<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>
[ ] 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 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
[GLOBALSTAR LETTERHEAD]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 18, 1999
------------------------
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 10019, at 9:30 A.M., on Tuesday, May 18, 1999 for the purpose of:
1. Electing to the Board nine directors whose terms have expired;
2. Acting upon a proposal to increase the number of authorized preference
shares, par value $.01 per share, of the Company (the "Preferred Stock")
from 10,000,000 to 20,000,000;
3. Acting upon a proposal to amend the Company's 1994 Stock Option Plan to
increase the number of common shares, $1.00 par value, of the Company
(the "Common Stock") available for issuance from 2,500,000 to 5,000,000;
4. Acting upon a proposal to ratify the appointment of Deloitte & Touche
LLP as independent auditors for the year ending December 31, 1999; and
5. Transacting any other business which may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 31, 1999 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 prepaid envelope.
By Order of the Board of Directors
/s/ Bernard L. Schwartz
BERNARD L. SCHWARTZ
Chairman of the Board of Directors
April 9, 1999
SHAREHOLDERS WILL NEED PROOF OF OWNERSHIP TO BE ADMITTED TO THE MEETING. IF
YOU PLAN TO ATTEND THE MEETING, PLEASE BRING WITH YOU THE ADMISSION TICKET THAT
ACCOMPANIES THIS NOTICE OF ANNUAL MEETING AND PROXY STATEMENT OR OTHER EVIDENCE
OF STOCK OWNERSHIP AS OF THE RECORD DATE, MARCH 31, 1999, SUCH AS A BROKERAGE
STATEMENT OR LETTER FROM YOUR BROKER OR BANK.
<PAGE> 3
PROXY STATEMENT
GLOBALSTAR TELECOMMUNICATIONS LIMITED
CEDAR HOUSE, 41 CEDAR AVENUE
HAMILTON HM12, BERMUDA
------------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 18, 1999
------------------------
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 April 12, 1999.
OUTSTANDING VOTING STOCK
Only shareholders at the close of business on the March 31, 1999 record
date are entitled to receive notice of and to vote at the Annual Meeting. There
were 82,020,021 common shares, 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 and 4 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 4.
ELECTION OF DIRECTORS
Nine directors are to be elected to hold office until the next Annual
Meeting or until their successors are elected. Messrs. Schwartz, Clark,
DeBlasio, Dwyre, 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
has begun to launch and is preparing to operate the Globalstar(TM) System, a
worldwide, low-earth orbit satellite-based digital telecommunications system.
Globalstar has a General Partners' Committee, Audit Committee and Council of
Service Operators. Globalstar's Audit Committee, which met twice during 1998, is
comprised of Messrs. Malvin A. Ruderman, E. Donald Shapiro, Arthur L. Simon and
Robert B. Hodes. The Company has an Audit
<PAGE> 4
Committee, Compensation and Stock Option Committee (the "Compensation
Committee") and Executive Committee. The Audit Committee, which met twice during
1998, 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
six times during 1998, 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 four times during 1998, is currently comprised of Messrs. Schwartz,
Clark 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 1998. No director attended
fewer than 75% of the meetings of the Board of Directors and its committees.
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. In addition, Mr. Hodes is paid an annual fee of $2,000 in respect
of his participation in the Audit Committee plus $1,000 for each meeting of the
Audit Committee attended. On May 20, 1996, Messrs. Grierson, Hodes, Peett and
Towbin were each contingently granted options to purchase 80,000 shares of
Common Stock at an exercise price of $12.59 per share (as adjusted to give
effect to the Company's two-for-one stock splits effected in the form of 100%
stock dividends paid on May 28, 1997 and June 8, 1998). 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. In addition, on January 2, 1998, in connection with certain
consulting arrangements between the Company and Mr. Peett, Mr. Peett received an
option for 40,000 shares of Common Stock at an exercise price of $23.97 per
share (as adjusted to give effect to the Company's two-for-one stock split
effected in the form of a 100% stock dividend paid on June 8, 1998). On October
22, 1998, Messrs. Grierson, Hodes and Towbin each received options to purchase
40,000 shares of Common Stock at an exercise price of $13.50 per share.
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, 2001 and costs $450,000 for 36 months of
coverage.
The following provides certain relevant information concerning the nominees
for election as directors and their principal occupations.
BERNARD L. SCHWARTZ
Bernard L. Schwartz, 73, has served as director since 1994. Mr. Schwartz is
Chairman of the Board of Directors and Chief Executive Officer 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 Mount Sinai -- NYU Medical Center and Health System, as well as a
trustee of Thirteen/WNET Educational Broadcasting Corporation.
GREGORY J. CLARK
Gregory J. Clark, 56, has served as director since 1998. Dr. Clark is the
Vice Chairman and President of the Company and Vice Chairman of the General
Partners' Committee of Globalstar. Since January 1998, he
2
<PAGE> 5
has been the President and Chief Operating Officer of Loral Space &
Communications Ltd. Prior to that time, Dr. Clark was President of News
Technology Group, a division of News Corporation since September 1994. Prior to
that, Dr. Clark was Director of Science and Technology of IBM in Australia since
1988.
MICHAEL P. DEBLASIO
Michael P. DeBlasio, 62, has served as director since 1996. Mr. DeBlasio is
the Senior Vice President of the Company. In addition, he is First Senior Vice
President of Loral Space & Communications Ltd.
DOUGLAS G. DWYRE
Douglas G. Dwyre, 66, has served as director since March 1999. Mr. Dwyre
was, until his retirement in March 1999, President of Globalstar since March
1994. Mr. Dwyre also served as Senior Vice President of the Company from May
1996 to March 1999. Prior to that, Mr. Dwyre was President of Northern Telecom's
STC Submarine Systems from 1988 to 1992.
SIR RONALD GRIERSON
Sir Ronald Grierson, 77, has served as director since 1996. Sir Ronald is
the retired Vice-Chairman of General Electric Company plc. He is a director of
Chime Communications plc, Daily Mail and General Trust plc, Etam Developement
S.A. and Safic-Alcan S.A. In addition, Sir Ronald is the Chairman of the
international advisory boards of Bain & Co. and Blackstone Group.
ROBERT B. HODES
Robert B. Hodes, 73, 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 Beaver
Dam Sanctuary, Inc., 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, 63, has served as director since 1994. 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 and Martin Dawes (Holdings) Limited and Chairman of
Cambridge Positioning Systems Limited.
MICHAEL B. TARGOFF
Michael B. Targoff, 54, has served as director since 1994. Mr. Targoff is
Chairman and Chief Executive Officer of CineComm Digital Cinema, L.L.C. Prior to
that, Mr. Targoff was President of the Company and Chief Operating Officer of
Globalstar, L.P. from May 1996 to January 1998. 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
and Leap Wireless International.
A. ROBERT TOWBIN
A. Robert Towbin, 64, 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
Systems, Inc. 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
Common Stock of the Company:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP CLASS(4)
---------------- -------------------- ----------
<S> <C> <C>
Loral Space & Communications Ltd............................ 14,723,647(1)(2) 16.64%
c/o Loral SpaceCom Corporation
600 Third Avenue
New York, New York 10016
General Electric Company.................................... 10,044,760 12.25%
3153 Easton Turnpike
Fairfield, Connecticut 06431
Prime 66 Partners, L.P. .................................... 9,630,000 11.74%
201 Main Street, Suite 3200
Fort Worth, Texas 76102
George Soros................................................ 8,530,000(3) 10.40%
888 Seventh Avenue, 33rd Floor
New York, New York 10106
Stanley F. Druckmiller...................................... 8,400,000(3) 10.24%
888 Seventh Avenue, 33rd Floor
New York, New York 10106
Soros Fund Management LLC................................... 8,400,000(3) 10.24%
888 Seventh Avenue, 33rd Floor
New York, New York 10106
</TABLE>
- ---------------
(1) This information is as of March 31, 1999 and includes 6,449,865 shares of
Common Stock issuable upon the conversion of the Company's 8% Convertible
Redeemable Preferred Stock due 2011 held by Loral Space & Communications
Ltd. (based upon a conversion price of $23.2563 per share).
(2) Of such amount, 1,668,000 shares represent shares of Common Stock subject to
options granted by Loral to certain of its executive officers and directors.
(3) Held for the accounts of the following entities: (i) 2,100,000 shares held
for the account of Quantum Industrial Partners LDC, a Cayman Islands
exempted limited duration company, (ii) 4,200,000 shares held for the
account of Quantum Partners LDC, a Cayman Islands exempted limited duration
company and (iii) 2,100,000 shares held for the account of Quasar Strategic
Partners LDC, a Cayman Islands exempted limited duration company. In
addition, Mr. Soros holds 130,000 shares for his personal account.
(4) Percent of class refers to percentage of class beneficially owned as the
term beneficial ownership is defined in Rule 13d-3 under the Securities
Exchange Act of 1934.
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
executive officers as a group on March 31, 1999. 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......................................... 1,457,604 1.8%
Gregory J. Clark............................................ 20,000 *
Michael P. DeBlasio......................................... 128,000 *
Sir Ronald Grierson......................................... 55,000(2) *
Robert B. Hodes............................................. 124,452(2) *
E. John Peett............................................... 53,333(3) *
Michael B. Targoff.......................................... 43,808 *
A. Robert Towbin............................................ 65,676(4) *
Douglas G. Dwyre............................................ 30,987(5) *
Anthony J. Navarra.......................................... 29,895(6) *
Gerard Canavan.............................................. 467(7) *
Joel Schindall.............................................. 4,865(8) *
All directors and executive officers as a group (22
persons).................................................. 2,316,708(9) 2.8%
</TABLE>
- ---------------
* Represents holdings of less than one percent.
(1) Includes shares which, as of March 31, 1999, may be acquired within sixty
days upon the exercise of options granted by Loral: 560,000 to Mr. Schwartz,
20,000 to Mr. Clark, 120,000 to Mr. DeBlasio, 80,000 to Mr. Hodes, 40,000 to
Mr. Targoff and 1,028,000 to all directors and executive officers as a
group.
(2) Includes 40,000 shares exercisable under the Company's stock option plan.
(3) Consists of 53,333 shares exercisable under the Company's stock option plan.
(4) Includes 40,000 shares exercisable under the Company's stock option plan,
6,676 shares held in an IRA account and 4,000 shares held in a trust, as to
which Mr. Towbin disclaims beneficial ownership.
(5) Includes 30,000 shares exercisable under the Company's stock option plan and
543 shares held in the Company's savings plan.
(6) Includes 25,000 shares exercisable under the Company's stock option plan and
443 shares held in the Company's savings plan.
(7) Includes 367 shares held in the Company's savings plan.
(8) Includes 2,400 shares exercisable under the Company's stock option plan,
2,000 shares owned jointly with his wife and 465 shares held in the
Company's savings plan.
(9) Includes 272,733 shares exercisable under the Company's stock option plan
and 3,055 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
borne by either Globalstar or Loral Space & Communications Ltd. ("Loral"). Loral
is solely responsible for the compensation of Messrs. Schwartz, Clark 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 incentive 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.
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
advisory and investment banking services to the Company and 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 15, 1999, assuming an investment of $100 in the Company's Common Stock and
each index.
COMPARISON OF CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
GLOBALSTAR NASDAQ COMPOSITE INDEX
TELECOMMUNICATIONS NASDAQ ----------------------
LIMITED TELECOMMUNICATIONS INDEX
------------------ ------------------------
<S> <C> <C> <C>
'14-Feb-95' 100.00 100.00 100.00
'30-Jun-95' 74.00 108.00 118.00
'31-Dec-95' 206.00 126.00 134.00
'30-Jun-96' 246.00 136.00 150.00
'31-Deci-96' 350.00 131.00 164.00
'30-Jun-97' 340.00 151.00 185.00
'31-Dec-97' 546.00 186.00 201.00
'30-Jun-98' 600.00 250.00 243.00
'31-Dec-98' 447.00 304.00 282.00
'15-Mar-99' 388.00 372.00 313.00
</TABLE>
7
<PAGE> 10
The salaries of the executive officers of Globalstar and the Company are
borne by either Globalstar or Loral. Loral is solely responsible for the
compensation of Messrs. Schwartz, Clark 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 and Globalstar who receive compensation from Globalstar.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG
TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
-------------------------------------- UNDERLYING
OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(A) BONUS(B) COMPENSATION(C) OPTIONS(D) Compensation(e)
- --------------------------- ---- --------- -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Douglas G. Dwyre* 1998 $230,000 $175,000 -- 8,800 $17,804
Senior Vice President of 1997 $230,000 $150,000 -- 35,000 $17,012
GTL; President of 1996 $195,932 $125,000 -- -- $ 9,132
Globalstar
Anthony J. Navarra* 1998 $225,000 $120,000 -- 6,300 $25,664
Vice President of GTL; 1997 $188,640 $ 90,000 -- 25,000 $ 5,700
Executive Vice President - 1996 $179,229 $ 90,000 -- -- $ 5,026
Strategic Development of
Globalstar
Gloria Everett 1998 $220,000 $ 74,000 $ 50,000 37,500 --
Senior Vice President -
Operations of Globalstar
Gerard Canavan 1998 $200,000 $ 60,000 $115,389 18,800 $ 4,846
Senior Vice President -
Marketing and Business
Development of Globalstar
Joel Schindall 1998 $172,194 $ 70,000 17,500 $16,357
Senior Vice President - 1997 $162,180 $ 55,000 -- 20,000 $ 5,501
Systems Development 1996 $157,339 $ 45,000 -- -- $ 500
of Globalstar
</TABLE>
- ---------------
* On March 31, 1999, Mr. Dwyre retired from his positions as President of
Globalstar and Senior Vice President of the Company. In connection therewith,
Mr. Navarra was appointed as acting chief operating officer of Globalstar
effective March 8, 1999.
(a) Amounts reflect annual salaries for each of Ms. Everett and Mr. Canavan, who
commenced employment with Globalstar on February 2, 1998 and February 9,
1998, respectively. The actual salary paid to Ms. Everett and Mr. Canavan in
1998 was $198,846 and $176,923, respectively.
(b) Reflects bonuses earned for the fiscal year ended December 31, 1998, paid in
1999, for the fiscal year ended December 31, 1997, paid in 1998 and for the
fiscal year ended December 31, 1996, paid in 1997.
(c) Consist of signing bonuses of $50,000 and $70,000 paid to Ms. Everett and
Mr. Canavan, respectively, and a relocation payment of $45,389 to Mr.
Canavan.
(d) Does not reflect grants during 1996 of stock options to acquire 25,000,
20,000 and 8,000 shares of Loral common stock granted by Loral to Messrs.
Dwyre, Navarra and Schindall, respectively (the "Loral Options"). The Loral
Options are exercisable at $10.50 per share, vest in 20% increments over
five years and have a 10-year term.
(e) Includes 1998 company matching contributions to the Savings Plans in the
amount of $5,760 for each of Mr. Dwyre, Mr. Navarra and Mr. Schindall and
$4,846 for Mr. Canavan. Also reflects a payout in 1998 of life insurance of
$9,390 to Mr. Dwyre and payouts in 1998 for unused vacation time of $2,654,
$19,904 and $10,597 to Mr. Dwyre, Mr. Navarra and Mr. Schindall,
respectively.
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............. 8,800 1.09% $ 13.50 $ 13.50 10/22/2008 $ 66,167
Anthony J. Navarra........... 6,300 .78% $ 13.50 $ 13.50 10/22/2008 $ 47,370
Gloria Everett............... 30,000 3.70% $ 29.03 $ 29.03 2/9/2008 $485,040
Gloria Everett............... 7,500 .93% $ 13.50 $ 13.50 10/22/2008 $ 56,393
Gerard Canavan............... 15,000 1.85% $ 29.03 $ 29.03 2/9/2008 $242,520
Gerard Canavan............... 3,800 .47% $ 13.50 $ 13.50 10/22/2008 $ 28,572
Joel Schindall............... 10,000 1.23% $ 29.78 $ 29.78 2/10/2008 $165,861
Joel Schindall............... 7,500 .93% $ 13.50 $ 13.50 10/22/2008 $ 56,393
</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........ -- -- 30,000 73,800 $479,063 $537,363
Anthony J. Navarra...... -- -- 25,000 56,300 $399,219 $440,956
Gloria Everett.......... -- -- -- 37,500 -- $ 49,688
Gerard Canavan.......... -- -- -- 18,800 -- $ 25,175
Joel Schindall.......... -- -- 2,400 39,900 $ 38,325 $ 88,013
</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 Globalstar, or a change in
such NEO's responsibilities following a change-in-control.
9
<PAGE> 12
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. Globalstar 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-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, 1998, the contributory credited years of service
for each of the executives in the Summary Compensation Table are as follows:
Douglas G. Dwyre, 25 years; Anthony J. Navarra, 7 years; Gloria Everett, less
than one year; Gerard Canavan, less than one year; and Joel Schindall, 4 years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SS/L Agreement and Subcontracts. Space Systems/Loral, Inc. ("SS/L"), which
is an affiliate of Globalstar and a wholly-owned subsidiary of Loral, has
entered into a contract with Globalstar to design, manufacture, test and launch
its satellite constellation, which contract consists of two parts. The price of
the first part consists of three phases, the first for non-recurring work at a
price not to exceed $117.1 million, the second for 56 satellites 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 and Globalstar have agreed to an additional payment
of $41 million related to certain additional services performed by SS/L. Under
the second part of the contract, Globalstar agreed to purchase from SS/L eight
additional satellites at a cost of $180 million. In addition, Globalstar has
agreed, subject to its partners' approval, to purchase 12 additional satellites
from SS/L, the cost and payment terms for which have not as yet been negotiated.
SS/L is designing, building and launching the satellites in Globalstar's
constellation, which are designed to have a minimum life span of seven and a
half 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 satellites is $684 million, net of insurance
recoveries and subject to equitable adjustments in light of future market
conditions, which may, in turn, be influenced by international
10
<PAGE> 13
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.
Globalstar has granted SS/L an irrevocable, royalty-free, non-exclusive
license to use certain intellectual property expressly developed in connection
with the SS/L agreement provided that SS/L will not use, or permit others to
use, such license for the purpose of engaging in any business activity that
would be in material competition with Globalstar. Globalstar has similarly
agreed that it will not license such intellectual property if it will be used
for the purpose of designing or building satellites that would be in competition
with SS/L.
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.
SS/L provides Globalstar with approximately $330 million of billings
deferred as follows -- $224 million of vendor financing and $106 million of
orbital incentives. SS/L subcontractors have assumed a portion of the vendor
financing commitments totalling approximately $116 million. The $224 million of
vendor financing consists of three tranches -- $110 million, $90 million and $24
million. Only the $90 million is interest bearing and bears interest at the
30-day LIBOR rate plus 3% per annum. Globalstar will repay the $110 million and
the $24 million tranches as follows: 50% will be paid over 5 years in equal
monthly installments following the launch and acceptance of 24 or more
satellites (the "Preliminary Constellation") and the remaining 50% will be paid
over 5 years in equal monthly installments following the launch and acceptance
of 48 or more satellites (the "Full Constellation"). Payment of the $90 million
interest bearing vendor financing will be due beginning March 31, 1999. Interest
and principal will be repaid in 20 equal quarterly installments over the next
five years. Approximately $47 million of the orbital incentives will be paid at
both the Preliminary Constellation Date and Full Constellation Date with the
remainder being paid with the delivery of the remaining 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 telephone 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 a 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
11
<PAGE> 14
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 would 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). Thus far, no other vendor has committed to
manufacture gateways. Qualcomm has granted a license to manufacture Globalstar
phones to each of Ericsson and TELITAL and has also agreed to grant a similar
license 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 period following Globalstar's full
constellation 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.
On March 4, 1998, Qualcomm entered into a deferred payment agreement with
Globalstar providing for $100 million of vendor financing. The deferred payments
accrue interest at a rate of 5.75% per annum, which is added to the outstanding
principal balance quarterly. Beginning January 1, 2000, Globalstar will make
eight equal quarterly principal payments. The final payment including all unpaid
interest is due October 1, 2001.
Gateway and User Terminals Programs. Qualcomm executed the initial
Globalstar gateway design work under its original development contract with
Globalstar. In 1997, in order to accelerate the deployment of gateways around
the world, Globalstar agreed to help finance approximately $80 million of the
cost of up to 32 of the initial 38 gateways. The contracts for the 38 gateways
aggregate approximately $345 million. Ericsson, Qualcomm and Telital are in the
process of manufacturing approximately 300,000 handheld and fixed user terminals
under contracts totaling $353 million from Globalstar and its service providers.
Globalstar has agreed to finance approximately $151 million of the cost of
handheld and fixed user terminals. Globalstar expects to recoup such costs upon
acceptance by the service providers of the gateways and user terminals.
Support Agreements. 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 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.
In October 1998, Globalstar entered into agreements with AirTouch Satellite
Services and TE.SA.M for approximately $7 million under which these partners
would provide support for integration and testing of the Globalstar system at
certain of the partners' gateways.
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
12
<PAGE> 15
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. 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.
Guarantee Fee and Warrants. On December 15, 1995, Globalstar entered into
a credit agreement providing for a $250 million credit facility (the "Globalstar
Credit Agreement"). 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
partners participating in such guarantee, warrants to purchase 16,741,272 shares
of Common Stock at an exercise price of $6.625 per share (after giving effect to
the Company's two-for-one stock splits effected in the form of 100% stock
dividends paid on May 28, 1997 and June 8, 1998). The holders of the warrants
have exercised such warrants and the Company has registered for resale the
Common Stock issued upon exercise of such 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.
Globalstar Managing Partner's Allocation and Distribution. Commencing on
the full constellation 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.
13
<PAGE> 16
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.
Purchase of Preferred Securities. In January 1999, the Company purchased
$350 million of convertible preferred partnership interests from Globalstar with
the net proceeds from its $350 million offering of 8% Convertible Redeemable
Preferred Stock due 2011 (the "Convertible Preferred"). In connection therewith,
Loral purchased $150 million face amount of the Company's Convertible Preferred
at a total purchase price of approximately $145.9 million. The purchase price
paid by Loral for the Convertible Preferred was the same as the price offered by
the Company to the initial purchasers of the offering.
Registration of Stock. The Company has filed and currently has effective a
shelf registration statement covering the resale of 717,600 shares of its Common
Stock by Dacom Corporation and Dacom International, Inc. In addition, the
Company has filed a registration statement covering the resale of 8,400,000
shares of its Common Stock by certain persons or entities associated with or
advised by Soros Fund Management LLC.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during 1998 all reports for the Company's
executive officers, directors and beneficial owners of more than 10% of the
Company's Common Stock that were required to be filed under Section 16 of the
Securities Exchange Act of 1934 were timely filed.
PROPOSAL 2. ACTING UPON A PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF PREFERRED STOCK.
The Board of Directors has declared advisable and recommended a proposal to
increase the number of authorized shares of Preferred Stock. The Board of
Directors believes that the availability of additional Preferred Stock will
provide additional financing flexibility for the Company. It is therefore
proposed to increase the number of authorized shares of Preferred Stock from
10,000,000 to 20,000,000.
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 May
18, 1999, the authorized preference share capital of the Company be
increased from $100,000 to $200,000 and a Memorandum of Increase of
Share Capital be deposited with the Registrar of Companies of Bermuda
reflecting such increase.
As of March 31, 1999, of the 10,000,000 authorized shares of Preferred
Stock, 7,000,000 shares, representing the 8% Convertible Redeemable Preferred
Stock due 2011 issued by the Company in January 1999, were outstanding.
The Board of Directors believes it is in the Company's best interest to
increase the number of authorized but unissued shares of Preferred Stock in
order to have additional authorized but unissued shares available for issuance
to meet business needs as they arise.
14
<PAGE> 17
The additional Preferred Stock to be authorized 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.
To the extent that the additional authorized shares of Preferred Stock are
issued in the future, they 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
additional shares of 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.
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.
PROPOSAL 3. 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 2,500,000 TO 5,000,000.
GENERAL. The Company has historically utilized stock options as a part of
its overall compensation program for key employees, directors and officers. As
of December 31, 1998, options for approximately 2,125,000 shares were
outstanding under the Company's 1994 Stock Option Plan (the "SOP"), leaving a
balance of approximately 350,000 additional shares that may be used for future
option grants. The Board of Directors has approved, subject to shareholder
approval, an amendment to the SOP (the "Amendment") to increase from 2,500,000
to 5,000,000 the number of shares of Common Stock that may be issued under the
SOP. As of December 31, 1998, after giving pro forma effect to the issuance of
the Convertible Preferred, the Company would have had 255,007,379 shares of
Common Stock outstanding on a fully diluted basis, consisting of 82,016,679
shares of Common Stock issued and outstanding, 15,049,685 shares of Common Stock
issuable upon conversion of the Convertible Preferred, 4,069,325 shares issuable
upon exercise of outstanding warrants, 2,121,690 shares issuable upon exercise
of outstanding options and 151,750,000 shares of Common Stock issuable upon
exercise by Globalstar's partners of certain exchange rights. Globalstar
partners have the right, following commencement of operations and two
consecutive quarters of positive net income, to exchange, subject to certain
limitations, their partnership interests for shares of Common Stock.
The Board of Directors believes that it is in the best interests of the
Company and Globalstar to have stock-based awards available in order to retain,
attract and motivate highly qualified personnel for the Company and Globalstar.
The Amendment, if approved by shareholders, will enable the Company to have a
sufficient number of stock options available for future grant.
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 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 and Globalstar's Annual Report on Form 10-K and the
Amendment as attached as Exhibit A.
15
<PAGE> 18
The Company's 1994 Stock Option Plan (the "SOP") was adopted by the Board
of Directors and approved by the Company's only shareholder on November 30,
1994. In April 1997, shareholders of the Company approved an amendment to the
SOP that increased the number of shares of Common Stock available for issuance
to 2,500,000 shares (as adjusted to give effect to the Company's two-for-one
stock splits effected in the form of 100% stock dividends paid on May 28, 1997
and June 8, 1998) and reduced the minimum purchase price at which options may be
granted thereunder.
The SOP provides for the grant of non-qualified stock options ("NQSOs") and
incentive stock options ("ISOs") as defined in Section 422 of 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, ten
officers, four directors and approximately two hundred and thirty 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 4,971,490 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 number of shares underlying the option grant, (2)
the purchase price of shares subject to options, (3) the dates on which options
become exercisable and (4) 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 400,000 (subject to adjustments for capital changes).
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.
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.
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.
16
<PAGE> 19
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.
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. 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, 1999. Deloitte & Touche LLP has advised the Company
that it has no direct or indirect financial interest in the Company, Globalstar
or any of their subsidiaries, and that it has had, during the last three years,
no connection with the Company, Globalstar or any of their subsidiaries other
than as independent auditors and related activities.
The financial statements of the Company and Globalstar for the year ended
December 31, 1998, and reports of the auditors 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 1998, Deloitte & Touche LLP provided services consisting of the
audit of the annual financial statements of the Company and Globalstar,
consultations with respect to the Company's and Globalstar'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 THE COMPANY VOTE IN
FAVOR OF THIS PROPOSAL.
17
<PAGE> 20
SHAREHOLDERS' PROPOSALS
Proposals of the Company's shareholders intended to be included in the
Company's 2000 proxy statement must be received by the Company no later than
December 13, 1999. In addition, proposals of the Company's shareholders intended
to be presented at the 2000 Annual Meeting of the Company must be received by
the Company no later than February 28, 2000. Proposals for inclusion in the
Company's Proxy Statement or for presentation at the Annual Meeting must be
submitted to the Company in writing at 600 Third Avenue, New York, New York
10016, Attention: Secretary. 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 judgment 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
April 9, 1999
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<PAGE> 21
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 5,000,000, subject to
adjustment as provided in Section 7 hereof."
<PAGE> 22
GLOBALSTAR TELECOMMUNICATIONS LIMITED
PROXY -- ANNUAL MEETING OF SHAREHOLDERS, MAY 18, 1999
BERNARD L. SCHWARTZ, GREGORY J. CLARK 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 10019, at 9:30 A.M., on Tuesday, May 18,
1999 and at all adjournments thereof. The Board of Directors Recommends a vote
FOR the Following Proposals:
1. ELECTION OF NINE DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all
nominees listed below [ ] Exceptions*
Nominees: B. Schwartz, G. Clark, M. DeBlasio, D. Dwyre, R. Grierson, R.
Hodes, E. Peett, M. Targoff, A. Towbin
Instruction: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided
below:
*Exceptions
----------------------------------------------------------------------------
2. Acting upon a proposal to increase the number of authorized shares of
Preferred Stock
of the Company from 10,000,000 to 20,000,000. FOR [ ] AGAINST [
] ABSTAIN [ ]
3. Acting upon a proposal to increase the number of shares of Common Stock
available for issuance under the Company's 1994 Stock Option Plan from
2,500,000 to 5,000,000. FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Acting upon a proposal to ratify the appointment of Deloitte & Touche LLP
as
independent auditors for the year ending December 31, 1999. FOR [
] AGAINST [ ] ABSTAIN [ ]
5. In their discretion, upon such other matters as may properly come before
the meeting. FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Continued on reverse side)
<PAGE> 23
(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 4.
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: , 1999
--------------------------------------------
--------------------------------------------
(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
