[GRAPHIC OF LOGO OF AMERICAN MOBILE SATELLITE CORPORATION OMITTED]
American Mobile Satellite Corporation
- -------------------------------------
10802 Parkridge Boulevard
Reston, Virginia 20191-5416
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders
of American Mobile Satellite Corporation to be held at 9:00 a.m. on Wednesday,
May 21, 1997 at the Sheraton Reston Hotel, 11810 Sunrise Valley Drive, Reston,
Virginia (703/620-9000).
The formal notice of annual meeting and proxy statement are attached to
this letter. This material contains information concerning the business to be
conducted at the meeting and the nominees for election as directors.
Even if you are unable to attend the meeting in person, it is important
that your shares be represented. Therefore, I urge you to complete, date, sign
and return the enclosed proxy card at your earliest convenience. If you choose
to attend the annual meeting, you may, of course, revoke your proxy and cast
your votes personally at the meeting.
Sincerely,
/s/JACK A. SHAW
Chairman of the Board
<PAGE>
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American Mobile Satellite Corporation
- -------------------------------------
10802 Parkridge Boulevard
Reston, Virginia 20191-5416
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS April 21, 1997
- ----------------------------------------
To the Stockholders of American Mobile Satellite Corporation:
The annual meeting of stockholders of American Mobile Satellite
Corporation ("AMSC") will be held at the Sheraton Reston Hotel, 11810 Sunrise
Valley Drive, Reston, Virginia, on Wednesday, May 21, 1997, at 9:00 a.m., for
the following purposes:
1. To elect eleven directors;
2. To approve an amendment to the Company's 1989 Stock Option Plan to
increase the number of shares authorized for issuance;
3. To consider and act upon a proposal to ratify the appointment of
Arthur Andersen LLP as independent accountants for AMSC for the year 1997; and
4. To transact such other business as may be properly brought before
the meeting or any adjournments thereof.
Only holders of record of AMSC's Common Stock at the close of business
on March 31, 1997, will be entitled to vote at the meeting. A list of such
stockholders will be available at the Company's headquarters, 10802 Parkridge
Boulevard, Reston, Virginia for examination during normal business hours by any
stockholder for any purpose germane to the meeting for a period of ten days
prior to the meeting.
Stockholders who do not expect to attend the meeting in person are
asked to date, sign and complete the enclosed proxy and return it without delay
in the enclosed envelope, which requires no postage if mailed in the United
States.
By order of the Board of Directors,
Randy S. Segal
Vice President and Secretary
Reston, Virginia
April 21, 1997
<PAGE>
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American Mobile Satellite Corporation
- -------------------------------------
10802 Parkridge Boulevard
Reston, Virginia 20191-5416
PROXY STATEMENT
---------------
The accompanying proxy is solicited on behalf of the Board of Directors
of American Mobile Satellite Corporation ("AMSC" or the "Company") for use at
the annual meeting of stockholders to be held on May 21, 1997, and any
adjournments thereof. The stockholder giving the proxy may revoke it at any time
before it is exercised at the meeting by delivering to the Secretary of AMSC a
written instrument of revocation or a duly executed proxy bearing a later date.
This proxy statement and the accompanying form of proxy are being first sent to
stockholders on or about April 21, 1997.
The only class of securities of AMSC entitled to vote at the 1997
annual meeting is its Common Stock, of which 25,111,180 shares were outstanding
on March 31, 1997. Only stockholders of record at the close of business on March
31, 1997, will be entitled to vote at the annual meeting. Each stockholder has
one vote for each share of Common Stock held, and in the election of directors
is entitled to cumulate his or her votes. Under cumulative voting, each
stockholder is allowed that number of votes equal to the number of director
positions to be filled (eleven) multiplied by the number of shares of Common
Stock owned. The stockholder may distribute those votes among one or more, or
all, of the nominees as the stockholder desires. However, as described below,
the accompanying proxy reserves to the persons named therein the right to
distribute the votes represented by such proxy in their discretion in order to
maximize the likelihood of electing the full slate of directors. Under
cumulative voting, directors are elected by a plurality of votes cast. A
withheld vote on any nominee will not affect the voting results.
With respect to Proposal 2, approval of the amendment to the 1989 Stock
Option Plan (the "1989 Plan") and Proposal 3, ratification of the appointment of
Arthur Andersen LLP as independent accountants for AMSC for the year 1997, will
in each case require the affirmative vote of a majority of the shares present in
person or represented by proxy at the Annual Meeting and entitled to vote.
Abstentions will be treated as votes present and entitled to vote and thus will
have the effect of a vote against the proposal.
Brokers who hold shares in street name do not have the authority to
vote on certain matters for which they have not received instructions from
beneficial owners. Such broker non-votes (arising from the lack of instructions
from beneficial owners) will not affect the outcome of the vote on Proposals 2
and 3. Broker non-votes will be counted in determining the existence of a
quorum.
1. ELECTION OF DIRECTORS
------------------------
It is intended that the persons named in the proxy will, unless
otherwise instructed, vote for the election of the eleven nominees listed below
to serve as directors until the next annual meeting of stockholders and until
their respective successors are elected and qualified. If for any reason any
nominee should not be available for election or able to serve as a director, the
accompanying proxy may be voted for the election of a substitute nominee
designated by the Board of Directors and will be voted for the
1
<PAGE>
election of the other nominees named therein. In any event, management reserves
the right in its discretion to distribute the total votes represented by the
proxies unevenly or among less than all of the persons named (or their
substitutes), as permitted by cumulative voting, in order to maximize the
likelihood of electing the full slate of directors.
Nominees
- --------
Information with respect to the business experience and affiliations of
the nominees to the Board of Directors is set forth below. The information set
forth below and elsewhere in this proxy statement concerning the nominees and
their security holdings has been furnished by them to AMSC.
Jack A. Shaw, 58. An AMSC director and Chairman of the Board of
Directors of AMSC since July 1996, Mr. Shaw is chairman and chief executive
officer of Hughes Network Systems, Inc., and senior vice president of Hughes
Electronics Corporation, a subsidiary of General Motors Corporation. He is a
member of the Hughes Electronics Office of the Chairman. Prior to joining
Hughes, he held senior management positions with companies including ITT Space
Communications, Inc., Digital Communications Corporation, and M/A-COM
Telecommunications, Inc., which was acquired by Hughes in 1987.
Steven D. Dorfman, 61. Mr. Dorfman is an executive vice president of
Hughes Electronics Corporation and chairman of Hughes Telecommunications and
Space Company, as well as a member of the Hughes Office of the Chairman. Prior
to being named to his present position in October 1993, Mr. Dorfman was
president of Hughes Space and Communications Company. Prior to that, Mr. Dorfman
was president and chief executive officer of Hughes Communications, Inc. Mr.
Dorfman has been with Hughes since 1957.
Ho Siaw Hong, 47. An AMSC director since April 1997 and from March
1993 to March 1994, Mr. Ho is Assistant Vice President Satellite Services of
Singapore Telecommunications Ltd. ("Singapore Telecom"). Since 1972 he has held
a variety of positions at Singapore Telecom in the areas of network control and
management, cellular radio, paging and satellite system planning and satellite
business development.
David Juliano, 46. An AMSC director since October 1996, Mr. Juliano is
Vice President National Retail of AT&T Wireless Services, which he joined in
December 1989. Prior to joining AT&T Wireless Services, he was with the Sony
Corporation in various regional and national management positions in its
Consumer Electronics Company.
Billy J. Parrott, 61. An AMSC director since May 1988, Mr. Parrott is
President and Chief Executive Officer of Antifire, Inc., a manufacturer of
non-toxic fire retardants. Mr. Parrott is also the founder and co-founder of
several telecommunications companies, including Private Networks, Inc., a
builder and operator of telecommunications and broadcast properties, and Roanoke
Valley Cellular Telephone Company, a cellular communications company. Mr.
Parrott is owner of a production company where he functions as a writer,
producer, director and marketing consultant to Fortune 500 companies.
Gary M. Parsons, 46. An AMSC director and Chief Executive Officer and
President of AMSC since July 1996. Mr. Parsons joined AMSC from MCI
Communications Corporation where he served in a variety of executive roles from
1990 to 1996, including most recently as Chief Executive Officer of MCI's
subsidiary MCImetro, Inc. and as Executive Vice President of MCI. From 1984 to
1990, Mr. Parsons was one of the principals of Telecom*USA, which was acquired
by MCI.
2
<PAGE>
Andrew A. Quartner, 43. An AMSC director since February 1994, Mr.
Quartner also served as an AMSC director from May 1988 to November 22, 1993. Mr.
Quartner is Senior Vice President, Law, of AT&T Wireless Services, Inc. ("AT&T
Wireless"), which he joined in November 1985. Prior to joining AT&T Wireless in
1985, Mr. Quartner was associated with the law firm of Debevoise & Plimpton in
New York.
Roderick M. Sherwood, III, 43. Mr. Sherwood has been an AMSC director
since April 1996. He is a corporate vice president and treasurer of Hughes,
Chairman of Hughes Investment Management Company, and a member of the Hughes
Chairman's Forum. Prior to being elected to his present position in May 1995,
Mr. Sherwood served in a variety of financial roles during his 14-year career
with Chrysler Corporation, where he served as assistant treasurer from 1991 to
1994.
Michael T. Smith, 54. Mr. Smith, an AMSC director since April 1996, is
chairman of Hughes Aircraft and vice chairman of Hughes Electronics. Mr. Smith
served as executive vice president and chief financial officer of Hughes from
1989 until 1992, when he was named to his current position. Mr. Smith was the
chairman of Hughes Missile Systems, Co. from 1992 to 1994. Previously, Mr. Smith
served in a variety of financial management positions with Hughes and General
Motors Corporation, beginning his career in 1968.
Yap Chee Keong, 36. Mr. Yap is the Group Financial Controller/Vice
President for the Corporate Finance Group of Singapore Telecom with overall
responsibility for the financial management and control of the Singapore Telecom
Group. Prior to joining Singapore Telecom in 1995, he was the General Manager
and Group Financial Controller of United Pulp & Paper Company Limited, and an
Audit Manager of KPMG Peat Marwick.
Albert L. Zesiger, 67. An AMSC director since May 1989, Mr. Zesiger is
Principal of the Zesiger Capital Group, LLC, an investment advisory firm. Prior
to forming Zesiger Capital, Mr. Zesiger was Managing Director of BEA Associates
("BEA"), an investment advisory firm. He began his career with the General Tire
and Rubber Company, where he was Investment Funds Manager and Chairman of the
Real Estate Committee. Later, he was involved in mutual fund management with
both the Commonwealth Group and the Anchor Group of Mutual Funds. Prior to
joining BEA, he was Manager of Investment Advisory Services and a member of the
Investment Committee at Lazard Freres & Co.
Board Committees, Meetings and Compensation
- -------------------------------------------
The Board of Directors has an Executive Committee which meets as needed
and generally has full authority to act on behalf of the Board of Directors
unless otherwise prohibited by Delaware law. The Executive Committee includes
representatives from Hughes, AT&T Wireless and Singapore Telecom, and its
members are designated by the Board of Directors in accordance with the terms of
a stockholders' agreement. Under certain circumstances, a stockholder holding a
Threshold Percentage of Common Stock has the right to cause other 5%
stockholders which are parties to the agreement to have such other parties'
representatives on the Board of Directors vote to have the nominee of that
stockholder appointed to the Executive Committee. See "Agreements Among
Stockholders." The current members of AMSC's Executive Committee are Messrs. Ho,
Quartner, Shaw, Sherwood and Zesiger. See "Compensation and
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<PAGE>
Stock Option Committee Interlocks and Insider Participation." The Executive
Committee took action by unanimous written consent three times during 1996.
The Board of Directors also has an Audit Committee which currently
consists of Messrs. Ho, Quartner, and Sherwood. The Audit Committee is
responsible for reviewing the Company's internal auditing procedures and
accounting controls and will consider the selection and independence of the
Company's outside auditors. The Audit Committee met two times during 1996.
The Board of Directors has a Nominating Committee which makes
nominations for the Board of Directors and the Committees of the Board. The
current members of the Nominating Committee are Messrs. Dorfman, Quartner, and
Smith. The Nominating Committee took action by unanimous written consent one
time during 1996. The Nominating Committee will consider stockholder proposals
of persons to be nominated for election to the Board made in accordance with the
Company's Bylaws. See "Proposals for 1998," below.
The Board of Directors has a Compensation and Stock Option Committee
which is responsible for administering AMSC's 1989 Plan, reviewing certain of
AMSC's compensation programs and making recommendations to the Board of
Directors with respect to compensation. The current members of the Compensation
and Stock Option Committee are Messrs. Quartner, Shaw, Smith and Zesiger. The
Compensation and Stock Option Committee met three times during 1996 and took
action by unanimous written consent three times during 1996. See "Compensation
and Stock Option Committee Report."
The Board of Directors met fourteen times during 1996. All director
nominees other than Messrs. Juliano and Shaw attended 75% or more of all Board
meetings and meetings of committees of which they were members during 1996.
Each non-employee member of the Board of Directors is entitled to
receive an annual retainer of $19,000, and each member of the committees of the
Board is entitled to receive additional amounts as follows: Executive Committee,
$3,500 per year; Audit Committee, $2,500 per year; Nominating Committee, $2,000
per year; and Compensation and Stock Option Committee, $2,000 per year.
Directors have the right to elect to retain or forego these amounts, or to have
them donated to a charity of their choice. Prior to August 1996, Messrs.
Quartner and Roderick directed that such amounts be paid to their respective
employers; Mr. Zesiger had elected to have such amounts paid to Asphalt Green, a
charity; Mr. Parrott elected to have such amounts paid to him directly.
Following the July 1996 Board of Directors meeting, Messrs. Dorfman, Ho,
Juliano, Quartner, Shaw, Sherwood, Smith and Zesiger have elected to forego
these amounts. Directors also receive reimbursement for reasonable expenses
incurred in attending meetings of the Board and of Board committees. During
1996, all directors elected to forego such reimbursement. Each non-employee
member of the Board of Directors (an "Eligible Director") is entitled to receive
options exercisable for the Company's Common Stock as provided in the Company's
1994 Non- Employee Director Stock Option Plan. Pursuant to the Director Plan,
each Eligible Director (other than directors electing not to receive such
options) receives an initial option to purchase 1,000 shares of Common Stock,
and automatically receives annually an option to purchase 500 shares of Common
Stock at an exercise price equal to the fair market value of the Common Stock on
the date of grant. Each option expires on the earlier of (i) ten (10) years from
the date of grant or (ii) seven (7) months after a director's termination of
service as a director. Messrs. Dorfman, Ho, Shaw, Sherwood, Smith and Zesiger
have elected to forego receipt of options under the Director Plan.
4
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------
The following table and the accompanying notes set forth certain
information concerning the beneficial ownership of AMSC's Common Stock at
January 31, 1997 (except where otherwise indicated), by (i) each person who is
known by AMSC to own beneficially more than five percent of AMSC's Common Stock,
(ii) each director, (iii) each Executive Officer named in the Summary
Compensation Table (see "Executive Compensation," below), and (iv) all directors
and Executive Officers as a group. Except as otherwise indicated, each person
listed in the table has informed AMSC that such person has (i) sole voting and
investment power with respect to such person's shares of Common Stock and (ii)
record and beneficial ownership with respect to such person's shares of Common
Stock.
<TABLE>
<CAPTION>
Name of Beneficial Owner (1) Number of
- ---------------------------- Shares % of Class
------ ----------
Beneficial Owners of More than 5%
- ---------------------------------
<S> <C> <C>
Space Technologies Investments, Inc.(2).......... 1,855,539 7.2%
Transit Communications, Inc...................... 681,818 2.7
Satellite Communications Investments
Corporation(2).......................... 1,344,067 5.3
1150 Connecticut Avenue, N.W.
Washington, DC 20036
--------- ----
Reflected as a Group (2)(3)............. 3,881,424 14.9%
</TABLE>
<TABLE>
<CAPTION>
Name of Beneficial Owner (1) Number of
- ---------------------------- Shares % of Class
------ ----------
<S> <C> <C> <C>
Baron Capital, Inc. (4) 5,143,733 20.0%
767 Fifth Avenue, 24th Floor
New York, NY 10153
Hughes Communications Satellite
Services, Inc. (5) 10,441,622 36.1%
Building S66/D468
Post Office Box 92424
Los Angeles, CA 90009
Singapore Telecommunications Ltd. (6) 4,731,546 18.3%
31 Exeter Road, Comcentre
Singapore 0923
Republic of Singapore
Directors and Executive Officers
- --------------------------------
Chia Choon Wei (7) (8)........................... 4,000 *
Steven A. Dorfman................................ 1,000 *
Ho Siaw Hong (9)................................. 0 *
David A. Juliano (7)............................. 1,000 *
Lim Toon (7) (10)................................ 4,000 *
Billy J. Parrott (7) (11)........................ 11,500 *
Gary M. Parsons.................................. 10,000 *
Andrew A. Quartner (7) (12)...................... 7,000 *
Jack A. Shaw..................................... 0 *
Roderick M. Sherwood III......................... 0 *
Michael T. Smith................................. 1,000 *
Yap Chee Keong (13).............................. 0 *
Albert L. Zesiger (14) .......................... 840,497 3.3%
Carson E. Agnew (15) (16) (17)................... 7,975 *
Patrick FitzPatrick (17)......................... 142 *
Brian B. Pemberton (16).......................... 112,446 *
Randy S. Segal (16) (17)......................... 32,493 *
All Directors and Executive Officers as a
group (17 persons) (7) (16) (17)................. 1,033,053 4.1%
- ------------------------------------------------- ---------
* Less than 1%
</TABLE>
(1) Certain holders of Common Stock, including each of the beneficial
owners of more than 5% of the Common Stock ("5% Stockholders") listed
in the table are parties to a stockholders' agreement dated December
1, 1993 (the "Stockholders' Agreement"). The 5% Stockholders who are
parties to the Stockholders' Agreement may be deemed to constitute a
group having beneficial ownership of all Common Stock held by members
of such group. See "Agreements Among Stockholders." Each such 5%
Stockholder disclaims beneficial ownership as to shares of Common
Stock held by other 5% Stockholders.
(2) Includes 649,347 shares of Common Stock issuable upon exercise of
warrants held by Space Technologies Investments, Inc., and 230,932
shares of Common Stock issuable upon exercise of warrants held by
Satellite Communications Investments Corporation. Such warrants are
exercisable at any time through December 20, 1998, at an exercise
price of $21.00 per share, subject to restriction if such exercise
would cause the Company's foreign ownership to exceed the levels
permitted by the Communications Act of 1934, as amended (the
"Communications Act").
(3) Transit Communications, Inc. is indirectly 80%-owned by LIN
Broadcasting Corporation, which is an indirect subsidiary of AT&T
Wireless. Satellite Communications Investments Corporation and Space
Technologies Investments, Inc. are direct or indirect subsidiaries of
AT&T Wireless.
(4) Includes 625,000 shares of Common Stock issuable upon exercise of Long
Term Guaranty Warrant issued to Baron Capital on June 28, 1996, in
connection with the Company's Long Term Financing.
6
<PAGE>
(5) Hughes Communications Satellite Services, Inc. ("HCSSI") is an
indirect wholly-owned subsidiary of Hughes, which is a wholly-owned
subsidiary of General Motors Corporation. Includes 25,000 shares of
Common Stock issuable upon exercise of warrants issued to HCSSI on
January 19, 1996, in connection with the Company's Interim Financing
and 3,750,000 shares of Common Stock issuable upon exercise of Long
Term Guaranty Warrant issued to HCSSI on June 28, 1996 in connection
with the Company's Long Term Financing. See "Compensation and Stock
Option Committee Interlocks and Insider Participation."
(6) Singapore Telecom is approximately 82%-owned by Temasek Holdings
(Private) Ltd., a Singapore holding company that is wholly owned by
the Government of Singapore. Includes 625,000 shares of Common Stock
issuable upon exercise of Long Term Guaranty Warrant issued to
Singapore Telecom on June 28, 1996 in connection with the Company's
Long Term Financing.
(7) Includes shares issuable upon the exercise of options granted under
the Nonemployee Director Stock Option Plan which options are vested
and exercisable within sixty days after January 31, 1997, subject to
compliance with applicable securities laws.
(8) Dr. Chia resigned from the Board of Directors effective April 1, 1997.
(9) Mr. Ho was elected to the Board of Directors effective upon the
resignation of Dr. Chia effective April 1, 1997.
(10) Mr. Lim will not be standing for reelection to the Board of Directors;
his term as a director will be completed effective with the
Stockholders' Annual Meeting.
(11) Includes 7,500 shares owned by Private Networks, Inc., a company in
which Mr. Parrott owns a one-third equity interest. Mr. Parrott
disclaims beneficial ownership as to all such shares of Common Stock.
(12) Includes 1,050 shares owned by trusts for the benefit of each of Mr.
Quartner's three children, of which Mr. Quartner is trustee, and 100
shares owned by Mr. Quartner's wife. Mr. Quartner disclaims beneficial
ownership as to all such shares of Common Stock.
(13) Mr. Yap is the Singapore Telecom nominee to replace the vacancy left
by Mr. Lim not standing for reelection to the Board of Directors.
(14) Includes 800,497 shares owned by funds managed by Mr. Zesiger,
including 3,000 shares owned by ZCG Pension Fund. Mr. Zesiger
disclaims beneficial ownership as to all such shares of Common Stock
except to the extent of his pecuniary interest in ZCG Pension Fund.
(15) Includes 300 shares owned by a revocable trust for the benefit of Dr.
Agnew's family.
(16) Includes shares issuable upon the exercise of options granted under
the Stock Option Plan which options are vested and exercisable within
sixty days after January 31, 1997, subject to compliance with
applicable securities laws.
(17) Includes shares owned through the Company's matching 401(k) Plan.
7
<PAGE>
Agreements Among Stockholders
- -----------------------------
AMSC and each holder of shares of Common Stock who acquired such shares
prior to the Company's initial public offering of 8,500,000 shares of Common
Stock, which was completed December 20, 1993 (the "Offering"), are parties to a
Stockholders' Agreement, amended and restated as of December 1, 1993 (the
"Stockholders' Agreement"). The parties to the Stockholders' Agreement hold in
excess of 57% of the outstanding shares of Common Stock. The Stockholders'
Agreement sets forth agreements among the parties relating to the governance of
the Company, ownership of shares and the voting and transferability of Common
Stock and other matters. The Stockholders' Agreement limits the Company's
activities to providing and marketing mobile satellite service, designing,
constructing, operating and maintaining the Company's mobile satellite system,
engaging in the communications business, and engaging in activities necessary,
appropriate or reasonably related to the foregoing. The Company does not
currently intend to engage in any other activities. The Stockholders' Agreement
provides that the parties will not vote to remove members of the Board of
Directors except for cause and that they will not elect or permit the election
of a director who is not a United States citizen, if such action would cause the
Company to violate applicable law, regulations or FCC policy.
In the Stockholders' Agreement, stockholders who, together with their
affiliates, own in excess of five percent of the Common Stock ("Specified
Stockholders") have also agreed to cause their representatives on AMSC's Board
of Directors to appoint to the Executive Committee two directors (and one
alternate) nominated by each of the two Specified Stockholders which are parties
to the Stockholders' Agreement that hold the greatest number of shares of Common
Stock and one director (and one alternate) nominated by the Specified
Stockholder that holds the third greatest number of shares of Common Stock,
provided that each Specified Stockholder making such nomination holds at least
15% (the "Threshold Percentage"), of the outstanding Common Stock.
Notwithstanding the foregoing, regardless of whether any other Specified
Stockholder which is a party to the Stockholders' Agreement holds the Threshold
Percentage of the outstanding shares of Common Stock, during the period that any
single Specified Stockholder or group of affiliated stockholders which are
parties to the Stockholders' Agreement are the record holders of more than 50%
of the outstanding Common Stock, the Specified Stockholders have agreed to cause
their Board representatives to vote for the appointment to the Executive
Committee of nominees of that Specified Stockholder. The Stockholders' Agreement
also provides that no person shall be elected to the Board of Directors if such
election would violate the Communications Act or regulations thereunder.
Furthermore, the Stockholders' Agreement provides that no director shall be
elected to the Executive Committee if such election, in the opinion of counsel
for AMSC, would raise a reasonable prospect of violating the Communications Act
or regulations thereunder. Moreover, before any Specified Stockholder may elect
a director of AMSC who is not a United States citizen, it must first allow
Singapore Telecom to elect such a director, provided Singapore Telecom casts
sufficient cumulative votes to elect a director.
The Communications Act provides that certain FCC licenses may not be
held by a corporation of which more than 20% of its capital stock is directly
owned of record or voted by non-U.S. citizens or entities or their
representatives (the Company's wholly-owned subsidiary, AMSC Subsidiary
Corporation ("AMSC Subsidiary"), as the holder of the FCC license to construct
and operate the Company's mobile satellite services system, is subject to these
restrictions). Further, the Communications Act provides that certain FCC license
may not be held by a corporation controlled by another corporation if more than
25%
8
<PAGE>
of the controlling corporation's capital stock is owned of record or voted by
non-U.S. citizens or entities or their representatives ("Alien Ownership"), if
the FCC finds that the public interest is served by the refusal or revocation of
such license (AMSC controls AMSC Subsidiary and therefore is subject to these
restrictions). The Stockholders' Agreement contains procedures for reducing the
risk that the Company will fail to comply with the FCC's Alien Ownership
restrictions as a result of the ownership of the stockholders party to that
Agreement or their respective holdings in AMSC.
The Stockholders' Agreement provides that when a Specified Stockholder
transfers Common Stock not acquired by such Specified Stockholder in the open
market, the transferee shall become a party to the Stockholders' Agreement, and
shall assume all of the transferring Specified Stockholder's rights and
obligations under the Stockholders' Agreement, provided such transferee together
with its affiliates would, giving effect to such transfer, hold in excess of
5.0% of the issued and outstanding Common Stock.
The Stockholders' Agreement continues until terminated by the
affirmative vote of the holders of three-fourths of the issued and outstanding
Common Stock held by parties to the Stockholders' Agreement. It may be amended
by a three-fourths' vote of the Specified Stockholders, except that amendments
to the provisions providing for registration rights and certain other matters
require the affirmative vote of the holders of three-fourths of the outstanding
Common Stock held by parties to the Stockholders' Agreement.
In connection with an interim financing facility entered into by the
Company in January 1996 (the "Interim Financing Facility"), the Specified
Stockholders entered into a voting agreement with the purchasers under that
facility with respect to a proposal presented to the stockholders for approval
at the April 25, 1996 annual meeting. That proposal, to approve the issuance of
shares of common stock upon conversion or exchange of securities issued pursuant
to the Interim Facility, was approved by the stockholders at that meeting.
Executive Officers
Executive Officers of AMSC are elected by the Board of Directors. As
part of their responsibilities, all Executive Officers currently serve as
officers of AMSC, AMSC Subsidiary and AMSC's wholly-owned subsidiaries, AMSC
Skycell, Inc., American Mobile Radio Corporation and Personal Communications
Satellite Corporation, and certain Executive Officers serve as officers or
directors of AMSC's wholly-owned subsidiary, AMSC Sales Corporation, Ltd.
Executive Officers receive no additional compensation for these services.
Information with respect to the age, business experience and the affiliations of
the Executive Officers of AMSC is set forth below.
Gary M. Parsons, Chief Executive Officer, President and Director,
joined the Company in July 1996. See "Nominees" for information regarding Mr.
Parson's age, business experience and affiliations.
Carson E. Agnew, 47, Vice President, Business Development, joined the
Company in 1995. Previously, Dr. Agnew had served as a Director of the Company
from May 1988 to September 1995. Prior to joining the Company Dr. Agnew was a
Vice President of Hughes Communications, Inc., from 1988, and Vice President of
its Mobile Satellite Program from 1991. Prior to that Dr. Agnew managed the New
Venture Organization in the Hughes Aircraft Space and Communications Group.
Patrick FitzPatrick, 57, former Vice President and Chief Financial
Officer, joined the Company in May 1996. Prior to joining the Company, Mr.
FitzPatrick served as Senior Vice President and Chief Financial Officer of PRC,
Inc. Mr. FitzPatrick terminated his employment with the Company effective
January 31, 1997.
9
<PAGE>
Robert L. Goldsmith, 53, joined the Company on February 3, 1997, as the
Executive Vice President and Chief Operating Officer. Prior to joining the
Company, Mr. Goldsmith was the Senior Vice President of Sales and Marketing and
General Manager of the Commercial Services Division for Qwest Communications
Company. Prior to joining Qwest, Mr. Goldsmith was with MCI for nine years in
various executive sales and marketing positions.
Brian B. Pemberton, 52, former President, Skycell Services, Inc. of the
Company since July 1996 and President and Chief Executive Officer of the Company
since April 1990. Mr. Pemberton terminated his employment with the Company
effective December 31, 1996.
Randy S. Segal, 40, Vice President, General Counsel and Secretary,
joined the Company in October 1992. From October 1983 to October 1992, Ms. Segal
was associated with the law firm of Debevoise & Plimpton in New York, New York.
Compensation and Stock Option Committee Report
- ----------------------------------------------
Introduction
- ------------
The Company's compensation policy for 1996 was established by the
Compensation and Stock Option Committee consisting of Messrs. Quartner, Shaw,
Smith and Zesiger. In accordance with this policy, which is discussed in greater
detail below, the Compensation and Stock Option Committee set the base salaries
of, and awarded cash bonuses and stock options to, AMSC's Executive Officers for
1996. None of the members of the Compensation and Stock Option Committee are
employees of the Company.
AMSC's Compensation Policy. AMSC's compensation policy is designed to
---------------------------
(i) attract and retain a talented and highly motivated executive corps, (ii)
reward those executives for attaining personal, departmental and company-wide
goals, and (iii) align the interests of those executives with the interests of
the Company's stockholders. Each of these objectives is addressed to a greater
or lesser extent by each of the three components of the executive's compensation
- - base salary, annual bonus and stock options.
Base Salary. AMSC's salary program is designed to pay competitive
------------
salaries to all of AMSC's employees, including its Executive Officers. Through
the salary program the Company offers competitive pay opportunities reinforced
by a strong pay for performance philosophy. Base salary opportunities for a
position are expressed as a salary range. Such ranges have been developed based
on analysis of the Company's business considerations, general economic
conditions and pay for similar types or levels of positions in the external
market place. In 1994, the Company employed an independent consultant to provide
information regarding the compensation programs of a select group of companies
in the telecommunications industry. This survey indicated that, on average and
in the aggregate, the salaries of the Company's Executive Officers compared were
approximately 93.12% of the median of the salaries paid by comparable companies
in 1993 to their five highest paid executive officers. (The study covered seven
companies in the telecommunications industry, while the Nasdaq Telecom index
referred to in the Performance Graph set forth below includes all companies
traded on Nasdaq which fall into Standard Industrial Classification Code 48.)
Current salary range position and performanc are considered in determining
10
<PAGE>
merit increase percentages. The President makes recommendations regarding merit
increases in the salaries of the Company's other Executive Officers. Such
recommendations are generally based on qualitative factors that tend to be
subjective in nature, although more objective quantitative measures may be used
in certain cases. In each of 1995 and 1996, the Company consulted
telecommunications industry surveys, as well as diversified local and national
surveys, to assess the comparability of base pay increases.
The Compensation and Stock Option Committee approved the President's
recommendation that merit increases would not be paid in 1997 to senior
executives (director level and above), and that the President's base
compensation would be reduced. Instead, the Committee approved a proportionate
increase in at-risk, bonus compensation to such executives. In view of the
economic constraints facing the Company, the desirability of placing a greater
emphasis on performance-based, at-risk compensation, and the positive message to
be derived throughout the organization by implementation of such a salary
reduction or freeze at the most senior management levels, the Committee believed
this base and bonus reallocation to be a desirable one.
Annual Bonus. AMSC's Executive Officers are eligible for discretionary
------------
annual bonuses. Performance objectives are set annually for each executive, with
relative values set for attaining each objective. At year end, the President of
the Company assesses each executive's success in obtaining his or her
performance objectives, and makes an appropriate recommendation to the
Compensation and Stock Option Committee regarding such executive's annual bonus.
Such recommendations are generally based, in part, on quantitative factors
relating to attainment of corporate objectives and, in part, on more qualitative
factors relating to individual performance.
Stock Options. The number of stock options granted to each executive is
-------------
determined by the Compensation and Stock Option Committee in its discretion. In
making its determination, the Compensation and Stock Option Committee considers
the executive's position at the Company, his or her individual performance, the
number of options held by the executive (if any) and other factors, including an
analysis of the estimated amount potentially realizable from the options.
On June 11, 1996, the Compensation and Stock Option Committee approved
a repricing of certain options granted to employees pursuant to the Company's
1989 Plan. Because of a decline in market value of the Company's Common Stock,
certain outstanding options were exercisable at prices that exceeded the market
value of the Common Stock. In view of this decline and in keeping with the
Company's philosophy of utilizing equity incentives to motivate and retain
qualified employees, the Compensation and Stock Option Committee felt that it
was important to regain the incentive intended to be provided by options to
purchase shares of the Company's Common Stock.
Pursuant to the terms of the repricing, 251 option holders, holding
options to purchase an aggregate of 272,398 shares of the Company's Common
Stock, that had an exercise price of $27.75 per share (the "Existing Options"),
were issued new options to purchase an equal number of shares at an exercise
price of $18.25 per share, the fair market value of the Company's Common Stock
on June 11, 1996, the date of the repricing (the "New Options"). The New Options
modify the exercise price of the Existing Options to which each relates, and
like the Existing Options, are governed by the 1989 Plan. The proportionate
share of vested options and the remaining vesting schedule for the New Options
remains the same as those of the Existing Options. The terms of the New Options
are otherwise the same as the terms of the Existing Options that they replace.
11
<PAGE>
Compensation of the President. The foregoing principles and policies
------------------------------
were applied in determining the compensation of Mr. Parsons, President of AMSC.
During fiscal 1996, Mr. Parsons received a base salary, on an annualized basis,
of $350,000. Upon recommendation by Mr. Parsons, his base compensation for 1997
will be reduced to $315,000. The Compensation and Stock Option Committee also
awarded Mr. Parsons options to purchase a total of 300,000 shares of the
Company's Common Stock.
Tax Deductibility of Executive Compensation. The Internal Revenue Code
-------------------------------------------
of 1986, as amended (the "Code"), limits the federal income tax deductibility of
compensation paid to the Company's chief executive officer and to each of the
other four most highly compensated Executive Officers. The Company may deduct
such compensation only to the extent that during any fiscal year the
compensation does not exceed $1 million or meets certain specified conditions
(such as stockholder approval). Based on the Company's current compensation
plans and policies and recently released regulations interpreting the Code, the
Company and the Compensation and Stock Option Committee believe that, for the
near future, there is little risk that the Company will lose any significant tax
deduction for executive compensation. The Compensation and Stock Option
Committee intends to monitor this issue, and will consider modifications of the
Company's compensation policies as conditions warrant and to the extent
necessary to serve the best interests of the Company.
Andrew A. Quartner Jack A. Shaw Michael T. Smith Albert L. Zesiger
Compensation and Stock Option Committee Interlocks and Insider Participation
- ----------------------------------------------------------------------------
During the fiscal year ended December 31, 1996, the Compensation and
Stock Option Committee of AMSC's Board of Directors consisted of Andrew A.
Quartner, Jack A. Shaw, Michael T. Smith and Albert L. Zesiger. During 1996, the
Company and AMSC Subsidiary entered into contracts and other transactions with
certain affiliates of Hughes, with AT&T Corp. and with Singapore Telecom. All of
these contracts and transactions were approved by AMSC's Board of Directors or
Executive Committee, and the Company believes that the contracts and
transactions were made on terms substantially as favorable to the Company as
could have been obtained from unaffiliated third parties. The following is a
description of such contracts and transactions.
In 1990, following a competitive bidding process in which there was
another bidder, the Company entered into the contract (the "Satellite
Construction Contract") for the development and construction of the Company's
first satellite (the "Satellite") with Hughes Aircraft. Hughes Aircraft, one of
the largest and most experienced satellite manufacturers in the world, is
building the Satellite's bus. The bus is comprised of the spacecraft and the
subsystems used to maintain the proper operation of the communications payload.
The Satellite is a Hughes HS-601 system with a payload specifically designed for
the Company's mobile satellite system by Spar Aerospace, Ltd. ("Spar"). In
January 1997, the Company reached an agreement with Hughes Aircraft to reduce
the amount of performance payments owed by the Company by 27.5%, and to defer
all payments otherwise due until January 1998.
In November 1994, AMSC Subsidiary entered into an agreement with Hughes
Network Systems Limited ("HNS") pursuant to which AMSC Subsidiary was granted an
option to purchase up to six land earth stations (each an "LES") at a price of
$2,700,000 or less per LES, subject to discount based on the number of LESs
actually purchased. Each LES acts as a switching network and interface between
signals transmitted from the Satellite and the public data network. AMSC
Subsidiary initially exercised an option to purchase five LESs from HNS, two of
which were purchased on behalf of Rockwell International
12
<PAGE>
("Rockwell"), then one of the Company's wholesale customers. The Company
acquired the two Rockwell LESs in November 1996, in connection with its
acquisition of Rockwell's multimode messaging business. The Company terminated
its purchase of one LES, and paid a $1.67 million terminate charge in accordance
with the agreement. HNS has also agreed to supply to AMSC Subsidiary software
maintenance services in support of the operation of the LESs at an annual rate
of $825,000 for the twelve month period commencing December 1, 1996.
On January 19, 1996, the Company executed a $40 million Interim
Financing Facility with Morgan Guaranty Trust Company of New York, Toronto
Dominion Investments, Inc. (a subsidiary of The Toronto- Dominion Bank) and
HCSSI. HCSSI has agreed to purchase 25% of the Notes issued under the Interim
Financing Facility, the issuance of which is subject to certain conditions. The
Interim Financing Facility has a stated maturity of September 1996 but is
expected to be repaid by the end of April 1996. The terms of the Interim
Financing Facility require the Company to issue to the purchasers of the Notes
thereunder warrants to acquire up to 100,000 shares of the Company's common
stock at a nominal exercise price in addition to the payment of commitment fees
to each of the purchasers. Under certain circumstances, the Notes issued under
the facility may be converted into shares of common or preferred stock of the
Company.
On June 28, 1996, the Company established a $225 million debt facility
with Morgan Guaranty Trust Company and Toronto Dominion Bank (the "Long Term
Financing") consisting of two facilities: (i) a $150 million five-year,
multi-draw term loan facility (the "Term Loan Facility") and (ii) a $75 million
five-year revolving credit facility with a bullet maturity on June 30, 2001 (the
"Working Capital Facility"). Two hundred million dollars of the Long Term
Financing is guaranteed (the "Guarantee") by three of the Company's principal
stockholders: HCSSI, Singapore Telecom and Baron Capital Partners, L.P.
(collectively, the "Guarantors"). The terms of the Guarantee were subsequently
modified on March 27, 1997 (the "Modified Guarantee"), at the request of the
Company, to eliminate the performance tests thereunder relating to net revenues,
number of subscribers, operating cash flow and earnings before interest, taxes,
depreciation and amortization that the Company must meet to qualify for
borrowings under the Long Term Financing. The Guarantors initially received
compensation consisting principally of cash fees and warrants (the "Guarantee
Warrants"), allowing the Guarantors to purchase 5 million shares of the
Company's Common Stock originally at $24 per share. Subsequently, in connection
with the Modified Guarantee, the Company reissued and modified the Warrants to
extend to 5.5 million shares of the Company's Common Stock exercisable at $13.00
per share. The Guarantee Warrants originally were valued by the Company at $19
million; the Company has not yet received a final valuation for the modified
Guarantor warrants.
The Company has entered into a reseller agreement with Hughes Space &
Communications Company, through its Hughes Government Services ("HGS") business
unit, whereby HGS will resell the Company's services to federal government
subscribers at the Company's established government rates. Like the Company's
other government resellers, HGS will set rates and prices for services and
equipment, respectively and will be responsible for billing and collecting
amounts due from its customers.
The Company has entered into a consulting agreement with HCSSI for the
services of one Company employee (Dr. Agnew) to be provided to HCSSI on a
half-time basis. The Company has entered into a reverse, similar arrangement
with HNS to obtain the services of one HNS employee, formerly the Company Chief
Scientist (William Garner) on a half-time basis. In each consulting arrangement,
the
13
<PAGE>
Company receives or pays, as the case may be, one-half of the consulting
employees' salary for the services.
In October 1995, the Company and AT&T Corp. entered into an agreement
pursuant to which the Company agreed to provide private voice network and
satellite telephone service to AT&T Corp. These services are being provided to
AT&T Corp. at rates comparable to those charged to similarly situated customers
that are unrelated to the Company. In 1996, AT&T Corp. also purchased 175
transportables.
In January, 1996, the Company entered into an agreement with AT&T Corp.
to provide long distance, public switched telephone network service to the
Company in connection with its service. The agreement with AT&T Corp. is on
commercial terms similar to those agreed to with Sprint Communications Company
in August 1995, also for use in connection with the Company's service offerings.
14
<PAGE>
Performance Graph
The graph set forth below shows the cumulative total return to holders
of the Company's Common Stock from December 31, 1993, through December 31, 1996,
computed by dividing (i) the difference between the closing price per share at
the beginning of such period and the last trading day of each month during such
period (the Company did not declare or pay dividends on its Common Stock during
such period) by (ii) the closing share price at the beginning of such period,
and compares such return to the performance during such period of the Center for
Research in Security Prices ("CRSP") Total Return Index for The Nasdaq Stock
Market (U.S. Companies) ("Nasdaq U.S.") and the CRSP Nasdaq Telecommunications
Stock Index ("Nasdaq Telecom"). The Nasdaq U.S. index comprises all domestic
common shares traded on the Nasdaq National Market and the Nasdaq SmallCap
Market, and the Nasdaq Telecom index comprises all such domestic common shares
of companies falling under Standard Industrial Classification Code 48. These
indices are prepared for Nasdaq by the CRSP at the University of Chicago. The
graph assumes $100 invested on December 31, 1993, in the Company's Common Stock
(at $ 20.50 per share), the Nasdaq U.S. index and the Nasdaq Telecom index.
[GRAPHIC OMITTED: COMPARISON OF THIRTY-SIX MONTHS CUMULATIVE TOTAL RETURN]
15
<PAGE>
Executive Compensation
- ----------------------
The following tables set forth (a) the compensation paid or accrued by
the Company to the Company's chief executive officer and its four other most
highly compensated Executive Officers receiving over $100,000 per year (such
officers, the "Named Executive Officers") for services rendered during the
fiscal year ended December 31, 1996, and (b) certain information relating to
options granted to such individuals.
<TABLE>
Summary Compensation Table
--------------------------
Long-Term All Other
<CAPTION>
Compensation Compen-
Annual Compensation Awards sation(3)
------------------- ------ ---------
Name and Other Annual Options/
Principal Position Year Salary Bonus Compensation(1) SARs(2)
------------------ ---- ------ ----- --------------- -------
<S> <C> <C> <C> <C> <C> <C>
Gary M. Parsons 1996 $145,385 $87,500 $4,026 300,000 $ --
President and
Chief Executive Officer
Carson E. Agnew 1996 $176,190 $48,300 $8,996 25,000 75,670
Vice President,
Business Development
Patrick FitzPatrick
former Vice President 1996 $162,245 -- $6,245 100,000 --
and Chief Financial Officer
Brian B. Pemberton 1996 $325,000 $80,000 $15,842 50,000 --
former President 1995 $300,000 $80,000 -- 30,000 --
and Chief Executive 1994 $286,040 $80,000 -- 30,000 --
Officer
Randy S. Segal 1996 191,000 52,716 $ 5,619 65,000 --
Vice President, General 1995 183,750 55,000 40,341 20,000 54,493
Counsel and Secretary 1994 175,000 55,000 4,790 12,000 26,845
</TABLE>
(1) All dollar amounts reported for fiscal years 1995 and 1994 relate to
payments to cover the Named Executive Officers' increased taxes as a
result of relocation expense reimbursements. All dollar amounts
reported for fiscal year 1996 relate to the personal use of a company
car and/or a car allowance.
(2) The numbers reflect grants of options to purchase shares of Common
Stock under the 1989 Plan. The Company has not granted SARs.
(3) All dollar amounts reported for fiscal years 1996, 1995 and 1994
relate to relocation expense reimbursements.
16
<PAGE>
Option/SAR Grants Last Fiscal Year
----------------------------------
The following table sets forth each grant of stock options made during
or with respect to 1996 to each of the Named Executive Officers.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
<CAPTION>
Potential Realizable
Individual Grants Value at Assumed
------------------------------------ Annual Rates of
Number of % of Total Stock Price
Securities Options/SARs Appreciation for
Underlying Granted to Exercise or Option Term(3)
Options/SARs Employees/ Base Price --------------
Name Granted(1)(2) Fiscal Year ($/Share) Expiration Date 5% 10%
---- ------------- ----------- --------- --------------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Gary M. Parsons ............. 300,000 19.1658% $12.00 July 31, 2006 $2,264,010 $5,737,470
Carson E. Agnew ............. 10,000 0.6389% $18.25 Jan. 24, 2006 $109,340 $274,104
15,000 .9583% $18.25 June 11, 2006 $172,160 $436,287
Patrick FitzPatrick ......... 40,000 2.5554% $18.56 May 7, 2006 $466,892 $1,183,196
60,000 3.8332% $18.55 Nov. 20, 2006 ($1,770) $656,454
Brian B. Pemberton .......... 30,000 1.9166% $18.25 Jan. 24, 2006 $328,020 $822,312
20,000 1.2777% $18.25 June 11, 2006 $229,546 $541,716
Randy S. Segal ............. 20,000 1.2777% $18.25 Jan. 24, 2006 $218,680 $548,208
15,000 .9583% $18.25 June 11, 2006 $172,160 $436,287
30,000 1.9166% $11.37 Nov. 20, 2006 $214,515 $543,627
</TABLE>
(1) The numbers reflect the grant of options to purchase shares of Common
Stock under the 1989 Plan. The Company has not granted SARs.
(2) The options become exercisable in three annual installments, vesting
at the rate of 33% per year for the first two years with the remaining
34% vesting in the third year.
(3) Based on actual option term and annual compounding. The actual value a
Named Executive Officer may realize will depend upon the excess of the
price of the Common Stock over the exercise price on the date the
option is exercised. Accordingly, there is no assurance that the value
ultimately realized by a Named Executive Officer, if any, will be at
or near the values indicated.
17
<PAGE>
Option/SAR Exercises and Year-End Option Values
-----------------------------------------------
The following table sets forth, for each of the Named Executive
Officers, the value of unexercised options at fiscal year-end:
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values (1)
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at Fiscal in-the-Money Options/SARs
Year-End(#) at Fiscal Year-End($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
<S> <C> <C>
Gary M. Parsons..................... 0/300,000 $0/$114,000
Carson E. Agnew..................... 3,300/31,700 $0/$0
Patrick FitzPatrick................. 0/100,000 $0/$0
Brian B. Pemberton.................. 83,828/92,537 $0/$0
Randy S. Segal ..................... 19,505/79,427 $0/$24,600
(1) Does not include options granted on January 23, 1997, with respect to
fiscal year 1996, and included in the table "Option Grants Last Fiscal
Year," above. None of the Named Executive Officers exercised options
during the fiscal year ended December 31, 1996. The Company has not
granted SARs.
</TABLE>
The following table sets forth each repriced grant of stock options
made during or with respect to 1996 to each of the Named Executive Officers.
<TABLE>
OPTION/SAR REPRICINGS
---------------------
<CAPTION>
Individual Grants
---------------------------------------
Market Length of
Number of Price of Exercise Original
Securities Stock at Price at Option Term
Underlying Time of Time of New Remaining at
Options/SARs Repricing or Repricing or Exercise Date of Repricing
Name Date Repriced Amendment Amendment Price or Amendment
---- ----------------- --------- ---------------- ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Carson E. Agnew .... 6/11/96 10,000 $18.75 $27.75 $18.75 9 years 7 months
Brian B. Pemberton . 6/11/96 30,000 $18.75 $27.75 $18.75 9 years 7 months
Randy S. Segal ..... 6/11/96 20,000 $18.75 $27.75 $18.75 9 years 7 months
</TABLE>
Employment Agreements
- ---------------------
At November 20, 1996, the Company was a party to change in
control agreements (collectively the "Change in Control Agreements" and
individually an "Change in Control Agreement") with each of Patrick FitzPatrick,
Lon C. Levin, Susan Byrd Lubert, Randy S. Segal (collectively "Executives and
individually "Executive"). Under the Change in Control Agreements, the Company
considers it essential to its best interests and to the best interests of its
stockholders to foster the continuous employment of its key management
18
<PAGE>
personnel. If a potential Change in Control or a Change in Control occurs during
the term of the Change in Control Agreement , the Company shall provide to each
Executive a lump-sum severance payment equal to the sum of the Executive's
annual base salary and the Executive's average bonus, all options to purchase
securities of the Company granted to the Executive pursuant to the Company's
1989 Plan or any other Company plan that are then held by the Executive shall be
accelerated to the later of the Date of Termination or six months after the date
such option was granted, and shall continue to be exercisable for a two-year
period after such acceleration, the Company shall provide the Executive with
group term life insurance, health insurance, accident and long-term disability
insurance benefits which shall continue for a twelve-month period or until the
date the Executive will reach age sixty-five substantially similar in all
respects to those that the Executive was receiving immediately prior to the
termination date. In addition, the Company shall pay to the Executive all
reasonable legal fees and expenses incurred by the Executive as a result of a
termination.
2. PROPOSAL TO AMEND THE 1989 PLAN
----------------------------------
Proposed Amendment
- ------------------
The American Mobile Satellite Corporation 1989 Plan was approved by the
Board of Directors in December 1989. There are currently 2,000,000 shares of
Common Stock reserved for issuance under the 1989 Plan. On January 24, 1997, the
Board of Directors of the Company approved for submission to stockholders an
amendment to the 1989 Plan which will increase the number of shares of Common
Stock reserved for issuance under the 1989 Plan from 2,000,000 shares to
3,500,000 shares.
As of March 31, 1997, options for 1,903,331 shares were
granted and outstanding, and 70,584 options had been exercised. If the amendment
is approved, there will be 1,526,085 shares of Common Stock available for grant
under the 1989 Plan.
Reason for the Amendment
- ------------------------
The Company utilizes stock option grants as part of its compensation
program for executives and employees. In this way, the Company links
compensation at various levels within the organization to performance and
believes that it is appropriate to continue such practice in the future through
the use of stock options. In addition, the Company believes that the use of
stock option grants to executives and employees helps to provide incentive for
their continued employment and otherwise more closely aligns their interests
with those of the Company's stockholders. As a result, the Board of Directors
believes that 1,500,000 additional shares of Common Stock should be made
available under the 1989 Plan in order to facilitate the continued use of stock
options as a part of the Company's incentive compensation program.
Terms of the 1989 Plan
- ----------------------
The 1989 Plan is intended to assist the Company in attracting
and retaining employees of outstanding ability and to promote the identification
of their interests with those of the stockholders of the Company. The 1989 Plan
permits the grant of nonstatutory stock options and award of bonus stock
covering 2,000,000 authorized but unissued or reacquired shares of Common Stock,
subject to adjustment to reflect events such as stock dividends, stock splits,
recapitalizations, mergers or reorganizations of or by the Company.
19
<PAGE>
As of December 31, 1996, stock options covering 1,513,179
shares of Common Stock were outstanding, which options were held by 266 persons
at a weighted average exercise price of $16.49 per share. As of March 31, 1997,
the market value of the shares underlying such options (as reflected in the
closing bid price for the Company's Common Stock as reported through the
National Association of Securities Dealers Automated Quotation system) was
$11.25 per share. The exercise price of all options granted under the 1989 Plan
has been at least equal to the fair market value of the Common Stock on the date
of grant, as determined in good faith by the Board. The following table sets
forth the number of options held as of December 31, 1996 by each of the Named
Executive Officers, all of the Company's Executive Officers as a group, and all
of the Company's employees, other than Executive Officers, as a group.
<TABLE>
1989 Plan
<CAPTION>
Number of Options Held as of
Name and Position December 31, 1996
- ----------------- -----------------
<S> <C>
Gary M. Parsons............................. 300,000
President and Chief Executive Officer
Carson E. Agnew............................. 35,000
Vice President
Patrick FitzPatrick......................... 100,000
former Vice President and
Chief Financial Officer
Brian B. Pemberton.......................... 176,365
former President, Skycell Services, Inc.
Randy S. Segal.............................. 98,932
Vice President, General Counsel
and Secretary
Executive Officers as a Group............... 450,297
Employees, other than Executive
Officers, as a Group....................... 1,062,882
</TABLE>
See "Option Grants Last Fiscal Year," above for additional information
about options granted under the 1989 Plan.
Unless sooner terminated by the Board, the 1989 Plan will expire on
December 6, 2003. Such termination will not affect the validity of any option
grant or bonus stock award outstanding on the date of termination.
20
<PAGE>
The 1989 Plan is administered by the Compensation and Stock Option
Committee of the Board and is intended to satisfy the requirements of Rule 16b-3
under the Exchange Act. Subject to the terms and conditions of the 1989 Plan,
the Compensation and Stock Option Committee has the authority to select the
persons to whom grants of options or awards of bonus stock are to be made, to
designate the number of shares of Common Stock to be covered by such grants or
awards, and to make all other determinations and take all other actions
necessary or advisable for the administration of the 1989 Plan.
Subject to the terms and conditions of the 1989 Plan, the Compensation
and Stock Option Committee may modify, extend or renew outstanding options, or
accept the surrender of outstanding options granted under the 1989 Plan or under
any other Stock Option Plan of the Company and authorize the granting of new
options pursuant to the 1989 Plan in substitution therefor. The substituted
options may specify a lower exercise price than the surrendered options, a
longer term than the surrendered options or have any other provisions that are
authorized by the 1989 Plan.
The 1989 Plan may be amended by the Board, subject to stockholder
approval if such approval is then required by applicable law or in order for the
1989 Plan to continue to satisfy the requirements of Rule 16b-3 under the
Exchange Act.
Stock options and bonus stock may be granted or awarded only to persons
determined by the Compensation and Stock Option Committee to be employees of the
Company. As of February 1, 1997, the Company had approximately 294 employees. An
employee may receive more than one option or award of bonus stock, provided that
no employee may be granted options or bonus stock under the 1989 Plan covering
more than 50% of the shares of Common Stock reserved for issuance under the 1989
Plan as set forth above.
Stock options granted under the 1989 Plan will have exercise prices not
less than the greater of the fair market value of the optioned stock at the date
of grant or the par value of the optioned stock. Generally, options granted
under the 1989 Plan shall not be exercisable until the expiration of six months
from the date of grant or have a term greater than ten years after the date of
grant. Without limiting the Compensation and Stock Option Committee's discretion
as to the terms of stock options granted in accordance with the provisions of
the 1989 Plan, options granted under the 1989 Plan generally become exercisable
as to 33% of the stock covered thereby on each of the first two anniversaries of
the date of grant and as to an additional 34% on the third anniversary of the
date of the grant, generally terminate ten years after the date of grant, and
generally have an exercise price equal to the fair market value of the optioned
stock at the date of grant. The Compensation and Stock Option Committee may in
its discretion provide that options granted under the 1989 Plan expire at
specified times following, or become exercisable in full upon, the occurrence of
certain events, including a change of control, death, disability or retirement.
The 1989 Plan permits the payment of the option exercise price to be
made in cash (which may include an assignment of the right to receive the cash
proceeds from the sale of Common Stock subject to the option pursuant to a
"cashless exercise" procedure) or by delivery of shares of Common Stock valued
at their fair market value on the date of exercise, or by a combination of both
cash and Common Stock. The 1989 Plan also provides, unless otherwise determined
by the Compensation and Stock Option Committee and set forth in an agreement,
for satisfaction of an optionee's or grantee's tax liabilities arising in
connection with the 1989 Plan through retention by the Company of shares of
Common Stock issuable upon the exercise of a nonstatutory stock option or
pursuant to an award of bonus stock or through delivery of shares of Common
Stock to the Company subject to the terms and conditions set forth in the 1989
21
<PAGE>
Plan and under such other terms and conditions as the Compensation and Stock
Option Committee deems appropriate.
The Compensation and Stock Option Committee may in its discretion
provide for the right of the optionee to surrender to the Company an option (or
portion thereof) that has become exercisable and receive upon such surrender,
without any payment to the Company, that number of shares of Common Stock having
an aggregate fair market value equal to the number of shares subject to the
option being surrendered multiplied by an amount equal to the difference between
the fair market value of a share of Common Stock on the date of surrender and
the option exercise price, plus an amount of cash equal to the fair market value
of any fractional share. The Compensation and Stock Option Committee also may
provide for the grant of a new option to an optionee upon the surrender of
shares of Common Stock to pay the option exercise price of a previously granted
option. The number of shares subject to any such new option shall equal the
number of shares surrendered to pay the option exercise price, and the option
exercise price for any such new option will not be less than the greater of the
fair market value of the optioned stock at the date of grant or the par value of
the optioned stock.
Options granted under the 1989 Plan shall not be transferable otherwise
than by will, by the laws of descent and distribution or pursuant to a qualified
domestic relations order (as defined in the Code), and may be exercised during
the optionee's lifetime only by the optionee or, in the event of the optionee's
legal disability, by the optionee's legal representative.
Bonus stock may also be awarded under the 1989 Plan. A bonus stock
award consists of shares of Common Stock that may be issued from time to time
under such conditions (if any) that the Compensation and Stock Option Committee
may prescribe. Such conditions might include such matters as continued
employment with the Company for a specified period of time or achievement of
certain performance goals.
An optionee will not recognize income on the grant of a nonstatutory
stock option, but generally will recognize ordinary income on the exercise of a
nonstatutory stock option. The amount of income recognized on the exercise of a
nonstatutory stock option generally will be equal to the excess, if any, of the
fair market value of the shares at the time of exercise over the aggregate
exercise price paid for the shares, regardless of whether the exercise price is
paid in cash or in shares. Where ordinary income is recognized by an optionee in
connection with the exercise of a nonstatutory stock option, the Company will be
entitled to a deduction in the amount of ordinary income so recognized, subject
to satisfying tax withholding requirements.
A grantee who is awarded bonus stock that is not subject to
restrictions generally will recognize ordinary income with respect to the shares
on the date of grant. If the shares of bonus stock are subject to a substantial
risk of forfeiture on the date of grant, the grantee is not required to include
the value of such shares in ordinary income until the shares become no longer
subject to a substantial risk of forfeiture, unless the grantee elects to be
taxed on receipt of the shares. In either case, the amount of such income
generally will be equal to the fair market value of the shares at the time the
income is recognized. The Company will be entitled to a deduction in the amount
of ordinary income so recognized, subject to satisfying tax withholding
requirements.
The rules governing the tax treatment of options and bonus stock, and
an optionee's or grantee's receipt of shares in connection with such grants or
awards, are quite technical, so that the above description of tax consequences
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is necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are, of course, subject to change, as are their
interpretations, and their application may vary in individual circumstances.
Finally, the tax consequences under applicable state law may not be the same as
under the federal income tax laws.
Recommendation and Vote Required
- --------------------------------
The affirmative vote of the holders of a majority of the Company's Common
Stock present in person or by proxy and entitled to vote at the Annual Meeting
is required to approve the amendment to the 1989 Plan. The Board of Directors
Recommends a Vote FOR the Approval of this Proposal.
PROXIES WILL BE VOTED FOR THE APPROVAL OF THE AMENDMENT TO THE 1989 PLAN
UNLESS OTHERWISE INDICATED ON THE PROXY.
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3. RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
---------------------------------------------
On the recommendation of the Audit Committee, the Board of Directors
has appointed Arthur Andersen LLP as independent accountants for the Company for
the year 1997, subject to ratification by the stockholders at the annual
meeting. Arthur Andersen LLP has been the independent accountants for the
Company since 1988. A representative of Arthur Andersen LLP will be present at
the annual meeting of stockholders with the opportunity to make a statement if
he so desires and to respond to appropriate questions.
The Board of Directors recommends a vote FOR ratification of the
appointment of Arthur Andersen LLP as independent accountants for the Company
for the year 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
-------------------------------------------------------
Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than ten percent
of the Company's common stock are required to report their ownership of the
Company's common stock and any changes in that ownership to the Securities and
Exchange Commission and the National Association of Securities Dealers, Inc.
Specific due dates for these reports have been established and the Company is
required to report in this proxy statement any failure to file by these dates.
Except as described in the following three sentences, no person associated with
the Company who was required to file under these rules failed to file any such
required report. Mr. Zesiger did not report on Form 4, but reported on Form 5,
the purchase by a pension fund over which Mr. Zesiger has investment control of
3,000 shares of the Company's common stock acquired in 1996. Mr. Dorfman was
late in filing on Form 4 the purchase in one transaction of 1,000 shares of the
Company's Common Stock in 1996. Ronald Baron, who may be deemed a ten percent
owner for purposes of Section 16(a), was late in filing his initial report with
the Securities and Exchange Commission. In making these statements, the Company
has relied on the written representations of its directors and officers and
copies of the reports that have been filed with the Commission.
OTHER MATTERS
-------------
The Board of Directors is not aware of any other matters to be
presented at the annual meeting. If any other matter proper for action at the
meeting should be presented, the holders of the accompanying proxy will vote the
shares represented by the proxy on such matter in accordance with their best
judgment. If any matter not proper for action at the meeting should be
presented, the holders of the proxy will vote against consideration thereof or
action thereon.
All shares represented by the accompanying proxy, if the proxy is duly
executed and received by the Company at or prior to the meeting, will be voted
at the meeting in accordance with any instructions specified on such proxy and,
where no instruction is specified, as indicated on such proxy.
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PROPOSALS FOR 1998
------------------
In accordance with rules promulgated by the SEC, the Company will
review for inclusion in next year's proxy statement stockholder proposals
received by November 30, 1997. Proposals should be sent to the Secretary of the
Company, 10802 Parkridge Boulevard, Reston, Virginia 20191-5416. In addition, in
accordance with Article II, Section 13 of the Company's By-Laws, in order to be
properly brought before the 1998 annual meeting of stockholders, a stockholder
submitting a proposal must file a written notice with the Secretary of the
Company which conforms to the requirements of the By-Laws. If the Board of
Directors or a designated committee or officer who will preside at the
stockholders meeting determines that the information provided in such notice
does not satisfy the informational requirements of the By-Laws or is otherwise
not in accordance with law, the stockholder will be notified promptly of such
deficiency and be given an opportunity to cure the deficiency within the time
period prescribed in the ByLaws. Such notice of a stockholder proposal must be
delivered not less than 60 days nor more than 120 days prior to the date of the
annual meeting to be held in 1997 (unless such notice relates to a special
meeting or the annual meeting is called to be held before the date specified in
the By-Laws, in which case the stockholder proposal must be delivered no later
than the close of business on the tenth day following the date on which notice
of the meeting is publicly announced).
1996 ANNUAL REPORT
------------------
AMSC's Annual Report for the year 1996, including financial statements,
is being furnished concurrently with this Proxy Statement to persons who were
stockholders of record as of March 31, 1997, the record date for the annual
meeting. The Annual Report does not form part of the material for the
solicitation of proxies.
By order of the Board of Directors,
Randy S. Segal
Vice President and Secretary
Reston, Virginia
April 21, 1997
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