MacDonald, Dettwiler and Associates Ltd.
MACDONALD, DETTWILER AND ASSOCIATES LTD.
ANNUAL INFORMATION FORM
For the year ended
December 31, 2015
Dated as of February 24, 2016
TABLE OF CONTENTS FORWARD-LOOKING STATEMENTS ............................................................................................................. 3 CURRENCY EXCHANGE .................................................................................................................................... 4 THE COMPANY ..................................................................................................................................................... 4 COMPANY PROFILE ............................................................................................................................................ 5 BUSINESS HISTORY............................................................................................................................................. 5 BUSINESS OF THE COMPANY – COMMUNICATIONS................................................................................ 6 BUSINESS OF THE COMPANY – SURVEILLANCE AND INTELLIGENCE............................................ 11 SUMMARY OF REPORTABLE SEGMENTS .................................................................................................. 22 LABOUR ................................................................................................................................................................ 25 ACQUISITIONS .................................................................................................................................................... 25 PRINCIPAL SUBSIDIARIES .............................................................................................................................. 25 RISK FACTORS ................................................................................................................................................... 25 DIRECTORS, OFFICERS AND SENIOR MANAGEMENT ........................................................................... 27 PRINCIPAL SHAREHOLDERS ......................................................................................................................... 33 LEGAL PROCEEDINGS ..................................................................................................................................... 33 DIVIDEND RECORD AND POLICY ................................................................................................................. 33 ISSUANCE OF COMMON SHARES ................................................................................................................. 34 CAPITAL STRUCTURE ...................................................................................................................................... 34 MARKET FOR SECURITIES ............................................................................................................................. 35 REGISTRAR AND TRANSFER AGENT .......................................................................................................... 35 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ................................ 35 MATERIAL CONTRACTS ................................................................................................................................. 35 INTERESTS OF EXPERTS ................................................................................................................................. 36 ADDITIONAL INFORMATION ......................................................................................................................... 36 SCHEDULE I – CORPORATE STRUCTURE .................................................................................................. 37 SCHEDULE II - AUDIT COMMITTEE CHARTER ........................................................................................ 38
FORWARD-LOOKING STATEMENTS This Annual Information Form (“AIF”) contains forward-looking statements that reflect the current view of MacDonald, Dettwiler and Associates Ltd. (“MDA” or the “Company”) with respect to future events and financial performance. The forward-looking statements in this AIF include, but are not limited to, statements regarding the funding, duration and benefits of customer contracts, spacecraft launch dates, business alliances, future competition, collective agreements, and expansion into new markets, and include, but are not limited to, those statements set out in this AIF under sections “Business of the Company – Communications”, “Business of the Company – Surveillance and Intelligence”, and “Summary of Reportable Segments”. The forward-looking statements in this AIF are based on the Company’s current expectations, estimates, projections and assumptions made in light of its experience and perception of historical trends. The factors and assumptions underlying the forward-looking statements include, among others: customer contracts not being terminated and no adverse changes to customer priorities and funding levels; current spacecraft construction plans; the Company maintaining its business alliances; the Company being able to remain competitive against future competition; the Company successfully negotiating collective agreements; and the Company having the ability to compete and expand into new markets. Any such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from current expectations. MDA cautions readers that should certain risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary significantly from those expected. The risks that could cause actual results to differ materially from current expectations include, but are not limited to: changes in government policies, priorities, funding levels, contracts or regulations and the failure to obtain necessary regulatory approvals and licenses; growth in the commercial satellite market is dependent on the growth in the businesses of the Company’s customers and the ability of its customers to develop new services; failure of third party subcontractors to complete contracts for which the Company is the prime contractor and the limited number of suppliers for some components; inherent risks of performance on firm fixed price construction contracts and termination of contracts by customers for convenience; changes in estimates of total revenues and costs on contracts and non-receipt of payments on failure of the Company’s satellites and products to perform successfully; potential for product liability or the occurrence of defects in products or systems and resulting loss of revenue and harm to the Company’s reputation; quality issues and failure of systems to meet performance requirements or to be accepted by a customer; inclusion of construction performance incentives in many of the Company’s customer contracts; potential for component failure or performance issues on the Company’s on-orbit satellites and resulting loss of revenue and harm to MDA’s reputation and failure of the Company to receive data for sales or of customers to purchase data; failure of the Company to manage its acquisitions and breaches of contract and indemnities and related risks on divestitures; certain customers are highly leveraged and may not fulfil their contractual payment obligations, including vendor financing; MDA’s ability to obtain certain satellite construction contracts depends, in part, on its ability to provide the customer with partial financing of working capital and any financing provided by the Company may not be repaid or the Company may be called upon to make payments; many of the Company’s costs are fixed and MDA may not be able to cut costs sufficiently to maintain profitability in the event of a downturn in its business; the availability of facility space and qualified personnel may affect MDA’s ability to perform its contracts as efficiently as planned; dependence on electronic systems may be subject to data and system security threats and malfunctions; detrimental reliance on third parties for data; dependence on key employees, potential for work stoppages and lack of oversight over a U.S. proxy board and management; failure to anticipate changes in technology, technical standards and offerings or comply with the requisite standards; failure to maintain technological advances and offer new products to retain customers and market position; significant competition with competitors that are larger or have 3
greater resources and foreign currency fluctuations may increase competition from the Company’s nonU.S. competitors; potential infringement of the intellectual property rights of others through licensed software or otherwise; inadequate protection of the Company’s intellectual property rights; exposure to foreign currency fluctuations; changes in economic and political conditions; inability of suppliers or subcontractors to effect technology transfer; failure to maintain business alliances; uncertainty in financing arrangements and failure to obtain required financing on acceptable terms; changes in regulations, telecommunication standards and laws due to political and economic instability in the countries in which MDA conducts business; changes in U.S. and foreign laws and regulations, including U.S. export control and economic sanctions laws, governing MDA’s business; wrongful call on letters of credit, guarantees and performance bonds; insufficient insurance against material claims or losses; exposure to fines and/or legal sanctions under anti-corruption laws; changes in customer security requirements and the resulting cancellation of contracts; reliance on information technology systems and threats of disruption from security breaches and cyber-attacks; and failure to comply with environmental regulations. For additional information with respect to certain of these risks or factors, reference should be made to section “Risk Factors” of this AIF, to section “Business Risks and Uncertainties” of the Company’s Management’s Discussion and Analysis for the year ended December 31, 2015, incorporated by reference into this AIF, and to the Company’s continuous disclosure materials filed from time to time with Canadian securities regulatory authorities, which are available online at www.sedar.com or on the Company’s website at www.mdacorporation.com. The forward-looking information contained in this AIF is expressly qualified by this cautionary statement. MDA disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law, rule or regulation. You should not place undue reliance on forward-looking statements. CURRENCY EXCHANGE Unless otherwise indicated, all references to “$” in this AIF are to Canadian dollars. Reference to “U.S.$” in this AIF are to United States dollars. The noon exchange rate on December 31, 2015 and on February 23, 2016 as reported by the Bank of Canada for the conversion of Canadian dollars into United States dollars was Cdn$1.00 to U.S.$0.7225 and U.S.$0.7251, respectively. THE COMPANY MDA was incorporated on February 3, 1969 by letters patent under the Canada Corporations Act. The Company was subsequently continued under the Canada Business Corporations Act on May 3, 1976. On December 22, 1999, MacDonald, Dettwiler and Associates Ltd. amalgamated with MacDonald, Dettwiler Holdings Inc., and continued as MacDonald, Dettwiler and Associates Ltd. On September 12 and 17, 2001, the Articles of the Company were amended to provide for a number of Directors, within a range, to be elected and to remove the right to cumulative voting with respect to the election of Directors, respectively. The terms “MDA” and the “Company” as used in this AIF shall mean MacDonald, Dettwiler and Associates Ltd. and its subsidiaries as the context so requires. The registered office of the Company is located at 25th Floor, 700 West Georgia Street, Vancouver, British Columbia, V7Y 1B3, and the principal place of business and corporate head office is located at 13800 Commerce Parkway, Richmond, British Columbia, V6V 2J3, telephone (604) 278-3411, facsimile (604) 231-2768. The Company’s common shares trade on the Toronto Stock Exchange under the symbol “MDA”.
COMPANY PROFILE MDA is a global communications and information company providing operational solutions to commercial and government organizations worldwide. MDA’s business is focused on markets and customers with strong repeat business potential, primarily in the Communications sector and the Surveillance and Intelligence sector. In addition, the Company conducts a significant amount of advanced technology development. MDA’s established global customer base is served by more than 4,800 employees operating from 11 locations in the United States, Canada, and internationally. In the Communications sector, MDA offers solutions for cost-efficient global delivery of a broad range of services, including television and radio distribution, broadband internet, and mobile communications. The Company is a leading supplier of communication satellites, satellite payloads, satellite antenna subsystems, and associated ground infrastructure and support services. MDA’s principal customers in this sector are communication satellite operators, communication satellite manufacturers, and government agencies worldwide. In the Surveillance and Intelligence sector, MDA offers end-to-end solutions to monitor changes and activities around the globe to support the operational needs of government agencies, both military and civilian, and commercial customers. The Company is a leading supplier of space-based and airborne surveillance solutions, imaging satellite ground systems, geospatial information services, and associated support services. The Company also supplies robotic systems for the space and terrestrial markets. The Company’s comprehensive capabilities in business and program management, systems engineering, systems integration, testing, and support services address complex customer requirements through the full solutions life cycle. BUSINESS HISTORY Early Developments and Transition MacDonald, Dettwiler and Associates Ltd. was established in 1969 to focus on the emerging field of Earth observation satellite ground stations. Over the next decades, MDA expanded to become a strong systems engineering company focused on developing large-scale, custom computer and software systems for government, space, and defence customers around the world. In the 1990’s, MDA began a program of strategic diversification, acquisition and investment to augment its core systems engineering capabilities which provided the Company with world leading capabilities in space robotics technology and permitted the Company to become an international distributor of geospatial information solutions derived from satellite imagery. At that same time, MDA also leveraged its strength in building systems that process information, into providing complete solutions for land and property-related information, thereby becoming an information solutions company and expanding into property-related information products in North America, the United Kingdom, and Europe. This property information business was sold in January 2011. In 2012, the Company acquired Space Systems/Loral, LLC (“SSL”), thereby becoming a leading provider of commercial communication satellites, serving a global customer base and creating a stronger presence in the U.S. market for the Company.
BUSINESS OF THE COMPANY – COMMUNICATIONS Satellite Communications represent a global market driven by strong demand from commercial enterprises, consumers, and governments. Its principal applications are direct-to-home television, digital audio radio, broadband internet, and mobile communications. MDA, through its acquisition of SSL, has over 50 years heritage of performance and delivering reliable solutions in this market, spanning hundreds of communication satellites. The Company has approximately 1.4 million square feet of stateof-the-art manufacturing facilities in Palo Alto, California and another 350,000 square foot facility in Sainte-Anne-de-Bellevue, Quebec. Communication Satellites With its satellite manufacturing operations in Palo Alto, California, the Company is a leading supplier of geostationary communication satellites to commercial satellite operators worldwide. The Company’s customers include the world’s largest communication satellite operators, such as Intelsat, S.A., SES S.A., Eutelsat S.A., Telesat Canada, EchoStar Corporation, Asia Satellite Telecommunications Co. Ltd., HISPASAT Group, and DIRECTV, LLC. With over 80 satellites in operation today, the Company has an excellent track record for delivery of commercial communication satellites. The Company is a leading supplier of direct-to-home television and radio broadcast satellites to commercial broadcast satellite operators. With over 40 Ka-band payloads fielded, the Company is also an industry leader in advanced high throughput multi-mission satellites for broadband internet services. In addition to the satellites it delivers, the Company offers its customers ground control and ground network distribution solutions, as well as mission engineering, simulation, performance evaluation, and training services. Subsequent to the acquisition of SSL, the Company has expanded its efforts to penetrate the U.S. Government market. The following sets forth the highlights achieved by the Company through the years indicated: Highlights: 2013
Successfully launched the Amazonas 3 satellite, designed and built for HISPASAT S.A. Amazonas 3 is a multi-mission satellite that includes the first Ka-band payload for broadband service in Latin America. Amazonas 3 is designed to provide a wide range of telecommunications services including direct-to-home television, corporate fixed and mobile telephone networks, and broadband in the Americas, Europe and North Africa;
Contracted with Hughes Network Systems, LLC, a subsidiary of EchoStar Corporation, to build the JUPITER 2/EchoStar XIX broadband satellite. The new Ka-band satellite will provide highspeed satellite internet service in North America;
Successfully launched the Satmex 8 satellite, designed and built for Satelites Mexicanos, S.A. de C.V. Satmex 8 is a fixed satellite that is designed to provide video content and distribution, broadband services, and cellular backhaul in North, South and Central America. It also provides people in remote areas with services for telemedicine, distance learning, and emergency communications;
Successfully launched the Anik G1 satellite, designed and built for Telesat Canada, on April 15, 2013. Anik G1 is a multi-mission satellite with three different payloads providing direct-tohome television service in Canada, as well as broadband, voice, data, and video services in South America. It is also the first commercial satellite with a substantial X-band payload for government communications over the Americas and the Pacific Ocean;
Contracted with SKY Perfect JSAT Corporation, a leading satellite operator based in Japan, to build the JCSAT-14 telecommunication satellite;
Contracted with Brazilian satellite operator Star One, a subsidiary of Embratel Participacoes S.A., to build the Star One D1 communication satellite. The satellite will be used for telecommunications, television broadcast, broadband, internet access and other services such as digital inclusion in Brazil and in the Latin America region;
Contracted with Intelsat, S.A., the world’s leading provider of satellite services, to build the Intelsat 34 communication satellite;
Contracted with Eutelsat S.A., a leading satellite operator, to build the EUTELSAT 65 West A satellite. This satellite will provide video and broadband services in Brazil and Latin America;
Awarded a contract option by the U.S. Air Force Space and Missile Systems Center to continue developing and demonstrating affordable design concepts for next generation protected military satellite communications;
Successfully launched the EUTELSAT 25B/Es’hail 1 satellite, designed and built for Eutelsat S.A. and Es’hailSat, the Qatar Satellite Company. This satellite is designed to provide television broadcasting, telecommunications and government services in the Middle East and North Africa;
Successfully launched the Sirius FM-6 satellite, designed and built for Sirius XM Radio Inc. This satellite helps ensure continuous and reliable delivery of SiriusXM’s audio entertainment and data services to subscribers across North America; and
Contracted with Asia Satellite Telecommunications Co. Ltd. to build the AsiaSat 9 satellite. AsiaSat 9 will be used for television broadcast, private networks and broadband services across the Asia Pacific.
Launched the ABS-2 satellite, designed and built for Asia Broadcast Satellite Limited. ABS-2 is a multi-mission C-band, Ku-band and Ka-band satellite designed to provide multiple services, including direct-to-home and cable television distribution, data networks and telecommunications services across four continents;
Contracted with SKY Perfect JSAT Corporation to provide two communication satellites, JCSAT-15 and JCSAT-16, which will be used by SKY Perfect JSAT to meet the growing demand for telecommunications infrastructure in the Asia Pacific region. The two satellites are designed to be used for services such as video distribution, data transfer communications, and back-up capabilities in Japan and neighboring regions;
Contracted with PT. Bank Rakyat Indonesia (Persero) Tbk (“BRI”) to construct a communication satellite to provide a dedicated platform for banking connection services for Indonesia, and to help BRI provide secure banking communications to more than 9,800 7
branches, 100,000 electronic channel outlets and 50 million customers across Indonesia;
Contracted with EchoStar Corporation to provide the EchoStar XXIII satellite, a flexible Kuband satellite capable of providing service from any of eight different orbital slots;
Contracted with Spanish satellite operator HISPASAT Group to provide the HISPASAT 1F satellite, a multi-mission satellite that will provide a broad range of services, including television, broadband, corporate networks and other telecommunication applications, in Europe, North Africa, North America and South America;
Contracted with Intelsat, S.A. to provide the Intelsat 36 satellite, designed to provide media and content distribution services in Africa and South Asia. Intelsat 36 will be located over the Indian Ocean to provide both Ku- and C-band services, with MultiChoice, Africa’s leading pay TV provider, using the Ku-band payload. The C-band payload will provide video services to other customers who distribute content to South Asian cable communities;
Successfully launched the AsiaSat 8 satellite, designed and built for Asia Satellite Telecommunications Co. Ltd., to provide direct-to-home television service, data broadcasting, and telecommunications services in Asia and the Middle East;
Successfully launched the AsiaSat 6 satellite, designed and built for Asia Satellite Telecommunications Co. Ltd., to provide broadcasting, telecommunications and broadband services across the Asia-Pacific region;
Contracted with Bulgaria Sat AD, an affiliate of Bulsatcom, to provide the BulgariaSat-1 satellite, which will provide direct-to-home television service in the Balkan region;
Successfully launched the Optus 10 satellite, designed and built for Singtel Optus Pty Limited, which provides high quality consumer broadcast service and two-way voice and data communications services for Australia and New Zealand;
Successfully launched the Intelsat 30 satellite, designed and built for Intelsat, S.A. Intelsat 30 is a 20-kilowatt class Ku- and C-band satellite. The Ku-band payload is designed to provide distribution services for DIRECTV Latin America in South America and the Caribbean and the C-band payload enhances Intelsat’s existing service infrastructure serving Latin America;
Contracted with PT Pasifik Satelit Nusantara to construct the PSN VI communication satellite to provide service throughout South East Asia. PSN VI will include a high throughput satellite payload to provide voice and data communications, broadband internet, and video distribution throughout Indonesia;
Contracted with HISPASAT Group to provide the Amazonas 5 satellite, to be used for broadband service in South America, Central America, and Mexico and television, corporate networks and other telecommunications applications in South America and Central America; and
Successfully launched the DIRECTV 14 satellite, designed and built for DIRECTV, LLC. Designed to provide ultra-high definition and other new consumer services, DIRECTV 14 is the sixth SSL-built satellite in DIRECTV’s fleet.
Successfully launched the THOR 7 satellite, designed and built for Telenor Satellite Broadcasting. THOR 7 is a multi-mission satellite equipped with Telenor’s first high performance Ka-band payload, designed to serve the maritime market and offer high powered coverage over the North Sea, the Norwegian Sea, the Red Sea and the Mediterranean. The satellite also has a Ku-band payload for broadcast and television services in Central and Eastern Europe;
Contracted with Broadcasting Satellite System Corporation to provide the BSAT-4a communication satellite. The satellite will be used for direct-to-home television service in Japan, and will expand the availability of advanced television services such as high definition and ultra-high definition television;
Successfully launched the Star One C4 satellite, designed and built for Embratel Star One. The satellite will provide direct-to-home television service in Brazil and will expand Embratel Star One’s broadcasting services to other Latin American countries and to the United States;
Successfully launched the Intelsat 34 satellite, designed and built for Intelsat S.A. The satellite will support direct-to-home television service and broadcast television distribution in Latin America. Intelsat 34 will also provide broadband services for maritime and aeronautical use in the North Atlantic region;
Successfully launched the Sky Muster satellite, designed and built for NBN Co. Limited. It is the first of two satellites being provided for NBN. The two satellites will work in conjunction to deliver fast broadband throughout Australia and its coastal islands and external territories. Sky Muster will offer access to distance education, telehealth, video-conferencing, as well as other essential services to homes and businesses in rural and remote Australia where fast broadband service is currently unavailable;
Announced the Company has joined the OneWeb team. OneWeb is building over 900 low Earth orbit satellites to enable affordable broadband access for emerging markets and rural areas;
Contracted with Azercosmos, the national satellite operator of Azerbaijan, to provide the Azerspace-2 satellite. Azercosmos has a strategic agreement with Intelsat on the design of the satellite. Azerspace-2 will be Azercosmos’ second telecommunications satellite, and will expand the current capacity of Azerspace-1. The satellite will support growing demand for direct-to-home, government, and network services. For Intelsat, the satellite will provide continuity of service for the Intelsat 12 satellite for central and eastern Europe, as well as the Asia-Pacific region;
Contracted with Telesat Canada to provide the Telstar 19 VANTAGE satellite. The satellite will be used to expand broadband services in Latin America, the North Atlantic Ocean, the Caribbean and Northern Canada;
Contracted with Telesat Canada to provide the Telstar 18 VANTAGE satellite. The satellite will significantly expand Telesat’s capacity over the Asia Pacific region through a combination of broad regional beams and high throughput spot-beams; and
Contracted with PT Telkom Indonesia (Persero) Tbk, the largest telecommunication and network provider in Indonesia, to provide the Telkom-4 satellite, which will be used for fixed satellite services in Indonesia, India, and Southeast Asia.
Satellite Subsystems Through its operations in Sainte-Anne-de-Bellevue, Quebec, MDA is a leading independent supplier of subsystem solutions for communication satellites. Principal customers are prime contractors of commercial and government communication satellites around the world, such as Airbus Defence and Space, Aselsan Electronic Industries, The Boeing Company, Lockheed Martin Corporation, OHBSystem, and Thales S.A. MDA is the world’s largest independent commercial supplier of communication satellite antenna subsystems, spanning all of C, Ku, Ka, L, and UHF bands. MDA also provides advanced radio frequency and power electronics, as well as various digital solutions for inclusion in satellite payloads. In selected cases, MDA offers complete payload solutions to emerging satellite prime contractors. MDA’s satellite antenna business in Quebec operates independently of MDA’s satellite manufacturing business in Palo Alto, California. The following sets forth the highlights for this business for the years indicated: Highlights: 2013
Contracted with The Boeing Company to provide four advanced technology solutions for a 702HP communication satellite;
Contracted with Tesat-Spacecom GmbH and Co. to provide advanced technology solutions to be integrated into the European Data Relay Satellite (EDRS) system. The EDRS system of telecommunication satellites in geostationary orbit will relay information between low Earth orbit satellites and ground stations, increasing the time the satellites can be in communication with the ground and enable faster delivery of imagery to users;
Contracted with Sierra Nevada Corporation to develop an engineering concept solution to provide on-board communication signal processing capabilities for its crew transportation vehicle. Sierra Nevada Corporation is one of three companies funded under the National Aeronautics and Space Administration’s (“NASA”) Commercial Crew Program aimed at developing a reusable spacecraft to transport crew and critical cargo to and from the International Space Station; and
Contracted with Astrium S.A.S. to provide multiple communication satellite subsystems. The subsystems are intended for the Telstar 12N communication satellite that will provide coverage over Europe, North America, South America and the Caribbean.
Contracted with OHB-System AG to provide satellite communication electronics to be integrated into the EDRS-C telecommunication satellite as part of the EDRS system;
Contracted with Aselsan Electronic Industries Inc. to provide an X-band communication hosted payload solution. The customer is Turkey’s leading space and defence company, and prime contractor of the Turksat 6A X-band payload, which is scheduled to provide government and other communications services;
Contracted with the European Space Agency for the development and construction of a Kaband data relay terminal flight model for use on the Columbus module of the International Space Station. MDA’s terminal will complement existing communication systems on board the
International Space Station to provide an independent connection for faster delivery of scientific data and high definition video imagery between the International Space Station and ground stations;
Contracted with Mitsubishi Electric Corporation to provide multiple Ku- and Ka-band antenna subsystems for a telecommunication satellite; and
Contracted with Airbus Defence and Space to provide multiple communication subsystems.
Contracted with The Boeing Company to provide several communication antenna subsystems to be installed on the Boeing 702MP satellite platform;
Contracted with Aselsan Electronics Industries Inc. to provide Ku-band payload equipment for a communication satellite subsystem. This award is in addition to the contract announced in 2014 for the provision of an X-band communication hosted payload solution; and
Contracted with Lockheed Martin Corporation to develop two communication subsystems for modernized A2100 satellites.
BUSINESS OF THE COMPANY – SURVEILLANCE AND INTELLIGENCE Surveillance and Intelligence represents a global market driven by ever increasing needs for accurate and timely information about man-made and natural changes occurring around the world. MDA has over 50 years heritage of performance and delivering reliable solutions in the market. MDA is a leading supplier of space-based surveillance and robotic solutions, ground-based and airborne surveillance and intelligence solutions, geospatial information services, and associated support services. MDA’s solutions support the operational needs of government and commercial customers worldwide, including space agencies, defence and civil departments, intelligence agencies, aerospace prime contractors, aviation authorities, imaging satellite operators, and oil and gas companies. Space-based Surveillance and Robotic Solutions MDA provides end-to-end space missions to monitor changes and activities around the globe. MDA is a leader with decades of heritage in the development, commissioning, and operation of entire radar satellite missions, including ground segments. Historically, the principal customer in this area has been the Government of Canada. Under contracts with the Government of Canada, MDA has built the RADARSAT-1 and RADARSAT-2 satellites, and is now building the RADARSAT Constellation Mission (“RCM”). Primary users for information provided by these satellites include civil, defence, and intelligence agencies around the world, as well as transportation authorities and exploration companies. The Company also offers low cost Earth observation satellite constellations for commercial and government applications. In 2014, the Company was selected by Skybox Imaging to build 13 low Earth orbit imaging satellites. These low cost Earth observation satellites are being constructed at the Company’s specialized facility in Palo Alto, California dedicated to small satellite manufacturing. In addition, MDA is a leader in space robotics, with NASA, the Canadian Space Agency, and the U.S. Defense Advanced Research Projects Agency (“DARPA”) as principal customers. The Company has a long term heritage of providing the robotics for the U.S. Space Shuttle and the International Space Station (“Canadarm” and “Dextre”), and is currently involved in development of the next generation of space automation for planetary exploration. In 2015, the Company was selected by NASA to develop on-orbit robotic assembly technology. The project is part of NASA’s Tipping Point initiative to work
with industry to advance the goals for robotic and human exploration of the solar system through the development of critical space technologies. Leveraging on its heritage in space robotics, the Company is pursuing terrestrial applications for its robotics capabilities in the medical and nuclear fields. With the acquisition of SSL, MDA has expanded its efforts to market its robotics capability to the U.S. Government and U.S. commercial markets with the Company’s combined U.S. and Canadian capabilities. MDA has won important Earth observation constellation contracts and space robotics contracts in the United States. The following sets forth the highlights for this business for the years indicated: Highlights: 2013
Contracted with the Canadian Space Agency to build, launch and provide initial operations for the RADARSAT Constellation Mission. RCM is a constellation of three satellites. Information obtained from RCM can include repeat imaging of the same area at different times of day, dramatically improving the frequency of monitoring coastal zones, northern territories, Arctic waterways and other areas of strategic and defence interest. RCM will also incorporate automated identification system technology, which when combined with the radar images, supports the immediate detection and identification of ships worldwide;
Successfully launched the Sapphire satellite. Sapphire is a space-based electro-optical sensor designed to track man-made space objects at high orbital altitudes and provide accurate, timely data to the Department of National Defence as part of Canada’s continued support of Space Situational Awareness;
Contracted with NASA’s Johnson Space Center to extend the Company’s support of the Robotic Work Station on the International Space Station. The Robotic Work Station is the control station used to operate Canadarm2 and plays an essential role in the capture and berthing of re-supply vehicles visiting the space station;
Contracted with the Canadian Space Agency to provide the preliminary design of an advanced technology solution for NASA’s new Frontiers Program – OSIRIS-REx, the next planetary science mission to another celestial body in the solar system. NASA plans to launch a spacecraft to study and return an asteroid sample to Earth. MDA’s solution will be used to perform comprehensive surface mapping operations that provide topographical maps that will assist in navigating the spacecraft towards the asteroid and identifying potential sample acquisition sites;
Contracted with the Canadian Space Agency to extend the provision of sustaining engineering and operational support for its robotics elements on the International Space Station through to December 2015. MDA’s robotic systems played a critical role in the construction of the space station. With construction of the space station complete, robotics continue to play a vital role in on-going operations. MDA was the prime contractor for the Mobile Servicing System, which consists of Canadarm2, Dextre, and the Mobile Base System;
Contracted with Canada’s Department of National Defence to provide five years of operational support for a space-based surveillance solution being developed by MDA to provide access to timely and accurate surveillance information. The contract includes three one-year options to extend the support;
Contracted with Bruce Power, an Ontario-based nuclear operator, to help develop inspection and maintenance technologies as part of the design phase of the Bruce reactor inspection and maintenance system; 12
Successfully launched the CASSIOPE satellite into orbit. CASSIOPE is a small satellite developed by a Canadian industrial team led by MDA. The satellite is designed to help the Canadian Space Agency and the University of Calgary accomplish a science mission;
Commenced work under an authorization to proceed to provide key systems on the European Space Agency’s ExoMars program;
Contracted with DARPA, under phase two of the Phoenix program, to develop designs, processes and business terms for carrying small science and technology missions to space on the Company’s geostationary satellite platform;
Contracted with DARPA, under the next phase of the Phoenix program, to develop advanced robotic tools, cameras, tool caddies and a flexible small robotic arm; and
Contracted with DARPA to develop the Payload Orbital Delivery system for the Phoenix program, in order to deliver small packages to geostationary Earth orbit using surplus capacity on regularly launched communication satellites.
Contracted with the Canadian Space Agency for multiple strategic technology development projects. Several of the projects are expected to advance technologies which enable robotic spacecraft servicing, robotic systems that can operate in challenging space environments, and instruments for planetary exploration. One project is to advance the development of deployable ultra-high frequency antennas used for satellite communication, by developing an antenna that could be folded, resulting in a very compact size for launch and benefiting initiatives such as small satellites and hosted payloads;
Completed the commissioning of the Sapphire satellite, which was developed by MDA for Canada’s Department of National Defence. The Sapphire satellite tracks man-made objects in Earth’s orbit between 6,000 and 40,000 kilometers in altitude, as part of Canada’s continued support of space situational awareness. Data from the Sapphire satellite is contributed to the U.S. Space Surveillance Network, enhancing the ability of both countries to detect and avoid collision of critical space platforms with other satellites or pieces of debris;
Contracted with Skybox Imaging, Inc. to build a constellation of 13 low Earth orbit satellites for Earth imaging in order to capture sub-meter color imagery and up to ninety-second clips of high definition video;
Contracted with the Canadian Space Agency to develop the mission concept for an operational Canadian hyperspectral mission. MDA is leading a team to develop a satellite constellation concept to collect hyperspectral imagery around the globe and specifically in Canada and its coastal waters. This mission supports public priorities such as monitoring territorial sovereignty and national security, managing environmental change, and responsibly exploiting Canada’s agricultural and natural resources;
Contracted with the Canadian Space Agency to define critical technologies and assess potential contributions that Canada could make to future space exploration missions beyond low-Earth orbit. MDA will assess applications of Canadian robotic technologies to potential missions such as the NASA asteroid redirect mission and the deep-space habitat mission proposed in the global exploration roadmap;
Selected by the Department of the U.S. Air Force Headquarters Space and Missile Systems Center as one of three companies to study ways to accommodate an instrument to monitor air pollutants over North America on a commercial satellite. The Tropospheric Emissions: Monitoring of Pollution Mission Study is the second delivery order to be awarded under the U.S. Air Force Hosted Payload Solutions contract;
Received a follow-on contract from the Canadian Space Agency for NASA’s OSIRIS-REx mission. MDA will build a laser-based instrument that will be used for mapping the surface of the 500 metre diameter asteroid called Bennu, creating a high resolution three-dimensional model of its surface. NASA’s OSIRIS-REx spacecraft is scheduled to launch in September 2016 to study the asteroid and return a sample of it to Earth in 2023;
Selected by NASA to study system concepts and key technologies for NASA’s asteroid redirect mission, which is expected to be a key part of the agency’s path to sending humans to Mars. The Company will conduct two studies – one that examines using MDA robotic technology for asteroid capture, and another that examines adapting commercial spacecraft for the asteroid redirect mission;
Selected by DARPA to integrate the flight hardware for a new capability designed to carry small science and technology missions to space on MDA’s geostationary satellite platform. MDA will support completing the design and integration of the first Payload Orbital Delivery system accommodation on the Company’s 1300 platform. This will enable affordable delivery of small free-flying spacecraft beyond low Earth orbit for future servicing, operational, science and technology space missions; and
Contracted with the Canadian Space Agency to extend on-going support of the Mobile Servicing System on the International Space Station through to March 2016.
Received contract amendments from the Canadian Space Agency to provide on-going support for the Mobile Servicing System on the International Space Station. The Mobile Servicing System comprises Canadarm2, the Special Purpose Dextrous Manipulator and the Mobile Base System. These three robotic systems perform a variety of operations ranging from resupply, maintenance, and service tasks that are critical to the on-going operations of the International Space Station;
Contracted with the Canadian Space Agency to design and develop upgraded camera systems for the Mobile Servicing System on the International Space Station. The new camera systems will provide superior illumination and viewing for critical robotic operations, such as capture of visiting spacecraft, and maintenance and inspection of the station. Camera features will include colour, high dynamic range, advanced focus and digital zoom to enhance the space station’s robotic operations;
Signed a contract amendment with DARPA to further develop and test the Payload Orbital Delivery system as part of DARPA’s Phoenix program. Originally announced by MDA in 2013, the Payload Orbital Delivery system is a standardized mechanism designed to safely carry a wide variety of separable mass elements, such as payloads and electronics, to orbit aboard communication satellites. This approach would take advantage of hosted payload services that commercial services now provide while enabling lower-cost delivery to geosynchronous Earth orbit;
Contracted with DARPA to study on-orbit robotic assembly of geostationary communication satellites. The program is designed to enable larger and more powerful satellites that cannot be launched fully assembled to be packaged in pieces within a standard launch vehicle fairing. Satellites will self-assemble from an efficiently stowed state while in orbit with a focus on the installation and reconfiguration of large radio frequency antenna reflectors;
Signed a contract amendment with Orbital ATK, Inc. for additional interface units to enable capture and berthing of its Cygnus commercial resupply spacecraft to the International Space Station;
Selected as an industrial partner for a project in the running to be NASA’s next Discovery mission. MDA would work for The California Institute of Technology’s Jet Propulsion Laboratory in an asteroid research mission. The NASA Discovery Program’s goal is to deepen the knowledge of the solar system. MDA will support the Jet Propulsion Laboratory, working within a multi-institutional team, to conduct concept design studies and analyses. Based on the results, NASA will select one or two of the five Discovery missions; and
Contracted with NASA to develop on-orbit satellite assembly technology. The project is part of NASA’s Tipping Point initiative to work with industry to advance the goals for robotic and human exploration of the solar system through the development of critical space technologies.
Ground-based and Airborne Information Solutions MDA’s ground-based and airborne surveillance and intelligence solutions provide vital intelligence to operational decision makers. The Company offers a full range of multi-satellite ground stations to operate radar and optical surveillance satellites and to receive, process, distribute, archive and exploit imagery from those satellites. More than 50 receiving ground stations have been installed by the Company in more than 25 different countries, processing data from over 20 different satellites. The intelligence provided through MDA’s ground stations supports a broad range of applications, such as national security, maritime transportation, urban development, land use, resource management, environmental monitoring, defence operations, law enforcement and mapping. MDA’s ground-based solutions include maritime surveillance systems that draw on satellite imagery. Domestically the Company provides a number of defense information solutions, including ship combat systems, command and control systems, and operational trainers. With the U.S. Air Force as a principal customer, MDA provides advanced navigation information systems that increase safety and efficiency of aircraft landings and departures, supporting the next generation of air traffic management. MDA provides various airborne surveillance solutions to monitor human activity and its impact. The Company’s airborne radar solution provides high resolution imaging, advanced moving target identification, and other advanced detection and identification modes. The Company also operates a long endurance unmanned aerial vehicle surveillance service which provides real-time multi-sensor intelligence to support critical operations directly in-theatre. This service is currently used by the Royal Australian Air Force. MDA’s U.S. proxy company, MDA Information Systems LLC, is marketing the Company’s ground station technology to the U.S. government and U.S. commercial ground systems market. The proxy company has won several important contracts in this area, including a contract with the U.S. Air Force Life Cycle Management Center.
The following sets forth the highlights for this business for the years indicated: Highlights: 2013
Received contract amendments from the Commonwealth of Australia to extend MDA’s unmanned aerial vehicle (“UAV”) surveillance service in support of Australia’s efforts in Afghanistan;
Contracted with OGSystems to develop a prototype surveillance solution for the U.S. Army Corps of Engineers, Army Geospatial Center. MDA will develop a very small, mobile ground station that can be rapidly deployed to any area of interest around the world to receive and process imagery from multiple commercial satellites;
Received multiple contracts with DigitalGlobe, Inc. to upgrade and provide operational support and enhancements to the WorldView Production Segment headquarter’s systems, which MDA previously delivered to provide support for the WorldView-3 satellite. These systems process information from DigitalGlobe’s constellation of imaging satellites to generate a variety of image products. MDA’s systems are in continuous operation to help DigitalGlobe support its worldwide government and commercial customers;
Contracted with DigitalGlobe, Inc. to provide a ground station solution to an international customer to enable access to information from the WorldView satellites. As prime contractor, MDA is responsible for developing, integrating and installing the WorldView information solution at the customer’s site;
Contracted with the Department of National Defence to extend the operational support of its Automated Airline Hosting and Aircraft Tasking System. The system provides a passenger booking and aircraft scheduling service for the Canadian Forces for five years at six locations in Canada. The contract includes four one-year options;
Contracted with DigitalGlobe, Inc. to provide a direct access facility ground station for an unspecified customer to task, collect and process imagery from the WorldView-1 and WorldView-2 satellites. This contract is another international direct access facility customer ground station order that MDA has received from DigitalGlobe;
Contracted with the U.S. Air Force to further enhance the flight path safety system that aides the design of airport approach and departure flight paths; and
Contracted with the Department of National Defence to provide an unmanned aerial surveillance solution.
Contracted with the U.S. Air Force to continue operational support and further enhance the flight path safety system. The original flight path safety system, developed by MDA for the U.S. Air Force and deployed worldwide since 2004, focused on the design of flight paths for aircraft fitted with ground-based navigation equipment. This contract extension will provide an additional year of operational support along with enhancements that evolve system capability in the support of aircraft fitted with both ground-based and satellite-based navigation equipment;
Contracted with the Department of National Defence to provide eight radar surveillance systems for integration into the CP-140 Aurora fleet. The additional radar surveillance systems supplement the previous radar surveillance systems developed and delivered by MDA under this program; 16
Contracted with the Royal Canadian Navy to provide in-service support of the simulators at Canadian Forces Base Halifax that are used to train personnel on the operation and maintenance of Victoria-class submarines. The use of training simulators improves safety decision-making skills during realistic mission scenarios, in a cost-effective and timely manner. MDA has been providing in-service training and maintenance support on the Victoria-class trainer since 2009;
Contracted with the Department of National Defence to provide additional support for the unmanned aerial surveillance solution announced in 2013;
Contracted with DigitalGlobe, Inc. to expand its existing direct access ground systems to include the ability to task, downlink, and process imagery from the WorldView-3 and GeoEye-1 satellites. MDA has also signed an agreement to become DigitalGlobe’s preferred supplier of ground station solutions offered to international customers, thereby updating its December 2006 agreement. MDA’s solution enables customers to directly access the optical imaging capabilities of the supported satellites to obtain timely and accurate data that is crucial to decision making;
Contracted with the Land Title and Survey Authority of British Columbia to provide an operational electronic parcel map solution. Under this project, MDA will design and implement a GIS-based system to create and maintain a single, complete, trusted and sustainable representation of British Columbia’s integrated land and resource holdings. The project also consolidates existing surveyed Crown land data, and titled land parcel data originally held in over 180 disparate local government data sites, into a single operational database with each parcel connected to the Land Title Register or Crown Land Registry;
Contracted with the Commonwealth of Australia to continue MDA’s UAV surveillance service for the Australian Defence Force in Kandahar Airfield, Afghanistan until the end of 2014. MDA has been supporting the Australian Defence Force since January 2010 by providing critical realtime intelligence, surveillance and reconnaissance information directly to ground commanders. This was followed by another contract to transition MDA’s UAV services to Australia following completion of the contracted services in Afghanistan. MDA will provide the Royal Australian Air Force with UAV operations and related services within Australia through December 2017, with options to extend the contract for up to an additional three years;
Contracted with DigitalGlobe, Inc. to provide a ground station solution to an international customer to receive and process imagery and data directly from DigitalGlobe’s WorldView-1, WorldView-2, and WorldView-3 satellites. This is MDA’s first ground station solution to include WorldView-3, which was launched in August 2014;
Through MDA Information Systems LLC, acquired a division of General Dynamics Corporation, the business of which includes radar and other information sensors used for national security purposes. This business strengthens MDA’s ability to pursue surveillance and intelligence programs in the United States. The acquired business had approximately 170 employees and annual revenues of approximately U.S.$40 million at the time of acquisition;
Contracted with the U.S. Air Force, by an indefinite delivery, indefinite quantity contract, to further enhance the flight path safety system that aids the design of airport approach and departure flight paths; and
Contracted with EarthSTAR Inc., a subsidiary of EarthView Image Inc., to provide a ground station able to receive and process data from the RADARSAT-2 satellite.
Contracted with Airbus Defence and Space to modernize the U.S. Air Force’s five Eagle Vision mobile ground stations. Once upgraded, the systems will be able to receive and process imagery from the RADARSAT-2 and RapidEye satellites and enhance the ability of the U.S. Air Force to provide near real-time in-theatre access to essential image data;
Received contract amendments with Canada’s Department of National Defence to provide software upgrades to the radar surveillance systems for Canada’s fleet of CP-140 Aurora surveillance and intelligence aircraft. The fleet is used by the Royal Canadian Air Force in activities such as domestic surveillance of Canada’s maritime approaches, search and rescue missions, and maritime and overland operations. MDA’s radar surveillance system provides users with a high resolution imaging capability that can detect, locate, and classify land and marine-based objects, such as vehicles and ships;
Contracted with Canada’s Department of National Defence to provide further operational support for the east and west coast RADARSAT-2 ground systems that support the Polar Epsilon ship detection system. The near-real time system is a broad-area surveillance system that was delivered by MDA to the Department of National Defence in 2012. The system provides space-based, day and night, all-weather maritime surveillance information of Canada’s Arctic, Pacific, and Atlantic Oceans and includes global high-resolution surveillance capabilities to support deployed Canadian forces;
Contracted with Natural Resources Canada to provide in-service support to maintain and operate Canada’s national ground station infrastructure at Inuvik, Prince Albert, and Gatineau. MDA will also be the exclusive supplier of hosting services to a global base of satellite operators wishing to install and operate antennas at the Inuvik satellite facility for satellite control and data reception. The facility receives satellite information that is used for environmental monitoring, security and surveillance, and natural resource development;
Contracted with the U.S. Air Force to provide a high-precision flight path safety system that aids the design of aircraft approach and departure flight paths for pilots, allowing them to safely navigate in and out of airfields. The U.S. Air Force system is deployed worldwide, supporting U.S. Department of Defense operations wherever operations to instrument flight rules are required;
Contracted with an undisclosed company to provide licenses and services to access MDA’s software solution that supports flight operations at airports and airspace immediately around them;
Contracted with the Malaysian Remote Sensing Agency to provide a RADARSAT-2 ground station, one year of RADARSAT-2 information, and training to develop products that provide information to support a variety of applications;
Contracted with The Mitre Corporation to survey sites in Latin America with complex topography and provide digital mapping products incorporating information from optical satellite images. The products are used to conduct aeronautical studies, and to identify objects on the ground that could adversely affect aviation safely; and
Contracted with DigitalGlobe, Inc. to provide multiple international ground stations to receive and process imagery and data directly from DigitalGlobe’s WorldView-4 satellite, in addition to DigitalGlobe’s existing satellite constellation. The WorldView-4 upgrades will maximize the advantages of MDA’s modular multi-satellite ground station infrastructure and rapid upgrade 18
capability. The ground station upgrades will also allow customers to receive and process new real-time data from the RADARSAT-2 synthetic aperture radar satellite, providing an integrated source for electro-optical and radar imagery capabilities. Geospatial Information Services MDA’s geospatial services operations provide optical and radar satellite imagery, and value added products derived from satellite and other data sources. The Company owns the worldwide commercial distribution rights for RADARSAT-2 satellite imagery. As the operator and worldwide commercial data distributor for the RADARSAT-2 satellite, MDA is one of the largest radar information providers worldwide. MDA also provides value added geospatial information and monitoring services derived from radar imagery and other sources to customers in defence, weather, transportation, energy and mining, and civilian sectors. In the United States, MDA provides critical geospatial intelligence and change detection services to the intelligence community through its proxy company, MDA Information Systems LLC. The proxy company provides efficient and advanced information solutions to government and commercial customers in four specialty areas. The geospatial solutions division uses remote sensing, geographic information systems, multi-source data, and large volume image and data processing technology to provide cutting edge intelligence and information products and analysis services. The intelligence, surveillance and reconnaissance (“ISR”) systems division leverages MDA’s world-leading multimission ground system experience to provide fixed and transportable remote sensing satellite ground systems. The weather services division has been providing unique weather information products and services for energy and agriculture applications for over forty years. The sensor systems technologies division designs, develops, and enhances high performance ISR solutions to exploit data and provide critical information to support customer needs. The following sets forth the highlights for this business for the years indicated: Highlights: 2013
Contracted with an undisclosed customer to provide operational support for the customer’s data fusion and exploitation projects. The contract includes options to extend the support services for up to four additional years;
Contracted with Accent Micro Technologies Inc. to provide digital elevation products using RADARSAT-2 information to the University of the Philippines. Covering the entire Philippines, over 300,000 square kilometers of digital elevation products were provided within a six-month period. A digital elevation product is a three dimensional representation of the land surface, providing height information that is useful for a variety of mapping applications. The University of the Philippines uses the digital elevation products to perform flood hazard analysis and to support disaster management and planning;
Contracted with the U.S. National Fish and Wildlife Foundation, in consultation with the U.S. Coast Guard, to coordinate the collection and analysis of satellite-based ship and oil detection information to help promote environmental compliance within the U.S. Exclusive Economic Zone. The U.S. National Fish and Wildlife Foundation is working to protect delicate ecological environments to detect illegal discharges of oil from vessels and to reduce the number of those incidents;
Contracted with an undisclosed customer to supply space-based radar surveillance and intelligence information, for up to $10 million per year with a contract ceiling of $50 million;
Contracted with Collecte Localisation Satellites SA to provide a RADARSAT-2 ground station and three years of RADARSAT-2 information. The ground station is being installed in Bali, Indonesia, providing maritime information solutions to support the detection of illegal fishing activity and marine pollution;
Contracted with the Norwegian Space Centre to extend MDA’s provision of RADARSAT-2 imagery for a further three years. MDA’s imagery is used in ice mapping, landslide monitoring, oil spill detection, and ship detection services;
Contracted with the European Space Agency to extend MDA’s provision of RADARSAT-2 imagery in support of Europe’s Copernicus program;
Contracted with an undisclosed customer to provide information related to apparent changes in land cover and global land and water boundaries. The information produced will be used for planning and analysis in conjunction with data previously delivered by the Company to this customer; and
Contracted with the U.S. National Oceanic and Atmospheric Administration to provide RADARSAT-2 information for ice monitoring services.
Contracted with several undisclosed customers to provide space-based monitoring services to support offshore exploration and production activities. Applying RADARSAT-2 technology, MDA’s monitoring services for the oil industry help track the rate and direction of oil movement by providing information over a very large area, in any kind of weather, day or night. The information supports more efficient operations and a more effective response in the event of an oil spill;
Contracted with several leading international mining companies to provide information to monitor surface deformation at and in the vicinity of their mines. MDA will apply advanced RADARSAT-2 technology to detect subtle surface changes over a broad area, allowing remedial actions to happen before problems escalate and impact the environmental safety or production activities of the mine. MDA will also provide analytical reports required for regulatory organizations;
Contracted with Collecte Localisation Satellites SA to extend MDA’s provision of RADARSAT-2 data, which is being used for maritime surveillance, detection of illegal, unregulated and unreported fishing ships, and for mapping and research;
Contracted with the European Maritime Safety Agency, as part of the agency’s CleanSeaNet program, to provide RADARSAT-2 information covering all European sea areas. The information is used in detecting possible oil spills on the sea surface and for maritime surveillance projects, such as vessel detection;
Signed a five-year agreement with PASCO Corporation to grant exclusive distribution rights for RADARSAT-2 products and services to support government and commercial users in Japan in areas such as defence and security, land use management, environmental monitoring, and disaster response;
Contracted with the National Geospatial-Intelligence Agency to provide software systems and services to automate the production of the agency’s aeronautical charting products associated with flight operations at airports and immediate airspace. MDA will leverage expertise gained from developing aeronautical information solutions for the U.S. Air Force and the U.S. Federal Aviation Administration;
Selected by the Canadian Space Agency for three research and development projects. Under the first project, MDA will evaluate how radar and optical images can be combined to rapidly detect and track ships. Rapid identification allows decision makers to efficiently use the information to support Canada’s maritime surveillance capability. Under the second project, MDA aims to improve the solution for monitoring geo-hazards in pipeline corridors. Early detection of changes, such as land shifts that could cause ground subsidence or landslides, allows remedial action before problems escalate and create a risk to pipelines. The information could provide pipeline developers and operators with critical risk assessment information, and potentially support more reliable monitoring of pipelines in Canada and worldwide. Under the third project, MDA intends to demonstrate the added value of RADARSAT-2 in monitoring of forest areas by providing information on forest clear or partial cut, and to develop innovative features that will enable its use in detecting forest disturbances. This project could improve the Canadian Forest Service’s current practices for disturbance mapping, providing added value to its activities, such as maintaining a national-scale carbon budget;
Contracted with EarthSTAR Inc. to provide RADARSAT-2 information to support government and commercial users in China in areas such as land use management, environmental monitoring, subsidence monitoring, and disaster response; and
Contracted with the National Geospatial-Intelligence Agency to provide maintenance and enhancement of MDA’s persistent change monitoring solution that supports the agency’s GEOINT data domain warehouse. The information provided by MDA’s solution allows for: monitoring the effects of climate change; detecting urban sprawl, deforestation and wetlands loss; monitoring coastal expansion; identifying new facilities and construction; and prioritizing GEOINT content maintenance by allowing for more efficient and effective targeted inventory management and planning.
Contracted with the European Space Agency to provide RADARSAT-2 satellite information to Copernicus, a program funded by the European Union. MDA has been providing RADARSAT2 information to the Copernicus program since 2009. The information is used to provide mission critical information on sea ice in the Baltic Sea and Antarctic Ocean throughout the ice seasons, support disaster relief, improve the safety of maritime navigation, monitor assets, and support various mapping applications. The Copernicus program was established to provide users in Europe with access to accurate and timely information to better manage the environment, understand and mitigate the effects of climate change, and ensure civil security;
Signed contract amendments with three existing long-term RADARSAT-2 customers. These customers use RADARSAT-2 information for flood, ice, environmental and agriculture monitoring, disaster, natural resource management and maritime surveillance;
Signed a contract amendment with the National Geospatial-Intelligence Agency to provide operational enhancements to the information solution that automates the production of aeronautical charting products associated with flight operations at airports; and
Signed an indefinite delivery, indefinite quantity contract with an undisclosed customer to deliver information products and services derived from the exploitation and analysis of spacebased imagery, open-source information, and geospatial data. The commitment does not have a minimum amount and has a potential total value over five years of up to U.S.$350 million.
SUMMARY OF REPORTABLE SEGMENTS COMMUNICATIONS Principal Markets: MDA designs, manufactures and integrates satellites, satellite sub-systems and advanced antennas for commercial and government customers worldwide. The Company’s solutions meet a broad range of customer requirements for broadband internet service to the home, mobile video and internet service, broadcast feeds for television and radio distribution, emergency services, civil and defence communications, direct-to-home television broadcast, satellite radio, telecommunications backhaul and trunking, weather and environmental monitoring, and air traffic control. In addition, the Company produces spacecraft subsystems and integrates government and other add-on missions on commercial satellites. Distribution Methods: MDA’s communications solutions are sold in domestic and international markets through a combination of direct sales and agents. The Company’s customers include, among others: Asia Broadcast Satellite Limited, Asia Satellite Telecommunications Co. Ltd., Avanti Communications Group plc, Aselsan Electronic Industries Inc., DIRECTV, LLC, EchoStar Corporation, Eutelsat S.A., Hispasat S.A., Hughes Network Systems, LLC, Intelsat, S.A., NBN Co. Limited, Satelites Mexicanos, S.A. de C.V., SES S.A., Sirius XM Radio Inc., SKY Perfect JSAT Corporation, Star One S.A., Telenor Satellite Broadcasting AS, and Telesat Canada. Revenues: MDA’s Communications business accounted for $1,509 million of consolidated revenues for the year ended December 31, 2015 (2014 - $1,494 million). Production and Services: The Company participates in a highly competitive commercial satellite manufacturing industry and is successful principally on the basis of its relationships, technical capabilities and engineering expertise, product reliability, cost and ability to meet delivery schedules. The Company’s major contracts are generally firm fixed price contracts under which work performed and products shipped are paid for at a fixed price generally without adjustment for actual costs incurred. Specialized Skills and Knowledge: MDA relies on engineers/scientists with a range of skills and knowledge, as well as more specialized engineering/science skills related to its business. Competition: Primary competitors for satellite manufacturing contracts are The Boeing Company, Lockheed Martin Corporation, and Orbital ATK, Inc. in the United States, Thales S.A. and Airbus Space and Defence, a subsidiary of the Airbus Group, in Europe, and Mitsubishi Electric Corporation in Japan. The Company sells in a highly competitive market. In addition, many of the Company’s competitors are larger and have greater resources. The Company may also face competition in the future from emerging low-cost competitors in India, Russia and China. Cycles: Satellite demand is driven by fleet replacement cycles, increased video, internet and data bandwidth demand and the development of new satellite applications. Economic Dependence: Commercial communication satellites and certain related equipment, technical data and services are subject to U.S export controls. U.S. government licenses or other approvals generally must be obtained before certain products and services are exported and may be required before they are re-exported or transferred from one foreign person to another foreign person. In addition, if a satellite project involves countries, individuals or entities that are subject to U.S. economic
sanctions, the Company may be prohibited altogether or licenses or other approvals may also be required. Employees: As of December 31, 2015, MDA’s Communications business employed approximately 3,360 people. The Communications business is a knowledge-intensive business, the success of which relies heavily on its technological heritage and the skills of its workforce. As of December 31, 2015, MDA’s U.S. operations had approximately 2,600 employees, none of whom were subject to collective bargaining agreements. As of December 31, 2015, MDA’s Canadian operations had approximately 760 employees. The Company has collective agreements with the following unions and associations. Union / Association
Space Systems Engineers and Scientists Association
Unifor – Local 508
Confederation des Syndicats Nationaux
(1) Currently in negotiations
Operations: MDA’s Communications business operates largely out of Palo Alto, California and SainteAnne-de-Bellevue, Quebec. The Company operates under owned and leased premises at its locations. MDA’s operations in the United States are headquartered in Palo Alto, California, with additional facilities located in nearby Menlo Park and Mountain View, California. The Palo Alto facilities encompass approximately 1.4 million square feet, of which approximately 582,000 square feet are owned and 802,000 square feet are leased, spanning 36 buildings on 80 acres. The Company maintains contributory and non-contributory defined benefit pension plans covering a portion of its employees. SURVEILLANCE AND INTELLIGENCE Principal Markets: MDA’s Surveillance and Intelligence business provides turnkey solutions developed around proprietary and purchased technologies and services, tailored to meet the operational requirements of government and commercial customers worldwide. MDA offers geospatial information solutions that consist of Earth observation imagery information from aerial platforms and the majority of commercially available radar and optical satellites. These products and services are used globally for maritime surveillance, military intelligence, offshore oil and gas exploration, environmental monitoring, agriculture resource management, ice reconnaissance, and disaster management. Distribution Methods: MDA’s information solutions are sold in domestic and international markets through a combination of direct sales and with the help of agents or partners. Customers for the Company’s information solutions include, among others: Canadian Space Agency, Canada’s Department of National Defence, DigitalGlobe, Inc., European Space Agency, NASA, National Geospatial-Intelligence Agency, Commonwealth of Australia, U.S. Air Force, DARPA, and numerous government agencies in Canada, the United States and internationally. MDA’s geospatial information solutions are distributed by a combination of direct sales, regional partners, and local distributors. Revenues: MDA’s Surveillance and Intelligence business accounted for $609 million of consolidated revenues for the year ended December 31, 2015 (2014 – $605 million).
Production and Services: A significant portion of MDA’s Surveillance and Intelligence business involves long-term projects which are based on firm fixed price contracts. The Company has sufficient processes and systems in place to ensure compliance of its systems with ISO standards, reasonably measure and monitor the technical risk and financial performance of these contracts, and recognize revenues using the percentage of completion method. MDA’s geospatial information solutions and services are derived from satellites and other data sources. The solutions provide applications for defence intelligence and surveillance, resource management, and environmental responses. Specialized Skills and Knowledge: MDA relies on engineers/scientists with a range of skills and knowledge, as well as more specialized engineering/science skills related to its business. Competition: Competition in the information solutions market is highly diverse and includes aerospace and defence contractors such as the Airbus Group, General Dynamics Corporation, Raytheon Company, Orbital ATK, Inc., Lockheed Martin Corporation, The Boeing Company, and Thales S.A. Competition with respect to the Company’s geospatial services operations comes from other data and information providers such as Satellite Imaging Corporation, Leidos, Inc., BAE Systems, and DigitalGlobe, Inc. While these companies offer different products, there is often competition for contracts that are part of governmental budgets. The Company’s radar products compete with products offered by Airbus Space and Defence’s TerraSAR-X satellite and also with Telespazio’s COSMO-SkyMed satellite data, though each radar system has its strengths and weaknesses. MDA addresses the information solutions market by providing end-to-end solutions that allow customers to deal with a single source supplier. The Company relies on its experience in both the commercial and aerospace markets to offer its customers the required level of reliability, customization and timely delivery. MDA also strives to co-operate, or team with, its competitors on large programs. Cycles: MDA is project driven and therefore can experience an irregular revenue profile as the result of large projects being at varying stages of completion. However, there is no specific seasonal or cyclical impact. Economic Dependence: In the Surveillance and Intelligence sector, MDA receives contracts from the Canadian federal government and its agencies, such as the Canadian Space Agency and Department of National Defence. For the fiscal year 2015, 13% of MDA’s consolidated revenues were from the Canadian federal government and its agencies. Employees: As of December 31, 2015, MDA’s Surveillance and Intelligence business employed approximately 1,440 people. The Company has collective agreements with the following unions and associations. Union / Association
SPATEA - Brampton UNIFOR (Local 112 and Local 673)
December 2015 August 2017
(1) Currently in negotiations
Operations: MDA’s Surveillance and Intelligence business operates largely out of Canada and the United States, with a small operation in the United Kingdom. The Company primarily operates under leased premises at each of its locations. MDA is not dependent upon its U.S. operations, but they do offer a strong supplement to MDA’s business offerings and provide inroads into U.S. Space and Defence markets. The Company maintains contributory and non-contributory defined benefit pension plans covering a portion of its employees.
LABOUR The Company has collective agreements in both of its Communications business and Surveillance and Intelligence business. The Company maintains good relations with the employees. Renegotiating collective agreements may result in work stoppages or slowdowns, which, depending on their nature and duration, could negatively affect the Company’s financial performance. The Company is willing to accept the short-term costs of labour disruption in order to negotiate competitive labour costs and operating conditions for longer term. The Company attempts to mitigate work stoppages and disputes. ACQUISITIONS Acquisition of Advanced Systems On July 14, 2014, the Company entered into an agreement for the purchase of the Advanced Systems business unit from General Dynamics Advanced Information Systems, Inc. The acquisition was completed and formally closed on October 3, 2014 for cash consideration of U.S.$40 million less working capital and other adjustments of U.S.$3.2 million. The business has over fifty years of in-depth experience in development and application of radar and other information sensors for the U.S. government and its agencies. PRINCIPAL SUBSIDIARIES MDA operates its businesses through the following principal operating subsidiaries:
MDA Geospatial Services Inc. is an international provider of geospatial information solutions.
MDA Information Systems LLC, operating in the United States under a Proxy Agreement with a completely independent proxy board, provides geospatial information solutions primarily in the United States.
MDA Systems Ltd. designs and manufactures ground-based information solutions and services, including Earth observation ground systems, defence information systems, airborne surveillance systems and services, and transportation management systems, and space-based information solutions.
MDA US Systems LLC, operating in the United States, provides mechanical systems engineering, robotics and mechanisms, and mechanical analyses for systems operating in extreme environments.
MacDonald, Dettwiler and Associates Inc. designs and constructs advanced robotics for space and terrestrial applications.
MacDonald, Dettwiler and Associates Corporation designs and manufactures systems and subsystems for commercial space communications and remote sensing.
Space Systems/Loral, LLC designs, manufactures and integrates satellites and satellite systems for commercial and government customers worldwide.
RISK FACTORS Investors in securities of the Company should consider, in addition to information contained in this Annual Information Form and information contained in the other documents incorporated by reference herein, the risks described in the section “Business Risks and Uncertainties” of the Company’s annual Management’s Discussion and Analysis (as most currently filed on SEDAR at www.sedar.com) 25
incorporated by reference into this Annual Information Form. The Company’s key risk factors include, but are not limited to, the following: changes in government policies, priorities, funding levels, contracts or regulations and the failure to obtain necessary regulatory approvals and licenses; growth in the commercial satellite market is dependent on the growth in the businesses of the Company’s customers and the ability of its customers to develop new services; failure of third party subcontractors to complete contracts for which the Company is the prime contractor and the limited number of suppliers for some components; inherent risks of performance on firm fixed price construction contracts and termination of contracts by customers for convenience; changes in estimates of total revenues and costs on contracts and non-receipt of payments on failure of the Company’s satellites and products to perform successfully; potential for product liability or the occurrence of defects in products or systems and resulting loss of revenue and harm to the Company’s reputation; quality issues and failure of systems to meet performance requirements or to be accepted by a customer; inclusion of construction performance incentives in many of the Company’s customer contracts; potential for component failure or performance issues on the Company’s on-orbit satellites and resulting loss of revenue and harm to MDA’s reputation and failure of the Company to receive data for sales or of customers to purchase data; failure of the Company to manage its acquisitions and breaches of contract and indemnities and related risks on divestitures; certain customers are highly leveraged and may not fulfil their contractual payment obligations, including vendor financing; MDA’s ability to obtain certain satellite construction contracts depends, in part, on its ability to provide the customer with partial financing of working capital and any financing provided by the Company may not be repaid or the Company may be called upon to make payments; many of the Company’s costs are fixed and MDA may not be able to cut costs sufficiently to maintain profitability in the event of a downturn in its business; the availability of facility space and qualified personnel may affect MDA’s ability to perform its contracts as efficiently as planned; dependence on electronic systems may be subject to data and system security threats and malfunctions; detrimental reliance on third parties for data; dependence on key employees, potential for work stoppages and lack of oversight over a U.S. proxy board and management; failure to anticipate changes in technology, technical standards and offerings or comply with the requisite standards; failure to maintain technological advances and offer new products to retain customers and market position; significant competition with competitors that are larger or have greater resources and foreign currency fluctuations may increase competition from the Company’s non-U.S. competitors; potential infringement of the intellectual property rights of others through licensed software or otherwise; inadequate protection of the Company’s intellectual property rights; exposure to foreign currency fluctuations; changes in economic and political conditions; inability of suppliers or subcontractors to effect technology transfer; failure to maintain business alliances; uncertainty in financing arrangements and failure to obtain required financing on acceptable terms; changes in regulations, telecommunication standards and laws due to political and economic instability in the countries in which MDA conducts business; changes in U.S. and foreign laws and regulations, including U.S. export control and economic sanctions laws, governing MDA’s business; wrongful call on letters of credit, guarantees and performance bonds; insufficient insurance against material claims or losses; exposure to fines and/or legal sanctions under anti-corruption laws; changes in customer security requirements and the resulting cancellation of contracts; reliance on information technology systems and threats of disruption from security breaches and cyber-attacks; and failure to comply with environmental regulations. For a full discussion of these risk factors, refer to the section noted above in the Company’s annual Management’s Discussion and Analysis (as most currently filed on SEDAR at www.sedar.com).
DIRECTORS, OFFICERS AND SENIOR MANAGEMENT The names, municipality and country of residence, position within the Company, and present and principal occupation of each of the Directors and officers of the Company at December 31, 2015 are set forth in the following tables. All of the Directors hold office until they resign or until the next annual general meeting of the Company. Directors Name, Municipality of Residence
Position Within Company
Present and Principal Occupation
ROBERT L. PHILLIPS(2)(3) West Vancouver, British Columbia, Canada
Director, Chairman of the Board
DANIEL E. FRIEDMANN Vancouver, British Columbia, Canada
Director, President and Chief Executive Officer
President and Chief Executive Officer of the Company
THOMAS S. CHAMBERS(1)(3)(4) West Vancouver, British Columbia, Canada
DENNIS H. CHOOKASZIAN(1)(2) Wilmette, Illinois, USA
LORI B. GARVER(2)(3) McLean, Virginia, USA
General Manager, Air Line Pilots Association
BRIAN G. KENNING(1)(2) Vancouver, British Columbia, Canada
Director, Vice Chairman of the Board
FARES F. SALLOUM(1)(3) Plano, Texas, USA
ERIC J. ZAHLER (1)(3) New York, New York, USA
Managing Director, Sagamore Capital Group LLC
(1) (2) (3) (4)
Member of Audit Committee. Member of Governance and Nominating Committee. Member of Human Resources and Management Compensation Committee. Mr. Chambers was a director of Catalyst Paper Corporation (“Catalyst”) from October 2003 to September 2012. On January 31, 2012, Catalyst was granted protection under the Companies’ Creditors Arrangement Act by the Supreme Court of British Columbia.
Officers and Senior Managers Name, Municipality of Residence
Position Within Company
Present and Principal Occupation
DANIEL FRIEDMANN Vancouver, British Columbia, Canada
President and Chief Executive Officer
President and Chief Executive Officer of the Company
ANIL WIRASEKARA Vancouver, British Columbia, Canada
Executive Vice President and Chief Financial Officer
Executive Vice President and Chief Financial Officer of the Company
PETER LOUIS Richmond, British Columbia, Canada
Executive Vice President and Chief Operating Officer
Executive Vice President and Chief Operating Officer of the Company
JOHN CELLI Sunnyvale, California, USA
President, Space Systems/Loral, LLC
President, Space Systems/Loral, LLC, a U.S. subsidiary of the Company
WILLIAM McCOMBE New York, New York, USA
Senior Vice President, Finance and Legal of Space Systems/Loral, LLC
Senior Vice President, Finance and Legal of Space Systems/Loral, LLC
DON OSBORNE Tsawwassen, British Columbia, Canada
Group Vice President and General Manager
Group Vice President and General Manager of the Company
ANGELA LAU Vancouver, British Columbia, Canada
Vice President, Taxation and Treasury, Assistant Secretary
Vice President, Taxation and Treasury, Assistant Secretary of the Company
GORDON THIESSEN Surrey, British Columbia, Canada
Vice President, Corporate Secretary
Vice President, Corporate Secretary of the Company
Background of Directors Further information on the business experience, professional qualifications and principal occupation for the past five years of the Directors of the Company is set out below: Robert L. Phillips: Mr. Phillips, 65, of West Vancouver, British Columbia, has been a Director of the Company since October 22, 2003. Mr. Phillips is a Corporate Director. Mr. Phillips retired as President and Chief Executive Officer of the BCR Group of Companies in 2004. Prior to joining BCR, Mr. Phillips was Executive Vice President, Business Development and Strategy for MacMillan Bloedel Ltd. and previously held the positions of President and Chief Executive Officer at the PTI Group Inc. and Dreco Energy Services Ltd. Mr. Phillips has also enjoyed a prestigious law career and was appointed Queen’s Counsel in Alberta in 1991. Currently, Mr. Phillips is a Director of several corporations, including Canadian National Railway Corporation, Canadian Western Bank, Precision Drilling Corporation, and West Fraser Timber Co. Ltd. Mr. Phillips has attained degrees in chemical engineering and law from the University of Alberta. Thomas S. Chambers: Mr. Chambers, 71, of West Vancouver, British Columbia, has been a Director of the Company since July 28, 2005. Mr. Chambers is President of Senior Partner Services Ltd., which provides business advisory services. Prior to his current position, Mr. Chambers served for 26 years as a Partner in various senior management roles with PricewaterhouseCoopers LLP. Mr. Chambers is currently a Director of Coopers Park Corporation. Mr. Chambers is a Chartered Accountant. He was named a Fellow (FCA) by the B.C. Institute of Chartered Accountants in 1995 and was awarded its Life Time Achievement Award in 2014. He is a graduate of the Institute of Corporate Director’s education program.
Dennis H. Chookaszian: Mr. Chookaszian, 72, of Wilmette, Illinois, has been a Director of the Company since July 28, 2005. Mr. Chookaszian is a Corporate Director. From November 1999 until February 2001, Mr. Chookaszian served as Chairman and Chief Executive Officer of mPower, Inc., a financial advice provider focused on the online management of 401(k) plans. Mr. Chookaszian served as Chairman and Chief Executive Officer of CNA Insurance Companies ("CNA") from September 1992 to February 1999. During his 27-year career with CNA, Mr. Chookaszian held several management positions at the business unit and corporate levels, including President and Chief Operating Officer from 1990 to 1992 and Chief Financial Officer from 1975 to 1990. He served as chairman of the executive committee of CNA from 1999 to 2001. He served as Chairman of the Financial Accounting Standards Advisory Council from 2007 to 2011. Mr. Chookaszian currently serves as a Director of Career Education Corporation, CME Holdings, and Internet Patents Corporation. Mr. Chookaszian is a Certified Public Accountant. Lori B. Garver: Ms. Garver, 54, of McLean, Virginia, has been a Director of the Company since July 30, 2015. Ms. Garver is General Manager of the Air Line Pilots Association. Ms. Garver served as Deputy Administrator of NASA from 2009 to 2013. She previously worked at NASA from 1996 to 2001 within the Office of Policy and Plans, culminating in reporting directly to the NASA Administrator on NASA’s policies and long range plans. Outside of NASA, Ms. Garver was Executive Director of the National Space Society for nine years and worked for Capital Space, LLC and DFI International as a Vice President. Daniel E. Friedmann: Mr. Friedmann, 59, of Vancouver, British Columbia, has been President and Chief Executive Officer of the Company since 1995 and has been a Director of the Company since December 22, 1999. Mr. Friedmann joined the Company in 1979 and has held a number of positions in the Company, including engineering operations, sales and marketing and Chief Operating Officer. Mr. Friedmann holds a Masters degree in engineering physics from the University of British Columbia. Brian G. Kenning: Mr. Kenning, 66, of Vancouver, British Columbia, has been a Director of the Company since May 14, 2003. Mr. Kenning is a Corporate Director. Mr. Kenning was a Managing Partner of Brookfield Asset Management, a company involved in the real estate, asset management and power generation sectors, from 1995 to January 2005. From 1988 to 2005, Mr. Kenning was also Chairman and Managing Partner of B.C. Pacific Capital Corporation, a Brookfield affiliate active in merchant banking and investing. Mr. Kenning is currently a Director of the British Columbia Ferry Services Inc. and UBC Investment Management. Mr. Kenning has also been Chairman of the Board of Trustees of the B.C. Cancer Foundation. Over the past ten years, Mr. Kenning has served as Director of a number of public and private corporations. In addition, Mr. Kenning is a past Governor of the B.C. Business Council and a past Director of the B.C. chapter of the Institute of Corporate Directors. Mr. Kenning graduated from Queen's University with an MBA in 1973. Fares F. Salloum: Mr. Salloum, 67, of Plano, Texas, has been a Director of the Company since October 22, 2003. Mr. Salloum is a Corporate Director. Mr. Salloum retired from Verizon Communications in 2002, where he was President, International-the Americas. He was Senior Vice President, International Operations for GTE Corporation from 1997 to 2000. Prior to GTE, Mr. Salloum was with BC Telecom Inc. in various senior executive positions from 1973 to 1997. He has served as a Director for a number of corporations, including TELUS Corporation, Groupo Iusacell S.A., Telecommunications de Puerto Rico Inc., Compania Anonima Nacinal Telefonos de Venezuela, Codetel, CTI Holdings S.A. and Taiwan Cellular Communications. Mr. Salloum holds a Bachelor of Science degree in electrical engineering from the University of Alberta and an MBA from the University of British Columbia. Eric J. Zahler: Mr. Zahler, 65, of New York, New York, has been a Director of the Company since May 1, 2014. Mr. Zahler is Managing Director of Sagamore Capital Group LLC, a private equity firm pursuing investments in the aerospace/defence, industrial electronics and selected business service markets. From February 2000 to November 2007, Mr. Zahler was President and Chief Operating Officer 29
of Loral Space & Communications Inc., a global satellite communications services provider and a manufacturer of commercial satellites. From 1992 to 2000, Mr. Zahler held varying senior level management positions at Loral and its predecessor companies. From 1975 to 1992, Mr. Zahler was an attorney at Fried, Frank, Harris, Shriver & Jacobson LLP, where he was elected Partner in 1983. Mr. Zahler holds a Bachelor of Science degree in mathematics from Yale University and a law degree from Harvard Law School. Audit Committee Audit Committee Mandate A copy of the Company’s Audit Committee Charter is attached to this Annual Information Form as Schedule II and can also be found on the Company’s website at www.mdacorporation.com. Composition of Audit Committee The Audit Committee of the Company consists of Thomas S. Chambers (Chairman), Brian G. Kenning, Dennis H. Chookaszian, Fares F. Salloum and Eric J. Zahler. Each member of the Audit Committee is independent and none receives, directly or indirectly, any compensation from the Company other than for service as a member of the Board of Directors and its committees. All members of the Audit Committee are financially literate as defined under National Instrument 52–110 – Audit Committees. Relevant Education and Experience Mr. Chambers is a Chartered Accountant. The B.C. Institute of Chartered Accountants awarded Mr. Chambers an FCA in 1995 and a Life Time Achievement Award in 2014. Mr. Chambers was an audit partner with PricewaterhouseCoopers LLP for 26 years, and the national managing partner of the audit practice from 1996 to 2001. Mr. Kenning has an MBA in finance and extensive Board experience. He was Chairman of the Audit Committee of the Company from 2003 to 2005, Chairman of the Audit Committee of British Columbia Railway Company, the past Chairman of the Audit Committee of Canadian Hunter Explorations, Ltd. and a member of the Audit Committee of Hot House Growers Income Fund. Mr. Kenning has served in numerous senior management positions, including President of Versatile Corporation and Managing Partner of B.C. Pacific Capital Corporation. Mr. Chookaszian is a Certified Public Accountant. Mr. Chookaszian has served in numerous senior management positions, including Chief Financial Officer of CNA Insurance Companies from 1975 to 1990. He served as Chairman of the Financial Accounting Standards Advisory Council from 2007 to 2011. Mr. Chookaszian is also Chairman of the Audit Committee of the Chicago Mercantile Exchange, Chairman of the Audit Committee of Career Education Corporation, and a member of the Audit Committee of Northwestern University. He also served in the past as the Chairman of the Audit Committee of Sapient Corp. Mr. Chookaszian was one of the eight panel members of the Public Oversight Board Panel on Audit Effectiveness, a member of the AICPA Group of 100, and has served on numerous FASB and AICPA committees and task forces, including the SAS 99 Fraud Detection Standard. Mr. Salloum has extensive Board experience. Prior to MDA, he was a member of the Audit Committee of TELUS Corporation, and was Chairman of the Audit Committees of Groupo Iusacell S.A. and Compania Anonima Nacinal Telefonos de Venezuela. Mr. Salloum has served in numerous senior management positions, including President of Americas Verizon Communications. Mr. Zahler is Managing Director of Sagamore Capital Group LLC, a private equity firm pursuing investments in the aerospace/defence, industrial electronics and selected business service markets. Prior 30
to MDA, he was a member of the Audit Committees of Actel Corporation and EasyLink Services Corporation. Mr. Zahler has served in numerous senior management positions, including President and Chief Operating Officer of Loral Space & Communications Inc. Pre-approval Policies and Procedures The Audit Committee has considered whether the provision of services other than audit services is compatible with maintaining the auditors’ independence. The Audit Committee has adopted a policy that requires pre-approval by the Audit Committee of non-audit services. External Auditor Service Fees Fees paid or accrued by the Company for audit and other services provided by KPMG during 2015 and 2014 were:
Audit fees Audit related fees Tax fees Total
2015 $2,489,400 3,500 837,100 $3,330,000
2014 $2,484,700 0 759,700 $3,244,400
Tax fees are related to work performed in connection with proposed transactions, compliance services and tax structuring advice. Human Resources and Management Compensation Committee Composition of Human Resources and Management Compensation Committee As at December 31, 2015, the Human Resources and Management Compensation Committee of the Company consisted of Robert L. Phillips (Chairman), Thomas S. Chambers, Lori B. Garver, Fares F. Salloum, and Eric J. Zahler. Each member of the committee is independent and none receives, directly or indirectly, any compensation from the Company other than for service as a member of the Board of Directors and its committees. Relevant Education and Experience Mr. Phillips has gained experience on human resources and compensation matters over several years as a result of having been the President and CEO of Dreco Energy Services Ltd., PTI Group Inc. and BCR Group. In addition, Mr. Phillips has been for several years a member of or chaired the board committees responsible for human resources and compensation matters of several organizations and is currently a member or the chair of such committees of Canadian Western Bank, West Fraser Timber Co. Ltd., and Precision Drilling Corporation. Mr. Chambers has extensive Board experience and experience in human resources and compensation matters as a result of having been a Partner in various senior management roles at PricewaterhouseCoopers LLP. In addition, Mr. Chambers has served on the compensation committee of several public companies. Ms. Garver has extensive experience on human resources and compensation matters, which she gained in her roles as Deputy Administrator of NASA and in her current role as General Manager of the Air Line Pilots Association. Ms. Garver oversaw Human Resources for NASA and currently oversees Human Resources for the Air Line Pilots Association, with the Human Resources offices reporting to her directly for both organizations.
Mr. Salloum has served in numerous senior management positions, including President of Americas, Verizon Communications. He was the chair of the Human Resources Committees of the Americas’ units that reported directly to him, including Groupo Iusacell S.A., Telecommunications de Puerto Rico Inc., Compania Anonima Nacinal Telefonos de Venezuela, Codetel, and CTI Holdings S.A. Mr. Zahler has gained experience on human resources and compensation matters as a result of serving in numerous senior management positions, including President and Chief Operating Officer of Loral Space & Communications Inc. In addition, he was the Chairman of the Compensation Committee of Universal Space Network Inc., a private corporation owned by the Government of Sweden. External Consultant Fees Independent compensation consultants are engaged by the Company periodically to assess the market competitiveness of the total executive compensation arrangements. During 2015, Towers Watson was engaged to assess the market competitiveness of the Company’s executive compensation arrangements. During 2014, the Company performed an internal compensation review (without any external consultants), using compensation survey data obtained from various sources (including Radford, Towers Watson, Economic Research Institute, and Mercer), and did not use external consultants. Fees paid or accrued by the Company for the executive compensation market competitiveness review during 2015 were $18,400 (2014 - nil). Common Shares Held By Directors and Officers As at December 31, 2015, the Directors and officers of MDA, as a group, beneficially owned, directly or indirectly, or exercised control or direction over common shares of the Company which represented approximately 0.2% of the outstanding common shares. Background of Officers and Senior Managers of the Company The following sets forth the business experience and professional qualifications of the officers and senior managers of the Company, other than Mr. Friedmann whose experience and qualifications are set forth under “Directors, Officers and Senior Management - Background of Directors”. Officers: Anil Wirasekara: Mr. Wirasekara has been Executive Vice President and Chief Financial Officer of the Company since 1996. Mr. Wirasekara joined the Company in 1992. Mr. Wirasekara’s professional affiliations include The Chartered Institute of Management Accountants (UK), The Society of Management Accountants of B.C. and The Institute of Chartered Accountants (Sri Lanka). Mr. Wirasekara is also a graduate of the Chartered Institute of Marketing and Management (UK). Prior to joining the Company, Mr. Wirasekara held a variety of financial management positions with a large multi-national organization and was with the Sri Lanka office of Ernst & Young. Peter Louis: Mr. Louis is Executive Vice President and Chief Operating Officer of the Company. Mr. Louis joined the Company in 1983. He holds an MBA from the University of British Columbia and a Bachelor of Commerce (Honours degree) from the University of Manitoba. He has held numerous positions within the Company, including Executive Vice President and General Manager of Information Products, Vice President and Division General Manager of Geographical Land Information Products, Director of Operations of Property Information Products and Director of Business Development, Information Systems. Angela Lau: Ms. Lau joined the Company in 2006 and is Vice President, Taxation and Treasury of the Company. Prior to joining the Company, Ms. Lau worked in the finance group of another Canadian
public company and held a variety of management positions at a major accounting firm in Vancouver, British Columbia. Ms. Lau holds a Bachelor of Commerce degree from the University of British Columbia and is a Chartered Accountant. Gordon Thiessen: Mr. Thiessen is Vice President, Corporate Secretary of the Company. Mr. Thiessen joined the Company in 1988, became Corporate Controller in 1990 and Chief Accounting Officer and Corporate Secretary in 1999. Prior to joining the Company, Mr. Thiessen was a senior manager with a major accounting firm in Vancouver, British Columbia. Mr. Thiessen holds a Bachelor of Commerce degree from the University of British Columbia and is a Chartered Accountant. Selected Senior Managers: John Celli: Mr. Celli is a divisional President of the Company holding the office of President of Space Systems/Loral, LLC. Mr. Celli holds a Masters degree in mechanical engineering from the University of Rome, Italy. He joined MDA in November 2012 with MDA’s acquisition of SSL. Mr. Celli joined SSL in 1981 and has held various positions with SSL, including Chief Operating Officer, Executive Vice President, and Senior Vice President of Engineering, Manufacturing, and Test Operations. William McCombe: Mr. McCombe is a divisional Vice President of the Company holding the position of Senior Vice President, Finance and Legal of Space Systems/Loral, LLC. Mr. McCombe joined MDA in March 2014. Prior to joining MDA, he held the position of Managing Director in investment banking at Bank of America Merrill Lynch. Prior to that he was a Managing Director in investment banking at Morgan Stanley. Mr. McCombe holds an MBA from Columbia University in New York. He also holds Bachelor degrees in Law (Honours) and Commerce from the University of Melbourne in Australia. Don Osborne: Mr. Osborne is Group Vice President and General Manager of the Company. Mr. Osborne joined MDA in May 2009 as Vice President and General Manager, Satellite Systems. Prior to joining MDA, he held the position of President, Advantech Networks, a provider of satellite and wireless solutions for the telecommunications and broadband markets. Mr. Osborne began his career with Spar Aerospace in 1983. His last position at Spar Aerospace was Vice President, Sales and Marketing. Mr. Osborne has a Bachelor degree in Mechanical Engineering and a Masters in Business Administration from McGill University in Montreal, Quebec. PRINCIPAL SHAREHOLDERS As at February 15, 2016, there are no persons known to the management of MDA through public filings made on www.sedi.com and www.sedar.com, owning, directly or indirectly, or exercising control or discretion over more than 10% of the common shares of MDA, except as noted below: Name of Shareholder
Number of Common Shares Held(1)
% of outstanding Common Shares
Franklin Resources, Inc. (1)
Number of Common Shares of the Company beneficially owned, directly or indirectly, by such person or over which control or direction is exercised by such person. Information contained in this table is based on filings made by the relevant shareholder on www.sedar.com.
LEGAL PROCEEDINGS In the ordinary course of business, MDA was involved in or a party to various ongoing, pending and threatened legal actions and proceedings. DIVIDEND RECORD AND POLICY In 2010, the Board of Directors established a dividend policy, payable semi-annually at the end of March and September. The Board of Directors reviews the dividend policy prior to any declaration of a
dividend. Any decision to pay dividends on the common shares in the future will be made by the Board of Directors on the basis of the Company’s earnings, financial requirements and other factors existing at such future time. On February 25, 2015, the Board of Directors changed the Company’s dividend policy to pay dividends quarterly. The dividend payments for 2015 and the prior four years were as follows: Payment dates in 2015
March 31, 2015 June 30, 2015 September 30, 2015 December 31, 2015
$0.37 per common share $0.37 per common share $0.37 per common share $0.37 per common share
2015 2014 2013 2012 2011
$1.48 per common share $1.30 per common share $1.30 per common share $1.30 per common share $1.00 per common share
ISSUANCE OF COMMON SHARES On March 27, 2013, the Company completed a public offering of common shares and issued 4,145,750 common shares at a price of $69.40 per share for gross proceeds of $287.7 million. The funds received were used to repay debt. For the year ended December 31, 2015, the Company issued 50,672 common shares, at an average price of $94.56, upon exercise of share-based compensation awards (2014 – nil). For the year ended December 31, 2015, the Company issued 63,450 common shares, at an average price of $87.46, under an employee share purchase plan (2014 – 57,449 common shares). CAPITAL STRUCTURE Description of Share Capital The authorized capital of the Company consists of an unlimited number of common shares, of which 36,246,152 were issued and outstanding as at February 15, 2016, and an unlimited number of preferred shares issuable in series of which none are outstanding. The following is a general description of the material rights, privileges, restrictions and conditions attaching to each class of shares authorized. Common Shares Holders of common shares are entitled to vote for each share on all matters to be voted on by shareholders. Holders of common shares will be entitled to receive such dividends, if any, as may be declared on the common shares by the Directors of the Company. In liquidation, dissolution or windingup of the Company, the holders of common shares will be entitled to receive the property of the Company remaining after payment of all outstanding debts and after payment of all amounts required to be paid on all issued and outstanding preferred shares as provided for in each series of preferred shares, including return of capital. The holders of the common shares have no pre-emptive, redemption or 34
conversion rights. All common shares, when issued, are and will be issued as fully paid and nonassessable shares without liability for further calls or to assessment by the Company. Preferred Shares The preferred shares may be issued from time to time in one or more series, each series consisting of such number of shares and having such designation and such rights, privileges, restrictions and conditions attaching thereto as may be determined by the Board of Directors of the Company including the right to convert into common shares. The preferred shares rank prior to the common shares with respect to payment of dividends and distributions of assets or return of capital in the event of the liquidation, dissolution or winding-up of the Company. Except as required by law, the holders of preferred shares as a class are not entitled to receive notice of or to attend or vote at any meeting of the shareholders of the Company and do not have the right to vote on any increase in the number of preferred shares, any change or classification or cancellation of the preferred shares, or any creation of a class of shares equal to or superior to the preferred shares. MARKET FOR SECURITIES Common shares of the Company are listed on the Toronto Stock Exchange under “MDA”. The closing day trading price ranges and volumes traded of the common shares of the Company for 2015 were as follows: 2015 January February March April May June July August September October November December
Low $90.16 $92.84 $94.06 $95.78 $94.98 $90.90 $77.54 $73.94 $72.58 $72.70 $78.54 $81.50
High $94.76 $99.73 $100.22 $99.06 $100.00 $98.98 $91.52 $80.21 $76.70 $80.17 $85.92 $86.67
Volume for Month 708,300 946,100 1,678,100 1,088,000 1,201,400 1,009,800 1,544,900 2,166,400 1,616,900 1,364,100 1,224,900 1,543,100
REGISTRAR AND TRANSFER AGENT Computershare Investor Services Inc. is the registrar and transfer agent for the common shares of the Company. Transfer of the Company’s common shares can be effected at Computershare Investor Services Inc.’s principal offices in Vancouver, British Columbia and Toronto, Ontario. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS In the three most recently completed financial years, no insiders of the Company have been involved in any material transactions with the Company. MATERIAL CONTRACTS The Company has not entered into any material contracts during 2015.
INTERESTS OF EXPERTS The Company’s consolidated financial statements for the most recently completed financial year have been audited by KPMG LLP, Chartered Accountants, of Vancouver, British Columbia. The Audit Committee is responsible for the appointment, compensation, retention and oversight of the work of KPMG LLP as the Company’s independent auditors. The auditors examined the consolidated financial statements in accordance with Canadian generally accepted auditing standards to enable them to express an independent opinion on the consolidated financial statements. KPMG LLP has advised the Audit Committee that they are independent with respect of the Company within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any other standards or applicable legislation or regulation. ADDITIONAL INFORMATION References are made to the Consolidated Financial Statements and the Auditors’ Report to the Shareholders which appear in the most current Annual Report of the Company, and which are hereby incorporated by reference. Additional financial information is provided in the Company’s most recent Consolidated Financial Statements and Management’s Discussion and Analysis. Additional information, including Directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and options to purchase the Company’s securities, and interests of insiders in material transactions, is contained in the Company’s most recent Management Information Circular issued in connection with the Annual Meeting of Shareholders. Additional information relating to MacDonald, Dettwiler and Associates Ltd. can also be found on SEDAR at http://www.sedar.com/ and on the Company’s website at www.mdacorporation.com.
SCHEDULE I – CORPORATE STRUCTURE Below are the names and percentage ownership of all the direct and indirect subsidiaries of MDA as at December 31, 2015. Name of Subsidiary
Jurisdiction of Incorporation
Canada 6457258 Canada Ltd. 6454879 Canada Inc. 847018 B.C. Ltd. Cascade Data Services Inc. MacDonald, Dettwiler and Associates Corporation MacDonald, Dettwiler and Associates Inc. MDA Brazil Holdings, Inc. MDA Geospatial Services Inc. MDA GP Holdings Ltd. MDA International Holdings, Inc. MDA Systems Holdings Ltd. MDA Systems Ltd. Triathlon Ltd.
Canada Canada British Columbia Canada Canada Ontario Canada Canada Canada Canada Canada Canada Canada
100%(2) 100%(2) 100%(1) 100%(2) 100%(2) 100%(2) 100%(10) 100%(1) 100%(1) 100%(1) 100%(1) 100%(2) 100%(2)
United States International Space Technology, Inc. MDA Communications Holdings, LLC MDA Information Holdings, Inc. MDA Information Systems LLC MDA Systems Inc. MDA US Systems Holdings, Inc. MDA US Systems LLC Space Systems/Loral, LLC Space Systems/Loral Land, LLC
Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware
57.1%(3) 100%(4) 100%(4) 100%(5) 100%(4) 100%(1) 100%(5) 100%(6) 100%(6)
Other jurisdictions Cosmotech ZAO Dynacs Engineering Company (India) Limited Limited Liability Company MDA Information Systems MacDonald, Dettwiler and Associates GmbH MD Information Service (Luxembourg) S.A.R.L. MDA Financial Services Inc. MDA Insurance Services Inc. MDA Space and Robotics Limited
Russia India Russia Germany Luxembourg Barbados Barbados United Kingdom
57.1%(7) 95.0%(8) 100%(9) 100%(1) 100%(1) 100%(1) 100%(1) 100%(1)
(1) Held by MacDonald, Dettwiler and Associates Ltd. (2) Held by MDA Systems Holdings Ltd. (3) Held by Space Systems/Loral, LLC (4) Held by MDA US Systems Holdings, Inc. (5) Held by MDA Information Holdings, Inc. (6) Held by MDA Communications Holdings, LLC (7) Held by International Space Technology, Inc. (8) Held by MDA Systems Inc. (9) Held by MacDonald, Dettwiler and Associates GmbH (10) Held by MDA International Holdings, Inc.
SCHEDULE II - AUDIT COMMITTEE CHARTER 1. PURPOSE Senior management, as overseen by the Board of Directors (the “Board”), has primary responsibility for the Company’s financial reporting, accounting systems, and internal controls. The primary function of the Audit Committee (the “Committee”) is to assist the Board in fulfilling its oversight responsibilities by reviewing and reporting to the Board on: the financial reports and other financial information provided by the Company to any regulatory body, shareholders and the public; the Company’s systems of internal controls regarding finance and accounting; and financial and cost reporting processes, the audit process and the Company’s process for compliance with laws and regulations. The Committee’s primary duties and responsibilities are to:
Serve as an independent and objective party to monitor the Company’s financial reporting process and internal control system including the review of significant accounting and reporting issues including their impact on the financial statements. Review and appraise the audit efforts of the Company’s independent auditors. Provide an open avenue of communication among the independent auditors, senior management, the internal auditor and the Board. Ensure the Company has appropriate processes in place to identify and manage the principal financial risks of its business.
2. COMPOSITION The Committee shall be comprised of a minimum of three members, as determined by the Board. All members of the Committee shall be “independent”, as defined in accordance with applicable securities laws and standards of the stock exchange(s) on which the Company’s securities are listed, and have no relationship to the Company that may interfere with the exercise of their independence from management and shareholders. In addition, all members of the Committee shall be “financially literate”, as defined in accordance with applicable securities laws and standards of the stock exchange(s) on which the Company’s securities are listed, and have a working familiarity with basic finance and accounting practices. At least one member of the Committee shall have accounting or related financial management expertise. The Committee shall be appointed by the Board at the first meeting of the Board, following the Annual General Meeting to hold office until the next Annual General Meeting. Any Committee member may be removed or replaced at any time by the Board. Committee members shall cease to be a member upon ceasing to be a Director of the Company. Each member shall hold office until the earlier of the close of the next annual meeting of shareholders of the Company or until the member resigns or is replaced. 3. CHAIR OF THE COMMITTEE Unless the Board elects a Chair of the Committee, the members of the Committee shall designate a Chair by the majority vote of the full Committee membership. The Chair of the Committee shall:
Call and conduct the meetings of the Committee;
Be entitled to vote to resolve any ties;
Prepare and forward to members of the Committee the agenda for each meeting of the Committee, and include, in the agenda, any items proposed for inclusion in the agenda by any member of the Committee; Review with the Chief Financial Officer (“CFO”) and the auditors of the Company any matters referred to the Chair by the CFO or the auditors of the Company; Appoint a secretary, who need not be a member of the Committee, to take minutes of the meetings of the Committee; and 38
Act in a manner that the Committee meetings are conducted in an efficient, effective and focused manner.
4. MEETINGS The Committee shall meet at least four times annually or more frequently as circumstances dictate. Any member of the Committee may call a meeting. As part of its goal to foster open communication, the Committee should meet at least annually with management, the internal auditor and the independent auditors in separate sessions to discuss any matters the Committee or each of these groups believes should be discussed privately. The Committee may meet privately with outside counsel of its choosing, the independent auditors and the Chief Financial Officer of the Company, as necessary. The independent auditors of the Company shall receive notice of every meeting of the Committee and may request a meeting of the Committee be called by notifying the Chair of the Committee. The following provides additional guidance with respect to meetings of the Committee:
A Chairman shall be elected from among the members of the Committee. A quorum of a meeting of the Committee shall consist of a simple majority of the members of the Committee. The Committee may meet by telephone or video-conference and may take action by unanimous written consent with respect to matters that may be acted upon without a formal meeting. The Committee shall appoint a Secretary to the Committee who shall record the proceedings of the meetings and maintain minutes of meetings and activities of the Committee to be reported to the Board following the meetings of the Committee. The Committee may request the presence at any meeting, of representatives from the independent auditors, internal auditor, senior management, legal counsel, or other advisor who they feel could contribute to the subject of the meeting. The Committee will regularly meet in camera. The Chair shall, in consultation with management and the independent auditors, establish the agenda for the meetings and ensure the properly prepared agenda materials are circulated to members with sufficient time for review prior to the meeting. The Committee shall report after each meeting to the Board on significant results of the exercise of their responsibilities.
5. RESPONSIBILITIES, DUTIES, AUTHORITY The following functions shall be the common recurring activities of the Committee in carrying out its responsibilities outlined in Section 1 of this Charter. These functions should serve as a guide with the understanding that the Committee may carry out additional functions and adopt additional policies and procedures as may be appropriate in light of changing business, legislative, regulatory, legal and other conditions. The Committee shall also carry out any other responsibilities and duties delegated to it by the Board from time to time related to the purposes of this Committee outlined in Section 1. The Committee, in discharging its oversight role, is empowered to investigate any matter of interest or concern that the Committee deems appropriate. In this regard, the Committee shall have the authority to retain outside counsel, accounting, or other advisors for this purpose, including authority to approve the fees payable to such advisors and other terms of retention. The Committee shall be given full access to the Board, management of the Company, employees of the Company, directly and indirectly responsible for financial reporting, the internal auditor and the independent auditors, as necessary, to carry out these responsibilities. While acting within the scope of this stated purpose, the Committee shall have all the authority of the Board. Notwithstanding the foregoing, the Committee is not responsible for certifying the financial statements of the Company or guaranteeing the independent auditors’ report. The fundamental responsibility for the financial 39
statements and disclosures rests with management of the Company and the independent auditors. Absent actual knowledge to the contrary (which shall be promptly reported to the Board), each member of the Committee shall be entitled to rely on (i) the integrity of those persons or organizations within and outside the Company from which it receives information, (ii) the accuracy of the financial and other information provided to the Committee by such persons or organizations and (iii) representations made by management and the independent auditors, as to any information technology, internal audit and other non-audit services provided by the independent auditors to the Company and its subsidiaries. To fulfil its primary duties and responsibilities, the Committee shall adhere to the following terms: (a)
Review and update this Charter annually to determine whether revisions are necessary. Review significant accounting and reporting issues, including recent professional and regulatory pronouncements, and understand their impact on the financial statements. Prior to public disclosure, review and recommend for approval the Company’s audited annual consolidated financial statements and any reports or other financial information submitted to shareholders, including review of the nature and extent of any significant changes in accounting principles, judgements, estimates, accruals and valuations. Prior to public disclosure, review and recommend for approval the Company’s quarterly consolidated financial statements and any reports or other financial information submitted to shareholders or regulatory bodies. Prior to public disclosure, review the annual and interim MD&A and other sections of the annual report before release. Prior to public disclosure, review earnings press releases and earnings guidance, if any. Review the material financial information included in any prospectus, press release, information circular or annual information form prior to their release and, where appropriate, recommend to the Board whether such prospectus, press release, information circular or annual information form should be approved by the Board. Review complex and/or unusual transactions such as restructuring charges, purchase accounting and other judgement areas such as those involving valuation of assets and liabilities. Obtain reasonable assurance from management about the process for ensuring the accuracy and timeliness of public disclosure documents that contain audited and unaudited financial information, and periodically receive reports that management assesses the adequacy of those processes.
Review the annual Insurance Report of the Company.
Review the Annual Tax Status Report of the Company.
Review the Company’s liquidity and cash management process and credit agreements.
Review the Company’s business continuity planning and disaster recovery planning.
Review the Company’s compliance with banking financial covenants.
Obtain reasonable assurance from discussions with and (or) reports from management, and reports from independent and internal auditors that the Company’s accounting systems are reliable and that the prescribed internal controls are operating effectively. Establish procedures for overseeing complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
Independent Auditors The independent auditors are accountable to the Board, as representatives of the shareholders, and report directly to the Committee. The Committee is responsible for overseeing the work of the independent auditors, including the resolution of disagreements between management and the independent auditors regarding financial reporting. In order to ensure itself that the independent audit function has been effectively carried out and that any matters that the independent auditors consider appropriate to bring to the attention of the Board have been addressed, the Committee shall:
Recommend to the Board the selection (retention or replacement) of the independent auditors, considering independence and effectiveness, and recommend approval of audit fees to be paid to the independent auditors. On an annual basis, the Committee should review and discuss with the independent auditors all significant relationships their accountants have with the Company. The Committee shall specifically confirm their independence and will ensure management documents the review and assessment. If there is a recommendation to change the auditors, review all the issues to change and the steps for an orderly transition. Review the independent auditors’ audit plan and engagement letter with management and the independent auditors, including audit scope and approach. The Committee shall annually discuss with the independent auditors, internal auditor and management, the adequacy and effectiveness of the disclosure controls of the Company and elicit recommendations for the improvement of such controls or particular areas where new or more detailed controls or procedures are desirable. Meet with the independent auditors and management in private sessions to discuss matters the Committee or these groups believe should be discussed privately. Review annually the actual non-audit services and related fees provided by the independent auditors. Review and pre-approve the planned non-audit services and the related fees. Any changes in such services and related fees must be reviewed and approved by the Committee Chair, who will present the item at the first scheduled meeting following such change. The Committee may delegate the pre-approval of non-audit services to any one member of the Committee, provided however, a report is made to the Committee on any pre-approval of such services at the Committee’s first scheduled meeting following the pre-approval. Review and assess the performance of the independent auditors, including consideration of demonstrated independent audit judgement and application adherence to accounting policy and standards. Review and approve partner rotation of the independent auditors. Conduct post-audit review of significant risks and exposures, audit activities and significant audit findings. Review post-audit or management letters, containing recommendations of the independent auditors and management’s response. Review reports of the independent auditors. Review and approve the hiring policies regarding employees and former employees of the present and former independent auditors.
Engage the independent auditors to review the quarterly interim financial statements.
Direct the independent auditors’ examinations to particular areas.
Request the independent auditors to undertake special examinations.
Internal Auditor The internal auditor shall report functionally to the Committee and administratively to the Chief Financial Officer and the Committee shall:
Review the terms of reference of the internal audit function. Review the resources, budget, reporting relationships and planned activities of the internal audit function. Meet at least annually with management and the internal auditor in order to review internal audit findings and determine that they are being properly followed up, including the status of previous audit recommendations and any difficulties in the course of his work. Review the scope of responsibilities and effectiveness of the internal auditor, his responsibilities, activities, organizational structure and resources, his independence from management, his credentials and his working relationship with the independent auditors. Meet privately, as required but at least annually, with the internal auditor to discuss pertinent matters, including the quality of internal control and the qualitative judgements applied to his deliberations. The internal auditor shall report to the Committee on the results of the internal audit activities and shall also have direct access to the Chair of the Committee when the internal auditor determines necessary.
6. OTHER DUTIES (a)
Legal/Regulatory Matters and Ethics To provide assurance of Company compliance with all legal and regulatory requirements, the Committee shall:
Consider the financial statement implications of applicable laws and regulations overseen by other Committees of the Board. Receive and review copies of legal letters provided to the independent auditors, by in-house and outside counsel regarding claims and possible claims against the Company. Make inquiries of management, as well as the independent and internal auditors, to ensure that all material legal matters have been brought to the attention of the Committee. Obtain assurance from management regarding the Company’s compliance with applicable laws and regulations in all jurisdictions where the Company does business. On at least an annual basis, review with the Company’s counsel any legal matters that could have a significant impact on the organization’s financial statements or risk profile, the Company’s compliance with applicable laws and regulations, and inquiries received from regulators or governmental agencies.
Oversee the Company’s Ethics and Compliance Hotline.
Oversee the Company’s Disclosure Policy Committee.
Regulations The following are certain regulations with respect to the Committee:
The Committee shall have the power, authority and discretion delegated to it by the Board and shall conform to the regulations which may from time to time be imposed upon it by the Board.
A resolution approved in writing by the members of the Committee shall be valid and effective as if it had been passed at a duly called meeting. Such resolution shall be filed with the minutes of the proceedings of the Committee and shall be effective on the date thereon. The Committee shall keep regular minutes of its meetings and record all material matters and shall cause such minutes to be recorded in the books kept for that purpose. The Board shall have the power at any time to revoke or override the authority given to or acts done by the Committee except as to acts done before such revocation or act of overriding and to terminate the appointment or change the membership of the Committee or fill in it as it shall see fit. The Committee shall have unrestricted and unfettered access to all Company personnel and documents and shall be provided with the resources, including independent counsel and other professional advisors where necessary, to carry out its responsibilities.
The Committee may meet and adjourn, as it thinks proper. Questions arising shall be determined by a majority of votes of the members of the Committee present.
The Committee shall review policies and procedures with respect to the Chair of the Board and the President and Chief Executive Officer’s expense accounts and perquisites, including their use of corporate assets. The Committee shall periodically review a summary of major expenses incurred by the Chair of the Board.
Annual Performance Review The Committee shall perform a review and evaluation annually, of the performance of the Committee and its members, including a review of the compliance of the Committee with this Charter. In addition, the Committee shall evaluate, annually, the adequacy of this Charter and recommend any proposed changes to the Board.
Other Duties The Committee shall perform such other functions as assigned by law or regulation or as required by the Board.