-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WxdQFIFDF9fQ5iLYKHAH6j1zEK58HgqmbvgtFBLKOOz7Kwli5SINLT5DVYht01fa Gh98ZKl9V2WFw/tvhnZ/aQ== 0000950133-96-000287.txt : 19960329 0000950133-96-000287.hdr.sgml : 19960329 ACCESSION NUMBER: 0000950133-96-000287 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORBITAL SCIENCES CORP /DE/ CENTRAL INDEX KEY: 0000820736 STANDARD INDUSTRIAL CLASSIFICATION: GUIDED MISSILES & SPACE VEHICLES & PARTS [3760] IRS NUMBER: 061209561 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-18287 FILM NUMBER: 96540240 BUSINESS ADDRESS: STREET 1: 21700 ATLANTIC BOULEVARD CITY: DULLES STATE: VA ZIP: 20166 BUSINESS PHONE: 7034065000 MAIL ADDRESS: STREET 2: 21700 ATLANTIC BLVD CITY: DULLES STATE: VA ZIP: 20166 FORMER COMPANY: FORMER CONFORMED NAME: ORBITAL SCIENCES CORP II DATE OF NAME CHANGE: 19900212 10-K 1 ORBITAL SCIENCES CORPORATION FORM 10-K, 12/31/95. 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- /X/ For the fiscal year ended December 31, 1995 or / / Transition report pursuant to Section 13 or 15(d) of the Securities for the transition period from __ to __ Commission file number 0-18287 ORBITAL SCIENCES CORPORATION 21700 ATLANTIC BOULEVARD 06-1209561 DULLES, VIRGINIA 20166 (I.R.S. Employer I.D. No.) (Address of principal executive offices) (703) 406-5000 (Registrant's telephone number) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.01 (listed on The Nasdaq National Market System) ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / The aggregate market value of the voting stock held by non-affiliates of the registrant based on the closing price as reported on the Nasdaq Stock Market on March 20, 1996 was approximately $350,131,005. As of March 20, 1996, 25,935,630 shares of the registrant's Common Stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Annual Report to Stockholders for fiscal year ended December 31, 1995 (the "Annual Report") are incorporated by reference in Parts I and II of this Report. Portions of the registrant's definitive Proxy Statement dated March 25, 1996 (the "Proxy Statement") are incorporated by reference in Part III of this Report. 2 ORBITAL SCIENCES CORPORATION INDEX TO ANNUAL REPORT ON FORM 10-K FOR YEAR ENDED DECEMBER 31, 1995
PART I PAGE - ------ ---- ITEM 1 BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . 1 ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . 11 ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . 12 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . 12 ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . 12 PART II - ------- ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY . . . . . . . . . . . 14 ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF . . . . . . . . . . 14 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . 14 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS . . . . . . . 14 PART III - -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . 14 ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . 15 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . 15 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . 15 PART IV - ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 15
ii 3 ITEM 1. BUSINESS BACKGROUND Orbital Sciences Corporation (together with its subsidiaries, "Orbital" or the "Company") is a space technology and satellite services company that designs, manufactures, operates and markets a broad range of space-related products and services. Orbital's products and services are grouped into four categories: Launch Systems, Space and Electronics Systems, Ground Systems and Software, and Communications and Information Services. Launch Systems include space and suborbital launch vehicles, and orbit transfer and other advanced vehicles; Space and Electronics Systems include satellites, spacecraft platforms, space sensors and instruments, space payloads and experiments, as well as advanced electronics and data management systems; Ground Systems and Software products include commercial satellite remote sensing ground station and related information processing software, automated aeronautical information and air traffic management systems, defense system software and network systems consulting services; and Communications and Information Services include satellite-based two-way mobile data communications systems and services, satellite-based navigation and communications products and remote sensing services. Orbital was incorporated in Delaware in 1987 to consolidate the assets, liabilities and operations of Space Systems Corporation (formerly named Orbital Sciences Corporation) ("SSC") and Orbital Research Partners, L.P. (the "Partnership") through an exchange offer to the Partnership and to the stockholders of SSC (the "Consolidation"). As a result of the consummation of the Consolidation in 1988, SSC became a wholly owned subsidiary of Orbital, and Orbital acquired substantially all the assets and liabilities of the Partnership. The Company acquired Space Data Corporation ("Space Data") in 1988, thereby expanding its product lines and increasing its vertical integration in production and testing. In late 1992, SSC and Space Data were merged into Orbital, with the Company being the surviving corporation. In September 1993, Orbital acquired all the assets of the Applied Science Operation, a division of The Perkin-Elmer Corporation ("ASO"). This operation designs, develops and produces satellite-borne scientific sensors for space and terrestrial research and in situ atmospheric monitoring equipment for human space flight programs. In August 1994 and December 1994, Orbital acquired Fairchild Space and Defense Corporation ("Fairchild") and Magellan Corporation ("Magellan"), respectively. The Fairchild acquisition enhanced Orbital's satellite system and subsystem development and production capabilities and expanded Orbital's existing product lines by adding various sophisticated electronics products. Magellan designs, manufactures and markets hand-held receivers for Global Positioning System ("GPS") satellite-based navigation and positioning for commercial and consumer markets, along with portable satellite communications equipment. In November 1995, Orbital acquired MacDonald, Dettwiler and Associates, Ltd. ("MDA"), a leading supplier of commercial space remote sensing ground stations and related information processing software headquartered in Vancouver, British Columbia. MDA complements Orbital's satellite information collection businesses and has strengthened Orbital's ability to offer a broader range of space-based information services. DESCRIPTION OF ORBITAL'S PRODUCTS AND SERVICES The space products and services provided by the Company are grouped into four categories: Launch Systems, Space and Electronics Systems, Ground Systems and Software, and Communications and Information Services. Orbital's business is not seasonal to any significant extent. LAUNCH SYSTEMS The Company's Launch Systems Group's products include space and suborbital launch vehicles and orbit transfer and other advanced vehicles. 1 4 SPACE LAUNCH VEHICLES. The Company has developed three space launch vehicles: the Pegasus(R) launch vehicle; the Pegasus XL(TM) launch vehicle; and the Taurus(R) launch vehicle. Orbital's Pegasus and Pegasus XL vehicles are launched from beneath a modified large aircraft such as the Company's leased Lockheed L-1011 to deploy satellites weighing up to 1,000 pounds into low-Earth orbit. Through December 1995, the Company had conducted a total of seven standard Pegasus missions, all of which were fully or partially successful. Whether a mission is fully or partially successful depends on the particular mission requirements designated by the customer. Prior to its first successful flight in March 1996, the modified Pegasus XL, developed to deploy heavier satellites into orbit, had two unsuccessful flights, one occurring in June 1994 and the other in June 1995. The first Pegasus XL failure was caused by inaccurate aerodynamic modeling of the vehicle. The second Pegasus XL failure resulted from human assembly error involving the improper installation of a small component that prevented the Stage 1/Stage 2 interstage from properly separating from Stage 2. Following a comprehensive review of design, assembly, test and operations procedures, the Pegasus XL returned to flight on March 8, 1996, successfully launching a satellite for the U.S. Air Force to its targeted orbit. Customers for Pegasus launch vehicles include the National Aeronautics and Space Administration ("NASA"), the U.S. Air Force, the Defense Advanced Research Projects Agency ("DARPA"), the Ballistic Missile Defense Organization ("BMDO"), Spain's National Institute of Aerospace Technology, the Company's affiliated partnership, ORBCOMM Global L.P. ("ORBCOMM Global") and the Company's wholly owned subsidiary, Orbital Imaging Corporation ("ORBIMAGE"). The higher capacity Taurus vehicle is a ground-launched derivative of the Pegasus vehicle that can carry payloads weighing up to 3,000 pounds to low-Earth orbit and payloads weighing up to 800 pounds to geosynchronous orbit. In March 1994, Orbital successfully launched the first Taurus vehicle, deploying two satellites for DARPA. The Company received several new Taurus orders in 1995, including a commercial launch for Ball Corporation ("Ball") carrying a U.S. Navy satellite scheduled for late 1996, a launch for the U.S. Air Force in 1997, and options for up to 11 Taurus missions pursuant to a contract award under NASA's Med-Lite program. The Taurus mission for Ball is also expected to launch two satellites for ORBCOMM Global as a secondary payload. During 1995, Orbital and Rockwell International Corporation ("Rockwell") teamed together to develop and construct the X-34 reusable launch vehicle in a project to be jointly funded by Orbital, Rockwell and NASA. The X-34 was intended as a next-generation space launch vehicle that would significantly reduce the costs of placing a satellite in orbit. Following an assessment that the design of the vehicle would not achieve the economic and performance goals of the project, development efforts on the vehicle were terminated in early 1996. Orbital continues to explore new, longer-term research and development opportunities for more affordable and flexible space launch vehicles. SUBORBITAL LAUNCH VEHICLES. Suborbital launch vehicles place payloads into a variety of high-altitude trajectories but, unlike space launch vehicles, do not place payloads into orbit around the Earth. The Company's suborbital launch products include suborbital vehicles and their principal subsystems, payloads carried by such vehicles and related launch support installations and systems used in their assembly and operation. The Company offers its customers customized vehicle and payload design, manufacturing and integration, launch and mission support and tracking and recovery services, as well as construction and activation of launch pads and other infrastructure elements. Customers typically use the Company's suborbital launch vehicles to launch scientific and other payloads and for defense-related applications such as target and interceptor experiments. Primary customers of the Company's suborbital launch vehicles include the U.S. Army, the U.S. Navy and BMDO. Orbital's primary programs in 1995 for suborbital launch vehicles and related systems included the STORM contract pursuant to which Orbital provided ballistic and maneuvering tactical target suborbital vehicles for use with the PATRIOT and Theater High Altitude Area Defense Interceptor anti-missile defense systems for target and interceptor experiments for the U.S. Army, the Navy LEAP 2 5 contract with BMDO and the High-Gear contract with the Massachusetts Institute of Technology - Lincoln Laboratory pursuant to which Orbital provided suborbital vehicles to serve as targets for U.S. Air Force testing of anti-missile defense systems. Orbital conducted ten suborbital launches in 1995, all of which were successful. Since January 1993, the Company has conducted a total of 26 launches of suborbital vehicles, all of which were successful. SPACE AND ELECTRONICS SYSTEMS The Company's Space and Electronics Systems Group's products enable Orbital to provide its customers fully integrated, low-cost space systems, networks and related services. The Company's most significant Space and Electronics Systems products are satellite systems and payloads, space sensors and instruments, defense electronics and sensors, and transit management systems. The Company designs and produces small and medium class satellites for scientific, military and commercial applications. The Company's small satellite platforms such as PegaStar(TM), MicroStar(TM) and PicoStar(TM) are designed and produced to be launched by the Pegasus or Taurus launch vehicle. The PegaStar spacecraft is a general purpose spacecraft that has successfully performed one mission for the U.S. Air Force measuring space radiation and carrying out related experiments. It will also be used for certain of the Company's satellite-based remote sensing systems, such as the SeaStar(TM) ocean and land surface environmental monitoring satellite system. Orbital's MicroStar spacecraft platform, which is placed into orbit by the Pegasus launch vehicle, is designed for use in ORBCOMM Global's satellite-based two-way data communications network (the "ORBCOMM System") and also for a variety of small space science and remote sensing projects, including some of those being pursued by ORBIMAGE. In April 1995, the first three MicroStar spacecraft were deployed, two for the ORBCOMM System, and the other for ORBIMAGE to monitor lightning and severe weather patterns for NASA. Customers for the Company's small spacecraft include NASA, the U.S. Air Force and ORBCOMM Global. In late 1995, DARPA selected the Company for a contract to develop a specialized MicroStar communications satellite. Orbital's medium class satellites, such as NASA's TOPEX/Poseidon, NASA's Upper Atmosphere Research satellite, and the National Oceanic and Atmospheric Administration's Landsat 4 and Landsat 5 have been in space for several years, and are used to gather various scientific data, such as ocean topography and Earth imaging information. In August 1995, Orbital was selected to become the spacecraft supplier to Johns Hopkins University, which is leading NASA's Far Ultraviolet Spectroscopy Explorer (FUSE) program to measure the early universe's radiation. The FUSE spacecraft is presently scheduled for launch in 1998. In addition, Orbital designs and manufactures satellite command and data handling, attitude control and structural subsystems for a variety of government and commercial customers, and provides a broad range of spacecraft design and engineering services as well as specialized analytical engineering services for NASA, the Department of Defense ("DoD"), the Department of Energy and other customers. Orbital provided engineering support and services for the first repair mission for the orbiting Hubble Space Telescope, and will provide similar services on a second repair mission currently scheduled for early 1997. The Company also develops, manufactures and markets defense electronics, including advanced avionics and data management systems for aircraft flight operations and ground support. These systems collect, process and store mission-critical data for, among other things, mission planning and flight operations, and manage on-board equipment for strategic and tactical military aircraft, helicopters, satellites and surface vehicles. The primary customers for data management systems are the U.S. Navy, the U.S. Air Force, and various DoD prime contractors and foreign governments. The Company is the leading supplier of certain avionics systems and products, including mission data loaders for the U.S. Navy and data transfer equipment and digital terrain systems for the U.S. Air Force. In addition, the 3 6 Company provides stores management systems, including weapons arming and firing functions for use on tactical aircraft and helicopters. The avionics systems and products are deployed on a number of aircraft, including the F-4, F-14, F-16, F-18 and F-22 and the LAMPS Helicopter. In addition, Orbital produces electronics and data management systems that have been applied to the development and manufacture of "intelligent transportation systems," primarily for metropolitan mass transit operators, that provide GPS-based tracking of vehicles and allow for communications and schedule management. Customers for Orbital's intelligent transportation systems include several metropolitan mass transit operators, such as the Chicago Transit Authority. Orbital's Pomona, California operations produce satellite-borne scientific sensors and instruments, such as atmospheric ozone monitoring instruments and environmental sensors. For example, the Total Ozone Mapping Spectrometer ("TOMS") instrument is being produced by the Company for launch on a Pegasus vehicle for NASA. TOMS measures ozone concentrations around the world for the purpose of monitoring the effect of man-made chemicals and atmospheric conditions on the ozone layer. In addition, Orbital is currently developing and producing various in situ monitoring products for space and defense applications. These products include an atmospheric monitoring system for use on the Space Station called the Atmospheric Composition Monitoring Assembly ("ACMA"). The ACMA, developed under a contract with The Boeing Company, will measure various atmospheric gases in the crew's living quarters on the Space Station for the purpose of ensuring a healthy environment for astronauts. The Company also produces the Central Atmospheric Monitoring System for the U.S. Navy for use on submarines. GROUND SYSTEMS AND SOFTWARE As a result of the Company's November 1995 acquisition of MDA, Orbital's Ground Systems and Software Group is a leading supplier of commercial satellite remote sensing ground stations and a provider of advanced space-qualified software, air navigation systems, and network communications training and consulting services. The Company's defense electronics systems have also expanded to include software-intensive systems designed for naval operations, artillery command and control, radar deception systems and logistics support. The Company develops, provides and upgrades commercial satellite remote sensing ground stations and related information processing software. Of the 27 major non-military satellite ground stations around the world, MDA has built or been involved in the construction of 23 ground stations in 20 countries. These ground stations are designed to receive and process data from the eight major civil and commercial Earth observation satellites currently in operation. In 1995, the Company completed the ground station and mission control and management systems for the Canadian Space Agency's RADARSAT-1 remote sensing satellite that was launched successfully in November 1995. MDA also develops and markets software that generates and processes imagery and mapping products from satellites and airborne sensors. Customers for the Company's ground stations and Earth information systems include the European and Canadian Space Agencies as well as Canadian and foreign government customers. The Company's aviation systems products include automated aeronautical information and air traffic management systems. The Company has developed the Pegasus-AIS(TM) (not related to the Pegasus launch vehicle), an off-the shelf, automated aeronautical information management system that delivers weather and route information directly to a pilot by computer. These systems are designed to address a growing trend toward commercialization and automation of air traffic control systems. Faster and less expensive to operate than traditional manual systems, automated aeronautical information systems provide pilots and other users with aeronautical and meteorological information on a timely basis. Customers for the Company's aviation systems products include the military and civil aviation authorities in various countries such as Australia, Belgium, Canada, Norway and Switzerland. 4 7 The Ground Systems and Software Group also provides computer network communications consulting, training and other services to network equipment vendors and telecommunications carriers in Canada, the United States, Australia and Asia. COMMUNICATIONS AND INFORMATION SERVICES Orbital's Communications and Information Services include products and services provided by Magellan, the Company's majority owned subsidiary Orbital Communications Corporation ("ORBCOMM"), and ORBIMAGE. Magellan manufactures GPS satellite-based navigation and communications products for commercial and consumer markets including commercial and recreational marine and aviation markets, outdoor recreational users such as hunters and hikers, and professional users such as geologists, geographers, surveyors, natural resource managers and contractors. ORBCOMM and ORBIMAGE are developing satellite-based services to address the expanding markets for global two-way data communications and information derived from remote sensing of the atmosphere, oceans and land surfaces. The ORBCOMM and ORBIMAGE systems will require significant capital investments and market development. Although the Company believes the long-term profit potential of such service businesses, developed and supported by the Company's proprietary product technologies, is significant, there can be no assurance that the Company will be able to successfully develop these businesses. SATELLITE-BASED NAVIGATION AND COMMUNICATIONS PRODUCTS. The Company's Magellan subsidiary designs, manufactures and markets hand-held GPS navigators that provide users with precise positioning and location information. The need for positioning and location information is central to a broad range of personal and professional activities including marine navigation, outdoor recreation (e.g., hiking and hunting), surveying and general aviation. Magellan focuses its research, design and engineering activities on the development of GPS navigators that are reliable, portable, easy to use and highly affordable, targeting the growing recreational market. During 1995, Magellan introduced the low-cost GPS 2000(TM) personal navigation unit that is widely distributed in mass merchandising outlets and mail order catalogs. Magellan has also started production of the microCOM-M(TM), a small, lightweight and low-priced INMARSAT satellite telephone for worldwide voice, fax and data communications. Magellan is also expected to be a significant supplier of personal communicators for the ORBCOMM System and to be involved in the continued development of satellite-based communications and tracking technology that is compatible with the ORBCOMM System. ORBCOMM COMMUNICATIONS SERVICES. The ORBCOMM System is designed to provide virtually continuous mobile data communications coverage over much of the Earth's surface. Under this system, subscribers are able to use inexpensive communicators to send and receive short messages, high priority alerts and other information, such as the location and condition of automobiles, trucks, shipping vessels and other remote assets. The Company expects that the ability to send and receive messages and data without the geographic limitations of existing data communications systems will stimulate the growth of new markets for satellite-based data communications and will be used to supplement terrestrial-based communications systems by providing relatively low-cost coverage in areas outside the range of such tower-based systems. The global ORBCOMM System design consists of a constellation of small low-Earth orbit satellites, a satellite control center operating and positioning the satellites, the mobile communicators used by subscribers to transmit and receive messages to and from the satellites, and the gateways that transmit and control the flow of data and message communications and other information for the system. A gateway generally will consist of gateway Earth stations and a software-based gateway message switching system that processes the message traffic and provides the interconnection to terrestrial networks. The U.S. gateway, for example, includes four gateway Earth stations located in New York, Washington, Arizona and Georgia with the message switching system located at ORBCOMM Global's network operations center in 5 8 Dulles, Virginia. Gateways are planned to be owned and operated by ORBCOMM Global licensees in strategic locations around the world. In April 1995, the Company successfully launched the first two satellites that will comprise the ORBCOMM System constellation. Certain technical problems with both spacecraft resulted in a delay of several months in the completion of on-orbit testing. The Company believes that it has identified and implemented the appropriate corrective actions with respect to these problems, and does not believe that they will impact continued development of the ORBCOMM System. During 1995, in addition to the launch of the first two satellites, the Company completed construction and testing of various network management systems including the satellite control center and the network operations center, and substantially completed the four United States gateway Earth stations. Prototype communicators also transmitted hundreds of thousands of messages. Following comprehensive testing of the space and ground network during 1995, intermittent commercial service in the United States commenced in February 1996. Several consumer electronics manufacturers are developing communicators that monitor fixed assets and hand-held communicators for personal use for shipment during 1996, and the Company expects that the number of users of the ORBCOMM System will grow significantly as subscriber unit production rates increase. The two ORBCOMM System satellites currently in orbit and the U.S. gateway provide communications availability in the United States approximately 10% of each 24-hour period, with maximum outages of approximately nine hours. With the launch of additional satellites, such as the two scheduled to be launched as a secondary payload on a Taurus mission scheduled for late 1996, communications availability will also increase. The Company expects that, with a planned constellation of at least 26 satellites and appropriately situated gateways, the ORBCOMM System will provide communications availability generally exceeding 95% of each 24-hour period in the United States and other temperate zones in the Northern and Southern hemispheres and exceeding 75% of each 24-hour period in the equatorial region. Equatorial region availability could be improved to generally exceed 90% with an additional plane of eight satellites. Outside the United States, the ORBCOMM System will only be available in countries and regions where appropriate licenses have been obtained and where there is a gateway that can serve the applicable market. DEVELOPMENT AND FINANCING. In 1993, ORBCOMM and Teleglobe Mobile Partners ("Teleglobe Mobile"), an affiliate of Teleglobe Inc., formed a partnership, ORBCOMM Global (formerly known as ORBCOMM Development Partners, L.P.) for the two-phased design, development, construction, integration, testing and operation of the ORBCOMM System. ORBCOMM and Teleglobe Mobile also formed two marketing partnerships, ORBCOMM USA, L.P. ("ORBCOMM USA") and ORBCOMM International Partners, L.P. ("ORBCOMM International"), each with the exclusive right to market the ORBCOMM System in the United States and internationally, respectively. ORBCOMM has retained control over applicable licenses issued by the Federal Communications Commission ("FCC"), consistent with FCC regulations. Also in 1993, Orbital entered into an agreement with ORBCOMM Global whereby Orbital had responsibility for the overall design, construction and integration for the first phase of the ORBCOMM project, which was completed during 1995. In September 1995, Orbital and ORBCOMM Global executed the ORBCOMM System Procurement Agreement (the "Procurement Agreement"), which provides that Orbital will, among other things, construct and launch an additional 26 satellites, and construct an additional eight satellites. Under the Procurement Agreement, Orbital is providing satellites and launch services on a fixed-price basis. Consistent with industry practice for many launch contracts, the Procurement Agreement contains certain performance incentives with respect to the satellites and their launch. Under ORBCOMM Global's partnership agreement, action by the partnership generally requires the approval of general partners holding a majority of the participating interests (i.e., interests participating in profits and losses). ORBCOMM and Teleglobe Mobile are each 50% general partners in 6 9 ORBCOMM Global, with the result that ORBCOMM and Teleglobe Mobile share equal responsibility for the operational and financial affairs of ORBCOMM Global and the approval of both ORBCOMM and Teleglobe Mobile is necessary for ORBCOMM Global to act. ORBCOMM holds indirectly a 51% participating interest in ORBCOMM USA and Teleglobe Mobile holds indirectly a 51% participating interest in ORBCOMM International, with the result that ORBCOMM acting alone can generally control the operational and financial affairs of ORBCOMM USA, and Teleglobe Mobile acting alone can generally control the operational and financial affairs of ORBCOMM International. In September 1995, Teleglobe Mobile exercised its option to participate in the second phase of the ORBCOMM System and, accordingly, Orbital and Teleglobe Mobile's total capital commitments to ORBCOMM Global are approximately $75 million and $85 million, respectively, of which approximately $62 million and $35 million, respectively, had been contributed through December 31, 1995. Although construction of the first phase of the ORBCOMM System is completed, development and construction of the second phase is in an early stage, and the actual cost of the system and the amount and structure of anticipated investment in ORBCOMM Global may vary significantly from current estimates. Orbital expects that the total estimated required capital for the ORBCOMM System will be approximately $225-$250 million. ORBCOMM Global intends to seek additional equity contributions and/or bank or other debt financing to fund the remaining requirements. ORBCOMM Global already obtained asset-based financing of $5 million to fund a portion of its development costs for the first phase of the ORBCOMM System. The Company has guaranteed ORBCOMM Global's outstanding indebtedness, and may be required to guarantee or provide credit support in connection with additional indebtedness incurred by ORBCOMM Global. In the event that ORBCOMM Global does not otherwise receive the necessary capital, full development and implementation of the ORBCOMM System may be delayed, significantly restricted or possibly abandoned, and the Company could be required to expense part or all of its investment in the ORBCOMM System. In addition, start-up of the ORBCOMM System will produce significant ORBCOMM Global operating losses for several years. Even if the ORBCOMM System is fully constructed and operational, there can be no assurance that an adequate market will develop for ORBCOMM System services, that ORBCOMM Global will achieve profitable operations or that Orbital will recover any of its past or anticipated investment in the ORBCOMM System. Because Orbital (through ORBCOMM) has a 50% participating interest in ORBCOMM Global, Orbital expects to recognize its pro rata share of ORBCOMM Global profits and losses. As of March 1, 1996, certain officers and employees of ORBCOMM Global and Orbital held options to acquire 555,100 shares of ORBCOMM's common stock (or approximately 12 percent of ORBCOMM's outstanding common stock) at option exercise prices ranging from $1.50 to $17.00 per share. On an annual basis, holders of ORBCOMM common stock acquired on exercise of these options may, subject to certain conditions, require ORBCOMM to purchase such ORBCOMM common stock at its then fair market value. As of March 1, 1996, there were 52,286 shares of ORBCOMM common stock outstanding that were acquired in connection with option exercises by current or former ORBCOMM and Orbital employees. REGULATORY APPROVALS. In October 1994, ORBCOMM became the first company to be awarded full FCC authority to construct, launch and operate a low-Earth orbit satellite-based messaging and data communications network in the United States. This license, which provides that the ORBCOMM System must be constructed within six years from the date the license was granted, extends for a period of ten years from the date the first ORBCOMM System satellite was operational. At the end of the seventh year of the ten-year term, a renewal application must be filed with the FCC. As with any such license, the ORBCOMM System license may be revoked and a license renewal application may be denied for cause. In October 1995, ORBCOMM requested a modification of its FCC license with respect to ORBCOMM's channel plan for purposes of facilitating frequency coordination of the ORBCOMM System with foreign governments. This request has completed the public comment cycle and 7 10 ORBCOMM believes its request will be granted within the next several months. In addition, for the ORBCOMM System to be operated in other countries throughout the world, the Company or the foreign licensees must obtain from the appropriate foreign regulatory bodies authority to do so. The Company anticipates that the cost of these activities will be borne primarily by foreign licensees. ORBCOMM International has entered into a definitive license agreement with ORBCOMM Canada Inc., which is expected to begin providing ORBCOMM service in Canada in Spring 1996. ORBCOMM has signed preliminary agreements with 19 candidate licensees serving 71 other countries to seek such regulatory approvals and to initiate territory-specific market development in such countries. There can be no assurance that ORBCOMM or its foreign licensees will be granted all licenses or approvals necessary to operate the ORBCOMM System in any other country. ORBIMAGE REMOTE SENSING AND IMAGING SERVICES. The Company is currently seeking to develop and market a broad range of information services that involve identifying and monitoring global environmental changes and weather patterns and collecting and disseminating digital land maps and other remote sensing information. Small Earth-viewing satellites and related sensors and instruments to be placed in relatively low orbits are planned to offer cost-efficient data collection, daily global coverage and high-resolution imaging services. In April 1995, ORBIMAGE's first MicroStar satellite, MicroLab-1, was successfully launched to monitor lightning and severe weather patterns for NASA. In 1991, Orbital entered into a contract with NASA to provide worldwide, daily ocean imagery using Orbital's SeaStar environmental monitoring satellite system, based on the PegaStar spacecraft. The Company plans to develop, produce, launch and operate the SeaStar system to deliver high-quality multi-spectral ocean imagery and land surface imagery for up to five years. The SeaStar launch has been delayed several years, primarily due to technical challenges associated with the development of the spacecraft and launch delays relating to the Pegasus XL failures in 1994 and 1995. The SeaStar satellite is currently scheduled to be launched in late 1996 or early 1997. In addition to providing unprocessed real-time ocean data to NASA, ORBIMAGE plans to market the SeaStar data directly and through value-added resellers and other marketing agents to other U.S. Government users and to potential domestic and international customers such as commercial fishing fleets, oil and gas companies, ocean transportation operators, oceanographers and agricultural companies. ORBIMAGE is developing and marketing other small satellite-based Earth observation, remote sensing and environmental monitoring services using, among other things, the Company's PegaStar and MicroStar spacecraft platforms, Pegasus and Taurus launch vehicles, space sensors and instruments and other space products. Services to be provided by ORBIMAGE could include high-resolution optical imaging of land surfaces for geographic information services, mapping, sensing of ocean and atmospheric conditions and measuring of ozone and other gaseous concentrations in the atmosphere. The Company is currently exploring potential strategic arrangements for development of the high-resolution remote sensing business, with Orbital providing launch services, spacecraft, ground stations and other related products. During 1995, ORBIMAGE signed preliminary agreements with several potential imagery distributors and initiated preliminary discussions with potential strategic partners. There can be no assurance that the Company will be able to conclude such strategic arrangements or develop profitable commercial Earth observation, remote sensing or environmental monitoring businesses. * * * * Financial information about the Company's products and services, foreign and domestic operations and export sales is included in Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes to the Company's Consolidated Financial Statements set forth in the Company's Annual Report, and is incorporated herein by reference. 8 11 COMPETITION Orbital believes that competition for sales of its products and services is based on performance and other technical features, price, reliability, scheduling and customization. The primary competition to the Pegasus and Taurus vehicles is expected to come from the smaller and larger classes, respectively, of LMLV launch vehicles currently being developed by Lockheed Martin Corporation ("Lockheed Martin"). The LMLV had an unsuccessful first flight in August 1995. Potential competition to the Pegasus may also come from launch systems derived from surplus ballistic missiles that are primarily being made available by the U.S. Government and Russia. The National Space Transportation Policy (the "NSTP") authorizes U.S. Government agencies to use excess ballistic missiles to launch payloads into orbit on a case-by-case basis. While Lockheed Martin currently has a contract with the DoD to convert excess Minuteman missiles into space launch vehicles, the NSTP established that such use may only be permitted after the DoD has determined, among other things, that such use would meet the agency's needs and would result in a cost savings to the U.S. Government compared to a commercial launch service. Competition for Taurus could also come from surplus Titan II launch vehicles, although Titan II production has been discontinued and only a very limited inventory remains. In addition, in 1995 the Japanese space agency successfully launched a booster that directly competes with Taurus in terms of launch capacity, but is more expensive than the Taurus. Indirect competition to Pegasus and Taurus vehicles also exists in the form of secondary or "piggyback" payload capacity on large boosters such as the Ariane, Titan, Long March and Proton launch vehicles. While secondary payloads offer a low-cost method of launching satellites in some cases, the secondary status of the payload often requires customers to accept less desirable orbits, "standby" launch scheduling and potentially more complicated and costly payload integration procedures. While several companies design and manufacture suborbital launch vehicles, Orbital's primary competitor in this product line is Coleman Research Corp. Satellite systems and payloads and space support products compete with products and services produced or provided by numerous companies and government entities, including TRW Inc. and CTA, Inc. The Company's space instruments and airborne and ground-based electronics, data management systems, defense-oriented avionics products and software systems, and aviation systems face competition from several established manufacturers. The Company's space sensors and instruments face competition from a number of companies and university research laboratories capable of designing and producing space instruments. The Company's main competition in the area of ground stations include Datron Systems Inc. and Hughes-STX Corp. Magellan's marine and outdoor recreation GPS satellite-based navigation products primarily face competition from Garmin International. Magellan competes with a larger number of producers of GPS navigation and communications products in its other markets. The Company believes that Magellan's success will depend on its ability to continue to develop new lower-cost and enhanced performance products and to enter into and develop new markets for GPS navigators. The ORBCOMM System will face competition from numerous existing and potential alternative communications products and services provided by various large and small companies, including sophisticated two-way satellite-based data and voice communications services. For specific markets, the ORBCOMM System may complement existing tower-based services such as one-way and two-way paging, cellular data, specialized mobile radio and private networks. ORBIMAGE may face competition from U.S. and foreign government and private entities that provide or are seeking to provide satellite-based and other land imaging, environmental monitoring and atmospheric sensing products. Many of the Company's competitors are larger and have substantially greater resources than the Company. Furthermore, the possibility exists that other domestic or foreign companies or governments, some with greater experience in the space industry and greater financial resources than Orbital, will seek to produce products or services that compete with those of the Company. Any such foreign competitor could benefit from subsidies from, or other protective measures by, its home country. 9 12 RESEARCH AND DEVELOPMENT The Company expects to continue to invest in product-related research and development, to conceive and develop new products and services, to enhance existing products and to seek customer and, where appropriate, strategic partner investments in these products. Orbital's research and development expenses, excluding direct customer-funded development, were approximately $25.5 million, $17.3 million, and $19.7 million, respectively, for the fiscal years ended December 31, 1995, 1994 and 1993. It is expected that the Company's research and development expenses during 1996 will be primarily for satellite programs, possible ORBIMAGE projects, new or modified launch systems, and satellite-based navigation and communications products. PATENTS AND TRADEMARKS Orbital relies, in part, on patents, trade secrets and know-how to develop and maintain its competitive position and technological advantage. The Company holds U.S. and foreign patents relating to the Pegasus vehicle and U.S. patents relating to the ORBCOMM System as well as for other components and products produced by the Company. The Company also has various pending patent applications relating to Pegasus and the ORBCOMM System along with other products. Certain of the trademarks and service marks used in connection with the Company's products and services have been registered with the U.S. Patent and Trademark Office and the Canadian Intellectual Property Office. COMPONENTS AND RAW MATERIALS Orbital purchases a significant percentage of its product components, including rocket propulsion motors, structural assemblies and electronic equipment, from third parties. Orbital also occasionally obtains from the U.S. Government parts and equipment that are used in the production of the Company's products or in the provision of the Company's services. Orbital has not experienced material difficulty in obtaining product components or necessary parts and equipment and believes that alternative sources of supply would be available, although increased costs could be incurred in securing alternative sources of supply. The Company's ability to launch its Pegasus and Pegasus XL vehicles depends on the availability of an aircraft with the capability of carrying and launching such space launch vehicles. Orbital entered into a 10-year lease in 1992 for a Lockheed L-1011 for the air-launch of the Pegasus and Pegasus XL vehicles. U.S. GOVERNMENT CONTRACTS During 1995, 1994 and 1993, approximately 40 percent, 45 percent and 45 percent, respectively, of the Company's total annual revenues were derived from contracts with the U.S. Government and its agencies or from subcontracts with the U.S. Government's prime contractors. Orbital's government contracts are subject to regular audit and periodic reviews and may be modified, increased, reduced or terminated in the event of changes in government requirements or policies, Congressional appropriations and program progress and scheduling. U.S. Government curtailment of expenditures for space research and development and related products and services could have a material adverse effect on Orbital's revenues and results from operations. Agencies within the U.S. Government and commercial customers to which sales by the Company accounted for ten percent or more of the Company's consolidated 1995 revenues were NASA, DoD and ORBCOMM Global. Orbital's major contracts with the U.S. Government fall into three categories: firm fixed-price contracts, fixed-price incentive fee contracts and cost-plus-fee contracts. Under firm fixed-price contracts, 10 13 work performed and products shipped are paid for at a fixed price without adjustment for actual costs incurred in connection with the contract. Risk of loss due to increased cost, therefore, is borne by the Company although some of this risk may be passed on to subcontractors. Under fixed-price government contracts, Orbital may receive progress payments, generally in an amount equal to between 80 and 95 percent of monthly costs, or it may receive milestone payments upon the occurrence of certain program achievements. Fixed-price incentive fee contracts provide for sharing by the customer and the Company of unexpected costs incurred or savings realized within specified limits, and may provide for adjustments in price depending on actual contract performance other than costs. Costs in excess of the negotiated maximum (ceiling) price and the risk of loss by reason of such excess costs are borne by the Company, although some of this risk may be passed on to subcontractors. Under a cost-plus-fee contract, Orbital recovers its actual allowable costs incurred and receives a fee consisting of a base amount that is fixed at the inception of the contract and/or an award amount that is based on the Government's subjective evaluation of the contractor's performance in terms of the criteria stated in the contract. All of Orbital's U.S. Government contracts and, in general, its subcontracts with the U.S. Government's prime contractors provide that such contracts may be terminated at will by the U.S. Government or the prime contractor, respectively. Furthermore, any of these contracts may become subject to a government-issued stop work order under which the Company is required to suspend production. In the event of a termination at will, Orbital is normally entitled to recognize the purchase price for delivered items, reimbursement for allowable costs for work in process, and an allowance for reasonable profit thereon or adjustment for loss if completion of performance would have resulted in a loss. The Company has experienced several contract suspensions and terminations in the past. BACKLOG The Company's backlog at December 31, 1995 and 1994 was approximately $530 million and $419 million, respectively. As of December 31, 1995, approximately 60 percent of the Company's backlog was with the U.S. Government and its agencies or from subcontracts with the U.S. Government's prime contractors. Backlog consists of aggregate contract values for firm product orders, excluding the portion previously included in operating revenues on the basis of percentage of completion accounting, and including government contracts awarded but not signed and orders not yet funded in the amounts of approximately $355 million and $171 million as of December 31, 1995 and 1994, respectively. Approximately $303 million of backlog is currently scheduled to be performed beyond 1996. Backlog excludes unexercised and undefinitized contract options having an aggregate potential contract value at December 31, 1995 of approximately $910 million. EMPLOYEES As of December 31, 1995, Orbital had 2, 729 full-time permanent employees. ITEM 2. PROPERTIES In 1993, Orbital entered into a 12-year lease agreement for approximately 100,000 square feet of office and engineering space in Dulles, Virginia, which serves as its corporate headquarters. The Company owns an approximately 30,000 square-foot satellite engineering and manufacturing facility on land adjacent to the Dulles office facility. Orbital also leases approximately 320,000 square feet of office, engineering and manufacturing space in Germantown, Maryland; 305,000 square feet of office, engineering and manufacturing space in Chandler, Arizona; approximately 212,000 square feet of office and engineering space in Richmond, British Columbia; approximately 135,000 square feet of office, engineering and manufacturing space in Pomona, California; approximately 40,000 square feet of office, engineering and manufacturing space in San Dimas, California. The Company leases or owns other 11 14 smaller facilities, offices or manufacturing space around the United States, including Huntsville, Alabama; Edwards Air Force Base, California; Vandenberg Air Force Base, California and Greenbelt, Maryland; in other locations in Canada such as Ottawa, Ontario, as well as in England, Malaysia, Mexico and Australia. Although completion of the Company's existing and pending contracts may in the future require additional manufacturing capacity, Orbital believes that its existing facilities are adequate for its near- and medium-term requirements. ITEM 3. LEGAL PROCEEDINGS Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There was no matter submitted to a vote of the Company's security holders during the fourth quarter of 1995. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the name, age and position of each of the Executive Officers of Orbital as of March 1, 1996. All Executive Officers are elected annually and serve at the discretion of the Board of Directors.
Name Age Position - ---- --- -------- David W. Thompson 41 Chairman of the Board, President and Chief Executive Officer Bruce W. Ferguson 41 Executive Vice President and General Manager/Communications and Information Services Group James R. Thompson 59 Executive Vice President and General Manager/Launch Systems Group Jack A. Frohbieter 59 Executive Vice President and General Manager/Space and Electronics Systems Group Daniel E. Friedmann 39 Executive Vice President and General Manager/Ground Systems and Software Group Michael D. Griffin 46 Executive Vice President and General Manager/Advanced Systems Group Carlton B. Crenshaw 50 Executive Vice President and Chief Financial Officer Antonio L. Elias 46 Senior Vice President and Chief Technical Officer John H. Mehoves 48 Senior Vice President/Corporate Strategy Leslie C. Seeman 43 Senior Vice President, General Counsel and Secretary
David W. Thompson is a founder of Orbital and has been Chairman of the Board, President and Chief Executive Officer of the Company since 1982. Bruce W. Ferguson is a founder of Orbital and has been Executive Vice President and General Manager/Communications and Information Services Group since October 1993 and a Director of the Company since 1982. Mr. Ferguson was Executive Vice President and Chief Operating Officer of Orbital from 1989 to October 1993 and Senior Vice President/Finance and Administration and General Counsel of Orbital from 1985 to 1989. James R. Thompson (who is not related to David W. Thompson) has been Executive Vice President and General Manager/Launch Systems Group since October 1993 and a Director since January 1992. Mr. Thompson was Executive Vice President and Chief Technical Officer of Orbital from 1991 to 12 15 October 1993. He was Deputy Administrator of NASA from 1989 to 1991. From 1986 until 1989, Mr. Thompson was Director of the Marshall Space Flight Center. He was Deputy Director for Technical Operations at Princeton University's Plasma Physics Laboratory from 1983 through 1986. Before that, he had a 20-year career with NASA at the Marshall Space Flight Center. Jack A. Frohbieter has been a Director of the Company since August 1994, and Executive Vice President and General Manager/Space and Electronics Systems since September 1994. From 1990 until August 1994, Mr. Frohbieter was President and Chief Operating Officer of Fairchild. From 1988 to 1990, he was Vice President and General Manager of General Electric Company's Government Electronics Systems Division, and from 1966 to 1987, he held a variety of positions at RCA's Astro Space Division, including Vice President and General Manager from 1986 to 1987. Daniel E. Friedmann has been Executive Vice President and General Manager/Ground Systems and Software since January 1996. He continues to serve as President and Chief Executive Officer of MDA, a position he has held since March 1995. From 1992 to March 1995, he served as Executive Vice President and Chief Operating Officer of MDA. Between 1979 and 1992, he held a variety of positions at MDA, including serving as Vice President of various divisions. Michael D. Griffin has been Executive Vice President/Advanced Systems Group since January 1996. Dr. Griffin joined Orbital in August 1995 when he was appointed Senior Vice President and Chief Technical Officer. From 1994 to August 1995, he was Senior Vice President for Program Development at Space Industries International. From September 1991 to January 1994 he served as Chief Engineer of NASA and was Deputy Director for Technology at the Strategic Defense Initiative Organization from 1989 to 1991. Carlton B. Crenshaw has been Executive Vice President and Chief Financial Officer since February 1996. He was Senior Vice President/Finance and Administration from August 1995 to January 1996 and was Senior Vice President/Finance and Administration and Treasurer of Orbital from January 1993 to August 1995. From 1989 to January 1993, he was Vice President/Finance and Administration and Treasurer of the Company. From 1985 to 1989, Mr. Crenshaw was Vice President/Finance and Administration and Chief Financial Officer of Software AG Systems, Inc. Antonio L. Elias has been Senior Vice President and Chief Technical Officer since January 1996. From May 1993 through December 1995 he was Senior Vice President for Advanced Projects and was Senior Vice President/Space Systems Division from 1990 to April 1993. He was Vice President/Engineering of Orbital from 1989 to 1990 and was Chief Engineer from 1986 to 1989. From 1980 to 1986, Dr. Elias was an Assistant Professor of Aeronautics and Astronautics at Massachusetts Institute of Technology. John H. Mehoves has been Senior Vice President/Corporate Strategy since January 1996. From October 1993 to December 1995, he was Senior Vice President, from 1990 to October 1993, he was Executive Vice President/Space Systems Division of Orbital, from 1987 to 1989, he was Vice President/Space Transportation and from 1985 to 1987, he was Vice President/Operations. Leslie C. Seeman has been Senior Vice President of the Company since October 1993 and General Counsel and Secretary of the Company since 1989. From 1989 to October 1993, she was Vice President of the Company, and from 1987 to 1989, Ms. Seeman was Assistant General Counsel of Orbital. From 1984 to 1987, she was General Counsel of Source Telecomputing Corporation, a telecommunications company. Prior to that, she was an associate with the law firm of Wilmer, Cutler & Pickering. 13 16 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this Item is included under the captions "Market Information" and "Corporate Information - Dividends" of the Annual Report and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information required by this Item is included under the caption "Selected Consolidated Financial Data" of the Annual Report and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is included under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Annual Report and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is included in pages 34 through 55 of the Annual Report and is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item and not given in Item 4A, Executive Officers of the Registrant, is included under the caption "Election of Directors -- Directors to be Elected at the 1996 Annual Meeting, -- Directors Whose Term Expires in 1997, and -- Directors Whose Term Expires in 1998" and "Compliance with Section 16(a) of the Exchange Act" of the Proxy Statement filed pursuant to Regulation 14A on March 28, 1996 and is incorporated herein by reference. 14 17 ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is included under the captions "Election of Directors -- Summary Compensation Table," "Election of Directors - -- Option Grants in Last Fiscal Year," "Election of Directors -- Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values," "Election of Directors -- Indemnification Agreements," "Election of Directors - -- Executive Employment Agreements" and "Election of Directors - Information Concerning the Board and Its Committees" of the Proxy Statement filed pursuant to Regulation 14A on March 28, 1996 and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is included under the caption "Ownership of Common Stock" of the Proxy Statement filed pursuant to Regulation 14A on March 28, 1996 and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents filed as part of this Report: 1. FINANCIAL STATEMENTS. The following financial statements, together with the report of KPMG Peat Marwick LLP, appearing in the portions of the Annual Report, filed as Exhibit 13, are filed as a part of this report: A. Independent Auditors' Report (Annual Report page 34) B. Consolidated Statements of Operations (Annual Report page 35) C. Consolidated Balance Sheets (Annual Report page 36) D. Consolidated Statements of Stockholders' Equity (Annual Report page 37) E. Consolidated Statements of Cash Flows (Annual Report page 38) F. Notes to Consolidated Financial Statements (Annual Report pages 39 through 55) 2. FINANCIAL STATEMENT SCHEDULES. The following additional financial data are transmitted with this report and should be read in conjunction with the Consolidated Financial Statements in the Annual Report. Schedules other than those listed below have been omitted because they are inapplicable or are not required. 15 18 Independent Auditors' Report on Consolidated Financial Statement Schedule II Valuation and Qualifying Accounts 3. EXHIBITS. A complete listing of exhibits required is given in the Exhibit Index that precedes the exhibits filed with this report. (b) Reports on Form 8-K 1. On November 2, 1995, the Company filed a Form 8-K reporting its potential acquisition of MacDonald, Dettwiler and Associates, Ltd. ("MDA") pursuant to Item 5. The following financial statements were filed as part of that report: Consolidated Financial Statements of MDA, together with report of the independent auditors, as of March 31, 1995, 1994 and 1993; Unaudited Consolidated Financial Statements of MDA, as of June 30, 1995 and for the three-month periods ended June 30, 1995 and 1994; Pro Forma Financial Information of Orbital Sciences Corporation as of and for the six-month period ended June 30, 1995, and for the years ended December 31, 1994, 1993 and 1992. 2. On December 4, 1995, the Company filed a Form 8-K reporting the consummation of its acquisition of MDA pursuant to Item 2. (c) See Item 14(a)(3) of this report. (d) See Item 14(a)(2) of this report. 16 19 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ORBITAL SCIENCES CORPORATION DATED: March 28, 1996 By /s/ David W. Thompson ----------------------------------------- David W. Thompson, Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. DATED: March 28, 1996 Signature: Title: /s/ David W. Thompson Chairman of the Board, Principal -------------------------------------------------------- Executive Officer and Director David W. Thompson /s/ Carlton B. Crenshaw Principal Financial Officer -------------------------------------------------------- Carlton B. Crenshaw /s/ Jeffrey V. Pirone Controller and Principal Accounting -------------------------------------------------------- Officer Jeffrey V. Pirone /s/ Fred C. Alcorn Director -------------------------------------------------------- Fred C. Alcorn /s/ Kelly H. Burke Director -------------------------------------------------------- Kelly H. Burke /s/ Bruce W. Ferguson Director -------------------------------------------------------- Bruce W. Ferguson /s/ Daniel J. Fink Director -------------------------------------------------------- Daniel J. Fink
17 20 /s/ Lennard A. Fisk Director -------------------------------------------------------- Lennard A. Fisk /s/ Jack A. Frohbieter Director -------------------------------------------------------- Jack A. Frohbieter /s/ Jack L. Kerrebrock Director -------------------------------------------------------- Jack L. Kerrebrock /s/ J. Paul Kinloch Director -------------------------------------------------------- J. Paul Kinloch /s/ Douglas S. Luke Director -------------------------------------------------------- Douglas S. Luke /s/ John L. McLucas Director -------------------------------------------------------- John L. McLucas /s/ Harrison H. Schmitt Director -------------------------------------------------------- Harrison H. Schmitt /s/ James R. Thompson Director -------------------------------------------------------- James R. Thompson /s/ Scott L. Webster Director -------------------------------------------------------- Scott L. Webster
18 21 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Orbital Sciences Corporation Under date of February 5, 1996, we reported on the consolidated balance sheets of Orbital Sciences Corporation and subsidiaries (the "Company") as of December 31, 1995 and 1994, and the related statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1995, as contained in the 1995 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the Company's annual report on Form 10-K for the year 1995. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related consolidated financial statement schedule as listed in Item 14(a)2 in the Company's Form 10-K for the year 1995. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statement schedule based on our audits. In our opinion, based on our audits and the reports of other auditors, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG Peat Marwick LLP Washington, D.C. February 5, 1996 19 22 ORBITAL SCIENCES CORPORATION SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (AMOUNTS IN THOUSANDS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------------------------------------------------------------------------------------------------------ ADDITIONS -------------------------------- CHARGED/ BALANCE AT BALANCE AT CHARGED TO COSTS CREDITED TO END OF DESCRIPTION START OF PERIOD (1) AND EXPENSES OTHER ACCOUNTS (2) DEDUCTIONS (3) PERIOD - ----------------------------------------- ----------------- --------------- ------------------ -------------- ------------ YEAR ENDED DECEMBER 31, 1993 Allowance for doubtful accounts $ 475 $ 97 $ 15 - 587 Allowance for obsolete inventory 929 421 910 - 2,260 Deferred income tax valuation reserve 14,759 (4) - - (303) 14,456(4) YEAR ENDED DECEMBER 31, 1994 Allowance for doubtful accounts $ 587 $ 149 $ 42 - 778 Allowance for obsolete inventory 2,260 216 1,571 (111) 3,936 Allowance for unrecoverable investments - - 3,100 - 3,100 Deferred income tax valuation reserve 14,456 - 32,003 (168) 46,291 YEAR ENDED DECEMBER 31, 1995 Allowance for doubtful accounts $ 778 $ 189 $ - (194) 773 Allowance for obsolete inventory 3,936 580 - (738) 3,778 Allowance for unrecoverable investments 3,100 - - (2,000) 1,100 Deferred income tax valuation reserve 46,291 21,445 (2,695) - 65,041
(1) - All historical balances have been restated to reflect the Company's acquisitions of Magellan Corporation and MacDonald, Dettwiler and Associates, Ltd. The acquisitions were accounted for using the pooling of interests method of accounting. (2) - Amounts charged/credited to other accounts represent valuation and qualifying accounts recorded pursuant to purchase business combinations as described in Note (4) to the consolidated financial statements incorporated by reference elsewhere herein, adjustments required to recast pooled company's year end as described in Note (4) to the consolidated financial statements incorporated by reference elsewhere herein, and certain reclassifications of deferred tax accounts. (3) - Deduction for revaluation of allowance account. (4) - The deferred income tax valuation reserve at December 31, 1993 and 1992 has been provided based on estimated deferred tax assets and liabilities in a foreign taxing jurisdiction, converting to generally accepted accounting principles as applied in the U.S. (SFAS 109), after recasting pooled company's year end as described in Note (4) to the consolidated financial statements incorporated by reference elsewhere herein. Page 1 23 EXHIBIT INDEX The following exhibits are filed as part of this report. Where such filing is made by incorporation by reference to a previously filed statement or report, such statement or report is identified in parentheses. In addition, the registrant has executed certain instruments reflecting long-term debt, the total amount of which does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. In accordance with section 4(iii) of Item 601 under Regulation S-K, the registrant agrees to furnish to the Securities and Exchange Commission copies of each instrument relating to such long-term debt not otherwise filed herewith or incorporated herein by reference.
Exhibit No. Description --- ----------- 3.1 Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1 (File Number 33-33453) filed on February 9, 1990 and effective on April 24, 1990). 3.2 By-Laws of Orbital Sciences Corporation, as amended on July 27, 1995 (incorporated by reference to Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, dated November 14, 1995). 4.1 Form of Certificate of Common Stock (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1 (File Number 33-33453) filed on February 9, 1990 and effective on April 24, 1990). 4.3 Indenture dated as of February 25, 1993 among the Company and Security Trust Company, National Association, as Trustee (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K, dated March 31, 1993). 4.4 Form of 6 3/4% Convertible Subordinated Debenture due 2003 (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K, dated March 31, 1993). 9 Voting and Exchange Trust Agreement between the Company, MacDonald Dettwiler Holdings Inc. and State Street Bank and Trust Company (transmitted herewith). 10.1 Amended and Restated Credit Agreement, dated as of September 27, 1994 among the Company, Orbital Imaging Corporation and Fairchild Space and Defense Corporation, the Banks listed therein, Morgan Guaranty Trust Company of New York, as Administrative Agent and J.P. Morgan Delaware, as Collateral Agent (the "Credit Agreement") (incorporated by reference to Exhibit 10.6 to the Company's Report on Form 10-Q for the Quarter ended September 30, 1994, dated November 14, 1994). 10.1.1 Amendment No. 1 to the Credit Agreement, dated as of October 26, 1994 (incorporated by reference to Exhibit 10.6.1 to the Company's Annual Report on Form 10-K, dated March 28, 1995). 10.1.2 Amendment No. 2 to the Credit Agreement, dated as of July 5, 1995 (incorporated by reference to Exhibit 10.6.3 to the Company's Report on Form 10-Q for the quarter ended June 30, 1995 filed on August 14, 1995). 10.1.3 Amendment No. 3 to the Credit Agreement, dated as of August 23, 1995 (incorporated by reference to Exhibit 10.3 to the Company's Report on Form 10-Q for the quarter ended September 30, 1995, dated November 14, 1995). 10.1.4 Amendment No. 4 to the Credit Agreement, dated as of November 15, 1995 (transmitted herewith). 10.1.5 Waiver No. 1 to the Credit Agreement, dated as of December 19, 1994 (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1994, dated March
21 24 28, 1995). 10.1.6 Waiver No. 2 to the Credit Agreement, dated as of February 29, 1996 (transmitted herewith). 10.2 Note Agreement, dated as of June 14, 1995 between the Corporation and The Northwestern Mutual Life Insurance Company (the "NWML Note Agreement") (incorporated by reference to Exhibit 4.7.1 to the Company's Report on Form 10-Q for the quarter ended June 30, 1995, dated August 14, 1995). 10.2.1 1st Amendment to the NWML Note Agreement ,dated as of June 30, 1995, between the Corporation and The Northwestern Mutual Life Insurance Company (incorporated by reference to the Company's Report on Form 10-Q for the quarter ended September 30, 1995, dated November 14, 1995). 10.2.2 Second Amendment to the NWML Note Agreement, dated as of March 15, 1996 (transmitted herewith). 10.3 Promissory Notes dated as of August 31, 1994 made by Fairchild Space and Defense Corporation and Corporate Guaranty dated August 31, 1994 made by the Company (incorporated by reference to Exhibit 10.7 to the Company's Report on Form 10-Q for the Quarter ended September 30, 1994, dated November 14, 1994). 10.4 Security Agreement dated as of June 30, 1992 among the Company, J.P. Morgan Delaware, as Collateral Agent and American Security Bank, N.A., as Audit Agent (incorporated by Reference to Exhibit 10.6.1 to the Company's Report on Form 10-Q for the Quarter Ended September 30, 1994, dated November 14, 1994). 10.5 Master Security Agreement dated as of August 31, 1994 between Fairchild Space and Defense Corporation and General Electric Capital Corporation (incorporated by reference to Exhibit 10.7 to the Company's Report on Form 10-Q for the Quarter ended September 30, 1994, dated November 14, 1994). 10.6 Orbital Sciences Corporation 1990 Stock Option Plan, restated as of April 27, 1995 (incorporated by reference to Exhibit 10.5.1 to the Company's Report on Form 10-Q for the quarter ended June 30, 1995, dated August 14, 1995).** 10.7 Orbital Sciences Corporation 1990 Stock Option Plan for Non-Employee Directors, restated as of April 27, 1995 (incorporated by reference to Exhibit 10.5.2 to the Company's Report on Form 10-Q for the quarter ended June 30, 1995, dated August 14, 1995).** 10.8 Orbital Communications Corporation Restated 1992 Stock Option Plan, restated as of September 12, 1995 (transmitted herewith).** 10.9 Orbital Sciences Corporation 1995 Deferred Compensation Plan.** (transmitted herewith) 10.10 Fairchild Space and Defense Corporation Supplemental Executive Retirement Plan.** (transmitted herewith) 10.11 Form of Executive Employment Agreement entered into between the Company and Executive Officers and certain other Officers of the Company (incorporated by reference to Exhibit 10.17 to the Company's Registration Statement on Form S-1 (File Number 33-33453) filed on February 9, 1990 and effective on April 24, 1990).** 10.11.1 Employment Agreement between Jack A. Frohbieter and Fairchild Space and Defense Corporation, dated August 26, 1992 (incorporated by reference to Exhibit 10.10.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994, filed March 28, 1995).** 10.12 Form of Indemnification Agreement entered into between the Company and Directors, Executive Officers and certain other Officers of the Company (incorporated by reference to Exhibit 10.18 to
22 25 the Company's Registration Statement on Form S-1 (File Number 33-33453) filed on February 9, 1990 and effective on April 24, 1990).** 10.12.1 Amendment dated October 22, 1992 to form of Indemnification Agreement entered into between the Company and Directors, Executive Officers and certain other Officers of the Company (incorporated by reference to Exhibit 19 to the Company's Report on Form 10-Q for the Quarter Ended September 30, 1992, dated November 16, 1992).** 10.13 Participation Agreement dated August 20, 1992 by and between ITT Commercial Finance Corp. and the Company, as amended through August 26, 1992 (incorporated by reference to Exhibit 19.14 to Amendment No. 2 to the Company's Report on Form 10-Q for the Quarter Ended September 30, 1992, dated January 27, 1993). 10.14 Master Agreement dated as of June 30, 1993 among the Company, Orbital Communications Corporation, Teleglobe Inc. and Teleglobe Mobile Partners (the "Master Agreement") (incorporated by reference to Exhibit 10.24.1 to the Company's Report on Form 10-Q for the Quarter Ended June 30, 1993, dated August 13, 1993).+ 10.14.1 Amendment No. 1 to Master Agreement dated as of April 1, 1994 (incorporated by reference to Exhibit 10.16.1.1 to the Company's Report on Form 10-Q for the Quarter Ended June 30, 1994, dated August 15, 1994).+ 10.14.2 Amendment No. 2 to Master Agreement dated as of October 1, 1994 (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 dated March 28, 1995).+ 10.14.3 Amendment No. 3 to Master Agreement dated as of September 12, 1995 (transmitted herewith). 10.15 Agreement of Limited Partnership of ORBCOMM Development Partners, L.P. dated as of June 30, 1993 between Orbital Communications Corporation and Teleglobe Mobile Partners (incorporated by reference to Exhibit 10.24.2 for the Company's Report on Form 10-Q for the Quarter ended June 30, 1993, dated August 13, 1993).+ 10.15.1 Amendment No.1 to Agreement of Limited Partnership of ORBCOMM Development Partners, L.P. dated as of April 1, 1994 (incorporated by reference to Exhibit 10.16.2.1 to the Company's Report on Form 10-Q for the Quarter Ended June 30, 1994, dated August 15, 1994).+ 10.16 Agreement of Limited Partnership of ORBCOMM U.S. Partners, L.P. dated as of June 30, 1993 between Orbital Communications Corporation and Teleglobe Mobile Partners (incorporated by reference to Exhibit 10.24.3 of the Company's Report on Form 10-Q for the Quarter ended June 30, 1993, dated August 13, 1993). 10.16.1 Amendment No. 1 to Agreement of Limited Partnership of ORBCOMM U.S. Partners, L.P. dated as of September 12, 1995 between Orbital Communications Corporation and ORBCOMM Global Partners (transmitted herewith). 10.17 Agreement of Limited Partnership of ORBCOMM International Partners, L.P. dated as of June 30, 1993 between Orbital Communications Corporation and Teleglobe Mobile Partners (incorporated by reference to Exhibit 10.24.3 to the Company's Report on Form 10-Q for the Quarter Ended June 30, 1993, dated August 13, 1993). 10.17.1 Amendment No.1 to Agreement of Limited Partnership of ORBCOMM International Partners, L.P. dated as of September 12, 1995 between Orbital Communications Corporation and ORBCOMM Global Partners (transmitted herewith). 10.18 Proprietary Information and Non-Competition Agreement dated as of June 30, 1993 among the Company, Orbital Communications Corporation, Teleglobe Inc., Teleglobe Mobile Partners, ORBCOMM Development Partners, L.P., ORBCOMM U.S. Partners, L.P. and ORBCOMM International Partners, L.P. (incorporated by reference to Exhibit 10.24.9 to the Company's Report
23 26 on Form 10-Q for the Quarter Ended June 30, 1993, dated August 13, 1993). 10.18.1 Amendment No.1 to Proprietary Information and Non-Competition Agreement dated as of September 12, 1995 among the Company, Orbital Communications Corporation, Teleglobe Inc., Teleglobe Mobile Partners, ORBCOMM Global, L.P., ORBCOMM USA, L.P., and ORBCOMM International Partners, L.P. (transmitted herewith). 10.19 Support Agreement between the Company and MacDonald, Dettwiler Holdings, Inc., dated November 17, 1995. (transmitted herewith) 11 Statement re: Computation of Earnings Per Share (transmitted herewith). 13 Portions of the 1995 Annual Report to Stockholders (transmitted herewith). 21 Subsidiaries of the Company (transmitted herewith). 23 Consent of KPMG Peat Marwick LLP (transmitted herewith). 27 Financial Data Schedule (such schedule is furnished for the information of the Securities and Exchange Commission and is not to be deemed "filed" as part of the Form 10-K, or otherwise subject to the liabilities of Section 18 of the Securities Exchange Act of 1934) (transmitted herewith).
- ---------------------- * Confidential treatment requested pursuant to Rule 24b-2 of the Exchange Act. + Confidential treatment previously granted by the Commission. ** Management Contract or Compensatory Plan or Arrangement. 24 EX-9 2 TRUST AGREEMENT. 1 EXHIBIT 9 EXHIBIT 2.2 VOTING AND EXCHANGE TRUST AGREEMENT MEMORANDUM OF AGREEMENT made as of the 17th day November, 1995. B E T W E E N: ORBITAL SCIENCES CORPORATION, a corporation existing under the laws of the State of Delaware, (hereinafter referred to as "Orbital"), - and - MACDONALD, DETTWILER HOLDINGS INC., (FORMERLY KNOWN AS 3173623 CANADA INC.) a corporation existing under the laws of Canada, (hereinafter referred to as "Corporation"), - and - STATE STREET BANK AND TRUST COMPANY, a trust company existing under the laws of the Commonwealth of Massachusetts, (hereinafter referred to as "Trustee"). WHEREAS pursuant to a combination agreement dated as of August 31, 1995 (the "Combination Agreement"), by and between Orbital, the Corporation and MacDonald, Dettwiler and Associates Ltd. ("MDA"), the parties agreed that on the Effective Date (as defined in the Combination Agreement), Orbital and the Corporation would execute and deliver a Voting and Exchange Trust Agreement containing the terms and conditions set forth in Exhibit 2.2 to the Combination Agreement together with such other terms and conditions as may be agreed to by the parties to the Combination Agreement acting reasonably; 2 - 2 - AND WHEREAS pursuant to an arrangement (the "Arrangement") effected by articles of arrangement dated November 17 , 1995 filed pursuant to the Canada Business Corporations Act, each issued and outstanding common share of MDA (an "MDA Common Share") was exchanged directly or indirectly for 0.3607 of an issued and outstanding Exchangeable Non-Voting Share of the Corporation (the "Exchangeable Shares"); AND WHEREAS the aforesaid articles of arrangement set forth the rights, privileges, restrictions and conditions (collectively the "Exchangeable Share Provisions") attaching to the Exchangeable Shares; AND WHEREAS Orbital is to provide voting rights in Orbital to each holder (other than Orbital and its Affiliates) from time to time of Exchangeable Shares, such voting rights per Exchangeable Share to be equivalent to the voting rights per share of the common stock, par value U.S. $.01 per share, of Orbital (the "Orbital Common Shares"); AND WHEREAS Orbital is to grant to and in favour of the holders (other than Orbital and its Affiliates) from time to time of Exchangeable Shares the right, in the circumstances set forth herein, to require Orbital to purchase from each such holder all or any part of the Exchangeable Shares held by the holder; AND WHEREAS the parties desire to make appropriate provision and to establish a procedure whereby voting rights in Orbital shall be exercisable by holders (other than Orbital and its Affiliates) from time to time of Exchangeable Shares by and through the Trustee, which will hold legal title to one share of Orbital Special Voting Preferred Stock, U.S. $.01 par value (the "Orbital Special Voting Stock"), to which voting rights attach for the benefit of such holders and whereby the rights to require Orbital to purchase Exchangeable Shares from the holders thereof shall be exercisable by such holders from time to time of Exchangeable Shares by and through the Trustee, which will hold legal title to such rights for the benefit of such holders; AND WHEREAS these recitals and any statements of fact in this Agreement are made by Orbital and the Corporation and not by the Trustee and the Trustee in no way warrants the accuracy thereof and shall have no liability therefor; NOW THEREFORE in consideration of the respective covenants and agreements provided in this Agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties agree as follows: 3 - 3 - ARTICLE 1 DEFINITIONS AND INTERPRETATION .1 DEFINITIONS. In this Agreement, the following terms shall have the following meanings: "AFFILIATE" of any person means any other person directly or indirectly controlling, controlled by, or under common control of, that person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control of"), as applied to any person, means the possession by another person, directly or indirectly, of the power to direct or cause the direction of the management and policies of that first mentioned person, whether through the ownership of voting securities, by contract or otherwise. "ARRANGEMENT" has the meaning ascribed thereto in the recitals hereto. "AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of Orbital to effect the automatic exchange of shares of Orbital Common Shares for Exchangeable Shares pursuant to subsection 5.12(c) hereof. "BOARD OF DIRECTORS" means the Board of Directors of the Corporation. "BUSINESS DAY" means a day other than a Saturday, a Sunday or a day when banks are not open for business in one or both of Vancouver, British Columbia and the Commonwealth of Virginia. "CALL RIGHTS" means collectively the Liquidation Call Right, the Redemption Call Right and the Retraction Call Right. "CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed in a foreign currency (the "Foreign Currency Amount") at any date the product obtained by multiplying (a) the Foreign Currency Amount by (b) the noon spot exchange rate on such date for such foreign currency expressed in Canadian dollars as reported by the Bank of Canada or, in the event such spot exchange rate is not available, such exchange rate on such date for such foreign currency expressed in Canadian dollars as may be deemed by the Board of Directors to be appropriate for such purpose. "CBCA" means the Canada Business Corporations Act, as amended; 4 - 4 - "CURRENT MARKET PRICE" means, in respect of Orbital Common Shares on any date, the Canadian Dollar Equivalent of the closing sale price of Orbital Common Shares on such date (or, if no trades of any Orbital Common Shares occurred on such date, on the last trading day prior thereto on which such trades occurred) reported on the NASDAQ National Market System, or, if the Orbital Common Shares are not then quoted on the NASDAQ National Market System, on such other stock exchange or automated quotation system on which the Orbital Common Shares are listed or quoted, as the case may be, as may be selected by the Board of Directors for such purpose; provided, however, that if in the opinion of the Board of Directors the public distribution or trading activity of Orbital Common Shares during such period does not create a market that reflects the fair market value of Orbital Common Shares, then the Current Market Price of Orbital Common Shares shall be determined by the Board of Directors based upon the advice of such qualified independent financial advisors as the Board of Directors may deem to be appropriate, and provided further that any such selection, opinion or determination by the Board of Directors shall be conclusive and binding. "CURRENT ORBITAL COMMON SHARE EQUIVALENT" has the meaning ascribed thereto in the Exchangeable Share Provisions. "DEFAULT EVENT" means any failure, other than by reason of an Insolvency Event, of the Corporation to perform any of its obligations pursuant to the Exchangeable Share Provisions, including without limitation its obligation to redeem any Retracted Shares. "EXCHANGE RIGHT" has the meaning ascribed thereto in section 5.1 hereof. "EXCHANGEABLE SHARE PROVISIONS" has the meaning ascribed thereto in the recitals hereto. "EXCHANGEABLE SHARES" has the meaning ascribed thereto in the recitals hereto. "HOLDER VOTES" has the meaning ascribed thereto in section 4.2 hereof. "HOLDERS" means the registered holders from time to time of Exchangeable Shares, other than Orbital and its Affiliates. "INSOLVENCY EVENT" means the institution by the Corporation of any proceeding to be adjudicated a bankrupt or insolvent or to be dissolved or wound up, or the consent of the Corporation to the institution of bankruptcy, insolvency, dissolution 5 - 5 - or winding up proceedings against it, or the filing of a petition, answer or consent seeking dissolution or winding up under any bankruptcy, insolvency or analogous laws, including without limitation the Companies Creditors' Arrangement Act (Canada) and the Bankruptcy and Insolvency Act (Canada), and the failure by the Corporation to contest in good faith any such proceedings commenced in respect of the Corporation within 15 days of becoming aware thereof, or the consent by the Corporation to the filing of any such petition or to the appointment of a receiver, or the making by the Corporation of a general assignment for the benefit of creditors, or the admission in writing by the Corporation of its inability to pay its debts generally as they become due, or the Corporation not being permitted, pursuant to solvency requirements of applicable law, to redeem any Retracted Shares pursuant to section 5.6 of the Exchangeable Share Provisions. "LIEN" has the meaning ascribed thereto in the Plan of Arrangement. "LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in the Plan of Arrangement. "LIQUIDATION EVENT" has the meaning ascribed thereto in subsection 5.12(a) hereof. "LIQUIDATION EVENT EFFECTIVE DATE" has the meaning ascribed thereto in subsection 5.12(c) hereof. "LIST" has the meaning ascribed thereto in section 4.6 hereof. "OFFICER'S CERTIFICATE" means, with respect to Orbital or the Corporation, as the case may be, a certificate signed by any one of the Chairman of the Board, the President, any Vice-President or any other senior officer of Orbital or the Corporation, as the case may be. "ORBITAL COMMON SHARES" has the meaning ascribed thereto in the recitals hereto. "ORBITAL CONSENT" has the meaning ascribed thereto in section 4.2 hereof. "ORBITAL MEETING" has the meaning ascribed thereto in section 4.2 hereof. 6 - 6 - "ORBITAL SPECIAL VOTING STOCK" has the meaning ascribed thereto in the recitals hereto. "ORBITAL SUCCESSOR" has the meaning ascribed thereto in subsection 10.1(a) hereof. "PERSON" includes an individual, partnership, corporation, company, unincorporated syndicate or organization, trust, trustee, executor, administrator and other legal representative. "PLAN OF ARRANGEMENT" means the plan of arrangement of the Corporation providing for the Arrangement. "REDEMPTION CALL RIGHT" has the meaning ascribed thereto in the Plan of Arrangement. "RETRACTED SHARES" HAS the meaning ascribed thereto in section 5.7 hereof. "RETRACTION CALL RIGHT" has the meaning ascribed thereto in the Plan of Arrangement. "SUPPORT AGREEMENT" means that certain support agreement made as of even date herewith between the Corporation and Orbital. "TRUST" means the trust created by this Agreement. "TRUST ESTATE" means the Voting Share, any other securities, the Exchange Right, the Automatic Exchange Rights and any money or other property that may be held by the Trustee from time to time pursuant to this Agreement. "VOTING RIGHTS" means the voting rights attached to the Voting Share. "VOTING SHARE" means the one share of Orbital Special Voting Stock, issued by Orbital to and deposited with the Trustee, which entitles the holder of record to a number of votes at meetings of holders of Orbital Common Shares equal to the number of Exchangeable Shares outstanding from time to time, other than Exchangeable Shares held by Orbital and its Affiliates, multiplied by the Current Orbital Common Share Equivalent at the relevant time. 7 - 7 - .2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this Agreement into articles, sections and paragraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. .3 NUMBER, GENDER, ETC. Words importing the singular number only shall include the plural and vice versa. Words importing the use of any gender shall include all genders. .4 DATE FOR ANY ACTION. If any date on which any action is required to be taken under this Agreement is not a Business Day, such action shall be required to be taken on the next succeeding Business Day. .5 WITHHOLDING OF TAX. All amounts required to be paid, deposited or delivered hereunder shall be paid, deposited or delivered after deduction of any amount required by applicable law to be deducted or withheld on account of tax and the deduction of such amounts and remittance to the applicable tax authorities shall, to the extent thereof, satisfy such requirement to pay, deposit or deliver hereunder. The Trustee shall have no obligation or liability to pay, deposit, deliver or to deduct any amount required by applicable law to be deducted or withheld on account of tax or to remit the same to applicable tax authorities. ARTICLE 2 PURPOSE OF AGREEMENT .1 ESTABLISHMENT OF TRUST. The purpose of this Agreement is to create the Trust for the benefit of the Holders, as herein provided. The Trustee will hold the Voting Share in trust in order to enable the Trustee to exercise the Voting Rights and will hold the Exchange Right and the Automatic Exchange Rights in trust in order to enable the Trustee to exercise such rights, in each case as trustee for and on behalf of the Holders as provided in this Agreement. 8 - 8 - ARTICLE 3 VOTING SHARE .1 ISSUE AND OWNERSHIP OF THE VOTING SHARE. In consideration of the granting of the Call Rights to Orbital, Orbital hereby issues to and deposits with the Trustee the Voting Share to be hereafter held of record by the Trustee as trustee for and on behalf of, and for the use and benefit of, the Holders and in accordance with the provisions of this Agreement. Orbital hereby acknowledges receipt from the Trustee as trustee for and on behalf of the Holders of good and valuable consideration (and the adequacy thereof) for the issuance of the Voting Share by Orbital to the Trustee. During the term of the Trust and subject to the terms and conditions of this Agreement, the Trustee shall possess and be vested with full legal ownership of the Voting Share and shall be entitled to exercise all of the rights and powers of an owner with respect to the Voting Share, provided that the Trustee shall: (a) hold the Voting Share and the legal title thereto as trustee solely for the use and benefit of the Holders in accordance with the provisions of this Agreement; and (b) except as specifically authorized by this Agreement, have no power or authority to sell, transfer, vote or otherwise deal in or with the Voting Share and the Voting Share shall not be used or disposed of by the Trustee for any purpose other than the purposes for which this Trust is created pursuant to this Agreement. .2 LEGENDED SHARE CERTIFICATES. The Corporation shall cause each certificate representing Exchangeable Shares to bear an appropriate legend notifying the Holders of their right to instruct the Trustee with respect to the exercise of the Voting Rights with respect to the Exchangeable Shares held by Holders, which Voting Rights attach solely to the Voting Share. .3 SAFE KEEPING OF CERTIFICATE. The certificate representing the Voting Share shall at all times be held by the Trustee in the Commonwealth of Massachusetts. 9 - 9 - ARTICLE 4 VOTING RIGHTS .1 VOTING RIGHTS. The Trustee, as the holder of record of the Voting Share, shall be entitled to all of the Voting Rights in accordance with the instructions of the Holders, subject to section 6.15 hereof, including the right to consent to or to vote in person or by proxy the Voting Share, on any matter, question or proposition whatsoever that may properly come before the stockholders of Orbital for their vote at an Orbital Meeting or in connection with an Orbital Consent. The Voting Rights shall be and remain vested in and, subject to section 6.15 hereof, be exercised by the Trustee in accordance with the instructions of the Holders. Subject to section 6.15 hereof, the Trustee shall exercise the Voting Rights only on the basis of instructions received pursuant to this Article 4 from Holders entitled to instruct the Trustee as to the voting thereof at the time at which an Orbital Consent is sought or an Orbital Meeting is held. To the extent that no instructions are received from a Holder with respect to the Voting Rights to which such Holder is entitled, the Trustee shall not exercise or permit the exercise of such Holder's Voting Rights. .2 NUMBER OF VOTES. With respect to all meetings of stockholders of Orbital at which holders of Orbital Common Shares are entitled to vote (an "Orbital Meeting") and with respect to all written consents sought from the holders of Orbital Common Shares (an "Orbital Consent"), each Holder shall be entitled to instruct the Trustee to cast and exercise, in the manner instructed, such number of votes comprised in the Voting Rights as is equal to the Current Orbital Common Share Equivalent on the record date established by Orbital or by applicable law for such Orbital Meeting or Orbital Consent, as the case may be, for each Exchangeable Share owned of record by such Holder on such record date (the "Holder Votes") in respect of each matter, question or proposition to be voted on at such Orbital Meeting or to be consented to in connection with such Orbital Consent. .3 MAILINGS TO SHAREHOLDERS. With respect to each Orbital Meeting and Orbital Consent, the Trustee shall mail or cause to be mailed (or otherwise communicate in the same manner as Orbital utilizes in communications to holders of Orbital Common Shares) to each of the Holders named in the List on the same day as the initial mailing of notice (or other communication) with respect thereto is given by Orbital or any third party to Orbital's stockholders: (a) a copy of such notice, together with any proxy or information statement and related materials to be provided to stockholders of Orbital; 10 - 10 - (b)a statement that such Holder is entitled to instruct the Trustee as to the exercise of the Holder Votes with respect to such Orbital Meeting or Orbital Consent, as the case may be, or, as set forth in section 4.7 hereof, to attend such Orbital Meeting and to exercise personally the Holder Votes thereat; (c)a statement as to the manner in which such instructions may be given to the Trustee, including an express indication that instructions may be given to the Trustee to give: (i) a proxy to such Holder or his designee to exercise personally the Holder Votes; or (ii) a proxy to a designated agent or other representative of the management of Orbital to exercise such Holder Votes; (d)a statement that if no such instructions are received from the Holder, the Holder Votes to which such Holder is entitled will not be exercised; (e)a form of direction whereby the Holder may direct and instruct the Trustee as contemplated herein (which form shall follow as closely as practicable Orbital's form of proxy); and (f)a statement of (i) the time and date by which such instructions must be received by the Trustee in order to be binding upon it, which in the case of an Orbital Meeting shall not be earlier than the close of business on the second Business Day prior to such meeting, and (ii) the method for revoking or amending such instructions. For the purpose of determining Holder Votes to which a Holder is entitled in respect of any such Orbital Meeting or Orbital Consent, the number of Exchangeable Shares owned of record by the Holder shall be determined at the close of business on the record date established by Orbital or by applicable law for purposes of determining stockholders entitled to vote at such Orbital Meeting or to give written consent in connection with such Orbital Consent. Orbital shall notify the Trustee of any decision of the board of directors of Orbital with respect to the calling of any such Orbital Meeting or the seeking by Orbital of any such Orbital Consent and shall provide all necessary information and materials to the Trustee in each case promptly and in sufficient time to enable the Trustee to perform its obligations contemplated by this section 4.3 and in any event not later than two Business Days after such decision has been made or such information and materials are available, as the case may be. 11 - 11 - .4 COPIES OF STOCKHOLDER INFORMATION. Orbital shall deliver to the Trustee copies of all proxy materials (including notices of Orbital Meetings but excluding proxies to vote Orbital Common Shares), information statements, reports (including without limitation all interim and annual financial statements) and other written communications that are to be distributed by Orbital from time to time to holders of Orbital Common Shares in sufficient quantities and in sufficient time so as to enable the Trustee to send those materials to each Holder at the same time as such materials are first sent to holders of Orbital Common Shares. The Trustee shall mail or otherwise send to each Holder, at the expense of Orbital, copies of all such materials (and all materials specifically directed to the Holders or to the Trustee for the benefit of the Holders by Orbital) received by the Trustee from Orbital at the same time as such materials are first sent to holders of Orbital Common Shares. The Trustee shall keep copies of all such materials available for inspection by any Holder at the Trustee's principal office. .5 OTHER MATERIALS. Immediately after receipt by Orbital or any stockholder of Orbital of any material sent or given generally to the holders of Orbital Common Shares by or on behalf of a third party, including without limitation dissident proxy and information circulars (and related information and material) and tender and exchange offer circulars (and related information and material), Orbital shall use all commercially reasonable efforts to obtain and deliver to the Trustee copies thereof in sufficient quantities so as to enable the Trustee to forward such material (unless the same has been provided directly to Holders by such third party) to each Holder as soon as possible thereafter. As soon as practicable after receipt thereof, the Trustee shall mail or otherwise send to each Holder, at the expense of Orbital, copies of all such materials received by the Trustee from Orbital. The Trustee shall also keep copies of all such materials available for inspection by any Holder at the Trustee's principal office. .6 LIST OF PERSONS ENTITLED TO VOTE. The Corporation shall, (a) prior to each annual, general and special Orbital Meeting or the seeking of any Orbital Consent and (b) forthwith upon each request made at any time by the Trustee in writing, prepare or cause to be prepared a list (a "List") of the names and addresses of the Holders arranged in alphabetical order and showing the number of Exchangeable Shares held of record by each such Holder, in each case at the close of business on the date specified by the Trustee in such request or, in the case of a List prepared in connection with an Orbital Meeting or an Orbital Consent, at the close of business on the record date established by Orbital or pursuant to applicable law for determining the holders of Orbital Common Shares entitled to receive notice of and/or to vote at such Orbital Meeting or to give consent in connection with such Orbital Consent. Each such List shall be delivered to the Trustee promptly after receipt by the Corporation of such request or the record date for such meeting or seeking of consent, as the case may be, 12 - 12 - and in any event within sufficient time as to enable the Trustee to perform its obligations under this Agreement. Orbital agrees to give the Corporation notice (with a copy to the Trustee) of the calling of any Orbital Meeting or the seeking of any Orbital Consent, together with the record dates therefor, sufficiently prior to the date of the calling of such meeting or seeking of such consent so as to enable the Corporation to perform its obligations under this section 4.6. .7 ENTITLEMENT TO DIRECT VOTES. Any Holder named in a List prepared in connection with any Orbital Meeting or any Orbital Consent shall be entitled (a) to instruct the Trustee in the manner described in section 4.3 hereof with respect to the exercise of the Holder Votes to which such Holder is entitled or (b) to attend such meeting and personally to exercise thereat (or to exercise with respect to any written consent), as the proxy of the Trustee, the Holder Votes to which such Holder is entitled. .8 VOTING BY TRUSTEE, AND ATTENDANCE OF TRUSTEE REPRESENTATIVE, AT MEETING. (a) In connection with each Orbital Meeting and Orbital Consent, the Trustee shall exercise, either in person or by proxy, in accordance with the instructions received from a Holder pursuant to section 4.3 hereof, the Holder Votes as to which such Holder is entitled to direct the vote (or any lesser number thereof as may be set forth in the instructions); provided, however, that such written instructions are received by the Trustee from the Holder prior to the time and date fixed by it for receipt of such instructions in the notice given by the Trustee to the Holder pursuant to section 4.3 hereof. (b)The Trustee shall cause such representatives as are empowered by it to sign and deliver, on behalf of the Trustee, proxies for Voting Rights to attend each Orbital Meeting. Upon submission by a Holder (or its designee) of identification satisfactory to the Trustee's representatives, and at the Holder's request, such representatives shall sign and deliver to such Holder (or its designee) a proxy to exercise personally the Holder Votes as to which such Holder is otherwise entitled hereunder to direct the vote, if such Holder either (i) has not previously given the Trustee instructions pursuant to section 4.3 hereof in respect of such meeting, or (ii) submits to the Trustee's representatives written revocation of any such previous instructions. At such meeting, the Holder exercising such Holder Votes shall have the same rights as the Trustee to speak at the meeting in respect of any matter, question or proposition, to vote by way of ballot at the meeting in respect of any matter, question or proposition and to vote 13 - 13 - at such meeting by way of a show of hands in respect of any matter, question or proposition. .9 DISTRIBUTION OF WRITTEN MATERIALS. Any written materials to be distributed by the Trustee to the Holders pursuant to this Agreement shall be delivered or sent by mail (or otherwise communicated in the same manner as Orbital utilizes in communications to holders of Orbital Common Shares) to each Holder at its address as shown on the books of the Corporation. The Corporation shall provide or cause to be provided to the Trustee for this purpose, on a timely basis and without charge or other expense: (a) a List; and (b) upon the request of the Trustee, mailing labels to enable the Trustee to carry out its duties under this Agreement. .10 TERMINATION OF VOTING RIGHTS. Except with respect to an Orbital Meeting or Orbital Consent for which the record date has occurred, all of the rights of a Holder with respect to the Holder Votes exercisable in respect of the Exchangeable Shares held by such Holder, including the right to instruct the Trustee as to the voting of or to vote personally such Holder Votes, shall be deemed to be surrendered by the Holder to Orbital and such Holder Votes and the Voting Rights represented thereby shall cease, unless Orbital shall not have delivered the requisite Orbital Common Shares issuable in exchange therefor directly to the Holder or otherwise pursuant to the Holder's instruction or to the Trustee for delivery to the Holders, immediately upon the delivery by such Holder to the Trustee of the certificates representing such Exchangeable Shares in connection with the exercise by the Holder of the Exchange Right or the occurrence of the automatic exchange pursuant to the Automatic Exchange Rights (it being acknowledged that the Trustee is not obligated to procure delivery of certificates representing Exchangeable Shares in either of such events) or upon the redemption of Exchangeable Shares pursuant to Article 5 or Article 6 of the Exchangeable Share Provisions, or upon the effective date of the liquidation, dissolution or winding-up of the Corporation pursuant to Article 4 of the Exchangeable Share Provisions, or upon the purchase of Exchangeable Shares from the holder thereof by Orbital pursuant to the exercise by Orbital of the Retraction Call Right, the Redemption Call Right or the Liquidation Call Right. .11 ISSUE OF ADDITIONAL SHARES. During the term of this Agreement, Orbital will not issue or commit to issue any shares of Orbital Special Voting Stock, in addition to the Voting Share. 14 - 14 - ARTICLE 5 EXCHANGE RIGHT AND AUTOMATIC EXCHANGE .1 GRANT AND OWNERSHIP OF THE EXCHANGE RIGHT. In consideration of the granting of the Call Rights to Orbital, Orbital hereby grants to the Trustee as trustee for and on behalf of, and for the use and benefit of, the Holders (a) the right (the "Exchange Right"), upon the occurrence and during the continuance of an Insolvency Event or Default Event, to require Orbital to purchase from each Holder all or any part of the Exchangeable Shares held by such Holder and (b) the Automatic Exchange Rights, all in accordance with the provisions of this Agreement. Orbital hereby acknowledges receipt from the Trustee as trustee for and on behalf of the Holders of good and valuable consideration (and the adequacy thereof) for the grant of the Exchange Right and the Automatic Exchange Rights by Orbital to the Trustee. During the term of the Trust and subject to the terms and conditions of this Agreement, the Trustee shall possess and be vested with full legal ownership of the Exchange Right and the Automatic Exchange Rights and shall be entitled to exercise all of the rights and powers of an owner with respect to the Exchange Right and the Automatic Exchange Rights, provided that the Trustee shall: (a) hold the Exchange Right and the Automatic Exchange Rights and the legal title thereto as trustee solely for the use and benefit of the Holders in accordance with the provisions of this Agreement; and (b) except as specifically authorized by this Agreement, have no power or authority to exercise or otherwise deal in or with the Exchange Right or the Automatic Exchange Rights, and the Trustee shall not exercise any such rights for any purpose other than the purposes for which this Trust is created pursuant to this Agreement. .2 LEGENDED SHARE CERTIFICATES. The Corporation shall cause each certificate representing Exchangeable Shares to bear an appropriate legend notifying the Holders of: (a)their right to instruct the Trustee with respect to the exercise of the Exchange Right in respect of the Exchangeable Shares held by a Holder; and (b)the Automatic Exchange Rights. .3 GENERAL EXERCISE OF EXCHANGE RIGHT. The Exchange Right shall be and remain vested in and exercisable by the Trustee. Subject to section 6.15 hereof, the 15 - 15 - Trustee shall exercise the Exchange Right only on the basis of instructions received pursuant to this Article 5 from Holders entitled to instruct the Trustee as to the exercise thereof. To the extent that no instructions are received from a Holder with respect to the Exchange Right, the Trustee shall not exercise or permit the exercise of the Exchange Right as to that Holder. .4 PURCHASE PRICE. The purchase price payable by Orbital for each Exchangeable Share to be purchased by Orbital under the Exchange Right shall be an amount per share equal to (a) the Current Market Price multiplied by the Current Orbital Common Share Equivalent, in each case determined on the day of closing of the purchase and sale of such Exchangeable Share under the Exchange Right, which shall be satisfied in full in respect of the Exchangeable Shares in regard to which a Holder has exercised the Exchange Right by causing to be delivered to such Holder such whole number of Orbital Common Shares as is equal to the product obtained by multiplying the number of such Exchangeable Shares by the Current Orbital Common Share Equivalent (together with an amount in lieu of any fractional Orbital Common Share resulting from such calculation payable in accordance with section 9.4 of the Exchangeable Share Provisions), plus (b) the aggregate of all dividends declared and unpaid on each such Exchangeable Share (provided that if the record date for any such declared and unpaid dividends occurs on or after the day of closing of such purchase and sale the purchase price shall not include such declared and unpaid dividends). The sole responsibility to calculate the purchase price and pay the same to the Holder shall be that of Orbital and not the Trustee. .5 EXERCISE INSTRUCTIONS. Subject to the terms and conditions herein set forth, a Holder shall be entitled, upon the occurrence and during the continuance of an Insolvency Event, to instruct the Trustee to exercise the Exchange Right with respect to all or any part of the Exchangeable Shares registered in the name of such Holder on the books of the Corporation. To cause the exercise of the Exchange Right by the Trustee, the Holder shall deliver to the Trustee, in person or by certified or registered mail, at its principal office or at such other place as the Trustee may from time to time designate by written notice to the Holders, the certificates representing the Exchangeable Shares that such Holder desires Orbital to purchase, duly endorsed in blank, and accompanied by such other documents and instruments as the Trustee may reasonably require together with (a) a duly completed form of notice of exercise of the Exchange Right, contained on the reverse of or attached to the Exchangeable Share certificates, stating (i) that the Holder thereby instructs the Trustee to exercise the Exchange Right so as to require Orbital to purchase from the Holder the number of Exchangeable Shares specified therein, (ii) that such Holder has good title to and owns all such Exchangeable Shares to be acquired by Orbital free and clear of all Liens, (iii) the names in which the certificates representing Orbital Common Shares issuable in connection with the exercise of the Exchange Right are to be issued and (iv) the names and addresses of the 16 - 16 - persons to whom such new certificates should be delivered and (b) payment (or evidence satisfactory to the Trustee, the Corporation and Orbital of payment) of the taxes (if any) payable as contemplated by section 5.8 of this Agreement. If only a part of the Exchangeable Shares represented by any certificate or certificates delivered to the Trustee are to be purchased by Orbital under the Exchange Right, a new certificate for the balance of such Exchangeable Shares shall be issued to the Holder at the expense of the Corporation. .6 DELIVERY OF ORBITAL COMMON SHARES: EFFECT OF EXERCISE. Promptly after receipt of the certificates, duly endorsed in blank, representing the Exchangeable Shares that are the subject of instructions to the Trustee pursuant to section 5.5 (together with such documents and instruments of transfer and a duly completed form of notice of exercise of the Exchange Right (and payment of taxes, if any, or evidence thereof in accordance with section 5.8)), the Trustee shall notify Orbital and the Corporation of its receipt of the same, which notice to Orbital and the Corporation shall constitute exercise of the Exchange Right by the Trustee on behalf of the Holder of such Exchangeable Shares, and Orbital shall immediately thereafter deliver or cause to be delivered to the Holder of such Exchangeable Shares (or to such other persons, if any, properly designated by such Holder), the certificates for the number of Orbital Common Shares issuable in connection with the exercise of the Exchange Right, which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any Liens, and cheques for the balance, if any, of the total purchase price therefor (or, if part of the purchase price consists of dividends payable in property, such property or property the same as or economically equivalent to such property). Immediately upon the giving of notice by the Trustee to Orbital and the Corporation of the exercise of the Exchange Right, as provided in this section 5.6, the closing of the transaction of purchase and sale contemplated by the Exchange Right shall be deemed to have occurred, and the Holder of such Exchangeable Shares shall be deemed to have transferred to Orbital all of its right, title and interest in and to such Exchangeable Shares and in the related interest in the Trust Estate and shall cease to be a holder of such Exchangeable Shares and shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive the purchase price therefor, unless the requisite number of Orbital Common Shares (together with a cheque for the balance, if any, of the purchase price therefor or, if part of the purchase price consists of dividends payable in property, such property or property the same as or economically equivalent to such property) is not allotted, issued and delivered by Orbital to such Holder (or to other persons, if any, properly designated by such Holder) within five Business Days of the date of the giving of such notice by the Trustee, in which case the rights of the Holder shall remain unaffected until such Orbital Common Shares are so allotted, issued and delivered by Orbital and any such cheque is so delivered and paid. Concurrently with such Holder ceasing to be a holder of Exchangeable Shares, the 17 - 17 - Holder shall be considered and deemed for all purposes to be the holder of the Orbital Common Shares delivered to it pursuant to the Exchange Right. .7 EXERCISE OF EXCHANGE RIGHT SUBSEQUENT TO RETRACTION. In the event that a Holder has exercised its right under Article 5 of the Exchangeable Share Provisions to require the Corporation to redeem any or all of the Exchangeable Shares held by the Holder (the "Retracted Shares") and is notified by the Corporation pursuant to section 5.6 of the Exchangeable Share Provisions that the Corporation is not permitted as a result of solvency requirements of applicable law to redeem all of such Retracted Shares, and provided that Orbital shall not have exercised the Retraction Call Right with respect to the Retracted Shares, the retraction request shall constitute and shall be deemed to constitute notice from the Holder to the Trustee instructing the Trustee to exercise the Exchange Right with respect to those Retracted Shares that the Corporation is unable to redeem. In any such event, the Corporation hereby agrees with the Trustee and in favour of the Holder immediately to notify the Trustee of such prohibition against the Corporation redeeming all of the Retracted Shares and immediately to forward or cause to be forwarded to the Trustee all relevant materials delivered by the Holder to the Corporation or to the transfer agent of the Exchangeable Shares (including without limitation a copy of the retraction request delivered pursuant to section 5.1 of the Exchangeable Share Provisions) in connection with such proposed redemption of the Retracted Shares and the Trustee shall thereupon exercise the Exchange Right with respect to the Retracted Shares that the Corporation is not permitted to redeem and will require Orbital to purchase such shares in accordance with the provisions of this Article 5. .8 STAMP OR OTHER TRANSFER TAXES. Upon any sale of Exchangeable Shares to Orbital pursuant to the Exchange Right or the Automatic Exchange Rights, the share certificate or certificates representing Orbital Common Shares to be delivered in connection with the payment of the purchase price therefor shall be issued in the name of the Holder of the Exchangeable Shares so sold or in such names as such Holder may otherwise direct in writing without charge to the holder of the Exchangeable Shares so sold, provided, however, that such Holder (a) shall pay (and neither Orbital, the Corporation nor the Trustee shall be required to pay) any documentary, stamp, transfer or other similar taxes that may be payable in respect of any transfer involved in the issuance or delivery of such shares to a person other than such Holder or (b) shall establish to the satisfaction of the Trustee, Orbital and the Corporation that such taxes, if any, have been paid. .9 NOTICE OF INSOLVENCY EVENT OR DEFAULT EVENT. Immediately upon the occurrence of an Insolvency Event or Default Event or any event that with the giving of notice or the passage of time or both would be an Insolvency Event or Default Event, the Corporation and Orbital shall give written notice thereof to the Trustee. As soon as 18 - 18 - practicable after receiving notice from the Corporation and Orbital or from any other person of the occurrence of an Insolvency Event or Default Event, the Trustee shall mail to each Holder, at the expense of Orbital, a notice of such Insolvency Event or Default Event, which notice shall be sufficient if it references this Agreement and that an event has occurred that, pursuant to this Agreement, entitles Holders to instruct the Trustee to cause Orbital to exchange Orbital Common Shares for Exchangeable Shares. .10 QUALIFICATION OF ORBITAL COMMON SHARES. Unless the staff of the United States Securities and Exchange Commission (the "SEC") has confirmed the availability of an exemption from registration under the United States Securities Act of 1933, as amended (the "Securities Act") as to the issuance of the Orbital Common Shares in exchange for the Exchangeable Shares pursuant to the Plan of Arrangement and the Exchangeable Share Provisions or this Agreement, in response to the No Action Request (as defined in the Combination Agreement) or Orbital has received an opinion of counsel reasonably satisfactory to the Corporation to such effect, then Orbital shall cause such issuance to be registered under the Securities Act, and shall file a registration statement covering such issuance with the SEC and use all commercially reasonable efforts to cause such registration statement to become effective as soon as practicable and remain effective throughout the period during which the Exchangeable Shares may be exchanged in accordance with the Plan of Arrangement, the Exchangeable Share Provisions or this Agreement. Orbital agrees to file any such required registration statement as soon as reasonably practicable. Orbital shall use all reasonable efforts to obtain all orders required from the applicable Canadian securities authorities to permit the issuance of the Orbital Common Shares upon any such exchange of the Exchangeable Shares without registration or qualification with or approval of or the filing of any document including any prospectus or similar document or the taking of any proceeding with or the obtaining of any order, ruling or consent from any governmental or regulatory authority under any Canadian federal or provincial law or regulation or pursuant to the rules and regulations of any regulatory authority or the fulfilment of any other legal requirement before such Orbital Common Shares may be issued and delivered by the Corporation or Orbital to the holder thereof or in order that such Orbital Common Shares may be freely traded thereafter (other than any restrictions on transfer by reason of a holder being a "control person" of the Corporation or Orbital for purposes of Canadian federal or provincial securities law or an "affiliate" for purposes of United States Federal or state securities law). The obligations of the Trustee with respect to the Exchange Right and the Automatic Exchange Rights shall in all respects be subject to the Trustee being satisfied that all applicable laws and regulations with respect thereto and the issuance of Orbital Common Shares in connection with the exercise thereof have been complied with. .11 RESERVATION OF ORBITAL COMMON SHARES. Orbital hereby represents and warrants that it has irrevocably reserved for issuance out of its authorized and 19 - 19 - unissued capital stock such number of Orbital Common Shares as is equal to the number of Exchangeable Shares outstanding at the date hereof and covenants that it will at all times keep available, free from pre-emptive and other rights, out of its authorized and unissued capital stock such number of Orbital Common Shares (or other shares or securities into which Orbital Common Shares may be reclassified or changed) as is necessary to enable Orbital and the Corporation to perform their respective obligations pursuant to this Agreement, the Exchangeable Share Provisions and the Support Agreement. .12 AUTOMATIC EXCHANGE ON LIQUIDATION OF ORBITAL. (a) Orbital shall give the Trustee notice of each of the following events (a "Liquidation Event") at the time set forth below: (i) in the event of any determination by the Board of Directors of Orbital to institute voluntary liquidation, dissolution or winding-up proceedings with respect to Orbital or to effect any other distribution of assets of Orbital among its stockholders for the purpose of winding up its affairs, at least 60 days prior to the proposed effective date of such liquidation, dissolution, winding-up or other distribution; and (ii) immediately, upon the earlier of (A) receipt by Orbital of notice of and (B) Orbital otherwise becoming aware of any threatened or instituted claim, suit, petition or other proceedings with respect to the involuntary liquidation, dissolution or winding up of Orbital or to effect any other distribution of assets of Orbital among its stockholders for the purpose of winding up its affairs. (b) Immediately following receipt by the Trustee from Orbital of notice of any Liquidation Event, the Trustee shall give notice thereof to the Holders. Such notice shall be sufficient if it references this Agreement and that an event has occurred that, pursuant to this Agreement, causes the Exchangeable Shares to be exchanged automatically for Orbital Common Shares. (c) In order that the Holders will be able to participate on a pro rata basis with the holders of Orbital Common Shares in the distribution of assets of Orbital in connection with a Liquidation Event, on the fifth Business Day prior to the effective date of a Liquidation Event (the "Liquidation Event Effective Date") all of the then outstanding Exchangeable Shares shall be automatically exchanged for Orbital Common Shares. To effect such automatic exchange, Orbital shall purchase each Exchangeable Share outstanding on the fifth Business Day prior to the Liquidation 20 - 20 - Event Effective Date and held by Holders, and each Holder shall sell the Exchangeable Shares held by it at such time, for a purchase price per share equal to (a) the Current Market Price multiplied by the Current Orbital Common Share Equivalent on such fifth Business Day prior to the Liquidation Event Effective Date, which shall be satisfied in full in respect of the Exchangeable Shares held by each Holder by Orbital by issuing to such Holder such whole number of Orbital Common Shares as is equal to the product obtained by multiplying the number of such Exchangeable Shares by the Current Orbital Common Share Equivalent (together with an amount in lieu of any fractional Orbital Common Share resulting from such calculation payable in accordance with section 9.4 of the Exchangeable Share Provisions), plus (b) an additional amount equal to the aggregate of all dividends declared and unpaid on each such Exchangeable Share (provided that if the record date for any such declared and unpaid dividends occurs on or after the day of closing of such purchase and sale, the purchase price shall not include such additional amount equal to such declared and unpaid dividends). (d) On the fifth Business Day prior to the Liquidation Event Effective Date, the closing of the transaction of purchase and sale contemplated by the automatic exchange of Exchangeable Shares for Orbital Common Shares shall be deemed to have occurred, and each Holder of Exchangeable Shares shall be deemed to have transferred to Orbital all of the Holder's right, title and interest in and to such Exchangeable Shares and the related interest in the Trust Estate and shall cease to be a Holder of such Exchangeable Shares and Orbital shall issue to the Holder the Orbital Common Shares issuable upon the automatic exchange of Exchangeable Shares for Orbital Common Shares and shall deliver to the Holder a cheque for the balance, if any, of the purchase price for such Exchangeable Shares (or, if any part of the purchase price consists of dividends payable in property, such property or property that is the same as or economically equivalent to such property). Concurrently with such Holder ceasing to be a holder of Exchangeable Shares, the Holder shall be considered and deemed for all purposes to be the holder of the Orbital Common Shares issued to it pursuant to the automatic exchange of Exchangeable Shares for Orbital Common Shares and the certificates held by the Holder previously representing the Exchangeable Shares exchanged by the Holder with Orbital pursuant to such automatic exchange shall thereafter be deemed to represent the Orbital Common Shares issued to the Holder by Orbital pursuant to such automatic exchange. Upon the request of a Holder and the surrender by the Holder of Exchangeable Share certificates deemed to represent Orbital Common Shares, duly endorsed in blank and accompanied by such instruments of transfer as Orbital may reasonably require, Orbital shall deliver or cause to be delivered to the Holder certificates representing the Orbital Common Shares of which the Holder is the holder. 21 - 21 - ARTICLE 6 CONCERNING THE TRUSTEE .1 POWERS AND DUTIES OF THE TRUSTEE. The rights, powers and authorities of the Trustee under this Agreement, in its capacity as trustee of the Trust, shall include: (a) purchasing the Voting Share from Orbital as trustee for and on behalf of the Holders in accordance with the provisions of this Agreement; (b) granting proxies and distributing materials to Holders as provided in this Agreement; (c)voting the Holder Votes in accordance with the provisions of this Agreement; (d)receiving the grant of the Exchange Right and the Automatic Exchange Rights from Orbital as trustee for and on behalf of the Holders in accordance with the provisions of this Agreement; (e)exercising the Exchange Right and requiring Orbital to honour the Automatic Exchange Rights, in each case in accordance with the provisions of this Agreement and in connection therewith receiving from Holders certificates representing Exchangeable Shares and other requisite documents and distributing to such Holders, upon receipt thereof from Orbital, the Orbital Common Shares and cheques, if any, to which such Holders are entitled upon the exercise of the Exchange Right or pursuant to the Automatic Exchange Rights, as the case may be; (f) holding title to the Trust Estate as trustee for, and for the benefit of, the Holders; (g) investing any moneys forming, from time to time, a part of the Trust Estate as provided in this Agreement; (h) taking action at the direction of a Holder or Holders to enforce the obligations of Orbital under this Agreement; and (i) taking such other actions and doing such other things as are specifically provided in this Agreement. 22 - 22 - In the exercise of such rights powers and authorities the Trustee shall have (and is granted) such incidental and additional rights, powers and authority not in conflict with any of the provisions of this Agreement as the Trustee, acting in good faith and in the reasonable exercise of its discretion, may deem necessary, appropriate or desirable to effect the purpose of the Trust, provided that the Trustee need perform only those duties and obligations that are specifically set forth in this Agreement and no other duties or obligations shall be read into this Agreement. Any exercise of such discretionary rights, powers and authorities by the Trustee shall be final, conclusive and binding upon all persons. For greater certainty, the Trustee shall have only those duties as are set out specifically in this Agreement. The Trustee in exercising its rights, powers, duties and authorities hereunder shall act reasonably and in good faith with a view to the best interests of the Holders and shall exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances in the exercise of his or her own affairs. The Trustee shall not be deemed to have notice of any fact, claim, demand, event or matter with respect hereto unless actually known by an officer charged with responsibility for administering this Agreement or unless in writing received by the Trustee and specifically referencing this Agreement. The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers, provided that the Trustee's conduct does not constitute negligence or bad faith. .2 NO CONFLICT OF INTEREST. The Trustee represents to the Corporation and Orbital that at the date of execution and delivery of this Agreement there exists no material conflict of interest in the role of the Trustee as a fiduciary hereunder and the role of the Trustee in any other capacity. The Trustee shall, within 30 days after it becomes aware that such a material conflict of interest exists, either eliminate such material conflict of interest or resign in the manner and with the effect specified in Article 9 hereof. If, notwithstanding the foregoing provisions of this section 6.2, the Trustee has such a material conflict of interest, the validity and enforceability of this Agreement shall not be affected in any manner whatsoever by reason only of the existence of such material conflict of interest. If the Trustee contravenes the foregoing provisions of this section 6.2, any interested party may apply to the Supreme Court of British Columbia (Trial Division) for an order that the Trustee be replaced as trustee hereunder. .3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC. The Corporation and Orbital irrevocably authorize the Trustee, from time to time, to: 23 - 23 - (a) consult, communicate and otherwise deal with the respective registrars and transfer agents, and with any such subsequent registrar or transfer agent, of the Exchangeable Shares and Orbital Common Shares; and (b) requisition, from time to time, (i) from any such registrar or transfer agent any information readily available from the records maintained by it which the Trustee may reasonably require for the discharge of its duties and responsibilities under this Agreement and (ii) from the transfer agent of Orbital Common Shares, and any subsequent transfer agent of such shares, the share certificates issuable upon the exercise from time to time of the Exchange Right and pursuant to the Automatic Exchange Rights in the manner specified in Article 5 hereof. The Corporation and Orbital irrevocably authorize their respective registrars and transfer agents to comply with all such requests. Orbital covenants that it will supply its transfer agent with duly executed share certificates for the purpose of completing the exercise from time to time of the Exchange Right and the Automatic Exchange Rights, in each case pursuant to Article 5 hereof. .4 BOOKS AND RECORDS. The Trustee shall keep available for inspection by Orbital and the Corporation, at the Trustee's principal office, correct and complete books and records of account relating to the Trustee's actions under this Agreement, including without limitation all information relating to mailings and instructions to and from Holders and all transactions pursuant to the Voting Rights, the Exchange Right and the Automatic Exchange Rights for the term of this Agreement. On or before March 31, 1996, and on or before March 31 in every year thereafter, so long as the Voting Share is on deposit with the Trustee, the Trustee shall transmit to Orbital and the Corporation a brief report, dated as of the preceding December 31, with respect to: (a) the property and funds comprising the Trust Estate as of that date; (b) the number of exercises of the Exchange Right, if any, and the aggregate number of Exchangeable Shares received by the Trustee on behalf of Holders in consideration of the issue and delivery by Orbital of Orbital Common Shares in connection with the Exchange Right, during the calendar year ended on such date; and (c) all other actions taken by the Trustee in the performance of its duties under this Agreement that it had not previously reported. 24 - 24 - .5 INCOME TAX RETURNS AND REPORTS. The Trustee shall, to the extent necessary, prepare and file on behalf of the Trust, and at Orbital's expense, appropriate United States and Canadian income tax returns and any other returns or reports as may be required by applicable law or pursuant to the rules and regulations of any securities exchange or other trading system through which the Exchangeable Shares are traded and, in connection therewith, may obtain the advice and assistance of such experts as the Trustee may consider necessary or advisable and Orbital shall pay the reasonable fees and disbursements of such experts. .6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE. The Trustee shall exercise any or all of the rights, duties, powers or authorities vested in it by this Agreement at the request, order or direction of any Holder upon such Holder furnishing to the Trustee reasonable funding, security and indemnity satisfactory to the Trustee against the costs, expenses and liabilities (including the reasonable fees and expenses of its attorneys and agents) that may be incurred by the Trustee therein or thereby, provided that no Holder shall be obligated to furnish to the Trustee any such funding, security or indemnity in connection with the exercise by the Trustee of any of its rights, duties, powers and authorities with respect to (i) the Voting Share pursuant to Article 4 hereof, subject to section 6.15 hereof, (ii) the Exchange Right pursuant to Article 5 hereof, subject to section 6.15 hereof, and (iii) the Automatic Exchange Rights pursuant to Article 5 hereof. None of the provisions contained in this Agreement shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the exercise of any of its rights, powers, duties or authorities unless funded and given security and indemnity as aforesaid. .7 ACTIONS BY HOLDERS. No Holder shall have the right to institute any action, suit or proceeding or to exercise any other remedy authorized by this Agreement for the purpose of enforcing any of its rights or for the execution of any trust or power hereunder unless the Holder has requested the Trustee to take or institute such action, suit or proceeding and furnished the Trustee with the funding, security and indemnity referred to in section 6.6 hereof and the Trustee shall have failed to act within 60 days thereafter. In such case, but not otherwise, the Holder shall be entitled to take proceedings in any court of competent jurisdiction such as the Trustee might have taken, it being understood and intended that no one or more Holders shall have any right in any manner whatsoever to affect, disturb or prejudice the rights hereby created by any such action, or to enforce any right hereunder or under the Voting Rights, the Exchange Right or the Automatic Exchange Rights except subject to the conditions and in the manner herein provided, and that all powers and trusts hereunder shall be exercised and all proceedings at law shall be instituted, had and maintained by the 25 - 25 - Trustee, except only as herein provided, and in any event for the equal benefit of all Holders. .8 RELIANCE UPON DECLARATIONS. The Trustee shall not be considered to be in contravention of any of its rights, powers, duties and authorities hereunder if, when required, it acts and relies in good faith upon lists, mailing labels, notices, statutory declarations, certificates, opinions, reports or other papers or documents furnished pursuant to the provisions hereof or required by the Trustee to be furnished to it in the exercise of its rights, powers, duties and authorities hereunder and such lists, mailing labels, notices, statutory declarations, certificates, opinions, reports or other papers or documents conform on their face with the provisions of section 6.9 hereof, if applicable, and with any other applicable provisions of this Agreement. The Trustee shall not be bound to make any investigation into the facts or matters stated in any notice, statutory declaration, certificate, report, request, direction, consent or other paper or document furnished to it, but the Trustee may, in its discretion, make such further inquiry or investigation into such facts or matters as it may see fit. .9 EVIDENCE AND AUTHORITY TO TRUSTEE. The Corporation and/or Orbital shall furnish to the Trustee evidence of compliance with the conditions provided for in this Agreement relating to any action or step required or permitted to be taken by the Corporation and/or Orbital or the Trustee under this Agreement or as a result of any obligation imposed under this Agreement, including, without limitation, in respect of the Voting Rights, the Exchange Right or the Automatic Exchange Rights and the taking of any other action to be taken by the Trustee at the request of or on the application of the Corporation and/or Orbital forthwith if and when: (a) such evidence is required by any other section of this Agreement to be furnished to the Trustee in accordance with the terms of this section 6.9; or (b) the Trustee, in the exercise of its rights, powers, duties and authorities under this Agreement, gives the Corporation and/or Orbital written notice requiring it to furnish such evidence in relation to any particular action or obligation specified in such notice. Such evidence shall consist of an Officer's Certificate of the Corporation and/or Orbital or a statutory declaration or a certificate made by persons entitled to sign an Officer's Certificate stating that any such condition has been complied with in accordance with the terms of this Agreement. The Trustee shall not be liable for any action it takes or omits to take in good faith in accordance with any such declaration or certificate. 26 - 26 - Whenever such evidence relates to a matter other than the Voting Rights, the Exchange Right or the Automatic Exchange Rights, and except as otherwise specifically provided herein, such evidence may consist of a report or opinion of any solicitor, auditor, accountant, appraiser, valuer, engineer or other expert or any other person whose qualifications give authority to a statement made by him, provided that if such report or opinion is furnished by a director, officer or employee of the Corporation and/or Orbital it shall be in the form of an Officer's Certificate or a statutory declaration. Each statutory declaration, certificate, opinion or report furnished to the Trustee as evidence of compliance with a condition provided for in this Agreement shall include a statement by the person giving the evidence: (a) declaring that he has read and understands the provisions of this Agreement relating to the condition in question; (b) describing the nature and scope of the examination or investigation upon which he based the statutory declaration, certificate, statement or opinion; and (c) declaring that he has made such examination or investigation as he believes is necessary to enable him to make the statements or give the opinions contained or expressed therein. 27 - 27 - .10 EXPERTS, ADVISERS AND AGENTS. The Trustee may: (a) in relation to this Agreement act and rely on the opinion or advice of or information obtained from any lawyer, accountant, appraiser, valuer, engineer or other expert, whether retained by the Trustee or by the Corporation and/or Orbital or otherwise, and shall be fully and completely protected from liability in acting or relying thereon; and (b) retain such lawyers, accountants, appraisers, valuers, engineers and other experts as it may reasonably require for the proper discharge of its powers and duties hereunder, shall not be responsible for the misconduct or negligence of any such expert, and may pay, at Orbital's expense, reasonable remuneration for all services performed for it in the discharge of the trusts hereof and compensation for all disbursements, costs and expenses made or incurred by it in the discharge of its duties hereunder and in the management of the Trust, including the reasonable fees and disbursements of such experts. .11 INVESTMENT OF MONEYS HELD BY TRUSTEE. Unless otherwise provided in this Agreement, any moneys held by the Trustee that under the terms of this Agreement may be invested shall be invested and reinvested in accordance with the written direction of the Corporation in the name or under the control of the Trustee or its nominee in securities in which, under the laws of the Commonwealth of Massachusetts, trustees are authorized to invest trust moneys, provided that such securities are stated to mature within two years after their purchase by the Trustee. Absent such written direction, the Trustee shall not be responsible for the investment of any moneys received by it. The Trustee shall have no responsibility for any losses on any investment made by it hereunder. Pending the investment of any moneys as hereinbefore provided, such moneys may be (but shall not be required to be) deposited 28 - 28 - in the name of the Trustee or its nominee in any bank in the United States approved by the Corporation or, with the consent of the Corporation, in the deposit department of the Trustee at the rate of interest then current on similar deposits. .12 TRUSTEE NOT REQUIRED TO GIVE SECURITY. The Trustee shall not be required to give any bond or security in respect of the execution of the trusts, rights, duties, powers and authorities of this Agreement. .13 TRUSTEE NOT BOUND TO ACT ON CORPORATION'S REQUEST. Except as in this Agreement otherwise specifically provided, the Trustee shall not be bound to act in accordance with any direction or request of the Corporation and/or Orbital or of the directors thereof until a duly authenticated copy of the instrument or resolution containing such direction or request shall have been delivered to the Trustee, and the Trustee shall be empowered to act and rely upon any such copy purporting to be authenticated and believed by the Trustee to be genuine; provided that the Trustee shall not be under any obligation to take any action hereunder that may involve it in any expense for which indemnification reasonably satisfactory to it is not made available. In no event shall the Trustee be liable for the acts or omissions of the Corporation and/or Orbital or any other person and the Trustee shall not be liable for any distributions, payments or other actions made in accordance with the instructions of the Corporation and/or Orbital. .14 AUTHORITY TO CARRY ON BUSINESS. The Trustee represents to the Corporation and Orbital that at the date of execution and delivery by it of this Agreement it is authorized to perform its obligations pursuant to this Agreement under all applicable laws but if, notwithstanding the provisions of this section 6.14, it ceases to be so authorized, the validity and enforceability of this Agreement and the Voting Rights, the Exchange Right and the Automatic Exchange Rights shall not be affected in any manner whatsoever by reason only of such event but the Trustee shall, within 30 days after ceasing to be so authorized, either become so authorized or resign in the manner and with the effect specified in Article 9 hereof. 29 - 29 - .15 CONFLICTING CLAIMS. If conflicting claims or demands are made or asserted with respect to any interest of any Holder in any Exchangeable Shares, including any disagreement between the heirs, representatives, successors or assigns succeeding to all or any part of the interest of any Holder in any Exchangeable Shares resulting in conflicting claims or demands being made in connection with such interest, then the Trustee shall be entitled, at its sole discretion, to refuse to recognize or to comply with any such claim or demand. In so refusing, the Trustee may elect not to exercise any Voting Rights, Exchange Right or Automatic Exchange Rights subject to such conflicting claims or demands and, in so doing, the Trustee shall not be or become liable to any person on account of such election or its failure or refusal to comply with any such conflicting claims or demands. The Trustee shall be entitled to continue to refrain from acting and to refuse to act until: (a) the rights of all adverse claimants with respect to the Voting Rights, Exchange Right or Automatic Exchange Rights subject to such conflicting claims or demands have been adjudicated by a final judgment of a court of competent jurisdiction; or (b) all differences with respect to the Voting Rights, Exchange Right or Automatic Exchange Rights subject to such conflicting claims or demands have been conclusively settled by a valid written agreement binding on all such adverse claimants, and the Trustee shall have been furnished with an executed copy of such agreement. If the Trustee elects to recognize any claim or comply with any demand made by any such adverse claimant, it may in its discretion require such claimant to furnish such surety bond or other security satisfactory to the Trustee as it shall deem appropriate fully to indemnify it as between all conflicting claims or demands. .16 ACCEPTANCE OF TRUST. The Trustee hereby accepts the Trust created and provided for by and in this Agreement and agrees to perform the same upon the terms and conditions herein set forth and to hold all rights, privileges and benefits 30 - 30 - conferred hereby and by law in trust for the various persons who shall from time to time be Holders, subject to all the terms and conditions herein set forth. ARTICLE 7 COMPENSATION .1 FEES AND EXPENSES OF THE TRUSTEE. Orbital and the Corporation jointly and severally agree to pay to the Trustee reasonable compensation for entering into this Agreement and for all of the services rendered by it under this Agreement and will reimburse the Trustee for all reasonable expenses and disbursements, including the cost and expense (including fees and expenses of its lawyers) of any suit or litigation of any character and any proceedings before any governmental agency reasonably incurred by the Trustee in connection with its rights and duties under this Agreement; provided that Orbital and the Corporation shall have no obligation to reimburse the Trustee for any expenses or disbursements paid, incurred or suffered by the Trustee in any suit or litigation in which the Trustee is determined by final judgment of a court of competent jurisdiction to have acted fraudulently, in bad faith or with negligence or wilful misconduct if such expenses or disbursements are the result of or caused by such fraud, bad faith, negligence or wilful misconduct. 31 - 31 - ARTICLE 8 INDEMNIFICATION AND LIMITATION OF LIABILITY 32 - 32 - .1 INDEMNIFICATION OF THE TRUSTEE. Orbital and the Corporation jointly and severally agree to indemnify and hold harmless the Trustee and each of its directors, officers, employees and agents appointed and acting in accordance with this Agreement (collectively the "Indemnified Parties") against all claims, losses, damages, costs, taxes (other than income taxes imposed on the Trustee), penalties, fines and reasonable expenses (including reasonable expenses of the Trustee's legal counsel) which, without fraud, negligence, wilful misconduct or bad faith on the part of such Indemnified Party, may be paid, incurred or suffered by the Indemnified Party by reason of or as a result of the Trustee's acceptance or administration of the Trust, its compliance with its duties set forth in this Agreement, or any written or oral instructions delivered to the Trustee by Orbital or the Corporation pursuant hereto. In no case shall Orbital or the Corporation be liable under this indemnity for any claim against any of the Indemnified Parties unless Orbital and the Corporation shall be notified by the Trustee of the written assertion of a claim or of any action commenced against the Indemnified Parties, promptly after any of the Indemnified Parties shall have received any such written assertion of a claim or shall have been served with a summons or other first legal process giving information as to the nature and basis of the claim. Subject to (ii), below, Orbital and the Corporation shall be entitled to participate at their own expense in the defense and, if Orbital or the Corporation so elect at any time after receipt of such notice, either of them may assume the defence of any suit brought to enforce any such claim. The Trustee shall have the right to employ separate counsel in any such suit and participate in the defence thereof but the fees and expenses of such counsel shall be at the expense of the Trustee unless: (i) the employment of such counsel has been authorized by Orbital or the Corporation; or (ii) the named parties to any such suit include both the Trustee and Orbital or the Corporation and the Trustee shall have been advised by counsel acceptable to Orbital or the Corporation that there may be one or more legal defences available to the Trustee that are different from or in addition to those available to Orbital or the Corporation and that an actual or potential conflict of interest exists (in which case Orbital and the Corporation shall not have the right to assume the defence of such suit on behalf of the Trustee but shall be liable to pay the reasonable fees and expenses of 33 - 33 - counsel for the Trustee). The indemnifications set forth in this Agreement shall survive the termination hereof. .2 LIMITATION OF LIABILITY. The Trustee shall not be held liable for any loss that may occur by reason of depreciation of the value of any part of the Trust Estate or any loss incurred on any investment of funds pursuant to this Agreement. ARTICLE 9 CHANGE OF TRUSTEE .1 RESIGNATION. The Trustee, or any trustee hereafter appointed, may at any time resign by giving written notice of such resignation to Orbital and the Corporation specifying the date on which it desires to resign, provided that such notice shall never be given less than 60 days before such desired resignation date unless Orbital and the Corporation otherwise agree and provided further that such resignation shall not take effect until the date of the appointment of a successor trustee and the acceptance of such appointment by the successor trustee. Upon receiving such notice of resignation, Orbital and the Corporation shall promptly appoint a successor trustee by written instrument in duplicate, one copy of which shall be delivered to the resigning trustee and one copy to the successor trustee. Failing acceptance by a successor trustee, a successor trustee may be appointed by an order of the Supreme Court of British Columbia (Trial Division) upon application of one or more of the parties hereto. .2 REMOVAL. The Trustee, or any trustee hereafter appointed, may be removed with or without cause, at any time on 60 days' prior notice by written instrument executed by Orbital and the Corporation, in duplicate, one copy of which shall be delivered to the trustee so removed and one copy to the successor trustee. 34 - 34 - .3 SUCCESSOR TRUSTEE. Any successor trustee appointed as provided under this Agreement shall execute, acknowledge and deliver to Orbital and the Corporation and to its predecessor trustee an instrument accepting such appointment. Thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor under this Agreement, with like effect as if originally named as trustee in this Agreement. However, on the written request of Orbital and the Corporation or of the successor trustee, the trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of this Agreement, execute and deliver an instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act. Upon the request of any such successor trustee, Orbital, the Corporation and such predecessor trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. .4 NOTICE OF SUCCESSOR TRUSTEE. Upon acceptance of appointment by a successor trustee as provided herein, Orbital and the Corporation shall cause to be mailed notice of the succession of such trustee hereunder to each Holder specified in a List. If Orbital or the Corporation shall fail to cause such notice to be mailed within 10 days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of Orbital and the Corporation. 35 - 35 - ARTICLE 10 ORBITAL SUCCESSORS .1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC. Orbital shall not enter into any transaction (whether by way of reconstruction, reorganization, consolidation, merger, transfer, sale, lease or otherwise) whereby all or substantially all of its undertaking, property and assets would become the property of any other person or, in the case of a merger, of the continuing corporation resulting therefrom, unless: (a) such other person or continuing corporation is a corporation (herein called the "Orbital Successor") incorporated under the laws of any state of the United States or the laws of Canada or any province thereof; and (b) Orbital Successor, by operation of law, becomes, without more, bound by the terms and provisions of this Agreement or, if not so bound, executes, prior to or contemporaneously with the consummation of such transaction an agreement supplemental hereto and such other instruments (if any) as are satisfactory to the Trustee acting reasonably to evidence the assumption by Orbital Successor of liability for all moneys payable and property deliverable hereunder and the covenant of such Orbital Successor to pay and deliver or cause to be delivered the same and its agreement to observe and perform all the covenants and obligations of Orbital under this Agreement. .2 VESTING OF POWERS IN SUCCESSOR. Whenever the conditions of section 10.1 hereof have been duly observed and performed, the Trustee, if required, by section 10.1 hereof, Orbital Successor and the Corporation shall execute and deliver the supplemental agreement provided for in Article 11 hereof and thereupon Orbital Successor shall possess and from time to time may exercise each and every right and power of Orbital under this Agreement in the name of Orbital or otherwise and any act or proceeding by any provision of this Agreement required to be done or performed by 36 - 36 - the board of directors of Orbital or any officers of Orbital may be done and performed with like force and effect by the directors or officers of such Orbital Successor. .3 WHOLLY-OWNED SUBSIDIARIES. Nothing herein shall be construed as preventing the amalgamation or merger of any wholly-owned subsidiary of Orbital with or into Orbital. ARTICLE 11 AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS .1 AMENDMENTS, MODIFICATIONS, ETC. This Agreement may not be amended or modified except by an agreement in writing executed by the Corporation, Orbital and the Trustee and approved by the Holders in accordance with section 8.2 of the Exchangeable Share Provisions. .2 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of section 11.1 hereof, the parties to this Agreement may in writing, at any time and from time to time, without the approval of the Holders, amend or modify this Agreement for the purposes of: (a) adding to the covenants of any or all of the parties hereto for the protection of the Holders hereunder; (b) making such amendments or modifications not inconsistent with this Agreement as may be necessary or desirable with respect to matters or questions that, in the opinion of the Board of Directors of each of Orbital and Corporation and in the opinion of the Trustee, having in mind the best interests of the Holders as a whole, it may be expedient to make, provided that such boards of directors and the Trustee shall be of the 37 - 37 - opinion that such amendments and modifications will not be prejudicial to the interests of the Holders as a whole; or (c) making such changes or corrections required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error, provided that the Trustee and the Board of Directors of each of the Corporation and Orbital shall be of the opinion that such changes or corrections will not be prejudicial to the interests of the Holders as a whole. .3 MEETING TO CONSIDER AMENDMENTS. The Corporation, at the request of Orbital, shall call a meeting or meetings of the Holders for the purpose of considering any proposed amendment or modification requiring approval pursuant hereto. Any such meeting or meetings shall be called and held in accordance with the by-laws of the Corporation, the Exchangeable Share Provisions and all applicable laws. .4 CHANGES IN CAPITAL OF ORBITAL AND THE CORPORATION. Notwithstanding section 11.1, at all times after the occurrence of any Orbital Common Share Reorganization or Capital Reorganization (as such terms are respectively defined in the Exchangeable Share Provisions) or other change in either the Orbital Common Shares or the Exchangeable Shares or both, this Agreement shall forthwith be amended and modified as necessary in order that it shall apply with full force and effect, mutatis mutandis, to all new securities into which Orbital Common Shares or the Exchangeable Shares or both are so changed and the parties hereto shall execute and deliver a supplemental agreement giving effect to and evidencing such necessary amendments and modifications. .5 EXECUTION OF SUPPLEMENTAL TRUST AGREEMENTS. Notwithstanding section 11.1, from time to time the Corporation (when authorized by a resolution of the Board of Directors), Orbital (when authorized by a resolution of its board of directors) and the Trustee may, subject to the provisions hereof, and they shall, when so directed by these presents, execute and deliver by their proper officers, agreements or other 38 - 38 - instruments supplemental hereto, which thereafter shall form part hereof, for any one or more of the following purposes: (a) evidencing the succession of Orbital Successors to Orbital and the covenants of and obligations assumed by each such Orbital Successor in accordance with the provisions of Article 10 and the succession of any successor trustee in accordance with the provisions of Article 9; (b) making any additions to, deletions from or alterations of the provisions of this Agreement or the Voting Rights, the Exchange Right or the Automatic Exchange Rights that, in the opinion of the Trustee acting reasonably will not be prejudicial to the interests of the Holders as a whole or are in the opinion of counsel to the Trustee necessary or advisable in order to incorporate, reflect or comply with any legislation the provisions of which apply to Orbital, the Corporation, the Trustee or this Agreement; and (c) for any other purposes not inconsistent with the provisions of this Agreement including, without limitation, to make or evidence any amendment or modification to this Agreement as contemplated hereby, provided that, in the opinion of the Trustee acting reasonably, the rights of the Trustee and the Holders as a whole will not be prejudiced thereby. The Trustee shall not be required to execute any amendment or supplemental agreement that adversely affects its own rights. In executing any amendment or supplemental agreement hereunder, the Trustee shall be entitled to receive and to rely upon an opinion of counsel as to whether such supplemental agreement or amendment is permitted hereunder. 39 - 39 - ARTICLE 12 TERMINATION .1 TERM. The Trust created by this Agreement shall continue until the earliest to occur of the following events: (a) no outstanding Exchangeable Shares are held by any Holder; (b) each of the Corporation and Orbital elects in writing to terminate the Trust and such termination is approved by the Holders of the Exchangeable Shares in accordance with Section 8.2 of the Exchangeable Share Provisions; and (c) 21 years after the death of the last survivor of the descendants of His Majesty King George VI of the United Kingdom of Great Britain and Northern Ireland living on the date of the creation of the Trust. .2 SURVIVAL. The provisions of Articles 7 and 8 hereof shall survive any termination of the Trust pursuant to section 12.1. 40 - 40 - ARTICLE 13 GENERAL .1 SEVERABILITY. If any provision of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remainder of this Agreement shall not in any way be affected or impaired thereby and this Agreement shall be carried out as nearly as possible in accordance with its original terms and conditions; provided, however, that if the provision or provisions so held to be invalid, in the reasonable judgment of the parties, is or are so fundamental to the intent of the parties and the operation of this Agreement that the enforcement of the other provisions hereof, in the absence of such invalid provision or provisions, would damage irreparably the intent of the parties in entering into this Agreement, the parties shall agree (i) to terminate this Agreement, or (ii) to amend or otherwise modify this Agreement so as to carry out the intent and purposes hereof and the transactions contemplated hereby. .2 INUREMENT. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns and to the benefit of the Holders. .3 NOTICES TO PARTIES. All notices and other communications between the parties hereunder shall be in writing and shall be deemed to have been given if delivered personally or by confirmed telecopy to the parties at the following addresses (or at such other address for such party as shall be specified in like notice): (a) if to Orbital at: Orbital Sciences Corporation 21700 Atlantic Boulevard Dulles, Virginia U.S.A. 20166 41 - 41 - Attention: General Counsel Telecopy: (703) 406-5572 (b) if to the Corporation at: MacDonald, Dettwiler Holdings Inc. 21700 Atlantic Boulevard Dulles, VA 20166 Attention: Secretary Telecopy: (604) 273-9830 (with a copy to Orbital at the address set out in (a)) (c) if to the Trustee at: State Street Bank and Trust Company Two International Place 4th Floor Boston, Massachusetts U.S.A. 02110 Attention: Leonard H. Butler Assistant Vice President Corporate Trust Operations Corporate Trust Department Telecopy: (617) 664-5371 42 - 42 - With a copy to: Anil Khosla, Esq. Peabody & Arnold 50 Rowes Wharf Boston, Massachusetts U.S.A. 02110 Any notice or other communication given personally shall be deemed to have been given and received upon delivery thereof and if given by telecopy shall be deemed to have been given and received on the date of receipt thereof unless such day is not a Business Day in which case it shall be deemed to have been given and received upon the immediately following Business Day. .4 NOTICE TO HOLDERS. Any and all notices to be given and any documents to be sent to any Holders may be given or sent to the address of such Holder shown on the register of Holders in any manner permitted by the by-laws of the Corporation from time to time in force in respect of notices to shareholders and shall be deemed to be received (if given or sent in such manner) at the time specified in such by-laws, the provisions of which bylaws shall apply mutatis mutandis to notices or documents as aforesaid sent to such Holders. .5 RISK OF PAYMENTS BY POST. Whenever payments are to be made or documents are to be sent to any Holder by the Trustee or by the Corporation, or by such Holder to the Trustee or to Orbital or the Corporation, the making of such payment or sending of such document sent through the post shall be at the risk of the Corporation, in the case of payments made or documents sent by the Trustee or the Corporation, and the Holder, in the case of payments made or documents sent by the Holder. .6 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. 43 - 43 - .7 JURISDICTION. This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Massachusetts. .8 ATTORNMENT. Orbital agrees that any action or proceeding arising out of or relating to this Agreement may be instituted in the courts of the Commonwealth of Massachusetts, waives any objection that it may have now or hereafter to the venue of any such action or proceeding, irrevocably submits to the jurisdiction of the said courts in any such action or proceeding, agrees to be bound by any judgment of the said courts and agrees not to seek, and hereby waives, any review of the merits of any such judgment by the courts of any other jurisdiction and hereby appoints its registered agent in Massachusetts as Orbital's attorney for service of process. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. ORBITAL SCIENCES CORPORATION by /s/ Carlton B. Crenshaw ------------------------- Senior Vice President ---------------------------- MACDONALD, DETTWILER HOLDINGS INC. By /s/ Carlton B. Crenshaw ------------------------- Vice President ---------------------------- 44 - 44 - STATE STREET BANK & TRUST COMPANY by Jill Olson --------------------------------- Assistant Vice President ----------------------------------- EX-10.1.4 3 CREDIT AGREEMENT (AMENDMENT 4). 1 EXHIBIT 10.1.4 [CONFORMED COPY] AMENDMENT NO. 4 TO CREDIT AGREEMENT AMENDMENT No. 4 dated as of November 15, 1995 among ORBITAL SCIENCES CORPORATION (the "Company"), ORBITAL IMAGING CORPORATION and FAIRCHILD SPACE AND DEFENSE CORPORATION, the BANKS listed on the signature pages hereof, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the "Administrative Agent"), and J.P. MORGAN DELAWARE, as Collateral Agent. W I T N E S S E T H : WHEREAS, the parties hereto have heretofore entered into an Amended and Restated Credit and Reimbursement Agreement dated as of September 27, 1994 (as amended from time to time, the "Agreement"); and WHEREAS, the parties hereto desire to amend the Agreement as set forth below; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions; References. Unless otherwise specifically defined herein, each term used herein that is defined in the Agreement shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Agreement shall from and after the date hereof refer to the Agreement as amended hereby. SECTION 2. Changes to Definitions. (a) The definition of "Temporary Cash Investments" in Section 1.01 of the Agreement is amended by (i) inserting the phrase "or Canada" immediately after the term "United States" in clause (i) thereof and (ii) inserting the phrase "or Canada or any province thereof" in clause (iii) thereof. (b) The definition of "Consolidated Delinquency Ratio" is amended by deleting the phrase "Company and its Consolidated Subsidiaries" in clauses (i) and (ii) thereof and replacing it with the phrase "all the Borrowers". 2 (c) The definition of "Consolidated DSO Ratio" is amended by deleting the phrase "Company and its Consolidated Subsidiaries" in clauses (i) and (ii) thereof and replacing it with the phrase "all the Borrowers". (d) The definition of "Consolidated Loss Ratio" is amended by (x) deleting the phrase "Company and its Consolidated Subsidiaries" in clause (i) thereof and replacing it with the phrase "all the Borrowers" and (y) deleting the phrase "Company and any of its Consolidated Subsidiaries" in clause (ii) thereof and replacing it with the phrase "all the Borrowers". (e) A new definition of "MDA" is added in Section 1.01 in alphabetical order, to read in its entirety as follows: "MDA" means MacDonald, Dettwiler and Associates Ltd., a Canadian corporation, and its successors. SECTION 3. Additional Permitted Investments. Section 5.07 of the Agreement is amended by: (i) deleting the amount "$68,000,000" and replacing it with the amount "$73,000,000" in clause (e) thereof; (ii) renumbering clause (g) thereof as clause (h); and (iii) inserting a new clause (g) immediately following clause (f) thereof, to read in its entirety as follows: "(g) Investments (other than Investments described in clause (b) above) made or acquired or committed to be made or acquired by MDA prior to the date MDA was acquired by the Company and listed on Schedule III; and" SECTION 4. Exclusion from Subsidiary Debt. Section 5.17 of the Agreement is amended by adding the following proviso at the end thereof: ";provided that in no event shall the Exchangeable Non-Voting Shares or the Class B Preferred Shares of MacDonald, Dettwiler Holdings Inc. be included in the "Debt" of MacDonald, Dettwiler Holdings Inc." SECTION 5. Addition of Schedule III. A new Schedule III is added to the Agreement to read in its entirety as set forth on Schedule I hereto. 2 3 SECTION 6. New York Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts; Effectiveness. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective on the date on which the Administrative Agent shall have received duly executed counterparts hereof signed by the Borrowers and the Required Banks (or, in the case of any party as to which an executed counterpart shall not have been received, the Administrative Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party). 3 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. ORBITAL SCIENCES CORPORATION By /s/ Carlton B. Crenshaw ----------------------- Title: Chief Financial Officer ORBITAL IMAGING CORPORATION By /s/ Carlton B. Crenshaw ----------------------- Title: Chief Financial Officer FAIRCHILD SPACE AND DEFENSE CORPORATION By /s/ Carlton B. Crenshaw ----------------------- Title: Treasurer MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Kevin J. O'Brien ------------------------ Title: Vice President THE BANK OF NOVA SCOTIA By /s/ J. R. Trimble ------------------------ Title: Senior Relationship Manager 4 5 SIGNET BANK/VIRGINIA By /s/ Ronald K. Hobson ------------------------ Title: Vice President NATIONSBANK, N.A. By /s/ James W. Gaittens ----------------------- Title: Vice President THE BANK OF TOKYO TRUST COMPANY By ----------------------- Title: THE DAIWA BANK, LIMITED By ----------------------- Title: By ----------------------- Title: 5 EX-10.1.6 4 CREDIT AGREEMENT (WAIVER 2). 1 EXHIBIT 10.1.6 [CONFORMED COPY] WAIVER NO. 2 UNDER CREDIT AGREEMENT WAIVER NO. 2 dated as of February 29, 1996 among ORBITAL SCIENCES CORPORATION (the "Company"), ORBITAL IMAGING CORPORATION and FAIRCHILD SPACE AND DEFENSE CORPORATION (together with the Company, the "Borrowers"), the BANKS listed on the signature pages hereof (the "Banks"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the "Administrative Agent"), and J.P. MORGAN DELAWARE, as Collateral Agent. W I T N E S S E T H : WHEREAS, the parties hereto have heretofore entered into an Amended and Restated Credit and Reimbursement Agreement dated as of September 27, 1994 (as amended from time to time, the "Agreement"); and WHEREAS, pursuant to the Agreement, the Company has agreed for itself and each of its Subsidiaries (as defined in the Agreement) to comply with the covenants set forth in the Agreement; and WHEREAS, in the absence of this Waiver, the Company is in noncompliance with one of such covenants; and WHEREAS, the Company has asked the Banks, and the Banks are willing, on the terms and conditions set forth below, to waive, among other things, compliance with one of such covenants and the Defaults (as defined in the Agreement) caused by such noncompliance; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions. Unless otherwise specifically defined herein, each term used herein that is defined in the Agreement shall have the meaning assigned to such term in the Agreement. SECTION 2. Waiver of Compliance with the Consolidated Fixed Charge Ratio Covenant. (a) The Banks waive (i) compliance by the Company with the terms of Section 5.10 of the Agreement at December 31, 1995 and (ii) 2 any Default arising under the Agreement by reason of such noncompliance; provided that, the waivers granted under this Section 2 shall be effective solely if the ratio of Earnings Available for Fixed Charges to Consolidated Fixed Charges for the four consecutive fiscal quarters ended at December 31, 1995 is not less than 1.01 to 1. (b) For purposes of calculating compliance by the Company with the provisions of Section 5.10 of the Agreement on and after the date hereof, the fiscal quarter of the Company ended December 31, 1995 shall be excluded from any determination of any period of four consecutive fiscal quarters (e.g. the fiscal quarters ended March 31, 1995, June 30, 1995, September 30, 1995 and March 31, 1996 shall constitute four consecutive fiscal quarters for purposes of Section 5.10 of the Agreement). SECTION 3. No Other Waivers. Other than as specifically provided herein, this Waiver shall not operate as a waiver of any right, remedy, power or privilege of the Banks under the Agreement or any other Financing Document or of any other term or condition of the Agreement or any other Financing Document. SECTION 4. New York Law. This Waiver shall be governed by and construed in accordance with the laws of the State of New York. SECTION 5. Counterparts; Effectiveness. This Waiver may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Waiver shall become effective upon (i) receipt by the Administrative Agent of duly executed counterparts hereof signed by the Borrowers and the Required Banks (or, in the case of any party as to which an executed counterpart shall not have been received, the Administrative Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party) and (ii) receipt by the Administrative Agent, for the account of each Bank, of a fee in an amount equal to 1/8 of 1% of such Bank's Commitment as in effect on the date hereof. 2 3 IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly executed as of the date first above written. ORBITAL SCIENCES CORPORATION By /s/ Carlton B. Crenshaw ------------------------ Title: Executive Vice President and Chief Financial Officer ORBITAL IMAGING CORPORATION By /s/ Carlton B. Crenshaw ----------------------- Title: Chief Financial Officer and Treasurer FAIRCHILD SPACE AND DEFENSE CORPORATION By /s/ Carlton B. Crenshaw ----------------------- Title: Treasurer MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Kevin J. O'Brien ------------------------ Title: Vice President THE BANK OF NOVA SCOTIA By /s/ James R. Trimble ------------------------ Title: Senior Relationship Manager 3 4 SIGNET BANK/VIRGINIA By /s/ Ronald K. Hobson ----------------------- Title: Vice President NATIONSBANK, N.A. By /s/ James W. Gaittens ----------------------- Title: Vice President THE BANK OF TOKYO TRUST COMPANY By /s/ Catherine A. Moeser ----------------------- Title: Assistant Vice President THE SUMITOMO BANK, LTD. By /s/ Louanne Baily ----------------------- Title: Vice President and Manager By /s/ R.M. Shehorn ------------------------ Title: SVP and RM Midwest 4 EX-10.2.2 5 NOTE AGREEMENT (AMENDMENT 2). 1 EXHIBIT 10.2.2 EXECUTION COPY ORBITAL SCIENCES CORPORATION SECOND AMENDMENT DATED AS OF MARCH 15, 1996 TO NOTE AGREEMENT DATED AS OF JUNE 1, 1995 Re: $20,000,000 10.50% Senior Notes, Due June 14, 2001 2 SECOND AMENDMENT TO NOTE AGREEMENT THIS SECOND AMENDMENT to Note Agreement dated as of March 15, 1996 (the or this "Second Amendment"), is entered into between Orbital Sciences Corporation, a Delaware corporation (the "Company"), and The Northwestern Mutual Life Insurance Company (the "Purchaser"). RECITALS: A. The Company and the Purchaser have heretofore entered into the Note Agreement dated as of June 1, 1995 and the First Amendment to Note Agreement dated as of June 30, 1995 (as amended, the "Note Agreement"). B. On or about November 17, 1995, the Company consummated the acquisition of MacDonald, Dettwiler and Associates Ltd., a corporation incorporated under the laws of Canada ("MacDonald, Dettwiler"), upon the terms and conditions and all as contemplated by that certain Notice of Special Meeting of Shareholders and Holders of the 1988 Employee Share Options and the 1988 Key Employee Share Options of MacDonald, Dettwiler and Associates Ltd. and Management information Circular dated October 6, 1995 (the "Information Circular") relating to the Arrangement Involving MacDonald Dettwiler and Associates Ltd., 3173623 Canada Inc. and the Company (the "MacDonald, Dettwiler Arrangement"). C. The consummation of the MacDonald, Dettwiler Arrangement would have been prohibited by the terms of the Note Agreement and in consequence thereof, the Company requested the Purchaser to waive application of certain terms of the Note Agreement in order to permit consummation of the MacDonald, Dettwiler Arrangement and within 90 days thereafter enter into a second amendment to the Note Agreement upon terms and conditions acceptable to the Purchaser, for the purpose of amending such of the terms of the Note Agreement as would be necessary in order to permit the acquisition and ownership of MacDonald, Dettwiler on an ongoing basis. D. On or about November 17, 1995, the Purchaser entered into such waiver. E. The Company and the Purchaser now desire to amend certain of the terms of the Note Agreement in order to (i) permit the acquisition and ownership of MacDonald, Dettwiler on an ongoing basis within the limitations of the Note Agreement, (ii) waive certain other defaults and (iii) permit further actions by the Company. F. In consideration of the Purchaser's agreeing to amend the Note Agreement as set forth herein, the Company has paid to the Purchaser a fee equal to $50,000. G. Capitalized terms used herein shall have the respective meanings ascribed thereto in the Note Agreement unless herein defined or the context shall otherwise require. -1- 3 H. All requirements of law have been fully complied with and all other acts and things necessary to make this Second Amendment a valid, legal and binding instrument according to its terms for the purposes herein expressed have been done or performed. NOW, THEREFORE, the Company and the Purchaser, in consideration of good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, do hereby agree as follows: SECTION 1. AMENDMENT. Section 1.1. Section 5.1 of the Note Agreement shall be and is hereby amended in its entirety to read as follows: "The Company will preserve and keep in full force and effect, and will cause each Subsidiary to preserve and keep in full force and effect, its corporate existence and all licenses and permits necessary to the proper conduct of its business, provided that the foregoing shall not prevent any transaction permitted by Section 5.13, and provided, further, that nothing contained in this Section 5.1 shall be deemed or construed to require the Company to maintain the corporate existence of any Subsidiary or to maintain or cause any of its Subsidiaries to maintain any such license or permit if the failure to preserve and keep in full force and effect the corporate existence of such Subsidiary or such permit or license, as the case may be, would not, individually or in the aggregate, materially and adversely affect the properties, business, prospects, profits or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole." Section 1.2. Section 5.8 of the Note Agreement shall be and is hereby amended in its entirety to read as follows: "Section 5.8. Fixed Charges Coverage Ratio. The Company will at all times keep and maintain the Fixed Charges Coverage Ratio at not less than: DURING THE PERIOD MINIMUM RATIO LEVEL March 31, 1996 through 1.35 to 1.00 June 30, 1996 June 30, 1996 and 1.50 to 1.00" thereafter
Section 1.3. Section 5.13(c) of the Note Agreement shall be and is hereby amended as follows: -2- 4 (a) Clause (3) shall be and is hereby amended in its entirety to read as follows: "(3) the issue or grant of any right, option or warrant to purchase capital stock of a Subsidiary or other Securities exchangeable for or convertible into capital stock of such Subsidiary to any employee or employees of such Subsidiary, provided that after giving effect to the exercise of such right, option, warrant or other convertible Security, such holders of rights, options, warrants or convertible Securities do not hold in the aggregate more than 10% of the outstanding capital stock of such Subsidiary, provided further that in the case of Magellan Corporation, a Delaware corporation and a Wholly-owned Subsidiary of the Company, after giving effect to the exercise of such right, option, warrant, or other convertible Security, such holders of rights, options, warrants or convertible Securities do not hold in the aggregate more than 15% of the outstanding capital stock of Magellan Corporation; or" (b) Clause (5) is hereby amended by substituting a comma for the period and adding the word "or" at the end thereof; (c) A new clause (6) shall be added reading as follows: "(6) the issue of MacDonald, Dettwiler Preferred Stock by MacDonald, Dettwiler Holdings, in connection with consummation of the MacDonald, Dettwiler Arrangement;" Section 1.4. Section 8.1 of the Note Agreement shall be and is hereby amended as follows: (a) The following definitions shall be added thereto in alphabetical order: ""MacDonald, Dettwiler Arrangement" shall mean that certain arrangement involving MacDonald, Dettwiler and Associates Ltd., 3173623 Canada Inc. and the Company as more fully described in that certain Notice of Special Meeting of Shareholders and Holders of the 1988 Employee Share Options and the 1988 Key Employee Share Options of MacDonald, Dettwiler and Associates Ltd. and Management Information Circular dated October 6, 1995, which Arrangement was consummated on November 17, 1995." ""MacDonald, Dettwiler Holdings" shall mean MacDonald, Dettwiler Holdings, Inc. (formerly known as 3173623 Canada Inc.), a corporation incorporated under the laws of Canada." -3- 5 ""MacDonald, Dettwiler Preferred Stock" shall mean the Exchangeable Non-Voting Shares of MacDonald, Dettwiler Holdings as provided in the MacDonald Dettwiler Arrangement and the 10,000 shares of Series B Preferred Shares of MacDonald, Dettwiler Holdings, in each case issued in connection with the consummation of the MacDonald, Dettwiler Arrangement." (b) The definition of "Consolidated Priority Funded Debt" shall be and is hereby amended in its entirety to read as follows: ""Consolidated Priority Funded Debt" shall mean the sum of (a) Consolidated Secured Funded Debt plus (b) all Funded Debt of the Company's Subsidiaries, plus (c) all preferred stock of Subsidiaries held by Persons other than the Company or any Wholly-owned Subsidiary; provided, that the MacDonald, Dettwiler Preferred Stock issued in connection with the consummation of the MacDonald, Dettwiler Arrangement shall not be included in any calculation of "Consolidated Priority Funded Debt"." (c) The definition of "Fixed Charges Coverage Ratio" shall be and is hereby amended in its entirety to read as follows: ""Fixed Charges Coverage Ratio" shall mean (a) during the period from and including March 31, 1996 through and including June 29, 1996, the ratio of Adjusted Consolidated Operating Earnings for the period from and including January 1, 1996 through and including March 31, 1996 to Consolidated Fixed Charges for such fiscal quarter period, (b) during the period from and including June 30, 1996 through and including September 29, 1996, the ratio of Adjusted Consolidated Operating Earnings for the period from and including January 1, 1996 through and including June 30, 1996 to Consolidated Fixed Charges for such two fiscal quarter period, (c) during the period from and including September 30, 1996 through and including December 30, 1996, the ratio of Adjusted Consolidated Operating Earnings for the period from and including January 1, 1996 through and including September 30, 1996 to Consolidated Fixed Charges for such three fiscal quarter period, and (d) during the period from and including December 31, 1996 to the date of payment in full of the Notes, the ratio of Adjusted Consolidated Operating Earnings for the immediately preceding four fiscal quarter period to Consolidated Fixed Charges for such four fiscal quarter period." -4- 6 (d) Paragraph (e) of the definition of "Restricted Investment" shall be and is hereby amended in its entirety to read as follows: "(e)(1) Investments in commercial paper of corporations organized under the laws of the United States or any state thereof maturing in 360 days or less from the date of issuance which, at the time of acquisition by the Company or any Subsidiary, is accorded a rating of "A-1" or better by Standard & Poor's Ratings Group or "P-1" by Moody's Investors Service, Inc.; and (2) Investments by MacDonald, Dettwiler and Associates Ltd., a corporation incorporated under the laws of Canada ("MDA"), in commercial paper of corporations organized under the laws of Canada or any province thereof maturing in 360 days or less from the date of issuance which, at the time of acquisition by MDA, is accorded the highest rating by Standard & Poor's Ratings Group or by Moody's Investors Service, Inc.;" (e) The definition of "Wholly-owned" shall be and is hereby amended in its entirety to read as follows: ""Wholly-owned" when used in connection with any Subsidiary shall mean a Subsidiary of which all of the issued and outstanding shares of stock (except shares required as directors' qualifying shares) and all Indebtedness for borrowed money shall be owned by the Company and/or one or more of its Wholly-owned Subsidiaries, provided, however, that (a) so long as the Company shall own 90% or more of the Voting Stock of ORBCOMM, ORBCOMM shall be deemed to be a Wholly-owned Subsidiary and (b) so long as the Company shall own 100% or more of the Voting Stock of MacDonald, Dettwiler Holdings, MacDonald, Dettwiler Holdings shall be deemed to be a Wholly-owned Subsidiary, notwithstanding that the Company does not own the MacDonald, Dettwiler Preferred Stock, in each such case for all purposes of this Agreement." SECTION 2. WAIVER. Section 2.1. Upon and by virtue of this Second Amendment becoming effective as herein contemplated, the failure of the Company to comply with the provisions of Section 5.8 (Fixed Charge Coverage Ratio) of the Note Agreement for the period of October 1, 1995 through December 31, 1995 which failure constitutes an Event of Default under the Note Agreement shall be deemed to have been waived by the Purchaser. The Company understands and agrees that the waiver contained in this -5- 7 Section 2.1 pertains only to the matters and to the extent herein described and not to any other actions of the Company under, or matters arising in connection with, the Note Agreement or to any rights which the Purchaser has arising by virtue of any such other actions or matters. SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Section 3.1. To induce the Purchaser to execute and deliver this Second Amendment, the Company represents and warrants to the Purchaser (which representations shall survive the execution and delivery of this Second Amendment) that: (a) this Second Amendment has been duly authorized, executed and delivered by it and this Second Amendment constitutes the legal, valid and binding obligation, contract and agreement of the Company enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally; (b) the Note Agreement, as amended by this Second Amendment, constitutes the legal, valid and binding obligations, contracts and agreements of the Company enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally; (c) the execution, delivery and performance by the Company of this Second Amendment (i) has been duly authorized by all requisite corporate action and, if required, shareholder action, (ii) does not require the consent or approval of any governmental or regulatory body or agency, and (iii) will not (A) violate (1) any provision of law, statute, rule or regulation or its certificate of incorporation or bylaws, (2) any order of any court or any rule, regulation or order of any other agency or government binding upon it, or (3) any provision of any material indenture, agreement or other instrument to which it is a party or by which its properties or assets are or may be bound, or (B) result in a breach or constitute (alone or with due notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in clause (iii)(A)(3) of this Section 2.1(c); (d) as of the date hereof and after giving effect to this Second Amendment, no Default or Event of Default has occurred which is continuing; and (e) Exhibit A attached to this Second Amendment correctly describes all of the preferred stock of the Company and its Subsidiaries issued in connection with the MacDonald, Dettwiler Arrangement (as defined herein). -6- 8 SECTION 4. MISCELLANEOUS. Section 4.1. This Second Amendment shall become effective and binding upon the Company and the Purchaser on the date hereof upon the acceptance hereof by the Purchaser in the space below. Section 4.2. Except as modified and expressly amended by this Second Amendment, the Note Agreement is in all respects ratified, confirmed and approved and all of the terms, provisions and conditions thereof shall be and remain in full force and effect. Section 4.3. The Company agrees to pay all reasonable fees and expenses of the Purchaser and its special counsel in connection with the preparation of this Second Amendment. Section 4.4. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Second Amendment may refer to the Note Agreement without making specific reference to this Second Amendment but nevertheless all such references shall include this Second Amendment unless the context otherwise requires. Section 4.5. This Second Amendment shall be governed by and construed in accordance with the laws of the State of Illinois. Section 4.6. This Second Amendment may be executed and delivered in any number of counterparts, each of such counterparts constituting an original, but all together only one Second Amendment. IN WITNESS WHEREOF, the Company and the Purchaser have caused this instrument to be executed, all as of the day and year first above written. ORBITAL SCIENCES CORPORATION By /s/ Carlton B. Crenshaw ------------------------------- Its Executive Vice President and Chief Financial Officer Accepted and Agreed to: THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By /s/ A. Kipp Koester ------------------------------- Its Vice President -7- 9 PREFERRED STOCK ISSUED IN CONNECTION WITH THE MACDONALD, DETTWILER ARRANGEMENT PREFERRED STOCK ISSUED BY ORBITAL SCIENCES CORPORATION:
NUMBER AND DESCRIPTION OF SHARES HOLDER One Share Of Series A Special Voting Preferred Stock, par Value State Street Exchange and Trust Company $0.01 per share. This stock has no liquidation or dividend rights; it entitles the holder to vote on behalf of the holders of the Macdonald, Dettwiler Holdings Inc. Exchangeable Shares at meetings of the company's common stockholders.
PREFERRED SHARES ISSUED BY MACDONALD, DETTWILER HOLDINGS INC.:
10,000 Class B Preferred Shares Canadian Imperial Bank Of Commerce 2,784,516 Exchangeable Shares Public stockholders (1,005,912 shares outstanding on March 15, 1996)
-1- EX-10.8 6 STOCK OPTION PLAN. 1 EXHIBIT 10.8 ORBITAL COMMUNICATIONS CORPORATION 1992 STOCK OPTION PLAN (Amended and Restated Effective September 12, 1995) ARTICLE I PURPOSE OF PLAN The purpose of this 1992 Stock Option Plan is to promote the growth and profitability of Orbital Communications Corporation by providing, through the ownership of Shares, incentives to attract and retain highly talented persons to provide managerial and administrative services to the Company or other entities in which the Company has a significant interest and to motivate such persons to use their best effort on behalf of the Company. ARTICLE II DEFINITIONS For the purposes of this Plan, the following terms shall have the meanings set forth in this Article II: 2.01 Accrued Installment. The term "Accrued Installment" shall mean any vested installment of an Option. 2.02 Board. The term "Board" shall mean the Board of Directors of the Company. 2.03 Committee. The term "Committee" shall mean a committee appointed by the Board pursuant to Section 3.04 and constituting two (2) members of the Board, and two (2) members nominated by the partners of ORBCOMM Global, other than ORBCOMM, which shall be by Teleglobe Mobile, as long as Teleglobe Mobile holds at least forty percent (40%) of the Participating Percentage in ORBCOMM Global, L.P. (as defined in the Agreement of Limited Partnership of ORBCOMM Global, L.P.). 2.04 Company. The term "Company" shall mean Orbital Communications Corporation, a Delaware corporation, or any successor thereof. 2.05 Director. The term "Director" shall mean a member of the Board, or a member of the board of directors of any Participating Company. 2.06 Disinterested Person. The term "Disinterested Person" shall mean any person defined as a disinterested person under Rule 16b-3 of the Securities and Exchange Commission as promulgated under the Exchange Act. 2.07 Effective Date. The term "Effective Date" shall mean September 29, 1992. 2.08 Eligible Person. The term "Eligible Person" shall mean any employee or officer of any Participating Company, but shall not include any Director of any Participating Company who is not also an employee or officer of a Participating Company. 2 2.09 Exchange Act. The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. 2.10 Fair Market Value. The term "Fair Market Value" shall mean the closing sale price of a Share on the national securities exchange on which Shares are then principally traded or, if that measure of price is not available, on a composite index of such exchanges or, if that measure of price is not available, in a national market system for securities on the date in question. In the event that there are no sales of Shares on any such exchange or market on such date, the fair market value of a Share shall be deemed to be the closing sales price on the next preceding day on which Shares were sold on any such exchange or market. In the event that such Shares are not listed on any such market or exchange on such date, a reasonable valuation of the fair market value of a Share shall be made by the Committee. Any determination of fair market value made in good faith by the Committee shall be conclusive and binding on the Company and all Optionees and/or holders of Shares. 2.11 I.R.C. The term "I.R.C." shall mean the Internal Revenue Code of 1986, as amended from time to time. 2.12 Incentive Stock Option. The term "Incentive Stock Option" shall mean any Option intended to satisfy the requirements under I.R.C. Section 422(b) as an incentive stock option. 2.13 Nonstatutory Stock Option. The term "Nonstatutory Stock Option" shall mean any Option granted under the Plan that does not qualify as an Incentive Stock Option. 2.14 Option. The term "Option" shall mean an option to acquire Shares granted under the Plan. 2.15 Optionee. The term "Optionee" shall mean an Eligible Person who has been granted Options. 2.16 ORBCOMM Partnerships. The term "ORBCOMM Partnerships" shall mean ORBCOMM Global, L.P., ORBCOMM USA, L.P., ORBCOMM International Partners, L.P. and any successor partnerships thereto; provided, however, that the term "ORBCOMM Partnership" shall not include any such partnership at any time when the Company holds, directly or indirectly, a Participation Percentage (as defined in the applicable partnership agreement) in such partnership aggregating less than 20%. 2.17 Parent Corporation. The term "Parent Corporation" shall mean a corporation as defined in I.R.C. Section 424(e). 2.18 Participating Company. The term "Participating Company" shall mean the Company, any Parent Corporation of the Company, any Subsidiary Corporation of the Company or its Parent Corporation and any ORBCOMM Partnership. 2.19 Plan. The term "Plan" shall refer to the Stock Option Plan of the Company set forth herein that provides for the granting of Incentive Stock Options and Nonstatutory Stock Options. 2 3 2.20 Restricted Shareholder. The term "Restricted Shareholder" shall mean an Optionee granted an Incentive Stock Option who, at the time the Incentive Stock Option is granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, with stock ownership determined in accordance with the attribution rules of I.R.C. Section 424(d). 2.21 Shares. The term "Shares" shall mean shares of the Company's authorized Common Stock, $0.01 par value, and may be unissued shares or treasury shares or shares purchased for purposes of the Plan. 2.22 Subsidiary Corporation. The term "Subsidiary Corporation" shall mean a corporation as defined in I.R.C. Section 424(f). 2.23 Teleglobe Mobile. The term "Teleglobe Mobile" shall mean Teleglobe Mobile Partners, a Delaware general partnership. 2.24 Terminating Transaction. The term "Terminating Transaction" shall mean any of the following events: (a) the dissolution or liquidation of the Company; (b) a reorganization, merger or consolidation of the Company with one or more other corporations as a result of which the Company goes out of existence or becomes a subsidiary of a corporation other than a corporation that was a Participating Company immediately prior to such event (which shall be deemed to have occurred only if such a corporation shall own, directly or indirectly, eighty percent (80%) or more of the aggregate voting power of all outstanding equity securities of the Company); (c) a sale of all or substantially all of the Company's assets to a person or persons other than a corporation that was a Participating Company immediately prior to such event; or (d) a sale to one person (or two or more persons acting in concert), other than to a corporation that was a Participating Company immediately prior to such event, of equity securities of the Company representing eighty percent (80%) or more of the aggregate voting power of all outstanding equity securities of the Company. As used herein or elsewhere in this Plan, the word "person" shall mean an individual, corporation, partnership, association or other person or entity, or any group of two or more of the foregoing that have agreed to act together. 2.25 Termination Date. The term "Termination Date" shall mean September 29, 2002. 2.26 Total Disability. The term "Total Disability" shall mean a permanent and total disability as that term is defined in I.R.C. Section 22(e)(3). ARTICLE III ADMINISTRATION OF PLAN 3.01 Administration by Board. The Plan shall be administered by the Board. The Board shall have full and absolute power and authority in its sole discretion to (a) determine which Eligible Persons shall receive Options; (b) determine the time when Options shall be granted; (c) determine the terms and conditions, not inconsistent with the provisions of this Plan, of any Option granted hereunder, including whether such Option is an Incentive Stock Option or a Nonstatutory Stock Option (except that Incentive Stock Options may not be granted to any Eligible Person that is not an employee or officer of the Company, any Parent Corporation of the Company or any Subsidiary 3 4 Corporation of the Company or its Parent Corporation); (d) determine the number of Shares which may be issued upon exercise of the Options; and (e) interpret the provisions of this Plan and of any Option granted under this Plan. 3.02 Rules and Regulations. The Board may adopt such rules and regulations as the Board may deem necessary or appropriate to carry out the purposes of the Plan and shall have authority to do everything necessary or appropriate to administer the Plan. 3.03 Binding Authority. All decisions, determinations, interpretations or other actions by the Board shall be final, conclusive and binding on all Eligible Persons, Optionees, Participating Companies and any successors-in-interest to such parties. 3.04 Administration by Committee. (a) The Board shall appoint a Committee to administer the Plan and exercise all of the powers, authority and discretion of the Board under the Plan, other than the power and authority to amend and terminate the Plan under Section 7.01. (b) At any time the Company has a class of equity securities registered under the Exchange Act, each member of the Committee must be a Disinterested Person, and the Board may, but is not required to, take such other actions as are deemed necessary or advisable to conform the Plan to the requirements of Rule 16b-3 as promulgated under the Exchange Act. (c) The Committee shall report to the Board the names of Eligible Persons granted Options, the number of Shares covered by each Option, and the terms and conditions of each such Option. (d) Prior to the time that it appoints a Committee to administer the Plan, the Board shall consult with, and obtain the concurrence of, the Human Resources Committee of the Board of Directors of Orbital Sciences Corporation in administering the Plan. ARTICLE IV NUMBER OF SHARES AVAILABLE FOR GRANT Subject to the following provisions of this Article IV, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 700,000. In the event that Options granted under the Plan shall, for any reason, terminate, lapse, be forfeited or expire without being exercised, the Shares subject to such unexercised Options shall again be available for the granting of Options under the Plan. In the event that Shares that were previously issued by the Company, upon exercise of an Option, are reacquired by the Company as part of the consideration received (in accordance with Section 6.05(b) hereof) upon the subsequent exercise of an Option, such reacquired Shares shall again be available for the granting of Options hereunder. 4 5 ARTICLE V TERM OF PLAN The Plan shall be effective as of the Effective Date and shall terminate on the Termination Date. No Option may be granted hereunder after the Termination Date. ARTICLE VI OPTION TERMS 6.01 Form of Option Agreement. Any Option granted under the Plan shall be evidenced by an agreement ("Option Agreement") in such form as the Board, in its discretion, may, from time to time, approve. Any Option Agreement shall contain such terms and conditions as the Board may deem necessary or appropriate and which are not inconsistent with the provisions of the Plan. 6.02 Option Exercise Price. The option exercise price for Shares to be issued under this Plan shall be determined by the Board in its sole discretion, but in no event shall the option exercise price be less than the Fair Market Value of the Shares in the case of an Incentive Stock Option (or one hundred and ten percent (110%) of such Fair Market Value in the case of an Incentive Stock Option granted to a Restricted Shareholder), or less than eighty-five percent (85%) of the Fair Market Value in the case of a Nonstatutory Stock Option. 6.03 Vesting and Exercise of Options. Subject to the limitations set forth herein and/or in any applicable Option Agreement entered into hereunder, Options granted under the Plan shall vest and be exercisable in accordance with the rules set forth in this Section 6.03: (a) General. Subject to the other provisions of this Section 6.03, Options shall vest and become exercisable at such time and in such installments as the Board shall provide in each individual Option Agreement. Notwithstanding the foregoing, the Board may, in its sole discretion, accelerate the time at which an Option or installment thereof may be exercised. Unless otherwise provided in this Section 6.03, in Section 6.04(a) or in the Option Agreement pursuant to which an Option is granted, an Option may be exercised when Accrued Installments accrue as provided in such Option Agreement and at any time thereafter until, and including, the day before the Option Termination Date. (b) Termination of Options. All installments of an Option shall expire and terminate on such date as the Board shall determine ("Option Termination Date"), which in no event shall be later than ten (10) years from the date such Option was granted (five (5) years in the case of an Incentive Stock Option granted to a Restricted Shareholder). (c) Termination of Employment other than by Death, Retirement or Total Disability. In the event that the employment of an Optionee with a Participating Company is terminated for any reason (other than death or Total Disability or retirement on or after reaching age 60), any installments under an Option held by such Optionee that have not accrued as of the employment termination date shall expire and become unexercisable as of the employment termination date. All Accrued Installments as of the employment termination date shall expire and become unexercisable as of the earlier of (i) three (3) months following the employment termination date; or 5 6 (ii) the original Option Termination Date. For purposes of the Plan, an Optionee who is an employee or officer of any Participating Company shall not be deemed to have incurred a termination of his employment so long as such Optionee is an employee or officer of any Participating Company. (d) Leave of Absence. An approved leave of absence shall not constitute a termination of employment under the Plan. An approved leave of absence shall mean an absence approved pursuant to the policy of a Participating Company for military leave, sick leave, or other bona fide leave, not to exceed ninety (90) days or, if longer, as long as the employee's right to re-employment is guaranteed by contract, statute or the policy of a Participating Company. Notwithstanding the foregoing, in no event shall an approved leave of absence operate to make an Option exercisable after the original Option Termination Date. (e) Death, Retirement or Total Disability of Optionee. In the event that the employment of an Optionee with a Participating Company is terminated by reason of death, Total Disability, or retirement on or after reaching age sixty (60), any unexercised Accrued Installments of Options granted hereunder to such Optionee shall expire and become unexercisable as of the earlier of: (i) The applicable Option Termination Date; or (ii) The first anniversary of the date of termination of employment of such Optionee by reason of the Optionee's death, Total Disability or retirement. Any such Accrued Installments of a deceased Optionee may be exercised prior to their expiration only by the person or persons to whom the Optionee's Option rights pass by will or the laws of descent and distribution. Any Option installments under such a deceased, disabled or retired Optionee's Option that have not accrued as of the date of the employee's termination of employment due to death, Total Disability or retirement shall expire and become unexercisable as of the employment termination date. (f) Termination of Affiliation of Participating Company. Notwithstanding the foregoing provisions of this Section 6.03, (i) in the case of an Optionee who is an employee or officer of a Participating Company other than the Company, upon an Affiliation Termination (as defined herein) of such Participating Company or an ORBCOMM Partnership, such Optionee shall be deemed (for all purposes of the Plan) to have incurred a termination of his employment for reasons other than death, retirement on or after age 60 or Total Disability, with such termination to be deemed effective as of the effective date of said Affiliation Termination and (ii) in the case of an Optionee who is an employee or officer of a Participating Company that is an ORBCOMM Partnership, upon an Affiliation Termination of such Participating Company, all unaccrued installments of any Option held by such Optionee shall vest and become Accrued Installments immediately prior to the effectiveness of such Affiliation Termination and thereafter each such Option shall expire and become unexercisable as of the earlier of (A) the applicable Option Termination Date, (B) the first anniversary of the Optionee's death, Total Disability or retirement on or after reaching age 60 or (C) three (3) months following the date the Optionee's ceases to be employed by any Participating Company or any ORBCOMM Partnership. As used herein, the term "Affiliation Termination" shall mean, with respect to a Participating Company, the termination of such Participating Company's status as an ORBCOMM Partnership or as a Parent or Subsidiary Corporation of the Company or of Orbital Sciences Corporation. 6 7 6.04 Exercise of Options. (a) Subject to Section 6.09(b), no Options may be exercised by any Optionee until the Board has determined that the value of Orbital Sciences Corporation's share of the Company is equal to at least one hundred twenty-five percent (125%) of the amount of Orbital Sciences Corporation's investment in the Company, or until September 1, 2001, whichever is earlier. For purposes of this Section 6.04(a), (i) the "value of Orbital Sciences Corporation's share of the Company" shall mean the sum of the percentage of the Company's Common Stock owned by Orbital Sciences Corporation multiplied by the then Fair Market Value of the Common Stock of the Company as determined by the Board, plus the principal amount of net intercompany indebtedness owed by the Company to Orbital Sciences Corporation; and (ii) "Orbital Sciences Corporation's investment in the Company" shall mean Orbital Sciences Corporation's investment in, and to the extent not reflected in the computation of such investment, the cumulative total of all unreimbursed expenses incurred, and expenditures made by Orbital Sciences Corporation on behalf of, the Company, net of expenditures that are charged to Independent Research and Development or directly reimbursed by customers. Any such determination of the value of Orbital Sciences Corporation's share of the Company, or of Orbital Sciences Corporation's investment in the Company, made in good faith by the Board shall be conclusive and binding on the Company and all Optionees. (b) Subject to the restrictions in Section 6.04(a), an Option may be exercised in accordance with this Section 6.04 as to all or any portion of the Shares covered by an Accrued Installment of the Option, from time to time during the applicable option period, except that an Option shall not be exercisable with respect to fractions of a Share. Options may be exercised, in whole or in part, by giving written notice of exercise to the Company, which notice shall specify the number of Shares to be purchased and shall be accompanied by payment in full of the purchase price in accordance with Section 6.05. An Option shall be deemed exercised when such written notice of exercise has been received by the Company. No Shares shall be issued until full payment has been made and the Optionee has satisfied such other conditions as may be required by this Plan, as may be required by applicable laws, rules or regulations, or as may be adopted or imposed by the Board. Until the issuance of stock certificates, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Shares subject to an Option notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other rights for which the record date is prior to the date the stock certificate is issued, except as provided in Section 6.09(a). 6.05 Payment of Option Exercise Price. (a) Except as otherwise provided in Section 6.05(b), the entire option exercise price shall be paid at the time the Option is exercised by cashier's check or such other means as deemed acceptable by the Board. (b) In the discretion of the Board (which, in the case of an Incentive Stock Option, shall be exercised only at the time of grant), an Optionee may elect to pay for all or some of the Optionee's Shares with Shares the Optionee has held for at least six (6) months, subject to all restrictions and limitations of applicable laws, rules and regulations and subject to the satisfaction of any conditions the Board may impose, including, but not limited to, the making of such representations and warranties and the providing of such other assurances that the Board may require with respect to the Optionee's title to the Shares used for payment of the exercise price. Such payment shall be made 7 8 by delivery of certificates representing Shares, duly endorsed or with duly signed stock power attached, such Shares to be valued at the Fair Market Value of such Shares on the day immediately preceding the day notice of exercise is received by the Company. 6.06 Purchase by the Company of Shares Acquired Pursuant to Exercise of Option. (a) Valuation. Provided that there has not yet been a public offering (within the meaning of the Securities Act of 1933, as amended, and the rules and regulations thereunder) of the Company's Common Stock, all Shares acquired pursuant to exercise of an Option that as of the applicable Valuation Date (as hereinafter defined), have been held by an Optionee at least six (6) months from the date of exercise of the Option (such Shares, in each year, the "Payable Shares"), shall, at the election of the Optionee exercised in the manner set forth herein, be purchased by the Company at a price per share equal to the Fair Market Value of a share of Common Stock on September 1, 1995, September 1, 1996 and September 1, 1997 and in subsequent years on March 1 and September 1 of each year (each such date is referred to as a "Valuation Date"); provided further that on the Valuation Date in 1995 only, no more than fifty percent (50%) of each Optionee's Payable Shares shall become subject to purchase by the Company. Within thirty (30) days after each such Valuation Date after Options are exercisable under Section 6.04(a), the Company shall cause the Fair Market Value of the Shares to be determined in accordance with Section 6.06(b) and shall notify each holder of Shares acquired pursuant to exercise of an Option of such Fair Market Value. Within thirty (30) days after receipt of such notice, each such holder of Shares may elect to have all or any portion of his or her Payable Shares be purchased by the Company at a price per share equal to such Fair Market Value by submitting to the Committee an irrevocable written notice of such election. The rights of an Optionee under this Section 6.06 may be exercised by the Optionee and any transferee specified in clause (ii) of Section 6.08(a) (in which case all references herein to "Optionee" shall refer to such transferee), but shall not be exercisable by any other holder of Shares, whether or not such holder acquired such Shares in a transfer permitted by Section 6.08(a). (b) Method of Valuation. The value of a Share of Company Common Stock on each Valuation Date shall be determined in good faith by the Committee, and any such determination shall be conclusive and binding on the Company and all Optionees and/or holders of Shares. In making any such determination of Fair Market Value, the Committee may, but shall not be required to, rely on a determination of Fair Market Value made by an independent appraiser or other appropriate financial professional selected by the Committee in its sole discretion and reasonably believed to be competent to make such determination. No member of the Committee shall have any personal liability to any Optionee and/or holder of Shares for any determination of Fair Market Value under this Section 6.06, or any act or omission in connection therewith, unless the Optionee and/or holder of Shares shall establish that such determination, act or omission was not made in good faith. (c) Closing of Purchase of Shares. The closing for any purchase of Shares pursuant to this Section 6.06 shall occur on such date within sixty (60) days of the giving by the Company of the notification required by Section 6.06(a) as the Company shall specify by five (5) business days' notice to each selling Optionee, at the offices of the Company at 11:00 a.m. local time, or at such other time and place as the parties to such sale may mutually agree. At the closing, the Optionee shall deliver to the Company a certificate or certificates representing the Shares to be purchased by the Company, duly endorsed for transfer, free and clear of any lien or encumbrance, in exchange for payment of the purchase price (i) by check, (ii) by delivery of certificates representing 8 9 shares of Common Stock of Orbital Sciences Corporation having a Fair Market Value (determined in the manner provided in Section 2.10) as of the business day preceding the closing equal to the purchase price of the Shares, (iii) by delivery of a subordinated promissory note of the Company in the principal amount of the purchase price of the Shares, bearing interest at a rate equal to the then applicable federal short-term rate (determined pursuant to Section 1274(d) of the I.R.C.), providing for quarterly payments of interest and payment of the full principal amount on the first anniversary of the date of issuance, and containing provisions as approved by the Board in its sole discretion providing for the subordination of such notes to such indebtedness, whether then existing or thereafter created, of the Company as is specified by the Board, including, without limitation, indebtedness for money borrowed or similar indebtedness, or (iv) any combination of the foregoing; provided, however, that no more than fifty percent (50%) of the purchase price for Shares may be paid by subordinated promissory note. Any payment in the form of shares of Orbital Sciences Corporation Common Stock shall be subject to all applicable federal and state securities laws restrictions and all other restrictions. (d) Limitations on Repurchase Obligations. Notwithstanding any other provision of this Section 6.06, the Company shall not be obligated to purchase Payable Shares (i) to the extent such purchase is not permitted under applicable law or under the terms of any of (A) the Company's then-existing debt instruments or agreements governing such debt instruments, (B) the then-existing terms of any class of preferred stock of the Company, or (C) a then-existing stockholders agreement to which the Company is a party; or (ii) in the event there has been a public offering (within the meaning of the Securities Act of 1933 as amended, and the rules and regulations thereunder) of the Company's Common Stock. 6.07 Options Not Transferable. Options granted under this Plan may not be sold, pledged, hypothecated, assigned, encumbered, gifted or otherwise transferred or alienated in any manner, whether voluntarily, by operation of law, pursuant to judicial process or otherwise, other than by will or the laws of descent and distribution, and may be exercised during the lifetime of an Optionee only by such Optionee. 6.08 Restrictions on Issuance or Transfer of Shares. (a) Until such time as the Company shall have consummated an underwritten public offering of Shares involving an aggregate public offering price of at least Five Million Dollars ($5,000,000), or the Shares are registered under the Exchange Act, no Shares issuable upon exercise of an Option shall be sold, assigned, encumbered, pledged, hypothecated, given away or in any other manner disposed of or transferred, whether voluntarily, by operation of law, pursuant to judicial process or otherwise, except (i) to the Company pursuant to Section 6.06 hereof, or (ii) upon the death of the holder thereof, Shares may be transferred and distributed by will or other instrument taking effect at death or by the laws of descent and distribution to such holder's estate, executors, administrators and personal representatives, and then to such holder's heirs, legatees or distributees, provided that no such transfer shall be effective until the recipient has delivered to the Company a written acknowledgment in form and substance reasonably satisfactory to the Company that such Shares are subject to the restrictions on disposition or transfer set forth in this Section 6.08(a). Any attempted transfer of Shares not in accordance with this Section 6.08(a) shall be null and void, and the Company shall not in any way give effect to any such disposition or transfer. 9 10 (b) No Shares shall be issued or delivered upon exercise of an Option unless and until there shall have been compliance with all applicable requirements of the Securities Act of 1933, as amended, all applicable listing or quotation requirements of any national securities exchange or market on which Shares are then listed or quoted, and any other requirement of law or of any regulatory body having jurisdiction over such issuance and delivery. The inability of the Company to obtain any required permits, authorizations or approvals necessary for the lawful issuance and sale of any Shares hereunder on terms deemed reasonable by the Board shall relieve the Company, the Board and any Committee of any liability in respect of the non-issuance or sale of such Shares as to which such requisite permits, authorizations or approvals shall not have been obtained. (c) As a condition to the granting or exercise of any Option, the Board may require the person receiving or exercising such Option to make any representation and/or warranty to the Company as may be required under any applicable law or regulation, including, but not limited to, a representation that the Option and/or Shares are being acquired only for investment and without any present intention to sell or distribute such Option and/or Shares, if such a representation is required under the Securities Act of 1933, as amended, or any other applicable law, rule or regulation. (d) The exercise of Options under the Plan is conditioned on approval of the Plan by the vote or written consent of a majority of the holders of outstanding Shares of the Company's Common Stock within twelve (12) months of the adoption of the Plan. In the event such stockholder approval is not obtained within such time period, any Options granted hereunder shall be void. 6.09 Option Adjustments. (a) If the outstanding Shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of shares of the Company through reorganization, recapitalization, reclassification, stock dividend, stock split or reverse stock split or other similar transaction, the Board shall make a proportionate adjustment in the number or kind of shares and the per-share option price thereof, which may be issued in the aggregate and to individual Optionees upon exercise of Options granted under the Plan; provided, however, that no such adjustment need be made if, upon the advice of counsel, the Board determines that such adjustment may result in the receipt of federally taxable income to holders of Options granted hereunder or the holders of Common Stock or other classes of the Company's securities. (b) Upon the occurrence of a Terminating Transaction, as of the effective date of such Terminating Transaction, the Plan and any then outstanding Options (whether or not vested) shall terminate unless (i) provision is made in writing in connection with such transaction for the continuance of the Plan and for the assumption of such Options, or for the substitution for such Options of new options covering the securities of any successor or survivor corporation in the Terminating Transaction or an affiliate thereof, with such adjustments as the Board deems appropriate with respect to the number and kind of securities and the per-share exercise price under such substituted options, in which event the Plan and such outstanding Options shall continue or be replaced, as the case may be, in the manner and under the terms so provided; or (ii) the Board otherwise shall provide in writing for such adjustments as it deems appropriate in the terms and conditions of the then outstanding Options (whether or not vested), including, without limitation, (A) accelerating the vesting of outstanding Options; and/or (B) providing for the cancellation of Options and their automatic conversion into the right to receive the securities or other properties which a holder of Shares underlying such Options 10 11 would have been entitled to receive upon the consummation of such Terminating Transaction had such Shares been issued and outstanding (net of the appropriate option exercise prices). If, pursuant to the foregoing provisions of this paragraph (b), the Plan and the Options shall terminate by reason of occurrence of a Terminating Transaction without provision for any of the action(s) described in clause (i) and/or (ii) hereof, then any Optionee holding outstanding Options shall have the right, at such time immediately prior to the consummation of the Terminating Transaction as the Board shall designate, to exercise their Options to the full extent not theretofore exercised, including any installments which have not yet become Accrued Installments. (c) Except to the extent required in order to retain the qualification of an Option as an Incentive Stock Option under I.R.C. Section 422, to the maximum extent possible, any adjustments authorized under this Section 6.09 with respect to any outstanding Options shall be made by means of appropriate adjustments to the number of Shares (or other securities) and the option exercise price therefor under the unexercised portions of such outstanding Options, but without changing the aggregate exercise price applicable to said unexercised portions. In all cases, the nature and extent of adjustments under this Section 6.09 shall be determined by the Board in its sole discretion, and any such determination as to what adjustments shall be made, and the extent thereof, shall be final and binding. No fractional shares of stock shall be issued under the Plan pursuant to any such adjustment. 6.10 Taxes. The Board shall make such provisions and take such steps as it deems necessary or appropriate for the withholding of any federal, state, local and other tax required by law to be withheld with respect to the grant or exercise of an Option under the Plan, or with respect to the disposition of Shares acquired pursuant to the exercise of an Option pursuant to the Plan, including, but without limitation, the deduction of the amount of any such withholding tax from any compensation or other amounts payable to an Optionee by any member of the Participating Companies, or requiring an Optionee (or the Optionee's beneficiary or legal representative), as a condition of granting or exercising an Option, to pay to any member of the Participating Companies any amount required to be withheld, or to execute such other documents as the Board deems necessary or desirable in connection with the satisfaction of any applicable withholding obligation. Prior to January 1, 1998, the Board may permit, and after January 1, 1998, the Board shall permit, either at the time of the grant of an Option or the time of exercise, the Optionee and/or holder of Shares to elect, at such time and in such manner as the Board may prescribe, to satisfy such withholding obligation by (i) delivering to the Company Shares owned by such individual having a Fair Market Value equal to such withholding obligation, or (ii) requesting that the Company withhold from the Shares to be delivered upon the exercise a number of Shares having a Fair Market Value equal to such withholding obligation; provided that after January 1, 1998, in the first year that any Optionee and/or holder of Shares elects to satisfy his or her tax withholding obligation in a manner specified in this Section 6.10(i) or (ii), such Optionee and/or holder of Shares shall not be entitled to exercise more than 50% of his or her total vested Options in such manner; and provided further that the Board shall amend this Plan to delay the foregoing January 1, 1998 date in the event there are not a total of at least eighteen (18) operational ORBCOMM satellites in orbit by January 1, 1998. 6.11 Legends on Options and Stock Certificates. Each Option Agreement and each certificate representing Shares acquired upon exercise of an Option shall be endorsed with all legends, if any, required by applicable federal and state securities laws to be placed on the Option Agreement and/or the certificate, as well as legends setting forth the restrictions contained in Section 6.08(a) hereof. The determination of which legends, if any, shall be placed upon Stock Option Agreements 11 12 and/or said Shares shall be made by the Board in its sole discretion, and such decision shall be final and binding. 6.12 Employment Rights. Neither the adoption of the Plan nor the grant of Options will confer upon any person any right to continued employment with the Company or any subsidiary or affect in any way the right of the Company or subsidiary to terminate an employment relationship at any time. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in connection with Options granted under the Plan will not constitute an element of damages in the event of termination of an employment relationship. 6.13 Non-Competition Provisions. In consideration for the grant of Options, the Committee may require that Optionees enter into a non-competition agreement with the Company. ARTICLE VII AMENDMENT OR TERMINATION OF PLAN 7.01 Board Authority. The Board may amend, alter and/or terminate the Plan at any time; provided, however, that no change shall be effective unless approved by the stockholders of the Company if such change would cause the Option Plan to fail to meet the qualification requirements for Incentive Stock Option Plans as set forth in the Internal Revenue Code or, if the Company then has a class of equity security registered under the Exchange Act, to comply with Rule 16b-3 of the Exchange Act or any successor rule under such Act as in effect on the date of such amendment. 7.02 Limitation on Board Authority. The Board may amend the terms of any Option previously granted, prospectively or retroactively, and may amend the Plan in accordance with the provisions of Section 7.01; provided, however, that unless required by applicable law, rule or regulation, no amendment of the Plan or of any Option Agreement shall affect, in a material and adverse manner, Options granted prior to the date of any such amendment without the consent of any Optionee holding any such affected Options. 7.03 Substitution of Options. In the Board's discretion, the Board may, with an Optionee's consent, substitute Nonstatutory Stock Options for outstanding Incentive Stock Options, and any such substitution shall not constitute a new Option grant for the purposes of the Plan, and shall not require a revaluation of the Option exercise price for the substituted Option. Any such substitution may be implemented by an amendment to the applicable Option Agreement or in such other manner as the Board in its discretion may determine. ARTICLE VIII GENERAL PROVISIONS 8.01 Availability of the Plan. A copy of the Plan shall be delivered to the Secretary of the Company and shall be shown by the Secretary to any Eligible Person making reasonable inquiry concerning the Plan. 12 13 8.02 Notice. Any notice or other communication required or permitted to be given pursuant to the Plan or under any Option Agreement must be in writing and may be given by registered or certified mail and, if given by registered or certified mail, shall be determined to have been given and received when a registered or certified letter containing such notice, properly addressed with postage prepaid, is deposited in the United States mails and, if given otherwise than by registered or certified mail, shall be deemed to have been given when delivered to and received by the party to whom addressed. Notice shall be given to Eligible Persons at their most recent addresses shown in the Company's records. Notice to the Company shall be addressed to the Company at the address of the Company's principal executive offices, to the attention of the Secretary of the Company. 8.03 Titles and Headings. Titles and headings of sections of the Plan are for convenience of reference only and shall not affect the construction of any provision of the Plan. 8.04 Governing Law. The Plan shall be governed by, interpreted under and construed and enforced in accordance with the internal laws, and not the laws pertaining to conflicts or choice of laws, of the State of Delaware, applicable to agreements made and to be performed wholly within the State of Delaware. 13 EX-10.9 7 DEFERRED COMPENSATION PLAN. 1 EXHIBIT 10.9 ORBITAL SCIENCES CORPORATION 1995 DEFERRED COMPENSATION PLAN SECTION 1. PURPOSE OF THE PLAN Orbital Sciences Corporation (the "Employer") has established this Deferred Compensation Plan (the "Plan") effective as of March 1, 1995 to attract, retain and motivate certain of its key employees, as well as those of its affiliates, by providing them with the opportunity (i) to defer receipt of certain amounts of compensation and (ii) to be credited with discretionary matching or other Employer credits as hereinafter provided. The Plan is intended to be "a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, ("ERISA"), and shall be administered in a manner consistent with that intent. SECTION 2. ADMINISTRATION The Plan will be administered by the Human Resources Committee of the Board of Directors of the Employer (the "Committee"). From time to time, the Committee shall have the authority to appoint persons and entities to act as designated representatives on its behalf in administering the Plan pursuant to its provisions. The Committee will have full discretionary authority to interpret the provisions of the Plan and decide all questions and settle all disputes which may arise in connection with the Plan, and may establish its own operative and administrative rules and procedures in connection therewith, provided such procedures are consistent with the claims procedure requirements of Section 503 of ERISA and the regulations thereunder. All interpretations, decisions and determinations made by the Committee will be binding on all persons concerned. No member of the Committee who is a Participant in the Plan may vote or otherwise participate in any decision or act with respect to a matter relating solely to himself or herself (or to his or her beneficiaries). SECTION 3. SELECTION OF PARTICIPANTS The Committee will select from time to time the key employees who are eligible to participate in the Plan. When a key employee has been selected to participate in the Plan, he or she will be notified by the Committee and given the opportunity to elect to defer compensation under the Plan. (A key employee who makes such an election is hereinafter referred to as a "Participant"). 2 SECTION 4. ESTABLISHMENT OF ACCOUNT The Committee will cause the Employer or an affiliate to establish on its books a deferred compensation account (the "Account") for each Participant employed by it reflecting the Employer's or affiliate's obligation to pay the Participant deferred compensation as provided under the Plan. SECTION 5. DEFERRAL ELECTIONS For each calendar year, a Participant may elect to defer receipt of a specified portion of his or her compensation from the Employer or an affiliate for the year. A Participant's election to defer compensation for a calendar year shall be subject to the following restrictions: (i) Elections to defer regular pay not yet earned may be cancelled at any point during the year. Once an election has been cancelled, the Participant may not reenter the Plan during that calendar year in which the cancellation occurred. (ii) Elections to defer compensation already earned or bonus awards attributable to work performed during the calendar year are irrevocable. (iii) Elections to defer shall be made prior to the beginning of such calendar year, except as follows: (a) For 1995, a Participant may elect to defer receipt of a specified portion of his or her compensation from the Employer or an affiliate for the remainder of the calendar year, provided that such an election is made prior to receipt of such compensation and is irrevocable for the remainder of the calendar year; and (b) For employees designated as eligible for Participation at any time during a calendar year, such Participant may elect to defer receipt of a specified portion of his or compensation from the Employer for the remainder of the calendar year, provided that such election is made prior to the receipt of such compensation and is irrevocable for the remainder of the calendar year. SECTION 6. EMPLOYER CREDITS 2 3 For each calendar year, the Employer or an affiliate in its sole discretion may credit additional amounts to a Participant's Account on a matching or other basis. Such additional amounts, if any, may be different for each Participant. The Participant will be notified by the Committee of the Employer's or affiliate's decision to credit such additional amounts. Such notice will include the amount to be credited and such other information as the Committee shall determine. SECTION 7. INVESTMENT MEASUREMENTS From time to time, the Committee will establish investment measurements to be used to adjust the balance of each Participant's Account. Such investment measurements may be changed from time to time by the Committee, and may be different for each Participant. Each Participant will be notified by the Committee from time to time of such investment measurements and will be furnished such other information as the Committee shall determine. SECTION 8. ADJUSTMENTS TO PARTICIPANT'S ACCOUNT From time to time, the Committee will adjust each Participant's Account to (i) credit the amount which the Participant has elected to defer under Section 5 or the Employer (or affiliate) has elected to credit under Section 6 and (ii) reflect the investment measurements established under Section 7. A Participant's Account will continue to be adjusted under this Section until the entire amount has been paid to the Participant or his or her beneficiary. A Participant's Account will also be adjusted to reflect benefit payments and withdrawals under Section 9. SECTION 9. PARTICIPANT BENEFITS; VESTING Subject to the following provisions of this Section, a Participant who terminates employment with the Employer (or an affiliate) for any reason other than death will be entitled to elect to receive the vested portion of the balance credited to his or her Account on a specified date following termination of employment (but not later than April 1 following the year in which the Participant attains age 70 1/2) either in a single payment or in a series of monthly installment payments (not to exceed 120 such payments). An election by a Participant to defer receipt or to receive a lump sum or installment payments must be made at least 90 days prior to his or her termination of employment. Furthermore, the Committee at its sole discretion may modify any such election at any time if the Committee determines that such modification is in the best interest of the Employer or an affiliate. The Committee 3 4 will determine the time and the form of payment in the case of any Participant who fails to make a timely election. A Participant who incurs a severe financial hardship resulting from unforeseeable circumstances beyond the Participant's control may request to withdraw all or a portion of his or her vested Account to satisfy such financial hardship. The Committee in its sole discretion will determine whether a severe financial hardship exists and what amount, if any, may be withdrawn. A Participant will be 100% vested in the portion of his or her Account attributable to his or her elective deferrals under Section 5 above. A Participant will become vested in the portion of his or her Account attributable to Employer credits under Section 6 above in accordance with the following vesting schedule:
Years of Service With Vested the Employer or an Affiliate Percentage ---------------------------- ---------- less than 1 0 % more than 1, but less than 2 20 % more than 2, but less than 3 40 % more than 3, but less than 4 60 % more than 4, but less than 5 80 % more than 5 100 %
For purposes of the Plan, Years of Services for vesting purposes will have the same meaning as under the Deferred Salary & Profit Sharing Plan for Employees of Orbital Sciences Corporation. SECTION 10. BENEFICIARY BENEFITS The beneficiary of a Participant who dies prior to the commencement of benefit payments under Section 9 will be entitled to receive 100% of the Participant's entire Account. The beneficiary of a Participant who dies after the commencement of benefit payments under Section 9 will become entitled to receive the remaining balance, if any, of the Participant's Account. A Participant may designate a beneficiary or beneficiaries, or change any prior designation, on a form approved by the Committee to receive the remaining vested balance in his or her Account upon 4 5 his or her death. If no beneficiary is designated (or if a designated beneficiary does not survive the Participant), the beneficiary will be the Participant's estate. Payments under this section will be made in a single sum or installments as selected by the Committee. SECTION 11. NATURE OF CLAIM FOR PAYMENTS The Employer or an affiliate shall not be required to set aside or segregate any assets of any kind to meet its obligations hereunder. A Participant shall have no right on account of the Plan in or to any specific assets of the Employer or any affiliate. Any right to any payment the Participant may have on account of the Plan shall be that of a general, unsecured creditor of the Employer or an affiliate. The Employer or an affiliate may establish a trust of which the Employer or the affiliate is treated as the owner under Subpart E of Subchapter J, Chapter 1 of the Internal Revenue Code of 1986, as amended, (a "grantor trust") and may deposit funds with the trustee of the trust (the "Trustee") sufficient to satisfy the benefits provided under the Plan. If the Employer or affiliate establishes such a trust and, if at the time of a "change of control" as defined in the trust, the trust has not been fully funded, the Employer or affiliate shall, within the time and manner specified under such trust, deposit in such trust amounts sufficient to satisfy all obligations under the Plan as of the date of deposit. In all events, the Employer or affiliate shall remain ultimately liable for the benefits payable under this Plan to Participants employed by the Employer or affiliate, and to the extent the assets at the disposal of the trustee are insufficient to enable the trustee to satisfy all benefits, the Employer or affiliate shall pay all such benefits necessary to meet its obligations under this plan. SECTION 12. NO ASSIGNMENT OR ALIENATION The interest hereunder of any Participant or beneficiary will not be alienable by the Participant or beneficiary by assignment or any other method and will not be subject to be taken by his or her creditors by any process whatsoever, and any attempt to cause such interest to be so subjected will not be recognized, except to such extent as may be required by law. 5 6 The obligations of the Employer or affiliate hereunder shall be binding upon its successors and assigns, whether by merger, consolidation or acquisition of all or substantially all of its business or assets. SECTION 13. NO CONTRACT OF EMPLOYMENT The Plan will not be deemed to constitute a contract of employment between the Employer or affiliate and any Participant, or to be consideration for the employment of any Participant. SECTION 14. AMENDMENT The Plan may be altered, amended or revoked in writing by the Employer in any manner and at any time. SECTION 15. GOVERNING LAW This Plan will be governed and construed in accordance with the laws of the state in which the Employer's headquarters are located, to the extent such laws are not preempted by federal law. IN WITNESS WHEREOF, the Employer, by its duly authorized officer, has caused this Plan to be executed this _____ day of _______, 19___. ORBITAL SCIENCES CORPORATION By:________________________ 6 EX-10.10 8 FAIRCHILD RETIREMENT PLAN. 1 EXHIBIT 10.10 FAIRCHILD SPACE AND DEFENSE CORPORATION Supplemental Executive Retirement Plan Effective September 1, 1989 Revised 11/3/93 2 TABLE OF CONTENTS I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 II. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 III. PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 IV. VESTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 V. THE BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 VI. TERMINATION FROM THE PLAN PRIOR TO RETIREMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 VII. RETIREMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 VIII. PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 IX. DEATH OF THE PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 X. AMENDMENT OR TERMINATION OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 XI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 XII. THE COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3 I. INTRODUCTION Fairchild Space and Defense Corporation, a Delaware Corporation ("Employer"), hereby establishes a Supplemental Executive Retirement Plan (the "Plan"). The purpose of the Plan is to assure adequate retirement income for key executives of the Employer. The Plan is an unfunded, unqualified plan for certain highly compensated employees or top management and is not a plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
II. DEFINITIONS Account Balances: The Participant's profit-sharing or equivalent account with respect to the Company's contributions and the earnings thereon in the Savings Plan for Employees of Fairchild Space and Defense Corporation. Accrual Percentage: The rate by which the Participant's benefits under the Plan accrue as set forth in Article V.B. Actuarial Equivalent: The Actuarial Equivalent shall be any benefit provided under the terms of the Plan which has the same present value on the date the benefit payment commences and shall be determined in accordance with the definition of Actuarial Equivalent or the method for determination thereof in the defined benefit plan of the Company in which the Participant participates except that for the purposes of lump sum payment the Pension Benefit Guaranty Corporation rates (PBGC) shall be used. Agreement: The written agreement between the Participant and the Company evidencing participation in the Plan. Annual Retirement Benefit: The retirement benefit to be paid to Participant in accordance with the provisions of the Plan. Beneficiary: Any beneficiaries last designated by the Participant to receive the benefits provided to him under this Plan. All such designations shall be by written document filed with the Employer and shall be revocable at any time by the Participant by written document filed with the Employer. All such revocations may be made without the consent of the Beneficiary. If no designation shall be in effect at the time benefits are payable under this Plan, the Beneficiary shall be the estate of the Participant.
4 Board of Directors: The Board of Directors of the Employer. Committee: The Executive Compensation Committee which has been designated by the Board of Directors to administer the Plan. Company: The Employer, its successors and assigns, and any corporation that the Employer owns the majority of stock, directly or indirectly, and that adopts the Plan. Disability: A disability of the Participant under a tax-qualified retirement plan of the Company in which the Participant participates. Employee: Any person regularly employed by the Company, exempt from the overtime provisions of the Fair Labor Standards Act. Final Average Earnings: The result obtained by dividing the Salary paid to an Employee during a certain period by the number of years, including fractional years, in such period for which the Salary was received. The certain period shall be the five consecutive calendar years of Service within the last 10 completed years of Service which yield the highest average salary. If the Employee has less than five consecutive calendar years of Service, the average shall be taken over his total period of Service. For the purposes of this calculation, Service shall only include service with the Company after September 1, 1989 and service with Fairchild Industries, Inc. after December 31, 1978. Hour of Service: Each hour for which an Employee is directly or indirectly paid by the Employer for the performance of duties and for reasons other than the performance of duties. The following periods of time shall be included as Hours of Service: authorized leaves of absence and employment by the Company in a position that is not exempt from the overtime provisions of the Fair Labor Standards Act. Normal Year of Service: A calendar year in which an Employee completes 2,080 Hours of Service whether or not a Participant. Participant: Any Employee who meets the participation requirements described within or hereafter amended. Policy: The term Policy shall mean a life insurance policy as set forth in Article XI.C.
5 Salary: The basic rate of annual compensation payable as regular compensation for Service as an Employee, including salary reduction elected by the Employee under the Fairchild Space and Defense Corporation deferred compensation plan, exclusive of bonuses, overtime and other extraordinary compensation. The basic rate in effect on January 1 of each year shall be used in calculating the Benefit. Service: Service as an Employee of the Company. Including service with Fairchild Industries, Inc. which is recognized by the Retirement Plan for Employees of Fairchild Space and Defense Corporation. Vesting Percentage: The rate by which the Participant's rights to accrued benefits under the Plan become nonforfeitable as set forth in Article IV. Vesting Year of Service: A calendar year in which an Employee completes at least 1,000 Hours of Service.
III. PARTICIPATION A. In General Participation in the Plan is determined by the Board of Directors and may be terminated at their convenience. Participation in the Plan is voluntary for selected Employees. Employee participation shall commence as of the effective date of the Agreement. B. Forms to be Filed Each Employee who participates in the Plan shall file with the Committee documents containing such information which in the opinion of the Committee is necessary or desirable for the operation of the Plan. C. Consent to the Plan Each Participant participating in the Plan shall be conclusively deemed for all purposes to have consented to this Plan and any amendments thereto and to all the terms and conditions thereof. However, nothing in this Plan shall be deemed to constitute an employment agreement between the Participant and the Employer or give the Participant any right to be retained by the 6 Employer. Further, nothing herein shall be construed to modify the terms of any employment agreement between the Participant and Employer but is intended to be a supplement thereto. IV. VESTING The Vesting Percentage for any Participant is 10% of the Annual Retirement Benefit for each Vesting Year of Service after an Employee becomes a Participant and, for Hours of Service less than a vesting Year of Service, 1% for each 100 Hours of Service. V. THE BENEFIT A. The Formula An Annual Retirement Benefit beginning at age 65 will be paid to the Participant annually for life equal to 60% of the Participant's Final Average Earnings reduced by: (1) the Participant's annual estimated primary Social Security benefit at age 65; (2) the amount which the Participant has accrued under all defined benefit plans maintained by the Company expressed as a yearly amount in the form of a single life annuity; and (3) the Account Balances at age 65 or the equivalent value of the Account Balances at age 65 if determined for a Participant who is not age 65 expressed as a yearly amount in the form of a single life annuity. B. Accrual of Benefit The Accrual Percentage shall be an accrual for any Participant of 5% of the Annual Retirement Benefit for each Normal Year of Service and, for Hours of Service less than a Normal Year of Service, .5% for each 208 Hours of Service. VI. TERMINATION FROM THE PLAN PRIOR TO RETIREMENT A. Termination of Employment In the event of the Participant's termination of employment, other than by death or retirement under a tax qualified retirement plan maintained by the Company in which the Participant participates, the Participant is entitled to the Annual Retirement Benefit (as if he had continued employment until reaching age 65 and then immediately retired but based on his current Final Average Earnings as of his termination of employment) multiplied by his Accrual Percentage and by the Vesting Percentage in each case as of the date of termination of employment, payable in accordance with the provisions of Article VIII. 7 In addition to the stated eligibility requirements for the Company's Retiree Health Plan, Participants also shall be entitled, upon reaching the age of 55 years, to participate in the Retiree Health Plan in accordance with its terms and as it may be from time-to-time amended and if it remains in existence if: (a) the participant's employment was terminated involuntarily; (b) the participant had at least ten years accrued service at the time of termination, and (c) reasonable health care coverage is otherwise unavailable from another source when the participant reaches the age of 55 years. B. Termination from the Plan While an Employee In the event of the Participant's termination from the Plan prior to his termination of employment, the Participant is entitled to the Annual Retirement Benefit calculated in accordance with Section A. of this Article Vi. as if the Participant terminated employment as of his date of termination from the Plan and payable in accordance with the provisions of Article VIII. C. Total Disability Notwithstanding any other provision of the Plan, in the event of the Participant's termination of employment by reason of a Disability, the participant is entitled to the Annual Retirement Benefit calculated in accordance with Section A. of this Article VI. (for the purposes of such calculation the Vesting Percentage shall be 100%) and payable in accordance with the provisions of Article VIII. VII. RETIREMENT A. Normal Retirement In the event of the Participant's termination of employment by retirement in accordance with the provisions of a Company Retirement plan on or subsequent to age 65, the Participant is deemed 100% vested and entitled to the Annual Retirement Benefit as calculated in Article V.A. multiplied by the Participant's Accrual Percentage. B. Early Retirement In the event of retirement under the provisions of a tax-qualified retirement plan maintained by the Company in which the Participant participates prior to age 65, the Participant is entitled to the Annual Retirement Benefit (calculated as if he had continued employment until reaching age 65 and then immediately retired but based on his current Final Average Earnings as of his early retirement and reduced by (i) the early retirement benefit payable under the tax-qualified retirement plan in which the Participant participates and (ii) the Account Balances expressed as a yearly amount in the form of a single life annuity multiplied by his Accrual Percentage and by 8 his Vesting Percentage in each case as of the date of early retirement, payable in accordance with the provisions of Article VIII. of the Plan. VIII. PAYMENT OF BENEFITS A. Normal Benefits The Annual Retirement Benefit payable under the Plan is payable monthly beginning at age 65 to the retiree for his life. However, this form of benefit may be converted by the Participant at the convenience of the Company (as determined by the Committee) to the Actuarial Equivalent in the form of a joint and 50% spousal survivor annuity or a joint and 100% spousal survivor annuity. (1) Post-Age 65 Termination or Retirement If the Participant terminates employment or retires on or subsequent to the Participant's reaching age 65, payments calculated pursuant to Article VII.A. will begin on the date of such termination of employment or retirement. (2) Pre-Age 65 Termination In the event of the Participant's termination from the Plan prior to his termination from employment or if the Participant terminates employment prior to the Participant's reaching age 65 other than by death or retirement, then, at the election of the Participant and at the convenience of the Company (as determined by the Committee), the Participant may begin to receive the Actuarial Equivalent of payments calculated pursuant to Article VI.A., B., or C., as applicable, (i) for payments pursuant to Article VI.A. or B., on the later of age 55 or the date of termination of employment or (ii) for payment pursuant to Article VI.C., on the date of termination of employment by reason of a Disability. (3) Early Retirement In the event of early retirement under the provisions of a tax-qualified plan maintained by the Company in which the Participant participates, then, at the election of the Participant and the convenience of the Company (as determined by the Committee), the Participant may begin to receive payments calculated pursuant to Article VII.B. on the date of such early retirement and reduced by reference to the following factors:
Age of Payment % of Benefit Commencement Date Payable ----------------- ------- 64 100 63 100 62 100
9 61 96 60 92 59 88 58 84 57 80 56 76 55 72
B. Lump Sum Payments The Annual Retirement Benefit payable under the Plan may be paid to any Participant who was an Employee on or after September 1, 1989 at the election of the Participant and at the convenience of the Company (as determined by the Committee), in a lump sum payment. (1) Post-Age 65 Termination or Retirement If the Participant terminates employment or retires on or subsequent to the Participant's reaching age 65, payments may be made in a lump sum which is the Actuarial Equivalent of the payment calculated pursuant to Article VII.A. (2) Pre-Age 65 Termination In the event of the Participant's termination from the Plan prior to his termination from employment or if the Participant terminates employment prior to the Participant's reaching age 65 other than be death or retirement, payments may be made in a lump sum which is the Actuarial Equivalent of the payment calculated pursuant to Article VI.A., B. or C., as applicable, on the date of termination of employment. (3) Early Retirement In the event of early retirement under the provisions of a tax-qualified plan maintained by the Company in which the Participant participates, payments may be made in a lump sum which is the Actuarial Equivalent of Annual Retirement Benefit multiplied by the Participant's Accrual Percentage and Vesting Percentage in each case as of the date of early retirement. C. Limitations Benefits from this Plan will not be paid to an active Employee even in the case where the Company hires a previously retired Employee. Further, in no case will a Participant be paid twice by this Plan for the same year of service. 10 IX. DEATH OF THE PARTICIPANT A. Pre-Retirement Death Benefit If a Participant dies prior to retirement, his Beneficiary shall receive a death benefit equal to two times his Final Average Earnings plus the difference, if any, by which the amount payable to such Beneficiary under the Group Life Insurance Plan maintained by the Company with respect to such Participant has been reduced by salary deferrals of the Participant under any salary deferral plan maintained by the Company. This benefit shall be paid in 120 equal monthly installments. If benefits under a Policy with respect to the Participant shall not be receivable by the Company through fault of the Participant, or shall be receivable in a reduced amount, than the benefit payable to the Beneficiary pursuant to this Section A. shall either, as appropriate, not be paid or be proportionately reduced. B. Post-Age 55 Spousal, Survivor Annuity After age 55, a Participant may elect in writing to the Committee the pre-retirement "joint and 50% spousal" survivor annuity. For the Participant who elects this coverage, his Plan benefit will be reduced 1/2% for each year or partial year the election is in effect. If the Participant dies prior to retirement after making this election, the Participant shall be considered to be 100% vested, and his surviving spouse shall receive at the spouse's option, 50% of the Participant's plan annuity for life or the pre-retirement death benefit set forth in Article IX.A. C. Post-Retirement Death Benefit If a Participant has elected the "joint and spousal" survivor benefit as his retirement payment form and dies after retirement, then upon his death the spouse shall receive the elected amount for her life. Otherwise, no post-retirement death benefit is available from the Plan. X. AMENDMENT OR TERMINATION OF PLAN The Employer may terminate this Plan at his discretion. The termination may not reduce benefits accrued to date of Plan termination and payable to Participants, except as follows; a. No new Participants need be admitted and no additional benefits need be accrued; b. Participants with less than five calendar years of participation may be treated as terminated from the Plan while an Employee; c. Termination may not reduce benefits accrued to date of Plan termination for Participants with more than five calendar years of participation if they otherwise perform all the conditions of this Plan. 11 Employer may amend this Plan in any respect, except that such amendment may not reduce benefits except as permitted by Article X . XI. MISCELLANEOUS A. Gender and Number The masculine pronouns whenever used shall include the feminine. Whenever any words are used herein in the singular, they shall be construed as though they were also used in the plural in all cases where they shall so apply. B. Offset If at the time any payments are to be made in accordance with the provisions of this Plan, the Employee or the Beneficiary or both are indebted to the Company, then the payments remaining to be made to the Employee or the Beneficiary or both may, at the discretion of the Board of Directors, be reduced by the amount of such indebtedness provided, however, that an election by the Company not to reduce any such payment or payments shall not constitute a waiver of its claim or such indebtedness. C. The Policy The Company may maintain a Policy underlying this Plan. Neither the Employee nor any Beneficiary shall have any interest in the Policy nor in any other assets of the Company. The Employee's and the Beneficiaries' only interest hereunder shall be the right to receive the benefit set forth herein. Nothing in this Plan shall be construed as the creation by the Company of an escrow account or trust fund or as any other form of asset segregation. D. Retention of Services This Agreement shall not be construed as giving the Employee any right to have his services retained or continued by the Company. E. Nonassignability No benefits under this Agreement shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, or encumbrance and any attempt to do so shall be void. Such benefits shall not be subject to or liable for the debts, contracts, liabilities, engagements or torts of the Employee or the Beneficiary. F. Construction 12 This Agreement shall be construed and governed in all respects under and by the laws of the State of Delaware. If any provision of this Agreement shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. XII. THE COMMITTEE A. Appointment of the Committee The Plan shall be administered by the Committee. All usual and reasonable expenses of the Committee may be paid in whole or in part by the Company. B. Claims Procedure The Committee shall make all determinations as to the right of any person to a benefit. Any denial by the Committee of a claim for benefits under the Plan, by a Participant, or a former Participant, or a Beneficiary thereof, shall be stated in writing by the Committee and delivered or mailed to the claimant and such notice shall set forth the specific reasons for the denial written in a reasonable manner that may be understood without legal or actuarial counsel. In addition, the Committee shall afford a reasonable opportunity to any claimant whose claim for benefits has been denied to review the decision denying the claim. C. Records and Reports The Committee shall make available to each participant such records as may pertain to such Participant's interests in the Plan, and such Participant shall have the right to examine same at the office of the Committee during regular business hours. However, such Participant shall have no right to inspect any other records of the Committee or the Company. D. Committee Powers and Duties The Committee shall have the specific power and authority as herein granted to it and shall have such other power and authority as may be necessary in order to discharge its duties under the Plan, including, but not limited to, the following: a. To construe and interpret the Plan, decide all questions of eligibility and determine the amount, manner and time of payment of any benefits hereunder; b. To prescribe procedures to be followed by Participants or Beneficiaries filing applications for benefits; c. To prepare and distribute, in such manner as the Committee determines to be appropriate, information explaining the Plan; 13 d. To receive from the Company and from Participants such information as shall be necessary for the proper administration of the Plan, e. To furnish the Company, upon request, such annual reports with respect to the administration of the Plan as are reasonable and appropriate. f. To receive, review and keep on file (as it deems convenient or proper) reports of the financial condition, and of the receipts and disbursements of the Plan: g. To appoint or employ individuals to assist in the administration of the Plan and any other agents it deems advisable, including legal and actuarial counsel. The Committee shall have no power to add to, subtract from, or modify any terms of the Plan, or to change or add to any benefits provided by the Plan, or to waive or fail to apply any requirements of eligibility for a benefit under the Plan. However, not withstanding anything to the contrary, the Committee with the permission of the Board of Directors may waive, modify, or revise certain aspects of the Plan. E. Promulgation of Rules and Decisions The Committee may adopt such rules as it deems necessary, desirable or appropriate. All rules and decisions of the Committee shall be uniformly and consistently applied to all Participants in similar circumstances. When making a determination or calculation, the Committee shall be entitled to reply upon information furnished by a Participant or a former Participant, or Beneficiary thereof, the Company, or the legal counsel of the Company. F. Procedures The Committee may act at a meeting or in writing without a meeting. The Committee shall elect one of its members as chairman and appoint a secretary, who may or may not be a Committee member. The secretary shall keep a written record of all meetings and of all actions taken without a meeting and shall forward all communications as the Committee deems necessary to the Company. The Committee may adopt such bylaws and regulations as it deems desirable for the conduct of its affairs. All decisions of the Committee shall be made by the vote of the majority including actions in writing taken without a meeting. A dissenting Committee member, who within a reasonable time after he has knowledge of any action or failure to act by the majority, registers his dissent in writing delivered to the other Committee members of the Company shall not be responsible for any such action or failure to act. The acts and decisions of the Committee in connection will all matters within the scope of its authority shall be final, conclusive and binding on the Company, all Participants, all former Participants, and all persons claiming under or through such Participants or former Participants. G. Authorization of Benefit Payments 14 The Committee or their duly authorized agent or agents shall issue directions concerning all benefits to be paid from the Plan pursuant to the provisions of the Plan and shall warrant that all such directions are in accordance with the Plan. H. Applications and Forms The Committee may require all Participants or former Participants, and all personal claiming under or through such Participants or former Participants, to complete and file with the Committee an application for a benefit or any other form approved by the Committee, and to furnish all pertinent information required by the Committee. The Committee may rely upon all such information furnished it. I. Payment of Benefits Whenever, in the Committee's opinion, a person entitled to receive a payment of a benefit hereunder is under a legal disability or is incapacitated in any way so as to be unable to manage his financial affairs, the Committee may make payments to such person or to his legal representative or to a relative or friend of such person for his benefit, or the Committee may apply the payment for the benefit of such person in such manner as the Committee considers advisable. Any payment of a benefit in accordance with the provisions of this Section shall be a complete discharge of any liability for the making of such payment under the provisions of the Plan. EX-10.14.3 9 MASTER AGREEMENT (AMENDMENT 3). 1 EXHIBIT 10.14.3 AMENDMENT NO. 3 TO MASTER AGREEMENT This Amendment No. 3 to the Master Agreement ("Amendment No. 3") is made and entered into this 12th day of September 1995 by and among Orbital Sciences Corporation ("Orbital"), Orbital Communications Corporation ("ORBCOMM"), Teleglobe Inc. ("Teleglobe") and Teleglobe Mobile Partners ("Teleglobe Mobile"). W I T N E S S E T H WHEREAS, Orbital, ORBCOMM, Teleglobe and Teleglobe Mobile previously entered into a Master Agreement dated as of June 30, 1993, Amendment No. 1 to the Master Agreement dated as of April 1, 1994 and Amendment No. 2 to the Master Agreement dated as of October 1, 1994 (as amended, the "Master Agreement"); and WHEREAS, Orbital, ORBCOMM, Teleglobe and Teleglobe Mobile desire to further amend and modify the Master Agreement. NOW, THEREFORE, the parties agree as follows: SECTION 1. Terms used but not otherwise defined herein shall have the meanings assigned thereto in the Master Agreement. SECTION 2. The whereas clauses of the Master Agreement are amended and modified as follows: (a) The references to "ORBCOMM Development" and "ORBCOMM U.S." set forth in the fifth whereas clause of the Master Agreement are deleted and replaced with "ORBCOMM Global" and "ORBCOMM USA", respectively. (b) The seventh whereas clause of the Master Agreement is deleted in its entirety and replaced with the following: "WHEREAS, it is contemplated that ORBCOMM and Teleglobe shall make the capital contributions to fund the development, construction and operation of the ORBCOMM System as more fully described herein;" SECTION 3. Appendix C to the Master Agreement, which Appendix sets forth the Definitions, is hereby amended and modified as follows: 2 (a) The definition of "Affiliate" is hereby deleted in its entirety and replaced with the following: ""Affiliate" has the meaning assigned thereto in the ORBCOMM Global Partnership Agreement." (b) The definition of "Definitive Agreements" is hereby deleted in its entirety and replaced with the following: ""Definitive Agreements" shall mean the Master Agreement, the ORBCOMM Global Partnership Agreement, the ORBCOMM USA Partnership Agreement, the ORBCOMM International Partnership Agreement, the ORBCOMM System Construction Agreement, the System Charge Agreement, the International System Charge Agreement, the Procurement Contract and the Proprietary Information and Non- Competition Agreement." (c) The definition of "Gateway Earth Station Equipment Contract" is deleted in its entirety. (d) The definition of "International System Charge and Marketing (Non-U.S.) Agreement" is hereby deleted in its entirety and replaced with the following: ""International System Charge Agreement" shall mean the International System Charge Agreement dated as of June 30, 1993 among ORBCOMM Global, Teleglobe Mobile and ORBCOMM International, as such agreement may be amended and restated from time to time." (e) The definition of "Master Agreement" is hereby deleted in its entirety and replaced with the following: ""Master Agreement" shall mean this Agreement, as it may be amended and restated from time to time." (f) The definition of "Master Network Control Center" shall be deleted in its entirety and replaced with the following: ""Master Network Control Center" shall mean the Network Control Center and the Satellite Control Center to be located in Dulles, Virginia." (g) The definition of "ORBCOMM Development" shall be deleted in its entirety and replaced with the following: 2 3 ""ORBCOMM Global" shall mean ORBCOMM Global, L.P., the limited partnership created pursuant to the ORBCOMM Global Partnership Agreement." (h) The definition of "ORBCOMM Development Partnership Agreement" shall be deleted in its entirety and replaced with the following: ""ORBCOMM Global Partnership Agreement" shall mean the limited partnership agreement dated as of June 30, 1993 between ORBCOMM and Teleglobe, as such partnership agreement may be amended and restated from time to time." (i) The definition of "ORBCOMM International Partnership Agreement" is deleted in its entirety and replaced with the following: ""ORBCOMM International Partnership Agreement" shall mean the limited partnership agreement dated as of June 30, 1993 between ORBCOMM and Teleglobe, as such partnership agreement may be amended and restated from time to time." (j) The definition of "ORBCOMM Option" is deleted in its entirety. (k) The definition of "ORBCOMM System Construction Agreement" shall be deleted in its entirety and replaced with the following: ""ORBCOMM System Construction Agreement" shall mean the ORBCOMM System Construction Agreement dated as of June 30, 1993 between ORBCOMM and ORBCOMM Global, as such agreement may be amended and restated from time to time." (l) The definition of "ORBCOMM U.S." shall be deleted in its entirety and replaced with the following: ""ORBCOMM USA" shall mean ORBCOMM USA, L.P., the limited partnership created pursuant to the ORBCOMM USA Partnership Agreement." (m) The definition of "ORBCOMM U.S. Partnership Agreement" shall be deleted in its entirety and replaced with the following: ""ORBCOMM USA Partnership Agreement" shall mean the limited partnership agreement dated as of June 30, 1993 between ORBCOMM and Teleglobe Mobile Agreement, as such partnership agreement may be amended and restated from time to time." (n) The definition of "Participation Percentage" shall be deleted in its entirety and replaced with the following: 3 4 ""Participation Percentage" shall have the meaning assigned thereto in the ORBCOMM Global Partnership Agreement, the ORBCOMM International Partnership Agreement or the ORBCOMM USA Partnership Agreement, as the context may require." (o) The definition of "Proprietary Information and Non-Competition Agreement" shall be deleted in its entirety and replaced with the following: ""Proprietary Information and Non-Competition Agreement" shall mean the Proprietary Information and Non-Competition Agreement dated as of June 30, 1993 among Orbital, ORBCOMM, Teleglobe, Teleglobe Mobile, ORBCOMM Global, ORBCOMM USA and ORBCOMM International, as such agreement may be amended and restated from time to time." (p) The definition of "Satellite and Launch Services Contract" shall be deleted in its entirety. (q) The definition of "System Agreement" shall be deleted in its entirety. (r) The definition of "System Charge and Marketing (U.S.) Agreement" shall be deleted in its entirety and replaced with the following: ""System Charge Agreement" shall mean the System Charge Agreement dated as of June 30, 1993 between ORBCOMM and ORBCOMM USA, as such agreement may be amended and restated from time to time." (s) The definitions of "System Charge Revision Date", "Technical Assistance Center" and "Teleglobe Mobile Option Effective Date" shall be deleted in their entirety. (t) The definition of "Unrecouped Capital Preference" shall be deleted in its entirety and replaced with the following: ""Unrecouped Capital Preference" shall have the meaning assigned thereto in the ORBCOMM Global Partnership Agreement, the ORBCOMM International Partnership Agreement or the ORBCOMM USA Partnership Agreement, as the context may require." (u) Any remaining references to "ORBCOMM Development" or "ORBCOMM U.S." set forth in Appendix C shall be deleted and replaced with "ORBCOMM Global" and "ORBCOMM USA", respectively. (v) The following new definitions shall be added to Appendix C in the appropriate alphabetical order: 4 5 ""Procurement Contract" shall mean the Procurement Contract dated September 12, 1995 between Orbital and ORBCOMM Global as such agreement may be amended and restated from time to time." ""Restatement Date" shall have the meaning ascribed thereto in Section 2.31 of the ORBCOMM Global Partnership Agreement." SECTION 4. Appendix D to the Master Agreement, which sets forth the Amended and Restated Agreement of Limited Partnership of ORBCOMM Global, L.P. is amended as follows: (a) The name of Appendix D shall be changed to be the "Amended and Restated Agreement of Limited Partnership of ORBCOMM Global, L.P." (b) Section 1.2 is hereby deleted in its entirety and replaced with the following: "Section 1.2. Name. The name of the Partnership shall be ORBCOMM Global, L.P., but the business of the Partnership may be conducted under any other name agreed to by the General Partners and, in such event, the General Partners shall notify the Partners of such name change promptly thereafter." (c) Section 2.19 is hereby deleted in its entirety and replaced with the following: "2.19. Monthly Cash Requirements. "Monthly Cash Requirements" for any month means the total cash amounts that the Partnership anticipates it will be obligated to pay for the next succeeding month, net of any anticipated cash receipts of the Partnership for such succeeding month." (d) Section 2.31 is hereby deleted in its entirety and replaced with the following: "2.31 Restatement Date. "Restatement Date" means September 12, 1995." (e) Section 3.2(b) is deleted in its entirety and replaced with the following: "(b) In accordance with the contribution schedule set forth in Section 3.5, and in addition to the capital contributions previously made pursuant to the Original Agreement or required to be made under Section 3.2(a), ORBCOMM hereby agrees to contribute in cash or in immediately available funds eighteen million three hundred twenty-five thousand one hundred forty-one dollars ($18,325,141) and (ii) Teleglobe Mobile hereby agrees to contribute in cash or in immediately available funds seventy- four million five hundred twenty-five thousand dollars ($74,525,000)." (f) Sections 3.2(c), (d) and (e) are deleted in their entirety. 5 6 (g) Section 3.3 shall be amended to insert the following at the end of such section: "In addition to the foregoing, in the event ORBCOMM fails to fulfill a Capital Obligation and fails to cure such failure within thirty (30) days after receiving notice from Teleglobe Mobile or any other General Partner, Orbital shall not be entitled to receive any portion of the incentive fees remaining to be paid pursuant to Article 14 of the Procurement Contract." (h) Section 3.5 is deleted in its entirety and replaced with the following: "3.5 Contribution Schedule. The Partners agree to contribute to the Partnership the amounts required to be contributed by them under Section 3.2(b) in cash or in immediately available funds in accordance with the following schedule: (a) On the Restatement Date, Teleglobe Mobile shall contribute to the Partnership an amount equal to twenty million dollars ($20,000,000); (b) Thereafter, the contributions required to be made pursuant to Section 3.2(b) shall be made as follows: each month ORBCOMM shall contribute an amount equal to fifty percent of the Monthly Cash Requirements for such month, and Teleglobe Mobile shall contribute an amount equal to the balance of the Monthly Cash Requirements for such month, until such time as the sums of ORBCOMM's and Teleglobe Mobile's contributions in cash or in immediately available funds made pursuant to this Section 3.5(b) equals twenty million dollars ($20,000,000); (c) Thereafter, the contributions required to be made pursuant to Section 3.2(b) shall be made as follows: each month ORBCOMM shall contribute an amount equal to the product of (i) eight million three hundred twenty-five thousand one hundred forty-one dollars ($8,325,141) divided by fifty-two million eight hundred fifty thousand one hundred forty-one dollars ($52,850,141) and (ii) the Monthly Cash Requirements for such month, and Teleglobe Mobile shall contribute an amount equal to the balance of the Monthly Cash Requirements for such month, until such time as the sums of ORBCOMM's and Teleglobe Mobile's contributions in cash or in immediately available funds made pursuant to this Section 3.5 equals the amount required to be contributed by each Partner required by Section 3.2(b); (i) Section 3.6 is hereby deleted in its entirety and replaced with the following: 6 7 "3.6. Loans. (a) Optional Loans. Any General Partner shall have the right to make a loan of cash to the Partnership at any time on such terms as such General Partner may determine; provided, however, that in no event shall any such optional loan be secured by Partnership assets, bear interest or original issue discount, be with recourse to any Partner or replace any Partner's obligations to make capital contributions pursuant to this Section 3. (b) Stock Option Plan Loans. To the extent the Partnership has agreed to reimburse ORBCOMM for the costs paid by ORBCOMM pursuant to Section 6.06 of the Orbital Communications Corporation 1992 Stock Option Plan (including the payment by ORBCOMM of withholding taxes with respect to the exercise of stock options) in purchasing stock acquired by employees or former employees of the Partnership, ORBCOMM USA or ORBCOMM International (the "Stock Option Plan Costs"), ORBCOMM agrees to provide to the Partnership a loan in the amount of the Stock Option Plan Costs paid prior to January 1, 2001 (but only to the extent that such Stock Option Costs have been paid with respect to options granted prior to the Restatement Date). Such loan shall bear interest at the rate of eight per cent (8%) per annum and the principal and interest of such loan shall be repaid in whole or in part at such time as there is Partnership cash on hand available for distribution to the Partners, with the balance being repaid in three equal annual installments commencing on January 1, 2001 and ending on January 1, 2003." (j) Section 3.7 is hereby deleted in its entirety and replaced with the following: "3.7 Additional Capital Contributions. If the Partnership shall require additional capital contributions in excess of one hundred fifty-nine million eight hundred thousand dollars ($159,800,000), each Partner shall have the opportunity to contribute in cash or immediately available funds an amount equal to such excess multiplied by such Partner's Participation Percentage. Any such contribution shall increase the contributing Partner's Capital Preference in accordance with Section 3.1. If either Partner declines to make a contribution pursuant to the preceding sentence, then: (a) The other Partner shall be entitled to contribute the amount so declined (in addition to any amount such Partner is entitled to contribute pursuant to the preceding sentence), and (b) The Partners' Participation Percentages shall be adjusted as follows: (i) ORBCOMM's Participation Percentage shall be adjusted so as to equal the percentage equal to the quotient of (x) ORBCOMM's Capital Preference plus nine million two hundred fifty thousand dollars ($9,250,000), divided by (y) the aggregate Capital Preferences of the 7 8 Partners, both calculated after taking into account any additional capital contributions pursuant to this Section 3.7 plus nine million two hundred fifty thousand dollars ($9,250,000); and (ii) Teleglobe Mobile's Participation Percentage shall be adjusted so as to equal one hundred per cent (so adjusted) (100%) minus ORBCOMM's Participation Percentage (so adjusted)." (k) Section 6.1(l) is hereby deleted in its entirety and replaced with the following: "(l) Appoint or remove officers to the Partnership." (l) A new Section 6.3(c) is added following Section 6.3(b) that reads as follows: "(c) In the event that a Majority in Interest of the General Partners, each acting in the best interests of the Partnership, shall be unable to agree on exercising or enforcing the rights of the Partnership under the Procurement Agreement including, without limitation, the rights to exercise the options thereunder, to stop work, to request changes and to send notices to preserve or exercise any such rights, then the President of the Partnership shall decide on the appropriate action with respect to such rights, and the Partnership shall then act upon such decision." (m) Section 6.6 is deleted in its entirety and replaced with the following: "6.6 Designation of Officers. Subject to Section 6.1(l), officers of the Partnership shall be nominated by the President of the Partnership and elected by the General Partners and shall exercise such authority as they are granted by the General Partners. If an officer is an employee of a General Partner, the Partnership will promptly reimburse such General Partner the pro rata share of expenses, including compensation and overhead, attributable to such officer of the Partnership by reference to the share of his or her total time spent upon Partnership operations. Without limiting the foregoing, the General Partners shall, no later than promptly following the Restatement Date, appoint one or more officers to have such authority as the General Partners determine to be appropriate to act for the Partnership with respect to the Construction Contracts after the Restatement Date." (n) Section 6.7 is deleted in its entirety and replaced with the following: "6.7 Removal of Officers. Any officer of the Partnership may be removed at any time and for any reason by approval or written consent of the General Partners. Any officer removed pursuant to this Section shall remain entitled to exculpation and indemnification from the Partnership pursuant to Section 7.3 with respect to any matter arising prior to his or her removal." 8 9 (o) Section 6.10 is deleted in its entirety and replaced with the following: "6.10 [RESERVED]." (p) Section 11.1 is amended to provide that copies of notices to be delivered to Teleglobe Mobile shall be sent c/o Teleglobe at the address set forth therein to the attention of the Executive Vice President, Corporate Development and Corporate Secretary. (q) A new Section 12.11 is added after Section 12.10 that reads as follows: "12.11. Dispute Resolution. Any controversy or claim that may arise under, out of, in connection with or relating to this Agreement shall be resolved in accordance with Section 13.4 of the Master Agreement." (r) All remaining references to "ORBCOMM U.S." shall be deleted and replaced with "ORBCOMM USA". SECTION 5. A new Section 4.1(h) is added to the Master Agreement following Section 4.1(g) that reads as follows: "(h) Transfer of ORBCOMM Employees. By January 1, 1996, transfer all of the employees of ORBCOMM to ORBCOMM Global, ORBCOMM USA or ORBCOMM International, as the case may be. SECTION 6. A new Section 4.4 is added to the Master Agreement following Section 4.3 that reads as follows: "4.4 Affirmative Covenants of the Partners. Each of ORBCOMM and Teleglobe Mobile covenant and agree that the headquarters facilities for ORBCOMM Global shall be relocated from 21700 Atlantic Boulevard, Dulles Virginia to another facility upon the approval by the general partners of ORBCOMM Global of a capital budget and plan for such relocation. The President of ORBCOMM Global shall submit to each of its general partners for their approval a capital expenditure budget and plan for such relocation, which approval by such general partners shall not be unreasonably withheld. The fact that the Dulles facility may be less expensive shall not be a basis for withholding approval of a proposed relocation plan and budget if such plan and budget are otherwise reasonable and consistent with applicable market requirements and conditions." 9 10 SECTION 7. Article V of the Master Agreement is hereby amended and modified as follows: (a) Section 5.2(a) of the Master Agreement shall be deleted in its entirety and replaced with the following: "(a) The ORBCOMM Global Partnership Agreement shall, without any action by the partners of ORBCOMM Global, be amended and restated in its entirety as set forth in Appendix D." (b) Sections 5.2(d), 5.2(e) and 5.2(f) of the Master Agreement are deleted in their entirety. (c) Section 5.3 of the Master Agreement is deleted in its entirety and replaced with the following: "5.3 ORBCOMM System FCC Licenses. Orbital and ORBCOMM jointly and severally represent and warrant to Teleglobe and Teleglobe Mobile that, upon the exercise of the Teleglobe Mobile Option, ORBCOMM has obtained all FCC licenses required to construct the Phase 1B System except as specified in Schedule 5.3." SECTION 8. Section 9.2 of the Master Agreement shall be deleted in its entirety and replaced with the following: "9.2 Orbital Guaranty. Orbital hereby unconditionally and absolutely guarantees the full and punctual payment of all of ORBCOMM's payment obligations under the Definitive Agreements to which it is a party . Upon failure of ORBCOMM to pay any of its payment obligations under any of the Definitive Agreements to which it is a party, Orbital shall on demand pay such obligation in the manner specified in such Definitive Agreement and none of the beneficiaries of this guaranty shall have any obligation to proceed to first preserve, use or exhaust any right or remedy it may have against ORBCOMM." SECTION 9. Section 10 of the Master Agreement is amended and modified as follows: (a) Sections 10.1 and 10.2 are hereby deleted in their entirety and replaced with the following: "10.1 Change of Control. (a) In the event of a Change of Control of Orbital or Teleglobe, as the case may be (the "Change of Control Party"), Teleglobe Mobile or ORBCOMM, as the case may be (the "Non-Change of Control Party"), shall have the option to: 10 11 (i) for a period of 180 days from such Change of Control (the "Option Period"), cause the Change of Control Party to purchase the Non-Change of Control Party's interest in each of ORBCOMM Global, ORBCOMM USA and ORBCOMM International at an aggregate price equal to the greater of (A) the Non-Change of Control Party's aggregate Unrecouped Capital Preferences in such partnerships and (B) the Non-Change of Control Party's direct and indirect Participation Percentage in each such partnership multiplied by the Fair Market Value of each such partnerships as determined in accordance with Section 10.1(d); or (ii) cause the General Partners of ORBCOMM Global to adopt a resolution providing that in the event there is a deadlock on a matter requiring the approval of a Majority in Interest of the Partners, the President of ORBCOMM Global shall be entitled to decide on such matter by way of a casting vote or otherwise, as deemed appropriate by the Non-Change of Control Party, notwithstanding any contrary provision set forth in the ORBCOMM Global Partnership Agreement. Such resolution shall be automatically deemed adopted by the General Partners upon the written election by the Non-Change of Control Party to require that such resolution be adopted. (b) The Non-Change of Control Party shall exercise the Section 10.1(a)(i) option by delivering to the Change of Control Party a written notice of exercise ("the "Option Exercise Notice") within the Option Period. (c) For purposes of Section 10.1(a), (i) a "Change of Control" shall be deemed to occur if a Person or "group," as such term is used in Rule 13d-5(b)(1) or 14(d)(2) under the Securities Exchange Act, becomes the beneficial owner of more than 50% of the voting power represented by Orbital's or Teleglobe's , as the case may be, outstanding securities; provided however, that a Change of Control shall not be deemed to have occurred with respect to (A) Orbital if the Person who acquires such securities is Teleglobe or an Affiliate of Teleglobe and (B) Teleglobe if the Person or group who acquires such securities is or includes as its largest member (x) Orbital or an Affiliate of Orbital or (y) a Person that owns, directly or indirectly, fifteen percent or more of the voting power represented by outstanding securities of Teleglobe as of the Restatement Date, or an affiliate of such Person. (d) "Fair Market Value" shall mean the aggregate total value of ORBCOMM Global, ORBCOMM USA and ORBCOMM International as of the date of the Change of Control valued on the basis of an arms' length transaction between a willing buyer and a willing seller involving the sale of all partnership interests, determined in the manner specified in this Section 10.1(d). Any determination of Fair Market Value pursuant to this Section 10.1 shall be final, binding and conclusive on the parties. Fair Market Value shall be determined as follows: 11 12 (i) Promptly after delivery of the Option Exercise Notice, Orbital and Teleglobe shall attempt in good faith to agree on the Fair Market Value. If Orbital and Teleglobe agree on a value (regardless of when such agreement is reached, and 12 13 notwithstanding the pendency of appraisal efforts pursuant to this Section), such value shall be the Fair Market Value. (ii) If Orbital and Teleglobe fail to reach such an agreement within one month after the delivery of the Option Exercise Notice, they shall each select an independent appraiser who is one of the "Big Six" United States accounting firms . If either Orbital or Teleglobe shall fail to select an appraiser within twenty (20) days after the expiration of the one-month period referred to in the preceding sentence, the Fair Market Value shall be determined by the appraiser selected by the other. Following such selection, each such appraiser shall determine the aggregate total value of ORBCOMM Global, ORBCOMM USA and ORBCOMM International as quickly as practicable, and in any event within forty-five (45) days after the last appraiser has been selected, and give notice of such determination to Orbital and Teleglobe. If either appraiser shall fail to make such a determination of value within forty-five days after the last appraiser has been selected, the Fair Market Value shall be the value determined by the other appraiser. If the greater of the two values determined by such two appraisers is within 10% of the lesser of such two values, the Fair Market Value shall be the average of such two values. (iii) If the greater of the two values determined by such two appraisers is not within 10% of the lesser of such two values, such two appraisers shall select a third independent appraiser who shall be one of the "Big Six" United States accounting firms and who shall as quickly as practicable, but in no event later than forty-five days after appointment, select one of the values determined by the first two appraisers as the value that more closely approximates the correct fair market value, and such value selected by the third appraiser shall be Fair Market Value. (iv) Orbital and Teleglobe agree to cooperate with one another and with the appraisers in determining Fair Market Value. Orbital and Teleglobe shall each bear its own out-of-pocket expenses incurred in connection with the determination of Fair Market Value, including without limitation the fees and expenses of the appraiser selected by each, and one-half of the fees and expenses of the third appraiser, if any." (b) A new Section 10.2 is added to the Master Agreement following Section 10.2 that reads as follows: "10.2 Transfer of FCC Licenses for the ORBCOMM System. Subject to the receipt of all necessary governmental approvals, including all approvals required under the rules and regulations of the FCC, upon the Change of Control of Orbital, Orbital agrees to cause ORBCOMM to transfer to ORBCOMM USA at no additional cost any and all FCC licenses then held by ORBCOMM relating to the construction, launch or operation of the ORBCOMM System." 13 14 SECTION 10. Section 13.1 of the Master Agreement is amended to provide that copies of notices to be delivered to Orbital shall be sent to the attention of the Executive Vice President and General Manager/Communications and Information Systems Group and that copies of notices to be delivered to Teleglobe, and Teleglobe Mobile c/o Teleglobe, shall be sent to the attention of the Executive Vice President, Corporate Development and Corporate Secretary. SECTION 11. Section 13.2 of the Master Agreement is amended to delete the phrase "and that Teleglobe shall bear half of the fees and expenses of Ropes & Gray incurred by Orbital in assisting in structuring the transactions contemplated by and preparing the Definitive Agreements up to a maximum of U.S.$75,000" set forth therein. SECTION 12. Section 13.4(a) is deleted in its entirety and replaced with the following: "Any controversy or claim that may arise under, out of, in connection with or relating to this Agreement or any Definitive Agreement (other than the Procurement Contract) or any breach hereof or thereof, shall be submitted to a representative management panel of Orbital and Teleglobe, provided that in the case of the ORBCOMM System Construction Agreement, the System Charge Agreement and the International System Charge Agreement, ORBCOMM Global shall be entitled to representation on such management panel. Each of Orbital and Teleglobe (and where applicable, ORBCOMM Global) may appoint up to two individuals to such panel. The members of such panel shall be appointed by each party within ten (10) days of the receipt by either Orbital or Teleglobe (or where applicable, ORBCOMM Global) of notice of the existence of such controversy or claim. The unanimous decision and agreement of such panel shall resolved the controversy or claim. If the panel is unable to resolve such matter within thirty (30) days of the submission of such controversy or claim to such panel, it shall be brought before the Presidents of Orbital and Teleglobe (and where applicable, ORBCOMM Global) for final resolution. If such individuals are unable to resolve the matter within thirty (30) days of the submission of such controversy or claim to such individuals, either Orbital or Teleglobe may remove the controversy or claim for arbitration in accordance with Section 13.4(b)." SECTION 13. Appendices G, H, I and J of the Master Agreement are deleted in their entirety. SECTION 14. Any remaining references to "ORBCOMM Development" or "ORBCOMM U.S." set forth in the Master Agreement shall be deleted and replaced with "ORBCOMM Global" and "ORBCOMM USA", respectively. 14 15 SECTION 15. The parties agree and agree on behalf of each of ORBCOMM Global, ORBCOMM USA and ORBCOMM International that, upon the restatement of any of the Definitive Agreement to incorporate all the amendments thereto executed prior to or concurrently with the Restatement Date into one agreement, counsel representing Teleglobe and Orbital shall be entitled to correct any and all inadvertent or typographical errors and make any inconsistent terms consistent. IN WITNESS WHEREOF, the parties have executed this Amendment No. 3 to the Master Agreement as of the day and year first above written. ORBITAL SCIENCES CORPORATION By: /s/ Bruce W. Ferguson ------------------------------------ Name: Bruce W. Ferguson Title: Executive Vice President and General Manager/Communications and Information Systems Group ORBITAL COMMUNICATIONS CORPORATION By: /s/ Alan L. Parker ----------------------------------- Name: Alan L. Parker Title: President TELEGLOBE INC. By: /s/ Guthrie J. Stewart ----------------------------------- Name: Guthrie J. Stewart Title: Executive Vice President, Corporate Development and Corporate Secretary 15 16 TELEGLOBE MOBILE PARTNERS By: Teleglobe Mobile Investment Inc., its Managing Partner By: /s/ Guthrie J. Stewart ----------------------------------- Name: Guthrie J. Stewart Title: Chairman of the Board and Chief Executive Officer 16 EX-10.16.1 10 PARTNERSHIP AGREEMENT (AMENDMENT 1). 1 EXHIBIT 10.16.1 AMENDMENT NO. 1 TO AGREEMENT OF LIMITED PARTNERSHIP OF ORBCOMM U.S. PARTNERS, L.P. This Amendment No. 1 to the Agreement of Limited Partnership of ORBCOMM U.S. Partners, L.P. (the "Amendment") is made and entered into as of this 12th day of September 1995 by and between Orbital Communications Corporation ("ORBCOMM ") and ORBCOMM Global, L.P. ("ORBCOMM Global"). W I T N E S S E T H WHEREAS, Orbital Communications Corporation (a portion of whose interest in ORBCOMM USA, L.P. (the "Partnership") was transferred to ORBCOMM Global upon the exercise of the Teleglobe Mobile Option) and Teleglobe Mobile (all of whose interest in the Partnership was transferred to ORBCOMM Global upon exercise of the Teleglobe Mobile Option) previously entered into the Agreement of Limited Partnership of ORBCOMM U.S. Partners L.P. (the "Agreement"); WHEREAS, the name of the Partnership was changed from ORBCOMM U.S. Partners, L.P. to ORBCOMM USA, L.P. pursuant to the filing with the Delaware Secretary of State of a Certificate of Amendment to the Agreement; and WHEREAS, ORBCOMM and ORBCOMM Global desire to amend and modify the Agreement. NOW, THEREFORE, the parties agree as follows: SECTION 1. Terms used but not otherwise defined herein shall have the meanings assigned thereto in the Agreement. SECTION 2. The name of the Agreement shall be changed from the "Agreement of Limited Partnership of ORBCOMM U.S. Partners, L.P." to the "Agreement of Limited Partnership of ORBCOMM USA, L.P.". SECTION 3. The reference to (a) "Teleglobe Mobile Partners, a Delaware general partnership ("Teleglobe Mobile")" and (b) "Teleglobe Mobile" set forth in the introduction to the Agreement shall be deleted and replaced with "ORBCOMM Global, L.P., a Delaware limited partnership ("ORBCOMM Global")" and "ORBCOMM Global", respectively. 2 SECTION 4. The second whereas clause of the Agreement shall be deleted in its entirety and replaced with the following: "WHEREAS, the Partnership, the Partners, Orbital Sciences Corporation, a Delaware corporation ("Orbital"), Teleglobe Inc., a Canadian corporation ("Teleglobe"), Teleglobe Mobile Partners, a Delaware general partnership ("Teleglobe Mobile"), and ORBCOMM International Partners, L.P., a Delaware limited partnership ("ORBCOMM International"), are entering into certain agreements for the development, construction, operation and marketing of the ORBCOMM System ( as hereinafter defined); and" SECTION 5. Section 1.2 of the Agreement is deleted in its entirety and replaced with the following: "Section 1.2. Name. The name of the Partnership shall be ORBCOMM USA, L.P., but the business of the Partnership may be conducted under any other name agreed to by the General Partners and, in such event, the General Partners shall notify the Partners of such name change promptly thereafter." SECTION 6. Section 2.15 of the Agreement is deleted in its entirety and replaced with the following: "2.15. Majority in Interest. "Majority in Interest" of the General Partners means a General Partner or General Partners having Participation Percentages aggregating at least a majority of the Participation Percentages held by all General Partners, provided that for purposes of determining a Majority in Interest of the General Partners each general partner of ORBCOMM Global shall be treated as a General Partner of the Partnership holding directly a fraction of ORBCOMM Global's Participation Percentage in the Partnership, such fraction being determined by reference to the ORBCOMM Global Partnership Agreement, as the same may be amended or restated from time to time." SECTION 7. Section 2.31 of the Agreement is deleted in its entirety and replaced with the following: "2.31. Super-Majority in Interest. "Super-Majority in Interest" of the General Partners means a General Partner or General Partners having Participation Percentages aggregating more than eighty-six per cent (86%) of the Participation Percentages held by all General Partners, provided that for purposes of determining a Super-Majority in Interest of the General Partners each general partner of ORBCOMM Global shall be treated as a General Partner of the Partnership holding directly a fraction of ORBCOMM Global's Participation Percentage in the Partnership, such fraction being - 2 - 3 determined by reference to the ORBCOMM Global Partnership Agreement, as the same may be amended or restated from time to time." SECTION 8. Section 3.1 of the Agreement shall be deleted in its entirety and replaced with the following: "3.1. Partnership Interests. The Partnership Interests shall be expressed in terms of the Partners' Participation Percentages and Capital Preferences. The Participation Percentage of ORBCOMM Global shall be ninety-eight per cent (98%), the Participation Percentage of ORBCOMM shall be two per cent (2%), and the Capital Preference of each Partner as of any date shall be equal to the amount actually contributed by such Partner in cash or in immediately available funds to the Partnership through such date (including any amount contributed in exchange for Participation Percentages), provided that any amounts contributed to the Partnership by Teleglobe Mobile prior to the exercise of the Teleglobe Mobile Option shall be deemed for purposes of this Agreement to have been made by ORBCOMM Global. The Partners shall be required to make the capital contributions set forth in Section 3.2 in exchange for their Partnership Interests and shall be entitled to receive the distributions set forth in Sections 4 and 10 in respect of such Partnership Interests." SECTION 9. Section 3.2 of the Agreement shall be deleted in its entirety and replaced with the following: "Section 3.2. Capital Contributions. As of the Restatement Date, ORBCOMM shall be deemed to have contributed two hundred dollars ($200) and ORBCOMM Global shall be deemed to have contributed nine thousand eight hundred dollars ($9,800) in cash or in immediately available funds." SECTION 10. Section 6.1(l) of the Agreement shall be deleted in its entirety and replaced with the following: "(l) appoint or remove officers of the Partnership who shall be nominated by the President of ORBCOMM Global, including a President of the Partnership." " SECTION 11. Section 6.6 of the Agreement shall be deleted in its entirety and replaced with the following: "6.6 Designation of Officers. Subject to Section 6.1(l), officers of the Partnership shall be nominated by the President of the Partnership and elected by the General Partners and shall exercise such authority as they are granted by the General Partners. If an officer is an employee of a General Partner, the Partnership will promptly reimburse such General Partner the pro rata share of expenses, including - 3 - 4 compensation and overhead, attributable to such officer of the Partnership by reference to the share of his or her total time spent on Partnership Operations." SECTION 12. The first sentence of Section 6.7 of the Agreement shall be deleted in its entirety and replaced with the following: "Any officer of the Partnership may be removed at any time and for any reason by approval or written consent of the General Partners." SECTION 13. The reference to "ORBCOMM Development" set forth in Section 7.4 of the Agreement shall be deleted and replaced with "ORBCOMM Global". SECTION 14. The reference to "ORBCOMM" set forth in Section 8.1 of the Agreement shall be deleted and replaced with "ORBCOMM Global". SECTION 14. Section 9.2 of the Agreement shall be deleted in its entirety and replaced with the following: "9.2. [RESERVED]" SECTION 16. The phrase "If to ORBCOMM, to Orbital Communications Corporation, 21700 Atlantic Boulevard, Dulles, Virginia 20166, Attention: President; if to Teleglobe Mobile to Teleglobe Mobile Partners, 1000, rue de La Gauchetiere ouest, Montreal, Quebec, Canada H3B 4X5, Attention: Vice-President, Legal Matters and Corporate Secretary" set forth in Section 11.1 of the Agreement shall be deleted as replaced with "If to ORBCOMM, to Orbital Communications Corporation, 21700 Atlantic Boulevard, Dulles, Virginia 20166, Attention: President; if to ORBCOMM Global, to ORBCOMM Global, L.P., 21700 Atlantic Boulevard, Dulles, Virginia 20166, Attention: President, with a copy to Teleglobe Inc., 1000, rue de La Gauchetiere ouest, Montreal, Quebec, Canada H3B 4X5, Attention: Executive Vice President, Corporate Development and Corporate Secretary." SECTION 17. A new section 12.11 is added to the Agreement after Section 12.10 that reads as follows: "12.11. Dispute Resolution. Any controversy or claim that may arise under, out of, in connection with or relating to this Agreement shall be resolved in accordance with Section 13.4 of the Master Agreement." - 4 - 5 SECTION 18. The signature block for Teleglobe Mobile Partners set forth in the Agreement shall be deleted in its entirety and replaced with the following: "ORBCOMM GLOBAL, L.P. By: Orbital Communications Corporation, General Partner By: -------------------------------- Name: Alan L. Parker Title: President By: Teleglobe Mobile Partners, General Partner By: Teleglobe Mobile Investment Inc., its Managing Partner By: ------------------------------- Name: Guthrie J. Stewart Title: Chairman of the Board and Chief Executive Officer" - 5 - 6 IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to the Agreement of Limited Partnership of ORBCOMM U.S. Partners, L.P. to be executed as of the day and year first above written. ORBCOMM GLOBAL, L.P. By: Orbital Communications Corporation, General Partner By: /s/ Alan L. Parker -------------------------------- Name: Alan L. Parker Title: President By: Teleglobe Mobile Partners, General Partner By: Teleglobe Mobile Investment Inc., its Managing Partner By: /s/ Guthrie J. Stewart ------------------------------------ Name: Guthrie J. Stewart Title: Chairman of the Board and Chief Executive Officer ORBITAL COMMUNICATIONS CORPORATION By: /s/ Alan L. Parker -------------------------------- Name: Alan L. Parker Title: President - 6 - EX-10.17.1 11 INTERNATIONAL PARTNERSHIP AGREEMENT (AMENDMENT 1). 1 EXHIBIT 10.17.1 AMENDMENT NO. 1 TO AGREEMENT OF LIMITED PARTNERSHIP OF ORBCOMM INTERNATIONAL PARTNERS, L.P. This Amendment No. 1 to the Agreement of Limited Partnership of ORBCOMM International Partners, L.P. (the "Amendment") is made and entered into as of this 12th day of September 1995 by and between Teleglobe Mobile Partners ("Teleglobe Mobile") and ORBCOMM Global, L.P. ("ORBCOMM Global"). W I T N E S S E T H WHEREAS, Orbital Communications Corporation (all of whose interest in ORBCOMM International Partners, L.P. (the "Partnership") was transferred to ORBCOMM Global upon the exercise of the Teleglobe Mobile Option) and Teleglobe Mobile (a portion of whose interest in the Partnership was transferred to ORBCOMM Global upon exercise of the Teleglobe Mobile Option) previously entered into the Agreement of Limited Partnership of ORBCOMM International Partners, L.P. (the "ORBCOMM International Partnership Agreement"); and WHEREAS, ORBCOMM Global and Teleglobe Mobile desire to amend and modify the ORBCOMM International Partnership Agreement. NOW, THEREFORE, the parties agree as follows: SECTION 1. Terms used but not otherwise defined herein shall have the meanings assigned thereto in the ORBCOMM International Partnership Agreement. SECTION 2. The reference to (a) "Orbital Communications Corporation, a Delaware corporation, ("ORBCOMM")" and (b) "ORBCOMM" set forth in the introduction to the ORBCOMM International Partnership Agreement shall be deleted and replaced with "ORBCOMM Global, L.P., a Delaware limited partnership ("ORBCOMM Global")" and "ORBCOMM Global", respectively. SECTION 3. The second whereas clause of the ORBCOMM International Partnership Agreement shall be deleted in its entirety and replaced with the following: "WHEREAS, the Partnership, the Partners, Orbital Sciences Corporation, a Delaware corporation ("Orbital"), Teleglobe Inc., a Canadian corporation ("Teleglobe"), Orbital Communications Corporation, a Delaware corporation ("ORBCOMM"), and ORBCOMM USA, L.P., a Delaware limited partnership ("ORBCOMM USA") are entering into certain agreements for the development, construction, operation and marketing of the ORBCOMM System ( as hereinafter defined); and" 2 SECTION 4. Section 2.15 of the ORBCOMM International Partnership Agreement is deleted in its entirety and replaced with the following: "2.15. Majority in Interest. "Majority in Interest" of the General Partners means a General Partner or General Partners having Participation Percentages aggregating at least a majority of the Participation Percentages held by all General Partners, provided that for purposes of determining a Majority in Interest of the General Partners each general partner of ORBCOMM Global shall be treated as a General Partner of the Partnership holding directly a fraction of ORBCOMM Global's Participation Percentage in the Partnership, such fraction being determined by reference to the ORBCOMM Global Partnership Agreement, as the same may be amended or restated from time to time." SECTION 5. Section 2.31 of the ORBCOMM USA Partnership Agreement is deleted in its entirety and replaced with the following: "2.31. Super-Majority in Interest. "Super-Majority in Interest" of the General Partners means a General Partner or General Partners having Participation Percentages aggregating more than eighty-six per cent (86%) of the Participation Percentages held by all General Partners, provided that for purposes of determining a Super-Majority in Interest of the General Partners each general partner of ORBCOMM Global shall be treated as a General Partner of the Partnership holding directly a fraction of ORBCOMM Global's Participation Percentage in the Partnership, such fraction being determined by reference to the ORBCOMM Global Partnership Agreement, as the same may be amended or restated from time to time." SECTION 6. Section 3.1 of the ORBCOMM International Partnership Agreement shall be deleted in its entirety and replaced with the following: "3.1. Partnership Interests. The Partnership Interests shall be expressed in terms of the Partners' Participation Percentages and Capital Preferences. The Participation Percentage of ORBCOMM Global shall be ninety-eight percent (98%), the Participation Percentage of Teleglobe Mobile shall be two percent (2%), and the Capital Preference of each Partner as of any date shall be equal to the amount actually contributed by such Partner in cash or in immediately available funds to the Partnership through such date (including any amount contributed in exchange for Participation Percentages), provided that any amounts contributed to the Partnership by ORBCOMM prior to the exercise of the Teleglobe Mobile Option shall be deemed for purposes of this Agreement to have been made by ORBCOMM Global. The Partners shall be required to make the capital contributions set forth in Section 3.2 in exchange for their Partnership Interests and shall be entitled to receive the distributions set forth in Sections 4 and 10 in respect of such Partnership Interests." - 2 - 3 SECTION 7. Section 3.2 of the ORBCOMM International Partnership Agreement shall be deleted in its entirety and replaced with the following: "Section 3.2. Capital Contributions. As of the Restatement Date, ORBCOMM Global shall be deemed to have contributed nine thousand eight hundred dollars ($9,800) and Teleglobe Mobile shall be deemed to have contributed two hundred dollars ($200) in cash or in immediately available funds." SECTION 8. Section 6.1(l) of the ORBCOMM International Partnership Agreement shall be deleted in its entirety and replaced with the following: "(l) appoint or remove officers of the Partnership who shall be nominated by the President of ORBCOMM Global, including a President of the Partnership and and a senior officer of the Partnership who shall report directly to the Presidentand be located in Montreal." SECTION 9. Section 6.6 is deleted in its entirety and replaced with the following: "6.6 Designation of Officers. Subject to Section 6.1(l), officers of the Partnership shall be nominated by the President of the Partnership and elected by the General Partners and shall exercise such authority as they are granted by the General Partners. If an officer is an employee of a General Partner, the Partnership will promptly reimburse such General Partner the pro rata share of expenses, including compensation and overhead, attributable to such officer of the Partnership by reference to the share of his or her total time spent upon Partnership operations." SECTION 10. The first sentence of Section 6.7 of the ORBCOMM International Partnership Agreement shall be deleted in its entirety and replaced with the following: "Any officer of the Partnership may be removed at any time and for any reason by approval or written consent of the General Partners." SECTION 11. The references to "ORBCOMM Development" and to "ORBCOMM U.S." set forth in Section 7.4 of the ORBCOMM International Partnership Agreement shall be deleted and replaced with "ORBCOMM Global" and ORBCOMM USA", respectively. SECTION 12. The reference to "ORBCOMM" set forth in Section 8.1 of the ORBCOMM International Partnership Agreement shall be deleted and replaced with "ORBCOMM Global." - 3 - 4 SECTION 13. Section 9.2 of the ORBCOMM International Partnership Agreement shall be deleted in its entirety and replaced with the following: "9.2. [RESERVED]" SECTION 14. The phrase "If to ORBCOMM, to Orbital Communications Corporation, 21700 Atlantic Boulevard, Dulles, Virginia 20166, Attention: President; if to Teleglobe Mobile to Teleglobe Mobile Partners, 1000, rue de La Gauchetiere ouest, Montreal, Quebec, Canada H3B 4X5, Attention: Vice-President, Legal Matters and Corporate Secretary" set forth in Section 11.1 of the ORBCOMM International Partnership Agreement shall be deleted as replaced with "If to ORBCOMM Global, to ORBCOMM Global, L.P., 21700 Atlantic Boulevard, Dulles, Virginia 20166, Attention: President, with a copy to Orbital, 21700 Atlantic Boulevard, Dulles, Virginia 20166, Attention: Executive Vice President and General Manager/Communications and Information Systems Group; if to Teleglobe Mobile, to Teleglobe Mobile Partners c/o Teleglobe Inc., 1000, rue de La Gauchetiere ouest, Montreal, Quebec, Canada H3B 4X5, Attention: Executive Vice President, Corporate Development and Corporate Secretary." SECTION 15. A new section 12.11 is added to the ORBCOMM International Partnership Agreement after Section 12.10 that reads as follows: "12.11. Dispute Resolution. Any controversy or claim that may arise under, out of, in connection with or relating to this Agreement shall be resolved in accordance with Section 13.4 of the Master Agreement." SECTION 16. The signature block for Orbital Communications Corporation set forth in the ORBCOMM International Partnership Agreement shall be deleted in its entirety and replaced with the following: "ORBCOMM GLOBAL, L.P. By: Orbital Communications Corporation, General Partner By: -------------------------------- Name: Alan L. Parker Title: President By: Teleglobe Mobile Partners, General Partner - 4 - 5 By: Teleglobe Mobile Investment Inc., its Managing Partner By: ------------------------------- Name: Guthrie J. Stewart Title: Chairman of the Board and Chief Executive Officer" - 5 - 6 IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to Agreement of Limited Partnership of ORBCOMM International Partnership Agreement to be executed as of the day and year first above written. ORBCOMM GLOBAL, L.P. By: Orbital Communications Corporation, General Partner By: /s/ Alan L. Parker ------------------------------- Name: Alan L. Parker Title: President By: Teleglobe Mobile Partners, General Partner By: Teleglobe Mobile Investment Inc., its Managing Partner By: /s/ Guthrie J. Stewart ------------------------------- Name: Guthrie J. Stewart Title: Chairman of the Board and Chief Executive Officer TELEGLOBE MOBILE PARTNERS By: Teleglobe Mobile Investment Inc., its Managing Partner By: /s/ Guthrie J. Stewart ------------------------------- Name: Guthrie J. Stewart Title: Chairman of the Board and Chief Executive Officer - 6 - EX-10.18.1 12 NON-COMPETITION AGREEMENT (AMENDMENT 1). 1 EXHIBIT 10.18.1 AMENDMENT NO. 1 TO PROPRIETARY AND NON-COMPETITION AGREEMENT This Amendment No. 1 to the Proprietary and Non-Competition Agreement ("Amendment No. 1") is made and entered into as of this 12th day of September 1995 by and among Orbital Sciences Corporation, a Delaware corporation ("Orbital"), Orbital Communications Corporation, a Delaware corporation ("ORBCOMM"), Teleglobe Inc., a Canadian corporation ("Teleglobe"), Teleglobe Mobile Partners, a Delaware general partnership ("Teleglobe Mobile"), ORBCOMM Global, L.P., a Delaware limited partnership ("ORBCOMM Global"), ORBCOMM USA, L.P., a Delaware limited partnership ("ORBCOMM USA"), and ORBCOMM International Partners, L.P., a Delaware limited partnership ("ORBCOMM International"). W I T N E S S E T H WHEREAS, Orbital, ORBCOMM, Teleglobe, Teleglobe Mobile, ORBCOMM Global, ORBCOMM USA and ORBCOMM International previously entered into the Proprietary and Non-Competition Agreement dated as of June 30, 1993 (the "Proprietary and Non-Competition Agreement"); and WHEREAS, the parties desire to amend and modify the Proprietary and Non-Competition Agreement. NOW, THEREFORE, the parties agree as follows: SECTION 1. Terms used but not otherwise defined herein shall have the meanings assigned thereto in the Proprietary and Non-Competition Agreement. SECTION 2. Section 3.1(a) of the Proprietary and Non-Competition Agreement is deleted in its entirety and replaced with the following: "(a) except in connection with the fulfillment of their respective obligations under any of the Definitive Agreements, carry on, engage, participate, invest or have an equity interest in, or have any financial interest in the marketing, construction, development or management of any business or enterprise that competes with Orbital or any of its Affiliates or Teleglobe or any of its Affiliates, as the case may be, in offering commercial low-Earth orbit non-voice satellite communications services operating in the 137-150 MHz band or such other frequency allocated to "little LEO" mobile satellite services below 1 GHz; ; provided, however, that notwithstanding the foregoing, ORBCOMM and Orbital shall be permitted to (i) sell satellites, launch vehicles, launch services and 2 communication services to non-commercial entities without limitation and (ii) provide to all other entities up to two satellites every two years and launch vehicles or launch services for up to two satellites every two years; or" SECTION 3. Section 3.1(b) of the Proprietary and Non-Competition Agreement is amended and modified by replacing the period at the end of the paragraph with "; or". SECTION 4. A new Section 3.1(c) is added to the Proprietary and Non-Competition Agreement following Section 3.1(b) that reads as follows: "(c) employ any person to work on or represent the ORBCOMM System who will also work on or represent another mobile communications system, whether in a technical, marketing or other non-administrative capacity, without first notifying the President of ORBCOMM Global of such person's proposed duties and the duties such person may have with respect to such other mobile communications projects." IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to the Proprietary and Non-Competition Agreement as of the day and year first above written. ORBITAL SCIENCES CORPORATION By: /s/ Bruce W. Ferguson ------------------------------- Name: Bruce W. Ferguson Title: Executive Vice President and General Manager/Communications and Information Systems Group ORBITAL COMMUNICATIONS CORPORATION By: /s/ Alan L. Parker ------------------------------- Name: Alan L. Parker Title: President TELEGLOBE INC. By: /s/ Guthrie J. Stewart ------------------------------- Name: Guthrie J. Stewart Title: Executive Vice President, Corporate + Development and Corporate Secretary 2 3 TELEGLOBE MOBILE PARTNERS By: Teleglobe Mobile Investment Inc., its Managing Partner By: /s/ Guthrie J. Stewart ------------------------------- Name: Guthrie J. Stewart Title: Chairman of the Board and Chief Executive Officer ORBCOMM GLOBAL, L.P. By: Orbital Communications Corporation, General Partner By: /s/ Alan L. Parker ------------------------------ Name: Alan L. Parker Title: President By: Teleglobe Mobile Partners, General Partner By: Teleglobe Mobile Investment Inc., its Managing Partner By: /s/ Guthrie J. Stewart ------------------------------- Name: Guthrie J. Stewart Title: Chairman of the Board and Chief Executive Officer 3 4 ORBCOMM USA, L.P. By: Orbital Communications Corporation, General Partner By: /s/ Alan L. Parker ------------------------------- Name: Alan L. Parker Title: President By: Teleglobe Mobile Partners, General Partner By: Teleglobe Mobile Investment Inc., its Managing Partner By: /s/ Guthrie J. Stewart ------------------------------- Name: Guthrie J. Stewart Title: Chairman of the Board and Chief Executive Officer 4 5 ORBCOMM INTERNATIONAL PARTNERS, , L.P. By: Orbital Communications Corporation, General Partner By: /s/ Alan L. Parker ------------------------------- Name: Alan L. Parker Title: President By: Teleglobe Mobile Partners, General Partner By: Teleglobe Mobile Investment Inc., its Managing Partner By: /s/ Guthrie J. Stewart ------------------------------- Name: Guthrie J. Stewart Title: Chairman of the Board and Chief Executive Officer 5 EX-10.19 13 SUPPORT AGREEMENT. 1 EXHIBIT 10.19 EXHIBIT 2.3 SUPPORT AGREEMENT MEMORANDUM OF AGREEMENT made as of the 17th day of November, 1995. B E T W E E N: ORBITAL SCIENCES CORPORATION, a corporation existing under the laws of the State of Delaware, (hereinafter referred to as "Orbital"), - and - MACDONALD DETTWILER HOLDINGS INC. (FORMERLY KNOWN AS 3173623 CANADA INC.), a corporation existing under the laws of Canada. (hereinafter referred to as "Corporation"). WHEREAS pursuant to a combination agreement dated as of August 31, 1995 (the "Combination Agreement") by and between Orbital, the Corporation and MacDonald, Dettwiler and Associates Ltd. ("MDA") the parties agreed that on the Effective Date (as defined in the Combination Agreement), Orbital and the Corporation would execute and deliver a Support Agreement containing the terms and conditions set forth in Exhibit 2.3 to the Combination Agreement together with such other terms and conditions as may be agreed to by the parties to the Combination Agreement acting reasonably; AND WHEREAS pursuant to an arrangement (the "Arrangement") effected by articles of arrangement filed pursuant to the Canada Business Corporations Act on November ______, 1995, each issued and outstanding common share of MDA (an "MDA Common Share") was exchanged directly or indirectly with the Corporation for 0.3607 issued and outstanding Exchangeable Shares of the Corporation (the "Exchangeable Shares"); 2 - 2 - AND WHEREAS the aforesaid articles of arrangement set forth the rights, privileges, restrictions and conditions (collectively the "Exchangeable Share Provisions") attaching to the Exchangeable Shares; AND WHEREAS the parties hereto desire to make appropriate provision and to establish a procedure whereby Orbital will take certain actions and make certain payments and deliveries necessary to ensure that the Corporation will be able to make certain payments and to deliver or cause to be delivered shares of Orbital Common Shares in satisfaction of the obligations of the Corporation under the Exchangeable Share Provisions with respect to the payment and satisfaction of dividends, Liquidation Amounts, Retraction Prices and Redemption Prices all in accordance with the Exchangeable Share Provisions; NOW THEREFORE in consideration of the respective covenants in this agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties agree as follows: ARTICLE 1 DEFINITIONS AND INTERPRETATION .1 DEFINED TERMS. Each term denoted herein by initial capital letters and not otherwise defined herein shall have the meaning ascribed thereto in the Exchangeable Share Provisions, unless the context requires otherwise. .2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this agreement into articles, sections and paragraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this agreement. .3 NUMBER, GENDER, ETC. Words importing the singular number only shall include the plural and vice versa. Words importing the use of any gender shall include all genders. .4 DATE FOR ANY ACTION. If any date on which any action is required to be taken under this agreement is not a Business Day, such action shall be required to be taken on the next succeeding Business Day. 3 - 3 - ARTICLE 2 COVENANTS OF ORBITAL AND THE CORPORATION .1 COVENANTS OF ORBITAL REGARDING EXCHANGEABLE SHARES. So long as any Exchangeable Shares are outstanding, Orbital will: (a) not declare or pay any dividend on Orbital Common Shares unless (i) the Corporation shall have sufficient assets, funds and other property (including, where applicable, Orbital Common Shares or other securities of Orbital) available to enable the due declaration and the due and punctual payment in accordance with applicable law, of an equivalent dividend on the Exchangeable Shares in accordance with the Exchangeable Share Provisions and (ii) the Corporation shall simultaneously declare or pay, as the case may be, an equivalent dividend on the Exchangeable Shares in accordance with the Exchangeable Share Provisions; (b)cause the Corporation to declare simultaneously with the declaration of any dividend on Orbital Common Shares an equivalent dividend on the Exchangeable Shares and, when such dividend is paid on Orbital Common Shares, cause the Corporation to pay simultaneously therewith such equivalent dividend on the Exchangeable Shares, in each case in accordance with the Exchangeable Share Provisions; (c)advise the Corporation sufficiently in advance of the declaration by Orbital of any dividend on Orbital Common Shares and take all such other actions as are necessary, in cooperation with the Corporation, to ensure that the declaration date, record date and payment date for any dividend on the Exchangeable Shares shall be the same as the record date, declaration date and payment date for the corresponding dividend on Orbital Common Shares and such dates in respect of dividends on the Exchangeable Shares shall be in accordance with any requirement of the Exchangeable Share Provisions and the stock exchange on which the Exchangeable Shares are listed; (d)ensure that the record date for any dividend declared on Orbital Common Shares, Orbital Common Share Reorganization, Rights Offering, Special Distribution or Capital Reorganization is not less than 10 Business Days after the declaration date for such dividend, Orbital Common Share Reorganization, Rights Offering, Special Distribution or Capital Reorganization; 4 - 4 - (e)take all such actions and do all such things as are necessary or desirable to enable and permit the Corporation, in accordance with applicable law, to pay and otherwise perform its obligations with respect to the satisfaction of the Liquidation Amount in respect of each issued and outstanding Exchangeable Share upon the liquidation, dissolution or winding-up of the Corporation, including without limitation all such actions and all such things as are necessary or desirable to enable and permit the Corporation to cause to be delivered shares of Orbital Common Shares to the holders of Exchangeable Shares in satisfaction of the Liquidation Amount for each such Exchangeable Share, in accordance with the provisions of Article 4 of the Exchangeable Share Provisions; (f)take all such actions and do all such things as are necessary or desirable to enable and permit the Corporation, in accordance with applicable law, to pay and otherwise perform its obligations with respect to the satisfaction of the Retraction Price and the Redemption Price, including without limitation all such actions and all such things as are necessary or desirable to enable and permit the Corporation to cause to be delivered shares of Orbital Common Shares to the holders of Exchangeable Shares, upon the retraction or redemption of the Exchangeable Shares in accordance with the provisions of Article 5 or Article 6 of the Exchangeable Share Provisions, as the case may be; (g) not exercise its vote as a shareholder of the Corporation to initiate, consent to or approve the voluntary liquidation, dissolution or winding-up of the Corporation nor take any action or omit to take any action that is designed to result in the liquidation, dissolution or winding-up of the Corporation; and (h) not exercise its vote as a shareholder of the Corporation to authorize the continuance or other transfer of the corporate existence of the Corporation to any jurisdiction outside Canada. .2 SEGREGATION OF FUNDS. Orbital will cause the Corporation to deposit a sufficient amount of funds in a separate account and segregate a sufficient amount of such assets and other property as is necessary to enable the Corporation to pay or otherwise satisfy the applicable dividends, Liquidation Amount, Retraction Price or Redemption Price, in each case for the benefit of holders from time to time of the Exchangeable Shares, and will cause the Corporation to use such funds, assets and other property so segregated exclusively for the payment of dividends and the payment or other satisfaction of the Liquidation Amount, the Retraction Price or the Redemption 5 - 5 - Price, as applicable, in each case in accordance with the Exchangeable Share Provisions. .3 RESERVATION OF ORBITAL COMMON SHARES. Orbital hereby represents and warrants that it has irrevocably reserved for issuance out of its authorized and unissued capital stock such number of Orbital Common Shares as is equal to the number of Exchangeable Shares outstanding immediately following the Effective Date and covenants that at all times in the future while any Exchangeable Shares are outstanding it will keep available, free from pre-emptive and other rights, out of its authorized and unissued capital stock such number of Orbital Common Shares (or other shares or securities into which Orbital Common Shares may be reclassified or changed) as is necessary to enable Orbital and the Corporation to perform their respective obligations pursuant to this agreement, the Exchangeable Share Provisions and the Voting and Exchange Trust Agreement. .4 NOTIFICATION OF CERTAIN EVENTS. In order to assist Orbital to comply with its obligations hereunder, the Corporation will give, or cause the Transfer Agent to give, Orbital notice of each of the following events at the time set forth below: (a) in the event of any determination by the Board of Directors of the Corporation to institute voluntary liquidation, dissolution or winding up proceedings with respect to the Corporation or to effect any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, at least 60 days prior to the proposed effective date of such liquidation, dissolution, winding up or other distribution; (b)immediately, upon the earlier of (i) receipt by the Corporation of notice of, and (ii) the Corporation otherwise becoming aware of, any threatened or instituted claim, suit, petition or other proceedings with respect to the involuntary liquidation, dissolution or winding up of the Corporation or to effect any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs; (c)immediately, upon receipt by the Transfer Agent of a Retraction Request; and (d)as soon as practicable upon the issuance by the Corporation of any Exchangeable Shares or rights to acquire Exchangeable Shares. 6 - 6 - .5 DELIVERY OF ORBITAL COMMON SHARES. In furtherance of its obligations under subsections 2.1(e) and (f) hereof, upon notice of any event that requires the Corporation to cause to be delivered Orbital Common Shares to any holder of Exchangeable Shares, Orbital shall forthwith issue and deliver the requisite Orbital Common Shares to or to the order of the former holder of the surrendered Exchangeable Shares, as the Corporation shall direct. All such Orbital Common Shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any Liens. In consideration of the issuance of each such Orbital Common Share by Orbital, the Corporation shall issue to Orbital, or as Orbital shall direct, such number of common shares of the Corporation as is equal to the fair value of such Orbital Common Shares. .6 QUALIFICATION OF ORBITAL COMMON SHARES. Unless the staff of the United States Securities and Exchange Commission (the "SEC") has confirmed the availability of an exemption from registration under the United States Securities Act of 1933, as amended (the "Securities Act") as to the issuance of the Orbital Common Shares in exchange for the Exchangeable Shares pursuant to the Plan of Arrangement, the Exchangeable Share Provisions or the Voting and Exchange Trust Agreement, in response to the No Action Request (as defined in the Combination Agreement) or Orbital has received an opinion of counsel reasonably satisfactory to the Corporation to such effect, then Orbital shall cause such issuance to be registered under the Securities Act, and shall file a registration statement covering such issuance with the SEC and use all commercially reasonable efforts to cause such registration statement to become effective as soon as practicable and remain effective throughout the period during which the Exchangeable Shares may be exchanged in accordance with the Plan of Arrangement, the Exchangeable Share Provisions or the Voting and Exchange Trust Agreement. Orbital agrees to file any such required registration statement as soon as reasonably practicable. Orbital shall use all reasonable efforts to obtain all orders required from the applicable Canadian securities authorities to permit the issuance of the Orbital Common Shares upon any such exchange of the Exchangeable Shares without registration or qualification with or approval of or the filing of any document including any prospectus or similar document or the taking of any proceeding with or the obtaining of any order, ruling or consent from any governmental or regulatory authority under any Canadian federal or provincial law or regulation or pursuant to the rules and regulations of any regulatory authority or the fulfillment of any other legal requirement before such Orbital Common Shares may be issued and delivered by the Corporation or Orbital to the holder thereof or in order that such Orbital Common Shares may be freely traded thereafter (other than any restrictions on transfer by reason of a holder being a "control person" of the Corporation or Orbital for purposes of Canadian federal or provincial securities law or an "affiliate" for purposes of United States Federal or state securities law). 7 - 7 - .7 TENDER OFFERS, ETC. In the event that a tender offer, share exchange offer, issuer bid, take-over bid or similar transaction with respect to Orbital Common Shares (an "Offer") is proposed by Orbital or is proposed to Orbital or its stockholders and is recommended by the Board of Directors of Orbital, or is otherwise effected or to be effected with the consent or approval of the Board of Directors of Orbital, Orbital will use all commercially reasonable efforts expeditiously and in good faith to take all such actions and do all such things as are necessary or desirable to enable and permit holders of Exchangeable Shares to participate in such Offer to the same extent and on an economically equivalent basis as the holders of Orbital Common Shares, without discrimination. Without limiting the generality of the foregoing, Orbital will use all commercially reasonable efforts expeditiously and in good faith to ensure that holders of Exchangeable Shares may participate in all such Offers without being required to retract Exchangeable Shares as against the Corporation (or, if so required, to ensure that any such retraction shall be effective only upon, and shall be conditional upon, the closing of the Offer and only to the extent necessary to tender or deposit to the Offer). .8 OWNERSHIP OF OUTSTANDING SHARES. Orbital covenants and agrees in favour of the Corporation that, as long as any outstanding Exchangeable Shares are owned by any person or entity other than Orbital or any of its Affiliates, Orbital will be and remain the direct or indirect beneficial owner of all issued and outstanding shares in the capital of the Corporation (other than Exchangeable Shares and the Class B Preferred Shares of the Corporation issued to Canadian Imperial Bank of Commerce pursuant to the Arrangement) and all outstanding securities of the Corporation carrying or otherwise entitled to voting rights in any circumstances (other than Exchangeable Shares and the Class B Preferred Shares of the Corporation issued to Canadian Imperial Bank of Commerce pursuant to the Arrangement), unless Orbital shall have obtained the prior approval of the Corporation and the holders of the Exchangeable Shares given in accordance with section 8.2 of the Exchangeable Share Provisions. .9 ORBITAL NOT TO VOTE EXCHANGEABLE SHARES. Orbital covenants and agrees that it will appoint and cause to be appointed proxyholders with respect to all Exchangeable Shares held by Orbital and its Affiliates for the sole purpose of attending each meeting of holders of Exchangeable Shares in order to be counted as part of the quorum for each such meeting. Orbital further covenants and agrees that it will not, and will cause its Affiliates not to, exercise any voting rights that may be exercisable by holders of Exchangeable Shares from time to time pursuant to the Exchangeable Share Provisions or pursuant to the provisions of the CBCA with respect to any Exchangeable Shares held by it or by its Affiliates in respect of any matter considered at any meeting of holders of Exchangeable Shares, including without limitation any approval to be 8 - 8 - given by holders of Exchangeable Shares pursuant to section 8.2 of the Exchangeable Share Provision. .10 DUE PERFORMANCE. On and after the Effective Date, Orbital shall duly and timely perform all of its obligations provided for in the Plan of Arrangement, including any obligations that may arise upon the exercise of Orbital's rights under the Exchangeable Share Provisions. .11 ECONOMIC EQUIVALENCE. Orbital hereby acknowledges that it will be bound by any determination of economic equivalence made by the Board of Directors pursuant to section 5.6 of the Plan of Arrangement or section 9.1 of the Exchangeable Share Provisions, where applicable. ARTICLE 3 GENERAL .1 TERM. This agreement shall come into force and be effective as of the date hereof and shall terminate and be of no further force and effect at such time as there are no Exchangeable Shares (or securities or rights convertible into or exchangeable for or carrying rights to acquire Exchangeable Shares) held by any party other than Orbital and its Affiliates. .2 CHANGES IN CAPITAL OF ORBITAL AND THE CORPORATION. Notwithstanding the provisions of section 3.4 hereof, at all times after the occurrence of any event effected pursuant to section 2.7 hereof as a result of which either Orbital Common Shares or the Exchangeable Shares or both are in any way changed, this agreement shall forthwith be amended and modified as necessary in order that it shall apply with full force and effect, mutatis mutandis, to all new securities into which Orbital Common Shares or the Exchangeable Shares or both are so changed and the parties hereto shall execute and deliver an agreement in writing giving effect to and evidencing such necessary amendments and modifications. .3 SEVERABILITY. If any provision of this agreement is held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remainder of this agreement shall not in any way be affected or impaired thereby and this agreement shall be carried out as nearly as possible in accordance with its original terms and conditions. .4 AMENDMENTS, MODIFICATIONS, ETC. This agreement may not be amended or modified except by an agreement in writing executed by the Corporation 9 - 9 - and Orbital and approved by the holders of the Exchangeable Shares in accordance with section 10.2 of the Exchangeable Share Provisions. .5 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of section 3.4, the parties to this agreement may without the approval of the holders of the Exchangeable Shares, at any time and from time to time, amend or modify this agreement in writing for the purposes of: (a)adding to the covenants of either or both parties for the protection of the holders of the Exchangeable Shares; (b)making such amendments or modifications not inconsistent with this agreement as may be necessary or desirable with respect to matters or questions which, in the opinion of the Board of Directors of each of the Corporation and Orbital, it may be expedient to make, provided that each such board of directors shall be of the opinion that such amendments or modifications will not be prejudicial to the interests of the holders of the Exchangeable Shares; or (c)making such changes or corrections which, on the advice of counsel to the Corporation and Orbital, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error herein, provided that the boards of directors of each of the Corporation and Orbital shall be of the opinion that such changes or corrections will not be prejudicial to the interests of the holders of the Exchangeable Shares. .6 MEETING TO CONSIDER AMENDMENTS. The Corporation, at the request of Orbital, shall call a meeting or meetings of the holders of the Exchangeable Shares for the purpose of considering any proposed amendment or modification requiring approval pursuant to section 3.4 hereof. Any such meeting or meetings shall be called and held in accordance with the by-laws of the Corporation and the Exchangeable Share Provisions. .7 WAIVERS ONLY IN WRITING. No waiver of any of the provisions of this agreement otherwise permitted hereunder shall be effective unless made in writing and signed by both of the parties hereto. .8 INUREMENT. This agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 10 - 10 - .9 ORBITAL SUCCESSORS. Orbital shall not enter into any transaction (whether by way of reconstruction, reorganization, consolidation, merger, transfer, sale, lease or otherwise) whereby all or substantially all its undertaking, property and assets would become the property of any other person or, in the case of a merger, of the continuing corporation resulting therefrom, unless: (a) such other person or continuing corporation is a corporation (the "Orbital Successor") incorporated under the laws of any state of the United States or the laws of Canada or any province thereof; and (b) the Orbital Successor, by operation of law, becomes, without more, bound by the terms and provisions of this agreement or, if not so bound, executes, prior to or contemporaneously with the consummation of such transaction, an agreement to be bound by the provisions hereof as if it were an original party hereto and to observe and perform all of the covenants and obligations of Orbital pursuant to this agreement, in form satisfactory to the Corporation, acting reasonably. Nothing herein shall be construed as preventing the amalgamation or merger of any wholly-owned subsidiary of Orbital with or into Orbital. .10 NOTICES TO PARTIES. All notices and other communications between the parties shall be in writing and shall be deemed to have been given if delivered personally or by confirmed telecopy to the parties at the following addresses (or at such other address for either such party as shall be specified in like notice): (a)if to Orbital at: Orbital Sciences Corporation 21700 Atlantic Boulevard Dulles, VA 20166 Attention: General Counsel Telecopy: (703) 406-5572 (b) if to the Corporation at: MacDonald Dettwiler Holdings Inc. 13800 Commerce Parkway Richmond, British Columbia V6V 2J3 11 - 11 - Attention: President Telecopy: (604) 273-9830 12 - 12 - Any notice or other communication given personally shall be deemed to have been given and received upon delivery thereof and if given by telecopy shall be deemed to have been given and received on the date of confirmed receipt thereof unless such day is not a Business Day in which case it shall be deemed to have been given and received upon the immediately following Business Day. .11 COUNTERPARTS. This agreement may be executed in counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. .12 JURISDICTION. This agreement shall be construed and enforced in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein. 13 - 13 - .13 ATTORNMENT. Orbital agrees that any action or proceeding arising out of or relating to this agreement may be instituted in the courts of British Columbia, waives any objection which it may have now or hereafter to the venue of any such action or proceeding, irrevocably submits to the jurisdiction of the said courts in any such action or proceeding, agrees to be bound by any judgment of the said courts and not to seek, and hereby waives, any review of the merits of any such judgment by the courts of any other jurisdiction and hereby appoints the Corporation at its registered office as Orbital's attorney for service of process. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly executed as of the date first above written. ORBITAL SCIENCES CORPORATION by /s/ Carlton B. Crenshaw -------------------------------- Senior Vice President MACDONALD DETTWILER HOLDINGS INC. By /s/ Carlton B. Crenshaw ---------------------------- Vice President EX-11 14 COMPUTATION OF EARNINGS PER SHARE. 1 EXHIBIT 11. STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
THREE MONTH PERIOD ENDED DECEMBER 31, 1995 ------------------------------------- --------------------------- ASSUMING PRIMARY FULL DILUTION ---------- ------------- WEIGHTED AVERAGE OF OUTSTANDING SHARES 26,775,548 26,775,548 COMMON EQUIVALENT SHARES: OUTSTANDING STOCK OPTIONS 376,973 376,939 OTHER POTENTIALLY DILUTIVE SECURITIES: CONVERTIBLE DEBENTURES N/A 3,895,652 ---------- ---------- SHARES USED IN COMPUTING NET INCOME PER SHARE 27,152,521 31,048,139 ========== ========== NET INCOME ($3,836,719) ($3,836,719) ADJUSTMENTS ASSUMING FULL DILUTION: INTEREST EXPENSE, NET OF TAXES N/A 945,000 ---------- ---------- NET INCOME, ASSUMING FULL DILUTION ($3,836,719) ($2,891,719) ========== ========== NET INCOME PER SHARE ($0.141) ($0.093) DILUTION PERCENTAGE ASSUMING FULL DILUTION (1) N/A -34.087% NET INCOME PER SHARE ($0.14) ($0.14) ========== ========== NET INCOME PER SHARE USED (2) ($0.14) ($0.14) ========== ========== TWELVE MONTH PERIOD ENDED DECEMBER 31, 1995 -------------------------------------- --------------------------- ASSUMING PRIMARY FULL DILUTION ---------- ------------- WEIGHTED AVERAGE OF OUTSTANDING SHARES 25,694,084 25,694,084 COMMON EQUIVALENT SHARES: OUTSTANDING STOCK OPTIONS 513,662 514,122 OTHER POTENTIALLY DILUTIVE SECURITIES: CONVERTIBLE DEBENTURES N/A 3,895,652 SHARES USED IN COMPUTING ---------- ---------- NET INCOME PER SHARE 26,207,746 30,103,858 ========== ========== NET INCOME ($4,847,512) ($4,847,512) ADJUSTMENTS ASSUMING FULL DILUTION: INTEREST EXPENSE, NET OF TAXES N/A 3,780,000 ---------- ---------- NET INCOME, ASSUMING FULL DILUTION ($4,847,512) ($1,067,512) ========== ========== NET INCOME PER SHARE ($0.185) ($0.035) DILUTION PERCENTAGE ASSUMING FULL DILUTION (1) N/A -80.828% NET INCOME PER SHARE ($0.18) ($0.18) ========== ========== NET INCOME PER SHARE USED (2) ($0.19) ($0.19) ========== ==========
NOTES: (1) - PROVIDED THAT DILUTION IS GREATER THAN 3%, THE CONVERTIBLE DEBENTURES ARE CONSIDERED DILUTIVE IN THE CALCULATION AND PRESENTATION OF PER SHARE DATA. (2) - SINCE COMMON STOCK EQUIVALENTS ARE ANTIDILUTIVE, THE COMMON STOCK EQUIVALENTS HAVE BEEN EXCLUDED FROM THE CALCULATION AND PRESENTATION OF PER SHARE DATA. EX-13 15 PORTIONS OF ANNUAL REPORT. 1 F I N A N C I A L I N F O R M A T I O N - -------------------------------------------------------------------------------- INDEX TO FINANCIAL REVIEW AND DISCUSSION Selected Consolidated Financial Data page 28 Management's Discussion and Analysis of Financial Condition and Results of Operations page 29 Independent Auditors' Report page 34 Consolidated Statements of Operations page 35 Consolidated Balance Sheets page 36 Consolidated Statements of Stockholders' Equity page 37 Consolidated Statements of Cash Flows page 38 Notes to Consolidated Financial Statements page 39
MARKET INFORMATION The Company's Common Stock is traded on the Nasdaq Stock Market under the symbol ORBI. The number of stockholders of record as of March 7, 1996 was 1,479. The Company's Convertible Debentures are traded on the Nasdaq Stock Market under the symbol ORBIG. The range of high and low closing sales prices of Orbital Common Stock for 1993 through 1995, as reported on the Nasdaq Stock Market, was as follows:
1995 HIGH LOW --------- --------- Fourth Quarter $16 5/8 $12 3/16 Third Quarter $19 1/4 $16 Second Quarter $22 $15 1/2 First Quarter $20 1/2 $16 1/2
1994 HIGH LOW --------- --------- Fourth Quarter $22 1/2 $15 Third Quarter $18 1/2 $14 1/2 Second Quarter $24 1/2 $14 First Quarter $26 1/2 $15 1/4
1993 HIGH LOW --------- --------- Fourth Quarter $23 $16 1/2 Third Quarter $19 $12 1/4 Second Quarter $13 3/4 $10 1/4 First Quarter $14 1/4 $10 3/4
twenty-seven ------------------------------ ORBITAL SCIENCES CORPORATION 2 S E L E C T E D C O N S O L I D A T E D F I N A N C I A L D A T A - -------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA) YEARS ENDED DECEMBER 31, 1995 1994 1993 1992 1991 ----------- ------------------------------------------------------- OPERATING DATA (1): Revenues $ 364,320 $ 301,576 $ 300,184 $ 273,171 $ 223,955 Costs of Goods Sold 268,016 216,417 228,289 207,834 170,531 ---------- ---------- ---------- ---------- ---------- Gross Profit 96,304 85,159 71,895 65,337 53,424 Research and Development Expenses 25,512 17,259 19,703 15,565 9,950 Reusable Launch System Charges 3,000 -- -- -- -- Selling, General and Administrative Expenses 63,427 53,165 38,270 41,723 36,169 Amortization of Excess of Purchase Price Over Net Assets Acquired 3,221 2,360 1,634 1,606 1,542 Net Investment Income (Expense) 639 (244) (44) 860 1,579 Equity in Earnings (Losses) of Affiliates (759) (1,264) (2,436) -- -- Non-Controlling Interests in (Earnings) Losses of Consolidated Subsidiaries 427 -- -- -- -- Other Expenses (3,441) (503) -- -- -- ---------- ---------- ---------- ---------- ---------- Income (Loss) Before Provision (Benefit) for Income Taxes, Cumulative Effect of Accounting Changes and Extraordinary Item (1,990) 10,364 9,808 7,303 7,342 Provision (Benefit) for Income Taxes (1,302) 2,744 2,403 1,997 3,132 ---------- ---------- ---------- ---------- ---------- Income (Loss) Before Cumulative Effect of Accounting Changes and Extraordinary Item (688) 7,620 7,405 5,306 4,210 Cumulative Effect of Accounting Changes, net of taxes (4,160) -- 200 -- -- Extraordinary Item (2) -- -- -- -- 1,748 ---------- ---------- ---------- ---------- ---------- Net Income (Loss) $ (4,848) $ 7,620 $ 7,605 $ 5,306 $ 5,958 ========== ========== ========== ========== ========== NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE (3): Income (Loss) Before Cumulative Effect of Accounting Changes and Extraordinary Item $ (0.03) $ 0.33 $ 0.40 $ 0.29 $ 0.24 Cumulative Effect of Accounting Changes (0.16) -- 0.01 -- -- Extraordinary Item -- -- -- -- 0.10 ---------- ---------- ---------- ---------- ---------- $ (0.19) $ 0.33 $ 0.41 $ 0.29 $ 0.34 ========== ========== ========== ========== ========== SHARES USED IN COMPUTING NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE 26,207,746 23,191,553 18,728,980 18,492,059 17,579,410 ========== ========== ========== ========== ========== NET INCOME (LOSS) PER SHARE, ASSUMING FULL DILUTION (4): Income (Loss) Before Cumulative Effect of Accounting Changes and Extraordinary Item $ (0.03) $ 0.32 $ 0.36 $ 0.29 $ 0.24 Cumulative Effect of Accounting Changes (0.16) -- 0.01 -- -- Extraordinary Item -- -- -- -- 0.10 ---------- ---------- ---------- ---------- ---------- $ (0.19) $ 0.32 $ 0.37 $ 0.29 $ 0.34 ========== ========== ========== ========== ========== SHARES USED IN COMPUTING NET INCOME (LOSS) PER COMMON SHARE, ASSUMING FULL DILUTION 30,103,858 27,309,336 22,343,402 18,492,059 17,579,410 ========== ========== ========== ========== ========== BALANCE SHEET DATA (1): Cash and Cash Equivalents and Short-Term Investments $ 35,030 $ 40,345 $ 85,347 $ 16,019 $ 51,088 Net Working Capital 87,553 57,449 92,036 41,527 64,723 Total Assets 466,908 441,042 367,979 212,151 213,780 Short-Term Borrowings 11,907 28,977 15,793 6,377 1,494 Long-Term Obligations 96,990 86,068 73,165 10,818 9,724 Stockholders' Equity $ 238,908 $ 206,943 $ 169,389 $ 111,687 $ 115,042 ========== ========== ========== ========== ==========
1 / All historical balances have been restated to reflect the Company's acquisitions of Magellan Corporation and MacDonald, Dettwiler and Associates Ltd. Both acquisitions were accounted for using the pooling of interests method. 2 / Represents an income tax benefit from net operating loss carryforwards. 3 / Net income (loss) per common and common equivalent share is calculated using the weighted average number of shares and dilutive equivalent shares outstanding during the periods. 4 / Net income (loss) per share, assuming full dilution, is calculated using the weighted average number of shares and dilutive equivalent shares outstanding during the periods, plus the effect of an assumed conversion of the Company's convertible subordinated debentures. twenty-eight ---------------------------- ORBITAL SCIENCES CORPORATION 3 M A N A G E M E N T ' S D I S C U S S I O N A N D A N A L Y S I S O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S O F O P E R A T I O N S - -------------------------------------------------------------------------------- OVERVIEW A significant portion of the Company's revenues are generated under long-term contracts with various agencies of the U.S. Government, various foreign governments and commercial customers. Orbital recognizes revenues on long-term contracts using the percentage of completion method of accounting, whereby revenue, and therefore profit, is recognized based on actual costs incurred in relation to total estimated costs to complete the contract or based on specific delivery terms and conditions. In the case of incentive fee and award fee contracts, such fees are included in revenue at the time the amount of such fee can reasonably be determined or based on the Company's ongoing estimates of the amount of the fee to be received. To the extent that estimated costs of completion are adjusted, revenue recognized from a particular contract will be affected in the period of the adjustment. The Company is accounting for its investment in ORBCOMM Global, L. P. ("ORBCOMM Global") using the equity method of accounting. In accordance with the equity method of accounting, Orbital consolidates 100% of the revenues earned and costs incurred pursuant to sales to ORBCOMM Global. The Company also recognizes as equity in earnings (losses) of affiliates its pro rata share of ORBCOMM Global's profits and losses. During the construction phase of the ORBCOMM System, ORBCOMM Global is capitalizing substantially all system construction costs, including amounts paid to Orbital. To the extent ORBCOMM Global capitalizes its purchases from Orbital, the Company eliminates as equity in earnings (losses) of affiliates 50% of its profits and losses from those sales. In 1995, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"), which (i) requires that long-lived assets "to be held and used" be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, (ii) requires that long-lived assets "to be disposed of" be reported at the lower of carrying amount or fair value less cost to sell, and (iii) provides guidelines and procedures for measuring an impairment loss that are significantly different from previous guidelines and procedures. The cumulative effect of adopting SFAS 121 on prior years' earnings, relating to the impairment in the carrying amount of certain assets to be disposed of that supported its orbit transfer vehicle product line, was approximately $4,160,000, and is reported in the 1995 consolidated statement of operations. The effect of adopting SFAS 121 on income from continuing operations for 1995 was not material. ACQUISITIONS Orbital acquired MacDonald, Dettwiler and Associates Ltd. ("MDA") on November 17, 1995 and Magellan Corporation ("Magellan") on December 29, 1994. Both transactions were accounted for using the pooling of interests method of accounting for business combinations. Orbital's historical financial information has been restated to effect the pooling of interests with MDA and Magellan as of the earliest period presented. Orbital incurred transaction expenses of approximately $3,400,000 for the MDA acquisition and $500,000 for the Magellan acquisition in 1995 and 1994, respectively. On August 11, 1994, Orbital acquired Fairchild Space and Defense Corporation ("Fairchild"), a subsidiary of Matra Aerospace, Inc., in a transaction accounted for as a purchase business combination. Fairchild's results of operations for the nineteen-week period ended December 31, 1994 have been included in Orbital's consolidated results of operations for the year ended December 31, 1994. On April 6, 1994, the Company (as a result of its acquisition of MDA) acquired The PSC Communications Group Inc. ("PSC") from PSC's former shareholders in a transaction accounted for as a purchase business combination. As a result of recasting MDA's fiscal year end, Orbital's consolidated results of operations for 1994 include PSC's financial results for the full year. On September 17, 1993, Orbital acquired the Applied Science Operation ("ASO"), a business unit of The Perkin-Elmer Corporation, in a transaction accounted for as a purchase business combination. ASO's results of operations for the fourteen-week period ended December 31, 1993 have been included in Orbital's consolidated results of operations for the year ended December 31, 1993. The following table shows the Company's revenues, gross profits and gross profit margin, by major product category, for each of the three years ended December 31, 1995, 1994 and 1993: twenty-nine ---------------------------- ORBITAL SCIENCES CORPORATION 4
1995 1994 1993 ------------------------------ ------------------------------ -------------------------------- (IN THOUSANDS) GROSS GROSS GROSS REVENUES PROFIT MARGIN REVENUES PROFIT MARGIN REVENUES PROFIT MARGIN ------------------------------ ----------------------------- ------------------------------- LAUNCH VEHICLES $ 69,377 $ 11,920 17.2% $ 74,832 $12,652 16.9% $120,410 $20,818 17.3% Space launch vehicles 33,883 4,959 14.6 52,200 8,067 15.4 55,988 7,216 12.9 Suborbital launch vehicles 22,523 6,170 27.4 22,632 5,785 25.6 48,990 12,428 25.4 Orbit transfer vehicles and other 12,971 791 6.1 -- (1,200) NA 15,432 1,174 7.6 SATELLITE AND ELECTRONICS SYSTEMS 152,496 34,878 22.9 88,305 24,007 27.2 31,287 6,519 20.8 Satellite systems and payloads 83,166 11,480 13.8 35,031 9,231 26.4 25,160 4,907 19.5 Space sensors and instruments 11,416 2,732 23.9 17,670 4,894 27.7 3,710 895 24.1 Defense electronics and sensors 57,914 20,666 35.7 35,604 9,882 27.8 2,417 717 29.7 GROUND SYSTEMS AND SOFTWARE 73,473 22,871 31.1 79,630 20,279 25.5 77,097 19,012 24.7 COMMUNICATIONS AND INFORMATION SERVICES 68,974 26,635 38.6 58,809 28,221 47.0 71,390 25,546 35.8 Navigation and communications products 55,333 22,257 40.2 38,517 17,802 46.2 32,900 14,995 45.6 Satellite-based services 11,191 3,831 34.2 10,154 6,117 60.2 20,609 3,269 15.9 Satellite tracking systems and other 2,450 547 22.3 10,138 4,302 42.4 17,881 7,282 40.7 -------- -------- ---- -------- -------- ---- -------- -------- ---- CONSOLIDATED TOTAL $364,320 $ 96,304 26.4% $301,576 $85,159 28.2% $300,184 $71,895 24.0% ======== ======== ==== ======== ======== ==== ======== ======== ====
RESULTS OF OPERATIONS REVENUES. Orbital's revenues for 1995, 1994 and 1993 were $364,320,000, $301,576,000 and $300,184,000, respectively. Revenues include sales to ORBCOMM Global of approximately $49,187,000, $30,048,000 and $38,207,000 in 1995, 1994 and 1993, respectively. Revenues from the Company's space launch vehicle products decreased from $55,988,000 in 1993 to $52,200,000 in 1994, and were $33,883,000 in 1995. The decreases in 1994 and 1995 are primarily attributable to significant delays in production of the Company's Pegasus space launch vehicle as a result of the June 1994 and June 1995 Pegasus XL launch failures. Orbital has completed its failure review and return-to-flight processes, successfully launched a Pegasus XL vehicle in March 1996 and expects to launch several more Pegasus XL vehicles in 1996. As a result, the Company expects Pegasus revenues to increase significantly in 1996 as it resumes its production program and planned launches. Revenues from suborbital launch vehicle products were $22,523,000 in 1995, $22,632,000 in 1994 and $48,990,000 in 1993. Revenues from suborbital launch vehicles, which are primarily purchased by various agencies within the U. S. Department of Defense for military purposes, have decreased significantly over the past few years as defense spending by the U.S. Government has been reduced. The Company expects suborbital launch vehicle product revenues in 1996 to remain consistent with 1995 levels. Revenues from orbit transfer vehicles and other products were $12,971,000 in 1995. These revenues are primarily attributable to work performed on developing a technologically advanced reusable launch vehicle, pursuant to a cooperative agreement with NASA awarded in 1995. Orbital recorded charges of $3,000,000 related to a termination of the development effort in early 1996. Satellite and electronics systems revenues increased to $152,496,000 in 1995, from $88,305,000 in 1994, and $31,287,000 in 1993. The increase in sales in thirty ---------------------------- ORBITAL SCIENCES CORPORATION 5 1995 is primarily attributable to a full year's sales of satellite systems and electronics following the August 1994 acquisition of Fairchild. The increase in 1994 sales as compared to 1993 sales is primarily as a result of the Fairchild acquisition in August 1994, and a full year's sales of sensors and instruments following the September 1993 acquisition of ASO. The Company expects its satellite and electronics systems revenues to increase in 1996 as a result of several new commercial and government satellite and electronics contracts awarded during the latter part of 1995. Ground systems and software revenues were $73,473,000, $79,630,000 and $77,097,000 in 1995, 1994 and 1993, respectively. The change in revenues from 1994 to 1995 is attributable primarily to a continued decrease in sales of satellite ground systems offset, in part, by an increase in revenues generated by communication services provided by PSC. The decrease in sales of satellite ground systems is primarily a result of fewer Earth observation satellites being placed into operation during the past few years. The slight increase in total revenues from 1993 to 1994 is attributable to the first year of PSC's sales after its acquisition in April 1994 offset, in part, by a decrease in sales of satellite ground systems due to completion of a specific project for the Canadian Space Agency. The change in revenues between 1995 and 1994 is also partially attributable to the fluctuation of the exchange rate between the Canadian dollar and the U.S. dollar during the periods. The Company anticipates that ground systems and software revenues will increase in 1996 based on potential new contracts expected to be awarded in mid-1996. Communications and information services revenues increased to $68,974,000 in 1995, from $58,809,000 in 1994, but were still below 1993's revenues of $71,390,000. The decrease in total sales from 1993 to 1994 is attributable primarily to a decrease in sales of ground systems and software (used to operate the ORBCOMM System) to ORBCOMM Global. The largest component of communications and information services revenues is from sales of Magellan's satellite navigation and communications equipment. Magellan's sales were $52,630,000 in 1995 as compared to $37,144,000 in 1994 and $32,900,000 in 1993. The year-to-year increases in Magellan's sales are due to a significant increase in the number of products sold offset, in part, by lower average unit sales prices. Orbital expects communications and information services revenues to increase in 1996, primarily due to continuing increasing unit sales of satellite navigation and communications equipment. In 1996, the Company also expects to generate modest sales from the ORBCOMM System, which became commercially operational in February 1996. COSTS OF GOODS SOLD. Costs of goods sold include the costs of personnel and materials under the Company's various development and production contracts, including costs of subcontracts. Orbital's costs of goods sold for 1995, 1994 and 1993 were $268,016,000 (73.6% of revenues), $216,417,000 (71.8% of revenues) and $228,289,000 (76.0% of revenues), respectively. The increase in costs of sales as a percentage of revenues in 1995 results in part from approximately $2,100,000 of cost increases on the Company's Pegasus program resulting from the two launch failures, and cost increases on certain satellite programs. Other contributing factors include lower average unit sales prices of satellite navigation equipment offset, in part, by increasing profit margins on certain satellite and ground systems contracts contributed by recent acquisitions. Costs of goods sold in 1994 and 1993 also reflect cost increases on the Taurus space launch vehicle development program. The Company believes that its costs of goods sold as a percentage of sales in 1996 will be lower than that achieved in 1995. RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses represent Orbital's self-funded product development activities, and exclude direct customer-funded development. Research and development expenses during 1995, 1994 and 1993 were $25,512,000, $17,259,000 and $19,703,000, respectively. Research and development spending during 1995 and 1994 reflected Orbital's continued development of its Pegasus XL vehicle, including certain failure review and return-to-flight efforts totaling $7,900,000 in 1995 and $2,500,000 in 1994. Addi- thirty-one ---------------------------- ORBITAL SCIENCES CORPORATION 6 tionally, 1994 and 1993 expenses included continuing costs for Orbital's development of its Taurus space launch vehicle and development of lower-cost satellite navigation and communications equipment. The Company expects its research and development expenditures, primarily related to development of new satellite programs and continued research in developing lower-cost satellite navigation and communications equipment, to decrease slightly in 1996. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses include the costs of marketing, advertising, promotional and other selling expenses as well as the costs of the finance, administrative and general management functions of the Company. Selling, general and administrative expenses for 1995, 1994 and 1993 were 63,427,000 (17.4% of revenues), $53,165,000 (17.6% of revenues) and $38,270,000 (12.7% of revenues), respectively. The increase in selling, general and administrative expenses and its related percentage of revenues from 1993 levels to 1995 levels is primarily attributable to the three significant purchase business combinations that have been concluded since September 1993. The acquired businesses have higher historical selling, general and administrative rates than Orbital's original businesses. Increasing selling, general and administrative expenses related to initial marketing activities for the Company's ORBCOMM project ($5,671,000 in 1995 and $5,470,000 in 1994) have also contributed to higher costs in 1995 and 1994. NET INVESTMENT INCOME (EXPENSE). Net investment income (expense) was $639,000, ($244,000) and ($44,000) for 1995, 1994 and 1993, respectively. Investment income reflects interest earnings on short-term investments and realized gains and losses on investments, reduced by interest expense (net of capitalized interest of $5,700,000, $5,500,000 and $3,500,000 in 1995, 1994 and 1993, respectively) on outstanding debt. EQUITY AND NON-CONTROLLING INTERESTS IN EARNINGS (LOSSES) OF AFFILIATES AND CONSOLIDATED SUBSIDIARIES. Equity in earnings (losses) of affiliates in 1995, 1994 and 1993 represents elimination of $1,213,000, $1,264,000 and $2,436,000, respectively, of profits on sales to ORBCOMM Global, due to ORBCOMM Global's capitalization of its purchases from the Company, and Orbital's share of ORBCOMM Global's net income (loss). Non-controlling interests in earnings (losses) of consolidated subsidiaries represent the portion of earnings (losses) allocable to other shareholders. PROVISION (BENEFIT) FOR INCOME TAXES. The Company adopted the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109") effective January 1, 1993. The cumulative effect on prior years of this change in accounting principle increased net income for 1993 by approximately $200,000. The effect of adopting SFAS 109 on income from operations for 1993 was not material. The Company recorded a consolidated income tax benefit of approximately $1,302,000 in 1995, primarily as a result of the carryback and recapture of previously paid U.S. Federal alternative minimum taxes and management's determination that certain Canadian investment tax credit carryforwards will be realized in the near future. Orbital recorded income tax provisions of $2,744,000 and $2,403,000 for 1994 and 1993, respectively. The Company's effective tax rate for these periods (26.5% and 24.5% in 1994 and 1993, respectively) is primarily a result of non-tax deductible goodwill amortization related to its acquisition of Space Data Corporation in 1988 and Fairchild in 1994, offset by tax-exempt interest earnings, U.S. Federal research and experimental tax credits and Canadian investment tax credits. At December 31, 1995, Orbital had approximately $102,000,000 of U.S. Federal net operating loss carryforwards and $3,000,000 of U.S. Federal research and experimental tax credit carryforwards which, subject to certain annual limitations, are available to reduce future U.S. Federal income tax obligations. At thirty-two ---------------------------- ORBITAL SCIENCES CORPORATION 7 December 31, 1995 and 1994, Orbital provided a valuation allowance of approximately $65,000,000 and $43,500,000, respectively, against certain of its consolidated deferred tax assets. LIQUIDITY AND CAPITAL RESOURCES During the first quarter of 1993, Orbital completed a public offering of convertible debentures, receiving net proceeds of approximately $57,000,000. During the fourth quarter of 1993, Orbital completed a public offering of approximately 2,923,000 shares of its common stock, receiving net proceeds of approximately $45,300,000. In June 1995, the Company completed a private placement of 2,000,000 shares of its common stock, receiving net proceeds of approximately $32,400,000. The Company's shares were placed with various international institutional investors. At December 31, 1995, cash, cash equivalents and short-term investments were approximately $35,030,000 and Orbital had approximately $108,897,000 of short- and long-term debt outstanding. Additionally, at December 31, 1995, Orbital had approximately $11,000,000 of cash reserved against outstanding letters of credit and was guarantor on approximately $5,000,000 of debt held by ORBCOMM Global. Orbital's current ratio was 1.8 at December 31, 1995, compared to 1.4 and 1.8 at December 31, 1994 and 1993. The Company maintains a line of credit facility that provides for total borrowings from an international syndicate of six banks of up to $65,000,000, subject to a defined borrowing base composed of certain contract receivables. Approximately $3,000,000 of borrowings were outstanding against the facility at December 31, 1995, against an available facility limit of approximately $23,500,000. The interest rate charged under the facility is a variable rate based on Morgan Guaranty Trust Company of New York's prime rate, the Federal Funds rate, or adjusted LIBOR. At December 31, 1995, the interest rate on outstanding borrowings under this facility was approximately 9.5%. Borrowings are secured by contract receivables and certain other assets. The facility restricts the payment of dividends and contains certain covenants with respect to the Company's working capital, fixed charge ratio, leverage ratio and tangible net worth. The facility expires in September 1997. The Company also maintains several other short-term domestic line of credit facilities, totaling approximately $12,000,000, of which $2,000,000 was outstanding as of December 31, 1995, as well as a facility for its Canadian operations. The Company's operations used net cash of approximately $2,318,000 in 1995. During 1995 Orbital invested approximately $18,900,000 in ORBCOMM Global and invested approximately $17,200,000 in capital assets to support its launch vehicle and satellite products and various satellite systems. Orbital's capital expenditures for 1996 are expected to exceed $10,000,000, including continued investments in various satellite systems. Additionally, in 1996 the Company expects to invest approximately $5,000,000 to $10,000,000 in new Earth observation and remote sensing products and services and approximately $10,000,000 in ORBCOMM Global. Orbital expects that its 1996 capital needs, including its planned investment in the ORBCOMM System, will be provided by working capital, cash flows from operations, credit facilities, customer financing and operating lease arrangements. If ORBCOMM Global fails to raise sufficient capital to complete construction of its planned satellite constellation, Orbital may be required to increase its equity position by an additional $30,000,000 to $50,000,000 over the next several years. thirty-three ---------------------------- ORBITAL SCIENCES CORPORATION 8 I N D E P E N D E N T A U D I T O R S ' R E P O R T The Board of Directors and Stockholders Orbital Sciences Corporation: We have audited the accompanying consolidated balance sheets of Orbital Sciences Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of Magellan Corporation, a wholly owned subsidiary, in 1993, which statements reflect total revenues constituting 11% of the related consolidated total in that year. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Magellan Corporation, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Orbital Sciences Corporation and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," as of January 1, 1995. As discussed in Notes 1 and 11 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," as of January 1, 1993. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Washington, D.C. February 5, 1996 thirty-four ---------------------------- ORBITAL SCIENCES CORPORATION 9 C O N S O L I D A T E D S T A T E M E N T S O F O P E R A T I O N S
(IN THOUSANDS, EXCEPT SHARE DATA) FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993 ------------ ---------------------------- Revenues $ 364,320 $ 301,576 $ 300,184 Costs of Goods Sold 268,016 216,417 228,289 ----------- ----------- ---------- Gross Profit 96,304 85,159 71,895 Research and Development Expenses 25,512 17,259 19,703 Reusable Launch System Charges 3,000 -- -- Selling, General and Administrative Expenses 63,427 53,165 38,270 Amortization of Excess of Purchase Price Over Net Assets Acquired 3,221 2,360 1,634 ----------- ----------- ---------- Income from Operations 1,144 12,375 12,288 Net Investment Income (Expense), net of interest expense of $3,815, $1,740, and $1,409, respectively 639 (244) (44) Equity in Earnings (Losses) of Affiliates (759) (1,264) (2,436) Non-Controlling Interests in (Earnings) Losses of Consolidated Subsidiaries 427 -- -- Other Expenses (3,441) (503) -- ----------- ----------- ---------- Income (Loss) Before Provision (Benefit) for Income Taxes and Cumulative Effect of Accounting Changes (1,990) 10,364 9,808 Provision (Benefit) for Income Taxes (1,302) 2,744 2,403 ----------- ----------- ---------- Income (Loss) Before Cumulative Effect of Accounting Changes (688) 7,620 7,405 Cumulative Effect of Accounting Changes, net of taxes (4,160) -- 200 ----------- ----------- ---------- Net Income (Loss) $ (4,848) $ 7,620 $ 7,605 =========== =========== ========== NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE: Income (Loss) Before Cumulative Effect of Accounting Changes $ (0.03) $ 0.33 $ 0.40 Cumulative Effect of Accounting Changes (0.16) -- 0.01 $ (0.19) $ 0.33 $ 0.41 Shares Used in Computing Net Income (Loss) per Common and Common Equivalent Share 26,207,746 23,191,553 18,728,980 NET INCOME (LOSS) PER COMMON SHARE, ASSUMING FULL DILUTION: Income (Loss) Before Cumulative Effect of Accounting Changes $ (0.03) $ 0.32 $ 0.36 Cumulative Effect of Accounting Changes (0.16) -- 0.01 ----------- ----------- ---------- $ (0.19) $ 0.32 $ 0.37 =========== =========== ========== Shares Used in Computing Net Income (Loss) per Common Share, assuming full dilution 30,103,858 27,309,336 22,343,402 =========== =========== ==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. thirty-five ---------------------------- ORBITAL SCIENCES CORPORATION 10 C O N S O L I D A T E D B A L A N C E S H E E T S
(IN THOUSANDS, EXCEPT SHARE DATA) DECEMBER 31, A S S E T S 1995 1994 --------- --------- CURRENT ASSETS: Cash and cash equivalents $ 15,317 $ 27,919 Short-term investments, at market 19,713 12,426 Receivables, net 118,358 116,021 Inventories, net 38,527 26,445 Deferred income taxes and other assets 7,330 3,871 --------- -------- TOTAL CURRENT ASSETS 199,245 186,682 PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated depreciation and amortization of $53,067 and $46,409, respectively 91,512 103,090 SATELLITE SYSTEMS, at cost, less accumulated depreciation of $547 and $0, respectively 14,363 6,788 INVESTMENTS IN AFFILIATES, net 74,063 54,721 EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, less accumulated amortization of $13,695 and $10,612, respectively 75,395 74,599 DEFERRED INCOME TAXES AND OTHER ASSETS 12,330 15,162 --------- -------- TOTAL ASSETS $ 466,908 $441,042 ========= ======== L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y CURRENT LIABILITIES: Short-term borrowings and current portion of long-term obligations $ 11,907 $ 28,977 Accounts payable 25,808 17,457 Accrued expenses 29,922 43,603 Payable to subcontractors 11,552 13,695 Deferred revenue 32,503 25,501 --------- -------- TOTAL CURRENT LIABILITIES 111,692 129,233 LONG-TERM OBLIGATIONS, net of current portion 96,990 86,068 OTHER LIABILITIES 19,740 18,798 --------- -------- TOTAL LIABILITIES 228,422 234,099 NON-CONTROLLING INTERESTS IN NET ASSETS OF CONSOLIDATED SUBSIDIARIES (422) -- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Series A Special Voting Preferred Stock, par value $.01; one share authorized and outstanding -- -- Class B Preferred Stock, no par value; 10,000 shares authorized and outstanding -- -- Preferred Stock, par value $.01; 10,000,000 shares authorized, no shares outstanding -- -- Common Stock, par value $.01; 40,000,000 shares authorized, 26,766,029 and 24,257,322 shares outstanding, after deducting 15,735 shares held in treasury 268 243 Additional paid-in capital 247,580 210,030 Unrealized gains (losses) on short-term investments 68 (462) Cumulative translation adjustment (3,356) (3,111) Retained earnings (deficit) (5,652) 243 --------- -------- TOTAL STOCKHOLDERS' EQUITY 238,908 206,943 --------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 466,908 $441,042 ========= ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. thirty-six ---------------------------- ORBITAL SCIENCES CORPORATION 11 C O N S O L I D A T E D S T A T E M E N T S O F S T O C K H O L D E R S ' E Q U I T Y
(IN THOUSANDS, EXCEPT SHARE DATA) UNREALIZED COMMON STOCK GAINS (LOSSES) CUMULATIVE RETAINED ------------------ ADDITIONAL ON SHORT-TERM TRANSLATION EARNINGS SHARES AMOUNT PAID-IN CAPITAL INVESTMENTS ADJUSTMENT (DEFICIT) TOTAL ------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1992, AS INITIALLY REPORTED 11,670,652 $ 117 $ 103,174 $ -- $ -- $ (9,474) $ 93,817 Adjustment for Magellan Corporation business combination, accounted for as a pooling of interests 2,640,441 26 14,303 -- -- (195) 14,134 Adjustment for MacDonald, Dettwiler and Associates Ltd. business combination, accounted for as a pooling of interests 4,087,126 41 8,601 -- (1,708) (3,198) 3,736 ---------- ---- --------- -------- ------ ------- -------- BALANCE, DECEMBER 31, 1992, RESTATED 18,398,219 184 126,078 -- (1,708) (12,867) 111,687 Shares issued to employees and directors 84,474 1 1,012 -- -- -- 1,013 Shares issued in purchase business combination 320,000 3 4,997 -- -- -- 5,000 Net proceeds from public offering 2,923,000 29 45,244 -- -- -- 45,273 Transactions of pooled companies -- -- 48 -- -- (622) (574) Translation adjustment -- -- -- -- (627) -- (627) Net income -- -- -- -- -- 7,605 7,605 Unrealized gains on short-term investments -- -- -- 12 -- -- 12 ---------- ---- --------- -------- ------ ------- -------- BALANCE, DECEMBER 31, 1993 21,725,693 217 177,379 12 (2,335) (5,884) 169,389 Shares issued to employees and directors 107,387 2 1,619 -- -- -- 1,621 Shares issued in purchase business combination 2,424,242 24 30,976 -- -- -- 31,000 Adjustment to recast year end of pooled company -- -- -- -- -- (1,138) (1,138) Transactions of pooled companies -- -- 56 -- -- (355) (299) Translation adjustment -- -- -- -- (776) -- (776) Net income -- -- -- -- -- 7,620 7,620 Unrealized losses on short-term investments -- -- -- (474) -- -- (474) ---------- ---- --------- -------- ------ ------- -------- BALANCE, DECEMBER 31, 1994 24,257,322 243 210,030 (462) (3,111) 243 206,943 Shares issued to employees and directors 300,011 3 1,857 -- -- -- 1,860 Shares issued in private placement 2,000,000 20 32,366 -- -- -- 32,386 Conversion of convertible debentures 208,696 2 2,914 -- -- -- 2,916 Adjustment to recast year end of pooled company -- -- -- -- -- (1,047) (1,047) Transactions of pooled company -- -- 413 -- -- -- 413 Translation adjustment -- -- -- -- (245) -- (245) Net loss -- -- -- -- -- (4,848) (4,848) Unrealized gains on short-term investments -- -- -- 530 -- -- 530 ---------- ---- --------- -------- ------ ------- -------- BALANCE, DECEMBER 31, 1995 26,766,029 $268 $247,580 $ 68 $(3,356) $ (5,652) $238,908 ========== ==== ========= ======== ====== ======= ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. thirty-seven ---------------------------- ORBITAL SCIENCES CORPORATION 12 C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
(IN THOUSANDS) FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993 ---------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME (LOSS) $ (4,848) $ 7,620 $ 7,605 ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Depreciation and amortization expense 22,229 17,198 10,467 Equity in (earnings) losses of affiliates 759 1,264) 2,436) Non-controlling interests in earnings (losses) of consolidated subsidiaries (427) -- -- (Gain) loss on sale of fixed assets and investments (2,196) 4 5 Cumulative effect of accounting changes 4,160 -- (200) Foreign currency translation adjustment (245) (776) (627) CHANGES IN ASSETS AND LIABILITIES: (Increase) decrease in receivables (2,337) 12,536 (3,350) (Increase) decrease in inventories (12,082) (3,638) (2,906) (Increase) decrease in other current assets (2,112) 5,215 (2,585) (Increase) decrease in other assets (1,828) 169 (4,406) Increase (decrease) in payables and accrued expenses (11,423) (10,929) (8,035) Increase (decrease) in deferred revenue 7,090 (22,609) 21,221 Increase (decrease) in other liabilities 942 2,761 596 --------- -------- -------- Net cash provided by (used in) operating activities (2,318) 8,815 20,221 --------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (17,239) (29,939) (38,350) Proceeds from sales of fixed assets 293 -- 10,335 Purchase of investment securities (61,685) (35,731) (51,299) Sale of investment securities 49,168 42,255 24,098 Maturities of investment securities 8,100 7,789 -- Investments in affiliates (18,888) (15,208) (40,307) Payment for business acquisition -- (45,063) (794) --------- -------- -------- Net cash used in investing activities (40,251) (75,897) (96,317) --------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net short-term borrowings (repayments) (17,483) 9,405 10,006 Principal payments on long-term obligations (5,749) (1,883) (2,398) Proceeds from issuance of long-term obligations 20,000 28,730 64,154 Net proceeds from issuances of common stock 34,246 1,753 46,449 Adjustment to recast pooled companies' year ends (1,047) (1,138) -- --------- -------- -------- Net cash provided by financing activities 29,967 36,867 118,211 --------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (12,602) (30,215) 42,115 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 27,919 58,134 16,019 --------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15,317 $ 27,919 $ 58,134) ========= ======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. thirty-eight ---------------------------- ORBITAL SCIENCES CORPORATION 13 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S D E C E M B E R 3 1 , 1 9 9 5 , 1 9 9 4 A N D 1 9 9 3 1 / SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Orbital Sciences Corporation (together with its subsidiaries, "Orbital" or the "Company"), a Delaware corporation, is an international space technology and satellite services company that designs, manufactures, operates and markets a broad range of space products and services that are grouped into four general categories: Launch Vehicles, Satellite and Electronics Systems, Ground Systems and Software, and Communications and Information Services. Disaggregated financial information is presented in Note 15. Preparation of Consolidated Financial Statements Certain reclassifications have been made to the 1994 and 1993 financial statements to conform to the 1995 financial statement presentation. The acquisitions of MacDonald, Dettwiler and Associates Ltd. ("MDA") in November 1995 (the "MDA Acquisition") and Magellan Corporation ("Magellan") in December 1994 (the "Magellan Acquisition") (see Note 4) were recorded using the pooling of interests method of accounting for business combinations and, accordingly, Orbital's 1994 and 1993 historical consolidated financial statements have been restated to reflect these transactions. All financial amounts are stated in U.S. dollars unless otherwise indicated. The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation The consolidated financial statements include the accounts of Orbital, all wholly and partially owned subsidiaries controlled by Orbital, and partnerships in which Orbital directly or indirectly controls the general partner interests. All material transactions and accounts among consolidated entities have been eliminated in consolidation. Revenue Recognition Orbital recognizes revenues on long-term contracts using the percentage of completion method of accounting. Accordingly, (i) revenues on cost-plus-fee contracts are recognized to the extent of costs incurred plus a proportionate amount of fee earned, and (ii) revenues on long-term fixed-price contracts are recognized based on costs incurred in relation to total estimated costs, or based on specific delivery terms and conditions. Anticipated contract losses are recognized as they become known. Revenues from sales of commercial products and services are generally recognized when the product is shipped or the service is performed. Foreign Currency Orbital's foreign operating entities operate in a number of economic environments and deal in a number of foreign currencies. The financial results of foreign operations are translated to U.S. dollars using the current exchange rates for assets and liabilities and using weighted average exchange rates for revenues, expenses, gains and losses. Translation gains and losses relating to foreign operations that are self-contained and integrated within a particular country or economic environment, and therefore are not dependent on the U.S. dollar, are deferred in a separate component of stockholders' equity until there is a realized reduction in Orbital's net investment in the foreign operation. Translation losses (net of related income tax effect) deferred in 1995, 1994 and 1993 were approximately $3,356,000, $3,111,000 and $2,335,000, respectively. Translation gains and losses relating to foreign operations that are a direct and integral component or extension of Orbital's domestic operations, and therefore are dependent on the U.S. dollar, are reported currently as a component of net income. Orbital enters into forward exchange contracts to hedge against foreign currency fluctuations on certain receivables and payables. Gain and losses on contracts to hedge specific foreign currency commitments are deferred and accounted for as part of the transaction. thirty-nine ---------------------------- ORBITAL SCIENCES CORPORATION 14 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S Research and Development Research and development expenses include self-funded product development activities and exclude direct customer-funded development and are expensed as incurred. Research and development expenses are allocated, when appropriate, to U.S. Government contracts under government-mandated cost accounting standards. Depreciation, Amortization and Recoverability of Long-Lived Assets Depreciation and amortization are provided using the straight-line method as follows: Buildings 18 to 20 years Machinery, Equipment and Software 3 to 10 years Satellite Systems estimated useful life of satellite Leasehold Improvements shorter of estimated useful life or lease term
In 1995, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"), which (i) requires that long-lived assets "to be held and used" be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, (ii) requires that long-lived assets "to be disposed of" be reported at the lower of carrying amount or fair value less cost to sell, and (iii) provides guidelines and procedures for measuring an impairment loss that are significantly different from previous guidelines and procedures. The cumulative effect of adopting SFAS 121 on prior years' earnings, relating to the impairment in the carrying amount of certain assets to be disposed of that supported Orbital's orbit transfer vehicle product line, was approximately $4,160,000, and is reported in the 1995 consolidated statement of operations. The effect of adopting SFAS 121 on income from continuing operations for 1995 was not material. Orbital's policy is to review its long-lived assets, including specialized equipment used to support specific space-related products and satellite systems, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company recognizes an impairment loss when the sum of expected future cash flows is less than the carrying amount of the asset. Given the inherent technical and commercial risks within the space industry, it is reasonably possible that the Company's current estimate that it will recover the carrying amount of its long-lived assets from future operations may change. Income Taxes Prior to 1993, the Company recorded its provisions for income taxes using the deferred method. Under the deferred method, provisions for income taxes were computed at current tax rates on reported financial statement income. Deferred income tax provisions represented the tax effect of significant "timing differences" between financial statement income and current taxable earnings. In 1993, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which required a change from the deferred method to the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities, and the effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. SFAS 109 requires that deferred taxes be determined separately for each tax-paying component in each tax jurisdiction. The cumulative effect of adopting SFAS 109 on prior years' earnings was approximately $200,000, and is reported in the 1993 consolidated statement of operations. The effect of adopting SFAS 109 on income forty ---------------------------- ORBITAL SCIENCES CORPORATION 15 from continuing operations for the year ended December 31, 1993 was not material. Income (Loss) per Share Income (loss) per common and common equivalent share is calculated using the weighted average number of common shares (including the Exchangeable Shares (see Note 4)) and common equivalent shares, to the extent dilutive, outstanding during the periods. Income (loss) per common share assuming full dilution is calculated using the weighted average number of common (including the Exchangeable Shares) and common equivalent shares outstanding during the periods, plus the effects of an assumed conversion of the Company's convertible subordinated debentures, after giving effect to all net income adjustments that would result from the assumed conversion. Any reduction of less than 3% in the aggregate has not been considered dilutive in the calculation and presentation of income (loss) per common share assuming full dilution. Common equivalent shares are comprised solely of stock options. Since the Exchangeable Shares have voting and economic rights identical to Orbital common shares, the Exchangeable Shares have been included as common shares in the accompanying consolidated balance sheets. Cash and Cash Equivalents and Short-Term Investments Orbital considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Investments in securities that do not meet the definition of cash equivalents are classified as short-term investments. Since Orbital does not intend to hold its investments in debt and equity securities until maturity and does not actively trade the securities to maximize trading gains, Orbital classifies these securities as "available for sale" and, accordingly, reports such securities at fair value plus accrued interest. Any temporary excess (deficiency) of market value over (under) the underlying cost of the short-term investment is excluded from current period earnings and is reported as unrealized gains (losses) as a separate component of stockholders' equity. At December 31, 1995 and 1994, the Company had approximately $10,700,000 and $7,800,000, respectively, of cash restricted in support of outstanding letters of credit. Inventories Inventories consist of components inventory, work-in-process inventory and finished goods inventory and are generally stated at the lower of cost or net realizable value on a first-in, first-out ("FIFO") or specific identification basis. Inventories, net of allowances for obsolescence, consisted of the following at December 31, 1995 and 1994 (in thousands):
1995 1994 -------- -------- Components and raw materials $ 17,756 $ 13,623 Work-in-process 19,430 12,043 Finished goods 1,341 779 -------- -------- Total $ 38,527 $ 26,445 ======== ========
Components inventory consists primarily of components and raw materials purchased to support future production efforts. Work-in-process inventory consists primarily of (i) costs incurred under long-term fixed-price contracts accounted for using the percentage-of-completion method of accounting applied on a units of delivery basis, and (ii) partially assembled commercial products, and generally includes direct production costs and certain allocated indirect costs (including an allocation of general and administrative costs). Work-in-process inventory has been reduced by contractual progress payments received of $2,631,000 and $4,122,000 at December 31, 1995 and 1994, respectively. Finished goods inventory consists of fully assembled commercial products awaiting shipment. Self-Constructed Assets The Company self-constructs much of its ground support equipment, airborne support equipment and special test equipment used in the manufacture, production and delivery of many of its space-technology products. Orbital also develops and manufactures product improvements and enhancements to existing products for sale, and builds and operates satellite systems used in providing commercial services. forty-one ---------------------------- ORBITAL SCIENCES CORPORATION 16 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S Orbital capitalizes certain costs incurred in constructing ground and airborne support and test equipment, product improvements and enhancements and satellite systems. Capitalized costs generally include direct construction costs and certain allocated indirect costs, and exclude general and administrative and research and development costs. Investments in Affiliates The Company uses the equity method of accounting for its investments in and earnings of affiliates in which the Company has the ability to significantly influence, but not control, such affiliate's operations. In accordance with the equity method of accounting, the Company's carrying amount of an investment in an affiliate is initially recorded at cost and is increased to reflect its share of the affiliate's income and is reduced to reflect its share of the affiliate's losses. Orbital's investment is also increased to reflect contributions to, and decreased to reflect distributions received from, the affiliate. Any difference between the amount of Orbital's investment and the amount of the underlying equity in each affiliate's net assets is amortized over a period of 20 years. The Company capitalizes interest costs on equity method investments when such affiliate has significant assets under construction. At December 31, 1995 and 1994, approximately $10,100,000 and $5,500,000, respectively, of interest costs had been capitalized as part of the historical cost of investments in affiliates. The Company uses the cost method of accounting for investments in affiliates in which it cannot control or significantly influence operations. The Company provides a valuation allowance against an investment in an affiliate when it is determined that recovery of all or part of the investment is not probable. At December 31, 1995 and 1994, approximately $1,100,000 and $3,100,000, respectively, of allowance had been provided to fully reserve against certain investments in affiliates. Approximately $2,000,000 of gain on the sale of an investment was realized in 1995 when Orbital sold one such fully-reserved investment. The gain is reported in net investment income in the accompanying consolidated statement of operations. Excess of Purchase Price Over Net Assets Acquired The Company amortizes the excess of purchase price over net assets acquired related to prior business combinations on a straight-line basis over their estimated useful life, generally 20-40 years. Orbital periodically assesses and evaluates the recoverability of such assets based on current facts and circumstances and the operational viability of its acquired businesses. During 1994, as a result of obtaining additional information subsequent to the September 1993 acquisition of the Applied Science Operation ("ASO") (see Note 4), the purchase price was reallocated to reflect a more accurate valuation of assets and liabilities acquired. As a result of the reallocation, the value of net tangible and identifiable intangible assets acquired increased by approximately $3,000,000, with a resulting decrease to the excess of purchase price over net assets acquired. During 1995 and 1994, as a result of obtaining additional information subsequent to the August 1994 acquisition of Fairchild Space and Defense Corporation ("Fairchild") (see Note 4), the purchase price was reallocated to reflect a more accurate valuation of assets and liabilities acquired. As a result of the reallocations, the value of net tangible and identifiable intangible assets acquired increased by approximately $6,700,000, with a resulting decrease to the excess of purchase price over net assets acquired. Additionally, at the date of the acquisition, Fairchild had certain contingencies relating primarily to the appropriateness and allowability of certain severance costs charged to its U.S. Government contracts from 1989 through 1992, for which a reasonable estimate of fair value could not be determined. During 1995, an estimate of the ultimate outcome of pre-acquisition contingencies was determined, and Orbital accordingly revised the allocation of purchase price to increase liabilities acquired by approximately $500,000, with a resulting increase in the excess of purchase price over net assets acquired. Warranties The Company occasionally accepts warranty clauses in its commercial and government contracts. In the forty-two ---------------------------- ORBITAL SCIENCES CORPORATION 17 event the Company does not purchase insurance coverage to protect itself in connection with such warranty clauses, the Company records a liability for warranty claims when it determines that a specific material liability exists. Orbital has not recorded any liability for potential warranty claims on its existing contracts because these expenses, if any, are not expected to have a material adverse impact on the Company's financial condition or results of operations. The Company at times provides limited warranties on certain commercial products and accrues an estimate of expected warranty costs based on historical experience. 2 / TRANSACTIONS WITH ALLIANT TECHSYSTEMS, INC. In November 1988, Orbital and Hercules Incorporated ("Hercules") entered into a joint venture agreement relating to the development and production of the Pegasus space launch vehicle (the "Joint Venture Agreement"). In 1994, Alliant Techsystems, Inc. ("Alliant") acquired the assets of Hercules Aerospace Company (a wholly owned subsidiary of Hercules) and, in connection therewith, assumed the rights and responsibilities of Hercules with respect to the Joint Venture Agreement. During 1995, Orbital and Alliant replaced the Joint Venture Agreement with a joint teaming agreement to provide for the continuation of joint performance on the Pegasus and Taurus space launch vehicle programs (the "Joint Teaming Agreement"). The Joint Teaming Agreement provides, among other things, that Orbital will perform as the prime contractor for all present and future Pegasus and Taurus missions and Alliant will perform as a solid rocket motor and payload fairing subcontractor to Orbital on the Pegasus program and as a solid rocket motor subcontractor to Orbital on the Taurus program. As a subcontractor, Alliant will receive firm-fixed prices for its subcontracts and will no longer share in overall contract profits and losses, but will share in the costs and benefits associated with certain defined outstanding contingencies on current contracts. The Joint Teaming Agreement will continue through December 31, 2005, unless terminated earlier by mutual agreement. Alliant has also agreed to a final dismissal with prejudice of all present and future claims and litigation related to the Joint Venture Agreement, including (i) the January 1994 lawsuit filed by Hercules against Orbital alleging breaches of certain representations and warranties by Orbital in the 1988 stock purchase agreement between Hercules and Orbital, and (ii) the July 1994 lawsuit filed by Hercules against Orbital alleging breach of fiduciary duty and breach of contract in the determination of Orbital's recoverable costs pursuant to the Joint Venture Agreement. 3 / INVESTMENTS IN AFFILIATES ORBCOMM Partnerships. In 1993, the Company's majority owned subsidiary, Orbital Communications Corporation ("OCC"), and Teleglobe Mobile Partners, an affiliate of Teleglobe Inc., formed a partnership, ORBCOMM Global, L.P. ("ORBCOMM Global"), formerly known as ORBCOMM Development Partners, L.P., for the two-phased design, development, construction, integration, test and operation of a low-Earth orbit satellite communications system (the "ORBCOMM System"). OCC and Teleglobe Mobile Partners are each 50% general partners in ORBCOMM Global. OCC's and Teleglobe Mobile's total capital commitments to ORBCOMM Global are approximately $75,000,000 and $85,000,000, respectively, of which approximately $62,000,000 and $35,000,000, respectively, had been contributed through December 31, 1995. Additionally, OCC is a 2% general partner in ORBCOMM USA, L.P. ("ORBCOMM USA") and Teleglobe Mobile is a 2% general partner in ORBCOMM International Partners, L.P. ("ORBCOMM International"), two partnerships formed to market the ORBCOMM System. ORBCOMM Global is a 98% general partner in each of the two marketing partnerships. Pursuant to the terms of the partnership agreements, (i) OCC and Teleglobe Mobile share equal responsibility for the operational and financial affairs of ORBCOMM Global; (ii) OCC controls the operational and financial affairs of ORBCOMM USA; and (iii) Teleglobe Mobile controls the operational and finan- forty-three ---------------------------- ORBITAL SCIENCES CORPORATION 18 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S cial affairs of ORBCOMM International. Since OCC is unable to control, but is able to exercise significant influence over, ORBCOMM Global's and ORBCOMM International's operating and financial policies, the Company is accounting for its investments in ORBCOMM Global and ORBCOMM International using the equity method of accounting. Since OCC is able to control the operational and financial affairs of ORBCOMM USA, the Company consolidates the accounts of ORBCOMM USA. Orbital is the primary supplier of the communications satellites, launch vehicles and ground systems to ORBCOMM Global, and successfully launched the first two ORBCOMM System satellites in April 1995. During 1995, 1994 and 1993, Orbital recorded contract revenues on sales to ORBCOMM Global of approximately $49,187,000, $30,048,000 and $38,207,000, respectively, and eliminated as equity in earnings (losses) of affiliates 50% of its profits on those sales since ORBCOMM Global is capitalizing substantially all its purchases from Orbital. At December 31, 1995 and 1994, Orbital had approximately $8,900,000 and $7,900,000, respectively, in receivables from ORBCOMM Global. At December 31, 1995, ORBCOMM Global had total assets, total liabilities and total partners' capital of $109,030,000, $14,428,000 and $94,602,000, respectively. ORBCOMM Global had approximately $900,000 in international distribution fee revenues in 1995 (none in 1994) and net income (loss) of approximately $55,000 and ($9,000) for the years ended December 31, 1995 and 1994, respectively. Based on its current assessment of the overall business prospects of the ORBCOMM partnerships and the ORBCOMM System, the Company currently believes its investment of approximately $73,000,000 in ORBCOMM Global is fully recoverable. If, in the future, implementation of the ORBCOMM System is significantly delayed, significantly restricted or abandoned, the Company may be required to expense part or all of its investment. Radarsat International Inc. The Company owns an approximate 25% equity interest in Radarsat International Inc. ("RSI"), a Canadian-based company specializing in satellite-based remote sensing. RSI successfully launched its first remote sensing satellite in November 1995 and expects to begin generating revenues in 1996. Orbital is accounting for its investment in RSI using the equity method of accounting. EarthWatch, Incorporated. The Company owns an approximate 1% equity interest in EarthWatch, Incorporated ("EarthWatch"), a U.S.-based company developing high-resolution commercial imaging services. The Company has agreed to acquire 300,000 Series B Preferred Shares of EarthWatch for approximately $3,000,000, payable in equal quarterly installments beginning in 1995. At December 31, 1995, Orbital had paid approximately $1,000,000 of this commitment. Orbital accounts for this investment using the cost method of accounting. American Space Lines. During 1995, Orbital and Rockwell International Corporation, pursuant to a cooperative agreement with NASA, endeavored to establish American Space Lines, a joint venture for the development of a technologically advanced reusable launch system. The joint venture agreement was not formally signed and, in the fourth quarter of 1995, Orbital expensed $3,000,000 of costs related to the termination of the development effort in early 1996. 4 / BUSINESS COMBINATIONS Purchase Transactions. On September 17, 1993, Orbital acquired ASO, a business unit of The Perkin-Elmer Corporation (the "ASO Acquisition"). As a result of the ASO Acquisition, the Company now produces and markets space- and ground-based sensors and instruments primarily for agencies of the U.S. Government and commercial aerospace companies. The ASO Acquisition has been accounted for using the purchase method of accounting and, accordingly, the purchase price of approximately $5,800,000 (consisting of 320,000 shares of the Company's Common Stock, $600,000 in cash and $200,000 in transaction expenses) was allocated to assets and liabilities ac- forty-four ---------------------------- ORBITAL SCIENCES CORPORATION 19 quired based on estimates of fair values as of the date of acquisition. The excess of purchase price over net assets acquired is being amortized on a straight-line basis over 20 years. On April 6, 1994, the Company (as a result of its acquisition of MDA, see below) acquired all the outstanding common shares of The PSC Communications Group Inc. ("PSC") from PSC's former shareholders (the "PSC Acquisition"). As a result of the PSC Acquisition, the Company now provides network communications training and consulting for various commercial and governmental entities. The PSC Acquisition has been accounted for using the purchase method of accounting and, accordingly, the purchase price of approximately $3,750,000 (excluding a maximum of approximately 100,000 shares of Orbital Common Stock issuable based on future earnings levels achieved by PSC) was allocated to assets and liabilities acquired based on estimates of fair values as of the date of acquisition. The excess of purchase price over net assets acquired is being amortized on a straight-line basis over 20 years. On August 11, 1994, the Company acquired all the outstanding common stock of Fairchild from Matra Aerospace, Inc. (the "Fairchild Acquisition"). As a result of the Fairchild Acquisition, the Company has expanded its satellite systems and space payload product lines and enhanced its spacecraft production capabilities. The Fairchild Acquisition has been accounted for using the purchase method of accounting and, accordingly, the purchase price of approximately $71,000,000 (consisting of 2,424,242 shares of the Company's Common Stock, $40,000,000 in cash and approximately $800,000 in transaction expenses) was allocated to assets and liabilities acquired based on estimates of fair values as of the date of acquisition. The excess of purchase price over net assets acquired is being amortized on a straight-line basis over 40 years. ASO's results of operations for the 14-week period ended December 31, 1993 and Fairchild's results of operations for the 19-week period ended December 31, 1994 are included in Orbital's 1993 and 1994 consolidated results of operations, respectively. As a result of recasting MDA's fiscal year end, Orbital's consolidated results of operations for 1994 include PSC's financial results for the full year. Pooling of Interests Transactions. On December 28, 1994, the Company acquired all the outstanding common stock of Magellan from Magellan's former shareholders in a tax-free merger. As a result of the Magellan Acquisition, Orbital now manufactures, markets and sells satellite-based navigation and communications equipment for consumer and industrial markets worldwide and has expanded its GPS satellite-based navigation applications. The Magellan Acquisition was consummated by exchanging 2,640,441 shares of the Company's Common Stock for all of Magellan's outstanding common stock. The Company also granted 409,556 options to acquire Orbital Common Stock (see Note 12) to Magellan employees who, at the date of the acquisition, held options to acquire Magellan common stock. The Magellan Acquisition is accounted for using the pooling of interests method of accounting and, accordingly, Orbital's historical consolidated financial statements have been restated to include Magellan's financial position, results of operations and cash flows. Merger expenses relating to the Magellan Acquisition of approximately $500,000 were charged to earnings during the three months ended December 31, 1994 and are included in other expenses in the accompanying consolidated statement of operations. Prior to the acquisition, Magellan's financial results were prepared on a June 30 fiscal year basis. Orbital's restated consolidated financial statements for 1993 and 1992 include Magellan's historical financial results for its fiscal years ended June 30, 1994 and 1993, respectively. Orbital's consolidated financial statements for the year ended December 31, 1994 include Magellan's financial results for the twelve-month period ended December 31, 1994. The effect of recasting Magellan's year end for 1994 has been charged to Orbital's retained earnings as of January 1, 1994. The charge to retained earnings eliminates the effect of forty-five ---------------------------- ORBITAL SCIENCES CORPORATION 20 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S including Magellan's results of operations for the six-month period ended June 30, 1994 of $1,138,000 in Orbital's 1994 and 1993 consolidated results of operations. Magellan's revenues for the same six-month period were approximately $18,500,000. On November 17, 1995, the Company acquired all the outstanding common shares of MDA from MDA's former shareholders in a merger designed to be tax-free to MDA's Canadian shareholders. As a result of the MDA Acquisition, Orbital is now a leading supplier of commercial satellite remote sensing ground systems, capable of handling all major optical and radar imaging satellites. Orbital also now provides advanced space-qualified software, air traffic control systems, defense electronics systems and network communications training and consulting. Pursuant to the terms of the MDA Acquisition, a newly established, wholly owned Canadian subsidiary of Orbital ("Acquisition Subsidiary") issued exchangeable shares (the "Exchangeable Shares") in exchange for all the issued and outstanding MDA common shares. The Exchangeable Shares have voting and economic rights with respect to Orbital identical to Orbital Common Stock and are exchangeable into Orbital Common Stock at the option of the holders. As part of the MDA Acquisition, Acquisition Subsidiary also issued 10,000 shares of Class B Preferred Stock to a financial advisor in satisfaction of a portion of the fees owed to that advisor. Additionally, Orbital issued one share of Series A Special Voting Preferred Stock to a voting trust to act as voting trustee on behalf of the holders of the Exchangeable Shares. The Orbital Series A Special Voting Preferred Stock has voting rights, privileges and preferences required to secure the voting rights relating to the Orbital Common Stock granted for the benefit of the holders of the Exchangeable Shares. The MDA Acquisition was consummated by issuing 4,087,126 Exchangeable Shares for all of MDA's outstanding common shares. The Company also granted 328,399 options to acquire Orbital Common Stock (see Note 12) to MDA employees who, at the date of the acquisition, held options to acquire MDA common shares. The MDA Acquisition is accounted for using the pooling of interests method of accounting and, accordingly, Orbital's historical consolidated financial statements have been restated to include MDA's financial position, results of operations and cash flows. Merger expenses relating to the MDA Acquisition of approximately $3,400,000 were charged to earnings during the three months ended December 31, 1995 and are included in other expenses in the accompanying consolidated statement of operations. Prior to the acquisition, MDA's financial results were prepared on a March 31 fiscal year basis. Orbital's restated consolidated financial statements for 1994 and 1993 include MDA's historical financial results for its fiscal years ended March 31, 1995 and 1994, respectively. Orbital's consolidated financial statements for the year ended December 31, 1995 include MDA's financial results for the twelve-month period ended December 31, 1995. The effect of recasting MDA's year end for 1995 has been charged to Orbital's retained earnings as of January 1, 1995. The charge to retained earnings eliminates the effect of including MDA's results of operations for the three-month period ended March 31, 1995 of $1,047,000 in Orbital's 1995 and 1994 consolidated results of operations. MDA's revenues for the same three-month period were approximately $20,634,000. The following table reconciles Orbital's previously reported operating results to operating results restated to reflect the pooling of interests with Magellan and MDA (in thousands):
Years Ended December 31, 1994 1993 --------- -------- REVENUES: As previously reported $ 221,946 $190,186 Magellan NA 32,901 MDA 79,630 77,097 --------- -------- Restated $ 301,576 $300,184 ========= ======== NET INCOME: As previously reported $ 5,389 $ 4,640 Magellan NA 1,756 MDA 2,231 1,209 --------- -------- Restated $ 7,620 $ 7,605 ========= ========
forty-six ---------------------------- ORBITAL SCIENCES CORPORATION 21 5 / SHORT-TERM INVESTMENTS The following table sets forth the aggregate amortized cost, aggregate fair value and gross unrealized gains and losses for Orbital's short-term investments in debt and equity securities at December 31, 1995 and 1994 (in thousands):
Amortized Fair Unrealized 1995 Cost Value Gains Losses --------------------------------------------------- Debt securities $ 19,645 $ 19,713 $ 70 $ (2) ========= ======== ======= ===== 1994 Debt securities $ 8,755 $ 8,663 $ -- $ (92) Preferred stock 4,133 3,763 -- (370) --------- -------- ------- ------ Total $ 12,888 $ 12,426 $ -- $ (462) ========= ======== ======= ======
Orbital realized net losses of approximately $261,000 and $353,000 on sales of short-term investments in 1995 and 1994, respectively. Debt securities (at fair value) with contractually scheduled maturities scheduled to mature in 1996, 1997 through 2000, and beyond 2000 are in the amounts of $14,690,000, $4,034,000 and $989,000, respectively. 6 / RECEIVABLES AND ACCRUED EXPENSES The components of receivables are as follows (in thousands):
December 31, 1995 1994 --------- --------- Billed and billable $ 63,552 $ 56,912 Recoverable costs and accrued profit not billed 47,855 51,859 Retainages due upon contract completion 7,724 8,109 Allowance for doubtful accounts (773) (859) --------- --------- Total $ 118,358 $ 116,021 ========= =========
Recoverable costs and accrued profit not billed and retainages due upon contract completion at December 31, 1995 are amounts due primarily within one year and will be billed on the basis of contract terms and delivery schedules. Additionally, provisions of certain of the Company's agreements with subcontractors provide for payments to subcontractors on the basis of contract terms and delivery schedules, which at December 31, 1995 are also due primarily within one year. The accuracy and appropriateness of Orbital's direct and indirect costs and expenses under its government contracts, and therefore its receivables recorded pursuant to such contracts, are subject to extensive regulation and audit, including by the U. S. Defense Contract Audit Agency or by other appropriate agencies of the U.S. Government, which have the right to challenge Orbital's cost estimates or allocations with respect to any such contract. Additionally, a substantial portion of the payments to the Company under government contracts are provisional payments that are subject to potential adjustment upon audit by such agencies. In the opinion of management, any adjustments likely to result from inquiries or audits of its contracts will not have a material adverse impact on the Company's financial condition or results of operations. At December 31, 1995 and 1994, $26,470,000 and $27,792,000, respectively, were receivable from foreign customers. The Company enters into forward exchange contracts to hedge against foreign currency fluctuations on certain receivables and payables denominated in such foreign currencies. Accordingly, Orbital is subject to off-balance sheet market risk for the possibility that future changes in market prices may make the forward exchange contracts less valuable or more onerous. The following table summarizes outstanding foreign exchange contracts at December 31, 1995 to (purchase) sell foreign currencies, along with current market values (U.S. dollars, in thousands): forty-seven ---------------------------- ORBITAL SCIENCES CORPORATION 22 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
- ---------------------------------------------------------------- Foreign Currency Current Unrealized Currency Hedged Contract Market Gain Hedged Against Amount Value (Loss) - ---------------------------------------------------------------- Australian Dollars CD $ (73) $ (74) $ 1 Belgian Francs CD 2,762 2,850 (88) Swiss Francs CD (1) (1) - ECU CD 7,628 7,406 222 ECU PS 106 110 (4) Pounds Sterling CD (241) (244) 3 Japanese Yen CD 2,831 2,701 130 Malaysian Riggits CD 56 53 3 U.S. Dollars CD 1,284 1,288 (4) - --------------------------------------------------------------- CD = Canadian Dollars PS = Pounds Sterling - ---------------------------------------------------------------
Accrued expenses consist of the following (in thousands):
December 31, 1995 1994 --------- --------- Payroll, payroll taxes and fringe benefits $ 17,856 $ 19,113 Accrued contract costs 9,787 10,257 Other accrued expenses 2,279 14,233 --------- --------- Total $ 29,922 $ 43,603 ========= =========
7 / PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following (in thousands):
December 31, 1995 1994 --------- --------- Land $ 1,422 $ 1,349 Buildings and leasehold improvements 17,455 18,433 Machinery and equipment 90,061 85,348 Equipment under construction 28,301 37,262 Purchased software and technical drawings 7,340 7,107 Accumulated depreciation and amortization (53,067) (46,409) --------- --------- Total $ 91,512 $ 103,090 ========= =========
Interest expense of approximately $5,700,000, $5,500,000 and $3,500,000 was capitalized during 1995, 1994 and 1993, respectively, as part of the historical cost of equipment under construction, satellite systems under construction and investments in affiliates. 8 / SATELLITE SYSTEMS Orbital owns and operates several satellite systems, and is in the process of constructing additional satellite systems, that provide or will provide high-resolution imaging, remote sensing services and Earth observation services to government and commercial customers. Generally, the Company does not begin construction of a specific project until a customer has committed to purchase future services generated by or provided from the specific satellite system. Orbital expenses the costs of developing and constructing these systems until such time that technological and economic feasibility have been established. Once established, Orbital capitalizes remaining construction costs, net of non-refundable payments received from customers. Any refundable advance payments for data received from customers are deferred until such time as the data is delivered. At December 31, 1995 and 1994, Orbital had capitalized approximately $14,910,000 and $6,788,000, respectively, relating to various satellite systems that are either operating or under construction. 9 / SHORT-TERM BORROWINGS The Company has a revolving credit facility that provides for total borrowings from an international syndicate of six banks of up to $65,000,000, subject to a defined borrowing base composed of certain contract receivables. At December 31, 1995 and 1994, approximately $3,000,000 and $22,500,000, respectively, of borrowings were outstanding against an available facility limit of approximately $23,500,000 and $24,800,000, respectively. The interest rate charged under the facility is a variable rate based on the prime rate, the Federal Funds rate or adjusted LIBOR. As of December 31, 1995, the interest rate on outstanding borrowings under this facility was approximately 9.5%. Borrowings are secured by contract receivables and certain other assets. The facility restricts the payment of dividends and contains certain covenants with respect to the Company's working capital, fixed charge ratio, leverage ratio and tangible net worth, and expires in September 1997. forty-eight ---------------------------- ORBITAL SCIENCES CORPORATION 23 In September 1995, Orbital entered into a $7,000,000 unsecured demand line of credit with an international bank. The line is repayable upon demand and bears interest at the prime rate or LIBOR. No amounts were outstanding on the line at December 31, 1995. The Company maintains a $5,000,000 line of credit with a domestic bank, subject to a defined borrowing base. At December 31, 1995, $2,000,000 was outstanding against a facility limit of $3,000,000, and was secured by all of Magellan's assets. The interest rate on outstanding borrowings was approximately 9% at December 31, 1995. 10 / LONG-TERM OBLIGATIONS The following sets forth the Company's long-term obligations, excluding capital lease obligations (see Note 13), at December 31, 1995 and 1994 (in thousands):
December 31, 1995 1994 ---------- ---------- 7.00% Secured Note, principal and interest due monthly through December 1998 $ 1,876 $ 2,422 7.74-9.35% Secured Notes, principal and interest due monthly through September 1997-October 1999 17,816 23,065 8.95% Secured Bank Note, principal and interest due monthly through September 1999 2,310 2,336 8.25% Secured Bank Note, principal and interest due monthly through July 1997 1,707 1,779 8.25% Secured Bank Note, interest due monthly through July 1997 2,633 2,751 6.75% Convertible Subordinated Debentures, interest due semi-annually, principal due March 2003 56,000 59,000 10.50% Unsecured Notes, interest due monthly, principal due June 2001 20,000 -- ---------- ---------- 102,342 91,353 Less current portion (6,084) (5,798) ---------- ---------- Total $ 96,258 $ 85,555 ========== ==========
The 7.00% secured note is collateralized by certain equipment located at the Company's Pomona, California facility. The 7.74-9.35% secured notes are collateralized by certain equipment located at the Company's Germantown, Maryland facility. The 8.95% secured bank note is collateralized by the Company's satellite integration and test facility located in Dulles, Virginia. Additionally, Orbital is guarantor on approximately $5,000,000 of debt incurred by ORBCOMM Global. The Company has two secured bank borrowing agreements, totaling approximately $60,000,000, of which $13,500,000 was available at December 31, 1995. The secured bank notes, pursuant to a pari-passu agreement between two international banks, provide for borrowings at a variable rate based on the prime rate (approximately 8.25% at December 31, 1995), and are collateralized by receivables, inventory and certain other assets. In February 1993, the Company completed a public offering of $59,000,000 in convertible subordinated debentures (the "Convertible Debentures"). The Convertible Debentures mature in March 2003, are convertible into the Company's Common Stock at any time prior to maturity at a conversion price of $14 3/8 per share, and bear interest payable semi-annually in arrears at 6.75%. The Convertible Debentures are redeemable at the option of the Company, in whole or in part, at any time on or after March 1, 1996 at certain defined redemption prices, plus accrued interest to the date of redemption. Upon a defined change in control, each holder of Convertible Debentures has the right to require the Company to repurchase the Convertible Debentures for the principal amount, plus accrued interest. The Convertible Debentures are subordinated to all existing and future defined senior indebtedness of the Company. During 1995, $3,000,000 of Convertible Debentures were converted to Common Stock at the request of the holders. The fair value of Orbital's long-term obligations at December 31, 1995 and 1994 is estimated at approximately $106,000,000 and $111,000,000, respectively, based on quoted market prices or on current rates of- forty-nine ---------------------------- ORBITAL SCIENCES CORPORATION 24 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S fered for debt of similar remaining maturities. Scheduled maturities of long-term debt for 1996, 1997, 1998, 1999 and 2000 are $6,100,000, $8,700,000, $5,200,000, $5,600,000 and $263,000, respectively. 11 / INCOME TAXES The provisions (benefit) for income taxes for 1995, 1994 and 1993 consist of the following (in thousands):
Years Ended December 31, 1995 1994 1993 --------- --------- -------- CURRENT PROVISION: Federal $ 33 $ 563 $ 599 Foreign 1,180 756 128 State -- 732 502 DEFERRED PROVISION: Federal (356) 342 1,006 Foreign (2,159) (93) (13) State -- 444 181 --------- --------- -------- Total $ (1,302) $ 2,744 $ 2,403 ========= ========= ========
The income tax provisions (benefit) are different from those computed using the statutory U.S. Federal income tax rate as set forth below:
Years Ended December 31, 1995 1994 1993 -------- -------- ------- U.S. Federal statutory rate (34.0)% 34.0% 34.0% Tax-exempt interest (13.7) (5.7) (5.5) Intangible amortization 50.3 9.2 8.0 U.S. Federal tax credits -- (7.2) (13.1) State income taxes, net of Federal benefits -- 2.3 2.0 Foreign sales corporation -- (1.3) (0.1) Foreign income taxes, net (53.1) (1.4) (2.5) Disqualifying stock sales (16.0) -- -- Other, net 1.1 (3.4) 1.7 -------- -------- ------- Effective Rate (65.4)% 26.5% 24.5% ======== ======== =======
The tax effects of significant temporary differences at December 31, 1995 and 1994 are as follows (in thousands):
December 31, 1995 1994 --------- --------- TAX ASSETS: Non-deductible financial statement accruals $ 31,829 $ 11,996 Federal net operating loss carryforward 40,850 28,214 Intangible assets 6,865 8,900 Federal and foreign tax credit carryforward 16,342 16,342 --------- --------- 95,886 65,452 Valuation allowance (65,041) (43,596) --------- --------- Tax assets, net $ 30,845 $ 21,856 ========= ========= TAX LIABILITIES: Percentage of completion accounting $ 2,555 $ 2,585 Excess tax depreciation 7,198 5,349 Excess deductions for tax reporting purposes 18,132 13,475 --------- --------- Tax liabilities $ 27,885 $ 21,409 ========= =========
The Company established deferred tax assets in connection with its ASO and Fairchild acquisitions (see Note 4) in the amounts of $2,425,000 and $35,446,000, respectively, and deferred tax liabilities of $2,175,000 and $2,337,000, respectively. The Company also established a valuation allowance of approximately $33,109,000 against certain deferred tax assets acquired in connection with the Fairchild Acquisition. In 1995, approximately $2,100,000 of income before benefit for income taxes and cumulative effect of an accounting change was generated from foreign sources. Approximately 27.9% and 13.5% of the Company's 1994 and 1993 income before provision for income taxes and cumulative effect of accounting changes, respectively, was generated from foreign sources. The Company had Federal net operating loss and tax credit carryforwards of approximately $102,000,000 and $3,000,000, respectively, at December 31, 1995 that may be utilized through the year 2004, subject to certain annual limitations and other restrictions, of which portions expire beginning in 2001. fifty ---------------------------- ORBITAL SCIENCES CORPORATION 25 12 / COMMON STOCK, STOCK OPTIONS AND OTHER COMPENSATION PLANS In December 1993, the Company completed its third public offering of Common Stock consisting of 2,923,000 shares, receiving net proceeds of approximately $45,300,000. In June 1995, the Company completed a private placement of 2,000,000 shares of its Common Stock, receiving net proceeds of approximately $32,400,000. The Company's shares were placed with various international institutional investors and the private placement was exempt from public registration pursuant to Regulation S of the Securities Act of 1933, as amended. The Company's 1990 Stock Option Plan (the "1990 Plan") provides for grants of either incentive or non-qualified stock options to officers, employee directors and general employees of the Company and its subsidiaries. Under the terms of the 1990 Plan, incentive stock options may not be granted at less than 100% of the fair market value at the date of grant, and non-qualified options may not be granted at less than 85% of the fair market value at the date of grant. Each option under the 1990 Plan vests at a rate set forth by the Board of Directors in each individual option agreement, generally in one-third increments over a three-year period following the date of grant. Options expire no more than ten years following the grant date. The 1990 Plan currently provides for the granting of up to 2,975,000 shares of the Company's Common Stock. The Company also maintains the 1990 Stock Option Plan for Non-Employee Directors, which provides solely for automatic grants of non-qualified stock options to purchase shares to eligible non-employee directors of the Company. The following table summarizes the option activity under the company's stock option plans (including option plans assumed by the Company as a result of the Magellan and MDA acquisitions) for the last three years:
Outstanding Number of Option Price and Shares per Share Exercisable --------- ------------- --------- OUTSTANDING AT DECEMBER 31, 1992 1,223,102 $ 1.82-$20.00 502,802 Grants 234,559 $ 3.51-$11.50 Exercised (84,474) $ 7.50-$15.30 Cancelled/Expired (48,989) $10.50-$20.00 --------- ------------- OUTSTANDING AT DECEMBER 31, 1993 1,324,198 $ 1.82-$20.00 558,422 Grants 978,560 $ 3.51-$22.00 Exercised (107,387) $ 3.51-$15.30 Cancelled/Expired (78,476) $10.20-$22.00 --------- ------------- OUTSTANDING AT DECEMBER 31, 1994 2,116,895 $ 1.82-$22.00 997,981 Grants 553,966 $ 7.47-$18.81 Exercised (300,011) $ 3.51-$15.30 Cancelled/Expired (130,325) $ 3.51-$22.00 --------- ------------- OUTSTANDING AT DECEMBER 31, 1995 2,240,525 $ 1.82-$22.00 1,133,713 --------- ------------- ---------
OCC adopted a stock option plan in 1992 (the "ORBCOMM Plan"). The ORBCOMM Plan provides for grants of incentive and non-qualified stock options to purchase OCC common stock to officers and employees of OCC and the Company. Under the terms of the ORBCOMM Plan, incentive stock options may not be granted at less than 100% of the fair market value at the date of grant and non-qualified options may not be granted at less than 85% of the fair market value of OCC common stock at the date of grant as determined by a committee consisting of two OCC Board members and two members appointed by Teleglobe Mobile. The options vest at a rate set forth by the Board of Directors in each individual option agreement, generally in one-fourth increments over a four-year period. Certain provisions of the ORBCOMM Plan require OCC to repurchase the common stock acquired pursuant to the options beginning in 1995 if a public market for OCC common stock has not been established. During 1994 and 1993, 118,650 and 99,500 options, respectively, were granted under the ORBCOMM Plan at prices ranging from $1.50 to $14.00 per share; none were granted in 1995. At December 31, 1995, 1994 and 1993, 545,900 options, 599,074 options and 496,274 options, respectively, were outstanding, and 411,086 fifty-one ---------------------------- ORBITAL SCIENCES CORPORATION 26 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S options were exercisable at December 31, 1995. Approximately 9,000 and 44,000 ORBCOMM options were exercised and cancelled, respectively, during 1995. These OCC options are excluded from the above table. Compensation expense of approximately $55,000, $234,000 and $356,000 related to various option grants under the Company's plans was recognized for the years ended December 31, 1995, 1994 and 1993, respectively. In 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), which is effective for Orbital's year ending December 31, 1996. SFAS 123 recommends, but does not require, the adoption of fair value accounting for stock-based compensation, including common stock options issued to employees. Orbital does not currently intend to adopt fair value accounting for stock-based compensation as recommended by SFAS 123. As of December 31, 1995, the Company had five Deferred Salary Profit-Sharing Plans (the "Plans") in accordance with Section 401(k) of the Internal Revenue Code of 1986, as amended. Generally, all full-time employees are eligible for participation in the Plans. Company contributions to the Plans are made based on certain Plan provisions and at the discretion of the Board of Directors, and were approximately $5,015,000, $2,991,000 and $2,418,000 in 1995, 1994 and 1993, respectively. Total Company contributions to foreign defined contribution plans in 1995, 1994 and 1993 were $1,518,000, $1,436,000 and $1,292,000, respectively. Orbital also adopted a deferred compensation plan in 1995; participation in the plan in 1995 was not material. As part of the Fairchild Acquisition, the Company also acquired a defined benefit plan covering substantially all Fairchild employees. Shortly after the Fairchild Acquisition, Orbital curtailed the defined benefit plan by suspending future participation in the plan. The approximate $2,500,000 excess of fair value of plan assets over the projected benefit obligation at the date of curtailment was recorded in the allocation of the purchase price. As a result of the curtailment, periodic pension cost was not material in 1995 and 1994 and is not expected to be material in the future. Also as part of the Fairchild Acquisition, the Company acquired a post-retirement health care plan covering employees retiring from Fairchild on or after attaining age 55 who have rendered at least 10 years of service. Orbital also curtailed the post-retirement plan by suspending future participation in the plan. The approximate $2,800,000 unfunded accumulated post-retirement benefit obligation at the date of curtailment was recorded in the allocation of the purchase price. As a result of the curtailment, post-retirement benefit cost was not material in 1995 and 1994 and is not expected to be material in the future. 13 / LEASE COMMITMENTS Aggregate minimum rental commitments under non-cancelable operating and capital leases (primarily for office space and equipment) as of December 31, 1995, are as follows (in thousands):
Operating Capital ---------- ---------- 1996 $ 11,300 $ 935 1997 8,800 608 1998 8,200 200 1999 8,100 -- 2000 8,100 -- 2001 and thereafter 40,200 -- --------- ------- $ 84,700 $ 1,743 ========= Less: Interest portion at 10% (188) 1,555 Less: Current portion (823) ------- $ 732 =======
Rent expense under operating leases for 1995, 1994 and 1993 was $11,215,000, $10,624,000 and $9,300,000, respectively. 14 / SUPPLEMENTAL CASH FLOW DISCLOSURES Supplemental cash flow disclosures related to the ASO, PSC and Fairchild purchase business combinations are as follows (in tho usands): fifty-two ---------------------------- ORBITAL SCIENCES CORPORATION 27
Fairchild PSC ASO 1994 1994 1993 --------- ------- -------- Fair value of assets acquired $95,000 $ 4,585 $ 11,037 Liabilities assumed or established (23,200) (835) (5,437) Value of common stock issued to seller (31,000) -- (5,000) --------- ------- -------- Cash paid for acquisition $40,800 $ 3,750 $ 600 ========= ======= ========
Cash payments for interest and income taxes for 1995, 1994 and 1993 are as follows (in thousands):
Years ended December 31, 1995 1994 1993 --------- -------- -------- Interest paid $ 9,906 $ 11,831 $ 8,765 Income taxes paid, net of refunds 1,339 2,447 2,643
15 / DISAGGREGATED FINANCIAL INFORMATION Industry Segment Information. Orbital's operations have been classified into two industry segments, "Space-Technology Products" and "Satellite-Based Services." Space-Technology Products include Launch Vehicles, including space and suborbital launch vehicles and technologically advanced launch vehicles; Satellite and Electronics Systems, including satellites, space sensors and instruments, and space payloads and experiments, as well as avionics and other electronics equipment; and Ground Systems and Software, including satellite ground systems and various software products and network consulting services. Satellite-Based Services include satellite-based mobile data communications, navigation and communications products and services and Earth observation services, along with various environmental monitoring products. The following table presents revenues, operating income, identifiable assets, capital expenditures and depreciation and amortization by industry segment for 1995, 1994 and 1993. Operating income is total revenues less costs of goods sold, research and development expenses, selling, general and administrative expenses and amortization of goodwill (where applicable); identifiable assets are those assets used in the operations of each industry segment. There were no significant intersegment sales or transfers during 1995, 1994 and 1993.
Years Ended December 31, (In Thousands) 1995 1994 1993 --------- --------- --------- SPACE-TECHNOLOGY PRODUCTS: Revenues $ 295,378 $ 242,767 $ 230,093 Operating Income 7,117 9,787 10,794 Identifiable Assets 236,569 236,305 189,686 Capital Expenditures 12,108 26,158 2,639 Depreciation and Amortization 15,412 11,507 6,533 Impairment Losses 4,160 -- -- SATELLITE-BASED SERVICES: Revenues 68,974 58,809 71,390 Operating Income (1,289) 4,587 2,787 Identifiable Assets 94,882 87,360 61,664 Capital Expenditures 2,178 2,617 2,770 Depreciation and Amortization 872 1,048 570 CORPORATE, ADJUSTMENTS AND GOODWILL: Revenues (32) -- (1,299) Operating Income (4,684) (1,999) (1,293) Identifiable Assets 60,062 42,778 89,380 Goodwill 75,395 74,599 27,249 Capital Expenditures 2,953 1,164 2,941 Depreciation and Amortization 2,724 2,285 1,730 Goodwill Amortization 3,221 2,358 1,634 CONSOLIDATED: Revenues 364,320 301,576 300,184 Operating Income 1,144 12,375 12,288 Identifiable Assets and Goodwill 466,908 441,042 367,979 Capital Expenditures 17,239 29,939 38,350 Depreciation and Total Amortization 22,229 17,198 10,467 Impairment Losses 4,160 -- --
Domestic and Foreign Operations. Orbital's operations are conducted primarily from office, manufacturing and integration facilities in the United States and Canada, as follows (in thousands): fifty-three ---------------------------- ORBITAL SCIENCES CORPORATION 28 N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Years Ended December 31, 1995 1994 1993 -------- -------- --------- REVENUES: United States $290,914 $221,946 $ 223,087 Canada 68,997 74,408 72,477 United Kingdom and Other 4,409 5,222 4,620 OPERATING INCOME (LOSS): United States $ (2,413) 9,662 10,969 Canada 3,964 2,796 1,052 United Kingdom and Other (407) (83) 267 IDENTIFIABLE ASSETS: United States $420,078 $396,228 $ 322,099 Canada 44,291 42,302 44,002 United Kingdom and Other 2,539 2,512 1,878
Major Customers and Export Sales. A summary of Orbital's export sales by geographic area for the years ended December 31,1995, 1994 and 1993 follows (in thousands):
Years Ended December 31, 1995 1994 1993 -------- -------- ------- United States $275,707 $213,606 $209,873 Canada 45,558 46,839 51,392 Europe 23,594 24,468 17,938 Far East 15,242 13,998 15,489 Middle East and Other 4,219 2,665 5,492 -------- -------- -------- Total $364,320 $301,576 $300,184 ======== ======== ========
Approximately 40% of the Company's revenues in 1995, and 45% in each of 1994 and 1993, was generated under contracts with the U.S. Government and its agencies or under subcontracts with the U.S. Government's prime contractors. 16 / SUMMARY SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of selected quarterly financial data for the years ended December 31, 1995 and 1994, restated to reflect the MDA Acquisition and the Magellan Acquisition: (In thousands, except share data)
Quarter Ended Mar. 31 June 30 Sept. 30 Dec. 31 ----------------------------------------------------- 1995 Revenues, as previously reported $68,341 $ 64,589 $ 79,172 $ NA MDA revenues 20,634 17,177 16,645 NA Revenues, restated 88,975 81,766 95,817 97,762 Income (loss) from operations, as previously reported 3,152 (386) 4,662 NA MDA income (loss) from operations 1,462 (586) (979) NA Income (loss) from operations, restated 4,614 (972) 3,683 (6,179) Net income (loss) before cumulative effect of accounting change, as previously reported 1,968 (727) 2,202 NA MDA net income (loss) before cumulative effect of accounting change 1,047 (899) (445) NA Net income (loss) before cumulative effect of accounting change, restated 3,015 (1,626) 1,757 (3,837) Net income (loss), as previously reported (2,192) (727) 2,202 NA MDA net income (loss) 1,047 ( 899) (445) NA Net income (loss), restated (1,139) (1,626) 1,757 (3,837)
fifty-four ---------------------------- ORBITAL SCIENCES CORPORATION 29
Quarter Ended Mar. 31 June 30 Sept. 30 Dec. 31 --------------------------------------------------- Earnings (loss) per share, as previously reported: primary (.11) (.03) .10 NA fully diluted (.11) (.03) .10 NA Earnings (loss) per share, restated: primary (.05) (.07) .06 (.14) fully diluted (.05) (.07) .06 (.14) 1994 Revenues, as initially reported $41,388 $ 38,734 $ 50,020 $65,066 Magellan and MDA revenues 28,878 30,044 26,812 20,634 Revenues, restated 70,266 68,778 76,832 85,700 Income (loss) from operations, as initially reported 2,304 (336) 3,573 2,530 Magellan and MDA income (loss) from operations 1,213 1,244 (77) 1,462 Income from operations, restated 3,517 908 3,496 3,992 Net income (loss), as initially reported 1,660 (62) 1,580 1,140 Magellan and MDA net income 1,069 1,082 101 1,047 Net income, restated 2,729 1,020 1,681 2,187 Earnings per share, as initially reported: primary .11 -- .10 .06 fully diluted .09 -- .10 .06 Earnings per share, restated: primary .12 .05 .07 .09 fully diluted .10 .04 .08 .09
fifty-five ---------------------------- ORBITAL SCIENCES CORPORATION 30 C O R P O R A T E I N F O R M A T I O N COMPANY OFFICES HEADQUARTERS: Orbital Sciences Corporation 21700 Atlantic Boulevard Dulles, VA 20166 (703) 406-5000 OTHER MAJOR FACILITIES: Germantown Operations 20301 Century Boulevard Germantown, MD 20874 Chandler Operations 3380 South Price Road Chandler, AZ 85248 San Dimas Operations 960 Overland Court San Dimas, CA 91773 Pomona Operations 2771 North Garey Avenue Pomona, CA 91767 Greenbelt Operations 7500 Greenway Center Drive Greenbelt, MD 20770 Huntsville Operations 620 Discovery Drive Huntsville, AL 35806 Vancouver Operations 13800 Commerce Parkway Richmond, British Columbia Canada V6V 2J3 Ottawa Operations 2430 Don Reid Drive Ottawa, Ontario Canada K1H 8P5 United Kingdom Operations Broadmede Weydon Lane Farnham, Surrey, U.K. INDEPENDENT AUDITORS KPMG Peat Marwick LLP Washington, D.C. TRANSFER AGENT The First National Bank of Boston Shareholders may obtain information with respect to share position, transfer requirements, lost certificates and IRS Form 1099 by writing or telephoning: The First National Bank of Boston Investor Relations Mail Stop 45-02-64 P.O. Box 644 Boston, MA 02102-0644 Telephone: (617) 575-3170 INVESTOR AND PUBLIC RELATIONS General inquiries from investors, analysts, media or the general public should be directed to: Orbital Sciences Corporation 21700 Atlantic Boulevard Dulles, Virginia 20166 (703) 406-5000 Attention: Investor Relations or Public Relations http://www.orbital.com FORM 10-K REPORT A copy of the Company's report on Form 10-K can be obtained by writing or telephoning the Company's headquarters. ANNUAL MEETING The annual meeting of Orbital Sciences Corporation will be held on April 25, 1996 at 9:00 a.m. at the Company's headquarters. DIVIDENDS Orbital has never paid a cash dividend on its Common Stock. The Company currently intends to retain earnings primarily for working capital and product development and therefore does not anticipate paying dividends in the foreseeable future. In addition, the Company is subject to certain contractual restrictions on its ability to pay dividends. EQUAL EMPLOYMENT OPPORTUNITY Orbital Sciences Corporation is an equal opportunity employer. fifty-six ---------------------------- ORBITAL SCIENCES CORPORATION EX-21 16 SUBSIDIARIES. 1 EXHIBIT 21 ORBITAL SCIENCES CORPORATION LIST OF SUBSIDIARIES AS OF MARCH 26, 1996 Orbital Communications Corporation ORBCOMM USA, L.P.* Orbital Imaging Corporation Orbital Services Corporation Fairchild Space and Defense Corporation Magellan Corporation Magellan Sistemas de Mexico* Magellan Foreign Sales Corp.* MacDonald, Dettwiler Holdings Inc. MacDonald, Dettwiler and Associates Ltd.* MacDonald, Dettwiler Technologies Ltd.* MacDonald Dettwiler Pty Ltd.* PSC USA* MacDonald, Dettwiler Technologies Inc.* PSC Europe* MacDonald, Dettwiler Limited* Earth Observation Sciences Ltd.* MDA (USA) Inc.* Iotek, Inc.* - ---------------------- *Indirect subsidiary. EX-23 17 CONSENT OF KPMG PEAT MARWICK LLP. 1 Exhibit 23 ACCOUNTANTS' CONSENT The Board of Directors Orbital Sciences Corporation: We consent to the incorporation by reference in the registration statements on Form S-8 of Orbital Sciences Corporation of our reports dated February 5, 1996, relating to the consolidated balance sheets of Orbital Sciences Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1995, and the related consolidated financial statement schedule, which reports are incorporated by reference or appear in the December 31, 1995 annual report on Form 10-K of Orbital Sciences Corporation. Our report on the consolidated financial statements refers to changes in accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, and in accounting for income taxes. KPMG Peat Marwick LLP Washington, D.C. March 27, 1996 EX-27.1 18 FINANCIAL DATA SCHEDULE. WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AT AND FOR THE YEAR ENDED DECEMBER 31, 1995 AND SCHEDULE II AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000820736 ORBITAL SCIENCES CORP /DE/ 1,000 YEAR DEC-31-1995 DEC-31-1995 15,317 19,713 119,131 (773) 38,527 199,245 159,489 (53,614) 466,908 111,692 96,990 0 0 268 238,640 466,908 364,320 364,320 268,016 268,016 0 189 3,815 (1,990) (1,302) (668) 0 0 (4,160) (4,848) (0.19) (0.19)
EX-27.2 19 RESTATED FINANCIAL DATA SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AT AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995, FOR THE SIX MONTHS ENDED JUNE 30, 1995, FOR THE THREE MONTHS ENDED MARCH 31, 1995, AND FOR THE YEAR ENDED DECEMBER 31, 1994 AND SCHEDULE II AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000820736 ORBITAL SCIENCES CORP /DE/ 1000 9-MOS 6-MOS 3-MOS YEAR DEC-31-1995 DEC-31-1995 DEC-31-1995 DEC-31-1994 SEP-30-1995 JUN-30-1995 MAR-31-1995 DEC-31-1995 25,177 30,651 11,134 27,919 32,697 21,440 9,427 12,426 107,211 100,537 122,949 116,799 (765) (753) (770) (778) 26,495 28,915 24,156 26,445 204,471 190,004 175,938 186,682 149,793 152,470 147,007 156,287 (46,432) (42,495) (41,495) (46,409) 471,427 453,479 429,890 441,042 102,587 90,701 118,192 129,233 99,733 101,176 84,616 86,068 0 0 0 0 0 0 0 0 268 268 244 243 241,906 240,338 205,103 206,730 471,427 453,479 429,890 441,042 266,558 170,741 88,975 301,576 266,558 170,741 88,975 301,576 195,239 124,498 63,462 216,417 195,239 124,498 63,462 216,417 0 0 0 0 37 68 46 149 3,701 2,386 1,084 1,740 4,577 2,297 4,346 10,364 1,428 905 1,328 2,744 3,149 1,392 3,018 7,620 0 0 0 0 0 0 0 0 (4,160) (4,160) (4,160) 0 (1,011) (2,768) (1,142) 7,620 (0.04) (0.11) (0.05) 0.33 (0.04) (0.11) (0.05) 0.32
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