SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 31, 1995
________________________
ORBITAL SCIENCES CORPORATION
Delaware 0-18287 06-1209561
(State of (Commission File (I.R.S. Employer
incorporation) Number) I.D. No.)
21700 Atlantic Boulevard
Dulles, Virginia 20166
(703) 406-5000
(Address and telephone number
of principal executive offices)
Item 5. Other Events
On August 31, 1995, Orbital Sciences Corporation ("Orbital"
or the "Company") executed an agreement to acquire MacDonald,
Dettwiler and Associates Ltd. ("MDA"), a high technology company
specializing in the design, manufacture and marketing of space
remote sensing ground stations capable of handling all major
optical and radar imaging for Earth observation satellites. MDA
is also a major provider of advanced space-qualified software,
air navigation systems, defense electronics systems and network
communications training and consulting. MDA's Common Shares are
publicly traded on the Vancouver Stock Exchange and The Toronto
Stock Exchange.
The acquisition is expected to be concluded by December 31, 1995.
Pursuant to the terms of the agreement, a newly established,
wholly owned Canadian subsidiary of Orbital will issue
Exchangeable Shares in exchange for all the issued and
outstanding MDA Common Shares. These Exchangeable Shares will
have voting and economic rights with respect to Orbital identical
to Orbital Common Stock, and will be exchangeable into Orbital
Common Stock at the option of the holders, subject to certain
regulatory restrictions.
The actual number of shares of Orbital Common Stock issuable
pursuant to the agreement is based on the average closing sales
price of Orbital's Common Stock for the 20 trading days ending on
the date four trading days prior to closing. Assuming an average
closing sales price of $17.25 per share for Orbital Common Stock
and an exchange ratio of .31 Orbital Common Stock to 1.00 MDA
Common Share, Orbital expects to issue approximately 3.9 million
shares of its Common Stock for all of MDA's issued and
outstanding voting common shares and employee share options.
Pursuant to the agreement, Orbital will assume all of MDA's
outstanding common share options, which vest in variable amounts
over the next four years.
The acquisition will be accounted for using the pooling of
interests method of accounting.
Item 7. Financial Statements and Exhibits
(a) (i) Consolidated Financial Statements of
MacDonald, Dettwiler and Associates Ltd., together with report of
the independent auditors, as of March 31, 1995, 1994 and 1993;
and
(ii) Unaudited Consolidated Financial Statements of
MacDonald, Dettwiler and Associates Ltd. as of June 30, 1995 and
for the three-month periods ended June 30, 1995 and 1994.
(b) Pro Forma Financial Information of Orbital Sciences
Corporation
(i) as of and for the six-month period ended June 30,
1995; and
(ii) for the years ended December 31, 1994, 1993 and
1992.
(c) Exhibits. The following exhibits are filed as part of
this report:
Exhibit
No.
2 Combination Agreement dated as of August
31, 1995 among Orbital Sciences Corporation,
3173623 Canada Inc. and MacDonald, Dettwiler
and Associates Ltd. (transmitted herewith)
2.1 Plan of Arrangement under Section 192 of
the Canada Business Corporations Act
(transmitted herewith)
2.2 Voting and Exchange Trust Agreement
between Orbital Sciences Corporation,
MacDonald Dettwiler Holdings Inc. And State
Street Bank and Trust Company (transmitted
herewith)
2.3 Support Agreement between Orbital
Sciences Corporation and MacDonald, Dettwiler
Holdings, Inc. (transmitted herewith)
2.4 Notice of Special Meeting of
Shareholders and Holders of the 1988 Employee
Share Options and the 1988 Key Employee Share
Options of MacDonald, Dettwiler and
Associates Ltd. and Management Information
Circular dated as of October 6, 1995
(transmitted herewith)
23 Consent of KPMG Peat Marwick Thorne
(transmitted herewith)
MACDONALD, DETTWILER AND ASSOCIATES LTD.
CONSOLIDATED FINANCIAL STATEMENTS
For the Years ended March 31, 1995, 1994 and 1993
(including Auditors' Report thereon)
For the Three Months ended June 30, 1995 and 1994
(Unaudited)
<PAGE>
MDA FINANCIAL STATEMENTS
AUDITORS' REPORT TO THE DIRECTORS
We have audited the consolidated balance sheets of MacDonald,
Dettwiler and Associates Ltd. as at March 31, 1995 and 1994 and
the consolidated statements of earnings, retained earnings and
changes in financial position for each of the years in the three
year period ended March 31, 1995. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as at March 31, 1995 and 1994 and the results of its
operations and the changes in its financial position for each of
the years in the three year period ended March 31, 1995 in
accordance with generally accepted accounting principles.
Vancouver, Canada (signed) KPMG Peat Marwick Thorne
May 25, 1995, except as to Chartered Accountants
Note 8(d) which is as
at September 29, 1995
<PAGE>
<TABLE>
<CAPTION>
MACDONALD, DETTWILER AND ASSOCIATES LTD.
Consolidated Balance Sheets
(In thousands of Canadian dollars)
June 30, March 31,
1995 1995 1994
(Unaudited) _____ _____
<S> <C> <C> <C>
Assets
Current assets:
Cash and term deposits $16,845 $ 9,463 $12,008
Receivables 22,518 30,484 33,104
Recoverable income taxes 275 221 1,443
Inventories 817 486 488
Prepaid expenses 1,193 1,011 1,407
Total current assets 41,648 41,665 48,450
Lease receivable 1,171 1,186 1,415
Investment 586 586 586
Fixed assets (Note 2) 10,597 10,939 10,342
Goodwill 7,865 8,005 2,339
Deferred income taxes 191 184 -
$62,058 $62,565 $63,132
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued $11,803 $12,118 $14,655
liabilities
Deferred revenue 19,813 21,204 26,553
Current portion of long-term
debt and obligations under
capital leases (Note 3) 1,224 1,143 1,043
Deferred income taxes - - 297
Total current liabilities 32,840 34,465 42,548
Long-term debt and obligations under
capital leases (Note 3) 8,197 8,052 4,334
Shareholders' equity:
Capital stock (Note 4) 8,107 8,052 7,969
Contributed surplus 2,050 2,050 2,050
Retained earnings 10,549 9,539 6,065
Cumulative translation
adjustment 315 407 166
Total shareholders' equity 21,021 20,048 16,250
$62,058 $62,565 $63,132
Contingencies and commitments (Note 8)
</TABLE>
On behalf of the Board:
(signed) John W. Pitts (signed) J. S. MacDonald
Director Director
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
MACDONALD, DETTWILER AND ASSOCIATES LTD.
Consolidated Statements of Earnings
(In thousands of Canadian dollars, except per share data)
Three months Year ended March 31
ended June 30
1995 1994 1995 1994 1993
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues $23,611 $27,605 $109,955 $101,417 $85,156
Expenses (Note 7):
Cost of sales 15,769 20,459 80,063 75,294 59,705
General and administrative 2,253 1,941 7,761 6,673 6,689
Marketing 3,388 2,687 12,098 10,096 9,448
Research and development 438 656 2,381 3,421 4,378
Interest on long-term debt 85 102 387 524 488
and capital lease obligations
Goodwill amortization 109 107 435 127 136
22,042 25,952 103,125 96,135 80,844
Operating earnings 1,569 1,653 6,830 5,282 4,312
Other income 232 115 637 532
634
Earnings before income taxes 1,801 1,768 7,467 5,814 4,946
Income taxes (Note 6) 793 778 3,502 2,557 2,177
Net earnings $ 1,008 $ 990 $ 3,965 $ 3,257 $ 2,769
Net earnings per common share
(Note 5):
Basic $ .09 $ .09 $ .36 $ .29 $ .25
Fully diluted $ .09 $ .08 $ .34 $ .28 $ .24
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
MACDONALD, DETTWILER AND ASSOCIATES LTD.
Consolidated Statements of Retained Earnings
(In thousands of Canadian dollars)
Three months Year ended March 31,
ended June 30,
1995 1994 1995 1994 1993
(Unaudited)
<S> <C> <C> <C> <C> <C>
Retained earnings, beginning $ 9,539 $ 6,065 $ 6,065 $ 3,624 $11,820
of period
Net earnings 1,008 990 3,965 3,257 2,769
Excess of cost of shares
purchased and cancelled over
average issuance price 2 - (491) (816) -
Dividends on common shares - - - - (10,965)
Retained earnings, end of $10,549 $ 7,055 $ 9,539 $ 6,065 $ 3,624
period
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
MACDONALD, DETTWILER AND ASSOCIATES LTD.
Consolidated Statements of Changes in Financial Position
(In thousands of Canadian dollars)
Three months Year ended March 31,
ended June 30,
1995 1994 1995 1994 1993
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net earnings $ 1,008 $ 990 $ 3,965 $ 3,257 $ 2,769
Items not affecting cash:
Depreciation and amortization 1,031 921 3,949 3,384 2,823
Deferred income taxes (7) (19) (481) (283) 155
Loss on disposal of fixed - - 5 7 7
assets
Net change in non-cash working
capital balances relating to 5,635 (2,294) (3,189) 9,909 (5,259)
operations
Cash provided by (applied to) 7,667 (402) 4,249 16,274 495
operations
Financing activities:
Net increase (decrease) in long-term 226 3,908 3,818 (296) 27
debt and obligations under capital
leases
Decrease in other receivables - - - 685 961
Decrease (increase) in lease 15 13 51 (1,470) -
receivable
Issue of capital stock 53 11 185 205 358
Purchase of capital stock - (468) (593) (967) -
Dividends paid on common shares - - - - (10,965)
Cash provided by (applied to) 294 3,464 3,461 (1,843) (9,619)
financing activities
Total cash generated for 7,961 3,062 7,710 14,431 (9,124)
investing activities
Investing activities:
Purchase of fixed assets (579) (904) (3,928) (3,631) (4,133)
Acquisition of subsidiary - (6,345) (6,327) - -
Investment, net - - - (221)
(66)
Cash applied to investing (579) (7,249) (10,255) (3,697) (4,354)
activities
Increase (decrease) in cash during the 7,382 (4,187) (2,545) 10,734 (13,478)
period
Cash, beginning of period 9,463 12,008 12,008 1,274 14,752
Cash, end of period $16,845 $ 7,821 $ 9,463 $12,008 $ 1,274
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
1. Significant accounting policies:
(a) Consolidation:
The consolidated financial statements include the
accounts of the Company and its wholly-owned
subsidiaries. The Company accounts for its investment
in Radarsat International Inc. (RSI) on the equity
basis. The Company considers RSI to be in the
development stage and is capitalizing its share of start-
up expenditures until commencement of operations.
All intercompany balances and transactions are eliminated
on consolidation.
(b) Recognition of revenue:
Contract revenue is recognized on the percentage
of completion basis. A provision for loss is made when
estimated total costs are in excess of total contract
revenue.
(c) Fixed assets:
Fixed assets are stated at cost less accumulated
depreciation. Depreciation is applied on a
straight-line basis at the following rates:
Computers 20% - 33%
Equipment 20%
Furniture and fixtures 20%
Software 25%
Leasehold improvements Term of lease
(d) Research and development:
Research costs are expensed in the year incurred.
Development costs are expensed in the year incurred
unless the Company believes a development project meets
generally accepted accounting criteria for deferral and
amortization. The Company interprets the criteria for
deferral of development costs on a very stringent basis
under which interpretation, few, if any, development
costs qualify for deferral. In the current year no
development costs were deferred.
Research and development costs are reduced by
related government assistance.
(e) Investment tax credits:
Investment tax credits are accounted for using the
cost reduction method and are applied against cost of
sales.
(f) Foreign currency translation:
Foreign operations which are considered integrated
(financially and operationally dependent on the parent)
are translated to Canadian dollars using current rates
of exchange for monetary assets and liabilities.
Historical rates of exchange are used for non-monetary
assets and liabilities and average rates for the year
for revenues and expenses. Gains or losses resulting
from these translation adjustments are included in
income.
Foreign operations which are considered
self-sustaining (financially and operationally
independent of the parent) are translated to Canadian
dollars using the current rates of exchange for assets
and liabilities and using average rates for the year for
revenues and expenses. Gains or losses resulting from
these translation adjustments are deferred in a separate
component of shareholders' equity ("Cumulative
translation adjustment") until there is a realized
reduction in the parent's net investment in the foreign
operation.
The Company considers the operations of Earth
Observation Sciences Limited to be self-sustaining.
Operations of all other foreign subsidiaries are
integrated.
(g) Goodwill:
Goodwill represents the excess of the cost of
shares in subsidiaries over amounts assigned to their
net identifiable assets. The excess cost is amortized on
a straight-line basis over a period of twenty years.
2. Fixed assets:
<TABLE>
<CAPTION>
June 30, 1995
Unaudited
Cost Accumulated Net
Depreciation
(000's) (000's) (000's)
<S> <C> <C> <C>
Computers $13,507 $10,141 $ 3,366
Equipment 2,831 1,975 856
Furniture and fixtures 3,096 2,403 693
Leasehold improvements 7,630 2,828 4,802
Software 2,640 1,760 880
$29,704 $19,107 $10,597
<CAPTION>
March 31, 1995
Cost Accumulated Net
Depreciation
(000's) (000's) (000's)
<S> <C> <C> <C>
Computers $13,124 $ 9,557 $ 3,567
Equipment 2,734 1,906 828
Furniture and fixtures 3,095 2,344 751
Leasehold improvements 7,632 2,678 4,954
Software 2,513 1,674 839
$29,098 $18,159 $10,939
<CAPTION>
March 31, 1994
Cost Accumulated Net
Depreciation
(000's) (000's) (000's)
<C> <C> <C>
Computers $10,408 $ 7,160 $ 3,248
Equipment 2,248 1,663 585
Furniture and fixtures 2,795 2,103 692
Leasehold improvements 7,343 2,128 5,215
Software 2,008 1,406 602
$24,802 $14,460 $10,342
</TABLE>
Total assets under capital leases included above have a cost
of $2,400,000 at March 31, 1995 (March 31, 1994 -
$2,513,000) and a net book value of $1,721,000 at March 31,
1995 (March 31, 1994 - $1,785,000).
3. Long-term debt:
<TABLE>
<CAPTION>
June 30, March 31,
1995 1995 1994
(Unaudited
(000's) (000's) (000's)
<S> <C> <C> <C>
Promissory note payable, interest at
6.8%, principal and interest repayable
at $35,000 monthly $2,428 $2,490 $2,730
Western Economic Diversification
loan, non-interest bearing, repayable
in annual installments commencing June
30, 1996 and ending June 30, 2005 1,230 1,188 802
Term loan, interest at 10.5%, payable
monthly, principal repayable in full on
or before July 15, 1996 3,750 1,850 -
Obligations under capital leases. 2,013 1,667 1,845
9,421 9,195 5,377
Deduct current portion 1,224 1,143 1,043
$8,197 $8,052 $4,334
</TABLE>
Long-term debt is secured by a fixed and floating charge on
all Company assets and by charges and chattel mortgages on
specific equipment.
(a) Future minimum lease payments due under capital
leases at March 31, 1995 are as follows:
(000's)
1996 $ 1,023
1997 588
1998 257
Total minimum lease payments 1,868
Less amount representing interest 201
$ 1,667
(b)Principal repayments on long-term debt at March 31,
1995 are as follows:
(000's)
1996 $ 1,143
1997 4,778
1998 657
1999 433
2000 455
Thereafter 1,729
$ 9,195
4. Capital stock:
(a) Common shares:
The authorized capital of the Company consists of an
unlimited number of common shares without par value,
205,000 Class A preference shares of no par value
(issued nil) and 27,000 Class B preference shares of no
par value (issued nil).
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
Common Shares Contributed
Surplus
<S> <C> <C>
Number of shares issued, and to be issued
April 1, 1992, net of 82,798 treasury
shares 11,089,843 -
Balance, April 1, 1992 $ 7,557 $ 2,050
Issuance of 181,844 shares for cash 358 -
Adjustment of 79,066 shares to be issued
in exchange for 49.9% interest in EOS - -
Balance, March 31, 1993 7,915 2,050
Issuance of 107,866 shares for cash 205 -
Repurchased 251,100 shares for cash (151) -
Balance, March 31, 1994 7,969 2,050
Issuance of 94,343 shares for cash 185 -
Repurchased 158,600 shares for cash (102) -
Balance, March 31, 1995 8,052 2,050
Issuance of 29,785 shares for cash
(unaudited) 55 -
Balance, June 30, 1995 (unaudited) $ 8,107 $ 2,050
Number of shares issued, and to be issued
June 30, 1995 (unaudited) 11,173,047 -
</TABLE>
(b) Share option plans:
Under four share option plans, employees are entitled to acquire
common shares in quantities and prices as determined by the directors
of the Company. The number of common shares available for allocation is
as follows:
<TABLE>
<CAPTION>
June 30, March 31,
1995 1995 1994
(Unaudited)
<S> <C> <C> <C>
Reserved at beginning of the period 868,477 935,717 869,806
Exercised during the period (29,785) (33,605) (86,586)
Options allocated during the period 246,000 - 254,000
Options expired during the period (7,135) (33,635) (101,503)
Remainder reserved for future 1,077,557 868,477 935,717
periods
</TABLE>
4. Capital stock, continued:
Under the plans, any share options granted must be
exercised and purchased within nine years of being
granted. The remaining 1,077,557 shares have been
allocated for issue at prices ranging from $.90 to $4.40
per common share.
(c) Shares to be issued:
The common shares to be issued are consideration for
the 1992 acquisition of the remaining 10.4% of Earth
Observation Sciences Limited (EOS). At June 30, 1995,
the shareholders of EOS have an option, exercisable at
any time to exchange their interest in EOS for 79,214
shares of the Company. In addition, the Company has the
right to require the exchange of these EOS shares. This
right may be exercised at any time, but will take place
no later than October 31, 2001. As the purchase
consideration is fixed, and the purchase will occur no
later than October 31, 2001, the transaction has been
treated for accounting purposes as an acquisition of
100% of the outstanding shares of EOS.
5. Net earnings per common share:
Basic earnings per common share is computed by dividing net
earnings by the weighted average number of common shares
outstanding during the year. Weighted average common shares
are as follows:
June 30, 1995 (unaudited) 11,148,378
June 30, 1994 (unaudited) 11,158,572
March 31, 1995 11,142,811
March 31, 1994 11,315,231
March 31, 1993 11,292,881
6. Income taxes:
(a) The income tax provision is comprised of the
following:
<TABLE>
<CAPTION>
Three months Year ended,
ended June 30 March 31,
1995 1994 1995 1994 1993
(Unauditied)
(000's) (000's) (000's) (000's) (000's)
<S> <C> <C> <C> <C> <C>
Current income tax expense $ 800 $ 797 $ 3,983 $ 2,840 $ 2,022
Deferred income tax expense (7) (19) (481) (283) 155
$ 793 $ 778 $ 3,502 $ 2,557 $ 2,177
</TABLE>
6. Income taxes, continued:
(b) Investment tax credits:
At March 31, 1995, the Company had unused investment tax
credits expiring March 31:
(000's)
1996 $ 1,271
1997 1,895
1998 286
1999 865
2000 761
2001 975
2002 2,348
2003 2,000
2004 2,430
2005 2,500
$15,331
(c) A reconciliation of income taxes at statutory
rates to actual income taxes is:
<TABLE>
<CAPTION>
Three months ended Year ended
June 30, March 31,
1995 1994 1995 1994 1993
Unaudited)
<S> <C> <C> <C> <C> <C>
Combined basic income tax 45.3% 45.3% 45.3% 44.8% 44.5%
rate
(000's) (000's) (000's) (000's) (000's)
Income tax expense prior to $ 816 $ 801 $ 3,383 $ 2,605 $ 2,201
the following increases
(reductions)
Non-deductible expenditures 18 20 92 50 79
Reduction of deferred tax
credits at rates in excess
of the current period rate (1) (1) (3) (19) (3)
Differing statutory rates
in foreign jurisdictions 25 33 130 70 10
Net foreign losses not tax
effected 45 67 466 294 152
Manufacturing and
processing rate reduction (107) (138) (553) (338) (137)
Other (3) (4) (13) (105) (125)
$ 793 $ 778 $ 3,502 $ 2,557 $2,177
</TABLE>
7. Supplementary information to the consolidated statements of
earnings:
(a) Research and development expenses have been
reduced by government assistance as follows:
<TABLE>
<CAPTION>
Three months Year ended
ended June 30, March 31,
1995 1994 1995 1994 1993
(Unaudited)
(000's) (000's) (000's) (000's) (000's)
<S> <C> <C> <C> <C> <C>
Research and development $ 1,136 $ 1,128 $ 4,747 $4,319 $ 6,701
expenses
Government assistance (698) (472) (2,366) (898) (2,323)
$ 438 $ 656 $ 2,381 $ 3,421 $ 4,378
</TABLE>
The above expenditures represent internally funded
research and development. In addition, during the year
ended March 31, 1995, the Company incurred $29,320,000
(1994 - $29,281,000 1993 - $26,507,000) of research and
development which was performed as part of customer
contracts. Customer contractual research and development
expenditures have been included in cost of sales.
(b) Investment tax credits earned in the year ended
March 31, 1995 on scientific research expenditures have
been applied to reduce the cost of sales by $1,850,000
(1994 - $1,150,000 1993 - $1,050,000).
8. Contingencies and commitments:
(a) At March 31, 1995, the Company was committed under
operating leases for the following minimum annual
rentals:
(000's)
1996 $ 2,926
1997 3,134
1998 3,155
1999 3,159
2000 2,931
Subsequent years 12,440
$27,745
(b)The Company's bankers have issued letters of
guarantee to certain customers of the Company in the
amount of $9,459,000 (1994 - $15,378,000) of which
$2,438,000 (1994 - $6,791,000) is guaranteed by the
Federal Government of Canada. If the Company failed to
perform as agreed with these customers and if the
letters of guarantee were called, the $7,021,000 (1994
- $8,587,000) due the Company's bankers would be secured
by the existing general assignment of book debts and
assignment of inventories. Inventories relating to
contracts with the Government of Canada are excluded
from the assignment. The Federal Government of Canada
is secured under a general recourse agreement, which is
secondary to the Company's bankers.
8. Contingencies and commitments, continued:
(c)Certain government assistance may be repayable based
on future sales levels related to the projects funded.
At March 31, 1995 this amount approximated $12,109,000
(1994 - $10,716,000). Amounts, if any, that may be
repayable would be accounted for in the period in which
conditions that cause repayment arise.
(d)In April 1995, the Company signed a memorandum of
agreement to acquire 300,000 Series B Preferred Shares
of EarthWatch, Incorporated for cash consideration of
U.S. $3,000,000, payable by six equal quarterly
installments. Payments are to commence once a stock
purchase agreement between the parties is finalized.
Each Preferred Share may be converted at any time into a
fully-paid Common Share of EarthWatch, Incorporated on a
one-for-one basis. The Company is accounting for the
investment on the cost basis.
EarthWatch, Incorporated is developing high-resolution
commercial imaging satellites. The first satellite
launch is scheduled for 1996.
9. Segmented information:
The Company's principal business activity relates to the
design, development and integration of computer-based
systems. Sales to customers in foreign countries amounted
to:
(000's)
Three months ended:
June 30, 1995 (unaudited) $ 10,362
June 30, 1994 (unaudited) 12,158
Year ended: March 31, 1995 48,331
March 31, 1994 37,135
March 31, 1993 40,366
10. Acquisition:
On April 6, 1994, the Company acquired 100% of the
outstanding shares of The PSC Communications Group Inc.
(PSC), for cash consideration of $5,176,000 and a maximum of
250,000 common shares of the Company. The issue of shares
is contingent upon PSC achieving certain income levels in
the year ending March 31, 1996.
The total net assets acquired, accounted for using the
purchase method are as follows:
(000's)
Net non-cash assets acquired,
at assigned values:
Working capital $ 215
Fixed assets 188
Net non-cash assets acquired 403
Excess of cost of net assets
over assigned values (goodwill) 5,924
6,327
Bank indebtedness of
acquired operations (1,151)
Total cash consideration $ 5,176
11. Reconciliation of Accounting Principles
The Company historically reports its financial results using
generally accepted accounting principles in Canada ("GAAP-
C"). The major differences between GAAP-C and generally
accepted accounting principles in the United States ("GAAP-
US"), as applied to the Company, are as follows:
Year ended March 31,
1995 1994 1993
(000's) (000's) (000's)
Net Income, as reported $ 3,965 $ 3,257 $ 2,769
GAAP-US adjustments (869) (1,657) (1,088)
Net Income, as adjusted $ 3,096 $ 1,600 $ 1,681
(a) The Company has an approximate 25% equity
investment in RSI that is accounted for under GAAP-C
using the equity method of accounting for investments.
RSI is in its development stage and, pursuant to GAAP-C,
MDA is capitalizing its share of RSI's start-up
operating expenses until the commencement of RSI's
intended operations. Accordingly, the Company's
historical statements of operations do not report as a
current expense the Company's share of RSI's start-up
expenses. GAAP-US would require RSI to charge to
earnings all such operating expenses incurred during
RSI's development stage.
In converting to GAAP-US, the Company's method of
accounting for costs incurred by RSI during the
development stage would be adjusted, resulting in an
increase to research and development expenses of $66,000
and $221,000 for the years ended March 31, 1994 and
1993, respectively. No adjustment was required for the
year ended March 31, 1995.
(b) The Company has historically received Canadian
Government assistance for certain research and
development projects that may be repayable based on
future sales levels or other benefits achieved by MDA as
a result of the projects. In the event that such
projects do not result in future benefits to MDA, the
repayment obligation is relieved. Pursuant to GAAP-C,
the Company's historical financial statements have
recorded the receipt of such government assistance as a
current period reduction in research and development
expenses, disclosing a contingent liability for the
potential repayment obligation. GAAP-US would require
postponing the recognition of a gain contingency until
the contingency is resolved.
In converting to GAAP-US, the Company's method of
accounting for such government assistance would be
adjusted by recording a liability for the government
assistance received (as opposed to a reduction in
current period research and development expenses) in the
amounts (on a pre-tax basis) of $1,598,000, $2,839,000
and $1,549,000 for the years ended March 31, 1995, 1994
and 1993, respectively, reflecting the repayment
obligation.
(c) The Company has historically received investment
tax credits for Canadian tax purposes for certain
qualifying research and development projects. Pursuant
to GAAP-C, the Company's historical financial statements
have recorded the receipt of investment tax credits as a
current period reduction in costs of sales.
In converting to GAAP-US, the Company's method of
accounting for investment tax credits would be adjusted
by recording the credit as a reduction in current period
income tax expense (as opposed to a reduction in current
period costs of sales) of $1,850,000, $1,150,000 and
$1,050,000 for the years ended March 31, 1995, 1994 and
1993, respectively.
ORBITAL SCIENCES CORPORATION
Pro Forma Financial Information
All references to dollars in the following Pro Forma Statements
and the related notes thereto are to U.S. dollars, unless
otherwise noted.
On August 31, 1995, Orbital signed an agreement to acquire MDA
(the "MDA Acquisition"). MDA's Common Shares are publicly traded
on the Vancouver Stock Exchange and The Toronto Stock Exchange.
The MDA Acquisition is expected to be concluded by December 31,
1995.
Pursuant to the terms of the agreement, a newly established,
wholly owned Canadian subsidiary of Orbital will issue
Exchangeable Shares in exchange for all the issued and
outstanding MDA Common Shares. These Exchangeable Shares will
have voting and economic rights with respect to Orbital identical
to Orbital Common Stock, and will be exchangeable into Orbital
Common Stock at the option of the holders, subject to certain
regulatory restrictions. For purposes of the following pro forma
presentation, Orbital has assumed that conversion of the
Exchangeable Shares occurred contemporaneously with closing
(i.e., that Orbital issued Common Stock directly for MDA Common
Shares).
The actual number of shares of Orbital Common Stock issuable
pursuant to the agreement is based on the average closing sales
price of Orbital's Common Stock for the 20 trading days ending on
the date four trading days prior to closing. Assuming an average
closing sales price of $17.25 per share for Orbital Common Stock
and an exchange ratio of .31 Orbital Common Stock to 1.00 MDA
Common Share, Orbital expects to issue approximately 3.9 million
shares of its Common Stock for all of MDA's issued and
outstanding voting common shares and employee share options. As
part of the MDA Acquisition, Orbital will assume all of MDA's
outstanding common share options, which vest in variable amounts
over the next four years. The MDA Acquisition will be accounted
for using the pooling of interests method of accounting and,
accordingly, MDA's assets and liabilities will be carried forward
at their historical recorded amounts.
The following unaudited condensed consolidated pro forma
financial information consists of Unaudited Pro Forma Condensed
Consolidated Statements of Operations for the six months ended
June 30, 1995 and for the year ended December 31, 1994, 1993 and
1992, and the Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of June 30, 1995 (collectively, the "Pro Forma
Statements"). The Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the six months ended June 30, 1995
gives effect to the MDA Acquisition as if it had occurred on
January 1, 1995. The Unaudited Pro Forma Condensed Consolidated
Statements of Operations for the years ended December 31, 1994,
1993 and 1992 give effect to the MDA Acquisition as if it had
occurred on January 1, 1992. The Unaudited Pro Forma Condensed
Consolidated Balance Sheet gives effect to the MDA Acquisition as
if it had occurred on June 30, 1995.
ORBITAL SCIENCES CORPORATION
Pro Forma Financial Information
Management believes that, on the basis set forth herein, the Pro
Forma Statements reflect a reasonable estimate of the MDA
Acquisition based on currently available information. The pro
forma financial data do not purport to represent what the
Company's financial position or results of operations would
actually have been had the MDA Acquisition in fact occurred on
June 30, 1995, January 1, 1995 or January 1, 1992, or to project
the Company's financial position or results of operations for any
future date or period indicated. The Pro Forma Statements should
be read in conjunction with the consolidated financial statements
of each of the Company and MDA and related notes thereto.
<TABLE>
<CAPTION>
ORBITAL SCIENCES
CORPORATION
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED
BALANCE SHEET
JUNE 30, 1995
(thousands)
Historical Historical Conversion Converted Pro Forma Pro Forma
Orbital MacDonald Adjustments Historical Adjustments Results
Sciences Dettwiler (B) Debit MacDonald (US$)
Corporation and (Credit) Dettwiler and
(US$) Associates Associates Ltd.
Ltd. (C) (C) (US$)
(C$)
<S> <S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 18,377 $ 16,845 $ (4,571) 1 $ 12,274 $ 30,651
Short-term investments 21,440 - - - 21,440
Receivables, net 83,376 22,518 (6,110) 1 16,408 99,784
Inventories, net 28,320 817 (222) 1 595 28,915
Other current assets 8,145 1,468 (399) 1 1,069 9,214
Total current assets 159,658 41,648 30,346 190,004
PROPERTY, PLANT AND 101,882 10,597 (2,875) 1 7,722 109,604
EQUIPMENT, net
INVESTMENTS IN AFFILIATES, 64,093 586 (586) 2(a) - 64,093
net
EXCESS OF PURCHASE PRICE 67,464 7,865 (2,134) 1 5,731 73,195
OVER NET ASSETS ACQUIRED,
net
DEPOSITS AND OTHER ASSETS 15,737 1,362 19 2(b) 1,006 16,743
TOTAL ASSETS $ 408,834 $ 62,058 $ 44,805 $ 453,639
</TABLE>
<TABLE>
<CAPTION>
ORBITAL SCIENCES
CORPORATION
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED
BALANCE SHEET
JUNE 30, 1995
(thousands)
Historical Historical Conversion Converted Pro Forma Pro Forma
Orbital MacDonald, Adjustments Historical Adjustments Results
Sciences Dettwiler (B) Debit MacDonald, (US$)
Corporation and (Credit) Dettwiler and
(US$) Associates Associates Ltd.
Ltd. (C) (C) (US$)
(C$)
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and $ 11,752 $ 1,224 $ 332 1 $ 892 $ 12,644
current portion of long-
term obligations
Accounts payable and 43,463 11,803 3,203 1 8,600 52,063
accrued expenses
Deferred revenue and other 11,557 19,813 5,377 1 14,436 25,993
liabilities
Total current liabilities 66,772 32,840 23,928 90,700
LONG-TERM OBLIGATIONS, 95,203 8,197 (13,382) 2(b) 15,724 110,927
net of current portion 5,855 1
DEFERRED INCOME TAXES
AND OTHER LIABILITIES 11,245 - - 11,245
TOTAL LIABILITIES 173,220 41,037 39,652 212,872
STOCKHOLDERS' EQUITY
Preferred Stock - - - -
Common Stock 227 8,107 1,117 1 6,990 (6,990) A 266
39 A
Cumulative Translation - 315 3,886 1 (3,571) (3,571)
Adjustment (1)
Other equity accounts 235,387 12,599 586 2(a) 1,734 (1,734) A 244,072
(19) 2(b) 8,685 A
TOTAL STOCKHOLDERS EQUITY 235,614 21,021 5,153 240,767
TOTAL LIABILITIES AND $ 408,834 $ 62,058 $ 44,805 $ 453,639
STOCKHOLDERS' EQUITY
</TABLE>
<TABLE>
<CAPTION>
ORBITAL SCIENCES
CORPORATION
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30,
1995
(in thousands, except share data)
Historical Historical Conversion Converted Pro Forma Pro Forma
Orbital MacDonald, Adjustments Historical Adjustments Results
Sciences Dettwiler (B) Debit MacDonald, (US$)
Corporation and (Credit) Dettwiler and
(US$) Associates Associates Ltd.
Ltd. (C) (C) (US$)
(C$)
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 132,930 $ 52,503 $ 14,692 1 $ 37,811 $ 170,741
Costs of Goods Sold 97,293 34,519 1,234 2(c) 25,750 123,043
Gross Profit 35,637 17,984 12,061 47,698
Research and Development 8,764 1,747 442 2(b) 1,570 10,334
Expenses
Selling, General & 22,707 11,099 (3,097) 1 8,002 30,709
Administrative Expenses
Amortization of Excess of 1,400 219 (61) 1 158 1,558
Purchase Price Over Net
Assets Acquired
Income (Loss) from Operations 2,766 4,919 2,331 5,097
Net Interest Income (1,887) 249 69 1 180 (1,707)
(Expense)
Equity in Earnings of 362 - - 362
Affiliate
Income Before Provision 1,241 5,168 2,511 3,752
for Income Taxes
Provision for Income Taxes - 2,491 (220) 2(b) 745 745
Net Income (F) $ 1,241 $ 2,677 $ 1,766 3,007
Net Income per Common and $ 0.06 $ 0.12 D
Common Equivalent Share:
Shares Used in Computing 20,954,359 3,920,290 A 24,874,649 D
Net Income per Common and
Common Equivalent Share
Net Income per Common
Share Assuming
Full Dilution: $ 0.06 $ 0.12 D
Shares Used in Computing 24,863,449 3,920,290 A 28,783,739 D
Net Income per Common
Share, Assuming Full
Dilution
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ORBITAL SCIENCES
CORPORATION
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED
DECEMBER 31, 1994
(thousands, except share data)
Historical Historical Conversion Converted Pro Forma Pro Forma
Orbital MacDonald, Adjustments Historical Adjustments Results
Sciences Dettwiler (B) Debit MacDonald, (US$)
Corporation and (Credit) Dettwiler and
(US$) Associates Associates Ltd.
Ltd. (C) (C) (US$)
(C$)
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 221,946 $ 109,955 $ 30,325 1 $ 79,630 $ 301,576
Costs of Goods Sold 157,066 80,063 1,850 2(c) 59,351 216,417
(22,562) 1
Gross Profit 64,880 29,892 20,279 85,159
Research and Development 14,389 2,381 1,598 2(b) 2,870 17,259
Expenses
(1,109) 1
Selling, General & 39,749 19,859 (5,478) 1 14,381 54,130
Administrative Expenses
Amortization of Excess of 2,045 435 (120) 1 315 2,360
Purchase Price Over Net
Assets Acquired
Income from Operations 8,697 7,217 2,713 11,410
Net Interest Income 37 250 69 1 181 218
(Expense)
Equity in Earnings (1,264) - - (1,264)
(Losses) of Affiliate
Income Before Provision 7,470 7,467 2,894 10,364
for Income Taxes
Provision for Income Taxes 2,081 3,502 (729) 2(b) 663 2,744
Net Income $ 5,389 $ 3,965 $ 2,231 $ 7,620
Net Income per Common and $ 0.28 $ 0.33 D
Common Equivalent Share:
Shares Used in Computing 19,104,427 3,920,290 A 23,024,717 D
Net Income per Common and
Common Equivalent Share
Net Income per Common $ 0.28
Share, Assuming Full
Dilution:
Shares Used in Computing 22,222,210 3,920,290 A 27,142,500 D
Net Income per Common
Share, Assuming Full
Dilution
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ORBITAL SCIENCES
CORPORATION
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED
DECEMBER 31, 1993
(thousands, except share data)
Historical Historical Conversion Converted Pro Forma Pro Forma
Orbital MacDonald, Adjustments Historical Adjustments Results
Sciences Dettwiler (B) Debit MacDonald, (US$)
Corporation and (Credit) Dettwiler and
(US$) Associates Associates Ltd.
Ltd. (C) (C) (US$)
(C$)
<S> <C> <C> <C> <C>
Revenues $ 223,087 $ 101,417 $ 24,320 1 $ 77,097 $ 300,184
Costs of Goods Sold 170,204 75,294 1,150 2(c) 58,085 228,289
(18,359) 1
Gross Profit 52,883 26,123 19,012 71,895
Research and Development 14,885 3,421 66 2(a) 4,818 19,703
Expenses
2,839 2(b)
(1,508) 1
Selling, General & 25,897 16,769 (3,991) 1 12,778 38,675
Administrative Expenses
Amortization of Excess of 1,537 127 (30) 1 97 1,634
Purchase Price Over Net
Assets Acquired
Income from Operations 10,564 5,806 1,319 11,883
Net Interest Income 356 8 3 1 5 361
(Expense)
Equity in Earnings (2,436) - - (2,436)
(Losses) of Affiliate
Income Before Provision 8,484 5,814 1,324 9,808
for Income Taxes
Provision for Income Taxes 2,288 2,557 (1,248) 2(b) 115 2,403
(1,150) 2(c)
(44) 1
Net Income (F) $ 6,196 $ 3,257 $ 1,209 $ 7,405
Net Income per Common and $ 0.43 $ 0.40 D
Common Equivalent Share:
Shares Used in Computing 14,641,854 3,920,290 A 18,562,144 D
Net Income per Common and
Common Equivalent Share
Net Income per Common $ 0.38 $ 0.37 D
Share, Assuming Full
Dilution:
Shares Used in Computing 18,256,276 3,920,290 A 22,176,566 D
Net Income per Common
Share, Assuming Full
Dilution
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ORBITAL SCIENCES
CORPORATION
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED
DECEMBER 31, 1992
(thousands, except share data)
Historical Historical Conversion Converted Pro Forma Pro Forma
Orbital MacDonald, Adjustments Historical Adjustments Results
Sciences Dettwiler (B) Debit MacDonald, (US$)
Corporation and (Credit) Dettwiler and
(US$) Associates Associates Ltd.
Ltd. (C) (C) (US$)
(C$)
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 204,190 $ 85,156 $ 16,175 1 $ 68,981 $ 273,171
Costs of Goods Sold 158,661 59,705 1,050 2(c) 49,173 207,834
(11,582) 1
Gross Profit 45,529 25,451 19,808 65,337
Research and Development 10,586 4,378 221 2(a) 4,979 15,565
Expenses
1,549 2(b)
(1,169) 1
Selling, General & 28,615 16,137 (3,029) 1 13,108 41,723
Administrative Expenses
Amortization of Excess of 1,495 136 (25) 1 111 1,606
Purchase Price Over Net
Assets Acquired
Income (Loss) from 4,833 4,800 1,610 6,443
Operations
Net Interest Income 738 146 24 1 122 860
(Expense)
Income (Loss) Before
Provision for Income 5,571 4,946 1,732 7,303
Taxes
Provision (Benefit) for 1,630 2,177 (682) 2(b) 367 1,997
Income Taxes
(1,050) 2(c)
(78) 1
Net Income $ 3,941 $ 2,769 $ 1,365 $ 5,306
Net Income per Common
and Common Equivalent $ 0.27 $ 0.29 D
Share:
Shares Used in Computing 14,404,933 3,920,290 A 18,325,223 D
Net Incomeper Common and
Common Equivalent Share
Net Income per Common $ 0.27 $ $0.29 D
Share, Assuming Full
Dilution:
Shares Used in Computing 14,404,933 3,920,290 A 18,325,223 D
Net Income per Common
Share, Assuming Full
Dilution
</TABLE>
<PAGE>
ORBITAL SCIENCES CORPORATION
Notes to Pro Forma Adjustments to the
Unaudited Pro Forma Condensed
Consolidated Financial Statements
(A) On August 31, 1995, the Company signed an agreement to
acquire MDA. The MDA Acquisition is expected to be
concluded by December 31, 1995. The Pro Forma Statements
assume Orbital issues approximately 3.9 million shares of
its Common Stock for all of MDA's issued and outstanding
voting Common Shares and employee share options. As part of
the MDA Acquisition, Orbital will assume all of MDA's
outstanding employee share options, which vest in variable
amounts over the next four years.
The MDA Acquisition will be accounted for using the pooling
of interests method of accounting and, accordingly, the
issuance of the Company's Common Stock was recorded in an
amount equal to MDA's historical net assets at June 30,
1995.
(B) The Pro Forma Statements convert MDA's historical
financial statements to conform to generally accepted
accounting standards in the United States and the provisions
of Regulation S-X promulgated under the Securities Exchange
Act of 1934. Certain reclassifications have been made to
the historical MDA financial statements to conform to the
historical Orbital financial statement presentation.
(C) The Company historically presented its consolidated
financial statements on a calendar year basis. MDA
historically presented its consolidated financial statements
on a fiscal year March 31 basis.
MDA's historical consolidated financial statements included
in the pro forma condensed consolidated financial statements
for the six months ended June 30, 1995 have been recast to
include the three-month period ended March 31, 1995 and the
three-month period ended June 30, 1995, to coincide with the
Company's calendar year basis of presentation.
The pro forma condensed consolidated financial statements
for the calendar years ended December 31, 1994, 1993 and
1992 include MDA's historical financial statements for its
fiscal years ended March 31, 1995, 1994 and 1993 and
Orbital's historical consolidated financial statements for
its calendar years ended December 31, 1994, 1993 and 1992.
The effect of recasting MDA's historical consolidated
financial statements as presented in the pro forma condensed
consolidated financial statements for the six months ended
June 30, 1995 has been charged to retained earnings as of
January 1, 1995 in the Pro Forma Financial Statements. The
charge to retained earnings eliminates the effect of
including MDA's results of operations for the three-month
period ending March 31, 1995 of $1,050,000 (after giving
effect to the conversions and translations described in
these notes) in both the pro forma condensed consolidated
statements of operations for the six months ending June 30,
1995 and for the year ending December 31, 1994. MDA's
revenues for the three-month period ended March 31, 1995
were approximately $20,634,000.
ORBITAL SCIENCES CORPORATION
Notes to Pro Forma Adjustments to the
Unaudited Pro Forma Condensed
Consolidated Financial Statements
(D) Pro forma income per common and common equivalent share
and pro forma income per common share assuming full dilution
are both calculated based on the aggregate of the weighted
average number of common and common equivalent shares of
both Orbital and MDA, adjusted to equivalent shares of the
combined company for all periods presented, assuming all MDA
outstanding stock options are outstanding and "in the money"
for all periods presented. Pro forma income per common
share assuming full dilution for the periods presented also
includes the effects of an assumed conversion of the
Company's convertible subordinated debentures (issued, and
assumed converted, on February 25, 1993), after giving
effect to all net income adjustments that would result from
the assumed conversion.
(E) Approximately $3,000,000 of nonrecurring charges
directly attributable to the MDA Acquisition, including
legal, accounting and investment banking fees, will be
included in Orbital's consolidated statement of operations
in the period the MDA Acquisition is consummated, currently
expected to be during the quarter ending December 31, 1995.
Such charges were not considered in the Unaudited Pro Forma
Condensed Consolidated Statements of Operations.
(F) The Company adopted SFAS 121 as of January 1, 1995.
The Company's adoption of SFAS 121 resulted in a cumulative
effect adjustment of $4,160,000 which decreased net income
for the six-month period ended June 30, 1995. The
cumulative effect of the change in accounting principle is
not included in the accompanying Unaudited Pro Forma
Condensed Consolidated Statement of Operations for the six
months ended June 30, 1995.
The Company adopted SFAS 109 as of January 1, 1993. The
Company's adoption of SFAS 109 resulted in a cumulative
effect adjustment of $200,000 which increased net income for
the year ended December 31, 1993. The cumulative effect of
the change in accounting principle is not included in the
accompanying Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the twelve months ended December
31, 1993.
ORBITAL SCIENCES CORPORATION
Notes to Conversion Adjustments to the
Unaudited Pro Forma Condensed
Consolidated Financial Statements
(1) MDA operates with, and has historically reported its
financial results using, the Canadian dollar as its
functional currency. Orbital operates with, and reports its
financial results using, the U.S. dollar. Accordingly, the
Pro Forma Statements report the consolidated entity's
financial results using the U.S. dollar as its functional
currency, and MDA's historical financial results have
accordingly been translated to the U.S. dollar using the
appropriate exchange rates for the appropriate periods as
follows (Canadian dollars to U.S. dollars):
Date or Period Exchange Rate
at June 30, 1995 1.37 to 1.00
for the six months ended June 30, 1995 1.38 to 1.00
for the year ended December 31, 1994 1.38 to 1.00
for the year ended December 31, 1993 1.31 to 1.00
for the year ended December 31, 1992 1.23 to 1.00
The economic effects of an exchange rate change on an
operation that is relatively self-contained and integrated
within a foreign country relate to the net investment in
that operation. Translation adjustments that arise from
consolidating that foreign operation do not impact cash
flows and are not included in net income. Since MDA is a
self-contained entity integrated within Canada, the impacts
of cumulative translation adjustments that arise from
consolidating MDA with Orbital have been excluded from
determining net income and have been reported within
stockholders' equity.
(2) MDA has historically reported its financial results
using generally accepted accounting principles in Canada
("GAAP-C"). Orbital reports its financial results using
generally accepted accounting principles in the United
States ("GAAP-US"). The Pro Forma Statements report the
consolidated entity's financial results using GAAP-US.
Accordingly, MDA's historical financial results have been
converted to GAAP-US.
The major differences between GAAP-C and GAAP-US, as it
applies to MDA, are as follows:
(a) MDA has an approximate 25% equity investment in a
Canadian company ("Investee") that is accounted for under
GAAP-C using the equity method of accounting for
investments. Investee is in its development stage and,
pursuant to GAAP-C, MDA's historical statements of
operations do not report as a current expense MDA's share of
Investee's start-up expenses. GAAP-US would require MDA to
charge to earnings all such operating expenses incurred
during Investee's development stage. In converting to GAAP-
US, the Pro Forma Statements adjust MDA's method of
accounting for costs
ORBITAL SCIENCES CORPORATION
Notes to Conversion Adjustments to the
Unaudited Pro Forma Condensed
Consolidated Financial Statements
incurred by Investee during the development stage, resulting
in a cumulative reduction in the carrying amount of MDA's
investment.
(b) MDA has historically received Canadian Government
assistance for certain research and development projects
that may be repayable based on future sales levels or other
benefits achieved by MDA as a result of the projects. In
the event that such projects do not result in future
benefits to MDA, the repayment obligation is relieved.
Pursuant to GAAP-C, MDA's historical financial statements
have recorded the receipt of such government assistance as a
current period reduction in research and development
expenses, disclosing a contingent liability for the
potential repayment obligation. In converting to GAAP-US,
the Pro Forma Statements adjust MDA's method of accounting
for such government assistance by recording a liability for
the government assistance received (as opposed to a
reduction in current period research and development
expenses) reflecting the repayment obligation. The amount
of government assistance will be recorded as an adjustment
to research and development expenses in the period the
contingency is resolved.
(c) MDA has historically received investment tax credits
for Canadian tax purposes for certain qualifying research
and development projects. Pursuant to GAAP-C, MDA's
historical financial statements have recorded the receipt of
investment tax credits as a current period reduction in
costs of sales. In converting to GAAP-US, the Pro Forma
Statements adjust MDA's method of accounting for investment
tax credits by recording the credit as a reduction in
current period income tax expense (as opposed to a reduction
in current period costs of sales).
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
ORBITAL SCIENCES CORPORATION
DATED: November __, 1995 By /s/ David W. Thompson
David W. Thompson,
President and Chief Executive
Officer
COMBINATION AGREEMENT
dated as of August 31, 1995
among
ORBITAL SCIENCES CORPORATION,
3173623 CANADA INC.
and
MACDONALD, DETTWILER AND ASSOCIATES LTD.
<PAGE>
ARTICLE 1 DEFINITIONS 1
1.1. CROSS REFERENCE TABLE OF CERTAIN DEFINED TERMS 1
1.2. DEFINITIONS OF CERTAIN ADDITIONAL TERMS 3
1.2.1. CODE 3
1.2.2. CONSOLIDATED TAX 3
1.2.3. EFFECTIVE DATE 3
1.2.4. EXCHANGE ACT 3
1.2.5. MDA MATERIAL ADVERSE EFFECT 3
1.2.6. ORBITAL MATERIAL ADVERSE EFFECT 3
1.2.7. RETURN 3
1.2.8. SECURITIES ACT 3
1.2.9. SEC 3
1.2.10. SUBSIDIARY 3
1.2.11. TAX 4
ARTICLE 2 GENERAL 4
2.1. PLAN OF ARRANGEMENT 4
2.2. VOTING AND EXCHANGE TRUST AGREEMENT 5
2.3. SUPPORT AGREEMENT 6
2.4. CLOSING, CLOSING DATE AND EFFECTIVE TIME 6
2.5. HOLDING COMPANY AGREEMENTS. 6
2.6. CONTEMPORANEOUS TRANSACTIONS 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF MDA 6
3.1. DUE ORGANIZATION, AUTHORIZATION AND GOOD STANDING
OF MDA 6
3.2. NO VIOLATION OR APPROVAL 7
3.3. CAPITAL STOCK 7
3.4. SUBSIDIARIES 8
3.5. SECURITIES LAW FILINGS. 8
3.6. FINANCIAL STATEMENTS, ETC. 9
3.7. ABSENCE OF CHANGES; OPERATIONS IN THE ORDINARY
COURSE 9
3.8. TAXES 11
3.9. PROPERTIES 12
3.10. CUSTOMERS, DISTRIBUTORS AND SUPPLIERS 12
3.11. OPERATIONS IN CONFORMITY WITH LAW, ETC 13
3.12. LITIGATION 13
3.13. EMPLOYEE MATTERS; BENEFIT PLANS 14
3.14. LABOR RELATIONS 15
3.15. GOVERNMENT CONTRACTS AND SUBCONTRACTS 15
3.16. LICENSES, ETC. 15
3.17. ENVIRONMENTAL MATTERS 16
3.18. CONTRACTUAL OBLIGATIONS, ETC 16
3.19. EARTHWATCH AGREEMENT. 17
3.20. AFFILIATED TRANSACTIONS 18
3.21. PATENTS, TRADEMARKS, ETC 18
3.22. INSURANCE 18
3.23. CUSTOMER WARRANTY COVERAGE 18
3.24. POOLING 18
3.25. CERTAIN AGREEMENTS 18
3.26. OPINION OF FINANCIAL ADVISOR 19
3.27. BROKERS, FINDERS, ETC 19
3.28. DISCLOSURE; PROVISION OF INFORMATION 19
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF ORBITAL AND
ACQUISITION 20
4.1. DUE ORGANIZATION, AUTHORIZATION AND GOOD STANDING
OF ORBITAL AND ACQUISITION 20
4.2. NO VIOLATION OR APPROVAL 21
4.3. CAPITAL STOCK 21
4.4. SEC REPORTS 22
4.5. FINANCIAL STATEMENTS, ETC. 22
4.6. ABSENCE OF CHANGES 23
4.7. POOLING 23
4.8. OPERATIONS IN CONFORMITY WITH LAW, ETC. 23
4.9. LITIGATION 23
4.10. GOVERNMENT CONTRACTS AND SUBCONTRACTS 23
4.11. ENVIRONMENTAL MATTERS 24
4.12. DISCLOSURE 24
ARTICLE 5 CERTAIN COVENANTS 25
5.1. PREPARATION OF PROXY STATEMENT AND NO ACTION
REQUEST; OTHER FILINGS AND SUBMISSIONS 25
5.2. SHAREHOLDERS' MEETING 26
5.3. EXCLUSIVITY; ACQUISITION PROPOSALS 26
5.4. AMENDMENT TO PLAN OF ARRANGEMENT 27
5.5. PUBLIC ANNOUNCEMENTS 27
5.6. NOTIFICATION OF CERTAIN MATTERS 27
5.7. OTHER LIMITATIONS ON CONDUCT OF BUSINESS PRIOR TO
THE EFFECTIVE TIME 28
5.8. EXERCISE OF CALL RIGHT 28
5.9. ACCESS TO INFORMATION 28
5.10. POST EFFECTIVE DATE REPORTING 28
5.11. NO ACTION REQUEST 29
5.12. INDEMNIFICATION 29
5.13. TAX FILINGS. 30
5.14. FURTHER ASSURANCES 30
ARTICLE 6 CONDITIONS PRECEDENT 31
6.1. CONDITIONS PRECEDENT TO MDA'S OBLIGATION TO
EFFECT THE ARRANGEMENT 31
6.1.1. REPRESENTATIONS; COVENANTS; CERTIFICATE 31
6.1.2. OPINION OF COUNSEL FOR ORBITAL 31
6.1.3. PRICE OF ORBITAL STOCK 31
6.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF ORBITAL 31
6.2.1. REPRESENTATIONS; COVENANTS; CERTIFICATE 31
6.2.2. OPINION OF COUNSEL FOR MDA 32
6.2.3. MDA RIGHTS PLAN. 32
6.2.4. AFFILIATE AGREEMENTS 32
6.2.5. EMPLOYMENT AGREEMENTS 32
6.2.6. APPRAISAL RIGHTS 32
6.2.7. POOLING OF INTERESTS ACCOUNTING
TREATMENT 32
6.2.8. REQUIRED CONSENTS 32
6.2.9 PRICE OF ORBITAL STOCK 33
6.3. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH
PARTY 33
6.3.1. SHAREHOLDER APPROVAL 33
6.3.2. GOVERNMENTAL AND COURT APPROVALS 33
6.3.3. NO ACTION REQUEST/REGISTRATION STATEMENT 33
6.3.4. INJUNCTIONS 34
6.3.5. NASDAQ/NMS LISTING APPROVAL 34
ARTICLE 7 MISCELLANEOUS 34
7.1. TERMINATION 34
7.2. AMENDMENTS AND SUPPLEMENTS 35
7.3. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS 36
7.4 OTHER PAYMENTS 36
7.5. EXPENSES 36
7.6. GOVERNING LAW 36
7.7. NOTICE 36
7.8A. ENTIRE AGREEMENT, ASSIGNABILITY, ETC 38
7.8. COUNTERPARTS 39
EXHIBITS
EXHIBIT 2.1 FORM OF PLAN OF ARRANGEMENT
EXHIBIT 2.1.2 FORM OF HOLDING COMPANY AGREEMENT
EXHIBIT 2.2 FORM OF VOTING AND EXCHANGE TRUST AGREEMENT
EXHIBIT 2.3 FORM OF SUPPORT AGREEMENT
EXHIBIT 3.18 FORM OF EMPLOYMENT AGREEMENTS
EXHIBIT 6.2.4(A) FORM OF AFFILIATES AGREEMENT -- GENERAL
EXHIBIT 6.2.4(B) FORM OF AFFILIATES AGREEMENT -- SPAR
AEROSPACE LIMITED
EXHIBIT 6.2.5 FORM OF CHANGE OF CONTROL AGREEMENT
EXHIBIT 7.1(H) FORM OF VOTING AGREEMENT AND IRREVOCABLE
PROXY
</PAGE>
COMBINATION AGREEMENT
COMBINATION AGREEMENT (the "Agreement") dated as of August
31, 1995, among Orbital Sciences Corporation, a corporation
incorporated under the laws of the State of Delaware ("Orbital"),
3173623 Canada Inc., a corporation incorporated under the laws of
Canada and a wholly owned subsidiary of Orbital ("Acquisition"),
and MacDonald, Dettwiler and Associates Ltd., a corporation
incorporated under the laws of Canada ("MDA").
WHEREAS, the respective Boards of Directors of Orbital,
Acquisition and MDA have approved the transactions contemplated
by this Agreement and the Board of Directors of MDA has agreed to
submit the Plan of Arrangement (as defined in Section 2.1) and
the other transactions contemplated hereby to its shareholders
and holders of certain employee stock options for approval;
WHEREAS, Orbital, Acquisition and MDA intend the
transactions described in the Plan of Arrangement to be treated
as a "pooling of interests" under generally accepted accounting
principles in the United States; and
WHEREAS, it is the current intention of Orbital to operate
MDA as a separate division of Acquisition.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements set forth herein, and
intending to be legally bound hereby, Orbital, Acquisition and
MDA hereby agree as follows:
ARTICLE 1
DEFINITIONS
Certain terms are used in this Agreement as specifically
defined herein.
1.1 Cross Reference Table of Certain Defined Terms. The
following terms are defined in the Sections set forth below, and
shall have the respective meanings therein defined:
Term Section
"Acquisition" Preamble
"Acquisition Transaction" Section 5.3
"Affiliate" Section 6.2.4
"Affiliate Agreements" Section 6.2.4
"Agreement" Preamble
"Arrangement" Section 2.1
"Average Closing Price" Section 2.1.2
"CBCA" Section 2.1
"Canadian GAAP" Section 3.6
"Charter Documents" Section 3.1
"Class B Preferred Shares" Section 2.1.4
"Closing" Section 2.4
"Closing Date" Section 2.4
"Contract" Section 3.18
"Contractual Obligations" Section 3.18
"Court" Section 2.1
"EarthWatch Agreement" Section 3.19
"Effective Time" Section 2.4
"Employment Agreements" Section 3.18
"EOS" Section 3.3
"ERISA" Section 3.13
"Exchange Ratio" Section 2.1.2
"Exchangeable Shares" Section 2.1.1
"Final Order" Section 2.1
"Financial Statements" Section 3.5
"Government Contract" Section 3.16
"Government Subcontract" Section 3.16
"Hazardous Substance" Section 3.17
"Holding Company Agreement" Section 2.1.2
"Intellectual Property Rights" Section 3.21
"Interim Order" Section 2.1
"Lien" Section 3.4
"MDA" Preamble
"MDA Common Shares" Section 2.1.2
"MDA Disclosure Schedule" Section 3.1
"MDA Options" Section 2.1.3
"MDA 1988 Options" Section 2.1
"Multiemployer Plan" Section 3.13
"No Action Request" Section 3.28
"Orbital" Preamble
"Orbital Common Shares" Section 2.1.3
"Orbital Disclosure Schedule" Section 4.2
"Orbital Financial Statements" Section 4.5
"PCBs" Section 3.17
"PSC" Section 3.3
"Plans" Section 3.13
"Plan of Arrangement" Section 2.1
"Pooling of Interests" Preamble
"Proxy Circular" Section 3.28
"Registration Statement" Section 3.28
"Replacement Options" Section 2.1.3
"Rights" Section 2.1.2
"SEC Reports" Section 4.4
"Securities Reports" Section 3.5
"Shareholder Meeting" Section 5.2
"Shareholders' Meeting Date" Section 5.2
"Support Agreement" Section 2.3
"Trustee" Section 2.2
"US GAAP" Section 4.5
"Voting Trust Agreement" Section 2.2
1.2. Definitions of Certain Additional Terms. The
following terms shall have the meanings set forth below:
1.2.1. "Code" means the United States Internal Revenue
Code of 1986, as amended.
1.2.2. Consolidated Tax" means any Canadian and United
States Federal income Tax and any provincial, state, local
or foreign income or corporate franchise Tax imposed on any
affiliated, combined or unitary group of corporations (or
the common parent of any such group of corporations) that
included or was required to include MDA for any taxable year
ending on or before the Closing Date.
1.2.3. "Effective Date" shall mean the date on which
the Effective Time occurs.
1.2.4. "Exchange Act" shall mean the United States
Securities Exchange Act of 1934, as amended.
1.2.5. "MDA Material Adverse Effect" shall mean an
effect that does or would reasonably be expected to have a
material adverse effect on the financial condition or
results of operations of MDA and its Subsidiaries, taken as
a whole.
1.2.6. "Orbital Material Adverse Effect" shall mean an
effect that does or would reasonably be expected to have a
material adverse effect on the financial condition or
results of operations of Orbital and its Subsidiaries, taken
as a whole.
1.2.7. "Return" means any return, amended return,
declaration, report, estimate, information return (e.g.
United States Internal Revenue Service Form 1099 and 5500),
closing agreement, or statement required or permitted to be
filed under the laws of any jurisdiction in respect of any
Tax.
1.2.8. "Securities Act" shall mean the United States
Securities Act of 1933, as amended.
1.2.9. "SEC" shall mean the United States Securities
and Exchange Commission.
1.2.10. "Subsidiary" shall mean, with respect to any
corporation, any other corporation, association, or other
business entity a majority (by number of votes) of the
shares of capital stock (or other voting interests) of which
is owned directly or indirectly by such corporation.
1.2.11. "Tax" means any Canadian or United States
Federal, provincial, state or local tax or any foreign tax
(including, without limitation, any net income, gross
income, profits, premium, estimated, excise, sales, value
added, services, use, occupancy, gross receipts, franchise,
license, ad valorem, severance, capital levy, production,
stamp, transfer, withholding, employment, unemployment,
payroll or property tax, customs duty, or any other
governmental charge or assessment), together with any
interest, addition to tax, or penalty.
ARTICLE 2
GENERAL
2.1. Plan of Arrangement. MDA agrees that it shall, as
soon as reasonably practical, apply to the Supreme Court of
British Columbia (the "Court") pursuant to Section 192 of the
Canada Business Corporations Act, as amended (the "CBCA") for an
interim order in form and substance reasonably satisfactory to
Orbital (the "Interim Order") providing for, among other things,
the calling and holding of a special meeting of the shareholders
of MDA (voting together as one class) and the holders of options
to purchase MDA Common Shares pursuant to the MDA Key Employee
Stock Option Plan 1988 or the MDA Employee Stock Option Plan 1988
(collectively, the "MDA 1988 Options") (voting separately from
the shareholders of MDA as a second class) for the purpose of
considering and, if deemed advisable, approving a plan of
arrangement involving MDA and Acquisition substantially in the
form attached as Exhibit 2.1 (the "Arrangement" or "Plan of
Arrangement"), the principal terms of which include:
2.1.1. the designation and authorization of a class of
preferred stock of Acquisition (the "Exchangeable Shares")
that will have the rights, privileges and restrictions, and
be subject to the conditions, set forth in Appendix A of the
Plan of Arrangement;
2.1.2. an exchange of shares whereby (i) all
outstanding common shares of MDA ("MDA Common Shares"),
other than MDA Common Shares held by holding companies
referred to in clause (ii) of this subsection, together with
all rights (the "Rights") associated with such MDA Common
Shares under that certain Amended and Restated Shareholder
Protection Rights Plan Agreement dated as of August 27, 1992
as amended through the date hereof, between MDA and Montreal
Trust Company of Canada, shall be exchanged for the number
of Exchangeable Shares per MDA Common Share equal to the
quotient (the "Exchange Ratio") of U.S.$5.41 divided by the
average closing sales price of Orbital common stock, par
value U.S.$ .01 per share (the "Orbital Common Shares"), for
the twenty trading days ending on the date four trading days
prior to the Effective Date, as reported on the Nasdaq
National Market System (the "Average Closing Price"),
provided, however, that in no event shall the Exchange Ratio
be less than .2705 or greater than .3607; and (ii) all
outstanding shares of each newly formed holding company with
no assets other than MDA Common Shares (together with all
Rights) and all of the shares of which are owned by a party
who has entered into an agreement with Acquisition
substantially in the form of Exhibit 2.1.2 hereto (a
"Holding Company Agreement") pursuant to the provisions of
Section 2.5 hereof and has performed such agreement to the
satisfaction of Acquisition in its sole discretion, will be
exchanged for a number of Exchangeable Shares equal to the
product of the Exchange Ratio multiplied by the number of
MDA Common Shares owned by such holding company; in each
case such Exchangeable Shares to be thereafter exchangeable
for Orbital Common Shares on a one-for-one basis (subject to
certain adjustments pursuant to the Plan of Arrangement), at
the option of the holder, during the periods, at the times
and subject to the conditions set forth in Article 2 of the
Plan of Arrangement;
2.1.3. the conversion of each outstanding MDA employee
stock option, including the MDA 1988 Options, (collectively
the "MDA Options"), into an option (collectively, the
"Replacement Options") to purchase a number of Orbital
Common Shares determined by multiplying the number of MDA
Common Shares subject to such MDA Option times the Exchange
Ratio, each Replacement Option having an exercise price per
share equal to the exercise price per share of such MDA
Option immediately prior to the Effective Time divided by
the Exchange Ratio, and having the same vesting, expiration
and other terms as such MDA Option, all in accordance with
the terms of the plan governing such MDA Option or the Plan
of Arrangement; and
2.1.4. the issuance of 10,000 Class B Preferred Shares
of Acquisition (the "Class B Preferred Shares") to Canadian
Imperial Bank of Commerce as partial consideration for
investment banking services rendered in connection with the
Arrangement.
The foregoing is only a summary of the Plan of Arrangement.
The terms, conditions and procedures for accomplishing the
exchange of shares are set forth in the Plan of Arrangement and
the Appendices thereto and the foregoing is qualified by
reference thereto.
If approval of the Plan of Arrangement by the shareholders
of MDA and the holders of MDA 1988 Options is obtained, MDA shall
promptly take the necessary steps to submit the Arrangement to
the Court and apply for a final order of the Court approving such
Arrangement (the "Final Order").
2.2. Voting and Exchange Trust Agreement. Prior to the
Closing, Orbital, Acquisition and The First National Bank of
Boston or a bank or trust company to be selected by Orbital and
approved by Acquisition and MDA as trustee (the "Trustee"), shall
execute and deliver a Voting and Exchange Trust Agreement in
substantially the form set forth as Exhibit 2.2 hereto, with such
changes and additions thereto as may be reasonably requested by
the Trustee (as so executed, the "Voting Trust Agreement").
Orbital shall deposit with the Trustee one share of a newly
created class of Orbital preferred stock having such voting
rights, privileges and preferences as may be required to secure
the voting rights relating to the Orbital Common Shares granted
for the benefit of the holders of the Exchangeable Shares, such
share to be held by the Trustee in accordance with the Voting
Trust Agreement.
2.3. Support Agreement. Prior to the Closing, Orbital and
Acquisition shall execute and deliver the Support Agreement (the
"Support Agreement") in substantially the form set forth as
Exhibit 2.3.
2.4. Closing, Closing Date and Effective Time. The
execution and delivery of the documents required to effectuate
the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of Farris, Vaughan, Wills &
Murphy, 700 West Georgia Street, Vancouver, British Columbia,
Canada or at such other place and at such time as the parties
hereto may agree; provided, however, such Closing shall take
place no later than the fifth business day after satisfaction or
waiver of the last to be fulfilled of the conditions set forth in
ARTICLE 6 that by their terms are not to occur at the Closing
(the "Closing Date"). The Arrangement shall become effective as
provided for in the Plan of Arrangement (the "Effective Time").
2.5. Holding Company Agreements. The Proxy Circular shall
stipulate that those shareholders of MDA who wish to contribute
their MDA Common Shares (together with all Rights) to a holding
company and exchange the shares of such holding company for
Exchangeable Shares pursuant to clause (ii) of Section 2.1.2 must
notify MDA of their desire to do so not less than five business
days prior to the Shareholder Meeting and must have entered into
the Holding Company Agreement with Acquisition prior to the date
of the Shareholder Meeting. Acquisition shall enter into a
Holding Company Agreement with each shareholder of MDA who
provides the aforementioned notification to MDA. Any shareholder
of MDA who has not entered into a Holding Company Agreement with
Acquisition on or before the date of the Shareholder Meeting or
who has entered into such agreement but has failed to perform
such agreement to the satisfaction of Acquisition in its sole
discretion shall, subject to the Plan of Arrangement receiving
all necessary approvals, exchange his or her MDA Common Shares
and all Rights for Exchangeable Shares in accordance with clause
(i) of Section 2.1.2
2.6. Contemporaneous Transactions. The parties hereby
agree that each of the transactions contemplated by this
Agreement that is in fact consummated shall, to the extent
permitted by applicable law and not otherwise provided for herein
or in the Plan of Arrangement, be deemed consummated
substantially contemporaneously with any other transaction that
is in fact consummated pursuant to this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF MDA
In order to induce Orbital and Acquisition to enter into
this Agreement, MDA hereby represents and warrants as follows:
3.1. Due Organization, Authorization and Good Standing of
MDA. MDA is a corporation duly organized, validly existing and
in good standing under the CBCA and each Subsidiary of MDA is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation as listed
in Section 3.1 of the disclosure schedule prepared by MDA and
provided to Orbital concurrently with the execution of this
Agreement (the "MDA Disclosure Schedule"). MDA has the requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and, upon receipt of any
approvals required by the Interim Order and receipt of the Final
Order, to consummate all transactions contemplated hereby. The
execution, delivery and performance by MDA of this Agreement, and
the consummation by MDA of the transactions contemplated hereby,
have been duly and validly authorized and approved by all
necessary corporate action in respect thereof on the part of MDA,
subject only to any approvals required by the Interim Order and
receipt of the Final Order. This Agreement constitutes the valid
and binding obligation of MDA, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, moratorium,
reorganization and similar laws of general applicability
affecting the rights and remedies of creditors and to general
principles of equity, regardless of whether enforcement is sought
in proceedings in equity or at law. Each of MDA and its
Subsidiaries has full corporate power and authority to carry on
its business as now conducted and to own or lease and to operate
its properties and assets where such properties and assets are
now owned, leased or operated by it and where such business is
now conducted by it. Each of MDA and its Subsidiaries is duly
qualified to do business and is in good standing as a foreign
corporation and licensed or qualified to transact business in the
jurisdictions set forth in Section 3.1 of the MDA Disclosure
Schedule, which are the only jurisdictions where such
qualification is required by reason of the nature of the business
conducted by it or the properties or assets owned, operated or
leased by it, other than such failures to be so licensed or
qualified that in the aggregate would not have a MDA Material
Adverse Effect. True, complete and correct copies of the
charter, By-laws and other analogous organizational documents
(the "Charter Documents") of MDA and each of its Subsidiaries as
in effect on the date hereof have heretofore been delivered to
Orbital.
3.2. No Violation or Approval. Except as set forth in
Section 3.2 of the MDA Disclosure Schedule, the execution,
delivery and performance by MDA of this Agreement and the
consummation of the transactions contemplated hereby will not
result in a breach or violation of, or a default under, or the
acceleration of any payment obligation pursuant to, any law, rule
or regulation applicable to MDA and its Subsidiaries, any
material agreement or instrument to which any of them is a party
or by which any of them or any of their properties are bound, or
any order, judgment or decree of any court or any governmental
agency or body having jurisdiction over any of them or their
properties or in a breach or a default under any of their Charter
Documents. No consent, approval, order or authorization of,
declaration or filing with, any governmental authority or entity
or other party is required to be obtained or made by MDA and its
Subsidiaries in connection with the execution and delivery of
this Agreement or the consummation by MDA of the transactions
contemplated hereby other than (i) any approvals required by the
Interim Order, (ii) the Final Order, (iii) filings with the
Director under the CBCA and filings with and approvals required
by provincial securities commissions and stock exchanges, (iv)
those approvals set forth in Section 3.2 of the MDA Disclosure
Schedule and (v) such failures to obtain or make such other
consents, approvals, orders, authorizations, declarations or
filings as in the aggregate would not have a MDA Material Adverse
Effect.
3.3. Capital Stock. The authorized capital stock of MDA
consists of an unlimited number of MDA Common Shares and 232,000
Preference Shares, of which 205,000 shares have been designated
as Class A Preference Shares and 27,000 shares have been
designated as Class B Preference Shares. As of July 31, 1995,
there were 11,103,296 MDA Common Shares outstanding, 1,073,856
MDA Common Shares reserved for issuance upon the exercise of
outstanding MDA Options, 79,215 MDA Common Shares issuable to
shareholders of Earth Observation Sciences Limited ("EOS") and
up to 250,000 MDA Common Shares issuable to former shareholders
of PSC Communications Group, Inc. ("PSC"). Since July 31, 1995,
MDA has not issued or obligated itself to issue (other than (i)
pursuant to MDA Options granted on or before July 31, 1995, (ii)
upon exchange of shares of common stock of EOS, or (iii) to
former shareholders of PSC in the event certain financial
performance targets are achieved), any shares of capital stock or
any outstanding options, warrants, rights, other agreements or
commitments obligating it to issue or sell shares of its capital
stock or any securities or obligations convertible into, or
exchangeable for, any shares of its capital stock. No MDA Common
Shares are held as treasury stock or by any Subsidiary of MDA,
and no Preference Shares are outstanding. All of the
outstanding MDA Common Shares have been, and any MDA Common
Shares issued upon exercise of any MDA Options or to shareholders
of EOS or former shareholders of PSC will be, validly issued,
fully paid and nonassessable and free of preemptive rights.
Except for the MDA Options (more fully described as to exercise
price and exercise period in Section 3.3 of the MDA Disclosure
Schedule) and the obligation to issue shares to EOS and to former
shareholders of PSC as described above, neither MDA nor any of
its Subsidiaries has any outstanding options, warrants, rights,
other agreements or commitments obligating it to issue or sell
shares of its capital stock or any securities or obligations
convertible into, or exchangeable for, any shares of its capital
stock. Neither MDA nor any of its Subsidiaries has outstanding
any bonds, debentures, notes or other indebtedness the holders of
which have the right to vote (or that are convertible or
exercisable into securities having the right to vote) with
holders of MDA Common Shares or holders of the MDA 1988 Options
on any matter. None of the outstanding shares of capital stock
of MDA or of its Subsidiaries was issued in violation of
Canadian provincial securities laws, the Securities Act or the
rules and regulations promulgated thereunder or the securities or
blue sky laws of any state or other jurisdiction, which
violations would have in the aggregate a MDA Material Adverse
Effect.
3.4. Subsidiaries. Except for the equity investments set
forth in Section 3.4 of the MDA Disclosure Schedule, MDA does not
own, directly or indirectly, any capital stock, any partnership
or equity or other ownership interest in, or any security issued
by, any other corporation, organization, association, entity or
business enterprise, and Section 3.4 of the MDA Disclosure
Schedule indicates which such equity investments are Subsidiaries
of MDA and which are minority ownership interests. Except as set
forth in Section 3.4 of the MDA Disclosure Schedule, MDA owns,
directly or indirectly, all of the outstanding shares of each of
the entities listed thereon and identified as Subsidiaries of MDA
(except for directors' qualifying shares or such shares as may be
required by local laws to be owned by residents of the
jurisdiction of incorporation) free and clear of all liens,
pledges, security interests, mortgages, claims, charges and
encumbrances ("Liens"). All shares of capital stock owned by MDA
in any of its Subsidiaries are duly authorized, validly issued,
fully paid and nonassessable.
3.5. Securities Law Filings. MDA has filed all proxy
circulars, reports and other documents required to be filed by it
after March 31, 1995 pursuant to the CBCA and all applicable
Canadian provincial securities laws or any rule or order of a
stock exchange on which MDA Common Shares are listed. MDA has
provided to Orbital copies of MDA's Annual Report and its Annual
Information Form for the fiscal year ended March 31, 1995, and
all final proxy circulars, reports and other documents filed by
MDA pursuant to all such securities laws and/or stock exchange
rules or orders (collectively, the "Securities Reports"). Each
Securities Report was, as of the date of filing such report, in
compliance in all material respects with all applicable
requirements of its respective form and none of the Securities
Reports, as of their respective filing dates, contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading.
3.6. Financial Statements, etc. MDA has previously
furnished Orbital with true and complete copies of the following
financial statements (collectively, the "Financial Statements"):
(i) consolidated financial statements for the fiscal years ended
March 31, 1993, 1994 and 1995 audited by KPMG Peat Marwick
Thorne, and (ii) unaudited statements of income and cash flows
for the fiscal quarter ended June 30, 1995 and the accompanying
balance sheet as of June 30, 1995, each prepared from the books
and records of MDA and its consolidated Subsidiaries. The
Financial Statements present fairly, in all material respects,
the consolidated financial position of MDA and the results of its
operations and its cash flows as of the respective dates and for
the periods presented therein in conformity with generally
accepted accounting principles in Canada as in effect on the
applicable dates of such financial statements ("Canadian GAAP")
and applied on a consistent basis, except as noted therein and
except that in the case of the unaudited financial statements, no
notes are included and such unaudited financial statements may be
subject to normal, recurring adjustments that would be made in
the course of an audit and that would not be material. Except as
and to the extent reflected or reserved against in the balance
sheet as of June 30, 1995 included in the Financial Statements
or as set forth in Section 3.6 of the MDA Disclosure Schedule,
MDA and its Subsidiaries, taken as a whole, do not have any
material liabilities or obligations of any nature.
3.7. Absence of Changes; Operations in the Ordinary Course.
Except as set forth in the Securities Reports or in Section 3.7
of the MDA Disclosure Schedule, since March 31, 1995 neither MDA
nor any of its Subsidiaries has undergone any adverse change in
its financial condition, or suffered any damage, destruction or
loss (whether or not covered by insurance) that adversely affects
its financial condition, the condition of its assets or the
ability to conduct its business other than such changes in
financial condition, damage, destruction or loss as in the
aggregate would not have a MDA Material Adverse Effect; and since
March 31, 1995, except as set forth in the Securities Reports or
in Section 3.7 of the MDA Disclosure Schedule, there has been no
adverse change in the condition of the business of MDA or any of
its Subsidiaries, whether as a result of any change as to
accounts receivable, inventory or other assets, any loss of
competitive position, any natural disaster, accident, strike,
sabotage, or confiscation of property, or any other event or
condition directly affecting or relating to MDA, whether or not
related to any of the foregoing, except for such changes as would
not in the aggregate have a MDA Material Adverse Effect and such
changes as are the result of changes in general economic or
industry wide conditions. Since March 31, 1995, with the
exception of actions taken at the request of Orbital or otherwise
necessary to the consummation of the transactions contemplated by
this Agreement or the Plan of Arrangement, and except as set
forth in the Securities Reports or in Section 3.7 of the MDA
Disclosure Schedule, MDA and each of its Subsidiaries has
operated its business in the ordinary course, consistent in all
material respects with past practice. Without limiting the
generality of the foregoing, since March 31, 1995, neither MDA
nor any of its Subsidiaries has:
(a) amended the terms of any outstanding indebtedness or
incurred any indebtedness for borrowed money that has not been
repaid in full, or issued or sold any of its debt or equity
securities, except in the ordinary course of business consistent
with past practice;
(b) subjected to any Lien or lease any of its properties,
tangible or intangible, except in the ordinary course of business
consistent with past practice;
(c) forgiven or canceled any debts owed to MDA or any of
its Subsidiaries or claims of MDA or any of its Subsidiaries, or
waived any rights, except in the ordinary course of business
consistent with past practice;
(d) incurred any liability or obligation (whether absolute,
accrued, contingent or otherwise) or made any payment in respect
of (i) any acquisition or disposition of any assets or properties
in any transaction with any officer, director, shareholder or
employee of MDA or any of its Subsidiaries, or any relative by
blood or marriage or any "affiliate" or "associate" of MDA or any
of its Subsidiaries (as such terms are defined in Rule 405
promulgated under the Securities Act), (ii) except as set forth
in Section 3.7 of the MDA Disclosure Schedule, any other
transaction with any such affiliate or associate of MDA or any of
its Subsidiaries, other than salaries paid to officers; or (iii)
any declaration, setting aside or payment of dividends or other
distributions in respect of, or purchases or redemptions
(directly or indirectly) of, any shares of its capital stock;
(e) proposed or adopted any amendments to its Charter
Documents except as contemplated by this Agreement or the Plan of
Arrangement;
(f) entered into or publicly announced an intention to
enter into any agreement (including, without limitation, an
agreement in principle) with respect to, any acquisition of a
material amount of assets or securities or any release or
relinquishment of any material contract rights not in the
ordinary course of business;
(g) made any capital expenditures other than in the
ordinary course of business consistent with past practice or as
necessary to maintain existing assets in good repair;
(h) entered into any line of business not described or
contemplated in MDA's Annual Report for the fiscal year ended
March 31, 1995;
(i) committed any act or omission that constitutes a
material breach or default by MDA or any of its Subsidiaries
under any material contract or material license to which MDA or
any of its Subsidiaries is a party or by which any of them or
their respective properties is bound;
(j) made any investment or commitment to make such an
investment in real estate or in any real estate development
project;
(k) except as disclosed in the Financial Statements or in
Section 3.7 of the MDA Disclosure Schedule: (i) granted to any
officer or employee any increase in compensation in any form
(including without limitation any increase in value of any
benefits) in excess of the amount thereof in effect as of March
31, 1995 other than increases in base salary or hourly wages of
employees other than officers of MDA in the ordinary course of
business in amounts consistent with past practice, or any
severance or termination pay, or entered into any employment
agreement with any employee that is not terminable by the
employer, without cause and without penalty, upon notice of 30
days or less, (ii) adopted or amended any bonus, profit-sharing,
compensation, stock option, pension, retirement, deferred
compensation or other plan, agreement, trust, fund or arrangement
for the benefit of employees (whether or not legally binding),
(iii) hired any employee who shall have total expected annual
compensation in excess of U.S.$100,000, or (iv) paid or incurred
any obligation to pay any bonus or fee to any employee (including
any officer) of MDA or any of its Subsidiaries or in connection
with the transactions contemplated by this Agreement; or
(l) agreed in writing or otherwise to do any of the
foregoing.
3.8. Taxes.
(a) For each of its taxation or taxable years or periods
ending on or prior to the date hereof : (i) all Tax Returns
that are required to have been filed by or with respect to MDA or
any of its Subsidiaries have been duly and timely filed and are
correct and complete in all material respects; (ii) all income,
capital and corporate franchise Taxes with respect to or required
to have been paid by MDA or any of its Subsidiaries or for which
MDA or any of its Subsidiaries is or may otherwise be liable
(including without limitation all Consolidated Taxes), whether or
not shown on any Tax Return, have been paid in full if due or
accrued for in accordance with Canadian GAAP in the Financial
Statements through the date thereof and in the books and records
of MDA or the relevant Subsidiary in respect of subsequent
periods; and (iii) all Taxes other than those described in
clause (ii) with respect to or required to have been paid by MDA
or any of its Subsidiaries or for which MDA or any of its
Subsidiaries is or may otherwise be liable, whether or not shown
on any Tax Return, have been paid in full if due or accrued for
in accordance with Canadian GAAP in the Financial Statements
through the date thereof and in the books and records of MDA or
the relevant Subsidiary in respect of subsequent periods except
for such amounts the nonpayment of which, in the aggregate, would
not result in a MDA Material Adverse Effect.
(b) Except as set forth in Section 3.8 of the MDA
Disclosure Schedule, (i) there are no audits, proceedings, or
litigation in respect of Taxes relating to MDA or any of its
Subsidiaries pending, in progress, or to MDA's knowledge,
threatened, (ii) there are no Tax Liens upon any property or
assets of MDA or any of its Subsidiaries other than Liens for
Taxes that are not yet due and payable, and (iii) neither MDA nor
any of its Subsidiaries has consented to any extension of any
statute of limitations pertaining to Taxes.
(c) Neither MDA nor any of its Subsidiaries is obligated as
a result of the transactions contemplated by this Agreement to
make a payment that would be a "parachute payment" to a
"disqualified individual" as those terms are defined in Section
280G of the Code without regard to whether such payment is
reasonable compensation for personal services performed or to be
performed in the future.
(d) MDA and each of its Subsidiaries has collected or
withheld all amounts required to be collected or withheld by it
on account of Taxes or otherwise, and has remitted the same to
the appropriate governmental authority in the manner and within
the time required under any applicable legislation or, if it is
not yet due, has set it aside in appropriate accounts for payment
when due.
(e) The liability for Taxes under the Income Tax Act
(Canada) of each of MDA and its Subsidiaries has been assessed by
Revenue Canada for all taxation years up to and including the
taxation years ending March 31, 1994. True and complete copies
of the federal and provincial Tax Returns for MDA and each
Subsidiary for the taxation year ending March 31, 1994 and copies
of all assessments and reassessments relating to the most recent
taxation year for which the same are available have been provided
to Orbital.
(f) There are no circumstances that exist and would result,
or that have existed and resulted, in section 80 of the Income
Tax Act (Canada) applying to MDA or any of its Subsidiaries.
3.9. Properties. MDA and each of its Subsidiaries do not
own any real property. MDA and each of its Subsidiaries has good
and marketable title to all tangible personal property reflected
in the March 31, 1995 balance sheet included in the Financial
Statements or acquired since such date (except for property
disposed of since such date in the ordinary course of business
consistent with past practice), and valid leasehold interests in
all real and tangible personal properties leased by it, in each
case free and clear of Liens, easements or title imperfections
except (a) Liens for current Taxes not yet due and payable, (b)
encumbrances and easements that do not materially detract from
the value or interfere with the use by MDA or any of its
Subsidiaries, as the case may be, of the properties affected
thereby, (c) Liens reflected in the Financial Statements, (d)
Liens of customers on property purchased by MDA in connection
with its performance of contracts to provide products or services
to such customers and which in the aggregate would not have a MDA
Material Adverse Effect, and (e) Liens set forth in Section 3.9
of the MDA Disclosure Schedule. MDA or its Subsidiary as lessee
thereof enjoys peaceful and undisturbed possession under all
material leases under which it operates. All tangible personal
property material for the conduct of the business of MDA and its
Subsidiaries as presently conducted is in satisfactory operating
condition and repair, subject to ordinary wear and tear.
3.10. Customers, Distributors and Suppliers. Except as set
forth in Section 3.10 of the MDA Disclosure Schedule, neither MDA
nor any of its Subsidiaries has received notice from any person
or entity with which it has an existing agreement, oral or
written, for the purchase or distribution of products or services
from MDA or any of its Subsidiaries that it intends to reduce
significantly such purchases or terminate such agreement, whether
as a result of the transactions contemplated hereby or otherwise,
other than such reductions and actions as in the aggregate would
not have a MDA Material Adverse Effect.
3.11. Operations in Conformity With Law, etc. Neither MDA
nor any of its Subsidiaries has been or is in violation of, or in
default under, any law, rule, regulation, order, judgment or
decree relating in any manner or applicable to the business or
assets of MDA or any of its Subsidiaries or any of their
respective employees, except for such violations or defaults that
in the aggregate would not have a MDA Material Adverse Effect.
Neither MDA or any of its Subsidiaries, nor, to the knowledge of
MDA or any of its Subsidiaries, any of their respective officers,
employees or agents has (a) directly or indirectly given or
agreed to give any illegal gift, contribution, payment or similar
benefit to any supplier, customer, governmental official or
employee or other person who was, is or may be in a position to
help or hinder MDA or any of its Subsidiaries (or assist in
connection with any actual or proposed transaction) or made or
agreed to make any illegal contribution, or reimbursed any
illegal political gift or contribution made by any other person,
to any candidate for Canadian or United States Federal,
provincial, state or local, or foreign public office
(collectively, a "Restricted Activity") that (i) would subject
MDA or any of its Subsidiaries to any damage or penalty in any
civil, criminal or governmental litigation or proceeding that
would have, in the aggregate, a MDA Material Adverse Effect,
(ii), if such Restricted Activity had occurred after the
Effective Date, would subject Orbital to any damage or penalty in
any civil, criminal or governmental litigation or proceeding that
would have, in the aggregate, a MDA Material Adverse Effect, or
(iii) if such Restricted Activities were to cease as of the date
hereof, such cessation would have a MDA Material Adverse Effect.
.
3.12. Litigation. Except as set forth in Section 3.12 of
the MDA Disclosure Schedule, there are no actions, claims, suits,
investigations or proceedings pending or to MDA's knowledge
threatened against MDA or any of its Subsidiaries pertaining to
the business or assets of MDA or any of its Subsidiaries that, in
the aggregate, if adversely determined, would have a MDA Material
Adverse Effect or that question the validity of this Agreement or
any action taken or to be taken pursuant to or in connection with
the provisions of this Agreement, nor to the knowledge of MDA or
its Subsidiaries is there any basis for any such action, claim,
suit, proceeding or investigation. There are no judgments,
orders, decrees, citations, fines or penalties heretofore
assessed (and not discharged or otherwise satisfied) against MDA
or any of its Subsidiaries under any Canadian or United States
Federal, provincial, state or local, or foreign law except for
such judgments, orders, decrees, citations, fines or penalties
that in the aggregate would not have a MDA Material Adverse
Effect.
3.13. Employee Matters; Benefit Plans.
(a) All plans, agreements, policies and arrangements
(including those sponsored by the Federal or any provincial
government of Canada), whether or not reduced to writing and
whether or not legally binding, to which MDA or any of its
Subsidiaries contributes or is obligated to contribute, or under
which MDA or any of its Subsidiaries has or may have any
liability for premiums or benefits, and which benefits any
active, former or retired employee, outside director, consultant
or other independent contractor who provides or provided services
to or for the benefit of MDA and its Subsidiaries, are listed in
Section 3.13 of the MDA Disclosure Schedule (the "Plans"). MDA
has delivered to Orbital, a true, correct and complete copy of
each written Plan (or a written summary of the material terms of
any Plan that has not been reduced to writing) any related trust
agreement and annuity or insurance contract, if any, each Plan's
most recent annual report filed with the Internal Revenue Service
or Revenue Canada, if any, and all summary plan descriptions,
employee handbooks, or other similar employee communications with
respect to the Plans.
(b) Each Plan has been maintained and administered in
material compliance with its terms and with the requirements
prescribed by any and all applicable statutes, orders, rules and
regulations, and is, to the extent required by applicable law or
contract, fully funded without having any deficit or unfunded
actuarial liability; all required employer contributions under
any such Plans have been made and the applicable funds have been
funded in accordance with the terms thereof and no past service
funding liabilities exist thereunder; and all material
contributions, reserves or premium payments required to be made
as of the date hereof to the Plans have been made or provided
for.
(c) Each Plan that is required or intended to be qualified
under applicable law (including to the extent applicable, the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code, including without limitation Section
401(a) of the Code) or registered or approved by a government
agency or authority has been so qualified, registered or approved
by the appropriate governmental agency or authority, and nothing
has occurred since the date of the last qualification,
registration or approval to cause the appropriate governmental
agency or authority to revoke, or otherwise adversely affect,
such qualification, registration or approval.
(d) Except as set forth in Section 3.13 of the MDA
Disclosure Schedule, there are no pending or, to MDA's knowledge,
anticipated claims against or otherwise involving any of the
Plans and no suit, action or other litigation (excluding claims
for benefits incurred in the ordinary course of Plan activities)
has been brought against or with respect to any such Plan.
(e) No Plan currently maintained by MDA is covered by Title
IV of ERISA. Neither MDA nor any Subsidiary has incurred any
liability under Subtitle C or D of Title IV of ERISA with respect
to any "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by MDA,
any of its Subsidiaries or any entity that is considered one
employer with MDA under Section 4001 of ERISA. Neither MDA nor
any such Subsidiary has incurred any withdrawal liability under
Subtitle E of Title IV of ERISA with respect to any
"multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA.
(f) Except as set forth in Section 3.13 of the MDA
Disclosure Schedule, neither MDA nor any of its Subsidiaries has
any obligations for retiree health and life benefits under any
Plan, and there are no restrictions on the rights of MDA or any
of its Subsidiaries to amend or terminate any such Plan without
incurring any liability thereunder.
3.14. Labor Relations. There is no existing dispute or
controversy between MDA or any of its Subsidiaries and any of
MDA's or such Subsidiary's employees that would have a MDA
Material Adverse Effect. Neither MDA nor any of its Subsidiaries
is a party to any collective bargaining agreement with respect to
any of its employees, none of such employees is represented by a
labor union and, to MDA's knowledge, there is no labor union
organizing activity by or among such employees.
3.15. Government Contracts and Subcontracts. Except as and
to the extent reflected or reserved against in the balance sheet
dated as of March 31, 1995 included in the Financial Statements,
there are no claims, penalties, or causes of action against MDA
or any of its Subsidiaries the basis of which is an actual or
alleged violation of, or noncompliance with, any applicable law,
regulation or order (a) related to a contract between MDA or any
of its Subsidiaries and the Canadian or United States Federal
government or the province of British Columbia or any other
provincial, state or local, or foreign government or any division
or agency of any of the foregoing (a "Government Contract"), or
(b) related to a contract between MDA or any of its Subsidiaries
and any other party which contract renders MDA or any of its
Subsidiaries a subcontractor at any tier to a prime contract with
the Canadian or the United States Federal government or the
province of British Columbia or any other provincial, state or
local, or foreign government or any division or agency of any of
the foregoing (a "Government Subcontract"). To the knowledge of
MDA and its Subsidiaries, there is no basis for a claim, penalty,
or cause of action against MDA or any of its Subsidiaries
alleging a violation of, or noncompliance with, any applicable
law, regulation or order related to any Government Contract or
Government Subcontract to which MDA or any of its Subsidiaries is
a party, except for such claims, penalties or causes of action as
do not, in the aggregate, have a MDA Material Adverse Effect.
For purposes of this Section 3.15, claims, penalties, and causes
of action alleging a violation of, or noncompliance with, any
applicable law, regulation or order include, but are not limited
to, those purporting to be based on failure to comply with cost
accounting standards, allowable costs, allocation of costs,
omissions or errors in disclosure statements, or defective
pricing.
3.16. Licenses, etc. MDA and each of its Subsidiaries has
all governmental and regulatory licenses and permits necessary
for the conduct of its business as presently conducted except
where the failure to obtain or maintain such licenses and permits
would not, in the aggregate, have a MDA Material Adverse Effect.
All such licenses and permits are in full force and effect, and
no violations have been recorded in respect thereof. Neither MDA
nor any of its Subsidiaries is in violation of any such license
or permit, and no proceeding or investigation is pending or, to
MDA's or any of its Subsidiaries' knowledge, threatened that
would have the effect, directly or indirectly, of revoking or
limiting in any way any such licenses or permits.
3.17. Environmental Matters. MDA and each of its
Subsidiaries is and has at all times been in compliance in all
material respects with all applicable Canadian and United States
Federal, provincial, state and local, and foreign laws,
regulations, by-laws, ordinances, orders, directives and
decisions relating to environmental, natural resources, health
and safety matters. There is no suit, claim, action or
proceeding pending or threatened against MDA or any of its
Subsidiaries or, to MDA's and each Subsidiary's knowledge, any
basis therefor, in respect of (i) noncompliance by MDA or any of
its Subsidiaries with any such laws, regulations, by-laws,
ordinances, orders, directives or decisions (ii) personal injury,
wrongful death, other tortious conduct, or relating to materials,
commodities or products held, used, sold, transferred,
manufactured or disposed of by or on behalf of MDA or any of its
Subsidiaries, containing or incorporating any hazardous or toxic
materials, commodities or substances, or (iii) the presence or
release or threatened release into the environment of any
pollutant, contaminant, deleterious or toxic or hazardous
material, substance or waste, whether solid, liquid or gas (each
a "Hazardous Substance"), whether generated by MDA or any of its
Subsidiaries or located at or about a site leased or otherwise
used by MDA or any of its Subsidiaries or heretofore owned,
leased or otherwise used by MDA or any of its Subsidiaries or any
predecessor entity. To MDA's and each Subsidiary's knowledge,
there have been no Hazardous Substances of or generated by MDA or
any Subsidiary that have been disposed of or come to rest at any
site that has been included in any published United States
Federal, state or local "superfund" site list or any other list
of hazardous or toxic waste sites published by any governmental
authority in Canada or the United States. To MDA's and each
Subsidiary's knowledge there are and have been no underground
storage tanks located on, no polychlorinated biphenyls ("PCBs")
or PCB-containing equipment used or stored on, and no hazardous
waste, as defined by the Resource Conservation and Recovery Act,
as amended, stored on, any site, leased or otherwise used by MDA
or any Subsidiary. To MDA's and each Subsidiary's knowledge,
there have been no emissions or releases or threatened emissions
or releases of Hazardous Substances on, upon, into or from any
site leased or otherwise used by MDA or any of its Subsidiaries
or heretofore owned, leased or otherwise used by MDA or any of
its Subsidiaries or any predecessor entity.
3.18. Contractual Obligations, etc. Section 3.18 of the
MDA Disclosure Schedule contains a true and complete list of all
contracts, agreements, deeds, mortgages, leases (whether or not
capitalized), licenses, instruments, commitments, sales orders,
purchase orders, quotations, bids, undertakings, arrangements or
understandings, written or oral (each, a "Contract") to which or
by which MDA or any of its Subsidiaries is a party or otherwise
bound or to which or by which any of MDA's or its Subsidiaries'
assets are subject of the types described below and in effect on
the date hereof (Contracts of the type described below,
collectively, the "Contractual Obligations").
(a) All Contracts relating to noncompetition;
(b) All Contracts to which any employee is a party, other
than option agreements relating to the MDA Options and employment
offer letters that are terminable by MDA at will (subject only to
reasonable notice) and the employment agreements to be entered
into, pursuant to Section 6.2.5 hereof, in substantially the form
of Exhibit 3.18 (the "Employment Agreements");
(c) All Contracts relating to the provision of consulting
services that involve liabilities or obligations of MDA or any of
its Subsidiaries in excess of C$150,000 or that have a term
extending more than one year after the Closing Date;
(d) All Contracts (including without limitation options) to
sell (other than sales of products) or lease (as lessor) any
property or asset owned or leased by MDA or any of its
Subsidiaries, other than property or assets having individual
values less than C$50,000 and an aggregate value less than
C$300,000;
(e) All Contracts pursuant to which MDA or any of its
Subsidiaries possesses or uses (including as lessee) any
properties or assets in its business the loss of use of which
would have a MDA Material Adverse Effect, or pursuant to which
MDA pays, accrues expenses of or incurs charges of at least
C$50,000 per annum;
(f) All Contracts for the sale of products or provision of
services by MDA or any of its Subsidiaries that individually
involve products or services having a value of at least C$250,000
or that have a term extending more than one year after the
Closing Date;
(g) All Contracts with suppliers or providers of goods or
services (other than cleaning, trash removal, facilities
maintenance or repair, or similar services and other than agent
or representation agreements terminable upon no more than one
year's notice) to MDA or any of its Subsidiaries, including
without limitation purchase orders, that individually involve
liabilities in excess of C$100,000; and
(h) Each other Contract (other than Contracts of the type
described in (a) through (g) of this Section 3.18) that involves
liabilities or obligations of MDA or any of its Subsidiaries in
excess of C$150,000 or that has a term extending more than one
year after the Closing Date.
MDA shall make available to Orbital upon request a true and
complete copy of each of the Contractual Obligations referred to
in (a) through (h) except as otherwise provided in Section 3.19
below. Other than defaults resulting from claims, penalties or
causes of action disclosed in Section 3.15 or Section 3.18 of the
MDA Disclosure Schedule, neither MDA nor any of its Subsidiaries
nor, to the knowledge of MDA or its Subsidiaries, any other party
is in default under or in breach or violation of, nor has an
event occurred that (with or without notice, lapse of time or
both) would constitute a default by MDA or any of its
Subsidiaries or to MDA's knowledge by any other party, under any
Contractual Obligations which defaults, in the aggregate, have a
MDA Material Adverse Effect.
3.19. EarthWatch Agreement. MDA has executed one or more
contracts with EarthWatch, Inc. ("EarthWatch") (collectively, the
"EarthWatch Agreement") which provides, among other things, that
MDA shall make an equity investment in EarthWatch and build a
portion of EarthWatch's image data archival and processing
facility. In lieu of providing to Orbital a copy of the
EarthWatch Agreement, Section 3.19 of the Disclosure Schedule
describes, to MDA's belief, all of MDA's material obligations
(financial or otherwise) under the EarthWatch Agreement.
3.20. Affiliated Transactions. Except for Contracts
described in Section 3.18(b), none of the directors, officers,
shareholders or employees of MDA or any of its Subsidiaries, or
any relative by blood or marriage or any "affiliate" or
"associate" (as such terms are defined in Rule 405 promulgated
under the Securities Act) of any of the foregoing, is currently a
party to any Contractual Obligation.
3.21. Patents, Trademarks, etc. Section 3.21 of the MDA
Disclosure Schedule contains a complete and correct list of all
patents, patent applications, trade names, trademarks, trademark
applications, service marks, copyrights and copyright
applications owned or used by MDA or any of its Subsidiaries.
MDA and each of its Subsidiaries owns, or pursuant to license
agreements possesses adequate rights to use, all patents, trade
names, trademarks, copyrights, inventions, processes, designs,
formulas, trade secrets, know-how and other intellectual property
and proprietary rights (collectively, the "Intellectual Property
Rights") used in or necessary in all material respects for the
conduct of its business with no known conflict with or
infringement of the asserted rights of others. With respect to
any such Intellectual Property Right owned by MDA or any of its
Subsidiaries, MDA or such Subsidiary is the sole and exclusive
owner of, with all right, title and interest in and to, free and
clear of any Lien, such Intellectual Property Right and MDA and
its Subsidiaries have sole and exclusive rights (and except as
reflected in the Financial Statements, are not contractually
obligated to pay any compensation to any third party in respect
thereof) to the use thereof. To the best of MDA's knowledge (i)
all inventions, processes, designs, formulas, trade secrets, know-
how and other intellectual property that are material and have
not been patented or copyrighted have been kept confidential and
(ii) no third party is currently infringing or has infringed the
rights of MDA or any of its Subsidiaries under any patent, trade
name, trademark or copyright owned by MDA or any of its
Subsidiaries.
3.22. Insurance. Section 3.22 of the MDA Disclosure
Schedule contains a summary description of all insurance policies
maintained by MDA or its Subsidiaries, all of which policies are
in full force and effect.
3.23. Customer Warranty Coverage. Section 3.23 of the MDA
Disclosure Schedule contains a description of all warranty
coverages (including terms of such coverages, expiration dates,
and estimated amounts of liability) extended by MDA or any of its
Subsidiaries for repair or replacement of defective products or
service to its customers as of the date indicated thereon. The
estimated liability for warranty claims is fairly reflected in
the Financial Statements.
3.24. Pooling. Neither MDA nor, to MDA's knowledge, any of
its "affiliates" (as defined in Opinion No. 16, as amended, of
the Accounting Principles Board of the American Institute of
Certified Public Accountants and the interpretive rulings issued
thereunder) has taken or agreed to take any action that would
prevent Orbital from accounting for the business combination to
be effected by the Plan of Arrangement as a pooling-of-interests.
3.25. Certain Agreements. Except as set forth in Section
3.25 of the MDA Disclosure Schedule, neither the execution and
delivery of this Agreement nor the consummation of the
transactions contemplated hereby or by the Plan of Arrangement
will (i) result in any payment (including, without limitation,
severance, unemployment compensation, parachute payment, bonus or
otherwise) becoming due to any director, employee or independent
contractor of MDA or its Subsidiaries, from MDA or any of its
Subsidiaries under any Plan, agreement or otherwise, (ii) except
as contemplated by the Employment Agreements, increase any
benefits otherwise payable under any Plan or agreement, or (iii)
result in the acceleration of the time of payment or vesting of
any such benefits.
3.26. Opinion of Financial Advisor. MDA has received the
opinion of Nesbitt Burns, dated the date hereof, to the effect
that, as of such date, the consideration to be received in the
Arrangement by MDA's shareholders and the holders of the MDA 1988
Options is fair to MDA's shareholders and the holders of the MDA
1988 Options from a financial point of view, a copy of which
opinion has been provided to Orbital.
3.27. Brokers, Finders, etc. All negotiations relating to
this Agreement and the transactions contemplated hereby have been
carried on without the intervention of any person acting on
behalf of MDA in such manner as to give rise to any valid claim
against MDA or Orbital for any brokerage or finder's commission,
fee or similar compensation, except for fees payable to Nesbitt
Burns pursuant to the engagement letter between it and MDA, dated
June 16, 1995, a copy of which has been provided to Orbital.
3.28. Disclosure; Provision of Information. This Agreement,
including the Exhibits hereto and the MDA Disclosure Schedule,
the certificates delivered or to be delivered in connection
herewith and the Securities Reports, taken as a whole, do not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements herein or
therein not misleading. The proxy circular or other disclosure
document and any amendment or supplement thereto to be
distributed in connection with MDA's meeting of its shareholders
and the holders of the MDA 1988 Options to vote upon the
Arrangement (the "Proxy Circular") will, at the time of the
mailing thereof and at the time of such meeting, not contain any
misrepresentation (within the meaning of any applicable Canadian
or United States Federal, provincial or state securities laws) or
any untrue statement of a material fact or omit to state a
material fact necessary to be stated therein or necessary to make
the statements therein, in light of the circumstances in which
they are made, not misleading and comply as to form in all
material respects with the provisions of all applicable laws,
including the provisions of the CBCA and the rules and
regulations thereunder, except that no representation is made by
MDA with respect to information supplied by or on behalf of
Orbital or Acquisition specifically for inclusion therein. None
of the information supplied or to be supplied by or on behalf of
MDA or its Subsidiaries for inclusion in (i) the Plan of
Arrangement, (ii) the request for a "no action letter" submitted
by Orbital to the SEC seeking to confirm the availability of an
exemption under Section 3(a)(10) of the Securities Act for the
issuance of the Exchangeable Shares and an exemption under
Section 3(a)(9) or 3(a)(10) of the Securities Act for the
issuance of Orbital Common Shares in exchange for the
Exchangeable Shares and any requests to Canadian securities
regulators for rulings or orders to permit the Arrangement and
related transactions to be carried out without prospectus or
registration requirements (collectively, the "No Action
Request"); or (iii) any registration statement and any amendment
thereto required to be filed under the Securities Act by Orbital
in connection with the issuance of the Exchangeable Shares or the
Orbital Common Shares in or as a result of the Arrangement (a
"Registration Statement") will (a) in the case of the Plan of
Arrangement, at the time the Plan of Arrangement is considered by
the Court, (b) in the case of the No Action Request, at the time
the No Action Request, as amended or supplemented, is acted on by
the SEC or Canadian securities regulators, as the case may be, or
(c) in the case of any Registration Statement, at the time it
becomes effective and at the time of any post-effective amendment
thereto, contain any misrepresentation (within the meaning of any
applicable Canadian or United States Federal, provincial or state
securities laws) or any 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, in light of the
circumstances in which they are made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ORBITAL
AND ACQUISITION
In order to induce MDA to enter into this Agreement, each of
Orbital and Acquisition jointly and severally represents and
warrants as follows:
4.1. Due Organization, Authorization and Good Standing of
Orbital and Acquisition. Orbital is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware. Acquisition is a corporation duly
organized, validly existing and in good standing under the CBCA.
Each other Subsidiary of Orbital is a corporation or limited
partnership duly organized or formed, validly existing and in
good standing under the laws of the jurisdiction of its
organization or formation. Each of Orbital and Acquisition has
the requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement and to
consummate all transactions contemplated hereby. The execution,
delivery and performance of this Agreement by each of them, and
the consummation of the transactions contemplated hereby have
been duly and validly authorized and approved by all necessary
corporate action in respect thereof on the part of each of
Orbital and Acquisition. This Agreement constitutes the valid
and binding obligation of each of Orbital and Acquisition,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, moratorium, reorganization and similar laws of
general applicability affecting the rights and remedies of
creditors and to general principles of equity, regardless of
whether enforcement is sought in proceedings in equity or at law.
Each of Orbital, Acquisition and each other Subsidiary of Orbital
has full corporate or partnership power and authority to carry on
its business as now conducted and to own or lease and to operate
its properties and assets where such properties and assets are
now owned, leased or operated by it and where such business is
now conducted by it. Each of Orbital, Acquisition and each other
Subsidiary of Orbital is duly qualified to do business and in
good standing as a foreign corporation or limited partnership and
licensed or qualified to transact business in each jurisdiction
in which the nature of the business conducted by it or the
properties or assets owned, operated or leased by it requires it
to be so licensed or qualified, other than such failures to be so
licensed or qualified that, in the aggregate, would not have an
Orbital Material Adverse Effect. True, complete and correct
copies of the Charter Documents of Orbital and Acquisition as in
effect on the date hereof have heretofore been delivered to MDA.
4.2. No Violation or Approval. Except as set forth in
Section 4.2 of the disclosure schedule prepared by Orbital and
provided to MDA concurrently with the execution of this Agreement
(the "Orbital Disclosure Schedule"),the execution, delivery and
performance by Orbital and Acquisition of this Agreement and the
consummation of the transactions contemplated hereby will not
result in a breach or violation of, or a default under, any law,
rule or regulation, order, judgment or decree applicable to
Orbital, Acquisition or any other Subsidiary of Orbital, any
material agreement or instrument to which any of them is a party
or by which any of them or any of their respective properties are
bound, or any order, judgment or decree of any court or any
governmental agency or body having jurisdiction over any of them
or their properties or in a breach or a default under their
Charter Documents other than any breach, violation or default
that would not have an Orbital Material Adverse Effect. No
consent, approval, order or authorization of, or declaration or
filing with, any governmental authority or entity or other party
is required of and has not been obtained or made by Orbital or
Acquisition in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated
hereby other than (i) any approvals required by the Interim
Order, (ii) the Final Order, (iii) filings with the Director
under the CBCA and filings with and approvals required by
provincial securities commissions and stock exchanges, (iv) the
filing and effectiveness of any required Registration Statement
and (v) such failures to obtain or make consents, approvals,
orders, authorizations, declarations or filings as in the
aggregate would not have an Orbital Material Adverse Effect.
4.3. Capital Stock. The authorized capital stock of
Orbital consists of (i) 40,000,000 shares of Orbital Common
Shares, of which, as of August 10, 1995, approximately 22,662,618
shares are outstanding; and (ii) 10,000,000 shares of Preferred
Stock, U.S.$.01 par value per share, of which, as of the date
hereof, no shares are outstanding. Upon issuance of the Orbital
Common Shares in exchange for the Exchangeable Shares as provided
in the Plan of Arrangement, such shares shall be validly issued,
fully paid and nonassessable, free of preemptive rights and free
of all Liens other than such as arise under applicable securities
laws. The Orbital Common Shares to be issued pursuant to the
Plan of Arrangement will be issued in full compliance with all
Canadian provincial securities laws and the Securities Act and
the rules and regulations promulgated thereunder and all other
relevant securities or blue sky laws of any state or other
jurisdiction. No class of capital stock of Orbital is entitled
to preemptive rights. As of the date hereof, there are no
outstanding options, warrants, rights or other agreements or
commitments obligating Orbital to issue or sell shares of its
capital stock or any securities or obligations convertible into
or exchangeable for any shares of its capital stock, except (i)
up to 3,895,692 shares of Common Stock issuable upon conversion
of Orbital's Convertible Subordinated Debentures due 2003; (ii)
the Orbital Common Shares to be issued in exchange for the
Exchangeable Shares and upon exercise of the Replacement Options
in accordance with the terms of this Agreement and the Plan of
Arrangement and (iii) up to 2,025,000 shares of Orbital Common
Shares authorized for issuance under Orbital's stock option plans
(true and complete copies of which plans have been made available
to MDA by Orbital). None of the outstanding shares of capital
stock of Orbital was issued in violation of the Securities Act or
the securities or blue sky laws of any state or jurisdiction
which violation would have an Orbital Material Adverse Effect.
The authorized capital stock of Acquisition consists of an
unlimited number of shares of common stock of which, as of the
date hereof, 1,000 shares are outstanding and all of which are
owned by Orbital. All of the outstanding shares of common stock
of Acquisition have been, and any Class B Preferred Shares and
Exchangeable Shares issued pursuant to the Plan of Arrangement
will be, validly issued, fully paid and nonassessable, and free
of preemptive rights. The Class B Preferred Shares and
Exchangeable Shares to be issued pursuant to the Plan of
Arrangement will be issued in full compliance with all applicable
Canadian provincial securities laws and with the Securities Act
and the rules and regulations promulgated thereunder and all
other relevant securities or blue sky laws of any state.
Acquisition does not have any outstanding options, warrants,
rights, other agreements or commitments obligating Acquisition to
issue or sell shares of its capital stock or any securities or
obligations convertible into, or exchangeable for, any shares of
its capital stock. None of the outstanding shares of capital
stock of Acquisition was issued in violation of any applicable
Canadian provincial securities laws, the Securities Act or the
rules and regulations promulgated thereunder or the securities or
blue sky laws of any state which violation would have an Orbital
Material Adverse Effect.
4.4. SEC Reports. Orbital has filed all proxy statements,
reports and other documents required to be filed by it under the
Exchange Act after December 31, 1994, and Orbital has made
available to MDA copies of Orbital's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, and all final proxy
statements and reports filed by Orbital under the Exchange Act
after such date, each as filed with the SEC (collectively, the
"SEC Reports"). Each SEC Report was, as of the date of filing of
such report, in compliance in all material respects with the
requirements of its respective form and none of the SEC Reports,
as of their respective dates, contained any untrue statement of a
material fact or omitted to state 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.
4.5. Financial Statements, etc. Orbital has previously
furnished MDA with true and complete copies of the following
financial statements (collectively, the "Orbital Financial
Statements"): (i) consolidated financial statements for the
fiscal years ended December 31, 1992, 1993 and 1994 audited by
KPMG Peat Marwick, and (ii) unaudited statements of income and
cash flows for the fiscal quarters ended March 31 and June 30,
1995 and the accompanying balance sheets as of such dates each
prepared from the books and records of Orbital and its
consolidated Subsidiaries. The Orbital Financial Statements
present fairly, in all material respects, the consolidated
financial position of Orbital and the results of its operations
and its cash flows as of the respective dates and periods thereof
in conformity with generally accepted accounting principles in
the United States as in effect on the applicable dates of such
financial statements ("US GAAP") and applied on a consistent
basis, except as noted therein and except that in the case of the
unaudited financial statements, no notes are included and such
unaudited financial statements may be subject to normal,
recurring adjustments that would be made in the course of an
audit and that would not be material. Except as and to the
extent reflected or reserved against in the balance sheet as of
June 30, 1995 included in the Orbital Financial Statements,
Orbital and its Subsidiaries, taken as a whole, do not have any
material liabilities or obligations of any nature.
4.6. Absence of Changes. Since December 31, 1994, except
as set forth in the SEC Reports (copies of which have all been
provided by Orbital to MDA), neither Orbital nor any of its
Subsidiaries has undergone any adverse change in its financial
condition, or suffered any damage, destruction or loss (whether
or not covered by insurance) that adversely affects its financial
condition, the condition of its assets or the ability to conduct
its business other than such changes in condition, damage,
destruction or loss as in the aggregate would not have an Orbital
Material Adverse Effect or that are the result of changes in
general economic or industry wide conditions; and since December
31, 1994, except as set forth in the SEC Reports, there has been
no adverse change in the condition of the business of Orbital or
any of its Subsidiaries, whether as a result of any change as to
accounts receivable, inventory or other assets, any loss of
competitive position, any natural disaster, accident, strike,
sabotage, or confiscation of property, or any other event or
condition directly affecting or relating to Orbital, whether or
not related to any of the foregoing (including without limitation
labor disputes, environmental audits or disclosures, and
intellectual property disputes), except for such changes as would
not in the aggregate have an Orbital Material Adverse Effect and
such changes as are the result of changes in general economic or
industry wide conditions.
4.7. Pooling. Neither Orbital nor, to Orbital's knowledge,
any of its "affiliates" (as defined in Opinion No. 16, as
amended, of the Accounting Principles Board of the American
Institute of Certified Public Accountants and the interpretive
rulings issued thereunder) has taken or agreed to take any action
that would prevent the parties from accounting for the business
combination to be effected by the Plan of Arrangement as a
pooling of interest.
4.8. Operations in Conformity With Law, etc. Neither
Orbital nor any of its Subsidiaries has been or is in violation
of, or in default under, any law, rule, regulation, order,
judgment or decree relating in any manner or applicable to the
business or assets of Orbital or any of its Subsidiaries or any
of their respective employees, except for such violations or
defaults that in the aggregate would not have an Orbital Material
Adverse Effect.
4.9. Litigation. Except as set forth in the Section 4.9 of
the Orbital Disclosure Schedule, there are no actions, claims,
suits, investigations or proceedings pending or to Orbital's
knowledge threatened against Orbital or any of its Subsidiaries
pertaining to the business or assets of Orbital or any of its
Subsidiaries that, in the aggregate, if adversely determined,
would have an Orbital Material Adverse Effect or that question
the validity of this Agreement or any action taken or to be
taken pursuant to or in connection with the provisions of this
Agreement, nor to the knowledge of Orbital or its Subsidiaries is
there any basis for any such action, claim, suit, proceeding or
investigation. There are no judgments, orders, decrees,
citations, fines or penalties heretofore assessed (and not
discharged or otherwise satisfied) against Orbital or any of its
Subsidiaries under any Canadian or United States Federal,
provincial, state or local, or foreign law except for such
judgments, orders, decrees, citations, fines or penalties that in
the aggregate would not have an Orbital Material Adverse Effect.
4.10. Government Contracts and Subcontracts. Except as and
to the extent reflected or reserved against in the balance sheet
dated as of December 31, 1994 included in the Orbital Financial
Statements, there are no known claims, penalties, or causes of
action against Orbital or any of its Subsidiaries the basis of
which is an actual or alleged violation of, or noncompliance
with, any applicable law, regulation or order, related to a
Government Contract or a Government Subcontract to which Orbital
or any of its Subsidiaries is a party, except for such claims,
penalties or causes of action which would not, in the aggregate
have an Orbital Material Adverse Effect. To the knowledge of
Orbital and its Subsidiaries, there is no basis for a claim,
penalty, or cause of action against Orbital or any of its
Subsidiaries alleging a violation of, or noncompliance with, any
applicable law, regulation or order related to any Government
Contract or Government Subcontract to which Orbital or any of its
Subsidiaries is a party except for such claims, penalties or
causes of action as would not have in the aggregate an Orbital
Material Adverse Effect. For purposes of this Section 4.10,
claims, penalties, and causes of action alleging a violation of,
or noncompliance with, any applicable law, regulation or order
include, but are not limited to, those purporting to be based on
failure to comply with cost accounting standards, allowable
costs, allocation of costs, omissions or errors in disclosure
statements, or defective pricing.
4.11. Environmental Matters. Orbital and its Subsidiaries
have obtained all permits, licenses and other authorizations that
are required under all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, franchises,
licenses, agreements or other governmental restrictions relating
to the environment or to emissions, discharges or releases of
pollutants, contaminants, petroleum or petroleum products,
chemicals or industrial, toxic or hazardous substances or wastes
into the environment including, without limitation, ambient air,
surface water, ground water, or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants,
contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-
up or other remediation thereof (the "Environmental Laws"),
except to the extent failure to have any such permit, license or
authorization would not have an Orbital Material Adverse Effect
and (ii) Orbital and its Subsidiaries are in compliance with the
terms and conditions of all such permits, licenses and
authorizations, and are also in compliance with all other
provisions of any applicable Environmental Law or any order,
judgment, injunction, notice or demand letter issued or entered
thereunder, except to the extent failure to comply would not have
an Orbital Material Adverse Effect.
4.12. Disclosure. This Agreement, including the Exhibits
hereto and the Orbital Disclosure Schedule, the certificates
delivered or to be delivered in connection herewith and the SEC
Reports referenced hereby, taken as a whole, does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements herein or therein not
misleading. The Registration Statement will, at the time it
becomes effective and at the time of any post-effective amendment
thereto, not contain any misrepresentation (within the meaning of
any applicable Canadian or United States Federal, provincial or
state securities laws) or any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading, and comply
as to form in all material respects with the provisions of all
applicable laws, including the provisions of the Securities Act
and the Exchange Act and the rules and regulations of the SEC
thereunder, except that no representation is made by Orbital with
respect to information supplied by or on behalf of MDA
specifically for inclusion therein. None of the information
supplied or to be supplied by or on behalf of Orbital or its
Subsidiaries for inclusion in (i) the Plan of Arrangement, (ii)
the No Action Request; or (iii) the Proxy Circular, will (a) in
the case of the Plan of Arrangement, at the time the Plan of
Arrangement is considered by the Court, (b) in the case of the No
Action Request, at the time the No Action Request, as amended or
supplemented, is acted on by the SEC or Canadian securities
regulators, as the case may be, or (c) in the case of the Proxy
Circular and any amendment or supplement thereto, at the time of
the mailing of the Proxy Circular and any amendment or supplement
thereto, and at the time of the meeting of shareholders of MDA
and the holders of the MDA 1988 Options to vote upon the
Arrangement, contain any misrepresentation (within the meaning of
any applicable Canadian or United States Federal, provincial or
state securities laws) or any 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, in light of the
circumstances in which they are made, not misleading.
ARTICLE 5
CERTAIN COVENANTS
5.1. Preparation of Proxy Statement and No Action Request;
Other Filings and Submissions. Orbital, Acquisition and MDA
shall cooperate in (i) the preparation of the Proxy Statement,
the No Action Request and any required Registration Statement and
any other documents reasonably deemed by Orbital or MDA to be
necessary to discharge their respective obligations under United
States and Canadian securities laws in connection with the
Arrangement and the other transactions contemplated hereby, (ii)
the taking of all such action as may be required under any
applicable provincial or state securities laws (including "blue
sky laws") in connection with the issuance of the Exchangeable
Shares and the Orbital Common Shares in the Arrangement;
provided, however, that with respect to United States blue sky
and Canadian provincial qualifications none of Orbital,
Acquisition or MDA shall be required to register or qualify as a
foreign corporation or to take any action that would subject it
to service of process in any jurisdiction where any such entity
is not now so subject, except as to matters and transactions
arising solely from the offer and sale of the Exchangeable Shares
and the Orbital Common Shares, (iii) the taking of all such
action as may be required under the CBCA in connection with the
transactions contemplated by this Agreement and the Plan of
Arrangement, and (iv) the preparation of a Registration Statement
of Orbital on Form S-8 covering issuances of Orbital Common
Shares upon exercise of the Replacement Options. Orbital,
Acquisition and MDA shall each use all reasonable efforts to list
the Exchangeable Shares on a stock exchange in Canada, unless in
connection with obtaining a favorable response to the No Action
Request, Orbital is advised by the staff of the SEC that in their
view the listing of such shares will in and of itself preclude
the granting of the requested exemptions from registration
requested in the No Action Request. Orbital, Acquisition and MDA
shall each furnish to one another all such information as may be
required for the effectuation of the foregoing actions, and each
covenants that no information furnished in connection with such
actions or otherwise in connection with the consummation of the
Arrangement and the other transactions contemplated by this
Agreement will contain any untrue statement of a material fact or
omit to state a material fact required to be stated in order to
make any information so furnished not misleading. Orbital and
MDA shall each promptly notify the other if at any time before or
after the Effective Time it becomes aware that the Proxy Circular
or Registration Statement (or any prospectus related thereto), if
required, contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements contained therein not
misleading. In any such event, Orbital and MDA shall cooperate
in the preparation of a supplement or amendment to the Proxy
Circular or Registration Statement (and any prospectus related
thereto), if required, as the case may be, that corrects such
misstatement or omission, and shall cause the same to be
distributed to shareholders of MDA or Acquisition, as the case
may be, and, if required, filed with (and shall use its best
efforts to have the same declared effective by) the SEC.
5.2. Shareholders' Meeting. MDA shall duly call, give
notice of, convene and hold a meeting of its shareholders and the
holders of the MDA 1988 Options as promptly as practicable for
the purpose of voting upon the Arrangement (the "Shareholder
Meeting"). Subject to Section 5.3, MDA shall, through its Board
of Directors, recommend to its shareholders and the holders of
the MDA 1988 Options approval of the Arrangement and shall use
all reasonable efforts to hold such meeting as soon as
practicable after the date hereof ("Shareholder Meeting Date"),
and shall use all reasonable efforts to secure the approval by
its shareholders, the holders of the MDA 1988 Options and the
Court of the Arrangement.
5.3. Exclusivity; Acquisition Proposals. Unless and until
this Agreement shall have been terminated by either party
pursuant to Section 7.1 hereof, except as required by law, MDA
shall not (and it shall use its best efforts to ensure that none
of its officers, directors, agents, representatives or
affiliates) take or cause or permit any Subsidiary to take,
directly or indirectly, any of the following actions with any
party other than Orbital and its designees or agents: (i)
solicit, encourage, initiate or participate in any negotiations,
inquiries or discussions with respect to any offer or proposal to
acquire all or any significant part of its business, assets or
capital shares whether by arrangement, amalgamation, merger,
consolidation, other business combination, purchase of assets,
tender or exchange offer or otherwise (each of the foregoing an
"Acquisition Transaction"); (ii) disclose any information not
customarily disclosed to any person concerning its business or
properties or afford to any person or entity access to its
properties, books or records, except in the ordinary course of
business consistent with past practice and as required pursuant
to a governmental request for information; (iii) enter into or
execute any agreement relating to an Acquisition Transaction,
plan of reorganization, or other agreement calling for the sale
of all or any significant part of its business and properties; or
(iv) make or authorize any public statement, recommendation or
solicitation with respect to any Acquisition Transaction or any
offer or proposal relating to an Acquisition Transaction other
than with respect to the Arrangement; provided, however, that
nothing contained herein shall limit the power of the MDA Board
of Directors to withdraw or modify any recommendation with
respect to the Plan of Arrangement if an adverse material change
occurs in the business or affairs of Orbital or in any of the
information provided by Orbital on which the MDA Board of
Directors has based any recommendation. Further, if any person
proposes an unsolicited bona fide Acquisition Transaction that in
the opinion of MDA's Board of Directors (having consulted its
financial advisors) offers terms that may be more favorable to
the MDA shareholders than pursuant to this Agreement or the Plan
of Arrangement, MDA shall have seven business days to consider
such proposal, following which time the MDA Board of Directors
may withdraw or modify any recommendation with respect to the
Plan of Arrangement only if to do so would, in the opinion of the
Board of Directors (having consulted outside counsel), acting
reasonably, be a proper exercise of the directors' fiduciary
duty. Notwithstanding the provisions of Section 5.2, if such
unsolicited bona fide Acquisition Transaction is proposed within
the seven-business-day period preceding the Shareholder Meeting,
then the MDA Board of Directors may recommend or support a
proposal to postpone or adjourn such meeting for not more than 10
business days, provided that nothing shall entitle MDA or its
Board of Directors to terminate this Agreement (except pursuant
to and in accordance with the provisions of Section 7.1 hereof),
not to proceed with the Shareholder Meeting or to withdraw from
the MDA shareholders the vote on the Plan of Arrangement. In the
event MDA shall be required by law to take any action described
in the two immediately preceding sentences or receives any offer
or proposal, directly or indirectly, of the type referred to in
clause (i) above, or any request for disclosure or access with
respect to information of the type referred to in clause (ii)
above, it shall immediately, and prior to taking any action in
response thereto, inform Orbital as to all material facts
concerning any such offer, proposal or request (to the extent not
otherwise restricted by confidentiality obligations), including
the identity of the party making the offer, proposal or request,
and will thereafter cooperate with Orbital by informing Orbital
of additional material facts as they arise and furnishing to
Orbital any additional information as is furnished to any third
party making such proposal or requesting information to the
extent not otherwise restricted by confidentiality obligations.
5.4 . Amendment to Plan of Arrangement. In the event a
favorable response to the No Action Request is received such that
it is not necessary for Orbital to maintain the effectiveness of
any Registration Statement covering the issuance of the Orbital
Common Shares upon exchange of the Exchangeable Shares, each of
MDA and Orbital shall take all necessary steps to amend the Plan
of Arrangement and the provisions of the Exchangeable Shares so
as to permit the Exchangeable Shares to be redeemed at the option
of the holder at any time before the fifth anniversary of the
Effective Date and so that the Automatic Redemption Date (as
defined in the Plan of Arrangement) will become the fifth
anniversary of the Effective Date.
5.5. Public Announcements. Neither Orbital nor MDA shall,
nor shall either permit any of its Subsidiaries to (and each such
party shall use all commercially reasonable efforts to cause its
affiliates, directors, officers, employees, agents and
representatives not to), issue any press release, make any public
announcement or public filing or furnish any written statement to
its employees or shareholders generally concerning the
transactions contemplated by this Agreement without the consent
of the other party (which consent shall not be unreasonably
withheld), except to the extent required by applicable law, rule
or regulation or the applicable requirements of the National
Association of Securities Dealers, Inc. with respect to issuers
whose securities are quoted on the Nasdaq National Market System,
or, in the case of MDA, the applicable requirements of the
Toronto Stock Exchange or the Vancouver Stock Exchange (and in
any such case such party shall, to the extent consistent with
timely compliance with such requirement, consult with the other
party prior to making the required release, announcement, filing
or statement).
5.6. Notification of Certain Matters. Between the date
hereof and the Effective Time, each party shall give prompt
notice in writing to the other parties of: (i) any information
that indicates that any of its representations or warranties
contained herein was not true and correct as of the date hereof
or will not be true and correct at and as of the Effective Time
with the same force and effect as if made at and as of the
Effective Time (except for changes permitted or contemplated by
this Agreement); (ii) the occurrence of any event that will
result, or has a reasonable prospect of resulting, in the failure
of any condition specified in ARTICLE 6 hereof to be satisfied
and; (iii) any notice or other communication from any third party
alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this
Agreement or that such transactions otherwise may violate the
rights of or confer remedies upon such third party.
5.7. Other Limitations on Conduct of Business Prior to the
Effective Time. MDA hereby covenants and agrees with Orbital
that, prior to the Effective Time: (i) unless the prior written
consent of Orbital shall have been obtained and except as
otherwise contemplated herein, it shall operate its business, and
it shall cause each of its Subsidiaries to operate its business,
only in the usual, regular and ordinary course of business
consistent with past practices; (ii) use its reasonable efforts
to preserve intact its and each of its Subsidiaries' business
organization and assets and maintain their rights and franchises;
(iii) not authorize for issuance, issue or obligate itself to
issue any shares of its capital stock or any options, warrants or
rights, or enter into any other agreements or commitments
obligating it to issue or sell shares of its capital stock or any
securities or obligations convertible into, or exchangeable for,
any shares of its capital stock, other than the issuance of MDA
Common Shares pursuant to MDA Options outstanding on July 31,
1995, to shareholders of EOS in accordance with Section 5.8 or to
former shareholders of PSC in the event certain financial
performance targets are achieved; and (iv) to take no action that
would (a) materially adversely affect the ability of Orbital or
MDA to obtain any necessary approvals of any third parties or any
governmental authorities required for the transactions
contemplated hereby or materially increase the period of time
necessary to obtain such approvals, or (b) materially adversely
affect its ability to perform its covenants and agreements under
this Agreement.
5.8. Exercise of Call Right. MDA shall, on or before the
Shareholder Meeting, exercise its right to call all options to
purchase MDA Common Shares granted pursuant to the Agreement
dated as of October 31, 1991 between MDA and certain shareholders
of EOS named therein, pursuant to Sections 2.2 and 3.2 of such
agreement.
5.9. Access to Information. MDA shall, subject to
applicable law, afford Orbital and its accountants, counsel and
other representatives reasonable access during the period prior
to the Effective Time to (a) all of MDA's and its Subsidiaries'
financial statements, properties, books, contracts, commitments
and records, and (b) all other information concerning the
business, properties and personnel of MDA and its Subsidiaries,
as Orbital may reasonably request. No information or knowledge
obtained after the date hereof in any investigation pursuant to
this Section 5.9 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to
the obligations of the parties to consummate the Arrangement.
5.10. Post Effective Date Reporting. Orbital shall use its
best efforts to release publicly the combined financial results
of Orbital and MDA for the first full month for which such
results are available not later than thirty days after the end of
such month, provided that Orbital shall have the right not to
release such financial results, if it determines in its sole
discretion that such release would not be in the best interests
of Orbital.
5.11. No Action Request; Registration. Unless the staff of
the SEC has confirmed the availability of an exemption from
registration under the Securities Act as to the issuance of the
Exchangeable Shares and/or the issuance of the Orbital Common
Shares in exchange for the Exchangeable Shares in response to the
No Action Request or Orbital has received an opinion of counsel
reasonably satisfactory to MDA to such effect, then in each case
in which no exemption is available, Orbital and Acquisition shall
cause such issuance to be registered under the Securities Act,
and shall file a Registration Statement covering such issuance
with the SEC and use all commercially reasonable efforts to cause
such registration statement to become effective as soon as
practicable and remain effective (i) in the case of a
registration statement covering the issuance of the Exchangeable
Shares, through the Effective Date, (ii) in the case of a
Registration Statement covering the issuance of the Orbital
Common Shares in exchange for the Exchangeable Shares, throughout
the period during which the Exchangeable Shares may be exchanged
in accordance with the Plan of Arrangement and (iii) in the case
of a Registration Statement covering the issuance of the Orbital
Common Shares upon exercise of the Replacement Options,
throughout the period that the Replacement Options are
exercisable. Orbital and Acquisition agree to file any such
required Registration Statement as soon as reasonably practicable
and, in the case of a registration statement covering the
issuance of the Orbital Common Shares, no later than one week
after the Proxy Circular is mailed to MDA's shareholders and the
holders of the MDA 1988 Options. Orbital and Acquisition shall
use all reasonable efforts to obtain all orders required from the
applicable Canadian securities authorities to permit the issuance
of the Exchangeable Shares and the Orbital Common Shares upon
exchange of the Exchangeable Shares without registration or
qualification with or approval of or the filing of any document
including any prospectus or similar document or the taking of any
proceeding with or the obtaining of any order, ruling or consent
from any governmental or regulatory authority under any Canadian
Federal, or provincial law or regulation or pursuant to the rules
and regulations of any regulatory authority or the fulfillment of
any other legal requirement before such shares may be issued and
delivered by Acquisition or Orbital to the holder thereof or in
order that such shares may be freely traded thereafter (other
than any restrictions on transfer by reason of a holder being a
"control person" of Acquisition or Orbital for purposes of
Canadian Federal or provincial securities law or an "affiliate"
for purposes of United States Federal or state securities law).
Notwithstanding the foregoing, Acquisition shall not be obligated
to list the Exchangeable Shares on a stock exchange in Canada if
in connection with obtaining a favorable response to the No
Action Request, Orbital is advised by the SEC that the listing of
such shares will in and of itself preclude the granting of the
requested exemptions from registration requested in the No Action
Request.
5.12. Indemnification. Orbital and Acquisition hereby
agree that after the Effective Date, (a) the provisions of the
Charter Documents of MDA providing for indemnification of
directors and officers shall not be amended, repealed or
otherwise modified for a period of six years from the Effective
Date in any manner that would adversely affect the rights
thereunder of directors and officers and former directors and
former officers who immediately prior to the Effective Date were
covered by such provisions, unless such modification is required
by law and (b) Orbital and Acquisition shall continue in effect
with respect to any claims arising out of conduct prior to the
Effective Date, for a period of six years following the Effective
Date, director and officer insurance policies providing coverage
of substantially the same scope as is maintained by MDA and
covering the same persons as are covered by such policies as in
effect on March 31, 1995; provided, however, Orbital may amend,
repeal or otherwise modify the Charter Documents of MDA and/or
terminate such director and officer liability insurance policies
if Orbital indemnifies and holds harmless each person covered by
the indemnification provisions of MDA's Charter Documents on the
Effective Date and MDA's director and officer liability insurance
policy as in effect on March 31, 1995 against all expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by reason of the fact
that such person was a director or officer of MDA, in connection
with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative provided that, such expenses were incurred by such
person in connection with such action, suit or proceeding and
provided that such person acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to MDA's best
interests and had no reasonable cause to believe his or her
conduct was unlawful.
5.13. Tax Filings. Orbital covenants to cause Acquisition
after the Effective Date to agree with each person who was a
holder of MDA Common Shares, or the holder of shares of a holding
company referred to in Section 2.1.2 hereof, immediately prior to
the Effective Time who wishes to do so to jointly make an
election under subsection 85(1) or 85(2) of the Income Tax Act
(Canada) in the prescribed form in respect of the exchange of the
MDA Common Shares or such holder's holding company shares, as the
case may be, and to specify therein as the holder's proceeds of
disposition and Acquisition's cost of the MDA Common Shares or
holding company shares such amount as is determined by the holder
, subject to the several limitations of subsection 85(1) or
85(2), as the case may be, of the Income Tax Act (Canada).
Acquisition shall complete the election form within 30 days of
receipt from such persons of an election form fully completed
other than with respect to information relating to Acquisition.
5.14. Further Assurances. Subject to the terms and
conditions herein provided, and subject to its fiduciary
obligations under law, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and
make effective the Arrangement and the other transactions
contemplated by this Agreement, including without limitation the
taking of all reasonable actions necessary to satisfy each
condition precedent set forth in ARTICLE 6, to comply promptly
with all legal requirements that may be imposed on any of them
with respect to the Arrangement or to procure any consent,
approval, order or authorization of, or any exemption by, any
governmental entity, or other third party, required to be
obtained or made in connection with the Arrangement or the taking
of any action contemplated thereby or by this Agreement.
ARTICLE 6
CONDITIONS PRECEDENT
6.1. Conditions Precedent to MDA's Obligation to Effect the
Arrangement. The obligations of MDA to effect the Arrangement
and other transactions contemplated by this Agreement shall be
subject to the satisfaction, prior to or substantially
contemporaneously with the Effective Time, of the following
conditions, compliance with which, or the occurrence of which,
may be waived in whole or in part by MDA in writing.
6.1.1. Representations; Covenants; Certificate. The
representations and warranties of Orbital contained in
ARTICLE 4 hereof (except for clause (i) of the first
sentence of Section 4.3 to the extent it refers to the
number of issued and outstanding shares of Orbital Common
Shares and except that Orbital shall have authorized a newly
created class of preferred stock, one share of which shall
be issued to the Trustee on the Effective Date pursuant to
the Voting Trust Agreement) shall be true in all material
respects as of the date of this Agreement and as of the
Effective Date with the same effect as though made as of the
Effective Time; Orbital shall in all material respects have
performed all obligations and complied with all covenants
required by this Agreement to be performed or complied with
by it prior to the Effective Time; and Orbital shall have
delivered to MDA a certificate, dated the Effective Date and
signed by its President or a Vice President, to each such
effect.
6.1.2 Opinion of Counsel for Orbital. MDA shall have
received from Ropes & Gray, counsel for Orbital, a legal
opinion, dated the Effective Date, with respect to legal
matters related to this Agreement and the transactions
contemplated hereby and in form and substance reasonably
acceptable to MDA.
6.1.3. Price of Orbital Stock. The Average Closing
Price shall be equal to or greater than U.S.$12.775.
6.2. Conditions Precedent to Obligations of Orbital. The
obligations of Orbital to effect the Arrangement and the other
transactions contemplated by this Agreement shall be subject to
the satisfaction, prior to or substantially contemporaneously
with the Effective Time, of the following conditions, compliance
with which, or the occurrence of which, may be waived in whole or
in part by Orbital in writing:
6.2.1. Representations; Covenants; Certificate. The
representations and warranties of MDA contained in ARTICLE 3
hereof shall be true in all material respects as of the date
of this Agreement (except for clause (i) of the first
sentence of Section 3.3 to the extent the number of issued
and outstanding MDA Common Shares has increased solely
because of the exercise of any of the MDA Options and the
issuance of MDA Common Shares required by Section 5.8) and
the Effective Time with the same effect as though made as of
the Effective Time; MDA shall in all material respects have
performed all obligations and complied with all covenants
required by this Agreement to be performed or complied with
by it prior to the Effective Time; and MDA shall have
delivered to Orbital a certificate, dated the Effective Date
and signed by its President or a Vice President, to each
such effect.
6.2.2. Opinion of Counsel for MDA. Orbital shall have
received from Farris, Vaughan, Wills & Murphy, counsel for
MDA, a legal opinion, dated the Effective Date, with respect
to legal matters related to this Agreement and the
transactions contemplated hereby and in form and substance
reasonably acceptable to Orbital.
6.2.3. MDA Rights Plan. The Board of Directors of MDA
shall have waived the provisions of the Amended and Restated
Shareholder Protection Rights Plan Agreement, dated as of
August 27, 1992 as amended through the date hereof, between
MDA and Montreal Trust Company of Canada, pursuant to
Section 5.1(b) of such agreement, such that the Arrangement
and the other transactions contemplated hereby shall be
wholly exempt from such agreement.
6.2.4. Affiliate Agreements. Orbital shall have
received executed affiliate agreements (the "Affiliate
Agreements") (i) in substantially the form attached as
Exhibit 6.2.4(a), from each director, the President, the
Group Managers and the Controller of MDA, all holders of ten
percent or more of the MDA Common Shares issued and
outstanding on the date hereof (other than Spar Aerospace
Limited) and all entities controlled by any of the foregoing
(including without limitation, Ventures West) and (ii) in
substantially the form attached as Exhibit 6.2.4(b) from
Spar Aerospace Limited (together with those referenced in
clause (i), the "Affiliates").
6.2.5. Employment Agreements. MDA shall have entered
into an Employment Agreement and a Change of Control
Agreement in substantially the form attached as Exhibit
6.2.5 with the President, Chairman and each Group Manager of
MDA, and copies of such agreements shall have been delivered
to Orbital.
6.2.6. Appraisal Rights. The holders of MDA Common
Shares or MDA 1988 Options in the aggregate entitled to
receive no more than 10% of the sum of the Orbital Common
Shares issuable pursuant to the Plan of Arrangement and the
Orbital Common Shares reserved for issuance upon the
exercise of Replacement Options shall have dissented and be
entitled to be paid the fair value of their shares or
options, as the case may be, pursuant to the Plan of
Arrangement.
6.2.7. Pooling of Interests Accounting Treatment.
Orbital shall have been advised in writing by KPMG Peat
Marwick, its independent public accountants that in their
opinion the transactions contemplated herein meet the
requirements for pooling-of-interests treatment under U.S.
GAAP as set forth in Opinion No. 16, as amended, of the
Accounting Principles Board of the American Institute of
Certified Public Accountants.
6.2.8 Required Consents. MDA and Orbital shall have
received all necessary consents, waivers or amendments
listed by MDA and Orbital in Sections 3.2 and 4.2 of the MDA
Disclosure Schedule and Orbital Disclosure Schedule,
respectively, as being required (other than the consent of
EarthWatch). The representation made by MDA and Orbital in
the first sentence of Section 3.2 and 4.2, respectively,
hereof construed without reference to any exceptions noted
in the MDA or Orbital Disclosure Schedule (other than MDA's
failure to obtain the consent of EarthWatch) shall be true
and correct.
6.2.9. Price of Orbital Stock. The Average Closing
Price shall be equal to or less than U.S.$25.00.
6.3. Conditions Precedent to the Obligations of Each Party.
The obligations of the parties to effect the Arrangement and the
other transactions contemplated by this Agreement shall be
subject to the satisfaction prior to or substantially
contemporaneously with the Effective Time of the following
additional conditions, compliance with which, or the occurrence
of which, may be waived in whole or in part by a writing executed
by each of MDA and Orbital:
6.3.1. Shareholder Approval. The holders of the
requisite number, as specified by the Court in its Interim
Order, of outstanding shares of MDA Common Shares and the
MDA 1988 Options shall have duly approved the Plan of
Arrangement and the transactions contemplated thereby and
hereby, all in accordance with the requirements of the CBCA
and such Interim Order.
6.3.2. Governmental and Court Approvals. Consents
legally required from any governmental authority with
respect to the consummation of the Arrangement and the
transactions contemplated by this Agreement, including the
Final Order shall have been filed, occurred, or been
obtained, other than such consents, the failure to obtain
which would not have any MDA or Orbital Material Adverse
Effect or any material adverse effect on the consummation of
the Arrangement.
6.3.3. No Action Request/Registration Statement. The
staff of the SEC shall have confirmed the availability of an
exemption from registration to the issuance of the
Exchangeable Shares, Orbital Common Shares and Replacement
Options pursuant to the Arrangement in response to the No
Action Request or Orbital shall have received an opinion of
counsel reasonably satisfactory to it and MDA to such effect
or a Registration Statement with respect to such issuances
shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings
seeking a stop order and the Proxy Circular shall not be at
the Effective Time subject to any proceedings commenced or
threatened by the SEC or any Canadian or provincial
securities authority. Canadian provincial securities
regulators in those provinces of Canada considered necessary
by Canadian counsel to MDA and Canadian counsel to Orbital
shall have granted rulings or orders, satisfactory to both
of such counsel acting reasonably, so that the registration
and prospectus provisions of applicable Canadian securities
laws will not be applicable to any of the issuance of
securities contemplated by the Arrangement and such
securities (other than the Class B Preferred Shares to be
issued to Canadian Imperial Bank of Commerce) will be freely
tradable by holders resident in such provinces.
6.3.4. Injunctions. No temporary restraining order,
preliminary or permanent injunction or other order by any
Canadian or United States Federal or provincial or state
court or governmental body prohibiting the consummation of
the transactions contemplated by this Agreement shall have
been issued and shall not have expired or been withdrawn or
reversed and there shall be no pendent or threatened
litigation or other proceeding seeking to prohibit or impose
any material limitations on the consummation of such
transactions.
6.3.5. Nasdaq/NMS Listing Approval. Orbital shall
have filed with the National Association of Securities
Dealers, Inc. a notice of listing of additional shares for
the Orbital Common Shares issuable pursuant to the
Arrangement.
ARTICLE 7
MISCELLANEOUS
7.1. Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and
abandoned at any time before the Effective Time, whether before
or after adoption and approval of the Arrangement by the
shareholders of MDA and the holders of the MDA 1988 Options as
herein provided:
(a) By the mutual consent of Orbital and MDA;
(b) By either MDA or Orbital, if (i) there has been a
material breach on the part of the other party of any
representation, warranty, covenant or agreement contained herein
that cannot be or has not been cured within ten days after
written notice of such breach to the breaching party or (ii)
MDA's shareholders or the holders of the MDA 1988 Options fail to
approve the Plan of Arrangement, provided, however such failure
is not due to MDA's breach of its covenants contained in Article
5;
(c) By Orbital, if the Board of Directors of MDA shall have
withdrawn or modified in a manner adverse to Orbital its support
of the transaction, or shall fail to affirm such support upon the
request of Orbital;
(d) By MDA, if MDA shall have received a bona fide offer to
consummate an Acquisition Transaction for consideration per MDA
Common Share having a fair market value of at least U.S.$5.95
(based on the currency exchange rate on the date the offer is
made);
(e) By MDA on or before the date on which the Proxy Circular
is mailed to MDA shareholders and holders of the MDA 1988
Options, if by such date Teleglobe Mobile Partners ("Teleglobe
Mobile") has not committed to increase its investment in ORBCOMM
Development Partners, L.P. on substantially the terms reflected
in the Master Agreement dated June 30, 1993 between Orbital,
Orbital Communications Corporation, Teleglobe, Inc. and Teleglobe
Mobile or on such other terms as do not have an Orbital Material
Adverse Effect.
(f) By the Board of Directors of MDA, if the Effective Time
shall not have occurred by December 31, 1995 other than as a
result of the failure of MDA to satisfy its obligations
hereunder.
(g) By the Board of Directors of Orbital, if the Effective
Time shall not have occurred by December 31, 1995 other than as a
result of the failure of Orbital to satisfy its obligations
hereunder.
(h) By Orbital, if Spar has not executed the voting
agreement and affiliate agreements, in substantially the forms
attached as Exhibits 7.1(h) and 6.2.4(b), respectively, by
September 6, 1995.
In the event of both (i) a termination by EarthWatch, in whole or
in part, of its agreement with MDA pursuant to which MDA is to
build a portion of EarthWatch's image data archival and
processing facility, which termination was solely as a result of
the public announcement of MDA's and Orbital's agreement to
consummate the Arrangement, and (ii) a termination of this
Agreement because of (a) the failure to satisfy the conditions
precedent to Closing set forth in Section 6.1.3 or Section 6.2.7,
or (b) either party has exercised its right to terminate pursuant
to paragraph (f) or (g) of this Section 7.1; then Orbital shall
(x) use all commercially reasonable efforts to notify MDA as soon
as practicable at any time Orbital (or any entity that was a
Subsidiary of Orbital on July 31, 1995) has determined to solicit
third party bids for the construction of satellite ground
stations and (y) afford MDA the opportunity to participate in
such bidding; provided, however, such actions would not be
required if to do so would result in the breach of a currently
existing contract or if otherwise prohibited by any applicable
rules or regulations, including, but not limited to, rules or
regulations governing bidding procedures with respect to
Government Contracts and export controls; and provided further
that this obligation to provide notice and afford MDA an
opportunity to bid shall terminate three years from the earlier
of (A) the date of termination of such EarthWatch agreement and
(B) December 31, 1995. In the event of termination and
abandonment under this Section 7.1, this Agreement shall
forthwith become null and void and there shall be no liability on
the part of any of MDA, Orbital or Acquisition or any of their
respective officers and directors; provided, however, that the
provisions of the immediately preceding sentence, Section 7.3 and
Section 7.4 hereof shall survive any termination of this
Agreement as provided therein and in the event of a termination
pursuant to Section 7.1(b)(i) the breaching party shall be liable
for all out-of-pocket costs and expenses incurred in connection
with the transactions contemplated hereby.
7.2. Amendments and Supplements. At any time before or
after approval and adoption of this Agreement and the Plan of
Arrangement by the shareholders of MDA and the holders of the MDA
1988 Options and prior to the Effective Time, this Agreement and
the Plan of Arrangement may be amended or supplemented (including
without limitation, any amendment to the Plan of Arrangement
required to be made pursuant to Section 5.4 hereof) by a written
instrument signed by MDA, Orbital and approved by their
respective Boards of Directors, except that, after the
shareholders of MDA and the holders of the MDA 1988 Options shall
have approved the Plan of Arrangement, there shall be no
amendment that (i) changes the consideration into which the MDA
Common Shares or the MDA Options are entitled to be converted
upon consummation of the Arrangement as provided in the Plan of
Arrangement or (ii) otherwise would require the approval of the
shareholders of MDA or the holders of the 1988 MDA Options in
accordance with the CBCA.
7.3. Survival of Representations, Warranties and
Agreements. The respective representations, warranties and
agreements of MDA, Orbital and Acquisition contained in Articles
3 and 4 hereof and except with respect to Sections 5.10, 5.11
5.12 and 5.13, their respective agreements contained in Article 5
hereof shall expire with, and be terminated by, the consummation
of the Arrangement, and neither Orbital nor MDA shall have any
liability whatsoever with respect to such representations,
warranties or agreements after the Effective Time.
7.4 Other Payments. MDA covenants and agrees that if MDA
terminates this Agreement pursuant to Section 7.1(d) hereof and
the transaction that gives rise to such termination is completed,
then MDA shall pay to Orbital a fee of $750,000.
7.5. Expenses. Subject to the provisions of Section 7.1
and 7.4, whether or not the Arrangement is consummated, all costs
and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expenses.
7.6. Governing Law. This Agreement shall be governed by
and construed in accordance with the domestic substantive laws of
the province of British Columbia without giving effect to any
choice or conflict of laws rule or provision that would cause the
application of the domestic substantive laws of any other
jurisdiction.
7.7. Notice. All notices and other communications required
or permitted hereunder shall be in writing (including any
facsimile transmission or similar writing), and shall be sent
either by telecopy, hand delivery, or reputable overnight
courier, addressed as follows or to such other address or
addresses of which the respective party shall have notified the
other party. Each such notice 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 business day after
being delivered to such courier or (iii) if given by any other
means, when received at the address specified in this Section.
To Orbital or Acquisition:
21700 Atlantic Boulevard
Dulles, Virginia 20166
Telecopier: (703) 406-5572
Attention: General Counsel
With a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Telecopier: (617) 951-7050
Attention: Daniel S. Evans, Esq.
To MDA:
13800 Commerce Parkway
Richmond, British Columbia V6V 2J3
Canada
Telecopier: (604) 273-9830
Attention: President
With a copy to:
Farris, Vaughan, Wells & Murphy
26th Floor, 700 West Georgia Street
Vancouver, British Columbia V7Y 1B3
Canada
Telecopier: (604) 661-9349
Attention: Elizabeth J. Harrison, Q.C.
7.8a. Entire Agreement, Assignability, Etc. This Agreement
(including the Schedules and Exhibits attached hereto) and
together with the confidentiality agreement dated June 23, 1995
and paragraph 9 of the letter of intent dated July 31, 1995, each
entered into by Orbital and MDA, (i) constitutes the entire
agreement, and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any
of them, with respect to the Arrangement, (ii) is not intended to
confer upon any person other than the parties hereto any rights
or remedies hereunder and (iii) shall not be assignable by
operation of law or otherwise.
7.9. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original
but all of which together shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
Attest: ORBITAL SCIENCES CORPORATION
/s/ Susan Herlick By: /s/ Carlton B. Crenshaw
Name: Susan Herlick Name: Carlton B. Crenshaw
Title: Assistant Secretary Title: Senior Vice President/Finance
and Administration
Attest: 3173623 CANADA INC.
/s/ Susan Herlick By /s/ Carlton B. Crenshaw
Name: Susan Herlick Name: Carlton B. Crenshaw
Title: Assistant Secretary Title: Vice President
Attest: MACDONALD, DETTWILER AND
ASSOCIATES LTD.
/s/ Robert B. Wallis By /s/ Daniel E. Friedmann
Name: Robert B. Wallis Name: Daniel E. Friedmann
Title: Secretary Title: President and Chief Executive
Officer
PLAN OF ARRANGEMENT
UNDER SECTION 192
OF THE CANADA BUSINESS CORPORATIONS ACT
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Plan of Arrangement unless there is something
in the subject matter or context inconsistent therewith, the
following terms shall have the respective meanings set out below
and grammatical variations of such terms shall have corresponding
meanings:
(a) "Affiliate" of any person means any other person
directly or indirectly controlling, controlled by, or under
common control with, that person. For the purposes of this
definition, "control" (including, with correlative meanings, the
terms "controlling", "controlled by" and "under common control
with"), as applied to any person, means the possession by another
person, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that first
mentioned person, whether through the ownership of voting
securities, by contract or otherwise;
(b) "Arrangement" means the arrangement under section 192
of the CBCA on the terms and subject to the conditions set out in
this Plan of Arrangement, subject to any amendments thereto made
in accordance with section 6.1 or made at the direction of the
Court in the Final Order;
(c) "Automatic Redemption Date" means November , 2000,
unless such date shall be accelerated at any time to a specified
earlier date by the Board of Directors upon at least 75 days
prior written notice to the registered holders of Exchangeable
Shares, in which case the Automatic Redemption Date shall be such
earlier date; provided, however, that the Board of Directors may
so accelerate the Automatic Redemption Date only at such time as
there are outstanding fewer than 400,000 Exchangeable Shares held
by holders other than Orbital and its Affiliates;
(d) "Average Closing Price" means the average closing sales
price of Orbital Common Shares for the 20 trading days ending on
the date four trading days prior to the Effective Date, as
reported on NASDAQ;
(e) "Board of Directors" means the board of directors of
the Corporation;
(f) "Business Day" means any day other than a Saturday, a
Sunday or a day when banks are not open for business in either or
both of the Commonwealth of Virginia, and Vancouver, British
Columbia;
(g) "Canadian Dollar Equivalent" means in respect of an
amount expressed in a foreign currency (the "Foreign Currency
Amount") at any date the product obtained by multiplying (a) the
Foreign Currency Amount by (b) the noon spot exchange rate on
such date for such foreign currency expressed in Canadian dollars
as reported by the Bank of Canada or, in the event such spot
exchange rate is not available, such exchange rate on such date
for such foreign currency expressed in Canadian dollars as may be
deemed by the Board of Directors to be appropriate for such
purpose;
(h) "Capital Reorganization" has the meaning ascribed
thereto in section 5.7;
(i) "CBCA" means the Canada Business Corporations Act, as
amended from time to time;
(j) "Class B Preferred Shares" means the Class B Preferred
Shares of the Corporation having the rights, privileges,
restrictions and conditions set out in Appendix A annexed hereto.
(k) "Combination Agreement" means the agreement by and
among Orbital, the Corporation and MDA, dated as of August 31,
1995, as the same may be amended and restated, providing for,
among other things, the Arrangement;
(l) "Corporation" means 3173623 Canada Inc., a corporation
existing under the CBCA;
(m) "Court" means the Supreme Court of British Columbia;
(n) "Current Market Price" means, in respect of an Orbital
Common Share on any date, the Canadian Dollar Equivalent of the
closing sale price of Orbital Common Shares on such day (or, if
no trades of Orbital Common Shares occurred on such day, on the
last trading day prior thereto on which such trades occurred)
reported on NASDAQ, or, if the Orbital Common Shares are not then
quoted on NASDAQ, on such other stock exchange or automated
quotation system on which the Orbital Common Shares are listed or
quoted, as the case may be, as may be selected by the Board of
Directors for such purpose; provided, however, that if in the
opinion of the Board of Directors the public distribution or
trading activity of Orbital Common Shares during such period does
not create a market that reflects the fair market value of an
Orbital Common Share, then the Current Market Price of an Orbital
Common Share shall be determined by the Board of Directors based
upon the advice of such qualified independent financial advisors
as the Board of Directors may deem to be appropriate, and
provided further that any such selection, opinion or
determination by the Board of Directors shall be conclusive and
binding;
(o) "Current Orbital Common Share Equivalent" means, on any
date, the equivalent as at such date of one Orbital Common Share
as at the Effective Date, expressed to four decimal places,
determined by applying on a cumulative basis the following
adjustments, to the extent applicable by reason of any
transactions occurring in respect of Orbital Common Shares
between the Effective Date and such date, the Current Orbital
Common Share Equivalent as at the Effective Date being 1.0000:
(i) if Orbital shall (A)
subdivide, redivide or change its then outstanding
Orbital Common Shares into a greater number of
Orbital Common Shares, unless the Corporation is
permitted under applicable law without a vote of
its shareholders to make, and shall simultaneously
make, the same or an economically equivalent
change to the rights of the holders of
Exchangeable Shares, (B) reduce, combine,
consolidate or change its then outstanding Orbital
Common Shares into a lesser number of Orbital
Common Shares, unless the Corporation is permitted
under applicable law without a vote of its
shareholders to make, and shall simultaneously
make, the same or an economically equivalent
change to the rights of the holders of
Exchangeable Shares, or (C) issue Orbital Common
Shares (or securities exchangeable or convertible
into Orbital Common Shares) to the holders of all
or substantially all of its then outstanding
Orbital Common Shares by way of stock dividend or
other distribution (other than to holders of
Orbital Common Shares who exercise an option to
receive stock dividends in lieu of receiving cash
dividends), unless the Corporation is permitted
under applicable law without a vote of its
shareholders to issue or distribute, and shall
simultaneously issue and distribute, equivalent
numbers of Orbital Common Shares or other
securities (adjusted if necessary in accordance
with the Current Orbital Common Share Equivalent),
or the economic equivalent on a per share basis,
to the holders of the Exchangeable Shares (any of
such events being herein called an "Orbital Common
Share Reorganization"), the Current Orbital Common
Share Equivalent shall be adjusted effective
immediately after the record date at which the
holders of Orbital Common Shares are determined
for the purpose of the Orbital Common Share
Reorganization by multiplying the Current Orbital
Common Share Equivalent in effect on such record
date by the quotient obtained when:
(I) the number of Orbital
Common Shares outstanding after the
completion of such Orbital Common Share
Reorganization (but before giving effect to
the issue of any Orbital Common Shares issued
after such record date otherwise than as part
of such Orbital Common Share Reorganization)
including, in the case where securities
exchangeable or convertible into Orbital
Common Shares are distributed, the number of
Orbital Common Shares that would have been
outstanding had such securities been
exchanged for or converted into Orbital
Common Shares on such record date,
is divided by
(II) the number of Orbital
Common Shares outstanding on such record date
before giving effect to the Orbital Common
Share Reorganization;
(ii) if at any time Orbital shall
fix a record date for the issuance of rights,
options or warrants to the holders of all or
substantially all of the Orbital Common Shares
entitling them to subscribe for or to purchase
Orbital Common Shares (or securities of Orbital
convertible into Orbital Common Shares) at a price
per Orbital Common Share (or having a conversion
price per Orbital Common Share) of less than the
Pre-Dilution Market Price on such record date,
unless the Corporation is permitted under
applicable law without a vote of its shareholders
to issue, and shall simultaneously issue,
equivalent numbers of such rights, options or
warrants, adjusted if necessary in accordance with
the Current Orbital Common Share Equivalent at
such record date, or the economic equivalent
thereof on a per share basis, to the holders of
Exchangeable Shares (any such event being herein
referred to as a "Rights Offering"), then the
Current Orbital Common Share Equivalent then in
effect shall be adjusted immediately after such
record date by multiplying the Current Orbital
Common Share Equivalent in effect on such record
date by the quotient obtained when:
(A) the sum of the
number of Orbital Common Shares outstanding
on such record date and the number of
additional Orbital Common Shares offered for
subscription or purchase under the Rights
Offering (or the number of Orbital Common
Shares into which the securities so offered
are convertible)
is divided by
(B) the sum of the
number of Orbital Common Shares outstanding
on such record date and the number determined
by dividing the aggregate price of the total
number of additional Orbital Common Shares
offered for subscription or purchase under
the Rights Offering (or the aggregate
conversion price of the convertible
securities so offered) by the Pre-Dilution
Market Price on such record date.
Any Orbital Common Share owned by or held for the
account of Orbital shall be deemed not to be
outstanding for the purpose of any such computation.
If such rights, options or warrants are not so issued
or if, at the date of expiry of the rights, options or
warrants subject to the Rights Offering, less than all
the rights, options or warrants have been exercised,
then the Current Orbital Common Share Equivalent shall
be readjusted effective immediately after the date of
expiry to the Current Orbital Common Share Equivalent
which would have been in effect if such record date had
not been fixed or to the Current Orbital Common Share
Equivalent which would then be in effect on the date of
expiry if the only rights, options or warrants issued
had been those that were exercised, as the case may be;
(iii) if Orbital shall fix a record
date for the making of a distribution (including a
distribution by way of stock dividend) to the
holders of all or substantially all its
outstanding Orbital Common Shares of
(A) shares of Orbital of
any class other than Orbital Common Shares
(or shares convertible into Orbital Common
Shares referred to in (i) (C) above),
(B) rights, options or
warrants (excluding a Rights Offering),
(C) evidences of its
indebtedness (excluding indebtedness
convertible into Orbital Common Shares
referred to in (i) (C) above) or
(D) any other assets
(other than any of the distributions referred
to in (A), (B) or (C), dividends paid in the
ordinary course or an Orbital Common Share
Reorganization)
unless the
Corporation is permitted under applicable law
without a vote of its shareholders to
distribute, and shall simultaneously
distribute, the same number of shares,
rights, options or warrants, evidences of
indebtedness or other assets, as the case may
be, adjusted if necessary in accordance with
the Current Orbital Common Share Equivalent
as at such record date, or the economic
equivalent thereof on a per share basis, to
the holders of Exchangeable Shares (any such
event being herein referred to as a "Special
Distribution") then, in each such case, the
Current Orbital Common Share Equivalent shall
be adjusted effective immediately after the
record date at which the holders of Orbital
Common Shares are determined for the purposes
of the Special Distribution by multiplying
the Current Orbital Common Share Equivalent
in effect on such record date by the quotient
obtained when:
(I) the product
obtained when the number of Orbital
Common Shares outstanding on the record
date is multiplied by the Pre-Dilution
Market Price on such date,
is divided by
(II) the difference obtained
when the amount by which the aggregate fair
market value (as determined by the Board of
Directors, which determination shall be
conclusive) of the shares, rights, options,
warrants, evidences of indebtedness or
assets, as the case may be, distributed in
the Special Distribution exceeds the fair
market value (as determined by the Board of
Directors, which determination shall be
conclusive) of the consideration, if any,
received therefor by Orbital, is subtracted
from the product obtained when the number of
Orbital Common Shares outstanding on the
record date is multiplied by the Pre-Dilution
Market Price on such date,
provided that no such
adjustment shall be made if the result of such
adjustment would be to decrease the Current
Orbital Common Share Equivalent in effect
immediately before such record date. Any Orbital
Common Share owned by or held for the account of
Orbital shall be deemed not to be outstanding for
the purpose of any such computation. Such
adjustment shall be made successively whenever
such a record date is fixed. To the extent that
such distribution is not so made, the Current
Orbital Common Share Equivalent shall be
readjusted effective immediately to the Current
Orbital Common Share Equivalent which would then
be in effect based upon such shares or rights,
options or warrants or evidences of indebtedness
or assets actually distributed;
(p) "Depositary" means Montreal Trust Company at its
principal offices in Vancouver, British Columbia and Toronto,
Ontario;
(q) "Effective Date" means the date shown on the
certificate of arrangement issued by the Director under the CBCA
giving effect to the Arrangement;
(r) "Effective Time" means 12:01 a.m. on the Effective
Date;
(s) "Exchange Ratio" is equal to U.S. $5.41 divided by the
Average Closing Price, provided that in no event shall it be less
than 0.2705 or greater than 0.3607;
(t) "Exchangeable Share Provisions" means the rights,
privileges, restrictions and conditions attaching to the
Exchangeable Shares, which are set forth in Appendix A hereto;
(u) "Exchangeable Shares" means the Exchangeable Non-Voting
Shares of the Corporation having the rights, privileges,
restrictions and conditions set forth in the Exchangeable Share
Provisions;
(v) "Final Order" means the final order of the Court
approving the Arrangement as such order may be amended by the
Court at any time prior to the Effective Time;
(w) "Lien" means any lien, pledge, adverse claim, security
interest, mortgage, claim, charge or encumbrance;
(x) "Liquidation Call Purchase Price" has the meaning
ascribed thereto in subsection 5.2(a);
(y) "Liquidation Call Right" has the meaning ascribed
thereto in subsection 5.2(a);
(z) "Liquidation Date" has the meaning ascribed thereto in
section 4.1 of the Exchangeable Share Provisions;
(aa) "MDA" means MacDonald, Dettwiler and Associates Ltd., a
corporation existing under the CBCA;
(bb) "MDA Common Shares" means the common shares in the
capital of MDA, including all rights associated therewith,
including without limitation all rights associated with such
common shares pursuant to the Shareholder Protection Rights Plan
Agreement dated as of August 27, 1992 between MDA and Montreal
Trust Company of Canada, as Rights Agent, as amended from time to
time;
(cc) "MDA 1988 Options" has the meaning ascribed thereto in
subsection 2.1(l);
(dd) "Meeting" means the Special Meeting of the shareholders
of MDA (voting together as one class) and the holders of MDA 1988
Options (voting separately from the shareholders of MDA as a
second class) to be held to consider the Arrangement;
(ee) "NASDAQ" means the NASDAQ National Market System;
(ff) "Options" means options, whether vested or unvested,
granted by MDA prior to the Effective Date to purchase MDA Common
Shares pursuant to the 1988 Key Employee Share Option Plan
("KESOP 88"), the 1988 Employee Share Option Plan ("ESOP 88"),
the Key Employee Share Option Plan and the Amended and Restated
Key Employee Share Option Plan;
(gg) "Orbital" means Orbital Sciences Corporation, a
corporation existing under the laws of the State of Delaware;
(hh) "Orbital Call Notice" has the meaning ascribed thereto
in subsection 5.1(b);
(ii) "Orbital Common Share Reorganization" has the meaning
ascribed thereto in subsection 1.1(o);
(jj) "Orbital Common Shares" means the common stock, par
value $.01 per share, of Orbital;
(kk) "Pre-Dilution Market Price" means, in respect of an
Orbital Common Share on any date, the Canadian Dollar Equivalent
of the average of the closing sale prices as reported on NASDAQ
of such shares during a period of 20 consecutive trading days
ending on the fourth trading day prior to such date, or, if the
Orbital Common Shares are not then quoted on NASDAQ, on such
other stock exchange or automated quotation system on which the
Orbital Common Shares are listed or quoted as may be selected by
the Board of Directors for such purpose; provided, however, that
if in the opinion of the Board of Directors the public
distribution or trading activity of Orbital Common Shares during
such period does not create a market that reflects the fair
market value of an Orbital Common Share, then the Pre-Dilution
Market Price of an Orbital Common Share shall be determined by
the Board of Directors based upon the advice of such qualified
independent financial advisors as the Board of Directors may deem
to be appropriate, and provided further that any such selection,
opinion or determination by the Board of Directors shall be
conclusive and binding;
(ll) "Qualifying Holdco" means a corporation that shall have
become a party to this Plan of Arrangement prior to the date of
the Meeting pursuant to subsection 6.1(b) hereof and that is
listed in Appendix B;
(mm) "Redemption Call Purchase Price" has the meaning
ascribed thereto in subsection 5.3(a);
(nn) "Redemption Call Right" has the meaning ascribed
thereto in subsection 5.3(a);
(oo) "Retracted Shares" has the meaning ascribed thereto in
section 5.1 of the Exchangeable Share Provisions;
(pp) "Retraction Call Purchase Price" has the meaning
ascribed thereto in subsection 5.1(a);
(qq) "Retraction Call Right" has the meaning ascribed
thereto in subsection 5.1(a);
(rr) "Retraction Date" has the meaning ascribed thereto in
section 5.2 of the Exchangeable Share Provisions;
(ss) "Retraction Request" has the meaning ascribed thereto
in section 5.1 of the Exchangeable Share Provisions;
(tt) "Revised Exercise Price" of an Option means the
exercise price of such Option in effect immediately prior to the
Effective Time divided by the Exchange Ratio;
(uu) "Transfer Agent" means Montreal Trust Company of Canada
or such other person as may from time to time be the Registrar
and Transfer Agent for the Exchangeable Shares; and
(vv) "Voting and Exchange Trust Agreement" means the Voting
and Exchange Trust Agreement between the Corporation, Orbital and
State Street Bank and Trust Company, made as of the Effective
Date.
1.2 Sections and Headings
The division of this Plan of Arrangement into sections
and the insertion of headings are for reference purposes only and
shall not affect the interpretation of this Plan of Arrangement.
Unless otherwise indicated, any reference in this Plan of
Arrangement to a section or an Appendix refers to the specified
section of or Appendix to this Plan of Arrangement.
1.3 Number, Gender and Persons
In this Plan of Arrangement, unless the context
otherwise requires, words importing the singular number include
the plural and vice versa, words importing any gender include all
genders and words importing persons include individuals,
corporations, partnerships, associations, trusts, unincorporated
organizations, governmental bodies and other legal or business
entities of any kind.
1.4 Withholding Tax
All amounts required to be paid, deposited or delivered
under this Plan of Arrangement shall be paid, deposited or
delivered after deduction of any amount required by applicable
law to be deducted or withheld on account of tax and the
deduction of such amounts and remittance to the applicable tax
authorities shall, to the extent thereof, satisfy such
requirement to pay, deposit or deliver hereunder.
ARTICLE 2
ARRANGEMENT
2.1 Arrangement
At the Effective Time on the Effective Date, the
following shall occur and shall be deemed to occur in the
following order without any further act or formality:
(a) The authorized share capital of the Corporation
shall be amended to authorize an unlimited number of
Exchangeable Shares and 10,000 Class B Preferred
Shares; as a result of such amendment the Corporation
shall have three classes of authorized share capital,
namely, an unlimited number of Common Shares, an
unlimited number of Exchangeable Shares and 10,000
Class B Preferred Shares, the rights, privileges,
restrictions and conditions attaching to each of which
classes shall be as set out in Appendix A.
(b) The Corporation shall issue 10,000 Class B
Preferred Shares to Canadian Imperial Bank of Commerce
in partial consideration for services rendered to the
Corporation in connection with the Arrangement.
(c) The Corporation shall add to its stated capital
account in respect of the Class B Preferred Shares an
amount in respect of the Class B Preferred Shares
issued pursuant to subsection 2.1(b) equal to $10,000.
(d) Schedule A and paragraphs 1 and 2 of Schedule B to
the Articles of the Corporation shall be deleted and
the sentence "The annexed Schedule A is incorporated in
this form." contained in paragraph 4 of the Articles of
the Corporation shall be deleted and replaced with the
words "not applicable".
(e) All of the outstanding MDA Common Shares, except
MDA Common Shares owned beneficially and of record by
the Qualifying Holdcos and MDA Common Shares held by
holders who have exercised their rights of dissent in
accordance with section 3.1 hereof and who are
ultimately entitled to be paid fair value for such
shares (hereinafter, "Dissenters") shall be exchanged
by the holders thereof for Exchangeable Shares, the
number of which shall be the product of such number of
MDA Common Shares being exchanged and the Exchange
Ratio. Each former holder of MDA Common Shares (other
than the Qualifying Holdcos and Dissenters) shall
receive the whole number of Exchangeable Shares
resulting from the exchange of such holder's MDA Common
Shares for the consideration set out in the foregoing
sentence. In lieu of fractional Exchangeable Shares,
each holder of an MDA Common Share who otherwise would
be entitled to receive a fraction of an Exchangeable
Share on the exchange shall be paid an amount
determined as set forth in section 4.3 hereto.
(f) Upon the exchange referred to in subsection 2.1(e)
above, each holder of exchanged MDA Common Shares shall
cease to be such a holder, shall have his name removed
from the register of holders of MDA Common Shares and
shall become a holder of the number of fully paid
Exchangeable Shares to which he is entitled as a result
of such exchange and such holder's name shall be added
to the register of holders of Exchangeable Shares
accordingly.
(g) All of the outstanding shares of each of the
Qualifying Holdcos shall be exchanged by the holders
thereof for Exchangeable Shares, the number of which
shall be the product of the number of MDA Common Shares
owned beneficially and of record by each respective
Qualifying Holdco and the Exchange Ratio. Each former
holder of shares of a Qualifying Holdco shall receive
the whole number of Exchangeable Shares resulting from
the exchange of all such holder's shares of a
Qualifying Holdco for the consideration set out in the
foregoing sentence. In lieu of fractional Exchangeable
Shares, each holder of shares of a Qualifying Holdco
who otherwise would be entitled to receive a fraction
of an Exchangeable Share on the exchange shall be paid
an amount determined as set forth in section 4.3
hereto.
(h) Upon the exchange referred to in subsection 2.1(g)
above, each holder of exchanged Qualifying Holdco
shares shall cease to be such a holder, shall have his
name removed from the register of holders of Qualifying
Holdco shares and shall become a holder of the number
of fully paid Exchangeable Shares to which he is
entitled as a result of such exchange and such holder's
name shall be added to the register of holders of
Exchangeable Shares accordingly.
(i) The Corporation shall add to its stated capital
account in respect of Exchangeable Shares issued
pursuant to subsections 2.1(e) and (g) an amount equal
to the aggregate fair market value of the MDA Common
Shares exchanged pursuant to subsection 2.1(e) and the
shares of Qualifying Holdcos exchanged pursuant to
subsection 2.1(g) and immediately thereafter such
stated capital shall be reduced to an amount equal to
the aggregate of (i) the cost, for purposes of the
Income Tax Act (Canada), to the Corporation of the
shares of the Qualifying Holdcos exchanged pursuant to
subsection (g) and, (ii) the paid-up capital, for
purposes of the Income Tax Act (Canada), of the MDA
Common Shares exchanged pursuant to subsection (e), all
as determined by the Board of Directors of the
Corporation.
(j) Each of the Qualifying Holdcos shall be dissolved
into and its assets distributed to the Corporation and
for the purposes of such dissolution each of the
Qualifying Holdcos is authorized and directed to file
articles of dissolution with the Director under the
CBCA at such time as the board of directors of the
Corporation shall determine. The Corporation, and each
of the Qualifying Holdcos are authorized and directed
to create and deliver all such documents and
instruments as may be necessary or appropriate to
implement the dissolution.
(k) The name of each of the Qualifying Holdcos shall
be removed from the register of holders of MDA Common
Shares and the Corporation shall be registered as the
holder of all of the issued and outstanding MDA Common
Shares.
(l) Except for Options granted pursuant to the KESOP
88 or the ESOP 88 ("MDA 1988 Options") to holders who
have exercised their rights of dissent in accordance
with section 3.1 hereof and who are ultimately entitled
to be paid fair value for the MDA Common Shares subject
to such MDA 1988 Options, each outstanding Option shall
become an option to purchase a number of Orbital Common
Shares equal to the product (rounded to the nearest
whole number) of the Exchange Ratio times the number of
MDA Common Shares subject to such Option and having an
exercise price equal to the Revised Exercise Price and
having the same vesting, expiration and other terms as
in effect immediately prior to the Effective Time,
subject to subsection (m).
(m) The KESOP 88 and the ESOP 88 shall be amended by
deleting the words in subsection 9.1 of the KESOP 88
and the words in subsection 8.1 of the ESOP 88 and
replacing each of them with the words following:
"In the event that the outstanding
Shares of the Company shall be changed into
or exchanged for a different number or of
kind of securities of the Company or of
another corporation, whether through an
arrangement, amalgamation or other similar
statutory procedure, or a share
capitalization, sub-division or
consolidation, then there shall be
substituted for each Share subject to any
such Option, for each share authorized for
issuance pursuant to the Plan but not yet
covered by an Option and for the maximum
number of Shares issuable under the Plan with
respect to any year, the number and kind of
securities into which each outstanding Share
shall be so changed or for which each such
Share shall be exchanged.
In the event that there shall be any
change, other than as specified in this
subsection, in the number or kind of
outstanding Shares of the Company or of any
securities into which such Shares shall have
been changed or for which Shares shall have
been exchanged, then an equitable adjustment
shall be made in the number or kind of Shares
or any such securities theretofore authorized
for issuance pursuant to the Plan but not yet
covered by an Option, of the Shares or any
such securities then subject to an Option or
Options, and the maximum of Shares or any
such securities issuable under the Plan with
respect to any year, such adjustment to be
reasonably determined by the Directors and to
be effective and binding for all purposes.
In the case of any such substitution or
adjustment as provided for in this
subsection, the Option price for each share
option agreement for each Share covered
thereby prior to such substitution or
adjustment will be proportionately and
appropriately varied. Such variation shall
generally require that the number of
securities covered by the Option after the
relevant event multiplied by the revised
Option price shall equal the number of shares
covered by the Option prior to the relevant
event multiplied by the original Option
price. No adjustment or substitution
provided for in this subsection shall require
the Company in any share option agreement to
issue a fractional Share and the total
substitution or adjustment with respect to
each share option agreement shall be limited
accordingly."
(n) The name of the Corporation shall be changed to
"MacDonald Dettwiler Holdings Inc."
ARTICLE 3
RIGHTS OF DISSENT
3.1 Rights of Dissent
Holders of MDA Common Shares or of MDA 1988 Options may
exercise rights of dissent with respect to such MDA Common Shares
or the MDA Common Shares subject to such MDA 1988 Options, as the
case may be ("Dissenters' Shares"). In order to dissent with
respect to MDA 1988 Options, such MDA 1988 Options shall be
deemed to have been exercised for the purpose of exercising such
dissent rights and the exercise price under each such MDA 1988
Option shall be deemed to be satisfied by set-off against the
fair value paid for the Dissenters' Shares subject thereto,
provided that if the holder of any such MDA 1988 Option is
ultimately not entitled to be paid fair value for the Dissenters'
Shares subject thereto, such MDA 1988 Option shall be deemed not
to have been exercised and shall become an option to purchase
Orbital Common Shares in accordance with subsection 2.1(l). All
such rights of dissent shall be exercised pursuant to and in the
manner set forth in section 190 of the CBCA and this section 3.1
(the "Dissent Procedures") in connection with the Arrangement and
holders who duly exercise such rights of dissent and who:
(a) are ultimately entitled to be paid fair value for
their Dissenters' Shares shall be deemed to have
transferred such Dissenters' Shares to MDA for
cancellation on the Effective Date; or
(b) are ultimately not entitled, for any reason, to be
paid fair value for their Dissenters' Shares shall be
deemed to have participated in the Arrangement on the
same basis as any non-dissenting holder of MDA Common
Shares or Options, as the case may be, and shall
receive Exchangeable Shares on the basis determined in
accordance with subsection 2.1(e) or options on the
basis provided in subsection 2.1(l), as the case may
be.
In no case shall MDA be required to recognize such holders as
holders of MDA Common Shares or MDA 1988 Options, as the case may
be, on and after the Effective Date, and the names of such
holders of MDA Common Shares or MDA 1988 Options, as the case may
be, shall be deleted from the register of holders of MDA Common
Shares and all records of Options maintained by the Corporation,
respectively, on the Effective Date.
ARTICLE 4
CERTIFICATES AND FRACTIONAL SHARES
4.1 Issuance of Certificates Representing Exchangeable Shares
At or promptly after the Effective Time, the
Corporation shall deposit with the Depositary, for the benefit of
the holders of MDA Common Shares exchanged pursuant to
subsection 2.1(e) and the holders of shares of the Qualifying
Holdcos exchanged pursuant to subsection 2.1(g), certificates
representing the Exchangeable Shares issued pursuant to
subsections 2.1(f) and (h). Upon surrender to the Depositary for
cancellation of a certificate which immediately prior to the
Effective Time represented outstanding MDA Common Shares
exchanged pursuant to subsection 2.1(e) or outstanding shares of
Qualifying Holdcos exchanged pursuant to subsection 2.1(g), as
the case may be, together with such other documents and
instruments as would have been required to effect the transfer of
the shares formerly represented by such certificate under the
CBCA and the articles and by-laws of MDA or of the relevant
Qualifying Holdco, as the case may be, and such additional
documents and instruments as the Depositary may reasonably
require, the holder of such surrendered certificate shall be
entitled to receive in exchange therefor, and the Depositary
shall deliver to such holder, a certificate representing that
number (rounded down to the nearest whole number) of Exchangeable
Shares which such holder has the right to receive (together with
any dividends or distributions with respect thereto pursuant to
section 4.2 and any cash in lieu of fractional Exchangeable
Shares pursuant to section 4.3), and the certificate so
surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of MDA Common Shares which is not
registered in the transfer records of MDA, a certificate
representing the proper number of Exchangeable Shares may be
issued to a transferee if the certificate representing such MDA
Common Shares is presented to the Depositary, accompanied by all
documents required to evidence and effect such transfer. Until
surrendered as contemplated by this section 4.1, each certificate
which immediately prior to the Effective Time represented
outstanding MDA Common Shares or outstanding shares of Qualifying
Holdcos, as the case may be, that were purchased for
consideration consisting of Exchangeable Shares shall be deemed
at any time after the Effective Time to represent only the right
to receive upon such surrender (i) the certificate representing
Exchangeable Shares as contemplated by this section 4.1, (ii) a
cash payment in lieu of any fractional Exchangeable Shares as
contemplated by section 4.3 and (iii) any dividends or
distributions with a record date after the Effective Time
theretofore paid or payable with respect to Exchangeable Shares
as contemplated by section 4.2.
4.2 Distributions with Respect to Unsurrendered Certificates
No dividends or other distributions declared or made
after the Effective Time with respect to Exchangeable Shares with
a record date after the Effective Time shall be paid to the
holder of any unsurrendered certificate which, immediately prior
to the Effective Time, represented outstanding MDA Common Shares
or shares of Qualifying Holdcos that were exchanged pursuant to
section 2.1, and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to section 4.3, unless
and until such certificate shall be surrendered in accordance
with section 4.1. Subject to applicable law and to section 4.5,
at the time of such surrender of any such certificate (or, in the
case of clause (iii) below, at the appropriate payment date),
there shall be paid to the record holder of the certificate
representing whole Exchangeable Shares into which the shares
represented by the surrendered certificate were exchanged,
without interest, (i) the amount of any cash payable in lieu of a
fractional Exchangeable Share to which such holder is entitled
pursuant to section 4.3, (ii) the amount of dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to such whole Exchangeable Shares,
and (iii) the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such
whole Exchangeable Shares.
4.3 No Fractional Shares
No certificates or scrip representing fractional
Exchangeable Shares shall be issued upon the surrender for
exchange of certificates pursuant to section 4.1 and no dividend,
stock split or other change in the capital structure of the
Corporation shall relate to any such fractional security and such
fractional interests shall not entitle the owner thereof to vote
or to exercise any rights as a security holder of the
Corporation. In lieu of any such fractional securities, each
person entitled to a fractional interest in an Exchangeable Share
will receive an amount of cash (rounded to the nearest whole
cent), without interest, equal to the Canadian Dollar Equivalent
as of the Effective Date of the product of (i) such fraction,
multiplied by (ii) the Average Closing Price.
4.4 Lost Certificates
If any certificate that immediately prior to the
Effective Time represented outstanding MDA Common Shares that
were exchanged pursuant to section 2.1 has been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
person claiming such certificate to be lost, stolen or destroyed,
the Depositary will issue in exchange for such lost, stolen or
destroyed certificate, certificates representing Exchangeable
Shares (and any dividends or distributions with respect thereto
and any cash pursuant to section 4.3) deliverable in respect
thereof as determined in accordance with section 2.1. When
authorizing such payment in exchange for any lost, stolen or
destroyed certificate, the person to whom certificates
representing Exchangeable Shares are to be issued shall, as a
condition precedent to the issuance thereof, give a bond
satisfactory to MDA or the Corporation, as the case may be, in
such sum as MDA or the Corporation may direct or otherwise
indemnify MDA or the Corporation in a manner satisfactory to the
Corporation and MDA against any claim that may be made against
MDA or the Corporation with respect to the certificate alleged to
have been lost, stolen or destroyed.
4.5 Extinguishment of Rights
Any certificate that immediately prior to the Effective
Time represented outstanding MDA Common Shares or outstanding
shares of a Qualifying Holdco that were purchased pursuant to
section 2.1 and not deposited, with all other instruments
required by section 4.1, on or prior to the sixth anniversary of
the Effective Date shall cease to represent a claim or interest
of any kind or nature as a shareholder of MDA, the relevant
Qualifying Holdco or the Corporation. On such date, the
Exchangeable Shares to which the former registered holder of the
certificate referred to in the preceding sentence was ultimately
entitled shall be deemed to have been surrendered to the
Corporation together with all entitlements to dividends,
distributions and interests thereon held for such former
registered holder for no consideration.
ARTICLE 5
CERTAIN RIGHTS OF ORBITAL TO ACQUIRE EXCHANGEABLE SHARES
5.1 Orbital Retraction Call Right
(a) Orbital shall have the overriding right (the
"Retraction Call Right"), notwithstanding the proposed redemption
of Retracted Shares by the Corporation on a Retraction Date, to
purchase from the holder of the Retracted Shares on the
Retraction Date the Retracted Shares upon payment by Orbital to
the holder of an amount per share equal to (a) the Current Market
Price multiplied by the Current Orbital Common Share Equivalent,
in each case determined on the Retraction Date, which shall be
satisfied in full in respect of the Retracted Shares by causing
to be delivered to such holder such whole number of Orbital
Common Shares as is equal to the product obtained by multiplying
the number of Retracted Shares by the Current Orbital Common
Share Equivalent (together with an amount in lieu of any
fractional Orbital Common Share resulting from such calculation
payable in accordance with section 5.5), plus (b) the aggregate
of all dividends declared and unpaid on such Retracted Share
(collectively the "Retraction Call Purchase Price"). In the
event of the exercise of the Retraction Call Right by Orbital,
the holder of the Retracted Shares shall be obligated to sell to
Orbital, and Orbital shall be obligated to purchase, the
Retracted Shares on the Retraction Date upon payment by Orbital
to such holder of the Retraction Call Purchase Price for each
Retracted Share.
(b) In order to exercise the Retraction Call Right, Orbital
must notify the Transfer Agent in writing of its determination to
do so (the "Orbital Call Notice") prior to the expiry of the
third Business Day after the receipt by the Transfer Agent of the
Retraction Request. If Orbital does not so notify the Transfer
Agent, the Transfer Agent will notify the holder as soon as
possible thereafter that Orbital will not exercise the Retraction
Call Right. If Orbital delivers the Orbital Call Notice before
the end of such three Business Day period, the Retraction Request
shall thereupon be considered only to be an offer by the holder
to sell the Retracted Shares to Orbital in accordance with the
Retraction Call Right. In such event, the Corporation shall not
redeem the Retracted Shares and Orbital shall purchase from such
holder and such holder shall sell to Orbital on the Retraction
Date the Retracted Shares for the Retraction Call Purchase Price
for each Retracted Share.
(c) For the purposes of completing a purchase of the
Retracted Shares pursuant to the Retraction Call Right, Orbital
shall deposit with the Transfer Agent, on or before the
Retraction Date, certificates representing the Orbital Common
Shares to be delivered to the holder of the Retracted Shares in
payment of the total Retraction Call Purchase Price for the
Retracted Shares (or the portion thereof payable in Orbital
Common Shares, as the case may be) and a cheque in the amount of
the remaining portion, if any, of the total Retraction Call
Purchase Price (or, if any part of the Retraction Call Purchase
Price consists of dividends payable in property, such property or
property that is the same as or economically equivalent to such
property). Provided that such total Retraction Call Purchase
Price has been so deposited with the Transfer Agent, the closing
of the purchase and sale of the Retracted Shares pursuant to the
Retraction Call Right shall be deemed to have occurred as of the
close of business on the Retraction Date and, for greater
certainty, no redemption by the Corporation of such Retracted
Shares shall take place on the Retraction Date. Orbital shall
cause the Transfer Agent to deliver to the holder of the
Retracted Shares, at the address of such holder recorded in the
securities register of the Corporation for the Exchangeable
Shares or at the address specified in the holder's Retraction
Request or by holding for pick-up by the holder at the office of
the Transfer Agent to which the Retraction Request was delivered,
in payment of such total Retraction Call Purchase Price,
certificates representing the Orbital Common Shares to be
delivered in respect of such payment (which shares shall be duly
issued as fully paid and non-assessable and shall be free and
clear of any Liens) registered in the name of the holder or in
such other name as the holder may request in payment of such and,
if applicable, a cheque of Orbital payable at par and in Canadian
dollars at any branch of the bankers of Orbital or the
Corporation in Canada (or, if any part of the Retraction Call
Purchase Price consists of dividends payable in property, such
property or property that is the same as or economically
equivalent to such property), and such delivery of such
certificates and cheque (and property, if any) to the holder on
behalf of Orbital by the Transfer Agent shall be deemed to be
payment of and shall satisfy and discharge all liability for the
total Retraction Call Purchase Price to the extent that the same
is represented by such share certificates and cheque (and
property, if any), unless such cheque is not paid on due
presentation. On and after the close of business on the
Retraction Date, the holder of the Retracted Shares shall cease
to be a holder of such Retracted Shares and shall not be entitled
to exercise any of the rights of a holder in respect thereof,
other than the right to receive the Retraction Call Purchase
Price, unless upon presentation and surrender of certificates in
accordance with the foregoing provisions, payment of the total
Retraction Call Purchase Price shall not be made, in which case
the rights of such holder shall remain unaffected until the total
Retraction Call Purchase Price has been paid in the manner
hereinbefore provided. On and after the close of business on the
Retraction Date, provided that presentation and surrender of
certificates and payment of the total Retraction Call Purchase
Price has been made in accordance with the foregoing provisions,
the holder of the Retracted Shares so purchased by Orbital shall
thereafter be considered and deemed for all purposes to be a
holder of the Orbital Common Shares delivered to such holder.
5.2 Orbital Liquidation Call Right
(a) Orbital shall have the overriding right (the
"Liquidation Call Right"), in the event of and notwithstanding
the proposed liquidation, dissolution or winding-up of the
Corporation, to purchase from all but not less than all of the
holders (other than Orbital and its Affiliates) of Exchangeable
Shares on the Liquidation Date all but not less than all of the
Exchangeable Shares held by each such holder on payment by
Orbital of an amount per share equal to (a) the Current Market
Price multiplied by the Current Orbital Common Share Equivalent,
in each case determined on the Liquidation Date, which shall be
satisfied in full in respect of all of the Exchangeable Shares
held by such holder by Orbital causing to be delivered to such
holder such whole number of Orbital Common Shares as is equal to
the product obtained by multiplying the number of such
Exchangeable Shares by the Current Orbital Common Share
Equivalent (together with an amount in lieu of any fractional
Orbital Common Share resulting from such calculation payable in
accordance with section 5.5), plus (b) the aggregate of all
dividends declared and unpaid on such Exchangeable Share up to
the Liquidation Date (collectively the "Liquidation Call Purchase
Price"). In the event of the exercise of the Liquidation Call
Right by Orbital, each holder shall be obligated to sell all the
Exchangeable Shares held by the holder to Orbital on the
Liquidation Date on payment by Orbital to the holder of the
Liquidation Call Purchase Price for each such share.
(b) To exercise the Liquidation Call Right, Orbital must
notify the Transfer Agent and the Corporation of Orbital's
intention to exercise such right at least 30 days before the
Liquidation Date in the case of a voluntary liquidation,
dissolution or winding up of the Corporation and at least five
Business Days before the Liquidation Date in the case of an
involuntary liquidation, dissolution or winding up of the
Corporation. The Transfer Agent will notify the holders of
Exchangeable Shares as to whether or not Orbital has exercised
the Liquidation Call Right forthwith after the expiry of the date
by which the same may be exercised by Orbital. If Orbital
exercises the Liquidation Call Right, on the Liquidation Date
Orbital will purchase and the holders will sell all of the
Exchangeable Shares then outstanding for a price per share equal
to the Liquidation Call Purchase Price.
(c) For the purposes of completing the purchase of the
Exchangeable Shares pursuant to the Liquidation Call Right,
Orbital shall deposit with the Transfer Agent, on or before the
Liquidation Date, certificates representing the aggregate number
of Orbital Common Shares deliverable by Orbital (which shares
shall be duly issued as fully paid and non-assessable and shall
be free and clear of any Liens) in payment of the total
Liquidation Call Purchase Price (or the portion thereof payable
in Orbital Common Shares, as the case may be) and a cheque or
cheques in the amount of the remaining portion, if any, of the
total Liquidation Call Purchase Price (or, if any part of the
Liquidation Call Purchase Price consists of dividends payable in
property, such property or property that is the same as or
economically equivalent to such property). Provided that such
total Liquidation Call Purchase Price has been so deposited with
the Transfer Agent, on and after the Liquidation Date the rights
of each holder of Exchangeable Shares will be limited to
receiving such holder's proportionate part of the total
Liquidation Call Purchase Price payable by Orbital upon
presentation and surrender by the holder of certificates
representing the Exchangeable Shares held by such holder and the
holder shall on and after the Liquidation Date be considered and
deemed for all purposes to be the holder of the Orbital Common
Shares delivered to it. Upon surrender to the Transfer Agent of
a certificate or certificates representing Exchangeable Shares,
together with such other documents and instruments as may be
required to effect a transfer of Exchangeable Shares under the
CBCA and the articles and by-laws of the Corporation and such
additional documents and instruments as the Transfer Agent may
reasonably require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor,
and the Transfer Agent on behalf of Orbital shall deliver to such
holder, certificates representing the Orbital Common Shares to
which the holder is entitled and a cheque or cheques of Orbital
payable at par and in Canadian dollars at any branch of the
bankers of Orbital or of the Corporation in Canada in payment of
the remaining portion, if any, of the total Liquidation Call
Purchase Price (or, if any part of the Liquidation Call Purchase
Price consists of dividends payable in property, such property or
property that is the same as or economically equivalent to such
property). If Orbital does not exercise the Liquidation Call
Right in the manner described above, on the Liquidation Date the
holders of the Exchangeable Shares will be entitled to receive in
exchange therefor the Liquidation Amount otherwise payable by the
Corporation in connection with the liquidation, dissolution or
winding-up of the Corporation pursuant to sections 4.1 to 4.3 of
the Exchangeable Share Provisions.
5.3 Orbital Redemption Call Right
(a) Orbital shall have the overriding right (the
"Redemption Call Right"), notwithstanding the proposed redemption
of the Exchangeable Shares by the Corporation on the Automatic
Redemption Date, to purchase from all but not less than all of
the holders (other than Orbital or its Affiliates) of
Exchangeable Shares on the Automatic Redemption Date all but not
less than all of the Exchangeable Shares held by each such holder
on payment by Orbital to the holder of an amount per share equal
to (a) the Current Market Price multiplied by the Current Orbital
Common Share Equivalent, in each case determined on the Automatic
Redemption Date, which shall be satisfied in full in respect of
all of the Exchangeable Shares held by such holder by causing to
be delivered to such holder such number of Orbital Common Shares
as is equal to the product obtained by multiplying the number of
such Exchangeable Shares by the Current Orbital Common Share
Equivalent (together with an amount in lieu of any fractional
Orbital Common Share resulting from such calculation payable in
accordance with section 5.5), plus (b) the aggregate of all
dividends declared and unpaid on such Exchangeable Share
(collectively the "Redemption Call Purchase Price"). In the
event of the exercise of the Redemption Call Right by Orbital,
each holder shall be obligated to sell to Orbital, and Orbital
shall be obligated to purchase, all the Exchangeable Shares held
by the holder on the Automatic Redemption Date on payment by
Orbital to the holder of the Redemption Call Purchase Price for
each such share.
(b) To exercise the Redemption Call Right, Orbital must
notify the Transfer Agent, as agent for the holders of the
Exchangeable Shares, and the Corporation of Orbital's intention
to exercise such right at least 75 days before the Automatic
Redemption Date. The Transfer Agent will notify the holders of
the Exchangeable Shares as to whether or not Orbital has
exercised the Redemption Call Right forthwith after the date by
which the same may be exercised by Orbital. If Orbital exercises
the Redemption Call Right, on the Automatic Redemption Date
Orbital will purchase and the holders will sell all of the
Exchangeable Shares then outstanding for a price per share equal
to the Redemption Call Purchase Price.
(c) For the purposes of completing the purchase of the
Exchangeable Shares pursuant to the Redemption Call Right,
Orbital shall deposit with the Transfer Agent, on or before the
Automatic Redemption Date, certificates representing the
aggregate number of Orbital Common Shares deliverable by Orbital
(which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any Liens) in
payment of the total Redemption Call Purchase Price (or the
portion thereof payable in Orbital Common Shares, as the case may
be) and a cheque or cheques in the amount of the remaining
portion, if any, of the total Redemption Call Purchase Price (or,
if part of the Redemption Call Purchase Price consists of
dividends payable in property, such property or property the same
as or economically equivalent to such property). Provided that
such total Redemption Call Purchase Price has been so deposited
with the Transfer Agent, on and after the Automatic Redemption
Date the rights of each holder of Exchangeable Shares will be
limited to receiving such holder's proportionate part of the
total Redemption Call Purchase Price payable by Orbital upon
presentation and surrender by the holder of certificates
representing the Exchangeable Shares held by such holder and the
holder shall on and after the Automatic Redemption Date be
considered and deemed for all purposes to be the holder of the
Orbital Common Shares delivered to such holder. Upon surrender
to the Transfer Agent of a certificate or certificates
representing Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer
of Exchangeable Shares under the CBCA and the articles and
by-laws of the Corporation and such additional documents and
instruments as the Transfer Agent may reasonably require, the
holder of such surrendered certificate or certificates shall be
entitled to receive in exchange therefor, and the Transfer Agent
on behalf of Orbital shall deliver to such holder, certificates
representing the Orbital Common Shares to which the holder is
entitled and a cheque or cheques of Orbital payable at par and in
Canadian dollars at any branch of the bankers of Orbital or of
the Corporation in Canada in payment of the remaining portion, if
any, of the total Redemption Call Purchase Price (or, if part of
the Redemption Call Purchase Price consists of dividends payable
in property, such property or property the same as or
economically equivalent to such property). If Orbital does not
exercise the Redemption Call Right in the manner described above,
on the Automatic Redemption Date the holders of the Exchangeable
Shares will be entitled to receive in exchange therefor the
redemption price otherwise payable by the Corporation in
connection with the redemption of the Exchangeable Shares
pursuant to sections 6.1 and 6.2 of the Exchangeable Share
Provisions.
5.4 Consideration for Call Rights of Orbital
The Retraction Call Right, the Liquidation Call Right
and the Redemption Call Right are granted to Orbital by the
holders of Exchangeable Shares in consideration of the grant by
Orbital of the Voting Rights, Automatic Exchange Rights and
Exchange Right (as such terms are respectively defined in the
Voting and Exchange Trust Agreement) to the Trustee (as defined
in the Exchangeable Share Provisions) for the benefit of the
holders of Exchangeable Shares.
5.5 Fractional Orbital Common Shares
No certificates or scrip representing fractional
Orbital Common Shares shall be delivered to holders of
Exchangeable Shares pursuant to the provisions hereof. In lieu
of any such fractional security, each person entitled to a
fractional interest in an Orbital Common Share will receive an
amount of cash (rounded to the nearest whole cent), without
interest, equal to the Canadian Dollar Equivalent as of the
fourth Business Day prior to the relevant date of delivery of
certificates representing Orbital Common Shares (the "Fractional
Share Calculation Date") of the product of (i) such fraction,
multiplied by (ii) the closing sale price of Orbital Common
Shares as reported on NASDAQ on the Fractional Share Calculation
Date.
5.6 Economic Equivalence
The Board of Directors shall determine, in good faith
and in its sole discretion (with the assistance of such reputable
and qualified independent financial advisors and/or other experts
as the Board of Directors may require) economic equivalence for
the purposes of any provision herein that requires such a
determination and each such determination shall be conclusive and
binding on Orbital and the holders of Exchangeable Shares, where
applicable.
5.7 Capital Reorganization of Orbital
If at any time there is a capital reorganization of
Orbital that is not provided for in subsection 1.1(o) or a
consolidation, merger, arrangement or amalgamation (statutory or
otherwise) of Orbital with or into another entity (any such event
being called a "Capital Reorganization"), any holder of
Exchangeable Shares whose Exchangeable Shares have not been
exchanged for Orbital Common Shares in accordance with the
provisions hereof prior to the record date for such Capital
Reorganization shall be entitled to receive and shall accept,
upon any such exchange occurring pursuant to the provisions
hereof at any time after the record date for such Capital
Reorganization, in lieu of the Orbital Common Shares that he
would otherwise have been entitled to receive pursuant to the
provisions hereof, the number of shares or other securities of
Orbital or of the body corporate resulting, surviving or
continuing from the Capital Reorganization, or other property,
that such holder would have been entitled to receive as a result
of such Capital Reorganization if, on the record date, he had
been the registered holder of the number of Orbital Common Shares
to which he was then entitled upon any exchange of his
Exchangeable Shares into Orbital Common Shares in accordance with
the provisions hereof, subject to adjustment thereafter in the
same manner, as nearly as may be possible, as is provided for in
subsection 1.1(o); provided that no such Capital Reorganization
shall be carried into effect unless all necessary steps shall
have been taken so that each holder of Exchangeable Shares shall
thereafter be entitled to receive, upon any exchange of his
Exchangeable Shares pursuant to the provisions hereof, such
number of shares or other securities of Orbital or of the body
corporate resulting, surviving or continuing from the Capital
Reorganization, or other property.
5.8 Other Change in Orbital Common Shares
In the case of any reclassification of, or other change
in, the outstanding Orbital Common Shares other than a Common
Share Reorganization or a Capital Reorganization, such changes
shall be made in the rights attaching to the Exchangeable Shares,
without any action on the part of the Corporation or the holders
of the Exchangeable Shares to the extent permitted by applicable
law, effective immediately following the record date for such
reclassification or other change, to the extent necessary to
ensure that holders of Exchangeable Shares shall be entitled to
receive, upon the occurrence at any time after such record date
of any event whereby they would receive Orbital Common Shares
pursuant to the provisions hereof, such shares, securities or
rights as they would have received if their Exchangeable Shares
had been exchanged for Orbital Common Shares pursuant to the
provisions hereof immediately prior to such record date, subject
to adjustment thereafter in the same manner, as nearly as may be
possible, as is provided for in subsection 1.1(o).
ARTICLE 6
AMENDMENT
6.1 Plan of Arrangement Amendment
(a) By instrument in writing the Corporation and MDA may
amend, modify and/or supplement this Plan of Arrangement at any
time and from time to time provided that any such amendment,
modification, or supplement must be (i) agreed to by Orbital,
(ii) filed with the Court and, if made following the Meeting,
approved by the Court and (iii) communicated to holders of MDA
Common Shares and Options in the manner required by the Court (if
so required).
(b) Notwithstanding subsection 6.1(a), by instrument in
writing the Corporation and MDA may modify this Plan up to, but
not after, the termination of the Meeting to add as Qualifying
Holdcos any corporations that, in the sole judgment of the
Corporation, meet the requirements of Section 2.1.2 of the
Combination Agreement, such modification to be evidenced by
adding the name of each such Qualifying Holdco to Appendix B
hereto.
(c) Any amendment, modification or supplement to this Plan
of Arrangement that is approved by the Court following the
Meeting shall be effective only if (i) it is consented to by each
of the Corporation, MDA and Orbital and (ii) it is consented to
by the holders of the MDA Common Shares, the holders of the MDA
1988 Options and the holders of the shares of any Qualifying
Holdcos, in each case to the extent so required by the Court.
APPENDIX A TO PLAN OF ARRANGEMENT
PROVISIONS ATTACHING TO THE EXCHANGEABLE SHARES
The Exchangeable Shares in the capital of the
Corporation shall have the following rights, privileges,
restrictions and conditions.
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these share provisions:
(a) "Affiliate" of any person means any other person
directly or indirectly controlling, controlled by, or
under common control with, that person. For the
purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as
applied to any person, means the possession by another
person, directly or indirectly, of the power to direct
or cause the direction of the management and policies
of that first mentioned person, whether through the
ownership of voting securities, by contract or
otherwise.
(b) "Automatic Redemption Date" means November ,
2000, unless such date shall be accelerated at any time
to a specified earlier date by the Board of Directors
upon at least 75 days prior written notice to the
registered holders of Exchangeable Shares, in which
case the Automatic Redemption Date shall be such
earlier date; provided, however, that the Board of
Directors may so accelerate the Automatic Redemption
Date only at such time as there are outstanding fewer
than 400,000 Exchangeable Shares held by holders other
than Orbital and its Affiliates.
(c) "Board of Directors" means the board of directors
of the Corporation.
(d) "Business Day" means any day other than a
Saturday, a Sunday or a day when banks are not open for
business in one or both of the Commonwealth of Virginia
and Vancouver, British Columbia.
(e) "Canadian Dollar Equivalent" means in respect of
an amount expressed in a foreign currency (the "Foreign
Currency Amount") at any date the product obtained by
multiplying (a) the Foreign Currency Amount by (b) the
noon spot exchange rate on such date for such foreign
currency expressed in Canadian dollars as reported by
the Bank of Canada or, in the event such spot exchange
rate is not available, such exchange rate on such date
for such foreign currency expressed in Canadian dollars
as may be deemed by the Board of Directors to be
appropriate for such purpose.
(f) "Capital Reorganization" has the meaning ascribed
thereto in section 9.2 of these share provisions.
(g) "CBCA" means the Canada Business Corporations Act,
as amended from time to time.
(h) "Corporation" means MacDonald Dettwiler Holdings
Inc. (formerly known as 3173623 Canada Inc.), a
corporation incorporated under the CBCA.
(i) "Current Market Price" means, in respect of an
Orbital Common Share on any date, the Canadian Dollar
Equivalent of the closing sale price of Orbital Common
Shares on such day (or, if no trades of Orbital Common
Shares occurred on such day, on the last trading day
prior thereto on which such trades occurred) reported
on NASDAQ, or, if the Orbital Common Shares are not
then quoted on NASDAQ, on such other stock exchange or
automated quotation system on which the Orbital Common
Shares are listed or quoted, as the case may be, as may
be selected by the Board of Directors for such purpose;
provided, however, that if in the opinion of the Board
of Directors the public distribution or trading
activity of Orbital Common Shares during such period
does not create a market that reflects the fair market
value of an Orbital Common Share, then the Current
Market Price of an Orbital Common Share shall be
determined by the Board of Directors based upon the
advice of such qualified independent financial advisors
as the Board of Directors may deem to be appropriate,
and provided further that any such selection, opinion
or determination by the Board of Directors shall be
conclusive and binding.
(j) "Current Orbital Common Share Equivalent" means,
on any date, the equivalent as at such date of one
Orbital Common Share as at the Effective Date,
expressed to four decimal places, determined by
applying on a cumulative basis the following
adjustments, to the extent applicable by reason of any
transactions occurring in respect of Orbital Common
Shares between the Effective Date and such date, the
Current Orbital Common Share Equivalent as at the
Effective Date being 1.0000:
(i) if Orbital shall (A)
subdivide, redivide or change its then outstanding
Orbital Common Shares into a greater number of
Orbital Common Shares, unless the Corporation is
permitted under applicable law without a vote of
its shareholders to make, and shall simultaneously
make, the same or an economically equivalent
change to the rights of the holders of
Exchangeable Shares, (B) reduce, combine,
consolidate or change its then outstanding Orbital
Common Shares into a lesser number of Orbital
Common Shares, unless the Corporation is permitted
under applicable law without a vote of its
shareholders to make, and shall simultaneously
make, the same or an economically equivalent
change to the rights of the holders of
Exchangeable Shares, or (C) issue Orbital Common
Shares (or securities exchangeable or convertible
into Orbital Common Shares) to the holders of all
or substantially all of its then outstanding
Orbital Common Shares by way of stock dividend or
other distribution (other than to holders of
Orbital Common Shares who exercise an option to
receive stock dividends in lieu of receiving cash
dividends), unless the Corporation is permitted
under applicable law without a vote of its
shareholders to issue or distribute, and shall
simultaneously issue and distribute, equivalent
numbers of Orbital Common Shares or other
securities (adjusted if necessary in accordance
with the Current Orbital Common Share Equivalent),
or the economic equivalent on a per share basis,
to the holders of the Exchangeable Shares (any of
such events being herein called an "Orbital Common
Share Reorganization"), the Current Orbital Common
Share Equivalent shall be adjusted effective
immediately after the record date at which the
holders of Orbital Common Shares are determined
for the purpose of the Orbital Common Share
Reorganization by multiplying the Current Orbital
Common Share Equivalent in effect on such record
date by the quotient obtained when:
(I) the number of
Orbital Common Shares outstanding after the
completion of such Orbital Common Share
Reorganization (but before giving effect to
the issue of any Orbital Common Shares issued
after such record date otherwise than as part
of such Orbital Common Share Reorganization)
including, in the case where securities
exchangeable or convertible into Orbital
Common Shares are distributed, the number of
Orbital Common Shares that would have been
outstanding had such securities been
exchanged for or converted into Orbital
Common Shares on such record date,
is divided by
(II) the number of
Orbital Common Shares outstanding on such
record date before giving effect to the
Orbital Common Share Reorganization;
(ii) if at any time Orbital shall
fix a record date for the issuance of rights,
options or warrants to the holders of all or
substantially all of the Orbital Common Shares
entitling them to subscribe for or to purchase
Orbital Common Shares (or securities of Orbital
convertible into Orbital Common Shares) at a price
per Orbital Common Share (or having a conversion
price per Orbital Common Share) of less than the
Pre-Dilution Market Price on such record date,
unless the Corporation is permitted under
applicable law without a vote of its shareholders
to issue, and shall simultaneously issue,
equivalent numbers of such rights, options or
warrants, adjusted if necessary in accordance with
the Current Orbital Common Share Equivalent at
such record date, or the economic equivalent
thereof on a per share basis, to the holders of
Exchangeable Shares (any such event being herein
referred to as a "Rights Offering"), then the
Current Orbital Common Share Equivalent then in
effect shall be adjusted immediately after such
record date by multiplying the Current Orbital
Common Share Equivalent in effect on such record
date by the quotient obtained when:
(A) the sum of the
number of Orbital Common Shares outstanding
on such record date and the number of
additional Orbital Common Shares offered for
subscription or purchase under the Rights
Offering (or the number of Orbital Common
Shares into which the securities so offered
are convertible)
is divided by
(B) the sum of the
number of Orbital Common Shares outstanding
on such record date and the number determined
by dividing the aggregate price of the total
number of additional Orbital Common Shares
offered for subscription or purchase under
the Rights Offering (or the aggregate
conversion price of the convertible
securities so offered) by the Pre-Dilution
Market Price on such record date.
Any Orbital Common Share owned
by or held for the account of Orbital shall be
deemed not to be outstanding for the purpose of
any such computation. If such rights, options or
warrants are not so issued or if, at the date of
expiry of the rights, options or warrants subject
to the Rights Offering, less than all the rights,
options or warrants have been exercised, then the
Current Orbital Common Share Equivalent shall be
readjusted effective immediately after the date of
expiry to the Current Orbital Common Share
Equivalent which would have been in effect if such
record date had not been fixed or to the Current
Orbital Common Share Equivalent which would then
be in effect on the date of expiry if the only
rights, options or warrants issued had been those
that were exercised, as the case may be;
(iii) if Orbital shall fix a record
date for the making of a distribution (including a
distribution by way of stock dividend) to the
holders of all or substantially all its
outstanding Orbital Common Shares of
(A) shares of Orbital of
any class other than Orbital Common Shares
(or shares convertible into Orbital Common
Shares referred to in (i) (C) above),
(B) rights, options or
warrants (excluding a Rights Offering),
(C) evidences of its
indebtedness (excluding indebtedness
convertible into Orbital Common Shares
referred to in (i) (C) above) or
(D) any other assets
(other than any of the distributions referred
to in (A), (B) or (C), dividends paid in the
ordinary course or an Orbital Common Share
Reorganization)
unless the Corporation is
permitted under applicable law without a vote of
its shareholders to distribute, and shall
simultaneously distribute, the same number of
shares, rights, options or warrants, evidences of
indebtedness or other assets, as the case may be,
adjusted if necessary in accordance with the
Current Orbital Common Share Equivalent as at such
record date, or the economic equivalent thereof on
a per share basis, to the holders of Exchangeable
Shares (any such event being herein referred to as
a "Special Distribution") then, in each such case,
the Current Orbital Common Share Equivalent shall
be adjusted effective immediately after the record
date at which the holders of Orbital Common Shares
are determined for the purposes of the Special
Distribution by multiplying the Current Orbital
Common Share Equivalent in effect on such record
date by the quotient obtained when:
(I) the product obtained
when the number of Orbital Common Shares
outstanding on the record date is multiplied
by the Pre-Dilution Market Price on such
date,
is divided by
(II) the difference
obtained when the amount by which the
aggregate fair market value (as determined by
the Board of Directors, which determination
shall be conclusive) of the shares, rights,
options, warrants, evidences of indebtedness
or assets, as the case may be, distributed in
the Special Distribution exceeds the fair
market value (as determined by the Board of
Directors, which determination shall be
conclusive) of the consideration, if any,
received therefor by Orbital, is subtracted
from the product obtained when the number of
Orbital Common Shares outstanding on the
record date is multiplied by the Pre-Dilution
Market Price on such date,
provided that no such adjustment shall be made if
the result of such adjustment would be to decrease the
Current Orbital Common Share Equivalent in effect
immediately before such record date. Any Orbital
Common Share owned by or held for the account of
Orbital shall be deemed not to be outstanding for the
purpose of any such computation. Such adjustment shall
be made successively whenever such a record date is
fixed. To the extent that such distribution is not so
made, the Current Orbital Common Share Equivalent shall
be readjusted effective immediately to the Current
Orbital Common Share Equivalent which would then be in
effect based upon such shares or rights, options or
warrants or evidences of indebtedness or assets
actually distributed.
(k) "Effective Date" has the meaning ascribed thereto
in the Plan of Arrangement.
(l) "Exchangeable Shares" mean the Exchangeable
Non-Voting Shares of the Corporation having the rights,
privileges, restrictions and conditions set forth
herein.
(m) "Lien" has the meaning ascribed thereto in the
Plan of Arrangement.
(n) "Liquidation Amount" has the meaning ascribed
thereto in section 4.1 of these share provisions.
(o) "Liquidation Call Right" has the meaning ascribed
thereto in section 5.2 of the Plan of Arrangement.
(p) "NASDAQ" means the NASDAQ National Market System;
(q) "Liquidation Date" has the meaning ascribed
thereto in section 4.1 of these share provisions.
(r) "Orbital" means Orbital Sciences Corporation, a
corporation organized and existing under the laws of
the State of Delaware, and any successor corporation.
(s) "Orbital Call Notice" has the meaning ascribed
thereto in subsection 5.1(b) of the Plan of
Arrangement.
(t) "Orbital Common Share Reorganization" has the
meaning ascribed thereto in subsection 1.1(j) of these
share provisions.
(u) "Orbital Common Shares" mean the shares of common
stock of Orbital, with a par value of U.S.$.01 per
share and having one vote per share, and any other
securities into which such shares may be changed.
(v) "Orbital Dividend Declaration Date" means the date
on which the Board of Directors of Orbital declares any
dividend on the Orbital Common Shares.
(w) "Orbital Special Share" means the one share of
Special Voting Preferred Stock of Orbital with a par
value of U.S.$.01 and having voting rights at meetings
of holders of Orbital Common Shares equal to the number
of Exchangeable Shares outstanding from time to time
(other than Exchangeable Shares held by Orbital and its
Affiliates) to be issued to, and voted by, the Trustee
pursuant to the Voting Trust and Exchange Agreement.
(x) "Plan of Arrangement" means the plan of
arrangement relating to the arrangement of the
Corporation under section 192 of the CBCA, to which
plan these share provisions are attached.
(y) "Pre-Dilution Market Price" means, in respect of
an Orbital Common Share on any date, the Canadian
Dollar Equivalent of the average of the closing sale
prices as reported on NASDAQ of such shares during a
period of 20 consecutive trading days ending on the
fourth trading day prior to such date, or, if the
Orbital Common Shares are not then quoted on NASDAQ, on
such other stock exchange or automated quotation system
on which the Orbital Common Shares are listed or quoted
as may be selected by the Board of Directors for such
purpose; provided, however, that if in the opinion of
the Board of Directors the public distribution or
trading activity of Orbital Common Shares during such
period does not create a market that reflects the fair
market value of an Orbital Common Share, then the Pre-
Dilution Market Price of an Orbital Common Share shall
be determined by the Board of Directors based upon the
advice of such qualified independent financial advisors
as the Board of Directors may deem to be appropriate,
and provided further that any such selection, opinion
or determination by the Board of Directors shall be
conclusive and binding;
(z) "Redemption Call Right" has the meaning ascribed
thereto in section 5.3 of the Plan of Arrangement.
(aa) "Redemption Price" has the meaning ascribed
thereto in section 6.1 of these share provisions.
(bb) "Retracted Shares" has the meaning ascribed
thereto in section 5.1 of these share provisions.
(cc) "Retraction Call Right" has the meaning ascribed
thereto in section 5.1 of the Plan of Arrangement.
(dd) "Retraction Date" has the meaning ascribed thereto
in section 5.2 of these share provisions.
(ee) "Retraction Price" has the meaning ascribed
thereto in section 5.1 of these share provisions.
(ff) "Retraction Request" has the meaning ascribed
thereto in section 5.1 of these share provisions.
(gg) "Rights Offering" has the meaning ascribed thereto
in subsection 1.1(j) of these share provisions.
(hh) "Special Distribution" has the meaning ascribed
thereto in subsection 1.1(j) of these share provisions.
(ii) "Support Agreement" means the Support Agreement
between Orbital and the Corporation, made as of the
Effective Date.
(jj) "Transfer Agent" means Montreal Trust Company of
Canada or such other person as may from time to time be
the registrar and transfer agent for the Exchangeable
Shares.
(kk) "Trustee" means State Street Bank and Trust
Company, and any successor trustee appointed under the
Voting and Exchange Trust Agreement.
(ll) "Voting and Exchange Trust Agreement" means the
Voting and Exchange Trust Agreement between the
Corporation, Orbital and the Trustee, made as of the
Effective Date.
1.2 All amounts required to be paid, deposited or delivered
hereunder shall be paid, deposited or delivered after deduction
of any amount required by applicable law to be deducted or
withheld on account of tax and the deduction of such amounts and
remittance to the applicable tax authorities shall, to the extent
thereof, satisfy such requirement to pay, deposit or deliver
hereunder.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall rank senior to the
Class B Preferred Shares and the Common Shares and any other
shares ranking junior to the Exchangeable Shares, with respect to
the payment of dividends and the distribution of assets in the
event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or any other
distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs.
ARTICLE 3
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled to
receive and the Board of Directors shall, subject to applicable
law, declare a dividend on each Exchangeable Share (a) in the
case of a cash dividend declared on the Orbital Common Shares, in
an amount in cash for each Exchangeable Share equal to the
Canadian Dollar Equivalent on the Orbital Dividend Declaration
Date of the cash dividend declared on such number of Orbital
Common Shares as is equal to the Current Orbital Common Share
Equivalent on the Orbital Dividend Declaration Date or (b) in the
case of a stock dividend declared on the Orbital Common Shares to
be paid in Orbital Common Shares, in such whole number of
Exchangeable Shares for the Exchangeable Shares held by each
holder as is equal to the number of Orbital Common Shares to be
paid as a dividend per Orbital Common Shares (if such calculation
results in a fraction of an Exchangeable Share, the holder shall
receive in lieu of such fraction an amount in cash equal to the
product obtained by multiplying the amount that would be payable
in respect of an equal fraction of an Orbital Common Share as at
the Orbital Dividend Declaration Date, calculated in accordance
with section 9.4, by the Current Orbital Common Share Equivalent
as at such date) or (c) in the case of a dividend declared on the
Orbital Common Shares to be paid in property other than cash or
Orbital Common Shares (including without limitation other
securities of Orbital), in such type and amount of property for
each Exchangeable Share as is the same as or economically
equivalent (as determined by the Board of Directors in accordance
with section 9.1) to the type and amount of property to be paid
as a dividend on such number of Orbital Common Shares as is equal
to the Current Orbital Common Share Equivalent on the Orbital
Dividend Declaration Date. Such dividends shall be paid out of
money, assets or property of the Corporation properly applicable
to the payment of dividends, or out of authorized but unissued
Exchangeable Shares.
3.2 Cheques of the Corporation payable at par at any branch
of the bankers of the Corporation shall be issued in respect of
any cash dividends contemplated by subsection 3.1(a) hereof or in
respect of any cash amount payable in lieu of a fractional
Exchangeable Share in connection with any stock dividends
contemplated by subsection 3.1(b) hereof and the sending of such
a cheque to each holder of an Exchangeable Share shall satisfy
the cash dividend represented thereby unless the cheque is not
paid on presentation. Certificates registered in the name of the
registered holder of Exchangeable Shares shall be issued or
transferred in respect of any stock dividends contemplated by
subsection 3.1(b) hereof and the sending of such a certificate to
each holder of an Exchangeable Share shall satisfy the stock
dividend represented thereby. Such other type and amount of
property in respect of any dividends contemplated by
subsection 3.1(c) hereof shall be issued, distributed or
transferred by the Corporation in such manner as it shall
determine and the issuance, distribution or transfer thereof by
the Corporation to each holder of an Exchangeable Share shall
satisfy the dividend represented thereby. No holder of an
Exchangeable Share shall be entitled to recover by action or
other legal process against the Corporation any dividend that is
represented by a cheque that has not been duly presented to the
Corporation's bankers for payment or that otherwise remains
unclaimed for a period of six years from the date on which such
dividend was payable.
3.3 The record date for the determination of the holders of
Exchangeable Shares entitled to receive payment of, and the
payment date for, any dividend declared on the Exchangeable
Shares under section 3.1 hereof shall be the same dates as the
record date and payment date, respectively, for the corresponding
dividend declared on the Orbital Common Shares.
3.4 If on any payment date for any dividends declared on
the Exchangeable Shares under section 3.1 hereof the dividends
are not paid in full on all of the Exchangeable Shares then
outstanding, any such dividends that remain unpaid shall be paid
on a subsequent date or dates determined by the Board of
Directors on which the Corporation shall have sufficient moneys,
assets or property properly applicable to the payment of such
dividends.
3.5 So long as any of the Exchangeable Shares are
outstanding, the Corporation shall not at any time without, but
may at any time with, the approval of the holders of the
Exchangeable Shares given as specified in section 8.2 of these
share provisions:
(a) pay any dividends on the Class B Preferred Shares
or the Common Shares, or any other shares ranking
junior to the Exchangeable Shares, other than stock
dividends payable in Common Shares or any such other
shares ranking junior to the Exchangeable Shares, as
the case may be;
(b) redeem or purchase or make any capital
distribution in respect of Class B Preferred Shares or
Common Shares or any other shares ranking junior to the
Exchangeable Shares;
(c) redeem or purchase any other shares of the
Corporation ranking equally with the Exchangeable
Shares with respect to the payment of dividends or on
any liquidation distribution;
(d) issue any Exchangeable Shares other than (i) by
way of stock dividends to the holders of such
Exchangeable Shares, (ii) otherwise pro rata to holders
of Exchangeable Shares, (iii) as contemplated by the
Support Agreement or (iv) pursuant to any agreements or
rights in existence at the Effective Date; or
(e) issue any other shares of the Corporation ranking
equally with or senior to the Exchangeable Shares;
provided that the restrictions in subsections 3.5(a), 3.5(b) and
3.5(c) shall not apply if all dividends on the outstanding
Exchangeable Shares corresponding to dividends declared to date
on the Orbital Common Shares shall have been declared on the
Exchangeable Shares and paid in full.
ARTICLE 4
DISTRIBUTION ON LIQUIDATION
4.1 In the event of the liquidation, dissolution or
winding-up of the Corporation or any other distribution of the
assets of the Corporation among its shareholders for the purpose
of winding up its affairs, a holder of Exchangeable Shares shall
be entitled, subject to applicable law, to receive from the
assets of the Corporation in respect of each Exchangeable Share
held by such holder on the effective date (the "Liquidation
Date") of such liquidation, dissolution or winding-up, before any
distribution of any part of the assets of the Corporation among
the holders of the Class B Preferred Shares, the Common Shares or
any other shares ranking junior to the Exchangeable Shares, an
amount per share equal to (a) the Current Market Price multiplied
by the Current Orbital Common Share Equivalent, in each case
determined on the Liquidation Date, which shall be satisfied in
full in respect of all of the Exchangeable Shares held by such
holder by the Corporation causing to be delivered to such holder
such whole number of Orbital Common Shares as is equal to the
product obtained by multiplying the number of such Exchangeable
Shares by the Current Orbital Common Share Equivalent (together
with an amount in lieu of any fractional Orbital Common Share
resulting from such calculation payable in accordance with
section 9.4), plus (b) the aggregate of all declared and unpaid
dividends on each such Exchangeable Share up to the Liquidation
Date (collectively the "Liquidation Amount").
4.2 On or promptly after the Liquidation Date, and subject
to the exercise by Orbital of the Liquidation Call Right, the
Corporation shall cause to be delivered to the holders of the
Exchangeable Shares the Liquidation Amount for each such
Exchangeable Share upon presentation and surrender of the
certificates representing such Exchangeable Shares, together with
such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under the CBCA and the by-laws
of the Corporation and such additional documents and instruments
as the Transfer Agent may reasonably require, at the registered
office of the Corporation or at any office of the Transfer Agent
as may be specified by the Corporation by notice to the holders
of the Exchangeable Shares. Payment of the total Liquidation
Amount for such Exchangeable Shares shall be made by delivery to
each holder, at the address of the holder recorded in the
securities register of the Corporation for the Exchangeable
Shares or by holding for pick-up by the holder at the registered
office of the Corporation or at any office of the Transfer Agent
as may be specified by the Corporation by notice to the holders
of Exchangeable Shares, on behalf of the Corporation of
certificates representing the Orbital Common Shares to be
delivered in payment thereof (which shares shall be duly issued
as fully paid and non-assessable and shall be free and clear of
any Liens) and a cheque of the Corporation payable at par at any
branch of the bankers of the Corporation in respect of any
fractional Orbital Common Share and all declared and unpaid
dividends comprising part of the total Liquidation Amount (or, if
any of such dividends were payable in property, such property or
property that is the same as or economically equivalent to such
property). On and after the Liquidation Date, the holders of the
Exchangeable Shares shall cease to be holders of such
Exchangeable Shares and shall not be entitled to exercise any of
the rights of holders in respect thereof, other than the right to
receive the total Liquidation Amount in respect of their
Exchangeable Shares, unless payment of the total Liquidation
Amount for such Exchangeable Shares shall not be made upon
presentation and surrender of share certificates in accordance
with the foregoing provisions, in which case the rights of the
holders shall remain unaffected until the total Liquidation
Amount has been paid in the manner hereinbefore provided. The
Corporation shall have the right at any time on or after the
Liquidation Date to deposit or cause to be deposited the total
Liquidation Amount in respect of the Exchangeable Shares
represented by certificates that have not at the Liquidation Date
been surrendered by the holders thereof in a custodial account
with any chartered bank or trust company in Canada. Upon such
deposit being made, the rights of the holders of Exchangeable
Shares after such deposit shall be limited to receiving the total
Liquidation Amount (without interest) for such Exchangeable
Shares so deposited, against presentation and surrender of the
said certificates held by them, respectively, in accordance with
the foregoing provisions. Upon such payment or deposit of the
total Liquidation Amount, the holders of the Exchangeable Shares
shall thereafter be considered and deemed for all purposes to be
the holders of the Orbital Common Shares delivered to them.
4.3 After the Corporation has satisfied its obligations to
pay the holders of the Exchangeable Shares the Liquidation Amount
per Exchangeable Share pursuant to section 4.1 of these share
provisions, such holders shall not be entitled to share in any
further distribution of the assets of the Corporation.
ARTICLE 5
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
5.1 A holder of Exchangeable Shares shall be entitled at
any time, subject to the exercise by Orbital of the Retraction
Call Right and otherwise upon compliance with the provisions of
this Article 5, to require the Corporation to redeem any or all
of the Exchangeable Shares registered in the name of such holder
(the "Retracted Shares") for an amount for each Retracted Share
equal to (a) the Current Market Price multiplied by the Current
Orbital Common Share Equivalent, in each case determined on the
Retraction Date, which shall be satisfied in full in respect of
the Retracted Shares by the Corporation causing to be delivered
to such holder such whole number of Orbital Common Shares as is
equal to the product obtained by multiplying the number of
Retracted Shares by the Current Orbital Common Share Equivalent
(together with an amount in lieu of any fractional Orbital Common
Share resulting from such calculation payable in accordance with
section 9.4), plus (b) the aggregate of all dividends declared
and unpaid on each Retracted Share up to the Retraction Date
(collectively the "Retraction Price", provided that if the record
date for any such declared and unpaid dividend occurs on or after
the Retraction Date the Retraction Price shall not include such
declared and unpaid dividends). To effect such redemption, the
holder shall present and surrender at any office of the Transfer
Agent listed on Schedule A hereto the certificate or certificates
representing the Exchangeable Shares which the holder desires to
have the Corporation redeem, together with such other documents
and instruments as may be required to effect a transfer of
Exchangeable Shares under the CBCA and the by-laws of the
Corporation and such additional documents and instruments as the
Transfer Agent may reasonably require, and together with a duly
executed statement (the "Retraction Request") in the form of
Schedule A hereto or in such other form as may be acceptable to
the Transfer Agent:
(a) specifying that the holder desires to have the
Retracted Shares represented by such certificate or
certificates redeemed by the Corporation; and
(b) acknowledging the Retraction Call Right of Orbital
to purchase all but not less than all the Retracted
Shares directly from the holder and that the Retraction
Request shall be deemed to be an irrevocable offer by
the holder to sell the Retracted Shares to Orbital in
accordance with the Retraction Call Right.
5.2 Subject to the exercise by Orbital of the Retraction
Call Right, upon receipt by the Transfer Agent in the manner
specified in section 5.1 hereof of a certificate or certificates
representing the number of Exchangeable Shares which the holder
desires to have the Corporation redeem, together with such other
documents and instruments as may be required pursuant to
section 5.1 and a Retraction Request, the Corporation shall
redeem the Retracted Shares effective at the close of business on
the sixth Business Day after the Retraction Request is received
(the "Retraction Date") and shall cause to be delivered to such
holder the total Retraction Price with respect to such shares.
If only a part of the Exchangeable Shares represented by any
certificate are redeemed (or purchased by Orbital pursuant to the
Retraction Call Right), a new certificate for the balance of such
Exchangeable Shares shall be issued to the holder at the expense
of the Corporation.
5.3 Upon receipt by the Transfer Agent of a Retraction
Request, the Transfer Agent shall forthwith notify Orbital
thereof. In order to exercise the Retraction Call Right, Orbital
must deliver an Orbital Call Notice to the Transfer Agent prior
to the expiry of the third Business Day after the receipt by the
Transfer Agent of the Retraction Request. If Orbital does not so
notify the Transfer Agent, the Transfer Agent will notify the
holder as soon as possible thereafter that Orbital will not
exercise the Retraction Call Right. If Orbital delivers the
Orbital Call Notice before the end of such three Business Day
period, the Retraction Request shall thereupon be considered only
to be an offer by the holder to sell the Retracted Shares to
Orbital in accordance with the Retraction Call Right. In such
event, the Corporation shall not redeem the Retracted Shares and
Orbital shall purchase from such holder and such holder shall
sell to Orbital on the Retraction Date the Retracted Shares
pursuant to the Retraction Call Right.
5.4 If a Retraction Request is received by the Transfer
Agent pursuant to section 5.1 and Orbital has not exercised the
Retraction Call Right, the Corporation shall cause the Transfer
Agent to deliver to the holder of the Retracted Shares, at the
address of the holder recorded in the securities register of the
Corporation for the Exchangeable Shares or at the address
specified in the holder's Retraction Request or by holding for
pick-up by the holder at the office of the Transfer Agent to
which the Retraction Request was delivered, certificates
representing the Orbital Common Shares to be delivered to the
holder in payment of the total Retraction Price for the Retracted
Shares (or the portion thereof payable in Orbital Common Shares,
as the case may be) (which shares shall be duly issued as fully
paid and non-assessable and shall be free and clear of any Liens)
registered in the name of the holder or in such other name as the
holder may request and a cheque of the Corporation payable at par
at any branch of the bankers of the Corporation in payment of the
remaining portion, if any, of the total Retraction Price (or, if
any part of the Retraction Price consists of dividends payable in
property, such property or property that is the same as or
economically equivalent to such property), and such delivery of
such certificates and cheque (and property, if any) on behalf of
the Corporation by the Transfer Agent shall be deemed to be
payment of and shall satisfy and discharge all liability for the
total Retraction Price, to the extent that the same is
represented by such share certificates and cheque (and property,
if any), unless such cheque is not paid on due presentation.
5.5 On and after the close of business on the Retraction
Date, the holder of the Retracted Shares shall cease to be a
holder of such Retracted Shares and shall not be entitled to
exercise any of the rights of a holder in respect thereof, other
than the right to receive his proportionate part of the total
Retraction Price, unless upon presentation and surrender of
certificates in accordance with the foregoing provisions, payment
of the total Retraction Price shall not be made, in which case
the rights of such holder shall remain unaffected until the total
Retraction Price has been paid in the manner hereinbefore
provided. On and after the close of business on the Retraction
Date, provided that presentation and surrender of certificates
and payment of the total Retraction Price has been made in
accordance with the foregoing provisions, the holder of the
Retracted Shares so redeemed by the Corporation shall thereafter
be considered and deemed for all purposes to be a holder of the
Orbital Common Shares delivered to it.
5.6 Notwithstanding any other provision of this Article 5,
the Corporation shall not be obligated to redeem Retracted Shares
specified by a holder in a Retraction Request to the extent that
such redemption of Retracted Shares would be contrary to solvency
requirements or other provisions of applicable law. If the
Corporation believes that on any Retraction Date it would not be
permitted by any of such provisions to redeem the Retracted
Shares tendered for redemption on such date, and provided that
Orbital shall not have exercised the Retraction Call Right with
respect to the Retracted Shares, the Corporation shall be
obligated to redeem Retracted Shares specified by a holder in a
Retraction Request only to the extent of the maximum number that
may be so redeemed (rounded down to a whole number of shares) as
would not be contrary to such provisions on a pro rata basis and
shall notify the holder at least two Business Days prior to the
Retraction Date as to the number of Retracted Shares which will
not be redeemed by the Corporation and the Corporation shall
issue to each holder of Retracted Shares a new certificate, at
the expense of the Corporation, representing the Retracted Shares
not redeemed by the Corporation pursuant to section 5.2 hereof.
The holder of any such Retracted Shares not redeemed by the
Corporation pursuant to section 5.2 of these share provisions as
a result of solvency requirements of applicable law shall be
deemed by giving the Retraction Request to require Orbital to
purchase such Retracted Shares from such holder pursuant to the
Exchange Right (as defined in the Voting and Exchange Trust
Agreement).
ARTICLE 6
REDEMPTION OF EXCHANGEABLE SHARES
6.1 Subject to applicable law and if Orbital does not
exercise the Redemption Call Right, the Corporation shall on the
Automatic Redemption Date redeem the whole of the then
outstanding Exchangeable Shares for an amount per share equal to
(a) the Current Market Price multiplied by the Current Orbital
Common Share Equivalent, in each case determined on the Automatic
Redemption Date, which shall be satisfied in full in respect of
all of the Exchangeable Shares held by each holder of
Exchangeable Shares by the Corporation causing to be delivered to
such holder such whole number of Orbital Common Shares as is
equal to the product obtained by multiplying the number of such
Exchangeable Shares by the Current Orbital Common Share
Equivalent (together with an amount in lieu of any fractional
Orbital Common Share resulting from such calculation payable in
accordance with section 9.4), plus (b) the aggregate of all
declared and unpaid dividends thereon up to the Automatic
Redemption Date (collectively the "Redemption Price").
6.2 On or after the Automatic Redemption Date and subject
to the exercise by Orbital of the Redemption Call Right, the
Corporation shall cause to be delivered to the holders of the
Exchangeable Shares the Redemption Price for each such
Exchangeable Share upon presentation and surrender at any office
of the Transfer Agent of the certificates representing such
Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of
Exchangeable Shares under the CBCA and the by-laws of the
Corporation and such additional documents and instruments as the
Transfer Agent may reasonably require. Payment of the total
Redemption Price for such Exchangeable Shares shall be made by
delivery to each holder, at the address of the holder recorded in
the securities register of the Corporation or by holding for pick
up by the holder at the registered office of the Corporation or
at any office of the Transfer Agent as may be specified by the
Corporation in such notice, on behalf of the Corporation of
certificates representing the Orbital Common Shares to be
delivered to the holder in payment of the Redemption Price (or
the portion thereof payable in Orbital Common Shares, as the case
may be) (which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any Liens) and a
cheque of the Corporation payable at par at any branch of the
bankers of the Corporation in respect of any fractional Orbital
Common Share and all declared and unpaid dividends comprising
part of the total Redemption Price (or, if any of such dividends
are payable in property, such property). On and after the
Automatic Redemption Date, the holders of the Exchangeable Shares
called for redemption shall cease to be holders of such
Exchangeable Shares and shall not be entitled to exercise any of
the rights of holders in respect thereof, other than the right to
receive the total Redemption Price for their Exchangeable Shares,
unless payment of the total Redemption Price for such
Exchangeable Shares shall not be made upon presentation and
surrender of certificates in accordance with the foregoing
provisions, in which case the rights of the holders shall remain
unaffected until the total Redemption Price has been paid in the
manner hereinbefore provided. The Corporation shall have the
right at any time to deposit or cause to be deposited the total
Redemption Price of the Exchangeable Shares so called for
redemption, or of such of the said Exchangeable Shares
represented by certificates that have not at the date of such
deposit been surrendered by the holders thereof in connection
with such redemption, in a custodial account with any chartered
bank or trust company in Canada named in such notice. Upon the
later of such deposit being made and the Automatic Redemption
Date, the Exchangeable Shares in respect whereof such deposit
shall have been made shall be redeemed and the rights of the
holders thereof after such deposit or Automatic Redemption Date,
as the case may be, shall be limited to receiving the total
Redemption Price for such Exchangeable Shares so deposited,
against presentation and surrender of the said certificates held
by them, respectively, in accordance with the foregoing
provisions. Upon such payment or deposit of the total Redemption
Price, the holders of the Exchangeable Shares shall thereafter be
considered and deemed for all purposes to be holders of the
Orbital Common Shares delivered to them.
ARTICLE 7
VOTING RIGHTS
7.1 Except as required by applicable law and the provisions
of sections 3.5, 8.1 and 10.2, the holders of the Exchangeable
Shares shall not be entitled as such to receive notice of or to
attend any meeting of the shareholders of the Corporation or to
vote at any such meeting.
ARTICLE 8
AMENDMENT AND APPROVAL
8.1 The rights, privileges, restrictions and conditions
attaching to the Exchangeable Shares may be added to, changed or
removed but only with the approval of the holders of the
Exchangeable Shares given as hereinafter specified.
8.2 Any approval given by the holders of the Exchangeable
Shares to add to, change or remove any right, privilege,
restriction or condition attaching to the Exchangeable Shares or
any other matter requiring the approval or consent of the holders
of the Exchangeable Shares shall be deemed to have been
sufficiently given if it shall have been given in accordance with
applicable law subject to a minimum requirement that such
approval be evidenced by resolution passed by not less than
two-thirds of the votes cast on such resolution at a meeting of
holders of Exchangeable Shares duly called and held at which the
holders of at least 50% of the outstanding Exchangeable Shares at
that time are present or represented by proxy. If at any such
meeting the holders of at least 50% of the outstanding
Exchangeable Shares at that time are not present or represented
by proxy within one-half hour after the time appointed for such
meeting then the meeting shall be adjourned to such date not less
than 10 days thereafter and to such time and place as may be
designated by the Chairman of such meeting. At such adjourned
meeting the holders of Exchangeable Shares present or represented
by proxy thereat may transact the business for which the meeting
was originally called and a resolution passed thereat by the
affirmative vote of not less than two thirds of the votes cast on
such resolution at such meeting shall constitute the approval or
consent of the holders of the Exchangeable Shares.
ARTICLE 9
ECONOMIC EQUIVALENCE; CHANGES RELATING TO ORBITAL
9.1 The Board of Directors shall determine, in good faith
and in its sole discretion (with the assistance of such reputable
and qualified independent financial advisors and/or other experts
as the Board of Directors may require) economic equivalence for
the purposes of any provision herein that requires such a
determination and each such determination shall be conclusive and
binding on Orbital, where applicable.
9.2 If at any time there is a capital reorganization of
Orbital that is not provided for in subsection 1.1(j) or a
consolidation, merger, arrangement or amalgamation (statutory or
otherwise) of Orbital with or into another entity (any such event
being called a "Capital Reorganization"), any holder of
Exchangeable Shares whose Exchangeable Shares have not been
exchanged for Orbital Common Shares in accordance with the
provisions hereof prior to the record date for such Capital
Reorganization shall be entitled to receive and shall accept,
upon any such exchange occurring pursuant to the provisions
hereof at any time after the record date for such Capital
Reorganization, in lieu of the Orbital Common Shares that he
would otherwise have been entitled to receive pursuant to the
provisions hereof, the number of shares or other securities of
Orbital or of the body corporate resulting, surviving or
continuing from the Capital Reorganization, or other property,
that such holder would have been entitled to receive as a result
of such Capital Reorganization if, on the record date, he had
been the registered holder of the number of Orbital Common Shares
to which he was then entitled upon any exchange of his
Exchangeable Shares into Orbital Common Shares in accordance with
the provisions hereof, subject to adjustment thereafter in the
same manner, as nearly as may be possible, as is provided for in
subsection 1.1(j); provided that no such Capital Reorganization
shall be carried into effect unless all necessary steps shall
have been taken so that each holder of Exchangeable Shares shall
thereafter be entitled to receive, upon any exchange of his
Exchangeable Shares pursuant to the provisions hereof, such
number of shares or other securities of Orbital or of the body
corporate resulting, surviving or continuing from the Capital
Reorganization, or other property.
9.3 In the case of any reclassification of, or other change
in, the outstanding Orbital Common Shares other than a Common
Share Reorganization or a Capital Reorganization, such changes
shall be made in the rights attaching to the Exchangeable Shares,
without any action on the part of the Corporation or the holders
of the Exchangeable Shares to the extent permitted by applicable
law, effective immediately following the record date for such
reclassification or other change, to the extent necessary to
ensure that holders of Exchangeable Shares shall be entitled to
receive, upon the occurrence at any time after such record date
of any event whereby they would receive Orbital Common Shares
pursuant to the provisions hereof, such shares, securities or
rights as they would have received if their Exchangeable Shares
had been exchanged for Orbital Common Shares pursuant to the
provisions hereof immediately prior to such record date, subject
to adjustment thereafter in the same manner, as nearly as may be
possible, as is provided for in subsection 1.1(j).
9.4 No certificates or scrip representing fractional
Orbital Common Shares shall be delivered to holders of
Exchangeable Shares pursuant to the provisions hereof. In lieu
of any such fractional security, each person entitled to a
fractional interest in an Orbital Common Share will receive an
amount of cash (rounded to the nearest whole cent), without
interest, equal to the Canadian Dollar Equivalent as of the
fourth Business Day prior to the relevant date of delivery of
certificates representing Orbital Common Shares (the "Fractional
Share Calculation Date") of the product of (i) such fraction,
multiplied by (ii) the closing sale price of Orbital Common
Shares as reported on NASDAQ on the Fractional Share Calculation
Date.
ARTICLE 10
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
10.1 The Corporation will take all such actions and do all
such things as shall be necessary or advisable to perform and
comply with and to ensure performance and compliance by Orbital
with all provisions of the Support Agreement and the Voting and
Exchange Trust Agreement applicable to the Corporation and
Orbital, respectively, in accordance with the terms thereof
including, without limitation, taking all such actions and doing
all such things as shall be necessary or advisable to enforce to
the fullest extent possible for the direct benefit of the
Corporation and the holders of Exchangeable Shares all rights and
benefits in favour of the Corporation under or pursuant to such
agreements.
10.2 The Corporation shall not propose, agree to or
otherwise give effect to any amendment to, or waiver or
forgiveness of its rights or obligations under, the Support
Agreement and the Voting and Exchange Trust Agreement without the
approval of the holders of the Exchangeable Shares given in
accordance with section 8.2 of these share provisions other than
such amendments, waivers and/or forgiveness as may be necessary
or advisable for the purposes of:
(a) adding to the covenants of the other party or
parties to such agreement for the protection of the
Corporation or the holders of Exchangeable Shares; or
(b) making such provisions or modifications not
inconsistent with such agreements as may be necessary
or desirable with respect to matters or questions
arising thereunder which, in the opinion of the Board
of Directors, it may be expedient to make, provided
that the Board of Directors shall be of the opinion,
after consultation with counsel, that such provisions
and modifications will not be prejudicial to the
interests of the holders of the Exchangeable Shares; or
(c) making such changes in or corrections to such
agreements which, on the advice of counsel to the
Corporation, are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent
provision or clerical omission or mistake or manifest
error contained therein, provided that the Board of
Directors shall be of the opinion, after consultation
with counsel, that such changes or corrections will not
be prejudicial to the interests of the holders of the
Exchangeable Shares.
ARTICLE 11
LEGEND
11.1 The certificates evidencing the Exchangeable Shares
shall contain or have affixed thereto a legend, in form and on
terms approved by the Board of Directors, with respect to the
Support Agreement, the provisions of the Plan of Arrangement
relating to the Retraction Call Right, the Liquidation Call Right
and the Redemption Call Right, and the Voting and Exchange Trust
Agreement (including the provisions with respect to the voting
rights, exchange right and automatic exchange thereunder).
ARTICLE 12
NOTICES
12.1 Any notice, request or other communication to be given
to the Corporation by a holder of Exchangeable Shares shall be in
writing and shall be valid and effective if given by mail
(postage prepaid) or by telecopy or by delivery to the registered
office of the Corporation and addressed to the attention of the
President. Any such notice, request or other communication, if
given by mail, telecopy or delivery, shall only be deemed to have
been given and received upon actual receipt thereof by the
Corporation.
12.2 Any presentation and surrender by a holder of
Exchangeable Shares to the Corporation or the Transfer Agent of
certificates representing Exchangeable Shares in connection with
the liquidation, dissolution or winding up of the Corporation or
the retraction or redemption of Exchangeable Shares shall be made
by registered mail (postage prepaid) or by delivery to the
registered office of the Corporation or to such office of the
Transfer Agent as may be specified by the Corporation, in each
case addressed to the attention of the President of the
Corporation. Any such presentation and surrender of certificates
shall only be deemed to have been made and to be effective upon
actual receipt thereof by the Corporation or the Transfer Agent,
as the case may be. Any such presentation and surrender of
certificates made by registered mail shall be at the sole risk of
the holder mailing the same.
12.3 Any notice, request or other communication to be given
to a holder of Exchangeable Shares by or on behalf of the
Corporation shall be in writing and shall be valid and effective
if given by mail (postage prepaid) or by delivery to the address
of the holder recorded in the securities register of the
Corporation or, in the event of the address of any such holder
not being so recorded, then at the last known address of such
holder. Any such notice, request or other communication, if
given by mail, shall be deemed to have been given and received on
the fifth Business Day following the date of mailing and, if
given by delivery, shall be deemed to have been given and
received on the date of delivery. Accidental failure or omission
to give any notice, request or other communication to one or more
holders of Exchangeable Shares shall not invalidate or otherwise
alter or affect any action or proceeding to be taken by the
Corporation pursuant thereto.
PROVISIONS ATTACHING TO THE CLASS B PREFERRED SHARES
The Class B Preferred Shares in the capital of the
Corporation shall have attached thereto the following rights,
privileges, restrictions and conditions:
Dividends
Subject to the prior rights of the holders of the
Exchangeable Shares and any other shares ranking senior to the
Class B Preferred Shares with respect to priority in the payment
of dividends, the holders of Class B Preferred Shares shall be
entitled to receive dividends and the Corporation shall pay
dividends thereon, as and when declared by the Board of
Directors, in the amount of $0.10 per share per annum payable
quarterly on March 31, June 30, September 30 and December 31 in
each year (each a "Dividend Payment Date") in arrears. Such
dividends shall be cumulative dividends and shall accrue from the
date of issue, or from the most recent Dividend Payment Date on
which dividends were paid, to and including the date to which the
computation of dividends is to be made. A cheque for the amount
of the dividend less any required deduction shall be mailed by
first class mail to the addresses of the registered holders
thereof.
Redemption by the Corporation
The Corporation may, upon giving notice as hereinafter
provided, redeem at any time the whole, but not a part only, of
the then outstanding Class B Preferred Shares on payment for each
share to be redeemed of a sum of $1.00 together with all accrued
unpaid preferential cumulative cash dividends thereon whether or
not declared (the "Redemption Amount").
In the case of redemption of Class B Preferred Shares
under the provisions of the foregoing paragraph hereof, the
Corporation shall at least 20 days before the date specified for
redemption mail to each person who at the date of mailing is a
registered holder of Class B Preferred Shares to be redeemed a
notice in writing of the intention of the Corporation to redeem
such Class B Preferred Shares. Such notice shall be mailed by
letter, postage prepaid, addressed to each such shareholder at
his address as it appears on the records of the Corporation;
provided, however, that accidental failure to give any such
notice to one or more of such shareholders shall not affect the
validity of such redemption. Such notice shall set out the
Redemption Amount and the date on which redemption is to take
place. On or after the date so specified for redemption, the
Corporation shall pay or cause to be paid to or to the order of
the registered holders of the Class B Preferred Shares to be
redeemed the Redemption Amount thereof on presentation and
surrender of the certificates representing the Class B Preferred
Shares called for redemption at the registered office of the
Corporation, or any other place or places designated in the
notice of redemption. On and after the date specified for
redemption in any such notice the Class B Preferred Shares called
for redemption shall cease to be entitled to dividends and the
holders thereof shall not be entitled to exercise any of the
rights of shareholders in respect thereof unless payment of the
Redemption Amount shall not be made upon presentation of
certificates in accordance with the foregoing provisions, in
which case the rights of the shareholders shall remain
unaffected.
The Corporation shall have the right at any time after
the mailing of notice of its intention to redeem any Class B
Preferred Shares as aforesaid to deposit the Redemption Amount
for the shares so called for redemption or for such of the said
shares represented by certificates as have not at the date of
such deposit been surrendered by the holders thereof in
connection with such redemption to a special account in a
specified chartered bank in Canada, named in such notice of
redemption, to be paid without interest to or to the order of the
respective holders of such Class B Preferred Shares called for
redemption upon presentation and surrender to such bank of the
certificates representing the same and upon such deposit being
made or upon the date specified for redemption in such notice,
whichever is the later, the Class B Preferred Shares in respect
whereof such deposit shall have been made shall be deemed to be
redeemed and the rights of the holders thereof shall be limited
to receiving without interest their proportionate part of the
total Redemption Amount so deposited against presentation and
surrender of the said certificates held by them respectively.
Any interest allowed on any such deposit shall belong to the
Corporation. Redemption moneys that are represented by a cheque
which has not been presented to the Corporation's bankers for
payment or that otherwise remain unclaimed (including moneys held
on deposit to a special account as provided for above) for a
period of 6 years from the date specified for redemption shall be
forfeited to the Corporation.
Redemption at the Option of the Holders of the Class B Preferred
Shares
Every registered holder of Class B Preferred Shares
may, at his option and in the manner hereinafter provided,
require the Corporation to redeem at any time after the fifth
anniversary of the Effective Date all, but not part only, of the
Class B Preferred Shares held by such holder upon payment for
each share to be redeemed of the Redemption Amount.
In the case of the redemption of Class B Preferred
Shares under the provisions of this paragraph, the holder thereof
shall surrender the certificate or certificates representing such
Class B Preferred Shares at the registered office of the
Corporation accompanied by a notice in writing (hereinafter
called a "redemption notice") signed by such holder requiring the
Corporation to redeem all, but not part only, of the Class B
Preferred Shares represented thereby. As soon as is practicable
following receipt of a redemption notice, the Corporation shall
pay or cause to be paid to or to the order of the registered
holder of the Class B Preferred Shares to be redeemed the
Redemption Amount thereof.
Dissolution
In the event of the dissolution, liquidation or
winding-up of the Corporation, whether voluntary or involuntary,
or any other distribution of assets of the Corporation among its
shareholders for the purpose of winding up its affairs, subject
to the prior rights of the holders of the Exchangeable Shares and
any other shares ranking senior to the Class B Preferred Shares
with respect to priority in the distribution of assets upon
dissolution, liquidation or winding-up, the holders of the Class
B Preferred Shares shall be entitled to receive an amount equal
to the Redemption Amount in respect of the Class B Preferred
Shares and any cumulative dividends remaining unpaid, whether or
not declared. After payment to the holders of the Class B
Preferred Shares of such amounts, such holders shall not be
entitled to share in any further distribution of the assets of
the Corporation.
Voting Rights
Except where specifically provided by the Canada
Business Corporations Act, the holders of the Class B Preferred
Shares shall not be entitled to receive notice of or to attend
meetings of the shareholders of the Corporation and shall not be
entitled to vote at any meeting of shareholders of the
Corporation.
PROVISIONS ATTACHING TO THE COMMON SHARES OF THE CORPORATION
The common shares in the capital of the Corporation
shall have attached thereto the following rights, privileges,
restrictions and conditions:
Dividends
Subject to the prior rights of the holders of the
Exchangeable Shares, the Class B Preferred Shares and any other
shares ranking senior to the common shares with respect to
priority in the payment of dividends, the holders of common
shares shall be entitled to receive dividends and the Corporation
shall pay dividends thereon, as and when declared by the Board of
Directors out of moneys properly applicable to the payment of
dividends, in such amount and in such form as the Board of
Directors may from time to time determine and all dividends which
the Board of Directors may declare on the common shares shall be
declared and paid in equal amounts per share on all common shares
at the time outstanding.
Dissolution
In the event of the dissolution, liquidation or
winding-up of the Corporation, whether voluntary or involuntary,
or any other distribution of assets of the Corporation among its
shareholders for the purpose of winding up its affairs, subject
to the prior rights of the holders of the Exchangeable Shares,
the Class B Preferred Shares and any other shares ranking senior
to the common shares with respect to priority in the distribution
of assets upon dissolution, liquidation or winding-up, the
holders of the common shares shall be entitled to receive the
remaining property and assets of the Corporation.
Voting Rights
The holders of the common shares shall be entitled to
receive notice of and to attend all meetings of the shareholders
of the Corporation and shall have one vote for each common share
held at all meetings of the shareholders of the Corporation,
except for meetings at which only holders of another specified
class or series of shares of the Corporation are entitled to vote
separately as a class or series.
SCHEDULE A
NOTICE OF RETRACTION
To MacDonald Dettwiler Holdings Inc. (the "Corporation") and
Orbital Sciences Corporation ("Orbital")
This notice is given pursuant to Article 5 of the
provisions (the "Share Provisions") attaching to the share(s)
represented by this certificate and all capitalized words and
expressions used in this notice that are defined in the Share
Provisions have the meanings ascribed to such words and
expressions in such Share Provisions.
The undersigned hereby notifies the Corporation that,
subject to the Retraction Call Right referred to below, the
undersigned desires to have the Corporation redeem in accordance
with Article 5 of the Share Provisions:
all share(s) represented by this certificate; or
_______________________ share(s) only.
The undersigned acknowledges the Retraction Call Right
of Orbital to purchase all but not less than all the Retracted
Shares from the undersigned and that this notice shall be deemed
to be an irrevocable offer (subject as hereinafter provided) by
the undersigned to sell the Retracted Shares to Orbital in
accordance with the Retraction Call Right on the Retraction Date
for the Retraction Call Purchase Price and on the other terms and
conditions set out in section 5.1 of the Plan of Arrangement. If
Orbital determines not to exercise the Retraction Call Right, the
Corporation will notify the undersigned of such fact as soon as
possible.
The undersigned acknowledges that if, as a result of
solvency provisions of applicable law or otherwise, the
Corporation fails to redeem all Retracted Shares, the undersigned
will be deemed to have exercised the Exchange Right (as defined
in the Voting and Exchange Trust Agreement) so as to require
Orbital to purchase the unredeemed Retracted Shares.
The undersigned hereby represents and warrants to the
Corporation and Orbital:
(i) that the undersigned has good title to, and
owns, the share(s) represented by this certificate to
be acquired by the Corporation or Orbital, as the case
may be, free and clear of all Liens; AND
(ii) either
the undersigned is a
resident of Canada for purposes of
the Income Tax Act (Canada); OR
the undersigned is
not a resident of Canada for
purposes of the Income Tax Act
(Canada).
The undersigned hereby acknowledges that, if the undersigned is
not a resident of Canada, and has not submitted with this notice
a certificate issued by Revenue Canada under section 116 of the
Income Tax Act (Canada) in respect of the Retracted Shares, the
amount of any securities or cash resulting from the retraction or
the purchase of the Retracted Shares will be reduced by the
amount of withholdings required under the Income Tax Act
(Canada).
____________________ ____________________ ____________________
____ ______ ____
(Date) (Signature of Share (Guarantee of Signat
holder) ure)
Please check box if the securities and any cheque(s)
resulting from the retraction or purchase of the Retracted
Shares are to be held for pick-up by the shareholder at the
principal transfer office of Montreal Trust Company of
Canada (the "Transfer Agent") at 510 Burrard Street,
Vancouver, British Columbia, V6C 3B9 failing which the
securities and any cheque(s) will be mailed to the last
address of the shareholder as it appears on the register.
NOTE: This panel must be completed and this certificate,
together with such additional documents as the Transfer
Agent may require, must be deposited with the Transfer Agent
at its principal transfer office in Vancouver. The
securities and any cheque(s) resulting from the retraction
or purchase of the Retracted Shares will be issued and
registered in, and made payable to, respectively, the name
of the shareholder as it appears on the register of the
Corporation and the securities and cheque(s) resulting from
such retraction or purchase will be delivered to such
shareholder as indicated above, unless the form appearing
immediately below is duly completed.
________________________________________ ______________________
________ _____
Name of Person in Whose Name Securities Date
or
Cheque(s) Are To Be Registered, Issued
or
Delivered (please print)
________________________________________ ______________________
________ _____
Street Address or P.O. Box Signature of
Shareholder
________________________________________ ______________________
________ _____
City-Province Signature Guaranteed
by
NOTE: If the notice of retraction is for less than all of the
share(s) represented by this certificate, a certificate
representing the remaining shares of the Corporation will be
issued and registered in the name of the shareholder as it
appears on the register of the Corporation, unless the Share
Transfer Power on the share certificate is duly completed in
respect of such shares.
EXHIBIT 2.2
VOTING AND EXCHANGE TRUST AGREEMENT
MEMORANDUM OF AGREEMENT made as of the day of
, 1995.
B E T W E E N:
ORBITAL SCIENCES CORPORATION,
a corporation existing under
the laws of the State of
Delaware,
(hereinafter referred to as "Orbital"),
- and -
MacDONALD DETTWILER HOLDINGS INC.,
(formerly known as 3173623 Canada Inc.)
a corporation existing under
the laws of Canada,
(hereinafter referred to as "Corporation"),
- and -
STATE STREET BANK AND TRUST COMPANY,
a ! existing under the laws
of the United States,
(hereinafter referred to as "Trustee").
WHEREAS pursuant to a combination agreement dated as of
August 31, 1995 (the "Combination Agreement"), by and between
Orbital, the Corporation and MacDonald, Dettwiler and Associates
Ltd. ("MDA"), the parties agreed that on the Effective Date (as
defined in the Combination Agreement), Orbital and the
Corporation would execute and deliver a Voting and Exchange Trust
Agreement containing the terms and conditions set forth in
Exhibit 2.2 to the Combination Agreement together with such other
terms and conditions as may be agreed to by the parties to the
Combination Agreement acting reasonably;
AND WHEREAS pursuant to an arrangement (the
"Arrangement") effected by articles of arrangement dated
, 1995 filed pursuant to the Canada Business Corporations Act,
each issued and outstanding common share of MDA (an "MDA Common
Share") was exchanged directly or indirectly for 0.# of an issued
and outstanding Exchangeable Non-Voting Share of the Corporation
(the "Exchangeable Shares");
AND WHEREAS the aforesaid articles of arrangement set
forth the rights, privileges, restrictions and conditions
(collectively the "Exchangeable Share Provisions") attaching to
the Exchangeable Shares;
AND WHEREAS Orbital is to provide voting rights in
Orbital to each holder (other than Orbital and its Affiliates)
from time to time of Exchangeable Shares, such voting rights per
Exchangeable Share to be equivalent to the voting rights per
share of the common stock, par value U.S. $.01 per share, of
Orbital (the "Orbital Common Shares");
AND WHEREAS Orbital is to grant to and in favour of the
holders (other than Orbital and its Affiliates) from time to time
of Exchangeable Shares the right, in the circumstances set forth
herein, to require Orbital to purchase from each such holder all
or any part of the Exchangeable Shares held by the holder;
AND WHEREAS the parties desire to make appropriate
provision and to establish a procedure whereby voting rights in
Orbital shall be exercisable by holders (other than Orbital and
its Affiliates) from time to time of Exchangeable Shares by and
through the Trustee, which will hold legal title to one share of
Orbital Special Voting Preferred Stock, U.S. $.01 par value (the
"Orbital Special Voting Stock"), to which voting rights attach
for the benefit of such holders and whereby the rights to require
Orbital to purchase Exchangeable Shares from the holders thereof
shall be exercisable by such holders from time to time of
Exchangeable Shares by and through the Trustee, which will hold
legal title to such rights for the benefit of such holders;
AND WHEREAS these recitals and any statements of fact
in this Agreement are made by Orbital and the Corporation and not
by the Trustee;
NOW THEREFORE in consideration of the respective
covenants and agreements provided in this Agreement and for other
good and valuable consideration (the receipt and sufficiency of
which are hereby acknowledged), the parties agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions. In this Agreement, the following terms
shall have the following meanings:
"Affiliate" of any person means any other person
directly or indirectly controlling, controlled by, or under
common control of, that person. For the purposes of this
definition, "control" (including, with correlative meanings, the
terms "controlling", "controlled by" and "under common control
of"), as applied to any person, means the possession by another
person, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that first
mentioned person, whether through the ownership of voting
securities, by contract or otherwise.
"Arrangement" has the meaning ascribed thereto in the
recitals hereto.
"Automatic Exchange Rights" means the benefit of the
obligation of Orbital to effect the automatic exchange of shares
of Orbital Common Shares for Exchangeable Shares pursuant to
subsection 5.12(c) hereof.
"Board of Directors" means the Board of Directors of
the Corporation.
"Business Day" means a day other than a Saturday, a
Sunday or a day when banks are not open for business in one or
both of Vancouver, British Columbia and the Commonwealth of
Virginia.
"Call Rights" means collectively the Liquidation Call
Right, the Redemption Call Right and the Retraction Call Right.
"Canadian Dollar Equivalent" means in respect of an
amount expressed in a foreign currency (the "Foreign Currency
Amount") at any date the product obtained by multiplying (a) the
Foreign Currency Amount by (b) the noon spot exchange rate on
such date for such foreign currency expressed in Canadian dollars
as reported by the Bank of Canada or, in the event such spot
exchange rate is not available, such exchange rate on such date
for such foreign currency expressed in Canadian dollars as may be
deemed by the Board of Directors to be appropriate for such
purpose.
"CBCA" means the Canada Business Corporations Act, as
amended;
"Current Market Price" means, in respect of Orbital
Common Shares on any date, the Canadian Dollar Equivalent of the
closing sale price of Orbital Common Shares on such date (or, if
no trades of any Orbital Common Shares occurred on such date, on
the last trading day prior thereto on which such trades occurred)
reported on the NASDAQ National Market System, or, if the Orbital
Common Shares are not then quoted on the NASDAQ National Market
System, on such other stock exchange or automated quotation
system on which the Orbital Common Shares are listed or quoted,
as the case may be, as may be selected by the Board of Directors
for such purpose; provided, however, that if in the opinion of
the Board of Directors the public distribution or trading
activity of Orbital Common Shares during such period does not
create a market that reflects the fair market value of Orbital
Common Shares, then the Current Market Price of Orbital Common
Shares shall be determined by the Board of Directors based upon
the advice of such qualified independent financial advisors as
the Board of Directors may deem to be appropriate, and provided
further that any such selection, opinion or determination by the
Board of Directors shall be conclusive and binding.
"Current Orbital Common Share Equivalent" has the
meaning ascribed thereto in the Exchangeable Share Provisions.
"Default Event" means any failure, other than by reason
of an Insolvency Event, of the Corporation to perform any of its
obligations pursuant to the Exchangeable Share Provisions,
including without limitation its obligation to redeem any
Retracted Shares.
"Exchange Right" has the meaning ascribed thereto in
section 5.1 hereof.
"Exchangeable Share Provisions" has the meaning
ascribed thereto in the recitals hereto.
"Exchangeable Shares" has the meaning ascribed thereto
in the recitals hereto.
"Holder Votes" has the meaning ascribed thereto in
section 4.2 hereof.
"Holders" means the registered holders from time to
time of Exchangeable Shares, other than Orbital and its
Affiliates.
"Insolvency Event" means the institution by the
Corporation of any proceeding to be adjudicated a bankrupt or
insolvent or to be dissolved or wound up, or the consent of the
Corporation to the institution of bankruptcy, insolvency,
dissolution or winding up proceedings against it, or the filing
of a petition, answer or consent seeking dissolution or winding
up under any bankruptcy, insolvency or analogous laws, including
without limitation the Companies Creditors' Arrangement Act
(Canada) and the Bankruptcy and Insolvency Act (Canada), and the
failure by the Corporation to contest in good faith any such
proceedings commenced in respect of the Corporation within 15
days of becoming aware thereof, or the consent by the Corporation
to the filing of any such petition or to the appointment of a
receiver, or the making by the Corporation of a general
assignment for the benefit of creditors, or the admission in
writing by the Corporation of its inability to pay its debts
generally as they become due, or the Corporation not being
permitted, pursuant to solvency requirements of applicable law,
to redeem any Retracted Shares pursuant to section 5.6 of the
Exchangeable Share Provisions.
"Lien" has the meaning ascribed thereto in the Plan of
Arrangement.
"Liquidation Call Right" has the meaning ascribed
thereto in the Plan of Arrangement.
"Liquidation Event" has the meaning ascribed thereto in
subsection 5.12(a) hereof.
"Liquidation Event Effective Date" has the meaning
ascribed thereto in subsection 5.12(c) hereof.
"List" has the meaning ascribed thereto in section 4.6
hereof.
"Officer's Certificate" means, with respect to Orbital
or the Corporation, as the case may be, a certificate signed by
any one of the Chairman of the Board, the President, any
Vice-President or any other senior officer of Orbital or the
Corporation, as the case may be.
"Orbital Common Shares" has the meaning ascribed
thereto in the recitals hereto.
"Orbital Consent" has the meaning ascribed thereto in
section 4.2 hereof.
"Orbital Meeting" has the meaning ascribed thereto in
section 4.2 hereof.
"Orbital Special Voting Stock" has the meaning ascribed
thereto in the recitals hereto.
"Orbital Successor" has the meaning ascribed thereto in
subsection 10.1(a) hereof.
"Person" includes an individual, partnership,
corporation, company, unincorporated syndicate or organization,
trust, trustee, executor, administrator and other legal
representative.
"Plan of Arrangement" means the plan of arrangement of
the Corporation providing for the Arrangement.
"Redemption Call Right" has the meaning ascribed
thereto in the Plan of Arrangement.
"Retracted Shares" has the meaning ascribed thereto in
section 5.7 hereof.
"Retraction Call Right" has the meaning ascribed
thereto in the Plan of Arrangement.
"Support Agreement" means that certain support
agreement made as of even date herewith between the Corporation
and Orbital.
"Trust" means the trust created by this Agreement.
"Trust Estate" means the Voting Share, any other
securities, the Exchange Right, the Automatic Exchange Rights and
any money or other property that may be held by the Trustee from
time to time pursuant to this Agreement.
"Voting Rights" means the voting rights attached to the
Voting Share.
"Voting Share" means the one share of Orbital Special
Voting Stock, issued by Orbital to and deposited with the
Trustee, which entitles the holder of record to a number of votes
at meetings of holders of Orbital Common Shares equal to the
number of Exchangeable Shares outstanding from time to time,
other than Exchangeable Shares held by Orbital and its
Affiliates, multiplied by the Current Orbital Common Share
Equivalent at the relevant time.
1.2 Interpretation not Affected by Headings, etc. The
division of this Agreement into articles, sections and paragraphs
and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation of
this Agreement.
1.3 Number, Gender, etc. Words importing the singular
number only shall include the plural and vice versa. Words
importing the use of any gender shall include all genders.
1.4 Date for any Action. If any date on which any action
is required to be taken under this Agreement is not a Business
Day, such action shall be required to be taken on the next
succeeding Business Day.
1.5 Withholding of Tax. All amounts required to be paid,
deposited or delivered hereunder shall be paid, deposited or
delivered after deduction of any amount required by applicable
law to be deducted or withheld on account of tax and the
deduction of such amounts and remittance to the applicable tax
authorities shall, to the extent thereof, satisfy such
requirement to pay, deposit or deliver hereunder.
ARTICLE 2
PURPOSE OF AGREEMENT
2.1 Establishment of Trust. The purpose of this Agreement
is to create the Trust for the benefit of the Holders, as herein
provided. The Trustee will hold the Voting Share in order to
enable the Trustee to exercise the Voting Rights and will hold
the Exchange Right and the Automatic Exchange Rights in order to
enable the Trustee to exercise such rights, in each case as
trustee for and on behalf of the Holders as provided in this
Agreement.
ARTICLE 3
VOTING SHARE
3.1 Issue and Ownership of the Voting Share. In
consideration of the granting of the Call Rights to Orbital,
Orbital hereby issues to and deposits with the Trustee the Voting
Share to be hereafter held of record by the Trustee as trustee
for and on behalf of, and for the use and benefit of, the Holders
and in accordance with the provisions of this Agreement. Orbital
hereby acknowledges receipt from the Trustee as trustee for and
on behalf of the Holders of good and valuable consideration (and
the adequacy thereof) for the issuance of the Voting Share by
Orbital to the Trustee. During the term of the Trust and subject
to the terms and conditions of this Agreement, the Trustee shall
possess and be vested with full legal ownership of the Voting
Share and shall be entitled to exercise all of the rights and
powers of an owner with respect to the Voting Share, provided
that the Trustee shall:
(a) hold the Voting Share and the legal
title thereto as trustee solely for the use and
benefit of the Holders in accordance with the
provisions of this Agreement; and
(b) except as specifically authorized by
this Agreement, have no power or authority to
sell, transfer, vote or otherwise deal in or with
the Voting Share and the Voting Share shall not be
used or disposed of by the Trustee for any purpose
other than the purposes for which this Trust is
created pursuant to this Agreement.
3.2 Legended Share Certificates. The Corporation shall
cause each certificate representing Exchangeable Shares to bear
an appropriate legend notifying the Holders of their right to
instruct the Trustee with respect to the exercise of the Voting
Rights with respect to the Exchangeable Shares held by Holders.
3.3 Safe Keeping of Certificate. The certificate
representing the Voting Share shall at all times be held in safe
keeping by the Trustee.
ARTICLE 4
VOTING RIGHTS
4.1 Voting Rights. The Trustee, as the holder of record of
the Voting Share, shall be entitled to all of the Voting Rights,
including the right to consent to or to vote in person or by
proxy the Voting Share, on any matter, question or proposition
whatsoever that may properly come before the stockholders of
Orbital for their vote at an Orbital Meeting or in connection
with an Orbital Consent. The Voting Rights shall be and remain
vested in and exercised by the Trustee. Subject to section 6.15
hereof, the Trustee shall exercise the Voting Rights only on the
basis of instructions received pursuant to this Article 4 from
Holders entitled to instruct the Trustee as to the voting thereof
at the time at which an Orbital Consent is sought or an Orbital
Meeting is held. To the extent that no instructions are received
from a Holder with respect to the Voting Rights to which such
Holder is entitled, the Trustee shall not exercise or permit the
exercise of such Holder's Voting Rights.
4.2 Number of Votes. With respect to all meetings of
stockholders of Orbital at which holders of Orbital Common Shares
are entitled to vote (an "Orbital Meeting") and with respect to
all written consents sought from the holders of Orbital Common
Shares (an "Orbital Consent"), each Holder shall be entitled to
instruct the Trustee to cast and exercise, in the manner
instructed, such number of votes comprised in the Voting Rights
as is equal to the Current Orbital Common Share Equivalent on the
record date established by Orbital or by applicable law for such
Orbital Meeting or Orbital Consent, as the case may be, for each
Exchangeable Share owned of record by such Holder on such record
date (the "Holder Votes") in respect of each matter, question or
proposition to be voted on at such Orbital Meeting or to be
consented to in connection with such Orbital Consent.
4.3 Mailings to Shareholders. With respect to each Orbital
Meeting and Orbital Consent, the Trustee shall mail or cause to
be mailed (or otherwise communicate in the same manner as Orbital
utilizes in communications to holders of Orbital Common Shares)
to each of the Holders named in the List on the same day as the
initial mailing of notice (or other communication) with respect
thereto is given by Orbital or any third party to its
stockholders:
(a) a copy of such notice, together with any
proxy or information statement and related
materials to be provided to stockholders of
Orbital;
(b) a statement that such Holder is entitled
to instruct the Trustee as to the exercise of the
Holder Votes with respect to such Orbital Meeting
or Orbital Consent, as the case may be, or,
pursuant to section 4.7 hereof, to attend such
Orbital Meeting and to exercise personally the
Holder Votes thereat;
(c) a statement as to the manner in which
such instructions may be given to the Trustee,
including an express indication that instructions
may be given to the Trustee to give:
(d) a proxy to such Holder or his designee
to exercise personally the Holder Votes; or
(i) a proxy to a
designated agent or other representative
of the management of Orbital to exercise
such Holder Votes;
(e) a statement that if no such instructions
are received from the Holder, the Holder Votes to
which such Holder is entitled will not be
exercised;
(f) a form of direction whereby the Holder
may so direct and instruct the Trustee as
contemplated herein; and
(g) a statement of (i) the time and date by
which such instructions must be received by the
Trustee in order to be binding upon it, which in
the case of a Orbital Meeting shall not be earlier
than the close of business on the second Business
Day prior to such meeting, and (ii) the method for
revoking or amending such instructions.
For the purpose of determining Holder Votes to which a Holder is
entitled in respect of any such Orbital Meeting or Orbital
Consent, the number of Exchangeable Shares owned of record by the
Holder shall be determined at the close of business on the record
date established by Orbital or by applicable law for purposes of
determining stockholders entitled to vote at such Orbital Meeting
or to give written consent in connection with such Orbital
Consent. Orbital shall notify the Trustee of any decision of the
board of directors of Orbital with respect to the calling of any
such Orbital Meeting or the seeking by Orbital of any such
Orbital Consent and shall provide all necessary information and
materials to the Trustee in each case promptly and in any event
in sufficient time to enable the Trustee to perform its
obligations contemplated by this section 4.3.
4.4 Copies of Stockholder Information. Orbital shall
deliver to the Trustee copies of all proxy materials, (including
notices of Orbital Meetings but excluding proxies to vote Orbital
Common Shares), information statements, reports (including
without limitation all interim and annual financial statements)
and other written communications that are to be distributed by
Orbital from time to time to holders of Orbital Common Shares in
sufficient quantities and in sufficient time so as to enable the
Trustee to send those materials to each Holder at the same time
as such materials are first sent to holders of Orbital Common
Shares. The Trustee shall mail or otherwise send to each Holder,
at the expense of Orbital, copies of all such materials (and all
materials specifically directed to the Holders or to the Trustee
for the benefit of the Holders by Orbital) received by the
Trustee from Orbital at the same time as such materials are first
sent to holders of Orbital Common Shares. The Trustee shall make
copies of all such materials available for inspection by any
Holder at the Trustee's principal office.
4.5 Other Materials. Immediately after receipt by Orbital
or any stockholder of Orbital of any material sent or given
generally to the holders of Orbital Common Shares by or on behalf
of a third party, including without limitation dissident proxy
and information circulars (and related information and material)
and tender and exchange offer circulars (and related information
and material), Orbital shall use all commercially reasonable
efforts to obtain and deliver to the Trustee copies thereof in
sufficient quantities so as to enable the Trustee to forward such
material (unless the same has been provided directly to Holders
by such third party) to each Holder as soon as possible
thereafter. As soon as practicable after receipt thereof, the
Trustee shall mail or otherwise send to each Holder, at the
expense of Orbital, copies of all such materials received by the
Trustee from Orbital. The Trustee shall also make copies of all
such materials available for inspection by any Holder at the
Trustee's principal office.
4.6 List of Persons Entitled to Vote. The Corporation
shall, (a) prior to each annual, general and special Orbital
Meeting or the seeking of any Orbital Consent and (b) forthwith
upon each request made at any time by the Trustee in writing,
prepare or cause to be prepared a list (a "List") of the names
and addresses of the Holders arranged in alphabetical order and
showing the number of Exchangeable Shares held of record by each
such Holder, in each case at the close of business on the date
specified by the Trustee in such request or, in the case of a
List prepared in connection with an Orbital Meeting or an Orbital
Consent, at the close of business on the record date established
by Orbital or pursuant to applicable law for determining the
holders of Orbital Common Shares entitled to receive notice of
and/or to vote at such Orbital Meeting or to give consent in
connection with such Orbital Consent. Each such List shall be
delivered to the Trustee promptly after receipt by the
Corporation of such request or the record date for such meeting
or seeking of consent, as the case may be, and in any event
within sufficient time as to enable the Trustee to perform its
obligations under this Agreement. Orbital agrees to give the
Corporation notice (with a copy to the Trustee) of the calling of
any Orbital Meeting or the seeking of any Orbital Consent,
together with the record dates therefor, sufficiently prior to
the date of the calling of such meeting or seeking of such
consent so as to enable the Corporation to perform its
obligations under this section 4.6.
4.7 Entitlement to Direct Votes. Any Holder named in a
List prepared in connection with any Orbital Meeting or any
Orbital Consent shall be entitled (a) to instruct the Trustee in
the manner described in section 4.3 hereof with respect to the
exercise of the Holder Votes to which such Holder is entitled or
(b) to attend such meeting and personally to exercise thereat (or
to exercise with respect to any written consent), as the proxy of
the Trustee, the Holder Votes to which such Holder is entitled.
4.8 Voting by Trustee, and Attendance of Trustee
Representative, at Meeting.
(a) In connection with each Orbital Meeting
and Orbital Consent, the Trustee shall exercise,
either in person or by proxy, in accordance with
the instructions received from a Holder pursuant
to section 4.3 hereof, the Holder Votes as to
which such Holder is entitled to direct the vote
(or any lesser number thereof as may be set forth
in the instructions); provided, however, that such
written instructions are received by the Trustee
from the Holder prior to the time and date fixed
by it for receipt of such instructions in the
notice given by the Trustee to the Holder pursuant
to section 4.3 hereof.
(b) The Trustee shall cause such
representatives as are empowered by it to sign and
deliver, on behalf of the Trustee, proxies for
Voting Rights to attend each Orbital Meeting.
Upon submission by a Holder (or its designee) of
identification satisfactory to the Trustee's
representatives, and at the Holder's request, such
representatives shall sign and deliver to such
Holder (or its designee) a proxy to exercise
personally the Holder Votes as to which such
Holder is otherwise entitled hereunder to direct
the vote, if such Holder either (i) has not
previously given the Trustee instructions pursuant
to section 4.3 hereof in respect of such meeting,
or (ii) submits to the Trustee's representatives
written revocation of any such previous
instructions. At such meeting, the Holder
exercising such Holder Votes shall have the same
rights as the Trustee to speak at the meeting in
respect of any matter, question or proposition, to
vote by way of ballot at the meeting in respect of
any matter, question or proposition and to vote at
such meeting by way of a show of hands in respect
of any matter, question or proposition.
4.9 Distribution of Written Materials. Any written
materials to be distributed by the Trustee to the Holders
pursuant to this Agreement shall be delivered or sent by mail (or
otherwise communicated in the same manner as Orbital utilizes in
communications to holders of Orbital Common Shares) to each
Holder at its address as shown on the books of the Corporation.
The Corporation shall provide or cause to be provided to the
Trustee for this purpose, on a timely basis and without charge or
other expense:
(a) a List; and
(b) upon the request of the Trustee, mailing
labels to enable the Trustee to carry out its
duties under this Agreement.
4.10 Termination of Voting Rights. Except with respect to
an Orbital Meeting or Orbital Consent for which the record date
has occurred, all of the rights of a Holder with respect to the
Holder Votes exercisable in respect of the Exchangeable Shares
held by such Holder, including the right to instruct the Trustee
as to the voting of or to vote personally such Holder Votes,
shall be deemed to be surrendered by the Holder to Orbital and
such Holder Votes and the Voting Rights represented thereby shall
cease immediately upon the delivery by such Holder to the Trustee
of the certificates representing such Exchangeable Shares in
connection with the exercise by the Holder of the Exchange Right
or the occurrence of the automatic exchange pursuant to the
Automatic Exchange Rights (unless in either case Orbital shall
not have delivered the requisite Orbital Common Shares issuable
in exchange therefor to the Trustee for delivery to the Holders),
or upon the redemption of Exchangeable Shares pursuant to Article
5 or Article 6 of the Exchangeable Share Provisions, or upon the
effective date of the liquidation, dissolution or winding-up of
the Corporation pursuant to Article 4 of the Exchangeable Share
Provisions, or upon the purchase of Exchangeable Shares from the
holder thereof by Orbital pursuant to the exercise by Orbital of
the Retraction Call Right, the Redemption Call Right or the
Liquidation Call Right.
4.11 Issue of Additional Shares. During the term of this
Agreement, Orbital will not issue any shares of Orbital Special
Voting Stock, in addition to the Voting Share.
ARTICLE 5
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
5.1 Grant and Ownership of the Exchange Right. In
consideration of the granting of the Call Rights to Orbital,
Orbital hereby grants to the Trustee as trustee for and on behalf
of, and for the use and benefit of, the Holders (a) the right
(the "Exchange Right"), upon the occurrence and during the
continuance of an Insolvency Event or Default Event, to require
Orbital to purchase from each Holder all or any part of the
Exchangeable Shares held by such Holder and (b) the Automatic
Exchange Rights, all in accordance with the provisions of this
agreement. Orbital hereby acknowledges receipt from the Trustee
as trustee for and on behalf of the Holders of good and valuable
consideration (and the adequacy thereof) for the grant of the
Exchange Right and the Automatic Exchange Rights by Orbital to
the Trustee. During the term of the Trust and subject to the
terms and conditions of this Agreement, the Trustee shall possess
and be vested with full legal ownership of the Exchange Right and
the Automatic Exchange Rights and shall be entitled to exercise
all of the rights and powers of an owner with respect to the
Exchange Right and the Automatic Exchange Rights, provided that
the Trustee shall:
(a) hold the Exchange Right and the
Automatic Exchange Rights and the legal title
thereto as trustee solely for the use and benefit
of the Holders in accordance with the provisions
of this Agreement; and
(b) except as specifically authorized by
this Agreement, have no power or authority to
exercise or otherwise deal in or with the Exchange
Right or the Automatic Exchange Rights, and the
Trustee shall not exercise any such rights for any
purpose other than the purposes for which this
Trust is created pursuant to this Agreement.
5.2 Legended Share Certificates. The Corporation shall
cause each certificate representing Exchangeable Shares to bear
an appropriate legend notifying the Holders of:
(a) their right to instruct the Trustee with
respect to the exercise of the Exchange Right in
respect of the Exchangeable Shares held by a
Holder; and
(b) the Automatic Exchange Rights.
5.3 General Exercise of Exchange Right. The Exchange Right
shall be and remain vested in and exercisable by the Trustee.
Subject to section 6.15 hereof, the Trustee shall exercise the
Exchange Right only on the basis of instructions received
pursuant to this Article 5 from Holders entitled to instruct the
Trustee as to the exercise thereof. To the extent that no
instructions are received from a Holder with respect to the
Exchange Right, the Trustee shall not exercise or permit the
exercise of the Exchange Right.
5.4 Purchase Price. The purchase price payable by Orbital
for each Exchangeable Share to be purchased by Orbital under the
Exchange Right shall be an amount per share equal to (a) the
Current Market Price multiplied by the Current Orbital Common
Share Equivalent, in each case determined on the day of closing
of the purchase and sale of such Exchangeable Share under the
Exchange Right, which shall be satisfied in full in respect of
the Exchangeable Shares in regard to which a Holder has exercised
the Exchange Right by causing to be delivered to such Holder such
whole number of Orbital Common Shares as is equal to the product
obtained by multiplying the number of such Exchangeable Shares by
the Current Orbital Common Share Equivalent (together with an
amount in lieu of any fractional Orbital Common Share resulting
from such calculation payable in accordance with section 9.4 of
the Exchangeable Share Provisions), plus (b) the aggregate of all
dividends declared and unpaid on each such Exchangeable Share
(provided that if the record date for any such declared and
unpaid dividends occurs on or after the day of closing of such
purchase and sale the purchase price shall not include such
declared and unpaid dividends).
5.5 Exercise Instructions. Subject to the terms and
conditions herein set forth, a Holder shall be entitled, upon the
occurrence and during the continuance of an Insolvency Event, to
instruct the Trustee to exercise the Exchange Right with respect
to all or any part of the Exchangeable Shares registered in the
name of such Holder on the books of the Corporation. To cause
the exercise of the Exchange Right by the Trustee, the Holder
shall deliver to the Trustee, in person or by certified or
registered mail, at its principal office or at such other place
as the Trustee may from time to time designate by written notice
to the Holders, the certificates representing the Exchangeable
Shares that such Holder desires Orbital to purchase, duly
endorsed in blank, and accompanied by such other documents and
instruments as may be required to effect a transfer of
Exchangeable Shares under the CBCA and the by-laws of the
Corporation and such additional documents and instruments as the
Trustee may reasonably require together with (a) a duly completed
form of notice of exercise of the Exchange Right, contained on
the reverse of or attached to the Exchangeable Share
certificates, stating (i) that the Holder thereby instructs the
Trustee to exercise the Exchange Right so as to require Orbital
to purchase from the Holder the number of Exchangeable Shares
specified therein, (ii) that such Holder has good title to and
owns all such Exchangeable Shares to be acquired by Orbital free
and clear of all Liens, (iii) the names in which the certificates
representing Orbital Common Shares issuable in connection with
the exercise of the Exchange Right are to be issued and (iv) the
names and addresses of the persons to whom such new certificates
should be delivered and (b) payment (or evidence satisfactory to
the Trustee, the Corporation and Orbital of payment) of the taxes
(if any) payable as contemplated by section 5.8 of this
Agreement. If only a part of the Exchangeable Shares represented
by any certificate or certificates delivered to the Trustee are
to be purchased by Orbital under the Exchange Right, a new
certificate for the balance of such Exchangeable Shares shall be
issued to the holder at the expense of the Corporation.
5.6 Delivery of Orbital Common Shares: Effect of Exercise.
Promptly after receipt of the certificates representing the
Exchangeable Shares that the Holder desires Orbital to purchase
under the Exchange Right (together with such documents and
instruments of transfer and a duly completed form of notice of
exercise of the Exchange Right (and payment of taxes, if any, or
evidence thereof in accordance with section 5.8)), duly endorsed
for transfer to Orbital, the Trustee shall notify Orbital and the
Corporation of its receipt of the same, which notice to Orbital
and the Corporation shall constitute exercise of the Exchange
Right by the Trustee on behalf of the holder of such Exchangeable
Shares, and Orbital shall immediately thereafter deliver or cause
to be delivered to the Trustee, for delivery to the Holder of
such Exchangeable Shares (or to such other persons, if any,
properly designated by such Holder), the certificates for the
number of Orbital Common Shares issuable in connection with the
exercise of the Exchange Right, which shares shall be duly issued
as fully paid and non-assessable and shall be free and clear of
any Liens, and cheques for the balance, if any, of the total
purchase price therefor (or, if part of the purchase price
consists of dividends payable in property, such property or
property the same as or economically equivalent to such
property). Immediately upon the giving of notice by the Trustee
to Orbital and the Corporation of the exercise of the Exchange
Right, as provided in this section 5.6, the closing of the
transaction of purchase and sale contemplated by the Exchange
Right shall be deemed to have occurred, and the Holder of such
Exchangeable Shares shall be deemed to have transferred to
Orbital all of its right, title and interest in and to such
Exchangeable Shares and in the related interest in the Trust
Estate and shall cease to be a holder of such Exchangeable Shares
and shall not be entitled to exercise any of the rights of a
holder in respect thereof, other than the right to receive the
purchase price therefor, unless the requisite number of Orbital
Common Shares (together with a cheque for the balance, if any, of
the purchase price therefor or, if part of the purchase price
consists of dividends payable in property, such property or
property the same as or economically equivalent to such property)
is not allotted, issued and delivered by Orbital to the Trustee
for delivery to such Holder (or to other persons, if any,
properly designated by such Holder) within five Business Days of
the date of the giving of such notice by the Trustee, in which
case the rights of the Holder shall remain unaffected until such
Orbital Common Shares are so allotted, issued and delivered by
Orbital and any such cheque is so delivered and paid.
Concurrently with such Holder ceasing to be a holder of
Exchangeable Shares, the Holder shall be considered and deemed
for all purposes to be the holder of the Orbital Common Shares
delivered to it pursuant to the Exchange Right.
5.7 Exercise of Exchange Right Subsequent to Retraction.
In the event that a Holder has exercised its right under Article
5 of the Exchangeable Share Provisions to require the Corporation
to redeem any or all of the Exchangeable Shares held by the
Holder (the "Retracted Shares") and is notified by the
Corporation pursuant to section 5.6 of the Exchangeable Share
Provisions that the Corporation is not permitted as a result of
solvency requirements of applicable law to redeem all of such
Retracted Shares, and provided that Orbital shall not have
exercised the Retraction Call Right with respect to the Retracted
Shares, the retraction request shall constitute and shall be
deemed to constitute notice from the Holder to the Trustee
instructing the Trustee to exercise the Exchange Right with
respect to those Retracted Shares that the Corporation is unable
to redeem. In any such event, the Corporation hereby agrees with
the Trustee and in favour of the Holder immediately to notify the
Trustee of such prohibition against the Corporation redeeming all
of the Retracted Shares and immediately to forward or cause to be
forwarded to the Trustee all relevant materials delivered by the
Holder to the Corporation or to the transfer agent of the
Exchangeable Shares (including without limitation a copy of the
retraction request delivered pursuant to section 5.1 of the
Exchangeable Share Provisions) in connection with such proposed
redemption of the Retracted Shares and the Trustee shall
thereupon exercise the Exchange Right with respect to the
Retracted Shares that the Corporation is not permitted to redeem
and will require Orbital to purchase such shares in accordance
with the provisions of this Article 5.
5.8 Stamp or Other Transfer Taxes. Upon any sale of
Exchangeable Shares to Orbital pursuant to the Exchange Right or
the Automatic Exchange Rights, the share certificate or
certificates representing Orbital Common Shares to be delivered
in connection with the payment of the purchase price therefor
shall be issued in the name of the Holder of the Exchangeable
Shares so sold or in such names as such Holder may otherwise
direct in writing without charge to the holder of the
Exchangeable Shares so sold, provided, however, that such Holder
(a) shall pay (and neither Orbital, the Corporation nor the
Trustee shall be required to pay) any documentary, stamp,
transfer or other similar taxes that may be payable in respect of
any transfer involved in the issuance or delivery of such shares
to a person other than such Holder or (b) shall establish to the
satisfaction of the Trustee, Orbital and the Corporation that
such taxes, if any, have been paid.
5.9 Notice of Insolvency Event or Default Event.
Immediately upon the occurrence of an Insolvency Event or Default
Event or any event that with the giving of notice or the passage
of time or both would be an Insolvency Event or Default Event,
the Corporation and Orbital shall give written notice thereof to
the Trustee. As soon as practicable after receiving notice from
the Corporation and Orbital or from any other person of the
occurrence of an Insolvency Event or Default Event, the Trustee
shall mail to each Holder, at the expense of Orbital, a notice of
such Insolvency Event or Default Event, which notice shall
contain a brief statement of the right of the Holders with
respect to the Exchange Right.
5.10 Qualification of Orbital Common Shares. Unless the
staff of the United States Securities and Exchange Commission
(the "SEC") has confirmed the availability of an exemption from
registration under the United States Securities Act of 1933, as
amended (the "Securities Act") as to the issuance of the Orbital
Common Shares in exchange for the Exchangeable Shares pursuant to
the Plan of Arrangement, the Exchangeable Share Provisions or
this Agreement, in response to the No Action Request (as defined
in the Combination Agreement) or Orbital has received an opinion
of counsel reasonably satisfactory to the Corporation to such
effect, then Orbital shall cause such issuance to be registered
under the Securities Act, and shall file a registration statement
covering such issuance with the SEC and use all commercially
reasonable efforts to cause such registration statement to become
effective as soon as practicable and remain effective throughout
the period during which the Exchangeable Shares may be exchanged
in accordance with the Plan of Arrangement, the Exchangeable
Share Provisions or this Agreement. Orbital agrees to file any
such required registration statement as soon as reasonably
practicable. Orbital shall use all reasonable efforts to obtain
all orders required from the applicable Canadian securities
authorities to permit the issuance of the Orbital Common Shares
upon any such exchange of the Exchangeable Shares without
registration or qualification with or approval of or the filing
of any document including any prospectus or similar document or
the taking of any proceeding with or the obtaining of any order,
ruling or consent from any governmental or regulatory authority
under any Canadian federal or provincial law or regulation or
pursuant to the rules and regulations of any regulatory authority
or the fulfilment of any other legal requirement before such
Orbital Common Shares may be issued and delivered by the
Corporation or Orbital to the holder thereof or in order that
such Orbital Common Shares may be freely traded thereafter (other
than any restrictions on transfer by reason of a holder being a
"control person" of the Corporation or Orbital for purposes of
Canadian federal or provincial securities law or an "affiliate"
for purposes of United States Federal or state securities law).
5.11 Reservation of Orbital Common Shares. Orbital hereby
represents and warrants that it has irrevocably reserved for
issuance out of its authorized and unissued capital stock such
number of Orbital Common Shares as is equal to the number of
Exchangeable Shares outstanding at the date hereof and covenants
that it will at all times keep available, free from pre-emptive
and other rights, out of its authorized and unissued capital
stock such number of Orbital Common Shares (or other shares or
securities into which Orbital Common Shares may be reclassified
or changed) as is necessary to enable Orbital and the Corporation
to perform their respective obligations pursuant to this
Agreement, the Exchangeable Share Provisions and the Support
Agreement.
5.12 Automatic Exchange on Liquidation of Orbital.
(a) Orbital shall give the Trustee notice of each of
the following events (a "Liquidation Event") at the time set
forth below:
(i) in the event of any
determination by the Board of Directors of
Orbital to institute voluntary liquidation,
dissolution or winding-up proceedings with
respect to Orbital or to effect any other
distribution of assets of Orbital among its
stockholders for the purpose of winding up
its affairs, at least 60 days prior to the
proposed effective date of such liquidation,
dissolution, winding-up or other
distribution; and
(ii) immediately, upon the
earlier of (A) receipt by Orbital of notice
of and (B) Orbital otherwise becoming aware
of any threatened or instituted claim, suit,
petition or other proceedings with respect to
the involuntary liquidation, dissolution or
winding up of Orbital or to effect any other
distribution of assets of Orbital among its
stockholders for the purpose of winding up
its affairs.
(b) Immediately following receipt by the Trustee from
Orbital of notice of any Liquidation Event, the Trustee shall
give notice thereof to the Holders. Such notice shall include a
brief description of the automatic exchange of Exchangeable
Shares for Orbital Common Shares provided for in subsection
5.12(c) below.
(c) In order that the Holders will be able to
participate on a pro rata basis with the holders of Orbital
Common Shares in the distribution of assets of Orbital in
connection with a Liquidation Event, on the fifth Business Day
prior to the effective date of a Liquidation Event (the
"Liquidation Event Effective Date") all of the then outstanding
Exchangeable Shares shall be automatically exchanged for Orbital
Common Shares. To effect such automatic exchange, Orbital shall
purchase each Exchangeable Share outstanding on the fifth
Business Day prior to the Liquidation Event Effective Date and
held by Holders, and each Holder shall sell the Exchangeable
Shares held by it at such time, for a purchase price per share
equal to (a) the Current Market Price multiplied by the Current
Orbital Common Share Equivalent on such fifth Business Day prior
to the Liquidation Event Effective Date, which shall be satisfied
in full in respect of the Exchangeable Shares held by each Holder
by Orbital issuing to such Holder such whole number of Orbital
Common Shares as is equal to the product obtained by multiplying
the number of such Exchangeable Shares by the Current Orbital
Common Share Equivalent (together with an amount in lieu of any
fractional Orbital Common Share resulting from such calculation
payable in accordance with section 9.4 of the Exchangeable Share
Provisions), plus (b) an additional amount equal to the aggregate
of all dividends declared and unpaid on each such Exchangeable
Share (provided that if the record date for any such declared and
unpaid dividends occurs on or after the day of closing of such
purchase and sale, the purchase price shall not include such
additional amount equal to such declared and unpaid dividends).
(d) On the fifth Business Day prior to the Liquidation
Event Effective Date, the closing of the transaction of purchase
and sale contemplated by the automatic exchange of Exchangeable
Shares for Orbital Common Shares shall be deemed to have
occurred, and each Holder of Exchangeable Shares shall be deemed
to have transferred to Orbital all of the Holder's right, title
and interest in and to such Exchangeable Shares and the related
interest in the Trust Estate and shall cease to be a Holder of
such Exchangeable Shares and Orbital shall issue to the Holder
the Orbital Common Shares issuable upon the automatic exchange of
Exchangeable Shares for Orbital Common Shares and shall deliver
to the Trustee for delivery to the Holder a cheque for the
balance, if any, of the purchase price for such Exchangeable
Shares (or, if any part of the purchase price consists of
dividends payable in property, such property or property that is
the same as or economically equivalent to such property).
Concurrently with such Holder ceasing to be a holder of
Exchangeable Shares, the Holder shall be considered and deemed
for all purposes to be the holder of the Orbital Common Shares
issued to it pursuant to the automatic exchange of Exchangeable
Shares for Orbital Common Shares and the certificates held by the
Holder previously representing the Exchangeable Shares exchanged
by the Holder with Orbital pursuant to such automatic exchange
shall thereafter be deemed to represent the Orbital Common Shares
issued to the Holder by Orbital pursuant to such automatic
exchange. Upon the request of a Holder and the surrender by the
Holder of Exchangeable Share certificates deemed to represent
Orbital Common Shares, duly endorsed in blank and accompanied by
such instruments of transfer as Orbital may reasonably require,
Orbital shall deliver or cause to be delivered to the Holder
certificates representing the Orbital Common Shares of which the
Holder is the holder.
ARTICLE 6
CONCERNING THE TRUSTEE
6.1 Powers and Duties of the Trustee. The rights, powers
and authorities of the Trustee under this Agreement, in its
capacity as trustee of the Trust, shall include:
(a) purchasing the Voting Share from Orbital
as trustee for and on behalf of the Holders in
accordance with the provisions of this Agreement;
(b) granting proxies and distributing
materials to Holders as provided in this
Agreement;
(c) voting the Holder Votes in accordance
with the provisions of this Agreement;
(d) receiving the grant of the Exchange
Right and the Automatic Exchange Rights from
Orbital as trustee for and on behalf of the
Holders in accordance with the provisions of this
Agreement;
(e) exercising the Exchange Right and
enforcing the benefit of the Automatic Exchange
Rights, in each case in accordance with the
provisions of this Agreement and in connection
therewith receiving from Holders Exchangeable
Shares and other requisite documents and
distributing to such Holders the Orbital Common
Shares and cheques, if any, to which such Holders
are entitled upon the exercise of the Exchange
Right or pursuant to the Automatic Exchange
Rights, as the case may be;
(f) holding title to the Trust Estate;
(g) investing any moneys forming, from time
to time, a part of the Trust Estate as provided in
this Agreement;
(h) taking action on its own initiative or
at the direction of a Holder or Holders to enforce
the obligations of Orbital under this Agreement;
and
(i) taking such other actions and doing such
other things as are specifically provided in this
Agreement.
In the exercise of such rights powers and authorities
the Trustee shall have (and is granted) such incidental and
additional rights, powers and authority not in conflict with any
of the provisions of this Agreement as the Trustee, acting in
good faith and in the reasonable exercise of its discretion, may
deem necessary, appropriate or desirable to effect the purpose of
the Trust. Any exercise of such discretionary rights, powers and
authorities by the Trustee shall be final, conclusive and binding
upon all persons. For greater certainty, the Trustee shall have
only those duties as are set out specifically in this Agreement.
The Trustee in exercising its rights, powers, duties
and authorities hereunder shall act honestly and in good faith
with a view to the best interests of the Holders and shall
exercise the care, diligence and skill that a reasonably prudent
trustee would exercise in comparable circumstances.
6.2 No Conflict of Interest. The Trustee represents to the
Corporation and Orbital that at the date of execution and
delivery of this Agreement there exists no material conflict of
interest in the role of the Trustee as a fiduciary hereunder and
the role of the Trustee in any other capacity. The Trustee
shall, within 30 days after it becomes aware that such a material
conflict of interest exists, either eliminate such material
conflict of interest or resign in the manner and with the effect
specified in Article 9 hereof. If, notwithstanding the foregoing
provisions of this section 6.2, the Trustee has such a material
conflict of interest, the validity and enforceability of this
Agreement shall not be affected in any manner whatsoever by
reason only of the existence of such material conflict of
interest. If the Trustee contravenes the foregoing provisions of
this section 6.2, any interested party may apply to the Supreme
Court of British Columbia (Trial Division) for an order that the
Trustee be replaced as trustee hereunder.
6.3 Dealings with Transfer Agents, Registrars, etc. The
Corporation and Orbital irrevocably authorize the Trustee, from
time to time, to:
(a) consult, communicate and otherwise deal
with the respective registrars and transfer
agents, and with any such subsequent registrar or
transfer agent, of the Exchangeable Shares and
Orbital Common Shares; and
(b) requisition, from time to time, (i) from
any such registrar or transfer agent any
information readily available from the records
maintained by it which the Trustee may reasonably
require for the discharge of its duties and
responsibilities under this Agreement and (ii)
from the transfer agent of Orbital Common Shares,
and any subsequent transfer agent of such shares,
the share certificates issuable upon the exercise
from time to time of the Exchange Right and
pursuant to the Automatic Exchange Rights in the
manner specified in Article 5 hereof.
The Corporation and Orbital irrevocably authorize their
respective registrars and transfer agents to comply with all such
requests. Orbital covenants that it will supply its transfer
agent with duly executed share certificates for the purpose of
completing the exercise from time to time of the Exchange Right
and the Automatic Exchange Rights, in each case pursuant to
Article 5 hereof.
6.4 Books and Records. The Trustee shall keep available
for inspection by Orbital and the Corporation, at the Trustee's
principal office, correct and complete books and records of
account relating to the Trustee's actions under this Agreement,
including without limitation all information relating to mailings
and instructions to and from Holders and all transactions
pursuant to the Voting Rights, the Exchange Right and the
Automatic Exchange Rights for the term of this Agreement. On or
before March 31, 1996, and on or before March 31 in every year
thereafter, so long as the Voting Share is on deposit with the
Trustee, the Trustee shall transmit to Orbital and the
Corporation a brief report, dated as of the preceding December
31, with respect to:
(a) the property and funds comprising the
Trust Estate as of that date;
(b) the number of exercises of the Exchange
Right, if any, and the aggregate number of
Exchangeable Shares received by the Trustee on
behalf of Holders in consideration of the issue
and delivery by Orbital of Orbital Common Shares
in connection with the Exchange Right, during the
calendar year ended on such date; and
(c) all other actions taken by the Trustee
in the performance of its duties under this
Agreement that it had not previously reported.
6.5 Income Tax Returns and Reports. The Trustee shall, to
the extent necessary, prepare and file on behalf of the Trust
appropriate United States and Canadian income tax returns and any
other returns or reports as may be required by applicable law or
pursuant to the rules and regulations of any securities exchange
or other trading system through which the Exchangeable Shares are
traded and, in connection therewith, may obtain the advice and
assistance of such experts as the Trustee may consider necessary
or advisable.
6.6 Indemnification Prior to Certain Actions by Trustee.
The Trustee shall exercise any or all of the rights, duties,
powers or authorities vested in it by this Agreement at the
request, order or direction of any Holder upon such Holder
furnishing to the Trustee reasonable funding, security and
indemnity against the costs, expenses and liabilities that may be
incurred by the Trustee therein or thereby, provided that no
Holder shall be obligated to furnish to the Trustee any such
funding, security or indemnity in connection with the exercise by
the Trustee of any of its rights, duties, powers and authorities
with respect to (i) the Voting Share pursuant to Article 4
hereof, subject to section 6.15 hereof, (ii) the Exchange Right
pursuant to Article 5 hereof, subject to section 6.15 hereof, and
(iii) the Automatic Exchange Rights pursuant to Article 5 hereof.
None of the provisions contained in this Agreement
shall require the Trustee to expend or risk its own funds or
otherwise incur financial liability in the exercise of any of its
rights, powers, duties or authorities unless funded and given
security and indemnity as aforesaid.
6.7 Actions by Holders. No Holder shall have the right to
institute any action, suit or proceeding or to exercise any other
remedy authorized by this Agreement for the purpose of enforcing
any of its rights or for the execution of any trust or power
hereunder unless the Holder has requested the Trustee to take or
institute such action, suit or proceeding and furnished the
Trustee with the funding, security and indemnity referred to in
section 6.6 hereof and the Trustee shall have failed to act
within a reasonable time thereafter. In such case, but not
otherwise, the Holder shall be entitled to take proceedings in
any court of competent jurisdiction such as the Trustee might
have taken, it being understood and intended that no one or more
Holders shall have any right in any manner whatsoever to affect,
disturb or prejudice the rights hereby created by any such
action, or to enforce any right hereunder or under the Voting
Rights, the Exchange Right or the Automatic Exchange Rights
except subject to the conditions and in the manner herein
provided, and that all powers and trusts hereunder shall be
exercised and all proceedings at law shall be instituted, had and
maintained by the Trustee, except only as herein provided, and in
any event for the equal benefit of all Holders.
6.8 Reliance upon Declarations. The Trustee shall not be
considered to be in contravention of any of its rights, powers,
duties and authorities hereunder if, when required, it acts and
relies in good faith upon lists, mailing labels, notices,
statutory declarations, certificates, opinions, reports or other
papers or documents furnished pursuant to the provisions hereof
or required by the Trustee to be furnished to it in the exercise
of its rights, powers, duties and authorities hereunder and such
lists, mailing labels, notices, statutory declarations,
certificates, opinions, reports or other papers or documents
comply with the provisions of section 6.9 hereof, if applicable,
and with any other applicable provisions of this Agreement.
6.9 Evidence and Authority to Trustee. The Corporation
and/or Orbital shall furnish to the Trustee evidence of
compliance with the conditions provided for in this Agreement
relating to any action or step required or permitted to be taken
by the Corporation and/or Orbital or the Trustee under this
Agreement or as a result of any obligation imposed under this
Agreement, including, without limitation, in respect of the
Voting Rights, the Exchange Right or the Automatic Exchange
Rights and the taking of any other action to be taken by the
Trustee at the request of or on the application of the
Corporation and/or Orbital forthwith if and when:
(a) such evidence is required by any other
section of this Agreement to be furnished to the
Trustee in accordance with the terms of this
section 6.9; or
(b) the Trustee, in the exercise of its
rights, powers, duties and authorities under this
Agreement, gives the Corporation and/or Orbital
written notice requiring it to furnish such
evidence in relation to any particular action or
obligation specified in such notice.
Such evidence shall consist of an Officer's Certificate
of the Corporation and/or Orbital or a statutory declaration or a
certificate made by persons entitled to sign an Officer's
Certificate stating that any such condition has been complied
with in accordance with the terms of this Agreement.
Whenever such evidence relates to a matter other than
the Voting Rights, the Exchange Right or the Automatic Exchange
Rights, and except as otherwise specifically provided herein,
such evidence may consist of a report or opinion of any
solicitor, auditor, accountant, appraiser, valuer, engineer or
other expert or any other person whose qualifications give
authority to a statement made by him, provided that if such
report or opinion is furnished by a director, officer or employee
of the Corporation and/or Orbital it shall be in the form of an
Officer's Certificate or a statutory declaration.
Each statutory declaration, certificate, opinion or
report furnished to the Trustee as evidence of compliance with a
condition provided for in this Agreement shall include a
statement by the person giving the evidence:
(a) declaring that he has read and
understands the provisions of this Agreement
relating to the condition in question;
(b) describing the nature and scope of the
examination or investigation upon which he based
the statutory declaration, certificate, statement
or opinion; and
(c) declaring that he has made such
examination or investigation as he believes is
necessary to enable him to make the statements or
give the opinions contained or expressed therein.
6.10 Experts, Advisers and Agents.
The Trustee may:
(a) in relation to this Agreement act and
rely on the opinion or advice of or information
obtained from any solicitor, auditor, accountant,
appraiser, valuer, engineer or other expert,
whether retained by the Trustee or by the
Corporation and/or Orbital or otherwise, and may
employ such assistants as may be necessary to the
proper discharge of its powers and duties and
determination of its rights hereunder and may pay
proper and reasonable compensation for all such
legal and other advice or assistance as aforesaid;
and
(b) employ such agents and other assistants
as it may reasonably require for the proper
discharge of its powers and duties hereunder, and
may pay reasonable remuneration for all services
performed for it in the discharge of the trusts
hereof and compensation for all disbursements,
costs and expenses made or incurred by it in the
discharge of its duties hereunder and in the
management of the Trust.
6.11 Investment of Moneys Held By Trustee. Unless otherwise
provided in this Agreement, any moneys held by or on behalf of
the Trustee that under the terms of this Agreement may or ought
to be invested or which may be on deposit with the Trustee or
that may be in the hands of the Trustee may be invested and
reinvested in the name or under the control of the Trustee in
securities in which, under the laws of the Commonwealth of
Massachusetts, trustees are authorized to invest trust moneys,
provided that such securities are stated to mature within two
years after their purchase by the Trustee, and the Trustee shall
so invest such moneys on the written direction of the
Corporation. Pending the investment of any moneys as
hereinbefore provided, such moneys may be deposited in the name
of the Trustee in any bank in the United States approved by the
Corporation or, with the consent of the Corporation, in the
deposit department of the Trustee at the rate of interest then
current on similar deposits.
6.12 Trustee Not Required to Give Security. The Trustee
shall not be required to give any bond or security in respect of
the execution of the trusts, rights, duties, powers and
authorities of this Agreement.
6.13 Trustee Not Bound to Act on Corporation's Request.
Except as in this Agreement otherwise specifically provided, the
Trustee shall not be bound to act in accordance with any
direction or request of the Corporation and/or Orbital or of the
directors thereof until a duly authenticated copy of the
instrument or resolution containing such direction or request
shall have been delivered to the Trustee, and the Trustee shall
be empowered to act and rely upon any such copy purporting to be
authenticated and believed by the Trustee to be genuine.
6.14 Authority to Carry on Business. The Trustee represents
to the Corporation and Orbital that at the date of execution and
delivery by it of this Agreement it is authorized to perform its
obligations pursuant to this Agreement under all applicable laws
but if, notwithstanding the provisions of this section 6.14, it
ceases to be so authorized, the validity and enforceability of
this Agreement and the Voting Rights, the Exchange Right and the
Automatic Exchange Rights shall not be affected in any manner
whatsoever by reason only of such event but the Trustee shall,
within 30 days after ceasing to be so authorized, either become
so authorized or resign in the manner and with the effect
specified in Article 9 hereof.
6.15 Conflicting Claims. If conflicting claims or demands
are made or asserted with respect to any interest of any Holder
in any Exchangeable Shares, including any disagreement between
the heirs, representatives, successors or assigns succeeding to
all or any part of the interest of any Holder in any Exchangeable
Shares resulting in conflicting claims or demands being made in
connection with such interest, then the Trustee shall be
entitled, at its sole discretion, to refuse to recognize or to
comply with any such claim or demand. In so refusing, the
Trustee may elect not to exercise any Voting Rights, Exchange
Right or Automatic Exchange Rights subject to such conflicting
claims or demands and, in so doing, the Trustee shall not be or
become liable to any person on account of such election or its
failure or refusal to comply with any such conflicting claims or
demands. The Trustee shall be entitled to continue to refrain
from acting and to refuse to act until:
(a) the rights of all adverse claimants with
respect to the Voting Rights, Exchange Right or
Automatic Exchange Rights subject to such
conflicting claims or demands have been
adjudicated by a final judgment of a court of
competent jurisdiction; or
(b) all differences with respect to the
Voting Rights, Exchange Right or Automatic
Exchange Rights subject to such conflicting claims
or demands have been conclusively settled by a
valid written agreement binding on all such
adverse claimants, and the Trustee shall have been
furnished with an executed copy of such agreement.
If the Trustee elects to recognize any claim or comply with any
demand made by any such adverse claimant, it may in its
discretion require such claimant to furnish such surety bond or
other security satisfactory to the Trustee as it shall deem
appropriate fully to indemnify it as between all conflicting
claims or demands.
6.16 Acceptance of Trust. The Trustee hereby accepts the
Trust created and provided for by and in this Agreement and
agrees to perform the same upon the terms and conditions herein
set forth and to hold all rights, privileges and benefits
conferred hereby and by law in trust for the various persons who
shall from time to time be Holders, subject to all the terms and
conditions herein set forth.
ARTICLE 7
COMPENSATION
7.1 Fees and Expenses of the Trustee. Orbital and the
Corporation jointly and severally agree to pay to the Trustee
reasonable compensation for all of the services rendered by it
under this Agreement and will reimburse the Trustee for all
reasonable expenses and disbursements, including the cost and
expense of any suit or litigation of any character and any
proceedings before any governmental agency reasonably incurred by
the Trustee in connection with its rights and duties under this
Agreement; provided that Orbital and the Corporation shall have
no obligation to reimburse the Trustee for any expenses or
disbursements paid, incurred or suffered by the Trustee in any
suit or litigation in which the Trustee is determined to have
acted fraudulently, in bad faith or with negligence or wilful
misconduct.
ARTICLE 8
INDEMNIFICATION AND LIMITATION OF LIABILITY
8.1 Indemnification of the Trustee. Orbital and the
Corporation jointly and severally agree to indemnify and hold
harmless the Trustee and each of its directors, officers,
employees and agents appointed and acting in accordance with this
Agreement (collectively the "Indemnified Parties") against all
claims, losses, damages, costs, penalties, fines and reasonable
expenses (including reasonable expenses of the Trustee's legal
counsel) which, without fraud, negligence, wilful misconduct or
bad faith on the part of such Indemnified Party, may be paid,
incurred or suffered by the Indemnified Party by reason of or as
a result of the Trustee's acceptance or administration of the
Trust, its compliance with its duties set forth in this
Agreement, or any written or oral instructions delivered to the
Trustee by Orbital or the Corporation pursuant hereto. In no
case shall Orbital or the Corporation be liable under this
indemnity for any claim against any of the Indemnified Parties
unless Orbital and the Corporation shall be notified by the
Trustee of the written assertion of a claim or of any action
commenced against the Indemnified Parties, promptly after any of
the Indemnified Parties shall have received any such written
assertion of a claim or shall have been served with a summons or
other first legal process giving information as to the nature and
basis of the claim. Subject to (ii), below, Orbital and the
Corporation shall be entitled to participate at their own expense
in the defense and, if Orbital or the Corporation so elect at any
time after receipt of such notice, either of them may assume the
defence of any suit brought to enforce any such claim. The
Trustee shall have the right to employ separate counsel in any
such suit and participate in the defence thereof but the fees and
expenses of such counsel shall be at the expense of the Trustee
unless: (i) the employment of such counsel has been authorized by
Orbital or the Corporation; or (ii) the named parties to any such
suit include both the Trustee and Orbital or the Corporation and
the Trustee shall have been advised by counsel acceptable to
Orbital or the Corporation that there may be one or more legal
defences available to the Trustee that are different from or in
addition to those available to Orbital or the Corporation and
that an actual or potential conflict of interest exists (in which
case Orbital and the Corporation shall not have the right to
assume the defence of such suit on behalf of the Trustee but
shall be liable to pay the reasonable fees and expenses of
counsel for the Trustee).
8.2 Limitation of Liability. The Trustee shall not be held
liable for any loss that may occur by reason of depreciation of
the value of any part of the Trust Estate or any loss incurred on
any investment of funds pursuant to this Agreement, except to the
extent that such loss is attributable to the fraud, negligence,
wilful misconduct or bad faith on the part of the Trustee.
ARTICLE 9
CHANGE OF TRUSTEE
9.1 Resignation. The Trustee, or any trustee hereafter
appointed, may at any time resign by giving written notice of
such resignation to Orbital and the Corporation specifying the
date on which it desires to resign, provided that such notice
shall never be given less than 60 days before such desired
resignation date unless Orbital and the Corporation otherwise
agree and provided further that such resignation shall not take
effect until the date of the appointment of a successor trustee
and the acceptance of such appointment by the successor trustee.
Upon receiving such notice of resignation, Orbital and the
Corporation shall promptly appoint a successor trustee by written
instrument in duplicate, one copy of which shall be delivered to
the resigning trustee and one copy to the successor trustee.
Failing acceptance by a successor trustee, a successor trustee
may be appointed by an order of the Supreme Court of British
Columbia upon application of one or more of the parties hereto.
9.2 Removal. The Trustee, or any trustee hereafter
appointed, may be removed with or without cause, at any time on
60 days' prior notice by written instrument executed by Orbital
and the Corporation, in duplicate, one copy of which shall be
delivered to the trustee so removed and one copy to the successor
trustee.
9.3 Successor Trustee. Any successor trustee appointed as
provided under this Agreement shall execute, acknowledge and
deliver to Orbital and the Corporation and to its predecessor
trustee an instrument accepting such appointment. Thereupon the
resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act,
deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor under this
Agreement, with like effect as if originally named as trustee in
this Agreement. However, on the written request of Orbital and
the Corporation or of the successor trustee, the trustee ceasing
to act shall, upon payment of any amounts then due it pursuant to
the provisions of this Agreement, execute and deliver an
instrument transferring to such successor trustee all the rights
and powers of the trustee so ceasing to act. Upon the request of
any such successor trustee, Orbital, the Corporation and such
predecessor trustee shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers.
9.4 Notice of Successor Trustee. Upon acceptance of
appointment by a successor trustee as provided herein, Orbital
and the Corporation shall cause to be mailed notice of the
succession of such trustee hereunder to each Holder specified in
a List. If Orbital or the Corporation shall fail to cause such
notice to be mailed within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall
cause such notice to be mailed at the expense of Orbital and the
Corporation.
ARTICLE 10
ORBITAL SUCCESSORS
10.1 Certain Requirements in Respect of Combination, etc.
Orbital shall not enter into any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer,
sale, lease or otherwise) whereby all or substantially all of its
undertaking, property and assets would become the property of any
other person or, in the case of a merger, of the continuing
corporation resulting therefrom, unless:
(a) such other person or continuing
corporation is a corporation (herein called the
"Orbital Successor") incorporated under the laws
of any state of the United States or the laws of
Canada or any province thereof; and
(b) Orbital Successor, by operation of law,
becomes, without more, bound by the terms and
provisions of this Agreement or, if not so bound,
executes, prior to or contemporaneously with the
consummation of such transaction an agreement
supplemental hereto and such other instruments (if
any) as are satisfactory to the Trustee acting
reasonably to evidence the assumption by Orbital
Successor of liability for all moneys payable and
property deliverable hereunder and the covenant of
such Orbital Successor to pay and deliver or cause
to be delivered the same and its agreement to
observe and perform all the covenants and
obligations of Orbital under this Agreement.
10.2 Vesting of Powers in Successor. Whenever the
conditions of section 10.1 hereof have been duly observed and
performed, the Trustee, if required, by section 10.1 hereof,
Orbital Successor and the Corporation shall execute and deliver
the supplemental agreement provided for in Article 11 hereof and
thereupon Orbital Successor shall possess and from time to time
may exercise each and every right and power of Orbital under this
Agreement in the name of Orbital or otherwise and any act or
proceeding by any provision of this Agreement required to be done
or performed by the board of directors of Orbital or any officers
of Orbital may be done and performed with like force and effect
by the directors or officers of such Orbital Successor.
10.3 Wholly-Owned Subsidiaries. Nothing herein shall be
construed as preventing the amalgamation or merger of any
wholly-owned subsidiary of Orbital with or into Orbital.
ARTICLE 11
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
11.1 Amendments, Modifications, etc. This Agreement may not
be amended or modified except by an agreement in writing executed
by the Corporation, Orbital and the Trustee and approved by the
Holders in accordance with section 8.2 of the Exchangeable Share
Provisions.
11.2 Ministerial Amendments. Notwithstanding the provisions
of section 11.1 hereof, the parties to this Agreement may in
writing, at any time and from time to time, without the approval
of the Holders, amend or modify this Agreement for the purposes
of:
(a) adding to the covenants of any or all of
the parties hereto for the protection of the
Holders hereunder;
(b) making such amendments or modifications
not inconsistent with this Agreement as may be
necessary or desirable with respect to matters or
questions that, in the opinion of the Board of
Directors of each of Orbital and Corporation and
in the opinion of the Trustee, having in mind the
best interests of the Holders as a whole, it may
be expedient to make, provided that such boards of
directors and the Trustee shall be of the opinion
that such amendments and modifications will not be
prejudicial to the interests of the Holders as a
whole; or
(c) making such changes or corrections
required for the purpose of curing or correcting
any ambiguity or defect or inconsistent provision
or clerical omission or mistake or manifest error,
provided that the Trustee and the Board of
Directors of each of the Corporation and Orbital
shall be of the opinion that such changes or
corrections will not be prejudicial to the
interests of the Holders as a whole.
11.3 Meeting to Consider Amendments. The Corporation, at
the request of Orbital, shall call a meeting or meetings of the
Holders for the purpose of considering any proposed amendment or
modification requiring approval pursuant hereto. Any such
meeting or meetings shall be called and held in accordance with
the by-laws of the Corporation, the Exchangeable Share Provisions
and all applicable laws.
11.4 Changes in Capital of Orbital and the Corporation.
Notwithstanding section 11.1, at all times after the occurrence
of any Orbital Common Share Reorganization or Capital
Reorganization (as such terms are respectively defined in the
Exchangeable Share Provisions) or other change in either the
Orbital Common Shares or the Exchangeable Shares or both, this
Agreement shall forthwith be amended and modified as necessary in
order that it shall apply with full force and effect, mutatis
mutandis, to all new securities into which Orbital Common Shares
or the Exchangeable Shares or both are so changed and the parties
hereto shall execute and deliver a supplemental agreement giving
effect to and evidencing such necessary amendments and
modifications.
11.5 Execution of Supplemental Trust Agreements.
Notwithstanding section 11.1, from time to time the Corporation
(when authorized by a resolution of the Board of Directors),
Orbital (when authorized by a resolution of its board of
directors) and the Trustee may, subject to the provisions hereof,
and they shall, when so directed by these presents, execute and
deliver by their proper officers, Agreements or other instruments
supplemental hereto, which thereafter shall form part hereof, for
any one or more of the following purposes:
(a) evidencing the succession of Orbital
Successors to Orbital and the covenants of and
obligations assumed by each such Orbital Successor
in accordance with the provisions of Article 10
and the succession of any successor trustee in
accordance with the provisions of Article 9;
(b) making any additions to, deletions from
or alterations of the provisions of this Agreement
or the Voting Rights, the Exchange Right or the
Automatic Exchange Rights that, in the opinion of
the Trustee acting reasonably will not be
prejudicial to the interests of the Holders as a
whole or are in the opinion of counsel to the
Trustee necessary or advisable in order to
incorporate, reflect or comply with any
legislation the provisions of which apply to
Orbital, the Corporation, the Trustee or this
Agreement; and
(c) for any other purposes not inconsistent
with the provisions of this Agreement including,
without limitation, to make or evidence any
amendment or modification to this Agreement as
contemplated hereby, provided that, in the opinion
of the Trustee acting reasonably, the rights of
the Trustee and the Holders as a whole will not be
prejudiced thereby.
ARTICLE 12
TERMINATION
12.1 Term. The Trust created by this Agreement shall
continue until the earliest to occur of the following events:
(a) no outstanding Exchangeable Shares are
held by any Holder;
(b) each of the Corporation and Orbital
elects in writing to terminate the Trust and such
termination is approved by the Holders of the
Exchangeable Shares in accordance with Section 8.2
of the Exchangeable Share Provisions; and
(c) 21 years after the death of the last
survivor of the descendants of His Majesty King
George VI of the United Kingdom of Great Britain
and Northern Ireland living on the date of the
creation of the Trust.
12.2 Survival. The provisions of Articles 7 and 8 hereof
shall survive any termination of the Trust pursuant to section
12.1.
ARTICLE 13
GENERAL
13.1 Severability. If any provision of this Agreement is
held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remainder of this Agreement
shall not in any way be affected or impaired thereby and this
Agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions; provided,
however, that if the provision or provisions so held to be
invalid, in the reasonable judgment of the parties, is or are so
fundamental to the intent of the parties and the operation of
this Agreement that the enforcement of the other provisions
hereof, in the absence of such invalid provision or provisions,
would damage irreparably the intent of the parties in entering
into this Agreement, the parties shall agree (i) to terminate
this Agreement, or (ii) to amend or otherwise modify this
Agreement so as to carry out the intent and purposes hereof and
the transactions contemplated hereby.
13.2 Inurement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and permitted assigns and to the benefit of the
Holders.
13.3 Notices to Parties. All notices and other
communications between the parties hereunder shall be in writing
and shall be deemed to have been given if delivered personally or
by confirmed telecopy to the parties at the following addresses
(or at such other address for such party as shall be specified in
like notice):
(a) if to Orbital at:
Orbital Sciences Corporation
21700 Atlantic Boulevard
Dulles, Virginia 20166
U.S.A.
Attention: General Counsel
Telecopy: (703) 406-5572
(b) if to the Corporation at:
MacDonald Dettwiler Holdings Inc.
13800 Commerce Parkway
Vancouver, British Columbia
V6V 2J3
Attention: #
Telecopy: (604) #
(with a copy to Orbital at the address set out in
(a))
(c) if to the Trustee at:
#
Attention: #
Telecopy: (#) #
Any notice or other communication given personally shall be
deemed to have been given and received upon delivery thereof and
if given by telecopy shall be deemed to have been given and
received on the date of receipt thereof unless such day is not a
Business Day in which case it shall be deemed to have been given
and received upon the immediately following Business Day.
13.4 Notice to Holders. Any and all notices to be given and
any documents to be sent to any Holders may be given or sent to
the address of such Holder shown on the register of Holders in
any manner permitted by the by-laws of the Corporation from time
to time in force in respect of notices to shareholders and shall
be deemed to be received (if given or sent in such manner) at the
time specified in such by-laws, the provisions of which bylaws
shall apply mutatis mutandis to notices or documents as aforesaid
sent to such Holders.
13.5 Risk of Payments by Post. Whenever payments are to be
made or documents are to be sent to any Holder by the Trustee or
by the Corporation, or by such Holder to the Trustee or to
Orbital or the Corporation, the making of such payment or sending
of such document sent through the post shall be at the risk of
the Corporation, in the case of payments made or documents sent
by the Trustee or the Corporation, and the Holder, in the case of
payments made or documents sent by the Holder.
13.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same
instrument.
13.7 Jurisdiction. This Agreement shall be construed and
enforced in accordance with the laws of the Province of British
Columbia and the laws of Canada applicable therein.
13.8 Attornment. Orbital agrees that any action or
proceeding arising out of or relating to this Agreement may be
instituted in the courts of the Province of British Columbia,
waives any objection that it may have now or hereafter to the
venue of any such action or proceeding, irrevocably submits to
the jurisdiction of the said courts in any such action or
proceeding, agrees to be bound by any judgment of the said courts
and agrees not to seek, and hereby waives, any review of the
merits of any such judgment by the courts of any other
jurisdiction and hereby appoints the Corporation at its
registered office as Orbital's attorney for service of process.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
ORBITAL SCIENCES CORPORATION
by ___________________________
___________________________
MACDONALD DETTWILER HOLDINGS
INC.
by ___________________________
___________________________
STATE STREET BANK AND TRUST
COMPANY
by ___________________________
___________________________
EXHIBIT 2.3
SUPPORT AGREEMENT
MEMORANDUM OF AGREEMENT made as of the day of
1995.
B E T W E E N:
ORBITAL SCIENCES CORPORATION,
a corporation existing under
the laws of the State of
Delaware,
(hereinafter referred to as "Orbital"),
- and -
MACDONALD DETTWILER HOLDINGS INC.
(formerly known as 3173623 Canada Inc.),
a corporation existing under
the laws of Canada.
(hereinafter referred to as "Corporation").
WHEREAS pursuant to a combination agreement dated as of
August 31, 1995 (the "Combination Agreement") by and between
Orbital, the Corporation and MacDonald, Dettwiler and Associates
Ltd. ("MDA") the parties agreed that on the Effective Date (as
defined in the Combination Agreement), Orbital and the
Corporation would execute and deliver a Support Agreement
containing the terms and conditions set forth in Exhibit 2.3 to
the Combination Agreement together with such other terms and
conditions as may be agreed to by the parties to the Combination
Agreement acting reasonably;
AND WHEREAS pursuant to an arrangement (the
"Arrangement") effected by articles of arrangement filed pursuant
to the Canada Business Corporations Act on #, 1995, each issued
and outstanding common share of MDA (an "MDA Common Share") was
exchanged directly or indirectly with the Corporation for 0.#
issued and outstanding Exchangeable Shares of the Corporation
(the "Exchangeable Shares");
AND WHEREAS the aforesaid articles of arrangement set
forth the rights, privileges, restrictions and conditions
(collectively the "Exchangeable Share Provisions") attaching to
the Exchangeable Shares;
AND WHEREAS the parties hereto desire to make
appropriate provision and to establish a procedure whereby
Orbital will take certain actions and make certain payments and
deliveries necessary to ensure that the Corporation will be able
to make certain payments and to deliver or cause to be delivered
shares of Orbital Common Shares in satisfaction of the
obligations of the Corporation under the Exchangeable Share
Provisions with respect to the payment and satisfaction of
dividends, Liquidation Amounts, Retraction Prices and Redemption
Prices all in accordance with the Exchangeable Share Provisions;
NOW THEREFORE in consideration of the respective
covenants in this agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms. Each term denoted herein by initial
capital letters and not otherwise defined herein shall have the
meaning ascribed thereto in the Exchangeable Share Provisions,
unless the context requires otherwise.
1.2 Interpretation not Affected by Headings, etc. The
division of this agreement into articles, sections and paragraphs
and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation of
this agreement.
1.3 Number, Gender, etc. Words importing the singular
number only shall include the plural and vice versa. Words
importing the use of any gender shall include all genders.
1.4 Date for any Action. If any date on which any action
is required to be taken under this agreement is not a Business
Day, such action shall be required to be taken on the next
succeeding Business Day.
ARTICLE 2
COVENANTS OF ORBITAL AND THE Corporation
2.1 Covenants of Orbital Regarding Exchangeable Shares. So
long as any Exchangeable Shares are outstanding, Orbital will:
(a) not declare or pay any dividend on
Orbital Common Shares unless (i) the Corporation
shall have sufficient assets, funds and other
property (including, where applicable, Orbital
Common Shares or other securities of Orbital)
available to enable the due declaration and the
due and punctual payment in accordance with
applicable law, of an equivalent dividend on the
Exchangeable Shares in accordance with the
Exchangeable Share Provisions and (ii) the
Corporation shall simultaneously declare or pay,
as the case may be, an equivalent dividend on the
Exchangeable Shares in accordance with the
Exchangeable Share Provisions;
(b) cause the Corporation to declare
simultaneously with the declaration of any
dividend on Orbital Common Shares an equivalent
dividend on the Exchangeable Shares and, when such
dividend is paid on Orbital Common Shares, cause
the Corporation to pay simultaneously therewith
such equivalent dividend on the Exchangeable
Shares, in each case in accordance with the
Exchangeable Share Provisions;
(c) advise the Corporation sufficiently in
advance of the declaration by Orbital of any
dividend on Orbital Common Shares and take all
such other actions as are necessary, in
cooperation with the Corporation, to ensure that
the declaration date, record date and payment date
for any dividend on the Exchangeable Shares shall
be the same as the record date, declaration date
and payment date for the corresponding dividend on
Orbital Common Shares and such dates in respect of
dividends on the Exchangeable Shares shall be in
accordance with any requirement of the
Exchangeable Share Provisions and the stock
exchange on which the Exchangeable Shares are
listed;
(d) ensure that the record date for any
dividend declared on Orbital Common Shares,
Orbital Common Share Reorganization, Rights
Offering, Special Distribution or Capital
Reorganization is not less than 10 Business Days
after the declaration date for such dividend,
Orbital Common Share Reorganization, Rights
Offering, Special Distribution or Capital
Reorganization;
(e) take all such actions and do all such
things as are necessary or desirable to enable and
permit the Corporation, in accordance with
applicable law, to pay and otherwise perform its
obligations with respect to the satisfaction of
the Liquidation Amount in respect of each issued
and outstanding Exchangeable Share upon the
liquidation, dissolution or winding-up of the
Corporation, including without limitation all such
actions and all such things as are necessary or
desirable to enable and permit the Corporation to
cause to be delivered shares of Orbital Common
Shares to the holders of Exchangeable Shares in
satisfaction of the Liquidation Amount for each
such Exchangeable Share, in accordance with the
provisions of Article 4 of the Exchangeable Share
Provisions;
(f) take all such actions and do all such
things as are necessary or desirable to enable and
permit the Corporation, in accordance with
applicable law, to pay and otherwise perform its
obligations with respect to the satisfaction of
the Retraction Price and the Redemption Price,
including without limitation all such actions and
all such things as are necessary or desirable to
enable and permit the Corporation to cause to be
delivered shares of Orbital Common Shares to the
holders of Exchangeable Shares, upon the
retraction or redemption of the Exchangeable
Shares in accordance with the provisions of
Article 5 or Article 6 of the Exchangeable Share
Provisions, as the case may be;
(g) not exercise its vote as a shareholder
of the Corporation to initiate, consent to or
approve the voluntary liquidation, dissolution or
winding-up of the Corporation nor take any action
or omit to take any action that is designed to
result in the liquidation, dissolution or
winding-up of the Corporation; and
(h) not exercise its vote as a shareholder
of the Corporation to authorize the continuance or
other transfer of the corporate existence of the
Corporation to any jurisdiction outside Canada.
2.2 Segregation of Funds. Orbital will cause the
Corporation to deposit a sufficient amount of funds in a separate
account and segregate a sufficient amount of such assets and
other property as is necessary to enable the Corporation to pay
or otherwise satisfy the applicable dividends, Liquidation
Amount, Retraction Price or Redemption Price, in each case for
the benefit of holders from time to time of the Exchangeable
Shares, and will cause the Corporation to use such funds, assets
and other property so segregated exclusively for the payment of
dividends and the payment or other satisfaction of the
Liquidation Amount, the Retraction Price or the Redemption Price,
as applicable, in each case in accordance with the Exchangeable
Share Provisions.
2.3 Reservation of Orbital Common Shares. Orbital hereby
represents and warrants that it has irrevocably reserved for
issuance out of its authorized and unissued capital stock such
number of Orbital Common Shares as is equal to the number of
Exchangeable Shares outstanding immediately following the
Effective Date and covenants that at all times in the future
while any Exchangeable Shares are outstanding it will keep
available, free from pre-emptive and other rights, out of its
authorized and unissued capital stock such number of Orbital
Common Shares (or other shares or securities into which Orbital
Common Shares may be reclassified or changed) as is necessary to
enable Orbital and the Corporation to perform their respective
obligations pursuant to this agreement, the Exchangeable Share
Provisions and the Voting and Exchange Trust Agreement.
2.4 Notification of Certain Events. In order to assist
Orbital to comply with its obligations hereunder, the Corporation
will give, or cause the Transfer Agent to give, Orbital notice of
each of the following events at the time set forth below:
(a) in the event of any determination by the
Board of Directors of the Corporation to institute
voluntary liquidation, dissolution or winding up
proceedings with respect to the Corporation or to
effect any other distribution of the assets of the
Corporation among its shareholders for the purpose
of winding up its affairs, at least 60 days prior
to the proposed effective date of such
liquidation, dissolution, winding up or other
distribution;
(b) immediately, upon the earlier of (i)
receipt by the Corporation of notice of, and (ii)
the Corporation otherwise becoming aware of, any
threatened or instituted claim, suit, petition or
other proceedings with respect to the involuntary
liquidation, dissolution or winding up of the
Corporation or to effect any other distribution of
the assets of the Corporation among its
shareholders for the purpose of winding up its
affairs;
(c) immediately, upon receipt by the
Transfer Agent of a Retraction Request; and
(d) as soon as practicable upon the issuance
by the Corporation of any Exchangeable Shares or
rights to acquire Exchangeable Shares.
2.5 Delivery of Orbital Common Shares. In furtherance of
its obligations under subsections 2.1(e) and (f) hereof, upon
notice of any event that requires the Corporation to cause to be
delivered Orbital Common Shares to any holder of Exchangeable
Shares, Orbital shall forthwith issue and deliver the requisite
Orbital Common Shares to or to the order of the former holder of
the surrendered Exchangeable Shares, as the Corporation shall
direct. All such Orbital Common Shares shall be duly issued as
fully paid and non-assessable and shall be free and clear of any
Liens. In consideration of the issuance of each such Orbital
Common Share by Orbital, the Corporation shall issue to Orbital,
or as Orbital shall direct, such number of common shares of the
Corporation as is equal to the fair value of such Orbital Common
Shares.
2.6 Qualification of Orbital Common Shares. Unless the
staff of the United States Securities and Exchange Commission
(the "SEC") has confirmed the availability of an exemption from
registration under the United States Securities Act of 1933, as
amended (the "Securities Act") as to the issuance of the Orbital
Common Shares in exchange for the Exchangeable Shares pursuant to
the Plan of Arrangement, the Exchangeable Share Provisions or the
Voting and Exchange Trust Agreement, in response to the No Action
Request (as defined in the Combination Agreement) or Orbital has
received an opinion of counsel reasonably satisfactory to the
Corporation to such effect, then Orbital shall cause such
issuance to be registered under the Securities Act, and shall
file a registration statement covering such issuance with the SEC
and use all commercially reasonable efforts to cause such
registration statement to become effective as soon as practicable
and remain effective throughout the period during which the
Exchangeable Shares may be exchanged in accordance with the Plan
of Arrangement, the Exchangeable Share Provisions or the Voting
and Exchange Trust Agreement. Orbital agrees to file any such
required registration statement as soon as reasonably
practicable. Orbital shall use all reasonable efforts to obtain
all orders required from the applicable Canadian securities
authorities to permit the issuance of the Orbital Common Shares
upon any such exchange of the Exchangeable Shares without
registration or qualification with or approval of or the filing
of any document including any prospectus or similar document or
the taking of any proceeding with or the obtaining of any order,
ruling or consent from any governmental or regulatory authority
under any Canadian federal or provincial law or regulation or
pursuant to the rules and regulations of any regulatory authority
or the fulfillment of any other legal requirement before such
Orbital Common Shares may be issued and delivered by the
Corporation or Orbital to the holder thereof or in order that
such Orbital Common Shares may be freely traded thereafter (other
than any restrictions on transfer by reason of a holder being a
"control person" of the Corporation or Orbital for purposes of
Canadian federal or provincial securities law or an "affiliate"
for purposes of United States Federal or state securities law).
2.7 Tender Offers, etc. In the event that a tender offer,
share exchange offer, issuer bid, take-over bid or similar
transaction with respect to Orbital Common Shares (an "Offer") is
proposed by Orbital or is proposed to Orbital or its stockholders
and is recommended by the Board of Directors of Orbital, or is
otherwise effected or to be effected with the consent or approval
of the Board of Directors of Orbital, Orbital will use all
commercially reasonable efforts expeditiously and in good faith
to take all such actions and do all such things as are necessary
or desirable to enable and permit holders of Exchangeable Shares
to participate in such Offer to the same extent and on an
economically equivalent basis as the holders of Orbital Common
Shares, without discrimination. Without limiting the generality
of the foregoing, Orbital will use all commercially reasonable
efforts expeditiously and in good faith to ensure that holders of
Exchangeable Shares may participate in all such Offers without
being required to retract Exchangeable Shares as against the
Corporation (or, if so required, to ensure that any such
retraction shall be effective only upon, and shall be conditional
upon, the closing of the Offer and only to the extent necessary
to tender or deposit to the Offer).
2.8 Ownership of Outstanding Shares. Orbital covenants and
agrees in favour of the Corporation that, as long as any
outstanding Exchangeable Shares are owned by any person or entity
other than Orbital or any of its Affiliates, Orbital will be and
remain the direct or indirect beneficial owner of all issued and
outstanding shares in the capital of the Corporation (other than
Exchangeable Shares and the Class B Preferred Shares of the
Corporation issued to Canadian Imperial Bank of Commerce pursuant
to the Arrangement) and all outstanding securities of the
Corporation carrying or otherwise entitled to voting rights in
any circumstances (other than Exchangeable Shares and the Class B
Preferred Shares of the Corporation issued to Canadian Imperial
Bank of Commerce pursuant to the Arrangement), unless Orbital
shall have obtained the prior approval of the Corporation and the
holders of the Exchangeable Shares given in accordance with
section 8.2 of the Exchangeable Share Provisions.
2.9 Orbital Not To Vote Exchangeable Shares. Orbital
covenants and agrees that it will appoint and cause to be
appointed proxyholders with respect to all Exchangeable Shares
held by Orbital and its Affiliates for the sole purpose of
attending each meeting of holders of Exchangeable Shares in order
to be counted as part of the quorum for each such meeting.
Orbital further covenants and agrees that it will not, and will
cause its Affiliates not to, exercise any voting rights that may
be exercisable by holders of Exchangeable Shares from time to
time pursuant to the Exchangeable Share Provisions or pursuant to
the provisions of the CBCA with respect to any Exchangeable
Shares held by it or by its Affiliates in respect of any matter
considered at any meeting of holders of Exchangeable Shares,
including without limitation any approval to be given by holders
of Exchangeable Shares pursuant to section 8.2 of the
Exchangeable Share Provision.
2.10 Due Performance. On and after the Effective Date,
Orbital shall duly and timely perform all of its obligations
provided for in the Plan of Arrangement, including any
obligations that may arise upon the exercise of Orbital's rights
under the Exchangeable Share Provisions.
2.11 Economic Equivalence. Orbital hereby acknowledges that
it will be bound by any determination of economic equivalence
made by the Board of Directors pursuant to section 5.6 of the
Plan of Arrangement or section 9.1 of the Exchangeable Share
Provisions, where applicable.
ARTICLE 3
GENERAL
3.1 Term. This agreement shall come into force and be
effective as of the date hereof and shall terminate and be of no
further force and effect at such time as there are no
Exchangeable Shares (or securities or rights convertible into or
exchangeable for or carrying rights to acquire Exchangeable
Shares) held by any party other than Orbital and its Affiliates.
3.2 Changes in Capital of Orbital and the Corporation.
Notwithstanding the provisions of section 3.4 hereof, at all
times after the occurrence of any event effected pursuant to
section 2.7 hereof as a result of which either Orbital Common
Shares or the Exchangeable Shares or both are in any way changed,
this agreement shall forthwith be amended and modified as
necessary in order that it shall apply with full force and
effect, mutatis mutandis, to all new securities into which
Orbital Common Shares or the Exchangeable Shares or both are so
changed and the parties hereto shall execute and deliver an
agreement in writing giving effect to and evidencing such
necessary amendments and modifications.
3.3 Severability. If any provision of this agreement is
held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remainder of this agreement
shall not in any way be affected or impaired thereby and this
agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
3.4 Amendments, Modifications, etc. This agreement may
not be amended or modified except by an agreement in writing
executed by the Corporation and Orbital and approved by the
holders of the Exchangeable Shares in accordance with section
10.2 of the Exchangeable Share Provisions.
3.5 Ministerial Amendments. Notwithstanding the provisions
of section 3.4, the parties to this agreement may without the
approval of the holders of the Exchangeable Shares, at any time
and from time to time, amend or modify this agreement in writing
for the purposes of:
(a) adding to the covenants of either or
both parties for the protection of the holders of
the Exchangeable Shares;
(b) making such amendments or modifications
not inconsistent with this agreement as may be
necessary or desirable with respect to matters or
questions which, in the opinion of the Board of
Directors of each of the Corporation and Orbital,
it may be expedient to make, provided that each
such board of directors shall be of the opinion
that such amendments or modifications will not be
prejudicial to the interests of the holders of the
Exchangeable Shares; or
(c) making such changes or corrections
which, on the advice of counsel to the Corporation
and Orbital, are required for the purpose of
curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or
mistake or manifest error herein, provided that
the boards of directors of each of the Corporation
and Orbital shall be of the opinion that such
changes or corrections will not be prejudicial to
the interests of the holders of the Exchangeable
Shares.
3.6 Meeting to Consider Amendments. The Corporation, at
the request of Orbital, shall call a meeting or meetings of the
holders of the Exchangeable Shares for the purpose of considering
any proposed amendment or modification requiring approval
pursuant to section 3.4 hereof. Any such meeting or meetings
shall be called and held in accordance with the by-laws of the
Corporation and the Exchangeable Share Provisions.
3.7 Waivers Only in Writing. No waiver of any of the
provisions of this agreement otherwise permitted hereunder shall
be effective unless made in writing and signed by both of the
parties hereto.
3.8 Inurement. This agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
3.9 Orbital Successors. Orbital shall not enter into any
transaction (whether by way of reconstruction, reorganization,
consolidation, merger, transfer, sale, lease or otherwise)
whereby all or substantially all its undertaking, property and
assets would become the property of any other person or, in the
case of a merger, of the continuing corporation resulting
therefrom, unless:
(a) such other person or continuing
corporation is a corporation (the "Orbital
Successor") incorporated under the laws of any
state of the United States or the laws of Canada
or any province thereof; and
(b) the Orbital Successor, by operation of
law, becomes, without more, bound by the terms and
provisions of this agreement or, if not so bound,
executes, prior to or contemporaneously with the
consummation of such transaction, an agreement to
be bound by the provisions hereof as if it were an
original party hereto and to observe and perform
all of the covenants and obligations of Orbital
pursuant to this agreement, in form satisfactory
to the Corporation, acting reasonably.
Nothing herein shall be construed as preventing the amalgamation
or merger of any wholly-owned subsidiary of Orbital with or into
Orbital.
3.10 Notices to Parties. All notices and other
communications between the parties shall be in writing and shall
be deemed to have been given if delivered personally or by
confirmed telecopy to the parties at the following addresses (or
at such other address for either such party as shall be specified
in like notice):
(a) if to Orbital at:
Orbital Sciences Corporation
21700 Atlantic Boulevard
Dulles, VA 20166
Attention: General Counsel
Telecopy: (703) 406-5572
(b) if to the Corporation at:
MacDonald Dettwiler Holdings Inc.
13800 Commerce Parkway
Richmond, British Columbia
V6V 2J3
Attention: #
Telecopy: (604) #
Any notice or other communication given personally shall be
deemed to have been given and received upon delivery thereof and
if given by telecopy shall be deemed to have been given and
received on the date of confirmed receipt thereof unless such day
is not a Business Day in which case it shall be deemed to have
been given and received upon the immediately following Business
Day.
3.11 Counterparts. This agreement may be executed in
counterparts, each of which shall be deemed an original, and all
of which taken together shall constitute one and the same
instrument.
3.12 Jurisdiction. This agreement shall be construed and
enforced in accordance with the laws of the Province of British
Columbia and the laws of Canada applicable therein.
3.13 Attornment. Orbital agrees that any action or
proceeding arising out of or relating to this agreement may be
instituted in the courts of British Columbia, waives any
objection which it may have now or hereafter to the venue of any
such action or proceeding, irrevocably submits to the
jurisdiction of the said courts in any such action or proceeding,
agrees to be bound by any judgment of the said courts and not to
seek, and hereby waives, any review of the merits of any such
judgment by the courts of any other jurisdiction and hereby
appoints the Corporation at its registered office as Orbital's
attorney for service of process.
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be duly executed as of the date first above written.
ORBITAL SCIENCES CORPORATION
by ___________________________
___________________________
MACDONALD DETTWILER HOLDINGS
INC.
by ___________________________
___________________________
ARRANGEMENT
INVOLVING
MacDONALD, DETTWILER AND ASSOCIATES LTD.
3173623 CANADA INC.
AND
ORBITAL SCIENCES CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND
HOLDERS OF THE 1988 EMPLOYEE SHARE OPTIONS AND THE
1988 KEY EMPLOYEE SHARE OPTIONS OF
MacDONALD, DETTWILER AND ASSOCIATES LTD.
AND
MANAGEMENT INFORMATION CIRCULAR
OCTOBER 6, 1995
<PAGE>
[MDA LETTERHEAD]
October 10, 1995
Dear Shareholder or Optionholder:
You are cordially invited to attend a Special Meeting of Shareholders and
holders of 1988 Employee Share Options and 1988 Key Employee Share Options
(collectively, the "MDA 1988 Optionholders") of MacDonald, Dettwiler and
Associates Ltd. ("MDA") to be held on Tuesday, November 14, 1995 at MDA's
offices located at 13800 Commerce Parkway, Richmond, British Columbia at
10:00 a.m. local time. As described in the enclosed Proxy Circular, at the
Special Meeting, the MDA Shareholders and MDA 1988 Optionholders will be
asked to consider and vote upon an Arrangement under section 192 of the
Canada Business Corporation Act involving MDA, Orbital Sciences Corporation
("Orbital"), and 317632 Canada Inc. ("Acquisition"), a wholly owned
subsidiary of Orbital. Subject to any further order of the Supreme Court
of British of Columbia, the Arrangement must be approved by the affirmative
vote of 66-2/3% of the votes actually cast thereon by MDA Shareholders and
by MDA 1988 Optionholders, voting as separate classes.
The MDA Board of Directors has carefully reviewed and considered the terms
and conditions of the proposed Arrangement. The Board of Directors
believes that the transaction is fair and in the best interests of MDA, MDA
Shareholders and MDA 1988 Optionholders, and has unanimously approved the
Arrangement. The Board of Directors unanimously recommends that the MDA
Shareholders and MDA 1988 Optionholders vote FOR the proposed Arrangement
Resolution approving the Arrangement.
Under the Plan of Arrangement, MDA will receive Exchangeable Shares of
Acquisition, which will have voting, dividend and liquidation rights that
are, as nearly as practicable, equivalent to those of Orbital Common
Shares. The number of Exchangeable Shares to be issued will be based upon
an Exchange Ratio that is to be determined by dividing U.S.$5.41 by the
average closing sale price of Orbital Common Shares for the twenty day
period ending on the date four trading days prior to the Effective Date,
and may not be less than .2705 or greater than .3607. The Effective Date
is expected to occur shortly after the Special Meeting. MDA Shareholders
will receive the number of Exchangeable Shares equal to the product of the
Exchange Ratio multiplied by the number of MDA Common Shares held by them.
Holders of MDA Options, including MDA 1988 Options, will receive
Replacement Options entitling them to purchase such number of Orbital
Common Shares equal to the product of the Exchange Ratio multiplied by the
number of MDA Common Shares underlying such MDA Option, having an exercise
price per share equal to the quotient of the exercise price per share of
such MDA Option divided by the Exchange Ratio, and having the same vesting,
expiration and other terms as such MDA Option.
The accompanying Proxy Circular provides a detailed description of the
Arrangement and the business and financial information of MDA and Orbital.
MDA retained the investment banking firm of Nesbitt Burns Inc. ("Nesbitt
Burns") to advise it on the acquisition transaction, including to advise it
with respect to the consideration to be paid by Orbital in the Arrangement.
Nesbitt Burns has advised the MDA Board of Directors that, in Nesbitt
Burns' opinion, the consideration to be paid by Orbital in the Arrangement
is fair to MDA Shareholders and MDA 1988 Optionholders from a financial
point of view. A copy of Nesbitt Burns' opinion is attached to the Proxy
Circular as Appendix "C".
Your vote on this matter is very important. We urge you to review
carefully the enclosed materials and to return your proxy promptly.
Shareholders with questions regarding the Arrangement or other matters
described herein may contact Gordon Thiessen at (604) 278-3411.
Whether or not you plan to attend the Special Meeting, please sign and
promptly return your proxy card in the enclosed postage paid envelope. If
you attend the meeting, you may vote in person if you wish, even though you
have previously returned your proxy.
Sincerely,
/s/ John S. MacDonald /s/ Daniel E. Friedman
John S. MacDonald, Chairman Daniel E. Friedman, President and
CEO
NOTICE OF SPECIAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that a Special General Meeting (the
"Special Meeting") of holders of MDA Common Shares ("MDA
Shareholders") and holders of options ("MDA 1988 Optionholders")
under the 1988 Employee Share Option Plan and the 1988 Key
Employee Share Option Plan (together, the "MDA 1988 Options") of
MacDonald, Dettwiler and Associates Ltd. ("MDA") will be held at
the offices of MDA at 13800 Commerce Parkway, Richmond, British
Columbia, V6V 2J3, on Tuesday, November 14, 1995 at the hour of
10:00 a.m. (Vancouver time) for the following purposes:
(a) to consider, pursuant to an order of the Supreme Court of
British Columbia dated October 6, 1995 (the "Interim
Order"), and, if deemed advisable to pass, with or without
variation, a special resolution (the "Arrangement
Resolution") to approve an arrangement (the "Arrangement")
under section 192 of the Canada Business Corporations Act;
and
(b) to transact such further or other business as may properly
come before the Special Meeting or any adjournment thereof.
The texts of the Arrangement Resolution, the Plan of Arrangement
and the agreements in respect of the Arrangement are set forth in
Appendices "F," "A" and "B," respectively, to the accompanying
Management Information Circular of MDA (the "Proxy Circular").
Pursuant to the Interim Order, MDA Shareholders and the MDA 1988
Optionholders have been granted the right to dissent with respect
to the Arrangement and to be paid the fair value of their MDA
Common Shares or the MDA Common Shares to which they are entitled
under the MDA 1988 Options, as the case may be, in respect of the
Arrangement Resolution in accordance with section 190 of the
Canada Business Corporations Act. This right is described in the
Proxy Circular.
The Board of Directors has fixed October 10, 1995 as the record
date for determining MDA Shareholders entitled to receive notice
of and to vote at the Meeting. Only holders of record of MDA
Common Shares at the close of business on October 10, 1995 will
be entitled to vote in respect of the matters to be voted on at
the Special Meeting or any adjournment thereof, except that a
person who has acquired MDA Common Shares subsequent to such
record date will be entitled to vote such shares, instead of the
holder of record, upon making a written request to that effect
not later than 10 days preceding the date of the Special Meeting
to the Secretary of MDA at the registered office of MDA at 26th
floor, 700 West Georgia Street, Vancouver, British Columbia,
V7Y 1B3 and establishing that such person owns such shares. All
MDA 1988 Optionholders on the date of mailing of the Proxy
Circular will receive Notice of the Special Meeting and all MDA
1988 Optionholders on the date of the Special Meeting will be
entitled to attend and vote at the Special Meeting.
MDA Shareholders and MDA 1988 Optionholders who are unable to
attend the Special Meeting in person are requested to sign, date
and return, in the envelope provided for that purpose, the
enclosed instrument of proxy. In order to be valid for use at
the Special Meeting, proxies must be received by Montreal Trust
Company of Canada, 510 Burrard Street, Vancouver, British
Columbia, V6C 3B9 not less than 48 hours (excluding Saturdays,
Sundays and holidays) preceding the Special Meeting or any
adjournment thereof.
DATED at Richmond, British Columbia, this 6th day of October,
1995.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT B. WALLIS, Secretary
<PAGE>
TABLE OF CONTENTS
Page
MANAGEMENT INFORMATION CIRCULAR 1
GLOSSARY OF TERMS 2
MDA AND ORBITAL REPORTING CURRENCIES AND ACCOUNTING PRINCIPLES 7
CANADIAN/U.S. EXCHANGE RATES 7
SUMMARY OF PROXY CIRCULAR 8
General 8
The Arrangement and The Combination Agreement 8
Certain Canadian Federal Income Tax Considerations 11
Certain United States Federal Income
Tax Considerations 12
The Special Meeting 13
Business of Orbital 14
Business of MDA 16
MARKET PRICE AND DIVIDEND INFORMATION 17
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA 18
Selected Historical Consolidated Financial Data of
MDA 18
Selected Historical Consolidated
Financial Data of Orbital 19
PRO FORMA FINANCIAL INFORMATION 20
PRO FORMA CONSOLIDATED CAPITALIZATION 27
RISK FACTORS 28
Technologically Advanced Products and Services 28
Dependence on United States Government 28
Capital Requirements 28
Regulation 29
THE SPECIAL MEETING - GENERAL PROXY INFORMATION 30
General 30
Solicitation of Proxies 30
Appointment of Proxies 30
Signing of Proxies 30
Revocation of Proxies 30
Voting of Proxies 31
MDA Common Shares 31
MDA 1988 Options 31
Required Votes to Approve the Arrangement
and Voting Intentions of Certain Shareholders
and Optionholders 31
Principal Holders of MDA Common Shares
and MDA 1988 Options 32
THE ARRANGEMENT AND THE COMBINATION AGREEMENT 32
The Arrangement - General 32
Background of the Arrangement 33
MDA's Reasons for the Arrangement and
Recommendations of the MDA Board 35
Orbital's Reasons for the Arrangement 35
Operations Following the Arrangement 36
Interests of Certain Persons in the Arrangement 36
Opinion of MDA's Financial Advisor 36
Plan of Arrangement 39
Post-Combination Share Ownership 40
Qualifying Holdcos 40
Dissenting Holders 40
Description of Exchangeable Shares 40
Voting Rights 41
Dividend Rights 41
Retraction, Redemption and Exchange Right 42
Deduction and Remittance of Withholding Tax 43
Anti-dilution and Capital Reorganizations 44
Support Agreement 44
Market for Orbital Common Shares
and Exchangeable Shares 45
The Combination Agreement 45
Actions to be Taken Prior to the Effective
Time 45
Business of MDA Pending the Arrangement 45
Solicitation of Alternate Transactions 46
Conditions to the Arrangement 46
Termination and Amendment 47
Fees, Expenses and Indemnification 47
Confidentiality Agreement 48
Agreements of MDA Affiliates 48
Court Approval and Completion of the Arrangement 48
Accounting Treatment 49
Stock Exchange Listings 49
Exchangeable Shares 49
Orbital Common Shares 49
Eligibility for Investment in Canada 49
Exchangeable Shares 49
Voting Rights and Exchange Right 49
Orbital Common Shares 49
Resale of Exchangeable Shares and Orbital
Common Shares Received in the Arrangement 50
Canada 50
United States 50
Procedures for Exchange of Share
Certificates by MDA Shareholders 51
Return to Depositary of Letter of Transmittal 51
Election to Immediately Exchange
Exchangeable Shares for Orbital Common Shares 51
Fractional Shares 52
Failure to Deposit Certificates Representing
MDA Common Shares 52
Confirmation of Replacement Options 52
INCOME TAX CONSIDERATIONS TO MDA SHAREHOLDERS AND
OPTIONHOLDERS 52
Canadian Federal Income Tax Considerations 52
Holders of MDA Common Shares Resident in Canada 53
Holders of MDA Common Shares Not Resident in Canada 57
MDA 1988 Optionholders 58
United States Federal Income Tax Considerations 58
Taxation of U.S. Holders 59
Shareholders Not Resident in or Citizens of the
United States 62
Information, Reporting and Backup Withholding 63
INFORMATION CONCERNING ACQUISITION 63
INFORMATION CONCERNING ORBITAL 63
Background and Recent Acquisitions 63
Description Of Orbital's Products And Services 64
Launch Systems 65
Space and Electronics Systems 66
Communications and Information Systems 67
Competition 70
Research and Development 71
Backlog and Contracts 71
Properties 72
Environmental Regulation 73
Insurance 73
Litigation 73
Management's Discussion and Analysis of
Financial Condition and Results of Operations 73
Overview 73
Adoption of New Accounting Standard 74
Results of Operations for the Six-Month Periods
Ended June 30, 1995 and 1994 76
Results of Operations for the Years Ended
December 31, 1994, 1993 and 1992 77
Liquidity and Capital Resources 79
Management and Employees 80
Executive Officers and Directors 80
Indebtedness of Directors and Officers 81
Employees 81
Description of Capital 82
Capitalization 82
Common Shares 82
Preferred Shares 82
Dividend Policy 83
Transfer Agent 83
Independent Auditors 83
INFORMATION CONCERNING MDA 83
Business 83
Subsidiary Companies 83
General 84
Geo-Information Systems 84
Aviation Systems 85
Space and Defence Systems 86
Communications 87
Contract Pricing and Completion 87
Marketing and Sales 87
Competition 89
Research and Development 89
Patents and Licenses 89
Personnel 90
Properties 90
Management's Discussion and Analysis of
Financial Condition and Results of Operations 90
Results of Operations for the Quarter ended
June 30, 1995 and Quarter Ended June 30, 1994 90
Results of Operations for the Fiscal Years
ended March 31, 1995 and 1994 90
Results of Operations for the Fiscal Years ended
March 31, 1994 and 1993 91
Directors and Officers 92
Description of Share Capital 93
Dividend Record and Dividend Policy 93
Executive Compensation 94
Summary Compensation Table 94
Long-Term Incentive Plan Compensation 94
Pensions 95
Auditors 95
Registrar and Transfer Agent 96
Stock Exchange Listings 96
COMPARISON OF SHAREHOLDERS' RIGHTS 96
Extraordinary Transactions - Vote Required 96
Amendment to Governing Documents 97
Dissent Rights 98
Oppression Remedy 98
Derivative Action 99
Shareholder Consent in Lieu of Meeting 99
Director Qualifications 99
Fiduciary Duties of Directors 99
Indemnification of Officers and Directors 100
Director Liability 100
Anti-takeover Provisions and Interested
Stockholder Transactions 100
Shareholder Protection Rights Plan 101
DISSENTING RIGHTS 101
AVAILABLE INFORMATION 104
LEGAL MATTERS 104
APPROVAL OF PROXY CIRCULAR BY MDA BOARD OF DIRECTORS 104
ANNEX "I" Orbital's Consolidated Financial Statements and
Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 1995 F-1 (OMITTED)
ANNEX "II" MDA's Financial Statements F-39 (OMITTED)
ANNEX "III" Excerpt of Orbital's Proxy Statement for 1995
Annual Meeting of Stockholders P-1 (OMITTED)
APPENDIX "A" Plan of Arrangement A-1
APPENDIX "B" Combination Agreement B-1
APPENDIX "C" Opinion of Nesbitt Burns C-1 (OMITTED)
APPENDIX "D" Interim Order D-1 (OMITTED)
APPENDIX "E" Notice of Application for Final Order
to the Supreme Court (British Columbia) E-1 (OMITTED)
APPENDIX "F" Arrangement Resolution F-1 (OMITTED)
APPENDIX "G" Section 190 of the CBCA G-1 (OMITTED)
<PAGE>
MacDONALD, DETTWILER and ASSOCIATES LTD.
MANAGEMENT INFORMATION CIRCULAR
This Proxy Circular is being furnished to holders of Common
Shares of MDA and MDA 1988 Optionholders in connection with the
solicitation of proxies by management of MDA for use at the
Special Meeting to be held at 10:00 a.m., local time, on Tuesday,
November 14, 1995, at the offices of MDA at 13800 Commerce
Parkway, Richmond, British Columbia, V6V 2J3, and at any
adjournment thereof.
At the Special Meeting, MDA Shareholders and MDA 1988
Optionholders will be asked to consider and vote upon a proposal
to approve an arrangement under section 192 of the CBCA involving
MDA and its shareholders and optionholders and to transact such
further or other business as may properly come before the meeting
or any adjournment thereof.
MDA Shareholders and MDA 1988 Optionholders are being asked to
approve the Arrangement under the CBCA. Pursuant to the
Arrangement, MDA will become a wholly owned subsidiary of
Acquisition and each outstanding MDA Common Share will be
exchanged for a number of Exchangeable Shares of Acquisition
equal to the Exchange Ratio. The Exchange Ratio will be
determined by dividing US$5.41 by the average closing price of
Orbital Common Shares for the 20 trading days ending on the date
four trading days prior to the Effective Date of the Arrangement,
provided that the Exchange Ratio will not be less than 0.2705 or
greater than 0.3607. Outstanding MDA Options will become
Replacement Options to acquire Orbital Common Shares on terms
identical to the existing MDA Options, with appropriate
adjustments in the exercise price and the number of shares
subject to such options to reflect the Exchange Ratio. The
Exchangeable Shares will have voting, dividend and liquidation
rights that are, as nearly as practicable, equivalent to those
rights of the Orbital Common Shares.
Holders of Exchangeable Shares will have the right to exchange
all or any of such shares for an equal number (subject to
adjustment in the event of certain capital and corporate
reorganizations) of Orbital Common Shares plus the Dividend
Amount attributable to such shares, at any time prior to the
Automatic Redemption Date and subject to certain Call Rights of
Orbital. The Exchangeable Shares will be automatically exchanged
on the Automatic Redemption Date and upon the occurrence of
certain events, including the liquidation, dissolution or winding-
up of Orbital or Acquisition or the default by Acquisition under
the Exchangeable Share Provisions. Acquisition has the right to
accelerate the Automatic Redemption Date upon 75 days' written
notice to the holders of Exchangeable Shares at any time when
there are outstanding less than 400,000 Exchangeable Shares held
by persons other than Orbital and its Affiliates.
This Proxy Circular and the accompanying forms of proxy, Letter
of Transmittal and Notice of Guaranteed Delivery are first being
mailed to MDA Shareholders and MDA 1988 Optionholders on or about
October 11, 1995.
All information in this Proxy Circular relating to MDA has been
supplied by MDA. All information relating to Orbital Sciences
Corporation and Acquisition has been supplied by Orbital.
Orbital has reviewed all information relating to itself and
Acquisition after its inclusion in this Proxy Circular. MDA has
not made any independent investigations and assumes no
responsibility for the accuracy or completeness of such
information. Certain capitalized terms used in this Proxy
Circular without definition have the meanings given in the
Glossary of Terms found at page 2.
See "Risk Factors" for certain considerations relevant to MDA
Shareholders and MDA 1988 Optionholders regarding the Arrangement
and their investment in the securities referred to herein.
No person is authorized to give any information or to make any
representation not contained in this Proxy Circular and, if given
or made, such information or representation should not be relied
upon as having been authorized. This Proxy Circular does not
constitute an offer to sell, or a solicitation of an offer to
purchase, any securities, or the solicitation of a proxy, by any
person in any jurisdiction in which such an offer or solicitation
would be unlawful or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom
it is unlawful to make such an offer or solicitation of an offer
to purchase or proxy solicitation. Neither delivery of this
Proxy Circular nor any distribution of the securities referred to
in this Proxy Circular shall, under any circumstances, create an
implication that there has been no change in the information set
forth herein since the date of this Proxy Circular.
GLOSSARY OF TERMS
The following terms have the following meanings when used in this
Proxy Circular (including the summary). These defined terms are
not used in the consolidated financial statements of either MDA
or Orbital attached as annexes hereto.
"1933 Securities Act" means the United States Securities Act of
1933, including all regulations made thereunder, all amendments
to such statute or regulations from time to time, and any statute
or regulation that supplements or supersedes such statute or
regulation.
"1934 Securities Exchange Act" means the United States Securities
Exchange Act of 1934, including all regulations made thereunder,
all amendments to such statute or regulations from time to time,
and any statute or regulation that supplements or supersedes such
statute or regulation.
"Acquisition" means 3173623 Canada Inc., a newly incorporated
subsidiary of Orbital, existing under the CBCA.
"Acquisition Class B Preferred Shares" means the Class B
Preferred Shares of Acquisition having the rights, privileges,
restrictions and conditions set forth in Appendix A to the Plan
of Arrangement.
"Acquisition Common Shares" means the Common Shares of
Acquisition having the rights, privileges, restrictions and
conditions set forth in Appendix A to the Plan of Arrangement.
"Affiliate" of any person means any other person directly or
indirectly controlling, controlled by, or under common control
with, that person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"),
as applied to any person, means the possession by another person,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of that first mentioned
person, whether through the ownership of voting securities, by
contract or otherwise.
"Affiliate Agreements" means the agreements entered into between
Orbital and persons who are deemed to be "affiliates" of MDA
within the meaning of the 1933 Securities Act, substantially in
the forms attached as Exhibits 6.2.4(A) and (B) to the
Combination Agreement.
"Arrangement" means the arrangement under section 192 of the CBCA
on the terms and subject to the conditions set out in the Plan of
Arrangement, subject to any amendments thereto made in accordance
with section 6.1 of the Plan of Arrangement or made at the
direction of the Court in the Final Order.
"Arrangement Resolution" means the resolution concerning the
Arrangement in the form set forth in Appendix "F" to this Proxy
Circular.
"Automatic Redemption Date" means the fifth anniversary of the
Effective Date, unless such date shall be accelerated at any time
to a specified earlier date by the board of directors of
Acquisition upon at least 75 days' prior written notice to the
registered holders of Exchangeable Shares, in which case the
Automatic Redemption Date shall be such earlier date; provided,
however, that the board of directors of Acquisition may so
accelerate the Automatic Redemption Date only at such time as
there are outstanding fewer than 400,000 Exchangeable Shares held
by holders other than Orbital and its Affiliates.
"Average Closing Price" means the average closing sales price of
Orbital Common Shares for the 20 trading days ending on the date
four trading days prior to the Effective Date, as reported on
NASDAQ.
"Business Day" means any day other than a Saturday, a Sunday or a
day when banks are not open for business in either or both of the
Commonwealth of Virginia and Vancouver, British Columbia.
"CBCA" means the Canada Business Corporations Act, R.S.C. 1985,
c.C-44, including all regulations made thereunder, all amendments
to such statute or regulations from time to time, and any statute
or regulation that supplements or supersedes such statute or
regulation.
"Call Rights" means collectively, the Liquidation Call Right, the
Redemption Call Right and the Retraction Call Right.
"Canadian dollars" and "Cdn$," "dollars" and "$" mean the lawful
currency of Canada.
"Canadian GAAP" means generally accepted accounting principles in
Canada.
"Canadian Tax Act" means the Income Tax Act (Canada), R.S.C.
1985, c.1 (5th Supplement), including all regulations made
thereunder, all amendments to such statute or regulations from
time to time, and any statute or regulation that supplements or
supersedes such statute or regulation.
"Change of Control Agreements" means the agreements to be entered
into between Orbital and certain employees of MDA substantially
in the form attached as Exhibit 6.2.5 to the Combination
Agreement.
"Combination Agreement" means the Combination Agreement among
Orbital, Acquisition and MDA dated as of August 31, 1995 as
amended on September 29, 1995, a copy of which is appended as
Appendix "B" hereto.
"Court" means the Supreme Court of British Columbia.
"DGCL" means the General Corporation Law of the State of
Delaware, including all amendments to such statute from time to
time, and any statute or regulation that supplements or
supersedes such statute.
"Depositary" means Montreal Trust Company of Canada, at its
office set out in the Letter of Transmittal.
"Dissenting MDA Shareholders" means MDA Shareholders who have
exercised a right of dissent in respect of the Arrangement
Resolution in strict compliance with section 190 of the CBCA and
the Interim Order.
"Dissenting MDA 1988 Optionholders" means MDA 1988 Optionholders
who have exercised a right of dissent in respect of the
Arrangement Resolution in strict compliance with section 190 of
the CBCA and the Interim Order.
"Dividend Amount" means an amount equivalent to the full amount
of declared and unpaid dividends on the Exchangeable Shares plus
all dividends declared on Orbital Common Shares that have not
been declared on the Exchangeable Shares in accordance with the
Exchangeable Share Provisions.
"Effective Date" means the date on which the Arrangement becomes
effective as established by the date of issue of the certificate
of amendment in respect of the Plan of Arrangement to be issued
by the Director under the CBCA pursuant to subsection 192(7) of
the CBCA.
"Effective Time" means 12:01 a.m. (Vancouver time) on the
Effective Date.
"Employment Agreements" means the employment agreements to be
entered into between MDA and certain officers substantially in
the form attached as Exhibit 3.18 to the Combination Agreement.
"Exchange Ratio" is equal to US$5.41 divided by the Average
Closing Price, provided that in no event shall it be less than
0.2705 or greater than 0.3607.
"Exchange Right" means the right of the Trustee, on behalf of the
holders of Exchangeable Shares other than Orbital and its
Affiliates, to require Orbital to purchase the Exchangeable
Shares upon the occurrence of certain events as stated in the
Voting and Exchange Trust Agreement.
"Exchangeable Share Provisions" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares,
which are set forth in Appendix A to the Plan of Arrangement.
"Exchangeable Shares" means the Exchangeable Non-Voting Shares of
Acquisition having the rights, privileges, restrictions and
conditions set forth in the Exchangeable Share Provisions.
"Final Order" means the final order of the Court approving the
Arrangement.
"Holding Company Agreements" means the agreements to be entered
into among Acquisition, the respective Qualifying Holdcos and
their shareholders, substantially in the form attached as Exhibit
2.1.2 to the Combination Agreement.
"Insolvency Event" means the dissolution or winding-up of
Acquisition, any insolvency or bankruptcy proceeding instituted
by or against Acquisition, including any such proceeding under
the Companies' Creditor Arrangement Act (Canada) and the
Bankruptcy and Insolvency Act (Canada), the admission in writing
by Acquisition of its inability to pay its debts generally as
they become due and the inability of Acquisition, as a result of
solvency requirements of the CBCA, to redeem any Exchangeable
Shares tendered for retraction.
"Interim Order" means the interim order of the Court, a copy of
which is appended to this Proxy Circular as Appendix "D".
"Letter of Transmittal" means the letter of transmittal for use
by MDA Shareholders. A copy is enclosed with this Proxy Circular
and additional copies are available on request from the
Depositary.
"Liquidation Call Right" means the overriding right of Orbital,
in the event of and notwithstanding the proposed liquidation,
dissolution, winding-up or insolvency of Acquisition, to purchase
from all but not less than all of the holders of Exchangeable
Shares all but not less than all of the Exchangeable Shares held
by each such holder, as more particularly described in the Plan
of Arrangement.
"MDA" means MacDonald, Dettwiler and Associates Ltd., a
corporation existing under the CBCA, and where the context so
requires, means MDA and its subsidiaries.
"MDA Board" means the board of directors of MDA.
"MDA Common Shares" means the common shares of MDA, together with
all Rights.
"MDA Options" means collectively, the options outstanding under
the MDA 1988 Option Plans, the Key Employee Share Option Plan and
the Amended and Restated Key Employee Share Option Plan.
"MDA 1988 Option Plans" means together, the 1988 Employee Share
Option Plan of MDA and the 1988 Key Employee Share Option Plan of
MDA.
"MDA 1988 Optionholder" means a holder of an MDA 1988 Option.
"MDA 1988 Options" means the options to purchase MDA Common
Shares issued under the MDA 1988 Option Plans.
"MDA Shareholder" means a holder of record of MDA Common Shares.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation National Market System.
"Nesbitt Burns" means Nesbitt Burns Inc., financial advisor to
MDA.
"Orbital" means Orbital Sciences Corporation, a corporation
existing under the laws of the State of Delaware, and where the
context so requires, means Orbital and its subsidiaries.
"Orbital Common Shares" means the common stock, par value $.01
per share, of Orbital.
"Plan of Arrangement" means the plan of arrangement proposed
under section 192 of the CBCA, substantially in the form attached
to this Proxy Circular as Appendix "A," as amended, modified or
supplemented from time to time in accordance with its terms.
"Proxy Circular" means this Management Information Circular
including the Annexes and Appendices attached hereto and all
amendments and supplements hereto from time to time.
"PSC" means The PSC Communications Group, a division of MDA.
"Qualifying Holdco" means a corporation that shall have become a
party to the Plan of Arrangement prior to the date of the Special
Meeting pursuant to the Plan of Arrangement and in accordance
with the terms of the Combination Agreement and shall have
satisfied all the conditions under its respective Holding Company
Agreement to the satisfaction of Acquisition in its sole
discretion.
"Redemption Call Right" means the overriding right of Orbital, in
the event of and notwithstanding a proposed redemption of
Exchangeable Shares by Acquisition, to purchase from all but not
less than all of the holders of Exchangeable Shares all but not
less than all of the Exchangeable Shares held by each such
holder, as more particularly described in the Plan of
Arrangement.
"Replacement Option" means an option to purchase Orbital Common
Shares issued or granted in replacement of a MDA Option.
"Retraction Call Right" means the overriding right of Orbital, in
the event of and notwithstanding a request by a holder of
Exchangeable Shares for Acquisition to redeem any or all of the
Exchangeable Shares registered in the name of such holder, to
purchase all but not less than all of the Exchangeable Shares
that are the subject of such request directly from such holder,
as more particularly described in the Plan of Arrangement.
"Rights" means all rights associated with the Common Shares in
the capital of MDA, including without limitation all rights
associated with such Common Shares pursuant to the Shareholder
Protection Rights Plan.
"SEC" means the United States Securities and Exchange Commission.
"SFAS" means the Financial Accounting Standards Board's
statements of financial accounting standards.
"Shareholder Protection Rights Plan" means the Shareholder
Protection Rights Plan Agreement dated as of August 27, 1992
between MDA and Montreal Trust Company of Canada, as Rights
Agent, as amended from time to time.
"Special Meeting" means the meeting of MDA Shareholders and MDA
1988 Optionholders to be held on Tuesday, November 14, 1995 to
consider the Arrangement Resolution and to transact such further
and other business as may properly come before the meeting, and
any adjournment thereof.
"Special Voting Share" means the one Series A Preferred Share of
Orbital to be issued to the Trustee by Orbital in connection with
the Arrangement and to be held by the Trustee pursuant to the
terms of the Voting and Exchange Trust Agreement.
"Support Agreement" means the agreement to be entered into
between Acquisition and Orbital in connection with the
Arrangement substantially in the form attached as Exhibit 2.3 to
the Combination Agreement.
"TSE" means The Toronto Stock Exchange.
"Trustee" means State Street Bank and Trust Company.
"U.S. dollars" and "US$" mean the lawful currency of the United
States.
"U.S. GAAP" means generally accepted accounting principles in the
United States.
"Voting Agreements and Irrevocable Proxy" means the agreements
between certain directors, officers and shareholders of MDA and
Orbital relating to the voting by such persons of MDA Common
Shares held by them on the Arrangement Resolution.
"VSE" means the Vancouver Stock Exchange.
"Voting and Exchange Trust Agreement" means the agreement to be
entered into as of the Effective Date between Orbital,
Acquisition and the Trustee in connection with the Arrangement
substantially in the form attached as Exhibit 2.2 to the
Combination Agreement.
"Voting Rights" means the voting rights attached to the Special
Voting Share exercisable by the Trustee at the direction of the
holders of Exchangeable Shares pursuant to the terms of the
Voting and Exchange Trust Agreement.
MDA AND ORBITAL REPORTING CURRENCIES
AND ACCOUNTING PRINCIPLES
The financial information related to MDA contained in this Proxy
Circular is reported in Canadian dollars and has been prepared in
accordance with Canadian GAAP, which differs in certain respects
from U.S. GAAP.
The financial information related to Orbital, including the pro
forma financial information, contained in this Proxy Circular is
reported in U.S. dollars and has been prepared in accordance with
U.S. GAAP, which differs in certain respects from Canadian GAAP.
See Notes 2 and G to the pro forma financial information of
Orbital for an explanation of the relevant major differences
between U.S. GAAP and Canadian GAAP.
CANADIAN/U.S. EXCHANGE RATES
In this Proxy Circular, dollar amounts are expressed either in
"Canadian dollars," "Cdn$," "$" or "dollars" or in "U.S. dollars"
or "US$."
According to Reuters Historical Data for calendar 1992 to
calendar 1994 and for the nine months ended September 30, 1995,
the high and low exchange rates (i.e. the rate at which Canadian
dollars were sold for U.S. dollars), the average exchange rate
(i.e. the average of the exchange rates on the last day of each
month during the period) and the end-of-period exchange rates for
one Canadian dollar expressed in U.S. dollars for the periods
indicated are set forth below:
<TABLE>
<CAPTION>
Twelve Nine Months Ended
Months September 30,
Ended
December
31,
_______ _________________________
1992 1993 1994 1995
US$ US$ US$ US$
<S> <C> <C> <C> <C>
High for period 0.8485 0.7994 0.7567 0.7446
Low for period 0.7725 0.7417 0.7097 0.7009
End of period 0.7866 0.7566 0.7133 0.7410
Average for 0.8249 0.7737 0.7302 0.7288
period
</TABLE>
On September 29, 1995, the noon buying rate for Cdn$1.00 was
US$0.7442.
SUMMARY OF PROXY CIRCULAR
The following is a summary of certain information about the
Arrangement, MDA, Orbital and Acquisition and is qualified in its
entirety by reference to the full text of this Proxy Circular,
including the annexes and appendices hereto. MDA Shareholders
and MDA 1988 Optionholders are urged to read this Proxy Circular,
including the accompanying annexes and appendices, in its
entirety. See "Risk Factors" for certain information that should
be considered by MDA Shareholders and MDA 1988 Optionholders.
For the definitions of certain terms used in this Proxy Circular,
see "Glossary of Terms."
General
Orbital Sciences Corporation, MacDonald, Dettwiler and Associates
Ltd. and 3173623 Canada Inc., a newly formed subsidiary of
Orbital, have entered into the Combination Agreement. Pursuant
to the Combination Agreement, MDA and Acquisition have applied
for and received the Interim Order of the Supreme Court of
British Columbia calling the Special Meeting of MDA Shareholders
and MDA 1988 Optionholders to consider the approval of the
Arrangement under section 192 of the CBCA.
Pursuant to the Arrangement, MDA will become a wholly owned
subsidiary of Acquisition and each outstanding MDA Common Share
will be exchanged for a number of Exchangeable Shares of
Acquisition equal to the Exchange Ratio. The Exchange Ratio will
be determined by dividing US$5.41 by the average closing price of
Orbital Common Shares for the 20 trading days ending on the date
four trading days prior to the Effective Date of the Arrangement,
provided that the Exchange Ratio will not be less than 0.2705 or
greater than 0.3607. Outstanding MDA Options will become
Replacement Options to acquire Orbital Common Shares on terms
identical to the existing MDA Options, with appropriate
adjustments in the exercise price and the number of shares
subject to such options to reflect the Exchange Ratio. The
Exchangeable Shares will have voting, dividend and liquidation
rights that are, as nearly as practicable, equivalent to those
rights of the Orbital Common Shares.
Orbital is a space technology company that designs, manufactures,
operates and markets a broad range of space products and services
that include launch systems, space and electronics systems, and
communications and information systems. Orbital had revenues of
approximately US$222 million for the year ended December 31,
1994. As of June 30, 1995, Orbital's total backlog, including
firm orders of approximately US$495 million, was approximately
US$1.3 billion. The closing sales price of an Orbital Common
Share on September 29, 1995 was US$16.25, as reported by NASDAQ.
The Arrangement and The Combination Agreement
The Combination Agreement, a copy of which is appended hereto as
Appendix "B," provides for the implementation of the Arrangement
under the CBCA, including obtaining the Interim Order, calling
the Special Meeting and obtaining the Final Order of the Court
approving the Arrangement. The Combination Agreement also
contains the terms and conditions of Orbital's, MDA's and
Acquisition's obligations to consummate the Arrangement.
The Arrangement. Pursuant to the Arrangement, (i) MDA will
become a wholly owned subsidiary of Acquisition and an indirect
subsidiary of Orbital, (ii) MDA Shareholders (except dissenting
holders, and except corporations ("Qualifying Holdcos") that,
together with their respective shareholders, have entered into an
agreement (a "Holding Company Agreement") with Acquisition
substantially in the form attached as Exhibit 2.1.2 to the
Combination Agreement and have met the conditions under the
Holding Company Agreement) will receive, in exchange for their
MDA Common Shares, a number of Exchangeable Shares equal to the
product of the number of such MDA Common Shares multiplied by the
Exchange Ratio; (iii) all outstanding shares of each Qualifying
Holdco will be exchanged for a number of Exchangeable Shares
equal to the product of the number of MDA Common Shares owned by
such Qualifying Holdco multiplied by the Exchange Ratio; and
(iii) each outstanding MDA Option will be converted into a
Replacement Option exercisable for a number of Orbital Common
Shares equal to the product of the number of MDA Common Shares
subject to such MDA Option multiplied by the Exchange Ratio, at
an exercise price per share equal to the exercise price per share
of such MDA Option divided by the Exchange Ratio, and subject to
the same vesting, expiration and other terms as such MDA Option.
In addition, Acquisition will issue 10,000 Class B Preferred
Shares to Canadian Imperial Bank of Commerce as partial payment
for investment banking services rendered with respect to the
Arrangement. See "The Arrangement and the Combination Agreement
- - Plan of Arrangement."
Recommendation and Fairness Opinion. The MDA Board has approved
the Combination Agreement and unanimously recommends that MDA
Shareholders and MDA 1988 Optionholders vote to adopt the
Arrangement Resolution. Nesbitt Burns Inc., financial advisor to
MDA, has delivered to the MDA Board its written opinion dated as
of October 4, 1995 (a copy of which is attached to this Proxy
Circular as Appendix "C") to the effect that, based upon and
subject to the various considerations set forth in such opinion
and as of that date, the Arrangement is fair to MDA Shareholders
and MDA 1988 Optionholders from a financial point of view. The
fees to be paid to Nesbitt Burns are contingent upon consummation
of the Arrangement. See "The Arrangement and the Combination
Agreement - MDA's Reasons for the Arrangement and Recommendations
of the MDA Board" and "- Opinion of MDA's Financial Advisor."
Qualifying Holdcos. The Combination Agreement provides that any
MDA Shareholder that wishes to contribute its MDA Common Shares
to a holding company and exchange the shares of the Qualifying
Holdco for Exchangeable Shares as provided in the Plan of
Arrangement may do so by complying with certain notice
provisions, entering into a Holding Company Agreement and
satisfying the conditions set forth in the Holding Company
Agreement. See "The Arrangement and the Combination Agreement -
Qualifying Holdcos."
Description of Exchangeable Shares. The Exchangeable Shares will
have voting, dividend and liquidation rights that are, as nearly
as practicable, equivalent to those rights of the Orbital Common
Shares, and will be exchangeable for Orbital Common Shares on a
one-for-one basis (subject to adjustment). Each Exchangeable
Share will be entitled to receive dividends from Acquisition
payable at the same time as, and to the extent possible in the
same property or cash as, and in the case of cash dividends, in
the Canadian dollar equivalent of, each dividend paid by Orbital
on an Orbital Common Share. The Exchangeable Shares generally
will not be entitled to vote on matters submitted to
Acquisition's shareholders but, pursuant to the Voting and
Exchange Trust Agreement, holders of Exchangeable Shares will be
provided with voting rights that will entitle them to vote along
with holders of Orbital Common Shares on matters submitted to
Orbital's shareholders. In the event of the liquidation,
dissolution or winding-up of Acquisition or Orbital, a holder of
Exchangeable Shares will receive one Orbital Common Share for
each Exchangeable Share (subject to adjustment). Acquisition
will automatically redeem all Exchangeable Shares then
outstanding on the fifth anniversary of the Effective Date, and
may redeem all outstanding Exchangeable Shares at any time when
there are less than 400,000 outstanding Exchangeable Shares held
by persons other than Orbital and its Affiliates, in each case
for a redemption price of one Orbital Common Share per
Exchangeable Share (subject to adjustment). Upon a proposed
retraction or redemption of an Exchangeable Share, or in the
event of the liquidation, dissolution or winding-up of
Acquisition, Orbital will have the right, in lieu of Acquisition
making such retraction, redemption or liquidation payment, to
purchase Exchangeable Shares for a price of one Orbital Common
Share for each Exchangeable Share (subject to adjustment). In
the event of certain capital or corporate reorganizations of
Orbital, the number of Orbital Common Shares to be issued upon
the exchange of Exchangeable Shares will be appropriately
adjusted so that the holders of the Exchangeable Shares are
treated in the same manner as holders of Orbital Common Shares.
Although the transfer of Exchangeable Shares, subject to
receiving certain orders from securities regulators, will not be
restricted under applicable securities laws, except in certain
stated instances, the Exchangeable Shares will not be listed on
any stock exchange and MDA does not expect there will be any
market for the Exchangeable Shares. See "The Arrangement and the
Combination Agreement - Description of Exchangeable Shares."
Voting and Exchange Trust Agreement. At the Effective Time,
Acquisition, Orbital and the Trustee will enter into the Voting
and Exchange Trust Agreement pursuant to which Orbital will issue
to the Trustee one Series A Preferred Share of Orbital (the
"Special Voting Share"). The Special Voting Share will vote with
the Orbital Common Shares at any meeting at which the holders of
Orbital Common Shares are entitled to vote, and will be entitled
to a number of votes equal to the number of Orbital Common Shares
issuable upon exchange of all Exchangeable Shares outstanding
from time to time not owned by Orbital or its Affiliates. On
each vote of Orbital Common Shares, holders of Exchangeable
Shares as of the record date established for the meeting at which
such vote will be taken will have the right to direct the Trustee
with respect to a number of votes equal to the number of Orbital
Common Shares issuable upon exchange of their Exchangeable
Shares. See "The Arrangement and the Combination Agreement -
Description of Exchangeable Shares - Voting Rights."
Pursuant to the Voting and Exchange Trust Agreement, Orbital will
grant to the Trustee for the benefit of the holders of
Exchangeable Shares the Exchange Right, exercisable upon the
liquidation, dissolution or insolvency of Acquisition or if
Acquisition defaults in its dividend, retraction or redemption
obligations with respect to the Exchangeable Shares, to require
Orbital to purchase all or any part of the Exchangeable Shares at
a purchase price of one Orbital Common Share for each
Exchangeable Share (subject to adjustment). In addition, Orbital
will grant to the Trustee for the benefit of the holders of the
Exchangeable Shares the Automatic Exchange Right, exercisable
upon the liquidation, dissolution or winding-up of Orbital, to
automatically exchange each Exchangeable Share for one Orbital
Common Share (subject to adjustment) five business days prior to
the date of any such liquidation event. See "The Arrangement and
the Combination Agreement - Description of Exchangeable Shares -
Retraction, Redemption and Exchange Right."
Support Agreement. At the Effective Time, Acquisition and
Orbital will enter into the Support Agreement pursuant to which
Orbital will covenant to take such action as is necessary to
permit Acquisition to (i) pay simultaneous and equivalent
dividends on the Exchangeable Shares as are paid by Orbital on
the Orbital Common Shares, and (ii) honour the redemption and
retraction rights and the dissolution entitlements that are
attributes of the Exchangeable Shares. The Support Agreement
will also provide that, without the prior approval of the holders
of the Exchangeable Shares, Orbital will not take certain
actions, such as declaring dividends on the Orbital Common Shares
or effecting reclassifications or reorganizations of the Orbital
Common Shares, without the same or an economically equivalent
action being taken in respect of the Exchangeable Shares. See
"The Arrangement and the Combination Agreement - Support
Agreement."
Court Approval and Completion of the Arrangement. The
implementation of the Arrangement is subject to the Final Order
approving the Arrangement. MDA, Acquisition and Orbital intend
to apply for the Final Order as promptly as practicable after the
Special Meeting. A copy of the Notice of Application for the
Final Order is attached as Appendix "E" hereto. The hearing in
respect of the Final Order is scheduled to take place on
November 16, 1995 before the presiding Judge or Master in
Chambers at the Courthouse, 800 Smithe Street, Vancouver, British
Columbia. At that hearing, any MDA Shareholder, any MDA 1988
Optionholder and any other interested party who wishes to
participate or to be represented or to present evidence or
argument may do so, subject to filing with the Court and serving
appropriate notices of appearance in accordance with the Interim
Order. At the hearing for the Final Order, the Court will
consider, among other factors, the fairness of the Arrangement
and the approval of the Arrangement Resolution by MDA
Shareholders and MDA 1988 Optionholders. The Effective Date of
the Arrangement will occur after the Final Order is obtained and
all other conditions in the Combination Agreement have been
satisfied or waived, which is expected to occur promptly after
the Special Meeting. See "The Arrangement and the Combination
Agreement - Court Approval and Completion of the Arrangement."
Conditions to the Arrangement. Consummation of the Arrangement
is subject to the satisfaction of a number of conditions,
including but not limited to: (i) the passage of the Arrangement
Resolution by the MDA Shareholders and the MDA 1988
Optionholders; (ii) Dissenting MDA Shareholders and Dissenting
MDA 1988 Optionholders being entitled in the aggregate to receive
no more than 10% of the aggregate number of Orbital Common Shares
and Replacement Options to be issued pursuant to the Plan of
Arrangement; (iii) the receipt of necessary orders or
registrations under applicable securities regulations to permit
the transactions contemplated by the Arrangement to be completed
and the Exchangeable Shares to be freely tradeable except in
certain limited circumstances; (iv) the absence of any
restrictive court orders or any other legal restraints preventing
or making illegal the consummation of the Arrangement; (v) the
continuing accuracy in all material respects of the
representations and warranties made by each of MDA and
Acquisition and Orbital in the Combination Agreement on and as of
the Effective Date; and (vi) the receipt by Orbital of an opinion
that the Arrangement is to be accounted for as a pooling of
interests. See "The Arrangement and the Combination Agreement -
The Combination Agreement."
Termination. The Combination Agreement may be terminated and the
Arrangement may be abandoned prior to the Effective Date,
notwithstanding the approval by the MDA Shareholders and the MDA
1988 Optionholders of the Arrangement Resolution, under the
circumstances specified in the Combination Agreement, including:
(i) by Orbital, if the Average Closing Price is more than
US$25.00; (ii) by Orbital, if the MDA Board shall have withdrawn
or modified in any manner adverse to Orbital its support of the
Arrangement, or shall fail to affirm such support upon the
request of Orbital; (iii) by MDA, if the Average Closing Price is
less than US$12.775; (iv) by MDA, if MDA receives a bona fide
offer to acquire all the shares or assets of MDA for a
consideration per MDA Common Share having a fair market value
greater than US$5.95, based on prevailing exchange rates at the
date of the offer; (v) by mutual agreement of Orbital and MDA;
and (vi) by either party if the Arrangement is not consummated by
December 31, 1995 (other than as a result of a default of the
terminating party). Under certain circumstances MDA may be
required to pay Orbital a US$750,000 termination fee if the
Combination Agreement is terminated by MDA. See "The Arrangement
and the Combination Agreement - The Combination Agreement -
Termination and Amendment" and "- Solicitation of Alternate
Transactions."
Operations Following the Arrangement. Orbital currently expects
that following the Arrangement, MDA will continue to operate as a
separate entity, substantially in the same manner as it has
operated its business prior to the Arrangement. See "The
Arrangement and the Combination Agreement - Operations Following
the Arrangement."
Accounting Treatment. The Arrangement is expected to be
accounted for as a pooling of interests under U.S. GAAP, and it
is a condition to Orbital's obligation to consummate the
Arrangement that Orbital shall have received an opinion of KPMG
Peat Marwick LLP, its independent auditors, to the effect that
such accounting treatment is appropriate. See "The Arrangement
and the Combination Agreement - Accounting Treatment."
Certain Canadian Federal Income Tax Considerations
The following discussion of Canadian federal income tax
considerations is intended as a general summary and does not
discuss all of the facts and circumstances that may affect the
tax liability of particular holders of MDA Common Shares and MDA
1988 Options. Holders of MDA Common Shares and MDA 1988 Options
are urged to consult their own tax advisors. See "Income Tax
Considerations to MDA Shareholders and Optionholders - Canadian
Federal Income Tax Considerations."
Residents of Canada. A holder of MDA Common Shares who receives
Exchangeable Shares will generally not be subject to Canadian
income tax in respect of such transaction (i) if such holder is
not considered to receive Voting Rights or the Exchange Right for
MDA Common Shares, or (ii) even if such holder is considered to
receive Voting Rights or the Exchange Right for MDA Common
Shares, if such holder effects a Tax Election under section 85 of
the Canadian Tax Act specifying a transfer price equal to the
aggregate of the adjusted cost bases of such MDA Common Shares
immediately before the exchange.
Pursuant to the Canadian Tax Act, a holder of an outstanding MDA
1988 Option that becomes a Replacement Option will be deemed not
to have disposed of the MDA 1988 Option and not to have acquired
the Replacement Option, provided the value of the Replacement
Option is not greater than the value of the MDA 1988 Option.
Furthermore, for purposes of the tax consequences of the
Replacement Option, the Replacement Option will be deemed to be
the same option as, and a continuation of, the MDA 1988 Option
and Orbital will be deemed to be the same corporation as, and a
continuation of, MDA.
So long as the value of the Call Rights, Exchange Right and the
Voting Rights is nominal, the grant of Call Rights by a holder of
Exchangeable Shares, in consideration of the receipt of Exchange
Right and Voting Rights, should not result in any material
Canadian federal income tax consequences.
A holder of Exchangeable Shares who receives Orbital Common
Shares from Acquisition on a redemption (including a retraction)
by Acquisition of the holder's Exchangeable Shares will be deemed
to receive a dividend as a result of such redemption. A holder
of Exchangeable Shares who exchanges his Exchangeable Shares with
Orbital for Orbital Common Shares upon the exercise of the Call
Rights or the Exchange Right will generally realize a capital
gain (or capital loss) as a result of such exchange.
Non-Residents of Canada. Provided the MDA Common Shares are
listed on a prescribed stock exchange at the time of
implementation of the Arrangement, a holder of MDA Common Shares
who is not resident in Canada, who holds MDA Common Shares as
capital property and does not hold MDA Common Shares in
connection with a business carried on in Canada, generally will
not be subject to tax under the Canadian Tax Act solely as a
result of the transactions effected pursuant to the Arrangement.
A non-resident holder of Exchangeable Shares who receives Orbital
Common Shares from Acquisition on a redemption (including a
retraction) of the holder's Exchangeable Shares will be deemed to
receive a dividend as a result of such redemption that will be
subject to non-resident withholding tax under the Canadian Tax
Act at the rate of 25%, subject to reduction under the provisions
of an applicable income tax treaty. Under the Canada-United
States Income Tax Convention, the rate is generally reduced to
15% for residents of the United States. A holder of Exchangeable
Shares who exchanges his Exchangeable Shares with Orbital for
Orbital Common Shares upon the exercise of the Call Rights or the
Exchange Right will generally realize a capital gain (or capital
loss) as a result of such exchange.
An exchange of Exchangeable Shares for Orbital Common Shares by a
non-resident may be subject to tax under the Canadian Tax Act. A
non-resident may be exempt from tax pursuant to the provisions of
an applicable tax treaty such as the Canada-United States Income
Tax Convention. In any case, Orbital or Acquisition will require
non-residents to obtain a certificate from Revenue Canada on such
exchange specifying a certificate limit not less than the fair
market value of the Orbital Common Shares. If no such
certificate is obtained, then either Orbital or Acquisition will
withhold and remit to Revenue Canada as tax on behalf of such non-
resident holder, 33J% of the fair market value of the Orbital
Common Shares, and Orbital or Acquisition will deliver to the non-
resident holder a reduced number of Orbital Common Shares to
reflect such payment to Revenue Canada.
Certain United States Federal Income Tax Considerations
The following discussion of United States federal income tax
considerations is intended as a general summary and does not
discuss all of the facts and circumstances that may affect the
tax liability of particular MDA Shareholders. MDA Shareholders
are urged to consult their own tax advisors. See "Income Tax
Considerations to MDA Shareholders and Optionholders - United
States Federal Income Tax Considerations."
U.S. Shareholders. MDA and Orbital believe, based on advice of
counsel, that there is a reasonable basis on which to conclude
that the exchange of MDA Common Shares pursuant to the
Arrangement will constitute a taxable transaction for U.S.
federal income tax purposes, and MDA understands that Orbital
intends to report the exchange in a manner consistent with the
foregoing. If the exchange is taxable, MDA Shareholders who are
"United States persons" for U.S. federal income tax purposes
("U.S. Holders"), including United States citizens or residents,
domestic corporations, domestic partnerships, and estates or
trusts subject to U.S. federal income tax on their income
regardless of source, who receive Exchangeable Shares would
recognize capital gain or loss in an amount equal to the
difference between the fair market value of the Exchangeable
Shares received (together with cash received in lieu of
fractional shares (if any)) and the tax basis of the MDA Common
Shares surrendered in the exchange. Such capital gain or loss
would generally constitute U.S. source gain and would be long-
term capital gain or loss if the MDA Common Shares exchanged have
been held for more than one year at the time of the exchange. It
is possible, however, that the United States Internal Revenue
Service (the "IRS") may take the position that the receipt of
Exchangeable Shares in exchange for MDA Common Shares is not a
taxable event, in which case a U.S. Holder would only have to
recognize gain to the extent of cash in lieu of fractional shares
(if any), and certain carryover tax basis and holding period
rules would apply to the Exchangeable Shares.
MDA and Orbital also believe, based on the advice of counsel,
that there is a reasonable basis on which to conclude that the
exchange, retraction or redemption of the Exchangeable Shares for
Orbital Common Shares will be treated as a taxable event for U.S.
federal income tax purposes, and Orbital has advised MDA that it
currently intends to take this position. If the exchange is a
taxable event, a U.S. Holder that receives Orbital Common Shares
from Orbital pursuant to the Call Rights would generally
recognize capital gain or loss equal to the difference between
the fair market value of the Orbital Common Shares at the time of
the exchange (together with cash in lieu of fractional shares (if
any) and cash equal to the Dividend Amount (if any)) and the tax
basis of the Exchangeable Shares. Such capital gain or loss
would be long-term capital gain or loss if the Exchangeable
Shares have been held for more than one year at the time of the
exchange. It is possible, however, that the IRS could assert
that a portion of such gain constitutes U.S. source ordinary
income. If the receipt of Orbital Common Shares is effected
through a retraction or redemption of Exchangeable Shares
distributed to a U.S. Holder directly by Acquisition, then if the
retraction or redemption is treated as a taxable transaction, it
would be treated as a taxable exchange of the Exchangeable Shares
if the U.S. Holder meets certain tests relating to reductions in
its percentage shareholdings in Acquisition, and otherwise would
be taxed as a dividend paid on the Exchangeable Shares to the
extent of Acquisition's (or, possibly, Orbital's) earnings and
profits. It is possible, however, that the IRS could assert that
the exchange, retraction or redemption of Exchangeable Shares for
Orbital Common Shares is not a taxable event, in which case a
U.S. Holder would only have to recognize gain to the extent of
cash in lieu of fractional shares (if any) and the Dividend
Amount (if any), and certain carryover tax basis and holding
period rules would apply to the Orbital Common Shares.
Non-U.S. Shareholders. A holder of MDA Common Shares that is not
a U.S. Holder ("non-U.S. Holder") generally will not be subject
to U.S. federal income tax on a gain recognized on the receipt of
the Exchangeable Shares, Voting Rights and Exchange Right, or on
the subsequent sale or exchange of the Exchangeable Shares or
Orbital Common Shares, unless such gain is effectively connected
with a U.S. trade or business.
Dividends received by a non-U.S. Holder with respect to the
Orbital Common Shares generally will be subject to U.S.
withholding tax at a rate of 30%, which rate may be subject to
reduction by an applicable income tax treaty in effect between
the U.S. and the non-U.S. Holder's country of residence. Under
the Canada-U.S. Income Tax Convention, the rate is generally
reduced to 15%. Although the matter is not entirely free from
doubt, dividends received by a non-U.S. Holder on Exchangeable
Shares should not be subject to U.S. withholding tax.
The Special Meeting
Time and Place. The Special Meeting will be held on Tuesday,
November 14, 1995 at the office of MDA at 13800 Commerce Parkway,
Richmond, B.C., V6V 2J3, at 10:00 a.m. (Vancouver time).
MDA Shareholders and MDA 1988 Optionholders Entitled to Vote. At
the Special Meeting, the MDA Shareholders (voting together as one
class) and the MDA 1988 Optionholders (voting separately from the
MDA Shareholders as a second class) will each consider and vote
upon a proposal to approve the Arrangement Resolution, and will
transact such other business as may properly come before the
Special Meeting or any adjournments thereof. The close of
business on October 10, 1995 is the record date for determination
of MDA Shareholders entitled to receive notice of and to vote at
the Special Meeting, subject to the rights of certain transferees
of MDA Common Shares after that date in accordance with the CBCA.
All holders of MDA 1988 Options on the date of the Special
Meeting will be entitled to attend and vote at the Special
Meeting. As of September 29, 1995, 11,218,156 MDA Common Shares
and 277,643 MDA 1988 Options were outstanding. See "The Special
Meeting -General Proxy Information."
Vote Required. Subject to any further order of the Court, the
Arrangement Resolution must be approved by the affirmative vote
of 66K% of the votes actually cast thereon by the MDA
Shareholders and the MDA 1988 Optionholders, voting as separate
classes (and for this purpose any spoiled votes, illegible votes,
defective votes and abstentions shall be considered not to be
votes cast). Directors, officers and shareholders of MDA holding
approximately 56.6% of the issued and outstanding MDA Common
Shares have executed Voting Agreements and Irrevocable Proxies
with Orbital agreeing to vote for the Arrangement Resolution at
the Special Meeting. In addition, certain officers and employees
of MDA holding approximately 59.2% of total votes entitled to be
cast by the MDA 1988 Optionholders have agreed with MDA to vote,
as MDA 1988 Optionholders, for the Arrangement Resolution. See
"The Special Meeting - General Proxy Information - Required Votes
to Approve the Arrangement and Voting Intentions of Certain
Shareholders and Optionholders."
Dissent Rights. MDA Shareholders and MDA 1988 Optionholders who
do not vote in favour the Arrangement Resolution and comply with
certain procedures are entitled to dissent under section 190 of
the CBCA, in accordance with the Interim Order. See "Dissenting
Rights."
Business of Orbital
Orbital is a space technology company that designs, manufactures,
operates and markets a broad range of space products and services
that are grouped into three categories: Launch Systems, Space and
Electronics Systems, and Communications and Information Systems.
Launch Systems include space and suborbital launch vehicles;
Space and Electronics Systems include satellites, spacecraft
platforms, space sensors and instruments, and space payloads and
experiments, as well as advanced avionics and data management
systems; and Communications and Information Systems include
satellite-based two-way mobile data communications systems,
satellite-based navigation products and remote sensing systems,
along with satellite tracking systems and environmental
monitoring products. See "Information Concerning Orbital."
Orbital's goal is to become a full-service space company by
integrating its launch vehicles, satellites and other products
into complete "turn-key" space systems and providing end-to-end
satellite-based services for particular markets. Orbital's
strategy is to exploit expanding opportunities to provide
government, commercial and other customers with low-cost access
to space. Essential elements of Orbital's strategy include
investment of substantial private capital in the development of
proprietary products; reduction of the time required for product
development; formation of strategic business alliances to enhance
Orbital's marketing, technical, manufacturing and financial
capabilities; establishment of vertically integrated
manufacturing and testing capabilities; and acquisitions of
companies with product lines that complement or enhance Orbital's
existing base of products, services and technologies. Orbital
believes that providing lower-cost "turn-key" space systems
should stimulate the use of space products and services by
private corporations, educational and research institutions and
other non-traditional space customers including, ultimately,
individual consumers.
Orbital's customer base includes a wide range of U.S.
governmental agencies, universities and commercial enterprises
including: the U.S. National Aeronautics and Space Administration
("NASA"); the National Oceanic and Atmospheric Administration;
various organizations within the U.S. Department of Defense
("DoD"), including the U.S. Army, the U.S. Navy, the U.S. Air
Force, the Advanced Research Projects Agency ("ARPA") and the
Ballistic Missile Defense Organization ("BMDO"); ORBCOMM Global,
L.P. ("ORBCOMM Global"), an affiliate of Orbital; Johns Hopkins
University; and certain distributors of electronics and
recreational equipment.
Launch Systems. Orbital's Launch Systems Group's most
significant products are space and suborbital launch vehicles. A
space launch vehicle launches a satellite into orbit around the
Earth. Suborbital launch vehicles place payloads into a variety
of high-altitude trajectories but, unlike space launch vehicles,
do not place payloads into Earth orbit.
Orbital's space launch vehicles are the Pegasusr launch vehicle;
the Pegasus XL launch vehicle (a modified, larger version of the
Pegasus); and the Taurusr launch vehicle. The Pegasus and
Pegasus XL vehicles are launched from beneath a modified large
aircraft such as a Lockheed L-1011 to deploy satellites weighing
up to 1,000 pounds into low-Earth orbit. The higher-capacity
Taurus vehicle is a ground-launched derivative of the Pegasus
vehicle that can carry payloads weighing up to 3,000 pounds to
low-Earth orbit and payloads weighing up to 800 pounds to
geosynchronous orbit. In March 1995, Orbital and Rockwell
International Corporation agreed to form a joint venture to
develop, construct, operate and market a new advanced technology
small reusable space launch vehicle (the "X-34").
Orbital's suborbital launch products include various types of
suborbital vehicles and their principal subsystems, payloads
carried by such vehicles, and related launch support
installations and systems used in their assembly and operation.
Customers typically use Orbital's suborbital launch vehicles to
launch scientific and other payloads and for defence-related
applications such as target and interceptor experiments for anti-
missile defence systems.
Space and Electronics Systems. Orbital's Space and Electronics
Systems Group's products include spacecraft systems and payloads,
defence avionics and sensors.
The Space and Electronics Systems Group is responsible for the
design, production and testing of small and medium class
spacecraft for scientific, military and commercial applications.
The small standard spacecraft platforms developed by Orbital,
such as the PegaStarO and the MicroStarO, are designed to be
launched by the Pegasus, Pegasus XL or Taurus launch vehicles.
The PegaStar spacecraft platform is a general purpose spacecraft
that has successfully performed on one mission, and is planned to
be used for Orbital's SeaStarO ocean environmental monitoring
satellite system. Orbital's MicroStar spacecraft platform is
designed for use in the ORBCOMM Global satellite-based two-way
data communications network consisting of up to 36 MicroStar
satellites (the "ORBCOMM System") and also for a variety of small
space science and remote sensing projects, including some of
those being pursued by Orbital's wholly owned subsidiary, Orbital
Imaging Corporation ("ORBIMAGE"). Orbital's medium class
satellites are generally used to gather various scientific data,
such as ocean topography and ultraviolet sources outside the
galaxy.
Orbital develops, manufactures and markets avionics products,
including advanced electronics and data management systems for
aircraft flight operations and ground support for the U.S.
military and foreign governments. The Space and Electronics
Systems Group also is responsible for the design, production and
testing of spacecraft command and data handling, attitude control
and structural subsystems for a variety of government and
commercial customers. Other Space and Electronics Systems Group
products include satellite-borne scientific sensors and
instruments, such as atmospheric ozone monitoring instruments and
environmental sensors.
Communications and Information Systems. Orbital's Communications
and Information Systems Group includes Orbital's subsidiaries:
Orbital Communications Corporation ("ORBCOMM"), ORBIMAGE and
Magellan Corporation ("Magellan").
In June 1993, ORBCOMM and Teleglobe Mobile Partners ("Teleglobe
Mobile"), a partnership formed by Teleglobe Inc. ("Teleglobe"),
formed ORBCOMM Global to design, develop, construct, integrate,
test and market the ORBCOMM System. The ORBCOMM System is a
satellite-based communications network designed to provide
virtually continuous mobile data communications coverage over
much of the Earth's surface. The ORBCOMM System will include a
constellation of up to 36 small low-Earth orbit MicroStar
satellites, a satellite control centre operating and positioning
the satellites, network control centres controlling the flow of
information through the system, local ground stations sending and
receiving signals between the network control centres and nearby
satellites, and the mobile communicators used by subscribers to
transmit and receive messages to and from nearby satellites. In
April 1995, Orbital launched on a Pegasus launch vehicle the
first two satellites of the ORBCOMM System. ORBCOMM Global
expects to begin intermittent commercial service using these
satellites during the first quarter of 1996.
ORBIMAGE is currently seeking to develop and market a broad range
of information services that identify and monitor global
environmental changes and collect and disseminate other remote
sensing information. Small Earth-viewing satellites and related
sensors and instruments to be placed in relatively low orbits are
expected to offer cost-efficient data collection, daily global
coverage and high-resolution sensing services. Services to be
provided by ORBIMAGE could include high-resolution optical
imaging of land surfaces for geographic information and sensing
of ozone and atmospheric conditions.
Magellan designs, manufactures and markets Global Positioning
System satellite-based navigation and positioning products for
commercial and consumer markets including marine and aviation
applications, outdoor recreational users such as hunters and
hikers, professional users such as geologists, geographers,
surveyors, natural resource managers and contractors and, to a
lesser extent, governmental users.
Business of MDA
MDA provides technology-based solutions and services to Earth
information, air navigation, defence applications and data
communications markets worldwide, through four business areas.
Geo-Information Systems. Geo-Information Systems, MDA's largest
business area, involves the development of systems for the
management of Earth resources and the environment, by applying
MDA's expertise in Earth observation ground stations and related
markets. MDA is one of the world's leading companies in
providing solutions for the acquisition, processing, archiving
and dissemination of non-classified Earth observation data. Of
the 26 non-secret ground stations in the world, MDA has built or
been part of the construction of 23 ground stations in 20
countries. In addition to pursuing opportunities to build new
ground stations, MDA is actively pursuing opportunities to
upgrade existing ground stations so that they are able to process
the data that new technologically-advanced Earth observation
satellites are able to provide.
In addition to systems for space-based Earth observation, MDA
builds systems to process Earth images from airborne radar. MDA
also designs and builds customized software products in
consultation with consumers in government and industry to make
geographic related data more useful. The Geo-Information Systems
business area provides operational and post-delivery support to
ensure operational efficiency of systems delivered to its
customers. This support includes consulting services, training,
maintenance and test equipment, spare parts and manuals.
Aviation Systems. MDA's Aviation Systems business area is
focused on specific markets, including the provision of automated
aeronautical information systems and automated air traffic
management systems. MDA builds and markets the Pegasus-AISTM
(unrelated to Orbital's Pegasus space launch vehicle), an
automated aeronautical information management system. This
system provides pilots and other users with aeronautical and
meteorological information. In addition, MDA is developing a
niche in the embedding of its aeronautical information systems
into broader air traffic management systems.
MDA is currently participating in the development and delivery of
air traffic management software to be used in the Canadian
Automated Air Traffic System. Air traffic management systems
allow air traffic controllers to guide pilots in flight by
combining information about flights, routes, weather,
navigational aids, airways and airports, and delivering it to air
traffic controllers in a form that is intended to enable timely,
safe decisions.
Space and Defence Systems. MDA's Space and Defence Systems
business area provides surveillance and command support systems
for space and defence. MDA's defence systems include naval mine
countermeasures, artillery command and control, radar deception
systems and military materiel management. In space-related work,
MDA continues to provide major software development efforts as
part of Canada's contribution to the Space Station project. This
activity provides an opportunity for the enhancement of MDA's
space-qualified software capabilities.
Communications. In 1994, MDA entered a new computer network
communications consulting and training business through the
acquisition of Ottawa-based The PSC Communications Group Inc.
PSC helps customers design and implement networks so that
computers can communicate faster and at lower cost, and develops
software for special client needs, such as to monitor networks,
and find and correct trouble-spots. PSC also offers
instructional classes for a variety of vendor products, as well
as general courses in computer communications, aimed mainly at
technicians in companies across North America, Europe and other
parts of the world.
MARKET PRICE AND DIVIDEND INFORMATION
Orbital Common Shares are quoted on NASDAQ under the symbol
"ORBI". The following table sets forth the high and low closing
sale prices reported on NASDAQ for an Orbital Common Share for
the periods indicated. The closing sale price of an Orbital
Common Share on the NASDAQ on July 28, 1995, the last trading day
prior to the public announcement of the Arrangement, was
US$17.625 and on September 29, 1995, the latest practicable
trading day before the printing of this Proxy Circular, was
US$16.25.
Twelve Month Periods High Low
Ended December 31, US$ US$
1993
First Quarter 14.25 10.75
Second Quarter 13.75 10.25
Third Quarter 19.00 12.25
Fourth Quarter 23.00 16.50
1994
First Quarter 26.50 15.25
Second Quarter 24.50 14.00
Third Quarter 18.50 14.50
Fourth Quarter 22.50 15.00
1995
First Quarter 20.50 16.50
Second Quarter 22.00 15.50
Third Quarter 19.25 16.25
MDA Common Shares have been traded on the VSE since August 9,
1993 and on the TSE since April 3, 1995 under the symbol "MDA".
The following table sets forth the high and low closing sale
prices reported on the VSE and TSE for an MDA Common Share for
the periods indicated. The closing sale price for an MDA Common
Share on the TSE on July 28, 1995, the last trading day prior to
the public announcement of the Arrangement, was Cdn$5.50 and on
September 29, 1995, the latest practicable trading day before the
printing of this Proxy Circular, was Cdn$6.375. Assuming
Effective Dates of July 28, 1995 and September 29, 1995, the
Exchange Ratio would have been .2927 and .3133, respectively.
<TABLE>
<CAPTION>
VSE TSE
Twelve Month Periods Ended High Low High Low
December 31,
Cdn$ Cdn$ Cdn$ Cdn$
<S> <C> <C> <C> <C>
1993
August 9 to Sept. 30 4.50 3.80 --- ---
Fourth Quarter 4.10 3.00 --- ---
1994 ---
First Quarter 4.15 3.20 ---
Second Quarter 4.00 3.50 --- ---
Third Quarter 4.25 3.65 --- ---
Fourth Quarter 4.00 3.25 --- ---
1995
First Quarter 3.75 2.90 --- ---
Second Quarter 3.75 3.50 4.55(1) 3.30 (1)
Third Quarter 6.625 6.625 7.125 4.05
</TABLE>
Note 1: Commencing April 3, 1995.
Neither Orbital nor MDA has paid any dividends on their common
shares except for a cash dividend of $1.00 per MDA Common Share
paid by MDA in 1992. Orbital currently intends to retain
earnings for use in its business and does not anticipate paying
cash dividends on the Orbital Common Shares in the foreseeable
future. In addition, Orbital is subject to certain contractual
restrictions on its ability to pay dividends. The Combination
Agreement prohibits the payment of any dividends by MDA prior to
the Effective Date.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected historical financial information of MDA
and Orbital has been derived from their respective historical
consolidated financial statements, and should be read in
conjunction with such consolidated financial statements and the
related notes thereto, which are attached as Annex "I" for
Orbital and Annex "II" for MDA to this Proxy Circular.
Selected Historical Consolidated Financial Data of MDA
The following selected consolidated financial data as of and for
the fiscal years ended March 31, 1993, 1994 and 1995 of MDA are
derived from the consolidated financial statements of MDA,
including those contained in Annex "II" to this Proxy Circular,
and should be read in conjunction with such consolidated
financial statements and the related notes thereto. The
following selected consolidated financial data for the three
months ended June 30, 1994 and 1995 and as of June 30, 1995 are
derived from the unaudited consolidated financial statements
included in Annex "II" to this Proxy Circular. In the opinion of
management of MDA, the unaudited consolidated financial data
reflect all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation. The operating results for
interim periods are not necessarily indicative of the results
expected for the full year.
Omitted: See the Consolidated Financial Data of MDA included
in Item 7(a) above.
Selected Historical Consolidated Financial Data of Orbital
The following selected consolidated financial data as of and for
the years ended December 31, 1992, 1993 and 1994 of Orbital are
derived from consolidated financial statements contained in
Annex "I" to this Proxy Circular, and should be read in
conjunction with such consolidated financial statements and the
related notes thereto. The following selected consolidated
financial data for the six months ended June 30, 1994 and 1995
and as of June 30, 1995 are derived from unaudited condensed
consolidated financial statements included in Annex "I" to this
Proxy Circular. In the opinion of management of Orbital, the
unaudited consolidated financial data reflect all adjustments,
consisting of normal recurring accruals, necessary for a fair
presentation. The operating results for interim periods are not
necessarily indicative of the results expected for the full year.
Omitted: See the Selected Historical Consolidated Financial Data
of Orbital included in the Company's Annual Report on Form 10-K
filed with the SEC on March 29, 1995.
PRO FORMA FINANCIAL INFORMATION
For purposes of the following pro forma presentation, Orbital has
assumed that the conversion of the Exchangeable Shares occurs
contemporaneously with the other transactions occurring on the
Effective Date (i.e., that Orbital issues Orbital Common Shares
directly for MDA Common Shares). The actual number of Orbital
Common Shares issuable pursuant to the Combination Agreement is
based on the Average Closing Price. Assuming an Average Closing
Price of US$17.25 per Orbital Common Share and an Exchange Ratio
of .3136 Orbital Common Shares to 1.00 MDA Common Share, Orbital
expects to issue approximately 3.9 million Orbital Common Shares
for all issued and outstanding MDA Common Shares and under all
Replacement Options for MDA Options. The Arrangement will be
accounted for using the pooling of interests method of accounting
and, accordingly, MDA's assets and liabilities will be carried
forward at their historical recorded amounts.
The following unaudited pro forma condensed consolidated
financial information consists of the Unaudited Pro Forma
Condensed Consolidated Statements of Operations for the six
months ended June 30, 1995 and for the year ended December 31,
1994, and the Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of June 30, 1995 (collectively, the "Pro Forma
Statements"). The Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the six months ended June 30, 1995
gives effect to the Arrangement as if it had occurred on
January 1, 1995. The Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the year ended December 31, 1994
gives effect to the Arrangement as if it had occurred on
January 1, 1994. The Unaudited Pro Forma Condensed Consolidated
Balance Sheet gives effect to the Arrangement as if it had
occurred on June 30, 1995. The Pro Forma Statements have been
prepared in accordance with U.S. GAAP (see Notes 2 and G to the
Pro Forma Statements for a description of major differences
between U.S. GAAP and Canadian GAAP).
Orbital's management believes that, on the basis set forth
herein, the Pro Forma Statements reflect a reasonable estimate of
the Arrangement based on currently available information and the
assumptions described herein. The pro forma financial data do
not purport to represent what Orbital's financial position or
results of operations would actually have been had the
Arrangement in fact occurred on June 30, 1995, January 1, 1995 or
January 1, 1994, or to project Orbital's financial position or
results of operations for any future date or period indicated.
The Pro Forma Statements should be read in conjunction with the
consolidated financial statements of each of Orbital and MDA and
related notes thereto included in Annexes "I" and "II,"
respectively.
OMITTED: See the Unaudited Pro Forma Condensed Cconsolidated Balance
Sheet at June 30, 1995 filed above in Item 7(b).
OMITTED: See the Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Six Months Ended June 30, 1995 filed above in Item 7(b).
OMITTED: See the Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1994 filed above in Item 7(b).
OMITTED: See the Notes to Pro Forma Adjustments to Unaudited Pro Forma
Condensed Consolidated Financial Statements and Notes, Notes to Pro Forma
Adjustments to the Unaudited Pro Forma Condensed Consolidated Financial
Statements and Notes to Conversion Adjustments to the Unaudited Pro
Forma Condensed Consolidated Financial Statements filed above in Item 7(b).
PRO FORMA CONSOLIDATED CAPITALIZATION
The following table sets forth the short-term debt and
capitalization of Orbital, on a pro forma consolidated basis, to
give effect to the Arrangement.
June 30, 1995
(Pro Forma)
(US$ in
thousands)
Short-term debt:
Current portion of long-term $ 5,639
obligations 7,005
Short-term bank borrowings $ 12,644
Total short-term debt
Long-term debt:
Long-term obligations, net of 34,927
current portion 20,000
10 1/2% Senior Notes due 2002 56,000
6 3/4% Convertible Subordinated $110,927
Debentures due 2003
Total long-term debt
Stockholders' equity:
Preferred Shares, par value $0.01
per share: 10,000,000 --
authorized; no shares issued and
outstanding
Preferred Series A Shares, par value
$0.01 per share: --
one share authorized; no shares
issued and outstanding (1)
Preferred Series B Shares, no par
value: 10,000 authorized, issued
and outstanding (2) 10
Preferred Series B Shares, no par
value:
10,000 authorized, issued and
outstanding (2)
Common Shares, par value $0.01 per 266
share: 40,000,000
authorized; 26,556,640 shares
issued and outstanding
after adjusting for 15,735 shares
in treasury (3)
Additional paid-in capital 246,243
Cumulative translation adjustment (3,571)
Unrealized losses on short-term (221)
investments
Retained earnings (deficit) (1,960)
Total stockholders' equity $240,767
Total capitalization $351,694
Notes:
(1) The Preferred Series A Share issued by Orbital is held under
the Voting and Exchange Trust Agreement and is eliminated in
consolidation.
(2) Preferred Series B Shares are issued by Acquisition to
Canadian Imperial Bank of Commerce pursuant to the
Arrangement.
(3) Assumes an immediate exchange of all outstanding
Exchangeable Shares and exercise of Replacement Options for
3,920,290 Orbital Common Shares. Excludes 3,900,945 Orbital
Common Shares issuable upon conversion of Orbital's 6 3/4%
Convertible Subordinated Debentures due 2003 and 1,661,146
Orbital Common Shares reserved for issuance pursuant to
options outstanding as of September 8, 1995 with exercise
prices ranging from US$7.50 to US$22.00 per share.
RISK FACTORS
The following risk factors related to Orbital should be
considered by MDA Shareholders and MDA 1988 Optionholders in
evaluating whether to approve the Arrangement Resolution. These
factors should be considered in conjunction with the other
information included in this Proxy Circular. In addition, MDA
Shareholders and MDA 1988 Optionholders should refer to "The
Arrangement - Reasons for Recommendation of the MDA Board."
Technologically Advanced Products and Services
Most of the products developed and manufactured by Orbital are
technologically advanced and novel systems that must function
under demanding operating conditions. Even though Orbital
believes it employs sophisticated design, manufacturing and
testing practices, there can be no assurance that Orbital's
products will be successfully launched or operated or that they
will be developed or will perform as intended. Certain of
Orbital's contracts require it to forfeit part of its expected
profit, to receive reduced payments, to provide a replacement
launch or other product or service, or to reduce the price of
follow-on missions if its products fail to perform adequately.
Performance penalties also may be imposed should Orbital fail to
meet delivery schedules or other measures of contract
performance. Orbital, like most companies and governments that
have launch and satellite programs, has experienced occasional
product failures and other problems, including with respect to
certain of its launch vehicles and satellites. For example,
Orbital's first two flights of the Pegasus XL space launch
vehicle in June 1994 and June 1995 were unsuccessful.
Orbital's products and services are and will continue to be
subject to significant technological change and innovation.
Orbital's success will generally depend on its ability to
penetrate and retain markets for its existing products and to
continue to conceive, design, develop, manufacture and market new
products and services on a cost-effective and timely basis.
Orbital anticipates that it will incur significant expenses in
the design, development and initial manufacture and marketing of
new products and services. There can be no assurance that
Orbital will be able to achieve the technological advances
necessary to remain competitive and profitable, that new products
and services will be developed and manufactured on schedule and
on a cost-effective basis, that licenses and regulatory approvals
required for new products and services will be secured, or that
anticipated markets will exist or develop for new products or
services.
Dependence on United States Government
A significant percentage of Orbital's backlog is with the U.S.
Government or under subcontracts with prime contractors to the
U.S. Government. Most of Orbital's government contracts are
funded incrementally on a year-to-year basis. Changes in
government policies, priorities or funding levels through agency
or program budget reductions by the U.S. Congress or the
imposition of budgetary constraints could materially adversely
affect Orbital's business and financial performance.
Furthermore, contracts with the U.S. Government may be terminated
or suspended by the U.S. Government at any time, with or without
cause.
Capital Requirements
Orbital's future business requirements and growth plans will
require significant additional capital. Orbital believes that
working capital, cash from operations, operating leases, customer
financing and available bank borrowings will be adequate to meet
these capital needs through 1995. Orbital expects that it will
need to incur indebtedness or raise additional equity capital to
fund its anticipated growth in 1996 and beyond. While Orbital
believes that, if necessary, it has flexibility to reduce or
delay its anticipated capital requirements and its anticipated
investments in ORBIMAGE or the X-34 program, such reductions or
delays could impede Orbital's growth and adversely affect
Orbital's results of operations.
The ORBCOMM System and the X-34 program are in relatively early
stages and the actual cost of each project may vary significantly
from current estimates. In addition to the funds committed by
Orbital and its respective partner in each venture, additional
financing from the partners and/or third party sources will be
required, and there can be no assurance that the required capital
will be received. In the event that the necessary capital cannot
be obtained, implementation and commercial development of the
ORBCOMM System or X-34 will be delayed, significantly restricted
or possibly abandoned, and Orbital could be required to expense
part or all of its investment in the ORBCOMM System or the X-34
program, as the case may be.
Orbital has invested and will continue to invest substantial
resources in capital equipment and other assets supporting its
various products and programs. In the event of significantly
reduced or eliminated product sales with respect to a particular
program, Orbital could be required to expense some or all of its
investments in assets dedicated to that program.
Regulation
The ability of Orbital to pursue its business activities is
regulated by various agencies and departments of the U.S.
Government. Commercial space launches require licenses from the
U.S. Department of Transportation ("DoT") and operation by
Orbital of its leased L-1011 aircraft requires licenses from
certain agencies of the DoT, including the Federal Aviation
Administration. Construction, launch and operation of commercial
communications satellites, including the ORBCOMM System, require
licenses from the U.S. Federal Communications Commission and
frequently require the approval of international regulatory
authorities. Some planned ORBIMAGE private remote sensing
satellites require a license from the U.S. Department of
Commerce. Exports of Orbital's products, services and technical
information frequently require licenses from the U.S. Department
of State or the U.S. Department of Commerce. There can be no
assurance that Orbital will continue to be successful in its
efforts to obtain necessary licenses or regulatory approvals.
THE SPECIAL MEETING - GENERAL PROXY INFORMATION
General
This Proxy Circular is furnished to MDA Shareholders and MDA 1988
Optionholders in connection with the solicitation of proxies by
management of MDA to be used at the Special Meeting to be held on
Tuesday, November 14, 1995 at 10:00 a.m., Vancouver time, at the
offices of MDA at 13800 Commerce Parkway, Richmond, British
Columbia, V6V 2J3, and at any adjournments or postponements
thereof for the purposes set forth in the accompanying Notice of
Special Meeting. The information contained herein is given as at
September 29, 1995, except where otherwise noted.
Solicitation of Proxies
In addition to solicitation by mail, officers, directors and
regular employees of MDA may, without additional compensation,
solicit proxies personally or by telephone or telecopier. This
solicitation is made on behalf of management of MDA and the cost
of the solicitation will be borne by MDA.
Arrangements will be made with custodians, nominees and
fiduciaries for forwarding proxy solicitation materials to
beneficial owners of MDA Common Shares held of record by such
custodians, nominees and fiduciaries, and MDA will reimburse such
custodians, nominees and fiduciaries for reasonable expenses
incurred in connection therewith.
In order to be valid for use at the Special Meeting, any proxy
must be received by Montreal Trust Company of Canada, 510 Burrard
Street, Vancouver, British Columbia, V6C 3B9, not less than
48 hours (excluding Saturdays, Sundays and holidays) preceding
the Special Meeting or any adjournment thereof.
Appointment of Proxies
The persons named in the enclosed proxy are directors or officers
of MDA. A MDA Shareholder or MDA 1988 Optionholder who wishes to
appoint some other person to represent him or her at the Special
Meeting may do so by inserting such person's name in the blank
space provided in the form of proxy or by completing another form
of proxy and, in either case, delivering it or returning it by
mail so that it is received by the stated deadline. A proxy
nominee need not be an MDA Shareholder or MDA 1988 Optionholder.
Signing of Proxies
The proxy must be signed by the MDA Shareholder or MDA 1988
Optionholder, as the case may be, or by his or her attorney
authorized in writing, as his or her name appears on MDA's
register of shareholders or records of holders of MDA 1988
Options. If the MDA Shareholder is a corporation, the proxy must
be executed by a duly authorized officer or attorney thereof.
Revocation of Proxies
In addition to revocation in any other manner permitted by law, a
proxy given pursuant to this solicitation may be revoked by
instrument in writing executed by the MDA Shareholder or MDA 1988
Optionholder, as the case may be, or by his or her attorney
authorized in writing or, if the MDA Shareholder is a
corporation, by a duly authorized officer or attorney thereof and
deposited either:
(i) at the registered office of MDA at any time up to
and including the last business day preceding the day
of the Special Meeting, or any adjournments or
postponements thereof; or
(ii) with the chairman of the Special Meeting on the
day of the Special Meeting prior to the commencement
thereof, or any adjournments or postponements thereof.
Upon either of such deposits, the former proxy will be revoked.
Voting of Proxies
The persons named in the enclosed proxy will vote "FOR" or
"AGAINST" the Arrangement Resolution such number of shares or
votes with respect to which such persons are appointed proxy, on
the ballot to be cast with respect to the Arrangement Resolution
in accordance with the instructions of the MDA Shareholder or MDA
1988 Optionholder appointing them. In the absence of direction
or instruction, shares or votes represented by a properly
executed proxy will be voted "FOR" approval of the Arrangement
Resolution.
The enclosed form of proxy confers discretionary authority upon
the persons designated therein with respect to amendments to or
variations of matters identified in the accompanying Notice of
Special Meeting of Shareholders and with respect to other matters
that may properly come before the Special Meeting. At the date
of this Proxy Circular, the management of MDA knows of no such
amendments, variations or other matters. However, if any such
amendments, variations or other matters not presently known to
the management of MDA should properly come before the Special
Meeting, the shares represented by the proxies will be voted in
accordance with the best judgment of the person or persons voting
such proxies, absent contrary instructions.
MDA Common Shares
On September 29, 1995, MDA had outstanding 11,218,156 MDA Common
Shares; the only shares of MDA issued and outstanding. Each MDA
Shareholder of record at the close of business on October 10,
1995, the record date established for notice of the Special
Meeting, will be entitled to one vote for each MDA Common Share
held by him or her on all matters proposed to come before the
Special Meeting, except to the extent that he or she has
transferred any MDA Common Shares after the record date and the
transferee of such shares produces properly endorsed share
certificates or otherwise establishes ownership thereof and makes
a written demand, not later than the close of business on
November 3, 1995, to be included in the list of shareholders
entitled to vote at the Special Meeting, in which case the
transferee will be entitled to vote such shares.
MDA 1988 Options
On September 29, 1995, MDA had 277,643 MDA 1988 Options
outstanding. Each MDA 1988 Optionholder on the date of mailing
will receive notice of the Special Meeting and each MDA 1988
Optionholder, on the date of the Special Meeting, will be
entitled to one vote for each MDA Common Share such person is
entitled to purchase under a MDA 1988 Option.
Required Votes to Approve the Arrangement and Voting Intentions
of Certain Shareholders and Optionholders
Subject to any further order of the Court, the Arrangement
Resolution must be approved by the affirmative vote of 66K% of
the votes actually cast thereon by the MDA Shareholders and by
the MDA 1988 Optionholders, voting as separate classes, and for
this purpose any spoiled votes, illegible votes, defective votes
and abstentions shall be considered not to be votes cast.
As at September 29, 1995, the directors and officers of MDA as a
group beneficially owned approximately 23.6% of the outstanding
MDA Common Shares and executive officers of MDA as a group held
approximately 47.0% of the outstanding MDA 1988 Options.
All of the directors and officers of MDA and MDA Shareholders
holding 10% or more of the MDA Common Shares have executed Voting
Agreements and Irrevocable Proxies agreeing to hold their MDA
Common Shares and to vote for the Arrangement Resolution. These
agreements represent 56.6% of the votes attached to the
outstanding MDA Common Shares. In addition, officers and
employees of MDA holding approximately 59.2% of the total votes
entitled to be cast by MDA 1988 Optionholders have agreed with
MDA to hold their options and vote for the Arrangement Resolution
in their capacity as MDA 1988 Optionholders. All of these
agreements contain provisions which provide for termination in
certain circumstances, including if the Combination Agreement is
terminated. See "The Arrangement and the Combination Agreement -
Interests of Certain Persons in the Arrangement" and "- The
Combination Agreement - Termination and Amendment."
Principal Holders of MDA Common Shares and MDA 1988 Options
To the knowledge of the directors and officers of MDA, the only
persons who beneficially own, directly or indirectly, or exercise
direction over, MDA Common Shares carrying more than 10% of the
votes attached to all of the MDA Common Shares are as follows:
<TABLE>
<CAPTION>
Number of MDA Common
Name of Shareholder Shares Beneficially Held Percentage
<S> <C> <C>
Ventures West Technologies (1) 2,404,104 21%
Spar Aerospace Limited 1,292,709 12%
John W. Pitts (2) 1,154,314 10%
John S. MacDonald (3) 1,110,449 10%
</TABLE>
Notes:
(1) Ventures West Technologies' holdings are in two limited
partnerships: Ventures West Technologies (1994) Limited
Partnership owns 1,879,666 shares and Ventures West
Technologies Limited Partnership owns 524,438 shares.
(2) Mr. Pitts controls 1,154,314 MDA Common Shares indirectly
through Anako Holdings Inc.
(3) Dr. MacDonald controls 1,110,449 MDA Common Shares
indirectly through QuMac Enterprises Limited.
There is no MDA 1988 Optionholder carrying the right to vote at
the Special Meeting more than 10% of the votes attached to all of
the MDA 1988 Options.
Each of the above MDA Shareholders have executed Voting
Agreements and Irrevocable Proxies agreeing to hold their MDA
Common Shares and to vote for the Arrangement Resolution.
Management of MDA has been advised that Orbital does not own any
MDA Common Shares.
THE ARRANGEMENT AND THE COMBINATION AGREEMENT
The Arrangement - General
MDA Shareholders and MDA 1988 Optionholders are being asked to
approve the Arrangement under the CBCA whereby: (i) MDA will
become a wholly-owned subsidiary of Acquisition and an indirect
subsidiary of Orbital; (ii) MDA Shareholders (other than
Dissenting MDA Shareholders but including Qualifying Holdcos)
will receive, in exchange for all of their MDA Common Shares, a
number of Exchangeable Shares equal to the product of the
Exchange Ratio multiplied by the number of MDA Common Shares held
by them; and (iii) holders of MDA Options (other than Dissenting
MDA 1988 Optionholders) will receive, in exchange for each of
their MDA Options, a Replacement Option entitling them to
purchase a number of Orbital Common Shares equal to the product
of the Exchange Ratio multiplied by the number of MDA Common
Shares underlying such MDA Option, having an exercise price per
share equal to the quotient of the exercise price per share of
such MDA Option divided by the Exchange Ratio, and having the
same vesting, expiration and other terms as such MDA Option. The
Exchangeable Shares will have voting, dividend and liquidation
rights that are, as nearly as practicable, equivalent to those
rights of the Orbital Common Shares.
Holders of Exchangeable Shares will have the right to exchange
all or any of such shares for an equal number (subject to
adjustment in the event of certain capital and corporate
reorganizations) of Orbital Common Shares plus the Dividend
Amount attributable to such shares, at any time prior to the
Automatic Redemption Date and subject to certain Call Rights of
Orbital. The Exchangeable Shares will be automatically exchanged
on the Automatic Redemption Date and upon the occurrence of
certain events, including the liquidation, dissolution or winding-
up of Orbital or Acquisition or the default by Acquisition under
the Exchangeable Share Provisions. Acquisition has the right to
accelerate the Automatic Redemption Date upon 75 days' written
notice to the holders of Exchangeable Shares at any time when
there are outstanding less than 400,000 Exchangeable Shares held
by persons other than Orbital and its Affiliates.
Background of the Arrangement
On March 31, 1995, the MDA Board engaged Nesbitt Burns as
financial advisors to MDA to assist in determining whether or not
it would be advantageous for MDA to proceed with a public
offering of MDA Common Shares, and to provide advice with respect
to any acquisition transaction relating to MDA or to the MDA
Common Shares. An engagement letter was executed by MDA and
Nesbitt Burns on June 15, 1995. At the March 31 meeting the MDA
Board proposed the terms of bonus arrangements for senior
employees in the event of the completion of certain transactions.
See "The Arrangement and the Combination Agreement - Interests of
Certain Persons in the Arrangement."
On June 8, 1995, at a regularly scheduled board meeting the MDA
Board was advised by a director that Orbital had indicated an
interest in acquiring all of the MDA Common Shares. Management
was instructed by the MDA Board to meet with Orbital and
determine whether or not a transaction could be proceeded with.
On June 14, 1995, senior management of MDA and advisors met in
Richmond, B.C. with senior management of Orbital to determine
Orbital's level of interest and the general terms of a
transaction, including the requirements that the transaction be
effected as a pooling of interests and on a tax deferred basis
for Canadian MDA Shareholders.
On June 19, 1995, the MDA Board met and was advised of the
position of Orbital and the general terms of the transactions
contemplated. Management was advised to conduct due diligence on
Orbital and if the results were positive, to proceed with
negotiations with Orbital to reach an agreement as to the
structure and price of a proposed transaction.
On June 23, 1995, Orbital and MDA signed a confidentiality
agreement and Orbital agreed not to purchase any MDA Common
Shares.
During the period from June 26 to July 12, 1995, executives and
advisors of Orbital met with representatives of MDA in Vancouver,
B.C. and conducted due diligence on MDA. Executives and advisors
of MDA met with representatives of Orbital at Orbital's office in
Dulles, Virginia and conducted due diligence on Orbital.
Discussions of a general nature were held on the form of a
proposed transaction, including the requirements that the
transaction be effected on a pooling of interests basis through
an arrangement under the CBCA, and whereby Canadian MDA
Shareholders would receive a tax deferral as a result of the
transaction. In addition, senior management and advisors of MDA
met with senior management and advisors of Orbital. The
preliminary terms of a proposal were presented by Orbital and
Orbital and MDA commenced preliminary negotiations on the
exchange ratio (price), conditions for completion of the
transaction, factors relating to the exchange ratio, and other
related matters.
On July 13, 1995, the MDA Board met and was advised of the
results of due diligence on Orbital and the preliminary
negotiations. Representatives of Nesbitt Burns presented a
preliminary review of the proposed transaction, including the
range of prices then being discussed and its preliminary view as
to the fairness of a transaction from a financial point of view.
The MDA Board was advised of the duties of directors in
transactions such as the one being proposed by Orbital.
From July 17 to July 25, 1995, senior management of MDA and its
advisors met with senior management of Orbital to continue
negotiations. Orbital and MDA and their advisors commenced
preparation of the Affiliate Agreements and Voting Agreements and
Irrevocable Proxies. Drafts of these agreements were circulated
to certain shareholders, directors and officers of MDA who would
be required to execute the same. On July 18, 1995, the MDA Board
met and was advised of the status of negotiations and on July 20,
1995, MDA signed a letter with Orbital agreeing not to solicit
other business combinations except as specified.
On July 27, 1995, the MDA Board met and was updated on the status
of negotiations and the status of the position of major
shareholders including Spar Aerospace Limited ("Spar").
Management was advised to continue negotiations and those
negotiations were proceeded with. The meeting adjourned until
July 28, 1995 following a meeting between Mr. Wallis of MDA and
senior management of Spar. At the adjourned meeting the MDA
Board was advised of Spar's position and that a meeting among
senior executives of MDA, Orbital and Spar would be held on
July 31, 1995. On July 28, 1995, MDA was advised that Orbital's
board of directors had given approval in principle to the
proposed transaction.
On July 31, 1995, trading in MDA Common Shares was halted on the
TSE and VSE pending a press release. MDA, Orbital and Spar met
to discuss the terms of the proposed transaction and implications
to Spar. Spar senior management advised that they would
recommend supporting the transaction to Spar's board of
directors. On that date, Orbital and MDA executed a memorandum
of understanding with respect to the transaction and each of MDA
and Orbital issued press releases with respect thereto.
On August 3, 1995, the MDA Board ratified and confirmed the
memorandum of understanding, approved proceeding with the
preparation of definitive agreements for the completion of the
transaction with Orbital and waived the provisions of the
Shareholder Protection Rights Plan to permit the execution of
Voting Agreements and Irrevocable Proxies and Affiliate
Agreements. Representatives of Nesbitt Burns took part in this
meeting and gave an oral opinion on the fairness of the
Arrangement from a financial point of view.
From August 5 to August 31, 1995, negotiations were held on the
form of the definitive agreements and transactions related
thereto. On August 17, 1995 the MDA Board met. Representatives
of Nesbitt Burns updated the MDA Board with respect to its view
on the fairness of the Arrangement to MDA Shareholders and MDA
1988 Optionholders and confirmed its opinion on the fairness of
the Arrangement. The MDA Board reviewed and commented on the
draft definitive agreements including the Combination Agreement
and discussed certain conditions and changes with respect
thereto.
On August 17, 1995, the MDA Board formally approved and
authorized execution of the Combination Agreement and waived the
provisions of the Shareholder Protection Rights Plan to permit
the transactions contemplated by the Arrangement to be effected.
On August 18, 1995, the Orbital board of directors met and
approved the definitive agreements in the form presented, subject
to Orbital's management negotiating the terms of a fee payable by
MDA in the event MDA were to terminate the Combination Agreement
and not proceed with the transaction because a higher bona fide
offer was received by MDA. Negotiations were conducted over the
period from August 21 to 22, 1995. In exchange for the agreement
of MDA to provide a break-up fee of US$750,000 in certain
circumstances, the parties agreed that the maximum and minimum
range within which the Exchange Ratio was established be changed
from .3488 to .3607 for the maximum, and from .2578 to .2705 for
the minimum.
From August 25 to August 31, 1995, the disclosure schedules of
the respective parties were reviewed. On August 31, 1995 the
definitive Combination Agreement was executed, subject to receipt
from Spar of an executed Affiliate Agreement and Voting Agreement
and Irrevocable Proxy. These agreements were received from Spar
on September 1, 1995.
On September 5, 1995, MDA and Orbital issued press releases with
respect to the execution of the definitive Combination Agreement
and terms of the Arrangement.
As of September 29, 1995, the Combination Agreement was amended
and restated to reflect, inter alia, amendments to the
Exchangeable Share Provisions as a result of Orbital obtaining a
"no-action" letter from the SEC with respect to the issue of
Orbital Common Shares on the exchange of the Exchangeable Shares.
MDA's Reasons for the Arrangement and Recommendations of the MDA
Board
On October 5, 1995 the MDA Board unanimously approved the
Arrangement and determined that the Arrangement was fair and in
the best interests of MDA, the MDA Shareholders and the MDA 1988
Optionholders. The MDA Board unanimously recommends to MDA
Shareholders and MDA 1988 Optionholders that they vote "FOR" the
Arrangement Resolution. The MDA Board based its approval of the
Arrangement on its determination that the Exchange Ratio is fair
to MDA, MDA Shareholders and MDA 1988 Optionholders, and upon a
number of other factors, including its views regarding the
following:
(i) as of July 28, 1995, the last trading day prior to
the public announcement of the Arrangement, the
consideration provided under the Arrangement to MDA
Shareholders and MDA 1988 Optionholders of Cdn$7.35 per
MDA Common Share (based on currency exchange rates at
that date), and provided that the Average Closing Price
is US$15.00 or more, represented a 34% premium to the
closing price of MDA Common Shares on the TSE on that
date;
(ii) the Arrangement will provide MDA Shareholders and
MDA 1988 Optionholders with the opportunity to receive
Orbital Common Shares, a security that has a
significantly larger market float and greater liquidity
than MDA Common Shares;
(iii) the opinion of the MDA Board
that the combination of Orbital's space and defence
business with MDA's expertise in earth imaging and air
navigation systems will result in expanded
opportunities for MDA's core business that should
strengthen overall combined operations;
(iv) the fact that Orbital's business combined with
MDA's business after the Arrangement will have
significantly greater financial and business resources
than those of MDA alone, which may enable MDA's
business to compete more effectively with competitors
having greater resources than MDA alone and to
negotiate future acquisitions;
(v) the geographic distribution of customers for
Orbital's and MDA's business are complementary and will
allow these businesses easier access to new customers;
and
(vi) the discussions between management of MDA and
senior executives of Orbital relating to operations of
MDA, after the Effective Date.
The MDA Board also considered the following information in
concluding that the Arrangement and the Exchange Ratio are fair
to MDA Shareholders and MDA 1988 Optionholders: (i) its knowledge
of the business, operations, property, assets, financial
condition, operating results and prospects of MDA and Orbital;
(ii) current industry, economic and market conditions and trends
and its informed expectations of the future of the industry in
which MDA operates; (iii) the opinion of Nesbitt Burns as to the
fairness from a financial point of view of the Arrangement to MDA
Shareholders and to the MDA 1988 Optionholders; (iv) the terms of
the Combination Agreement; (v) the structure and accounting and
tax treatment of the Arrangement; and (vi) the respective
corporate cultures and strategies of MDA and Orbital.
In view of the variety of factors considered in connection with
its evaluation of the Arrangement, the MDA Board did not find it
practicable to and did not quantify or otherwise assign relative
strengths to the specific factors considered in reaching its
determination.
Orbital's Reasons for the Arrangement
Orbital believes that the combination of the two companies will
expand the vertical integration of Orbital's manufacturing and
testing capabilities, enhance Orbital's ability to offer
customers complete space-based systems and augment Orbital's
satellite tracking product line and customer base. The
combination of MDA's expertise in satellite ground systems and
related information processing software with services offered by
Orbital is expected to achieve synergies that should strengthen
Orbital's ability to offer affordable space-based services, while
also expanding the combined company's overall commercial base.
Orbital also anticipates that MDA's significant international
presence will solidify Orbital's expansion of its existing lines
of business into international markets. Finally, Orbital expects
to realize synergies due to the ability of the combined company
to integrate MDA's technical expertise in such areas as advanced
space-qualified software, air navigation systems and defence
electronics with Orbital's existing defence and avionics
products.
Operations Following the Arrangement
Following the Arrangement, Orbital expects that MDA will continue
to operate as a separate entity, substantially in the same manner
as it is operated prior to the Effective Date.
Interests of Certain Persons in the Arrangement
In considering the recommendation of the MDA Board with respect
to the Arrangement, MDA Shareholders and MDA 1988 Optionholders
should be aware that certain officers and directors of MDA had
interests in the Arrangement, including those referred to below,
that may present potential conflicts of interest. The MDA Board
was aware of these potential conflicts and considered them along
with the other matters described in "The Arrangement - MDA's
Reasons for the Arrangement and Recommendations of the MDA
Board."
Dr. John S. MacDonald, Chairman of MDA will be asked to join the
board of directors of Orbital. On the Effective Date, Dr.
MacDonald will execute an Employment Agreement with MDA.
The President and each area general manager of MDA will execute
an Employment Agreement with MDA which will provide for payment
of compensation in accordance with industry standards and will
contain an obligation on the employee not to compete with MDA for
a two year period following the Effective Date. The Chairman,
the President and each general manager will also concurrently
enter into a Change of Control Agreement with Orbital that will
provide compensation to them of two times their annual level of
compensation if their employment with MDA is terminated or
changed in certain circumstances following a change of control of
Orbital or MDA after the Effective Date.
The MDA Board, in March, 1995, approved the grant of a bonus to
certain members of MDA management in the event of certain
transactions such as share dispositions and sales of assets of
MDA occurring, to compensate for the fact that change of control
agreements were not in place for these members of management.
The amount of the bonus will based on the value of the
transaction, including the price for MDA Common Shares obtained
thereunder. If a transaction were completed at a price no higher
than the price for MDA Common Shares at the time of the grant no
bonus would have been payable under the formula therefor. The
aggregate amount of this bonus will be allocated among certain
members of MDA's management, including officers, by the
compensation committee of the MDA Board and while not yet
definitively allocated, the amount paid to any one recipient may
be significant to that recipient.
Opinion of MDA's Financial Advisor
MDA appointed Nesbitt Burns on March 31, 1995 to act as the
exclusive financial advisor to MDA and to evaluate the fairness
from a financial point of view to MDA Shareholders and MDA 1988
Optionholders of certain business transactions, including the
Arrangement. An engagement letter was executed on June 15, 1995
relating to this appointment. Nesbitt Burns was retained based
on its experience as a financial advisor in connection with
mergers and acquisitions and in securities valuation as well as
Nesbitt Burns' familiarity with relevant markets and with MDA.
As compensation for its financial advisory services in connection
with a proposed business combination Arrangement MDA agreed to
pay Nesbitt Burns a success fee on the closing of any
transaction. Assuming the Average Closing Price is between
US$15.00 and US$20.00, this fee is estimated to be to
Cdn$981,000. Whether or not a transaction is consummated, MDA
has agreed to reimburse Nesbitt Burns for its out-of-pocket
expenses, including reasonable counsel fees, and to indemnify
Nesbitt Burns against certain liabilities and expenses in
connection with its services as financial advisor to MDA,
including liabilities arising under securities laws.
Nesbitt Burns first delivered to the MDA Board its oral opinion
on fairness of the Arrangement at the MDA Board meeting held on
August 3, 1995. Concurrently with the execution of the
Combination Agreement on August 31, 1995, Nesbitt Burns delivered
to the MDA Board a written opinion that the Arrangement was fair
to the MDA Shareholders and the MDA 1988 Optionholders from a
financial point of view. This opinion was subsequently updated
to October 4, 1995. The complete text of Nesbitt Burns' opinion
is attached hereto as Appendix "C" and the summary of the opinion
set forth below is qualified in its entirety by reference to such
opinion. MDA Shareholders and MDA 1988 Optionholders are urged
to read such opinion carefully and in its entirety for a
description of the procedures followed, the factors considered
and the assumptions made by Nesbitt Burns. In connection with
the rendering of its opinion dated October 4, 1995, Nesbitt Burns
among other things reviewed and relied upon:
(a) the most recent available draft of this Proxy Circular
prepared in connection with the Arrangement;
(b) the Combination Agreement as at September 29, 1995;
(c) the Voting Agreements and Irrevocable Proxies;
(d) the agreement dated as of July 31, 1995 between Orbital and
MDA outlining the proposed terms and conditions of the
Arrangement;
(e) the Agreement dated July 20, 1995 between Orbital and MDA
relating to MDA's agreement not to solicit third party bids
("No-Shop Agreement");
(f) audited financial statements of MDA for each of the fiscal
years in the five-year period ended March 31, 1995 and the
unaudited financial statements of MDA for the three month
periods ended June 30, 1994 and June 30, 1995;
(g) the budget for MDA for the fiscal year ending March 31,
1996;
(h) the strategic plan for MDA dated April 24, 1995 for the five
fiscal years ending March 31, 2000 prepared by the
management of MDA;
(i) certain income tax information with respect to MDA;
(j) publicly available information related to the business,
operations and consolidated financial performance of MDA
including the annual report to shareholders for the fiscal
year ended March 31, 1995;
(k) confidential information provided to Nesbitt Burns by the
management of MDA consistent with that disclosed to Orbital;
(l) discussions with senior management of MDA with respect to
the information referred to in (f), (g), (h), (i) and (j)
above, and MDA management's assessment of the current and
prospective operations of MDA and the industries in which
they operate;
(m) relevant stock market information relating to the MDA Common
Shares and the shares of other companies whose activities
include businesses similar to certain of MDA's businesses;
(n) data with respect to other transactions of a comparable
nature considered by Nesbitt Burns to be relevant;
(o) such other financial, market and industry information and
such other analysis as Nesbitt Burns considered relevant and
appropriate in the circumstances; and
(p) a certificate dated the date of the opinion from senior
officers of MDA as to the accuracy and completeness of
certain information provided to Nesbitt Burns.
In addition, Nesbitt Burns reviewed and relied upon the following
with respect to Orbital:
(a) audited financial statements of Orbital for each of the
fiscal years in the five-year period ended December 31, 1994
and the unaudited financial statements for the six months
ended June 30, 1994 and June 30, 1995;
(b) publicly available information related to the business,
operations and consolidated financial performance of
Orbital, including the annual report to shareholders for the
fiscal year ended December 31, 1994;
(c) confidential information provided to Nesbitt Burns by the
management of Orbital consistent with that disclosed to MDA;
(d) discussions with senior management of Orbital with respect
to the information referred to in (a), (b) and (c) above and
Orbital management's assessment of the current and
prospective operations of Orbital, and the industries in
which it operates;
(e) relevant stock market information relating to the Orbital
Common Shares and the shares of other companies whose
activities include businesses similar to certain of
Orbital's businesses;
(f) data with respect to transactions involving other companies
similar to Orbital; and
(g) such other financial, market and industry information and
such other analysis as Nesbitt Burns considered relevant and
appropriate in the circumstances.
Nesbitt Burns' conclusion as to the fairness of the Arrangement
from a financial point of view to the MDA Shareholders and MDA
1988 Optionholders was based upon various factors and
assumptions, including without limitation, the following:
(a) the conclusion that fairness in respect of the Arrangement
for MDA Shareholders or MDA 1988 Optionholders should be
based upon whether the consideration to be received under
the Arrangement by current holders of MDA Common Shares is
equal to or greater than the bottom end of the range of
values of the MDA Common Shares currently held;
(b) the determination that it was not inappropriate to utilize
the market trading price of Orbital Common Shares for
purposes of its assessment;
(c) in assessing the MDA Common Shares and the consideration
offered for each MDA Common Share, an assumption of a
currency exchange rate of US$0.7361 per Cdn$1.00 as agreed
on July 31, 1995 and US$0.7509 per Cdn$1.00 on October 4,
1995 and an assumption of a trading value of Orbital Common
Shares in excess of US$15.00;
(d) in assessing the MDA Common Shares, an approach to value
based on MDA remaining a going concern. Liquidation and
break-up methodologies were not considered appropriate in
the circumstances. Nesbitt Burns considered that the most
appropriate going concern method to apply to MDA was a
discounted cash flow ("DCF") approach. The DCF approach
takes into account the amount, timing and relative certainty
of future cash flows expected to be generated by MDA's
businesses after provision for cash taxes, capital
expenditures and changes in working capital and before
provisions for payment to debtholders, interest income or
expense and payment to equity holders ("Free Cash Flow").
These Free Cash Flow projections were present valued by
applying an appropriate weighted average cost of capital
("WACC"). The DCF analysis included consideration of
sensitivities in respect of revenue growth, gross margins,
levels of WACC and the future growth rates of Free Cash
Flow;
(e) in order to check the conclusions reached based upon the DCF
analysis, a comparison of a range of multiples implied by
Nesbitt Burns' analysis to the range of multiples derived
from an analysis of comparable transactions and the market
trading of comparable public companies; and
(f) the fact that the consideration value offered to MDA
Shareholders of $7.35 per MDA Common Share, provided that
the Average Closing Price is greater than or equal to
US$15.00, represents a 53% premium to the closing price of
MDA Common Shares on the TSE on July 19, 1995 (the day prior
to MDA and Orbital entering into the No-Shop Agreement) and
a 34% premium to the closing price of MDA Common Shares on
the TSE on July 28, 1995 (the last trading day prior to the
announcement of the proposed Arrangement).
Based on and subject to the foregoing, Nesbitt Burns is of the
opinion that, as of the date of the Opinion, the Arrangement is
fair, from a financial point of view, to the holders of MDA
Common Shares and MDA 1988 Optionholders.
Plan of Arrangement
Under the Plan of Arrangement, the following transactions, among
others, shall occur in the following order:
(a) the authorized share capital of Acquisition shall be amended
to authorize an unlimited number of Exchangeable Shares
having the rights, restrictions and limitations set forth in
the Exchangeable Share Provisions and 10,000 Class B
Preferred Shares having the rights, restrictions and
limitations set forth in Appendix A to the Plan of
Arrangement;
(b) Acquisition shall issue 10,000 Class B Preferred Shares to
Canadian Imperial Bank of Commerce in partial consideration
for services rendered to Acquisition in connection with the
Arrangement;
(c) all the outstanding MDA Common Shares, except MDA Common
Shares owned beneficially and of record by the Qualifying
Holdcos and MDA Common Shares held by Dissenting MDA
Shareholders, shall be exchanged by the holders thereof for
Exchangeable Shares, the number of which shall be the
product of such number of MDA Common Shares being exchanged
and the Exchange Ratio. Each former holder of MDA Common
Shares (other than the Qualifying Holdcos and Dissenting MDA
Shareholders) shall receive the whole number of Exchangeable
Shares resulting from the exchange of such holder's MDA
Common Shares for the consideration set out in the foregoing
sentence and in lieu of fractional Exchangeable Shares, an
amount in cash equal to the fraction multiplied by the
Average Closing Price, payable in Canadian dollars;
(d) all the outstanding shares of each of the Qualifying Holdcos
shall be exchanged by the holders thereof for Exchangeable
Shares, the number of which shall be the product of the
number of MDA Common Shares owned beneficially and of record
by each respective Qualifying Holdco and the Exchange Ratio.
Each former holder of shares of a Qualifying Holdco shall
receive the whole number of Exchangeable Shares resulting
from the exchange of all such holder's shares of a
Qualifying Holdco for the consideration set out in the
foregoing sentence and in lieu of fractional Exchangeable
Shares, an amount in cash equal to the fraction multiplied
by the Average Closing Price, payable in Canadian dollars;
(e) each of the Qualifying Holdcos shall be dissolved into and
its assets distributed to Acquisition and for the purposes
of such dissolution each of the Qualifying Holdcos will be
authorized to file articles of dissolution with the Director
under CBCA at such time as the board of directors of
Acquisition shall determine;
(f) each outstanding MDA Option, except options held by
Dissenting MDA 1988 Optionholders, shall become an option to
purchase a number of Orbital Common Shares equal to the
product (rounded to the nearest whole number) of the
Exchange Ratio times the number of MDA Common Shares subject
to such MDA Option and will have an exercise price equal to
the exercise price for such option divided by the Exchange
Ratio and the same vesting, expiration and other terms as
such MDA Option as in effect immediately prior to the
Effective Time;
(g) the MDA 1988 Option Plans will be amended to provide that if
the Orbital Common Shares are changed or exchanged for a
different kind or number of securities, the options
thereunder will be amended accordingly; and
(h) the name of Acquisition shall be changed to "MacDonald
Dettwiler Holdings Inc."
Contemporaneously with the Arrangement, Orbital and Acquisition
will enter into the Voting and Exchange Trust Agreement and the
Support Agreement. See "The Arrangement and the Combination
Agreement - Description of Exchangeable Shares."
Post-Combination Share Ownership
Upon completion of the Arrangement, Acquisition will be the
beneficial owner of all the outstanding MDA Common Shares and
Orbital will be the beneficial and registered owner of all of the
Acquisition Common Shares. The Acquisition Common Shares will be
the only class of voting securities of Acquisition. As a result
of the Arrangement, assuming an Exchange Ratio of .3136 (based on
an assumed Average Closing Price of US$17.25), the former MDA
Shareholders and holders of MDA Options will own or will have the
right to acquire (through ownership of Exchangeable Shares and
Replacement Options) approximately 15% of the outstanding Orbital
Common Shares (including shares issuable to holders of the
Exchangeable Shares and Replacement Options).
Qualifying Holdcos
Any MDA Shareholder who wishes to transfer the MDA Common Shares
owned by it to a Qualifying Holdco and exchange the shares of
such Qualifying Holdco for Exchangeable Shares pursuant to the
Plan of Arrangement must notify MDA of its desire to do so not
less than five Business Days prior to the Special Meeting and
must have entered into a Holding Company Agreement with
Acquisition and met all the conditions thereunder prior to the
date of the Special Meeting. Acquisition shall enter into a
Holding Company Agreement with each MDA Shareholder who provides
the aforementioned notice to MDA and who meets the conditions
provided in the Holding Company Agreement. Any MDA Shareholder
who has not entered into a Holding Company Agreement with
Acquisition on or before the date of the Special Meeting or who
has entered into such agreement but has failed to meet all such
conditions to the satisfaction of Acquisition in its sole
discretion shall, subject to the Plan of Arrangement receiving
all necessary approvals, exchange his or her MDA Common Shares
for Exchangeable Shares as an MDA Shareholder. Any MDA
Shareholder wishing to use a Qualifying Holdco should consult its
legal advisors and tax advisors.
Dissenting Holders
As permitted in the Interim Order, MDA Shareholders and MDA 1988
Optionholders may exercise rights of dissent with respect to
their MDA Common Shares or the MDA Common Shares underlying the
MDA 1988 Options pursuant to and in the manner set forth in
section 190 of the CBCA and the Plan of Arrangement. In the
event of the exercise of dissent rights by any MDA 1988
Optionholders, such MDA 1988 Options shall be deemed to have been
exercised and the exercise price of each such MDA 1988 Option
shall be satisfied by reducing the fair market value paid for the
MDA Common Shares underlying such MDA 1988 Option by such
exercise price, provided that if the MDA 1988 Optionholder is
ultimately not entitled to be paid the fair market value for such
underlying shares, such MDA 1988 Option shall be deemed not to
have been exercised and shall become a Replacement Option. See
"Dissenting Rights."
Description of Exchangeable Shares
Holders of Exchangeable Shares will have voting, liquidation and
dividend rights which are, as nearly as practicable, equivalent
to the rights of holders of Orbital Common Shares. Holders of
Exchangeable Shares will have the right to exchange any of such
shares for an equal number (subject to adjustment in the event of
certain capital and corporate reorganizations of Orbital) of
Orbital Common Shares plus the Dividend Amount attributable to
such shares, at any time prior to the Automatic Redemption Date
and subject to certain Call Rights of Orbital. The Exchangeable
Shares will be automatically exchanged on the Automatic
Redemption Date and upon the occurrence of certain events,
including the liquidation, dissolution or winding-up of Orbital
or Acquisition or the default by Acquisition under the
Exchangeable Share Provisions. Acquisition has the right to
accelerate the Automatic Redemption Date upon not less than
75 days' written notice to the holders of Exchangeable Shares at
any time when there are outstanding less than 400,000
Exchangeable Shares held by persons other than Orbital and its
Affiliates.
Voting Rights
Holders of Exchangeable Shares will generally not be entitled to
vote at meetings of the shareholders of Acquisition (except as
required by law). Orbital will be the only voting shareholder of
Acquisition. Pursuant to the Voting and Exchange Trust Agreement
holders of Exchangeable Shares will be entitled to vote along
with holders of Orbital Common Shares at meetings of the holders
of Orbital Common Shares.
As of the Effective Date, Orbital, Acquisition and the Trustee
will enter into the Voting and Exchange Trust Agreement under
which Orbital will issue one Special Voting Share to the Trustee
for the benefit of the holders of the Exchangeable Shares (the
"Beneficiaries"). The Special Voting Share will carry the number
of votes, exercisable at any meeting at which holders of Orbital
Common Shares are entitled to vote, equal to the number of
Orbital Common Shares into which the outstanding Exchangeable
Shares not held by Orbital or any of its Affiliates are then
exchangeable.
Each Beneficiary on the record date for any meeting at which
holders of Orbital Common Shares are entitled to vote will be
entitled to instruct the Trustee to exercise that number of the
votes attached to the Special Voting Share equal to the number of
votes that the Exchangeable Shares held by such holder would be
entitled to if exchanged for Orbital Common Shares. The Trustee
will exercise each vote attached to the Special Voting Share only
as directed by the relevant Beneficiary and, in the absence of
instructions from a Beneficiary, will not exercise such votes.
Each Beneficiary may, upon instructing the Trustee, obtain a
proxy from the Trustee entitling the Beneficiary to vote directly
at the relevant meeting the votes attached to the Special Voting
Share to which the Beneficiary is entitled. All rights of a
Beneficiary to exercise votes attached to the Special Voting
Share will cease upon the exchange or redemption of Exchangeable
Shares for Orbital Common Shares or the purchase of Exchangeable
Shares by Orbital pursuant to the Call Rights.
The Trustee will send to the Beneficiaries the notice of each
meeting at which holders of Orbital Common Shares are entitled to
vote, together with the related meeting materials and a statement
as to the manner in which the Beneficiary may instruct the
Trustee to exercise the votes attaching to the Special Voting
Share, in each case at the same time as Orbital sends such notice
and materials to the holders of Orbital Common Shares. The
Trustee will also send to the Beneficiaries copies of all
information statements, interim and annual financial statements,
reports and other materials and at the same time as, and to the
extent that, such materials are sent by Orbital to the holders of
Orbital Common Shares. The Trustee will also send to the
Beneficiaries all materials sent by third parties to holders of
Orbital Common Shares to the extent such materials are provided
by Orbital to the Trustee, including dissident proxy circulars
and tender and exchange offer circulars, as soon as possible
after such materials are first sent to holders of Orbital Common
Shares.
Dividend Rights
Under the Exchangeable Share Provisions, holders of Exchangeable
Shares will be entitled to receive dividends as follows:
(i) in the case of a cash dividend declared on Orbital
Common Shares, holders of each Exchangeable Share will
be entitled to receive the Canadian dollar equivalent
of the dividend declared on one Orbital Common Share
(subject to adjustment);
(ii) in the case of a stock dividend declared on
Orbital Common Shares that is payable in Orbital Common
Shares, holders of each Exchangeable Share will be
entitled to receive such number of Exchangeable Shares
as is equal to the number of Orbital Common Shares to
be paid as a dividend on one Orbital Common Share
(subject to adjustment); and
(iii) in the case of a dividend
declared on Orbital Common Shares in property other
than cash or Orbital Common Shares, holders of each
Exchangeable Share will be entitled to receive such
type and amount of property as is the same or
economically equivalent to (as determined by the board
of directors of Acquisition) the type and amount of
property declared as a dividend on one Orbital Common
Share (subject to adjustment).
The number of Orbital Common Shares referred to in determining
the amount of dividends to be paid on one Exchangeable Share is
subject to adjustment in the event of certain capital and
corporate reorganizations so as to treat the holders of
Exchangeable Shares in the same manner as the holders of Orbital
Common Shares were treated with respect to any such
reorganization. The record date for the determination of the
holders of Exchangeable Shares entitled to receive payment of,
and the payment date for, any dividend declared on Exchangeable
Shares shall be the same dates as the record date and payment
date, respectively, for the corresponding dividend on Orbital
Common Shares.
Retraction, Redemption and Exchange Right
Subject to applicable law and the Call Rights of Orbital
described below, (i) holders of Exchangeable Shares shall be
entitled at any time upon notice to the Depositary to require
Acquisition to redeem any of such Exchangeable Shares, and (ii)
on the Automatic Redemption Date, Acquisition shall redeem all of
the then outstanding Exchangeable Shares held by holders other
than Orbital and its Affiliates. Pursuant to the Voting and
Exchange Trust Agreement, subject to applicable law and the Call
Rights of Orbital described below, (i) upon the occurrence of and
during the continuance of an Insolvency Event or if Acquisition
shall be in default of the terms of the Exchangeable Share
Provisions, a holder of Exchangeable Shares may instruct the
Trustee to require Orbital to purchase any or all of such
holder's Exchangeable Shares and (ii) in the event of the
voluntary or involuntary liquidation, dissolution or winding-up
of Orbital, the Exchangeable Shares will automatically be
exchanged for Orbital Common Shares. In the case of any
retraction or redemption of Exchangeable Shares by Acquisition,
any purchase or exchange of Exchangeable Shares pursuant to the
Voting and Exchange Trust Agreement, or any purchase of
Exchangeable Shares by Orbital pursuant to its Call Rights
described below, each Exchangeable Share so retracted, redeemed,
purchased or exchanged shall (subject to required withholding)
entitle the holder thereof to receive (i) an amount equal to the
market price of an Orbital Common Share, which amount shall be
satisfied in full by delivery to such holder of one Orbital
Common Share (subject to adjustment) and (ii) payment of the
Dividend Amount. Upon the exercise by Orbital of any of the Call
Rights described below, the holder of Exchangeable Shares with
respect and to which such Call Right is exercised will be
authorized to sell and Orbital will be obligated to purchase the
Exchangeable Shares with respect to which such Call Right is
exercised.
Exercise of Retraction Rights of Holders and Orbital's Retraction
Call Rights. Holders of Exchangeable Shares may effect a
retraction by presenting a certificate or certificates to
Acquisition's transfer agent representing the number of
Exchangeable Shares the holder desires to retract, together with
a written request (a "Retraction Request") specifying the number
of Exchangeable Shares the holder wishes to retract and
acknowledging the Retraction Call Right of Orbital described
below, and such other documents as may be required to effect the
retraction of the Exchangeable Shares. Subject to the Retraction
Call Right of Orbital, Acquisition shall redeem the Exchangeable
Shares so retracted effective at the close of business on the
sixth Business Day after the Retraction Request is received.
Upon receipt of a Retraction Request, the transfer agent shall
immediately notify Orbital of such request. If Orbital wishes to
exercise its Retraction Call Right, it must so notify the
transfer agent by the end of the third Business Day following the
receipt by the transfer agent of the Retraction Request that it
intends to exercise its Retraction Call Right to purchase all,
but not less than all, of the Exchangeable Shares submitted by
the holder thereof for retraction.
Exercise of Redemption Rights of Acquisition and Orbital's
Redemption Call Rights. Subject to Orbital's Redemption Call
Right, the Exchangeable Shares shall be redeemed by Acquisition
on the Automatic Redemption Date. Acquisition has the right to
accelerate the Automatic Redemption Date upon 75 days' written
notice to the holders of Exchangeable Shares at any time when
there are outstanding less than 400,000 Exchangeable Shares held
by holders other than Orbital and its Affiliates. Orbital shall
have the Redemption Call Right, notwithstanding any proposed
redemption of the Exchangeable Shares by Acquisition as outlined
above, to purchase on the Automatic Redemption Date all, but not
less than all, of the outstanding Exchangeable Shares.
Orbital shall, at least 75 days before the Automatic Redemption
Date, provide Acquisition and the transfer agent with notice of
its exercise of the Redemption Call Right. The transfer agent
shall thereafter give notice to each holder of Exchangeable
Shares of Orbital's exercise of the Redemption Call Right.
Exercise of Liquidation Exchange Right of Holders and Orbital's
Liquidation Call Rights. Pursuant to the Voting and Exchange
Trust Agreement, upon the occurrence and during the continuance
of an Insolvency Event, or if Acquisition shall be in default of
the terms of the Exchangeable Share Provisions, a Beneficiary may
instruct the Trustee to require Orbital to purchase any or all of
the Exchangeable Shares held by the Beneficiary. Acquisition and
Orbital will give immediate written notice to the Trustee of the
occurrence of an Insolvency Event or any event that may, with the
passage of time or the giving of notice, become an Insolvency
Event, or if Acquisition shall be in default of the Exchangeable
Share Provisions. As soon as practicable thereafter, the Trustee
will notify each Beneficiary of such event or potential event
and will advise the Beneficiary of its rights as described above.
Under the Plan of Arrangement, Orbital will be granted the
Liquidation Call Right, in the event of and notwithstanding the
proposed voluntary or involuntary liquidation, dissolution or
winding-up of Acquisition, to purchase all, but not less than
all, of the Exchangeable Shares then outstanding and not held by
Orbital or its Affiliates. The purchase by Orbital of all the
outstanding Exchangeable Shares upon the exercise of such
Liquidation Call Right in that event will occur on the effective
date of the voluntary or involuntary liquidation, dissolution or
winding up of Acquisition. In addition, if Acquisition is not
legally able to redeem all Exchangeable Shares tendered for
retraction by a Beneficiary because it is insolvent or to do so
would render it insolvent, Orbital shall be deemed to have
exercised its Liquidation Call Right with respect to those
Exchangeable Shares which could not be redeemed.
Exercise of Automatic Exchange Right in the Event of Liquidation
or Winding Up of Orbital. Under the Voting and Exchange Trust
Agreement, in the event of the voluntary or involuntary
liquidation, dissolution or winding-up of Orbital, all
outstanding Exchangeable Shares will automatically be exchanged
for Orbital Common Shares, by way of a purchase by Orbital. The
consideration for the full purchase price for the Exchangeable
Shares subject to such automatic exchange shall be delivered to
the holder thereof at least five days prior to a liquidation
event.
Deduction and Remittance of Withholding Tax
Delivery of Orbital Common Shares to a holder of Exchangeable
Shares by Acquisition or Orbital, as the case may be, as
described under "Exercise of Retraction Rights of Holders and
Orbital's Retraction Call Rights," "Exercise of Redemption Rights
of Acquisition and Orbital's Redemption Call Rights," "Exercise
of Liquidation Exchange Right of Holders and Orbital's
Liquidation Call Rights," and "Exercise of Automatic Exchange
Right in the Event of Liquidation or Winding Up of Orbital," will
be made, in the case of a holder that is a resident of Canada or
a holder that is a non-resident of Canada who provides a
certificate issued under section 116 of the Canadian Tax Act
specifying a certificate limit not less than the fair market
value of the Exchangeable Shares, without any reduction in number
of Orbital Common Shares, and will be made, in the case of a
holder who is a non-resident of Canada and who does not provide
such a certificate, in a reduced number of Orbital Common Shares
to reflect compliance with the obligation of Acquisition or
Orbital, as the case may be, to withhold and remit on behalf of
such non-resident holder, tax under section 116 of the Canadian
Tax Act.
Anti-dilution and Capital Reorganizations
In the event of stock splits or consolidations of Orbital Common
Shares, the distribution to the holders of Orbital Common Shares
of options, warrants or rights to acquire securities or assets of
Orbital for less than their fair market value or other
distribution to holders of Orbital Common Shares of assets of
Orbital, unless an economically equivalent distribution is made
by Acquisition to holders of the Exchangeable Shares, the number
of Orbital Common Shares to be received upon exchange of the
Exchangeable Shares will be adjusted so as to give equivalent
economic treatment to the holders of the Exchangeable Shares. In
the event of a capital reorganization of Orbital, holders of
Exchangeable Shares shall be entitled to receive after such
capital reorganization, the number of shares or other securities
of Orbital or of a corporation resulting, surviving or continuing
from the capital reorganization that such holder would have
received had he or she been a holder of Orbital Common Shares on
the record date of the capital reorganization.
Support Agreement
The Support Agreement obligates Orbital and Acquisition to take
or refrain from taking certain actions so as to ensure that
holders of Exchangeable Shares will receive the voting, dividend,
liquidation and exchange rights described above. In particular,
the Support Agreement provides that: (i) Orbital shall not, and
shall cause its Affiliates not to, exercise any voting rights
attached to Exchangeable Shares owned by it or any of its
Affiliates on any matter considered at meetings of holders of
Exchangeable Shares (including any approval sought from such
holders in respect of matters arising under the Support
Agreement); (ii) Orbital shall not declare or pay any dividend on
the Orbital Common Shares unless Acquisition simultaneously
declares and pays the same or an economically equivalent dividend
(after, in the case of cash dividends, appropriate adjustments
for currency translations) on the Exchangeable Shares; and (iii)
Orbital and Acquisition will do all things necessary to ensure
that Acquisition will be able to make all payments on the
Exchangeable Shares required in the event of (a) the liquidation,
dissolution or winding-up of Acquisition, (b) the retraction of
Exchangeable Shares by a holder, or (c) the redemption of the
Exchangeable Shares by Acquisition.
The Support Agreement obligates Orbital, in the event that a
tender offer, share exchange offer, issuer bid, takeover bid or
similar transaction with respect to Orbital Common Shares (an
"Offer") is proposed or recommended by Orbital, its shareholders
or board of directors, or is otherwise effected with the consent
or approval of Orbital's board of directors, to use all
commercially reasonable efforts to take such actions in good
faith as are necessary or desirable to enable and permit holders
of Exchangeable Shares to participate in such Offer to the same
extent and on an economically equivalent basis as the holders of
the Orbital Common Shares, without discrimination.
The Support Agreement also provides that Orbital will take all
actions necessary or desirable to cause all Orbital Common Shares
issued and delivered pursuant to the Combination Agreement and
related agreements to be freely tradeable by the holders thereof
(other than any restrictions on transfer by reason of a holder
being a "control person" of Orbital for purposes of Canadian law
or an "affiliate" of Orbital for purposes of United States
securities laws). In addition, Orbital will take all such
actions necessary to cause all such Orbital Common Shares to be
listed or quoted for trading on all stock exchanges or quotation
systems on which outstanding Orbital Common Shares are then
listed or quoted for trading. The Orbital Common Shares are
currently quoted for trading on the NASDAQ and it is not
anticipated that such shares will be listed on any other stock
exchange or trading system.
The Support Agreement also provides that, without the prior
approval of Acquisition and the holders of the Exchangeable
Shares, Orbital will not distribute additional Orbital Common
Shares or rights to subscribe therefor or other assets or
evidences of indebtedness to all or substantially all holders of
Orbital Common Shares nor change the Orbital Common Shares nor
effect any reorganization or other transaction affecting the
Orbital Common Shares, unless the same or an economically
equivalent distribution on, or change to, the Exchangeable Shares
(or in the rights of the holders thereof) is made simultaneously.
The board of directors of Acquisition is conclusively empowered
to determine in good faith and in its sole discretion whether any
corresponding distribution on or change to the Exchangeable
Shares is the same as or economically equivalent to any proposed
distribution on or change to the Orbital Common Shares.
The Support Agreement also provides that so long as there remain
outstanding any Exchangeable Shares not owned by Orbital or any
of its Affiliates, Orbital will remain the beneficial owner,
directly or indirectly, of all outstanding shares of Acquisition,
other than Exchangeable Shares and the Class B Preferred Shares.
With the exception of administrative changes for the purposes of
adding covenants for the protection of the holders of the
Exchangeable Shares, making certain necessary amendments or
curing ambiguities or clerical errors (in each case provided that
the board of directors of each of Orbital and Acquisition is of
the opinion that such amendments are not prejudicial to the
interests of the holders of the Exchangeable Shares), the Support
Agreement may not be amended without the approval of the holders
of the Exchangeable Shares.
Market for Orbital Common Shares and Exchangeable Shares
The Orbital Common Shares issued upon exchange of the
Exchangeable Shares will be freely tradeable by the holders
thereof (other than any restrictions on transfer by reason of a
holder being a "control person" of Orbital for purposes of
Canadian law or an "affiliate" of Orbital for purposes of United
States securities laws) and will be quoted for trading on the
NASDAQ. Although the transfer of Exchangeable Shares, subject to
receiving orders from applicable securities regulators, will not
be restricted under applicable securities laws, subject to the
above-noted exceptions, the Exchangeable Shares will not be
listed on any stock exchange and MDA does not expect there will
be any market for the Exchangeable Shares. See "The Arrangement
and the Combination Agreement - Stock Exchange Listings" and "-
Resale of Exchangeable Shares and Orbital Common Shares Received
in the Arrangement."
The Combination Agreement
The following paragraphs summarize the material terms of the
Combination Agreement. MDA Shareholders and MDA 1988
Optionholders are urged to read the Combination Agreement in its
entirety for a more complete description of the terms and
conditions of the obligations of the parties in respect of the
Plan of Arrangement.
Actions to be Taken Prior to the Effective Time
Pursuant to the Combination Agreement, MDA, Acquisition and
Orbital have agreed to perform certain obligations. MDA agreed
to call all options to purchase MDA Common Shares presently held
by shareholders of Earth Observation Sciences Ltd., a subsidiary
of MDA. Orbital and Acquisition covenanted to obtain exemptions
from registration or file a registration statement under the 1933
Securities Act qualifying the issue of the Orbital Common Shares,
and to obtain all orders necessary from securities regulators in
Canada so as to qualify the issuance and permit the free trading
of the Exchangeable Shares and the Orbital Common Shares in the
U.S. and Canada subject only to restrictions on holders who are
"control persons" in Canada or "affiliates" in the U.S. In
addition, Orbital, Acquisition and MDA have agreed to cooperate
in the preparation of this Proxy Circular, to take all actions
necessary to qualify the issue of the Exchangeable Shares and
Orbital Common Shares under appropriate securities legislation in
order to permit the issue and free trading thereof, subject to
the above-noted exceptions, to call the Special Meeting, and to
obtain the necessary court orders to permit the Arrangement to be
completed.
Business of MDA Pending the Arrangement
Pending consummation of the Arrangement, and except as otherwise
consented to or approved in advance by Orbital in writing, MDA
has agreed that MDA and its subsidiaries will, among other
things, operate their respective businesses in the ordinary
course of business consistent with past practices and use
reasonable efforts to preserve intact their respective business
organizations; not authorize for issuance or issue any capital
stock, rights, warrants, options or convertible or similar
securities, subject to certain exceptions, or repurchase any
capital stock; not take any action that would materially
adversely affect the ability of MDA or Orbital to obtain the
approvals required to effect the transactions contemplated by the
Combination Agreement; and not take any action that would
materially affect the ability of MDA to perform its covenants and
agreements under the Combination Agreement.
Solicitation of Alternate Transactions
The Combination Agreement provides that except as required by
law, MDA will not, directly or indirectly: solicit, encourage,
initiate or participate in any negotiations, inquiries or
discussions with respect to any offer or proposal to acquire all
or any significant part of MDA's business, assets or capital
shares whether by arrangement, amalgamation, merger,
consolidation, other business combination, purchase of assets,
tender or exchange offer or otherwise (each an "Acquisition
Transaction"); or disclose any information not customarily
disclosed to any person concerning MDA's business or properties
or afford to any person or entity access to its properties, books
or records, except in the ordinary course of business consistent
with past practice and except as required pursuant to a
governmental request for information; enter into or execute any
agreement relating to an Acquisition Transaction, plan of
reorganization, or other agreement calling for the sale of all or
any significant part of its business and properties; or make or
authorize any public statement, recommendation or solicitation
with respect to any Acquisition Transaction or any offer or
proposal relating to an Acquisition Transaction other than with
respect to the Arrangement.
The Combination Agreement provides that nothing contained therein
limits the power of the MDA Board to withdraw or modify any
recommendation with respect to the Plan of Arrangement if a
material adverse change occurs in the business or affairs of
Orbital or in any of the information provided by Orbital on which
the MDA Board has based any recommendation regarding the
Arrangement. If any person proposes an unsolicited bona fide
acquisition transaction that in the opinion of MDA's Board
(having consulted its financial advisors) offers terms that may
be more favourable to the MDA Shareholders than pursuant to the
Combination Agreement or the Plan of Arrangement, MDA shall have
seven business days to consider such proposal, following which
time the MDA Board may withdraw or modify any recommendation with
respect to the Plan of Arrangement only if to do so would, in the
opinion of the MDA Board (having consulted outside counsel),
acting reasonably, be a proper exercise of the directors'
fiduciary duty. Depending on the timing of the unsolicited bona
fide Acquisition Transaction, the MDA Board may support a
proposal to postpone or adjourn the Special Meeting for not more
than 10 business days. The Combination Agreement generally
requires MDA to inform Orbital of any such bona fide offer
received by it or any related request for information.
In addition, MDA may terminate the Combination Agreement if a
bona fide offer for an Acquisition Transaction providing
consideration for MDA Common Shares having a fair market value of
at least US$5.95 per share (based on prevailing currency exchange
rates at the date of the offer) is received, in which case MDA
has agreed to pay Orbital a fee of US$750,000 upon completion of
the transaction that gave rise to such termination.
Conditions to the Arrangement
Consummation of the Arrangement is subject to the satisfaction of
various conditions for the benefit of each of MDA or Orbital and
both of them. Conditions precedent for the benefit of MDA
include: (i) Orbital's and Acquisition's representations and
warranties being correct on the Effective Date and Orbital having
performed its covenants under the Combination Agreement in all
material respects; (ii) MDA receiving an opinion from counsel to
Orbital in form and substance reasonably satisfactory to MDA; and
(iii) the Average Closing Price being equal to or greater than
US$12.775. Conditions precedent for the benefit of Orbital
include: (i) MDA's representations and warranties being correct
on the Effective Date and MDA having performed its covenants
under the Combination Agreement in all material respects; (ii)
Orbital having received an opinion of MDA's counsel in form and
substance reasonably satisfactory to Orbital; (iii) MDA's Board
having waived the applicable provisions of the Shareholder
Protection Rights Plan; (iv) all necessary Affiliate Agreements
having been executed; (v) MDA having entered into Employment
Agreements and Change of Control Agreements with the Chairman,
the President and each area general manager, as required, (vi)
Dissenting MDA Shareholders and Dissenting MDA 1988 Optionholders
entitled to receive in the aggregate no more than 10% of the
aggregate number of Orbital Common Shares and the Orbital Common
Shares reserved for issuance upon exercise of the Replacement
Options to be issued pursuant to the Plan of Arrangement; (vii)
Orbital having received a letter from its independent auditors to
the effect that the transaction meets the requirements for
pooling of interests accounting under U.S. GAAP; (viii) all
required third-party consents and waivers relating to the
Arrangement having been obtained; and (ix) the Average Closing
Price being equal to or less than US$25.00.
In addition, for the benefit of both MDA and Orbital, the
following conditions must be met: (i) the approval of MDA
Shareholders and MDA 1988 Optionholders as required under the
Interim Order shall have been obtained and the Final Order shall
have been issued by the Court; (ii) there shall be no temporary
restraining order, preliminary or permanent injunction or other
legal restraints or prohibitions, statutes, rules, regulations or
orders preventing consummation of the Arrangement; and (iii) the
approval for quotation, subject to notice of issuance, on the
NASDAQ of the Orbital Common Shares to be issued in connection
with the Arrangement shall have been obtained.
The parties entitled to the benefit of a particular condition may
waive compliance thereof.
Termination and Amendment
The Combination Agreement may be terminated and the Arrangement
may be abandoned prior to the Effective Date notwithstanding
approval by the MDA Shareholders and MDA 1988 Optionholders,
under the circumstances specified therein, including: (i) by
mutual consent of Orbital and MDA; (ii) by either Orbital or MDA,
if the Arrangement shall not have been consummated by
December 31, 1995 and if the terminating party has not caused the
failure of the Arrangement to be consummated by its own failure
to fulfil any of its obligations under the Combination Agreement;
(iii) by either Orbital or MDA, if the MDA Shareholders or the
MDA 1988 Optionholders fail to approve the Arrangement
Resolution; (iv) by either Orbital or MDA if there is a material
breach on the part of the other party in a representation or
warranty or covenant or agreement contained in the Combination
Agreement which is not cured within 10 days of notice; (v) by
Orbital, if the MDA Board has withdrawn or changed its
recommendation on the Arrangement in a manner adverse to Orbital,
or shall fail to affirm such support at Orbital's request; and
(vi) by MDA, if it has received a bona fide offer to consummate
an Acquisition Transaction for consideration per MDA Common Share
having a fair market value of at least US$5.95 (based on
prevailing currency exchange rates on the date of such offer).
The Combination Agreement may be amended by an agreement in
writing among the parties thereto at any time prior to the
Effective Date; provided, however, that, after approval of the
Arrangement by the MDA Shareholders and MDA 1988 Optionholders,
no amendment may be made which by law requires further approval
of such shareholders or optionholders, without such further
approval.
Fees, Expenses and Indemnification
Except as described herein, all fees and expenses incurred in
connection with the Combination Agreement and the transactions
contemplated thereby will be paid by the party incurring such
expenses, whether or not the Arrangement is consummated.
MDA has agreed to pay Orbital a fee of US$750,000 if the
Combination Agreement is terminated by MDA because MDA has
received a bona fide offer of an Acquisition Transaction for
consideration per MDA Common Share having a fair market value of
at least US$5.95 (based on prevailing currency exchange rates on
the date of such offer), and such fee is payable only when such
Acquisition Transaction is completed.
If the Combination Agreement is terminated as a result of a
breach by one of the parties, the party who has breached will pay
the actual out-of-pocket expenses of the others.
The Combination Agreement provides that the indemnification
provisions set forth in MDA's by-laws may not be modified for six
years from the Effective Date in any manner that would adversely
affect the rights thereunder of individuals who at the Effective
Date were MDA's directors or officers, unless such modification
is required by law, and requires Orbital or Acquisition to
continue in effect with respect to any claims arising out of
conduct prior to the Effective Date directors and officers'
insurance policies providing coverage of substantially the same
scope as is currently maintained by MDA; provided, however, that
Orbital may amend, repeal or modify such by-law provisions or
cause the directors and officer's insurance policies to be
modified or cancelled if it indemnifies such parties against all
expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
reason of the fact that such person was a director or officer of
MDA, in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative, provided that such expenses were
incurred by such person in connection with such action, suit or
proceeding and provided that such person acted in good faith and
in a manner he reasonably believed to be in or not opposed to
MDA's best interests and had no reasonable cause to believe his
conduct was unlawful.
MDA has agreed that, if the Arrangement is not effective, it will
indemnify each present and former director or officer of MDA or
any of its subsidiaries (collectively, the "Indemnified
Parties"), to the fullest extent permitted under applicable law
or under its by-laws, against any costs or expenses (including
attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or
pertaining to any action or omission occurring while they were
directors, officers or employees for six years after the proposed
Effective Date.
Confidentiality Agreement
Each of Orbital and MDA has agreed to keep confidential, pursuant
to a confidentiality agreement dated June 23, 1995 (the
"Confidentiality Agreement"), proprietary information provided by
the other party. The Confidentiality Agreement contains terms
restricting the disclosure and use of confidential information
exchanged between the two parties in evaluating the Arrangement
and otherwise.
Agreements of MDA Affiliates
Rule 145 promulgated under the 1933 Securities Act regulates the
disposition in the U.S. of securities by "affiliates" of MDA in
connection with the Arrangement. Affiliates of MDA, as so
defined, have delivered to Orbital executed Affiliate Agreements.
Under such Affiliate Agreements, each affiliate agrees not to
sell, transfer or otherwise dispose of Orbital Common Shares or
Exchangeable Shares issued to the affiliate in the Arrangement
unless such sale, transfer or other disposition (i) has been
registered under the 1933 Securities Act, (ii) is made in
compliance with the requirements of Rule 145 under the 1933
Securities Act, or (iii) in the opinion of counsel reasonably
acceptable to Orbital, is otherwise exempt from registration
under the 1933 Securities Act. To comply with the requirements
of pooling of interests accounting treatment, each Affiliate
Agreement also restricts the sales of such shares prior to and
following the Arrangement until the publication and dissemination
by Orbital of consolidated financial results that include results
of combined operations of MDA and Orbital for at least 30 days on
a consolidated basis following the Effective Date. The Affiliate
Agreements terminate if the Combination Agreement is terminated.
Court Approval and Completion of the Arrangement
Under the CBCA and pursuant to the Interim Order, the Arrangement
requires Court approval, after approval of the MDA Shareholders
and MDA 1988 Optionholders has been obtained. Prior to the
mailing of this Proxy Circular, MDA obtained the Interim Order
providing for the calling, holding and conduct of the Special
Meeting and other procedural matters. A copy of the Interim
Order is attached as Appendix "D" to this Proxy Circular. The
Notice of Application for the Final Order appears as Appendix "E"
to this Proxy Circular.
Subject to the approval of the Arrangement Resolution by the MDA
Shareholders and the MDA 1988 Optionholders, the hearing in
respect of the Final Order is scheduled to take place on
November 16, 1995 at 10:00 a.m. (Vancouver time). At that
hearing, any MDA Shareholder, any MDA 1988 Optionholder, or any
other interested party who wishes to participate or to be
represented or to present evidence or arguments may do so,
subject to filing a notice of appearance with the Court and
serving such notice of appearance upon MDA's solicitors within
the time as set forth in the Notice of Application for the Final
Order, and upon all other parties who have filed a notice of
appearance, and satisfying other requirements as provided in the
Interim Order. At the final hearing the Court will consider,
among other things, the fairness and reasonableness of the
Arrangement.
Assuming that the Final Order is granted, and the other
conditions to the Combination Agreement are satisfied, or waived
by the party or parties entitled to do so, it is anticipated that
the following will occur substantially simultaneously: articles
of arrangement will be filed with the Director appointed under
the CBCA to give effect to the Arrangement; and the Support
Agreement, the Voting and Exchange Trust Agreement and the
various other documents necessary to give effect to the
Arrangement and other transactions contemplated by the
Combination Agreement will be executed and delivered.
Subject to the foregoing, it is anticipated that the Arrangement
will be completed not later than November 30, 1995.
Accounting Treatment
The Arrangement is expected to be treated by Orbital as a pooling
of interests for accounting purposes under U.S. GAAP. This
accounting method permits the recorded assets and liabilities of
both Orbital and MDA to be carried forward on a consolidated
basis by Orbital, after giving effect to the Arrangement, at
their recorded historical amounts. No recognition of goodwill
will be required as a result of the Arrangement and consequently,
there will be no amortization of goodwill from the Arrangement
reflected in Orbital's future financial periods.
It is a condition to Orbital's obligation to effect the
Arrangement that Orbital receive an opinion from KPMG Peat
Marwick LLP, independent auditors of Orbital, to the effect that
pooling of interests accounting treatment for the Arrangement
under U.S. GAAP is appropriate. In the event holders of MDA
Common Shares and MDA 1988 Options in the aggregate entitled to
receive greater than 10% of the sum of the Orbital Common Shares
issuable pursuant to the Plan of Arrangement and the Orbital
Common Shares reserved for issuance upon exercise of the
Replacement Options, shall properly exercise their right to
dissent, the Arrangement may not qualify for treatment as a
pooling of interests under applicable accounting rules.
Stock Exchange Listings
Exchangeable Shares
The Exchangeable Shares will not be listed or posted for trading
on any stock exchange. MDA does not expect there will be any
market for the Exchangeable Shares.
Orbital Common Shares
NASDAQ has conditionally approved inclusion of the additional
Orbital Common Shares issuable upon exchange of the Exchangeable
Shares and the Replacement Options for quotation. Orbital
expects that NASDAQ will grant final approval for such inclusion.
Eligibility for Investment in Canada
Exchangeable Shares
The Exchangeable Shares (including the Voting Rights and the
Exchange Right) (a) will be "foreign property" under the Canadian
Tax Act for trusts governed by registered pension plans,
registered retirement savings plans, registered retirement income
funds and deferred profit sharing plans or for certain other tax-
exempt persons, and (b) will not be qualified investments under
the Canadian Tax Act for trusts governed by registered retirement
savings plans, registered retirement income funds and deferred
profit sharing plans.
Voting Rights and Exchange Right
The Voting Rights and the Exchange Right will not be qualified
investments and will be "foreign property" under the Canadian Tax
Act.
Orbital Common Shares
The Orbital Common Shares will be qualified investments under the
Canadian Tax Act for trusts governed by registered retirement
savings plans, registered retirement income funds and deferred
profit sharing plans so long as such shares remain quoted on the
NASDAQ or another prescribed stock exchange. The Orbital Common
Shares will be "foreign property" under the Canadian Tax Act.
Resale of Exchangeable Shares and Orbital Common Shares Received
in the Arrangement
Canada
Orbital, Acquisition and MDA have applied for rulings of the
British Columbia Securities Commission ("BCSC"), the Ontario
Securities Commission (the "OSC") and the securities commissions
of certain other jurisdictions in Canada in which holders of MDA
Common Shares reside, exempting any trade in Exchangeable Shares
or in Orbital Common Shares made in connection with or pursuant
to the Arrangement from the applicable prospectus and
registration requirements of the securities legislation of such
jurisdictions. If granted, these rulings would permit holders of
Exchangeable Shares who are not "control persons" of Acquisition
to sell such securities in British Columbia, Ontario and such
other jurisdictions, without being required to file a prospectus
in respect thereof, provided that no unusual effort is made to
prepare the market for any such sale or to create a demand for
such securities and no extraordinary commission or consideration
is paid in respect thereof. However, if such resale occurs in
British Columbia by a seller that is an insider of Acquisition,
then, as a further condition to permitting such resale,
Acquisition must not be in default of any requirement of the
Securities Act (British Columbia) or the regulations thereunder.
If granted, these rulings would permit residents of such
jurisdictions who are recipients of Orbital Common Shares to
resell such securities provided that such resales are executed
through the facilities of a stock exchange or market outside of
British Columbia, Ontario or such other jurisdiction, as the case
may be, and such resales are made in accordance with the rules of
the stock exchange or market upon which such trades are made and
in accordance with all laws applicable to such stock exchange or
market.
MDA, Acquisition and Orbital have also applied for orders under
the Securities Act (British Columbia), the Securities Act
(Ontario) and the applicable securities laws of certain other
jurisdictions in Canada in which holders of MDA Common Shares
reside to permit all issuances of securities to be carried out
pursuant to the Exchangeable Share Provisions and the Voting and
Exchange Trust Agreement to be exempt from the registration
requirements of such Acts and applicable securities laws. Upon
completion of the Arrangement, Acquisition will be a reporting
issuer under the Securities Act (British Columbia), but MDA will
cease to be a reporting issuer under the Securities Act (Ontario)
and the applicable securities laws of the other jurisdictions.
In addition, the ruling requested from the BCSC would, if
granted, exempt Acquisition from certain statutory financial and
other reporting requirements under the Securities Act (British
Columbia). As a condition to granting the ruling as described
above, Orbital will undertake, among other things, to file with
the appropriate securities commissions of such jurisdictions
copies of all documents filed by it with the SEC and to send to
all holders of Exchangeable Shares resident in British Columbia
and such other jurisdictions all disclosure materials that are
sent to holders of Orbital Common Shares, including, without
limitation, copies of its annual reports and all proxy
solicitation materials and, upon request, copies of its quarterly
reports.
United States
The offer and sale of the Exchangeable Shares, the Replacement
Options and the Orbital Common Shares to be issued in exchange
therefor (collectively the "New Shares") will not be registered
under the 1933 Securities Act. The Exchangeable Shares, the
Replacement Options and the Orbital Common Shares issuable upon
exchange of the Exchangeable Shares will be issued in reliance on
section 3(a)(10) of the 1933 Securities Act, which exempts from
registration under the 1933 Securities Act securities that are
issued in exchange for other outstanding securities where the
terms and conditions of the issuance have been approved by any
court expressly authorized by law to grant approval to the
proposed issuance, after a hearing upon the fairness of the terms
and conditions of the issuance at which all persons to whom such
securities will be issued have the right to appear. Orbital has
been orally advised that it will be issued a letter from the SEC
confirming that the staff of the SEC will not recommend any
enforcement action to the SEC if Acquisition, in reliance on the
exemption provided by section 3(a)(10), issues the Exchangeable
Shares, the Replacement Options, and the Orbital Common Shares
issuable in exchange for the Exchangeable Shares.
All Orbital Common Shares received by MDA Shareholders in the
Arrangement will be freely transferable under the United States
federal securities laws, except that Orbital Common Shares
received by persons who are deemed to be "affiliates" (as such
term is defined under the 1933 Securities Act) of MDA at the time
of the transaction may be resold by such affiliates only in
transactions permitted by the resale provisions of
Rule 145(d)(1), (2) or (3) promulgated under the 1933 Securities
Act (or Rule 145(d)(1) alone in the case of such persons who
become affiliates of Orbital upon the completion of the
Arrangement), or as otherwise permitted under the 1933 Securities
Act. Rule 145(d)(1) generally provides that the "affiliates" of
the acquired company may not sell securities of the issuer unless
pursuant to an effective registration statement or unless
pursuant to the volume, current public information, manner of
sale and timing limitations of Rule 144 (excluding the holding
period requirements of Rule 144). These limitations generally
require that (a) any sales made by the affiliate in any three
month period not exceed the greater of (i) 1% of the outstanding
shares of the issuer or (ii) the average weekly reported volume
of trading in such shares on all national securities exchanges
and/or reported through an automated quotation system of a
registered securities association over a four-week period and (b)
that such sales be made in unsolicited, open market "broker
transactions" or in transactions directly with a market maker.
Rules 145(d)(2) and (3) generally provide that the foregoing
limitations lapse for nonaffiliates of the issuer after a period
of two or three years has elapsed since the date the securities
were acquired from the issuer, respectively. The average weekly
reported volume of the Orbital Common Shares for the four weeks
ending September 29, 1995 was 848,250 Orbital Common Shares.
Persons who may be deemed to be affiliates of an issuer generally
include individuals or entities that directly or indirectly
control, are controlled by, or are under common control with,
such issuer and may include certain officers and directors of
such issuer as well as principal stockholders of such issuer.
See "The Arrangement and the Combination Agreement - Agreements
of MDA Affiliates."
Procedures for Exchange of Share Certificates by MDA Shareholders
At or promptly after the Effective Time, Acquisition shall
deposit with the Depositary, for the benefit of the holders of
MDA Common Shares and the holders of shares of the Qualifying
Holdcos exchanged pursuant to the Plan of Arrangement,
certificates representing the Exchangeable Shares issued
therefor.
A Letter of Transmittal is enclosed with this Proxy Circular for
use by MDA Shareholders for transmittal of certificates
representing MDA Common Shares. Additional copies of the Letter
of Transmittal may be obtained from the Depositary. A subsequent
letter of transmittal may also be forwarded to MDA Shareholders
following the Effective Date. The details of the procedures for
exchange of certificates representing MDA Common Shares and the
deposit of such certificates with the Depositary and the
addresses of the office of the Depositary are set out in the
Letter of Transmittal.
The procedures for receiving certificates representing
Exchangeable Shares and/or Orbital Common Shares are as follows:
Return to Depositary of Letter of Transmittal
A properly completed Letter of Transmittal, or any subsequent
letter of transmittal, is to be forwarded to the Depositary at
the office as set forth therein, together with the certificate(s)
representing the MDA Common Shares. As soon as practicable after
the surrender of certificates representing MDA Common Shares and
after the Effective Date, the Depositary will deliver
certificates representing Exchangeable Shares and/or Orbital
Common Shares in accordance with the instructions set forth in
the Letter of Transmittal or any subsequent letter of
transmittal, as the case may be.
Election to Immediately Exchange Exchangeable Shares for Orbital
Common Shares
MDA Shareholders who wish to immediately exchange their
Exchangeable Shares for Orbital Common Shares must complete the
Letter of Transmittal and indicate their election to immediately
exchange the Exchangeable Shares they are entitled to receive for
Orbital Common Shares in the election section therein. If only a
part of such holder's MDA Common Shares are to be immediately
exchanged for Orbital Common Shares, the MDA Shareholder shall
indicate the number of Exchangeable Shares to be so exchanged.
If any MDA Shareholder elects to immediately exchange all or part
of his or her Exchangeable Shares for Orbital Common Shares, a
certificate for the full number of Exchangeable Shares to which
that holder would have been entitled under the Plan of
Arrangement shall be issued, the Depositary shall, by the Letter
of Transmittal, be appointed an attorney to effect the retraction
on behalf of the holder and the holder will receive certificates
representing Orbital Common Shares. MDA has been advised that in
the event of the retraction contemplated by the exercise of this
election, Orbital intends to exercise its Redemption Call Right
and purchase such Exchangeable Shares. Orbital or Acquisition as
the case may be, will require holders of Exchangeable Shares who
are not residents of Canada and who elect to retract their
Exchangeable Shares as described above to obtain a certificate
from Revenue Canada pursuant to section 116 of the Canadian Tax
Act, specifying a certificate limit no less than the fair market
value of the Orbital Common Shares immediately before the
exchange or redemption, as the case may be, and to deliver such
certificate to Orbital or Acquisition. See "The Arrangement and
the Combination Agreement - Description of Exchangeable Shares -
Deduction and Remittance of Withholding Tax."
Fractional Shares
No certificates or scrip representing fractional Exchangeable
Shares or Orbital Common Shares will be issued. In lieu of any
such fractional interests, each MDA Shareholder entitled to a
fractional interest in Exchangeable Shares or Orbital Common
Shares in consequence of the Arrangement or upon exchange of the
Exchangeable Shares for Orbital Common Shares will receive an
equivalent amount in cash (rounded to the nearest whole cent),
without interest, from Acquisition equal to the Canadian Dollar
Equivalent (as defined in the Exchangeable Share Provisions) of
the product of such fraction, multiplied by the Average Closing
Price.
Failure to Deposit Certificates Representing MDA Common Shares
Pending the surrender of certificates formerly representing MDA
Common Shares, such certificates will, subject to the provisions
in the following sentence, be deemed to represent the right to
receive upon such surrender, a certificate representing the
appropriate number of Exchangeable Shares (based on the Exchange
Ratio), any cash payment in lieu of a fractional Exchangeable
Share, and any Dividend Amount. Any certificate formerly
representing MDA Common Shares not deposited with all other
necessary documents on or prior to the sixth anniversary of the
Effective Date shall cease to represent a claim or interest of
any kind or nature as a shareholder of MDA, the relevant
Qualifying Holdco or Acquisition, as the case may be. On such
date, the Exchangeable Shares to which the former registered
holder of such undeposited certificate was entitled shall be
deemed to have been surrendered to Acquisition together with all
dividends, distributions and interests held for such former
registered holder.
Confirmation of Replacement Options
As soon as practicable after the Effective Date, Orbital will
forward to each holder of a MDA Option, except a Dissenting MDA
1988 Optionholder, confirmation of the Replacement Option,
setting forth the number of Orbital Common Shares such holder is
entitled to and the exercise price therefor.
INCOME TAX CONSIDERATIONS TO MDA SHAREHOLDERS AND OPTIONHOLDERS
Canadian Federal Income Tax Considerations
In the opinion of Farris, Vaughan, Wills and Murphy, counsel for
MDA, the following is a summary of the principal Canadian federal
income tax considerations generally applicable to (i) MDA
Shareholders who, for purposes of the Canadian Tax Act, are
residents of Canada, hold their MDA Common Shares as capital
property and deal at arm's length with MDA, Acquisition and
Orbital, (ii) MDA Shareholders who, for purposes of the Canadian
Tax Act, have not been and will not be resident in Canada at any
time while they have held MDA Common Shares or Exchangeable
Shares, and deal at arm's length with MDA, Acquisition and
Orbital, and (iii) MDA 1988 Optionholders.
This summary is based on the current provisions of the Canadian
Tax Act, all specific proposals to amend the Canadian Tax Act
publicly announced by the Minister of Finance prior to the date
hereof, and counsel's understanding of the current administrative
practices of Revenue Canada. Except for the foregoing, this
summary does not take into account or anticipate any changes in
law, whether by legislative, administrative or judicial decision
or action, nor does it take into account provincial, territorial
or foreign income tax legislation or considerations, which may
differ from the federal income tax considerations described
herein.
WHILE THIS SUMMARY IS INTENDED TO ADDRESS ALL PRINCIPAL CANADIAN
FEDERAL INCOME TAX CONSIDERATIONS, IT IS OF A GENERAL NATURE ONLY
AND IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED TO BE,
LEGAL OR TAX ADVICE TO ANY PARTICULAR MDA SHAREHOLDER OR MDA 1988
OPTIONHOLDER. THEREFORE, SUCH HOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THEIR PARTICULAR CIRCUMSTANCES. NO
ADVANCE INCOME TAX RULING HAS BEEN OR WILL BE OBTAINED FROM
REVENUE CANADA TO CONFIRM THE TAX CONSEQUENCES OF ANY OF THE
TRANSACTIONS DESCRIBED HEREIN.
Holders of MDA Common Shares Resident in Canada
Exchange of MDA Common Shares for Exchangeable Shares. A holder
of MDA Common Shares who receives Exchangeable Shares in exchange
for MDA Common Shares pursuant to the Plan of Arrangement
(provided such holder is not considered to receive Voting Rights
or any Exchange Right as partial consideration for MDA Common
Shares (see below)) will, unless such holder of MDA Common Shares
includes any portion of the capital gain or capital loss
otherwise determined in respect of the disposition of such MDA
Common Shares in the holder's income tax return for the taxation
year in which the exchange occurs, be deemed pursuant to the
"automatic" rollover provisions of section 85.1 of the Canadian
Tax Act to have disposed of such MDA Common Shares and will be
deemed to have acquired the Exchangeable Shares received in
exchange for such MDA Common Shares at a cost equal to the
adjusted cost base to such holder of such MDA Common Shares.
Based on the current administrative practise of Revenue Canada, a
holder of MDA Common Shares who receives cash not exceeding $200
in lieu of a fraction of an Exchangeable Share may reduce the
adjusted cost base of the Exchangeable Shares received by such
holder by the amount of such cash. Alternatively, the capital
gain or capital loss otherwise arising on the disposition of the
fraction of the MDA Common Share which is disposed of for such
cash may be reported.
If a holder of MDA Common Shares chooses to treat the exchange of
MDA Common Shares for Exchangeable Shares as a taxable
transaction, such holder of MDA Common Shares will be required to
recognize a capital gain (or capital loss) to the extent that the
fair market value of the Exchangeable Shares (and any cash in
lieu of a fractional MDA Common Share) received in exchange for
such holder's MDA Common Shares immediately before the exchange,
net of any costs of disposition, exceeds (or is less than) the
adjusted cost base to the holder of such MDA Common Shares
immediately before the exchange. The cost to the holder of the
Exchangeable Shares received in exchange for such MDA Common
Shares will in this case be equal to the fair market value of
such Exchangeable Shares immediately before the exchange.
Where the transitional rules contained in the Income Tax
Application Rules, R.S.C. 1985, c.2 (5th Supplement), as amended
(the "ITARs"), apply to determine the adjusted cost base to a
holder of MDA Common Shares of any MDA Common Shares owned by
such holder prior to 1972 and continuously thereafter until
immediately before the exchange of such shares for Exchangeable
Shares, such rules may continue to apply for the purposes of
determining the adjusted cost base to the holder of any
Exchangeable Shares received in exchange therefor. Holders of MDA
Common Shares who may be affected by such rules should consult
their own tax advisors.
Although the Plan of Arrangement and the Voting and Exchange
Trust Agreement provide that Orbital has granted the Voting
Rights and Exchange Right to holders of the MDA Common Shares in
consideration of the Call Rights, it is possible Revenue Canada
may take the position that the Voting Rights and Exchange Right
were acquired by a holder of MDA Common Shares in connection with
the exchange of the MDA Common Shares and not in consideration of
the Call Rights. In such event, a holder of MDA Common Shares
who receives Exchangeable Shares in exchange for MDA Common
Shares pursuant to the Plan of Arrangement would not qualify for
the "automatic" rollover provisions of section 85.1 of the
Canadian Tax Act. In such circumstances, unless a holder of MDA
Common Shares effects an election in respect of such exchange in
accordance with the provisions of subsection 85(1) or (2) of the
Canadian Tax Act (as described below), the holder may be
considered to have disposed of MDA Common Shares in a taxable
transaction and the holder therefore may be required to recognize
a capital gain (or capital loss) to the extent that the aggregate
of the fair market value of the Exchangeable Shares (and any cash
in lieu of a fractional MDA Common Share) and the fair market
value of Voting Rights and Exchange Right (which MDA believes to
be nominal) received in exchange for such holder's MDA Common
Shares immediately before the exchange, net of any costs of
disposition, exceeds (or is less than) the adjusted cost base to
the holder of such MDA Common Shares immediately before the
exchange. The cost to the holder of the Exchangeable Shares
received in exchange for such MDA Common Shares will in this case
be equal to the fair market value of such Exchangeable Shares
immediately before the exchange.
A holder may exchange MDA Common Shares and obtain a full or
partial tax-free "rollover" in respect of such exchange by filing
with Revenue Canada (and, where applicable, with a provincial tax
authority) an election (the "Tax Election") under
subsection 85(1) of the Canadian Tax Act or, in the case of a
partnership, under subsection 85(2) of the Canadian Tax Act (and
the corresponding provisions of any applicable provincial tax
legislation) made jointly by the holder and Acquisition (which
Acquisition, subject to the following paragraphs, has agreed to
make) in respect of the holder's MDA Common Shares so exchanged
pursuant to the Plan of Arrangement and specifying therein a
"transfer price," within the limitations set forth in the
Canadian Tax Act, so that such MDA Common Shares will be deemed
to be disposed of for proceeds of disposition equal to the
transfer price thereof. Subject to the limitations set out in
subsection 85(1) of the Canadian Tax Act regarding the specified
transfer price, if the transfer price is equal to the aggregate
of the adjusted cost bases of such MDA Common Shares determined
immediately before the exchange, no capital gain or capital loss
will be realized, and to the extent that the transfer price in
respect of such shares exceeds (or is less than) the aggregate of
the adjusted cost bases thereof, such holder will realize a
capital gain (or a capital loss).
Holders of MDA Common Shares who desire to effect the exchange of
their MDA Common Shares pursuant to subsection 85(1) or (2) of
the Canadian Tax Act, as the case may be, should obtain the
appropriate federal election forms at any Revenue Canada District
Taxation Office. Where necessary, the appropriate provincial
election forms should be obtained from the income tax authorities
in that province. These forms must be completed and submitted to
Acquisition for execution at the following address: c/o
MacDonald, Dettwiler and Associates Ltd., 13800 Commerce Parkway,
Richmond, British Columbia, V6V 2J3, Attention: Secretary.
Although the Tax Election involves certain complexities, it may
result in more favourable tax consequences to a holder than would
otherwise be the case if the Tax Election was not made in respect
of the exchange.
Holders of MDA Common Shares who wish to effect the exchange of
their MDA Common Shares pursuant to subsection 85(1) or (2) of
the Canadian Tax Act, as the case may be, are referred to
Information Circular 76-19R2 and Interpretation Bulletin IT-
291R2, published by Revenue Canada, for information respecting
the joint election to be made under the Canadian Tax Act.
The comments provided herein with respect to joint elections are
provided for general assistance only. The law in this area is
complex and contains numerous technical requirements including
limitations applicable to the transfer price. Compliance with
such requirements to ensure the validity of the joint elections
will be the sole responsibility of the holder making the
election. Acquisition will not be responsible for proper
completion and timely filing of such joint elections and agrees
only to execute any properly completed election forms received
from holders of MDA Common Shares. In particular, Acquisition
will not be responsible or liable for any taxes, interest,
penalties, damages or expenses resulting from the failure of
Acquisition or any of its agents, servants or officers, to
properly complete and return such joint election forms to any
holder for filing by such holder with Revenue Canada (and the
appropriate provincial authority, where applicable) within the
time and in the prescribed form required under the Canadian Tax
Act and any applicable provincial tax legislation.
Call Rights. MDA is of the view and has advised counsel that the
Call Rights, the Exchange Right and the Voting Rights have only
nominal value. The disposition by a holder of the Call Rights in
consideration for the Voting Rights and the Exchange Right
should, therefore, not result in any material Canadian federal
income tax consequences. Such determinations of value are not
binding on Revenue Canada and counsel can express no opinion on
matters of factual determination such as this. If the Voting
Rights or Exchange Right do have greater than nominal value and
are properly viewed as being received by a holder of MDA Common
Shares from Orbital in consideration for the Call Rights, a
capital gain would arise in an amount equal to the fair market
value of the Voting Rights and the Exchange Right and such holder
will be deemed to have acquired such Voting Rights and such
Exchange Right for a cost equal to their fair market value.
Dividends. Dividends on Exchangeable Shares or Orbital Common
Shares will receive the following treatment under the Canadian
Tax Act.
Exchangeable Shares. In the case of a shareholder who is an
individual, dividends received or deemed to be received on the
Exchangeable Shares will be included in computing the
shareholder's income, and will be subject to the gross-up and
dividend tax credit rules normally applicable to taxable
dividends received from taxable Canadian corporations.
The Exchangeable Shares will be "taxable preferred shares" and
"short-term preferred shares" for purposes of the Canadian Tax
Act, and accordingly, dividends received or deemed to be received
on the Exchangeable Shares will not be subject to the 10% tax
under Part IV.1 of the Canadian Tax Act applicable to certain
corporations.
If the Support Agreement is deemed to be a "guarantee agreement"
under the Canadian Tax Act and if Acquisition or any person with
whom Acquisition does not deal at arm's length is a "specified
financial institution" under the Canadian Tax Act at a point in
time that a dividend is paid on an Exchangeable Share, then
dividends received or deemed to be received by a shareholder that
is a corporation will not be deductible in computing taxable
income but will be fully includable in taxable income under
Part I of the Canadian Tax Act. Such dividend will not be
subject to tax under Part IV of the Canadian Tax Act. A
corporation will generally be a specified financial institution
for these purposes if it is a bank, a trust company, a credit
union, an insurance corporation or a corporation whose principal
business is the lending of money to persons with whom the
corporation is dealing at arm's length or the purchasing of debt
obligations issued by such persons or a combination thereof, and
corporations controlled by or related to such entities.
Acquisition has informed counsel that it is of the view that
neither it nor any person with whom it does not deal at arm's
length is a specified financial institution at the current time
but there can be no assurance that this status will not change
prior to the time any dividend on an Exchangeable Share is
received or deemed to be received by a corporate shareholder.
Subject to the foregoing, in the case of a shareholder that is a
corporation, other than a "specified financial institution" as
defined in the Canadian Tax Act, dividends received or deemed to
be received on the Exchangeable Shares will normally be
deductible in computing its taxable income.
A shareholder that is a "private corporation" (as defined in the
Canadian Tax Act) or any other corporation resident in Canada and
controlled or deemed to be controlled directly or indirectly in
any manner whatsoever by or for the benefit of an individual or a
related group of individuals may be liable under Part IV of the
Canadian Tax Act to pay a refundable tax of 33 1/3% on dividends
received or deemed to be received on the Exchangeable Shares to
the extent that such dividends are deductible in computing the
shareholder's taxable income.
Orbital Common Shares. Dividends on Orbital Common Shares will
be included in the recipient's income for the purposes of the
Canadian Tax Act. Such dividends received by an individual
shareholder will not be subject to the gross-up and dividend tax
credit rules in the Canadian Tax Act. A corporation which is a
shareholder will include such dividends in computing its income
and generally will not be entitled to deduct the amount of such
dividends in computing its taxable income. United States non-
resident withholding tax on such dividends will be eligible for
foreign tax credit or deduction treatment where applicable under
the Canadian Tax Act.
Redemption or Exchange of Exchangeable Shares. On the redemption
(including a retraction) of an Exchangeable Share by Acquisition
for an Orbital Common Share, the holder of an Exchangeable Share
will be deemed to have received a dividend equal to the amount,
if any, by which the redemption proceeds (the fair market value
at the time of the redemption of the Orbital Common Share
received by the shareholder from Acquisition on the redemption
plus the amount, if any, of all unpaid dividends on the
Exchangeable Share) exceeds the paid-up capital at that time of
the Exchangeable Share so redeemed. The amount of any such
deemed dividend will be subject to the tax treatment accorded to
dividends described above. On the redemption, the holder of an
Exchangeable Share will also be considered to have disposed of
the Exchangeable Share, but the amount of such deemed dividend
will be excluded in computing the shareholder's proceeds of
disposition for purposes of computing any capital gain or capital
loss arising on the disposition of the Exchangeable Share. In
the case of a shareholder that is a corporation, it is possible
that in some circumstances the amount of any such deemed dividend
may be treated as proceeds of disposition and not as a dividend
and accordingly, such corporate shareholders should consult their
own tax advisors for specific advice in these circumstances.
On the exchange of an Exchangeable Share by the holder thereof
with Orbital for an Orbital Common Share pursuant to the Call
Rights or the Exchange Right, the holder will in general realize
a capital gain (or a capital loss) equal to the amount by which
the proceeds of disposition of the Exchangeable Share, net of any
reasonable costs of disposition, exceed (or are less than) the
adjusted cost base of the Exchangeable Share to the holder
thereof. For these purposes, the proceeds of disposition will be
the value of an Orbital Common Share at the time of exchange plus
the amount of all unpaid dividends on the Exchangeable Share.
The cost of an Orbital Common Share received on the retraction,
redemption or exchange of an Exchangeable Share will be equal to
the fair market value of the Orbital Common Share at the time of
such event.
If the holder of an Exchangeable Share is a corporation, or a
partnership or a trust of which a corporation is a partner or
beneficiary, as the case may be, the amount of any loss arising
from a disposition or deemed disposition of an Exchangeable Share
in certain circumstances may be reduced by the amount of
dividends received or deemed to have been received by it on such
share.
Because of the existence of the Call Right, a holder exercising
the right of retraction in respect of an Exchangeable Share
cannot control whether such holder will receive an Orbital Common
Share by way of redemption of the Exchangeable Share by
Acquisition or by way of purchase of the Exchangeable Share by
Orbital. As described above, the Canadian federal income tax
consequences of a redemption differ from those of a purchase.
However, a holder who exercises the right of retraction will be
notified if the Call Right will not be exercised by Orbital, and
if such holder does not wish to proceed, such holder may cancel
the notice of retraction and retain such holder's Exchangeable
Share.
Dissenting MDA Shareholders. A holder of MDA Common Shares is
permitted to dissent from the Arrangement in compliance with
section 190 of the CBCA and the Interim Order. A MDA Shareholder
who dissents from the Arrangement Resolution in compliance with
section 190 of the CBCA will be entitled, in the event the
Arrangement becomes effective, to be paid by MDA the fair value
of the MDA Common Shares held by such shareholder determined at
the appropriate date. See "Dissenting Rights." A Dissenting MDA
Shareholder will be considered to receive a deemed dividend and
to have disposed of the MDA Common Shares in accordance with the
discussion above of the redemption of the Exchangeable Shares.
Additional income tax considerations may be relevant to
Dissenting MDA Shareholders who fail to perfect or withdraw their
claims pursuant to the rights of dissent. Dissenting MDA
Shareholders should consult their own tax advisors for specific
advice in these circumstances.
Foreign Property. The Exchangeable Shares will be foreign
property under the Canadian Tax Act for trusts governed by
registered pension plans, registered retirement savings plans,
registered retirement income funds and deferred profit sharing
plans or for certain other tax-exempt persons. The Voting Rights
and Exchange Right will be foreign property under the Canadian
Tax Act. Orbital Common Shares will be foreign property under
the Canadian Tax Act.
Qualified Investments. The Exchangeable Shares will not be
qualified investments under the Canadian Tax Act for trusts
governed by registered retirement savings plans, registered
retirement income funds and deferred profit sharing plans and at
the end of each month, such trusts will be liable to pay a tax
under the Canadian Tax Act of 1% of the fair market value of the
Exchangeable Shares. Orbital Common Shares will be qualified
investments under the Canadian Tax Act for such plans as long as
such shares remain listed on the NASDAQ (or are listed on certain
other exchanges). The Voting Rights and Exchange Right will not
be qualified investments under the Canadian Tax Act.
Holders of MDA Common Shares Not Resident in Canada
Generally, MDA Common Shares will not be taxable Canadian
property provided that those shares are listed on a prescribed
stock exchange in Canada, the holder does not use or hold, and is
not deemed to use or hold, the MDA Common Shares in connection
with carrying on a business in Canada and the holder, persons
with whom such holder does not deal at arm's length, or the
holder and such persons, has not owned (or had under option) 25%
or more of the issued shares of any class or series of the
capital stock of MDA at any time within five years preceding the
date in question. The MDA Common Shares are currently listed on
a prescribed stock exchange in Canada under the Canadian Tax Act.
Such a holder of MDA Common Shares will not be subject to tax
under the Canadian Tax Act on the exchange of MDA Common Shares.
Generally, the Exchangeable Shares will be taxable Canadian
property, and on the redemption (including a retraction) of an
Exchangeable Share by Acquisition for an Orbital Common Share, a
non-resident holder of an Exchangeable Share will be considered
to have received a deemed dividend and be considered to have
disposed of the Exchangeable Share for proceeds of disposition in
an amount as described above for residents of Canada. The amount
of such deemed dividend will be subject to non-resident
withholding tax under the Canadian Tax Act as described below,
and Acquisition will require the non-resident holder to obtain a
certificate pursuant to section 116 of the Canadian Tax Act as
described below. On the exchange of an Exchangeable Share by the
non-resident holder thereof with Orbital for an Orbital Common
Share, the non-resident holder of an Exchangeable Share will be
considered to have disposed of the Exchangeable Share for
proceeds of disposition in an amount as described above for
residents of Canada, and Orbital will require the non-resident
holder to obtain a certificate pursuant to section 116 of the
Canadian Tax Act as described below.
Orbital or Acquisition, as the case may be, will require the non-
resident holder of the Exchangeable Shares to apply to Revenue
Canada to obtain a certificate pursuant to section 116 of the
Canadian Tax Act, specifying a certificate limit no less than the
fair market value of the Orbital Common Shares immediately before
the exchange or redemption, as the case may be. A certificate
should generally be obtainable from Revenue Canada where the non-
resident holder of Exchangeable Shares pays an amount on account
of tax arising on a disposition or establishes that no tax is
payable. Where no certificate is obtained by such non-resident
holder or where a certificate is obtained specifying a
certificate limit less than the fair market value of the Orbital
Common Shares, Orbital or Acquisition will withhold and remit to
Revenue Canada within 30 days after the end of the month in which
Orbital or Acquisition acquires the Exchangeable Shares, as tax
on behalf of the non-resident holder, 33J% of the amount by which
the fair market value of the Orbital Common Shares exceeds the
certificate limit specified in the certificate or if no
certificate is obtained, 33J% of the fair market value of the
Orbital Common Shares, and Acquisition or Orbital will deliver to
the non-resident holder a reduced number of Orbital Common Shares
to reflect such payment to Revenue Canada. Holders of such
Exchangeable Shares may be exempt from liability to pay tax under
the Canadian Tax Act by virtue of any applicable tax treaty
between Canada and the country in which they are resident. For
example, under the Canada-United States Income Tax Convention, a
resident of the United States who has not been a resident of
Canada at any time during the ten years immediately preceding the
exchange of the Exchangeable Shares should generally be exempt
from such tax under the Canadian Tax Act. However, such
exemption will not relieve Acquisition or Orbital from their
liability to withhold or remit amounts to Revenue Canada on
account of tax where the non-resident holder has not provided the
appropriate certificate as discussed above. Non-resident holders
of Exchangeable Shares should consult their own tax advisors for
specific advice in these circumstances.
Dividends paid or deemed to be paid on the Exchangeable Shares
are subject to non-resident withholding tax under the Canadian
Tax Act at the rate of 25%, although such rate may be reduced
under the provisions of an applicable income tax treaty. For
example, under the Canada-United States Income Tax Convention,
the rate is generally reduced to 15%.
A holder whose Exchangeable Shares are redeemed (either under
Acquisition's redemption right or pursuant to the holder's
retraction rights) will be deemed to receive a dividend as
described above, which deemed dividend will be subject to
withholding tax as described in the preceding paragraph.
MDA 1988 Optionholders
Pursuant to the Canadian Tax Act, a holder of each outstanding
MDA 1988 Option which becomes a Replacement Option pursuant to
the Plan of Arrangement will be deemed not to have disposed of
the MDA 1988 Option and not to have acquired the Replacement
Option, provided the value of the Replacement Option is no
greater than the value of the MDA 1988 Option. Furthermore, the
Replacement Option shall be deemed to be the same option as, and
a continuation of, the MDA 1988 Option and Orbital shall be
deemed to be the same corporation as, and a continuation of, MDA.
Dissenting MDA 1988 Optionholders. A holder of MDA 1988 Options
is permitted to dissent from the Arrangement and shall be deemed,
pursuant to the Plan of Arrangement and the Interim Order, to
have exercised the MDA 1988 Options with respect to which he or
she is exercising the dissent and the exercise price under each
such MDA 1988 Option shall be deemed to be paid by set-off
against the fair value paid for MDA Common Shares under such MDA
1988 Option, determined at the appropriate date. See "Dissenting
Rights." A benefit (the "Benefit Amount") equal to the amount of
such payment by MDA to the Dissenting MDA 1988 Optionholder will
be deemed to have been received by the Dissenting MDA 1988
Optionholder because of his or her employment and will be added
to the taxable income of such holder, and where the exercise
price for the MDA Common Share under each such MDA 1988 Option
was not less than the fair market value of the MDA Common Share
at the time the agreement for the MDA 1988 Option was made, an
amount equal to one fourth of the Benefit Amount may be deducted
by the Dissenting MDA 1988 Optionholder for the purpose of
computing taxable income. Where Dissenting MDA 1988
Optionholders are considered to have acquired MDA Common Shares
under his or her MDA 1988 Option, Dissenting MDA 1988
Optionholders would also be considered to have received a deemed
dividend. Dissenting MDA 1988 Optionholders should consult their
own tax advisors for specific advice in these circumstances.
United States Federal Income Tax Considerations
In the opinion of Paul, Weiss, Rifkind, Wharton & Garrison,
United States counsel to MDA, the following summarizes the
principal U.S. federal income tax considerations arising from and
relating to the Arrangement, including the receipt and ownership
of Exchangeable Shares and Orbital Common Shares, that are
generally applicable to MDA Shareholders that are U.S. citizens
or residents, domestic corporations, domestic partnerships, and
estates or trusts subject to U.S. federal income tax on their
income regardless of source ("U.S. Holders") and to certain MDA
Shareholders that are not U.S. Holders. This summary is intended
for general information only. It does not discuss all aspects of
U.S. federal income taxation that may be relevant to a particular
U.S. Holder (including potential application of the alternative
minimum tax) or to certain types of investors subject to special
treatment under the U.S. federal income tax laws (for example,
banks, life insurance companies, tax-exempt organizations, broker-
dealers or U.S. Holders who received their MDA Common Shares as
compensation), nor does it discuss any aspect of state, local or
foreign tax laws. Additionally, the following summary is limited
to U.S. Holders (i) who hold MDA Common Shares as "capital
assets" within the meaning of section 1221 of the United States
Internal Revenue Code of 1986, as amended (the "Code"), (ii) who
will hold Exchangeable Shares and Orbital Common Shares as
"capital assets," (iii) who do not actually or constructively own
(and have not at any time in the preceding five-year period
actually or constructively owned) 10% or more of the voting stock
of MDA or Acquisition, as the case may be, and (iv) whose
ownership, receipt and disposition of Exchangeable Shares and
Orbital Common Shares is not attributable to a permanent
establishment in Canada. The summary also does not discuss the
federal income tax consequences of any transaction involving a
Qualifying Holdco.
This summary is based on laws, regulations, rulings and decisions
currently in effect, all of which are subject to change, possibly
with retroactive effect. In addition, U.S. Holders should note
that there is no statutory, judicial, or administrative authority
that directly addresses certain of the U.S. federal income tax
consequences of the issuance and ownership of instruments and
rights comparable to the Exchangeable Shares, the Voting Rights,
the Exchange Right and the Call Rights. Consequently (as
discussed more fully below), many aspects of the U.S. federal
income tax treatment of the Arrangement, including the receipt,
ownership and disposition of Exchangeable Shares, are uncertain.
No advance income tax ruling has been sought or obtained from the
Internal Revenue Service ("IRS") regarding the tax consequences
of any of the transactions described herein. Accordingly, it is
possible that the U.S. federal income tax consequences of the
Arrangement and the holding and disposition of the Exchangeable
Shares may differ from those described below.
U.S. HOLDERS AND NON-U.S. HOLDERS ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL, STATE, AND LOCAL
TAX CONSEQUENCES AND THE FOREIGN TAX CONSEQUENCES OF THE
ARRANGEMENT, INCLUDING THE RECEIPT AND OWNERSHIP OF EXCHANGEABLE
SHARES OR ORBITAL COMMON SHARES.
Taxation of U.S. Holders
The Arrangement. Although the matter is not free from doubt, MDA
and Orbital have been advised that there is a reasonable basis on
which to conclude that the exchange of MDA Common Shares for
Exchangeable Shares pursuant to the Arrangement will constitute a
taxable transaction for U.S. federal income tax purposes, and MDA
understands that Orbital intends to report the exchange in a
manner consistent with the foregoing.
If the exchange is a taxable transaction:
(1) a U.S. Holder who receives Exchangeable Shares would
recognize capital gain or loss in an amount equal to the
difference between the fair market value of the Exchangeable
Shares received (together with cash received in lieu of
fractional shares (if any)) and the adjusted basis of the
MDA Common Shares surrendered in the exchange;
(2) such capital gain or loss would be long-term capital gain or
loss if the MDA Common Shares exchanged have been held for
more than one year at the time of the exchange and otherwise
would be short-term capital gain or loss;
(3) an exchanging U.S. Holder would take as its tax basis in the
Exchangeable Shares the fair market value of the
Exchangeable Shares at the time of the exchange;
(4) the holding period of the Exchangeable Shares received by
the U.S. Holder in the exchange would begin on the day after
the U.S. Holder receives the Exchangeable Shares; and
(5) gain realized on the exchange of MDA Common Shares for
Exchangeable Shares generally would be treated as U.S.
source gain.
It is possible that the IRS may take the position that the
receipt of Exchangeable Shares in exchange for MDA Common Shares
is not a taxable event. In such case:
(1) a U.S. Holder generally would not recognize gain or loss on
the receipt of the Exchangeable Shares; such a U.S. Holder
would, however, be required to recognize gain to the extent
of the receipt of cash in lieu of fractional shares (if any)
and, possibly as discussed below, the value, if any, of the
Voting Rights, Exchange Right and other rights under the
Support Agreement;
(2) the tax basis of the Exchangeable Shares would be equal to
the tax basis of the MDA Common Shares exchanged therefor
(reduced by the tax basis allocated to fractional share
interests); and
(3) the holding period of the Exchangeable Shares would include
the holding period of the MDA Common Shares exchanged
therefor.
The IRS may assert that the Exchangeable Shares and certain of
the rights associated therewith constitute "offsetting positions"
for purposes of the straddle rules set forth in section 1092 of
the Code. In such case, the holding period of the Exchangeable
Shares would not increase while held by a U.S. Holder, and
interest incurred in carrying the Exchangeable Shares would not
be deductible by a U.S. Holder.
MDA believes that the Voting Rights and the Exchange Right
received and the Call Rights conveyed by MDA shareholders
pursuant to the Combination Agreement and the Arrangement will
have only nominal value and, therefore, that their receipt or
conveyance will not result in any material U.S. federal income
tax consequences. Further, the exchange of the Call Rights for
the Voting Rights and the Exchange Right may not be taxable to
such U.S. Holders because such U.S. Holders may be deemed to have
granted a purchase option to Orbital, which is not generally
treated as a taxable event for U.S. federal income tax purposes
(although, under this approach, the value of the Voting Rights
and the Exchange Right would be taken into account upon the
exercise or lapse of the Call Rights). It is possible, however,
that the IRS could take the position that the Voting Rights, the
Exchange Right and the Call Rights have greater than nominal
value and that the transfer or receipt of such rights is taxable.
In such event, the receipt of the Voting Rights and the Exchange
Right and the conveyance of the Call Rights could generate
taxable gain or loss. Such gain or loss would generally be U.S.
source short-term capital gain or loss, unless the IRS were to
assert that the Voting Rights and the Exchange Right (or any
other rights, such as the rights beneficially enjoyed by U.S.
Holders under the Support Agreement) were transferred to the U.S.
Holder by MDA, and not by Orbital, in consideration for a portion
of the U.S. Holder's MDA Common Shares. In the latter case, any
gain recognized by a U.S. Holder may be treated as ordinary
income.
Distributions on the Exchangeable Shares. MDA understands that
Orbital does not intend to pay dividends prior to the Automatic
Redemption Date, and thus, no dividends would be payable with
respect to the Exchangeable Shares. If any such dividends were
paid, however, a U.S. Holder of Exchangeable Shares generally
would be required to include in gross income as ordinary income
any dividends paid on the Exchangeable Shares to the extent paid
out of the earnings and profits of Acquisition, as determined
under U.S. federal income tax principles. Distributions, if any,
in excess of Acquisition's current or accumulated earnings and
profits would constitute a non-taxable return of capital to a
U.S. Holder to the extent of the U.S. Holder's basis in the
Exchangeable Shares and would be applied against and reduce the
basis in the Exchangeable Shares. To the extent that such
distributions are in excess of a U.S. Holder's basis in the
Exchangeable Shares, the distributions would constitute capital
gain. It is possible that the IRS could take the position that
Orbital's, rather than Acquisition's, earnings and profits should
be taken into account in the foregoing calculations.
Based on the tax position that Orbital has advised MDA that it
plans to take, any dividends paid on the Exchangeable Shares out
of Acquisition's earnings and profits would be treated as foreign
source dividend income and would generally not be eligible for
the dividends received deduction allowed to corporation
shareholders under the Code. It is possible, however, that the
IRS could assert that such dividends constitute U.S. source
income. Under the current Canada-United States Income Tax
Convention, such distributions to U.S. Holders would be subject
to Canadian withholding tax at a rate of 15% irrespective of any
position that the IRS may take. See "Canadian Federal Income Tax
Considerations - Holders of MDA Common Shares Not Resident In
Canada," above. Subject to certain limitations of U.S. federal
income tax law, a U.S. Holder should generally be entitled to
either a credit against its U.S. federal income tax liability or
a deduction in computing U.S. taxable income for Canadian income
taxes withheld from distributions with respect to the
Exchangeable Shares. The use of a credit may, however, be
limited or precluded entirely if the U.S. Holder has no income
that is treated as non U.S. source income for U.S. federal income
tax purposes.
Exchange or Retraction of Exchangeable Shares. Although the
matter is not free from doubt, MDA and Orbital have been advised
that there is a reasonable basis on which to conclude that the
exchange, retraction or redemption of the Exchangeable Shares for
Orbital Common Shares will be treated as a taxable event for U.S.
federal income tax purposes, and Orbital has advised MDA that it
currently intends to take this position. If the exchange is a
taxable event, and the U.S. Holder receives Orbital Common Shares
from Orbital pursuant to the Call Rights:
(1) a U.S. Holder generally would recognize gain or loss equal
to the difference between the fair market value of the
Orbital Common Shares at the time of the exchange (together
with cash equal to the Dividend Amount (if any) and cash in
lieu of fractional shares (if any)) and the U.S. Holder's
tax basis in the Exchangeable Shares;
(2) such gain or loss would generally be capital gain or loss,
except that the IRS could assert that a holder must
recognize amounts attributable to any declared but unpaid
dividends on the Exchangeable Shares as ordinary income that
may he treated as U.S. source income;
(3) any capital gain or loss would be long-term capital gain or
loss if the Exchangeable Shares have been held for more than
one year at the time of the exchange and otherwise would be
short-term capital gain or loss;
(4) the U.S. Holder would take as its tax basis in the Orbital
Common Shares the fair market value of the Orbital Common
Shares at the time of the exchange;
(5) the holding period of the Orbital Common Shares received by
the U.S. Holder in exchange would begin on the day after the
U.S. Holder receives the Orbital Common Shares; and
(6) gain realized on the exchange of Exchangeable Shares for
Orbital Common Shares generally will be treated as U.S.
source gain.
If the receipt of Orbital Common Shares is effected through a
retraction or redemption of Exchangeable Shares with respect to
which Orbital does not exercise its overriding Call Right, and
thus the Orbital Common Shares are distributed to a U.S. Holder
directly by Acquisition, then if the retraction or redemption is
treated as a taxable transaction, it will be treated as a taxable
exchange of the Exchangeable Shares (treated for U.S. federal
income tax purposes as described above) if the retraction (i)
results in a "complete termination" of the U.S. Holder's stock
interest in Acquisition under section 302(b)(3) of the Code, (ii)
is "substantially disproportionate" with respect to the U.S.
Holder under section 302(b)(2) of the Code, or (iii) is "not
essentially equivalent to a dividend" with respect to the U.S.
Holder under section 302(b)(1) of the Code. In determining
whether any of these tests has been met, shares of stock
considered to be owned by the U.S. Holder by reason of certain
constructive ownership rules set forth in section 318 of the
Code, as well as shares actually owned, generally must be taken
into account. If a retraction or a redemption is treated as a
taxable transaction but does not meet any of the tests described
above, the cash and the fair market value of the Orbital Common
Shares received by the U.S. Holder would generally be taxed as a
dividend paid on the Exchangeable Share to the extent of
Acquisition's (or, possibly, Orbital's) earnings and profits.
See "Distributions on the Exchangeable Shares," above.
Irrespective of how the retraction or redemption is treated for
U.S. federal income tax purposes, it will, as discussed above, be
subject to Canadian withholding tax. See "Canadian Federal
Income Tax Considerations - Holders of MDA Common Shares Not
Resident in Canada," above. Any Canadian tax imposed on the
exchange will be available as a credit against U.S. federal
income taxes, subject to applicable limitations. For example,
the use of such a credit may be limited or precluded entirely if
the U.S. Holder has no income that is treated as non U.S. source
income for U.S. federal tax purposes. A U.S. Holder that is
ineligible for a foreign tax credit with respect to any Canadian
tax paid, or who otherwise so chooses, may be entitled to a
deduction therefor in computing U.S. taxable income.
It is possible that the exchange, or retraction or redemption of
Exchangeable Common Shares for Orbital shares would be held to
constitute a nonrecognition event. In such case:
(1) a U.S. Holder that exchanges its Exchangeable Shares for
Orbital Common Shares generally would not recognize gain or
loss on the receipt of the Orbital Common Shares;
(2) a U.S. Holder would, however be required to recognize gain
to the extent of the receipt of cash in lieu of fractional
shares (if any) exceeds the tax basis allocable thereto and
income (which may be ordinary income) to the extent of cash
equal to the Dividend Amount (if any);
(3) the tax basis of the Orbital Common Shares would be equal to
the tax basis of the Exchangeable Shares exchanged therefor
(reduced by the tax basis allocated to fractional share
interests); and
(4) the holding period of the Orbital Common Shares would
include the holding period of the Exchangeable Shares
exchanged therefor.
Dissenting U.S. Holders. A U.S. Holder who exercises its right
to dissent from the Arrangement will generally recognize U.S.
gain or loss on the exchange of its MDA Common Shares for cash in
an amount equal to the difference between the amount of cash
received and its adjusted tax basis in the MDA Common Shares.
Such gain or loss will be capital gain or loss if such shares
have been held for more than one year at the time of the exchange
and otherwise will be short-term capital gain or loss, and will
generally be U.S. source.
Shareholders Not Resident in or Citizens of the United States
The following summary is applicable to a holder of MDA Common
Shares that is not a U.S. Holder ("non-U.S. Holder").
A non-U.S. Holder generally will not be subject to U.S. federal
income tax on gain recognized on the receipt of the Exchangeable
Shares, the Voting Rights and the Exchange Right, on the sale or
exchange of the Exchangeable Shares, or on the receipt or sale of
the Orbital Common Shares unless such gain is effectively
connected with the conduct by the non-U.S. Holder of a U.S. trade
or business or, if a tax treaty applies, if the gain is
attributable to a U.S. permanent establishment of the non-U.S.
Holder.
If gain recognized by a non-U.S. Holder on the receipt of the
Exchangeable Shares, on the sale or exchange of the Exchangeable
Shares, or on the receipt or sale of the Orbital Common Shares,
is effectively connected with a U.S. trade or business or is
attributable to a permanent establishment in the United States,
the non-U.S. Holder would be subject to U.S. federal income tax
at the graduated rates that are applicable to U.S. citizens,
resident aliens, and domestic corporations, and may be subject to
withholding in certain circumstances. Non-U.S. Holders may be
entitled to a limited foreign tax credit on non-U.S. source
income that is effectively connected with a U.S. trade or
business. In addition, if the non-U.S. Holder is a corporation,
the branch profits tax also may apply.
MDA understands that Orbital does not intend to pay dividends
prior to the Automatic Redemption Date and thus, no dividends
would be payable with respect to the Exchangeable Shares. Any
dividends received by a non-U.S. Holder with respect to the
Exchangeable Shares should not be subject to U.S. withholding
tax, and MDA understands that it is not anticipated that
Acquisition would withhold any amounts in respect of such tax
from such dividends. The possibility exists, however, that the
IRS may assert that U.S. withholding tax is payable with respect
to dividends paid on the Exchangeable Shares to non-U.S. Holders.
In such case, holders of Exchangeable Shares could be subject to
U.S. withholding tax at a rate of 30%, which rate may be reduced
by an applicable income tax treaty in effect between the United
States and the non-U.S. Holder's country of residence (15% on
dividends paid to residents of Canada). Dividends paid to a non-
U.S. Holder that are effectively connected with the conduct of a
trade or business in the United States are taxed at the graduated
rates that are applicable to U.S. citizens, resident aliens, and
domestic corporations, and are not subject to withholding if the
non-U.S. holder gives an appropriate statement to the withholding
agent in advance of the dividend payment. Such effectively
connected dividends also may, under certain circumstances, be
subject to an additional branch profits tax if the non-U.S.
Holder is a corporation.
Dividends received by a non-U.S. Holder with respect to the
Orbital Common Shares generally will be subject to U.S.
withholding tax at a rate of 30%, which rate may be subject to
reduction by an applicable income tax treaty (15% on dividends
paid to residents of Canada). If the dividends are effectively
connected with the conduct of a U.S. trade or business, they
would be taxed at the graduated rates that are applicable to U.S.
citizens, resident aliens, and domestic corporations, and would
not be subject to withholding if the non-U.S. holder gives an
appropriate statement to the withholding agent in advance of the
dividend payment. A non-U.S. Holder that is a corporation also
may be subject to an additional branch profits tax on effectively
connected dividends.
The Orbital Common Shares (and, possibly, the Exchangeable Shares
or a portion thereof) will be deemed to be U.S. situs assets for
purposes of the U.S. federal estate tax with the result that any
such shares held by an individual non-U.S. Holder at the time of
his or her death will be subject to the U.S. federal estate tax,
except as may otherwise be provided by an applicable estate tax
treaty with the U.S.
Information, Reporting and Backup Withholding
Information reporting to the IRS by paying agents and custodians
located in the United States may be required with respect to
amounts received on the disposition of Exchangeable Shares or
Orbital Common Shares, or dividends paid on either of the
foregoing. A U.S. Holder may be subject to backup withholding at
the rate of 31% with respect to dividends paid by such persons,
unless the holder (i) is a corporation or comes within certain
other exempt categories and, when required, demonstrates this
fact, or (ii) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding, and
otherwise complies with applicable requirements of the backup
withholding rules. Generally, dividends paid to non-U.S. Holders
of the Orbital Common Shares that are subject to the 30% (or
reduced treaty) rate of withholding tax will be exempt from
backup withholding tax. Backup withholding is not an additional
tax, and may be credited against the holder's federal income tax
liability.
INFORMATION CONCERNING ACQUISITION
Acquisition was incorporated under the CBCA on August 11, 1995
solely for the purpose of entering into the Combination Agreement
and completing the transactions contemplated thereby, including
the Arrangement. Acquisition has not carried on any material
business or activities other than those relating to the
Combination Agreement and the Arrangement. The registered and
principal office of Acquisition is located at 44th Floor, 1 First
Canadian Place, Toronto, Ontario, M5X 1B1. It is anticipated
that immediately prior to the Effective Date, Acquisition will
change its registered and principal office to 13800 Commerce
Parkway, Richmond, British Columbia, V6V 2J3.
Acquisition is a wholly owned subsidiary of Orbital. Pursuant to
the Arrangement, among other things, the authorized share capital
of Acquisition will be amended to authorize an unlimited number
of Exchangeable Shares and 10,000 Class B Preferred Shares; as a
result of this amendment, Acquisition will have three classes of
authorized share capital consisting of an unlimited number of
common shares, an unlimited number of Exchangeable Shares and
10,000 Class B Preferred Shares. Pursuant to the Arrangement,
the Exchangeable Shares will be issued to MDA Shareholders (other
than Dissenting MDA Shareholders) and holders of shares of
Qualifying Holdcos in exchange for the MDA Common Shares held by
them or the Qualifying Holdcos, as the case may be. As a result,
Acquisition will become the sole shareholder of MDA. The 10,000
Class B Preferred Shares will be issued to Canadian Imperial Bank
of Commerce as partial payment for investment banking services
rendered with respect to the Arrangement. All of the issued and
outstanding common shares of Acquisition will be held by Orbital.
In addition, pursuant to the Arrangement, the name of Acquisition
will be changed to "MacDonald Dettwiler Holdings Inc." See "The
Arrangement and The Combination Agreement - Plan of Arrangement."
The directors of Acquisition are David W. Thompson (President and
Chief Executive Officer of Orbital), Ian J. Cowan (Vice-
President, Lehman Brothers Canada Inc.) and Michael Gregory (Vice-
President, Lehman Brothers Canada Inc.). The officers of
Acquisition are David W. Thompson, President, Carlton B.
Crenshaw, Vice-President and Treasurer, and Leslie C. Seeman,
Secretary, all of whom are also officers of Orbital.
INFORMATION CONCERNING ORBITAL
Background and Recent Acquisitions
Orbital was incorporated under the laws of the State of Delaware
in 1987. Its headquarters are located at 21700 Atlantic
Boulevard, Dulles, Virginia, 20166, U.S.A.
Orbital is a space technology company that designs, manufactures,
operates and markets a broad range of space products and services
that are grouped into three categories: Launch Systems, Space and
Electronics Systems, and Communications and Information Systems.
Launch Systems include space and suborbital launch vehicles;
Space and Electronics Systems include satellites, spacecraft
platforms, space sensors and instruments, and space payloads and
experiments, as well as advanced avionics and data management
systems; and Communications and Information Systems include
satellite-based two-way mobile data communications systems,
satellite-based navigation products and remote sensing systems,
along with satellite tracking systems and environmental
monitoring products.
Orbital's goal is to become a full-service space company by
integrating its launch vehicles, satellites and other products
into complete "turn-key" space systems and providing end-to-end
satellite-based services for particular markets. Orbital's
strategy is to exploit expanding opportunities to provide
government, commercial and other customers with low-cost access
to and operations in space. Essential elements of Orbital's
strategy include investment of substantial private capital in the
development of proprietary products; reduction of the time
required for product development; formation of strategic business
alliances to enhance Orbital's marketing, technical,
manufacturing and financial capabilities; and establishment of
vertically integrated manufacturing and testing capabilities. In
addition, Orbital believes that its strategy of providing "turn-
key" space systems, through the integration of lower-cost space
launch vehicles with lower-cost smaller satellites and sensors
and instruments, should stimulate the use of space products and
services by private corporations, educational and research
institutions and other non-traditional space customers including,
ultimately, individual consumers.
An important element of Orbital's strategy to integrate its
various products into complete "turn-key" systems is the
acquisition of companies with product lines that complement or
enhance Orbital's existing base of products, technology and
services. Orbital acquired Space Data Corporation ("Space Data")
in 1988, thereby expanding its product lines and increasing its
vertical integration in production and testing. In September
1993, Orbital acquired all the assets of the Applied Sciences
Operation, a division of The Perkin-Elmer Corporation ("ASO").
This operation designs, develops and produces satellite-borne
scientific sensors for space and terrestrial research and in situ
atmospheric monitoring equipment for human space flight programs.
In August 1994 and December 1994, Orbital acquired Fairchild
Space and Defense Corporation ("Fairchild") and Magellan
Corporation ("Magellan"), respectively. The Fairchild
acquisition has enhanced Orbital's satellite system and subsystem
development and production capabilities and has expanded
Orbital's existing product lines by adding various sophisticated
electronics and defence products. Magellan designs, manufactures
and markets hand-held receivers for Global Positioning System
("GPS") satellite-based navigation and positioning for commercial
and consumer markets.
Orbital's customer base includes a wide range of
U.S. governmental agencies, universities and commercial
enterprises including NASA; the National Oceanic and Atmospheric
Administration; various organizations within the U.S. Department
of Defense ("DoD") including the U.S. Army, the U.S. Navy, the
U.S. Air Force, ARPA and BMDO; ORBCOMM Global; John Hopkins
University; and certain distributors of electronics and
recreational equipment. Orbital's diversification and
integration of space-based products and services is reflected in
its revenue mix with 34%, 40% and 26% of its 1994 revenues
derived from Launch Systems, Space and Electronics Systems and
Communications and Information Systems, respectively. Orbital
had revenues of approximately US$222 million for the year ended
December 31, 1994. As of June 30, 1995, Orbital's total backlog,
including firm orders of approximately US$495 million, was
approximately US$1.3 billion.
Orbital has three wholly owned active subsidiaries -- Magellan,
ORBIMAGE and Fairchild -- and owns 99.9% of the outstanding
shares of ORBCOMM. Magellan, ORBIMAGE, Fairchild and ORBCOMM are
each incorporated under the laws of the State of Delaware.
Description Of Orbital's Products And Services
The space products and services provided by Orbital are grouped
into three categories: Launch Systems, Space and Electronics
Systems, and Communications and Information Systems.
Launch Systems
Orbital's Launch Systems Group's products include space and
suborbital launch vehicles. Orbital also continues to explore
new, longer-term research and development opportunities for more
affordable and flexible space launch vehicles, such as the X-34
reusable launch vehicle described below.
Space Launch Vehicles. A space launch vehicle launches a
satellite into orbit around the Earth. Orbital's three space
launch vehicles are the Pegasus launch vehicle, the Pegasus XL
launch vehicle, and the Taurus launch vehicle.
Orbital's Pegasus vehicle is launched from beneath a modified
large aircraft, such as a Lockheed L-1011, to deploy satellites
up to 1,000 pounds into low-Earth orbit. Customers for Pegasus
include the U.S. Air Force, NASA, BMDO, ORBCOMM Global and ARPA,
as well as the Brazilian and Spanish space agencies. Through
September 1995, Orbital has conducted a total of seven standard
Pegasus missions, all of which were fully or partially
successful. Whether a mission is fully or partially successful
depends on the particular mission requirements designated by the
customer. The modified Pegasus XL, developed to deploy heavier
satellites into orbit, has had two unsuccessful flights, one
occurring in June 1994 and the other occurring in June 1995.
Orbital believes that it correctly identified and remedied the
cause of the 1994 failure. Orbital believes it has identified
the cause of the 1995 failure, which was not related to the
anomalies observed in the first unsuccessful flight, and is
implementing what it believes to be the necessary corrective
actions. There can be no assurance, however, that the causes of
the failures here been correctly identified or that they will be
successfully corrected. In 1992, Orbital entered into a ten-year
lease for a Lockheed L-1011 aircraft, which has been modified to
enable it to launch both the Pegasus and Pegasus XL vehicles.
There is no assurance that, in the event that the L-1011 were
unavailable for any reason, another aircraft could be obtained on
a timely or cost-effective basis.
The higher-capacity Taurus vehicle is a four-stage, ground-
launched derivative of the Pegasus vehicle that can carry
payloads weighing up to 3,000 pounds to low-Earth orbit and
payloads weighing up to 800 pounds to geosynchronous orbit.
Taurus is designed to be readily transported with a self-
contained launch pad, including assembly and pre-flight
equipment, so that launch from a variety of developed or remote
locations can be achieved on short notice. In March 1994,
Orbital successfully launched the first Taurus vehicle, deploying
two satellites for ARPA.
Suborbital Launch Vehicles. Suborbital launch vehicles place
payloads into a variety of high-altitude trajectories but, unlike
space launch vehicles, do not place payloads into orbit around
the Earth. Orbital's suborbital launch products include
suborbital vehicles and their principal subsystems, payloads
carried by such vehicles, and related launch support
installations and systems used in their assembly and operation.
Orbital offers its customers customized vehicle and payload
design, manufacturing and integration, launch and mission support
and tracking and recovery services, as well as construction and
activation of launch pads and other infrastructure elements.
Customers typically use Orbital's suborbital launch vehicles to
launch scientific and other payloads and for defence-related
applications such as target and interceptor experiments for anti-
missile defence systems. The primary customers for Orbital's
suborbital launch vehicles include the U.S. Army, the U.S. Navy
and BMDO.
From January 1991 through September 1995, Orbital has conducted a
total of 38 launches of suborbital vehicles, of which 34 have
been fully or partially successful and four have been failures.
While cutbacks in the DoD's budget and, in particular, those
projects related to missile defence have resulted in decreased
revenues attributable to suborbital launches, Orbital believes
that increasing sophistication of missile technology and public
concern over the United States' missile defence system will
continue to provide opportunities for Orbital's suborbital
program.
Reusable Launch Vehicles. A major reason for the high cost of
access to space today using expendable launch vehicles is the
fact that the entire launch vehicle, including expensive
structures and electronics equipment, is expended during launch.
Orbital is currently developing the X-34 partially reusable
launch vehicle with the goal of significantly reducing the cost
of access to space. Like Pegasus, the X-34 will be air-launched
from a carrier aircraft. Although the X-34 upper stage will be
expended during launch, the booster vehicle itself will return to
Earth, to be refurbished and reused in subsequent launches. The
X-34 is being designed to launch small 500 to 1,000-pound
satellites to low-Earth orbit.
In March 1995, Orbital entered into a Cooperative Agreement with
NASA to develop, construct, test and launch two X-34 reusable
launch vehicles. At that time, Orbital and Rockwell
International Corporation ("Rockwell") agreed to establish a
joint venture, to be called American Space Lines ("ASL"), the
terms of which are under negotiation, to develop, construct, test
and operate two X-34 small reusable launch vehicles. Under the
ASL joint venture, Orbital will be the prime contractor for the
design and construction of the launch vehicle, and Rockwell will
be a subcontractor for the design and construction of various
subsystems, including the propulsion and thermal protection
subsystems. There can be no assurance that Orbital and Rockwell
will successfully conclude their negotiations to establish ASL.
Orbital estimates that the development, construction and initial
testing of the first two X-34 vehicles will require a total
investment of at least US$190 million. Under the Cooperative
Agreement between Orbital (to be novated to ASL) and NASA, NASA
will partially fund the project by providing approximately US$60
million in cash to ASL as specified performance milestones are
met. NASA also is providing approximately US$10 million in
funding NASA centres that will perform as subcontractors.
Orbital and Rockwell are expected to fund the remaining costs of
the X-34 program.
The Cooperative Agreement can be suspended or revoked by NASA or
Orbital/ASL at any time, and there can be no assurance that NASA
will continue to fund or support the project to the extent
presently contemplated by the Cooperative Agreement. Development
and construction of the X-34 is in a very early stage and the
actual cost of the X-34 and the amount and structure of
anticipated investment in ASL may vary significantly from current
estimates. There can be no assurance that the funds expected to
be committed by Orbital, Rockwell and NASA will be sufficient to
finance the project, or that ASL will be able to raise the
required capital if NASA exercises its right to suspend or revoke
the Cooperative Agreement. In the event that ASL does not
receive the necessary capital and Orbital and Rockwell decide not
to go forward with the project, Orbital could be required to
expense part or all of its expected investment in ASL.
Space and Electronics Systems
Orbital's Space and Electronics Systems Group's products include
spacecraft systems and payloads, defence avionics and sensors.
The Space and Electronics Systems Group is responsible for the
design, production and testing of small and medium class
spacecraft for scientific, military and commercial applications.
The small standard spacecraft platforms developed by Orbital,
such as the PegaStar and the MicroStar, are designed to be
launched by the Pegasus or Taurus launch vehicle. The PegaStar
spacecraft platform is a general purpose spacecraft that has
successfully performed one mission for the U.S. Air Force
measuring space radiation. It is also planned to be used for
Orbital's SeaStar ocean environmental monitoring satellite
system. Orbital's MicroStar spacecraft platform is designed for
use in the ORBCOMM System and also for a variety of small space
science and remote sensing projects, including some of those
being pursued by Orbital's wholly owned subsidiary, ORBIMAGE. In
April 1995, the first three MicroStar spacecraft were deployed,
two for the ORBCOMM System, and the other to monitor lightning
and severe weather patterns for NASA.
Orbital's medium class satellites, such as TOPEX/Poseidon, NASA's
Upper Atmosphere Research Satellite, Landsat 4 and Landsat 5 have
been in space for several years, and are used to gather various
scientific data, such as ocean topography and ultraviolet sources
outside the galaxy. In August 1995, Orbital was selected to
become the spacecraft supplier to Johns Hopkins University, which
is leading NASA's Far Ultraviolet Spectroscopy Explorer (FUSE)
program to measure far ultraviolet radiation. The FUSE
spacecraft is presently scheduled for launch in 1998.
Orbital develops, manufactures and markets avionics, advanced
electronics and data management systems for aircraft flight
operations and ground support. These systems collect, process
and store mission-critical data for, among other things, mission
planning and flight operations, and manage on-board equipment for
strategic tactical military aircraft, helicopters, satellites and
surface vehicles. The primary customers for data management
systems are the U.S. Navy, the U.S. Air Force, various DoD prime
contractors and foreign governments. Orbital is the leading
supplier of certain avionics systems and products, including
mission data loaders for the U.S. Navy, and data transfer
equipment and digital terrain systems for the U.S. Air Force. In
addition, Orbital provides stores management systems, including
weapons arming and firing functions for use on tactical aircraft
and helicopters. The avionics systems and products are deployed
on a number of aircraft, including the F-14, F-15, F-16, F-22 and
the LAMPS Helicopter.
Orbital's satellite-borne scientific sensors and instruments
include atmospheric ozone monitoring instruments and
environmental sensors. The Total Ozone Mapping Spectrometer
("TOMS") instrument was produced by Orbital to be launched on a
Pegasus vehicle for NASA. TOMS will measure ozone concentrations
around the world for the purpose of monitoring the effect of man-
made chemicals and atmospheric conditions on the ozone layer. In
addition, Orbital is currently developing and producing various
in situ monitoring products for space and defence applications.
These products include the Atmospheric Composition Monitoring
Assembly, being developed under a contract with The Boeing
Company, that will measure various atmospheric gases in the
crew's living quarters on the Space Station for the purpose of
ensuring a healthy living environment for astronauts. Orbital
also produces the Central Atmospheric Monitoring System for the
U.S. Navy for use on submarines.
Communications and Information Systems
Orbital's Communications and Information Systems include planned
and operational products and services provided by Orbital's
Magellan, ORBCOMM and ORBIMAGE subsidiaries. Magellan
manufactures GPS satellite-based navigation and positioning
products for commercial and consumer markets including marine and
aviation applications, outdoor recreational users such as hunters
and hikers, professional users such as geologists, geographers,
surveyors, natural resource managers and contractors and, to a
lesser extent, the U.S. Government. ORBCOMM and ORBIMAGE are
developing satellite-based services to address the expanding
market for global two-way data communications and information
derived from remote sensing of the atmosphere, oceans and land
surfaces. Orbital believes that the ORBCOMM and ORBIMAGE systems
will require significant capital investments. Although Orbital
believes the long-term profit potential of such service
businesses developed and supported by Orbital's proprietary
product technologies is significant, there can be no assurance
that Orbital will be able to successfully develop these
businesses.
Satellite-Based Navigation and Positioning Products. Orbital's
Magellan subsidiary designs, manufactures and markets hand-held
GPS receivers that provide users with precise positioning and
navigation information for a broad range of personal and
professional activities including marine navigation, outdoor
recreation (hiking and hunting), surveying and general aviation.
Magellan focuses its research, design and engineering activities
on the development of GPS receivers that are reliable, portable,
easy-to-use and affordable, recently targeting the growing
recreational market. Magellan is also expected to be a
significant supplier of personal communicators for the ORBCOMM
System.
In addition, Orbital's Germantown operations produce data
management systems that have been applied to the design,
development and manufacture of "intelligent transportation
systems," primarily for metropolitan transit operators, that
provide GPS-based location of vehicles and allow for
communications and schedule management.
ORBCOMM System. The ORBCOMM System is designed to provide
virtually continuous mobile data communications coverage over
much of the Earth's surface. Under this design, subscribers will
be able to use inexpensive, pocket-sized personal communicators
to send and receive short messages, emergency alerts and other
critical information, and to use the position-determining
capability of the communicators to obtain data concerning the
location and condition of automobiles, trucks, shipping vessels
and other valuable assets. Orbital expects that the ability to
send and receive other short messages and data without the
geographic limitations of existing data communications systems
will stimulate the growth of new markets for satellite-based data
communications and will be used to supplement terrestrial
communications systems by providing relatively low-cost coverage
in areas outside the range of these systems.
The ORBCOMM System design consists of a constellation of small
low-Earth orbit satellites, a satellite control centre operating
and positioning the satellites, network control centres
controlling the flow of information through the system, local
ground stations sending and receiving signals between the network
control centres and nearby satellites, and the mobile
communicators used by subscribers to transmit and receive
messages to and from nearby satellites. In April 1995, Orbital
successfully launched the first two satellites that will comprise
the ORBCOMM System constellation. After working through certain
anomalies that were initially observed on these two spacecraft,
the satellites have validated a number of technical capabilities
of the ORBCOMM System. ORBCOMM Global is presently involving in
beta testing the ORBCOMM System, and has successfully used the
ORBCOMM System to transmit data messages.
Orbital expects that, using at least 26 satellites and
appropriately located gateway Earth stations, the ORBCOMM System
will provide communications availability generally exceeding 95%
during each 24-hour period in the United States and other
temperate zones in the Northern and Southern hemispheres and
exceeding 75% of each 24-hour period in the equatorial region.
Equatorial region availability could be improved to generally
exceed 90% with an additional plane of eight satellites. Outages
will be dispersed in brief intervals over the 24-hour period,
thereby minimizing the effect of any unavailability of the
system. The ORBCOMM System will only be available in areas where
appropriate licenses have been obtained and generally only where
there is a proximate gateway Earth station and network control
centre.
The ORBCOMM System is being constructed and implemented in two
phases: the ORBCOMM Phase 1 System, consisting of the satellite
control centre, the United States network control centre, four
United States gateway Earth Stations and two MicroStar
satellites; and the ORBCOMM Phase 2 System, consisting of up to
an additional 34 MicroStar satellites. The ORBCOMM Phase 1
System satellites were launched in April 1995, and Phase 1 has
been substantially completed. Subject to the ability of ORBCOMM
Global to secure sufficient financing and completion of satellite
development and production in accordance with current schedules,
Orbital believes that the ORBCOMM Phase 2 System could be fully
operational in late 1997.
Development and Financing. Effective June 30, 1993, ORBCOMM and
Teleglobe Mobile formed a partnership, ORBCOMM Global, for the
design, development, construction, testing and operation of the
ORBCOMM System, and formed two marketing partnerships to market
the ORBCOMM System in the United States and internationally.
ORBCOMM USA, L.P. ("ORBCOMM USA") and ORBCOMM International
Partners, L.P. ("ORBCOMM International, " and together with
ORBCOMM USA, the "Marketing Partnerships") each has the exclusive
right to market the ORBCOMM System in the United States and
internationally, respectively. Also effective June 30, 1993,
Orbital entered into an arm's length agreement with ORBCOMM
Global pursuant to which Orbital had responsibility for the
overall design, development and integration of the ORBCOMM System
(the "System Agreement"). The System Agreement was replaced by
the ORBCOMM System Procurement Agreement between ORBCOMM Global
and Orbital, dated September 12, 1995 (the "Procurement
Agreement").
The Phase 1 System was designed, constructed and implemented
pursuant to the System Agreement. The Procurement Agreement
provides that Orbital will, among other things, construct and
launch 24 satellites, and construct an additional 10 satellites,
for the ORBCOMM Phase 2 System. Under the Procurement Agreement,
Orbital is providing satellites and launch services and the
remaining work to be done on the U.S. satellite control centre
and U.S. gateway Earth stations on a fixed-price basis.
Construction and implementation of the ORBCOMM Phase 1 System in
the United States cost approximately US$65 million, with
US$55 million and US$10 million contributed by Orbital (through
ORBCOMM) and Teleglobe Mobile, respectively. Teleglobe Mobile
and Orbital (through ORBCOMM) are obligated to increase each of
their aggregate investment in ORBCOMM Global to US$85 million and
US$75 million, respectively.
Under ORBCOMM Global's partnership agreement, action by the
partnership generally requires the approval of general partners
holding a majority of the participating interests (i.e.,
interests participating in profits and losses). Each of ORBCOMM
and Teleglobe Mobile is a general partner of ORBCOMM Global and
holds 50% of the participating interests in ORBCOMM Global, with
the result that the approval of both Orbital and Teleglobe Mobile
is necessary for ORBCOMM Global to act. ORBCOMM holds directly
and indirectly a 51% participating interest in ORBCOMM USA and
Teleglobe Mobile holds directly and indirectly a 51%
participating interest in ORBCOMM International, with the result
that ORBCOMM acting alone generally controls the operation of
ORBCOMM USA, and Teleglobe Mobile acting alone generally controls
the operation of ORBCOMM International.
Although construction of the ORBCOMM Phase 1 System is
substantially completed, development and construction of the
ORBCOMM Phase 2 System is in an early stage and the actual cost
of the system, schedule and the amount and structure of the
anticipated investment in ORBCOMM Global may vary significantly
from current estimates. Orbital expects that design,
construction and implementation in the United States of the
ORBCOMM Phase 2 System will require total capital of
approximately US$160 million, bringing the total estimated
required capital for the ORBCOMM System to approximately
US$235 million. ORBCOMM Global may seek additional equity
contributions and/or bank or other debt financing. ORBCOMM
Global has already obtained asset-based financing of US$5 million
to fund a portion of its development and startup costs for the
ORBCOMM Phase 2 System. Orbital has guaranteed ORBCOMM Global's
outstanding indebtedness, and Orbital or Teleglobe may be
required to guarantee or provide credit support in connection
with additional indebtedness incurred by ORBCOMM Global.
Teleglobe Mobile has obtained a US$44 million commitment from
Technologies Resources Industries Bhd., a Malaysian
telecommunications company, to acquire up to 30% of Teleglobe
Mobile's interest in ORBCOMM Global. Orbital has been informed
that Teleglobe Mobile may seek additional investors to
participate in its investment in ORBCOMM Global.
In the event that ORBCOMM Global does not otherwise receive the
necessary capital, implementation and commercial development of
the ORBCOMM System may be delayed, significantly restricted or
possibly abandoned, and Orbital could be required to expense part
or all of its investment in the ORBCOMM System. In addition,
start-up of the ORBCOMM System will produce significant ORBCOMM
Global operating losses for several years. Even if the ORBCOMM
System is fully implemented, there can be no assurance that an
adequate market will develop for ORBCOMM System services, that
ORBCOMM Global will achieve profitable operations or that Orbital
will recover any of its past or anticipated investment in the
ORBCOMM System. Because Orbital has a 50% participating interest
in ORBCOMM Global, Orbital expects to recognize its pro rata
share of ORBCOMM Global profits and losses.
Regulatory Approvals. In October 1994, ORBCOMM became the first
company to be awarded full U.S. Federal Communication Commission
("FCC") authority to construct, launch and operate a low-Earth
orbit satellite-based messaging and data communications network
in the United States. This license, which provides that the
ORBCOMM System must be constructed within six years from the date
the license was granted, extends for a period of ten years from
the date the first ORBCOMM System satellite became operational.
At the end of the seventh year of the ten-year term, a renewal
application must be filed with the FCC. ORBCOMM has retained
control over applicable FCC licences consistent with FCC
regulations. As with any such license, the ORBCOMM System
license may be revoked and a license renewal application may be
denied for cause. In late 1994, two other applicants for FCC
licenses similar to that awarded to ORBCOMM petitioned the FCC to
reconsider the grant of the license to ORBCOMM. ORBCOMM has
opposed the petitions, which Orbital and ORBCOMM believe are
without merit. In addition, for the ORBCOMM System to be
operated in other countries throughout the world, Orbital or the
foreign licensees must obtain from the appropriate foreign
regulatory bodies authority to do so. Orbital anticipates that
the cost of these activities will be borne primarily by foreign
licensees. ORBCOMM International has entered into preliminary
agreements with 19 candidate licensees serving 66 countries to
seek such licenses and to initiate country-specific market
development in such countries. There can be no assurance that
Orbital or foreign licensees will be granted all licenses or
approvals necessary to operate the ORBCOMM System in any other
country.
ORBIMAGE Remote Sensing and Imaging Systems. Orbital, primarily
through ORBIMAGE, is currently seeking to develop and market a
broad range of information services to identify and monitor
global environmental changes and to collect and disseminate other
remote sensing information. Small Earth-viewing satellites and
related sensors and instruments to be placed in relatively low
orbits are expected to offer cost-efficient data collection,
daily global coverage and high-resolution imaging services for
government and commercial uses.
In April 1995, ORBIMAGE's first MicroStar satellite was
successfully launched to monitor lightning and severe weather
patterns for NASA. In March 1991, Orbital entered into a
contract with NASA to provide worldwide, daily ocean imagery
using Orbital's SeaStar environmental monitoring satellite
system, based on the PegaStar spacecraft. Orbital plans to
develop, produce, launch and operate the SeaStar system to
deliver high-quality multi-spectral ocean imagery for up to five
years, currently scheduled to commence during 1996. In addition
to providing unprocessed real-time ocean data to NASA, Orbital
plans to process and package the data received from SeaStar and
to use value-added resellers and other marketing agents to sell
the SeaStar data to other U.S. Government users and to potential
domestic and international customers such as commercial
fishermen, oil and gas companies, ocean transportation companies
and oceanographers.
ORBIMAGE is developing and marketing other small satellite-based
Earth observation, remote sensing and environmental monitoring
services using, among other things, Orbital's PegaStar and
MicroStar spacecraft platforms, Pegasus and Taurus launch
vehicles, space sensors and instruments and other space products.
Services to be provided by ORBIMAGE could include high-resolution
optical imaging of land surfaces for geographic information
services, mapping and news-gathering, sensing of ocean and
atmospheric conditions and measuring of ozone and other gaseous
concentrations in the atmosphere. ORBIMAGE is currently
exploring potential strategic arrangements for the development of
several remote sensing businesses, with Orbital providing launch
services, spacecraft and other related products. There can be no
assurance that ORBIMAGE will be able to conclude such strategic
arrangements or develop profitable commercial Earth observation,
remote sensing or environmental monitoring businesses.
Satellite Tracking Systems. Orbital's ground tracking systems,
installed at approximately 70 sites around the world, consist of
meteorological and satellite tracking and telemetry stations that
are used to collect weather data and to communicate with and
control orbiting spacecraft. Orbital's current customers for
satellite tracking systems include Lockheed Martin Corporation
("Lockheed Martin"), ORBCOMM and Orbital's SeaStar project. As a
result of the Arrangement, Orbital is exploring the feasibility
of combining its satellite tracking systems operations with those
of MDA.
Competition
Orbital believes that competition for sales of its products and
services is based on price, performance and other technical
features, reliability, scheduling and customization.
The primary competition to the Pegasus and Taurus vehicles is
expected to come from the smaller and larger classes,
respectively, of LLV launch vehicles currently being developed by
Lockheed Martin. The LLV had an unsuccessful first flight in
August 1995. Direct competition to the Taurus vehicle also comes
from EER Systems' Conestoga launch vehicle. Potential
competition to the Pegasus may come from launch systems derived
from surplus ballistic missiles that could be made available by
the U.S. Government and various foreign governments including
Russia. In addition, the X-34 reusable launch vehicle is
expected to compete with, and eventually replace, the Pegasus.
Competition for Taurus could also come from surplus Titan II
launch vehicles, although Titan II production has been
discontinued and only a limited inventory remains. Indirect
competition to the Pegasus and Taurus vehicles also exists in the
form of secondary or "piggyback" payload capacity on large
boosters such as Ariane, Titan, Long March and Proton launch
vehicles. While secondary payloads offer a low-cost method of
launching satellites in some cases, the secondary status of the
payload often requires customers to accept less desirable orbits,
"standby" launch scheduling and potentially more complicated and
costly payload integration procedures.
Orbital's suborbital launch vehicles, spacecraft systems and
payloads, satellite-based services and space support products
compete with products and services produced or provided by
numerous companies and government entities. Orbital's airborne
and ground-based electronics, data management systems and defence-
oriented avionics products face competition from several
established manufacturers. Orbital's space sensors and
instruments face competition from a number of companies and
university research laboratories capable of designing and
producing space instruments.
The ORBCOMM System will face direct and indirect competition from
numerous existing and potential alternative communication
products and services from various large and small companies,
ranging from one-way tower-based data and messaging services to
sophisticated two-way satellite-based data and voice
communications services. Depending on the requirement of the
specific market, the ORBCOMM System may both compete with and
complement existing services such as one-way and two-way paging,
cellular data, specialized mobile radio and private networks.
ORBIMAGE may face competition from private and U.S. government
entities that provide satellite-based and other land imaging,
environmental monitoring and atmospheric sensing products. GPS
satellite-based navigation and positioning products manufactured
by Magellan face competition from several other producers of GPS
receivers, such as Garmin International and Trimble Navigation
Ltd. Orbital believes that Magellan's success will depend on its
ability to continue to develop new lower-cost and enhanced
performance products and to enter into and develop new markets
for GPS receivers.
Many of Orbital's competitors are larger and have substantially
greater resources than Orbital. Furthermore, the possibility
exists that other domestic or foreign companies or governments,
some with greater experience in the space industry and greater
financial resources than Orbital, will seek to produce products
or services that compete with those of Orbital, including the
Pegasus and Taurus launch vehicles, various suborbital launch
vehicles, PegaStar, MicroStar and other satellite systems, GPS
receivers and ORBCOMM and other satellite services. Any such
foreign competitor could benefit from subsidies from, or other
protective measures by, its home country. In addition, in
response to reductions in the U.S. defence budget, Orbital may
face competition from companies, such as missile manufacturers,
that could attempt to adapt existing or future products for non-
defence, space or suborbital launch applications.
Research and Development
Orbital believes that its future success will depend in part on
its ability to continue to conceive and develop new products and
services and enhance existing products on a more rapid and less
expensive basis than its competitors. Accordingly, Orbital
expects to continue to invest in product-related research and
development, to conceive and develop new products and services,
to enhance existing products and to seek customer and strategic
partner investments in these products. These strategic
relationships have included, and may include in the future, joint
development arrangements, joint venture investments and
acquisitions of strategic product lines and businesses.
Orbital's research and development expenses, excluding direct
customer-funded development, were approximately US$8.8 million
for the six months ended June 30, 1995 and approximately US$14.4
million, US$14.9 million, and US$10.6 million for the years ended
December 31, 1994, 1993 and 1992, respectively. Orbital's
research and development expenses during 1995 have been and will
be primarily for new or modified launch systems, spacecraft
programs, including possible ORBIMAGE projects, and satellite-
based navigation and positioning products.
Backlog and Contracts
Orbital's firm backlog at June 30, 1995 and 1994 was
approximately US$495 million and US$256 million, respectively.
As of June 30, 1995, approximately 60% of Orbital's backlog was
with the U.S. Government and its agencies or from subcontracts
with the U.S. Government's prime contractors. Backlog consists
of aggregate contract values for firm product orders, excluding
the portion previously included in operating revenues on the
basis of percentage of completion accounting, and including
government contracts awarded but not signed and orders not yet
funded in the amounts of approximately US$140 million as of
June 30, 1995. Approximately US$385 million of backlog at
June 30, 1995 is currently scheduled to be performed beyond 1995.
Backlog excludes unexercised contract options having an aggregate
potential contract value at June 30, 1995 of approximately
US$795 million.
A substantial portion of Orbital's revenues have been generated
primarily under fixed-price incentive fee, firm fixed-price and
cost-plus-fee U.S. government contracts. Fixed-price incentive
fee contracts are long-term contracts with specified cost, profit
and price targets. To the extent a contractor incurs less costs
than targeted, the contractor's profit will be increased based on
contractual incentives. In this manner, the contractor is
encouraged to keep costs at a minimum and, as a reward, realizes
additional profit. The U.S. Government, by virtue of the
contractor's reduced costs, offset in part by increased profit,
realizes a reduced price for the product or service. Firm-fixed-
price contracts are long-term contracts with fixed stated prices.
The contractor bears the burden of cost increases and realizes
the reward of cost savings. Cost-plus-fee contracts, which
include cost-reimbursable contracts, cost-plus-fixed-fee
contracts, cost-plus-award-fee contracts and cost-plus-incentive-
fee contracts, are long-term contracts that reimburse a
contractor for all costs incurred in the performance of the
contract with various contractual fee arrangements, including
fixed fees, award fees based on specific contractor performance,
and incentive fees based on contractor cost performance.
Orbital uses the percentage of completion method of accounting,
whereby revenue is recognized based on actual costs incurred in
relation to total estimated costs to complete the contract or
based on specific delivery terms and conditions, with incentive
and award amounts included in revenue or expense based on ongoing
estimates of expected incentive or award fees. Unforeseen events
and circumstances can alter Orbital's estimate of the costs
associated with a particular contract and any related profit or
incentive or award fee. To the extent cost overruns cannot be
passed on to Orbital's customers, they could materially adversely
affect Orbital's results of operations.
All of Orbital's U.S. Government contracts and, in general, its
subcontracts with the U.S. Government's prime contractors,
provide that such contracts may be terminated at will by the U.S.
Government or the prime contractor, respectively. Furthermore,
any of these contracts may become subject to a government-issued
stop work order under which Orbital is required to suspend
production. In the event of a termination at will, Orbital is
normally entitled to the purchase price for delivered items,
reimbursement for allowable costs for work in process, and an
allowance for reasonable profit thereon or adjustment for loss if
completion of performance would have resulted in a loss. Orbital
has experienced several contract suspensions and terminations in
the past, and there can be no assurance that such terminations or
stop work orders will not occur in the future.
During 1994, 1993 and 1992, approximately 60%, 70% and 80%,
respectively, of Orbital's total annual revenues were derived
from contracts with the U.S. Government and its agencies or from
subcontracts with the U.S. Government's prime contractors.
Orbital's government contracts are subject to regular audit and
periodic reviews and may be modified, increased, reduced or
terminated in the event of changes in government requirements or
policies, Congressional appropriations and program progress and
scheduling. Orbital believes that any adjustments likely to
result from pending inquiries or audits of its contracts will not
have a material adverse impact on Orbital's financial condition
or results of operation. Since Orbital's inception, it has not
experienced any material adjustments as a result of any such
inquiries or audits. U.S. Government curtailment of expenditures
for space research and development and related products and
services could have a material adverse effect on Orbital's
revenues and results of operations.
Properties
In 1993, Orbital entered into a 12-year lease agreement for
approximately 100,000 square feet of office and engineering space
in Dulles, Virginia, which serves as its corporate headquarters.
In 1994, Orbital completed construction of an approximately
30,000 square-foot satellite engineering and manufacturing
facility on land adjacent to the Dulles office facility. Orbital
also leases approximately 320,000 square feet of office,
engineering and manufacturing space in Germantown, Maryland;
312,000 square feet of office, engineering and manufacturing
space in Chandler, Arizona; approximately 135,000 square feet of
office, engineering and manufacturing space in Pomona,
California; approximately 40,000 square feet of office,
engineering and manufacturing space in San Dimas, California; and
approximately 25,000 square feet of manufacturing space in
Mexicali, Mexico. Orbital leases other small facilities or
offices in Huntsville, Alabama; Edwards Air Force Base,
California; Vandenberg Air Force Base, California; and Greenbelt,
Maryland. Although completion of Orbital's existing and pending
contracts may in the future require additional manufacturing
capacity, Orbital believes that its existing facilities are
adequate for its near- and medium-term requirements.
Environmental Regulation
Orbital's operations are subject to a variety of Federal, state
and local environmental regulations, including laws regulating
air and water quality and hazardous materials and regulations
implementing those laws. Orbital is one of several potentially
responsible parties involved in a California mandated clean-up of
a manufacturing facility near Salinas, California. Through
June 30, 1995, Orbital and two other potentially responsible
parties have shared certain investigation and monitoring costs,
resulting in total Orbital expenditures after insurance
recoveries of approximately US$85,000. Orbital does not believe
that its total exposure in this clean-up, or that other
compliance by it with applicable environmental regulations, will
have a material adverse effect on its operations.
Insurance
Orbital maintains a US$100 million aviation products liability
policy that insures Orbital against certain liabilities to third
parties that might arise in connection with the production or
operation of a number of its products and generally purchases
launch liability insurance with respect to certain liabilities to
third parties that might arise in connection with a launch.
Orbital also maintains a commercial general liability umbrella
policy of US$50 million to insure Orbital against any third party
claims associated with its manufacturing or business ventures.
In addition, under certain of its government contracts, Orbital
is indemnified by the U.S. Government against certain potential
third-party liabilities resulting from launch or operation of
space launch vehicles and for commercial launches is indemnified
against certain of such liabilities under launch licenses with
the U.S. Department of Transportation. In circumstances in which
Orbital has provided mission success warranties, depending on an
assessment of its exposure and the availability and pricing of
insurance, Orbital generally seeks to purchase mission success
insurance, which provides coverage with respect to contract
losses in the event its launch vehicles or other products fail to
perform and the mission is not completed successfully. Orbital
separately maintains both property (aircraft hull) and liability
insurance on the Lockheed L-1011 aircraft it is currently leasing
for its Pegasus program.
Orbital reviews its insurance coverage from time to time and
considers changes to its insurance coverage in response to the
introduction and operation of new products. The insurance
carried by Orbital and its indemnity rights against the U.S.
Government and other parties do not extend to all of Orbital's
products and services, may not cover all potential risks and may
not be effective to protect Orbital against all potential claims
or losses. In addition, there can be no assurance that mission
success insurance will be available at premium levels that in
Orbital's judgment justify purchase of such insurance or that
such insurance will be available in all instances in which
Orbital has provided mission success warranties.
Litigation
To its knowledge, Orbital is not a party to any legal proceeding,
the outcome of which would materially impact its business or
operations.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
A significant portion of Orbital's revenues are generated under
fixed-price incentive fee, firm fixed-price, and cost-plus-fee
contracts with various agencies of the U.S. Government, including
NASA, the U.S. Air Force, ARPA, the U.S. Army, the U.S. Navy and
BMDO. Orbital recognizes revenues using the percentage of
completion method of accounting, whereby revenue is recognized
based on actual costs incurred in relation to total estimated
costs to complete the contract or based on specific delivery
terms and conditions. In the case of fixed-price incentive fee
contracts, the final revenue amount can be increased or decreased
in accordance with cost incentive provisions that measure actual
financial performance against established targets. The incentive
fee is included in revenue at the time the amount of such fee can
reasonably be determined. In the case of cost-plus award fee
contracts, revenues are recognized to the extent of costs
incurred plus a proportionate amount of a base fee fixed at the
inception of the contract, if any. The award fee is included in
revenue as work is performed based on Orbital's on-going
estimates of the amount of the fee to be awarded. To the extent
that estimated costs of completion are adjusted, revenue
recognized from a particular contract will be affected in the
period of the adjustment.
Orbital is accounting for its investment in ORBCOMM Global using
the equity method of accounting and will continue to use the
equity method as long as Orbital's interest in the profits and
losses of ORBCOMM Global does not exceed the current 50%. In
accordance with the equity method of accounting, Orbital
consolidates 100% of the revenues earned and costs incurred
pursuant to the System Agreement and Procurement Agreement. See
"Information on Orbital - Communications and Information Systems
- - Development and Financing." Orbital also recognizes as equity
in earnings (losses) of affiliates its pro rata share of ORBCOMM
Global's profits and losses. During construction of the ORBCOMM
System, ORBCOMM Global is capitalizing substantially all system
construction costs, including amounts paid under the System
Agreement and Procurement Agreement. To the extent ORBCOMM
Global capitalizes its purchases under these agreements, Orbital
eliminates as equity in earnings (losses) of affiliates 50% of
Orbital's profits and losses thereunder.
Orbital acquired Magellan on December 28, 1994, in a transaction
accounted for as a pooling of interests. Orbital's historical
financial information has been restated to effect the pooling of
interests with Magellan as of the earliest period presented. On
August 11, 1994, Orbital acquired Fairchild, a subsidiary of
Matra Aerospace, Inc., in a transaction accounted for as a
purchase business combination. Fairchild's results of operations
for the nineteen-week period ended December 31, 1994 have been
included in Orbital's consolidated results of operations for the
year ended December 31, 1994. Orbital acquired ASO on
September 17, 1993, in a transaction accounted for as a purchase
business combination. ASO's results of operations for the
fourteen-week period ended December 31, 1993 have been included
in Orbital's consolidated results of operations for the year
ended December 31, 1993.
Adoption of New Accounting Standard
The Financial Accounting Standards Board recently issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of" ("SFAS 121") which (i)
requires that long-lived 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 existing guidelines and procedures.
Orbital adopted the provisions of SFAS 121 during the quarter
ended June 30, 1995. As a result, as of January 1, 1995 Orbital
recorded a cumulative adjustment for a change in accounting
principle of approximately US$4.2 million related to the
impairment in the carrying amount of certain assets to be
disposed of that supported its orbit transfer vehicle product
line.
The following table shows Orbital's revenues, gross profit and
gross profit margin, by major product category, for each of the
three years ended December 31, 1992, 1993 and 1994.
OMITTED: See Management's Discussion and Analysis in the Company's
Annual Report on Form 10-K filed with the SEC on March 29, 1995.
Results of Operations for the Six-Month Periods Ended June 30,
1995 and 1994
Revenues. Orbital's revenues for the six-month periods ended
June 30, 1995 and 1994 were US$132,930,000 and US$98,675,000,
respectively.
Space launch vehicle revenues were US$11,965,000 and
US$29,762,000 for the six-month periods ended June 30, 1995 and
1994, respectively. The significant decrease in revenues during
the periods is attributable primarily to the continuing effects
of production delays caused by Orbital's failed first launch of
its new Pegasus XL launch vehicle in June 1994, and was impacted
to some extent by the failed second launch of the Pegasus XL in
June 1995. Orbital expects revenues during the rest of 1995 to be
less than 1994 as a result of the ongoing failure review process
and resulting schedule delays. Sales of space launch vehicles to
ORBCOMM Global were US$1,452,000 and US$4,150,000 for the 1995
and 1994 six-month periods, respectively.
Revenues from suborbital launch vehicle products were
US$11,492,000 and US$11,626,000 for the six-month periods ended
June 30, 1995 and 1994, respectively. While suborbital revenues
have decreased significantly during the past few years as U.S.
Government defence spending has been reduced, Orbital expects
1995 revenues to remain approximately consistent with, or to
increase slightly from, revenue levels achieved in 1994.
For the six months ended June 30, 1995, spacecraft systems
revenues increased to US$28,901,000 from US$11,043,000 in the
same period in 1994. The increase in spacecraft system sales is
primarily as a result of additional revenues generated from
Orbital's Germantown operations, acquired in August 1994. The
1995 and 1994 six-month periods included US$3,395,000 and
US$4,496,000, respectively, in sales of MicroStar spacecraft to
ORBCOMM Global. Space sensors and instruments sales were
US$6,547,000 and US$8,773,000 for the 1995 and 1994 six-month
periods, respectively, and are expected to remain lower than 1994
levels throughout 1995.
Revenues from defence electronics and avionics products were
approximately US$29,790,000 and US$5,860,000 in the 1995 and 1994
six-month periods, respectively. Orbital acquired these products
as part of the August 1994 Fairchild acquisition and the
September 1993 acquisition of ASO.
Revenues from sales of navigation and positioning products
increased to US$26,459,000 for the six months ended June 30, 1995
as compared to US$18,553,000 for the 1994 period, primarily due
to increased unit sales offset, in part, by lower unit prices for
GPS navigators.
Revenues from Orbital's newly established Advanced Projects Group
were US$9,404,000 during the first half of 1995 as a result of
work performed under the Cooperative Agreement with NASA awarded
in March 1995 for the development of the X-34 small reusable
launch vehicle and work under a contract with ARPA, completed in
April 1995, for the study of a new advanced unmanned, long-
duration, high-flying aircraft.
Gross Profit. Gross profit depends on a number of factors,
including Orbital's mix of contract types and costs incurred
thereon in relation to estimated costs. Gross profit for the six-
month periods ended June 30, 1995 and 1994 was US$35,637,000 and
US$25,052,000, respectively. Gross profit margin as a percentage
of sales was approximately 26.8% and 25.4%, for the six-month
periods ended June 30, 1995 and 1994, respectively. The
increased gross profit margin during 1995 was primarily
attributable to increased margins for spacecraft systems and
navigation and positioning products, offset in part by cost
increases on the Pegasus program as a result of the Pegasus XL
failures in June of 1994 and 1995. Orbital believes that its
gross profit margin for the remainder of 1995 will increase
slightly as compared to the first half of 1995.
Research and Development Expenses. Research and development
expenses represent Orbital's self-funded product development
activities, and exclude direct customer-funded development.
Research and development expenses for the 1995 and 1994 six-month
periods were US$8,764,000 and US$6,506,000, respectively.
Research and development expenses in 1995 relate primarily to the
development of new or improved navigation products and
development efforts on Orbital's Pegasus XL program, and include
estimated expenses related to the recent Pegasus XL failure.
Orbital expects its research and development expenditures for the
rest of 1995 to be consistent with second half 1994 expenditures.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses include the costs of marketing,
advertising, promotional and other selling expenses as well as
the costs of the finance, administrative and general management
functions of Orbital. Selling, general and administrative
expenses for the six months ended June 30, 1995 and 1994 were
US$22,707,000 (or 17.1% of revenues) and US$14,472,000 (or 14.7%
of revenues), respectively. The increase in selling, general and
administrative expenses during 1995 as compared to 1994 was
primarily attributable to expanded marketing efforts related to
Orbital's ORBCOMM project (US$3,304,000 of expenses in 1995 as
compared to US$1,714,000 in 1994) and to various remote sensing
systems (US$408,000 of expenses in 1995 with no corresponding
expenses in 1994), and to the August 1994 Fairchild acquisition
(US$12,188,000 of expenses in 1995). Orbital expects selling,
general and administrative expenses as a percentage of revenues
during the remainder of 1995 to be less than or approximately
equal to those in the first half of 1995.
Interest Income and Interest Expense. Net interest expense for
the 1995 six-month period was US$1,887,000 as compared to
US$931,000 of net interest income for the 1994 six-month period.
Interest income for the periods reflects interest earnings on
short-term investments. Interest expense is primarily for
outstanding amounts on Orbital's revolving credit facility, on
Orbital's public debentures and, during 1995, on acquisition debt
incurred in connection with the August 1994 Fairchild
acquisition. Interest expense has been reduced by capitalized
interest of US$2,533,000 and US$2,517,000 for the 1995 and 1994
six-month periods, respectively.
Equity in Earnings (Losses) of Affiliates. Equity in earnings
(losses) of affiliates for the six-month periods ended June 30,
1995 and June 30, 1994 of US$362,000 and (US$544,000),
respectively, represents elimination of 50% of the profits on
sales to ORBCOMM Global, as well as Orbital's pro rata share of
ORBCOMM Global's current period earnings and losses. During the
construction phase of the project and prior to the commencement
of planned operations, ORBCOMM Global is capitalizing
substantially all construction-related costs and is expensing as
incurred all selling, general and administrative costs as period
costs.
Provision for Income Taxes. A provision for income taxes was not
necessary for the six months ended June 30, 1995 given Orbital's
reported operating losses. Orbital recorded an income tax
provision of US$917,000 for the six-month period ended June 30,
1994. Orbital records its interim income tax provisions based on
estimates of Orbital'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.
At December 31, 1994, Orbital had approximately US$50,000,000 and
US$900,000 of net operating loss and tax credit carryforwards,
respectively, which are available to reduce future income tax
obligations, subject to certain annual limitations and other
restrictions.
Results of Operations for the Years Ended December 31, 1994, 1993
and 1992
Revenues. Orbital's revenues for 1994, 1993 and 1992 were
US$221,946,000, US$223,087,000 and US$204,190,000, respectively.
Revenues in 1994 included approximately US$30 million in sales to
ORBCOMM Global, as compared to US$38 million in 1993.
Revenues from Orbital's space launch vehicle products decreased
from US$55,987,000 in 1993 to US$52,200,000 in 1994. The
unexpected decrease was primarily attributable to a significant
delay in production of Orbital's Pegasus space launch vehicle
products as a result of the June 1994 Pegasus XL launch failure.
Revenues from space launch vehicle products increased in 1993, as
compared to 1992, due to work performed on Pegasus contracts
awarded in 1992 by BMDO and Brazil's national space agency and
initial work performed on the commercial contract awarded by
ORBCOMM Global.
Revenues from suborbital launch vehicle products decreased to
US$22,632,000 in 1994 as compared to US$48,990,000 in 1993.
Revenues from suborbital launch vehicle products also decreased
in 1993 from 1992's record revenues of US$82,061,000. Revenues
from suborbital launch vehicles, which are primarily purchased by
various agencies within the DoD for U.S. military purposes, have
decreased significantly as defence spending throughout the U.S.
Government has been reduced.
Orbital's sole contract with NASA for its orbit transfer vehicle
products was completed in 1993 after two successful launches.
Space and Electronics Systems revenues increased to US$88,305,000
in 1994 as compared to US$31,287,000 in 1993, due primarily to a
full year of sales of sensors and instruments equal to
US$28,482,000 following the September 1993 acquisition of ASO and
19 weeks of sales of spacecraft systems and defence avionics
equal to US$44,998,000 following the August 1994 acquisition of
Fairchild. Space systems revenues increased to US$31,287,000 in
1993 from US$20,715,000 in 1992, primarily as a result of sales
of sensors and instruments and sales of MicroStar satellites to
ORBCOMM Global. Space systems revenues in 1992 consisted solely
of sales of satellite systems to NASA and the U.S. Air Force.
Communications and Information Systems revenues decreased to
US$58,808,000 in 1994 from US$71,391,000 in 1993. The decrease
was attributable primarily to a decrease in sales to ORBCOMM
Global of US$10,455,000 as the initial contract for network
software neared completion, and a decrease in sales of satellite
tracking systems of US$8,443,000 as a large contract was
completed in 1994. Sales of Magellan's satellite navigational
instruments were US$37,144,000 in 1994 as compared to
US$32,900,000 in 1993 and US$29,557,000 in 1992. The increase
from 1993 was due to a significant increase in the number of
products sold offset, in part, by lower average unit sales
prices. Communications and Information Systems revenues
increased in 1993 as compared to 1992 as a result of sales of
network software and satellite tracking systems to ORBCOMM Global
under a contract awarded in 1993 and as a result of work
performed on a large satellite tracking system contract awarded
in late 1992.
Gross Profit. Orbital's gross profit for 1994, 1993 and 1992 was
US$64,881,000, US$52,883,000 and US$45,529,000, respectively.
Gross profit margin as a percentage of sales for those periods
was approximately 29.1%, 23.7%, and 22.3%, respectively. Gross
profit margin during 1994 reflected higher profit margins on ASO
and Fairchild products offset in part by cost growth on the
Taurus space launch vehicle development program, the first
product of which was successfully launched in March 1994.
Additionally, gross profit margin was decreased by cost growth on
the Pegasus program as a result of the June 1994 Pegasus XL
launch failure.
Research and Development Expenses. Research and development
expenses during 1994, 1993 and 1992 were US$14,389,000,
US$14,885,000 and US$10,586,000, respectively. Research and
development spending during 1994 and 1993 reflected Orbital's
continued development of its Pegasus XL and Taurus space launch
vehicles and development of lower-cost satellite navigation
equipment. In 1994, Orbital incurred approximately US$2,500,000
of unexpected research and development costs related to the June
1994 failure of its Pegasus XL vehicle.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses for 1994, 1993 and 1992 were
US$39,751,000 (or 17.9% of revenues), US$25,897,000 (or 11.6% of
revenues) and US$28,615,000 (or 14.0% of revenues), respectively.
The significant increase in selling, general and administrative
expenses and its related percentage of revenues in 1994 was
attributable to a full year of ASO's expenses (US$4,666,000 in
1994, or 16.8% of ASO's revenues), nineteen weeks of Fairchild's
expenses (US$6,409,000 in 1994, or 14.0% of Fairchild's revenues)
and significant selling, general and administrative expenses
related to initial marketing activities for Orbital's ORBCOMM
project (US$5,470,000 in 1994) offset in part by significant
company-wide cost reduction initiatives adopted during 1994 and
1993.
Interest Income and Interest Expense. Net interest income was
US$37,000, US$356,000 and US$738,000 for 1994, 1993 and 1992,
respectively. Interest income reflects interest earnings on
short-term investments reduced by interest expense (net of
capitalized interest of US$5,500,000, US$3,500,000 and US$850,000
in 1994, 1993 and 1992, respectively) for outstanding amounts on
Orbital's revolving credit facility, the public debentures and on
debt incurred in 1994 related to the Fairchild acquisition.
Equity in Earnings (Losses) of Affiliates. Equity in earnings of
affiliates in 1994 and 1993 primarily represents elimination of
US$1,264,000 and US$2,436,000, respectively, of profits on sales
to ORBCOMM Global, due to ORBCOMM Global's capitalization of its
purchases from Orbital. There were no sales to ORBCOMM Global
prior to 1993.
Provision for Income Taxes. Orbital adopted SFAS No. 109
effective January 1, 1993. The cumulative effect on prior years
of this change in accounting principle increased net income in
1993 by approximately US$200,000. The effect of adopting SFAS
109 on income from continuing operations in 1993 was not
material.
Orbital recorded income tax provisions of US$2,081,000,
US$2,288,000 and US$1,630,000 for 1994, 1993 and 1992,
respectively. Orbital's effective tax rate for these periods of
approximately 28% is primarily a result of non-tax deductible
goodwill amortization related to its acquisition of Space Data in
1988 and Fairchild in 1994, offset by tax-exempt interest
earnings and U.S. Federal research and experimental tax credits.
Liquidity and Capital Resources
Orbital's growth has required substantial capital to fund both an
expanding business base and significant research and development
and capital investment expenditures. Additionally, Orbital has
historically made strategic acquisitions of businesses and
routinely evaluates potential acquisition candidates. Orbital
expects to continue to pursue potential acquisitions that it
believes would augment its marketing, technical, manufacturing or
financial capabilities. Orbital has funded these requirements to
date, and expects to fund its requirements in the future, through
cash generated by operations, working capital loan facilities,
asset-based financings, joint venture arrangements, and private
and public equity and debt offerings.
During the quarter ended June 30, 1995, Orbital entered into a
US$20 million fixed-rate unsecured debt financing arrangement
with a private insurance company. The debt has a six-year term
and bears interest at 10 1/2% per annum. The debt arrangement
restricts the payment of dividends and contains certain covenants
with respect to Orbital's working capital, fixed charge ratio,
leverage ratio and tangible net worth. Additionally, in June
1995, Orbital completed a private placement of two million
Orbital Common Shares, receiving net proceeds of approximately
US$32 million. Orbital's shares were placed with various
offshore institutional investors and the issuance was exempt from
public registration pursuant to Regulation S of the 1933
Securities Act, as amended. In August 1994, Orbital issued
secured notes totalling approximately US$24,200,000 to eight
financial institutions, to support Orbital's acquisition of
Fairchild. The notes have an average interest rate of
approximately 8_% and generally mature on a monthly basis over a
three- to five-year period.
Cash, cash equivalents and short-term investments were
US$39,817,000 at June 30, 1995, and Orbital had short-term and
long-term debt obligations outstanding of approximately
US$106,955,000. The outstanding debt relates primarily to
advances under Orbital's line of credit facility, secured notes
issued in connection with the Fairchild acquisition, unsecured
notes issued in 1995, fixed asset financings and Orbital's public
debentures. During the quarter ended June 30, 1995, Orbital
converted, at a premium, approximately US$3,000,000 of its
convertible debentures at the request of certain debenture
holders, issuing approximately 209,000 Orbital Common Shares.
Orbital's revolving credit facility provides for total borrowings
from an international syndicate of six banks of up to
US$65,000,000, subject to a defined borrowing base comprised of
certain contract receivables. Approximately US$6,113,000 of
borrowings were outstanding under the facility at June 30, 1995,
against an available facility limit of approximately
US$25,491,000. At June 30, 1995, the average interest rate on
outstanding borrowings under this facility was approximately
8.2%. Borrowings are secured by contract receivables and certain
other assets. The facility restricts the payment of dividends
and contains certain covenants with respect to Orbital's working
capital, fixed charge ratio, leverage ratio and tangible net
worth, and expires in September 1997.
Orbital's operations used net cash of approximately US$8,466,000
in the six months ended June 30, 1995. Orbital also invested
approximately US$9,689,000 in the ORBCOMM System and incurred
US$9,854,000 of capital expenditures related primarily to
spacecraft production and test equipment.
Orbital expects that its 1995 capital needs for its existing
operations, including its planned US$5,000,000 net investment in
the ORBCOMM System, will in part be provided by working capital,
cash flows from operations, credit facilities, asset-based
financings, customer financings and operating lease arrangements.
Additionally, Orbital intends to invest at least US$67,500,000 in
the X-34 program, which investment will be required over the next
four years, including approximately US$5,000,000 in 1995.
Orbital believes that it may require additional equity and/or
debt financing to fund fully its currently planned operations and
capital requirements, to meet its potential increased investment
in the ORBCOMM System and to meet its investment requirements for
the X-34 program.
Management and Employees
Executive Officers and Directors
The following table sets forth the name, city of residence,
position and principal occupation of each of the executive
officers and directors of Orbital as of September 1, 1995. As of
September 29, 1995, the executive officers and directors of
Orbital beneficially owned, as a group, approximately 3.7% of the
outstanding Orbital Common Shares.
<TABLE>
<CAPTION>
Principal
Name and Director Position with Occupation if
Residence Since Orbital Different than
Office Held
<C> <C> <C> <C>
David W. 1982 Chairman of the
Thompson Board, President
Reston, and Chief
Virginia Executive Officer
Bruce W. 1982 Executive Vice
Ferguson President and
Great Falls, General Manager/
Virginia Communications
and Information
Systems Group and
Director
James R. 1992 Executive Vice
Thompson President and
Huntsville, General
Alabama Manager/Launch
Systems Group and
Director
Jack A. 1994 Executive Vice
Frohbieter President and
Germantown, General
Maryland Manager/Space and
Electronics
Systems Group and
Director
Fred C. Alcorn 1983 Director President, Alcorn
Houston, Texas Oil & Gas and
Alcorn
Development
(Real Estate)
Kelly H. Burke 1984 Director Chairman,
Alexandria, Stafford, Burke &
Virginia Hoaxer
(Aerospace
consulting)
Daniel J. Fink 1983 Director President, D.J.
Potomac, Fink Associates,
Maryland Inc.
(Management
consulting)
Lennard A. 1993 Director Professor and
Fisk Chairman,
Ann Arbor, Department of
Michigan Atmospheric,
Oceanic, and
Space Sciences,
University of
Michigan
Jack L. 1993 Director Professor of
Kerrebrock Aeronautics and
Lincoln, Astronautics,
Massachusetts Massachusetts
Institute of
Technology
J. Paul 1984 Director Managing
Kinloch Director, Lehman
Los Angeles, Brothers
California (Investment
Banking)
Douglas S. 1983 Director President and
Luke CEO, WLD
Coral Gables, Enterprises, Inc.
Florida (Investments)
John L. 1993 Director Consultant
McLucas
Alexandria,
Virginia
Harrison H. 1983 Director Consultant
Schmitt
Albuquerque,
New Mexico
Scott L. 1982 Director Consultant
Webster
Chandler,
Arizona
Antonio L. Executive Vice
Elias President and
McLean, General
Virginia Manager/Advanced
Projects Group
Carlton B. Senior Vice
Crenshaw President/Finance
Herndon, and
Virginia Administration
Leslie C. Senior Vice
Seeman President,
Bethesda, General Counsel
Maryland and Secretary
</TABLE>
For information regarding executive and director compensation,
and a description of Orbital's stock option plans, reference is
made to the excerpt from Orbital's Proxy Statement dated
March 27, 1995, attached as Annex "III" to this Proxy Circular.
Indebtedness of Directors and Officers
There is no indebtedness owed by Orbital's directors or officers
to Orbital.
Employees
As of June 31, 1995 Orbital had 1,781 full-time permanent
employees, none of whom are covered by a collective-bargaining
agreement.
Description of Capital
Capitalization
The following table sets forth the capitalization of Orbital as
of June 30, 1995.
June 30,
1995
(US$ in
thousands)
Long-term debt:
Long-term obligations, net of current $ 19,203
portion
10 1/2% Senior Notes due 2002 20,000
6 3/4% Convertible Subordinated Debentures $ 56,000
due 2003
Total long-term debt $ 95,203
Shareholders' equity:
Preferred Shares, par value $0.01 per
share: 10,000,000 --
authorized; no shares issued and
outstanding
Common Shares, par value $0.01 per 227
share: 40,000,000
authorized; 22,636,357 shares issued
and outstanding
after adjusting for 15,735 shares in
treasury (1)
Additional paid-in capital 237,549
Unrealized losses on short-term (221)
investments
Retained earnings (deficit) (1,941)
Total shareholders' equity $ 235,614
Total capitalization $ 330,817
Note:
(1) Excludes 3,900,945 Orbital Common Shares issuable upon
conversion of Orbital's 6 3/4% Convertible Subordinated
Debentures due 2003 and 1,661,146 Orbital Common Shares
reserved for issuance pursuant to options outstanding as of
September 8, 1995 with exercise prices ranging from US$7.50
to US$22.00 per share.
Common Shares
Orbital has authorized 40,000,000 Common Shares, par value $0.01
per share of which approximately 22,636,357 are issued as at
June 30, 1995. Holders of Orbital Common Shares are entitled to
one vote per share on all matters to be voted on by shareholders
including the election of directors. Subject to the rights of
holders of any Orbital Preferred Shares that may be issued,
holders of Orbital Common Shares are entitled to receive such
dividends as may be declared from time to time by the board of
directors of Orbital from funds legally available therefor. Upon
liquidation, dissolution or winding-up of Orbital, the holders of
Orbital Common Shares will be entitled to share ratably all
assets available for distribution to shareholders after payment
of liabilities, subject to prior distribution rights of holders
of Preferred Shares then outstanding. The Orbital Common Shares
have no preemptive or conversion rights or other subscription
rights. There are no redemption or sinking fund provisions
applicable to the Common Shares.
Preferred Shares
Orbital has authorized 10,000,000 Preferred Shares, $0.01 par
value per share of which none are issued. See "Special Voting
Share" below. Orbital's board of directors is authorized,
without any further action by the shareholders, to determine the
rights, preferences, privileges and restrictions of the unissued
Preferred Shares.
Special Voting Share. In connection with the Arrangement,
Orbital's Board of Directors will designate the Series A
Preferred Stock as a series of Preferred Shares, and will
authorize the issue of one Series A Preferred Share, as the
Special Voting Share, to the Trustee under the Voting and
Exchange Trust Agreement. Except as otherwise required by law or
Orbital's Restated Certificate of Incorporation (the "Orbital
Restated Certificate"), the holder of record of the Special
Voting Share will have a number of votes equal to the number of
Orbital Common Shares issuable upon exchange of all outstanding
Exchangeable Shares (not owned by Orbital or its Affiliates).
The holders of Orbital Common Shares and the Special Voting Share
will vote together as a single class on all matters, except as
may be required by applicable law. In the event of any
liquidation, dissolution or winding up of Orbital, the holder of
the Special Voting Share shall not be entitled to receive any
assets of Orbital available for distribution to its shareholders.
The holder of the Special Voting Share shall not be entitled to
receive dividends. At such time as the Special Voting Share has
no votes attached to it because there are no Exchangeable Shares
outstanding not owned by Orbital or its Affiliates, the Special
Voting Share will be cancelled.
Dividend Policy
Orbital has never paid a cash dividend on the Orbital Common
Shares. Orbital currently intends to retain earnings primarily
for working capital and product development and therefore does
not anticipate paying dividends in the foreseeable future. In
addition, Orbital is subject to certain contractual restrictions
on its ability to pay dividends.
Transfer Agent
Orbital's transfer agent with respect to the Orbital Common
Shares is The First National Bank of Boston. Acquisition's
transfer agent with respect to the Exchangeable Shares is
expected to be Montreal Trust Company of Canada.
Independent Auditors
Orbital's independent auditors are KPMG Peat Marwick LLP.
INFORMATION CONCERNING MDA
Business
MDA was incorporated under the laws of Canada on February 3, 1969
by letters patent under the Canada Corporations Act. MDA was
subsequently continued under the CBCA on May 3, 1976. The head
and principal office of MDA is located at 13800 Commerce Parkway,
Richmond, British Columbia, V6V 2J3.
Subsidiary Companies
MDA owns 100% of the following active subsidiary companies:
INFORMATION CONCERNING MDA
Business
MDA was incorporated under the laws of Canada on February 3, 1969
by letters patent under the Canada Corporations Act. MDA was
subsequently continued under the CBCA on May 3, 1976. The head
and principal office of MDA is located at 13800 Commerce Parkway,
Richmond, British Columbia, V6V 2J3.
Subsidiary Companies
MDA owns 100% of the following active subsidiary companies:
Company Jurisdiction of
Incorporation
MacDonald Dettwiler British Columbia
Technologies Ltd.
MacDonald Dettwiler U.S.A.
Technologies Inc.
MacDonald Dettwiler Pty. Ltd. Australia
MacDonald Dettwiler Limited United Kingdom
PSC International (Europe) United Kingdom
Limited
At June 30, 1995 MDA owned 89.6% of Earth Observation Sciences
Limited, a corporation incorporated under the laws of the United
Kingdom, and will acquire the balance of its shares as a
condition to the Arrangement.
General
MDA is a leading supplier of commercial space remote sensing
ground stations, installed in over 20 countries, capable of
handling all major optical and radar imaging, or Earth
observation, satellites. MDA is also a major provider of
advanced space-qualified software, air navigation systems,
defence electronic systems and network communications training
and consulting.
MDA's customers for systems are usually Fortune-500 companies and
government agencies worldwide. MDA's basic business strategy is
to develop customized systems for individual clients, drawing on
proprietary technologies and on off-the-shelf products. MDA's
strength is in undertaking fixed price projects and delivering on
time and within the customer's budget. MDA currently has a
strategy of reducing its reliance on contracts from or related to
the Canadian Federal Government through operations and alliances
outside of Canada. MDA is seeking to expand its export markets
through understanding and accessing foreign funding sources such
as multi-lateral development agencies.
Utilizing existing technologies and seeking opportunities in
areas that complement MDA's business in terms of technological
capabilities and markets, MDA is currently developing a new
business strategy to capitalize on higher margin opportunities.
As part of the strategy, MDA's PSC division is extending its
consulting services by negotiating worldwide service agreements
with manufacturers of computer network equipment. The strategy
also contemplates MDA charging a per-use fee for data processed
by systems provided by MDA. In addition, MDA may acquire an
equity interest in ventures where it traditionally sold systems.
MDA's participation in EarthWatch Inc. is a part of this
strategy. This strategy is also consistent with MDA's 25.4%
interest in RSI, which has worldwide rights to market data from
the soon to be launched RADARSAT satellite. In other situations,
MDA will package components of customized systems into products
which can be sold to many buyers with few changes. This latter
strategy is designed to permit MDA to bring products to market
economically by capitalizing on the initial development of a
system. An example of a new product opportunity is the radar-
jamming system of the Space and Defence Systems business area.
MDA's business is divided into four business areas consisting of
Geo-Information Systems, Aviation Systems, Space and Defence
Systems and Communications, which are described in detail in the
following sections.
Geo-Information Systems
Geo-Information Systems, MDA's largest business area in terms of
revenues, involves the development of systems for the management
of Earth resources and the environment. This business area is
built on MDA's expertise in Earth observation ground stations and
related markets. The Geo-Information Systems business area also
provides operational and post-delivery support to ensure
operational efficiency of systems delivered to its customers.
This support includes consulting services, training, maintenance
and test equipment, spare parts and manuals.
MDA is one of the world's leading companies in providing
solutions for the acquisition, processing, archiving and
dissemination of non-classified Earth observation data. Of the
26 non-secret ground stations in the world, MDA has built or been
involved in the construction of 23 ground stations in 20
countries. These ground stations are designed to receive or
process data from some or all of the seven major non-secret Earth
observation satellites currently in operation. Among other
things, the data is processed to construct useful images or is
modified to enhance special characteristics or to correct
distortions and anomalies.
A significant portion of MDA's business in this area involves
upgrades to existing systems. Such upgrades are required as a
result of the launch of new technologically-advanced Earth-
observation satellites in order to ensure that existing ground
stations are able to process the data that the new satellites
provide. Delays in the launch of such new satellites can
adversely impact the ground station upgrade business.
The upgrade business has recently declined, in part due to the
failure of the U.S. LANDSAT-6 satellite, which was launched in
1994 but failed to achieve orbit. The only satellite launched
since then was the European Space Agency's ERS-2 which was
launched in April 1995. While MDA performed about $3.5 million
of ground station upgrades in Europe for ERS-2 during fiscal
1995, additional upgrading work will be relatively minor because
this satellite uses technology similar to ERS-1, launched in July
1991. However, several new technologically-advanced satellites
are scheduled for launch by the end of 1996 and these launches
are expected to increase demand for new and upgraded ground
stations.
Over the longer term, other major trends affecting the Geo-
Information Systems business area include technological advances,
the loosening of government restrictions, and a growing
commercial value and profit potential in the ownership of
satellites and ground stations. The technological advances
include a declining cost to obtain and disseminate satellite-
based Earth information and the proliferation of low-cost
personal computers capable of receiving these images. The
loosening of government restrictions mainly involves the 1994
decision of the U.S. government to begin issuing licences
permitting private companies to obtain and sell high-resolution
Earth images of a quality previously restricted to government
intelligence agencies. MDA expects that these trends will lead
to an increase in the number of satellites and ground stations,
and to the ownership of some satellites and ground stations by
private-sector companies.
MDA has completed several Earth information projects involving
mission-control and mission-management systems for the Canadian
Space Agency's RADARSAT satellite, scheduled for launch in late
1995, which contracts totalled $33.6 million. MDA has also
completed a multi-year project to build a specialized software
and hardware ground system that refines raw data from RADARSAT.
This $10 million system was installed at the Gatineau, Quebec
ground station that MDA has upgraded several times since the mid-
1980s. MDA owns approximately 25% of RSI, which has worldwide
rights to market data from the new RADARSAT satellite imagery.
In addition to space-based Earth observation, MDA builds other
systems related to Earth information, including the $10.8 million
Fast Mapping System for the government of Malaysia, which will
allow the Malaysian government to quickly update and generate
digital mapping products from satellite and airborne sensors, and
the installation of a multimillion-dollar Airborne Radar System
in China, which is used for flood monitoring and natural disaster
relief.
MDA has developed and delivered airborne Earth observation
systems with both electro-optical and radar sensors. The
Integrated Radar Imaging System, a side-looking radar that
provides detailed images of the ground in any light or weather
conditions, makes high-resolution imagery available in realtime
both on board an aircraft and at transportable ground stations.
Airborne Earth observation systems have been used for a number of
applications including mapping, forest management, oil spill
recovery and ice flow monitoring in the Arctic. MDA is a member
of a team, led by Raytheon Corporation of Lexington,
Massachusetts, that was awarded a contract from the Brazilian
Government in May 1995 for the development of an Amazon
surveillance system. MDA is currently negotiating the final
terms of its subcontract with Raytheon.
In mission management, under a contract with the European Space
Agency ("ESA"), MDA has built a system for managing the ERS-1
satellite's instrument package and for cataloguing and archiving
the vast quantities of data the satellite will deliver over its
lifetime. MDA expects to use this technology in providing
satellite mission management systems in the future, including
systems for ESA's ENVISAT satellite, which is scheduled for
launch in 1998.
Aviation Systems
Since 1987, MDA's Aviation Systems business area has focused on
specific aviation niche markets, including automated aeronautical
information systems and automated air traffic management systems.
This division was established to take advantage of a growing
trend toward commercialization of civil aviation authorities.
This commercialization typically leads to a strong incentive to
cut costs by investing in automation. At the same time, the
airline industry estimates several billion dollars will be spent
worldwide before the year 2000 on upgrading, replacing and
automating civil aviation traffic management systems. To meet
these developments MDA's Aviation Systems business area provides
the following:
Aeronautical Information Systems. MDA builds and markets Pegasus-
AIS (unrelated to Orbital's Pegasus launch vehicle), an automated
aeronautical information management system. The first sale of a
Pegasus-AIS system was to the Belgian Air Force for $1.8 million.
Faster and less expensive to operate than traditional manual
systems, Pegasus-AIS provides pilots and other users with
aeronautical and meteorological information. MDA has been
developing the underlying technology for Pegasus-AIS since 1989
by way of customized automated briefing systems that MDA is
building for civil aviation authorities in Australia, Norway and
Belgium. In addition, MDA incorporates its knowledge into
broader air traffic management systems. MDA has recently
completed work on a $2.7 million AIS project in India for
Raytheon.
Air Traffic Management Systems. Air traffic management systems
allow air traffic controllers to guide pilots in flight. These
systems combine information about flights, routes, weather,
navigational aids, airways and airports and deliver it to air
traffic controllers in a form that enables timely, safe decisions
to be made. In Canada, MDA is currently working under a
subcontract to Hughes Aircraft of Canada Limited ("Hughes") to
develop and deliver air traffic management software as part of
the Canadian Automated Air Traffic System. The subcontract value
was increased by $24 million during fiscal 1995 to a total of $85
million. Hughes' prime contract with Transport Canada is being
renegotiated. In Switzerland, MDA has a $4 million subcontract
for a Hughes air traffic control project. Under a $3 million
subcontract to Hughes, MDA is providing a military version of the
Canadian Automated Air Traffic System to Canada's Department of
National Defence. Together, MDA and Hughes are pursuing a
growing number of air traffic management systems sales
opportunities around the world, including a bid on two large
projects in Britain and the execution of projects in China and
Indonesia.
Space and Defence Systems
Many of MDA's technologies are directly applicable to the
development of space and defence systems. Defence markets around
the world have declined as governments reformulate defence policy
in the wake of the Gulf War and the collapse of the Soviet Bloc.
MDA has, however, sought to identify niches that are likely to
grow as defence agencies focus on peace-time surveillance,
monitoring and defensive capabilities. MDA's defence systems
include naval mine countermeasures, artillery command and
control, radar deception system and military materiel management.
In space-related work, MDA continues to provide major software
development efforts as part of Canada's contribution to the Space
Station project. This activity provides an opportunity for the
enhancement of MDA's space-qualified software capabilities. MDA
has actively pursued space and defence systems business since
1988.
Naval Mine Countermeasures System. Since 1988 MDA has worked on
a series of projects to develop geocoded sonar image modelling
and mosaicking techniques for mapping the ocean floor. MDA
currently has an $80 million subcontract from a unit of the SNC-
Lavalin Group Inc. of Montreal to develop a mine countermeasures
system for the Canadian Navy's Maritime Coastal Defence Vessel
program. MDA's role is to provide command and control systems
and operational ship-borne and shore-based sonar sensing and
processing capabilities for the detection of underwater mines.
Artillery Command and Control System. MDA is developing the
Artillery Regimental Data System to automate certain command and
control functions for the Canadian Army. This project draws on
MDA's expertise in the computerization of geographic information
and in the management of complex database systems. The Army has
agreed to extend the project into the implementation phase and
has increased the value of MDA's contract to $15.3 million.
Radar Deception System. MDA is developing a system to protect
airplanes, ships or ground installations from being detected and
tracked by hostile radars, under contract with the Department of
National Defence. MDA is also pursuing possible licensing
arrangements that would allow original-equipment manufacturers to
market and install the product.
Military Materiel Management System. In March 1994, the
Department of National Defence selected the SHL Systemhouse Inc.
team, which includes MDA as a major subcontractor, to upgrade the
Canadian Forces Supply System. This inventory management system
is scheduled for completion in 1997.
Communications
MDA entered into the computer network communications, consulting
and training business in fiscal 1995 with the acquisition of
Ottawa-based PSC Communications Group ("PSC").
PSC helps customers design and implement networks so that
computers can communicate faster and at less cost. It also
develops software for special client needs, such as to monitor
networks and find and correct trouble spots. PSC has built a
training relationship with U.S.-based Cisco Systems Inc.
("Cisco") and a worldwide service relationship with Nortel Inc.
PSC recently entered into a training relationship with Digital
Equipment Corporation ("DEC"). Training relationships such as
those with Cisco and DEC are expected to play a significant role
in PSC's future business.
PSC's relationship with Cisco, one of the world's largest
manufacturers of network equipment, includes acting as a leading
training and consulting partner around the world. PSC provides
similar services for DEC in the United States. PSC's arrangement
with Nortel Inc. involves a new product called Entrust which is
designed to ensure the security of computer networking systems.
PSC provides post-sales service to Entrust customers, including
product installation, training and ongoing customer support. PSC
anticipates offering additional training through its new office
in Australia, which will begin serving Hong Kong and other Asian
markets.
In addition to classes for specific vendor products, PSC offers
general courses in computer communications, aimed mainly at
technicians in companies across North America, Europe and other
parts of the world. PSC also provides software programming and
consulting services for clients with network related needs,
including assistance to customers in developing advanced
switching and network management products and recommending and
designing an optimal network system.
Contract Pricing and Completion
As of March 31, 1995 approximately 56% of MDA's active contracts
were fixed-price contracts. MDA has developed costing,
contingency management, operations and engineering methodologies
to allow it to undertake work on a fixed-price basis, and
believes its ability to undertake large-scale systems engineering
and software development projects on a fixed-price basis is a
major competitive advantage. The balance of MDA's contracts are
performed on a cost-plus or limitation of expenditures basis.
The technical nature and sophistication of the systems
deliverable under MDA's contracts require amendments to such
contracts to be negotiated, from time to time, in the ordinary
course of completing any contracts. These amendments may relate
to specifications, delivery times or similar matters. In the
absence of an agreement to such amendments, customers of MDA may
be in a position to terminate a contract with MDA and demand
repayments and penalties. Any such termination and demand may
have an effect on the earnings of MDA. To date, MDA has
generally been successful in renegotiating contracts as required
from time to time.
MDA endeavours to negotiate payment terms in its commercial
contracts that include advance and progress payments for
completion of project milestones. To secure these payments, some
customers require bank guarantees or letters of credit for all or
part of the advance and progress payments remitted to MDA.
Marketing and Sales
Within each of its business areas MDA focuses on specific niche
markets and follows a strategy of seeking to thoroughly
understand, anticipate and follow the trends within each niche.
The Earth observation market is shifting from one of scientific
orientation to one of end-user applications. This has resulted
in MDA now providing complete remote sensing centres and mission
management and control systems, where it previously marketed
satellite ground stations. In image analysis, the market has
matured for specific application systems focused on resource
management, digital mapping and land information. These shifts
have greatly expanded the size of the markets in which MDA is
operating.
The worldwide defence market is undergoing a rapid change from
one centred on conventional forces to one focused on intelligence
gathering and surveillance by methods that include the use of
sonar or radar mapping techniques. Economic pressures on
governments have caused defence agencies to focus on the
efficient use of resources through logistics and supply service
systems. MDA is focusing its defence marketing efforts on these
new areas of emphasis.
The space market is shifting from a scientific orientation to
include global environmental monitoring and commercial
applications. Several large programs such as the U.S. Mission to
Planet Earth, the Japanese ADEOS program and the European Space
Agency's Polar Orbiting Earth Mission program will require large
amounts of processing of remotely sensed satellite data and
mission management systems, and MDA has positioned itself to
compete in these emerging markets. In addition, MDA is
positioning itself to participate in the evolving private-sector
ownership of satellites and ground stations through a supply
contract and the acquisition of a minority interest in EarthWatch
Inc., which plans to launch a privately-owned Earth imaging
satellite in 1996.
MDA has taken advantage of the trend in the airspace management
market from a focus on radar systems and hardware to advanced air
traffic management systems. Through participation in programs in
Canada, Australia, Norway, Belgium and Switzerland, MDA is in a
position to market automated technology that it has previously
developed and provide applications expertise relating to
aeronautical information systems and flight data processing.
For the fiscal year ended March 31, 1995 approximately 44% of
MDA's revenues were generated from outside Canada, an increase
from 36% a year earlier. MDA traditionally works closely with
domestic and foreign customers to develop technology. MDA's
target is to derive 70% of its revenues from export markets,
replacing MDA's reliance on Canadian government funding. The
Canadian business is higher than the target, in part because of
MDA's entry into several new market niches. MDA is developing
export markets for such business.
The following table presents the source of MDA's gross revenues
by region during the last three fiscal years:
<TABLE>
<CAPTION>
Gross
Revenues
Country 1993 1994 1995
<S> <C> <C> <C>
Canada 52% 64% 56%
Asia 25% 19% 11%
Europe 11% 9% 18%
Australia 4% 4% 3%
South America 1% - -
United States 1% 2% 6%
Other 6% 2% 6%
Total 100% 100% 100%
</TABLE>
MDA's sales cycle varies from as short as three weeks for
communications consulting projects to as long as two or three
years for certain defence and ground station projects. Where
required MDA has the capability to provide customer financing
through various agencies, including Canada's Export Development
Corporation and the Asian Development Bank.
MDA has established sales and engineering offices worldwide to
serve key geographic locations. These offices are presently
located in Canada, the United States, England, Malaysia and
Australia. In several other countries MDA has developed a
network of in-country agents to provide necessary assistance to
sales teams and to provide long-term customer support. PSC,
which is operated as a division of MDA, has its headquarters in
Ottawa, Ontario, and has branch offices in Ontario, British
Columbia, the United States, England and Australia.
Competition
MDA participates in various technological and geographical
markets. No one competitor is considered dominant in these
markets and MDA knows of no competitor which competes across its
entire span of technological expertise and markets. MDA may
compete against or team with the same company, depending on the
nature of each project opportunity.
In the Geo-Information Systems business area, MDA faces
competition from Datron Systems Inc. and Hughes-STX Corp. of the
United States. Competition in airborne radar systems includes
Loral Corp. (USA) and Thomson CSF (France). In the field of
land, resource and environmental management systems, MDA faces a
variety of competitors including MBB Dornier (Germany) and
Intergraph Corp. (USA).
Competition in the Aviation Systems markets is broad. Major
competitors include Siemens Plessy (Germany), Alenia S.p.A.
(Italy) and Thomson CSF (France).
In the Space and Defence Systems market, MDA's competitive
strategy is to take part in a consortium, when appropriate, in
order to participate in all of the major Canadian programs within
MDA's particular areas of expertise. Competitors and consortium
partners vary according to the specific program, but typically
include Computing Devices Canada, CAE Inc. and Paramax Systems
Canada.
PSC's consulting business has many small competitors, while its
training business competition is limited to a few companies
licensed by equipment manufacturers.
Research and Development
The majority of systems developed by MDA are large, highly
interactive and on the leading edge of technology. MDA devotes
significant resources to research and development because it is a
critical element in the maintenance of MDA's edge in a highly
competitive and rapidly changing worldwide market. MDA's
strategy is to conduct most research and development through
commercial contracts with customers providing the funding, while
maintaining the rights to use and exploit the technology. Where
full customer funding is not sufficient, MDA uses its own funds
and solicits assistance from various Canadian Government
agencies. A large percentage of MDA's customer-funded research
is contracted from government agencies, particularly the
Government of Canada which encourages research activity and the
development of new systems for export around the world.
MDA's net research and development expenditures for the fiscal
years ended 1993, 1994 and 1995 were $4.4 million, $3.4 million
and $2.4 million, respectively. These amounts exclude customer-
funded research and development and government assistance of
$28.8 million, $30.2 million and $31.7 million in 1993, 1994 and
1995, respectively.
Patents and Licenses
MDA seeks to protect its proprietary information and technology
under applicable intellectual property laws. For work that is
not patentable, contractual provisions, non-disclosure
agreements, copyright and secrecy laws are all used to protect
MDA's proprietary information and technology.
Where software is sold to a customer under contract, rights to
any proprietary software used, but developed outside the
contract, are restricted. MDA seeks to retain, to the greatest
extent possible, rights to use the software developed under the
contract.
Where MDA develops systems and software under development
contracts with the Government of Canada or by utilizing funds
provided in the form of government assistance, the Government of
Canada retains the ownership rights to the products developed and
in return licenses the technology to the developer. These
licenses are sole licenses which, in practice, give the use of
the technology only to the developer of the technology. Where
systems and software are developed under development contracts
with other governments, however, MDA seeks to retain all rights
to ownership and use of the technology developed.
Personnel
A key factor in MDA's success has been the ability to recruit and
retain the highly qualified people it needs to be successful in
the diverse and rapidly evolving markets in which it competes.
As at March 31, 1995, MDA employed 916 people, the majority of
whom hold university or college degrees. MDA has no unionized
employees and believes its relations with its employees are good.
Properties
MDA's head office, located at 13800 Commerce Parkway, Richmond,
British Columbia, is comprised of approximately 182,000 square
feet and is leased until January 2004. A second Richmond office,
located at 13571 Commerce Parkway, is comprised of approximately
30,000 square feet and is leased until February 2003. MDA also
leases space in Ottawa, Ontario and Kuala Lumpur, Malaysia, and
its subsidiaries lease space for their operations in each of
Boulder, Colorado; Farnham, England; and Sydney, Australia. The
PSC division is headquartered in Ottawa, Ontario and has offices
in Toronto, Ontario; Richmond, British Columbia; McLean,
Virginia; Bristol, England; and Sydney, Australia.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations for the Quarter ended June 30, 1995 and
Quarter Ended June 30, 1994
For the first quarter ended June 30, 1995, consolidated gross
revenues declined to $23.6 million, from $27.6 million for the
1994 quarter. The decline in revenue is primarily due to delays
in certain satellite launches that impact demand for Earth
information systems. MDA believes that revenues will increase
through the end of its 1996 fiscal year based on the current
schedule of upcoming optical and radar satellite launches.
Despite the drop in revenues for the quarter ended June 30, 1995,
net earnings remained constant for the June 30, 1995 and 1994
quarters at $0.09 per MDA Common Share. The earnings for the
June 30, 1994 quarter were affected by several low margin
development projects that have since been completed.
Other income consists primarily of interest income on term
deposits, bank balances and a lease receivable with RSI.
Interest income increased from $115,000 in the first quarter
ended June 30, 1994 to $232,000 in the 1995 quarter, primarily
due to an approximate $9 million increase in average cash
balances.
The acquisition of The PSC Communications Group Inc. in April
1994 was partially funded by debt, which is reflected in the net
increase in long-term debt of $3.9 million for the quarter ended
June 30, 1994.
Results of Operations for the Fiscal Years ended March 31, 1995
and 1994
Consolidated gross revenue increased by 8.4% over the previous
year. Fiscal year 1995 includes $13.9 million of revenue from
MDA's newly acquired Communications business area. Geo-
Information Systems revenues declined from $59.3 million in
fiscal 1994 to $48.8 million in fiscal 1995. An important part
of this unit's business is the construction and upgrade of ground-
based Earth observation centres. The revenue decline is
attributable mainly to a temporary lull in the launching of new
Earth observation satellites and the 1994 launch failure of the
Landsat-6 satellite, which delayed several customers' programs.
Cost of sales, consisting of labour, the purchase of deliverable
equipment and the engagement of subcontractors, rose by 6.3%,
from approximately $75.3 million in fiscal 1994 to $80.1 million
in fiscal 1995. In fiscal 1995, equipment and subcontracting
costs declined as a percentage of revenue. Labour costs were
higher primarily due to the acquisition of PSC, whose cost of
sales is comprised mainly of labour, and a one-time labour
expense to deliver a UNIX based system for MDA's Earth-imaging
technology.
Research and development expenditures, before allowing for
government assistance, were $4.7 million in fiscal 1995, up 9.9%
from $4.3 million in fiscal 1994. MDA received government
assistance for research and development of $2.3 million in fiscal
1995, bringing the net expenditure to $2.4 million. That
compared with net expenditures of $3.4 million in fiscal 1994.
In addition to the internally funded expenditures, customer-
funded research and development, pursuant to which MDA conducts
most of its research and development, was $29.3 million in fiscal
1995, unchanged from fiscal 1994. In most cases, MDA has the
right to exploit the technology that results from this customer-
funded research and development.
General and administrative expenditures were $7.8 million in
fiscal 1995, up from $6.7 million in fiscal 1994. This increase
includes $1.6 million attributable to the acquisition of PSC,
which has a slightly higher general and administrative component
than MDA's traditional business. General and administrative
expenditures for the traditional business declined by 7.5% in
fiscal 1995.
The effective rate of income tax for MDA was 46.9% in 1995,
compared with 44.0% in 1994. This increase is primarily due to
certain losses on foreign operations which MDA was unable to take
advantage of in fiscal 1995 but which can be carried forward and
used in the future, if these foreign operations become
profitable. These foreign losses are substantially due to start-
up operations in Australia and Britain.
Cash from operations was $4.2 million in fiscal 1995, down from
$16.3 million a year earlier. This change is largely
attributable to prepayment in fiscal 1994 for work to be
performed in fiscal 1995 and the recognition of revenue on the
percentage of completion basis. MDA does not recognize advance
prepayments on work as revenue until the work is done. In fiscal
1995, MDA worked off advance payments that had been received in
fiscal 1994.
Capital expenditures, primarily required to support growth in the
number of employees and replacement of existing computing
infrastructure, totalled $3.9 million in 1995 compared with $3.6
million in fiscal 1994. On April 6, 1994, MDA acquired 100% of
PSC for $6.3 million. The acquisition was funded by cash
reserves and a term bank loan.
Gross order backlog at March 31, 1995 was $112 million, compared
to $136 million at March 31, 1994. The backlog has been higher
in the recent past due to the simultaneous booking of some large
multi-year programs. But at about one year's revenue, the
backlog is typical for MDA's industry. In addition, with the
acquisition of PSC and with changes in certain market niches, MDA
is less reliant on traditional, long-term delivery contracts than
it once was.
As at the end of the 1995 fiscal year, MDA's bankers have issued
letters of guarantee to certain customers of MDA in the amount of
$9,459,000 of which $2,438,000 is guaranteed by the Federal
Government of Canada. If MDA fails to perform as agreed with
these customers and if the letters of guarantee are called, the
$7,021,000 due to MDA's bankers would be secured by an existing
general assignment of book debts and assignment of raw materials,
work in progress and finished goods. Inventories relating to
contracts with the Government of Canada are excluded from the
assignment. The Federal Government of Canada is secured under a
general recourse agreement, which ranks second to the charge held
by MDA's bankers. A letter of guarantee has never been drawn
against with respect to any project.
Results of Operations for the Fiscal Years ended March 31, 1994
and 1993
Consolidated gross revenues increased by 19.1%, from
approximately $85.2 million in fiscal 1993 to $101.4 million in
fiscal 1994. Operating costs increased by 18.9% in fiscal 1994,
slightly below the increase in revenues for the corresponding
1993 period. Internally funded research and development, net of
government assistance, decreased from $4.4 million in fiscal 1993
to $3.4 million in fiscal 1994. Research and development
decreased as the Geo-Information Systems business area
substantially completed the development phase of its ground
station upgrade program in fiscal 1993.
Operating earnings increased to $5.3 million in fiscal 1994 from
$4.3 million in fiscal 1993, an increase of 22%. Other income
decreased from $634,000 in fiscal 1993 to $532,000 in fiscal
1994. The decrease in interest income due to lower interest
rates is partially offset by interest income earned on the 10%
lease receivable with RSI.
Net cash provided by operations reached $16.3 million in fiscal
1994, compared with $0.5 million in fiscal 1993. Deferred
revenue was a major reason for this change, increasing by $12.0
million. Deferred revenue represents amounts invoiced to
customers in excess of revenue earned. Capital expenditures
amounted to $3.6 million in 1994.
Directors and Officers
The following table sets forth the directors and officers of MDA,
their municipality of residence, their principal occupations, the
year when they became directors and the number of MDA Common
Shares and MDA Options held by them. Following the Effective
Date, Orbital expects to appoint new directors to the MDA Board.
<TABLE>
<CAPTION>
Principal
Occupation if No. of MDA
Director Different than Common
Name and Residence Office Since Office Held Shares or
MDA Options
Held
<C> <C> <C> <C> <C>
J. Brian Aune Director 1986 Chairman, St. Nil
Westmount, Quebec James Financial
Corporation
(Private
investment
company)
Winslow W. Bennett* Director 1982 President, 202,000
Vancouver, B.C. Winwood Holdings shares
Ltd. (Private
investment
company)
Michael J. Brown* Director 1982 President, 100 shares
West Vancouver, B.C. Ventures West
Management Inc.
(Venture capital
management)
Mark H. Leonard Director 1990 Senior Vice- Nil
Toronto, Ontario President,
Ventures West
Management Inc.
(Venture capital
management)
C. Calvert Knudsen* Director 1988 Director, 50,000
Seattle, Washington, MacMillan Bloedel shares
U.S.A. Limited, formerly
Chairman and
Chief Executive
Officer of
MacMillan Bloedel
(Integrated
forest products
company)
John S. MacDonald Director, 1969 1,110,449
Vancouver, B.C. Chairman of shares
the Board 1,994
options (1)
John W. Pitts* Director, 1982 1,154,314
Vancouver, B.C. Deputy shares
Chairman 2,341
options (1)
Daniel E. Friedmann Director, 1992 77,041
Vancouver, B.C. President shares
and Chief 161,467
Executive options (1)
Officer
Mark Dostie Director, 1995 5 shares
Vancouver, B.C. Engineer
David N. Caddey Vice- 11,346
Delta, B.C. President, shares
Space & 81,700
Defence options (1)
Systems
Bernard S. Clark Vice- 15,165
Delta, B.C. President, shares
Geo- 80,660
Information options (1)
Systems
Robert B. Wallis Vice- 15,002
Surrey, B.C. President, shares
Aviation 82,584
Systems, options (1)
Chief
Financial
Officer and
Secretary
Gordon D. Thiessen Controller 3,029
Richmond, B.C. and shares
Assistant 10,816
Secretary options (1)
John S. Rybinski Treasurer 9,315
Vancouver, B.C. shares
Elizabeth J. Harrison, Assistant Partner, Farris, Nil
Q.C. Secretary Vaughan, Wills &
Vancouver, B.C. Murphy
(Barristers and
Solicitors)
</TABLE>
* Member of Audit Committee
Note:
(1) The outstanding MDA Options are exercisable at varying times
at prices ranging from $0.90 to $3.75 per MDA Common Share.
All of the directors of MDA have been engaged for the last five
years in their present principal occupation or in another
capacity with the firms identified opposite their names or
related firms, with the exception of J. Brian Aune. Prior to
November 1990, Mr. Aune was Chairman and Chief Executive Officer
of Nesbitt Thomson Inc., an investment dealer. MDA's Board does
not have an executive committee.
Description of Share Capital
The authorized share capital of MDA consists of an unlimited
number of MDA Common Shares, 205,000 Class A Preference Shares
and 27,000 Class B Preference Shares. As at the date hereof,
there are no Class A or Class B Preference Shares outstanding.
The MDA Common Shares are without par value and rank equally as
to dividends and participation in assets in the event of
liquidation, dissolution or winding up. The holders of MDA
Common Shares are entitled to one vote for each share held at
general meetings of MDA. Following completion of the
Arrangement, Acquisition will be the sole shareholder of MDA.
Dividend Record and Dividend Policy
MDA paid a dividend of $1.00 per MDA Common Share, totalling
$10,965,000, on July 30, 1992. No dividends have been paid since
that date. It is MDA's general policy to retain its earnings for
use in its business and not to pay cash dividends.
Executive Compensation
Summary Compensation Table
The following table sets forth the summary of compensation of the
Chief Executive Officer and the four named executive officers of
MDA and its subsidiaries for the fiscal years ended March 31,
1994 and 1995:
<TABLE>
<CAPTION>
Long-Term
Compensation All
Annual Compensation Awards Other
Compensa-
tion
Securities
Name and Principal Other Under
Position Year Salary Bonus Annual Options $ (2)
($) ($) Compen- Granted
sation (1) (3)
<S> <C> <C> <C> <C> <C> <C>
Daniel E. Friedmann 1995 208,000 --- --- 35,000 7,342
President & C.E.O. (3)
Vice President & C.O.O 1994 202,000 --- --- 30,000 7,352
John W. Pitts (3) 1995 216,000 --- --- --- 7,373
Deputy Chairman
President & C.E.O. 1994 216,000 --- --- --- 7,379
John S. MacDonald 1995 186,760 11,560 --- --- 7,270
Chairman
1994 184,690 10,600 --- 7,269
Bernard S. Clark 1995 113,600 20,499 --- 20,000 7,050
Vice President
Geo-Information Systems 1994 108,933 30,947 --- 20,000 9,521
Robert B. Wallis 1995 110,200 20,000 --- 20,000 6,139
Chief Financial Officer
Vice-President,
Aviation Systems
Vice President 1994 107,369 10,000 --- 20,000 6,139
Chief Financial Officer
David N. Caddey 1995 108,600 17,233 --- 20,000 7,044
Vice President
Space & Defence Systems 1994 107,400 29,965 --- 20,000 7,050
</TABLE>
Notes:
(1) Perquisites and other personal benefits do not exceed the
lesser of $50,000 and 10% of the total of the annual salary
and bonus of the named executive officer for the financial
year.
(2) Includes amounts paid pursuant to contributions to
designated retirement savings plan.
(3) John W. Pitts served as President and Chief Executive
Officer until March 15, 1995. Daniel E. Friedmann served as
Executive Vice President and Chief Operating Officer until
he was appointed President and Chief Executive Officer on
March 15, 1995.
Long-Term Incentive Plan Compensation
MDA provides long-term incentive compensation to key employees,
including executive officers, in the form of options granted
under the Key Employee Share Option Plan ("KESOP") and
predecessor plans, whereby options to purchase MDA Common Shares
are granted.
The following table set forth individual grants of options under
the KESOP during the fiscal year ended March 31, 1995, to the
named executive officers:
Options Granted During the Financial Year Ended March 31, 1995
<TABLE>
<CAPTION>
Market Value
% of Total of
Options Securities
Securities Granted to Exercise of Underlying
Under Employees Base Price Options on
Name Options in ($/Security) the Date of Expiration
Granted Financial Grant Date
(#) (1) Year ($/Security)
<S> <C> <C> <C> <C> <C>
Daniel E. Friedmann 35,000 14% 3.75 3.75 March
31, 2001
Bernard S. Clark 20,000 8% 3.75 3.75 March
31, 2001
Robert B. Wallis 20,000 8% 3.75 3.75 March
31, 2001
David N. Caddey 20,000 8% 3.75 3.75 March
31, 2001
</TABLE>
Note:
(1) The first 20% of the MDA Common Shares under option vest
immediately and the remaining options vest over the four
succeeding anniversary dates of the day of grant.
The following table sets forth each exercise of options during the
fiscal year ended March 31, 1995 by the named executive officers:
Aggregate Options Exercised During the Financial Year Ended
March 31, 1995 and Financial Year-End Option Values
<TABLE>
<CAPTION>
Securities Aggregate Value of
Acquired Value Unexercised Unexercised in
Name on Realized Options the Money Options
Exercise ($) at FY-End at FY-End($)
(#) (#) _________________________
Exercisable Unexer- Exer- Unexer-
cisable cisable cisable
<S> <C> <C> <C> <C> <C> <C>
Daniel E. Friedmann --- --- 81,760 40,000 302,512 148,000
Bernard S. Clark --- --- 35,400 24,000 130,980 88,800
Robert B. Wallis --- --- 37,500 24,000 138,750 88,800
David N. Caddey --- --- 39,700 24,000 146,870 88,800
</TABLE>
Pensions
MDA does not maintain any pension plans for its executive
officers. MDA makes contributions on behalf of all of its
employees, as part of their compensation, for registered
retirement savings plans ("RRSP") equal to the contributions made
by each employee to their RRSP up to a maximum of 5% of that
person's base salary.
Auditors
MDA's auditors are KPMG Peat Marwick Thorne, 777 Dunsmuir Street,
Vancouver, British Columbia V7Y 1K3.
Registrar and Transfer Agent
Montreal Trust Company, at its principal offices in Vancouver and
Toronto, is the registrar and transfer agent for the MDA Common
Shares.
Stock Exchange Listings
The MDA Common Shares are listed on the TSE and the VSE and trade
under the symbol "MDA".
COMPARISON OF SHAREHOLDERS' RIGHTS
Former MDA Shareholders will, at the Effective Date, own
Exchangeable Shares that are exchangeable for Orbital Common
Shares. Pursuant to the Voting and Exchange Trust Agreement the
Trustee may, at the direction of the holders of the Exchangeable
Shares, exercise votes equivalent to those of Orbital Common
Shares. At the Effective Date, Acquisition will be a reporting
issuer under the laws of the province of British Columbia,
Ontario and certain other provinces.
While the rights and privileges of stockholders of a Delaware
corporation such as Orbital are, in many instances, comparable to
those of shareholders of a corporation under the CBCA, such as
MDA and Acquisition, there are certain differences. The
following is a summary of the material differences between the
rights of holders of MDA Common Shares, the rights of holders of
Exchangeable Shares, and the rights of holders of Orbital Common
Shares. These differences arise from differences between United
States and Canadian securities laws, between the DGCL and the
CBCA, and between the MDA articles and by-laws (the "MDA
Articles" and the "MDA By-Laws," respectively), Acquisition's
articles (the "Acquisition Articles") and by-laws (the
"Acquisition By-laws") as proposed to be amended in connection
with the Arrangement and the Orbital Restated Certificate and by-
laws (the "Orbital By-Laws"). For a description of the
respective rights of the holders of MDA Common Shares and Orbital
Common Shares, see, respectively, "Information Concerning MDA -
Share Capital Structure" and "Information Concerning Orbital -
Description of Capital."
Extraordinary Transactions - Vote Required
Under the CBCA, certain extraordinary corporate actions, such as
certain amalgamations, continuances, sales, leases or exchanges
of all the assets of a corporation other than in the ordinary
course of business, and other extraordinary corporate actions
such as liquidations, dissolutions and (if ordered by a court)
arrangements, are required to be approved by special resolution.
A special resolution is a resolution passed by a majority of not
less than two-thirds of the votes cast by the shareholders who
voted in respect of that resolution. In certain cases, a special
resolution to approve an extraordinary corporate action is also
required to be approved separately by the holders of a class or
series of shares.
The DGCL requires the affirmative vote of a majority of the
outstanding stock entitled to vote thereon to authorize any
merger, consolidation, dissolution or sale of substantially all
of the assets of a corporation, except that, unless required by
its certificate of incorporation, no authorizing stockholder vote
is required of a corporation surviving a merger if (a) such
corporation's certificate of incorporation is not amended in any
respect by the merger, (b) each share of stock of such
corporation outstanding immediately prior to the effective date
of the merger will be an identical outstanding or treasury share
of the surviving corporation after the effective date of the
merger, and (c) the number of shares to be issued in the merger
plus those initially issued upon conversion of any other
securities to be issued in the merger do not exceed 20% of such
corporation's outstanding common stock immediately prior to the
effective date of the merger. Stockholder approval is also not
required under the DGCL for mergers or consolidations in which a
parent corporation merges or consolidates with a subsidiary of
which it owns at least 90% of the outstanding shares of each
class of stock. The Orbital Restated Certificate does not
require a greater percentage vote for such actions except with
respect to certain business combinations. See "Anti-takeover
Provisions and Interested Stockholder Transactions."
Such matters as take-over bids, issuer bids or self tenders,
going-private transactions and transactions with directors,
officers, significant shareholders and other related parties to
which Acquisition is a party will be subject to regulation by
Canadian provincial securities legislation and administrative
policies of Canadian securities administrators. Similar matters
to which Orbital is a party will be subject to regulation under
United States securities laws, regulations and policies.
Orbital's Restated Certificate contains a provision that requires
the holders of two-thirds of Orbital's voting power, voting as a
single class, to approve a merger or certain other business
transactions ("Business Combination") between Orbital and a
holder of more than 5% of Orbital's outstanding voting stock or
any such holder's affiliates or associates ("Related Person").
Stockholder approval is not required if the "fair price
provision" (as defined therein) is satisfied or if two-thirds of
the "Continuing Directors" (as defined therein) (i) expressly
approve in advance the acquisition of stock that caused the
Related Person to become a Related Person and expressly decide in
advance of such acquisition that the approval of two-thirds of
the holders of the outstanding shares of voting stock is not
required, or (ii) approve the Business Combination. Generally,
the "fair price provision" will have been satisfied if the price
received by the holders of shares of Orbital Common Shares or
other class of voting stock is not less than the highest price
paid by the Related Person when acquiring any of its Orbital
Common Shares or other class of voting stock, as applicable,
within the two-year period preceding the earlier of the date of
the Business Combination or the date of the first public
announcement of the Business Combination.
Amendment to Governing Documents
Under the CBCA, any amendment to the articles generally requires
the approval by special resolution, which is a resolution passed
by a majority of not less than two-thirds of the votes cast by
shareholders who voted in respect of that resolution. Under the
CBCA, unless the articles or by-laws otherwise provide, the
directors may, by resolution, make, amend or repeal any by-law
that regulates the business or affairs of a corporation. Where
the directors make, amend or repeal a by-law, they are required
under the CBCA to submit the by-law, amendment or repeal to the
shareholders at the next meeting of shareholders, and the
shareholders may confirm, reject or amend the by-law, amendment
or repeal by an ordinary resolution, which is a resolution passed
by a majority of the votes cast by the shareholders who voted in
respect of the resolution.
The DGCL requires a vote of the corporation's board of directors
followed by the affirmative vote of a majority of the outstanding
stock of each class entitled to vote for any amendment to the
certificate of incorporation, unless a greater level of approval
is required by the certificate of incorporation. The Orbital
Restated Certificate provides that any amendment that relates to
(i) a director's liability to Orbital or its stockholders, (ii)
indemnification of directors, (iii) classification of the board
of directors or election or removal of directors, (iv) voting
requirements for approval of certain mergers, consolidations and
other business combinations, or (v) voting requirements for
amendment of any supermajority voting provisions, must be
approved by the affirmative vote of the holders of not less than
two-thirds of the outstanding shares entitled to vote for the
election of directors. The DGCL provides that if an amendment
alters the powers, preferences or special rights of a particular
class or series of stock so as to affect them adversely, that
class or series shall be given the power to vote as a class
notwithstanding the absence of any specifically enumerated power
in the certificate of incorporation. The Orbital Series A
Preferred Share which will be issued in connection with the
Arrangement has special voting powers. See "The Arrangement -
Description of Exchangeable Shares - Voting Rights."
The DGCL also states that the power to adopt, amend or repeal the
by-laws of a corporation shall be in the stockholders entitled to
vote, provided that the corporation in its certificate of
incorporation may confer such power on the board of directors in
addition to the stockholders. Under the Orbital Restated
Certificate the board of directors has been granted this power.
The Orbital By-laws are subject to adoption, amendment, repeal or
rescission by a majority of the authorized number of directors,
subject to the right of the stockholders entitled to vote with
respect thereto to alter and repeal by-laws adopted by the board
of directors.
Dissent Rights
The CBCA provides that shareholders of a CBCA corporation
entitled to vote on certain matters are entitled to exercise
dissent rights and to be paid the fair value of their shares in
connection therewith. The CBCA does not distinguish for this
purpose between listed and unlisted shares. Such matters include
(a) any amalgamation with another corporation (other than with
certain affiliated corporations); (b) an amendment to the
corporation's articles to add, change or remove any provisions
restricting or constraining the issue, transfer or ownership of
shares; (c) an amendment to the corporation's articles to add,
change or remove any restriction on the business or businesses
that the corporation may carry on or upon the powers that the
corporation may exercise; (d) a continuance under the laws of
another jurisdiction; (e) a sale, lease or exchange of all or
substantially all the property of the corporation other than in
the ordinary course of business; (f) a court order permitting a
shareholder to dissent in connection with an application to the
court for an order approving an arrangement proposed by the
corporation; or (g) certain amendments to the articles of a
corporation which require a separate class or series vote,
provided that a shareholder is not entitled to dissent if an
amendment to the articles is effected by a court order approving
a reorganization or by a court order made in connection with an
action for an oppression remedy. Under the CBCA, a shareholder
may, in addition to exercising dissent rights, seek an oppression
remedy for any act or omission of a corporation which is
oppressive, unfairly prejudicial to or that unfairly disregards a
shareholder's interest.
Under the DGCL, holders of shares of any class or series have the
right, in certain circumstances, to dissent from a merger or
consolidation by demanding payment in cash for their shares equal
to the fair value (excluding any appreciation or depreciation as
a consequence, or in expectation, of the transaction) of such
shares, as determined by agreement with the corporation or by an
independent appraiser appointed by a court in an action timely
brought by the corporation or the dissenters. The DGCL grants
dissenters' appraisal rights only in the case of mergers or
consolidations and not in the case of a sale or transfer of
assets or a purchase of assets for stock regardless of the number
of shares being issued. Further, no appraisal rights are
available for shares of any class or series listed on a national
securities exchange or designated as a national market system
security on the NASDAQ or held of record by more than 2,000
stockholders, unless the agreement of merger or consolidation
converts such shares into anything other than (a) stock of the
surviving corporation, (b) stock of another corporation which is
either listed on a national securities exchange or designated as
a national market system security on the NASDAQ or held of record
by more than 2,000 stockholders, (c) cash in lieu of fractional
shares, or (d) some combination of the above. In addition, such
rights are not available for any shares of the surviving
corporation if the merger did not require the vote of the
stockholders of the surviving corporation.
Oppression Remedy
The CBCA provides an oppression remedy that enables the court to
make any order, both interim and final, to rectify the matters
complained of, if the Director under the CBCA is satisfied upon
application by a complainant (as defined below) that: (i) any act
or omission of the corporation or an affiliate effects a result;
(ii) the business or affairs of the corporation or an affiliate
are or have been carried on or conducted in a manner; or (iii)
the powers of the directors of the corporation or an affiliate
are, have been or are threatened to be exercised in a manner
that, in any of the foregoing cases, is oppressive or unfairly
prejudicial to, or that unfairly disregards the interests of any
security holder, creditor, director or officer of the
corporation. A complainant includes: (a) a present or former
registered holder or beneficial owner of securities of a
corporation or any of its affiliates; (b) a present or former
officer or director of the corporation or any of its affiliates;
(c) the Director under the CBCA; and (d) any other person who in
the discretion of the court is a proper person to make such
application.
Because of the breadth of the conduct which can be complained of
and the scope of the court's remedial powers, the oppression
remedy is very flexible and is frequently relied upon to
safeguard the interests of shareholders and other complainants
with a substantial interest in the corporation. Under the CBCA,
it is not necessary to prove that the directors of a corporation
acted in bad faith in order to seek an oppression remedy.
Furthermore, the court may order the corporation to pay the
interim expenses of a complainant seeking an oppression remedy,
but the complainant may be held accountable for such interim
costs on final disposition of the complaint (as in the case of a
derivative action). The DGCL does not provide for a similar
remedy.
Derivative Action
Derivative actions may be brought in Delaware by a stockholder on
behalf of, and for the benefit of, the corporation. The DGCL
provides that a stockholder must aver in the complaint that he or
she was a stockholder of the corporation at the time of the
transaction of which he or she complains. A stockholder may not
sue derivatively unless he or she first makes demand on the
corporation that it bring suit and such demand has been refused,
unless it is shown that such demand would have been futile.
Under the CBCA, a complainant may apply to the court for leave to
bring an action in the name of and on behalf of a corporation or
any subsidiary, or to intervene in an existing action to which
any such body corporate is a party, for the purpose of
prosecuting, defending or discontinuing the action on behalf of
the body corporate. Under the CBCA, no action may be brought and
no intervention in an action may be made unless the court is
satisfied that (a) the complainant has given reasonable notice to
the directors of the corporation or its subsidiary of the
complainant's intention to apply to the court if the directors of
the corporation or its subsidiary do not bring, diligently
prosecute or defend or discontinue the action; (b) the
complainant is acting in good faith; and (c) it appears to be in
the interests of the corporation or its subsidiary that the
action be brought, prosecuted, defended or discontinued. A
complainant is not required to give security for costs in a
derivative action.
Shareholder Consent in Lieu of Meeting
Under the DGCL, unless otherwise provided in the certificate of
incorporation, any action required to be taken or which may be
taken at an annual or special meeting of stockholders may be
taken without a meeting if a consent in writing is signed by the
holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize such action
at a meeting at which all shares entitled to vote were present
and voted. The Orbital Restated Certificate does not permit any
action to be taken by written consent. Under the CBCA,
shareholder action without a meeting may only be taken by written
resolution signed by all shareholders who would be entitled to
vote thereon at a meeting.
Director Qualifications
A majority of the directors of a CBCA corporation generally must
be resident Canadians. The CBCA also requires that a corporation
whose securities are publicly traded must have not fewer than
three directors, at least two of whom are not officers or
employees of the corporation or its affiliates. The DGCL does
not have comparable requirements.
Fiduciary Duties of Directors
Directors of corporations incorporated or organized under the
CBCA and the DGCL have fiduciary obligations to the corporation
and its shareholders. Pursuant to these fiduciary obligations,
the directors must act in accordance with the so-called duties of
"due care" and "loyalty." Under the DGCL, the duty of care
requires that the directors act in an informed and deliberative
manner and inform themselves, prior to making a business
decision, of all material information available to them. The
duty of loyalty may be summarized as the duty to act in good
faith, not out of self-interest, and in a manner which the
directors reasonably believe to be in the best interests of the
stockholders.
Pursuant to section 122 of the CBCA, the duty of loyalty requires
directors of a CBCA corporation to act honestly and in good faith
with a view to the best interests of the corporation, and the
duty of care requires that the directors exercise the care,
diligence and skill that a reasonably prudent person would
exercise in comparable circumstances.
Indemnification of Officers and Directors
Under the CBCA and pursuant to the MDA By-Laws and the
Acquisition By-Laws, MDA and Acquisition may indemnify a director
or officer, a former director or officer or a person who acts or
acted at the corporation's request as a director or officer of a
body corporate of which MDA or Acquisition, as the case may be,
is or was a shareholder or creditor, and his or her heirs and
legal representatives (an "Indemnifiable Person"), against all
costs, charges and expenses, including an amount paid to settle
an action or satisfy a judgment, reasonably incurred by him or
her in respect of any civil, criminal or administrative action or
proceeding to which he or she is made a party by reason of being
or having been a director or officer of MDA or Acquisition, as
the case may be, or such body corporate, if: (a) he or she acted
honestly and in good faith with a view to the best interests of
MDA; and (b) in the case of a criminal or administrative action
or proceeding that is enforced by a monetary penalty, he or she
had reasonable grounds for believing that his or her conduct was
lawful. An Indemnifiable Person is entitled to such indemnity
from the corporation if he or she was substantially successful on
the merits in his or her defence of the action or proceeding and
fulfilled the conditions set out in (a) and (b), above. A
corporation may, with the approval of a court, also indemnify an
Indemnifiable Person in respect of an action by or on behalf of
the corporation or such body corporate to procure a judgment in
its favour, to which such person is made a party by reason of
being or having been a director or an officer of the corporation
or body corporate, if he or she fulfils the conditions set out in
(a) and (b), above.
The DGCL provides that a corporation may indemnify its present
and former directors, officers, employees and agents (each an
"indemnitee") against all reasonable expenses (including
attorneys' fees) and, except in actions initiated by or in the
right of the corporation, against all judgments, fines and
amounts paid in settlement in actions brought against them, if
such indemnitee acted in good faith and in a manner which he or
she reasonably believed to be in, or not opposed to, the best
interests of the corporation, and in the case of a criminal
proceeding, had no reasonable cause to believe that his or her
conduct was unlawful. The corporation shall indemnify an
indemnitee to the extent that he or she is successful on the
merits or otherwise in the defence of any claim, issue or matter
associated with an action. The Orbital Restated Certificate
provides for indemnification of directors or officers to the
fullest extent permitted by the DGCL.
The DGCL allows for the advance payment of an indemnitee's
expenses prior to the final disposition of an action, provided
that the indemnitee undertakes to repay any such amount advanced
if it is later determined that the indemnitee is not entitled to
indemnification with regard to the action for which such expenses
were advanced. The CBCA does not expressly provide for such
advance payment.
Director Liability
The DGCL provides that the charter of the corporation may include
a provision which limits or eliminates the liability of directors
to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided such liability
does not arise from certain proscribed conduct, including acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, breach of the duty of
loyalty, the payment of unlawful dividends or expenditure of
funds for unlawful stock purchases or redemptions or transactions
from which such director derived an improper personal benefit.
The Orbital Restated Certificate contains a provision limiting
the liability of its directors to the fullest extent permitted by
the DGCL. The CBCA does not permit any such limitation of a
director's liability.
Anti-takeover Provisions and Interested Stockholder Transactions
The DGCL prohibits, in certain circumstances, a "business
combination" between the corporation and an "interested
stockholder" within three years of the stockholder becoming an
"interested stockholder." An "interested stockholder" is a
holder who, directly or indirectly, controls 15% or more of the
outstanding voting stock or is an affiliate of the corporation
and was the owner of 15% or more of the outstanding voting stock
at any time within the prior three-year period. A "business
combination" includes a merger or consolidation, a sale or other
disposition of assets having an aggregate market value of 10% or
more of the consolidated assets of the corporation or the
aggregate market value of the outstanding stock of the
corporation and certain transactions that would increase the
interested stockholder's proportionate share ownership in the
corporation. This provision does not apply where: (i) either the
business combination or the transaction which resulted in the
stockholder becoming an interested stockholder is approved by the
corporation's board of directors prior to the date the interested
stockholder acquired such 15% interest; (ii) upon the
consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder
owned at least 85% of the outstanding voting stock of the
corporation excluding, for the purpose of determining the number
of shares outstanding, shares held by persons who are directors
and also officers and by employee stock plans in which
participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered, (iii)
the business combination is approved by a majority of the board
of directors and the affirmative vote of two-thirds of the
outstanding votes entitled to be cast by disinterested
stockholders at an annual or special meeting; (iv) the
corporation does not have a class of voting stock that is listed
on a national securities exchange, authorized for quotation on an
inter-dealer quotation system of a registered national securities
association, or held of record by more than 2,000 stockholders
unless any of the foregoing results from action taken, directly
or indirectly, by an interested stockholder or from a transaction
in which a person becomes an interested stockholder, or (v) the
corporation has opted out of this provision. Orbital has not
opted out of this provision.
The CBCA does not contain a comparable provision with respect to
"business combinations" however policies of certain Canadian
securities regulatory authorities, including Policy 9.1 of the
Ontario Securities Commission ("Policy 9.1"), contain
requirements in connection with related party transactions. A
related party transaction means, generally, any transaction by
which an issuer, directly or indirectly, acquires or transfers an
asset or acquires or issues treasury securities or assumes or
transfers a liability from or to, as the case may be, a related
party by any means in any one transaction or any combination of
transactions. "Related party" is defined in Policy 9.1 to
include directors, senior officers and holders of at least 10% of
the voting securities of the issuer.
Policy 9.1 requires more detailed disclosures in the proxy
material sent to security holders in connection with a related
party transaction. Where the value of the asset, treasury
security or the principal amount of the liability, subject to the
related party transactions exceeds 25% of the issuer's market
capitalization, subject to certain exceptions, Policy 9.1
requires the preparation of a formal valuation of the subject
matter of the related party transaction and any non-cash
consideration offered therefor and the inclusion of a summary of
the valuation in the proxy material. For related party
transactions of such value, Policy 9.1 also requires, subject to
certain exemptions, that the minority shareholders of the issuer
approve the transaction, by either a simple majority or two-
thirds of the votes cast, depending upon the circumstances.
Shareholder Protection Rights Plan
MDA has a Shareholder Protection Rights Plan. The Shareholder
Protection Rights Plan in certain specific circumstances,
including the event of a hostile takeover bid being made for MDA,
provides that each MDA Common Shareholder is entitled to acquire
MDA Common Shares, or in certain circumstances common shares of
the bidder, at a 50% discount from the then prevailing market
price. The MDA Board has waived the provisions of the
Shareholder Protection Rights Plan to permit the transactions
contemplated by the Arrangement to be completed without
triggering such provisions.
Orbital does not currently have a plan similar to the Shareholder
Protection Rights Plan, although plans comparable to the
Shareholder Protection Rights Plan are permitted by the DGCL and
may be adopted by a board of directors without shareholder
approval. Orbital may in the future adopt a shareholder rights
plan.
DISSENTING RIGHTS
Pursuant to the Interim Order, MDA Shareholders and MDA 1988
Optionholders have been provided with the right to dissent from
the Arrangement Resolution under and in compliance with
section 190 of the CBCA and the Interim Order, reprinted in their
entireties as Appendices "D" and "G", respectively to this Proxy
Circular. The following summary is qualified in its entirety by
the Interim Order and the provisions of section 190 of the CBCA.
Pursuant to the Interim Order, a MDA Shareholder who dissents
from the Arrangement Resolution in compliance with section 190 of
the CBCA and the Interim Order (a "Dissenting MDA Shareholder")
will be entitled, in the event the Arrangement becomes effective,
to be paid by MDA the fair value of the MDA Common Shares held by
such Dissenting MDA Shareholder determined as of the close of
business on the day before the Arrangement Resolution is adopted.
Pursuant to the Interim Order and the Plan of Arrangement, any
MDA 1988 Optionholder who dissents from the Arrangement
Resolution in accordance with section 190 of the CBCA and the
Interim Order (a "Dissenting MDA 1988 Optionholder"), shall be
deemed, pursuant to the Plan of Arrangement and the Interim
Order, to have exercised the MDA 1988 Options with respect to
which he or she is exercising the dissent. Such Dissenting MDA
1988 Optionholder, will be entitled, if the Arrangement becomes
effective, to be paid the fair value of the MDA Common Shares
deemed to have been issued upon exercise, set-off by the exercise
price. The fair value shall be determined as of the close of
business on the day before the Arrangement Resolution is adopted.
A MDA Shareholder or MDA 1988 Optionholder who wishes to dissent
must send to MDA, no later than the termination of the Special
Meeting (or any adjournment thereof), written objection to the
Arrangement Resolution (a "Dissent Notice") and must not vote for
the Arrangement Resolution. The filing of a Dissent Notice does
not deprive a MDA Shareholder or a MDA 1988 Optionholder, as the
case may be, of the right to vote. The CBCA does not provide,
and MDA will not assume, that a vote against the Arrangement
Resolution or an abstention constitutes a Dissent Notice but a
MDA Shareholder or a MDA 1988 Optionholder need not vote his or
her MDA Common Shares or the votes to be exercised with respect
to his or her MDA 1988 Options against the Arrangement Resolution
in order to dissent. Under the CBCA, there is no right of
partial dissent and, accordingly, a Dissenting MDA Shareholder or
a Dissenting MDA 1988 Optionholder, as the case may be, may only
dissent with respect to all MDA Common Shares or all MDA Common
Shares to which he or she is entitled under all MDA 1988 Options,
respectively, held by him or her on behalf of any one beneficial
owner and which are registered in the name of the Dissenting MDA
Shareholder or Dissenting MDA 1988 Optionholder, as the case may
be.
MDA is required, within 10 days after the Arrangement Resolution
is adopted, to notify each MDA Shareholder or MDA 1988
Optionholder or MDA 1988 Optionholder who has filed a Dissent
Notice that the Arrangement Resolution has been adopted, but such
notice is not required to be sent to any MDA Shareholder who
voted for the Arrangement Resolution or who has withdrawn his or
her Dissent Notice.
A Dissenting MDA Shareholder or a Dissenting MDA 1988
Optionholder must then, within 20 days after receipt of notice
that the Arrangement Resolution has been adopted or, if he or she
does not receive such notice, within 20 days after he or she
learns that the Arrangement Resolution has been adopted, send to
MDA a written notice (a "Payment Demand") containing his or her
name and address, the number of MDA Common Shares in respect of
which he or she dissents, and a demand for payment of the fair
value of such MDA Common Shares. Within 30 days after sending a
Payment Demand, the Dissenting MDA Shareholder must send to the
MDA transfer agent the certificates representing the MDA Common
Shares in respect of which he or she dissents. A Dissenting MDA
1988 Optionholder shall be deemed to have sent those certificates
to the MDA transfer agent by reason of the deemed exercise of the
MDA 1988 Option. A Dissenting MDA Shareholder or a Dissenting
MDA 1988 Optionholder who fails to send to MDA, within the
appropriate time frame, certificates representing the MDA Common
Shares in respect of which he or she dissents, forfeits his or
her right to make a claim in accordance with the provisions of
section 190 of the CBCA. The MDA transfer agent will endorse on
share certificates received from a Dissenting MDA Shareholder a
notice that the holder is a Dissenting MDA Shareholder and will
forthwith return the share certificates to the Dissenting MDA
Shareholder.
On sending a Payment Demand to MDA, a Dissenting MDA Shareholder
or a Dissenting MDA 1988 Optionholder ceases to have any rights
as a MDA Shareholder or MDA 1988 Optionholder, other than the
right to be paid the fair value of his or her MDA Common Shares
as determined under section 190 of the CBCA, except where:
(a) the Dissenting MDA Shareholder or a Dissenting MDA 1988
Optionholder withdraws his or her Payment Demand before MDA
makes an offer to him or her pursuant to the CBCA;
(b) MDA fails to make an offer as hereinafter described and the
Dissenting MDA Shareholder or the Dissenting MDA 1988
Optionholder withdraws his or her Payment Demand; or
(c) the Arrangement does not proceed;
in which case his or her rights as a MDA Shareholder or a MDA
1988 Optionholder, as the case may be, are reinstated as of the
date he or she sent the Payment Demand.
MDA is required, not later than seven days after the later of the
Effective Date or the date on which MDA received the Payment
Demand of a Dissenting MDA Shareholder or a Dissenting MDA 1988
Optionholder, as the case may be, to send to each such dissenting
person who has sent a Payment Demand a written offer to pay
("Offer to Pay") for his or her MDA Common Shares an amount
considered by the MDA Board to be the fair value thereof, on the
close of business on the day before the Arrangement Resolution is
adopted, accompanied by a statement showing the manner in which
the fair value was determined. Every Offer to Pay must be on the
same terms. MDA must pay for the MDA Common Shares of a
Dissenting MDA Shareholder or a Dissenting MDA 1988 Optionholder
within 10 days after an Offer to Pay made as aforesaid has been
accepted by a Dissenting MDA Shareholder or a Dissenting MDA 1988
Optionholder, but any such Offer to Pay lapses if MDA does not
receive an acceptance thereof within 30 days after the Offer to
Pay has been made.
If MDA fails to make an Offer to Pay for a Dissenting MDA
Shareholder's or a Dissenting MDA 1988 Optionholder's MDA Common
Shares, or if a Dissenting MDA Shareholder or a Dissenting MDA
1988 Optionholder fails to accept an Offer to Pay which has been
made, MDA may, within 50 days after the Effective Date or within
such further period as a court may allow, apply to a court having
jurisdiction in the place where MDA has its registered office or
in the Province where such Dissenting MDA Shareholder or
Dissenting MDA 1988 Optionholder resides if MDA carries on
business in that province, to fix a fair value for the MDA Common
Shares of Dissenting MDA Shareholders or Dissenting MDA 1988
Optionholders. If MDA fails to apply to a court within such
period, a Dissenting MDA Shareholder or Dissenting MDA 1988
Optionholder may apply to a court for the same purpose within a
further period of 20 days or within such further period as a
court may allow. A Dissenting MDA Shareholder or Dissenting MDA
1988 Optionholder is not required to give security for costs in
such an application.
Upon an application to a court, all Dissenting MDA Shareholders
and all Dissenting MDA 1988 Optionholders whose MDA Common Shares
have not been purchased by MDA will be joined as parties and
bound by the decision of the court, and MDA will be required to
notify each affected Dissenting MDA Shareholder and Dissenting
MDA 1988 Optionholder of the date, place and consequences of the
application and of his or her right to appear and be heard in
person or by counsel. Upon any such application to a court, the
court may determine whether any other Dissenting MDA Shareholder
or Dissenting MDA 1988 Optionholder should be joined as a party,
and the court will then fix a fair value for the MDA Common
Shares of all Dissenting MDA Shareholders or Dissenting MDA 1988
Optionholders who have not accepted an Offer to Pay. The final
order of a court will be rendered against MDA in favour of each
such Dissenting MDA Shareholder and Dissenting MDA 1988
Optionholder and for the amount of the fair value of his or her
MDA Common Shares as fixed by the court. The court may, in its
discretion, allow a reasonable rate of interest on the amount
payable to each such Dissenting MDA Shareholder and Dissenting
MDA 1988 Optionholder from the Effective Date until the date of
payment.
The above is only a summary of the dissenting shareholder
provisions of the CBCA and the Interim Order, which are technical
and complex. It is suggested that any MDA Shareholder or MDA
1988 Optionholder wishing to avail himself or herself of his or
her rights under those provisions seek his or her own legal
advice as failure to comply strictly with the provisions of the
CBCA and the Interim Order may prejudice his or her right of
dissent. For a general summary of certain income tax
implications to a Dissenting MDA Shareholder, see "Income Tax
Considerations to MDA Shareholders and Optionholders - Canadian
Federal Income Tax Considerations - Dissenting MDA Shareholders,
and "- Dissenting MDA 1988 Optionholders" and "- United States
Federal Income Tax Considerations - Dissenting Persons."
AVAILABLE INFORMATION
Orbital is subject to the informational requirements of the 1934
Securities Exchange Act, and in accordance therewith files
reports and other information with the SEC. Such reports and
other information filed with the SEC can be inspected and copied
at the public reference facilities maintained by the SEC at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's Regional Offices at Seven World Trade Center, 13th Floor,
New York, New York 10048 and Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material also can be obtained from the Public Reference
Section of the SEC, Washington, D.C. 20549 at prescribed rates.
In addition, material filed by Orbital can be inspected at the
offices of The Nasdaq Stock Market, Reports Section, 1735 K
Street N.W., Washington, D.C., 20006.
LEGAL MATTERS
Certain legal matters in connection with the Arrangement will be
passed upon by Farris, Vaughan, Wills & Murphy, Vancouver and
Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York on
behalf of MDA and by Ropes & Gray, Boston, Massachusetts and
Davies, Ward & Beck, Toronto on behalf of Orbital and
Acquisition.
APPROVAL OF PROXY CIRCULAR BY MDA BOARD OF DIRECTORS
The contents of this Proxy Circular and the sending thereof to
MDA Shareholders and MDA 1988 Optionholders has been approved by
the MDA Board.
DATED at Richmond, British Columbia, this 6th day of October,
1995.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ Robert B. Wallis
ROBERT B. WALLIS, Secretary
ACCOUNTANTS' CONSENT
The Board of Directors
Orbital Sciences Corporation
We consent to the incorporation by reference in the Registration
Statement on Form S-8 dated August 31, 1995 of Orbital Sciences
Corporation of our report dated May 25, 1995, except as to note
8(d) which is at September 29, 1995, with respect to the
consolidated balance sheets of MacDonald, Dettwiler and
Associates Ltd. as at March 31, 1995 and 1994, and the related
consolidated statements of earnings, retained earnings and
changes in financial position for each of the years in the three
year period ended March 31, 1995, which report appears in the
Form 8-K of Orbital Sciences Corporation dated October 19, 1995.
(Signed) KPMG Peat Marwick Thorne
Chartered Accountants
Vancouver, Canada
October 19, 1995
