-----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, BR1/6SzoG0aLarV50B6G1lTSpLEcHy8qLu3rEu1PfDzIaFbMB21kcgPsO4gwWxu9 WNXwEhAs+9mB6qPPYAaa6A== 0000903423-03-000577.txt : 20030630 0000903423-03-000577.hdr.sgml : 20030630 20030630132224 ACCESSION NUMBER: 0000903423-03-000577 CONFORMED SUBMISSION TYPE: 20-F PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030630 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW SKIES SATELLITES NV CENTRAL INDEX KEY: 0001124215 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 000000000 STATE OF INCORPORATION: P7 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 20-F SEC ACT: 1934 Act SEC FILE NUMBER: 001-15130 FILM NUMBER: 03763454 BUSINESS ADDRESS: STREET 1: ROOSEVELTPLANTSOEN 4 STREET 2: 011-31-70-306-4100 CITY: HAGUE NETHERLANDS STATE: P7 ZIP: 2517 KR 20-F 1 newskies20f_6-30.txt As filed with the Securities and Exchange Commission on June 30, 2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------- FORM 20-F |_| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2002 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from N/A to N/A Commission file number: 1-15130 New Skies Satellites N.V. (Exact name of Registrant as specified in its charter) New Skies Satellites N.V. (Translation of Registrant's name into English) The Netherlands (Jurisdiction of incorporation or organization) Rooseveltplantsoen 4 2517 KR The Hague, The Netherlands (Address of principal executive offices) Securities registered or to be registered pursuant to Section 12(b) of the Act. Title of each class Name of each exchange on which registered - ------------------- ----------------------------------------- Ordinary Shares, nominal value New York Stock Exchange (euro)0.05 per share Euronext Amsterdam N.V. Securities registered or to be registered pursuant to Section 12(g) of the Act. None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: Ordinary Shares, nominal value (euro)0.05 per share 125,376,211 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 which financial statement item the registrant has elected to follow. Item 17 |_| Item 18 |X| ii Forward looking statements PART I Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.................2 Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE...............................2 Item 3. KEY INFORMATION.......................................................2 Item 4. INFORMATION ON THE COMPANY...........................................13 Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.........................29 Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES...........................41 Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS....................51 Item 8. FINANCIAL INFORMATION................................................54 Item 9. THE OFFER AND LISTING................................................54 Item 10. ADDITIONAL INFORMATION..............................................55 Item 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........60 Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES..............60 PART II Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.....................60 Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.................................................61 Item 15. DISCLOSURE CONTROLS AND PROCEDURES..................................61 item 16. [RESERVED]..........................................................61 PART III Item 17. FINANCIAL STATEMENTS................................................61 Item 18. FINANCIAL STATEMENTS................................................61 Item 19. EXHIBITS............................................................61 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS...................................F-1 In this document, the "Company," "New Skies," "we," "us," and "our" refer to New Skies Satellites N.V. FORWARD-LOOKING STATEMENTS Certain statements in this annual report are not historical facts and are "forward-looking statements" within the meaning of U.S. federal securities laws. We intend that those statements be covered by the safe harbors created under those laws. Words such as "believes", "expects", "estimates", "may", "intends", "will", "should" or "anticipates" and similar expressions or their negatives identify forward-looking statements. Forward-looking statements, such as the statements regarding our ability to develop and expand our business, our ability to manage costs, our ability to exploit and respond to technological innovation, the effects of laws and regulations (including tax laws and regulations) and legal and regulatory changes, the opportunities for strategic business combinations and the effects of consolidation in our industry on us and our competitors, our anticipated future revenues, our anticipated capital spending (including for future satellite procurements), our anticipated financial resources, our expectations about the future operational performance of our satellites (including their projected operational lives), the expected strength of and growth prospects for our existing customers and the markets that we serve, and other statements contained in this annual report regarding matters that are not historical facts, involve predictions. Statements of that sort involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by any statements of that sort. These risks and uncertainties include: o problems with respect to the construction, launch or in-orbit performance of our existing and future satellites; o increased competition; o decreased demand, either for our services or for the products and services provided by our customers to third parties; o changing technology; o changes in our business strategy or development plans; o our ability to attract and retain qualified personnel; o our ability to attract sufficient funding to meet our future capital requirements; o worldwide economic and business conditions; and o legal and regulatory developments. Certain of these factors are discussed in more detail elsewhere in this annual report including, without limitation, in Item 3 "Risk Factors", Item 4 "Information on the Company" and Item 5 "Operating and Financial Review and Prospects". These risks could cause actual results to vary materially from future results indicated, expressed or implied in any forward-looking statements. Many of these factors are beyond our ability to control or predict. Given these uncertainties, readers are cautioned not to place undue reliance on forward-looking statements. Neither our independent auditors nor any other independent accountants have compiled, examined or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information. ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not applicable. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable. ITEM 3. KEY INFORMATION OVERVIEW We are a satellite communications company with global operations and service coverage. We have been an independent commercial satellite operator since 1998. We currently operate a network of six satellites located at five different fixed orbital positions above the earth, together with a ground-based network for controlling our satellites and providing commercial traffic over them. Our customers can access one or more of our satellites from almost any point around the world. We have one additional satellite under construction, which is planned for launch in fourth quarter 2004. During 2002, the transponder availability rate for our satellites was 99.998 percent. Our customers include established "blue chip" telecommunications carriers, leading broadcasting and video companies, governmental entities, and fast-growing smaller companies from around the globe. They use our services for video contribution and distribution, corporate data networks, voice transmissions, and Internet applications. We believe that the combination of our global satellite fleet and our expanding customer base, well diversified in terms of both geography and service applications, provides us with a solid foundation from which we can execute our long-term business plan. SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA The following tables set out our selected consolidated historical financial data as of and for the years ended December 31, 2002, 2001, 2000, 1999 and 1998. We have extracted part of the selected consolidated historical financial data as of December 31, 2002 and 2001 and for the years ended December 31, 2002, 2001 and 2000 from the consolidated historical financial statements included elsewhere in this annual report. We have extracted part of the selected consolidated historical financial data as of December 31, 2000, 1999 and 1998 and for the years ended December 31, 1999 and 1998 from the consolidated historical financial statements previously filed with the U.S. Securities and Exchange Commission. Our financial statements as of and for the years ended December 31, 2002, 2001, 2000, 1999 and 1998 have been audited by Deloitte & Touche Accountants, independent auditors. We acquired our initial assets as a spin-off from our predecessor on November 30, 1998. Our 1999 financial statements reflect our first full year of independent operations. The information included in our financial statements up to November 30, 1998 was derived from the historical financial statements of our predecessor using allocation assumptions. Revenues were allocated on the basis of the actual historical revenues generated by the satellites transferred to us. Expenses were allocated on various bases. We believe these allocations were reasonable and consistently applied. Nonetheless, our financial statements for 1998 do not necessarily reflect actual costs that we would have incurred or revenues that we would have earned if we had operated as an independent, stand-alone commercial business during that period. In particular, after our spin-off in November 1998, we incurred a number of costs associated with being a stand-alone commercial entity that either were not incurred or were incurred at substantially lower levels when our predecessor controlled our assets, including the cost of in-orbit insurance, which we incurred for the first time in November 1998; costs associated with establishing commercially oriented marketing operations; and costs associated with sub-contracting our tracking, telemetry and control and payload management operations, which we now perform ourselves for all but one of our satellites. You should read the selected consolidated historical financial data together with Item 5 "Operating and Financial Review and Prospects" and our consolidated financial statements and the accompanying notes included elsewhere in this annual report. Year Ended December 31, ----------------------------------------------------------------- 2002 2001 2000(1) 1999 1998 ----------------------------------------------------------------- (in millions, except for per ordinary share and margin data) Statement of operations data: Revenues (2)................................... $ 200.5 $ 209.0 $ 198.3 $ 135.5 $ 116.7 Operating expenses: Cost of operations (3)....................... 50.7 51.5 47.0 30.9 20.7 Selling, general and administrative (3)...... 39.5 38.7 34.8 20.7 11.2 Organization costs........................... - - - - 2.9 Depreciation and amortization................ 80.6 75.4 69.9 71.9 71.5 Termination of the KTV satellite contract (4)............................... - - - 15.5 - ------------ ------------ ------------- ----------- ------------- Total operating expenses....................... 170.8 165.6 151.7 139.0 106.3 ------------ ------------ ------------- ----------- ------------- Operating income (loss)........................ 29.7 43.4 46.6 (3.5) 10.4 Interest expense (income), net................. 0.5 (9.0) (2.6) (0.1) 1.8 ------------ ------------ ------------- ----------- ------------- Income (loss) before income tax (benefit) expense............................ 29.2 52.4 49.2 (3.4) 8.6 Income tax (benefit) expense................... 10.5 19.3 17.5 (1.2) (1.0) ------------ ------------ ------------- ----------- ------------- Income (loss) before cumulative effect of change in accounting principle....................... 18.7 33.1 31.7 (2.2) 9.6 Cumulative effect of change in accounting principle, relating to goodwill, net of taxes (5) (23.3) - - - - ------------ ------------ ------------- ----------- ------------- Net income (loss) ............................. $ (4.6) $ 33.1 $ 31.7 $ (2.2) $ 9.6 ============ ============ ============= =========== ============= Basic and diluted earnings per share (6) : Income before cumulative effect of change in accounting principle..................... $ 0.14 $ 0.25 $ 0.29 $ (0.02) $ 0.10 Cumulative effect of change in accounting principle........................ (0.18) - - - - ------------ ------------ ------------- ----------- ------------- Basic and diluted earnings per share........... $ (0.04) $ 0.25 $ 0.29 $ (0.02) $ 0.10 ============ ============ ============= =========== ============= Statement of cash flow data: Net cash provided by operating Activities................................... $ 112.0 $ 130.7 $ 117.9 $ 60.2 $ 83.2 Net cash used in investing activities (or capital expenditures).................... (231.4) (222.7) (148.9) (73.1) (117.1) Net cash (used) provided by financing activities................................... (10.6) (2.5) 230.5 0.1 80.6 Other financial data (unaudited): EBITDA (adjusted) (7).......................... $ 110.3 $ 118.8 $ 116.5 $ 83.9 $ 81.9 EBITDA (adjusted) margin (8)................... 55% 57% 59% 62% 70% As of December 31, ---------------------------------------------------------------- 2002 2001 2000 1999 1998 ---------------------------------------------------------------- (in millions) Balance sheet data: Total current assets (4)....................... $ 58.3 $ 189.4 $ 287.3 $ 85.5 $ 65.6 Communications, plant and other property (4)... 1,058.1 886.2 685.4 631.5 749.6 Total assets................................... 1,127.8 1,109.8 1,064.6 782.3 830.7 Total liabilities (4).......................... 108.8 72.6 59.0 63.1 111.5 Total shareholders' equity..................... 1,019.0 1,037.2 1,005.6 719.2 719.2
- ---------- (1) Includes results of operations for New Skies Networks Pty Ltd. for the nine-month period from March 31, 2000 (the date of acquisition) to December 31, 2000. (2) Includes a one-time contract termination payment received in 2000 that resulted in a net positive impact of $19.7 million. (3) After we began independent operations, we incurred additional operating costs, including the cost of in-orbit insurance, which we incurred for the first time in November 1998; costs associated with establishing commercially oriented marketing operations; and costs associated with tracking, telemetry and control and payload management operations. Those costs either were not included in any of the historical allocations of our predecessor's results in 1998 or were included at lower levels. (4) In 1999, we terminated a contract for the construction of the KTV satellite due to the manufacturer's failure to deliver the satellite by the contractual deadline. Due to the termination of the KTV satellite construction contract, we originally: o reduced communications, plant and other property by $84.1 million; o recorded a receivable from the satellite manufacturer of $51.5 million; o eliminated a $17.1 million liability to the manufacturer of the KTV satellite; and o wrote off $15.5 million of previously capitalized interest and program management costs. The effect of this write-off was to turn net income of $7.9 million to a net loss of $2.2 million in 1999. In 2001, the Company received a reimbursement of payments previously made for the construction and program management of the satellite totaling $53.3 million. The award included the reimbursement of $1.8 million of previously expensed KTV project management costs. (5) As of January 1, 2002, we adopted Statement of Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets. This Standard eliminates goodwill amortization from the Consolidated Statement of Operations and requires an evaluation of goodwill for impairment upon adoption of this Standard, as well as subsequent evaluations on an annual basis, and more frequently if circumstances indicate a possible impairment. Upon adoption of SFAS No. 142, we performed a transitional impairment test on the goodwill resulting from the purchase of New Skies Networks Pty Limited in March 2000. As a result of this impairment test, we recorded an impairment charge of approximately $23 million, which is classified as a cumulative effect of a change in accounting principle. (6) Basic earnings per ordinary share for the years ending December 31, 2002, 2001, 2000, and 1999 is calculated by dividing the net income (loss) for that period by the weighted average number of ordinary shares outstanding for the respective period, which equaled 130.3 million, 130.6 million, 107.4 million and 100.0 million shares for 2002, 2001, 2000 and 1999, respectively. We have computed earnings per ordinary share for the year ended December 31, 1998 on a pro forma basis assuming approximately 100.0 million shares had been outstanding for that year. Diluted earnings per share for the year ended December 31, 2001 takes into consideration the dilutive effect of stock options for approximately 141,000 ordinary shares, out of a total of 4,904,302 shares under options outstanding at the end of the period. The difference in the weighted average number of shares outstanding for 2001 resulted in no differences between basic and diluted earnings per share. Diluted earnings per share for the year ended December 31, 2000 takes into consideration the dilutive effect of stock options for approximately 691,000 ordinary shares, out of a total of 3,541,040 shares under options outstanding at the end of the period. The difference in the weighted average number of shares outstanding for 2000 resulted in no differences between basic and diluted earnings per share. In 2002 and 1999 we excluded a number of ordinary shares from this calculation that are not outstanding but relate to outstanding stock options that have not been exercised. To include these shares in the calculation would be antidilutive, because we had a net loss in those years. The share data for 1998 and 1999 has been adjusted to reflect a 10-to-1 share split effected on August 24, 2000. (7) "EBITDA (adjusted)" as used in this annual report consists of operating income before depreciation and amortization, termination of the KTV satellite contract and cumulative effect of change in accounting principle due to goodwill. We believe EBITDA (adjusted) is an appropriate measure of our performance because the annual charge for depreciation, along with the 1999 charge for the termination of the KTV satellite contract and the cumulative effect of change in accounting principle relating to goodwill recorded in 2002, comprise a disproportionate share of our expenses. This information comes from our historical financial statements. We believe that earnings before interest, taxes, depreciation and amortization (EBITDA) is a measure of performance used by some investors, equity analysts and others to make informed investment decisions. EBITDA is not presented as an alternative measure of operating results or cash flow from operations, as determined in accordance with generally accepted accounting principles in the U.S. EBITDA as presented herein may not be comparable to similarly titled measures reported by other companies. See Item 5 "Operating and Financial Review and Prospects -- Table 2 `- Reconciliation of EBITDA (adjusted) to net (loss) income'". (8) EBITDA (adjusted) margin represents EBITDA (adjusted) as a percentage of revenues. EXCHANGE RATE INFORMATION On January 1, 1999, the Euro was introduced as a new currency in The Netherlands and ten other European Union member states. The exchange rate at which the Dutch guilder has been irrevocably fixed against the Euro is NLG 2.20371 = (euro)1.00. Before January 1, 1999, there was no fixed exchange rate between the Euro and the U.S. dollar. The following table describes, for the periods and dates indicated, information concerning the noon buying rate for the Euro in New York City for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York. Amounts are expressed in U.S. dollars per (euro)1.00, and average figures reflect the average of the noon buying rates on the last day of each month during the relevant period.
Rate at Year Ended period end Average High Low December 31, 1999............... 1.0070 1.0653 1.1812 1.0016 December 31, 2000............... 0.9388 0.9232 1.0335 0.8270 December 31, 2001............... 0.8901 0.8909 0.9535 0.8370 December 31, 2002............... 1.0485 0.9454 1.0485 0.8594 Month Ended October 31, 2002.............................................. 0.9881 0.9708 November 30, 2002............................................. 1.0139 0.9895 December 31, 2002............................................. 1.0485 0.9927 January 31, 2003.............................................. 1.0861 1.0361 February 28, 2003............................................. 1.0875 1.0708 March 31, 2003................................................ 1.1062 1.0545 April 30, 2003................................................ 1.1180 1.0621 May 31, 2003.................................................. 1.1853 1.1200
The noon buying rate for the Euro on June 25, 2003 was (euro)1.00 = $1.1592. RISK FACTORS Risks Relating to Our Business A significant launch delay or launch failure could affect our ability to satisfy demand for our services, to generate future revenues and, in certain cases, to maintain our legal rights to use the orbital location from which the satellite was to operate. At this time, we have plans to launch one new satellite (NSS-8) in the fourth quarter of 2004. NSS-8 will be used to replace our existing NSS-703 satellite. NSS-703, which has an anticipated commercial life ending in 2009, will then be relocated to a different orbital location. Based on a variety of considerations, we may choose to launch additional new and replacement satellites in future years. The launch of any future spacecraft may not take place as scheduled. Delays in launching satellites are quite common and can result from construction delays, the unavailability of the launch vehicle when construction has been completed, and other factors. We also may experience delays in achieving operational service after launch. If we were to experience a material delay in launching and placing into service a replacement satellite, the delay could adversely affect our ability to continue providing services to existing customers and, thereby, adversely affect our future revenues. More generally, a material delay could defer our ability to generate future revenues. In addition, because our rights to use our authorized orbital locations expire if we do not place a satellite into operation within a specified period of time, a significant launch delay could cause us to lose our rights to make use of the orbital location intended for that satellite. Satellites are subject to launch failure. The overall historical loss rate for all launches of commercial satellites in fixed orbits is estimated to be approximately 10 percent, but may be higher. Launch failure rates vary according to the launch vehicle used. We expect to use a 6,000 kg payload variant of the Sea Launch Zenit-3SL vehicle to launch NSS-8. In the event of a launch failure, we likely would face a significant delay in constructing and launching a replacement satellite. Typically, the construction and launch of a satellite takes at least two, and sometimes more than three, years to complete. A launch failure for a replacement satellite could affect our ability to continue providing service to existing customers and, thereby, adversely affect our revenues. More generally, a launch failure could adversely affect our ability to expand our available capacity. Although we would endeavor to accommodate customers on one of our other satellites or, potentially, by using capacity leased from a third party, a launch failure could adversely affect our ability to generate future revenues. In addition, in certain cases, a launch failure could cause us to lose our rights to make use of the orbital location intended for that satellite. We may experience satellite equipment failures that impair the commercial performance of our satellites, which could lead to lost revenues. During and after their launch, satellites are subject to in-orbit equipment failures, including for example circuit failures, transponder failures, solar array failures, battery cell failures, satellite control system failures, and propulsion system failures. These failures can degrade commercial performance, reduce transmission capacity, shorten the commercial lives of satellites, or otherwise limit their revenue generating ability. We anticipate that NSS-5, NSS-6, NSS-7, NSS-703, and NSS-806 will have commercial lives in excess of 12 years from their respective launch dates, but we cannot assure you that this will be the case. A number of factors will affect the anticipated commercial lives of our satellites, including: o the amount of propellant used in maintaining orbital position or relocating to a new orbital position; o the durability and quality of their construction; o the performance of their components; and o operational considerations, including operational failures. To date, we have not experienced any catastrophic in-orbit failures. Certain of our satellites, however, have experienced component failures. There is a possibility that one or more transponders or other key components on any of our existing or future satellites may cease to work in accordance with design specifications during the satellite's anticipated commercial life. While, in many cases, back-up components or reconfigurations allow for the continued operation of an affected transponder or component, it is possible that individual transponders or components may become inoperable. We cannot assure you that normal operations could be restored through redundant transponders or other redundant components on the satellite or that failed components could be replaced with other components. Where service cannot be restored, the failure would cause the satellite to suffer performance degradation or to cease operating prematurely, either in whole or in part. Our satellites may suffer from other problems, such as a loss of propellant, greater than anticipated use of propellant during launch, or malfunctions that could reduce their maneuver or commercial lives. Acts of war, magnetic, electrostatic or solar storms, space debris or micrometeoroids could also damage our satellites. Any full or partial failure of one of our satellites could cause our revenues to decline and adversely affect our ability to generate future revenues. In addition, a failure could cause us to have to expedite our planned replacement program and thereby affect our financing needs and our ability to use available funds for other purposes. We may experience a failure of our satellite or ground operations infrastructure that impairs the commercial performance of our satellites or the services delivered over our satellites, which could lead to lost revenues. We operate a primary Satellite Operations Center (SOC) at our headquarters in The Hague. In addition, we maintain a remote, fully functional, routinely tested back-up facility for our SOC in Redu, Belgium. Signals from our SOC are transmitted to our satellites through our own teleport facilities and through teleports owned by third parties. We may experience a failure in necessary equipment in our SOC, in our back-up facility, or in the communication links between these facilities and remote teleport facilities. A failure affecting our tracking, telemetry and control operations might cause us to be unable to communicate with our satellites or to transmit an incorrect instruction to the satellites. This could lead to a degradation in satellite performance or to the loss of one or more of our satellites, and could adversely affect our future revenues. We also provide communications services through our own teleport facilities and through teleports owned by third parties. We may experience a failure in necessary equipment in one of our teleports or in a third-party teleport. A failure of necessary ground-based communications equipment could lead to a loss of revenues from customers who were not provided with the proper transmission services, which could adversely affect our revenues. Insurance expenses may increase, or insurance may become unavailable. We insure our satellites both during launch and during their in-orbit operational lives. Launch insurance currently costs approximately 15 percent to 25 percent of the insured amount, but may vary depending on market conditions, the safety record of the launch vehicle and the performance record of similar satellites built by the same manufacturer. In-orbit insurance generally costs between 1 percent and 3 percent of the net book value of the insured satellite each year. Insurance costs have increased substantially in recent years and could increase further for any number of reasons. In particular, the cost of launch insurance could increase significantly based on one or more launch failures involving launch vehicles used by us, launch vehicles similar to those to be used by us, or launch vehicles in general. The cost of in-orbit insurance may increase based on the failure or degradation of one of our in-orbit satellites, the failure of another satellite of a similar series owned by another operator, or satellite failures in general. If rates were to rise substantially, our operating costs would increase. In addition, we might conclude that it does not make business sense to obtain third-party insurance. It is also possible that insurance could become unavailable, either generally or for a specific launch vehicle, satellite series, or a particular satellite, or that new insurance could be subject to broader exclusions on coverage. Our insurance for satellite operation and for future satellite launches will not protect us against all satellite-related losses. In the event of a total or partial failure of a satellite, our in-orbit insurance will reimburse us for the proportion of the net book value of the satellite lost as a result of the failure, unless the cause of the failure is subject to a policy exclusion. The insurance will not protect us, however, against business interruption, lost revenues or delay of revenues. We plan to obtain insurance for the launch of any future satellite. Typically, launch insurance covers the replacement cost of the satellite, the launch, and the insurance, but does not protect us against business interruption, lost revenues, delay of revenues or other issues arising from the launch failure or other operational problems covered by the launch insurance policy. Both launch and in-orbit insurance policies include, or can be expected to include, specified exclusions, deductibles and material change limitations that are customary in the industry at the time the policy is written. The loss of customers, particularly our large customers, may reduce our future revenues. The top ten purchasers of our services accounted for, in the aggregate, approximately 48 percent of our revenues in 2002, 42 percent of our revenues in 2001, and 47 percent of our revenues in 2000. If we fail to maintain our relationships with our major customers, if we fail to replace them, if we lose them or if there is reduced demand from them, it could result in a significant loss of revenues. More generally, our customers may fail to renew or may cancel their contracts with us, which could negatively affect future revenues. The loss of key employees could impede our ability to implement our business plan. We rely on a number of key employees. Many of these key employees have been recruited away from their home countries to work in the Netherlands or in our other international offices and may intend to return to their home countries in the future. Our key employees have highly specialized skills and extensive experience in their respective fields, and their individual contributions to our operations may be difficult to replace due to the scarcity of candidates of comparable caliber and experience. Accordingly, the loss of some or all of these employees could adversely affect our ability to manage our operations and to execute our long-term business strategy. We may not have access to sufficient capital to pursue future growth opportunities. We have sufficient funding to complete the construction and launch of the NSS-8 satellite. However, in the event that we choose to launch new or replacement satellites, it is possible that we may not have, or be able to obtain, the financing required to fund such procurements. In addition, if we were to choose to engage in any major business combination or similar strategic transaction, we may require significant external financing in connection with such a transaction. Depending on market conditions, investor perceptions of us, and other factors, we may not be able to obtain capital on acceptable terms, in acceptable amounts, or at appropriate times to implement any such transaction. Risks Relating to Our Industry Changes in technology could make our business obsolete. Continuing technological changes in the telecommunications industry could undermine our competitive position or make our satellite system obsolete, either generally or for particular types of services. Particular technological developments that could adversely affect us include the deployment by our competitors of new satellites with greater power, greater flexibility, greater efficiency or greater capabilities, as well as continuing improvements in ground-based wired and wireless technologies. Overcapacity and competition in the satellite industry and among terrestrial competitors may adversely affect our ability to sell our services, exert downward pressure on prices, or both. While we believe that capacity on different satellites or satellite systems can be distinguished from other satellite capacity in some respects, the provision of satellite-based capacity and services can be subject to commodity-like price pressures. In addition, while satellite communications services and ground-based communications services are not perfect substitutes, we compete in certain markets and for certain services with providers of ground-based services. Supply of satellite- and ground-based services can increase for a number of reasons, including: o the launch of new satellites with higher power levels, enhanced connectivity, on-board switching or greater frequency re-use, each of which can lead to increased capacity and lower per-transponder costs; o the creation of new providers of satellite-based services, which can introduce new competition; o wider availability of fiber optic cable and other non-satellite transmission services, which can result in less expensive alternatives, particularly for point-to-point transmission; and o the implementation of new transmission technologies, such as improved signal compression, which can reduce the transponder capacity required to transmit the same information. Where fiber optic networks or other ground-based high-capacity systems are available and capable of supporting a particular type of transmission with comparable service parameters (e.g., ease of installation, coverage, speed, and quality of signal), that capacity is generally less expensive than satellite capacity. Further expansions in the reach of terrestrial-based networks may induce our customers to shift their transmissions to non-satellite capacity or make it more difficult for us to obtain new customers, thereby adversely affecting our current and future revenues. Similarly, over-capacity and competition in the satellite industry may make it more difficult for us to sell our services and to maintain our prices for the capacity that we do sell. This, in turn, could adversely affect our revenues and our ability to increase our revenues over time. Demand for satellite services, including bundled services, may not develop in the manner we anticipate. Demand for satellite-based transmission services may stop growing, or may even shrink. A lack of demand could adversely affect our ability to sell our services and to develop and successfully market new services, could exert downward pressure on prices, or both. This, in turn, could adversely affect our revenues and our ability to increase our revenues over time. Some of our competitors have greater resources than we do, which may make them better able to compete in terms of pricing, service offerings, marketing, name recognition, product development, or otherwise. The satellite services industry is highly competitive. We compete with a number of established service providers, including global and regional satellite service providers, resellers of satellite capacity, and other service providers. Some of our competitors have long-standing customer relationships; enjoy close ties with regulatory authorities or more favorable regulatory treatment; and/or have the ability to subsidize competitive services with revenues from services they provide as a dominant or monopoly carrier. Many of them are substantially larger than we are and have financial resources, experience, marketing capabilities and name recognition that are substantially greater than ours. As a result, they may have a competitive advantage over us. We face risks in operating our business globally. We face certain risks as a result of the global nature of our business. Certain countries may impose withholding taxes on us or on our customers or deem us to have a permanent establishment in their country. These taxes may make our services more expensive for customers or impose an unanticipated tax burden upon us. In addition, such tax burdens may not be imposed equally on our competitors and may not be alleviated or subject to appeal under existing tax treaties. We also may face difficulties in enforcing our contracts in certain countries. Finally, while our contracts generally are denominated in U.S. dollars, and therefore are not sensitive to our customer's local currency exchange fluctuations, in some countries economic conditions and currency transfer restrictions may make it difficult for some of our customers to meet their payment obligations or to make payments in U.S. dollars. We may not be able to take advantage of, or may be made less competitive as a result of, industry consolidation. We may pursue acquisitions, joint ventures or other strategic transactions on an opportunistic basis as consolidation of the satellite services industry continues to unfold. Our principal focus is likely to be on the acquisition of, or strategic combination with, another satellite operator as and when suitable opportunities arise, and on the acquisition of rights to use additional orbital locations. Under appropriate circumstances, we also would consider acquiring additional individual in-orbit satellites, transponders on existing in-orbit satellites, or other established facilities and components necessary for the provision of bundled services. However, we may not find or be able to take advantage of any suitable opportunities. In addition, industry consolidation could adversely affect us by increasing the scale or scope of our competitors and thereby making it more difficult for us to compete. Risks Relating to Regulation Our rights to use the orbital locations from which our satellites operate are subject to regulation at the national and international levels. There are a limited number of orbital locations in space from which one can operate the type of satellites that we operate. Rights to make use of these orbital locations, and the frequencies over which commercial satellites transmit, are regulated by the International Telecommunication Union, known as the ITU. Under the treaty and regulations currently in effect, the Government of the Netherlands has obtained the rights to use the orbital locations and frequencies used by our satellites, as well as rights to use certain additional orbital locations and frequencies. We cannot guarantee that the ITU will not change these rules in the future. A change in these regulations could limit or preclude our use of some or all of our existing or future orbital locations or frequencies. The Government of the Netherlands authorizes us to make use of the orbital locations and frequencies that we use for our existing satellites, as well as at a number of additional orbital locations. While the government has authorized us to use these orbital locations, we cannot guarantee that it will not modify or revoke this authorization. A modification or revocation could limit or preclude our use of some or all of our in-use or presently unoccupied orbital locations, or some or all of the frequencies we currently use at these orbital locations. With respect to the primary frequencies used by commercial geostationary satellites, the ITU rules grant rights to member states (which are the national governments party to the ITU treaty) on a "first-in-time, first-in-right" basis and set forth a process for protecting earlier-registered satellite systems from interference from later-registered satellite systems. In order to comply with these rules, we must coordinate the operation of our satellites, including any replacement satellite that has performance characteristics that exceed those of the satellite it replaces, with other satellites. The coordination process may require us to modify our proposed coverage areas, or satellite design or transmission plans, in order to eliminate or minimize interference with other satellites or ground-based facilities. Those modifications may mean that our use of a particular orbital position is restricted, possibly to the extent that it may not be commercially desirable to place a new satellite in that location. In certain countries, failure to resolve coordination issues may be used by regulators as a justification to limit or condition market access by foreign satellite operators. In addition, while the ITU's rules oblige later-in-time systems to coordinate their operations with us, we cannot guarantee that other operators will operate in a manner that does not adversely affects our operations. Under the ITU's rules and our authorization from the Dutch government, we must begin using our authorized orbital locations and frequencies within a fixed period of time. If we do not begin or reinstate use of a particular orbital location within the applicable deadline, we will lose our priority rights to use that orbital location. We are subject to regulatory and licensing requirements in each of the countries in which we provide services, and our business is sensitive to regulatory changes in those countries. The satellite business is heavily regulated. In particular, we are subject to and need to comply with the laws and regulations of the European Union, the Netherlands, and the national and local governments of other countries to, from, or within which we provide services. In addition, while many countries are permitting increased competition, some countries continue to have laws and regulations that may impede or prohibit foreign service providers from entering their markets. These laws and regulations may affect our ability to use frequencies and to provide satellite capacity and some or all satellite-based services in specific regions, or to particular types of customers in a given jurisdiction. Obtaining and maintaining the required regulatory approvals can involve significant time and expense. Our inability to obtain and maintain particular approvals may delay or prevent our ability to offer some or all of our services and adversely affect our revenues. Generally, once we have received a regulatory authorization, we need an additional authorization only if we introduce new services or place a new or replacement satellite into operation. However, countries may adopt new laws, policies or regulations, or change their interpretation of existing laws, policies or regulations, and these changes could occur at any time. Such changes may make it more difficult for us to obtain or maintain authorizations, cause our existing authorizations to be cancelled, require us to incur additional costs, or otherwise adversely affect our operations and revenues. Export control and embargo laws may preclude us from obtaining necessary satellites, parts or data or providing certain services in the future. U.S. companies and companies located in the United States must comply with U.S. export control laws in connection with any information, products, or materials that they provide to us relating to satellites, associated equipment and data and with the provision of related services. If these entities cannot or do not obtain the necessary export or re-export authorizations from the United States government, we must obtain such authorizations ourselves. It is possible that, in the future, they and we may not be able to obtain and maintain the necessary authorizations, or existing authorizations could be revoked. If our manufacturers and we cannot obtain and maintain the necessary authorizations, this failure could adversely affect our ability to: o procure new U.S.-manufactured satellites; o control our existing satellites; o acquire launch services; o obtain insurance and pursue our rights under insurance policies; or o conduct our satellite-related operations. In addition, if we do not properly manage our internal compliance processes and were to violate the terms of a license, it could have a material adverse effect on our ability to maintain or obtain licenses and could result in civil or criminal penalties. We must comply with Dutch and E.U. embargo laws. In addition, some of our subsidiaries, employees and services are subject to the embargo laws of other jurisdictions, including the United States. This may adversely affect our ability to provide satellite-based services to entities in countries subject to an embargo. Other Risks Provisions of our articles of association could be used to delay, or otherwise impede, a change of control in certain circumstances. Our shareholders have authorized us to enter into, and we have entered into, an option agreement with a Dutch foundation, under which it may acquire a number of governance preference shares equal to the aggregate number of outstanding ordinary shares and financing preference shares minus one by making a payment equal to one-quarter of the nominal value of those governance preference shares. Under the terms of the agreement, the foundation may exercise the option only if a person or group of persons acting collectively has acquired shares or voting rights for 30 percent or more of our outstanding ordinary shares and either has not made a bona fide public offer for all our remaining outstanding ordinary shares or has made such an offer but did not acquire more than 50 percent of the outstanding ordinary shares in our capital in response to the offer, taken together with the shares that person or group held at the time it made the offer. Under the terms of the agreement, the foundation must make the governance preference shares available to us for repurchase or cancellation if: o the person or group of persons ceases to hold shares or voting rights for 30 percent or more of our outstanding ordinary shares; o our board of management, after consultation with our Supervisory Board, has approved the aforementioned acquisition; or o the offeror has made a bona fide public offer for all of our outstanding ordinary shares and in response to the offer has acquired more than 50 percent of our shares, including shares held by the offeror or group associated with the offeror prior to the offer. Because the governance preference shares have the same voting rights as ordinary shares, their issuance could make it more difficult for another entity to acquire control of us under circumstances described above. Our share price may be adversely affected by the actual or perceived availability for sale of a large number of our shares. Historically, our shares have exhibited relatively thin daily trading volume on both the Euronext Amsterdam N.V. exchange and the New York Stock Exchange. Because our shares are not heavily traded, the price of our ordinary shares may be adversely affected by sales of large numbers of shares by existing shareholders, or by the perception that such sales may occur. ITEM 4. INFORMATION ON THE COMPANY BUSINESS Overview Our official name is "New Skies Satellites N.V.". Our principal offices are located at Rooseveltplantsoen 4, 2517 KR The Hague, The Netherlands, and our telephone number is +31 70 306 4100. Our company was created on April 23, 1998 as a limited liability company (naamloze vennootschap) organized under the laws of The Netherlands. We are a satellite communications company with global operations and service coverage. We began independent operations as a privatized, commercial spin-off from INTELSAT, an intergovernmental organization, on November 30, 1998. At that time, INTELSAT transferred to us certain assets and liabilities, including satellites and related contracts. Today, we operate a network of six (6) satellites located at five (5) different fixed orbital positions above the earth, including two (2) satellites that we have designed, constructed, launched and placed in commercial operation since our creation in 1998. We also have one additional satellite (NSS-8) that is currently under construction. Our customers can access one or more of our geostationary satellites from almost any point around the world. We also have ground-based infrastructure to operate our satellite network and to provide additional services to access the terrestrial communications network for data, voice, video, and Internet services. We have developed and expanded the business we inherited - the simple provision of satellite-based transponder capacity to telecommunications carriers and to brokers and integrators who resell it to third parties - into a broader business where we also provide value-added services and bundled products directly to a broader base of customers further down the communications distribution chain. The headquarters of our operations is in The Hague, The Netherlands. We have established sales and marketing regional offices or liaison offices in Beijing, Hong Kong, Johannesburg, New Delhi, Sao Paulo, Sydney, Singapore and Washington D.C., to provide regional sales support to our worldwide customer base. We completed our initial public offering in October 2000 and listed our ordinary shares on the official segment of Euronext Amsterdam N.V. and our American Depositary Shares on the New York Stock Exchange. 2002 Key Events o Daniel S. Goldberg became Chief Executive Officer (CEO) of New Skies on January 1, 2002, having served the previous two years as New Skies' Chief Operating Officer and, prior to that, as New Skies' General Counsel. Mr. Robert Ross, New Skies' CEO from its creation in 1998 through 2001, will be available as an external advisor to the Company through mid-2004. o In 2002, we launched two new satellites, NSS-7 in April and NSS-6 in December. The addition of these two new state-of-the-art satellites increased our total inventory of station-kept satellite capacity from 194 transponders(1) to 324 transponders, an increase of approximately 67 percent. o NSS-7 was placed in commercial service on May 30, 2002. It replaced two existing satellites at 338.5o E.L., the NSS-K and NSS-5 (formerly NSS-803) satellites. Customer traffic on the NSS-K and NSS-5 satellites was transitioned to NSS-7. The transition was completed in August 2002. The NSS-K satellite was subsequently decommissioned. We drifted the NSS-5 satellite to the Pacific Ocean Region to 183o E.L. in order to replace another satellite, NSS-513. o Following the transition of traffic from NSS-K and NSS-5, we drifted NSS-7 one-half a degree from 338.5o to 338o E.L. to comply with a July 2002 directive of the Netherlands regulatory authority and to meet international frequency coordination requirements. The drift of NSS-7, which began in November 2002, was completed in January 2003 without significant disruption to customer services. o The NSS-6 satellite was launched on December 17, 2002 and placed in orbit at 95o E.L. It was placed into commercial operation in February 2003. o We made a decision to "re-purpose" the NSS-8 satellite. NSS-8 had an original delivery date of August 2003 and was intended to provide capacity over the Americas at 105o W.L. We decided to re-purpose the satellite as a replacement for the NSS-703 satellite that now operates in the Indian Ocean Region. Working closely with the satellite's manufacturer, Boeing Space Systems, we have been able to re-purpose the satellite at a minimal incremental cost. We expect to launch NSS-8 during the fourth quarter of 2004. o We strengthened the ground infrastructure supporting our value-added service offerings by adding a new digital platform in our Washington Mediaport and entering into agreements with third-party teleport service providers in the United Kingdom (Kingston Inmedia) and Singapore (ST Teleport). o During 2002, we operated one of the most reliable satellite fleets in the industry, with a 99.998 percent fleet-wide satellite availability rate. o Following our adoption of SFAS No. 142 on January 1, 2002, we took a one-time non-cash write-off of $23.4 million reflecting the unamortized goodwill that the Company had been carrying on its balance sheet from its March 2000 acquisition of AAPT Sat-Tel Pty Ltd. (which was subsequently renamed New Skies Networks, Pty Ltd). o In October 2002, we initiated a share buyback program to repurchase up to ten percent of our then outstanding shares at prevailing market prices. Share repurchases began in November 2002. - ------------ (1) Unless otherwise indicated, when used in this document, the term "transponder" means "36 MHz-equivalent transponder", consistent with satellite industry practice. The number of actual physical transponders may differ from the number of 36 MHz-equivalent transponders. Our Strategy Our management has sometimes described 2002 as a "bridge year" for New Skies, bridging the high-growth period we achieved using the assets we inherited from our predecessor to the high-growth period that we anticipate achieving using the new satellites that we have constructed and launched on our own. In 2002, we successfully launched two new satellites and made other important adjustments to the configuration of our satellite constellation. As a result of these events, we were obligated to idle a certain amount of our satellite fleet's capacity in order to achieve the required deployments and corresponding traffic transitions among satellites in the fleet. By doing so, however, we believe that we have now positioned the company to take advantage of future growth opportunities consistent with our long-term strategy. Our long-term strategy is to offer a seamless global satellite network to meet our customers' requirements for the transmission of their video, voice and data services. We combine our satellite resources with ground-based communications facilities, some of which we own and others which we procure through third parties (to whom we refer as "our partner teleports"), as needed, in order to provide customers with bundled services that meet their transmission and platform needs. We intend to grow our business by: o Selling the capacity on our existing satellites - With the launch of NSS-6 and NSS-7, we expanded our inventory of station-kept satellite capacity from 194 transponders to 324 transponders, an increase of approximately 67 percent. Much of the additional capacity has been added in regions where we perceive demand to be increasing, namely South Asia, the Middle East and Africa. We intend to sell our available capacity through a combination of: - proactive marketing; - providing "value-added services", which bundle satellite capacity with ground-based services such as Internet protocol and other platform services (including video services) available through our teleport facilities or those of our partner teleports; and - pricing our available capacity competitively. While we expect our fleet to grow over time, we will enter into procurement contracts for new satellites only where we have a demonstrated need for additional capacity and a sound business case for the particular satellite. As we add new satellites or move existing satellites to new orbital locations, we will undertake focused marketing campaigns in order to maximize the sales of new capacity and to highlight the value of new service areas to our customers. o Maintaining and augmenting a diverse customer base - We market and provide our satellite capacity to major broadcasters, distributors and telecommunications providers, and to customers further down the distribution chain. Our provision of bundled services has aided us in achieving an expansion in our customer base over the past four years, and we expect this trend to continue. As we augment and diversify our customer base, we endeavor to retain a balanced mix among customers with regard to both service type and region. This balance helps position us to be able to capture new demand wherever it may arise, and to reduce the risks associated with over-reliance upon any one market segment or geographic region. o Expanding the services we offer to include a range of selected bundled services - In addition to continuing to provide space segment-only services to certain customers, we provide value-added services which bundle space segment with services provided through ground-based facilities, such as video and Internet protocol platforms which reside in our own teleports or in our partner teleports. o Acquiring other businesses and entering into strategic transactions - We also intend to pursue acquisitions, joint ventures or other strategic transactions on an opportunistic basis as consolidation within the satellite services industry continues to unfold. Our principal focus is likely to be on the acquisition of, or strategic combination with, another satellite operator as and when suitable opportunities arise, and on the acquisition of rights to use additional orbital locations. Under appropriate circumstances, we also would consider acquiring additional individual in-orbit satellites, transponders on existing in-orbit satellites, or other established facilities and components necessary for the provision of bundled services. Our Services We currently offer satellite capacity for different applications, which may be grouped as follows: o video transmission; o private data and voice networks and traditional telephony applications; and o Internet-related services. Video Transmission Our C- and Ku-band global satellite fleet is well-suited to distribute video signals, on both a point-to-point and point-to-multipoint basis, to ground-based broadcasting systems around the world, directly to some private telecommunications networks used by businesses via small antennas, and for direct-to-home (DTH) applications. We estimate, based on frequency plans supplied by our customers, that video transmissions have comprised the single largest source of our revenues since we began independent operations, and represented approximately 41 percent of our revenues in 2002. Cable and Broadcast Television Distribution We broadcast television channels to international, regional and national cable and television networks in Latin America, the Middle East, Africa and India. This makes our satellites attractive to potential customers for satellite capacity who would also like to transmit similar or related programs to those cable or television systems. These groupings of similar channels that develop are referred to as "neighborhoods". As it can be difficult to redirect the ground-based antennas, or cable head-ends, of a local cable network that has multiple antennas, and because groupings of popular channels tend to build viewer loyalty, video broadcasters often try to develop neighborhoods in markets with relatively homogeneous viewing characteristics. The New Skies satellites with significant video neighborhoods are: o NSS-806, which currently reaches cable headends throughout Latin America, Western Europe and parts of North America and has one of the leading video neighborhoods in Latin America; o NSS-7, from which an offering of leading French language channels, such as TV5 Afrique, Canal+Horizons, MCM and CFI target the African market; and o NSS-703, which is a key distributor of news and entertainment programming throughout Africa, the Middle East and Asia. Television Contribution Services We provide our broadcast customers with capacity for both regular television contribution feeds and occasional coverage of special sports, news or other scheduled events and fast-breaking news stories of global and local interest. Contribution feeds are signals collected by programmers from multiple sources or transmitted from the location where specific events are taking place back to video production facilities. Our customers use contribution feeds to integrate different segments or special events into a consolidated video program for broadcast to their customers. We provide television contribution services on a long-term basis to customers who have a regular need for such services. For example, the European Broadcast Union (EBU), a group of 119 broadcasters from 80 countries, uses capacity on the NSS-7 satellite and our Washington Mediaport for the delivery of contribution footage from the United States to its member broadcasters throughout Europe and the Middle East. We also allocate specific capacity for occasional-use services on a short-term basis for customers who have a temporary need for capacity. We have a special booking operation for television contribution services to accommodate major broadcasters such as the EBU, CNN, Reuters and the BBC. Demand for short-term services is event-related and sometimes unpredictable. Customers generally request short-term contribution services either in connection with major international sporting events, such as the Olympics or World Cup, or in connection with major breaking news events that attract sustained international attention. Data and Voice We provide transponder capacity for the operation of private data and voice networks for governments and businesses in various countries, usually through carriers, third-party resellers, and other network integrators. Our satellites support high-bandwidth transmissions, which allow these customers to transmit information quickly and reliably using relatively small antennas known as VSATs (very small aperture terminals), which can be located on a business rooftop. Private networks use VSAT antennas to create a dedicated, interconnected communication link allowing various geographically dispersed sites to connect into a central location. Each remote site is able individually to send and receive information directly to and from the central site. We also provide transponder capacity for a number of telephone applications worldwide. The majority of this business has been the transmission of telephony on behalf of intermediaries and resellers to and from major post, telephone and telegraph administrations. We have also begun to market these services to customers in countries where regulators are opening the telecommunications market to competition, particularly in Asia and Africa. These markets may offer substantial demand and new opportunities to provide telephony and related services at profitable levels. In 2002, satellite capacity used for data and voice service applications accounted for approximately 32 percent of our total revenues, increasing from 30 percent of total revenues in 2001. We expect continued demand for capacity to provide data and voice services in 2003, driven in part by government requirements for these services and in part by increasing requirements for international long-distance voice services from newly authorized service providers in countries undergoing telephony deregulation. These sources of demand have helped to counter-balance the general trend toward the use of fiber optic networks for voice services, and we expect that this segment will continue to contribute to our revenues over time (although possibly at declining levels). Internet-Related Services Our satellites connect Internet service providers, businesses and other customers further down the signal distribution chain who may be in locations that do not currently have a direct high speed connection to the U.S. or European Internet backbone. For example: o NSS-703 provides a high-bandwidth Internet connection between the Indian subcontinent and South East Asia and the European Internet backbone; o NSS-7 provides high-bandwidth connectivity between European Internet service providers and the United States and between the Middle East and Africa and the Internet backbone; and o NSS-806 serves the same function for this traffic from the United States to South America. Our primary suite of branded Internet bundled service offerings is called IPsys(R). These offerings are capable of providing high-speed Internet backbone connections to Internet service providers, or ISPs, in virtually all regions of the globe. Since the launch of our IPsys(R) service in May 2000, sales have been strong. At present, we provide Internet connectivity to customers in India, the Middle East, Africa, Latin America, and other regions. We target Internet service providers, multinational corporations and broadcasters for IPsys(R) and related bundled services. To support our IPsys(R) service offerings, we built and operate our own Network Operations Center, and have installed high-bandwidth digital video broadcast (or DVB) and frame-relay platforms at the ground facilities through which we connect to the Internet backbone, as well as other performance-enhancing equipment. Revenues from Internet-related traffic represented approximately 27 percent of our total revenues in 2002, down slightly from 29 percent of revenues in 2001. Sales and Marketing and Customers We have significantly broadened and expanded our customer base since our creation in order to increase revenue opportunities while reducing the risks associated with selling to a limited number of customers. In addition to providing services to large telecommunications companies, we now also provide transponder capacity and other services directly to other commercial resellers, such as network system integrators, ground stations or capacity brokers, as well as to some of the larger customers further down the distribution chain. During 2002, we provided service under contract to more than 240 customers worldwide. Our ten largest customers represented approximately 48 percent of our total revenues in 2002. Our sales and marketing personnel are divided into six regions: (i) North America; (ii) Latin America; (iii) Europe; (iv) Asia Pacific; (v) India, the Middle East and Africa; and (vi) Australasia. We currently have approximately 76 employees who sell, market and provide sales support for our services worldwide. We manage our sales, marketing and billing activities from our headquarters in The Hague. We also have established regional sales or liaison offices in North America (Washington DC), South America (Sao Paulo), Asia (Singapore, Hong Kong, Beijing and New Delhi), Africa (Johannesburg) and Australia (Sydney). Contracts In 2002, we signed 333 new contracts with our customers. Our contracts generally are denominated in U.S. dollars; provide for payment monthly in advance; are non-preemptible and non-cancelable during the term (or allow customers to cancel their commitments only under certain limited conditions and the payment of significant penalties); and otherwise provide a level of protection consistent with industry practice. Although the contracts can be terminated in the event of certain capacity malfunctions, we generally have a cure period. A small percentage of our current contracts (approximately 10 percent) were assigned or otherwise transferred to us by our predecessor and may have terms and conditions that differ from our standard agreements (e.g., payment quarterly in arrears rather than monthly in advance). Backlog For 2002 backlog, see Item 5, "Operating and Financial Review and Prospects". Our Satellites We currently operate and provide commercial service through a network of five (5) communications satellites positioned in fixed (station-kept) geosynchronous orbits (NSS-5, NSS-6, NSS-7, NSS-703 and NSS-806). We have one additional satellite, NSS-513, which is in inclined orbit and is not currently being used to provide commercial services. We have one additional satellite, NSS-8, currently under construction, and have also received authorizations from the Dutch government to use certain additional orbital locations for future satellites. For 2002, we operated one of the most reliable satellite fleets in the industry, with a 99.998 percent fleet-wide satellite availability rate. Our satellites are located approximately 22,300 miles (35,700 kilometers) above the earth. We operate five of our satellites in station-kept mode, which means that they maintain their geosynchronous position over the equator within tightly controlled limits (plus or minus .05o). Because of this control, most earth antennas within a satellite's beam can communicate continuously with the satellite without having to track it in orbit. Our oldest satellite, NSS-513, is in geosynchronous orbit, but it is not station-kept. While we keep the satellite in the same east-west position above the earth, we allow it to drift north and south relative to the equator which we call "inclined orbit" operation. It is typical in the industry to operate a satellite that is near the end of its useful life in an inclined orbit mode. Our newest satellites, NSS-6 and NSS-7, are designed to carry additional and more powerful transponders than the satellites that we inherited from our predecessor at the time of our creation, although to a limited extent our ability to use additional power and frequencies may be limited by technical and regulatory limits (including, for example, those agreed to in relevant coordination agreements). They were also designed to provide better connectivity and to allow for more operational flexibility than our inherited satellites. In-Orbit Satellites NSS-5 In 2002, we relocated NSS-5 (formerly known as NSS-803) from 338.5o E.L. to its current orbital location at 183o E.L. to replace NSS-513. NSS-5 was brought into commercial use in its new location in January 2003. NSS-5 is our principal connectivity satellite for the Pacific Ocean Region and provides coverage of certain areas in North America, Asia and Australia. NSS-5 is one of the few satellites that can connect North America with all major destinations in the Pacific Rim. NSS-5 provides station-kept capacity with high performance and greater throughput than the NSS-513 satellite. Access to the satellite from the West Coast of the United States, Canada and Mexico can be achieved at C-band frequencies on global, hemispheric or zone beams. The satellite also has a steerable Ku-band spot beam over North America that can provide additional connectivity and can include Hawaii. Over Asia, a second steerable Ku-band spot beam has initially been deployed over Japan and Korea. The western zone beam of NSS-5 covers major destinations such as China, Hong Kong, and Singapore. Hemispheric coverage extends from the north of China to Australia and New Zealand. One of two duplicate power subsystem units on NSS-5 - a low-voltage bus converter - stopped operating in 2002. The manufacturer of the satellite has informed us that the duplicate unit that is currently not operational should automatically restart if the single unit that is currently operating fails. If this did not occur, the satellite might prematurely cease to operate (although we believe that there is only a low risk that the currently operating unit will fail and that other unit will not restart). NSS-6 NSS-6 was launched successfully on December 17, 2002 to the 95(degree) E.L. orbital position (over the Asia-Pacific Region) and was placed into service in early 2003. NSS-6 is equipped with 60 36-MHz-equivalent Ku-band transponders. From the orbital slot at 95o E.L., NSS-6's six high power Ku-band beams provide coverage of India, China, the Middle East (including Cyprus and Southern Africa), Australia, Southeast Asia and Northeast Asia. Additionally, NSS-6 has 10 uplink spot beams in the Ka-band, fixed on the strategic markets of Hong Kong, Shanghai, Beijing/Tianjin, Wuhan, Taiwan, Seoul, Tokyo/Osaka, Mumbai, Bangalore/Chennai, Delhi, Sydney and Melbourne. Each of the Ka-band uplinks can be used in lieu of one Ku-band uplink. NSS-6 has significantly greater Ku-band capacity and power than any of our current satellites. The design of NSS-6 permits extensive transponder switching among beams, allowing us to reassign capacity among geographic regions in response to market demand. Moreover, NSS-6 has a broad coverage area and a high degree of intra-satellite interconnectivity, which will make it possible, depending on the relevant transmission, for a customer to uplink a signal from one region and downlink that signal to a different region using a different transponder. NSS-6 is designed to serve a wide range of customers, including broadcasters, telecommunications carriers, DTH service providers, ISPs, corporations and other enterprise customers. Its versatile Ku-band and Ka-beams can also be interconnected ("cross-strapped"), offering enhanced connectivity throughout its service area. NSS-7 NSS-7 was launched in April 2002 and entered commercial service in May 2002. It is the first satellite that we designed, constructed and launched entirely during the course of our operations as an independent company. We deployed NSS-7 to 338.5(degree) E.L. (over the Atlantic Ocean Region) to replace the NSS-K and NSS-5 satellites. Following the transition of customer traffic from NSS-K and NSS-5, we relocated the NSS-7 by one-half degree to 338o E.L., its current location, in order to comply with a directive of the Netherlands government and to meet international frequency coordination requirements. NSS-7 has greater combined capabilities than the two satellites that it replaced, including higher power, enhanced geographic coverage, and a larger number of transponders. NSS-7 was built by Lockheed Martin and has a 12-year design life. It has 49 36-MHz-equivalent C-band and 48 36-MHz-equivalent Ku-band transponders. It offers the ability to transmit or receive a large number of C-band and Ku-band signals simultaneously, with a high level of interconnectivity between different beam coverages on a channel-by-channel basis. NSS-7 is specifically designed, by means of on-board switching, to facilitate asymmetric traffic between coverage areas. Its capabilities, including in particular its higher power, will allow many customers to use smaller antennas. NSS-7 supports a variety of services, including video distribution and contribution, Internet access, private telecommunications networks used by businesses, and fixed services such as telephone and data transmission. In addition, capacity can be flexibly assigned to eleven high-powered coverage beams, blanketing the Americas, Europe, the Middle East and Africa. NSS-513 We removed NSS-513 from commercial service at its current location, 183(degree) E.L., in December 2002 following the relocation of NSS-5 to that orbital location and the transfer of customer traffic from NSS-513 to NSS-5. NSS-513 has 42 36-MHz-equivalent C-band transponders and 16 36-MHz-equivalent Ku-band transponders. NSS-513 is currently maintained in inclined orbit, rather than in station-kept orbit. This was done to preserve fuel that we otherwise would use to keep the satellite over the equator. Because a satellite in inclined orbit moves in a predictable pattern, only antennas that can track the satellite are capable of maintaining uninterrupted communications. NSS-513 has sufficient propellant to continue its inclined-orbit operations for one to two years depending on where it is relocated and its health. We are currently considering possible future commercial uses of the NSS-513 satellite. NSS-703 NSS-703, located at 57o E.L., provides a wide range of services, as the television and telecommunications needs of the multiple regions it serves are diverse. Analog and digital television broadcasters, post, telephone and telegraph authorities and communications service providers are the primary users of this satellite. NSS-703 is used for telephone services in Asia Minor, cable television distribution in India and for television distribution and contribution throughout the Asia Pacific Region. NSS-703 provides service via 38 C-band transponders and 20 Ku-band transponders. Its C-band hemispheric beams cover two major regions. The first is Africa. The second is the triangle from Eastern Iran to Japan to Australia. Within this region, NSS-703 offers complete India and China coverage. These hemispheric beams are supported by four zone beams, which are optimized to provide service to sub-regions of northeast Asia, Southeast Asia and Australia, southern Africa and from northern and western Africa to the Mediterranean Sea. We have currently deployed the satellite's three fully steerable Ku-band spot beams to service Europe, central Asia and the Arabian Peninsula. We are currently planning to replace NSS-703 with NSS-8 following NSS-8's launch (which is expected to occur in the fourth quarter of 2004). Following replacement of NSS-703 by NSS-8, we are currently planning to re-deploy NSS-703 to another orbital location. NSS-806 NSS-806, located at 319.5o E.L., provides C-band and Ku-band coverage of the Americas and Europe. It transmits a neighborhood of 104 Spanish language cable television channels to South America, including video channels from Argentina, Brazil, Venezuela, Colombia, Peru, Bolivia and the United States, as well as other regional services and international channels. NSS-806 has 36 C-band transponders and 6 Ku-band transponders. It contains a single high-powered beam that provides simultaneous coverage of the Spanish- and Portuguese-speaking regions of both the Americas and Europe. In addition to providing coverage of the Latin American markets, it reaches the Iberian Peninsula, the Canary Islands, Western Europe and much of Eastern Europe via a high-power hemispheric beam. This facilitates the distribution of programming from both Latin American content providers and North American and European content providers to Latin American cable networks. The satellite also features a spot beam covering Mercosur (Argentina, Brazil, Paraguay, Uruguay and Chile) with high-powered Ku-band coverage over urban areas. This capacity is well suited for use by corporate network communications. The high power of NSS-806's signals helps to ensure that its signals can be delivered to small antennas. Planned Satellites NSS-8 In March 2001, we entered into a construction and launch contract for our NSS-8 spacecraft with Boeing Satellite Systems, formerly Hughes Space and Communications. NSS-8 originally had been planned for launch in late 2003 to serve the Americas market from 105o W.L. We have decided, however, to re-purpose the NSS-8 for deployment to the 57(0) EL. orbital slot as a replacement satellite for NSS-703 satellite currently located in that slot. By doing so, we will provide expansion capacity in response to demand in the Indian Ocean Region. NSS-8 is now expected to be launched in the fourth quarter of 2004. NSS-8 will carry 56 C-band and 36 high-power Ku-band transponders, making it one of the largest and highest power satellites with coverage of Europe, the Middle East, India, Africa and Asia. As part of our contract with Boeing Satellite Systems, they are required to deliver the spacecraft to us in orbit. Currently, the contract calls for the manufacturer to use a Sea Launch Zenit vehicle to launch the satellite (although under certain circumstances we can designate a substitute launch vehicle). By deploying our newest, largest, and most powerful satellite to an established orbital location in the Indian Ocean Region, New Skies will endeavor to continue to meet the current and future needs of its many customers throughout India, Asia, the Middle East, and Africa as well as capitalize on the region's strong projected growth. The table below summarizes selected data relating to our six operational satellites and the NSS-8 satellite which is currently under construction:
Satellites under In-orbit Satellites construction -------------------------------------------------------------------------------------------- ---------------- NSS-513(1) NSS-6 NSS-703 NSS-5 NSS-806 NSS-7 NSS-8 ------------------------------------------------------------------------------------------------------------------- Orbital position 183o 95o 57o 183o 319.5o 338o 57o East East East East East East East (177o West) (265o West) (303o West) (177o West) (40.5o West) (21o West) (303o West) (planned) Land regions served: -- -- Europe, Asia, North America, Europe, Americas Europe, Africa, Europe, Asia, C-band........ Australia, Asia, Australia Americas, Australia, Africa, Africa Middle East Middle East Ku-band....... Middle East, Europe, Central North America, Argentina, Europe, Africa, -- Asia, Asia, Asia Brazil Americas, Europe, Asia, Australia Middle East Middle East Australia, Africa, Middle East Ka-band....... -- Middle East, -- -- -- -- -- Asia, Australia Launch date..... May 1988 December 2002 October 1994 September 1997 February 1998 April 2002 Fourth Quarter 2004 (est.) Manufacturer....Ford Aerospace Lockheed Martin Space Systems/ Lockheed Martin Lockheed Martin Lockheed Martin Boeing Satellite LORAL Systems Number of transponders:(2) 42 -- 42 61 36 49 56 C-band........ Ku-band....... 16 60 24 12 6 48 36 Ka-band....... -- 12 -- -- -- -- -- -- -- -- -- -- -- -- Total....... 58 60 (4) 66 (5) 73 (5) 42 97 92 (5) Maximum signal strength at receiving antenna (decibel-watts): 23.5 to 29 -- 26 to 36 29 to 36 36 to 37.2 38 to 40 38 to 43 (3) C-band........ Ku-band....... 41.1 to 44.4 44 to 52 44.5 to 47 44 to 47 42 to 49 46 to 49 48 to 52 Ka-band....... -- -- -- -- -- -- -- Power output (kilowatts):(6) At beginning of life........ 1.7 13.6 4.9 6.2 7.1 12.7 16.0 (est.) At end of orbital design life........ 1.3 12.0 4.0 4.8 5.4 10.7 13.8 (est.) Orbital design life, end(7).......... May 1995 February 2015 August 2005 September 2007 March 2008 April 2014 12 years after Anticipated delivery in orbit commercially operable end of life(8)...... See note (1) First Quarter Third Quarter Third Quarter Third Quarter Third Quarter (est) 16 years below 2019 2009 2015 2016 2015 after delivery in orbit
- -------------------------- (1) NSS-513 is presently operating in inclined orbit and is not in commercial service at its current orbital location . See "In-orbit Satellites: NSS-513." (2) Satellite transponders receive signals from uplink ground stations, then convert, amplify and transmit the signals to downlink ground stations. This table states the transponder capacity of our satellites in terms of the number of 36 MHz equivalents of capacity they can handle. Actual transponders range in size. For example, there are 36 MHz, 54 MHz, 72 MHz and 112 MHz transponders. (3) Measures the transmission power of a transponder based on the strength of the signal received by a ground station antenna in decibel-watts. Smaller and less expensive ground station antennas can be used with transponders that provide higher signal strength at a receiving antenna. (4) NSS-6 satellite has 60 transponders, all of which operate in the Ku-band for downlink (satellite-to-customer) transmissions and can operate in the Ku-band for uplink (customer-to-satellite) transmissions. The satellite also contains 12 Ka-band uplink transponders, up to 10 of which can be activated at any given time. If activated, a Ka-band uplink operate in lieu of one Ku-band uplink. (5) For technical reasons, we sometimes configure a satellite so that certain transponders are not operational. For example, in order to optimize NSS-5's overall performance we are operating it in a manner that effectively reduces the number of operational C-band transponders to 55 and we are operating NSS-703 in a manner that effectively reduces the number of operational C-band transponders to 38 and Ku-band transponders to 20. Similarly, we anticipate we will configure NSS-8 in a way that will yield only 88 operational transponders. (6) Power available, as required under the terms of the satellite construction contract, is measured in kilowatts. (7) The manufacturer determines a satellite's in-orbit design life. The manufacturer contractually commits that the satellite will be able to maintain its contractually specified performance throughout this period. (8) We estimate anticipated commercially operable life based on a number of factors and we update these estimates periodically based on each satellite's actual in-orbit performance. The most important factor is the length of time during which a satellite's on-board propellant is projected to permit maneuvers to keep the satellite in geosynchronous orbit. Under appropriate circumstances we would also consider other factors, including remaining on-board redundant systems and expected performance of satellite components. Additional Future Satellites We anticipate that we may launch additional satellites in the future, both to replace our existing satellites as they near their end of life and, depending upon market conditions, to expand our scale and scope by expanding the size of our in-orbit fleet. We regularly study the demand for satellite services in various regions and for different applications in order to keep abreast of opportunities. While we are committed to a long-term strategy of enhancing our satellite fleet, we expect to enter into procurement contracts for new satellites only where we have an expected need for the additional capacity and a sound business case for demand for the particular satellite. We may further expand our global coverage, capacity and service offerings by deploying satellites into new orbital locations. The exact location and intended use of each of our satellites is subject to various governmental approvals, coordination issues and other regulatory risks. See "Government Regulation". We may also choose to enter into arrangements with other satellite providers to use existing orbital and satellite resources at a single orbital location to expand the respective commercial service offerings of both operators. We believe such arrangements may make productive use of our orbital locations without making additional capital expenditures or incurring significant incremental expenses. Such arrangements are subject to applicable law and regulation, which may limit their scope or application. Satellite Operations and Related Facilities We perform tracking, telemetry and control (TT&C) functions for all but one of our satellites from our satellite operations center located in The Hague. Because NSS-513 had only limited remaining anticipated commercial life when we inherited that satellite, we have contracted with a third party to perform TT&C functions for that satellite. TT&C functions involve (i) tracking our satellites and ensuring that they maintain the designated geostationary orbital position; (ii) receiving information about the operational status of our satellites via the transmission of coded data; and (iii) relaying operating instructions to our satellites, including regular maintenance activities and, in the event of component faults, diagnostic tests and initiation of redundant subsystems. The satellite operations center is supported by additional sites around the globe that we own or lease, and which allow us to communicate with our satellites. Each of our satellites can communicate with at least two of these remote TT&C facilities so that flight command instructions and return performance data can be sent reliably between the satellite operations center and the satellite on a redundant basis. In addition, we perform all of our payload management and carrier monitoring services with respect to all of our satellites from our own payload operations center located in The Hague. These functions include (i) monitoring the appropriate frequencies and power settings for each signal being transmitted by the satellite in order to preclude interference with other customers or third parties; (ii) monitoring the quality of signals being transmitted by the satellite; and (iii) verifying that the customer traffic on our satellites is being transmitted in accordance with contractual obligations and our operating procedures. Most of the data provided to our payload operations center regarding the traffic carried over our satellites is collected by a network of carrier service monitoring sites that we own or lease worldwide, which measure the usage of the transponders and quality of service on our satellites. These critical TT&C and payload management and carrier monitoring functions are supported by an auxiliary satellite operations center and auxiliary payload operations center located at a separate facility in Belgium. These centers are fully redundant, routinely tested and operate on a stand-by basis to provide an immediately usable emergency back-up to our primary operations centers at our headquarters. Network Operations Facilities We currently own and operate ground-based facilities in the United States and Australia. Our mediaport in the United States, which is located near Washington, D.C., provides uplink and downlink services to our NSS-7 and NSS-806 satellites. We also have installed equipment at this mediaport and leased fiber optic cable capacity that enables us to transmit signals between our satellites, on the one hand, and the U.S. Internet backbone, the public telephone network and private telecommunications networks used by businesses, on the other hand. We have a number of teleports across Australia, including two substantial facilities in Perth and Adelaide. Our Australian teleports can access NSS-5 and NSS-6 and provide a wide variety of satellite networking and Internet-related services. We also enter into agreements with third parties to provide the teleport facilities and services which we require in locations around the globe where we do not have our own terrestrial facilities. In 2002, we concluded such agreements with teleport operators in the United Kingdom and Singapore, and in January 2003, with an operator in Hong Kong, thereby adding to the existing set of relationships that we have with teleport operators on the West Coast of the United States and the Middle East. We regularly evaluate opportunities to enter into agreements with teleport operators in strategic locations with facilities that can access our satellites and facilitate our customers' use of our services. To support IPsys(R) and our other bundled services, we have installed at our Washington Mediaport and at one or more third-party teleports high-bandwidth digital video broadcast, or DVB, platforms, as well as equipment that permits the provision of video-based bundled services such as the compressed multi-carrier-per-channel transmission of video networks. We have also developed additional platform facilities to serve customers in Asia, the Middle East and Africa. Satellite Operations Risk Management Launch Insurance We obtained launch insurance for our NSS-7 and NSS-6 satellites, which were launched in 2002. Launch insurance policies typically cover claims arising from events that take place during launch and for a fixed period of time following launch (in the case of NSS-7 and NSS-6, for three years). Launch insurance policy coverages include: o catastrophic loss of a satellite during launch; o the failure of a satellite to obtain proper orbit; and o the failure of a satellite to perform in accordance with design specifications during the policy period. The terms of launch insurance policies generally provide for payment of the full insured amount if 75 percent or more of a satellite's communications capacity or life is lost within the period, and, partial payment for losses of less than 75 percent of the satellite's communications capacity within this period. Launch insurance policies include standard commercial launch insurance provisions and customary exclusions in launch policies. Special exclusions may be added in light of the performance of a particular type of satellite or launch vehicle. We currently intend to procure launch insurance for our future satellites in an amount approximately equal to the net book value of the construction, launch and launch insurance costs for each satellite at the initial date of coverage. We may obtain a re-launch guarantee from the launch service contractor, either in addition to obtaining launch insurance or in lieu of a portion of that insurance. In-Orbit Insurance Our in-orbit insurance policies cover claims that relate to events that take place after the expiration of the relevant launch insurance policy. This coverage includes the failure of a satellite to continue performing in accordance with design specifications. Partial failures or anomalies which occur during a policy period, but which do not give rise to a claim, may be excluded in renewal policies. Our in-orbit policies include customary commercial satellite insurance exclusions. We seek to obtain in-orbit insurance with respect to our satellites in an initial amount approximately equal to the unamortized construction, launch and insurance costs for each of them. We have obtained in-orbit insurance for our in-orbit satellites, except that we do not have in-orbit insurance for NSS-513 because it currently has no residual book value. The amount of in-orbit insurance in force with respect to each of our satellites will generally decrease over time, typically based on its declining book value. Typically, in-orbit insurance is renewed annually. As is common in the industry, we have not insured against lost revenues in the event of a total or partial loss of the communications capacity or life of a satellite. Employees At December 31, 2002, we had approximately 264 full-time employees. We believe that our relations with our employees are good. Property We established our global headquarters in The Hague in 1998. We own our headquarters buildings. Our headquarters facilities house our satellite operations center, payload operations center, operating and engineering staff, and our sales, marketing and other administrative personnel. We currently own and operate teleports in Bristow, Virginia, USA (the Washington Mediaport), Perth, Western Australia and Adelaide, South Australia. We lease office space, either directly or through a local operating subsidiary, for regional sales or liaison offices in North America (Washington DC), Australia (Sydney), South America (Sao Paulo), Asia (Singapore, Hong Kong, Beijing and New Delhi) and Africa (Johannesburg). See also "Satellite Operations and Related Facilities" and "Network Operations Facilities". Legal Proceedings We are often engaged in proceedings before national telecommunications regulatory authorities. See "Government Regulation". In addition, we also may become involved from time to time in other legal proceedings arising in the normal course of our business. We believe that none of these proceedings, either individually or in the aggregate, is currently likely to have a material adverse effect on our business or our consolidated financial position. Competition We are one of four global satellite operators. We compete against other global, regional and national satellite operators and, to a lesser extent, with suppliers of ground-based communications capacity. The other three global satellite operators are Intelsat, PanAmSat and SES Global, all of which have substantially larger satellite fleets than New Skies. We also compete with a number of nationally or regionally focused satellite operators in each region of the world, such as Eutelsat and Loral. Based on our analysis of market trends, we believe that the number of satellite operators may decrease slightly or remain broadly constant, with consolidation of the industry offsetting the emergence of any new operators. Several of our many competitors whose operations are principally regional may expand their operations through acquisitions and alliances in an effort to become global operators or may be acquired by another regional or global operator. Fiber optic cable operators may provide an alternative to satellite capacity, principally on point-to-point long-distance routes, especially transoceanic routes. The growth in this capacity, particularly across the Atlantic Ocean, and the reduction in prices of that capacity have led some services (between major city hubs, including most voice and data traffic and some video traffic) to migrate from satellite to fiber optic. However, satellites may remain competitive for signals that need to be transmitted beyond the main termination points of the fiber optic cables. Satellite capacity is also competitive in parts of the world where providing fiber optic cable capacity is not yet cost-effective. Satellites also remain the medium of choice for broadcast and multicast (or point-to-multipoint) applications. Satellite Operators Intelsat Ltd. Intelsat, Ltd. is the privatized successor of the International Telecommunications Satellite Organization (INTELSAT). From 1964 until 2001, INTELSAT operated as an international treaty organization with a mandate to provide satellite capacity on a non-discriminatory basis to countries around the world. In July 2001, INTELSAT was privatized by transferring the assets and liabilities of the intergovernmental organization into a for-profit satellite operator. Intelsat, Ltd. operates 24 satellites. PanAmSat. PanAmSat is another company that we directly compete with in providing global satellite telecommunications services. PanAmSat currently has a fleet of 23 satellites. PanAmSat has a particularly strong presence in North and South America. SES Global. SES Global was created in 2001 through the merger of two regional operators, GE Americom and SES Astra. The company operates 29 satellites of its own and another 13 through equity participations. We do not compete against SES Global's core direct-to-home consumer video services in Europe or in cable distribution in the US. Loral. Loral, which is also a principal manufacturer of satellites, has acquired interests in a fleet of 10 satellites since 1997 by acquiring Skynet, Orion Network Systems, a 75 percent stake of SatMex and entering into a joint venture with Alcatel to create Europe*Star. Loral has entered into joint marketing arrangements with other regional and national satellite operators under the umbrella of the "Loral Global Alliance". This has enabled Loral to expand its coverage beyond its principal home markets. Regional and Domestic Providers. We compete against a number of regional providers of transponder capacity. These entities include, among others: o Arabsat in the Middle East; o Eutelsat and Europe*Star in Europe, Africa, the Middle East, and on trans-Atlantic routes; o Measat, AsiaSat, Apstar and Shinawatra in Asia; and o SatMex, Star One and Nahuelsat in Latin America. These entities are active in regions in which we provide facilities and services. A number of other countries have domestic satellite systems that we also compete against to some extent, although most of our business is international in scope. Proposed Satellite Systems Other companies have announced plans to operate regional or transoceanic satellite systems. The international satellite communications industry, however, imposes significant barriers to entry. The construction and launch of a satellite comparable to our newest satellites usually takes approximately two or more years and costs approximately $250 million to $300 million. In addition, there are a limited number of orbital positions and frequencies that can be coordinated for use through the International Telecommunication Union. The operation of an international satellite communications system also requires approvals from particular national telecommunications authorities. While the trend around the world is to liberalize these regulatory requirements, at present obtaining the necessary authorizations involves significant time, expense and expertise. Resellers We also compete against service providers that offer business communications and other satellite-based services reselling satellite capacity provided by other operators, including companies such as Globecast, BT and Verestar. Certain service providers also use leased satellite capacity to provide limited services to broadcasters, primarily for ad hoc applications. We also compete in some ways with local post, telephone and telegraph agencies who provide local connection services over the "last mile" between transmissions from major service providers to end user customers. Fiber Optic Cables The primary use of fiber optic cables is carrying high-volume communications traffic from point to point. Satellite companies generally do not address this market. Based on current trends, we expect that in the future, transcontinental fiber optic cables will carry video signals and other video and audio applications that use formats compatible with the Internet, although recent business difficulties among fiber optic cable operators may affect fiber build-out plans. Fiber optic cables are not, however, well suited for point-to-multipoint broadcast applications, which we believe will increasingly develop with the introduction of Internet applications, such as multicasting, streaming and caching. Fiber optic cables are not readily usable for the transmission of ad hoc events occurring at locations that are remote from a fiber optic connection. Those sorts of events require the use of short-term satellite capacity and transportable uplink ground stations. Government Regulation The international communications environment is highly regulated. As an operator of a private international satellite system based in the Netherlands, we are subject to the regulatory authority of the government of the Netherlands and the national communications authorities of the countries in which we operate. We are also subject to regulations promulgated by the ITU. In order to provide services to, from, or within a country, we must comply with that country's "market access" rules. This has required us, in some instances, to obtain governmental permissions to provide transponder capacity and other services to customers in those countries. We believe we will benefit substantially from the pro-competitive trends informing national regulatory policies. Under the Agreement on Basic Telecommunications Services, for example, a number of countries that are members of the World Trade Organization committed to open their markets to satellite operators established in other member countries. Despite these trends, however, we will need to continue devoting considerable time and resources to our market access efforts, and will have to continue to comply with laws and regulations, including amended laws and regulations, in the countries in which we provide service. We have assembled a team of regulatory professionals devoted almost exclusively to market access issues. This team prioritizes its continuing efforts by the magnitude of business opportunities in each market. Our fleet provides services in the majority of the world's markets, and we believe that we have obtained all necessary authorizations, permits and licenses for the conduct of our business as whole. Regulation in the Netherlands The Ministry of Economic Affairs, Directorate-General for Telecommunications and Post (DGTP) is the governmental body in The Netherlands with primary authority over satellite carriers. The primary source of regulation with respect to telecommunications services providers is the Telecommunications Act. This act requires operators to have a license to use frequencies within the territory of the Netherlands. We are not required under Dutch law to have a license for the use of frequencies in space, such as the operation of our satellites at the specific orbital locations and upon the frequencies assigned to us, although we have obtained an authorization from the Dutch government allowing us to use such locations and frequencies. We are not required to have a license in the Netherlands to operate a telecommunications network or services, although registration is required with the Dutch independent telecommunications regulatory agency. The Netherlands government is considering developing additional laws regarding space activities to comply with its international treaty obligations. The government of the Netherlands has registered our satellites with the International Telecommunication Union. Accordingly, the government of the Netherlands remains responsible internationally for resolving any allegations that our satellites are causing harmful interference to other registered wireless systems. Thus, although Dutch law provides no specific framework for satellite licenses, we work closely with DGTP to ensure that we comply with ITU regulations and any other obligations resulting from international telecommunications agreements or treaties to which The Netherlands is a signatory. Other National Telecommunications Authorities Regulation in the United States Regulation of Satellite Use. The Federal Communications Commission (FCC) is the governmental agency in the United States with primary authority over all satellite operators that want to access that market. In the case of non-U.S. licensed satellite operators, such as ourselves, the FCC does not generally grant any licenses directly to the satellite operator. Instead, the FCC regulates the ability of ground stations in the United States to communicate with the satellites operated by the non-U.S. company. In March 2001, the FCC granted our request for full authority to serve customers in the U.S. market. Export License Requirements. U.S. companies and companies located in the United States must comply with U.S. export control laws in connection with their provision to us of certain products, data, software, documentation and services relating to our satellites and satellite-related terrestrial facilities. Since we are a non-U.S. company, the exporter must obtain from the United States government certain export licenses and other approvals, including new or amended licenses with respect to each new satellite we may procure in the future from the United States, and both we and the exporter must comply with the terms of all such licenses and other approvals. Other Governmental Authorities In many of the other countries that our satellites can serve, we are subject to national communications and/or broadcasting laws. While these laws vary from country to country and are subject to periodic revision, national telecommunications regulatory authorities generally have not required us to obtain licenses or regulatory authorizations in order to provide transponder capacity to authorized entities. Many countries have liberalized their national communications market. Many countries allow authorized communications providers to own their own transmission facilities and purchase satellite capacity without restriction. In these environments, we may provide services through one or many authorized carriers or to customers further down the distribution chain. Other countries, however, have maintained strict monopoly regimes or have regulated the provision of services within their borders. In some cases, we must establish a local legal entity or representative through which to do business, and/or obtain specialized governmental licenses, concessions or permits. In other countries, we must operate pursuant to a bilateral or multilateral agreement permitting such operations. In other countries, some or all customers may be required to access our services through one or a small number of designated entities, which in some cases are government-owned. In order to provide services in these environments, we may need to negotiate an operating agreement with the designated entity(ies) that describes the types of services offered by each party, the contractual terms for service and each party's rates. Depending on the national regulatory requirements, these operating agreements may require that customers obtain our services through the monopoly authority alone at a pre-arranged markup or may allow customers to own and operate their own facilities but require them to purchase our services through that entity at a rate reflecting the pre-arranged markup. Notwithstanding the wide variety of regulatory regimes existing in the countries where we currently provide service, we believe that we comply in all material respects with applicable laws and regulations governing the conduct of our business as whole. International Telecommunication Union Under current international practice, satellite systems are entitled to protection from harmful radio frequency interference from other satellite systems and other transmitters in the same frequency band only if the authorizing nation of the operator registers the orbital location, frequency and use of the satellite system on the ITU's Master International Frequency Register. Nations are required to register their proposed use of orbital positions with the Radiocommunications Bureau of the International Telecommunication Union. This ensures that there is an orderly process to accommodate each country's orbital positions needs. After a nation has advised the Radiocommunications Bureau that it desires to use a given frequency at a given orbital position, other nations notify that nation of any use or intended use that would conflict with the original proposal. These nations are then obligated to negotiate with each other in an effort to coordinate the proposed uses and resolve interference concerns. If the countries resolve all disputes, the member governments are formally notified and the frequency use is registered. Following that notification, the registered satellite networks are entitled under international law to interference protection from subsequent or nonconforming uses. A nation is not entitled to invoke the protections in the ITU's rules against harmful interference if that nation decided to operate a satellite at the relevant orbital location without completing the coordination process. Under the ITU's rules, a country that places a satellite or any ground station into operation without completing coordination and notification: o would have to respond to complaints related to interference; o would not be entitled to seek the assistance of the Radiocommunications Bureau in resolving complaints relating to interference; o would be vulnerable to interference from other systems; and o might have to alter the operating parameters of its satellite if the ITU found that the satellite caused harmful interference to other users already entered on the International Frequency Registry. The Radio Regulations Board, however, has no effective mechanism to resolve disputes regarding coordination or to enforce its rules regarding the use of frequencies and orbital locations. Because only nations have full standing as ITU members, we must rely on the government of the Netherlands to represent our interests there, including filing and coordinating our orbital positions with the ITU and with the national administrations of other countries, obtaining new orbital positions, and resolving disputes related to the ITU's rules and procedures. C. Organization Structure/List of Significant Subsidiaries The significant subsidiaries of New Skies Satellites, N.V. as of December 31, 2002 were:
Name Location % ownership - ----------------------------------------------- ----------------------------- ------------------- New Skies Networks, Inc. Delaware, U.S.A 100% New Skies Satellites, Inc. Delaware, U.S.A 100% New Skies Satellites Asset Holding, Inc. Delaware, U.S.A 100% New Skies Networks Pty Ltd. New South Wales, Australia 100% New Skies Networks (UK) Ltd. London, United Kingdom 100% New Skies Satellites (UK) Ltd. London, United Kingdom 100% New Skies Satellites MAR B.V. The Hague, The Netherlands 100% New Skies Satellites Kazakhstan B.V. The Hague, The Netherlands 100% New Skies Satellites Singapore B.V. The Hague, The Netherlands 100% New Skies Satellites India B.V. The Hague, The Netherlands 100% New Skies Satellites Brazil Ltda. Sao Paulo, Brazil 100%
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following should be read together with Item 3 "Selected Consolidated Historical Financial Data" and our consolidated financial statements and the accompanying notes appearing elsewhere in this annual report. Our financial statements are prepared in accordance with U.S. GAAP. Overview We are a global satellite telecommunications company that owns and operates six in-orbit satellites, and has one additional satellite under construction. We provide satellite-based transponder capacity for the transmission of video signals, data and telephone traffic, and Internet access services. We also offer ground-based services in conjunction with our satellite capacity in order to provide our customers with end-to-end communications services for certain applications. Revenues In 2002 we had revenues of $200.5 million. We earn revenues by providing transponder capacity, or a combination of transponder capacity and terrestrial facilities and services, to customers to allow them to transmit and receive signals using our satellites. We currently provide transponder capacity on both fixed-term and occasional-use bases. We recognize revenues on a straight-line basis over the period during which satellite services are provided. Revenue diversity by service type: 2002 [GRAPHIC OMITTED] The chart above presents our estimate, based on our analysis of frequency plans supplied by our customers, of the percentage of our total revenues in 2002 attributable to each of the three broad categories of content for which our customers used our services. As the chart shows, our revenues are well balanced across these three categories of demand. Video transmission represented our largest source of revenues in 2002 followed by data and voice services. Internet connectivity and other transmissions using Internet formats accounted for the remainder of our revenues. Data and voice services have contributed a significant and growing portion of our revenues, increasing from 20 percent of total revenues in 2000 to 32 percent in 2002. We expect continued demand for our data and voice services in 2003, driven in part by government requirements for these services and in part by increasing requirements for international long-distance voice services from newly authorized service providers in countries undergoing telephony deregulation. These sources of demand have helped to counter-balance the general trend toward the use of fiber optic networks for voice services, and we expect that this segment will continue to contribute to our revenues over time (although possibly at declining levels). Revenue Drivers The primary drivers of revenues in the satellite communications industry are the supply of suitable capacity - i.e., capacity that is capable of providing the desired communications links between two or more different points - and the level of demand for that capacity. The supply of suitable capacity is driven by two principal factors: o the availability of unused existing satellite capacity and the launch of new satellites serving the relevant region; and o the availability of capacity offered by ground-based competitors that is suitable for serving a given communications requirement. Both we and our competitors build and launch new satellites to replace existing satellites and to provide new geographic or frequency coverage. Because the entry into service of any new satellite can add a significant amount of capacity, the increase in supply can outstrip demand for some period following launch. We try to mitigate this risk by working to sell the capacity of a new satellite to customers before it is launched and by employing a business model that makes reasonable assumptions about the speed with which we will be able to sell capacity on a new satellite. More generally, we try to mitigate the risk of over-supply of satellite capacity by designing our new satellites with better performance characteristics and greater flexibility than other satellites. As such, we design new satellites with flexibility to address different markets in a dynamic manner as demand patterns shift, while focusing our new capacity on regions and communications routes with high demand. We also try to mitigate the risk of over-supply of satellite capacity by enhancing the attractiveness of our satellites to potential customers in other ways, such as through the creation of a video distribution `neighborhood'. If a satellite carries video content that is in high demand, then an increasing number of ground-based receiving antennas will be dedicated to that particular satellite to receive the popular video signal. If a high number of receiving antennas are installed to receive the signal from the satellite, then the satellite has created a `neighborhood' that is desirable to other broadcasters of video content because a large number of their potential customers already have antennas dedicated to that satellite. Accordingly, the remaining available capacity on the satellite that can serve the neighborhood becomes more desirable to the satellite operator's customers and prospective customers. As noted above, the second source of supply is ground-based competition, such as fiber optic networks. Where ground-based networks exist, and when new networks are brought into service, they typically are able to provide large amounts of bandwidth at very low rates. Ground-based capacity and satellite system capacity, however, are not perfect substitutes. The ability to provide desirable communications links between different points (for example, between various corporate offices or between a video programmer's production facility and cable operators' local networks) is driven by the design of a satellite- or ground-based network. Capacity can be used for transmissions only along the particular communications routes or in the areas that the capacity connects. We call the ability to provide transmission capacity between different places `connectivity', and the desirability of a given connectivity drives the value of that particular capacity. The connectivities of a satellite network are determined principally by the geographic coverage of the satellites and the frequencies in which they transmit signals. The connectivities of a ground-based network are determined principally by the geographic route along which it travels, such as a cable between New York and London. A ground-based network can only transmit a signal along the route that it physically travels, which we call `point-to-point' connectivity. A satellite network has the advantage of being able to connect multiple points with a single transmission because satellites, in essence, `blanket' an entire coverage area with their signal, which we call `point-to-multi-point' or `broadcast' connectivity. We try to avoid competing with ground-based services by focusing on regions where such ground-based services are not available, and on services (particularly point-to-multi-point or broadcast services) where satellites have a competitive advantage. In addition, we seek to provide services to customers who desire a combination of ground-based and satellite services, for redundancy or other reasons. Demand is principally driven by economic conditions, both generally and within a particular geographic area or product/service market. Economic growth fuels new demand for capacity as society seeks increasing access to news, entertainment and other forms of media rich content. For example, in healthy economic environments people may purchase more televisions or personal computers. Increased television viewership raises demand for additional video content provided by television broadcasters, who then need to purchase more capacity to transmit their increased programming. Increased personal computer use may increase demand for Internet services provided by local Internet Service Providers, which similarly then need to purchase more capacity to transmit their data packets. Demand for other applications, such as data and telephony services or the establishment of private telecommunications networks used by businesses, also is driven by general economic conditions, both globally and in specific regions. Another key driver of demand for capacity is regulatory access to new markets. As communications markets are liberalized, competition generally increases, with two consequences. First, the new competitors desire capacity upon which to establish their new networks. Second, competition tends to place downward pressure on prices; as prices decline, a larger number of customers in the newly liberalized markets are able to afford communications services. Declining prices and increased competition, moreover, may encourage consumers to demand improved access to and a broader selection of telecommunications and video services. Demand also can be driven by events of a shorter-term nature, such as major sporting events (for example, the Olympics or World Cup) or events of a newsworthy nature. The continuation of past trends for growth, such as the growth of the Internet and video programming offerings, are uncertain. In 2002 approximately nine satellites were launched that could reasonably be expected to compete, at varying levels, with our own satellites. We anticipate, on the basis of publicly available information, that 17 such satellites could be launched by our competitors in 2003. Certain of these satellites are replacement satellites, although they may have incremental capacity. As satellites take roughly three years to procure, build and launch, the satellites that were launched in 2002 and 2003 were, in all likelihood, contracted for a number of years ago. The introduction of this new capacity, particularly in the current economic environment and in light of existing capacity that remains available on some pre-existing satellites, could place downward pressure on pricing and/or result in a slower uptake on the capacity we are offering. In light of the fact that there is excess satellite capacity in many markets today, a significant number of commercial satellite operators have announced their intention to put their expansion plans on hold. Consistent with such announcements, publicly available information indicates that only two commercial satellite orders were placed in 2002. New Skies was created in 1998 and, at that time, was transferred five operational satellites. From 1998 to 2002, our growth resulted from our ability to sell the unused capacity on these satellites. During 2002, however, we expanded our fleet by launching two new satellites and re-deploying a third. NSS-7, launched in April 2002, replaced one satellite at the end of its life and freed a second, NSS-5 (formally referred to as NSS-803) for re-deployment to the Pacific Ocean Region. NSS-6, launched in December 2002, provides new capacity for us to utilize in the Asia Pacific Region. We plan to launch another satellite, NSS-8, in late 2004. NSS-8 will be used to replace an existing satellite in the Indian Ocean Region, giving us both a newer, more competitive satellite in that region and incremental capacity to be able to satisfy future growth. NSS-7 became available for new services in late August 2002, after we had completed the process of transitioning services onto it from the two satellites it replaced. NSS-5 completed its drift to the Pacific Ocean Region in mid-December, 2002, and NSS-6 entered commercial service in early 2003. Looking forward, we expect our revenues in 2003 and beyond to reflect the addition of this new capacity. Together, these new satellites give us approximately 67 percent more capacity to sell. We believe that our new satellites are commercially attractive, given their relatively high power levels, good connectivities, and flexibility that will allow us to allocate capacity over time to areas in which demand exists. Our growth also relies in part on our ability to sell bundled services. These services involve combining our transponder capacity with ground-based services, such as transmission of signals from the earth to a satellite and providing ground-based connections to the Internet. We believe that our ability to provide those services will allow us to address a broader marketplace by supplying services to customers further down the signal distribution chain. We further believe, based on our experience with providing these services, that this will provide us with an opportunity to capture incremental revenue that we could not generate from the supply of satellite-based transponder capacity alone. We provide bundled services using both our own facilities as well as third-party facilities. In 2002, we entered into agreements with service providers in Hong Kong, the Middle East, Singapore and the United States that will expand the range of bundled services we are able to offer to our customers. Pricing also affects our revenues. Various market forces, which differ by region, affect our pricing of transponder capacity. We sell our available capacity at prevailing market prices, which vary with the connectivity and neighborhood, the amount of capacity required, and the duration of the service under contract. In general, we price contracts of shorter duration and for less capacity on a higher cost-per-unit capacity basis than contracts of longer duration and for more capacity. Prior to 1999, the majority of our contracts were for video transmission, which generally had an average duration of five years and were for capacities of 18 MHz or greater. Over the past several years, we observed increased customer demand for services related to the transmission of voice and data and Internet-related content, with capacity requirements of typically 1-2 MHz and contract durations of three years or less. That said, the majority of our revenues in 2002 continue to reflect contracts with average duration of three years or greater. The average duration of our backlog as of December 31, 2002 was approximately 6.7 years on a weighted average basis, and approximately 2.5 years on a simple average basis. For new contracts concluded during 2002, our average rates per transponder (expressed in 36-MHz units) were approximately $1.5 million per year. These rates were 50 percent higher than the per transponder rates we inherited from INTELSAT, but less than the approximate $1.7 million average per transponder rate for similar contracts that we had concluded in the years since our inception but prior to 2002. Based on our analysis of market trends, we believe the decrease in average per-transponder pricing is a result of difficult economic conditions during 2002, significant competition from other operators, and incentives given to customers to commence services on one of our newest satellites, NSS-7. We continue to market and sell long-term contracts in order to provide greater stability and certainty regarding our revenues going forward. During 2002, we succeeded in increasing our customers' contractual service commitments, or backlog, from $631 million at December 31, 2001 to $706 million at December 31, 2002. (See "- Backlog"). Among the market segments that we serve, video and data customers tend to enter into multi-year contracts, while Internet customers tend to prefer shorter-term contracts. We anticipate that, consistent with our prior experience, a number of our Internet customers will renew their commitments and increase the amount of our capacity they use as their businesses grow, although some Internet and other customers may not renew contracts for various reasons. We derive our revenues from customers spread around the globe. The chart above sets forth the geographic source of our revenues in 2002, based on the sales region. Many of our customers purchase capacity to provide services outside of their home country. As a result, this distribution may not reflect actual traffic flow on our satellites. We believe, based on our analysis of market trends, that we will continue to see revenue growth from all regions as we sell capacity on our newest satellites launched in 2002, NSS-6 and NSS-7, as well as the NSS-5 satellite which we relocated to the Pacific Ocean Region during 2002. While we will continue to market our services in all geographic markets, we expect that revenues from customers in Asia Pacific, India, the Middle East and Africa will form a greater proportion of our revenue mix in the future, due to the arrival of incremental capacity in these regions from NSS-5 and NSS-6 and, ultimately, NSS-8. Expenses Our ongoing operating expenses include our cost of operations, selling, general and administrative expenses and depreciation. Our cost of operations includes costs associated with: o tracking, telemetry, control and payload management operations for our satellites; o fiber optic and teleport services associated with the provision of bundled services; o in-orbit insurance for our satellites; and o the costs associated with our own operations and engineering infrastructure. Selling, general and administrative expenses include costs associated with: o our sales and marketing and administrative staff; o travel, office and occupancy costs; and o other related expenses. Depreciation includes the costs associated with the depreciation of capital items, principally our satellites. In 2000, we began to perform our own payload management operations for all of our satellites, and during 2001 we successfully assumed operational control for the NSS-5, NSS-703 and NSS-806 satellites, activities previously performed by INTELSAT. We are currently fully monitoring and operating these satellites using our own tracking, telemetry and control facilities, and our ongoing net savings achieved from bringing these activities in-house are reflected in the results of operations in 2002. We also perform tracking, telemetry, control and monitoring services for our newest satellites, NSS-7 and NSS-6, and expect to perform these services for NSS-8 once it has been delivered to us in-orbit. As discussed in the previous section, we believe that by providing bundled services we can capture incremental revenue that we could not generate from the supply of satellite-based transponder capacity alone. Additionally, offering bundled services allows us to seek new customers and gain access to developing markets. In order to provide bundled services, however, we incur the costs of operating our owned teleports and generally must incur additional third-party ground infrastructure costs. In 2002, we noted an incremental rise in ground infrastructure costs. To a significant extent, however, the third-party costs are correlated with actual services and can be scaled to reflect actual sales success. We believe that we have achieved a critical mass with respect to our operations and staff, with the result that we do not anticipate significant increases in these expenses in the near term except for effects of insurance markets and related impact on in-orbit insurance, and from additional third-party costs as we provide incremental bundled services to our customers, as mentioned above. To the extent that our operations and sales infrastructure is in place, we consider this aspect of our business to represent a largely fixed cost. Depreciation is our single largest expense. Because we depreciate our satellites on a straight-line basis over their anticipated useful lives, depreciation expense is generally constant from year to year unless we launch a satellite or a satellite reaches the end of its depreciable life. Depreciation of a satellite starts when it enters operational service, which begins upon successful completion of in-orbit testing. In 2002, we placed one new satellite, NSS-7, into service and took one existing (although fully depreciated) satellite out of service. This resulted in a significant net increase in depreciation expense beginning in second half 2002. We launched our NSS-6 satellite in December 2002, which became operational in the first quarter 2003. Consequently, depreciation expense will increase substantially in 2003 as a result of the full-year effect of the NSS-7 depreciation and the partial year effect of the NSS-6 depreciation. We are constructing one additional satellite, NSS-8, which is planned for launch in late 2004. This new satellite will involve significant capital expenditures and will further increase depreciation charges once it is placed into service. As we add new satellites to our fleet, we will also incur additional costs for launch insurance and in-orbit insurance. Backlog We provide customers with satellite transponder capacity for contract periods varying from less than one year to 15 years. At December 31, 2002, we had a contractual backlog for future services of approximately $706 million. Of this amount, which we do not recognize as revenue until we actually perform the services, approximately $601 million, or 85 percent, relates to obligations provided under non-cancelable agreements. The remaining backlog relates to preemptible capacity contracts that have cancellation options, subject to the payment of early termination penalties. We cannot rule out the possibility we could face contract terminations arising in the normal course of business or as a result of other market forces. As of December 31, 2002, the average remaining duration of our contracted backlog, based on a simple average of our order book, was approximately 2.2 years. On a weighted average basis, the average remaining duration of our contracts was approximately 6.7 years. Results of Operations Table 1 sets forth, for the periods indicated, certain items in the consolidated statements of operations, reflected as a percentage of revenues. Table 1 - Statement of operations data as a percentage of revenues
Year Ended December 31, 2002 2001 2000 ---- ---- ---- Statement of operations data: Revenues............................................. 100% 100% 100% Operating expenses: Cost of operations................................. 25 25 24 Selling, general and administrative................ 20 18 18 Depreciation and amortization...................... 40 36 35 Total operating expenses............................. 85 79 77 Operating income..................................... 15 21 23 Income before cumulative effect of change in 9 16 16 accounting principle............................. Cumulative effect of change in accounting principle........................................ (11) - - Net (loss) income................................... (2) 16 16
Year ended December 31, 2002 compared to year ended December 31, 2001 Revenues. Our revenues for the year ended December 31, 2002 were $200.5 million, a decrease of $8.5 million, or 4 percent, from $209.0 million for the year ended December 31, 2001. The decrease for the year is principally the result of the prevailing difficult market conditions, as well as the unavailability of some of our capacity for service during the transition of traffic from the NSS-K and NSS-5 satellites to NSS-7, which went into commercial service in August 2002, and the subsequent migration of NSS-5 to the Pacific Ocean Region, completed in December 2002. Our station-kept satellite fleet fill rate for satellites available for service at December 31, 2002 was 67 percent as compared to 65 percent at December 31, 2001. Fill rate is defined as the number of our revenue-generating transponders (expressed in 36-MHz units) divided by our fleet-wide station-kept transponder capacity available for service (expressed in 36-MHz units). Average rate per transponder for contracts concluded in 2002 was approximately $1.5 million per year, down $0.2 million as compared to 2001, reflecting difficult market conditions as well as incentives given to customers to commence services on NSS-7. Cost of operations. Our cost of operations decreased $0.8 million, or 2 percent, to $50.7 million for the year ended December 31, 2002 compared to $51.5 million for the year ended December 31, 2001. As a percentage of revenues, our cost of operations remained unchanged at 25 percent. In absolute terms, the net decrease in our cost of operations reflects our success in managing our discretionary costs and from bringing our tracking, telemetry, control and payload management operations in-house. Selling, general and administrative. Our selling, general and administrative expenses increased by $0.8 million, or 2 percent, to $39.5 million in the year ended December 31, 2002 from $38.7 million for the year ended December 31, 2001. This slight net increase resulted primarily from the expansion of the sales and marketing staff that we undertook in order to better exploit the capacity on our new satellites primarily offset by savings arising from careful management of our discretionary costs. Earnings before interest, taxes, depreciation and amortization (EBITDA) (adjusted). Our EBITDA (adjusted) for the year ended December 31, 2002 was $110.3 million, a decrease of $8.5 million, or 7 percent, from $118.8 million in 2001. The decrease in EBITDA (adjusted) is attributable to decreased revenues in 2002. In 2002, we calculated EBITDA (adjusted) to exclude the cumulative effect of change in accounting principle relating to goodwill of $23.4 million. See footnote 7 to our " - Selected Consolidated Historical Financial Data". As a percentage of revenues, EBITDA (adjusted) decreased to 55 percent for the year ended December 31, 2002 from 57 percent for the year ended December 31, 2001We believe that earnings before interest, taxes, depreciation and amortization is a measure of performance used by some investors, equity analysts and others to make informed investment decisions. EBITDA is not presented as an alternative measure of operating results or cash flow from operations, as determined in accordance with generally accepted accounting principles in the U.S. EBITDA as presented herein may not be comparable to similarly titled measures reported by other companies. (See Table 2 "- Reconciliation of EBITDA (adjusted) to net (loss) income"). Table 2 - Reconciliation of EBITDA (adjusted) to net (loss) income
(in thousands of U.S. dollars) 2002 2001 2000 -------------- --------------- --------------- Net (loss) income $ (4,645) $ 33,068 $ 31,674 Cumulative effect of change in accounting principle 23,375 - - Income tax expense 10,506 19,364 17,506 Interest expense (income) and other, net 510 (9,008) (2,543) Depreciation and amortization 80,574 75,338 69,870 -------------- --------------- --------------- Earnings before interest, taxes, depreciation and amortization (EBITDA) (adjusted) $ 110,320 $ 118,762 $ 116,507 ============== =============== ===============
Depreciation and amortization. Our depreciation and amortization expense increased $5.3 million, or 7 percent, to $80.6 million for the year ended December 31, 2002 from $75.3 million for 2001. This increase was primarily due to commencement of service of NSS-7, successfully launched in April 2002, net of elimination of goodwill amortization of $2.8 million in 2001. Effective January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, ("SFAS No. 142") Goodwill and Other Intangible Assets, and in accordance with the standard stopped amortizing goodwill that resulted from business combinations completed prior to the adoption of SFAS No. 141. (See "- Recently Issued Accounting Standards"). Interest expense (income) and other, net. Net interest expense for the year ended December 31, 2002 was $0.5 million, a decrease of $9.5 million, compared to net interest income of $9.0 million for the year ended December 31, 2001. The decrease primarily arises from lower interest income in 2002, as we fully utilized the remaining funds raised through our initial public offering to fund the ongoing construction of our new satellites, NSS-7, NSS-6 and NSS-8. (See "- Liquidity"). Income tax expense. Our income tax expense decreased $8.9 million, or 46 percent, to $10.5 million for the year ended December 31, 2002, from $19.4 million in 2001. The decrease was due primarily to the decrease in our pre-tax income. Cumulative effect of change in accounting principle, relating to goodwill, net of taxes. As of January 1, 2002, we adopted SFAS No. 142. (See "-Recently Issued Accounting Standards"). This Standard eliminates goodwill amortization from the consolidated statement of operations and requires an evaluation of goodwill for impairment upon adoption of this Standard, as well as subsequent evaluations on an annual basis, and more frequently if circumstances indicate a possible impairment. Upon adoption of SFAS No. 142, we performed a transitional impairment test on the goodwill resulting from the purchase of New Skies Networks Pty Limited in March 2000. As a result of this impairment test, we recorded an impairment charge of $23.4 million, which is classified as a cumulative effect of a change in accounting principle. Year Ended December 31, 2001 Compared to Year Ended December 31, 2000 Revenues. Our revenues increased by $10.7 million, or 5 percent, to $209.0 million in the year ended December 31, 2001 from $198.3 million in the year ended December 31, 2000. Our 2000 revenues included the positive impact of a $19.7 million exceptional one-time contract termination payment made by one customer. Excluding this one-time payment recorded in 2000, our 2001 revenues increased 17 percent from $178.6 million in 2000. The increase in revenues was attributable to the success in increasing the fleet-wide average yield per transponder and in increasing the fill rate of our station-kept satellite fleet to 65 percent at December 31, 2001 from a 63 percent fill rate at December 31, 2000. The increase in the fleet-wide average yield per transponder was a result of our market-based pricing strategy as compared to the pricing we inherited at the time we commenced independent commercial operations, our willingness to enter into contracts for smaller units of capacity and for shorter duration, and our ability to offer value-added services. Cost of operations. Our cost of operations increased $4.5 million, or 10 percent, to $51.5 million for the year ended December 31, 2001 compared to $47.0 million for the year ended December 31, 2000. As a percentage of revenue, our cost of operations remained relatively unchanged at 25 percent for the year ended December 31, 2001 compared to 24 percent for the year ended December 31, 2000. Excluding the net impact of a one-time exceptional payment to us that was recorded in the third quarter 2000, cost of operations as a percentage of revenues was 26 percent in 2000. In absolute terms, the net increase in our cost of operations of $4.5 million related to the continued development of the engineering and operational worldwide infrastructure, including the development of our terrestrial infrastructure. Selling, general and administrative. Our selling, general and administrative expenses increased $3.9 million, or 11 percent, to $38.7 million in the year ended December 31, 2001 from $34.8 million in the year ended December 31, 2000. This increase resulted primarily from the full year effect of our continuing expansion of our sales, marketing and support staff required to fully exploit the unused capacity of our existing satellites. We employed 261 full-time employees as of December 31, 2001 compared to 219 full-time employees as of December 31, 2000. Earnings before interest, taxes, depreciation and amortization (EBITDA). Our EBITDA increased by $2.3 million, or 2 percent, to $118.8 million for the year ended December 31, 2001 from $116.5 million in 2000. Excluding the $19.7 million one-time exceptional contract termination payment received in the third quarter 2000, EBITDA increased by $22.0 million, or 23 percent. The increase in EBITDA was largely attributable to increased revenues in 2001 offset in part by the planned expansion of marketing and support staff and overall build up of the corporate and terrestrial infrastructure required to fully exploit the unutilized capacity of our existing satellites. As a percentage of revenues, EBITDA decreased to 57 percent for the year ended December 31, 2001 from 59 percent for the year ended December 31, 2000. Excluding the one-time termination payment, EBITDA as a percentage of revenues improved 3 percent from 54 percent. We believe that earnings before interest, taxes, depreciation and amortization is a measure of performance used by some investors, equity analysts and others to make informed investment decisions. EBITDA is not presented as an alternative measure of operating results or cash flow from operations, as determined in accordance with generally accepted accounting principles in the U.S. EBITDA as presented herein may not be comparable to similarly titled measures reported by other companies. (See Table 2 "- Reconciliation of EBITDA (adjusted) to net (loss) income"). Depreciation and amortization. Our depreciation and amortization expense increased $5.4 million, or 8 percent, to $75.3 million for the year ended December 31, 2001 from $69.9 million for 2000. This increase was due to the increase in the depreciable assets as a result of the completion of the construction of our satellite operations center in The Hague and our Washington D.C. mediaport and the full year effect of amortization of goodwill relating to the acquisition of New Skies Networks Pty Ltd. on March 31, 2000. Interest expense (income) and other, net. Net interest income increased $6.5 million, or 254 percent, to $9.0 million for the year ended December 31, 2001 from net interest income of $2.5 million in 2000. The increase in the overall interest income was primarily due to the investment of unexpended proceeds arising from our initial public offering completed in October 2000 and reimbursement of $1.8 million of KTV project management costs as a part of an arbitration judgement. Income tax expense. Our income tax expense increased $1.9 million, or 11 percent, to $19.4 million for the year ended December 31, 2001, from $17.5 million in 2000. The increase was due primarily to the increase in our taxable income. Liquidity and Capital Resources Our liquidity requirements arise principally from the need to: o fund capital expenditures for the construction and launch of new satellites; o fund working capital requirements; o expand our business organically; and o finance any acquisitions we may make. Liquidity As of December 31, 2002, our principal sources of funds were cash flows from operating activities and amounts available under a $300 million unsecured revolving credit facility. At December 31, 2002, we had drawn down $10 million on our $300 million credit facility, with $290 million remaining available. Net cash provided by operating activities totaled $112.0 million in 2002, $130.7 million in 2001 and $117.9 million in 2000. We had cash and cash equivalents of approximately $8.3 million as of December 31, 2002. We intend to use our $300 million facility for capital expenditures, acquisitions and general corporate purposes. We currently can borrow up to $290 million under this facility, although this maximum amount will be reduced to $200 million on December 31, 2003 and further reduced to $100 million on June 30, 2004. The facility must be repaid in full by December 31, 2004. The interest rate on borrowings will vary with LIBOR or EURIBOR and the applicable margin, which will vary with the amount of our indebtedness as a proportion of our EBITDA. The facility also contains customary events of default and financial covenants that relate to our business and regulations that affect us. In November 2002, we launched a share buyback initiative to repurchase a total of 13 million shares as a way to provide additional liquidity to our shareholders. As of December 31, 2002, 5,194,030 shares had been repurchased at a cost of $19.3 million. The acquired shares are recorded as `Treasury Stock' as a reduction of Shareholders' Equity. As our business is generally not seasonal, we have little need for short-term borrowings to finance normal operations. As of December 31, 2002, we had approximately $39.1 million of trade receivables outstanding. Pursuant to its policy, INTELSAT sold capacity with credit terms that included making payments in arrears. Approximately 52 percent of trade receivables at the end of 2002 reflect credit terms monthly or quarterly in arrears. New service agreements generally require payment monthly in advance. Our cost of satellite construction includes an element of deferred consideration to the satellite manufacturers called `satellite performance incentives'. We are contractually obligated to make these payments, representing up to 8 percent of the overall contract price of our existing satellites, over the minimum, contractually obligated, orbital design lives of the satellites so long as those satellites continue to meet contractual specifications. We capitalize the present value of these payments as part of the cost of constructing these satellites and record a corresponding liability to the satellite manufacturers. This obligation is then reduced as the satellite performance incentive payments are made. We believe that our cash flows from operations, our cash and cash equivalents and funds available under our $300 million credit facility will provide us with sufficient liquidity to meet our currently anticipated future financial obligations, committed capital expenditures and other needs through the end of 2003. Nevertheless, we plan to carefully evaluate opportunities to expand our operations. If capital investments exceed expected levels, we may seek additional financing. Capital expenditures and investments Cash used in investing activities, primarily representing capital expenditures for satellite construction, launch contracts, launch insurance and other property, was mainly funded using cash flow from operations and, to the extent necessary, borrowings under our credit facility. Net payments for investing activities totaled $231.4 million in 2002, $222.7 million in 2001 and $148.9 million in 2000. We signed a contract for a new satellite, NSS-7, with Lockheed Martin in 1999, which was launched in April 2002. We signed a contract for another satellite, NSS-6, with Lockheed Martin in 2000, which was launched in December 2002. We also signed a contract for a third satellite, NSS-8, with Boeing Satellite Systems in March 2001. We recently amended that contract, reconfiguring the satellite for deployment for service in an established orbital location in the Indian Ocean Region. We anticipate that NSS-8 will enter commercial service in the first half of 2005. We currently anticipate that our capital expenditures for 2003 will be approximately $65 to $85 million, to be financed with a combination of borrowings under our $300 million facility and operating cash flow. We expect that these expenditures will consist primarily of: o payments with respect to the final acceptance of the NSS-6 satellite and construction and launch contract for NSS-8; o payments made to acquire and upgrade ground station facilities; and o costs associated with the expansions of our operations. As part of our operational and strategic plan, we plan to launch replacement satellites when existing satellites near the end of their commercial lives. We will also explore the possibility of adding additional satellites to our fleet and will evaluate strategic opportunities such as joint ventures and acquisitions. We regularly study the demand for satellite services in various regions and for different applications in order to keep abreast of opportunities. While we are committed to a long- term strategy of enhancing our satellite fleet, we will enter into procurement contracts for new satellites only where we have a demonstrated need for the additional capacity and a sound business case for the particular satellite. Table 3 below summarizes our contractual obligations and commercial commitments as of December 31, 2002. Table 3 - Contractual obligations
(in thousands of U.S. dollars) Payments due by period -------------------------------------------------------------------------- Total Less than 1 1-3 years 4-5 years After 5 years year -------------- -------------- -------------- -------------- -------------- Short-term debt $10,000 $ 10,000 $ - $ - $ - Long-term debt - - - - - Capital lease obligations - - - - - Operating leases 6,088 1,395 2,008 961 1,724 Unconditional purchase obligations 27,377 13,643 10,149 2,014 1,571 Conditional purchase obligations (In-progress satellite procurement 86,196 43,988 42,208 - - programs) Conditional payment obligations (In-orbit satellite performance 40,517 5,756 11,538 7,673 15,550 incentives) Contingent conditional payment obligations (In-progress satellite 39,952 1,672 6,659 6,659 24,962 performance incentives) -------------- -------------- -------------- -------------- -------------- TOTAL $ 210,130 $ 76,454 $ 72,562 $17,307 $43,807 ============== ============== ============== ============== ==============
Taxation We are currently in discussions with the Dutch tax authorities to determine the tax basis of the assets contributed to us by our predecessor. While we have not agreed to the final determination of the tax basis of these assets with those authorities, we have made a preliminary valuation of these assets. The difference between the book value of the assets on November 30, 1998 and the estimated initial tax basis of the assets of $750 million gave rise to a deferred tax asset, which approximated $15.6 million at December 1, 1998. We believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize this deferred tax asset. Application of the deferred tax asset will reduce our annual tax payments by approximately $1.3 million per year for approximately the next 12 years, based on the average lives of our current satellites. Should the tax authorities agree to a different initial valuation of the assets as of November 30, 1998, then 34.5 percent of the difference between that amount and $750 million would be adjusted to this deferred tax asset provided that recovery is more likely than not. Certain countries within which we operate have sought to impose withholding taxes or income taxes on payments from customers in those countries, notwithstanding the existence of tax treaties that do not permit the imposition of such taxes. We use available legal means to contest such taxation and in addition, in many but not all such cases, we also have the right under contracts to pass such taxes on to our customers or to other third parties. Currency and exchange rates All of our major capital expenditures and substantially all of our revenues and operating expenses are denominated in U.S. dollars. Accordingly, we have adopted the U.S. dollar as our functional currency. Transactions in other currencies are translated into U.S. dollars using the rates that were in effect at the transaction date. Since all of our major inflows and outflows are denominated in U.S. dollars, we are not exposed to significant foreign currency exchange risk. Disclosures about market risk We are exposed to market risks relating to interest rate changes from time to time. To the extent that we make significant borrowings under our $300 million facility, we will evaluate the appropriateness of using various hedging instruments. We do not enter into derivatives or other financial instruments for trading, hedging foreign currency exposure or speculative purposes. Critical Accounting Policies Our significant accounting policies are described fully in Note 2 to our consolidated financial statements appearing elsewhere in this annual report. We consider a number of accounting policies to be critical to the understanding of our results of operations. These accounting policies relate to revenue recognition, our communications, plant and other property, impairment of long-lived assets, income taxes, goodwill and satellite performance incentives. Our preparation of financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Revenue recognition Telecommunications revenue results from utilization charges that are recognized as revenue on a straight-line basis over the period during which the satellite services are provided. This revenue is recognized provided that collection of the related receivable is probable. We make estimates regarding the probability of collection based upon an evaluation of the customer's creditworthiness, the customer's payment history and other conditions or circumstances that may affect the likelihood of payment. When we have determined that the collection of payments for satellite utilization is not probable at the time the service is provided, we defer recognition of the revenue until such time that collection is believed to be probable or the payment is received. We also maintain an allowance for doubtful accounts for customers' receivables where the collection of these receivables is uncertain. If our estimate of the probability of collection is not accurate, we may experience lower revenue or an increase in our bad debt expense. We receive payments for satellite utilization charges from some customers in advance of our providing services. Amounts received from customers pursuant to satellite capacity prepayment options are recorded in the financial statements as deferred revenue. These deferred amounts are recognized as revenue on a straight-line basis over the agreement terms. Communications, plant and other property Communications, plant and other property are carried at cost and consist primarily of the costs of spacecraft construction and launch, including capitalized performance payments, insurance premiums, capitalized interest, and costs directly associated with monitoring and support of spacecraft construction. Satellite construction and launch services costs are capitalized to reflect progress toward completion, which typically coincides with contract milestone payment schedules. Insurance premiums related to satellite launches are capitalized and amortized over the lives of the related satellites. Insurance policies procured for in-orbit operations are expensed as incurred. Performance incentives payable in future periods are dependent on the continued satisfactory performance of the satellites in service. Communications, plant and other property are depreciated and amortized on a straight-line basis over their estimated useful lives. The depreciable lives of our satellites range from 7 years to 13 years. We make estimates of the useful lives of our satellites for depreciation purposes based upon an analysis of each satellite's performance, including its orbital design life and its estimated orbital maneuver life. The orbital design life of a satellite is the length of time that the satellite's hardware is guaranteed by the manufacturer to remain operational under normal operating conditions. In contrast, a satellite's orbital maneuver life is the length of time the satellite is expected to remain operational as determined by remaining fuel levels and consumption rates. Impairment of long-lived assets We periodically review our long-lived assets, which are comprised primarily of our in-service satellite fleet, to determine whether an impairment exists. Impairment can arise from complete failure or partial failure of the satellites as well as a change in expected cash flows. Such impairment tests are based on a comparison of estimated undiscounted future cash flows to the recorded value of the asset. If impairment is indicated, the asset value will be written down to fair value based upon discounted cash flows, using an appropriate discount rate. Income taxes We account for income taxes under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities and net operating loss carry-forwards using enacted rates. Valuation allowances are provided against assets that are not likely to be realized. We are currently in negotiations with the Dutch tax authorities to determine the fair value (tax basis) of the assets contributed by our predecessor. While the final determination of the tax basis of these assets has not been agreed, we have made a preliminary valuation of these assets. The difference between the book and estimated tax bases of the contributed assets gives rise to a deferred tax asset, which approximated $15.6 million at December 1, 1998, the date of the Asset Transfer. To the extent that the final tax value of the contributed assets differs from this estimate, a corresponding adjustment will be made to the deferred tax asset and additional paid-in capital. Goodwill The excess of the purchase price over the fair market value of net assets acquired is recorded as goodwill and is tested for impairment at least on an annual basis. As of January 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets. This Statement eliminates goodwill amortization from the Consolidated Statement of Operations and requires an evaluation of goodwill for impairment upon adoption of this Statement, as well as subsequent evaluations on an annual basis, and more frequently if circumstances indicate a possible impairment. Upon adoption of SFAS No. 142, we performed a transitional impairment test on the goodwill resulting from the purchase of New Skies Networks Pty Limited. As a result of this impairment test, we recorded an impairment charge of $23.4 million, which is classified as a cumulative effect of a change in accounting principle Satellite performance incentives Our cost of satellite construction includes an element of deferred consideration to satellite manufacturers referred to as satellite performance incentives. We are contractually obligated to make these payments, representing up to 8 percent of the overall contract price of our existing satellites, over the minimum, contractually obligated, orbital design lives of the satellites, provided the satellites continue to operate in accordance with contractual specifications. Dutch GAAP reconciliation matters Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and do not differ in any material respect from those which would have been prepared if we had used accounting principles generally accepted in The Netherlands other than the accounting for goodwill. Under Dutch GAAP goodwill continues to be amortized. However, given that New Skies Networks Pty Limited was impaired both under US GAAP and Dutch GAAP, our result for 2002 was the same under both accounting methods. Under Dutch law, we prepare annual financial statements in accordance with Dutch accounting principles and file those statements with the Trade Register of the Chamber of Commerce and Industry in The Hague. These accounts are available for inspection at our executive offices. Recently issued accounting standards In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.143, Accounting for Asset Retirement Obligations. SFAS No. 143 establishes accounting standards for the recognition and measurement of legal obligations associated with the retirement of tangible long-lived assets and requires recognition of a liability for an asset retirement obligation in the period in which it is incurred. The provisions of this statement are effective for financial statements issued for fiscal years beginning after June 15, 2002. On January 1, 2003, we adopted SFAS No.143 which did not have a material impact on our consolidated financial statements. As of January 1, 2002 we adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement defines the accounting and reporting for the impairment and disposal of long-lived assets and is effective on January 1, 2002. Adopting SFAS No.144 did not have a material impact on our consolidated financial statements. As of January 1, 2002, we adopted SFAS No.145, Rescission of SFAS No. 4, 44, 64, Amendment of SFAS No. 13, and Technical Corrections. SFAS No. 4, which was amended by SFAS No. 64, required all gains and losses from the extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in Opinion 30 will now be used to classify those gains and losses. The provisions of this statement are effective for financial statements issued for fiscal years beginning after December 15, 2002. The adoption of SFAS No.145 did not have a material impact on our consolidated financial statements. As of January 1, 2002, we adopted SFAS No.142, Goodwill and Other Intangible Assets. This Standard eliminates goodwill amortization from the Consolidated Statement of Operations and requires an evaluation of goodwill for impairment upon adoption of this Standard, as well as subsequent evaluations on an annual basis, and more frequently if circumstances indicate a possible impairment. Upon adoption of SFAS No. 142, we performed a transitional impairment test on the goodwill resulting from the purchase of New Skies Networks Pty Limited. As a result of this impairment test, an impairment charge of $23.4 million was recorded, which is classified as a cumulative effect of a change in accounting principle. Changes in the carrying amount of goodwill are reflected in Table 4. Table 4 - Changes in the carrying amount of goodwill (in thousands of U.S. dollars) Balance at December 31, 2000 $ 26,135 Amortization (2,760) --------------------- Balance at December 31, 2001 23,375 Impairment loss (23,375) --------------------- Balance at December 31, 2002 $ - ===================== The reconciliation of reported net (loss) income and earnings per share to net (loss) income and earnings per share for the years ended December 31, 2002, 2001 and 2000, adjusted to eliminate the effect of goodwill amortization in 2001 and 2000, is reflected in Table 5.
Table 5 - Net (loss) income and earnings per share as adjusted for goodwill amortization (in thousands of U.S. dollars, except per share 2002 2001 2000 amounts) ------------------ ---------------- ----------------- Net (loss) income, as reported $ (4,645) $ 33,068 $ 31,674 Add: Goodwill amortization - 2,760 1,494 ------------------ ---------------- ----------------- Adjusted net (loss) income $ (4,645) $ 35,828 $ 33,168 ================== ================ ================= Basic and diluted earnings per share, as reported $ (0.04) $ 0.25 $ 0.29 Add: Goodwill amortization - 0.02 0.02 ------------------ ---------------- ----------------- Adjusted basic and diluted earnings per share $ (0.04) $ 0.27 $ 0.31 ================== ================ =================
Upon adoption of SFAS No.142, the transition provisions of SFAS No. 141, Business Combinations, also became effective. These transition provisions specify criteria for determining whether an acquired intangible asset should be recognized separately from goodwill. Adopting SFAS No.141 did not have a material impact on our consolidated financial statements. In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This statement defines the accounting and reporting for costs associated with exit or disposal activities and is effective for exit or disposal activities that are initiated after December 31, 2002. We do not anticipate that the adoption of SFAS No. 146 will have a material impact on our consolidated financial statements. In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. SFAS No. 148 establishes accounting standards for the transition from accounting for stock-based compensation to employees under the intrinsic value method under APB No. 25, Accounting for Stock Issued to Employees to the fair value based method as defined by SFAS No. 123, Accounting for Stock-Based Compensation. The statement provides three alternatives of transition: a prospective method, a modified prospective method, and a retroactive restatement method. We adopted the fair value method as of January 2003 and will transition using the prospective method provided by SFAS No. 148. Under the prospective method, we will apply the fair-value based method of accounting for stock options, recognizing expense for awards granted after January 1, 2003. In November 2002, the FASB issued Interpretation Number 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others ("FIN 45"). This interpretation requires certain disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for interim and annual periods after December 15, 2002. The adoption of FIN 45 did not have a material impact on our consolidated financial statements. In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities - an interpretation of ARB No. 51 ("FIN 46"). FIN 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for the first fiscal year or interim period beginning after June 15, 2003 to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. We do not anticipate that the adoption of FIN 46 will have a material impact on our consolidated financial statements. Several new Dutch accounting guidelines became effective January 1, 2002. Generally, these guidelines further align Dutch accounting standards with international accounting standards. The new guidelines did not have a material impact on our Dutch GAAP financial statements or the reconciliation between United States and Dutch GAAP. ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Our Management Board manages our general affairs and business. Our Supervisory Board supervises the Management Board. Supervisory Board Our Supervisory Board must approve the resolutions of our Management Board specified in our articles of association. Our Supervisory Board also advises our Management Board. In fulfilling their duties, all members of our Supervisory Board must serve our best interests and the best interests of the business of our connected enterprises. Our articles of association provide that at least three and at most eleven supervisory directors may serve on our Supervisory Board. Each of our current supervisory directors was elected for a one-year term and can be re-elected without limitation until he or she reaches the age of seventy-two. At our last annual general meeting in May 2003 our shareholders elected nine members to our Supervisory Board. Under Dutch law, supervisory directors cannot serve as members of our Management Board. The general meeting of shareholders appoints the supervisory directors. Our shareholders choose the supervisory directors at the general meeting from non-binding nominations made by the Supervisory Board or by shareholders holding 2 percent or more of our issued and outstanding share capital, and from declarations of availability submitted by a member of the Supervisory Board who is not otherwise nominated by the Supervisory Board. The general meeting of shareholders votes on candidates nominated by the Supervisory Board before voting on any other candidates. The general meeting of shareholders also decides the compensation we will pay the supervisory directors. If we were to become subject to the "structured regime" for large companies in the Netherlands, however, we would be required to amend our articles of association within three years to allow supervisory directors to nominate and appoint the candidates for supervisory directors without shareholder oversight. Dutch law mandates that companies become subject to the structured regime if they meet certain requirements including, for example, that for an uninterrupted period of three years they have more than 100 employees in The Netherlands and they establish and maintain a works council. An absolute majority of the votes cast at a Supervisory Board meeting is required to approve most decisions. The business address of each supervisory director is the address of our principal executive office in The Hague. All of our Supervisory Board members currently hold ordinary shares or ADSs, as well as options and rights to acquire shares. See "-- Compensation of Supervisory Board". Our Supervisory Board currently consists of nine members. These supervisory directors are: Name Age Position Terence Seddon.......................... 62 Chairman S.K. Fung............................... 56 Member Ashok Ganguly........................... 67 Member Jerry Kolb.............................. 67 Member Neelie Kroes............................ 61 Member Gerd D. Mueller......................... 66 Member Luigi Ruspantini........................ 63 Member Claude Seguin........................... 53 Member Don Wear................................ 56 Member Our Supervisory Board has three standing committees: Audit and Finance, Management Compensation and Development and Corporate Governance. Membership on the committees is: Committees - -------------------------------------------------------------------------------- Audit & Finance Management Compensation & Corporate Goverance Development - ---------------------- --------------------------- ------------------------ Claude Seguin (Chair) Terence Seddon (Chair) Neelie Kroes (Chair) S.K. Fung Ashok Ganguly S.K. Fung Jerry Kolb Jerry Kolb Terence Seddon Gerd D. Mueller Luigi Ruspantini Don Wear Mr. Seddon, 62 years of age, has served as Chairman of the Supervisory Board since May 1998. He is a citizen of the United Kingdom. Mr. Seddon currently is retired. Prior to his retirement he served as Director of Projects in Europe and also as the Malaysian Representative Director for Cable and Wireless. Prior to that, Mr. Seddon served as Chief Executive Officer of Asia Satellite Telecommunications Company Ltd. from 1988 - 1993. Mr. Seddon is a non-executive Director of Multitone Electronics plc, a specialist mobile telecommunications product provider. Mr. Fung, 56 years of age, has served as a Supervisory Director since May 1999. He is a citizen of the United States of America. Mr. Fung currently is Managing Director, North Asia of ACNielsen (a VNU N.V. company), a global provider of market information, research and analysis. Previously, he was a Director of Media Genesis Limited from 2000 to 2002. From 1999 to 2000, Mr. Fung was Managing Director of Sage Capital Management and from 1995 to 1999 he was President of NBC Asia and established the Asian operations of NBC. Mr. Fung also served as the Chairman of the Cable and Satellite Broadcasting Association of Asia (CASBAA) from 1997 to 1999. From 1987 to 1995, he was General Manager of TVB International, a leading broadcaster in Hong Kong. Dr. Ganguly, 67 years of age, has served as a Supervisory Director since May 2002. He is a citizen of India. Dr. Ganguly currently serves as the Chairman of ICICI One Source Ltd., as a Director on the Central Board of the Reserve Bank of India, to which post he was appointed in November 2000, and as a Director on the Board of Hemogenomics Pvt Ltd, to which post he was appointed in November 2002. In addition, Dr. Ganguly heads his own company, Technology Network India Pvt Ltd., which focuses on industrial research & development and supply chain management. Dr. Ganguly's principal professional career spanned 35 years with Unilever, which culminated with his service as a member of the Board of Directors of Unilever N.V. from 1990 through 1997 with responsibility for world-wide research and technology. Dr. Ganguly also currently serves as a non-executive Director of British Airways plc, Mahindra & Mahindra, WIPRO Ltd, ICICI Knowledge Park, and Tata AIG Life Insurance Co Ltd.. During his career, Dr. Ganguly has served several public bodies including as a member of the Science Advisory Council to the Prime Minister of India (1985-89) and the UK Advisory Board of Research Councils. His honors include, among others, the Indian award of Padma Bhushan and being named an Honorary Professor by the Chinese Academy of Science, Shanghai. Mr. Kolb, 67 years of age, has served as a Supervisory Director since May 1998. He is a citizen of the United States of America. Until his retirement in May 1998, Mr. Kolb was Vice Chairman of Deloitte & Touche LLP, an international public accounting and consulting firm. He joined the accounting firm in 1957 and served as Managing Partner of the Chicago office, Managing Partner of professional services, and Chief Financial and Administrative Officer, as well as Vice Chairman. Mr. Kolb has been a member of the Board of Directors of Gaylord Container Corporation, a manufacturer and distributor of corrugated containers, containerboard and other paper products, from August 1998 to May 2002, of Mid America Group, a commercial and residential real estate development and management company, from August 2002, and of Walter Industries, Inc. from June 2003. Mrs. Kroes, 61 years of age, has served as a Supervisory Director since May 1999. She is a citizen of the Netherlands. From 1991 to 2000 Mrs. Kroes served as President of Nijenrode University in the Netherlands. Prior to that, she served as an advisor to the European Transport Commissioner from 1989 to 1991 and as Cabinet Minister for Transport and Public Works in the Netherlands from 1982 to 1989. She also served as Deputy Minister for Transport and Public Works in the Netherlands from 1977 to 1981. Mrs. Kroes is a Member of the Boards of the following companies: Ballast Nedam N.V., P & O Nedloyd, ProLogis, Corio N.V. (formerly VIB N.V.), Lucent Technologies B.V., Volvo Group (Sweden), Thales Group, MM02 (non-executive board), and Nederlandse Spoorwegen (Supervisory Board). Mrs. Kroes is as of December 2002 a member of the High Level Group on the trans-European Network in Brussels. Mr. Mueller, 66 years of age, has served as a Supervisory Director since May 2001. He is a citizen of Germany and the United States of America residing in the United States of America. Mr. Mueller is currently retired. Prior to his retirement, Mr. Mueller served as Executive Vice President and Chief Administrative and Financial Officer of Bayer Corporation, the U.S. wholly owned subsidiary of Bayer AG, Germany. He is currently a member of the Board of Directors of Schott Corporation, a U.S. wholly owned subsidiary of the German company Schott Glas. Mr. Mueller also is a trustee of the Robert Morris University and a member of the Board of Directors of the Western Pennsylvania Hospital, both in Pittsburgh, and Chairman of CDS International (formerly Carl Duisberg Society), a non-profit organization engaged in the implementation of exchange programs for young professionals primarily between the United States and Europe. Mr. Ruspantini, 63 years of age, has served as a Supervisory Director since May 1998. He is a citizen of Italy. Mr. Ruspantini is presently retired after more than 30 years of experience in satellite communications. Prior to his retirement, he served as Assistant to the Chief Executive Officer of Telespazio, at the time a fully owned subsidiary of Telecom Italia, where he was responsible for the definition of the company's multimedia program strategy and implementation. Prior to 1997, Mr. Ruspantini served as Director of the Broadcast Services division of Telespazio and oversaw the provision of Television, Business Television and Radio Services to the company's customers in Italy and abroad. Mr. Seguin, 53 years of age, has served as a Supervisory Director since May 1998. He is a citizen of Canada. Mr. Seguin is currently Senior Vice President - Strategic Investments for the Montreal based CGI Group, a global IT service provider. Previously, he was President of CDP Capital - Private Equity from 2001 to 2003 and Executive Vice-President and Chief Financial Officer of Teleglobe Inc. from 1992 to 2000. Immediately prior to that, he was the Deputy Minister of Finance for the Province of Quebec, to which post he was appointed in 1987. Mr. Wear, 56 years of age, has served as a Supervisory Director since May 2001. He is a citizen of the United States of America. In 2001 Mr. Wear started his own business, Wear Multimedia International. Mr. Wear has spent the majority of his career in the media, television and telecommunications industries, working in legal, regulatory, commercial, business and senior executive positions. From 1997 to 2001 Mr. Wear was the President, International Policy and President, International Networks at Discovery Communications, Inc. From 1993 to 1997, Mr. Wear was Vice President and General Counsel of INTELSAT. Mr. Wear is a member of the Board of Directors of the International Council of the National Academy of Television Arts and Sciences in the United States. He is also a member of several advisory panels, committees and councils dealing with telecommunications- and television-related matters. Compensation of Supervisory Board Each of our supervisory directors receives a quarterly fee. Additionally, each supervisory director is paid a stipend in connection with attendance at, and travel to and from, a Supervisory Board meeting or a Supervisory Board committee meeting, and reimbursement in connection with other expenses. The total amount paid to our supervisory directors during 2002 was approximately $0.5 million. In 2002, the total remuneration of the individual members of the Supervisory Board were as follows (in thousands of U.S. dollars): Supervisory Board T.M. Seddon $ 87 J.W. Kolb 59 C. Seguin 55 G.D. Mueller 54 L. Ruspantini 53 D. Wear 53 S.K. Fung 50 N. Kroes 39 A.S. Ganguly 33 T. Hashimoto 10 ------------------ Total $ 493 ================== We have awarded options to acquire ordinary shares to the members of our Supervisory Board for each year since our inception. Each option grant has been, and each future option grant must be, approved by shareholders based on a proposed grant made to them. The vesting period for all options is three years and the options have a maximum term of 10 years. We granted 99,970 options to the supervisory directors in aggregate in 1998 and 127,960 options in aggregate to them in May 1999. The general meeting of shareholders approved 1998 and 1999 grants at the annual general meeting held in June 2000. The exercise price of $7.50 for these options was set at the estimated fair market value at the time they were granted. Under U.S. GAAP the Company must record a non-cash compensation cost equal to the excess of the market value of the shares at the date of ratification (June 28, 2000) over the exercise price. In establishing the fair market value of the shares, the Supervisory Board utilized an independent valuation performed by KPMG Corporate Finance. The calculated compensation cost was amortized over the vesting period of the options. Using the independent valuation performed by KPMG Corporate Finance, we have determined that the fair market value of these options was $11.00 each on June 28, 2000. Accordingly, we recorded $0.8 million as unearned compensation of which $0.5 million was expensed in 2000 and the remainder was expensed in 2001 and 2002. We also granted options to acquire ordinary shares to the members of our Supervisory Board in 2003, 2002, 2001 and 2000. The exercise price of these options was set at the fair market value as of the date of grant. Complete details of these option grants is set forth in the tables under "-- Outstanding Stock and Stock Options of the Supervisory Board and the Management Board as of May 22, 2003". In 2003 and 2002, our shareholders also approved the grant to the members of our Supervisory Board of rights to acquire ordinary shares. These rights are similar to restricted stock grants, which entitle (and require) the individual to purchase the shares specified in the grant at a price per share equal to nominal value ((euro)0.05). The purchase of shares under each grant is to be settled in three equal installments within 30 days of the designated settlement dates, which are the first, second and third anniversary of the date of grant. Grants may be extinguished under certain limited circumstances if the individual recipient ceases to be a member of our Supervisory Board. As is the case with options, our shareholders must approve any and all proposed future grants of this nature. We currently have no loans outstanding to members of our Supervisory Board. Management Board Our Management Board manages our business and operations under the supervision of our Supervisory Board. The general meeting of shareholders appoints members of our Management Board from binding nominations drawn up by our Supervisory Board and from nominations made by our shareholders holding two percent or more of our issued and outstanding share capital, pursuant to a mechanism described in our Articles of Association. This list of binding nominations drawn up by our Supervisory Board contains at least two nominations for each Management Board vacancy to be filled. The general meeting can over-ride these binding nominations by a vote of two-thirds of the votes cast. This vote must represent more than one-half of the issued share capital. If our Supervisory Board does not nominate anyone for a specific position or their nominee for that position is defeated, the general meeting of shareholders may appoint any candidate duly nominated by a shareholder holding two percent or more of our shares by an absolute majority of the votes cast. Our Supervisory Board may suspend, but not dismiss, any member of our Management Board. The general meeting of shareholders has the power to lift a suspension. In addition, the general meeting of shareholders may dismiss or suspend any or all members of our Management Board at any time. A resolution to suspend or dismiss any member of our Management Board may only be passed by a two-thirds majority of the votes cast representing more than one half of the issued capital, unless the proposal was made by the Supervisory Board. A majority of the members of our Management Board present or represented at a meeting is required to adopt decisions. Our Management Board may only adopt valid resolutions by favorable vote when the majority of the members of our Management Board in office are present or represented at a meeting, provided that the majority shall at least include the vote of the chief executive officer. Our Management Board is vested with the general legal authority to represent us. Any member of our Management Board, acting severally, is authorized to represent us. Certain decisions of our Management Board require the prior approval of our Supervisory Board. Our articles of association identify these decisions as they currently stand. Our Supervisory Board determines the compensation and benefits of the members of our Management Board. The business address of each member of our Management Board is the address of our principal executive office in The Hague. Each member of our Management Board currently holds some ordinary shares and/or options. See "-- Compensation of Management Board". Our articles of association provide that members of our Supervisory Board are entitled to represent us in case of conflicts of interest between us and members of our Management Board. According to our corporate purpose, we may arrange financing and may take up loans and provide security for our loans and obligations, as well as for loans and obligations of companies controlled by our affiliates our subsidiaries or us. This means that our Management Board and any member of our Management Board can bind us vis-a-vis third parties in this respect. This can only be varied by an amendment of our articles of association effecting an amendment to our corporate purpose, or to our representation provision. Our Management Board had six members until February 21, 2003, when Mr. R. Jockin resigned as Executive Vice President, Sales and Marketing. As a consequence, as of February 21, 2003, our Management Board has five members. The members of our Management Board are: Name Age Position - ---- --- -------- Daniel Goldberg....... 38 Chief Executive Officer Andrew Browne......... 47 Chief Financial Officer Timothy Cowart........ 36 Senior Vice President, Corporate Development Mary Dent............. 41 General Counsel Stephen Stott......... 56 Chief Technical Officer Mr. Goldberg, 38 years of age, has served as our Chief Executive Officer since January 2002. Prior to that, he had served as our Chief Operating Officer from February 2000, and prior to that time, he had served as our General Counsel since October 1998. Prior to joining us, he worked at PanAmSat as the Associate General Counsel and Vice President of Government and Regulatory Affairs during 1998. From 1993 to 1997, Mr. Goldberg was an associate at Goldberg, Godles, Wiener & Wright, a law firm in Washington D.C. Mr. Browne, 47 years of age, has served as our Chief Financial Officer since October 1998. Prior to joining us, he served as Vice President, Chief Financial Officer of INTELSAT. From 1985 to 1995, Mr. Browne worked for Advanced Micro Devices, Inc. in several financial and business capacities and, on leaving, was Director of Worldwide Finance, Sales and Marketing Operations. Mr. Cowart, 36 years of age, has served as our Senior Vice President of Corporate Development since March 1999. Prior to joining us, he worked at PanAmSat as Vice President of Business Development from 1998 to 1999 and as Director of Financial Planning from 1997 to 1998. Prior to that, he worked at Hughes Electronics Corp. from 1995 to 1997 as a senior associate of corporate development, and from 1993 to 1995 he worked at The Geneva Companies, Inc. as an associate vice president. Ms. Dent, 41 years of age, has served as our General Counsel since March 2000. Prior to joining us, she practiced telecommunications law from 1992 to 2000 with the firm of Goldberg, Godles, Wiener & Wright. Previously, Ms. Dent served as a counsel for U.S. Senator Edward M. Kennedy and worked in various capacities for satellite communications companies Hughes Communications Inc. and Equatorial Communications Co. Mr. Stott, 56 years of age, has served as our Chief Technical Officer since March 1999. Prior to joining us, he worked at INTELSAT from 1985 to 1999, most recently as Director of Satellite Systems Engineering from 1996 to 1999. Compensation of Management Board In 2002, we had six Management Board members. The aggregate annual base salary compensation that our Management Board members received during 2002 was $2.0 million. The members of our Management Board are eligible to participate in the company's Employee Annual Incentive Plan. In accordance with the terms and conditions of this plan, in 2002, the Chief Executive Officer and certain other Management Board members were eligible for an on-target bonus equal to 40 percent of their annual base salary, and the other Management Board members were eligible for an on-target bonus equal to 25 percent of their annual base salary. Bonus payments depend on our financial results and achievement of individual goals and objectives. In February 2003, the Supervisory Board approved an aggregate amount of $0.6 million in performance related bonus/incentive compensation for the six members of our Management Board for the year 2002, including our retired Chief Executive Officer. Other compensation was provided to the six members of our Management Board in the form of pension contributions and company leased cars, totaling $0.1 million in aggregate in 2002. Total remuneration of the Management Board, including pension costs for the year ended December 31, 2002, is summarized as follows (in thousands of U.S. dollars): Base Salary Bonus Pension Total -------------------------------------------------------- Management Board D.S. Goldberg 450 225 27 702 A.M. Browne 451 93 34 578 S.J. Stott 340 70 31 441 R. Jockin 275 92 21 388 M.J. Dent 262 88 16 366 T.L. Cowart 255 52 15 322 -------------------------------------------------------- Total 2,033 620 144 2,797 ======================================================== We have established a stock option plan with respect to our management and employees. Under this plan, members of our Management Board and other specified employees may be granted an option to acquire a specified number of ordinary shares. The exercise price for all options issued to date has been between $4.66 and $11.00. The options granted are exercisable for a period of 10 years after the grant date but are subject to vesting or, in certain cases, resale restrictions, as well as other restrictions. Options granted vest (or, where applicable, the resale restrictions are voided) in three equal annual installments. On December 31, 2002 (and adjusting for the share split), the number of options outstanding under this plan was 6,910,629. The total number of unexercised outstanding options held by members of our Management Board as a group on December 31, 2002 was, on the same basis, 1,845,434. The options have a maximum term of 10 years. In 2003, we also granted 448,133 stock options to the members of our Management Board in aggregate for performance during 2002. The vesting period of these options is three years and they have a maximum term of 10 years. The exercise price for these options was set at the fair market value as of the date of grant. In addition to option grants, the Management Board compensation package for 2002 and 2003 also consisted of grants of rights to acquire shares. In February 2002 we granted to the members of our Management Board rights to acquire an aggregate of 233,736 ordinary shares and in February 2003 we granted to the members of our Management Board rights to acquire an aggregate of 180,253 ordinary shares. These rights are similar to restricted stock grants, which entitle (and require) the individual to purchase the shares specified in the grant at a price per share equal to nominal value ((euro)0.05). The purchase of shares under each grant is to be settled in three equal installments within 30 days of the designated settlement dates, which generally are the first, second and third anniversary of the date of grant. However, in the case of the 2002 grant to our chief executive officer, the settlement dates have been aligned to match those of the grants made to other members of the Management Board. All Management Board equity grants (both options and grants of rights to acquire shares) are governed by a plan administered by the Supervisory Board. Under the plans, the size of a grant to an eligible recipient is determined at the discretion of the plan administrator. All grants under the option plan, including option grants to employees, are subject to an aggregate cap, which was raised in 2002 to a total of 13,057,024 ordinary shares. Grants may be extinguished under certain limited circumstances if the individual recipient ceases to be an employee of the company. For further information regarding stock options, including the accounting impact and vesting of these options, see Note 10 to our consolidated financial statements included elsewhere in this annual report. We currently have no loans outstanding to members of our Management Board. Limitation of Liability and Indemnification Matters Pursuant to Dutch law, each member of our Supervisory Board and our Management Board is responsible to us for the proper performance of his or her assigned duties. They are also responsible for taking measures to prevent the consequences of any improper performance of duties by another member of our Supervisory Board or our Management Board. Our articles of association provide that the adoption of our annual accounts by the general meeting of shareholders constitutes a discharge from liability for the members of our Supervisory Board and our Management Board in respect of the exercise of their duties during the financial year concerned. This is the case only so long as no proviso has explicitly been made, and without prejudice to what has been or will be provided by law. This discharge of liability may be limited by mandatory provisions of Dutch law, such as in the case of bankruptcy. In addition, this discharge extends only to actions or omissions disclosed in or apparent from the adopted annual accounts or otherwise communicated to the general meeting of shareholders. In case of actions or omissions, the members of our Supervisory Board and our Management Board could be jointly and severally liable toward third parties for any loss sustained by these third parties as a result of these actions or omissions. An individual Supervisory Board or Management Board member can avoid liability if he or she can prove that he or she was not responsible for these actions or omissions and that he or she has not been negligent in taking measures to prevent the consequences of those actions or omissions. Under Dutch law, our supervisory directors generally cannot be held personally liable for decisions made exercising their reasonable business judgment. Our articles of association require us to indemnify the persons described below against all expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by them in relation to any threatened, pending or completed action, suits or other proceedings, other than an action by us or on our behalf. We shall also indemnify those persons if they are threatened to be made a party to any threatened, pending or completed action or proceeding by or in our right to procure a judgment in their favor. We shall indemnify a person who acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, our best interests and who is or was: o a member of our Supervisory Board, o a member of our Management Board, o an officer or agent, or o was serving at our request as a member of our Supervisory Board, Management Board, or was an officer or agent of another company, a partnership, joint venture, foundation, trust or other enterprise. This indemnification generally will not be available if the person seeking indemnification acted with gross negligence or willful misconduct in the performance of their duty to us. A court in which an action is brought may, however, determine that indemnification is appropriate nonetheless. Outstanding Stock and Stock Options of the Supervisory Board and the Management Board as of May 22, 2003. The following table sets forth the number of shares owned by the respective individual determined in accordance with the rules of the Securities and Exchange Commission.
Number of Percent of Percent of shares and total Number of total issued exercisable issued Name shares (1) shares (2) options (3) shares (4) - ---- --------- ---------- ----------- ---------- Supervisory Board: Terence Seddon......................... 2,314 * 54,681 * S.K. Fung.............................. 3,607 * 26,585 * Ashok Ganguly.......................... 607 * 2,125 * Jerry Kolb............................. 2,607 * 41,575 * Neelie Kroes........................... 668 * 25,944 * Gerd Mueller (5)....................... 5,607 * 12,985 * Luigi Ruspantini....................... 1,607 * 37,915 * Claude Seguin.......................... 3,668 * 43,604 * Don Wear............................... 1,107 * 8,485 * ------ ------- Total............................. 21,792 * 253,899 0.2% Management Board: Daniel Goldberg........................ 46,000 * 389,370 0.3% Andrew Browne.......................... 11,835 * 426,079 0.3% Timothy Cowart......................... 10,143 * 200,550 0.2% Mary Dent.............................. 10,759 * 155,002 0.1% Stephen Stott.......................... 11,156 257,999 0.2% ------ ------- Total............................. 89,893 * 1,429,000 1.1%
(1) Represents share ownership as reported to us by the named individuals. Because our shares are publicly traded in bearer form, we have no independent means to verify any shareholder's beneficial ownership. (2) An asterisk indicates that the percentage is less than one-tenth of one percent. (3) Represents share ownership as reported to us by the named individuals. Because our shares are publicly traded in bearer form, we have no independent means to verify any shareholder's beneficial ownership. The information includes options over our ordinary shares that are exercisable within 60 days of the date of calculation in accordance with Rule 13d-3 under the U.S. Securities and Exchange Act. (4) The percentage is calculated by dividing the number of shares indicated for the person or group of persons by the sum of the total number of shares issued and outstanding plus the number of options over ordinary shares held by the relevant person or group of persons which are exercisable within 60 days. An asterisk indicates that the percentage is less than one-tenth of one percent. (5) The shares are held by the Helen Mueller Revocable Trust. In addition to shares owned or subject to options that are exercisable within 60 days, our supervisory directors and members of the Management Board also have rights to acquire our ordinary shares. These rights are similar to restricted stock grants, which entitle (and require) the individual to purchase a pre-determined number of shares at a price per share equal to nominal value ((euro)0.05), and the purchase of shares subject to each grant is to be settled in three equal installments within 30 days of the designated settlement dates, which are the first, second and third anniversary of the date of grant. See "Compensation of Supervisory Board" and "Management Compensation" for a full discussion of these rights. Because none of these shares are included in the table above or are comparable to options set forth in the second table further below, the following table illustrates the shares subject to these rights agreements.
Number of Purchase price per Name shares (1) share Settlement Dates - ---- ---------- ----- ---------------- Supervisory Board: Terence Seddon.................... 1,658 (euro) 0.05 05-22-04 1,658 0.05 05-22-05 1,659 0.05 05-22-06 1,214 0.05 05-16-04 1,215 0.05 05-16-05 S.K. Fung......................... 829 0.05 05-22-04 829 0.05 05-22-05 830 0.05 05-22-06 607 0.05 05-16-04 608 0.05 05-16-05 Ashok Ganguly..................... 829 0.05 05-22-04 829 0.05 05-22-05 830 0.05 05-22-06 607 0.05 05-16-04 608 0.05 05-16-05 Jerry Kolb........................ 829 0.05 05-22-04 829 0.05 05-22-05 830 0.05 05-22-06 607 0.05 05-16-04 608 0.05 05-16-05 Neelie Kroes...................... 911 0.05 05-22-04 912 0.05 05-22-05 912 0.05 05-22-06 668 0.05 05-16-04 668 0.05 05-16-05 Gerd Mueller...................... 829 0.05 05-22-04 829 0.05 05-22-05 830 0.05 05-22-06 607 0.05 05-16-04 608 0.05 05-16-05 Luigi Ruspantini.................. 829 0.05 05-22-04 829 0.05 05-22-05 830 0.05 05-22-06 607 0.05 05-16-04 608 0.05 05-16-05 Claude Seguin..................... 911 0.05 05-22-04 912 0.05 05-22-05 912 0.05 05-22-06 668 0.05 05-16-04 668 0.05 05-16-05 Don Wear.......................... 829 0.05 05-22-04 829 0.05 05-22-05 830 0.05 05-22-06 607 0.05 05-16-04 608 0.05 05-16-05 Management Board: Daniel Goldberg................... 25,751 (euro) 0.05 02-01-04 25,751 0.05 02-01-05 25,751 0.05 02-01-06 36,000 0.05 02-25-04 36,000 0.05 02-25-05 Andrew Browne..................... 13,333 0.05 02-01-04 13,333 0.05 02-01-05 13,334 0.05 02-01-06 10,835 0.05 02-25-04 10,835 0.05 02-25-05 Timothy Cowart.................... 7,666 0.05 02-01-04 7,667 0.05 02-01-05 7,667 0.05 02-01-06 7,643 0.05 02-25-04 7,643 0.05 02-25-05 Mary Dent......................... 10,000 0.05 02-01-04 8,860 0.05 02-25-04 8,860 0.05 02-25-05 Stephen Stott..................... 10,000 0.05 02-01-04 10,000 0.05 02-01-05 10,000 0.05 02-01-06 8,156 0.05 02-25-04 8,156 0.05 02-25-05
The following table sets forth the information regarding stock option ownership for each member of our Supervisory Board and Management Board.
Number of Exercise Expiration Name Options (1) Price Date (2) - ---- ----------- ----- -------- Supervisory Board: Terence Seddon................... 17,330 $7.50 05-14-08 17,330 7.50 05-27-09 2,950 11.00 06-28-10 17,581 7.11 05-17-11 9,108 5.49 05-16-12 12,437 6.03 05-22-13 S.K. Fung........................ 13,330 7.50 05-27-09 2,270 11.00 06-28-10 8,790 7.11 05-17-11 4,554 5.49 05-16-12 6,219 6.03 05-22-13 Ashok Ganguly.................... 4,554 5.49 05-16-12 6,219 6.03 05-22-13 Jerry Kolb....................... 14,660 7.50 05-14-08 14,660 7.50 05-27-09 2,270 11.00 06-28-10 8,790 7.11 05-17-11 4,554 5.49 05-16-12 6,219 6.03 05-22-13 Neelie Kroes..................... 14,660 7.50 05-27-09 2,500 11.00 06-28-10 9,669 7.11 05-17-11 5,009 5.49 05-16-12 6,841 6.03 05-22-13 Gerd Mueller..................... 8,790 7.11 05-17-11 4,554 5.49 05-16-12 6,219 6.03 05-22-13 Luigi Ruspantini................. 13,330 7.50 05-14-08 13,330 7.50 05-27-09 2,270 11.00 06-28-10 8,790 7.11 05-17-11 4,554 5.49 05-16-12 6,219 6.03 05-22-13 Claude Seguin.................... 14,660 7.50 05-14-08 14,660 7.50 05-27-09 2,500 11.00 06-28-10 9,669 7.11 05-17-11 5,009 5.49 05-16-12 6,841 6.03 05-22-13 Don Wear......................... 8,790 7.11 05-17-11 4,554 5.49 05-16-12 6,219 6.03 05-22-13 Management Board: Daniel Goldberg.................. 233,330 $ 7.50 10-26-08 37,100 11.00 02-17-10 109,410 9.14 02-23-11 193,133 4.66 02-20-13 Andrew Browne.................... 266,670 7.50 10-12-08 43,900 11.00 02-17-10 114,880 9.14 02-23-11 81,262 5.00 02-25-12 100,000 4.66 02-20-13 Timothy Cowart................... 120,000 7.50 03-04-09 17,000 11.00 02-17-10 51,450 9.14 02-23-11 57,322 5.00 02-25-12 55,000 4.66 02-20-13 Mary Dent........................ 94,740 9.50 03-01-10 41,030 9.14 02-23-11 66,448 5.00 02-25-12 25,000 4.66 02-20-13 Stephen Stott.................... 160,000 7.50 03-29-09 20,500 11.00 02-17-10 68,930 9.14 02-23-11 61,170 5.00 02-25-12 75,000 4.66 02-20-13 - ----------
(1) All options are for our ordinary shares, which have the same voting rights as all of our other ordinary shares. (2) The expiration date of each option is 10 years from the date of grant, unless earlier cancelled. ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS Principal Shareholders The following table sets forth information regarding the beneficial ownership of our ordinary shares at May 22, 2003 by each person known by us to own beneficially more than five percent of our outstanding ordinary shares. For information regarding holdings of shares, grants of stock options and rights to acquire shares of the members of the Management Board and Supervisory Board see Item 6. Except as otherwise indicated, each shareholder identified by name has: o sole voting and investment power with respect to its shares; and o record and beneficial ownership with respect to its shares.
Number of Percent of total issued ordinary shares ordinary shares Lockheed Martin Global Telecommunications(1)..................... 18,610,660 14.3% Stichting Administratiekantoor NSS(2)..... 8,135,230 6.2% K-Capital Partners LLC.................... See note (3) 5.8% - ----------
(1) Includes ordinary shares held by wholly owned subsidiaries. (2) This stichting holds ordinary shares that could not be distributed to signatories or investing parties of our predecessor in connection with the transfer of our assets to us on November 30, 1998, together with the shares our predecessor distributed to its signatories and investing parties in February 2000 and July 2001, less shares that have been removed from the stichting by the relevant shareholders. These shares are held for the beneficial interest of individually designated signatories and investing parties. These shares will be registered in our share register in the name of the signatories and investing entities upon completion of appropriate documents of transfer. (3) The company has no information regarding the actual numbers of shares held by K Capital Partners LLC. Under Dutch Law K-Capital Partners LLC is only required to file publicly the percentage of shares they hold. Changes in shareholdings by five-percent shareholders over the last three years. The following table shows the significant changes over the past three years in the shareholdings of those shareholders who currently hold more than five percent of our issued share capital. The table reflects only those significant changes in percentage ownership caused an acquisition or disposition of shares and does not reflect changes in percentage ownership caused by dilution. To date, we have only issued ordinary shares. Currently, our shareholders may hold our ordinary shares in one or more of three possible forms: registered shares, bearer shares and American Depositary Shares, each of which represent one bearer share. We can confirm the shareholdings and transfers only of shareholders who hold registered shares. In addition, several of our shareholders hold beneficial interests in a Dutch foundation, or stichting, which in turn holds registered shares. Where a shareholder holds a beneficial interest through this stichting, we are able to verify that beneficial ownership by reference to the stichting's register. In the case of bearer shares and American Depositary Shares that are publicly traded on the exchanges, we have no independent means to verify at any given time the identity of a shareholder or the actual or beneficial ownership of a known shareholder. In some cases, U.S. and Dutch law require shareholders of public companies to report publicly their shareholding at certain thresholds, and in those cases we have been able to verify their shareholding against public records. As a result, the information below represents only the information that is contained in our share register or in shareholder public filings that are known to us. Finally, some of the share numbers below have been adjusted to reflect a 10-to-1 stock split that became effective on August 24, 2000, and the percentages are calculated based on the total number of issued and outstanding shares, as adjusted for the stock split, as of the relevant date.
- -------------------------------------------------------------------------------------------------------------- Shareholder Transaction Date Number of shares Percentage - -------------------------------------------------------------------------------------------------------------- Lockheed Martin Global Acquisition of Comsat August 3, 2000 18,610,660 18.6% Telecommunications Corporation and its wholly-owned subsidiaries, Comsat Argentina S.A. and Comsat General Corporation - -------------------------------------------------------------------------------------------------------------- Stichting Additional acquisition February 18, 2000 9,907,620 9.9% Administratiekantoor NSS - -------------------------------------------------------------------------------------------------------------- Transfers 2000 6,077,780 in 12 4.7% separate transactions - -------------------------------------------------------------------------------------------------------------- Transfers 2001 2,049,630 in 15 1.6% separate transactions - -------------------------------------------------------------------------------------------------------------- Transfers 2002 1,963,650 in 10 1.5% separate transactions - -------------------------------------------------------------------------------------------------------------- K-Capital Partners LLC Acquisition(s) May 14, 2003 See note (1) 5.8% - --------------------------------------------------------------------------------------------------------------
- ---------- (1) The company has no information regarding the actual numbers of shares held by K Capital Partners LLC. Under Dutch Law K-Capital Partners LLC is only required to file publicly the percentage of shares it holds. The following table shows the total number of shares held in The Netherlands as of May 22, 2003. We can confirm the shareholdings only of shareholders who hold registered shares. In the case of bearer shares and American Depositary Shares that are publicly traded on the exchanges, we have no independent means to verify at any given time the identity of a shareholder or the actual or beneficial ownership of a known shareholder. In some cases, U.S. and Dutch law require shareholders of public companies to publicly report their shareholding at certain thresholds. However, individual shareholders may move their shares to accounts within or outside of The Netherlands at any time without our knowledge. As a result, the information below represents only the information that is contained in our share register, and it is likely that there are a number of shareholders located in The Netherlands that hold an indeterminable number of shares that are not included in the table below. Our only shareholder of record in The Netherlands is a Dutch trust, or stichting, which holds a number of our shares on behalf of others. We have included the shares held by this trust in the number of shares stated below, although, according to the stichting's register, none of the beneficial owners of those shares are resident in The Netherlands. There are approximately 160 beneficial owners of shares who hold shares through that stichting. Number of Shares Number of Shareholders Percentage ---------------- ---------------------- ---------- 8,135,230 1 6.2% Related Party Transactions We have entered into a number of contracts with our shareholders, including those of our shareholders who hold more than five percent of our outstanding shares. Certain of these contracts are ongoing service contracts with our shareholders. We inherited some of these contracts from INTELSAT and we entered into the others after beginning independent operations. We entered into the construction contracts for NSS-7 and NSS-6 after beginning independent operations. We believe that each of these contracts was entered into on an arm's length basis. We entered into the other contracts with INTELSAT in connection with the transfer of our assets to us at a time when INTELSAT was our sole shareholder. Certain of these agreements subsequently have been amended. Service Agreements From time to time, we conduct transactions with our shareholders, their affiliates and other connected persons. We currently provide transponder capacity to approximately 39 of our current shareholders, including one shareholder who owns more than five percent of our outstanding share capital. We anticipate that these arrangements and future similar arrangements will continue to be conducted on an arm's length basis. With respect to our contracts with Lockheed Martin Global Telecommunications, under the terms of 27 transponder agreements at December 31, 2002, we provide capacity of approximately 800MHz to Lockheed Martin Global Telecommunications and its subsidiaries and affiliates. These agreements have remaining terms of approximately 2.5 years on average. In 2002, revenues from Lockheed Martin Global Telecommunications were approximately 19 percent of total revenues. The transactions mentioned above have been entered into in the ordinary course of business and on normal commercial terms. Satellite Construction Contracts for NSS-7 and NSS-6 Lockheed Martin Global Telecommunications, a wholly owned subsidiary of Lockheed Martin Corporation, owns approximately 14 percent of our issued share capital. We contracted with Lockheed Martin Corporation for the construction of the NSS-7 satellite in 1999. See Item 4 "Business -- Our Satellites -- In-Orbit Satellites -- NSS-7" for a further description of the NSS-7. We launched NSS-7 in April 2002. In August 2000 we entered into a separate contract with Lockheed Martin Corporation for the construction of the NSS-6 satellite. See Item 4 "Business -- Our Satellites NSS-6" for a further description of NSS-6. We launched NSS-6 in December 2002. These contracts have been filed as exhibits to our Registration Statement on Form F-1 (No. 333-12564) filed September 19, 2000 under the Securities Act of 1933, as amended, and are incorporated by reference into this annual report. Agreements Related to the Transfer of Our Assets to Us We entered into each of the following agreements with INTELSAT on November 30, 1998 in connection with the transfer of our assets to us. Although INTELSAT is no longer a related party, at the time we entered into the following agreements, INTELSAT was a related party of ours. We believe these contracts were entered into on an arm's length basis. Subscription Agreement The subscription agreement imposes a number of ongoing obligations both on us and on INTELSAT. Our obligations include the following: o to use our best efforts to replace contracts that were assigned to us with new contracts that are directly with our customers; o to use commercially reasonable efforts to transfer any contract subject to the leaseback arrangement directly to us; o to take any necessary steps to retire the satellites that were transferred to us at the end of their useful lives; o to abide by INTELSAT's coordination agreements with respect to each of the satellites transferred to us; and o to comply with certain indemnification provisions. INTELSAT did not warrant the condition of the satellites transferred to us. However, on the date we acquired the satellites INTELSAT did provide representations and warranties that it had disclosed to us all material information in its possession regarding the technical health status of the satellites, including material technical problems and the remaining fuel life of the satellites. INTELSAT expressly excluded all implied warranties and made no guarantees as to any other information regarding the condition of the satellites. INTELSAT also made certain representations and warranties regarding the validity and enforceability of the assigned contracts on the date of assignment. It also agreed that, in the event of a dispute arising in connection with a transponder service contract assigned to us, it will prosecute or settle any claim which arises where no alternative forum is available, at our direction and our cost. Transponder Leasing Agreement The transponder leasing agreement is the agreement under which INTELSAT leased back transponder capacity from us in order to fulfill the transponder service contracts that were serviced by INTELSAT under the leaseback mechanism. INTELSAT effectively terminated the leaseback mechanism by assigning to us all active service contracts being administered under this mechanism at the time of its privatization in 2001. Under certain limited circumstances we can reinstate an inherited contract under the leaseback mechanism with INTELSAT's privatized successor. While we have no current expectation that this will occur, the last contract potentially subject to reinstatement on leaseback will not expire until May 2014. The transponder leasing agreement will terminate on the date the last agreement subject to leaseback is terminated. Ensured Capacity Rights Agreement The ensured capacity rights agreement provides that, in some limited circumstances, we are required to bid in response to a tender by INTELSAT's privatized successor for transponder capacity to be used for international public telecommunications services. If INTELSAT's privatized successor initiates the procedures under the contract, we will be required to submit a proposal to provide the capacity requested, subject to the following: o to the extent we have available transponder capacity on existing satellites, we must submit a bid to provide the requested service using that existing capacity; o if we do not have any spare transponder capacity, we must either submit a proposal for the provision of capacity involving the launch of a new satellite into an orbital position allocated to us or, alternatively, we could submit a proposal involving the launch of a new satellite into an orbital position provided by INTELSAT's privatized successor, at our option. If we are required to submit a proposal, our offer must be set at a price calculated to earn an annual return on used assets of 10 percent above the then-prevailing interest rate on 10-year U.S. Treasury obligations. The ensured capacity rights agreement was executed on November 30, 1998; however the term of the contract begins on January 1, 2005 and the contract expires on December 31, 2030. Accordingly, INTELSAT's privatized successor can initiate the ensured capacity rights procedure only if they believe that they would not be able to meet the demand themselves or if they have fewer than two satellites in any particular ocean region. Agreement Between New Skies Satellites and INTELSAT to Establish Technical Compatibility Between New Skies Satellites' and INTELSAT's Satellite Networks We entered into an agreement on November 20, 1998 with INTELSAT to ensure technical compatibility between the satellite system we operate and their satellite system. The agreement addresses a number of issues, and is intended to eliminate interference between satellites. In March 2002, we concluded an additional frequency coordination agreement with Intelsat Ltd. (INTELSAT's privatized successor) to ensure we could operate the NSS-7 satellite without causing or receiving harmful interference from Intelsat's adjacent satellites. ITEM 8. FINANCIAL INFORMATION CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION See Item 18 "Financial Statements" pages F-1 to F-19. ITEM 9. THE OFFER AND LISTING LISTING DETAILS AND ORDINARY SHARE PRICE RANGE Since our initial public offering in October 2000, our ordinary shares have been listed on the official segment of the Euronext Amsterdam N.V. stock market and our American Depositary Shares ("ADSs") have been listed on the New York Stock Exchange under the symbol "NSK". The following table sets forth the low and high sales prices of our shares as recorded on the Euronext Amsterdam N.V. stock market and of our ADSs as recorded on the New York Stock Exchange for the periods indicated.
New York Stock Exchange Euronext Amsterdam N.V. price per ADS price per Ordinary Share High Low High Low ---- --- ---- --- ($) ((euro)) Calendar Year 2001................ 10.63 5.85 11.50 6.38 Calendar Year 2002................ 6.45 3.14 7.05 3.00 First Quarter 2002................ 6.45 4.50 7.05 5.00 Second Quarter 2002............... 6.00 4.60 7.00 4.80 Third Quarter 2002................ 5.18 4.15 5.25 4.00 Fourth Quarter 2002............... 4.45 3.14 4.47 3.00 October 2002...................... 4.45 3.50 4.47 3.30 November 2002..................... 4.08 3.25 4.00 3.14 December 2002..................... 4.45 3.14 4.12 3.00 January 2003...................... 4.12 3.76 3.85 3.55 February 2003..................... 4.97 3.90 4.75 3.60 March 2003........................ 4.36 3.93 4.25 3.58 April 2003........................ 4.85 4.19 4.20 3.90 May 2003.......................... 6.35 4.20 7.15 4.88
On June 28, 2000, our shareholders approved a ten-for-one ordinary share split and a change in the currency denomination and par value of our ordinary shares from NLG 1.00 to (euro)0.05. These changes were effected on August 24, 2000, and the stock split has been given retroactive recognition in all periods presented in our consolidated financial statements. ITEM 10. ADDITIONAL INFORMATION MEMORANDUM AND ARTICLES OF ASSOCIATION Incorporated by reference from the Registrant's Registration Statement on Form F-1 (No. 333-12564) filed by the Registrant with the Commission on September 19, 2000. MATERIAL CONTRACTS We have been party to the following material contracts since January 1, 2001: o Amendment No. 2 to Contract No. NSS-20-03-01 for NSS-8 Spacecraft and Associated Equipment and Services between Boeing Satellite Systems International, Inc. and New Skies Satellites N.V. dated as of March 21, 2001. This amendment amends the 21 March 2001contract for the construction and optional launch of the NSS-8 Satellite in order to re-purpose the satellite as a replacement for the NSS-703 satellite. See Item 4 "Business--Our Satellites--Planned Satellites--NSS-8". Note: Amendment No. 1 to this Contract was superseded in its entirety by Amendment No. 2. o Amendment No. 3 to Contract No. NSS-20-03-01 for NSS-8 Spacecraft and Associated Equipment and Services between Boeing Satellite Systems International, Inc. and New Skies Satellites N.V. dated as of March 21, 2001. This amendment amends the 21 March 2001contract for the construction and optional launch of the NSS-8 Satellite in order to optimize certain antenna optimization efforts. o Launch Insurance Contract AF/AG982414 between New Skies Satellites N.V. and International Space Brokers dated November 23, 1998, as amended. This contract provided the launch insurance coverage for the launch of NSS-7 in April 2002 and for the launch of NSS-6 in December 2002. The contract also provides for in-orbit insurance for all station-kept satellites. o Subscription Agreement between New Skies Satellites N.V. and the International Telecommunications Satellite Organization, dated November 30, 1998. For a description of this contract see Item 7 "Related Party Transactions--Agreements Related to the Transfer of Our Assets to Us--Subscription Agreement". o Ensured Capacity Rights Contract between New Skies Satellites N.V. and the International Telecommunications Satellite Organization, dated November 30, 1998. For a description of this contract see Item 7 "Related Party Transactions--Agreements Related to the Transfer of Our Assets to Us--Ensured Capacity Rights Agreement". o Transponder Leasing Agreement between New Skies Satellites N.V. and the International Telecommunications Satellite Organization, dated November 30, 1998. For a description of this contract see Item 7 "Related Party Transactions--Agreements Related to the Transfer of Our Assets to Us--Transponder Leasing Agreement". o Option Agreement Regarding the Issuance and Subscription of Preference Shares in the Share Capital of New Skies Satellites N.V. See Item 3 "Risk Factors--Provisions of our articles of association could prevent a change of control" for a discussion of the material terms of this option agreement. o $300 million multi-currency loan agreement between New Skies Satellites N.V. and ABN AMRO Bank N.V. as Arranger, Agent and Original Lender and the banks named therein. For a discussion of the material terms of this contract see Item 5 "Operating and Financial Review and Prospects--Liquidity and Capital Resources--Liquidity." o Employment Agreement between Daniel S. Goldberg and New Skies Satellites, N.V. dated April 23, 2002. TAXATION Netherlands Taxation Each investor should consult his or her own tax advisor with respect to the tax consequences for holding our ordinary Shares or ADSs. The discussion of certain Netherlands taxes set forth below is included for general information only and does not address every potential tax consequence of an investment in our ordinary shares or ADSs under the laws of The Netherlands. The following summary of Netherlands tax considerations is limited to the tax implications for (i) a corporation, owning less than five percent of our nominal issued share capital and (ii) an individual who or a non-resident corporation which does not have a substantial or deemed substantial interest in us. An individual holding ordinary shares or ADSs has a substantial interest or deemed substantial interest if he or she owns, alone or together with his or her partner and certain other relatives, at least five percent of our issued share capital or rights (including share options) to acquire at least five percent of our share capital. A deemed substantial interest would be present if (part of) this substantial interest is disposed of, or deemed to have been disposed of, under a deferral facility. The sale of shares includes certain deemed dispositions of shares, options or profit sharing rights. Dividend Withholding Tax Non-Residents of The Netherlands Dividends distributed by us are subject to Netherlands withholding tax at a 25 percent rate unless the recipient of the dividend qualifies for, and claims the benefit of, a reduced rate under an applicable tax treaty. Dividends paid to U.S. holders that are eligible for benefits under the income tax convention between the United States and The Netherlands (the "Treaty") generally will be subject to a reduced withholding rate of 15 percent; certain U.S. pension funds and tax-exempt organizations will qualify for a complete exemption from Netherlands tax. Whether a U.S. holder will be eligible for Treaty benefits is discussed under "United States Taxation". An eligible U.S. holder may claim the benefit of the reduced Treaty withholding rate by submitting a duly completed Form IB 92 USA that has been certified by a financial institution (typically the entity that holds the ordinary shares or ADSs as custodian for the holder). If we receive the required documentation prior to the relevant dividend payment date, we may apply the reduced withholding rate at source. An eligible U.S. holder that fails to satisfy these requirements may claim a refund of the excess of the amount withheld over the Treaty rate by filing Form IB 92 USA together with a supplemental statement with the Netherlands tax authorities. Pension funds and tax-exempt organizations, which qualify for a complete exemption from tax and which are not entitled to claim Treaty benefits at source, instead must file claims for refund by filing Form IB 95 USA. Under certain circumstances, we will not be required to transfer to the Netherlands tax authorities the full amount of the tax we withhold with respect to dividend distributions made on ordinary shares out of dividends received by us from foreign affiliates. The amount not transferred to Netherlands tax authorities cannot exceed three percent of the gross amount of any cash dividend paid by us on the ordinary shares. This reduction in withholding taxes will not be paid out to shareholders, but will accrue with us instead. Residents of The Netherlands Individuals or corporations (or an entity enjoying equivalent status under Netherlands tax legislation, hereafter referred to as "corporation") which hold ordinary shares or ADSs and are resident or deemed to be resident in The Netherlands, will normally be entitled to credit, in whole or in part, the dividend withholding tax on income from ordinary shares or ADSs against Netherlands personal or corporate income tax due on such income. Netherlands resident entities that are not subject to corporate income tax may, provided that the shares are not disposed of within 3 months after they were acquired, apply for, and will normally be granted, a refund of the dividend withholding tax. The withholding of dividend tax may not be required if the so-called participation exemption as defined in section 13 of the Netherlands Corporate Income Tax Act 1969 (Wet op de vennootschapsbelasting 1969) applies to the benefits which the recipient of the income derives from the ordinary shares and the ordinary shares form part of the recipient's business carried on in The Netherlands. Anti-dividend stripping legislation Anti-dividend stripping measures working retroactively to April 27, 2001 were implemented on July 26, 2002. Based upon this legislation a refund, credit or abstinence of withholding (in case the participation exemption applies) can be denied when the person or entity that receives the dividend is considered not to be the beneficial owner of these dividends. Netherlands Personal and Corporate Income Tax Non-residents of The Netherlands A holder of ordinary shares or ADSs will not be subject to Netherlands income tax or corporate income tax in respect of dividend distributions on ordinary shares or ADSs or capital gains realized on the disposal of ordinary shares or ADSs, provided that: o such holder is neither resident nor deemed to be resident in The Netherlands for tax purposes; o such holder does not have an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a permanent establishment or a permanent representative in The Netherlands and to which enterprise or part of an enterprise the ordinary shares or ADSs are attributable; o such holder is not entitled to a share in the profits of an enterprise that is effectively managed in The Netherlands, other than stemming from securities or through an employment contract, the ordinary shares being attributable to such an enterprise; and o such holder does not perform other activities in respect of the shares in the Netherlands (including without limitation activities that are beyond the scope of normal investment activities). The exchange of ADSs for ordinary shares will not, for Netherlands tax purposes, be regarded as a taxable event, provided beneficiary rights have not or the position of the shares among the assets of the holder has not changed. Residents of the Netherlands Where the ordinary shares or ADSs are owned by an individual or entity resident or deemed resident in the Netherlands, the question whether distribution and/or capital gains on such ordinary shares or ADSs are subject to Netherlands income tax or corporate income tax depends on the general tax status of the individual or the entity in question, the capacity in which he or it owns such ordinary shares or ADSs, the percentage of interest in our capital owned by him or it, and on certain other facts and circumstances. Generally, dividend withholding tax with respect to distributions made by us will be creditable against Netherlands income tax or corporate income tax, or will be recoverable. Under the new personal income tax regime as of January 1, 2001, individual shareholders that are residents of The Netherlands and are holding the shares or ADSs as investment (for tax purposes) will annually be taxed at the rate of 30 percent on an assumed yield of four percent of the market value of the shares (based on a calculation method prescribed by law). Netherlands Gift, Estate and Inheritance Taxes The acquisition of ordinary shares or ADSs as a gift or as a result of the death of a holder will not be subject to Netherlands gift, estate or inheritance taxes, provided that: o the donor or decedent was not a resident or a deemed resident of The Netherlands and did not hold the ordinary shares or ADSs in connection with the conduct of business through a permanent establishment or via a permanent representative in The Netherlands; o in the case of a gift of ordinary shares or ADSs by an individual who at the date of the gift, was not resident or deemed to be resident in The Netherlands, such individual does not die within 180 days after the date of the gift, while being resident or deemed to be resident in The Netherlands; and o if the donor or decedent was a citizen of The Netherlands, he or she was not resident or deemed to be resident in The Netherlands during the preceding 10 years. The United States and The Netherlands have entered into an estate tax convention that provides rules for reconciling the estate tax systems of the two countries in circumstances where property otherwise would be subject to taxation in both countries. Other Netherlands Taxes and Duties Save for capital tax which we will pay, no registration tax, transfer tax, stamp duty or other similar documentary tax or duty will be due in The Netherlands in connection with the subscription, issue, placement, allotment or delivery of the ordinary shares or ADSs. United States Taxation The following is a summary of the material U.S. federal income tax considerations regarding the purchase, ownership and disposition of ordinary shares or ADSs if you are an eligible U.S. holder. You are an eligible U.S. holder if you are a resident of the United States for purposes of the Treaty and are fully eligible for benefits under the Treaty. You generally will be entitled to Treaty benefits if you are: o the beneficial owner of the ordinary shares or ADSs (and of the dividends paid with respect to the ordinary shares or ADSs); o an individual resident of the United States, a U.S. corporation, or a partnership, estate or trust to the extent your income is subject to taxation in the United States in your hands or in the hands of your partners or beneficiaries; o not resident in The Netherlands for Netherlands tax purposes; and o not subject to an anti-treaty shopping rule. You generally will not be eligible for Treaty benefits, and therefore will not be an eligible U.S. holder, if you hold the ordinary shares or ADSs in connection with the conduct of business through a permanent establishment, or the performance of services through a fixed base, in The Netherlands, or you are not resident in the United States for U.S. tax purposes. The summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to an investment in our ordinary shares or ADSs. In particular, the summary does not address considerations that may be applicable to you if you do not hold ordinary shares or ADSs as capital assets, are a taxpayer subject to special tax rules, such as a bank, tax-exempt entity, insurance company, a regulated investment company, a pension fund, a real estate investment trust, a dealer in securities or currencies, a person that holds ordinary shares or ADSs as part of an integrated investment (including a "straddle") comprised of ordinary shares or ADSs and one or more other positions, and a person that owns or is deemed to own more than ten percent of any class of our stock. The summary is based on laws, treaties and regulatory interpretations in effect on the date of this annual report, all of which are subject to change. You should consult your own advisers regarding the tax consequences of an investment in the ordinary shares or ADSs in light of your particular circumstances, including the effect of any state, local or other national laws. For U.S. federal income tax purposes and for purposes of the Treaty, beneficial owners of ADSs will be treated as the owners of the underlying ordinary shares represented by those ADSs. Taxation of Dividends The gross amount of dividends distributed by us (including amounts withheld in respect of Netherlands withholding tax) generally will be subject to U.S. federal income taxation as foreign source dividend income, and will not be eligible for the dividends received deduction. Dividends paid in Euros will be included in income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of receipt by you (or by the depositary in the case of ADSs). Subject to exceptions for positions that are hedged or held for less than 60 days, an individual US holder generally will be subject to US taxation at a maximum rate of 15% in respect of dividends received after 2002 and before 2009. If such dividends are converted into U.S. dollars on the date of receipt, you generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. If you receive a Treaty refund, you may be required to recognize foreign currency gain or loss to the extent the U.S. dollar equivalent of the Treaty refund on the date the refund is received by you differs from the U.S. dollar equivalent of the refund amount on the date the dividends were received. Subject to generally applicable limitations and to the special considerations discussed below, Netherlands withholding tax at the 15 percent Treaty rate will be treated as a foreign income tax that is eligible for credit against your U.S. federal income tax liability or, at your election, may be deducted in computing taxable income. Foreign tax credits will not be allowed for withholding taxes imposed in respect of certain short-term or hedged positions and arrangements in which your expected economic profit, after non-U.S. taxes, is insubstantial. You should consult your own advisers concerning the implications of these rules in light of your particular circumstances. Taxation of Capital Gains Gain or loss realized by you on the sale or other disposition of ordinary shares or ADSs will be capital gain or loss in an amount equal to the difference between your basis in the ordinary shares or ADSs and the amount realized on the disposition (or its dollar equivalent, determined at the spot rate on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss will be long-term gain or loss if the ordinary shares or ADSs were held for more than one year. If you are an individual, the net amount of long-term capital gain realized by you generally is subject to taxation at a maximum rate of 20 percent; however, net long-term capital gain recognized after May 5, 2003 and before 2009 generally is subject to taxation at a maximum rate of 15%. U.S. Backup Withholding Tax and Information Reporting Payments in respect of the ordinary shares or ADSs that are made in the United States or by a U.S.-related financial intermediary will be subject to information reporting and may be subject to backup withholding unless you: o are a corporation or other exempt recipient, or o provide an IRS Form W-9 or an acceptable substitute form, certifying your taxpayer identification number and that no loss of exemption from backup withholding has occurred. If you are not a U.S.-resident please consult your local tax lawyer whether and to what extent you are entitled by Treaty to a reduction in the rate of withholding tax or an exemption of these rules. DOCUMENTS ON DISPLAY We are subject to the information requirements of the U.S. Securities Exchange Act of 1934, as amended, and in accordance therewith are required to file reports, including annual reports on Form 20-F, and other information with the U.S. Securities Exchange Commission. These materials, including this annual report on Form 20-F and the exhibits hereto, may be inspected and copied, upon payment of a duplicating fee, at the Commission's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the Commission at +1-800-SEC-0330 for further information on the public reference rooms. Any filings we make electronically will be available to the public over the Internet at the Commission's web site at http://www.sec.gov. The following documents are available for inspection during regular business hours at our principal executive office and at the offices of our paying agent, ABN AMRO Bank N.V.: o our latest published annual report and our most recent publicly released financial statements; and o our articles of association. We will furnish, upon request without charge, a copy of any of these documents. You can reach us for this purpose at: New Skies Satellites N.V. Rooseveltplantsoen 4 2517 KR The Hague The Netherlands You can reach ABN AMRO Bank N.V. for this purpose at +31-76-579-9455. These documents are also available from the SEC. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. For a discussion of quantitative and qualitative disclosures about market risk, see Item 5 "Operating and Financial Review and Prospects--Disclosures About Market Risk". ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Not applicable. PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES None. ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS Use of Proceeds We received net proceeds of $255.9 million from our initial public offering on October 10, 2000 and the exercise of the underwriter's over-allotment option. We used $22.0 million to repay amounts outstanding under the promissory note held by INTELSAT in 2000 and the remainder $233.9 million on satellite milestone payments for the construction and launch contracts for NSS-7, NSS-6 and NSS-8. ITEM 15. DISCLOSURE CONTROLS AND PROCEDURES Within the 90 days prior to the date of this report, the Company carried out an evaluation under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon and as of the date of the Company's evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective in all material respects to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required. ITEM 16. [RESERVED] PART III ITEM 17. FINANCIAL STATEMENTS See Item 18 "Financial Statements". ITEM 18. FINANCIAL STATEMENTS See attached pages F-1 to F-19. ITEM 19. EXHIBITS Exhibit Number Description -------------- ----------- (1) Articles of Association of the Registrant (including an English translation thereof). (2)* Form of Deposit Agreement. (4.1)* $300 million multi-currency loan agreement between New Skies Satellites N.V. and ABN AMRO Bank N.V. as Arranger, Agent and Original Lender and the banks named therein. (4.2)* Subscription Agreement between New Skies Satellites N.V. and the International Telecommunications Satellite Organization, dated November 30, 1998. (4.3)* Ensured Capacity Rights Contract between New Skies Satellites N.V. and the International Telecommunications Satellite Organization, dated November 30, 1998. (4.4)* Transponder Leasing Agreement between New Skies Satellites N.V. and the International Telecommunications Satellite Organization, dated November 30, 1998. (4.5)* Option Agreement Regarding the Issuance and Subscription of Preference Shares in the Share Capital of New Skies Satellites N.V. (4.6)** Satellite Launch and In-Orbit Insurance Agreement, between New Skies Satellite N.V. and International Space Brokers, dated November 23, 1998, policy number 893/AF982414, and the Endorsement thereto, dated December 17, 2001.(1) (4.7) Amendment No. 2 dated February 12, 2003 to Contract No. NSS-20-03-01 for NSS-8 Spacecraft and Associated Equipment and Services between Boeing Satellite Systems International, Inc. and New Skies Satellites N.V. dated as of March 21, 2001.(1) (4.8) Amendment No. 3 dated May 6, 2003 to Contract No. NSS-20-03-01 for NSS-8 Spacecraft and Associated Equipment and Services between Boeing Satellite Systems International, Inc. and New Skies Satellites N.V. dated as of March 21, 2001.(1) (4.9) Employment Agreement between Daniel S. Goldberg and New Skies Satellites, N.V. dated April 23, 2002. (8) Significant Subsidiaries. (99) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. - ---------- * Exhibits to the registrant's Registration Statement on Form F-1 (No. 333-12564) filed September 19, 2000 under the Securities Act of 1933, as amended, hereby incorporated by reference in this annual report. ** Exhibits to the registrant's Annual Report on Form 20-F filed July 1, 2002 under the Exchange Act of 1934, as amended, hereby incorporated by reference in this annual report. (1) Portions of this Exhibit have been omitted pursuant to a request for confidential treatment filed with the Commission under 17 C.F.R. ss.200.80(b). SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. New Skies Satellites N.V. (Registrant) By: /s/ Mary Dent Name: Mary Dent Title: General Counsel and Member of the Management Board June 30, 2003 CERTIFICATIONS I, Daniel Goldberg, certify that: 1. I have reviewed this annual report on Form 20-F of New Skies Satellites N.V.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 30, 2003 /s/ Daniel Goldberg ------------------------------- Title: Chief Executive Officer I, Andrew Browne, certify that: 1. I have reviewed this annual report on Form 20-F of New Skies Satellites N.V.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 30, 2003 /s/ Andrew Browne ------------------------------- Title: Chief Financial Officer Index to Consolidated Financial Statements Page Independent Auditors' Report F-2 Consolidated Balance Sheets as of December 31, 2002 and 2001 F-3 Consolidated Statements of Operations for the Years Ended December 31, 2002, 2001 and 2000 F-4 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2002, 2001 and 2000 F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000 F-6 Notes to the Consolidated Financial Statements F-7 Independent Auditors' Report To the Supervisory Board of Directors and Shareholders of New Skies Satellites N.V.: We have audited the consolidated balance sheets of New Skies Satellites N.V. and subsidiaries (the "Company") as of December 31, 2002 and 2001, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, such financial statements present fairly, in all material respects, the financial position of New Skies Satellites N.V. and subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 2 to the financial statements, the Company changed its method of accounting for goodwill in 2002. /s/ Deloitte & Touche Accountants Amsterdam, The Netherlands January 24, 2003 New Skies Satellites N.V. and subsidiaries Consolidated balance sheets (In thousands of U.S. dollars, except share data)
December 31, 2002 2001 ----------- ----------- Assets Current assets Cash and cash equivalents $ 8,329 $ 138,268 Trade receivables (including trade receivables from shareholders totaling $22,100 in 2002 and $25,321 in 2001 less: allowance for doubtful accounts of $6,171 for 2002 and $4,948 for 2001) 39,109 41,981 Prepaid expenses and other assets 10,885 9,139 ----------- ----------- Total current assets 58,323 189,388 Communications, plant and other property, net (Note 4) 1,058,119 886,244 Deferred tax asset (Note 6) 10,087 11,441 Goodwill, net and other assets (Note 2) 1,226 22,730 ----------- ----------- TOTAL $ 1,127,755 $ 1,109,803 =========== =========== Liabilities and shareholders' equity Current liabilities Short-term debt $ 10,000$ - Accounts payable and accrued liabilities 18,396 20,350 Income taxes payable 29,124 22,357 Deferred revenues 8,994 8,848 Satellite performance incentives 6,218 4,610 ----------- ----------- Total current liabilities 72,732 56,165 Deferred revenues and other liabilities 8,351 3,925 Satellite performance incentives 27,639 12,529 ----------- ----------- Total liabilities 108,722 72,619 ----------- ----------- Shareholders' equity (Note 8) Governance preference shares (227,530,000 shares authorized, par value (euro)0.05; none issued) - - Cumulative preferred financing shares (22,753,000 shares authorized, par value(euro)0.05; none issued) - - Ordinary Shares (204,777,000 shares authorized, par value(euro)0.05; 130,570,241 shares issued) 6,026 6,026 Additional paid-in capital 977,506 976,168 Retained earnings 56,019 60,664 Unearned compensation (Note 10) (685) (352) Accumulated other comprehensive loss (492) (5,322) Treasury stock, at cost (5,194,030 ordinary shares) (19,341) - ----------- ----------- Total shareholders' equity 1,019,033 1,037,184 ----------- ----------- TOTAL $ 1,127,755 $ 1,109,803 =========== ===========
See notes to consolidated financial statements. New Skies Satellites N.V. and subsidiaries Consolidated statements of operations (In thousands of U.S. dollars, except per share amounts)
Years ended December 31, 2002 2001 2000 ---------------- --------------- ---------------- Revenues (including services to shareholders totaling $108,346 in 2002, $101,916 in 2001 and $117,999 in 2000) (Note 9) $ 200,524 $ 209,028 $ 198,294 ---------------- --------------- ---------------- Operating expenses Cost of operations (including services received from shareholders totaling $12,031 in 2000) 50,714 51,533 47,022 Selling, general and administrative 39,490 38,733 34,765 Depreciation and amortization 80,574 75,338 69,870 ---------------- --------------- ---------------- Total operating expenses 170,778 165,604 151,657 ---------------- --------------- ---------------- Operating income 29,746 43,424 46,637 Interest expense (income) and other, net 510 (9,008) (2,543) ---------------- --------------- ---------------- Income before income tax expense 29,236 52,432 49,180 Income tax expense (Note 6) (10,506) (19,364) (17,506) ---------------- --------------- ---------------- Income before cumulative effect of change in 18,730 33,068 31,674 accounting principle Cumulative effect of change in accounting principle, relating to goodwill, net of taxes (23,375) - - ---------------- --------------- ---------------- Net (loss) income $ (4,645) $ 33,068 $ 31,674 ================ =============== ================ Basic and diluted earnings per share: Income before cumulative effect of change in accounting principle $ 0.14 $ 0.25 $ 0.29 Cumulative effect of change in accounting principle (0.18) - - ---------------- --------------- ---------------- Basic and diluted earnings per share $ (0.04) $ 0.25 $ 0.29 ================ =============== ================
See notes to consolidated financial statements.
New Skies Satellites N.V. and subsidiaries Consolidated statements of shareholders' equity Years ended December 31, 2002, 2001 and 2000 (In thousands of U.S. dollars, except share data) - ------------------------------------------------------------------------------------------------------------------------------------ Accumulated Number of Additional Retained Other Treasury Total Ordinary Ordinary Paid-in Earnings Unearned Comprehensive Stock Shareholders' Shares Shares Capital (Deficit) Compensation Loss (at Cost) Equity ----------- ---------- ------------- ---------- ----------- ----------- ------------ ------------ (in thousands) Balance, January 1, 2000 100,285 $ 5,110 $ 718,542 $ (4,078) $ (413) $ - $ - $ 719,161 Ordinary shares issued 30,276 1,329 254,531 - - - - 255,860 Adjustment in par value of ordinary shares (Note 8) - (413) 413 - - - - - Unearned stock compensation - 2,691 - (2,691) - - - Amortization of unearned stock compensation - - - 1,757 - - 1,757 Cumulative translation adjustment - - - - - (2,895) - (2,895) Net income - - - 31,674 - - - 31,674 ----------- ---------- ------------- ---------- ----------- ----------- ------------ ------------ Balance, December 31, 2000 130,561 6,026 976,177 27,596 (1,347) (2,895) - 1,005,557 Stock options exercised (Note 10) 9 - 67 - - - - 67 Stock option forfeiture - - (23) 23 - - - Amortization of unearned stock compensation - - - - 972 - - 972 Cumulative translation adjustment - - - - - (2,427) - (2,427) Net income - - 33,068 - - - 33,068 Other - - (53) - - - - (53) ----------- ---------- ------------- ---------- ----------- ----------- ------------ ------------ Balance, December 31, 2001 130,570 6,026 976,168 60,664 (352) (5,322) - 1,037,184 Unearned stock compensation - - 1,338 - (1,338) - - - Amortization of unearned stock compensation - - - - 1,005 - - 1,005 Purchase of treasury stock - - - - - - (19,341) (19,341) Cumulative translation adjustment - - - - - 4,830 - 4,830 Net loss - - - (4,645) - - - (4,645) ----------- ---------- ------------- ---------- ----------- ----------- ------------ ------------ Balance, December 31, 2002 130,570 $ 6,026 $ 977,506 $ 56,019 $ (685) $ (492) $(19,341) $ 1,019,033 =========== ========== ============= ========== =========== ========== ============ =============
See notes to consolidated financial statements. New Skies Satellites N.V. and subsidiaries Consolidated statements of cash flows (In thousands of U.S. dollars) Years Ended December 31, 2002 2001 2000 ---------------- -------------- ----------------- Cash flows from operating activities: Net (loss) income $ (4,645) $ 33,068 $ 31,674 Adjustments for non-cash items: Depreciation and amortization 80,574 75,338 69,870 Cumulative effect of change in accounting principle 23,375 - - Deferred taxes 1,354 1,382 4,943 Amortization of unearned stock compensation 1,005 972 1,757 Changes in operating assets and liabilities: Trade receivables 2,981 4,940 (7,932) Prepaid expenses and other (1,727) (1,855) 800 Accounts payable and accrued liabilities (2,096) (321) 9,291 Deferred revenues 4,501 (129) 2,288 Income taxes payable 6,668 17,296 5,170 ---------------- -------------- ----------------- Net cash provided by operating activities 111,990 130,691 117,861 ---------------- -------------- ----------------- Cash flows from investing activities: Payments for communications, plant and other property (231,400) (274,167) (118,480) Reimbursement of KTV constructions costs - 51,452 - Acquisition of business - - (30,462) ---------------- -------------- ----------------- Net cash used in investing activities (231,400) (222,715) (148,942) ---------------- -------------- ----------------- Cash flows from financing activities: Ordinary shares issued - - 255,860 Stock options exercised - 67 - Proceeds of note payable and short-term borrowings 10,000 - 20,000 Purchases of treasury stock (19,341) - - Repayment of note payable and short-term borrowings - - (42,000) Satellite performance incentives and other (1,297) (2,553) (3,392) ---------------- -------------- ----------------- Net cash (used in) provided by financing activities (10,638) (2,486) 230,468 ---------------- -------------- ----------------- Effect of exchange rate differences 109 (120) (551) ---------------- -------------- ----------------- Net change in cash and cash equivalents (129,939) (94,630) 198,836 Cash and cash equivalents, beginning of year 138,268 232,898 34,062 ---------------- -------------- ----------------- Cash and cash equivalents, end of year $ 8,329 $ 138,268 $ 232,898 ================ ============== =================
See notes to consolidated financial statements. Cash payments for interest (net of amounts capitalized) were $0.9 million for the years ended December 31, 2000. Income taxes paid amounted to $2.1 million and $0.8 million for the years ended December 31, 2002 and 2001, respectively. New Skies Satellites N.V. and subsidiaries Notes to consolidated financial statements Years ended December 31, 2002, 2001 and 2000 1. Basis of presentation Business description - New Skies Satellites N.V. (the "Company") is an independent, global satellite communications company. The Company owns and operates six satellites in geosynchronous orbit that provide capacity to various entities throughout the world for the global public telecommunications, broadcasting, Internet and corporate business network market sectors. During 2002, two satellites were launched, the NSS-6 and NSS-7, and the NSS-K was retired. As the NSS-6 was launched in the fourth quarter of 2002 it is expected to enter commercial service in the first quarter of 2003. A further satellite, the NSS-8, is currently under construction, with a projected launch date in the fourth quarter of 2004. Formation and asset transfer - The Company was formed on April 23, 1998 as a corporation organized under the laws of The Netherlands, with headquarters in The Hague, through the issuance of 90 million shares of common stock to International Telecommunications Satellite Organization ("INTELSAT") for 9.0 million Dutch Guilders (or approximately $4.6 million) to carry on the satellite communication business associated with the satellites contributed by INTELSAT. The Company and INTELSAT then entered into a subscription agreement (the "Subscription Agreement"). Under the Subscription Agreement dated November 30, 1998 INTELSAT received an additional 10 million of the Company's shares and in exchange, the Company received certain assets including five in-orbit satellites and assumed certain liabilities (the "Asset Transfer"). Immediately after the Asset Transfer, INTELSAT distributed 90 percent of its shares in the Company to its investment shareholders. Following distribution of these shares, INTELSAT held 10 percent of the stock through a passive, non-voting trust and no longer controlled the Company. In February 2000, INTELSAT distributed the remaining shares to its investment shareholders. At the Asset Transfer, the Company and INTELSAT also entered into various other agreements including a space segment capacity, a satellite communications services and a transition services agreement. For the years ended December 31, 2001 and 2000, $4.1 million and $12.0 million, respectively, of operating expenses were incurred under the terms of these agreements which have since expired. INTELSAT also leased from the Company space segment capacity to fulfill the needs of certain INTELSAT contracts. During the years ended December 31, 2001 and 2000, approximately 9 percent and 15 percent, respectively, of the Company's revenues were derived from these lease agreements. On January 16, 2002 INTELSAT assigned all of these remaining lease agreements to the Company. 2. Summary of significant accounting policies Functional currency - The Company's revenues, capital expenditures and substantially all operating expenses are denominated in U.S. dollars. Accordingly, the U.S. dollar has been adopted as the functional currency. Transactions in other currencies are translated into U.S. dollars using rates that are in effect at the transaction date. Principles of consolidation - The consolidated financial statements include the accounts of the Company and its wholly owned domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Foreign currency translation - Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at exchange rates prevailing at the balance sheet date. Revenues and costs relating to the operations of such subsidiaries are translated at average exchange rates during the period. Resulting translation adjustments are directly recorded in shareholders' equity as a component of accumulated other comprehensive loss. Use of estimates - The preparation of financial statements requires management to make estimates and assumptions that affect: (1) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (2) the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Revenue recognition - Telecommunications revenue results from utilization charges that are recognized as revenue on a straight-line basis over the period during which the satellite services are provided. Deferred revenues represent the unearned balances remaining from amounts received from customers pursuant to transponder lease prepayment options. These amounts are recorded as revenues on a straight-line basis over the respective lease terms. Cash and cash equivalents - The Company considers temporary investments with original maturities of three months or less when purchased to be cash equivalents. Communications, plant and other property - Communications, plant and other property are carried at cost and consist primarily of the costs of spacecraft construction and launch, including capitalized performance payments, insurance premiums, capitalized interest, and costs directly associated with monitoring and support of spacecraft construction. Interest expense in the accompanying statements of operations is net of capitalized interest of $1.6 million, $1.4 million, and $2.7 million for the years ended December 31, 2002, 2001 and 2000, respectively. Upon commencement of commercial operation, communications, plant and other property are depreciated on a straight-line basis over the following estimated useful lives (see Note 4): Years ------------------------------- Spacecraft and launch costs 7-13 Communication support and other 3-7 Buildings 30 Goodwill - The excess of the purchase price over the fair market value of net assets acquired is recorded as goodwill and is tested for impairment at least on an annual basis. See "Recently issued Accounting Standards". Unsuccessful launches and satellite failures - In the event of an unsuccessful launch or total in-orbit satellite failure, all unamortized costs that are not recoverable under launch or in-orbit insurance are recorded as an operating expense. Impairment of long-lived assets - The Company periodically reviews its long-lived assets, which are comprised primarily of its in-service satellite fleet, to determine whether an impairment exists. Impairment can arise from complete failure or partial failure of the satellites as well as a change in expected cash flows. Such impairment tests are based on a comparison of estimated undiscounted future cash flows to the recorded value of the asset. If impairment is indicated, the asset value will be written down to fair value based upon discounted cash flows, using an appropriate discount rate. Satellite performance incentives - The Company has certain contracts with its satellite manufacturers that require the Company to make incentive payments over the orbital design life of the satellites. The Company records the present value of such payments as a liability and capitalizes these costs in the cost of the satellite. Income taxes - The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities and net operating loss carry-forwards using enacted rates. Valuation allowances are provided against assets that are not likely to be realized. Net earnings (loss) per share - Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average ordinary shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if options issued under New Skies stock option plans were exercised. In 2002, the weighted average number of shares outstanding was 130.3 million. Due to the net loss in that year, approximately 307,000 incremental common shares relating to outstanding dilutive stock options have been excluded from the calculation of diluted earnings per share due to their anti-dilutive effect. A summary of the weighted average number of shares and incremental shares used in the calculation of earnings per share for 2001 and 2000 follows: Years ended December 31 (in thousands) --------------------------- 2001 2000 ------------- ------------ Basic weighted average shares outstanding 130,569 107,407 Weighted average incremental shares 141 691 ------------- ------------ Adjusted weighted average shares outstanding 130,710 108,098 ============= ============ The difference in the weighted average number of shares outstanding and the adjusted weighted average number of shares outstanding resulted in no difference between basic and diluted earnings per share for 2001 and 2000. Stock Compensation - SFAS No. 123, Accounting for Stock-Based Compensation, encourages but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. For periods through December 31, 2002 the Company has chosen to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued to Employees, and related interpretations and has adopted the disclosure-only provisions of SFAS No. 123. Accordingly, compensation cost for stock options is measured as the excess, if any, of the estimated fair market value of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. Effective January 1, 2003 the Company will record compensation cost for options and other forms of stock-based compensation issued subsequent to that date. See Note 10. Fair Value of Financial Instruments - The Company's financial instruments consist of accounts receivable, accounts payable, short-term debt and satellite performance incentives. The current carrying amounts of such instruments are considered reasonable estimates of the fair market value of these instruments due to the short maturity of these items or as a result of the current market interest rates accruing on these instruments. Comprehensive Income - Comprehensive income includes net income (loss) and translation adjustments that were recognized directly in equity. Translation adjustments of $4.8 million, $(2.4) million and $(2.9) million for the years ended December 31, 2002, 2001 and 2000, respectively, were incurred and consequently comprehensive income in these years is equal to $0.2 million, $30.6 million and $28.8 million, respectively. Recently Issued Accounting Standards - In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 establishes accounting standards for the recognition and measurement of legal obligations associated with the retirement of tangible long-lived assets and requires recognition of a liability for an asset retirement obligation in the period in which it is incurred. The provisions of this statement are effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company does not anticipate that the adoption of SFAS No. 143 will have a material impact on the consolidated financial statements. As of January 1, 2002 the Company adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement defines the accounting and reporting for the impairment and disposal of long-lived assets and is effective for the Company on January 1, 2002. Adopting SFAS No. 144 did not have a material impact on the consolidated financial statements. As of January 1, 2002, the Company adopted SFAS No. 145, Rescission of SFAS No. 4, 44, 64, Amendment of SFAS No. 13, and Technical Corrections. SFAS No. 4, which was amended by SFAS No. 64, required all gains and losses from the extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in Opinion No. 30 will now be used to classify those gains and losses. The provisions of this statement are effective for financial statements issued for fiscal years beginning after December 15, 2002. The Company does not anticipate that the adoption of SFAS No. 145 will have a material impact on the consolidated financial statements. As of January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets. This Statement eliminates goodwill amortization from the Consolidated Statement of Operations and requires an evaluation of goodwill for impairment upon adoption of this Statement, as well as subsequent evaluations on an annual basis, and more frequently if circumstances indicate a possible impairment. Upon adoption of SFAS No. 142, the Company performed a transitional impairment test on the goodwill resulting from the purchase of New Skies Networks Pty Limited (see Note 3). As a result of this impairment test, the Company recorded an impairment charge of $23.4 million, which is classified as a cumulative effect of a change in accounting principle. Changes in the carrying amount of goodwill were as follows: (in thousands of U.S. dollars) Balance at December 31, 2000 $ 26,135 Amortization (2,760) --------------- Balance at December 31, 2001 23,375 Impairment loss (23,375) --------------- Balance at December 31, 2002 $ - =============== The reconciliation of reported net (loss) income and earnings per share to adjusted net (loss) income and earnings per share for the years ended December 31, 2002, 2001 and 2000 was as follows:
(in thousands of U.S. dollars, except per share amounts) 2002 2001 2000 ------------------ ---------------- ----------------- Net (loss) income, as reported $ (4,645) $ 33,068 $ 31,674 Add: Goodwill amortization - 2,760 1,494 ------------------ ---------------- ----------------- Adjusted net (loss) income $ (4,645) $ 35,828 $ 33,168 ================== ================ ================= Basic and diluted earnings per share, as reported $ (0.04) $ 0.25 $ 0.29 Add: Goodwill amortization - 0.02 0.02 ------------------ ---------------- ----------------- Adjusted basic and diluted earnings per share $ (0.04) $ 0.27 $ 0.31 ================== ================ =================
Upon adoption of SFAS No. 142, the transition provisions of SFAS No. 141, Business Combinations, also became effective. These transition provisions specify criteria for determining whether an acquired intangible asset should be recognized separately from goodwill. Adopting SFAS No. 141 did not have a material impact on the consolidated financial statements. In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This statement defines the accounting and reporting for costs associated with exit or disposal activities and is effective for exit or disposal activities that are initiated after December 31, 2002. The Company does not anticipate that the adoption of SFAS No. 146 will have a material impact on the consolidated financial statements. In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. SFAS No. 148 establishes accounting standards for the transition from accounting for stock-based compensation to employees under the intrinsic value method under APB No. 25, Accounting for Stock Issued to Employees to the fair value based method as defined by SFAS No. 123, Accounting for Stock-Based Compensation. The statement provides three alternatives of transition, a prospective method, a modified prospective method and a retroactive restatement method. Upon adoption of the fair value method in 2003, the Company will utilize the prospective method provided by SFAS No. 148. In November 2002, the FASB issued Interpretation Number 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others ("FIN 45"). This interpretation requires certain disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for interim and annual periods after December 15, 2002. The adoption of FIN 45 did not have a material impact on our consolidated financial statements. In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities - an interpretation of ARB No. 51 ("FIN 46"). FIN 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for the first fiscal year or interim period beginning after June 15, 2003 to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. We do not anticipate that the adoption of FIN 46 will have a material impact on our consolidated financial statements. Presentation - Certain amounts reported in 2001 and 2000 have been reclassified to conform to the 2002 financial statement presentation. 3. Acquisition of a business On March 31, 2000, the Company acquired all of the outstanding shares of New Skies Networks Pty Limited (formerly AAPT Sat-Tel Pty Limited) for cash consideration of AUD $49.75 million ($30.5 million). New Skies Networks Pty Ltd is a system integrator and network service provider, operating six teleports in major Australian cities and providing Internet access services as well as tracking, telemetry and control services to satellite operators. The acquisition was accounted for as a purchase business combination. The results of New Skies Networks Pty Ltd operations have been included with those of the Company from March 31, 2000, the date of acquisition. The acquired assets and liabilities were valued at fair market value on the date of acquisition. The resulting goodwill amount was $27.6 million, and was being amortized over a period of 10 years. In implementing SFAS No. 142, Goodwill and Other Intangible Assets in 2002, the Company performed a transitional impairment test on its goodwill. As a result of this impairment test which now requires the primary evaluation to be performed on a discounted cash flow basis, the Company recorded an impairment charge of $23.4 million, which is classified as a cumulative effect of a change in accounting principle. The unaudited consolidated results of operations on a pro forma basis as though New Skies Networks Pty Ltd had been acquired as of the beginning of 2000 are as follows: Revenues $ 203,176,000 Net income 31,107,000 Earnings per share - basic and diluted 0.29 The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the New Skies Networks Pty Ltd acquisition been consummated as of the beginning of 2000, nor are they necessarily indicative of future operating results. 4. Communications, plant and other property Communications, plant and other property consisted of the following: (in thousands of U.S. dollars) December 31, 2002 2001 -------------------- ------------------ Spacecraft and launch costs $ 1,002,083 $ 884,259 Construction-in-progress 395,976 447,816 Communication support and other 71,547 59,657 Buildings 23,736 12,330 -------------------- ------------------ 1,493,342 1,404,062 Less: accumulated depreciation 435,223 517,818 -------------------- ------------------ Total $ 1,058,119 $ 886,244 ==================== ================== Construction-in-progress relates primarily to satellites under construction and related launch services. 5. Contractual commitments In further development and operation of the Company's global commercial communications satellite system, significant additional expenditures are anticipated. At December 31, 2002, the Company had a contract for the construction, development and launch of the NSS-8 satellite, and pending final acceptance of the NSS-6 satellite, future committed payments totaling $44.0 million and $42.2 million, for the years ending December 31, 2003 and 2004, respectively. Additional commitments on these satellite programs ("satellite performance incentives") totaling $40.0 million will fall due over the design lives of these satellites to the extent that they continue to operate successfully throughout this time. The Company has recorded a liability of $33.9 million at December 31, 2002 representing the present value, at a weighted average discount rate of 5.2 percent, of the remaining satellite performance incentive payments on the satellites which were in service at December 31, 2002 of $5.8 million, $5.9 million, $5.7 million, $3.9 million, $3.8 million and $15.4 million for payments to be made in the years ending December 31, 2003, 2004, 2005, 2006, 2007, and 2008 and thereafter, respectively. Commitments as of December 31, 2002 for future payments under operating leases primarily relating to telecommunication infrastructure and office facilities are as follows (in thousands of U.S. dollars): 2003 $ 15,038 2004 10,035 2005 2,122 2006 1,694 2007 1,281 2008 and thereafter 3,295 ----------------- Total commitments $ 33,465 ================= 6. Income Taxes The Company is currently in negotiations with the Dutch tax authorities to determine the fair value (tax basis) of the assets contributed by INTELSAT. While the final determination of the tax basis of these assets has not been agreed, we have made a preliminary valuation of these assets. The difference between the book and estimated tax bases of the contributed assets gives rise to a deferred tax asset, which approximated $15.6 million at December 1, 1998, the date of the Asset Transfer. To the extent that the final tax value of the contributed assets differs from this estimate, a corresponding adjustment will be made to the deferred tax asset and additional paid-in capital. The Company's provision for income taxes consists of the following:
(in thousands of U.S. dollars) 2002 2001 2000 ----------------- ---------------- ------------------ Current domestic $ 6,953 $ 16,032 $ 12,444 Current foreign 2,207 1,950 119 Deferred domestic 1,346 1,382 4,943 ----------------- ---------------- ------------------ Total income tax expense $ 10,506 $ 19,364 $ 17,506 ================= ================ ==================
The income tax expense is computed in the financial statements at 35.9 percent, 36.9 percent and 35.6 percent for the years ended December 31, 2002, 2001 and 2000, respectively, as compared with The Netherlands statutory rate of 34.5 percent for 2002 and 35 percent for 2001 and 2000. The Company's provision for income taxes differs from the statutory rate by 1.4 percent, 1.9 percent and 0.6 percent for 2002, 2001 and 2000, respectively, due to the permanent differences arising from certain non-deductible amounts. Management believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets. The deferred tax asset as of December 31, 2002 and 2001 consists of the tax effect of the difference in the tax and book basis of communications, plant and other property. 7. Financing arrangements Available credit facility - The Company has an unsecured credit facility that provides up to $300 million in available credit through December 31, 2004. Borrowings under the facility bear interest at an adjustable rate, which as of December 31, 2002 is 1.9 percent. A commitment fee of 0.225 percent is paid on the unused revolving credit amount. As of December 31, 2002 $290 million of the facility was unused and amounts outstanding under this facility as of December 31, 2002 totaled $10 million. 8. Change in share capital In October 2002, the Supervisory Board authorized the purchase of up to 13 million ordinary shares. The Company purchased 5,194,030 shares in 2002 at an average cost of $3.72 per share. The acquired shares are recorded as "Treasury Stock" as a reduction of Shareholders' Equity. On June 28, 2000, the Shareholders of the Company approved a ten-for-one ordinary share split and a change in the currency denomination and par value of the Company's ordinary shares, from NLG 1.00 to (euro)0.05. The stock split has been given retroactive recognition in all periods presented in the accompanying financial statements. In addition, the Shareholders approved the increase in the number of authorized ordinary shares to 204,777,000 with a par value of (euro)0.05. As a result of this change, $413,000 originally classified as ordinary shares was reclassified as additional paid-in capital. In addition, on June 28, 2000, the Shareholders authorized the issuance of one class of preferred financing shares, par value (euro)0.05 per share, with a total authorized amount of 22,753,000 shares. No shares of preferred stock have been issued. The Shareholders also authorized on June 28, 2000 the issuance of up to 227,530,000 governance preference shares at a par value of (euro)0.05 per share. The Shareholders also approved in the Shareholders Meeting on the same date an option right to an independent foundation (the "Foundation") to purchase governance preference shares. Under this option, if certain preconditions are satisfied, the Foundation may acquire up to the number of then outstanding ordinary and financing preference shares at the time of the purchase, less one. The shares will be issued at par upon a payment of 25 percent of the par value. The object of the Foundation is to own and vote the Company's preference shares in order to protect the interests of the Company and its ordinary shareholders. No governance preference shares have been issued. 9. Significant customers Certain shareholders are the principal customers of the Company. These shareholders accounted for approximately 54 percent, 49 percent and 60 percent of total revenues for years ended December 31, 2002, 2001 and 2000, respectively. The Company has one customer in 2002 representing more than 10 percent of revenues. This significant customer represented 19 percent, 15 percent and 15 percent of total revenues for the years ended December 31, 2002, 2001 and 2000, respectively. In 2000, the Company had a further significant customer representing more than 10 percent of revenues that accounted for 13 percent of total revenues for that year. The Company has no other unusual credit risks or concentrations. 10. Retirement and incentive plans Defined contribution plan - The Company has defined contribution plans for substantially all Company employees. The Company matches a portion of the employee contribution. Total compensation expense related to the defined contribution plans approximated $1,097,000, $1,079,000 and $733,000 for the years ended December 31, 2002, 2001 and 2000, respectively. Executive incentive plan - In 1998, the Company executed a long-term incentive plan (the "Executive Plan") with the chief executive officer of the company at that time. Under the Executive Plan, the individual was entitled to receive ordinary shares of the Company if an initial public offering ("IPO") of the Company's stock or a private transaction involving no less than 20 percent of the common shares of the Company (collectively, the "Equity Transaction") was completed prior to August 1, 2002. The number of shares awarded under the Executive Plan was to be dependent upon the fair market value of the Company on the date of the Equity Transaction. On October 10, 2000, the Company successfully completed its IPO and the individual was granted 155,556 ordinary shares valued at $9.00 per ordinary share. Under the terms of the Executive Plan, the Company also paid an additional $0.9 million relating to the tax liability due on this award. One third of the awarded shares vested on the date of the Equity Transaction and the remaining shares vested in two equal installments ending on December 31, 2001. The total compensation awarded in relation to the Executive Plan was $2.3 million. The Company recognized $1,069,000 and $1,124,000 of compensation expense for the years ended December 31, 2001 and 2000, respectively, under the Executive Plan. Stock option plans - The Supervisory Board of Directors adopted the 1999 Stock Option Plan as amended ("Stock Plan") effective January 1, 1999. The Supervisory Board can administer the Stock Plan itself or through a committee of the Supervisory Board or can appoint a foundation to administer the plan. At no time can the number of options issued under the Stock Plan exceed 10 percent of the issued common stock of the Company unless the Board amends the Stock Plan. All grants under the plan, including option grants and incentive stock plan grants, are subject to an aggregate limitation, which was increased in 2002 to a total of 13,057,024 ordinary shares representing 10 percent of the issued ordinary shares as of the date of the amendment. As of December 31, 2002, the total number of shares available for grant was 5,600,291. The Board utilized independent valuations performed by KPMG Corporate Finance in establishing the estimated fair value of the common shares underlying each of the options that have been granted under the Stock Plan in the period prior to the Company's IPO in 2000. Options granted subsequent to the IPO were based on the fair market value at the date of grant. The options have a maximum term of 10 years. All options vest in 3 equal annual installments. The Supervisory Board has also approved the Stock Option Plan for the Supervisory Board, as amended (the "Directors Plan"). The terms of the Directors Plan are similar to those of the 1999 Stock Option Plan. The options have a term of ten years and vest ratably in three equal installments annually from the date of grant. At December 31, 1999, options to acquire 227,930 common shares were granted under the Directors Plan and were approved by the shareholders at the annual meeting on June 28, 2000. Substantially all of the options that were awarded were for prior service on the Supervisory Board. As such, these awards vest as if they had been issued during 1998 and 1999. At the annual meeting of shareholders in the years 2002, 2001 and 2000, the shareholders approved further grants to members of the Supervisory Board of 46,450 options, 89,659 options and 21,570 options, respectively. The following table presents a summary of the Company's share option activity and related information for the years ended December 31, 2002, 2001 and 2000: Weighted Options Average Outstanding Exercise Price ------------------ ---------------- Outstanding, January 1, 2000 2,291,290 $ 7.50 Granted 1,373,400 10.03 Exercised - - Forfeited (123,650) 8.40 ------------------ ---------------- Outstanding, December 31, 2000 3,541,040 8.45 Granted 1,534,849 9.02 Exercised (8,905) 7.50 Forfeited (162,682) 9.14 ------------------ ---------------- Outstanding, December 31, 2001 4,904,302 8.61 Granted 2,525,847 4.95 Exercised - - Forfeited (519,520) 7.77 ------------------ ---------------- Outstanding, December 31, 2002 6,910,629 $ 7.35 ================== ================ Additional information regarding options outstanding at December 31, 2002 is as follows:
Options Outstanding ------------------------------------------------------------------------------------------------------------- Range of Number Weighted Average Number Exercise Prices per share Outstanding Remaining Contractual Exercisable Life (years) ----------------------------- -------------------- ------------------------- --------------------- $ 3.50 - $ 5.00 2,350,097 9.2 - $ 5.01 - $ 6.50 58,750 9.3 - $ 6.51 - $ 8.00 2,272,649 6.3 2,169,150 $ 8.01 - $ 9.50 1,475,401 7.9 585,049 $ 9.51 - $11.00 753,732 7.3 470,303
The Company records compensation related to stock options using the intrinsic value method prescribed by APB No. 25, Accounting for Stock Issued to Employees, and related interpretations. Certain options awarded during 1999 and 2000 were considered to be granted below fair market value according to an independent valuation report prepared by KPMG Corporate Finance and received subsequent to the granting of these options. Prior to the receipt of this report, an earlier independent valuation report had been used to determine the exercise price of options granted. In addition, certain other option awards required shareholder ratification by which time the market value of the shares had changed. The difference in value at the grant date for such option awards and the subsequent determined market value was required to be accounted for as compensation. As of December 31, 2001 and 2000, $352,000 and $871,000, respectively, of such compensation was considered unearned and is being amortized over the remaining vesting period of the related options. The amount of unearned compensation amortized to income in 2002, 2001 and 2000 under the Stock Option Plans was approximately $352,000, $473,000 and $944,000, respectively. The Company has adopted the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 defines a fair value method of accounting for stock-based compensation awards to employees and non-employees. SFAS No. 123 requires that the fair value of stock-based awards to employees be calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company's stock option awards. These models also require subjective assumptions, which greatly affect the calculated values. The fair value of the stock option grants has been estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions: 2002 2001 2000 ------------- ------------ -------------- Expected life 5 years 5 years 5 years Interest rate 3.75% 4.5% 5.75% Volatility 40% 30% 25% Assumed forfeitures 10% 10% 10% The weighted average fair value of stock options granted during 2002, 2001 and 2000 was $2.01, $3.14 and $4.22, respectively. Had compensation expense for the stock option plans been determined consistent with SFAS No. 123, the Company's pro forma net income (loss) and net income (loss) per share would have been as follows:
2002 2001 2000 -------------------- ----------------- ------------------- Net income (loss): As reported $ (4,645,000) $ 33,068,000 $ 31,674,000 Pro forma (9,074,000) 28,371,000 29,236,000 Basic and diluted net income (loss) per share: As reported $ (0.04) $ 0.25 $ 0.29 Pro forma (0.07) 0.22 0.27
Effective January 1, 2003, the Company will record compensation cost for stock options and other forms of stock-based compensation issued subsequent to that date in accordance with SFAS No. 123. (See Note 2). Incentive stock plan - In 2002, the members of the Management Board were awarded rights to acquire an aggregate of 233,736 ordinary shares. These rights are similar to restricted stock grants which entitle (and require) the individual to purchase the shares specified in the grant at a price per share equal to the nominal value ((euro)0.05). The purchase of shares under each grant is to be settled in three equal installments within 30 days of the designated settlement dates, which generally are the first, second and third anniversary of the date of grant. The Management Board grants are governed by a plan administered by the Supervisory Board. All grants under the plan are subject to the aggregate limitation that was raised in 2002 to a total of 13,057,024 ordinary shares. Grants may be extinguished under certain limited circumstances if the individual recipient ceases to be an employee of the Company. In 2002, the shareholders also approved the grant to the members of the Supervisory Board of the rights to acquire an aggregate of 18,583 ordinary shares, with similar entitlements and obligations as the rights granted to the Management Board as described above. The Supervisory Board grants are governed by a plan administered by the Company's Compliance Officer. The fair value of the restricted stock grants made to the Management Board and Supervisory Board members in 2002 was $1,237,000 and $101,000, respectively. At December 31, 2002 $685,000 of such compensation was considered unearned and is being amortized over the remaining vesting period of these grants. The amount of unearned compensation amortized to income in 2002 under the Incentive Stock Plan was $653,000. 11. Business segments and geographic information The Company monitors its operations as a single enterprise and therefore believes that it has one operating segment, which is telecommunication satellite services. The geographic source of revenues, based on the billing addresses of customers, for the years ended December 31 is as follows:
(in thousands of U.S. dollars) 2002 2001 2000 ------------------ ----------------- -------------------- North America $ 74,861 $ 72,043 $ 73,181 Europe 41,407 48,795 57,871 Asia Pacific 16,069 17,906 20,663 Latin America 24,577 34,094 27,827 India, Middle East and Africa 43,610 36,190 18,752 ------------------ ----------------- -------------------- Total $ 200,524 $ 209,028 $ 198,294 ================== ================= ====================
The Company's satellites are in geosynchronous orbit, and consequently are not attributable to any geographic location. Of the remaining assets, substantially all are located in Europe. EX-1 3 newskies20fex1_6-16.txt STATUTEN VAN NEW SKIES SATELLITES N.V. GEVESTIGD TE AMSTERDAM PER 24 AUGUSTUS 2000 Naam en zetel. Artikel 1. 1.1. De vennootschap is genaamd: New Skies Satellites N.V. (de "Vennootschap"). 1.2. De Vennootschap is gevestigd te Amsterdam. 1.3. De Vennootschap kan, bij besluit van de Raad van Bestuur, zowel in het binnenland als in het buitenland kantoren en filialen oprichten. Doel. Artikel 2. 2.1. De Vennootschap heeft ten doel het zich bezig te houden met de planning, ontwikkeling, opbouw, eigendom en exploitatie van een wereldwijd satellietcommunicatiesysteem; overeenkomsten aan te gaan voor de ontwikkeling, bouw en exploitatie van ruimtevaartuigen, lanceerapparatuur en satellietcontrolecentra; het verkrijgen van de nodige materiele faciliteiten, uitrusting en apparatuur voor haar operaties; het verstrekken van diensten aan INTELSAT in overeenstemming met de Ensured Capacity Rights Agreement tussen INTELSAT en de Vennootschap en alle opvolgende overeenkomsten of verwante overeenkomsten; het deelnemen in verschillende segmenten van de omroep-, telecommunicatie- en informatiedienstenmarkten; het verstrekken van multimediadiensten per satelliet; de marketing danwel het organiseren van de marketing van alle diensten die zij verstrekt; het verrichten van onderzoek en ontwikkeling in verband hiermee; en zich bezig te houden met alle andere activiteiten van commerciele, industriele of financiele aard, met inbegrip van het oprichten van en het participeren in andere ondernemingen, voor eigen rekening van de Vennootschap, of voor rekening van, of met medewerking van, of in samenwerking met, derden. 2.2. De Vennootschap kan de financiering organiseren en kan leningen aangaan en zekerheden verstrekken voor haar leningen en verplichtingen, alsmede voor leningen en verplichtingen van vennootschappen waarin zijzelf of met haar verbonden groepsmaatschappijen of dochtermaatschappijen de zeggenschap hebben, en alle activiteiten die bedoeld of bevorderlijk zijn voor de verwezenlijking van doeleinden vermeld in dit artikel 2. Duur. Artikel 3. De Vennootschap is aangegaan voor onbepaalde tijd. Kapitaal en aandelen. Artikel 4. 4.1. Het maatschappelijk kapitaal van de vennootschap bedraagt tweeentwintig miljoen zevenhonderddrieenvijftigduizend euro (EUR 22.753.000,--), verdeeld in tweehonderdvier miljoen zevenhonderdzevenenzeventigduizend (204.777.000) gewone aandelen van vijf euro cent (EUR 0,05) elk, tweeentwintig miljoen zevenhonderddrieenvijftigduizend (22.753.000) financieringspreferente aandelen van vijf euro cent (EUR 0,05) elk, en tweehonderdzevenentwintig miljoen vijfhonderddertigduizend (227.530.000) beschermingsaandelen van vijf euro cent (EUR 0,05) elk. 4.2. Waar in deze statuten gesproken wordt van aandelen en aandeelhouders, zijn daaronder de gewone aandelen, de financieringspreferente aandelen en de beschermingsaandelen, respectievelijk de houders van gewone aandelen, de houders van financieringspreferente aandelen en de houders van beschermingsaandelen begrepen, tenzij het tegendeel uitdrukkelijk blijkt. Waar in deze statuten gesproken wordt van gewone aandelen, zijn daaronder gewone aandelen aan toonder en gewone aandelen op naam begrepen, tenzij het tegendeel uitdrukkelijk blijkt. 4.3. De Vennootschap kan meewerken aan de uitgifte van certificaten van aandelen voor aandelen in haar aandelenkapitaal, op voorwaarde dat houders van dergelijke certificaten gerechtigd zijn instructie te geven aan de houder(s) van de corresponderende aandelen om de daaraan verbonden stemrechten uit te oefenen of een volmacht te verkrijgen om het stemrecht uit te oefenen. Uitgifte van aandelen. Artikel 5. 5.1. De algemene vergadering van aandeelhouders, (hierna te noemen: de "Algemene Vergadering van Aandeelhouders") is bevoegd tot uitgifte van aandelen te besluiten, doch slechts op voorstel van en tegen een prijs en de verdere voorwaarden vastgesteld door de Raad van Bestuur. Daarnaast kan de Algemene Vergadering van Aandeelhouders de Raad van Bestuur aanwijzen als het orgaan dat bevoegd is tot verdere uitgifte van aandelen te besluiten, zulks met inachtneming van artikel 20, letter a. Zolang en, ingeval van een delegatie voor een beperkt aantal aandelen, voor zover de delegatie aan de Raad van Bestuur van kracht is, is de Algemene Vergadering van Aandeelhouders niet bevoegd tot verdere uitgifte van aandelen te besluiten. Een voorafgaand of gelijktijdig goedkeuringsbesluit van elke groep houders van aandelen van een zelfde soort, aan wier rechten de uitgifte of delegatie afbreuk doet, is vereist voor de geldigheid van een besluit van de algemene vergadering tot uitgifte van aandelen of tot delegatie van de Raad van Bestuur. 5.2. Ingeval de bevoegdheid tot uitgifte van aandelen aan de Raad van Bestuur werd gedelegeerd, stelt de Raad van Bestuur de prijs en de verdere voorwaarden van uitgifte vast, rekening houdend met de wettelijke en statutaire bepalingen in verband daarmee. Elke handeling van de Raad van Bestuur in verband hiermee geschiedt met inachtneming van het bepaalde in artikel 20. 5.3. Een delegatie aan de Raad van Bestuur van de bevoegdheid tot uitgifte van aandelen zal geschieden in overeenstemming met de wet en de statuten. Het besluit betreffende de delegatie vermeldt het maximum aantal aandelen dat kan worden uitgegeven en de duur ervan, die niet langer dan vijf (5) jaar zal zijn. De Algemene Vergadering van Aandeelhouders kan de delegatie van tijd tot tijd verlengen voor een periode van ten hoogste vijf (5) jaar voor elke verlenging. De delegatie kan niet worden herroepen tenzij het besluit betreffende de delegatie anders bepaalt. 5.4. Binnen acht dagen nadat de Algemene Vergadering van Aandeelhouders een besluit heeft genomen tot uitgifte van aandelen of een besluit heeft genomen tot delegatie van deze bevoegdheid aan de Raad van Bestuur zoals voorzien in lid 1, legt de Raad van Bestuur de volledige tekst van een dergelijk besluit neer ten kantore van het handelsregister van de Kamer van Koophandel waar de vennootschap haar hoofdvestiging heeft. Binnen acht dagen na iedere uitgifte van aandelen doet de Raad van Bestuur hiervan mededeling aan het handelsregister, met vermelding van het aantal uitgegeven aandelen. 5.5. De leden 1 tot en met 4 zijn van overeenkomstige toepassing op het verlenen van rechten tot het nemen van aandelen maar zijn niet van toepassing op de uitgifte van aandelen aan iemand die een voordien verkregen recht tot het nemen van aandelen uitoefent. 5.6. Indien de bevoegdheid tot uitgifte van aandelen aan de Raad van Bestuur is gedelegeerd en beschermingsaandelen worden uitgegeven, daaronder begrepen het verlenen van rechten tot het nemen van beschermingsaandelen doch niet het uitgeven van aandelen ingevolge het uitoefenen van het recht tot het nemen van aandelen: a. is de Raad van Bestuur verplicht een Algemene Vergadering van Aandeelhouders bijeen te roepen binnen vier weken na een dergelijke uitgifte, in welke vergadering de redenen voor de uitgifte worden toegelicht, tenzij een dergelijke toelichting reeds is gegeven in een Algemene Vergadering van Aandeelhouders welke gehouden is voorafgaand aan de uitgifte; b. is de voorafgaande goedkeuring van de Algemene Vergadering van Aandeelhouders vereist voor het specifieke geval, indien (i) ten gevolge van een dergelijke uitgifte en/of (ii) tengevolge van een eerdere uitgifte van beschermingsaandelen door de Raad van Bestuur zonder dergelijke goedkeuring of andere medewerking van de Algemene Vergadering van Aandeelhouders, op een zodanig aantal beschermingsaandelen kan worden ingeschreven en/of een zodanig aantal wordt uitgegeven, dat het totaal van de nominale waarde van de beschermingsaandelen dat is uitgegeven zonder genoemde goedkeuring of andere medewerking van de Algemene Vergadering van Aandeelhouders, hoger is dan honderd procent (100%) van de totale nominale waarde van de overige aandelen die waren uitgegeven voor een dergelijke uitgifte. 5.7. Indien beschermingsaandelen zijn geplaatst krachtens een besluit tot uitgifte van aandelen, dan wel een besluit tot het verlenen van een recht tot het nemen van aandelen, genomen door de Raad van Bestuur zonder de voorafgaande goedkeuring of andere medewerking van de Algemene Vergadering van Aandeelhouders, is de Raad van Bestuur verplicht een Algemene Vergadering van Aandeelhouders bijeen te roepen binnen twee jaren na die plaatsing en daarin een voorstel te doen omtrent inkoop casu quo intrekking van bedoelde geplaatste beschermingsaandelen. Indien in die vergadering niet het besluit wordt genomen dat strekt tot inkoop casu quo intrekking van de beschermingsaandelen is de Raad van Bestuur verplicht telkens binnen twee jaar nadat vorenbedoeld voorstel aan de orde is gesteld, wederom een Algemene Vergadering van Aandeelhouders bijeen te roepen waarin een zodanig voorstel opnieuw wordt gedaan, welke verplichting er niet meer is indien de bedoelde aandelen niet langer zijn geplaatst casu quo niet langer door een ander dan de vennootschap worden gehouden. 5.8. De delegatie aan de Raad van Bestuur van de bevoegdheid tot uitgifte van aandelen heeft geen invloed op de bevoegdheid van de Algemene Vergadering van Aandeelhouders om dividenden op aandelen van de Vennootschap uit te keren, zoals genoemd in artikel 29 van deze statuten. 5.9. Onverminderd het bepaalde in artikel 2:80, lid 2, Burgerlijk Wetboek, worden aandelen nimmer beneden pari uitgegeven. 5.10. Gewone aandelen en financieringspreferente aandelen worden slechts tegen volstorting uitgegeven. Beschermingsaandelen kunnen tegen gedeeltelijke volstorting worden uitgegeven, met dien verstande, dat (a) het verplicht te storten gedeelte van het nominale bedrag voor elk beschermingsaandeel - ongeacht wanneer het is uitgegeven - gelijk moet zijn; en (b) bij het nemen van een aandeel ten minste een/vierde (1/4) van het nominale bedrag moet worden gestort. 5.11. Onder goedkeuring van de Raad van Commissarissen kan de Raad van Bestuur besluiten op welke dag en tot welk bedrag verdere storting op niet volgestorte beschermingsaandelen moet zijn geschied. De Raad van Bestuur geeft van zodanig besluit onverwijld kennis aan de houders van beschermingsaandelen; tussen die kennisgeving en de dag waarop de storting moet zijn geschied dienen ten minste dertig dagen te liggen. 5.12. Storting moet in geld geschieden voor zover niet een andere inbreng is overeengekomen. Storting in geld moet in euro geschieden, tenzij de Vennootschap toestemt in storting in vreemd geld. Met storting in vreemd geld wordt aan de stortingsplicht voldaan voor het bedrag waartegen het gestorte bedrag vrijelijk in euro's kan worden omgewisseld. Bepalend is de wisselkoers op de dag van storting, dan wel na toepassing van de volgende zin op de daar bedoelde dag. De Vennootschap kan storting verlangen tegen de wisselkoers op een bepaalde dag binnen twee maanden voor de laatste dag waarop moet worden gestort mits de aandelen of certificaten daarvan onverwijld na de uitgifte zullen worden opgenomen in de prijscourant van een beurs buiten Nederland. 5.13. Aandelen worden uitgegeven bij notariele akte, indien wettelijk vereist, overeenkomstig de desbetreffende wettelijke bepalingen. 5.14. Behoudens voorafgaande goedkeuring van de Raad van Commissarissen, is de Raad van Bestuur uitdrukkelijk gemachtigd rechtshandelingen te verrichten zoals bedoeld in artikel 2:94, Burgerlijk Wetboek, zonder voorafgaande goedkeuring van de Algemene Vergadering van Aandeelhouders. 5.15. In deze statuten wordt de bevoegdheid om tot honderdeenentachtig miljoen vijfhonderdtwaalfduizend (181.512.000) gewone aandelen, tweeentwintig miljoen zevenhonderddrieenvijftigduizend (22.753.000) financieringspreferente aandelen en tweehonderdzevenentwintig miljoen vijfhonderddertigduizend (227.530.000) beschermingsaandelen uit te geven, gedelegeerd aan de Raad van Bestuur, behoudens goedkeuring overeenkomstig artikel 20 van deze statuten. Deze delegatie geldt voor periode van vijf jaar, met ingang van de dag van goedkeuring van de Algemene Vergadering van Aandeelhouders van deze gewijzigde statuten. Voorkeursrechten. Artikel 6. 6.1. Bij uitgifte van gewone aandelen, heeft iedere aandeelhouder een voorkeursrecht ten aanzien van de uit te geven gewone aandelen, naar evenredigheid van zijn of haar totale aantal gewone aandelen. Houders van beschermingsaandelen en houders van financieringspreferente aandelen hebben geen voorkeursrecht op aandelen die worden uitgegeven. Houders van gewone aandelen hebben geen voorkeursrecht op de uitgifte van beschermingsaandelen of financieringspreferente aandelen. Onverminderd de overige bepalingen in dit artikel bestaat geen voorkeursrecht op aandelen die worden uitgegeven tegen inbreng anders dan in geld of op aandelen die worden uitgegeven aan werknemers van de Vennootschap of van een groepsmaatschappij (in deze statuten wordt onder een groep verstaan een economische eenheid waarin rechtspersonen en vennootschappen organisatorisch zijn verbonden. Groepsmaatschappijen zijn rechtspersonen en vennootschappen die met elkaar in een groep zijn verbonden). Voorkeursrechten zijn overdraagbaar zonder enige beperking. 6.2. De Algemene Vergadering van Aandeelhouders, of de Raad van Bestuur in voorkomend geval, bepaalt bij het nemen van het besluit tot uitgifte van aandelen op welke wijze en binnen welk tijdvak het voorkeursrecht kan worden uitgeoefend. 6.3. De Vennootschap kondigt de uitgifte van aandelen waarop een voorkeursrecht rust en het tijdvak waarbinnen dergelijk recht mag worden uitgeoefend, aan in de Staatscourant en op de wijze als bepaald in artikel 22, lid 5 van deze statuten. 6.4. Eventuele voorkeursrechten kunnen worden uitgeoefend binnen een periode van ten minste twee weken na de datum van de aankondiging van de uitgifte van aandelen waarop een voorkeursrecht rust. 6.5. Het voorkeursrecht kan worden beperkt of uitgesloten bij besluit van de Algemene Vergadering van Aandeelhouders. Met inachtneming van artikel 20, letter a kan de Algemene Vergadering van Aandeelhouders de bevoegdheid tot beperking of uitsluiting van het voorkeursrecht delegeren aan de Raad van Bestuur voorzover zij ook de bevoegdheid heeft gedelegeerd aan de Raad van Bestuur om aandelen uit te geven. Indien en, ingeval van een gedeeltelijke delegatie, voorzover de Raad van Bestuur is gemachtigd de voorkeursrechten te beperken of uit te sluiten kan de Raad van Bestuur bij besluit alle voorkeursrechten waartoe aandeelhouders gerechtigd zouden kunnen zijn beperken of uitsluiten, met inachtneming van eventuele beperkingen zoals opgenomen in het delegatiebesluit. Het besluit waarbij aan de Raad van Bestuur de bevoegdheid om het voorkeursrecht te beperken of uit te sluiten wordt gedelegeerd, vermeldt de duur van delegatie, die ten hoogste vijf (5) jaar beloopt. De Algemene Vergadering van Aandeelhouders kan de delegatie van tijd tot tijd verlengen, telkens voor een periode van ten hoogste vijf (5) jaar. De delegatie kan niet worden herroepen tenzij het besluit betreffende de delegatie anders bepaalt. 6.6. Ieder voorstel aan de Algemene Vergadering van Aandeelhouders om de voorkeursrechten te beperken of uit te sluiten vermeld de redenen daarvoor en de redenen voor de beoogde uitgiftekoers. 6.7. Voor een besluit van de Algemene Vergadering van Aandeelhouders om het voorkeursrecht uit te sluiten of te beperken of om deze bevoegdheid aan de Raad van Bestuur te delegeren overeenkomstig het vijfde lid van dit artikel, is een meerderheid van tenminste twee/derde van de uitgebrachte stemmen vereist, indien op de Algemene Vergadering van Aandeelhouders minder dan de helft van het geplaatste kapitaal aanwezig of vertegenwoordigd is. 6.8. De Raad van Bestuur legt binnen acht dagen na een besluit tot uitsluiting of beperking van het voorkeursrecht of tot delegatie aan de Raad van Bestuur zoals vermeld in lid 5 van dit artikel een volledige tekst daarvan neer ten kantore van het handelsregister. 6.9. Dit artikel 6 is van toepassing wanneer rechten tot het nemen van aandelen worden verleend, doch is niet van toepassing op het uitgeven van aandelen aan iemand die een voordien reeds verkregen recht tot het nemen van aandelen uitoefent, in welk geval geen voorkeursrecht bestaat. 6.10. In deze statuten wordt de bevoegdheid om het voorkeursrecht uit te sluiten of te beperken met betrekking tot alle aandelen vermeld in lid 15 van artikel 5 gedelegeerd aan de Raad van Bestuur voor een aanvankelijke periode van vijf jaar, met ingang van de dag van goedkeuring van deze gewijzigde statuten door de Algemene Vergadering van Aandeelhouders. Verkrijging en vervreemding door de Vennootschap van eigen aandelen. Artikel 7. 7.1. De Vennootschap is bevoegd volgestorte aandelen in haar eigen kapitaal om niet te verkrijgen. De Vennootschap is eveneens bevoegd volgestorte aandelen in haar eigen kapitaal onder bezwarende titel te verkrijgen indien aan de hiernavolgende voorwaarden is voldaan: a. de Algemene Vergadering van Aandeelhouders heeft de Raad van Bestuur tot dergelijke verkrijging gemachtigd en de machtiging (die slechts voor ten hoogste achttien maanden geldig is) bepaalt het aantal aandelen dat kan worden verworven, de wijze waarop deze kunnen worden verworven en tussen welke grenzen de prijs moet liggen; b. het eigen vermogen van de Vennootschap, verminderd met de verkrijgingsprijs, is niet kleiner dan de som van het gestorte en opgevraagde deel van het aandelenkapitaal vermeerderd met de reserves die krachtens de wet of deze statuten moeten worden aangehouden; en c. de som van de nominale waarde van de te verkrijgen aandelen en van de aandelen in haar kapitaal die de Vennootschap reeds houdt, die de Vennootschap houdt als pandhouder of die worden gehouden door een dochtermaatschappij, bedraagt niet meer dan een/tiende van het totale nominale bedrag van het geplaatste kapitaal; onverminderd het overigens in de wet of deze statuten bepaalde. 7.2. Voor het bepaalde onder (b) is bepalend de grootte van het eigen vermogen van de Vennootschap volgens de laatste vastgestelde balans, verminderd met de verkrijgingsprijs voor aandelen in het aandelenkapitaal van de Vennootschap en uitkeringen ten laste van winst of reserves aan anderen, die zij en haar dochtermaatschappijen na de balansdatum verschuldigd werden. Is een boekjaar meer dan zes maanden verstreken zonder dat de jaarrekening is vastgesteld, dan is de verkrijging overeenkomstig het eerste lid niet toegestaan. 7.3. Elke verkrijging door de Vennootschap van niet volgestorte aandelen is nietig. 7.4. De Vennootschap kan aandelen die zij heeft verkregen in overeenstemming met dit artikel vervreemden. 7.5. Indien certificaten van aandelen zijn uitgegeven worden deze voor de toepassing van de leden 1 en 4 beschouwd als aandelen. 7.6. Bij de vaststelling in hoeverre de aandeelhouders stemmen, aanwezig of vertegenwoordigd zijn, of in hoeverre het aandelenkapitaal wordt verschaft of vertegenwoordigd is, wordt geen rekening gehouden met aandelen waarvan de wet of de statuten bepaalt dat daarvoor geen stem kan worden uitgebracht. Vermindering van het geplaatste kapitaal. Intrekking van aandelen. Artikel 8. 8.1. De Algemene Vergadering van Aandeelhouders kan met inachtneming van het bepaalde in artikel 2:99 Burgerlijk Wetboek, op voorstel van de Raad van Commissarissen, besluiten tot vermindering van het geplaatste kapitaal door intrekking van aandelen of door de nominale waarde van de aandelen bij statutenwijziging te verminderen. In dit besluit moeten de aandelen waarop het besluit betrekking heeft, worden vermeld en moet de wijze van uitvoering van het besluit zijn geregeld. Intrekking met terugbetaling van aandelen dan wel gedeeltelijke terugbetaling op aandelen of ontheffing van de verplichting tot storting als bedoeld in artikel 2:99 Burgerlijk Wetboek, kan ook plaatsvinden uitsluitend ten aanzien van gewone aandelen dan wel uitsluitend ten aanzien van beschermingsaandelen dan wel uitsluitend ten aanzien van financieringspreferente aandelen. Een gedeeltelijke terugbetaling of ontheffing is slechts mogelijk ter uitvoering van een besluit tot vermindering van het bedrag van de aandelen en moet naar evenredigheid op alle betrokken aandelen geschieden. Van het vereiste van evenredigheid mag worden afgeweken met instemming van alle betrokken aandeelhouders. 8.2. Voor een besluit tot kapitaalvermindering is een meerderheid van tenminste twee/derde van de uitgebrachte stemmen vereist, indien minder dan de helft van het geplaatste kapitaal in de vergadering is vertegenwoordigd. 8.3. De oproeping tot een vergadering waarin een besluit zal worden genomen als bedoeld in dit artikel, vermeldt het doel van de kapitaalvermindering en de wijze waarop deze zal worden uitgevoerd. Het tweede, derde en vierde lid van artikel 2:123 Burgerlijk Wetboek, zijn van overeenkomstige toepassing. 8.4. De Vennootschap legt de besluiten als bedoeld in lid 1 van dit artikel neer ten kantore van het handelsregister van de Kamer van Koophandel en kondigt de neerlegging aan in een landelijk verspreid en in een internationaal verspreid financieel dagblad met internationale bekendheid, voor zover de wet dit vereist; het bepaalde in artikel 2:100, leden 2 tot en met 6 Burgerlijk Wetboek, is op de Vennootschap van toepassing. Aandelen en aandeelbewijzen. Artikel 9. 9.1. Gewone aandelen luiden op naam of aan toonder. Beschermingsaandelen en financieringspreferente aandelen luiden op naam. De aandelen zijn genummerd. Gewone aandelen op naam zijn doorlopend genummerd van 1 af. Beschermingsaandelen zijn doorlopend genummerd van G1 af. Financieringspreferente aandelen zijn doorlopend genummerd van F1 af. 9.2. De Raad van Bestuur kan bepalen dat voor gewone aandelen op naam aandeelbewijzen worden uitgegeven, in de coupures en in de vorm als bepaald door de Raad van Bestuur. Elk aandeelbewijs vermeldt het (de) nummer(s) van het aandeel of de aandelen waarvoor het werd uitgegeven. 9.3. Alle gewone aandelen aan toonder worden belichaamd in een aandeelbewijs. 9.4. Het gewone toonder aandeelbewijs wordt getekend door of namens een lid van de Raad van Bestuur. De Raad van Bestuur kan bepalen dat de handtekening een fascimile handtekening zal zijn en kan aan een of meer personen de bevoegdheid delegeren het aandeelbewijs namens de Vennootschap te tekenen. 9.5. De Vennootschap kent aan een rechthebbende een recht terzake van een gewoon aandeel aan toonder toe doordat (a) de vennootschap het Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. ("Necigef") in staat stelt een gewoon aandeel op het aandeelbewijs bij te (doen) schrijven; en (b) de rechthebbende een aangesloten instelling, als bedoeld in de Wet giraal effectenverkeer (hierna: "aangesloten instelling") aanwijst, die hem dienovereenkomstig als deelgenoot (hierna: "deelgenoot") in het verzameldepot, als bedoeld in de Wet giraal effectenverkeer, crediteert. De deelgenoten worden hierna ook aangeduid als houders van aandelen aan toonder en voor zover nodig worden zij ook als zodanig door de Vennootschap erkend. 9.6. Onverminderd het bepaalde in artikel 23, lid 7 van deze statuten is het beheer over het aandeelbewijs onherroepelijk opgedragen aan Necigef, en is Necigef onherroepelijk gevolmachtigd namens de rechthebbende(n) ter zake van de desbetreffende aandelen al het nodige te doen, waaronder aanvaarden en leveren, en namens de Vennootschap mede te werken aan bijschrijving op en afschrijving van het aandeelbewijs. 9.7. Indien een deelgenoot van de aangesloten instelling uitlevering wenst van een of meer gewone aandelen aan toonder tot ten hoogste een hoeveelheid waarvoor hij deelgenoot is, zullen, per het tijdstip van het kenbaar maken van vorenbedoelde wens, deze door deze deelgenoot gehouden gewone aandelen aan toonder worden omgezet in evenzoveel gewone aandelen op naam, en zal (a) Necigef de Vennootschap in staat stellen deze gewone aandelen van het aandeelbewijs te (doen) afschrijven, (b) de desbetreffende aangesloten instelling de rechthebbende dienovereenkomstig als deelgenoot in haar verzameldepot debiteren (c) Necigef bij akte deze gewone aandelen aan de gerechtigde toedelen door middel van een levering, (d) de Vennootschap de levering erkennen, en (e) de Raad van Bestuur van de Vennootschap de houder als houder van aandelen op naam in het aandeelhoudersregister (doen) inschrijven. De Vennootschap mag de aandeelhouder die zijn aandelen op naam of aan toonder doet stellen op grond van het bepaalde in dit lid of in lid 8 van dit artikel niet meer dan de kosten in rekening brengen. 9.8. Een aandeelhouder kan te allen tijde een of meer van zijn gewone aandelen op naam aan toonder doen stellen doordat (a) de rechthebbende die aandelen bij akte aan Necigef levert, (b) de Vennootschap de levering erkent, (c) Necigef de Vennootschap in staat stelt die aandelen op het aandeelbewijs bij te (doen) schrijven, (d) een door de rechthebbende aangewezen aangesloten instelling de rechthebbende dienovereenkomstig als deelgenoot in haar verzameldepot crediteert en (e) de Raad van Bestuur van de Vennootschap de rechthebbende als houder van die aandelen uit het aandeelhoudersregister (doet) uitschrijven. Voor omzetting van een aandeel op naam dat is verpand of waarop een recht van vruchtgebruik rust is voorafgaande schriftelijke goedkeuring van de pandhouder of de vruchtgebruiker vereist. 9.9. Indien aandeelbewijzen zijn uitgegeven voor aandelen op naam worden de aandeelbewijzen ondertekend door of namens een lid van de Raad van Bestuur namens de Vennootschap. De Raad van Bestuur kan bepalen dat de handtekening een facsimile handtekening zal zijn. Bovendien kunnen alle aandeelbewijzen geldig namens de Vennootschap worden ondertekend door een of meer te dien einde aangewezen personen. 9.10. Alle aandeelbewijzen worden gekentekend door nummers en/of letters. 9.11. De Raad van Bestuur kan bepalen dat met het oog op het verhandelen en de levering van aandelen op een buitenlandse effectenbeurs, aandeelbewijzen worden uitgegeven in een zodanige vorm als door de Raad van Bestuur bepaald zodat zij beantwoorden aan de vereisten van een dergelijke buitenlandse effectenbeurs. 9.12. Op schriftelijk verzoek door of namens een aandeelhouder en op verstrekking van genoegzaam bewijs door of namens die aandeelhouder met betrekking tot de eigendom daarvan, het verloren gegaan zijn van die eigendom, de diefstal, de beschadiging of vernietiging van de aandeelbewijzen, kunnen door de Vennootschap vervangende aandeelbewijzen worden uitgegeven voor die aandeelbewijzen die verloren zijn gegaan, werden gestolen, beschadigd of vernietigd. Iedere uitgifte van vervangende aandeelbewijzen is onderworpen aan de voorwaarden bepaald door de Raad van Bestuur, met inbegrip van, maar niet beperkt tot, vrijwaring van de Vennootschap. 9.13. De kosten van de uitgifte van vervangende aandeelbewijzen kunnen ten laste van de aanvrager worden gebracht. Door de uitgifte van vervangende aandeelbewijzen worden de originele aandeelbewijzen nietig en heeft de Vennootschap geen verdere verplichting met betrekking tot dergelijke originele aandeelbewijzen. Vervangende aandeelbewijzen dragen de nummers van de stukken die zij vervangen. Register van aandeelhouders. Artikel 10. 10.1. Met inachtneming van het in de wet bepaalde met betrekking tot aandelen op naam wordt door of namens de Vennootschap een aandelenregister gehouden. 10.2. De Raad van Bestuur is bevoegd het register uit meerdere exemplaren te laten bestaan en het op meerdere adressen te laten berusten. De Raad van Bestuur is ook bevoegd een deel van het register buiten Nederland te houden indien zulks vereist is om te voldoen aan toepasselijke buitenlandse wetgeving of de regels van een effectenbeurs waar de aandelen van de Vennootschap zijn genoteerd. 10.3. Het aandeelhoudersregister bevat de naam en het adres van iedere houder van een of meer aandelen op naam met vermelding van het op ieder aandeel gestorte bedrag alsmede de overige gegevens waarvan de wet aantekening eist, alsmede zodanige verdere gegevens als de directie wenselijk oordeelt. 10.4. De Raad van Bestuur bepaalt de vorm en inhoud van het register met inachtneming van het in de eerste drie leden van dit artikel bepaalde. 10.5. Iedere inschrijving in het register wordt getekend door een lid van de Raad van Bestuur of door een daartoe door de Raad van Bestuur gemachtigde persoon; het register wordt regelmatig bijgehouden. 10.6. De Raad van Bestuur verstrekt desgevraagd kosteloos aan de houders van aandelen op naam een uittreksel uit het register met betrekking tot hun rechten op een aandeel of, ter keuze van de Raad van Bestuur, ander schriftelijk bewijs van de inhoud van het register met betrekking tot de aandelen die op naam van de betreffende aandeelhouders staan. Het uittreksel of het andere bewijs wordt door een lid van de Raad van Bestuur of door een daartoe door de Raad van Bestuur gemachtigd persoon getekend. 10.7. De bepalingen van dit artikel met betrekking tot aandeelhouders zijn van overeenkomstige toepassing op houders van een recht van vruchtgebruik of een recht van pand op een of meer aandelen op naam. 10.8. De Raad van Bestuur en de Raad van Commissarissen zijn bevoegd autoriteiten te voorzien van informatie en gegevens uit het register van aandeelhouders, of het register ter inzage voor te leggen alsmede alle informatie te verschaffen die de Vennootschap bekend is met betrekking tot het direct of indirect houden van aandelen voor zover dit is vereist om te voldoen aan de wet of aan toepasselijke buitenlandse wet of regelgeving of regels van een effectenbeurs waar de aandelen van de Vennootschap zijn genoteerd. 10.9. Iedere aandeelhouder heeft het recht om na schriftelijk verzoek en met inachtneming van een redelijke termijn en gedurende normale werktijden, het aandeelhoudersregister en een lijst van de aandeelhouders van de Vennootschap en hun adressen en de aandelen die door hen worden gehouden in te zien en kopieen of uittreksels daarvan te maken met betrekking tot zijn eigen aandelen. Het verzoek dient gericht te zijn aan de leden van de Raad van Bestuur van de Vennootschap op het adres van de Vennootschap of het adres van haar hoofdvestiging. Levering van aandelen; Blokkeringsregeling voor beschermingsaandelen en financieringspreferente aandelen. Artikel 11. 11.1. De levering van aandelen op naam, de levering of beeindiging van een recht van vruchtgebruik op aandelen op naam, dan wel de vestiging of opheffing van een recht van vruchtgebruik of van een pandrecht op aandelen op naam dient te geschieden bij schriftelijke overeenkomst met inachtneming van het bepaalde in artikel 2:86, Burgerlijk Wetboek casu quo, indien van toepassing, artikel 2:86c, Burgerlijk Wetboek. Een levering van aandelen op naam waarvoor aandeelbewijzen zijn uitgegeven kan alleen plaatsvinden wanneer de betreffende aandeelbewijzen zijn ingeleverd bij de Vennootschap. De rechten verbonden aan een aandeel op naam mogen slechts worden uitgeoefend indien de Vennootschap partij is bij de transactie, of nadat: a. de Vennootschap de levering heeft erkend, of b. de akte aan de Vennootschap is betekend; of c. de Vennootschap op eigen initiatief de levering in haar aandelenregister heeft ingeschreven; voor elk geval overeenkomstig de betreffende wettelijke bepalingen. 11.2. Het in lid 1 van dit artikel bepaalde vindt overeenkomstige toepassing op (i) de toedeling van aandelen op naam bij verdeling van enige vorm van gemeenschap, (ii) de levering van een aandeel op naam als gevolg van executie van een pandrecht en (iii) het vestigen van beperkte zakelijke rechten op een aandeel op naam. 11.3. De indiening van verzoeken als bedoeld in de artikelen 9, 10 en dit artikel 11 dient te geschieden op een door de Raad van Bestuur aan te wijzen adres(sen). 11.4. De Vennootschap is gerechtigd door de Raad van Bestuur vast te stellen bedragen, zijnde ten hoogste de kostprijs, in rekening te brengen aan personen op wier verzoek handelingen worden verricht ingevolge en in overeenstemming met het bepaalde in de artikelen 9, 10 en dit artikel 11 tenzij deze statuten kosteloze voorziening voorschrijven. 11.5. Voor iedere levering van beschermingsaandelen of van financieringspreferente aandelen is voorafgaande goedkeuring door de Raad van Commissarissen vereist. De goedkeuring wordt schriftelijk verzocht en het verzoek vermeld de naam en het adres van de beoogde verkrijger, alsmede de prijs of andere tegenprestatie die de beoogde verkrijger bereid is te betalen of te geven. 11.6. Indien de goedkeuring wordt geweigerd, is de Raad van Commissarissen verplicht tegelijkertijd een of meer gegadigden aan te wijzen die bereid en in staat zijn al de aandelen, waarop het verzoek betrekking heeft, tegen contante betaling te kopen tegen een prijs, door de vervreemder en de Raad van Commissarissen binnen twee maanden na die aanwijzing in onderling overleg vast te stellen. 11.7. Indien de vervreemder niet binnen drie maanden na ontvangst door de Vennootschap van het verzoek tot goedkeuring van de voorgenomen overdracht van de Vennootschap een schriftelijke mededeling daaromtrent heeft ontvangen danwel een tijdige schriftelijke weigering tot goedkeuring niet tegelijkertijd vergezeld is gegaan van de aanwijzing van een of meer gegadigden als in lid 6 bedoeld, wordt de goedkeuring tot overdracht na verloop van genoemde periode respectievelijk na ontvangst van het bericht van weigering geacht te zijn verleend. 11.8. Indien binnen twee maanden na de weigering der goedkeuring geen overeenstemming tussen de vervreemder en de Raad van Commissarissen omtrent de in lid 6 bedoelde prijs is bereikt, zal deze prijs worden vastgesteld door een deskundige, aan te wijzen door de vervreemder en de Raad van Bestuur in onderling overleg of, bij gebreke van overeenstemming daaromtrent binnen drie maanden na de weigering der goedkeuring, door de voorzitter van de Kamer van Koophandel en Fabrieken van de plaats waar de vennootschap volgens deze statuten haar zetel heeft, op verzoek van de meest gerede partij. 11.9. De vervreemder zal het recht hebben van de overdracht af te zien, mits hij binnen een maand, nadat zowel de naam van de aangewezen gegadigde(n) alsook de vastgestelde prijs te zijner kennis zijn gebracht, hiervan schriftelijk mededeling doet aan de Raad van Bestuur. 11.10. In geval van goedkeuring tot overdracht in de zin van lid 5 of lid 7 is de vervreemder gerechtigd gedurende een periode van drie maanden na deze goedkeuring alle aandelen waarop zijn verzoek betrekking heeft over te dragen aan de in het verzoek genoemde verkrijger, tegen de door hem genoemde prijs of tegenprestatie bedoeld in lid 5 van dit artikel. 11.11. De aan de overdracht voor de Vennootschap verbonden kosten kunnen ten laste van de nieuwe verkrijger worden gebracht. Kwaliteitseisen voor het aandeelhouderschap. Artikel 12. (Vervallen) Artikel 13. (Vervallen) Bestuur. Artikel 14. 14.1. De Vennootschap heeft een Raad van Bestuur, bestaande uit een of meer leden. Het maximum aantal leden zal worden bepaald door de Raad van Commissarissen. 14.2. Met inachtneming van het maximum aantal leden van de Raad van Bestuur, zoals bepaald door de Raad van Commissarissen, zal de Algemene Vergadering van Aandeelhouders het aantal leden van de Raad van Bestuur bepalen en kan dit naderhand wijzigen. Een besluit tot vaststelling van het aantal leden van de Raad van Bestuur kan slechts worden genomen met een meerderheid van ten minste twee derden van de uitgebrachte stemmen, vertegenwoordigende ten minste vijftig procent (50%) van het geplaatste kapitaal, tenzij het voorstel daartoe, met goedkeuring van de Raad van Commissarissen, door de Raad van Bestuur is gedaan. In dat geval kan een zodanig besluit worden genomen met een meerderheid van de uitgebrachte stemmen. De Algemene Vergadering van Aandeelhouders kan bepalen dat de vaststelling of wijziging voor een bepaalde periode geschiedt of totdat zich een bepaalde gebeurtenis voordoet. 14.3. De Algemene Vergadering van Aandeelhouders benoemt leden van de Raad van Bestuur van een bindende lijst met tenminste twee kandidaten voor elke vacature, indien een dergelijke bindende lijst is voorgelegd. De lijst wordt opgesteld door de Raad van Commissarissen en vermeldt tenminste twee kandidaten voor elke vacature in volgorde van voorkeur van de Raad van Commissarissen. De lijst van kandidaten wordt uiterlijk twee weken voor de vergadering en tot de afloop van de vergadering, ten kantore van de Vennootschap ter inzage neergelegd voor de aandeelhouders en andere personen gerechtigd tot het bijwonen van de Algemene Vergadering van Aandeelhouders en -- in geval van een notering aan een effectenbeurs, NASDAQ of een soortgelijk systeem -- bij een bank of financiele instelling te vermelden in de oproeping tot de Algemene Vergadering van Aandeelhouders. 14.4. Voor elke Algemene Vergadering van Aandeelhouders bijeengeroepen voor de verkiezing van leden van de Raad van Bestuur, zijn aandeelhouders die ten tijde van de voordracht tenminste twee procent (2%) van de geplaatste en uitstaande aandelen in het kapitaal van de Vennootschap houden, gerechtigd kandidaten voor te dragen, welke voordrachten ten minste een week voor de vergadering in het bezit van de Vennootschap moeten zijn. Lid 6 van artikel 18 van deze statuten is van overeenkomstige toepassing. Indien de Raad van Commissarissen voor een of meer vacatures geen bindende voordracht heeft ingediend overeenkomstig lid 3 van dit artikel, staat het de Algemene Vergadering van Aandeelhouders vrij elke kandidaat voorgedragen overeenkomstig de procedure beschreven in de voorgaande twee zinnen, te benoemen bij absolute meerderheid. 14.5. Voor elke vacature waarvoor de Raad van Commissarissen een bindende voordracht heeft ingediend overeenkomstig lid 3 van dit artikel, worden de twee kandidaten onderworpen aan stemming, en wordt de kandidaat die de meerderheid van de stemmen verkrijgt, benoemd. In geval van staking van stemmen, wordt de kandidaat die door de Raad van Commissarissen voor die vacature als eerste op de lijst wordt vermeld, benoemd. Blanco stemmen, onthoudingen en ongeldige stemmen tellen niet mee voor de berekening van de meerderheid. 14.6. De Algemene Vergadering van Aandeelhouders kan aan een voordracht zoals vermeld in lid 3 steeds het bindend karakter ontnemen bij een besluit, dat genomen wordt met een meerderheid van ten minste twee/derde van de uitgebrachte stemmen, indien die meerderheid meer dan de helft van het geplaatste kapitaal vertegenwoordigt. 14.7. De voordracht gedaan overeenkomstig lid 3 van dit artikel wordt in de oproeping tot de Algemene Vergadering van Aandeelhouders, waarin de benoeming aan de orde wordt gesteld, opgenomen. Is een voordracht niet of niet tijdig opgemaakt, dan wordt daarvan in de oproeping mededeling gedaan en, indien in de agenda voor de vergadering de benoeming van een of meer leden van de Raad van Bestuur is opgenomen, is de Algemene Vergadering van Aandeelhouders vrij in de benoeming van een lid of leden van de Raad van Bestuur. 14.8. De Raad van Commissarissen stelt de bezoldiging vast voor de leden van de Raad van Bestuur alsmede de contractuele voorwaarden en bepalingen voor de uitvoering van hun taken, met dien verstande dat geen enkele bepaling hierin leden van de Raad van Bestuur zal verhinderen tegen vergoeding diensten te verstrekken aan de Vennootschap of een dochtermaatschappij of een daarmee verbonden vennootschap in een andere hoedanigheid. 14.9. De Algemene Vergadering van Aandeelhouders heeft te allen tijde de bevoegdheid elk lid van de Raad van Bestuur te schorsen of te ontslaan. Een besluit tot schorsing of ontslag van een lid van de Raad van Bestuur kan, tenzij op voorstel van de Raad van Commissarissen, slechts genomen worden met een meerderheid van ten minste twee derden van de uitgebrachte stemmen, indien die meerderheid meer dan de helft van het geplaatste kapitaal vertegenwoordigt. 14.10. De Raad van Commissarissen kan een lid van de Raad van Bestuur schorsen maar niet ontslaan. De Algemene Vergadering van Aandeelhouders kan deze schorsing opheffen. 14.11. Indien, na schorsing van een lid van de Raad van Bestuur, de Algemene Vergadering van Aandeelhouders niet binnen drie maanden heeft beslist over zijn of haar ontslag, wordt de schorsing opgeheven. 14.12. Een geschorst lid van de Raad van Bestuur is gerechtigd zich in een Algemene Vergadering van Aandeelhouders voor zijn of haar daden te verantwoorden en zich daarbij door een raadsman te doen bijstaan, op zijn of haar eigen kosten. Artikel 15. 15.1. De Raad van Bestuur is, behoudens beperkingen in deze statuten, verantwoordelijk voor het bestuur van de Vennootschap. 15.2. De Raad van Commissarissen wijst uit leden van de Raad van Bestuur een voorzitter, een Chief Executive Officer, een Chief Financial Officer en een of meer vice-voorzitters aan. De Raad van Bestuur is bevoegd een secretaris van de Raad van Bestuur te benoemen. De functie van voorzitter en Chief Executive Officer kan door een en dezelfde persoon worden bekleed. 15.3. De Raad van Bestuur stelt een directiereglement op dat zij van tijd tot tijd kan wijzigen, teneinde de interne organisatie van de Raad van Bestuur te regelen, met inachtneming van deze statuten. Het reglement kan een taakverdeling tussen de leden van de Raad van Bestuur bevatten, alsmede een delegatie van specifieke bevoegdheden. Het reglement bevat bepalingen betreffende de wijze waarop de vergaderingen van de Raad van Bestuur worden gehouden en bijeengeroepen. Deze vergaderingen kunnen per telefoon of video worden gehouden, op voorwaarde dat alle deelnemende leden van de Raad van Bestuur elkaar simultaan kunnen horen. 15.4. De Raad van Bestuur kan alleen geldige besluiten aannemen wanneer de meerderheid van de in functie zijnde leden van de Raad van Bestuur op de vergadering aanwezig of vertegenwoordigd is. 15.5. Een lid van de Raad van Bestuur kan enkel vertegenwoordigd worden door een ander lid van de Raad van Bestuur dat daartoe schriftelijk gemachtigd is. Een lid van de Raad van Bestuur mag niet optreden als gemachtigde voor meer dan een ander lid van de Raad van Bestuur. 15.6. Alle besluiten worden genomen bij meerderheid van stemmen van de leden van de Raad van Bestuur die op de vergadering aanwezig of vertegenwoordigd zijn, mits de Chief Executive Officer eveneens voorstemt. Elke lid van de Raad van Bestuur heeft een stem. In geval van staking van stemmen, is de stem van de Chief Executive Officer doorslaggevend, tenzij slechts twee leden van de Raad van Bestuur op de vergadering aanwezig of vertegenwoordigd zijn. 15.7. De Raad van Bestuur kan besluiten aannemen bij meerderheid van stemmen zonder bijeenroeping van een vergadering indien alle leden van de Raad van Bestuur hun opinie schriftelijk hebben meegedeeld, tenzij een of meer leden van de Raad van Bestuur bezwaren opperen tegen het aannemen van een besluit op deze wijze. De uitdrukking "schriftelijk" omvat elk bericht per telefax, behoorlijk beveiligde elektronische post, of andere moderne communicatiemiddelen. 15.8. Indien de positie(s) van een of meer leden van de Raad van Bestuur vacant is (zijn) of bij belet of ontstentenis van een of meer leden van de Raad van Bestuur, worden de overige leden of het overige lid van de Raad van Bestuur tijdelijk met het volledige bestuur belast. Indien de posities van alle leden van de Raad van Bestuur vacant zijn of bij belet of ontstentenis van alle leden van de Raad van Bestuur, berust het bestuur tijdelijk bij de Raad van Commissarissen. De Raad van Commissarissen kan deze taak aan een of meer personen opdragen. 15.9. De persoon of personen die tijdelijk met het bestuur is (worden) belast, roep(t)(en) zo spoedig mogelijk een Algemene Vergadering van Aandeelhouders bijeen, die niet later dan drie maanden na de aanvang van het belet of de ontstentenis van de leden van de Raad van Bestuur wordt gehouden, met het oog op een definitieve voorziening in het bestuur. Comites. Artikel 16. De Raad van Bestuur is bevoegd tot het instellen van comites, bestaande uit leden van de Raad van Bestuur en functionarissen van de Vennootschap en van groepsmaatschappijen. De Raad van Bestuur bepaalt hun taken en bevoegdheden. Vertegenwoordiging. Artikel 17. 17.1. De algemene bevoegdheid tot vertegenwoordiging van de Vennootschap berust bij de Raad van Bestuur, en bij alle leden van de Raad van Bestuur afzonderlijk. De Raad van Bestuur kan ook een of meer personen, al dan niet werknemers of functionarissen van de Vennootschap, de bevoegdheid toekennen de Vennootschap alleen of gezamenlijk te vertegenwoordigen, waarbij de Raad van Bestuur bepaalt en aan het handelsregister meedeelt voor welke handelingen of categorieen van handelingen de vertegenwoordigingsbevoegdheid wordt verleend. Tevens kan de Raad van Bestuur aan personen zodanige titel toekennen als zij zal verkiezen. 17.2. Leden van de Raad van Commissarissen zijn enkel gerechtigd de Vennootschap te vertegenwoordigen in de situatie beschreven in artikel 15 lid 8 van deze statuten of indien de belangen van de leden van de Raad van Bestuur strijdig zijn met die van de Vennootschap. Raad van commissarissen. Artikel 18. 18.1. De Vennootschap heeft een Raad van Commissarissen, bestaande uit ten minste drie en ten hoogste elf leden. Een commissaris mag niet tegelijkertijd lid zijn van de Board of Governors van INTELSAT, of een werknemer, functionaris of bestuurder van INTELSAT of enige andere intergouvernementele organisatie die blijft bestaan na privatisering van INTELSAT. Een meerderheid van de leden van de Raad van Commissarissen zal niet zijn een directeur, werknemer, functionaris of bestuurder van enige ondertekenaar (Signatory) of voormalig ondertekenaar van INTELSAT, of op enige andere wijze een ondertekenaar (Signatory) of voormalig ondertekenaar van INTELSAT vertegenwoordigen. Tenminste twee commissarissen zullen onafhankelijk zijn en geen werknemers van, en geen functies vervullen vergelijkbaar met functionarissen, vertegenwoordigers, leden van de Raad van Bestuur of commissarissen van de Vennootschap, van een aandeelhouder, of van een groepsmaatschappij van de Vennootschap of van een aandeelhouder. De Raad van Commissarissen kan, na overleg met de Raad van Bestuur, een of meer personen voordragen die niet voldaan aan de vereisten van dit lid indien de redenen die dienen ter rechtvaardiging van de afwijking van die vereisten worden toegelicht in de voordracht. Onverminderd de vereisten genoemd in dit lid is de Algemene Vergadering van Aandeelhouders bevoegd om ingevolge een dergelijke voordracht zodanige personen te benoemen. 18.2. De Algemene Vergadering van Aandeelhouders kan het aantal commissarissen wijzigen, op voorwaarde dat het aantal oneven is. De Algemene Vergadering van Aandeelhouders kan beslissen dat de wijziging geldt voor een bepaalde periode of totdat zich een bepaalde gebeurtenis voordoet. 18.3. Elke commissaris blijft in dienst voor een termijn van ten hoogste een jaar, welke termijn eindigt na afloop van de jaarlijkse Algemene Vergadering van Aandeelhouders die wordt gehouden in het eerste jaar na de Algemene Vergadering van Aandeelhouders waarin de commissaris is benoemd. Tenzij anders bepaald in deze statuten kan elk lid van de Raad van Commissarissen onbeperkt worden herkozen. 18.4. Personen die tweeenzeventig jaar of ouder zijn, kunnen niet worden benoemd tot commissaris. Een commissaris dient zijn ontslag in op de dag van de eerste Algemene Vergadering van Aandeelhouders in het boekjaar waarin hij of zij tweeenzeventig wordt. 18.5. De Algemene Vergadering van Aandeelhouders benoemt de commissarissen. De Raad van Commissarissen kan voordrachten doen voor elke beschikbare plaats. Aandeelhouders kunnen ook voordrachten doen indien zij ten tijde van de voordracht tenminste twee procent (2%) van de geplaatste en uitstaande aandelen in het kapitaal van de Vennootschap houden. Commissarissen die niet zijn voorgedragen mogen zichzelf herkiesbaar stellen. De Algemene Vergadering stemt eerst over de voordrachten die door de Raad van Commissarissen zijn gedaan. Bij staking van stemmen wordt de persoon die (als eerste) is voorgedragen door de Raad van Commissarissen benoemd. Blanco stemmen, onthoudingen en ongeldige stemmen tellen niet mee voor de berekening van de meerderheid. Indien, nadat er gestemd is over de personen die zijn voorgedragen door de Raad van Commissarissen, nog vacatures binnen de Raad van Commissarissen bestaan, zal de Algemene Vergadering van Aandeelhouders een tweede stemming houden over elke geldig door een aandeelhouder overlegde voordracht en iedere verklaring van beschikbaarheid voor herbenoeming. 18.6. Voordrachten van kandidaten voor de Raad van Commissarissen en herkiesbaarstellingen worden schriftelijk medegedeeld aan de Vennootschap en, om vigerend te zijn, dienen te zijn ontvangen door de Vennootschap uiterlijk twee weken voor de datum van de Algemene Vergadering van Aandeelhouders. De Vennootschap legt de lijst van geldig voorgedragen kandidaten en herkiesbare commissarissen onverwijld neer op haar kantoor ter inzage voor elke aandeelhouder. De Raad van Bestuur en de Algemene Vergadering van Aandeelhouders kunnen afstand doen van de termijnen vermeld in dit lid en het vereiste in de voorgaande zin, mits afstand door de Raad van Bestuur wordt vermeld in de oproeping voor de Algemene Vergadering van Aandeelhouders. 18.7. Elke voordracht van een kandidaat voor de Raad van Commissarissen vermeld van wie de voordracht uitgaat. Indien de voordracht door een of meer aandeelhouders werd gedaan, vermeldt zij het totale aandeel in het kapitaal van de Vennootschap gehouden door de aandeelhouder(s) die de voordracht indienen. Elke voordracht of herkiesbaarstelling vermeldt gegevens met betrekking tot de leeftijd en het beroep van de kandidaat, de nominale waarde van de aandelen die de kandidaat houdt in het kapitaal van de Vennootschap, zijn of haar huidige en voorgaande functies voor zover deze van belang zijn met betrekking tot de vervulling van de plichten van een commissaris, en elke vennootschap waarvan de kandidaat reeds commissaris is. Indien dergelijke vennootschappen tot dezelfde groep behoren, is het voldoende die groep te vermelden. De redenen voor de voordracht of herkiesbaarstelling worden vermeld. 18.8. De Algemene Vergadering van Aandeelhouders stelt de bezoldiging van de commissarissen vast. 18.9. De Algemene Vergadering van Aandeelhouders is te allen tijde bevoegd een commissaris te schorsen of te ontslaan. 18.10. Indien, na schorsing van een commissaris, de Algemene Vergadering van Aandeelhouders niet binnen drie maanden heeft beslist over zijn of haar ontslag, wordt de schorsing opgeheven. 18.11. Een geschorste commissaris is gerechtigd zich voor zijn of haar daden in de Algemene Vergadering van Aandeelhouders te verantwoorden en zich daarbij door een raadsman te doen bijstaan, op zijn of haar eigen kosten. Artikel 19. 19.1. Met inachtneming van de beperkingen neergelegd in deze statuten, houdt de Raad van Commissarissen toezicht op de Raad van Bestuur en de algemene gang van zaken van de Vennootschap en de met haar verbonden onderneming en adviseert hij de Raad van Bestuur. Bij de uitoefening van hun taken, laten de commissarissen zich leiden door het belang van de Vennootschap en de daarmee verbonden onderneming. 19.2. De Raad van Bestuur verstrekt de Raad van Commissarissen tijdig de informatie nodig voor de uitoefening van zijn taken. Voor zover nodig voor de vervulling van zijn of haar taken, heeft elke commissaris toegang tot de gebouwen en terreinen van de Vennootschap. 19.3. Elk jaar benoemt de Raad van Commissarissen een voorzitter en een secretaris van de Raad van Commissarissen. Het verloop van elke vergadering van de Raad van Commissarissen wordt opgetekend in notulen ondertekend door de voorzitter en de secretaris van de vergadering. De notulen van de Raad van Commissarissen worden bewaard ten kantore van de Vennootschap en elke commissaris ontvangt afschriften van deze notulen en heeft het recht deze in te zien tijdens gewone kantooruren. 19.4. De Raad van Commissarissen stelt een reglement op voor de interne organisatie van de Raad van Commissarissen. Het reglement kan een taakverdeling tussen de commissarissen bevatten. Het reglement bevat bepalingen betreffende de wijze waarop de vergaderingen van de Raad van Commissarissen worden bijeengeroepen en gehouden. Deze vergaderingen kunnen per telefoon of video worden gehouden, op voorwaarde dat alle deelnemende leden van de Raad van Commissarissen elkaar simultaan kunnen horen. 19.5. De Raad van Commissarissen vergadert zo vaak als hij dit nodig acht voor de vervulling van zijn taak als bedoeld in lid 1 van dit artikel. De Raad van Commissarissen vergadert eveneens op verzoek van de Chief Executive Officer. Artikel 20. De besluiten van de Raad van Bestuur met betrekking tot de volgende zaken zijn onderworpen aan de voorafgaande goedkeuring van de Raad van Commissarissen: a. uitgifte van meer dan vierhonderddrieenvijftigduizend zevenhonderdtachtig (453.780) aandelen in totaal, in een keer of in meerdere keren tijdens het tijdvak van vijf jaar bedoeld in lid 15 van artikel 5, en beperking of uitsluiting van voorkeursrechten op dergelijke aandelen indien de Raad van Bestuur daartoe bevoegd is; b. uitgifte en verkrijging van schuldbewijzen uitgegeven door de Vennootschap of schuldbewijzen uitgegeven door een commanditaire vennootschap of een vennootschap onder firma waarvan de Vennootschap vennoot is met volledige aansprakelijkheid, voor een bedrag dat negen miljoen euro (EUR 9.000.000,--) of enig ander bedrag vastgesteld door de Raad van Commissarissen overschrijdt; c. aanvraag tot notering of tot intrekking van de officiele notering van aandelen, schuldbewijzen of certificaten van aandelen; d. het aangaan of het beeindigen van een voortdurende samenwerking door de Vennootschap met een andere vennootschap of een commanditaire vennootschap of een vennootschap onder firma als vennoot met volledige aansprakelijkheid, indien dergelijke samenwerking of de beeindiging daarvan van strategisch belang is voor de Vennootschap of een investering met zich meebrengt voor een bedrag dat negen miljoen euro (EUR 9.000.000,--) of enig ander bedrag vastgesteld door de Raad van Commissarissen overschrijdt; e. verkrijging door de Vennootschap of door een afhankelijke vennootschap van een deelneming in het kapitaal van een andere vennootschap waarvan de waarde ten minste gelijk is aan een vierde van de som van het geplaatste kapitaal en de reserves van de andere vennootschap, zoals vermeld in haar balans met toelichting, en elke verstrekkende wijziging in de grootte van dergelijke deelneming, voor een bedrag dat negen miljoen euro (EUR 9.000.000,--) of enig ander bedrag vastgesteld door de Raad van Commissarissen overschrijdt; f. investeringen die een bedrag vereisen dat gelijk is aan ten minste een vierde van de som van het geplaatste kapitaal en de reserves van de Vennootschap zoals vermeld in haar balans met toelichting, of voor een bedrag dat negen miljoen euro (EUR 9.000.000,--) of enig ander bedrag bepaald door de Raad van Commissarissen overschrijdt; g. verkoop van eigendommen van de vennootschap waarvan de marktwaarde het equivalent negen miljoen euro (EUR 9.000.000,--) of enig ander bedrag vastgesteld door de Raad van Commissarissen overschrijdt; h. een voorstel tot wijziging van de statuten; i. een voorstel tot ontbinding van de Vennootschap; j. aangifte van faillissement en aanvraag van surseance van betaling; k. een voorstel tot vermindering van het geplaatste kapitaal; en l. besluiten als bedoeld in artikel 29 van deze statuten. Schadevergoeding. Artikel 21. 21.1. De Vennootschap stelt iedere persoon die, vanwege het feit dat hij of zij commissaris, lid van de Raad van Bestuur, functionaris of vertegenwoordiger van de Vennootschap is of was, of die op verzoek van de Vennootschap als commissaris, lid van de Raad van Bestuur, functionaris of vertegenwoordiger van een andere - al dan niet rechtspersoonlijkheid bezittende - vennootschap, maatschap, joint venture, stichting, trust of andere onderneming optreedt of optrad, als partij betrokken dreigt te worden bij een op handen zijnd, aanhangig of beeindigd geding, geschil of procedure van burgerrechtelijke, strafrechtelijke, administratiefrechtelijke dan wel ter verkrijging van gegevens (anders dan een actie door of namens de Vennootschap) schadeloos voor alle kosten (advocatenhonoraria inbegrepen), uitspraken, boetes en ter schikking betaalde bedragen, die hij of zij in werkelijkheid en redelijkerwijze heeft opgelopen in verband met een dergelijk geding, geschil of procedure, indien hij of zij te goeder trouw en op een wijze die hij of zij redelijkerwijs beschouwde in het belang van of niet tegen de belangen van de Vennootschap te zijn, heeft gehandeld, en hij of zij, voor wat betreft een strafzaak of -procedure, geen goede redenen had aan te nemen dat zijn of haar gedrag onrechtmatig was. 21.2. De Vennootschap stelt iedere persoon die, vanwege het feit dat hij of zij commissaris, lid van de Raad van Bestuur, functionaris of vertegenwoordiger van de Vennootschap is of was, of die op verzoek van de Vennootschap als commissaris, lid van de Raad van Bestuur, functionaris of vertegenwoordiger van een andere - al dan niet rechtspersoonlijkheid bezittende - vennootschap, maatschap, joint venture, stichting, trust of andere onderneming optreedt of optrad, als partij betrokken was of is of als partij betrokken dreigt te worden bij een op handen zijnd, aanhangig of beeindigd geding, geschil of procedure, aanhangig gemaakt door of namens de Vennootschap teneinde een uitspraak in haar voordeel te verkrijgen, schadeloos voor alle kosten (advocatenhonoraria inbegrepen) die hij of zij in werkelijkheid en redelijkerwijze heeft moeten dragen in verband met de verdediging of schikking van een dergelijk geding, geschil of procedure, indien hij of zij te goeder trouw en op een wijze die hij of zij redelijkerwijs kon beschouwen in het belang van of niet tegen de belangen van de Vennootschap te zijn, heeft gehandeld, behalve dat geen schadeloosstelling zal plaatsvinden met betrekking tot een vordering, geschil of zaak ten aanzien waarvan deze persoon volgens de uitspraak aansprakelijk is wegens grove nalatigheid of opzettelijk tekortschieten in het uitoefenen van zijn taak jegens de Vennootschap, tenzij en slechts voorzover de rechter waarvoor dit geding, geschil of procedure heeft gediend of een andere daartoe bevoegde rechter op verzoek beslist dat, ondanks het feit dat de persoon aansprakelijk bevonden is, hij of zij toch, alle omstandigheden van het geval in aanmerking genomen, billijker- en redelijkerwijs recht heeft op schadeloosstelling voor die kosten die de rechter, voor wie de actie of de procedure gevoerd is, of die andere bevoegde rechter, juist acht. 21.3. Voorzover een commissaris, lid van de Raad van Bestuur, functionaris of vertegenwoordiger van de Vennootschap met succes inhoudelijk of anderszins verweer heeft gevoerd in een geding, geschil of procedure genoemd in de leden 1 en 2, of met de verdediging tegen een vordering, onderdeel of onderwerp daarin, wordt hij of zij schadeloos gesteld voor de door hem of haar in verband daarmee in werkelijkheid en redelijkerwijs gemaakte kosten (advocatenhonoraria inbegrepen). 21.4. Het beeindigen van een geding, geschil of procedure door een gerechtelijke uitspraak, bevel, schikking, veroordeling of pleidooi van nolo contendere of iets dat daarmee gelijk staat, brengt op zichzelf niet het vermoeden met zich mee dat de persoon genoemd in lid 1 van dit artikel 21 niet te goeder trouw en niet op een wijze heeft gehandeld die hij of zij redelijkerwijs kon beschouwen in het belang van of niet tegen de belangen van de Vennootschap te zijn, en dat hij of zij, voor wat betreft een strafzaak of -procedure, goede redenen had aan te nemen dat zijn gedrag onrechtmatig was of buiten zijn of haar bevoegdheid. 21.5. Iedere schadeloosstelling door de Vennootschap bedoeld in de leden 1 en 2 van dit artikel 21 geschiedt enkel (tenzij door een rechter bevolen) na een vaststelling dat schadeloosstelling van de commissaris, het lid van de Raad van Bestuur, de functionaris of vertegenwoordiger onder de omstandigheden juist is, omdat hij of zij voldaan had aan de van toepassing zijnde gedragsnorm genoemd in de leden 1 en 2 van dit artikel 21. Deze vaststelling geschiedt: (a) hetzij door de Raad van Commissarissen met meerderheid van stemmen in een vergadering bestaande uit commissarissen die geen partij waren bij het geschil, geding, of procedure; of (b) indien de meerderheid als bedoeld onder (a) daartoe besluit, door een onafhankelijk juridisch adviseur in een schriftelijke opinie; of (c) door de Algemene Vergadering van Aandeelhouders. 21.6. Kosten gemaakt voor het voeren van verweer in een burgerrechtelijk, vennootschapsrechtelijk of strafrechtelijk geding, geschil of procedure kunnen door de Vennootschap worden voorgeschoten in afwachting van de einduitspraak in het geding, geschil of procedure en wel krachtens besluit van de Raad van Bestuur met betrekking tot het desbetreffende geval, na ontvangst van een toezegging door of namens de commissaris, lid van de Raad van Bestuur, functionaris of vertegenwoordiger om dit bedrag terug te betalen, tenzij uiteindelijk vastgesteld wordt dat hij of zij het recht heeft door de Vennootschap schadeloos gesteld te worden, krachtens dit artikel 21. 21.7. De schadeloosstelling voorzien in dit artikel 21 wordt niet geacht enig ander recht uit te sluiten waartoe degene die schadeloosstelling tracht te verkrijgen, gerechtigd zou zijn krachtens statuten, overeenkomst, besluit van de Algemene Vergadering van Aandeelhouders of van de niet-belanghebbende leden van de directie of anderszins, zowel met betrekking tot handelingen in officiele hoedanigheid als met betrekking tot handelingen in een andere hoedanigheid terwijl hij of zij een dergelijke betrekking bekleedt, en zal blijven gelden voor een persoon die geen commissaris, lid van de Raad van Bestuur, functionaris of vertegenwoordiger meer is en zal ook ten goede komen aan de erfgenamen, uitvoerders van de uiterste wilsbeschikking en bewindvoerders van een dergelijk persoon. 21.8. De Vennootschap is gerechtigd verzekeringen aan te gaan en aan te houden ten behoeve van iedere persoon die commissaris, lid van de Raad van Bestuur, functionaris of vertegenwoordiger van de Vennootschap is of was, of die op verzoek van de Vennootschap als commissaris, lid van de Raad van Bestuur, functionaris of vertegenwoordiger van een andere - al dan niet rechtspersoonlijkheid bezittende - vennootschap, maatschap, joint venture, stichting, trust of andere onderneming optreedt of optrad, ter dekking van iedere aansprakelijkheid die tegen hem of haar is ingeroepen en die hij of zij moest dragen in zijn hoedanigheid, of die het gevolg is van zijn hoedanigheid als zodanig, ongeacht of de Vennootschap bevoegd zou zijn hem of haar krachtens de bepalingen van dit artikel 21 voor deze aansprakelijkheid schadeloos te stellen. 21.9. Wanneer in dit artikel 21 sprake is van de Vennootschap wordt hieronder (naast de ontstane of overblijvende vennootschap na fusie of consolidatie) ook begrepen iedere constituerende vennootschap (met inbegrip van iedere constituerende vennootschap van een constituerende vennootschap) die opgegaan is bij een consolidatie of fusie en die, indien zij afzonderlijk had voortbestaan, bevoegd zou zijn geweest de commissarissen, leden van de Raad van Bestuur, functionarissen en vertegenwoordigers schadeloos te stellen, zodat iedere persoon die commissaris, lid van de Raad van Bestuur, functionaris of vertegenwoordiger van een dergelijke constituerende vennootschap is of was, of die op verzoek van een dergelijke constituerende vennootschap als commissaris, lid van de Raad van Bestuur, functionaris of vertegenwoordiger van een andere - al dan niet rechtspersoonlijkheid bezittende - vennootschap, maatschap, joint venture, stichting, trust of andere onderneming optreedt of optrad, ten aanzien van de ontstane of overblijvende vennootschap dezelfde positie inneemt krachtens het in dit artikel bepaalde als hij of zij zou hebben ingenomen ten aanzien van een dergelijke constituerende vennootschap indien zij afzonderlijk was blijven voortbestaan. Algemene vergadering van aandeelhouders. Artikel 22. 22.1. Jaarlijks wordt ten minste een Algemene Vergadering van Aandeelhouders gehouden, binnen zes maanden na afloop van het boekjaar. In deze vergadering worden de volgende onderwerpen behandeld: a. het door de Raad van Bestuur schriftelijk uitgebrachte jaarverslag omtrent de gang van zaken van de Vennootschap en het gevoerde bestuur gedurende het afgelopen boekjaar en het door de Raad van Commissarissen uitgebrachte verslag over de jaarrekening; b. de vaststelling van de jaarrekening; c. de bepaling van iedere dividenduitkering en de verdere verdeling van de winsten; d. de vervulling van vacatures in de Raad van Bestuur en de Raad van Commissarissen; en e. de voorstellen die op de agenda zijn geplaatst door de Raad van Bestuur of de Raad van Commissarissen tezamen met voorstellen van aandeelhouders die overeenkomstig het bepaalde in lid 7 van dit artikel gerechtigd zijn zodanige voorstellen te doen, voor zover zij uiterlijk zes weken voor de dag van de Algemene Vergadering van Aandeelhouders door het bestuur werden ontvangen. 22.2. Bovendien worden Buitengewone Algemene Vergaderingen van Aandeelhouders gehouden in het geval genoemd in artikel 2:108a Burgerlijk Wetboek en voorts zo vaak als de Raad van Commissarissen, de Raad van Bestuur, of the Chief Executive Officer het nodig acht deze te houden, onverminderd de bepalingen van het hiernavolgende lid. 22.3. De Raad van Bestuur is verplicht een Algemene Vergadering van Aandeelhouders bijeen te roepen indien een of meer stemgerechtigden die tezamen ten minste tien procent (10%) van het geplaatste aandelenkapitaal bezitten, daartoe een schriftelijk verzoek indienen bij de Raad van Bestuur, met vermelding van de te behandelen aangelegenheid. Indien de Raad van Bestuur in dat geval verzuimt een vergadering bijeen te roepen binnen zes weken na ontvangst van bovenvermeld verzoek, zijn al diegenen die dergelijk verzoek hebben ingediend gerechtigd dergelijke vergadering bijeen te roepen, met inachtneming van de relevante bepalingen van deze statuten. 22.4. De Algemene Vergaderingen van Aandeelhouders worden gehouden in Amsterdam, Haarlemmermeer (Schiphol Airport), Rotterdam of Den Haag. De besluiten aangenomen op een Algemene Vergadering van Aandeelhouders die elders werd gehouden zijn enkel geldig indien het volledig geplaatste kapitaal aanwezig of vertegenwoordigd is. 22.5. De algemene vergaderingen van aandeelhouders worden niet later dan vier weken voor de vergadering bijeengeroepen door de Raad van Bestuur, de Chief Executive Officer, de Raad van Commissarissen, of door de personen die ingevolge de wet of deze statuten gerechtigd zijn de vergadering bijeen te roepen door middel van een publicatie van een kennisgeving daartoe in een landelijk verspreid dagblad, in een internationaal verspreid financieel dagblad met internationale bekendheid en op enige andere wijze die vereist kan zijn om te voldoen aan toepasselijke voorschriften van effectenbeurzen of zoals passend geacht door de personen die de vergadering bijeen roepen. De oproeping wordt uiterlijk vier weken voor de vergadering gepubliceerd of, indien van toepassing, op enige andere wijze verzonden. 22.6. De oproeping vermeldt de plaats, datum en uur van de vergadering alsmede de agenda van de vergadering of vermeldt dat alle personen die een wettelijk recht hebben de vergadering bij te wonen, de agenda kunnen inzien ten kantore van de Vennootschap en op een andere plaats of plaatsen die de Raad van Bestuur bepaalt. Als de agenda niet bekend wordt gemaakt verschaft de Vennootschap, op verzoek aan iedere daartoe gerechtigde persoon, kosteloos kopieen. 22.7. De agenda bevat de aangelegenheden zoals bepaald door de persoon (personen) die de vergadering bijeenroep(t)(en) en daarnaast eventuele andere aangelegenheden waar een of meer stemgerechtigde personen die samen ten minste tien procent (10%) van het geplaatste kapitaal bezitten, de Raad van Bestuur minstens zeven dagen voor de datum van de oproeping tot de vergadering schriftelijk om hebben verzocht. 22.8. Indien een voorstel tot wijziging van de statuten van de Vennootschap aan de orde zal komen, wordt een afschrift van dat voorstel, waarin de voorgestelde wijzigingen letterlijk zijn opgenomen, vanaf de dag van oproeping tot de vergadering tot na afloop van die vergadering, ten kantore van de Vennootschap ter inzage gelegd voor de aandeelhouders en andere personen die krachtens wet bevoegd zijn de vergadering bij te wonen, en ieder van hen heeft het recht, op zijn of haar verzoek, daarvan een kosteloos afschrift te verkrijgen. Voorzitter van de Algemene Vergadering van Aandeelhouders; Notulen; Aanwezigheid; Volmachten. Artikel 23. 23.1. De voorzitter van de Raad van Commissarissen of een persoon verkozen door de voorzitter of door de Raad van Commissarissen om als voorzitter van een Algemene Vergadering van Aandeelhouders op te treden, zit een dergelijke vergadering voor. Gedurende de beraadslagingen of procedures voor de benoeming van commissarissen, wordt de Algemene Vergadering van Aandeelhouders voorgezeten door een onafhankelijk persoon, die een notaris kan zijn. 23.2. De voorzitter van de vergadering wijst de secretaris van die vergadering aan die notulen maakt van de besproken aangelegenheden. De notulen worden goedgekeurd door de voorzitter van de vergadering en de secretaris en door hen ondertekend. 23.3. Indien een proces-verbaal wordt opgemaakt van de op de vergadering besproken aangelegenheden, hoeven er geen notulen te worden opgesteld en volstaat de ondertekening van het proces-verbaal door de notaris. Elk lid van de Raad van Bestuur is te allen tijde bevoegd om opdracht te geven voor het opstellen van een proces-verbaal op kosten van de Vennootschap. 23.4. De Raad van Bestuur kan bepalen dat iedere persoon die op een door de Raad van Bestuur te bepalen tijdstip, hierna te noemen: het "registratietijdstip", gerechtigd is de Algemene Vergadering van Aandeelhouders bij te wonen, de Algemene Vergadering van Aandeelhouders mag bijwonen, indien (i) hij of zij als zodanig is ingeschreven in een door de Raad van Bestuur daartoe aangewezen register (of een of meer delen daarvan), hierna te noemen: het "register", en (ii) de houder van het register op verzoek van de desbetreffende gerechtigde voor de Algemene Vergadering van Aandeelhouders schriftelijk aan de Vennootschap heeft kennis gegeven dat de desbetreffende gerechtigde voornemens is de Algemene Vergadering van Aandeelhouders bij te wonen, ongeacht wie ten tijde van de Algemene Vergadering van Aandeelhouders gerechtigde is als hiervoor bedoeld. De kennisgeving vermeldt de naam en het aantal aandelen of certificaten waarvoor de gerechtigde gerechtigd is de Algemene Vergadering van Aandeelhouders bij te wonen. Het hiervoor onder (ii) bepaalde omtrent de kennisgeving aan de Vennootschap geldt tevens voor de schriftelijk gevolmachtigde van de gerechtigde. 23.5. Het in lid 4 bedoelde registratietijdstip en het in dat lid bedoelde tijdstip waarop uiterlijk het voornemen om de Algemene Vergadering van Aandeelhouders bij te wonen moet zijn kenbaar gemaakt, kan niet vroeger gesteld worden dan op een tijdstip op de zevende dag en niet later dan op een tijdstip op de derde dag voor die van de Algemene Vergadering van Aandeelhouders. Bij de oproeping van de Algemene Vergadering van Aandeelhouders worden die tijdstippen, voorzover van toepassing vermeld, alsmede waar en de wijze waarop registratie casu quo kennisgeving dient te geschieden. 23.6. Ingeval de Raad van Bestuur haar bevoegdheden onder lid 4 niet uitoefent zijn de leden 7 en 8 van dit artikel van toepassing. 23.7. Om de Algemene Vergadering van Aandeelhouders bij te wonen en aan de stemmingen te kunnen deelnemen, dienen de houders van aandelen aan toonder een schriftelijke verklaring van een aangesloten instelling ten kantore van de Vennootschap te deponeren. Bedoelde verklaring moet inhouden dat de in die verklaring genoemde hoeveelheid aandelen aan toonder behoort tot haar verzameldepot en, voor zover wettelijk vereist, dat de in de verklaring genoemde persoon tot de genoemde hoeveelheid aandelen deelgenoot in haar verzameldepot is en tot na de vergadering zal blijven. In de aankondiging zal de dag waarop de deponering van de verklaring van de aangesloten instelling uiterlijk moet plaatshebben, worden vermeld; deze dag kan niet vroeger worden gesteld dan op de zevende dag voor die van de vergadering. 23.8. De houders van aandelen op naam en andere vergadergerechtigden zullen de Vennootschap schriftelijk kennis geven van hun voornemen de Algemene Vergadering van Aandeelhouders bij te wonen of zich daar te laten vertegenwoordigen op uiterlijk de zevende dag voor die van de vergadering, tenzij de Raad van Bestuur bepaalt dat kennisgeving op kortere termijn wordt toegestaan. 23.9. Aandeelhouders en overige vergadergerechtigden kunnen zich doen vertegenwoordigen via een schriftelijke volmacht, mits het schriftelijk stuk waaruit van die volmacht blijkt niet later dan op de datum en het tijdstip genoemd in lid 8 bij de Vennootschap wordt ingeleverd. Op voorwaarde dat voorafgaande goedkeuring van de Raad van Commissarissen werd verkregen, kan de Raad van Bestuur nadere regels stellen betreffende de neerlegging van de volmachten; deze worden in de oproeping tot de vergadering vermeld. 23.10. De aandeelhouders of hun gevolmachtigden zullen de presentielijst moeten tekenen, met opgaaf van het aantal van de door hen vertegenwoordigde aandelen en - voor zover van toepassing - het aantal door hen uit te brengen stemmen. 23.11. De voorzitter van de vergadering beslist over de toelating tot de vergadering van andere personen dan degenen die gerechtigd zijn tot bijwonen. 23.12. Omtrent alle zaken betreffende de toelating tot de Algemene Vergadering van Aandeelhouders, het uitoefenen van stemrecht, en het resultaat van een stemming alsmede alle andere zaken de Algemene Vergadering van Aandeelhouders betreffende, besluit de voorzitter van de vergadering, met inachtneming van het bepaalde in artikel 2:13 Burgerlijk Wetboek. Stemrecht per aandeel; Besluitneming; Vergaderingen van houders van aandelen van een bepaalde soort. Artikel 24. 24.1. In de Algemene Vergadering van Aandeelhouders geeft elk aandeel het recht een stem uit te brengen, tenzij de wet of deze statuten anders bepalen. 24.2. Tenzij de wet of deze statuten anders bepalen, worden alle besluiten genomen met een absolute meerderheid van de geldig uitgebrachte stemmen. Blanco stemmen, onthoudingen of ongeldige stemmen, worden niet meegeteld als uitgebrachte stemmen. 24.3. De Vennootschap en haar dochtermaatschappijen kunnen de stemrechten behorend bij aandelen of certificaten die zij houden in het kapitaal van de Vennootschap niet uitoefenen, noch op aandelen met betrekking waartoe zij een recht van pand of van vruchtgebruik hebben. Houders van een recht van vruchtgebruik of een recht van pand op aandelen die worden gehouden door de Vennootschap en haar dochtermaatschappijen hebben desalniettemin het recht om te stemmen op die aandelen indien het recht van vruchtgebruik of van pand was gevestigd voordat het aandeel werd verkregen door de Vennootschap of haar dochtermaatschappijen. 24.4. Bij staking van stemmen, beslist de Raad van Commissarissen. Onverminderd het hiervoor bepaalde, zal bij staking van stemmen omtrent de benoeming van een lid van de Raad van Bestuur waarvoor een bindende voordracht is gedaan, de persoon die het eerst op die voordracht staat genoemd, benoemd zijn. 24.5. De houder van een recht van vruchtgebruik en de houder van een pandrecht die in overeenstemming met het bepaalde in artikel 2:89 Burgerlijk Wetboek geen stemrecht heeft, heeft niet de rechten die de wet toekent aan houders van met medewerking van de Vennootschap uitgegeven certificaten van aandelen. 24.6. Waar in deze statuten vergadergerechtigden staan vermeld worden hieronder begrepen de personen die ingevolge de artikelen 2:88, lid 4 en 2:89 lid 4 Burgerlijk Wetboek de rechten hebben die door de wet worden toegekend aan houders van met medewerking van de Vennootschap uitgegeven certificaten van aandelen. 24.7. Een vergadering van houders van aandelen van een bepaalde soort zal worden gehouden zo dikwijls een besluit van die vergadering vereist is. Bovendien zal een dergelijke vergadering worden gehouden, zo dikwijls de Raad van Bestuur en/of de Raad van Commissarissen zulks besluiten. 24.8. De artikelen 22 tot en met 24 zijn van overeenkomstige toepassing op besluiten genomen in een vergadering van aandeelhouders van een bepaalde soort, met dien verstande dat de aankondiging uiterlijk zes dagen voor de vergadering wordt verzonden, dat de vergadering haar eigen voorzitter aanwijst en dat de vergadering van houders van financieringspreferente aandelen en de vergadering van houders van beschermingsaandelen eveneens besluiten buiten vergadering kan nemen, indien het voorstel daartoe van de Raad van Commissarissen is uitgegaan. Een besluit buiten vergadering is alleen geldig wanneer respectievelijk alle houders van beschermingsaandelen of van financieringspreferente aandelen, schriftelijk, telegrafisch, per telex of per telecopier ten gunste van het desbetreffende voorstel stem hebben uitgebracht. Artikel 25. 25.1. Besluiten van aandeelhouders kunnen schriftelijk worden aangenomen - met inbegrip van telegram-, telefax- en telexberichten - in plaats van op de Algemene Vergadering van Aandeelhouders, met dien verstande dat zij worden aangenomen met eenparigheid van stemmen van alle stemgerechtigde personen. 25.2. De Raad van Bestuur neemt de besluiten genomen op de wijze vermeld in het vorig lid van dit artikel 25 op in het register van notulen van de Algemene Vergadering van Aandeelhouders. Wijziging van de statuten. Artikel 26. 26.1. Wijzigingen van deze statuten vereisen een besluit van de Algemene Vergadering van Aandeelhouders, aangenomen met een absolute meerderheid. Desalniettemin, vereist elke wijziging van de artikelen 12 en 24 gedurende de eerste twee jaren na de oprichting van de Vennootschap de goedkeuring van aandeelhouders die tezamen twee/derde van alle uitgebrachte stemmen vertegenwoordigen en die ten minste vijftig procent (50%) van het geplaatste kapitaal vertegenwoordigen. Artikel 13 van deze statuten en dit artikel 26 kunnen niet worden gewijzigd behalve met eenparigheid van stemmen op een Algemene Vergadering van Aandeelhouders waar alle aandeelhouders vertegenwoordigd zijn; met dien verstande echter, dat indien artikel 12 van deze statuten wordt geschrapt, artikel 13 van deze statuten eveneens zal worden geschrapt. Een wijziging van artikel 12 of artikel 24 van deze statuten met het oog op vermindering van het percentage bedoeld in deze artikelen tot tien procent of minder, vereist eenparigheid van stemmen op een Algemene Vergadering van Aandeelhouders waar alle aandeelhouders vertegenwoordigd zijn. 26.2. Als deel van een besluit tot wijziging van de statuten kan eveneens worden beslist dat: a. de wijziging van de statuten van kracht wordt indien en wanneer een afschrift daarvan zal zijn neergelegd bij het handelsregister; b. de Raad van Bestuur bevoegd is bovenvermelde neerlegging uit te voeren; c. de Raad van Bestuur naar eigen goeddunken kan beslissen tot de neerlegging bedoeld onder a. over te gaan of niet over te gaan, en de datum ervan te bepalen; of d. de Raad van Bestuur slechts toestemming heeft of verplicht is tot dergelijke neerlegging over te gaan onder bepaalde omstandigheden, nader beschreven in het besluit. Accountantsonderzoek. Artikel 27. 27.1. De Algemene Vergadering van Aandeelhouders benoemt een accountant als bedoeld in artikel 2:393 Burgerlijk Wetboek, teneinde de door de Raad van Bestuur opgemaakte jaarrekening te onderzoeken, daarover verslag uit te brengen aan de Raad van Commissarissen en de Raad van Bestuur en daaromtrent een verklaring af te leggen. De accountant zal een accountantsverklaring afleggen waarin de resultaten van zijn onderzoek staan, die voor de aandeelhouders ter inzage zal liggen. 27.2. Indien de algemene vergadering verzuimt de accountant bedoeld in lid 1 van dit artikel te benoemen, geschiedt deze benoeming door de Raad van Commissarissen. 27.3. De benoeming bepaald in lid 1 kan te allen tijde worden ingetrokken door de Algemene Vergadering van Aandeelhouders en, indien de benoeming is geschied door de Raad van Commissarissen, tevens door de Raad van Commissarissen. Boekjaar; Jaarrekening; Jaarverslag; Winstverdeling. Artikel 28. 28.1. Het boekjaar van de Vennootschap is gelijk aan het kalenderjaar. 28.2. De Raad van Bestuur stelt jaarlijks binnen vijf maanden -- behoudens verlenging van deze termijn met ten hoogste zes maanden door de Algemene Vergadering van Aandeelhouders op grond van bijzondere omstandigheden -- een jaarrekening op, bestaande uit een balans per eenendertig december, een winst- en verliesrekening en een toelichting. De Raad van Bestuur stelt bovendien een verslag op betreffende de gang van zaken van de Vennootschap in het afgelopen jaar. De Raad van Bestuur legt het jaarverslag binnen de in dit lid bedoelde termijn ter inzage voor de aandeelhouders ten kantore van de Vennootschap. 28.3. De jaarrekening wordt door de Raad van Bestuur opgesteld volgens in het maatschappelijk verkeer als aanvaardbaar beschouwde waarderingsmethoden en volgens alle overige wettelijke bepalingen. 28.4. De jaarrekening van de Vennootschap of haar geconsolideerde jaarrekening mogen worden opgesteld in een buitenlandse valuta indien de activiteiten van de Vennootschap of de internationale structuur van haar groep dit rechtvaardigen. 28.5. De jaarrekening wordt ondertekend door alle leden van de Raad van Bestuur en alle commissarissen. Indien een handtekening ontbreekt, wordt daarvan, onder opgave van de reden, melding gemaakt in de jaarrekening. 28.6. Afschriften van de jaarrekening, het jaarverslag van de Raad van Bestuur, het verslag van de Raad van Commissarissen en de krachtens de wet aan ieder van deze documenten toe te voegen gegevens, zijn vanaf de dag van de oproeping tot de Algemene Vergadering van Aandeelhouders bestemd voor hun behandeling tot na afloop van die vergadering ten kantore van de Vennootschap beschikbaar ter inzage en inspectie door de aandeelhouders en overige vergadergerechtigden. Aandeelhouders en overige vergadergerechtigden kunnen deze stukken aldaar inzien en er kosteloos een afschrift van verkrijgen. 28.7. De Algemene Vergadering van Aandeelhouders stelt de jaarrekening vast; deze vaststelling strekt de leden van de Raad van Bestuur en de commissarissen tot decharge voor alle handelingen waarvan uit die stukken blijkt of welker resultaat daarin is verwerkt, tenzij uitdrukkelijk een voorbehoud is gemaakt en onverminderd hetgeen in de wet daaromtrent is of zal worden bepaald. Artikel 29. 29.1. Uit de winst die in enig boekjaar is behaald, wordt allereerst, tenzij anders bepaald in dit lid, op de beschermingsaandelen die gedurende enige tijd in dat jaar geplaatst waren een uitkering gedaan. De uitkering is gelijk aan het percentage genoemd in de volgende zin vermenigvuldigd met het bedrag dat is gestort op dat aandeel bij het begin van het boekjaar waarover de uitkering wordt gedaan. Het percentage genoemd in de vorige zin is gelijk aan het gemiddelde van de EURIBOR voor kasgeldleningen met een looptijd van twaalf maanden gewogen naar het aantal dagen waarvoor dit percentage gold gedurende het boekjaar waarover de uitkering geschiedt, verhoogd met honderd basispunten. Indien in het boekjaar waarover de hiervoor bedoelde uitkering plaatsvindt, het verplicht op de beschermingsaandelen gestorte bedrag is verlaagd of, ingevolge een besluit tot verdere storting, is verhoogd, zal de uitkering worden verlaagd respectievelijk, zo mogelijk, worden verhoogd met een bedrag gelijk aan het hiervoor bedoelde percentage van het bedrag van de verlaging respectievelijk verhoging, berekend vanaf het tijdstip van de verlaging respectievelijk vanaf het tijdstip waarop de verdere storting verplicht is geworden. Indien in de loop van enig boekjaar uitgifte van beschermingsaandelen heeft plaatsgevonden, zal voor dat boekjaar het dividend op de beschermingsaandelen naar rato tot de dag van uitgifte worden verminderd, waarbij een gedeelte van een maand voor een volle maand zal worden gerekend. Indien en voor zover de winst niet voldoende is om de hiervoor in dit lid bedoelde uitkering volledig te doen, zal het tekort worden uitgekeerd ten laste van de reserves, met uitzondering van de reserve die als agio gevormd is bij de uitgifte van financieringspreferente aandelen. 29.2. In geval van intrekking met terugbetaling van beschermingsaandelen wordt op de dag van terugbetaling een uitkering gedaan op de ingetrokken beschermingsaandelen, welke uitkering berekend wordt in overeenstemming met het bepaalde in lid 1 en lid 3 van dit artikel en wel naar tijdsgelang te berekenen over de periode vanaf de dag waarover voor het laatst een uitkering als bedoeld in lid 1 en lid 3 werd gedaan - dan wel indien de beschermingsaandelen na een zodanige dag zijn geplaatst: vanaf de dag van plaatsing - tot aan de dag van terugbetaling, een en ander onverminderd het bepaalde in artikel 2:105, lid 4, Burgerlijk Wetboek. 29.3. Indien in enig boekjaar de in lid 1 bedoelde winst niet toereikend is om de hiervoor in dit artikel bedoelde uitkeringen te doen, en voorts geen uitkering of slechts ten dele een uitkering uit de reserves, als bedoeld in lid 1, geschiedt, zodanig dat het tekort niet of niet volledig is uitgekeerd, vindt in de daarop volgende boekjaren het in de leden 2, 4 en lid 7 eerst toepassing nadat het tekort is ingehaald. 29.4. Van de winst die resteert na toepassing van de vorige leden zal: a. zo mogelijk, op elk financieringspreferent aandeel een dividend worden uitgekeerd gelijk aan een percentage berekend over het nominaal bedrag, vermeerderd met het bedrag aan agio dat werd gestort bij de eerste uitgifte van financieringspreferente aandelen, en welk percentage is gerelateerd door het rekenkundig gemiddelde te nemen van het gemiddelde effectieve rendement van zakelijke financieringen ("corporate loans") in de Verenigde Staten van Amerika zoals opgenomen in de krant "The Wall Street Journal", berekend en bepaald op de wijze als hierna vermeld. b. Het percentage van het dividend voor de financieringspreferente aandelen wordt berekend door het gemiddelde effectieve rendement te nemen van de hierboven genoemde leningen over de laatste twintig beursdagen, voorafgaande aan de dag waarop voor het eerst een financieringspreferent aandeel werd uitgegeven, of waarop het dividendpercentage is aangepast, eventueel verhoogd of verlaagd met maximaal een procent punt, afhankelijk van de dan geldende marktomstandigheden, al naar gelang de Raad van Bestuur onder goedkeuring van de Raad van Commissarissen daartoe besluit. c. Voor het eerst per een januari van het kalenderjaar volgend op de dag nadat drie jaar zijn verstreken sedert de dag waarop voor het eerst financieringspreferente aandelen werden uitgegeven, en telkenmale drie jaar nadien, kan het dividendpercentage van alle desbetreffende financieringspreferente aandelen worden aangepast aan het alsdan gemiddelde effectieve rendement van de hiervoor bedoelde zakelijke financieringen in de Verenigde Staten van Amerika zoals opgenomen in de krant "The Wall Street Journal", berekend en bepaald op de wijze als vermeld onder b. 29.5. Indien in enig boekjaar de hiervoor in lid 4 van dit artikel bedoelde uitkeringen niet zijn gedaan, vindt in de daarop volgende boekjaren het in lid 4 en in lid 7 bepaalde eerst toepassing nadat het tekort is ingehaald en nadat het hiervoor bepaalde in de leden 1 en 3 toepassing heeft gevonden. De Raad van Bestuur is bevoegd onder goedkeuring van de Raad van Commissarissen te besluiten een bedrag gelijk aan het in de vorige zin bedoelde tekort uit te keren ten laste van de reserves, met uitzondering van de reserve die als agio gevormd is bij de uitgifte van financieringspreferente aandelen. 29.6. Indien de uitgifte van financieringspreferente aandelen plaatsvindt gedurende de loop van een boekjaar, zal over dat boekjaar het dividend op de desbetreffende financieringspreferente aandelen naar rato tot de eerste dag van uitgifte worden verminderd. 29.7. Voorzover de winst niet krachtens toepassing van de vorige leden wordt gereserveerd of uitgekeerd zal een zodanig bedrag worden gereserveerd als de Raad van Bestuur met goedkeuring van de Raad van Commissarissen, zal bepalen. Voor zover winst niet wordt uitgekeerd en geen reservering plaatsvindt staat de resterende winst ter vrije beschikking van de Algemene Vergadering van Aandeelhouders, met dien verstande, dat op de beschermingsaandelen en de financieringspreferente aandelen geen verdere dividenduitkering zal geschieden. 29.8. De Raad van Bestuur kan met inachtneming van artikel 2:105 Burgerlijk Wetboek en met goedkeuring van de Raad van Commissarissen een of meer interim dividenden uitkeren, mits de vereisten van lid 13 van dit Artikel in acht worden genomen zoals dient te blijken uit een tussentijdse balans. Interim dividenden kunnen ook uitsluitend op een soort of een groep van soorten van aandelen worden uitgekeerd. 29.9. De Algemene Vergadering van Aandeelhouders kan op een door de Raad van Commissarissen gedaan voorstel besluiten dividenden of reserves geheel of gedeeltelijk, in de plaats van in contanten, uit te keren in de vorm van aandelen in het kapitaal van de vennootschap. 29.10. In geval van intrekking met terugbetaling van financieringspreferente aandelen wordt op de dag van terugbetaling een tweetal uitkeringen gedaan op de ingetrokken financieringspreferente aandelen: a. een uitkering wordt gedaan uit de agioreserve van de desbetreffende aandelen, indien aanwezig, welke gelijk is aan het saldo daarin met betrekking tot die aandelen; en b. een tweede uitkering wordt uit de winstreserve gedaan, welke zoveel mogelijk berekend wordt in overeenstemming met het bepaalde in lid 4 en lid 5 van dit artikel en wel naar tijdsgelang te berekenen over de periode vanaf de dag waarover voor het laatst een uitkering als bedoeld in lid 1 en lid 3 van dit artikel werd gedaan - dan wel indien de financieringspreferente aandelen na een zodanige dag zijn geplaatst: vanaf de dag van plaatsing - tot aan de dag van terugbetaling, een en ander onverminderd het bepaalde in artikel 2:105, lid 4, Burgerlijk Wetboek. 29.11. Een tekort als bedoeld in artikel 2:104 Burgerlijk Wetboek, kan slechts ten laste van het bij de uitgifte van financieringspreferente aandelen gevormde agio worden gedelgd, indien alle overige reserves zijn uitgeput. 29.12. Aandelen die door de Vennootschap in haar eigen kapitaal worden gehouden worden niet meegeteld bij het bepalen van de verdeling van dividenden die worden uitgekeerd op aandelen. 29.13. De Vennootschap kan slechts uitkeringen doen voorzover het eigen vermogen van de Vennootschap groter is dan het geplaatste en opgevraagde deel van het kapitaal, vermeerderd met de wettelijke reserves. Op aandelen die de Vennootschap in haar eigen kapitaal houdt, kan geen uitkering van winst plaatsvinden. 29.14. Onverminderd het bepaalde in lid 13 van dit artikel, kan de Raad van Bestuur er voor zorgen dat de Vennootschap uitkeringen doet, geheel of gedeeltelijk uit de agioreserve of uit enige andere reserve die staat weergegeven op de jaarrekening, niet zijnde een wettelijke reserve. 29.15. Uitkeringen uit de winst geschieden na het vaststellen van de jaarrekening waaruit blijkt dat zij geoorloofd zijn. 29.16. Uitkeringen op grond van dit artikel zullen betaalbaar zijn vanaf een door de Raad van Bestuur te bepalen datum. 29.17. Uitkeringen op grond van dit artikel zullen betaalbaar zijn op een door de Raad van Bestuur te bepalen adres of adressen in Nederland, alsmede op tenminste een adres in het land waar de aandelen van de Vennootschap genoteerd zijn. 29.18. De Raad van Bestuur bepaalt de manier van betaling van uitkeringen in contanten op aandelen met inachtneming van het bepaalde in lid 19 van dit artikel. 29.19. Uitkeringen in contanten, indien en voorzover deze uitkeringen buiten Nederland betaalbaar zijn gesteld, worden betaald in de valuta van een land waar de aandelen genoteerd zijn, omgerekend tegen de wisselkoers bepaald door de Nederlandsche Bank N.V. op het einde van de dag te bepalen door de Raad van Bestuur. Indien en voor zover de Vennootschap op de eerste dag waarop de uitkering betaalbaar is, als gevolg van overheidsmaatregelen of andere buitengewone omstandigheden buiten haar macht niet in staat is op de buiten Nederland aangewezen plaats of in de betrokken buitenlandse valuta te betalen, is de Raad van Bestuur bevoegd in plaats daarvan een of meer plaatsen in Nederland aan te wijzen. In dat geval is het in de eerste zin van dit lid bepaalde niet langer van toepassing. 29.20. Tot een uitkering op aandelen is diegene gerechtigd, te wiens name het aandeel is gesteld op de door de Raad van Bestuur te bepalen datum, welke zal liggen tussen de datum van vaststelling van de uitkering en de datum van betaalbaarstelling. 29.21. Kennisgevingen betreffende uitkeringen, alsmede betreffende data en plaatsen als bedoeld in de voorgaande leden van dit artikel, worden in Nederland gepubliceerd in een landelijk verspreid dagblad en daarnevens nog op zodanige wijze als de Raad van Bestuur wenselijk acht. 29.22. Uitkeringen in contanten welke binnen vijf jaren na de aanvang van de tweede dag waarop zij opeisbaar zijn geworden niet in ontvangst zijn genomen, vervallen aan de Vennootschap. Enquete. Artikel 30. 30.1. Elke aandeelhouder die twee procent (2%) of meer van de geplaatste en uitstaande aandelen houdt heeft het recht een onderzoek in te stellen met betrekking tot het bestuur van de Vennootschap, als bedoeld in artikel 2:345, Burgerlijk Wetboek en volgende bepalingen. 30.2. De aandeelhouder die overweegt een enquete in te stellen zal eerst schriftelijk zijn of haar bezwaren met betrekking tot het optreden en het commercieel beleid van de Vennootschap meedelen aan de Raad van Bestuur. Hij of zij zal de Vennootschap een redelijke termijn toekennen om deze bezwaren te onderzoeken en passende maatregelen te nemen. Ontbinding en vereffening. Artikel 31. 31.1. Indien een besluit tot ontbinding van de Vennootschap wordt genomen, geschiedt de vereffening door de Raad van Bestuur. De bepalingen in artikel 14 betreffende de benoeming, schorsing en het ontslag van een lid van de Raad van Bestuur zijn van overeenkomstige toepassing op een vereffenaar. 31.2. De Algemene Vergadering van Aandeelhouders stelt op voorstel van de Raad van Commissarissen de bezoldiging van de vereffenaar(s) vast en benoemt een persoon die toezicht houdt op de vereffening. 31.3. De vereffening geschiedt met inachtneming van de wettelijke bepalingen. Tijdens de vereffening blijven deze statuten voor zover mogelijk van kracht. 31.4. De vereffenaars doen na afloop der liquidatie rekeningen en verantwoording overeenkomstig het in de wet bepaalde. 31.5. Nadat de vennootschap heeft opgehouden te bestaan, blijven de boeken en bescheiden van de Vennootschap gedurende zeven jaar in bewaring bij degene die daartoe door de vereffenaars is aangewezen. Uitkering aan aandeelhouders na ontbinding. Artikel 32. Hetgeen resteert van het vermogen van de Vennootschap na betaling van alle schulden en de kosten van de vereffening wordt als volgt verdeeld: a. allereerst wordt, zo veel mogelijk, aan de houders van beschermingsaandelen het op hun beschermingsaandelen nominaal gestorte bedrag uitgekeerd, vermeerderd met het ingevolge artikel 29 te weinig daarop uitgekeerde, en vermeerderd met een bedrag gelijk aan het in artikel 29 bedoelde percentage over het nominaal bedrag, berekend over de periode, die aanvangt op de eerste dag van het laatste volledig verstreken boekjaar voorafgaande aan de ontbinding en die eindigt op de dag van de in dit artikel bedoelde uitkering op beschermingsaandelen, met dien verstande dat alle dividenden die over deze periode op de beschermingsaandelen zijn betaald, in mindering komen op de uitkering ingevolge dit onderdeel; b. vervolgens wordt zoveel mogelijk aan de houders van financieringspreferente aandelen het op hun aandelen nominaal gestorte bedrag, alsmede het op hun aandelen bij de uitgifte daarvan gestorte agio uitgekeerd, vermeerderd met een bedrag gelijk aan het ingevolge artikel 29 te weinig op de financieringspreferente aandelen uitgekeerde, en vermeerderd met een bedrag gelijk aan het in lid 4 onder a van artikel 29 bedoelde percentage (zoals eventueel aangepast op grond van het bepaalde in dat artikel lid 4 onder b) over het nominaal bedrag nadat dat bedrag is vermeerderd met het op het aandeel bij de uitgifte daarvan gestorte agio, berekend over de periode, die aanvangt op de eerste dag van het laatste volledig verstreken boekjaar voorafgaande aan de ontbinding en die eindigt op de dag van de in dit artikel bedoelde uitkering op financieringspreferente aandelen, met dien verstande dat alle dividenden die over deze periode op de financieringspreferente aandelen zijn betaald, in mindering komen op de uitkering ingevolge dit onderdeel; c. het dan resterende wordt uitgekeerd aan de houders van gewone aandelen, in evenredigheid met het aantal gewone aandelen dat ieder van hen bezit. Niet opgevraagde uitkeringen na ontbinding. Artikel 33. Aan aandeelhouders of schuldeisers toekomende bedragen welke niet binnen zes (6) maanden na de betaalbaarstelling der laatste uitkering mochten zijn opgevraagd, zullen worden gedeponeerd in de consignatiekas. ARTICLES OF ASSOCIATION OF NEW SKIES SATELLITES N.V. ESTABLISHED AT AMSTERDAM, THE NETHERLANDS AS PER 24 AUGUST 2000 Name and corporate seat. Article 1. 1.1. The name of the company is: New Skies Satellites N.V. (the "Company"). 1.2. The Company has its corporate seat in Amsterdam. 1.3. The Company may by resolution of the Board of Management establish offices and branches inside as well as outside The Netherlands. Objects. Article 2. The objects of the Company are: 2.1. To engage in the planning, development, construction, ownership and operation of a global satellite communications system; to contract for the development, construction and operation of spacecraft, launch vehicles and satellite control centers; to acquire physical facilities, equipment and devices necessary for its operations; to provide services to INTELSAT in accordance with the Ensured Capacity Rights Agreement between INTELSAT and the Company and any successive agreements or related agreements; to participate in various segments of the broadcasting, telecommunications, and information services markets; to provide satellite multimedia services; to market or arrange the marketing of all services it provides; to engage in research and development in connection therewith; and to engage in any other activities of a commercial, industrial or financial nature, including creation and participation in other enterprises, for the Company's own account, or for the account of or with the participation of or in cooperation with third parties. 2.2. The Company may arrange financing and may take up loans and provide security for its loans and obligations, as well as for loans and obligations of companies controlled by it, its affiliates or subsidiaries, together with all activities which are intended for or which may be conducive to any of the objects mentioned in this Article 2. Duration. Article 3. The Company shall continue to exist for an indefinite period of time. Share capital and shares. Article 4. 4.1. The authorized share capital of the Company amounts to twenty-two million seven hundred and fifty-three thousand Euro (EUR 22,753,000), divided into two hundred and four million seven hundred and seventy-seven thousand (204,777,000) ordinary shares of five Eurocent (EUR 0.05) each; twenty-two million seven hundred fifty-three thousand (22,753,000) financing preference shares of five Eurocent (EUR 0.05) each; and two hundred and twenty-seven million five hundred and thirty thousand (227,530,000) governance preference shares of five Eurocent (EUR 0.05) each. 4.2. Where in these Articles of Association reference is made to shares and shareholders it shall include respectively the ordinary shares, the financing preference shares and the governance preference shares and the holders of ordinary shares, the holders of financing preference shares and the holders of governance preference shares unless the contrary is expressly stated. Where in these Articles of Association reference is made to ordinary shares it shall include the bearer ordinary shares and the registered ordinary shares unless the contrary is expressly stated. 4.3. The Company may co-operate with the issuance of depositary receipts for shares in its share capital ("certificaten van aandelen") on condition that holders of such depositary receipts shall be entitled to obtain a proxy to vote the shares or to instruct the holder of the corresponding shares to vote such shares. Issuance of shares. Article 5. 5.1. The general meeting of shareholders (hereinafter referred to as "The General Meeting of Shareholders") shall have the authority to resolve on any further issuance of shares, but only in response to a proposal for such issuance submitted by the Board of Management specifying the price and the further terms and conditions for the issuance. In addition the General Meeting of Shareholders may designate the Board of Management, subject to Article 20(a), as the corporate body authorized for the further issuance of shares. For as long as and, in the case of a designation for a limited number of shares, to the extent that, a designation of the Board of Management is in force, the General Meeting of Shareholders shall have no authority to decide on a further issuance of shares. Any resolution by the General Meeting of Shareholders to issue shares or to designate the Board of Management shall be valid only if accompanied by a prior or simultaneous approving resolution of each class of shareholders whose rights are prejudiced by such issuance or designation. 5.2. To the extent that a designation of the Board of Management is in place the Board of Management shall have authority to determine the price and further terms and conditions of an issuance of shares, with due observance of what has been provided in relation thereto according to the law and these Articles of Association. Any action by the Board of Management hereunder shall be subject to the requirements of Article 20. 5.3. Any designation of the Board of Management as the corporate body authorized for the issuance of shares shall be made in accordance with the law and these Articles of Association. The resolution containing the designation shall specify the maximum number of shares that may be issued and the duration of the designation, which shall be for a specific period not exceeding five (5) years. The General Meeting of Shareholders may renew the designation from time to time for a period of up to five (5) years for each such renewal. A designation of the Board of Management may not be withdrawn unless otherwise provided in the resolution containing the designation. 5.4. Within eight days after the General Meeting of Shareholders has passed a resolution to issue shares or a resolution to designate the Board of Management as provided in paragraph 1 of this Article, the Board of Management shall file the complete text of such resolution with the trade registry of the Chamber of Commerce where the Company has her principal place of business in the Netherlands to the extent required by law. Within eight days after each issuance of shares, the Board of Management shall report the same to the trade registry of the Chamber of Commerce in the Netherlands, stating the number and class of the shares issued, to the extent required by law. 5.5. Paragraphs 1 up to and including 4 shall be applicable mutatis mutandis to the grant of rights to subscribe for shares but shall not be applicable to the issuance of shares to anyone who exercises a previously acquired right to subscribe for shares. 5.6. If the Board of Management has been designated to be authorized to resolve upon the issuance of shares and governance preference shares are being issued, including the granting of rights to subscribe for governance preference shares, but not the issuance of governance preference shares by virtue of the exercise of such option right: a. the Board of Management shall be obliged to convene a General Meeting of Shareholders within four weeks of such issuance, at which meeting the reasons for the issuance shall be explained, unless such explanation has been given at a General Meeting of Shareholders held prior to the issuance; b. the prior approval of the General Meeting of Shareholders shall be required for the specific case, if (i) as a consequence of such issuance and/or (ii) as a consequence of the prior issuance of governance preference shares by the Board of Management without said approval or other co-operation of the General Meeting of Shareholders, such a number of governance preference shares may be subscribed for and/or have been issued, that the aggregate nominal amount of the governance preference shares issued without said approval or other co-operation of the General Meeting of Shareholders, by the Board of Management, amounts to a rate higher than one hundred per cent (100%) of the aggregate nominal value of the other shares issued prior such issuance. 5.7. If governance preference shares have been issued pursuant to a resolution to issue shares, or pursuant a resolution to grant a right to subscribe for shares, which has been adopted by the Board of Management without the prior approval or other co-operation of the General Meeting of Shareholders, the Board of Management shall be obliged to convene a general meeting within two years after such issuance and to make a proposal to purchase or, as the case may be, to cancel said issued governance preference shares. If at this meeting, no resolution has been adopted to purchase or, as the case may be, to cancel preference shares, the Board of Management shall be obliged to convene another general meeting at which a proposal is made, each time within two years after such proposal has been brought up for discussion; such obligation shall no longer be in force if said shares are no longer issued or, as the case may be, if the governance preference shares are held by the Company. 5.8. A designation of the Board of Management under this Article shall not affect any power the General Meeting of Shareholders may have to pay dividends on shares pursuant to Article 29 of these Articles of Association. 5.9. Without prejudice to what has been provided in Section 2:80.2 Civil Code, shares shall at no time be issued below their nominal value. 5.10. Ordinary shares and financing preference shares shall be fully paid up upon issuance. Governance preference shares may be issued against partial payment, provided that: (a) the obligatory payable portion of the nominal value (the "call") shall be equal for each governance preference share, without regard to the date of issuance of such share; and (b) at least one-quarter of the nominal value of the share shall be paid upon issuance. 5.11. The Board of Management may, subject to the approval of the Supervisory Board, resolve on the timing and amount for a further call for governance preference shares that have not been paid up in full. The Board of Management shall give immediate notice of such resolution to the holders of governance preference shares and shall issue such notice at least thirty (30) days before the day on which the call must be paid. 5.12. Payment shall be made in cash, unless another contribution has been agreed upon. Payment shall be made in Euro, unless the Company agrees to payment in a currency other than Euro. If payment is made in a currency other than Euro, the obligation to pay shall be deemed fulfilled only to the extent that the sum paid is freely convertible into Euros at: (a) the rate of exchange on the day of payment; or (b) if the Company requires payment on a specified date pursuant to the following sentence, at the rate of exchange on that date. The Company may require payment at the rate of exchange on a specified date no more than two months prior to the date on which payment must be made if the shares or depositary receipts issued therefor shall immediately upon their issuance be admitted to a listing at a stock exchange outside of the Netherlands. 5.13. Shares shall be issued by notarial deed if so required by law, in accordance with the relevant provisions of law. 5.14. Subject to prior approval of the Supervisory Board, the Board of Management is expressly authorized to enter into legal acts referred to in Section 2:94 Civil Code, without the prior consent of the General Meeting of Shareholders. 5.15. By these Articles of Association, the Board of Management is designated as the Corporate body that is authorized to issue up to one hundred and eighty-one million five hundred and twelve thousand (181,512,000) ordinary shares, twenty-two million seven hundred and fifty-three thousand (22,753,000) financing preference shares and two hundred and twenty-seven million five hundred and thirty thousand (227,530,000) governance preference shares, subject to approval in accordance with Article 20 of these Articles of Association. This designation is for a period of five years, starting on the date these Amended Articles of Association are approved by the General Meeting of Shareholders. Preemptive rights. Article 6. 6.1. In the event of an issuance of ordinary shares, each shareholder shall have a preemptive right with regard to the ordinary shares to be issued in proportion to the aggregate number of ordinary shares held by the shareholder. Holders of governance preference shares and holders of financing preference shares shall have no preemptive right in respect of any shares to be issued. Holders of ordinary shares shall have no preemptive right in respect of any governance preference shares or any financing preference shares to be issued. Notwithstanding any other provision of this Article, no shareholder shall have any preemptive right to any shares issued against a contribution other than in cash or issued to employees of the Company or of a group company. (For the purposes of these Articles of Association, a "group" is an economic unit in which legal persons and partnerships are united in one organisation, and a "group company" is any collection of legal persons or partnerships that are united in one group). Preemptive rights shall be transferable without restriction. 6.2. The General Meeting of Shareholders or, if the Board of Management has been given the authority to issue shares, the Board of Management, shall decide when passing the resolution to issue shares in which manner and within which time limit the preemptive right may be exercised. 6.3. The Company shall give notice of an issuance of shares that is subject to a preemptive right and of the period during which such right may be exercised, by announcement in the State Gazette (Staatscourant) and in the manner provided in Article 22.5. of these Articles of Association. 6.4. Preemptive rights, if any, may be exercised during a period of at least two (2) weeks after the day of announcement in the State Gazette or the day of notice under Article 22.5. 6.5. The General Meeting of Shareholders may by resolution limit or exclude any preemptive rights to which shareholders may be entitled. In addition, the General Meeting of Shareholders may designate the Board of Management, subject to Article 20.a, as the corporate body authorized to limit or exclude preemptive rights as to any shares that the Board of Management has been authorized to issue. If and, with respect to a partial designation, to the extent that the Board of Management has been authorized to limit or exclude preemptive rights, the Board of Management may by resolution limit or exclude any preemptive rights to which shareholders may be entitled, subject to any limitations set forth in the designation. The resolution designating the Board of Management as the corporate body authorized to limit or exclude preemptive rights shall specify the duration of such delegation, which shall not be for more than five (5) years. The General Meeting of Shareholders may renew the designation from time to time for a period of up to five (5) years for each such renewal. A designation of the Board of Management may not be withdrawn unless otherwise provided in the resolution containing the designation. 6.6. Any proposal to the General Meeting of Shareholders to limit or exclude preemptive rights shall state the reasons for the limitation or exclusion and the reasons for the intended price of issuance. 6.7. In order to be validly adopted, a resolution or designation by the General Meeting of Shareholders pursuant to paragraph 5 of this Article must be adopted by a majority of at least two-thirds of the votes cast if less than fifty per cent (50%) of the issued share capital is present or represented at the General Meeting of Shareholders. 6.8. Within eight (8) days of a resolution to exclude or limit preemptive rights or a designation of the Board of Management pursuant to paragraph 5 of this Article, the Board of Management shall file a complete text of the resolution or designation with the trade registry of the Chamber of Commerce in the Netherlands to the extent required by law. 6.9. This Article 6 shall apply to the granting of rights to subscribe for shares, but shall not apply to the issuance of shares to a person who exercises a previously acquired right to subscribe for shares, in which case no preemptive rights shall exist. 6.10. By these Articles of Association the Board of Management is authorized to limit or exclude preemptive rights as to all shares described in Article 5.15. This designation is for an initial period of five years, starting on the date these amended Articles of Association are approved by the General Meeting of Shareholders. Acquisition and transfer by the Company of shares in its own share capital. Article 7. 7.1. The Company shall have the authority to acquire fully paid-up shares in its own share capital for free. The Company shall also have authority to acquire fully paid-up shares in its own share capital for valuable consideration if and to the extent the following conditions are met: a. the General Meeting of Shareholders has authorized the Board of Management to make such an acquisition and the authorization (which shall be valid for no more than eighteen months) specifies the number of shares that may be acquired, the manner in which they may be acquired and the limits within which the price must be set; b. the Company's "eigen vermogen" (shareholders equity), less the purchase price to be paid by the Company for such shares, is not less than the aggregate amount of the paid up and called up share capital and the reserves which must be maintained pursuant to the law or these Articles of Association; and c. the aggregate par value of the shares to be acquired and the shares in its share capital that the Company already holds, on which it holds a right of pledge, or that are held by a subsidiary of the Company, amounts to no more than one-tenth of the aggregate par value of the issued share capital; subject to any further applicable statutory provisions and the provisions of these Articles of Association. 7.2. The Company's equity as shown in the last adopted balance sheet, after deduction of the price of acquisition for shares in the share capital of the Company and distributions from profits or reserves to any other persons that became due by the Company and its subsidiary companies after the date of the balance sheet, shall be decisive for purposes of paragraph 1.b of this Article. If more than six (6) months have expired after the end of any financial year and no annual accounts have been adopted with respect to that financial year, an acquisition by virtue of this paragraph shall not be allowed. 7.3. Any acquisition by the Company of shares in its own capital that have not been fully paid-up shall be null and void. 7.4. The Company may dispose of shares acquired by it pursuant to this Article. 7.5. If depositary receipts for shares in the share capital of the Company have been issued, such depositary receipts shall be treated as shares for the purposes of paragraphs 1 and 4 of this Article. 7.6. Shares in respect of which voting rights may not be exercised by law or by these Articles of Association shall not be taken into account when determining the extent to which the shareholders have cast their votes, the extent to which they are present or represented at the General Meeting of Shareholders, or the extent to which the share capital is present or represented. Reduction of the issued share capital; Cancellation of shares. Article 8. 8.1. With due observance of the provisions of Section 2:99 Civil Code, upon the proposal of the Supervisory Board, the General Meeting of Shareholders shall have power to pass a resolution to reduce the issued share capital by cancelling shares or by reducing the nominal value of the shares by means of an amendment of the Company's Articles of Association. The shares to which such resolution relates shall be designated in the resolution and the resolution shall also state the manner in which it shall be implemented. Cancellation with repayment of shares or partial repayment on shares or release from the obligation to pay up as referred to in Section 2:99 Civil Code may be made or be given exclusively with respect to ordinary shares or exclusively with respect to governance preference shares or exclusively with respect to financing preference shares. A partial repayment or release shall only be allowed pursuant to a resolution to reduce the par value of the shares and must be made pro rata as to all shares concerned. The pro rata requirement may be waived with the consent of all shareholders concerned. Any reduction of the nominal value of shares without redemption must be done pro rata on all shares of the same class. The pro rata requirement may be waived with the consent of all shareholders of that class. 8.2. For a resolution to reduce the capital, a majority of at least two-thirds of the votes cast shall be required, if less than one half of the issued capital is represented at the meeting. 8.3. The notice convening a meeting at which a resolution, as mentioned in this Article is to be passed shall state the purpose of the reduction of the share capital and the manner in which effect is to be given thereto. The second, third and fourth paragraphs of Section 2:123 Civil Code shall apply mutatis mutandis. 8.4. The Company shall file the resolutions referred to in paragraph 1 of this Article at the trade registry of the Chamber of Commerce and shall publish a notice of such deposit in a nationally distributed daily and an internationally distributed financial daily periodical of international repute, to the extent required by law. The provisions of Section 2:100.2 up to and including 2:100.6 Civil Code shall apply to the Company. Shares and share certificates. Article 9. 9.1. Ordinary shares shall be issued in registered form or in bearer form. Governance preference shares and financing preference shares shall be issued in registered form only. All shares shall be identified by number. Ordinary registered shares shall be numbered consecutively from 1 onwards. Governance preference shares shall be numbered consecutively from G1 onwards. Financing preference shares shall be numbered consecutively from F1 onwards. 9.2. The Board of Management may resolve that share certificates (aandeelbewijzen) shall be issued in respect of registered ordinary shares in such denominations, and in such form, as the Board of Management shall determine. Each share certificate shall mention the number(s) of the share(s) in respect of which it was issued. 9.3. All ordinary bearer shares shall be embodied in one share certificate. 9.4. The ordinary bearer share certificate shall be signed by or on behalf of a member of the Board of Management. The Board of Management may resolve that the signature shall be a facsimile signature and may designate one or more persons to sign the share certificate on behalf of the Company. 9.5. The Company will grant a right with respect to an ordinary bearer share to a person entitled thereto in the following manner (a) the Company will enable the Netherlands Central Institute for Securities Giro Administration and Transfer B.V. ("Necigef") to (cause to) add an ordinary share to the share certificate; and (b) the person entitled thereto will designate an affiliated institution as referred to in the Securities Giro Administration and Transfer Act (hereinafter: the "affiliated institution"), which will credit that person accordingly as a joint owner (hereinafter: "joint owner") of the collective depository as referred to in the Securities Giro Administration and Transfer Act. The joint owners will hereinafter also be referred to as holders of bearer shares and, to the extent necessary, they will also be recognised as such by the Company. 9.6. Without prejudice to the provision of Article 23, paragraph 7 of these Articles of Association, the administration of the share certificate will be irrevocably assigned to Necigef, and Necigef will be irrevocably authorized to do anything necessary for that purpose on behalf of the person(s) entitled thereto with respect to the shares, including the acceptance and transfer and - on behalf of the Company - the co-operation with adding the share to and deleting the share from the share certificate. 9.7. In the event that a joint owner of the affiliated institution wishes to have one or more ordinary bearer shares delivered to him, these ordinary bearer shares held by the joint owner, up to the maximum amount for which he is a joint owner at the time this wish is announced, will be converted into the same number of ordinary registered shares, and (a) Necigef will enable the Company to (cause to) delete these ordinary shares from the share certificate, (b) the relevant affiliated institution will debit the person entitled thereto as a joint owner of its collective depositary (c) Necigef will allocate these ordinary shares to the person entitled thereto with due observance of the formalities for transfer, (d) the Company will recognise this transfer, and (e) the Board of Management of the Company will (cause to) enter this person as a holder of registered shares in the shareholders' register. The Company may not charge the shareholder that causes to convert his shares into registered shares or into bearer shares pursuant to the provisions of this paragraph or of paragraph 8 of this Article, more than cost. 9.8. A shareholder may at all times cause to convert one or more of his registered shares into bearer shares as follows (a) the person entitled thereto will transfer these shares to Necigef by a deed of transfer, (b) the Company will recognise such transfer, (c) Necigef will enable the Company to (cause to) add these shares to the share certificate, (d) an affiliated institution designated by the person will credit the person so entitled as a joint owner of its collective depositary and (e) the Board of Management of the Company will delete such person from the shareholders' register as a holder of the registered shares thus converted. A conversion of a registered share that is pledged or for which share a right of usufruct exists, requires the prior written approval of the pledgee or usufructuaree. 9.9. If share certificates are issued for registered shares, all such share certificates shall be signed by or on behalf of a managing director on behalf of the Company; the signature may be effected by printed facsimile. In addition all share certificates for registered shares may be validly signed on behalf of the Company by one or more persons designated by the Board of Management for that purpose. 9.10. All share certificates shall be identified by numbers and/or letters. 9.11. The Board of Management can determine that for the purpose to permit or facilitate trading of shares at a foreign stock exchange, share certificates for registered shares shall be issued in such form as the Board of Management may determine, in order to comply with the requirements set by such foreign exchange. 9.12. Upon written request by or on behalf of a shareholder, the Company may issue replacement share certificates for share certificates that have been mislaid, stolen, damaged or destroyed; provided that the shareholder making the request, or the person making the request on the shareholder's behalf, provides satisfactory evidence of title to the share(s) and of the loss, theft, damage or destruction of the share certificate(s). Any issuance of replacement share certificates shall be subject to such conditions, including without limitation the provision of indemnity to the Company, as the Board of Management shall determine. 9.13. The Company may charge the costs of issuing one or more replacement share certificates to the shareholder or the person making the request on behalf of the shareholder. Upon issuance of a replacement share certificate, the original share certificate shall become void and the Company shall have no further obligation with respect to such original share certificate. Replacement share certificates shall bear the numbers of the share certificates they replace. Register of shareholders. Article 10. 10.1. With due observance of the applicable statutory provisions in respect of registered shares, a share register shall be kept by or on behalf of the Company. 10.2. The Board of Management shall be authorized to keep the register in more than one copy and at more than one address. The Board of Management also shall be authorized to keep the register, in whole or in part, outside the Netherlands in order to comply with applicable foreign statutory provisions or the rules of a stock exchange on which the shares of the Company are listed. 10.3. The share register shall include the name and address of each holder of one or more registered shares, the amount paid-up on each share and such further information as is required by law or determined by the Board of Management to be appropriate. 10.4. The Board of Management shall determine the form and contents of the register with due observance of the provisions of paragraphs 1, 2 and 3 of this Article. 10.5. Every entry in the register shall be signed by a member of the Board of Management or by a person authorized by the Board of Management. The register shall be kept regularly up to date. 10.6. Upon request by a holder of registered shares the Board of Management shall provide that holder of registered shares with an extract from the register or, at the Board of Management's option, with other written evidence of the contents of the register with regard to the shares registered in that shareholder's name, free of charge. The extract or other evidence shall be signed by a member of the Board of Management or by a person designated for that purpose by the Board of Management. 10.7. The provisions of this Article regarding shareholders shall equally apply to persons who hold a right of usufruct or a right of pledge on one or more registered shares. 10.8. The Board of Management and Supervisory Board shall have power and authority to permit inspection of the register and to provide information recorded therein, as well as any other information known to the Company regarding the direct or indirect shareholding of a shareholder, to the extent required by law or to comply with legal or regulatory requirements or the requirements of any stock exchange on which the Company's shares are listed. 10.9. Any shareholder shall have the right, by written request and upon reasonable notice and during normal business hours, to inspect the Company's share register and a list of its shareholders and their addresses and shareholdings, and to make copies or extracts therefrom with respect to its own shares. The request shall be directed to the managing directors of the Company at its registered office in the Netherlands or at its principal place of business. Transfer of shares; Restriction on the transfer of governance preference and financing preference shares. Article 11. 11.1. The transfer of title to registered shares, the transfer of title to or a termination of a right of usufruct on registered shares, and the creation, vesting or release of a right of usufruct or of a right of pledge on registered shares shall be effected by way of a written instrument of transfer and in accordance with the provisions set forth in Section 2:86, or, as the case may be, Section 2:86c Civil Code. A transfer of registered shares for which share certificates have been issued can only take place when the share certificate representing such shares has been submitted to the Company. The rights attached to any registered share may be exercised if the Company is a party to the transaction, or after: a. the Company has acknowledged the transaction; or b. the deed has been served on the Company; or c. the Company has entered the transaction in its shareholder register on its own initiative; in each case in accordance with the relevant provisions of law. 11.2. The provisions of paragraph 1 of this Article shall equally apply to (i) the allotment of registered shares in the event of a judicial partition of any community of property, (ii) the transfer of a registered share as a consequence of foreclosure of a right of pledge and (iii) the creation of limited rights in rem on a registered share. 11.3. Any requests made pursuant to and in accordance with the provisions of Articles 9, 10 and this Article 11 may be sent to the Company at such address(es) as to be determined by the Board of Management. 11.4. The Company is authorized to charge such amounts as may be determined by the Board of Management provided they do not exceed cost price, to persons who have made a request pursuant to and in accordance with the provisions of Articles 9, 10 and this Article 11 unless these Articles of Association prescribe supply against no costs. 11.5. Any transfer of governance preference shares or of financing preference shares shall be valid only if approved, in advance, by the Supervisory Board. The request for approval shall be submitted in writing and shall state the name and address of the intended transferee and the price or other consideration to be paid or given by the intended transferee. 11.6. If the Supervisory Board does not approve a proposed transfer, the Supervisory Board shall at the same time designate one or more prospective purchasers who are willing and able to purchase all the shares to which the request for approval relates, against cash payment at a price to be fixed mutually by the transferor and the Supervisory Board within two months following such designation. 11.7. If, within three months of receipt by the Company of the request to approve a proposed transfer, the transferor has not received a written notice of approval from the Company or the Supervisory Board's refusal to approve the transfer was not simultaneously accompanied by the designation of one or more prospective purchasers as referred to in paragraph 6 of this Article, the approval to transfer shall be deemed granted following expiry of said period or upon receipt of the notice of refusal. 11.8. If the transferor and the Supervisory Board have failed to reach agreement on the price meant in paragraph 6 of this Article within two months of the refusal of the approval, such price shall be fixed by an expert, to be designated by the transferor and the Board of Management by mutual agreement or, failing agreement on an expert within three months following the refusal of the approval, by the President of the Chamber of Commerce and Industry in the district in which the Company has its corporate seat according to its Articles of Association, at the request of the party who is first to take action. 11.9. The transferor shall have the right to abandon the proposed transfer, provided it so notifies the Board of Management in writing within one month of being informed of both the name of the designated prospective purchaser(s) and the fixed price. 11.10. In the event of approval of the transfer pursuant to paragraphs 5 or 7 of this Article, the transferor shall be entitled to transfer all shares to which the request submitted in accordance with paragraph 5 of this Article relates to the purchaser specified in that request at the price or consideration specified therein. 11.11. The costs connected with the transfer for the Company may be charged to the transferee. Shareholders requirements. Article 12. (Intentionally left blank) Article 13. (Intentionally left blank) Management. Article 14. 14.1. The Company shall have a Board of Management, consisting of one or more members. The maximum number of members shall be determined by the Supervisory Board. 14.2. The General Meeting of Shareholders shall determine, and may subsequently change, the number of members of the Board of Management. The determination of the number of members of the Board of Management shall require a resolution adopted by at least two-third of the votes cast, representing at least fifty per cent (50%) of the issued share capital, unless the proposal to that extent, with the approval of the Supervisory Board, has been made by the Board of Management. In that case, such resolution can be adopted by the majority of votes cast. The General Meeting of Shareholders may decide that the determination or the change shall be for a specified period of time or until the occurrence of a specified event. 14.3. The General Meeting of Shareholders shall appoint the members of the Board of Management from a binding list prepared by the Supervisory Board of at least two nominees for each position, if such a binding list has been presented. The list shall list two nominees for each position in the order preferred by the Supervisory Board. The list of nominees shall be deposited, not later than two weeks prior to the meeting until the close of the meeting, at the office of the Company for inspection by shareholders and other persons entitled to attend the General Meeting of Shareholders and - in the event of a listing at an exchange, NASDAQ or a similar system - at a bank or financial institution to be mentioned in the notice calling the General Meeting of Shareholders. 14.4. Before each General Meeting of Shareholders convened for the election of members of the Board of Management, any shareholder holding, at the time of the nomination, at least two percent (2%) of the issued and outstanding shares in the share capital of the Company shall be entitled to nominate candidates, which nominations must be received by the Company at least one week before the meeting. Article 18.6 of these Articles of Association shall apply mutatis mutandis. If, for one or more specific positions as to which an election is provided in the notice of the meeting, the Supervisory Board has not submitted a list of nominees in accordance with paragraph 3 of this Article, the General Meeting of Shareholders shall be free to appoint any candidate nominated in accordance with the procedure described in the previous two sentences, by absolute majority. 14.5. For each position for which the Supervisory Board has submitted a list of nominees in accordance with paragraph 3 of this Article, the two nominees shall be submitted to a vote, and the nominee who obtains the majority of the vote shall be appointed. If the vote is tied, the nominee listed first by the Supervisory Board for that position shall be appointed. Blank votes, abstentions, and invalid votes shall not count to calculate the majority. 14.6. The General Meeting of Shareholders may at all times overrule the binding nature of a nomination submitted pursuant to paragraph 3 of this Article by a resolution adopted by at least a two thirds majority of the votes cast, if such majority represents more than half the issued share capital. 14.7. The nomination submitted pursuant to paragraph 3 of this Article shall be included in the notice of the General Meeting of Shareholders at which the appointment shall be considered. If a nomination has not been made or has not been made in due time, this shall be stated in the notice and, if the agenda for the meeting includes the appointment of one or more members of the Management Board, the General Meeting of Shareholders may appoint such managing director(s) at its discretion. 14.8. The Supervisory Board shall fix the remuneration and contractual terms and conditions for the members of the Board of Management in respect of the performance of their duties, provided that nothing herein contained shall preclude any members of the Board of Management from serving the Company or any subsidiary or related company thereof in any other capacity and receiving compensation therefor. 14.9. The General Meeting of Shareholders shall at all times have the power to suspend or to dismiss every one of the members of the Board of Management. A resolution to suspend or dismiss any member of the Board of Management may only be passed by a two-thirds majority of the votes cast representing more than one-half of the issued share capital, unless the proposal to suspend or dismiss the member of the Board of Management was made by the Supervisory Board. 14.10. The Supervisory Board can suspend, but not dismiss, any member of the Board of Management. The General Meeting of Shareholders has the power to lift this suspension. 14.11. If, following suspension of a member of the Board of Management, the General Meeting of Shareholders has not decided on his or her dismissal within three months, the suspension shall end. 14.12. A suspended member of the Board of Management shall be entitled to justify his or her actions before the General Meeting of Shareholders and may elect to be assisted by an adviser when doing so, at his or her own expense. Article 15. 15.1. The Board of Management shall, subject to the limitations contained in these Articles of Association, be in charge of the management of the Company. 15.2. The Supervisory Board shall designate among the members of the Board of Management, a President, a Chief Executive Officer, a Chief Financial Officer and one or more Vice-Presidents. The Board of Management shall have the power to appoint a secretary of the Board of Management. The office of President and Chief Executive Officer may be held by one and the same person. 15.3. The Board of Management shall draw up, and may from time to time amend, Board of Management regulations (directiereglement) to deal with matters that concern the Board of Management internally, with due observance of these Articles of Association. The regulations may include an allocation of tasks amongst the members of the Board of Management and a delegation of specified powers. The regulations shall contain provisions concerning the manner in which meetings of the Board of Management are called and held. These meetings may be held by telephone conference or video conference, provided all participating members of the Board of Management can hear each other simultaneously. 15.4. The Board of Management may only adopt valid resolutions when the majority of the members of the Board of Management in office are present or represented at the meeting. 15.5. A member of the Board of Management may only be represented by a co-member of the Board of Management authorized in writing. A member of the Board of Management may not act as a proxy for more than one co-member. 15.6. All resolutions shall be adopted by the favourable vote of the majority of the members of the Board of Management present or represented at the meeting, provided that such majority shall at least include the vote of the Chief Executive Officer. Each member of the Board of Management shall have one vote. If there is a tie vote the Chief Executive Officer shall have a casting vote, unless only two members of the Board of Management are present or represented. 15.7. The Board of Management shall be authorized to adopt resolutions by majority vote without convening a meeting if all members of the Board of Management shall have expressed their opinions in writing, unless one or more members of the Board of Management object to a resolution being adopted in this way. The expression "in writing" shall include any message transmitted by facsimile, properly authenticated electronic mail, or other current means of communication. 15.8. If the office(s) of one or more members of the Board of Management is (are) vacant or if one or more members of the Board of Management are otherwise unable to act, the remaining members or the remaining member shall temporarily be vested with the entire management. If the offices of all members of the Board of Management are vacant or if all members of the Board of Management are otherwise unable to act, the management shall temporarily be vested in the Supervisory Board. The Supervisory Board may delegate this task to one or more persons. 15.9. The person or persons who is or are temporarily entrusted with management shall convene a General Meeting of Shareholders as soon as possible, to be held no later than three months after the commencement of the inability to act of the members of the Board of Management, in order to make a definitive provision for management. Committees. Article 16. The Board of Management shall have the power to appoint committees, composed of members of the Board of Management and officers of the Company and of group companies. The Board of Management shall determine their duties and powers. Representation. Article 17. 17.1. The general authority to represent the Company and to bind it vis-a-vis third parties shall be vested in the Board of Management, and in all members of the Board of Management severally. The Board of Management may also confer authority to represent the Company, jointly or severally, on any one or more other persons, whether or not employees or officers of the Company, who would thereby be granted powers of representation with respect to such acts or categories of acts as the Board of Management may determine and shall register such grants at the trade registry of the Chamber of Commerce. The Board of Management may, in addition, grant to such persons such titles as it deems appropriate. 17.2. Members of the Supervisory Board will only be entitled to represent the Company in the situation described in Article 15.8. of these Articles of Association or in case of conflicts of interest between the members of the Board of Management and the Company. Supervisory Board. Article 18. 18.1. The Company shall have a Supervisory Board, consisting of at least three and at most eleven members. No member of the Supervisory Board may concurrently be a member of the Board of Governors of INTELSAT, or an employee, officer, or manager of INTELSAT or of any other intergovernmental organisation, including any intergovernmental organization remaining after the privatization of INTELSAT. A majority of the Supervisory Board's members shall not be a director, employee, officer, or manager of any Signatory or former Signatory to INTELSAT, or otherwise serve as a representative of any Signatory or former Signatory. At least two members of the Supervisory Board shall be independent and shall not be employees of, and shall not be or have functions similar to officers, representatives, members of the Board of Management or members of the Supervisory Board of the Company, of any shareholder or of any group company of the Company, or of any shareholder. The Supervisory Board, after consultation with the Board of Management, may nominate one or more individuals who do not satisfy the requirements of this Article if the reasons justifying a deviation from these requirements are explained in the nomination. In response to such a nomination, the General Meeting of Shareholders may appoint such individuals notwithstanding the requirements of this paragraph. 18.2. The General Meeting of Shareholders may change the number of members of the Supervisory Board, provided that the number shall be odd. The General Meeting of Shareholders may decide that the change shall be for a specified period of time or until the occurrence of a specified event. 18.3. Each member of the Supervisory Board shall serve for a maximum period of one year, which term shall expire at the close of the annual General Meeting of Shareholders held in the first year after the General Meeting of Shareholders at which the member was elected. Except as otherwise provided in these Articles of Association, each member of the Supervisory Board may be re-elected without limitation. 18.4. Persons who are seventy-two years of age or older cannot be appointed as a member of the Supervisory Board. A member of the Supervisory Board shall resign effective as of the date of the annual General Meeting of Shareholders in the financial year in which he or she reaches the age of seventy two. 18.5. The General Meeting of Shareholders shall appoint the members of the Supervisory Board. The Supervisory Board shall make a non-binding nomination for each vacancy, which may include one or more existing members of the Supervisory Board. Nominations may also be made by any shareholder that, at the time of the nomination, holds two percent (2%) or more of the issued and outstanding shares of the Company, and any existing member of the Supervisory Board who is not nominated by the Supervisory Board may declare themself available for reelection. The General Meeting of Shareholders shall first hold a vote on the nominations submitted by the Supervisory Board. If a vote is tied, the person (first) nominated by the Supervisory Board shall be appointed. Blank votes, abstentions, and invalid votes shall not count to calculate a majority. If, after the vote on the candidates nominated by the Supervisory Board, any vacancies on the Supervisory Board exist, the General Meeting of Shareholders shall hold a second vote on any duly submitted nominations submitted by a shareholder and any declarations of availability for reelection. 18.6. All nominations for the Supervisory Board and all declarations of availability for reelection shall be made in writing to the Company and, to be effective, must be received by the Company at least two weeks before the meeting. The Company shall promptly deposit the list of validly nominated candidates and valid declarations of availability for re-election at its office for inspection by any shareholder. The Board of Management and the General Meeting of Shareholders each may waive the time periods in this paragraph and the requirement in the previous sentence, provided that any waiver by the Board of Management shall be set forth in the notice convening the General Meeting of Shareholders. 18.7. Any nomination of a candidate for the Supervisory Board shall state who makes the nomination. If the nomination is made by one or more shareholders, it shall state the aggregate share in the Company's capital held by the shareholder(s) submitting the nomination. Any nomination or declaration shall state particulars in respect of the candidate's age, profession, the nominal value of shares the candidate holds in the capital of the Company, his or her present and past functions insofar as the same are of interest in connection with the performance of the duties of a member of a Supervisory Board, and any companies of which the candidate is already a Supervisory Board member. If such companies belong to the same group, it shall be sufficient to name such group. The reasons for the nomination or declaration shall be stated. 18.8. The General Meeting of Shareholders shall fix the remuneration for the members of the Supervisory Board. 18.9. The General Meeting of Shareholders shall at all times have the power to suspend or to dismiss every one of the members of the Supervisory Board. 18.10. If, following suspension of a member of the Supervisory Board, the General Meeting of Shareholders has not decided on his or her dismissal within three months, the suspension shall end. 18.11. A suspended member of the Supervisory Board shall be entitled to justify his or her actions before the General Meeting of Shareholders and may be assisted by an adviser when doing so, at his or her own expense. Article 19. 19.1. The Supervisory Board shall, subject to the limitations contained in these Articles of Association, supervise the Board of Management and the general state of affairs of the Company and the business connected with it and advise the Board of Management. In the performance of their duty the members of the Supervisory Board shall be guided by the corporate interest of the Company and the business connected with it. 19.2. The Board of Management shall timely provide the Supervisory Board with the information necessary for it to exercise its duties. As far as necessary for the fulfilment of his or her duties, each member of the Supervisory Board shall have access to the buildings and premises of the Company. 19.3. Each year, the Supervisory Board shall appoint one person to serve as Chairperson and one person to serve as secretary of the Supervisory Board. The proceedings at each Supervisory Board meeting shall be recorded in minutes signed by the Chairperson and the secretary of the meeting. The minutes of the Supervisory Board meetings shall be kept at the Company's office and each member of the Supervisory Board shall be provided with copies of these minutes and be allowed to inspect them during normal business hours. 19.4. The Supervisory Board shall draw up regulations to deal with matters that concern the Supervisory Board internally. The regulations may include an allocation of tasks amongst the members of the Supervisory Board. The regulations shall contain provisions concerning the manner in which meetings of the Supervisory Board are called and held. These meetings may be held by telephone conference or video conference, provided all participating members of the Supervisory Board can hear each other simultaneously. 19.5. The Supervisory Board shall meet as often as it deems necessary for the fulfilment of its task as mentioned in paragraph 1 of this Article. The Supervisory Board shall also meet if so requested by the Chief Executive Officer. Article 20. Resolutions of the Board of Management relating to the following matters shall be subject to prior approval of the Supervisory Board: a. issuance of more than four hundred and fifty-three thousand seven hundred and eighty (453,780) shares in the aggregate, whether in one single transaction or a series of transactions during the five-year period referred to in Article 5.15, and limitation or exclusion of preemptive rights on such shares, if the Board of Management has been authorized to do so; b. issuance and acquisition of debt instruments issued by the Company or of debt instruments issued by a limited partnership or a general partnership of which the Company is the general partner with full liability, all in excess of the equivalent of nine million Euro (EUR 9,000,000) or any other amount fixed by the Supervisory Board; c. application for listing or withdrawal of the official listing of shares, debt instruments or certificates of economic ownership; d. entry into or termination of a continuing co-operation by the Company with another company or partnership as general partner with full liability in a limited partnership or general partnership, if such co-operation or the termination thereof is of strategic significance for the Company or involves an investment in excess of the equivalent of nine million Euro (EUR 9,000,000) or any other amount fixed by the Supervisory Board; e. acquisition by it or by a dependent company of a participation in the capital of another company the value of which equals at least one quarter of the sum of the issued capital and the reserves of the other company, as shown in its balance sheet with explanatory notes and any far reaching change in the size of any such participation, for consideration in excess of the equivalent of nine million Euro (EUR 9,000,000) or any other amount fixed by the Supervisory Board; f. investments requiring an amount equal to at least one quarter of the sum of the issued capital and the reserves of the Company as shown in its balance sheet with explanatory notes, or in excess of the equivalent of nine million Euro (EUR 9,000,000) or any other amount fixed by the Supervisory Board; g. sale of assets of the Company, the fair market value of which exceeds nine million Euro (EUR 9,000,000) or any other amount fixed by the Supervisory Board; h. a proposal to amend these Articles of Association; i. a proposal to wind up the Company; j. application for voluntary liquidation and for a moratorium of payments; k. a proposal to reduce the issued capital; and l. resolutions as referred to in Article 29 of these Articles of Association. Indemnity. Article 21. 21.1. The Company shall indemnify any person who was or is a party or is threatened to be made party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or on behalf of the Company) by reason of the fact that he or she is or was a member of the Supervisory Board, the Board of Management, officer or agent of the Company, or was serving at the request of the Company as a member of the Supervisory Board, the Board of Management, officer or agent of another company, partnership, joint venture, foundation, trust or other enterprise, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful or outside of his or her mandate. 21.2. The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or proceeding by or in the right of the Company to procure a judgment in its favor, by reason of the fact that he or she is or was a member of the Supervisory Board, member of the Board of Management, officer or agent of the Company, or is or was serving at the request of the Company as a member of the Supervisory Board, member of the Board of Management, officer or agent of another company, partnership, joint venture, foundation, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defence or settlement of such action or proceeding if he or she acted in good faith and in a manner he or she reasonably could believe to be in or not opposed to the best interests of the Company and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall been adjudged to be liable for gross negligence or willful misconduct in the performance of his or her duty to the Company, unless and only to the extent that the court in which such action or proceeding was brought or any other court having appropriate jurisdiction shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnification against such expenses which the court in which such action or proceeding was brought or such other court having appropriate jurisdiction shall deem proper. 21.3. To the extent that a member of the Supervisory Board, member of the Board of Management, officer or agent of the Company has been successful on the merits or otherwise in the defence of any action, suit or proceeding referred to in paragraphs 1 or 2 of this Article or in the defence of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorney's fees) actually and reasonably incurred by him or her in connection therewith. 21.4. The termination of any action, suit or proceeding by a judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person mentioned in paragraph 1 of this Article did not act in good faith and not in a manner which he or she reasonably believed to be in, or not opposed to, the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful or outside of his or her mandate. 21.5. Any indemnification by the Company referred to in paragraphs 1 or 2 of this Article shall (unless ordered by a Court) only be made upon a determination that indemnification of a member of the Supervisory Board, a member of the Board of Management, officer or agent is proper in the circumstances because he or she had met the applicable standard of conduct set forth in paragraphs 1 or 2 of this Article. Such determination shall be made: (a) either by the Supervisory Board by a majority vote in a meeting consisting of members of the Supervisory Board who were not parties to such action, suit or proceeding; or (b) if the majority referred to under (a) adopts a resolution to that effect, by independent legal counsel in a written opinion; or (c) by the General Meeting of Shareholders. 21.6. Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon a resolution of the Board of Management with respect to the specific case upon receipt of an undertaking by or on behalf of the member of the Supervisory Board, member of the Board of Management, officer or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Company as authorized in this Article 21. 21.7. The indemnification provided for by this Article 21 shall not be deemed to exclude any other right to which a person seeking indemnification may be entitled under any by-laws, agreement, resolution of the General Meeting of Shareholders or resolutions of the disinterested members of the Board of Management or otherwise, both as to actions in his or her official capacity and as to actions in another capacity while holding such position, and shall continue as to a person who has ceased to be a member of the Supervisory Board, member of the Board of Management, officer or agent and shall also inure to the benefit of the heirs, executors and administrators of such a person. 21.8. The Company shall have the power to purchase and maintain insurance on behalf of any person who is or was a member of the Supervisory Board, member of the Board of Management, officer or agent of the Company, or is or was serving at the request of the Company as a member of the Supervisory Board, member of the Board of Management, officer, employee or agent of another company, partnership, joint venture, foundation, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity or arising out of his or her capacity as such, whether or not the Company would have the power to indemnify him against such liability under the provisions of this Article 21. 21.9. Whenever in this Article 21 reference is made to the Company, this shall include (in addition to the resulting or surviving company in case of merger or consolidation) any constituent company (including any constituent company of a constituent company) absorbed in a consolidation or merger which, if its separate existence had continued, would have had the power to indemnify its members of the Supervisory Board, member of the Board of Management, officers and agents, so that any person who is or was a member of the Supervisory Board, member of the Board of Management, officer or agent of such constituent company, or is or was serving at the request of such constituent company as a member of the Supervisory Board, member of the Board of Management, officer or agent of another company, partnership, joint venture, foundation, trust or other enterprise, shall stand in the same position under the provisions of this Article 21 with respect to the resulting or surviving company as he would have with respect to such constituent company if its separate existence had continued. General Meeting of Shareholders. Article 22. 22.1. At least one General Meeting of Shareholders shall be held every year, which meeting shall be held within six months after the close of the financial year. At this General Meeting of Shareholders the following subjects shall be considered: a. the written annual report prepared by the Board of Management on the course of business of the Company and the conduct of its affairs during the past financial year, and the report of the Supervisory Board on the annual accounts; b. the adoption of the annual accounts; c. the determination of any dividend distribution and further allocation of profits; d. the filling of any vacancies in the Board of Management or the Supervisory Board; and e. any proposals placed on the agenda by the Board of Management or by the Supervisory Board, together with proposals made by shareholders pursuant to paragraph 7 of this Article if and insofar as they have been received by the Board of Management at the latest six weeks before the day of the General Meeting of Shareholders. 22.2. Extraordinary General Meeting of Shareholders shall be held in the case referred to in Section 2:108a Civil Code and otherwise as often as the Supervisory Board, the Board of Management, or the Chief Executive Officer deems it necessary, without prejudice to what has been provided in paragraph 3 of this Article. 22.3. The Board of Management shall call a General Meeting of Shareholders if one or more of those having the right to vote who, together, hold at least ten per cent (10%) of the issued share capital make a request in writing to the Board of Management to that effect, stating the matter to be dealt with. If the Board of Management fails to call a meeting to comply with such a request in such manner that the General Meeting of Shareholders can be held within six weeks after the request has been received, then every one of those who have made such a request shall be entitled to call such a meeting, subject to relevant provisions of these Articles of Association. 22.4. General Meetings of Shareholders shall be held in Amsterdam, Haarlemmermeer (including Schiphol Airport), Rotterdam or The Hague. Resolutions adopted at a General Meeting of Shareholders held elsewhere are valid only if the entire issued share capital is present or represented. 22.5. The notice convening a General Meeting of Shareholders shall be issued by either the Board of Management, the Chief Executive Officer, the Supervisory Board, or the persons who according to the law or these Articles of Association are entitled to convene such a meeting. The notice shall be published in a nationally distributed daily newspaper published in the Netherlands, in an internationally distributed financial daily periodical of international repute, and in such other manner as may be required to comply with applicable stock exchange regulations or deemed appropriate by the persons convening the meeting. The notice convening a General Meeting of Shareholders shall be published or, where applicable, distributed in other ways no later than four weeks prior to the meeting. 22.6. The notice of the meeting shall state the place, date and hour of the meeting and shall contain the agenda of the meeting or shall state that the agenda will be available for inspection by the persons entitled to attend the meeting at the office of the Company and at such other place(s) as the Board of Management shall determine. If the agenda is not published, the Company shall provide copies, at no charge, on request to any person who is entitled to inspect the agenda. 22.7. The agenda shall contain such subjects as the person(s) convening the meeting shall decide, and furthermore such other subjects as one or more of those having the right to vote, who together hold at least ten percent (10%) of the issued capital, have so requested the Board of Management in writing at least seven days before the date of the notice convening the meeting. 22.8. If a proposal to amend the Company's Articles of Association is to be dealt with, a copy of that proposal, in which the proposed amendments shall be stated verbatim, shall be made available for inspection to the shareholders and others who are permitted by law to attend the meeting, at the office of the Company, as from the day the meeting of shareholders is called until after the close of that meeting, and each of them shall be entitled, upon his or her request, to obtain a copy thereof, free of charge. Chairperson of the General Meeting of Shareholders; Minutes; Attendance; Proxies. Article 23. 23.1. The Chairperson of the Supervisory Board or a person chosen by such Chairperson or by the Supervisory Board to act as chairperson for a General Meeting of Shareholders shall preside over a General Meeting of Shareholders. During discussion of or procedures for the appointment of members of the Supervisory Board, the General Meeting of Shareholders shall be presided by an independent person, who may be a civil law notary ("notaris"). 23.2. The chairperson of the meeting shall appoint the secretary of that meeting. The secretary of the meeting shall keep the minutes of the business transacted at the meeting, which minutes shall in evidence of their adoption be signed by the chairperson and the secretary. 23.3. If an official record is made of the business transacted at the meeting then minutes need not be drawn up and it shall suffice that the "notarieel proces-verbaal" (official notarial record) be signed by a "notaris" (civil law notary). Each member of the Board of Management shall at all times have power to give instructions to have an official notarial record made at the Company's expense. 23.4. The Board of Management may determine that any person entitled per a certain date, such date to be determined by the Board of Management and such date hereinafter to be referred to as: the "Record Date", to attend the General Meeting of Shareholders, may attend the General Meeting of Shareholders if (i) they are as such registered in a register (or one or more parts thereof) designated for that purpose by the Board of Management, and (ii) at the request of the applicant the holder of the register has notified the Company in writing prior to the general meeting that such applicant has the intention to attend the General Meeting of Shareholders, regardless of who will be applicant at the time of the General Meeting of Shareholders. The notification will state the name and the number of shares or depositary receipts for which the applicant is entitled to attend the general meeting. The provision under (ii) on the notification to the Company will also apply to an attorney authorized in writing by an applicant. 23.5. The record date mentioned in paragraph 4 and the date mentioned in said paragraph on which the notification of the intention to attend the General Meeting of Shareholders shall have been given at the latest cannot be fixed earlier than at a time on the seventh day, and not later than at a time on the third day, prior to the date of the General Meeting of Shareholders. The convocation of the General Meeting of Shareholders will include said times, the place of the meeting and the proceedings for registration and / or notification. 23.6. In case the Board of Management does not exercise the power referred to in paragraph 4 of this Article paragraphs 7 and 8 of this Article apply. 23.7. In order to attend the General Meeting of Shareholders the holders of bearer shares shall deposit a written statement of an affiliated institution at the office of the Company. Said statement shall certify that the number of bearer shares listed in such statement belongs to its collective depository, that the person mentioned in the statement is a joint owner of its collective depository to the extent of such number of bearer shares and, to the extent required by law, that the person mentioned in the statement will continue to be the joint owner of its collective depository to such extent until after the meeting. The announcement shall state the day on which the deposit of the statement of the affiliated institution shall be made at the latest; this day may not be set earlier than on the seventh day prior to the meeting. 23.8. In order to attend the General Meeting of Shareholders, all holders of registered shares and other persons entitled to attend the General Meeting of Shareholders, shall inform the Company in writing of their intention to be present at the meeting or to be represented not later than on the close of business on the seventh day prior to the day of the meeting, unless the Board of Management determines to permit notification within a shorter period of time prior to any such meeting. 23.9. Shareholders and other persons entitled to attend a General Meeting of Shareholders may cause themselves to be represented at any meeting by depositing with the Company a proxy duly authorized in writing, provided that such proxies shall be deposited not later than on the close of business on the date specified in paragraph 8 of this Article. Subject to the prior approval of the Supervisory Board, the Board of Management may determine further rules concerning the deposit of the powers of attorney; these shall be stated in the notice of the meeting. 23.10. The shareholders or their proxies must sign the attendance list, stating the number of the shares represented by them and - insofar as applicable - the number of votes to be cast by them. 23.11. The chairperson of the meeting shall decide on the admission to the meeting of persons other than those who are entitled to attend. 23.12. All matters regarding the admittance to the General Meeting of Shareholders, the exercise of voting rights and the result of voting, as well as any other matters regarding the proceedings at the General Meeting of Shareholders shall be decided upon by the chairperson of that meeting, with due observance of the provisions of Section 2:13 Civil Code. Voting right per share; Adoption of resolutions; Class Meetings. Article 24. 24.1. At the General Meeting of Shareholders, each share shall confer the right to cast one vote, unless the law or these Articles of Association provide otherwise. 24.2. All resolutions shall be validly adopted if passed by a simple majority of votes validly cast unless otherwise stated in the law or these Articles. Blank votes, abstentions and invalid votes shall not be counted as votes cast. The chairperson of the meeting shall decide on the method of voting and on the possibility of voting by acclamation. 24.3. In the General Meeting of Shareholders no votes may be cast in respect of any shares held by the Company or by a subsidiary of the Company. No votes may be cast in respect of a share the depositary receipt for which is held by the Company or by a subsidiary of the Company. However, the holders of a right of "vruchtgebruik" (usufruct) and the holders of a right of pledge on shares held by the Company or by a subsidiary of the Company, are nonetheless not excluded from the right to vote such shares, if the right of usufruct or the right of pledge was granted prior to the time such share was acquired by the Company or by a subsidiary of the Company. Neither the Company nor a subsidiary of the Company may cast votes in respect of a share on which it holds a right of usufruct or a right of pledge. 24.4. In case of a tie vote the Supervisory Board shall decide the matter being voted upon. Notwithstanding the foregoing, if there is a tie vote with respect to the appointment of a managing director for which a binding nomination has been made, the person first named in the nomination shall be appointed. 24.5. The usufructuary, who in conformity with the provisions of Section 2:88 Civil Code has no right to vote, and the pledgee, who in conformity with the provisions of Section 2:89 Civil Code has no right to vote, shall not be entitled to the rights which by law have been conferred on holders of depositary receipts for shares issued with the co-operation of the Company. 24.6. Where in these Articles of Association persons are mentioned who are entitled to attend meetings of shareholders, this shall include persons who pursuant to Section 2:88.4 or Section 2:89.4 Civil Code have the rights that by law have been conferred on holders of depositary receipts for shares issued with the co-operation of the Company. 24.7. A class meeting shall be held whenever a resolution by such meeting is required as a matter of law or pursuant to these Articles of Association. In addition, a class meeting shall be held if deemed appropriate by either the Board of Management or the Supervisory Board. 24.8. The requirements of Articles 22 up to and including 24 shall be applicable to resolutions that are required to be adopted by the meeting of holders of shares of a specific class, provided that: the notice shall be sent not later than the sixth day prior to the meeting; the shareholders in the class shall appoint the chairperson for the meeting at the meeting; and the holders of governance preference shares and the holders of financing preference shares may adopt all resolutions outside a meeting if so proposed by the Supervisory Board. A resolution outside a meeting shall be valid only if all holders of governance preference shares or all holders of financing preference shares, as applicable, have cast their votes, in writing by letter, cable, telex or telecopier, in favour of the proposal concerned. Article 25. 25.1. Resolutions of shareholders may be adopted in writing - which shall include cable, telefax and telex messages - instead of at a General Meeting of Shareholders, provided that these are adopted with a unanimous vote of all persons who are entitled to vote. 25.2. The Board of Management shall enter the resolutions that have been passed in the manner specified in the preceding paragraph of this Article 25, in the register of minutes of the General Meetings of Shareholders. Amendment of the articles of association. Article 26. 26.1. Amendment of these Articles of Association shall require a resolution of the General Meeting of Shareholders adopted by absolute majority. Nevertheless, in the first two years following incorporation of the Company, any amendment of Articles 12 and 24 shall require the approval of shareholders together holding two-thirds (66,66%) of all votes cast representing at least fifty percent of the issued share capital. Article 13 of these Articles and this Article 26 cannot be amended except by unanimity during a General Meeting of Shareholders at which all shareholders are represented; provided, however, that if Article 12 of these Articles of Association is at any time deleted, Article 13 of these Articles of Association shall also be deleted. An amendment of Article 12 or Article 24 of these Articles of Association so as to reduce the percentage referred to in these Articles to ten percent or less shall requiree a unanimous vote during a General Meeting of Shareholders at which all shareholders are represented. 26.2. As part of a resolution to amend the Articles of Association it may also be resolved that: a. the amendment of the Articles of Association shall become effective if and when a copy thereof will have been deposited at the Trade Registry; b. the Board of Management shall be authorized to perform the above-mentioned deposit; c. the Board of Management may decide at its entire discretion to make the deposit referred to in subparagraph a. above or to refrain from such deposit, as well as the date of the deposit; or d. the Board of Management shall only be allowed or obliged to proceed to such deposit in certain circumstances described in more detail in the resolution. Audit. Article 27. 27.1 The General Meeting of Shareholders shall appoint an accountant as referred to in Section 2:393 Dutch Civil Code, to examine the annual accounts drawn up by the Board of Management, to report on such accounts to the Supervisory Board and Board of Management, and to express an opinion with regard thereto. The accountant shall issue a certificate containing the results thereof, which shall be available for the shareholders. 27.2. If the General Meeting of Shareholders fails to appoint the accountant as referred to in paragraph 1 of this Article, the appointment shall be made by the Supervisory Board. 27.3. The appointment provided for in paragraph 1 of this Article may at all times be cancelled by the General Meeting of Shareholders and if the appointment has been made by the Supervisory Board, also by the Supervisory Board. Financial year; Annual accounts; Report of the Board of Management; Distribution of profits. Article 28. 28.1. The financial year of the Company shall coincide with the calendar year. 28.2. Within five (5) months after the end of each financial year - subject to an extension of up to six (6) months by the General Meeting of Shareholders by reason of special circumstances - the Board of Management shall cause annual accounts to be drawn up, consisting of a balance sheet as of the thirty-first day of December and a profit and loss account in respect of the preceding financial year, together with the explanatory notes thereto. The Board of Management shall furthermore prepare a report on the course of business of the Company in the preceding year. The Board of Management shall make the Annual Report available to shareholders for inspection within the time period set forth in this paragraph. 28.3. The Board of Management shall draw up the annual accounts in accordance with applicable generally accepted accounting principles and all other applicable provisions of the law. 28.4. The Company's annual accounts or its consolidated accounts may be prepared in a foreign currency if the activity of the Company or the international structure of its group justifies this. 28.5. The annual accounts shall be signed by all members of the Board of Management and all members of the Supervisory Board. Should any signature be missing, this shall be mentioned in the annual accounts, stating the reason for such omission. 28.6. Copies of the annual accounts, the annual report of the Board of Management, the report of the Supervisory Board, and the information to be added to each of such documents pursuant to the law shall be made available at the office of the Company for inspection by the shareholders and the other persons entitled to attend meetings of shareholders, as from the date of the notice convening the General Meeting of Shareholders at which meeting they shall be discussed, until the close thereof. The shareholders and those who are permitted by law to attend the General Meeting of Shareholders shall be allowed to obtain copies thereof free of charge. 28.7. The General Meeting of Shareholders shall adopt the annual accounts; this adoption shall constitute a release from liability for the members of the Board of Management and the members of the Supervisory Board with relation to all acts that appear from those documents or the result of which is contained therein, unless a provision has explicitly been made, and without prejudice to what has been or will be provided by law. Article 29. 29.1. From the profit made in any financial year, except as provided in this paragraph 1, the Company shall first distribute a dividend on each governance preference share that was issued and outstanding at any point during the financial year in question. The dividend shall equal the percentage referred to in the following sentence multiplied by the amount paid on such share at the commencement of the financial year for which the distribution is being made. The percentage referred to in the previous sentence shall be equal to the average of the European Inter Bank Offering Rate ("EURIBOR") for cash loans with a term of twelve months, increased by one hundred basis points. The average EURIBOR rate shall be determined on a weighted basis that reflects the number of days during the year on which each EURIBOR rate was in effect. If, during the financial year for which the distribution referred to above is being made, the amount paid on a governance preference share was decreased or if, pursuant to a resolution on a further call, was increased, the distribution shall be decreased or increased, as applicable, on a pro rata basis. If governance preference shares were issued in the course of a financial year, the dividend on such shares shall be decreased pro rata to reflect the number of days during which the share was unissued. If and to the extent the profit is not sufficient to make the payment referred to in this paragraph in full, the deficit shall be distributed against the reserves, with the exception of the reserve which was formed as a share premium upon the issuance of the financing preference shares. 29.2. In the event of cancellation with repayment of governance preference shares, the Company shall make a distribution on the cancelled governance preference shares as of the day of repayment. The distribution shall be calculated in accordance with the provisions of paragraphs 1 and 3 of this Article. The distribution shall be adjusted to reflect any distributions due for a prenons period but unpaid, without prejudice to the provisions of Section 2:105.4 Civil Code. 29.3. If in any financial year the profit as provided in paragraph 1 of this Article is not sufficient to make the distributions described above in this Article and, in addition, no distribution or only a partial distribution is made from the reserves pursuant to paragraph 1 of this Article, such that the deficit is not fully distributed, the provisions of paragraphs 2, 4 and 7 of this Article shall not be applied until the deficit has been recovered. 29.4. Insofar as the profit is sufficient, further: a. if possible, a dividend shall be distributed on each financing preference share equalling a percentage calculated on the nominal value, increased by the amount of share premium that was paid upon the first issuance of financing preference shares of and which percentage is related to the average effective yield on the prime interest rate on corporate loans in the United States of America as quoted in the Wall Street Journal, calculated and fixed in the manner as stated hereinafter. b. The percentage of the dividend for the financing preference shares is calculated by taking the average effective yield of the above-mentioned loans, for the last twenty exchange days, prior to the day on which financing preference shares were issued for the first time or on which the dividend percentage is adjusted, possibly increased or decreased by a maximum of one per cent point, depending on the then prevailing market conditions, as the Board of Management shall resolve subject to the approval of the Supervisory Board. c. For the first time on the first of January of the calendar year following the three year anniversary of the day on which one or more financing preference shares were issued for the first time, and every time three years later, the dividend percentage of all financing preference shares may be adjusted to the then average effective yield of the prime interest rate on corporate loans in the United States of America as quoted in the Wall Street Journal, calculated and fixed in the manner as stated in b. 29.5. If in any financial year the distributions provided for in paragraph 4 of this Article have not been made, the provisions of the first sentence of paragraphs 4 and 7 of this Article shall not be applied until the deficit has been recovered and after the provisions above in paragraphs 1 and 3 of this Article have become applicable. The Board of Management shall be authorized, subject to the approval of the Supervisory Board, to decide to distribute an amount equal to the deficit meant in the previous sentence against the reserves, with the exception of the reserve which was formed as share premium upon the issuance of the financing preference shares. 29.6. If financing preference shares are issued in the course of any financial year, the dividend on the financing preference shares shall be decreased pro rata for such financial year. 29.7. Out of the profit remaining after application of the previous paragraphs of this Article, such amounts shall be allocated to reserves as the Board of Management shall determine, subject to approval of the Supervisory Board. Insofar as any profit has not been distributed or allocated to reserve upon application of the previous Sections of this Article, such profits shall be at the disposal of the General Meeting of Shareholders, provided that no further dividend shall be distributed on the governance preference shares or the financing preference shares. 29.8. Subject to prior approval of the Supervisory Board and with due observance of Section 2:105 Civil Code, the Board of Management shall have power to declare one or more interim dividends, provided that the requirements of paragraph 13 of this Article are duly observed as evidenced by an interim statement of assets and liabilities. Interim dividends may be distributed on any single class of shares or group of classes of shares. 29.9. The General Meeting of Shareholders may resolve on a proposal made by the Supervisory Board wholly or partly to distribute dividends or reserves, instead of in cash, in the form of shares in the capital of the Company. 29.10. In the event of cancellation with repayment of financing preference shares, two distributions shall be made on the cancelled financing preference shares on the day of repayment: a. the first distribution shall be made out of the share premium reserve, if present, of the relevant shares and shall be equal to the balance thereof applicable to such shares; b. the second distribution shall be made out of the profit reserve and shall be calculated as much as possible in accordance with the provisions of paragraphs 4 and 5 of this Article, such distribution to be calculated pro rata temporis on the period from the day on which a distribution as meant in paragraphs 1 and 3 of this Article was made for the last time - or if the financing preference shares have been issued following such day: from the day of issuance - until the day of repayment, without prejudice to the provisions of Section 2:105.4 Civil Code. 29.11. A deficit, as meant in Section 2:104 Civil Code, may only be applied against the share premium formed upon the issuance of financing preference shares if all other reserves are depleted. 29.12. Shares which the Company holds in its own share capital shall not be counted when determining the division of any dividend to be distributed on shares. 29.13. The Company may only declare distributions to the extent its "eigen vermogen" (shareholders equity) exceeds the amount of the paid up and called portion of the share capital, plus the "wettelijke" (statutory) reserves. No distributions of profits may be made to the Company itself for shares that the Company holds in its own share capital. 29.14 With due observance of the provisions of paragraph 13 of this Article, the Board of Management may cause the Company to declare and pay distributions, in whole or in part, out of a share premium reserve or out of any other reserve shown in the annual accounts, not being a "wettelijke" (statutory) reserve. 29.15 Any distribution of profits shall be made only after the adoption of the annual accounts, from which it appears that the same is permitted. 29.16. Distributions pursuant to this Article 29 shall be payable as from a date to be determined by the Board of Management. 29.17. Distributions under this Article 29 shall be made payable at an address or addresses in the Netherlands, to be determined by the Board of Management, as well as at least one address in each country where the shares of the Company are listed on a stock exchange. 29.18. The Board of Management may determine the method of payment of cash distributions on shares with due observance of the provisions of paragraph 19 of this Article. 29.19. Cash distributions shall, if such distributions are made payable only outside the Netherlands, be paid in the currency of a country where the shares of the Company are listed on a stock exchange, converted at the rate of exchange determined by the Dutch Central Bank at the close of business on a day to be determined for that purpose by the Board of Management. If and to the extent that, on the first day on which a distribution is payable, the Company is unable to make any such payment because of governmental action or other exceptional circumstances beyond its control, the Board of Management may instead designate one or more addresses in the Netherlands where such payments shall be made. In such event the provisions of the first sentence of this paragraph shall no longer apply. 29.20. The person entitled to a distribution shall be the person in whose name the share is registered at the date to be determined for that purpose by the Board of Management in respect of each distribution. The date shall be between the date of determination of distributions and the date of payment. 29.21. Notice of distributions and of the dates and addresses referred to in the preceding paragraphs of this Article shall be published in the Netherlands in a daily newspaper and in such other manner as the Board of Management may deem desirable. 29.22. Distributions in cash that have not been collected within five years after they have become due and payable shall revert to the Company. Enquete. Article 30. 30.1. Each shareholder that holds two percent (2%) or more of the issued and outstanding shares in the share capital of the Company shall have the right to initiate an investigation into the management of the Company as provided for in Section 2:345 Civil Code and subsequent provisions (enquete). 30.2. The shareholder considering initiating enquete proceedings shall first, in writing, communicate his or her objections with respect to the conduct and commercial policy of the Company to the Board of Management. He or she shall allow the Company a reasonable time period to investigate the objections and take measures to remedy the same. Dissolution and winding-up. Article 31. 31.1. In the event a resolution is passed to dissolve the Company, the Company shall be wound-up by the members of the Board of Management. The provisions of Article 14 regarding the appointment, suspension and dismissal of a member of the Board of Management apply mutatis mutandis to a liquidator. 31.2. The General Meeting of Shareholders shall, upon the proposal of the Supervisory Board decide upon the remuneration of the liquidator(s) and the person responsible for supervising the liquidation. 31.3. The liquidation shall take place with due observance of the provisions of the law. During the liquidation period these Articles of Association shall, to the maximum extent possible, remain in full force and effect. 31.4. After settling the liquidation, the liquidators shall render an account in accordance with the provisions of the law. 31.5. After the Company has ceased to exist, the books and records of the Company shall remain in the custody of the person designated for that purpose by the liquidators for a seven-year period. Distribution to shareholders upon dissolution. Article 32. After payment of all liabilities and the cost of liquidation, the balance of the assets of the Company shall be divided as follows: a. in the first place, if possible, the holders of governance preference shares shall be paid the nominal value paid on their governance preference shares, increased by any shortfall in the payment pursuant to Article 29 and increased by an amount equal to the percentage on the nominal value referred to in Article 29, calculated for the period commencing on the first day of the last fully expired financial year prior to the dissolution and ending on the day of the distribution on governance preference shares referred to in this Article, on the understanding that all dividends which have been paid on the governance preference shares for this period shall be deducted from the distribution pursuant to this subparagraph; b. subsequently, the holders of financing preference shares shall, to the extent possible, be paid the nominal value paid on their financing preference shares, as well as the share premium paid on their shares upon the issuance of the same, increased by any shortfall in the payment pursuant to Article 29 and increased by an amount equal to the percentage on the nominal value referred to in Article 29.4.a (as possibly adjusted pursuant to the provisions of Article 29.4.b) on the nominal value after such amount has been increased by the share premium paid on their shares upon issuance of the same, calculated for the period commencing on the first day of the last fully expired financial year prior to the dissolution and ending on the day of the distribution on financing preference shares referred to in this Article, provided that all dividends which have been paid on the governance preference shares for this period shall be deducted from the distribution pursuant to this subparagraph; c. the balance then remaining shall be distributed among the holders of ordinary shares in proportion to the number of ordinary shares held by each of them. Unclaimed distributions upon dissolution. Article 33. Any amounts payable to shareholders or due to creditors which are not claimed within six (6) months after the last distribution was made payable shall be deposited with the "consignatiekas" (Public Administrator of Unclaimed Debts). EX-4.7 4 newskies20f-ex47_630.txt Exhibit 4.7 Amendment 2 AMENDMENT NUMBER 2 TO THE NSS-8 SPACECRAFT AND ASSOCIATED EQUIPMENT AND SERVICES CONTRACT (NSS-20-03-01) BETWEEN NEW SKIES SATELLITES N.V. AND BOEING SATELLITE SYSTEMS INTERNATIONAL, INC. This Amendment Number 2 to the NSS-8 Spacecraft and Associated Equipment and Services Contract Number NSS-20-03-01 dated and signed on 21 March 2001, as amended by one contract amendment, dated 15 January 2002 (as so amended, hereinafter referred to as "the Contract") is made on this 12th day of February 2003 by and between NEW SKIES SATELLITES N.V., a Dutch corporation, with its principal place of business located at Rooseveltplantsoen #4, 2517KR The Hague, The Netherlands (hereinafter referred to as "NSS"); and BOEING SATELLITE SYSTEMS INTERNATIONAL, INC., a Delaware corporation, with its principal place of business located at 2260 East Imperial Highway, El Segundo, CA, U.S.A., (hereinafter referred to as "Contractor"). WHEREAS: NSS and Contractor have previously entered into the Contract for provision of the NSS-8 communications satellite and other items, and WHEREAS: NSS and Contractor have previously incorporated Amendment Number 1 to the Contract on 15 January 2002, and WHEREAS: NSS and Contractor have reached agreement to modify certain additional Contract Articles and Contract Exhibits, NOW THEREFORE, in consideration of the agreement between the Parties, the Parties agree that the Contract is amended as follows below: 1. Revise the following Contract Articles: a. Article 3.A b. Article 4.A c. Article 5.H d. Article 8.D.6 e. Article 10.B f. Article 20 g. Article 29 h. Article 30.B i. Article 30.C.2 j. Article 30.E k. Article 34 l. Article 35 2. Add the following new Contract Articles: a. Article 30.A.3 b. Article 36 (formerly Article 35) 3. Replace the original EXHIBIT A, NSS-8 SPACECRAFT PERFORMANCE SPECIFICATION, dated March 2001 with the revised EXHIBIT A, NSS-8 SPACECRAFT PERFORMANCE SPECIFICATION, Revision A, dated January 2003. 4. Replace the original EXHIBIT B, NSS-8 STATEMENT OF WORK (SOW), dated 20 March 2001 with the revised EXHIBIT B, NSS-8 STATEMENT OF WORK, Revision A, dated January 2003. 5. Replace the original EXHIBIT D, NSS-8 COMPREHENSIVE TEST PLAN, dated 20 March 2001 with the revised EXHIBIT D, NSS-8 COMPREHENSIVE TEST PLAN, dated January 2003. 6. Replace the original EXHIBIT E, MILESTONE PAYMENT PLAN, dated 20 March 2001 with the revised EXHIBIT E, MILESTONE PAYMENT PLAN, dated January 2003. 7. Replace the original EXHIBIT F, CRITERIA FOR CONDITIONAL ACCEPTANCE, TOTAL CONSTRUCTIVE LOSS, AND ADJUSTMENT OF FIRM FIXED PRICE AND IN-ORBIT INCENTIVES, dated 20 March 2001, with the revised EXHIBIT F, CRITERIA FOR CONDITIONAL ACCEPTANCE, TOTAL CONSTRUCTIVE LOSS, AND ADJUSTMENT OF FIRM FIXED PRICE AND IN-ORBIT INCENTIVES, dated January 2003. The composite compiled Satellite Contract and relevant EXHIBITS are attached and made a part hereof. For clarity and continuity, the contract pages have been marked "Amendment 2" and "January 2003" in the upper right hand corner. This Amendment Number 2 results in a Contract price increase of US$ * . Save as provided for in this Amendment Number 2, the Contract, including all Exhibits thereto, shall otherwise remain unchanged. This Amendment Number 2 may be signed in separate counterparts, each of which, together, will constitute one agreement between the Parties. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. IN WITNESS WHEREOF, this Amendment Number 2 has been duly executed by the Parties on the date stated above. NEW SKIES SATELLITES N.V. By: /s/ Daniel S. Goldberg ------------------------------------- Daniel S. Goldberg ------------------------------------- Title: CEO ------------------------------------- BOEING SATELLITE SYSTEMS INTERNATIONAL, INC. By: /s/ Dennis R. Beeson ------------------------------------- Dennis R Beeson ------------------------------------- Title: Contracts Manager ------------------------------------- January 2003 - Amendment 2 NSS-8 Satellite Contract Contract Number: NSS-20-03-01 - -------------------------------------------------------------------------------- COMPOSITE COMPILED SATELLITE CONTRACT between NEW SKIES SATELLITES N.V. Rooseveltplantsoen # 4 2517KR The Hague The Netherlands and BOEING SATELLITE SYSTEMS INTERNATIONAL, INC. 2260 East Imperial Highway El Segundo, CA U.S.A. for NSS-8 Spacecraft and Associated Equipment and Services Contract No. NSS-20-03-01 Date: March 21, 2001 Confidential portions omitted and filed separately with the Commission pursuant to a request for confidential treatment. TABLE OF CONTENTS Page ---- ARTICLE 1. DEFINITIONS........................................................1 ARTICLE 2. SCOPE OF WORK/ORDER OF PRECEDENCE..................................7 A. Scope of Work............................................................7 B. Order of Precedence......................................................8 ARTICLE 3. ITEMS TO BE DELIVERED AND DELIVERY SCHEDULE........................9 A. Items/Promised Delivery Dates............................................9 B. Time of Essence.........................................................10 C. Contractor Responsibility...............................................10 ARTICLE 4. PRICES............................................................10 A. Total Firm Fixed Price..................................................10 B. Taxes...................................................................12 C. Adjustments.............................................................12 ARTICLE 5. METHOD OF PAYMENT.................................................14 A. Spacecraft Less Incentives..............................................14 B. Launch Services.........................................................15 C. Insurance...............................................................16 D. Operational In Orbit Incentives.........................................17 E. Prepayment of Operational In Orbit Incentives...........................18 F. Adjustment of Payments..................................................19 G. Disputed Payments.......................................................19 H. Currency/Place of Payment...............................................19 ARTICLE 6. DELIVERY, TITLE AND RISK OF LOSS OR DAMAGE........................20 A. Spacecraft Delivery.....................................................20 B. Delivery of Other Items.................................................20 C. Title................................................................21 ARTICLE 7. CERTIFICATION, INSPECTION, ACCEPTANCE, WAIVERS....................21 A. General Requirements....................................................21 B. Waivers.................................................................21 C. Inspections.............................................................22 D. Spacecraft Acceptance Procedure.........................................22 E. Acceptance Procedures for Other Items...................................23 F. Remedy of Defects.......................................................24 G. Post Acceptance Remedies................................................24 ARTICLE 8. LAUNCH SERVICES PROCUREMENT.......................................24 A. Procurement of Launch Services by Contractor............................24 B. Option for NSS To Procure Launch Services...............................26 C. Contractor Obligations..................................................27 D. Option To Change Launch Services........................................27 ARTICLE 9. INSURANCE.........................................................29 A. Launch Insurance........................................................29 B. Life Insurance..........................................................31 C. Incentives..............................................................31 ARTICLE 10. SUBCONTRACTS......................................................32 A. Subcontracts............................................................32 B. Key Subcontracts........................................................32 ARTICLE 11. PROPERTY ACCOUNTING...............................................33 A. Identification and Control..............................................33 B. Subcontractors..........................................................33 C. Inventory...............................................................33 ARTICLE 12. CHANGES REQUESTED BY CONTRACTOR OR NSS............................34 A. Contract Change Notice..................................................34 B. Acceptance of Change....................................................34 C. Non Refusal.............................................................34 D. Price of Changes........................................................35 E. Compressed Time Periods.................................................35 F. Changes To Meet Specifications..........................................35 ARTICLE 13. CONTRACT TECHNOLOGY...............................................35 A. Disclosure of Contract Technology.......................................35 B. Rights Granted in Contract Technology...................................36 C. Limitations.............................................................36 ARTICLE 14. RIGHT OF ACCESS, REPORTS, TESTING, MONITORING.....................36 A. Access..................................................................36 B. Reports.................................................................37 C. Performance Testing.....................................................37 D. Monitoring..............................................................38 E. Export Laws Compliance..................................................38 ARTICLE 15. WARRANTY..........................................................40 A. Warranty................................................................40 B. Remedies................................................................40 C. Warranty Period.........................................................40 D. Disclaimer..............................................................41 E. Not Exclusive Rights....................................................41 ARTICLE 16. DEFICIENCIES NOTED IN OTHER SPACECRAFT............................41 A. Qualification Heritage..................................................41 B. Notice..................................................................41 ARTICLE 17. TERMINATION FOR CONVENIENCE.......................................42 A. Termination.............................................................42 B. Termination Expense.....................................................42 C. Termination Charges.....................................................42 D. Subcontractor Settlements...............................................43 E. Inventory...............................................................43 F. Termination of Launch...................................................43 ARTICLE 18. TERMINATION FOR OTHER REASONS.....................................44 A. Termination by NSS for Cause............................................44 B. NSS Termination for Unsuccessful Launch.................................45 C. NSS Termination for Spacecraft Failure Prior to Delivery................45 D. NSS Termination for Excusable Delay.....................................46 E. Improper Termination....................................................46 F. Termination of Launch...................................................47 ARTICLE 19. EXCUSABLE DELAYS..................................................47 A. Non Launch Related Delays...............................................47 B. Launch Related Delays...................................................47 ARTICLE 20. KEY PERSONNEL.....................................................47 ARTICLE 21. DISPUTES..........................................................48 ARTICLE 22. INDEMNIFICATION...................................................49 A. General Indemnification.................................................49 B. Intellectual Property Indemnification...................................49 C. Indemnification For Taxes...............................................50 D. Procedures..............................................................50 ARTICLE 23. LIMITATION OF LIABILITY...........................................50 ARTICLE 24. DAMAGE TO PERSONS OR PROPERTY, ASSOCIATED WITH LAUNCH, INTERPARTY WAIVER.................................................51 ARTICLE 25. REPRESENTATIONS AND WARRANTIES....................................51 A. Mutual Representations and Warranties...................................51 B. Contractor's Special Representations and Warranties.....................51 ARTICLE 26. ASSIGNMENT........................................................52 ARTICLE 27. CONFIDENTIALITY...................................................52 A. Identification of Proprietary Information...............................52 B. Restrictions on Use, Disclosure.........................................53 C. Company Restricted Information..........................................54 D. Standard of Care........................................................54 E. Property of Disclosing Party............................................54 ARTICLE 28. PUBLIC RELEASE OF INFORMATION.....................................54 ARTICLE 29. NOTICES AND REPORTS, AUTHORIZED REPRESENTATIVES...................54 ARTICLE 30. OPTIONS...........................................................56 A. Optional Spacecraft.....................................................56 B. Replacement Spacecraft..................................................59 C. Optional Storage and Retest.............................................60 D. Intentionally Omitted...................................................61 E. In-Orbit Test Location..................................................61 ARTICLE 31. NSS FURNISHED INFORMATION AND PROPERTY............................61 A. Title...................................................................61 B. Risk of Loss............................................................61 C. Use.....................................................................61 D. Taxes...................................................................61 E. Encumbrances............................................................62 F. Return..................................................................62 G. Damages.................................................................62 ARTICLE 32. HAZARDOUS MATERIAL IDENTIFICATION AND MATERIAL SAFETY DATA..............................................62 ARTICLE 33. APPLICABLE LAWS...................................................62 ARTICLE 34. NOTIFICATION OF ANOMALY OCCURRENCE................................62 ARTICLE 35. GENERAL...........................................................64 A. Severability............................................................64 B. Cumulative Rights/Waivers...............................................64 C. Gender/Captions.........................................................64 D. Relationship of the Parties.............................................64 E. Construction............................................................65 F. Including/Time..........................................................65 G. Survival................................................................65 H. Entire Agreement........................................................65 Exhibit A - Spacecraft Performance Specifications Exhibit B - Statement of Work Exhibit C - Product Assurance Plan Exhibit D - Test Plan Exhibit E - Milestone Payment Plan Exhibit F - Criteria for Conditional Acceptance Exhibit G - Export Laws Compliance Program Exhibit H - Maximum Termination Liability Exhibit I - Reserved Exhibit J - Bill of Sale Exhibit K - Certificate of Performance Exhibit L - Launch Services * Exhibit M - * Spacecraft Baseline Specifications * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. January 2003 - Amendment 2 NSS-8 Satellite Contract Contract Number: NSS-20-03-01 - -------------------------------------------------------------------------------- CONTRACT FOR NSS-8 SPACECRAFT AND ASSOCIATED EQUIPMENT AND SERVICES THIS CONTRACT (the "Contract"), entered into as of this 21st day of March, 2001 (the "Effective Date of Contract" or "EDC"), by and between Boeing Satellite Systems International, Inc., a Delaware corporation, with its principal place of business located at 2260 East Imperial Highway, El Segundo, CA, U.S.A., ("Contractor"), and New Skies Satellites N.V., a Dutch corporation, with its principal place of business located at Rooseveltplantsoen # 4, 2517KR The Hague, The Netherlands ("NSS"). W I T N E S S E T H T H A T: The Parties hereto mutually agree as follows: ARTICLE 1. DEFINITIONS As used in this Contract: A. "Acceptance" with respect to any Item other than the Spacecraft shall be as defined in Paragraph 7.E. "Acceptance" with respect to the Spacecraft shall be as defined in Paragraph 7.D. B. "Alternative Launch Services Provider" means either Arianespace, Boeing Delta Launch Services or International Launch Services, which may be selected by NSS pursuant to Paragraphs 8.B. and 8.D. to Launch the Spacecraft. C. "Alternative Launch Vehicle" means either the Ariane 5, the Atlas V, the Delta IV or the Proton/Breeze M launch vehicle, which may be procured and provided by NSS pursuant to Paragraphs 8.B. and 8.D. D. "Authorized Representative" shall have the meaning set forth in Article 29. E. "Company Restricted Information" shall have the meaning set forth in Paragraph 27.A. F. "Conditional Acceptance" means that the Spacecraft does not meet the criteria for Unconditional Acceptance, but the Spacecraft does meet the criteria for conditional acceptance specified in Exhibit F, and that NSS has accepted the Spacecraft in accordance with Paragraph 7.D.2. G. "Contract" shall have the meaning set forth in the preamble. H. "Contract Change Notice" means a notice proposing a change in any requirement of this Contract as described in the Statement of Work and in accordance with Article 12. I. "Contract Data" means all Information, including Deliverable Data, generated, developed, utilized, referenced, and/or referred to in the performance of Work and/or relating to any Items. J. "Contract Intellectual Property" means all Patents, U.S. and foreign patent applications and patent disclosures; all patentable or unpatentable inventions, discoveries, improvements, and innovations; all U.S. and foreign trademarks, trademark applications, and all registrations and recordings thereof; all U.S. and foreign service marks, service mark applications, and all registrations and recordings thereof; trade names; all U.S. and foreign copyrights, copyright registrations, and applications to register copyrights; confidential or proprietary technical and business information and trade secrets; know-how; show-how; licenses (including in the form of an immunity from suit) to use the intellectual property of third parties (to the extent that the licensee can sublicense); software; technical manuals and documentation used in connection with the foregoing; and other intellectual property and proprietary information generated, developed, utilized, referenced, and/or referred to in the performance of Work and/or relating to any Items. K. "Contract Technology" means any and all Contract Data and Contract Intellectual Property. L. "Contracted Orbital Maneuver Life" means an Orbital Maneuver Life as set forth in Section 1.1.5 of the Spacecraft Performance Specifications. M. "Contractor" shall have the meaning set forth in the preamble. N. "Deliverable Data" means all Information required to be delivered to NSS under this Contract, including data and information contained in reports, documents, computer programs, drawings and graphs. O. "Deliverable Hardware" means all property other than Deliverable Data required to be delivered to NSS under this Contract, including Spacecraft, equipment, models, devices and the tangible media on which Deliverable Data is delivered. P. "Delivery" for Items other than the Spacecraft shall occur upon Acceptance as confirmed in writing by NSS as described in Paragraph 6.B. "Delivery" for the Spacecraft shall be as described in Paragraph 6.A. Q. "Effective Date of Contract" or "EDC" shall have the meaning set forth in the preamble. R. "Export Laws" shall have the meaning set forth in Paragraph 3.C. S. "Export Laws Compliance Program" means the program described in Exhibit G that Contractor will implement to ensure that Contractor obtains all governmental authorizations and approvals necessary to permit NSS to have access to all Work, facilities, data, information, documentation, books, records, testing and test results, and to take Delivery of all Items, as required by this Contract. T. "Information" means all data and information, including data and information of a technical, business or financial nature which has been documented on any tangible media, including writings, drawings, sound recordings, computer programs, pictorial representations and graphs. U. "In Service Date" means the date of Acceptance of the Spacecraft. V. "Insurance Agreement" means one (1) or more agreements providing for insurance of the Spacecraft between either Contractor or NSS and insurance underwriters as described in Paragraph 9.A, * * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. W. "Intentional Ignition" means the intentional ignition of the Launch Vehicle by the Launch Services Provider as defined in the Launch Services Agreement. X. "IOT" means in-orbit tests as specified in the Test Plan. Y. "Items" means any and all Deliverable Hardware and Deliverable Data. Z. "Key Subcontract" shall have the meaning set forth in Paragraph 10.B. AA. "Key Subcontractor(s)" shall have the meaning set forth in Paragraph 10.B. BB. "Launch" means the launch of the Spacecraft as defined in the Launch Services Agreement. CC. "Launch Services Provider" means Sea Launch, or an Alternative Launch Services Provider selected by NSS in accordance with Paragraphs 8.B. and 8.D., which will Launch the Spacecraft. DD. "Launch Services" means those services to be provided by the Launch Services Provider pursuant to the Launch Services Agreement. EE. "Launch Services Agreement" means the agreement between Contractor and Sea Launch providing for the Launch of the Spacecraft and containing the * , or a launch services agreement between NSS and an Alternative Launch Services Provider as described in Paragraphs 8.B. and 8.D. FF. "Launch Site" means the location from which the Launch of the Spacecraft will occur, as specified in the Launch Services Agreement. GG. * HH. "Launch Vehicle" means the Sea Launch vehicle procured and provided by Contractor, or an Alternative Launch Vehicle procured and provided by NSS pursuant to Paragraphs 8.B. and 8.D. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. II. "License to Practice" means a right to disclose, make, use, lease, offer for sale, market, advertise, promote, sell, dispose of and otherwise practice. JJ. "Milestone Payment Plan" means the milestone payment plan attached hereto as Exhibit E. KK. "NPV Discount Rate" means such rate specified in Paragraph 4.A. LL. "NSP" means Items that are not separately priced hereunder. MM. "NSS" shall have the meaning set forth in the preamble. NN. "Operational In Orbit Incentives" means the monies that may be earned by Contractor, as specified in Paragraph 4.A., based on the performance of the Spacecraft, which monies shall be payable to Contractor under the conditions set forth in Paragraphs 5.D. through 5.F. OO. "Optional Spacecraft" means the spacecraft that Contractor is obligated to deliver to NSS, if NSS elects its option(s) for such Delivery, as described in Paragraph 30.A. PP. "Orbital Design Life" means the orbital design life of the Spacecraft as specified in Section 1.1.4. of the Spacecraft Performance Specifications. QQ. "Orbital Maneuver Life" means the period of time following the In Service Date for which the Spacecraft has sufficient fuel to be operated at the Orbital Station, in accordance with stationkeeping requirements set forth in the Spacecraft Performance Specifications, and allowing sufficient fuel to deorbit the Spacecraft at the end of its life, also in accordance with the standards set forth in the Spacecraft Performance Specifications. RR. "Orbital Station" means the orbital location at which the Spacecraft is to be placed in geosynchronous orbit for Delivery to be specified by NSS pursuant to the Statement of Work. SS. "Patent" means a U.S. or foreign patent for an invention or a similar form of statutory protection such as a utility model or registered design. TT. "Party" or "Parties" means NSS and/or Contractor, who are the principals to this Contract. UU. "Prepaid Operational In Orbit Incentives" shall have the meaning set forth in Paragraph 5.E. VV. "Product Assurance Plan" means the product assurance plan attached hereto as Exhibit C. WW. "Promised Delivery Date" means the date promised for Delivery of an applicable Item pursuant to Article 3. XX. "Proprietary Information" shall have the meaning set forth in Paragraph 27.A. YY. "Replacement Spacecraft" means the replacement spacecraft that Contractor is obligated to deliver to NSS, if the Spacecraft fails after Intentional Ignition and before Delivery and if NSS exercises its option for such replacement spacecraft pursuant to Paragraph 30.B. ZZ. "Right to Publish" means a right to make public through any means and media whatsoever. AAA. "Right to Use" means a right to disclose, copy, duplicate, reproduce, modify and otherwise use. BBB. "Schedule Margin" means the time period between Contractor's planned Delivery of the Spacecraft and the Promised Delivery Date of the Spacecraft, expressed in calendar days. CCC. "Services" means all services and labor required to be provided or arranged for under this Contract by Contractor, including studies, development, research, design, analysis, manufacture, product assurance, product integration, transportation, launch, insurance and testing. DDD. "Spacecraft" means the satellite to be constructed by Contractor and launched and delivered to NSS. EEE. "Spacecraft Performance Specifications" means the performance specifications attached hereto as Exhibit A. FFF. "Statement of Work" means the statement of work attached hereto as Exhibit B. GGG. "Subcontract" means a subcontract including purchase orders, memoranda of understanding and all similar forms of agreement at any tier under this Contract. HHH. "Subcontractor" means a contractor under any Subcontract. III. "Test Plan" means the on-ground and in-orbit test plan attached hereto as Exhibit D. JJJ. "Total Firm Fixed Price" shall have the meaning set forth in Paragraph 4.A. KKK. "Total Verified Termination Expense" shall have the meaning set forth in Paragraph 17.B. LLL. "Unconditional Acceptance" means that the Spacecraft meets the criteria for unconditional acceptance specified in Paragraph 7.D.1., and that NSS has accepted the Spacecraft in accordance with Paragraph 7.D. MMM. "Work" means the production and Delivery of all Items and the provision of all Services under this Contract by Contractor. ARTICLE 2. SCOPE OF WORK/ORDER OF PRECEDENCE A. Scope of Work Contractor (i) shall provide the necessary personnel, material, equipment, services and facilities to perform the Work specified under the provisions of this Contract, including the Exhibits listed below, (ii) shall perform such work and (iii) shall deliver to NSS those Items listed under Article 3, in accordance with the Promised Delivery Dates specified therein. The Exhibits to this Contract, which are attached hereto and hereby made a part of this Contract, are as follows: Exhibit A - Spacecraft Performance Specifications Exhibit B - Statement of Work Exhibit C - Product Assurance Plan Exhibit D - Test Plan Exhibit E - Milestone Payment Plan Exhibit F - Criteria for Conditional Acceptance Exhibit G - Export Laws Compliance Program Exhibit H - Maximum Termination Liability Exhibit I - Reserved Exhibit J - Bill of Sale Exhibit K - Certificate of Performance Exhibit L - Launch Services * Exhibit M - * Spacecraft Baseline Specifications B. Order of Precedence In the event of conflict among the terms of this Contract (other than the Exhibits) and the Exhibits, the following order of decreasing precedence shall apply: - This Contract (Preamble and Articles 1 through 35) - Exhibit E Milestone Payment Plan - Exhibit B Statement of Work - Exhibit A Spacecraft Performance Specifications - Exhibit F Criteria for Conditional Acceptance - Exhibit C Product Assurance Plan - Exhibit D Test Plan - Exhibit L Launch Services * - Exhibit G Export Laws Compliance Program - Exhibit H Maximum Termination Liability - Exhibit J Bill of Sale * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. - Exhibit M * Spacecraft Baseline Specifications - Exhibit K Certificate of Performance ARTICLE 3. ITEMS TO BE DELIVERED AND DELIVERY SCHEDULE A. Items/Promised Delivery Dates All Items and Services to be delivered and the corresponding Promised Delivery Dates and points of Delivery are set forth below: - ------------------------------------------------------------------------------------------------------------------ Promised Delivery Point of Delivery Item No. Quantity Description Date - ------------------------------------------------------------------------------------------------------------------ 1. 1 Spacecraft as specified in Exhibit A and (1) * Orbital Station Exhibit B - ------------------------------------------------------------------------------------------------------------------ 2. 1 lot All Software Models, Databases, Analysis Per Exhibit B NSS Headquarters Tools or any other Data required to operate the Spacecraft - ------------------------------------------------------------------------------------------------------------------ 3. 1 lot All other documentation, Software and Data Per Exhibit B Per Exhibit B as specified in Exhibit B - ------------------------------------------------------------------------------------------------------------------ 4. 1 lot Launch Operations Support, Launch Services Per Exhibit B Per Exhibit B (subject to Paragraph 8.B.), Insurance (subject to Paragraph 9.A.2.), IOT, Mission Operations Support, Anomaly Investigation Support, and Visibility Services as specified in Exhibit B (no Deliverable Hardware will be delivered under this category (Paragraph 3.A, Item 4)) - ------------------------------------------------------------------------------------------------------------------ 5. 1 Spacecraft Simulator as specified in Per Exhibit B NSS Headquarters Exhibit B - ------------------------------------------------------------------------------------------------------------------
- ---------------- (1) If IOT is conducted at an orbital location other than the Orbital Station, the Promised Delivery Date shall be extended on a day-for-day basis for the number of days required to accomplish the relocation of the Spacecraft from the IOT location to the Orbital Station plus two (2) additional days for final check-out at the Orbital Station. The rate of relocation from the IOT location to the Orbital Station shall be specified by Customer provided that, if Customer requires the relocation at a rate in excess of one degree (1(degree)) per day, any additional station keeping fuel required to accomplish the relocation at a rate greater than one degree (1(degree)) per day shall be restored for purposes of calculating the Orbital Maneuver Life of the Spacecraft on the In Service Date. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. Any optional Items ordered by NSS hereunder are specified in Article 30 and would be delivered, if ordered, pursuant to the terms of Article 30. B. Time of Essence Contractor understands and agrees that the times for the Promised Delivery Dates set forth above are of the essence to this Contract. At EDC, Contractor represents and warrants to NSS that it has built in to its internal schedule for the Spacecraft program at least * (*) days of Schedule Margin. C. Contractor Responsibility Delivery of all Items under this Contract shall be at Contractor's expense. As provided in Paragraph 14.E., Contractor shall be responsible for securing all necessary export and import authorizations in a timely manner, including, as necessary to deliver to NSS and its representatives and contractors, technical data under all applicable laws, rules, and regulations, including the U.S. International Traffic in Arms Regulations, as the same may be amended (collectively, "Export Laws"). Notwithstanding the foregoing, Contractor shall not be responsible for the payment of any import duties related to Items delivered to NSS, or Services performed for NSS, in The Netherlands. ARTICLE 4. PRICES A. Total Firm Fixed Price The Total Firm Fixed Price for the Spacecraft and all other Items, including all software, documentation, and Services described in items numbered 1 through 5 in Paragraph 3.A., for the scope of the Work detailed in the Statement of Work, is * ($ * ) plus insurance premiums paid (the "Total Firm Fixed Price"). The itemization of the Total Firm Fixed Price of the Spacecraft and the other Items is as follows: * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. - ---------------------------------------------------------------------------------------------------------- Item No. Description Amount - ---------------------------------------------------------------------------------------------------------- 1. Spacecraft less incentives $ * - ---------------------------------------------------------------------------------------------------------- 2. Operational In Orbit Incentives $ * (1) - ---------------------------------------------------------------------------------------------------------- 3. Launch on Sea Launch Launch Vehicle $ * - ---------------------------------------------------------------------------------------------------------- 4. Insurance * %(2) - ---------------------------------------------------------------------------------------------------------- 5. Operations software and all other documentation, software and data as set forth in Exhibit B * - ---------------------------------------------------------------------------------------------------------- 6. Launch operations support/mission operations support $ * - ---------------------------------------------------------------------------------------------------------- 7. All other Services as set forth in Exhibit B except * Launch Services, insurance, Launch operations support and mission * operations support - ---------------------------------------------------------------------------------------------------------- 8. Spacecraft Simulator $ * - ---------------------------------------------------------------------------------------------------------- Total Firm Fixed Price $ * (3) plus insurance premium - ----------------------------------------------------------------------------------------------------------
(1) If paid over time, plus interest, at the London Interbank Offered Rate (London Quote) for three (3) months plus * percent (* %) per annum net present value interest factor (the "NPV Discount Rate"). (2) Indicative premium of insured value for Total Firm Fixed Price, including the amount of the insurance premium plus all accrued interest at the NPV Discount Rate on all money paid by NSS to Contractor (or directly to the Alternative Launch Services Provider and/or to insurance underwriters if NSS elects its option to procure Launch Services from an Alternative Launch Services Provider pursuant to Paragraphs 8.B. and 8.D. and insurance pursuant to Paragraph 9.A.2.), from Intentional Ignition through one (1) year thereafter, subject to adjustment based on market conditions and final scope. * (3) Subject to the exercise by NSS of the options to procure Launch Services and insurance directly pursuant to Paragraphs 8.B. and 8.D. and 9.A.2., respectively. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. The prices for any Items that are subject to options under this Contract are described in the particular Articles which set forth those options. B. Taxes The Total Firm Fixed Price and the prices for all other deliverables (including optional deliverables) under this Contract include all taxes, duties (except for import duties related to Items delivered to NSS, or Services performed for NSS, in The Netherlands), transportation, insurance and all other costs and charges associated with the performance of all Work. Contractor shall be responsible for payment of all taxes and duties (except for import duties related to Items delivered to NSS or Services performed for NSS in The Netherlands) which may be required under any present or future laws and which become due by reason of performance of the Work, and shall comply with all requirements of said laws, including payment of any interest or penalties related to or arising from such taxes and duties. For the purposes of this Contract, the price of the Spacecraft authorized by NSS to be delivered shall be FOB on station at the Orbital Station and the prices of all other Items authorized by NSS to be shipped shall be FOB NSS headquarters in The Netherlands, unless otherwise specified in writing by NSS. C. Adjustments 1. Conditional Acceptance. If, on the In Service Date, the Spacecraft does not meet the criteria for Unconditional Acceptance, but does meet the criteria for Conditional Acceptance, the * shall be adjusted in the manner described in Exhibit F, and NSS shall be entitled to refunds of amounts paid to Contractor prior to the In Service Date and adjustments in the payments due to Contractor on or after the In Service Date in an amount equal to the amount of the adjustment to the * calculated pursuant to Exhibit F. 2. Delayed Delivery. Contractor and NSS agree that TIME IS OF THE ESSENCE IN THIS CONTRACT, and that delayed Delivery of the Items required by this Contract past the Promised Delivery Dates may cause NSS to incur additional costs including loss of anticipated revenue, and other damages difficult or impossible to measure. Accordingly, Contractor and NSS agree to liquidated damages for late Delivery (up to the maximum number of days for which price reductions are applied) as provided below, which damages are intended to be compensatory and do not constitute a penalty. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment a. Amount of Adjustment. In the event any Spacecraft, * , to be delivered hereunder are not delivered on or before the Promised Delivery Date (excluding the number of days of excusable delay, if any, within the meaning of Article 19), then until such Spacecraft * are delivered, commencing on the first day following the Promised Delivery Date, the Total Firm Fixed Price of such Spacecraft * shall be reduced for each day of late Delivery as follows: -------------------------------------------------------------------------- Number of Days Price Adjustment of Late Delivery Per Day Maximum -------------------------------------------------------------------------- 1st - 30th day $ * $ * -------------------------------------------------------------------------- 31st day $ * $ * -------------------------------------------------------------------------- 32nd - 150th day $ * $ * -------------------------------------------------------------------------- (total) $ * -------------------------------------------------------------------------- b. Application of Adjustment. If the Spacecraft * is delivered late, NSS shall determine against which payments due Contractor, pursuant to the terms of this Contract, the adjustments specified above for late Delivery of such Spacecraft . If no payments are owed to Contractor, then NSS may obtain an immediate refund from Contractor for the amount of the price adjustment. * c. Sole Compensation. If Contractor does not meet the Promised Delivery Dates specified in the Contract, the price adjustments corresponding to the number of days of late Delivery specified in Paragraph 4.C.2.a. hereof shall be the sole compensation to which NSS shall be entitled for delays in Deliveries of the Spacecraft * for such period of time; provided however, that NSS may also exercise its right to terminate this Contract for cause or excusable delay, pursuant to Article 18. NSS' right or election to accept adjustments for late Delivery shall not be in lieu of its right to terminate for late Delivery pursuant to Article 18. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. d. Other Remedies. Nothing contained in this Paragraph 4.C.2. shall affect any right or remedy available to NSS, under this Contract * , for delay exceeding the number of days stated in Paragraph 4.C.2.a. e. Contractor Notice. Contractor shall immediately notify NSS of any circumstance that will cause or threaten to cause a delay in Delivery, including any reduction in available Schedule Margin. Contractor shall provide NSS, no less frequently than quarterly, with Contractor's best estimate of when Delivery will occur, which estimate NSS may then use for purposes of this Paragraph 4.C.2. and Paragraphs 18.A. and 18.D. * 3. NSS Provision of Launch Services. In the event NSS exercises its option to procure directly the Launch Services from an Alternative Launch Services Provider pursuant to Paragraphs 8.B. and 8.D., the Total Firm Fixed Price specified in Paragraph 4.A. shall be adjusted by the difference between * Dollars ($ * ) and the cost of the Launch Services procured by NSS from the Alternative Launch Services Provider and increased by the amount specified in Paragraphs 8.D.6. and 8.D.7., corresponding with the Alternative Launch Vehicle selected by NSS pursuant to Paragraphs 8.B. and 8.D. 4. NSS Provision of Insurance. In the event NSS exercises its option to procure directly the insurance pursuant to Paragraph 9.A.2., the Total Firm Fixed Price for the Spacecraft specified in Paragraph 4.A. shall be adjusted by the difference in the insurance cost specified in item 4 under Paragraph 4.A. and the cost of the insurance procured directly by NSS. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. ARTICLE 5. METHOD OF PAYMENT A. Spacecraft Less Incentives Payment by NSS to Contractor of the amount due for the Spacecraft (less incentives) specified in item 1 in Paragraph 4.A. of this Contract (and of the amounts due for Launch operations support/mission operations support and Spacecraft simulator specified in items 6 and 8 in Paragraph 4.A. of this Contract) shall be made in accordance with the Milestone Payment Plan and the conditions specified therein. The amounts specified in the Milestone Payment Plan shall in each case be paid by NSS to Contractor within thirty (30) days after receipt by NSS of an invoice from Contractor, accompanied by a certification from an officer of Contractor, that the particular milestone events for which payment is being claimed in each case have been completed and enclosing any other documentation necessary to demonstrate the completion of such milestones. Contractor shall submit no more than one (1) invoice per calendar month which shall list all completed milestones for that month. B. Launch Services 1. Launch Services Procurement by Contractor. Subject to Paragraph 5.B.2., payment by NSS to Contractor of the amount due for Launch Services specified in item 3 in Paragraph 4.A. of this Contract shall be in the form of reimbursements of payments that Contractor makes under the Launch Services Agreement with respect to the Launch of the Spacecraft, which reimbursement schedule is set forth separately in Exhibit E. Contractor shall submit invoices to NSS for reimbursement of payments that Contractor is to make to the Launch Services Provider at least thirty (30) days prior to the date such payments to the Launch Services Provider are due as specified in Exhibit E. NSS shall remit such amounts to Contractor on or before the date that Contractor's payments to the Launch Services Provider are due. Contractor shall promptly advise NSS of any changes in the due dates for payments due to the Launch Services Provider and shall adjust the schedule in Exhibit E for the corresponding payments by NSS accordingly. * 2. Launch Services Procurement by NSS a. NSS procurement. If NSS exercises its option to procure the Launch Services from an Alternative Launch Services Provider pursuant to Paragraphs 8.B. and 8.D. of this Contract, NSS shall pay amounts due for the Launch Services directly to the Launch Services Provider. Under these circumstances, in the event that the Spacecraft delivered for Launch is not able to meet the Contracted Orbital Maneuver Life and all other requirements of the Spacecraft Performance Specifications, * . NSS shall submit invoices to Contractor for any amounts due to NSS under this Paragraph 5.B.2.a. at least thirty (30) days prior to the date NSS' payments to the Alternative Launch Services Provider are due. Contractor shall remit such amounts to NSS on or before the date that NSS' payments to the Alternative Launch Services Provider are due. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. b. Associated Services. In the event Contractor wishes to acquire any associated services under the Launch Services Agreement with an Alternative Launch Services Provider other than those considered normal and customary, Contractor shall notify NSS, in writing. Upon receipt of such notice, NSS shall procure the specified associated services on Contractor's behalf and invoice Contractor for same, * C. Insurance 1. Procurement of Insurance by Contractor. Subject to Paragraph 5.C.2., payment by NSS to Contractor of the amount due for insurance specified in item 4 in Paragraph 4.A. of this Contract shall be in the form of reimbursements of payments that Contractor makes under the Insurance Agreement with respect to the insurance of the Spacecraft. The Insurance Agreement shall contain a payment schedule that is comparable to payment schedules set forth in similar agreements made by the selected insurance underwriters, and in any event, such payment schedule shall be no less favorable to Contractor than any other insurance agreements that Contractor may have with the selected insurance underwriters as of EDC. Contractor shall submit invoices to NSS for reimbursement of payments that Contractor is to make to the insurance underwriters at least thirty (30) days prior to the date such payments to the insurance underwriters are due. NSS shall remit such amounts to Contractor on or before the date that Contractor's payments to the insurance underwriters are due. Contractor shall promptly advise NSS of any changes in the due dates for payments due to the insurance underwriters that previously have been invoiced to NSS and shall adjust the schedule of the corresponding payments by NSS accordingly. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. * 2. Option for Procurement of Insurance by NSS. If NSS exercises its option to procure directly the insurance pursuant to Paragraph 9.A.2. of this Contract, NSS shall pay amounts due for the insurance directly to the insurance underwriters. D. Operational In Orbit Incentives Payment by NSS to Contractor of the amount due for the Operational In Orbit Incentives specified in item 2 in Paragraph 4.A. of this Contract (as may be adjusted pursuant to Exhibit F to reflect the performance of the Spacecraft on the payment due date) shall be made in forty-eight (48) equal quarterly payments. Each quarterly payment shall include interest on the amount of the remaining unpaid Operational In Orbit Incentives calculated at the NPV Discount Rate on the date of invoice. The quarterly payments of the Operational In Orbit Incentives (as may be adjusted pursuant to Exhibit F) shall be made within thirty (30) days after receipt by NSS of Contractor's invoices therefor, the first of which may be issued by Contractor no earlier than the sixtieth (60th) day after the In Service Date, and payment shall be due only if (i) Acceptance of the Spacecraft has occurred and (ii) from the In Service Date and for sixty (60) days thereafter, the Spacecraft has continued to meet or exceed the criteria for Conditional Acceptance as specified in Exhibit F. Forty-seven (47) subsequent quarterly payments of Operational In Orbit Incentives (as may be adjusted pursuant to Exhibit F) shall be invoiced by Contractor on ninety (90) day intervals after the first such invoice but only if, throughout each ninety (90) day period preceding an invoice date, the Spacecraft has continued to meet or exceed the criteria for Conditional Acceptance as specified in Exhibit F. Notwithstanding the foregoing, any quarterly Operational In Orbit Incentives payments made by NSS * shall be promptly refunded by Contractor to NSS (1) in full, if the Spacecraft does not continue to meet or exceed the criteria for Conditional Acceptance * , or (2) in part, if the performance of the Spacecraft * has degraded such that adjustments in the Operational In Orbit Incentives are appropriate pursuant to Exhibit F. Any degradations in the performance of the Spacecraft which are solely and directly attributable to the negligence or willful misconduct of NSS in connection with the operation of the Spacecraft after Delivery shall not give rise to any adjustments in the Operational In Orbit Incentives due to Contractor. E. Prepayment of Operational In Orbit Incentives NSS may prepay the Operational In Orbit Incentives at any time in an amount equal to the total outstanding amount of the unpaid balance of the Operational In Orbit Incentives plus interest on such outstanding amount calculated at the NPV Discount Rate from the date of the previous payment until the time of the final prepayment ("Prepaid Operational In Orbit Incentives"). The prepaid Operational In Orbit Incentives shall be refundable by Contractor to NSS (in the amount specified below) if, after such prepayment is made and prior to the end of the Orbital Design Life, the performance of the Spacecraft has degraded such that adjustments in the Operational In Orbit Incentives are appropriate pursuant to Exhibit F. Any such refund shall be due within thirty (30) days after Contractor's receipt of an invoice from NSS in an amount equal to the sum of (x) the amount of any Prepaid Operational In Orbit Incentives that, if not prepaid, would have become due after the date on which the Spacecraft's performance has degraded such that adjustments in the Operational In Orbit Incentives are appropriate pursuant to Exhibit F, plus (y) interest on each such amount at the NPV Discount Rate from the date prepaid to the date of such invoice. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment F. Adjustment of Payments Payments due to Contractor from NSS under this Article 5. may be adjusted by NSS to the extent * of the Spacecraft is adjusted pursuant to Paragraph 4.C. and Exhibit F of this Contract, and such adjustments in the payments shall be made by NSS in the manner specified therein. If * is adjusted because there has been Conditional Acceptance of the Spacecraft, then the amount of the adjusted Operational In Orbit Incentives shall be paid pursuant to Paragraphs 5.D. and/or E. above, as applicable. In addition, the actual performance parameters of the Spacecraft on the date of Conditional Acceptance shall be the baseline criteria for determining whether Contractor is entitled to * to be made by NSS after the In Service Date pursuant to Paragraphs 5.D. and/or E. * G. Disputed Payments If * an item for which an invoice has been submitted is not payable in accordance with the terms of this Contract, or that any milestone or condition established by this Contract as a prerequisite to payment has not been fulfilled, the applicable payment shall not be made until such time as NSS determines that such milestone or condition has been fulfilled. H. Currency/Place of Payment All payments and/or refunds due from either Party to the other shall be made in United States Dollars. Payments and/or refunds to a Party shall be made by wire transfer of funds to such place for payments and/or refunds as the receiving Party's Authorized Representative may designate from time to time in writing. Unless NSS otherwise notifies Contractor, all invoices for payments to be made by NSS shall be addressed as follows: * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. New Skies Satellites N.V. Rooseveltplantsoen # 4 2517KR The Hague The Netherlands Attn: Accounts Payable / Mr. Adrien Bull with a separate New Skies Satellites N.V. copy to: Rooseveltplantsoen # 4 2517KR The Hague The Netherlands Attention: Vice President, Space Segment Technology Facsimile No.: +31 70 306 4285 NSS-8 Program Office Building S12, M/S W341 c/o Boeing Satellite Systems, Inc. P.O. Box 92919 Los Angeles, CA 90009-2919 Attention: NSS-8 Program Manager Facsimile No.: 1-310-426-1443 Unless Contractor otherwise notifies NSS, all payments to be made by NSS to Contractor shall be made by wire transfer to the following account: Bank of America Los Angeles Main Office Los Angeles, CA. USA For deposit to the account of Boeing Satellite Systems International, Inc. Account No. * ARTICLE 6. DELIVERY, TITLE AND RISK OF LOSS OR DAMAGE A. Spacecraft Delivery Risk of loss or damage, and title, to the Spacecraft shall transfer from Contractor to NSS upon Delivery. Delivery of the Spacecraft shall occur upon Acceptance in writing by NSS pursuant to Paragraph 7.D., and delivery of a bill of sale for the Spacecraft in the form of Exhibit J. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. B. Delivery of Other Items Risk of loss or damage and title to all Items other than the Spacecraft shall transfer from Contractor to NSS upon Delivery. Delivery of such Items shall occur upon Acceptance in writing by NSS pursuant to Paragraph 7.E., and delivery of a bill of sale in the form of Exhibit J, except as otherwise provided in the Statement of Work. C. Title Contractor warrants that title to all Items delivered hereunder shall be good, marketable and rightfully conveyed, and shall be delivered free and clear of all liens, encumbrances, pledges and other interests whatsoever. Furthermore, Contractor agrees to execute and deliver all instruments reasonably required to perfect or evidence such title in NSS. ARTICLE 7. CERTIFICATION, INSPECTION, ACCEPTANCE, WAIVERS A. General Requirements Contractor is responsible for testing, demonstrating, delivering, * * the Spacecraft and all other Deliverable Hardware and Deliverable Data meet all of the requirements of this Contract, including the Spacecraft Performance Specifications. NSS' right of inspection or acceptance shall not be deemed a waiver of any defect, except as may be expressly agreed in writing by NSS in accordance with Paragraph 7.B. below. Prior to asking NSS to accept any Items and prior to Delivery, * B. Waivers Contractor shall immediately notify NSS at such time that Contractor determines that it will not be able to meet a particular Contract requirement or specification and seek a waiver from NSS. Nothing herein shall be deemed to require NSS to grant a waiver, but, if it is willing to consider doing so, and except for adjustments which are addressed in other Articles of this Contract, NSS and Contractor shall negotiate in good faith reasonable consideration (in the form of a reduction in the Total Firm Fixed Price of the Spacecraft or the price of the other Items to be delivered hereby, or a refund) for any requested waiver that represents a material deviation from Contract requirements or specifications. If the Parties cannot agree on an appropriate amount, * , subject to a determination by binding arbitration under Article 21 of an appropriate price adjustment. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. C. Inspections Preliminary inspections of Items may be made by NSS or its designated representatives at either Contractor's or, subject to any Subcontractor's consent, a Subcontractor's plant, as the case may be. Contractor shall use reasonable efforts to accommodate NSS' inspection requests and to further request such inspections at a Subcontractor's plant when reasonable and appropriate. All such inspections shall be in the company of a Contractor's representative; provided that, if after reasonable notice (orally or in writing) of NSS' inspection plans at a Subcontractor's facility, Contractor shall have failed to furnish such a representative, NSS may conduct an unaccompanied inspection, subject to Subcontractor's consent. Without limiting Contractor's own responsibilities in this respect, Contractor shall also remedy any and all defects identified by NSS in the course of such inspections. D. Spacecraft Acceptance Procedure Following a successful completion of the pre-shipment inspection of the Spacecraft, Contractor shall ship the Spacecraft to the Launch Site and proceed with the further testing and Launch of the Spacecraft in accordance with the Statement of Work and the Test Plan. Contractor shall notify NSS of the IOT schedule at least thirty (30) days prior to the Launch of the Spacecraft. The IOT shall be conducted in accordance with the Statement of Work and the Test Plan, and NSS' representatives shall be permitted to observe all phases of the IOT. When the IOT is completed, Contractor shall submit to NSS the test results and shall hold an acceptance review with NSS in accordance with the requirements of the Statement of Work and the Test Plan. At the conclusion of the acceptance review and upon arrival of the Spacecraft at the Orbital Station, * NSS shall either accept the Spacecraft in accordance with Paragraph 7.D.1. or Paragraph 7.D.2. hereof if NSS is reasonably satisfied with the IOT results * , or reject the Spacecraft. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. 1. Unconditional Acceptance. NSS shall be obligated to accept, in writing, without conditions, the Spacecraft only if (i) the Spacecraft has successfully passed the Test Plan (as may be modified by any waivers previously granted by NSS), (ii) it has been verified that the Spacecraft's Orbital Maneuver Life will be at least for the period specified in Section 1.1.5. of the Spacecraft Performance Specifications, (iii) the Spacecraft satisfies all the requirements specified in the Spacecraft Performance Specifications (as may be modified by any waivers previously granted by NSS), (iv) it has been verified that the Spacecraft, * will meet all the requirements of the Spacecraft Performance Specifications during the Orbital Design Life of the Spacecraft, and (v) * . 2. Conditional Acceptance. NSS shall be obligated to accept, in writing, the Spacecraft when it has been verified at the acceptance review that, although it does not meet the criteria for Unconditional Acceptance, the Spacecraft meets the criteria for Conditional Acceptance specified in Exhibit F. E. Acceptance Procedures for Other Items Except as specified in the Statement of Work, Acceptance of Items to be Delivered under the Contract other than the Spacecraft shall occur in accordance with the requirements of this Paragraph 7.E. Contractor shall certify to NSS the results of its inspection and tests of all such Items in a form acceptable to NSS. Based upon this certification, upon which NSS shall be entitled to rely, and any inspection or testing that NSS may conduct, NSS shall either accept the same in writing or notify Contractor in writing of those defects in which the Items are unacceptable. Upon receipt of a notice that any Item is unacceptable to NSS, Contractor shall remedy such Item. Upon remedy of such defects * , the Item shall be accepted by NSS in writing. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. F. Remedy of Defects Except as set forth in Paragraph 7.G. below with respect to a Spacecraft after Delivery, remedy of any defects in an Item shall be accomplished by Contractor at its expense, promptly upon receipt of notice thereof. Any Items found to be non-conforming during or after testing required under this Contract, * , and without charge to NSS, shall be promptly re-tested (together with any other potentially affected parts or systems) by Contractor both at the unit level, and, if NSS requests in its sole discretion exercised in good faith, at a system level or of the entire Spacecraft ( * ) after Contractor has remedied such non-conformance. G. Post Acceptance Remedies After Acceptance by NSS of the Spacecraft, Contractor shall fully cooperate with NSS and Contractor, at NSS' request, shall investigate and assist NSS in remedying, to the extent reasonably practicable, any defects that are identified on the Spacecraft (including, without limitation, through changes in operational procedures, software, or, where possible, Spacecraft configurations) until the end of the Orbital Maneuver Life. ARTICLE 8. LAUNCH SERVICES PROCUREMENT A. Procurement of Launch Services by Contractor Subject to NSS' right to select an Alternative Launch Services Provider pursuant to Paragraphs 8.B. and 8.D., the Spacecraft shall be Launched by Sea Launch on a Sea Launch Vehicle pursuant to the terms of the Launch Services Agreement between Contractor and Sea Launch. With respect to such Launch Services Agreement, Contractor represents, warrants and covenants to NSS as follows: 1. Representations and Warranties of Contractor. Contractor represents and warrants that the Launch Services Agreement between Contractor and Sea Launch: a. Validity. Is a legal, valid and binding obligation of Contractor and Sea Launch enforceable in accordance with its terms; * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. b. Consistency with Contract. Provides for the Launch of the Spacecraft (i) on a Launch Vehicle with a minimum performance capability of * kilograms (*kg) Spacecraft separated mass to Sea Launch's standard referenced geosynchronous transfer orbit pursuant to the Sea Launch User's Guide Revision B dated October, 2000 (D688-10009-1); (ii) in a manner that will enable Contractor to meet all of the requirements of the Spacecraft Performance Specifications; and (iii) within a time period that has been designated on a manifest for the Launch of the Spacecraft, and pursuant to other terms and conditions, that will enable Contractor to deliver the Spacecraft by the Promised Delivery Date and in accordance with all other terms and conditions of this Contract; and c. Other Terms and Conditions. Contains terms that are normal and customary in Sea Launch services agreements, * . 2. Covenants of Contractor. With respect to the Launch Services Agreement between Contractor and Sea Launch, Contractor covenants that it will: a. Performance. Perform its obligations and enforce its rights under such Launch Services Agreement in general and specifically with respect to the Launch of the Spacecraft hereunder; b. Amendment. Not amend, modify or waive any provisions of such Launch Services Agreement that would affect the Launch schedule of the Spacecraft or any other material term or condition regarding the Launch of the Spacecraft, without NSS' prior written consent; c. Contractor Postponements. Not request any postponement in the Launch of the Spacecraft unless such postponement is directed or consented to by NSS in writing; d. Sea Launch Postponements. Consult with NSS regarding any postponements in the Launch requested by Sea Launch and respond to such requested postponements as NSS may communicate; * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. e. NSS Participation. Provide NSS with all reports, data and documentation generated by Contractor or provided to Contractor by Sea Launch with respect to the Launch of the Spacecraft and provide NSS complete access to all meetings, reviews, Spacecraft/Launch Vehicle integration activities at the Spacecraft factory and at the Launch Site, and Launch Vehicle anomaly or failure investigation activities related to the Launch of the Spacecraft to the same extent as Contractor has access thereto; f. Amendments Requested by NSS. Use its best efforts to negotiate any changes or amendments to the Launch Services Agreement related to the Launch of the Spacecraft as may be requested by NSS, with NSS being responsible for any costs and other consequences (including changes in Launch dates) resulting from the changes requested by NSS to the extent such costs and consequences are imposed by Sea Launch in connection with the change or amendment; g. Termination. Either terminate the NSS Launch if NSS exercises its option to change to an Alternative Launch Services Provider pursuant to Paragraph 8.D. (with NSS being responsible for termination charges, if any, related to such termination) or, in lieu thereof, maintain the Launch Services Agreement in full force and effect at Contractor's own expense, for some other Contractor program. B. Option for NSS To Procure Launch Services Under the circumstances set forth in Paragraph 8.D., NSS may, up until * (*) day prior to the shipment of the Spacecraft to the Sea Launch facility at Long Beach, California, elect to procure Launch Services directly from any of the Alternative Launch Services Providers, and may use any of the Alternative Launch Vehicles, in lieu of using Sea Launch pursuant to Paragraph 8.A. NSS shall notify Contractor accordingly, with such notification to include the identification of NSS' selected Alternative Launch Vehicle and Alternative Launch Services Provider. Upon such notification, and before entering into a Launch Services Agreement, NSS shall solicit from Contractor any recommendations for provisions or requirements to be included in the Launch Services Agreement. Contractor shall respond to such solicitation within ten (10) days of receipt of the request from NSS. NSS shall then promptly enter into a Launch Services Agreement with the Alternative Launch Services Provider, giving due consideration to such Contractor recommendations and incorporating Contractor requirements where applicable. C. Contractor Obligations Contractor hereby agrees to perform all of the obligations pursuant to the Launch Services Agreement with respect to the accomplishment of the Launch, irrespective of whether the Launch Services have been procured pursuant to Paragraph 8.A. or Paragraph 8.B. The Parties agree that in the event of any ambiguity or inconsistency between any portion of this Contract and the Launch Services Agreement, this Contract will take precedence. Except as provided in Paragraphs 5.B.2.a. and b., the Parties acknowledge that the obligations of Contractor under this Paragraph 8.C. shall not include NSS' payment obligations to the Launch Services Provider if NSS procures the Launch Services pursuant to Paragraph 8.B. D. Option To Change Launch Services If after the EDC, * Sea Launch will not be able to Launch the Spacecraft in time to support the Promised Delivery Date of the Spacecraft plus * (*) days, * or if NSS wishes to have the Launch Services Agreement terminated for one of the reasons for termination * , NSS may elect to procure alternative Launch Services pursuant to Paragraph 8.B. In this event: 1. NSS shall promptly notify Contractor of such election in writing. 2. NSS shall procure a Launch on one of the Alternative Launch Vehicles from one of the Alternative Launch Services Providers. 3. Contractor shall refund to NSS all payments made by NSS to Contractor pursuant to Paragraph 5.B.1 (less, if Contractor in fact terminates the NSS Launch with Sea Launch, any termination charges due to Sea Launch pursuant to the * ) within * (*) days of receipt of NSS notice. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. 4. The Promised Delivery Date of the Spacecraft shall be adjusted, without penalty, to a new date as required to accomplish all work required to prepare to Launch the Spacecraft on the Alternative Launch Vehicle. Contractor agrees to support a Launch integration schedule that will not exceed * (*) months or any Launch integration schedule greater than * (*) months as required by the Alternative Launch Services Provider. Contractor shall use reasonable efforts to support a Launch integration schedule of less than * (*) months if such schedule can be accommodated by the Alternative Launch Services Provider. 5. * If NSS elects to procure an Alternative Launch Vehicle from a non-United States Alternative Launch Services Provider other than * , Contractor shall not be responsible for adjustments in the Promised Delivery Date pursuant to Paragraph 8.D.4. that exceed * (*) months to the extent such additional adjustments are required to comply with the Export Laws with respect to such other non-United States Alternative Launch Services Provider. 6. Contractor shall perform all obligations relative to the new Launch Services Agreement according to Paragraph 8.C. above. Contractor shall be entitled to payment for this work according to the following schedule, provided, however, that this payment shall be offset by work not actually performed by Contractor pursuant to Contractor's obligations relative to the original Launch Services Agreement: ---------------------------------------------------------- Alternate Launch Vehicle Payment Amount (US$) ---------------------------------------------------------- Ariane 5 * ---------------------------------------------------------- Atlas V * ---------------------------------------------------------- Delta IV * ---------------------------------------------------------- Proton/Breeze M * ---------------------------------------------------------- * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. 7. In addition to the fixed payment indicated above, Contractor will be entitled to a charge of * Dollars ($ *) per month for each month that the Promised Delivery Date is actually adjusted pursuant to Paragraph 8.D.4. 8. Payment of the fixed amount pursuant to Paragraph 8.D.6. will be made in three (3) equal installments based on Contractor reaching the following milestones: 1) Delivery of Spacecraft into storage; 2) Completion of Spacecraft FIST; and 3) Completion of IOT. The variable charge specified in Paragraph 8.D.7. will be payable in * installments beginning * (*) months after EDC, assuming NSS has elected its option to change Launch Services pursuant to this Paragraph 8.D. 9. If NSS terminates the Sea Launch for convenience * , the following adjustments to other payment milestones terms will be required. The milestone payment for completion of IOT will become payable at * (*) months after EDC. The payments of the Operational In Orbit Incentives will continue to start after IOT, but incentive payments will begin to accrue interest at the NPV Discount Rate commencing at * (*) months after EDC. 10. If the Alternative Launch Services Provider elected by NSS requires a three (3) axis vibration and acoustic test in addition to those tests performed for the Sea Launch Vehicle, then the Contract will be subject to an equitable adjustment pursuant to Article 12. ARTICLE 9. INSURANCE A. Launch Insurance 1. Procurement of Insurance by Contractor. If NSS has not exercised its option to procure insurance for Launch of the Spacecraft as contemplated by Paragraph 9.A.2., within nine (9) months prior to the Launch of the Spacecraft, Contractor shall submit to NSS for NSS' approval, the proposed Insurance Agreement which shall provide insurance for the Spacecraft from Intentional Ignition through one (1) year after Intentional Ignition. The amount of the insurance shall be equal to the Total Firm Fixed Price, including the amount of the insurance premium plus all accrued interest at the NPV Discount Rate on all money paid by NSS to Contractor (or directly to the Alternative Launch Services Provider and/or to insurance underwriters if NSS elects its option to procure Launch Services from an Alternative Launch Services Provider pursuant to Paragraphs 8.B. and 8.D. and insurance pursuant to Paragraph 9.A.2.); provided that, in the event of a successful Launch of the Spacecraft, at the time of successful separation of the Spacecraft from the Launch Vehicle, the insurance on the amount of the Operational In Orbit Incentives shall terminate. * The Insurance Agreement shall specify Contractor as the named insured until the In Service Date. NSS shall be specified as the named insured from the In Service Date to the conclusion of the term of the Insurance Agreement and as an additional insured during all other periods of the term of the Insurance Agreement. At NSS' request and expense, Contractor shall increase the amount of the insurance and/or the term of the Insurance Agreement or substitute partially therefor, * . NSS shall provide notice to Contractor of NSS' agreement or disagreement with the Insurance Agreement at least eight (8) months prior to the Launch of the Spacecraft. If there is a disagreement with the Insurance Agreement, the Parties shall meet promptly and seek to resolve the dispute. Upon approval of the Insurance Agreement by NSS, Contractor shall promptly enter into the Insurance Agreement with the insurance underwriters and shall provide a copy of such Insurance Agreement to NSS. NSS shall be permitted to participate in matters related to the Insurance Agreement as specified in the Statement of Work. The Insurance Agreement shall be assigned to NSS, at no cost to NSS, upon Acceptance of the Spacecraft. 2. Option for NSS to Procure Insurance. On or before * (*) months prior to the Launch of the Spacecraft, NSS may elect to procure directly the insurance described above in Paragraph 9.A.1. (and/or if required to be procured through Contractor, * ). In the event that NSS elects to procure such insurance, NSS shall notify Contractor of such election, no less than nine (9) months prior to the Launch of the Spacecraft. The Insurance Agreement shall specify Contractor as the named insured until the In Service Date. NSS shall be specified as the named insured from the In Service Date to the conclusion of the term of the Insurance Agreement and as an additional insured during all other periods of the term of the Insurance Agreement. Upon such notification, and before entering into an Insurance Agreement with the insurance underwriters, NSS shall solicit from Contractor any recommendations, for provisions to be included in the Agreement. Contractor shall respond to such solicitation within ten (10) working days of receipt of the request from NSS. NSS shall then promptly enter into the Insurance Agreement with the insurance underwriters, giving due consideration to such Contractor's recommendations. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. 3. Contractor Obligations. Contractor hereby agrees to perform all of the obligations of NSS pursuant to the Insurance Agreement with respect to the insurance of the Spacecraft Launch, irrespective of whether the insurance has been procured pursuant to Paragraphs 9.A.1. or 9.A.2. The Parties will meet to mutually agree upon the roles and responsibilities of the Parties regarding oversight and management of the Insurance Agreement, and document same. The Parties agree that in the event of any ambiguity or inconsistency between any portion of this Contract and the Insurance Agreement, this Contract will take precedence. The Parties acknowledge that the obligations that Contractor is to perform under this Paragraph 9.A.3. shall not include NSS' premium payment obligations to the insurance underwriters if NSS procures the insurance pursuant to Paragraph 9.A.2. B. Life Insurance Contractor shall use all reasonable efforts to cooperate with NSS and its insurance underwriters in connection with the procurement of any insurance policy relating to the operation of the Spacecraft after the expiration of the term of the Insurance Agreement, including the due diligence inquiry for and preparation of any such policy. In the event of a Launch failure or a failure of the NSS Spacecraft in orbit, Contractor shall use all reasonable efforts to cooperate with NSS and Contractor's and/or NSS' insurance underwriters, in connection with the investigation, preparation, filing and administration of any insurance claim pertaining to such Launch or Spacecraft failure. C. Incentives * * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. ARTICLE 10. SUBCONTRACTS A. Subcontracts Within ninety (90) days after the Effective Date of Contract, Contractor shall provide a list of all Subcontracts with a value in excess of Five Hundred Thousand Dollars ($500,000) and shall identify the work to be provided in each such Subcontract. Changes to this list shall be detailed in each quarterly report, to be provided by Contractor pursuant to the Statement of Work. B. Key Subcontracts Contractor agrees to enter into major Subcontracts (hereinafter referred to as "Key Subcontracts") for the Work specified below with the persons or entities (hereinafter referred to as "Key Subcontractors") listed below. Contractor further agrees that the Key Subcontractors are necessary for the successful completion of the Work to be performed hereunder. Contractor shall not change its Key Subcontractors without NSS' prior written consent. Key Subcontractor Work ----------------- ---- 1. * C/Ku TWTs 2. * Triple Junction GaAs Solar Cells 3. * Loop Heat Pipes 4. * Structure Assemblies 5. * Battery 6. * C/Ku Quad LNAs 7. * C Downconv/Ku Upconv 8. * Ku Downconv 9. * XIPS Thrusters 10. * Reflector Mirrors 11. * 45" DGS Reflector 12. * C-band T/R CP Feed * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. ARTICLE 11. PROPERTY ACCOUNTING A. Identification and Control Contractor shall be directly responsible for and accountable for all * , * , subsystems or systems (whether in its possession or, where feasible, the possession of any of its Subcontractors) which are designated to become the property of NSS pursuant to the terms of this Contract, and which are part of the Items to be Delivered under this Contract. For this purpose, Contractor shall establish and maintain a system to control, protect, preserve and identify, at all times and until the Delivery and Acceptance of the last Item to be delivered hereunder, all of the aforementioned property in its possession * B. Subcontractors Contractor shall, where feasible, require Subcontractors who are responsible for developing or manufacturing any of the Items to be delivered under the terms of this Contract to comply with provisions similar to the provisions of this Article. C. Inventory Contractor shall maintain an inventory of all NSS designated property in its possession that has been incorporated into the Spacecraft. Contractor shall retain and shall use its reasonable efforts to cause Subcontractors to retain, inventory records of property incorporated into the Spacecraft, until * Contractor and Subcontractors shall have inventory records covering the property incorporated into the Spacecraft available for NSS review and inspection, upon reasonable notice. If there are no property inventories in Contractor's or Subcontractors' possession, notification shall also be provided to that effect to NSS. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. ARTICLE 12. CHANGES REQUESTED BY CONTRACTOR OR NSS A. Contract Change Notice Any changes requested during the performance of this Contract which will add or delete Work, affect the design of the Spacecraft, change the method of shipment or packing, or place or time of any Delivery, or will affect any other requirement of this Contract, whether proposed by Contractor or NSS, shall be reflected by Contractor in writing as a contract change notice in accordance with the Statement of Work ("Contract Change Notice") issued at least thirty (30) days prior to the proposed date of the change. B. Acceptance of Change NSS shall notify Contractor within ten (10) business days after receipt of a Contract Change Notice whether or not it agrees with and accepts such change. If NSS agrees with and accepts the change, Contractor shall proceed with the performance of the Contract as changed, and an amendment to the Contract reflecting such change, and price and/or schedule adjustments, if any, shall be issued. If NSS does not agree to implement the change, and the Parties are unable to reach any other agreement regarding such change, Contractor shall proceed with the performance of the Contract, as unchanged. NSS shall be permitted to refer any dispute as to the price of a change to arbitration and/or authorize the change, subject to binding arbitration under Article 21 as to the change order price. In circumstances where NSS authorizes Contractor to go forward pending arbitration, Contractor shall proceed with the change, with the price effect to be so determined by arbitration; provided that, pending conclusion of such arbitration, Contractor shall be entitled to receive partial payment from NSS in the amount of the undisputed portion of the price of the change, within thirty (30) days after Contractor issues an invoice for such amount. NSS shall deposit the disputed amount of the change price into an interest-bearing escrow account to be allocated and distributed between the Parties at the conclusion of, and in accordance with, the arbitration. C. Non Refusal Contractor may not refuse any change that may be requested by NSS during the performance of this Contract as long as the NSS-requested change is within the general scope of this Contract and is technically feasible. D. Price of Changes All pricing determinations for changes shall be based on the materials and efforts involved in implementing the change (which shall be described to NSS in reasonable detail) and such materials and efforts previously required that will no longer be required. * Calculation of expense savings for Work that is not required, regardless of who requested the change, shall include a deduction for the applicable profit margin (also to be taken from the base amount of the Operational In Orbit Incentives). In addition, if certain supplies or materials already acquired for the Work are made obsolete or excess as a result of a change, NSS shall have the right to prescribe the manner of disposition of such supplies or materials. E. Compressed Time Periods The time periods specified in this Article and in the Statement of Work for proposing and approving changes may be shortened as necessary to accommodate exigent circumstances. F. Changes To Meet Specifications For the avoidance of doubt, in no event shall NSS be required to pay for any change, accept any deviation in performances or specifications, or allow any delay to the extent that Contractor is required to remedy any defects, including those that may become apparent through the testing or operation of other spacecraft, all such Work to be performed by Contractor at its sole cost and expense. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. ARTICLE 13. CONTRACT TECHNOLOGY A. Disclosure of Contract Technology From the Effective Date of Contract, and for a period of twenty-four (24) months after the Delivery of the Spacecraft, Contractor shall maintain copies of all Contract Technology (including Contract Data previously delivered to NSS hereunder). During such period, and thereafter to the extent such Contract Technology is retained by Contractor, NSS may have access to and/or request copies of such Contract Technology to the extent reasonably required for preparing, launching, testing, maintaining, operating, using or marketing capacity on or services that employ the Spacecraft. Within seven (7) days after receipt of such request, Contractor shall furnish copies of the requested Contract Technology. The cost of furnishing copies of such Contract Technology shall be borne by the requester and shall include the cost of collecting, editing, duplicating, assembling and shipping, to the extent not included in the Contract price, but shall not include any amount associated with the value of such Contract Technology. The Contractor may, by appropriate marking on Contract Technology, indicate that such shall be used only in accordance with the terms of this Contract. B. Rights Granted in Contract Technology 1. Contract Data. Contractor hereby grants to NSS an irrevocable, non-exclusive, royalty free, worldwide Right to Use and Right to Publish Contract Data in connection with * , launching, testing, maintaining, operating, * , and * the Spacecraft. 2. Contract Intellectual Property. For all Contract Intellectual Property owned by Contractor or under which Contractor has rights, Contractor hereby grants to NSS an irrevocable, non-exclusive, royalty free, worldwide License to Practice under such Contract Intellectual Property in connection with preparing, launching, testing, maintaining, operating, using, and marketing capacity on or services that employ the Spacecraft. C. Limitations NSS' rights to receive and/or disclose Contract Technology shall be subject to the Export Laws and Article 27 of this Contract. ARTICLE 14. RIGHT OF ACCESS, REPORTS, TESTING, MONITORING A. Access Subject to compliance with the Export Laws Compliance Program, NSS shall have the access rights specified below and as described in the Statement of Work. 1. Work. NSS shall be allowed reasonable access to Contractor's facilities and to all Work and Work in progress, and all data and information related to this Contract, for purposes of observation, inspection, examination and evaluation, at any reasonable time prior to Acceptance of the relevant Item or termination of this Contract and thereafter to the extent such data and information are of the type customarily retained in the ordinary course of business. 2. Subcontracts. Contractor shall provide access rights to NSS to the subject matters of the Key Subcontracts with * to the same extent as access is provided to Contractor. For all other Key Subcontracts, Contractor will use best efforts to negotiate terms that will provide access rights to NSS to the subject matter of the Key Subcontracts to the same extent as access is provided to Contractor. For all other Subcontracts, Contractor shall use reasonable efforts to negotiate terms that will provide access rights to NSS to the subject matter of the Subcontracts to the same extent as access is provided to Contractor. Such NSS access shall be coordinated through Contractor's product assurance program interface. B. Reports Subject to compliance with the Export Laws Compliance Program, Contractor shall deliver to NSS written progress and status reports, test data, and any final reports, in accordance with the requirements of the Statement of Work. All reports furnished pursuant to this Paragraph may be used and distributed by NSS in accordance with the provisions of this Contract. C. Performance Testing Subject to compliance with the Export Laws Compliance Program, NSS shall have the rights with respect to testing set forth below and in the Statement of Work. 1. Witness of Tests. All developmental, qualification and acceptance testing of Items required by this Contract may be witnessed by NSS' representatives at Contractor's or Subcontractor's plant (subject to Subcontractor's consent which Contractor shall use reasonable efforts to obtain) or at such other place as the tests are conducted or test results are monitored, and NSS shall be provided with access to and copies of same to the extent specified in the Statement of Work or requested by NSS. 2. Acceptance Tests. NSS shall have the right reasonably to specify the times and places for the undertaking of final acceptance testing of any Deliverable Hardware to be delivered in accordance with the requirements of this Contract. 3. Notice of Tests. If Contractor or any Subcontractor establishes the time, date, or location of any testing required under this Contract, Contractor shall provide, or cause the Subcontractor to provide, NSS with the advance notice specified in this Contract, or if not specified, with reasonable advance notice. Contractor reserves the right to perform any testing under this Contract without NSS' participation where such prior written notice was provided to NSS. 4. Test Plan. All testing under this Contract shall be undertaken in accordance with the Test Plan and the Statement of Work. D. Monitoring Subject to compliance with the Export Laws Compliance Program, approximately four (4) of NSS' personnel and consultants shall be located at the manufacturing site of the Spacecraft for the purpose of monitoring the progress of the Work as specified in the Statement of Work. Contractor shall provide office and other facilities to such personnel and consultants as described in the Statement of Work. In addition, Contractor shall provide adequate parking spaces for NSS on-site personnel and consultants. NSS personnel and consultants shall have twenty-four (24)-hour access to the office space provided hereunder. The witnessing of tests and the monitoring of progress of Work under this Article 14 shall be subject to Contractor's personnel accompanying NSS personnel during such activities. Contractor shall obtain from the Key Subcontractors the rights for Contractor's personnel and for NSS' personnel and consultants to access the Work in progress related to the Spacecraft at the Key Subcontractors' plants. To the extent Contractor has similar rights of access to the plants of other Subcontractors, it shall permit NSS' personnel and consultants to accompany Contractor's personnel to such plants, subject to the consent of the Subcontractor, if required. E. Export Laws Compliance The export of any Items under this Contract is subject to the approval of the United States government through its relevant agencies and bodies. Contractor shall promptly implement the Export Laws Compliance Program described in Exhibit G to obtain and maintain all authorizations and consents under the Export Laws necessary to permit NSS to take Delivery of all Items and to permit NSS, the Launch Services Provider, the insurance underwriters or other third parties with a need to access to information supplied by Contractor or Subcontractors under any of the provisions of the Contract, and their respective personnel and consultants, to have full access to the Work, reports, testing and monitoring and all information, documents and data related thereto, as specified in this Contract. Contractor shall use best efforts to obtain such authorizations and consents prior to the Spacecraft system-level preliminary design review as set forth in the Statement of Work. Pending receipt of such authorizations and consents, Contractor shall employ Satellite Consulting, Inc. as an independent auditor who will provide a minimum of two (2) equivalent man - months per month of auditor support. Individuals provided by Satellite Consulting, Inc. for this effort shall have access to all Items and all Work, reports, testing and monitoring and all information, documents and data related thereto, to which NSS' and any necessary third parties' access is precluded by the Export Laws. The independent auditor will have full authority to exercise any and all access and related rights under the Contract, with respect to the material and information to which it is given access under the foregoing. At the time of receipt of the authorizations under the Export Laws Compliance Program, the independent auditor will transition its access rights to NSS as permitted by the Export Laws, and NSS shall assume full access rights with respect thereto. For clarification purposes, the cost of Satellite Consulting, Inc.'s services shall be borne by Contractor until 5 August 2001; after which, and until such time as Satellite Consulting, Inc. obtains the proper export authorizations, NSS will reimburse Contractor for any Satellite Consulting, Inc. costs incurred by Contractor under the NSS-8 program. Contractor may invoice NSS for these Satellite Consulting, Inc. costs on a monthly basis (with net 30 days payment terms) commencing the month of December 2001. Upon receipt by Satellite Consulting, Inc. of proper export authorization, Contractor shall terminate its NSS-8 program purchase order with Satellite Consulting, Inc. and invoice NSS for any remaining amounts due. NSS shall then assume any future procurement responsibility for Satellite Consulting, Inc.'s services under the NSS-8 program. To the extent any access by NSS specified in this Contract is not permitted by the Export Laws, the independent auditor specified above shall continue to have access and the authority to exercise access-related rights on behalf of NSS. Nothing in this Article 14 shall preclude NSS and any necessary third parties, during the period when the Export Laws Compliance Program is pending, from having access to any Items and all Work, reports, testing and monitoring and all information, documents and data related thereto, to the extent such access is not precluded by the Export Laws. ARTICLE 15. WARRANTY A. Warranty Contractor warrants that, notwithstanding prior inspection or Acceptance by NSS: 1. All Deliverable Hardware shall be in good working order and free from all defects in workmanship and materials and shall conform with the requirements of this Contract; 2. All Deliverable Data shall conform with the requirements of this Contract; and 3. All Services shall be performed in a skillful and workmanlike manner and shall conform with the requirements of this Contract. Contractor shall pass through to NSS any warranties regarding Launch Services that Contractor obtains from the Launch Services Provider. B. Remedies Promptly after receipt of written notification from NSS that Work is defective or non-conforming, Contractor shall, * , either (i) correct, repair or replace, at Contractor's sole expense, any defective or non-conforming Work so as to comply with the above warranties, or (ii) reimburse NSS for such portion of the price as is equitable; provided that, to the extent NSS recovers amounts for particular defective work by obtaining a reduction in the Firm Fixed Price pursuant to Exhibit F, NSS shall not be entitled to receive a warranty reimbursement for such defect. The remedies stated herein shall not apply to the extent a defect results from willful misconduct or gross negligence on the part of NSS, its employees, agents, consultants or representatives. C. Warranty Period The above warranties shall continue for a period of * (*) years from the date of Acceptance of each Item, except, however, all corrections, repairs and replacements made pursuant to this Article by Contractor after Acceptance shall be so warranted for a period of * (*) years from the date of Acceptance of such corrections, repairs or replacements. The warranties in this Article shall not apply to a Spacecraft after Acceptance; provided the foregoing shall not be construed to relieve Contractor of any liability that may arise out of any willful, knowing or reckless misrepresentation to NSS by Contractor hereunder. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. D. Disclaimer Except as otherwise set forth herein and in other articles of this Contract, Contractor expressly disclaims any express or implied warranties, including without limitation, warranties of fitness for a particular purpose and merchantability. E. Not Exclusive Rights * ARTICLE 16. DEFICIENCIES NOTED IN OTHER SPACECRAFT A. Qualification Heritage * B. Notice Whether before or after Acceptance of the Spacecraft, Contractor shall immediately notify NSS of any circumstance, known to or suspected by Contractor that would make any statement set forth in Paragraph 16.A., if made at the time, no longer the case, and of any other data available to it that indicates (i) that conditions exist which affect or may affect adversely the Spacecraft operation, or (ii) that the Spacecraft performance and/or operation depart or may depart from that expected from the program documentation at any time during the period of the Spacecraft's Orbital Maneuver Life, or (iii) that the Spacecraft does not meet all the requirements of the Spacecraft Performance Specifications, or can not be reasonably predicted to be able to meet the requirements of the Spacecraft Performance Specifications for the full Orbital Maneuver Life. Contractor shall take prompt appropriate corrective measures at its sole cost in any Spacecraft that has not been Launched so as to eliminate all the deficiencies so noted or suspected, to NSS' satisfaction. NSS shall have the right to reject, until Intentional Ignition any Spacecraft that does not meet the requirements of this Article 16. Thereafter, NSS' obligations to complete Delivery and Acceptance of the Spacecraft shall be governed by other provisions of this Contract. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. ARTICLE 17. TERMINATION FOR CONVENIENCE A. Termination NSS may, prior to Contractor's completion of all Work, by written notice issued by NSS' Authorized Representative, terminate this Contract (except for any Items for which Delivery and Acceptance have been completed) for its convenience, whereupon Contractor shall cease Work in accordance with the terms of said notice. B. Termination Expense Contractor shall promptly submit to NSS a detailed written statement of Contractor's total out of pocket expense incurred in the performance of Work and total out of pocket expenses resulting from such termination as determined in accordance with Contractor's standard accounting practices and, at NSS' request and expense, verified to NSS by Contractor's or other reputable independent certified public accountants (hereinafter referred to as "Total Verified Termination Expense"). C. Termination Charges Termination charges shall be negotiated by NSS and Contractor based upon the Total Verified Termination Expense plus a profit margin of * percent ( *%). 1. Maximum Charge. In no event shall termination charges exceed the lesser of (i) the Total Verified Termination Expense plus the profit margin specified above or (ii) the Total Firm Fixed Price, including the net present value of Operational In Orbit Incentives determined at the NPV Discount Rate on the date of termination, but excluding the cost of the Launch Services and/or insurance if procured by NSS pursuant to Paragraphs 8.B. and 8.D. and 9.A.2., or (iii) based upon the date of termination, the amount specified in the Maximum Termination Liability Schedule shown in Exhibit H hereto. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. 2. Payment. Termination charges, as negotiated, less (i) amounts previously paid by NSS pursuant to this Contract and (ii) amounts representing termination charges attributable to Deliverable Hardware and the Launch Services Agreement and Insurance Agreement and other rights associated therewith (to the extent NSS does not elect to retain same) which Contractor or any of its Subcontractors elects to retain (which election Contractor shall make as to each item for which it has another reasonably compatible use), shall be paid by NSS (or, if a net refund is due, by Contractor) within sixty (60) days after receipt of Contractor's (or, if applicable, NSS') invoice therefor. D. Subcontractor Settlements Contractor shall advise NSS of all proposed settlements with vendors and Subcontractors in the event of termination, and Contractor further shall not enter into any binding settlement until NSS has approved the proposed settlement or until thirty (30) days have elapsed from the date when NSS was advised of the proposed settlement, without approval or objection by NSS. E. Inventory In the event of such a termination, all inventory generated under this Contract, except that retained by Contractor or Subcontractors pursuant to Paragraph 17.C.2., shall become the property of NSS. F. Termination of Launch * * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. ARTICLE 18. TERMINATION FOR OTHER REASONS A. Termination by NSS for Cause NSS may, by written notice issued by NSS' Authorized Representative, terminate this Contract, in whole or in part (except for any Items for which Delivery and Acceptance have been completed) if: 1. there is a cumulative delay in Delivery of an Item past the Promised Delivery Date, which is not excusable pursuant to Article 19 hereof, and which exceeds a cumulative period of * ( * ) days or it * ; 2. * 3. Contractor commits a material breach of this Contract or otherwise fails to perform any other material provisions of this Contract, and such breach or failure is not cured within thirty (30) days from the date of such notice; or 4. Contractor shall (i) apply for or consent to the appointment of a receiver, trustee, custodian, intervenor or liquidator of itself or substantially all of its assets; (ii) file a voluntary petition in bankruptcy, admitting, in writing, that it is unable to pay its debts as they become due; (iii) make a general assignment for the benefit of creditors; (iv) file a petition or answer seeking reorganization or arrangement with creditors to take advantage of any bankruptcy or insolvency laws; (v) file an answer admitting the material allegations of, or consent to, or default in answering, a petition filed against it in any bankruptcy, reorganization or insolvency proceeding where such action or failure to act will result in a determination of bankruptcy or insolvency; or (vi) downsize or discontinue its commercial communications spacecraft manufacturing business such that Contractor's ability to perform its obligations under this Contract is impaired. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. Upon termination pursuant to this Paragraph 18.A., NSS shall receive, within thirty (30) days of termination, (i) a full refund of all payments made by NSS under this Contract (including any amounts paid directly or indirectly for Launch Services and insurance pursuant to Articles 8 and 9, unless NSS elects to retain or obtain the rights to such Launch Services and/or insurance) with respect to the terminated Items, plus (ii) interest on such amounts at the NPV Discount Rate, plus (iii) the full amount of the price adjustments for late Delivery specified in Paragraph 4.C.2.a., in which event NSS shall relinquish all of its rights to Items not retained by NSS or for which Delivery and Acceptance have not been completed, and return or destroy all Deliverable Data not related to Items for which Delivery and Acceptance have been completed previously that is in tangible form. B. NSS Termination for Unsuccessful Launch If there is not a successful Launch of the Spacecraft due to non-performance of the Launch Vehicle, NSS may, by written notice issued by NSS' Authorized Representative, terminate this Contract with respect to the Spacecraft and any related deliverable items. Upon termination pursuant to this Paragraph 18.B., NSS shall receive immediately after Contractor receives insurance proceeds from such unsuccessful Launch but in no event later than sixty (60) days after termination, (i) a full refund of all payments made by NSS under this Contract (including any amounts paid directly or indirectly for Launch and insurance pursuant to Articles 8 and 9) with respect to the terminated Items (but specifically excluding any price adjustments for late Delivery specified in Paragraph 4.C.2.a.), plus (ii) interest on such amounts at the NPV Discount Rate, in which event NSS shall relinquish all of its rights to Items related to such Spacecraft for which Delivery and Acceptance have not been completed, and return or destroy all Deliverable Data not related to Items for which Delivery and Acceptance have been completed previously that is in tangible form. * C. NSS Termination for Spacecraft Failure Prior to Delivery If there is a successful Launch of the Spacecraft, but due to Spacecraft anomalies, Unconditional Acceptance or Conditional Acceptance does not occur, NSS may, by written notice issued by NSS' Authorized Representative, terminate this Contract with respect to such Spacecraft and related deliverable Items. Upon termination pursuant to this Paragraph 18.C., NSS shall receive within thirty (30) days of termination, (i) a full refund of all payments made by NSS under this Contract (including any amounts paid directly or indirectly for Launch and insurance pursuant to Articles 8 and 9) with respect to the terminated Items, plus (ii) interest on such amounts at the NPV Discount Rate, plus (iii) the full amount of the price adjustments for late Delivery specified in Paragraph 4.C.2.a., in which event NSS shall relinquish all of its rights to Items related to such Spacecraft for which Delivery and Acceptance have not been completed, and return or destroy all Deliverable Data not related to items for which Delivery and Acceptance have been completed previously that is in tangible form. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. D. NSS Termination for Excusable Delay If there is a cumulative delay in Delivery of an Item past the Promised Delivery Date which exceeds a cumulative period of * (*) days (no more than * (*) of which are not excusable pursuant to Article 19), * NSS may, by written notice issued by its Authorized Representative, terminate this Contract with respect to the Spacecraft and any related deliverable Items. Upon termination pursuant to this Paragraph 18.D., NSS shall receive, within thirty (30) days of termination, * in which event NSS shall relinquish all of its rights to Items related to such Spacecraft (except for insurance and any Launch Services for which it receives no refunds), and return or destroy all Deliverable Data not related to such Items. E. Improper Termination If, after termination under the provisions of Paragraphs 18.A., 18.B., or 18.C., it is determined for any reason that the Contract was terminated improperly under the provisions of this Article, the rights and obligations of the Parties shall be the same as if termination had been effected pursuant to Article 17. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. F. Termination of Launch * ARTICLE 19. EXCUSABLE DELAYS A. Non Launch Related Delays Delays in Delivery resulting from acts of God or of the public enemy, acts of a government in its sovereign capacity (but expressly excluding any delays arising out of the Export Laws), fires, earthquakes, floods, riots, acts of war, strikes and lock-outs (excluding strikes and lock-outs at Contractor-owned or operated facilities), epidemics, quarantine restrictions, and freight embargoes, provided in every case such acts or occurrences are beyond the reasonable control and without the fault or negligence of Contractor and its Subcontractors, shall constitute excusable delays if a written claim thereof together with information sufficient to support such claim is received by NSS within twenty (20) days after the start of each such act or occurrence. Contractor shall provide written evidence of the period of such delay. Contractor shall use its best efforts to minimize the effect of any force majeure delay including (without limitation) through the use of work-around schedules, twenty-four (24)-hour operations, and through the use of alternative suppliers (to be approved by NSS where required under Article 10). Subject to NSS' rights under this Contract, the Delivery requirements shall be extended by the amount of such period as is supported by the evidence provided. B. Launch Related Delays As it relates to the Launch Services Provider, any postponement of the Launch of the Spacecraft caused by (i) any of the events described in Paragraph 19.A. above, (ii) * shall constitute an excusable delay. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. ARTICLE 20. KEY PERSONNEL It is agreed that the following Contractor employees and positions are necessary for the successful performance of this Contract: Key Personnel Position ------------- -------- * Program Manager * Program Engineering Manager * Lead Payload Engineer * Systems Lead * Lead Bus Engineer * Contracts Manager * Ground Systems Lead * PA Manager * Systems Lead (Deputy) * Antenna Lead In the event one (1) or more of the above-named personnel are no longer available for the performance of this Contract, Contractor agrees to replace such personnel with personnel of a comparable level of experience, qualifications and ability, and such replacement shall be subject to NSS' approval. ARTICLE 21. DISPUTES Any dispute or disagreement arising between Contractor and NSS in connection with this Contract, which is not settled within thirty (30) days (or such longer period as may be mutually agreed upon by the Parties) from the date that either Party notifies the other in writing that such dispute or disagreement exists, at the request of either Party may be settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce, in effect on the date that such request is made, by three (3) arbitrators. Each Party shall select one (1) arbitrator and the two (2) arbitrators so selected shall select the third (3rd) arbitrator; provided that if the two (2) arbitrators selected by the Parties cannot agree on a third arbitrator within thirty (30) days of their selection by the Parties, the third arbitrator shall be appointed in accordance with the Rules of Conciliation and Arbitration. The arbitration proceedings shall be conducted in the United Kingdom. The arbitration resolution shall be final and binding upon the Parties and judgment may be entered thereon, upon the application of either Party, by any court having jurisdiction. Each Party shall bear the cost of preparing and presenting its case; and the cost of arbitration, including the fees and expenses of the arbitrators, will be shared equally by the Parties unless the resolution otherwise provides. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. ARTICLE 22. INDEMNIFICATION A. General Indemnification * shall indemnify and hold *, its officers, directors, agents, employees, owners, subsidiaries, affiliates, successors and assigns, or any of them, harmless from any and all loss, damage, liability or expense resulting from damage (excluding damage to the Spacecraft caused after Acceptance) and injuries, including death, to all persons (natural or juridical), arising from any occurrence caused by a material act or omission of * , * , or any of them, and * shall at its sole expense defend any claims, actions, suits and proceedings, whether in law or equity, brought against * , its officers, directors, agents, employees, owners, subsidiaries, affiliates, successors and assigns, or any of them, on account thereof, and shall pay all expenses, including attorney's fees, and satisfy all judgments as may be incurred by or rendered against them, or any of them, in connection therewith, provided * is given prompt notice of any such claim, action, suit or proceeding. * shall provide, at * written request and sole expense, such assistance and information as may be reasonably provided by * in connection with the defense of any such action. Notwithstanding the foregoing, for the period commencing at Intentional Ignition through Spacecraft separation from the Launch Vehicle, Contractor shall indemnify NSS for damages caused by the nonperformance of the Launch Services only to the extent that the Launch Services Provider provides such indemnity under the Launch Services Agreement. B. Intellectual Property Indemnification * shall, at its expense, defend, indemnify and hold * , its officers, directors, agents, sublicensees, owners, subsidiaries, affiliates and employees, successors or assigns or any of them harmless from and against any and all claims, losses, actions, damages, expenses and all other liabilities, including but not limited to costs and reasonable attorneys' fees, resulting from any claim against an indemnified party by any third party, for infringement or other violation of any patent, copyright, trademark, trade secret rights, or any other intellectual property rights arising from preparing, launching, testing, maintaining, operating, using, and marketing capacity on or services that employ the Spacecraft or in connection with any Item; the performance of Work; or any Contract Technology owned by * and/or licensed by * to * under this Contract. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. If an injunction or other order is obtained against the manufacture, preparation, use, lease, sale or other disposition of any deliverable Item, Contractor agrees to use its best efforts either to procure rights so that such deliverable Item and the manufacture, preparation, use, lease, sale or other disposition thereof is no longer infringing or to modify or replace such deliverable Item, subject to NSS' technical approval, so that it is no longer subject to such injunction or order. In the event that neither of the foregoing alternatives is suitably accomplished, * shall be liable to * , its successors and assigns, or any of them, for all additional costs and damages resulting from such injunction or order. C. Indemnification For Taxes Contractor shall assume responsibility for, and shall hold NSS harmless from all taxes, duties (except for import duties related to Items delivered to NSS, or Services performed for NSS, in The Netherlands), tariffs or similar charges, however denominated, which may be required under any present or future law or laws, and which become due by reason of the performance of Work under this Contract or any Subcontract hereunder, and shall execute and deliver such other further instruments, and comply with such requirements of said laws, as may be necessary thereunder to confirm and effectuate this Contract, including making of payment of any interest or penalties related to or arising from such taxes, duties, tariffs or other charges. D. Procedures In the event * employs any attorney, accountant, engineer or consultant to assist in defense of any matter pursuant to this Article 22, such attorney, accountant, engineer or consultant shall be reasonably satisfactory to the indemnified party. If * does not employ counsel to take charge of the defense, the indemnified party shall, at the sole expense of * , employ separate counsel and direct such defense on its own behalf. No settlement of any claim, action, proceeding or suit shall admit liability on the part of an indemnified party without such indemnified party's prior written consent, which may be given or withheld in an indemnified party's sole discretion. ARTICLE 23. LIMITATION OF LIABILITY NOTWITHSTANDING ANY OTHER PROVISION HEREIN TO THE CONTRARY, NEITHER PARTY SHALL BE LIABLE, WHETHER IN CONTRACT, TORT OR OTHERWISE, FOR SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OR FOR LOST PROFITS OR REVENUES, OTHER THAN FOR A WILLFUL BREACH OR GROSS NEGLIGENCE. THE FOREGOING LIMITATIONS SHALL NOT APPLY TO A PARTY'S OBLIGATIONS TO INDEMNIFY A THIRD PARTY CLAIM PURSUANT TO ARTICLE 22 OR ANY OTHER PROVISIONS OF THIS CONTRACT RELATING TO INDEMNIFICATION OF A THIRD PARTY CLAIM. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. ARTICLE 24. DAMAGE TO PERSONS OR PROPERTY, ASSOCIATED WITH LAUNCH, INTERPARTY WAIVER Each Party agrees to be bound to such interparty waiver as the Launch Services Provider may set forth in the Launch Services Agreement, provided that the waiver contains reciprocal rights for both Parties and is substantially consistent with the standard provisions of such Launch Services Provider. ARTICLE 25. REPRESENTATIONS AND WARRANTIES A. Mutual Representations and Warranties Each Party represents, covenants and warrants to the other that: 1. Existence. It is a corporation, duly organized and validly existing and with the power to undertake the obligations set forth in this Contract. 2. Authority. All corporate action required to be taken by it to execute, deliver and perform the terms of this Contract have been taken. 3. Binding Agreement. The execution and delivery of this Contract by it will cause this Contract to constitute a legal, valid and binding obligation of it enforceable in accordance with its terms, except where enforceability thereof may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors rights generally or general principles of equity. B. Contractor's Special Representations and Warranties Contractor represents, covenants and warrants to NSS that: 1. Contract Intellectual Property. None of the Contract Intellectual Property is, to the best of Contractor's knowledge, the subject of infringement or other violations of intellectual property protections by any third party; and all of the Contract Intellectual Property is free from any lien, claim or other encumbrance, including as a pledge of collateral. Contractor shall employ all reasonable commercial efforts to retain all Contract Intellectual Property. 2. Contract Technology. There are no claims filed, or, to the best of Contractor's knowledge, threatened that any of the Contract Technology or the practice thereof infringe or violate in any way any patent or other intellectual property rights of any third party. Contractor has the authority to grant to NSS the licenses and rights to the Contract Technology according to the terms of this Contract. ARTICLE 26. ASSIGNMENT Neither this Contract nor any of the rights, duties, and obligations of Contractor or NSS under this Contract may be assigned or delegated by either Party without the prior written consent of the other Party, not to be unreasonably withheld, conditioned or delayed. Any attempted assignment or delegation, without such consent, shall be void and without effect. Notwithstanding the foregoing, NSS may assign this Contract or any of its rights and obligations, including but not limited to any warranties and indemnities, with a right to reassign, without Contractor's consent: (i) to a subsidiary of NSS, or (ii) to a joint venture in which NSS is a majority participant or holds at least a twenty-five percent (25%) ownership interest; and either Party may assign this Contract or any of its rights and obligations, including but not limited to any warranties and indemnities, with a right to reassign without consent of the other Party (x) to any entity that acquires or succeeds, by merger or other vehicle, to all or substantially all of the assigning Party's assets, or (y) to a financial institution as security in connection with a bona fide financing transaction. Any assignment of the Contract shall not relieve the assignor of its obligations hereunder unless the assignor provides the other Party with reasonable evidence of the financial viability of the assignee, which evidence is reasonably acceptable to such other Party, or unless such other Party otherwise agrees to release the assignor of its obligations hereunder. This Contract shall be binding upon and inure to the benefit of the Parties and their respective permitted successors and assigns. ARTICLE 27. CONFIDENTIALITY A. Identification of Proprietary Information All information, in whatever form, orally or in any written or electronic form, that has been or may be disclosed in the future by one Party to the other in connection with this Contract shall be deemed proprietary information, if written, if marked "proprietary" or "confidential," or if disclosed orally, if so stated to the receiving Party by the disclosing Party at the time of disclosure and reduced to writing no later than thirty (30) days after the disclosure (together "Proprietary Information"). In addition, and without limitation, Contractor acknowledges and agrees that all information regarding NSS' contemplated use of or customers for the Spacecraft, areas of coverage or antenna plots, potential types of traffic or related requirements, health and expected life of existing satellites, the performance of the Spacecraft and any anomalies with respect thereto, and all information that could be revealing of the foregoing, shall be deemed NSS' Proprietary Information and "Company Restricted Information." B. Restrictions on Use, Disclosure Neither Party shall use the Proprietary Information of the other Party except for the purpose of this Contract. Neither Party shall disclose the Proprietary Information of the other Party except: (1) on a confidential and need-to-know (for the purposes specified herein) basis to its employees, agents, and advisors (and with respect to NSS, its insurance underwriters, launch service providers, investors, lenders and TT&C operators), each of whom shall be subject to comparable restrictions of confidentiality; (2) as to information that is already rightfully in the possession of the receiving Party through other means and without such confidentiality restrictions; (3) as to information that is required to be disclosed under applicable law or by a valid subpoena or other court or governmental order, decree, regulation or rule; provided, however, that if disclosure is required under this provision, the receiving Party shall advise the disclosing Party of the requirement to disclose Proprietary Information prior to such disclosure and as soon as reasonably practicable after the receiving Party becomes aware of such required disclosure; and further provided that upon the request of the disclosing Party, the receiving Party agrees to cooperate in good faith and at the expense of the disclosing Party in any reasonable and lawful actions which the disclosing Party takes to resist such disclosure, to limit the information to be disclosed or to limit the extent to which the information so disclosed may be used or made available to third parties; (4) as to information that is released for public disclosure by the disclosing Party; (5) as to information that is developed by the receiving Party independently of any Proprietary Information of the disclosing Party. Notwithstanding any other rights of either Party, either Party may seek injunctive relief in any count of competent jurisdiction against improper use or disclosure of Proprietary Information. C. Company Restricted Information In addition to the obligations set forth above, Contractor agrees that its disclosure of Company Restricted Information under Paragraph 27.B. above shall be limited to individuals within the Boeing Satellite Systems (BSS) business unit of Contractor who have no responsibility for, or participation in, any venture in which Contractor may have any interest that involves the direct sales and/or leasing of satellite transponder capacity or the provision of any satellite communications services, including any individuals who may have dual roles. Contractor employees outside Contractor's business unit who have responsibility for evaluation and oversight of BSS' operations will be provided Company Restricted Information only to the extent required for performance of their duties and only after they are advised of their responsibilities under this Contract. D. Standard of Care Each Party agrees to exercise a level of care consistent with that employed by said Party for its most highly restricted and proprietary information to ensure compliance with its obligations stated herein. E. Property of Disclosing Party Proprietary Information shall be deemed the property of the disclosing Party and, upon request, the receiving Party shall return or destroy all Proprietary Information received from the disclosing Party, including any compilations thereof, to the extent that either may be in tangible form. ARTICLE 28. PUBLIC RELEASE OF INFORMATION Within a reasonable time prior to the issuance of news releases, articles, brochures, advertisements, prepared speeches and other information releases concerning the work performed hereunder by Contractor, a Subcontractor or any employee or a consultant of either, Contractor shall obtain the written approval of NSS concerning the content and timing of such releases. NSS' approval will not be unreasonably delayed or denied. ARTICLE 29. NOTICES AND REPORTS, AUTHORIZED REPRESENTATIVES All notices and reports to be provided to NSS or Contractor under this Contract shall be in writing, in English, and sent to NSS or Contractor by courier, by certified mail (postage prepaid) or by facsimile (with confirmation by courier or certified mail) at the following addresses (or to such other address as each Party may give the other by notice to the other in accordance with this Article 29): NSS: NSS-8 Program Office Building S12, M/S W341 c/o Boeing Satellite Systems, Inc. P.O. Box 92919 Los Angeles, CA 90009-2919 Attention: NSS-8 Program Manager Facsimile No.: 1-310-426-1443 with a separate New Skies Satellites N.V. copy sent to: Rooseveltplantsoen # 4 2517KR The Hague The Netherlands Attention: Vice President, Space Segment Techology Facsimile No.: +31 70 306 4285 New Skies Satellites N.V. Rooseveltplantsoen # 4 2517KR The Hague The Netherlands Attention: General Counsel Facsimile No.: +31 70 306 4289 CONTRACTOR: Boeing Satellite Systems International, Inc. P.O. Box 92919 Los Angeles, CA. 90009 Attention: Mr. Dennis Beeson Contracts Manager Bldg. S52, Mail Sta. Z103 Facsimile No.: (310) 364-5721 For purposes of binding each Party under provisions of this Contract, the "Authorized Representative" of NSS shall be it's a) Chief Technology Officer, currently Dr. Stephen Stott, or b) General Counsel, currently Ms. Mary Dent, or c) Vice President, Space Segment Technology Division, currently Mr. Leroy A. Argyle, and the Authorized Representative of Contractor shall be its Contracts Manager, currently Dennis Beeson. Each Party may change or add to its list of Authorized Representatives by giving notice to the other Party (signed by the notifying Party's then-current Authorized Representative) pursuant to the Contract notice provisions above. ARTICLE 30. OPTIONS A. Optional Spacecraft 1. Similar Spacecraft NSS may, at its option, exercisable at any time on or before * ( *) months after the Effective Date of the Contract, elect to procure from Contractor one (1) additional spacecraft ("Optional Spacecraft") substantially similar to the Spacecraft specified in Article 3, with the exception of potential changes in the coverage areas. Contractor's firm-fixed price for such Optional Spacecraft is * Dollars (*). The firm fixed price includes an upgrade to the Spacecraft simulator delivered pursuant to Article 3 to include the similar Optional Spacecraft, plus all other deliverable Items and Services specified in the Statement of Work. Upon exercise of such option, Contractor shall immediately commence construction of such Optional Spacecraft and shall use its best efforts to ship such Optional Spacecraft to the launch site within * (*) months after exercise of the option, but in no case earlier than * (*) months after shipment of NSS 8. Contractor's price for such Optional Spacecraft specified above is Contractor's price for such Optional Spacecraft having the general specifications and payment terms as the Spacecraft to be delivered pursuant to Article 3 and includes launch and mission operations for the Sea Launch Vehicle only. Upon exercise of its option for the Optional Spacecraft, NSS and Contractor shall meet promptly and shall negotiate in good faith to reach final resolution of the specifications and the corresponding adjustment (if any) to the firm fixed price and/or delivery schedule resulting from changes in scope for such Optional Spacecraft, including, if requested by NSS, prices for launch and insurance of such Optional Spacecraft. Upon completion of such negotiations, this Contract shall be amended to include Delivery of such Optional Spacecraft selected by NSS and such Optional Spacecraft shall be constructed, delivered and accepted pursuant to the provisions of this Contract in the same manner and to the same extent as the Spacecraft specified in Article 3 is constructed, delivered and accepted hereunder. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. 2. Spacecraft for * NSS may, at its option, exercisable at any time on or before twelve (12) months after the Effective Date of the Contract, elect to procure an Optional Spacecraft suitable for deployment at * with the general specifications set forth in Exhibit M and having the general payment terms as the Spacecraft to be delivered pursuant to Article 3. Contractor's firm-fixed price for such Optional Spacecraft and Sea Launch Vehicle is * Dollars ($ *) * Dollars ($ *) * . The firm fixed price includes an upgrade to the Spacecraft Simulator delivered pursuant to Article 3 to include the Optional Spacecraft, plus all other deliverable Items and Services specified in the Statement of Work. Upon exercise of such option, Contractor shall immediately commence construction of such Optional Spacecraft and shall use its best efforts to deliver such Optional Spacecraft within * (*) months after exercise of the option, but in no case earlier than * (*) months after delivery of NSS-8. * Contractor's price for such Optional Spacecraft specified above is Contractor's price for such Optional Spacecraft having the general specifications disclosed by NSS to Contractor prior to the Effective Date of Contract. Upon exercise of its option for the Optional Spacecraft, NSS and Contractor shall meet promptly and shall negotiate in good faith to reach final resolution of the specifications and corresponding adjustment (if any) to the firm fixed price and/or delivery schedule resulting from changes in scope for such Optional Spacecraft, including, if requested by NSS, prices for insurance of such Optional Spacecraft. Upon completion of such negotiations, this Contract shall be amended to include Delivery of such Optional Spacecraft selected by NSS and such Optional Spacecraft shall be constructed, delivered and accepted pursuant to the provisions of this Contract in the same manner and to the same extent as the Spacecraft specified in Article 3 is constructed, delivered and accepted hereunder. * * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. 3. Spacecraft for Later Delivery (a) 105(0) W.L. Spacecraft. NSS may, at its option, exercisable at any time on or before December 1, 2004, elect to procure from Contractor an Optional Spacecraft, for use in the 105(0) W.L. orbital location. This option shall be based upon a BS-601HP, BS-601 or BS-376 spacecraft bus and shall include Contractor's provision of a suitable launch vehicle, launch operations, mission operations and all other Deliverable Items and Services specified in the Statement of Work, and Delivery of such Optional Spacecraft in orbit at 105(0) W.L. within a nominal time period of twenty-four (24) months after exercise of the option. Within thirty (30) days after notice from NSS of a desire to consider this option, with such notice to be given not later than November 1, 2004, Contractor shall present to NSS a firm-fixed price proposal for such Optional Spacecraft which shall be based on the cost to manufacture the Optional Spacecraft and provide the related Services and Deliverable Items, plus a profit of * percent (*%) of such cost, plus the cost of the launch vehicle and associated services. NSS shall have thirty (30) days after receipt of such proposal to exercise the option, during such thirty (30) day period the Parties shall meet and negotiate in good faith to reach final resolution of the specifications, Delivery schedule, and any other terms and conditions not otherwise already covered by this Contract. Upon completion of such negotiations, NSS may exercise this option and this Contract shall be amended to include Delivery of such Optional Spacecraft selected by NSS and such Optional Spacecraft shall be constructed, delivered and accepted pursuant to the provisions of this Contract, as amended, in the same manner and to the same extent as the Spacecraft specified in Article 3 is constructed, delivered and accepted hereunder. (b) CONUS Spacecraft. NSS may, at its option, exercisable at any time on or before December 1, 2004, elect to procure from Contractor one (1) or more Optional Spacecraft capable of serving the Continental United States ("CONUS") and utilizing C-band and/or Ku-band frequencies. Such Optional Spacecraft shall be based upon a BS-601HP, BS-601 or BS-376 spacecraft bus and shall include Contractor's provision of a suitable launch vehicle, launch operations, mission operations and all other Deliverable Items and Services specified in the Statement of Work, and Delivery of such Optional Spacecraft in orbit within a nominal time period of twenty-four (24) months after exercise of the option. Within thirty (30) days after notice from NSS of a desire to consider this option, Contractor shall present to NSS a firm-fixed price proposal for such Optional Spacecraft which shall be based on the cost to manufacture the Optional Spacecraft and provide the related Services and Deliverable Items, plus a profit of * percent (*%) of such cost, plus the cost of the launch vehicle and associated services. NSS shall have thirty (30) days after receipt of such proposal to exercise the option, during such thirty (30) day period the Parties shall meet and negotiate in good faith to reach final resolution of the specifications, Delivery schedule, and any other terms and conditions not otherwise already covered by this Contract. Upon completion of such negotiations, NSS may exercise this option and this Contract shall be amended to include Delivery of such Optional Spacecraft selected by NSS and such Optional Spacecraft shall be constructed, delivered and accepted pursuant to the provisions of this Contract, as amended, in the same manner and to the same extent as the Spacecraft specified in Article 3 is constructed, delivered and accepted hereunder. B. Replacement Spacecraft In the event that after Launch and prior to Acceptance, the Spacecraft becomes a total constructive loss as specified in the Insurance Agreement, NSS may, at its option exercisable within * (*) days of the total constructive loss event, elect to procure a Replacement Spacecraft having the same design and specifications as the Spacecraft. The total firm fixed price for the Replacement Spacecraft (including payments for deliverable Items and Services specified in the Statement of Work, with the exception of the Launch Services and insurance payments) shall not exceed * Dollars ($ *). This price assumes launch and mission operations for the Sea Launch Vehicle. If NSS desires to launch the Replacement Spacecraft on an alternate launch vehicle, such change shall constitute a Contract Change Notice in accordance with Article 12. Contractor's price for such Replacement Spacecraft specified above is Contractor's price for such Replacement Spacecraft having the general payment terms as the Spacecraft to be delivered pursuant to Article 3. Upon exercise of this option by NSS, Contractor shall commence construction of the Replacement Spacecraft and shall deliver it to the designated Launch Site within * (*) months after the exercise of the option. Except for the foregoing, the Replacement Spacecraft otherwise shall be constructed, tested, delivered and accepted in the same manner and to the same extent as the Spacecraft specified in Article 3 is constructed, tested, delivered and accepted hereunder. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. C. Optional Storage and Retest 1. Storage at Contractor's Expense. If the Spacecraft has not been Launched by the Promised Delivery Date, at NSS' option, Contractor shall place the Spacecraft in storage at Contractor's facilities, or such other facilities as Contractor may arrange, which alternate facilities must have been approved by NSS. So long as NSS has not terminated this Contract, Contractor shall continue to store, and perform any necessary testing or refurbishment on, such Spacecraft, at Contractor's expense, until such Spacecraft is Launched, and Delivery and Acceptance thereof has been completed under this Contract, but not to exceed six (6) months. 2. Storage at NSS' Expense. Following * storage of the Spacecraft by Contractor, NSS may elect to direct Contractor to continue to store the Spacecraft for an additional period of time provided that the total storage period, including the earlier free period, does not exceed three (3) years. The firm fixed prices for such storage shall be as set forth in the table below: - ------------------------------------------------------------------------------- Storage Duration --------------------------------------------- Optional Storage Prices 1 Year 2 Years 3 Years - ------------------------------------------------------------------------------- Total Storage Price(1) $ * $ * $ * Monthly Storage Fee Adjustment $ * $ * $ * - ---------------------------------------------- -------------------------------- (1) Total Storage Price adjusted downward by the Monthly Storage Fee Adjustment if Spacecraft removed from storage before completion of applicable year - ------------------------------------------------------------------------------- The price for any refurbishment and retest of the Spacecraft after storage is included in the above prices. In the event that NSS elects to deliver the Spacecraft to storage for any reason, NSS shall pay Contractor the milestone payment for completion of IOT upon delivery of the Replacement Spacecraft to storage and NSS shall commence payments to Contractor for all Operational In Orbit Incentive payments for such stored Spacecraft (in accordance with Paragraph 5.E.) as though Unconditional Acceptance had been achieved, subject to any adjustments or refunds if, after the Launch of the Spacecraft, its performance is such that adjustments to the Operational In Orbit Incentives are appropriate pursuant to Exhibit F. For storage periods greater than twelve (12) months, prices for launch and mission operations will be escalated at a rate of 3% per annum. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. D. Intentionally Omitted E. In-Orbit Test Location On or before the later to occur of i) * (*) months prior to the IOT or, ii) * (*) months following submittal by Contractor to NSS of the IOT earth station requirements document, NSS shall have the option to require Contractor to supply all ground facilities necessary to conduct the IOT. If NSS exercises this option, Contractor shall supply such on ground facilities at a price not to exceed * Dollars ($ *). ARTICLE 31. NSS FURNISHED INFORMATION AND PROPERTY Contractor agrees, with respect to all Information and property, including but not limited to equipment, models and devices, furnished by NSS under this Contract: A. Title That title to such Information and property shall remain exclusively in NSS. B. Risk of Loss To assume all risk of loss or damage, reasonable wear and tear excepted, to such Information and property while in Contractor's or any Subcontractor's possession or control. C. Use To ensure that such Information and property are used solely in the performance of the Contract. D. Taxes To be responsible for payment of all taxes which become due by reason of Contractor's or any Subcontractor's possession, control or use of such Information and property, and to comply with all requirements of said laws, including making payment of any interest or penalties related to or arising from such taxes. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. E. Encumbrances To ensure that no lien, encumbrance, pledge or other interest whatsoever attaches to such Information and property as a result of Contractor's or any Subcontractor's acts or omissions. F. Return Except as may otherwise be provided in this Contract to return such Information and property to NSS upon completion of all Work or termination of this Contract. G. Damages That in no event will NSS be liable for special, indirect or consequential damages related to such Information and property or arising from the use thereof. ARTICLE 32. HAZARDOUS MATERIAL IDENTIFICATION AND MATERIAL SAFETY DATA Contractor shall comply with applicable national, state, and local laws, codes, ordinances, and regulations (including the acquisition of licenses and permits) in connection with any hazardous material used during Launch processing. Contractor agrees to provide the right to use and disclose such data relating to hazardous materials as necessary to comply with this Article. ARTICLE 33. APPLICABLE LAWS This Contract shall be interpreted, construed and governed by the laws of the State of New York, U.S.A., except to the extent that the conflicts of laws rules of New York would require the application of the laws of another jurisdiction. The United Nations Convention on the International Sale of Goods does not apply to this Contract. ARTICLE 34. NOTIFICATION OF ANOMALY OCCURRENCE Notwithstanding any other provision in this Contract, NSS authorizes Contractor to provide notification of a major on-orbit anomaly that has occurred on the Satellite(s) to: (i) all third-party Boeing satellite owners within a common satellite class (i.e. 376, 601, 601HP, 702), and (ii) all third-party Boeing satellite owners of other satellite classes using a common system and/or sub-system as those are present on the Satellite(s) which are impacted by such anomaly. In consideration for such authorization, NSS shall receive from Contractor similar notifications regarding major on-orbit anomalies described above that have occurred on satellites of other Boeing commercial satellite owners who have agreed to this clause. Such notifications will be generic in nature (i.e., no technical details) and will not directly identify the specific satellite (or satellite owner) experiencing the anomaly. Contractor shall provide such notification within one (1) Business Day of Contractor's receipt of written notification of an anomaly occurrence. Contractor's notification shall be proprietary and shall be handled in accordance with Article 27 CONFIDENTIALITY. Anomaly notifications provided by Contractor to NSS may be in any form (oral, written, email, or voice mail message) and shall be delivered to NSS' NSS-8 Program Manager. If orally notified, confirmation in writing will be provided within 10 business days of the oral notification. The following is an example of a notification as contemplated under this Article: 'A Boeing Satellite Systems 601 satellite has just experienced a failure of a satellite control processor. Further details will be forthcoming. The provision of additional detailed information regarding this anomaly will be provided under the existing terms of the contract for disclosure of information' ARTICLE 35. * * * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. ARTICLE 36. GENERAL A. Severability If any provision of this Contract is declared or found to be illegal, unenforceable or void, the Parties shall negotiate in good faith to agree upon a substitute provision that is legal and enforceable and as nearly as possible consistent with the intentions underlying the original provision. If the remainder of this Contract is not materially affected by such declaration or finding and is capable of substantial performance, then the remainder shall be enforced to the extent permitted by law. B. Cumulative Rights/Waivers All rights and remedies conferred hereunder or otherwise shall be cumulative and may be exercised singly or concurrently. No delay or omission by either Party to exercise any right or power shall impair such right or power or be construed to be a waiver thereof. No payment of money by any person or entity shall be construed as a waiver of any right or power under this Contract. A waiver by any Party of any of the covenants, conditions or contracts to be performed by the other or any breach thereof shall not be construed to be a waiver of any succeeding breach thereof or of any other covenants, conditions or contracts herein contained. No change, waiver or discharge hereof shall be valid unless in writing and signed by the Authorized Representative of the Party against which such change, waiver or discharge is sought to be enforced. C. Gender/Captions As used herein, the singular shall include the plural and the plural may refer only to the singular. The use of any gender shall be applicable to all genders. The captions contained herein are for purposes of convenience only and are not a part of this Contract. D. Relationship of the Parties It is expressly understood that Contractor, on the one hand, and NSS, on the other hand, intend by this Contract to establish the relationship of independent contractors and do not intend to undertake the relationship of principal and agent or to create a joint venture or partnership between them or their respective successors in interest. Neither Contractor, on the one hand, nor NSS, on the other hand, shall have any authority to create or assume in the name or on behalf of the other Party any obligation, expressed or implied, nor to act or purport to act as the agent or the legally empowered representative of the other Party hereto for any purpose whatsoever. E. Construction This Contract and the Exhibits and Schedules hereto, have been drafted jointly by the Parties and in the event of any ambiguity in the language hereof, there shall be no inference drawn in favor of or against either Party. F. Including/Time Whenever the terms "including" or "include" are used in this Contract in connection with a single item or a list of items within a particular classification (whether or not the term is followed by the phrase "but not limited to" or words of similar effect) that reference shall be interpreted to be illustrative only, and shall not be interpreted as a limitation on, or an exclusive enumeration of the items within that classification. The dates for Delivery of Items and dates and times for all other purposes under this Contract shall be defined in relation to Greenwich Mean Time. G. Survival Termination or expiration of this Contract for any reasons shall not release either Party from any liabilities or obligations set forth in this Contract which (i) the Parties have expressly agreed shall survive such termination or expiration, including the obligations in Articles 9, 11, 13, 14, 15, 16, 17, 18, 21, 22, 23, 26, 27 and 28, or (ii) remain to be performed or by their nature would be intended to be applicable following any such termination or expiration. H. Entire Agreement This Contract: (i) consists of this document and the referenced Exhibits in Article 2 of this Contract and the Schedules attached thereto; (ii) constitutes the entire agreement of the Parties with respect to the subject matter hereof; and (iii) supersedes all prior correspondence, representations, proposals, negotiations, understandings, and agreements of the Parties, oral or written, with respect to the subject matter hereof. No addition to, deletion of, or deviation from the provisions of this Contract shall be binding against NSS unless in writing and signed by an Authorized Representative of NSS or against Contractor unless in writing and signed by an Authorized Representative of Contractor. EXHIBIT A Entire Exhibit Redacted pursuant to U.S. International Traffic in Arms Regulation (ITAR), 22 CFR 120-130 SPACECRAFT PERFORMANCE SPECIFICATIONS EXHIBIT B Entire Exhibit Redacted pursuant to U.S. International Traffic in Arms Regulation (ITAR), 22 CFR 120-130 STATEMENT OF WORK EXHIBIT C Entire Exhibit Redacted pursuant to U.S. International Traffic in Arms Regulation (ITAR), 22 CFR 120-130 PRODUCT ASSURANCE PLAN EXHIBIT D Entire Exhibit Redacted pursuant to U.S. International Traffic in Arms Regulation (ITAR), 22 CFR 120-130 TEST PLAN EXHIBIT E MILESTONE PAYMENT PLAN NSS-8 Payment Schedule (US$K) Item Number 1, 2, 5, 6, 7 and 8 - ------------------------------------------------------------------------------------------------- Payment Due Payment Payment from EDC Milestone $K - ------------------------------------------------------------------------------------------------- 1 * Effective Date of Contract (EDC) * - ------------------------------------------------------------------------------------------------- 2 * Antenna Patterns Complete * - ------------------------------------------------------------------------------------------------- 3 * Complete Preliminary Design Review (PDR) * - ------------------------------------------------------------------------------------------------- 4 * Complete C-Band TWT (First Set of 25) * - ------------------------------------------------------------------------------------------------- 5 * Complete Ku-Band TWT (First Set of 15) * - ------------------------------------------------------------------------------------------------- 6 * Complete Critical Design Review (CDR) * - ------------------------------------------------------------------------------------------------- 7 * Complete De-mate of Bus and payload Structures * - ------------------------------------------------------------------------------------------------- 8 * IOR Contract Amendment Signed * - ------------------------------------------------------------------------------------------------- 9 * Delta System PDR * - ------------------------------------------------------------------------------------------------- 10 * Complete Bus Test * - ------------------------------------------------------------------------------------------------- 11 * Delta System CDR * - ------------------------------------------------------------------------------------------------- 12 * Repeater Equipment Delivered * - ------------------------------------------------------------------------------------------------- 13 * Complete Qual of C-band Feed * - ------------------------------------------------------------------------------------------------- 14 * Complete SCTV * - ------------------------------------------------------------------------------------------------- 15 * Complete Spacecraft Integration * - ------------------------------------------------------------------------------------------------- 16 * Complete Mechanical Environmental Test * - ------------------------------------------------------------------------------------------------- 17 * Satellite FRR Complete * - ------------------------------------------------------------------------------------------------- 18 * Completion of In-Orbit Test (IOT) * - ------------------------------------------------------------------------------------------------- Spacecraft In-Orbit Incentives (Present Value) * - -------------------------------------------------------------------------------------------------
Notes to Milestone Payment Schedule 1. Payments are made based upon cost of Items in Paragraph 4.A of the Contract. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. EXHIBIT E - MILESTONE PAYMENT PLAN (CONT'D) Conditions for Payment. Unless otherwise specified in the Contract: A. Milestones which call for the completion or delivery to the Contractor of subcontracted or procured hardware items will be deemed completed when receiving inspection of the hardware items at the Contractor's plant has been successfully completed and copies of an acceptance test report and/or other supporting data, analyzed by the Contractor, have been submitted to NSS. B. Milestones which call for the completion or delivery of hardware items manufactured or assembled by the Contractor will be deemed completed when an acceptance test report and/or other hardware acceptance data has been submitted to NSS. C. Milestones which call for the completion of testing at the system level will be deemed completed when a corresponding test report is submitted to and concurred with by NSS in conformance with requirements of the Statement of Work. Test data must also be transferred to NSS in conformance with the Statement of Work. D. Milestones related to system reviews (preliminary, critical and preshipment reviews) will be deemed completed if the purpose and objectives of the review (as defined in the Statement of Work) have been met, a review report and action plan have been submitted to and concurred in by NSS and critical design issues identified in the review have been closed. E. In the event the Contractor completes any milestone event, as set forth in the Milestone Payment Plan of this Exhibit E, at any time in advance of the month in which such event is set forth in said Milestone Payment Plan, the Contractor shall have the right to submit an invoice for such event, and NSS shall have the obligation to make such payment, provided that: (1) the Contractor may not submit in any quarter for amounts which, when added to amounts previously invoiced, exceed the total cumulative amount shown in the Milestone Payment Plan from the Effective Date of Contract through that quarter; and (2) NSS concurs that advanced completion is not detrimental to the program. F. The approval of milestone payments by NSS, in accordance with the Milestone Payment Plan of this Exhibit E, shall not affect the Contractor's overall responsibility to perform all the Work required by the Contract pursuant to the provisions thereof. Sea Launch Services Payment Schedule (US$K) ====================================================== Payment Due (Month or Months Prior to L) Sea Launch ====================================================== L-27 * ------------------------------------------------------ L-26 ------------------------------------------------------ L-25 ------------------------------------------------------ L-24 ------------------------------------------------------ L-23 ------------------------------------------------------ L-22 ------------------------------------------------------ L-21 * ------------------------------------------------------ L-20 ------------------------------------------------------ L-19 ------------------------------------------------------ L-18 * ------------------------------------------------------ L-17 ------------------------------------------------------ L-16 ------------------------------------------------------ L-15 * ------------------------------------------------------ L-14 ------------------------------------------------------ L-13 ------------------------------------------------------ L-12 * ------------------------------------------------------ L-11 ------------------------------------------------------ L-10 ------------------------------------------------------ 15 February 2003 * ------------------------------------------------------ L-8 ------------------------------------------------------ L-7 ------------------------------------------------------ L-6 * ------------------------------------------------------ L-5 ------------------------------------------------------ L-4 ------------------------------------------------------ L-3 * ------------------------------------------------------ L-2 ------------------------------------------------------ L-1 ------------------------------------------------------ L ------------------------------------------------------ L+30 * ====================================================== Total * ------------------------------------------------------ Table Note: L= First day of Launch Period, Slot, or the Launch Date, as applicable as of the date of payment. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment. EXHIBIT F Entire exhibit redacted and filed separately with the Commission pursuant to a request for confidential treatment. CRITERIA FOR CONDITIONAL ACCEPTANCE TOTAL CONSTRUCTIVE LOSS AND ADJUSTMENT OF FIRM FIXED PRICE AND IN ORBIT INCENTIVES EXHIBIT G EXPORT LAWS COMPLIANCE PLAN G.1 Export Licensing and Compliance, Management Resources and Process During the period of this Contract, the Contractor shall maintain an Export Compliance Office to support the United States government licensing and export requirements related to the NSS-8 spacecraft program. The Contractor shall identify for NSS the title, responsibilities and the location of the unit of the Office that is responsible for particular export-licensing functions under this Contract and shall ensure that each such unit of the Office is staffed with export specialists who will carry out their functions by drawing upon the technical expertise of the Contractor. The Contractor's licensing and technical specialists shall be responsible for preparing, submitting, monitoring status and following up on processing of all applications that are required for the NSS-8 program under the International Traffic in Arms Regulations ("ITAR") administered by the Office of Defense Trade Controls, U.S. Department of State ("ODTC"). The Contractor shall ensure that such license preparation begins in a timely manner with adequate lead-time for approval cycles, recognizing that NSS will be required to provide documents and review draft agreements in a timely manner, and that all license paperwork and technical documents meet the requirements of the provisions of the ITAR. The Contractor shall interface with all U.S. government offices that are involved in the processing and review of ITAR license applications including ODTC and the Defense Threat Reduction Agency ("DTRA"). Contractor's Export Compliance staff shall with the cooperation of NSS respond expeditiously to any U.S. government questions or concerns regarding applications to ODTC under the ITAR or regarding the NSS-8 program with a view to resolving issues promptly to permit final processing of pending applications. Contractor's export compliance staff shall also prepare, submit, monitor and support all administrative paperwork necessary for the mandatory Congressional notification for the sale of commercial communications satellites to non-U.S. buyers when such sales exceed a value of $50 million USD. Within 60 days of the signature of this Contract, the Export Compliance Office shall prepare and submit to NSS for prior approval an export license administrative plan that will identify export licensing requirements for the entire NSS-8 program, from program start to launch and final delivery. This plan shall show milestones for preparing, seeking and obtaining all required ODTC authorizations. The purpose of this plan shall be to minimize delay associated with seeking required authorization for the export of defense articles, including technical data, and defense services for the NSS 8 program. The Export Compliance Office will be responsible for updating this plan as and when circumstances require. G.2 New Skies Networks Inc. and NSS Access to Program Information For all purposes relating to the application of the ITAR to the export from the United States of defense articles, including technical data, and defense services, Contractor shall treat New Skies Networks Inc. ("NSNI") as a "United States person" under the ITAR, provided that NSNI maintains its registration in good standing with ODTC. Contractor shall also treat as "United States persons" under the ITAR all United States citizens and U.S. permanent resident aliens who are employees of NSNI or that are consultants or independent contractors. Accordingly, Contractor shall without prior ODTC authorization furnish defense articles, including technical data, and defense services relating to the NSS-8 program to NSNI or to U.S. citizen employees, consultants and independent contractors of NSNI, provided that such articles or services are not subject to specific restriction for release to such persons under the terms and conditions of applicable ODTC export licenses issued to Contractor or NSS and provided also that NSNI has provided Contractor with appropriate written assurances that NSNI will not release such articles or services to foreign persons, as defined by the ITAR, without prior ODTC authorization. For the avoidance of doubt, from EDC until the date that an export license for the Spacecraft is obtained, Contractor agrees to treat NSNI, all U.S. citizens and U.S. permanent resident aliens who are employees of NSNI or that are consultants or independent contractors of NSNI as U.S. persons under the ITAR. G.3 NSS Program Licenses In accordance with the Statement of Work and Spacecraft Performance Specification herein and with this Exhibit G, Contractor anticipates various U.S. Government authorizations and licenses will be required to support the export of technical data and associated defense services during the period of performance of this Contract. These may include, but may not be limited to, the following authorizations and licenses for which Contractor will have the responsibilities set forth in Section G.1 above: Technical Assistance Agreements a) Program Services Technical Assistance Agreement (TAA) providing for export of the technical data and defense services for the full scope of the development and production Work under this Contract, including daily technical interactions, design reviews, test data reviews, technical meetings, initial mission/on-orbit support, and certain deliverable software. b) Launch Services TAA providing for export of the technical data and defense services to all the launch service providers as required in accordance with this Contract to cover activities related to launch vehicle interface definition and launch campaign support. c) Customer Service TAA providing for export of technical data and services for efforts associated with long-term, on-orbit support of the Spacecraft. Manufacturing Licensing Agreements (MLAs) MLAs to authorize the export of ITAR controlled technical data and defense services to support subcontracts for the manufacture of hardware components for the Spacecraft by non-U.S. suppliers. DSP-5 Licenses a) DSP-5 licenses for the shipment of the Spacecraft and related fuel and spare parts, as well as any other defense articles required in connection with launches because of the nature of the launch vehicle or the launch location. b) DSP-5 licenses for shipment and presentation of specific data items associated with launch-related insurance briefings, and related DSP-83s to be executed by insurance underwriters. c) DSP-5 licenses for shipment of any satellite control software to NSS ground control facilities. d) DSP-5 licenses for shipment of the Dynamic Satellite Simulator software. e) DSP-5 licenses for the shipment of flight software source code. f) DSP-5 and other required approvals for encryption keys and technical data relating to the command encryption software. DSP-73 Licenses a) DSP-73 licenses for the temporary import and/or export of launch campaign support equipment to the launch site including mechanical support equipment b) DSP-73 licenses for shipment of mission/in-orbit test support equipment to the relevant non-U.S. sites, including mission control centers and tracking sites. DSP-61 Licenses DSP-61 licenses to authorize the temporary import and re-export of hardware and data that may be required for the launch vehicle adapter in order to perform a fit check. G.4 Alternative Launch Vehicle Licenses Contractor shall maintain and/or apply for the required export licenses and agreements related to one alternative non-U.S. launch services provider in a manner consistent with the schedule requirements of Article 8.D, Option to Change Launch Services. G.5 License Process Monitoring Contractor shall during the performance of this Contract abide by the course of action and processes as described above and shall make every reasonable effort to ensure compliance with the procedures outlined in order to permit compliance with timetables established under this Contract. Contractor shall seek to have all export license applications processed expeditiously such that no NSS-8 program milestone is affected by any U.S. Government administrative processing delay including, in particular, action by ODTC. Contractor shall keep NSS informed by way of written weekly status reports of the progress of all export license applications and approvals, including the status of license applications both within the Contractor's organization and within the U.S. Government until such time as all necessary export licenses are obtained. EXHIBIT H MAXIMUM TERMINATION LIABILITY MAXIMUM TERMINATION LIABILITY SCHEDULE - -------------------------------------------------------------------------------- PERIOD CUMULATIVE PERCENTAGE (Months after EDC) OF TOTAL FIRM FIXED PRICE - -------------------------------------------------------------------------------- 1 * - -------------------------------------------------------------------------------- 2 * - -------------------------------------------------------------------------------- 3 * - -------------------------------------------------------------------------------- 4 * - -------------------------------------------------------------------------------- 5 * - -------------------------------------------------------------------------------- 6 * - -------------------------------------------------------------------------------- 7 * - -------------------------------------------------------------------------------- 8 * - -------------------------------------------------------------------------------- 9 * - -------------------------------------------------------------------------------- 10 * - -------------------------------------------------------------------------------- 11 * - -------------------------------------------------------------------------------- 12 * - -------------------------------------------------------------------------------- 13 * - -------------------------------------------------------------------------------- 14 * - -------------------------------------------------------------------------------- 15 * - -------------------------------------------------------------------------------- 16 * - -------------------------------------------------------------------------------- 17 * - -------------------------------------------------------------------------------- 18 * - -------------------------------------------------------------------------------- 19 * - -------------------------------------------------------------------------------- 20 * - -------------------------------------------------------------------------------- 21 * - -------------------------------------------------------------------------------- 22 * - -------------------------------------------------------------------------------- 23 * - -------------------------------------------------------------------------------- * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment EXHIBIT J BILL OF SALE Bill of Sale [LOGO] BOEING - ------------------------------------------------------------------------------------------------ Exporter Contract No. Program Boeing Satellite Systems Int'l Inc. ------------------------------------------- 909 N. Sepulveda Boulevard Invoice No. Page No. El Segundo, CA 90246 91-2046588 XXXXX 1 of 1 - ------------------------------------------------------------------------------------------------ Consign to Shipment No. Date ------------------------------------------- GLA Code Source Code TL550C - ------------------------------------------------------------------------------------------------ Mark For Packing Sheet No. ------------------------------------------- Packing Details ------------------------------------------- Shipped via - ------------------------------------------------------------------------------------------------ Sold To AWB No./Bill of lading ------------------------------------------- House AWB No. - ------------------------------------------------------------------------------------------------ Notify Party Instructions - ------------------------------------------------------------------------------------------------ County of Origin Terms United States of America ------------------------------------------- Gross Weight: XXXX KGS - ------------------------------------------------------------------------------------------------ Item Description Quantity Amount - ------------------------------------------------------------------------------------------------ Shipment Contains IATA Hazardous Materials 01 Commercial Communications Satellite 1 NO HTS 8802.80.3000; Net Weights: XXXX kgs License: XXXXXX, expires 00/00/0000 02 Flight Hardware LOT HTS 8803.90.3000; Net Weight: XX kgs License: XXXXXX, expires 00/00/0000 ---------- TOTAL VALUE FOR CUSTOMS PURPOSES: $0.00 - ------------------------------------------------------------------------------------------------
THESE COMMODITIES ARE AUTHORIZED BY THE U.S. GOVERNMENT FOR EXPORT ONLY TO _____________________ FOR USE BY ____________________ REPRESENTATIVES. THEY MAY NOT BE TRANSFERRED, TRANSSHIPPED, ON A NON-CONTINUOUS VOYAGE, OR OTHERWISE DISPOSED OF IN ANY OTHER COUNTRY, EITHER IN THEIR ORIGINAL FORM OR AFTER BEING INCORPORATED INTO OTHER END-ITEMS, WITHOUT THE PRIOR WRITTEN APPROVAL OF THE U.S. DEPARTMENT OF STATE. The seller of the above-listed property hereby warrants to the buyer of same, its successors and assigns that, immediately prior to the delivery of this Bill of Sale, the seller was the owner of the full, legal and beneficial title to the property and that the seller has good and lawful right to sell the same, and that good and marketable title to the property is hereby vested in the buyer free and clear of all liens, security interests, claims, pledges, encumbrances and rights of others of any nature; and the seller covenants and agrees with the buyer, its successors and assigns, that it will warrant and defend such title forever against all claims and demands of the seller and all other persons claiming from, through or under the seller. EXHIBIT K CERTIFICATE OF PERFORMANCE [LOGO] BOEING CERTIFICATE OF CONFORMANCE Boeing Satellite Systems International, Inc. ("BSSI") certifies that the goods and commodities delivered to New Skies Satellites N.V. under Bill of Sale Number __________ in association with Contract No. NSS-______________ for NSS-8 Spacecraft and Associated Equipment and Services, dated ________________, 2001 (the "Contract") comply with the Spacecraft Performance Specifications set forth in the Contract and all other applicable BSSI drawings and specifications and that all goods and commodities delivered hereunder are free from defects in material and workmanship. BOEING SATELLITE SYSTEMS INTERNATIONAL, INC. By: ------------------------------------------- Title: ---------------------------------------- Date: ----------------------------------------- EXHIBIT L Entire exhibit redacted and filed separately with the Commission pursuant to a request for confidential treatment * LAUNCH OF SPACECRAFT BETWEEN CONTRACTOR AND SEA LAUNCH * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment EXHIBIT M * SPACECRAFT BASELINE SPECIFICATIONS * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment Exhibit M Pricing assumption for NSS-9, Hybrid Satellite in the * General assumptions 1. Same size and layout of * dual gridded shaped antennas as NSS-8 2. Similar complement of transponders as NSS-8, see NSS-9 Scroll appended to this exhibit for specific assumptions. 3. Number of channel filter and interconnection selectivity switches not to exceed those assumed in NSS-9 Scroll. 4. Spacecraft requirements are within by Boeing 702-bus capability used for NSS-8. For example, spacecraft design life, environmental, payload power, thermal and pointing/attitude control does not exceed the capabilities of the NSS-8 spacecraft. 5. Spacecraft orbital manuever life requirements will be derived based on the mass budget derived once a preliminary design for NSS-9 is complete. 6. Payload Reliability requirements will be derived once a preliminary design for NSS-9 is complete. Payload Communication Subsystem Performance 1. The general scope of the performance specification is the same as NSS-8 Antenna Beams The NSS-9 satellite will provide the following beams, the coverage shapes are provided at the end of this attachment. * * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment Antenna Physical Configuration * 4. Antenna performance consistent with the above geometry. Transponder configuration 1. * for * C-Band transponders not to exceed * Watt TWTAs 2. * for * Ku-band transponders not to exceed * Watt TWTAs 3. Payload power limited to the capability of the NSS-8 spacecraft. Example simultaneous operating complement o * C-Band + * Ku-Band o * C-Band + * Ku-Band 4. Interconnectivity bounded by the switches assumed in the NSS-9 Scroll 5. Frequency plan bid is provided at the end of this attachment. 6. Payload definition is bounded by the payload scroll provided at the end of this attachment. Programmatic 1. Delivery on ground at * months after contract start 2. Delta PDR and CDR are conducted as required. 3. Antenna coverages are defined at NSS-9 EDC + 3months. 4. General scope of work as defined in NSS-8 Statement of Work 5. General test scope as defined in NSS-8 Comprehensive Test Plan, except that NSS-9 spacecraft will be tested at acceptance levels. 6. NSS-8 Program office and program management team will manage NSS-9 program. 7. * assumed for Launch and Mission Operations. * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment NSS-9 Frequency Plan * * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment * C and Ku Band Antenna Coverages * * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment NSS-9 Unit Scroll * * Confidential portion omitted and filed separately with the Commission pursuant to a request for confidential treatment EX-4.8 5 newskies20fex48_6-24.txt Exhibit 4.8 Amendment 3 AMENDMENT NUMBER 3 TO THE NSS-8 SPACECRAFT AND ASSOCIATED EQUIPMENT AND SERVICES CONTRACT (NSS-20-03-01) BETWEEN NEW SKIES SATELLITES N.V. AND BOEING SATELLITE SYSTEMS INTERNATIONAL, INC. This Amendment Number 3 to the NSS-8 Spacecraft and Associated Equipment and Services Contract Number NSS-20-03-01 dated and signed on 21 March 2001, as amended by two contract amendments, dated 15 January 2002 and 12 February 2003, respectively (as so amended, hereinafter referred to as "the Contract") is made on this 6 May day of May 2003 by and between NEW SKIES SATELLITES N.V., a Dutch corporation, with its principal place of business located at Rooseveltplantsoen #4, 2517KR The Hague, The Netherlands (hereinafter referred to as "NSS"); and BOEING SATELLITE SYSTEMS INTERNATIONAL, INC., a Delaware corporation, with its principal place of business located at 2260 East Imperial Highway, El Segundo, CA, U.S.A., (hereinafter referred to as "Contractor"). WHEREAS: NSS and Contractor have previously entered into the Contract for provision of the NSS-8 communications satellite and other items, and Confidential portions omitted and filed separately with the Commission pursuant to a request for confidential treatment. WHEREAS: NSS and Contractor have previously incorporated Amendment Number 1 to the Contract on 15 January 2002 and Amendment Number 2 to the Contract on 12 February 2003, and WHEREAS: NSS and Contractor have reached agreement to further modify Contract EXHIBIT A, NSS-8 SPACECRAFT PERFORMANCE SPECIFICATION. NOW THEREFORE, in consideration of the agreement between the Parties, the Parties agree that the Contract is amended as follows below: 1. Replace Attachment 1 (G/T), Attachment 2 (EIRP), and Attachment 3 (Service Region Definitions) of the EXHIBIT A, NSS-8 SPACECRAFT PERFORMANCE SPECIFICATION, Revision B, dated January 2003 with the revised Attachment 1 (G/T), Attachment 2 (EIRP), and Attachment 3 (Service Region Definitions) of the revised EXHBIT A, NSS-8 SPACECRAFT PERFORMANCE SPECIFICATION, Revision C, dated April 2003. 2. Revise Articles 2.4.3.1 and 2.4.3.2 of the EXHIBIT A, NSS-8 SPACECRAFT PERFORMANCE SPECIFICATION, Revision B, dated January 2003 to reflect the clarified wording contained in Articles 2.4.3.1 and 2.4.3.2 of the revised EXHIBIT A, NSS-8 SPACECRAFT PERFORMANCE SPECIFICATION, Revision C, dated April 2003. The above changes to the EXHIBIT A, NSS-8 SPACECRAFT PERFORMANCE SPECIFICATION, Revision B, dated January 2003 result in a revised EXHIBIT A, NSS-8 SPACECRAFT PERFORMANCE SPECIFICATION, Revision C, dated April 2003. The relevant revised EXHIBIT A is attached and made a part hereof. For clarity and continuity, the EXHIBIT A pages have been marked "REV C" and "April 2003" in the upper right hand corner. This Amendment Number 3 results in no change to the Contract price. Save as provided for in this Amendment Number 3, the Contract, including all Exhibits thereto, shall otherwise remain unchanged. This Amendment Number 3 may be signed in separate counterparts, each of which, together, will constitute one agreement between the Parties. IN WITNESS WHEREOF, this Amendment Number 3 has been duly executed by the Parties on the date stated above. NEW SKIES SATELLITES N.V. By: /s/ Leroy A. Argyle ------------------------------------- Leroy A. Argyle ------------------------------------- Title: VP - Space Segment Technology Division ------------------------------------- BOEING SATELLITE SYSTEMS INTERNATIONAL, INC. By: /s/ Dennis R. Beeson ------------------------------------- Dennis R Beeson ------------------------------------- Title: Contracts Manager ------------------------------------- Logo Propietary Information Rev C - April 2001 EXHIBIT A NSS-8 SPACECRAFT PERFORMANCE SPECIFICATION APRIL, 2003 REVISION C ----------------------------------------- ------------------ Approved by Boeing Satellite Systems Date ----------------------------------------- ------------------ Approved by New Skies Satellites Date NOTICE: This document is confidential and governed by Non-Disclosure Agreements as well as all applicable laws. It is not to be reproduced, retransmitted, excerpted, or otherwise provided to a third party, in part or in whole, without the expressed written authorization of New Skies Satellites, N.V. Entire Exhibit Redacted pursuant to U.S. International Traffic in Arms Regulation (ITAR), 22 CFR 120-130 EX-4.9 6 newskies20fex4-9_616.txt Exhibit 4.9 EMPLOYMENT AGREEMENT AGREEMENT, dated this 23rd day of April, 2002, (the "Agreement"), between New Skies Satellites N.V. (the "Employer" or the "Company"), an entity established under Dutch law, and Daniel S. Goldberg (the "Employee"). 1. Employment, Duties, Authority and Agreements. -------------------------------------------- (a) The Employer hereby agrees to employ the Employee as Chief Executive Officer of the Employer and the Employee hereby accepts such position and agrees to serve the Employer in such capacity during the employment period fixed by Section 3 hereof (the "Employment Period"). The Employee shall report solely and directly to the Supervisory Board of the Employer (the "Supervisory Board"). The Employee will have such duties, responsibilities and authority as are customary for chief executive officers of comparable entities to the Employer. During the Employment Period, the Employee shall be subject to, and shall act in substantial accordance with, all reasonable instructions and directions of the Supervisory Board and all applicable reasonable policies and rules thereof as are consistent with the above title, duties, responsibilities and authority and the Company's Articles of Association. Pursuant to Article 15.2 of the Company's Articles of Association, the Supervisory Board hereby designates Employee as the Chief Executive Officer of the Board of Management. (b) During the Employment Period, excluding any periods of vacation and sick leave to which the Employee is entitled, the Employee shall devote his full working time, energy and attention to the performance of his duties and responsibilities hereunder and shall faithfully and diligently endeavor to promote the business and best interests of the Employer. (c) During the Employment Period, the Employee may not, without the prior written consent of the Supervisory Board, operate, participate in the management, operations or control of, or act as an employee, officer, consultant, agent or representative of, any type of business or service (other than as an employee of the Employer), provided that it shall not be a violation of the foregoing for the Employee to (i) act or serve as a director, trustee or committee member of any civic or charitable organization and (ii) manage his personal, financial and legal affairs, so long as such activities (described in clauses (i) and (ii)) do not interfere with the performance of his duties and responsibilities to the Employer as provided hereunder. Except as described in this Section 1(c), Employee shall not provide any services to any other entity during the term of this Agreement without the written consent of the Supervisory Board. 2. Compensation. ------------ (a) As compensation for the agreements made by the Employee herein and the performance by the Employee of his obligations hereunder, during the Employment Period the Employer shall pay the Employee, not less than once a month pursuant to the Employer's normal and customary payroll procedures, a base salary at the rate of U.S. $450,000 per annum, payable in U.S. Dollars or in Euros at the Employee's election, at an exchange rate to be fixed annually by mutual agreement between the Employee and the Employer (the "Base Salary"). The Base Salary shall be reviewed annually and be increased further (but not decreased) in the absolute discretion of the Supervisory Board. Any such increased Base Salary shall then become the Base Salary for all purposes hereunder. (b) As compensation for the agreements made by the Employee herein and the performance by the Employee of his obligations hereunder, beginning in calendar year 2002 and for the remainder of the Employment Period (the "Bonus Period"), the Employee shall have an opportunity to earn an annual cash bonus in accordance with the following terms. For each calendar year during the Bonus Period, Employee shall be eligible to earn a cash bonus. With respect to each such year, the target cash bonus shall be 40% and the maximum cash bonus shall be 60% of the Employee's Base Salary for that year, subject to the attainment of certain targets established by the Supervisory Board in good faith (either acting directly or acting through its Management Compensation and Development Committee) for that year and subject to the Employee's employment with the Employer on the last day of the calendar year (the "Annual Bonus"). It is agreed that the target 40% bonus level is a target and not a minimum bonus amount. The Annual Bonus earned by the Employee with respect to each year shall be paid to the Employee not later than the first regular pay date following the determination of the amount of such Annual Bonus. (c) (i) As compensation for the agreements made by the Employee herein and the performance by the Employee of his obligations hereunder, the Employer shall grant the Employee effective as of the date of this Agreement and as soon as practical thereafter an award of 108,000 shares of restricted stock ("Restricted Stock"). The award will vest in three equal annual installments on February 25, 2003, February 25, 2004, and February 25, 2005 and shall be subject to such additional terms as the Employer shall specify in the agreement and/or plan governing the award ("Restricted Stock Plan"), provided that any award under the Restricted Stock Plan or any successor plan shall vest immediately in its entirety upon the occurrence of a "change in control" (as defined in the Restricted Stock Plan). (ii) The Employer currently maintains the New Skies Satellites N.V. 1999 Stock Option Plan, as amended (such plan, or any successor thereto providing for the award of options to purchase ordinary shares of the Employer on substantially the same terms as such plan, the "Option Plan"), pursuant to which the Employer may award options to purchase ordinary shares of the Employer ("Options"). As compensation for the agreements made by the Employee herein and the performance by the Employee of his obligations hereunder, the Employer will award stock incentives in the form of Options and Restricted Stock on or about February 2003 and annually thereafter during the Employment Period to the Employee pursuant to the Option Plan and the Restricted Stock Plan. With respect to each such year, the target allocation of the awards (the "Allocation") will be three times and the maximum Allocation will be five times the Employee's Base Salary as in effect on the date of the award, subject to the attainment of certain long-term performance goals established by the Supervisory Board in good faith (either acting directly or acting through its Management Compensation and Development Committee) from time to time. It is agreed that the three times Allocation is a target and not a minimum Allocation. At least fifty percent (50%) of the Allocation of each such award shall be comprised of Restricted Stock. (iii) The portion of the Allocation awarded in the form of Options shall be options to acquire ordinary shares of the Company in an aggregate value equal to the portion of the Allocation based on the Fair Market Value (as such term is defined in the Option Plan) of such shares as of the date of grant. Each Option shall have an exercise price that is not greater than the Fair Market Value of one ordinary share of the Company as of the date of grant. The portion of the Allocation awarded in the form of Restricted Stock shall be ordinary shares of the Company with an aggregate value based on the Fair Market Value of such shares equal to 40% of such portion of the Allocation. For purposes of the Options and Restricted Stock, the definitions of "Cause" and "Good Reason" set forth in this Agreement shall apply, notwithstanding any contrary definitions in any applicable award agreement or plan. An example illustrating the application of this paragraph (iii) and paragraph (ii) above is attached hereto as Annex A. (iv) Upon the termination of the employment of the Employee with the Employer by the Employee for Good Reason or by the Employer without Cause, any shares of Restricted Stock and any Options that have not vested shall immediately vest. Upon the termination of the employment of the Employee with the Employer by the Employee for Good Reason or by the Employer without Cause, any Option that is outstanding on the Date of Termination shall not terminate or expire prior to the earlier of (i) the expiration of the term of such Option and (ii) the date which is one year following the Date of Termination. The provisions of this paragraph (iv) shall apply notwithstanding anything to the contrary in the applicable award agreement or plan. (d) During the Employment Period, the Employee shall be entitled to the following benefits and perquisites: (i) medical and dental coverage (including for the Employee's spouse and children under the age of 21), on terms that are no less favorable than those generally provided to other senior executives of the Employer from time to time, subject to customary and reasonable limits, co-payments, deductibles, employee contributions and exclusions; (ii) at Employee's election, either a car provided by the Employer suitable to his position or the equivalent cost of such a car to the Employer in cash; and (iii) any benefits and perquisites generally provided to other senior executives of the Employer, from time to time, provided that the Employee shall not be entitled to participate in any such plan providing for benefits in the nature of severance pay. (e) During the Employment Period, the Employee shall be entitled to paid vacation of twenty-five (25) days per year. The ability to carry forward vacation time shall be subject to the Employer's vacation policy applicable generally to executive officers of the Employer as in effect from time to time. The Employee is not entitled to holiday allowances. (f) The Employer shall promptly reimburse the Employee for all reasonable business expenses upon the presentation of statements of such expenses in accordance with the Employer's policies and procedures now in force or as such policies and procedures may be modified with respect to all senior executive officers of the Employer. (g) The Employer shall promptly reimburse the Employee for expenses related to his relocation from Europe to the United States upon the termination of the Employment Period, as provided for in the New Skies' Relocation Policy existing on January 1, 2002. 3. Employment Period. ----------------- The Employee's employment hereunder shall commence on January 1, 2002 (the "Effective Date") and shall continue indefinitely until it is terminated in accordance with Section 4 below upon the earliest to occur of the following events: (a) Death. The Employee's employment hereunder shall terminate upon his death. (b) Cause. The Employer may terminate the Employee's employment hereunder for Cause. For purposes of this Agreement, the term "Cause" shall mean: (i) a willful and material violation by the Employee of either Section 1(c) or 7 of this Agreement (unless such violation is cured by the Employee within thirty (30) days of receipt of a written notice from the Supervisory Board which specifically identifies the facts and circumstances of such violation); (ii) the willful failure by the Employee to substantially perform the duties reasonably assigned to him within the scope of the Employee's duties and authority as stated in Section 1(a) hereunder (other than as a result of physical or mental illness or injury), after the Supervisory Board delivers to the Employee a written demand for substantial performance that specifically identifies the manner in which the Employee has not substantially performed the Employee's duties and provides the Employee thirty (30) days to begin to substantially perform, provided that the Employer shall not have the right to terminate the Employee's employment hereunder for Cause if the Employee begins to substantially perform within such thirty-day period; (iii) the Employee's willful misconduct, willful waste of corporate assets or gross negligence which in any such event substantially and materially injures the Employer; or (iv) the indictment of the Employee for a felony involving moral turpitude. In order for a termination to be considered to be for Cause, the Notice of Termination (as defined below) must be delivered within six (6) months of the date on which the Employer first knows of the event constituting Cause. (c) Without Cause. The Employer may terminate the Employee's employment hereunder without Cause. (d) Good Reason. The Employee may terminate his employment hereunder for Good Reason. For purposes of this Agreement, the term "Good Reason" shall mean: (i) a reduction by the Company in the Employee's Base Salary; (ii) any failure by the Company to pay any amounts due to the Employee within ninety (90) days of the date such amount is due; (iii) any material diminution of the level of responsibility or authority of the Employee, including the Employee's reporting duties; (iv) any adverse change in Employee's title or position; (v) the failure by the Employer to obtain from any successor an assumption of the obligations of the Employer as contemplated by Section 10(d) herein; (vi) removal of the Employee from membership on the Board of Management of the Employer during the Employment Period other than in connection with a termination of the Employee's employment under Section 3(a), 3(b) or 3(e) of this Agreement or as a result of the Employee's Disability (as defined below) in accordance with the requirements of the laws of The Netherlands; and (vii) the Employer requiring the Employee to be based at any office or location that is more than 50 kilometers from the Employer's current corporate headquarters and that is not in Paris, France; provided, that, with respect to any such relocation the Employee delivers a written notice of such Good Reason termination to the Employer within thirty (30) days after receiving written notice from the Employer of the possibility of such event; and provided, further, that the Employee delivers a written notice to the Supervisory Board within six (6) months of the date on which the Employee first knows of the event constituting Good Reason which specifically identifies the facts and circumstances claimed by Employee to constitute Good Reason and the Employer has failed to cure such facts and circumstances within thirty (30) days after receipt of such notice. For purposes of this Section 3(d), "Disability" shall mean the Employee's incapacity due to physical or mental illness, where the Employee has been unable to perform his duties hereunder for a period of (i) six (6) consecutive months or 180 days within a 365-day period or (ii) such longer period as may be required by the laws of The Netherlands. (e) Without Good Reason. The Employee may terminate his employment hereunder without Good Reason. 4. Termination Procedure. --------------------- (a) Notice of Termination. Any termination of the Employee's employment by the Employer or by the Employee during the Employment Period (other than termination pursuant to Section 3(a)) shall be communicated by written "Notice of Termination" to the other party hereto in accordance with Section 10(a). For purposes of this Agreement, a Notice of Termination shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee's employment under the provision so indicated and shall attach any prior notices required under Section 3. (b) Date of Termination. "Date of Termination" shall mean (i) if the Employee's employment is terminated by his death, the date of his death; or (ii) if the Employee's employment is terminated for any other reason, the date on which a Notice of Termination is given or any later date (within thirty (30) days, or any alternative time period agreed upon by the parties, after the giving of such notice) set forth in such Notice of Termination. 5. Termination Payments. -------------------- (a) Without Cause or for Good Reason. In the event of the termination of the Employee's employment during the Employment Period by the Employer without Cause or by the Employee for Good Reason, the Employer shall pay to (or in the case of business expenses pursuant to clause (i), reimburse) the Employee, or his estate in the event of his death, within thirty (30) days following the Date of Termination, (i) the Employee's Base Salary through the Date of Termination and outstanding business expenses pursuant to Section 2(f) hereof (to the extent not theretofore paid) (the "Accrued Obligations"), (ii) any earned but unpaid Annual Bonus in respect of a Bonus Period ending prior to or coincident with the Date of Termination, (iii) an Annual Bonus equal to the prior year's Annual Bonus (or, if such termination occurs during the 2002 fiscal year, an amount equal to $154,080) pro-rated for the year in which the Date of Termination occurs based on the number of days occurring in such year prior to the Date of Termination and (iv) a lump-sum payment equal to two times the sum of (x) the Employee's Base Salary (as in effect on the Date of Termination) and (y) (I) if the Date of Termination occurs prior to January 1, 2004, 40% of the Employee's Base Salary (as in effect on the Date of Termination) and (II) otherwise, the average Annual Bonus earned by the Employee with respect to the two years preceding the Date of Termination. The payments provided in this Section 5(a) are (i) not subject to offset or mitigation and (ii) conditioned upon and subject to the Employee executing a valid general release and waiver, waiving all claims the Employee may have against the Employer, its affiliates, directors, officers and employees. The Employer shall have no additional obligations under this Agreement, except for (i) the indemnification obligations set forth in Section 6 herein, (ii) any benefits (other than benefits in the nature of severance pay) to which the Employee is entitled under the terms of any employee benefit plan in which he is eligible to participate and (iii) as set forth in Section 2(c)(iv). (b) Cause or without Good Reason. If the Employee's employment is terminated during the Employment Period by the Employer for Cause or by the Employee without Good Reason, the Employer shall pay to (or in the case of business expenses pursuant to clause (i), reimburse) the Employee or his estate in the event of his death, within thirty (30) days of the Date of Termination, (i) the Accrued Obligations and (ii) any earned but unpaid Annual Bonus in respect of a Bonus Period ending prior to the Date of Termination, but only if the event constituting Cause occurs after the termination of such Bonus Period. The Employer shall have no additional obligations under this Agreement, except for (i) the indemnification obligations set forth in Section 6 herein and (ii) any benefits (other than benefits in the nature of severance pay) to which the Employee is entitled under the terms of any employee benefit plan in which he is eligible to participate. (c) Death. If the Employee's employment is terminated by the Employee or as a result of his death, the Employer shall pay to (or in the case of business expenses pursuant to clause (i), reimburse) the Employee's estate, within thirty (30) days of the Date of Termination, (i) the Accrued Obligations; (ii) any earned but unpaid Annual Bonus in respect of a Bonus Period ending prior to or coincident with the Date of Termination; and (iii) an Annual Bonus equal to the prior year's Annual Bonus which amount shall not be less than 40% of the Base Salary as of the Date of Termination pro-rated for the year in which the Date of Termination occurs based on the number of days occurring in such year prior to the Date of Termination. The Employer shall have no additional obligations under this Agreement, except for (i) the indemnification obligations set forth in Section 6 herein and (ii) any benefits (other than benefits in the nature of severance pay) to which the Employee is entitled under the terms of any employee benefit plan in which he is eligible to participate. 6. Indemnification. --------------- The Employer shall indemnify, defend and hold the Employee harmless from and against any and all liability or obligation arising from or relating to this Agreement or the performance by the Employee of his obligations hereunder, in accordance with the indemnification provisions set forth in Article 21 of the Employer's Articles of Association, as in effect on the date hereof, provided, that this obligation to indemnify and defend shall not extend to disputes between the Employee and the Employer, if any, which relate to the benefits or other amounts in the nature of compensation from the Employer to which the Employee believes he is entitled. The Employee shall receive coverage by a customary director and officer indemnification policy on a basis that is no less favorable than the coverage provided to any other officer or director of the Employer. 7. Non-Solicitation; Non-Disclosure; Workproduct; Non-Competition. -------------------------------------------------------------- (a) During the Employment Period and for one year following the termination of Employee's employment with Employer the Employee agrees not to offer employment to any employee of the Employer or any of its affiliates for other than employment by the Employer or attempt to induce any such employee to leave the employ of the Employer or any subsidiaries of the Employer and the Employee further agrees not to solicit any clients or suppliers of the Employer to do business with any competing business of the Employer. (b) Employee agrees that he will not appropriate for his own use, disclose, divulge, furnish or make available to any person, unless in the normal course of business or as authorized by Employer in writing, any confidential or proprietary information concerning Employer, including, without limitation, any confidential or proprietary information concerning the operations, plans or methods of doing business of Employer (the "Information"); provided, that the term "Information" shall not include such information which is or becomes generally available to the public other than as a result of a disclosure by Employee in violation of this Agreement. Notwithstanding the foregoing, Employee may disclose Information to the extent he is compelled to do so by lawful service of process, subpoena, court order, or as he is otherwise compelled to do by law or the rules or regulations of any regulatory body to which he is subject, including full and complete disclosure in response thereto, in which event he agrees to provide Employer with a copy of the documents seeking disclosure of such information promptly upon receipt of such documents and prior to their disclosure of any such information, so that Employer may, upon notice to Employee, take such action as Employer deems appropriate in relation to such subpoena or request. (c) Employee agrees that all right, title and interest to all works of whatever nature generated in the course of his employment resides with Employer. Employee agrees that he will return to Employer, not later than the Date of Termination, all property, in whatever form (including computer files and other electronic data), of Employer in his possession, including without limitation, all copies (in whatever form) of all files or other information pertaining to Employer, its officers, directors, shareholders, customers or affiliates, and any business or business opportunity of Employer and its affiliates. (d) Employee agrees not to engage in any aspect of the Satellite Business (as hereinafter defined) (i) during the Employment Period and (ii) in the event of the termination of the Employee's employment during the Employment Period by the Employer without Cause or by the Employee (with or without Good Reason), for one year following the termination of Employee's employment with Employer. Employee shall be deemed to be engaging in the Satellite Business if he directly or indirectly, whether or not for compensation, renders personal services of any kind in any capacity for any Competitor (as hereinafter defined). For purposes of this Section 7(d): (i) The "Satellite Business" shall mean the business of communication of electronic video, data, voice or other information by transmission by satellite operating in the Fixed Satellite Service frequencies for hire or any other business in which the Employer is engaged from time to time during the Employment Period. (ii) A "Competitor" is any corporation, firm, partnership, proprietorship or other entity which engages in the Satellite Business. (e) The restrictions of Section 7(d) hereof shall be deemed to be separate restrictions with respect to each geographic area, time period and activity covered thereby. Employee hereby agrees that if, in any judicial proceeding, a court shall refuse to enforce any such separate restriction, then such unenforceable restriction shall be deemed eliminated from this Agreement for the purpose of such proceeding or any other judicial proceeding, but only to the extent necessary to permit the remaining restrictions of Section 7(d) hereof to be enforced. (f) The parties hereto hereby declare that it is impossible to measure in money the damages which will accrue to Employer by reason of a failure by Employee to perform any of his obligations under this Section 7. Accordingly, if Employer or any of its affiliates institutes any action or proceeding to enforce the provisions hereof, to the extent permitted by applicable law, Employee hereby waives the claim or defense that Employer or its affiliate has an adequate remedy at law, and Employee shall not urge in any such action or proceeding the claim or defense that any such remedy at law exists. (g) The restrictions in this Section 7 shall be in addition to any restrictions imposed on Employee by statute or at common law. 8. Legal Fees. ---------- Employer will pay, or reimburse Employee for, reasonable attorney's fees and costs incurred by Employee in negotiating and documenting this Agreement and any related agreement with the Employer (not including any termination or similar agreement except as provided in Section 10(g)). 9. Excise Tax Matters. ------------------ (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Employer to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the United States Internal Revenue Code (the "Code"), then the amount of the Payments to which the Employee shall be entitled shall be reduced to the extent, and only to the extent, that such excise tax shall not apply, unless it is determined that the after-tax benefit to the Employee would be greater if such reduction did not occur. Notwithstanding the provisions of Section 9(b), the specific Payment or Payments that are reduced, and the order and amount of reduction from each such Payment, shall be determined by the Employee in his discretion. (b) All determinations required to be made under this Section 9, including whether a reduction is required and the amount of such reduction and the assumptions not specified herein to be used in arriving at such determinations, shall be made by the Employer's certified public accounting firm immediately prior to the Effective Date (the "Accounting Firm"). Such determination shall be made within thirty business days after request therefor by notice from the Employee to such firm and to the Employer. In making such determination with respect to any matter which is uncertain, the Accounting Firm shall adopt the position which it believes more likely than not would be adopted by the Internal Revenue Service. The Accounting Firm shall provide detailed supporting calculations with respect to its determination both to the Employer and the Employee within such thirty business day period. All fees and expenses of the Accounting Firm shall be borne solely by the Employer. Any determination by the Accounting Firm shall be final, binding and conclusive upon the Employer and the Employee, except as provided in the following sentences of this Section 9(b). As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that reductions which will not have been made by the Employer should have been made ("Overpayment") or that reductions which have been made by the Employer should not have been made ("Underpayment"), consistent with the calculations required to be made hereunder. Either party hereto can request a redetermination by the Accounting Firm. In the event that the Accounting Firm determines that an Underpayment has occurred, the Accounting Firm shall promptly determine the amount of the Underpayment, which shall be promptly paid by the Employer to or for the benefit of the Employee. In the event that the Accounting Firm determines that an Overpayment has occurred has occurred, the Accounting Firm shall promptly determine the amount of the Overpayment, which shall be promptly repaid by the Employee to the Employee. 10. Miscellaneous. ------------- (a) Any notice or other communication required or permitted under this Agreement shall be effective only if it is in writing and delivered personally or sent by registered or certified mail, postage prepaid, addressed as follows (or if it is sent through any other method agreed upon by the parties): If to the Employer: New Skies Satellites N.V. Rooseveltplantsoen 4 2517 KR The Hague The Netherlands Attention: Members of the Supervisory Board and Secretary to the Supervisory Board If to the Employee: Frederik Hendrikplein 46 2582 BA, The Hague The Netherlands or to such other address as any party hereto may designate by notice to the others, and shall be deemed to have been given upon receipt. (b) This Agreement constitutes the entire agreement among the parties hereto with respect to the Employee's Employment, and supersedes and is in full substitution for any and all prior understandings or agreements with respect to the Employee's Employment. (c) This Agreement may be amended only by an instrument in writing signed by the parties hereto, and any provision hereof may be waived only by an instrument in writing signed by the party or parties against whom or which enforcement of such waiver is sought. The failure of any party hereto at any time to require the performance by any other party hereto of any provision hereof shall in no way affect the full right to require such performance at any time thereafter, nor shall the waiver by any party hereto of a breach of any provision hereof be taken or held to be a waiver of any succeeding breach of such provision or a waiver of the provision itself or a waiver of any other provision of this Agreement. (d) (i) This Agreement, the Restricted Stock Plan and the Option Plan are binding on and are for the benefit of the parties hereto and their respective successors, heirs, executors, administrators and other legal representatives. Neither this Agreement, the Restricted Stock Plan or the Option Plan nor any right or obligation under this Agreement, the Restricted Stock Plan or the Option Plan may be assigned, transferred, pledged or encumbered by the Employer or by the Employee except as otherwise permitted herein or in the Restricted Stock Plan or the Option Plan. (ii) The Employer shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Employer expressly to assume and agree to perform this Agreement, the Restricted Stock Plan and the Option Plan in the same manner and to the same extent that the Employer would have been required to perform it if no such succession had taken place. As used in this Agreement, the Restricted Stock Plan and the Option Plan, "the Employer" shall mean both the Employer as defined above and any such successor that assumes and agrees to perform this Agreement, by operation of law or otherwise. (e) If any provision of this Agreement or portion thereof is so broad, in scope or duration, so as to be unenforceable, such provision or portion thereof shall be interpreted to be only so broad as is enforceable. (f) The Employer may withhold from any amounts payable to the Employee hereunder all Dutch and foreign, federal, state, city or other taxes and other amounts that the Employer may reasonably determine are required to be withheld pursuant to any applicable law or regulation. (g) This Agreement shall be governed by and construed in accordance with the laws of The Netherlands, without reference to its principles of conflicts of law. In the event of any dispute or controversy arising hereunder, the Employer shall bear the expenses reasonably incurred by the Employee in connection therewith, including without limitation reasonable legal fees; provided, that the Employee shall reimburse the Employer for such expenses (including without limitation such legal fees) if the Employee does not prevail with respect to a majority of his position in such dispute. (h) This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. (i) The headings in this Agreement are inserted for convenience of reference only and shall not be a part of or control or affect the meaning of any provision hereof. IN WITNESS WHEREOF, the parties have executed this Agreement, as of the date first written above. NEW SKIES SATELLITES N.V. ------------------------------ By: Terry Seddon Chairman of the Supervisory Board DANIEL S. GOLDBERG ------------------------------ By: Daniel S. Goldberg Annex A Example of Application of Sections 2(c)(ii) and (c)(iii): A. Assumptions: Base salary = $450,000 Target performance is achieved (i.e., grant is at 3x multiple) 50% payable in Restricted Stock; 50% payable in Options Fair Market Value per ordinary share at date of grant = $5.00 B. Determination of Allocation: Allocation = 3 x $450,000 or $1,350,000 C. Allocation payable in Options: 1,350,000 x 50% = $675,000 $675,000 / $5.00 per share = Options to acquire 135,000 ordinary shares D. Allocation payable in Restricted Stock: 1,350,000 x 50% = $675,000 $675,000 x 40% = $270,000 $270,000 / $5.00 per share = 54,000 shares of Restricted Stock EX-8 7 newskies20fex8_6-16.txt Exhibit 8 The significant subsidiaries of New Skies Satellites, N.V. as of December 31, 2002 are: Name Location % ownership - ----------------------------------------------- --------------------------------- ------------------- New Skies Networks, Inc. Delaware, U.S.A 100% New Skies Satellites, Inc. Delaware, U.S.A 100% New Skies Satellites Asset Holding, Inc. Delaware, U.S.A 100% New Skies Networks Pty Ltd. New South Wales, Australia 100% New Skies Networks (UK) Ltd. London, United Kingdom 100% New Skies Satellites (UK) Ltd. London, United Kingdom 100% New Skies Satellites MAR B.V. The Hague, The Netherlands 100% New Skies Satellites Kazakhstan B.V. The Hague, The Netherlands 100% New Skies Satellites Singapore B.V. The Hague, The Netherlands 100% New Skies Satellites India B.V. The Hague, The Netherlands 100% New Skies Satellites Brazil Ltda. Sao Paulo, Brazil 100%
EX-99 8 newskies20fex99_6-26.txt Exhibit 99 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of New Skies Satellites N.V. (the "Company"), does hereby certify, to such officer's knowledge, that: The Annual Report on Form 20-F for the year ended December 31, 2002 (the "Form 20-F") of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: /s/ Daniel S. Goldberg -------------------------- Daniel S. Goldberg Chief Executive Officer Dated: /s/ Andrew Browne -------------------------- Andrew Browne Chief Financial Officer The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code). A signed original of this written statement required by Section 906 has been provided to New Skies Satellites N.V. and will be retained by New Skies Satellites N.V. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----