<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended
JUNE 30, 1996
ORBITAL SCIENCES CORPORATION
Commission file number 0-18287
DELAWARE 06-1209561
- ---------------------------------------- ------------------------------------
(State of Incorporation) (IRS Identification number)
21700 ATLANTIC BOULEVARD
DULLES, VIRGINIA 20166 (703) 406-5000
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Telephone number)
The registrant has (1) 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,
and (2) has been subject to such filing requirements for the past 90 days.
As of July 31, 1996, 26,974,891 shares of the registrant's common stock were
outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
A S S E T S
JUNE 30, DECEMBER 31,
1996 1995
------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 14,112 $ 15,317
Short-term investments, at market 10,113 19,713
Receivables, net 129,055 118,358
Inventories, net 38,475 38,527
Deferred income taxes and other assets 5,817 7,330
------------ -------------
TOTAL CURRENT ASSETS 197,572 199,245
PROPERTY, PLANT AND EQUIPMENT, AT COST, LESS ACCUMULATED
depreciation and amortization of $59,074 and $53,067, respectively 94,839 91,512
SATELLITE SYSTEMS, AT COST, LESS ACCUMULATED
depreciation of $958 and $547, respectively 19,667 14,363
INVESTMENTS IN AFFILIATES, NET 82,625 74,063
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED,
less accumulated amortization of $15,203 and $13,697, respectively 74,660 75,395
DEFERRED INCOME TAXES AND OTHER ASSETS 11,408 12,330
------------ -------------
TOTAL ASSETS $480,771 $466,908
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current portion of
long-term obligations $ 42,513 $ 11,907
Accounts payable 18,548 25,808
Accrued expenses 27,198 29,922
Payable to subcontractors 5,592 11,552
Deferred revenue 31,440 32,503
------------ -------------
TOTAL CURRENT LIABILITIES 125,291 111,692
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION 92,351 96,990
OTHER LIABILITIES 17,465 19,740
------------ -------------
TOTAL LIABILITIES 235,107 228,422
NON-CONTROLLING INTERESTS IN
NET ASSETS OF CONSOLIDATED SUBSIDIARIES (875) (422)
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $.01; 10,000,000 shares authorized:
Series A Special Voting Preferred Stock, 1 share authorized and outstanding -- --
Class B Preferred Stock, 10,000 shares authorized and outstanding -- --
Common Stock, par value $.01; 40,000,000 shares authorized,
26,926,758 and 26,766,029 shares outstanding,
after deducting 15,735 shares held in treasury 269 268
Additional paid-in capital 248,738 247,580
Unrealized gains (losses) on short-term investments (12) 68
Cumulative translation adjustment (3,771) (3,356)
Retained earnings (deficit) 1,315 (5,652)
------------ -------------
TOTAL STOCKHOLDERS' EQUITY 246,539 238,908
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $480,771 $466,908
============ =============
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
---------------------------------
1996 1995
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<S> <C> <C>
REVENUES $ 116,512 $ 81,766
COSTS OF GOODS SOLD 83,624 61,036
-------------- ---------------
GROSS PROFIT 32,888 20,730
RESEARCH AND DEVELOPMENT EXPENSES 4,953 5,282
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 19,829 15,432
AMORTIZATION OF EXCESS OF PURCHASE PRICE OVER
NET ASSETS ACQUIRED 782 819
-------------- ---------------
INCOME (LOSS) FROM OPERATIONS 7,324 (803)
NET INTEREST EXPENSE (814) (1,181)
EQUITY IN EARNINGS (LOSSES) OF AFFILIATES (2,586) (65)
NON-CONTROLLING INTERESTS IN (EARNINGS) LOSSES
OF CONSOLIDATED SUBSIDIARIES 341 -
-------------- ---------------
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES 4,265 (2,049)
PROVISION (BENEFIT) FOR INCOME TAXES 426 (423)
-------------- ---------------
NET INCOME (LOSS) $ 3,839 $ (1,626)
============== ===============
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE $ 0.14 ($0.07)
SHARES USED IN COMPUTING NET INCOME (LOSS)
PER COMMON AND COMMON EQUIVALENT SHARE 27,378,722 25,307,950
============== ===============
NET INCOME (LOSS) PER COMMON SHARE, ASSUMING FULL DILUTION $ 0.14 ($0.07)
SHARES USED IN COMPUTING NET INCOME (LOSS)
PER COMMON SHARE, ASSUMING FULL DILUTION 31,303,789 29,203,602
============== ===============
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
-------------------------------
1996 1995
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<S> <C> <C>
REVENUES $ 221,406 $ 170,741
COSTS OF GOODS SOLD 156,206 124,498
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GROSS PROFIT 65,200 46,243
RESEARCH AND DEVELOPMENT EXPENSES 11,331 10,334
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 39,094 30,397
AMORTIZATION OF EXCESS OF PURCHASE PRICE OVER
NET ASSETS ACQUIRED 1,579 1,558
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INCOME FROM OPERATIONS 13,196 3,954
NET INTEREST EXPENSE (1,449) (2,019)
EQUITY IN EARNINGS (LOSSES) OF AFFILIATES (4,604) 362
NON-CONTROLLING INTERESTS IN (EARNINGS) LOSSES
OF CONSOLIDATED SUBSIDIARIES 598 --
------------ -----------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 7,741 2,297
PROVISION FOR INCOME TAXES 774 905
------------ -----------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 6,967 1,392
CUMULATIVE EFFECT OF ACCOUNTING CHANGES, net of taxes -- (4,160)
------------ -----------
NET INCOME (LOSS) $ 6,967 $ (2,768)
============ ===========
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE:
Income Before Cumulative Effect of Accounting Changes $ 0.26 $ 0.06
Cumulative Effect of Accounting Changes -- (0.17)
------------ -----------
$0.26 ($0.11)
============ ===========
SHARES USED IN COMPUTING NET INCOME (LOSS)
PER COMMON AND COMMON EQUIVALENT SHARE 27,270,385 25,041,485
============ ===========
NET INCOME (LOSS) PER COMMON SHARE, assuming full dilution:
Income Before Cumulative Effect of Accounting Changes $ 0.26 $ 0.06
Cumulative Effect of Accounting Changes -- (0.17)
------------ -----------
$0.26 ($0.11)
============ ===========
SHARES USED IN COMPUTING NET INCOME (LOSS)
PER COMMON SHARE, assuming full dilution 31,260,083 28,950,575
============ ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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ORBITAL SCIENCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED; IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
-------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 6,967 $ (2,768)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation and amortization expense 11,627 10,370
Equity in (earnings) losses of affiliates 4,604 362
Non-controlling interests in earnings (losses) of consolidated subsidiaries (598) --
Gain (loss) on sale of fixed assets and investments (17) --
Cumulative effect of accounting change -- 4,160
Foreign currency translation adjustment (415) 994
CHANGES IN ASSETS AND LIABILITIES:
(Increase) decrease in receivables (10,697) 16,237
(Increase) decrease in inventories (55) (2,470)
(Increase) decrease in other current assets 1,513 (2,655)
(Increase) decrease in other non-current assets 323 1,645
Increase (decrease) in payables and accrued expenses p(16,444) (24,192)
Increase (decrease) in deferred revenue (1,449) (2,932)
Increase (decrease) in other liabilities (2,275) (1,378)
---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (6,916) (2,627)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (12,923) (6,918)
Investments in satellite systems (5,715) (3,357)
Proceeds from sales of fixed assets -- 125
Purchases of investment securities (6,222) (13,083)
Sales of investment securities 9,576 4,310
Maturities of investment securities 6,215 --
Investments in affiliates (12,346) (9,689)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (21,415) (28,612)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings (repayments) 30,200 (16,435)
Principal payments on long-term obligations (4,114) (2,933)
Proceeds from issuance of long-term obligations -- 21,143
Net proceeds from issuances of common stock 1,040 33,246
Adjustment to recast pooled company's year end -- (1,050)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 27,126 33,971
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,205) 2,732
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 15,317 27,919
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,112 $ 30,651
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE> 6
ORBITAL SCIENCES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(UNAUDITED)
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim financial
information reflects all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation thereof. Certain information and footnote
disclosure normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to instructions, rules and regulations prescribed by the Securities
and Exchange Commission. Although the Company believes that the disclosures
provided are adequate to make the information presented not misleading, these
unaudited interim condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and the
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995. Operating results for the three- and six-month
periods ended June 30, 1996 and 1995 are not necessarily indicative of fiscal
year performance.
Orbital Sciences Corporation is hereafter referred to as "Orbital" or the
"Company."
(1) 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 or specific
identification basis.
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 U.S. Government 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. Finished goods inventory consists of
fully assembled commercial products awaiting shipment.
(2) Common Stock and Income Per Share
Income per common and common equivalent share is calculated using the
weighted average number of common and common equivalent shares, to
the extent dilutive, outstanding during the periods. Income per
common share assuming full dilution is calculated using the weighted
average
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number of common and common equivalent shares outstanding during the
periods plus the effects of an assumed conversion of the Company's 6
3/4% convertible subordinated debentures (the "Convertible
Debentures"), after giving effect to all net income adjustments that
would result from the assumed conversion. Any reduction of less than
three percent in the aggregate has not been considered dilutive in the
calculation and presentation of income per common share assuming full
dilution.
(3) Income Taxes
The Company has recorded its interim income tax provision based on
estimates of the Company's effective tax rate expected to be
applicable for the full fiscal year. Estimated effective rates
recorded during interim periods may be periodically revised, if
necessary, to reflect current estimates.
(4) Stockholders' Equity and Common Stock
On July 25, 1996, the Company called all its outstanding Convertible
Debentures for redemption on August 14, 1996. Pursuant to the terms
of the indenture governing the Convertible Debentures, the holders of
the Convertible Debentures may redeem their Debentures for a cash
payment of (i) $1,000 in principal, plus (ii) a premium of $47.25,
plus (iii) $30.56 of interest accrued from March 1, 1996 to the date
of redemption for each $1,000 principal amount of Convertible
Debentures. Alternatively, at their option, the holders may convert
their Convertible Debentures into Orbital Common Stock at a price of
$14.375 per share, or approximately 69.565 shares for each $1,000
principal amount of Convertible Debentures.
The Company has entered into a standby underwriting agreement with an
investment bank whereby the investment bank has agreed, subject to
certain customary conditions, to purchase from the Company shares of
its Common Stock to provide proceeds to the Company to satisfy any
redemption by the holders of the Convertible Debentures.
In June 1996, Magellan Corporation ("Magellan"), a wholly owned
subsidiary of the Company, adopted its 1996 Stock Option Plan (the
"Magellan Plan"), pursuant to which options to purchase up to 12.3% of
Magellan's common stock (on a fully diluted basis) may be granted to
Magellan and Orbital employees. In July 1996, options were granted
for approximately six million shares of Magellan common stock under
the Magellan Plan.
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<PAGE> 8
(5) Investments in Affiliates
On August 7, 1996, ORBCOMM Global, L.P. ("ORBCOMM Global") completed a
private financing involving the issuance and sale of $170,000,000
Senior Notes (the "Notes") to certain institutional investors. Net
proceeds from the sale of the Notes (approximately $164,500,000) will
be applied to (i) the design, construction, launch, operation and
marketing of ORBCOMM Global's satellite-based, two-way data
communications network (the "ORBCOMM System") and related development,
operating and management expenses (including cost contingencies) and
(ii) the first two years of fixed interest on the Notes. The
obligations of ORBCOMM Global under the Notes are nonrecourse to the
Company.
The Notes have a term of eight years and generally may not be redeemed
prior to August 15, 2001. The Notes bear interest at the fixed rate
of 14% per annum. In addition, the Notes provide for revenue
participation interest in an aggregate amount of 5% of the ORBCOMM
System revenues, payment of which may be deferred by ORBCOMM Global to
the extent that certain fixed charge ratios are not met. The
obligations under the Notes are guaranteed, jointly and severally, by
the Company's majority-owned subsidiary, Orbital Communications
Corporation ("OCC"), Teleglobe Mobile Partners ("Teleglobe"), ORBCOMM
USA, L.P. and ORBCOMM International, L.P. Such guarantees are also
nonrecourse to the Company. Upon closing of the financing, OCC and
Teleglobe contributed the balance of their capital commitments in
ORBCOMM Global for an aggregate equity investment of approximately
$160 million. The Company and Teleglobe have agreed to commit
additional capital in an amount up to $15 million each in the event of
certain limited contingencies in the future.
(6) Debt
The Company maintains several short-term borrowing arrangements to
meet working capital requirements. During the quarter ended June 30,
1996, the Company modified two of these agreements to provide for
additional borrowing capacity. Orbital's demand line of credit was
increased from $7 million to $25 million and remains unsecured.
Magellan's existing line of credit was increased from approximately $5
million to $10 million and remains collateralized by all of Magellan's
assets.
Orbital's $20 million unsecured loan agreement with The Northwestern
Mutual Life Insurance Company was amended as of July 31, 1996 to waive
non-compliance with a financial ratio requirement, as well as to amend
certain financial covenants and to permit the completion of the
ORBCOMM System financing (see Note (4) above). In connection with
this
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<PAGE> 9
amendment, the interest rate on the note was increased from 10 1/2% to
11 1/2% effective July 1, 1996.
(7) Reclassifications
Certain reclassifications have been made to the 1995 condensed
consolidated financial statements to conform to the 1996 condensed
consolidated financial statement presentation. The November 1995
acquisition of MacDonald, Dettwiler and Associates Ltd. was recorded
using the pooling of interests method of accounting for business
combinations and, accordingly, Orbital's 1995 historical financial
statements have been restated to reflect this transaction.
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<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE- AND SIX-MONTH PERIODS ENDED JUNE 30, 1996
AND 1995
Certain statements included in this discussion constitute "forward-looking
statements" within the meaning of the U.S. Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. In addition, factors such as general economic and
business conditions, product performance, market acceptance of products and
technologies, and dependence upon long-term contracts with commercial and
government customers impact the Company's revenues, expenses and gross profit
from period to period. (Refer to Exhibit 99 filed herewith for further
discussion of some of these factors.)
The Company's products and services are grouped into three business sectors:
Space Infrastructure Systems, Satellite Access Products, and Satellite-Provided
Services. Space Infrastructure includes Launch Systems, Satellites and Space
Systems, Electronics and Sensor Systems, and Ground Systems and Software. The
Company's Satellite Access Products sector consists of satellite-based
navigation and communications products. The Company's Satellite-Provided
Services sector includes satellite-based, two-way mobile data communications
services and Earth imagery remote sensing services.
REVENUES. Orbital's revenues for the three-month periods ended June 30, 1996
and 1995 were $116,512,000 and $81,766,000, respectively. Revenues for the
six-month periods ended June 30, 1996 and 1995 were $221,406,000 and
$170,741,000, respectively.
Space Infrastructure Systems
Revenues from the Company's space infrastructure systems totaled $97,500,000
and $66,385,000 for the three months ended June 30, 1996 and 1995,
respectively, and $179,161,000 and $138,497,000 for the six months ended June
30, 1996 and 1995, respectively. Revenues from the Company's launch systems
increased to $27,554,000 in the second quarter of 1996, from $17,321,000 in the
second quarter of 1995. Launch systems revenues were $46,871,000 for the six
months ended June 30, 1996 as compared to $32,182,000 for the comparable 1995
period. The significant increase in revenues in 1996 is attributable primarily
to the resumption of production and launch of the Company's Pegasus XL launch
vehicle. Orbital has successfully completed all three of its Pegasus launches
to date in 1996, consisting of two Pegasus XL launches and one standard Pegasus
launch. Additionally, revenues generated from the Company's Taurus launch
vehicle also increased as a result of work performed on two orders received
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<PAGE> 11
subsequent to June 30, 1995. As a result, Orbital expects total 1996 launch
systems revenues to continue to exceed 1995's total revenues on a quarterly
basis.
For the three months ended June 30, 1996, satellite systems revenues increased
to $27,982,000 from $14,382,000 in the 1995 quarter. Satellite systems
revenues were $50,541,000 for the six months ended June 30, 1996 as compared to
$28,901,000 for the comparable 1995 period. The increase in satellite systems
sales is primarily due to additional revenues generated from new satellite
orders from government and commercial customers, including 1996 sales to
ORBCOMM Global, L.P. ("ORBCOMM Global") of $22,835,000 as compared to 1995
sales of $3,395,000.
Revenues from electronics and sensors systems were approximately $21,370,000
for the three months ended June 30, 1996 as compared to $17,505,000 for the
comparable 1995 period. Electronics and sensors systems revenues were
$37,849,000 for the six months ended June 30, 1996 as compared to $37,603,000
for the comparable 1995 period. The increase in revenues in the second quarter
is primarily a result of work performed on defense electronics and
transportation management systems orders received during 1996. Orbital expects
sales of electronics and sensors systems to continue to increase as compared to
1995 levels throughout the remainder of 1996.
Revenues from the Company's satellite ground systems and other software
products were $20,593,000 in the second quarter of 1996 as compared to
$17,177,000 for the comparable 1995 period. Satellite ground systems revenues
were $43,899,000 for the six months ended June 30, 1996 as compared to
$37,811,000 for the comparable 1995 period. The 1996 increase in revenues
reflects work performed on new contract awards and is expected to continue at
approximately the same rate throughout 1996.
Satellite Access Products
Revenues from sales of navigation and communications products increased to
$18,688,000 for the second quarter of 1996 as compared to $12,457,000 for the
comparable 1995 period, primarily due to a substantial increase in unit sales
offset, in part, by lower unit prices, for GPS navigators. Satellite access
product revenues were $41,456,000 for the six months ended June 30, 1996 as
compared to $25,193,000 for the comparable 1995 period. The Company expects
navigation and communications products sales to continue to increase as
compared to 1995 levels throughout 1996, although at somewhat lower levels than
achieved during the first six months of 1996.
Satellite-Provided Services
The Company's satellite-based services include communications and information
services. In 1993, the Company's majority-owned subsidiary, Orbital
Communications Corporation ("OCC") and Teleglobe Mobile Partners ("Teleglobe"),
formed ORBCOMM Global for the design, development, construction, integration,
testing and operation of a satellite-based, two-way data communications network
(the "ORBCOMM System"). OCC and
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<PAGE> 12
Teleglobe each hold a 50% interest in ORBCOMM Global. Orbital's subsidiary
Orbital Imaging Corporation ("ORBIMAGE") is seeking to develop and market a
broad range of satellite remote sensing-based information services.
The Company's ORBCOMM and ORBIMAGE start-up businesses generated service
revenues of approximately $325,000 in the 1996 second quarter, and $790,000 for
the six months ended June 30, 1996. Satellite-provided services revenues in
1995 represented sales of ground and network software to ORBCOMM Global of
approximately $2,924,000 and $7,050,000 for the three- and six-month periods
ended June 30, 1995, respectively; no such sales were made in 1996.
GROSS PROFIT. Gross profit depends on a number of factors, including the
Company's mix of contract types and costs incurred thereon in relation to
estimated costs. The Company's gross profit for the second quarter of 1996 was
$32,888,000, as compared to $20,730,000 for the comparable 1995 period. Gross
profit margin as a percentage of sales for those periods was approximately
28.2% and 25.4%, respectively. The Company's gross profit for the first half
of 1996 was $65,200,000, as compared to $46,243,000 for the first half of 1995.
Gross profit margin as a percentage of sales for those periods was
approximately 29.4% and 27.1%, respectively. The increased gross profit margin
as a percentage of sales in 1996 is primarily attributable to the resumption of
Pegasus production after launch failures in June 1994 and June 1995. The
Company expects that its gross profit margin for the remainder of 1996 will be
slightly higher than 1995 levels.
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 the
three-month periods ended June 30, 1996 and 1995 were $4,953,000 and
$5,282,000, respectively. Research and development expenses during the
six-month periods ended June 30, 1996 and 1995 were $11,331,000 and
$10,334,000, respectively. Research and development expenses in 1996 relate
primarily to the development of new or improved navigation and communications
products, improved launch vehicles and new satellite programs. The Company
expects its research and development expenditures for the rest of 1996 to be
lower than 1995 expenditures both as a percentage of revenues and in absolute
dollar terms.
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 the second quarters of 1996 and 1995
were $19,829,000 (or 17.0% of revenues) and $15,432,000 (or 18.9% of revenues),
respectively. Selling, general and administrative expenses for the first
halves of 1996 and 1995 were $39,094,000 (or 17.7% of revenues) and $30,397,000
(or 17.8% of revenues), respectively. The increase in selling, general and
administrative expenses during 1996 as compared to 1995 is primarily
attributable to substantially expanded marketing efforts related to the
Company's ORBCOMM System and ORBIMAGE projects. The Company expects selling,
general and administrative expenses
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<PAGE> 13
as a percentage of revenues during the remainder of 1996 to be generally
consistent with the percentage attained during the first half of 1996.
INTEREST INCOME AND INTEREST EXPENSE. Net interest expense was $814,000 and
$1,181,000 for the three months ended June 30, 1996 and 1995, respectively.
Net interest expense was $1,449,000 and $2,019,000 for the six months ended
June 30, 1996 and 1995, respectively. Interest income for the periods reflects
interest earnings on short-term investments. Interest expense is primarily for
outstanding amounts on Orbital's revolving credit facility, on the Company's
Convertible Debentures and on secured and unsecured debt. Interest expense has
been reduced by capitalized interest of $1,682,000 and $1,188,000 in 1996 and
1995, respectively. The Company expects interest expense in the second half of
1996 to be less than that in the first half as a result of the expected
conversion of the Convertible Debentures (see Liquidity and Capital Resources).
EQUITY IN EARNINGS (LOSSES) OF AFFILIATES AND NON-CONTROLLING INTERESTS IN
CONSOLIDATED SUBSIDIARIES. Equity in earnings (losses) of affiliates and
non-controlling interests in (earnings) losses of consolidated subsidiaries for
the second quarters of 1996 and 1995 were ($2,245,000) and ($65,000),
respectively. Equity in earnings (losses) of affiliates and non-controlling
interests in (earnings) losses of consolidated subsidiaries for the six-month
periods ended June 30, 1996 and 1995 were ($4,006,000) and $362,000,
respectively. These amounts primarily represent (i) elimination of 50% of the
profits on sales to ORBCOMM Global, (ii) the Company's pro rata share of
ORBCOMM Global's and ORBCOMM International Partners L.P.'s ("ORBCOMM
International") current period earnings and losses and (iii) non-controlling
shareholders' pro rata share of ORBCOMM USA L.P.'s ("ORBCOMM USA") current
period earnings and losses. ORBCOMM International and ORBCOMM USA are
marketing partnerships for the ORBCOMM System.
PROVISION FOR INCOME TAXES. The Company recorded an income tax provision of
$426,000 and $774,000 for the three- and six-month periods ended June 30, 1996.
The Company recorded an income tax benefit of $423,000 for the three-month
period ended June 30, 1995 and an income tax provision of $905,000 for the
six-month period ended June 30, 1995. The Company records its interim income
tax provisions based on estimates of the Company's effective tax rate expected
to be applicable for the full fiscal year. Estimated effective rates recorded
during interim periods may be periodically revised, if necessary, to reflect
current estimates.
At December 31, 1995, Orbital had approximately $100,000,000 and $2,000,000 of
net operating loss and tax credit carryforwards, respectively, which are
available to reduce future income tax obligations, subject to certain annual
limitations and other restrictions.
-13-
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company's growth has required substantial capital to fund both an expanding
business base and significant research and development and capital
expenditures. Additionally, the Company has historically made strategic
acquisitions of businesses and routinely evaluates potential acquisition
candidates. The Company expects to continue to pursue potential acquisitions
that it believes would augment its marketing, technical, manufacturing or
financial capabilities. The Company has funded these requirements to date, and
expects to fund its requirements in the future, through cash generated by
operations, working capital loan facilities, asset-based financings, joint
venture arrangements, and private and public equity and debt offerings.
Cash, cash equivalents and short-term investments were $24,225,000 at June 30,
1996, and the Company had short-term and long-term debt obligations outstanding
of approximately $134,864,000. The outstanding debt relates primarily to
advances under the Company's lines of credit facilities, secured and unsecured
notes, fixed asset financings and the Convertible Debentures.
On July 25, 1996, the Company called all its outstanding 6 3/4% convertible
subordinated debentures (the "Convertible Debentures") for redemption on August
14, 1996. Pursuant to the terms of the indenture governing the Convertible
Debentures, the holders of the Convertible Debentures may redeem their
Debentures for a cash payment of (i) $1,000 in principal, plus (ii) a premium
of $47.25, plus (iii) $30.56 of interest accrued from March 1, 1996 to the date
of redemption for each $1,000 principal amount of Convertible Debentures.
Alternatively, at their option, the holders may convert their Convertible
Debentures into Orbital Common Stock at a price of $14.375 per share, or
approximately 69.565 shares for each $1,000 principal amount of Convertible
Debentures. The Company has entered into a standby underwriting agreement with
an investment bank whereby the investment bank has agreed, subject to customary
conditions, to purchase from the Company shares of its Common Stock to provide
proceeds to the Company to satisfy any redemption by the holders of the
Convertible Debentures.
Orbital's $20 million unsecured loan agreement with The Northwestern Mutual Life
Insurance Company was amended as of July 31, 1996 to waive non-compliance with
a financial ratio requirement, as well as to amend certain financial covenants
and to permit the completion of the ORBCOMM System financing. In connection
with this amendment, the interest rate on the note was increaseed from 10 1/2%
to 11 1/2% effective July 1, 1996.
The Company's primary revolving credit facility provides for total borrowings
from an international syndicate of six banks of up to $65,000,000, subject to a
defined borrowing base comprised of certain contract receivables.
Approximately $21,000,000 of borrowings were outstanding under the facility at
June 30, 1996, and the available facility limit was approximately $25,000,000.
At June 30, 1996, the average interest rate on outstanding borrowings under
this facility was approximately 9%. 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
-14-
<PAGE> 15
capital, fixed charge ratio, leverage ratio and tangible net worth, and expires
in September 1997. The Company (or its subsidiaries) also maintains two
additional, smaller revolving credit facilities, under which approximately
$14,200,000 was outstanding at June 30, 1996. During the quarter ended June
30, 1996, the Company modified the two additional agreements to increase
borrowing capacity from approximately $12,000,000 to approximately $35,000,000.
As anticipated, the Company's operations used net cash of approximately
$6,916,000 in the first half of 1996. The Company also invested approximately
$12,346,000 in ORBCOMM Global, incurred $5,715,000 in capital expenditures
related to ORBIMAGE satellite remote sensing systems, and incurred
approximately $12,923,000 in capital expenditures for various spacecraft
production and test equipment.
On August 7, 1996, ORBCOMM Global completed a private financing involving the
issuance and sale of $170,000,000 Senior Notes (the "Notes") to certain
institutional investors. Net proceeds from the sale of the Notes
(approximately $164,500,000) will be applied to (i) the design, construction,
launch, operation and marketing of the ORBCOMM System and related development,
operating and management expenses (including cost contingencies) and (ii) the
first two years of fixed interest on the Notes. The obligations of ORBCOMM
Global under the Notes are nonrecourse to the Company.
The Notes have a term of eight years and generally may not be redeemed prior to
August 15, 2001. The Notes bear interest at the fixed rate of 14% per annum.
In addition, the Notes provide for revenue participation interest in an
aggregate amount of 5% of the ORBCOMM System revenues, payment of which may be
deferred by ORBCOMM Global to the extent that certain fixed charge ratios are
not met. The obligations under the Notes are guaranteed, jointly and
severally, by OCC, Teleglobe, ORBCOMM USA and ORBCOMM International. Such
guarantees also are nonrecourse to the Company. Upon closing of the financing,
OCC and Teleglobe contributed the balance of their capital commitments in
ORBCOMM Global for an aggregate equity investment of approximately $160
million. The Company and Teleglobe have agreed to commit additional capital in
an amount up to $15 million each in the event of certain limited contingencies
in the future.
Orbital expects to invest up to $15,000,000 in various ORBIMAGE satellite
remote sensing projects for all of 1996. Orbital expects that its capital
needs for the second half of 1996, including its planned investment in its
ORBIMAGE projects, will in part be provided by working capital, cash flows from
operations, credit facilities, asset-based financings, customer financings and
operating lease arrangements. Orbital believes that it is likely to require
additional equity and/or debt financing to fully fund its currently planned
operations and capital requirements in 1997.
-15-
<PAGE> 16
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - A complete listing of exhibits required is given in
the Exhibit Index that precedes the exhibits filed with this
report.
(b) Not applicable.
-16-
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ORBITAL SCIENCES CORPORATION
DATED: August 12, 1996 By: /s/ David W. Thompson
----------------------------------------
David W. Thompson, President
and Chief Executive Officer
DATED: August 12, 1996 By: /s/ Jeffrey V. Pirone
----------------------------------------
Jeffrey V. Pirone, Senior Vice President
and Principal Financial Officer
-17-
<PAGE> 18
EXHIBIT INDEX
The following exhibits are filed as part of this report.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 Amendment No. 5 to Credit Agreement among Orbital Sciences Corporation,
Orbital Imaging Corporation, Fairchild Space and Defense Corporation, the
Banks (listed on the signature pages), Morgan Guaranty Trust Company of New
York and J.P. Morgan Delaware, dated July 19, 1996 (transmitted herewith).
10.2 Third Amendment to Note Agreement between Orbital Sciences Corporation and The
Northwestern Mutual Life Insurance Company, dated July 31, 1996 (transmitted
herewith).
10.3 Magellan Corporation 1996 Stock Option Plan (transmitted herewith).
11 Statement re: Computation of Earnings Per Share (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-Q, or otherwise subject to the liabilities of Section 18 of the
Securities Exchange Act of 1934) (transmitted herewith).
99 Important Factors Regarding Forward-Looking Statements (transmitted herewith).
</TABLE>
-18-
<PAGE> 1
Exhibit 10.1
[CONFORMED COPY]
AMENDMENT NO. 5 TO CREDIT AGREEMENT
AMENDMENT No. 5 dated as of July 19, 1996 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) A new definition of
"ORBCOMM Global Guaranty" is added in alphabetical order in Section 1.01 of the
Agreement, to read in its entirety as follows:
"ORBCOMM Global Guaranty" means the Guaranty by Orbital
Communications Corporation and ORBCOMM USA L.P. of the Senior Notes
Due 2004 issued by ORBCOMM Global Limited Partnership and ORBCOMM
Global Capital Corporation, the proceeds of which Notes are to be
applied to develop the ORBCOMM system, such Guaranty being in the
form provided to the Banks prior to the date of effectiveness of
Amendment No. 5 dated as of July 19, 1996 to this Agreement among the
Borrowers, the Banks, the Administrative Agent and the Collateral
Agent."
(b) The definition of "Consolidated Fixed Charges" set forth
in Section 1.01 of the Agreement is amended by deleting the parenthetical
"(other than Debt owing to the Company or a Consolidated Subsidiary)" where it
appears therein and replacing it with the parenthetical "(other than (i) Debt
owing to the Company or a Consolidated Subsidiary and (ii) the ORBCOMM Global
Guaranty")".
<PAGE> 2
(c) The definition of "Consolidated Leverage Ratio" set forth
in Section 1.01 of the Agreement is amended by inserting the parenthetical
"(other than the ORBCOMM Global Guaranty") immediately after the term
"Consolidated Debt" where it appears therein.
SECTION 3. Exception to the Investments Covenant. Section
5.07 of the Agreement is amended by:
(i) deleting the parenthetical "(other than Investments
described in clause (a) above)" set forth in clause (b) thereof and replacing
it with the parenthetical "(other than (x) Investments described in clause (a)
above and (y) the ORBCOMM Global Guaranty)";
(ii) renumbering clause (h) thereof as clause (i); and
(iii) inserting a new clause (h) immediately following clause
(g) thereof, to read in its entirety as follows:
"(h) the ORBCOMM Global Guaranty; and"
SECTION 4. Exception to the Subsidiary Debt Covenant. The
first sentence of Section 5.17 of the Agreement is amended to read in its
entirety as follows:
"Total Debt of all of the Company's Subsidiaries (excluding
(i) Loan and Letter of Credit Liabilities hereunder, (ii) Debt of a
Subsidiary to the Company or to a Wholly-Owned Subsidiary of the
Company and (iii) the ORBCOMM Global Guaranty) will at no time exceed
50 of Consolidated Tangible Net Worth."
SECTION 5. Exception to the Restricted Payments Covenant.
Section 5.18 of the Agreement is amended by deleting the period at the end
thereof and replacing it with the following phrase "and the redemption in whole
of the Debentures on or prior to September 30, 1996 substantially on the terms
and conditions described to the Banks prior to the date of effectiveness of
Amendment No. 5 dated as of July 19, 1996 to this Agreement among the
Borrowers, the Banks, the Administrative Agent and the Collateral Agent."
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 (i) 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) evidence reasonably satisfactory to it that ORBCOMM Global
2
<PAGE> 3
Limited Partnership and ORBCOMM Global Capital Corporation will have issued the
Senior Notes Due 2004, the proceeds of which Notes are to be applied to develop
the ORBCOMM system.
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/ Jeffrey V. Pirone
----------------------------
Title: Vice President and
Treasurer
ORBITAL IMAGING CORPORATION
By: /s/ Jeffrey V. Pirone
----------------------------
Title: Vice President and
Chief Financial Officer
FAIRCHILD SPACE AND DEFENSE
CORPORATION
By: /s/ Jeffrey V. Pirone
----------------------------
Title: Vice President and
Assistant 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
3
<PAGE> 4
SIGNET BANK (formerly known as
Signet Bank/Virginia)
By: /s/ Ronald K. Hobson
---------------------------------
Title: Vice President
NATIONSBANK, N.A.
By: /s/ James W. Gaittens
---------------------------------
Title: Vice President
Financial Strategies Group
THE BANK OF TOKYO TRUST COMPANY
By:
---------------------------------
Title:
THE SUMITOMO BANK LIMITED
By: /s/ Louanne Baily
---------------------------------
Title: Vice President and Manager
By: /s/ Nancy Z. Reimann
---------------------------------
Title: Vice President
4
<PAGE> 1
Exhibit 10.2
[CONFORMED COPY]
================================================================================
Orbital Sciences Corporation
Third Amendment
Dated as of July 31, 1996
To
Note Agreement
Dated as of June 1, 1995
Re: $20,000,000 10.50% Senior Notes,
Due June 14, 2001
================================================================================
<PAGE> 2
THIRD AMENDMENT TO NOTE AGREEMENT
This Third Amendment to Note Agreement dated as of July 31, 1996 (the
or this "Third 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, the First Amendment to Note Agreement
dated as of June 30, 1995 and the Second Amendment to Note Agreement dated as
of March 15, 1996 (as amended, the "Note Agreement").
B. An Event of Default under the Note Agreement has occurred as a
result of the Company's default in the observance of the covenant contained in
Section 5.9 of the Note Agreement for the period from January 1, 1996 to and
including June 30, 1996.
C. On or about August 1, 1996, the Company anticipates that
ORBCOMM Global, L.P., a Delaware partnership ("ORBCOMM Partnership"), and
ORBCOMM Global Capital Corp., a Delaware corporation ("ORBCOMM Capital";
together with ORBCOMM Partnership, the "Issuers"), will consummate the issuance
of $170,000,000 aggregate principal amount of the Issuers' 14% Senior Notes
(the "ORBCOMM Notes") and that ORBCOMM (as defined in the Note Agreement) and
certain other subsidiaries of the Issuers will guarantee such ORBCOMM Notes
upon the terms and conditions contemplated by that certain Preliminary Offering
Memorandum dated July 11, 1996 (the "ORBCOMM Notes Offering Memorandum"). The
transactions contemplated by the ORBCOMM Notes Offering Memorandum are
hereinafter referred to as the "ORBCOMM Notes Issuance".
D. The consummation of the ORBCOMM Notes Issuance would be
prohibited by the terms of the Note Agreement and in consequence thereof, the
Company has requested the Purchaser to amend the application of certain terms
of the Note Agreement in order to permit consummation of the ORBCOMM Notes
Issuance and to further amend 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 existence of
the ORBCOMM Notes and the guarantees thereof on an ongoing basis.
E. The Company and the Purchaser now desire to amend, effective
on and as of the opening of business on August 2, 1996 (the "Effective Date"),
certain of the terms of the Note Agreement in order to permit the issuance and
existence of the ORBCOMM Notes on an ongoing basis within the limitations of
the Note Agreement and to waive the existing Event of Default.
<PAGE> 3
F. In consideration of the Purchaser's agreeing to amend the Note
Agreement as set forth herein, the Company has agreed to increase the interest
rate on the Notes outstanding under the Note Agreement.
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.
H. All requirements of law have been fully complied with and all
other acts and things necessary to make this Third 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. From and after the Effective Date, the Note
Agreement shall be and is hereby amended as follows:
(i) the references to "10.50%" throughout the
Note Agreement, including each of the exhibits thereto, shall
be changed to "11.50%"; provided that, the reference to
"10.50%" in the definition of "Make-Whole Amount" contained in
Section 8.1 of the Note Agreement shall not be changed by this
Amendment;
(ii) the references to "12.50%" throughout the
Note Agreement, including each of the exhibits thereto, shall
be changed to "13.50%"; and
(iii) the references to "ORBCOMM Development"
throughout the Note Agreement shall be changed to "ORBCOMM
Partnership".
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
from June 30, 1996 and thereafter at not less than 1.65 to 1.00."
-2-
<PAGE> 4
Section 1.3. Section 5.9 of the Note Agreement shall be and is
hereby amended in its entirety to read as follows:
"Section 5.9. Priority Funded Debt Ratio. The Company
will not at any time permit the ratio of Consolidated Priority Funded
Debt to Consolidated Tangible Net Worth to exceed:
<TABLE>
<CAPTION>
Ratio of Consolidated
During the Period Priority Funded Debt to
Consolidated Tangible Net
Worth
<S> <C>
July 1, 1996 through
September 30, 1996 .30 to 1.00
October 1, 1996 through
December 31, 1996 .25 to 1.00
January 1, 1997 through
March 31, 1997 .20 to 1.00
April 1, 1997 and thereafter .15 to 1.00"
</TABLE>
Section 1.4. Section 5.15 of the Note Agreement shall be and is
hereby amended in its entirety to read as follows:
"Section 5.15. Transactions with Affiliates. The
Company will not, and will not permit any Subsidiary to, enter
into or be a party to any transaction or arrangement with any
Affiliate (including, without limitation, the purchase from,
sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate), except in the ordinary
course of and pursuant to the reasonable requirements of the
Company's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Company or such
Subsidiary than would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate; provided
that notwithstanding the foregoing, ORBCOMM and ORBCOMM USA
may guarantee the Non-Recourse ORBCOMM Debt upon the terms and
conditions contemplated by this Agreement."
-3-
<PAGE> 5
Section 1.5. Section 8.1 of the Note Agreement shall be and is
hereby amended as follows:
(a) The definition of "Indebtedness" shall be and is
hereby amended in its entirety to read as follows:
"Indebtedness" of any Person shall mean and include
all obligations of such Person which in accordance with GAAP
shall be classified upon a balance sheet of such Person as
liabilities of such Person, and in any event shall include all
(a) obligations of such Person for borrowed money or which
have been incurred in connection with the acquisition of
property or assets, (b) obligations secured by any Lien upon
property or assets owned by such Person, even though such
Person has not assumed or become liable for the payment of
such obligations, (c) obligations created or arising under any
conditional sale or other title retention agreement with
respect to property acquired by such Person, notwithstanding
the fact that the rights and remedies of the seller, lender or
lessor under such agreement in the event of default are
limited to repossession or sale of property, (d) Capitalized
Rentals and (e) Guaranties of obligations of others of the
character referred to in this definition; provided that, the
foregoing shall not include the Non-Recourse ORBCOMM Debt."
(b) The definition of "Reinvestment Rate" contained
within the definition of "Make Whole Amount" shall be and is hereby
amended in its entirety to read as follows:
""Reinvestment Rate" shall mean (1) the sum of 1.50%, plus
the yield reported on page "USD" of the Bloomberg Financial
Markets Services Screen (or, if not available, any other
nationally recognized trading screen reporting on-line
intraday trading in the United States government Securities)
at 11:00 A.M. (New York, New York time) for the United States
government Securities having a maturity (rounded to the
nearest month) corresponding to the remaining Weighted Average
Life to Maturity of the principal of the Notes being prepaid
or paid (taking into account the application of such
prepayment and payments required by Section 2.1) or (2) in the
event that no nationally recognized trading screen reporting
on-line intraday trading in the United States government
Securities is available, Reinvestment Rate shall mean the sum
of 1.50%, plus the arithmetic mean of the yields for the two
columns under the heading "Week Ending" published in the
Statistical Release under the caption "Treasury Constant
Maturities" for the maturity (rounded to the nearest month)
corresponding to the Weighted Average Life to Maturity of the
principal of the Notes being prepaid or paid (taking into
account the application of such prepayment payments required
by Section 2.1). If no maturity exactly corresponds to such
Weighted Average Life to Maturity, yields for the two
published maturities most closely corresponding to such
Weighted Average Life to Maturity shall be
-4-
<PAGE> 6
calculated pursuant to the immediately preceding sentence and
the Reinvestment Rate shall be interpolated or extrapolated
from such yields on a straight-line basis, rounding in each of
such relevant periods to the nearest month. For the purposes
of calculating the "Reinvestment Rate", the most recent
Statistical Release published prior to the date of
determination of the Make-Whole Amount shall be used.":
(c) The following definition of "Non-Recourse ORBCOMM
Debt" shall be added thereto in alphabetical order:
"Non-Recourse ORBCOMM Debt" shall mean Indebtedness
evidenced by the guarantee of ORBCOMM and ORBCOMM USA of the
Indebtedness for borrowed money of ORBCOMM Partnership and
ORBCOMM Capital not to exceed $170,00,0000 in aggregate
principal amount, the proceeds of which shall be used to
finance the design, development, construction, integration,
testing and operation of the satellite-based two-way data and
messaging communications of ORBCOMM Partnership, provided that
recourse for payment of such Indebtedness for borrowed money
is expressly limited to the assets and revenues of ORBCOMM,
ORBCOMM USA, ORBCOMM Partnership, ORBCOMM Capital and the
subsidiaries thereof, and provided, further, that with respect
to such Indebtedness for borrowed money neither the Company
nor any other Subsidiary (other than ORBCOMM and ORBCOMM USA),
nor any of the property or assets of the Company or any
Subsidiary (other than ORBCOMM and ORBCOMM USA) is directly or
indirectly liable in any manner whatsoever for the payment
thereof."
(d) The definition of "ORBCOMM Development" shall be and
is hereby deleted therefrom and the following definition of "ORBCOMM
Partnership" shall be added thereto in alphabetical order:
"ORBCOMM Partnership" shall mean ORBCOMM Global,
L.P., a Delaware limited partnership.
(e) The following definition of "ORBCOMM Capital" shall
be added thereto in alphabetical order:
"ORBCOMM Capital" shall mean ORBCOMM Global Capital
Corp., a Delaware corporation.
(f) The following definition of "ORBCOMM USA" shall be
added hereto in alphabetical order:
-5-
<PAGE> 7
"ORBCOMM USA" shall mean ORBCOMM USA, L.P., a
Delaware limited partnership.
Section 2. Waiver.
Section 2.1. Upon and by virtue of this Third Amendment becoming
effective on the Effective Date, the failure of the Company to comply with the
provisions of Section 5.9 (Priority Funded Debt Ratio) of the Note Agreement
for the period from and including January 1, 1996 through and including June
30, 1996, which failure constitutes an Event of Default under the Note
Agreements, shall be deemed to have been waived by the Purchaser. The Company
understands and agrees that the waiver contained in this 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
Third Amendment, the Company represents and warrants to the Purchaser (which
representations shall survive the execution and delivery of this Third
Amendment) that:
(a) this Third Amendment has been duly authorized,
executed and delivered by it and this Third 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 Third
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 Third 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 3.1(C); and
-6-
<PAGE> 8
(d) as of the date hereof and after giving effect to this
Third Amendment, no Default or Event of Default has occurred which is
continuing.
Section 4. Conditions to Effectiveness of Third Amendment.
Section 4.1. This Third Amendment shall not become effective
until, and shall become effective when, each and every one of the following
conditions shall have been satisfied:
(a) executed counterparts of this Third Amendment, duly
executed by the Company and the Purchaser, shall have been delivered
to the Purchaser;
(b) the Purchaser shall have received a new Note in the
form of Exhibit A hereto duly executed by the appropriate officer of
the Company which reflects the amendment to the interest rate set
forth in Section 1.1 hereof;
(c) the representations and warranties of the Company set
forth in Section 2 hereof shall be true and correct on and with
respect to the date hereof; and
(d) that certain Indenture dated as of August 7, 1996
between ORBCOMM Global, L.P. and ORBCOMM Global Capital Corp., as
issuers, Orbital Communications Corporation, Teleglobe Mobile
Partners, ORBCOMM USA, L.P. and ORBCOMM International Partners, L.P.,
as guarantors, and Marine Midland Bank, N.A., as trustee, shall be in
form and substance satisfactory to you and your special counsel and
you shall have received a true, correct and complete copy thereof.
Upon receipt of all of the foregoing, this Third Amendment shall on the
Effective Date become effective.
Section 5. Miscellaneous.
Section 5.1. Except as modified and expressly amended by this
Third 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 5.2. The Company agrees to pay all reasonable fees and
expenses of the Purchaser and its special counsel in connection with the
preparation of this Third Amendment.
Section 5.3. Any and all notices, requests, certificates and
other instruments executed and delivered after the execution and delivery of
this Third Amendment may refer to the Note Agreement without making specific
reference to this Third Amendment but nevertheless all such references shall
include this Third Amendment unless the context otherwise requires.
-7-
<PAGE> 9
Section 5.4. This Third Amendment shall be governed by and
construed in accordance with the laws of the State of Illinois.
Section 5.5. This Third Amendment may be executed and delivered
in any number of counterparts, each of such counterparts constituting an
original, but all together only one Third Amendment.
-8-
<PAGE> 10
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/ Jeffrey V. Pirone
------------------------------------
Vice President
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<PAGE> 11
Accepted and Agreed to:
The Northwestern Mutual Life
Insurance Company
By /s/ Steven Swanson
-------------------------------------
Vice President
-10-
<PAGE> 12
ORBITAL SCIENCES CORPORATION
11.50% Senior Note
Due June 14, 2001
No. R-2 June 14, 1996
$20,000,000
Orbital Sciences Corporation, a Delaware corporation (the "Company"),
for value received, hereby promises to pay to
The Northwestern Mutual Life Insurance Company
or registered assigns
on the fourteenth day of June, 2001
the principal amount of
Twenty Million Dollars ($20,000,000)
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at
the rate of 11.50% per annum from the date hereof until maturity, payable
semiannually on the fourteenth of June and December in each year (commencing on
December 14, 1995) and at maturity. The Company agrees to pay interest on
overdue principal (including any overdue required or optional prepayment of
principal) and premium, if any, and (to the extent legally enforceable) on any
overdue installment of interest, at the rate Overdue Rate after the due date,
whether by acceleration or otherwise, until paid. "Overdue Rate" shall mean
the lesser of (a) the maximum interest rate permitted by law and (b) the
greater of (1) 13.50% per annum and (2) the rate which Morgan Guaranty Trust
Company of New York, New York City, New York, announces from time to time as
its prime lending rate as in effect from time to time, plus 2%.
Both the principal hereof and interest hereon are payable at the
principal office of the Company in Dulles, Virginia in coin or currency of the
United States of America which at the time of payment shall be legal tender for
the payment of public and private debts. If any amount of principal, premium,
if any, or interest on or in respect of this Note becomes due and payable on
any date which is not a Business Day, such amount shall be payable on the
immediately preceding Business Day. "Business Day" means any day other than a
Saturday, Sunday or other day on which banks in Dulles, Virginia or New York,
New York are required by law to close or are customarily closed.
EXHIBIT A
(to Third Amendment)
<PAGE> 13
This Note is one of the 11.50% Senior Notes due June 14, 2001 (the
"Notes") of the Company in the aggregate principal amount of $20,000,000 issued
or to be issued under and pursuant to the terms and provisions of the Note
Agreement dated as of June 1, 1995 as amended by the First Amendment dated as
of June 1, 1995, the Second Amendment dated as of March 15, 1996, and the Third
Amendment dated as of July 31, 1996 (collectively, the "Note Agreement"),
entered into by the Company with the original Purchaser therein referred to and
this Note and the holder hereof are entitled equally and ratably with the
holders of all other Notes outstanding under the Note Agreement to all the
benefits provided for thereby or referred to therein. Reference is hereby made
to the Note Agreement for a statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreement may
be declared due prior to their expressed maturity date and certain prepayments
are required to be made thereon, all in the events, on the terms and in the
manner and amounts as provided in the Note Agreement.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreement.
This Note is registered on the books of the Company and is
transferable only by surrender thereof at the principal office of the Company
duly endorsed or accompanied by a written instrument of transfer duly executed
by the registered holder of this Note or its attorney duly authorized in
writing. Payment of or on account of principal, premium, if any, and interest
on this Note shall be made only to or upon the order in writing of the
registered holder.
This Note and said Note Agreement are governed by and construed in
accordance with the laws of Illinois, including all matters of construction,
validity and performance.
Orbital Sciences Corporation
By
--------------------------------
Its
--------------------------------
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<PAGE> 1
Exhibit 10.3
MAGELLAN CORPORATION
1996 STOCK OPTION PLAN
ARTICLE I
PURPOSE OF PLAN
The purpose of this 1996 Stock Option Plan is to promote the growth
and profitability of Magellan Corporation by providing, through the ownership
of Shares, incentives to attract and retain highly talented persons to provide
managerial and administrative services to the Company or other entities in
which the Company has a significant interest and to motivate such persons to
use their best effort on behalf of the Company.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following terms shall have the
meanings set forth in this Article II:
2.1. Accrued Installment. The term "Accrued Installment" shall
mean any vested installment of an Option.
2.2. Board. The term "Board" shall mean the Board of Directors of
the Company.
2.3. Committee. The term "Committee" shall mean a committee
appointed by the Board pursuant to Section 3.3 and consisting of at least two
members.
2.4. Company. The term "Company" shall mean Magellan Corporation,
a Delaware corporation (currently doing business as "Magellan Systems
Corporation"), or any successor thereof.
2.5. Director. The term "Director" shall mean a member of the
Board, or a member of the board of directors of any Participating Company.
2.6. 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.
2.7. Effective Date. The term "Effective Date" shall mean June 20,
1996, the date of adoption by the Board.
2.8. Eligible Person. The term "Eligible Person" shall mean any
employee, officer, consultant or advisor of any Participating Company, but
shall not include any Director of any Participating Company who is not also an
employee, officer, consultant or advisor of a Participating Company.
<PAGE> 2
2.9. Entitled Holder. The term "Entitled Holder" shall mean any
Optionee or any transferee thereof described in clause (ii) or (iii) of Section
6.7(a).
2.10. Exchange Act. The term "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended from time to time.
2.11. Fair Market Value. The term "Fair Market Value" shall mean
the closing sale price of a Share on the national securities exchange on which
Shares are then principally traded or, if that measure of price is not
available, on a composite index of such exchanges or, if that measure of price
is not available, in a national market system for securities on the date in
question. In the event that there are no sales of Shares on any such exchange
or market on such date, the fair market value of a Share shall be deemed to be
the closing sales price on the next preceding day on which Shares were sold on
any such exchange or market. In the event that such Shares are not listed on
any such market or exchange on such date, a valuation of the fair market value
of a Share shall be made by the Board after considering a recommendation of
Fair Market Value (or range thereof), which recommendation shall have been made
no more than one year prior to the Board's determination and shall have been
made by an independent appraiser or other appropriate financial professional
selected by the Board in its sole discretion and reasonably believed to be
competent to make such determination; provided, however, that at any time when
at least a majority of the voting power of the Company's capital stock is
beneficially owned by Orbital, any such determination of Fair Market Value
shall only be effective upon the approval of the Audit and Finance Committee of
the Board of Directors of Orbital, which approval shall not be unreasonably
withheld. Any determination of Fair Market Value made in accordance with this
Section 2.11 shall be conclusive and binding on the Company and all Optionees
and/or holders of Shares. In each case, Fair Market Value shall be determined
in a manner consistent with Section 260.140.50 of Title 10 of the California
Code of Regulations.
2.12. I.R.C. The term "I.R.C." shall mean the Internal Revenue Code
of 1986, as amended from time to time.
2.13. 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.
2.14. Nonstatutory Stock Option. The term "Nonstatutory Stock
Option" shall mean any Option not intended to qualify as an Incentive Stock
Option.
2.15. Option. The term "Option" shall mean an option to acquire
Shares granted under the Plan.
2.16. Option Shares. The term "Option Shares" shall mean, at any
time, all shares acquired upon exercise of Options and then held by Optionees.
2
<PAGE> 3
2.17. Optionee. The term "Optionee" shall mean an Eligible Person
who has been granted Options.
2.18. Orbital. The term "Orbital" shall mean Orbital Sciences
Corporation, a Delaware corporation, or any successor thereof.
2.19. Orbital Common Stock. The term "Orbital Common Stock" shall
mean the common stock, $0.01 par value per share, of Orbital.
2.20. Parent Corporation. The term "Parent Corporation" shall mean
a "parent corporation" as defined in I.R.C. Section 424(e) and any partnership
or other entity that, if it were a corporation, would be a "parent corporation"
as defined in I.R.C. Section 424(e).
2.21. Participating Company. The term "Participating Company" shall
mean the Company, any Parent Corporation of the Company, and any Subsidiary
Corporation of the Company or its Parent Corporation.
2.22. Person. The term "person" shall mean an individual,
corporation, partnership, association or other person or entity, or any group
of two or more of the foregoing that have agreed to act together.
2.23. Plan. The term "Plan" shall mean this 1996 Stock Option Plan.
2.24. Registration Expenses. The term "Registration Expenses" shall
mean all expenses incident to performance of or compliance with Sections 8.5
and 8.6 hereof by the Company and its subsidiaries including, without
limitation, all registration and filing fees, all fees and expenses of
complying with securities or blue sky laws, all printing expenses, all
messenger and delivery expenses, the fees and disbursements of counsel for the
Company and of its independent public accountants, including the expenses of
any special audits required by or incident to such performance and compliance,
and the fees and disbursements of counsel for the holders on whose behalf
Registrable Securities are being registered, but excluding (a) any allocation
of salaries of personnel of the Company and its subsidiaries or other general
overhead expenses of the Company and its subsidiaries or other expenses for the
preparation of financial statements or other data normally prepared by the
Company and its subsidiaries in the ordinary course of their business, which
shall be borne by the Company in all cases, and (b) underwriting discounts and
commissions and applicable transfer taxes, if any.
2.25. Required Holders. The term "Required Holders" shall mean, in
connection with any request for registration pursuant to Section 8.5, the
holders of Options or Option Shares that in the aggregate represent, as of the
date of the Company's notice given pursuant to Section 8.5, at least twenty
percent (20%) of the sum of (a) the Option Shares and (b) the Shares issuable
pursuant to then exercisable Options.
2.26. Restricted Shareholder. The term "Restricted Shareholder"
shall mean an Optionee granted an Incentive Stock Option who, at the time the
Incentive Stock Option is
3
<PAGE> 4
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).
2.27. Securities Act. The term "Securities Act" shall mean the
Securities Act of 1933, as amended from time to time.
2.28. 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.
2.29. Subsidiary Corporation. The term "Subsidiary Corporation"
shall mean a "subsidiary corporation" as defined in I.R.C. Section 424(f) and
any partnership or other entity that, if it were a corporation, would be a
"subsidiary corporation" as defined in I.R.C. Section 424(f).
2.30. 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.
2.31. Termination Date. The term "Termination Date" shall mean the
tenth anniversary of the Effective Date or, if earlier, the tenth anniversary
of the date the Plan is adopted by the Board.
ARTICLE III
ADMINISTRATION OF PLAN
3.1. Administration by Board. Subject to Section 3.3, the Plan
shall be administered by the Board, which shall have authority to do everything
necessary or appropriate to administer the Plan. The Board shall have full and
absolute power and authority in its sole discretion to (a) determine which
Eligible Persons shall receive Options; (b) determine the time when Options
shall be granted; (c) determine the terms and conditions, not inconsistent with
the provisions of this Plan, of any Option granted hereunder, including whether
such Option is an Incentive Stock Option or a Nonstatutory Stock Option (except
that Incentive Stock Options may not be granted to any Eligible Person that is
not an employee or officer of the Company, any Parent Corporation
4
<PAGE> 5
of the Company or any Subsidiary Corporation of the Company or its Parent
Corporation); (d) determine the number of Shares that may be issued upon
exercise of the Options; and (e) interpret the provisions of this Plan and of
any Option. At any time when at least a majority of the voting power of the
Company's capital stock is beneficially owned by Orbital, prior to each grant
of an Option and each other action taken with respect to the Plan (other than a
determination of Fair Market Value) the Board shall consult with the Human
Resources and Nominating Committee of Orbital's Board of Directors (except to
the extent otherwise authorized by such Human Resources and Nominating
Committee) with respect to such intended grant or other action.
3.2. Binding Authority. All decisions, determinations,
interpretations or other actions by the Board shall be final, conclusive and
binding on all Eligible Persons, Optionees, Participating Companies and any
successors-in-interest to such parties.
3.3. Administration by Committee. The Board may appoint a
Committee to administer the Plan and exercise all of the powers, authority and
discretion of the Board under the Plan, other than the power and authority to
amend and terminate the Plan under Section 7.1. 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. The Committee shall report to the Board the names of Eligible
Persons granted Options, the number of Shares covered by each Option, and the
terms and conditions of each such Option.
ARTICLE IV
NUMBER OF SHARES AVAILABLE FOR GRANT
Subject to the following provisions of this Article IV, the maximum
aggregate number of Shares which may be optioned and sold under the Plan is
7,000,000. 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 hereunder. In the event that Shares that were previously
issued by the Company, upon exercise of an Option, are reacquired by the
Company as part of the consideration received (in accordance with Section 6.5
hereof) upon the subsequent exercise of an Option or pursuant to Sections 8.3
and 8.4 hereof, such reacquired Shares shall again be available for the
granting of Options hereunder.
ARTICLE V
TERM OF PLAN
The Plan shall become effective upon adoption by the Board, subject to
approval of the Plan on or before the first anniversary of the Effective Date
by the holders of a majority of the outstanding Shares. No option granted
prior to such approval shall be exercisable prior to such approval. The Plan
shall remain in full force and effect until the later of the Termination Date
or the date on which no Options are outstanding; provided, however, that no
Option may be granted
5
<PAGE> 6
hereunder after the Termination Date; and provided, further, that except as
provided therein the provisions of Section 8 shall not terminate prior to the
first anniversary of the date on which no Options are outstanding.
ARTICLE VI
OPTION TERMS
6.1. Form of Option Agreement. Any Option granted under the Plan
shall be evidenced by an agreement ("Option Agreement") in the form attached
hereto as Exhibit A (for an Incentive Stock Option) or Exhibit B (for a
Nonstatutory Stock Option) or in such other form as the Board, in its
discretion, may, from time to time, approve. Any Option Agreement shall
contain such terms and conditions as the Board may deem necessary or
appropriate and that are not inconsistent with the provisions of the Plan.
6.2. Option Exercise Price. The option exercise price for Shares
to be issued under this Plan shall be determined by the Board in its sole
discretion, but in no event shall the option exercise price be less than the
Fair Market Value in the case of an Incentive Stock Option or less than
eighty-five percent (85%) of the Fair Market Value in the case of a
Nonstatutory Stock Option (or one hundred and ten percent (110%) of the Fair
Market Value in the case of an Option granted to a Restricted Shareholder).
6.3. Vesting and Exercise of Options. Subject to the limitations
set forth herein and/or in any applicable Option Agreement entered into
hereunder, Options shall vest and be exercisable in accordance with the rules
set forth in this Section 6.3:
(a) General. Subject to the other provisions of this
Section 6.3, Options shall vest and become exercisable at such time and in such
installments as the Board shall provide in each individual Option Agreement;
provided, however, that each Option shall vest at a rate at least equal to 20%
per year commencing on the date of grant. Unless otherwise provided in this
Section 6.3, in Section 6.4 or in the Option Agreement pursuant to which an
Option is granted, an Option may be exercised when Accrued Installments accrue
as provided in such Option Agreement and at any time thereafter until, and
including, the day before the Option Termination Date.
(b) Termination of Options. All installments of an
Option shall expire and terminate on such date as the Board shall determine
("Option Termination Date"), which in no event shall be later than ten (10)
years from the date such Option was granted (five (5) years in the case of an
Incentive Stock Option granted to a Restricted Shareholder).
(c) Termination of Employment Other than by Death,
Retirement or Disability. In the event that the employment of an Optionee with
a Participating Company is terminated for any reason (other than by death,
disability, retirement on or after reaching age 60 or an Affiliation
Termination (as defined in paragraph (f) below), 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
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<PAGE> 7
employment termination date shall expire and become unexercisable as of the
earlier of (i) three (3) months following the employment termination date; or
(ii) the original Option Termination Date. For purposes of the Plan, an
Optionee who is an employee or officer of any Participating Company shall not
be deemed to have incurred a termination of his employment so long as such
Optionee is an employee or officer of any Participating Company.
(d) Leave of Absence. An approved leave of absence shall
not constitute a termination of employment under the Plan. An approved leave of
absence shall mean an absence approved pursuant to the policy of a
Participating Company for military leave, sick leave, or other bona fide leave,
not to exceed ninety (90) days or, if longer, as long as the employee's right
to re-employment is guaranteed by contract, statute or the policy of a
Participating Company.
(e) Death, Disability or Retirement of Optionee. In the
event that the employment of an Optionee with a Participating Company is
terminated by reason of death, disability, or retirement on or after reaching
age sixty (60), any unexercised Accrued Installments of Options granted
hereunder to such Optionee shall expire and become unexercisable as of the
earlier of (i) the applicable Option Termination Date; or (ii) the first
anniversary of the date of termination of employment of such Optionee by reason
of the Optionee's death, disability or retirement. Any such Accrued
Installments of a deceased Optionee may be exercised prior to their expiration
only by the person or persons to whom the Optionee's Option rights pass by will
or the laws of descent and distribution. Any Option installments under such a
deceased, disabled or retired Optionee's Option that have not accrued as of the
date of the employee's termination of employment due to death, disability or
retirement shall expire and become unexercisable as of the employment
termination date.
(f) Affiliation Termination. 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, 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 effective date of the Affiliation Termination. Any Option
installments held by such Optionee that have not accrued as of the effective
date of such Affiliation Termination shall expire and become unexercisable as
of such effective date. As used herein, the term "Affiliation Termination"
shall mean, with respect to a Participating Company, the termination of such
Participating Company's status as a Parent Corporation of the Company or as a
Subsidiary Corporation of the Company or its Parent Corporation.
6.4. Exercise of Options. An Option may be exercised as to all or
any portion of the Shares covered by an Accrued Installment of the Option, from
time to time during the applicable option period, except that an Option shall
not be exercisable with respect to fractions of a Share. Options may be
exercised, in whole or in part, by giving written notice of exercise to the
Company, which notice shall specify the number of Shares to be purchased and
shall be accompanied by payment in full of the purchase price in accordance
with Section 6.5. An Option shall be deemed exercised when such written notice
of exercise and payment have been received by the Company. No Shares shall be
issued until full payment has been made and the Optionee
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<PAGE> 8
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 6.8(a).
6.5. Payment of Option Exercise Price. The entire option exercise
price shall be paid at the time the Option is exercised by check or such other
means as is deemed acceptable by the Board. Notwithstanding the foregoing, in
the discretion of the Board (which, in the case of an Incentive Stock Option,
shall be exercised only at the time of grant), an Optionee may elect to pay for
all or some of the Optionee's Shares with Shares the Optionee has held for at
least six (6) months (or, at any time when at least a majority of the voting
power of the Company's capital stock is owned by Orbital, shares of Orbital
Common Stock), subject to all restrictions and limitations of applicable laws,
rules and regulations and subject to the satisfaction of any conditions the
Board may impose, including, but not limited to, the making of such
representations and warranties and the providing of such other assurances that
the Board may require with respect to the Optionee's title to the Shares used
for payment of the exercise price. Such payment shall be made by delivery of
certificates representing Shares (or Orbital Common Stock), duly endorsed or
with a duly signed stock power attached, such Shares (or Orbital Common Stock)
to be valued at the Fair Market Value of such Shares (or Orbital Common Stock)
on the day immediately preceding the day notice of exercise is received by the
Company.
6.6. Options Not Transferable. Options granted under this Plan may
not be sold, pledged, hypothecated, assigned, encumbered, gifted or otherwise
transferred or alienated in any manner, whether voluntarily, by operation of
law, pursuant to judicial process or otherwise, other than by will or the laws
of descent and distribution or pursuant to a qualified domestic relations
order, as defined under the I.R.C., and may be exercised during the lifetime of
an Optionee only by such Optionee. The person to whom the Option is granted
may, by delivering written notice to the Company in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionee, shall thereafter be entitled to exercise the Option.
6.7. Restrictions on Issuance or Transfer of Shares.
(a) Until such time as the Shares are registered under
the Exchange Act, no Shares issuable upon exercise of an Option shall be sold,
assigned, encumbered, pledged, hypothecated, given away or in any other manner
disposed of or transferred, whether voluntarily, by operation of law, pursuant
to judicial process or otherwise, except (i) to the Company pursuant to Section
8.4 hereof, (ii) pursuant to a qualified domestic relations order, as defined
under the I.R.C., or (iii) upon the death of the holder thereof, Shares may be
transferred and distributed by will or other instrument taking effect at death
or by the laws of descent and distribution to such holder's estate, executors,
administrators and personal representatives, and then to such holder's heirs,
legatees or distributees, provided that no such transfer shall be effective
until the recipient has delivered to the Company a written acknowledgment in
form and substance reasonably satisfactory to the Company that such Shares are
subject to the restrictions on disposition or
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<PAGE> 9
transfer set forth in this Section 6.7(a). Any attempted transfer of Shares
not in accordance with this Section 6.7(a) shall be null and void, and the
Company shall not in any way give effect to any such disposition or transfer.
(b) The Company shall use all reasonable efforts to
obtain all required permits, authorizations and approvals necessary for the
lawful issuance and sale of Shares hereunder. However, no Shares shall be
issued or delivered upon exercise of an Option unless there shall have been
compliance with all applicable requirements of the Securities Act, all
applicable listing or quotation requirements of any national securities
exchange or market on which Shares are then listed or quoted, and any other
requirement of law or of any regulatory body having jurisdiction over such
issuance and delivery. The inability of the Company to obtain any required
permits, authorizations or approvals necessary for the lawful issuance and sale
of any Shares hereunder on terms deemed reasonable by the Board shall relieve
the Company, the Board and any Committee of any liability in respect of the
non-issuance or sale of such Shares for so long as such requisite permits,
authorizations or approvals shall not have been obtained.
(c) As a condition to the granting or exercise of any
Option, the Board may require the person receiving or exercising such Option to
make any representation and/or warranty to the Company as may be required under
any applicable law or regulation, including, but not limited to, a
representation that the Option and/or Shares are being acquired only for
investment and without any present intention to sell or distribute such Option
and/or Shares, if such a representation is required under the Securities Act or
any other applicable law, rule or regulation.
(d) The exercise of Options under the Plan is conditioned
on approval of the Plan by the vote or written consent of a majority of the
holders of outstanding Shares of the Company's Common Stock within twelve (12)
months of the adoption of the Plan. In the event such stockholder approval is
not obtained within such time period, any Options granted hereunder shall be
void.
6.8. Option Adjustments.
(a) If the outstanding Shares are increased, decreased,
changed into or exchanged for a different number or kind of shares of the
Company through reorganization, recapitalization, reclassification, stock
dividend, stock split or reverse stock split or other similar transaction, the
Board shall make a proportionate adjustment in the number or kind of shares and
the per-share option price thereof that may be issued in the aggregate and to
individual Optionees upon exercise of Options granted under the Plan; provided,
however, that no such adjustment need be made if, upon the advice of counsel,
the Board determines that such adjustment may result in the receipt of
federally taxable income to holders of Options granted hereunder or the holders
of Shares or other classes of the Company's securities.
(b) Upon the occurrence of a Terminating Transaction, as
of the effective date of such Terminating Transaction, the Plan and any then
outstanding Options not exercised prior to the effectiveness of such
Terminating Transaction (whether or not vested) shall terminate unless
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(i) provision then is made in writing in connection with such transaction for
the continuance of the Plan and for the assumption of such Options, or for the
substitution for such Options of new options covering the securities of any
successor or survivor corporation in the Terminating Transaction or an
affiliate thereof, with such adjustments as the Board deems appropriate with
respect to the number and kind of securities and the per-share exercise price
under such substituted options, in which event the Plan and such outstanding
Options shall continue or be replaced, as the case may be, in the manner and
under the terms so provided; or (ii) the Board then otherwise provides in
writing for such adjustments as it deems appropriate in the terms and
conditions of the then outstanding Options (whether or not vested), including,
without limitation, (A) accelerating the vesting of outstanding Options (to the
extent not prohibited by Section 260.140.41 of Title 10 of the California Code
of Regulations) and/or (B) providing for the cancellation of Options and their
automatic conversion into the right to receive the securities or other
properties which a holder of Shares underlying such Options would have been
entitled to receive upon the consummation of such Terminating Transaction had
such Shares been issued and outstanding (net of the appropriate option exercise
prices). If, pursuant to the foregoing provisions of this paragraph (b), the
Plan and the Options shall terminate by reason of the occurrence of a
Terminating Transaction without provision for any of the action(s) described in
clause (i) and/or (ii) hereof, then any Optionee holding outstanding Options
shall have the right, at such time immediately prior to the consummation of the
Terminating Transaction as the Board shall designate, to exercise their Options
to the full extent not theretofore exercised, including (to the extent not
prohibited by Section 260.140.41 of Title 10 of the California Code of
Regulations) any installments which have not yet become Accrued Installments.
(c) Except to the extent required in order to retain the
qualification of an Option as an Incentive Stock Option under I.R.C. Section
422, to the maximum extent possible, any adjustments authorized under this
Section 6.8 with respect to any outstanding Options shall be made by means of
appropriate adjustments to the number of Shares (or other securities) and the
option exercise price therefor under the unexercised portions of such
outstanding Options, but without changing the aggregate exercise price
applicable to said unexercised portions. In all cases, the nature and extent
of adjustments under this Section 6.8 shall be determined by the Board in its
sole discretion, and any such determination as to what adjustments shall be
made, and the extent thereof, shall be final and binding. No fractional shares
of stock shall be issued under the Plan pursuant to any such adjustment.
6.9. Taxes. The Board shall make such provisions and take such
steps as it deems necessary or appropriate for the withholding of any federal,
state, local and other tax required by law to be withheld with respect to the
grant or exercise of an Option, or with respect to the disposition of Shares
acquired pursuant to the exercise of an Option, including, but without
limitation, the deduction of the amount of any such withholding tax from any
compensation or other amounts payable to an Optionee by any Participating
Company, or requiring an Optionee (or the Optionee's beneficiary or legal
representative), as a condition of granting or exercising an Option, to pay any
member of the Participating Companies any amount required to be withheld, or to
execute such other documents as the Board deems necessary or desirable in
connection with the satisfaction of any applicable withholding obligation;
provided, however, that the Optionee may elect, at such time and in such manner
as the Board may prescribe, to satisfy such
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withholding obligation by (i) delivering to the Company Shares owned by such
individual having a Fair Market Value equal to such withholding obligation, or
(ii) requesting that the Company withhold from the Shares to be delivered upon
the exercise a number of Shares having a Fair Market Value equal to such
withholding obligation.
6.10. Legends on Options and Stock Certificates. Each Option
Agreement and each certificate representing Shares acquired upon exercise of an
Option shall be endorsed with all legends, if any, required by applicable
federal and state securities laws to be placed on the Option Agreement and/or
the certificate, as well as legends setting forth the restrictions contained in
Section 6.7 hereof. The determination of which legends, if any, shall be
placed upon Stock Option Agreements and/or said Shares shall be made by the
Board in its sole discretion, and such decision shall be final and binding.
6.11. Employment Rights. Neither the adoption of the Plan nor the
grant of Options will confer upon any person any right to continued employment
with 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.
ARTICLE VII
AMENDMENT OR TERMINATION OF PLAN
7.1. Board Authority. The Board may amend, alter and/or terminate
the Plan at any time; provided, however, that no change shall be effective
unless approved by the stockholders of the Company if such change would cause
the Option Plan to fail to meet the qualification requirements for Incentive
Stock Option Plans as set forth in the Internal Revenue Code 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.
7.2. Limitation on Board Authority. The Board may amend the terms
of any Option previously granted, prospectively or retroactively, and may amend
the Plan in accordance with the provisions of Section 7.1; provided, however,
that unless required by applicable law, rule or regulation, no amendment of the
Plan or of any Option Agreement shall affect, in a material and adverse manner,
Options granted prior to the date of any such amendment without the written
consent of any Optionee holding any such affected Options.
7.3. Substitution of Options. In the Board's discretion, the Board
may, with an Optionee's written consent, substitute Nonstatutory Stock Options
for outstanding Incentive Stock Options, and any such substitution shall not
constitute a new Option grant for the purposes of the Plan, and shall not
require a revaluation of the Option exercise price for the substituted Option.
Any such substitution may be implemented by an amendment to the applicable
Option Agreement or in such other manner as the Board in its discretion may
determine.
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ARTICLE VIII
PURCHASE OR REGISTRATION OF OPTION SHARES
8.1. General. Until such time as the Shares are registered under
the Exchange Act, each Optionee may elect in the manner provided herein to
cause, at the option of the Company, the Company to (i) purchase any or all
Option Shares that as of the applicable Valuation Date (as hereinafter defined)
have been held by the Optionee at least six (6) months from the date of
exercise of the Option (such Shares, in each year, the "Payable Shares") at a
price per share equal to the Fair Market Value of a Share on October 31, 1997
and each October 31 in subsequent years (each such date is referred to as a
"Valuation Date"), as applicable, or (ii) if requested by the Required Holders,
register under the Securities Act the offer and sale of all Option Shares as to
which registration is requested, in each case as provided in this Section 8.
8.2. Valuation. Within thirty (30) days after each Valuation Date,
the Company shall cause the Fair Market Value of the Shares on such Valuation
Date to be determined in accordance with Section 2.11 and shall notify each
holder of Payable Shares of such Fair Market Value.
8.3. Request for Repurchase or Registration. Within thirty (30)
days after receipt of the notice given under Section 8.2, each such holder of
Shares may request the Company to purchase all or any portion of his or her
Payable Shares at a price per share equal to such Fair Market Value by
submitting to the Company an irrevocable written notice of such request (except
that such notice may be revoked as specifically provided in Section 8.4).
Within ninety (90) days after the Valuation Date the Company shall notify each
requesting holder of Payable Shares (i) that the Company will purchase the
Payable Shares requested to be so purchased (in which case the Company shall in
that notice specify a closing date not more than fifteen days after the giving
of the notice) or (ii) that the Company will, upon the request of the Required
Holders, register the offer and sale of Option Shares under the Securities Act.
8.4. Purchase of Payable Shares. The closing for any purchase of
Payable Shares pursuant to Section 8.3 shall occur on the specified closing
date at the offices of the Company at 11:00 a.m. local time, or at such other
time and place as the parties to such sale may mutually agree. At the closing,
the Optionee shall deliver to the Company a certificate or certificates
representing the Payable Shares to be purchased by the Company, duly endorsed
for transfer, free and clear of any lien or encumbrance, in exchange for
payment of the purchase price (i) by check, (ii) by delivery of certificates
representing shares of Orbital Common Stock that have a Fair Market Value
(determined in the manner provided in Section 2.11) as of the business day
preceding the closing equal to the purchase price of the Shares and that are
freely tradable (i.e., not "restricted securities" within the meaning of Rule
144 under the Securities Act), with payment by check for any amount that would
otherwise be paid by a fractional share, (iii) by delivery of a subordinated
promissory note of the Company in the principal amount of the purchase price of
the Payable Shares, bearing interest at a fixed rate equal to the then
applicable prime rate (as published in The Wall Street Journal) plus three
percent (3.0%), providing for quarterly payments of interest and payment of the
full principal amount on the first anniversary of the date of issuance, and
containing provisions as approved by the Board in its sole discretion providing
for the subordination of such notes to such indebtedness, whether then existing
or thereafter created,
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of the Company as is specified by the Board, including without limitation
indebtedness for money borrowed or similar indebtedness, or (iv) any
combination of the foregoing; provided, however, that no part of the purchase
price for the Payable Shares may be paid by subordinated promissory note unless
the Board determines in good faith that payment in cash or Orbital Common Stock
would adversely affect the financial condition or liquidity of the Company or
adversely affect Orbital (including without limitation because of a pending or
contemplated offering or other transaction); and provided, further, that if any
portion of the purchase price for the Payable Shares is to be paid by
subordinated promissory note the Optionee may revoke his or her request that
the Payable Shares be purchased in which case the Payable Shares shall remain
held by the Optionee unaffected by the original request. Any payment in
Orbital Common Stock shall be subject to all applicable federal and state
securities laws restrictions and any other applicable legal restrictions.
8.5. Registration of Payable Shares. If the Company elects
pursuant to Section 8.3 not to purchase Payable Shares, the Company shall
simultaneous with the notice given by the Company pursuant to Section 8.3
notify all Entitled Holders that the Company will register the offer and sale
of all Option Shares as to which registration is requested if the Required
Holders notify the Company of their request for such registration within thirty
(30) days of receipt of the Company's notice. If the Company receives notices
of such request (which notices shall specify the intended method of
distribution) from the Required Holders within such thirty (30) day period, the
Company will promptly give written notice of such requested registration and
intended method of distribution to all Entitled Holders and thereupon will use
all reasonable efforts to effect the registration under the Securities Act of
the Option Shares (which may include Shares subject to Options intended to be
exercised in connection with the registered offering) that the Company has been
so requested to register by the original requesting Entitled Holders and by all
other Entitled Holders who shall have so requested within 10 days after the
giving of such written notice by the Company, to the extent requisite to permit
the disposition (in accordance with the intended method thereof specified in
the original request) of the Option Shares so to be registered; provided,
however, that:
(a) the Company may delay the preparation and filing of
any registration requested pursuant to this Section 8.5 to the extent (but only
to the extent) that the request would require the Company to file a
registration statement within 45 days prior to any date as of which the Company
regularly prepares audited financial statements in the ordinary course of its
business, if the preparation thereof would entail material expense on the part
of the Company;
(b) the Company may postpone for a period of up to 90
days the filing or the effectiveness of any registration requested pursuant to
this Section 8.5 if the Board of Directors of the Company in good faith
determines that such registration is likely to have an adverse effect on any
plan or proposal by the Company with respect to any financing, acquisition,
recapitalization, reorganization or other material transaction; provided,
however, that the Company may not exercise such right of postponement more
frequently than one time in any one-year period; and
(c) the Company shall not be required to effect any
registration pursuant to this Section 8.5 if the registration statement would
relate to the distribution of Option Shares
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having aggregate gross proceeds (based on the mid-point of the range of
expected offering prices reflected in the initial registration statement) of
less than $3,000,000.
Each Registration requested pursuant to this Section 8.5 shall be effected by
the filing of a registration statement on Form S-1 (or any other form which
includes substantially the same information as would be required to be included
in a registration statement on such form as presently constituted), unless the
use of a different form has been agreed to in writing by the holders of at
least 66 2/3% of the aggregate principal amount of Option Shares as to which
registration has been requested pursuant to this Section 8.5.
8.6. Registration Procedures. If the Company is required to use
all reasonable efforts to effect the registration of any Option Shares under
the Securities Act as provided in Section 8.5, the Company will:
(a) prepare and file with the Commission as soon as
reasonably practicable, and in any event within 150 days of the Company's
receipt of the request to effect such registration, a registration statement
with respect to such Option Shares and use all reasonable efforts to cause such
registration statement to become effective as soon as practicable;
(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Option Shares covered by
such registration statement until such time as all of such Option Shares have
been disposed of by the seller or the sellers thereof in accordance with the
intended methods of disposition set forth in such registration statement, but
in no event for a period of more than 180 days after such registration
statement becomes effective;
(c) furnish to each seller of such Option Shares such
number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits, except
that the Company shall not be obligated to furnish any such seller with more
than two copies of such exhibits other than incorporated documents), such
number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus) in
conformity with the requirements of the Securities Act, such documents
incorporated by reference in such registration statement or prospectus, and
such other documents, as such seller may reasonably request in order to
facilitate the disposition of its Option Shares covered by such registration
statement;
(d) use all reasonable efforts to register or qualify
such Option Shares under such other securities or blue sky laws of such
jurisdictions as each seller shall reasonably request, and do any and all other
acts and things which may be necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the Option Shares covered
by such registration statement; provided, however, that the Company shall not
for any such purpose be required to (a) qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified, (b)
subject itself to taxation in any such jurisdiction, or (c) consent to general
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service of process in any such jurisdiction, except to the extent the failure
to so register or qualify may have a material adverse effect on such
distribution of Option Shares;
(e) apply for and use all reasonable efforts to obtain
listing of the Shares on The New York Stock Exchange or The American Stock
Exchange or the quotation of the Shares on the Nasdaq National Market and
include in the registered offering of Option Shares such number of primary
Shares as will, when combined with all Option Shares and other secondary Shares
to be offered in the registered offering, result in the Company meeting the
applicable minimum "market value of publicly held shares" (or comparable
successor public float requirement) required for the quotation of the Shares on
the Nasdaq National Market;
(f) if requested by the underwriters for any underwritten
offering of Option Shares pursuant to a registration requested under Section
8.5, enter into an underwriting agreement with such underwriters for such
offering, such agreement to contain such representations and warranties by the
Company and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, indemnity and contribution to the effect and to the extent
provided in Sections 8.7 through 8.10, below;
(g) furnish to each underwriter (if any) for each seller
of such Option Shares a signed counterpart, addressed to such underwriter, of
an appropriate opinion of counsel for the Company covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) as are customarily covered in opinions of issuer's counsel
delivered to underwriters in underwritten public offerings of securities;
(h) immediately notify each seller of Option Shares
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing, and at the request of any such seller prepare and furnish to
such seller a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Option Shares, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing;
(i) give the holders of Option Shares on whose behalf
such Option Shares are to be so registered and their underwriters, if any, and
counsel and accountants designated by the holders of a majority of the Option
Shares to be so registered, the opportunity to participate in the preparation
of such registration statement, each prospectus included therein or filed with
the Commission, and each amendment thereof or supplement thereto, and give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements
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as shall be necessary, in the opinion of such holders and such underwriters or
their respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act;
(j) bear all Registration Expenses in connection with any
registration requested pursuant to Section 8.5; and
(k) otherwise use its best efforts to comply with the
Securities Act, the Exchange Act, and all applicable rules and regulations of
the Securities and Exchange Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first day of the first fiscal quarter after the effective date of such
registration statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act.
8.7. Indemnification by Company. In connection with any
registration under the Securities Act of the offer and sale of any Option
Shares pursuant to Section 8.5 hereof, the Company will, and hereby does,
indemnify and hold harmless each seller of securities, and each other person
who participates on behalf of any such seller as an underwriter, broker or
dealer in any such offering or sale of such securities, against any losses,
claims, damages or liabilities, joint or several, to which any such seller or
participating person may become subject under the Securities Act insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained or incorporated by
reference in any registration statement under which securities were registered
under the Securities Act, any preliminary prospectus or final prospectus
included therein, or any related summary prospectus, or any amendment or
supplement thereto, or any document incorporated by reference therein, or (ii)
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading;
and will reimburse any such seller or participating person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in any registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment, supplement or incorporated document in reliance
upon and in conformity with written information furnished to the Company
through an instrument duly executed by such seller specifically stating that it
is for use in the preparation thereof. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of any
such seller or participating person and shall survive any transfer of
securities by any such seller.
8.8. Indemnification Procedures. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim of the type referred to in Section 8.7 or 8.10, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided
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herein shall not relieve the indemnifying party of its obligations under
Section 8.7 or 8.10, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled
to participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified patty, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof; provided, however, that (i) if
there is a conflict between the positions of such indemnifying party and the
indemnified party in conducting the defense of such action, then counsel for
the indemnified party shall conduct the defense to the extent reasonably
determined by such counsel to be necessary to protect the interests of the
indemnified party and such indemnifying party shall employ separate counsel for
its own defense, (ii) in any event, the indemnified party shall be entitled to
have counsel chosen by such indemnified party participate, at the expense of
such indemnified party, in, but not conduct, the defense, (iii) the
indemnifying party shall bear the legal expenses incurred in connection with
the conduct of, and the participation in, the defense referred to in clause (i)
above and (iv) in no event shall the indemnifying party bear, by virtue of
clause (iii) hereof, the fees and expenses of more than one counsel other than
its own. If within a reasonable time after receipt of the notice, such
indemnifying party shall not have elected to assume the defense of the action,
such indemnifying party shall be responsible for any legal or other expenses
incurred by such indemnified party in connection with the defense of the
action, suit, investigation, inquiry or proceeding. No indemnifying party will
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation, and no indemnified party will enter into any
settlement without the consent of the indemnifying party.
8.9. Contribution. If the indemnification provided for in Section
8.7 or 8.10 is unavailable to a party that would have been an indemnified party
under any such Section in respect of any losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) referred to therein, then each
party that would have been an indemnifying party thereunder shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion
as is appropriate to reflect the relative fault of the indemnifying party on
the one hand and such indemnified party on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions
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or proceedings in respect thereof). The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or such
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company agrees that it would not be just and equitable if contribution
pursuant to this Section 8.9 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the preceding sentence. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 8.9 shall include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
such action or claim (which shall be limited as provided in Section 8.8 hereof
if the indemnifying party has assumed the defense of any such action in
accordance with the provisions thereof). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
8.10. Indemnification of Company. Each of the Entitled Holders
severally (but not jointly) agrees to indemnify and hold harmless the Company,
its directors, each of its officers who sign the registration statement filed
pursuant to Section 8.5, and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act against any and all
loss, liability, claim, damage and expense to which the Company or any such
director, officer or controlling person may become subject under the Securities
Act insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained or
incorporated by reference in the registration statement, preliminary prospectus
or prospectus, or any amendment or supplement thereto, or (ii) any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only with
respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the registration statement, preliminary prospectus or
prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by such Entitled
Holder in its capacity as an Entitled Holder (and not in its capacity as a
director, officer or employee) expressly for use in the registration statement,
preliminary prospectus or prospectus, or any amendment or supplement thereto.
The Company may require, as a condition to including any Option Shares in any
registration statement filed pursuant to Section 8.5, that the Company shall
have received an undertaking satisfactory to it from the prospective seller of
such securities, to indemnify and hold harmless (in the same manner and to the
same extent as set forth in Sections 8.8, 8.9 and 8.10 above, but only to the
extent of any proceeds received by such seller) the Company, each director of
the Company, each officer of the Company who shall sign such registration
statement and each other person, if any, who controls the Company within the
meaning of the Securities Act, with respect to any statement in or omission
from such registration statement, any preliminary prospectus or final
prospectus included therein, or any amendment or supplement thereto, if such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
such seller specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
8.11. Limitations on Repurchase or Registration Obligations.
Notwithstanding any other provision of this Section 8, the Company shall have
no obligations under this Section 8 (i) to the extent the purchase of Payable
Shares would not be permitted under applicable law or under the terms of any of
(A) the then-existing debt instruments (or agreements governing such debt
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instruments) of the Company or any Parent Corporation of the Company, (B) the
then-existing terms of any class of preferred stock of the Company or any
Parent Corporation of the Company, or (C) a then-existing stockholders
agreement to which the Company or any Parent Corporation of the Company is a
party; or (ii) in the event the Shares have been registered under the Exchange
Act; provided, however, that in the event that the Company is requested to
purchase Payable Shares pursuant to Section 8.3 and is unable to do so within
twelve months (other than for the reason described in clause (ii)), upon the
request of the Required Holders the Company shall use all reasonable efforts to
effect the registration under the Securities Act of the offer and sale of
Option Shares in accordance with Section 8.5.
ARTICLE IX
GENERAL PROVISIONS
9.1. Availability of the Plan. A copy of the Plan shall be
delivered to the Secretary of the Company and shall be shown by the Secretary
to any Eligible Person making reasonable inquiry concerning the Plan.
9.2. Notice. Any notice or other communication required or
permitted to be given pursuant to the Plan or under any Option Agreement must
be in writing and may be given by mail and, if given by mail, shall be
determined to have been given and received five (5) days after such letter
containing such notice, properly addressed with postage prepaid, is deposited
in the United States mails and, if given otherwise than by mail, shall be
deemed to have been given when delivered to and received by the party to whom
addressed. Notice shall be given to Eligible Persons at their most recent
addresses shown in the Company's records. Notice to the Company shall be
addressed to the Company at the address of the Company's principal executive
offices, to the attention of the Secretary of the Company.
9.3. Title and Headings. Titles and headings of sections of the
Plan are for convenience of reference only and shall not affect the
construction of any provision of the Plan.
9.4. Governing Law. The Plan shall be governed by, interpreted
under and construed and enforced in accordance with the internal laws, and not
the laws pertaining to conflicts or choice of laws, of the State of Delaware,
applicable to agreements made and to be performed wholly within the State of
Delaware.
9.5. Proceeds. Proceeds from the sale of Shares pursuant to
Options shall constitute general funds of the Company.
9.6. Status of Optionee. Neither an Optionee nor any person to
whom an Option is transferred under Section 6.7 shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Option unless and until such person has satisfied all
requirements for exercise of the Option pursuant to its terms.
9.7. Exculpation. No member of the Board or of the Human Resources
and Nominating Committee or Audit Committee of Orbital shall have any personal
liability to any
19
<PAGE> 20
Optionee and/or holder of Shares for any act or omission in connection with
this Plan (including without limitation any determination of Fair Market
Value), unless the Optionee and/or holder of Shares shall establish that such
determination, act or omission was not made in good faith.
9.8. Lockup Agreements. By its exercise of an Option, the holder
thereof agrees that upon the request of the managing underwriter of any
underwritten public offering of Shares such holder will enter into a "lockup
agreement" with such underwriter in form and substance reasonably satisfactory
to the Company and containing provisions generally preventing the sale of
Shares by such holder for a period beginning no earlier than seven days prior
to filing the registration statement for such offering and ending no later than
90 days (180 days in the case of the Company's initial public offering) after
the effectiveness of such registration statement.
9.9. Financial Statements. Throughout the term of any Option, the
Company shall deliver to the holder of such Option, not later than one hundred
twenty (120) days after the close of each of the Company's fiscal years a
balance sheet and an income statement. This section shall not apply when
Options are held only by key employees whose duties in connection with the
Company assure them access to equivalent information.
20
<PAGE> 21
Exhibit A
IT IS UNLAWFUL TO CONSUMMATE A SALE OR
TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE
COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS
PERMITTED IN THE COMMISSIONER'S RULES.
INCENTIVE STOCK OPTION
________________________, Optionee:
Magellan Corporation (the "Company"), pursuant to its 1996 Stock
Option Plan (the "Plan"), has granted to you, the optionee named above, an
option to purchase shares of the common stock of the Company ("Shares"). This
option is intended to qualify as an "incentive stock option" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's
employees (including officers), directors or consultants and is intended to
comply with the provisions of Rule 701 promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act").
Defined terms not explicitly defined in this agreement but defined in the Plan
shall have the same definitions as in the Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total
number of Shares subject to this option is ________________ (_____).
2. VESTING. Subject to the limitations contained herein, ______
of the Shares subject to this Option will vest (become exercisable) each _____
beginning on _________, 19__ until either (i) you cease to provide services to
the Company for any reason other than an approved leave of absence described
in Section 6.3(d) of the Plan, or (ii) this option becomes fully vested.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
21
<PAGE> 22
(a) EXERCISE PRICE. The exercise price of this option is
_____________ ($_____) per Share, being not less than the Fair Market Value of
a Share on the date of grant of this option.
(b) METHOD OF PAYMENT. Payment of the exercise price per
share is due in full upon exercise of all or any part of each installment that
has accrued to you. You may elect, to the extent permitted by applicable
statutes and regulations, to make payment of the exercise price under one of
the following alternatives:
(i) Payment of the exercise price per share in
cash (including check) at the time of exercise;
(ii) Payment pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board that, prior to the
issuance of Shares, results in either the receipt of cash (or check) by the
Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds;
(iii) Payment by delivery of already-owned Shares,
held for at least six (6) months, or shares of Orbital Common Stock, in each
case owned free and clear of any liens, claims, encumbrances or security
interests, which Shares or shares of Orbital Common Stock shall be valued at
their Fair Market Value on the day immediately preceding the day notice of
exercise is received by the Company; or
(iv) Payment by a combination of the methods of
payment permitted by subparagraphs 3(b)(i) through 3(b)(iii) above.
4. WHOLE SHARES. This option may not be exercised for any number
of Shares that would require the issuance of anything other than whole Shares.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, this option may not be exercised unless the offer
and sale of the Shares issuable upon exercise of this option are then
registered under the Act or, if not then so registered, the Company has
determined that such offer and sale would be exempt from the registration
requirements of the Act.
6. TERM. The term of this option commences on _________, 19__,
the date of grant, and expires on ________________ (the "Expiration Date,"
which date shall be no more than ten (10) years from the date this option is
granted), unless this option expires sooner as set forth below or in the Plan.
In no event may this option be exercised on or after the Expiration Date. In
the event of a Terminating Event, an Affiliation Termination, or the
termination of your employment with the Company or a Participating Company,
this option shall thereafter be exercisable only as provided in the Plan.
7. EXERCISE.
2
<PAGE> 23
(a) This option may be exercised, to the extent specified
herein and in the Plan, by delivering a notice of exercise (in a form
designated by the Company) together with the exercise price to the Secretary of
the Company, or to such other person as the Company may designate, during
regular business hours, together with such additional documents as the Company
may then require pursuant to the Plan.
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any
exercise of this option, the Company may require you to enter an arrangement
providing for the payment by you to the Company of any tax withholding
obligation of the Company arising by reason of (1) the exercise of this option;
(2) the lapse of any substantial risk of forfeiture to which the Shares are
subject at the time of exercise; or (3) the disposition of Shares acquired upon
such exercise. You also agree that any exercise of this option has not been
completed and that the Company is under no obligation to issue any Shares to
you until such an arrangement is established or the Company's tax withholding
obligations are satisfied, as determined by the Company;
(ii) you will notify the Company in writing within
fifteen (15) days after the date of any disposition of any of the Shares issued
upon exercise of this option that occurs within two (2) years after the date of
this option grant or within one (1) year after such Shares are acquired upon
exercise of this option; and
(iii) the Company (or a representative of the
underwriters) may, in connection with the registration of the first
underwritten offering of any securities of the Company under the Act, require
that you not sell or otherwise transfer or dispose of any Shares or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date (the "Effective Date") of the
registration statement of the Company filed under the Act as may be requested
by the Company or the representative of the underwriters. You further agree
that the Company may impose stop transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such period.
8. TRANSFERABILITY. This option is not transferable, except by
will or by the laws of descent and distribution, and is exercisable during your
life only by you. By delivering written notice to the Company, in a form
satisfactory to the Company, you may designate a third party who, in the event
of your death, shall thereafter be entitled to exercise this option.
9. OPTION NOT A SERVICE CONTRACT. This option is not an
employment contract and nothing in this option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or any Participating Company, or of the Company or any Participating
Company to continue your employment with the Company.
10. NOTICES. Any notices provided for in this option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt
or, in the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid,
3
<PAGE> 24
addressed to you at the address specified below or at such other address as you
hereafter designate by written notice to the Company.
11. GOVERNING PLAN DOCUMENT. This option is subject to all
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan, and is further subject to all
interpretations, amendments, rules and regulations that may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any conflict
between the provisions of this option and those of the Plan, the provisions of
the Plan shall control.
Dated the __ day of ________, 19__.
Very truly yours,
---------------------------------------
By:
------------------------------------
Duly authorized on behalf of
the Board of Directors
Attachments:
Magellan Systems Corporation 1996 Stock Option Plan
Regulation 260.141.11
Notice of Exercise
4
<PAGE> 25
The undersigned:
(a) Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it
sets forth the entire understanding between the undersigned optionee and the
Company and its Affiliates regarding the acquisition of stock in the Company
and supersedes all prior oral and written agreements on that subject with the
exception of (i) any options previously granted and delivered to the
undersigned under stock option plans of the Company, and (ii) the following
agreements only:
None
----------------
(Initial)
Other
---------------------------------
---------------------------------
---------------------------------
(c) Acknowledges receipt of copy of Section 260.141.11 of Title 10
of the California Code of Regulations.
---------------------------------------
Optionee
Address:
----------------------------
----------------------------
5
<PAGE> 26
Exhibit B
IT IS UNLAWFUL TO CONSUMMATE A SALE OR
TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE
COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS
PERMITTED IN THE COMMISSIONER'S RULES.
NONSTATUTORY STOCK OPTION
__________________________, Optionee
Magellan Corporation (the "Company"), pursuant to its 1996 Stock
Option Plan (the "Plan"), has granted to you, the optionee named above, an
option to purchase shares of the common stock of the Company ("Shares"). This
option is not intended to qualify and will not be treated as an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's
employees (including officers), directors or consultants and is intended to
comply with the provisions of Rule 701 promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act").
Defined terms not explicitly defined in this agreement but defined in the Plan
shall have the same definitions as in the Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total
number of Shares subject to this option is ___________________ (_________).
2. VESTING. Subject to the limitations contained herein, ______
of the Shares subject to this option will vest (become exercisable) each ______
beginning on _______________, 19__ until either (i) you cease to provide
services to the Company for any reason other than an approved leave of absence
described in Section 6.3(d) of the Plan, or (ii) this option becomes fully
vested.
<PAGE> 27
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) EXERCISE PRICE. The exercise price of this option is
__________________ ___________________ ($___________) per share, being not less
than 85% of the Fair Market Value of a Share on the date of grant of this
option.
(b) METHOD OF PAYMENT. Payment of the exercise price per
share is due in full upon exercise of all or any part of each installment that
has accrued to you. You may elect, to the extent permitted by applicable
statutes and regulations, to make payment of the exercise price under one of
the following alternatives:
(i) Payment of the exercise price per share in
cash (including check) at the time of exercise;
(ii) Payment pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board that, prior to the
issuance of Shares, results in either the receipt of cash (or check) by the
Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds;
(iii) Payment by delivery of already-owned Shares,
held for at least six (6) months, or shares of Orbital Common Stock, in each
case owned free and clear of any liens, claims, encumbrances or security
interests, which Shares or shares of Orbital Common Stock shall be valued at
their Fair Market Value on the date of exercise; or
(iv) Payment by a combination of the methods of
payment permitted by subparagraph 3(b)(i) through 3(b)(iii) above.
4. WHOLE SHARES. This option may not be exercised for any number
of shares that would require the issuance of anything other than whole Shares.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, this option may not be exercised unless the offer
and sale of the Shares issuable upon exercise of this option are then
registered under the Act or, if not then so registered, the Company has
determined that such offer and sale would be exempt from the registration
requirements of the Act.
6. TERM. The term of this option commences on ______________,
19__, the date of grant, and expires on ____________________ (the "Expiration
Date," which date shall be no more than ten (10) years from the date this
option is granted), unless this option expires sooner as set forth below or in
the Plan. In no event may this option be exercised on or after the Expiration
Date. In the event of a Terminating Event, an Affiliation Termination, or the
termination of your employment with the Company or a Participating Company,
this option shall thereafter be exercisable only as provided in the Plan.
2
<PAGE> 28
7. EXERCISE.
(a) This option may be exercised, to the extent specified
herein and in the Plan, by delivering a notice of exercise (in a form
designated by the Company) together with the exercise price to the Secretary of
the Company, or to such other person as the Company may designate, during
regular business hours, together with such additional documents as the Company
may then require pursuant to the Plan.
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any
exercise of this option, the Company may require you to enter an arrangement
providing for the satisfaction in accordance with Section 6.9 of the Plan of
cash payment of any tax withholding obligation of the Company arising by reason
of: (1) the exercise of this option; (2) the lapse of any substantial risk of
forfeiture to which the shares are subject at the time of exercise; or (3) the
disposition of shares acquired upon such exercise. You also agree that any
exercise of this option has not been completed and that the Company is under no
obligation to issue any Shares to you until such an arrangement is established
or the Company's tax withholding obligations are satisfied, as determined by
the Company; and
(ii) the Company (or a representative of the
underwriters) may, in connection with the registration of the first
underwritten offering of any securities of the Company under the Act, require
that you not sell or otherwise transfer or dispose of any Shares or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date (the "Effective Date") of the
registration statement of the Company filed under the Act as may be requested
by the Company or the representative of the underwriters. You further agree
that the Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such period.
8. TRANSFERABILITY. This option is not transferable, except by
will or by the laws of descent and distribution, and is exercisable during your
lifetime only by you. By delivering written notice to the Company, in a form
satisfactory to the Company, you may designate a third party who, in the event
of your death, shall thereafter be entitled to exercise this option.
9. OPTION NOT A SERVICE CONTRACT. This option is not an
employment contract and nothing in this option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or any Participating Company, or of the Company or any Participating
Company to continue your employment with the Company.
10. NOTICES. Any notices provided for in this option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt
or, in the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the
address specified below or at such other address as you hereafter designate by
written notice to the Company.
3
<PAGE> 29
11. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan, and is further subject to all
interpretations, amendments, rules and regulations that may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any conflict
between the provisions of this option and those of the Plan, the provisions of
the Plan shall control.
Dated the ____ day of ______________, 19__.
Very truly yours,
-----------------------------------
By
---------------------------------
Duly authorized on behalf of
the Board of Directors
ATTACHMENTS:
Magellan Systems Corporation 1996 Stock Option Plan
Regulation 260.141.11
Notice of Exercise
4
<PAGE> 30
The undersigned:
(a) Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it
sets forth the entire understanding between the undersigned optionee and the
Company and its Affiliates regarding the acquisition of stock in the Company
and supersedes all prior oral and written agreements on that subject with the
exception of (i) any options previously granted and delivered to the
undersigned under stock option plans of the Company, and (ii) the following
agreements only:
None
---------------
(Initial)
Other
-----------------------------
-----------------------------
-----------------------------
(c) Acknowledges receipt of a copy of Section 260.141.11 of Title
10 of the California Code of Regulations.
---------------------------------------
Optionee
Address:
----------------------------
----------------------------
5
<PAGE> 1
EXHIBIT 11.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED JUNE 30, 1996
- --------------------------------- ----------------------------------
ASSUMING
PRIMARY FULL DILUTION
--------------- ----------------
<S> <C> <C>
WEIGHTED AVERAGE OF OUTSTANDING
SHARES 26,888,775 26,888,775
COMMON EQUIVALENT SHARES:
OUTSTANDING STOCK OPTIONS 489,947 527,710
OTHER POTENTIALLY DILUTIVE SECURITIES:
CONVERTIBLE DEBENTURES N/A 3,887,304
--------------- ----------------
SHARES USED IN COMPUTING
NET INCOME PER SHARE 27,378,722 31,303,789
=============== ================
NET INCOME $3,838,801 $3,838,801
ADJUSTMENTS ASSUMING FULL DILUTION:
INTEREST EXPENSE, NET OF TAXES N/A 942,975
--------------- ----------------
NET INCOME, ASSUMING FULL DILUTION $3,838,801 $4,781,776
=============== ================
NET INCOME PER SHARE $0.14 $0.15
DILUTION PERCENTAGE ASSUMING FULL DILUTION (1) N/A -8.946%
NET INCOME PER SHARE $0.14 $0.14
=============== ================
</TABLE>
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED JUNE 30, 1996
- --------------------------------- ----------------------------------
ASSUMING
PRIMARY FULL DILUTION
--------------- ----------------
<S> <C> <C>
WEIGHTED AVERAGE OF OUTSTANDING
SHARES 26,838,407 26,838,407
COMMON EQUIVALENT SHARES:
OUTSTANDING STOCK OPTIONS 431,978 534,372
OTHER POTENTIALLY DILUTIVE SECURITIES:
CONVERTIBLE DEBENTURES N/A 3,887,304
--------------- ----------------
SHARES USED IN COMPUTING
NET INCOME PER SHARE 27,270,385 31,260,083
=============== ================
NET INCOME $6,966,949 $6,966,949
ADJUSTMENTS ASSUMING FULL DILUTION:
INTEREST EXPENSE, NET OF TAXES N/A 1,885,950
--------------- ----------------
NET INCOME, ASSUMING FULL DILUTION $6,966,949 $8,852,899
=============== ================
NET INCOME PER SHARE $0.26 $0.28
DILUTION PERCENTAGE ASSUMING FULL DILUTION (1) N/A -10.852%
NET INCOME PER SHARE $0.26 $0.26
=============== ================
</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.
<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 THREE MONTHS ENDED JUNE 30, 1996 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 14,112
<SECURITIES> 10,113
<RECEIVABLES> 129,998
<ALLOWANCES> (943)
<INVENTORY> 38,475
<CURRENT-ASSETS> 197,572
<PP&E> 174,538
<DEPRECIATION> (60,032)
<TOTAL-ASSETS> 480,771
<CURRENT-LIABILITIES> 125,291
<BONDS> 92,351
0
0
<COMMON> 269
<OTHER-SE> 246,270
<TOTAL-LIABILITY-AND-EQUITY> 480,771
<SALES> 221,406
<TOTAL-REVENUES> 221,406
<CGS> 156,206
<TOTAL-COSTS> 156,206
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 54
<INTEREST-EXPENSE> 1,893
<INCOME-PRETAX> 7,741
<INCOME-TAX> 774
<INCOME-CONTINUING> 6,967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,967
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
