<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ORBITAL SCIENCES CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3)Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule
0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
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<PAGE> 2
/ / Fee paid previously with preliminary materials.
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
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<PAGE> 3
Orbital
Sciences
Corporation
March 19, 1997
Dear Stockholder:
It is my pleasure to invite you to the Annual Meeting of Stockholders of
Orbital Sciences Corporation to be held on Thursday, April 24, 1997 at 9:00
A.M. at the Company's headquarters located at 21700 Atlantic Boulevard, Dulles,
Virginia 20166.
Whether or not you plan to attend, and regardless of the number of shares
you own, it is important that your shares be represented at the meeting. You
are accordingly urged to sign, date and return your proxy promptly in the
enclosed envelope, which requires no postage if mailed in the United States.
Your return of a proxy in advance will not affect your right to vote in person
at the meeting.
I hope that you will be able to attend the meeting. The officers and
directors of the Company look forward to seeing you at that time.
Sincerely,
/s/ DAVID W. THOMPSON
- ----------------------------------
DAVID W. THOMPSON
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 4
ORBITAL SCIENCES CORPORATION
21700 ATLANTIC BOULEVARD
DULLES, VIRGINIA 20166
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 1997
---------------
The Annual Meeting of Stockholders of Orbital Sciences Corporation (the
"Company"), a Delaware corporation, will be held at the Company's headquarters
located at 21700 Atlantic Boulevard, Dulles, Virginia 20166, on Thursday, April
24, 1997 at 9:00 A.M. for the following purposes:
1. To elect four directors for three-year terms ending in 2000.
2. To approve the adoption of an amendment to the Company's Restated
Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 40,000,000 shares to 80,000,000 shares.
3. To approve the adoption of the Orbital Sciences Corporation 1997
Stock Option and Incentive Plan.
4. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1997
as the record date for determination of stockholders entitled to notice of and
to vote at the meeting and any adjournments thereof.
IF YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE SIGN AND DATE THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors,
/s/ LESLIE C. SEEMAN
- ------------------------------
LESLIE C. SEEMAN
Senior Vice President, General Counsel
and Secretary
March 19, 1997
<PAGE> 5
ORBITAL SCIENCES CORPORATION
21700 ATLANTIC BOULEVARD
DULLES, VIRGINIA 20166
---------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
---------------
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Orbital Sciences Corporation (the "Company" or "Orbital") for use
at the Annual Meeting of Stockholders to be held at the Company's headquarters
located at 21700 Atlantic Boulevard, Dulles, Virginia 20166, on Thursday, April
24, 1997 at 9:00 A.M. and any adjournments thereof.
There are two outstanding classes of securities that entitle holders
thereof to vote generally at meetings of Orbital stockholders: (a) common
stock of Orbital, par value $0.01 per share ("Common Stock") and (b) Series A
Preferred Stock (the "Special Voting Stock"). A single share of Special Voting
Stock was issued to State Street Bank and Trust Company (the "Trustee"), as
trustee under a voting trust agreement for the benefit of holders of
exchangeable shares of the Company's wholly owned subsidiary, MacDonald,
Dettwiler Holdings Inc. (the "Exchangeable Shares") that were issued in
connection with Orbital's acquisition of MacDonald, Dettwiler and Associates
Ltd. ("MDA") in November 1995 (the "MDA Acquisition"). The Common Stock and
Special Voting Share vote together as a single class on all matters except as
otherwise required by Delaware law. The Common Stock is entitled to one vote
per share. The Trustee, as holder of one outstanding share of Special Voting
Stock, is entitled to one vote for each outstanding Exchangeable Share for
which instructions with respect to such voting are received in proper form from
Exchangeable Shareholders. Unless otherwise indicated, references herein to
"stockholders" means holders of Orbital Common Stock and the Special Voting
Stock. Rights and procedures with respect to the voting of Exchangeable Shares
are set forth in the "Information Statement for Holders of Exchangeable Shares
of MacDonald, Dettwiler Holdings Inc." included in proxy materials sent to
Exchangeable Shareholders.
The Board of Directors has fixed the close of business on March 12, 1997
(the "Record Date") for determining stockholders who are entitled to vote at
the Annual Meeting of Stockholders. On the Record Date, there were ________
shares of Common Stock outstanding, the holders of which are entitled to one
vote per share on each matter to come before the meeting. On the Record Date,
there were _________________ Exchangeable Shares outstanding, entitling the
Trustee to one vote per Exchangeable Share to the extent and in the manner
instructed by the respective Exchangeable Shareholders. Proxies properly
executed and returned will be voted at the meeting in accordance with any
directions noted. Any proxy on which no directions are indicated will be voted
FOR the election of the nominees for director set forth below and FOR the other
proposals described in this Proxy Statement. Proxies will be voted in the
discretion of the holders of the proxy with respect to any other business that
may properly come before the meeting and all matters incidental to the conduct
of the meeting. Any stockholder signing and delivering a proxy may revoke it
at any time before it is voted by delivering to the Secretary of the Company a
written revocation or a duly executed proxy bearing a date later than the date
of the proxy being revoked. Any stockholder attending the meeting in person
may revoke his or her proxy and vote his or her shares.
This Proxy Statement and accompanying form of proxy will be first mailed
to Common Stockholders, the Trustee and the Exchangeable Shareholders on or
about March 19, 1997.
<PAGE> 6
PROPOSAL 1
ELECTION OF DIRECTORS
Four directors are to be elected at the 1997 Annual Meeting for three-year
terms that expire in 2000. Ten other directors have been elected to, or
appointed to fill vacancies for, terms that end in either 1998 or 1999, as
indicated below. The term of office of each nominated director will be for
three years expiring at the 2000 Annual Meeting of Stockholders and until a
successor is elected and qualified or until such director's earlier death,
removal or resignation. If any nominees for directors should become
unavailable, the Human Resources and Nominating Committee of the Board of
Directors would designate substitute nominees and proxies would be voted for
such substitutes. Management does not anticipate that any of the nominees will
become unavailable.
In order to be elected, a nominee must receive the vote of a plurality of
the outstanding shares of Common Stock represented at the meeting and entitled
to vote. The four nominees for election as directors at the Annual Meeting who
receive the greatest number of votes properly cast for the election of
directors shall be elected directors. Shares that are withheld and broker
non-votes will have no effect on the outcome of the election.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES NAMED. Unless instructions are given to the contrary, it is the
intention of the persons named as proxies to vote the shares to which the proxy
is related FOR the election of each of the nominees listed below.
Set forth below is certain information (as of February 12, 1997)
concerning each of the nominees and each person whose term of office as a
director will continue after the Annual Meeting.
DIRECTORS TO BE ELECTED AT THE 1997 ANNUAL MEETING
DOUGLAS S. LUKE, 55
Chairman of Audit and Finance Committee and Member of Human Resources and
Nominating Committee
Douglas S. Luke has been a Director of the Company since 1983. Since 1991, Mr.
Luke has been President and Chief Executive Officer of WLD Enterprises, Inc., a
private investment firm. From 1979 until 1990, he held various positions with
Rothschild, Inc., including the position of Managing Director from 1987 until
1990. Mr. Luke is currently a director of DNA Plant Technology Corporation,
Regency Realty Corporation and Westvaco Corporation.
JOHN L. MCLUCAS, 76
Member of Human Resources and Nominating and Strategy and Technology Committees
John L. McLucas has been a Director of the Company since 1993. From 1987 until
1993, he was a director of Orbital's then wholly owned subsidiary Orbital
Research Corporation ("ORC"). He was formerly Chairman of the International
Space University and currently serves on its Board of Advisors. From 1988 to
1991, he was Chairman of the National Aeronautics and Space Administration
("NASA") Advisory Council and Chairman of the U.S. Air Force Studies Board.
From 1985 to 1988, he was Chairman of QuesTech, Inc. From 1977 to 1985, Dr.
McLucas was Executive Vice President of The Communications Satellite
Corporation. Prior to 1977, Dr. McLucas held a variety of positions, including
Administrator of the Federal Aviation Administration, Secretary of the U.S. Air
Force and President of MITRE Corporation.
HARRISON H. SCHMITT, 61
Member of Audit and Finance and Strategy and Technology Committees
Harrison H. Schmitt has been a Director of the Company since 1983. From 1982
until the present, Dr. Schmitt has served in various capacities as a
consultant. From 1976 to 1982, Dr. Schmitt was a United States Senator from
New Mexico, during which time he chaired the Senate Science, Technology and
Space Subcommittee, which
2
<PAGE> 7
approves and oversees all non-military space-related research and development
projects of the U.S. Government. From 1974 to 1975, he was NASA Assistant
Administrator for Energy Programs. From 1965 to 1973, he was a NASA astronaut.
As Lunar Module Pilot on Apollo 17 in 1972, he explored the Moon's surface.
SCOTT L. WEBSTER, 44
Scott L. Webster is a founder of Orbital and has been a Director of the Company
since 1982. Since January 1995, Mr. Webster has worked on special projects for
Orbital. Mr. Webster was Senior Vice President of Orbital from October 1993
until January 1995, was President/Space Data Division of Orbital from 1991
until October 1993, was Executive Vice President/Space Data Division from 1989
to 1990, was Senior Vice President/Marketing and Business Development from 1985
to 1989 and was Vice President/ Marketing from 1982 to 1985. From 1974 to
1978, he was a Senior Engineer at Litton Industries, Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 1998
FRED C. ALCORN, 66
Member of Human Resources and Nominating Committee
Fred C. Alcorn has been a Director of the Company since 1983. Since 1975, Mr.
Alcorn has been President of Alcorn Oil & Gas Company and Alcorn Development
Company.
LENNARD A. FISK, 53
Member of Strategy and Technology Committee
Lennard A. Fisk has been a Director of the Company since October 1993. Since
July 1993, Dr. Fisk has been Professor and Chairman of the Department of
Atmospheric, Oceanic, and Space Sciences at the University of Michigan. From
1987 until 1993, he was Associate Administrator for Space Science and
Applications at NASA. From 1977 until 1987, he held various positions at the
University of New Hampshire, including Vice President for Research and
Financial Affairs.
JACK L. KERREBROCK, 69
Member of Strategy and Technology Committee
Jack L. Kerrebrock has been a Director of the Company since January 1993. From
1984 until 1993, he was a director of ORC. Since 1965, Dr. Kerrebrock has been
a Professor of Aeronautics and Astronautics at the Massachusetts Institute of
Technology ("MIT"). From 1990 to 1991, he was Acting Dean of Engineering at
MIT, and from 1985 to 1989, he was Associate Dean of Engineering. From 1985 to
1986, Dr. Kerrebrock served as a member of the National Commission on Space.
He was NASA Associate Administrator for Aeronautics and Space Technology from
1981 to 1983.
DAVID W. THOMPSON, 42
Chairman of the Board
David W. Thompson is a founder of Orbital and has been Chairman of the Board,
President and Chief Executive Officer of the Company since 1982. From 1981 to
1982, Mr. Thompson was Special Assistant to the President at Hughes Aircraft
Company's Missile Systems Group. From 1977 to 1979, Mr. Thompson was employed
by NASA at the Marshall Space Flight Center as a project manager and engineer.
From 1975 to 1976, he worked on the Space Shuttle's autopilot design at the
Charles Stark Draper Laboratory.
JAMES R. THOMPSON, 60
James R. Thompson (who is not related to David W. Thompson) has been Executive
Vice President and General Manager/Launch Systems Group since October 1993 and
a Director of the Company since 1992. Mr. Thompson
3
<PAGE> 8
was Executive Vice President and Chief Technical Officer of Orbital from 1991
to October 1993. He was Deputy Administrator of NASA from 1989 to 1991. From
1986 until 1989, Mr. Thompson was Director of NASA's Marshall Space Flight
Center. Mr. Thompson was Deputy Director for Technical Operations at Princeton
University's Plasma Physics Laboratory from 1983 through 1986. Before that, he
had a 20-year career with NASA at the Marshall Space Flight Center. He is a
director of Nichols Research Corp., an engineering analysis and services
company, and SPACEHAB Incorporated, a space module supplier.
DIRECTORS WHOSE TERMS EXPIRE IN 1999
KELLY H. BURKE, 67
Chairman of Human Resources and Nominating Committee
Kelly H. Burke has been a Director of the Company since 1984. In 1982, General
Burke retired from the U.S. Air Force. Since that time, General Burke has been
Chairman of Stafford, Burke and Hecker, Inc., an aerospace consulting firm.
During 30 years of U.S. Air Force service, General Burke held a wide variety of
command and staff positions, culminating with that of Deputy Chief of Staff for
Research, Development and Acquisition at the Pentagon. Additionally, he has
served as an advisor to the White House Science Office, the National Academy of
Sciences, the Defense Science Board and the U.S. Air Force Scientific Advisory
Board.
BRUCE W. FERGUSON, 42
Bruce W. Ferguson is a founder of Orbital and has been Executive Vice President
and General Manager/Communications and Information Services Group since October
1993 and a Director of the Company since 1982. Mr. Ferguson was Executive Vice
President and Chief Operating Officer of Orbital from 1989 to October 1993 and
Senior Vice President/Finance and Administration and General Counsel from 1985
to 1989.
DANIEL J. FINK, 70
Chairman of Strategy and Technology Committee and Member of Audit and Finance
Committee
Daniel J. Fink has been a Director of the Company since 1983. Since 1982, Mr.
Fink has been President of D.J. Fink Associates, Inc., a management consulting
firm. From 1967 until 1982, Mr. Fink held a variety of positions at General
Electric Company, including the position of Senior Vice President from 1979 to
1982. He is a director of Titan Corporation, a former member of the Defense
Science Board and a former Chairman of the NASA Advisory Council.
JANICE I. OBUCHOWSKI, 45
Member of Strategy and Technology Committee
Janice I. Obuchowski was appointed by the Board of Directors in December 1996
to fill a vacancy on the Board. Ms. Obuchowski is a founder and Executive Vice
President of NextWave TeleCom, Inc., a wireless personal communications
services provider. Since February 1992, she has been President of Freedom
Technologies, Incorporated, a telecommunications research and consulting firm.
From 1989 to 1992, she served as the Assistant Secretary for Communications and
Information in the U.S. Department of Commerce and Administrator of the
National Telecommunications and Information Agency. From 1980 to 1987, Ms.
Obuchowski served in a variety of positions at the U.S. Federal Communications
Commission, including Chief of the Common Carrier Bureau's International Policy
Division and Senior Advisor to Chairman Mark Fowler. Ms. Obuchowski formerly
served as a board member of QUALCOMM, Inc.
4
<PAGE> 9
FRANK L. SALIZZONI, 58
Member of Audit and Finance Committee
Frank L. Salizzoni was appointed by the Board of Directors in December 1996 to
fill a vacancy on the Board. Mr. Salizzoni has been President and Chief
Executive Officer of H&R Block, Inc. since October 1996, and has served as that
company's interim President and Chief Executive Officer since June 1996. Mr.
Salizzoni also serves as Chairman of H&R Block's subsidiary, CompuServe
Corporation. From 1994 until April 1996, Mr. Salizzoni was President and Chief
Operating Officer of USAir, Inc. and USAir Group, Inc. He joined USAir as
Executive Vice President-Finance and Chief Financial Officer in 1990. From
1987 to 1989, Mr. Salizzoni was Chairman and Chief Executive Officer of TW
Services, one of the largest food services companies in the United States. Mr.
Salizzoni held several senior financial management positions from 1967 to 1987
with Trans World Airlines and its parent company, Transworld Corporation. Mr.
Salizzoni has been a director of H&R Block since 1988. He is also a director of
SKF USA, Inc. and TotalBank.
INFORMATION CONCERNING THE BOARD AND ITS COMMITTEES
The Board has three standing committees: the Audit and Finance Committee;
the Human Resources and Nominating Committee; and the Strategy and Technology
Committee. The biographical information in the immediately preceding section
identifies the committee memberships held by each director.
The Audit and Finance Committee, which held four meetings during 1996,
reviews corporate financial planning; recommends annually the persons or firm
to be employed by the Company as its independent auditors; consults with the
independent auditors with regard to the plan of audit; reviews, in consultation
with the independent auditors, the audit report and the accompanying management
letter, if any, of such independent auditors; and consults with the independent
auditors with regard to the adequacy of internal controls of the Company.
The Human Resources and Nominating Committee, which held five meetings and
took action by unanimous written consent two times during 1996, administers the
Company's 1990 Stock Option Plan (the "1990 Option Plan") and the Company's
1990 Stock Option Plan for Non-Employee Directors (the "Non-Employee Director
Plan"); approves compensation arrangements for directors, executive officers
and certain other members of management; evaluates compensation plans and
policies and makes recommendations to the Board with respect thereto; considers
issues of management development and evaluation; nominates candidates for
positions on the Board; and will consider nominees recommended by stockholders
if such recommendations are in writing, are filed with the Secretary of the
Company, and set forth the information and are filed by the time specified in
the Company's By-Laws. Two of the Company's subsidiaries, Magellan Corporation
("Magellan") and Orbital Imaging Corporation ("ORBIMAGE") also consult with the
Human Resources and Nominating Committee in connection with the Magellan
Corporation 1996 Stock Option Plan (the "Magellan Option Plan") and the Orbital
Imaging Corporation 1996 Stock Option Plan (the "ORBIMAGE Option Plan"),
respectively.
The Strategy and Technology Committee, which held five meetings during
1996, is responsible for giving initial Board-level consideration to certain
technology and business strategy issues, which may include competitive
assessments, evaluation of technical and market risks associated with new
product development, and potential acquisition, divestiture and joint venture
evaluations.
In 1996, directors who were not employees of the Company were paid an
annual retainer of $7,500 for service on the Board and fees of $1,000 for each
Board or committee meeting they attended. In addition, pursuant to the terms of
the Non-Employee Director Plan, each year non-employee directors are
automatically granted options for 3,000 shares of Common Stock at an exercise
price equal to the fair market value on the date of grant.
During 1996, the Board held six meetings and took action by unanimous
written consent two times. Each incumbent director, other than Mr. Webster,
attended at least 75 percent of all meetings of the Board and committees of
which he was a member.
5
<PAGE> 10
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of all compensation information
earned, awarded or paid in the fiscal years ended December 31, 1996, 1995 and
1994, as applicable, to those persons who were (i) at December 31, 1996, the
Chief Executive Officer and the four most highly compensated executive officers
of the Company, and (ii) two former executive officers of the Company
(collectively, the "Named Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(#) COMPENSATION
- ---------------------------- ------- ------ ----- ------------ ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
David W. Thompson....................... 1996 $300,000 $153,000 45,000 $263,445(a)(b)
Chairman of the Board, President 150,000(c)
and Chief Executive Officer 200,000(d)
1995 300,000 121,500 25,000 16,048(e)
1994 250,000 27,500 10,000 12,949(e)
James R. Thompson....................... 1996 245,000 154,125 45,000 17,483(a)
Executive Vice President 20,000(d)
and General Manager/
Launch Systems Group 1995 235,000 79,300 15,000 15,259(e)
1994 220,000 27,000 10,000 9,871(e)
Bruce W. Ferguson....................... 1996 225,000 95,625 35,000 12,979(a)
Executive Vice President and 300,000(c)
General Manager/ Communications 200,000(d)
and Information Services Group
1995 210,000 75,900 10,000 11,622(e)
1994 195,000 24,500 10,000 10,850(e)
2,500(f)
Michael D. Griffin...................... 1996 225,000 95,625 25,000 11,798(a)
Executive Vice President and 75,000(d)
General Manager/Space Systems
Group
1995(g) 123,000 71,667 50,000 4,868(e)
Daniel E. Friedmann(h).................. 1996 200,000 170,000 45,000 4,946(a)
Executive Vice President and 30,000(d)
General Manager/Systems
Integration and Software Group
Jack A. Frohbieter...................... 1996 160,450 --- 277,435(i) 35,000 364,900(a)(j)
Former Executive Vice President
and General Manager/Space and 1995 260,000 87,700 25,000 12,814(e)
Electronics Systems Group
1994(k) 89,500 100,000 -- 1,744(e)
Carlton B. Crenshaw .................... 1996 76,924 --- 45,000 206,005(a)(l)
Former Executive Vice President
and Chief Financial Officer 1995 215,000 147,500 15,000 11,421(e)
1994 190,000 50,000 10,000 11,659(e)
3,000(f)
</TABLE>
- --------------
6
<PAGE> 11
(a) Includes (i) Company matching and profit-sharing contributions earned
under the Company's 401(k) Plan or, for Mr. Friedmann only, a Canadian
registered retirement savings plan and (ii) Company profit-sharing
contributions under its 1995 Deferred Compensation Plan in the following
amounts: Mr. D.W. Thompson, $11,385 and $6,060; Mr. J.R. Thompson,
$12,500 and $4,983; Mr. Ferguson, $9,566 and $3,413; Dr. Griffin, $8,385
and $3,413; Mr. Friedmann, $4,946 and $0; Mr. Frohbieter, $10,000 and $0;
and Mr. Crenshaw, $3,002 and $0.
(b) Includes $246,000 earned under a Performance Share Agreement between the
Company and Mr. D.W. Thompson adopted in 1996. Pursuant to the agreement,
Mr. Thompson earned a bonus, payable to his account under the Company's
1995 Deferred Compensation Plan, based on the one-year increase in value
of 50,000 shares of Common Stock as determined in January 1996 and in
January 1997. The average closing sales price of the Common Stock for the
twenty trading days prior to January 30, 1997 was $18.08 per share, an
increase of $4.92 from $13.16 per share for the comparable period in
January 1996.
(c) Shares of common stock of Magellan Corporation ("Magellan") subject to
options granted under the Magellan Option Plan.
(d) Shares of common stock of Orbital Imaging Corporation ("ORBIMAGE")
subject to options granted under the ORBIMAGE Option Plan.
(e) Includes Company matching and profit-sharing contributions under the
Company's 401(k) Plan and Company profit-sharing contributions under its
1995 Deferred Compensation Plan.
(f) Shares of common stock of Orbital Communications Corporation ("ORBCOMM")
subject to options granted under the ORBCOMM 1992 Stock Option Plan (the
"ORBCOMM Option Plan").
(g) Reports compensation earned by Dr. Griffin after he joined the Company in
August 1995.
(h) Mr. Friedmann became an executive officer of the Company as of January 1,
1996 as a result of the MDA Acquisition in November 1995.
(i) Represents the amount accrued and vested under a Fairchild Space and
Defense Corporation ("Fairchild") supplemental executive retirement
plan that was terminated after Orbital's acquisition of Fairchild.
(j) Includes $354,900 payable under a severance agreement. Mr. Frohbieter
resigned his position as an executive officer of the Company in August
1996.
(k) Reports compensation earned by Mr. Frohbieter after he joined the Company
in August 1994 following the Company's acquisition of Fairchild.
(l) Includes $203,003 payable under a severance agreement. Mr. Crenshaw
resigned his position as an executive officer of the Company in April
1996.
7
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information on grants of stock options to the Named
Officers pursuant to the 1990 Option Plan, the Magellan Option Plan and
ORBIMAGE Option Plan during the fiscal year ended December 31, 1996, which
options are reflected in the Summary Compensation Table.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------- RATES OF STOCK
NUMBER OF PRICE APPRECIATION
SECURITIES % OF TOTAL PRICE ON FOR OPTION TERM
UNDERLYING GRANTED TO EXERCISE DATE OF -------------------
OPTIONS EMPLOYEES IN PRICE GRANT EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE) ($/SHARE) DATE 5% 10%
- ----- ----------- ------------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
David W. Thompson... 35,000(a) 3% $13.50 $13.50 1/23/06 $297,050 $ 752,723
10,000(a) 1 13.50 13.50 4/29/06 84,871 215,064
150,000(b) 2 1.10 1.10 6/30/06 103,732 262,856
200,000(c) 14 3.60 3.60 11/14/06 452,647 1,147,007
James R. Thompson... 35,000(a) 3 13.50 13.50 1/23/06 297,050 752,723
10,000(a) 1 13.50 13.50 5/2/06 84,871 215,064
20,000(c) 1 3.60 3.60 11/14/06 45,265 114,701
Bruce W. Ferguson... 35,000(a) 3 13.50 13.50 1/23/06 297,050 752,723
300,000(b) 4 1.10 1.10 6/30/06 207,420 525,732
200,000(c) 14 3.60 3.60 11/14/06 452,647 1,147,007
Michael D. Griffin.. 25,000(a) 2 13.50 13.50 1/23/06 212,178 537,660
75,000(c) 5 3.60 3.60 11/14/06 169,743 430,128
Daniel E. Friedmann. 25,000(a) 2 13.50 13.50 1/23/06 212,178 537,660
20,000(a) 2 13.50 13.50 5/2/06 169,743 430,128
30,000(c) 2 3.60 3.60 11/14/06 67,897 172,051
Jack A. Frohbieter.. 35,000(a) 3 13.50 13.50 1/23/06(d) N/A N/A
Carlton B. Crenshaw. 45,000(a) 3 13.50 13.50 1/23/06(e) --- ---
</TABLE>
(a) Options granted under the 1990 Option Plan. Options vest in one-third
increments over a three-year period.
(b) Options granted under the Magellan Option Plan. Options vest in
one-third increments over a three-year period.
(c) Options granted under the ORBIMAGE Option Plan. One-quarter of the
options are vested immediately, with the remaining three-quarters vesting
in equal installments over a three-year period.
(d) Mr. Frohbieter is entitled to exercise his vested options under the 1990
Option Plan through April 30, 1997.
(e) Options expired following Mr. Crenshaw's resignation from the Company.
8
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
Shown below is information with respect to the exercise of stock options
granted under the 1990 Option Plan (except in the case of Mr. Friedmann) during
fiscal year 1996 as well as the 1996 year-end value of unexercised stock
options granted under the 1990 Option Plan, the ORBCOMM Option Plan, the
ORBIMAGE Option Plan and the Magellan Option Plan. In 1996, none of the Named
Officers (except as indicated below) exercised any options granted under the
ORBCOMM Option Plan, the ORBIMAGE Option Plan or the Magellan Option Plan. The
option exercises reported for Mr. Friedmann relate to replacement options
issued in connection with the MDA Acquisition.
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTION SHARES IN-THE-MONEY OPTIONS
ACQUIRED AT DECEMBER 31, 1996(#) AT DECEMBER 31, 1996
ON VALUE ---------------------------------- ----------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE (#) UNEXERCISABLE (#) EXERCISABLE ($) UNEXERCISABLE ($)
---- ------------ ------------ --------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
David W. Thompson.... --- --- 35,998 65,002 84,521 177,084
18,000(a) --- 435,000 ---
50,000(b) 150,000(b) --- ---
--- 150,000(c) --- ---
James R. Thompson.... --- --- 68,665 58,335 341,437 172,084
8,250(a) 1,250(a) 161,250 17,500
5,000(b) 15,000(b) --- ---
Bruce W. Ferguson.... --- --- 35,999 45,001 160,197 134,584
31,250(a) 1,250(a) 741,875 16,875
50,000(b) 150,000(b) --- ---
--- 300,000(c) --- ---
Michael D. Griffin... --- --- 16,665 58,335 6,166 106,084
18,750(b) 56,250(b) --- ---
Daniel E. Friedmann.. 10,989 155,094 33,979 58,275 342,431 260,835
7,500(b) 27,500(b) --- ---
Jack Frohbieter...... --- --- 8,332 51,668 4,166 139,584
Carlton B. Crenshaw.. 13,433 45,114 --- --- --- ---
15,000(a) 340,000(a) --- --- --- ---
</TABLE>
- -------------------------------------
(a) Options to acquire ORBCOMM common stock granted pursuant to the ORBCOMM
Option Plan.
(b) Options to acquire ORBIMAGE common stock granted pursuant to the ORBIMAGE
Option Plan.
(c) Options to acquire Magellan common stock granted pursuant to the Magellan
Option Plan.
9
<PAGE> 14
COMPENSATION COMMITTEE REPORT
Overview and Philosophy. The Human Resources and Nominating Committee
(the "Committee"), which is composed entirely of independent outside directors,
is responsible for determining executive compensation, including salaries,
bonus awards and stock option awards. Orbital's philosophy regarding executive
compensation is to attract and retain highly qualified people by paying
competitive salaries, and to link the financial interests of Orbital's senior
management to those of the Company's stockholders by also tying compensation to
the achievement of operational and financial objectives. To implement these
goals, the Company's compensation structure generally has three components:
base salary, annual (and occasional "special") cash bonuses and stock options.
Base Salary. Generally, in the early part of each fiscal year, the
Committee reviews with the Chief Executive Officer and approves, with any
modifications it deems appropriate, salary levels for the Company's executive
officers, including the Named Officers, and certain other senior managers.
Generally, the salary amounts are determined subjectively, based on perceptions
of industry and peer group salary levels and judgments as to the past and
expected future contributions of the individual senior executives, as well as
the Company's overall growth and profitability.
Annual Cash Incentive Bonus. Under the Company's incentive bonus plan for
1996, the Chief Executive Officer was eligible to receive a bonus of up to 60
percent of base salary and executive officers of the Company were eligible to
receive annual bonuses of up to 40 percent or 50 percent of base salary. In
January 1996, the Committee reviewed Company and group performance goals
recommended by management for purposes of 1996 bonus opportunities. Financial
goals included achievement of milestones with respect to revenues, backlog,
earnings and cash flow, with greater emphasis placed on earnings.
Non-financial operational goals included space mission reliability and
timeliness, new orders and contracts, new product initiatives and completion of
certain corporate transactions. At the end of the year, management evaluated
the Company's and the groups' performance against the established goals, and
presented this evaluation, together with its reasoning and recommended bonus
percentages, to the Committee. The Committee then determined, based on the
recommendations of management and any other factors the Committee considered
relevant, the percentage of base salary to be awarded as a bonus to each
executive officer and senior manager and established a bonus pool for all other
eligible employees. The nature of the goals meant that management's
recommendations and the Committee's determinations as to bonus percentages were
necessarily based on subjective judgments. In recognition of the Company's
overall success in meeting its financial goals and its substantial success in
meeting its operational goals, the total bonus percentages awarded to each of
the currently employed Named Officers, other than the Chief Executive Officer
(discussed below), was 42.5 percent of annual base salary, as compared to a
maximum bonus opportunity of 50 percent.
The Company also has a policy of awarding "special" one-time occasional
bonuses to an individual or a group in recognition of exceptional achievement
or effort. This policy is intended to complement the incentive bonus plan.
Generally, special bonuses are awarded when the performance of an individual,
program or department is perceived to merit extraordinary recognition or
compensation in excess of that which is awarded under the incentive bonus plan.
The amounts of special bonuses are determined subjectively, based on such
factors as the perceived value to the Company of the achievement, the amount of
effort involved and the salary level of the individual. During 1996, the
Company awarded special bonuses to two Named Officers: one in recognition of
Mr. J.R. Thompson's success in the Pegasus XL launch vehicle program, and one
in recognition of Mr. Friedmann's sale of certain MDA assets.
Stock Options. The Committee believes that stock options provide
meaningful long-term incentives because they reward the enhancement of
stockholder value. The number of stock options granted to each individual is
determined subjectively based on a number of factors, including the
individual's degree of responsibility, general level of performance, ability to
affect future Company performance, salary level, option holdings and recent
noteworthy achievements. Stock option grants are intended to incentivize
employees to work towards achieving operational and financial goals that
management believes will ultimately be reflected in stock value. In addition
to the options granted under the 1990 Option Plan, certain senior managers,
including certain of the Named Officers, were granted options under the
Magellan Option Plan and the ORBIMAGE Option Plan, each
10
<PAGE> 15
of which is administered by the board of directors of such company with
assistance from the Committee. These stock options were granted in recognition
of the efforts expended by the grantees in assisting in each subsidiary's
development and work.
Chief Executive Compensation. The Chief Executive Officer's 1996 base
salary of $300,000 and his potential annual bonus, which is 60 percent of his
base salary, remained at 1995 levels. In order to create a greater incentive
to increase earnings and stock performance in 1996, the Committee believed it
was prudent to structure the Chief Executive Officer's 1996 compensation
package to place greater emphasis on achievement of earnings and stock price
goals. Accordingly, and based on the considerations discussed above and the
Committee's perceptions as to option grants to executive officers at other
companies, the Committee authorized two grants in an aggregate of 45,000
options under the 1990 Option Plan, which were greater than previous option
grants to the Chief Executive Officer. The Committee also approved the grants
of 150,000 options for shares of common stock under the Magellan Option Plan
and 200,000 options for shares of common stock under the ORBIMAGE Option Plan.
In addition, in October 1996, the Committee adopted a performance share
agreement with the Chief Executive Officer pursuant to which he was granted
150,000 performance shares of which 50,000 vested in 1996. Under the
agreement, the Chief Executive Officer earned a bonus in 1996 of $246,000,
which represents the difference between the fair market value of the 50,000
performance shares on January 30, 1996 ($13.16 per share) and January 30, 1997
($18.08 per share), as measured by the average closing sales price of the
Company's Common Stock for the 20 trading days prior to January 30 of the
applicable year. The bonus under the agreement vests in two equal annual
installments in 1997 and 1998 and is credited to the Chief Executive Officer's
deferred compensation account. The Committee believes that the performance
share agreement provides the Chief Executive Officer with further incentive to
enhance the financial and operational strength of the Company by directly
linking a component of his salary to the amount of appreciation in the
Company's Common Stock.
Based on the factors discussed above under "Annual Cash Incentive Bonus,"
the total bonus percentage awarded the Chief Executive Officer under the
Company's incentive bonus plan in 1996 was 51 percent of his annual base
salary, as compared to an opportunity of 60 percent.
The foregoing report has been furnished by the Committee members:
Lt. Gen. Kelly H. Burke (Chairman) Mr. Douglas S. Luke
Dr. John L. McLucas Mr. Fred C. Alcorn
11
<PAGE> 16
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The following graph compares the yearly cumulative total return on the
Company's Common Stock against the cumulative total return on the Nasdaq Stock
Market Index of U.S. Companies and the Dow Jones Aerospace/Defense Index for
the five-year period commencing on December 30, 1991 and ending on December 31,
1996.
COMPARISON OF CUMULATIVE TOTAL RETURNS*
<TABLE>
<CAPTION>
DOW JONES ORBITAL SCIENCES
MEASUREMENT PERIOD NASDAQ US AERO/DEFENSE CORPORATION
(FISCAL YEAR COVERED) COMPANY INDEX INDEX
<S> <C> <C> <C>
December 1991 $ 100.000 $ 100.000 $ 100.000
December 1992 116.378 101.182 85.714
December 1993 133.595 127.387 146.429
December 1994 130.587 140.060 137.500
December 1995 184.674 239.117 91.071
December 1996 227.164 313.671 123.214
</TABLE>
* Assumes that the value of the investment in Orbital Common Stock, the
Nasdaq Stock Market Index of U.S. Companies and the Dow Jones
Aerospace/Defense Index was $100 on December 30, 1991 and that all
dividends were reinvested.
12
<PAGE> 17
INDEMNIFICATION AGREEMENTS
The Company has entered into substantially identical indemnification
agreements with each of its directors, the Named Officers and with certain
other officers and senior managers. The agreements provide that the Company
shall, to the full extent permitted by the Delaware General Corporation Law, as
amended from time to time, indemnify each indemnitee against all loss and
expense incurred by the indemnitee because he or she was, is or is threatened
to be made a party to any completed, pending or threatened action, suit or
proceeding by reason of the fact that he or she was a director, officer,
employee or agent of the Company or any of its affiliates, or because the
Company has a right to judgment in its favor because of his or her position
with the Company or any of its affiliates. The indemnitee will be indemnified
so long as he or she acted in good faith and in a manner reasonably believed by
him or her to be in or not opposed to the Company's best interest. The
agreements further provide that the indemnification thereunder is not exclusive
of any other rights the indemnitee may have under the Company's Restated
Certificate of Incorporation, By-Laws or any agreement or vote of stockholders
and that the Restated Certificate of Incorporation or By-Laws may not be
amended to affect adversely the rights of the indemnitee.
EXECUTIVE EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AGREEMENTS
The Company has entered into executive employment agreements with certain
officers including Messrs. D.W. Thompson, J.R. Thompson, Ferguson, Friedmann
and Dr. Griffin. These agreements become effective in the event of a "change
of control" (as defined in the agreements) of the Company, and no officer
currently receives compensation under these agreements. Upon a "change of
control," each officer whose employment is terminated by the Company other than
for disability or "cause" (as defined in the agreements), or whose employment
is terminated by the executive for "good reason" (as defined in the
agreements), within 24 months following such "change of control," would receive
his or her full base salary through the termination date, plus the lesser of
(i) $500,000, or (ii) two times the sum of 12 times his or her then-current
monthly salary plus an amount equal to any bonus paid in the previous year. In
addition, all retirement benefits would vest, all insurance benefits would
continue for 30 months and all Company stock options would be repurchased by
the Company at the difference between the highest price paid in the "change of
control" transaction for shares of stock of the same class or series and the
exercise price.
On April 17, 1996, the Company entered into a severance agreement with Mr.
Crenshaw, who resigned his position as Executive Vice President and Chief
Financial Officer of the Company as of that date. Pursuant to the terms of the
agreement, the Company paid Mr. Crenshaw the sum of $203,000 upon the execution
of the agreement.
On August 5, 1996, the Company entered into a severance agreement with Mr.
Frohbieter, who resigned his positions as a Director and as Executive Vice
President and General Manager/Space and Electronics Systems Group as of that
date. Pursuant to the terms of the agreement, the Company paid Mr. Frohbieter
$354,900, an amount determined with reference to Mr. Frohbieter's employment
agreement with Fairchild which continued in effect following Orbital's
acquisition of Fairchild in 1994. In addition, Mr. Frohbieter is entitled to
exercise options granted under the 1990 Option Plan through April 30, 1997.
13
<PAGE> 18
PROPOSAL 2
APPROVAL OF INCREASE IN AUTHORIZED
SHARES OF COMMON STOCK
On January 24, 1997, the Company's Board of Directors adopted, and
recommended that the stockholders of the Company approve, an amendment to the
first paragraph of Section 5 of the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock of
the Company from 40,000,000 shares to 80,000,000 shares. The proposed
amendment would replace the first paragraph of Section 5 in its entirety as
follows:
"5. The total number of shares of stock that this
Corporation shall have authority to issue is
90,000,000 shares consisting of 80,000,000 of Common
Stock, $.01 par value per share (the "Common Stock")
and 10,000,000 shares of Preferred Stock, $.01 par
value per share (the "Preferred Stock") which may be
issued as follows:"
No increase in the number of authorized shares of Preferred Stock of the
Company, currently 10,000,000 shares, will be made. The rights and
limitations of the Common Stock under the amendment would remain the same. The
Common Stock does not have preemptive rights, and any future issuance of Common
Stock, other than on a pro rata basis, would dilute the percentage ownership
position of current stockholders.
Of the 40,000,000 currently authorized shares of Common Stock, as of
December 31, 1996, 32,190,264 shares of Common Stock of Orbital were issued and
outstanding (including the Common Stock issuable upon exchange of the
outstanding Exchangeable Shares). In addition, 2,944,577 shares were reserved
for issuance under the Company's existing option plans and replacement options
issued in connection with Orbital's 1994 acquisition of Magellan and the 1995
MDA Acquisition. Subject to stockholder approval of Proposal 3 below,
1,600,000 shares will be reserved for issuance under the 1997 Orbital Sciences
Corporation Stock Option and Incentive Plan.
The proposed amendment would increase the number of authorized shares of
Common Stock from 40,000,000 to 80,000,000. The Board of Directors believes
that it is desirable to have sufficient authorized shares of Common Stock
available for future corporate needs, such as financings, acquisition or joint
venture transactions, dividends or stock splits and other general corporate
purposes. In addition, the Company believes that stock-based compensation is
an important component of Orbital's long-term strategy to incentivize
management by linking compensation to overall Company performance and
stockholder value.
Since its initial public offering in 1990, Orbital has obtained financing
for general corporate purposes, working capital and special projects through
the sale of Common Stock and convertible debentures in the capital markets.
Since 1993, the Company has financed all or a portion of four major
acquisitions through the issuance of Common Stock. While Orbital frequently
has various transactions under consideration, Orbital has not entered into any
agreements regarding the issuance of the additional shares, and has no present
intention to issue the additional shares of Common Stock to be authorized.
The additional authorized shares of Common Stock will allow the Company to
maintain the flexibility to issue Common Stock in the future without
the potential expense or delay of a special meeting of stockholders at such
time. If the amendment is approved, the Board of Director could issue the
additional shares without further action by the stockholders, unless such
action is required by Delaware law or by the rules of any market or exchange
where the Common Stock is traded.
Although the increase in authorized shares will not have an immediate
effect on the rights of existing stockholders, under certain circumstances, an
increase in the authorized number of shares of a company's capital stock could
provide management with a means of preventing or discouraging a change of
control of a company. For example, additional shares could be issued to a
holder expected to vote in accordance with the recommendations of a company's
management with respect to any stockholder proposal, including a proposal to
effect a merger or other extraordinary transaction. In addition, common stock
could be issued to dilute the percentage voting stock of a significant
stockholder. Orbital has no present intention or understanding to issue any
shares of Common Stock for
14
<PAGE> 19
such purposes, and the proposal to increase the authorized shares is not made
with any intent to impede any change of control.
If the proposed amendment to the Company's Restated Certificate of
Incorporation is approved, a Certificate of Amendment will be filed with the
Secretary of State of the State of Delaware as promptly as practicable
thereafter. The amendment would be effective upon the date of filing.
Approval of the amendment to the Restated Certificate of Incorporation
will require the affirmative vote of the holders of a majority of the
outstanding shares of the Company's Common Stock. Any shares not voted,
whether by abstentions or broker non-votes, will have the same effect as
votes against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ADOPTION OF THIS
AMENDMENT. Unless instructions are given to the contrary, it is the intention
of the persons named as proxies to vote the shares to which the proxy is
related FOR adoption of the amendment to the Restated Certificate of
Incorporation.
PROPOSAL 3
APPROVAL OF THE 1997 ORBITAL STOCK
OPTION AND INCENTIVE PLAN
On January 24, 1997, the Board of Directors adopted, subject to approval
by the stockholders, the 1997 Orbital Sciences Corporation Stock Option and
Incentive Plan ( the "1997 Option Plan"). All employees and directors of
Orbital (approximately 3,000 employees as of February 1, 1997 and ten outside
directors) are eligible to participate in the 1997 Option Plan, which provides
for the grant of options and restricted stock of the Company.
The 1997 Option Plan is summarized below. The full text of the 1997
Option Plan is set forth in Exhibit A to this Proxy Statement. For purposes of
the following discussion and unless otherwise indicated, "Company" means
Orbital and its subsidiaries (as defined in Section 424(f) of the Internal
Revenue Code of 1986, as amended (the "Code")).
BACKGROUND AND REASONS FOR THE 1997 OPTION PLAN
Orbital has generally granted options to employees and directors under the
1990 Option Plan and the Non-Employee Directors Plan and has issued a
significant number of options to employees of companies acquired by Orbital to
substitute for such employees' options for common stock of the acquired
companies. The 1990 Option Plan expires in November 1997. As of March 14,
1997, there were _____ and _______ options issued and outstanding under the
1990 Option Plan and Non-Employee Directors Plan, respectively, and only ______
and ________ remaining options available for grant under each of such plans,
respectively.
The Board believes that the adoption of the 1997 Option Plan would advance
the interests of the Company and its stockholders. The Board believes that
stock options serve as an essential compensation tool that enables the Company
and its subsidiaries to attract and retain highly talented employees,
directors, consultants and advisers who are in a position to make significant
contributions to the success of the Company, by rewarding them for their
contributions to the success of the Company, and encouraging them, through
stock ownership, to increase their proprietary interest in the Company and
their personal interest in its continued success and progress. Also, as the
Company's workforce continues to grow and the competition among high-technology
companies for qualified personnel remains tight, the Board believes it is
important to have maximum flexibility to devise management compensation
packages and awards that include stock options and, in special limited cases,
restricted stock grants.
15
<PAGE> 20
ADMINISTRATION
The Human Resources and Nominating Committee will administer the 1997
Option Plan. The Committee may exercise all the powers, authority and
discretion of the Board, except with respect to grants to directors. The
Committee must include not less than two members of the Board each of whom
shall be "non-employee directors" as defined under Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and currently consists
of four non-employee directors. The Committee has authority, among other
things, to (i) determine which eligible persons will receive options and
restricted stock, (ii) determine the time when grants will be made, (iii)
determine the terms and conditions, not inconsistent with the provisions of the
1997 Option Plan, of any grant, (iv) determine the number of shares that may be
issued upon exercise of the options, and (v) interpret the provisions of the
1997 Option Plan and of any grant thereunder.
ELIGIBILITY
Discretionary Grants. The Committee will have discretion to grant options
or restricted stock under the 1997 Option Plan to employees (including officers
and directors), consultants and advisers of the Company and of any "subsidiary"
of the Company (within the meaning of Section 424(f) of the Code), as
designated from time to time by the Committee. The option exercise price for
shares is determined by the Committee, provided that all stock options must be
granted at an option exercise price of not less than the fair market value of
the shares on the date of the grant. The 1997 Option Plan provides that options
to acquire no more than 750,000 shares may be granted to any individual during
the first ten calendar years of the plan, and 100,000 thereafter.
Formula Plan for Outside Directors. On January 2 of each year, each
outside director will automatically receive nonstatutory options to purchase
3,000 shares of Common Stock at the fair market value on the date of grant. In
addition, each outside director will have the opportunity to elect to receive
his or her annual Board retainer fee in nonstatutory options based on a formula
set forth in the 1997 Option Plan. Ten outside directors are currently
eligible to receive grants under the 1997 Option Plan.
SHARES SUBJECT TO THE PLAN
Under the terms of the 1997 Option Plan, 1,600,000 authorized but unissued
shares of Common Stock, or approximately 4.9% of the outstanding shares of
Common Stock at February 1, 1997, will be reserved for issuance. In the event
any change is made to the Common Stock subject to the 1997 Option Plan (whether
by reason of recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other increase,
decrease or change in such shares), the Board of Directors will adjust
proportionately the number and kinds of shares that may be purchased and the
exercise price.
OPTIONS
All options granted under the 1997 Option Plan are presumed to be
nonstatutory options, unless the Committee specifically designates an option as
an incentive stock option. The period within which any stock option granted
under the 1997 Option Plan may be exercised is a matter of Board discretion,
provided that the period cannot exceed ten years from the date of grant. Each
option will vest at a rate set forth by the Board in each individual option
agreement. The Board may accelerate the time at which an option or installment
may be exercised. Generally, options issued under the 1997 Option Plan will
vest one-third each year following the grant date for a three-year period and
terminate ten years following the grant date. Options granted to outside
directors will vest in their entirety one-year from the date of grant. Options
will cease vesting upon termination of employment, and in any event expire no
later than six months (one year in the case of death or disability) following
such a termination. The shares underlying any unexercised options that expire
or terminate will again be available for award under the 1997 Option Plan.
16
<PAGE> 21
The Company made grants of 749,000 options to 85 employees on February 4,
1997, with an exercise price of $16.50 per share (the fair market value on the
grant date), subject to stockholder approval of the 1997 Option Plan. On March
14, 1997, the closing sales price for the Company's Common Stock on the NASDAQ
National Market System was $_____ per share.
17
<PAGE> 22
RESTRICTED STOCK
Under the provision for awards of restricted stock under the 1997 Option
Plan, the Committee may grant to eligible persons shares of Common Stock
subject to such restrictions or conditions, if any, deemed appropriate by the
Committee. The Committee will establish the conditions to vesting, and the
period of time during which the conditions will apply (the "Restricted
Period"), at the time of grant. If the termination of a grantee's
employment/directorship with Orbital occurs during the Restricted Period, any
unvested portion of the award is forfeited unless the Committee, in its
discretion, determines otherwise. The Committee will determine on a case by
case basis the vesting of an award upon the death or "permanent and total
disability" of a grantee. Any shares of restricted stock that are forfeited
will again be available for award under the 1997 Option Plan. The Committee
may, in the agreement evidencing a grant of restricted stock, provide that the
grantee will be entitled to vote on the shares of Common Stock subject to the
award. Upon vesting of an award of restricted stock, including the
satisfaction, lapse or waiver of all applicable restrictions and conditions,
the grantee will be entitled to receive a stock certificate representing the
vested shares.
No restricted stock awards have been granted under the 1997 Option Plan.
DURATION, AMENDMENT AND TERMINATION
The Board may terminate or amend the 1997 Option Plan without stockholder
approval, except that approval would be required to the extent an amendment
would cause the Plan to fail to satisfy the incentive stock option requirements
of the Code. The Board may also, under certain circumstances, amend the terms
of any option previously granted, prospectively or retroactively, although no
amendment may materially adversely affect a previously granted option without
the consent of the optionee.
EFFECT OF CERTAIN CORPORATE EVENT
In the event of a merger, reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split, the Board
has the authority to authorize a proportionate adjustment in the number or kind
of shares and the option price, of outstanding options. In addition, all
outstanding shares of restricted stock will vest and any restrictions and
conditions applicable to the restricted stock will lapse.
FEDERAL TAX ASPECTS OF THE ORBITAL OPTION PLAN
In general, neither the grant nor the exercise of an incentive stock
option will result in taxable income to the option holder or a deduction to the
Company. However, option holders exercising incentive stock options may become
subject to the alternative minimum tax by reason of that exercise.
If the stock received upon the exercise of an incentive stock option is
held for at least two years from the date of grant and at least one year after
the date of exercise, any gain or loss recognized upon a later disposition of
the stock will be considered long-term capital gain or loss and will be taxable
accordingly. If stock received upon exercise of an incentive stock option is
disposed of before the holding period requirements described above have been
satisfied (a "disqualifying disposition"), the option holder will realize
ordinary income, and the Company will be entitled to a deduction, equal in
general to the difference between the option price and the value of the stock
on the date of exercise. The amount of ordinary income realized on a
disqualifying disposition may be limited when the stock is sold for less than
its value on the exercise date. Incentive stock options will be treated for tax
purposes as nonstatutory options (see below) to the extent the aggregate value
(determined at the time of grant) of the stock for which the options first
became exercisable in any calendar year exceeds $100,000.
In the case of nonstatutory options, no income results upon the grant of
the option. When an option holder exercises a nonqualified option, he or she
will realize ordinary income, subject to withholding, equal in
18
<PAGE> 23
general to the excess of the then-fair market value of the stock over the
option price. The Company will in general be entitled to a deduction equal to
the amount of ordinary income realized by the optionee, provided the Company
satisfies certain withholding and reporting requirements.
An award of restricted stock will create no immediate tax consequences for
the employee or the Company unless the employee makes an election pursuant to
Section 83(b) of the Code. The employee will, however, realize ordinary income
when restricted stock becomes vested, in an amount equal to the fair market
value of the underlying shares of Common Stock on the date of vesting less any
consideration paid by the employee for such stock. If the employee makes an
election pursuant to Section 83(b) of the Code with respect to a grant of
restricted stock, the employee will recognize income at the time the restricted
stock is awarded (based upon the value of such stock at the time of award),
rather than when the stock when the restricted stock becomes vested. The
Company will be allowed a business expense deduction for the amount of any
taxable income recognized by the employee at the time such income is recognized
(assuming the Company complies with applicable reporting requirements).
Section 162(m) of the Code limits to $1 million the deduction a public
corporation may claim with respect to the remuneration paid in any year to any
of the corporation's chief executive officer and the other four most highly
compensated executive officers. The deduction limitation is subject to a
number of exemptions, including for "performance-based" compensation. It is
anticipated that options granted under the 1997 Option Plan will be eligible
for an exemption from the $1 million deduction limitation.
The foregoing summary is limited to Federal income tax consequences and
does not purport to be a complete description of the tax consequences with
respect to the 1997 Option Plan.
NEW PLAN BENEFITS
The following table presents certain information with respect to options
granted, subject to shareholder approval, under the 1997 Option Plan through
February 12, 1997 to (i) the currently employed Named Officers, (ii) all
executive officers as a group, (iii) all non-executive officer directors as a
group, and (iv) all non-executive officer employees as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES
SUBJECT TO
NAME AND POSITION OPTIONS GRANTED
----------------- ----------------
<S> <C>
David W. Thompson.............................. 75,000
Chairman of the Board, President and Chief
Executive Officer
James R. Thompson.............................. 20,000
Executive Vice President and General Manager/
Launch Systems Group
Bruce W. Ferguson.............................. 20,000
Executive Vice President and General Manager/
Communications and Information Services Group
Daniel E. Friedmann
Executive Vice President and General Manager/
Systems Integration and Software Group 20,000
Michael D. Griffin............................. 20,000
Executive Vice President and General Manager/
Space Systems Group
All Executive Officers as a Group 295,000
All Non-Executive Directors as a Group 0
All Non-Executive Officer Employees as a Group 454,000
</TABLE>
19
<PAGE> 24
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the meeting will be
required to approve the 1997 Option Plan. Abstentions will be considered
shares present at the meeting entitled to vote, but since they are not
affirmative votes on the proposal, will have the same effect as votes against
the proposal. Broker non-votes will be counted towards a quorum, but are not
counted for any purpose in determining whether the proposal has been approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE 1997 OPTION
PLAN. Unless instructions are given to the contrary, it is the intention of the
persons named as proxies to vote the shares to which the proxy is related FOR
adoption of the 1997 Option Plan.
PROPOSAL 4
RATIFICATION OF THE SELECTION
OF INDEPENDENT AUDITORS
The Board of Directors recommends the ratification by the stockholders of
the appointment by the Board of Directors of KPMG Peat Marwick LLP ("KPMG") as
the Company's independent auditors for the fiscal year ending December 31,
1997. KPMG has served as the Company's independent auditors since 1989. A
representative of KPMG is expected to be present at the Annual Meeting and will
be available to respond to appropriate questions and make such statements as he
or she may desire. In the event that the stockholders do not ratify the
selection of KPMG, the Board of Directors will consider the selection of
another firm of independent auditors. The affirmative vote of the holders of a
majority of shares properly cast on the proposal, in person or by proxy, will
be required to approve Proposal 4. Abstentions will be considered shares
present at the meeting entitled to vote, but since they are not affirmative
votes on the proposal, will have the same effect as votes against the proposal.
Broker non-votes will counted towards a quorum, but are not counted for any
purpose in determining whether the proposal has been approved.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF
SUCH APPOINTMENT. Unless instructions are given to the contrary, it is the
intention of the persons named as proxies to vote the shares to which the proxy
is related FOR the ratification of the appointment of KPMG.
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of February 1, 1997 by
(i) each person known by the Company to own beneficially more than five percent
of the Common Stock, (ii) each director of the Company and each currently
employed Named Officer and (iii) all officers and directors as a group. Unless
otherwise indicated, each of the persons or entities listed below exercises
sole voting and investment power over the shares that each of them beneficially
owns. Because the Exchangeable Shares are exchangeable into Common Stock at
the holder's option at any time on a one for one basis, the percentage
calculation assumes the conversion of all outstanding Exchangeable Shares into
Common Stock.
<TABLE>
<CAPTION>
NUMBER
NAME AND ADDRESS OF SHARES PERCENT
---------------- --------- -------
<S> <C> <C>
LGT Asset Management, Inc.
50 California Street, 27th Floor
San Francisco, CA 94111 (a) 2,243,000 7%
Fred C. Alcorn(b)................ 67,590 *
Kelly H. Burke(b)................ 36,100 *
Bruce W. Ferguson(b)(c).......... 210,383 *
Daniel J. Fink(b)(d)............. 25,000 *
</TABLE>
20
<PAGE> 25
<TABLE>
<S> <C>
Lennard A. Fisk(b)............... 7,000 *
Daniel E. Friedmann(b)........... 42,536 *
Michael D. Griffin(b)............ 24,997 *
Jack L. Kerrebrock(b)............ 27,500 *
Douglas S. Luke(b)............... 22,000 *
John L. McLucas(b)............... 26,500 *
Janice I. Obuchowski............. 0 *
Frank L. Salizzoni............... 0 *
Harrison H. Schmitt(b)(d)........ 18,850 *
David W. Thompson(b)(c).......... 105,754 *
James R. Thompson(b)(c).......... 83,663 *
Scott L. Webster(b).............. 168,398 *
Officers and Directors as a Group
(20 persons)(b).................. 1,040,690 3%
</TABLE>
* Represents less than one percent of the outstanding shares of stock.
(a) LGT Asset Management, Inc.'s beneficial ownership is as of January 24,
1997.
(b) Includes shares issuable upon exercise of currently vested stock options
or options that will vest within sixty days of February 1, 1997, in the
following amounts: Fred C. Alcorn, 21,000 shares; Kelly H. Burke, 21,000
shares; Bruce W. Ferguson, 50,997 shares; Daniel J. Fink, 21,000 shares;
Lennard A. Fisk, 7,000 shares; Daniel E. Friedmann, 42,311 shares, Michael
D. Griffin, 24,997 shares; Jack L. Kerrebrock, 21,000 shares; Douglas S.
Luke, 21,000 shares; John L. McLucas, 21,000 shares; Harrison H. Schmitt,
17,000 shares; David W. Thompson, 55,998 shares; James R. Thompson, 83,663
shares; Scott L. Webster, 28,998 shares; and all officers and directors as
a group, 602,783 shares.
(c) Excludes 17,700 shares of Common Stock owned by Mr. Ferguson's wife,
23,000 shares of Common Stock owned by Mr. D.W. Thompson's wife, 1,385
shares of Common Stock owned by Mr. J.R. Thompson's wife and 450 shares of
Common Stock owned by Mr. J.R. Thompson's dependent children. Messrs.
Ferguson, D.W. Thompson and J.R. Thompson disclaim beneficial ownership of
such shares.
(d) Includes 300 shares of Common Stock with respect to which Mr. Fink shares
voting and investment power with his wife, and 1,850 shares of Common
Stock with respect to which Dr. Schmitt shares voting and investment power
with his wife.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Orbital's executive officers
and directors, and persons who beneficially own more than ten percent of the
Company's Common Stock, to file reports of ownership and changes in ownership
on Forms 3, 4 and 5 with the Securities and Exchange Commission (the "SEC").
Executive officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish to the Company copies of all Forms 3, 4
and 5 they file. Based solely on the Company's review of the copies of such
forms it has received and written representations from certain reporting
persons, the Company believes that, except as specified below, all its
executive officers and directors complied with all such filing requirements
applicable to them with respect to transactions during fiscal 1996.
Mr. Friedmann's sale of 1,356 shares of Common Stock in October 1996 was
reported late on his Form 5 filed for the year ended December 31, 1996.
21
<PAGE> 26
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the SEC, stockholder proposals
intended to be included in the Company's proxy materials for the Company's 1998
annual meeting of stockholders must be received by the Company on or before
November 20, 1997 at its principal office, 21700 Atlantic Boulevard, Dulles,
Virginia 20166, Attention: Corporate Secretary.
OTHER MATTERS
The management has no knowledge of any other matter that may come before
the Annual Meeting and does not, itself, currently intend to present any such
other matter. However, if any such other matters properly come before the
meeting or any adjournment thereof, the persons named as proxies will have
discretionary authority to vote the shares represented by the accompanying
proxy in accordance with their own judgment.
PROXY SOLICITATION
The cost of soliciting proxies will be paid by the Company. Proxies may be
solicited without extra compensation by certain directors, officers and regular
employees of the Company by mail, telephone or personally. In addition, the
Company has retained D.F. King & Co. ("D.F. King") to solicit proxies by
personal interview, mail, telephone and telegram and to request brokerage
houses and other custodians, nominees and fiduciaries to forward proxy
materials to the beneficial owners of Common Stock. The Company will pay D.F.
King a fee not to exceed $3,500 covering its services and, in addition, will
reimburse D.F. King for expenses and payments made for the Company's account to
brokers and other nominees for their expenses in forwarding soliciting
material.
Stockholders are urged to send their proxies without delay. Your
cooperation is appreciated.
22
<PAGE> 27
ORBITAL SCIENCES CORPORATION
PROXY STATEMENT
APPENDIX
A. Orbital Sciences Corporation 1997 Stock Option and Incentive Plan
23
<PAGE> 28
ORBITAL SCIENCES CORPORATION
1997 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE OF PLAN
The purpose of this 1997 Stock Option and Incentive Plan (the "Plan") is
to advance the interests of Orbital Sciences Corporation and its stockholders
by enabling Orbital and Participating Companies (as defined below) to attract
and retain highly talented employees, directors, consultants and advisers who
are in a position to make significant contributions to the success of Orbital,
to reward them for their contributions to the success of Orbital, and to
encourage them, through stock ownership, to increase their proprietary interest
in Orbital and their personal interest in its continued success and progress.
The Plan provides for the award of Orbital stock options and Orbital
common stock. Options granted pursuant to the Plan may be incentive or
nonstatutory stock options. Options granted pursuant to the Plan shall be
presumed to be nonstatutory options unless expressly designated as incentive
options at the time of grant.
2. DEFINITIONS
For the purposes of this Plan and related documents, the following
definitions apply:
"Award Agreement" means the stock option agreement, restricted stock
agreement or other written agreement between Orbital and a Grantee that
evidences and sets out the terms and conditions of a Grant.
"Board" means the Board of Directors of the Company.
"Committee" means a committee of, and designated from time to time by
resolution of the Board, which shall consist of no fewer than two members of
the Board, none of whom shall be an officer or other salaried employee of the
Company or any affiliate, and each of whom shall qualify in all respects as a
"non-employee director" within the meaning of Rule 16b-3 under the Exchange Act
or any successor rule or regulation. Commencing on the Effective Date, and
until such time as the Board shall determine otherwise, the Committee shall be
the Human Resources and Nominating Committee of the Board.
"Company" or "Orbital" means Orbital Sciences Corporation, a Delaware
corporation, or any successor thereof.
"Effective Date" means January 24, 1997.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
<PAGE> 29
"Fair Market Value" means the closing sale price of Stock on the national
securities exchange on which the Stock is then principally traded or, if that
measure of price is not available, on a composite index of such exchanges or,
if that measure of price is not available, in a national market system for
securities on the date of the option grant (or such other date as is specified
herein). In the event that there are no sales of Stock on any such exchange or
market on date of the option grant (or such other date as is specified herein),
the fair market value of Stock on the date of the grant (or such other date as
is specified herein) shall be deemed to be the closing sales price on the next
preceding day on which Stock was sold on any such exchange or market. In the
event that the Stock is not listed on any such market or exchange on the
applicable date, a reasonable valuation of the fair market value of the Stock
on such date shall be made by the Board.
"Grant" means an award of an option or Restricted Stock under the Plan.
"Grantee" means a person who receives or holds an option or Restricted
Stock under the Plan.
"I.R.C." means the Internal Revenue Code of 1986, as it may be amended
from time to time.
"Incentive Option" means any option granted under the Plan intended to
satisfy the requirements under I.R.C. Section 422(b) as an incentive stock
option.
"Nonstatutory Option" means any option granted under the Plan that does
not qualify as an Incentive Option.
"Old Option Plans" shall mean Orbital's 1990 Stock Option Plan and
Orbital's 1990 Stock Option Plan for Non-Employee Directors.
"Option Termination Date" is defined in Section 11(c) below.
"Outside Director" means a member of the Board who is not an officer or
employee of the Company.
"Parent" means a parent corporation as defined in I.R.C. Section 424(e).
"Participating Company" means the Company, any Parent of the Company, and
any subsidiary (as defined in Rule 405 under the Securities Act of 1933, as
amended) of the Company or its Parent.
"Plan" means this 1997 Stock Option and Incentive Plan.
"Restricted Stock" means shares of Stock awarded to a Grantee pursuant to
Section 13 hereof.
2
<PAGE> 30
"Stock" means shares of the Company's authorized Common Stock, $.01 par
value per share.
"Subsidiary" means a subsidiary corporation as defined in I.R.C. Section
424(f).
"Terminating Transaction" means any of the following events: (a) the
dissolution or liquidation of the Company; (b) a reorganization, merger or
consolidation of the Company with one or more other persons in which the
Company is not the surviving corporation or becomes a subsidiary of another
corporation other than a corporation that was a Participating Company
immediately prior to such event; (c) a sale of substantially all the Company's
assets to a person or entity other than a corporation that was a Participating
Company immediately prior to such event; or (d) a person (or persons acting as
a group or otherwise in concert) owning equity securities of the Company that
represent a majority or more of the aggregate voting power of all outstanding
equity securities of the Company. As used herein or elsewhere in this Plan,
the word "person" shall mean an individual, corporation, partnership,
association or other person or entity, or any group of two or more of the
foregoing that have agreed to act together.
"Total Disability" means a "total and permanent disability" as defined in
I.R.C. Section 22(e)(3).
3. ADMINISTRATION OF PLAN
(a) Administration by Board. The Plan shall be administered by the Board.
The Board shall have authority, not inconsistent with the express provisions
of the Plan, to:
(i) award Grants consisting of options or Restricted Stock, or both,
to such eligible persons as the Board may select;
(ii) determine the timing of Grants and the number of shares of
Stock subject to each Grant;
(iii) determine the terms and conditions of each Grant, including
whether an option is an Incentive Option or a Nonstatutory Option
(consistent with the requirements of the I.R.C.) and the nature and
duration of any restriction or condition (or provision for lapse thereof)
relating to the vesting or forfeiture of a Grant;
(iv) adopt such rules and regulations as the Board may deem
necessary or appropriate to carry out the purposes of the Plan; and
(v) interpret the provisions of the Plan and of any Grants made
hereunder and decide any questions and settle all controversies and
disputes that may arise in connection with the Plan.
3
<PAGE> 31
All decisions, determinations, interpretations or other actions by the Board
with respect to the Plan shall be final, conclusive and binding on all persons,
including the Company, Participating Companies and Grantees and their
respective legal representatives, their successors in interest and permitted
assigns and upon all other persons claiming by, through, under or against any
of them.
(b) Administration and Delegation by Committee. The Board, in its sole
discretion, may delegate some or all of its powers with respect to the Plan to
a Committee (in which case references to the Board in this Plan shall be deemed
to refer to the Committee, where appropriate) except for interpreting or making
changes to Section 9 or Section 11(b) and except with respect to any grants to
directors of the Company under Sections 8 and 13. The Committee, in its sole
discretion, may delegate to the Chairman, the President and the Chief Executive
Officer, or any of them, while any such officer is a member of the Board,
authority to award Grants under the Plan. Such authority shall be on such
terms and conditions, and subject to such limitations, as the Committee shall
specify in its delegation of authority. Except to the extent otherwise
specified by the Committee in such delegation, the delegated authority to grant
awards of options and Restricted Stock shall include the power to:
(i) award Grants consisting of options or Restricted Stock, or both,
to such eligible persons as the authorized officer may select;
(ii) determine the timing of Grants and the number of shares of
Stock subject to each award; and
(iii) determine the terms and conditions of each Grant, including
whether an option is an Incentive Option or a Nonstatutory Option
(consistent with the requirements of the I.R.C.) and the nature and
duration of any restriction or condition (or provision for lapse thereof)
relating to the vesting or forfeiture of a Grant.
Except to the extent otherwise specified by the Committee in such delegation,
the authority so delegated shall be in addition to, and not in lieu of, the
authority of the Committee to make awards under the Plan.
4. SHARES SUBJECT TO THE PLAN
(a) Availability. Subject to adjustment as provided in Section 4(c)
below, the maximum aggregate number of shares of Stock available for issuance
under the Plan shall be 1,600,000.
(b) Reavailability of Options; Stock to be Delivered. If any Stock
covered by a Grant is not purchased or is forfeited, or if a Grant otherwise
terminates without delivery of any Stock subject thereto, then the number of
shares of Stock so terminated or forfeited shall again be
4
<PAGE> 32
available for making Grants under the Plan. In the event that Stock that was
previously issued by the Company is reacquired by the Company as part of the
consideration received (in accordance with Section 12(b) below) upon the
subsequent exercise of an option, such reacquired Shares shall again be
available for the granting of options hereunder. Stock delivered under the
Plan shall be authorized but unissued shares or, at the Board 's discretion,
previously issued Stock acquired by the Company and held in its treasury. No
fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock split or
combination of shares, exchange of shares, distribution payable in capital
stock, recapitalization or other change in Orbital's capital stock, the number
and kind of shares of Stock subject to Grants then outstanding or subsequently
awarded under the Plan, the exercise price of any outstanding option, the
maximum number of shares of Stock that may be delivered under the Plan, and
other relevant provisions shall be appropriately adjusted by the Board, so that
the proportionate interest of the Grantee immediately following such event
shall, to the extent practicable, be the same as immediately before such event.
5. EFFECTIVE DATE.
The Plan shall be effective as of the Effective Date, subject to approval
of the Plan within one year of the Effective Date by Orbital's shareholders.
Upon approval of the Plan by the stockholders of Orbital as set forth above,
all Grants made under the Plan on or after the Effective Date shall be fully
effective as if Orbital's stockholders had approved the Plan on the Effective
Date. If the stockholders fail to approve the Plan within one year of the
Effective Date, any Grants made hereunder shall be null and void and of no
effect.
6. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award Agreement,
to be executed by Orbital and by the Grantee, in such form or forms as the
Board shall from time to time approve. Each Award Agreement evidencing a Grant
of options shall specify whether such options are intended to be Nonstatutory
Options or Incentive Options.
7. OPTION EXERCISE PRICE
The option exercise price for shares of Stock to be issued under the Plan
shall be the Fair Market Value of the Stock on the Grant date (or 110% of the
Fair Market Value in the case of an Incentive Option granted to a ten-percent
shareholder).
5
<PAGE> 33
8. DISCRETIONARY OPTION GRANTS. Grants may be made under the Plan to any
employee or director of any Participating Company as the Board shall determine
and designate from time to time. Grants of options may be made under the Plan
to any consultant or adviser to any Participating Company whose participation
in the Plan is determined by the Board to be in the best interests of the
Company and is so designated by the Board. Notwithstanding the foregoing,
grants to persons who are not employees of the Company or any Parent or
Subsidiary of the Company shall not be Incentive Options.
9. OUTSIDE DIRECTOR OPTION GRANTS
(a) Automatic Grants. On January 2 of each year, each Outside Director
shall automatically be awarded a Grant of a Nonstatutory Option to purchase
3,000 shares of Stock.
(b) Grants in Lieu of Annual Fee. Each Outside Director shall be entitled
to receive a Nonstatutory Option to purchase a specified number of shares of
Stock in lieu of his or her annual Board retainer fee. Such specified number
(i) shall be calculated by the Chief Financial Officer of the Company, using a
Black-Scholes (or other generally accepted) valuation method based on the Fair
Market Value of the Stock on January 15 of the applicable year (or the next
business day, if January 15 falls on a weekend), assuming a ten-year option
term and (ii) shall be adjusted upward by 10% to take into account the one-year
vesting term. The exercise price of such option shall be equal to the Fair
Market Value of Shares on January 15 (or the next business day, if January 15
falls on a weekend), which shall also be the Grant date. Any Outside Director
desiring to receive an option in lieu of cash shall notify the Company of this
election, which shall be irrevocable, by submitting a written notice to the
Corporate Secretary in accordance to procedures as determined by the Board.
10. LIMITATIONS ON GRANTS
(a) Limitation on Shares of Stock Subject to Grants. The maximum number
of shares of Stock subject to Options that can be awarded under the Plan to any
person eligible for a Grant under Section 8 hereof is 750,000 shares of Stock
during the first ten (10) calendar years of the Plan, and 100,000 per year
thereafter. The "per individual" limitations described in this paragraph shall
be construed and applied consistent with the rules and regulations under I.R.C.
Section 162(m).
(b) Limitations on Incentive Options. Incentive Options may only be
granted to employees of the Company or any Parent or Subsidiary of the Company.
6
<PAGE> 34
11. VESTING AND TERMINATION OF OPTIONS
(a) Vesting of Discretionary Options. Subject to the other provisions of
this Section 11, Options granted pursuant to Section 8 shall vest and become
exercisable at such time and in such installments as the Board shall provide in
each individual Award Agreement. Notwithstanding the foregoing, the Board may,
in its sole discretion, accelerate the time at which all or any part of an
option may be exercised.
(b) Vesting of Outside Director Options. Subject to the other provisions
of this Section 11, options granted under Section 9 shall become exercisable as
to 100% of the Stock covered thereby on the first anniversary of the Grant
date.
(c) Termination of Options. All options shall expire and terminate on
such date as the Board shall determine ("Option Termination Date"), which in no
event shall be later than ten (10) years from the date such option was
granted. In the case of an Incentive Option granted to a ten-percent
stockholder, the option shall not be exercisable after the expiration of five
(5) years from the date such option was granted. Upon termination of an option
or portion thereof, the Grantee shall have no further right to purchase Stock
pursuant to such option.
(d) Termination of Employment or Service.
(i) Termination of Employment or Directorship. Upon the termination of
the employment or directorship of a Grantee with a Participating Company for
any reason other than for "cause" (pursuant to Section 14 below) or by reason
of death or Total Disability, all options that are not exercisable shall
terminate on the employment/directorship termination date. Options that are
exercisable on the employment/directorship termination date shall continue to
be exercisable for (A) six (6) months following the employment/directorship
termination date (in the case of Nonstatutory Options), (B) three (3) months
following the employment termination date (in the case of Incentive Options),
or (C) the Option Termination Date, whichever occurs first. A Grantee who is
an employee or director of a Participating Company shall be deemed to have
incurred a termination for purposes of this Section 11 (d)(i) if such
Participating Company ceases to be a Participating Company, unless such Grantee
is an employee, director, consultant or adviser of any other Participating
Company.
(ii) Service Termination. In the case of an optionee who is not an
employee or director of any Participating Company, provisions relating to the
exercisability of options following termination of service shall be specified
in the award. If not so specified, all options held by such optionee that are
not then exercisable shall terminate upon termination of service for any
reason. Unless such termination was for "cause" (pursuant to Section 14
below), options that are exercisable on the date the optionee's service as a
consultant or adviser terminates shall continue to be exercisable for a period
of six (6) months following the service termination date (as defined in a
consulting or similar agreement or as determined by the Board) or the Option
Termination Date, whichever occurs first.
7
<PAGE> 35
(e) Rights in the Event of Death. In the event that the employment and/or
directorship of an optionee with a Participating Company is terminated by
reason of death, all options that are not exercisable shall terminate on the
date of death. Options that were exercisable on the date of the prior to death
may be exercised by the optionee's executor or administrator or by the person
or persons to whom the option is transferred by will or the applicable laws of
descent and distribution, at any time within the one-year period (or such
longer period as the Board may determine prior to the expiration of such
one-year period) beginning with the date of the optionee's death, but in no
event beyond the Option Termination Date.
(g) Rights in the Event of Total Disability. In the event that the
employment and/or directorship of an optionee with a Participating Company is
terminated by reason of Total Disability, all options that are not exercisable
shall terminate on the employment/directorship termination date. Options that
were exercisable on the employment/directorship termination date may be
exercised at any time within the one-year period (or such longer period as the
Board may determine prior to the expiration of such one-year period) beginning
with the commencement of the optionee's Total Disability (as determined by the
Board) but in no event beyond the Option Termination Date.
(h) Leave of Absence. An approved leave of absence shall not constitute a
termination of employment under the Plan. An approved leave of absence shall
mean an absence approved pursuant to the policy of a Participating Company for
military leave, sick leave, or other bona fide leave, not to exceed ninety (90)
days or, if longer, as long as the employee's right to re-employment is
guaranteed by contract, statute or the policy of a Participating Company.
Notwithstanding the foregoing, in no event shall an approved leave of absence
extend an option beyond the Option Termination Date.
12. EXERCISE OF OPTIONS; NON-TRANSFERABILITY
(a) Exercise of Options. Vested options may be exercised, in whole or in
part, by giving written notice of exercise to the Company, which notice shall
specify the number of shares of Stock to be purchased and shall be accompanied
by payment in full of the purchase price in accordance with Section 12(b) below
and the full amount of any federal and state withholding and other employment
taxes applicable to such person as a result of such exercise. No shares of
Stock shall be issued until full payment of the purchase price and applicable
withholding tax has been made. Until the issuance of stock certificates, no
right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to optioned shares notwithstanding the exercise of the
option.
(b) Payment. Full payment of the purchase price for the Stock as to which
an option is being exercised shall be made (i) in United States dollars in cash
or by check in a form satisfactory to the Company, (ii) at the Grantee's
election, and subject to discretion of the Board, through delivery of Shares
having a Fair Market Value on the day immediately preceding the day notice of
exercise is received by the Company equal to the cash exercise price of the
option, (iii)
8
<PAGE> 36
in accordance with a so-called cashless exercise plan established with a
securities brokerage firm, or (iv) by any combination of the permissible forms
of payment.
(c) Non-Transferability of Options. Except as the Board may otherwise
determine, no option may be transferred other than by will or by the laws of
descent and distribution, and during an optionee's lifetime an option may be
exercised only by the Grantee.
13. RESTRICTED STOCK
(a) Grant of Restricted Stock. The Board may from time to time grant
Restricted Stock to certain employees and directors of a Participating Company,
subject to such restrictions, conditions and other terms, if any, as the Board
may determine.
(b) Restrictions. At the time a Grant of Restricted Stock is made, the
Board may establish a period of time (the "Restricted Period") during which a
Grantee's right to all or a portion of such Restricted Stock shall vest over
time, subject to certain terms and conditions. Each Grant of Restricted Stock
may be subject to a different Restricted Period. The Board may, in its sole
discretion, at the time a Grant of Restricted Stock is made, prescribe
forfeiture or vesting conditions in addition to or other than the expiration of
the Restricted Period. The Board also may, in its sole discretion, shorten or
terminate the Restricted Period or waive any other restrictions applicable to
all or a portion of the Restricted Stock. Restricted Stock may not be sold,
transferred, assigned, pledged or otherwise encumbered or disposed of during
the Restricted Period or prior to the satisfaction of any other restrictions
prescribed by the Board with respect to such Restricted Stock.
(c) Restricted Stock Certificates. Orbital shall issue, in the name of
each Grantee to whom Restricted Stock has been granted, stock certificates
representing the total number of shares of Restricted Stock granted to the
Grantee. The Secretary of Orbital shall hold such certificates for the
Grantee's benefit until such time as the restrictions lapse or the Restricted
Stock is forfeited to Orbital.
(d) Rights of Holders of Restricted Stock. Unless the Board otherwise
provides in an Award Agreement, holders of Restricted Stock shall have the
right to vote such Stock and the right to receive any dividends declared or
paid with respect to such Stock. The Board may provide that any dividends paid
on Restricted Stock must be reinvested in Stock, which may or may not be
subject to the same vesting conditions and restrictions applicable to such
Restricted Stock. All distributions, if any, received by a Grantee with
respect to Restricted Stock as a result of any stock split, stock dividend,
combination of shares, or other similar transaction shall be subject to the
restrictions applicable to the original Grant.
(e) Termination of Employment. Upon termination of the
employment/directorship of a Grantee with Orbital, other than by reason of
death or Total Disability, any Restricted Stock held by such Grantee that has
not vested, or with respect to which all applicable restrictions and conditions
have not lapsed, shall immediately be deemed forfeited, unless the Board, in
its
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discretion, determines otherwise. Upon forfeiture of Restricted Stock, the
Grantee shall have no further rights with respect to such Grant, including but
not limited to any right to vote Restricted Stock or any right to receive
dividends with respect to shares of Restricted Stock.
(f) Rights in the Event of Total Disability or Death. The rights of a
Grantee with respect to Restricted Stock in the event such Grantee terminates
employment/directorship with Orbital by reason of Total Disability or death
shall be determined by the Board at the time of Grant.
(g) Delivery of Stock and Payment Therefor. Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Board, the restrictions applicable to shares of
Restricted Stock shall lapse, and, upon payment by the Grantee to Orbital, in
cash or by check, of the aggregate par value of the shares of Stock represented
by such Restricted Stock, a stock certificate for such shares shall be
delivered, free of all such restrictions, to the Grantee or the Grantee's
beneficiary or estate, as the case may be.
14. FORFEITURE CONDITIONS.
The Board may provide in an Award Agreement for conditions of forfeiture
for "cause" of any Grantee's rights with respect to a Grant. "Cause" shall
include engaging in an activity that is detrimental to the Company including,
without limitation, criminal activity, failure to carry out the duties assigned
to the Grantee as a result of incompetence or willful neglect, conduct casting
such discredit on the Company as in the opinion of the Board justifies
termination or forfeiture of the Grant, or such other reasons, including the
existence of a conflict of interest, as the Board may determine. "Cause" is
not limited to events that have occurred prior to the Grantee's termination of
service, nor is it necessary that the Board's finding of "cause" occur prior to
such termination. If the Board determines, subsequent to a Grantee's
termination of service but prior to the exercise of any rights under a Grant,
that either prior or subsequent to the Grantee's termination the Grantee
engaged in conduct that would constitute "cause," then the rights with respect
to a Grant shall be forfeited.
15. COMPLIANCE WITH SECURITIES LAWS.
(a) The delivery of Stock upon the exercise of an option or lapse of a
Restricted Period shall be subject to compliance with (i) applicable federal
and state laws and regulations, (ii) all applicable listing requirements of any
national securities exchange or national market system on which the Stock is
then listed or quoted, and (iii) Company counsel's approval of all other legal
matters in connection with the issuance and delivery of such Stock. If the
sale of Stock has not been registered under the Securities Act of 1933, as
amended, the Company may require, as a condition to exercise of the option or
receipt of Restricted Stock, such representations or agreements as counsel for
the Company may consider appropriate to avoid violation of such Act and may
require that the certificates evidencing such Stock bear an appropriate legend
restricting transfer.
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(b) It is the intent of the Company that Grants pursuant to the Plan and
the exercise of options granted hereunder will qualify for the exemption
provided by Rule 16b-3 under the Exchange Act. To the extent that any
provision of the Plan or action by the Board does not comply with the
requirements of Rule 16b-3 in respect of an employee or director subject to
Section 16(b) of the Exchange Act, it shall be deemed inoperative to the extent
permitted by law and deemed advisable by the Board, and shall not affect the
validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the
Board may exercise its discretion to modify this Plan in any respect necessary
to satisfy the requirements of, or take advantage of any features of the
revised exemption or its replacement.
16. MERGERS, etc.
(a) Effect on Options and Plan. Except as otherwise provided herein, all
options outstanding under the Plan shall accelerate and become immediately
exercisable for a period of fifteen days (or such longer or shorter period as
the Board may prescribe) immediately prior to the scheduled consummation of a
Terminating Transaction, which exercise shall be (i) conditioned upon the
consummation of the Terminating Transaction and (ii) effective only immediately
before the consummation of such Terminating Transaction. Upon consummation of
any such event, the Plan and all outstanding but unexercised options shall
terminate. Notwithstanding the foregoing, to the extent provision is made in
writing in connection with such Terminating Transaction, for the continuation
of the Plan and the assumption of options under the Plan theretofore granted,
or for the substitution for such options of new options covering the stock of a
successor company, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares or units and exercise prices,
then the Plan and options theretofore granted shall continue in the manner and
under the terms so provided, and the acceleration and termination provisions
set forth in the first two sentences of this Section 16(a) shall be of no
effect. The Company shall send written notice of a Terminating Transaction to
all individuals who hold options not later than the time at which the Company
gives notice thereof to its stockholders.
b. Effect on Restricted Stock. All outstanding shares of Restricted Stock
shall be deemed to have vested, and all restrictions and conditions applicable
to such shares of Restricted Stock shall be deemed to have lapsed immediately
prior to the occurrence of a Terminating Transaction.
17. TAXES
The Board shall make such provisions and take such steps as it deems
necessary or appropriate for the withholding of any federal, state, local and
other tax required by law to be withheld with respect to the grant or exercise
of options, or the vesting of or other lapse of restrictions applicable to
Restricted Stock, or with respect to the disposition of Stock acquired pursuant
to the Plan, including, but without limitation, the deduction of the amount of
any such withholding tax from any compensation or other amounts payable to a
Grantee, or requiring a
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Grantee (or the optionee's beneficiary or legal representative), as a condition
of a Grant or exercise of an option or receipt of Restricted Stock, to pay to
the appropriate Participating Company any amount required to be withheld, or to
execute such other documents as the Board deems necessary or desirable in
connection with the satisfaction of any applicable withholding obligation.
18. EMPLOYMENT RIGHTS
Neither the adoption of the Plan nor the making of any Grants shall confer
upon any Grantee any right to continue as an employee or director of, or
consultant or adviser to, any Participating Company or affect in any way the
right of any Participating Company to terminate them at any time. Except as
specifically provided by the Board in any particular case, the loss of existing
or potential profit in Grants under this Plan shall not constitute an element
of damages in the event of termination of the relationship of a Grantee even if
the termination is in violation of an obligation of the Company to the Grantee
by contract or otherwise.
19. AMENDMENT OR TERMINATION OF PLAN
(a) Neither adoption of the Plan nor the making of any Grants shall affect
the Company's right to make awards to any person that is not subject to the
Plan, to issue to such persons Stock as a bonus or otherwise, or to adopt other
plans or arrangements under which Stock may be issued.
(b) The Board may at any time discontinue granting awards under the Plan.
With the consent of the Grantee, the Board may at any time cancel an existing
Grant in whole or in part and make any other Grant for such number of shares as
the Board specifies. The Board may at any time, prospectively or
retroactively, amend the Plan or any outstanding Grant for the purpose of
satisfying the requirements of I.R.C. Section 422 or of any changes in
applicable laws or regulations or for any other purpose that may at the time be
permitted by law, or may at any time terminate the Plan as to further grants of
awards, but no such amendment shall materially adversely affect the rights of
any Grantee (without the Grantee's consent) under any outstanding Grant.
(c) In the Board's discretion, the Board may, with an optionee's consent,
substitute Nonstatutory Options for outstanding Incentive Options, and any such
substitution shall not constitute a new option grant for the purposes of the
Plan, and shall not require a revaluation of the option exercise price for the
substituted option. Any such substitution may be implemented by an amendment
to the applicable option agreement or in such other manner as the Board in its
discretion may determine.
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20. GENERAL PROVISIONS
(a) Titles and Headings. Titles and headings of sections of the Plan are
for convenience of reference only and shall not affect the construction of any
provision of the Plan.
(b) Governing Law. The Plan shall be governed by, interpreted under and
construed and enforced in accordance with the internal laws, and not the laws
pertaining to conflicts or choice of laws, of the State of Delaware, applicable
to agreements made and to be performed wholly within the State of Delaware.
(c) Severability. If any provision of the Plan or any Award Agreement
shall be determined to be illegal or unenforceable by any court of law in any
jurisdiction, the remaining provisions hereof and thereof shall be severable
and enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.
* * *
The Plan was duly adopted by the Board of Directors of the Company as of
January 24, 1997.
---------------------------------------
Leslie C. Seeman
Senior Vice President, General Counsel and
Secretary of the Company
The Plan was duly approved by the stockholders of the Company on April
_____, 1997.
---------------------------------------
Leslie C. Seeman
Senior Vice President, General Counsel and
Secretary of the Company
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ORBITAL SCIENCES CORPORATION
Proxy for Annual Meeting of Stockholders -- April 24, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints David W. Thompson and Leslie C. Seeman and each
of them as proxies, with power of substitution and re-substitution to each, to
vote at the annual meeting of stockholders of Orbital Sciences Corporation (the
"Company") to be held at the Company's headquarters, 21700 Atlantic Boulevard,
Dulles, Virginia 20166 on April 24, 1997 at 9:00 a.m. and at any adjournments
thereof, all shares of stock of the Company that the undersigned would be
entitled to vote if personally present. A majority of said proxies or their
substitutes or re-substitutes or any one if only one is present and acting,
shall have all the powers of all said proxies. The undersigned instructs said
proxies, or their substitutes or re-substitutes, to vote in such manner as they
may determine on any matters that may properly come before the meeting as
indicated in the Notice of Annual Meeting and Proxy Statement, receipt of which
is hereby acknowledged, and to vote as specified by the undersigned on the
reverse side.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL ITEMS.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED, OR IF NO
DIRECTION IS MADE, FOR THE ELECTION OF THE NAMED NOMINEES AS DIRECTORS AND FOR
PROPOSALS 2-4.
<TABLE>
<S> <C>
1. To elect four directors, each to serve for a three-year term ending in
2000.
Nominees: Douglas S. Luke, John L. McLucas, Harrison H. Schmitt, Scott L. Webster
/ / FOR ALL / / WITHHOLD ALL
-------------------------------------------
/ / FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
(Instruction: To withhold authority to vote for any nominee(s), write
such nominee(s) name(s) above.)
........................................................................................
2. Approve the adoption of an amendment to Section 5 of the Company's
Restated Certificate of Incorporation increasing the number of authorized
shares of Common Stock from 40,000,000 to 80,000,000.
/ / FOR / / AGAINST / / ABSTAIN
........................................................................................
</TABLE>
<PAGE> 42
<TABLE>
<S> <C>
3. Approve the adoption of the Orbital Sciences Corporation 1997 Stock
Option and Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
................................................................................
4. Ratify the selection of KPMG Peat Marwick LLP as the Company's
independent accountants for the fiscal year ending December 31, 1997.
/ / FOR / / AGAINST / / ABSTAIN
................................................................................
Please vote, date and promptly return this proxy in the enclosed return
envelope which is postage prepaid if mailed in the United States.
Dated: , 1997
-------------------
- ------------------------------- For Inspector of
Signature Elections' Use Only
- ------------------------------- ------------------------
Name (please print) Number of Shares
</TABLE>
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their titles. If signer
is a corporation, please give full corporate name and have an authorized
officer sign, stating title. If signer is a partnership, please sign in
partnership name by authorized person.
