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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| o Soliciting Material Pursuant to §240.14a-12 |
Loral Space & Communications Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 22, 2012December 9, 2013
The Annual Meeting of Stockholders of Loral Space & Communications Inc. (“Loral” or the “Company”) will be held at the offices ofGrand Hyatt New York,Willkie 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 22, 2012,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 Statement. |
The Board of Directors has fixed the close of business on April 12, 2012October 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 IIII directors who have been nominated by the Board of Directors and in favor of Proposals 2 and 3.
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 18, 2012.November 7, 2013.
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 | |
April 18, 2012November 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 | |
| Proposal 2 — Independent Registered Public Accounting Firm | |
| Proposal 3 — Advisory Vote on Compensation Paid to Our Named Executive Officers | |
| Report of the Audit Committee | |
| Executive Compensation | |
| Compensation Discussion and Analysis | |
| 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 | |
| Ownership of Voting Common Stock | |
| Certain Relationships and Related Transactions | |
| Other Matters | |
| Section 16(a) Beneficial Ownership Reporting Compliance | |
| Solicitation of Proxies | |
| Stockholder Proposals for | |
| Communications with the Board | |
| Code of Ethics | |
| Householding |
Loral Space & Communications Inc.
600 Third888 Seventh Avenue
New York, New York 1001610106
PROXY STATEMENT
Questions and Answers About the Annual Meeting andVoting
| Why 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 Statement. | ||
| 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 (Proposal 3)? | 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) or in the advisory vote on compensation paid to our named executive officers (Proposal 3). Your broker has the authority to exercise discretion with respect to ratification of appointment of Deloitte & Touche LLP (Proposal 2) if it has not received your instructions for that proposal because that matter is treated as routine under applicable rules. |
| 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 22, 2012December 9, 2013
The 20122013 Proxy Statement, a form of proxy, and Loral’s Annual Report on Form 10-K for the year ended December 31, 20112012 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, 2014 and 2012,2015, respectively.
At the Annual Meeting, stockholders will be asked to elect the two current Class IIII directors who have been nominated by the Board and whose terms expire at the Annual Meeting. Dr. Mark RacheskyMr. Arthur L. Simon and Mr. Hal Goldstein,John P. Stenbit, each of whom is a current Class IIII director, are the nominees to serve as Class IIII directors for a new three-year term. One Class III directorship is currently vacant and will remainbe vacant afterat 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 IIII 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 20122013
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 III — Nominees Whose Terms Expire in 2012
Continuing Members of the Board of Directors
The following are brief biographical sketches of each of our directors whose term continues beyond 2012 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 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 co-founded the aerospace/defense contracting group at his former firm. In addition, he brings to the Company substantial business knowledge gained while serving as an independent director for another public company in the aerospace and defense industry. |
| 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: | ||
| 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 (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: | ||
| Director Since: | November 2005 | |
| Class: | Class II | |
| Business Experience: | Mr. Targoff has been | |
| 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 2011,2012, the Board of Directors held 10 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. Three members of the Board attended the 2012 Annual Meeting of Stockholders.
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 2011,2012, 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. Mr. Targoff is not a member of any of the compensation, nominating or audit committees of the Company.
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. For the period from November 21, 20112012 to November 20,December 21, 2012, we purchased twoextended our existing director and officer liability policies – one covering Loralcoverage and one covering our subsidiary, SS/L –fiduciary liability coverage, and for the period from December 21, 2012 to January 31, 2014, we purchased a new director and officer liability policy and a separatenew fiduciary liability policy. Our cost for the annual insurance premiums for these extensions and new policies is $1,723,104was $763,756 in the aggregate. We also converted our existing fiduciary liability policy to an extended six-year reporting period known as “run off” coverage for a one-time cost of $134,832.
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 linked to the Company’s program for compliance with Sarbanes Oxley 404 and is coordinated with 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 | Telephonic | |||||||||||||||||||||||||||||||
| Meeting Fee | Meeting Fee | |||||||||||||||||||||||||||||||
| Annual | In-Person | (over | Annual | Annual | In-Person | (over | Annual | |||||||||||||||||||||||||
| Fee(1) | Meeting Fee(2) | 30 minutes)(3) | Stock Award(4) | Medical | 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 | $ | 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 | No extra fees unless set on an ad hoc basis by Board of Directors | ||||||||||||||||||||||||||||||
| Audit Committee | ||||||||||||||||||||||||||||||||
| Chairman | $ | 20,000 | $ | 1,000 | $ | 500 | $ | 20,000 | $ | 1,000 | $ | 500 | ||||||||||||||||||||
| Member | $ | 10,000 | $ | 1,000 | $ | 500 | $ | 10,000 | $ | 1,000 | $ | 500 | ||||||||||||||||||||
| Compensation Committee | ||||||||||||||||||||||||||||||||
| Chairman | $ | 5,000 | $ | 1,000 | $ | 500 | $ | 5,000 | $ | 1,000 | $ | 500 | ||||||||||||||||||||
| Member | $ | 2,000 | $ | 1,000 | $ | 500 | $ | 2,000 | $ | 1,000 | $ | 500 | ||||||||||||||||||||
| Nominating Committee | ||||||||||||||||||||||||||||||||
| Chairman | $ | 5,000 | $ | 1,000 | $ | 500 | $ | 5,000 | $ | 1,000 | $ | 500 | ||||||||||||||||||||
| Member | $ | 2,000 | $ | 1,000 | $ | 500 | $ | 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 20112012
For fiscal year 2011,2012, Loral provided the compensation set forth in the table below to its directors.
On May 24, 2011,22, 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 2011 (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 |
2011
2012 Director Compensation
| Fees | Fees | |||||||||||||||||||||||||||||||
| Earned | All | Earned | All | |||||||||||||||||||||||||||||
| or Paid | Stock | Other | or Paid | Stock | Other | |||||||||||||||||||||||||||
| in Cash | Awards(1) | Compensation | in Cash | Awards(1) | Compensation | |||||||||||||||||||||||||||
| Name | ($) | ($) | ($) | Total | ($) | ($) | ($) | Total | ||||||||||||||||||||||||
| Mark H. Rachesky, M.D. | $ | 71,000 | $ | 320,550 | — | $ | 391,550 | $ | 60,834 | $ | 250,003 | — | $ | 310,837 | ||||||||||||||||||
| Michael B. Targoff(2) | $ | 60,000 | — | — | $ | 60,000 | $ | 50,000 | — | $ | 60,000 | $ | 110,000 | |||||||||||||||||||
| Sai S. Devabhaktuni(3) | $ | 66,000 | $ | 128,220 | $ | 9,147 | (4) | $ | 203,367 | — | — | — | — | |||||||||||||||||||
| Hal Goldstein | $ | 68,500 | $ | 128,220 | — | $ | 196,720 | $ | 56,000 | $ | 99,990 | — | $ | 155,990 | ||||||||||||||||||
| John D. Harkey, Jr. | $ | 85,500 | $ | 128,220 | — | $ | 213,720 | $ | 71,334 | $ | 99,990 | — | $ | 171,324 | ||||||||||||||||||
| Arthur L. Simon | $ | 144,750 | (5) | $ | 128,220 | — | $ | 272,970 | $ | 76,334 | (4) | $ | 99,990 | — | $ | 176,324 | ||||||||||||||||
| John P. Stenbit | $ | 124,500 | (6) | $ | 128,220 | — | $ | 252,720 | $ | 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) | |
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 during 2011 on the audit committee of more than three public companies did 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 its 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 2011,2012, the Compensation Committee did not retain any compensation consultants to assist in general compensation analyses or reviews. Independent compensation consultants were, however, retained Aon Hewitt as its executive compensation consultant.in 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 Compensation – SS/L Sale Transaction Bonuses” below) and 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, Aon 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 2013.2014.”
Neither the Nominating 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, 2012.2013. 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.Committee.
Financial Statements and Reports
The financial statements of the Company for the year ended December 31, 20112012 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 20102011 and 2011,2012, 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 20102011 and 20112012 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 20102011 and 2011,2012, for the reviews of the condensed consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q for the 20102011 and 20112012 fiscal years, for stand-alone audits of our subsidiaries and for accounting research and consultation related to the audits and reviews totaled approximately $3,171,000 for 2010 and $3,288,400 for 2011.2011 and $3,563,200 for 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 20102011 and 20112012 were $800,600$517,100 and $517,100,$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 20102011 and 20112012 were $857,100$660,000 and $660,000,$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 20102011 and 2011.2012.
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, 2012.2013.
PROPOSAL 3 — ADVISORY VOTE ON
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. For 2011, 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 proposed financial goals. The Company, for the most part, exceeded these goals, and, as a result, 2011 bonuses were, for most components, paid at the highest level. Moreover, although no equity awards were granted in 2011, prior equity awards continued to incentivize our named executive officers and align their interests with those of our stockholders.SS/L Sale.
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, 2011,2012, which includes the Company’sCompany��s audited consolidated financial statements for the year ended December 31, 2011,2012, 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, 2011.2012.
For 2011,2012, the Audit Committee operated under a written charter adopted by the Board of Directors which is available on the Company’s website atwww.loral.com. All of the responsibilities enumerated in such charter, as in effect during 2011,2012, were fulfilled for the year ended December 31, 2011.2012.
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, 2011.2012.
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, 2011.2012.
| 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. Titles and positions are those in effect as of December 31, 2012.
| 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). In 2011,For the Committee retained Aon Hewitt as its compensation consultant to develop recommendations for a long-term incentive (“LTI”) approach for usereasons described below, however, in making grants in conjunction with a potential spin-off of SS/L and SS/L doing business on an on-going basis as a stand-alone public company (the “2011 SS/L LTI Design Review”).
For purposes of the 2011 SS/L LTI Design Review, Aon Hewitt developed two custom peer groups. One custom peer group was based on a custom proxy study of 11 SS/L peer companies covering the named executive officers of those companies. Data from this group was used to develop recommendations for LTI eligibility and grant value for the SS/L President and SS/L Senior Vice Presidents. The companies comprising this custom proxy peer group for SS/L in 2011 were:
The other custom peer group was derived from a custom compensation study from Radford of 24 companies (including the same 11 companies used in the proxy study). Data from this group was used to develop recommendations for LTI eligibility and grant value for positions below the level of Senior Vice President. The companies comprising the Radford custom peer group for SS/L in 2011 were:
The 2011 SS/L LTI Design Review recommended components for an LTI design for 2011 and for 2012, and beyond. For purposes of the recommendations, executives and employees were divided into six tiers, with SS/L senior executives comprising Tier 1, vice presidents and functional executive directors comprising Tier 2, program directors comprising Tier 3, executive directors and activity managers comprising Tier 4, department and people managers comprising Tier 5 and key individual contributors comprising Tier 6. With respect to 2011, the SS/L LTI Design Review recommended a one-time restricted stock grant to key contributors whose retention during the proposed spin-off transaction would be critical and a stock option grant to all LTI eligible employees in Tiers 1-6. With respect to 2012 and beyond, the SS/L LTI Design Review recommended annual on-going stock option grants for employees in Tiers 1-3 and annual on-going performance-based unit grants to employees in Tiers 4-6. Performance-based units would be based on achievement of pre-determined EBITDA and award goals. Because the proposed spin-off did not occur in 2011, no LTI grants were made to SS/L executives or employees in 2011.
In 2010, the Committee retained Aon Hewitt to prepare an assessment of general market compensation practices in SS/L’s industry and other related industries and an analysis of the compensation levels for SS/L senior executives, including Mr. Celli, in comparison to the peer companies (the “2010 SS/L Executive Compensation Review”). The 2010 SS/L Executive Compensation Review evaluated base salary, annual bonus compensation and long-term incentives (see “Elements of Compensation” below) for SS/L’s senior executive officers, including Mr. Celli, as compared to officers in similar positions in the peer group. The study concluded that, in general, target total direct compensation for SS/L’s senior executive officers, including Mr. Celli, was below the peer group market median, primarily because their compensation had previously been based on compensation paid to comparable division or business unit executives and did not also take into account compensation paid to executives with more significant responsibilities. The study also concluded that long-term incentives for Mr. Celli were below the market median range for the custom peer group. Based on the 2010 SS/L Executive Compensation Review, Aon Hewitt recommended and the Committee approved in 2010 an increase in base salary and target bonus percentage for Mr. Celli. The results of and compensation decisions made by the Committee based on the 2010 SS/L Executive Compensation Review were thoroughly discussed in our Proxy Statement for our 2011 Annual Meeting. Because of the recent peer review analysis undertaken in 2010 for the SS/L named executive officers, the Committee did not believereview the executive compensation programs or pay levels of any peer companies or perform any comparative compensation assessments.
In early 2012, the Company commenced a process to explore the sale of SS/L, which ultimately resulted in completion of the sale of SS/L in November 2012 to MDA Communications Holdings, Inc. Because the Company was involved in the sale process throughout 2012, and because a sale would result both in SS/L no longer being a subsidiary of the Company and in a significant restructuring of the Company’s corporate office, the Committee believed that it was necessarynot appropriate to undertake a new peer review analysisevaluate executive compensation for either executives of SS/L or for the SS/L named executive officers again in 2011.
In 2009, the Committee retained Aon Hewitt to prepare a study similar to the 2010 SS/L Executive Compensation Review with respect to our other named executives who work at our corporate office (the “2009 Corporate Executive Compensation Review”). The 2009 Corporate Executive Compensation Review confirmed that cash compensation levels foruntil the Company’s corporate named executive officers were either in line with or slightly above our objectives and current market conditions. In addition, in connection with the 2009 Corporate Executive Compensation Review, in 2009, Aon 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 resultresults 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 the 2009 Corporate Executive Compensation Reviewsale process and the 2009 Incentive Compensation Review were thoroughly discussed in our Proxy Statement for our 2010 Annual Meeting. Becausepost-sale structure of the recent peer review analyses undertaken in 2009corporate office were known. Accordingly, for the Loral named executive officers and because of the ongoing evaluation of strategic alternatives for SS/L and Loral during 2010 and 2011,2012, the Committee did not believe that it was necessaryretain any compensation consultants to assist in general compensation analyses or appropriatereviews and no peer groups were developed. Independent compensation consultants were, however, retained in 2012 to undertake a new peer review analysisrender advice in connection with establishing transaction bonus plans relating to the SS/L Sale (see “Elements of Compensation – SS/L Sale Transaction Bonuses” below) and revisions to the SS/L severance policy (see “Severance Policies for the Loral named executive officers again in 2010 or 2011.
Named Executive Officers – SS/L Severance Policy” below).
Consideration of 20112012 Say-on-Pay Vote
At our 20112012 annual meeting of stockholders, we held our firsta stockholder advisory vote on the compensation of our named executive officers, or say-on-pay, as well as our first stockholder advisory vote on the frequency of future say-on-pay shareholder votes, each as required by Section 14A of the Exchange Act. Eighty-fiveSeventy-eight percent (85%(78%) of the stockholder votes cast were in favor of our say-on-pay proposal. The vast majority (eighty-nine percent (89%)) of the stockholder votes cast on the frequency of future say-on-pay advisory votes was in support of annual frequency. 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 named executive officers and decidedmade no significant changes to continue thesesuch programs and practices during 2011 without any major changes. In addition,in response to the Committee approved the holding of annual stockholder advisory votes on our executive compensation program, consistent with the outcome of the stockholder vote on the frequency of such votes at the 2011 annual meeting of shareholders. The executive compensation advisory vote proposal for 2012 is presented to stockholders as Proposal 3 in this proxy statement.vote.
Elements of Compensation
Total Direct Compensation – Cash and Stock Incentives
Our total direct compensation consists of three components:
| · | base salary; |
| · | performance-based annual cash bonus; and |
| · | long-term incentive compensation in the form of equity awards. |
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 2011,2012, Mr. Targoff’s base salary was established by his employment agreement (see “Employment Agreements” below). Effective January 1, 2011,2012, Mr. Targoff’s employment agreement was amended to increase his base salary per year from $950,000$1,094,525 to $1,094,525.$1,127,361. This 3% increase was approved by the Committee as an ordinary course cost of living adjustment, representingadjustment. Base salaries for Messrs. Katz, Rein, Capogrossi and Mastoloni, having been subject to a 3% increase for each year since 2006 when Mr. Targoff first entered into his employment agreement.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 Aon Hewitt’sthe findings and recommendations of Aon Hewitt in its 2010 analysis of the 2010compensation levels for SS/L Executive Compensation Review,senior executives, was not changed for 2011.2012. Effective December 31, 2011, the Committee approved aApril 1, 2013, base salaries for Messrs. Katz and Capogrossi were increased by 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.adjustment, and Mr. Capogrossi also received an additional 15% increase in base salary to reflect his promotion in March 2013 to the positions of Chief Financial Officer and Treasurer and the increased responsibilities associated therewith.
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.
The target bonus opportunity for Mr. Targoff was set by his employment agreement (see “Employment Agreements” below). The target bonus opportunities for Messrs. Katz, Rein and Mastoloni, having been increased in 2011 to more closely align 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 In the
After the end of the year, in order to determine the amount to be paid to named executive officers under the MIB 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
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 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 performance in connection with the SS/L Sale which was paid by SS/L after closing of the SS/L Sale. 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
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
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
In general, when granting equity-based awards, the Committee takes into account the following subjective and objective factors:
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
Other Benefits and Perquisites Our named executive officers receive other benefits also available to other salaried employees, including 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 the named executive officers who are officers of Loral with universal life insurance policies in various amounts beyond that provided for other employees. Other 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 those available to other salaried employees. We do not provide the 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. 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
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
As of December 31, 2012, the Loral pension plan covers all named executive
The
Under both the Loral SERP and the SS/L SERP, each participant 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 Employment Agreements
Former CEO –Michael B. Targoff
On March 1, 2006, Michael Targoff became our Chief Executive Officer. On March 28, 2006, we entered into an employment agreement with Mr. Targoff. Prior to becoming our Chief Executive Officer, Mr. Targoff was Vice Chairman of our Board. The Committee believed it was important and desirable to enter into an employment agreement with Mr. Targoff, which
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
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
Mr. Targoff 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
Mr. Targoff’s employment agreement Mr. Targoff’s employment agreement also
In addition, Mr. Targoff’s employment agreement
Loral Holdings Corporation and SS/L 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.
Severance 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
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
Tax Aspects of Executive Compensation
Section 162(m) of the Internal Revenue Code generally limits our corporate tax deduction for 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
Compensation Tables
Summary Compensation Table
All Other Compensation
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,
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 in 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 For Mr. Mastoloni, the “Other” column in
his employment. Outstanding Equity Awards at
Option Exercises and Stock Vested in Fiscal
The following table provides information on the exercise of stock options and vesting of other stock awards held by the named executive officers during
Pension Benefits in Fiscal Year
The table below sets forth information on the pension benefits for the named executive officers under each of the following pension
The Loral pension plan is a funded and tax qualified retirement plan that, as of December 31, 2012, covered 440 participants, including the named executive 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 2012, the SSWB was $110,100 and the IRS-prescribed compensation limit was $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 2012, each named executive officer contributed $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.
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. 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,
Nonqualified Deferred Compensation in Fiscal
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
The table below identifies the aggregate earnings and aggregate withdrawals/distributions during
Potential Change in Control and other Post Employment Payments
As discussed above in the Compensation Discussion and Analysis,
CEO
Mr. Targoff’s employment agreement
Mr. Targoff’s employment agreement also In connection with the corporate office restructuring resulting from the SS/L Sale, Mr. Targoff’s employment
Other Named Executive Officers
Messrs. 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).
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
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/L Potential Severance Payments upon Termination (As of December 31,
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
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.
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.
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
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
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
Consulting Agreements On December 14, 2012, Loral entered into a consulting agreement with Michael B. Targoff, Vice Chairman of the Company and former Chief Executive Officer and President. 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. 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. For service performed in the period from January 1, 2013 to September 30, 2013, Mr. Targoff earned $1,080,000 (before expenses of $153,000 to be reimbursed). On December 14, 2012, Loral entered into a consulting agreement with Richard 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 Board to assist in the transition of treasury functions and for other assignments on an as-needed basis. Under the agreement, Mr. Mastoloni receives consulting fees of $600 per hour for his services. For service performed in the period from January 1, 2013 to September 30, 2013, Mr. Mastoloni earned $119,280. Other Relationships
In the ordinary course of business, SS/L, 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
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
The Company currently expects to hold its 2014 Annual Meeting of Stockholders in May 2014. Any stockholder who intends to present a proposal
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., Code of Ethics
Loral has adopted a Code of Conduct for all of its employees, including all of its executive officers. 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. 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
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., [This page intentionally left blank.]
REVOCABLE PROXY LORAL SPACE & COMMUNICATIONS INC.
ANNUAL MEETING OF STOCKHOLDERS DECEMBER 9, 2013
THE BOARD OF DIRECTORS Avi Katz and
Please be sure to date and sign this proxy card in the box below.
AS IN THIS EXAMPLE
Nominees: Class I:
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.
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.
The Board of Directors recommends that stockholders vote their shares in favor of the election of the Class
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