Change of Control Agreement - Orbital Sciences Corp. and Garrett E. Pierce
EXECUTIVE EMPLOYMENT
CHANGE OF CONTROL AGREEMENT
August 9, 2000
Mr. Garrett E. Pierce
Orbital Sciences Corporation
21700 Atlantic Blvd.
Dulles, Virginia 20166
Dear Garrett:
Orbital Sciences Corporation and its subsidiaries (together, the
"Company") consider the maintenance of a sound and vital management to be
essential to protecting and enhancing the best interests of the Company and
its stockholders. In this connection, the Company recognizes that the
possibility of a change in control may exist and that such possibility, and
the uncertainty and questions which it may raise among management, may result
in the departure or distraction of management personnel to the detriment of
the Company and its stockholders. Accordingly, the Company's Board of
Directors (the "Board") has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of members
of the Company's management, including yourself, to their assigned duties
without distraction in the face of the potentially disturbing circumstances
arising from the possibility of a change in control of the Company.
This letter agreement (the "Agreement") sets forth the severance
benefits that the Company agrees will be provided to you in the event your
employment with the Company terminates following a "Change in Control" (as
defined in Section 2 hereof) under the circumstances described below. This
Agreement is not an employment contract nor does it alter your status as an
at-will employee of the Company. No benefit shall be payable under this
Agreement except on termination of your employment with the Company as a
result of a Change in Control (as defined below).
1. Term. This Agreement commences as of August 9, 2000, and shall
remain in effect so long as you are employed as an executive officer of the
Company, provided, however, that in the event of a Change in Control, this
Agreement shall remain in full force and effect for a 24-month period
commencing on the date of the Change in Control regardless of whether you
remain an executive officer of the Company during such 24-month period.
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Mr. Garrett E. Pierce
Orbital Sciences Corporation
August 9, 2000
Page 2
2. Change in Control. For purposes of this Agreement, a Change in
Control shall mean:
(a) the acquisition by any individual, entity or group (within
the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934 (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 of
the Exchange Act) of 30% or more of either (i) the then
outstanding shares of common stock of the Company or (ii)
the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors;
(b) within any 24-month period, the persons who were directors
of the Company immediately prior thereto (the "Incumbent
Board") shall cease to constitute a majority of the Board of
Directors of the Company or of its successor by merger,
consolidation or sale of assets. For this purpose, the
Incumbent Board includes any new director whose (i) election
to the Board resulted from a vacancy caused by the
retirement, death or disability of a director and was
approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of
the period, or (ii) nomination to the Board was approved by
a committee of the Board whose majority consisted of
directors who were directors in office at the beginning of
the period; or
(c) the consummation by the Company of a reorganization, merger,
consolidation or sale or disposition of all or substantially
all the assets of the Company (other than any such
transaction initiated by the action of the Board) (a
"Business Combination"), the result of which is that (i) the
stockholders of the Company at the time of the execution of
the agreement to effect the Business Combination own less
than 60% of the total equity of the surviving or resulting
entity entitled to vote generally in the election of
directors, (ii) a Person (excluding any corporation
resulting from the Business Combination) becomes the
beneficial owner of 20% or more of the then outstanding
shares of common stock of the corporation resulting from
such Business Combination or (iii) at least a majority of
the members of the board of directors of the corporation
resulting from such Business Combination were members of the
Board of Directors of the Company at the time of execution
of the initial agreement or other action of the Board that
provided for such Business Combination.
Notwithstanding the above, a Change in Control shall not be deemed to
occur as a result of a transaction where either you, individually or as an
officer, director or 5% stockholder or partner of any entity, or any employee
benefit plan (or related trust) of the Company (a) becomes the beneficial
owner of securities representing 30% or more of the combined voting power of
the
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Mr. Garrett E. Pierce
Orbital Sciences Corporation
August 9, 2000
Page 3
Company 's then outstanding securities, or (b) enters into an agreement with
the Company providing for the merger, consolidation, or sale or transfer of
all or substantially all the assets of the Company. In addition, a Change in
Control shall not be deemed to occur where you enter into an employment
agreement with the Company, any Person whose acquisition of the Company's
securities resulted in the Change in Control or any entity resulting from a
Business Combination.
3. Termination Following Change in Control. If a Change in
Control as described in Section 2 occurs, you shall be entitled to the
benefits provided in Section 4 of this Agreement if your employment is
terminated by the Company for Disability or Cause, as described below, or by
you for Good Reason, as described below.
(i) Disability. If, as a result of your incapacity due
to physical or mental illness, you shall have been absent from your duties
with the Company on a full-time basis for nine consecutive months, and within
30 days after written notice of termination is given you shall not have
returned to the full-time performance of your duties, the Company may
terminate your employment for "Disability."
(ii) Cause. Termination by the Company of your
employment for "Cause" shall mean termination on (A) the willful and continued
failure by you substantially to perform your duties with the Company in
accordance with the instructions of the Board or the executive officers to
whom you report (other than any such failure resulting from your incapacity
due to physical or mental illness), after a demand for substantial performance
is delivered to you by the Board which specifically identifies the manner in
which the Board believes that you have not substantially performed your
duties, or (B) the willful engaging by you in conduct which is demonstrably
and materially injurious to the Company, monetarily or otherwise. For purposes
of this Subsection, no act, or failure to act, on your part shall be
considered "willful" unless done, or omitted to be done, by you not in good
faith and without reasonable belief that your action or omission was in the
best interest of the Company. Notwithstanding the foregoing, you shall not be
deemed to have been terminated for Cause unless and until there shall have
been delivered to you a copy of a resolution duly adopted by the affirmative
vote of not less than two-thirds of the entire membership of the Board at a
meeting of the Board called and held for the purpose (after reasonable notice
to you and an opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of the Board you
were guilty of conduct set forth above in clause (A) or (B) of the first
sentence of this Subsection and specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate
your employment for Good Reason in connection with a Change in Control. For
purposes of this Agreement, "Good Reason" shall mean:
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Mr. Garrett E. Pierce
Orbital Sciences Corporation
August 9, 2000
Page 4
(A) without your written consent, the assignment to you
of any position (including status, offices, titles and reporting
requirements), authorities, duties and responsibilities, that are not
at least commensurate in all material respects with the most
significant of those held, exercised and assigned by you at any time
during the 180-day period immediately preceding a Change in Control,
or any other action by the Company that results in a diminution in
such position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and that is remedied by the Company promptly after
receipt of notice thereof given by you;
(B) a reduction by the Company in your annual base
salary ("Annual Base Salary"), which for the purposes of this
Agreement shall mean an amount at least equal to 12 times the highest
monthly base salary paid or payable, including any base salary that
has been earned but deferred, to you by the Company in respect of the
12-month period immediately preceding the month in which the Change
of Control occurs;
(C) the Company's requiring you to be based anywhere
other than the office of the Company in which you are based prior to
the Change in Control or any office or location within a 50 mile
radius of such office, except for required travel on the Company's
business to an extent substantially consistent with your present
business travel obligations;
(D) the failure by the Company to continue in effect
any compensation plan in which you participate, or to provide you
with plans substantially similar, including but not limited to any
stock purchase plan, stock option plan, incentive compensation,
bonus, and other plan in which you were participating at the time of
the Change in Control, or the failure by the Company to continue your
participation therein;
(E) the failure by the Company to continue to provide
you with benefits substantially similar to those enjoyed by you under
any of the Company's retirement, pension, 401(k), deferred
compensation, life insurance, medical, health, accident, disability
or other benefit plans in which you were participating at the time of
a Change in Control, the taking of any action by the Company which
would directly or indirectly materially reduce any of such benefits
enjoyed by you at the time of the Change in Control, or the failure
by the Company to provide you with the number of paid vacation days
to which you are entitled in accordance with the Company's normal
vacation policy in effect at the time of the Change in Control;
(F) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 5 hereof; or
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Mr. Garrett E. Pierce
Orbital Sciences Corporation
August 9, 2000
Page 5
(G) any termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the
requirements of Section 3(iv) hereof (and, if applicable, Section
3(ii) hereof); and for purposes of this Agreement, no such purported
termination shall be effective.
(iv) Notice of Termination. Any termination by the
Company or by you shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 6 hereof, and if by the
Company for Cause, shall not be effective unless such notice includes the
information set forth in Section 3(ii) hereof.
(v) Date of Termination, etc. "Date of Termination"
shall mean (A) if your employment is terminated by reason of death or
Disability, the date of your death or 30 days after Notice of Termination is
given (provided that you shall not have returned to the performance of your
duties on a full-time basis during such 30 day period), as the case may be,
(B) if your employment is terminated by the Company for Cause or for any other
reason, the date specified in the Notice of Termination which shall not be
less than 30 days from the date such Notice of Termination is given, and (C)
if you terminate your employment for "Good Reason," the date such Notice of
Termination is given or any later date specified therein.
4. Benefits Upon Termination or During Disability.
(i) During any period that you fail to perform your
duties hereunder as a result of incapacity due to physical or mental illness,
and in the event your employment is terminated pursuant to Section 3(i)
hereof, your benefits shall be determined in accordance with the Company's
insurance and benefit programs then in effect.
(ii) If your employment shall be terminated for Cause,
the Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
and the Company shall have no further obligations to you under this Agreement.
(iii) If your employment shall be terminated immediately
prior to or any time after a Change in Control (a) by the Company for any
reason other than for Cause or Disability or (b) by you for Good Reason, then
you shall be entitled to all the benefits provided below:
(A) The Company shall pay you on the Date of
Termination your full base salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given.
(B) In lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Company shall pay
to you, not later than 15 days following the Date of Termination, a
lump sum payment equal to two times the sum of (a) your Annual
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Mr. Garrett E. Pierce
Orbital Sciences Corporation
August 9, 2000
Page 6
Base Salary and (b) the sum of any incentive, annual and other cash
bonuses, paid to you for the 12-month period immediately preceding
the month in which the Change in Control occurred.
(C) The Company shall also immediately fully vest you
in all your account balances under the Company's retirement, deferred
compensation and pension plans (the "Plans"); provided, however, that
should the Company be unable to provide for such vesting under the
terms of any such Plans, the Company shall pay to you in the manner
and as directed by you, an amount that equals on an after-tax basis
the value of any amounts that were not vested or would otherwise be
forfeited by you under the Plans upon your termination of employment
with the Company.
(D) The Company shall also allow you the opportunity to
surrender to the Company any then outstanding vested and unvested
options (whether exercisable or not) to purchase Common Stock of the
Company and any of its subsidiaries and affiliates that you own and
that you did not previously surrender or convert in the transaction
that resulted in the Change in Control, and the Company shall
promptly pay to you in consideration therefor a cash payment equal to
the difference between the respective exercise price for such options
and the higher of the (a) highest price paid in connection with the
transaction that resulted in the Change in Control or (b) then
current fair-market value.
(E) The Company shall also pay to you all reasonable
legal fees and expenses incurred by you as a result of such
termination (including all such fees and expenses, if any, incurred
in contesting or disputing any such termination or in seeking to
obtain or enforce any right or benefit provided by this Agreement)
upon presentation to the Company of a reasonably detailed invoice for
such expenses, whether or not you have already made payment for such
expenses.
(F) For a 24-month period after such termination, the
Company shall arrange to provide you with life, disability, accident
and health insurance benefits substantially similar to those you were
receiving immediately prior to the Notice of Termination, provided,
however, that should the Company be unable to provide for any such
benefits under the terms of the benefit plans, or by law, the Company
shall pay you an amount equal to the premiums the Company would have
paid for such benefits under such plans.
(G) You shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section 4 be reduced by any compensation
earned by you as the result of employment by another employer or by
retirement benefits after the Date of Termination, or otherwise.
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Mr. Garrett E. Pierce
Orbital Sciences Corporation
August 9, 2000
Page 7
(H) In addition to all other amounts payable to you
under this Section 4, you shall be entitled to receive all benefits
payable to you under any of the Company's plans or agreements
relating to retirement benefits.
(iv) All payments required to be made by the Company
hereunder to you shall be subject to the withholding of such amounts relating
to Federal, state, local or foreign taxes as the Company reasonably may
determine it should withhold pursuant to any applicable law or regulation.
Notwithstanding any other provision of this Agreement or of any other
agreement, contract or understanding heretofore or hereafter entered into by
you and the Company, you shall not have any right to receive any payment or
other benefit under this Agreement if such payment or benefit, taking into
account all other payments to or benefits received by you, would cause any
payment to you under this Agreement to be considered a "parachute payment"
within the meaning of Section 280G(b)(2) of the Internal Revenue Code (a
"Parachute Payment"). In the event that the receipt of any such payment or
benefit under this Agreement would cause you to be considered to have received
a Parachute Payment under this Agreement, then you shall have the right, in
your sole discretion, to designate those payments or benefits under this
Agreement which should be reduced or eliminated so as to avoid having the
payment to you under this Agreement be deemed to be a Parachute Payment.
5. Successors; Binding Agreement.
(i) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all its business and/or assets to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement no later than
ten days prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle you to compensation from the Company in
the same amount and on the same terms as you would be entitled under section
4(iii), except that for purposes of implementing the foregoing, a date ten
days prior to the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "the Company" shall
mean the Company, as hereinbefore defined and any successor to its business
and/or assets that assumes and agrees to perform this Agreement by executing
and delivering the agreement provided for in this paragraph 5, by operation of
law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees. If
you should die while any amount would still be payable to you hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or
if there is no such designee, to your estate.
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Mr. Garrett E. Pierce
Orbital Sciences Corporation
August 9, 2000
Page 8
6. Notice. For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by registered
mail, return receipt requested, postage prepaid, addressed (i) if to the
Company, to Orbital Sciences Corporation, 21700 Atlantic Boulevard, Dulles,
Virginia 20166, Attn: Secretary of the Company, and (ii) if to you, to the
address set forth on the first page of this Agreement, or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing and signed by you and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth in
this Agreement, and this Agreement supersedes all prior agreements between the
Company and you with respect to the subject matter herein. The validity,
interpretation construction and performance of this Agreement shall be
governed by the local laws of the Commonwealth of Virginia (regardless of the
laws that might otherwise govern under principles of conflicts of law).
8. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Washington, D.C. in accordance with the domestic rules of the American
Arbitration Association then in effect. Pending the resolution of such dispute
or controversy, the Company will continue to pay you your full base salary in
effect when the notice giving rise to the dispute was given and you will
continue as a participant in all incentive compensation, stock option,
retirement, deferred compensation, pension, life, disability, health and
accident plans in which you were participating when the notice giving rise to
dispute was given, unless you have already received all benefits payable under
Section 4(iii) of this Agreement. Judgment may be entered on the arbitrator's
award in any court having jurisdiction; provided, however, that you shall be
entitled to seek specific performance of your right to be paid until the Date
of Termination during the pendency of any dispute or controversy arising under
or in connection with this Agreement.
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Mr. Garrett E. Pierce
Orbital Sciences Corporation
August 9, 2000
Page 9
If this Agreement correctly sets forth our agreement on the subject
matter hereof, kindly sign both of the enclosed copies, keeping one for your
files and returning the other to the Company.
Sincerely,
ORBITAL SCIENCES CORPORATION
/s/ David W. Thompson
-------------------------------------------
By: David W. Thompson
Chairman and Chief Executive Officer
Agreed to:
/s/ Garrett E. Pierce
-------------------------------------------
Name: Garrett E. Pierce
Date: August 9, 2000