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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
/X/
For the fiscal year ended December 31, 1995
or
/ /
Transition report pursuant to Section 13 or 15(d) of the Securities for the
transition period from __ to __
Commission file number 0-18287
ORBITAL SCIENCES CORPORATION
21700 ATLANTIC BOULEVARD 06-1209561
DULLES, VIRGINIA 20166 (I.R.S. Employer I.D. No.)
(Address of principal executive offices)
(703) 406-5000
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 (listed on The Nasdaq National Market System)
------------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates
of the registrant based on the closing price as reported on the Nasdaq Stock
Market on March 20, 1996 was approximately $350,131,005.
As of March 20, 1996, 25,935,630 shares of the registrant's Common
Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders for fiscal year
ended December 31, 1995 (the "Annual Report") are incorporated by reference in
Parts I and II of this Report. Portions of the registrant's definitive Proxy
Statement dated March 25, 1996 (the "Proxy Statement") are incorporated by
reference in Part III of this Report.
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ORBITAL SCIENCES CORPORATION
INDEX TO
ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED DECEMBER 31, 1995
<TABLE>
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PART I PAGE
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<S> <C> <C>
ITEM 1 BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . 12
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . 12
PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY . . . . . . . . . . . 14
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF . . . . . . . . . . 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . 14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS . . . . . . . 14
PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . 14
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . 15
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . 15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . 15
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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ITEM 1. BUSINESS
BACKGROUND
Orbital Sciences Corporation (together with its subsidiaries,
"Orbital" or the "Company") is a space technology and satellite services
company that designs, manufactures, operates and markets a broad range of
space-related products and services. Orbital's products and services are
grouped into four categories: Launch Systems, Space and Electronics Systems,
Ground Systems and Software, and Communications and Information Services.
Launch Systems include space and suborbital launch vehicles, and orbit transfer
and other advanced vehicles; Space and Electronics Systems include satellites,
spacecraft platforms, space sensors and instruments, space payloads and
experiments, as well as advanced electronics and data management systems;
Ground Systems and Software products include commercial satellite remote
sensing ground station and related information processing software, automated
aeronautical information and air traffic management systems, defense system
software and network systems consulting services; and Communications and
Information Services include satellite-based two-way mobile data communications
systems and services, satellite-based navigation and communications products
and remote sensing services.
Orbital was incorporated in Delaware in 1987 to consolidate the
assets, liabilities and operations of Space Systems Corporation (formerly named
Orbital Sciences Corporation) ("SSC") and Orbital Research Partners, L.P. (the
"Partnership") through an exchange offer to the Partnership and to the
stockholders of SSC (the "Consolidation"). As a result of the consummation of
the Consolidation in 1988, SSC became a wholly owned subsidiary of Orbital, and
Orbital acquired substantially all the assets and liabilities of the
Partnership. The Company acquired Space Data Corporation ("Space Data") in
1988, thereby expanding its product lines and increasing its vertical
integration in production and testing. In late 1992, SSC and Space Data were
merged into Orbital, with the Company being the surviving corporation. In
September 1993, Orbital acquired all the assets of the Applied Science
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 enhanced Orbital's
satellite system and subsystem development and production capabilities and
expanded Orbital's existing product lines by adding various sophisticated
electronics products. Magellan designs, manufactures and markets hand-held
receivers for Global Positioning System ("GPS") satellite-based navigation and
positioning for commercial and consumer markets, along with portable satellite
communications equipment. In November 1995, Orbital acquired MacDonald,
Dettwiler and Associates, Ltd. ("MDA"), a leading supplier of commercial space
remote sensing ground stations and related information processing software
headquartered in Vancouver, British Columbia. MDA complements Orbital's
satellite information collection businesses and has strengthened Orbital's
ability to offer a broader range of space-based information services.
DESCRIPTION OF ORBITAL'S PRODUCTS AND SERVICES
The space products and services provided by the Company are grouped
into four categories: Launch Systems, Space and Electronics Systems, Ground
Systems and Software, and Communications and Information Services. Orbital's
business is not seasonal to any significant extent.
LAUNCH SYSTEMS
The Company's Launch Systems Group's products include space and
suborbital launch vehicles and orbit transfer and other advanced vehicles.
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SPACE LAUNCH VEHICLES. The Company has developed three space launch
vehicles: the Pegasus(R) launch vehicle; the Pegasus XL(TM) launch vehicle;
and the Taurus(R) launch vehicle. Orbital's Pegasus and Pegasus XL vehicles
are launched from beneath a modified large aircraft such as the Company's
leased Lockheed L-1011 to deploy satellites weighing up to 1,000 pounds into
low-Earth orbit. Through December 1995, the Company had 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. Prior to its first
successful flight in March 1996, the modified Pegasus XL, developed to deploy
heavier satellites into orbit, had two unsuccessful flights, one occurring in
June 1994 and the other in June 1995. The first Pegasus XL failure was caused
by inaccurate aerodynamic modeling of the vehicle. The second Pegasus XL
failure resulted from human assembly error involving the improper installation
of a small component that prevented the Stage 1/Stage 2 interstage from
properly separating from Stage 2. Following a comprehensive review of design,
assembly, test and operations procedures, the Pegasus XL returned to flight on
March 8, 1996, successfully launching a satellite for the U.S. Air Force to its
targeted orbit.
Customers for Pegasus launch vehicles include the National
Aeronautics and Space Administration ("NASA"), the U.S. Air Force, the Defense
Advanced Research Projects Agency ("DARPA"), the Ballistic Missile Defense
Organization ("BMDO"), Spain's National Institute of Aerospace Technology, the
Company's affiliated partnership, ORBCOMM Global L.P. ("ORBCOMM Global") and
the Company's wholly owned subsidiary, Orbital Imaging Corporation
("ORBIMAGE").
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 1994, Orbital successfully launched the first Taurus vehicle,
deploying two satellites for DARPA. The Company received several new Taurus
orders in 1995, including a commercial launch for Ball Corporation ("Ball")
carrying a U.S. Navy satellite scheduled for late 1996, a launch for the U.S.
Air Force in 1997, and options for up to 11 Taurus missions pursuant to a
contract award under NASA's Med-Lite program. The Taurus mission for Ball is
also expected to launch two satellites for ORBCOMM Global as a secondary
payload.
During 1995, Orbital and Rockwell International Corporation
("Rockwell") teamed together to develop and construct the X-34 reusable launch
vehicle in a project to be jointly funded by Orbital, Rockwell and NASA. The
X-34 was intended as a next-generation space launch vehicle that would
significantly reduce the costs of placing a satellite in orbit. Following an
assessment that the design of the vehicle would not achieve the economic and
performance goals of the project, development efforts on the vehicle were
terminated in early 1996. Orbital continues to explore new, longer-term
research and development opportunities for more affordable and flexible space
launch vehicles.
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. The Company'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. The Company
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 the Company's suborbital launch vehicles to
launch scientific and other payloads and for defense-related applications such
as target and interceptor experiments. Primary customers of the Company's
suborbital launch vehicles include the U.S. Army, the U.S. Navy and BMDO.
Orbital's primary programs in 1995 for suborbital launch vehicles
and related systems included the STORM contract pursuant to which Orbital
provided ballistic and maneuvering tactical target suborbital vehicles for use
with the PATRIOT and Theater High Altitude Area Defense Interceptor
anti-missile defense systems for target and interceptor experiments for the
U.S. Army, the Navy LEAP
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contract with BMDO and the High-Gear contract with the Massachusetts Institute
of Technology - Lincoln Laboratory pursuant to which Orbital provided
suborbital vehicles to serve as targets for U.S. Air Force testing of
anti-missile defense systems. Orbital conducted ten suborbital launches in
1995, all of which were successful. Since January 1993, the Company has
conducted a total of 26 launches of suborbital vehicles, all of which were
successful.
SPACE AND ELECTRONICS SYSTEMS
The Company's Space and Electronics Systems Group's products enable
Orbital to provide its customers fully integrated, low-cost space systems,
networks and related services. The Company's most significant Space and
Electronics Systems products are satellite systems and payloads, space sensors
and instruments, defense electronics and sensors, and transit management
systems.
The Company designs and produces small and medium class satellites
for scientific, military and commercial applications. The Company's small
satellite platforms such as PegaStar(TM), MicroStar(TM) and PicoStar(TM) are
designed and produced to be launched by the Pegasus or Taurus launch vehicle.
The PegaStar spacecraft is a general purpose spacecraft that has successfully
performed one mission for the U.S. Air Force measuring space radiation and
carrying out related experiments. It will also be used for certain of the
Company's satellite-based remote sensing systems, such as the SeaStar(TM) ocean
and land surface environmental monitoring satellite system. Orbital's
MicroStar spacecraft platform, which is placed into orbit by the Pegasus launch
vehicle, is designed for use in ORBCOMM Global's satellite-based two-way data
communications network (the "ORBCOMM System") and also for a variety of small
space science and remote sensing projects, including some of those being
pursued by ORBIMAGE. In April 1995, the first three MicroStar spacecraft were
deployed, two for the ORBCOMM System, and the other for ORBIMAGE to monitor
lightning and severe weather patterns for NASA. Customers for the Company's
small spacecraft include NASA, the U.S. Air Force and ORBCOMM Global. In late
1995, DARPA selected the Company for a contract to develop a specialized
MicroStar communications satellite.
Orbital's medium class satellites, such as NASA's TOPEX/Poseidon,
NASA's Upper Atmosphere Research satellite, and the National Oceanic and
Atmospheric Administration's 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 Earth imaging information. 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 the
early universe's radiation. The FUSE spacecraft is presently scheduled for
launch in 1998.
In addition, Orbital designs and manufactures satellite command and
data handling, attitude control and structural subsystems for a variety of
government and commercial customers, and provides a broad range of spacecraft
design and engineering services as well as specialized analytical engineering
services for NASA, the Department of Defense ("DoD"), the Department of Energy
and other customers. Orbital provided engineering support and services for the
first repair mission for the orbiting Hubble Space Telescope, and will provide
similar services on a second repair mission currently scheduled for early 1997.
The Company also develops, manufactures and markets defense
electronics, including advanced avionics 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 and 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,
and various DoD prime contractors and foreign governments. The Company 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, the
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Company 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-4, F-14,
F-16, F-18 and F-22 and the LAMPS Helicopter.
In addition, Orbital produces electronics and data management
systems that have been applied to the development and manufacture of
"intelligent transportation systems," primarily for metropolitan mass transit
operators, that provide GPS-based tracking of vehicles and allow for
communications and schedule management. Customers for Orbital's intelligent
transportation systems include several metropolitan mass transit operators,
such as the Chicago Transit Authority.
Orbital's Pomona, California operations produce satellite-borne
scientific sensors and instruments, such as atmospheric ozone monitoring
instruments and environmental sensors. For example, the Total Ozone Mapping
Spectrometer ("TOMS") instrument is being produced by the Company for launch on
a Pegasus vehicle for NASA. TOMS measures 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 defense
applications. These products include an atmospheric monitoring system for use
on the Space Station called the Atmospheric Composition Monitoring Assembly
("ACMA"). The ACMA, developed under a contract with The Boeing Company, will
measure various atmospheric gases in the crew's living quarters on the Space
Station for the purpose of ensuring a healthy environment for astronauts. The
Company also produces the Central Atmospheric Monitoring System for the U.S.
Navy for use on submarines.
GROUND SYSTEMS AND SOFTWARE
As a result of the Company's November 1995 acquisition of MDA,
Orbital's Ground Systems and Software Group is a leading supplier of commercial
satellite remote sensing ground stations and a provider of advanced
space-qualified software, air navigation systems, and network communications
training and consulting services. The Company's defense electronics systems
have also expanded to include software-intensive systems designed for naval
operations, artillery command and control, radar deception systems and
logistics support.
The Company develops, provides and upgrades commercial satellite
remote sensing ground stations and related information processing software. Of
the 27 major non-military satellite ground stations around 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 and process data from
the eight major civil and commercial Earth observation satellites currently in
operation. In 1995, the Company completed the ground station and mission
control and management systems for the Canadian Space Agency's RADARSAT-1
remote sensing satellite that was launched successfully in November 1995. MDA
also develops and markets software that generates and processes imagery and
mapping products from satellites and airborne sensors. Customers for the
Company's ground stations and Earth information systems include the European
and Canadian Space Agencies as well as Canadian and foreign government
customers.
The Company's aviation systems products include automated aeronautical
information and air traffic management systems. The Company has developed the
Pegasus-AIS(TM) (not related to the Pegasus launch vehicle), an off-the shelf,
automated aeronautical information management system that delivers weather and
route information directly to a pilot by computer. These systems are designed
to address a growing trend toward commercialization and automation of air
traffic control systems. Faster and less expensive to operate than traditional
manual systems, automated aeronautical information systems provide pilots and
other users with aeronautical and meteorological information on a timely basis.
Customers for the Company's aviation systems products include the military and
civil aviation authorities in various countries such as Australia, Belgium,
Canada, Norway and Switzerland.
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The Ground Systems and Software Group also provides computer network
communications consulting, training and other services to network equipment
vendors and telecommunications carriers in Canada, the United States, Australia
and Asia.
COMMUNICATIONS AND INFORMATION SERVICES
Orbital's Communications and Information Services include products
and services provided by Magellan, the Company's majority owned subsidiary
Orbital Communications Corporation ("ORBCOMM"), and ORBIMAGE. Magellan
manufactures GPS satellite-based navigation and communications products for
commercial and consumer markets including commercial and recreational marine
and aviation markets, outdoor recreational users such as hunters and hikers,
and professional users such as geologists, geographers, surveyors, natural
resource managers and contractors. ORBCOMM and ORBIMAGE are developing
satellite-based services to address the expanding markets for global two-way
data communications and information derived from remote sensing of the
atmosphere, oceans and land surfaces. The ORBCOMM and ORBIMAGE systems will
require significant capital investments and market development. Although the
Company believes the long-term profit potential of such service businesses,
developed and supported by the Company's proprietary product technologies, is
significant, there can be no assurance that the Company will be able to
successfully develop these businesses.
SATELLITE-BASED NAVIGATION AND COMMUNICATIONS PRODUCTS. The
Company's Magellan subsidiary designs, manufactures and markets hand-held GPS
navigators that provide users with precise positioning and location
information. The need for positioning and location information is central to a
broad range of personal and professional activities including marine
navigation, outdoor recreation (e.g., hiking and hunting), surveying and
general aviation. Magellan focuses its research, design and engineering
activities on the development of GPS navigators that are reliable, portable,
easy to use and highly affordable, targeting the growing recreational market.
During 1995, Magellan introduced the low-cost GPS 2000(TM) personal navigation
unit that is widely distributed in mass merchandising outlets and mail order
catalogs. Magellan has also started production of the microCOM-M(TM), a small,
lightweight and low-priced INMARSAT satellite telephone for worldwide voice,
fax and data communications. Magellan is also expected to be a significant
supplier of personal communicators for the ORBCOMM System and to be involved in
the continued development of satellite-based communications and tracking
technology that is compatible with the ORBCOMM System.
ORBCOMM COMMUNICATIONS SERVICES. The ORBCOMM System is designed to
provide virtually continuous mobile data communications coverage over much of
the Earth's surface. Under this system, subscribers are able to use
inexpensive communicators to send and receive short messages, high priority
alerts and other information, such as the location and condition of
automobiles, trucks, shipping vessels and other remote assets. The Company
expects that the ability to send and receive 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-based communications systems by providing
relatively low-cost coverage in areas outside the range of such tower-based
systems.
The global ORBCOMM System design consists of a constellation of
small low-Earth orbit satellites, a satellite control center operating and
positioning the satellites, the mobile communicators used by subscribers to
transmit and receive messages to and from the satellites, and the gateways that
transmit and control the flow of data and message communications and other
information for the system. A gateway generally will consist of gateway Earth
stations and a software-based gateway message switching system that processes
the message traffic and provides the interconnection to terrestrial networks.
The U.S. gateway, for example, includes four gateway Earth stations located in
New York, Washington, Arizona and Georgia with the message switching system
located at ORBCOMM Global's network operations center in
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Dulles, Virginia. Gateways are planned to be owned and operated by ORBCOMM
Global licensees in strategic locations around the world.
In April 1995, the Company successfully launched the first two
satellites that will comprise the ORBCOMM System constellation. Certain
technical problems with both spacecraft resulted in a delay of several months
in the completion of on-orbit testing. The Company believes that it has
identified and implemented the appropriate corrective actions with respect to
these problems, and does not believe that they will impact continued
development of the ORBCOMM System. During 1995, in addition to the launch of
the first two satellites, the Company completed construction and testing of
various network management systems including the satellite control center and
the network operations center, and substantially completed the four United
States gateway Earth stations. Prototype communicators also transmitted
hundreds of thousands of messages. Following comprehensive testing of the
space and ground network during 1995, intermittent commercial service in the
United States commenced in February 1996. Several consumer electronics
manufacturers are developing communicators that monitor fixed assets and
hand-held communicators for personal use for shipment during 1996, and the
Company expects that the number of users of the ORBCOMM System will grow
significantly as subscriber unit production rates increase.
The two ORBCOMM System satellites currently in orbit and the U.S.
gateway provide communications availability in the United States approximately
10% of each 24-hour period, with maximum outages of approximately nine hours.
With the launch of additional satellites, such as the two scheduled to be
launched as a secondary payload on a Taurus mission scheduled for late 1996,
communications availability will also increase. The Company expects that, with
a planned constellation of at least 26 satellites and appropriately situated
gateways, the ORBCOMM System will provide communications availability generally
exceeding 95% of each 24-hour period in the United States and other temperate
zones in the Northern and Southern hemispheres and exceeding 75% of each
24-hour period in the equatorial region. Equatorial region availability could
be improved to generally exceed 90% with an additional plane of eight
satellites. Outside the United States, the ORBCOMM System will only be
available in countries and regions where appropriate licenses have been
obtained and where there is a gateway that can serve the applicable market.
DEVELOPMENT AND FINANCING. In 1993, ORBCOMM and Teleglobe Mobile
Partners ("Teleglobe Mobile"), an affiliate of Teleglobe Inc., formed a
partnership, ORBCOMM Global (formerly known as ORBCOMM Development Partners,
L.P.) for the two-phased design, development, construction, integration,
testing and operation of the ORBCOMM System. ORBCOMM and Teleglobe Mobile also
formed two marketing partnerships, ORBCOMM USA, L.P. ("ORBCOMM USA") and
ORBCOMM International Partners, L.P. ("ORBCOMM International"), each with the
exclusive right to market the ORBCOMM System in the United States and
internationally, respectively. ORBCOMM has retained control over applicable
licenses issued by the Federal Communications Commission ("FCC"), consistent
with FCC regulations.
Also in 1993, Orbital entered into an agreement with ORBCOMM Global
whereby Orbital had responsibility for the overall design, construction and
integration for the first phase of the ORBCOMM project, which was completed
during 1995. In September 1995, Orbital and ORBCOMM Global executed the
ORBCOMM System Procurement Agreement (the "Procurement Agreement"), which
provides that Orbital will, among other things, construct and launch an
additional 26 satellites, and construct an additional eight satellites. Under
the Procurement Agreement, Orbital is providing satellites and launch services
on a fixed-price basis. Consistent with industry practice for many launch
contracts, the Procurement Agreement contains certain performance incentives
with respect to the satellites and their launch.
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). ORBCOMM and Teleglobe Mobile are each 50% general
partners in
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ORBCOMM Global, with the result that ORBCOMM and Teleglobe Mobile share equal
responsibility for the operational and financial affairs of ORBCOMM Global and
the approval of both ORBCOMM and Teleglobe Mobile is necessary for ORBCOMM
Global to act. ORBCOMM holds indirectly a 51% participating interest in
ORBCOMM USA and Teleglobe Mobile holds indirectly a 51% participating interest
in ORBCOMM International, with the result that ORBCOMM acting alone can
generally control the operational and financial affairs of ORBCOMM USA, and
Teleglobe Mobile acting alone can generally control the operational and
financial affairs of ORBCOMM International.
In September 1995, Teleglobe Mobile exercised its option to
participate in the second phase of the ORBCOMM System and, accordingly, Orbital
and Teleglobe Mobile's total capital commitments to ORBCOMM Global are
approximately $75 million and $85 million, respectively, of which approximately
$62 million and $35 million, respectively, had been contributed through
December 31, 1995. Although construction of the first phase of the ORBCOMM
System is completed, development and construction of the second phase is in an
early stage, and the actual cost of the system and the amount and structure of
anticipated investment in ORBCOMM Global may vary significantly from current
estimates. Orbital expects that the total estimated required capital for the
ORBCOMM System will be approximately $225-$250 million. ORBCOMM Global intends
to seek additional equity contributions and/or bank or other debt financing to
fund the remaining requirements. ORBCOMM Global already obtained asset-based
financing of $5 million to fund a portion of its development costs for the
first phase of the ORBCOMM System. The Company has guaranteed ORBCOMM
Global's outstanding indebtedness, and may be required to guarantee or provide
credit support in connection with additional indebtedness incurred by ORBCOMM
Global.
In the event that ORBCOMM Global does not otherwise receive the
necessary capital, full development and implementation of the ORBCOMM System
may be delayed, significantly restricted or possibly abandoned, and the Company
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 constructed and operational, 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 (through
ORBCOMM) has a 50% participating interest in ORBCOMM Global, Orbital expects to
recognize its pro rata share of ORBCOMM Global profits and losses.
As of March 1, 1996, certain officers and employees of ORBCOMM
Global and Orbital held options to acquire 555,100 shares of ORBCOMM's common
stock (or approximately 12 percent of ORBCOMM's outstanding common stock) at
option exercise prices ranging from $1.50 to $17.00 per share. On an annual
basis, holders of ORBCOMM common stock acquired on exercise of these options
may, subject to certain conditions, require ORBCOMM to purchase such ORBCOMM
common stock at its then fair market value. As of March 1, 1996, there were
52,286 shares of ORBCOMM common stock outstanding that were acquired in
connection with option exercises by current or former ORBCOMM and Orbital
employees.
REGULATORY APPROVALS. In October 1994, ORBCOMM became the first
company to be awarded full 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 was
operational. At the end of the seventh year of the ten-year term, a renewal
application must be filed with the FCC. As with any such license, the ORBCOMM
System license may be revoked and a license renewal application may be denied
for cause. In October 1995, ORBCOMM requested a modification of its FCC
license with respect to ORBCOMM's channel plan for purposes of facilitating
frequency coordination of the ORBCOMM System with foreign governments. This
request has completed the public comment cycle and
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ORBCOMM believes its request will be granted within the next several months.
In addition, for the ORBCOMM System to be operated in other countries
throughout the world, the Company or the foreign licensees must obtain from the
appropriate foreign regulatory bodies authority to do so. The Company
anticipates that the cost of these activities will be borne primarily by
foreign licensees. ORBCOMM International has entered into a definitive license
agreement with ORBCOMM Canada Inc., which is expected to begin providing
ORBCOMM service in Canada in Spring 1996. ORBCOMM has signed preliminary
agreements with 19 candidate licensees serving 71 other countries to seek such
regulatory approvals and to initiate territory-specific market development in
such countries. There can be no assurance that ORBCOMM or its foreign
licensees will be granted all licenses or approvals necessary to operate the
ORBCOMM System in any other country.
ORBIMAGE REMOTE SENSING AND IMAGING SERVICES. The Company is
currently seeking to develop and market a broad range of information services
that involve identifying and monitoring global environmental changes and
weather patterns and collecting and disseminating digital land maps and other
remote sensing information. Small Earth-viewing satellites and related sensors
and instruments to be placed in relatively low orbits are planned to offer
cost-efficient data collection, daily global coverage and high-resolution
imaging services.
In April 1995, ORBIMAGE's first MicroStar satellite, MicroLab-1,
was successfully launched to monitor lightning and severe weather patterns for
NASA. In 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. The Company plans to develop,
produce, launch and operate the SeaStar system to deliver high-quality
multi-spectral ocean imagery and land surface imagery for up to five years.
The SeaStar launch has been delayed several years, primarily due to technical
challenges associated with the development of the spacecraft and launch delays
relating to the Pegasus XL failures in 1994 and 1995. The SeaStar satellite is
currently scheduled to be launched in late 1996 or early 1997. In addition to
providing unprocessed real-time ocean data to NASA, ORBIMAGE plans to market
the SeaStar data directly and through value-added resellers and other marketing
agents to other U.S. Government users and to potential domestic and
international customers such as commercial fishing fleets, oil and gas
companies, ocean transportation operators, oceanographers and agricultural
companies.
ORBIMAGE is developing and marketing other small satellite-based
Earth observation, remote sensing and environmental monitoring services using,
among other things, the Company'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, sensing of ocean and atmospheric conditions and measuring of
ozone and other gaseous concentrations in the atmosphere. The Company is
currently exploring potential strategic arrangements for development of the
high-resolution remote sensing business, with Orbital providing launch
services, spacecraft, ground stations and other related products. During 1995,
ORBIMAGE signed preliminary agreements with several potential imagery
distributors and initiated preliminary discussions with potential strategic
partners. There can be no assurance that the Company will be able to conclude
such strategic arrangements or develop profitable commercial Earth observation,
remote sensing or environmental monitoring businesses.
* * * *
Financial information about the Company's products and services,
foreign and domestic operations and export sales is included in Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Notes to the Company's Consolidated Financial Statements set forth in the
Company's Annual Report, and is incorporated herein by reference.
8
<PAGE> 11
COMPETITION
Orbital believes that competition for sales of its products and
services is based on performance and other technical features, price,
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 LMLV
launch vehicles currently being developed by Lockheed Martin Corporation
("Lockheed Martin"). The LMLV had an unsuccessful first flight in August 1995.
Potential competition to the Pegasus may also come from launch systems derived
from surplus ballistic missiles that are primarily being made available by the
U.S. Government and Russia. The National Space Transportation Policy (the
"NSTP") authorizes U.S. Government agencies to use excess ballistic missiles to
launch payloads into orbit on a case-by-case basis. While Lockheed Martin
currently has a contract with the DoD to convert excess Minuteman missiles into
space launch vehicles, the NSTP established that such use may only be permitted
after the DoD has determined, among other things, that such use would meet the
agency's needs and would result in a cost savings to the U.S. Government
compared to a commercial launch service. Competition for Taurus could also come
from surplus Titan II launch vehicles, although Titan II production has been
discontinued and only a very limited inventory remains. In addition, in 1995
the Japanese space agency successfully launched a booster that directly
competes with Taurus in terms of launch capacity, but is more expensive than
the Taurus. Indirect competition to Pegasus and Taurus vehicles also exists in
the form of secondary or "piggyback" payload capacity on large boosters such as
the 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.
While several companies design and manufacture suborbital launch
vehicles, Orbital's primary competitor in this product line is Coleman Research
Corp. Satellite systems and payloads and space support products compete with
products and services produced or provided by numerous companies and government
entities, including TRW Inc. and CTA, Inc. The Company's space instruments and
airborne and ground-based electronics, data management systems,
defense-oriented avionics products and software systems, and aviation systems
face competition from several established manufacturers. The Company's space
sensors and instruments face competition from a number of companies and
university research laboratories capable of designing and producing space
instruments. The Company's main competition in the area of ground stations
include Datron Systems Inc. and Hughes-STX Corp.
Magellan's marine and outdoor recreation GPS satellite-based
navigation products primarily face competition from Garmin International.
Magellan competes with a larger number of producers of GPS navigation and
communications products in its other markets. The Company 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 navigators.
The ORBCOMM System will face competition from numerous existing and
potential alternative communications products and services provided by various
large and small companies, including sophisticated two-way satellite-based data
and voice communications services. For specific markets, the ORBCOMM System
may complement existing tower-based services such as one-way and two-way
paging, cellular data, specialized mobile radio and private networks. ORBIMAGE
may face competition from U.S. and foreign government and private entities that
provide or are seeking to provide satellite-based and other land imaging,
environmental monitoring and atmospheric sensing products.
Many of the Company's competitors are larger and have substantially
greater resources than the Company. 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 the
Company. Any such foreign competitor could benefit from subsidies from, or
other protective measures by, its home country.
9
<PAGE> 12
RESEARCH AND DEVELOPMENT
The Company 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, where appropriate,
strategic partner investments in these products. Orbital's research and
development expenses, excluding direct customer-funded development, were
approximately $25.5 million, $17.3 million, and $19.7 million, respectively,
for the fiscal years ended December 31, 1995, 1994 and 1993. It is expected
that the Company's research and development expenses during 1996 will be
primarily for satellite programs, possible ORBIMAGE projects, new or modified
launch systems, and satellite-based navigation and communications products.
PATENTS AND TRADEMARKS
Orbital relies, in part, on patents, trade secrets and know-how to
develop and maintain its competitive position and technological advantage. The
Company holds U.S. and foreign patents relating to the Pegasus vehicle and U.S.
patents relating to the ORBCOMM System as well as for other components and
products produced by the Company. The Company also has various pending patent
applications relating to Pegasus and the ORBCOMM System along with other
products. Certain of the trademarks and service marks used in connection with
the Company's products and services have been registered with the U.S. Patent
and Trademark Office and the Canadian Intellectual Property Office.
COMPONENTS AND RAW MATERIALS
Orbital purchases a significant percentage of its product
components, including rocket propulsion motors, structural assemblies and
electronic equipment, from third parties. Orbital also occasionally obtains
from the U.S. Government parts and equipment that are used in the production of
the Company's products or in the provision of the Company's services. Orbital
has not experienced material difficulty in obtaining product components or
necessary parts and equipment and believes that alternative sources of supply
would be available, although increased costs could be incurred in securing
alternative sources of supply. The Company's ability to launch its Pegasus and
Pegasus XL vehicles depends on the availability of an aircraft with the
capability of carrying and launching such space launch vehicles. Orbital
entered into a 10-year lease in 1992 for a Lockheed L-1011 for the air-launch
of the Pegasus and Pegasus XL vehicles.
U.S. GOVERNMENT CONTRACTS
During 1995, 1994 and 1993, approximately 40 percent, 45 percent
and 45 percent, respectively, of the Company'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. 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 from operations.
Agencies within the U.S. Government and commercial customers to which sales by
the Company accounted for ten percent or more of the Company's consolidated
1995 revenues were NASA, DoD and ORBCOMM Global.
Orbital's major contracts with the U.S. Government fall into three
categories: firm fixed-price contracts, fixed-price incentive fee contracts and
cost-plus-fee contracts. Under firm fixed-price contracts,
10
<PAGE> 13
work performed and products shipped are paid for at a fixed price without
adjustment for actual costs incurred in connection with the contract. Risk of
loss due to increased cost, therefore, is borne by the Company although some of
this risk may be passed on to subcontractors. Under fixed-price government
contracts, Orbital may receive progress payments, generally in an amount equal
to between 80 and 95 percent of monthly costs, or it may receive milestone
payments upon the occurrence of certain program achievements. Fixed-price
incentive fee contracts provide for sharing by the customer and the Company of
unexpected costs incurred or savings realized within specified limits, and may
provide for adjustments in price depending on actual contract performance other
than costs. Costs in excess of the negotiated maximum (ceiling) price and the
risk of loss by reason of such excess costs are borne by the Company, although
some of this risk may be passed on to subcontractors. Under a cost-plus-fee
contract, Orbital recovers its actual allowable costs incurred and receives a
fee consisting of a base amount that is fixed at the inception of the contract
and/or an award amount that is based on the Government's subjective evaluation
of the contractor's performance in terms of the criteria stated in the
contract.
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 the Company is
required to suspend production. In the event of a termination at will, Orbital
is normally entitled to recognize 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. The Company has experienced several contract
suspensions and terminations in the past.
BACKLOG
The Company's backlog at December 31, 1995 and 1994 was
approximately $530 million and $419 million, respectively. As of December 31,
1995, approximately 60 percent of the Company'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 $355 million and $171 million as of December 31, 1995 and 1994,
respectively. Approximately $303 million of backlog is currently scheduled to
be performed beyond 1996. Backlog excludes unexercised and undefinitized
contract options having an aggregate potential contract value at December 31,
1995 of approximately $910 million.
EMPLOYEES
As of December 31, 1995, Orbital had 2, 729 full-time permanent
employees.
ITEM 2. 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. The Company owns 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; 305,000 square feet of office, engineering and
manufacturing space in Chandler, Arizona; approximately 212,000 square feet of
office and engineering space in Richmond, British Columbia; 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. The Company leases or owns other
11
<PAGE> 14
smaller facilities, offices or manufacturing space around the United States,
including Huntsville, Alabama; Edwards Air Force Base, California; Vandenberg
Air Force Base, California and Greenbelt, Maryland; in other locations in
Canada such as Ottawa, Ontario, as well as in England, Malaysia, Mexico and
Australia. Although completion of the Company'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.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There was no matter submitted to a vote of the Company's security
holders during the fourth quarter of 1995.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age and position of each
of the Executive Officers of Orbital as of March 1, 1996. All Executive
Officers are elected annually and serve at the discretion of the Board of
Directors.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
David W. Thompson 41 Chairman of the Board, President and Chief Executive Officer
Bruce W. Ferguson 41 Executive Vice President and General Manager/Communications and Information Services Group
James R. Thompson 59 Executive Vice President and General Manager/Launch Systems Group
Jack A. Frohbieter 59 Executive Vice President and General Manager/Space and Electronics Systems Group
Daniel E. Friedmann 39 Executive Vice President and General Manager/Ground Systems and Software Group
Michael D. Griffin 46 Executive Vice President and General Manager/Advanced Systems Group
Carlton B. Crenshaw 50 Executive Vice President and Chief Financial Officer
Antonio L. Elias 46 Senior Vice President and Chief Technical Officer
John H. Mehoves 48 Senior Vice President/Corporate Strategy
Leslie C. Seeman 43 Senior Vice President, General Counsel and Secretary
</TABLE>
David W. Thompson is a founder of Orbital and has been Chairman of the
Board, President and Chief Executive Officer of the Company since 1982.
Bruce W. Ferguson is a founder of Orbital and has been Executive Vice
President and General Manager/Communications and Information Services Group
since October 1993 and a Director of the Company since 1982. Mr. Ferguson was
Executive Vice President and Chief Operating Officer of Orbital from 1989 to
October 1993 and Senior Vice President/Finance and Administration and General
Counsel of Orbital from 1985 to 1989.
James R. Thompson (who is not related to David W. Thompson) has been
Executive Vice President and General Manager/Launch Systems Group since October
1993 and a Director since January 1992. Mr. Thompson was Executive Vice
President and Chief Technical Officer of Orbital from 1991 to
12
<PAGE> 15
October 1993. He was Deputy Administrator of NASA from 1989 to 1991. From
1986 until 1989, Mr. Thompson was Director of the Marshall Space Flight Center.
He was Deputy Director for Technical Operations at Princeton University's
Plasma Physics Laboratory from 1983 through 1986. Before that, he had a
20-year career with NASA at the Marshall Space Flight Center.
Jack A. Frohbieter has been a Director of the Company since August
1994, and Executive Vice President and General Manager/Space and Electronics
Systems since September 1994. From 1990 until August 1994, Mr. Frohbieter was
President and Chief Operating Officer of Fairchild. From 1988 to 1990, he was
Vice President and General Manager of General Electric Company's Government
Electronics Systems Division, and from 1966 to 1987, he held a variety of
positions at RCA's Astro Space Division, including Vice President and General
Manager from 1986 to 1987.
Daniel E. Friedmann has been Executive Vice President and General
Manager/Ground Systems and Software since January 1996. He continues to serve
as President and Chief Executive Officer of MDA, a position he has held since
March 1995. From 1992 to March 1995, he served as Executive Vice President and
Chief Operating Officer of MDA. Between 1979 and 1992, he held a variety of
positions at MDA, including serving as Vice President of various divisions.
Michael D. Griffin has been Executive Vice President/Advanced Systems
Group since January 1996. Dr. Griffin joined Orbital in August 1995 when he
was appointed Senior Vice President and Chief Technical Officer. From 1994 to
August 1995, he was Senior Vice President for Program Development at Space
Industries International. From September 1991 to January 1994 he served as
Chief Engineer of NASA and was Deputy Director for Technology at the Strategic
Defense Initiative Organization from 1989 to 1991.
Carlton B. Crenshaw has been Executive Vice President and Chief
Financial Officer since February 1996. He was Senior Vice President/Finance
and Administration from August 1995 to January 1996 and was Senior Vice
President/Finance and Administration and Treasurer of Orbital from January 1993
to August 1995. From 1989 to January 1993, he was Vice President/Finance and
Administration and Treasurer of the Company. From 1985 to 1989, Mr. Crenshaw
was Vice President/Finance and Administration and Chief Financial Officer of
Software AG Systems, Inc.
Antonio L. Elias has been Senior Vice President and Chief Technical
Officer since January 1996. From May 1993 through December 1995 he was Senior
Vice President for Advanced Projects and was Senior Vice President/Space
Systems Division from 1990 to April 1993. He was Vice President/Engineering of
Orbital from 1989 to 1990 and was Chief Engineer from 1986 to 1989. From 1980
to 1986, Dr. Elias was an Assistant Professor of Aeronautics and Astronautics
at Massachusetts Institute of Technology.
John H. Mehoves has been Senior Vice President/Corporate Strategy
since January 1996. From October 1993 to December 1995, he was Senior Vice
President, from 1990 to October 1993, he was Executive Vice President/Space
Systems Division of Orbital, from 1987 to 1989, he was Vice President/Space
Transportation and from 1985 to 1987, he was Vice President/Operations.
Leslie C. Seeman has been Senior Vice President of the Company since
October 1993 and General Counsel and Secretary of the Company since 1989. From
1989 to October 1993, she was Vice President of the Company, and from 1987 to
1989, Ms. Seeman was Assistant General Counsel of Orbital. From 1984 to 1987,
she was General Counsel of Source Telecomputing Corporation, a
telecommunications company. Prior to that, she was an associate with the law
firm of Wilmer, Cutler & Pickering.
13
<PAGE> 16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is included under the captions
"Market Information" and "Corporate Information - Dividends" of the Annual
Report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is included under the caption
"Selected Consolidated Financial Data" of the Annual Report and is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is included under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Annual Report and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is included in pages 34 through
55 of the Annual Report and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item and not given in Item 4A,
Executive Officers of the Registrant, is included under the caption "Election
of Directors -- Directors to be Elected at the 1996 Annual Meeting, --
Directors Whose Term Expires in 1997, and -- Directors Whose Term Expires in
1998" and "Compliance with Section 16(a) of the Exchange Act" of the Proxy
Statement filed pursuant to Regulation 14A on March 28, 1996 and is
incorporated herein by reference.
14
<PAGE> 17
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included under the captions
"Election of Directors -- Summary Compensation Table," "Election of Directors
- -- Option Grants in Last Fiscal Year," "Election of Directors -- Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values,"
"Election of Directors -- Indemnification Agreements," "Election of Directors
- -- Executive Employment Agreements" and "Election of Directors - Information
Concerning the Board and Its Committees" of the Proxy Statement filed pursuant
to Regulation 14A on March 28, 1996 and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is included under the caption
"Ownership of Common Stock" of the Proxy Statement filed pursuant to Regulation
14A on March 28, 1996 and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) Documents filed as part of this Report:
1. FINANCIAL STATEMENTS. The following financial
statements, together with the report of KPMG Peat
Marwick LLP, appearing in the portions of the Annual
Report, filed as Exhibit 13, are filed as a part of this
report:
A. Independent Auditors' Report (Annual Report
page 34)
B. Consolidated Statements of Operations (Annual
Report page 35)
C. Consolidated Balance Sheets (Annual Report page
36)
D. Consolidated Statements of Stockholders' Equity
(Annual Report page 37)
E. Consolidated Statements of Cash Flows (Annual
Report page 38)
F. Notes to Consolidated Financial Statements
(Annual Report pages 39 through 55)
2. FINANCIAL STATEMENT SCHEDULES. The following additional
financial data are transmitted with this report and
should be read in conjunction with the Consolidated
Financial Statements in the Annual Report. Schedules
other than those listed below have been omitted because
they are inapplicable or are not required.
15
<PAGE> 18
Independent Auditors' Report on
Consolidated Financial Statement
Schedule
II Valuation and Qualifying Accounts
3. EXHIBITS. A complete listing of exhibits required is
given in the Exhibit Index that precedes the exhibits
filed with this report.
(b) Reports on Form 8-K
1. On November 2, 1995, the Company filed a Form 8-K reporting its
potential acquisition of MacDonald, Dettwiler and Associates, Ltd.
("MDA") pursuant to Item 5. The following financial statements were
filed as part of that report:
Consolidated Financial Statements of MDA, together with report
of the independent auditors, as of March 31, 1995, 1994 and
1993;
Unaudited Consolidated Financial Statements of MDA, as of June
30, 1995 and for the three-month periods ended June 30, 1995
and 1994;
Pro Forma Financial Information of Orbital Sciences
Corporation as of and for the six-month period ended June 30,
1995, and for the years ended December 31, 1994, 1993 and
1992.
2. On December 4, 1995, the Company filed a Form 8-K reporting the
consummation of its acquisition of MDA pursuant to Item 2.
(c) See Item 14(a)(3) of this report.
(d) See Item 14(a)(2) of this report.
16
<PAGE> 19
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ORBITAL SCIENCES CORPORATION
DATED: March 28, 1996 By /s/ David W. Thompson
-----------------------------------------
David W. Thompson, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
DATED: March 28, 1996
<TABLE>
<S> <C>
Signature: Title:
/s/ David W. Thompson Chairman of the Board, Principal
-------------------------------------------------------- Executive Officer and Director
David W. Thompson
/s/ Carlton B. Crenshaw Principal Financial Officer
--------------------------------------------------------
Carlton B. Crenshaw
/s/ Jeffrey V. Pirone Controller and Principal Accounting
-------------------------------------------------------- Officer
Jeffrey V. Pirone
/s/ Fred C. Alcorn Director
--------------------------------------------------------
Fred C. Alcorn
/s/ Kelly H. Burke Director
--------------------------------------------------------
Kelly H. Burke
/s/ Bruce W. Ferguson Director
--------------------------------------------------------
Bruce W. Ferguson
/s/ Daniel J. Fink Director
--------------------------------------------------------
Daniel J. Fink
</TABLE>
17
<PAGE> 20
<TABLE>
<S> <C>
/s/ Lennard A. Fisk Director
--------------------------------------------------------
Lennard A. Fisk
/s/ Jack A. Frohbieter Director
--------------------------------------------------------
Jack A. Frohbieter
/s/ Jack L. Kerrebrock Director
--------------------------------------------------------
Jack L. Kerrebrock
/s/ J. Paul Kinloch Director
--------------------------------------------------------
J. Paul Kinloch
/s/ Douglas S. Luke Director
--------------------------------------------------------
Douglas S. Luke
/s/ John L. McLucas Director
--------------------------------------------------------
John L. McLucas
/s/ Harrison H. Schmitt Director
--------------------------------------------------------
Harrison H. Schmitt
/s/ James R. Thompson Director
--------------------------------------------------------
James R. Thompson
/s/ Scott L. Webster Director
--------------------------------------------------------
Scott L. Webster
</TABLE>
18
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Orbital Sciences Corporation
Under date of February 5, 1996, we reported on the consolidated balance sheets
of Orbital Sciences Corporation and subsidiaries (the "Company") as of December
31, 1995 and 1994, and the related statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1995, as contained in the 1995 annual report to stockholders.
These consolidated financial statements and our report thereon are incorporated
by reference in the Company's annual report on Form 10-K for the year 1995. In
connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related consolidated financial statement
schedule as listed in Item 14(a)2 in the Company's Form 10-K for the year 1995.
This consolidated financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on the
consolidated financial statement schedule based on our audits.
In our opinion, based on our audits and the reports of other auditors, such
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Washington, D.C.
February 5, 1996
19
<PAGE> 22
ORBITAL SCIENCES CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
--------------------------------
CHARGED/ BALANCE AT
BALANCE AT CHARGED TO COSTS CREDITED TO END OF
DESCRIPTION START OF PERIOD (1) AND EXPENSES OTHER ACCOUNTS (2) DEDUCTIONS (3) PERIOD
- ----------------------------------------- ----------------- --------------- ------------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Allowance for doubtful accounts $ 475 $ 97 $ 15 - 587
Allowance for obsolete inventory 929 421 910 - 2,260
Deferred income tax valuation reserve 14,759 (4) - - (303) 14,456(4)
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful accounts $ 587 $ 149 $ 42 - 778
Allowance for obsolete inventory 2,260 216 1,571 (111) 3,936
Allowance for unrecoverable investments - - 3,100 - 3,100
Deferred income tax valuation reserve 14,456 - 32,003 (168) 46,291
YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts $ 778 $ 189 $ - (194) 773
Allowance for obsolete inventory 3,936 580 - (738) 3,778
Allowance for unrecoverable investments 3,100 - - (2,000) 1,100
Deferred income tax valuation reserve 46,291 21,445 (2,695) - 65,041
</TABLE>
(1) - All historical balances have been restated to reflect the Company's
acquisitions of Magellan Corporation and MacDonald, Dettwiler and
Associates, Ltd. The acquisitions were accounted for using the pooling of
interests method of accounting.
(2) - Amounts charged/credited to other accounts represent valuation and
qualifying accounts recorded pursuant to purchase business combinations as
described in Note (4) to the consolidated financial statements
incorporated by reference elsewhere herein, adjustments required to recast
pooled company's year end as described in Note (4) to the consolidated
financial statements incorporated by reference elsewhere herein, and
certain reclassifications of deferred tax accounts.
(3) - Deduction for revaluation of allowance account.
(4) - The deferred income tax valuation reserve at December 31, 1993 and 1992
has been provided based on estimated deferred tax assets and liabilities
in a foreign taxing jurisdiction, converting to generally accepted
accounting principles as applied in the U.S. (SFAS 109), after recasting
pooled company's year end as described in Note (4) to the consolidated
financial statements incorporated by reference elsewhere herein.
Page 1
<PAGE> 23
EXHIBIT INDEX
The following exhibits are filed as part of this report. Where such
filing is made by incorporation by reference to a previously filed statement or
report, such statement or report is identified in parentheses. In addition,
the registrant has executed certain instruments reflecting long-term debt, the
total amount of which does not exceed 10% of the total assets of the registrant
and its subsidiaries on a consolidated basis. In accordance with section
4(iii) of Item 601 under Regulation S-K, the registrant agrees to furnish to
the Securities and Exchange Commission copies of each instrument relating to
such long-term debt not otherwise filed herewith or incorporated herein by
reference.
<TABLE>
<CAPTION>
Exhibit
No. Description
--- -----------
<S> <C>
3.1 Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (File Number 33-33453) filed on February 9, 1990
and effective on April 24, 1990).
3.2 By-Laws of Orbital Sciences Corporation, as amended on July 27, 1995 (incorporated by
reference to Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, dated November 14, 1995).
4.1 Form of Certificate of Common Stock (incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-1 (File Number 33-33453) filed on February 9, 1990 and
effective on April 24, 1990).
4.3 Indenture dated as of February 25, 1993 among the Company and Security Trust Company, National
Association, as Trustee (incorporated by reference to Exhibit 4.4 to the Company's Annual
Report on Form 10-K, dated March 31, 1993).
4.4 Form of 6 3/4% Convertible Subordinated Debenture due 2003 (incorporated by reference to
Exhibit 4.5 to the Company's Annual Report on Form 10-K, dated March 31, 1993).
9 Voting and Exchange Trust Agreement between the Company, MacDonald Dettwiler Holdings Inc. and
State Street Bank and Trust Company (transmitted herewith).
10.1 Amended and Restated Credit Agreement, dated as of September 27, 1994 among the Company,
Orbital Imaging Corporation and Fairchild Space and Defense Corporation, the Banks listed
therein, Morgan Guaranty Trust Company of New York, as Administrative Agent and J.P. Morgan
Delaware, as Collateral Agent (the "Credit Agreement") (incorporated by reference to Exhibit
10.6 to the Company's Report on Form 10-Q for the Quarter ended September 30, 1994, dated
November 14, 1994).
10.1.1 Amendment No. 1 to the Credit Agreement, dated as of October 26, 1994 (incorporated by
reference to Exhibit 10.6.1 to the Company's Annual Report on Form 10-K, dated March 28, 1995).
10.1.2 Amendment No. 2 to the Credit Agreement, dated as of July 5, 1995 (incorporated by reference
to Exhibit 10.6.3 to the Company's Report on Form 10-Q for the quarter ended June 30, 1995
filed on August 14, 1995).
10.1.3 Amendment No. 3 to the Credit Agreement, dated as of August 23, 1995 (incorporated by
reference to Exhibit 10.3 to the Company's Report on Form 10-Q for the quarter ended September
30, 1995, dated November 14, 1995).
10.1.4 Amendment No. 4 to the Credit Agreement, dated as of November 15, 1995 (transmitted herewith).
10.1.5 Waiver No. 1 to the Credit Agreement, dated as of December 19, 1994 (incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended December 31, 1994, dated March
</TABLE>
21
<PAGE> 24
<TABLE>
<S> <C>
28, 1995).
10.1.6 Waiver No. 2 to the Credit Agreement, dated as of February 29, 1996 (transmitted herewith).
10.2 Note Agreement, dated as of June 14, 1995 between the Corporation and The Northwestern Mutual
Life Insurance Company (the "NWML Note Agreement") (incorporated by reference to Exhibit 4.7.1
to the Company's Report on Form 10-Q for the quarter ended June 30, 1995, dated August 14,
1995).
10.2.1 1st Amendment to the NWML Note Agreement ,dated as of June 30, 1995, between the Corporation
and The Northwestern Mutual Life Insurance Company (incorporated by reference to the Company's
Report on Form 10-Q for the quarter ended September 30, 1995, dated November 14, 1995).
10.2.2 Second Amendment to the NWML Note Agreement, dated as of March 15, 1996 (transmitted
herewith).
10.3 Promissory Notes dated as of August 31, 1994 made by Fairchild Space and Defense Corporation
and Corporate Guaranty dated August 31, 1994 made by the Company (incorporated by reference to
Exhibit 10.7 to the Company's Report on Form 10-Q for the Quarter ended September 30, 1994,
dated November 14, 1994).
10.4 Security Agreement dated as of June 30, 1992 among the Company, J.P. Morgan Delaware, as
Collateral Agent and American Security Bank, N.A., as Audit Agent (incorporated by Reference to
Exhibit 10.6.1 to the Company's Report on Form 10-Q for the Quarter Ended September 30, 1994,
dated November 14, 1994).
10.5 Master Security Agreement dated as of August 31, 1994 between Fairchild Space and Defense
Corporation and General Electric Capital Corporation (incorporated by reference to Exhibit 10.7
to the Company's Report on Form 10-Q for the Quarter ended September 30, 1994, dated November
14, 1994).
10.6 Orbital Sciences Corporation 1990 Stock Option Plan, restated as of April 27, 1995
(incorporated by reference to Exhibit 10.5.1 to the Company's Report on Form 10-Q for the
quarter ended June 30, 1995, dated August 14, 1995).**
10.7 Orbital Sciences Corporation 1990 Stock Option Plan for Non-Employee Directors, restated as of
April 27, 1995 (incorporated by reference to Exhibit 10.5.2 to the Company's Report on Form
10-Q for the quarter ended June 30, 1995, dated August 14, 1995).**
10.8 Orbital Communications Corporation Restated 1992 Stock Option Plan, restated as of September
12, 1995 (transmitted herewith).**
10.9 Orbital Sciences Corporation 1995 Deferred Compensation Plan.** (transmitted herewith)
10.10 Fairchild Space and Defense Corporation Supplemental Executive Retirement Plan.** (transmitted
herewith)
10.11 Form of Executive Employment Agreement entered into between the Company and Executive Officers
and certain other Officers of the Company (incorporated by reference to Exhibit 10.17 to the
Company's Registration Statement on Form S-1 (File Number 33-33453) filed on February 9, 1990
and effective on April 24, 1990).**
10.11.1 Employment Agreement between Jack A. Frohbieter and Fairchild Space and Defense Corporation,
dated August 26, 1992 (incorporated by reference to Exhibit 10.10.1 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, filed March 28, 1995).**
10.12 Form of Indemnification Agreement entered into between the Company and Directors, Executive
Officers and certain other Officers of the Company (incorporated by reference to Exhibit 10.18
to
</TABLE>
22
<PAGE> 25
<TABLE>
<S> <C>
the Company's Registration Statement on Form S-1 (File Number 33-33453) filed on February 9,
1990 and effective on April 24, 1990).**
10.12.1 Amendment dated October 22, 1992 to form of Indemnification Agreement entered into between the
Company and Directors, Executive Officers and certain other Officers of the Company
(incorporated by reference to Exhibit 19 to the Company's Report on Form 10-Q for the Quarter
Ended September 30, 1992, dated November 16, 1992).**
10.13 Participation Agreement dated August 20, 1992 by and between ITT Commercial Finance Corp. and
the Company, as amended through August 26, 1992 (incorporated by reference to Exhibit 19.14 to
Amendment No. 2 to the Company's Report on Form 10-Q for the Quarter Ended September 30, 1992,
dated January 27, 1993).
10.14 Master Agreement dated as of June 30, 1993 among the Company, Orbital Communications
Corporation, Teleglobe Inc. and Teleglobe Mobile Partners (the "Master Agreement")
(incorporated by reference to Exhibit 10.24.1 to the Company's Report on Form 10-Q for the
Quarter Ended June 30, 1993, dated August 13, 1993).+
10.14.1 Amendment No. 1 to Master Agreement dated as of April 1, 1994 (incorporated by reference to
Exhibit 10.16.1.1 to the Company's Report on Form 10-Q for the Quarter Ended June 30, 1994,
dated August 15, 1994).+
10.14.2 Amendment No. 2 to Master Agreement dated as of October 1, 1994 (incorporated by reference to
the Company's Annual Report on Form 10-K for the year ended December 31, 1994 dated March 28,
1995).+
10.14.3 Amendment No. 3 to Master Agreement dated as of September 12, 1995 (transmitted herewith).
10.15 Agreement of Limited Partnership of ORBCOMM Development Partners, L.P. dated as of June 30,
1993 between Orbital Communications Corporation and Teleglobe Mobile Partners (incorporated by
reference to Exhibit 10.24.2 for the Company's Report on Form 10-Q for the Quarter ended June
30, 1993, dated August 13, 1993).+
10.15.1 Amendment No.1 to Agreement of Limited Partnership of ORBCOMM Development Partners, L.P. dated
as of April 1, 1994 (incorporated by reference to Exhibit 10.16.2.1 to the Company's Report on
Form 10-Q for the Quarter Ended June 30, 1994, dated August 15, 1994).+
10.16 Agreement of Limited Partnership of ORBCOMM U.S. Partners, L.P. dated as of June 30, 1993
between Orbital Communications Corporation and Teleglobe Mobile Partners (incorporated by
reference to Exhibit 10.24.3 of the Company's Report on Form 10-Q for the Quarter ended June
30, 1993, dated August 13, 1993).
10.16.1 Amendment No. 1 to Agreement of Limited Partnership of ORBCOMM U.S. Partners, L.P. dated as of
September 12, 1995 between Orbital Communications Corporation and ORBCOMM Global Partners
(transmitted herewith).
10.17 Agreement of Limited Partnership of ORBCOMM International Partners, L.P. dated as of June 30,
1993 between Orbital Communications Corporation and Teleglobe Mobile Partners (incorporated by
reference to Exhibit 10.24.3 to the Company's Report on Form 10-Q for the Quarter Ended June
30, 1993, dated August 13, 1993).
10.17.1 Amendment No.1 to Agreement of Limited Partnership of ORBCOMM International Partners, L.P.
dated as of September 12, 1995 between Orbital Communications Corporation and ORBCOMM Global
Partners (transmitted herewith).
10.18 Proprietary Information and Non-Competition Agreement dated as of June 30, 1993 among the
Company, Orbital Communications Corporation, Teleglobe Inc., Teleglobe Mobile Partners, ORBCOMM
Development Partners, L.P., ORBCOMM U.S. Partners, L.P. and ORBCOMM International Partners,
L.P. (incorporated by reference to Exhibit 10.24.9 to the Company's Report
</TABLE>
23
<PAGE> 26
<TABLE>
<S> <C>
on Form 10-Q for the Quarter Ended June 30, 1993, dated August 13, 1993).
10.18.1 Amendment No.1 to Proprietary Information and Non-Competition Agreement dated as of September
12, 1995 among the Company, Orbital Communications Corporation, Teleglobe Inc., Teleglobe
Mobile Partners, ORBCOMM Global, L.P., ORBCOMM USA, L.P., and ORBCOMM International Partners,
L.P. (transmitted herewith).
10.19 Support Agreement between the Company and MacDonald, Dettwiler Holdings, Inc., dated November
17, 1995. (transmitted herewith)
11 Statement re: Computation of Earnings Per Share (transmitted herewith).
13 Portions of the 1995 Annual Report to Stockholders (transmitted herewith).
21 Subsidiaries of the Company (transmitted herewith).
23 Consent of KPMG Peat Marwick LLP (transmitted herewith).
27 Financial Data Schedule (such schedule is furnished for the information of the Securities and
Exchange Commission and is not to be deemed "filed" as part of the Form 10-K, or otherwise
subject to the liabilities of Section 18 of the Securities Exchange Act of 1934) (transmitted
herewith).
</TABLE>
- ----------------------
* Confidential treatment requested pursuant to Rule 24b-2 of the Exchange
Act.
+ Confidential treatment previously granted by the Commission.
** Management Contract or Compensatory Plan or Arrangement.
24
<PAGE> 1
EXHIBIT 9
EXHIBIT 2.2
VOTING AND EXCHANGE TRUST AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 17th day November, 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 trust company existing under the laws of the
Commonwealth of Massachusetts,
(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;
<PAGE> 2
- 2 -
AND WHEREAS pursuant to an arrangement (the "Arrangement")
effected by articles of arrangement dated November 17 , 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
0.3607 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 and
the Trustee in no way warrants the accuracy thereof and shall have no liability
therefor;
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:
<PAGE> 3
- 3 -
ARTICLE 1
DEFINITIONS AND INTERPRETATION
.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;
<PAGE> 4
- 4 -
"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
<PAGE> 5
- 5 -
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.
<PAGE> 6
- 6 -
"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.
<PAGE> 7
- 7 -
.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.
.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.
.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.
.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. The Trustee shall have no obligation or
liability to pay, deposit, deliver or to deduct any amount required by
applicable law to be deducted or withheld on account of tax or to remit the
same to applicable tax authorities.
ARTICLE 2
PURPOSE OF AGREEMENT
.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 trust in order to enable the Trustee to exercise the
Voting Rights and will hold the Exchange Right and the Automatic Exchange
Rights in trust 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.
<PAGE> 8
- 8 -
ARTICLE 3
VOTING SHARE
.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.
.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, which Voting Rights attach solely to the Voting Share.
.3 SAFE KEEPING OF CERTIFICATE. The certificate representing the Voting
Share shall at all times be held by the Trustee in the Commonwealth of
Massachusetts.
<PAGE> 9
- 9 -
ARTICLE 4
VOTING RIGHTS
.1 VOTING RIGHTS. The Trustee, as the holder of record of the Voting
Share, shall be entitled to all of the Voting Rights in accordance with the
instructions of the Holders, subject to section 6.15 hereof, 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,
subject to section 6.15 hereof, be exercised by the Trustee in accordance with
the instructions of the Holders. 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.
.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.
.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 Orbital's stockholders:
(a) a copy of such notice, together with any proxy or information
statement and related materials to be provided to stockholders
of Orbital;
<PAGE> 10
- 10 -
(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, as set forth
in 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:
(i) a proxy to such Holder or his designee to exercise personally
the Holder Votes; or
(ii) a proxy to a designated agent or other representative of the
management of Orbital to exercise such Holder Votes;
(d)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;
(e)a form of direction whereby the Holder may direct and instruct the Trustee
as contemplated herein (which form shall follow as closely as
practicable Orbital's form of proxy); and
(f)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 an 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
sufficient time to enable the Trustee to perform its obligations contemplated
by this section 4.3 and in any event not later than two Business Days after
such decision has been made or such information and materials are available, as
the case may be.
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.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 keep copies of all such materials available for inspection by
any Holder at the Trustee's principal office.
.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
keep copies of all such materials available for inspection by any Holder at the
Trustee's principal office.
.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,
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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.
.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.
.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
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at such meeting by way of a show of hands in respect of any
matter, question or proposition.
.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.
.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, unless Orbital shall not
have delivered the requisite Orbital Common Shares issuable in exchange
therefor directly to the Holder or otherwise pursuant to the Holder's
instruction or to the Trustee for delivery to the Holders, 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 (it being acknowledged that the Trustee is not
obligated to procure delivery of certificates representing Exchangeable Shares
in either of such events) 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.
.11 ISSUE OF ADDITIONAL SHARES. During the term of this Agreement,
Orbital will not issue or commit to issue any shares of Orbital Special Voting
Stock, in addition to the Voting Share.
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ARTICLE 5
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
.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.
.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.
.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
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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 as to that Holder.
.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). The sole
responsibility to calculate the purchase price and pay the same to the Holder
shall be that of Orbital and not the Trustee.
.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 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
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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.
.6 DELIVERY OF ORBITAL COMMON SHARES: EFFECT OF EXERCISE. Promptly
after receipt of the certificates, duly endorsed in blank, representing the
Exchangeable Shares that are the subject of instructions to the Trustee
pursuant to section 5.5 (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)), 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 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 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
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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.
.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.
.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.
.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
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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 be sufficient if it
references this Agreement and that an event has occurred that, pursuant to this
Agreement, entitles Holders to instruct the Trustee to cause Orbital to
exchange Orbital Common Shares for Exchangeable Shares.
.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 and 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).
The obligations of the Trustee with respect to the Exchange Right and the
Automatic Exchange Rights shall in all respects be subject to the Trustee being
satisfied that all applicable laws and regulations with respect thereto and the
issuance of Orbital Common Shares in connection with the exercise thereof have
been complied with.
.11 RESERVATION OF ORBITAL COMMON SHARES. Orbital hereby represents and
warrants that it has irrevocably reserved for issuance out of its authorized
and
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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.
.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 be sufficient if it references this Agreement and that an
event has occurred that, pursuant to this Agreement, causes the Exchangeable
Shares to be exchanged automatically for Orbital Common Shares.
(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
<PAGE> 20
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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 by 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 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.
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ARTICLE 6
CONCERNING THE TRUSTEE
.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 requiring Orbital to honour the Automatic
Exchange Rights, in each case in accordance with the provisions
of this Agreement and in connection therewith receiving from
Holders certificates representing Exchangeable Shares and other
requisite documents and distributing to such Holders, upon
receipt thereof from Orbital, 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 as trustee for, and for the
benefit of, the Holders;
(g) investing any moneys forming, from time to time, a part of the
Trust Estate as provided in this Agreement;
(h) taking action 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.
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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, provided that the Trustee need perform only those duties
and obligations that are specifically set forth in this Agreement and no other
duties or obligations shall be read into this Agreement. 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 reasonably 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 person would exercise in comparable circumstances in
the exercise of his or her own affairs.
The Trustee shall not be deemed to have notice of any fact,
claim, demand, event or matter with respect hereto unless actually known by an
officer charged with responsibility for administering this Agreement or unless
in writing received by the Trustee and specifically referencing this Agreement.
The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within its rights or
powers, provided that the Trustee's conduct does not constitute negligence or
bad faith.
.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.
.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC. The Corporation and
Orbital irrevocably authorize the Trustee, from time to time, to:
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(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.
.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.
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.5 INCOME TAX RETURNS AND REPORTS. The Trustee shall, to the extent
necessary, prepare and file on behalf of the Trust, and at Orbital's expense,
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 and Orbital shall pay the reasonable fees and disbursements of such
experts.
.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 satisfactory to the Trustee against the costs, expenses and
liabilities (including the reasonable fees and expenses of its attorneys and
agents) 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.
.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 60 days 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
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Trustee, except only as herein provided, and in any event for the equal benefit
of all Holders.
.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 conform on their face with the provisions of section
6.9 hereof, if applicable, and with any other applicable provisions of this
Agreement. The Trustee shall not be bound to make any investigation into the
facts or matters stated in any notice, statutory declaration, certificate,
report, request, direction, consent or other paper or document furnished to it,
but the Trustee may, in its discretion, make such further inquiry or
investigation into such facts or matters as it may see fit.
.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. The Trustee shall not be liable for any action it takes or omits to
take in good faith in accordance with any such declaration or certificate.
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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.
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.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 lawyer, accountant, appraiser,
valuer, engineer or other expert, whether retained by the Trustee or
by the Corporation and/or Orbital or otherwise, and shall be fully
and completely protected from liability in acting or relying thereon;
and
(b) retain such lawyers, accountants, appraisers, valuers, engineers and
other experts as it may reasonably require for the proper discharge
of its powers and duties hereunder, shall not be responsible for the
misconduct or negligence of any such expert, and may pay, at
Orbital's expense, 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,
including the reasonable fees and disbursements of such experts.
.11 INVESTMENT OF MONEYS HELD BY TRUSTEE. Unless otherwise provided in
this Agreement, any moneys held by the Trustee that under the terms of this
Agreement may be invested shall be invested and reinvested in accordance with
the written direction of the Corporation in the name or under the control of
the Trustee or its nominee 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. Absent such written direction, the Trustee shall not
be responsible for the investment of any moneys received by it. The Trustee
shall have no responsibility for any losses on any investment made by it
hereunder. Pending the investment of any moneys as hereinbefore provided, such
moneys may be (but shall not be required to be) deposited
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in the name of the Trustee or its nominee 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.
.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.
.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; provided that the Trustee shall not be under any obligation to
take any action hereunder that may involve it in any expense for which
indemnification reasonably satisfactory to it is not made available. In no
event shall the Trustee be liable for the acts or omissions of the Corporation
and/or Orbital or any other person and the Trustee shall not be liable for any
distributions, payments or other actions made in accordance with the
instructions of the Corporation and/or Orbital.
.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.
<PAGE> 29
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.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.
.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
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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
.1 FEES AND EXPENSES OF THE TRUSTEE. Orbital and the Corporation
jointly and severally agree to pay to the Trustee reasonable compensation for
entering into this Agreement and 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 (including fees and expenses of
its lawyers) 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 by final judgment of a court of
competent jurisdiction to have acted fraudulently, in bad faith or with
negligence or wilful misconduct if such expenses or disbursements are the
result of or caused by such fraud, bad faith, negligence or wilful misconduct.
<PAGE> 31
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ARTICLE 8
INDEMNIFICATION AND LIMITATION OF LIABILITY
<PAGE> 32
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.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, taxes (other than income taxes imposed on the
Trustee), 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
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counsel for the Trustee). The indemnifications set forth in this Agreement
shall survive the termination hereof.
.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.
ARTICLE 9
CHANGE OF TRUSTEE
.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 (Trial Division) upon application of one or
more of the parties hereto.
.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.
<PAGE> 34
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.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.
.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.
<PAGE> 35
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ARTICLE 10
ORBITAL SUCCESSORS
.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.
.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
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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.
.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
.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.
.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
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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.
.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.
.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.
.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
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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.
The Trustee shall not be required to execute any amendment or supplemental
agreement that adversely affects its own rights. In executing any amendment or
supplemental agreement hereunder, the Trustee shall be entitled to receive and
to rely upon an opinion of counsel as to whether such supplemental agreement or
amendment is permitted hereunder.
<PAGE> 39
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ARTICLE 12
TERMINATION
.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.
.2 SURVIVAL. The provisions of Articles 7 and 8 hereof shall survive
any termination of the Trust pursuant to section 12.1.
<PAGE> 40
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ARTICLE 13
GENERAL
.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.
.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.
.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
U.S.A. 20166
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Attention: General Counsel
Telecopy: (703) 406-5572
(b) if to the Corporation at:
MacDonald, Dettwiler Holdings Inc.
21700 Atlantic Boulevard
Dulles, VA 20166
Attention: Secretary
Telecopy: (604) 273-9830
(with a copy to Orbital at the address set out in (a))
(c) if to the Trustee at:
State Street Bank and Trust Company
Two International Place
4th Floor
Boston, Massachusetts
U.S.A. 02110
Attention: Leonard H. Butler
Assistant Vice President
Corporate Trust Operations
Corporate Trust Department
Telecopy: (617) 664-5371
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With a copy to:
Anil Khosla, Esq.
Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts
U.S.A. 02110
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.
.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.
.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.
.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.
<PAGE> 43
- 43 -
.7 JURISDICTION. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts.
.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
Commonwealth of Massachusetts, 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 its registered agent in Massachusetts 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 /s/ Carlton B. Crenshaw
-------------------------
Senior Vice President
----------------------------
MACDONALD, DETTWILER HOLDINGS
INC.
By /s/ Carlton B. Crenshaw
-------------------------
Vice President
----------------------------
<PAGE> 44
- 44 -
STATE STREET BANK & TRUST
COMPANY
by Jill Olson
---------------------------------
Assistant Vice President
-----------------------------------
<PAGE> 1
EXHIBIT 10.1.4
[CONFORMED COPY]
AMENDMENT NO. 4 TO CREDIT AGREEMENT
AMENDMENT No. 4 dated as of November 15, 1995 among ORBITAL SCIENCES
CORPORATION (the "Company"), ORBITAL IMAGING CORPORATION and FAIRCHILD SPACE
AND DEFENSE CORPORATION, the BANKS listed on the signature pages hereof, MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the
"Administrative Agent"), and J.P. MORGAN DELAWARE, as Collateral Agent.
W I T N E S S E T H :
WHEREAS, the parties hereto have heretofore entered into an Amended
and Restated Credit and Reimbursement Agreement dated as of September 27, 1994
(as amended from time to time, the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement as set
forth below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically
defined herein, each term used herein that is defined in the Agreement shall
have the meaning assigned to such term in the Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Agreement shall from and after the date hereof refer to the
Agreement as amended hereby.
SECTION 2. Changes to Definitions. (a) The definition of "Temporary
Cash Investments" in Section 1.01 of the Agreement is amended by (i) inserting
the phrase "or Canada" immediately after the term "United States" in clause (i)
thereof and (ii) inserting the phrase "or Canada or any province thereof" in
clause (iii) thereof.
(b) The definition of "Consolidated Delinquency Ratio" is amended by
deleting the phrase "Company and its Consolidated Subsidiaries" in clauses (i)
and (ii) thereof and replacing it with the phrase "all the Borrowers".
<PAGE> 2
(c) The definition of "Consolidated DSO Ratio" is amended by deleting
the phrase "Company and its Consolidated Subsidiaries" in clauses (i) and (ii)
thereof and replacing it with the phrase "all the Borrowers".
(d) The definition of "Consolidated Loss Ratio" is amended by (x)
deleting the phrase "Company and its Consolidated Subsidiaries" in clause (i)
thereof and replacing it with the phrase "all the Borrowers" and (y) deleting
the phrase "Company and any of its Consolidated Subsidiaries" in clause (ii)
thereof and replacing it with the phrase "all the Borrowers".
(e) A new definition of "MDA" is added in Section 1.01 in
alphabetical order, to read in its entirety as follows:
"MDA" means MacDonald, Dettwiler and Associates Ltd., a Canadian
corporation, and its successors.
SECTION 3. Additional Permitted Investments. Section 5.07 of the
Agreement is amended by:
(i) deleting the amount "$68,000,000" and replacing it with the
amount "$73,000,000" in clause (e) thereof;
(ii) renumbering clause (g) thereof as clause (h); and
(iii) inserting a new clause (g) immediately following clause (f)
thereof, to read in its entirety as follows:
"(g) Investments (other than Investments described in clause (b)
above) made or acquired or committed to be made or acquired by MDA prior
to the date MDA was acquired by the Company and listed on Schedule III;
and"
SECTION 4. Exclusion from Subsidiary Debt. Section 5.17 of the
Agreement is amended by adding the following proviso at the end thereof:
";provided that in no event shall the Exchangeable Non-Voting Shares or the
Class B Preferred Shares of MacDonald, Dettwiler Holdings Inc. be included in
the "Debt" of MacDonald, Dettwiler Holdings Inc."
SECTION 5. Addition of Schedule III. A new Schedule III is added to
the Agreement to read in its entirety as set forth on Schedule I hereto.
2
<PAGE> 3
SECTION 6. New York Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts; Effectiveness. This Amendment may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Amendment shall become effective on the date on which the
Administrative Agent shall have received duly executed counterparts hereof
signed by the Borrowers and the Required Banks (or, in the case of any party as
to which an executed counterpart shall not have been received, the
Administrative Agent shall have received telegraphic, telex or other written
confirmation from such party of execution of a counterpart hereof by such
party).
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
ORBITAL SCIENCES CORPORATION
By /s/ Carlton B. Crenshaw
-----------------------
Title: Chief Financial Officer
ORBITAL IMAGING CORPORATION
By /s/ Carlton B. Crenshaw
-----------------------
Title: Chief Financial Officer
FAIRCHILD SPACE AND DEFENSE
CORPORATION
By /s/ Carlton B. Crenshaw
-----------------------
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Kevin J. O'Brien
------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ J. R. Trimble
------------------------
Title: Senior Relationship
Manager
4
<PAGE> 5
SIGNET BANK/VIRGINIA
By /s/ Ronald K. Hobson
------------------------
Title: Vice President
NATIONSBANK, N.A.
By /s/ James W. Gaittens
-----------------------
Title: Vice President
THE BANK OF TOKYO TRUST COMPANY
By
-----------------------
Title:
THE DAIWA BANK, LIMITED
By
-----------------------
Title:
By
-----------------------
Title:
5
<PAGE> 1
EXHIBIT 10.1.6
[CONFORMED COPY]
WAIVER NO. 2 UNDER CREDIT AGREEMENT
WAIVER NO. 2 dated as of February 29, 1996 among ORBITAL SCIENCES
CORPORATION (the "Company"), ORBITAL IMAGING CORPORATION and FAIRCHILD SPACE
AND DEFENSE CORPORATION (together with the Company, the "Borrowers"), the BANKS
listed on the signature pages hereof (the "Banks"), MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Administrative Agent (the "Administrative Agent"), and
J.P. MORGAN DELAWARE, as Collateral Agent.
W I T N E S S E T H :
WHEREAS, the parties hereto have heretofore entered into an Amended
and Restated Credit and Reimbursement Agreement dated as of September 27, 1994
(as amended from time to time, the "Agreement"); and
WHEREAS, pursuant to the Agreement, the Company has agreed for itself
and each of its Subsidiaries (as defined in the Agreement) to comply with the
covenants set forth in the Agreement; and
WHEREAS, in the absence of this Waiver, the Company is in
noncompliance with one of such covenants; and
WHEREAS, the Company has asked the Banks, and the Banks are willing,
on the terms and conditions set forth below, to waive, among other things,
compliance with one of such covenants and the Defaults (as defined in the
Agreement) caused by such noncompliance;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions. Unless otherwise specifically defined
herein, each term used herein that is defined in the Agreement shall have the
meaning assigned to such term in the Agreement.
SECTION 2. Waiver of Compliance with the Consolidated Fixed Charge
Ratio Covenant. (a) The Banks waive (i) compliance by the Company with the
terms of Section 5.10 of the Agreement at December 31, 1995 and (ii)
<PAGE> 2
any Default arising under the Agreement by reason of such noncompliance;
provided that, the waivers granted under this Section 2 shall be effective
solely if the ratio of Earnings Available for Fixed Charges to Consolidated
Fixed Charges for the four consecutive fiscal quarters ended at December 31,
1995 is not less than 1.01 to 1.
(b) For purposes of calculating compliance by the Company with the
provisions of Section 5.10 of the Agreement on and after the date hereof, the
fiscal quarter of the Company ended December 31, 1995 shall be excluded from
any determination of any period of four consecutive fiscal quarters (e.g. the
fiscal quarters ended March 31, 1995, June 30, 1995, September 30, 1995 and
March 31, 1996 shall constitute four consecutive fiscal quarters for purposes
of Section 5.10 of the Agreement).
SECTION 3. No Other Waivers. Other than as specifically provided
herein, this Waiver shall not operate as a waiver of any right, remedy, power
or privilege of the Banks under the Agreement or any other Financing Document
or of any other term or condition of the Agreement or any other Financing
Document.
SECTION 4. New York Law. This Waiver shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 5. Counterparts; Effectiveness. This Waiver may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Waiver shall become effective upon (i) receipt by the
Administrative Agent of duly executed counterparts hereof signed by the
Borrowers and the Required Banks (or, in the case of any party as to which an
executed counterpart shall not have been received, the Administrative Agent
shall have received telegraphic, telex or other written confirmation from such
party of execution of a counterpart hereof by such party) and (ii) receipt by
the Administrative Agent, for the account of each Bank, of a fee in an amount
equal to 1/8 of 1% of such Bank's Commitment as in effect on the date hereof.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly
executed as of the date first above written.
ORBITAL SCIENCES CORPORATION
By /s/ Carlton B. Crenshaw
------------------------
Title: Executive Vice President
and Chief Financial
Officer
ORBITAL IMAGING CORPORATION
By /s/ Carlton B. Crenshaw
-----------------------
Title: Chief Financial Officer
and Treasurer
FAIRCHILD SPACE AND DEFENSE
CORPORATION
By /s/ Carlton B. Crenshaw
-----------------------
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Kevin J. O'Brien
------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ James R. Trimble
------------------------
Title: Senior Relationship
Manager
3
<PAGE> 4
SIGNET BANK/VIRGINIA
By /s/ Ronald K. Hobson
-----------------------
Title: Vice President
NATIONSBANK, N.A.
By /s/ James W. Gaittens
-----------------------
Title: Vice President
THE BANK OF TOKYO TRUST COMPANY
By /s/ Catherine A. Moeser
-----------------------
Title: Assistant Vice President
THE SUMITOMO BANK, LTD.
By /s/ Louanne Baily
-----------------------
Title: Vice President and
Manager
By /s/ R.M. Shehorn
------------------------
Title: SVP and RM Midwest
4
<PAGE> 1
EXHIBIT 10.2.2
EXECUTION COPY
ORBITAL SCIENCES CORPORATION
SECOND AMENDMENT
DATED AS OF MARCH 15, 1996
TO
NOTE AGREEMENT
DATED AS OF JUNE 1, 1995
Re: $20,000,000 10.50% Senior Notes,
Due June 14, 2001
<PAGE> 2
SECOND AMENDMENT TO NOTE AGREEMENT
THIS SECOND AMENDMENT to Note Agreement dated as of March 15,
1996 (the or this "Second Amendment"), is entered into between Orbital Sciences
Corporation, a Delaware corporation (the "Company"), and The Northwestern
Mutual Life Insurance Company (the "Purchaser").
RECITALS:
A. The Company and the Purchaser have heretofore entered into the
Note Agreement dated as of June 1, 1995 and the First Amendment to Note
Agreement dated as of June 30, 1995 (as amended, the "Note Agreement").
B. On or about November 17, 1995, the Company consummated the
acquisition of MacDonald, Dettwiler and Associates Ltd., a corporation
incorporated under the laws of Canada ("MacDonald, Dettwiler"), upon the terms
and conditions and all as contemplated by that certain 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 October 6, 1995 (the "Information
Circular") relating to the Arrangement Involving MacDonald Dettwiler and
Associates Ltd., 3173623 Canada Inc. and the Company (the "MacDonald, Dettwiler
Arrangement").
C. The consummation of the MacDonald, Dettwiler Arrangement would
have been prohibited by the terms of the Note Agreement and in consequence
thereof, the Company requested the Purchaser to waive application of certain
terms of the Note Agreement in order to permit consummation of the MacDonald,
Dettwiler Arrangement and within 90 days thereafter enter into a second
amendment to the Note Agreement upon terms and conditions acceptable to the
Purchaser, for the purpose of amending such of the terms of the Note Agreement
as would be necessary in order to permit the acquisition and ownership of
MacDonald, Dettwiler on an ongoing basis.
D. On or about November 17, 1995, the Purchaser entered into such
waiver.
E. The Company and the Purchaser now desire to amend certain of
the terms of the Note Agreement in order to (i) permit the acquisition and
ownership of MacDonald, Dettwiler on an ongoing basis within the limitations of
the Note Agreement, (ii) waive certain other defaults and (iii) permit further
actions by the Company.
F. In consideration of the Purchaser's agreeing to amend the Note
Agreement as set forth herein, the Company has paid to the Purchaser a fee
equal to $50,000.
G. Capitalized terms used herein shall have the respective
meanings ascribed thereto in the Note Agreement unless herein defined or the
context shall otherwise require.
-1-
<PAGE> 3
H. All requirements of law have been fully complied with and all
other acts and things necessary to make this Second Amendment a valid, legal
and binding instrument according to its terms for the purposes herein expressed
have been done or performed.
NOW, THEREFORE, the Company and the Purchaser, in consideration of
good and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, do hereby agree as follows:
SECTION 1. AMENDMENT.
Section 1.1. Section 5.1 of the Note Agreement shall be and
is hereby amended in its entirety to read as follows:
"The Company will preserve and keep in full force and effect,
and will cause each Subsidiary to preserve and keep in full
force and effect, its corporate existence and all licenses and
permits necessary to the proper conduct of its business,
provided that the foregoing shall not prevent any transaction
permitted by Section 5.13, and provided, further, that nothing
contained in this Section 5.1 shall be deemed or construed to
require the Company to maintain the corporate existence of any
Subsidiary or to maintain or cause any of its Subsidiaries to
maintain any such license or permit if the failure to preserve
and keep in full force and effect the corporate existence of
such Subsidiary or such permit or license, as the case may be,
would not, individually or in the aggregate, materially and
adversely affect the properties, business, prospects, profits
or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole."
Section 1.2. Section 5.8 of the Note Agreement shall be and is
hereby amended in its entirety to read as follows:
"Section 5.8. Fixed Charges Coverage Ratio. The Company will at
all times keep and maintain the Fixed Charges Coverage Ratio at not
less than:
<TABLE>
<S> <C>
DURING THE PERIOD MINIMUM RATIO LEVEL
March 31, 1996 through 1.35 to 1.00
June 30, 1996
June 30, 1996 and 1.50 to 1.00"
thereafter
</TABLE>
Section 1.3. Section 5.13(c) of the Note Agreement shall be and
is hereby amended as follows:
-2-
<PAGE> 4
(a) Clause (3) shall be and is hereby amended in its entirety to
read as follows: "(3) the issue or grant of any right,
option or warrant to purchase capital stock of a Subsidiary or
other Securities exchangeable for or convertible into capital
stock of such Subsidiary to any employee or employees of such
Subsidiary, provided that after giving effect to the exercise
of such right, option, warrant or other convertible Security,
such holders of rights, options, warrants or convertible
Securities do not hold in the aggregate more than 10% of the
outstanding capital stock of such Subsidiary, provided further
that in the case of Magellan Corporation, a Delaware
corporation and a Wholly-owned Subsidiary of the Company,
after giving effect to the exercise of such right, option,
warrant, or other convertible Security, such holders of
rights, options, warrants or convertible Securities do not
hold in the aggregate more than 15% of the outstanding capital
stock of Magellan Corporation; or"
(b) Clause (5) is hereby amended by substituting a comma for the
period and adding the word "or" at the end thereof;
(c) A new clause (6) shall be added reading as follows:
"(6) the issue of MacDonald, Dettwiler Preferred
Stock by MacDonald, Dettwiler Holdings, in connection with
consummation of the MacDonald, Dettwiler Arrangement;"
Section 1.4. Section 8.1 of the Note Agreement shall be and is
hereby amended as follows:
(a) The following definitions shall be added thereto in
alphabetical order:
""MacDonald, Dettwiler Arrangement" shall mean that
certain arrangement involving MacDonald, Dettwiler and
Associates Ltd., 3173623 Canada Inc. and the Company as more
fully described in that certain 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 October 6, 1995, which Arrangement was
consummated on November 17, 1995."
""MacDonald, Dettwiler Holdings" shall mean
MacDonald, Dettwiler Holdings, Inc. (formerly known as 3173623
Canada Inc.), a corporation incorporated under the laws of
Canada."
-3-
<PAGE> 5
""MacDonald, Dettwiler Preferred Stock" shall mean
the Exchangeable Non-Voting Shares of MacDonald, Dettwiler
Holdings as provided in the MacDonald Dettwiler Arrangement
and the 10,000 shares of Series B Preferred Shares of
MacDonald, Dettwiler Holdings, in each case issued in
connection with the consummation of the MacDonald, Dettwiler
Arrangement."
(b) The definition of "Consolidated Priority Funded Debt" shall be
and is hereby amended in its entirety to read as follows:
""Consolidated Priority Funded Debt" shall mean the
sum of (a) Consolidated Secured Funded Debt plus (b) all
Funded Debt of the Company's Subsidiaries, plus (c) all
preferred stock of Subsidiaries held by Persons other than the
Company or any Wholly-owned Subsidiary; provided, that the
MacDonald, Dettwiler Preferred Stock issued in connection with
the consummation of the MacDonald, Dettwiler Arrangement shall
not be included in any calculation of "Consolidated Priority
Funded Debt"."
(c) The definition of "Fixed Charges Coverage Ratio" shall be and
is hereby amended in its entirety to read as follows:
""Fixed Charges Coverage Ratio" shall mean (a) during
the period from and including March 31, 1996 through and
including June 29, 1996, the ratio of Adjusted Consolidated
Operating Earnings for the period from and including January
1, 1996 through and including March 31, 1996 to Consolidated
Fixed Charges for such fiscal quarter period, (b) during the
period from and including June 30, 1996 through and including
September 29, 1996, the ratio of Adjusted Consolidated
Operating Earnings for the period from and including January
1, 1996 through and including June 30, 1996 to Consolidated
Fixed Charges for such two fiscal quarter period, (c) during
the period from and including September 30, 1996 through and
including December 30, 1996, the ratio of Adjusted
Consolidated Operating Earnings for the period from and
including January 1, 1996 through and including September 30,
1996 to Consolidated Fixed Charges for such three fiscal
quarter period, and (d) during the period from and including
December 31, 1996 to the date of payment in full of the Notes,
the ratio of Adjusted Consolidated Operating Earnings for the
immediately preceding four fiscal quarter period to
Consolidated Fixed Charges for such four fiscal quarter
period."
-4-
<PAGE> 6
(d) Paragraph (e) of the definition of "Restricted Investment"
shall be and is hereby amended in its entirety to read as follows:
"(e)(1) Investments in commercial paper of
corporations organized under the laws of the United States or
any state thereof maturing in 360 days or less from the date
of issuance which, at the time of acquisition by the Company
or any Subsidiary, is accorded a rating of "A-1" or better by
Standard & Poor's Ratings Group or "P-1" by Moody's Investors
Service, Inc.; and (2) Investments by MacDonald, Dettwiler and
Associates Ltd., a corporation incorporated under the laws of
Canada ("MDA"), in commercial paper of corporations organized
under the laws of Canada or any province thereof maturing in
360 days or less from the date of issuance which, at the time
of acquisition by MDA, is accorded the highest rating by
Standard & Poor's Ratings Group or by Moody's Investors
Service, Inc.;"
(e) The definition of "Wholly-owned" shall be and is hereby
amended in its entirety to read as follows:
""Wholly-owned" when used in connection with any
Subsidiary shall mean a Subsidiary of which all of the issued
and outstanding shares of stock (except shares required as
directors' qualifying shares) and all Indebtedness for
borrowed money shall be owned by the Company and/or one or
more of its Wholly-owned Subsidiaries, provided, however, that
(a) so long as the Company shall own 90% or more of the Voting
Stock of ORBCOMM, ORBCOMM shall be deemed to be a Wholly-owned
Subsidiary and (b) so long as the Company shall own 100% or
more of the Voting Stock of MacDonald, Dettwiler Holdings,
MacDonald, Dettwiler Holdings shall be deemed to be a
Wholly-owned Subsidiary, notwithstanding that the Company does
not own the MacDonald, Dettwiler Preferred Stock, in each such
case for all purposes of this Agreement."
SECTION 2. WAIVER.
Section 2.1. Upon and by virtue of this Second Amendment
becoming effective as herein contemplated, the failure of the Company to comply
with the provisions of Section 5.8 (Fixed Charge Coverage Ratio) of the Note
Agreement for the period of October 1, 1995 through December 31, 1995 which
failure constitutes an Event of Default under the Note Agreement shall be
deemed to have been waived by the Purchaser. The Company understands and
agrees that the waiver contained in this
-5-
<PAGE> 7
Section 2.1 pertains only to the matters and to the extent herein described and
not to any other actions of the Company under, or matters arising in connection
with, the Note Agreement or to any rights which the Purchaser has arising by
virtue of any such other actions or matters.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Section 3.1. To induce the Purchaser to execute and deliver this
Second Amendment, the Company represents and warrants to the Purchaser (which
representations shall survive the execution and delivery of this Second
Amendment) that:
(a) this Second Amendment has been duly authorized, executed and
delivered by it and this Second Amendment constitutes the legal, valid
and binding obligation, contract and agreement of the Company
enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or
limiting creditors' rights generally;
(b) the Note Agreement, as amended by this Second Amendment,
constitutes the legal, valid and binding obligations, contracts and
agreements of the Company enforceable against it in accordance with
its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable
principles relating to or limiting creditors' rights generally;
(c) the execution, delivery and performance by the Company of this
Second Amendment (i) has been duly authorized by all requisite
corporate action and, if required, shareholder action, (ii) does not
require the consent or approval of any governmental or regulatory body
or agency, and (iii) will not (A) violate (1) any provision of law,
statute, rule or regulation or its certificate of incorporation or
bylaws, (2) any order of any court or any rule, regulation or order of
any other agency or government binding upon it, or (3) any provision
of any material indenture, agreement or other instrument to which it
is a party or by which its properties or assets are or may be bound,
or (B) result in a breach or constitute (alone or with due notice or
lapse of time or both) a default under any indenture, agreement or
other instrument referred to in clause (iii)(A)(3) of this Section
2.1(c);
(d) as of the date hereof and after giving effect to this Second
Amendment, no Default or Event of Default has occurred which is
continuing; and
(e) Exhibit A attached to this Second Amendment correctly
describes all of the preferred stock of the Company and its
Subsidiaries issued in connection with the MacDonald, Dettwiler
Arrangement (as defined herein).
-6-
<PAGE> 8
SECTION 4. MISCELLANEOUS.
Section 4.1. This Second Amendment shall become effective and
binding upon the Company and the Purchaser on the date hereof upon the
acceptance hereof by the Purchaser in the space below.
Section 4.2. Except as modified and expressly amended by this
Second Amendment, the Note Agreement is in all respects ratified, confirmed and
approved and all of the terms, provisions and conditions thereof shall be and
remain in full force and effect.
Section 4.3. The Company agrees to pay all reasonable fees and
expenses of the Purchaser and its special counsel in connection with the
preparation of this Second Amendment.
Section 4.4. Any and all notices, requests, certificates and
other instruments executed and delivered after the execution and delivery of
this Second Amendment may refer to the Note Agreement without making specific
reference to this Second Amendment but nevertheless all such references shall
include this Second Amendment unless the context otherwise requires.
Section 4.5. This Second Amendment shall be governed by and
construed in accordance with the laws of the State of Illinois.
Section 4.6. This Second Amendment may be executed and delivered
in any number of counterparts, each of such counterparts constituting an
original, but all together only one Second Amendment.
IN WITNESS WHEREOF, the Company and the Purchaser have caused this
instrument to be executed, all as of the day and year first above written.
ORBITAL SCIENCES CORPORATION
By /s/ Carlton B. Crenshaw
-------------------------------
Its Executive Vice President and
Chief Financial Officer
Accepted and Agreed to:
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By /s/ A. Kipp Koester
-------------------------------
Its Vice President
-7-
<PAGE> 9
PREFERRED STOCK ISSUED IN CONNECTION WITH THE
MACDONALD, DETTWILER ARRANGEMENT
PREFERRED STOCK ISSUED BY ORBITAL SCIENCES CORPORATION:
<TABLE>
<CAPTION>
NUMBER AND DESCRIPTION OF SHARES HOLDER
<S> <C>
One Share Of Series A Special Voting Preferred Stock, par Value State Street Exchange and Trust Company
$0.01 per share. This stock has no liquidation or dividend
rights; it entitles the holder to vote on behalf of the holders of
the Macdonald, Dettwiler Holdings Inc. Exchangeable Shares at
meetings of the company's common stockholders.
</TABLE>
PREFERRED SHARES ISSUED BY MACDONALD, DETTWILER HOLDINGS INC.:
<TABLE>
<CAPTION>
10,000 Class B Preferred Shares Canadian Imperial Bank Of Commerce
<S> <C>
2,784,516 Exchangeable Shares Public stockholders
(1,005,912 shares outstanding
on March 15, 1996)
</TABLE>
-1-
<PAGE> 1
EXHIBIT 10.8
ORBITAL COMMUNICATIONS CORPORATION
1992 STOCK OPTION PLAN
(Amended and Restated Effective September 12, 1995)
ARTICLE I
PURPOSE OF PLAN
The purpose of this 1992 Stock Option Plan is to promote the growth
and profitability of Orbital Communications Corporation by providing, through
the ownership of Shares, incentives to attract and retain highly talented
persons to provide managerial and administrative services to the Company or
other entities in which the Company has a significant interest and to motivate
such persons to use their best effort on behalf of the Company.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following terms shall have the
meanings set forth in this Article II:
2.01 Accrued Installment. The term "Accrued Installment" shall mean any
vested installment of an Option.
2.02 Board. The term "Board" shall mean the Board of Directors of the
Company.
2.03 Committee. The term "Committee" shall mean a committee appointed by
the Board pursuant to Section 3.04 and constituting two (2) members of the
Board, and two (2) members nominated by the partners of ORBCOMM Global, other
than ORBCOMM, which shall be by Teleglobe Mobile, as long as Teleglobe Mobile
holds at least forty percent (40%) of the Participating Percentage in ORBCOMM
Global, L.P. (as defined in the Agreement of Limited Partnership of ORBCOMM
Global, L.P.).
2.04 Company. The term "Company" shall mean Orbital Communications
Corporation, a Delaware corporation, or any successor thereof.
2.05 Director. The term "Director" shall mean a member of the Board, or a
member of the board of directors of any Participating Company.
2.06 Disinterested Person. The term "Disinterested Person" shall mean any
person defined as a disinterested person under Rule 16b-3 of the Securities and
Exchange Commission as promulgated under the Exchange Act.
2.07 Effective Date. The term "Effective Date" shall mean September 29,
1992.
2.08 Eligible Person. The term "Eligible Person" shall mean any employee
or officer of any Participating Company, but shall not include any Director of
any Participating Company who is not also an employee or officer of a
Participating Company.
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2.09 Exchange Act. The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time.
2.10 Fair Market Value. The term "Fair Market Value" shall mean the
closing sale price of a Share on the national securities exchange on which
Shares are then principally traded or, if that measure of price is not
available, on a composite index of such exchanges or, if that measure of price
is not available, in a national market system for securities on the date in
question. In the event that there are no sales of Shares on any such exchange
or market on such date, the fair market value of a Share shall be deemed to be
the closing sales price on the next preceding day on which Shares were sold on
any such exchange or market. In the event that such Shares are not listed on
any such market or exchange on such date, a reasonable valuation of the fair
market value of a Share shall be made by the Committee. Any determination of
fair market value made in good faith by the Committee shall be conclusive and
binding on the Company and all Optionees and/or holders of Shares.
2.11 I.R.C. The term "I.R.C." shall mean the Internal Revenue Code of
1986, as amended from time to time.
2.12 Incentive Stock Option. The term "Incentive Stock Option" shall mean
any Option intended to satisfy the requirements under I.R.C. Section 422(b) as
an incentive stock option.
2.13 Nonstatutory Stock Option. The term "Nonstatutory Stock Option"
shall mean any Option granted under the Plan that does not qualify as an
Incentive Stock Option.
2.14 Option. The term "Option" shall mean an option to acquire Shares
granted under the Plan.
2.15 Optionee. The term "Optionee" shall mean an Eligible Person who has
been granted Options.
2.16 ORBCOMM Partnerships. The term "ORBCOMM Partnerships" shall mean
ORBCOMM Global, L.P., ORBCOMM USA, L.P., ORBCOMM International Partners, L.P.
and any successor partnerships thereto; provided, however, that the term
"ORBCOMM Partnership" shall not include any such partnership at any time when
the Company holds, directly or indirectly, a Participation Percentage (as
defined in the applicable partnership agreement) in such partnership
aggregating less than 20%.
2.17 Parent Corporation. The term "Parent Corporation" shall mean a
corporation as defined in I.R.C. Section 424(e).
2.18 Participating Company. The term "Participating Company" shall mean
the Company, any Parent Corporation of the Company, any Subsidiary Corporation
of the Company or its Parent Corporation and any ORBCOMM Partnership.
2.19 Plan. The term "Plan" shall refer to the Stock Option Plan of the
Company set forth herein that provides for the granting of Incentive Stock
Options and Nonstatutory Stock Options.
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2.20 Restricted Shareholder. The term "Restricted Shareholder" shall mean
an Optionee granted an Incentive Stock Option who, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company, with
stock ownership determined in accordance with the attribution rules of I.R.C.
Section 424(d).
2.21 Shares. The term "Shares" shall mean shares of the Company's
authorized Common Stock, $0.01 par value, and may be unissued shares or
treasury shares or shares purchased for purposes of the Plan.
2.22 Subsidiary Corporation. The term "Subsidiary Corporation" shall mean
a corporation as defined in I.R.C. Section 424(f).
2.23 Teleglobe Mobile. The term "Teleglobe Mobile" shall mean Teleglobe
Mobile Partners, a Delaware general partnership.
2.24 Terminating Transaction. The term "Terminating Transaction" shall
mean any of the following events: (a) the dissolution or liquidation of the
Company; (b) a reorganization, merger or consolidation of the Company with one
or more other corporations as a result of which the Company goes out of
existence or becomes a subsidiary of a corporation other than a corporation
that was a Participating Company immediately prior to such event (which shall
be deemed to have occurred only if such a corporation shall own, directly or
indirectly, eighty percent (80%) or more of the aggregate voting power of all
outstanding equity securities of the Company); (c) a sale of all or
substantially all of the Company's assets to a person or persons other than a
corporation that was a Participating Company immediately prior to such event;
or (d) a sale to one person (or two or more persons acting in concert), other
than to a corporation that was a Participating Company immediately prior to
such event, of equity securities of the Company representing eighty percent
(80%) or more of the aggregate voting power of all outstanding equity
securities of the Company. As used herein or elsewhere in this Plan, the word
"person" shall mean an individual, corporation, partnership, association or
other person or entity, or any group of two or more of the foregoing that have
agreed to act together.
2.25 Termination Date. The term "Termination Date" shall mean September
29, 2002.
2.26 Total Disability. The term "Total Disability" shall mean a permanent
and total disability as that term is defined in I.R.C. Section 22(e)(3).
ARTICLE III
ADMINISTRATION OF PLAN
3.01 Administration by Board. The Plan shall be administered by the
Board. The Board shall have full and absolute power and authority in its sole
discretion to (a) determine which Eligible Persons shall receive Options; (b)
determine the time when Options shall be granted; (c) determine the terms and
conditions, not inconsistent with the provisions of this Plan, of any Option
granted hereunder, including whether such Option is an Incentive Stock Option
or a Nonstatutory Stock Option (except that Incentive Stock Options may not be
granted to any Eligible Person that is not an employee or officer of the
Company, any Parent Corporation of the Company or any Subsidiary
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Corporation of the Company or its Parent Corporation); (d) determine the number
of Shares which may be issued upon exercise of the Options; and (e) interpret
the provisions of this Plan and of any Option granted under this Plan.
3.02 Rules and Regulations. The Board may adopt such rules and
regulations as the Board may deem necessary or appropriate to carry out the
purposes of the Plan and shall have authority to do everything necessary or
appropriate to administer the Plan.
3.03 Binding Authority. All decisions, determinations, interpretations or
other actions by the Board shall be final, conclusive and binding on all
Eligible Persons, Optionees, Participating Companies and any
successors-in-interest to such parties.
3.04 Administration by Committee.
(a) The Board shall appoint a Committee to administer the Plan and
exercise all of the powers, authority and discretion of the Board under the
Plan, other than the power and authority to amend and terminate the Plan under
Section 7.01.
(b) At any time the Company has a class of equity securities
registered under the Exchange Act, each member of the Committee must be a
Disinterested Person, and the Board may, but is not required to, take such
other actions as are deemed necessary or advisable to conform the Plan to the
requirements of Rule 16b-3 as promulgated under the Exchange Act.
(c) The Committee shall report to the Board the names of Eligible
Persons granted Options, the number of Shares covered by each Option, and the
terms and conditions of each such Option.
(d) Prior to the time that it appoints a Committee to administer the
Plan, the Board shall consult with, and obtain the concurrence of, the Human
Resources Committee of the Board of Directors of Orbital Sciences Corporation
in administering the Plan.
ARTICLE IV
NUMBER OF SHARES AVAILABLE FOR GRANT
Subject to the following provisions of this Article IV, the maximum
aggregate number of Shares which may be optioned and sold under the Plan is
700,000. In the event that Options granted under the Plan shall, for any
reason, terminate, lapse, be forfeited or expire without being exercised, the
Shares subject to such unexercised Options shall again be available for the
granting of Options under the Plan. In the event that Shares that were
previously issued by the Company, upon exercise of an Option, are reacquired by
the Company as part of the consideration received (in accordance with Section
6.05(b) hereof) upon the subsequent exercise of an Option, such reacquired
Shares shall again be available for the granting of Options hereunder.
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ARTICLE V
TERM OF PLAN
The Plan shall be effective as of the Effective Date and shall
terminate on the Termination Date. No Option may be granted hereunder after
the Termination Date.
ARTICLE VI
OPTION TERMS
6.01 Form of Option Agreement. Any Option granted under the Plan shall be
evidenced by an agreement ("Option Agreement") in such form as the Board, in
its discretion, may, from time to time, approve. Any Option Agreement shall
contain such terms and conditions as the Board may deem necessary or
appropriate and which are not inconsistent with the provisions of the Plan.
6.02 Option Exercise Price. The option exercise price for Shares to be
issued under this Plan shall be determined by the Board in its sole discretion,
but in no event shall the option exercise price be less than the Fair Market
Value of the Shares in the case of an Incentive Stock Option (or one hundred
and ten percent (110%) of such Fair Market Value in the case of an Incentive
Stock Option granted to a Restricted Shareholder), or less than eighty-five
percent (85%) of the Fair Market Value in the case of a Nonstatutory Stock
Option.
6.03 Vesting and Exercise of Options. Subject to the limitations set
forth herein and/or in any applicable Option Agreement entered into hereunder,
Options granted under the Plan shall vest and be exercisable in accordance
with the rules set forth in this Section 6.03:
(a) General. Subject to the other provisions of this Section 6.03,
Options shall vest and become exercisable at such time and in such installments
as the Board shall provide in each individual Option Agreement.
Notwithstanding the foregoing, the Board may, in its sole discretion,
accelerate the time at which an Option or installment thereof may be exercised.
Unless otherwise provided in this Section 6.03, in Section 6.04(a) or in the
Option Agreement pursuant to which an Option is granted, an Option may be
exercised when Accrued Installments accrue as provided in such Option Agreement
and at any time thereafter until, and including, the day before the Option
Termination Date.
(b) Termination of Options. All installments of an Option shall
expire and terminate on such date as the Board shall determine ("Option
Termination Date"), which in no event shall be later than ten (10) years from
the date such Option was granted (five (5) years in the case of an Incentive
Stock Option granted to a Restricted Shareholder).
(c) Termination of Employment other than by Death, Retirement or
Total Disability. In the event that the employment of an Optionee with a
Participating Company is terminated for any reason (other than death or Total
Disability or retirement on or after reaching age 60), any installments under
an Option held by such Optionee that have not accrued as of the employment
termination date shall expire and become unexercisable as of the employment
termination date. All Accrued Installments as of the employment termination
date shall expire and become unexercisable as of the earlier of (i) three (3)
months following the employment termination date; or
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(ii) the original Option Termination Date. For purposes of the Plan, an
Optionee who is an employee or officer of any Participating Company shall not
be deemed to have incurred a termination of his employment so long as such
Optionee is an employee or officer of any Participating Company.
(d) Leave of Absence. An approved leave of absence shall not
constitute a termination of employment under the Plan. An approved leave of
absence shall mean an absence approved pursuant to the policy of a
Participating Company for military leave, sick leave, or other bona fide leave,
not to exceed ninety (90) days or, if longer, as long as the employee's right
to re-employment is guaranteed by contract, statute or the policy of a
Participating Company. Notwithstanding the foregoing, in no event shall an
approved leave of absence operate to make an Option exercisable after the
original Option Termination Date.
(e) Death, Retirement or Total Disability of Optionee. In the event
that the employment of an Optionee with a Participating Company is terminated
by reason of death, Total Disability, or retirement on or after reaching age
sixty (60), any unexercised Accrued Installments of Options granted hereunder
to such Optionee shall expire and become unexercisable as of the earlier of:
(i) The applicable Option Termination Date; or
(ii) The first anniversary of the date of termination of
employment of such Optionee by reason of the Optionee's death, Total
Disability or retirement.
Any such Accrued Installments of a deceased Optionee may be exercised
prior to their expiration only by the person or persons to whom the Optionee's
Option rights pass by will or the laws of descent and distribution. Any Option
installments under such a deceased, disabled or retired Optionee's Option that
have not accrued as of the date of the employee's termination of employment due
to death, Total Disability or retirement shall expire and become unexercisable
as of the employment termination date.
(f) Termination of Affiliation of Participating Company.
Notwithstanding the foregoing provisions of this Section 6.03, (i) in the case
of an Optionee who is an employee or officer of a Participating Company other
than the Company, upon an Affiliation Termination (as defined herein) of such
Participating Company or an ORBCOMM Partnership, such Optionee shall be deemed
(for all purposes of the Plan) to have incurred a termination of his employment
for reasons other than death, retirement on or after age 60 or Total
Disability, with such termination to be deemed effective as of the effective
date of said Affiliation Termination and (ii) in the case of an Optionee who is
an employee or officer of a Participating Company that is an ORBCOMM
Partnership, upon an Affiliation Termination of such Participating Company, all
unaccrued installments of any Option held by such Optionee shall vest and
become Accrued Installments immediately prior to the effectiveness of such
Affiliation Termination and thereafter each such Option shall expire and become
unexercisable as of the earlier of (A) the applicable Option Termination Date,
(B) the first anniversary of the Optionee's death, Total Disability or
retirement on or after reaching age 60 or (C) three (3) months following the
date the Optionee's ceases to be employed by any Participating Company or any
ORBCOMM Partnership. As used herein, the term "Affiliation Termination" shall
mean, with respect to a Participating Company, the termination of such
Participating Company's status as an ORBCOMM Partnership or as a Parent or
Subsidiary Corporation of the Company or of Orbital Sciences Corporation.
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6.04 Exercise of Options.
(a) Subject to Section 6.09(b), no Options may be exercised by any
Optionee until the Board has determined that the value of Orbital Sciences
Corporation's share of the Company is equal to at least one hundred twenty-five
percent (125%) of the amount of Orbital Sciences Corporation's investment in
the Company, or until September 1, 2001, whichever is earlier. For purposes of
this Section 6.04(a), (i) the "value of Orbital Sciences Corporation's share of
the Company" shall mean the sum of the percentage of the Company's Common Stock
owned by Orbital Sciences Corporation multiplied by the then Fair Market Value
of the Common Stock of the Company as determined by the Board, plus the
principal amount of net intercompany indebtedness owed by the Company to
Orbital Sciences Corporation; and (ii) "Orbital Sciences Corporation's
investment in the Company" shall mean Orbital Sciences Corporation's investment
in, and to the extent not reflected in the computation of such investment, the
cumulative total of all unreimbursed expenses incurred, and expenditures made
by Orbital Sciences Corporation on behalf of, the Company, net of expenditures
that are charged to Independent Research and Development or directly reimbursed
by customers. Any such determination of the value of Orbital Sciences
Corporation's share of the Company, or of Orbital Sciences Corporation's
investment in the Company, made in good faith by the Board shall be conclusive
and binding on the Company and all Optionees.
(b) Subject to the restrictions in Section 6.04(a), an Option may be
exercised in accordance with this Section 6.04 as to all or any portion of the
Shares covered by an Accrued Installment of the Option, from time to time
during the applicable option period, except that an Option shall not be
exercisable with respect to fractions of a Share. Options may be exercised, in
whole or in part, by giving written notice of exercise to the Company, which
notice shall specify the number of Shares to be purchased and shall be
accompanied by payment in full of the purchase price in accordance with Section
6.05. An Option shall be deemed exercised when such written notice of exercise
has been received by the Company. No Shares shall be issued until full payment
has been made and the Optionee has satisfied such other conditions as may be
required by this Plan, as may be required by applicable laws, rules or
regulations, or as may be adopted or imposed by the Board. Until the issuance
of stock certificates, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to Shares subject to an Option
notwithstanding the exercise of the Option. No adjustment will be made for a
dividend or other rights for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 6.09(a).
6.05 Payment of Option Exercise Price.
(a) Except as otherwise provided in Section 6.05(b), the entire
option exercise price shall be paid at the time the Option is exercised by
cashier's check or such other means as deemed acceptable by the Board.
(b) In the discretion of the Board (which, in the case of an
Incentive Stock Option, shall be exercised only at the time of grant), an
Optionee may elect to pay for all or some of the Optionee's Shares with Shares
the Optionee has held for at least six (6) months, subject to all restrictions
and limitations of applicable laws, rules and regulations and subject to the
satisfaction of any conditions the Board may impose, including, but not limited
to, the making of such representations and warranties and the providing of such
other assurances that the Board may require with respect to the Optionee's
title to the Shares used for payment of the exercise price. Such payment
shall be made
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by delivery of certificates representing Shares, duly endorsed or with duly
signed stock power attached, such Shares to be valued at the Fair Market Value
of such Shares on the day immediately preceding the day notice of exercise is
received by the Company.
6.06 Purchase by the Company of Shares Acquired Pursuant to Exercise of
Option.
(a) Valuation. Provided that there has not yet been a public
offering (within the meaning of the Securities Act of 1933, as amended, and the
rules and regulations thereunder) of the Company's Common Stock, all Shares
acquired pursuant to exercise of an Option that as of the applicable Valuation
Date (as hereinafter defined), have been held by an Optionee at least six (6)
months from the date of exercise of the Option (such Shares, in each year, the
"Payable Shares"), shall, at the election of the Optionee exercised in the
manner set forth herein, be purchased by the Company at a price per share equal
to the Fair Market Value of a share of Common Stock on September 1, 1995,
September 1, 1996 and September 1, 1997 and in subsequent years on March 1 and
September 1 of each year (each such date is referred to as a "Valuation Date");
provided further that on the Valuation Date in 1995 only, no more than fifty
percent (50%) of each Optionee's Payable Shares shall become subject to
purchase by the Company. Within thirty (30) days after each such Valuation
Date after Options are exercisable under Section 6.04(a), the Company shall
cause the Fair Market Value of the Shares to be determined in accordance with
Section 6.06(b) and shall notify each holder of Shares acquired pursuant to
exercise of an Option of such Fair Market Value. Within thirty (30) days after
receipt of such notice, each such holder of Shares may elect to have all or any
portion of his or her Payable Shares be purchased by the Company at a price per
share equal to such Fair Market Value by submitting to the Committee an
irrevocable written notice of such election. The rights of an Optionee under
this Section 6.06 may be exercised by the Optionee and any transferee specified
in clause (ii) of Section 6.08(a) (in which case all references herein to
"Optionee" shall refer to such transferee), but shall not be exercisable by any
other holder of Shares, whether or not such holder acquired such Shares in a
transfer permitted by Section 6.08(a).
(b) Method of Valuation. The value of a Share of Company Common
Stock on each Valuation Date shall be determined in good faith by the
Committee, and any such determination shall be conclusive and binding on the
Company and all Optionees and/or holders of Shares. In making any such
determination of Fair Market Value, the Committee may, but shall not be
required to, rely on a determination of Fair Market Value made by an
independent appraiser or other appropriate financial professional selected by
the Committee in its sole discretion and reasonably believed to be competent to
make such determination. No member of the Committee shall have any personal
liability to any Optionee and/or holder of Shares for any determination of Fair
Market Value under this Section 6.06, or any act or omission in connection
therewith, unless the Optionee and/or holder of Shares shall establish that
such determination, act or omission was not made in good faith.
(c) Closing of Purchase of Shares. The closing for any purchase of
Shares pursuant to this Section 6.06 shall occur on such date within sixty (60)
days of the giving by the Company of the notification required by Section
6.06(a) as the Company shall specify by five (5) business days' notice to each
selling Optionee, at the offices of the Company at 11:00 a.m. local time, or at
such other time and place as the parties to such sale may mutually agree. At
the closing, the Optionee shall deliver to the Company a certificate or
certificates representing the Shares to be purchased by the Company, duly
endorsed for transfer, free and clear of any lien or encumbrance, in exchange
for payment of the purchase price (i) by check, (ii) by delivery of
certificates representing
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shares of Common Stock of Orbital Sciences Corporation having a Fair Market
Value (determined in the manner provided in Section 2.10) as of the business
day preceding the closing equal to the purchase price of the Shares, (iii) by
delivery of a subordinated promissory note of the Company in the principal
amount of the purchase price of the Shares, bearing interest at a rate equal to
the then applicable federal short-term rate (determined pursuant to Section
1274(d) of the I.R.C.), providing for quarterly payments of interest and
payment of the full principal amount on the first anniversary of the date of
issuance, and containing provisions as approved by the Board in its sole
discretion providing for the subordination of such notes to such indebtedness,
whether then existing or thereafter created, of the Company as is specified by
the Board, including, without limitation, indebtedness for money borrowed or
similar indebtedness, or (iv) any combination of the foregoing; provided,
however, that no more than fifty percent (50%) of the purchase price for Shares
may be paid by subordinated promissory note. Any payment in the form of shares
of Orbital Sciences Corporation Common Stock shall be subject to all applicable
federal and state securities laws restrictions and all other restrictions.
(d) Limitations on Repurchase Obligations. Notwithstanding any
other provision of this Section 6.06, the Company shall not be obligated to
purchase Payable Shares (i) to the extent such purchase is not permitted under
applicable law or under the terms of any of (A) the Company's then-existing
debt instruments or agreements governing such debt instruments, (B) the
then-existing terms of any class of preferred stock of the Company, or (C) a
then-existing stockholders agreement to which the Company is a party; or (ii)
in the event there has been a public offering (within the meaning of the
Securities Act of 1933 as amended, and the rules and regulations thereunder) of
the Company's Common Stock.
6.07 Options Not Transferable. Options granted under this Plan may not be
sold, pledged, hypothecated, assigned, encumbered, gifted or otherwise
transferred or alienated in any manner, whether voluntarily, by operation of
law, pursuant to judicial process or otherwise, other than by will or the laws
of descent and distribution, and may be exercised during the lifetime of an
Optionee only by such Optionee.
6.08 Restrictions on Issuance or Transfer of Shares.
(a) Until such time as the Company shall have consummated an
underwritten public offering of Shares involving an aggregate public offering
price of at least Five Million Dollars ($5,000,000), or the Shares are
registered under the Exchange Act, no Shares issuable upon exercise of an
Option shall be sold, assigned, encumbered, pledged, hypothecated, given away
or in any other manner disposed of or transferred, whether voluntarily, by
operation of law, pursuant to judicial process or otherwise, except (i) to the
Company pursuant to Section 6.06 hereof, or (ii) upon the death of the holder
thereof, Shares may be transferred and distributed by will or other instrument
taking effect at death or by the laws of descent and distribution to such
holder's estate, executors, administrators and personal representatives, and
then to such holder's heirs, legatees or distributees, provided that no such
transfer shall be effective until the recipient has delivered to the Company a
written acknowledgment in form and substance reasonably satisfactory to the
Company that such Shares are subject to the restrictions on disposition or
transfer set forth in this Section 6.08(a). Any attempted transfer of Shares
not in accordance with this Section 6.08(a) shall be null and void, and the
Company shall not in any way give effect to any such disposition or transfer.
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(b) No Shares shall be issued or delivered upon exercise of an
Option unless and until there shall have been compliance with all applicable
requirements of the Securities Act of 1933, as amended, all applicable listing
or quotation requirements of any national securities exchange or market on
which Shares are then listed or quoted, and any other requirement of law or of
any regulatory body having jurisdiction over such issuance and delivery. The
inability of the Company to obtain any required permits, authorizations or
approvals necessary for the lawful issuance and sale of any Shares hereunder on
terms deemed reasonable by the Board shall relieve the Company, the Board and
any Committee of any liability in respect of the non-issuance or sale of such
Shares as to which such requisite permits, authorizations or approvals shall
not have been obtained.
(c) As a condition to the granting or exercise of any Option, the
Board may require the person receiving or exercising such Option to make any
representation and/or warranty to the Company as may be required under any
applicable law or regulation, including, but not limited to, a representation
that the Option and/or Shares are being acquired only for investment and
without any present intention to sell or distribute such Option and/or Shares,
if such a representation is required under the Securities Act of 1933, as
amended, or any other applicable law, rule or regulation.
(d) The exercise of Options under the Plan is conditioned on
approval of the Plan by the vote or written consent of a majority of the
holders of outstanding Shares of the Company's Common Stock within twelve (12)
months of the adoption of the Plan. In the event such stockholder approval is
not obtained within such time period, any Options granted hereunder shall be
void.
6.09 Option Adjustments.
(a) If the outstanding Shares of Common Stock of the Company are
increased, decreased, changed into or exchanged for a different number or kind
of shares of the Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split or other
similar transaction, the Board shall make a proportionate adjustment in the
number or kind of shares and the per-share option price thereof, which may be
issued in the aggregate and to individual Optionees upon exercise of Options
granted under the Plan; provided, however, that no such adjustment need be made
if, upon the advice of counsel, the Board determines that such adjustment may
result in the receipt of federally taxable income to holders of Options granted
hereunder or the holders of Common Stock or other classes of the Company's
securities.
(b) Upon the occurrence of a Terminating Transaction, as of the
effective date of such Terminating Transaction, the Plan and any then
outstanding Options (whether or not vested) shall terminate unless (i)
provision is made in writing in connection with such transaction for the
continuance of the Plan and for the assumption of such Options, or for the
substitution for such Options of new options covering the securities of any
successor or survivor corporation in the Terminating Transaction or an
affiliate thereof, with such adjustments as the Board deems appropriate with
respect to the number and kind of securities and the per-share exercise price
under such substituted options, in which event the Plan and such outstanding
Options shall continue or be replaced, as the case may be, in the manner and
under the terms so provided; or (ii) the Board otherwise shall provide in
writing for such adjustments as it deems appropriate in the terms and
conditions of the then outstanding Options (whether or not vested), including,
without limitation, (A) accelerating the vesting of outstanding Options; and/or
(B) providing for the cancellation of Options and their automatic conversion
into the right to receive the securities or other properties which a holder of
Shares underlying such Options
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would have been entitled to receive upon the consummation of such Terminating
Transaction had such Shares been issued and outstanding (net of the appropriate
option exercise prices). If, pursuant to the foregoing provisions of this
paragraph (b), the Plan and the Options shall terminate by reason of occurrence
of a Terminating Transaction without provision for any of the action(s)
described in clause (i) and/or (ii) hereof, then any Optionee holding
outstanding Options shall have the right, at such time immediately prior to the
consummation of the Terminating Transaction as the Board shall designate, to
exercise their Options to the full extent not theretofore exercised, including
any installments which have not yet become Accrued Installments.
(c) Except to the extent required in order to retain the
qualification of an Option as an Incentive Stock Option under I.R.C. Section
422, to the maximum extent possible, any adjustments authorized under this
Section 6.09 with respect to any outstanding Options shall be made by means of
appropriate adjustments to the number of Shares (or other securities) and the
option exercise price therefor under the unexercised portions of such
outstanding Options, but without changing the aggregate exercise price
applicable to said unexercised portions. In all cases, the nature and extent
of adjustments under this Section 6.09 shall be determined by the Board in its
sole discretion, and any such determination as to what adjustments shall be
made, and the extent thereof, shall be final and binding. No fractional shares
of stock shall be issued under the Plan pursuant to any such adjustment.
6.10 Taxes. The Board shall make such provisions and take such steps as
it deems necessary or appropriate for the withholding of any federal, state,
local and other tax required by law to be withheld with respect to the grant or
exercise of an Option under the Plan, or with respect to the disposition of
Shares acquired pursuant to the exercise of an Option pursuant to the Plan,
including, but without limitation, the deduction of the amount of any such
withholding tax from any compensation or other amounts payable to an Optionee
by any member of the Participating Companies, or requiring an Optionee (or the
Optionee's beneficiary or legal representative), as a condition of granting or
exercising an Option, to pay to any member of the Participating Companies any
amount required to be withheld, or to execute such other documents as the Board
deems necessary or desirable in connection with the satisfaction of any
applicable withholding obligation. Prior to January 1, 1998, the Board may
permit, and after January 1, 1998, the Board shall permit, either at the time
of the grant of an Option or the time of exercise, the Optionee and/or holder
of Shares to elect, at such time and in such manner as the Board may prescribe,
to satisfy such withholding obligation by (i) delivering to the Company Shares
owned by such individual having a Fair Market Value equal to such withholding
obligation, or (ii) requesting that the Company withhold from the Shares to be
delivered upon the exercise a number of Shares having a Fair Market Value equal
to such withholding obligation; provided that after January 1, 1998, in the
first year that any Optionee and/or holder of Shares elects to satisfy his or
her tax withholding obligation in a manner specified in this Section 6.10(i) or
(ii), such Optionee and/or holder of Shares shall not be entitled to exercise
more than 50% of his or her total vested Options in such manner; and provided
further that the Board shall amend this Plan to delay the foregoing January 1,
1998 date in the event there are not a total of at least eighteen (18)
operational ORBCOMM satellites in orbit by January 1, 1998.
6.11 Legends on Options and Stock Certificates. Each Option Agreement and
each certificate representing Shares acquired upon exercise of an Option shall
be endorsed with all legends, if any, required by applicable federal and state
securities laws to be placed on the Option Agreement and/or the certificate, as
well as legends setting forth the restrictions contained in Section 6.08(a)
hereof. The determination of which legends, if any, shall be placed upon Stock
Option Agreements
11
<PAGE> 12
and/or said Shares shall be made by the Board in its sole discretion, and such
decision shall be final and binding.
6.12 Employment Rights. Neither the adoption of the Plan nor the grant of
Options will confer upon any person any right to continued employment with the
Company or any subsidiary or affect in any way the right of the Company or
subsidiary to terminate an employment relationship at any time. Except as
specifically provided by the Board in any particular case, the loss of existing
or potential profit in connection with Options granted under the Plan will not
constitute an element of damages in the event of termination of an employment
relationship.
6.13 Non-Competition Provisions. In consideration for the grant of
Options, the Committee may require that Optionees enter into a non-competition
agreement with the Company.
ARTICLE VII
AMENDMENT OR TERMINATION OF PLAN
7.01 Board Authority. The Board may amend, alter and/or terminate the
Plan at any time; provided, however, that no change shall be effective unless
approved by the stockholders of the Company if such change would cause the
Option Plan to fail to meet the qualification requirements for Incentive Stock
Option Plans as set forth in the Internal Revenue Code or, if the Company then
has a class of equity security registered under the Exchange Act, to comply
with Rule 16b-3 of the Exchange Act or any successor rule under such Act as in
effect on the date of such amendment.
7.02 Limitation on Board Authority. The Board may amend the terms of any
Option previously granted, prospectively or retroactively, and may amend the
Plan in accordance with the provisions of Section 7.01; provided, however, that
unless required by applicable law, rule or regulation, no amendment of the Plan
or of any Option Agreement shall affect, in a material and adverse manner,
Options granted prior to the date of any such amendment without the consent of
any Optionee holding any such affected Options.
7.03 Substitution of Options. In the Board's discretion, the Board may,
with an Optionee's consent, substitute Nonstatutory Stock Options for
outstanding Incentive Stock Options, and any such substitution shall not
constitute a new Option grant for the purposes of the Plan, and shall not
require a revaluation of the Option exercise price for the substituted Option.
Any such substitution may be implemented by an amendment to the applicable
Option Agreement or in such other manner as the Board in its discretion may
determine.
ARTICLE VIII
GENERAL PROVISIONS
8.01 Availability of the Plan. A copy of the Plan shall be delivered to
the Secretary of the Company and shall be shown by the Secretary to any
Eligible Person making reasonable inquiry concerning the Plan.
12
<PAGE> 13
8.02 Notice. Any notice or other communication required or permitted to
be given pursuant to the Plan or under any Option Agreement must be in writing
and may be given by registered or certified mail and, if given by registered or
certified mail, shall be determined to have been given and received when a
registered or certified letter containing such notice, properly addressed with
postage prepaid, is deposited in the United States mails and, if given
otherwise than by registered or certified mail, shall be deemed to have been
given when delivered to and received by the party to whom addressed. Notice
shall be given to Eligible Persons at their most recent addresses shown in the
Company's records. Notice to the Company shall be addressed to the Company at
the address of the Company's principal executive offices, to the attention of
the Secretary of the Company.
8.03 Titles and Headings. Titles and headings of sections of the Plan are
for convenience of reference only and shall not affect the construction of any
provision of the Plan.
8.04 Governing Law. The Plan shall be governed by, interpreted under and
construed and enforced in accordance with the internal laws, and not the laws
pertaining to conflicts or choice of laws, of the State of Delaware, applicable
to agreements made and to be performed wholly within the State of Delaware.
13
<PAGE> 1
EXHIBIT 10.9
ORBITAL SCIENCES CORPORATION
1995 DEFERRED COMPENSATION PLAN
SECTION 1. PURPOSE OF THE PLAN
Orbital Sciences Corporation (the "Employer") has established this
Deferred Compensation Plan (the "Plan") effective as of March 1, 1995 to
attract, retain and motivate certain of its key employees, as well as those of
its affiliates, by providing them with the opportunity (i) to defer receipt of
certain amounts of compensation and (ii) to be credited with discretionary
matching or other Employer credits as hereinafter provided. The Plan is
intended to be "a plan which is unfunded and is maintained by an employer
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees" within the meaning of sections
201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act
of 1974, as amended, ("ERISA"), and shall be administered in a manner
consistent with that intent.
SECTION 2. ADMINISTRATION
The Plan will be administered by the Human Resources Committee of the
Board of Directors of the Employer (the "Committee"). From time to time, the
Committee shall have the authority to appoint persons and entities to act as
designated representatives on its behalf in administering the Plan pursuant to
its provisions. The Committee will have full discretionary authority to
interpret the provisions of the Plan and decide all questions and settle all
disputes which may arise in connection with the Plan, and may establish its own
operative and administrative rules and procedures in connection therewith,
provided such procedures are consistent with the claims procedure requirements
of Section 503 of ERISA and the regulations thereunder. All interpretations,
decisions and determinations made by the Committee will be binding on all
persons concerned. No member of the Committee who is a Participant in the Plan
may vote or otherwise participate in any decision or act with respect to a
matter relating solely to himself or herself (or to his or her beneficiaries).
SECTION 3. SELECTION OF PARTICIPANTS
The Committee will select from time to time the key employees who are
eligible to participate in the Plan. When a key employee has been selected to
participate in the Plan, he or she will be notified by the Committee and given
the opportunity to elect to defer compensation under the Plan. (A key employee
who makes such an election is hereinafter referred to as a "Participant").
<PAGE> 2
SECTION 4. ESTABLISHMENT OF ACCOUNT
The Committee will cause the Employer or an affiliate to establish on its
books a deferred compensation account (the "Account") for each Participant
employed by it reflecting the Employer's or affiliate's obligation to pay the
Participant deferred compensation as provided under the Plan.
SECTION 5. DEFERRAL ELECTIONS
For each calendar year, a Participant may elect to defer receipt of a
specified portion of his or her compensation from the Employer or an affiliate
for the year. A Participant's election to defer compensation for a calendar
year shall be subject to the following restrictions:
(i) Elections to defer regular pay not yet earned may be cancelled at any
point during the year. Once an election has been cancelled, the Participant
may not reenter the Plan during that calendar year in which the cancellation
occurred.
(ii) Elections to defer compensation already earned or bonus awards
attributable to work performed during the calendar year are irrevocable.
(iii) Elections to defer shall be made prior to the beginning of such
calendar year, except as follows:
(a) For 1995, a Participant may elect to defer receipt of a
specified portion of his or her compensation from the Employer or an affiliate
for the remainder of the calendar year, provided that such an election is made
prior to receipt of such compensation and is irrevocable for the remainder of
the calendar year; and
(b) For employees designated as eligible for Participation at any
time during a calendar year, such Participant may elect to defer receipt of a
specified portion of his or compensation from the Employer for the remainder of
the calendar year, provided that such election is made prior to the receipt of
such compensation and is irrevocable for the remainder of the calendar year.
SECTION 6. EMPLOYER CREDITS
2
<PAGE> 3
For each calendar year, the Employer or an affiliate in its sole
discretion may credit additional amounts to a Participant's Account on a
matching or other basis. Such additional amounts, if any, may be different for
each Participant. The Participant will be notified by the Committee of the
Employer's or affiliate's decision to credit such additional amounts. Such
notice will include the amount to be credited and such other information as the
Committee shall determine.
SECTION 7. INVESTMENT MEASUREMENTS
From time to time, the Committee will establish investment measurements to
be used to adjust the balance of each Participant's Account. Such investment
measurements may be changed from time to time by the Committee, and may be
different for each Participant. Each Participant will be notified by the
Committee from time to time of such investment measurements and will be
furnished such other information as the Committee shall determine.
SECTION 8. ADJUSTMENTS TO PARTICIPANT'S ACCOUNT
From time to time, the Committee will adjust each Participant's Account to
(i) credit the amount which the Participant has elected to defer under Section
5 or the Employer (or affiliate) has elected to credit under Section 6 and (ii)
reflect the investment measurements established under Section 7. A
Participant's Account will continue to be adjusted under this Section until the
entire amount has been paid to the Participant or his or her beneficiary. A
Participant's Account will also be adjusted to reflect benefit payments and
withdrawals under Section 9.
SECTION 9. PARTICIPANT BENEFITS; VESTING
Subject to the following provisions of this Section, a Participant who
terminates employment with the Employer (or an affiliate) for any reason other
than death will be entitled to elect to receive the vested portion of the
balance credited to his or her Account on a specified date following
termination of employment (but not later than April 1 following the year in
which the Participant attains age 70 1/2) either in a single payment or in a
series of monthly installment payments (not to exceed 120 such payments). An
election by a Participant to defer receipt or to receive a lump sum or
installment payments must be made at least 90 days prior to his or her
termination of employment. Furthermore, the Committee at its sole discretion
may modify any such election at any time if the Committee determines that such
modification is in the best interest of the Employer or an affiliate. The
Committee
3
<PAGE> 4
will determine the time and the form of payment in the case of any Participant
who fails to make a timely election.
A Participant who incurs a severe financial hardship resulting from
unforeseeable circumstances beyond the Participant's control may request to
withdraw all or a portion of his or her vested Account to satisfy such
financial hardship. The Committee in its sole discretion will determine
whether a severe financial hardship exists and what amount, if any, may be
withdrawn.
A Participant will be 100% vested in the portion of his or her Account
attributable to his or her elective deferrals under Section 5 above. A
Participant will become vested in the portion of his or her Account
attributable to Employer credits under Section 6 above in accordance with the
following vesting schedule:
<TABLE>
<CAPTION>
Years of Service With Vested
the Employer or an Affiliate Percentage
---------------------------- ----------
<S> <C>
less than 1 0 %
more than 1, but less than 2 20 %
more than 2, but less than 3 40 %
more than 3, but less than 4 60 %
more than 4, but less than 5 80 %
more than 5 100 %
</TABLE>
For purposes of the Plan, Years of Services for vesting purposes will have
the same meaning as under the Deferred Salary & Profit Sharing Plan for
Employees of Orbital Sciences Corporation.
SECTION 10. BENEFICIARY BENEFITS
The beneficiary of a Participant who dies prior to the commencement of
benefit payments under Section 9 will be entitled to receive 100% of the
Participant's entire Account. The beneficiary of a Participant who dies after
the commencement of benefit payments under Section 9 will become entitled to
receive the remaining balance, if any, of the Participant's Account.
A Participant may designate a beneficiary or beneficiaries, or change any
prior designation, on a form approved by the Committee to receive the remaining
vested balance in his or her Account upon
4
<PAGE> 5
his or her death. If no beneficiary is designated (or if a designated
beneficiary does not survive the Participant), the beneficiary will be the
Participant's estate. Payments under this section will be made in a single sum
or installments as selected by the Committee.
SECTION 11. NATURE OF CLAIM FOR PAYMENTS
The Employer or an affiliate shall not be required to set aside or
segregate any assets of any kind to meet its obligations hereunder. A
Participant shall have no right on account of the Plan in or to any specific
assets of the Employer or any affiliate. Any right to any payment the
Participant may have on account of the Plan shall be that of a general,
unsecured creditor of the Employer or an affiliate.
The Employer or an affiliate may establish a trust of which the Employer
or the affiliate is treated as the owner under Subpart E of Subchapter J,
Chapter 1 of the Internal Revenue Code of 1986, as amended, (a "grantor trust")
and may deposit funds with the trustee of the trust (the "Trustee") sufficient
to satisfy the benefits provided under the Plan. If the Employer or affiliate
establishes such a trust and, if at the time of a "change of control" as
defined in the trust, the trust has not been fully funded, the Employer or
affiliate shall, within the time and manner specified under such trust, deposit
in such trust amounts sufficient to satisfy all obligations under the Plan as
of the date of deposit.
In all events, the Employer or affiliate shall remain ultimately liable
for the benefits payable under this Plan to Participants employed by the
Employer or affiliate, and to the extent the assets at the disposal of the
trustee are insufficient to enable the trustee to satisfy all benefits, the
Employer or affiliate shall pay all such benefits necessary to meet its
obligations under this plan.
SECTION 12. NO ASSIGNMENT OR ALIENATION
The interest hereunder of any Participant or beneficiary will not be
alienable by the Participant or beneficiary by assignment or any other method
and will not be subject to be taken by his or her creditors by any process
whatsoever, and any attempt to cause such interest to be so subjected will not
be recognized, except to such extent as may be required by law.
5
<PAGE> 6
The obligations of the Employer or affiliate hereunder shall be binding
upon its successors and assigns, whether by merger, consolidation or
acquisition of all or substantially all of its business or assets.
SECTION 13. NO CONTRACT OF EMPLOYMENT
The Plan will not be deemed to constitute a contract of employment between
the Employer or affiliate and any Participant, or to be consideration for the
employment of any Participant.
SECTION 14. AMENDMENT
The Plan may be altered, amended or revoked in writing by the Employer in
any manner and at any time.
SECTION 15. GOVERNING LAW
This Plan will be governed and construed in accordance with the laws of
the state in which the Employer's headquarters are located, to the extent such
laws are not preempted by federal law.
IN WITNESS WHEREOF, the Employer, by its duly authorized officer, has
caused this Plan to be executed this _____ day of _______, 19___.
ORBITAL SCIENCES CORPORATION
By:________________________
6
<PAGE> 1
EXHIBIT 10.10
FAIRCHILD SPACE AND DEFENSE CORPORATION
Supplemental Executive Retirement Plan
Effective September 1, 1989
Revised 11/3/93
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
II. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
III. PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
IV. VESTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
V. THE BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
VI. TERMINATION FROM THE PLAN PRIOR TO RETIREMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
VII. RETIREMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
VIII. PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
IX. DEATH OF THE PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
X. AMENDMENT OR TERMINATION OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
XI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
XII. THE COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE> 3
I. INTRODUCTION
Fairchild Space and Defense Corporation, a Delaware Corporation ("Employer"),
hereby establishes a Supplemental Executive Retirement Plan (the "Plan"). The
purpose of the Plan is to assure adequate retirement income for key executives
of the Employer. The Plan is an unfunded, unqualified plan for certain highly
compensated employees or top management and is not a plan subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
<TABLE>
<CAPTION>
II. DEFINITIONS
<S> <C>
Account Balances: The Participant's profit-sharing or equivalent account with
respect to the Company's contributions and the earnings thereon
in the Savings Plan for Employees of Fairchild Space and Defense
Corporation.
Accrual Percentage: The rate by which the Participant's benefits under the Plan
accrue as set forth in Article V.B.
Actuarial Equivalent: The Actuarial Equivalent shall be any benefit provided under the
terms of the Plan which has the same present value on the date
the benefit payment commences and shall be determined in
accordance with the definition of Actuarial Equivalent or the
method for determination thereof in the defined benefit plan of
the Company in which the Participant participates except that
for the purposes of lump sum payment the Pension Benefit
Guaranty Corporation rates (PBGC) shall be used.
Agreement: The written agreement between the Participant and the Company
evidencing participation in the Plan.
Annual Retirement Benefit: The retirement benefit to be paid to Participant in accordance
with the provisions of the Plan.
Beneficiary: Any beneficiaries last designated by the Participant to receive
the benefits provided to him under this Plan. All such
designations shall be by written document filed with the
Employer and shall be revocable at any time by the Participant
by written document filed with the Employer. All such
revocations may be made without the consent of the Beneficiary.
If no designation shall be in effect at the time benefits are
payable under this Plan, the Beneficiary shall be the estate of
the Participant.
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Board of Directors: The Board of Directors of the Employer.
Committee: The Executive Compensation Committee which has been designated
by the Board of Directors to administer the Plan.
Company: The Employer, its successors and assigns, and any corporation
that the Employer owns the majority of stock, directly or
indirectly, and that adopts the Plan.
Disability: A disability of the Participant under a tax-qualified retirement
plan of the Company in which the Participant participates.
Employee: Any person regularly employed by the Company, exempt from the
overtime provisions of the Fair Labor Standards Act.
Final Average Earnings: The result obtained by dividing the Salary paid to an Employee
during a certain period by the number of years, including
fractional years, in such period for which the Salary was
received. The certain period shall be the five consecutive
calendar years of Service within the last 10 completed years of
Service which yield the highest average salary. If the Employee
has less than five consecutive calendar years of Service, the
average shall be taken over his total period of Service. For the
purposes of this calculation, Service shall only include service
with the Company after September 1, 1989 and service with
Fairchild Industries, Inc. after December 31, 1978.
Hour of Service: Each hour for which an Employee is directly or indirectly paid
by the Employer for the performance of duties and for reasons
other than the performance of duties. The following periods of
time shall be included as Hours of Service: authorized leaves of
absence and employment by the Company in a position that is not
exempt from the overtime provisions of the Fair Labor Standards
Act.
Normal Year of Service: A calendar year in which an Employee completes 2,080 Hours of
Service whether or not a Participant.
Participant: Any Employee who meets the participation requirements described
within or hereafter amended.
Policy: The term Policy shall mean a life insurance policy as set forth
in Article XI.C.
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Salary: The basic rate of annual compensation payable as regular
compensation for Service as an Employee, including salary
reduction elected by the Employee under the Fairchild Space and
Defense Corporation deferred compensation plan, exclusive of
bonuses, overtime and other extraordinary compensation. The
basic rate in effect on January 1 of each year shall be used in
calculating the Benefit.
Service: Service as an Employee of the Company. Including service with
Fairchild Industries, Inc. which is recognized by the Retirement
Plan for Employees of Fairchild Space and Defense Corporation.
Vesting Percentage: The rate by which the Participant's rights to accrued benefits
under the Plan become nonforfeitable as set forth in Article IV.
Vesting Year of Service: A calendar year in which an Employee completes at least 1,000
Hours of Service.
</TABLE>
III. PARTICIPATION
A. In General
Participation in the Plan is determined by the Board of Directors and may be
terminated at their convenience. Participation in the Plan is voluntary for
selected Employees. Employee participation shall commence as of the effective
date of the Agreement.
B. Forms to be Filed
Each Employee who participates in the Plan shall file with the Committee
documents containing such information which in the opinion of the Committee is
necessary or desirable for the operation of the Plan.
C. Consent to the Plan
Each Participant participating in the Plan shall be conclusively deemed for all
purposes to have consented to this Plan and any amendments thereto and to all
the terms and conditions thereof.
However, nothing in this Plan shall be deemed to constitute an employment
agreement between the Participant and the Employer or give the Participant any
right to be retained by the
<PAGE> 6
Employer. Further, nothing herein shall be construed to modify the terms of any
employment agreement between the Participant and Employer but is intended to be
a supplement thereto.
IV. VESTING
The Vesting Percentage for any Participant is 10% of the Annual Retirement
Benefit for each Vesting Year of Service after an Employee becomes a
Participant and, for Hours of Service less than a vesting Year of Service, 1%
for each 100 Hours of Service.
V. THE BENEFIT
A. The Formula
An Annual Retirement Benefit beginning at age 65 will be paid to the
Participant annually for life equal to 60% of the Participant's Final Average
Earnings reduced by:
(1) the Participant's annual estimated primary Social Security benefit at age
65;
(2) the amount which the Participant has accrued under all defined benefit
plans maintained by the Company expressed as a yearly amount in the form of a
single life annuity; and
(3) the Account Balances at age 65 or the equivalent value of the Account
Balances at age 65 if determined for a Participant who is not age 65 expressed
as a yearly amount in the form of a single life annuity.
B. Accrual of Benefit
The Accrual Percentage shall be an accrual for any Participant of 5% of the
Annual Retirement Benefit for each Normal Year of Service and, for Hours of
Service less than a Normal Year of Service, .5% for each 208 Hours of Service.
VI. TERMINATION FROM THE PLAN PRIOR TO RETIREMENT
A. Termination of Employment
In the event of the Participant's termination of employment, other than by
death or retirement under a tax qualified retirement plan maintained by the
Company in which the Participant participates, the Participant is entitled to
the Annual Retirement Benefit (as if he had continued employment until reaching
age 65 and then immediately retired but based on his current Final Average
Earnings as of his termination of employment) multiplied by his Accrual
Percentage and by the Vesting Percentage in each case as of the date of
termination of employment, payable in accordance with the provisions of Article
VIII.
<PAGE> 7
In addition to the stated eligibility requirements for the Company's Retiree
Health Plan, Participants also shall be entitled, upon reaching the age of 55
years, to participate in the Retiree Health Plan in accordance with its terms
and as it may be from time-to-time amended and if it remains in existence if:
(a) the participant's employment was terminated involuntarily;
(b) the participant had at least ten years accrued service at the time of
termination, and (c) reasonable health care coverage is otherwise unavailable
from another source when the participant reaches the age of 55 years.
B. Termination from the Plan While an Employee
In the event of the Participant's termination from the Plan prior to his
termination of employment, the Participant is entitled to the Annual Retirement
Benefit calculated in accordance with Section A. of this Article Vi. as if the
Participant terminated employment as of his date of termination from the Plan
and payable in accordance with the provisions of Article VIII.
C. Total Disability
Notwithstanding any other provision of the Plan, in the event of the
Participant's termination of employment by reason of a Disability, the
participant is entitled to the Annual Retirement Benefit calculated in
accordance with Section A. of this Article VI. (for the purposes of such
calculation the Vesting Percentage shall be 100%) and payable in accordance
with the provisions of Article VIII.
VII. RETIREMENT
A. Normal Retirement
In the event of the Participant's termination of employment by retirement in
accordance with the provisions of a Company Retirement plan on or subsequent to
age 65, the Participant is deemed 100% vested and entitled to the Annual
Retirement Benefit as calculated in Article V.A. multiplied by the
Participant's Accrual Percentage.
B. Early Retirement
In the event of retirement under the provisions of a tax-qualified retirement
plan maintained by the Company in which the Participant participates prior to
age 65, the Participant is entitled to the Annual Retirement Benefit
(calculated as if he had continued employment until reaching age 65 and then
immediately retired but based on his current Final Average Earnings as of his
early retirement and reduced by (i) the early retirement benefit payable under
the tax-qualified retirement plan in which the Participant participates and
(ii) the Account Balances expressed as a yearly amount in the form of a single
life annuity multiplied by his Accrual Percentage and by
<PAGE> 8
his Vesting Percentage in each case as of the date of early retirement, payable
in accordance with the provisions of Article VIII. of the Plan.
VIII. PAYMENT OF BENEFITS
A. Normal Benefits
The Annual Retirement Benefit payable under the Plan is payable monthly
beginning at age 65 to the retiree for his life. However, this form of benefit
may be converted by the Participant at the convenience of the Company (as
determined by the Committee) to the Actuarial Equivalent in the form of a joint
and 50% spousal survivor annuity or a joint and 100% spousal survivor annuity.
(1) Post-Age 65 Termination or Retirement
If the Participant terminates employment or retires on or subsequent to the
Participant's reaching age 65, payments calculated pursuant to Article VII.A.
will begin on the date of such termination of employment or retirement.
(2) Pre-Age 65 Termination
In the event of the Participant's termination from the Plan prior to his
termination from employment or if the Participant terminates employment prior
to the Participant's reaching age 65 other than by death or retirement, then,
at the election of the Participant and at the convenience of the Company (as
determined by the Committee), the Participant may begin to receive the
Actuarial Equivalent of payments calculated pursuant to Article VI.A., B., or
C., as applicable, (i) for payments pursuant to Article VI.A. or B., on the
later of age 55 or the date of termination of employment or (ii) for payment
pursuant to Article VI.C., on the date of termination of employment by reason
of a Disability.
(3) Early Retirement
In the event of early retirement under the provisions of a tax-qualified plan
maintained by the Company in which the Participant participates, then, at the
election of the Participant and the convenience of the Company (as determined
by the Committee), the Participant may begin to receive payments calculated
pursuant to Article VII.B. on the date of such early retirement and reduced by
reference to the following factors:
<TABLE>
<CAPTION>
Age of Payment % of Benefit
Commencement Date Payable
----------------- -------
<S> <C>
64 100
63 100
62 100
</TABLE>
<PAGE> 9
<TABLE>
<S> <C>
61 96
60 92
59 88
58 84
57 80
56 76
55 72
</TABLE>
B. Lump Sum Payments
The Annual Retirement Benefit payable under the Plan may be paid to any
Participant who was an Employee on or after September 1, 1989 at the election
of the Participant and at the convenience of the Company (as determined by the
Committee), in a lump sum payment.
(1) Post-Age 65 Termination or Retirement
If the Participant terminates employment or retires on or subsequent to the
Participant's reaching age 65, payments may be made in a lump sum which is the
Actuarial Equivalent of the payment calculated pursuant to Article VII.A.
(2) Pre-Age 65 Termination
In the event of the Participant's termination from the Plan prior to his
termination from employment or if the Participant terminates employment prior
to the Participant's reaching age 65 other than be death or retirement,
payments may be made in a lump sum which is the Actuarial Equivalent of the
payment calculated pursuant to Article VI.A., B. or C., as applicable, on the
date of termination of employment.
(3) Early Retirement
In the event of early retirement under the provisions of a tax-qualified plan
maintained by the Company in which the Participant participates, payments may
be made in a lump sum which is the Actuarial Equivalent of Annual Retirement
Benefit multiplied by the Participant's Accrual Percentage and Vesting
Percentage in each case as of the date of early retirement.
C. Limitations
Benefits from this Plan will not be paid to an active Employee even in the case
where the Company hires a previously retired Employee. Further, in no case will
a Participant be paid twice by this Plan for the same year of service.
<PAGE> 10
IX. DEATH OF THE PARTICIPANT
A. Pre-Retirement Death Benefit
If a Participant dies prior to retirement, his Beneficiary shall receive a
death benefit equal to two times his Final Average Earnings plus the
difference, if any, by which the amount payable to such Beneficiary under the
Group Life Insurance Plan maintained by the Company with respect to such
Participant has been reduced by salary deferrals of the Participant under any
salary deferral plan maintained by the Company. This benefit shall be paid in
120 equal monthly installments. If benefits under a Policy with respect to the
Participant shall not be receivable by the Company through fault of the
Participant, or shall be receivable in a reduced amount, than the benefit
payable to the Beneficiary pursuant to this Section A. shall either, as
appropriate, not be paid or be proportionately reduced.
B. Post-Age 55 Spousal, Survivor Annuity
After age 55, a Participant may elect in writing to the Committee the
pre-retirement "joint and 50% spousal" survivor annuity. For the Participant
who elects this coverage, his Plan benefit will be reduced 1/2% for each year
or partial year the election is in effect. If the Participant dies prior to
retirement after making this election, the Participant shall be considered to
be 100% vested, and his surviving spouse shall receive at the spouse's option,
50% of the Participant's plan annuity for life or the pre-retirement death
benefit set forth in Article IX.A.
C. Post-Retirement Death Benefit
If a Participant has elected the "joint and spousal" survivor benefit as his
retirement payment form and dies after retirement, then upon his death the
spouse shall receive the elected amount for her life. Otherwise, no
post-retirement death benefit is available from the Plan.
X. AMENDMENT OR TERMINATION OF PLAN
The Employer may terminate this Plan at his discretion. The termination may not
reduce benefits accrued to date of Plan termination and payable to
Participants, except as follows;
a. No new Participants need be admitted and no additional benefits need be
accrued;
b. Participants with less than five calendar years of participation may be
treated as terminated from the Plan while an Employee;
c. Termination may not reduce benefits accrued to date of Plan termination for
Participants with more than five calendar years of participation if they
otherwise perform all the conditions of this Plan.
<PAGE> 11
Employer may amend this Plan in any respect, except that such amendment may not
reduce benefits except as permitted by Article X .
XI. MISCELLANEOUS
A. Gender and Number
The masculine pronouns whenever used shall include the feminine. Whenever any
words are used herein in the singular, they shall be construed as though they
were also used in the plural in all cases where they shall so apply.
B. Offset
If at the time any payments are to be made in accordance with the provisions of
this Plan, the Employee or the Beneficiary or both are indebted to the Company,
then the payments remaining to be made to the Employee or the Beneficiary or
both may, at the discretion of the Board of Directors, be reduced by the amount
of such indebtedness provided, however, that an election by the Company not to
reduce any such payment or payments shall not constitute a waiver of its claim
or such indebtedness.
C. The Policy
The Company may maintain a Policy underlying this Plan.
Neither the Employee nor any Beneficiary shall have any interest in the Policy
nor in any other assets of the Company. The Employee's and the Beneficiaries'
only interest hereunder shall be the right to receive the benefit set forth
herein.
Nothing in this Plan shall be construed as the creation by the Company of an
escrow account or trust fund or as any other form of asset segregation.
D. Retention of Services
This Agreement shall not be construed as giving the Employee any right to have
his services retained or continued by the Company.
E. Nonassignability
No benefits under this Agreement shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, or encumbrance
and any attempt to do so shall be void. Such benefits shall not be subject to
or liable for the debts, contracts, liabilities, engagements or torts of the
Employee or the Beneficiary.
F. Construction
<PAGE> 12
This Agreement shall be construed and governed in all respects under and by the
laws of the State of Delaware. If any provision of this Agreement shall be held
by a court of competent jurisdiction to be invalid or unenforceable, the
remaining provisions hereof shall continue to be fully effective.
XII. THE COMMITTEE
A. Appointment of the Committee
The Plan shall be administered by the Committee. All usual and reasonable
expenses of the Committee may be paid in whole or in part by the Company.
B. Claims Procedure
The Committee shall make all determinations as to the right of any person to a
benefit. Any denial by the Committee of a claim for benefits under the Plan, by
a Participant, or a former Participant, or a Beneficiary thereof, shall be
stated in writing by the Committee and delivered or mailed to the claimant and
such notice shall set forth the specific reasons for the denial written in a
reasonable manner that may be understood without legal or actuarial counsel. In
addition, the Committee shall afford a reasonable opportunity to any claimant
whose claim for benefits has been denied to review the decision denying the
claim.
C. Records and Reports
The Committee shall make available to each participant such records as may
pertain to such Participant's interests in the Plan, and such Participant shall
have the right to examine same at the office of the Committee during regular
business hours. However, such Participant shall have no right to inspect any
other records of the Committee or the Company.
D. Committee Powers and Duties
The Committee shall have the specific power and authority as herein granted to
it and shall have such other power and authority as may be necessary in order
to discharge its duties under the Plan, including, but not limited to, the
following:
a. To construe and interpret the Plan, decide all questions of eligibility and
determine the amount, manner and time of payment of any benefits hereunder; b.
To prescribe procedures to be followed by Participants or Beneficiaries filing
applications for benefits;
c. To prepare and distribute, in such manner as the Committee determines to be
appropriate, information explaining the Plan;
<PAGE> 13
d. To receive from the Company and from Participants such information as shall
be necessary for the proper administration of the Plan,
e. To furnish the Company, upon request, such annual reports with respect to
the administration of the Plan as are reasonable and appropriate.
f. To receive, review and keep on file (as it deems convenient or proper)
reports of the financial condition, and of the receipts and disbursements of
the Plan:
g. To appoint or employ individuals to assist in the administration of the Plan
and any other agents it deems advisable, including legal and actuarial counsel.
The Committee shall have no power to add to, subtract from, or modify any terms
of the Plan, or to change or add to any benefits provided by the Plan, or to
waive or fail to apply any requirements of eligibility for a benefit under the
Plan.
However, not withstanding anything to the contrary, the Committee with the
permission of the Board of Directors may waive, modify, or revise certain
aspects of the Plan.
E. Promulgation of Rules and Decisions
The Committee may adopt such rules as it deems necessary, desirable or
appropriate. All rules and decisions of the Committee shall be uniformly and
consistently applied to all Participants in similar circumstances. When making
a determination or calculation, the Committee shall be entitled to reply upon
information furnished by a Participant or a former Participant, or Beneficiary
thereof, the Company, or the legal counsel of the Company.
F. Procedures
The Committee may act at a meeting or in writing without a meeting. The
Committee shall elect one of its members as chairman and appoint a secretary,
who may or may not be a Committee member. The secretary shall keep a written
record of all meetings and of all actions taken without a meeting and shall
forward all communications as the Committee deems necessary to the Company.
The Committee may adopt such bylaws and regulations as it deems desirable for
the conduct of its affairs. All decisions of the Committee shall be made by the
vote of the majority including actions in writing taken without a meeting. A
dissenting Committee member, who within a reasonable time after he has
knowledge of any action or failure to act by the majority, registers his
dissent in writing delivered to the other Committee members of the Company
shall not be responsible for any such action or failure to act. The acts and
decisions of the Committee in connection will all matters within the scope of
its authority shall be final, conclusive and binding on the Company, all
Participants, all former Participants, and all persons claiming under or
through such Participants or former Participants.
G. Authorization of Benefit Payments
<PAGE> 14
The Committee or their duly authorized agent or agents shall issue directions
concerning all benefits to be paid from the Plan pursuant to the provisions of
the Plan and shall warrant that all such directions are in accordance with the
Plan.
H. Applications and Forms
The Committee may require all Participants or former Participants, and all
personal claiming under or through such Participants or former Participants, to
complete and file with the Committee an application for a benefit or any other
form approved by the Committee, and to furnish all pertinent information
required by the Committee. The Committee may rely upon all such information
furnished it.
I. Payment of Benefits
Whenever, in the Committee's opinion, a person entitled to receive a payment of
a benefit hereunder is under a legal disability or is incapacitated in any way
so as to be unable to manage his financial affairs, the Committee may make
payments to such person or to his legal representative or to a relative or
friend of such person for his benefit, or the Committee may apply the payment
for the benefit of such person in such manner as the Committee considers
advisable. Any payment of a benefit in accordance with the provisions of this
Section shall be a complete discharge of any liability for the making of such
payment under the provisions of the Plan.
<PAGE> 1
EXHIBIT 10.14.3
AMENDMENT NO. 3
TO
MASTER AGREEMENT
This Amendment No. 3 to the Master Agreement ("Amendment No. 3") is made
and entered into this 12th day of September 1995 by and among Orbital Sciences
Corporation ("Orbital"), Orbital Communications Corporation ("ORBCOMM"),
Teleglobe Inc. ("Teleglobe") and Teleglobe Mobile Partners ("Teleglobe
Mobile").
W I T N E S S E T H
WHEREAS, Orbital, ORBCOMM, Teleglobe and Teleglobe Mobile previously
entered into a Master Agreement dated as of June 30, 1993, Amendment No. 1 to
the Master Agreement dated as of April 1, 1994 and Amendment No. 2 to the
Master Agreement dated as of October 1, 1994 (as amended, the "Master
Agreement"); and
WHEREAS, Orbital, ORBCOMM, Teleglobe and Teleglobe Mobile desire to
further amend and modify the Master Agreement.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Terms used but not otherwise defined herein shall have the
meanings assigned thereto in the Master Agreement.
SECTION 2. The whereas clauses of the Master Agreement are amended and
modified as follows:
(a) The references to "ORBCOMM Development" and "ORBCOMM U.S." set forth
in the fifth whereas clause of the Master Agreement are deleted and replaced
with "ORBCOMM Global" and "ORBCOMM USA", respectively.
(b) The seventh whereas clause of the Master Agreement is deleted in its
entirety and replaced with the following:
"WHEREAS, it is contemplated that ORBCOMM and Teleglobe shall make
the capital contributions to fund the development, construction and
operation of the ORBCOMM System as more fully described herein;"
SECTION 3. Appendix C to the Master Agreement, which Appendix sets forth
the Definitions, is hereby amended and modified as follows:
<PAGE> 2
(a) The definition of "Affiliate" is hereby deleted in its entirety and
replaced with the following:
""Affiliate" has the meaning assigned thereto in the ORBCOMM Global
Partnership Agreement."
(b) The definition of "Definitive Agreements" is hereby deleted in its
entirety and replaced with the following:
""Definitive Agreements" shall mean the Master Agreement, the ORBCOMM
Global Partnership Agreement, the ORBCOMM USA Partnership Agreement, the
ORBCOMM International Partnership Agreement, the ORBCOMM System
Construction Agreement, the System Charge Agreement, the International
System Charge Agreement, the Procurement Contract and the Proprietary
Information and Non- Competition Agreement."
(c) The definition of "Gateway Earth Station Equipment Contract" is
deleted in its entirety.
(d) The definition of "International System Charge and Marketing
(Non-U.S.) Agreement" is hereby deleted in its entirety and replaced with the
following:
""International System Charge Agreement" shall mean the International
System Charge Agreement dated as of June 30, 1993 among ORBCOMM Global,
Teleglobe Mobile and ORBCOMM International, as such agreement may be
amended and restated from time to time."
(e) The definition of "Master Agreement" is hereby deleted in its
entirety and replaced with the following:
""Master Agreement" shall mean this Agreement, as it may be amended and
restated from time to time."
(f) The definition of "Master Network Control Center" shall be deleted in
its entirety and replaced with the following:
""Master Network Control Center" shall mean the Network Control Center and
the Satellite Control Center to be located in Dulles, Virginia."
(g) The definition of "ORBCOMM Development" shall be deleted in its
entirety and replaced with the following:
2
<PAGE> 3
""ORBCOMM Global" shall mean ORBCOMM Global, L.P., the limited partnership
created pursuant to the ORBCOMM Global Partnership Agreement."
(h) The definition of "ORBCOMM Development Partnership Agreement" shall
be deleted in its entirety and replaced with the following:
""ORBCOMM Global Partnership Agreement" shall mean the limited
partnership agreement dated as of June 30, 1993 between ORBCOMM and
Teleglobe, as such partnership agreement may be amended and restated from
time to time."
(i) The definition of "ORBCOMM International Partnership Agreement" is
deleted in its entirety and replaced with the following:
""ORBCOMM International Partnership Agreement" shall mean the limited
partnership agreement dated as of June 30, 1993 between ORBCOMM and
Teleglobe, as such partnership agreement may be amended and restated from
time to time."
(j) The definition of "ORBCOMM Option" is deleted in its entirety.
(k) The definition of "ORBCOMM System Construction Agreement" shall be
deleted in its entirety and replaced with the following:
""ORBCOMM System Construction Agreement" shall mean the ORBCOMM System
Construction Agreement dated as of June 30, 1993 between ORBCOMM and
ORBCOMM Global, as such agreement may be amended and restated from time to
time."
(l) The definition of "ORBCOMM U.S." shall be deleted in its entirety and
replaced with the following:
""ORBCOMM USA" shall mean ORBCOMM USA, L.P., the limited partnership
created pursuant to the ORBCOMM USA Partnership Agreement."
(m) The definition of "ORBCOMM U.S. Partnership Agreement" shall be
deleted in its entirety and replaced with the following:
""ORBCOMM USA Partnership Agreement" shall mean the limited partnership
agreement dated as of June 30, 1993 between ORBCOMM and Teleglobe Mobile
Agreement, as such partnership agreement may be amended and restated from
time to time."
(n) The definition of "Participation Percentage" shall be deleted in its
entirety and replaced with the following:
3
<PAGE> 4
""Participation Percentage" shall have the meaning assigned thereto in the
ORBCOMM Global Partnership Agreement, the ORBCOMM International
Partnership Agreement or the ORBCOMM USA Partnership Agreement, as the
context may require."
(o) The definition of "Proprietary Information and Non-Competition
Agreement" shall be deleted in its entirety and replaced with the following:
""Proprietary Information and Non-Competition Agreement" shall mean the
Proprietary Information and Non-Competition Agreement dated as of June
30, 1993 among Orbital, ORBCOMM, Teleglobe, Teleglobe Mobile, ORBCOMM
Global, ORBCOMM USA and ORBCOMM International, as such agreement may be
amended and restated from time to time."
(p) The definition of "Satellite and Launch Services Contract" shall be
deleted in its entirety.
(q) The definition of "System Agreement" shall be deleted in its
entirety.
(r) The definition of "System Charge and Marketing (U.S.) Agreement"
shall be deleted in its entirety and replaced with the following:
""System Charge Agreement" shall mean the System Charge Agreement dated as
of June 30, 1993 between ORBCOMM and ORBCOMM USA, as such agreement may be
amended and restated from time to time."
(s) The definitions of "System Charge Revision Date", "Technical
Assistance Center" and "Teleglobe Mobile Option Effective Date" shall be
deleted in their entirety.
(t) The definition of "Unrecouped Capital Preference" shall be deleted in
its entirety and replaced with the following:
""Unrecouped Capital Preference" shall have the meaning assigned thereto
in the ORBCOMM Global Partnership Agreement, the ORBCOMM International
Partnership Agreement or the ORBCOMM USA Partnership Agreement, as the
context may require."
(u) Any remaining references to "ORBCOMM Development" or "ORBCOMM U.S."
set forth in Appendix C shall be deleted and replaced with "ORBCOMM Global" and
"ORBCOMM USA", respectively.
(v) The following new definitions shall be added to Appendix C in the
appropriate alphabetical order:
4
<PAGE> 5
""Procurement Contract" shall mean the Procurement Contract dated
September 12, 1995 between Orbital and ORBCOMM Global as such agreement
may be amended and restated from time to time."
""Restatement Date" shall have the meaning ascribed thereto in Section
2.31 of the ORBCOMM Global Partnership Agreement."
SECTION 4. Appendix D to the Master Agreement, which sets forth the
Amended and Restated Agreement of Limited Partnership of ORBCOMM Global, L.P.
is amended as follows:
(a) The name of Appendix D shall be changed to be the "Amended and
Restated Agreement of Limited Partnership of ORBCOMM Global, L.P."
(b) Section 1.2 is hereby deleted in its entirety and replaced with the
following:
"Section 1.2. Name. The name of the Partnership shall be ORBCOMM
Global, L.P., but the business of the Partnership may be conducted under
any other name agreed to by the General Partners and, in such event, the
General Partners shall notify the Partners of such name change promptly
thereafter."
(c) Section 2.19 is hereby deleted in its entirety and replaced with the
following:
"2.19. Monthly Cash Requirements. "Monthly Cash Requirements" for any
month means the total cash amounts that the Partnership anticipates it
will be obligated to pay for the next succeeding month, net of any
anticipated cash receipts of the Partnership for such succeeding month."
(d) Section 2.31 is hereby deleted in its entirety and replaced with the
following:
"2.31 Restatement Date. "Restatement Date" means September 12, 1995."
(e) Section 3.2(b) is deleted in its entirety and replaced with the
following:
"(b) In accordance with the contribution schedule set forth in
Section 3.5, and in addition to the capital contributions previously made
pursuant to the Original Agreement or required to be made under Section
3.2(a), ORBCOMM hereby agrees to contribute in cash or in immediately
available funds eighteen million three hundred twenty-five thousand one
hundred forty-one dollars ($18,325,141) and (ii) Teleglobe Mobile hereby
agrees to contribute in cash or in immediately available funds seventy-
four million five hundred twenty-five thousand dollars ($74,525,000)."
(f) Sections 3.2(c), (d) and (e) are deleted in their entirety.
5
<PAGE> 6
(g) Section 3.3 shall be amended to insert the following at the end of
such section:
"In addition to the foregoing, in the event ORBCOMM fails to fulfill a
Capital Obligation and fails to cure such failure within thirty (30) days
after receiving notice from Teleglobe Mobile or any other General Partner,
Orbital shall not be entitled to receive any portion of the incentive fees
remaining to be paid pursuant to Article 14 of the Procurement Contract."
(h) Section 3.5 is deleted in its entirety and replaced with the
following:
"3.5 Contribution Schedule. The Partners agree to contribute to the
Partnership the amounts required to be contributed by them under Section
3.2(b) in cash or in immediately available funds in accordance with the
following schedule:
(a) On the Restatement Date, Teleglobe Mobile shall contribute
to the Partnership an amount equal to twenty million dollars
($20,000,000);
(b) Thereafter, the contributions required to be made pursuant
to Section 3.2(b) shall be made as follows: each month ORBCOMM shall
contribute an amount equal to fifty percent of the Monthly Cash
Requirements for such month, and Teleglobe Mobile shall contribute an
amount equal to the balance of the Monthly Cash Requirements for such
month, until such time as the sums of ORBCOMM's and Teleglobe
Mobile's contributions in cash or in immediately available funds made
pursuant to this Section 3.5(b) equals twenty million dollars
($20,000,000);
(c) Thereafter, the contributions required to be made pursuant
to Section 3.2(b) shall be made as follows: each month ORBCOMM shall
contribute an amount equal to the product of (i) eight million three
hundred twenty-five thousand one hundred forty-one dollars
($8,325,141) divided by fifty-two million eight hundred fifty
thousand one hundred forty-one dollars ($52,850,141) and (ii) the
Monthly Cash Requirements for such month, and Teleglobe Mobile shall
contribute an amount equal to the balance of the Monthly Cash
Requirements for such month, until such time as the sums of ORBCOMM's
and Teleglobe Mobile's contributions in cash or in immediately
available funds made pursuant to this Section 3.5 equals the amount
required to be contributed by each Partner required by Section
3.2(b);
(i) Section 3.6 is hereby deleted in its entirety and replaced with the
following:
6
<PAGE> 7
"3.6. Loans. (a) Optional Loans. Any General Partner shall
have the right to make a loan of cash to the Partnership at any time on
such terms as such General Partner may determine; provided, however, that
in no event shall any such optional loan be secured by Partnership assets,
bear interest or original issue discount, be with recourse to any Partner
or replace any Partner's obligations to make capital contributions
pursuant to this Section 3.
(b) Stock Option Plan Loans. To the extent the Partnership has
agreed to reimburse ORBCOMM for the costs paid by ORBCOMM pursuant to
Section 6.06 of the Orbital Communications Corporation 1992 Stock Option
Plan (including the payment by ORBCOMM of withholding taxes with respect
to the exercise of stock options) in purchasing stock acquired by
employees or former employees of the Partnership, ORBCOMM USA or ORBCOMM
International (the "Stock Option Plan Costs"), ORBCOMM agrees to provide
to the Partnership a loan in the amount of the Stock Option Plan Costs
paid prior to January 1, 2001 (but only to the extent that such Stock
Option Costs have been paid with respect to options granted prior to the
Restatement Date). Such loan shall bear interest at the rate of eight per
cent (8%) per annum and the principal and interest of such loan shall be
repaid in whole or in part at such time as there is Partnership cash on
hand available for distribution to the Partners, with the balance being
repaid in three equal annual installments commencing on January 1, 2001
and ending on January 1, 2003."
(j) Section 3.7 is hereby deleted in its entirety and replaced with the
following:
"3.7 Additional Capital Contributions. If the Partnership shall
require additional capital contributions in excess of one hundred
fifty-nine million eight hundred thousand dollars ($159,800,000), each
Partner shall have the opportunity to contribute in cash or immediately
available funds an amount equal to such excess multiplied by such
Partner's Participation Percentage. Any such contribution shall increase
the contributing Partner's Capital Preference in accordance with Section
3.1. If either Partner declines to make a contribution pursuant to the
preceding sentence, then:
(a) The other Partner shall be entitled to contribute the
amount so declined (in addition to any amount such Partner is
entitled to contribute pursuant to the preceding sentence), and
(b) The Partners' Participation Percentages shall be adjusted
as follows:
(i) ORBCOMM's Participation Percentage shall be adjusted
so as to equal the percentage equal to the quotient of (x)
ORBCOMM's Capital Preference plus nine million two hundred fifty
thousand dollars ($9,250,000), divided by (y) the aggregate
Capital Preferences of the
7
<PAGE> 8
Partners, both calculated after taking into account any
additional capital contributions pursuant to this Section 3.7
plus nine million two hundred fifty thousand dollars
($9,250,000); and
(ii) Teleglobe Mobile's Participation Percentage shall be
adjusted so as to equal one hundred per cent (so adjusted)
(100%) minus ORBCOMM's Participation Percentage (so adjusted)."
(k) Section 6.1(l) is hereby deleted in its entirety and replaced with
the following:
"(l) Appoint or remove officers to the Partnership."
(l) A new Section 6.3(c) is added following Section 6.3(b) that reads as
follows:
"(c) In the event that a Majority in Interest of the General
Partners, each acting in the best interests of the Partnership, shall
be unable to agree on exercising or enforcing the rights of the
Partnership under the Procurement Agreement including, without
limitation, the rights to exercise the options thereunder, to stop
work, to request changes and to send notices to preserve or exercise
any such rights, then the President of the Partnership shall decide
on the appropriate action with respect to such rights, and the
Partnership shall then act upon such decision."
(m) Section 6.6 is deleted in its entirety and replaced with the
following:
"6.6 Designation of Officers. Subject to Section 6.1(l), officers
of the Partnership shall be nominated by the President of the Partnership
and elected by the General Partners and shall exercise such authority as
they are granted by the General Partners. If an officer is an employee of
a General Partner, the Partnership will promptly reimburse such General
Partner the pro rata share of expenses, including compensation and
overhead, attributable to such officer of the Partnership by reference to
the share of his or her total time spent upon Partnership operations.
Without limiting the foregoing, the General Partners shall, no later than
promptly following the Restatement Date, appoint one or more officers to
have such authority as the General Partners determine to be appropriate to
act for the Partnership with respect to the Construction Contracts after
the Restatement Date."
(n) Section 6.7 is deleted in its entirety and replaced with the
following:
"6.7 Removal of Officers. Any officer of the Partnership may be
removed at any time and for any reason by approval or written consent of
the General Partners. Any officer removed pursuant to this Section shall
remain entitled to exculpation and indemnification from the Partnership
pursuant to Section 7.3 with respect to any matter arising prior to his or
her removal."
8
<PAGE> 9
(o) Section 6.10 is deleted in its entirety and replaced with the
following:
"6.10 [RESERVED]."
(p) Section 11.1 is amended to provide that copies of notices to be
delivered to Teleglobe Mobile shall be sent c/o Teleglobe at the address set
forth therein to the attention of the Executive Vice President, Corporate
Development and Corporate Secretary.
(q) A new Section 12.11 is added after Section 12.10 that reads as
follows:
"12.11. Dispute Resolution. Any controversy or claim that may arise
under, out of, in connection with or relating to this Agreement shall be
resolved in accordance with Section 13.4 of the Master Agreement."
(r) All remaining references to "ORBCOMM U.S." shall be deleted and
replaced with "ORBCOMM USA".
SECTION 5. A new Section 4.1(h) is added to the Master Agreement
following Section 4.1(g) that reads as follows:
"(h) Transfer of ORBCOMM Employees. By January 1, 1996, transfer all of
the employees of ORBCOMM to ORBCOMM Global, ORBCOMM USA or ORBCOMM
International, as the case may be.
SECTION 6. A new Section 4.4 is added to the Master Agreement following
Section 4.3 that reads as follows:
"4.4 Affirmative Covenants of the Partners. Each of ORBCOMM and Teleglobe
Mobile covenant and agree that the headquarters facilities for ORBCOMM
Global shall be relocated from 21700 Atlantic Boulevard, Dulles Virginia
to another facility upon the approval by the general partners of ORBCOMM
Global of a capital budget and plan for such relocation. The President of
ORBCOMM Global shall submit to each of its general partners for their
approval a capital expenditure budget and plan for such relocation, which
approval by such general partners shall not be unreasonably withheld. The
fact that the Dulles facility may be less expensive shall not be a basis
for withholding approval of a proposed relocation plan and budget if such
plan and budget are otherwise reasonable and consistent with applicable
market requirements and conditions."
9
<PAGE> 10
SECTION 7. Article V of the Master Agreement is hereby amended and
modified as follows:
(a) Section 5.2(a) of the Master Agreement shall be deleted in its
entirety and replaced with the following:
"(a) The ORBCOMM Global Partnership Agreement shall, without any action by
the partners of ORBCOMM Global, be amended and restated in its
entirety as set forth in Appendix D."
(b) Sections 5.2(d), 5.2(e) and 5.2(f) of the Master Agreement are
deleted in their entirety.
(c) Section 5.3 of the Master Agreement is deleted in its entirety and
replaced with the following:
"5.3 ORBCOMM System FCC Licenses. Orbital and ORBCOMM jointly and
severally represent and warrant to Teleglobe and Teleglobe Mobile that,
upon the exercise of the Teleglobe Mobile Option, ORBCOMM has obtained all
FCC licenses required to construct the Phase 1B System except as specified
in Schedule 5.3."
SECTION 8. Section 9.2 of the Master Agreement shall be deleted in its
entirety and replaced with the following:
"9.2 Orbital Guaranty. Orbital hereby unconditionally and absolutely
guarantees the full and punctual payment of all of ORBCOMM's payment
obligations under the Definitive Agreements to which it is a party . Upon
failure of ORBCOMM to pay any of its payment obligations under any of the
Definitive Agreements to which it is a party, Orbital shall on demand pay
such obligation in the manner specified in such Definitive Agreement and
none of the beneficiaries of this guaranty shall have any obligation to
proceed to first preserve, use or exhaust any right or remedy it may have
against ORBCOMM."
SECTION 9. Section 10 of the Master Agreement is amended and modified as
follows:
(a) Sections 10.1 and 10.2 are hereby deleted in their entirety and
replaced with the following:
"10.1 Change of Control. (a) In the event of a Change of Control of
Orbital or Teleglobe, as the case may be (the "Change of Control Party"),
Teleglobe Mobile or ORBCOMM, as the case may be (the "Non-Change of
Control Party"), shall have the option to:
10
<PAGE> 11
(i) for a period of 180 days from such Change of Control (the
"Option Period"), cause the Change of Control Party to purchase the
Non-Change of Control Party's interest in each of ORBCOMM Global, ORBCOMM
USA and ORBCOMM International at an aggregate price equal to the greater
of (A) the Non-Change of Control Party's aggregate Unrecouped Capital
Preferences in such partnerships and (B) the Non-Change of Control Party's
direct and indirect Participation Percentage in each such partnership
multiplied by the Fair Market Value of each such partnerships as
determined in accordance with Section 10.1(d); or
(ii) cause the General Partners of ORBCOMM Global to adopt a
resolution providing that in the event there is a deadlock on a matter
requiring the approval of a Majority in Interest of the Partners, the
President of ORBCOMM Global shall be entitled to decide on such matter by
way of a casting vote or otherwise, as deemed appropriate by the
Non-Change of Control Party, notwithstanding any contrary provision set
forth in the ORBCOMM Global Partnership Agreement. Such resolution shall
be automatically deemed adopted by the General Partners upon the written
election by the Non-Change of Control Party to require that such
resolution be adopted.
(b) The Non-Change of Control Party shall exercise the Section
10.1(a)(i) option by delivering to the Change of Control Party a written
notice of exercise ("the "Option Exercise Notice") within the Option
Period.
(c) For purposes of Section 10.1(a), (i) a "Change of Control" shall
be deemed to occur if a Person or "group," as such term is used in Rule
13d-5(b)(1) or 14(d)(2) under the Securities Exchange Act, becomes the
beneficial owner of more than 50% of the voting power represented by
Orbital's or Teleglobe's , as the case may be, outstanding securities;
provided however, that a Change of Control shall not be deemed to have
occurred with respect to (A) Orbital if the Person who acquires such
securities is Teleglobe or an Affiliate of Teleglobe and (B) Teleglobe if
the Person or group who acquires such securities is or includes as its
largest member (x) Orbital or an Affiliate of Orbital or (y) a Person that
owns, directly or indirectly, fifteen percent or more of the voting power
represented by outstanding securities of Teleglobe as of the Restatement
Date, or an affiliate of such Person.
(d) "Fair Market Value" shall mean the aggregate total value of
ORBCOMM Global, ORBCOMM USA and ORBCOMM International as of the date of
the Change of Control valued on the basis of an arms' length transaction
between a willing buyer and a willing seller involving the sale of all
partnership interests, determined in the manner specified in this Section
10.1(d). Any determination of Fair Market Value pursuant to this Section
10.1 shall be final, binding and conclusive on the parties. Fair Market
Value shall be determined as follows:
11
<PAGE> 12
(i) Promptly after delivery of the Option Exercise Notice,
Orbital and Teleglobe shall attempt in good faith to agree on the Fair
Market Value. If Orbital and Teleglobe agree on a value (regardless of
when such agreement is reached, and
12
<PAGE> 13
notwithstanding the pendency of appraisal efforts pursuant to this
Section), such value shall be the Fair Market Value.
(ii) If Orbital and Teleglobe fail to reach such an agreement
within one month after the delivery of the Option Exercise Notice, they
shall each select an independent appraiser who is one of the "Big Six"
United States accounting firms . If either Orbital or Teleglobe shall
fail to select an appraiser within twenty (20) days after the expiration
of the one-month period referred to in the preceding sentence, the Fair
Market Value shall be determined by the appraiser selected by the other.
Following such selection, each such appraiser shall determine the
aggregate total value of ORBCOMM Global, ORBCOMM USA and ORBCOMM
International as quickly as practicable, and in any event within
forty-five (45) days after the last appraiser has been selected, and give
notice of such determination to Orbital and Teleglobe. If either
appraiser shall fail to make such a determination of value within
forty-five days after the last appraiser has been selected, the Fair
Market Value shall be the value determined by the other appraiser. If the
greater of the two values determined by such two appraisers is within 10%
of the lesser of such two values, the Fair Market Value shall be the
average of such two values.
(iii) If the greater of the two values determined by such two
appraisers is not within 10% of the lesser of such two values, such two
appraisers shall select a third independent appraiser who shall be one of
the "Big Six" United States accounting firms and who shall as quickly as
practicable, but in no event later than forty-five days after appointment,
select one of the values determined by the first two appraisers as the
value that more closely approximates the correct fair market value, and
such value selected by the third appraiser shall be Fair Market Value.
(iv) Orbital and Teleglobe agree to cooperate with one another
and with the appraisers in determining Fair Market Value. Orbital and
Teleglobe shall each bear its own out-of-pocket expenses incurred in
connection with the determination of Fair Market Value, including without
limitation the fees and expenses of the appraiser selected by each, and
one-half of the fees and expenses of the third appraiser, if any."
(b) A new Section 10.2 is added to the Master Agreement following Section
10.2 that reads as follows:
"10.2 Transfer of FCC Licenses for the ORBCOMM System. Subject to the
receipt of all necessary governmental approvals, including all approvals
required under the rules and regulations of the FCC, upon the Change of
Control of Orbital, Orbital agrees to cause ORBCOMM to transfer to
ORBCOMM USA at no additional cost any and all FCC licenses then held by
ORBCOMM relating to the construction, launch or operation of the ORBCOMM
System."
13
<PAGE> 14
SECTION 10. Section 13.1 of the Master Agreement is amended to provide
that copies of notices to be delivered to Orbital shall be sent to the
attention of the Executive Vice President and General Manager/Communications
and Information Systems Group and that copies of notices to be delivered to
Teleglobe, and Teleglobe Mobile c/o Teleglobe, shall be sent to the attention
of the Executive Vice President, Corporate Development and Corporate Secretary.
SECTION 11. Section 13.2 of the Master Agreement is amended to delete the
phrase "and that Teleglobe shall bear half of the fees and expenses of Ropes &
Gray incurred by Orbital in assisting in structuring the transactions
contemplated by and preparing the Definitive Agreements up to a maximum of
U.S.$75,000" set forth therein.
SECTION 12. Section 13.4(a) is deleted in its entirety and replaced with
the following:
"Any controversy or claim that may arise under, out of, in connection with
or relating to this Agreement or any Definitive Agreement (other than the
Procurement Contract) or any breach hereof or thereof, shall be submitted
to a representative management panel of Orbital and Teleglobe, provided
that in the case of the ORBCOMM System Construction Agreement, the System
Charge Agreement and the International System Charge Agreement, ORBCOMM
Global shall be entitled to representation on such management panel. Each
of Orbital and Teleglobe (and where applicable, ORBCOMM Global) may
appoint up to two individuals to such panel. The members of such panel
shall be appointed by each party within ten (10) days of the receipt by
either Orbital or Teleglobe (or where applicable, ORBCOMM Global) of
notice of the existence of such controversy or claim. The unanimous
decision and agreement of such panel shall resolved the controversy or
claim. If the panel is unable to resolve such matter within thirty (30)
days of the submission of such controversy or claim to such panel, it
shall be brought before the Presidents of Orbital and Teleglobe (and where
applicable, ORBCOMM Global) for final resolution. If such individuals are
unable to resolve the matter within thirty (30) days of the submission of
such controversy or claim to such individuals, either Orbital or Teleglobe
may remove the controversy or claim for arbitration in accordance with
Section 13.4(b)."
SECTION 13. Appendices G, H, I and J of the Master Agreement are deleted
in their entirety.
SECTION 14. Any remaining references to "ORBCOMM Development" or "ORBCOMM
U.S." set forth in the Master Agreement shall be deleted and replaced with
"ORBCOMM Global" and "ORBCOMM USA", respectively.
14
<PAGE> 15
SECTION 15. The parties agree and agree on behalf of each of ORBCOMM
Global, ORBCOMM USA and ORBCOMM International that, upon the restatement of any
of the Definitive Agreement to incorporate all the amendments thereto executed
prior to or concurrently with the Restatement Date into one agreement, counsel
representing Teleglobe and Orbital shall be entitled to correct any and all
inadvertent or typographical errors and make any inconsistent terms consistent.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 3 to the
Master Agreement as of the day and year first above written.
ORBITAL SCIENCES CORPORATION
By: /s/ Bruce W. Ferguson
------------------------------------
Name: Bruce W. Ferguson
Title: Executive Vice President and General
Manager/Communications and
Information Systems Group
ORBITAL COMMUNICATIONS CORPORATION
By: /s/ Alan L. Parker
-----------------------------------
Name: Alan L. Parker
Title: President
TELEGLOBE INC.
By: /s/ Guthrie J. Stewart
-----------------------------------
Name: Guthrie J. Stewart
Title: Executive Vice President, Corporate
Development and Corporate Secretary
15
<PAGE> 16
TELEGLOBE MOBILE PARTNERS
By: Teleglobe Mobile Investment Inc.,
its Managing Partner
By: /s/ Guthrie J. Stewart
-----------------------------------
Name: Guthrie J. Stewart
Title: Chairman of the Board and
Chief Executive Officer
16
<PAGE> 1
EXHIBIT 10.16.1
AMENDMENT NO. 1 TO
AGREEMENT OF LIMITED PARTNERSHIP OF
ORBCOMM U.S. PARTNERS, L.P.
This Amendment No. 1 to the Agreement of Limited Partnership of ORBCOMM
U.S. Partners, L.P. (the "Amendment") is made and entered into as of this 12th
day of September 1995 by and between Orbital Communications Corporation
("ORBCOMM ") and ORBCOMM Global, L.P. ("ORBCOMM Global").
W I T N E S S E T H
WHEREAS, Orbital Communications Corporation (a portion of whose interest
in ORBCOMM USA, L.P. (the "Partnership") was transferred to ORBCOMM Global upon
the exercise of the Teleglobe Mobile Option) and Teleglobe Mobile (all of whose
interest in the Partnership was transferred to ORBCOMM Global upon exercise of
the Teleglobe Mobile Option) previously entered into the Agreement of Limited
Partnership of ORBCOMM U.S. Partners L.P. (the "Agreement");
WHEREAS, the name of the Partnership was changed from ORBCOMM U.S.
Partners, L.P. to ORBCOMM USA, L.P. pursuant to the filing with the Delaware
Secretary of State of a Certificate of Amendment to the Agreement; and
WHEREAS, ORBCOMM and ORBCOMM Global desire to amend and modify the
Agreement.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Terms used but not otherwise defined herein shall have the
meanings assigned thereto in the Agreement.
SECTION 2. The name of the Agreement shall be changed from the "Agreement
of Limited Partnership of ORBCOMM U.S. Partners, L.P." to the "Agreement of
Limited Partnership of ORBCOMM USA, L.P.".
SECTION 3. The reference to (a) "Teleglobe Mobile Partners, a Delaware
general partnership ("Teleglobe Mobile")" and (b) "Teleglobe Mobile" set forth
in the introduction to the Agreement shall be deleted and replaced with
"ORBCOMM Global, L.P., a Delaware limited partnership ("ORBCOMM Global")" and
"ORBCOMM Global", respectively.
<PAGE> 2
SECTION 4. The second whereas clause of the Agreement shall be deleted in
its entirety and replaced with the following:
"WHEREAS, the Partnership, the Partners, Orbital Sciences
Corporation, a Delaware corporation ("Orbital"), Teleglobe Inc., a
Canadian corporation ("Teleglobe"), Teleglobe Mobile Partners, a Delaware
general partnership ("Teleglobe Mobile"), and ORBCOMM International
Partners, L.P., a Delaware limited partnership ("ORBCOMM International"),
are entering into certain agreements for the development, construction,
operation and marketing of the ORBCOMM System ( as hereinafter defined);
and"
SECTION 5. Section 1.2 of the Agreement is deleted in its entirety and
replaced with the following:
"Section 1.2. Name. The name of the Partnership shall be ORBCOMM USA,
L.P., but the business of the Partnership may be conducted under any other
name agreed to by the General Partners and, in such event, the General
Partners shall notify the Partners of such name change promptly
thereafter."
SECTION 6. Section 2.15 of the Agreement is deleted in its entirety and
replaced with the following:
"2.15. Majority in Interest. "Majority in Interest" of the
General Partners means a General Partner or General Partners having
Participation Percentages aggregating at least a majority of the
Participation Percentages held by all General Partners, provided that for
purposes of determining a Majority in Interest of the General Partners
each general partner of ORBCOMM Global shall be treated as a General
Partner of the Partnership holding directly a fraction of ORBCOMM Global's
Participation Percentage in the Partnership, such fraction being
determined by reference to the ORBCOMM Global Partnership Agreement, as
the same may be amended or restated from time to time."
SECTION 7. Section 2.31 of the Agreement is deleted in its entirety and
replaced with the following:
"2.31. Super-Majority in Interest. "Super-Majority in Interest"
of the General Partners means a General Partner or General Partners having
Participation Percentages aggregating more than eighty-six per cent (86%)
of the Participation Percentages held by all General Partners, provided
that for purposes of determining a Super-Majority in Interest of the
General Partners each general partner of ORBCOMM Global shall be treated
as a General Partner of the Partnership holding directly a fraction of
ORBCOMM Global's Participation Percentage in the Partnership, such
fraction being
- 2 -
<PAGE> 3
determined by reference to the ORBCOMM Global Partnership Agreement, as
the same may be amended or restated from time to time."
SECTION 8. Section 3.1 of the Agreement shall be deleted in its entirety
and replaced with the following:
"3.1. Partnership Interests. The Partnership Interests shall be
expressed in terms of the Partners' Participation Percentages and Capital
Preferences. The Participation Percentage of ORBCOMM Global shall be
ninety-eight per cent (98%), the Participation Percentage of ORBCOMM shall
be two per cent (2%), and the Capital Preference of each Partner as of any
date shall be equal to the amount actually contributed by such Partner in
cash or in immediately available funds to the Partnership through such
date (including any amount contributed in exchange for Participation
Percentages), provided that any amounts contributed to the Partnership by
Teleglobe Mobile prior to the exercise of the Teleglobe Mobile Option
shall be deemed for purposes of this Agreement to have been made by
ORBCOMM Global. The Partners shall be required to make the capital
contributions set forth in Section 3.2 in exchange for their Partnership
Interests and shall be entitled to receive the distributions set forth in
Sections 4 and 10 in respect of such Partnership Interests."
SECTION 9. Section 3.2 of the Agreement shall be deleted in its entirety
and replaced with the following:
"Section 3.2. Capital Contributions. As of the Restatement Date,
ORBCOMM shall be deemed to have contributed two hundred dollars ($200) and
ORBCOMM Global shall be deemed to have contributed nine thousand eight
hundred dollars ($9,800) in cash or in immediately available funds."
SECTION 10. Section 6.1(l) of the Agreement shall be deleted in its
entirety and replaced with the following:
"(l) appoint or remove officers of the Partnership who shall be
nominated by the President of ORBCOMM Global, including a President of the
Partnership." "
SECTION 11. Section 6.6 of the Agreement shall be deleted in its entirety
and replaced with the following:
"6.6 Designation of Officers. Subject to Section 6.1(l), officers
of the Partnership shall be nominated by the President of the Partnership
and elected by the General Partners and shall exercise such authority as
they are granted by the General Partners. If an officer is an employee of
a General Partner, the Partnership will promptly reimburse such General
Partner the pro rata share of expenses, including
- 3 -
<PAGE> 4
compensation and overhead, attributable to such officer of the Partnership
by reference to the share of his or her total time spent on Partnership
Operations."
SECTION 12. The first sentence of Section 6.7 of the Agreement shall be
deleted in its entirety and replaced with the following:
"Any officer of the Partnership may be removed at any time and for any
reason by approval or written consent of the General Partners."
SECTION 13. The reference to "ORBCOMM Development" set forth in Section
7.4 of the Agreement shall be deleted and replaced with "ORBCOMM Global".
SECTION 14. The reference to "ORBCOMM" set forth in Section 8.1 of the
Agreement shall be deleted and replaced with "ORBCOMM Global".
SECTION 14. Section 9.2 of the Agreement shall be deleted in its entirety
and replaced with the following:
"9.2. [RESERVED]"
SECTION 16. The phrase "If to ORBCOMM, to Orbital Communications
Corporation, 21700 Atlantic Boulevard, Dulles, Virginia 20166, Attention:
President; if to Teleglobe Mobile to Teleglobe Mobile Partners, 1000, rue de La
Gauchetiere ouest, Montreal, Quebec, Canada H3B 4X5, Attention: Vice-President,
Legal Matters and Corporate Secretary" set forth in Section 11.1 of the
Agreement shall be deleted as replaced with "If to ORBCOMM, to Orbital
Communications Corporation, 21700 Atlantic Boulevard, Dulles, Virginia 20166,
Attention: President; if to ORBCOMM Global, to ORBCOMM Global, L.P., 21700
Atlantic Boulevard, Dulles, Virginia 20166, Attention: President, with a copy
to Teleglobe Inc., 1000, rue de La Gauchetiere ouest, Montreal, Quebec, Canada
H3B 4X5, Attention: Executive Vice President, Corporate Development and
Corporate Secretary."
SECTION 17. A new section 12.11 is added to the Agreement after Section
12.10 that reads as follows:
"12.11. Dispute Resolution. Any controversy or claim that may arise
under, out of, in connection with or relating to this Agreement shall be
resolved in accordance with Section 13.4 of the Master Agreement."
- 4 -
<PAGE> 5
SECTION 18. The signature block for Teleglobe Mobile Partners set forth
in the Agreement shall be deleted in its entirety and replaced with the
following:
"ORBCOMM GLOBAL, L.P.
By: Orbital Communications Corporation,
General Partner
By:
--------------------------------
Name: Alan L. Parker
Title: President
By: Teleglobe Mobile Partners,
General Partner
By: Teleglobe Mobile Investment Inc.,
its Managing Partner
By:
-------------------------------
Name: Guthrie J. Stewart
Title: Chairman of the Board and
Chief Executive Officer"
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to the
Agreement of Limited Partnership of ORBCOMM U.S. Partners, L.P. to be executed
as of the day and year first above written.
ORBCOMM GLOBAL, L.P.
By: Orbital Communications Corporation,
General Partner
By: /s/ Alan L. Parker
--------------------------------
Name: Alan L. Parker
Title: President
By: Teleglobe Mobile Partners,
General Partner
By: Teleglobe Mobile Investment Inc.,
its Managing Partner
By: /s/ Guthrie J. Stewart
------------------------------------
Name: Guthrie J. Stewart
Title: Chairman of the Board and
Chief Executive Officer
ORBITAL COMMUNICATIONS CORPORATION
By: /s/ Alan L. Parker
--------------------------------
Name: Alan L. Parker
Title: President
- 6 -
<PAGE> 1
EXHIBIT 10.17.1
AMENDMENT NO. 1 TO
AGREEMENT OF LIMITED PARTNERSHIP OF
ORBCOMM INTERNATIONAL PARTNERS, L.P.
This Amendment No. 1 to the Agreement of Limited Partnership of ORBCOMM
International Partners, L.P. (the "Amendment") is made and entered into as of
this 12th day of September 1995 by and between Teleglobe Mobile Partners
("Teleglobe Mobile") and ORBCOMM Global, L.P. ("ORBCOMM Global").
W I T N E S S E T H
WHEREAS, Orbital Communications Corporation (all of whose interest in
ORBCOMM International Partners, L.P. (the "Partnership") was transferred to
ORBCOMM Global upon the exercise of the Teleglobe Mobile Option) and Teleglobe
Mobile (a portion of whose interest in the Partnership was transferred to
ORBCOMM Global upon exercise of the Teleglobe Mobile Option) previously entered
into the Agreement of Limited Partnership of ORBCOMM International Partners,
L.P. (the "ORBCOMM International Partnership Agreement"); and
WHEREAS, ORBCOMM Global and Teleglobe Mobile desire to amend and modify
the ORBCOMM International Partnership Agreement.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Terms used but not otherwise defined herein shall have the
meanings assigned thereto in the ORBCOMM International Partnership Agreement.
SECTION 2. The reference to (a) "Orbital Communications Corporation, a
Delaware corporation, ("ORBCOMM")" and (b) "ORBCOMM" set forth in the
introduction to the ORBCOMM International Partnership Agreement shall be
deleted and replaced with "ORBCOMM Global, L.P., a Delaware limited partnership
("ORBCOMM Global")" and "ORBCOMM Global", respectively.
SECTION 3. The second whereas clause of the ORBCOMM International
Partnership Agreement shall be deleted in its entirety and replaced with the
following:
"WHEREAS, the Partnership, the Partners, Orbital Sciences
Corporation, a Delaware corporation ("Orbital"), Teleglobe Inc., a
Canadian corporation ("Teleglobe"), Orbital Communications Corporation, a
Delaware corporation ("ORBCOMM"), and ORBCOMM USA, L.P., a Delaware
limited partnership ("ORBCOMM USA") are entering into certain agreements
for the development, construction, operation and marketing of the ORBCOMM
System ( as hereinafter defined); and"
<PAGE> 2
SECTION 4. Section 2.15 of the ORBCOMM International Partnership
Agreement is deleted in its entirety and replaced with the following:
"2.15. Majority in Interest. "Majority in Interest" of the
General Partners means a General Partner or General Partners having
Participation Percentages aggregating at least a majority of the
Participation Percentages held by all General Partners, provided that for
purposes of determining a Majority in Interest of the General Partners
each general partner of ORBCOMM Global shall be treated as a General
Partner of the Partnership holding directly a fraction of ORBCOMM Global's
Participation Percentage in the Partnership, such fraction being
determined by reference to the ORBCOMM Global Partnership Agreement, as
the same may be amended or restated from time to time."
SECTION 5. Section 2.31 of the ORBCOMM USA Partnership Agreement is
deleted in its entirety and replaced with the following:
"2.31. Super-Majority in Interest. "Super-Majority in Interest"
of the General Partners means a General Partner or General Partners having
Participation Percentages aggregating more than eighty-six per cent (86%)
of the Participation Percentages held by all General Partners, provided
that for purposes of determining a Super-Majority in Interest of the
General Partners each general partner of ORBCOMM Global shall be treated
as a General Partner of the Partnership holding directly a fraction of
ORBCOMM Global's Participation Percentage in the Partnership, such
fraction being determined by reference to the ORBCOMM Global Partnership
Agreement, as the same may be amended or restated from time to time."
SECTION 6. Section 3.1 of the ORBCOMM International Partnership Agreement
shall be deleted in its entirety and replaced with the following:
"3.1. Partnership Interests. The Partnership Interests shall be
expressed in terms of the Partners' Participation Percentages and Capital
Preferences. The Participation Percentage of ORBCOMM Global shall be
ninety-eight percent (98%), the Participation Percentage of Teleglobe
Mobile shall be two percent (2%), and the Capital Preference of each
Partner as of any date shall be equal to the amount actually contributed
by such Partner in cash or in immediately available funds to the
Partnership through such date (including any amount contributed in
exchange for Participation Percentages), provided that any amounts
contributed to the Partnership by ORBCOMM prior to the exercise of the
Teleglobe Mobile Option shall be deemed for purposes of this Agreement to
have been made by ORBCOMM Global. The Partners shall be required to make
the capital contributions set forth in Section 3.2 in exchange for their
Partnership Interests and shall be entitled to receive the distributions
set forth in Sections 4 and 10 in respect of such Partnership Interests."
- 2 -
<PAGE> 3
SECTION 7. Section 3.2 of the ORBCOMM International Partnership Agreement
shall be deleted in its entirety and replaced with the following:
"Section 3.2. Capital Contributions. As of the Restatement Date,
ORBCOMM Global shall be deemed to have contributed nine thousand eight
hundred dollars ($9,800) and Teleglobe Mobile shall be deemed to have
contributed two hundred dollars ($200) in cash or in immediately available
funds."
SECTION 8. Section 6.1(l) of the ORBCOMM International Partnership
Agreement shall be deleted in its entirety and replaced with the following:
"(l) appoint or remove officers of the Partnership who shall be
nominated by the President of ORBCOMM Global, including a President of the
Partnership and and a senior officer of the Partnership who shall report
directly to the Presidentand be located in Montreal."
SECTION 9. Section 6.6 is deleted in its entirety and replaced with the
following:
"6.6 Designation of Officers. Subject to Section 6.1(l), officers
of the Partnership shall be nominated by the President of the Partnership
and elected by the General Partners and shall exercise such authority as
they are granted by the General Partners. If an officer is an employee of
a General Partner, the Partnership will promptly reimburse such General
Partner the pro rata share of expenses, including compensation and
overhead, attributable to such officer of the Partnership by reference to
the share of his or her total time spent upon Partnership operations."
SECTION 10. The first sentence of Section 6.7 of the ORBCOMM
International Partnership Agreement shall be deleted in its entirety and
replaced with the following:
"Any officer of the Partnership may be removed at any time and for any
reason by approval or written consent of the General Partners."
SECTION 11. The references to "ORBCOMM Development" and to "ORBCOMM U.S."
set forth in Section 7.4 of the ORBCOMM International Partnership Agreement
shall be deleted and replaced with "ORBCOMM Global" and ORBCOMM USA",
respectively.
SECTION 12. The reference to "ORBCOMM" set forth in Section 8.1 of the
ORBCOMM International Partnership Agreement shall be deleted and replaced with
"ORBCOMM Global."
- 3 -
<PAGE> 4
SECTION 13. Section 9.2 of the ORBCOMM International Partnership
Agreement shall be deleted in its entirety and replaced with the following:
"9.2. [RESERVED]"
SECTION 14. The phrase "If to ORBCOMM, to Orbital Communications
Corporation, 21700 Atlantic Boulevard, Dulles, Virginia 20166, Attention:
President; if to Teleglobe Mobile to Teleglobe Mobile Partners, 1000, rue de La
Gauchetiere ouest, Montreal, Quebec, Canada H3B 4X5, Attention: Vice-President,
Legal Matters and Corporate Secretary" set forth in Section 11.1 of the ORBCOMM
International Partnership Agreement shall be deleted as replaced with "If to
ORBCOMM Global, to ORBCOMM Global, L.P., 21700 Atlantic Boulevard, Dulles,
Virginia 20166, Attention: President, with a copy to Orbital, 21700 Atlantic
Boulevard, Dulles, Virginia 20166, Attention: Executive Vice President and
General Manager/Communications and Information Systems Group; if to Teleglobe
Mobile, to Teleglobe Mobile Partners c/o Teleglobe Inc., 1000, rue de La
Gauchetiere ouest, Montreal, Quebec, Canada H3B 4X5, Attention: Executive Vice
President, Corporate Development and Corporate Secretary."
SECTION 15. A new section 12.11 is added to the ORBCOMM International
Partnership Agreement after Section 12.10 that reads as follows:
"12.11. Dispute Resolution. Any controversy or claim that may
arise under, out of, in connection with or relating to this Agreement
shall be resolved in accordance with Section 13.4 of the Master
Agreement."
SECTION 16. The signature block for Orbital Communications Corporation
set forth in the ORBCOMM International Partnership Agreement shall be deleted
in its entirety and replaced with the following:
"ORBCOMM GLOBAL, L.P.
By: Orbital Communications Corporation,
General Partner
By:
--------------------------------
Name: Alan L. Parker
Title: President
By: Teleglobe Mobile Partners,
General Partner
- 4 -
<PAGE> 5
By: Teleglobe Mobile Investment Inc.,
its Managing Partner
By:
-------------------------------
Name: Guthrie J. Stewart
Title: Chairman of the Board and
Chief Executive Officer"
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to
Agreement of Limited Partnership of ORBCOMM International Partnership Agreement
to be executed as of the day and year first above written.
ORBCOMM GLOBAL, L.P.
By: Orbital Communications Corporation,
General Partner
By: /s/ Alan L. Parker
-------------------------------
Name: Alan L. Parker
Title: President
By: Teleglobe Mobile Partners,
General Partner
By: Teleglobe Mobile Investment Inc.,
its Managing Partner
By: /s/ Guthrie J. Stewart
-------------------------------
Name: Guthrie J. Stewart
Title: Chairman of the Board and
Chief Executive Officer
TELEGLOBE MOBILE PARTNERS
By: Teleglobe Mobile Investment Inc.,
its Managing Partner
By: /s/ Guthrie J. Stewart
-------------------------------
Name: Guthrie J. Stewart
Title: Chairman of the Board and
Chief Executive Officer
- 6 -
<PAGE> 1
EXHIBIT 10.18.1
AMENDMENT NO. 1 TO
PROPRIETARY AND NON-COMPETITION AGREEMENT
This Amendment No. 1 to the Proprietary and Non-Competition Agreement
("Amendment No. 1") is made and entered into as of this 12th day of September
1995 by and among Orbital Sciences Corporation, a Delaware corporation
("Orbital"), Orbital Communications Corporation, a Delaware corporation
("ORBCOMM"), Teleglobe Inc., a Canadian corporation ("Teleglobe"), Teleglobe
Mobile Partners, a Delaware general partnership ("Teleglobe Mobile"), ORBCOMM
Global, L.P., a Delaware limited partnership ("ORBCOMM Global"), ORBCOMM USA,
L.P., a Delaware limited partnership ("ORBCOMM USA"), and ORBCOMM International
Partners, L.P., a Delaware limited partnership ("ORBCOMM International").
W I T N E S S E T H
WHEREAS, Orbital, ORBCOMM, Teleglobe, Teleglobe Mobile, ORBCOMM Global,
ORBCOMM USA and ORBCOMM International previously entered into the Proprietary
and Non-Competition Agreement dated as of June 30, 1993 (the "Proprietary and
Non-Competition Agreement"); and
WHEREAS, the parties desire to amend and modify the Proprietary and
Non-Competition Agreement.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Terms used but not otherwise defined herein shall have the
meanings assigned thereto in the Proprietary and Non-Competition Agreement.
SECTION 2. Section 3.1(a) of the Proprietary and Non-Competition
Agreement is deleted in its entirety and replaced with the following:
"(a) except in connection with the fulfillment of their respective
obligations under any of the Definitive Agreements, carry on, engage,
participate, invest or have an equity interest in, or have any financial
interest in the marketing, construction, development or management of any
business or enterprise that competes with Orbital or any of its Affiliates
or Teleglobe or any of its Affiliates, as the case may be, in offering
commercial low-Earth orbit non-voice satellite communications services
operating in the 137-150 MHz band or such other frequency allocated to
"little LEO" mobile satellite services below 1 GHz; ; provided, however,
that notwithstanding the foregoing, ORBCOMM and Orbital shall be
permitted to (i) sell satellites, launch vehicles, launch services and
<PAGE> 2
communication services to non-commercial entities without limitation and
(ii) provide to all other entities up to two satellites every two years
and launch vehicles or launch services for up to two satellites every two
years; or"
SECTION 3. Section 3.1(b) of the Proprietary and Non-Competition
Agreement is amended and modified by replacing the period at the end of the
paragraph with "; or".
SECTION 4. A new Section 3.1(c) is added to the Proprietary and
Non-Competition Agreement following Section 3.1(b) that reads as follows:
"(c) employ any person to work on or represent the ORBCOMM System who will
also work on or represent another mobile communications system, whether in
a technical, marketing or other non-administrative capacity, without first
notifying the President of ORBCOMM Global of such person's proposed duties
and the duties such person may have with respect to such other mobile
communications projects."
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to the
Proprietary and Non-Competition Agreement as of the day and year first above
written.
ORBITAL SCIENCES CORPORATION
By: /s/ Bruce W. Ferguson
-------------------------------
Name: Bruce W. Ferguson
Title: Executive Vice President and General
Manager/Communications and
Information Systems Group
ORBITAL COMMUNICATIONS CORPORATION
By: /s/ Alan L. Parker
-------------------------------
Name: Alan L. Parker
Title: President
TELEGLOBE INC.
By: /s/ Guthrie J. Stewart
-------------------------------
Name: Guthrie J. Stewart
Title: Executive Vice President, Corporate
+ Development and Corporate Secretary
2
<PAGE> 3
TELEGLOBE MOBILE PARTNERS
By: Teleglobe Mobile Investment Inc.,
its Managing Partner
By: /s/ Guthrie J. Stewart
-------------------------------
Name: Guthrie J. Stewart
Title: Chairman of the Board and
Chief Executive Officer
ORBCOMM GLOBAL, L.P.
By: Orbital Communications Corporation,
General Partner
By: /s/ Alan L. Parker
------------------------------
Name: Alan L. Parker
Title: President
By: Teleglobe Mobile Partners,
General Partner
By: Teleglobe Mobile Investment Inc.,
its Managing Partner
By: /s/ Guthrie J. Stewart
-------------------------------
Name: Guthrie J. Stewart
Title: Chairman of the Board and
Chief Executive Officer
3
<PAGE> 4
ORBCOMM USA, L.P.
By: Orbital Communications Corporation,
General Partner
By: /s/ Alan L. Parker
-------------------------------
Name: Alan L. Parker
Title: President
By: Teleglobe Mobile Partners,
General Partner
By: Teleglobe Mobile Investment Inc.,
its Managing Partner
By: /s/ Guthrie J. Stewart
-------------------------------
Name: Guthrie J. Stewart
Title: Chairman of the Board and
Chief Executive Officer
4
<PAGE> 5
ORBCOMM INTERNATIONAL PARTNERS, , L.P.
By: Orbital Communications Corporation,
General Partner
By: /s/ Alan L. Parker
-------------------------------
Name: Alan L. Parker
Title: President
By: Teleglobe Mobile Partners,
General Partner
By: Teleglobe Mobile Investment Inc.,
its Managing Partner
By: /s/ Guthrie J. Stewart
-------------------------------
Name: Guthrie J. Stewart
Title: Chairman of the Board and
Chief Executive Officer
5
<PAGE> 1
EXHIBIT 10.19
EXHIBIT 2.3
SUPPORT AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 17th day of November, 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 November ______, 1995, each issued and outstanding common
share of MDA (an "MDA Common Share") was exchanged directly or indirectly with
the Corporation for 0.3607 issued and outstanding Exchangeable Shares of the
Corporation (the "Exchangeable Shares");
<PAGE> 2
- 2 -
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 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.
.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.
.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.
.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.
<PAGE> 3
- 3 -
ARTICLE 2
COVENANTS OF ORBITAL AND THE CORPORATION
.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;
<PAGE> 4
- 4 -
(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 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
<PAGE> 5
- 5 -
Price, as applicable, in each case in accordance with the Exchangeable Share
Provisions.
.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.
.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.
<PAGE> 6
- 6 -
.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.
.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).
<PAGE> 7
- 7 -
.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).
.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.
.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
<PAGE> 8
- 8 -
given by holders of Exchangeable Shares pursuant to section 8.2 of the
Exchangeable Share Provision.
.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.
.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
.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.
.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 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.
.4 AMENDMENTS, MODIFICATIONS, ETC. This agreement may not be amended
or modified except by an agreement in writing executed by the Corporation
<PAGE> 9
- 9 -
and Orbital and approved by the holders of the Exchangeable Shares in
accordance with section 10.2 of the Exchangeable Share Provisions.
.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.
.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.
.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.
.8 INUREMENT. This agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
<PAGE> 10
- 10 -
.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.
.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
<PAGE> 11
- 11 -
Attention: President
Telecopy: (604) 273-9830
<PAGE> 12
- 12 -
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.
.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.
.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.
<PAGE> 13
- 13 -
.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 /s/ Carlton B. Crenshaw
--------------------------------
Senior Vice President
MACDONALD DETTWILER HOLDINGS
INC.
By /s/ Carlton B. Crenshaw
----------------------------
Vice President
<PAGE> 1
EXHIBIT 11.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED DECEMBER 31, 1995
------------------------------------- ---------------------------
ASSUMING
PRIMARY FULL DILUTION
---------- -------------
<S> <C> <C>
WEIGHTED AVERAGE OF OUTSTANDING
SHARES 26,775,548 26,775,548
COMMON EQUIVALENT SHARES:
OUTSTANDING STOCK OPTIONS 376,973 376,939
OTHER POTENTIALLY DILUTIVE SECURITIES:
CONVERTIBLE DEBENTURES N/A 3,895,652
---------- ----------
SHARES USED IN COMPUTING
NET INCOME PER SHARE 27,152,521 31,048,139
========== ==========
NET INCOME ($3,836,719) ($3,836,719)
ADJUSTMENTS ASSUMING FULL DILUTION:
INTEREST EXPENSE, NET OF TAXES N/A 945,000
---------- ----------
NET INCOME, ASSUMING FULL DILUTION ($3,836,719) ($2,891,719)
========== ==========
NET INCOME PER SHARE ($0.141) ($0.093)
DILUTION PERCENTAGE ASSUMING FULL DILUTION (1) N/A -34.087%
NET INCOME PER SHARE ($0.14) ($0.14)
========== ==========
NET INCOME PER SHARE USED (2) ($0.14) ($0.14)
========== ==========
<CAPTION>
TWELVE MONTH PERIOD ENDED DECEMBER 31, 1995
-------------------------------------- ---------------------------
ASSUMING
PRIMARY FULL DILUTION
---------- -------------
<S> <C> <C>
WEIGHTED AVERAGE OF OUTSTANDING
SHARES 25,694,084 25,694,084
COMMON EQUIVALENT SHARES:
OUTSTANDING STOCK OPTIONS 513,662 514,122
OTHER POTENTIALLY DILUTIVE SECURITIES:
CONVERTIBLE DEBENTURES N/A 3,895,652
SHARES USED IN COMPUTING ---------- ----------
NET INCOME PER SHARE 26,207,746 30,103,858
========== ==========
NET INCOME ($4,847,512) ($4,847,512)
ADJUSTMENTS ASSUMING FULL DILUTION:
INTEREST EXPENSE, NET OF TAXES N/A 3,780,000
---------- ----------
NET INCOME, ASSUMING FULL DILUTION ($4,847,512) ($1,067,512)
========== ==========
NET INCOME PER SHARE ($0.185) ($0.035)
DILUTION PERCENTAGE ASSUMING FULL DILUTION (1) N/A -80.828%
NET INCOME PER SHARE ($0.18) ($0.18)
========== ==========
NET INCOME PER SHARE USED (2) ($0.19) ($0.19)
========== ==========
</TABLE>
NOTES:
(1) - PROVIDED THAT DILUTION IS GREATER THAN 3%, THE CONVERTIBLE DEBENTURES ARE
CONSIDERED DILUTIVE IN THE CALCULATION AND PRESENTATION OF PER SHARE DATA.
(2) - SINCE COMMON STOCK EQUIVALENTS ARE ANTIDILUTIVE, THE COMMON STOCK
EQUIVALENTS HAVE BEEN EXCLUDED FROM THE CALCULATION AND PRESENTATION OF
PER SHARE DATA.
<PAGE> 1
F I N A N C I A L I N F O R M A T I O N
- --------------------------------------------------------------------------------
INDEX TO FINANCIAL REVIEW AND DISCUSSION
<TABLE>
<S> <C>
Selected Consolidated Financial Data page 28
Management's Discussion and Analysis of Financial
Condition and Results of Operations page 29
Independent Auditors' Report page 34
Consolidated Statements of Operations page 35
Consolidated Balance Sheets page 36
Consolidated Statements of Stockholders' Equity page 37
Consolidated Statements of Cash Flows page 38
Notes to Consolidated Financial Statements page 39
</TABLE>
MARKET INFORMATION
The Company's Common Stock is traded on the Nasdaq Stock Market under the
symbol ORBI. The number of stockholders of record as of March 7, 1996 was
1,479. The Company's Convertible Debentures are traded on the Nasdaq Stock
Market under the symbol ORBIG.
The range of high and low closing sales prices of Orbital Common Stock for 1993
through 1995, as reported on the Nasdaq Stock Market, was as follows:
<TABLE>
<CAPTION>
1995 HIGH LOW
--------- ---------
<S> <C> <C>
Fourth Quarter $16 5/8 $12 3/16
Third Quarter $19 1/4 $16
Second Quarter $22 $15 1/2
First Quarter $20 1/2 $16 1/2
</TABLE>
<TABLE>
<CAPTION>
1994 HIGH LOW
--------- ---------
<S> <C> <C>
Fourth Quarter $22 1/2 $15
Third Quarter $18 1/2 $14 1/2
Second Quarter $24 1/2 $14
First Quarter $26 1/2 $15 1/4
</TABLE>
<TABLE>
<CAPTION>
1993 HIGH LOW
--------- ---------
<S> <C> <C>
Fourth Quarter $23 $16 1/2
Third Quarter $19 $12 1/4
Second Quarter $13 3/4 $10 1/4
First Quarter $14 1/4 $10 3/4
</TABLE>
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ORBITAL SCIENCES CORPORATION
<PAGE> 2
S E L E C T E D C O N S O L I D A T E D F I N A N C I A L D A T A
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA) YEARS ENDED DECEMBER 31,
1995 1994 1993 1992 1991
----------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA (1):
Revenues $ 364,320 $ 301,576 $ 300,184 $ 273,171 $ 223,955
Costs of Goods Sold 268,016 216,417 228,289 207,834 170,531
---------- ---------- ---------- ---------- ----------
Gross Profit 96,304 85,159 71,895 65,337 53,424
Research and Development Expenses 25,512 17,259 19,703 15,565 9,950
Reusable Launch System Charges 3,000 -- -- -- --
Selling, General and Administrative Expenses 63,427 53,165 38,270 41,723 36,169
Amortization of Excess of Purchase Price
Over Net Assets Acquired 3,221 2,360 1,634 1,606 1,542
Net Investment Income (Expense) 639 (244) (44) 860 1,579
Equity in Earnings (Losses) of Affiliates (759) (1,264) (2,436) -- --
Non-Controlling Interests in (Earnings) Losses of
Consolidated Subsidiaries 427 -- -- -- --
Other Expenses (3,441) (503) -- -- --
---------- ---------- ---------- ---------- ----------
Income (Loss) Before Provision (Benefit)
for Income Taxes, Cumulative Effect of
Accounting Changes and Extraordinary Item (1,990) 10,364 9,808 7,303 7,342
Provision (Benefit) for Income Taxes (1,302) 2,744 2,403 1,997 3,132
---------- ---------- ---------- ---------- ----------
Income (Loss) Before Cumulative Effect of
Accounting Changes and Extraordinary Item (688) 7,620 7,405 5,306 4,210
Cumulative Effect of Accounting Changes, net of taxes (4,160) -- 200 -- --
Extraordinary Item (2) -- -- -- -- 1,748
---------- ---------- ---------- ---------- ----------
Net Income (Loss) $ (4,848) $ 7,620 $ 7,605 $ 5,306 $ 5,958
========== ========== ========== ========== ==========
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE (3):
Income (Loss) Before Cumulative Effect of Accounting
Changes and Extraordinary Item $ (0.03) $ 0.33 $ 0.40 $ 0.29 $ 0.24
Cumulative Effect of Accounting Changes (0.16) -- 0.01 -- --
Extraordinary Item -- -- -- -- 0.10
---------- ---------- ---------- ---------- ----------
$ (0.19) $ 0.33 $ 0.41 $ 0.29 $ 0.34
========== ========== ========== ========== ==========
SHARES USED IN COMPUTING NET INCOME (LOSS)
PER COMMON AND COMMON EQUIVALENT SHARE 26,207,746 23,191,553 18,728,980 18,492,059 17,579,410
========== ========== ========== ========== ==========
NET INCOME (LOSS) PER SHARE, ASSUMING FULL DILUTION (4):
Income (Loss) Before Cumulative Effect of Accounting
Changes and Extraordinary Item $ (0.03) $ 0.32 $ 0.36 $ 0.29 $ 0.24
Cumulative Effect of Accounting Changes (0.16) -- 0.01 -- --
Extraordinary Item -- -- -- -- 0.10
---------- ---------- ---------- ---------- ----------
$ (0.19) $ 0.32 $ 0.37 $ 0.29 $ 0.34
========== ========== ========== ========== ==========
SHARES USED IN COMPUTING NET INCOME (LOSS)
PER COMMON SHARE, ASSUMING FULL DILUTION 30,103,858 27,309,336 22,343,402 18,492,059 17,579,410
========== ========== ========== ========== ==========
BALANCE SHEET DATA (1):
Cash and Cash Equivalents and Short-Term Investments $ 35,030 $ 40,345 $ 85,347 $ 16,019 $ 51,088
Net Working Capital 87,553 57,449 92,036 41,527 64,723
Total Assets 466,908 441,042 367,979 212,151 213,780
Short-Term Borrowings 11,907 28,977 15,793 6,377 1,494
Long-Term Obligations 96,990 86,068 73,165 10,818 9,724
Stockholders' Equity $ 238,908 $ 206,943 $ 169,389 $ 111,687 $ 115,042
========== ========== ========== ========== ==========
</TABLE>
1 / All historical balances have been restated to reflect the Company's
acquisitions of Magellan Corporation and MacDonald,
Dettwiler and Associates Ltd. Both acquisitions were accounted for
using the pooling of interests method.
2 / Represents an income tax benefit from net operating loss carryforwards.
3 / Net income (loss) per common and common equivalent share is calculated
using the weighted average number of shares and
dilutive equivalent shares outstanding during the periods.
4 / Net income (loss) per share, assuming full dilution, is calculated
using the weighted average number of shares and dilutive
equivalent shares outstanding during the periods, plus the effect of an
assumed conversion of the Company's convertible
subordinated debentures.
twenty-eight
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ORBITAL SCIENCES CORPORATION
<PAGE> 3
M A N A G E M E N T ' S D I S C U S S I O N A N D A N A L Y S I S O F
F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F
O P E R A T I O N S
- --------------------------------------------------------------------------------
OVERVIEW
A significant portion of the Company's revenues are generated under long-term
contracts with various agencies of the U.S. Government, various foreign
governments and commercial customers. Orbital recognizes revenues on long-term
contracts using the percentage of completion method of accounting, whereby
revenue, and therefore profit, 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 incentive fee and award fee
contracts, such fees are included in revenue at the time the amount of such fee
can reasonably be determined or based on the Company's ongoing estimates of the
amount of the fee to be received. 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.
The Company is accounting for its investment in ORBCOMM Global, L. P. ("ORBCOMM
Global") using the equity method of accounting. In accordance with the equity
method of accounting, Orbital consolidates 100% of the revenues earned and
costs incurred pursuant to sales to ORBCOMM Global. The Company also
recognizes as equity in earnings (losses) of affiliates its pro rata share of
ORBCOMM Global's profits and losses. During the construction phase of the
ORBCOMM System, ORBCOMM Global is capitalizing substantially all system
construction costs, including amounts paid to Orbital. To the extent ORBCOMM
Global capitalizes its purchases from Orbital, the Company eliminates as equity
in earnings (losses) of affiliates 50% of its profits and losses from those
sales.
In 1995, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" ("SFAS 121"), which (i) requires that 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 previous guidelines and procedures. The
cumulative effect of adopting SFAS 121 on prior years' earnings, relating to
the impairment in the carrying amount of certain assets to be disposed of that
supported its orbit transfer vehicle product line, was approximately
$4,160,000, and is reported in the 1995 consolidated statement of operations.
The effect of adopting SFAS 121 on income from continuing operations for 1995
was not material.
ACQUISITIONS
Orbital acquired MacDonald, Dettwiler and Associates Ltd. ("MDA") on November
17, 1995 and Magellan Corporation ("Magellan") on December 29, 1994. Both
transactions were accounted for using the pooling of interests method of
accounting for business combinations. Orbital's historical financial
information has been restated to effect the pooling of interests with MDA and
Magellan as of the earliest period presented. Orbital incurred transaction
expenses of approximately $3,400,000 for the MDA acquisition and $500,000 for
the Magellan acquisition in 1995 and 1994, respectively.
On August 11, 1994, Orbital acquired Fairchild Space and Defense Corporation
("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. On April 6, 1994, the Company (as a result of its
acquisition of MDA) acquired The PSC Communications Group Inc. ("PSC") from
PSC's former shareholders in a transaction accounted for as a purchase business
combination. As a result of recasting MDA's fiscal year end, Orbital's
consolidated results of operations for 1994 include PSC's financial results for
the full year. On September 17, 1993, Orbital acquired the Applied Science
Operation ("ASO"), a business unit of The Perkin-Elmer Corporation, 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.
The following table shows the Company's revenues, gross profits and gross
profit margin, by major product category, for each of the three years ended
December 31, 1995, 1994 and 1993:
twenty-nine
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ORBITAL SCIENCES CORPORATION
<PAGE> 4
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------ ------------------------------ --------------------------------
(IN THOUSANDS) GROSS GROSS GROSS
REVENUES PROFIT MARGIN REVENUES PROFIT MARGIN REVENUES PROFIT MARGIN
------------------------------ ----------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LAUNCH VEHICLES $ 69,377 $ 11,920 17.2% $ 74,832 $12,652 16.9% $120,410 $20,818 17.3%
Space launch vehicles 33,883 4,959 14.6 52,200 8,067 15.4 55,988 7,216 12.9
Suborbital launch vehicles 22,523 6,170 27.4 22,632 5,785 25.6 48,990 12,428 25.4
Orbit transfer vehicles and
other 12,971 791 6.1 -- (1,200) NA 15,432 1,174 7.6
SATELLITE AND ELECTRONICS
SYSTEMS 152,496 34,878 22.9 88,305 24,007 27.2 31,287 6,519 20.8
Satellite systems and
payloads 83,166 11,480 13.8 35,031 9,231 26.4 25,160 4,907 19.5
Space sensors and
instruments 11,416 2,732 23.9 17,670 4,894 27.7 3,710 895 24.1
Defense electronics and
sensors 57,914 20,666 35.7 35,604 9,882 27.8 2,417 717 29.7
GROUND SYSTEMS AND
SOFTWARE 73,473 22,871 31.1 79,630 20,279 25.5 77,097 19,012 24.7
COMMUNICATIONS AND
INFORMATION SERVICES 68,974 26,635 38.6 58,809 28,221 47.0 71,390 25,546 35.8
Navigation and
communications products 55,333 22,257 40.2 38,517 17,802 46.2 32,900 14,995 45.6
Satellite-based services 11,191 3,831 34.2 10,154 6,117 60.2 20,609 3,269 15.9
Satellite tracking systems
and other 2,450 547 22.3 10,138 4,302 42.4 17,881 7,282 40.7
-------- -------- ---- -------- -------- ---- -------- -------- ----
CONSOLIDATED TOTAL $364,320 $ 96,304 26.4% $301,576 $85,159 28.2% $300,184 $71,895 24.0%
======== ======== ==== ======== ======== ==== ======== ======== ====
</TABLE>
RESULTS OF OPERATIONS
REVENUES. Orbital's revenues for 1995, 1994 and 1993 were $364,320,000,
$301,576,000 and $300,184,000, respectively. Revenues include sales to ORBCOMM
Global of approximately $49,187,000, $30,048,000 and $38,207,000 in 1995, 1994
and 1993, respectively.
Revenues from the Company's space launch vehicle products decreased from
$55,988,000 in 1993 to $52,200,000 in 1994, and were $33,883,000 in 1995. The
decreases in 1994 and 1995 are primarily attributable to significant delays in
production of the Company's Pegasus space launch vehicle as a result of the
June 1994 and June 1995 Pegasus XL launch failures. Orbital has completed its
failure review and return-to-flight processes, successfully launched a Pegasus
XL vehicle in March 1996 and expects to launch several more Pegasus XL vehicles
in 1996. As a result, the Company expects Pegasus revenues to increase
significantly in 1996 as it resumes its production program and planned
launches.
Revenues from suborbital launch vehicle products were $22,523,000 in 1995,
$22,632,000 in 1994 and $48,990,000 in 1993. Revenues from suborbital launch
vehicles, which are primarily purchased by various agencies within the U. S.
Department of Defense for military purposes, have decreased significantly over
the past few years as defense spending by the U.S. Government has been reduced.
The Company expects suborbital launch vehicle product revenues in 1996 to
remain consistent with 1995 levels.
Revenues from orbit transfer vehicles and other products were $12,971,000 in
1995. These revenues are primarily attributable to work performed on
developing a technologically advanced reusable launch vehicle, pursuant to a
cooperative agreement with NASA awarded in 1995. Orbital recorded charges of
$3,000,000 related to a termination of the development effort in early 1996.
Satellite and electronics systems revenues increased to $152,496,000 in 1995,
from $88,305,000 in 1994, and $31,287,000 in 1993. The increase in sales in
thirty
----------------------------
ORBITAL SCIENCES CORPORATION
<PAGE> 5
1995 is primarily attributable to a full year's sales of satellite systems and
electronics following the August 1994 acquisition of Fairchild. The increase
in 1994 sales as compared to 1993 sales is primarily as a result of the
Fairchild acquisition in August 1994, and a full year's sales of sensors and
instruments following the September 1993 acquisition of ASO. The Company
expects its satellite and electronics systems revenues to increase in 1996 as a
result of several new commercial and government satellite and electronics
contracts awarded during the latter part of 1995.
Ground systems and software revenues were $73,473,000, $79,630,000 and
$77,097,000 in 1995, 1994 and 1993, respectively. The change in revenues from
1994 to 1995 is attributable primarily to a continued decrease in sales of
satellite ground systems offset, in part, by an increase in revenues generated
by communication services provided by PSC. The decrease in sales of satellite
ground systems is primarily a result of fewer Earth observation satellites
being placed into operation during the past few years. The slight increase in
total revenues from 1993 to 1994 is attributable to the first year of PSC's
sales after its acquisition in April 1994 offset, in part, by a decrease in
sales of satellite ground systems due to completion of a specific project for
the Canadian Space Agency. The change in revenues between 1995 and 1994 is
also partially attributable to the fluctuation of the exchange rate between the
Canadian dollar and the U.S. dollar during the periods. The Company
anticipates that ground systems and software revenues will increase in 1996
based on potential new contracts expected to be awarded in mid-1996.
Communications and information services revenues increased to $68,974,000 in
1995, from $58,809,000 in 1994, but were still below 1993's revenues of
$71,390,000. The decrease in total sales from 1993 to 1994 is attributable
primarily to a decrease in sales of ground systems and software (used to
operate the ORBCOMM System) to ORBCOMM Global. The largest component of
communications and information services revenues is from sales of Magellan's
satellite navigation and communications equipment. Magellan's sales were
$52,630,000 in 1995 as compared to $37,144,000 in 1994 and $32,900,000 in 1993.
The year-to-year increases in Magellan's sales are due to a significant
increase in the number of products sold offset, in part, by lower average unit
sales prices. Orbital expects communications and information services revenues
to increase in 1996, primarily due to continuing increasing unit sales of
satellite navigation and communications equipment. In 1996, the Company also
expects to generate modest sales from the ORBCOMM System, which became
commercially operational in February 1996.
COSTS OF GOODS SOLD. Costs of goods sold include the costs of personnel and
materials under the Company's various development and production contracts,
including costs of subcontracts. Orbital's costs of goods sold for 1995, 1994
and 1993 were $268,016,000 (73.6% of revenues), $216,417,000 (71.8% of
revenues) and $228,289,000 (76.0% of revenues), respectively. The increase in
costs of sales as a percentage of revenues in 1995 results in part from
approximately $2,100,000 of cost increases on the Company's Pegasus program
resulting from the two launch failures, and cost increases on certain satellite
programs. Other contributing factors include lower average unit sales prices
of satellite navigation equipment offset, in part, by increasing profit margins
on certain satellite and ground systems contracts contributed by recent
acquisitions. Costs of goods sold in 1994 and 1993 also reflect cost increases
on the Taurus space launch vehicle development program. The Company believes
that its costs of goods sold as a percentage of sales in 1996 will be lower
than that achieved in 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 during 1995,
1994 and 1993 were $25,512,000, $17,259,000 and $19,703,000, respectively.
Research and development spending during 1995 and 1994 reflected Orbital's
continued development of its Pegasus XL vehicle, including certain failure
review and return-to-flight efforts totaling $7,900,000 in 1995 and $2,500,000
in 1994. Addi-
thirty-one
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ORBITAL SCIENCES CORPORATION
<PAGE> 6
tionally, 1994 and 1993 expenses included continuing costs for Orbital's
development of its Taurus space launch vehicle and development of lower-cost
satellite navigation and communications equipment. The Company expects its
research and development expenditures, primarily related to development of new
satellite programs and continued research in developing lower-cost satellite
navigation and communications equipment, to decrease slightly in 1996.
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 the Company. Selling,
general and administrative expenses for 1995, 1994 and 1993 were 63,427,000
(17.4% of revenues), $53,165,000 (17.6% of revenues) and $38,270,000 (12.7% of
revenues), respectively. The increase in selling, general and administrative
expenses and its related percentage of revenues from 1993 levels to 1995 levels
is primarily attributable to the three significant purchase business
combinations that have been concluded since September 1993. The acquired
businesses have higher historical selling, general and administrative rates
than Orbital's original businesses. Increasing selling, general and
administrative expenses related to initial marketing activities for the
Company's ORBCOMM project ($5,671,000 in 1995 and $5,470,000 in 1994) have also
contributed to higher costs in 1995 and 1994.
NET INVESTMENT INCOME (EXPENSE). Net investment income (expense) was $639,000,
($244,000) and ($44,000) for 1995, 1994 and 1993, respectively. Investment
income reflects interest earnings on short-term investments and realized gains
and losses on investments, reduced by interest expense (net of capitalized
interest of $5,700,000, $5,500,000 and $3,500,000 in 1995, 1994 and 1993,
respectively) on outstanding debt.
EQUITY AND NON-CONTROLLING INTERESTS IN EARNINGS (LOSSES) OF AFFILIATES AND
CONSOLIDATED SUBSIDIARIES. Equity in earnings (losses) of affiliates in 1995,
1994 and 1993 represents elimination of $1,213,000, $1,264,000 and $2,436,000,
respectively, of profits on sales to ORBCOMM Global, due to ORBCOMM Global's
capitalization of its purchases from the Company, and Orbital's share of
ORBCOMM Global's net income (loss). Non-controlling interests in earnings
(losses) of consolidated subsidiaries represent the portion of earnings
(losses) allocable to other shareholders.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company adopted the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS 109") effective January 1, 1993. The
cumulative effect on prior years of this change in accounting principle
increased net income for 1993 by approximately $200,000. The effect of
adopting SFAS 109 on income from operations for 1993 was not material.
The Company recorded a consolidated income tax benefit of approximately
$1,302,000 in 1995, primarily as a result of the carryback and recapture of
previously paid U.S. Federal alternative minimum taxes and management's
determination that certain Canadian investment tax credit carryforwards will be
realized in the near future. Orbital recorded income tax provisions of
$2,744,000 and $2,403,000 for 1994 and 1993, respectively. The Company's
effective tax rate for these periods (26.5% and 24.5% in 1994 and 1993,
respectively) is primarily a result of non-tax deductible goodwill amortization
related to its acquisition of Space Data Corporation in 1988 and Fairchild in
1994, offset by tax-exempt interest earnings, U.S. Federal research and
experimental tax credits and Canadian investment tax credits.
At December 31, 1995, Orbital had approximately $102,000,000 of U.S. Federal
net operating loss carryforwards and $3,000,000 of U.S. Federal research and
experimental tax credit carryforwards which, subject to certain annual
limitations, are available to reduce future U.S. Federal income tax
obligations. At
thirty-two
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ORBITAL SCIENCES CORPORATION
<PAGE> 7
December 31, 1995 and 1994, Orbital provided a valuation allowance of
approximately $65,000,000 and $43,500,000, respectively, against certain of its
consolidated deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1993, Orbital completed a public offering of
convertible debentures, receiving net proceeds of approximately $57,000,000.
During the fourth quarter of 1993, Orbital completed a public offering of
approximately 2,923,000 shares of its common stock, receiving net proceeds of
approximately $45,300,000. In June 1995, the Company completed a private
placement of 2,000,000 shares of its common stock, receiving net proceeds of
approximately $32,400,000. The Company's shares were placed with various
international institutional investors.
At December 31, 1995, cash, cash equivalents and short-term investments were
approximately $35,030,000 and Orbital had approximately $108,897,000 of short-
and long-term debt outstanding. Additionally, at December 31, 1995, Orbital
had approximately $11,000,000 of cash reserved against outstanding letters of
credit and was guarantor on approximately $5,000,000 of debt held by ORBCOMM
Global. Orbital's current ratio was 1.8 at December 31, 1995, compared to 1.4
and 1.8 at December 31, 1994 and 1993.
The Company maintains a line of credit facility that provides for total
borrowings from an international syndicate of six banks of up to $65,000,000,
subject to a defined borrowing base composed of certain contract receivables.
Approximately $3,000,000 of borrowings were outstanding against the facility at
December 31, 1995, against an available facility limit of approximately
$23,500,000. The interest rate charged under the facility is a variable rate
based on Morgan Guaranty Trust Company of New York's prime rate, the Federal
Funds rate, or adjusted LIBOR. At December 31, 1995, the interest rate on
outstanding borrowings under this facility was approximately 9.5%. Borrowings
are secured by contract receivables and certain other assets. The facility
restricts the payment of dividends and contains certain covenants with respect
to the Company's working capital, fixed charge ratio, leverage ratio and
tangible net worth. The facility expires in September 1997. The Company also
maintains several other short-term domestic line of credit facilities, totaling
approximately $12,000,000, of which $2,000,000 was outstanding as of December
31, 1995, as well as a facility for its Canadian operations.
The Company's operations used net cash of approximately $2,318,000 in 1995.
During 1995 Orbital invested approximately $18,900,000 in ORBCOMM Global and
invested approximately $17,200,000 in capital assets to support its launch
vehicle and satellite products and various satellite systems. Orbital's
capital expenditures for 1996 are expected to exceed $10,000,000, including
continued investments in various satellite systems. Additionally, in 1996 the
Company expects to invest approximately $5,000,000 to $10,000,000 in new Earth
observation and remote sensing products and services and approximately
$10,000,000 in ORBCOMM Global. Orbital expects that its 1996 capital needs,
including its planned investment in the ORBCOMM System, will be provided by
working capital, cash flows from operations, credit facilities, customer
financing and operating lease arrangements. If ORBCOMM Global fails to raise
sufficient capital to complete construction of its planned satellite
constellation, Orbital may be required to increase its equity position by an
additional $30,000,000 to $50,000,000 over the next several years.
thirty-three
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ORBITAL SCIENCES CORPORATION
<PAGE> 8
I N D E P E N D E N T A U D I T O R S ' R E P O R T
The Board of Directors and Stockholders
Orbital Sciences Corporation:
We have audited the accompanying consolidated balance sheets of Orbital
Sciences Corporation and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of Magellan Corporation, a wholly owned subsidiary, in 1993, which
statements reflect total revenues constituting 11% of the related consolidated
total in that year. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for Magellan Corporation, is based solely on the report of the
other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Orbital Sciences
Corporation and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of," as of January 1, 1995. As discussed in Notes 1 and 11 to
the consolidated financial statements, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," as of January 1, 1993.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Washington, D.C.
February 5, 1996
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ORBITAL SCIENCES CORPORATION
<PAGE> 9
C O N S O L I D A T E D S T A T E M E N T S O F O P E R A T I O N S
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA) FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993
------------ ----------------------------
<S> <C> <C> <C>
Revenues $ 364,320 $ 301,576 $ 300,184
Costs of Goods Sold 268,016 216,417 228,289
----------- ----------- ----------
Gross Profit 96,304 85,159 71,895
Research and Development Expenses 25,512 17,259 19,703
Reusable Launch System Charges 3,000 -- --
Selling, General and Administrative Expenses 63,427 53,165 38,270
Amortization of Excess of Purchase Price Over Net Assets Acquired 3,221 2,360 1,634
----------- ----------- ----------
Income from Operations 1,144 12,375 12,288
Net Investment Income (Expense), net of interest expense of
$3,815, $1,740, and $1,409, respectively 639 (244) (44)
Equity in Earnings (Losses) of Affiliates (759) (1,264) (2,436)
Non-Controlling Interests in (Earnings) Losses of
Consolidated Subsidiaries 427 -- --
Other Expenses (3,441) (503) --
----------- ----------- ----------
Income (Loss) Before Provision (Benefit) for Income Taxes
and Cumulative Effect of Accounting Changes (1,990) 10,364 9,808
Provision (Benefit) for Income Taxes (1,302) 2,744 2,403
----------- ----------- ----------
Income (Loss) Before Cumulative Effect of Accounting Changes (688) 7,620 7,405
Cumulative Effect of Accounting Changes, net of taxes (4,160) -- 200
----------- ----------- ----------
Net Income (Loss) $ (4,848) $ 7,620 $ 7,605
=========== =========== ==========
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE:
Income (Loss) Before Cumulative Effect of Accounting Changes $ (0.03) $ 0.33 $ 0.40
Cumulative Effect of Accounting Changes (0.16) -- 0.01
$ (0.19) $ 0.33 $ 0.41
Shares Used in Computing Net Income (Loss)
per Common and Common Equivalent Share 26,207,746 23,191,553 18,728,980
NET INCOME (LOSS) PER COMMON SHARE, ASSUMING FULL DILUTION:
Income (Loss) Before Cumulative Effect of Accounting Changes $ (0.03) $ 0.32 $ 0.36
Cumulative Effect of Accounting Changes (0.16) -- 0.01
----------- ----------- ----------
$ (0.19) $ 0.32 $ 0.37
=========== =========== ==========
Shares Used in Computing Net Income (Loss)
per Common Share, assuming full dilution 30,103,858 27,309,336 22,343,402
=========== =========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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ORBITAL SCIENCES CORPORATION
<PAGE> 10
C O N S O L I D A T E D B A L A N C E S H E E T S
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31,
A S S E T S 1995 1994
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 15,317 $ 27,919
Short-term investments, at market 19,713 12,426
Receivables, net 118,358 116,021
Inventories, net 38,527 26,445
Deferred income taxes and other assets 7,330 3,871
--------- --------
TOTAL CURRENT ASSETS 199,245 186,682
PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated
depreciation and amortization of $53,067 and $46,409, respectively 91,512 103,090
SATELLITE SYSTEMS, at cost, less accumulated
depreciation of $547 and $0, respectively 14,363 6,788
INVESTMENTS IN AFFILIATES, net 74,063 54,721
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED,
less accumulated amortization of $13,695 and $10,612, respectively 75,395 74,599
DEFERRED INCOME TAXES AND OTHER ASSETS 12,330 15,162
--------- --------
TOTAL ASSETS $ 466,908 $441,042
========= ========
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
CURRENT LIABILITIES:
Short-term borrowings and current portion of long-term obligations $ 11,907 $ 28,977
Accounts payable 25,808 17,457
Accrued expenses 29,922 43,603
Payable to subcontractors 11,552 13,695
Deferred revenue 32,503 25,501
--------- --------
TOTAL CURRENT LIABILITIES 111,692 129,233
LONG-TERM OBLIGATIONS, net of current portion 96,990 86,068
OTHER LIABILITIES 19,740 18,798
--------- --------
TOTAL LIABILITIES 228,422 234,099
NON-CONTROLLING INTERESTS IN NET ASSETS OF CONSOLIDATED SUBSIDIARIES (422) --
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series A Special Voting Preferred Stock, par value $.01;
one share authorized and outstanding -- --
Class B Preferred Stock, no par value;
10,000 shares authorized and outstanding -- --
Preferred Stock, par value $.01; 10,000,000 shares
authorized, no shares outstanding -- --
Common Stock, par value $.01; 40,000,000 shares authorized, 26,766,029 and
24,257,322 shares outstanding, after deducting 15,735 shares held in treasury 268 243
Additional paid-in capital 247,580 210,030
Unrealized gains (losses) on short-term investments 68 (462)
Cumulative translation adjustment (3,356) (3,111)
Retained earnings (deficit) (5,652) 243
--------- --------
TOTAL STOCKHOLDERS' EQUITY 238,908 206,943
--------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 466,908 $441,042
========= ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
thirty-six
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ORBITAL SCIENCES CORPORATION
<PAGE> 11
C O N S O L I D A T E D S T A T E M E N T S O F S T O C K H O L D E R S '
E Q U I T Y
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)
UNREALIZED
COMMON STOCK GAINS (LOSSES) CUMULATIVE RETAINED
------------------ ADDITIONAL ON SHORT-TERM TRANSLATION EARNINGS
SHARES AMOUNT PAID-IN CAPITAL INVESTMENTS ADJUSTMENT (DEFICIT) TOTAL
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992,
AS INITIALLY REPORTED 11,670,652 $ 117 $ 103,174 $ -- $ -- $ (9,474) $ 93,817
Adjustment for Magellan Corporation business
combination, accounted for as a pooling
of interests 2,640,441 26 14,303 -- -- (195) 14,134
Adjustment for MacDonald, Dettwiler and
Associates Ltd. business combination,
accounted for as a pooling of interests 4,087,126 41 8,601 -- (1,708) (3,198) 3,736
---------- ---- --------- -------- ------ ------- --------
BALANCE, DECEMBER 31, 1992, RESTATED 18,398,219 184 126,078 -- (1,708) (12,867) 111,687
Shares issued to employees and directors 84,474 1 1,012 -- -- -- 1,013
Shares issued in purchase business
combination 320,000 3 4,997 -- -- -- 5,000
Net proceeds from public offering 2,923,000 29 45,244 -- -- -- 45,273
Transactions of pooled companies -- -- 48 -- -- (622) (574)
Translation adjustment -- -- -- -- (627) -- (627)
Net income -- -- -- -- -- 7,605 7,605
Unrealized gains on short-term investments -- -- -- 12 -- -- 12
---------- ---- --------- -------- ------ ------- --------
BALANCE, DECEMBER 31, 1993 21,725,693 217 177,379 12 (2,335) (5,884) 169,389
Shares issued to employees and directors 107,387 2 1,619 -- -- -- 1,621
Shares issued in purchase business
combination 2,424,242 24 30,976 -- -- -- 31,000
Adjustment to recast year end of pooled
company -- -- -- -- -- (1,138) (1,138)
Transactions of pooled companies -- -- 56 -- -- (355) (299)
Translation adjustment -- -- -- -- (776) -- (776)
Net income -- -- -- -- -- 7,620 7,620
Unrealized losses on short-term investments -- -- -- (474) -- -- (474)
---------- ---- --------- -------- ------ ------- --------
BALANCE, DECEMBER 31, 1994 24,257,322 243 210,030 (462) (3,111) 243 206,943
Shares issued to employees and directors 300,011 3 1,857 -- -- -- 1,860
Shares issued in private placement 2,000,000 20 32,366 -- -- -- 32,386
Conversion of convertible debentures 208,696 2 2,914 -- -- -- 2,916
Adjustment to recast year end of pooled
company -- -- -- -- -- (1,047) (1,047)
Transactions of pooled company -- -- 413 -- -- -- 413
Translation adjustment -- -- -- -- (245) -- (245)
Net loss -- -- -- -- -- (4,848) (4,848)
Unrealized gains on short-term investments -- -- -- 530 -- -- 530
---------- ---- --------- -------- ------ ------- --------
BALANCE, DECEMBER 31, 1995 26,766,029 $268 $247,580 $ 68 $(3,356) $ (5,652) $238,908
========== ==== ========= ======== ====== ======= ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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ORBITAL SCIENCES CORPORATION
<PAGE> 12
C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
<TABLE>
<CAPTION>
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (4,848) $ 7,620 $ 7,605
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation and amortization expense 22,229 17,198 10,467
Equity in (earnings) losses of affiliates 759 1,264) 2,436)
Non-controlling interests in earnings (losses) of consolidated
subsidiaries (427) -- --
(Gain) loss on sale of fixed assets and investments (2,196) 4 5
Cumulative effect of accounting changes 4,160 -- (200)
Foreign currency translation adjustment (245) (776) (627)
CHANGES IN ASSETS AND LIABILITIES:
(Increase) decrease in receivables (2,337) 12,536 (3,350)
(Increase) decrease in inventories (12,082) (3,638) (2,906)
(Increase) decrease in other current assets (2,112) 5,215 (2,585)
(Increase) decrease in other assets (1,828) 169 (4,406)
Increase (decrease) in payables and accrued expenses (11,423) (10,929) (8,035)
Increase (decrease) in deferred revenue 7,090 (22,609) 21,221
Increase (decrease) in other liabilities 942 2,761 596
--------- -------- --------
Net cash provided by (used in) operating activities (2,318) 8,815 20,221
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (17,239) (29,939) (38,350)
Proceeds from sales of fixed assets 293 -- 10,335
Purchase of investment securities (61,685) (35,731) (51,299)
Sale of investment securities 49,168 42,255 24,098
Maturities of investment securities 8,100 7,789 --
Investments in affiliates (18,888) (15,208) (40,307)
Payment for business acquisition -- (45,063) (794)
--------- -------- --------
Net cash used in investing activities (40,251) (75,897) (96,317)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings (repayments) (17,483) 9,405 10,006
Principal payments on long-term obligations (5,749) (1,883) (2,398)
Proceeds from issuance of long-term obligations 20,000 28,730 64,154
Net proceeds from issuances of common stock 34,246 1,753 46,449
Adjustment to recast pooled companies' year ends (1,047) (1,138) --
--------- -------- --------
Net cash provided by financing activities 29,967 36,867 118,211
--------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (12,602) (30,215) 42,115
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 27,919 58,134 16,019
--------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15,317 $ 27,919 $ 58,134)
========= ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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ORBITAL SCIENCES CORPORATION
<PAGE> 13
N O T E S T O C O N S O L I D A T E D F I N A N C I A L
S T A T E M E N T S D E C E M B E R 3 1 , 1 9 9 5 , 1 9 9 4
A N D 1 9 9 3
1 / SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Orbital Sciences Corporation (together with its subsidiaries, "Orbital" or the
"Company"), a Delaware corporation, is an international space technology and
satellite services company that designs, manufactures, operates and markets a
broad range of space products and services that are grouped into four general
categories: Launch Vehicles, Satellite and Electronics Systems, Ground Systems
and Software, and Communications and Information Services. Disaggregated
financial information is presented in Note 15.
Preparation of Consolidated Financial Statements
Certain reclassifications have been made to the 1994 and 1993 financial
statements to conform to the 1995 financial statement presentation. The
acquisitions of MacDonald, Dettwiler and Associates Ltd. ("MDA") in November
1995 (the "MDA Acquisition") and Magellan Corporation ("Magellan") in December
1994 (the "Magellan Acquisition") (see Note 4) were recorded using the pooling
of interests method of accounting for business combinations and, accordingly,
Orbital's 1994 and 1993 historical consolidated financial statements have been
restated to reflect these transactions. All financial amounts are stated in
U.S. dollars unless otherwise indicated.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of Orbital, all
wholly and partially owned subsidiaries controlled by Orbital, and partnerships
in which Orbital directly or indirectly controls the general partner interests.
All material transactions and accounts among consolidated entities have been
eliminated in consolidation.
Revenue Recognition
Orbital recognizes revenues on long-term contracts using the percentage of
completion method of accounting. Accordingly, (i) revenues on cost-plus-fee
contracts are recognized to the extent of costs incurred plus a proportionate
amount of fee earned, and (ii) revenues on long-term fixed-price contracts are
recognized based on costs incurred in relation to total estimated costs, or
based on specific delivery terms and conditions. Anticipated contract losses
are recognized as they become known.
Revenues from sales of commercial products and services are generally
recognized when the product is shipped or the service is performed.
Foreign Currency
Orbital's foreign operating entities operate in a number of economic
environments and deal in a number of foreign currencies. The financial results
of foreign operations are translated to U.S. dollars using the current exchange
rates for assets and liabilities and using weighted average exchange rates for
revenues, expenses, gains and losses.
Translation gains and losses relating to foreign operations that are
self-contained and integrated within a particular country or economic
environment, and therefore are not dependent on the U.S. dollar, are deferred
in a separate component of stockholders' equity until there is a realized
reduction in Orbital's net investment in the foreign operation. Translation
losses (net of related income tax effect) deferred in 1995, 1994 and 1993 were
approximately $3,356,000, $3,111,000 and $2,335,000, respectively. Translation
gains and losses relating to foreign operations that are a direct and integral
component or extension of Orbital's domestic operations, and therefore are
dependent on the U.S. dollar, are reported currently as a component of net
income.
Orbital enters into forward exchange contracts to hedge against foreign
currency fluctuations on certain receivables and payables. Gain and losses on
contracts to hedge specific foreign currency commitments are deferred and
accounted for as part of the transaction.
thirty-nine
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ORBITAL SCIENCES CORPORATION
<PAGE> 14
N O T E S T O C O N S O L I D A T E D F I N A N C I A L
S T A T E M E N T S
Research and Development
Research and development expenses include self-funded product development
activities and exclude direct customer-funded development and are expensed as
incurred. Research and development expenses are allocated, when appropriate, to
U.S. Government contracts under government-mandated cost accounting standards.
Depreciation, Amortization and Recoverability of Long-Lived Assets
Depreciation and amortization are provided using the straight-line method as
follows:
<TABLE>
<S> <C>
Buildings 18 to 20 years
Machinery, Equipment
and Software 3 to 10 years
Satellite Systems estimated useful life
of satellite
Leasehold Improvements shorter of estimated
useful life or lease term
</TABLE>
In 1995, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" ("SFAS 121"), which (i) requires that 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 previous guidelines and procedures. The
cumulative effect of adopting SFAS 121 on prior years' earnings, relating to
the impairment in the carrying amount of certain assets to be disposed of that
supported Orbital's orbit transfer vehicle product line, was approximately
$4,160,000, and is reported in the 1995 consolidated statement of operations.
The effect of adopting SFAS 121 on income from continuing operations for 1995
was not material.
Orbital's policy is to review its long-lived assets, including specialized
equipment used to support specific space-related products and satellite
systems, for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company
recognizes an impairment loss when the sum of expected future cash flows is
less than the carrying amount of the asset. Given the inherent technical and
commercial risks within the space industry, it is reasonably possible that the
Company's current estimate that it will recover the carrying amount of its
long-lived assets from future operations may change.
Income Taxes
Prior to 1993, the Company recorded its provisions for income taxes using the
deferred method. Under the deferred method, provisions for income taxes were
computed at current tax rates on reported financial statement income. Deferred
income tax provisions represented the tax effect of significant "timing
differences" between financial statement income and current taxable earnings.
In 1993, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"), which required a change from the
deferred method to the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred income taxes are
recognized for the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax bases of existing assets
and liabilities, and the effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date. SFAS 109
requires that deferred taxes be determined separately for each tax-paying
component in each tax jurisdiction.
The cumulative effect of adopting SFAS 109 on prior years' earnings was
approximately $200,000, and is reported in the 1993 consolidated statement of
operations. The effect of adopting SFAS 109 on income
forty
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ORBITAL SCIENCES CORPORATION
<PAGE> 15
from continuing operations for the year ended December 31, 1993 was not
material.
Income (Loss) per Share
Income (loss) per common and common equivalent share is calculated using the
weighted average number of common shares (including the Exchangeable Shares
(see Note 4)) and common equivalent shares, to the extent dilutive, outstanding
during the periods. Income (loss) per common share assuming full dilution is
calculated using the weighted average number of common (including the
Exchangeable Shares) and common equivalent shares outstanding during the
periods, plus the effects of an assumed conversion of the Company's convertible
subordinated debentures, after giving effect to all net income adjustments that
would result from the assumed conversion. Any reduction of less than 3% in the
aggregate has not been considered dilutive in the calculation and presentation
of income (loss) per common share assuming full dilution. Common equivalent
shares are comprised solely of stock options. Since the Exchangeable Shares
have voting and economic rights identical to Orbital common shares, the
Exchangeable Shares have been included as common shares in the accompanying
consolidated balance sheets.
Cash and Cash Equivalents and Short-Term
Investments
Orbital considers all highly liquid investments with original maturities of
three months or less to be cash equivalents. Investments in securities that do
not meet the definition of cash equivalents are classified as short-term
investments. Since Orbital does not intend to hold its investments in debt and
equity securities until maturity and does not actively trade the securities to
maximize trading gains, Orbital classifies these securities as "available for
sale" and, accordingly, reports such securities at fair value plus accrued
interest. Any temporary excess (deficiency) of market value over (under) the
underlying cost of the short-term investment is excluded from current period
earnings and is reported as unrealized gains (losses) as a separate component
of stockholders' equity.
At December 31, 1995 and 1994, the Company had approximately $10,700,000 and
$7,800,000, respectively, of cash restricted in support of outstanding letters
of credit.
Inventories
Inventories consist of components inventory, work-in-process inventory and
finished goods inventory and are generally stated at the lower of cost or net
realizable value on a first-in, first-out ("FIFO") or specific identification
basis. Inventories, net of allowances for obsolescence, consisted of the
following at December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Components and raw materials $ 17,756 $ 13,623
Work-in-process 19,430 12,043
Finished goods 1,341 779
-------- --------
Total $ 38,527 $ 26,445
======== ========
</TABLE>
Components inventory consists primarily of components and raw materials
purchased to support future production efforts. Work-in-process inventory
consists primarily of (i) costs incurred under long-term fixed-price contracts
accounted for using the percentage-of-completion method of accounting applied
on a units of delivery basis, and (ii) partially assembled commercial products,
and generally includes direct production costs and certain allocated indirect
costs (including an allocation of general and administrative costs).
Work-in-process inventory has been reduced by contractual progress payments
received of $2,631,000 and $4,122,000 at December 31, 1995 and 1994,
respectively. Finished goods inventory consists of fully assembled commercial
products awaiting shipment.
Self-Constructed Assets
The Company self-constructs much of its ground support equipment, airborne
support equipment and special test equipment used in the manufacture,
production and delivery of many of its space-technology products. Orbital also
develops and manufactures product improvements and enhancements to existing
products for sale, and builds and operates satellite systems used in providing
commercial services.
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ORBITAL SCIENCES CORPORATION
<PAGE> 16
N O T E S T O C O N S O L I D A T E D F I N A N C I A L
S T A T E M E N T S
Orbital capitalizes certain costs incurred in constructing ground and airborne
support and test equipment, product improvements and enhancements and satellite
systems. Capitalized costs generally include direct construction costs and
certain allocated indirect costs, and exclude general and administrative and
research and development costs.
Investments in Affiliates
The Company uses the equity method of accounting for its investments in and
earnings of affiliates in which the Company has the ability to significantly
influence, but not control, such affiliate's operations. In accordance with
the equity method of accounting, the Company's carrying amount of an investment
in an affiliate is initially recorded at cost and is increased to reflect its
share of the affiliate's income and is reduced to reflect its share of the
affiliate's losses. Orbital's investment is also increased to reflect
contributions to, and decreased to reflect distributions received from, the
affiliate. Any difference between the amount of Orbital's investment and the
amount of the underlying equity in each affiliate's net assets is amortized
over a period of 20 years. The Company capitalizes interest costs on equity
method investments when such affiliate has significant assets under
construction. At December 31, 1995 and 1994, approximately $10,100,000 and
$5,500,000, respectively, of interest costs had been capitalized as part of the
historical cost of investments in affiliates. The Company uses the cost method
of accounting for investments in affiliates in which it cannot control or
significantly influence operations.
The Company provides a valuation allowance against an investment in an
affiliate when it is determined that recovery of all or part of the investment
is not probable. At December 31, 1995 and 1994, approximately $1,100,000 and
$3,100,000, respectively, of allowance had been provided to fully reserve
against certain investments in affiliates. Approximately $2,000,000 of gain on
the sale of an investment was realized in 1995 when Orbital sold one such
fully-reserved investment. The gain is reported in net investment income in
the accompanying consolidated statement of operations.
Excess of Purchase Price Over Net Assets Acquired
The Company amortizes the excess of purchase price over net assets acquired
related to prior business combinations on a straight-line basis over their
estimated useful life, generally 20-40 years. Orbital periodically assesses and
evaluates the recoverability of such assets based on current facts and
circumstances and the operational viability of its acquired businesses.
During 1994, as a result of obtaining additional information subsequent to the
September 1993 acquisition of the Applied Science Operation ("ASO") (see Note
4), the purchase price was reallocated to reflect a more accurate valuation of
assets and liabilities acquired. As a result of the reallocation, the value of
net tangible and identifiable intangible assets acquired increased by
approximately $3,000,000, with a resulting decrease to the excess of purchase
price over net assets acquired.
During 1995 and 1994, as a result of obtaining additional information
subsequent to the August 1994 acquisition of Fairchild Space and Defense
Corporation ("Fairchild") (see Note 4), the purchase price was reallocated to
reflect a more accurate valuation of assets and liabilities acquired. As a
result of the reallocations, the value of net tangible and identifiable
intangible assets acquired increased by approximately $6,700,000, with a
resulting decrease to the excess of purchase price over net assets acquired.
Additionally, at the date of the acquisition, Fairchild had certain
contingencies relating primarily to the appropriateness and allowability of
certain severance costs charged to its U.S. Government contracts from 1989
through 1992, for which a reasonable estimate of fair value could not be
determined. During 1995, an estimate of the ultimate outcome of pre-acquisition
contingencies was determined, and Orbital accordingly revised the allocation of
purchase price to increase liabilities acquired by approximately $500,000, with
a resulting increase in the excess of purchase price over net assets acquired.
Warranties
The Company occasionally accepts warranty clauses in its commercial and
government contracts. In the
forty-two
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ORBITAL SCIENCES CORPORATION
<PAGE> 17
event the Company does not purchase insurance coverage to protect itself in
connection with such warranty clauses, the Company records a liability for
warranty claims when it determines that a specific material liability exists.
Orbital has not recorded any liability for potential warranty claims on its
existing contracts because these expenses, if any, are not expected to have a
material adverse impact on the Company's financial condition or results of
operations.
The Company at times provides limited warranties on certain commercial products
and accrues an estimate of expected warranty costs based on historical
experience.
2 / TRANSACTIONS WITH ALLIANT TECHSYSTEMS, INC.
In November 1988, Orbital and Hercules Incorporated ("Hercules") entered into a
joint venture agreement relating to the development and production of the
Pegasus space launch vehicle (the "Joint Venture Agreement"). In 1994, Alliant
Techsystems, Inc. ("Alliant") acquired the assets of Hercules Aerospace Company
(a wholly owned subsidiary of Hercules) and, in connection therewith, assumed
the rights and responsibilities of Hercules with respect to the Joint Venture
Agreement. During 1995, Orbital and Alliant replaced the Joint Venture
Agreement with a joint teaming agreement to provide for the continuation of
joint performance on the Pegasus and Taurus space launch vehicle programs (the
"Joint Teaming Agreement"). The Joint Teaming Agreement provides, among other
things, that Orbital will perform as the prime contractor for all present and
future Pegasus and Taurus missions and Alliant will perform as a solid rocket
motor and payload fairing subcontractor to Orbital on the Pegasus program and
as a solid rocket motor subcontractor to Orbital on the Taurus program. As a
subcontractor, Alliant will receive firm-fixed prices for its subcontracts and
will no longer share in overall contract profits and losses, but will share in
the costs and benefits associated with certain defined outstanding
contingencies on current contracts. The Joint Teaming Agreement will continue
through December 31, 2005, unless terminated earlier by mutual agreement.
Alliant has also agreed to a final dismissal with prejudice of all present and
future claims and litigation related to the Joint Venture Agreement, including
(i) the January 1994 lawsuit filed by Hercules against Orbital alleging
breaches of certain representations and warranties by Orbital in the 1988 stock
purchase agreement between Hercules and Orbital, and (ii) the July 1994 lawsuit
filed by Hercules against Orbital alleging breach of fiduciary duty and breach
of contract in the determination of Orbital's recoverable costs pursuant to the
Joint Venture Agreement.
3 / INVESTMENTS IN AFFILIATES
ORBCOMM Partnerships. In 1993, the Company's majority owned subsidiary,
Orbital Communications Corporation ("OCC"), and Teleglobe Mobile Partners, an
affiliate of Teleglobe Inc., formed a partnership, ORBCOMM Global, L.P.
("ORBCOMM Global"), formerly known as ORBCOMM Development Partners, L.P., for
the two-phased design, development, construction, integration, test and
operation of a low-Earth orbit satellite communications system (the "ORBCOMM
System"). OCC and Teleglobe Mobile Partners are each 50% general partners in
ORBCOMM Global. OCC's and Teleglobe Mobile's total capital commitments to
ORBCOMM Global are approximately $75,000,000 and $85,000,000, respectively, of
which approximately $62,000,000 and $35,000,000, respectively, had been
contributed through December 31, 1995.
Additionally, OCC is a 2% general partner in ORBCOMM USA, L.P. ("ORBCOMM USA")
and Teleglobe Mobile is a 2% general partner in ORBCOMM International Partners,
L.P. ("ORBCOMM International"), two partnerships formed to market the ORBCOMM
System. ORBCOMM Global is a 98% general partner in each of the two marketing
partnerships.
Pursuant to the terms of the partnership agreements, (i) OCC and Teleglobe
Mobile share equal responsibility for the operational and financial affairs of
ORBCOMM Global; (ii) OCC controls the operational and financial affairs of
ORBCOMM USA; and (iii) Teleglobe Mobile controls the operational and finan-
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ORBITAL SCIENCES CORPORATION
<PAGE> 18
N O T E S T O C O N S O L I D A T E D F I N A N C I A L
S T A T E M E N T S
cial affairs of ORBCOMM International. Since OCC is unable to control, but is
able to exercise significant influence over, ORBCOMM Global's and ORBCOMM
International's operating and financial policies, the Company is accounting for
its investments in ORBCOMM Global and ORBCOMM International using the equity
method of accounting. Since OCC is able to control the operational and
financial affairs of ORBCOMM USA, the Company consolidates the accounts of
ORBCOMM USA.
Orbital is the primary supplier of the communications satellites, launch
vehicles and ground systems to ORBCOMM Global, and successfully launched the
first two ORBCOMM System satellites in April 1995. During 1995, 1994 and 1993,
Orbital recorded contract revenues on sales to ORBCOMM Global of approximately
$49,187,000, $30,048,000 and $38,207,000, respectively, and eliminated as
equity in earnings (losses) of affiliates 50% of its profits on those sales
since ORBCOMM Global is capitalizing substantially all its purchases from
Orbital. At December 31, 1995 and 1994, Orbital had approximately $8,900,000
and $7,900,000, respectively, in receivables from ORBCOMM Global.
At December 31, 1995, ORBCOMM Global had total assets, total liabilities and
total partners' capital of $109,030,000, $14,428,000 and $94,602,000,
respectively. ORBCOMM Global had approximately $900,000 in international
distribution fee revenues in 1995 (none in 1994) and net income (loss) of
approximately $55,000 and ($9,000) for the years ended December 31, 1995 and
1994, respectively.
Based on its current assessment of the overall business prospects of the
ORBCOMM partnerships and the ORBCOMM System, the Company currently believes its
investment of approximately $73,000,000 in ORBCOMM Global is fully recoverable.
If, in the future, implementation of the ORBCOMM System is significantly
delayed, significantly restricted or abandoned, the Company may be required to
expense part or all of its investment.
Radarsat International Inc. The Company owns an approximate 25% equity
interest in Radarsat International Inc. ("RSI"), a Canadian-based company
specializing in satellite-based remote sensing. RSI successfully launched its
first remote sensing satellite in November 1995 and expects to begin generating
revenues in 1996. Orbital is accounting for its investment in RSI using the
equity method of accounting.
EarthWatch, Incorporated. The Company owns an approximate 1% equity interest
in EarthWatch, Incorporated ("EarthWatch"), a U.S.-based company developing
high-resolution commercial imaging services. The Company has agreed to acquire
300,000 Series B Preferred Shares of EarthWatch for approximately $3,000,000,
payable in equal quarterly installments beginning in 1995. At December 31,
1995, Orbital had paid approximately $1,000,000 of this commitment. Orbital
accounts for this investment using the cost method of accounting.
American Space Lines. During 1995, Orbital and Rockwell International
Corporation, pursuant to a cooperative agreement with NASA, endeavored to
establish American Space Lines, a joint venture for the development of a
technologically advanced reusable launch system. The joint venture agreement
was not formally signed and, in the fourth quarter of 1995, Orbital expensed
$3,000,000 of costs related to the termination of the development effort in
early 1996.
4 / BUSINESS COMBINATIONS
Purchase Transactions. On September 17, 1993, Orbital acquired ASO, a business
unit of The Perkin-Elmer Corporation (the "ASO Acquisition"). As a result of
the ASO Acquisition, the Company now produces and markets space- and
ground-based sensors and instruments primarily for agencies of the U.S.
Government and commercial aerospace companies.
The ASO Acquisition has been accounted for using the purchase method of
accounting and, accordingly, the purchase price of approximately $5,800,000
(consisting of 320,000 shares of the Company's Common Stock, $600,000 in cash
and $200,000 in transaction expenses) was allocated to assets and liabilities
ac-
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ORBITAL SCIENCES CORPORATION
<PAGE> 19
quired based on estimates of fair values as of the date of acquisition. The
excess of purchase price over net assets acquired is being amortized on a
straight-line basis over 20 years.
On April 6, 1994, the Company (as a result of its acquisition of MDA, see
below) acquired all the outstanding common shares of The PSC Communications
Group Inc. ("PSC") from PSC's former shareholders (the "PSC Acquisition"). As
a result of the PSC Acquisition, the Company now provides network
communications training and consulting for various commercial and governmental
entities.
The PSC Acquisition has been accounted for using the purchase method of
accounting and, accordingly, the purchase price of approximately $3,750,000
(excluding a maximum of approximately 100,000 shares of Orbital Common Stock
issuable based on future earnings levels achieved by PSC) was allocated to
assets and liabilities acquired based on estimates of fair values as of the
date of acquisition. The excess of purchase price over net assets acquired is
being amortized on a straight-line basis over 20 years.
On August 11, 1994, the Company acquired all the outstanding common stock of
Fairchild from Matra Aerospace, Inc. (the "Fairchild Acquisition"). As a result
of the Fairchild Acquisition, the Company has expanded its satellite systems
and space payload product lines and enhanced its spacecraft production
capabilities.
The Fairchild Acquisition has been accounted for using the purchase method of
accounting and, accordingly, the purchase price of approximately $71,000,000
(consisting of 2,424,242 shares of the Company's Common Stock, $40,000,000 in
cash and approximately $800,000 in transaction expenses) was allocated to
assets and liabilities acquired based on estimates of fair values as of the
date of acquisition. The excess of purchase price over net assets acquired is
being amortized on a straight-line basis over 40 years. ASO's results of
operations for the 14-week period ended December 31, 1993 and Fairchild's
results of operations for the 19-week period ended December 31, 1994 are
included in Orbital's 1993 and 1994 consolidated results of operations,
respectively. As a result of recasting MDA's fiscal year end, Orbital's
consolidated results of operations for 1994 include PSC's financial results for
the full year.
Pooling of Interests Transactions. On December 28, 1994, the Company acquired
all the outstanding common stock of Magellan from Magellan's former
shareholders in a tax-free merger. As a result of the Magellan Acquisition,
Orbital now manufactures, markets and sells satellite-based navigation and
communications equipment for consumer and industrial markets worldwide and has
expanded its GPS satellite-based navigation applications.
The Magellan Acquisition was consummated by exchanging 2,640,441 shares of the
Company's Common Stock for all of Magellan's outstanding common stock. The
Company also granted 409,556 options to acquire Orbital Common Stock (see Note
12) to Magellan employees who, at the date of the acquisition, held options to
acquire Magellan common stock. The Magellan Acquisition is accounted for using
the pooling of interests method of accounting and, accordingly, Orbital's
historical consolidated financial statements have been restated to include
Magellan's financial position, results of operations and cash flows. Merger
expenses relating to the Magellan Acquisition of approximately $500,000 were
charged to earnings during the three months ended December 31, 1994 and are
included in other expenses in the accompanying consolidated statement of
operations.
Prior to the acquisition, Magellan's financial results were prepared on a June
30 fiscal year basis. Orbital's restated consolidated financial statements for
1993 and 1992 include Magellan's historical financial results for its fiscal
years ended June 30, 1994 and 1993, respectively. Orbital's consolidated
financial statements for the year ended December 31, 1994 include Magellan's
financial results for the twelve-month period ended December 31, 1994. The
effect of recasting Magellan's year end for 1994 has been charged to Orbital's
retained earnings as of January 1, 1994. The charge to retained earnings
eliminates the effect of
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ORBITAL SCIENCES CORPORATION
<PAGE> 20
N O T E S T O C O N S O L I D A T E D F I N A N C I A L
S T A T E M E N T S
including Magellan's results of operations for the six-month period ended June
30, 1994 of $1,138,000 in Orbital's 1994 and 1993 consolidated results of
operations. Magellan's revenues for the same six-month period were
approximately $18,500,000.
On November 17, 1995, the Company acquired all the outstanding common shares
of MDA from MDA's former shareholders in a merger designed to be tax-free to
MDA's Canadian shareholders. As a result of the MDA Acquisition, Orbital is now
a leading supplier of commercial satellite remote sensing ground systems,
capable of handling all major optical and radar imaging satellites. Orbital
also now provides advanced space-qualified software, air traffic control
systems, defense electronics systems and network communications training and
consulting.
Pursuant to the terms of the MDA Acquisition, a newly established, wholly owned
Canadian subsidiary of Orbital ("Acquisition Subsidiary") issued exchangeable
shares (the "Exchangeable Shares") in exchange for all the issued and
outstanding MDA common shares. The Exchangeable Shares have voting and
economic rights with respect to Orbital identical to Orbital Common Stock and
are exchangeable into Orbital Common Stock at the option of the holders. As
part of the MDA Acquisition, Acquisition Subsidiary also issued 10,000 shares
of Class B Preferred Stock to a financial advisor in satisfaction of a portion
of the fees owed to that advisor. Additionally, Orbital issued one share of
Series A Special Voting Preferred Stock to a voting trust to act as voting
trustee on behalf of the holders of the Exchangeable Shares. The Orbital
Series A Special Voting Preferred Stock has voting rights, privileges and
preferences required to secure the voting rights relating to the Orbital Common
Stock granted for the benefit of the holders of the Exchangeable Shares.
The MDA Acquisition was consummated by issuing 4,087,126 Exchangeable Shares
for all of MDA's outstanding common shares. The Company also granted 328,399
options to acquire Orbital Common Stock (see Note 12) to MDA employees who, at
the date of the acquisition, held options to acquire MDA common shares. The MDA
Acquisition is accounted for using the pooling of interests method of
accounting and, accordingly, Orbital's historical consolidated financial
statements have been restated to include MDA's financial position, results of
operations and cash flows. Merger expenses relating to the MDA Acquisition of
approximately $3,400,000 were charged to earnings during the three months ended
December 31, 1995 and are included in other expenses in the accompanying
consolidated statement of operations.
Prior to the acquisition, MDA's financial results were prepared on a March 31
fiscal year basis. Orbital's restated consolidated financial statements for
1994 and 1993 include MDA's historical financial results for its fiscal years
ended March 31, 1995 and 1994, respectively. Orbital's consolidated financial
statements for the year ended December 31, 1995 include MDA's financial results
for the twelve-month period ended December 31, 1995. The effect of recasting
MDA's year end for 1995 has been charged to Orbital's retained earnings as of
January 1, 1995. The charge to retained earnings eliminates the effect of
including MDA's results of operations for the three-month period ended March
31, 1995 of $1,047,000 in Orbital's 1995 and 1994 consolidated results of
operations. MDA's revenues for the same three-month period were approximately
$20,634,000.
The following table reconciles Orbital's previously reported operating results
to operating results restated to reflect the pooling of interests with Magellan
and MDA (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993
--------- --------
<S> <C> <C>
REVENUES:
As previously reported $ 221,946 $190,186
Magellan NA 32,901
MDA 79,630 77,097
--------- --------
Restated $ 301,576 $300,184
========= ========
NET INCOME:
As previously reported $ 5,389 $ 4,640
Magellan NA 1,756
MDA 2,231 1,209
--------- --------
Restated $ 7,620 $ 7,605
========= ========
</TABLE>
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ORBITAL SCIENCES CORPORATION
<PAGE> 21
5 / SHORT-TERM INVESTMENTS
The following table sets forth the aggregate amortized cost, aggregate fair
value and gross unrealized gains and losses for Orbital's short-term
investments in debt and equity securities at December 31, 1995 and 1994 (in
thousands):
<TABLE>
<CAPTION>
Amortized Fair Unrealized
1995 Cost Value Gains Losses
---------------------------------------------------
<S> <C> <C> <C> <C>
Debt securities $ 19,645 $ 19,713 $ 70 $ (2)
========= ======== ======= =====
1994
Debt securities $ 8,755 $ 8,663 $ -- $ (92)
Preferred stock 4,133 3,763 -- (370)
--------- -------- ------- ------
Total $ 12,888 $ 12,426 $ -- $ (462)
========= ======== ======= ======
</TABLE>
Orbital realized net losses of approximately $261,000 and $353,000 on sales of
short-term investments in 1995 and 1994, respectively. Debt securities (at
fair value) with contractually scheduled maturities scheduled to mature in
1996, 1997 through 2000, and beyond 2000 are in the amounts of $14,690,000,
$4,034,000 and $989,000, respectively.
6 / RECEIVABLES AND ACCRUED EXPENSES
The components of receivables are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1995 1994
--------- ---------
<S> <C> <C>
Billed and billable $ 63,552 $ 56,912
Recoverable costs and
accrued profit not billed 47,855 51,859
Retainages due upon
contract completion 7,724 8,109
Allowance for doubtful
accounts (773) (859)
--------- ---------
Total $ 118,358 $ 116,021
========= =========
</TABLE>
Recoverable costs and accrued profit not billed and retainages due upon
contract completion at December 31, 1995 are amounts due primarily within one
year and will be billed on the basis of contract terms and delivery schedules.
Additionally, provisions of certain of the Company's agreements with
subcontractors provide for payments to subcontractors on the basis of contract
terms and delivery schedules, which at December 31, 1995 are also due primarily
within one year.
The accuracy and appropriateness of Orbital's direct and indirect costs and
expenses under its government contracts, and therefore its receivables recorded
pursuant to such contracts, are subject to extensive regulation and audit,
including by the U. S. Defense Contract Audit Agency or by other appropriate
agencies of the U.S. Government, which have the right to challenge Orbital's
cost estimates or allocations with respect to any such contract. Additionally,
a substantial portion of the payments to the Company under government contracts
are provisional payments that are subject to potential adjustment upon audit by
such agencies. In the opinion of management, any adjustments likely to result
from inquiries or audits of its contracts will not have a material adverse
impact on the Company's financial condition or results of operations.
At December 31, 1995 and 1994, $26,470,000 and $27,792,000, respectively, were
receivable from foreign customers. The Company enters into forward exchange
contracts to hedge against foreign currency fluctuations on certain receivables
and payables denominated in such foreign currencies. Accordingly, Orbital is
subject to off-balance sheet market risk for the possibility that future
changes in market prices may make the forward exchange contracts less valuable
or more onerous. The following table summarizes outstanding foreign exchange
contracts at December 31, 1995 to (purchase) sell foreign currencies, along
with current market values (U.S. dollars, in thousands):
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ORBITAL SCIENCES CORPORATION
<PAGE> 22
N O T E S T O C O N S O L I D A T E D F I N A N C I A L
S T A T E M E N T S
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Foreign Currency Current Unrealized
Currency Hedged Contract Market Gain
Hedged Against Amount Value (Loss)
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars CD $ (73) $ (74) $ 1
Belgian Francs CD 2,762 2,850 (88)
Swiss Francs CD (1) (1) -
ECU CD 7,628 7,406 222
ECU PS 106 110 (4)
Pounds Sterling CD (241) (244) 3
Japanese Yen CD 2,831 2,701 130
Malaysian Riggits CD 56 53 3
U.S. Dollars CD 1,284 1,288 (4)
- ---------------------------------------------------------------
CD = Canadian Dollars PS = Pounds Sterling
- ---------------------------------------------------------------
</TABLE>
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1995 1994
--------- ---------
<S> <C> <C>
Payroll, payroll taxes
and fringe benefits $ 17,856 $ 19,113
Accrued contract costs 9,787 10,257
Other accrued expenses 2,279 14,233
--------- ---------
Total $ 29,922 $ 43,603
========= =========
</TABLE>
7 / PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1995 1994
--------- ---------
<S> <C> <C>
Land $ 1,422 $ 1,349
Buildings and leasehold
improvements 17,455 18,433
Machinery and equipment 90,061 85,348
Equipment under
construction 28,301 37,262
Purchased software and
technical drawings 7,340 7,107
Accumulated depreciation
and amortization (53,067) (46,409)
--------- ---------
Total $ 91,512 $ 103,090
========= =========
</TABLE>
Interest expense of approximately $5,700,000, $5,500,000 and $3,500,000 was
capitalized during 1995, 1994 and 1993, respectively, as part of the historical
cost of equipment under construction, satellite systems under construction and
investments in affiliates.
8 / SATELLITE SYSTEMS
Orbital owns and operates several satellite systems, and is in the process of
constructing additional satellite systems, that provide or will provide
high-resolution imaging, remote sensing services and Earth observation services
to government and commercial customers. Generally, the Company does not begin
construction of a specific project until a customer has committed to purchase
future services generated by or provided from the specific satellite system.
Orbital expenses the costs of developing and constructing these systems until
such time that technological and economic feasibility have been established.
Once established, Orbital capitalizes remaining construction costs, net of
non-refundable payments received from customers. Any refundable advance
payments for data received from customers are deferred until such time as the
data is delivered. At December 31, 1995 and 1994, Orbital had capitalized
approximately $14,910,000 and $6,788,000, respectively, relating to various
satellite systems that are either operating or under construction.
9 / SHORT-TERM BORROWINGS
The Company has a revolving credit facility that provides for total borrowings
from an international syndicate of six banks of up to $65,000,000, subject to a
defined borrowing base composed of certain contract receivables. At December
31, 1995 and 1994, approximately $3,000,000 and $22,500,000, respectively, of
borrowings were outstanding against an available facility limit of
approximately $23,500,000 and $24,800,000, respectively. The interest rate
charged under the facility is a variable rate based on the prime rate, the
Federal Funds rate or adjusted LIBOR. As of December 31, 1995, the interest
rate on outstanding borrowings under this facility was approximately 9.5%.
Borrowings are secured by contract receivables and certain other assets. The
facility restricts the payment of dividends and contains certain covenants with
respect to the Company's working capital, fixed charge ratio, leverage ratio
and tangible net worth, and expires in September 1997.
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ORBITAL SCIENCES CORPORATION
<PAGE> 23
In September 1995, Orbital entered into a $7,000,000 unsecured demand line of
credit with an international bank. The line is repayable upon demand and bears
interest at the prime rate or LIBOR. No amounts were outstanding on the line
at December 31, 1995.
The Company maintains a $5,000,000 line of credit with a domestic bank, subject
to a defined borrowing base. At December 31, 1995, $2,000,000 was outstanding
against a facility limit of $3,000,000, and was secured by all of Magellan's
assets. The interest rate on outstanding borrowings was approximately 9% at
December 31, 1995.
10 / LONG-TERM OBLIGATIONS
The following sets forth the Company's long-term obligations, excluding capital
lease obligations (see Note 13), at December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
December 31,
1995 1994
---------- ----------
<S> <C>
7.00% Secured Note, principal
and interest due monthly
through December 1998 $ 1,876 $ 2,422
7.74-9.35% Secured Notes,
principal and interest due
monthly through September
1997-October 1999 17,816 23,065
8.95% Secured Bank Note,
principal and interest due
monthly through
September 1999 2,310 2,336
8.25% Secured Bank Note,
principal and interest due
monthly through July 1997 1,707 1,779
8.25% Secured Bank Note,
interest due monthly
through July 1997 2,633 2,751
6.75% Convertible Subordinated
Debentures, interest due
semi-annually, principal due
March 2003 56,000 59,000
10.50% Unsecured Notes,
interest due monthly, principal
due June 2001 20,000 --
---------- ----------
102,342 91,353
Less current portion (6,084) (5,798)
---------- ----------
Total $ 96,258 $ 85,555
========== ==========
</TABLE>
The 7.00% secured note is collateralized by certain equipment located at the
Company's Pomona, California facility. The 7.74-9.35% secured notes are
collateralized by certain equipment located at the Company's Germantown,
Maryland facility. The 8.95% secured bank note is collateralized by the
Company's satellite integration and test facility located in Dulles, Virginia.
Additionally, Orbital is guarantor on approximately $5,000,000 of debt incurred
by ORBCOMM Global.
The Company has two secured bank borrowing agreements, totaling approximately
$60,000,000, of which $13,500,000 was available at December 31, 1995. The
secured bank notes, pursuant to a pari-passu agreement between two
international banks, provide for borrowings at a variable rate based on the
prime rate (approximately 8.25% at December 31, 1995), and are collateralized
by receivables, inventory and certain other assets.
In February 1993, the Company completed a public offering of $59,000,000 in
convertible subordinated debentures (the "Convertible Debentures"). The
Convertible Debentures mature in March 2003, are convertible into the Company's
Common Stock at any time prior to maturity at a conversion price of $14 3/8 per
share, and bear interest payable semi-annually in arrears at 6.75%. The
Convertible Debentures are redeemable at the option of the Company, in whole or
in part, at any time on or after March 1, 1996 at certain defined redemption
prices, plus accrued interest to the date of redemption. Upon a defined change
in control, each holder of Convertible Debentures has the right to require the
Company to repurchase the Convertible Debentures for the principal amount, plus
accrued interest. The Convertible Debentures are subordinated to all existing
and future defined senior indebtedness of the Company. During 1995, $3,000,000
of Convertible Debentures were converted to Common Stock at the request of the
holders.
The fair value of Orbital's long-term obligations at December 31, 1995 and 1994
is estimated at approximately $106,000,000 and $111,000,000, respectively,
based on quoted market prices or on current rates of-
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ORBITAL SCIENCES CORPORATION
<PAGE> 24
N O T E S T O C O N S O L I D A T E D F I N A N C I A L
S T A T E M E N T S
fered for debt of similar remaining maturities. Scheduled maturities of
long-term debt for 1996, 1997, 1998, 1999 and 2000 are $6,100,000, $8,700,000,
$5,200,000, $5,600,000 and $263,000, respectively.
11 / INCOME TAXES
The provisions (benefit) for income taxes for 1995, 1994 and 1993 consist of
the following (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
CURRENT PROVISION:
Federal $ 33 $ 563 $ 599
Foreign 1,180 756 128
State -- 732 502
DEFERRED PROVISION:
Federal (356) 342 1,006
Foreign (2,159) (93) (13)
State -- 444 181
--------- --------- --------
Total $ (1,302) $ 2,744 $ 2,403
========= ========= ========
</TABLE>
The income tax provisions (benefit) are different from those computed using the
statutory U.S. Federal income tax rate as set forth below:
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
U.S. Federal statutory rate (34.0)% 34.0% 34.0%
Tax-exempt interest (13.7) (5.7) (5.5)
Intangible amortization 50.3 9.2 8.0
U.S. Federal tax credits -- (7.2) (13.1)
State income taxes, net
of Federal benefits -- 2.3 2.0
Foreign sales corporation -- (1.3) (0.1)
Foreign income taxes, net (53.1) (1.4) (2.5)
Disqualifying stock sales (16.0) -- --
Other, net 1.1 (3.4) 1.7
-------- -------- -------
Effective Rate (65.4)% 26.5% 24.5%
======== ======== =======
</TABLE>
The tax effects of significant temporary differences at December 31, 1995 and
1994 are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1995 1994
--------- ---------
<S> <C> <C>
TAX ASSETS:
Non-deductible financial
statement accruals $ 31,829 $ 11,996
Federal net operating loss
carryforward 40,850 28,214
Intangible assets 6,865 8,900
Federal and foreign tax credit
carryforward 16,342 16,342
--------- ---------
95,886 65,452
Valuation allowance (65,041) (43,596)
--------- ---------
Tax assets, net $ 30,845 $ 21,856
========= =========
TAX LIABILITIES:
Percentage of completion
accounting $ 2,555 $ 2,585
Excess tax depreciation 7,198 5,349
Excess deductions for tax
reporting purposes 18,132 13,475
--------- ---------
Tax liabilities $ 27,885 $ 21,409
========= =========
</TABLE>
The Company established deferred tax assets in connection with its ASO and
Fairchild acquisitions (see Note 4) in the amounts of $2,425,000 and
$35,446,000, respectively, and deferred tax liabilities of $2,175,000 and
$2,337,000, respectively. The Company also established a valuation allowance of
approximately $33,109,000 against certain deferred tax assets acquired in
connection with the Fairchild Acquisition.
In 1995, approximately $2,100,000 of income before benefit for income taxes and
cumulative effect of an accounting change was generated from foreign sources.
Approximately 27.9% and 13.5% of the Company's 1994 and 1993 income before
provision for income taxes and cumulative effect of accounting changes,
respectively, was generated from foreign sources. The Company had Federal net
operating loss and tax credit carryforwards of approximately $102,000,000 and
$3,000,000, respectively, at December 31, 1995 that may be utilized through the
year 2004, subject to certain annual limitations and other restrictions, of
which portions expire beginning in 2001.
fifty
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ORBITAL SCIENCES CORPORATION
<PAGE> 25
12 / COMMON STOCK, STOCK OPTIONS AND OTHER COMPENSATION PLANS
In December 1993, the Company completed its third public offering of Common
Stock consisting of 2,923,000 shares, receiving net proceeds of approximately
$45,300,000. In June 1995, the Company completed a private placement of
2,000,000 shares of its Common Stock, receiving net proceeds of approximately
$32,400,000. The Company's shares were placed with various international
institutional investors and the private placement was exempt from public
registration pursuant to Regulation S of the Securities Act of 1933, as
amended.
The Company's 1990 Stock Option Plan (the "1990 Plan") provides for grants of
either incentive or non-qualified stock options to officers, employee directors
and general employees of the Company and its subsidiaries. Under the terms of
the 1990 Plan, incentive stock options may not be granted at less than 100% of
the fair market value at the date of grant, and non-qualified options may not
be granted at less than 85% of the fair market value at the date of grant. Each
option under the 1990 Plan vests at a rate set forth by the Board of Directors
in each individual option agreement, generally in one-third increments over a
three-year period following the date of grant. Options expire no more than ten
years following the grant date. The 1990 Plan currently provides for the
granting of up to 2,975,000 shares of the Company's Common Stock. The Company
also maintains the 1990 Stock Option Plan for Non-Employee Directors, which
provides solely for automatic grants of non-qualified stock options to purchase
shares to eligible non-employee directors of the Company.
The following table summarizes the option activity under the company's stock
option plans (including option plans assumed by the Company as a result of the
Magellan and MDA acquisitions) for the last three years:
<TABLE>
<CAPTION>
Outstanding
Number of Option Price and
Shares per Share Exercisable
--------- ------------- ---------
<S> <C> <C> <C>
OUTSTANDING AT
DECEMBER 31, 1992 1,223,102 $ 1.82-$20.00 502,802
Grants 234,559 $ 3.51-$11.50
Exercised (84,474) $ 7.50-$15.30
Cancelled/Expired (48,989) $10.50-$20.00
--------- -------------
OUTSTANDING AT
DECEMBER 31, 1993 1,324,198 $ 1.82-$20.00 558,422
Grants 978,560 $ 3.51-$22.00
Exercised (107,387) $ 3.51-$15.30
Cancelled/Expired (78,476) $10.20-$22.00
--------- -------------
OUTSTANDING AT
DECEMBER 31, 1994 2,116,895 $ 1.82-$22.00 997,981
Grants 553,966 $ 7.47-$18.81
Exercised (300,011) $ 3.51-$15.30
Cancelled/Expired (130,325) $ 3.51-$22.00
--------- -------------
OUTSTANDING AT
DECEMBER 31, 1995 2,240,525 $ 1.82-$22.00 1,133,713
--------- ------------- ---------
</TABLE>
OCC adopted a stock option plan in 1992 (the "ORBCOMM Plan"). The ORBCOMM Plan
provides for grants of incentive and non-qualified stock options to purchase
OCC common stock to officers and employees of OCC and the Company. Under the
terms of the ORBCOMM Plan, incentive stock options may not be granted at less
than 100% of the fair market value at the date of grant and non-qualified
options may not be granted at less than 85% of the fair market value of OCC
common stock at the date of grant as determined by a committee consisting of
two OCC Board members and two members appointed by Teleglobe Mobile. The
options vest at a rate set forth by the Board of Directors in each individual
option agreement, generally in one-fourth increments over a four-year period.
Certain provisions of the ORBCOMM Plan require OCC to repurchase the common
stock acquired pursuant to the options beginning in 1995 if a public market for
OCC common stock has not been established. During 1994 and 1993, 118,650 and
99,500 options, respectively, were granted under the ORBCOMM Plan at prices
ranging from $1.50 to $14.00 per share; none were granted in 1995. At December
31, 1995, 1994 and 1993, 545,900 options, 599,074 options and 496,274 options,
respectively, were outstanding, and 411,086
fifty-one
----------------------------
ORBITAL SCIENCES CORPORATION
<PAGE> 26
N O T E S T O C O N S O L I D A T E D F I N A N C I A L
S T A T E M E N T S
options were exercisable at December 31, 1995. Approximately 9,000 and 44,000
ORBCOMM options were exercised and cancelled, respectively, during 1995. These
OCC options are excluded from the above table.
Compensation expense of approximately $55,000, $234,000 and $356,000 related to
various option grants under the Company's plans was recognized for the years
ended December 31, 1995, 1994 and 1993, respectively. In 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), which is
effective for Orbital's year ending December 31, 1996. SFAS 123 recommends,
but does not require, the adoption of fair value accounting for stock-based
compensation, including common stock options issued to employees. Orbital does
not currently intend to adopt fair value accounting for stock-based
compensation as recommended by SFAS 123.
As of December 31, 1995, the Company had five Deferred Salary Profit-Sharing
Plans (the "Plans") in accordance with Section 401(k) of the Internal Revenue
Code of 1986, as amended. Generally, all full-time employees are eligible for
participation in the Plans. Company contributions to the Plans are made based
on certain Plan provisions and at the discretion of the Board of Directors, and
were approximately $5,015,000, $2,991,000 and $2,418,000 in 1995, 1994 and
1993, respectively. Total Company contributions to foreign defined
contribution plans in 1995, 1994 and 1993 were $1,518,000, $1,436,000 and
$1,292,000, respectively. Orbital also adopted a deferred compensation plan in
1995; participation in the plan in 1995 was not material.
As part of the Fairchild Acquisition, the Company also acquired a defined
benefit plan covering substantially all Fairchild employees. Shortly after the
Fairchild Acquisition, Orbital curtailed the defined benefit plan by suspending
future participation in the plan. The approximate $2,500,000 excess of fair
value of plan assets over the projected benefit obligation at the date of
curtailment was recorded in the allocation of the purchase price. As a result
of the curtailment, periodic pension cost was not material in 1995 and 1994 and
is not expected to be material in the future. Also as part of the Fairchild
Acquisition, the Company acquired a post-retirement health care plan covering
employees retiring from Fairchild on or after attaining age 55 who have
rendered at least 10 years of service. Orbital also curtailed the
post-retirement plan by suspending future participation in the plan. The
approximate $2,800,000 unfunded accumulated post-retirement benefit obligation
at the date of curtailment was recorded in the allocation of the purchase
price. As a result of the curtailment, post-retirement benefit cost was not
material in 1995 and 1994 and is not expected to be material in the future.
13 / LEASE COMMITMENTS
Aggregate minimum rental commitments under non-cancelable operating and capital
leases (primarily for office space and equipment) as of December 31, 1995, are
as follows (in thousands):
<TABLE>
<CAPTION>
Operating Capital
---------- ----------
<S> <C> <C>
1996 $ 11,300 $ 935
1997 8,800 608
1998 8,200 200
1999 8,100 --
2000 8,100 --
2001 and thereafter 40,200 --
--------- -------
$ 84,700 $ 1,743
=========
Less: Interest portion at 10% (188)
1,555
Less: Current portion (823)
-------
$ 732
=======
</TABLE>
Rent expense under operating leases for 1995, 1994 and 1993 was $11,215,000,
$10,624,000 and $9,300,000, respectively.
14 / SUPPLEMENTAL CASH FLOW
DISCLOSURES
Supplemental cash flow disclosures related to the ASO, PSC and Fairchild
purchase business combinations are as follows (in tho
usands):
fifty-two
----------------------------
ORBITAL SCIENCES CORPORATION
<PAGE> 27
<TABLE>
<CAPTION>
Fairchild PSC ASO
1994 1994 1993
--------- ------- --------
<S> <C> <C> <C>
Fair value of assets
acquired $95,000 $ 4,585 $ 11,037
Liabilities assumed
or established (23,200) (835) (5,437)
Value of common stock
issued to seller (31,000) -- (5,000)
--------- ------- --------
Cash paid for
acquisition $40,800 $ 3,750 $ 600
========= ======= ========
</TABLE>
Cash payments for interest and income taxes for 1995, 1994 and 1993 are as
follows (in thousands):
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Interest paid $ 9,906 $ 11,831 $ 8,765
Income taxes paid,
net of refunds 1,339 2,447 2,643
</TABLE>
15 / DISAGGREGATED FINANCIAL
INFORMATION
Industry Segment Information. Orbital's operations have been classified into
two industry segments, "Space-Technology Products" and "Satellite-Based
Services." Space-Technology Products include Launch Vehicles, including space
and suborbital launch vehicles and technologically advanced launch vehicles;
Satellite and Electronics Systems, including satellites, space sensors and
instruments, and space payloads and experiments, as well as avionics and other
electronics equipment; and Ground Systems and Software, including satellite
ground systems and various software products and network consulting services.
Satellite-Based Services include satellite-based mobile data communications,
navigation and communications products and services and Earth observation
services, along with various environmental monitoring products.
The following table presents revenues, operating income, identifiable assets,
capital expenditures and depreciation and amortization by industry segment for
1995, 1994 and 1993. Operating income is total revenues less costs of goods
sold, research and development expenses, selling, general and administrative
expenses and amortization of goodwill (where applicable); identifiable assets
are those assets used in the operations of each industry segment. There were
no significant intersegment sales or transfers during 1995, 1994 and 1993.
<TABLE>
<CAPTION>
Years Ended December 31,
(In Thousands) 1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
SPACE-TECHNOLOGY PRODUCTS:
Revenues $ 295,378 $ 242,767 $ 230,093
Operating Income 7,117 9,787 10,794
Identifiable Assets 236,569 236,305 189,686
Capital Expenditures 12,108 26,158 2,639
Depreciation and
Amortization 15,412 11,507 6,533
Impairment Losses 4,160 -- --
SATELLITE-BASED SERVICES:
Revenues 68,974 58,809 71,390
Operating Income (1,289) 4,587 2,787
Identifiable Assets 94,882 87,360 61,664
Capital Expenditures 2,178 2,617 2,770
Depreciation and
Amortization 872 1,048 570
CORPORATE, ADJUSTMENTS AND
GOODWILL:
Revenues (32) -- (1,299)
Operating Income (4,684) (1,999) (1,293)
Identifiable Assets 60,062 42,778 89,380
Goodwill 75,395 74,599 27,249
Capital Expenditures 2,953 1,164 2,941
Depreciation and
Amortization 2,724 2,285 1,730
Goodwill Amortization 3,221 2,358 1,634
CONSOLIDATED:
Revenues 364,320 301,576 300,184
Operating Income 1,144 12,375 12,288
Identifiable Assets and
Goodwill 466,908 441,042 367,979
Capital Expenditures 17,239 29,939 38,350
Depreciation and Total
Amortization 22,229 17,198 10,467
Impairment Losses 4,160 -- --
</TABLE>
Domestic and Foreign Operations. Orbital's operations are conducted primarily
from office, manufacturing and integration facilities in the United States and
Canada, as follows (in thousands):
fifty-three
----------------------------
ORBITAL SCIENCES CORPORATION
<PAGE> 28
N O T E S T O C O N S O L I D A T E D F I N A N C I A L
S T A T E M E N T S
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
REVENUES:
United States $290,914 $221,946 $ 223,087
Canada 68,997 74,408 72,477
United Kingdom and Other 4,409 5,222 4,620
OPERATING INCOME (LOSS):
United States $ (2,413) 9,662 10,969
Canada 3,964 2,796 1,052
United Kingdom and Other (407) (83) 267
IDENTIFIABLE ASSETS:
United States $420,078 $396,228 $ 322,099
Canada 44,291 42,302 44,002
United Kingdom and Other 2,539 2,512 1,878
</TABLE>
Major Customers and Export Sales. A summary of Orbital's export sales by
geographic area for the years ended December 31,1995, 1994 and 1993 follows (in
thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
United States $275,707 $213,606 $209,873
Canada 45,558 46,839 51,392
Europe 23,594 24,468 17,938
Far East 15,242 13,998 15,489
Middle East and Other 4,219 2,665 5,492
-------- -------- --------
Total $364,320 $301,576 $300,184
======== ======== ========
</TABLE>
Approximately 40% of the Company's revenues in 1995, and 45% in each of 1994
and 1993, was generated under contracts with the U.S. Government and its
agencies or under subcontracts with the U.S. Government's prime contractors.
16 / SUMMARY SELECTED QUARTERLY
FINANCIAL DATA (UNAUDITED)
The following is a summary of selected quarterly financial data for the years
ended December 31, 1995 and 1994, restated to reflect the MDA Acquisition and
the Magellan Acquisition: (In thousands, except share data)
<TABLE>
<CAPTION>
Quarter Ended
Mar. 31 June 30 Sept. 30 Dec. 31
-----------------------------------------------------
<S> <C> <C> <C> <C>
1995
Revenues, as previously
reported $68,341 $ 64,589 $ 79,172 $ NA
MDA revenues 20,634 17,177 16,645 NA
Revenues, restated 88,975 81,766 95,817 97,762
Income (loss) from
operations, as previously
reported 3,152 (386) 4,662 NA
MDA income (loss) from
operations 1,462 (586) (979) NA
Income (loss) from
operations, restated 4,614 (972) 3,683 (6,179)
Net income (loss) before
cumulative effect of
accounting change,
as previously reported 1,968 (727) 2,202 NA
MDA net income (loss)
before cumulative effect
of accounting change 1,047 (899) (445) NA
Net income (loss) before
cumulative effect of
accounting change,
restated 3,015 (1,626) 1,757 (3,837)
Net income (loss), as
previously reported (2,192) (727) 2,202 NA
MDA net income (loss) 1,047 ( 899) (445) NA
Net income (loss), restated (1,139) (1,626) 1,757 (3,837)
</TABLE>
fifty-four
----------------------------
ORBITAL SCIENCES CORPORATION
<PAGE> 29
<TABLE>
<CAPTION>
Quarter Ended
Mar. 31 June 30 Sept. 30 Dec. 31
---------------------------------------------------
<S> <C> <C> <C> <C>
Earnings (loss) per share,
as previously reported:
primary (.11) (.03) .10 NA
fully diluted (.11) (.03) .10 NA
Earnings (loss) per share,
restated:
primary (.05) (.07) .06 (.14)
fully diluted (.05) (.07) .06 (.14)
1994
Revenues, as initially
reported $41,388 $ 38,734 $ 50,020 $65,066
Magellan and MDA
revenues 28,878 30,044 26,812 20,634
Revenues, restated 70,266 68,778 76,832 85,700
Income (loss) from
operations, as initially
reported 2,304 (336) 3,573 2,530
Magellan and MDA income
(loss) from operations 1,213 1,244 (77) 1,462
Income from operations,
restated 3,517 908 3,496 3,992
Net income (loss), as
initially reported 1,660 (62) 1,580 1,140
Magellan and MDA net
income 1,069 1,082 101 1,047
Net income, restated 2,729 1,020 1,681 2,187
Earnings per share,
as initially reported:
primary .11 -- .10 .06
fully diluted .09 -- .10 .06
Earnings per share, restated:
primary .12 .05 .07 .09
fully diluted .10 .04 .08 .09
</TABLE>
fifty-five
----------------------------
ORBITAL SCIENCES CORPORATION
<PAGE> 30
C O R P O R A T E I N F O R M A T I O N
COMPANY OFFICES
HEADQUARTERS:
Orbital Sciences Corporation
21700 Atlantic Boulevard
Dulles, VA 20166
(703) 406-5000
OTHER MAJOR FACILITIES:
Germantown Operations
20301 Century Boulevard
Germantown, MD 20874
Chandler Operations
3380 South Price Road
Chandler, AZ 85248
San Dimas Operations
960 Overland Court
San Dimas, CA 91773
Pomona Operations
2771 North Garey Avenue
Pomona, CA 91767
Greenbelt Operations
7500 Greenway Center Drive
Greenbelt, MD 20770
Huntsville Operations
620 Discovery Drive
Huntsville, AL 35806
Vancouver Operations
13800 Commerce Parkway
Richmond, British Columbia
Canada V6V 2J3
Ottawa Operations
2430 Don Reid Drive
Ottawa, Ontario
Canada K1H 8P5
United Kingdom Operations
Broadmede
Weydon Lane
Farnham, Surrey, U.K.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Washington, D.C.
TRANSFER AGENT
The First National Bank of Boston
Shareholders may obtain information with respect to share position, transfer
requirements, lost certificates and IRS Form 1099 by writing or telephoning:
The First National Bank of Boston
Investor Relations
Mail Stop 45-02-64
P.O. Box 644
Boston, MA 02102-0644
Telephone: (617) 575-3170
INVESTOR AND PUBLIC RELATIONS
General inquiries from investors, analysts, media or the general public should
be directed to:
Orbital Sciences Corporation
21700 Atlantic Boulevard
Dulles, Virginia 20166
(703) 406-5000
Attention: Investor Relations or
Public Relations
http://www.orbital.com
FORM 10-K REPORT
A copy of the Company's report on Form 10-K can be obtained by writing or
telephoning the Company's headquarters.
ANNUAL MEETING
The annual meeting of Orbital Sciences Corporation will be held on April 25,
1996 at 9:00 a.m. at the Company's headquarters.
DIVIDENDS
Orbital has never paid a cash dividend on its Common Stock. The Company
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, the Company is subject to certain contractual
restrictions on its ability to pay dividends.
EQUAL EMPLOYMENT OPPORTUNITY
Orbital Sciences Corporation is an equal opportunity employer.
fifty-six
----------------------------
ORBITAL SCIENCES CORPORATION
<PAGE> 1
EXHIBIT 21
ORBITAL SCIENCES CORPORATION
LIST OF SUBSIDIARIES AS OF MARCH 26, 1996
Orbital Communications Corporation
ORBCOMM USA, L.P.*
Orbital Imaging Corporation
Orbital Services Corporation
Fairchild Space and Defense Corporation
Magellan Corporation
Magellan Sistemas de Mexico*
Magellan Foreign Sales Corp.*
MacDonald, Dettwiler Holdings Inc.
MacDonald, Dettwiler and Associates Ltd.*
MacDonald, Dettwiler Technologies Ltd.*
MacDonald Dettwiler Pty Ltd.*
PSC USA*
MacDonald, Dettwiler Technologies Inc.*
PSC Europe*
MacDonald, Dettwiler Limited*
Earth Observation Sciences Ltd.*
MDA (USA) Inc.*
Iotek, Inc.*
- ----------------------
*Indirect subsidiary.
<PAGE> 1
Exhibit 23
ACCOUNTANTS' CONSENT
The Board of Directors
Orbital Sciences Corporation:
We consent to the incorporation by reference in the registration statements on
Form S-8 of Orbital Sciences Corporation of our reports dated February 5, 1996,
relating to the consolidated balance sheets of Orbital Sciences Corporation and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1995, and the related
consolidated financial statement schedule, which reports are incorporated by
reference or appear in the December 31, 1995 annual report on Form 10-K of
Orbital Sciences Corporation.
Our report on the consolidated financial statements refers to changes in
accounting for the impairment of long-lived assets and for long-lived assets to
be disposed of, and in accounting for income taxes.
KPMG Peat Marwick LLP
Washington, D.C.
March 27, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AT AND FOR
THE YEAR ENDED DECEMBER 31, 1995 AND SCHEDULE II AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000820736
<NAME> ORBITAL SCIENCES CORP /DE/
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 15,317
<SECURITIES> 19,713
<RECEIVABLES> 119,131
<ALLOWANCES> (773)
<INVENTORY> 38,527
<CURRENT-ASSETS> 199,245
<PP&E> 159,489
<DEPRECIATION> (53,614)
<TOTAL-ASSETS> 466,908
<CURRENT-LIABILITIES> 111,692
<BONDS> 96,990
0
0
<COMMON> 268
<OTHER-SE> 238,640
<TOTAL-LIABILITY-AND-EQUITY> 466,908
<SALES> 364,320
<TOTAL-REVENUES> 364,320
<CGS> 268,016
<TOTAL-COSTS> 268,016
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 189
<INTEREST-EXPENSE> 3,815
<INCOME-PRETAX> (1,990)
<INCOME-TAX> (1,302)
<INCOME-CONTINUING> (668)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (4,160)
<NET-INCOME> (4,848)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AT AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1995, FOR THE SIX MONTHS ENDED JUNE 30,
1995, FOR THE THREE MONTHS ENDED MARCH 31, 1995, AND FOR THE YEAR ENDED DECEMBER
31, 1994 AND SCHEDULE II AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000820736
<NAME> ORBITAL SCIENCES CORP /DE/
<MULTIPLIER> 1000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995 DEC-31-1995 DEC-31-1994
<PERIOD-END> SEP-30-1995 JUN-30-1995 MAR-31-1995 DEC-31-1995
<CASH> 25,177 30,651 11,134 27,919
<SECURITIES> 32,697 21,440 9,427 12,426
<RECEIVABLES> 107,211 100,537 122,949 116,799
<ALLOWANCES> (765) (753) (770) (778)
<INVENTORY> 26,495 28,915 24,156 26,445
<CURRENT-ASSETS> 204,471 190,004 175,938 186,682
<PP&E> 149,793 152,470 147,007 156,287
<DEPRECIATION> (46,432) (42,495) (41,495) (46,409)
<TOTAL-ASSETS> 471,427 453,479 429,890 441,042
<CURRENT-LIABILITIES> 102,587 90,701 118,192 129,233
<BONDS> 99,733 101,176 84,616 86,068
0 0 0 0
0 0 0 0
<COMMON> 268 268 244 243
<OTHER-SE> 241,906 240,338 205,103 206,730
<TOTAL-LIABILITY-AND-EQUITY> 471,427 453,479 429,890 441,042
<SALES> 266,558 170,741 88,975 301,576
<TOTAL-REVENUES> 266,558 170,741 88,975 301,576
<CGS> 195,239 124,498 63,462 216,417
<TOTAL-COSTS> 195,239 124,498 63,462 216,417
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 37 68 46 149
<INTEREST-EXPENSE> 3,701 2,386 1,084 1,740
<INCOME-PRETAX> 4,577 2,297 4,346 10,364
<INCOME-TAX> 1,428 905 1,328 2,744
<INCOME-CONTINUING> 3,149 1,392 3,018 7,620
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> (4,160) (4,160) (4,160) 0
<NET-INCOME> (1,011) (2,768) (1,142) 7,620
<EPS-PRIMARY> (0.04) (0.11) (0.05) 0.33
<EPS-DILUTED> (0.04) (0.11) (0.05) 0.32
</TABLE>
