<PAGE> 1
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 Section 240.14a-11(c) or Section 240.14a-2.
[ ] Confidential for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
Globalstar Telecommunications Limited
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) and 0-12.
(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:
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(4) Date Filed:
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<PAGE> 2
[GLOBALSTAR LETTERHEAD]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
MAY 9, 2000
------------------------
The Annual Meeting of Shareholders of Globalstar Telecommunications
Limited (the "Company") will be held in Ballroom D, Grand Hyatt Hotel, Park
Avenue at Grand Central Station, New York, New York 10017, at 9:30 A.M., on
Tuesday, May 9, 2000 for the purpose of:
1. Electing to the Board nine directors whose terms have expired;
2. 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 5,000,000 to
10,000,000;
3. Acting upon a proposal to ratify the appointment of Deloitte & Touche
LLP as independent auditors for the year ending December 31, 2000;
and
4. Transacting any other business which may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 24, 2000
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.
This Proxy Statement and accompanying proxy will be first mailed to you
and to other shareholders of record on or about April 12, 2000.
By Order of the Board of Directors
/s/ Bernard L. Schwartz
BERNARD L. SCHWARTZ
Chairman of the Board of Directors
April 11, 2000
<PAGE> 3
QUESTIONS & ANSWERS
WHAT IS THE RELATIONSHIP
BETWEEN
THE COMPANY AND GLOBALSTAR? We are a general partner, owning approximately 40%
of Globalstar, L.P. ("Globalstar"), which is now
commencing operations of its global
telecommunications network. We operate as a holding
company to permit public equity ownership interest
in Globalstar. Our sole asset consists of our
partnership interests in Globalstar.
WHY DID I RECEIVE THIS
PROXY? We have sent you this Notice of Annual Meeting and
Proxy Statement and proxy card because our Board of
Directors is soliciting your proxy to vote at our
Annual Meeting of Shareholders on May 9, 2000 (the
"Annual Meeting"). This Proxy Statement contains
information about the items being voted on at the
Annual Meeting and information about us.
WHAT IS A PROXY? A proxy is a person you appoint to vote on your
behalf. We are soliciting proxies so that all
shares of our common stock may be voted at the
Annual Meeting.
WHO IS ENTITLED TO VOTE? You may vote if you owned stock as of the close of
business on March 24, 2000. On March 24, 2000,
there were 96,910,921 shares of our common stock
outstanding and entitled to vote at the Annual
Meeting.
WHAT AM I VOTING ON? You will be voting on the following:
- To elect nine Directors;
- To amend Globalstar's 1994 Stock Option Plan to
increase the number of common shares available
for issuance;
- To ratify Deloitte & Touche LLP as our
independent auditors; and
- To transact any other business which may properly
come before the Annual Meeting.
HOW DO I VOTE? All shareholders may vote by mail. To vote by mail,
please sign, date and mail the enclosed proxy card
in the postage prepaid envelope provided.
If you hold your shares in the name of a bank or
broker, you may be able to vote by telephone or
over the Internet. Please follow the directions on
your proxy card.
If you are planning to attend the Annual Meeting
and wish to vote your shares in person, we will
give you a ballot. If your shares are held in the
name of your broker, bank or other nominee, you
need to bring an account statement or letter from
the nominee indicating that you were the beneficial
owner of the shares on March 24, 2000, the record
date for voting. EVEN IF YOU PLAN TO BE PRESENT AT
THE MEETING, WE ENCOURAGE YOU TO VOTE YOUR SHARES
BY PROXY.
HOW MANY VOTES DO I HAVE? Each share of our common stock that you own
entitles you to one vote.
BY COMPLETING AND RETURNING
THE
PROXY CARD, WHO AM I
DESIGNATING
AS MY PROXY? You will be designating Bernard L. Schwartz, our
Chairman of the Board and Chief Executive Officer,
Eric J. Zahler, our Vice Chairman, and Robert B.
Hodes, a member of our Board of Directors, as your
proxies.
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<PAGE> 4
HOW WILL MY PROXY VOTE MY
SHARES? Your proxy, when properly executed, will be voted
according to the instructions you have indicated.
WHAT IF I RETURN MY PROXY
BUT DO
NOT MARK IT TO SHOW HOW I
AM
VOTING? If no direction is indicated, your proxy will be
voted "FOR" the election of all nominees to the
Board of Directors and "FOR" proposals 2 and 3.
CAN I CHANGE MY VOTE AFTER
I
RETURN MY PROXY CARD? You can change your vote by revoking your proxy at
any time before it is exercised in one of three
ways:
- Notify our Corporate Secretary in writing before
the Annual Meeting that you are revoking your
proxy;
- Submit another proxy with a later date; or
- Vote in person at the Annual Meeting.
WHAT DOES IT MEAN IF I
RECEIVE
MORE THAN ONE PROXY CARD? It means you have multiple accounts at the transfer
agent and/or with banks and stock brokers. Please
vote all of your shares.
WHAT CONSTITUTES A QUORUM? The presence of the holders of a majority of the
shares entitled to vote at the Annual Meeting
constitutes a quorum. Presence may be in person or
by proxy. Therefore, you will be considered part of
the quorum if you return a signed and dated proxy
card, if you vote by telephone or Internet or if
you attend the Annual Meeting.
Abstentions and broker "non-votes" are counted as
"shares present" at the meeting for purposes of
determining whether a quorum exists 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 3.
WHAT VOTE IS REQUIRED IN
ORDER TO
APPROVE EACH PROPOSAL? ELECTION OF DIRECTORS: The election of the nine
nominees requires the affirmative vote of a
majority of the shares cast at the Annual Meeting.
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. If you do not want
to vote your shares for a particular nominee, you
may indicate that in the space provided on the
proxy card or withhold authority as prompted during
telephone or Internet voting.
AMENDMENT OF 1994 STOCK OPTION PLAN: Amendment of
our 1994 Stock Option Plan will require the
affirmative vote of a majority of the votes cast at
the Annual Meeting.
RATIFICATION OF INDEPENDENT AUDITORS: Ratification
of Deloitte & Touche LLP as our independent
auditors requires the affirmative vote of a
majority of the shares cast at the Annual Meeting.
If the shareholders do not ratify the appointment
of Deloitte & Touche LLP, the appointment will be
reconsidered by our Board of Directors.
HOW WILL VOTING ON ANY
OTHER
BUSINESS BE CONDUCTED? We do not know of any business or proposals to be
considered at our Annual Meeting other than the
items described in this Proxy Statement. If any
other business is proposed and we decide to permit
it to be presented at the Annual Meeting, the
signed proxies received from our shareholders give
the persons voting the proxies the authority to
vote on the matter according to their best
judgment.
WHO WILL COUNT THE VOTES? The Bank of New York will act as the inspector of
election and will tabulate the votes.
3
<PAGE> 5
WHO PAYS TO PREPARE, MAIL
AND
SOLICIT THE PROXIES? We will pay all of the costs of soliciting these
proxies. We will ask banks, brokers and other
nominees and fiduciaries to forward the proxy
materials to the beneficial owners of our common
stock and to obtain the authority of executed
proxies. We will reimburse them for their
reasonable expenses. We have also retained W.F.
Doring & Co., Inc. to solicit proxies on our behalf
and will pay them a fee, not to exceed $5,000, for
such services. These expenses will in turn then be
paid by Globalstar.
HOW DO I SUBMIT A
SHAREHOLDER
PROPOSAL FOR NEXT YEAR'S
ANNUAL
MEETING? Proposals for inclusion in our 2001 Proxy Statement
must be submitted by shareholders and received by
us no later than December 12, 2000. Proposals
intended to be presented at the 2001 Annual Meeting
must be received by us no later than February 26,
2001. All proposals must be submitted in writing
and sent to 600 Third Avenue, New York, New York
10016, Attention: Secretary. Your proposal must
comply with the proxy rules of the Securities and
Exchange Commission and the requirements of Bermuda
law.
4
<PAGE> 6
PROPOSAL #1: ELECTION OF DIRECTORS
Shareholders will elect nine directors at the Annual Meeting. Each director will
serve until the next annual meeting, until a qualified successor director has
been elected, or until he resigns or is removed by the Board. 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 UNANIMOUSLY
RECOMMENDS A VOTE FOR EACH DIRECTOR NOMINEE.
The following are brief biographical sketches for each of our nominated
directors:
<TABLE>
<C> <S>
BERNARD L. SCHWARTZ
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Age: 74
Director Since: 1994
Business Experience: 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. In addition, he is Chairman of the Board of
Directors and Chief Executive Officer of K&F Industries,
Inc. and Loral Space & Communications Ltd. Prior to April
1996, Mr. Schwartz was Chairman of the Board of Directors
and Chief Executive Officer of Loral Corporation.
Other Directorships: First Data Corp., Reliance Group Holdings, Inc. and certain
of its subsidiaries, Loral CyberStar, Inc. and Satelites
Mexicanos, S.A. de C.V. Trustee of Mount Sinai - NYU Medical
Center and Health System and Thirteen/WNET Educational
Broadcasting Corporation.
MICHAEL P. DEBLASIO
- ---------------------------------------------------------------------------------------
Age: 63
Director Since: 1996
Business Experience: Mr. DeBlasio is the Senior Vice President of the Company. In
addition, he has been First Senior Vice President of Loral
Space & Communications Ltd. since 1998. Prior to that, he
was Senior Vice President and Chief Financial Officer of
Loral Space & Communications Ltd. Prior to that, Mr.
DeBlasio was Senior Vice President and Chief Financial
Officer of Loral Corporation.
Other Directorships: CJSC GlobalTel, Globalstar do Brasil S.A. and Loral
CyberStar, Inc. Trustee of Dickinson College, Our Lady of
Mercy Medical Center, Philharmonia Virtuosi and St. Francis
College.
DOUGLAS G. DWYRE
- ---------------------------------------------------------------------------------------
Age: 67
Director Since: 1999
Business Experience: Mr. Dwyre was President of Globalstar from March 1994 until
his retirement in March 1999. He also served as Senior Vice
President of the Company from May 1996 to March 1999.
SIR RONALD GRIERSON
- ---------------------------------------------------------------------------------------
Age: 78
Director Since: 1996 (Independent Director of Globalstar's General Partners'
Committee)
Business Experience: Sir Ronald is the retired Vice-Chairman of General Electric
Company plc.
Other Directorships: Chime Communications plc, Daily Mail and General Trust plc,
Etam Development S.A. and Safic-Alcan S.A. Chairman of the
international advisory boards of Bain & Co. and Blackstone
Group.
</TABLE>
5
<PAGE> 7
<TABLE>
<C> <S>
ROBERT B. HODES
- ---------------------------------------------------------------------------------------
Age: 74
Director Since: 1994
Business Experience: 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.
Other Directorships: K&F Industries, Inc., 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
- ---------------------------------------------------------------------------------------
Age: 64
Director Since: 1994
Business Experience: Mr. Peett held various positions with Vodafone Group plc
(now Vodafone AirTouch), including serving as its Executive
Director, until his retirement in October 1997.
Other Directorships: PNC Telecom plc. Non-Executive Chairman of Cambridge
Positioning Systems Limited.
MICHAEL B. TARGOFF
- ---------------------------------------------------------------------------------------
Age: 55
Director Since: 1994
Business Experience: Mr. Targoff is Chairman and Chief Executive Officer of
CineComm Digital Cinema, L.L.C. Prior to that, he was
President of the Company and Chief Operating Officer of
Globalstar from May 1996 to January 1998. From April 1996 to
January 1998, Mr. Targoff 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.
Other Directorships: Leap Wireless International.
A. ROBERT TOWBIN
- ---------------------------------------------------------------------------------------
Age: 64
Director Since: 1995 (Independent Director of Globalstar's General Partners'
Committee)
Business Experience: Mr. Towbin is Co-Chairman of C.E. Unterberg, Towbin and was
Senior Managing Director from September 1995 to 1999.
Other Directorships: Bradley Real Estate, Inc., Gerber Scientific Inc., Globecomm
Systems, Inc., K&F Industries, Inc. and TrueTime, Inc.
ERIC J. ZAHLER
- ---------------------------------------------------------------------------------------
Age: 49
Director Since: February 2000
Business Experience: Mr. Zahler is Vice Chairman of the Company and Vice Chairman
of the General Partners' Committee of Globalstar. In
addition, Mr. Zahler has been President and Chief Operating
Officer of Loral Space & Communications Ltd. since February
2000. Prior to that, Mr. Zahler was Executive Vice President
of Loral Space & Communications Ltd. since October 1999 and
Senior Vice President, General Counsel and Secretary of
Loral Space & Communications Ltd. since February 1998. Prior
to that, he was Vice President, General Counsel and
Secretary of Loral Space & Communications Ltd. since March
1996. Prior to that, Mr. Zahler was Vice President, General
Counsel and Secretary of Loral Corporation.
Other Directorships: Loral CyberStar, Inc. and Satelites Mexicanos, S.A. de C.V.
</TABLE>
6
<PAGE> 8
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. 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.
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.
7
<PAGE> 9
PROPOSAL #2: 1994 STOCK OPTION PLAN
Shareholders will act upon a proposal to amend the Company's 1994 Stock Option
Plan to increase the number of shares of our common stock available for issuance
from 5,000,000 to 10,000,000. APPROVAL OF THIS PROPOSAL 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 UNANIMOUSLY RECOMMENDS A VOTE FOR THIS
PROPOSAL.
BACKGROUND
The Company has historically utilized stock options as part of its overall
compensation program for key employees, directors and officers. As of March 24,
2000, options for approximately 4,835,000 shares were outstanding under the
Company's 1994 Stock Option Plan (the "SOP"), leaving a balance of approximately
69,000 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 5,000,000 to 10,000,000 the number of shares of
common stock that may be issued under the SOP. As of March 24, 2000, the Company
would have had approximately 274,487,000 shares of common stock outstanding,
assuming conversion and exercise of all outstanding convertible securities,
options and warrants of the Company, consisting of 96,910,921 shares of common
stock issued and outstanding, 15,230,647 shares of common stock issuable upon
conversion of the Company's Series A and Series B convertible preferred stock,
3,810,469 shares issuable upon exercise of outstanding warrants, 4,835,050
shares issuable upon exercise of outstanding options and approximately 153.7
million 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 our 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.
If the Amendment is approved by the shareholders, the first sentence of Section
3 of the SOP will be 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 10,000,000, subject to
adjustment as provided in Section 7 hereof."
DESCRIPTION OF THE 1994 STOCK OPTION PLAN
The Company's 1994 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. In May 1999,
shareholders of the Company approved an amendment to the SOP that increased the
number of shares of Common Stock available for issuance to 5,000,000 shares.
The SOP provides for the grant of non-qualified stock options ("NQSOs") and
incentive stock options ("ISOs") as defined in Section 422 of the Internal
Revenue Code. The SOP is administered by the Company's Compensation Committee.
Key employees, directors and officers of the Company and
8
<PAGE> 10
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, all directors and executive officers,
totalling 21 persons, and approximately 300 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
9,903,900 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 Internal Revenue 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 is made by such Optionee
within two years after the date of grant or within one year after the transfer
of such shares to such Optionee, then (1) upon sale of such shares, any amount
realized in excess of the option price will be taxed to such Optionee as a
long-term capital gain and any loss sustained will be a long-term capital loss
and (2) no deduction will be allowed to the Optionee's employer for federal
income tax purposes.
If the common stock acquired upon the exercise of an ISO is disposed of prior to
the expiration of either holding period described above, generally (1) the
Optionee will realize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of such shares at exercise
(or, if less, the amount realized on the disposition of such shares) over the
option price paid for such shares and (2) the Optionee's employer will be
entitled to deduct such amount for federal income tax purposes. 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.
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<PAGE> 11
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 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 (as defined in this Proxy Statement) may be
subject to the deduction limits of Section 162(m) of the Internal Revenue 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
various potential participants had the Amendment been in effect for the
Company's last completed fiscal year are not determinable.
10
<PAGE> 12
PROPOSAL #3: INDEPENDENT AUDITORS
Shareholders will act upon a proposal to ratify the appointment of Deloitte &
Touche LLP as the independent auditors of the Company. 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 THE INDEPENDENT
AUDITORS WILL BE RECONSIDERED BY THE BOARD. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR THIS PROPOSAL.
BACKGROUND
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, 2000. 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.
FINANCIAL STATEMENTS AND REPORTS
The financial statements of the Company and Globalstar for the year ended
December 31, 1999, 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.
SERVICES
During 1999, Deloitte & Touche LLP provided services consisting of the audit of
the annual financial statements of the Company and Globalstar and certain of
their affiliates, consultations with respect to the quarterly financial
statements, reports and registration statements filed by the Company and
Globalstar and their affiliates with the Securities and Exchange Commission and
other pertinent matters. Deloitte & Touche LLP also provided certain consulting
services to Globalstar and its affiliates in 1999.
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 in this Proxy Statement. However, the enclosed proxy
confers discretionary authority upon the proxy holders named in the proxy card
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.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met three times during 1999. Each director attended at
least 75% of the meetings of the Board, except for Sir Ronald Grierson, who
attended two meetings.
The Board of Directors has standing audit, compensation and executive
committees. The following shows the membership and functions of the various
committees:
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<C> <S>
AUDIT COMMITTEE
- ----------------------------------------------------------------------------------------------
Members: Robert B. Hodes
Number of Meetings in 1999: 4
Functions: 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.
COMPENSATION COMMITTEE
- ----------------------------------------------------------------------------------------------
Members: Sir Ronald Grierson, A. Robert Towbin
Number of Meetings in 1999: 7
Functions: Reviews and provides recommendations to the Board of
Directors regarding executive compensation matters and is
responsible for the administration of the Company's Stock
Option Plan.
EXECUTIVE COMMITTEE
- ----------------------------------------------------------------------------------------------
Members: Bernard L. Schwartz, Robert B. Hodes
Number of Meetings in 1999: 3
Functions: 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 affairs of
the Company that may be lawfully delegated.
</TABLE>
The Company is a general partner of Globalstar, the operating company.
Globalstar in turn has a General Partners' Committee, Audit Committee and
Council of Service Operators. The following shows the membership and functions
of Globalstar's Audit Committee:
<TABLE>
<C> <S>
GLOBALSTAR AUDIT COMMITTEE
- ----------------------------------------------------------------------------------------------
Members: Robert B. Hodes, Malvin A. Ruderman, E. Donald Shapiro and
Arthur L. Simon
Number of Meetings in 1999: 4
Functions: Reviews and acts with respect to various auditing and
accounting matters, including the selection of the
Globalstar's independent auditors, the accounting and
financial practices and controls of Globalstar, audit
procedures and findings and the nature of services performed
for Globalstar, by, and the fees paid to, the independent
auditors.
</TABLE>
12
<PAGE> 14
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, Zahler 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. This 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 and Globalstar's compensation program are to align
compensation with business objectives and corporate performance, and to enable
the Company and Globalstar to attract, retain and reward executive officers who
contribute to the long-term success of the Company and Globalstar and thereby
create value for shareholders. In order to attain these goals, the Company's and
Globalstar's compensation policies link compensation to corporate performance.
The principal components of Globalstar's compensation program are annual cash
compensation consisting of a 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
Globalstar's achieving its business objectives and Globalstar's overall
performance.
The Compensation Committee believes that the Company's and Globalstar'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 and Globalstar's growth and success.
ANNUAL COMPENSATION
Base salaries for the named executive officers in this Proxy Statement (the
"NEOs") have been set at competitive levels by the Chief Executive Officer
("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 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 its Stock Option Plan. In
addition, in determining overall compensation, the Compensation Committee also
considers fair market value stock options granted by Loral. During 1999,
2,821,500 options were granted to employees under the Stock Option Plan, of
which 622,500 were granted to NEOs.
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 four 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.
13
<PAGE> 15
The report of the Compensation Committee set forth above 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
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
None of the members of the Compensation Committee are present or former officers
or employees of the Company or Globalstar or their respective subsidiaries. Mr.
Towbin is Co-Chairman of C.E. Unterberg, Towbin, which has provided advisory,
investment banking and underwriting services to the Company and Globalstar.
14
<PAGE> 16
EXECUTIVE COMPENSATION
The salaries of the executive officers of Globalstar and the Company are borne
by either Globalstar or Loral. Loral is solely responsible for the salaries of
Messrs. Schwartz, Zahler, DeBlasio and the other officers of the Company and
Globalstar who are also officers of Loral. The following table summarizes the
salaries and other compensation paid to the five most highly compensated
executive officers of the Company and Globalstar who receive compensation from
Globalstar.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
SECURITIES
UNDERLYING
OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION(A) Year Salary(b) BONUS(c) COMPENSATION OPTIONS(e) COMPENSATION(f)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Navarra 1999 $256,792 $160,000 -- 175,000 $ 5,760
President of Globalstar 1998 $227,928 $120,000 -- 6,300 $25,664
and the Company 1997 $188,640 $ 90,000 -- 25,000 $ 5,700
- -----------------------------------------------------------------------------------------------------------
Gloria Everett 1999 $235,920 $ 90,000 $50,000(d) 137,500 --
Senior Vice President -- 1998 $198,846 $ 74,000 $50,000 37,500 --
Operations of Globalstar 1997 -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
Robert A. Wiedeman 1999 $143,158 $156,500 -- 45,000 $ 5,154
Vice President -- Systems 1998 $136,010 $112,000 -- 16,300 $ 4,896
and Regulatory Engineering 1997 $127,282 $ 77,000 -- 15,000 $ 4,582
of Globalstar
- -----------------------------------------------------------------------------------------------------------
Joel Schindall 1999 $182,518 $ 88,000 -- 130,000 $ 5,760
Senior Vice President -- 1998 $175,897 $ 70,000 -- 17,500 $16,357
Systems Development of 1997 $162,180 $ 55,000 -- 20,000 $ 5,501
Globalstar
- -----------------------------------------------------------------------------------------------------------
Megan Fitzgerald 1999 $153,235 $ 80,000 -- 135,000 $ 5,517
Senior Vice President -- 1998 $126,891 $ 65,000 -- 12,000 $ 4,568
Space Operations of 1997 $116,483 $ 45,000 -- 8,000 $ 4,193
Globalstar
</TABLE>
(a) Bernard L. Schwartz is Chief Executive Officer of the Company. For 1999,
Mr. Schwartz received no cash compensation, stock options or other
compensation from the Company except for a director's fee of $12,000 and
is, therefore, omitted from this table.
(b) For 1998, for Ms. Everett, amount reflects the actual salary earned from the
commencement of employment, February 2, 1998 to December 31, 1998, not the
annual base salary of $220,000.
(c) Reflects bonuses earned for each of the respective fiscal years; these
bonuses, however, were paid in the subsequent year. Amounts shown for Mr.
Wiedeman also included patent and achievement bonuses totaling $91,500 for
1999. Amounts shown for Dr. Schindall also include the payment of a $3,000
patent bonus during 1999.
(d) Consists of a signing bonus paid to Ms. Everett.
(e) Does not include a grant made in December 1999 by Loral Space &
Communications Ltd. to Mr. Navarra of stock options to acquire 30,000 shares
of Loral common stock at an exercise price of $16.00 per share.
(f) The amounts for 1999 consist of Company matching contributions to the
Savings Plan.
15
<PAGE> 17
OPTION GRANTS TABLE
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE GRANT DATE
NAME GRANTED(A) FISCAL YEAR (PER SHARE) EXPIRATION DATE PRESENT VALUE(B)
<S> <C> <C> <C> <C> <C>
Anthony J. Navarra 30,000 1.06% $ 20.625 04/26/2009 $ 431,130
45,000 1.59% $ 24.0625 08/04/2009 $ 754,470
100,000 3.54% $20.78125 12/16/2009 $1,448,000
Gloria Everett 22,500 0.80% $ 20.625 04/26/2009 $ 323,348
35,000 1.24% $ 24.0625 08/04/2009 $ 586,810
80,000 2.84% $20.78125 12/16/2009 $1,158,400
Robert Wiedeman 10,000 0.35% $ 20.625 04/26/2009 $ 143,710
35,000 1.24% $ 24.0625 08/04/2009 $ 586,810
Joel Schindall 15,000 0.53% $ 20.625 04/26/2009 $ 215,565
35,000 1.24% $ 24.0625 08/04/2009 $ 586,810
80,000 2.84% $20.78125 12/16/2009 $1,158,400
Megan Fitzgerald 20,000 0.71% $ 20.625 04/26/2009 $ 287,420
35,000 1.24% $ 24.0625 08/04/2009 $ 586,810
80,000 2.84% $20.78125 12/16/2009 $1,158,400
</TABLE>
(a) The options become exercisable over a five-year period as follows: 25% on
each of the second, third, fourth and fifth 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 6.25%, stock volatility of 50% 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 1999 AND
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR END(A)
NUMBER OF
SHARES
ACQUIRED ON REALIZED
NAME EXERCISE VALUE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Navarra -- -- 43,750 212,550 $1,615,234 $4,973,791
Gloria Everett -- -- 0 175,000 0 $3,759,063
Robert Wiedeman -- -- 26,250 80,050 $ 969,141 $1,782,697
Joel Schindall -- -- 8,600 163,700 $ 240,313 $3,615,313
Megan Fitzgerald -- -- 8,000 155,000 $ 277,813 $3,454,500
</TABLE>
(a) Market value of underlying securities at year-end, minus the exercise price.
16
<PAGE> 18
EMPLOYMENT AND OTHER COMPENSATION 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.
In connection with Gregory Clark's retirement as Vice Chairman and President of
the Company and Vice Chairman of the General Partners' Committee of Globalstar,
options granted by the Company to Dr. Clark to acquire 40,000 shares of its
common stock at an exercise price of $24.0625 per share were immediately vested.
These options are exercisable in the period starting January 1, 2004 to and
including December 31, 2007. All of Dr. Clark's other vested options continue to
be exercisable through January 20, 2010.
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
limitations under the Internal Revenue Code. 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.
<TABLE>
<CAPTION>
YEARS OF CONTRIBUTORY SERVICE
FINAL AVERAGE SALARY 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$100,000 $22,670 $ 30,230 $ 37,790 $ 45,350 $ 52,900
$125,000 $29,240 $ 38,980 $ 48,730 $ 58,470 $ 68,220
$150,000 $35,800 $ 47,730 $ 59,660 $ 71,600 $ 83,530
$175,000 $42,360 $ 56,480 $ 70,600 $ 84,720 $ 98,840
$200,000 $48,920 $ 65,230 $ 81,540 $ 97,850 $114,150
$225,000 $55,490 $ 73,980 $ 92,480 $110,970 $129,470
$250,000 $62,050 $ 82,730 $103,410 $124,100 $144,780
$300,000 $75,170 $100,230 $125,290 $150,350 $175,400
</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 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, 1999, the contributory credited years of service for each of the
NEOs are as follows: Anthony Navarra, 8 years; Gloria Everett, 1 year; Robert
Wiedeman, 3 years; Joel Schindall, 5 years; and Megan Fitzgerald, 4 years.
17
<PAGE> 19
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
We believe that during 1999 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(a) of the Securities Exchange
Act of 1934 were timely filed.
COMMON STOCK OWNERSHIP
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 our common stock because they possessed or shared
voting or investing power with respect to the shares of our common stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP CLASS(1)
<S> <C> <C>
Loral Space & Communications Ltd. 14,735,856(2)(3) 14.3%
c/o Loral SpaceCom Corporation
600 Third Avenue
New York, New York 10016
Prime 66 Partners, L.P. 8,630,000 8.9%
201 Main Street, Suite #3200
Fort Worth, Texas 76102
</TABLE>
(1) 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 and is based upon the number of shares of our common
stock outstanding as of March 24, 2000.
(2) This information is as of March 24, 2000 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. Does not include shares
of common stock issuable upon exchange of Loral's partnership interests in
Globalstar. 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
the Company's common stock. See also "Certain Relationships and Related
Transactions" for a discussion of warrants to purchase 3,450,000 partnership
interests issued by Globalstar to Loral in consideration of a guarantee
provided by two subsidiaries of Loral.
(3) Of such amount, 1,568,000 shares represent shares of common stock subject to
options granted by Loral to certain of its executive officers and directors.
18
<PAGE> 20
The following table presents the number of shares of our common stock
beneficially owned by the directors and nominees, the NEOs and all current
directors, nominees, NEOs and other executive officers of the Company as a group
on March 24, 2000. Individuals have sole voting and investment power over the
stock unless otherwise indicated in the footnotes.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF INDIVIDUAL BENEFICIAL OWNERSHIP(1) CLASS
<S> <C> <C>
Bernard L. Schwartz 1,632,604(2) 1.7%
Michael P. DeBlasio 68,001 *
Douglas G. Dwyre 54,691(3) *
Gloria Everett 8,500(4) *
Megan Fitzgerald 10,560(5) *
Sir Ronald Grierson 75,000(6) *
Robert B. Hodes 144,452(6) *
Anthony J. Navarra 48,846(7) *
E. John Peett 86,666(8) *
Joel Schindall 12,251(9) *
Michael B. Targoff 1,000 *
A. Robert Towbin 85,676(10) *
Robert Wiedeman 31,280(11) *
Eric J. Zahler 128,012(12) *
ALL CURRENT DIRECTORS, NEOS AND OTHER EXECUTIVE OFFICERS OF
THE COMPANY AS A GROUP (21 PERSONS) 2,559,566(13) 2.6%
</TABLE>
* Represents holdings of less than one percent.
(1) Includes shares which, as of March 24, 2000, may be acquired within sixty
days upon the exercise of options granted by Loral: 560,000 to Mr.
Schwartz, 60,000 to Mr. DeBlasio, 80,000 to Mr. Hodes, 100,000 to Mr.
Zahler and 748,000 to all current directors and executive officers as a
group.
(2) Includes 75,000 shares exercisable under the Company's stock option plan.
(3) Includes 53,750 shares exercisable under the Company's stock option plan
and 497 shares held in the Company's Savings Plan.
(4) Includes 7,500 shares exercisable under the Company's stock option plan.
(5) Includes 10,000 shares exercisable under the Company's stock option plan
and 560 shares held in the Company's Savings Plan.
(6) Includes 60,000 shares exercisable under the Company's stock option plan.
(7) Includes 43,750 shares exercisable under the Company's stock option plan
and 644 shares held in the Company's Savings Plan.
(8) Includes 86,666 shares exercisable under the Company's stock option plan.
(9) Includes 11,100 shares exercisable under the Company's stock option plan
and 651 shares held in the Company's Savings Plan.
(10) Includes 60,000 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 to
which Mr. Towbin disclaims beneficial ownership.
(11) Includes 888 shares owned by Mr. Wiedeman's wife, 28,750 shares exercisable
under the Company's stock option plan and 560 shares held in the Company's
Savings Plan.
(12) Includes 4,452 shares held in a Keogh Account and 3,560 shares held by
minor children.
(13) Includes 537,516 shares exercisable under the Company's stock option plan
and 3,476 shares held in the Company's Savings Plan.
19
<PAGE> 21
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, 2000, assuming an investment of $100 in the Company's common stock and
each index.
The graph below 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.
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-Dec-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-Jun-99 515.00 397.00 346.00
31-Dec-99 978.00 616.00 525.00
15-Mar-00 364.00 669.00 590.00
</TABLE>
20
<PAGE> 22
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 56
satellites. The price of the contract consisted 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. In addition,
Globalstar purchased from SS/L eight additional satellites at a cost of $180
million.
Globalstar also has agreed to purchase from SS/L eight spare satellites for $132
million. As of December 31, 1999, $53.5 million has been expended for these
spare satellites. Globalstar has secured from SS/L twelve-month call up orders
for two additional Delta launch vehicles. The total future commitment for these
launch vehicles is $84 million plus escalation of 3% per year. If these launch
vehicles are not used by the end of 2003, Globalstar will incur a termination
charge of $15.9 million.
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.
SS/L has provided $330 million of billings deferred under its construction
contracts with Globalstar, comprised of: $105 million of orbital incentives, of
which $44 million was repaid by Globalstar in 1999 and $61 million is expected
to be repaid in 2000; $90 million of vendor financing which bears interest at
LIBOR plus 3% and is repayable over five years commencing in 2001; and $134
million of non-interest bearing vendor financing due over five years in equal
monthly installments, commencing in 2000. SS/L's subcontractors have assumed
$116 million of such financing.
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"). The contract provides for reimbursement to Qualcomm,
subject to a cap for certain joint development efforts, for contract costs
incurred, plus a 12% fee thereon. As of December 31, 1999, costs billed under
this arrangement, before giving effect to contract payment deferrals were
approximately $1.04 billion and the efforts required to commence service were
substantially complete. Remaining activities under this contract are comprised
of maintenance efforts and further expenditures on system software for the
improvement of system functionality beyond that planned for the start of
service.
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.
21
<PAGE> 23
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.
Under certain specified circumstances, however, Qualcomm will be required to pay
a 3% royalty fee on such intellectual property.
Qualcomm is the only manufacturer of gateways to Globalstar's service providers.
Qualcomm has granted a license to manufacture Globalstar phones to each of
Ericsson and Telit. 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 sold, which will be payable until Globalstar's
funding of that design has been recovered.
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. Qualcomm has agreed to provide Globalstar with an
additional $400 million in vendor financing, for which the terms are still being
finalized. In consideration for the additional vendor financing, Qualcomm is
expected to receive 3,450,000 warrants to purchase Globalstar partnership
interests, a number that is comparable to that received by Loral pursuant to
Loral's guarantee of Globalstar's $500 million credit facility described below.
Globalstar was to commence repayment of the $100 million vendor financing in
January 2000; however, the $100 million of vendor financing is being
incorporated into the $400 million of additional vendor financing, for which the
repayment terms are still being negotiated.
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 Telit are in the process of
manufacturing approximately 300,000 handheld and fixed user terminals under
contracts totaling $375 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 AND CONSULTING AGREEMENTS. Globalstar has entered into agreements with
certain limited partners for approximately $6.3 million, under which Globalstar
will provide for the integration and testing of the Globalstar System at certain
of the partners' gateways.
Globalstar has entered into consulting agreements with certain limited partners.
There were no costs incurred under these arrangements during 1999.
SERVICE PROVIDER AGREEMENTS. Partners of Globalstar or affiliates thereof have
entered into service provider agreements with Globalstar granting them the right
to provide Globalstar 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. A number of Globalstar service providers recently agreed in
principle to make advance purchases of Globalstar airtime for approximately $20
million, after giving effect to a 25% promotional discount.
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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 a rate to be agreed upon. 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.
GUARANTEES AND WARRANTS. On December 15, 1995, Globalstar entered into a credit
agreement providing for a $250 million credit facility (the "1995 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 1995 Credit
Agreement, and SS/L, Qualcomm and one other Globalstar strategic partner
guaranteed $11.7 million, $21.9 million and $10.1 million, respectively, of
Globalstar's obligation. In addition, Loral agreed to indemnity Lockheed Martin
for liability in excess of $150 million under Lockheed Martin's guarantee of the
1995 Credit Agreement.
In connection with such guarantees and indemnity of the 1995 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 1995 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 1995 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.
On August 5, 1999, Globalstar entered into a $500 million credit agreement with
a group of banks. This credit facility is guaranteed by two subsidiaries of
Loral. The guarantee is secured by a pledge of certain assets of Loral and its
subsidiaries, including the stock of the guarantors and the Telstar 6 and 7
satellites. In consideration for the guarantee, Loral and certain Loral
subsidiaries received warrants to purchase an aggregate of 3,450,000 Globalstar
partnership interests at an exercise price of $91.00 per partnership interest.
Fifty percent of the warrants vested in February 2000. Assuming the guarantee
remains in effect, an additional 25% will vest in August 2000, with the
remaining 25% vesting in August 2001. The warrants expire in 2006. Globalstar
may call the warrants after August 5, 2001 if the market price of the Company's
common stock exceeds $45.50 for a defined period.
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.
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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 Brazil,
Canada, Mexico and Russia, 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 the Company, is counsel to the law
firm of Willkie Farr & Gallagher, which acts as counsel to Globalstar and the
Company. Mr. A. Robert Towbin is Co-Chairman in the investment banking firm of
C.E. Unterberg, Towbin, which has rendered advisory, investment banking and
underwriting 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.
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GLOBALSTAR TELECOMMUNICATIONS LIMITED
PROXY - ANNUAL MEETING OF SHAREHOLDERS, MAY 9, 2000
BERNARD L. SCHWARTZ, ERIC J. ZAHLER 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 Ballroom D, Grand Hyatt Hotel, Park
Avenue at Grand Central Station, New York, New York, at 9:30 A.M., on Tuesday,
May 9, 2000 and at all adjournments thereof.
The Board of Directors Recommends a Vote FOR the Following Proposals:
1. ELECTION OF NINE DIRECTORS - Nominees: B. Schwartz, M. DeBlasio, D.
Dwyre, R. Grierson, R. Hodes, J. Peett, M. Targoff, R. Towbin, E.
Zahler
/ / VOTE FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
for all nominees listed below
/ / EXCEPTIONS *
( 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 amend the Company's 1994 Stock Option Plan to
increase the number of common shares, $1.00 par value, of the Company
available for issuance from 5,000,000 to 10,000,000.
FOR / / AGAINST / / ABSTAIN / /
3. Acting upon a proposal to ratify the appointment of Deloitte & Touche
LLP as independent auditors for the year ending December 31, 2000.
FOR / / AGAINST / / ABSTAIN / /
4. In their discretion, upon such other matters as may properly come
before the meeting.
FOR / / AGAINST / / ABSTAIN / /
(Continued on reverse side)
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(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, 3 AND 4.
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R The undersigned hereby acknowledges receipt
of the Notice of Annual Meeting and
O accompanying Proxy Statement.
X
Dated: , 2000
Y -------------------------------
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(Signature of Shareholder)
(Please sign exactly as name or names appear
hereon. When signing as an 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.
