<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Loral Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / 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:
- --------------------------------------------------------------------------------
- ---------------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
---------------------------------
1995
---------------------------------
NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT
[LORAL LOGO]
<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 25, 1995
------------------------
The Annual Meeting of Stockholders of Loral Corporation will be held in the
Celeste Bartos Forum at the New York Public Library, Fifth Avenue and 42nd
Street, New York, New York, at 2:00 o'clock P.M., on Tuesday July 25, 1995 for
the purpose of:
1. Electing to the Board three Class I Directors whose terms have expired;
and, subject to obtaining Stockholder approval of Proposal 2, electing a
twelfth Director, who would be the fourth Class I Director;
2. Amending Article SEVENTH of the Restated Certificate of Incorporation,
increasing the maximum number of Directors from eleven to thirteen;
3. Acting upon a proposal to ratify the selection of Coopers & Lybrand
L.L.P. as independent auditors for the fiscal year ending March 31,
1996; and
4. Transacting any other business which may properly come before the
meeting.
The Board of Directors has fixed the close of business on June 16, 1995 as
the date for determining Stockholders of record entitled to receive notice of,
and to vote at, the Annual Meeting.
All Stockholders are cordially invited to attend. Those who do not expect
to be present are requested to date, sign and mail the enclosed proxy as
promptly as possible in the enclosed postage paid envelope.
By Order of the Board of Directors
/s/ Bernard L. Schwartz
------------------------------------
BERNARD L. SCHWARTZ
Chairman of the Board of Directors
Date: June [ ], 1995
<PAGE> 4
PROXY STATEMENT
LORAL CORPORATION
600 THIRD AVENUE
NEW YORK, NEW YORK 10016
------------------------
ANNUAL MEETING OF STOCKHOLDERS
JULY 25, 1995
------------------------
PROXY SOLICITATION
The enclosed Proxy is solicited by and on behalf of the Board of Directors
of Loral Corporation (the "Company" or "Loral"). Any Proxy given by a
Stockholder may be revoked by him at any time before it is voted by written
notice to the Secretary, by a duly executed Proxy bearing a later date, or by
voting in person at the meeting. The cost of soliciting proxies will be borne by
the Company. The Company will enlist the assistance of and reimburse banks,
brokers and other nominees for their costs in transmitting Proxies and Proxy
authorizations to beneficial owners whose stock is registered in the name of
such nominees. The Company has also retained W. F. Doring & Co., Inc. to assist
it in the solicitation of proxies and will pay a fee, not to exceed $7,500, for
such services. Proxies, ballots and voting tabulations that identify
Stockholders will be held confidential, except in a contested proxy solicitation
or where necessary to meet applicable legal requirements. The Inspectors of
Election will not be employees of the Company. This Proxy Statement and the
enclosed Proxy will be first mailed to Stockholders on or about June 29, 1995.
OUTSTANDING VOTING STOCK
Only Stockholders at the close of business on the June 16, 1995 record date
are entitled to notice of and to vote at the Annual Meeting. There were
[ , , ] shares of common stock, par value $.25 per share, ("Common Stock")
of the Company outstanding on that date and each share is entitled to one vote
on each matter. Abstentions and broker "non-votes" will be counted in
determining the number of shares present but will not be voted for election of
directors or on other proposals and will have the same effect as a vote against
Proposal 2.
As of May 31, 1995, the only officer or Director owning 1% or more of the
Company's Common Stock was Bernard L. Schwartz, Chairman of the Board of
Directors and Chief Executive Officer of Loral, who owned beneficially 1,807,001
shares constituting approximately 2.1% of the Company's outstanding voting
securities. All Directors, nominees and current executive officers as a group
(26 persons) owned beneficially 2,964,979 shares constituting approximately 3.4%
of outstanding voting securities.
Based upon filings made with the Company, the only reported 5% Stockholder
as of the record date is Fidelity Investments, FMR Corp. ("FMR") on behalf of
advisory accounts and/or investment companies. FMR owns 5,355,254 ( . %)
shares of the Company's common stock. FMR has represented that the shares were
acquired for investment purposes for managed accounts, trusts or employee
benefit plans.
<PAGE> 5
ELECTION OF DIRECTORS
The Company has three classes of Directors serving staggered three-year
terms. Class I currently consists of three Directors and Classes II and III
consist of four Directors. If Proposal 2 is adopted by the Stockholders, four
Class I Directors will be elected at the Annual Meeting for three-year terms
expiring on the date of the Annual Meeting in 1998. The terms of the Class II
and Class III Directors expire on the date of the Annual Meeting in 1996 and
1997, respectively. Of the Directors named below, the terms of office of Messrs.
Gittis, Kekst and Yankelovich expire at the 1995 Annual Meeting.
The three persons named above have been nominated by the Board of Directors
for election as Directors to serve for a period of three years and until their
respective successors are duly elected and shall qualify. Additionally, subject
to Stockholder approval of Proposal 2, Mr. Arthur L. Simon has been nominated by
the Board of Directors for election as Director to serve for a period of three
years and until his successor is duly elected and shall qualify. Unless
authority to vote for management's nominees is withheld, the enclosed proxy will
be voted for the election of the persons named above, including Mr. Simon if
Proposal 2 is approved, except that the persons designated as proxies reserve
full discretion to cast their votes for other persons in the unanticipated event
that any of such nominees is unable or declines to serve. The nominees, other
than Mr. Simon, have acted as Directors of the Company since the last Annual
Meeting of Stockholders.
The Company has a standing Audit and Government Compliance Committee (the
"Audit Committee"), Nominating Committee, and Compensation and Stock Option
Committee (the "Compensation Committee"). The Audit Committee, which met three
times during fiscal 1995, is comprised of four members: Messrs. Hodes, Ruderman,
Shapiro and Stanton. The Audit Committee reviews and acts or reports to the
Board with respect to government procurement compliance matters as well as
various auditing and accounting matters, including the selection of the
Company's independent auditors, the accounting and financial practices and
controls of the Company, audit procedures and findings, and the nature of
services performed for the Company by, and the fees paid to, the independent
auditors. The Nominating Committee, which met once in fiscal 1995, is comprised
of Messrs. Kekst, Shapiro and Stanton. The Nominating Committee is chartered to
establish criteria for recommendations for director nominees and in connection
therewith, to consider the participation and contribution of current Directors.
The Nominating Committee does not generally accept nominees randomly received
from third parties, including Stockholders. The Compensation Committee, which
met twice during fiscal 1995, is comprised of four members: Messrs. Gittis,
Hodes, Kekst and Shapiro. The Compensation Committee reviews and provides
recommendations to the Board of Directors regarding executive compensation
matters. The Compensation Committee is also responsible for the administration
of the Company's Stock Option and Incentive Stock Purchase Plans, Restricted
Stock Purchase Plan and the Incentive Compensation Plan for Senior Executives.
The Board of Directors held seven meetings during fiscal 1995. No Director
attended fewer than 75% of the meetings of the Board of Directors and of its
committees. Directors are paid a fixed fee of $25,000 per year. Non-employee
Directors are also paid $6,000 for personal attendance at each meeting. Audit
Committee members are paid $2,000 per year and $1,000 per meeting. Compensation
Committee members are paid $500 per year. The Company provides certain life
insurance and medical benefits to certain non-employee Directors. For fiscal
1995 the value of these benefits was $13,565 for Mr. Gittis, $15,515 for Mr.
Hodes, $14,553 for Mr. Kekst, $14,223 for Mr. Ruderman, $12,928 for Mr. Shapiro
and $14,170 for Mr. Yankelovich. In addition, Mr. Shapiro received compensation
in the amount of $35,570 with respect to early cancellation of a prior life
insurance policy.
The Company has purchased insurance from the Reliance Insurance Company
insuring the Company against obligations it might incur as a result of its
indemnification of its officers and Directors for certain
2
<PAGE> 6
liabilities they might incur, and insuring such officers and Directors for
additional liabilities against which they might not be indemnified by the
Company. The insurance expires on April 1, 1996, and costs $321,300. Pursuant to
the New York Business Corporation Law, the Company has entered into Indemnity
Agreements with its Directors and executive officers. The Indemnity Agreements
are intended to provide the full indemnity protection authorized by New York
law.
The following table provides certain relevant information concerning the
Directors (and Mr. Arthur L. Simon, nominee to the Board of Directors) and their
principal occupations:
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
PRINCIPAL OCCUPATION CONTINUOUSLY
NAME AGE AND DIRECTORSHIPS SINCE
- ----------------------------- --- ------------------------------------------- ------------
<S> <C> <C> <C>
Bernard L. Schwartz(1)....... 69 Chairman of the Board of Directors and 1972
(Class III) Chief Executive Officer
Chairman of the Board of Directors and
Chief Executive Officer of K&F
Industries, Inc.
Director of Globalstar Telecommunications
Limited, Reliance Group Holdings, Inc.,
and certain subsidiaries, Sorema
International Holding N.V., First Data
Corporation, and Trustee of N.Y.
University Medical Center
Frank C. Lanza............... 63 President and Chief Operating Officer 1981
(Class II) Director of Globalstar Telecommunications
Limited
Howard Gittis................ 61 Director, Vice Chairman and Chief 1990
(Class I) Administrative Officer of MacAndrews &
Forbes Holdings Inc.
Director of Andrews Group Incorporated,
Consolidated Cigar Corporation, First
Nationwide Holdings, Inc., First
Nationwide Bank, Jones Apparel Group,
Inc., Mafco Worldwide Corporation,
National Health Laboratories Holdings,
Inc., NWCG Holdings Corporation, New
World Communications Group Incorporated,
New World Television Incorporated, Revlon
Consumer Products Corporation, and Revlon
Worldwide Corporation.
Robert B. Hodes(1)(2)........ 69 Partner and Co-Chairman, Willkie Farr & 1959
(Class II) Gallagher, law firm, New York, N.Y.
Director of Aerointernational, Inc., W.R.
Berkley Corporation, Crystal Oil Company,
Globalstar Telecommunications Limited,
R.V.I. Guaranty, Ltd., LCH Investments
N.V., Mueller Industries, Inc. and
Restructured Capital Holdings, Ltd.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
PRINCIPAL OCCUPATION CONTINUOUSLY
NAME AGE AND DIRECTORSHIPS SINCE
- ----------------------------- --- ------------------------------------------- ------------
<S> <C> <C> <C>
Gershon Kekst(1)............. 60 President of Kekst and Company 1972
(Class I) Incorporated, corporate and financial
communications consultants, New York,
N.Y.
Charles Lazarus.............. 71 Chairman and Director of Toys "R" Us, Inc. 1994
(Class II) Director of Automatic Data Processing, Inc.
Malvin A. Ruderman........... 68 Professor of Physics, Columbia University, 1975
(Class III) New York, N.Y.
E. Donald Shapiro............ 63 The Joseph Solomon Distinguished Professor 1973
(Class III) of Law since 1983 and Dean/Professor of Law
(1973-1983), New York Law School
Director of Interferon Sciences, Inc., Bank
Leumi Trust Co., Eyecare Products PLC,
Future Medical Products, Inc., Kranzco
Realty Trust, MacroChem Corporation and
Premier Laser Systems
Vice Admiral Allen M. Shinn, 87 Independent Consultant 1973
U.S.N. (Ret.).............. Director Emeritus of Pennzoil Company
(Class II)
Thomas J. Stanton, Jr.(2).... 67 Chairman Emeritus of National Westminster 1988
(Class III) Bancorp NJ
Director of Reliance Group Holdings, Inc.,
and Reliance Insurance Co.
Daniel Yankelovich(2)........ 70 Chairman of DYG, Inc., market, consumer and 1982
(Class I) opinion research, New York, N.Y.
Director of U.S. West Inc., Meredith
Corporations and Arkla, Inc.
Arthur L. Simon.............. 63 Independent Consultant Nominee
(Nominee, Class I) Partner, Coopers & Lybrand L.L.P.,
Certified Public Accountants, from 1968
to 1994
</TABLE>
- ---------------
(1) Member of Executive Committee.
(2) Member of Pension Advisory Committee.
4
<PAGE> 8
SECURITIES OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the number of shares of Common Stock beneficially
owned by the Directors and nominees, the named executive officers in the Summary
Compensation Table ("NEOs"), and all Directors, nominees and officers as a group
on May 31, 1995. Individuals have sole voting and investment power over the
stock unless otherwise indicated in the footnotes.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF INDIVIDUAL BENEFICIAL OWNERSHIP(1)(2) OF CLASS
- ----------------------------------------------------------- -------------------------- --------
<S> <C> <C>
Bernard L. Schwartz........................................ 1,807,001 (3) 2.1%
Michael P. DeBlasio........................................ 105,749 (4) *
Howard Gittis.............................................. 3,000 *
Robert B. Hodes............................................ 14,400 (5) *
Gershon Kekst.............................................. 13,200 *
Frank C. Lanza............................................. 622,779 (6) *
Robert V. LaPenta.......................................... 93,461 (7) *
Charles Lazarus............................................ 7,000 (8) *
Malvin A. Ruderman......................................... 16,000 (9) *
E. Donald Shapiro.......................................... 14,000(10) *
Vice Admiral Allen M. Shinn................................ 14,000 *
Arthur L. Simon............................................ 1,000 *
Thomas J. Stanton, Jr...................................... 12,000 *
Michael B. Targoff......................................... 26,918(11) *
Daniel Yankelovich......................................... 16,500 *
All Directors, Nominees and Executive Officers as a Group
(26 persons)............................................. 2,964,979(12) 3.4%
</TABLE>
- ---------------
* Represents holdings of less than one percent.
(1) Includes shares which, as of May 31, 1995, may be acquired within sixty
days pursuant to the exercise of options (which shares are treated as
outstanding for the purposes of determining beneficial ownership and
computing the percentage set forth); shares held by trusts of which
Directors and their wives are trustees; shares held by a trust in which an
officer and Director is a trustee; and shares held for the benefit of
officers as of March 31, 1995 in the Loral Master Savings Plan (the
"Savings Plan").
(2) Except as noted, all shares are owned directly with sole investment and
voting power. All Directors other than Messrs. Schwartz, Lanza, Gittis and
Lazarus have the right to exercise Loral stock options for 10,000 shares at
$17.72 per share; such exercisable shares are included in the table.
(3) Includes 80,000 shares held by Mr. Schwartz' wife, 1,000,000 shares
exercisable under Company Stock Option Plans, and 6,112 shares in the
Savings Plan.
(4) Includes 22,000 shares exercisable under Company Stock Option Plans, 3,655
shares in the Savings Plan, and 1,968 shares restricted under the Company's
Restricted Stock Purchase Plan.
(5) Includes 400 shares as to which Mr. Hodes disclaims beneficial ownership
held by Mr. Hodes' minor child.
(6) Includes 244,280 shares exercisable under Company Stock Option Plans, 2,127
shares in the Savings Plan, and 4,681 shares restricted under the Company's
Restricted Stock Purchase Plan.
5
<PAGE> 9
(7) Includes 22,284 shares exercisable under Company Stock Option Plans, 3,111
shares in the Savings Plan, and 1,968 shares restricted under the Company's
Restricted Stock Purchase Plan.
(8) Includes 2,000 shares held by Mr. Lazarus' wife.
(9) Includes 6,000 shares owned jointly with Mr. Ruderman's wife.
(10) Includes 4,000 shares as to which Mr. Shapiro disclaims beneficial
ownership held by Mr. Shapiro's wife.
(11) Includes 16,424 shares exercisable under Company Stock Option Plans, 22
shares in the Savings Plan, and 1,968 shares restricted under the Company's
Restricted Stock Purchase Plan.
(12) Includes 1,461,288 shares exercisable under Company Stock Option Plans,
26,307 shares in the Savings Plan, and 14,275 shares restricted under the
Company's Restricted Stock Purchase Plan.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The goals of the Company's compensation program are to align compensation
with business objectives and corporate performance, and to enable the Company to
attract, retain and reward executive officers who contribute to the long-term
success of the Company and thereby create value for Stockholders. In order to
attain these goals, the Company's compensation policies have historically linked
compensation to corporate performance.
The principal components of the Company's compensation program are annual
cash compensation consisting of base salary and an annual incentive bonus, and
long-term incentive compensation using stock options and incentive stock
purchase awards. In determining the amount and form of executive compensation,
the Compensation Committee has considered the competitive market for senior
executives, the executive's role in the Company's achieving its business
objectives, and the Company's overall performance.
It is the Compensation Committee's intention that, provided other
compensation objectives are met, executive compensation be deductible for
Federal income tax purposes. For this reason, the Company proposed and the
Stockholders approved the 1994 Incentive Compensation Plan for Senior Executives
(the "Annual Bonus Plan") and the 1994 Stock Option and Incentive Stock Purchase
Plan (the "Stock Plans"), each of which has been designed to comply with
Internal Revenue Code Section 162(m).
ANNUAL COMPENSATION. The Company has historically paid its Chairman and
Chief Executive Officer ("CEO"), Bernard L. Schwartz, and its President and
Chief Operating Officer, Frank C. Lanza, pursuant to long-term employment
contracts. Base salaries for Messrs. Schwartz and Lanza have been fixed by
contract and have been increased over the years based on changes in the Consumer
Price Index. Base salaries for the other NEOs have been set at competitive
levels by the CEO in consultation with the Compensation Committee, giving due
regard to individual performance and time in position.
Annual incentive compensation for Messrs. Schwartz and Lanza has been
determined according to a contractual formula which provides for no bonus to be
paid until the Company's shareholders' equity, as defined, has grown by at least
9 1/4% from the end of the last fiscal year, and for bonuses to be directly
proportionate to increases above that level.
Annual incentive compensation for other corporate executives has not been
based on a formula using quantitative target levels. The CEO, in consultation
with the Compensation Committee, sets the compensation by assessing a number of
factors, including the executive's individual effort, performance and his
contribution toward achieving the Company's business plan and growth objectives.
Incentive compensation for
6
<PAGE> 10
corporate officers with line responsibility for division operations is generally
tied to performance targets for the businesses under their authority. These
performance targets are set as part of the Company's annual budgeting process.
LONG-TERM INCENTIVE COMPENSATION. It has been the Compensation Committee's
belief that Stockholders' interests are best served by encouraging key employees
to develop ownership interests in the Company. To that end, the Company
primarily relies upon fair market value employee stock options and incentive
stock purchase awards granted in accordance with the provisions of the Stock
Plans. It has not been the practice of the Company to make stock option or
incentive stock purchase awards on an annual basis. Thus, although fiscal 1995
reflected continued strong performance by the Company that was achieved during a
period of significant defense cutbacks, no stock options or incentive stock
purchase awards were granted during the year to the NEOs.
The Company's performance during the twenty-three fiscal year period since
Mr. Schwartz became Chairman of the Board and Chief Executive Officer of the
Company is highlighted by the performance graph following this report, which
compares the cumulative total return for Loral Common Stock with that of the
Standard & Poor's 500 Corporate Stock Index. The Compensation Committee believes
that the Company's compensation policies, which have been instrumental in
attracting and retaining highly qualified and dedicated personnel, have been an
important factor in the Company's growth and success.
This report of the Compensation Committee and the Performance Graphs
immediately following shall not be deemed incorporated by reference by any
general statements incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent it shall be specifically incorporated; and shall not
otherwise be deemed filed under such Acts.
MEMBERS OF THE COMPENSATION COMMITTEE
Howard Gittis
Robert B. Hodes
Gershon Kekst
E. Donald Shapiro
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
None of the members of the Compensation and Stock Option Committee (the
"Compensation Committee") of the Board of Directors are present or former
officers or employees of the Company or its subsidiaries. Mr. Hodes is a partner
in the law firm of Willkie Farr & Gallagher and Mr. Kekst is the principal
stockholder of Kekst and Company Incorporated. Both firms provided services to
the Company during the year.
7
<PAGE> 11
STOCK PERFORMANCE GRAPHS
The graph below compares the yearly change in cumulative total return,
including reinvestment of dividends, of the Company's common stock with the
cumulative total return of the Standard & Poor's 500 Composite Stock Index and a
peer group index, for the last five fiscal years, assuming an investment of $100
in the Company's stock and each index on April 1, 1990. The companies in the
peer group are: E-Systems, GM/Hughes, Grumman, Harris, Lockheed, Loral, Martin
Marietta, Raytheon and Texas Instruments.
GRAPH I
8
<PAGE> 12
The graph below compares the yearly change in cumulative total return,
including reinvestment of dividends, of the Company's common stock with the
cumulative total return of the Standard & Poor's 500 Composite Stock Index, for
the last twenty-three fiscal years, assuming an investment of $100 in the
Company's stock and the S&P index on April 1, 1972, just after Mr. Schwartz
became Chairman of the Board of Directors and Chief Executive Officer of the
Company.
GRAPH II
9
<PAGE> 13
FISCAL YEAR 1995
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
ANNUAL COMPENSATION ------------------------------------
SECURITIES
NAME AND PRINCIPAL --------------------- RESTRICTED UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS STOCK AWARD(A)(B) STOCK OPTIONS(C) COMPENSATION(D)
- ---------------------- ----- -------- ---------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Bernard L. Schwartz 1995 $908,300 $5,335,891 -- -- $88,252
Chairman of the Board 1994 $884,000 $3,604,237 -- 600,000 $97,399
of Directors and Chief 1993 $859,000 $3,525,669 -- 400,000 $86,266
Executive Officer
Frank C. Lanza 1995 $635,964 $2,611,215 -- -- $31,965
President and 1994 $618,925 $1,751,404 -- 150,000 $25,000
Chief Operating
Officer 1993 $600,924 $1,200,000 $ 1,623,019 -- $25,000
Michael P. DeBlasio 1995 $427,527 $ 527,106 -- -- $ 8,813
Senior Vice
President - 1994 $402,973 $ 355,584 -- 70,000 $ 5,385
Finance 1993 $402,973 $ 330,556 $ 682,500 -- $ 5,284
Robert V. LaPenta 1995 $357,753 $ 526,226 -- -- $ 7,246
Senior Vice President 1994 $337,723 $ 311,069 -- 70,000 $ 8,620
and Controller 1993 $337,723 $ 290,917 $ 682,500 -- $ 7,881
Michael B. Targoff 1995 $347,715 $ 526,712 -- -- $ 9,117
Senior Vice President 1994 $327,684 $ 311,495 -- 70,000 $10,758
and Secretary 1993 $327,684 $ 291,301 $ 682,500 -- $ 9,692
</TABLE>
- ---------------
(a) Value of shares awarded under the restricted stock purchase plan in 1993.
Shares awarded under the plan vest and become freely transferable in
accordance with a formula based upon Loral earnings. The total number of
shares vesting under the plan each year is equal to 3% of the Company's
pre-tax profit divided by the grant value (currently $105 per share) of
restricted shares outstanding. Any shares not earned at the earlier of
completion of the seventh year or termination of employment, will be
forfeited. Dividends are paid on the restricted shares awarded. As of March
31, 1995, the number and value of restricted stock holdings, respectively,
were 4,681 shares and $198,357 for Mr. Lanza, 1,968 shares and $83,394 for
each of Messrs. DeBlasio, LaPenta, and Targoff.
(b) Under the 1994 incentive stock purchase plan, the Compensation Committee
may permit participants to defer up to 100% of their annual bonus into a
Restricted Stock Purchase Account (the "Restricted Account"). The
Restricted Account will be used to purchase Loral Common Stock equal to
150% of the deferred bonus, subject to limits the Committee may establish
from time to time. The shares in the Restricted Account earn dividends and
generally vest 25% per year commencing upon the second anniversary of the
grant date. The Committee may establish specified performance conditions
that, if attained, will result in accelerated vesting. All non-vested
shares are forfeited upon termination of employment and the remaining
balance of the Restricted Account equal to the lesser of the original cost
or the market value of the shares is returned to the participant. No shares
have been issued under this plan.
(c) Stock options, which have been adjusted to reflect a two-for-one stock
split distributed on October 7, 1993, generally vest over a four and
one-half to six year period.
(d) Includes annual Board of Directors fee in 1995, 1994 and 1993 of $25,000
for Mr. Schwartz and Mr. Lanza, company matching contributions of $3,100 in
1995, $3,598 in 1994 and $3,722 in 1993 to the Savings Plan for Messrs.
DeBlasio, LaPenta and Targoff and the value of supplemental life insurance
programs attributable to 1995, 1994 and 1993 in the amounts of $63,252,
$72,399 and $61,266 for Mr. Schwartz, $5,713, $1,787 and $1,562 for Mr.
DeBlasio, $4,146, $5,022 and $4,159 for Mr. LaPenta, and $6,017, $7,160 and
$5,970 for Mr. Targoff, respectively, and $6,965 attributable to 1995 for
Mr. Lanza.
10
<PAGE> 14
FISCAL YEAR 1995
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS OPTIONS AT
SHARES AT YEAR-END YEAR-END(A)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bernard L. Schwartz...... -- -- 1,000,000 -- $23,500,000 --
Frank C. Lanza........... 56,000 $ 1,802,500 214,280 195,720 $ 6,672,850 $ 5,511,525
Michael P. DeBlasio...... -- -- 28,428 95,144 $ 937,785 $ 2,694,305
Robert V. LaPenta........ 13,998 $ 398,745 4,000 103,724 $ 130,000 $ 2,986,025
Michael B. Targoff....... -- -- 24,714 109,144 $ 845,205 $ 3,191,305
</TABLE>
- ---------------
(a) Market value of underlying securities at exercise date or year-end, as the
case may be, minus the exercise price.
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
The Company has an employment agreement with Bernard L. Schwartz, which
expires on March 31, 2000. Pursuant to the agreement, Mr. Schwartz' annual base
salary was $908,300 for fiscal 1995, to be increased annually by the percentage
change in a specified consumer price index. Under the agreement, Mr. Schwartz is
entitled to annual incentive compensation equal to 3% of the increase over
9 1/4% in the Company's shareholders' equity as adjusted for stock issuances,
other non-operating charges or credits and before dividends. In accordance with
the incentive bonus provisions, Mr. Schwartz received fiscal 1995 incentive
compensation of $5,214,426. The agreement also includes a cap on maximum annual
incentive compensation of $9 million, as adjusted for inflation.
Pursuant to the agreement, if Mr. Schwartz is removed as Chairman of the
Board of Directors or as Chief Executive Officer other than for cause, or if his
duties, authorities or responsibilities are diminished, or if there is a change
of control (as defined to encompass the Company becoming a subsidiary of another
company, the acquisition of 35% or more of the voting securities of the Company
by a particular stockholder or group, or a change in 35% of the Company's
directors at the insistence of the shareholder group), Mr. Schwartz may elect to
terminate the contract. In any such event, or upon his death or disability, Mr.
Schwartz will be entitled to receive a lump sum payment discounted at 9% per
annum, in an amount equal to his base salary as adjusted for defined consumer
price index changes for the remainder of the term, an amount of incentive
compensation equal to the highest received by Mr. Schwartz in any of the prior
three years, times the number of years (including partial fiscal years)
remaining during the term, and an amount calculated to approximate the annual
compensation element reflected in the difference between fair market value and
exercise price of stock options granted to Mr. Schwartz. All such sums are
further increased to offset any tax due by Mr. Schwartz under the excise tax and
related provisions of Section 4999 of the Internal Revenue Code but subject to a
cap equal to 200% of any such tax.
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<PAGE> 15
The Company also has an employment agreement with Mr. Frank C. Lanza for a
five year term expiring March 31, 1997. Pursuant to the agreement, Mr. Lanza's
annual base salary was $634,500 for fiscal 1995, to be increased annually by the
percentage change in a specified consumer price index. Under the agreement, Mr.
Lanza is entitled to annual incentive compensation under the growth in
shareholders' equity formula applicable under Mr. Schwartz' employment
agreement, but at 1 1/2% of the increase over the 9 1/4% threshold. As a result,
Mr. Lanza received fiscal 1995 incentive compensation of $2,607,213. If Mr.
Lanza becomes disabled, he will receive 50% of his salary for the remainder of
the term.
The Company has established Supplemental Life Insurance Programs for
certain key employees including the executives listed in the Summary
Compensation Table. For Messrs. Schwartz, Lanza, DeBlasio, LaPenta and Targoff,
the Plans are funded with "Split-Dollar" insurance policies in the face amounts
of $20,500,000, $1,000,000, $1,060,000, $1,200,000 and $1,450,000 respectively.
In the event of death, the Company will be entitled to receive an amount not
less than the Company's cumulative contributions. If any of such officers
terminates his employment prior to the time that the Company's contributions
equal the cash value of the insurance policy, he will be responsible for
repayment of the remainder of the Company's contribution to the extent cash
becomes available in the policy. Such officers contribute to the payment for
this program.
PENSION PLANS
The individuals named in the Summary Compensation Table participate in a
pension plan that generally provides an annual benefit for each year of
membership for the first 14 years of Loral service, of 1.2% of such remuneration
up to the Social Security Wage Base and 1.45% of such remuneration in excess of
that Base, and for 15 or more years of Loral service, 1.5% of such remuneration
up to the Social Security Wage Base and 1.75% of such remuneration in excess of
that Base, all subject to certain vesting and other requirements. Remuneration
covered by the Plans primarily includes salary and bonus. These individuals also
participate in a supplemental plan which generally makes up for certain
reductions in such benefits caused by Internal Revenue Code limitations.
Estimated annual benefits upon retirement for Messrs. Schwartz, Lanza,
DeBlasio, LaPenta and Targoff under the pension and supplemental plans are
$ , , , $ , , $ , , $ , and $ , , respectively. The
retirement benefits have been computed assuming that (i) employment will be
continued until normal retirement, or until the expiration of current employment
agreements, if later; and (ii) current levels of creditable compensation and the
Social Security Wage Base will continue without increases or adjustments
throughout the remainder of the computation period.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Schwartz is Chairman, Chief Executive Officer, 27% owner, and
controlling shareholder of K&F Industries, Inc. ("K&F"), which acquired the
Company's Aircraft Braking and Engineered Fabrics businesses in April 1989.
Certain other individuals named in the Summary Compensation Table are directors
of K&F's operating subsidiaries. Mr. Schwartz and the other individuals named in
the Summary Compensation Table receive compensation from K&F for rendering
advisory services to K&F. Such compensation is not included in the Summary
Compensation Table but is considered by the Compensation Committee regarding
compensation from Loral. In September 1994, the Company exchanged its $30
million 14.75% pay-in-kind subordinated convertible K&F debenture due in 2004
for $11,514,000 in cash, net of expenses, and a 22.5% voting equity interest in
K&F. Pursuant to agreements between the Company and K&F, the parties provide
services to each other and share certain expenses relating to a production
program, real property occupancy, benefits administration, treasury, accounting
and legal services. The related charges agreed upon by the parties
12
<PAGE> 16
were established to reimburse each party for the actual cost incurred without
profit or fee. The Company believes that the arrangements with K&F are as
favorable as could have been obtained from an unaffiliated third party. The
Company's billings to and from K&F in fiscal 1995 were $3,014,000 and $15,000,
respectively. The Company's sales to K&F in fiscal 1995 were $4,181,000.
Mr. Robert B. Hodes, a Director and a member of the Executive, Audit,
Pension Advisory, and Compensation Committees, is a partner in the law firm of
Willkie Farr & Gallagher, which is general counsel to the Company.
For the fiscal year ended March 31, 1995, the Company paid fees and
disbursements in the amount of $182,000 for corporate communications
consultations to Kekst and Company Incorporated, of which company Mr. Gershon
Kekst, a Director and member of the Executive, Nominating, and Compensation
Committees, is President and the principal stockholder. Kekst and Company
Incorporated continues to render such services to the Company.
PROPOSAL 2. APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE MAXIMUM NUMBER OF DIRECTORS
The Board of Directors, by unanimous vote at its June 6, 1995 regular
meeting, has determined that an amendment to Article SEVENTH of the Restated
Certificate of Incorporation (the "Certificate"), increasing the maximum number
of Directors from eleven to thirteen, is advisable and has voted to recommend
the amendment to the Company's Stockholders for adoption.
The current Board of Directors consists of eleven members, which is the
maximum number currently authorized by the Certificate. Management believes that
it is advisable for the Company to increase the maximum number of authorized
Directors so that the Company will have the ability to attract qualified new
Directors while continuing to retain the services of existing Directors who are
well qualified and informed about the Company's activities.
The Board also voted to amend the Corporation's By-Laws, subject to
Stockholder approval of the amendment to the Certificate, to increase from
eleven to twelve the number of Directors which shall constitute the whole Board.
The Board of Directors has nominated Mr. Arthur L. Simon to serve as the twelfth
director, subject to Stockholder approval of this proposal. The Board has no
present plans to elect any additional Directors.
The proposed amendment to Article SEVENTH of the Certificate amends the
first sentence to read as follows:
"SEVENTH: The number of its directors shall be set forth in the
By-Laws of this Corporation but shall at no time be less than
three (3) nor more than thirteen (13)."
APPROVAL OF PROPOSAL 2 WILL REQUIRE THE AFFIRMATIVE VOTE IN PERSON OR BY
PROXY OF THE HOLDERS OF A MAJORITY OF ALL OUTSTANDING SHARES OF COMMON STOCK
ENTITLED TO VOTE.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS OF LORAL VOTE IN FAVOR
OF THIS PROPOSAL.
PROPOSAL 3. RATIFICATION OF ELECTION OF INDEPENDENT AUDITORS OF LORAL.
The Board of Directors has selected Coopers & Lybrand L.L.P., certified
public accountants, as the independent auditors of the Company for the fiscal
year ending March 31, 1996.
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<PAGE> 17
Coopers & Lybrand L.L.P. has advised the Company that it has no direct or
indirect financial interest in the Company or any of its subsidiaries, and that
it has had, during the last three years, no connection with the Company or any
of its subsidiaries other than as independent auditors and related activities.
Coopers & Lybrand L.L.P. will have a representative present at the meeting who
will have an opportunity to make a statement if he or she so desires and to
respond to appropriate questions.
During fiscal 1995, Coopers & Lybrand L.L.P provided services consisting of
the audit of the annual consolidated financial statements of the Company and its
subsidiaries and of retirement and other employee benefit plans, consultations
with respect to the Company's quarterly consolidated financial statements,
reports and registration statements filed with the Securities and Exchange
Commission and general matters relating to accounting, taxes, benefit plans,
acquisitions and government compliance.
IF THE STOCKHOLDERS, BY THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY
OF THE SHARES OF COMMON STOCK REPRESENTED IN PERSON OR BY PROXY AND VOTING AT
THE MEETING DO NOT RATIFY THE SELECTION OF COOPERS & LYBRAND L.L.P., THE
SELECTION OF INDEPENDENT AUDITORS WILL BE RECONSIDERED BY THE BOARD.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS OF LORAL VOTE IN FAVOR
OF THIS PROPOSAL.
LORAL STOCKHOLDERS' PROPOSALS
Proposals of the Company's Stockholders intended to be presented at the
1996 Annual Meeting of the Company must be received by the Company at 600 Third
Avenue, New York, New York 10016, Attention: Secretary, no later than February
23, 1996.
OTHER ACTION AT MEETING AND VOTING OF PROXIES
Management does not know of any matters to come before the Annual Meeting
other than those herein set forth. However, the enclosed proxy confers
discretionary authority upon the proxy holders named therein to vote and act in
accordance with their best judgement with regard to any other matters which
should come before the meeting or any adjournment thereof. Upon receipt of such
proxy (in the form enclosed and properly signed) in time for voting, the shares
represented thereby will be voted as indicated thereon or, if no direction is
indicated, will be voted FOR the election of Directors and FOR any Proposal.
By Order of the Board of Directors
Michael B. Targoff
Secretary
Date: June [ ], 1995
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LORAL CORPORATION
PROXY - ANNUAL MEETING OF STOCKHOLDERS, JULY 25, 1995
BERNARD L. SCHWARTZ, MICHAEL B. TARGOFF and ROBERT B. HODES, and each of them,
are hereby appointed the proxies of the undersigned, with full power of
substitution on behalf of the undersigned to vote, as designated below, all the
shares of the undersigned at the Annual Meeting of Stockholders of LORAL
CORPORATION, to be held in the Celeste Bartos Forum at the New York Public
Library, Fifth Avenue and 42nd Street, New York, New York on July 25, 1995, at
2:00 o'clock P.M. and at all adjournments thereof. The Board of Directors
Recommends A Vote FOR The Following Proposals:
1. ELECTION OF FOUR CLASS I DIRECTORS - Nominees: Class I: H. Gittis, G.
Kekst, A. Simon, D. Yankelovich
/ / VOTE FOR all nominees except those written below
/ / WITHHOLD AUTHORITY to vote for all nominees
Instruction: To withhold authority to vote for any nominee write that
nominee's name on the line below:
- -------------------------------------------------------------------------------
2. Proposal to amend Article Seventh of the Company's Restated Certificate
of Incorporation;
FOR AGAINST ABSTAIN
/ / / / / /
3. Proposal to ratify the selection of COOPERS & LYBRAND L.L.P. as independent
auditors for the Company for its fiscal year ending March 31, 1996
FOR AGAINST ABSTAIN
/ / / / / /
4. In their discretion, upon such other matters as may properly come before the
meeting
FOR AGAINST ABSTAIN
/ / / / / /
================================================================================
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is indicated, this Proxy will
be voted FOR the election of all nominees listed hereon and FOR Proposals 2
through 4.
P
------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS
R PROXY IN THE ENVELOPE PROVIDED.
------------------------------------------------------
O THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
X
The undersigned hereby acknowledges receipt of the Notice of
Y Annual Meeting and accompanying Proxy Statement.
Dated:..................................................., 1995
...............................................................
...............................................................
(Signature of Stockholder)
(Please sign exactly as name or names appear hereon. When
signing as attorney, executor, administrator, trustee or
guardian, please give your full title as such; if by a
corporation, by an authorized officer; if by a partnership, in
partnership name by an authorized person. For joint owners,
all co-owners must sign.)
