UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Loral Space & Communications Inc.
(Name of Registrant as Specified In Its Charter)
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
December 9, 2013
The Annual Meeting of Stockholders of Loral Space & Communications Inc. (“Loral” or the “Company”) will be held at the Grand Hyatt New York, 109 East 42nd Street at Grand Central Terminal,offices ofWillkie Farr & Gallagher LLP,787 Seventh Avenue, New York, New York, at 10:30 A.M., on Tuesday, May 24, 2011,Monday, December 9, 2013, for the purpose of:
1. | Electing to the Board of Directors the two current Class |
2. | Acting upon a proposal to ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, |
3. | Acting upon a proposal to approve, on a non-binding, advisory basis, compensation of the Company’s named executive officers as described in the accompanying Proxy |
The Board of Directors has fixed the close of business on April 11, 2011October 28, 2013 as the date for determining stockholders of record entitled to receive notice of, and to vote at, the Annual Meeting.
The Board of Directors unanimously recommends that stockholders vote their shares in favor of the election of the Class II DirectorsI directors who have been nominated by the Board of Directors and in favor of Proposals 2 and 3, and, with respect to Proposal 4, in favor of holding future non-binding, advisory votes on compensation paid to named executive officers annually.
This Notice and accompanying Proxy Statement and proxy or voting instruction card will be first mailed to you and to other stockholders of record commencing on or about April 19, 2011.
All stockholders are cordially invited to attend the Annual Meeting. Stockholders may obtain directions to the Annual Meeting by contacting the Company’s investor relations department at (212) 697-1105. Whether or not you plan to attend, I hope that you will vote as soon as possible. Please review the instructions on the proxy or voting instruction card regarding your voting options.
By Order of the Board of Directors | |
Michael B. Targoff | |
Vice Chairman of the Board |
November 7, 2013
TABLE OF CONTENTS
Page | ||
Notice of Annual Meeting | ||
Proxy Statement | ||
Questions and Answers about the Annual Meeting and Voting | 1 | |
Proposal 1 — Election of Directors | 5 | |
Nominees for Election to the Board of Directors in | 5 | |
Continuing Members of the Board of Directors | 6 | |
Additional Information Concerning the Board of Directors of the Company | 8 | |
Director Independence | 8 | |
Indemnification Agreements | 9 | |
Directors and Officers Liability Insurance | 9 | |
Board Leadership Structure | 9 | |
Board Role in Risk Oversight | 10 | |
Director Compensation | ||
Board and Committee Compensation Structure | ||
Directors Compensation for Fiscal | 11 | |
Committees of the Board | 13 | |
Proposal 2 — Independent Registered Public Accounting Firm | 15 | |
Proposal 3 — Advisory Vote on Compensation Paid to Our Named Executive Officers | ||
Report of the Audit Committee | 18 | |
Executive Compensation | 19 | |
Compensation Discussion and Analysis | 19 | |
Report of the Compensation Committee | ||
Compensation Tables | ||
Summary Compensation Table | ||
Outstanding Equity Awards at | ||
Option Exercises and Stock Vested in Fiscal | ||
Pension Benefits in Fiscal Year | ||
Nonqualified Deferred Compensation in Fiscal | ||
Potential Change in Control and Other Post Employment Payments | 36 | |
Ownership of Voting Common Stock | 39 | |
Certain Relationships and Related Transactions | 42 | |
Other Matters | ||
Section 16(a) Beneficial Ownership Reporting Compliance | ||
Solicitation of Proxies | ||
Stockholder Proposals for | ||
Communications with the Board | ||
Code of Ethics | ||
Householding | 45 |
Loral Space & Communications Inc.
888 Seventh Avenue
New York, New York 10016
PROXY STATEMENT
Questions and Answers About the Annual Meeting and
VotingWhy did I receive this proxy statement? | We have sent you this Notice of Annual Meeting and Proxy Statement and proxy or voting instruction card because the Board of Directors (the “Board of Directors” or the “Board”) of Loral Space & Communications Inc. (“Loral” or the “Company”) is soliciting your proxy to vote at our Annual Meeting of Stockholders on | |
Who is entitled to vote? | You may vote on each matter properly submitted for stockholder action at the Annual Meeting if you were the record holder of our Voting Common Stock, par value $.01 per share (“Voting Common Stock”), as of the close of business on | |
How many votes do I have? | Each share of our Voting Common Stock that you own entitles you to one vote on each matter properly submitted for stockholder action at the Annual Meeting. | |
What am I voting on? | You will be voting on the following: | |
• To elect to the Board of Directors the two current Class | ||
• To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, | ||
• To approve, on a non-binding, advisory basis, compensation of the Company’s named executive officers as described in this Proxy | ||
How do I vote? | You may vote in the following ways: | |
•By Mail:If you are a holder of record, you may vote by marking, dating and signing your proxy card and returning it by mail in the enclosed postage-paid envelope. If you hold your shares in street name, please complete and mail the voting instruction card. | ||
•By Telephone or Internet:If you hold your shares in street name, you may be able to provide instructions to vote your shares by telephone or over the Internet. Please follow the instructions on your voting instruction card. |
•At the Annual Meeting:If you are planning to attend the Annual Meeting and wish to vote your shares in person, we will give you a ballot at the meeting. If your shares are held in street name, you need to bring an account statement or letter from your broker, bank or other nominee indicating that you were the beneficial owner of the shares on | ||
What if I return my proxy orvoting instruction card butdo not mark it to show howI am voting? | Your shares will be voted according to the instructions you have indicated on your proxy or voting instruction card. If no direction is indicated, your shares will be voted “FOR” the election of the Class | |
May I change my vote after Ireturn my proxy or votinginstruction card? | You may change your vote at any time before your shares are voted at the Annual Meeting in one of three ways: | |
• Notify our Corporate Secretary in writing before the Annual Meeting that you are revoking your proxy; | ||
• Submit another proxy by mail, telephone or the Internet (or voting instruction card if you hold your shares in street name) with a later date; or | ||
• Vote in person at the Annual Meeting. | ||
What does it mean if Ireceive more than one proxyor voting instruction card? | It means you have multiple accounts at the transfer agent and/or with banks and stockbrokers. Please vote all of your shares. | |
What constitutes a quorum? | Any number of stockholders, together holding at least a majority in voting power of the capital stock of the Company issued and outstanding and generally entitled to vote in the election of directors, present in person or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of all business. Abstentions and “broker non-votes” are counted as shares “present” at the meeting for purposes of determining whether a quorum exists. A “broker non-vote” occurs when shares held of record by a bank, broker or other holder of record for a beneficial owner are deemed present at the meeting for purposes of a quorum but are not voted on a particular proposal because that record holder does not have discretionary voting power for that particular matter under the applicable rules of the Nasdaq National Market and has not received voting instructions from the beneficial owner. |
What vote is required inorder to approve Proposals 1 and 2? | Proposal 1 (Election of Directors): The two current Class | |
Proposal 2 (Ratification ofAppointment of Deloitte & ToucheLLP): This proposal requires the affirmative vote of the holders of a majority of the voting power of our outstanding Voting Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on Proposal 2. Abstentions will have the effect of votes against the proposal. “Broker non-votes,” if any, will not have any effect on the adoption of the proposal. | ||
What is the standard for approving the non-binding, advisory | Proposal 3 (Advisory Vote on Compensation Paid to Named Executive Officers): This proposal requires the affirmative vote of the holders of a majority of the voting power of our outstanding Voting Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on Proposal 3. Abstentions will have the effect of votes against the proposal. “Broker non-votes,” if any, will not have any effect on the adoption of the proposal. The results of this vote are not binding on the Board, whether or not it is adopted by the aforementioned voting standard. In evaluating the vote on this advisory resolution, the Board will consider the voting results in their entirety. | |
May my broker vote my shares? | Brokers may no longer use discretionary authority to vote shares on the election of directors or non-routine matters if they have not received instructions from their clients. It is important, therefore, that you cast your vote if you want it to count in the election of directors (Proposal 1) |
How will voting on any otherbusiness be conducted? | We do not know of any business or proposals to be considered at the Annual Meeting other than those set forth in this Proxy Statement. If any other business is properly presented at the Annual Meeting, the proxies received from our stockholders give the proxy holders the authority to vote on the matter in their sole discretion. In accordance with our Bylaws, no business (other than the election of the two current Class | |
Who will count the votes? | Registrar & Transfer Company will act as the inspector of election and will tabulate the votes. |
Important Notice Regarding the Availability of Proxy Materials
for the Stockholder Meeting to Be Held on May 24, 2011
The 20112013 Proxy Statement, a form of proxy, and Loral’s Annual Report on Form 10-K for the year ended December 31, 20102012 and Amendment No. 1 on Form 10-K/A to Loral’s Annual Report on Form 10-K for the year ended December 31, 2012 are available at:www.loral.com.
4 |
PROPOSAL 1 — ELECTION OF DIRECTORS
The Company has three classes of directors serving staggered three-year terms, with each of Class I and Class II consisting of two directors and Class III consisting of three directors. The terms of the Class I, II and III directors expire on the date of the Annual Meeting in 2013, 20112014 and 2012,2015, respectively.
At the Annual Meeting, stockholders will be asked to elect the two current Class III directors who have been nominated by the Board. Messrs. HarkeyBoard and Targoff,whose terms expire at the Annual Meeting. Mr. Arthur L. Simon and Mr. John P. Stenbit, each of whom is a current Class III director, are the nominees to serve as Class III directors for a new three-year term. One Class III directorship is currently vacant and will be vacant at the time of the Annual Meeting and until the Board either reduces its size or elects a candidate to fill such vacancy. Each nominee will serve for a term of three years and will remain in office until a qualified successor director has been elected or until he resigns or is removed from the Board. Class III directors will be elected by plurality vote.The Board of Directorsunanimously recommends a vote FOR the director nominees.
Nominees for Election to the Board of Directors in 2011
The following are brief biographical sketches of each of our nominees, including their experience, qualifications, attributes and skills, which, taken as a whole, have enabled the Board to conclude that each nominee should, in light of the Company’s business and structure, serve as a director of the Company.
Class I — Directors Whose Terms Expire in 2013
Arthur L. Simon | ||
Age: | ||
Director Since: | November 2005 | |
Class: | Class I | |
Business Experience: | Mr. Simon is | |
Other Directorships: | Director and member of the Audit and Corporate Governance Committees of L-3 Communications Corporation. | |
Qualifications: | Mr. Simon’s qualifications for service on our Board include his significant experience in the satellite industry, having served as a director of the Company and its predecessor for more than 15 years. He also has significant expertise and background with regard to accounting and internal controls, having served in a public accounting firm for 38 years, 25 of which were as a partner, and having |
John P. Stenbit | ||
Age: | ||
Director Since: | June 2006 | |
Class: | Class I | |
Business Experience: | Mr. Stenbit is a consultant for various government and commercial clients. Mr. Stenbit is also Director and Chairman of the Audit Committee of Defense Group Inc., a private corporation, a Trustee of The Mitre Corp., a not-for-profit corporation, and a member of the Advisory Boards of the Missile Defense Agency, the Defense Intelligence Agency, the National Security Agency and the Science Advisory Group of the US Strategic Command. From 2001 to his retirement in March 2004, he was Assistant Secretary of Defense of Networks and Information Integration/Department of Defense Chief Information Officer. |
Other Directorships (current): | Director and member of the Nominating and Corporate Governance and Compensation and Human Resources Committees of ViaSat, Inc. | |
Other Directorships (previous within the last five years): | Director and member of the Governance and Nominating and Audit Committees of SM&A Corporation; Director and member of the Corporate Governance and Compensation Committees of SI International, Inc.; Director and member of the Nominating and Corporate Governance, Audit and Compensation Committees of Cogent, Inc. | |
Qualifications: | Mr. Stenbit’s qualifications for service on our Board include his significant experience in the aerospace and satellite industries, having previously served as a senior executive of TRW for 10 years in positions with financial oversight responsibilities. He also has had a distinguished career of government service focused on the telecommunications and command and control fields. In addition, he brings to the Company a breadth of business knowledge gained while serving as an independent director for other technology companies. |
Continuing Members of the Board of Directors
The following are brief biographical sketches of each of our directors whose term continues beyond 2013 and who is not subject to election this year, including his experience, qualifications, attributes and skills, which, taken as a whole, have enabled the Board to conclude that each director should, in light of the Company’s business and structure, serve as a director of the Company.
Class II — Directors Whose Terms Expire in 2014
John D. Harkey, Jr. | ||
Age: | 53 | |
Director Since: | November 2005 | |
Class: | Class II | |
Business Experience: | Mr. Harkey has been Chairman and Chief Executive Officer of Consolidated Restaurant Companies, Inc. since 1998. | |
Other Directorships (current): | Director and Chairman of the Audit Committee of Energy Transfer Equity, L.P.; Director of Emisphere Technologies, Inc.; Director and member of the Nominating and Corporate Governance Committee of Leap Wireless International, Inc.; Chairman of the Board and member of the Audit Committee of Regency Energy Partners LP. | |
Other Directorships (previous within the last five years): | Director and member of the Audit Committee of Energy Transfer Partners, L.L.C. | |
Qualifications: | Mr. Harkey’s qualifications for service on our Board include his ability to provide the insight and perspectives of a successful and long-serving active chief executive officer of a major restaurant company. His service on the boards of several other public companies in diverse industries allows him to offer a broad perspective on corporate governance, risk management and operating issues facing corporations today. |
Michael B. Targoff | ||
Age: | 69 | |
Director Since: | November 2005 | |
Class: | Class II | |
Business Experience: | Mr. Targoff has been Vice Chairman of Loral since November 21, 2005 and a consultant to the Company since December 15, 2012. Mr. Targoff was Chief Executive Officer of Loral from March 1, 2006 to December 14, 2012 and President of Loral from January 8, 2008 to December 14, 2012. Mr. Targoff also has been a Director and member of the Audit Committee ofTelesat Canada (“Telesat”), a subsidiary of Telesat Holdings Inc. (“Telesat Holdings”),since the Company acquired its interest in Telesat Holdings in October 2007. From 1998 to February 2006, Mr. Targoff was founder and principal of Michael B. Targoff & Co., a private investment company. | |
Other Directorships (current): | Director, Chairman of the Audit Committee and member of the Compensation Committee and Nominating and Corporate Governance Committee of Leap Wireless International, Inc. | |
Other Directorships (previous within the last five years): | Chairman of the Board and member of the Audit Committee of CPI International, Inc.; Director and Chairman of the Banking and Finance Committee and the Corporate Governance Committee of ViaSat, Inc. | |
Qualifications: | Mr. Targoff’s qualifications for service on our Board include his extensive understanding and knowledge of our business and the satellite industry, as well as demonstrated leadership skills and operating experience, acquired during more than 20 years of serving as a senior executive of the Company and its predecessors. As a director of other public and private companies in the telecommunications industry, Mr. Targoff also brings to the Company a broad-based business knowledge and substantial financial expertise. |
Class III — Directors Whose Terms Expire in 2015
Hal Goldstein | ||
Age: | 47 | |
Director Since: | November 2005 | |
Class: | Class III | |
Business Experience: | Mr. Goldstein is an independent investor. From 1996 to May 2012, Mr. Goldstein served MHR Fund Management LLC (“MHR”) in various capacities, including as a managing principal. | |
Qualifications: | Mr. Goldstein’s qualifications for service on our Board include his significant supervisory and oversight experience, as well as transactional expertise gained while structuring, acquiring and monitoring multiple and diverse portfolio investments and investment opportunities during his tenure at MHR. His experience serving on the boards of various companies also allows him to offer a broad perspective on corporate governance and operating issues facing corporations today. |
Mark H. Rachesky, M.D. | ||
Age: | 54 | |
Director Since: | November 2005 | |
Class: | Class III | |
Business Experience: | Dr. Rachesky has been non-executive Chairman of the Board of Directors of Loral since March 1, 2006. Dr. Rachesky also has been non-executive Chairman of the Board and a member of the Compensation and Corporate Governance Committee of Telesat, since the Company acquired its interest in Telesat Holdings in October 2007. Dr. Rachesky founded MHR and has been its President since 1996. MHR is an investment manager of various private investment funds that invest in inefficient market sectors, including special situation equities and distressed investments. | |
Other Directorships (current): | Non-executive Chairman of the Board, Chairman of the Nominating and Corporate Governance Committee and member of the Compensation Committee of Leap Wireless International, Inc.; Director and member of the Governance and Nominating Committee and Compensation Committee of Emisphere Technologies, Inc.; Non-executive Chairman of the Board and member of the Strategic Advisory Committee and Compensation Committee of Lions Gate Entertainment Corp.; Director and member of the Nominating and Governance Committee, Finance Committee and Compensation Committee of Navistar International Corporation. | |
Other Directorships (previous within the last five years): | Director of NationsHealth Inc. and Neose Technologies, Inc. | |
Qualifications: | Dr. Rachesky’s qualifications for service on our Board include his demonstrated leadership skills as well as his extensive financial expertise and broad-based business knowledge and relationships. In addition, as the President of MHR, with a demonstrated investment record in companies engaged in a wide range of businesses over the last 17 years, together with his experience as chairman and director of other public and private companies, Dr. Rachesky brings to the Company broad and insightful perspectives relating to economic, financial and business conditions affecting the Company and its strategic direction. |
Additional Information Concerning the Board of Directors of the Company
During 2010,2012, the Board of Directors held seven meetings.12 meetings and acted once by unanimous written consent. No director attended fewer than 75% of the aggregate of the total number of meetings of the Board of Directors and of committees of the Board of which he was a member. We do not have a policy regarding directors’ attendance at annual meetings.
Director Independence
The Company is listed on the Nasdaq Stock Market and complies with the Nasdaq listing requirements regarding independent directors. Under Nasdaq’s Marketplace Rules, the definition of an “independent director” is a person other than an executive officer or employee of the company or any other individual having a relationship which, in the opinion of the issuer’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our Board of Directors has reviewed such information as the Board has deemed appropriate for purposes of determining whether any of the directors has a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, including the beneficial ownership by our directors of Voting Common Stock (see “Ownership of Voting Common Stock – Voting Common Stock Ownership by Directors and Executive Officers”) and transactions between the Company on the one hand, and our directors and their affiliates, on the other hand (see “Certain Relationships and Related Party Transactions”). Based on such review, the Board of Directors has determined that all of our current directors, as well as directors who served on our Board in 2012, except for Mr. Targoff, were and are independent directors; independent directors, therefore, constitute a majority of our Board. Non-management directors meet periodically in executive session without members of the Company’s management at the conclusion of regularly scheduled Board meetings.
Indemnification Agreements
We have entered into Officers’ and Directors’ Indemnification Agreements (each, an “Indemnification Agreement”) with our directors and officers (each officer and director with an Indemnification Agreement, an “Indemnitee”). The Indemnification Agreement requires us to indemnify the Indemnitee if the Indemnitee is a party to or threatened to be made a party to or is otherwise involved in any Proceeding (as that term is used in the Indemnification Agreement), except with regard to any Proceeding by or in our right to procure a judgment in our favor, against all Expenses and Losses (as those terms are used in the Indemnification Agreement), including judgments, fines, penalties and amounts paid in settlement, subject to certain conditions, actually and reasonably incurred in connection with such Proceeding, if the Indemnitee acted in good faith for a purpose which he or she reasonably believed to be in or not opposed to our best interests. With regard to Proceedings by or in our right, the Indemnification Agreement provides similar terms of indemnification; no indemnification will be made, however, with respect to any claim, issue or matter as to which the Indemnitee shall have been adjudged to be liable to us, unless a court determines that the Indemnitee is entitled to indemnification for such portion of the Expenses as the court deems proper, all as detailed further in the Indemnification Agreement. The Indemnification Agreement also requires us to indemnify an Indemnitee where the Indemnitee is successful, on the merits or otherwise, in the defense of any claim, issue or matter therein, as well as in other circumstances delineated in the Indemnification Agreement. The indemnification provided for by the Indemnification Agreement is subject to certain exclusions detailed therein. Our subsidiaries,Space Systems/Loral, LLC (formerly, Space Systems/Loral, Inc. (“SS/, “SS/L”), prior to the sale of SS/L in November 2012 to MDA Communications Holdings, Inc. (the “SS/L Sale”), guaranteed, and Loral Holdings Corporation both guaranteeguarantees, the due and punctual payment of all of our obligations under the Indemnification Agreements.
Directors and Officers Liability Insurance
We have purchased insurance from various insurance companies against obligations we might incur as a result of our indemnification obligations of directors and officers for certain liabilities they might incur and insuring such directors and officers for additional liabilities against which they might not be indemnified by us. We have also procured coverage for our own liabilities in certain circumstances. Our cost for the annual insurance premium coveringFor the period from November 21, 20102012 to November 20, 2011 is $1,255,978.
Board Leadership Structure
Our Bylaws do not require that the positions of Chairman of the Board and Chief Executive Officer be held by the same person or by different individuals, and our Board does not have a formal policy with respect to the separation or combination of these offices. Currently,Until December 14, 2012, the position of Chief Executive Officer was held by Michael Targoff. In connection with our corporate office restructuring resulting from the SS/L Sale, Mr. Targoff’s employment as Chief Executive Officer and President of the Company was terminated effective December 14, 2012, and the Board did not believe that going forward it was necessary for the Company to employ a Chief Executive Officer. Thus, currently, the position of Chief Executive Officer is vacant.
Until December 14, 2012, the offices of Chairman of the Board and Chief Executive Officer arewere separated because the Board believesbelieved that it iswas in the best interests of the Company and its stockholders to structure the leadership of the Company in thisthat way. The Board believesbelieved that the separation of thesethose two roles provides, at present,provided the best balance of thesethose important responsibilities, with the Chairman directing the Company’s overall strategic direction and the Chief Executive Officer focusing on developing and implementing the Board-approved strategic vision and managing its day-to-day operations. With respect to 2012, Dr. Mark Rachesky servesserved as non-executive Chairman of the Board, and, Michaeluntil December 14, 2012, Mr. Targoff servesserved as Vice Chairman, Chief Executive Officer and President. The Board believesbelieved that during 2012 it iswas appropriate for Dr. Rachesky to serve as non-executive Chairman because he is co-founder and President of MHR, our largest stockholder, and has extensive knowledge of and experience with our industry, demonstrated financial skills and a history of innovation and independent thinking, all of which enable him to provide broad insights and perspective in leading the Board. The Board believesalso believed that, given Mr. Targoff’s understanding of the history and operations of the Company, his knowledge of the satellite industry, his wealth of executive management experience and his entrepreneurial style and abilities, Mr. Targoff iswas well suited to focus on development and implementation of both the Company’s strategic initiatives as well as its day-to-day operations.operations and, in particular, on accomplishing the sale of SS/L in 2012. Dr. Rachesky and Mr. Targoff frequently consultconsulted with one another during 2012 with respect to all significant matters affecting the Company.
Board Role in Risk Oversight
The Board recognizes its duty to assure itself that the Company has effective procedures for assessing and managing risks to the Company’s governance, strategy and planning, operations and infrastructure, compliance and reporting. The Board has delegated to the Audit Committee the responsibility for monitoring and overseeing the Company’s processes and procedures for risk assessment, risk management and compliance, including periodic reports on compliance with law and Company policies and consequent corrective action, if any. At the request of the Audit Committee, management has developed and implemented a comprehensive enterprise risk management program. This program identifies and focuses on the particular risks that the Company faces, determines the risks that could have a material adverse effect on the Company, establishes and documents a mitigation plan for all significant risks and identifies risks that may not be able to be mitigated. The enterprise risk management program is in the process of being linked to the Company’s existing program for compliance with Sarbanes Oxley 404 and is being coordinated with existing entity level controls and financial risk and fraud assessment processes that are also in place. The Chair of the Audit Committee reports on any significant risk matters to the Board as part of his reports on the Committee’s meetings and activities.
Director Compensation
Board and Committee Compensation Structure
The compensation structure adopted by the Board of Directors has adopted a compensation structureand in effect for directors2012 was designed to achieve the following goals:
The compensation structure thatin effect for 2012 was adopted is as follows:
Board and Committee Compensation Structure
Telephonic | |||||||||||||||
Meeting Fee | |||||||||||||||
Annual | In-Person | (over | Annual | ||||||||||||
Fee(1) | Meeting Fee(2) | 30 minutes)(3) | Stock Award(4) | Medical | |||||||||||
Board of Directors | $ | 60,000 | $ | 1,500 | $ | 1,000 | 2,000 Restricted Stock Units; 5,000 Restricted Stock Units for non-executive Chairman (vesting over two years) | Eligible for Loral Medical Plan at Company’s expense if not otherwise employed full-time | |||||||
Executive Committee | No extra fees unless set on an ad hoc basis by Board of Directors | ||||||||||||||
Audit Committee | |||||||||||||||
Chairman | $ | 20,000 | $ | 1,000 | $ | 500 | |||||||||
Member | $ | 10,000 | $ | 1,000 | $ | 500 | |||||||||
Compensation Committee | |||||||||||||||
Chairman | $ | 5,000 | $ | 1,000 | $ | 500 | |||||||||
Member | $ | 2,000 | $ | 1,000 | $ | 500 | |||||||||
Nominating Committee | |||||||||||||||
Chairman | $ | 5,000 | $ | 1,000 | $ | 500 | |||||||||
Member | $ | 2,000 | $ | 1,000 | $ | 500 |
Telephonic | ||||||||||||||||
Meeting Fee | ||||||||||||||||
Annual | In-Person | (over | Annual | |||||||||||||
Fee(1) | Meeting Fee(2) | 30 minutes)(3) | Stock Award(4) | Medical | ||||||||||||
Board of Directors | $ | 75,000 | $ | 1,500 | $ | 1,000 | Restricted Stock Units equal in value to $100,000 ($250,000 for non-executive Chairman) | Eligible for Loral Medical Plan at Company’s expense if not otherwise employed full-time | ||||||||
Executive Committee | No extra fees unless set on an ad hoc basis by Board of Directors | |||||||||||||||
Audit Committee | ||||||||||||||||
Chairman | $ | 20,000 | $ | 1,000 | $ | 500 | ||||||||||
Member | $ | 10,000 | $ | 1,000 | $ | 500 | ||||||||||
Compensation Committee | ||||||||||||||||
Chairman | $ | 5,000 | $ | 1,000 | $ | 500 | ||||||||||
Member | $ | 2,000 | $ | 1,000 | $ | 500 | ||||||||||
Nominating Committee | ||||||||||||||||
Chairman | $ | 5,000 | $ | 1,000 | $ | 500 | ||||||||||
Member | $ | 2,000 | $ | 1,000 | $ | 500 |
(1) | Annual fees are payable to all directors, including Company |
(2) | In-person meeting fees are not paid to Company |
(3) | Telephonic meeting fees are not paid to Company |
(4) | The annual grant of restricted stock units is not awarded to directors who are Company |
Directors Compensation for Fiscal 2010
For fiscal year 2010,2012, Loral provided the compensation set forth in the table below to its directors.
On May 18, 2010,22, 2012, the Board of Directors approved grants of 15,00011,057 restricted stock units to our non-executive directors as a group as compensation for services rendered during 2010 (5,0002012 (4,253 units to Dr. Rachesky and 2,0001,701 units to each of Messrs. Devabhaktuni, Goldstein, Harkey, Simon and Stenbit). These restricted stock units vest evenly on the first and second anniversary of the grant date (or, if earlier, the date of the Company’s first regular annual meeting of stockholders held after the Grant Date), and each director’s restricted stock units will be settled on the earlier of death of the director, the date the director undergoes a separation of service from the Company and the date of a change in control of the Company. Mr. Devabhaktuni resigned from the Board of Directors in January 2012, and his unvested restricted stock units were forfeited.
11 |
2012 Director Compensation
Fees | ||||||||||||||||
Earned | All | |||||||||||||||
or Paid | Stock | Other | ||||||||||||||
in Cash | Awards(1) | Compensation | ||||||||||||||
Name | ($) | ($) | ($) | Total | ||||||||||||
�� | ||||||||||||||||
Mark H. Rachesky, M.D. | $ | 71,000 | $ | 191,700 | — | $ | 262,700 | |||||||||
Michael B. Targoff(2) | $ | 60,000 | — | — | $ | 60,000 | ||||||||||
Sai Devabhaktuni | $ | 65,000 | $ | 76,680 | $ | 4,946 | (3) | $ | 146,626 | |||||||
Hal Goldstein | $ | 67,500 | $ | 76,680 | — | $ | 144,180 | |||||||||
John D. Harkey, Jr. | $ | 87,500 | $ | 76,680 | — | $ | 164,180 | |||||||||
Arthur L. Simon | $ | 92,000 | $ | 76,680 | — | $ | 168,680 | |||||||||
John P. Stenbit | $ | 114,000 | (4) | $ | 76,680 | — | $ | 190,680 |
Fees | ||||||||||||||||
Earned | All | |||||||||||||||
or Paid | Stock | Other | ||||||||||||||
in Cash | Awards(1) | Compensation | ||||||||||||||
Name | ($) | ($) | ($) | Total | ||||||||||||
Mark H. Rachesky, M.D. | $ | 60,834 | $ | 250,003 | — | $ | 310,837 | |||||||||
Michael B. Targoff(2) | $ | 50,000 | — | $ | 60,000 | $ | 110,000 | |||||||||
Sai S. Devabhaktuni(3) | — | — | — | — | ||||||||||||
Hal Goldstein | $ | 56,000 | $ | 99,990 | — | $ | 155,990 | |||||||||
John D. Harkey, Jr. | $ | 71,334 | $ | 99,990 | — | $ | 171,324 | |||||||||
Arthur L. Simon | $ | 76,334 | (4) | $ | 99,990 | — | $ | 176,324 | ||||||||
John P. Stenbit | $ | 67,666 | (5) | $ | 99,990 | — | $ | 167,656 |
(1) | The amounts in the “Stock Awards” column represent the aggregate grant date fair value of restricted stock units granted to our directors on May |
(2) | Does not include compensation paid to Mr. Targoff in his capacity as Chief Executive Officer and President of the Company and does not include severance and other related amounts paid to Mr. Targoff in connection with termination of his employment with the Company effective as of December 14, 2012,which compensation, |
The amount set forth in the “Fees Earned or Paid in Cash” column for Mr. Targoff represents $50,000 in director fees for service on the Board during 2012, and the amount set forth in the “All Other Compensation” column for Mr. Targoff represents $60,000 in consulting fees under his consulting agreement with the Company for the period from December 15, 2012 to December 31, 2012; these amounts are also included in the “All Other Compensation” column of the Summary Compensation Table. See “Executive Compensation – Compensation Tables – Summary Compensation Table.” See also “Certain Relationships and Related Transactions — Consulting Agreements” for a description of the Company’s consulting agreement with Mr. Targoff.
(3) | Mr. Devabhaktuni resigned from the Board of Directors in January 2012. |
(4) | Does not include |
(5) | Does not include $3,000 of fees paid to Mr. Stenbit in 2012 for service in 2011 on a committee of independent directors established by the |
Committees of the Board of Directors
The Company’s standing committees of the Board of Directors are the Audit Committee, the Compensation Committee, the Executive Committee and the Nominating Committee. The charters of the Audit Committee, the Compensation Committee and the Nominating Committee are available on the Investor Relations — Corporate Governance section of our website at www.loral.com. These documents are also available upon written request to: Investor Relations, Loral Space & Communications Inc., 600 Third888 Seventh Avenue, New York, New York 10016.10106. The Executive Committee does not have a charter. Information concerning these committees is set out below.
Audit Committee
Members: | Arthur L. Simon (Chairman), John D. Harkey, Jr., John P. Stenbit | |
Number of Meetings in |
The Board of Directors has determined that all of the members of the Audit Committee meet the independence and experience requirements of the Securities and Exchange Commission (“SEC”) and the Nasdaq Stock Market. Moreover, the Board of Directors has determined that one of the Committee’s members, Mr. Simon, qualifies as an “audit committee financial expert” as defined by the SEC. The Board of Directors has also determined, as required by the Audit Committee charter, that Mr. Harkey’s service on the audit committee of more than three public companies does not impair his ability to effectively serve as a member of our Audit Committee.
The Audit Committee is generally responsible for, among other things, (i) the appointment, termination and compensation of the Company’s independent registered public accounting firm and oversight of theirits services; (ii) approval of any non-audit services to be performed by the independent registered public accounting firm and related compensation; (iii) reviewing the scope of the audit proposed for the current year and its results; (iv) reviewing the adequacy of our disclosure and accounting and financial controls; (v) reviewing the annual and quarterly financial statements and related disclosures with management and the independent registered public accounting firm; (vi) monitoring the Company’s and the independent registered public accounting firm’s annual performance under the requirements of Sarbanes Oxley Act Section 404; and (vii) reviewing the internal audit function and findings from completed internal audits. The Audit Committee is also responsible for monitoring and overseeing the Company’s processes and procedures for risk assessment, risk management and compliance (see “Additional Information Concerning the Board of Directors of the Company – Board Role in Risk Oversight”).
Compensation Committee
Members: | Mark H. Rachesky, M.D. (Chairman), John D. Harkey, Jr. | |
Number of Meetings in |
Our Compensation Committee has primary responsibility for overseeing our executive compensation program, including compensation of our named executive officers listed in the compensation tables that follow. Our Compensation Committee is composed of independent directors, as determined by Nasdaq listing standards. The Compensation Committee’s responsibilities are set forth in its charter. In order to fulfill its responsibilities pertaining to executive and director compensation, the Compensation Committee:
Our Compensation Committee has the authority to retain a consulting firm to assist it in the evaluation of compensation for our officers and has the authority to approve the consultant’s fees and other retention terms. In 2010,2012, the Compensation Committee did not retain any compensation consultants to assist in general compensation analyses or reviews. Independent compensation consultants were, however, retained Hewitt Associates LLC (“Hewitt” which, asin 2012 by the Compensation Committee to render advice in connection with establishing transaction bonus plans relating to the SS/L Sale (see “Executive Compensation – Compensation Discussion and Analysis – Elements of October 1, 2010, became a subsidiary of Aon CorporationCompensation – SS/L Sale Transaction Bonuses” below) and conducts business as Aon Hewitt) as its executive compensation consultant.by management to render advice in connection with revisions to the SS/L severance policy (see “Executive Compensation – Compensation Discussion and Analysis –Severance Policies for Named Executive Officers – SS/L Severance Policy” below). In selecting this consultant,these consultants, the Compensation Committee or management, as the case may be, considered the reputation and experience of the consultantconsultants as well as itstheir independence. During the course of the year, Hewitt assisted the Compensation Committee by offering market perspectives and recommendations on annual pay and compensation programs currently in place at the Company’s subsidiary, SS/L.
Compensation Committee Interlocks and Insider Participation
Dr. Mark H. Rachesky and John D. Harkey, Jr. served as members of the Compensation Committee during 2012. No member of the Compensation Committee is a present or former officer of, or employed by, the Company or its subsidiaries. None of our executive officers serves as a member of the board of directors or compensation committee of any other entity the executive officers of which entity serve either on the Company’s Board of Directors or Compensation Committee. Dr. Rachesky is a co-founderfounded, and serves as President of, MHR, affiliated funds of which have engaged in transactions with the Company. See “Certain Relationships and Related Transactions – MHR Fund Management LLC.”
Executive Committee
Members: | Michael B. Targoff (Chairman), Mark H. Rachesky, M.D. | |
Number of Meetings in | None |
The Executive Committee performs such duties as are from time to time determined and assigned to it by the Board of Directors.
Nominating Committee
Members: | John D. Harkey, Jr. (Chairman), Hal Goldstein (through May 21, 2012) | |
Number of Meetings in | None |
The Nominating Committee assists the Board of Directors in (i) identifying individuals qualified to become members of the Board (consistent with criteria approved by the Board) and (ii) selecting, or recommending that the Board select, the director nominees for the next annual meeting of stockholders. The Nominating Committee will consider candidates for nomination as a director recommended by stockholders, directors, officers, third party search firms and other sources. Under its charter, the Nominating Committee seeks director nominees who have demonstrated exceptional ability and judgment. Nominees will be chosen with the primary goal of ensuring that the entire Board collectively serves the interests of the stockholders. Due consideration will be given to assessing the qualifications of potential nominees and any potential conflicts with the Company’s interests. The Nominating Committee will also assess the contributions of the Company’s incumbent directors in connection with their potential re-nomination. In identifying and recommending director nominees, the Nominating Committee members may take into account such factors as they determine appropriate, including any recommendations made by the Chief Executive Officer and stockholders of the Company. The Nominating Committee will review all candidates in the same manner, regardless of the source of the recommendation. Individuals recommended by stockholders for nomination as a director will be considered in accordance with the procedures described under “Other Matters – Stockholder Proposals for 2012.2014.”
Neither the nominating committeeNominating Committee nor the Board has a formal policy with regard to the consideration of diversity in identifying director candidates. As discussed above, however, the primary goal of the Nominating Committee is to identify candidates to ensure that the entire Board collectively serves the interests of the stockholders. Thus, in striving to achieve this goal, the Nominating Committee believes it is appropriate to consider a broad range of factors, including, among others, age, experience, skill, judgment and diversity of ethnic and cultural background of candidates for director.
PROPOSAL 2 — INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders will act upon a proposal to ratify the selection of Deloitte & Touche LLP as the independent registered public accounting firm of the Company.Ifthe stockholders, by the affirmative vote of the holders of a majority of the voting power of the sharesrepresented in person or by proxy at the Annual Meeting and entitled to vote on this proposal, do not ratify the selectionof Deloitte & Touche LLP, the selection of the independent registered publicaccounting firm will be reconsidered by the Audit Committee.
Background
The Audit Committee has selected Deloitte & Touche LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2011.2013. Deloitte & Touche LLP has advised the Company that it has no direct or indirect financial interest in the Company or any of its subsidiaries and that it has had, during the last three years, no connection with the Company or any of its subsidiaries other than as our independent registered public accounting firm and certain other activities as described below.
In accordance with its charter, the Audit Committee has established pre-approval policies with respect to annual audit, other audit and audit related services and certain permitted non-audit services to be provided by our independent registered public accounting firm and related fees. The Audit Committee has pre-approved detailed, specific services. Fees related to the annual audits of our consolidated financial statements, including the Section 404 attestation, are specifically approved by the Audit Committee on an annual basis. All fees for pre-approved other audit and audit related services are pre-approved annually or more frequently, if required, up to a maximum amount equal to 50% of the annual audit fee as reported in our most recently filed proxy statement with the SEC. All fees for pre-approved permitted non-audit services are pre-approved annually or more frequently, if required, up to a maximum amount equal to 50% of the fees for audit and audit related services as reported in our most recently filed proxy statement with the SEC. The Audit Committee also pre-approves any proposed engagement to provide permitted services not included in the approved list of audit and permitted non-audit services and for fees in excess of amounts previously pre-approved. The Audit Committee chairman or another designated committee member may approve these services and related fees and expenses on behalf of the Audit Committee, and reportthe Company promptly reports such to the Audit Committee at the next regularly scheduled meeting.
Financial Statements and Reports
The financial statements of the Company for the year ended December 31, 20102012 and the reports of the independent registered public accounting firm 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 from stockholders.
Services
During 20092011 and 2010,2012, Deloitte & Touche LLP and its affiliates (collectively, “Deloitte”) provided services consisting of the audit of the annual consolidated financial statements and internal controls over financial reporting of the Company, review of the quarterly financial statements of the Company, stand-alone audits of subsidiaries, accounting consultations and consents and other services related to SEC filings and registration statements filed by the Company and its subsidiaries and other pertinent matters. Deloitte also provided other permitted services to the Company in 20092011 and 20102012 consisting primarily of tax compliance, consultation and related services.
Audit Fees
The aggregate fees billed or expected to be billed by Deloitte for professional services rendered for the audit of the Company’s annual consolidated financial statements and internal controls over financial reporting for the fiscal years ended 20092011 and 2010,2012, for the reviews of the condensed consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q for the 20092011 and 20102012 fiscal years, for stand-alone audits of our subsidiaries and for accounting research and consultation related to the audits and reviews totaled approximately $2,854,800$3,288,400 for 20092011 and $3,171,000$3,563,200 for 2010.2012. These fees were approved by the Audit Committee.
Audit-Related Fees
The aggregate fees billed by Deloitte for audit-related services for the fiscal years ended 20092011 and 20102012 were $54,000$517,100 and $800,600,$106,100, respectively. These fees related to research and consultation on various filings with the SEC and were approved by the Audit Committee.
Tax Fees
The aggregate fees billed by Deloitte for tax-related services for the fiscal years ended 20092011 and 20102012 were $1,393,900$660,000 and $857,100,$985,000, respectively. These fees related to tax consultation, preparation of federal and state tax returns and related services and were approved by the Audit Committee.
All Other Fees
There were no fees billed by Deloitte for services rendered to the Company other than the services described above under “Audit Fees,” “Audit-Related Fees” and “Tax Fees” for the fiscal years ended 20092011 and 2010.
In its approval of these non-audit services, the Audit Committee has considered whether the provision of non-audit services is compatible with maintaining Deloitte’s independence.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE THEIR SHARESFORTHE PROPOSAL TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2011.
COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS
As required by Rule 14a-21(a) of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”), we are seeking an advisory vote on the compensation of the Company’s named executive officers as disclosed in the section of this Proxy Statement titled “Executive Compensation,” including the Compensation Discussion and Analysis, compensation tables and narrative discussion that follows the tables.
Our compensation program for our named executive officers is designed to (i) attract and retain high quality named executive officers, who are critical to our long-term success; (ii) motivate and reward our named executive officers for achieving our short-term business and long-term strategic goals; and (iii) align the financial interests of our named executive officers with those of our stockholders. During 2010, the Compensation Committee based bonusWe believe that in 2012 our executive compensation forprogram was instrumental in incentivizing our named executive officers predominantly onto successfully achieve and consummate the achievement of certain financial goals. The Company far exceeded the established targets, and, as a result, 2010 bonuses were, for most components, paid at the highest level. Moreover, although no equity awards were granted in 2010, prior equity awards continued to incentivize our named executive officers and align their interests with those of our stockholders.
Stockholders are urged to read the Compensation Discussion and Analysis, compensation tables and narrative discussion in this Proxy Statement, which discusses in greater detail our compensation philosophy, policies and procedures. The Board believes that the compensation paid to our named executive officers is necessary, appropriate and properly aligned with our compensation philosophy and policies.
Stockholders are being asked to approve the following advisory resolution:
RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.
Although the vote is non-binding, the Board of Directors and the Compensation Committee will consider the voting results, along with other relevant factors, in connection with their ongoing evaluation of the Company’s compensation programs.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE THEIR SHARES, ON A NON-BINDING, ADVISORY BASIS,FORTHE PROPOSAL TO APPROVE THE COMPANY’S COMPENSATION OF ITS NAMED EXECUTIVE OFFICERS AS DESCRIBED IN THIS PROXY STATEMENT.
REPORT OF THE AUDIT COMMITTEE
The Directors who serve on the Audit Committee are all “independent” for purposes of Nasdaq listing standards and applicable SEC rules and regulations. Among its functions, the Audit Committee reviews the financial reporting process of the Company on behalf of the Board of Directors. Management has the primary responsibility for the consolidated financial statements and the financial reporting process. The independent registered public accounting firm is responsible for expressing opinions on the conformity of the Company’s financial statements to accounting principles generally accepted in the United States of America and on the effectiveness, in all material respects, of internal control over financial reporting, based on criteria established in “Internal Control – An Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have reviewed and discussed with management the Company’s Annual Report on Form 10-K for the year ended December 31, 2010,2012, which includes the Company’sCompany��s audited consolidated financial statements for the year ended December 31, 2010,2012, and management’s assessment of, and the independent audit of, the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010.
For 2010,2012, the Audit Committee operated under a written charter adopted by the Board of Directors which is available on the Company’s website at www.loral.com.www.loral.com. All of the responsibilities enumerated in such charter, as in effect during 2010,2012, were fulfilled for the year ended December 31, 2010.
We have reviewed and discussed with management and the independent registered public accounting firm, Deloitte & Touche LLP, the Company’s consolidated financial statements as of and for the year ended December 31, 2010.
We have discussed with the independent registered public accounting firm, Deloitte & Touche LLP, the matters required to be discussed by the Sarbanes-Oxley Act of 2002 and PCAOB Interim Standard,Communicationwith Audit Committees, as amended, Rule 2-07,Communication with the Audit Committee, of Regulation S-X of the SEC and PCAOB Auditing Standard No. 5.
We have received and reviewed the written disclosures from Deloitte & Touche LLP, required by PCAOB Rule 3526, “Communications with Audit Committees Concerning Independence,” and have discussed with the independent registered public accounting firm the firm’s independence.
Based on the activities referred to above, we recommended to the Board of Directors that the financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.
The Audit Committee | |
Arthur L. Simon, Chairman | |
John D. Harkey, Jr. | |
John P. Stenbit |
18 |
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The Compensation Discussion and Analysis explains the Company’s executive compensation program as it relates to the following named executive officers.
Name | Title | |
Michael B. Targoff(1) | Vice Chairman of the Board of Directors, and Former Chief Executive Officer and President | |
President, | ||
Harvey B. Rein(3) | Senior Vice President and Chief Financial Officer | |
Vice President and Controller | ||
Richard P. Mastoloni(5) | Former Senior Vice President – Finance and Treasurer | |
John Celli(6) | President of SS/L |
(1) | In connection with the corporate office restructuring resulting from the sale of SS/L, Mr. Targoff’s employment as Chief Executive Officer and President of the Company was terminated effective as of December 14, 2012. Mr. Targoff is continuing as a Director and Vice Chairman of the Company and has been engaged as a part-time consultant to the Board of Directors. See “Certain Relationships and Related Transactions – Consulting Agreements” below. |
(2) | In connection with the corporate office restructuring resulting from the sale of SS/L, in addition to his position as General Counsel and Secretary, Mr. Katz was appointed as President on December 14, 2012, replacing Mr. Targoff in that position. Prior to that time, Mr. Katz was Senior Vice President, General Counsel and |
(3) | Mr. Rein was Senior Vice President and Chief Financial Officer throughout 2012. In connection with the corporate office restructuring resulting from the sale of SS/L, Mr. Rein’s employment as Senior Vice President and Chief Financial Officer of the Company was terminated effective as of March 15, 2013. |
(4) | In connection with the corporate office restructuring resulting from the sale of SS/L, in addition to his position as Vice President and Controller, Mr. Capogrossi was appointed Chief Financial Officer and Treasurer effective March 15, 2013. |
(5) | In connection with the corporate office restructuring resulting from the sale of SS/L, Mr. Mastoloni’s employment as Senior Vice President – Finance and Treasurer of the Company was terminated effective as of December 14, 2012. |
(6) | Mr. Celli is included as a named executive officer because he was President of SS/L, the Company’s wholly owned subsidiary, through November 2, 2012, the date on which the Company completed the sale of SS/L. |
Objectives and Philosophy
Our compensation program for our executive officers, including our named executive officers, is established and administered by our Compensation Committee (the “Committee”) and is designed to (i) attract and retain high quality named executive officers, who are critical to our long-term success; (ii) motivate and reward our named executive officers for achieving our short-term business and long-term strategic goals; and (iii) align the financial interests of our named executive officers with those of our stockholders.
Compensation for our named executive officers consists of “total direct compensation,” certain other compensatory benefits (including perquisites, nonqualified deferred compensation and retirement benefits) and potential compensation payable in the event of the executive’s termination of employment. “Total direct compensation” is comprised of base salary, annual bonus compensation (identified(included in the Summary Compensation Table below for 2012 in the Bonus column and for 2011 and 2010 in the Non-Equity Plan Incentive Plan Compensation column) and long-term incentive compensation in the form of equity awards. Each of these elements of total direct compensation is discussed in more detail below.
Specifically, in order to attract and retain high quality executive officers, the Committee seeks to provide compensation for the named executive officers at levels that are competitive in our industry, which is highly specialized and generally comprised of firms that are significantly larger in size than we are and for which the supply of qualified and talented executives is limited. For these reasons, and based on the most recent review of executive compensation levels at industry peer companies, the Committee seeks to set target total direct compensation levels for our named executive officers between the 50th and 75th percentile for comparable positions at our peer companies, if target levels for our performance measures are achieved. In addition, our executive compensation program is designed to provide performance-based compensation that rewards our named executive officers for the achievement of predetermined corporate and personal performance goals.
The Committee considers a variety of factors when determining target total direct compensation levels for our named executive officers, including:
In addition to total direct compensation, the Committee also considers certain other compensatory benefits and potential compensation payable to executive officers in determining compensation levels for the named executive officers. These other benefits and compensation include retirement benefits, deferred compensation account balances and potential benefits which may be payable upon separation from the Company. The nature of this other compensation is different from total direct compensation because it involves, in the case of retirement benefits and deferred compensation account balances, compensation payable only in the future, and, in the case of deferred compensation account balances and termination benefits, compensation which is contingent upon the possible occurrence of future events. When making pay decisions, the Committee does not consider each element of compensation in isolation; rather, the Committee considers the overall compensation package for each named executive officer with a view to ensuring that it is properly balanced to achieve the objectives noted above.
The Role of Peer Groups, Compensation Consultants, Surveys and Market Analysis
The Committee from time-to-time reviews market analyses assessing the extent to which the compensation program established for our named executive officers is competitive when compared with executive compensation programs established by a group of peer companies to ascertain whether the Company is paying its named executive officers in accordance with the Company’s stated compensation philosophy (as discussed under “Objectives and Philosophy” above). For 2010,the reasons described below, however, in 2012, the Committee retained Hewitt as itsdid not review the executive compensation consultantprograms or pay levels of any peer companies or perform any comparative compensation assessments.
In early 2012, the Company commenced a process to prepare an assessmentexplore the sale of general market compensation practicesSS/L, which ultimately resulted in our and related industries and an analysiscompletion of the compensation levels for SS/L senior executives, including Mr. Celli, in comparison to the peer companies. This analysis is referred to as the “2010 SS/L Executive Compensation Review.” The 2010 SS/L Executive Compensation Review compared the compensation levelssale of SS/L’s senior executive officers, including Mr. Celli, to compensation levels at other peer companies, particularly looking at base salary, actual annual incentives, long-term incentives and the total of these three pay elements.
Consideration of 2012 Say-on-Pay Vote
At our 2012 annual meeting of stockholders, we held a stockholder advisory vote on the compensation of our named executive officers, or say-on-pay, as required by Section 14A of the Exchange Act. Seventy-eight percent (78%) of the stockholder votes cast were in favor of our say-on-pay proposal. The Committee considered the non-binding say-on-pay vote as an affirmation of our current executive compensation programs and practices with respect to our other named executives who work at our corporate office (the “2009 Executive Compensation Review”). The 2009 Executive Compensation Review confirmed that cash compensation levels for the Company’s corporate named executive officers were eitherand made no significant changes to such programs and practices in line with or slightly above our objectives and current market conditions. In addition, in connection withresponse to the 2009 Executive Compensation Review, in 2009, Hewitt also evaluated our annual MIB program and our long-term incentive program as compared to market practice within a group of peer companies (the “2009 Incentive Compensation Review”). As a result of the 2009 Incentive Compensation Review, the Compensation Committee approved certain long-term incentive awards during 2009 for the named executive officers. The results of and compensation decisions made by the Committee based on these analyses were thoroughly discussed in our Proxy Statement for our 2010 Annual Meeting. Because of the recent peer review analyses undertaken in 2009 for the named executive officers who work at the corporate office, the Committee did not believe that it was necessary to undertake a new peer review analysis for them in 2010.
Elements of Compensation
Total Direct Compensation – Cash and Stock Incentives
Our total direct compensation consists of three components:
· |
· |
· |
Base Salary
We provide a base salary for services rendered by our named executive officers throughout the year to give them resources upon which to live and to provide a portion of compensation which is assured in order to help provide them with a certain level of financial security. When determining base salary, we may consider a number of factors, to the extent they are relevant to any named executive officer in any year, including market data, prior salary, job responsibilities and changes in job responsibilities, achievement of specified Company goals, individual experience, demonstrated leadership, performance potential, Company performance and retention considerations. These factors are not weighed or ranked in any particular way.
For 2010,2012, Mr. Targoff’s base salary was established by his employment agreement (see “Employment Agreements” below) and remained unchanged from 2009.. Effective January 2, 2010,1, 2012, Mr. Celli’sTargoff’s employment agreement was amended to increase his base salary was increasedper year from $354,420$1,094,525 to $450,000.$1,127,361. This increase was based on Hewitt’s findings and recommendations in the 2010 SS/L Executive Compensation Review and was approved to more closely align Mr. Celli’s base salary with base salary paid to executives in the custom peer group. Effective December 31, 2010, the Committee approved a 3% increase in base salary for each of Messrs. Mastoloni, Rein and Katz. This increase was approved by the Committee as an ordinary course cost of living adjustment. In addition,Base salaries for Messrs. Katz, Rein, Capogrossi and Mastoloni, having been subject to a 3% ordinary course cost of living adjustment effective December 31, 2011, were not adjusted in 2012. Base salary for Mr. Celli, having been adjusted in 2010 based on the findings and recommendations of Aon Hewitt in its 2010 analysis of the compensation levels for SS/L senior executives, was not changed for 2012. Effective April 1, 2013, base salaries for Messrs. Katz and Capogrossi were increased by 3% as an ordinary course cost of living adjustment, and Mr. Capogrossi also received an additional 15% increase in base salary to reflect his promotion in March 2013 to the positions of each named executive officer (except for Mr. Celli) wasChief Financial Officer and Treasurer and the increased by $4,000 because the $4,000 annual medical executive reimbursement program in which the named executive officers (except for Mr. Celli) participated was discontinued by the Company for years after 2010.
Annual Bonus Compensation
We provide annual cash bonus incentives for our named executive officers under our Management Incentive Bonus or MIB program to motivate and reward our named executive officers for achieving annual, short-term corporate goals. Each named executive officer has a target bonus opportunity, which isin the past was generally payable upon the achievement of certain performance goals at the target level. The Committee administers the MIB program, sets target bonus opportunities and annual performance goals and determines the degree to which goals have been achieved and the amounts payable under the MIB program each year. The table below sets forth the target bonus opportunity for 2012 for each named executive officer.
Name | Target Bonus Opportunity (as a % of salary) | |||
Michael B. Targoff | 125% | |||
Avi Katz | ||||
Harvey B. Rein | 60% | |||
John | ||||
Richard P. Mastoloni | ||||
The target bonus opportunity for Mr. Targoff was set by his employment agreement (see “Employment Agreements” below), and, although no peer analysis was performed specifically for 2010, the. The target bonus opportunities for the other named executive officers (except for Mr. Celli) were unchanged from 2009Messrs. Katz, Rein and were setMastoloni, having been increased in accordance, and were consistent, with past practice. Effective for 2010, Mr. Celli’s target bonus percentage was increased from 50% to 75% of his base salary. This increase was based on Hewitt’s findings and recommendations in the 2010 SS/L Executive Compensation Review and was approved2011 to more closely align Mr. Celli’s target bonus percentage with those of comparable similarly situated executives at SS/L, were not adjusted in 2012. The target bonus opportunity for Mr. Capogrossi was not adjusted in 2012. The target bonus opportunity for Mr. Celli was unchanged from that set in 2010 based on the custom peer group.
In the past, our MIB program provided that our named executive officers maycould earn more or less than their target bonus opportunities if actual performance fallsfell within certain ranges above or below the targeted performance. Specifically,For example, in 2010,past years, the program provided the named executive officers with the opportunity to earn up to 130% of their target percentage for performance at the highest performance level of each component and 70% of their target percentage for performance at the minimum or threshold level of performance for each component, below which level no bonus could be earned. Thus, for each named executive officer, the bonus amount paid could increase or decrease proportionately in accordance with performance against our performance measures. For example, inIn the case of the CEO, for example, performance at the highest level for each component would mean that he could earn up to 162.5% of his base salary as a bonus, and performance at the threshold level for each component would mean that he could earn 87.5% of his base salary as a bonus.
For the reasons described below, our 2012 MIB program did not follow the same structure as was customary in past years. In past years, management presented and recommended to the Committee, and, after review and consideration, the Committee approved, an MIB program structure is described in detail belowthat included certain formulas, performance targets, metrics and was, with one minor exception, substantially similar to the structure used during 2009. The minor difference in the 2010 program from the 2009 program was the way we take into account the effectweightings, such as achievement of corporate operating expenses. For 2010, the effectcertain specified levels of corporate operating expenses for the named executive officers in the corporate office (except for Mr. Targoff) was taken into account in the individual objective component of the corporate MIB plan instead of the EBITDA, component. The Committee believed that the EBITDA-related target should be measured without regard to corporate operating expenses because these expenses are for the most part fixednew business and not directly subject to management control. At the same time, however, it was appropriate to include an assessment of whether the corporate named executive officers adhered to their department’s operating expense budgets in the individual objective component so as to incentivize them to remain within their operating budgets. As in 2009, 50% ofyear-end cash levels. Specifically, Mr. Targoff’s bonus opportunity was tied to performance at SS/L and Telesat, the bonus opportunity for Messrs. Katz, Rein, Capogrossi and Mastoloni was tied to performance because a significant portion of Mr. Targoff’s time is devoted to his service on Telesat’s board of directors, to consultations with senior management at TelesatSS/L and to overseeing Loral’s rights under the Shareholders’ Agreement with PSP, its Canadian partner in Telesat.1 Also,individual objectives, and Mr. Celli’s bonus opportunity was tied solely to performance at SS/L. The Committee believed that this was appropriate because Mr. Celli’s primary responsibility was for the performance of the Company’s SS/L subsidiary.
MIB EBITDA Target (dollars, in millions) | Percent of Target Bonus | |||
75.0 | 70 | % | ||
80.0 | 85 | % | ||
85.0 | 100 | % | ||
90.0 | 115 | % | ||
95.0 and above | 130 | % |
Telesat MIB EBITDA Target (CAD, in millions) | Percent of Target Bonus | |||
571.2 | 70 | % | ||
586.2 | 85 | % | ||
601.3 | 100 | % | ||
616.3 | 115 | % | ||
631.3 and above | 130 | % |
Year-End Cash Balance Target (dollars, in millions) | Percent of Target Bonus | |
32.6 | 70% | |
39.6 | 85% | |
46.6 | 100% | |
53.6 | 115% | |
60.6 and above | 130% |
As discussed above, the Company was involved in the SS/L sale process throughout 2012, and, therefore, the Committee did not believe it would be appropriate to set performance goals for 2012, especially as they relate to SS/L which was anticipated not to be, and in fact was not, a subsidiary of the Company at year-end. In December 2012, after completion of the SS/L Sale, Mr. Targoff reviewed the performance during 2012 of the participants in the MIB program, including the named executive officers (other than Mr. Celli) and specifically noted their contribution towards the completion of the SS/L Sale and their excellent performance on other matters. He recommended, therefore, and the relative weightingCommittee approved, payment of each componentdiscretionary bonuses to the named executive officers (other than Mr. Celli) at the same level as in 2011. The Committee also reviewed Mr. Targoff’s performance in 2012 and specifically noted his contribution towards the completion of the SS/L Sale and his excellent performance on other matters and approved payment of a discretionary bonus to Mr. Targoff at the same level as in 2011. Thus, as in 2011, these 2012 bonus awards resulted in a bonus payments, forpayment to Mr. Targoff, at an aggregate of 122.5% of his target, and to each of Messrs. Targoff,Katz, Rein, Capogrossi and Mastoloni, Rein and Katz, at an aggregate of 130% of their targets, and, fortargets. These bonuses are included in the Bonus column of the Summary Compensation Table. Mr. Celli atdid not receive a bonus under the Company’s MIB program as SS/L was no longer a subsidiary of the Company on the date that bonuses were awarded.
SS/L Sale Transaction Bonuses
In early 2012, with the commencement of the SS/L sale process, the Committee, based on the recommendation of Mr. Targoff and an independent compensation consultant, Mr. Shekhar Purohit, approved transaction bonus plans relating to the SS/L Sale – the SS/L Change in Control Incentive Plan for SS/L Employees and the SS/L Change in Control Incentive Plan for Corporate Employees. The Committee believed that it was important for the success of any transaction that the SS/L and corporate executives and employees be properly motivated and rewarded for their work in achieving value for the shareholders. Both Change in Control Incentive Plans provided that the Plan Administrator, the Loral CEO, could designate participants for participation in the Plans and determine the bonus amounts to be paid upon a change in control of SS/L. The amounts payable would depend on the aggregate sale price for SS/L. Bonus payments under the Plans were neither mandatory nor guaranteed, and no participant had any vested right under the Plan until so notified by the Plan Administrator. The SS/L Change in Control Incentive Plan for SS/L Employees provided for a pool of 157%potential bonus payments to SS/L employees of up to $10.6 million depending on the final transaction price, and the SS/L Change in Control Incentive Plan for Corporate Employees provided for a pool of potential bonus payments to employees of the corporate office (other than Mr. Targoff) of up to $3.2 million depending on the final transaction price. Messrs. Katz, Rein, Capogrossi and Mastoloni received special discretionary bonuses under the SS/L Change in Control Incentive Plan for Corporate Employees which are included in the Bonus column of the Summary Compensation Table. Mr. Celli also received a special discretionary bonus under the SS/L Change in Control Incentive Plan for SS/L Employees in recognition of his target.
Long-term Incentive Compensation
General
We also provide long-term equity incentive compensation to our named executive officers through our Amended and Restated 2005 Stock Incentive Plan.Plan (the “Stock Incentive Plan”). We believe that equity-based awards help to align the financial interests of our named executive officers with those of our stockholders by providing our named executive officers with an additional equity stake in the Company. Equity-based awards also reward our named executive officers for increasing stockholder value.
Our Stock Incentive Plan allows us to grant a variety of stock-based awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units. These types of awards measure Company performance over a longer period of time than the other methods of compensation. The Committee administers the Amended and Restated 2005 Stock Incentive Plan and determines the level and type of awards granted to the named executive officers.
In addition to our Stock Incentive Plan, in 2009, the Company established the SS/L Phantom SAR program to incentivize and reward executives and employees based on an increase in a synthetically designed equity value for SS/L over a defined vesting period.period – three years for the named executive officers. Because SS/L common stock was not freely tradable on the open market and thus did not have a readily ascertainable market value, SS/L equity value under the program was derived from a formula that calculated equity value based on a multiple of Adjusted EBITDA plus cash on hand less debt at the end of the relevant year. A one-time grant of these SS/L Phantom SARs was made in 2009 to all of the named executive officers, except for Mr. Targoff. A more complete description of our SS/L Phantom SAR programTargoff, and the awards granted thereunder is set forth below underpayout of the heading “Outstanding Equity Awards at 2010final tranche was made to the named executive officers in 2012. See “Executive Compensation – Compensation Tables – Option Exercises and Stock Vested in Fiscal Year-End.”
In general, when granting equity-based awards, the Committee takes into account the following subjective and objective factors:
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Prior to making a grant, the Committee also considers our stock price, the volatility of the stock price and potential dilution.
The process by which the Committee evaluates, considers and approves equity-based awards is generally as follows. The Committee determines the nature and value of various equity-based awards by first looking both at market conditions, which may include review of peer company data, and at the estimated value of particular types of awards to develop ranges of awards for the named executive officers. After developing the potential range of awards, the Committee seeks recommendations from the CEO as to the value of the awards to be granted to specific individuals, other than the CEO. The Committee then reviews the recommendations, considers the total recommended grant size as compared to outstanding shares and expected dilution and makes the final grant decision for the named executive officers other than the CEO. The Committee independently undertakes the same evaluation and makes an award determination with respect to the CEO. If stock options or stock appreciation rights are the selected form of award, the Committee may use the Black-Scholes pricing model (a formula widely used to value exchange-traded options and determine the present value of the executive option award) or other pricing models as appropriate to determine the value of the awards and for comparison to equity-based compensation for executives in our peer group.
To date, all option grants have had an exercise price equal to at least the fair market value of our Voting Common Stock on the grant date. We do not grant equity-based awards in anticipation of the release of material nonpublic information, nor do we time the release of material nonpublic information to coincide with our equity-based award grant dates. We have not yet adopted a fixed policy or practice with regard to the timing of equity-based award grants but may consider doing so in the future. We do not have a specific policy regarding ownership of Company stock by our named executive officers. Our policy on insider trading and confidentiality generally restricts executive officers from engaging in short-term or speculative transactions involving our stock, including short sales and publicly traded options.
In 2010,2012, the Committee did not make any equity awards to the named executive officers. The Committee believed that the equity awards granted to the named executive officers in previous years were sufficient to continue to align the financial interests of ourthe named executive officers with those of our stockholders and to incentivize them to increase stockholder value. Specifically, awards granted in 2009 provided for vesting schedules over a period of years, and in the case of certain awards to Mr. Targoff, for delayed settlement dates, which, the Committee believed, would provide for continued motivation and reward ourthe named executive officers in line with our stockholders over the vesting period.period and through the ultimate settlement date. The Committee also believed that equity-based awards that were fully vested before 20102012 or that were scheduled to vest during 2012 would continue to provide long-term stockholder value beyond the vesting dates because of the continued upside financial potential for executives.
Other Benefits and Perquisites
Our named executive officers receive other benefits also available to other salaried employees. For example, we provide our named executive officers and other U.S. salaried employees, withincluding health insurance, life insurance, vacation pay and sick pay. Also, in order to compete effectively in attracting and retaining qualified named executive officers, we provide themthe named executive officers who are officers of Loral with universal life insurance policies in various amounts beyond that provided for other employees. In 2010, we also provided themOther than the additional life insurance, the Committee has determined that there generally should be no perquisites or similar benefits for named executive officers which are not consistent with a programthose available to reimburse medical and dental expenses not otherwise covered by our insurance program up to a maximum of $4,000 for the year.other salaried employees. We do not provide ourthe named executive officers with automobiles, aircraft for personal use, personal living accommodations, club memberships or reimbursement of “social expenses” except to the extent that they are specifically, directly and exclusively used to conduct Company business. Other than the additional life insurance and executive medical reimbursement, the Committee has determined that there generally should be no perquisites or similar benefits for named executive officers which are not consistent with those available to other salaried employees.
Nonqualified Deferred Compensation
In December 2005, in connection with our emergence from bankruptcy, pursuant to our plan of reorganization, we entered into deferred compensation arrangements for certain key employees, including our named executive officers. These deferred compensation awards were calculated by multiplying $9.441 by the number of shares of Voting Common Stock underlying the stock options granted to these key employees in connection with our emergence from bankruptcy. To the extent our stock price declinesdeclined below $28.441, the corresponding portion of the deferred compensation accounts also declineswould have declined accordingly. The value of the vested portion of the deferred compensation account becomes locked (i.e. no longer subject to fluctuation based on our stock price)accounts for the named executive officers were converted into interest-bearing accounts upon exercise of the related stock options or, if payout upon termination of employment is delayed in orderoptions. Pursuant to comply with Section 409Athe terms of the Internal Revenue Code, upon termination of employment. As of December 31, 2010, all named executive officers havedeferred compensation arrangements, vested in their accounts in full. The vested balance as of December 31, 2010 for each ofbalances, with applicable accrued interest thereon, were distributed to the named executive officers (except for Mr. Celli) in December 2012. Mr. Celli’s vested balance was the full value originally accrueddistributed to eachhim in November 2012 upon closing of the accounts. For Messrs. Celli and Rein, the vested balance also includes the value of interest earned on the portion of their accounts that was converted to an interest-bearing account upon exercise of stock options in 2010. Deferred amounts, if any, become payable on the earlier of the recipient’s termination of employment, a change in control of the Company or seven years from the date of grant.
Retirement Benefits
Retirement benefits are intended both to recognize long-term service with us and to keep the overall pay packages for our named executive officers comparable to that of our peer group so that we can attract and retain high quality executive officers and compete effectively with our peer companies. The Company maintains two types of “tax-qualified” retirement plans covering its executive officers: a defined benefit pension plan and a defined contribution savings plan. Pension benefits are also provided through a “non-qualified” plan. The non-qualified plan, also known as the Supplemental Executive Retirement Plan (“SERP”), is designed to “restore” the benefit levels that may be limited by IRS regulations.regulations under the qualified plans. In December 2010, the Company separated its SERP into two separate plans — one covering executives of the corporate office (the “Loral SERP”) and the other covering executives of SS/L (the “SS/L SERP”).
Prior to the closing of the SS/L Sale, our qualified pension plan (the “Loral pension plan”) and our defined contribution savings plan (the “Loral 401(k) plan”) covered both employees of Loral’s corporate office and employees of SS/L, including all of the named executive officers. In connection with the SS/L Sale, a new stand-alone SS/L pension plan (the “SS/L pension plan”) and a new stand-alone SS/L 401(k) plan were established, pension and 401(k) obligations related to SS/L current and former employees were transferred from the Loral pension plan and Loral 401(k) plan to the newly formed SS/L pension plan and SS/L 401(k) plan, and the newly formed SS/L pension plan and SS/L 401(k) were transferred to SS/L.
As of December 31, 2012, the Loral pension plan covers all named executive officers.officers, except for Mr. Celli who is covered by the SS/L pension plan. In 2006, the Company changed the qualified pension plan, which for all named executive officers other than Mr. Celli previously had been administered on a non-contributory basis, to require certain contributions by participants thereby having the effect of sharing the cost of providing pension benefits with the named executive officers.
As of December 31, 2012, the Loral 401(k) plan benefits all named executive officers.officers, except for Mr. Celli who participates in the SS/L 401(k) plan. Named executive officers who make contributions to the savings plan receive matching contributions from the Company or SS/L, as the case may be, of up to 6% of a participant’s eligible base salary at a rate of 66⅔%. All currentLoral named executive officers are eligible to and do participate in our qualified savingsthe Loral 401(k) plan and Mr. Celli is eligible to and participates in the SS/L 401(k) plan.
The qualifiedLoral and SS/L pension plan isplans are subject to the Internal Revenue Code’s limits on covered compensation and benefits payable. Named executive officers who earn in excess of applicable IRS limits also participate in either the Loral SERP or the SS/L SERP. Non-qualified excess benefits and supplemental retirement plans under ERISA provided by these SERPs restore the benefits that would be payable to participants under the qualified pension plan exceptplans but for the limitations imposed on qualified plans under the Internal Revenue Code.
Under both the Loral SERP and the SS/L SERP, each participant willis entitled to receive the difference, if any, between the full amount of retirement income due under the pension plan formula without application of the IRS limitations and the amount of retirement income payable to the participant under the pension plan formula when applicable Internal Revenue Code limitations are applied.
In connection with the corporate office restructuring as a result of the SS/L Sale, on December 13, 2012, our Board approved termination of the Loral SERP. The Company expects to make lump sum payments to the participants in the Loral SERP between December 16, 2013 and December 31, 2013 in accordance with the requirements of Section 409A and the regulations promulgated thereunder. All of ourthe named executive officers are eligible to receive benefits from either the Loral SERP, orexcept for Mr. Celli who is eligible to receive benefits from the SS/L SERP.
Employment Agreements
Former CEO
–Michael B. TargoffOn March 1, 2006, Michael Targoff became our Chief Executive Officer. On March 28, 2006, we entered into an employment agreement with Mr. Targoff. This agreement expired on December 31, 2010, and the Committee is in discussions with Mr. Targoff regarding terms for his continued employment. Prior to becoming our Chief Executive Officer, Mr. Targoff was Vice Chairman of our Board. WeThe Committee believed it was important and desirable to enter into an employment agreement with Mr. Targoff, which includesincluded severance arrangements, in order to induce him to assume the position of Chief Executive Officer and to assure him of a degree of certainty relating to his employment situation and thereby secure his dedication notwithstanding any concern he might have regarding his continued employment prior to or following termination or a change in control.
Mr. Targoff’s employment agreement was amended and restated on December 17, 2008 primarily in order to bring it into documentary compliance with Section 409A of the Internal Revenue Code (“Section 409A”) before December 31, 2008 as required by the IRS.
On July 19, 2011, we entered into an amendment to Mr. Targoff’s employment agreement to, among other things, extend the term of his employment to December 31, 2011. This amendment was effective retroactive to December 31, 2010, the expiration of the employment term under the original employment agreement.
On January 11, 2012, we entered into a second amendment to Mr. Targoff’s employment agreement to, among other things, extend the term of his employment to December 31, 2012. This amendment was effective retroactive to December 31, 2011, the expiration of the employment term under the employment agreement, as amended. The amendments to Mr. Targoff’s employment agreement were entered into in order to induce Mr. Targoff to continue in his position as Chief Executive Officer and to lead the Company as it considered strategic alternatives.
In connection with the corporate office restructuring resulting from the SS/L Sale, Mr. Targoff’s employment as Chief Executive Officer and President of the Company was terminated effective as of December 14, 2012.
Under his employment agreement, as amended, Mr. Targoff was entitled to receive an annual base salary of $950,000, which$1,127,361 for 2012. Mr. Targoff’s base salary was subject to annual review by ourthe Board. The employment agreement also provided that Mr. Targoff would participate in our Management Incentive Bonus Program, with a target annual bonus of one hundred twenty-five percent (125%) of his base salary.
Pursuant to his employment agreement, Mr. Targoff was granted in March 2006 five year options to purchase 825,000 shares of our Voting Common Stock with a per-share exercise price equal to $26.915, the fair market value of one share of our Voting Common Stock on the date of grant. This grant served as Mr. Targoff’s equity awards for 2006 and 2007 and was subject to the approval by our stockholders of our Amended and Restated 2005 Stock Incentive Plan which was obtained on May 22, 2007 at our 2007 annual meeting of stockholders. As of March 28, 2009, Mr. Targoff was fully vested in these options. Mr. Targoff exercised 300,000 of these options in May 2010 and the remaining 525,000 options in January 2011.
Mr. Targoff was also entitled under his employment agreement to participate in all Company benefit plans, including our Amended and Restated 2005 Stock Incentive Plan, available to our other executive officers. Mr. Targoff’s participation iswas on the same basis as other executive officers of the Company.
Upon Mr. Targoff’s termination of employment on account of death or permanent disability during the contract term, or if, during the term of the contract, his employment would have beenwas terminated by Loral without “cause” or if Mr. Targoff resigned for “good reason” (as such terms are defined in his employment agreement), Mr. Targoff would have beenwas entitled to a severance payment described below and to accelerated vesting of a portion (in the case of death or disability) or all (in the case of termination by Loral without “cause” or resignation for “good reason”) of his options. These arrangements and payments to Mr. Targoff in connection with termination of his employment effective December 14, 2012 are described more fully below under “Compensation Tables – Potential Change in Control and otherOther Post Employment Payments.”
Mr. Targoff’s employment agreement provided that during the term of Mr. Targoff’s employment with Loral and for a twelve-month period (or twenty-four (24) months in the case of termination following a change in control of Loral) following a termination of employment, Mr. Targoff wasis restricted from (i) engaging in competitive activities, (ii) directly or indirectly soliciting current and certain former employees of Loral or any of its affiliates and (iii) knowingly soliciting, directly or indirectly, any customers or suppliers within the twelve-month period prior to such termination of employment to terminate or diminish their relationship with Loral or any of its affiliates. In addition, the agreement provided that Mr. Targoff wasis not allowed to disclose confidential information of Loral.
Mr. Targoff’s employment agreement also provided that if any provision of the agreement (or of any award of compensation, including equity compensation or benefits) would have causedcause him to incur any additional tax or interest under Section 409A, the Company would, after consulting with him, reform such provision to comply with Section 409A, but only if, after consultation, such provision could be reformed to so comply, provided that the Company agreed to maintain, to the maximum extent practicable, the original intent and economic benefit to Mr. Targoff of the applicable provision without violating the provisions of Section 409A. In addition, we agreed to indemnify Mr. Targoff, on an after-tax basis, for any additional tax (including interest and penalties with respect thereto) that may be imposed on him by Section 409A as a result of the options being granted subject to the approval by our stockholders of our Amended and Restated 2005 Stock Incentive Plan.
In addition, Mr. Targoff’s employment agreement provided for the reimbursement of his attorney’s fees in connection with the negotiation of the employment agreement and a tax gross-up payment to cover his taxes for any such reimbursement.
Loral Holdings Corporation and SS/L guaranteed the payment and performance of Loral’s obligations under the employment contract with Mr. Targoff.
On December 14, 2012, Loral entered into a consulting agreement with Mr. Targoff. Pursuant to this agreement, Mr. Targoff is engaged as a part-time consultant to the Board to assist the Board with respect to the oversight of strategic matters relating to Telesat and Xtar and the ViaSat lawsuit. See “Certain Relationships and Related Transactions – Consulting Agreements” for further information about this agreement.
Under the agreement, Mr. Targoff receives consulting fees of $120,000 per month before deduction of certain expenses of $17,000 per month for which he reimburses the Company. Mr. Targoff earned $60,000 (before expenses of $8,500 to be reimbursed) for service performed in the period from December 15, 2012 to December 31, 2012.
Other Named Executive Officers
None of the named executive officers other than Mr. Targoff has an employment agreement with the Company. Prior employment agreements with these officers expired on November 21, 2007.
Severance PolicyPolicies for Named Executive Officers
Loral Severance Policy for Corporate Officers
In June 2006, the Company formally adopted a severance policy for corporate officers, including the named executive officers who were designated by the plan administrator (other than Mr. Targoff, whose severance if terminated in 2010, would have beenwas governed by his employment agreement as described above). This policy was amended and restated on December 17, 2008 primarily in order to bring it into documentary compliance with Section 409A of the Internal Revenue Code before December 31, 2008 as required by the IRS. The policy was again amended and restated in August 2011 primarily to include a provision for severance benefits payable to certain of Loral’s named executive officers in the event of termination of employment in connection with or in contemplation of a Corporate Event (defined to include, among other things, a change of control of Loral, a sale or spin-off of SS/L or the closing or cessation or reduction in the scope of operations, in whole or in part, of Loral’s corporate headquarters). The Loral Space & Communications Inc. Severance Policy for Corporate Officers (Amended and Restated as of December 17, 2008)August 4, 2011) (the “Severance“Loral Severance Policy for Corporate Officers”) provides for severance benefits following the termination of an eligible officer’s employment by the CompanyLoral without cause. Severance benefits will be provided at different levels, depending on the seniority and length of service of the officer when termination occurs. Severance benefits are not provided in the event employment is terminated due to death, disability or retirement.
Loral and SS/L believed it was important and desirable to adopt a severance policy in order to assure Loral’s and SS/L’s officers of a degree of certainty relating to their employment situation and thereby secure their dedication, notwithstanding any concerns they might have regarding their continued employment prior to or following termination or a change in control.
SS/L Severance Policy
In 2012, SS/L management engaged Mercer (US) Inc. (“Mercer”) as an independent consultant to review and assess SS/L’s existing severance policy in light of the sale process being conducted by Loral and to report its findings and recommendations to the Committee. SS/L management believed, and Mercer concurred, that as a result of the sale process a competitive severance policy was important to retain key employees before, during and after any contemplated transaction.
Mercer reviewed SS/L’s existing severance policy as well as management’s proposed changes and modifications to that policy. SS/L management proposed a revised severance policy that identified employees who would be critical to completion of a strategic transaction, critical in a post-transaction transition period and critical to SS/L’s business going forward. These employees were grouped into three classes with severance payout levels commensurate with the level of an employee’s criticality. Mercer reviewed the proposed revised severance policy and assessed it against market practices. Mercer also reviewed and compared the cost structures between SS/L’s standard severance program and its enhanced severance program. Based on market data and its experience, Mercer provided SS/L management with feedback and refinements to the proposed policy which was then presented to and approved by the Committee in May 2012 (the “SS/L Severance Policy”).
The SS/L Severance Policy provided for separation pay in the event of involuntary termination of employment. Under this policy, separation pay would be provided at different levels depending on the seniority and length of service of the officer when termination occurs. The policy also provided for enhanced severance pay for three categories of designated employees upon or within 12 or 18 months following a change in control of SS/L. Severance benefits would not be provided in the event employment was terminated due to voluntary retirement or involuntarily for poor performance, violation of SS/L policies or for other cause.
Role of Executive Officers in Pay Decisions
Upon the request of the Committee, certain of our employees including certain executive officers, compile and organize information, arrange and attend meetings and provide support for the Committee’s work. Mr. Targoff, our Chief Executive Officer and President recommendsuntil termination of his employment on December 14, 2012, recommended compensation levels and awards to the Committee with respect to the other named executive officers. The Committee determinesdetermined Mr. Targoff’s compensation without any input from any other executive officer. Ultimately, all compensation decisions for the named executive officers are approved by the Committee.
Tax Aspects of Executive Compensation
Section 162(m) of the Internal Revenue Code generally limits our corporate tax deduction for compensation paid to our named executive officers that is not “performance based” to $1 million annually perthat is paid to each named executive officer.officer who is a Company employee at year-end. Options granted under our Amended and Restated 2005 Stock Incentive Plan are designed to meet the Section 162(m) requirements for performance-based compensation, and are, therefore, exempt from the $1 million limitation on tax deductions for a named executive officer’s compensation in any fiscal year. Our MIB program,other bonus and incentive programs, however, while performance-based, isare not designed to meet the technical Section 162(m) requirements. Accordingly, for 2010,2012, compensation in the amount of $1,922,991 in the aggregate payable to our named executive officers willin the aggregate amount of $949,358 is not be deductible. In addition to the MIB program,these bonus and incentive programs, there may be other instances in which the Committee determines that it cannot structure compensation to meet Section 162(m) requirements. In those instances, the Committee may elect to structure elements of compensation (such as certain qualitative factors in annual bonuses) to accomplish business objectives that it believes are in our best interests and those of our stockholders, even though doing so may reduce the amount of our tax deduction for such compensation.
Report of the Compensation Committee
The Compensation Committee has reviewed and discussed with management the above “Compensation Discussion and Analysis” contained in this Proxy Statement with management.and in the Company’s Amendment No. 1 to Annual Report for the year ended December 31, 2012 on Form 10-K/A. Based upon that review and those discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be incorporated by reference into the Company’sincluded in this Proxy Statement and in Amendment No. 1 to Annual Report on Form 10-K for the year ended December 31, 2010 and included in this Proxy Statement.
The Compensation Committee | |
Mark H. Rachesky, M.D., Chairman | |
John D. Harkey, Jr. |
Compensation Tables
Summary Compensation Table
Non-Equity | ||||||||||||||||||||||||||
Incentive | Change in | |||||||||||||||||||||||||
Plan | Pension | All Other | ||||||||||||||||||||||||
Name and Principal | Salary(3) | Bonus(4) | Compensation(5) | Value(6) | Compensation(7) | Total | ||||||||||||||||||||
Position(1) | Year | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||
Michael B. Targoff | 2012 | $ | 1,084,001 | $ | 1,675,991 | — | $ | 1,521,000 | $ | 5,787,600 | $ | 10,068,592 | ||||||||||||||
Vice Chairman of the Board and | 2011 | $ | 1,094,525 | — | $ | 1,675,991 | $ | 686,000 | $ | 107,371 | $ | 3,563,887 | ||||||||||||||
Former Chief Executive Officer andPresident | 2010 | $ | 953,669 | — | $ | 1,550,250 | $ | 560,000 | $ | 98,683 | $ | 3,162,602 | ||||||||||||||
Avi Katz | 2012 | $ | 523,085 | $ | 756,443 | — | $ | 415,000 | $ | 18,722 | $ | 1,713,250 | ||||||||||||||
President, General Counsel and Secretary | 2011 | $ | 505,904 | — | $ | 406,443 | $ | 225,000 | $ | 18,521 | $ | 1,155,868 | ||||||||||||||
2010 | $ | 489,231 | — | $ | 295,954 | $ | 148,000 | $ | 22,299 | $ | 955,484 | |||||||||||||||
Harvey B. Rein | 2012 | $ | 525,178 | $ | 658,069 | — | $ | 683,000 | $ | 18,207 | $ | 1,884,454 | ||||||||||||||
Senior Vice President and | 2011 | $ | 507,928 | — | $ | 408,069 | $ | 433,000 | $ | 18,006 | $ | 1,367,003 | ||||||||||||||
Chief Financial Officer | 2010 | $ | 491,204 | — | $ | 297,138 | $ | 307,000 | $ | 21,784 | $ | 1,117,126 | ||||||||||||||
John Capogrossi | 2012 | $ | 316,762 | $ | 289,085 | — | $ | 305,000 | $ | 12,126 | $ | 922,973 | ||||||||||||||
Vice President and Controller(2) | ||||||||||||||||||||||||||
Richard P. Mastoloni | 2012 | $ | 513,551 | $ | 1,716,593 | — | $ | 465,000 | $ | 1,528,006 | $ | 4,223,150 | ||||||||||||||
Former Senior Vice President – Finance | 2011 | $ | 518,537 | — | $ | 416,593 | $ | 175,000 | $ | 14,627 | $ | 1,124,757 | ||||||||||||||
and Treasurer | 2010 | $ | 501,544 | — | $ | 303,344 | $ | 108,000 | $ | 18,405 | $ | 931,293 | ||||||||||||||
John Celli | 2012 | $ | 380,769 | — | — | $ | 378,000 | $ | 9,347 | $ | 768,116 | |||||||||||||||
President of SS/L | 2011 | $ | 450,000 | — | $ | 532,125 | $ | 358,000 | $ | 9,693 | $ | 1,349,818 | ||||||||||||||
2010 | $ | 451,363 | — | $ | 529,958 | $ | 289,000 | $ | 8,707 | $ | 1,279,028 |
Change in | ||||||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||||
Non-Equity | Non-Qualified | |||||||||||||||||||||||||||||
Incentive | Deferred | |||||||||||||||||||||||||||||
Stock | Option | Plan | Compensation | All Other | ||||||||||||||||||||||||||
Name and Principal | Salary | Awards(1) | Awards(2) | Compensation(3) | Earnings(4) | Compensation(5) | Total(6) | |||||||||||||||||||||||
Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||
Michael B. Targoff | 2010 | $ | 953,669 | — | — | $ | 1,550,250 | $ | 560,000 | $ | 98,683 | $ | 3,162,602 | |||||||||||||||||
Vice Chairman of | 2009 | $ | 953,654 | $ | 1,489,513 | $ | 1,423,488 | $ | 1,543,750 | $ | 613,000 | $ | 1,076,900 | $ | 7,100,305 | |||||||||||||||
the Board, Chief Executive Officer and President | 2008 | $ | 957,308 | — | — | $ | 1,445,188 | $ | 428,000 | $ | (699,573 | ) | $ | 2,130,923 | ||||||||||||||||
John Celli | 2010 | $ | 451,363 | — | — | $ | 529,958 | $ | 289,000 | $ | 8,707 | $ | 1,279,028 | |||||||||||||||||
President of Space | ||||||||||||||||||||||||||||||
Systems/Loral, Inc. | ||||||||||||||||||||||||||||||
Richard P. Mastoloni | 2010 | $ | 501,544 | — | — | $ | 303,344 | $ | 108,000 | $ | 18,405 | $ | 931,293 | |||||||||||||||||
Senior Vice President – | 2009 | $ | 492,965 | $ | 27,983 | $ | 120,750 | $ | 273,504 | $ | 75,000 | $ | 396,667 | $ | 1,386,869 | |||||||||||||||
Finance and Treasurer | 2008 | $ | 488,731 | — | — | $ | 256,389 | $ | 45,000 | $ | (274,876 | ) | $ | 515,244 | ||||||||||||||||
Harvey B. Rein | 2010 | $ | 491,204 | — | — | $ | 297,138 | $ | 307,000 | $ | 21,784 | $ | 1,117,126 | |||||||||||||||||
Senior Vice President and | 2009 | $ | 482,801 | $ | 27,983 | $ | 120,750 | $ | 267,864 | $ | 225,000 | $ | 494,456 | $ | 1,618,854 | |||||||||||||||
Chief Financial Officer | 2008 | $ | 478,654 | — | — | $ | 240,415 | $ | 125,000 | $ | (344,956 | ) | $ | 499,113 | ||||||||||||||||
Avi Katz | 2010 | $ | 489,231 | — | $ | 295,954 | $ | 148,000 | $ | 22,299 | $ | 955,484 | ||||||||||||||||||
Senior Vice | 2009 | $ | 480,862 | $ | 27,983 | $ | 120,750 | $ | 266,789 | $ | 105,000 | $ | 494,971 | $ | 1,496,355 | |||||||||||||||
President, General Counsel | 2008 | $ | 476,731 | — | — | $ | 239,450 | $ | 62,000 | $ | (344,441 | ) | $ | 433,740 | ||||||||||||||||
and Secretary | ||||||||||||||||||||||||||||||
(1) |
(2) | Mr. Capogrossi was not a named executive officer in 2011 and 2010 and, therefore, his compensation information has not been included for those years. |
(3) | 2012 salary expense shown for |
Messrs. Targoff, Katz, Rein, Capogrossi and Mastoloni received discretionary bonuses of $1,675,991, $406,443, $408,069, $164,085 and $416,593, respectively, under the |
Special discretionary bonuses were awarded by the Company to Messrs. Katz, Rein, Capogrossi and Mastoloni in the amount of $350,000, $250,000, $125,000 and $1,300,000, respectively, in recognition of their performance in connection with the SS/L Sale. Mr. Celli also received a special discretionary bonus in recognition of his performance in connection with the SS/L Sale in the amount of $2,554,739 which was paid by SS/L after closing of the SS/L Sale. See “Compensation Discussion and Analysis — Elements of Compensation — SS/L Sale Transaction Bonuses.”
(5) | Amounts shown represent the annual incentive bonuses earned under our Management Incentive Bonus Plan for 2011 and 2010. See “Executive Compensation – Compensation Discussion and Analysis – Elements of Compensation – Annual Bonus Compensation” for a description of these bonuses. |
(6) | For 2012, represents the aggregate increase in the actuarial present value of pension benefits between fiscal year-end 2011 and fiscal year-end 2012. For 2011, represents the aggregate increase in the actuarial present value of pension benefits between fiscal year-end 2010 and fiscal year-end 2011. For 2010, represents the aggregate increase in the actuarial present value of pension benefits between fiscal year-end 2009 and fiscal year-end 2010. |
(7) | The following table describes each component of the “All Other Compensation” column in the Summary Compensation Table above. |
All Other Compensation
Value of | Company | Medical | ||||||||||||||||||||||||
Insurance | Matching | Executive | Deferred | |||||||||||||||||||||||
Premiums | 401(k) | Reimbursement | Compensation | |||||||||||||||||||||||
Name | Year | Paid | Contributions | Expense | Expense | Other | Total | |||||||||||||||||||
Michael B. Targoff | 2010 | $ | 25,105 | $ | 9,800 | $ | 3,778 | — | $ | 60,000 | $ | 98,683 | ||||||||||||||
2009 | $ | 25,105 | $ | 9,800 | $ | 4,400 | $ | 1,009,734 | $ | 27,861 | $ | 1,076,900 | ||||||||||||||
2008 | $ | 25,105 | $ | 9,200 | $ | 4,932 | $ | (785,656 | ) | $ | 46,846 | $ | (699,573 | ) | ||||||||||||
John Celli | 2010 | $ | 8,707 | — | — | — | $ | 8,707 | ||||||||||||||||||
Richard P. Mastoloni | 2010 | $ | 4,827 | $ | 9,800 | $ | 3,778 | — | — | $ | 18,405 | |||||||||||||||
2009 | $ | 4,827 | $ | 9,800 | $ | 4,400 | $ | 377,640 | — | $ | 396,667 | |||||||||||||||
2008 | $ | 4,827 | $ | 9,200 | $ | 4,932 | $ | (293,835 | ) | — | $ | (274,876 | ) | |||||||||||||
Harvey B. Rein | 2010 | $ | 8,206 | $ | 9,800 | $ | 3,778 | — | — | $ | 21,784 | |||||||||||||||
2009 | $ | 8,206 | $ | 9,800 | $ | 4,400 | $ | 472,050 | — | $ | 494,456 | |||||||||||||||
2008 | $ | 8,206 | $ | 9,200 | $ | 4,932 | $ | (367,294 | ) | — | $ | (344,956 | ) | |||||||||||||
Avi Katz | 2010 | $ | 8,721 | $ | 9,800 | $ | 3,778 | — | — | $ | 22,299 | |||||||||||||||
2009 | $ | 8,721 | $ | 9,800 | $ | 4,400 | $ | 472,050 | — | $ | 494,971 | |||||||||||||||
2008 | $ | 8,721 | $ | 9,200 | $ | 4,932 | $ | (367,294 | ) | — | $ | (344,441 | ) | |||||||||||||
Value of | Company | Medical | ||||||||||||||||||||
Insurance | Matching | Executive | ||||||||||||||||||||
Premiums | 401(k) | Reimbursement | ||||||||||||||||||||
Name | Year | Paid | Contributions | Expense | Other | Total | ||||||||||||||||
Michael B. Targoff | 2012 | $ | 25,105 | $ | 10,001 | — | $ | 5,752,494 | $ | 5,787,600 | ||||||||||||
2011 | $ | 25,105 | $ | 9,800 | — | $ | 72,466 | $ | 107,371 | |||||||||||||
2010 | $ | 25,105 | $ | 9,800 | $ | 3,778 | $ | 60,000 | $ | 98,683 | ||||||||||||
Avi Katz | 2012 | $ | 8,721 | $ | 10,001 | — | — | $ | 18,722 | |||||||||||||
2011 | $ | 8,721 | $ | 9,800 | — | — | $ | 18,521 | ||||||||||||||
2010 | $ | 8,721 | $ | 9,800 | $ | 3,778 | — | $ | 22,299 | |||||||||||||
Harvey B. Rein | 2012 | $ | 8,206 | $ | 10,001 | — | — | $ | 18,207 | |||||||||||||
2011 | $ | 8,206 | $ | 9,800 | — | — | $ | 18,006 | ||||||||||||||
2010 | $ | 8,206 | $ | 9,800 | $ | 3,778 | — | $ | 21,784 | |||||||||||||
John Capogrossi | 2012 | $ | 2,125 | $ | 10,001 | — | — | $ | 12,126 | |||||||||||||
Richard P. Mastoloni | 2012 | $ | 4,827 | $ | 10,001 | — | $ | 1,513,178 | $ | 1,528,006 | ||||||||||||
2011 | $ | 4,827 | $ | 9,800 | — | — | $ | 14,627 | ||||||||||||||
2010 | $ | 4,827 | $ | 9,800 | $ | 3,778 | — | $ | 18,405 | |||||||||||||
John Celli | 2012 | — | $ | 9,347 | — | — | $ | 9,347 | ||||||||||||||
2011 | — | $ | 9,693 | — | — | $ | 9,693 | |||||||||||||||
2010 | — | $ | 8,707 | — | — | $ | 8,707 |
The table above identifies and quantifies the compensation items set forth in the “All Other Compensation” column. These items include the value of life insurance premiums paid by the Company, Company 401(k) matching contributions and the expense incurred by us in 2010 with respect to the participation in our medical executive reimbursement program, and the expense recognized by us with respect to the deferred compensation accounts. Upon emergence from bankruptcywhich program was discontinued effective in 2005, each named executive officer received an award of a deferred compensation account valued at $9.441 per unit. Subject to earlier vesting upon a change in control or certain specified sale events as defined in our Amended and Restated 2005 Stock Incentive Plan, the deferred compensation units were subject to vesting at the rate of 25% of the units per year on the first, second, third and fourth anniversaries of the effective date of our plan of reorganization (November 21, 2005). All deferred compensation units were vested as of November 21, 2008 for Messrs. Targoff, Mastoloni, Rein and Katz and as of November 21, 2009 for Mr. Celli. The amounts in this column related to these deferred compensation accounts represent the expense recognized by us for each named executive officer in 2010, 2009 and 2008. For 2010, we did not recognize any expense because the value of our stock was above the maximum $28.441 level on both January 1, 2010 and December 31, 2010. For 2009, the “Deferred Compensation Expense” column includes the effect of a $9.441 gain attributed to each named executive officer in his deferred compensation account due to the increase in the value of our stock from below $19 (the threshold above which the deferred compensation accounts have positive value) on January 1, 2009 to the maximum $28.441 level on December 31, 2009. For 2008, the “Deferred Compensation Expense” column includes the effect of the loss sustained by each named executive officer in his deferred compensation account due to the value of our stock on December 31, 2008 being below $19 (the threshold above which the deferred compensation accounts have positive value).
For Mr. Targoff, the “Other” column in the table above includes (i) a $5,606,704 severance payment received in 2012 with respect to the termination of his employment effective December 14, 2012; (ii) a payment of $35,790 received in 2012 in lieu of continuation after termination of employment of his executive life insurance benefits to which he was entitled under his employment agreement ; (iii) $60,000 $25,000in consulting fees under his consulting agreement with the Company for the period from December 15, 2012 to December 31, 2012; (iv) $50,000, $60,000 and $25,000$60,000 for director fees received in 2010, 20092012, 2011 and 2008,2010, respectively, for his service on the Board of Directors (see “Director Compensation” above); (ii) $2,861Directors; and (v) $12,466 for reimbursement of legal fees ($1,445)6,804) and a tax gross-up ($1,416)5,662) in 20092011 in connection with the amendment of his employment agreement;agreement. Consulting and (iii) $21,846director fees received by Mr. Targoff in 2012 are also included in the 2012 Director Compensation Table below. See “Executive Compensation – Compensation Tables – Directors Compensation for reimbursement of legal fees ($12,387) and a tax gross-up ($9,459)Fiscal 2012.”
For Mr. Mastoloni, the “Other” column in 2008the table above includes the following payments paid to Mr. Mastoloni in 2012 in connection with the amendmenttermination of his employment agreement.
Estimated Possible Payouts Under | ||||||||||||||
Non-Equity Incentive Plan Awards | ||||||||||||||
Threshold | Target | Maximum | ||||||||||||
Name | Grant Date | ($) | ($) | ($) | ||||||||||
Michael B. Targoff | 7/21/2010 | $ | 834,750 | $ | 1,192,500 | $ | 1,550,250 | |||||||
John Celli | 7/21/2010 | $ | 236,250 | $ | 337,500 | $ | 625,500 | |||||||
Richard P. Mastoloni | 7/21/2010 | $ | 163,339 | $ | 233,342 | $ | 303,344 | |||||||
Harvey B. Rein | 7/21/2010 | $ | 159,997 | $ | 228,568 | $ | 297,138 | |||||||
Avi Katz | 7/21/2010 | $ | 159,360 | $ | 227,657 | $ | 295,954 |
Outstanding Equity Awards at 20102012 Fiscal Year-End
There were no outstanding unexercised stock options andor other unvested stock awards held by the named executive officers as of December 31, 2010.
Option Awards | Stock Awards | |||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||||
Plan | ||||||||||||||||||||||||||
Awards: | Market | |||||||||||||||||||||||||
Number of | Number of | Number of | Number of | Value of | ||||||||||||||||||||||
Securities | Securities | Securities | Shares or | Shares or | ||||||||||||||||||||||
Underlying | Underlying | Underlying, | Units of | Units of | ||||||||||||||||||||||
Unexercised | Unexercised | Unexercised | Option | Stock That | Stock That | |||||||||||||||||||||
Options | Options | Unearned | Exercise | Option | Have Not | Have Not | ||||||||||||||||||||
Exercisable | Unexercisable | Options | Price | Expiration | Vested | Vested | ||||||||||||||||||||
Name | (#) | (#) | (#) | ($) | Date | (#) | ($) | |||||||||||||||||||
Michael. B. Targoff | 106,952 | — | $ | 28.441 | 12/21/2012 | 40,000 | (1) | $ | 3,060,000 | (2) | ||||||||||||||||
525,000 | — | $ | 26.915 | 3/28/2011 | ||||||||||||||||||||||
62,500 | 62,500 | $ | 35.000 | 6/30/2014 | ||||||||||||||||||||||
John Celli | — | — | 22,500 | (3) | $ | 10.00 | (4) | 3/18/2016 | ||||||||||||||||||
Richard P. Mastoloni | 40,000 | — | $ | 28.441 | 12/21/2012 | 564 | (5) | $ | 43,146 | (2) | ||||||||||||||||
17,500 | (3) | $ | 10.00 | (4) | 3/18/2016 | |||||||||||||||||||||
Harvey B. Rein | 35,000 | — | $ | 28.441 | 12/21/2012 | 564 | (5) | $ | 43,146 | (2) | ||||||||||||||||
17,500 | (3) | $ | 10.00 | (4) | 3/18/2016 | |||||||||||||||||||||
Avi Katz | 50,000 | — | $ | 28.441 | 12/21/2012 | 564 | (5) | $ | 43,146 | (2) | ||||||||||||||||
17,500 | (3) | $ | 10.00 | (4) | 3/18/2016 |
Option Exercises and Stock Vested in Fiscal 2010
The following table provides information on the exercise of stock options and vesting of other stock awards held by the named executive officers during 2010.
Option Awards | Stock Awards | |||||||||||||||
Number of | Number of | |||||||||||||||
Shares Acquired | Value Realized | Shares Acquired | Value Realized | |||||||||||||
on Exercise | on Exercise | on Vesting | on Vesting | |||||||||||||
Name | (#) | ($) | (#) | ($) | ||||||||||||
Michael B. Targoff | 300,000 | $ | 3,808,500 | 135,000 | (1) | $ | 4,770,900 | |||||||||
John Celli | 40,000 | $ | 1,837,012 | |||||||||||||
22,500 | (2) | $ | 316,575 | |||||||||||||
Richard P. Mastoloni | 17,500 | (2) | $ | 246,225 | 936 | (3) | $ | 49,414 | ||||||||
Harvey B. Rein | 15,000 | $ | 693,060 | 936 | (3) | $ | 49,414 | |||||||||
17,500 | (2) | $ | 246,225 | |||||||||||||
Avi Katz | 17,500 | (2) | $ | 246,225 | 936 | (3) | $ | 49,414 |
Option Awards | Stock Awards | |||||||||||||||
Number of | Number of | |||||||||||||||
Shares Acquired | Value Realized | Shares Acquired | Value Realized | |||||||||||||
on Exercise | on Exercise | on Vesting | on Vesting | |||||||||||||
Name | (#) | ($) | (#) | ($) | ||||||||||||
Michael B. Targoff | 93,750 | $ | 4,302,188 | |||||||||||||
37,760 | (1) | $ | 1,377,481 | |||||||||||||
Avi Katz | 50,000 | $ | 2,622,450 | 192 | (3) | $ | 14,192 | |||||||||
8,750 | (2) | $ | 225,488 | |||||||||||||
Harvey B. Rein | 35,000 | $ | 1,835,715 | 192 | (3) | $ | 14,192 | |||||||||
8,750 | (2) | $ | 225,488 | |||||||||||||
John Capogrossi | 20,000 | $ | 1,038,880 | 128 | (3) | $ | 9,461 | |||||||||
6,250 | (2) | $ | 161,063 | |||||||||||||
Richard P. Mastoloni | 10,000 | $ | 519,440 | 192 | (3) | $ | 14,192 | |||||||||
12,083 | (1) | $ | 502,703 | |||||||||||||
8,750 | (2) | $ | 225,488 | |||||||||||||
John Celli | 11,250 | (2) | $ | 289,913 |
(1) |
(2) | Represents SS/L Phantom SARs that vested and were paid on March 18, |
(3) | Represents restricted stock units, payable in the Company’s discretion in cash or in stock, that vested in |
32 |
Pension Benefits in Fiscal Year 2010
The table below sets forth information on the pension benefits for the named executive officers under each of the following pension plans:
• | Pension Plan. Prior to the closing of the SS/L Sale, our pension plan (the “Loral pension plan”) covered both employees of Loral’s corporate office and employees of SS/L, including all of the named executive officers. In connection with the sale, a new stand-alone SS/L pension plan (the “SS/L pension plan”) was established, pension obligations related to SS/L current and former employees were transferred from the Loral pension plan to the newly formed SS/L pension plan, and the newly formed SS/L pension plan was transferred to SS/L. |
The Loral pension plan is a funded and tax qualified retirement plan that, as of December 31, 2010,2012, covered 1,518 eligible employees,440 participants, including the named executive officers.officers except for Mr. Celli, who, as of December 31, 2012, is covered by the SS/L pension plan. The Loral pension plan provides benefits based primarily on a formula that takes into account the executive’s earnings for each year of service. Annual benefits under the current contributory formula (meaning a required 1% post-tax contribution by the named executive officers) are accrued year-to-year during the years of credited service until retirement. At retirement, under the plan’s normal form of retirement benefit (life annuity), the aggregate of all annual benefit accruals becomes the annual retirement benefit payable on a monthly basis for life with a guaranteed minimum equal to the executive’s contributions. The current contributory formula for Loral named executive officers and other eligible employees calculated each year provides a benefit of 1.2% of eligible compensation up to the Social Security Wage Base (SSWB) and 1.45% of eligible compensation of amounts over the SSWB for those with less than 15 years of service, or 1.5% of the eligible compensation up to the SSWB and 1.75% of eligible compensation of amounts over the SSWB to the IRS-prescribed limit for those with 15 or more years of service. Eligible compensation for Loral named executive officers includes base salary and management incentive bonuses paid in that year. For 2010,2012, the SSWB was $106,800$110,100 and the IRS-prescribed compensation limit was $245,000.$250,000. For example, if an individual accrued $1,000 per year for 15 years and then retired, his annual retirement benefit for life would be $15,000. In 2010,2012, each named executive officer contributed $2,450.$2,500. Prior to July 1, 2006, with the exception of Mr. Celli, there was no contribution requirement for the named executive officers to receive this formula.
The normal retirement age as defined in the pension plan is 65. Eligible employees who have achieved ten years of service by the time they reach age 55 are eligible for an early retirement benefit at 50% |
• | Supplemental Executive Retirement Plan. The Company provides a Supplemental Executive Retirement Plan, or SERP, to participants who earn in excess of the IRS-prescribed compensation limit in any given year to provide for full retirement benefits above amounts available under our pension plan because of IRS limits. In December 2010, the Company separated its SERP into two separate plans — the Loral SERP, covering employees of the corporate office, and the SS/L SERP, covering employees of SS/L. Both the Loral SERP and the SS/L SERP are unfunded and are not qualified for tax purposes. For 2012, an employee’s annual SERP benefit was accrued under the same formulas used in the pension plan with respect to amounts earned above the $250,000 maximum noted above. SERP benefits in the past have generally been payable at the same time and in the same manner as benefits are payable under the pension plan. The timing and manner of SERP benefit payments after 2008, however, must be in compliance with Section 409A. For example, payments must begin at the later of age 55 or six months after termination and a participant is entitled to elect one of two actuarially equivalent forms of annuity benefits — either a single life annuity or a 50% joint and survivor annuity. |
In connection with the corporate office restructuring as a result of the SS/L Sale, on December 13, 2012, our Board approved termination of the Loral SERP. The Company expects to make lump sum payments to the participants in the Loral SERP covering executivesbetween December 16, 2013 and December 31, 2013 in accordance with the requirements of the corporate office,Section 409A and the SS/L SERP, covering executives of SS/L. Both the Loral SERP and the SS/L SERP are unfunded and are not qualified for tax purposes. For 2010, an employee’s annual SERP benefit was accrued under the same formulas used in the pension plan with respect to amounts earned above the $245,000 maximum noted above. SERP benefits in the past have generally been payable at the same time and in the same manner as benefits are payable under the pension plan. The timing and manner of SERP benefit payments after 2008, however, will be in compliance with Section 409A. For example, payments will begin on a mandatory basis at the later of age 55 or six months after termination and a participant will be entitled to elect one of two actuarially equivalent forms of annuity benefits — either a single life annuity or a 50% joint and survivor annuity.
The table below indicates the named executive officers’ years of credited service under our pension plans and the present value of their accumulated benefits, in each case as of December 31, 2010.2012 (except for Mr. Celli, values for whom are shown as of November 2, 2012, the date of completion of the SS/L Sale). During 2010,2012, no payments were made to any of the named executive officers.
2012 Pension Benefits
Present Value of | |||||||||
Number of Years | Accumulated | ||||||||
of Credited Service(1) | Benefit(2) | ||||||||
Name | Plan Name | (#) | ($) | ||||||
Michael B. Targoff | Pension Plan | 22 | $ | 355,000 | |||||
Loral SERP | 22 | $ | 2,512,000 | ||||||
John Celli | Pension Plan | 30 | $ | 630,000 | |||||
SS/L SERP | 30 | $ | 422,000 | ||||||
Richard P. Mastoloni | Pension Plan | 13 | $ | 135,000 | |||||
Loral SERP | 13 | $ | 241,000 | ||||||
Harvey B. Rein | Pension Plan | 31 | $ | 574,000 | |||||
Loral SERP | 31 | $ | 934,000 | ||||||
Avi Katz | Pension Plan | 14 | $ | 200,000 | |||||
Loral SERP | 14 | $ | 384,000 |
Present Value of | ||||||||||
Number of Years | Accumulated | |||||||||
of Credited Service(1) | Benefit(2) | |||||||||
Name | Plan Name | (#) | ($) | |||||||
Michael B. Targoff | Loral Pension Plan | 24 | $ | 483,000 | ||||||
Loral SERP | 24 | $ | 4,591,000 | |||||||
Avi Katz | Loral Pension Plan | 16 | $ | 365,000 | ||||||
Loral SERP | 16 | $ | 859,000 | |||||||
Harvey B. Rein | Loral Pension Plan | 33 | $ | 893,000 | ||||||
Loral SERP | 33 | $ | 1,731,000 | |||||||
John Capogrossi | Loral Pension Plan | 24 | $ | 654,000 | ||||||
Loral SERP | 24 | $ | 501,000 | |||||||
Richard P. Mastoloni | Loral Pension Plan | 15 | $ | 271,000 | ||||||
Loral SERP | 15 | $ | 745,000 | |||||||
John Celli | SS/L Pension Plan | 32 | $ | 929,000 | ||||||
SS/L SERP | 32 | $ | 859,000 |
(1) | The number of years of credited service is rounded to the nearest whole number as of December 31, |
(2) | The accumulated benefit for all named executive officers is based on service and earnings (base salary and bonus, as described above) considered by the plans for the period through December 31, |
34 |
Nonqualified Deferred Compensation in Fiscal 2010
On December 21, 2005, we established deferred compensation bookkeeping accounts for certain employees, including the named executive officers, and credited those accounts with a dollar amount equal to $9.441 for each deferred compensation unit. To the extent our stock price declinesdeclined below $28.441, the corresponding portion of the deferred compensation accounts also declineswould have declined accordingly.
The table below identifies the aggregate earnings and aggregate withdrawals/distributions during 2010 and the aggregate balance of the vested amount as of the end of 2010.
2012 Nonqualified Deferred Compensation
Aggregate Earnings | Aggregate Balance | |||||||
in Last FY(1) | at Last FYE(2) | |||||||
Name | ($) | ($) | ||||||
Michael B. Targoff | — | $ | 1,009,734 | |||||
John Celli | $ | 75 | $ | 377,715 | ||||
Richard P. Mastoloni | — | $ | 377,640 | |||||
Harvey B. Rein | $ | 32 | $ | 472,082 | ||||
Avi Katz | — | $ | 472,050 |
Aggregate | ||||||||
Aggregate Earnings | Withdrawals/ | |||||||
in Last FY(1) | Distributions | |||||||
Name | ($) | ($) | ||||||
Michael B. Targoff | $ | 1,621 | $ | 1,012,645 | ||||
Avi Katz | $ | 526 | $ | 472,576 | ||||
Harvey B. Rein | $ | 595 | $ | 472,887 | ||||
John Capogrossi | $ | 282 | $ | 236,389 | ||||
Richard P. Mastoloni | $ | 469 | $ | 378,321 | ||||
John Celli | $ | 553 | $ | 378,828 |
(1) |
Potential Change in Control and other Post Employment Payments
As discussed above in the Compensation Discussion and Analysis, asprior to termination of his employment on December 31, 2010, Mr.14, 2012, Michael B. Targoff was the only named executive officer who had an employment agreement with Loralthe Company that provided for potential post-termination payments. Post-termination payments for the other named executive officers (other than John Celli), as of December 31, 2010,2012, were governed by Loral’s Severance Policy for Corporate Officers. Post-termination payments for Mr. Celli, as of November 2, 2012, the Company’s severance policy.date of the sale of SS/L by the Company, were governed by SS/L’s Severance Policy. In this section, we provide details of these arrangements. Mr. Targoff’s employment agreement expired on December 31, 2010, and the Committee is in discussions with Mr. Targoff regarding terms for his continued employment.
CEO
Mr. Targoff’s employment agreement provided that, upon Mr. Targoff’s death or disability during the term of his employment agreement, Mr. Targoff waswould be entitled to, among other payments, his accrued and unpaid bonus for the preceding year, a pro rated annual bonus for the year in which such death or permanent disability occurs,occurred, acceleration of vesting of a prorated portion of the next vesting tranche of stock options and deferred compensation units, and, in the case of his death, salary through the end of the month in which he dies.died. In addition, under the agreement, in the event of his death, his dependents werewould be entitled to continued medical, prescription drug and dental insurance coverage through the end of the term of the agreement.
Mr. Targoff’s employment agreement also provided that, in the event that during the term of his employment agreement Mr. Targoff’s employment waswere terminated by us without “cause” or Mr. Targoff resigned for “good reason” (as such terms are defined in his employment agreement), Mr. Targoff waswould be entitled to a severance payment, in a lump sum, equal to two (2) times the sum of his base salary and annual bonus (for the preceding year). In addition, under the agreement, Mr. Targoff waswould be entitled to any accrued and unpaid annual bonus for the preceding year and a prorated annual bonus for the year in which any such termination of employment occurs.occurred. Mr. Targoff and his dependents werewould also be entitled under the agreement to coverage under Loral’s medical, dental and life insurance in effect immediately prior to such termination for eighteen (18) months following such termination, or until he commenced new employment and became eligible for comparable benefits. In addition, under the agreement, all of Mr. Targoff’s stock options, deferred compensation account and any other equity awards then held by Mr. Targoff would have become fully vested. Mr. Targoff’s severance payments and benefits under his employment agreement were contingent upon his execution of a release of claims in our favor. Mr. Targoff’s employment agreement also provided forTargoff was not entitled to a tax gross-up payment to Mr. Targoff in the event that he became subject to any parachute payment excise taxes under Section 4999 of the Internal Revenue Code. No other executive officer is or
In connection with the corporate office restructuring resulting from the SS/L Sale, Mr. Targoff’s employment as Chief Executive Officer and President of the Company was entitled to such a gross up payment at Loral.
Other Named Executive Officers
Messrs. Mastoloni,Katz, Rein, Capogrossi and Katz
An eligible officer with the title of Vice President will be entitled to cash severance payments aggregating to the sum of six months’ pay plus two weeks’ base salary for every year of service with the Company plus one twelfth of two weeks’ base salary for every month of service with the Company in excess of the officer’s full years of service with the Company. The officer will receive an initial lump sum payment within twenty days of termination, not subject to mitigation, equal to the sum of three months’ pay plus two weeks’ base salary for every year of service with the Company plus one twelfth of two weeks’ base salary for every month of service with the Company in excess of the officer’s full years of service with the Company. If the officer is unemployed after three months (or if the officer is employed at a rate of pay that is less than his rate of pay immediately prior to termination), the Remainder will be paid in biweekly installments over twelve weeks beginning on the three-month anniversary of the termination, subject to reduction by any amount of compensation then being received by the officer from other employment (including self-employment).
The Loral Severance Policy for Corporate Officers also provides for severance benefits payable to certain of Loral’s named executive officers in the event of termination of employment in connection with or in contemplation of a Corporate Event (defined to include, among other things, a change of control of Loral, a sale or spin-off of SS/L or the closing or cessation or reduction in the scope of operations, in whole or in part, of Loral’s corporate headquarters). In such event, named executive officers who are Senior Vice Presidents of Loral would be entitled to severance benefits that include, among other things, payment in a lump sum of an amount equal to one year’s pay (base salary and average bonus paid over the last two years) plus one year’s base salary, and named executive officers who are Vice Presidents of Loral would be entitled to severance benefits that include, among other things, payment in a lump sum of an amount equal to six months’ pay plus two weeks’ pay for every year of service with the Company plus one twelfth of two weeks’ pay for every month of service with the Company in excess of the officer’s full years of service with the Company.
If a terminated officer has outstanding unvested stock options or other equity or incentive compensation awards that provide for less than 100% vesting upon such a termination, such officer will vest (x) with respect to time-vested awards, in the next full tranche that would have vested on the next vesting date for such awards, and (y) with respect to performance-vested awards, in that portion of such awards that would have vested during the twelve months following such termination based on the actual achievement of the applicable performance thresholds. If such termination occurs within six months following a major corporate transaction, acquisition or divestiture, however, the terminated officer will be entitled to full vesting of his unvested awards, unless the plan administrator determines that such termination is not the result of such corporate transaction, acquisition or divestiture.
A terminated officer will also be entitled to continued participation in the Company’s medical, prescription, dental and vision insurance coverage. The officer may, if eligible, elect to participate in the Company’s Retiree Medical Plan by electing to receive benefits from the Retirement Plan of Space Systems/Loral Inc.pension plan. Alternatively, the officer may elect COBRA continuation coverage, and, during the “severance period,” the Company will pay the officer will be obligated to contributeeach month an amount equal to the premium atexcess, if any, of the same ratefull monthly COBRA premiums for such coverage under the Company’s benefit plans under which such medical and dental coverage is provided, as other corporate employees, andin effect from time to time, over the Company subsidy shall continue untilamount of the portion of such premiums the officer becomes eligible for coverage under another plan.would pay if the officer were an active employee. The term “severance period” for purposes of insurance continuation means, for the Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, Executive Vice President or, Executivein the event of termination of employment in connection with or in contemplation of a Corporate Event, a Senior Vice President, twenty-four months, and for a Vice President, threesix calendar months plus the number of full calendar months equal to (x) two weeks’ pay for every year of service plus one twelfth (1/12th) of two weeks’ pay and/or base salary, and one additional calendar month for any partial calendarevery month of base salary, constitutingservice in excess of such Vice President’s Remainder, as described above.years of service divided by (y) the monthly rate of the Vice President’s base salary. During the “severance period,” the officer will also be entitled to continued Company-providedcompany-provided executive life insurance benefits, to the extent the officer was receiving such benefits prior to his termination.
No executive officer is entitled to a tax gross-up payment in the event that he becomes subject to any parachute payment excise taxes under Section 4999 of the Internal Revenue Code.
In connection with the corporate office restructuring resulting from the SS/L Sale, Mr. Mastoloni’s employment as Senior Vice President, Finance and Treasurer of the Company was terminated effective as of December 14, 2012, and he received the severance benefits provided for in the Loral Severance Policy for Corporate Officers. See “Executive Compensation – Compensation Tables – Summary Compensation Table.”
Mr. Celli
. As noted above in Compensation Discussion and Analysis, as of the closing of the SS/LPotential Severance Payments
upon Termination(1)
(As of December 31, 2010)2012)(1)
Severance for | ||||||||
Termination | ||||||||
Without Cause | ||||||||
Severance for | upon a | |||||||
Termination | Change in Control | |||||||
Without Cause(2) | or Corporate Event(3) | |||||||
Name | ($) | ($) | ||||||
Michael B. Targoff | $ | 5,606,704 | (4) | $ | 5,606,704 | |||
Avi Katz | $ | 794,448 | $ | 1,448,605 | ||||
Harvey B. Rein | $ | 1,454,401 | $ | 1,659,509 | (5) | |||
John Capogrossi | $ | 532,103 | $ | 684,092 | ||||
Richard P. Mastoloni | $ | 792,033 | $ | 1,484,779 | (6) | |||
John Celli | $ | 450,000 | $ | 1,304,969 |
Severance for | ||||||||
Termination | ||||||||
Severance for | Without Cause | |||||||
Termination | upon a | |||||||
Without Cause(2) | Change in Control(2) | |||||||
Name | ($) | ($) | ||||||
Michael B. Targoff | $ | 4,995,500 | $ | 4,995,500 | ||||
John Celli | $ | 450,000 | $ | 1,065,000 | ||||
Richard P. Mastoloni | $ | 659,320 | $ | 659,320 | ||||
Harvey B. Rein | $ | 1,269,996 | $ | 1,269,996 | ||||
Avi Katz | $ | 661,651 | $ | 661,651 |
(1) | None of the named executive officers were entitled to a tax gross up with respect to the potential severance payments upon termination as of December 31, |
(2) |
(3) | For severance for termination without cause upon a change in control, amounts do not include the value of continued medical and life insurance coverage post-termination. The value of such coverage is $78,832 for Mr. Targoff, $100,007 for Mr. Katz, $43,783 for Mr. Rein, $41,387 for Mr. Capogrossi, $48,406 for Mr. Mastoloni and $16,594 for Mr. Celli. |
(4) | The value shown for Mr. Targoff reflects the actual amount of severance received by Mr. Targoff upon the termination of his employment effective December 14, 2012. This amount is also included in the “All Other Compensation” column of the Summary Compensation Table. |
(5) | In connection with the corporate office restructuring resulting from the sale of SS/L, Mr. Rein’s employment as Senior Vice President and Chief Financial Officer of the Company was terminated effective as of March 15, 2013, and he received severance of $1,665,478 which reflects service through March 15, 2013. |
(6) | The value shown for Mr. Mastoloni reflects the actual amount of severance received by Mr. Mastoloni upon the termination of his employment effective December 14, 2012. This amount is also included in the “All Other Compensation” column of the Summary Compensation Table. |
38 |
Upon | Upon Death | Upon | ||||||||||
Termination | and | Change in | ||||||||||
Without Cause | Disability | Control | ||||||||||
Name | ($) | ($) | ($) | |||||||||
Michael B. Targoff | $ | 5,653,750 | $ | 3,226,962 | $ | 5,653,750 | ||||||
John Celli | $ | 298,350 | $ | 235,410 | $ | 596,700 | ||||||
Richard P. Mastoloni | $ | 246,279 | $ | 184,504 | $ | 507,246 | ||||||
Harvey B. Rein | $ | 246,279 | $ | 184,504 | $ | 507,246 | ||||||
Avi Katz | $ | 246,279 | $ | 184,504 | $ | 507,246 |
OWNERSHIP OF VOTING COMMON STOCK
Principal Holders of Voting Common Stock
The following table shows, based upon filings made with the Company, certain information as of March 31, 2011October 28, 2013 concerning persons who may be deemed beneficial owners of 5% or more of the outstanding shares of Voting Common Stock because they possessed or shared voting or investment power with respect to the shares of Voting Common Stock:
Amount and Nature | Percent | |||||||
of Beneficial | of | |||||||
Name and Address | Ownership | Class(1) | ||||||
Various funds affiliated with MHR Fund Management LLC and Mark H. Rachesky, M.D.(2) 40 West 57th Street, 24th Floor, New York, NY 10019 | 8,144,719 | 38.0 | %(3) | |||||
Highland Capital Management, L.P., Strand Advisors, Inc. and James D. Dondero(4) 300 Crescent Court, Suite 700 Dallas, TX 75201 | 1,800,000 | 8.4 | % | |||||
Solus Alternative Asset Management LP., Solus GP LLC and Christopher Pucillo(5) 410 Park Avenue, 11th Floor, New York, NY 10022 | 1,585,553 | 7.4 | % |
Amount and Nature | Percent | |||||||
of Beneficial | of | |||||||
Name and Address | Ownership | Class(1) | ||||||
Various funds affiliated with | ||||||||
MHR Fund Management LLC and Mark H. Rachesky, M.D.(2) | ||||||||
40 West 57th Street, 24th Floor, New York, NY 10019 | 8,144,719 | 38.4 | %(3) | |||||
EchoStar Corporation and Charles W. Ergen(4) | ||||||||
100 Inverness Terrace East, Englewood, CO 80112 and 9601 South Meridian Boulevard, Englewood, CO 80112 | 1,529,073 | 7.2 | % | |||||
Solus Alternative Asset Management LP., Solus GP, LLC and Christopher Pucillo(5) | ||||||||
410 Park Avenue, 11th Floor, New York, NY 10022 | 1,517,300 | 7.2 | % | |||||
Various funds affiliated with | ||||||||
Highland Capital Management, L.P. and James Dondero(6) | ||||||||
Two Galleria Tower, 13455 Noel Road, Suite 800 Dallas, TX 75420 | 1,428,996 | 6.7 | % |
(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 |
(2) | Information based on Amendment Number |
MHRC LLC (“MHRC”) is the managing member of Advisors and, in such capacity, may be deemed to beneficially own the shares of Common Stock held for the accounts of each of Master Account II Holdings and Capital Partners (100). MHRC I LLC (“MHRC I”) is the managing member of Institutional Advisors and, in such capacity, may be deemed to beneficially own the shares of Common Stock held for the accounts of Institutional Partners, MHRA and MHRM. MHRC II LLC (“MHRC II”) is the managing member of Institutional Advisors II and, in such capacity, may be deemed to beneficially own the shares of Common Stock held for the accounts of each of Institutional Partners II and Institutional Partners IIA.
39 |
Mark H. Rachesky. M.D. (“Dr. Rachesky”) is the managing member of MHRC and, in such capacity, may be deemed to beneficially own the shares of Common Stock held for the accounts of each of Master Account II Holdings and Capital Partners (100). Dr. Rachesky is the managing member of MHRC II and, in such capacity, may be deemed to beneficially own the shares of Common Stock held for the accounts of each of Institutional Partners II and Institutional Partners IIA. Dr. Rachesky is the manager of MHRC I and, in such capacity, may be deemed to beneficially own the shares of Common Stock held for the accounts of each of Institutional Partners, MHRA and MHRM. Dr. Rachesky is the managing member of Institutional Advisors III and, in such capacity, may be deemed to beneficially own the shares of Common Stock held for the account of Institutional Partners III. Dr. Rachesky is the managing member of MHR Holdings, and, in such capacity, may be deemed to beneficially own the shares of Common Stock held for the accounts of each of Master Account II Holdings, Capital Partners (100), Institutional Partners, MHRA, MHRM, Institutional Partners II, Institutional Partners IIA and Institutional Partners III.
(3) | Various funds affiliated with MHR also own 9,505,673 shares of Non-Voting Common Stock, which, when taken together with the shares of Voting Common Stock owned by all funds affiliated with MHR, represent approximately |
(4) | Information based solely on a Schedule |
(5) | Information based solely on a Schedule 13G/A (Amendment No. 5), filed with the SEC on February 14, |
Voting Common Stock Ownership by Directors and Executive Officers
The following table presents the number of shares of Voting Common Stock beneficially owned by the directors, the named executive officers and all directors, named executive officers and all other executive officers as a group as of March 31, 2011.October 28, 2013. Individuals have sole voting and dispositive power over the stock unless otherwise indicated in the footnotes:
Amount and Nature | ||||||||
of Beneficial | Percent of | |||||||
Name of Individual | Ownership | Class(1) | ||||||
John Capogrossi | 7,803 | * | ||||||
John Celli | 0 | * | ||||||
Hal Goldstein | 6,000 | (2) | * | |||||
John D. Harkey, Jr. | 6,000 | (3) | * | |||||
Avi Katz | 0 | * | ||||||
Richard P. Mastoloni | 12,798 | * | ||||||
Mark H. Rachesky, M.D. | 8,144,719 | (4) | 38.0 | % | ||||
Harvey B. Rein | 3,000 | * | ||||||
Arthur L. Simon | 0 | (5) | * | |||||
John P. Stenbit | 6,000 | (6) | * | |||||
Michael B. Targoff | 42,894 | (7) | * | |||||
All directors, named executive officers and other executive officers as a group (11 persons) | 8,229,214 | (8) | 38.4 | % |
Amount and Nature | ||||||||
of Beneficial | Percent of | |||||||
Name of Individual | Ownership(1) | Class(2) | ||||||
John Celli | 0 | (3) | * | |||||
Sai S. Devabhaktuni | 6,000 | (4) | * | |||||
Hal Goldstein | 6,000 | (4) | * | |||||
John D. Harkey, Jr. | 6,000 | (4) | * | |||||
Avi Katz | 50,000 | (5) | * | |||||
Richard P. Mastoloni | 32,275 | (6) | * | |||||
Mark H. Rachesky, M.D. | 8,144,719 | (7) | 38.4 | % | ||||
Harvey B. Rein | 35,000 | (8) | * | |||||
Arthur L. Simon | 0 | (9) | * | |||||
John P. Stenbit | 6,000 | (4) | * | |||||
Michael B. Targoff | 610,737 | (10) | 2.9 | % | ||||
All directors, named executive officers and other executive officers as a group (12 persons) | 8,916,731 | (11) | 41.7 | % |
* | Represents holdings of less than one percent. |
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 |
(2) | Does not include |
(3) | Does not include |
(4) | Includes 8,129,719 shares of Voting Common Stock held by funds affiliated with MHR and 15,000 shares of Voting Common Stock held directly by Dr. Rachesky. Does not include |
Does not include |
(6) | Includes |
(7) | Includes |
(8) | Does not include |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We do not have a written policy for review, approval or ratification of related person transactions. Related persons include our major stockholders and directors and officers, as well as immediate family members of directors and officers. Transactions with related persons are, however, generally evaluated and assessed by the independent directors on our Board. If a determination is made that a related person has a material interest in any transaction with the Company, then our independent directors would review, approve or ratify the transaction and it would be disclosed in accordance with applicable SEC rules. If the related person at issue is one of our directors, or a family member of a director, then that director would not participate in discussions concerning the transaction.
MHR Fund Management LLC
In connection with the transaction in which Loral acquired its interest in Telesat transaction,Holdings, on October 31, 2007, Loral and certain of its subsidiaries, PSPPublic Sector Pension Investment Board (“PSP”) and one of its subsidiaries, two third-party investors, Telesat Holdings and certain of its subsidiaries, including Telesat, and MHR entered into a Shareholders Agreement (the “Shareholders Agreement”). Under the Shareholders Agreement, subject to certain exceptions, in the event that either (i) direct or indirect ownership or control by Dr. Rachesky of Loral’s voting stock falls below certain levels or (ii) there is a change in the composition of a majority of the members of the Loral Board of Directors over a consecutive two-year period, Loral will lose certain veto rights it has to approve certain extraordinary actions by Telesat Holdings and its subsidiaries. In addition, after either of these events, PSP will have certain rights to enable it to exit from its investment in Telesat Holdings, including a right to cause Telesat Holdings to conduct an initial public offering in which PSP’s shares would be the first shares offered or, if no such offering has occurred within one year due to a lack of cooperation from Loral or Telesat Holdings, to cause the sale of Telesat Holdings and to drag along the other shareholders in such sale, subject to Loral’s right to call PSP’s shares at fair market value.
The Shareholders Agreement provides for a board of directors of each of Telesat Holdings and certain of its subsidiaries, including Telesat, consisting of 10 directors, three nominated by Loral, three nominated by PSP and four independent directors to be selected by a nominating committee comprised of one PSP nominee, one nominee of Loral and one of the independent directors then in office. Each party to the Shareholders Agreement is obligated to vote all of its Telesat Holdings shares for the election of the directors nominated by the nominating committee. Pursuant to action by the board of directors taken on October 31, 2007, Dr. Rachesky, who is our non-executive Chairman of the Board of Directors, was appointed non-executive Chairman of the Board of Directors of Telesat Holdings and certain of its subsidiaries, including Telesat.
Dr. Rachesky is the President of MHR. Mr. Goldstein, a managing principal of MHR were participantsuntil May 2012, is a member of our Board. Mr. Devabhaktuni, a managing principal of MHR until May 2010, was a member of our Board until his resignation in a $200 million credit facility of Protostar Ltd. (“Protostar”), dated March 19, 2008, with an aggregate participation of $6.0 million. The MHR funds also owned certain equity interests in Protostar. During July 2009, Protostar filed for bankruptcy protection under chapter 11 of the Bankruptcy Code. The United States Bankruptcy Court for the District of Delaware entered an order confirming the plan of reorganization for Protostar and its affiliated debtors on October 6, 2010. The plan provided for the establishment of liquidating trusts for the Protostar debtors’ remaining assets, and Protostar commenced distributions on October 21, 2010 to the agent under the above-referenced facility for the benefit of its lenders. The plan of reorganization provided for no recovery by holders of equity interests in Protostar, and all equity interests were deemed cancelled as of the effective date of the plan.
Consulting Agreements
On December 14, 2012, Loral entered into a consulting agreement with Michael B. Targoff, Vice Chairman of Directors
On December 15, 2010, the Company, the MHR-affiliated directors and the insurers14, 2012, Loral entered into a Settlement Agreement (the “Settlement Agreement”)consulting agreement with respectRichard P. Mastoloni, former Senior Vice President, Finance and Treasurer of the Company. Pursuant to this agreement, Mr. Mastoloni is engaged as a part-time consultant to the pending litigation. PursuantBoard to assist in the Settlement Agreement,transition of treasury functions and for other assignments on an as-needed basis. Under the insurers paid Loralagreement, Mr. Mastoloni receives consulting fees of $600 per hour for his services. For service performed in December 2010 andthe period from January 2011, among other amounts, $7.5 million in full settlement of Loral’s claim for coverage under the policies for the MHR-Affiliated Director Indemnity Claim. The Settlement Agreement also provided for mutual releases by the parties. Additional parties1, 2013 to the Settlement Agreement for purposes of such releases were MHR and certain of its affiliates.
Other Relationships
In the ordinary course of business, SS/L, hasour subsidiary prior to its sale on November 2, 2012, entered into satellite construction contracts with affiliates of EchoStar Corporation, a corporation that ownsduring 2012 owned more than 5% of our Voting Common Stock. As of March 31, 2011,November 2, 2012, the date on which we completed the SS/L has one satelliteSale, SS/L had two satellites under construction and one satellite with respect to which construction has been suspended for affiliates of EchoStar and one satellite under construction for a customer which has fully leased the satellite to an affiliate of EchoStar.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers, directors and persons who own more than 10% of our Voting Common Stock to file reports with the SEC. Based solely on a review of the copies of reports furnished to us and written representations that no other reports were required, Loral believes that, during 2010,2012, all filing requirements were met on a timely basis.
Solicitation of Proxies
The Company pays all of the costs of soliciting proxies. We will ask banks, brokers and other nominees and fiduciaries to forward the proxy materials to the beneficial owners of our Voting Common Stock and to obtain the authority of executed proxies. We will reimburse them for their reasonable expenses. We have also retained Eagle Rock Proxy Advisors, LLC to solicit proxies on our behalf and will pay it a fee of approximately $3,500 for such services.
Stockholders Proposals for 2012
The Company currently expects to hold its 2014 Annual Meeting of Stockholders in May 2014. Any stockholder who intends to present a proposal at the 2012 Annual Meeting of Stockholders must deliver the proposal to the Corporate Secretary at our principal executive offices, located at Loral Space & Communications Inc., 600 Third Avenue, New York, New York 10016:
Any stockholder who intends to nominate a candidate for director election at the 20122014 Annual Meeting of Stockholders or who intends to submit a proposal pursuant to our bylaws without including such proposal in our proxy materials pursuant to Rule 14a-8 must deliver timely notice of the nomination or the proposal to the Corporate Secretary of the Company at our principal executive offices, located at Loral Space & Communications Inc., 600 Third888 Seventh Avenue, New York, New York 10016, no10106, in the form provided in our bylaws. To be timely, a stockholder’s notice shall be delivered not earlier than January 25, 2012the close of business on the one hundred twentieth (120th) day prior to the date of the 2014 Annual Meeting and nonot later than February 24, 2012.the close of business on the later of the ninetieth (90th) day prior to the 2014 Annual Meeting or the tenth (10th) day following the day on which public announcement of the date of the 2014 Annual Meeting is first made by the Company. The written notice must include certain information and satisfy certainthe requirements set forth in our Bylaws, a copy of which will be sent to any stockholder upon written request to the Senior Vice President, General Counsel and Secretary.
Communications with the Board
Stockholders and other interested parties wishing to communicate with the Board of Directors, the non-management directors or with an individual Board member concerning the Company may do so by writing to the Board, to the non-management directors or to the particular Board member and mailing the correspondence to Loral Space & Communications Inc., 600 Third888 Seventh Avenue, New York, New York 10016,10106, Attention: Senior Vice President, General Counsel and Secretary. If from a stockholder, the envelope should indicate that it contains a stockholder communication. All such communication will be forwarded to the director or directors to whom the communications are addressed.
Code of Ethics
Loral has adopted a Code of Conduct for all of its employees, including all of its executive officers. Any amendments or waivers to this Code of Conduct with respect to Loral’s principal executive officer, principal financial officer, principal accounting officer or controller (or persons performing similar functions) will be posted on such web site. This Code of Conduct is available on the Investor Relations — Corporate Governance section of our web site at www.loral.com. One may also obtain, without charge, a copy of this Code of Conduct by contacting our Investor Relations Department at (212) 697-1105.
Householding
Under SEC rules, a single set of proxy statements and annual reports may be sent to any household at which two or more stockholders reside if they appear to be members of the same family. Each stockholder continues to receive a separate proxy card. This procedure, referred to as “householding,” reduces the volume of duplicate information stockholders receive and reduces mailing and printing expenses. At the present time, we do not “household” for any of our stockholders of record. If a stockholder holds shares in street name, however, such beneficial holder’s bank, broker or other nominee may be delivering only one copy of our Proxy Statement and Annual Report on Form 10-K to multiple stockholders of the same household who share the same address, and may continue to do so, unless such stockholder’s bank, broker or other nominee has received contrary instructions from one or more of the affected stockholders in the household. We will deliver promptly, upon written or oral request, a separate copy of this Proxy Statement and our Annual Report on Form 10-K to a stockholder at a shared address to which a single copy of the documents was delivered. A beneficial holder who wishes to receive a separate copy of our Proxy Statement and Annual Report on Form 10-K, now or in the future, should submit this request by writing to Loral Space & Communications Inc., 600 Third888 Seventh Avenue, New York, New York 10016,10106, Attention: Investor Relations Department, or by calling our Investor Relations Department at (212) 697-1105. Beneficial holders sharing an address who are receiving multiple copies of proxy materials and annual reports and who wish to receive a single copy of such materials in the future should contact their bank, broker or other nominee directly to request that only a single copy of each document be mailed to all stockholders at the shared address in the future. Stockholders of record receiving multiple copies of our Proxy Statement and Annual Report on Form 10-K may request householding by contacting our Investor Relations Department either in writing or by telephone at the above address or phone number.
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REVOCABLE PROXY
LORAL SPACE & COMMUNICATIONS INC.
ANNUAL MEETING OF STOCKHOLDERS MAY 24, 2011
DECEMBER 9, 2013
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
Avi Katz and Avi Katz,John Capogrossi, 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 Stockholders of LORAL SPACE & COMMUNICATIONS INC. (the “Company”), to be held at the Grand Hyatt New Yorkoffices ofWillkie Farr & Gallagher LLP, 109 East 42nd Street at Grand Central Terminal,787 Seventh Avenue, New York, New York, at 10:30 A.M., on Tuesday, May 24, 2011Monday, December 9, 2013 and at all adjournments or postponements thereof, in the manner provided below and in such person’s or persons’ sole discretion upon any other matter that may properly come before such meeting or any adjournment or postponement thereof, including to vote for the election of a substitute nominee for director as such person or persons may select in the event a nominee becomes unable to serve.
Please be sure to date and sign this proxy card in the box below.
Mark here if you plan to attend the meeting. | ¨ | |
Mark here for address change. | ¨ | |
FOLD HERE – PLEASE DO NOT DETACH – PLEASE ACT PROMPTLY PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE |
x | PLEASE MARK VOTES |
AS IN THIS EXAMPLE
1. | Election of Two Class | |||
For | Withhold | For All Except | ||
Nominees: Class I:
Arthur L. Simon and John P. Stenbit
INSTRUCTION: To withhold authority to vote for any individual nominee, mark “For All Except” and write that nominee’s name in the space provided below.
2. | Acting upon a proposal to ratify the appointment of | |||
Deloitte & Touche LLP as the Company’s independent | ||||
registered public accounting firm for the year ending December 31, 2013. | For £ | Against £ | Abstain £ | |
3. | Acting upon a proposal to approve, on a | |||
non-binding, advisory basis, compensation of the | ||||
Company’s named executive officers | ||||
as described in the Company’s Proxy Statement. | For £ | Against £ |
Abstain | |||||
This Proxy when properly executed will be voted in the manner directed herein by the undersigned stockholder. If no direction is indicated, this PROXY will be votedFOR the election of nominees listed hereon andFOR Proposals 2 and 3, and, with respect to Proposal 4, in favor of holding future non-binding, advisory votes on compensation paid to the Company’s named executive officers annually.
The Board of Directors unanimously recommends that stockholders vote their shares in favor of the election of the Class III Directors that have been nominated by the Board and in favor of Proposals 2 and 3,3.
The below signed hereby acknowledges receipt of the Notice of Annual Meeting and with respect to Proposal 4,accompanying Proxy Statement.
Please be sure to date and sign this proxy card in the box below. | Date: |
Sign above | Co-holder (if any) sign above |
(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 favor of holding future non-binding, advisory votes on compensation paid to the Company’s named executive officers annually.