Annual Reports

  • 10-K (Feb 25, 2014)
  • 10-K (Feb 22, 2013)
  • 10-K (Feb 28, 2011)
  • 10-K (Feb 26, 2010)
  • 10-K (Mar 2, 2009)
  • 10-K (Feb 22, 2008)

 
Quarterly Reports

 
8-K

 
Other

Orbital Sciences DEF 14A 2009
def14a
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o       Preliminary Proxy Statement
o       Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ       Definitive Proxy Statement
o       Definitive Additional Materials
o       Soliciting Material under §240.14a-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):
  þ   No fee required.
  o   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:
 
  o   Fee paid previously with preliminary materials.
 
  o   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:
 


 

         
(27 YEARS LOGO)      
(ORBITAL LOGO)
 
 
March 11, 2009
 
 
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 30, 2009, at 9:00 a.m., at our headquarters located at 21839 Atlantic Boulevard, Dulles, Virginia 20166.
 
Your vote is important. Whether or not you plan to attend, and regardless of the number of shares you own, I urge you to vote in accordance with the instructions provided with this proxy statement. Even if you return a proxy card or vote via the Internet or by telephone, you may still attend the meeting and vote in person.
 
I hope that you will be able to attend the meeting. Orbital’s officers and directors look forward to seeing you at that time.
 
Sincerely,
 
-s- DAVID W. THOMPSON
David W. Thompson
Chairman of the Board and
Chief Executive Officer
 
 
         
         
Motto

      (NYSE LOGO)


 

ORBITAL SCIENCES CORPORATION

21839 Atlantic Boulevard
Dulles, Virginia 20166
(703) 406-5000
www.orbital.com
 
 
 
 
The annual meeting of stockholders of Orbital Sciences Corporation (“Orbital” or the “company”) will be held at our headquarters located at 21839 Atlantic Boulevard, Dulles, Virginia 20166, on Thursday, April 30, 2009, at 9:00 a.m.
 
Stockholders, as of the close of business on March 3, 2009, are entitled to vote at the annual meeting. The following items are on the agenda:
 
  1.  To elect five directors for three-year terms ending in 2012.
 
  2.  To ratify the appointment of PricewaterhouseCoopers LLP as the company’s independent registered public accounting firm for the fiscal year ending December 31, 2009.
 
  3.  To transact such other business as may properly come before the annual meeting or any adjournments thereof.
 
As permitted by rules adopted by the U.S. Securities and Exchange Commission, we have made our proxy materials available to our stockholders on the Internet, rather than mailing printed copies of these materials to each stockholder. On or about March 18, 2009, we will mail to our stockholders a Notice of Internet Availability of Proxy Materials that contains instructions on how to access our proxy materials online or request a printed or e-mail copy of these materials. We believe this method of distribution will allow us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our annual meeting.
 
Whether or not you plan to attend the annual meeting, please promptly vote your shares over the Internet or via the toll-free telephone number, as described in the enclosed materials. If you received a copy of the proxy card by mail, you may sign, date and mail the proxy card in the envelope provided. If you are present at the annual meeting and desire to vote in person, your vote by proxy will not be used.
 
By Order of the Board of Directors,
-s- SUSAN HERLICK
Susan Herlick
Senior Vice President, General Counsel
and Corporate Secretary
 
March 11, 2009


 

 
         
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ORBITAL SCIENCES CORPORATION
 
 
PROXY STATEMENT
FOR THE 2009 ANNUAL MEETING OF STOCKHOLDERS
 
 
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
 
 
The Board of Directors is soliciting your proxy to vote at our annual meeting of stockholders because you own shares of our common stock. This proxy statement contains information about the matters to be voted on at the annual meeting and the voting process, as well as information about our directors and executive officers and other information about Orbital. The annual meeting will be held at our headquarters located at 21839 Atlantic Boulevard, Dulles, Virginia 20166, on Thursday, April 30, 2009, at 9:00 a.m.
 
 
As permitted by the U.S. Securities and Exchange Commission (the “SEC”) rules, we have made this proxy statement and our Annual Report on Form 10-K available to our stockholders on the Internet, rather than mailing printed copies of these materials to each stockholder. If you received a Notice of Internet Availability of Proxy Materials (the “Notice”) by mail, you will not receive a printed copy of our proxy materials unless you request one. The Notice contains instructions for accessing and reviewing our proxy materials on the Internet. If you received the Notice by mail and would like to receive a printed or e-mail copy of our proxy materials, please follow the instructions included in the Notice.
 
 
Holders of our common stock at the close of business on March 3, 2009, the record date for the annual meeting, are entitled to vote at the annual meeting. Each share of our common stock is entitled to one vote on each matter to be voted on. On March 3, 2009, there were 57,064,463 shares of common stock issued and outstanding and entitled to vote.
 
 
You are voting on two items of business at the annual meeting — (1) the election of five directors to serve until the 2012 annual meeting and until their respective successors are elected and qualified or until the director’s death, removal or resignation and (2) the ratification of the appointment of PricewaterhouseCoopers LLP as the company’s independent registered public accounting firm for the fiscal year ending December 31, 2009. For more information, turn to “Proposal 1 — Election of Directors” on page 3 and “Proposal 2 — Ratification of the Appointment of Independent Registered Public Accounting Firm” on page 33.
 
 
If you are a holder of our common stock as of the record date, there are four ways to vote:
 
  •  by Internet at www.proxyvote.com, by following the instructions on the Notice or proxy card;
 
  •  by telephone, by following the instructions on the proxy card;
 
  •  if you received our proxy materials by mail, by completing and mailing your proxy card; or
 
  •  by written ballot at the annual meeting.
 
Votes by Internet or telephone must be received by 11:59 p.m. Eastern Time on Wednesday, April 29, 2009. If you do not indicate your voting preference, the appointed proxies will vote your shares FOR each of the nominees to our Board of Directors and FOR ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2009.
 
If your shares are held in a brokerage account or in your broker’s name (i.e., in “street name”), you should follow the voting directions provided by your broker or nominee. You may complete and mail a voting instruction


 

card to your broker or nominee or, in most cases, submit voting instructions by the Internet or by telephone to your broker or nominee. If you provide specific instructions, your broker or nominee should vote your shares as directed. If, however, your brokerage firm has not received your instructions in a timely manner, the firm may vote your shares on any matter which the rules of the New York Stock Exchange (the “NYSE”) determine to be “routine.” The matters on the agenda for the 2009 annual meeting are routine according to the NYSE rules. For your general information, if the brokerage firm cannot vote on a particular matter because it is not routine, there is a “broker non-vote” on that matter. The effect that a broker non-vote has on each matter to be considered at the annual meeting is discussed below.
 
We will pass out written ballots to anyone who wants to vote in person at the annual meeting. If you hold your shares in street name through a brokerage account, you will need a legal proxy from your broker in order to vote in person at the annual meeting.
 
 
You may revoke your proxy and change your vote at any time before it is voted at the annual meeting by (1) sending a written notice of revocation to our Corporate Secretary at the company’s address set forth in this proxy statement; (2) submitting a new written proxy, bearing a date later than the date of the proxy being revoked; (3) voting again on the Internet or by telephone prior to 11:59 p.m. Eastern Time on Wednesday, April 29, 2009; or (4) attending the annual meeting and voting in person. Attendance at the annual meeting will not, in itself, constitute revocation of a previously granted proxy.
 
If you hold your shares in street name, then you may submit new voting instructions by contacting your broker or nominee. You may also vote in person at the annual meeting if you obtain a legal proxy as described above.
 
 
As of the record date, 57,064,463 shares of our common stock were issued and outstanding and entitled to vote at the annual meeting. A majority of the outstanding shares entitled to vote at the annual meeting, represented in person or by proxy, constitute a quorum. Shares that are represented by a proxy that directs that the shares abstain from voting or that a vote be withheld are still deemed to be represented at the annual meeting for purposes of constituting a quorum. Similarly, broker non-votes will be treated as shares present for purposes of determining a quorum at the annual meeting.
 
 
We will announce preliminary voting results at the annual meeting. We will publish the final results in our Quarterly Report on Form 10-Q for the second quarter of 2009, to be filed with the SEC. A copy of our Form 10-Q will be available on our website (www.orbital.com) and on the SEC’s website (www.sec.gov). You may also receive a copy by contacting our Investor Relations Department, either by mail at our corporate headquarters, by e-mail at investor.relations@orbital.com, by telephone at (703) 406-5543 or by calling the SEC at 1-800-SEC-0330 for the location of the nearest SEC public reference room.
 
 
We will pay the costs of this proxy solicitation, including the reasonable expenses of brokerage firms and other custodians or nominees for forwarding proxy materials to beneficial owners. Our directors, officers and employees may solicit proxies without additional compensation.
 
 
As of the date of this proxy statement, our management knows of no other matters that will be presented for consideration at the annual meeting other than that discussed in this proxy statement. If any other matters properly come before the annual meeting and call for a stockholder vote, valid proxies will be voted by the holders of the proxies in accordance with the recommendation of the Board of Directors or, if no recommendation is given, in their own discretion.


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Five directors are to be elected at the 2009 annual meeting for three-year terms expiring at the 2012 annual meeting of stockholders and until their respective successors are elected and qualified or until the director’s death, removal or resignation. Eight other directors have been previously elected to terms that end in either 2010 or 2011, as indicated below.
 
If any nominees for director should become unavailable, the Board of Directors, upon the recommendation of our Corporate Governance and Nominating Committee, 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 annual 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. For purposes of the election of directors, abstentions, broker non-votes and other shares not voted will have no effect on the outcome of the election other than for purposes of determining a quorum. Stockholders are not allowed to cumulate their votes for the election of directors.
 
The Board of Directors recommends that you vote FOR the election of each of the nominees listed below. 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, 2009 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 2009 Annual Meeting
 
Director since 2002
 
From 1990 until his retirement at the end of 2003, Mr. Hanisee held a series of positions with Trust Company of the West, an investment management services company. He served as Managing Director and Chief Investment Officer for Asset Allocation in the Private Client Services Group from 1998 to 2003, managed the Convertible Securities Group from 1992 to 1998, and was Portfolio Manager for the Global Telecom Trust from September 1996 to October 1998. Mr. Hanisee was a founding partner of Amdec Securities, and later was President of Seidler Amdec Securities. He is a member of the National Aeronautics and Space Administration (“NASA”) Advisory Council.
 
Director since 2005
 
Dr. Roche served as the Secretary of the U.S. Air Force from 2001 to 2005. From 1984 to 2001, Dr. Roche held several executive positions with Northrop Grumman Corporation, a global defense company, including Corporate Vice President and President of its Electronic Sensors and Systems Sector. From 1983 to 1984, Dr. Roche was Democratic Staff Director of the U.S. Senate Committee on Armed Services. Dr. Roche served in the U.S. Navy for 23 years and retired with the rank of captain in 1983. As a naval officer, his assignments included Principal Deputy Director of the U.S. State Department’s Policy Planning Staff and Senior Professional Staff Member of the U.S. Senate Select Committee on Intelligence. He commanded the USS Buchanan, a guided missile destroyer, and was awarded the Arleigh Burke Fleet Trophy in 1974 for the most improved combat unit in the Pacific Theater. Dr. Roche is a director of TechTeam Global, Inc.


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Director since 1983
 
Dr. Schmitt has served in various capacities as a business and technical consultant since 1982. From 1977 through 1982, Dr. Schmitt was a U.S. 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 Assistant Administrator for Energy Programs for NASA. From 1965 to 1973, he was a NASA astronaut. As Lunar Module Pilot on Apollo 17 in 1972, he explored the Moon’s surface. Dr. Schmitt chaired the NASA Advisory Council from 2005 to 2008.
 
Director since 1992
 
Mr. J.R. Thompson, who is not related to David W. Thompson, has been Vice Chairman, President and Chief Operating Officer of Orbital since April 2002, and was President and Chief Operating Officer since October 1999. From 1993 until October 1999, Mr. J.R. Thompson served as Executive Vice President and General Manager of Orbital’s Launch Systems Group. Mr. J.R. 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. J.R. Thompson was Director of the Marshall Space Flight Center at NASA. Mr. J.R. 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.
 
Director since 1982
 
Mr. Webster is a co-founder of Orbital. Mr. Webster served as Senior Vice President, Special Projects of Orbital from May 2001 until his retirement in July 2002. From 1998 until April 2001, Mr. Webster was Chairman of the Board and Chief Executive Officer of ORBCOMM Global, L.P., a satellite services company formerly affiliated with Orbital. From 1993 to 1997, Mr. Webster served in various consulting capacities with Orbital. 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 was Orbital’s Senior Vice President of 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.
 
Directors Whose Terms Expire in 2010
 
Director since 2003
 
Dr. Crawley has been a professor of Aeronautics and Astronautics at the Massachusetts Institute of Technology (“MIT”) since 1980, and served as head of MIT’s Aeronautics and Astronautics Department from 1996 until 2003. He also currently serves as a director of the Bernard M. Gordon-MIT Engineering Leadership Program. From 2003 to 2006, he served as Executive Director of the Cambridge University-MIT Institute. In 1993, he was a member of the Presidential Advisory Committee on the Space Station Redesign. He is also a Fellow of the American Institute of Aeronautics and Astronautics, the Royal Aeronautical Society, the Royal Swedish Academy of Engineering Science, and the Royal Academy of Engineering (U.K.), and is a member of the U.S. National Academy of Engineering.
 
Director since 1993
 
Dr. Fisk has been a professor of Space Sciences at the University of Michigan since 1993, and also served as Chairman of the Department of Atmospheric, Oceanic and Space Sciences from 1993 to 2003. From 1987 until 1993, he was Associate Administrator for Space Sciences 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. He is a Fellow of the American Geophysical Union and a member of the U.S. National Academy of Sciences, where he served as Chairman of its Space Studies Board from 2003 to 2008.


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Director since 2005
 
General Kadish has been Vice President and Partner of Booz Allen Hamilton, Inc., a global strategy and technology consulting firm, since February 2005. In September 2004, General Kadish retired as Lieutenant General from the U.S. Air Force after serving for 34 years. From 1999 until his retirement, General Kadish served as Director of the U.S. Missile Defense Agency (formerly Ballistic Missile Defense Organization). From August 1996 to June 1999, General Kadish served as the Commander of the Electronic Systems Center at Hanscom Air Force Base. Prior to that time, General Kadish served in numerous assignments with the Air Force, including Program Director for several military aircraft platforms. During his career with the Air Force, General Kadish received a number of awards and decorations, including the Defense Distinguished Service Medal with oak leaf cluster, the Distinguished Service Medal, and the Legion of Merit. General Kadish is a director of Spirit AeroSystems Holdings, Inc.
 
Director since 2000
 
Mr. Pierce has been Vice Chairman and Chief Financial Officer of Orbital since April 2002, and was Executive Vice President and Chief Financial Officer since August 2000. From 1996 until August 2000, he was Executive Vice President and Chief Financial Officer of Sensormatic Electronics Corp., a supplier of electronic security systems, where he was also named Chief Administrative Officer in July 1998. Prior to joining Sensormatic, Mr. Pierce was the Executive Vice President and Chief Financial Officer of California Microwave, Inc., a supplier of microwave, radio frequency, and satellite systems and products for communications and wireless networks. From 1980 to 1993, Mr. Pierce was employed by Materials Research Corporation, a provider of thin film equipment and high purity materials to the semiconductor, telecommunications and media storage industries, where he progressed from Chief Financial Officer to President and Chief Executive Officer. Materials Research Corporation was acquired by Sony Corporation as a wholly-owned subsidiary in 1989. From 1972 to 1980, Mr. Pierce held various management positions with The Signal Companies. Mr. Pierce is a director of Kulicke and Soffa Industries, Inc.
 
Directors Whose Terms Expire in 2011
 
Director since 2002
 
Dr. Hermann has been a Senior Partner of Global Technology Partners, an aerospace, defense, and technology investment firm, since 1998. From 1982 to 1998, Dr. Hermann held a variety of positions at United Technologies Corporation, including the position of Senior Vice President, Science and Technology from 1987 to 1998. Prior to that time, Dr. Hermann served as Director of the National Reconnaissance Office, Assistant Secretary of the Air Force for Research and Development and Logistics, and Principal Deputy Assistant Secretary of Defense for Communications, Command, Control and Intelligence. He also spent 20 years with the National Security Agency. He is Chairman of the Technical Advisory Group for the National Reconnaissance Office, a member of the Defense Science Board, and recently a member of the Commission to Assess the Threat to the United States from Electromagnetic Pulse Attack. He was Chairman of the Charles Stark Draper Laboratory from 1995 to 2001 and was a member of the President’s Foreign Intelligence Advisory Board from 1993 to 2001. He received a Certificate of Director Education from the National Association of Corporate Directors Institute in 2007. Dr. Hermann is a member of the U.S. National Academy of Engineering.
 
Director since 1996
 
Ms. Obuchowski has been President of Freedom Technologies, Incorporated, a telecommunications research and consulting firm, since 1992. In 2003, Ms. Obuchowski also served as Ambassador and U.S. Representative to the World Radiocommunication Conference 2003. From 1989 to 1992, she served as Assistant Secretary for Communications and Information at 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


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positions at the U.S. Federal Communications Commission, including Senior Adviser to the Chairman. Ms. Obuchowski is a director of CSG Systems International, Inc.
 
Director since 1996
 
Mr. Salizzoni was President and Chief Executive Officer of H&R Block, Inc. from 1996 until 2000, and served as Chairman of the Board until his retirement in 2002. 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, a food services company. From 1967 to 1987, Mr. Salizzoni held several senior financial management positions with Trans World Airlines and its parent company, Transworld Corporation. He received a Certificate of Director Education from the National Association of Corporate Directors Institute in 2008.
 
Director since 1982
 
Mr. Thompson is a co-founder of Orbital and has been Chairman of the Board and Chief Executive Officer of Orbital since 1982. From 1982 until October 1999, he also served as President. 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 is a Fellow of the American Institute of Aeronautics and Astronautics, the American Astronautical Society and the Royal Aeronautical Society, and is a member of the U.S. National Academy of Engineering.
 
CORPORATE GOVERNANCE
 
 
The Board of Directors has adopted Corporate Governance Guidelines to assist the Board of Directors in exercising its responsibilities and in furtherance of its continuing efforts to enhance its corporate governance. The Corporate Governance Guidelines reflect the Board of Directors’ commitment to monitoring the effectiveness of policy and decision-making at the Board and management level and ensuring adherence to good corporate governance principles, with the goal of enhancing stockholder value over the long term.
 
A copy of the Corporate Governance Guidelines is posted on the “Investor Relations/Corporate Governance” page of our website at www.orbital.com and printed copies are available free of charge by request to our Investor Relations Department either by mail at our corporate headquarters, by telephone at (703) 406-5543 or by e-mail at investor.relations@orbital.com.
 
 
The Board of Directors has adopted a Code of Business Conduct and Ethics that applies to our directors, officers, employees and independent contractors. In compliance with the applicable rules of the SEC, special ethics obligations of our Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and Controller and other employees who perform financial or accounting functions are set forth in the section of the Code of Business Conduct and Ethics entitled “Special Ethics Obligations of Employees with Financial Reporting Obligations.” We intend to satisfy the disclosure requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), regarding an amendment to, or a waiver from, our Code of Business Conduct and Ethics by posting such information on our website at www.orbital.com. There have not been any waivers of the Code of Business Conduct and Ethics relating to any of our directors or officers.
 
A copy of the Code of Business Conduct and Ethics is posted on the “Investor Relations/Corporate Governance” page of our website at www.orbital.com and printed copies are available free of charge by request to our Investor Relations Department either by mail at our corporate headquarters, by telephone at (703) 406-5543 or by e-mail at investor.relations@orbital.com.


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INFORMATION CONCERNING THE BOARD OF DIRECTORS
AND ITS COMMITTEES
 
 
The NYSE rules require that a majority of our Board of Directors shall be independent, and define independence based on criteria relating to the current or historical relationship between Orbital and each individual director. In accordance with the NYSE rules, the Corporate Governance Guidelines provide that no director will qualify as “independent” unless the Board affirmatively determines that the director (1) has no material relationship with Orbital (either directly or indirectly, such as a partner, stockholder or officer of an organization that has a relationship with Orbital) and (2) otherwise meets the criteria for independence required by the NYSE. In making its independence determination, the Board considered all relevant facts and circumstances and applied the following standards:
 
The director will not be considered “independent” if:
 
  •  Employment:  The director is, or has been within the last three years, an employee of Orbital, or an immediate family member is, or has been within the last three years, an executive officer of Orbital.
 
  •  Other Compensation:  The director or an immediate family member has received, during any 12-month period within the last three years, more than $120,000 in direct compensation from Orbital, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).
 
  •  Auditor Affiliation:  (1) The director is a current partner or employee of a firm that is Orbital’s internal or external auditor; (2) the director has an immediate family member who is a current partner of such a firm; (3) the director has an immediate family member who is a current employee of such a firm and who personally works on Orbital’s audit; or (4) the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on Orbital’s audit within that time.
 
  •  Interlocking Directorships:  The director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of Orbital’s present executive officers at the same time serves or served on that company’s compensation committee.
 
  •  Business Transactions:  The director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to or received payments from Orbital for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or two percent of such other company’s consolidated gross revenues.
 
  •  Charitable Contributions:  The director is currently or has been within the last three years an executive officer of any tax exempt organization to which contributions made by Orbital exceeded, in any single fiscal year, the greater of $1,000,000 or two percent of such tax exempt organization’s consolidated gross revenues.
 
  •  Indebtedness:  Since January 1, 2008, the director is at any time a director, executive officer or partner of any company or organization which is indebted to Orbital, or to which Orbital is indebted, where the total amount of indebtedness exceeds five percent of the total consolidated assets of such company or organization on December 31, 2008.
 
The Board of Directors has affirmatively determined that Ms. Obuchowski and Messrs. Crawley, Fisk, Hanisee, Hermann, Kadish, Roche, Salizzoni, Schmitt and Webster are “independent” and that none of these directors has a material relationship with us. Our Board’s determination was based on the fact that none of these individuals, their immediate family members or any organizations with which these individuals or any of their immediate family members has been affiliated with us during at least the last five years, has had any formal or informal relationship with us whereby the individual or any of their immediate family members or the affiliated organization has been entitled to or received directly or indirectly any form of economic benefit from us (other than their individual compensation as a director), or otherwise has a relationship with us described in any of the categories listed above.


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Our Corporate Governance Guidelines provide that directors are generally ineligible to stand for election if they will have attained age 76 by July 1 of the year in which such election will be held.
 
 
We have a lead independent director (the “Lead Independent Director”) who is nominated by the Corporate Governance and Nominating Committee and approved by the non-management members of the Board of Directors for a two-year term. In January 2009, Robert J. Hermann was reappointed as the Lead Independent Director for a two-year term.
 
Consistent with the NYSE rules, our non-management directors, who are also independent directors, meet in regularly scheduled executive sessions, at least once a year, without management. The Lead Independent Director presides over all executive sessions of non-management directors or independent directors.
 
 
Stockholders or other interested parties may communicate directly with the Lead Independent Director, the full Board, the non-management directors as a group or the independent directors as a group, by writing to “Lead Independent Director, Orbital Sciences Corporation, 21839 Atlantic Boulevard, Dulles, Virginia 20166, Attn: General Counsel.” The Lead Independent Director will review all communications and report on all of them to the full Board, the non-management directors or the independent directors, as applicable. Complaints or concerns regarding our accounting, internal accounting controls or auditing matters will be referred directly to the Audit and Finance Committee and will be reviewed in the ordinary course by the committee or its designee.
 
 
Our Board of Directors has adopted a written Policy and Procedures for Related Person Transactions (the “Related Person Transactions Policy”) in order to facilitate the proper review and full disclosure of all related person transactions in accordance with SEC and NYSE rules.
 
The Related Person Transactions Policy covers any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which (1) the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, (2) the company is a participant and (3) any “related person,” as such term is defined by the regulations promulgated under the Exchange Act, has or will have a direct or indirect interest (a “Related Person Transaction”).
 
Under the Related Person Transactions Policy, all material information regarding a Related Person Transaction must be presented by management to the Corporate Governance and Nominating Committee for its review. All Related Person Transactions are also required to be disclosed to the full Board. The Corporate Governance and Nominating Committee, in its discretion, either approves, ratifies or disapproves the transaction or refers the transaction to the full Board or other appropriate Board committee consisting of independent directors. Waivers or exceptions to the Related Person Transactions Policy may only be granted by the Corporate Governance and Nominating Committee or the full Board. During 2008, we did not engage in any Related Person Transaction nor was any prospective Related Person Transaction required to be presented to the Corporate Governance and Nominating Committee for its review.
 
Nothing in the Related Person Transactions Policy prohibits the approval or ratification of any transaction that is approved in accordance with the provisions of the Delaware General Corporation Law.


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Our Board has four standing committees: the Audit and Finance Committee; the Corporate Governance and Nominating Committee; the Human Resources and Compensation Committee; and the Markets and Technology Committee. Each committee operates pursuant to a written charter, copies of which are posted on the “Investor Relations/Corporate Governance” page of our website at www.orbital.com. Printed copies are available free of charge by request to our Investor Relations Department either by mail at our corporate headquarters, by telephone at (703) 406-5543 or by e-mail at investor.relations@orbital.com.
 
Board membership on the committees is as follows:
 
             
    Corporate Governance and
  Human Resources and
   
Audit and Finance   Nominating   Compensation   Markets and Technology
 
 
Edward F. Crawley
  Robert M. Hanisee   Edward F. Crawley   Edward F. Crawley
Lennard A. Fisk
  Robert J. Hermann*   Robert J. Hermann   Lennard A. Fisk
Robert M. Hanisee*
  Janice I. Obuchowski   Ronald T. Kadish   Robert J. Hermann
Frank L. Salizzoni
  James G. Roche   Janice I. Obuchowski*   Ronald T. Kadish
Harrison H. Schmitt
  Frank L. Salizzoni   Scott L. Webster   Janice I. Obuchowski
            James G. Roche
            Harrison H. Schmitt*
            Scott L. Webster
 
 
* Chairperson
 
 
Our Audit and Finance Committee (the “Audit Committee”) held nine meetings during 2008. In accordance with the applicable NYSE and SEC rules, all of its members are independent. The Board has determined that Messrs. Hanisee and Salizzoni are each an “audit committee financial expert,” as such term is defined by the regulations promulgated under the Exchange Act, and that they have the accounting and related financial expertise required by the listing standards of the NYSE. In accordance with the terms of the Audit Committee’s charter, none of the members of the Audit Committee serves on the audit committees of more than three public companies, including our company.
 
The Audit Committee’s responsibilities and duties are detailed in its charter, and include:
 
  •  Appointing and overseeing our independent auditors, and consulting with them with regard to the plan of audit, financial results, significant accounting policies and issues and the adequacy of internal accounting controls;
 
  •  Reviewing our financial reports and related matters, including significant financial reporting issues and judgments;
 
  •  Reviewing and monitoring the integrity of financial reporting processes and internal control systems;
 
  •  Reviewing the appointment and replacement of our internal auditor and overseeing the performance of the internal audit department; and
 
  •  Monitoring compliance with legal and regulatory requirements related to our financial and accounting functions.
 
 
Our Corporate Governance and Nominating Committee (the “Governance Committee”) held two meetings during 2008. In accordance with the applicable NYSE rules, all of its members are independent.
 
The Governance Committee’s responsibilities and duties are detailed in its charter, and include:
 
  •  Identifying and considering director nominees for election to the Board;
 
  •  Recommending directors to serve on and chair committees of the Board;


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  •  Developing and reviewing our Corporate Governance Guidelines and the committee charters;
 
  •  Developing a plan for Chief Executive Officer succession;
 
  •  Reviewing director compensation and benefits;
 
  •  Reviewing matters related to potential conflicts of interest involving the company and directors, management and certain large stockholders; and
 
  •  Overseeing the annual self-evaluation of the Board and its committees.
 
The Governance Committee will seek to identify director nominees based on input provided by a number of sources, including (1) Governance Committee members, (2) other directors of the company and (3) our stockholders. The Governance Committee also has the authority to consult with or retain advisers or search firms to assist in the identification of qualified director nominees. The Governance Committee does not currently, and did not during 2008, employ a search firm or pay a fee to any other third party to locate any director nominees.
 
Once a director nominee has been identified, the Governance Committee will then evaluate such nominee in light of his or her qualifications and credentials and any additional factors that it deems necessary or appropriate. At a minimum, director nominees must possess such competencies, expertise and knowledge to enable the Board as a whole to possess the expertise necessary to perform its responsibilities in an efficient and effective manner. In evaluating the suitability of individual director nominees, the Governance Committee takes into account various factors, including professional experience, understanding of our business environment and the industry sector(s) in which we compete, educational background, integrity, ability to make analytical inquiries and willingness to devote adequate time to diligently perform Board duties.
 
It is the Governance Committee’s policy to consider any suggestions for director nominees received from a stockholder. We have established the following procedures for stockholders to submit director nominees for consideration at our annual meeting. The proposal must be delivered to us and contain the information required to be included in accordance with the requirements set forth in Section 1.6 of our Amended and Restated Bylaws and any applicable rules or regulations. The proposal should be addressed to “General Counsel and Corporate Secretary, Orbital Sciences Corporation, 21839 Atlantic Boulevard, Dulles, Virginia 20166.” The Governance Committee will evaluate director nominees submitted by stockholders in the same manner it evaluates nominees recommended by other sources, as set forth above.
 
 
Our Human Resources and Compensation Committee (the “Compensation Committee”) held five meetings and acted by unanimous written consent on one other occasion during 2008. In accordance with the applicable NYSE rules, all of its members are independent.
 
The Compensation Committee’s responsibilities and duties are detailed in its charter, and include:
 
  •  Evaluating the Chief Executive Officer’s performance and determining his compensation;
 
  •  Reviewing and making recommendations to the Board with respect to compensation of our other executive officers;
 
  •  Assisting in the preparation of the Compensation Discussion and Analysis to be included in our proxy statement;
 
  •  Assessing our processes and procedures for determining all components of executive compensation;
 
  •  Approving employment agreements containing change in control provisions and any non-standard severance arrangements with executive officers;
 
  •  Administering and reviewing our incentive and equity-based compensation plans and overseeing awards made under such plans; and
 
  •  Monitoring corporate human resources matters, including issues relating to employee benefits and workforce recruitment and retention.


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The Compensation Committee oversees the compensation paid to all of our executive officers based upon recommendations from David W. Thompson, our Chairman and Chief Executive Officer, and in consultation with the full Board. The Compensation Committee has not engaged compensation consultants to provide advice with respect to the amount or form of executive compensation. For more information regarding the Compensation Committee’s compensation objectives and procedures, as well as the role of executive officers in determining executive compensation, see the discussion in “Executive Compensation — Compensation Discussion and Analysis” starting on page 13.
 
The Compensation Committee is permitted to delegate its authority under its charter to subcommittees as it may deem appropriate and in the best interest of the company, provided that such subcommittees are composed entirely of independent directors and have published committee charters. During 2008, the Compensation Committee did not delegate any of its duties.
 
 
Our Markets and Technology Committee held four meetings during 2008. The Markets and Technology Committee’s responsibilities and duties are detailed in its charter, and include:
 
  •  Assessing existing and potential major technology trends and product development programs;
 
  •  Monitoring and evaluating existing and new markets for our products and services; and
 
  •  Reviewing and assessing the development of new technologies and products, including research and development activities and the associated technical and market risks.
 
 
During 2008, the Board held eight meetings and acted two times by unanimous written consent. Each incumbent director attended at least 75% of all meetings of the Board and committees of which he or she was a member, except that Dr. Crawley attended 67% of the Audit Committee meetings during 2008.
 
It is the Board’s policy that all directors should attend our annual meeting. All of our directors attended the 2008 annual meeting.


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The following table sets forth compensation earned, awarded or paid to our non-employee directors in connection with their Board service during 2008.
 
                         
    Fees Earned or
             
    Paid
    Stock
       
    in Cash 
    Awards
    Total 
 
Name(1)
  ($)     ($)(3)(4)     ($)  
 
Edward F. Crawley
  $ 48,000     $ 40,000     $ 88,000  
Daniel J. Fink(2)
    12,000       40,000       52,000  
Lennard A. Fisk
    43,000       40,000       83,000  
Robert M. Hanisee
    45,500       40,000       85,500  
Robert J. Hermann
    58,500       40,000       98,500  
Ronald T. Kadish
    40,500       40,000       80,500  
Janice I. Obuchowski
    48,000       40,000       88,000  
James G. Roche
    40,500       40,000       80,500  
Frank L. Salizzoni
    41,500       40,000       81,500  
Harrison H. Schmitt
    49,000       40,000       89,000  
Scott L. Webster
    42,000       40,000       82,000  
 
 
(1) David W. Thompson, Garrett E. Pierce and James R. Thompson are not included in this table because they are employees of the company and receive no additional compensation for their Board service. The compensation received by Messrs. Thompson, Pierce and J.R. Thompson as employees of the company is shown in the Summary Compensation Table on page 20.
 
(2) Mr. Fink retired from the Board of Directors in April 2008 and continued to serve in an advisory capacity through the year. Compensation shown for Mr. Fink reflects all compensation earned, awarded or paid to him during 2008 through the time of his retirement.
 
(3) Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2008 in accordance with the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123R, Share-Based Payment (“FAS 123R”). The grant date fair value of these restricted stock units is determined based on the closing price on the date of grant, which was $24.32. As of December 31, 2008, each non-employee director had 1,645 restricted stock units outstanding.
 
(4) We did not grant any stock options to our directors during 2008. As of December 31, 2008, each non-employee director had the following aggregate number of stock options outstanding: Edward F. Crawley, 0; Lennard A. Fisk, 34,000; Robert M. Hanisee, 25,000; Robert J. Hermann, 25,000; Ronald T. Kadish, 10,000; Janice I. Obuchowski, 34,000; James G. Roche, 10,000; Frank L. Salizzoni, 34,000; Harrison H. Schmitt, 21,000; and Scott L. Webster, 10,000.
 
The Governance Committee, pursuant to its charter, periodically assesses the appropriateness of the form and amount of director compensation and makes recommendations to the full Board concerning such compensation. The full Board approves all director compensation. In connection with its assessment of director compensation, the Governance Committee considers director compensation programs of certain peer companies, including the combination of cash and equity-based compensation, as well as recommendations by the Chairman and Chief Executive Officer. The Governance Committee has not engaged compensation consultants to provide advice with respect to the amount or form of director compensation.
 
The following is a description of the compensation arrangements with our non-employee directors for 2008:
 
         
  Annual Retainer   $30,000
  Lead Independent Director Annual Retainer   $10,000
  Committee Chair Annual Retainer   $5,000 for each committee
  Committee Member Annual Retainer   $1,000 for each committee
  Board Meeting Fees   $1,000 for each in-person Board meeting in excess of five per year
        $500 for each telephonic Board meeting


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  Committee Meeting Fees   $1,000 for each in-person committee meeting $500 for each telephonic committee meeting
  Annual Restricted Stock Unit Grant   $40,000 worth of restricted stock units
 
On the second business day of each year, each non-employee director receives an automatic grant of $40,000 worth of restricted stock units under Orbital’s 1997 Stock Option and Incentive Plan. The number of shares of restricted stock units granted is calculated based on the closing price of our common stock on the date of grant. On January 3, 2008, each non-employee director received a grant of 1,645 shares of restricted stock units based on a closing price of $24.32 per share on such date. This restricted stock unit grant vested in its entirety on January 3, 2009.
 
All directors are reimbursed for out-of-pocket expenses in connection with Board service and for out-of-pocket expenses incurred by their respective spouses when traveling with the director in connection with Board service for up to one trip per year. In addition, the company reimburses each director for out-of-pocket expenses incurred by the director to participate in director continuing education programs.
 
EXECUTIVE COMPENSATION
 
Compensation Discussion and Analysis
 
 
The following discussion describes Orbital’s executive compensation program and reviews the compensation earned or paid in 2008 to our named executive officers (the “Named Executive Officers”). For the fiscal year ended December 31, 2008, the Named Executive Officers were:
 
  •  David W. Thompson, Chairman of the Board and Chief Executive Officer
 
  •  James R. Thompson, Vice Chairman, President and Chief Operating Officer
 
  •  Garrett E. Pierce, Vice Chairman and Chief Financial Officer
 
  •  Ronald J. Grabe, Executive Vice President and General Manager, Launch Systems Group
 
  •  Antonio L. Elias, Executive Vice President and General Manager, Advanced Programs Group
 
 
Our executive compensation program reflects our philosophy to compensate our executive officers, including the Named Executive Officers, in ways that support the following three objectives:
 
We must attract and retain a highly qualified executive team.  Our industry is highly competitive and specialized. We believe that attracting a highly qualified, motivated and effective executive team is critical to our long-term success. In addition, our contracts tend to be performed over several years and new business pursuits often are long-term endeavors. Therefore, retention of our experienced executive team is a key strategic goal for the company. We believe our stockholders are best served when we can attract and retain talented executive officers with compensation packages that are competitive but fair.
 
Compensation should be linked to the achievement of financial and operational objectives.  We believe that our executive officers should feel accountable for the overall performance of the company as well as for the performance of the respective business units for which they may have day-to-day responsibility. Therefore, a significant portion of compensation is linked to the achievement of financial and operational objectives that are challenging, but achievable, and that are consistent with the company’s strategic plan.
 
The financial interests of our executive officers and of our stockholders should be aligned.  Performance-based cash bonuses and stock-based incentives are intended to motivate our executive officers to work towards achieving operational and financial goals that will ultimately be reflected in stockholder value.

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We seek to achieve our compensation objectives through a mix of compensation elements. The elements of our executive compensation program and how they help achieve our compensation objectives are set forth in the following table. These elements are discussed in more detail in “Elements of Compensation” below.
 
     
Element
 
How Compensation Objectives are Achieved
 
Base Salary
  Fixed base salary provided at a competitive level helps attract and retain executive talent. Annual adjustments to base salary based on competitive market data and our executive officers’ performance contributions provide further retention incentives.
Annual Cash Incentive Awards
  Annual cash bonuses under our Management Incentive Plan that are variable and performance-based serve to motivate and reward our executive officers to achieve annual financial and operational objectives, align the financial interests of our executive officers and stockholders, and attract and retain executive talent.
Special Cash Bonuses
  Special cash bonuses payable on a discretionary basis reward exceptional performance during the year.
Equity-Based Compensation
  Annual grants of restricted stock units that vest over a three-year service period serve to reward increases in stockholder value, align the financial interests of our executive officers and stockholders, and retain executive talent.
Severance and Termination Benefits
  Change in control and severance agreements providing compensation assurances upon certain events serve to attract and retain executive talent.
Other Benefits and Perquisites
  Providing reasonable and competitive benefits and perquisites, including tax gross-up payments, company 401(k) plan contributions, travel reimbursements and relocation bonuses, also help attract and retain executive talent.
 
The Compensation Committee has responsibility for overseeing our executive compensation program and ensuring that it is aligned with our compensation objectives. As directed by its charter, the Compensation Committee reviews and approves (or recommends to the full Board for approval, as appropriate) all compensation decisions relating to the Named Executive Officers.
 
Elements of Compensation
 
 
     Overview and Purpose
 
We pay base salary to provide our executive officers with a level of assured cash compensation. The base salary of the Named Executive Officers reflects the individual’s role in the company, level of responsibilities, experience and performance. We believe it is important that base salary should be market competitive to help us attract and retain executive talent.
 
Base salary increases for the Named Executive Officers are reviewed on an annual basis by the Compensation Committee. The Compensation Committee reviews base salary increases for the Named Executive Officers based on a variety of factors, including the compensation practices of our industry peers. For 2008, our peer group consisted of the following nine companies (“Peer Group”): ViaSat, Inc., GenCorp. Inc., Loral Space & Communications Inc., EDO Corporation, MacDonald, Dettwiler and Associates Ltd., Hughes Network Systems, LLC, Trimble Navigation Limited, ManTech International Corporation and SRA International, Inc. Our Peer Group was selected because they compete in one or more of the same industries as Orbital (aerospace,


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defense, satellite equipment and government information technology industries) and had annual revenues comparable to Orbital’s (between $500 million and $1.5 billion).
 
     2008 Base Salary Determination
 
At the beginning of 2008, Mr. Thompson proposed to the Compensation Committee 2008 salary increases for the Named Executive Officers. The proposed increases for two of our general managers, Mr. Grabe and Dr. Elias, were 6.1% and 9.7%, respectively. In approving the proposed increases, the Compensation Committee took into account each of their performance as a business unit leader, strong growth in the relevant business unit’s annual revenues and operating profit, as well as strong new order activity during 2007. The approval of a larger increase for Dr. Elias reflected the Compensation Committee’s recognition of the significant growth of his business unit’s revenue and backlog and the increasing importance of his business unit to the company.
 
The proposed increases for Messrs. Thompson, Pierce and J.R. Thompson were 6.1%, 4.6% and 4.8%, respectively. The Compensation Committee approved these proposed increases to reward each individual for his leadership role during 2007, which was a very successful year for the company in terms of overall financial results, operational successes and new business wins. The Compensation Committee also compared these officers’ salaries with the most current publicly available salaries for similarly situated executive officers in our Peer Group. The Compensation Committee approved a larger increase for Mr. Thompson to align his salary more closely with the mid-point of salaries of similarly situated executive officers in our Peer Group. More modest increases were approved for Mr. Pierce and Mr. J.R. Thompson because their base salaries were above the mid-point of salaries of similarly situated executive officers in a subset of our Peer Group.
 
The Compensation Committee presented its recommendation to the full Board (other than management directors) for final approval. The following table sets forth the 2008 base salaries approved for the Named Executive Officers.
 
         
    2008
 
Name
  Base Salary  
 
David W. Thompson
  $ 610,000  
Garrett E. Pierce
    570,000  
James R. Thompson
    545,000  
Ronald J. Grabe
    403,000  
Antonio L. Elias
    340,000  
 
 
     Overview and Purpose
 
Our Management Incentive Plan (the “MIP”) provides employee participants with an annual cash bonus opportunity that is intended to reward them for achieving a set of challenging annual financial and operational objectives. The Named Executive Officers and other key employees are eligible to receive annual MIP bonus payments. The MIP is consistent with our compensation objectives of linking compensation to performance, aligning executive compensation with stockholder interests, and attracting and retaining top level executive officers in our industry.
 
The amount of the annual MIP bonus payment (“MIP Bonus Payment”) that may be paid to the Named Executive Officers (and all other MIP participants) is determined based on the following formula:
 
                 
Target Bonus Amount ($)
(Base Salary x Target
Bonus Percentage)
  x   Performance Multiplier (%)
(0% to 125%)
  =   MIP Bonus Payment ($)
 
The Target Bonus Amount is a dollar amount derived by multiplying the Named Executive Officer’s base salary by a Target Bonus Percentage previously established by the Compensation Committee.
 
The Target Bonus Amount for each Named Executive Officer is then multiplied by the Performance Multiplier, which is a percentage ranging from 0% to 125% depending on the extent to which performance targets were met, if


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at all, or exceeded. The Performance Multiplier is a percentage score derived from an assessment of the applicable group’s and company’s achievement of financial and operational targets that are assigned different weights. This score may be adjusted by the Compensation Committee at its discretion.
 
     2008 MIP Bonus Determination
 
Setting Target Bonus Percentages.  In the beginning of 2008, the Compensation Committee reviewed the Target Bonus Percentages for the Named Executive Officers that would be used to calculate their Target Bonus Amount. Under the MIP, the Target Bonus Percentages that apply vary according to the individual’s job title. Based on the recommendation of Mr. Thompson, the Compensation Committee decided not to make any changes to the prior year’s Target Bonus Percentages for the Chief Executive Officer (90%), for both the Chief Financial Officer and the Chief Operating Officer and President (80%), and for each Executive Vice President and General Manager (60%) after determining that they were market competitive and properly reflected our philosophy that individuals with greater levels of responsibilities should have a greater proportion of their cash compensation tied to performance.
 
The following table sets forth the 2008 Target Bonus Percentages for the Named Executive Officers.
 
         
    Target Bonus
 
Name
  Percentage  
 
David W. Thompson
    90 %
Garrett E. Pierce
    80  
James R. Thompson
    80  
Ronald J. Grabe
    60  
Antonio L. Elias
    60  
 
Establishing MIP Targets.  Mr. Thompson recommended to the Compensation Committee for approval the 2008 proposed MIP targets for the corporate group and each specific business unit. Mr. Thompson developed these targets in consultation with senior management, including the other Named Executive Officers. The Compensation Committee approved the 2008 financial targets at the beginning of the year. In July, the Compensation Committee decided that it was appropriate to revise certain of the financial targets downward to give effect to the company’s mid-year disposition of a business unit and to take into account the company’s determination to proceed with the development of the new Taurus II medium-class launch vehicle. The 2008 operational targets for the first and second halves of the year were approved by the Compensation Committee at the beginning of the first and third quarters, respectively. The Compensation Committee believes that the 2008 MIP targets are consistent with our philosophy of linking compensation to the performance of company objectives that were challenging, but achievable, and that are consistent with the company’s strategic plan.
 
For participants in the corporate group, including Messrs. Thompson, Pierce and J.R. Thompson, the company’s annual consolidated financial results were weighted at 70% and the corporate group’s operational targets for the year were weighted at 30% (15% for the first half targets and 15% for the second half targets). The relative weight given to each of these targets is consistent with the Compensation Committee’s view that Messrs. Thompson, Pierce and J.R. Thompson have greater responsibility for managing the company’s overall performance which is reflected in the company’s consolidated financial results. For 2008, the company’s annual consolidated financial results were measured based upon specific targets established for revenues (weighted 25%), pre-tax income (weighted 30%), free cash flow (defined as net cash provided by operating activities under generally accepted accounting principles less capital expenditures) (weighted 25%) and year-end firm backlog (weighted 20%). The 2008 financial targets for the corporate group are set forth in the first row of the table in “Assessing the Achievement of MIP Targets” on page 17. The pre-tax income target and actual pre-tax income were adjusted to exclude non-cash investment impairment charges and unrecovered research and development costs associated with the Taurus II development program. The Compensation Committee believes that these financial targets were an appropriate tool to hold the executives accountable for the company’s financial and operational performance, as well as future prospects. For 2008, the operational targets at the corporate group level included, among other things, implementing systems designed to improve business operations efficiencies, adequately addressing various staffing needs, keeping real estate projects on schedule and within budget, and maintaining ethics and compliance training


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schedules. The Compensation Committee believes that these operational targets are consistent with the company’s current strategic objectives.
 
For the general managers of our operating business units, including Messrs. Grabe and Elias, the relevant business unit’s financial targets were weighted at 40%, the company’s annual consolidated financial results (as discussed in the paragraph above) were weighted at 30% and the relevant business unit’s operational targets for the year were weighted at 30% (15% for the first half targets and 15% for the second half targets). The relative weight given to these targets is consistent with the Compensation Committee’s view that Messrs. Grabe and Elias have a greater degree of responsibility for their particular business unit’s performance, but also should be accountable for the company’s financial performance as a whole. For 2008, the business unit’s financial results were measured based upon specific targets established for revenues (weighted 25%), operating income (weighted 30%), free cash flow (as defined above) (weighted 25%) and year-end firm backlog (weighted 20%). The operating income target and actual operating income for Mr. Grabe and the Launch Systems Group were adjusted to exclude unrecovered research and development costs associated with the Taurus II development program, which is being led by the Advanced Programs Group. No such adjustment was taken with respect to the Advanced Programs Group because all of its Taurus II related research and development costs are recoverable. The 2008 financial targets for the Launch Systems Group and Advanced Programs Group are set forth in the second and third rows, respectively, of the table in “Assessing the Achievement of MIP Targets” below. The Compensation Committee believes that these financial targets were appropriate because of the challenge they present to each executive to run his business unit efficiently and to aggressively pursue new business opportunities. For 2008, the operational targets at the business unit level focused on keeping programs on schedule and within budget, booking new business and successfully carrying out space missions. The Compensation Committee believes that these operational targets are consistent with the company’s current strategic objectives and could positively contribute to long-term increases in stockholder value.
 
Assessing the Achievement of MIP Targets.  In the beginning of 2009, the Compensation Committee met to assess whether and to what extent the 2008 financial and operational targets were attained. Mr. Thompson, in consultation with senior management (including the other Named Executive Officers), provided input on whether these targets where attained and performance score recommendations for the Compensation Committee’s approval. As noted above, while the determination of the Performance Multiplier is formulaic based on the weightings of the performance scores, it is subject to adjustment by the Compensation Committee at its discretion. The Compensation Committee exercised its discretion to increase the Performance Multiplier for Mr. Grabe and other MIP participants in the Launch Systems Group from a calculated score of 93% to 97.5%.
 
With respect to the financial targets, the following tables provide information regarding the 2008 financial targets and actual results for the corporate group, Launch Systems Group and Advanced Programs Group. If any particular financial objective was not met or exceeded, the financial performance score was adjusted downward or upward, respectively. Based on the 2008 financial results, the average financial performance score for all groups was 104%.
 
2008 Financial Targets and Results
 
                                                                               
          Pre-Tax
                   
    Revenues
    Income
    Operating Income
    Free Cash Flow
    Year-End Firm Backlog
 
    (Weighted 25%)     (Weighted 30%)     (Weighted 30%)     (Weighted 25%)     (Weighted 20%)  
($ in millions)   Target     Actual     Target     Actual     Target   Actual     Target     Actual     Target     Actual  
 
Consolidated Financial Targets/Results(1)   $ 1,095     $ 1,169       $94       $95       N/A     N/A     $ 80     $ 82     $ 2,200     $ 2,110  
Launch Systems Group Financial Targets/Results(2)
    430       454       N/A       N/A       $45     $42       45       28       1,205       1,089  
Advanced Programs Group Financial Targets/Results(3)
    250       298       N/A       N/A       15     19       20       41       495       572  
 
 
(1) Applicable for all Named Executive Officers’ MIP calculations.
(2) Applicable for Mr. Grabe’s MIP calculation.
(3) Applicable for Dr. Elias’ MIP calculation.


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With respect to the operational targets, the final assessment may involve subjectivity because operational targets may depend on the actions of third parties and include technical challenges. Any mission failure results in a “0” score with respect to mission performance targets, while scores related to the other targets may be reduced for less than full achievement. For 2008, the average score for first-half and second-half operational performance across all groups was 89% and 91%, respectively.
 
2008 MIP Bonus Payments.  The table below shows the Target Bonus Amount, Performance Multiplier and 2008 MIP Bonus Payment for each Named Executive Officer. The 2008 MIP Bonus Payments to the Named Executive Officers are also reflected in the Summary Compensation Table on page 20.
 
                         
    Target Bonus
    Performance
    2008 MIP
 
Name
  Amount     Multiplier     Bonus Payment  
 
David W. Thompson
  $ 549,000       100 %   $ 549,000  
Garrett E. Pierce
    456,000       100       456,000  
James R. Thompson
    436,000       100       436,000  
Ronald J. Grabe
    241,800       97.5       235,755  
Antonio L. Elias
    204,000       102.5       209,100  
 
 
We have a policy of periodically awarding special cash bonuses on a discretionary basis to an individual, generally in recognition of exceptional achievement or effort during the year. We believe the payment of discretionary special cash bonuses is consistent with our compensation objective of linking compensation to performance. No special cash bonuses were awarded to the Named Executive Officers during 2008.
 
 
     Overview and Purpose
 
Our equity-based compensation program consists of annual grants of restricted stock units (“RSU”) to individuals who participate in the MIP, including the Named Executive Officers and other high-achieving employees. An RSU represents a right to receive shares of our common stock subject to a vesting schedule over a three-year service period. We believe that RSUs provide meaningful long-term incentives that are directly related to the enhancement of stockholder value. RSUs are intended to align the financial interests of the Named Executive Officers with those of our stockholders, and to focus our executive officers on the achievement of long-term performance objectives that are aligned with our corporate strategy, thereby establishing a direct relationship between compensation and our operating performance. In this regard, the Named Executive Officers are subject to the downside risk of a decrease in the value of their compensation in the event that the price of our common stock declines. The long-term vesting provisions of our RSU awards also further the goal of executive retention.
 
2008 RSU Grant Determination
 
In July 2008, Mr. Thompson presented to the Compensation Committee the proposed RSU awards for the Named Executive Officers. In approving these proposed RSU awards, the Compensation Committee considered such factors as the officer’s degree of responsibility, general level of performance, the previous year’s award, and the fact that our stock price was higher in 2008 than it had been at the time of the 2007 grant. The Compensation Committee also took into account the 2008 base salaries and Target Bonus Percentages that were approved for the Named Executive Officers earlier in the year. Approximately 16% of the available 2008 RSU grant pool was awarded to the Named Executive Officers. The table below shows the RSU awards granted to the Named Executive Officers in 2008. Each award vests over three years.
 
         
Name
  Number of RSUs  
 
David W. Thompson
    12,000  
Garrett E. Pierce
    9,000  
James R. Thompson
    9,000  
Ronald J. Grabe
    7,500  
Antonio L. Elias
    7,500  


18


 

For a description of the material terms of the awards, see footnote 2 of the Grants of Plan-Based Awards table on page 22.
 
 
We have entered into executive change in control severance agreements with each Named Executive Officer and have entered into an executive severance agreement with Mr. Pierce. For a description of the material terms and conditions of these agreements, see the discussion in “Potential Payments Upon Termination or Change in Control” starting on page 26.
 
We believe that our executive change in control severance agreements and executive severance agreement are consistent with our overall compensation objective of attracting, motivating and retaining talented top level executives, and offering a compensation package that is fair. These agreements serve as retention tools, and are intended to ensure continuity of management in the event of an actual or threatened change in the control of the company and to provide replacement compensation and benefits for a reasonable period of time should an executive officer’s employment terminate as a result of a change in control.
 
Our executive change in control severance agreements have a “double trigger,” meaning that the executive officer’s right to receive severance payments and benefits arises only if there is both a change in control and termination of employment within a specified time period. A double trigger for severance was selected because unless the Named Executive Officer’s employment is terminated in connection with the change in control, a Named Executive Officer’s salary and bonus would continue to be paid by the acquiring entity, which is what the severance payment is based on and intended to replace. We do not provide tax gross-up payments to the Named Executive Officers in connection with any change in control or severance payment. For a description and quantification of the estimated amounts that the Named Executive Officers would receive upon a change in control and certain termination scenarios, see the discussion under “Potential Payments Upon Termination or Change in Control” starting on page 26.
 
 
We periodically provide certain benefits to our executive officers that we feel are important to attract and retain talented executives. These benefits include the following: tax gross-up payments related to long-term and supplemental disability premiums, tax gross-up payments related to relocation allowances, the ability to set aside compensation on a tax-deferred basis under our Nonqualified Management Deferred Compensation Plan and company contributions to our 401(k) plan (such contributions are available to all eligible employees). The company reimburses Mr. J.R. Thompson, who resides in Huntsville, Alabama, for travel expenses (including airfare, lodging, car rental and meals) associated with his travel between our Huntsville and Dulles offices. We also pay him the amount of the tax gross-up related to the reimbursement of such expenses. We also pay Mr. Grabe a monthly bonus of $5,000 plus a tax gross-up payment as consideration for his agreement to relocate, which he did at the request of one of our major customers, to Chandler, Arizona. Footnote 7 to the Summary Compensation Table on page 21 describes certain perquisites that were provided to the Named Executive Officers during 2008.
 
We have two overfunded defined benefit plans that were frozen upon our acquisition of another company in 1994. Employees of the acquired company remain eligible to receive benefits under those plans upon retirement. None of the Named Executive Officers are eligible to receive benefits under these plans.


19


 

 
 
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
 
The foregoing report has been furnished by the Compensation Committee members:
 
     
Janice I. Obuchowski, Chairman
  Ronald T. Kadish
Edward F. Crawley
  Scott L. Webster
Robert J. Hermann
   
 
Notwithstanding anything to the contrary set forth in any of our filings under the Securities Act of 1933 or the Exchange Act that might incorporate SEC filings, in whole or in part, the foregoing Human Resources and Compensation Committee Report will not be incorporated by reference into any such filings.
 
 
The following table sets forth compensation earned, awarded or paid to the Named Executive Officers during the fiscal years ended December 31, 2008, 2007 and 2006, as applicable.
 
                                                                 
                                  Non-Equity
             
                                  Incentive
             
                      Stock
    Option
    Plan
    All Other
       
          Salary
    Bonus
    Awards
    Awards
    Compensation
    Compensation
    Total
 
Name and Principal Position
  Year     ($)(2)     ($)(3)     ($)(4)     ($)(5)     ($)(6)     ($)(7)     ($)  
 
David W. Thompson
    2008     $ 610,000           $ 263,082           $ 549,000     $ 26,670     $ 1,448,752  
Chairman of the Board
    2007       575,000             260,267             541,051       24,711       1,401,029  
and Chief Executive Officer
    2006       551,300             323,426     $ 20,823       520,982       21,778       1,438,309  
Garrett E. Pierce
    2008       570,000             215,162             456,000       30,669       1,271,831  
Vice Chairman and
    2007       545,000             165,801             457,813       28,479       1,197,093  
Chief Financial Officer
    2006       525,000             177,102             441,011       26,490       1,169,603  
James R. Thompson
    2008       545,000             215,162             436,000       187,887       1,384,049  
Vice Chairman, President
    2007       520,100             165,801             436,852       356,890       1,479,643  
and Chief Operating Officer
    2006       500,100             177,102       7,072       420,050       101,765       1,206,089  
                                                                 
Ronald J. Grabe
    2008       403,000     $ 60,000       160,518             235,755       66,351       925,624  
Executive Vice President
    2007       380,000       60,000       115,626             239,410       67,986       863,022  
and General Manager,
    2006       360,000       145,000       118,068       4,715       180,014       170,226       978,023  
Launch Systems Group
                                                               
Antonio L. Elias(1)
    2008       340,000             160,518             209,100       19,977       729,595  
Executive Vice President
    2007       310,100             115,626             204,671       18,883       649,280  
and General Manager, Advanced Programs Group
                                                               
 
 
(1) Compensation information is not provided for Dr. Elias for fiscal year ended December 31, 2006 because he was not a “named executive officer,” as such term is defined by SEC rules, during such fiscal year.
 
(2) Reflects the dollar amount of base salary paid for each year reported. Mr. J.R. Thompson elected to receive approximately 25% of his 2006 base salary, net of taxes, in the form of common stock that was not subject to any vesting restrictions, the value of which is included in this amount.
 
(3) For each year reported, Mr. Grabe’s bonuses include a $5,000 special monthly cash bonus that is paid pursuant to an executive relocation agreement the company entered into with Mr. Grabe. See “Arrangements with the Named Executive Officers” starting on page 22 for more information on this executive relocation agreement. For 2006, Mr. Grabe’s bonus also includes a $65,000 special cash bonus paid pursuant to his executive relocation agreement and a $20,000 discretionary bonus in recognition of Mr. Grabe’s long-term relocation to Chandler, Arizona.
 
(4) For each year reported, reflects the dollar amounts recognized by the company in accordance with FAS 123R for financial statement reporting purposes for RSU awards granted in each such year and prior years. The grant date fair value of the RSUs is based on the closing price on the date of grant. See the Grants of Plan-Based Awards table on page 22 and the Outstanding Equity Awards at Fiscal Year-End table on page 24 for more information on the RSU awards reflected in this column.


20


 

 
(5) We did not grant any stock options to the Named Executive Officers in the fiscal years ended December 31, 2008, 2007 and 2006. For 2006, reflects the dollar amounts recognized by the company in accordance with FAS 123R for financial statement reporting purposes for the fiscal year ended December 31, 2006 for stock options granted in 2003, excluding any impact of estimated forfeitures related to service-based vesting conditions as required by SEC rules. For a discussion of the valuation assumptions with respect to these stock options, see Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2005.
 
(6) Non-equity incentive plan compensation reflects the compensation earned by the Named Executive Officers under the MIP. See “Compensation Discussion and Analysis — Elements of Our Compensation Program — Annual Cash Incentive Awards” starting on page 15 for a more detailed discussion of the MIP.
 
(7) All Other Compensation amounts consist of the following for 2008:
 
                                                 
                      Company
             
                      Contributions
             
                      to 401(k) and
             
                Tax
    Deferred
             
    Insurance
    Relocation
    Reimburse-
    Compensation
             
Name
  Premiums(a)     Expenses(b)     ments(c)     Plans(d)     Miscellaneous(e)     Total  
 
David W. Thompson
  $ 3,615           $ 1,081     $ 21,974           $ 26,670  
Garrett E. Pierce
    6,198             3,063       21,408             30,669  
James R. Thompson
    3,395             69,488       20,303     $ 94,701       187,887  
Ronald J. Grabe
    2,900     $ 1,118       45,025       17,308             66,351  
Antonio L. Elias
    2,672             1,081       16,224             19,977  
 
 
(a) The amount for each Named Executive Officer includes the reimbursement of executive long-term disability premiums and life insurance premiums paid by the company. For Mr. Pierce, the amount also includes $2,714 as reimbursement of supplemental disability premiums.
 
(b) The amount for Mr. Grabe reflects the reimbursement of relocation expenses pursuant to his executive relocation agreement with the company. The company calculates the amount shown in this column based on the amount of cash it pays in connection with the reimbursement.
 
(c) The amount for each Named Executive Officer includes tax gross-up payments related to the reimbursement of executive long-term disability premiums. For Mr. Pierce, the amount also includes a $1,982 tax gross-up payment related to the reimbursement of supplemental disability premiums. The amount for Mr. J.R. Thompson also includes a $68,407 tax gross-up payment related to the reimbursement of his aggregate travel expenses associated with his travel between our Huntsville and Dulles offices during 2008. For Mr. Grabe, the amount also includes a $777 tax gross-up payment related to the reimbursement of relocation expenses in 2008, and a $43,200 tax gross-up payment related to his special monthly cash bonus.
 
(d) The amounts include the aggregate of company contributions under our 401(k) and deferred compensation plans.
 
(e) Mr. J.R. Thompson resides in Huntsville, Alabama. The amount for Mr. J.R. Thompson reflects the reimbursement of aggregate travel expenses (including airfare, lodging, car rental and meals) associated with his travel between our Huntsville and Dulles offices in 2008. The company calculates the amount shown in this column based on the amount of cash it pays in connection with the reimbursement.


21


 

 
 
The following table sets forth information concerning the grant of plan-based awards made to or plan-based awards earned by each Named Executive Officer in the fiscal year ended December 31, 2008.
 
                                             
                              All Other
     
                              Stock
  Grant
 
                              Awards:
  Date Fair
 
            Estimated Future Payouts
    Number of
  Value of
 
            Under Non-Equity
    Shares
  Stock and
 
            Incentive Plan Awards(1)     of Stock
  Option
 
    Award
  Grant
  Threshold
    Target
    Maximum
    or Units
  Awards
 
Name
  Type   Date   ($)     ($)     ($)     (#)(2)   ($)(3)  
 
David W. Thompson
  RSU Grant   07/30/2008                     12,000   $ 304,680  
    MIP Bonus           $ 549,000     $ 686,250          
Garrett E. Pierce
  RSU Grant   07/30/2008                     9,000     228,510  
    MIP Bonus             456,000       570,000          
James R. Thompson
  RSU Grant   07/30/2008                     9,000     228,510  
    MIP Bonus             436,000       545,000          
Ronald J. Grabe
  RSU Grant   07/30/2008                     7,500     190,425  
    MIP Bonus             241,800       302,250          
Antonio L. Elias
  RSU Grant   07/30/2008                     7,500     190,425  
    MIP Bonus             204,000       255,000          
 
 
(1) These potential annual cash incentive awards, including applicable financial and operational performance targets, under the MIP are discussed in detail in “Compensation Discussion and Analysis — Elements of Our Compensation Program — Annual Cash Incentive Awards” starting on page 15. See the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table on page 20 for the amounts actually earned in 2008, 2007 and 2006, as applicable, by the Named Executive Officers under the MIP.
 
(2) Reflects RSUs granted under our 2005 Stock Incentive Plan for the fiscal year ended December 31, 2008. The RSUs vest in one-third increments on July 30, 2009, July 30, 2010 and July 30, 2011, provided that the Named Executive Officer remains on each such vesting date an employee, officer, or director of the company or its affiliates or a consultant or adviser currently providing services to the company or its affiliates (a “Service Provider”). If the Named Executive Officer’s service as a Service Provider is terminated other than by reason of death or disability, any unvested RSUs will be forfeited. If the Named Executive Officer dies or incurs a disability prior to any such vesting date, then the RSUs will become 100% vested upon the date of such event. In the event a dividend is declared and paid on Orbital’s common stock, dividend equivalents are paid on the RSUs at the same rate as dividends on Orbital’s common stock. Orbital has never declared any dividends on its common stock.
 
(3) Reflects grant date fair value of the equity award computed in accordance with FAS 123R.
 
The following is a discussion of the additional material factors necessary to understand the information we provided above in the Summary Compensation Table and Grants of Plan-Based Awards table.
 
Arrangements with the Named Executive Officers.  We have entered into an executive relocation agreement with Mr. Grabe as discussed in more detail below. In addition, we have entered into an executive change in control severance agreement with each Named Executive Officer and an executive severance agreement with Mr. Pierce pursuant to which each officer could receive certain severance payments and benefits. See “Potential Payments Upon Termination or Change in Control” starting on page 26 for information regarding these severance agreements.
 
In 2003, we entered into an executive relocation agreement with Mr. Grabe in connection with his long-term relocation assignment in Chandler, Arizona. Under the terms of the agreement, Mr. Grabe receives a $5,000 special monthly cash bonus and a related tax gross-up payment for each month Mr. Grabe is employed at our request in Chandler, Arizona. The agreement also provides that we reimburse Mr. Grabe for certain relocation expenses. The agreement terminates when Mr. Grabe’s relocation assignment is over or Mr. Grabe is no longer employed as one of our executive officers. In 2005, the agreement was amended to provide for the payment of a $65,000 special cash


22


 

bonus on June 1, 2006 and the reimbursement of certain expenses associated with the disposition of Mr. Grabe’s residence in Virginia.
 
Base Salary.  In 2006, Mr. J.R. Thompson elected to receive approximately 25% of his 2006 base salary, net of taxes, in the form of common stock that was not subject to any vesting restrictions. For the first and second quarters of the fiscal year ended December 31, 2006, the amount of shares issued was equal to (1) the dollar value of his net salary for each calendar quarter, divided by (2) the average closing price of our common stock during such calendar quarter. For the third and fourth quarters of the fiscal year ended December 31, 2006, the amount of shares issued was equal to (1) the dollar value of his net salary for each calendar quarter, divided by (2) the closing price of our common stock on the grant date, such grant date being the last trading day of the applicable quarter. The value of the common stock received by Mr. J.R. Thompson was approximately equal to the amount of salary foregone at his election, subject to any de minimus difference due to the rounding of fractional shares.
 
Annual Cash Incentive Awards and Special Cash Bonuses.  In 2008, 2007 and 2006, each Named Executive Officer earned a performance-based annual cash incentive award under the MIP, which is reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 20. See “Compensation Discussion and Analysis — Elements of Our Compensation Program — Annual Cash Incentive Awards” starting on page 15 for a detailed discussion of the MIP and how 2008 bonuses under the MIP were determined. In addition to the bonuses payable to Mr. Grabe under his executive relocation agreement with the company, in 2006, he received a discretionary $20,000 bonus in recognition of his long-term relocation to Chandler, Arizona.
 
Equity-Based Compensation.  With respect to equity grants during 2008, Messrs. Thompson, Pierce, J.R. Thompson, Grabe and Elias received grants of RSUs under our 2005 Stock Incentive Plan. See footnote 2 to the Grants of Plan-Based Awards table on page 22 for the amounts, vesting schedule and other material terms of these RSU awards. For 2007 and 2006, all Named Executive Officers received grants of RSUs under our 2005 Stock Incentive Plan, except that Mr. Thompson did not receive a grant of RSUs in 2007. See “Compensation Discussion and Analysis — Elements of Our Compensation Program — Equity-Based Compensation” starting on page 18 for a discussion of our practices with respect to equity grants.


23


 

 
 
The following table sets forth the outstanding equity awards for each Named Executive Officer as of December 31, 2008.
 
                                         
    Option Awards   Stock Awards  
                          Number
     
                          of Shares
  Market
 
    Number of
    Number of
              or Units
  Value of
 
    Securities
    Securities
              of Stock
  Shares or
 
    Underlying
    Underlying
              That
  Units of
 
    Unexercised
    Unexercised
    Option
    Option
  Have
  Stock That
 
    Options (#)
    Options (#)
    Exercise
    Expiration
  Not
  Have Not
 
Name
  Exercisable     Unexercisable     Price ($)     Date   Vested (#)   Vested ($)  
 
David W. Thompson
    60,000 (1)         $ 12.40     05/11/2010        
      100,000 (2)           4.00     04/24/2011        
      150,000 (3)           5.79     05/15/2013        
      —                     22,000   $ 429,660  
Garrett E. Pierce
    188,300 (4)           11.12     08/09/2010        
      —                     20,000     390,600  
James R. Thompson
    100,000 (5)           5.65     02/18/2013        
      —                     20,000     390,600  
Ronald J. Grabe
    34,200 (1)           12.40     05/11/2010        
      —                     15,833     309,218  
Antonio L. Elias
    4,421 (6)           22.62     05/28/2009        
      25,579 (6)           22.62     05/28/2009        
      20,000 (7)           14.00     04/26/2010        
      30,000 (1)           12.40     05/11/2010        
      60,000 (2)           4.00     04/24/2011        
      30,000 (8)           3.51     12/04/2011        
      33,333 (5)           5.65     02/18/2013        
      16,667 (9)           5.65     02/18/2013        
      —                     15,833     309,218  
 
 
All equity awards reported in the table vest solely based on the passage of time, and are not subject to any performance conditions.
 
(1) Options vested in three installments on May 11, 2004, May 11, 2005 and October 26, 2005.
 
(2) Options vested in three installments on April 24, 2001, February 6, 2002 and February 6, 2003.
 
(3) Options vested in three installments on May 15, 2004, May 15, 2005 and May 15, 2006.
 
(4) Options vested in three installments on August 9, 2001, August 9, 2002 and August 9, 2003.
 
(5) Options vested in two installments on February 18, 2005 and February 18, 2006.
 
(6) Options vested in three installments on May 28, 2000, May 28, 2001 and May 28, 2002.
 
(7) Options vested in three installments on April 26, 2000, January 20, 2001 and January 20, 2002.
 
(8) Options vested in two installments on December 4, 2002 and December 4, 2003.
 
(9) Options vested on February 18, 2004.


24


 

 
 
The following table sets forth information concerning stock option exercises and RSU vesting for each Named Executive Officer during the fiscal year ended December 31, 2008.
 
                             
    Option Awards     Stock Awards  
    Number of Shares
        Number of Shares
       
    Acquired on
  Value Realized on
    Acquired on
    Value Realized on
 
Name
  Exercise (#)   Exercise ($)     Vesting (#)     Vesting ($)  
 
David W. Thompson
  75,000   $ 940,099       23,334 (1)   $ 517,380  
Garrett E. Pierce
  161,700     2,573,855       15,500 (2)     350,560  
James R. Thompson
  110,000     1,015,892       15,500 (2)     350,560  
Ronald J. Grabe
  95,800     801,140       10,833 (2)     246,233  
Antonio L. Elias
            10,833 (2)     246,233  
 
 
(1) Reflects the vesting on July 28, 2008 and October 28, 2008 of one-third of the total RSUs granted to Mr. Thompson on July 26, 2006 and October 26, 2005, respectively.
 
(2) Reflects the vesting on July 28, 2008, July 28, 2008 and October 28, 2008 of one-third of the total RSUs granted to Messrs. Pierce, J.R. Thompson, Grabe and Elias on July 25, 2007, July 26, 2006 and October 26, 2005, respectively.
 
 
None of the Named Executive Officers receive benefits under any company plan that provides for specified retirement payments and benefits, or payments and benefits that will be provided primarily following retirement, including but not limited to any tax-qualified defined benefit plan and supplemental executive retirement plan, but excluding any tax-qualified defined contribution plans and nonqualified defined contribution plans.
 
 
Our Nonqualified Management Deferred Compensation Plan provides the Named Executive Officers and other key management and highly compensated employees with the ability to set aside compensation on a tax-deferred basis. This compensation can consist of amounts a Named Executive Officer elects to defer and/or discretionary contributions by us. Under the plan, the Named Executive Officers may defer up to 100% of their cash base salaries and up to 100% of their cash bonuses under the MIP. The Named Executive Officers need to make their deferral elections by December 15th of each year to defer amounts for the following year.
 
The Named Executive Officers have the right to have the amounts credited to their plan account invested in one or more funds made available by the plan administrator. The Named Executive Officers select the investment allocation among the available funds and may change these allocations on a daily basis by contacting the plan administrator by phone or accessing their plan account online through the plan administrator’s website.
 
Benefits under the plan will be distributed under the terms elected by the Named Executive Officer. For each deferral year and type of deferral, the Named Executive Officer may elect either a future in-service withdrawal date or a distribution upon a voluntary or involuntary termination of employment. The Named Executive Officer can elect to receive the distributions either as a lump sum payment or in annual installments. In the event a Named Executive Officer dies while employed by us, benefits will be paid to his beneficiaries in the same manner as elected by such Named Executive Officer. Additionally, upon a showing of an unforeseen financial hardship and with appropriate approval from the Compensation Committee, a Named Executive Officer may be allowed to access funds in his plan account earlier than the elected distribution date. All Named Executive Officers are fully vested in their account balances under the plan.


25


 

The following table sets forth contributions, earnings, withdrawals, distributions and year-end balances under our Nonqualified Management Deferred Compensation Plan for each Named Executive Officer during the fiscal year ended December 31, 2008.
 
                                         
    Executive
    Registrant
    Aggregate
    Aggregate
    Aggregate
 
    Contributions in
    Contributions in
    Earnings in
    Withdrawals/
    Balance at Last
 
Name
  Last FY ($)     Last FY ($)(1)     Last FY ($)(2)     Distributions ($)     FYE ($)(3)  
 
David W. Thompson
        $ 8,224     $ 63,510           $ 3,692,183  
Garrett E. Pierce
          7,658       (22,702 )           41,296  
James R. Thompson
          6,553       (316 )           61,855  
Ronald J. Grabe
          3,558       (25,245 )           43,257  
Antonio L. Elias
          2,474       (1,863 )           27,581  
 
 
(1) In 2008, pursuant to our Deferred Salary and Profit Sharing Plan for Employees (“401(k) Plan”), we made a discretionary contribution to the 401(k) Plan account of each Named Executive Officer (including other eligible employees) in the amount of 1% of the salary and MIP bonuses earned by such officer in 2007. Any discretionary contribution amounts exceeding the Internal Revenue Service limits for the 401(k) Plan are then credited into the Named Executive Officer’s Nonqualified Management Deferred Compensation Plan account as a company contribution. The amounts in this column reflect these company contributions. The full amounts are included in the “All Other Compensation” column of the Summary Compensation Table on page 20.
 
(2) The amounts in this column are not reported in the Summary Compensation Table on page 20.
 
(3) The amounts in this column include company contributions that were reported as compensation for the Named Executive Officers in the Summary Compensation Tables in our 2008, 2007 and 2006 proxy statements in the following amounts: David W. Thompson, $21,065; Garrett E. Pierce, $28,410; James R. Thompson, $18,779; Ronald J. Grabe, $13,569; and Antonio L. Elias, $1,949.
 
Potential Payments Upon Termination or Change in Control
 
Executive Change in Control Severance Agreements
 
We have entered into executive change in control severance agreements with each Named Executive Officer. Our executive change in control severance agreements have a “double trigger,” meaning that the executive officer’s right to receive severance payments and benefits arises only if there is both a change in control of the company and the executive officer is terminated within a specified time period. Under these agreements, a “change in control” is generally defined as (1) the acquisition by an individual or group of 30% or more of our common stock or the combined voting power of our then outstanding voting securities entitled to vote for directors, (2) within any 24-month period, the persons who were our directors immediately prior to the transaction shall cease to constitute a majority of our Board or its successor, (3) the sale or disposition of all or substantially all of the company’s assets, or (4) the consummation by us of a merger, consolidation or similar business combination transaction, the result of which is either (a) the stockholders of the company immediately prior to the transaction will not beneficially own more than 60% of the surviving entity, (b) a person owns more than 30% of our outstanding common stock, or (c) at least a majority of the board members of the entity resulting from the transaction were not members of the Board at the time the transaction was agreed to.
 
If a change in control is contemplated or has occurred, and the Named Executive Officer’s employment is terminated, the Named Executive Officer would be entitled to the following payments and benefits upon the following termination events:
 
Disability.  If the Named Executive Officer’s employment is terminated following a change in control due to disability (generally defined as incapacity due to physical or mental illness), the Named Executive Officer’s disability benefits would be determined in accordance with our insurance and benefit programs then in effect.


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Assuming a December 31, 2008 termination event for disability, the Named Executive Officers would receive from us the following:
 
                         
    Monthly
    Maximum Period of
    Total Potential
 
Name
  Payments     Payment Based on Age     Payments  
 
David W. Thompson
  $ 25,000       123 months     $ 3,075,000  
Garrett E. Pierce
    25,000       30 months       750,000  
James R. Thompson
    20,000       12 months       240,000  
Ronald J. Grabe
    20,000       36 months       720,000  
Antonio L. Elias
    20,000       63 months       1,260,000  
 
Cause.  If the Named Executive Officer is terminated for cause, the Named Executive Officer will not be entitled to receive any payments or benefits after the date of termination, and would only be entitled to accrued base salary and leave as of the date of termination. Under the executive change in control severance agreement, “cause” is generally defined as:
 
  •  the officer willfully and continually failing to substantially perform his or her duties in accordance with the instructions of the Board or the persons to whom the officer reports, after a demand for substantial performance is delivered to the officer by the Board which specifically identifies the manner in which the Board believes that the officer has not substantially performed his or her duties;
 
  •  the willful engaging by the officer in conduct which is materially injurious to the company;
 
  •  the embezzlement or misappropriation of the company’s funds or property by the officer;
 
  •  the officer’s conviction of a felony or plea of guilty or nolo contendere to a felony; or
 
  •  the officer’s conviction of a crime involving fraud, dishonesty, moral turpitude or breach of trust or plea of guilty or nolo contendere to such a crime.
 
Good Reason or Without Cause.  If the Named Executive Officer is terminated following a change in control without “cause” or by such Named Executive Officer for “good reason,” the Named Executive Officer would receive from us a lump sum equal to two times the sum of (1) the greater of his annual base salary upon the date of the change in control or termination and (2) the greater of (a) his full target bonus for the year of termination or (b) the average of the two highest cash bonuses earned during two of the three immediately preceding years. Also, the Named Executive Officer would receive a pro rata bonus equal to his target bonus through the date of termination. In addition, all unvested amounts under our deferred compensation plan would vest, all insurance benefits would continue for 24 months and all outstanding vested and unvested equity awards would be repurchased by us at the higher of (1) the highest price paid in the change in control transaction or (2) the then current fair market value on the termination date if the equity award has been assumed, less the exercise price for any such equity award, if applicable. The Named Executive Officer must execute a written release of claims provided by the company to be eligible to receive any of the foregoing payments.
 
If the Named Executive Officer is terminated following a change in control without “cause” or by the Named Executive Officer for “good reason,” and assuming a December 31, 2008 termination event for either of these reasons, payments and benefits to the Named Executive Officers would be as follows:
 
                                         
                      Equity
       
                Insurance
    Awards
       
Name
  Salary     Bonus     Benefits(1)     Payments(2)     Total(3)  
 
David W. Thompson
  $ 1,220,000     $ 1,647,000     $ 52,299     $ 4,471,460     $ 7,390,759  
Garrett E. Pierce
    1,140,000       1,368,000       49,679       1,974,203       4,531,882  
James R. Thompson
    1,090,000       1,308,000       11,923       1,778,600       4,188,523  
Ronald J. Grabe
    806,000       725,400 (4)     51,173       553,064       2,135,637  
Antonio L. Elias
    680,000       612,000       50,783       2,647,418       3,990,201  
 
 
(1) Reflects the gross premiums to be paid by the company to provide each Named Executive Officer with life insurance and health and welfare benefits substantially similar to those they were receiving as of December 31,


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2008 for the next 24-month period. Assumes annual increases in premiums based on historical percentage increases.
 
(2) Reflects payments in consideration for the surrender of all outstanding stock options equal to the difference between the respective exercise prices for such stock options as set forth in the Outstanding Equity Awards at Fiscal Year-End table on page 24, and $19.53, the closing price of our common stock on December 31, 2008. Also reflects payments in consideration for the surrender of all unvested RSUs at a repurchase price of $19.53 per RSU.
 
(3) Estimated legal fees and expenses incurred by the Named Executive Officer in connection with a termination are not included in the total. All Named Executive Officers are fully vested in their account balances under our 401(k) Plan and Nonqualified Management Deferred Compensation Plan, and therefore this termination event does not provide for any accelerated vesting under these plans, and no amounts related to such plans are included in the total. See the “Aggregate Balance at Last FYE” column in the table on page 26 for the year-end balances for each Named Executive Officer under our Nonqualified Management Deferred Compensation Plan.
 
(4) Pursuant to our executive relocation agreement with Mr. Grabe, the bonuses provided for in such agreement were not taken into account when calculating payments due under Mr. Grabe’s executive change in control severance agreement, and such bonuses would not be considered when calculating such payments in the event of an actual change in control of the company. See “Arrangements with the Named Executive Officers” starting on page 22 for more information on Mr. Grabe’s executive relocation agreement.
 
The definition of “cause” under the executive change in control severance agreement is described above. Under the executive change in control severance agreement, “good reason” is generally defined as:
 
  •  the assignment of the officer to duties that are a material adverse change from the most significant position held by the officer during the 180-day period prior to a change in control;
 
  •  a material reduction in the officer’s base salary;
 
  •  the relocation of the officer outside a 50-mile radius of the officer’s then current office;
 
  •  a material adverse change in (1) the value of any compensation plan (including bonus plan) that the officer participated in prior to the change in control or (2) the benefits under our retirement, pension, 401(k), deferred compensation, life insurance, medical, health, accident, disability or other benefit plans that the officer participated in prior to the change in control; or
 
  •  our failure to obtain from any successor an assumption of the obligations under the executive change in control severance agreement.
 
 
We have entered into an executive severance agreement with Mr. Pierce which sets forth the severance payments and benefits that he would receive from us in the event his employment is terminated other than in the event of a change in control.
 
Under his agreement, Mr. Pierce will be entitled to the following payments and benefits upon the occurrence of the following termination events:
 
Disability.  If Mr. Pierce’s employment is terminated by us for disability (generally defined as incapacity due to physical or mental illness), then (1) his benefits shall be determined in accordance with our insurance and benefits programs then in effect and (2) his equity grants shall continue to vest as scheduled for a 24-month period following such termination and his stock options shall remain exercisable for the rest of the originally scheduled term. As of December 31, 2008, all of Mr. Pierce’s outstanding stock options were fully vested. These options are set forth in the Outstanding Equity Awards at Fiscal Year-End table on page 24. Assuming a December 31, 2008 termination event for disability, Mr. Pierce would receive monthly payments of $25,000 for up to 30 months for an aggregate potential amount of $750,000 and a total of 20,000 unvested RSUs would continue to vest as scheduled for a 24-month period. As of December 31, 2008, the value of these RSUs was $390,600 based on the $19.53 closing price of our common stock on such date. The aggregate amount of compensation Mr. Pierce might receive under these circumstances is $1,140,600.


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Cause.  If Mr. Pierce’s employment is terminated by us for cause, Mr. Pierce would only be permitted to exercise vested stock options for 60 days after the date of termination. “Cause” is generally defined in the same manner as described above in the executive change in control severance agreements. As of December 31, 2008, all of Mr. Pierce’s outstanding stock options were fully vested. These options are set forth in the Outstanding Equity Awards at Fiscal Year-End table on page 24.
 
Good Reason or Without Cause.  If Mr. Pierce’s employment is terminated by us for any reason other than for disability or “cause,” as defined in the agreement, or by Mr. Pierce for “good reason,” as defined in the agreement (which is generally defined in the same manner as the executive change in control severance agreements), then Mr. Pierce would receive from us a lump sum payment equal to two times the sum of (1) his annual base salary and (2) the higher of (a) the sum of any bonuses paid or payable to him for the 12-month period immediately preceding the month of such termination, or (b) the target bonus for the year of termination based on 80% of his annual base salary. He would also be reimbursed for all reasonable legal fees and expenses incurred by him as a result of such termination. Also, Mr. Pierce’s outstanding RSUs would continue to vest as scheduled for a 24-month period. In addition, his insurance benefits would continue for a 24-month period following such termination.
 
If Mr. Pierce’s employment is terminated by us without “cause” or by him for “good reason,” and assuming a December 31, 2008 termination event for either of these reasons, payments would be as follows:
 
                                         
                Insurance
    Equity
       
Name
  Salary     Bonus     Benefits(1)     Awards(2)     Total(3)  
 
Garrett E. Pierce
  $ 1,140,000     $ 915,626     $ 49,679     $ 390,600     $ 2,495,905  
 
 
  (1)  Reflects the gross premiums to be paid by the company to provide Mr. Pierce with life, disability, accident and health insurance benefits substantially similar to those he was receiving as of December 31, 2008 for the next 24-month period. Assumes annual increases in premiums based on historical percentage increases.
 
  (2)  Reflects the value of 20,000 unvested RSUs, which would continue to vest as scheduled for the next 24-month period, based on the $19.53 closing price of our common stock on December 31, 2008. The amount does not include the value of Mr. Pierce’s stock options remaining exercisable for the rest of their originally scheduled terms because all such options are currently fully vested and therefore this termination event does not provide for any accelerated payments. These options are set forth in the Outstanding Equity Awards at Fiscal Year-End table on page 24.
 
  (3)  Estimated legal fees and expenses incurred by Mr. Pierce in connection with a termination are not included in the total.
 
 
In addition to the payments described above, in connection with our Nonqualified Management Deferred Compensation Plan, in the event that a Named Executive Officer dies while employed by us, benefits under the plan will be paid to his or her beneficiaries in the same manner elected by such Named Executive Officer. Assuming a December 31, 2008 termination event for death, payments for the Named Executive Officers would be as follows:
 
         
Name
  Payments  
 
David W. Thompson
  $ 3,692,183  
Garrett E. Pierce
    41,296  
James R. Thompson
    61,855  
Ronald J. Grabe
    43,257  
Antonio L. Elias
    27,581  
 
 
We have entered into substantially identical indemnification agreements with each of our directors, the Named Executive Officers and with certain other officers. The agreements provide that we will, to the full extent permitted by the Delaware General Corporation Law, as amended from time to time, indemnify each indemnitee against all


29


 

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 our affiliates, or because the company has a right to judgment in its favor because of his or her position with us or any of our 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 our best interest. The agreements further provide that the indemnification thereunder is not exclusive of any other rights the indemnitee may have under our Restated Certificate of Incorporation or any agreement or vote of stockholders and that the Restated Certificate of Incorporation may not be amended to adversely affect the rights of the indemnitee.
 
 
The Compensation Committee was comprised of Edward F. Crawley, Robert J. Hermann, Ronald T. Kadish, Janice I. Obuchowski and Scott L. Webster during 2008. No member of the Compensation Committee was an officer or employee of the company during fiscal year 2008, nor did any member have a business relationship with the company that is required to be disclosed pursuant to the applicable SEC rules. No interlocking relationship, as described in the applicable SEC rules, existed between any member of the Compensation Committee and any member of any other company’s board of directors or compensation committee during 2008.
 
 
The Audit Committee is responsible for providing independent, objective oversight of the company’s accounting functions and internal controls. The Audit Committee is comprised of five directors, each of whom is “independent” as defined by the existing NYSE listing rules and SEC rules. Members of the Audit Committee must also satisfy the independence requirements of Section 10A(m)(3) of the Exchange Act.
 
Management is responsible for the company’s internal controls and financial reporting process. The company’s independent registered public accounting firm is responsible for performing an independent audit of the company’s consolidated financial statements in accordance with generally accepted auditing standards and to issue a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes.
 
The Audit Committee has reviewed and discussed the audited consolidated financial statements of the company for the fiscal year ended December 31, 2008, with the company’s management, and also has discussed with PricewaterhouseCoopers LLP (“PwC”), the company’s independent registered public accounting firm, the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended, as adopted by the Public Accounting Oversight Board in rule 3200T. The Audit Committee has received both the written disclosures and the letter from PwC required by Independence Standards Board Standard No. 1, and has discussed with PwC that firm’s independence.
 
Based on the Audit Committee’s discussions with management and the company’s independent registered public accounting firm, the Audit Committee recommended to the Board of Directors of the company that the audited consolidated financial statements of the company for the fiscal year ended December 31, 2008, be included in the company’s Annual Report on Form 10-K as filed with the SEC in March 2009.
 
The foregoing report has been furnished by the Audit Committee members:
 
     
Robert M. Hanisee, Chairman
  Frank L. Salizzoni
Edward F. Crawley
  Harrison H. Schmitt
Lennard A. Fisk
   
 
Notwithstanding anything to the contrary set forth in any of our filings under the Securities Act of 1933 or the Exchange Act that might incorporate SEC filings, in whole or in part, the foregoing Audit and Finance Committee Report will not be incorporated by reference into any such filings.


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The table below sets forth certain information regarding our stock-based holdings as of February 27, 2009 unless otherwise indicated, by (1) each person known by us to own beneficially more than 5% of our common stock, (2) each of our directors and Named Executive Officers and (3) 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.
 
                 
          Percent of
 
    Shares
    Shares
 
    Beneficially
    Beneficially
 
Name and Address
  Owned(1)     Owned  
 
Barclays Global Investors, NA and associated entities
    3,924,202       6.7 %
400 Howard Street
San Francisco, CA 94105(2)
               
Alydar Partners, LLC and associated entities
    3,205,500       5.5 %
222 Berkeley Street, 17th Floor
Boston, MA 02116(3)
               
Edward F. Crawley
    7,369       *  
Antonio L. Elias
    280,797       *  
Lennard A. Fisk
    67,098       *  
Ronald J. Grabe
    83,507       *  
Robert M. Hanisee
    56,528       *  
Robert J. Hermann
    55,785       *  
Ronald T. Kadish
    15,539       *  
Janice I. Obuchowski
    51,926       *  
Garrett E. Pierce
    222,233       *  
James G. Roche
    17,262       *  
Frank L. Salizzoni
    55,264       *  
Harrison H. Schmitt
    33,680       *  
David W. Thompson
    432,293       *  
James R. Thompson(4)
    333,894       *  
Scott L. Webster
    52,991       *  
Executive Officers and Directors as a Group (17 persons)
    1,848,898       3.2 %
 
 
Less than 1%.
 
(1) Includes shares issuable upon exercise of outstanding stock options (all of which are currently vested) and RSUs that will vest within 60 days of February 27, 2009, in the following amounts: Edward F. Crawley, 0 shares; Antonio L. Elias, 220,000 shares; Lennard A. Fisk, 31,000 shares; Ronald J. Grabe, 34,200 shares; Robert M. Hanisee, 25,000 shares; Robert J. Hermann, 25,000 shares; Ronald T. Kadish, 10,000 shares; Janice I. Obuchowski, 31,000 shares; Garrett E. Pierce, 188,300 shares; James G. Roche, 10,000 shares; Frank L. Salizzoni, 31,000 shares; Harrison H. Schmitt, 18,000 shares; David W. Thompson, 310,000 shares; James R. Thompson, 100,000 shares; Scott L. Webster, 10,000 shares; and all executive officers and directors as a group, 1,105,525 shares.
 
(2) Beneficial ownership is as of December 31, 2008, based on a Schedule 13G filed on February 5, 2009 with the SEC by Barclays Global Fund Advisors; Barclays Global Investors, NA; Barclays Global Investors (Deutschland) AG; Barclays Global Investors, LTD; Barclays Global Investors Japan Limited; Barclays Global Investors Canada Limited; and Barclays Global Investors Australia Limited (collectively, the “Barclays Entities”). The Barclays Entities have reported that they hold the shares in trust accounts for the economic benefit of the beneficiaries of those accounts. The Barclays Entities reported on the Schedule 13G that they own in the aggregate 3,924,202 common shares, of which they report the sole power to vote 3,027,358 shares and the sole power to dispose of 3,924,202 shares.


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(3) Beneficial ownership is as of December 31, 2008, based on a Schedule 13G/A filed on February 17, 2009 with the SEC by Alydar Partners, LLC; Alydar Capital, LLC; Alydar Fund, L.P.; Alydar QP Fund, L.P.; Alysheba Fund, L.P.; Alysheba QP Fund, L.P.; Alysun Fund, L.P.; Alysun QP Fund, L.P.; Alydar Fund Limited; Alysheba Fund Limited; Alysun Fund Limited; and John A. Murphy, an individual and manager of Alydar Capital LLC (collectively, the “Alydar Entities”). The Alydar Entities have reported that they hold the shares in trust accounts for the economic benefit of the beneficiaries of those accounts. The Alydar Entities reported on the Schedule 13G/A that they own in the aggregate 3,205,500 common shares over which they have the shared voting power and shared dispositive power. Mr. Murphy disclaims beneficial ownership of such shares.
 
(4) Excludes 1,385 shares of common stock owned by Mr. J.R. Thompson’s wife, with respect to which Mr. J.R. Thompson disclaims beneficial ownership.


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PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
The Board of Directors recommends the ratification by the stockholders of the appointment by the Board of PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm for the fiscal year ending December 31, 2009. PwC has served as our independent registered public accounting firm since 1999. A representative of PwC 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 appointment of PwC, the Board will consider the appointment of another independent registered public accounting firm. The affirmative vote of the holders of a majority of shares present in person or represented by proxy at the annual meeting and entitled to vote with respect to the matter will be required to approve Proposal 2. Abstentions will be considered shares present at the annual meeting entitled to vote, but since they are not affirmative votes on the proposal, abstentions 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 that you vote FOR the ratification of the appointment of PwC. 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 PwC.
 
 
Stockholder proposals that are intended to be included in the proxy statement and related proxy materials pursuant to Rule 14a-8 of the rules promulgated under the Exchange Act for our 2010 annual meeting of stockholders must be received by us no later than November 18, 2009 at our principal office located at 21839 Atlantic Boulevard, Dulles, Virginia 20166, Attention: Corporate Secretary.
 
In addition, any stockholder who wishes to propose a nominee to the Board of Directors or submit any other matter to a vote at a meeting of stockholders (other than a stockholder proposal included in our proxy materials pursuant to Rule 14a-8 of the rules promulgated under the Exchange Act) must comply with the advance notice provisions and other requirements of Section 1.6 of our Amended and Restated Bylaws, which are on file with the SEC and available on our website, and may be obtained from us upon request. These notice provisions require that recommendations for director nominees for the 2010 annual meeting and any requests to submit any other matter to a vote of stockholders must be received no earlier than December 31, 2009 and no later than January 30, 2010. If a stockholder nomination or proposal is received before or after the range of dates specified in the advance notice provisions, our proxy materials for the next annual meeting of stockholders may confer discretionary authority to vote on such matter without any discussion of the matter in the proxy materials.
 
OTHER MATTERS
 
 
Section 16(a) of the Exchange Act requires our officers and directors and stockholders who beneficially own more than 10% of our common stock to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Executive officers, directors and stockholders beneficially owning more than 10% of our common stock are required by SEC regulations to furnish to us copies of all Forms 3, 4 and 5 they file. During 2008, a Form 4 was inadvertently filed late on behalf of Edward F. Crawley reporting the sale of 2,000 shares of our common stock. Based solely on Orbital’s review of the copies of such forms it has received and written representations from the reporting persons and except as otherwise provided in this proxy statement, Orbital believes that all of its executive officers and directors complied with the Section 16 filing requirements applicable to them with respect to all other transactions during fiscal year 2008.


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The Board has appointed PwC as our independent registered public accounting firm for the fiscal year ending December 31, 2009, subject to ratification by our stockholders at the annual meeting.
 
 
For services rendered during or in connection with our fiscal years indicated in the table below, we have received, or expect to receive, invoices from PwC for the following fees:
 
                 
    2007     2008  
 
Audit Fees(1)
  $ 1,153,000     $ 1,472,000  
Audit-Related Fees(2)
           
Tax Fees(3)
    95,000       246,000  
All Other Fees
    2,000       2,000  
 
 
  (1)  Includes fees for services rendered (i) for audit services related to our consolidated financial statements and effectiveness of internal controls over financial reporting, (ii) in connection with the quarterly reviews of the consolidated financial statements in our Forms 10-Q and (iii) in connection with auditor consents.
 
  (2)  Includes fees for assistance in connection with government contract matters and consultations regarding various accounting matters.
 
  (3)  Includes fees for tax compliance and consultation.
 
The Audit Committee takes into consideration all fees charged by the independent registered public accounting firm in its assessment of PwC’s independence.
 
 
The Audit Committee has adopted policies and procedures regarding the pre-approval of audit and non-audit services to be provided by our independent registered public accounting firm (the “Pre-Approval Policy”). Our Audit Committee is required to pre-approve all services performed by the independent registered public accounting firm to assure that the provision of such services do not impair our independent registered public accounting firm’s independence.
 
The Audit Committee reviews and approves a list of pre-approved services and the estimated costs of performance approved for each, at least annually. The list is updated throughout the year, as may be necessary. The Audit Committee has delegated to its Chairman the authority to pre-approve the performance by the independent registered public accounting firm of services with estimated aggregate costs of performance up to $100,000. All of the fees identified above under “Fees of Independent Registered Public Accounting Firm” for 2008 were pre-approved in accordance with the Pre-Approval Policy.
 
Any engagement agreement between the company and the independent registered public accounting firm must be signed by an officer of the company and at least one member of the Audit Committee. The Audit Committee must be notified, at its next regularly scheduled meeting, of any engagement that occurs which had been pre-approved by the Audit Committee or by the Audit Committee delegate. If the proposed service has not been pre-approved, then a representative of the independent registered public accounting firm and the Chief Financial Officer, Controller or other Senior Vice President must jointly submit to the Audit Committee, prior to the commencement of any work, a request for approval, including a reasonably detailed description of the service proposed to be provided, an estimate of the costs of performance of the service and a joint statement as to whether, in their view, the request or application is consistent with the SEC’s rules on auditor independence.


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We have adopted a procedure called “householding,” which has been approved by the SEC. Under this procedure, we are delivering only one copy of the Notice and/or the proxy statement and annual report to multiple stockholders who share the same address and have the same last name, unless we have received contrary instructions from an affected stockholder. This procedure reduces our printing costs, mailing costs and fees.
 
We will deliver upon written or oral request a separate copy of the Notice and/or the proxy statement and annual report to any stockholder at a shared address to which a single copy of these materials were delivered. To receive a separate copy of these materials, you may contact our Investor Relations Department either by mail at 21839 Atlantic Boulevard, Dulles, Virginia 20166, by telephone at (703) 406-5543 or by e-mail at investor.relations@orbital.com.
 
If you are a holder of our common stock as of the record date and would like to revoke your householding consent and receive a separate copy of the Notice and/or the proxy statement and the annual report in the future, please contact Broadridge Financial Solutions, Inc. (“Broadridge”), either by calling toll free at (800) 542-1061 or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. You will be removed from the householding program within 30 days of receipt of the revocation of your consent.
 
Any stockholders of record sharing the same address and currently receiving multiple copies of the Notice, the annual report and the proxy statement who wish to receive only one copy of these materials per household in the future, may contact our Investor Relations Department at the address, telephone number or e-mail listed above to participate in the householding program.
 
A number of brokerage firms have instituted householding. If you hold your shares in “street name,” please contact your bank, broker or other holder of record to request information about householding.


35


 

           
 
   
 
   
ORBITAL SCIENCES CORPORATION
21839 ATLANTIC BOULEVARD
DULLES, VA 20166
 
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on Wednesday, April 29, 2009. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.

ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by Orbital Sciences Corporation in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years.

VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on Wednesday, April 29, 2009. Have your proxy card in hand when you call and then follow the instructions.

VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Orbital Sciences Corporation, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
         
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
  ORBTL1   KEEP THIS PORTION FOR YOUR RECORDS
 
      DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
                                         
(GRAPHIC) ORBITAL SCIENCES CORPORATION                  
                     
Vote On Directors
                 
                     
 
1.  To elect five Directors, each to serve for a three- year term ending in 2012.

Nominees:
01) Robert M. Hanisee      04) James R. Thompson
02) James G. Roche         05) Scott L. Webster
03) Harrison H. Schmitt
  For
All





o
  Withhold
All





o
  For All
Except





o
 
To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.

 
                   
 
 
                 
                 
Vote On Proposal
  For   Against   Abstain
                 
2.
  To ratify the appointment of PricewaterhouseCoopers LLP as the company’s independent registered public accounting firm for the fiscal year ending December 31, 2009.   o   o   o
Please vote, date and promptly return this proxy in the enclosed return envelope, which is postage prepaid if mailed in the United States.
               
 
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.
 
               
               
               
                         
Signature [PLEASE SIGN WITHIN BOX]   Date           Signature (Joint Owners)   Date    
                     
                   


 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
Our Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com.
 

ORBITAL SCIENCES CORPORATION
Proxy for Annual Meeting of Stockholders – April 30, 2009
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
          The undersigned appoints David W. Thompson and Susan Herlick 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, 21839 Atlantic Boulevard, Dulles, Virginia 20166 on April 30, 2009 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 of Stockholders and Proxy Statement, receipt of which is hereby acknowledged, and to vote as specified by the undersigned on the reverse side.
          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 RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2009.
          THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL DIRECTOR NOMINEES AND FOR RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2009.

 

 

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