<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 1998
REGISTRATION NO. 333-42271
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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ORBITAL SCIENCES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 06-1209561
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
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21700 ATLANTIC BOULEVARD
DULLES, VIRGINIA 20166
(703) 406-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAVID W. THOMPSON
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ORBITAL SCIENCES CORPORATION
21700 ATLANTIC BOULEVARD
DULLES, VIRGINIA 20166
(703) 406-5000
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
------------------------
Copy to:
EVE N. HOWARD, ESQ.
HOGAN & HARTSON L.L.P.
555 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20004
(202) 637-5600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration
statement. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
PROSPECTUS
ORBITAL SCIENCES CORPORATION LOGO
- --------------------------------------------------------------------------------
UP TO $100,000,000
5% CONVERTIBLE SUBORDINATED NOTES DUE 2002 AND SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF
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This Prospectus covers the resale from time to time by the holders (the "Selling
Securityholders") of up to $100,000,000 aggregate principal amount of 5%
Convertible Subordinated Notes due 2002 (the "Notes") of Orbital Sciences
Corporation, a Delaware corporation ("Orbital" or the "Company"). This
Prospectus also covers sales by the Selling Securityholders from time to time of
shares of common stock, par value $0.01 per share (the "Common Stock"), of the
Company into which the Notes are convertible (the "Conversion Shares").
Interest on the Notes is payable on October 1 and April 1 of each year,
commencing on April 1, 1998. The Notes will mature on October 1, 2002. The Notes
will be convertible into Common Stock of the Company on or prior to the close of
business on the maturity date, unless previously redeemed or repurchased, at a
conversion price of $28.00 per share (equivalent to a conversion rate of
approximately 35.71 shares per each $1,000 principal amount of Notes), subject
to adjustment under certain circumstances as described herein. See "Description
of Notes -- Conversion."
The Notes are not entitled to any sinking fund. On or after October 2, 2000, the
Notes will be redeemable at the option of the Company, in whole or, from time to
time, in part, at the redemption prices set forth in this Prospectus plus
accrued interest. In the event of a Fundamental Change (as defined), each Holder
(as defined) of the Notes may require the Company to repurchase its Notes, in
whole or in part, for cash, at prices set forth in this Prospectus, subject to
adjustment under certain circumstances as described herein, plus accrued and
unpaid interest. There can be no assurance that the Company will have the
financial resources necessary to repurchase the Notes in such circumstances. The
Notes are redeemable by the Company in the event of certain developments
involving withholding taxes of the United States. Otherwise, the Notes are not
redeemable prior to October 2, 2000. See "Description of Notes -- Repurchase at
Option of Holders Upon a Fundamental Change" and "Description of
Notes -- Redemption -- Optional Redemption."
The Notes are general, unsecured obligations of the Company and are subordinated
in right of payment to all existing and future Senior Indebtedness (as defined)
of the Company. As of December 31, 1997, the aggregate amount of Senior
Indebtedness was approximately $228 million, and there was approximately $236
million of indebtedness and other liabilities of subsidiaries of the Company
outstanding (including guarantees by direct and indirect subsidiaries of the
Company of the debt of ORBCOMM (as defined) in the amount of $170.0 million) to
which the Notes were structurally subordinated. The Indenture (as defined) does
not restrict the Company or its subsidiaries from incurring additional Senior
Indebtedness or other liabilities.
The Notes were issued by the Company on September 16, 1997 in a placement
through certain initial purchasers (the "Initial Purchasers") to qualified
institutional buyers in transactions exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"), and in sales outside
the United States within the meaning of Regulation S under the Securities Act.
The Selling Securityholders, directly or through agents, broker-dealers or
underwriters, may sell the Notes or the Conversion Shares offered hereby from
time to time on terms to be determined at the time of sale. Such Notes or
Conversion Shares may be sold at market prices prevailing at the time of sale or
at negotiated prices. The Selling Securityholders and any agents, broker-dealers
or underwriters that participate in the distribution of the Notes or Conversion
Shares may be deemed to be "underwriters" within the meaning of the Securities
Act, and any commission or discount received by them and any profit on the
resale of the Common Stock purchased by them may be deemed to be underwriting
discounts or commissions under the Securities Act. The Company will not receive
any proceeds from the sale of Notes or Conversion Shares by the Selling
Securityholders. See "Selling Securityholders" and "Plan of Distribution."
The Notes are listed on the Luxembourg Stock Exchange. Prior to this offering,
the Notes have been eligible for trading on the Private Offerings, Resale and
Trading through Automated Linkages ("PORTAL") Market. Notes sold hereby are not
expected to remain eligible for trading on the PORTAL Market. The Common Stock
is listed on the Nasdaq National Market under the symbol "ORBI." The last
reported sale price of the Common Stock on the Nasdaq National Market on March
9, 1998 was $40 3/4 per share.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS IN
EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY, SEE "RISK FACTORS"
COMMENCING ON PAGE 4.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Expenses of preparing and filing the Registration Statement of which this
Prospectus is a part and all post-effective amendments will be borne by the
Company. No underwriting commissions or discounts will be paid by the Company in
connection with this offering. Estimated expenses payable by the Company in
connection with this offering are approximately $125,000. The aggregate proceeds
to the Selling Securityholders from the Notes or Conversion Shares will be the
price of the Notes or Conversion Shares sold less the aggregate agents'
commissions and underwriters' discounts, if any, and other expenses of issuance
and distribution not borne by the Company. The Company has agreed to indemnify
the Initial Purchasers, the Selling Securityholders and certain other persons
against certain liabilities, including liabilities under the Securities Act. See
"Plan of Distribution."
March , 1998
<PAGE> 3
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements included or incorporated by reference in this Prospectus
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, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, general economic and business conditions, launch
success, product performance, market acceptance of new products, services and
technologies, the introduction of products and services by competitors and the
other factors set forth herein under the heading "Risk Factors." See "Important
Factors Regarding Forward-Looking Statements" filed as Exhibit 99 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996
(incorporated herein by reference).
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Room 1024, Washington, D.C. 20549, and at the Commission's
following Regional Offices: Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. Reports, proxy statements and
other information filed electronically by the Company with the Commission are
available at the Commission's worldwide web site at http://www.sec.gov. The
Company's Common Stock is traded on the Nasdaq National Market and reports,
proxy statements and other information concerning the Company also may be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006. Such reports, proxy
statements and other information will also be made available at the office of
the Paying Agent, Banque de Luxembourg, at 14 Boulevard Royal, L-2449,
Luxembourg.
A registration statement on Form S-3 with respect to the Notes and
Conversion Shares offered hereby (together with all amendments, exhibits and
schedules thereto, the "Registration Statement") has been filed with the
Commission under the Securities Act. This Prospectus does not contain all of the
information contained in such Registration Statement, certain portions of which
have been omitted pursuant to the rules and regulations of the Commission. For
further information with respect to the Company and the Notes and Conversion
Shares offered hereby, reference is made to the Registration Statement.
Statements contained in this Prospectus regarding the contents of any contract
or any other documents are not necessarily complete and, in each instance,
reference is hereby made to the copy of such contract or document filed as an
exhibit to the Registration Statement. The Registration Statement may be
inspected without charge at the Commission's principal office in Washington,
D.C., and copies of all or any part thereof may be obtained from the Public
Reference Section, Securities and Exchange Commission, Washington, D.C., 20549,
upon payment of the prescribed fees.
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<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been previously filed by the Company
(File No. 0-18287) with the Commission pursuant to the Exchange Act, are
incorporated by reference in this Prospectus and shall be deemed to be a part
hereof:
(i) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (along with Amendment No. 1 on Form 10-K/A dated April 8,
1997);
(ii) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997;
(iii) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed under Section 12 of the
Exchange Act, including any reports filed under the Exchange Act for the
purpose of updating such description;
(iv) The Company's Current Report on Form 8-K filed on July 28, 1997;
(v) The Company's Current Report on Form 8-K filed on September 2,
1997, as amended by Form 8-K/A filed on September 9, 1997;
(vi) The Company's Current Report on Form 8-K filed on September 12,
1997;
(vii) The Company's Current Report on Form 8-K filed on September 22,
1997;
(viii) The Company's Current Report on Form 8-K filed on October 1,
1997;
(ix) The Company's Current Report on Form 8-K filed on December 8,
1997; and
(x) The Company's Current Report on Form 8-K filed on February 27,
1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the filing of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents
(such documents, and the documents enumerated above, being hereinafter referred
to as the "Incorporated Documents"). Any statement contained in an Incorporated
Document shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed Incorporated Document modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE INTO SUCH DOCUMENTS). SUCH REQUESTS SHOULD BE DIRECTED TO ORBITAL
SCIENCES CORPORATION, 21700 ATLANTIC BOULEVARD, DULLES, VIRGINIA 20166,
TELEPHONE NUMBER: (703) 406-5000, ATTENTION: GENERAL COUNSEL.
Copies of the Incorporated Documents, other than exhibits to such documents
(unless such exhibits are specifically incorporated by reference into such
documents), the Indenture dated as of September 16, 1997 between the Company and
Deutsche Bank AG, New York Branch, as trustee (the "Indenture") and the
Registration Rights Agreement dated September 16, 1997 between the Company and
the Initial Purchasers (the "Registration Rights Agreement") will also be
available without charge at the office of the Company's Paying Agent in
Luxembourg.
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<PAGE> 5
THE COMPANY
Orbital is a space and information systems company that designs,
manufactures, operates and markets a broad range of space-related products and
services. The Company's products and services are grouped into three business
sectors: space and ground infrastructure systems, satellite access products and
satellite services. Space and ground infrastructure systems currently include
launch vehicles, satellites, electronics and sensor systems, and ground systems.
Satellite access products include hand-held satellite-based navigation and
communications products and transportation management systems. Satellite
services include satellite-based two-way mobile data communications and
satellite-based remote imaging services. Orbital operates launch vehicle,
satellite and electronics engineering, manufacturing and test facilities in
Dulles and McLean, Virginia, Germantown and Greenbelt, Maryland and Chandler,
Arizona; a launch vehicle and satellite integration and test facility at
Vandenberg Air Force Base, California; a space sensors and instruments facility
in Pomona, California; a ground systems and software facility in Vancouver,
British Columbia; and facilities for its navigation and communications products
in Sunnyvale and San Dimas, California and Rochester Hills, Michigan.
Orbital's principal executive offices are located at 21700 Atlantic
Boulevard, Dulles, Virginia 20166, and the Company's telephone number is (703)
406-5000.
RISK FACTORS
An investment in the Notes and the Common Stock issuable upon conversion
thereof involves a significant degree of risk. In determining whether to make an
investment in the Notes and the related Common Stock, potential investors should
consider carefully all the information set forth in this Prospectus and, in
particular, the risk factors described below. This Prospectus contains certain
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth below and elsewhere in this Prospectus. See "Special Note Regarding
Forward-Looking Information."
TECHNOLOGICALLY ADVANCED PRODUCTS AND SERVICES
Most of the products developed and manufactured by Orbital are
technologically advanced and sometimes novel systems that must function under
demanding operating conditions. Even though Orbital believes it employs
sophisticated design, manufacturing and testing processes and practices, there
can be no assurance that Orbital's products will be successfully launched or
operated or that they will be developed or will perform as intended. Certain of
Orbital's contracts require it to forfeit part of its expected profit, to
receive reduced payments, to provide a replacement launch or other product or
service, or to reduce the price of subsequent sales to the same customer, if
any, if its products fail to perform adequately. Performance penalties also may
be imposed should Orbital fail to meet delivery schedules or other measures of
contract performance. Orbital, like most organizations that have launch and
satellite programs, has experienced occasional product failures and other
problems, including with respect to certain of its launch vehicles and
satellites. Orbital will likely experience some product and service failures,
schedule delays and other problems in connection with its launch vehicles,
satellites and other products in the future. In addition to any costs resulting
from product warranties, contract performance or required remedial action, such
failures may result in increased costs or loss of revenues due to postponement
of subsequently scheduled launches or satellite operations or other product and
service deliveries. While the Company usually insures certain potential costs
related to product warranties and contract performance, the Company generally
does not insure potential costs resulting from any required remedial actions or
costs or loss of revenues due to postponement of subsequently scheduled
operations or product deliveries.
Orbital's products and services are and will continue to be subject to
significant technological change and innovation. Orbital's success will
generally depend on its ability to penetrate and retain
4
<PAGE> 6
markets for its existing products and to continue to conceive, design,
manufacture and market new products and services on a cost-effective and timely
basis. Orbital anticipates that it will incur significant expenses in the design
and initial manufacture and marketing of new products and services. There can be
no assurance that Orbital will be able to achieve the technological advances
necessary to remain competitive and profitable, that new products and services
will be developed and manufactured on schedule and on a cost-effective basis,
that anticipated markets will exist or develop for new products or services, or
that its existing products and services will not become technologically
obsolete.
U.S. GOVERNMENT CONTRACTS
During 1997, approximately 38% of the Company's total annual revenues, and
at December 31, 1997 approximately 50% of the Company's total firm contract
backlog were derived from contracts with the United States ("U.S.") Government
and its agencies or were derived from subcontracts with the U.S. Government's
prime contractors. Most of Orbital's U.S. Government contracts are funded
incrementally on a year-to-year basis. Changes in government policies,
priorities or funding levels through agency or program budget reductions by the
U.S. Congress or executive agencies or the imposition of budgetary constraints
could materially adversely affect Orbital's financial condition or results of
operations. Furthermore, contracts with the U.S. Government may be terminated or
suspended by the U.S. Government at any time, with or without cause. There can
be no assurance that these contracts will not be terminated or suspended in the
future, or that contract suspensions or terminations will not result in
unreimbursable expenses or charges or other adverse effects on the Company.
The accuracy and appropriateness of Orbital's direct and indirect costs and
expenses under its contracts with the U.S. Government are subject to extensive
regulation and audit by the Defense Contract Audit Agency or by other
appropriate agencies of the U.S. Government. These agencies have the right to
challenge Orbital's cost estimates or allocations with respect to any such
contract. Additionally, a substantial portion of payments to the Company under
U.S. Government contracts are provisional payments that are subject to potential
adjustment upon audit by such agencies. Orbital believes that any adjustments
likely to result from inquiries or audits of its contracts will not have a
material adverse impact on Orbital's financial condition or results of
operations. Since Orbital's inception, it has not experienced any material
adjustments as a result of any such inquiries or audits.
REGULATION
The ability of Orbital to pursue its business activities is regulated by
various agencies and departments of the U.S. Government and, in certain
circumstances, the governments of other countries. Commercial space launches
require licenses from the U.S. Department of Transportation ("DoT") and
operation by Orbital of its L-1011 aircraft requires licenses from certain
agencies of the DoT, including the Federal Aviation Administration.
Construction, launch and operation of commercial communications satellites,
including the satellite-based two-way data communications network to be provided
by ORBCOMM Global L.P. ("ORBCOMM"), require licenses from the U.S. Federal
Communications Commission ("FCC") and frequently require the approval of
international and individual country regulatory authorities. In addition,
commercial satellite remote imagery providers such as Orbital Imaging
Corporation ("ORBIMAGE") require licenses from the U.S. Department of Commerce
("DoC") and the FCC for the operation of remote imaging satellites, such as the
OrbView-3 satellite, that Orbital is currently constructing for ORBIMAGE.
Exports of Orbital's products, services and technical information frequently
require licenses from the U.S. Department of State or the DoC. There can be no
assurance that the Company will continue to be successful in its efforts to
obtain necessary licenses or regulatory approvals. The inability of the Company
to secure any necessary licenses or approvals could have a material adverse
effect on its financial condition or results of operations.
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<PAGE> 7
COMPONENTS, RAW MATERIALS AND CARRIER AIRCRAFT
Orbital purchases a significant percentage of its product components,
including rocket propulsion motors, structural assemblies, electronic equipment
and computer chips, from third parties. Orbital also occasionally obtains from
the U.S. Government parts and equipment that are used in the production of the
Company's products or in the provision of the Company's services. Orbital has
not experienced material difficulty in obtaining product components or necessary
parts and equipment and believes that alternative sources of supply would be
available, although increased costs and possible delays could be incurred in
securing alternative sources of supply. The Company's ability to launch its
Pegasus vehicle depends on the availability of an aircraft with the capability
of carrying and launching such space launch vehicle. In June 1997, Orbital
purchased the modified Lockheed L-1011 used for its Pegasus vehicle. Prior to
that date, Orbital had leased the L-1011 since 1991 from a commercial lending
institution. This L-1011 is also planned to be used for the launch of the X-34
reusable launch vehicle currently under development by Orbital for the National
Aeronautics and Space Administration ("NASA"). In the event that the L-1011 were
to be unavailable, Orbital would experience significant delays, expenses and
loss of revenues as a result of having to acquire and modify a new carrier
aircraft.
INVESTMENTS IN SATELLITE SERVICES BUSINESSES
As of December 31, 1997, the Company had invested, through its
majority-owned subsidiary, Orbital Communications Corporation ("OCC"),
approximately $75 million in ORBCOMM for the development, construction and
operation of a satellite-based, two-way mobile data communication network (the
"ORBCOMM System"). Because the Company does not control ORBCOMM's operational
and financial affairs, the Company is accounting for its investment in, and
earnings and losses attributable to, ORBCOMM using the equity method of
accounting. In addition, as of December 31, 1997, the Company had invested
approximately $89 million in ORBIMAGE for the development, construction and
operation of a fleet of digital imaging satellites and related ground systems.
Because the Company does not control ORBIMAGE's operational and financial
affairs as a result of certain rights granted to preferred stockholders of
ORBIMAGE, the Company is accounting for its investment in, and earnings and
losses attributable to, ORBIMAGE using the equity method of accounting. Start-up
of the ORBCOMM and ORBIMAGE businesses have produced significant operating
losses for several years, and most likely will continue to produce operating
losses for several more years.
The recoverability of the Company's investments in ORBCOMM and ORBIMAGE is
dependent on several factors, including, among other things, the successful
implementation of innovative and novel technologies, including, with respect to
ORBCOMM, the launch of up to 36 satellites (twelve of which have been launched),
the establishment of commercial markets for new services and the ability to
maintain and expand these markets, and the ability to raise sufficient capital
to fund system implementation and start-up operating losses. To the extent
ORBCOMM cannot raise required capital to fund its implementation and start-up
operating losses, Orbital is committed to provide up to an additional $15
million to ORBCOMM. ORBCOMM has requested and Orbital has funded $5 million of
the commitment to date. In addition, Orbital has provided approximately $20
million in vendor financing to ORBCOMM ($10 million of which has been advanced
to Orbital by Teleglobe Inc.) and expects this amount to increase. There can be
no assurance that the ORBCOMM or ORBIMAGE businesses will be fully constructed,
become fully operational or obtain all necessary licenses or additional capital.
Further, even if such businesses are fully constructed and become operational,
there can be no assurance that an adequate market will develop for their
products and services, that they will achieve profitable operations or that
Orbital will recover any of its investment in such ventures. If such investments
are at any time deemed unrecoverable, then the Company may have to expense all
or part of such investments.
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<PAGE> 8
LONG-TERM CONTRACTS
The majority of the Company's contracts are long-term contracts. Orbital
recognizes revenues on long-term contracts using the percentage of completion
method of accounting, whereby revenue, and therefore profit, is recognized based
on actual costs incurred in relation to total estimated costs to complete the
contract or based on specific delivery terms and conditions. Revenue recognition
and profitability, if any, from a particular contract may be adversely affected
to the extent that original cost estimates, estimated costs to complete or
incentive or award fee estimates are revised, delivery schedules are delayed, or
progress under a contract is otherwise impeded.
COMPETITION
Virtually all Orbital's products and services face significant competition
from existing and potential competitors, many of whom are larger and have
substantially greater resources than the Company. The primary domestic
competition for the Company's Pegasus and Taurus launch vehicles comes from the
Athena launch vehicles developed by Lockheed Martin Corporation ("Lockheed"). In
addition, Pegasus may face competition from launch systems derived from U.S.
Government surplus ballistic missiles. The Israeli Shavit vehicle and other
potential foreign launch vehicles could also pose competitive challenges to
Pegasus, although U.S. Government policy currently prohibits the launch of
foreign vehicles from U.S. territory. Competition for Taurus could come from
surplus Titan II launch vehicles, although a very limited inventory remains, and
from the Russian Cosmos SL-8 launch vehicle. Competition to Pegasus and Taurus
launch vehicles also exists in the form of partial or secondary payload capacity
on larger boosters including the Ariane, Titan and Delta launch vehicles.
The Company's satellites and satellite subsystems products compete with
products and services produced or provided by government entities and numerous
private entities, including TRW Inc., Ball Aerospace and Technology Corporation,
Lockheed, GM Hughes Electronics Corporation ("Hughes") and Spectrum Astro, Inc.
The Company's airborne and ground-based electronics, data management systems,
defense-oriented avionics products and software systems, aviation systems and
space sensors and instruments face competition from several established
manufacturers, including Smith Industries, Lockheed, Raytheon Company and
Hughes. The Company's satellite access products primarily face competition from
Trimble Navigation Ltd., Garmin International, Lowrance Electronics, Philips
Automotive Electronics, Alpine Electronics and several other producers.
ORBCOMM, which provides satellite-based data communications services, may
face competition from numerous existing and proposed satellite-based and
terrestrial systems providing data and voice communications services. ORBIMAGE
may face competition from U.S. and foreign government entities, and private
entities including Space Imaging EOSAT, EarthWatch Incorporated, Radarsat
International Inc. and SPOT Image, that provide or are seeking to provide
satellite-based or aerial imaging products.
ANTI-TAKEOVER EFFECTS OF RESTATED CERTIFICATE OF INCORPORATION, BYLAWS AND
DELAWARE LAW
The Company's Board of Directors has the authority to issue up to 9,999,999
shares of Preferred Stock and to determine the price, rights, preferences, and
privileges of those shares without any further vote or action by the
stockholders. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue shares of Preferred Stock. In
addition, the Company is subject to the provisions of Section 203 of the
Delaware General Corporation Law, an anti-takeover law. Furthermore, certain
provisions of the Company's Restated Certificate of Incorporation and Bylaws may
have the effect of delaying or preventing changes in control or management of
the Company, which could adversely affect the market price of the Common Stock.
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LEVERAGE; SUBORDINATION; ABSENCE OF FINANCIAL COVENANTS
In connection with the sale of the Notes, the Company incurred $100 million
of indebtedness which resulted in a ratio of long-term debt to total
capitalization at December 31, 1997 of approximately 36%. As a result of this
additional indebtedness, the Company's principal and interest obligations have
increased substantially. The degree to which the Company is, and in the future
may be, leveraged could materially and adversely affect the Company's ability to
obtain additional financing for working capital, acquisitions or other purposes
and could make it more vulnerable to industry downturns and competitive
pressures. The Company's ability to meet its debt service obligations will be
dependent upon the Company's future performance, which will be subject to
financial, business and other factors affecting the operations of the Company,
many of which are beyond its control.
The Notes are unsecured and subordinated in right of payment in full to all
existing and future Senior Indebtedness of the Company. As a result of such
subordination, in the event of bankruptcy, liquidation or reorganization of the
Company or certain other events, the assets of the Company will be available to
pay obligations on the Notes only after all Senior Indebtedness has been paid in
full, and there may not be sufficient assets remaining to pay amounts due on any
or all of the Notes then outstanding. The Notes also are structurally
subordinated to the liabilities, including trade payables, of the Company's
subsidiaries. The Indenture does not prohibit or limit the incurrence of Senior
Indebtedness or the incurrence of other indebtedness and liabilities by the
Company or its subsidiaries, and the incurrence of any such additional
indebtedness or liabilities could adversely affect the Company's ability to pay
its obligations on the Notes. As of December 31, 1997, the aggregate amount of
Senior Indebtedness was approximately $228 million, and there was approximately
$236 million of indebtedness and other liabilities of subsidiaries of the
Company outstanding (including guarantees by direct and indirect subsidiaries of
the Company of the debt of ORBCOMM in the amount of $170.0 million) to which the
Notes were structurally subordinated. The Company anticipates that from time to
time it will incur additional indebtedness, including Senior Indebtedness, and
that it and its subsidiaries will from time to time incur other additional
indebtedness and liabilities. See "Description of Notes -- Subordination."
The Indenture does not contain any financial covenants or restrictions on
the payment of dividends, the incurrence of indebtedness, including Senior
Indebtedness, by the Company or its subsidiaries or the issuance or repurchase
of securities by the Company. The Indenture contains no covenants or other
provisions designed to afford protection to holders of the Notes in the event of
a highly leveraged transaction or a change in control of the Company except to
the extent described under "Description of Notes -- Repurchase at Option of
Holders Upon a Fundamental Change."
LIMITATIONS ON REPURCHASE OF NOTES
Upon the occurrence of a Fundamental Change (as defined), each Holder of
Notes will have the right, at such Holder's option, to require the Company to
repurchase all or a portion of such Holder's Notes. If a Fundamental Change were
to occur, there can be no assurance that the Company would have or would be able
to obtain sufficient funds to pay the repurchase price for all Notes tendered by
Holders. Any future credit agreements or other agreements relating to
indebtedness (including other Senior Indebtedness) to which the Company becomes
a party may contain restrictions and provisions which prohibit the Company from
purchasing or repurchasing any Notes or may provide that a Fundamental Change
would constitute an event of default thereunder. Under Orbital's existing credit
facility with a syndicate of banks led by Morgan Guaranty Trust Company of New
York (the "Credit Facility"), a Fundamental Change would constitute an event of
default. In the event a Fundamental Change occurs at a time when the Company is
prohibited from purchasing or repurchasing Notes, the Company could seek the
consent of its lenders to the purchase of Notes or could attempt to refinance
the indebtedness that contains such prohibition. If the Company does not obtain
such a consent or repay such indebtedness, the Company would remain prohibited
from purchasing or repurchasing Notes. In such a case, the Company's failure to
redeem tendered Notes may constitute an Event of Default under the Indenture,
which may, in turn, constitute a further
8
<PAGE> 10
default under the terms of other indebtedness that the Company has entered or
may enter into from time to time, including under any Senior Indebtedness. In
such circumstances, the subordination provisions in the Indenture would likely
prohibit the repurchase or redemption of the Notes. See "Description of
Notes -- Repurchase at Option of Holders upon a Fundamental Change."
RISKS ASSOCIATED WITH ACQUISITIONS
The Company has historically made strategic acquisitions of businesses and
routinely evaluates potential acquisition candidates that it believes would
enhance its business. The Company has also historically pursued strategic
alliances through joint ventures, and routinely evaluates similar opportunities.
Such transactions commonly involve certain risks including, among others,
assimilating the acquired operations, technologies and personnel and maintaining
appropriate standards, controls, procedures and policies, entering markets in
which the Company has little or no direct prior experience, potentially losing
key employees of acquired organizations and resolving potential disputes with
joint venture partners. There can be no assurance that the Company will be
successful in overcoming these risks in connection with its recent acquisitions
or any future transactions.
YEAR 2000 ISSUE
The Company has made a preliminary assessment of potential "Year 2000"
issues on various computer-related systems. The Company has developed an initial
corrective action plan that includes reprogramming impacted software where
appropriate and feasible, obtaining vendor-provided software upgrades where
available and completely replacing the impacted system when necessary. The
Company currently expects that identified "Year 2000" impacted systems will be
corrected by the end of 1998, although there can be no assurance that the
Company has identified all "Year 2000" affected systems or that its corrective
action plan will be timely and successful.
POSSIBLE VOLATILITY OF STOCK AND NOTES PRICES
The market price of the Notes and the Common Stock issuable upon conversion
thereof could be subject to significant fluctuations in response to various
factors and events, including technical performance of the Company's products,
market acceptance of the Company's new products and services, variations in the
Company's operating results, changes in reports of securities analysts, and
publicity regarding the industry or the Company. In addition, the stock market
in recent years has experienced broad price and volume fluctuations that often
have been unrelated to the operating performance of particular companies, which
may adversely affect the market price of the shares of Common Stock.
LIMITED PUBLIC MARKET FOR THE NOTES AND RESTRICTIONS ON TRANSFER
Prior to this offering, the Notes have been eligible for trading on the
PORTAL Market and are listed on the Luxembourg Stock Exchange. The Notes sold
pursuant to the Registration Statement of which this Prospectus forms a part are
not expected to remain eligible for trading on the PORTAL system. The Notes are
not listed on any national securities exchange in the United States and are not
quoted on the Nasdaq Stock Market. Although the Initial Purchasers have advised
the Company that they currently intend to make a market in the Notes, they are
not obligated to do so and may discontinue such market making at any time
without notice. In addition, such market making activity will be subject to the
limits imposed by the Securities Act and the Exchange Act. Accordingly, there
can be no assurance that any market for the Notes will develop or, if one does
develop, that it will be maintained. If an active market for the Notes fails to
develop or be sustained, the trading price of the Notes could be materially
adversely affected.
9
<PAGE> 11
RECENT DEVELOPMENTS
On February 25, 1998, ORBIMAGE completed a private financing of $150
million of units consisting of 11 5/8% Senior Notes due 2005 and warrants to
purchase an aggregate of approximately 3% of ORBIMAGE's outstanding common
stock. In addition, the existing preferred stock investors in ORBIMAGE exercised
an option to purchase additional preferred shares of ORBIMAGE, resulting in net
proceeds to ORBIMAGE of approximately $21 million. The preferred stock offering
closed concurrently with the unit financing. As a result of these transactions,
Orbital's voting interest in ORBIMAGE was reduced to approximately 60%. In
addition, Orbital no longer has any contractual capital commitments to ORBIMAGE.
On December 23, 1997, eight ORBCOMM satellites were successfully placed in
orbit by a Pegasus aircraft-based launch vehicle. On February 10, 1998, two
additional ORBCOMM satellites were launched successfully on the Company's Taurus
ground-based launch vehicle. The satellites are expected to be placed into
commercial service in the second quarter of 1998. To date in the in-orbit
check-out process, certain of these satellites are generating lower than
expected solar power levels, although it is anticipated that such power levels
will be sufficient to meet planned service requirements, and certain of these
satellites have experienced anomalies in certain radio transmitters. The Company
and ORBCOMM believe they have determined the causes of the lower power level and
radio transmitter anomalies, which they believe will be corrected in future
ORBCOMM satellites, and are developing procedures to minimize the effects of
and/or bypass these anomalies on the existing in-orbit ORBCOMM satellites. There
can be no assurance that the Company and ORBCOMM will be successful in their
efforts or, if unsuccessful, that ORBCOMM's commercial operations would not be
adversely affected.
The Company expects that ORBCOMM will require additional funding in 1998,
and ORBCOMM is currently in the process of exploring financing alternatives to
complete the construction of the ORBCOMM System and to fund its initial
operations. Such alternatives include, but are not limited to, additional
capital contributions from its existing partners, vendor financing, equity or
debt transactions and other strategic alternatives. There can be no assurance
that any financing will be completed or available on terms commercially
acceptable to ORBCOMM. See "Risk Factors -- Investment in Satellite Services
Businesses." Orbital is committed to provide up to an additional $15 million to
ORBCOMM. ORBCOMM has requested and Orbital has funded $5 million of the
commitment to date.
The Company expects that its capital needs for 1998 will, in part, be
provided by working capital, cash flows from operations, existing credit
facilities, customer financings and operating lease arrangements. In addition,
the Company may also consider equity and debt financings.
The Company received a waiver from The Morgan Guaranty Trust Company of New
York ("Morgan Guaranty") through March 13, 1998 with respect to its
noncompliance at the end of 1997 with certain financial covenants under its $100
million credit agreement with a syndicate of banks led by Morgan Guaranty. The
Company and the bank group have agreed in principle to amend these covenants to
facilitate compliance, and the Company expects to execute such amendments prior
to expiration of the waiver period.
On November 28, 1997, Orbital and its subsidiary, Magellan Corporation
("Magellan"), signed an Agreement and Plan of Merger (the "Agreement") with
Ashtech Inc. ("Ashtech"), a privately-held developer and supplier of
high-performance Global Positioning System and related satellite navigation
products, components and technologies. The merger was completed on December 31,
1997. Under the terms of the Agreement, approximately 23,954,000 shares of
Magellan common stock and $25 million in cash were exchanged for all issued and
outstanding securities of Ashtech. In the aggregate, after giving effect to the
merger, Orbital owns approximately 66% of the equity ownership of Magellan.
10
<PAGE> 12
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, -----------------------------
--------------------------------- SEPTEMBER 30, SEPTEMBER 30,
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges (1)............... 1.54x 1.43x 1.58x --(2) 2.38x 2.38x 3.71x
</TABLE>
- ---------------
(1) The ratio of earnings to fixed charges is computed by dividing (a) earnings
before taxes plus fixed charges as adjusted for income (loss) attributed to
minority interests and equity method investments by (b) fixed charges. Fixed
charges consist of interest expense, capitalized interest and the estimated
portion of rental expense deemed by the Company to be a reasonable
approximation of the interest factor of rental payments under operating
leases.
(2) For 1995, earnings were inadequate to cover fixed charges; the amount of the
deficiency was $7.6 million.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Notes and
the Conversion Shares by the Selling Securityholders.
11
<PAGE> 13
DESCRIPTION OF NOTES
The Notes were initially issued on September 16, 1997 under an indenture
dated as of September 16, 1997, between the Company and Deutsche Bank AG, New
York Branch, as trustee (the "Trustee"), as amended by a First Supplemental
Indenture dated as of December 15, 1997 (collectively, the "Indenture"). Copies
of the form of the Indenture and the Registration Rights Agreement (as defined
below) are available from the Trustee, the Company or the Luxembourg Paying
Agent upon request by a registered holder of Notes (a "Holder"). The following
summaries of certain provisions of the Notes, the Indenture and the Registration
Rights Agreement do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the Notes,
the Indenture and the Registration Rights Agreement, including the definitions
therein of certain terms which are not otherwise defined in this Prospectus.
Wherever particular provisions or defined terms of the Indenture (or the form of
Note which is a part thereof) or the Registration Rights Agreement are referred
to, such provisions or defined terms are incorporated herein by reference.
References in this section to the "Company" are solely to Orbital Sciences
Corporation, a Delaware corporation, and not its subsidiaries. Any reference to
interest shall include Additional Amounts and Additional Interest (each as
defined below) as the context requires.
GENERAL
The Notes are unsecured subordinated obligations of the Company and are
limited to $100,000,000 aggregate principal amount. The Notes mature on October
1, 2002 and are payable at a price of 100% of the principal amount thereof. The
Notes bear interest at a rate of 5% per annum from September 16, 1997, payable
semiannually on October 1 and April 1 of each year, commencing on April 1, 1998.
Interest will be computed on the basis of a 360-day year, comprised of twelve
30-day months.
The Notes are convertible into Common Stock initially at the conversion
price of $28.00 per share, subject to adjustment upon the occurrence of certain
events described under "-- Conversion," at any time on or prior to the close of
business on the maturity date, unless previously redeemed or repurchased.
The Notes are redeemable (a) at the option of the Company in the event of
certain developments involving withholding taxes of the U.S. as described below
under "-- Redemption -- Redemption for Taxation Reasons" at a redemption price
of 100% of the principal amount of the Notes to be redeemed, plus accrued
interest to, but excluding, the Redemption Date and (b) at the option of the
Company on or after October 2, 2000 at the redemption prices set forth below
under "-- Redemption -- Optional Redemption," plus accrued interest to, but
excluding, the Redemption Date.
The Indenture does not contain any financial covenants or restrictions on
the payment of dividends by the Company, the incurrence of indebtedness,
including Senior Indebtedness (as defined), by the Company or its subsidiaries
or the issuance or repurchase of securities by the Company. The Indenture
contains no covenants or other provisions designed to afford protection to
Holders of the Notes in the event of a highly leveraged transaction or a change
in control of the Company except to the extent described below under
"-- Repurchase at Option of Holders Upon a Fundamental Change."
BOOK ENTRY, DELIVERY AND FORM
The Notes were issued in fully registered form, without coupons, in
denominations of $1,000 principal amount and integral multiples thereof.
Global Note; Book-Entry Form. Except in the limited circumstances set
forth below under "Certificated Notes," the Notes will be evidenced by a global
Note (the "Global Note") deposited with, or on behalf of, The Depository Trust
Company, New York, New York ("DTC") and registered in the name of Cede & Co.
("Cede"), as DTC's nominee. Except as set forth below, record
12
<PAGE> 14
ownership of the Global Note may be transferred, in whole or in part, only to
another nominee of DTC or to a successor of DTC or its nominee.
A beneficial owner may hold its interests in the Global Note directly
through DTC if such beneficial owner is a participant in DTC, or indirectly
through organizations which are participants in DTC (the "Participants").
Transfers between Participants will be effected in the ordinary way in
accordance with DTC rules and will be settled in same-day funds. The laws of
some states require that certain persons take physical delivery of securities in
definitive form. Consequently, the ability to transfer beneficial interests in
the Global Note to such persons may be limited.
Beneficial owners who are not Participants may beneficially own interests
in the Global Note held by DTC only through Participants, including the
Euroclear System ("Euroclear") and Cedel Bank, societe anonyme ("Cedel"), or
certain banks, brokers, dealers, trust companies and other parties that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly ("Indirect Participants"). So long as Cede, as the nominee of DTC,
is the registered owner of the Global Note, Cede for all purposes will be
considered the sole holder of the Global Note. Except as provided below and
except in certain limited circumstances as provided in the Indenture, owners of
beneficial interests in the Global Note will not be entitled to have
certificates registered in their names, will not receive or be entitled to
receive physical delivery of certificates in definitive form, and will not be
considered holders thereof.
Payment of interest on and principal of and the redemption price or
repurchase price of the Global Note will be made to Cede, the nominee for DTC,
as the registered owner of the Global Note, by wire transfer of immediately
available funds on each relevant payment date. Neither the Company nor the
Trustee (nor any registrar, paying agent or conversion agent under the
Indenture) will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Note, including for any delay by DTC or any Participant
or Indirect Participant in identifying the beneficial owners of the Notes, or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests, and the Company and the Trustee may conclusively
rely on, and shall be protected in relying on, instructions from DTC for all
purposes.
The Company has been informed by DTC that, with respect to any payment of
interest on, principal of, or the redemption price or repurchase price of, the
Global Note, DTC's practice is to credit Participants' accounts on the payment
date therefor with payments in amounts proportionate to their respective
beneficial interests in the Notes represented by the Global Note, as shown on
the records of DTC (adjusted as necessary so that such payments are made with
respect to whole Notes only), unless DTC has reason to believe that it will not
receive payment on such payment date. Payments by Participants to owners of
beneficial interests in Notes represented by the Global Note held through such
Participants will be the responsibility of such Participants, as is now the case
with securities held for the accounts of customers registered in "street name."
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants, the ability of a person having a beneficial
interest in the principal amount represented by the Global Note to pledge such
interest to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interest, may be affected by the lack
of a physical certificate evidencing such interest.
Neither the Company nor the Trustee (nor any registrar, paying agent or
conversion agent under the Indenture) has any responsibility for the performance
of DTC or its Participants or Indirect Participants of their respective
obligations under the rules and procedures governing their operations. DTC has
advised the Company that it will take any action permitted to be taken by a
holder of Notes (including, without limitation, an exchange as described below)
only at the direction of one or more Participants to whose account with DTC
interests in the Global Note are credited and only in respect of the principal
amount of the Notes represented by the Global Note as to which such Participant
or Participants has or have given such direction.
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<PAGE> 15
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and include certain
other organizations. Certain of such Participants (or their representatives),
together with other entities, own DTC. Indirect access to the DTC system is
available to others such as banks, brokers, dealers and trust companies that
clear through, or maintain a custodial relationship with a Participant, either
directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among Participants, it is under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days, the Company will cause the Notes to be issued in
definitive form in exchange for the Global Note.
Certificated Notes. Certificated Notes may be issued in exchange for Notes
represented by the Global Note if no successor depositary is appointed by the
Company as set forth above or there has been and is continuing an Event of
Default with respect to the Global Note, in each case as described in the
Indenture.
CONVERSION
The Holder of any Note will have the right at the Holder's option to
convert any Note (in denominations of $1,000 or any multiple thereof) into
shares of Common Stock at any time on or prior to the close of business on
October 1, 2002, unless previously redeemed or repurchased, at an initial
conversion price of $28.00 per share of Common Stock (equivalent to a conversion
rate of approximately 35.71 shares per $1,000 principal amount of Notes). The
conversion price is subject to adjustment from time to time as described below.
The right to convert a Note called for redemption or delivered for repurchase
will terminate at the close of business on the Business Day prior to the
Redemption Date or the Repurchase Date (as defined) for such Note, as the case
may be.
Beneficial owners of interests in the Global Note may exercise their right
of conversion by delivering to DTC the appropriate instruction form for
conversion pursuant to DTC's conversion program and, in the case of conversions
through Euroclear or Cedel, in accordance with Euroclear's or Cedel's normal
operating procedures when application has been made to make the underlying
Common Stock eligible for trading on Euroclear or Cedel. To convert a Note held
in certificated form into shares of Common Stock, a Holder must (i) complete and
manually sign the conversion notice on the back of the Note (or complete and
manually sign a facsimile thereof) and deliver such notice to the Conversion
Agent in New York, New York or the Conversion Agent in Luxembourg, (ii)
surrender the Note to the Conversion Agent in New York, New York or to the
Conversion Agent in Luxembourg, as the case may be, (iii) if required, furnish
appropriate endorsements and transfer documents, (iv) if required, pay all
transfer or similar taxes, and (v) if required, pay funds equal to interest
payable on the next succeeding Interest Payment Date. Pursuant to the Indenture,
the date on which all of the foregoing requirements have been satisfied is the
date of surrender for conversion. Such notice of conversion can be obtained from
the Trustee at the Corporate Trust Office or the office of any Conversion Agent.
As promptly as practicable on or after the conversion date, the Company will
issue and deliver to the Trustee a certificate or certificates for the number of
full shares of Common Stock issuable upon conversion, together with payment in
lieu of any fraction of a share in an amount determined as set forth below. Such
certificate will be sent by the Trustee to the appropriate Conversion Agent for
delivery to the Holder entitled thereto. Such Common Stock
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<PAGE> 16
issuable upon conversion of the Notes will be fully paid and nonassessable. Any
Note surrendered for conversion during the period from the close of business on
any Regular Record Date to the opening of business on the next succeeding
Interest Payment Date must be accompanied by payment of an amount equal to the
interest payable on such Interest Payment Date on the principal amount of Notes
being surrendered for conversion. In the case of any Note which has been
converted after any Regular Record Date, but on or before the next Interest
Payment Date, interest the Stated Maturity of which is on such Interest Payment
Date shall be payable on such Interest Payment Date notwithstanding such
conversion. Such interest shall be paid to the Holder of such Note on such
Regular Record Date. As a result, a Holder that surrenders Notes for conversion
on a date that is not an Interest Payment Date will not receive any interest for
the period from the Interest Payment Date next preceding the date of conversion
to the date of conversion or for any later period, even if the Notes are
surrendered after a notice of redemption or after notice has been received of a
Fundamental Change (as defined). No other payment or adjustment for interest, or
for any dividends in respect of Common Stock, will be made upon conversion.
Holders of Common Stock issued upon conversion will not be entitled to receive
any dividends payable to holders of Common Stock as of any record time before
the close of business on the conversion date. No fractional shares will be
issued upon conversion but, in lieu thereof, the equivalent amount will be paid
in cash by the Company based on the Current Market Price (as defined in the
Indenture) of Common Stock on the day of conversion.
Notes surrendered for conversion, in whole or in part, shall be forwarded
promptly by the Conversion Agent to the Trustee for cancellation. The Company
shall execute and the Trustee shall authenticate and deliver a new Note or Notes
in principal amount equal to the unconverted portion of Notes so surrendered, if
any. The Conversion Agent will deliver promptly to the Paying Agent in New York,
New York or Luxembourg, as applicable, all funds collected representing interest
payable on a Note converted between a Regular Record Date and the next
succeeding Interest Payment Date.
A Holder delivering a Note for conversion will not be required to pay any
documentary, stamp or similar duties in respect of the issue or delivery of
Common Stock on conversion but will be required to pay any tax or duty which may
be payable in respect of any transfer involved in the issue and delivery of the
Common Stock in a name other than that of the Holder of the Note. Certificates
representing Common Stock will not be issued or delivered unless all taxes and
duties, if any, payable by the Holder have been paid.
The initial conversion price of $28.00 per share of Common Stock
(equivalent to a conversion rate of approximately 35.71 shares per $1,000
principal amount of the Notes) is subject to adjustment (under formulae set
forth in the Indenture) in certain events, including: (i) the issuance of Common
Stock as a dividend or distribution on Common Stock; (ii) the issuance to all
holders of Common Stock of certain rights or warrants entitling them to
subscribe for or to purchase Common Stock at less than the Current Market Price
(as defined) of the Common Stock (determined in accordance with the Indenture);
(iii) certain subdivisions and combinations of the Common Stock; (iv) the
distribution to all holders of Common Stock of shares of capital stock of the
Company (other than Common Stock) or evidences of indebtedness of the Company or
assets (including securities, but excluding those dividends and distributions of
Common Stock, rights and warrants referred to above and dividends paid only in
cash), provided however that if such distribution is only exercisable upon the
occurrence of certain triggering events, then the Conversion Price will not be
adjusted until such triggering event occurs; (v) distributions consisting of
cash, excluding any quarterly cash dividend on the Common Stock to the extent
that the aggregate cash dividend per share of Common Stock in any quarterly
period does not exceed the greater of (x) the amount per share of Common Stock
of the next preceding quarterly cash dividend on the Common Stock to the extent
that such preceding quarterly dividend did not require an adjustment of the
conversion price pursuant to this clause (v), and (y) 7.00% of the average of
the daily Current Market Price of the Common Stock for the ten consecutive
Trading Days (as defined) immediately prior to the date of declaration of such
dividend, and excluding any dividend or distribution in connection with the
liquidation, dissolution or winding up of the Company; and (vi) payment in
respect of a tender or
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<PAGE> 17
exchange offer by the Company or any subsidiary of the Company for the Common
Stock to the extent that the cash and value of any other consideration included
in such payment per share of Common Stock exceeds the Current Market Price (as
defined) per share of Common Stock on the Trading Day next succeeding the last
date on which tenders or exchanges may be made pursuant to such tender or
exchange offer. If an adjustment is required to be made as set forth in clause
(v) above as a result of a distribution that is a quarterly dividend, such
adjustment would be based upon the amount by which such distribution exceeds the
amount of the quarterly cash dividend permitted to be excluded pursuant to such
clause (v). If an adjustment is required to be made as set forth in clause (v)
above as a result of a distribution that is not a quarterly dividend, such
adjustment would be based upon the full amount of the distribution. In the event
of a distribution to all holders of Common Stock of certain rights or warrants
to subscribe for additional shares of the Company's capital stock as provided in
clause (iv) above, the Company may, instead of making any adjustment in the
conversion price, make proper provision so that each Holder of a Note who
converts such Note after the record date for such distribution and prior to the
expiration or redemption of such rights or warrants will be entitled to receive
upon such conversion, in addition to shares of Common Stock, a number of such
rights or warrants determined in accordance with a formula set forth in the
Indenture. So long as the Notes are listed on the Luxembourg Stock Exchange and
the rules of the Luxembourg Stock Exchange so require, notice of any adjustment
of the conversion price will be given to Holders of the Notes by publication in
a daily newspaper of general circulation in Luxembourg (which is expected to be
the Luxemberger Wort) or, if publication in Luxembourg is not practical,
elsewhere in Western Europe.
In the case of certain consolidations and mergers involving the Company
(other than a consolidation or merger that does not result in any
reclassification, conversion, exchange or cancellation of Common Stock) or a
sale or conveyance to another Person of the property and assets of the Company
as an entirety or substantially as an entirety, the Holders of the Notes then
outstanding will generally be entitled thereafter, during the period such Notes
shall be convertible as specified above, to convert such Notes for the kind and
amount of shares of stock, other securities or other property or assets
(including cash) which they would have owned or been entitled to receive upon
such reclassification, consolidation, merger, combination, sale or conveyance
had such Notes been converted into Common Stock immediately prior to such
reclassification, consolidation, merger, combination, sale or conveyance,
assuming that a Holder of Notes would not have exercised any rights of election
as to the stock, other securities or other property or assets (including cash)
receivable in connection therewith.
The Company from time to time may to the extent permitted by law reduce the
conversion price by any amount for any period of at least 20 days, in which case
the Company shall give at least 15 days' notice of such reduction, if the
reduction is irrevocable during the period and the Board of Directors of the
Company has made a determination that such reduction would be in the best
interests of the Company, which determination shall be conclusive. The Company
may, at its option, make such reductions in the conversion price, in addition to
those set forth above, as the Board of Directors of the Company deems advisable
to avoid or diminish any income tax to holders of Common Stock or rights to
purchase Common Stock resulting from any dividend or distribution on Common
Stock (or rights to acquire Common Stock) or resulting from any dividend or
distribution of shares or issuance of rights or warrants to purchase or
subscribe for shares or from any event treated as such for income tax purposes.
See "Certain Federal Income Tax Considerations."
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price then in
effect; provided that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the conversion price will not be adjusted for the
issuance of Common Stock or any securities convertible into or exchangeable for
Common Stock or carrying the right to purchase any of the foregoing.
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<PAGE> 18
SUBORDINATION
The indebtedness evidenced by the Notes is subordinated in right of payment
to the extent provided in the Indenture to the prior payment in full of all
existing and future Senior Indebtedness (as defined). As of December 31, 1997,
the aggregate amount of Senior Indebtedness was approximately $228 million, and
there was approximately $236 million of indebtedness and other liabilities of
subsidiaries of the Company outstanding (including guarantees of direct and
indirect subsidiaries of the Company of the debt of ORBCOMM in the amount of
$170.0 million) to which the Notes were structurally subordinated. The Indenture
does not prohibit or limit the incurrence of Senior Indebtedness or the
incurrence of other indebtedness and other liabilities by the Company or any of
its subsidiaries, and the incurrence of any such additional indebtedness and
other liabilities could adversely affect the Company's ability to pay its
obligations on the Notes. The Company expects that it will from time to time
incur additional indebtedness, including Senior Indebtedness, and other
liabilities. See "Risk Factors -- Leverage; Subordination; Absence of Financial
Covenants."
Upon any payment by the Company or distribution of assets of the Company to
creditors upon any dissolution, winding-up, liquidation or reorganization
(including any of the foregoing as a result of bankruptcy or moratorium of
payment or other similar proceeding), payment on account of the principal of,
redemption of, and interest on the Notes (including on account of a Fundamental
Change) is to be subordinated to the extent provided in the Indenture in right
of payment to the prior payment in full in cash or other payment of all Senior
Indebtedness. In the event of any acceleration of the Notes because of an Event
of Default (as defined), the holders of any Senior Indebtedness then outstanding
would be entitled to payment in full in cash or other payment of all obligations
in respect of such Senior Indebtedness before the Holders of the Notes are
entitled to receive any payment or other distribution in respect thereof. The
Indenture requires that the Company promptly notify holders of Senior
Indebtedness if payment of the Notes is accelerated because of an Event of
Default.
The Company also may not make any payment upon, redemption of, or payment
of Additional Interest, if any, on or repurchase or otherwise acquire the Notes
if (i) a default in the payment of the principal of, premium, if any, interest,
rent or other obligations in respect of Senior Indebtedness occurs and is
continuing beyond any applicable period of grace or (ii) any other default
occurs and is continuing with respect to Designated Senior Indebtedness (as
defined) that permits the holders of the Designated Senior Indebtedness as to
which such default relates to accelerate its maturity and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the Company or other
person permitted to give such notice under the Indenture. Payments on the Notes
will be resumed (a) in case of a payment default, upon the date on which such
default is cured or waived or ceases to exist and (b) in case of a nonpayment
default, upon the earlier of the date on which such nonpayment default is cured
or waived or ceases to exist or 179 days after the date on which the applicable
Payment Blockage Notice is received if the maturity of the Designated Senior
Indebtedness has not been accelerated, unless the Indenture otherwise prohibits
payments on the Notes at such time. No new period of payment blockage may be
commenced pursuant to a Payment Blockage Notice unless and until 365 days have
elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice. No nonpayment default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee (unless such
default was waived, cured or otherwise ceased to exist and thereafter
subsequently reoccurred) shall be, or be made, the basis for a subsequent
Payment Blockage Notice.
By reason of the subordination provisions described above, in the event of
the Company's bankruptcy, dissolution or reorganization, holders of Senior
Indebtedness may receive more, ratably, and Holders of the Notes may receive
less, ratably, than the other creditors of the Company. No provision contained
in the Indenture or the Notes will affect the obligation of the Company, which
is absolute and unconditional, to pay, when due, principal of, premium, if any,
and interest on, the Notes. The subordination provisions of the Indenture and
the Notes will not prevent the occurrence
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<PAGE> 19
of any default or Event of Default under the Indenture or limit the rights of
the Trustee or any Holder, subject to the preceding paragraphs, to pursue any
other rights or remedies with respect to the Notes.
In the event that, notwithstanding the foregoing, the Trustee or any Holder
of Notes receives any payment or distribution of assets of the Company of any
kind in contravention of any of the subordination provisions of the Indenture,
whether in cash, property or securities (including, without limitation, by way
of set-off or otherwise) in respect of the Notes before all Senior Indebtedness
is paid in full, then such payment or distribution will be held by the recipient
in trust for the benefit of, and paid over to, holders of Senior Indebtedness of
the Company or their representative or representatives to the extent necessary
to make payment in full of all Senior Indebtedness of the Company remaining
unpaid, after giving effect to any concurrent payment or distribution, or
provision therefor, to or for the holders of Senior Indebtedness of the Company.
The Company is obligated to pay reasonable compensation to the Trustee and
to indemnify the Trustee against any losses, liabilities or expenses (including
reasonable attorney's fees) incurred in connection with its duties relating to
the Notes. To the extent provided in the Indenture, the Trustee's claims for
such payments will be senior to those of Holders of the Notes in respect of all
funds collected or held by the Trustee.
The term "Senior Indebtedness" means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness (as defined) of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed, guaranteed or in effect guaranteed by the Company (including all
deferrals, renewals, extensions or refundings of, or amendments, modifications
or supplements to, the foregoing), unless in the case of any particular
Indebtedness the instrument creating or evidencing the same or the assumption or
guarantee thereof expressly provides that such Indebtedness shall not be senior
in right of payment to the Notes or expressly provides that such Indebtedness is
"pari passu" or "junior" to the Notes. Notwithstanding the foregoing, Senior
Indebtedness shall not include Indebtedness of the Company to any Subsidiary of
the Company arising by reason of a guarantee by the Company of Indebtedness of
such Subsidiary to a Person that is not a Subsidiary of the Company.
The term "Indebtedness" means, with respect to any Person (as defined), and
without duplication, (a) all indebtedness, obligations and other liabilities
(contingent or otherwise) of such Person for borrowed money (including
obligations of such Person in respect of overdrafts, foreign exchange contracts,
currency exchange agreements, interest rate protection agreements, and any loans
or advances from banks, or any similar agreement or instrument, whether or not
evidenced by notes or similar instruments) or evidenced by bonds, debentures,
notes or similar instruments (whether or not the recourse of the lender is to
the whole of the assets of such Person or to only a portion thereof) (other than
any account payable or other accrued current liability or obligation incurred in
the ordinary course of business in connection with the obtaining of materials or
services), (b) all reimbursement obligations and other liabilities (contingent
or otherwise) of such Person with respect to letters of credit, bank guarantees
or bankers' acceptances, (c) all obligations and liabilities (contingent or
otherwise) in respect of leases of such Person required, in conformity with
generally accepted accounting principles, to be accounted for as capitalized
lease obligations on the balance sheet of such Person and all obligations and
other liabilities (contingent or otherwise) under any lease or related document
(including a purchase agreement) in connection with the lease of real or
personal property or improvements thereon which provides that such Person is
contractually obligated to purchase or cause a third party to purchase the
leased property and the obligations of such Person under such lease or related
document to purchase or to cause a third party to purchase such leased property,
(d) all obligations of such person issued or assumed as the deferred purchase
price of property or services (but excluding trade accounts payable or
18
<PAGE> 20
accrued liabilities arising in the course of business), (e) all obligations to
purchase, redeem or acquire any capital stock of such Person, (f) all direct or
indirect guarantees or similar agreements by such Person in respect of, and
obligations or liabilities (contingent or otherwise) of such Person to purchase
or otherwise acquire or otherwise assure a creditor against loss in respect of,
indebtedness, obligations or liabilities of another Person of the kind described
in clauses (a) through (e), (g) any indebtedness or other obligations described
in clauses (a) through (f) secured by any mortgage, pledge, lien or other
encumbrance existing on property which is owned or held by such Person,
regardless of whether the indebtedness or other obligation secured thereby shall
have been assumed by such Person, and (h) any and all deferrals, renewals,
extensions and refundings of, or amendments, modifications or supplements to,
any indebtedness, obligation or liability of the kind described in clauses (a)
through (g).
The term "Designated Senior Indebtedness" means any particular Senior
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which the
Company is a party) expressly provides that such Senior Indebtedness shall be
"Designated Senior Indebtedness" for purposes of the Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness).
REDEMPTION
Optional Redemption
At any time on or after October 2, 2000, the Notes will be redeemable at
the Company's option on at least 20 and not more than 60 days' notice, in whole,
or from time to time, in part, at the following prices (expressed as percentages
of the principal amount), together with accrued and unpaid interest to, but
excluding, the Redemption Date:
If redeemed during the following periods:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
------ ----------------
<S> <C>
October 2, 2000 through and including September 30, 2001.... 102%
October 1, 2001 through and including September 30, 2002.... 101%
</TABLE>
and 100% at October 1, 2002; together, in each case, with accrued interest to,
but excluding the Redemption Date; provided that any semi-annual payment of
interest becoming due on the Redemption Date shall be payable to the Holders of
record on the Regular Record Date of the Notes being redeemed.
If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed by lot or in such other manner it deems appropriate and
fair. If any Note is to be redeemed in part only, a new Note or Notes in
aggregate principal amount equal to the unredeemed principal portion thereof
will be issued at the Corporate Trust Office of the Trustee in The City of New
York or the Security Registrar in Luxembourg. If a portion of a Holder's Notes
is selected for partial redemption and such Holder converts a portion of such
Notes, such converted portion shall be deemed to be taken from the portion
selected for redemption.
Redemption for Taxation Reasons
If the Company determines that principally as a result of any change in, or
amendment to, the laws or regulations prevailing in the U.S. or any political
subdivision or taxing authority thereof or therein, which change or amendment
becomes effective on or after September 11, 1997 or as a result of any
application or official interpretation of such laws or regulations not generally
known before that date (a "Tax Law Change") the Company is or would be required
on the next succeeding Interest Payment Date to pay Additional Amounts (as
defined), and such obligation cannot be avoided by the Company taking reasonable
measures available to it, the Company may redeem the affected Notes in whole,
but not in part, at any time, on giving not less than 20 days' notice, at a
redemption price equal to 100% of the principal amount thereof plus accrued
interest to,
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<PAGE> 21
but excluding, the Redemption Date and any Additional Amounts then payable,
provided that no such notice of redemption shall be given earlier than 90 days
prior to the earliest date on which the Company would be obligated to withhold
or pay Additional Amounts were a payment in respect of the Notes then made.
Prior to the giving of any notice of redemption with respect to a Tax Law
Change, the Company shall deliver to the Trustee (a) a certificate stating that
the Company is entitled to effect such redemption and setting forth a statement
of facts showing that the conditions precedent to the right of the Company so to
redeem have occurred and (b) an opinion of counsel selected by the Company and
reasonably acceptable to the Trustee, to the effect that the Company has or will
become obligated to pay such Additional Amounts as a result of a Tax Law Change.
The Company's right to redeem the affected Notes shall continue as long as the
Company is obligated to pay such Additional Amounts, notwithstanding that the
Company shall have theretofore made payments of Additional Amounts.
PAYMENT AND CONVERSION
The principal of Notes will be payable in U.S. dollars, against surrender
thereof at the Corporate Trust Office of the Trustee in The City of New York,
or, subject to any applicable laws and regulations, at the office of any Paying
Agent, by dollar check drawn on, or by transfer to a dollar account (such
transfer to be made only to Holders of an aggregate principal amount of Notes in
excess of $2,000,000) maintained by the Holder with a bank in The City of New
York. Payment of any installment of interest on Notes will be made to the Person
in whose name such Notes or any predecessor Notes are registered at the close of
business on March 15 or September 15 (whether or not a Business Day) immediately
preceding the relevant Interest Payment Date (a "Regular Record Date"). Payments
of such interest will be made by a dollar check drawn on a bank in The City of
New York mailed to the Holder at such Holder's registered address or, upon
application by the Holder thereof to the Security Registrar not later than the
applicable Regular Record Date, by transfer to a dollar account (such transfer
to be made only to Holders of an aggregate principal amount of Notes in excess
of $2,000,000) maintained by the Holder with a bank in The City of New York. No
transfer to a dollar account will be made unless the Trustee has received
written wire instructions not less than 15 days prior to the relevant payment
date.
Any payment on the Notes due on any day which is not a Business Day need
not be made on such day, but may be made on the next succeeding Business Day
with the same force and effect as if made on such due date, and no interest
shall accrue on such payment for the period between such originally-scheduled
payment date and the next succeeding Business Day. "Business Day," when used
with respect to any place of payment, place of conversion or any other place, as
the case may be, means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in such place of payment, place
of conversion or other place, as the case may be, are authorized or obligated by
law or executive order to close; provided, however, that a day on which banking
institutions in New York, New York or Luxembourg are authorized or obligated by
law or executive order to close shall not be a Business Day for certain
purposes.
Notes may be surrendered for conversion at the Corporate Trust Office of
the Trustee in The City of New York. In addition, Notes may be surrendered for
conversion, subject to any applicable laws and regulations, at the office of any
Conversion Agent outside the United States. Notes surrendered for conversion
must be accompanied by appropriate notices and any payments in respect of
interest or taxes, as applicable, as described above under "-- Conversion."
The Company has initially appointed as Paying Agent and Conversion Agent
the Trustee at its Corporate Trust Office in The City of New York and Banque de
Luxembourg as the Paying Agent and Conversion Agent in Luxembourg. The Company
may at any time terminate the appointment of any Paying Agent or Conversion
Agent and appoint additional or other Paying Agents and Conversion Agents,
provided that until the Notes have been delivered to the Trustee for
cancellation, or moneys sufficient to pay the principal of, premium, if any, and
interest on the Notes have been
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<PAGE> 22
made available for payment and either paid or returned to the Company as
provided in the Indenture, it will maintain offices or agencies in The City of
New York, and so long as the Notes are listed on the Luxembourg Stock Exchange
and the rules of the Luxembourg Stock Exchange shall so require, in Luxembourg,
for payments with respect to the Notes and for the surrender of Notes for
conversion, registration of transfer or exchange and receipt of notices and
demands to or upon the Company. Notice of any such termination or appointment
and of any change in the office through which any Paying Agent or Conversion
Agent will act will be given in accordance with "-- Notices" below.
Interest payable on Notes on any Redemption Date or Repurchase Date that is
an Interest Payment Date will be paid to the Holders of record as of the
immediately preceding Regular Record Date.
All moneys deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of principal of, premium, if any, or
interest on any Notes which remain unclaimed at the end of the earlier of ten
days prior to the date on which such money would escheat to the state and two
years after such payment has become due and payable will be repaid to the
Company, and the Holder of such Note will thereafter look only to the Company
for payment thereof.
PAYMENT OF ADDITIONAL AMOUNTS
The Company will pay to a Non-U.S. Holder (as defined in "Certain Federal
Income Tax Considerations" below) of any Note such additional amounts
("Additional Amounts") as may be necessary in order that every net payment of
the principal of, premium, if any, and interest on such Note, after deduction or
withholding for or on account of any present or future tax, assessment or
governmental charge imposed upon or as a result of such payment by the United
States or any political subdivision or taxing authority thereof or therein, will
not be less than the amount provided for in such Note to be then due and
payable; provided however, that the foregoing obligation to pay Additional
Amounts will not apply to:
(a) any tax, assessment or other governmental charge which would not
have been so imposed but for (i) the existence of any present or former
connection between such Non-U.S. Holder (or between a fiduciary, settlor,
beneficiary, member, shareholder of or possessor of a power over such
Non-U.S. Holder, if such Non-U.S. Holder is a trust, an estate, a
partnership or a corporation) and the United States or any political
subdivision or taxing authority thereof or therein, including, without
limitation, such Non-U.S. Holder (or such fiduciary, settlor, beneficiary,
member, shareholder or possessor) being or having been a citizen,
domiciliary or resident of the United States or treated as a resident
thereof, or being or having been engaged in a trade or business or present
therein, or having or having had a permanent establishment therein; or (ii)
such Non-U.S. Holder's present or former status as a personal holding
company, a foreign personal holding company with respect to the United
States, a controlled foreign corporation, a passive foreign investment
company, or a foreign private foundation or foreign tax exempt entity for
United States tax purposes, or a corporation which accumulates earnings to
avoid United States federal income tax;
(b) any tax, assessment or other governmental charge which would not
have been so imposed but for the presentation by the Non-U.S. Holder of
such Notes for payment on a date more than 15 days after the date on which
such payment became due and payable or the date on which payment thereof is
duly provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, personal property
or similar tax, assessment or governmental charge;
(d) any tax, assessment or other governmental charge which would not
have been imposed but for the failure to comply with any certification,
identification or other reporting requirement concerning the nationality,
residence, identity or connection with the United States of such Non-U.S.
Holder (or beneficial owner of such Note), if compliance is required or
imposed by a statute, treaty, regulation or administrative practice of the
United States as a
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<PAGE> 23
precondition to exemption from all or part of such tax, assessment or other
governmental charge;
(e) any tax, assessment or other governmental charge which is payable
otherwise than by deduction or withholding from payments of principal of,
premium, if any, or interest on such Note;
(f) any tax, assessment or other governmental charge imposed on
interest received by a Non-U.S. Holder actually or constructively holding
10% or more of the total combined voting power of all classes of stock of
the Company entitled to vote;
(g) any tax, assessment or other governmental charge imposed on a
Non-U.S. Holder that is a partnership or a fiduciary or other than the sole
beneficial owner of such payment, but only to the extent that any
beneficial owner or member of the partnership or beneficiary or settlor
with respect to the fiduciary would not have been entitled to the payment
of Additional Amounts had the beneficial owner, member, beneficiary or
settlor directly been the holder of the Note;
(h) any tax, assessment or other governmental charge required to be
withheld by any Paying Agent from any payment of principal of, premium, if
any, or interest on any Note, if such payment can be made without such
withholding by any other Paying Agent in Western Europe; or
(i) any combination of items (a), (b), (c), (d), (e), (f), (g) and
(h).
Notwithstanding the foregoing, the Company shall not be obligated to pay
Additional Amounts in respect of payments becoming due on the Notes more than 15
days after the Redemption Date with respect to any redemption of the Notes
described in the first paragraph under "Redemption -- Redemption for Taxation
Reasons" to the extent that the Company's obligation to pay such Additional
Amounts arises from the Tax Law Change that resulted in such redemption. Except
as specifically provided, the Company is not obligated to make any payment with
respect to any tax.
REPURCHASE AT OPTION OF HOLDERS UPON A FUNDAMENTAL CHANGE
If a Fundamental Change occurs, each Holder of Notes shall have the right,
at the Holder's option, to require the Company to repurchase all of such
Holder's Notes, or any portion of a Note that is $1,000 or an integral multiple
of $1,000 in excess thereof, on the date (the "Repurchase Date" ) that is 45
days after the date of the Company Notice (as defined), at a price (the
"Repurchase Price") (expressed as a percentage of the principal amount) equal to
102% if the Repurchase Date is during the period beginning September 17, 1997
and ending September 30, 2000, and thereafter at the redemption price set forth
under "-- Redemption -- Optional Redemption" which would be applicable to a
redemption at the option of the Company on the Repurchase Date; provided that,
if the Applicable Price (as defined) is less than the Reference Market Price (as
defined), the Company shall repurchase such Notes at a price equal to the
foregoing repurchase price multiplied by the fraction obtained by dividing the
Applicable Price by the Reference Market Price. In each case, the Company shall
also pay accrued interest on the redeemed Notes to, but excluding, the
Repurchase Date. Any Notes repurchased by the Company shall be canceled.
Within 30 days after the occurrence of a Fundamental Change, the Company is
obligated to give to all Holders of the Notes notice, as provided in the
Indenture (the "Company Notice") and in accordance with "-- Notices" below, of
the occurrence of such Fundamental Change and of the repurchase right arising as
a result thereof unless the Company has previously called for the redemption of
all the Notes. The Company must also deliver a copy of the Company Notice to the
Trustee. To exercise the repurchase right, a Holder of Notes must deliver on or
before the 30th day after the date of the Company Notice irrevocable written
notice to the Trustee or any Paying Agent of the Holder's exercise of such
right, together with the Notes with respect to which the right is being
exercised. Beneficial owners of an interest in the Global Note may exercise the
repurchase right by delivering the appropriate instruction form for repurchases
at the election of Holders pursuant to the DTC book-entry repurchase program.
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<PAGE> 24
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with which at least 90% of the then outstanding Common Stock
shall be exchanged for, converted into, acquired for or constitute solely the
right to receive, consideration (whether by means of an exchange offer,
liquidation, tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not, based on the aggregate fair market
value (as defined) of such consideration ("Aggregate Consideration"),
represented by common stock or other shares, having a fair market value equal to
at least 90% of the Aggregate Consideration, that are (or, upon consummation of
or immediately following such transaction or event, will be) listed on a United
States national securities exchange or approved for quotation on the Nasdaq
National Market or any similar United States system of automated dissemination
of quotations of securities prices. The term "Applicable Price" means (i) in the
event of a Fundamental Change in which the holders of Common Stock receive only
cash, the amount of cash received by the holder of one share of Common Stock and
(ii) in the event of any other Fundamental Change, the average of the last
reported sale price for the Common Stock during the ten Trading Days (as
defined) prior to the record date for the determination of the holders of Common
Stock entitled to receive cash, securities, property or other assets in
connection with such Fundamental Change or, if no such record date exists, the
date upon which the holders of the Common Stock shall have the right to receive
such cash, securities, property or other assets in connection with the
Fundamental Change. The term "Reference Market Price" shall initially mean
$15.13 (which is equal to 66 2/3% of the last sale price of the Common Stock on
September 10, 1997) and in the event of any adjustment to the conversion price
described above pursuant to the provisions of the Indenture, the Reference
Market Price shall also be adjusted so that the ratio of the Reference Market
Price to the conversion price after giving effect to any such adjustment shall
always be the same as the ratio of $15.13 to the conversion price specified on
the cover page of this Prospectus (without regard to any adjustment thereto).
Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to Holders of
the Notes. The Company will comply with this rule and any other securities laws
to the extent applicable at that time.
As described above and in the Indenture, upon a Fundamental Change, each
Holder of Notes will have certain rights, at the Holder's option, to require the
Company to repurchase all or a portion of such Holder's Notes. If a Fundamental
Change were to occur, there can be no assurance that the Company would have or
be able to obtain sufficient funds to pay the repurchase price for all Notes
tendered by the Holders thereof. Any future credit agreements or other
agreements relating to other indebtedness (including other Senior Indebtedness)
to which the Company becomes a party may contain restrictions and provisions
which prohibit the Company from repurchasing or redeeming any Notes or provide
that a Fundamental Change would constitute an event of default thereunder. Under
the Credit Facility, a Fundamental Change would constitute an event of default.
In the event a Fundamental Change occurs at a time when the Company is
prohibited from repurchasing or redeeming Notes, the Company could seek the
consent of its lenders to the repurchase of Notes or could attempt to refinance
the borrowings that contain such prohibition. If the Company does not obtain
such a consent or repay such borrowings, the Company would remain prohibited
from repurchasing or redeeming Notes. In such case, the Company's failure to
repurchase tendered Notes would constitute an Event of Default under the
Indenture, which could, in turn, constitute a further default under the other
Indebtedness (including Senior Indebtedness) that the Company has entered or may
enter into from time to time. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the Holders of
Notes.
The repurchase option of Holders upon a Fundamental Change may in certain
circumstances make more difficult or discourage a takeover of the Company and,
thus, the removal of incumbent management. The Fundamental Change repurchase
feature, however, was not the result of management's knowledge of any specific
effort to accumulate the Company's stock or to obtain control of the Company by
means of a merger, tender offer, solicitation or otherwise, or part of a
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<PAGE> 25
plan by management to adopt a series of anti-takeover provisions. Instead, the
Fundamental Change repurchase feature was a result of negotiations between the
Company and Initial Purchasers. Management has no present intention to engage in
a transaction involving a Fundamental Change, although it is possible that the
Company could decide to do so in the future. Subject to the limitations on
mergers, consolidations and transfers of assets described herein, the Company
could, in the future, enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not constitute a Fundamental
Change under the Indenture, but that could increase the amount of indebtedness
(including Senior Indebtedness) outstanding at such time or otherwise affect the
Company's capital structure or credit ratings. The payment of the repurchase
price in the event of a Fundamental Change is subordinated to the prior payment
of Senior Indebtedness as described under "-- Subordination" above.
The term "Fundamental Change" is limited to certain specified transactions
and may not include other events that might adversely affect the financial
condition of the Company, and the repurchase right of holders of the Notes upon
a Fundamental Change would not necessarily afford holders protection in the
event of a highly leveraged transaction, reorganization, merger or similar
transaction involving the Company.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other Person (in a
transaction in which the Company is not the surviving entity) or transfer its
properties and assets substantially as an entirety to any Person (other than to
its wholly owned subsidiaries) unless (i) the Person formed by such
consolidation or into which the Company is merged or the Person to which the
properties and assets of the Company are so transferred (the "Successor") shall
be a corporation, limited liability company, partnership or trust organized and
existing under the laws of the United States of America or any political
subdivision thereof and a resident for tax purposes therein, (ii) the Successor
shall expressly assume the due and punctual payment of the principal of,
premium, if any, and interest on the Notes, and the performance of the other
covenants of the Company under the Indenture, (iii) no default and no Event of
Default shall have occurred and be continuing as a result of such consolidation,
merger, transfer and (iv) certain other conditions are met.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of or premium, if any, on any Note when due; (b) failure to pay
any interest on, or Additional Amounts or Additional Interest with respect to,
any Note when due, continuing for 30 days; (c) failure to perform any other
covenant of the Company in the Indenture, continuing for 60 days after written
notice as provided in the Indenture; and (d) certain events of bankruptcy,
insolvency or reorganization. Subject to the provisions of the Indenture
relating to the duties of the Trustee in case an Event of Default shall occur
and be continuing, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request or direction of any of
the Holders, unless such Holders shall have offered to the Trustee reasonable
indemnity. Subject to such provisions providing for the indemnification of the
Trustee and certain other conditions specified in the Indenture, the Holders of
a majority in aggregate principal amount of the Outstanding Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee.
If an Event of Default (other than as specified in clause (d) above) shall
occur and be continuing, either the Trustee or the Holders of at least 25% in
aggregate principal amount of the Outstanding Notes may accelerate the maturity
of all Notes; provided, however, that after such acceleration, but before a
judgment or decree based on acceleration, the Holders of a majority in aggregate
principal amount of Outstanding Notes may, under certain circumstances, rescind
and annul such acceleration if all Events of Default, other than the non-payment
of accelerated principal, have been cured or waived as provided in the
Indenture. If an Event of Default as specified in clause (d) above occurs and is
continuing, then the principal of, and accrued interest on, all the Notes shall
24
<PAGE> 26
ipso facto become immediately due and payable without any declaration or other
act on the part of the Holders of the Notes or the Trustee. For information as
to waiver of defaults, see "-- Meetings, Modification and Waiver."
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and the Holders of at least 25% in aggregate principal amount of the
Outstanding Notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee, and the
Trustee shall not have received from the Holders of a majority in aggregate
principal amount of the Outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a Holder of a
Note for the enforcement of payment of the principal of, premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note (on or after the relevant repurchase date or redemption date, as the case
may be) or of the right to convert such Note in accordance with the Indenture.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MEETINGS, MODIFICATION AND WAIVER
The Indenture contains provisions for convening meetings of the Holders of
Notes to consider matters affecting their interests.
Modifications and amendments of the Indenture may be made, and certain past
defaults by the Company may be waived, either (i) with the written consent of
the Holders of not less than a majority in aggregate principal amount of the
Notes at the time Outstanding or (ii) by the adoption of a resolution, at a
meeting of Holders of the Notes at which a quorum is present, by the Holders of
at least the lesser of a majority in aggregate principal amount of the Notes at
the time Outstanding and 66 2/3% of the aggregate principal amount of the Notes
represented and entitled to vote at such meeting. However, no such modification
or amendment may, without the consent of the Holder of each Outstanding Note
affected thereby, (a) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, (b) reduce the principal amount of, or the
rate of interest payable thereon or the premium, if any, on any Note, (c) reduce
the amount payable upon a redemption or repurchase, (d) modify the provisions
with respect to the repurchase right of the Holders in a manner adverse to the
Holders, (e) change the obligation of the Company to pay Additional Amounts
described above in a manner adverse to the Holders, (f) change the place or
currency of payment of principal of, or premium, if any, or interest on, or any
other amount payable on, any Note, (g) impair the right to institute suit for
the enforcement of any payment on or with respect to any Note on or after the
Stated Maturity thereof (or, in the case of redemption or repurchase, on or
after the Redemption Date or Repurchase Date), (h) modify the obligation of the
Company to maintain an office or agency in The City of New York and, so long as
the Notes are listed on the Luxembourg Stock Exchange, in a Western European
city, (i) adversely affect the right to convert Notes, (j) modify the
subordination provisions in a manner adverse to the Holders of the Notes, (k)
reduce the above-stated percentage of Outstanding Notes necessary to modify or
amend the Indenture, (l) reduce the percentage of aggregate principal amount of
Outstanding Notes necessary for waiver of compliance with certain provisions of
the Indenture or for waiver of certain defaults, (m) reduce the percentage of
aggregate principal amount of Outstanding Notes required for the adoption of a
resolution or the quorum required at any meeting of Holders of Notes at which a
resolution is adopted, (n) modify the rights of the Holders to require
repurchase of the Securities in a manner adverse to the Holders, or (o) modify
the obligation of the Company to deliver information required under Rule 144A to
permit certain resales of Notes and Common Stock issuable upon conversion
thereof in the event the Company ceases to be subject to certain reporting
requirements under the United States securities laws in a manner adverse to the
Holders. The
25
<PAGE> 27
quorum at any meeting called to adopt a resolution will be persons holding or
representing a majority in aggregate principal amount of the Notes at the time
Outstanding and, at any reconvened meeting adjourned for lack of a quorum, 25%
of such aggregate principal amount.
The Indenture may also be modified or amended without the consent of the
Holders: (i) to evidence the succession of another Person to the Company as
otherwise permitted by the Indenture; (ii) to add to the covenants of the
Company for the benefit of the Holders of the Notes or to surrender any power
conferred upon the Company; (iii) to add any Events of Default; (iv) to secure
the Notes; (v) to make provision for conversion rights and repurchase rights of
the Holders pursuant to the Indenture; (vi) to provide for successor or
additional trustees; (vii) to comply with the requirements of the U.S. Trust
Indenture Act of 1939, as amended; or (viii) to cure any ambiguity, to correct
or supplement any provision which may be inconsistent with any other provision
or to make any other provisions with respect to matters or questions arising
under the Indenture, provided such action shall not adversely affect the
interest of Holders of Notes in any material respect.
REGISTRATION RIGHTS
Pursuant to a registration rights agreement dated September 16, 1997
between the Company and the Initial Purchasers (the "Registration Rights
Agreement"), the Company filed with the Commission within 90 days after the date
of original issuance of the Notes, a registration statement, of which this
Prospectus forms a part (the "Shelf Registration Statement"), covering resales
of the Notes and the Conversion Shares (together, the "Registrable Securities")
and will use its reasonable efforts to cause the Shelf Registration Statement to
be declared effective under the Securities Act within 180 days after the date of
original issuance of the Notes. Pursuant to the Registration Rights Agreement,
the Company must use its reasonable efforts to keep effective the Shelf
Registration Statement until the second anniversary of the last date of original
issuance of the Notes or such earlier date as all Registrable Securities shall
have been disposed of pursuant to the Shelf Registration Statement or on which
all Registrable Securities held by Persons that are not affiliates of the
Company may be resold without registration pursuant to Rule 144(k) under the
Securities Act (the "Effectiveness Period"). The Company is permitted to suspend
the use of this Prospectus, which is part of the Shelf Registration Statement,
in connection with the sales of the Registrable Securities during certain
periods of time under certain circumstances relating to pending corporate
developments and certain other events. The Company will provide to each holder
of Registrable Securities copies of this Prospectus, notify each holder when the
Shelf Registration Statement has become effective and take certain other actions
as are required to permit public resales of the Registrable Securities. A holder
of Registrable Securities that sells such Registrable Securities pursuant to the
Shelf Registration Statement will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement, including certain
indemnification obligations.
The Registration Rights Agreement provides that if, on or prior to the
180th day following the date of original issuance of the Notes, such Shelf
Registration Statement has not been declared effective (a "Registration
Default"), additional payments ("Additional Interest") would accrue on the
affected Notes, from and including the day following such Registration Default
until such time as such Shelf Registration Statement is declared effective.
Additional Interest is paid semi-annually in arrears, with the first semi-annual
payment due on the first Interest Payment Date following the date on which such
Additional Interest begins to accrue, and accrues at a rate per annum equal to
an additional one-quarter of one percent (0.25%) of the principal amount, to and
including the 90th day following such Registration Default and equal to an
aggregate of one-half of one percent (0.50%) thereof from and after the 91st day
following such Registration Default. In the event that during the Effectiveness
Period the Shelf Registration Statement ceases to be effective for more than 90
days or the Company suspends the use this Prospectus for more than 90 days,
whether or not consecutive, during any 12-month period, then the interest rate
borne by affected Notes will increase by one-half of one percent (0.50%) per
annum from the 91st day of the applicable
26
<PAGE> 28
12-month period during which such Shelf Registration Statement ceases to be
effective or the Company suspends the use of this Prospectus, as the case may
be, until the earlier of such time as (i) the Shelf Registration Statement again
becomes effective, (ii) the use of this Prospectus ceases to be suspended or
(iii) the Effectiveness Period expires. The Company agreed in the Registration
Rights Agreement to use its reasonable efforts to cause the Common Stock
issuable upon conversion of the Notes to be quoted on the Nasdaq National
Market, or, if the Common Stock is not then quoted on the Nasdaq National
Market, to be listed on such exchange or market in the United States as the
Common Stock is then listed, upon effectiveness of the Shelf Registration
Statement.
Any change in interest rate on the Notes as a result of the foregoing
provisions will be published in a daily newspaper of general circulation in
Luxembourg, and notice of any such change will be provided to the Luxembourg
Stock Exchange. In addition, notice will be published in a daily newspaper of
general circulation in Luxembourg prior to the eligibility for sale of
registered Notes. The results of sales of registered Notes also will be so
published. Certain services in connection with the sale of registered Notes will
be provided by Banque de Luxembourg, and information regarding the sale of
registered Notes will also be available at Banque de Luxembourg.
This summary of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, all the provisions of the Registration Rights Agreement.
TRANSFER AND EXCHANGE
At the option of the Holder, Notes will be exchangeable at any time into an
equal aggregate principal amount of Notes of different authorized denominations
upon surrender of the Notes to be exchanged at any office maintained by the
Company for such purpose. See "-- Book Entry, Delivery and Form."
Notes may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed) or exchange, at the office of the
Security Registrar, without service charge but, in the case of a transfer, upon
payment of any taxes and other governmental charges or insurance charges as
described in the Indenture. Any registration of transfer or exchange will be
effected upon the Security Registrar being satisfied with the documents of title
and identity of the Person making the request, and subject to such reasonable
regulations as the Company may from time to time agree upon with the Security
Registrar, all as described in the Indenture. Notes may be transferred in whole
or in part in authorized denominations at the Corporate Trust Office of the
Trustee in The City of New York or the Security Registrar in Luxembourg. Upon
any transfer or exchange of any Note (or portion thereof), a new Note may be
obtained at the Corporate Trust Office of the Trustee in The City of New York or
the Security Registrar in Luxembourg.
The Company has initially appointed the Trustee as Security Registrar in
New York, New York and Banque de Luxembourg as Security Registrar in Luxembourg.
The Company reserves the right to vary or terminate the appointment of the
Security Registrar or to appoint additional or other Security Registrars or to
approve any change in the office through which any Security Registrar acts,
provided that there will at all times be a Security Registrar, so long as the
Notes are listed on the Luxembourg Stock Exchange and the rules of the
Luxembourg Stock Exchange shall require, in Luxembourg.
In the event of a redemption of less than all of the Notes for any of the
reasons set forth above under "-- Redemption," the Trustee will not be required
(a) to register the transfer or exchange of Notes for a period of 15 days
immediately preceding the date notice is given identifying the serial numbers of
the Notes called for such redemption or (b) to register the transfer or exchange
of any Note, or portion thereof, called for redemption.
The Company may at any time purchase the Notes in the open market or
otherwise at any price, subject to applicable U.S. securities laws. See
"-- Cancellation"
27
<PAGE> 29
TITLE
Prior to the registration of transfer of any Note, the Company, the
Trustee, any Paying Agent, any Conversion Agent and any Security Registrar may
treat the registered owner (as reflected in the Security Register) of such Note
as the absolute owner thereof (whether or not such Note shall be overdue) for
the purpose of making payment and for all other purposes.
NOTICES
Notice to Holders of Notes will be given by mail to the addresses of such
Holders as they appear on the Security Register. Such notices will be deemed to
have been given on the date of such mailing or on the date of the first such
publication, as the case may be.
In addition, so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of the Luxembourg Stock Exchange shall require, notices
to Holders of the Notes will be given by publication in a daily newspaper of
general circulation in Luxembourg or, if publication in Luxembourg is not
practical, in Western Europe. Such publication is expected to be made in the
Luxemberger Wort. Such notices will be deemed to have been given on the date of
such publication or, if published in such newspapers on different dates, on the
date of the first such publication.
Notice of a redemption of Notes will be given at least once not less than
20 nor more than 60 days prior to the Redemption Date (which notice shall be
published in accordance with the procedures described in the preceding
paragraphs) and shall be irrevocable and will specify the Redemption Date.
REPLACEMENT OF NOTES
Notes that become mutilated, destroyed, stolen or lost will be replaced by
the Company at the expense of the Holder upon delivery to the Trustee or to a
Security Registrar outside the United States (or the Company in the case of
lost, stolen or destroyed certificates) of the mutilated Notes or evidence of
the loss, theft or destruction thereof satisfactory to the Company or the
Trustee or such Security Registrar, as the case may be. In the case of a lost,
stolen or destroyed Note, security or indemnity satisfactory to the Trustee and
the Company and such Security Registrar may be required from the Holder of such
Note before a replacement Note will be issued.
CANCELLATION
All Notes that are surrendered for payment, redemption, repurchase,
registration of transfer or exchange or conversion will forthwith be cancelled
and may not be reissued or resold.
PAYMENT OF STAMP AND OTHER TAXES
The Company will pay all stamp and other similar duties, if any, which may
be imposed by the United States or any political subdivision thereof or taxing
authority thereof or therein with respect to the issuance of the Notes or the
issuance of Common Stock upon any conversion of Notes. Except as described in
the preceding sentence and under "-- Payment of Additional Amounts," the Company
will not be required to make any payment with respect to any other tax,
assessment or governmental charge imposed by any government or any political
subdivision thereof or taxing authority thereof or therein.
SATISFACTION AND DISCHARGE
The Company may discharge its payment obligations under the Indenture while
Notes remain outstanding if (a)(i) all outstanding Notes have become due and
payable or will become due and payable at their scheduled maturity within one
year, or (ii) all outstanding Notes are scheduled for redemption within one
year, and the Company has deposited with the Trustee an amount sufficient to pay
and discharge the entire indebtedness on all outstanding Notes on the date of
their scheduled maturity or the scheduled date of redemption and (b) the Company
has paid all other sums payable by the Company under the Indenture.
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<PAGE> 30
GOVERNING LAW
The Indenture, the Notes and the Registration Rights Agreement are governed
by the laws of the State of New York, United States of America.
INFORMATION CONCERNING THE TRUSTEE
Deutsche Bank AG, New York Branch is the Trustee under the Indenture. The
Company may maintain deposit accounts and conduct other banking transactions
with the Trustee and its affiliates in the normal course of business.
In case an Event of Default of which a Responsible Officer (as defined) of
the Trustee has actual knowledge shall occur and be continuing, the Trustee will
be required in the exercise of its powers to use the degree of care of a prudent
person in the conduct of his own affairs. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any of the Holders of Notes, unless they
shall have offered to the Trustee reasonable security or indemnity.
29
<PAGE> 31
SELLING SECURITYHOLDERS
The following table sets forth the name of each Selling Securityholder and
material relationship, if any, with the Company and (i) the amount of Notes
owned by each Selling Securityholder as of February 28, 1998, (ii) the maximum
amount of Notes which may be offered for the account of such Selling
Securityholder under this Prospectus, (iii) the amount of Common Stock owned by
each Selling Securityholder as of February 28, 1998, and (iv) the maximum amount
of Common Stock which may be offered for the account of such Selling
Securityholder under this Prospectus. This information with respect to each
Selling Securityholder is based upon information provided by or on behalf of
such Selling Securityholder. The Selling Securityholders may offer all, some or
none of their Notes or Conversion Shares.
<TABLE>
<CAPTION>
COMMON
PRINCIPAL PRINCIPAL STOCK
AMOUNT OF AMOUNT OF NOTES OWNED PRIOR COMMON STOCK
NAME OF SELLING SECURITYHOLDER NOTES OWNED OFFERED HEREBY TO OFFERING(1) OFFERED HEREBY(2)
------------------------------ ----------- --------------- -------------- -----------------
<S> <C> <C> <C> <C>
Merrill Lynch International.............. 13,050,000 13,050,000 466,071 466,071
General Motors Employees Domestic Group
Trust.................................. 10,680,000 10,680,000 381,428 381,428
The Strategic Money Management Company
B.V. .................................. 8,300,000 8,300,000 296,428 296,428
Bankers Trust International.............. 5,000,000 5,000,000 178,571 178,571
Bond Fund Series Oppenheimer Bond Fund
For Growth............................. 4,500,000 4,500,000 160,714 160,714
J.P. Morgan Securities Inc.(3)........... 3,550,000 3,550,000 126,785 126,785
Delaware State Employees Retirement
Fund................................... 3,025,000 3,025,000 108,035 108,035
Societe Generale Securities Corp. ....... 2,750,000 2,750,000 98,214 98,214
Deutsche Morgan Grenfell Inc.(4)......... 2,725,000 2,725,000 97,321 97,321
SMALLCAP World Fund, Inc. ............... 2,500,000 2,500,000 89,285 89,285
Paloma Securities L.L.C. ................ 2,170,000 2,170,000 77,500 77,500
Chrysler Corporation Master Retirement
Trust.................................. 2,050,000 2,050,000 73,214 73,214
Allstate Insurance Company............... 2,000,000 2,000,000 95,928(5) 71,428
Lipper Offshore Convertibles, L.P. ...... 2,000,000 2,000,000 71,428 71,428
The Northwestern Mutual Life Insurance
Company................................ 2,000,000 2,000,000 71,428 71,428
Vanguard Convertible Securities Fund,
Inc.................................... 1,850,000 1,850,000 66,071 66,071
Froley, Revy Investment Co. Inc.
Account: Arkansas PERS................. 1,560,000 1,560,000 55,714 55,714
Lipper Convertibles, L.P. ............... 1,500,000 1,500,000 53,571 53,571
Froley, Revy Investment Co. Inc.
Account: Delaware PERS................. 1,350,000 1,350,000 48,214 48,214
Silverton International Fund Limited..... 1,330,000 1,330,000 47,500 47,500
Equitable Life Assurance Separate Account
Convertibles........................... 1,305,000 1,305,000 46,607 46,607
AAM/ZAZOVE Institutional Income Fund,
L.P. .................................. 1,300,000 1,300,000 46,428 46,428
Alexandra Global Investment Fund 1,
Ltd. .................................. 1,300,000 1,300,000 46,428 46,428
Husic Capital Management as a
Discretionary Asset Manager for the
Ameritech Pension Plan under an
Investment Management Agreement dated
December 22, 1995...................... 1,000,000 1,000,000 35,714 35,714
The Minnesota Mutual Life Insurance
Company................................ 1,000,000 1,000,000 35,714 35,714
Hudson River Trust Growth & Income
Account................................ 945,000 945,000 33,750 33,750
Orrington Investments L.P. .............. 937,000 937,000 33,464 33,464
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
COMMON
PRINCIPAL PRINCIPAL STOCK
AMOUNT OF AMOUNT OF NOTES OWNED PRIOR COMMON STOCK
NAME OF SELLING SECURITYHOLDER NOTES OWNED OFFERED HEREBY TO OFFERING(1) OFFERED HEREBY(2)
------------------------------ ----------- --------------- -------------- -----------------
<S> <C> <C> <C> <C>
Declaration of Trust for the Defined
Benefit Plan of ICI American Holdings,
Inc. .................................. 925,000 925,000 33,035 33,035
State Employees' Retirement Fund of the
State of Delaware...................... 900,000 900,000 32,142 32,142
Thermo Electron Balanced Investment
Fund................................... 830,000 830,000 29,642 29,642
Hudson River Trust Balanced Account...... 690,000 690,000 24,642 24,642
Declaration of Trust for the Defined
Benefit Plan of ZENECA Holdings
Inc. .................................. 640,000 640,000 22,857 22,857
Memphis Light, Water and Gas Retirement
Fund................................... 615,000 615,000 21,964 21,964
The J.W. McConnell Family Foundation..... 585,000 585,000 20,892 20,892
Orrington International Fund Ltd. ....... 563,000 563,000 20,106 20,106
Froley, Revy Investment Co. Inc.
Account: ICI American Holdings Trust... 545,000 545,000 19,464 19,464
Froley, Revy Investment Co. Inc.
Account: Zeneca Holdings Trust......... 545,000 545,000 19,464 19,464
Hudson River Trust Growth Investors...... 545,000 545,000 19,464 19,464
Combined Insurance Company of America.... 500,000 500,000 17,857 17,857
Black Diamond Partners, L.P. ............ 460,000 460,000 16,428 16,428
Black Diamond Ltd. ...................... 429,000 429,000 15,321 15,321
Bancroft Convertible Fund, Inc. ......... 350,000 350,000 12,500 12,500
Ellsworth Convertible Growth and Income
Fund, Inc. ............................ 350,000 350,000 12,500 12,500
Hillside Capital Incorporated Corporate
Account................................ 275,000 275,000 9,821 9,821
Froley, Revy Investment Co. Inc.
Account: Nalco Chemical Retirement
Trust.................................. 250,000 250,000 8,928 8,928
First Church of Christ, Scientist --
Endowment.............................. 245,000 245,000 8,750 8,750
Christian Science Trustees for Gifts and
Endowments............................. 225,000 225,000 8,035 8,035
FJH Absolute Return Fund, L.P. .......... 200,000 200,000 7,142 7,142
Partner Reinsurance Company, Ltd. ....... 200,000 200,000 7,142 7,142
The Frist Foundation..................... 160,000 160,000 5,714 5,714
Equitable Life Assurance Separate Account
Balanced............................... 70,000 70,000 2,500 2,500
Summer Hill Global Partners, L.P. ....... 70,000 70,000 2,500 2,500
Worldwide Transactions Ltd. ............. 63,000 63,000 2,250 2,250
Highbridge Capital Corp. ................ 48,000 48,000 1,714 1,714
David Lipscomb University General
Endowment.............................. 40,000 40,000 1,428 1,428
SUBTOTAL........................ $ 92,995,000 $ 92,995,000 3,345,727 3,321,227
------------ ------------ --------- ---------
Unnamed holders of Notes or any future
transferees, pledgees, donees or
successors of or from any such unnamed
holders(6)............................. $ 7,005,000 $ 7,005,000 250,201(7) 250,201
TOTAL........................... $100,000,000 $100,000,000 3,595,928 3,571,428
============ ============ ========= =========
</TABLE>
- ---------------
(1) Comprises the shares of Common Stock owned by each Selling Securityholder
prior to the offering, including the shares of Common Stock into which the
Notes held by such Selling Securityholder are convertible at the initial
conversion rate, excluding fractional shares. Fractional shares will not be
issued upon conversion of the Notes; rather, cash will be paid in lieu of
fractional shares, if any. The Conversion Rate and the number of shares of
Common Stock issuable upon conversion of the Notes are subject to
31
<PAGE> 33
adjustment under certain circumstances. See "Description of
Notes -- Conversion Rights." Accordingly, the number of shares of Common
Stock issuable upon conversion of the Notes may increase or decrease from
time to time.
(2) Assumes conversion into Common Stock of the full amount of Notes held by the
Selling Securityholder at the initial conversion rate and the offering of
such shares by such Selling Securityholder pursuant to this Prospectus. The
Conversion Rate and the number of shares of Common Stock issuable upon
conversion of the Notes is subject to adjustment under certain
circumstances. See "Description of Notes -- Conversion Rights." Accordingly,
the number of shares of Common Stock issuable upon conversion of the Notes
may increase or decrease from time to time. Fractional shares will not be
issued upon conversion of the Notes; rather, cash will be paid in lieu of
fractional shares, if any. The Selling Securityholders may offer and sell
pursuant to the Prospectus, their Notes, their Conversion Shares or both.
(3) J.P. Morgan Securities Inc. acted as an Initial Purchaser in the original
placement of the Notes. In addition, Morgan Guaranty Trust Company of New
York, an affiliate of J.P. Morgan Securities Inc., acts as an administrative
agent and collateral agent for a syndicate of six banks which provide a
credit facility to the Company.
(4) Deutsche Morgan Grenfell, Inc. ("DMG") acted as an Initial Purchaser in the
original placement of the Notes. In addition, Deutsche Bank AG, New York
Branch, an affiliate of DMG, is the trustee under the Indenture for the
Notes. In addition, Deutsche Bank, another affiliate of DMG, provides an
uncommitted $25 million demand line of credit to the Company.
(5) Does not include (i) 5,800 shares of Common Stock owned by CTC Illinois
Trust Company, as trustee for the Allstate Retirement Plan, or (ii) 3,800
shares of Common Stock owned by CTC Illinois Trust Company, as trustee for
Agents Pension Plan.
(6) No such holder may offer Notes pursuant to this Prospectus until such holder
is included as a Selling Securityholder in a supplement to this Prospectus
in accordance with the Registration Rights Agreement.
(7) Assumes that the unnamed holders of Notes or any future transferees,
pledgees, donees or successors of or from any such unnamed holder do not
beneficially own any Common Stock other than the Common Stock issuable upon
conversion of the Notes at the initial conversion rate.
Because the Selling Securityholders may, pursuant to this Prospectus, offer
all or some portion of the Notes and Common Stock acquired or to be acquired
upon conversion of the Notes, they presently hold or, with respect to Common
Stock, have the right to acquire upon conversion of such Notes, no estimate can
be given as to the amount of the Notes and Common Stock that will be held by the
Selling Securityholders upon termination of any such sales. In addition, the
Selling Securityholders identified above may have sold, transferred or otherwise
disposed of all or a portion of their Notes and Common Stock since the date on
which they provided the information regarding their Notes and Common Stock, in
transactions exempt from the registration requirements of the Securities Act.
See "Plan of Distribution."
The Company will pay the expenses of registering the Notes and Common Stock
being sold hereunder.
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<PAGE> 34
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material United States federal income
tax considerations relating to the purchase, ownership and disposition of the
Notes and of Common Stock into which Notes may be converted, but does not
purport to be a complete analysis of all the potential tax considerations
relating thereto. This summary is based on the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the applicable Treasury
Regulations promulgated or proposed thereunder ("Treasury Regulations"),
judicial authority and current administrative rulings and practice, all of which
are subject to change, possibly on a retroactive basis. This summary deals only
with holders that will hold Notes and Common Stock into which Notes may be
converted as "capital assets" (within the meaning of Section 1221). This summary
does not purport to deal with all aspects of U.S. federal income taxation that
might be relevant to particular holders in light of their particular investment
circumstances or status, nor does it address tax considerations applicable to
investors that may be subject to special tax rules, such as certain financial
institutions, tax-exempt organizations, insurance companies, dealers in
securities or currencies, persons that will hold Notes as a position in a
hedging transaction, "straddle" or "conversion transaction" for tax purposes, or
persons that have a "functional currency" other than the U.S. dollar. Moreover,
the effect of any applicable state, local or foreign tax laws is not discussed.
The Company has not sought any ruling from the Internal Revenue Service with
respect to the statements made and the conclusions reached in the following
summary, and there can be no assurance that the Internal Revenue Service will
agree with such statements and conclusions. THE FOLLOWING DISCUSSION IS FOR
GENERAL INFORMATION ONLY. INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD
CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED
STATES FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING
JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
UNITED STATES HOLDERS
As used herein, the term "United States Holder" means the beneficial owner
of a Note or Common Stock that for United States federal income tax purposes is
(i) a citizen or resident of the United States, (ii) treated as a domestic
corporation or domestic partnership or other domestic entity, (iii) an estate,
the income of which is subject to United States federal income taxation
regardless of its source, or (iv) a trust that is subject to the primary
supervision of a court within the United States and the control of a United
States person as described in Section 7701(a)(30) of the Code.
PAYMENT OF INTEREST. Interest on a Note generally will be included in the
income of a United States Holder as ordinary income at the time such interest is
received or accrued, in accordance with such Holder's method of accounting for
United States federal income tax purposes. The Notes will not have original
issue discount.
AMORTIZABLE BOND PREMIUM. If a United States Holder of a Note acquires the
Note at a cost (excluding any value attributable to the conversion feature) that
is in excess of the amount payable at maturity, the United States Holder may
elect under Section 171 of the Code to amortize the excess cost (as an offset to
interest income) on a constant interest rate basis over the term of such Note.
However, because the Notes may be redeemed at the option of the Company at a
price in excess of their principal amount, a United States holder may be
required to amortize any bond premium based on the earlier call date and the
call price payable at that time. If the United States Holder makes an election
to amortize bond premium, the tax basis of all such United States Holder's Notes
will be reduced by the allowable bond premium amortization. The amortization
election would apply to all debt instruments held or subsequently acquired by
the electing purchaser and cannot be revoked without permission from the
Service. On conversion of a Note into shares of Common Stock, no additional
amortization of any bond premium would be allowed, and any remaining premium
would be added to the United States Holder's basis in the Common Stock received.
33
<PAGE> 35
MARKET DISCOUNT. Except as described below, gain recognized on the
disposition of a Note that has accrued market discount will be treated as
ordinary income, and not capital gain, to the extent of the accrued market
discount. "Market discount" is defined generally as the excess, if any, of (i)
the principal amount of the Note over (ii) the tax basis of the Note in the
hands of the United States Holder immediately after its acquisition.
Under a de minimis exception, there is no market discount if the excess of
the principal amount of the obligation over the United States Holder's tax basis
in the obligation is less than 0.25% of the principal amount multiplied by the
number of complete years after the acquisition date to the obligation's date of
maturity. Unless the United States Holder elects to accrue market discount on a
constant yield basis, the accrued market discount generally would be the amount
calculated by multiplying the market discount by a fraction, the numerator of
which is the number of days the obligation has been held by the United States
Holder and the denominator of which is the number of days after the United
States Holder's acquisition of the obligation up to and including its maturity
date.
If a United States Holder of a Note acquired with market discount disposes
of such Note in any transaction other than a sale, exchange or involuntary
conversion, such United States Holder will be deemed to have realized an amount
equal to the fair market value of the Note and will be required to recognize as
ordinary income any accrued market discount. See the discussion below under
"-- Sale, Exchange or Redemption of the Notes" for the tax consequences of a
sale or exchange. A partial principal payment (if any) on a Note will be
includable as ordinary income upon receipt to the extent of any accrued market
discount thereon. Although it is not free from doubt, any accrued market
discount not previously taken into income prior to a conversion of a Note into
shares of Common Stock should carry over to the Common Stock received on
conversion and be treated as ordinary income upon a subsequent disposition of
such Common Stock, to the extent of any gain recognized on such disposition. A
United States Holder of a Note acquired at a market discount also may be
required to defer the deduction of all or a portion of the interest on any
indebtedness incurred or maintained to purchase or carry the Note until the
maturity of the Note or the earlier disposition of the Note in a taxable
transaction.
A United States Holder of a Note acquired at a market discount may elect to
include the market discount in income as it accrues (on either a straight-line
basis or a constant yield basis). This election would apply to all market
discount obligations acquired by the electing United States Holder on or after
the first day of the first year to which the election applies. The election may
be revoked only with the consent of the Service. If a United States Holder of a
Note elects to include market discount in income currently, the rules discussed
above regarding (i) ordinary income recognition resulting from a sale and
certain other disposition transactions and (ii) deferral of interest deductions
would not apply.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES. Upon the sale, exchange or
redemption of a Note, subject to the market discount rules discussed above, a
United States Holder generally will recognize capital gain or loss equal to the
difference between (i) the amount of cash proceeds and the fair market value of
any property received on the sale, exchange or redemption (except to the extent
such amount is attributable to accrued and unpaid interest not previously
recognized by such Holder, which is taxable as ordinary income) and (ii) such
Holder's adjusted tax basis in the Note. A United States Holder's adjusted tax
basis in a Note generally will equal the cost of the Note to such Holder, less
any principal payments received by such Holder and increased by any market
discount previously included in income by such Holder. Such capital gain or loss
will be long-term capital gain or loss if the United States Holder's holding
period in the Note is more than one year at the time of sale, exchange or
redemption. The distinction between capital gain or loss and ordinary income is
important for purposes of the limitations on a United States Holder's ability to
offset capital losses against ordinary income and because United States Holders
that are individuals may be entitled to a preferential tax rate on long-term
capital gains. On August 5, 1997, legislation was enacted which, among other
things, reduces to 20% the maximum rate of tax on long-term capital
34
<PAGE> 36
gains on most capital assets held by an individual for more than 18 months. Gain
on most capital assets held by an individual more than one year and up to 18
months is subject to tax at a maximum rate of 28%.
CONVERSION OF THE NOTES. A United States Holder generally will not
recognize any income, gain or loss upon conversion of a Note into Common Stock,
except with respect to cash received in lieu of a fractional share of Common
Stock. Such Holder's tax basis in the Common Stock received on conversion of a
Note will be the same as such Holder's adjusted tax basis in the Note at the
time of conversion (reduced by any basis allocable to a fractional share
interest), and the holding period for the Common Stock received on conversion
will generally include the holding period of the Note converted.
Cash received in lieu of a fractional share of Common Stock upon conversion
should be treated as a payment in exchange for the fractional share of Common
Stock. Accordingly, the receipt of cash in lieu of a fractional share of Common
Stock generally should result in capital gain or loss (measured by the
difference between the cash received for the fractional share and the United
States Holder's adjusted tax basis in the fractional share).
ADJUSTMENT OF CONVERSION PRICE. The conversion price of the Notes is
subject to adjustment in certain circumstances. Under Section 305(c) of the
Code, adjustments that have the effect of increasing the proportionate interest
of holders of the Notes in the assets or earnings of the Company (for example,
an adjustment following a distribution of property by the Company to its
shareholders) may in some circumstances give rise to deemed dividend income to
United States Holders of such Notes; similarly, a failure to adjust the
conversion price of the Notes to reflect a stock dividend or other event
increasing the proportionate interest of the holders of outstanding Company
Common Stock can in some circumstances give rise to deemed dividend income to
United States Holders of such Common Stock.
DIVIDENDS ON THE COMMON STOCK. The amount of any distribution by the
Company in respect of the Common Stock generally will be treated as a dividend,
subject to a tax as ordinary income, to the extent of the Company's current or
accumulated earnings and profits, then as a tax-free return of capital to the
extent of the Holder's tax basis in the Common Stock and thereafter as gain from
the sale or exchange of such stock.
SALE OF COMMON STOCK. Upon the sale or exchange of Common Stock, a United
States Holder generally will recognize capital gain or loss equal to the
difference between (i) the amount of cash and the fair market value of any
property received upon the sale or exchange and (ii) such Holder's adjusted tax
basis in the Common Stock. Such capital gain or loss will be long-term if the
United States Holder's holding period in the Common Stock is more than one year
at the time of the sale or exchange. The distinction between capital gain or
loss and ordinary income is important for purposes of the limitations on a
United States Holder's ability to offset capital losses against ordinary income
and because United States Holders that are individuals may be entitled to a
preferential tax rate on long-term capital gains. On August 5, 1997, legislation
was enacted which, among other things, reduces to 20% the maximum rate of tax on
long-term capital gains on most capital assets held by an individual for more
than 18 months. Gain on most capital assets held by an individual more than one
year and up to 18 months is subject to tax at a maximum rate of 28%. A United
States Holder's basis and holding period in Common Stock received upon
conversion of a Note are determined as discussed above under "-- Conversion of
the Notes."
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX. In general, certain
information is required to be reported by the payor to the Internal Revenue
Service ("IRS") with respect to payments of principal, premium, if any, and
interest on a Note (including the payment of additional interest under the
Registration Rights Agreement), payments of dividends on Common Stock, payments
of the proceeds of the sale of a Note, and payments of the proceeds of the sale
of Common Stock to certain noncorporate United States Holders. The payor will be
required to withhold backup withholding tax at the rate of 31% if (a) the payee
fails to furnish a taxpayer identification number ("TIN") to the payor or
establish an exemption from backup withholding,
35
<PAGE> 37
(b) the IRS notifies the payor that the TIN furnished by the payee is incorrect,
(c) there has been a notified payee underreporting with respect to interest,
dividends or original issue discount described in Section 3406(c) of the Code or
(d) there has been a failure of the payee to certify under the penalty of
perjury that the payee is not subject to backup withholding under the Code. Any
amounts withheld under the backup withholding rules from a payment to a United
States Holder will be allowed as a credit against such Holder's United States
federal income tax and may entitle the Holder to a refund, provided that the
required information is furnished to the IRS.
NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" or "Non-U.S. Holder"
means any beneficial owner of a Note or Common Stock that is not a United States
Holder.
PAYMENT OF INTEREST. Generally, interest income of a Non-United States
Holder that is not effectively connected with a United States trade or business
will be subject to a withholding tax at a 30% rate (or, if applicable, a lower
treaty rate). Interest paid on a Note (including any Additional Amounts) by the
Company or any Paying Agent to a Non-United States Holder will qualify for the
"portfolio interest exemption" and therefore, subject to the discussion of
backup withholding below, will not be subject to United States federal income
tax or withholding tax, provided that such interest income is not effectively
connected with a United States trade or business of the Non-United States Holder
and provided that the Non-United States Holder (i) does not actually or
constructively own (pursuant to the conversion feature of the Notes or
otherwise) 10% or more of the combined voting power of all classes of stock of
the Company entitled to vote, (ii) is not a controlled foreign corporation
related to the Company actually or constructively through stock ownership, and
(iii) either (a) provides a Form W-8 (or a suitable substitute form) signed
under penalties of perjury that includes its name and address and certifies as
to its non-United States status in compliance with applicable law and
regulations (or, with respect to payments made after December 31, 1998,
satisfies certain documentary evidence requirements for establishing that it is
a non-United States person), or (b) a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business holds the Note and provides a statement to the
Company or its agent under penalties of perjury in which it certifies that such
a Form W-8 (or a suitable substitute) has been received by it from the
Non-United States Holder or qualifying intermediary and furnishes the Company or
its agent with a copy thereof.
Except to the extent that an applicable treaty otherwise provides, a
Non-United States Holder generally will be taxed in the same manner as a United
States Holder with respect to interest if the interest income is effectively
connected with a United States trade or business of the Non-United States
Holder. Effectively connected interest received by a corporate Non-United States
Holder may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate (or, if applicable, a lower treaty rate).
Even though such effectively connected interest is subject to income tax, and
may be subject to the branch profits tax, it is not subject to withholding tax
if the Holder delivers a properly executed IRS Form 4224 (or applicable
successor form) to the payor.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES. A Non-United States Holder of a
Note generally will not be subject to United States federal income tax or
withholding tax on any gain realized on the sale, exchange or redemption of the
Note (including the receipt of cash in lieu of fractional shares upon conversion
of a Note into Common Stock but not including any amount representing interest
or accrued market discount) unless (1) the gain is effectively connected with a
United States trade or business of the Non-United States Holder, (2) in the case
of a Non-United States Holder who is an individual, such Holder is present in
the United States for a period or periods aggregating 183 days or more during
the taxable year of the disposition and certain other requirements are met, or
(3) the Holder is subject to tax pursuant to the provisions of the Code
applicable to certain United States expatriates.
CONVERSION OF THE NOTES. In general, no United States federal income tax
or withholding tax will be imposed upon the conversion of a Note into Common
Stock by a Non-United States Holder
36
<PAGE> 38
except with respect to the receipt of cash in lieu of fractional shares by
Non-United States Holders upon conversion of a Note where any of the conditions
described above under "-- Non-United States Holders -- Sale, Exchange or
Redemption of the Notes" is satisfied.
SALE OR EXCHANGE OF COMMON STOCK. A Non-United States Holder generally
will not be subject to United States federal income tax or withholding tax on
the sale or exchange of Common Stock unless any of the conditions described
above under "-- Non-United States Holders -- Sale, Exchange or Redemption of the
Notes" is satisfied.
DIVIDENDS. Distributions by the Company with respect to the Common Stock
that are treated as Dividends paid (or deemed paid), as described above under
"-- United States Holders -- Dividends" to a Non-United States Holder (excluding
dividends that are effectively connected with the conduct of a trade or business
in the United States by such Holder and are taxable as described below) will be
subject to United States federal withholding tax at a 30% rate (or lower rate
provided under any applicable income tax treaty). Except to the extent that an
applicable tax treaty otherwise provides, a Non-United States Holder will be
taxed in the same manner as a United States Holder on dividends paid (or deemed
paid) that are effectively connected with the conduct of a trade or business in
the United States by the Non-United States Holder. If such Non-United States
Holder is a foreign corporation, it may also be subject to a United States
branch profits tax on such effectively connected income at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. Even though
such effectively connected dividends are subject to income tax, and may be
subject to the branch profits tax, they will not be subject to U.S. withholding
tax if the Holder delivers IRS Form 4224 or applicable successor form to the
payor.
Under current United States Treasury regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussed above and, under the current interpretation of the
Treasury Regulations, for purposes of determining the applicability of a tax
treaty rate. Under recently adopted Treasury Regulations that will be effective
for distributions after December 31, 1998 (the "New Regulations"), however, a
non-U.S. holder of Common Stock who wishes to claim the benefit of an applicable
treaty rate would be required to provide a Form W-8 (or suitable substitute
form) certifying such Non-United States Holder's entitlement to benefits under
the treaty. These certification requirements may be relaxed somewhat in the case
of a Non-United States Holder who holds common stock through an account
maintained at a non-U.S. office of a financial institution. In addition, under
the New Regulations, in the case of common stock held by an entity that is
fiscally transparent (e.g., a partnership) for U.S. federal income tax purposes,
the certification requirement would generally be applied to each of the ultimate
beneficial owners of the entity. Prospective investors should consult their tax
advisors regarding the effect, if any, of the New Regulations on an investment
in the Notes and Common Stock.
DEATH OF A NON-UNITED STATES HOLDER. A Note held by an individual who is a
Non-United States Holder at the time of his or her death will not be includable
in the decedent's gross estate for United States estate tax purposes, provided
that such Holder or beneficial owner did not at the time of death actually or
constructively own 10% or more of the combined voting power of all classes of
stock of the Company entitled to vote, and provided that, at the time of death,
payments with respect to such Notes would not have been effectively connected
with the conduct by such Non-United States Holder of a trade or business within
the United States.
Common Stock actually or beneficially held (other than through a foreign
corporation) by a Non-United States Holder at the time of his or her death (or
previously transferred subject to certain retained rights or powers) will be
subject to United States federal estate tax unless otherwise provided by an
applicable estate tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX. United States
information reporting requirements and backup withholding tax will not apply to
payments on a Note to a Non-United States Holder if the statement described in
"-- Non-United States Holders -- Payment of Interest"
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<PAGE> 39
is duly provided by such Holder, provided that the payor does not have actual
knowledge that the Holder is a United States person.
Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of a Note or any payment of the
proceeds of the sale of Common Stock effected outside the United States by a
foreign office of a "broker" (as defined in applicable Treasury Regulations),
unless such broker is (i) a United States person, (ii) a foreign person that
derives 50% of more of its gross income for certain periods from activities that
are effectively connected with the conduct of a trade or business in the United
States, (iii) a controlled foreign corporation for United States federal income
tax purposes or (iv) with respect to payments made after December 31, 1998, a
foreign partnership that, at any time during its taxable year, is 50% or more
(by income or capital interest) owned by U.S. persons or is engaged in the
conduct of a U.S. trade or business. Payment of the proceeds of any such sale
effected outside the United States by a foreign office of any broker that is
described in (i), (ii), (iii) or (iv) of the preceding sentence will not be
subject to backup withholding tax, but will be subject to information reporting
requirements unless such broker has documentary evidence in its records that the
beneficial owner is a Non-United States Holder and certain other conditions are
met, or the beneficial owner otherwise establishes an exemption. Payment of the
proceeds of any such sale to or through the United States office of a broker is
subject to information reporting and backup withholding requirements, unless the
beneficial owner of the Note provides the statement described in "-- Non-United
States Holders -- Payment of Interest" or otherwise establishes an exemption.
If paid to an address outside the United States, dividends on Common Stock
held by a Non-United States Holder will generally not be subject to the
information reporting and backup withholding requirements described in this
section, provided that the payor does not have actual knowledge that the Holder
is a United States person. With respect to payments made after December 31,
1998, however, the New Regulations may require a Non-United States Holder to
provide a Form W-8 (or satisfy certain documentary evidence requirements for
establishing that it is a non-United States person) or otherwise demonstrate an
exemption.
38
<PAGE> 40
PLAN OF DISTRIBUTION
The Notes were issued to the Selling Securityholders in connection with an
underwritten private placement and are convertible into Common Stock as
described in "Description of Notes -- Conversion Rights." The Company entered
into the Registration Rights Agreement with the Initial Purchasers for the
benefit of holders of the Notes to register their Notes and such Common Stock
under the Securities Act under certain circumstances and at certain times. The
Registration Rights Agreement provides for cross-indemnification of the Selling
Securityholders and the Company for losses, claims, damages, liabilities and
expenses arising, under certain circumstances, out of the registration of the
Notes and such Common Stock.
The Notes and the Conversion Shares offered hereby may be sold from time to
time directly by the Selling Securityholders or, alternatively, through
underwriters, broker-dealers or agents. If the Registrable Securities are sold
through underwriters or broker-dealers, the Selling Securityholder will be
responsible for underwriting discounts or commissions or agent's commissions.
Such Registrable Securities may be sold in one or more transactions at fixed
prices, at prevailing market prices at the time of sale, at varying prices
determined at the time of sale, or at negotiated prices. The methods by which
the Registrable Securities may be sold include (i) transactions on any national
securities exchange or quotation service on which the Registrable Securities may
be listed or quoted at the time of sale, (ii) transactions in the
over-the-counter market, (iii) a block trade in which the broker or dealer so
engaged will attempt to sell the securities as agent but may position and resell
a portion of the block as principal to facilitate the transaction, (iv)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its own account, (v) ordinary brokerage transactions and transactions in
which the broker solicits purchasers, (vi) privately negotiated transactions and
(vii) through the writing of options.
The Company will not receive any of the proceeds from this offering. The
aggregate proceeds to the Selling Securityholders from the sale of the Notes or
Conversion Shares offered by them hereby will be the purchase price of such
Notes and Conversion Shares less discounts and commissions, if any.
The Company's outstanding Common Stock is listed for trading on the Nasdaq
National Market ("Nasdaq"). The Initial Purchasers have advised the Company that
they currently intend to make a market in the Notes; however, they are not
obligated to do so and any such market-making may be discontinued at any time
without notice, in the sole discretion of the Initial Purchasers. Prior to this
offering, the Notes were eligible for trading on the PORTAL market and are
listed on the Luxembourg Stock Exchange. The Notes sold pursuant to the
Registration Statement of which this Prospectus forms a part are not expected to
remain eligible for trading on the PORTAL system. The Company does not intend to
list the Notes for trading on any national securities exchange or on Nasdaq.
Accordingly, no assurance can be given as to the development of any trading
market for the Notes. See "Risk Factors -- Possible Volatility of Stock and Note
Prices; Limited Public Market for the Notes and Restrictions on Transfer."
In order to comply with the securities laws of certain states, if
applicable, the Notes and Conversion Shares may be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
states the Notes and Conversion Shares may not be sold unless they have been
registered or qualified for sale or an exemption from registration or
qualification requirements is available and is complied with.
The Selling Securityholders and any underwriters, dealers or agents that
participate in the distribution of the Notes and Conversion Shares offered
hereby may be deemed to be underwriters within the meaning of the Securities
Act, and any discounts, commissions or concessions received by them and any
provided pursuant to the sale of such securities by them might be deemed to be
underwriting discounts and commissions under the Securities Act.
In addition, any securities covered by this Prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than
39
<PAGE> 41
pursuant to this Prospectus. There is no assurance that any Selling
Securityholder will sell any or all of the Notes or Conversion Shares described
herein, and any Selling Securityholder may transfer, devise or gift such
securities by other means not described herein.
The Company will use its best efforts to cause the Registration Statement
to which this Prospectus relates to become effective as soon as practicable and
to keep the Registration Statement effective for a period of two years from
September 16, 1997 (the latest date of original issuance of the Notes), or until
the Registration Statement is no longer required for transfer of the Notes or
the Conversion Shares. The Company is permitted to suspend the use of this
Prospectus in connection with the sales of Notes and the Conversion Shares by
holders upon the happening of certain events or if there exists any fact that
makes any statement of material fact made in this Prospectus untrue or that
requires the making of additions to or changes in the Prospectus in order to
make the statements herein not misleading until such time as the Company advises
the Selling Securityholders that use of the Prospectus may be resumed. See
"Description of Notes -- Registration Rights." Expenses of preparing and filing
the Registration Statement and all post-effective amendments will be borne by
the Company. Such expenses are estimated to be $ .
LEGAL MATTERS
The validity of the Notes and the Conversion Shares will be passed upon for
the Company by Hogan & Hartson L.L.P., Washington, D.C.
EXPERTS
The consolidated financial statements and schedule of Orbital, incorporated
by reference in this Prospectus from the Company's Form 10-K for the fiscal year
ended December 31, 1996, and the financial statements of ORBCOMM incorporated by
reference in this Prospectus from the Company's Form 10-K/A dated April 8, 1997,
have been incorporated by reference herein and in the registration statement in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
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<PAGE> 42
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY SELLING
SECURITYHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE NOTES OR
COMMON STOCK OFFERED HEREBY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 3
The Company.......................... 4
Risk Factors......................... 4
Recent Developments.................. 10
Ratio of Earnings to Fixed Charges... 11
Use of Proceeds...................... 11
Description of Notes................. 12
Selling Securityholders.............. 30
Certain Federal Income Tax
Considerations..................... 33
Plan of Distribution................. 39
Legal Matters........................ 40
Experts.............................. 40
</TABLE>
- ------------------------------------------------------
ORBITAL SCIENCES CORPORATION LOGO
UP TO $100,000,000
5% CONVERTIBLE SUBORDINATED
NOTES DUE 2002
Prospectus
MARCH , 1998
<PAGE> 43
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
registration of the Notes and Common Stock offered hereby. The Company will bear
all of such expenses, including those of the Selling Securityholders (other than
any underwriting discounts or commissions or any agent commissions). All amounts
are estimated except for the Securities and Exchange Commission registration fee
and Nasdaq quotation fee.
<TABLE>
<CAPTION>
PAYABLE BY
REGISTRANT
----------
<S> <C>
SEC registration fee........................................ $ 30,303
Nasdaq quotation fee........................................ 17,500
Accounting fees and expenses................................ 8,000
Legal fees and expenses..................................... 60,000
Miscellaneous fees and expenses............................. 9,197
--------
Total.................................................. $125,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law sets forth provisions
that define the extent to which a corporation organized under the laws of
Delaware may indemnify directors, officers, employees or agents. Section 145
provides as follows:
(a) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
the person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
(b) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that the person is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is
II-1
<PAGE> 44
fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the present or former director, officer, employee or agent is proper in
the circumstances because the person has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors
designated by majority vote of such directors even though less than a
quorum, or (3) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative, or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to
action in such person's official capacity and as to action in another
capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against such person and incurred by such person in
any such capacity, or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify such person
against such liability under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good
faith and in a manner such person
II-2
<PAGE> 45
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in
a manner "not opposed to the best interests of the corporation" as referred
to in this Section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
Paragraph Ten of the Company's Restated Certificate of Incorporation
provides that the Company shall, to the maximum extent permitted by Delaware
law, indemnify and, upon request, advance expenses to any person:
. . . who is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit, proceeding or claim, whether
civil, criminal, administrative or investigative, by reason of the fact
that such person is or was or has agreed to be a director or officer of
this Corporation or while a director or officer is or was serving at the
request of this Corporation as a director, officer, partner, trustee,
employee or agent of any corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
against expenses (including attorney's fees and expenses), judgments,
fines, penalties and amounts paid in settlement incurred in connection with
the investigation, preparation to defend or defense of such action, suit,
proceeding or claim, provided, however, that the foregoing shall not
require this Corporation to indemnify or advance expenses to any person in
connection with any action, suit, proceeding, claim or counterclaim
initiated by or on behalf of such person. Such indemnification shall inure
to the benefit of the heirs and legal representatives of such person. Any
person seeking indemnification under this Paragraph 10 shall be deemed to
have met the standard of conduct required for such indemnification unless
the contrary shall be established.
Section 102(b)(7) of the Delaware General Corporation Law permits
corporations to eliminate or limit the personal liability of their directors by
adding to the Certificate of Incorporation a provision eliminating or limiting
the personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director for (a) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(b) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (c) payment of dividends or repurchases or
redemptions of stock other than from lawfully available funds, or (d) any
transaction from which the director derived an improper personal benefit.
Paragraph Nine of the Company's Restated Certificate of Incorporation provides
that no director of the Company shall be liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent that exculpation from liability is not permitted under the
Delaware General Corporation Law as in effect at the time such liability is
determined.
In addition, the Company has entered into substantially identical
indemnification agreements with each of its directors and executive officers and
certain other officers. The Company has agreed, to the full extent permitted by
the Delaware General Corporation Law, as amended from time to time, to indemnify
each indemnitee against all loss and expense incurred by the indemnitee because
he was, is or is threatened to be made a party to any completed, pending or
threatened action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he was a director, officer,
employee or agent of the Company or any of its affiliates, or because the
Company has a right to judgment in its favor because of his position with the
Company or any of its affiliates. The indemnitee will be indemnified so long as
he acted in good faith and in a manner reasonably believed by him to be in or
not opposed to the Company's best interests. The agreement further provides that
the indemnification thereunder is not exclusive of any other rights the
indemnitee may have under the Company's Restated Certificate of-Incorporation,
By-Laws or any agreement
II-3
<PAGE> 46
or vote of stockholders, nor may the Restated Certificate of Incorporation or
By-Laws be amended to affect adversely the rights of any indemnitee.
Reference is also made to Section 6 of the Registration Rights Agreement,
which is an exhibit hereto, which may provide for the indemnification of certain
directors and officers under certain circumstances.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
4.1 Form of Certificate of Common Stock*
4.2 Indenture dated as of September 16, 1997 between the Company
and Deutsche Bank AG, New York Branch, as Trustee**
4.3 Form of Note (included in Exhibit 4.2)**
4.4 First Supplemental Indenture dated as of December 15, 1997
between the Company and Deutsche Bank AG, New York Branch***
4.5 Form of Replacement Note***
4.6 Registration Rights Agreement dated as of September 16, 1997
among the Company and the Initial Purchasers****
5 Opinion of Hogan & Hartson L.L.P. regarding legality of
shares being registered****
12 Statements regarding computation of ratios****
23.1 Consent of KPMG Peat Marwick LLP***
23.2 Consent of Hogan & Hartson L.L.P. (included in Exhibit
5)****
24 Power of attorney (included on Signature Page)
25 Form T-1****
</TABLE>
- ---------------
* Incorporated herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-1 (File Number 33-33453) filed on February
9, 1990 and effective on April 24, 1990.
** Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997.
*** Filed herewith.
**** Previously filed.
(b) Financial Statement Schedules.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required in Section 10(a)(3) or the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
II-4
<PAGE> 47
(2) For purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Company's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE> 48
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Loudoun, Commonwealth of Virginia, on the 10th day
of March, 1998.
ORBITAL SCIENCES CORPORATION
By: /s/ DAVID W. THOMPSON
------------------------------------
DAVID W. THOMPSON,
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Each person whose signature appears below hereby constitutes and appoints
David W. Thompson, Bruce W. Ferguson and Leslie C. Seeman, or any of them, their
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for them and in their name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and to file the same with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
they might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on March 10, 1998 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ DAVID W. THOMPSON Chairman of the Board, Principal Executive
- ----------------------------------------------------- Officer and Director
DAVID W. THOMPSON
/s/ JEFFREY V. PIRONE Senior Vice President and Chief Financial
- ----------------------------------------------------- Officer
JEFFREY V. PIRONE
/s/ MICHAEL P. KEEGAN Controller
- -----------------------------------------------------
MICHAEL P. KEEGAN
/s/ FRED C. ALCORN Director
- -----------------------------------------------------
FRED C. ALCORN
/s/ KELLY H. BURKE Director
- -----------------------------------------------------
KELLY H. BURKE
/s/ BRUCE W. FERGUSON Director
- -----------------------------------------------------
BRUCE W. FERGUSON
</TABLE>
II-6
<PAGE> 49
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ DANIEL J. FINK Director
- -----------------------------------------------------
DANIEL J. FINK
/s/ LENNARD A. FISK Director
- -----------------------------------------------------
LENNARD A. FISK
/s/ JACK L. KERREBROCK Director
- -----------------------------------------------------
JACK L. KERREBROCK
/s/ DOUGLAS S. LUKE Director
- -----------------------------------------------------
DOUGLAS S. LUKE
/s/ JOHN L. MCLUCAS Director
- -----------------------------------------------------
JOHN L. MCLUCAS
/s/ JANICE I. OBUCHOWSKI Director
- -----------------------------------------------------
JANICE I. OBUCHOWSKI
/s/ FRANK L. SALIZZONI Director
- -----------------------------------------------------
FRANK L. SALIZZONI
/s/ HARRISON H. SCHMITT Director
- -----------------------------------------------------
HARRISON H. SCHMITT
/s/ JAMES R. THOMPSON Director
- -----------------------------------------------------
JAMES R. THOMPSON
/s/ SCOTT L. WEBSTER Director
- -----------------------------------------------------
SCOTT L. WEBSTER
</TABLE>
II-7
<PAGE> 1
EXHIBIT 4.4
-----------------------------------------------
ORBITAL SCIENCES CORPORATION
COMPANY
DEUTSCHE BANK AG,
NEW YORK BRANCH
TRUSTEE
--------------------
FIRST SUPPLEMENTAL INDENTURE
DATED AS OF DECEMBER 15, 1997
---------------------
5% CONVERTIBLE SUBORDINATED NOTES DUE 2002
-----------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RECITALS.....................................................................................................1
ARTICLE ONE - DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION........................................1
SECTION 1.1 Definitions...............................................................................1
SECTION 1.2. Effect of Headings and Table of Contents.................................................2
SECTION 1.3. Successors and Assigns...................................................................2
SECTION 1.4. Separability Clause......................................................................2
SECTION 1.5. Benefits of Indenture....................................................................2
SECTION 1.6. Governing Law............................................................................2
SECTION 1.7. Effectiveness............................................................................2
ARTICLE TWO - SECURITY FORMS.................................................................................3
SECTION 2.2. Form of Security.........................................................................3
ARTICLE TWELVE - CONVERSION OF SECURITIES....................................................................4
SECTION 12.1. Conversion Privilege and Conversion Price...............................................4
</TABLE>
i
<PAGE> 3
FIRST SUPPLEMENTAL INDENTURE, dated as of December 15, 1997, between
Orbital Sciences Corporation, a Delaware corporation (herein called the
"Company"), and Deutsche Bank AG, New York Branch, as Trustee hereunder (herein
called the "Trustee"), under the indenture between the Company and the Trustee
(the "Indenture") dated as of September 16, 1997.
RECITALS
The Indenture provides that the Company and the Trustee may, at any
time and from time to time, enter into one or more supplemental indentures, in
form satisfactory to the Trustee, for the purpose of supplementing the
provisions of the Indenture with respect to matters or questions arising under
the Indenture as the Company and the Trustee may deem necessary or desirable,
provided that such supplemental provisions do not adversely affect in any
material respect the Holders of Securities.
The Company has duly authorized the execution and delivery of this
First Supplemental Indenture, and all things necessary have been done to make
this First Supplemental Indenture a valid agreement of the Company, in
accordance with its terms.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, the Company and the Trustee mutually covenant
and agree, for the equal and proportionate benefit of all Holders of the
Securities as follows:
ARTICLE ONE
DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION
SECTION 1.1 Definitions.
For all purposes of the Indenture and this First Supplemental
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to the Indenture and this First Supplemental Indenture
as a whole and not to any particular Article, Section or other subdivision.
(3) certain capitalized terms are used herein as they are defined
in the Indenture.
1
<PAGE> 4
SECTION 1.2. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.3. Successors and Assigns
All covenants, stipulations, promises and agreements in this First
Supplemental Indenture by the Company shall bind its successors and assigns,
whether so expressed or not.
SECTION 1.4. Separability Clause.
In case any provision in this First Supplemental Indenture or the
Securities shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 1.5. Benefits of Indenture.
Except as provided in the next sentence, nothing in this First
Supplemental Indenture or in the Securities, express or implied, shall give to
any Person, other than the parties hereto and their successors and assigns
hereunder and the Holders of Securities, any benefit or legal or equitable
right, remedy or claim under this First Supplemental Indenture. The provisions
of Article Thirteen of the Indenture are intended to be for the benefit of, and
shall be enforceable directly by, the holders of Senior Indebtedness of the
Company.
SECTION 1.6. Governing Law.
THIS FIRST SUPPLEMENTAL INDENTURE AND THE SECURITIES SHALL BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK, THE UNITED STATES OF AMERICA,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 1.7. Effectiveness.
This First Supplemental Indenture shall take effect on the date
hereof and shall amend the provisions of the Indenture with respect to the
Securities.
ARTICLE TWO
SECURITY FORMS
SECTION 2.2. Form of Security
The second paragraph on the Reverse of Note is amended and restated
to read as follows:
"No sinking fund is provided for the Securities. Subject
to the redemption of Tax Affected Securities as described below, the
Securities will not be redeemable at the
2
<PAGE> 5
option of the Company prior to October 2, 2000. At any time on or after
October 2, 2000 and prior to maturity, the Securities are subject to
redemption at the option of the Company at any time, in whole or in part,
upon not less than 20 nor more than 60 days' notice to the Holders prior to
the Redemption Date, at the following Redemption Prices (expressed as
percentages of the principal amount thereof) if such Redemption Date occurs
during the following periods:
<TABLE>
<CAPTION>
PERIOD PERCENTAGE
------ ----------
<S> <C>
October 2, 2000 through and including September 30, 2001 102%
October 1, 2001 through and including September 30, 2002 101%
</TABLE>
and 100% on October 1, 2002; together, in each case, with accrued interest
to, but excluding the Redemption Date; Securities that are Tax Affected
Securities are also redeemable, in whole but not in part, under the
circumstances described in the next succeeding paragraph, at a Redemption
Price equal to 100% of the principal amount thereof plus interest accrued
to, but excluding, the Redemption Date; provided, however, that interest
installments on Securities whose Stated Maturity is on or prior to such
Redemption Date shall be payable to the Holders of such Securities, or one
or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof all as provided in the
Indenture."
The sixth paragraph on the Reverse of Note is amended and restated to
read as follows:
"Subject to and upon compliance with the provisions of the
Indenture, the Holder of this Security is entitled, at his or her option,
at any time on or prior to the close of business on October 1, 2002, or in
case this Security or a portion hereof is called for redemption or the
Holder hereof has exercised his or her right to require the Company to
repurchase this Security or such portion hereof then in respect of this
Security until and including, but (unless the Company defaults in making
the payment due upon redemption or repurchase, as the case may be) not
after, the close of business on the Business Day next preceding the
Redemption Date or the Repurchase Date, as the case may be, to convert this
Security (or any portion of the principal amount hereof that is an integral
multiple of U.S.$1,000, provided that the unconverted portion of such
principal amount is U.S.$1,000 or any integral multiple thereof) into fully
paid and nonassessable Common Stock of the Company at an initial Conversion
Price of U.S.$28.00 for each share of Common Stock (or at the current
adjusted Conversion Price if an adjustment has been made as provided in the
Indenture)."
3
<PAGE> 6
ARTICLE TWELVE
CONVERSION OF SECURITIES
SECTION 12.1. Conversion Privilege and Conversion Price
The first sentence of Section 12.1 is amended and restated to read as
follows:
"Subject to and upon compliance with the provisions of
this Article Twelve, at the option of the Holder thereof, the Holder of any
Security is entitled, at any time prior to the close of business on October
1, 2002, to convert such Security into fully paid and nonassessable shares
(calculated as to each conversion to the nearest 1/100th of a share) of
Common Stock at the Conversion Price, determined as hereinafter provided,
in effect at the time of conversion."
* * *
4
<PAGE> 7
This First Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed all as of the day and year first
above written.
ORBITAL SCIENCES CORPORATION
By: /s/ Jeffrey V. Pirone
---------------------------------
Name: Jeffrey V. Pirone
Title: Senior Vice Presindent and
Chief Financial Officer
DEUTSCHE BANK AG, NEW YORK BRANCH
By: /s/ George Gregor
---------------------------------
Name: George Gregor
Title: Vice President
By: /s/ Peter C. Olsen
---------------------------------
Name: Peter C. Olsen
Title: Vice President
5
<PAGE> 1
EXHIBIT 4.5
ORBITAL SCIENCES CORPORATION
5% CONVERTIBLE SUBORDINATED NOTE
DUE 2002
No. R-1 U.S.$100,000,000
CUSIP NO. 685564 AB 2
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY,
THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS SECURITY FOR ALL
PURPOSES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE FOR SECURITIES IN
DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO IN THE
INDENTURE, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC
TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC OR
BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY.
THE SECURITIES EVIDENCED BY THIS SECURITY (OR ITS PREDECESSOR) WERE
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SUCH
SECURITIES AND ANY COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITIES MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. SUCH SECURITIES MAY BE
OFFERED AND SOLD ONLY IN ACCORDANCE WITH THE INDENTURE, COPIES OF WHICH ARE
AVAILABLE FOR INSPECTION AT THE CORPORATE TRUST OFFICE OF THE TRUSTEE. EACH
PURCHASER OF ANY BENEFICIAL INTEREST IN THE SECURITIES IS HEREBY NOTIFIED THAT
THE SELLER OF SUCH BENEFICIAL INTEREST IN THE SECURITIES MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER.
EACH BENEFICIAL OWNER OF AN INTEREST IN ANY OF THE SECURITIES
EVIDENCED BY THIS SECURITY (INCLUDING ANY PARTICIPANT IN THE DEPOSITARY HOLDING
THE GLOBAL SECURITY THAT IS SHOWN AS HOLDING SUCH AN INTEREST ON THE RECORDS OF
SUCH DEPOSITARY AND EACH BENEFICIAL OWNER THAT HOLDS THROUGH ANY SUCH
PARTICIPANT) AGREES FOR THE BENEFIT OF ORBITAL SCIENCES CORPORATION (THE
"COMPANY") THAT THIS SECURITY AND ANY COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED (X)
PRIOR TO THE SECOND ANNIVERSARY (OR SUCH SHORTER PERIOD AS
<PAGE> 2
MAY THEN BE APPLICABLE UNDER THE SECURITIES ACT REGARDING THE HOLDING PERIOD FOR
NOTES UNDER RULE 144(K) OF THE SECURITIES ACT OR ANY SUCCESSOR RULE) OF THE
ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT
WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING
THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY OR A
SUBSIDIARY THEREOF (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER), (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE OFFER, SALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER), (3) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS DEFINED
BELOW) (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER), (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT (AS INDICATED
BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER), (5)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER),
OR (6) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER), IN EACH CASE IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER
JURISDICTION.
EACH BENEFICIAL OWNER OF AN INTEREST IN ANY OF THE SECURITIES
EVIDENCED BY THIS SECURITY AGREES THAT IT WILL FURNISH TO THE COMPANY AND THE
TRUSTEE SUCH CERTIFICATES, LEGAL OPINIONS AND OTHER INFORMATION AS IT MAY
REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES
WITH THE FOREGOING RESTRICTIONS. EACH BENEFICIAL OWNER WILL, AND EACH SUBSEQUENT
BENEFICIAL OWNER OF AN INTEREST IN ANY OF THE SECURITIES EVIDENCED BY THIS
SECURITY IS REQUIRED TO, NOTIFY ANY PURCHASER OF ANY BENEFICIAL INTEREST IN THE
SECURITIES OR SUCH COMMON STOCK ISSUABLE UPON CONVERSION OF THE SECURITIES FROM
IT OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.
THE BENEFICIAL OWNER OF AN INTEREST IN ANY OF THE SECURITIES
EVIDENCED BY THIS SECURITY, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES
FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A OR (2) A NON-U.S. PERSON OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF
PARAGRAPH (O)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT.
THIS SECURITY AND ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME
TO TIME TO MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR RESALES AND OTHER
TRANSFERS OF THIS SECURITY AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN
APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES
RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE
HOLDER AND BENEFICIAL OWNERS OF AN INTEREST IN ANY OF THE SECURITIES EVIDENCED
BY THIS SECURITY AND ANY SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF THIS
SECURITY AND THE BENEFICIAL
2
<PAGE> 3
INTERESTS THEREIN AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR
SUPPLEMENT.
THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE
SECURITY EVIDENCED HEREBY PURSUANT TO CLAUSE (5) ABOVE OR UPON TRANSFER OF THE
SECURITIES EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY
SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT.
ORBITAL SCIENCES CORPORATION, a Delaware corporation (herein called
the "Company", which term includes any successor Person under the Indenture
referred to on the reverse hereof), for value received, hereby promises to pay
to Cede & Co. or registered assigns (the "Holder"), the principal sum of one
hundred million United States Dollars (U.S.$100,000,000) (which amount may from
time to time be increased or decreased to such other principal amounts (which,
taken together with the principal amounts of all other Outstanding Securities,
shall not exceed $100,000,000 in the aggregate at any time) by adjustments made
on the records of the Trustee, as custodian of the Depositary, in accordance
with the rules and procedures of the Depositary) on October 1, 2002 and to pay
interest thereon, from September 16, 1997, or from the most recent Interest
Payment Date (as defined below) to which interest has been paid or duly provided
for, semi-annually in arrears on April 1 and October 1 in each year (each, an
"Interest Payment Date"), commencing April 1, 1998, at the rate of 5% per annum
(together with any Additional Amounts and Additional Interest that the Company
may be required to pay) until the principal hereof is due, and at a rate of 5%
per annum on any overdue principal and premium, if any, and, to the extent
permitted by law, on any overdue interest.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the March 15 and September 15 (whether or not a
Business Day (as defined in the Indenture)), as the case may be, next preceding
such Interest Payment Date. Except as otherwise provided in the Indenture, any
such interest not so punctually paid or duly provided for ("Defaulted Interest")
will forthwith cease to be payable to the Holder on such Regular Record Date and
may either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Company, notice whereof will be given to Holders of Securities not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in the Indenture. Payments of
principal shall be made upon the surrender of this Security, at the office of
the Trustee in The City of New York or, subject to the right of the Company to
terminate such appointment, the Paying Agent in Luxembourg, or at such other
office or agency of the Company as may be designated by it for such purpose in
The City of New York or Luxembourg in such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts, or at such other offices or agencies as the Company
may designate, by United States Dollar check drawn on, or transfer to a United
States Dollar account (such a transfer to be made only to a Holder of an
aggregate principal amount of Securities in excess of U.S.$2,000,000, and only
if such Holder shall have furnished wire instructions in writing to the Trustee
no later than 15 days prior to the relevant payment date) maintained by the
Holder with a bank in The City of New York. Payment of interest on this Security
will be made by United States Dollar check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register, or, upon
written application by the Holder to the Security Registrar setting forth wire
instructions not later than the relevant Regular Record Date, by transfer to a
United States Dollar account (such a transfer to be made only to a Holder of an
aggregate principal amount of Securities in excess of U.S.$2,000,000 and only if
such Holder shall have furnished wire instructions in writing to the Trustee no
later than 15 days prior to the relevant payment date) maintained by the Holder
with a bank in The City of New York.
3
<PAGE> 4
The Company will pay to the Holder of this Security who is a Non-U.S.
Holder (or in the case of a Global Security, to the registered Holder on behalf
of the beneficial owners in such Global Security who are Non-U.S. Holders) such
additional amounts ("Additional Amounts") as may be necessary in order that
every net payment of the principal of, premium, if any, and interest on this
Security (including payment on redemption or repurchase), after deduction or
withholding for, or on account of any present or future tax, assessment or
governmental charge imposed by, or as a result of such payment to, the United
States of America or any political subdivision or taxing authority thereof or
therein (each, a "Taxing Jurisdiction"), will not be less than the amount
provided for in this Security to be then due and payable; provided, however,
that the Company shall not be obligated to pay any Additional Amounts in respect
of payments becoming due on the Securities more than 15 days after the
Redemption Date with respect to any redemption of the Tax Affected Securities
pursuant to the third paragraph of the reverse of this Security to the extent
that the Company's obligation to pay such Additional Amounts arises from the Tax
Law Change that resulted in such redemption; and provided, further, that the
foregoing obligation to pay Additional Amounts will not apply to:
(a) any tax, assessment or other governmental charge which would not
have been so imposed but for (i) the existence of any present or former
connection between such Non-U.S. Holder (or between a fiduciary, settlor,
beneficiary, member, shareholder of or possessor of a power over such
Non-U.S. Holder, if such Non-U.S. Holder is an estate, a trust, a
partnership or a corporation) and the Taxing Jurisdiction, including,
without limitation, such Non-U.S. Holder (or such fiduciary, settlor,
beneficiary, member, shareholder or possessor) being or having been a
citizen, domiciliary or resident of the United States or treated as a
resident thereof, or being or having been engaged in trade or business or
present therein, or having or having had a permanent establishment therein
or (ii) such Non-U.S. Holder's present or former status as a personal
holding company, a foreign personal holding company with respect to the
United States, a controlled foreign corporation, a passive foreign
investment company, or a foreign private foundation or foreign tax exempt
entity for United States federal tax purposes, or a corporation which
accumulates earnings to avoid United States federal income tax;
(b) any tax, assessment or other governmental charge which would not
have been so imposed but for the presentation by the Non-U.S. Holder of
this Security for payment on a date more than 15 days after the date on
which such payment became due and payable or the date on which payment
thereof is duly provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, personal
property or similar tax, assessment or governmental charge;
(d) any tax, assessment or other governmental charge which would not
have been imposed but for the failure to comply with any certification,
identification or other reporting requirement concerning the nationality,
residence, identity or connection with the United States of such Non-U.S.
Holder (or beneficial owner of such Note), if compliance is required or
imposed by a statute, treaty, regulation or administrative practice of the
United States as a precondition to exemption from all or part of such tax,
assessment or other governmental charge;
(e) any tax, assessment or other governmental charge which is
payable otherwise than by deduction or withholding from payments of
principal of, premium, if any, or interest on this Security;
(f) any tax, assessment or other governmental charge imposed on
interest received by a Non-U.S. Holder actually or constructively holding
10% or more of the total combined voting power of all classes of stock of
the Company entitled to vote;
(g) any tax, assessment or other governmental charge imposed on a
Non-U.S. Holder that is a partnership or a fiduciary or other than the
sole beneficial owner of such payment, but only to the extent that any
beneficial owner or member of the partnership or beneficiary or settlor
with respect to the fiduciary would not have been entitled to the payment
of Additional Amounts had the beneficial owner, member, beneficiary or
settlor directly been the Holder of this Security;
4
<PAGE> 5
(h) any tax, assessment or other governmental charge required to be
withheld by any Paying Agent from any payment of principal of, premium, if
any, or interest on any Note, if such payment can be made without such
withholding by any other Paying Agent in Western Europe; or
(i) any combination of items (a), (b), (c), (d), (e), (f), (g) and
(h).
Except as specifically provided herein and in the Indenture, the
Company shall not be required to make any payment with respect to any tax,
assessment or other governmental charge imposed by any government or any
political subdivision or taxing authority thereof or therein. Whenever in this
Security there is a reference, in any context, to the payment of the principal
of, premium, if any, or interest on, or in respect of, this Security, such
mention shall be deemed to include mention of the payment of Additional Amounts
payable as described in the preceding paragraph to the extent that, in such
context, Additional Amounts are, were or would be payable in respect of this
Security and express mention of the payment of Additional Amounts (if
applicable) in any provisions of this Security shall not be construed as
excluding Additional Amounts in those provisions of this Security where such
express mention is not made.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place. Capitalized terms used
herein, including on the reverse hereof, and not defined herein or on the
reverse hereof shall have the respective meanings given to such terms in the
Indenture.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof or an Authenticating Agent by the
manual signature of one of their respective authorized signatories, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Security to be duly
executed.
Dated: December 15, 1997
ORBITAL SCIENCES CORPORATION
By: Jeffrey V. Pirone
-------------------------------------------
Name: Jeffrey V. Pirone
Title: Senior Vice President and
Chief Financial Officer
Attest
By: /s/ Elizabeth A. Abdoo
-------------------------------------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: December 15, 1997
DEUTSCHE BANK AG, NEW YORK BRANCH as Trustee
5
<PAGE> 6
By: George Gregor
-----------------------------------------
Authorized Signatory
6
<PAGE> 7
[REVERSE OF NOTE]
This Security is one of a duly authorized issue of securities of the
Company designated as its "5% Convertible Subordinated Notes due 2002" (herein
called the "Securities"), limited in aggregate principal amount to
U.S.$100,000,000, issued and to be issued under and pursuant to an Indenture,
dated as of September 16, 1997 (herein called the "Indenture"), between the
Company and Deutsche Bank AG, New York Branch, Trustee, herein called the
"Trustee" (which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee, the holders of Senior
Indebtedness of the Company and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. The
Securities are issuable in the denomination of U.S.$1,000 and integral multiples
thereof. As provided in the Indenture and subject to the limitations therein set
forth, the Securities are exchangeable (a) at the office of the Trustee, or at
such other office or agency of the Company as may be designated by it for such
purpose in The City of New York or (b) so long as the Securities are listed on
the Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange
shall so require (and subject to the right of the Company to terminate the
appointment of any Security Registrar (as defined below)), the office of Banque
de Luxembourg, International Department, 14 Boulevard Royal, L-2449 Luxembourg,
or at such other offices or agencies outside the United States as the Company
may designate (each a "Security Registrar").
No sinking fund is provided for the Securities. Subject to the
redemption of Tax Affected Securities as described below, the Securities will
not be redeemable at the option of the Company prior to October 2, 2000. At any
time on or after October 2, 2000 and prior to maturity, the Securities are
subject to redemption at the option of the Company at any time, in whole or in
part, upon not less than 20 nor more than 60 days' notice to the Holders prior
to the Redemption Date, at the following Redemption Prices (expressed as
percentages of the principal amount thereof) if such Redemption Date occurs
during the following periods:
<TABLE>
<CAPTION>
PERIOD PERCENTAGE
------ ----------
<S> <C>
October 2, 2000 through and including September 30, 2001 102%
October 1, 2001 through and including September 30, 2002 101%
</TABLE>
and 100% on October 1, 2002; together, in each case, with accrued interest to,
but excluding the Redemption Date; Securities that are Tax Affected Securities
are also redeemable, in whole but not in part, under the circumstances described
in the next succeeding paragraph, at a Redemption Price equal to 100% of the
principal amount thereof plus interest accrued to, but excluding, the Redemption
Date; provided, however, that interest installments on Securities whose Stated
Maturity is on or prior to such Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Record Dates referred to on the face hereof
all as provided in the Indenture.
If, as a result of a Tax Law Change, the Company is or would become
obligated on the next succeeding Interest Payment Date to pay to the Holder of
any Security Additional Amounts, as described in the third paragraph (following
the legends) of the face of this Security, and such obligation cannot be avoided
by the Company taking reasonable measures available to it, then the Company may,
at its option, redeem the Tax Affected Securities in whole, but not in part, at
any time, on giving not less than 20 days' notice to the Holders prior to the
Redemption Date, at a Redemption Price equal to 100% of the principal amount
plus interest accrued to, but excluding, the Redemption Date, and any Additional
Amounts then payable; provided, that no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which the Company would be
obligated to withhold or pay any such Additional Amounts were a payment in
respect of the Tax Affected Securities then made. Prior to the giving of any
notice of redemption pursuant to this paragraph, the Company shall deliver to
the Trustee (a) an Officers' Certificate stating that the Company is entitled to
effect such redemption and setting forth a statement of facts showing that the
conditions precedent to the right of the Company so to redeem have occurred and
(b) an Opinion of Counsel selected by the Company to the effect that the
7
<PAGE> 8
circumstances referred to above in this paragraph exist. The Trustee shall
accept such opinion as sufficient evidence of the satisfaction of the conditions
precedent described above, in which event it shall be conclusive and binding on
the Holder. The Company's right to redeem the Tax Affected Securities shall
continue as long as the Company is obligated to pay such Additional Amounts,
notwithstanding that the Company shall have made payments of Additional Amounts.
In the event of a redemption of less than all of the Securities, the
Trustee will not be required (a) to register the transfer or exchange of
Securities for a period of 15 days immediately preceding the date notice is
given identifying the serial numbers of the Securities called for such
redemption or (B) to register the transfer or exchange of any Security, or
portion thereof, called for redemption.
In any case where the due date for the payment of the principal or
premium, if any, or interest, including Additional Amounts and Additional
Interest on, any Security or the last day on which a Holder of a Security has a
right to convert his Security shall not be a Business Day, at any Place of
Payment or Place of Conversion, as the case may be, then payment of principal,
premium, if any, or interest, including Additional Amounts and Additional
Interest, or delivery for conversion of such Security need not be made on or by
such date at such place but may be made on or by the next succeeding Business
Day at such Place of Payment or Place of Conversion, as the case may be, with
the same force and effect as if made on the date for such payment or the date
fixed for redemption or repurchase, or by such last day for conversion, and no
interest shall accrue on the amount so payable for the period from and after
such date through such next succeeding Business Day.
Subject to and upon compliance with the provisions of the Indenture,
the Holder of this Security is entitled, at his or her option, at any time on or
prior to the close of business on October 1, 2002, or in case this Security or a
portion hereof is called for redemption or the Holder hereof has exercised his
or her right to require the Company to repurchase this Security or such portion
hereof then in respect of this Security until and including, but (unless the
Company defaults in making the payment due upon redemption or repurchase, as the
case may be) not after, the close of business on the Business Day next preceding
the Redemption Date or the Repurchase Date, as the case may be, to convert this
Security (or any portion of the principal amount hereof that is an integral
multiple of U.S.$1,000, provided that the unconverted portion of such principal
amount is U.S.$1,000 or any integral multiple thereof) into fully paid and
nonassessable Common Stock of the Company at an initial Conversion Price of
U.S.$28.00 for each share of Common Stock (or at the current adjusted Conversion
Price if an adjustment has been made as provided in the Indenture).
In order to convert a Certificated Security, a Holder must surrender
this Security, duly endorsed or assigned to the Company or in blank to a
Conversion Agent. In case surrender shall be made during the period from the
close of business of any Regular Record Date next preceding any Interest Payment
Date to the opening of business on such Interest Payment Date ("Interest
Period"), such Holder shall also be required to pay in New York Clearing House
or other funds acceptable to the Company an amount equal to the interest payable
on such Interest Payment Date on the principal amount of this Security then
being converted, and also to deliver the conversion notice hereon duly executed,
to the Company at the office of the Trustee in The City of New York or the
Conversion Agent in Luxembourg, or at such other office or agency of the
Company, subject to any laws or regulations applicable thereto and subject to
the right of the Company to terminate the appointment of any Conversion Agent as
may be designated by it for such purpose in The City of New York, or Luxembourg,
or at such other offices or agencies as the Company may designate (each a
"Conversion Agent").
No cash payment or adjustment shall be made on conversion of this
Security for interest accrued hereon from the Interest Payment Date next
preceding the date of conversion or for dividends on the Common Stock issued on
conversion hereof subject only (i) in the case of a conversion during an
Interest Period, to the obligation of the Holder to pay to the Company an amount
equal to the accrued interest in respect of this Security as provided in the
immediately preceding paragraph and the obligation of the Company to pay such
accrued interest to the Holder of this Security (or any Predecessor Security) of
record on the Regular Record Date that commences such Interest Period and (ii)
in the case of a conversion on an Interest Payment Date, the obligation of the
Company to pay to the Holder of this Security (or any Predecessor Security) of
record on the Regular Record Date next preceding such Interest Payment Date
interest accrued hereon from such next preceding Interest
8
<PAGE> 9
Payment Date. Following a conversion, the Company shall promptly deliver to the
Holder the fixed number of shares of Common Stock (together with any cash
adjustment, as provided in the Indenture) into which this Security is
convertible and such delivery will be deemed to satisfy the Company's obligation
to pay the principal amount of this Security. No fractions of shares or scrip
representing fractions of shares will be issued on conversion, but instead of
any fractional interest (calculated to the nearest 1/100th of a share) the
Company shall pay a cash adjustment as provided in the Indenture. The Conversion
Price is subject to adjustment as provided in the Indenture. In addition, the
Indenture provides that in case of certain consolidations or mergers to which
the Company is a party (other than a consolidation or merger which does not
result in any reclassification, conversion, exchange or cancellation of the
Common Stock) or the transfer of all or substantially all of the property and
assets of the Company, the Indenture shall be amended, without the consent of
any Holders of Securities, so that this Security, if then Outstanding, will be
convertible thereafter, during the period this Security shall be convertible as
specified above, only into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger or transfer by a holder of
the number of shares of Common Stock of the Company into which this Security
could have been converted immediately prior to such consolidation, merger or
transfer (assuming such holder of Common Stock is not a Constituent Person (as
defined in the Indenture) and failed to exercise any rights of election and
received per share the kind and amount received per share by a plurality of
Non-electing Shares). No adjustment in the Conversion Price will be made until
such adjustment would require an increase or decrease of at least one percent of
such price, provided that any adjustment that would otherwise be made will be
carried forward and taken into account in the computation of any subsequent
adjustment.
Subject to certain limitations in the Indenture, at any time when the
Company is not subject to Section 13 or 15(d) of the United States Securities
Exchange Act of 1934, as amended, upon the request of a Holder of a Restricted
Security or the holder of Common Stock issued upon conversion thereof the
Company will promptly furnish or cause to be furnished Rule 144A Information (as
defined in the Indenture) to such Holder of Restricted Securities or such holder
of Common Stock issued upon conversion of Restricted Securities, or to a
prospective purchaser of any such security designated by any such Holder or
holder, as the case may be, to the extent required to permit compliance by such
Holder or holder with Rule 144A under the Securities Act in connection with the
resale of any such security.
The Holder of this Security and the Common Stock issuable upon
conversion thereof is entitled to the benefits of a Registration Rights
Agreement (subject to the provisions thereof), dated as of September 16, 1997,
between the Company and the Initial Purchasers. In order to participate in any
such registration, Holders must obtain from the Trustee, and complete, sign and
deliver to the Company, a selling securityholder questionnaire, provide certain
other information with respect to the Holder and otherwise comply with the
provisions of the Registration Rights Agreement. The Company shall pay
Additional Interest to the Holder of this Security as provided for in the
Registration Rights Agreement. Whenever in this Security there is a reference,
in any context, to the payment of the principal of, premium, if any, or interest
on, or in respect of, this Security, such mention shall be deemed to include
mention of the payment of Additional Interest payable as described in the
preceding paragraph to the extent that, in such context, Additional Interest is,
was or would be payable in respect of this Security and express mention of the
payment of Additional Interest (if applicable) in any provisions of this
Security shall not be construed as excluding Additional Interest in those
provisions of this Security where such express mention is not made.
If a Fundamental Change (as defined in the Indenture) occurs at any
time on or prior to October 1, 2002, each Holder shall have the right, at such
Holder's option, to require the Company to repurchase all of such Holder's
Securities (or the portion of such Securities that is $1,000 or an integral
multiple of $1,000 in excess thereof) on the 45th day after notice thereof. Such
payment shall be made at the following Repurchase Prices (expressed as
percentages of the principal amount thereof) in the event of a Fundamental
Change occurring during the 12-month period beginning October 1, (September 17,
1997 in the case of the first period):
9
<PAGE> 10
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1997 102%
1998 102%
1999 102%
2000 102%
2001 101%
</TABLE>
and 100% at October 1, 2002; together in each case, with accrued interest to,
but excluding, the Repurchase Date; provided in each case that if the Applicable
Price (as defined in the Indenture) is less than the Reference Market Price (as
defined in the Indenture), the Company shall repurchase such Securities at a
price equal to the product of (i) foregoing Repurchase Price multiplied by (ii)
the fraction obtained by dividing the Applicable Price by the Reference Market
Price. In each case, the Company shall also pay accrued interest, if any, on
such Securities to, but excluding, the Repurchase Date; provided that if such
Repurchase Date is April 1 or October 1, then the interest payable on such date
shall be paid to the Holder of record of the Securities on the Regular Record
Date. Whenever in this Security there is a reference, in any context, to the
principal of any Security as of any time, such reference shall be deemed to
include reference to the Repurchase Price payable in respect of such Security to
the extent that such Repurchase Price is, was or would be so payable at such
time, and express mention of the Repurchase Price in any provision of this
Security shall not be construed as excluding the Repurchase Price in those
provisions of this Security when such express mention is not made.
In the event of a deposit or withdrawal of an interest in this
Security, including an exchange, transfer, redemption, repurchase or conversion
of this Security in part only, the Trustee, as custodian of the Depositary,
shall make an adjustment on its records to reflect such deposit or withdrawal in
accordance with the rules and procedures of the Depositary.
The indebtedness evidenced by this Security and the obligations of
the Company under the Indenture are to the extent and in the manner provided in
the Indenture, subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness (as defined in the Indenture) of the Company,
and this Security is issued subject to such provisions of the Indenture with
respect thereto. Each Holder of this Security, by accepting the same, (a) agrees
to and shall be bound by such provisions, (b) authorizes and directs the Trustee
on his behalf to take such action as may be necessary or appropriate to
effectuate the subordination so provided and (c) appoints the Trustee his
attorney-in-fact for any and all such purposes.
If an Event of Default (as defined in the Indenture) shall occur and
be continuing, the principal of all the Securities, together with accrued
interest to the date of declaration, may be declared due and payable in the
manner and with the effect provided in the Indenture. Upon payment (i) of the
amount of principal so declared due and payable, together with accrued interest,
premium, if any, Additional Amounts, if any, and Additional Interest, if any, to
the date of declaration, and (ii) of interest on any overdue principal and
overdue interest, to the extent permitted by law, all of the Company's
obligations in respect of the payment of the principal of and interest on the
Securities shall terminate.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with either (a) the written consent of
the Holders of not less than a majority in aggregate principal amount of the
Securities at the time Outstanding (as defined in the Indenture) or (b) by the
adoption of a resolution, at a meeting of Holders of the Outstanding Securities
at which a quorum is present, by the Holders of at least the lesser of (i) a
majority in aggregate principal amount of the Securities at the time Outstanding
and (ii) 66-2/3% in aggregate principal amount of the Outstanding Securities
represented and entitled to vote at such meeting. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any
10
<PAGE> 11
Successor Security, whether or not notation of such consent or waiver is made
upon this Security or such Successor Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless (a) such Holder shall have previously
given the Trustee written notice of a continuing Event of Default, (b) the
Holders of not less than 25% in aggregate principal amount of the Securities
Outstanding shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee and offered the
Trustee reasonable indemnity and the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of the Securities
Outstanding a direction inconsistent with such request, and (c) the Trustee
shall have failed to institute any such proceeding, for 60 days after receipt of
such notice, request and offer of indemnity. The foregoing shall not apply to
any suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof, premium, if any, or interest hereon (including any
Additional Amounts and Additional Interest) on or after the respective due dates
expressed herein or for the enforcement of the right to convert this Security as
provided in the Indenture.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, premium,
if any, and interest on (including Additional Amounts and Additional Interest,
as described herein) this Security at the times, places and rate, and in the
coin or currency, herein prescribed or to convert this Security as provided in
the Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of Securities is registrable on the Security
Register (as defined in the Indenture) upon surrender of a Security for
registration of transfer (a) at the Corporate Trust Office of the Trustee or at
such other office or agency of the Company as may be designated by it for such
purpose in The City of New York, or (b) so long as the Securities are listed on
the Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange
shall so require, the office of Banque de Luxembourg in Luxembourg or (c)
subject to any laws or regulations applicable thereto and to the right of the
Company to terminate the appointment of any Security Registrar (as defined in
the Indenture), at the offices of the Security Registrars described herein or at
such other offices or agencies as the Company may designate, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder thereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees by the Registrar. No service
charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to recover any tax or other
governmental charge payable in connection therewith.
No recourse for the payment of the principal (and premium, if any) or
interest on this Security and no recourse under or upon any obligation, covenant
or agreement of the Company in the Indenture or any indenture supplemental
thereto or in any Security, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder,
employee, agent, officer or director or subsidiary, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of consideration for the issue hereof, expressly waived and released.
Prior to due presentation of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered, as the owner thereof for
all purposes, whether or not such Security be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY THE LAW OF THE
STATE OF NEW YORK, UNITED STATES OF AMERICA WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS.
11
<PAGE> 12
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
12
<PAGE> 13
ASSIGNMENT FORM AND CERTIFICATE OF TRANSFER
To assign this Security fill in the form below:
(I) or (we) assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number, if any)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ______________ agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
Your signature:
---------------------------------------------------------
(Sign exactly as your name appears on
the other side of this Security)
Date:
-------------------
Signature Guarantee:*
---------------------------------------------------
In connection with any transfer of any of the Securities evidenced by
this certificate occurring prior to the date that is two years (or such shorter
period as may then be applicable under the United States Securities Act of 1933,
as amended (the "Securities Act") (or any successor provision)) after the later
of the date of original issuance of such Securities and the last date, if any,
on which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being transferred:
CHECK ONE BOX BELOW
(1) [ ] to the Company or a Subsidiary thereof; or
(2) [ ] pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) [ ] pursuant to and in compliance with Regulation S under the
Securities Act; or
(4) [ ] pursuant to Rule 144 of the Securities Act;
(5) [ ] pursuant to an effective registration statement under the
Securities Act; or
(6) [ ] pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any person
other than the registered holder thereof; provided, however,
- -----------------
* Signature must be guaranteed by a commercial bank, trust company or
member firm of a major stock exchange.
13
<PAGE> 14
that if box (2), (3), (4), (5), (6) or (7) is checked, the Trustee (as
instructed by the Company) and the Company may require, prior to registering any
such transfer of the Securities, such legal opinions, certifications and other
information as the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, such as
the exemption provided by Rule 144 under such Act.
14
<PAGE> 15
ELECTION OF HOLDER TO REQUIRE REPURCHASE
1. Pursuant to Section 14.1 of the Indenture, the undersigned
hereby elects to have this Security repurchased by the Company.
2. The undersigned hereby directs the Company to pay it or
_______________ the Repurchase Price plus interest accrued to, but excluding,
the Repurchase Date, as provided in the Indenture.
Dated:
------------------------------ ------------------------------------
------------------------------------
Signature(s)
Signature(s) must be guaranteed by a
commercial bank or trust company or
a member firm of a major stock
exchange if shares of Common Stock
are to be issued, or Securities to
be delivered, other than to or in
the name of the registered Holder.
------------------------------------
Signature Guaranteed
Principal amount to be repurchased:
-------------------
Remaining principal amount following such repurchase:
------------------
NOTICE: The signature to the foregoing Election must correspond to the name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.
15
<PAGE> 16
CONVERSION NOTICE
The undersigned Holder of this Security hereby irrevocably exercises
the option to convert this Security, or any portion of the principal amount
hereof (which is an integral multiple of U.S.$1,000) below designated, into
shares of Common Stock of the Company in accordance with the terms of the
Indenture referred to in this Security, and directs that such shares, together
with a check in payment for any fractional shares and any Securities
representing any unconverted principal amount hereof, be delivered to and be
registered in the name of the undersigned unless a different name has been
indicated below. If shares of Common Stock or Securities are to be registered in
the name of a Person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto. Any amount required to be paid by
the undersigned on account of interest accompanies this Security.
Dated:
--------------------------------- ------------------------------------
If shares or Securities are to be ------------------------------------
registered in the name of a Person Signature(s)
other than the Holder, please print
such Person's name and address: If only a portion of the Security is
to be converted, please indicate:
- --------------------------------------- Signature(s) must be guaranteed by a
Name commercial bank or trust company or
a member firm of a major stock
exchange if shares of Common Stock
are to be issued, or Securities to
be delivered, other than to or in
- --------------------------------------- the name of the registered Holder.
Address
Social Security or other Taxpayer
Identification Number, if any ------------------------------------
Signature Guaranteed
- ---------------------------------------
If only a portion of the Security is Principal amount and denominations
to be converted, please indicate of Securities representing
principal amount to be converted: unconverted principal amount to be
issued:
U.S.$_______________________ U.S$:_______________________
Denomination: U.S.$_________________
(any integral multiple of U.S.
$1,000).
16
<PAGE> 1
Exhibit 23.1
Accountants' Consent
The Board of Directors
Orbital Sciences Corporation:
We consent to the use of our reports incorporated herein by reference, which
reports appear in the Company's 1996 annual report on Form 10-K (along with
Amendment No. 1 on Form 10-K/A dated April 8, 1997), and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Washington, D.C.
March 10, 1998
