<PAGE> 1
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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by sec.
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 14a-11(c) or Rule 14a-12
ORBITAL SCIENCES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[ ] 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.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[ORBITAL LOGO]
March 25, 1998
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 23, 1998 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> 3
ORBITAL SCIENCES CORPORATION
21700 ATLANTIC BOULEVARD
DULLES, VIRGINIA 20166
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1998
------------------------
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
23, 1998 at 9:00 A.M. for the following purposes:
1. To elect five Directors for three-year terms ending in 2001.
2. To approve an amendment to the Orbital Sciences Corporation 1997
Stock Option and Incentive Plan increasing the number of shares of
Common Stock authorized for issuance under the Plan from 1,600,000 to
3,200,000.
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has set March 6, 1998 as the record date for the
meeting. This means that owners of the Company's Common Stock at the close of
business on that date are entitled to receive notice of the meeting and to vote
at the meeting and any adjournments or postponements thereof.
EACH STOCKHOLDER IS URGED TO VOTE PROMPTLY BY SIGNING AND RETURNING THE ENCLOSED
PROXY CARD. IF A STOCKHOLDER DECIDES TO ATTEND THE MEETING, HE OR SHE MAY REVOKE
THE PROXY AND VOTE THE SHARES IN PERSON.
By Order of the Board of Directors,
/s/ LESLIE C. SEEMAN
LESLIE C. SEEMAN
Senior Vice President, General Counsel
and Secretary
March 25, 1998
<PAGE> 4
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
23, 1998 at 9:00 A.M. and any adjournments thereof.
The Board of Directors has fixed the close of business on March 6, 1998
(the "Record Date") for determining stockholders who are entitled to vote at the
Annual Meeting of Stockholders. On the Record Date, there were 32,909,351 shares
of common stock, par value $0.01 per share (the "Common Stock"), outstanding,
the holders of which are entitled to one vote per share on each matter to come
before the meeting. 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
stockholders on or about March 25, 1998.
<PAGE> 5
PROPOSAL 1
ELECTION OF DIRECTORS
Five directors are to be elected at the 1998 Annual Meeting for three-year
terms that expire in 2001. Nine other directors have been elected to, or
appointed to fill vacancies for, terms that end in either 1999 or 2000, as
indicated below. The term of office of each nominated director will be for three
years expiring at the 2001 Annual Meeting of Stockholders and until a successor
is elected and qualified or until such director's 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 five nominees for election as directors at the Annual Meeting who
receive the greatest number of votes properly cast for the election of directors
will be elected directors. Shares that are withheld and broker nonvotes 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 March 1, 1998) 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 1998 ANNUAL MEETING
FRED C. ALCORN, 67
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, 54
Member of Strategy and Technology Committee
Lennard A. Fisk has been a Director of the Company since October 1993. Since
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 the
National Aeronautics and Space Administration ("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, 70
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 Orbital's then wholly owned subsidiary,
Orbital Research Corporation ("ORC"). Since 1965, Dr. Kerrebrock has been a
Professor of Aeronautics and Astronautics at the Massachusetts Institute of
Technology ("MIT"). He also served as NASA Associate Administrator for
Aeronautics and Space Technology from 1981 to 1983.
2
<PAGE> 6
DAVID W. THOMPSON, 43
Chairman of the Board
David W. Thompson is a co-founder of Orbital and has been Chairman of the Board,
President and Chief Executive Officer of the Company since 1982. Prior to
founding Orbital, Mr. Thompson was employed by Hughes Electronics Corporation as
special assistant to the President of its Missile Systems Group and by NASA at
the Marshall Space Flight Center as a project manager and engineer, and also
worked on the Space Shuttle's autopilot design at the Charles Stark Draper
Laboratory. Mr. Thompson serves as Chairman of the Board and Chief Executive
Officer of Orbital Imaging Corporation ("ORBIMAGE"), as Chairman of Magellan
Corporation ("Magellan"), and as a Director of ORBCOMM Global, L.P. ("ORBCOMM"),
each an Orbital affiliate. Mr. Thompson is a Fellow of the American Institute of
Aeronautics and Astronautics, the American Astronautical Society and the Royal
Aeronautical Society.
JAMES R. THOMPSON, 61
James R. Thompson (who is not related to David W. Thompson) has been Executive
Vice President and General Manager/Launch Systems Group since 1993 and a
Director of the Company since 1992. Mr. Thompson was Executive Vice President
and Chief Technical Officer of Orbital from 1991 to 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, 68
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, 43
Bruce W. Ferguson is a co-founder of Orbital and has been Senior Vice President,
Special Projects since July 1997, and a Director of the Company since 1982. Mr.
Ferguson was Executive Vice President and General Manager/Communications and
Information Services Group from 1993 until 1997, and Executive Vice President
and Chief Operating Officer of Orbital from 1989 to 1993. From 1985 to 1989, he
was Senior Vice President/Finance and Administration and General Counsel of
Orbital. Mr. Ferguson is a fellow at the Center for International Science and
Technology Policy and Center for Space Policy at The George Washington
University. Mr. Ferguson is also a Director of ORBIMAGE.
DANIEL J. FINK, 71
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
3
<PAGE> 7
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, 46
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 the Chairman.
FRANK L. SALIZZONI, 59
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 1996. From 1994 until 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 is a Director of H&R Block and
SKF USA, Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
DOUGLAS S. LUKE, 56
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 Regency Realty Corporation and
Westvaco Corporation.
JOHN L. MCLUCAS, 77
Member of Human Resources and Nominating Committee and Strategy and Technology
Committee
John L. McLucas has been a Director of the Company since 1993. From 1987 until
1993, he was a Director of 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 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 COMSAT 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, 62
Member of Audit and Finance Committee and Strategy and Technology Committee
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
4
<PAGE> 8
States Senator from New Mexico, during which time he chaired the Senate Science,
Technology and Space Subcommittee, which oversees all non-military space-related
research and development programs 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, 45
Scott L. Webster is a co-founder of Orbital and has been a Director of the
Company since 1982. In early 1998, Mr. Webster became Chairman of the Board and
Chief Executive Officer of ORBCOMM. From 1993 to 1997, Mr. Webster served in
various consulting capacities with the Company. He served as President of
Orbital's Space Data Division from 1990 until 1993, and Executive Vice President
of that Division from 1989 to 1990. Mr. Webster served as Orbital's Senior Vice
President/Marketing and Vice President of Marketing from Orbital's inception in
1982 until 1989. Previously, he held technical and management positions at
Advanced Technology Laboratories and Litton Industries, Inc.
INFORMATION CONCERNING THE BOARD AND ITS COMMITTEES
Meetings and Committees
During 1997, the Board of Directors held nine meetings and took action by
unanimous written consent two times. The Board has three standing committees:
the Audit and Finance Committee, the Human Resources and Nominating Committee,
and the Strategy and Technology Committee. Each incumbent director attended at
least 75 percent of all meetings of the Board and committees of which he or she
was a member. 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 and took action
by unanimous written consent once in 1997, reviews corporate financial
performance and planning; evaluates Company financings and financial aspects of
potential acquisitions, divestitures and joint ventures; 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 twice in 1997, administers the
Company's 1997 Stock Option and Incentive Plan (the "1997 Option Plan"), and
during 1997, reviewed option grants pursuant to the 1996 Stock Option Plan of
Orbital's subsidiary, Magellan (the "Magellan Option 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; oversees the Company's
defined contribution and deferred compensation plans; considers issues of
management development, evaluation and succession; reviews corporate human
resources matters, including issues relating to workforce recruiting and
retention; and nominates candidates for positions on the Board. In addition, the
Committee will consider nominees for directors recommended by stockholders if
such recommendations are in writing, are filed with the Secretary of the Company
by the time specified in the Company's By-Laws and include the information
specified in the Company's By-Laws.
The Strategy and Technology Committee, which held three meetings during
1997, is responsible for giving initial Board-level consideration to certain
advanced technology and business strategy issues, which may include competitive
assessments, major program reviews and assessments, evaluation of technical and
market risks associated with new product development, and potential acquisition,
divestiture and joint venture evaluations.
5
<PAGE> 9
Director Compensation
Currently, four members of the Board of Directors are salaried employees of
the Company or its affiliates. Such employee directors receive no additional
compensation for serving on the Board. Board members that are not salaried
employees receive separate compensation for Board service. That compensation
includes: (i) an annual retainer in the form of cash or restricted stock or a
combination of the two, (ii) attendance fees, (iii) stock options and (iv) in
some instances, restricted stock awards.
Retainer and Fees. Nonemployee directors receive an annual retainer of
$7,500, along with $1,000 for each Board or committee meeting attended. As
described below, nonemployee directors may elect to receive their annual
retainer in restricted Common Stock of the Company. Nonemployee directors also
are reimbursed for out-of-pocket expenses in connection with Board and committee
service.
Options and Restricted Stock. Under the 1997 Option Plan, nonemployee
directors receive an annual grant on January 2 of options to purchase 3,000
shares of Common Stock at an exercise price equal to the fair market value on
that date. On January 2, 1997, the option exercise price was $16.63 per share.
The option grant vests one year from the grant date.
In 1997, the Board adopted two nonemployee director compensation programs
that are intended to incentivize nonemployee directors to increase their equity
ownership in the Company and to directly align their financial interests with
those of stockholders. The first is a compensation program that allows
nonemployee directors to elect to receive shares of restricted Common Stock
instead of their annual cash retainer. Nonemployee directors making this
election receive a matching award of an equal number of shares of restricted
Common Stock. The grant, including the matching award of restricted Common
Stock, vests in its entirety two years from the date of grant. During 1997, the
Company issued a total of 10,340 shares of restricted Common Stock to all ten
eligible directors in lieu of a cash annual retainer.
In addition, under the Nonemployee Director Stock Purchase Program, the
Company matches a nonemployee director's purchase of up to $10,000 worth of
shares of Common Stock in the open market in the calendar year with a grant of
restricted Common Stock under the 1997 Option Plan. The grant of restricted
Common Stock is equal to the dollar value of the nonemployee director's stock
purchase in any given calendar quarter divided by the average closing sales
price of the Company's Common Stock during that calendar quarter. The grant
vests in its entirety in two years. In 1997, the Company issued a total of 3,052
shares of restricted Common Stock to five nonemployee directors who participated
in the program.
6
<PAGE> 10
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of all compensation earned,
awarded or paid in the fiscal years ended December 31, 1997, 1996 and 1995, as
applicable, to those persons who were at December 31, 1997, the Chief Executive
Officer and the four most highly compensated 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............. 1997 $375,000 $280,000 -- 105,000(c) $1,442,735(a)(b)
Chairman of the Board, 50,000
President and Chief Executive 40,000(d)
Officer
1996 300,000 153,000 -- 45,000 263,445(e)
150,000(c)
200,000(d)
1995 300,000 121,500 -- 25,000 16,048(f)
James R. Thompson............. 1997 255,000 114,800 -- 30,000 16,896(a)
Executive Vice President and
General Manager/Launch Systems 1996 245,000 154,125 -- 45,000 17,483(f)
Group 20,000(d)
1995 235,000 79,300 -- 15,000 15,259(f)
Michael D. Griffin............ 1997 250,000 112,500 -- 30,000 16,750(a)
Executive Vice President and 50,000(c)
Chief Technical Officer 1996 225,000 95,625 -- 25,000 11,798(f)
75,000(d)
1995(g) 123,000 71,667 -- 50,000 4,868(f)
Jeffrey V. Pirone............. 1997 215,000 136,800 -- 80,000 15,636(a)
Executive Vice President and 50,000(c)
Chief Financial Officer 20,000(d)
1996(h) 200,000 86,400 -- 55,000 9,310(f)
40,000(c)
100,000(d)
Robert D. Strain.............. 1997 210,000 63,400 -- 60,000 13,868(a)
Executive Vice President and
General Manager/Electronics 1996(i) 172,667 100,333 11,336(j) 30,000 11,808(f)
and Sensor Systems Group 20,000(d)
</TABLE>
- ---------------
(a) Includes (i) Company matching and profit-sharing contributions earned under
the Company's 401(k) Plan, and (ii) Company profit-sharing contributions
under its 1995 Deferred Compensation Plan (the "Deferred Compensation
Plan") in the following amounts: Mr. D.W. Thompson, $9,600 and $13,000; Mr.
J.R. Thompson, $9,600 and $7,296; Dr. Griffin, $9,600 and $7,150; Mr.
Pirone, $9,600 and $6,036; and Mr. Strain, $9,600 and $4,268.
(b) Includes $1,420,135 earned under the Performance Share Agreement, adopted in
1996 (the "Performance Share Agreement"), between the Company and Mr. D.W.
Thompson. Pursuant to the agreement, Mr. Thompson earned a bonus in 1997,
payable to his account under the Deferred Compensation Plan, based on the
one-year increase in value of 100,000 shares of Common Stock as determined
in January 1997 and in January 1998. The average closing sales price of the
Common Stock during January 1998 was $32.28 per share, an increase of
$14.20 from the average closing sales price of $18.08 per share during
January 1997.
(c) Shares of common stock of Magellan, subject to options granted under the
Magellan Option Plan.
7
<PAGE> 11
(d) Shares of common stock of ORBIMAGE, subject to options granted under the
1996 Stock Option Plan of ORBIMAGE (the "ORBIMAGE Option Plan").
(e) Includes Company matching and profit-sharing contributions under its 401(k)
Plan of $11,385 and Company profit-sharing contributions under the Deferred
Compensation Plan of $6,060. In addition, includes a $246,000 bonus earned
under the Performance Share Agreement and payable to Mr. Thompson's account
under the Deferred Compensation Plan. The bonus was 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 during January 1997 was $18.08 per share, an increase of $4.92 from
$13.16 per share during January 1996.
(f) Includes Company matching and profit-sharing contributions under the
Company's 401(k) Plan and Company profit-sharing contributions under the
Deferred Compensation Plan.
(g) Reports compensation earned by Dr. Griffin after he joined the Company in
August 1995.
(h) Mr. Pirone was appointed an executive officer of the Company in October
1996.
(i) Mr. Strain was appointed an executive officer of the Company in October
1996.
(j) Represents the amount accrued and vested under a Fairchild Space and
Defense Corporation ("Fairchild") supplemental executive retirement plan
that was terminated after Orbital's acquisition of Fairchild.
8
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
The table below shows information on grants of stock options to the Named
Officers under the 1997 Option Plan, the Magellan Option Plan and the ORBIMAGE
Option Plan during the fiscal year ended December 31, 1997, which options are
reflected in the Summary Compensation Table.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------------------------- ---------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING GRANTED TO EXERCISE PRICE ON
OPTIONS EMPLOYEES IN PRICE DATE OF EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SHARE) GRANT DATE 5% 10%
---- ---------- ------------ --------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
David W. Thompson....... 75,000(a) 4% $16.50 $16.50 2/04/07 $778,257 $1,972,256
30,000(a) 2% 18.25 18.25 7/23/07 344,320 872,574
50,000(b) 3% 1.10 1.10 10/22/07 34,589 87,656
40,000(c) 8% 4.17 4.17 6/09/07 104,900 265,836
James R. Thompson....... 20,000(a) 1% 16.50 16.50 2/04/07 207,535 525,935
10,000(a) 1% 18.25 18.25 7/23/07 114,773 290,858
Michael D. Griffin...... 20,000(a) 1% 16.50 16.50 2/04/07 207,535 525,935
10,000(a) 1% 18.25 18.25 7/23/07 114,773 290,858
50,000(b) 3% 1.10 1.10 10/22/07 34,589 87,656
Jeffrey V. Pirone....... 50,000(a) 3% 16.50 16.50 2/04/07 518,838 1,314,838
30,000(a) 2% 18.25 18.25 7/23/07 344,320 872,574
50,000(b) 3% 1.10 1.10 10/22/07 34,589 87,656
20,000(c) 4% 4.17 4.17 6/09/07 52,450 132,918
Robert D. Strain........ 50,000(a) 3% 16.50 16.50 2/04/07 518,838 1,314,838
10,000(a) 1% 18.25 18.25 7/23/07 114,773 290,858
</TABLE>
- ---------------
(a) Options granted under the 1997 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. Options vest in one-third
increments over a three-year period.
9
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The table below shows information with respect to the exercise of stock
options during fiscal year 1997, as well as the 1997 year-end value of
unexercised stock options granted under (i) the 1997 Option Plan and its
predecessor 1990 Stock Option Plan, (ii) the Orbital Communications Corporation
("OCC") 1992 Stock Option Plan (the "OCC Option Plan"), (iii) the Magellan
Option Plan and (iv) the ORBIMAGE Option Plan. In 1997, none of the Named
Officers exercised any options granted under the OCC Option Plan, the Magellan
Option Plan or the ORBIMAGE Option Plan.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTION SHARES IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 31, 1997 AT DECEMBER 31, 1997
ACQUIRED ON VALUE --------------------------------- ---------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
David W. Thompson.... -- -- 62,662(a) 143,338(a) $ 880,705 $1,934,651
18,000(b) -- 435,000 --
50,000(c) 150,000(c) -- --
100,000(d) 140,000(d) 57,000 57,000
James R. Thompson.... -- -- 91,996(a) 65,004(a) 1,501,796 931,725
9,500(b) -- 178,750 --
10,000(d) 10,000(d) 5,700 5,700
Michael D. Griffin... -- -- 41,662(a) 63,338(a) 564,352 865,398
-- 50,000(c) -- --
37,500(d) 37,500(d) 21,375 21,375
Jeffrey V. Pirone.... -- -- 45,827(a) 116,673(a) 721,428 1,586,122
5,250(b) 250(b) 118,875 3,375
13,334(c) 76,666(c) -- --
50,000(d) 70,000(d) 28,500 28,500
Robert D. Strain..... 3,333 $19,165 14,999(a) 84,168(a) 193,287 1,118,936
10,000(d) 10,000(d) 5,700 5,700
</TABLE>
- ---------------
(a) Options to acquire Common Stock granted under the 1997 Option Plan and 1990
Option Plan.
(b) Options to acquire OCC common stock granted under the OCC Option Plan.
(c) Options to acquire Magellan common stock granted under the Magellan Option
Plan.
(d) Options to acquire ORBIMAGE common stock granted under the ORBIMAGE Option
Plan.
COMPENSATION COMMITTEE REPORT
Overview and Philosophy. The Human Resources and Nominating Committee (the
"Committee") is composed entirely of independent nonemployee directors and is
responsible for evaluating and determining the compensation of the Company's
senior executives. The Committee strives to ensure that compensation serves to
motivate and retain senior executives while also being in the best interests of
the Company and its stockholders. Orbital's philosophy regarding executive
compensation is to attract and retain highly qualified people at industry
competitive salaries, and to link the financial interests of Orbital's senior
management to those of the Company's stockholders by tying compensation to the
achievement of operational and financial objectives, including stock price
goals. To implement these objectives, the Company's compensation structure has
four general components: (i) base salary, (ii) annual cash bonuses and, under
certain circumstances, special cash bonuses, (iii) stock options and (iv) stock
ownership incentives.
Base Salary. 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 salaries are
determined subjectively, intending to reflect the value of the job in the
marketplace and the past and expected future contributions of the individual
senior executive, as well as the Company's overall growth and profitability.
10
<PAGE> 14
Annual Cash Incentive Bonus. Under the Company's incentive bonus plan for
1997, the Chief Executive Officer was eligible to receive a bonus of up to 80
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 based on
individual, product line group and overall Company performance. In January 1997
and July 1997, the Committee reviewed Company and product line group performance
goals recommended by management for purposes of 1997 bonus opportunities.
Financial goals included achievement of milestones with respect to revenues,
backlog, earnings and cash flow, and the performance of the Company's Common
Stock, with greater emphasis placed on earnings and the performance of the
Company's Common Stock. Operational goals included space mission reliability and
timeliness, new orders and contracts, new product initiatives, and the
completion of certain corporate transactions, including acquisitions.
In July 1997 and January 1998, the Chief Executive Officer evaluated the
Company's and the product line groups' performance against the established
goals, and presented his evaluation, together with his reasoning and recommended
bonus percentages, to the Committee. In January 1998, the Committee then
determined, based on the recommendations of the Chief Executive Officer and
other members 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. In addition, the Committee established a
bonus pool for all other eligible employees. The Committee concluded that the
Company achieved overall success in meeting its financial goals and substantial
success in meeting its operational goals, and in recognition of these
achievements, the total bonus percentages awarded to each of the currently
employed Named Officers, other than the Chief Executive Officer (discussed
below), was 90 percent of the target bonus amount, or 45 percent of annual base
salary, as compared to a maximum bonus opportunity of 50 percent.
The Company also has a policy of awarding special cash 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 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. For 1997, the Company awarded special bonuses to two Named
Officers, other than the Chief Executive Officer (discussed below). Mr. Pirone
received special bonuses aggregating $40,000 in recognition of his exceptional
efforts and success in capital market transactions and acquisitions for the
Company. Mr. Strain was awarded a special bonus of $10,000 in recognition of his
continued success in the financial and operational performance of the
electronics and sensor systems business.
Stock Options. The Committee believes that the award of stock options
provides meaningful long-term incentives that are directly related to the
enhancement of stockholder value. Under the 1997 Option Plan, stock options are
granted at an exercise price equal to the fair market value of the Company's
Common Stock on the date of the grant and generally vest over a three-year
period. Therefore, the value of the grant to the recipient is directly related
to an increase in the price of the Company's Common Stock. The Committee
generally approves an annual grant to senior managers, including Named Officers,
in the beginning of each year. In addition, stock option grants are periodically
approved and awarded throughout the year to individuals, including Named
Officers. 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 awards are intended to incentivize employees to work towards
achieving operational and financial goals that management believes will
ultimately be reflected in stockholder value.
In addition to the options granted under the 1997 Option Plan, certain
senior managers, including certain of the Named Officers, were granted options
under the Magellan Option Plan and the ORBIMAGE Option Plan. The Magellan Option
Plan was administered by the Committee; the ORBIMAGE Option Plan was
administered by ORBIMAGE's Board of Directors. These stock options were granted
to incentivize continued efforts by the grantees in assisting each such
company's development and operations.
11
<PAGE> 15
Stock Ownership Incentives. In 1997, as an incentive to senior management
to increase their equity ownership in the Company and thus to further motivate
performance, the Committee approved an executive officer loan program that
authorizes the Company to make loans of up to $50,000 to an executive officer
solely for the purpose of purchasing Common Stock in the open market within a
specified period of time. Each loan is for a term of four years with interest
deferred. The Company has agreed to forgive one-half of the principal amount and
any accrued interest on the third anniversary of the loan and the other one-half
on the fourth anniversary of the loan if the executive officer continues to hold
all the shares of stock acquired with the loan proceeds on the third anniversary
and at least one-half of all such shares on the fourth anniversary. In 1997,
four executive officers, including two Named Officers, Messrs. D. W. Thompson
and J. R. Thompson, participated in the program.
Chief Executive Compensation. Based on the Committee's review of the Chief
Executive Officer's performance, the overall performance of the Company and
compensation levels for comparable positions in the industry, the Committee
authorized a merit increase of $75,000 in Mr. Thompson's annual base salary from
$300,000 in 1996 to $375,000 effective January 1, 1997. In addition, the
Committee increased the Chief Executive Officer's target bonus percentage from
60 percent of base salary for 1996 to 80 percent of base salary for 1997. Based
on the factors discussed above under "Annual Cash Incentive Bonus," the total
bonus percentage awarded the Chief Executive Officer under the Company's bonus
plan in 1997 was 72 percent of his base salary, as compared to an opportunity of
80 percent. In addition, in recognition of Mr. Thompson's exceptional efforts in
securing financing for one of the Company's subsidiaries, he was awarded a
special bonus of $10,000 in May 1997. Based on the Committee's review of Mr.
Thompson's performance and its perceptions as to the level of stock option
compensation granted to executive officers at other companies, the Committee
approved a grant of 75,000 options to Mr. Thompson in February 1997 and an
additional grant of 30,000 options in July 1997. The Committee also approved the
grant of 50,000 options for shares of common stock under the Magellan Option
Plan in October 1997.
In 1996, the Committee adopted the Performance Share Agreement with the
Chief Executive Officer in order to provide him with further incentive to
enhance the financial and operational strength of the Company by directly
linking a significant component of his compensation to the amount of
appreciation in the Company's Common Stock. Under this agreement, Mr. Thompson
was granted 150,000 performance shares of which 100,000 were vested in 1997. In
1997, Mr. Thompson earned a bonus of $1,420,135, which represents the difference
between the fair market value of 100,000 vested performance shares on January
30, 1997 ($18.08 per share) and January 31, 1998 ($32.28 per share), as measured
by the average closing sales price of the Company's Common Stock for the trading
days in January of the relevant year. The bonus vests in two equal annual
installments in 1998 and 1999 and is credited to the Chief Executive Officer's
deferred compensation account. The Committee believes that the sizable
compensation earned by Mr. Thompson under the Performance Share Agreement is
well-deserved in view of the approximately $500 million increase in the
Company's total market capitalization based on stock price growth from January
1997 to January 1998.
The foregoing report has been furnished by the Committee members:
<TABLE>
<S> <C>
Lt. Gen. Kelly H. Burke (Chairman) Mr. Douglas S. Luke
Dr. John L. McLucas Mr. Fred C. Alcorn
</TABLE>
12
<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 31, 1992 and ending on December 31,
1997.
[GRAPH]
COMPARISON OF CUMULATIVE TOTAL RETURNS*
<TABLE>
<CAPTION>
NASDAQ DOW JONES ORBITAL
MEASUREMENT PERIOD US COMPANY AEROSPACE/DEFENSE SCIENCES
(FISCAL YEAR COVERED) INDEX INDEX CORPORATION
<S> <C> <C> <C>
DECEMBER 1992 100.000 100.000 100.000
DECEMBER 1993 114.793 125.886 170.833
DECEMBER 1994 112.209 138.408 160.417
DECEMBER 1995 158.684 236.297 106.250
DECEMBER 1996 195.194 309.973 143.750
DECEMBER 1997 239.632 321.669 247.917
</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 31, 1992 and that all dividends were reinvested.
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.
The Company also maintains insurance to indemnify its directors and
officers against certain liabilities, for which the Company paid approximately
$320,000 in premiums in 1997.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has entered into executive employment agreements with certain
officers, including each of the Named Officers. These agreements become
effective in the event of a "change of control" (as defined in
13
<PAGE> 17
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.
RELATED TRANSACTIONS
Orbital's Board of Directors has adopted a director conflict of interest
policy whereby transactions between Orbital and any of its directors or any
entity in which a director has a material interest are subject to review and
approval by the Company's Audit and Finance Committee. The Company has entered
into an agreement with Hays-Fisk, L.L.C. ("Hays-Fisk"), a limited liability
corporation in which one of the Company's directors, Dr. Fisk, owns a 50 percent
interest, to perform certain work relating to a potential commercial weather
satellite system based on technology developed by Hays-Fisk. The Company paid
$150,000 to Hays-Fisk in 1997, and expects to retain Hays-Fisk for similar
services during 1998. Halprin, Temple, Goodman & Sugrue, a law firm in which the
spouse of one of the Company's directors, Ms. Obuchowski, is a partner, has,
since 1989, provided the Company with legal services in connection with
licensing and regulatory matters involving the Federal Communications Commission
("FCC"). In 1997, the Company and ORBCOMM, a partnership in which the Company
has a 50 percent interest, paid the law firm approximately $126,000 and
$324,000, respectively, in legal fees relating to FCC matters.
In September 1997, the Company entered into a loan agreement with Mr.
Pirone for the principal amount of $150,000 at the then-current market rate of
6.14 percent to assist in financing the purchase of a residence. Mr. Pirone
repaid the entire loan (including interest) in March 1998.
PROPOSAL 2
APPROVAL OF AN INCREASE IN NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE UNDER THE 1997 OPTION PLAN
INTRODUCTION
The Company's stockholders approved its 1997 Option Plan at last year's
Annual Meeting. The 1997 Option Plan provides for the award of stock options and
restricted stock to employees (including officers and directors), consultants
and advisors of the Company and its subsidiaries in order to attract and retain
highly talented persons who are in a position to make significant contributions
to the success of the Company, and to encourage them, through stock ownership,
to increase their proprietary interest in the Company and their personal
interest in its continued success and progress.
There are currently 1,600,000 shares of Common Stock authorized for
issuance under the 1997 Option Plan, of which approximately 136,000 are still
available for option or restricted stock grants.
In January 1998, the Board of Directors adopted an amendment to the 1997
Option Plan to increase the number of shares of Common Stock authorized for
issuance under the Plan from 1,600,000 to 3,200,000, subject to stockholder
approval. The Board of Directors found that the remaining number of shares
available for grant under the 1997 Option Plan was insufficient to adequately
attract and provide an incentive to the highly qualified employees necessary for
the continued development and success of the Company. An increase in the number
of shares also is necessary in view of the growth of the Company's work force
due to several acquisitions during 1997. The Board believes that increasing the
amount of Common Stock to be issued under
14
<PAGE> 18
the 1997 Option Plan would be adequate for the Company's near-term needs, and
therefore recommends that the stockholders approve the amendment to the 1997
Option Plan to effect this increase.
FEATURES OF THE 1997 OPTION PLAN
Discretionary Grants. The Human Resources and Nominating Committee (the
"Committee") has discretion to grant options or restricted stock under the 1997
Option Plan to employees (including officers and directors), consultants and
advisors of the Company and of any "subsidiary" of the Company (within the
meaning of Section 424(f) of the Internal Revenue Code of 1986, as amended), as
designated from time to time by the Committee (approximately 4,000 employees and
ten nonemployee directors as of March 1, 1998). 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. 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 no more than 100,000 per year thereafter.
Formula Grants for Nonemployee Directors. On January 2 of each year, each
nonemployee director automatically receives nonstatutory options to purchase
3,000 shares of Common Stock at the fair market value on the date of grant. Ten
nonemployee directors are currently eligible to receive grants under the 1997
Option Plan.
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 nonemployee
directors under the formula 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 termination. The shares underlying any unexercised
options that expire or terminate will again be available for award under the
1997 Option Plan.
Restricted Stock. Under the provisions 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 of
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 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.
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.
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 Proposal 2. Abstentions will be considered shares present at
the meeting entitled to vote, but since they are not affirmative votes on the
proposal, will have
15
<PAGE> 19
the same effect as votes against the proposal. Broker nonvotes 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 THAT YOU VOTE FOR THE AMENDMENT TO 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 an amendment to the 1997 Option Plan to increase the number of
shares of Common Stock authorized for issuance under such Plan from 1,600,000
shares to 3,200,000 shares.
PROPOSAL 3
RATIFICATION OF THE SELECTION
OF INDEPENDENT AUDITORS
The Board of Directors recommends the ratification by the stockholders of
the appointment by the Board of KPMG Peat Marwick LLP ("KPMG") as the Company's
independent auditors for the fiscal year ending December 31, 1998. 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 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 3.
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 nonvotes 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 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.
16
<PAGE> 20
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 1, 1998 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 executive 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.
<TABLE>
<CAPTION>
NUMBER
NAME AND ADDRESS OF SHARES PERCENT
---------------- --------- -------
<S> <C> <C>
FMR Corp.................................................... 2,344,854 7.2%
82 Devonshire Street
Boston, MA 02109(a)
LGT Asset Management, Inc................................... 1,785,500 5.5%
50 California Street, 27th Floor
San Francisco, CA 94111(a)
Fred C. Alcorn(b)........................................... 66,435 *
Kelly H. Burke(b)........................................... 39,230 *
Bruce W. Ferguson(b)(c)..................................... 117,741 *
Daniel J. Fink(b)(d)........................................ 29,490 *
Lennard A. Fisk(b).......................................... 12,546 *
Michael D. Griffin.......................................... -- --
Jack L. Kerrebrock(b)....................................... 31,990 *
Douglas S. Luke(b).......................................... 27,730 *
John L. McLucas(b).......................................... 30,990 *
Janice I. Obuchowski(b)..................................... 4,490 *
Jeffrey V. Pirone(b)(d)..................................... 79,612 *
Frank L. Salizzoni(b)....................................... 6,130 *
Harrison H. Schmitt(b)(d)................................... 14,340 *
Robert D. Strain(b)......................................... 29,168 *
David W. Thompson(b)(c)..................................... 163,455 *
James R. Thompson(b)(c)..................................... 105,810 *
Scott L. Webster(b)......................................... 162,400 *
Officers and Directors as a Group
(22 persons)(b)........................................... 1,195,462 3.5%
</TABLE>
- ---------------
* Represents less than one percent of the outstanding shares of stock.
(a) The beneficial ownership of each of FMR Corp. and LGT Asset Management,
Inc. is as of December 31, 1997, not March 1, 1998, and is based on a
Schedule 13G filed by each of them with the Securities and Exchange
Commission (the "SEC").
(b) Includes shares issuable upon exercise of currently vested stock options or
options that will vest within sixty days of March 1, 1998, in the following
amounts: Fred C. Alcorn, 20,000 shares; Kelly H. Burke, 20,000 shares; Bruce
W. Ferguson, 65,997 shares; Daniel J. Fink, 20,000 shares; Lennard A. Fisk,
10,000 shares; Jack L. Kerrebrock, 20,000 shares; Douglas S. Luke, 20,000
shares; John L. McLucas, 24,000 shares; Janice I. Obuchowski, 3,000 shares;
Jeffrey V. Pirone, 79,162 shares; Frank L. Salizzoni, 3,000 shares; Harrison
H. Schmitt, 11,000 shares; Robert D. Strain, 23,335 shares; David W.
Thompson, 110,996 shares; James R. Thompson, 98,750 shares; Scott L.
Webster, 33,000 shares; and all officers and directors as a group, 802,853
shares.
(c) Excludes 12,580 shares of Common Stock owned by Mr. Ferguson's wife, 23,000
shares of Common Stock owned by Mr. D.W. Thompson's wife, and 1,385 shares
of Common Stock owned by Mr. J.R. Thompson's wife. Messrs. Ferguson, D.W.
Thompson and J.R. Thompson disclaim beneficial ownership of such shares.
(d) Includes 500 shares of Common Stock with respect to which Mr. Fink shares
voting and investment power with his wife, 1,850 shares of Common Stock with
respect to which Dr. Schmitt shares voting and investment power with his
wife, and 200 shares of Common Stock with respect to which Mr. Pirone
exercises voting and investment power on behalf of his dependent children.
17
<PAGE> 21
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities 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 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 year 1997.
Dr. Lennard A. Fisk's purchase of 564 shares of Common Stock in July 1997
was reported late on his amended Form 4 for the month of July 1997, filed on
August 28, 1997.
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 1999
annual meeting of stockholders must be received by the Company on or before
November 30, 1998 at its principal office, 21700 Atlantic Boulevard, Dulles,
Virginia 20166, Attention: Corporate Secretary.
OTHER MATTERS
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 matter properly comes 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.
18
<PAGE> 22
ORBITAL SCIENCES CORPORATION
Proxy for Annual Meeting of Stockholders -- April 23, 1998
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 23, 1998 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 AND 3.
1. To elect five Directors, each to serve for a three-year term ending in
2001.
Nominees: Fred C. Alcorn, Lennard A. Fisk, Jack L. Kerrebrock, David W.
Thompson, James R. Thompson
[ ] 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 the Company's 1997 Stock Option
and Incentive Plan increasing the number of shares of Common Stock
authorized for issuance from 1,600,000 to 3,200,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
...............................................................................
<PAGE> 23
3. Ratify the selection of KPMG Peat Marwick LLP as the Company's
independent accountants for the fiscal year ending December 31, 1998.
[ ] 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:_________________________, 1998
___________________________________ For Inspector of
Signature Elections' Use Only
___________________________________ ____________________
Name (please print) Number of Shares
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.
