<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or 240.14a-12
</TABLE>
Globalstar Telecommunications Limited
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rule 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 transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
----------------------------------------------------------------------------
1997
----------------------------------------------------------------------------
NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT
GLOBALSTARTM
TELECOMMUNICATIONS LIMITED
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 8, 1997
------------------------
The Annual Meeting of Shareholders of Globalstar Telecommunications Limited
will be held in the Third Floor Auditorium, Chase Corporation, 270 Park Avenue,
New York, New York, at 10:00 o'clock A.M., on Tuesday, April 8, 1997 for the
purpose of:
1. Electing to the Board seven directors whose terms have expired;
2. Acting upon a proposal to fix the minimum and maximum number of
directors at five and nine, respectively, and to deem any vacancies on
the Board to be casual vacancies;
3. Acting upon a proposal to increase the number of authorized shares of
Common Stock of the Company from 60,000,000 to 200,000,000;
4. Acting upon a proposal to amend the Company's 1994 Stock Option Plan to
increase the number of shares of Common Stock available for issuance
from 250,000 to 625,000 and to reduce the minimum purchase price at
which options may be granted thereunder;
5. Acting upon a proposal to ratify the appointment of Deloitte & Touche
LLP as independent auditors for the year ending December 31, 1997; and
6. Transacting any other business which may properly come before the
meeting.
The Board of Directors has fixed the close of business on February 21, 1997
as the date for determining shareholders of record entitled to receive notice
of, and to vote at, the Annual Meeting.
All shareholders 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
LOGO
BERNARD L. SCHWARTZ
Chairman of the Board of Directors
March 7, 1997
<PAGE> 4
PROXY STATEMENT
GLOBALSTAR TELECOMMUNICATIONS LIMITED
CEDAR HOUSE, 41 CEDAR AVENUE
HAMILTON HM12, BERMUDA
------------------------
ANNUAL MEETING OF SHAREHOLDERS
APRIL 8, 1997
------------------------
PROXY SOLICITATION
The enclosed proxy is solicited by and on behalf of the Board of Directors
of Globalstar Telecommunications Limited (the "Company" or "GTL"). Any
shareholder may revoke a previously granted proxy 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
$5,000, for such services. Proxies, ballots and voting tabulations that identify
shareholders will be held confidential, except in a contested proxy solicitation
or where necessary to meet applicable legal requirements. The Inspector of
Election will not be an employee of the Company. This Proxy Statement and the
enclosed proxy will be first mailed to shareholders on or about March 7, 1997.
OUTSTANDING VOTING STOCK
Only shareholders at the close of business on the February 21, 1997 record
date are entitled to notice of and to vote at the Annual Meeting. There were
10,000,000 shares of common stock, par value $1.00 per share ("Common Stock"),
of the Company outstanding on that date and each share is entitled to one vote
on each matter. Pursuant to Bermuda law and the Company's Bye-Laws, the
Company's Chairman will request a poll at the Annual Meeting so that each
shareholder present in person or by proxy will have one vote for each share
held. Proposals 1, 2, 3, 4 and 5 require for approval the vote of a majority of
the votes cast at the Annual Meeting in person or by proxy. 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. Because
abstentions and broker "non-votes" are not treated as shares voted, they would
have no impact on proposals 1 through 5.
ELECTION OF DIRECTORS
Seven directors are to be elected to hold office until the next Annual
Meeting or until their successors are elected. Messrs. Schwartz, DeBlasio,
Grierson, Hodes, Peett, Targoff and Towbin are present directors of the Company.
Mr. Towbin and Sir Ronald Grierson are being nominated to act as the Company's
two Independent Directors. Each director and nominee has indicated an intention
to continue to serve if elected and has consented to being named in this Proxy
Statement. Unless authority to vote for management's nominees is withheld, the
enclosed proxy will be voted for the election of the persons named above, 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 Company is a general partner of Globalstar, L.P. ("Globalstar"), which
is building and preparing to launch and operate a worldwide, low-earth orbit
satellite-based digital telecommunications system, the Globalstar(TM) System.
Globalstar maintains its own General Partners' Committee, Audit Committee and
Council of Service Operators. The Company has a standing Audit Committee,
Compensation and Stock
<PAGE> 5
Option Committee (the "Compensation Committee") and Executive Committee. The
Audit Committee, which met once during 1996, is comprised of Mr. Hodes. The
Audit Committee reviews and acts or reports to the Board of Directors with
respect to 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 Compensation Committee, which met three times during 1996, is
comprised of Messrs. Hodes and Towbin. Effective after the Annual Meeting,
assuming their election as directors, the Compensation Committee will be
comprised of Messrs. Grierson and Towbin. The Compensation Committee reviews and
provides recommendations to the Board of Directors regarding executive
compensation matters and is also responsible for the administration of the
Company's Stock Option Plan. The Executive Committee, which met once during
1996, is comprised of Messrs. Schwartz, Hodes and Targoff. The Executive
Committee, between meetings of the Board of Directors, exercises all powers and
authority of the Board of Directors in the management of the business and
affairs of the Company that may be lawfully delegated. The Board of Directors
performs the function of a nominating committee.
The Board of Directors held three meetings in 1996. No director attended
fewer than 75% of the meetings of the Board of Directors except for Messrs.
DeBlasio, Grierson and Peett who each attended two meetings.
DIRECTOR COMPENSATION. Directors are paid a fixed fee of $12,000 per year.
Directors who are not officers of the Company, Globalstar or Loral Space &
Communications Ltd. ("Loral") are also paid $1,500 for personal attendance at
each meeting. On May 20, 1996, each of the Company's four non-employee directors
was contingently granted options to purchase 20,000 shares of Common Stock at an
exercise price of $50.375 per share. These options became effective on February
3, 1997 when the Company's 1994 Stock Option Plan was amended to include
non-employee directors as eligible to receive awards thereunder.
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 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 January 31, 1998, and costs $650,000 for the three years of coverage.
The following table provides certain relevant information concerning the
nominees for election as directors and their principal occupations:
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS SINCE
- -------------------------- --- ---------------------------------------------- ---------
<S> <C> <C> <C>
Bernard L. Schwartz....... 71 Chairman of the Board of Directors and Chief 1994
Executive Officer of the Company
Chairman of the Board of Directors and Chief
Executive Officer of K&F Industries, Inc.,
Loral Space & Communications Ltd. and Space
Systems/Loral, Inc.; Chief Executive Officer
of Globalstar, L.P.; Vice Chairman and
Director of Lockheed Martin Corporation
Director of Reliance Group Holdings, Inc. and
certain subsidiaries, First Data Corporation
and Trustee of N.Y. University Medical
Center
Michael P. DeBlasio....... 60 Senior Vice President and Chief Financial 1996
Officer of the Company; Senior Vice President
of Globalstar, L.P.
Senior Vice President and Chief Financial
Officer of Loral Space & Communications Ltd.
Senior Executive Vice President and Director
of Space Systems/Loral, Inc.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS SINCE
- -------------------------- --- ---------------------------------------------- ---------
<S> <C> <C> <C>
Sir Ronald Grierson(1).... 75 Retired Vice Chairman, General Electric 1996
Company plc (U.K.)
Director of Daily Mail and General Trust plc,
Safic-Alcan S.A. (France) and Chime
Communications plc
Chairman of international advisory boards of
Bain & Co., and Blackstone Group
Robert B. Hodes........... 71 Counsel to Willkie Farr & Gallagher, law firm, 1994
New York, N.Y.
Director of Aerointernational, Inc., Argentina
High Yield & Capital Appreciation Fund Ltd.,
W.R. Berkley Corporation, Beaver Dam
Sanctuary, Inc., Space Systems/Loral, Inc.,
Crystal Oil Company, Cross River Reservoir
Association, Loral Space & Communications
Ltd., LCH Investments N.V., Mueller
Industries, Inc., R.V.I. Guaranty Ltd.,
Restructured Capital Holdings, Ltd. and The
Cremer Foundation
E. John Peett............. 61 Executive Director, Vodafone Group plc 1994
Director of Vodafone Group plc
Michael B. Targoff........ 52 President and Chief Operating Officer of the 1994
Company; Chief Operating Officer of
Globalstar, L.P.
President and Chief Operating Officer of Loral
Space & Communications Ltd.
Director of Space Systems/Loral, Inc.
A. Robert Towbin(1)....... 62 Managing Director, Unterberg Harris 1995
Director of Bradley Real Estate, Inc.,
Columbus New Millennium Fund, Gerber
Scientific, Inc. and K&F Industries, Inc.
</TABLE>
- ---------------
(1) Independent Director.
PROPOSAL 2. ACTING UPON A PROPOSAL TO FIX THE MINIMUM AND MAXIMUM NUMBER OF
DIRECTORS AT FIVE AND NINE, RESPECTIVELY, AND TO DEEM ANY VACANCIES
ON THE BOARD TO BE CASUAL VACANCIES.
In accordance with the Bye-Laws of the Company, the determination of the
minimum and maximum number of directors and the determination that one or more
vacancies on the Board of Directors shall be deemed casual vacancies is to be
made at the Annual Meeting. The Board of Directors has recommended that the
minimum number of directors be five and the maximum number of directors be nine
and that all vacancies be deemed to be casual vacancies.
APPROVAL OF PROPOSAL 2 WILL REQUIRE THE AFFIRMATIVE VOTE IN PERSON OR BY
PROXY OF A MAJORITY OF THE VOTES CAST AT THE ANNUAL MEETING.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF GTL VOTE IN FAVOR OF
THIS PROPOSAL.
3
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, based upon filings made with the Company,
certain information concerning persons who may be deemed beneficial owners of 5%
or more of the outstanding shares of Common Stock of the Company because they
possessed or shared voting or investing power with respect to the shares of the
Company:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OWNERSHIP(1) CLASS(1)
- ----------------------------------------------------------- --------------------- -----------
<S> <C> <C>
Loral Space & Communications Ltd........................... 4,379,713(2) 33.8%
600 Third Avenue
New York, New York 10016
</TABLE>
- ---------------
(1) Includes (i) the impact of the conversion of 1,675,875 shares of the
Company's 6 1/2% Convertible Preferred Equivalent Obligations due 2006
(assuming a conversion price of $61.16 per share), (ii) the exercise of
subscription rights to purchase 159,172 shares of Common Stock and (iii) the
exercise of outstanding warrants to purchase 1,137,522 shares of Common
Stock.
(2) Of such amount, 492,000 shares represent shares of Common Stock subject to
options granted by Loral to certain of its executive officers and directors.
The following table presents 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 February 10, 1997. 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) OF CLASS
- ------------------------------------------------------------- ----------------------- --------
<S> <C> <C>
Bernard L. Schwartz.......................................... 257,600 2.6%
Michael B. Targoff........................................... 34,000(2) *
Michael P. DeBlasio.......................................... 34,000 *
Sir Ronald Grierson.......................................... -- --
Robert B. Hodes.............................................. 21,000 *
E. John Peett................................................ -- --
A. Robert Towbin............................................. 4,600(3) *
Douglas G. Dwyre............................................. 100 *
Anthony J. Navarra........................................... 1,000 *
Joel Schindall............................................... 500 --
William F. Adler............................................. -- --
Robert Hicks................................................. -- --
All directors and executive officers as a group (20
persons)................................................... 412,450 4.1%
</TABLE>
- ---------------
* Represents holdings of less than one percent.
(1) Includes shares which, as of February 10, 1997, may be acquired within sixty
days upon the exercise of options granted by Loral: 140,000 to Mr. Schwartz,
30,000 each to Messrs. Targoff and DeBlasio, 20,000 to Mr. Hodes and 272,000
to all directors and executive officers as a group.
(2) Includes the right to acquire 20,000 shares, held in a trust, as to which
Mr. Targoff disclaims beneficial ownership.
(3) Includes 1,100 shares held in a trust, as to which Mr. Towbin disclaims
beneficial ownership.
4
<PAGE> 8
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The salaries of the executive officers of the Company and Globalstar are
paid by either Globalstar or Loral. Loral is solely responsible for the
compensation of Messrs. Schwartz, Targoff and DeBlasio and the other officers of
the Company and Globalstar who are also officers of Loral, and Loral does not
receive any direct reimbursement from Globalstar or the Company for such
compensation. The following report discusses the executive compensation policies
of Globalstar with respect to annual compensation, and of the Company with
respect to long-term stock-based incentive compensation, for executive officers
and other employees who receive compensation from Globalstar and the Company.
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 shareholders. In order to
attain these goals, the Company's compensation policies link 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. 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.
The Compensation Committee believes that the Company's compensation
policies, which have been instrumental in attracting and retaining highly
qualified and dedicated personnel, will be an important factor in the Company's
growth and success.
ANNUAL COMPENSATION. Base salaries for the NEOs have been set at
competitive levels by the CEO of Globalstar in consultation with the
Compensation Committee, giving due regard to individual performance and time in
position. Annual incentive compensation of the NEOs is not based on a formula
using quantitative target levels. The CEO of Globalstar, 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 Globalstar's business plan and growth objectives.
LONG-TERM INCENTIVE COMPENSATION. It is the Compensation Committee's
belief that shareholders' interests are best served by encouraging key employees
to develop ownership interests in the Company. To that end, the Company relies
upon fair market value employee stock options granted in accordance with the
provisions of the 1994 Stock Option Plan. In addition, in determining overall
compensation, the Compensation Committee also considers fair market value stock
options granted by Loral. During 1996, Loral granted to the NEOs options to
purchase 63,000 shares of Loral Common Stock.
This report of the Compensation Committee and the Performance Graph
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
Robert B. Hodes
A. Robert Towbin
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
None of the members of the Compensation Committee of the Board of Directors
are present or former officers or employees of the Company or its subsidiaries.
Mr. Hodes is counsel to the law firm of Willkie Farr & Gallagher, and Mr. Towbin
is a managing director of Unterberg Harris. Both firms provided services to the
Company during the year.
5
<PAGE> 9
STOCK PERFORMANCE GRAPH
The graph below compares the monthly change in cumulative total return,
including reinvestment of dividends, of the Company's Common Stock with the
cumulative total return of the Nasdaq Composite Stock Index and the Nasdaq
Telecommunications Index, from February 14, 1995, the date on which the
Company's Common Stock was first listed on the Nasdaq National Market, through
January 31, 1997, assuming an investment of $100 in the Company's Common Stock
and each index.
COMPARISON OF CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
GLOBALSTAR
TELECOMMU- NASDAQ TELE- NASDAQ CO
MEASUREMENT PERIOD NICATIONS COMMUNICA- MPOSITE STOCK
(FISCAL YEAR COVERED) LTD. TIONS INDEX INDEX
<S> <C> <C> <C>
14-FEB-95 100 100 100
31-MAR-95 88 100 103
30-JUN-95 74 109 118
30-SEP-95 118 124 133
31-DEC-95 206 122 134
31-MAR-96 294 136 140
30-JUN-96 246 142 152
30-SEP-96 286 143 157
31-DEC-96 350 158 165
31-JAN-97 365 167 175
</TABLE>
6
<PAGE> 10
The salaries of the executive officers of Globalstar and the Company are
paid by either Globalstar or Loral. Loral is solely responsible for the
compensation of Messrs. Schwartz, Targoff and DeBlasio and the other officers of
the Company and Globalstar who are also officers of Loral. The following table
summarizes the compensation paid to the five most highly compensated executive
officers of the Company who receive compensation from Globalstar and the
Company.
SUMMARY COMPENSATION TABLE(A)
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-------------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(B) BONUS(C) STOCK OPTIONS(D) COMPENSATION(E)
- --------------------------- ---- -------- -------- ------------------- ---------------
<S> <C> <C> <C> <C> <C>
Douglas G. Dwyre 1996 $195,932 -- -- $ 9,132
President 1995 $176,220 $125,000 15,000 $ 5,400
1994 $176,220 $100,000 -- $ 4,010
Anthony J. Navarra 1996 $179,229 -- -- $ 5,026
Executive Vice President - 1995 $168,334 $ 90,000 12,500 $ 5,151
Business Development 1994 $160,006 $ 70,000 -- $ 3,438
Joel Schindall 1996 $157,339 -- -- $ 500
Vice President - Systems 1995 $153,300 $ 15,000 1,200 $ 5,374
Applications 1994 $153,300 $ 10,000 -- $ 3,379
William F. Adler 1996 $135,692 -- 5,000 $77,630
Vice President and General
Counsel
Robert Hicks 1996 $ 83,654 $ 20,000 7,000 $ 1,972
Vice President -
Operations
</TABLE>
- ---------------
(a) The above table excludes Ellis H. Gallimore, who was Vice President and
General Counsel until his resignation in November 1995. For 1995 and the
period March 23, 1994 to December 31, 1994, base annual compensation for
Mr. Gallimore was $115,464 and $99,399, respectively and his bonus for
1994, which was paid in 1995, was $10,000. In addition, other compensation
for Mr. Gallimore was $20,080 for his vacation payout in 1995. Mr.
Gallimore did not receive any stock option grants nor participate in the
Savings Plan.
(b) 1994 amounts reflect the annual base salary for each individual, not the
actual amounts earned during the period March 23, 1994 (commencement of
operations) to December 31, 1994. Base compensation earned during the
period March 23, 1994 to December 31, 1994 was $129,307, $120,770 and
$83,037, for Messrs. Dwyre, Navarra and Schindall, respectively. 1996
amounts reflect salary actually paid to Messrs. Adler and Hicks, who
commenced employment with Globalstar on January 15, 1996 and June 1, 1996,
respectively. The annual salary for Messrs. Adler and Hicks, as of December
31, 1996, was $144,000 and $150,000, respectively.
(c) Reflects annual bonuses earned for the fiscal period ended December 31,
1995, paid in 1996, and for the fiscal period ended December 31, 1994, paid
in 1995, and a special bonus for Mr. Hicks. Annual bonuses have not yet
been determined for the period ending December 31, 1996.
(d) Does not reflect grants during 1996 of stock options to acquire 25,000,
20,000, 8,000, 5,000 and 5,000 shares of Loral common stock granted by
Loral to Messrs. Dwyre, Navarra, Schindall, Adler and Hicks, respectively.
These options are exercisable at $10.50 per share, vest in 20% increments
over five years and have a 10-year term.
(e) Reflects company matching contributions to the Savings Plan attributable to
1996, 1995 and the period March 23, 1994 to December 31, 1994 in the
amounts of $5,396, $5,400 and $4,010 for Mr. Dwyre, $5,026, $5,151 and
$3,438 for Mr. Navarra, $0, $5,374 and $3,379 for Mr. Schindall, $4,084, $0
and $0 for Mr. Adler and $1,972, $0 and $0 for Mr. Hicks, respectively.
Also reflects a payout in 1996 of accrued vacation of $3,736 to Mr. Dwyre,
invention compensation in 1996 of $500 to Mr. Schindall and a one time
relocation payment in 1996 of $73,546 to Mr. Adler.
7
<PAGE> 11
OPTION GRANTS TABLE
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL MARKET
SECURITIES OPTIONS EXERCISE PRICE ON GRANT
UNDERLYING GRANTED TO OR BASE DATE OF DATE
OPTIONS EMPLOYEES PRICE GRANT EXPIRATION PRESENT
NAME GRANTED(A) IN FISCAL YEAR (PER SHARE) (PER SHARE) DATE VALUE(B)
- ---------------------------- ---------- -------------- ----------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Douglas G. Dwyre............ -- -- n/a n/a n/a n/a
Anthony J. Navarra.......... -- -- n/a n/a n/a n/a
Joel Schindall.............. -- -- n/a n/a n/a n/a
William F. Adler............ 5,000 11.90% $ 63.5313 $ 63.5313 11/18/2006 $179,400
Robert Hicks................ 7,000 16.67% $ 63.5313 $ 63.5313 11/18/2006 $251,100
</TABLE>
- ---------------
(a) Exercisability vests ratably over a five-year period.
(b) The Black-Scholes model of option valuation was used to determine grant date
present value. The Company does not advocate or necessarily agree that the
Black-Scholes model can properly determine the value of an option. The
present value calculation is based on a ten-year option term, a risk-free
interest rate assumption of 6.25%, stock price volatility of 30% over a
ten-year period and a dividend rate of $0 per share. However, there were no
adjustments made for non-transferability or risk of forfeiture. The actual
value realized, if any, will depend on the amount by which the stock price
at the time of exercise exceeds the exercise price. There is no assurance
that the amount estimated by the Black-Scholes model will be realized.
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT YEAR-END AT YEAR-END(A)
ON REALIZED --------------------------------- ---------------------------------
NAME EXERCISE VALUE EXERCISE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ --------- -------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Douglas G. Dwyre........ -- -- -- 15,000 -- $695,625
Anthony J. Navarra...... -- -- -- 12,500 -- $579,688
Joel Schindall.......... -- -- -- 1,200 -- $ 55,650
William F. Adler........ -- -- -- 5,000 -- $ -0-
Robert Hicks............ -- -- -- 7,000 -- $ -0-
</TABLE>
- ---------------
(a) Market value of underlying securities at year-end, minus the exercise price.
EMPLOYMENT ARRANGEMENTS
Except for the Retirement Plan, including a Supplemental Executive
Retirement Plan, the 401(k) Savings Plan, and the 1994 Stock Option Plan, there
are no compensatory plans or arrangements with respect to any of the NEOs under
which payments or benefits are triggered by, or result from, the resignation,
retirement or any other termination of such NEO's employment, a
change-in-control of the Company, or a change in such NEO's responsibilities
following a change-in-control.
PENSION PLAN
The Retirement Plan (the "Plan") provides a non-contributory benefit for
each year of non-contributory participation, and additional benefits associated
with contributory participation. The Company also has a Supplemental Executive
Retirement Plan ("SERP") under which eligible employees receive benefits which
generally make up for certain required reductions in Plan benefits caused by the
Code limitations. For non-
8
<PAGE> 12
contributory participation, the annual retirement benefit is $252 times credited
years of service. For contributory participation, the following table shows the
amounts of annual retirement benefits that would be payable at normal retirement
(age 65 or later). Benefits are shown for various rates of final average salary,
assuming that employee contributions were made for the periods indicated.
Employees who have completed at least one year of service and attained age 21
will receive the contributory benefit if they contribute to the Plan at the rate
of 1% of salary.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CONTRIBUTORY SERVICE
---------------------------------------------------------
FINAL AVERAGE SALARY 20 25 30 35 40
- --------------------------------------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000............................ $30,950 $38,690 $46,430 $ 54,160 $ 60,660
$125,000............................ $39,700 $49,630 $59,550 $ 69,480 $ 77,600
$150,000............................ $48,450 $60,560 $72,680 $ 84,790 $ 94,540
$175,000............................ $57,200 $71,500 $85,800 $100,100 $111,480
$200,000............................ $65,950 $82,440 $98,930 $115,410 $128,410
</TABLE>
The table above shows total estimated benefits payable under the Plan and
SERP including amounts attributable to employee contributions, determined on a
straight annuity basis. Such estimated benefits are not subject to any deduction
for Social Security or other offset amounts. The compensation covered by the
Plan and SERP is the employee's base salary, and is identical to the
compensation disclosed as "Annual Compensation Salary" in the Summary
Compensation Table. The Plan and SERP benefits are computed on the basis of the
average of an employee's highest five consecutive annual salaries out of the
last ten years contributions are made. As of December 31, 1996, the credited
years of service for each of the executives in the Summary Compensation Table
are as follows: Douglas G. Dwyre, 23 years; Anthony J. Navarra, 5 years; Joel
Schindall, 2 years; William F. Adler, less than one year; and Robert Hicks, less
than one year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Messrs. Schwartz, Targoff and DeBlasio are executive officers of Loral,
which is the largest shareholder of the Company and, through one of its
subsidiaries, acts as the managing general partner of Globalstar. Commencing on
the in-service date, Globalstar will make distributions to the managing general
partners equal to 2.5% of Globalstar's revenues up to $500 million plus 3.5% of
revenues in excess of $500 million. Loral ultimately will receive 80% of such
distribution. Should Globalstar incur a net loss in any year following
commencement of operations, the distribution for that year will be reduced by
50%.
Subsidiaries of Loral have formed joint ventures with partners which have
executed service provider agreements granting the joint ventures the exclusive
rights to provide Globalstar system services to users in Canada, Mexico and
Brazil, as long as specified minimum levels of subscribers are met. Certain
Globalstar service providers, including Loral, receive specified discounts from
Globalstar's expected pricing schedule generally over a five-year period.
Messrs. Schwartz, Targoff and DeBlasio are executive officers of Space
Systems/Loral, Inc. ("SS/L"), which is an affiliate of the Company. Globalstar
has entered into a contract with SS/L to design, manufacture, test and launch
its satellite constellation. The price of the contract consists of three parts,
the first for non-recurring work at a price not to exceed $117.1 million, the
second for recurring work at a fixed price of $15.6 million per satellite
(including certain performance incentives of up to approximately $1.9 million
per satellite) and the third for launch services and insurance. SS/L will
design, build and launch the 56 satellites in Globalstar's constellation, which
are designed to have a minimum life span of 7 1/2 years. SS/L has agreed to
obtain insurance on Globalstar's behalf for the cost of replacing satellites
lost in hot failures and any relaunch costs not covered by the applicable launch
contract. SS/L has also agreed pursuant to the agreement to obtain launch
vehicles and arrange for the launch of Globalstar's satellites on Globalstar's
behalf. The estimated total cost for launch services and launch insurance for
all 56 satellites is $455 million, subject to equitable adjustments in light of
future market conditions, which may, in turn, be influenced by international
political
9
<PAGE> 13
developments. Termination by Globalstar of this agreement will result in
termination fees, which may be substantial. Such termination fees are generally
limited to SS/L's cost incurred and uncancellable obligations under subcontracts
and outstanding orders for satellite materials at the time of termination plus a
reasonable fee.
The agreement provides for liquidated damages to Globalstar in the event
SS/L fails to supply the satellites at the times specified in the contract.
Liquidated damages of approximately $45,000 are payable by SS/L for each day of
delay, subject to an overall cap of approximately $33 million. Such liquidated
damages are Globalstar's exclusive remedies in the face of any delay by SS/L in
the delivery of the satellites or for any events of default specified in the
agreement.
In addition, Globalstar has agreed to purchase from SS/L eight additional
spare satellites at a cost estimated at $175 million.
SS/L and its subcontractors have committed approximately $310 million of
vendor financing to Globalstar of which $220 million will be non-interest
bearing. Globalstar will repay the non-interest bearing portions as follows: $49
million following the launch and acceptance of 24 or more satellites, $61
million upon the launch and acceptance of 48 or more satellites, and the
remainder in equal installments over the five-year period following acceptance
of the preliminary and final Globalstar constellations. The remaining $90
million will bear interest, the payment of which will be deferred until December
31, 1998, or the full constellation date, whichever is earlier. Thereafter,
interest and principal will be repaid in twenty equal quarterly installments
during the next five years.
During 1996, Messrs. Schwartz, Targoff and DeBlasio were executive officers
of Loral Corporation, which, prior to the merger (the "Merger") of Loral
Corporation with Lockheed Martin Corporation ("Lockheed Martin") in April 1996,
was a shareholder of the Company. Globalstar has entered into agreements with
subsidiaries of Loral Corporation for (1) the development and delivery of two
satellite operations control centers and 33 telemetry control units on a
cost-plus-fee basis with a maximum price of $25.1 million, and (2) an S-Band
beam forming network engineering model on a firm fixed-price basis for
approximately $463,000. Prior to the merger with Lockheed Martin, Globalstar
leased from Loral Corporation, and since the merger, Globalstar has been leasing
from Lockheed Martin, approximately 56,000 square feet of office at a cost of
approximately $72,000 per month. The lease agreement expires in August 2000 with
an option to extend for two additional five-year periods.
On December 15, 1995, Globalstar entered into a Credit Agreement with a
bank syndicate (the "Credit Agreement") providing for a $250 million credit
facility. Following the consummation of the Merger, Lockheed Martin guaranteed
$206.3 million of Globalstar's obligation under the Credit Agreement, and SS/L
and certain other Globalstar strategic partners guaranteed $11.7 million and $32
million, respectively, of Globalstar's obligation. In addition, Loral has agreed
to indemnify Lockheed Martin for liability in excess of $150 million under
Lockheed Martin's guarantee of the Credit Agreement.
In connection with such guarantees and indemnity of the Credit Agreement,
GTL issued to Loral, Lockheed Martin, SS/L and the other strategic partners
participating in such guarantee or indemnity, warrants (the "GTL Guarantee
Warrants") to purchase 4,185,318 shares of GTL common stock. In connection with
the issuance of the GTL Guarantee Warrants, GTL received (i) warrants to acquire
4,185,318 ordinary partnership interests in Globalstar plus (ii) additional
warrants to purchase an additional 1,131,168 ordinary partnership interests, on
terms and conditions generally similar to those of the GTL Guarantee Warrants.
In addition, Globalstar has also agreed to pay to Loral and the other
guaranteeing partners a fee equal to 1.5% per annum of the average quarterly
amount outstanding under the Credit Agreement (the "Guarantee Fee"). Payment of
the Guarantee Fee will be deferred and subordinated, with interest at LIBOR plus
3%, until after the termination date of the Credit Agreement. Loral/Qualcomm
Satellite Services, L.P. ("LQSS"), the managing general partner of Globalstar,
may also defer payment of such fee if it determines that such deferral is
necessary to comply with the terms of any applicable credit agreement or
indenture.
Globalstar and GTL have entered into an agreement pursuant to which GTL and
Globalstar have agreed that, upon the exercise of any GTL Guarantee Warrant, GTL
will purchase from Globalstar, and Globalstar
10
<PAGE> 14
will sell to GTL, a number of ordinary partnership interests equal to the number
of shares of Common Stock issuable upon such exercise for a purchase price equal
to the exercise price of the GTL Guarantee Warrant.
The GTL Guarantee Warrants have an exercise price of $26.50 per share
expiring on April 19, 2003 and originally were not exercisable until six months
after Globalstar's in-service date, subject to acceleration by LQSS in its sole
discretion. The GTL Guarantee Warrants may not be transferred to third parties
prior to such exercise date.
GTL and the holders of the GTL Guarantee Warrants have entered into an
agreement pursuant to which GTL and LQSS have agreed to accelerate the vesting
and exercisability of the GTL Guarantee Warrants to purchase 4,185,318 shares of
Common Stock at $26.50 per share and the holders have agreed to exercise such
warrants. GTL also has agreed to register for resale the GTL shares issuable
upon exercise of the GTL Guarantee Warrants. In addition, GTL has announced its
intention to distribute to the holders of its Common Stock rights (the "Rights")
to subscribe for and purchase 1,131,168 shares of Common Stock (the "Underlying
Shares") for a price of $26.50 per share. Loral has agreed to purchase all
Underlying Shares not purchased upon exercise of the Rights. Upon the exercise
of the GTL Guarantee Warrants and the Rights, GTL will receive proceeds of
approximately $140.9 million, which it will use to exercise rights to purchase
5,316,486 Globalstar partnership interests at $26.50 per interest. Globalstar
will use such proceeds to continue the construction of the Globalstar System.
Mr. Peett is an executive officer of Vodafone Group plc ("Vodafone"), which
is a limited partner of Globalstar. Globalstar has entered into a consulting
agreement with Vodafone for approximately $650,000 under which Vodafone will
develop Globalstar's security architecture design and billing systems
requirements. A subsidiary of Vodafone has executed service provider agreements,
granting it the right to provide Globalstar system services to users in eight
countries, including Australia, Sweden, South Africa and the United Kingdom, on
an exclusive basis, as long as specified minimum levels of subscribers are met.
The Vodafone subsidiary will receive certain discounts from Globalstar's
expected pricing schedule generally over a five-year period.
Mr. Hodes is counsel to the law firm of Willkie Farr & Gallagher, which
acts as outside counsel to the Company. Mr. Towbin is a managing director in the
investment banking firm of Unterberg Harris, which has rendered advisory and
investment banking services to the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during 1996 all reports for the Company's
executive officers and directors that were required to be filed under Section 16
of the Securities Exchange Act of 1934 were timely filed, except that a report
was not timely filed to report a purchase of Common Stock by Mr. Dwyre and a
disposition of Common Stock by each of Mr. Towbin and Loral.
PROPOSAL 3. ACTING UPON A PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK.
The Board of Directors has declared advisable and recommended a proposal to
increase the number of authorized shares of Common Stock. The Board of Directors
believes that the availability of additional Common Stock will provide
flexibility and allow the Company to issue Common Stock, if, as and when the
need arises. It is therefore proposed to increase the number of authorized
shares of Common Stock from 60,000,000 to 200,000,000.
The text of the resolution adopted by the Board of Directors is set forth
below.
RESOLVED that the Board of Directors deems it in the best interests of the
Company and declares it advisable that, subject to shareholder approval at
the Annual Meeting of Shareholders of the Company on April 8, 1997, the
authorized share capital of the Company be increased from $60,000,000 to
$200,000,000 and a Memorandum of Increase of Share Capital be deposited
with the Registrar of Companies of Bermuda reflecting such increase.
11
<PAGE> 15
As of February 21, 1997, of the 60,000,000 authorized shares of Common
Stock, 10,000,000 shares were outstanding. There were also 48,667,236 shares of
Common Stock (the "Reserved Shares") reserved for issuance upon exercise of
outstanding subscription rights to purchase additional shares of Common Stock,
upon exercise of outstanding warrants, upon conversion of the Company's 6 1/2%
Convertible Preferred Equivalent Obligations due 2006 (assuming a conversion
price of $61.16 per share), under the Company's 1994 Stock Option Plan and upon
exchange of Globalstar partnership interests. Taking into account the Reserved
Shares and the 10,000,000 shares of outstanding Common Stock, as of February 21,
1997, the total number of issued and reserved shares of Common Stock was
58,667,236.
The Board of Directors believes it is in the Company's best interest to
increase the number of authorized but unissued shares of Common Stock in order
to have additional authorized but unissued shares available for issuance to meet
business needs as they arise. The Board of Directors believes the availability
of such additional shares will provide the Company with the flexibility to issue
Common Stock for a variety of proper corporate purposes as the Board of
Directors may deem advisable without further action by the Company's
shareholders, except as may be required by law, regulation or stock exchange
rule. These purposes could include, among other things, the sale of stock to
obtain additional capital funds, the purchase of property, the acquisition of or
merger with other companies, the use of additional shares for various equity
compensation and other employee benefit plans, the declaration of stock
dividends or distributions and other bona fide corporate purposes. Were these
situations to arise, the issuance of additional shares of Common Stock could
have a dilutive effect on earnings per share.
The additional Common Stock to be authorized would have rights identical to
the current outstanding Common Stock. Approval of the proposal by the
shareholders will not have an immediate effect on the rights of existing
shareholders. To the extent that the additional authorized shares are issued in
the future, they would decrease the existing shareholders' relative percentage
equity ownership and, depending on the price at which the shares are issued,
could be dilutive to the existing shareholders. The holders of Common Stock have
no preemptive rights, which means that the shareholders do not have a prior
right to purchase any newly-issued shares of capital stock of the Company in
order to maintain their proportionate ownership interest.
The Board of Directors does not intend to issue any Common Stock or
securities convertible into Common Stock except on terms that it deems to be in
the best interests of the Company and its shareholders. Any future issuance of
Common Stock or securities convertible into Common Stock will be subject to the
rights of holders of outstanding shares of any preferred stock which the Company
may issue in the future. The Company's management has no arrangements,
agreements, understandings or plans at the present time for the issuance or use
of additional shares of Common Stock to be authorized by the proposal to
increase the number of authorized shares of Common Stock.
Although an increase in the authorized shares of Common Stock could, under
certain circumstances, have an anti-takeover effect (for example, by diluting
the stock of a person seeking to effect a change in the composition of the Board
of Directors or contemplating a tender offer or other transaction for a
combination of the Company with another company), the proposal is not in
response to any effort of which the Company is aware to accumulate the Company's
stock or obtain control of the Company, nor is it part of a plan by management
to recommend a series of similar proposals to the Board of Directors and
shareholders.
APPROVAL OF PROPOSAL 3 WILL REQUIRE THE AFFIRMATIVE VOTE IN PERSON OR BY
PROXY OF A MAJORITY OF THE VOTES CAST AT THE ANNUAL MEETING.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF GTL VOTE IN
FAVOR OF THIS PROPOSAL.
12
<PAGE> 16
PROPOSAL 4. ACTING UPON A PROPOSAL TO AMEND THE COMPANY'S 1994 STOCK OPTION
PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR
ISSUANCE FROM 250,000 TO 625,000 AND TO REDUCE THE MINIMUM PURCHASE
PRICE AT WHICH OPTIONS MAY BE GRANTED THEREUNDER.
GENERAL. The Company has historically utilized stock options as a key part
of its overall compensation program for key employees, directors and officers.
As of December 31, 1996, options for 231,200 shares were outstanding under the
Company's 1994 Stock Option Plan (the "SOP"), leaving a balance of 18,800
additional shares that may be the subject of future option grants. The Board of
Directors has approved, subject to shareholder approval, an amendment to the SOP
(the "Amendment") to increase from 250,000 to 625,000 the number of shares of
Common Stock that may be issued under the SOP and to reduce the minimum purchase
price at which non-qualified stock options may be granted under the SOP from
Fair Make Value (as defined in the SOP) to not less than 50% of the Fair Market
Value of a share of Common Stock on the date of grant. The Board of Directors
believes that it is in the best interests of the Company to have stock-based
awards available in order to retain, attract and motivate high quality personnel
for the Company. The Amendment, if approved by shareholders, will enable the
Company to have a sufficient number of stock options available for future grant
and to have a stock option plan with pricing features similar to those of stock
option plans maintained by other comparable companies.
The Board of Directors is submitting the Amendment for shareholder approval
because the terms of the SOP require that any increase in the maximum number of
shares available for issuance under the SOP and any reduction in the minimum
purchase price at which options may be granted thereunder be approved by
shareholders. Also, such approval is required by the rules of the Nasdaq
National Market and the regulations promulgated under Section 162(m) of the
Internal Revenue Code. If the Amendment is not approved by the shareholders, it
will not be adopted.
DESCRIPTION OF THE 1994 STOCK OPTION PLAN. The following description of
the SOP, as amended by the Amendment, is qualified in its entirety by reference
to the text of the SOP as filed with the Securities and Exchange Commission as
an exhibit to the Company's Registration Statement on Form S-1 (Registration
Number 33-86808) and the Amendment as attached hereto as Exhibit A.
The Company's 1994 Stock Option Plan (the "SOP") was adopted by the Board
of Directors and approved by the Company's then-sole shareholder on November 30,
1994. The SOP provides for the grant of non-qualified stock options ("NQSOs")
and incentive stock options ("ISOs") as defined in Section 422 of the Internal
Revenue Code of 1986 (the "Code"). The SOP is administered by the Company's
Compensation Committee. Key employees, directors and officers of the Company and
Globalstar and entities which are directly or indirectly controlled by
Globalstar and designated by the Compensation Committee are eligible to
participate in the SOP. At present, 16 officers, four directors and
approximately 130 key employees are eligible to participate in the SOP.
Management of the Company and Globalstar believe that the SOP is important to
provide an inducement to obtain and retain the services of qualified employees,
directors and officers. The SOP (but not outstanding options) will terminate on
the tenth anniversary of its adoption. Assuming approval of the Amendment by
shareholders, the Company will have reserved 625,000 shares of Common Stock for
issuance upon the exercise of options under the SOP.
Recipients of options under the SOP ("Optionees") are selected by the
Compensation Committee. The Compensation Committee determines the terms of each
option grant including (1) the purchase price of shares subject to options, (2)
the dates on which options become exercisable and (3) the expiration date of
each option (which may not exceed ten years from the date of grant). The
Compensation Committee has the power to accelerate the exercisability of
outstanding options at any time. The number of shares for which options may be
granted under the SOP to any single Optionee may not exceed 100,000 (subject to
adjustments for capital changes). Assuming approval of the Amendment by
shareholders, the minimum purchase price of an ISO granted under the SOP will be
the Fair Market Value (as defined in the SOP) of the Common Stock as of the date
of grant, and the minimum purchase price of an NQSO may be not less than 50% of
the Fair Market Value of a share of Common Stock as of the date of grant.
13
<PAGE> 17
Optionees will have no voting, dividend, or other rights as shareholders
with respect to shares of Common Stock covered by options prior to becoming the
holders of record of such shares. All option grants will permit the purchase
price to be paid in cash, by tendering stock, or by surrendering additional
options. The number of shares covered by options will be appropriately adjusted
in the event of any merger, recapitalization or similar corporate event.
The Board of Directors of the Company may, at any time, terminate the SOP
or, from time to time, make such modifications or amendments to the SOP as it
may deem advisable, provided that the Board may not, without the approval of the
Company's shareholders, (1) increase the maximum number of shares of Common
Stock for which options may be granted under the SOP or (2) reduce the minimum
purchase price at which options may be granted under the SOP.
Options granted under the SOP will be evidenced by a written option
agreement between the Optionee and the Company. Subject to limitations set forth
in the SOP, the terms of option agreements will be determined by the
Compensation Committee and need not be uniform among Optionees.
The following option grants have been made under the SOP to date: options
to purchase 110,400 shares of Common Stock at an exercise price of $16.625 per
share, of which 28,700 were granted to NEOs, 17,500 to all other executive
officers as a group, 64,200 to all other employees as a group and 1,200 which
have been forfeited; options to purchase 80,000 shares of Common Stock to the
Company's non-employee directors at an exercise price of $50.3675 per share; and
options to purchase 42,000 shares of Common Stock at an exercise price of
$63.5313 per share, of which 12,000 were granted to NEOs, 5,000 to all other
executive officers as a group and 25,000 to all other employees as a group. As
of March 6, 1997, the market value of the Common Stock was $60.50 per share.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief discussion of
the federal income tax consequences of transactions under the SOP based on the
Code. The SOP is not qualified under Section 401(a) of the Code.
No taxable income is realized by an Optionee upon the grant or exercise of
an ISO. If Common Stock is issued to an Optionee pursuant to the exercise of an
ISO, and if no disqualifying disposition of such shares are made by such
Optionee within two years after the date of grant or within one year after the
transfer of such shares to such Optionee, then (1) upon sale of such shares, any
amount realized in excess of the option price will be taxed to such Optionee as
a long-term capital gain and any loss sustained will be a long-term capital loss
and (2) no deduction will be allowed to the Optionee's employer for federal
income tax purposes.
If the Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of either holding period described above, generally (1)
the Optionee will realize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the fair market value of such shares at
exercise (or, if less, the amount realized on the disposition of such shares)
over the option price paid for such shares and (2) the Optionee's employer will
be entitled to deduct such amount for federal income tax purposes if the amount
represents an ordinary and necessary business expense. Any further gain (or
loss) realized by the Optionee after exercise will be taxed as short-term or
long-term capital gain (or loss), as the case may be, and will not result in any
deduction by the employer.
With respect to NQSOs, (1) no income is realized by an Optionee at the time
the option is granted; (2) generally, at exercise, ordinary income is realized
by the Optionee in an amount equal to the difference between the option price
paid for the shares and the fair market value of the shares, if unrestricted, on
the date of exercise, and the Optionee's employer is generally entitled to a tax
deduction in the same amount subject to applicable tax withholding requirements;
and (3) at sale, appreciation (or depreciation) after the date of exercise is
treated as either short-term or long-term capital gain (or loss) depending on
how long the shares have been held. Deductions for compensation attributable to
NQSOs (or disqualified ISOs) granted to NEOs may be subject to the deduction
limits of Section 162(m) of the Code, unless such compensation qualifies as
"performance-based" as defined therein.
NEW PLAN BENEFITS. The grant of options under the SOP is subject to the
discretion of the Compensation Committee. Accordingly, the options that will be
received by the various potential participants and options that might have been
received by the potential participants had the Amendment been in effect for the
Company's last completed fiscal year are not determinable.
14
<PAGE> 18
APPROVAL OF PROPOSAL 4 WILL REQUIRE THE AFFIRMATIVE VOTE IN PERSON OR BY
PROXY OF A MAJORITY OF THE VOTES CAST AT THE ANNUAL MEETING.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF GTL VOTE IN FAVOR OF
THIS PROPOSAL.
PROPOSAL 5. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS OF GTL.
The Board of Directors has appointed Deloitte & Touche LLP, certified
public accountants, as the independent auditors of the Company for the fiscal
year ending December 31, 1997. Deloitte & Touche LLP 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.
The financial statements of the Company for the year ended December 31,
1996, and report of the auditors thereon will be presented at the Annual
Meeting. Deloitte & Touche LLP 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 1996, Deloitte & Touche LLP provided services consisting of the
audit of the annual financial statements of the Company, consultations with
respect to the Company's quarterly financial statements, reports and
registration statements filed with the Securities and Exchange Commission and
other pertinent matters.
IF THE SHAREHOLDERS, 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 APPOINTMENT OF DELOITTE & TOUCHE LLP, THE
APPOINTMENT OF INDEPENDENT AUDITORS WILL BE RECONSIDERED BY THE BOARD.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF GTL VOTE IN FAVOR OF
THIS PROPOSAL.
GTL SHAREHOLDERS' PROPOSALS
Proposals of the Company's shareholders intended to be presented at the
1998 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 November
7, 1997. There are additional requirements regarding proposals of shareholders,
and a shareholder contemplating submission of a proposal is referred to Rule
14a-8 promulgated under the Securities Exchange Act of 1934.
OTHER ACTION AT MEETING AND VOTING OF PROXIES
Management does not know of any matters to come before the Annual Meeting
other than those set forth herein. 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 other
Proposal.
By Order of the Board of Directors
SIG
Eric J. Zahler
Secretary
March 7, 1997
15
<PAGE> 19
EXHIBIT A
AMENDMENT TO THE
GLOBALSTAR TELECOMMUNICATIONS LIMITED
1994 STOCK OPTION PLAN
The Globalstar Telecommunications Limited 1994 Stock Option Plan (the
"Plan") is hereby amended as follows:
1. The first sentence of Section 3 of the Plan is amended to read as
follows:
"The total number of shares of Common Stock which shall be subject
to Options granted under the Plan shall not exceed 625,000, subject to
adjustment as provided in Section 7 hereof."
2. Section 5(a) of the Plan is amended to read as follows:
"The purchase price of the shares of Common Stock subject to each
Option shall be fixed by the Committee, in its discretion, at the time
such Option is granted; provided, however, that (i) in no event shall
the purchase price of an ISO be less than the Fair Market Value (as
defined in paragraph (h) of this Section 5) of a share of Common Stock
as of the date such ISO is granted and (ii) in no event shall the
purchase price of a Non-Qualified Option be less than 50% of the Fair
Market Value of a share of Common Stock as of the date such
Non-Qualified Option is granted.
A-1
<PAGE> 20
GLOBALSTAR TELECOMMUNICATIONS LIMITED
PROXY -- ANNUAL MEETING OF SHAREHOLDERS, APRIL 8, 1997
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 Shareholders of GLOBALSTAR
TELECOMMUNICATIONS LIMITED, to be held in the Third Floor Auditorium, Chase
Corporation, 270 Park Avenue, New York, New York, at 10:00 o'clock A.M., on
Tuesday, April 8, 1997 and at all adjournments thereof. The Board of Directors
Recommends a vote FOR the Following Proposals:
1. ELECTION OF SEVEN DIRECTORS -- Nominees: B. Schwartz, M. DeBlasio, R.
Grierson, R. Hodes, E. Peett, M. Targoff, A. Towbin
[ ] 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. Acting upon a proposal to fix the minimum and maximum number of directors at
five
and nine, respectively, and to deem any vacancies on the Board to be casual
vacancies. FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Acting upon a proposal to increase the number of authorized shares of Common
Stock
of the Company from 60,000,000 to 200,000,000. FOR [ ] AGAINST [
] ABSTAIN [ ]
4. Acting upon a proposal to amend the Company's 1994 Stock Option Plan to
increase
the number of shares of Common Stock available for issuance from 250,000 to
625,000
and to reduce the minimum purchase price at which options may be granted
thereunder. FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. Acting upon a proposal to ratify the appointment of Deloitte & Touche LLP as
independent auditors for the year ending December 31, 1997. FOR [
] AGAINST [ ] ABSTAIN [ ]
6. In their discretion, upon such other matters as may properly come before
the meeting.
(Continued on reverse side)
<PAGE> 21
(Continued from other side)
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 5.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt
of the Notice of Annual Meeting and
accompanying Proxy Statement.
Dated: , 1997
--------------------------------------------
--------------------------------------------
(Signature of Shareholder)
(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.)
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY IN THE ENVELOPE PROVIDED.
P
