<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 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 Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] 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
[LETTERHEAD]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1998
------------------------
The Annual Meeting of Shareholders of Globalstar Telecommunications Limited
will be held in the Grand Salon, The Essex House, 160 Central Park South, New
York, New York, at 9:30 A.M., on Tuesday, April 28, 1998 for the purpose of:
1. Electing to the Board seven directors whose terms have expired;
2. Acting upon a proposal to increase the number of authorized common
shares, $1.00 par value, of the Company (the "Common Stock") from
200,000,000 to 600,000,000;
3. Acting upon a proposal to authorize and create 10,000,000 preference
shares, par value $.01 per share, of the Company (the "Preferred Stock")
and to amend the bye-laws to authorize the Board of Directors to
establish the rights, preferences and designations of such Preferred
Stock.
4. Acting upon a proposal to approve amendments to the Company's bye-laws
(i) to provide that stock distributions may be approved by the Board of
Directors, (ii) to fix the maximum number of directors at fifteen (15)
and to provide that directors may fill any vacancy on the Board and
(iii) to provide that directors' fees shall be determined by the Board.
5. Acting upon a proposal to ratify the appointment of Deloitte & Touche
LLP as independent auditors for the year ending December 31, 1998; and
6. Transacting any other business which may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 17, 1998 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
/s/ Bernard L. Schwartz
BERNARD L. SCHWARTZ
Chairman of the Board of Directors
March , 1998
<PAGE> 3
PROXY STATEMENT
GLOBALSTAR TELECOMMUNICATIONS LIMITED
CEDAR HOUSE, 41 CEDAR AVENUE
HAMILTON HM12, BERMUDA
------------------------
ANNUAL MEETING OF SHAREHOLDERS
APRIL, 28, 1998
------------------------
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 , 1998.
OUTSTANDING VOTING STOCK
Only shareholders at the close of business on the March 17, 1998 record
date are entitled to receive notice of and to vote at the Annual Meeting. There
were 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 serve as the Company's two Independent
Directors. Each director 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 will 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 Option Committee (the
<PAGE> 4
"Compensation Committee") and Executive Committee. The Audit Committee, which
met twice during 1997, 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 1997, is 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 1997, is currently comprised of
Messrs. Schwartz and Hodes. 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 two meetings in 1997. No director attended
fewer than 75% of the meetings of the Board of Directors.
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 40,000 shares of Common Stock at an
exercise price of $25.1875 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
("Reliance") 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 April 23, 1998, and costs $698,750 for thirty-nine months
of coverage. Discussions are ongoing between the Company and Reliance to extend
such insurance upon its scheduled expiration date.
The following provides certain relevant information concerning the nominees
for election as directors and their principal occupations.
BERNARD L. SCHWARTZ
Mr. Schwartz, 72, has served as director since 1994. Mr. Schwartz is
Chairman of the Board of Directors, Chief Executive Officer and President of the
Company and Chairman of the General Partners' Committee and Chief Executive
Officer of Globalstar, L.P. In addition, he is Chairman of the Board of
Directors and Chief Executive Officer of K&F Industries, Inc. and Loral Space &
Communications Ltd. Mr. Schwartz is a director of First Data Corp., Reliance
Group Holdings, Inc. and certain of its subsidiaries and Satelites Mexicanos,
S.A. de C.V. He is a Trustee of N.Y. University Medical Center.
MICHAEL P. DEBLASIO
Michael P. DeBlasio, 61, has served as director since 1996. Mr. DeBlasio is
the Senior Vice President and Chief Financial Officer of the Company and Senior
Vice President of Globalstar, L.P. In addition, he is First Senior Vice
President and Chief Financial Officer of Loral Space & Communications Ltd.
SIR RONALD GRIERSON
Sir Ronald Grierson, 76, has served as director since 1996. Sir Ronald is
the retired Vice-Chairman of General Electric Company plc (United Kingdom). He
is a director of Chime Communications plc, Daily Mail and General Trust plc,
Etam Developement S.A. (France) and Safic-Alcan S.A. (France). In addition, Sir
Ronald is the Chairman of the international advisory boards of Bain & Co. and
Blackstone Group.
2
<PAGE> 5
ROBERT B. HODES
Robert B. Hodes, 72, has served as director since 1994. Mr. Hodes is
counsel to Willkie Farr & Gallagher, a law firm in New York, N.Y. and until
1996, was a partner in and co-chairman of that firm. He is a director of
Aerointernational, Inc., Argentina High Yield & Capital Appreciation Fund Ltd.,
Beaver Dam Sanctuary, Inc., The Cremer Foundation, Crystal Oil Company, Cross
River Reservoir Association, LCH Investments N.V., Loral Space & Communications
Ltd., Mueller Industries, Inc., Restructured Capital Holdings, Ltd., R.V.I.
Guaranty Ltd. and W.R. Berkley Corporation.
E. JOHN PEETT
E. John Peett, 62, has served as director since 1994. Mr. Peett also serves
as an executive consultant to Globalstar, L.P. and Loral/Qualcomm Satellite
Services, L.P., its managing general partner. Mr. Peett held various positions
with Vodafone Group plc., including serving as its Executive Director, until his
retirement in October 1997. Mr. Peett is a director of The Personal Number
Company plc.
MICHAEL B. TARGOFF
Michael B. Targoff, 53, has served as director since 1994. From April 1996
to January 1998, he was President and Chief Operating Officer of Loral Space &
Communications Ltd. Prior to that time, he served as Senior Vice President and
Secretary of Loral Corporation. Mr. Targoff is a director of Foremost
Corporation of America.
A. ROBERT TOWBIN
A. Robert Towbin, 63, has served as director since 1995. Mr. Towbin is
Managing Director of C.E. Unterberg, Towbin. He is a director of Bradley Real
Estate, Inc., Columbus New Millenium Fund, Gerber Scientific Inc., Globecomm and
K&F Industries, Inc.
ELECTION OF THE NOMINEES 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 THE COMPANY VOTE FOR
THE NOMINEES FOR DIRECTORS.
3
<PAGE> 6
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 PERCENT OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP CLASS(1)
---------------- -------------------- ----------
<S> <C> <C>
Loral Space & Communications Ltd........................... 8,656,522(1)(2) 25.5%
600 Third Avenue
New York, New York 10016
General Electric Company................................... 5,022,380 16.4%
3135 Easton Turnpike
Fairfield, Connecticut 06431
The Capital Group Companies, Inc........................... 2,586,570(3) 8.4%
333 South Hope Street
Los Angeles, California 90071
</TABLE>
- ---------------
(1) This information is as of February 27, 1998 and includes 3,326,842 shares of
Common Stock issuable upon the conversion of the Company's 6 1/2%
Convertible Preferred Equivalent Obligations due 2006 held by Loral (based
upon a conversion price of $30.81 per share).
(2) Of such amount, 884,000 shares represent shares of Common Stock subject to
options granted by Loral to certain of its executive officers and directors.
(3) The Capital Group Companies, Inc. is the parent holding company of a group
of investment management companies that hold investment power and, in some
cases, voting power over the shares of Common Stock. The investment
management companies, which include a "bank" as defined in Section 3(a)6 of
the Securities Exchange Act of 1934 and several investment advisers
registered under Section 203 of the Investment Advisers Act of 1940, provide
investment advisory and management services for their respective clients,
which include registered investment companies and institutional accounts.
4
<PAGE> 7
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 27, 1998. 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......................................... 603,802 2%
Michael P. DeBlasio......................................... 64,000 *
Sir Ronald Grierson......................................... 1,500 *
Robert B. Hodes............................................. 42,226 *
E. John Peett............................................... -- --
Michael B. Targoff.......................................... 28,904 *
A. Robert Towbin............................................ 9,790(2) *
Douglas G. Dwyre............................................ 7,818(3) *
Anthony J. Navarra.......................................... 8,547(4) *
Joel Schindall.............................................. 1,784(5) *
William F. Adler............................................ 67(6) *
Joseph Browdy............................................... 598(7) *
All directors and executive officers as a group (20
persons).................................................. 902,435(8) 2.9%
</TABLE>
- ---------------
* Represents holdings of less than one percent.
(1) Includes shares which, as of February 27, 1998, may be acquired within sixty
days upon the exercise of options granted by Loral: 280,000 to Mr. Schwartz,
60,000 to Mr. DeBlasio, 40,000 to Mr. Hodes, 20,000 to Mr. Targoff and
504,000 to all directors and executive officers as a group.
(2) Includes 2,000 shares held in a trust, as to which Mr. Towbin disclaims
beneficial ownership.
(3) Includes 7,500 shares exercisable under the Company's stock option plan and
96 shares held in the Company's savings plan.
(4) Includes 6,250 shares exercisable under the Company's stock option plan and
71 shares held in the Company's savings plan.
(5) Includes 600 shares exercisable under the Company's stock option plan and 72
shares held in the Company's savings plan.
(6) Includes 67 shares held in the Company's savings plan.
(7) Includes 66 shares exercisable under the Company's stock option plan.
(8) Includes 27,350 shares exercisable under the Company's stock option plan and
427 shares held in the Company's savings plan.
5
<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 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 1997, Loral granted to one of the NEOs options
to purchase 5,000 shares of Loral Common Stock.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") limits to $1 million the amount of compensation deductible by a public
company paid to its chief executive officer and each of its next most highly
compensated executive officers. Because none of the NEOs has compensation from
the Company or Globalstar in excess of $1 million, the Company has not yet
formulated a policy with respect to the deduction limitations of Section 162(m)
of the Code.
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
Sir Ronald Grierson
A. Robert Towbin
6
<PAGE> 9
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. Towbin is a managing director of C.E. Unterberg, Towbin which provided
services to Globalstar during the year.
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
March 10, 1998, assuming an investment of $100 in the Company's Common Stock and
each index.
COMPARISON OF CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
NASDAQ
MEASUREMENT PERIOD GLOBALSTAR TELECOMMUNICATIONS NASDAQ COMPOSITE
(FISCAL YEAR COVERED) TELECOMM LTD. INDEX INDEX
<S> <C> <C> <C>
14-FEB-95 100 100 100
30-JUN-95 74 108 118
31-DEC-95 206 126 134
30-JUN-96 246 136 152
31-DECI-96 350 131 165
30-JUN-97 340 151 185
31-DEC-97 546 186 203
10-MAR-98 799 220 226
</TABLE>
7
<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 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
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------------
-------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(A) BONUS(B) COMPENSATION(C) STOCK OPTIONS(D) Compensation(e)
- --------------------------- ---- --------- -------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Douglas G. Dwyre 1997 $230,000 -- -- 17,500 $17,012
President 1996 $195,932 $125,000 -- -- $ 9,132
1995 $176,220 $125,000 -- 30,000 $ 5,400
Anthony J. Navarra 1997 $188,640 -- -- 12,500 $ 5,700
Executive Vice President - 1996 $179,229 $ 90,000 -- -- $ 5,026
Business Development 1995 $168,334 $ 90,000 -- 25,000 $ 5,151
Joel Schindall 1997 $162,180 -- -- 10,000 $ 5,501
Vice President - Systems 1996 $157,339 $ 45,000 -- -- $ 500
Applications 1995 $153,300 $ 15,000 -- 2,400 $ 5,374
William F. Adler 1997 $153,000 -- -- 6,000 $16,940
Vice President and General 1996 $135,692 $ 45,000 $73,546 10,000 $ 4,084
Counsel
Joseph Browdy(f) 1997 $150,000 -- -- 10,000 $ 4,050
Senior Vice President -- 1996 $ 5,769 -- -- -- --
Business Development
and Marketing
</TABLE>
- ---------------
(a) 1996 amounts reflect salary actually paid to Messrs. Adler and Browdy, who
commenced employment with Globalstar on January 15, 1996 and December 9,
1996, respectively. The annual salary for Messrs. Adler and Browdy, as of
December 31, 1996, was $144,000 and $150,000, respectively.
(b) Annual bonuses have not yet been determined for the period ended December
31, 1997.
(c) Represents a relocation payment in 1996 to Mr. Adler.
(d) Does not reflect grants during 1996 of stock options to acquire 25,000,
20,000, 8,000 and 5,000 shares of Loral common stock granted by Loral to
Messrs. Dwyre, Navarra, Schindall and Adler, respectively and in 1997 of
stock options to acquire 5,000 shares of Loral common stock granted by Loral
to Mr. Browdy (collectively, the "Loral Options"). The Loral Options vest in
20% increments over five years and have a 10-year term. The Loral Options
granted in 1996 are exercisable at $10.50 per share and the Loral Options
granted in 1997 are exercisable at $13.75 per share. Reflects 2 for 1 stock
split of the Common Stock which occurred in 1997.
(e) Reflects 1997 company matching contributions to the Savings Plan in the
amounts of $7,622 for Mr. Dwyre, $5,700 for Mr. Navarra, $5,501 for Mr.
Schindall, $5,420 for Mr. Adler and $4,050 for Mr. Browdy, respectively.
Also reflects a payout in 1997 of life insurance of $9,390.
(f) Mr. Browdy terminated his employment with the Company on March 13, 1998.
8
<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.............. 17,500 6.63% $ 49.25 $ 49.25 9/29/2007 $480,008
Anthony J. Navarra............ 12,500 4.74% $ 49.25 $ 49.25 9/29/2007 $342,863
Joel Schindall................ 10,000 3.79% $ 49.25 $ 49.25 9/29/2007 $274,290
William F. Adler.............. 6,000 2.27% $ 49.25 $ 49.25 9/29/2007 $164,574
Joseph Browdy................. 10,000 3.79% $26.625 $26.625 4/03/2007 $148,283
</TABLE>
- ---------------
(a) The options become exercisable over a four and one half-year period as
follows: 25% on each of the second, third, fourth and four and one
half-year anniversary from the date of grant.
(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%, 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 EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas G. Dwyre........ -- -- 7,500 40,000 $306,094 $918,281
Anthony J. Navarra...... -- -- 6,250 31,250 $255,078 $765,234
Joel Schindall.......... -- -- 600 11,800 $ 24,488 $ 73,462
William F. Adler........ -- -- -- 16,000 -- $173,594
Joseph Browdy........... -- -- -- 10,000 -- $225,000
</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 employment contracts or 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
9
<PAGE> 12
generally make up for certain required reductions in Plan benefits caused by the
Code limitations. For non-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 "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, 1997, the credited years of service for each of the
executives in the Summary Compensation Table are as follows: Douglas G. Dwyre,
24 years; Anthony J. Navarra, 6 years; Joel Schindall, 3 years; William F.
Adler, one year; and Joseph Browdy, one year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SS/L Agreement and Subcontracts. Messrs. Schwartz and DeBlasio are
executive officers and directors of Space Systems/Loral, Inc. ("SS/L"), which is
an affiliate of Globalstar and a wholly-owned subsidiary of Loral. 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 is
designing, building and launching 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 (including eight in-orbit spares) is $459
million, subject to equitable adjustments in light of future market conditions,
which may, in turn, be influenced by international political 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.
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<PAGE> 13
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. In addition, under the contract for the additional
eight spare satellites, SS/L will provide an additional $43 million of vendor
financing, of which $19 million will be interest bearing. The repayment terms
are substantially the same as those for the vendor financing relating to the
first 56 satellites.
On March 23, 1994, Globalstar entered into an agreement with Hyundai
Electronics Industries Co., Ltd. ("Hyundai") pursuant to which it agreed to
cause the prime contractor of its satellite constellation to enter into certain
arrangements with Hyundai, including offering Hyundai the right to provide
assembly, integration and testing with respect to satellites in Globalstar's
constellation beyond the first 56 and in any second generation satellite system
and supporting Hyundai in its efforts as a satellite vendor, through for
instance, providing training and transferring certain know-how to Hyundai.
Qualcomm Agreement. Globalstar and Qualcomm Incorporated ("Qualcomm") have
entered into an agreement providing for the design, development, manufacture,
installation, testing and maintenance by Qualcomm of four gateways, two ground
operations control centers ("GOCC") and 300 pre-production subscriber terminals
(the "Qualcomm Segment"). A portion of the GOCC is being developed and
manufactured by Globalstar. The contract is a cost-plus-fee contract that
provides for payment to Qualcomm of a 12% fee, along with reimbursement for
costs incurred in performing such contract, such as labor, material, travel,
license fees, royalties and general administrative expenses. The contract also
includes a cost sharing arrangement for certain technologies being developed by
Qualcomm.
Except for the intellectual property contained in certain software relating
to the public switched networks and the GOCCs (excluding any software or
technical data contained in Qualcomm's CDMA technology) which will be owned by
Globalstar, Qualcomm retains all intellectual property in the Qualcomm Segment.
However, Qualcomm has granted Globalstar an exclusive license to use its CDMA
technology for mobile satellite service commercial applications.
Globalstar has granted to Qualcomm an irrevocable, non-exclusive, worldwide
perpetual license to intellectual property owned by Globalstar in the Qualcomm
Segment and developed pursuant to the Qualcomm agreement. Qualcomm may, pursuant
to such grant, use the intellectual property for applications other than the
Globalstar System provided that Qualcomm may not for a period of three years
after its withdrawal as a strategic partner or prior to the third anniversary of
the full constellation date, whichever is earlier, engage in any business
activity that would be in competition with the Globalstar System. The grant of
intellectual property to Qualcomm described above is generally royalty free.
Qualcomm has agreed to grant at least one vendor a non-exclusive worldwide
license to use Qualcomm's intellectual property to manufacture and sell gateways
to Globalstar's service providers. The foregoing license will be granted by
Qualcomm to one or more such vendors on reasonable terms and conditions, which
will in any event not provide for royalty fees in excess of 7% of a gateway's
sales price (not including the approximately $400,000 per gateway in recoupment
expenses payable to Globalstar). Qualcomm has granted a license to manufacture
Globalstar phones to each of Ericsson and TELITAL and has also agreed to grant
similar licenses to at least one additional qualified manufacturer to enable it
to manufacture and sell the Globalstar phones to service providers. On March 23,
1994, a letter agreement was entered into among Qualcomm, Globalstar and Hyundai
pursuant to which Hyundai may elect to become a licensee authorized to
manufacture and sell Globalstar phones to service providers. Should Hyundai so
elect, it would, for a five-year
11
<PAGE> 14
period following Globalstar's in-service date, be the exclusive licensee
authorized to manufacture and sell such units in South and North Korea.
Globalstar will receive a payment of approximately $400,000 on each
installed gateway sold to a Globalstar service provider. Globalstar will also
receive up to $10 on each Globalstar phone, which will be payable until
Globalstar's funding of that design has been recovered.
The agreement provides for liquidated damages to Globalstar in the event
Qualcomm fails to supply the Qualcomm Segment at the times specified in the
contract. Liquidated damages of approximately $29,000 are payable by Qualcomm
for each day of delay, subject to an overall cap of approximately $11 million.
Such liquidated damages are Globalstar's exclusive remedies in the face of any
delay by Qualcomm in the delivery of the Qualcomm Segment or for any other
events of default specified in the agreement. Qualcomm's obligation to license
the intellectual property necessary to manufacture gateways and Globalstar
phones to Globalstar or a third-party manufacturer will continue even upon a
default or breach by Qualcomm under the agreement. Termination by Globalstar of
this agreement will result in termination fees, which may be substantial.
Gateway Program. Globalstar will acquire 38 gateways from Qualcomm for
resale to service providers under contracts totaling approximately $340 million.
In order to accelerate the deployment of gateways around the world, Globalstar
has agreed to finance approximately $80 million of the cost of up to 32 of the
38 gateways. Globalstar expects to recover its investment in this gateway
financing program from resale of the gateways to service providers.
Qualcomm Support Agreement. A support agreement was entered into among
Qualcomm, Loral and Globalstar pursuant to which Qualcomm agreed to (i) assist
Globalstar and SS/L with Globalstar's system design, (ii) support Globalstar and
Loral with respect to various regulatory matters, including the FCC application
and (iii) assist Globalstar and Loral in their marketing efforts with respect to
Globalstar. As compensation for its efforts, Qualcomm would be paid an amount
equal to the costs incurred in rendering such support and assistance.
Vodafone Agreements. Mr. E. John Peett, a director of the Company, was,
until his retirement in October 1997, an executive officer of Vodafone, which is
a limited partner of Globalstar. Globalstar has entered into consulting
agreements with Vodafone for approximately $650,000 under which Vodafone will
develop Globalstar's security architecture design and billing system
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.
Service Provider Agreements. Limited partners of Globalstar or affiliates
thereof have entered into service provider agreements with Globalstar granting
them the right to provide Globalstar System service to users in designated
countries as long as specified minimum levels of subscribers are met. These
service providers will receive certain discounts from Globalstar's expected
pricing generally over a five-year period.
OmniTRACS Services Agreement. Globalstar has granted Qualcomm the
worldwide exclusive right to utilize the Globalstar System to provide
OmniTRACS-like services, including certain data-messaging and
position-determination services offered by Qualcomm, primarily to fleets of
motor vehicles and rail cars and/or vessels and supervisory control and data
acquisition services. Qualcomm will utilize the Globalstar System in particular
territories to provide its OmniTRACS-like services if the Globalstar service
provider in such region or country offers pricing that is the most favorable
rate charged by it for a comparable service and that is at least as favorable as
the pricing then charged to Qualcomm for geostationary satellite capacity in the
United States. In the event Qualcomm and the service provider fail to reach an
agreement with respect to such access, Globalstar has agreed to provide Qualcomm
with access to the Globalstar System at Globalstar's most favorable rates. To
the extent consistent with Qualcomm's prior commitments, Qualcomm has also
agreed to offer each Globalstar service provider certain rights of first refusal
to participate with Qualcomm in the provision of OmniTRACS-like services using
the Globalstar system in the service provider's territory.
12
<PAGE> 15
Guarantee Fee and Warrants. On December 15, 1995, Globalstar entered into
the Globalstar Credit Agreement providing for a $250 million credit facility.
Following the consummation of the merger of Loral Corporation into a subsidiary
of Lockheed Martin Corporation ("Lockheed Martin"), Lockheed Martin guaranteed
$206.3 million of Globalstar's obligation under the Globalstar 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 agreed to indemnify Lockheed Martin for liability in excess of $150
million under Lockheed Martin's guarantee of the Globalstar Credit Agreement.
In connection with such guarantees and indemnity of the Globalstar Credit
Agreement, the Company issued to Loral, Lockheed Martin, SS/L and the other
strategic partners participating in such guarantee or indemnity, warrants to
purchase 4,185,318 (8,370,636 shares after giving effect to the Company's 100%
stock distribution made in May 1997) shares of GTL common stock (the "GTL
Guarantee Warrants"). In connection with the issuance of GTL Guarantee Warrants,
the Company 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 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 Globalstar
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 Globalstar Credit Agreement. Loral/Qualcomm Satellite
Services, L.P. ("LQSS"), Globalstar's managing general partner, 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.
The holders of the GTL Guarantee Warrants have exercised such warrants at
$13.25 per share, and the Company has registered for resale the Company's common
stock issued upon exercise of such warrants.
Subscription Rights. In May 1997, the Company issued 2,262,336 shares of
common stock at a price of $13.25 per share in connection with the exercise of
subscription rights. In addition to shares purchased pursuant to the exercise of
subscription rights issued to it, Loral purchased pursuant to a standby
agreement with the Company 32,004 shares of common stock underlying rights not
subscribed for by the holders of such rights.
Globalstar Managing Partner's Allocation and Distribution. Commencing on
the in-service date, Globalstar will make distributions to LQSS equal to 2.5% of
Globalstar's revenues up to $500 million plus 3.5% of revenues in excess of $500
million. Loral and Qualcomm ultimately will receive 80% and 20% of such
distribution, respectively. Should Globalstar incur a net loss in any year
following commencement of operations, the distribution for that year will be
reduced by 50% and Globalstar will be reimbursed for managing partner's
allocations, if any, made in any prior quarter of such year, sufficient to
reduce the managing partner's allocation for such year by 50%. Any managing
partner's allocation may be deferred (with interest at 4% per annum) in any
quarter in which Globalstar would report negative cash flow from operations if
the managing partner's allocation were made.
LQSS has a right to a preferred allocation of gross operating revenue until
such allocated revenue cumulatively equals LQSS's distributions payable (whether
or not deferred for a shortfall in cash flow from operations). To the extent
that distributions exceed such allocated profit, they will be charged against
LQSS's capital account and will not be allocated among the Globalstar partners
as a Globalstar expense.
Joint Ventures. 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.
Services. Mr. Robert B. Hodes, a director of GTL, is counsel to the law
firm of Willkie Farr & Gallagher, which acts as counsel to Globalstar and the
Company. Mr. A. Robert Towbin is a managing director in the investment banking
firm of C.E. Unterberg, Towbin, which has rendered advisory and investment
banking services to Globalstar and the Company.
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<PAGE> 16
Peett Consulting Arrangement. Mr. E. John Peett has entered into a
consulting arrangement with the Company pursuant to which the Company will pay
to Mr. Peett a fee of $4,200 per day provided that he shall have provided a
minimum of eight hours of consulting services to Globalstar or LQSS. The Company
will also reimburse Mr. Peett for certain expenses incurred in connection
therewith. Mr. Peett also received stock options to purchase 20,000 shares of
Common Stock at an exercise price of $47.25 per share, which options will vest
in three annual installments commencing January 2, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during 1997 all reports for the Company's
executive officers, directors and 10% beneficial owners that were required to be
filed under Section 16 of the Securities Exchange Act of 1934 were timely filed,
except that one report was not timely filed to report a purchase of Common Stock
by Mr. Schwartz.
PROPOSAL 2. 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 200,000,000 to 600,000,000.
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 28, 1998, the
authorized share capital of the Company be increased from $200,000,000 to
$600,000,000 and a Memorandum of Increase of Share Capital be deposited
with the Registrar of Companies of Bermuda reflecting such increase.
As of February 27, 1998, of the 200,000,000 authorized shares of Common
Stock, 30,640,702 shares were outstanding. There were also 86,845,230 shares of
Common Stock (the "Reserved Shares") reserved for issuance, upon exercise of
outstanding warrants, upon conversion of the Company's 6 1/2% Convertible
Preferred Equivalent Obligations due 2006 (based upon a conversion price of
$30.81 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 30,640,702 shares of outstanding Common Stock, as of February 27, 1998, the
total number of issued and reserved shares of Common Stock was 117,485,932.
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
14
<PAGE> 17
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 is considering submitting to
the Board of Directors at its next meeting a proposal to approve a stock split
for the Company. Except as described in the preceding sentence, the Company's
management has no other 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 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 THE SHAREHOLDERS OF THE COMPANY VOTE
IN FAVOR OF THIS PROPOSAL.
PROPOSA1 3. ACTING UPON A PROPOSAL TO AUTHORIZE AND CREATE PREFERRED STOCK OF
THE COMPANY AND TO AMEND THE BYE-LAWS TO AUTHORIZE THE BOARD OF
DIRECTORS TO ESTABLISH THE RIGHTS, PREFERENCES AND DESIGNATIONS OF
SUCH PREFERRED STOCK.
The Board of Directors has declared advisable and recommended a proposal to
authorize the creation of Preferred Stock of the Company. The Board of Directors
believes that the availability of Preferred Stock of the Company will provide
financing flexibility for the Company. It is therefore proposed to authorize the
creation of 10,000,000 shares of Preferred Stock, par value $.01 per share, of
the Company, the preferences, rights and designations of which will be
determined by the Board of Directors.
The text of the resolution of 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 28, 1998, the
authorized capital of the Company be increased to provide for 10,000,000
shares of preferred stock, par value $.01 per share, which preferred stock
shall have such rights, preferences and designations as may be determined
by the Board of Directors from time to time and a Memorandum of Increase of
Share Capital be deposited with the Registrar of Companies of Bermuda
reflecting an increase of $100,000 of authorized capital of the Company.
The Company's current bye-laws make no provision for any class of stock
other than Common Stock. The class of Preferred Stock provided for under the
proposed amendment to the bye-laws may be issued, without further shareholder
approval, by the Board, which would have the authority to establish series of
unissued shares of any or all preferred or special classes by fixing and
determining the relative rights and preferences of the shares of Preferred Stock
authorized for issuance by it.
Accordingly, it is hereby proposed that Bye-law 4 be amended to permit the
Board of Directors to authorize the issuance of Preferred Stock from time to
time, in one more series or classes, with such designations, preferences and
rights as may be designated by the Board of Directors from time to time prior to
the issuance of such class or series. The designations, preferences and rights
that may be designated by the
15
<PAGE> 18
Board, include without limitation the following: (i) the class or series of
Preferred Stock, (ii) the dividend rate of such class or series and the
conditions and dates on which the dividend is payable, (iii) the redemption
provisions and terms of such redemption, (iv) the terms and amount of any
sinking funds established therefor, (v) the terms and conditions on which any
series or class of Preferred Stock may be converted into Common Stock or other
securities of the Company, (vi) the voting rights, if any, of the Preferred
Stock, (vii) the restrictions on the issue or reissue of any additional
Preferred Stock and (viii) the rights of the holders of such series or class
upon liquidation or dissolution of the Company.
The Board believes that Preferred Stock is often a useful financing tool
and that it is advisable that the Board be given flexibility in setting the
terms of the Preferred Stock. If opportunities arise that would make desirable
the issuance of the Company's Preferred Stock through either public offerings or
private placements, the proposed amendment would avoid the possible delay and
expense of a shareholders' meeting. The Company's shareholders will have no
preemptive rights with respect to the issuance of any such shares.
Issuance of the Preferred Stock could result in one or more classes of
securities outstanding that will have certain preferences with respect to
dividends and in liquidation over the Common Stock, and could result in the
dilution of voting rights, net income per share and net book value of the Common
Stock.
The specific terms of any series of Preferred Stock will depend primarily
on market conditions and other factors existing at the time of issuance. The
Board has no present plans, understandings or agreements for issuing any
Preferred Stock and the Board does not intend to issue any such shares except on
terms that it deems to be in the best interests of the Company and its
shareholders.
In the event of a hostile attempt to take over the Company which the Board
determines is not in the best interest of the Company and its shareholders, it
may be possible for the Board to issue Preferred Stock with rights and
preferences which could impede the completion of a takeover. Such possibilities
may make the Company less attractive as a takeover candidate and may deter
takeover attempts not approved by the Board.
The foregoing summary of the amendment to the bye-laws is qualified in its
entirety by reference to the complete text of the proposed Bye-law 4, which is
set forth as Exhibit A to this Proxy Statement. The proposed amendment would
replace existing Article 4 in its entirety.
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 THE COMPANY VOTE
IN FAVOR OF THIS PROPOSAL.
PROPOSAL 4. ACTING UPON A PROPOSAL TO AMEND THE COMPANY'S BYE-LAWS TO (I)
AUTHORIZE THE BOARD OF DIRECTORS OF THE COMPANY TO APPROVE STOCK
DISTRIBUTIONS, (II) FIX THE MAXIMUM NUMBER OF DIRECTORS AT FIFTEEN
(15) AND PROVIDE THAT DIRECTORS MAY FILL ANY VACANCY ON THE BOARD
AND (III) PROVIDE THAT DIRECTORS' FEES SHALL BE DETERMINED BY THE
BOARD.
The Board of Directors has declared advisable and recommended a proposal to
amend the bye-laws of the Company to effect various changes, in each case to
afford greater flexibility and discretion to the Board. A more detailed
description of each of the proposed amendments is set forth below.
PROPOSED AMENDMENT TO PROVIDE THAT STOCK DISTRIBUTIONS MAY BE APPROVED BY THE
BOARD
The current bye-laws provide that capitalization of profits, that is stock
distributions, may be effected only with the prior approval of shareholders of
the Company. By giving the Board the authority to approve stock distributions,
for instance, in connection with a stock split by the Company, the proposed
amendment would avoid the possible delay and expense of a shareholders' meeting
that would be required under the existing bye-laws before such stock
distribution could be effected. Accordingly, it is hereby proposed that Bye-law
110 be amended to permit the Board of Directors to authorize such stock
distributions. The complete text of proposed
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<PAGE> 19
Bye-law 110 is set forth as Exhibit B to this Proxy Statement. Bolded language
contained therein indicates proposed changes from the existing bye-law
provision.
PROPOSED AMENDMENT TO FIX THE MAXIMUM NUMBER OF DIRECTORS AT FIFTEEN (15) AND
TO PROVIDE THAT DIRECTORS MAY FILL ANY VACANCY ON THE BOARD
To avoid having to submit annually to shareholders a proposal to fix the
minimum and maximum number of directors of the Board and to deem all vacancies
on the Board casual vacancies which may be filled by the directors, it is
proposed that the bye-laws be amended to fix the maximum number of directors at
fifteen (15) and to expressly provide that all vacancies on the Board may
thereafter be filled by the directors. The election of directors would continue
to be submitted to shareholders at the annual meeting but the proposed amendment
would permit the directors to fill any vacancy that may arise on the Board and
to elect additional persons as directors (up to a maximum Board size of fifteen)
during any interim period between shareholder meetings. Accordingly, it is
hereby proposed that Bye-laws 74 and 75 be amended to fix the maximum number of
directors at fifteen and to provide that vacancies on the Board may be filled by
the directors. The complete text of proposed Bye-laws 74 and 75 is set forth as
Exhibit C to this Proxy Statement. Bolded language contained therein indicates
proposed changes from the existing bye-law provision.
PROPOSED AMENDMENT TO PROVIDE THAT DIRECTORS' FEES SHALL BE DETERMINED BY THE
BOARD
It is proposed that the bye-laws of the Company be amended to provide that
fees paid to directors of the Company shall be determined from time to time by
the Board of Directors, and not by shareholders. This proposed amendment would
merely implement an arrangement common for U.S. companies. Accordingly, it is
proposed that the first sentence of Bye-law 78 be amended to read as follows:
"The amount, if any, of Directors' fees shall from time to time be determined by
RESOLUTION OF THE BOARD (OR ANY COMMITTEE THEREOF SO AUTHORIZED BY THE BOARD)."
The bolded language contained in the preceding sentence indicates proposed
changes from the existing bye-law provision.
The Board of Directors believes that granting to the Board the flexibility
reflected in the above-mentioned amendments is in the best interest of the
Company and its shareholders.
The foregoing summary of the amendments to the bye-laws is qualified in its
entirety by reference to the complete texts of proposed Bye-laws 110, 74 and 75,
which are set forth as Exhibits B and C to this Proxy Statement.
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 THE SHAREHOLDERS OF THE COMPANY VOTE
IN FAVOR OF THIS PROPOSAL.
PROPOSAL 5. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS OF THE COMPANY.
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, 1998. 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,
1997, 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 1997, 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,
17
<PAGE> 20
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 THE COMPANY VOTE IN
FAVOR OF THIS PROPOSAL.
SHAREHOLDERS' PROPOSALS
Proposals of the Company's shareholders intended to be presented at the
1999 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
, 1998. 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
/s/ Eric J. Zahler
Eric J. Zahler
Secretary
March , 1998
18
<PAGE> 21
EXHIBIT A
BYE-LAW 4
(AS PROPOSED TO BE AMENDED)
SHARE RIGHTS
4. The Board shall be authorized to issue preference shares and such shares
may be issued from time to time, in one or more series with such designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as may be designated by the
Board prior to the issuance of such series, and the Board is hereby expressly
authorized to fix by resolution or resolutions prior to such issuance such
designations, preferences and relative, participating, optional or other special
rights, or qualifications, limitations or restrictions, including without
limiting the generality of the foregoing, the following:
(i) the designation of such series or class;
(ii) the dividend rate of such series or class, the conditions and
dates upon which such dividends will be payable, the relation which such
dividends will bear to the dividends payable on any other class or classes
of shares or any other series of any class of shares of the Company, and
whether such dividends will be cumulative or non-voting;
(iii) the redemption provisions and times, prices and other terms and
conditions of such redemption, if any, for such series or class, which may
include provisions that they are to be redeemed on the happening of a
specified event or on a given date, that they are liable to be redeemed at
the option of the Company or that if authorized by the Memorandum of
Association of the Company, that they are liable to be redeemed at the
option of the holder;
(iv) the terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series or class;
(v) the terms and conditions, if any, on which shares of such series
or class shall be convertible into, or exchangeable for, shares of the
Company or any other securities, including the price or prices, or the
rates of exchange thereof;
(vi) the voting rights, if any;
(vii) the restrictions, if any, on the issue or reissue of any
additional preference shares; and
(viii) the rights of the holders of such series or class upon the
liquidation, dissolution, or distribution of assets of the Company.
The designations, preferences and relative, participating, optional or
other special rights, or qualifications, limitations or restrictions thereof, of
each additional series, if any, may differ from those of any or all other series
already outstanding.
19
<PAGE> 22
EXHIBIT B
BYE-LAW 110
(AS PROPOSED TO BE AMENDED)
110. THE BOARD MAY, AT ANY TIME AND FROM TIME TO TIME PASS A RESOLUTION to
the effect that it is desirable to capitalize all or any part of any amount for
the time being standing to the credit of any reserve or fund which is available
for distribution or to the credit of any share premium account or any capital
redemption reserve fund and accordingly that such amount be set free for
distribution amongst the Shareholders or any class of Shareholders who would be
entitled thereto if distributed by way of dividend and in the same proportions,
on the footing that the same be not paid in cash but be applied either in or
towards paying up amounts for the time being unpaid on any shares in the Company
held by such Shareholders respectively or in payment up in full of unissued
shares, debentures or other obligations of the Company, to be allotted and
distributed credited as fully paid among such Shareholders, or partly in one way
and partly in the other, provided that for purpose of this Bye-law, a share
premium account and a capital redemption reserve fund may be applied only in
paying up of unissued shares to be issued to such Shareholders credited as fully
paid and provided further that any sum standing to the credit of a share premium
account may only be applied in crediting as fully paid shares of the same class
as that from which the relevant share premium was derived.
<PAGE> 23
EXHIBIT C
BYE-LAW 74
(AS PROPOSED TO BE AMENDED)
74. The number of Directors shall be such number not less than five NOR
MORE THAN FIFTEEN as the Company by Resolution may from time to time determine
and, subject to the Companies Act and these Bye-Laws, shall serve until
re-elected or their successors are appointed at the next Annual General Meeting.
The Board shall nominate for election to the Board at each Annual General
Meeting two Independent Directors.
BYE-LAW 75
(AS PROPOSED TO BE AMENDED)
75. WITHOUT PREJUDICE TO THE POWER OF THE COMPANY BY RESOLUTION IN
PURSUANCE OF ANY OF THE PROVISIONS OF THESE BYE-LAWS TO APPOINT ANY PERSON TO BE
A DIRECTOR, ANY VACANCY ON THE BOARD MAY BE FILLED BY THE DIRECTORS, SO LONG AS
A QUORUM OF DIRECTORS REMAINS IN OFFICE.
<PAGE> 24
GLOBALSTAR TELECOMMUNICATIONS LIMITED
PROXY -- ANNUAL MEETING OF SHAREHOLDERS, APRIL 28, 1998
BERNARD L. SCHWARTZ 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 Grand Salon, The Essex House, 160 Central Park South, New York,
New York, at 9:30 A.M., on Tuesday, April 28, 1998 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:
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2. Acting upon a proposal to increase the number of authorized shares of Common
Stock
of the Company from 200,000,000 to 600,000,000. FOR [ ] AGAINST [
] ABSTAIN [ ]
3. Acting upon a proposal to authorize and create 10,000,000 shares of Preferred
Stock of the Company and to amend the bye-laws to authorize the Board of
Directors to establish the rights, preferences and designations of such
Preferred Stock. FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Acting upon a proposal to amend the Company's Bye-laws (i) to authorize the
Board to approve stock distributions (ii) to fix the maximum number of
directors at fifteen (15) and provide that directors may fill any vacancy on
the Board and (iii) to provide that directors' fees shall be determined by
the Board. 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, 1998. FOR [
] AGAINST [ ] ABSTAIN [ ]
6. In their discretion, upon such other matters as may properly come before
the meeting.
(Continued on reverse side)
<PAGE> 25
(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: , 1998
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(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
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