the international obligations and foreign
policies of the United States. The Licensee shall at
all times maintain positive control of the spacecraft
including safeguards to ensure the integrity of
spacecraft operations. The Licensee shall maintain
and make available to the U.S. Government, as
requested, a record of all satellite tasking
operations, for the previous year.
During periods when national security or
international obligations and/or foreign policies may
be compromised, as defined by the Secretary of
Defense or the Secretary of State, respectively, the
Secretary of Commerce may, after consultation with
the appropriate agency(ies), require the Licensee to
limit data collection and/or distribution by the
system to the extent necessitated by the given
situation. During those periods when, and for those
geographic areas that, the Secretary of Commerce has
required the Licensee to limit distribution, the
Licensee shall, on request, make the enhanced data
thus limited from the system available exclusively,
by means of government furnished rekeyable encryption
on the downlink, to the U.S. Government. The costs
and terms associated with meeting this condition will
be negotiated directly between the Licensee and DOD
(for the U.S. Government) in accordance with Section
507 (d) of the Act.
The Licensee shall ensure that all encryption devices
used are approved by the U.S. Government for the
purpose of denying unauthorized access to others
during periods when national security or
international obligations and/or foreign policies may
be compromised.
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The Licensee shall use a data downlink format that
allows the U.S. Government access and use of these
data during periods when national security or
international obligations and/or foreign policies may
be compromised. The Licensee shall provide sufficient
documentation to the U.S. Government on the
Licensee's downlink data format to assure this
access.[
2. Licensee will make available to the Government of any
country (including the United States) unenhanced data
concerning the territory under the jurisdiction of
such Government as soon as such data are available
and on reasonable cost terms and conditions.
3. Licensee will make available unenhanced data
requested by the National Satellite Land Remote
Sensing Data Archive (the Archive) in the Department
of the Interior on reasonable cost terms as agreed by
the Licensee and the Archive. After a reasonable
period of time, as agreed with the Licensee, the
Archive may make these data available to the public
at a price equivalent to the cost of fulfilling user
requests.
Before purging any data in its possession, the
Licensee shall offer such data to the Archive at the
cost of reproduction and transmission. The Archive
may make these data available immediately to the
public at a price equivalent to the cost of
fulfilling user requests.
4. Upon termination of operations under the license, the
Licensee will dispose of any satellite in space in a
manner satisfactory to the President. To meet this
condition and to deal with any circumstances
involving the satellite's end of life/termination of
mission, the Licensee shall obtain a priori U.S.
Government approval of all plans and procedures to
deal with the safe disposition of the satellite
(e.g., burn on reentry or controlled deorbit).
5. Licensee shall not change the operational
specifications of the satellite system from the
application as submitted, which would result in
materially different capabilities than those
described in the application, without filing an
amendment as specified in paragraph C.3 of this
license.
6. Licensee shall notify the National Environmental
Satellite, Data, and Information Service (NESDIS) of
any significant or substantial agreement the Licensee
intends to enter with a foreign nation, entity, or
consortium involving foreign nations or entities at
least 60 days before concluding such agreement.
Significant or substantial agreements include, but
are not limited to, agreements which would provide
for the tasking of the satellite and its sensors,
provide for real-time direct access to unenhanced
data, or involve high-volume data purchase
agreements. NESDIS, in consultation with the
appropriate agencies, shall review the proposed
agreement to ensure that it is consistent with the
terms and conditions of this license. Specifically,
the agreement shall require that
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the foreign entity will abide by the conditions in
this license addressing national security and
international obligations and foreign policies. If
NESDIS, in consultation with appropriate agencies,
determines that the proposed agreement will
compromise national security concerns or
international obligations or foreign policy, NESDIS
will so advise the Licensee.
B. Enforcement of this license will be carried out in
accordance with section 203 of the Act. Any civil penalties authorized by
section 203(a) (3) will be assessed in accordance with the procedures set forth
in Subparts B and C of 15 C.F.R. Part 904. Such civil penalties may be assessed
in amounts up to $10,000 for any violation of the Act or any condition of this
license with each day of violation constituting a separate violation.
C. Before the Licensee may take any of the following actions
NESDIS must grant an amendment to the license. NESDIS will consult with the
appropriate Federal agencies, as required by the Act, before taking final action
on the amendment. The Licensee must promptly file all relevant information with
NESDIS if the Licensee anticipates the occurrence of any of the following
conditions:
1. Assignment or transfer of the license;
2. Any change in ownership of the Licensee that would
result in foreign individuals, entities, or consortia
having an aggregate interest in the Licensee in
excess of 25 percent; and
3. Any change in the orbital characteristics,
performance specifications, or data collection and
exploitation capabilities approved above. In the case
of an emergency posing an imminent and substantial
threat of harm to human life, property, environment,
or the remote-sensing space system itself, Licensee
shall not be required to obtain such amendment. If
circumstances permit, Licensee shall attempt to
obtain oral approval from NESDIS prior to making any
such substantial change.
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ATTACHMENT B
COMPLIANCE WITH INTERNATIONAL TRAFFIC IN ARMS REGULATIONS
Although this Agreement is not intended to be a technical
assistance agreement as defined in Part 120.22 of the International Traffic in
Arms Regulations, to the extent any part of this Agreement is deemed to be a
technical assistance agreement, the following provisions of Part 124.8 shall
apply with respect to that part of this Agreement:
A. The applicable part of this Agreement shall not enter into
force, and shall not be amended or extended, without the prior written approval
of the Department of State of the U.S. Government.
B. The applicable part of this Agreement is subject to all
United States laws and regulations relating to exports and to all administrative
acts of the U.S. Government pursuant to such laws and regulations.
C. The parties to this Agreement agree that the obligations
contained in this Agreement shall not affect the performance of any obligations
created by prior contracts or subcontracts which the parties may have
individually or collectively with the U.S. Government.
D. No liability will be incurred by or attributed to the U.S.
Government in connection with any possible infringement of privately owned
patent or proprietary rights, either domestic or foreign, by reason of the U.S.
Government's approval of this Agreement.
E. Any technical data or defense service exported from the
United States in furtherance of this Agreement and any defense article which may
be produced or manufactured from such technical data or defense service may not
be transferred to a person in a third country or to a national of a third
country unless the prior written approval of the Department of State has been
obtained.
F. All provisions in this Agreement which refer to the U.S.
Government and the Department of State will remain binding on the parties after
the termination of this Agreement.
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ATTACHMENT C
PROHIBITED FOREIGN TRADE PRACTICES ACT
A. Licensee agrees that, in connection with this Agreement, it
will not, directly or indirectly, give, offer or promise, or authorize or
tolerate to be given, offered or promised, anything of value to any official or
employee of a government, or of any subdivision thereof, with the intent to (1)
influence any official act or decision of such official or employee, (2) induce
such official or employee to do or omit to do any act in violation of his or her
lawful duty, or (3) induce such official or employee to use his or her influence
to affect or influence any act or decision of a government, or of any
subdivision thereof, to assist ORBIMAGE in obtaining or retaining business, or
in directing business to any person.
B. Licensee agrees that, in connection with this Agreement, it
will not, directly or indirectly, give, offer or promise, or authorize or
tolerate to be given, offered or promised, anything of value to any political
party or official thereof or any candidate for any political office, with the
intent to (1) influence any official act or decision of such party, official or
candidate, (2) induce such party, official or candidate to do or omit to do any
act in violation of its, his or her lawful duty, or (3) induce such party,
official or candidate to use its, his or her influence to affect or influence
any act or decision of a government, or of any subdivision thereof, to assist
ORBIMAGE in obtaining or retaining business, or in directing business to any
person.
C. Licensee agrees that, in connection with this Agreement, it
will not, directly or indirectly, give, offer or promise, or authorize or
tolerate to be given, offered or promised, anything of value to any person,
knowing or having reason to know that all or a portion of such thing of value is
to be given, offered or promised to any official or employee of a government, or
of any subdivision thereof, or any political party or official thereof, or to
any candidate for any political office, with the intent to (1) influence any
official act or decision of such official, party, party official or candidate,
(2) induce such official, party, party official or candidate to do or omit to do
any act in violation of its, his or her lawful duty, or (3) induce such
official, party, party official or candidate to use its, his or her influence to
affect or influence any act or decision of a government, or of any subdivision
thereof, to assist ORBIMAGE in obtaining or retaining business, or in directing
business to any person.
D. Licensee agrees that, in performing its obligations under
this Agreement, it will not undertake, nor cause nor permit to be undertaken,
any activity which either (1) is illegal under any applicable laws, decrees,
rules or regulations in effect in any country, or (2) would have the effect of
causing ORBIMAGE to be in violation of any applicable laws, decrees, rules or
regulations in effect in the United States or in any country.
E. Licensee hereby represents and warrants that neither
Licensee, nor any employee, representative or agent of Licensee, is an official
or employee of the government of any country whose laws are applicable to the
performance of this Agreement ("Applicable Country"), or any subdivision
thereof. Licensee further agrees to notify ORBIMAGE event that this covenant
ceases to be true.
F. Licensee agrees to notify ORBIMAGE immediately of any
extortive solicitation, demand or other request for anything of value, by or on
behalf of any official or employee of the government of any Applicable Country,
or of any subdivision thereof, relating to the subject matter of this Agreement.
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G. If Licensee breaches any of the covenants set forth in A,
B, or C above, (1) this Agreement shall become void, and (2) ORBIMAGE shall have
a cause of action against Licensee for, among other things, the amount of any
monetary payment or thing of value given by Licensee in breach of any of the
above-mentioned covenants.
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ATTACHMENT D
EXPECTED PERFORMANCE OF THE ORBVIEW-3 SYSTEM
--------------------------------------------
- - Resolution & Swath Width:
Panchromatic: 1-meter resolution in 8 kilometer swaths
2-meter resolution in 8 kilometer swaths
Multispectral: 4-meter resolution in 8 kilometer swaths
- - MTF:
[Confidential Treatment]
[Confidential Treatment]
[Confidential Treatment]
Revisit over the Korean Peninsula every three days or less.
- - Accuracy
[Confidential Treatment]
[Confidential Treatment]
<PAGE> 1
Exhibit 10.7
OFFICER/DIRECTOR INDEMNIFICATION AGREEMENT
This Indemnification Agreement is made and entered into as of April 13,
1998 by and between ORBITAL IMAGING CORPORATION (the "Corporation") and _______
(the "Director/Officer").
W I T N E S S E T H:
WHEREAS, the Director/Officer has agreed to serve as a director/officer
of the Corporation; and
WHEREAS, the Corporation wishes to indemnify the Director/Officer
against certain liabilities and expenses that may be incurred in connection with
the Director/Officer's service on behalf of the Corporation;
NOW THEREFORE, the parties hereto agree, subject to the terms and
conditions hereof, as follows:
1. Indemnification Agreement.
a. Third Party Actions. The Corporation shall indemnify and
hold harmless the Director/Officer in the event that the Director/Officer was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in right of the Corporation) by reason
of the fact that the Director/Officer (A) is or was a director, officer,
employee or agent of (i) the Corporation or (ii) any subsidiary of the
Corporation or any corporation, partnership or other entity affiliated with the
Corporation (other than Orbital Sciences Corporation) (each of the foregoing
being hereinafter referred to as an "Affiliate") or (B) is or was serving at the
request of the Corporation or any Affiliate as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise (including any employee benefit plan of the Corporation or any
Affiliate) against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the
Director/Officer in connection with such action, suit or proceeding if the
Director/Officer acted in good faith and in a manner the Director/Officer
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the Director/Officer's conduct was unlawful;
provided, however, that the foregoing shall not require the Corporation to
indemnify or advance expenses to any person in connection with any action, suit,
proceeding, claim or counterclaim initiated by or on behalf of such person.
b. Actions By or In Right of the Corporation. The Corporation
shall, to the full extent permitted by applicable law as then in effect,
indemnify and hold harmless the Director/Officer in the event that the
Director/Officer was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in right of the
Corporation to procure a judgment in its favor by reason of the fact that the
Director/Officer (A) is or was a Director/Officer, officer, employee or agent of
the Corporation or any Affiliate or (B) is or was serving at the request of the
Corporation or any Affiliate as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
<PAGE> 2
(including any employee benefit plan of the Corporation or any Affiliate)
against expenses (including attorneys' fees) actually and reasonably incurred by
the Director/Officer in connection with the defense or settlement of such action
or suit if the Director/Officer acted in good faith and in a manner the
Director/Officer reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which the Director/Officer shall
have been adjudged to be liable to the Corporation unless and only to the extent
that the court in which such action was brought shall determine that the
Director/Officer is entitled to be indemnified.
c. Nature of Right; Non-Exclusivity; Survival. The
indemnification provided by this Agreement shall be a contract right of the
Director/Officer and shall not be deemed exclusive of and shall be in addition
to, and not in lieu of, any other rights to which the Director/Officer may be
entitled under any provision of the Corporation's Certificate of Incorporation
or By-Laws or pursuant to any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in the Director/Officer's official
capacity and as to action in another capacity while holding such office. The
indemnification and advancement of expenses provided by this Agreement shall
continue as to the Director/Officer when the Director/Officer has ceased to be a
director, officer employee or agent of the Corporation and shall inure to the
benefit of the Director/Officer's heirs, executors and administrators.
2. Advancement of Expenses; Procedures; Presumptions. In furtherance,
but not in limitation of the foregoing provisions, the following procedures and
presumptions shall apply with respect to the advancement of expenses and the
right to indemnification under this Agreement:
a. Advancement of Expenses. All reasonable expenses incurred
by the Director/Officer in defending an action, suit or proceeding for which
indemnification may be had under Section 1(a) shall be advanced to the
Director/Officer by the Corporation within ten (10) days after submission by the
Director/Officer to the Corporation of each statement requesting such advance
and setting forth in reasonable detail such expenses, whether prior to or after
final disposition of such action, suit or proceeding; provided, however, that if
required by law at the time such advancement of expenses is to be made, then no
such advancement shall be made except upon receipt of an undertaking by or on
behalf of the Director/Officer, in form and substance satisfactory to the
Corporation, to repay any amounts advanced to the Director/Officer pursuant to
this Section 2(a) if it shall ultimately be determined that the Director/Officer
is not entitled to be indemnified by the Corporation with respect to the matter
for which such advancement was made.
b. Procedure for Determination of Entitlement to
Indemnification. To obtain indemnification under this Agreement, the
Director/Officer shall submit to the Secretary of the Corporation a written
request therefor, including such documentation and information as is reasonably
available to the Director/Officer and reasonably necessary to determine whether
and to what extent the Director/Officer is entitled to indemnification (the
"Supporting Documentation"). The determination of the Director/Officer's
entitlement to indemnification shall be made by the Corporation's Board of
Director/Officers (the "Board") or in such other manner as required by law as
then in effect not later than sixty (60) days after receipt by the
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<PAGE> 3
Corporation of the Director/Officer's written request for indemnification
together with the Supporting Documentation. The Secretary of the Corporation
shall, promptly upon receipt of such a request for indemnification, advise the
Board in writing that the Director/Officer has requested indemnification.
c. Presumptions and Effect of Certain Proceedings. Except as
otherwise expressly provided in this Agreement, the Director/Officer shall be
presumed to be entitled to indemnification under this Agreement upon submission
of a written request for indemnification together with the Supporting
Documentation in accordance with Section 2(b) hereof, and thereafter the
Corporation shall have the burden of proof to overcome such presumption in
reaching a contrary determination. In any event, if a determination of the
Director/Officer's entitlement to indemnification shall not have been made
within sixty (60) days after receipt by the Corporation of the
Director/Officer's written request therefor together with the Supporting
Documentation, the Director/Officer shall be deemed to be entitled to
indemnification and shall be entitled to such indemnification unless (A) the
Director/Officer misrepresented or failed to disclose a material fact in making
the request for indemnification or (B) such indemnification is prohibited by
applicable law as then in effect. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent shall not, of itself, adversely affect the right of
the Director/Officer to indemnification or create a presumption that the
Director/Officer did not act in good faith and in a manner which the
Director/Officer reasonably believed to be in or not opposed to the best
interests of the Corporation or, with respect to any criminal action or
proceeding, that the Director/Officer had reasonable cause to believe that his
or her conduct was unlawful.
3. Notification and Defense of Claim. Promptly after receipt of notice
of the commencement of any action, suit or proceeding, the Director/Officer
shall, if a claim for indemnification in respect thereof is to be made against
the Corporation under this Agreement, notify the Corporation of the commencement
thereof, but the omission so to notify the Corporation will not relieve the
Corporation from any liability that the Corporation may have to the
Director/Officer under this Agreement unless the Corporation is materially
prejudiced thereby. With respect to any such action, suit or proceeding as to
which the Director/Officer notifies the Corporation of the commencement thereof:
a. The Corporation will be entitled to participate therein at
its own expense;
b. Except as otherwise provided below, the Corporation jointly
with any other indemnifying party similarly notified will be entitled to assume
the defense thereof, with counsel reasonably satisfactory to the
Director/Officer. After notice from the Corporation to the Director/Officer of
the Corporation's election to assume the defense thereof, the Corporation will
not be liable to the Director/Officer under this Agreement for any legal or
other expenses subsequently incurred by the Director/Officer in connection with
the defense thereof other than reasonable costs of investigation or as otherwise
provided below. The Director/Officer shall have the right to employ the
Director/Officer's own counsel in any such action, suit or proceeding, but the
fees and disbursements of such counsel incurred after notice from the
Corporation of the Corporation's assumption of the defense thereof shall be at
the expense of the Director/Officer unless (i) the employment of counsel by the
Director/Officer has been
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<PAGE> 4
authorized by the Corporation, (ii) the Director/Officer shall have reasonably
concluded that there may be a conflict of interest between the Corporation and
the Director/Officer in the conduct of the defense of such action, suit or
proceeding, (iii) such action, suit or proceeding seeks penalties or other
relief against the Director/Officer with respect to which the Corporation could
not provide monetary indemnification to the Director/Officer (such as injunctive
relief or incarceration) or (iv) the Corporation shall not in fact have employed
counsel to assume the defense of such action, suit or proceeding, in each of
which cases the reasonable fees and disbursements of the Director/Officer's
counsel shall be at the expense of the Corporation. The Corporation shall not be
entitled to assume the defense of any action, suit or proceeding brought by or
on behalf of the Corporation, or which involves penalties or other relief
against the Director/Officer of the type referred to in clause (iii) above; and
c. The Corporation shall not be liable to indemnify the
Director/Officer under this Agreement for any amounts paid in settlement of any
action, suit or proceeding entered into without the Corporation's written
consent. The Corporation shall not settle any action, suit or proceeding in any
manner that would impose any penalty or limitation on the Director/Officer
without the Director/Officer's written consent. Neither the Corporation nor the
Director/Officer will unreasonably withhold consent to any proposed settlement.
4. Expenses of Enforcing Agreement or Other Indemnification Rights. The
Corporation agrees to pay all out-of-pocket expenses of the Director/Officer
(including reasonable fees and expenses of the Director/Officer's counsel) in
connection with any action brought by the Director/Officer to enforce any
provision of this Agreement or in connection with any action brought by the
Director/Officer to enforce the Director/Officer's right to indemnification
under applicable law as then in effect or under the Corporation's or any
Affiliate's Certificate of Incorporation or By-Laws, as either may be amended
from time to time, in any case only if and to the extent that the
Director/Officer prevails in such action.
5. Corporation's Right to Indemnification. Nothing in this Agreement
shall diminish, limit or otherwise restrict or modify in any way the
Corporation's right to indemnification or contribution from the Director/Officer
or the Director/Officer's obligation to indemnify or hold harmless the
Corporation under any agreement, instrument, commitment or understanding now or
hereafter in effect.
6. Amendments and Waiver.
a. No amendment, modification or discharge of this Agreement,
and no waiver hereunder, shall be valid or binding unless set forth in writing
and duly executed by both of the parties hereto. Neither the waiver by any of
the parties hereto of a breach of or a default under any of the provisions of
this Agreement, nor the failure of any of the parties, on one or more occasions,
to enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder shall thereafter be construed as a waiver of any subsequent
breach or default of a similar nature, or as a waiver of any of such provisions,
rights or privileges hereunder. No delay or failure on the part of any party in
exercising any right, power or privilege under this Agreement or under any other
instruments given in connection with or pursuant to this Agreement shall impair
any such right, power or privilege or be construed as a waiver of any
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<PAGE> 5
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such right,
power or privilege, or the exercise of any other right, power or privilege.
b. No amendment or repeal of the Corporation's or any
Affiliate's Certificate of Incorporation or By-Laws shall adversely affect or
deny to the Director/Officer the rights of indemnification provided herein with
respect to any action, suit or proceeding relating to any act or omission, or
alleged act or omission, of the Director/Officer that occurs before such
amendment or repeal; and the provisions of this Agreement shall apply to any
such action, suit or proceeding whenever commenced, including any such action,
suit or proceeding commenced after any such amendment or repeal of the
Corporation's or any Affiliate's Certificate of Incorporation or By-Laws.
7. Subrogation. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of the Director/Officer, who shall execute all papers
required and shall do everything that may be necessary to secure such rights,
including the execution and delivery of such documents as may be necessary, in
the reasonable judgment of the Corporation, to enable the Corporation
effectively to bring suit to enforce such rights.
8. No Duplication of Payment. The Corporation shall not be liable under
this Agreement to make any payment in connection with any claim made against the
Director/Officer to the extent the Director/Officer has otherwise actually
received payment (under any provision of applicable law as then in effect, under
any provision of the Certificate of Incorporation or By-Laws of the Corporation
or any Affiliate, under any insurance policy or otherwise) of amounts otherwise
indemnifiable hereunder.
9. Severability. If, at any time subsequent to the date hereof, any
provisions of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be of no
force and effect; but the illegality or unenforceability of such provision shall
have no effect upon and shall not impair the enforceability of any other
provision of this Agreement.
10. Governing Law; Headings. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in such state without giving
effect to the conflicts of laws principles thereof. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
11. Benefit; Assignment; Binding Effect. It is the explicit intention
of the parties hereto that no person or entity other than the parties hereto is
or shall be entitled to bring any action to enforce any provision of this
Agreement against either of the parties hereto, and that the covenants,
undertakings and agreements set forth in this Agreement shall be solely for the
benefit of, and shall be enforceable only by, the parties hereto or their
respective successors and assigns as permitted hereunder. The Director/Officer
may not assign the Director/Officer's rights under this Agreement. The
Director/Officer may not attempt to have any other person or entity assume the
Director/Officer's obligations under this Agreement without the prior written
consent of the
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<PAGE> 6
Corporation. The rights and obligations of the Corporation under this Agreement
may be freely assigned to any person or entity as long as the obligations of the
Corporation hereunder are satisfied in full. Subject to the foregoing provisions
restricting assignment of this Agreement, this Agreement shall be binding upon
and shall inure to the benefit of the Director/Officer and the Corporation and
their respective successors and permitted assigns.
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement or have caused this Agreement to be executed and delivered as of the
day and year first above written.
ORBITAL IMAGING CORPORATION
By: ______________________________
Gilbert D. Rye
President and Chief Operating Officer
____________________________________
William W. Sprague
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<PAGE> 1
Exhibit 10.8
ORBITAL IMAGING CORPORATION
1996 STOCK OPTION PLAN
(as amended)
ARTICLE I
PURPOSE OF PLAN
The purpose of this 1996 Stock Option Plan is to promote the growth and
profitability of Orbital Imaging Corporation by providing, through the ownership
of Shares, incentives to attract and retain highly talented persons to provide
managerial and administrative services to the Company or other entities in which
the Company has a significant interest and to motivate such persons to use their
best effort on behalf of the Company.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following terms shall have the
meanings set forth in this Article II:
2.1. Accrued Installment. The term "Accrued Installment" shall mean any
vested installment of an Option.
2.2. Board. The term "Board" shall mean the Board of Directors of the
Company.
2.3. Committee. The term "Committee" shall mean a committee appointed
by the Board pursuant to Section 3.3 and consisting of at least two members.
2.4. Company. The term "Company" shall mean Orbital Imaging
Corporation, a Delaware corporation, or any successor thereof.
2.5. Director. The term "Director" shall mean a member of the Board, or
a member of the board of directors of any Participating Company.
2.6. Effective Date. The term "Effective Date" shall mean November 15,
1996, the date of adoption by the Board.
2.7. Eligible Person. The term "Eligible Person" shall mean any
employee, officer, director, consultant or advisor of any Participating Company,
but shall not include any Director of any Participating Company who is not also
an employee, officer, director, consultant or advisor of a Participating
Company.
- --------
* Amended on September 30, 1997.
<PAGE> 2
2.8. Entitled Holder. The term "Entitled Holder" shall mean any
Optionee or any transferee thereof described in clause (ii) or (iii) of Section
6.7(a).
2.9. Exchange Act. The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time.
2.10. Fair Market Value. The term "Fair Market Value" shall mean the
closing sale price of a Share on the national securities exchange on which
Shares are then principally traded or, if that measure of price is not
available, on a composite index of such exchanges or, if that measure of price
is not available, in a national market system for securities on the date in
question. In the event that there are no sales of Shares on any such exchange or
market on such date, the fair market value of a Share shall be deemed to be the
closing sales price on the next preceding day on which Shares were sold on any
such exchange or market. In the event that such Shares are not listed on any
such market or exchange on such date, a valuation of the fair market value of a
Share shall be made by the Board, which may in its discretion seek advice from
an independent appraiser or other appropriate financial professional selected by
the Board in its sole discretion and reasonably believed to be competent to make
such determination; provided, however, that at any time when at least a majority
of the voting power of the Company's capital stock is beneficially owned by
Orbital, any such determination of Fair Market Value shall only be effective
upon the approval of the Audit and Finance Committee of the Board of Directors
of Orbital, which approval shall not be unreasonably withheld. Any determination
of Fair Market Value made in accordance with this Section 2.10 shall be
conclusive and binding on the Company and all Optionees and/or holders of
Shares.
2.11. I.R.C. The term "I.R.C." shall mean the Internal Revenue Code of
1986, as amended from time to time.
2.12. Incentive Stock Option. The term "Incentive Stock Option" shall
mean any Option intended to satisfy the requirements under I.R.C. Section 422(b)
as an incentive stock option.
2.13. Nonstatutory Stock Option. The term "Nonstatutory Stock Option"
shall mean any Option not intended to qualify as an Incentive Stock Option.
2.14. Option. The term "Option" shall mean an option to acquire Shares
granted under the Plan.
2.15. Option Shares. The term "Option Shares" shall mean, at any time,
all shares acquired upon exercise of Options and then held by Optionees.
2.16. Optionee. The term "Optionee" shall mean an Eligible Person who
has been granted Options.
2.17. Orbital. The term "Orbital" shall mean Orbital Sciences
Corporation, a Delaware corporation, or any successor thereof.
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<PAGE> 3
2.18. Orbital Common Stock. The term "Orbital Common Stock" shall mean
the common stock, $0.01 par value per share, of Orbital.
2.19. Parent Corporation. The term "Parent Corporation" shall mean a
"parent corporation" as defined in I.R.C. Section 424(e) and any partnership or
other entity that, if it were a corporation, would be a "parent corporation" as
defined in I.R.C. Section 424(e).
2.20. Participating Company. The term "Participating Company" shall
mean the Company, any Parent Corporation of the Company, any Subsidiary
Corporation of the Company or its Parent Corporation, and Orbital Sciences
Corporation.
2.21. Person. The term "person" shall mean an individual, corporation,
partnership, association or other person or entity, or any group of two or more
of the foregoing that have agreed to act together.
2.22. Plan. The term "Plan" shall mean this 1996 Stock Option Plan.
2.23. Restricted Shareholder. The term "Restricted Shareholder" shall
mean an Optionee granted an Incentive Stock Option who, at the time the
Incentive Stock Option is granted, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
with stock ownership determined in accordance with the attribution rules of
I.R.C. Section 424(d).
2.24. Securities Act. The term "Securities Act" shall mean the
Securities Act of 1933, as amended from time to time.
2.25. Shares. The term "Shares" shall mean shares of the Company's
authorized Common Stock, $0.01 par value, and may be unissued shares or treasury
shares or shares purchased for purposes of the Plan.
2.26. Subsidiary Corporation. The term "Subsidiary Corporation" shall
mean a "subsidiary corporation" as defined in I.R.C. Section 424(f) and any
partnership or other entity that, if it were a corporation, would be a
"subsidiary corporation" as defined in I.R.C. Section 424(f).
2.27. Terminating Transaction. The term "Terminating Transaction" shall
mean any of the following events: (a) the dissolution or liquidation of the
Company; (b) a reorganization, merger or consolidation of the Company with one
or more other corporations as a result of which the Company goes out of
existence or becomes a subsidiary of a corporation other than a corporation that
was a Participating Company immediately prior to such event (which shall be
deemed to have occurred only if such a corporation shall own, directly or
indirectly, eighty percent (80%) or more of the aggregate voting power of all
outstanding equity securities of the Company); (c) a sale of all or
substantially all of the Company's assets to a person or persons other than a
corporation that was a Participating Company immediately prior to such event; or
(d) a sale to one person (or two or more persons acting in concert), other than
to a corporation that was a Participating Company immediately
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<PAGE> 4
prior to such event, of equity securities of the Company representing eighty
percent (80%) or more of the aggregate voting power of all outstanding equity
securities of the Company.
2.28. Termination Date. The term "Termination Date" shall mean the
tenth anniversary of the Effective Date or, if earlier, the tenth anniversary of
the date the Plan is adopted by the Board.
ARTICLE III
ADMINISTRATION OF PLAN
3.1. Administration by Board. Subject to Section 3.3, the Plan shall be
administered by the Board, which shall have authority to do everything necessary
or appropriate to administer the Plan. The Board shall have full and absolute
power and authority in its sole discretion to (a) determine which Eligible
Persons shall receive Options; (b) determine the time when Options shall be
granted; (c) determine the terms and conditions, not inconsistent with the
provisions of this Plan, of any Option granted hereunder, including whether such
Option is an Incentive Stock Option or a Nonstatutory Stock Option (except that
Incentive Stock Options may not be granted to any Eligible Person that is not an
employee or officer of the Company, any Parent Corporation of the Company or any
Subsidiary Corporation of the Company or its Parent Corporation); (d) determine
the number of Shares that may be issued upon exercise of the Options; and (e)
interpret the provisions of this Plan and of any Option. At any time when at
least a majority of the voting power of the Company's capital stock is
beneficially owned by Orbital, prior to each grant of an Option and each other
action taken with respect to the Plan (other than a determination of Fair Market
Value) the Board shall consult with the Human Resources and Nominating Committee
of Orbital's Board of Directors (except to the extent otherwise authorized by
such Human Resources and Nominating Committee) with respect to such intended
grant or other action.
3.2. Binding Authority. All decisions, determinations, interpretations
or other actions by the Board shall be final, conclusive and binding on all
Eligible Persons, Optionees, Participating Companies and any
successors-in-interest to such parties.
3.3. Administration by Committee. The Board may appoint a Committee to
administer the Plan and exercise all of the powers, authority and discretion of
the Board under the Plan, other than the power and authority to amend and
terminate the Plan under Section 7.1. The Committee shall report to the Board
the names of Eligible Persons granted Options, the number of Shares covered by
each Option, and the terms and conditions of each such Option.
ARTICLE IV
NUMBER OF SHARES AVAILABLE FOR GRANT
Subject to the following provisions of this Article IV, the maximum
aggregate number of Shares that may be optioned and sold under the Plan is
4,800,000** . In the event that Options granted under the Plan shall, for any
reason, terminate, lapse, be forfeited or expire without being exercised, the
Shares subject to such unexercised Options shall again be available for the
granting of
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** Amended on March 30, 1998.
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<PAGE> 5
Options hereunder. In the event that Shares that were previously issued by the
Company, upon exercise of an Option, are reacquired by the Company as part of
the consideration received (in accordance with Section 6.5 hereof) upon the
subsequent exercise of an Option or pursuant to Sections 8.3 and 8.4 hereof,
such reacquired Shares shall again be available for the granting of Options
hereunder.
ARTICLE V
TERM OF PLAN
The Plan shall become effective upon adoption by the Board, subject to
approval of the Plan on or before the first anniversary of the Effective Date by
the holders of a majority of the outstanding Shares. No option granted prior to
such approval shall be exercisable prior to such approval. The Plan shall remain
in full force and effect until the later of the Termination Date or the date on
which no Options are outstanding; provided, however, that no Option may be
granted hereunder after the Termination Date.
ARTICLE VI
OPTION TERMS
6.1. Form of Option Agreement. Any Option granted under the Plan shall
be evidenced by an agreement ("Option Agreement") in the form attached hereto as
Exhibit A for an Incentive Stock Option) or Exhibit B (for a Nonstatutory Stock
Option) or in such other form as the Board, in its discretion, may, from time to
time, approve. Any Option Agreement shall contain such terms and conditions as
the Board may deem necessary or appropriate and that are not inconsistent with
the provisions of the Plan.
6.2. Option Exercise Price. The option exercise price for Shares to be
issued under this Plan shall be determined by the Board in its sole discretion,
but in no event shall the option exercise price be less than the Fair Market
Value in the case of an Incentive Stock Option or less than eighty-five percent
(85%) of the Fair Market Value in the case of a Nonstatutory Stock Option (or
one hundred and ten percent (110%) of the Fair Market Value in the case of an
Option granted to a Restricted Shareholder).
6.3. Vesting and Exercise of Options. Subject to the limitations set
forth herein and/or in any applicable Option Agreement entered into hereunder,
Options shall vest and be exercisable in accordance with the rules set forth in
this Section 6.3:
(a) General. Subject to the other provisions of this Section
6.3, Options shall vest and become exercisable at such time and in such
installments as the Board shall provide in each individual Option Agreement.
Unless otherwise provided in this Section 6.3, in Section 6.4 or in the Option
Agreement pursuant to which an Option is granted, an Option may be exercised
when Accrued Installments accrue as provided in such Option Agreement and at any
time thereafter until, and including, the day before the Option Termination
Date.
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(b) Termination of Options. All installments of an Option
shall expire and terminate on such date as the Board shall determine ("Option
Termination Date"), which in no event shall be later than ten (10) years from
the date such Option was granted (five (5) years in the case of an Incentive
Stock Option granted to a Restricted Shareholder).
(c) Termination of Employment Other than by Death, Retirement
or Disability. In the event that the employment of an Optionee with a
Participating Company is terminated for any reason (other than by death,
disability, retirement on or after reaching age 60), any installments under an
Option held by such Optionee that have not accrued as of the employment
termination date shall expire and become unexercisable as of the employment
termination date. All Accrued Installments as of the employment termination date
shall expire and become unexercisable as of the earlier of (i) three (3) months
following the employment termination date; or (ii) the original Option
Termination Date. For purposes of the Plan, an Optionee who is an employee or
officer of any Participating Company shall not be deemed to have incurred a
termination of his employment so long as such Optionee is an employee or officer
of any Participating Company.
(d) Leave of Absence. An approved leave of absence shall not
constitute a termination of employment under the Plan. An approved leave of
absence shall mean an absence approved pursuant to the policy of a Participating
Company for military leave, sick leave, or other bona fide leave, not to exceed
ninety (90) days or, if longer, as long as the employee's right to re-employment
is guaranteed by contract, statute or the policy of a Participating Company.
(e) Death, Disability or Retirement of Optionee. In the event
that the employment of an Optionee with a Participating Company is terminated by
reason of death, disability, or retirement on or after reaching age sixty (60),
any unexercised Accrued Installments of Options granted hereunder to such
Optionee shall expire and become unexercisable as of the earlier of (i) the
applicable Option Termination Date; or (ii) the first anniversary of the date of
termination of employment of such Optionee by reason of the Optionee's death,
disability or retirement. Any such Accrued Installments of a deceased Optionee
may be exercised prior to their expiration only by the person or persons to whom
the Optionee's Option rights pass by will or the laws of descent and
distribution. Any Option installments under such a deceased, disabled or retired
Optionee's Option that have not accrued as of the date of the employee's
termination of employment due to death, disability or retirement shall expire
and become unexercisable as of the employment termination date.
6.4. Exercise of Options. An Option may be exercised as to all or any
portion of the Shares covered by an Accrued Installment of the Option, from time
to time during the applicable option period, except that an Option shall not be
exercisable with respect to fractions of a Share. Options may be exercised, in
whole or in part, by giving written notice of exercise to the Company, which
notice shall specify the number of Shares to be purchased and shall be
accompanied by payment in full of the purchase price in accordance with Section
6.5. An Option shall be deemed exercised when such written notice of exercise
and payment have been received by the Company. No Shares shall be issued until
full payment has been made and the Optionee has satisfied such other conditions
as may be required by this Plan, as may be required by applicable laws, rules or
regulations, or as may be adopted or imposed by the Board. Until the issuance of
stock certificates,
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no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to Shares subject to an Option notwithstanding the exercise
of the Option. No adjustment will be made for a dividend or other rights for
which the record date is prior to the date the stock certificate is issued,
except as provided in Section 6.8(a).
6.5. Payment of Option Exercise Price. The entire option exercise price
shall be paid at the time the Option is exercised by check or such other means
as is deemed acceptable by the Board. Notwithstanding the foregoing, in the
discretion of the Board (which, in the case of an Incentive Stock Option, shall
be exercised only at the time of grant), an Optionee may elect to pay for all or
some of the Optionee's Shares with Shares (or, at any time when at least a
majority of the voting power of the Company's capital stock is owned by Orbital,
shares of Orbital Common Stock), subject to all restrictions and limitations of
applicable laws, rules and regulations and subject to the satisfaction of any
conditions the Board may impose, including, but not limited to, the making of
such representations and warranties and the providing of such other assurances
that the Board may require with respect to the Optionee's title to the Shares
used for payment of the exercise price. Such payment shall be made by delivery
of certificates representing Shares (or Orbital Common Stock), duly endorsed or
with a duly signed stock power attached, such Shares (or Orbital Common Stock)
to be valued at the Fair Market Value of such Shares (or Orbital Common Stock)
on the day immediately preceding the day notice of exercise is received by the
Company.
6.6. Options Not Transferable. Options granted under this Plan may not
be sold, pledged, hypothecated, assigned, encumbered, gifted or otherwise
transferred or alienated in any manner, whether voluntarily, by operation of
law, pursuant to judicial process or otherwise, other than by will or the laws
of descent and distribution or pursuant to a qualified domestic relations order,
as defined under the I.R.C., and may be exercised during the lifetime of an
Optionee only by such Optionee. The person to whom the Option is granted may, by
delivering written notice to the Company in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.
6.7. Restrictions on Issuance or Transfer of Shares.
(a) Until such time as the Shares are registered under the
Exchange Act, no Shares issuable upon exercise of an Option shall be sold,
assigned, encumbered, pledged, hypothecated, given away or in any other manner
disposed of or transferred, whether voluntarily, by operation of law, pursuant
to judicial process or otherwise, except (i) to the Company pursuant to Section
8.4 hereof, (ii) pursuant to a qualified domestic relations order, as defined
under the I.R.C., or (iii) upon the death of the holder thereof, Shares may be
transferred and distributed by will or other instrument taking effect at death
or by the laws of descent and distribution to such holder's estate, executors,
administrators and personal representatives, and then to such holder's heirs,
legatees or distributees, provided that no such transfer shall be effective
until the recipient has delivered to the Company a written acknowledgment in
form and substance reasonably satisfactory to the Company that such Shares are
subject to the restrictions on disposition or transfer set forth in this Section
6.7(a). Any attempted transfer of Shares not in accordance with this Section
6.7(a) shall be null and void, and the Company shall not in any way give effect
to any such disposition or transfer.
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<PAGE> 8
(b) The Company shall use all reasonable efforts to obtain all
required permits, authorizations and approvals necessary for the lawful issuance
and sale of Shares hereunder. However, no Shares shall be issued or delivered
upon exercise of an Option unless there shall have been compliance with all
applicable requirements of the Securities Act, all applicable listing or
quotation requirements of any national securities exchange or market on which
Shares are then listed or quoted, and any other requirement of law or of any
regulatory body having jurisdiction over such issuance and delivery. The
inability of the Company to obtain any required permits, authorizations or
approvals necessary for the lawful issuance and sale of any Shares hereunder on
terms deemed reasonable by the Board shall relieve the Company, the Board and
any Committee of any liability in respect of the non-issuance or sale of such
Shares for so long as such requisite permits, authorizations or approvals shall
not have been obtained.
(c) As a condition to the granting or exercise of any Option,
the Board may require the person receiving or exercising such Option to make any
representation and/or warranty to the Company as may be required under any
applicable law or regulation, including, but not limited to, a representation
that the Option and/or Shares are being acquired only for investment and without
any present intention to sell or distribute such Option and/or Shares, if such a
representation is required under the Securities Act or any other applicable law,
rule or regulation.
(d) The exercise of Options under the Plan is conditioned on
approval of the Plan by the vote or written consent of a majority of the holders
of outstanding Shares of the Company's Common Stock within twelve (12) months of
the adoption of the Plan. In the event such stockholder approval is not obtained
within such time period, any Options granted hereunder shall be void.
6.8. Option Adjustments.
(a) If the outstanding Shares are increased, decreased,
changed into or exchanged for a different number or kind of shares of the
Company through reorganization, recapitalization, reclassification, stock
dividend, stock split or reverse stock split or other similar transaction, the
Board shall make a proportionate adjustment in the number or kind of shares and
the per-share option price thereof that may be issued in the aggregate and to
individual Optionees upon exercise of Options granted under the Plan; provided,
however, that no such adjustment need be made if, upon the advice of counsel,
the Board determines that such adjustment may result in the receipt of federally
taxable income to holders of Options granted hereunder or the holders of Shares
or other classes of the Company's securities.
(b) Upon the occurrence of a Terminating Transaction, as of
the effective date of such Terminating Transaction, the Plan and any then
outstanding Options not exercised prior to the effectiveness of such Terminating
Transaction (whether or not vested) shall terminate unless (i) provision then is
made in writing in connection with such transaction for the continuance of the
Plan and for the assumption of such Options, or for the substitution for such
Options of new options covering the securities of any successor or survivor
corporation in the Terminating Transaction or an affiliate thereof, with such
adjustments as the Board deems appropriate with respect to the number and kind
of securities and the per-share exercise price under such substituted options,
in which event the Plan and such outstanding Options shall continue or be
replaced, as the case may be, in the
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<PAGE> 9
manner and under the terms so provided; or (ii) the Board then otherwise
provides in writing for such adjustments as it deems appropriate in the terms
and conditions of the then outstanding Options (whether or not vested),
including, without limitation, (A) accelerating the vesting of outstanding
Options and/or (B) providing for the cancellation of Options and their automatic
conversion into the right to receive the securities or other properties which a
holder of Shares underlying such Options would have been entitled to receive
upon the consummation of such Terminating Transaction had such Shares been
issued and outstanding (net of the appropriate option exercise prices). If,
pursuant to the foregoing provisions of this paragraph (b), the Plan and the
Options shall terminate by reason of the occurrence of a Terminating Transaction
without provision for any of the action(s) described in clause (i) and/or (ii)
hereof, then any Optionee holding outstanding Options shall have the right, at
such time immediately prior to the consummation of the Terminating Transaction
as the Board shall designate, to exercise such Optionee's Options to the full
extent not theretofore exercised, including any installments which have not yet
become Accrued Installments.
(c) Except to the extent required in order to retain the
qualification of an Option as an Incentive Stock Option under I.R.C. Section
422, to the maximum extent possible, any adjustments authorized under this
Section 6.8 with respect to any outstanding Options shall be made by means of
appropriate adjustments to the number of Shares (or other securities) and the
option exercise price therefor under the unexercised portions of such
outstanding Options, but without changing the aggregate exercise price
applicable to said unexercised portions. In all cases, the nature and extent of
adjustments under this Section 6.8 shall be determined by the Board in its sole
discretion, and any such determination as to what adjustments shall be made, and
the extent thereof, shall be final and binding. No fractional shares of stock
shall be issued under the Plan pursuant to any such adjustment.
6.9. Taxes. The Board shall make such provisions and take such steps as
it deems necessary or appropriate for the withholding of any federal, state,
local and other tax required by law to be withheld with respect to the grant or
exercise of an Option, or with respect to the disposition of Shares acquired
pursuant to the exercise of an Option, including, but without limitation, the
deduction of the amount of any such withholding tax from any compensation or
other amounts payable to an Optionee by any Participating Company, or requiring
an Optionee (or the Optionee's beneficiary or legal representative), as a
condition of granting or exercising an Option, to pay any member of the
Participating Companies any amount required to be withheld, or to execute such
other documents as the Board deems necessary or desirable in connection with the
satisfaction of any applicable withholding obligation; provided, however, that
the Optionee may elect, at such time and in such manner as the Board may
prescribe, to satisfy such withholding obligation by (i) delivering to the
Company Shares owned by such individual having a Fair Market Value equal to such
withholding obligation, or (ii) requesting that the Company withhold from the
Shares to be delivered upon the exercise a number of Shares having a Fair Market
Value equal to such withholding obligation.
6.10. Legends on Options and Stock Certificates. Each Option Agreement
and each certificate representing Shares acquired upon exercise of an Option
shall be endorsed with all legends, if any, required by applicable federal and
state securities laws to be placed on the Option Agreement and/or the
certificate, as well as legends setting forth the restrictions contained in
Section
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<PAGE> 10
6.7 hereof. The determination of which legends, if any, shall be placed upon
Stock Option Agreements and/or said Shares shall be made by the Board in its
sole discretion, and such decision shall be final and binding.
6.11. Employment Rights. Neither the adoption of the Plan nor the grant
of Options will confer upon any person any right to continued employment with
any Participating Company or affect in any way the right of any Participating
Company to terminate an employment relationship at any time. Except as
specifically provided by the Board in any particular case, the loss of existing
or potential profit in connection with Options granted under the Plan will not
constitute an element of damages in the event of termination of an employment
relationship.
ARTICLE VII
AMENDMENT OR TERMINATION OF PLAN
7.1. Board Authority. The Board may amend, alter and/or terminate the
Plan at any time; provided, however, that no change shall be effective unless
approved by the stockholders of the Company if such change would cause the
Option Plan to fail to meet the qualification requirements for Incentive Stock
Option Plans as set forth in the Internal Revenue Code.
7.2. Limitation on Board Authority. The Board may amend the terms of
any Option previously granted, prospectively or retroactively, and may amend the
Plan in accordance with the provisions of Section 7.1; provided, however, that
unless required by applicable law, rule or regulation, no amendment of the Plan
or of any Option Agreement shall affect, in a material and adverse manner,
Options granted prior to the date of any such amendment without the written
consent of any Optionee holding any such affected Options.
7.3. Substitution of Options. In the Board's discretion, the Board may,
with an Optionee's written consent, substitute Nonstatutory Stock Options for
outstanding Incentive Stock Options, and any such substitution shall not
constitute a new Option grant for the purposes of the Plan, and shall not
require a revaluation of the Option exercise price for the substituted Option.
Any such substitution may be implemented by an amendment to the applicable
Option Agreement or in such other manner as the Board in its discretion may
determine.
ARTICLE VIII
PURCHASE OF OPTION SHARES
8.1. General. Until such time as the Shares are registered under the
Exchange Act, the Company may, at its option and in its sole discretion, offer
to purchase any or all Option Shares (the "Payable Shares") at a price per share
equal to the Fair Market Value of a Share.
8.2. Valuation. If the Company decides to exercise the purchase right,
it shall cause the Fair Market Value of the Shares to be determined as of the
purchase offer date designated by the Board (the "Purchase Offer Date") in
accordance with Section 2.10 and shall notify each holder of Payable Shares of
such Fair Market Value.
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<PAGE> 11
8.3. Request for Repurchase. Within thirty (30) days after receipt of
the notice given under Section 8.2, each such holder of Shares may request the
Company to purchase all or any portion of his or her Payable Shares at a price
per share equal to such Fair Market Value by submitting to the Company an
irrevocable written notice of such request (except that such notice may be
revoked as specifically provided in Section 8.4). Within ninety (90) days after
the Purchase Offer Date the Company shall notify each requesting holder of
Payable Shares whether the Company will purchase all or a portion of the Payable
Shares requested to be so purchased on a closing date not more than fifteen (15)
days after the giving of such Company notice.
8.4. Purchase of Payable Shares. The closing for any purchase of
Payable Shares pursuant to Section 8.3 shall occur on the specified closing date
at the offices of the Company at 11:00 a.m. local time, or at such other time
and place as the parties to such sale may mutually agree. At the closing, the
Optionee shall deliver to the Company a certificate or certificates representing
the Payable Shares to be purchased by the Company, duly endorsed for transfer,
free and clear of any lien or encumbrance, in exchange for payment of the
purchase price (i) by check, (ii) by delivery of certificates representing
shares of Orbital Common Stock that have a Fair Market Value (determined in the
manner provided in Section 2.10) as of the business day preceding the closing
equal to the purchase price of the Shares and that are freely tradable (i.e.,
not "restricted securities" within the meaning of Rule 144 under the Securities
Act), with payment by check for any amount that would otherwise be paid by a
fractional share, (iii) by delivery of a subordinated promissory note of the
Company in the principal amount of the purchase price of the Payable Shares,
bearing interest at a fixed rate equal to the then applicable prime rate (as
published in The Wall Street Journal) plus three percent (3.0%), providing for
quarterly payments of interest and payment of the full principal amount on the
first anniversary of the date of issuance, and containing provisions as approved
by the Board in its sole discretion providing for the subordination of such
notes to such indebtedness, whether then existing or thereafter created, of the
Company as is specified by the Board, including without limitation indebtedness
for money borrowed or similar indebtedness, or (iv) any combination of the
foregoing; provided, however, that no part of the purchase price for the Payable
Shares may be paid by subordinated promissory note unless the Board determines
in good faith that payment in cash or Orbital Common Stock would adversely
affect the financial condition or liquidity of the Company or adversely affect
Orbital (including without limitation because of a pending or contemplated
offering or other transaction); and provided, further, that if any portion of
the purchase price for the Payable Shares is to be paid by subordinated
promissory note the Optionee may revoke his or her request that the Payable
Shares be purchased in which case the Payable Shares shall remain held by the
Optionee unaffected by the original request. Any payment in Orbital Common Stock
shall be subject to all applicable federal and state securities laws
restrictions and any other applicable legal restrictions.
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<PAGE> 12
ARTICLE IX
GENERAL PROVISIONS
9.1. Availability of the Plan. A copy of the Plan shall be delivered to
the Secretary of the Company and shall be shown by the Secretary to any Eligible
Person making reasonable inquiry concerning the Plan.
9.2. Notice. Any notice or other communication required or permitted to
be given pursuant to the Plan or under any Option Agreement must be in writing
and may be given by mail and, if given by mail, shall be determined to have been
given and received five (5) days after such letter containing such notice,
properly addressed with postage prepaid, is deposited in the United States mails
and, if given otherwise than by mail, shall be deemed to have been given when
delivered to and received by the party to whom addressed. Notice shall be given
to Eligible Persons at their most recent addresses shown in the Company's
records. Notice to the Company shall be addressed to the Company at the address
of the Company's principal executive offices, to the attention of the Secretary
of the Company.
9.3. Title and Headings. Titles and headings of sections of the Plan
are for convenience of reference only and shall not affect the construction of
any provision of the Plan.
9.4. Governing Law. The Plan shall be governed by, interpreted under
and construed and enforced in accordance with the internal laws, and not the
laws pertaining to conflicts or choice of laws, of the State of Delaware,
applicable to agreements made and to be performed wholly within the State of
Delaware.
9.5. Proceeds. Proceeds from the sale of Shares pursuant to Options
shall constitute general funds of the Company.
9.6. Status of Optionee. Neither an Optionee nor any person to whom an
Option is transferred under Section 6.7 shall be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares subject to
such Option unless and until such person has satisfied all requirements for
exercise of the Option pursuant to its terms.
9.7. Exculpation. No member of the Board or of the Human Resources and
Nominating Committee or Audit Committee of Orbital shall have any personal
liability to any Optionee and/or holder of Shares for any act or omission in
connection with this Plan (including without limitation any determination of
Fair Market Value), unless the Optionee and/or holder of Shares shall establish
that such determination, act or omission was not made in good faith.
9.8. Lockup Agreements. By its exercise of an Option, the holder
thereof agrees that upon the request of the managing underwriter of any
underwritten public offering of Shares such holder will enter into a "lockup
agreement" with such underwriter in form and substance reasonably satisfactory
to the Company and containing provisions generally preventing the sale of Shares
by such holder for a period beginning no earlier than seven days prior to filing
the registration statement
12
<PAGE> 13
for such offering and ending no later than 90 days (180 days in the case of the
Company's initial public offering) after the effectiveness of such registration
statement.
13
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Orbital Imaging Corporation:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Washington, DC
June 15, 1998
<PAGE> 1
Exhibit 99.2
ORBITAL IMAGING CORPORATION
NOTICE OF GUARANTEED DELIVERY
OF 11 5/8% SENIOR NOTES DUE 2005, SERIES B
FOR ANY AND ALL OUTSTANDING
11 5/8% SENIOR NOTES DUE 2005, SERIES A
PURSUANT TO THE PROSPECTUS DATED MAY ___, 1998
THIS FORM, OR ONE SUBSTANTIALLY EQUIVALENT HERETO, MUST BE USED BY A HOLDER OF
11 5/8% SENIOR NOTES DUE 2005, SERIES A (THE "ORIGINAL NOTES") OF ORBITAL
IMAGING CORPORATION, A DELAWARE CORPORATION (THE "COMPANY"), WHO WISHES TO
EXCHANGE HIS ORIGINAL NOTES PURSUANT TO THE COMPANY'S EXCHANGE OFFER, AS DEFINED
IN THE PROSPECTUS (THE "PROSPECTUS"), DATED MAY ___, 1998 AND (I) WHOSE ORIGINAL
NOTES ARE NOT IMMEDIATELY AVAILABLE, (II) WHO CANNOT DELIVER HIS ORIGINAL NOTES
OR ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL ON OR BEFORE THE
EXCHANGE OFFER EXPIRATION DATE (AS DEFINED IN THE PROSPECTUS) OR (III) WHO
CANNOT COMPLETE THE PROCEDURE FOR BOOK ENTRY TRANSFER ON A TIMELY BASIS. SUCH
FORM MAY BE DELIVERED BY FACSIMILE TRANSMISSION, IF APPLICABLE, MAIL OR HAND
DELIVERY TO THE EXCHANGE AGENT. SEE "THE EXCHANGE OFFER -- GUARANTEED DELIVERY
PROCEDURES" IN THE PROSPECTUS.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON JUNE ___,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). ORIGINAL NOTES TENDERED IN THE
EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To: Marine Midland Bank, THE EXCHANGE AGENT
By Hand/Overnight Courier Facsimile By Registered or Certified Mail
Transmission:
Marine Midland Bank (212) 658-2292 Marine Midland Bank
140 Broadway 140 Broadway
A Level Confirm by A Level
New York, New York 10005-1180 Telephone: New York, New York 10005-1180
Corporate Trust Services (212) 658-5931 Corporate Trust Services
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN TO THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF
A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
"ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE
MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE LETTER OF TRANSMITTAL FOR
GUARANTEE OF SIGNATURES.
<PAGE> 2
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby represents that he owns the Original Notes
tendered and hereby tenders to the Company upon the terms and subject to the
conditions set forth in the Prospectus and the related Letter of Transmittal,
receipt of which is hereby acknowledged, the principal amount of Original Notes
specified below pursuant to the guaranteed delivery procedures set forth under
the caption "The Exchange Offer -- Guaranteed Delivery Procedures" in the
Prospectus. The undersigned hereby tenders the Original Notes listed below:
- ---------------------------------------- -----------------------------
ORIGINAL NOTES CERTIFICATE NUMBERS
(IF AVAILABLE) PRINCIPAL AMOUNT TENDERED
- ---------------------------------------- -----------------------------
- ---------------------------------------- -----------------------------
- ---------------------------------------- -----------------------------
- ---------------------------------------- -----------------------------
If Original Notes will be tendered by book entry SIGN HERE
transfer:
----------------------------
Name of Tendering Institution: Signature(s)
- -------------------------------------------
Account No. , at
---------------------------- ----------------------------
The Depository Trust Company Name(s) (Please Print)
-----------------------------
Address
-----------------------------
Zip Code
-----------------------------
Area Code and Telephone No.
Date:
----------------------
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17A(d)-15 under the Securities Exchange Act
of 1934, as amended, hereby guarantees (a) that the above-named person(s) own(s)
the above-described securities tendered hereby and (b) that delivery to the
Exchange Agent of certificates tendered hereby, in proper form for transfer, or
delivery of such certificates pursuant to the procedure for book-entry transfer,
in either case with delivery of a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and any other required documents, is being
made within three business days after the date of execution of a Notice of
Guaranteed Delivery of the above-named person.
SIGN HERE
--------------------------------
Name of Firm
--------------------------------
Authorized Signature
--------------------------------
Name (Please print)
--------------------------------
--------------------------------
Address
--------------------------------
Zip Code
--------------------------------
Area Code and Telephone No.
Date:
--------------------------------
DO NOT SEND ORIGINAL NOTES WITH THIS FORM. ACTUAL SURRENDER OF ORIGINAL NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A COPY OF THE PREVIOUSLY
EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE> 4
INSTRUCTIONS
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth on the cover hereof prior to the
Exchange Offer Expiration Date. The method of delivery of this Notice of
Guaranteed Delivery and all other required documents to the Exchange Agent is at
the election and risk of the Holder but, except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
If such delivery is by mail, it is recommended that the Holder use properly
insured, registered mail with return receipt requested. For a full description
of the guaranteed delivery procedures, see the Prospectus under the caption "The
Exchange Offer -- Guaranteed Delivery Procedures." In all cases, sufficient time
should be allowed to assure timely delivery. No Notice of Guaranteed Delivery
should be sent to the Company.
2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF
SIGNATURES. If this Notice of Guaranteed Delivery is signed by the registered
Holder(s) of the Original Notes referred to herein, the signature must
correspond with the name(s) as written on the face of the Original Notes without
alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and, unless waived by the Company, evidence satisfactory
to the Company of their authority so to act must be submitted with this Notice
of Guaranteed Delivery.
If this Notice of Guaranteed Delivery is signed by a participant of the
Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of the Original Notes, the signature must correspond with the name
shown on the security position listing as the owner of the Original Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the Registered Holder(s) of any Original Notes listed or a participant of the
Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the Registered
Holder(s) appears on the Original Notes or signed as the name of the participant
shown on the Book-Entry Transfer Facility's security position listing.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the Exchange Offer or the procedure for tendering as well as requests for
assistance or for additional copies of the Prospectus and the Letter of
Transmittal, may be directed to the Exchange Agent. Holders may also contact
their broker, dealer, commercial bank, trust company, or other nominee for
assistance concerning the Exchange Offer.
4
