UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Loral Space & Communications Inc.
(Name of Registrant as Specified In Its Charter)
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
December 9, 2013May 19, 2016
The Annual Meeting of Stockholders of Loral Space & Communications Inc. (“Loral” or the “Company”) will be held at the offices ofWillkie Farr & Gallagher LLP,787 Seventh Avenue, New York, New York, at 10:30 A.M., on Monday, December 9, 2013,Thursday, May 19, 2016, for the purpose of:
1. | Electing to the Board of Directors the two |
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 October 28, 2013March 31, 2016 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 I directors who have been nominated by the Board of Directorsnominees 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 November 7, 2013.April 14, 2016.
All stockholders are cordially invited to attend the Annual Meeting. Stockholders may obtain directions to the Annual Meeting by contacting the Company’s investor relations department at (212) 697-1105. Whether or not you plan to attend, I hope that you will vote as soon as possible. Please review the instructions on the proxy or voting instruction card regarding your voting options.
By Order of the Board of Directors | |
Michael B. Targoff | |
Vice Chairman of the Board |
November 7, 2013
April 14, 2016 |
TABLE OF CONTENTS
Loral Space & Communications Inc.
888 Seventh565 Fifth Avenue
New York, New York 1010610017
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 | ||
• 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 I | |
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. |
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What vote is required inorder to approve Proposals 1 and 2? | Proposal 1 (Election of Directors): The two | |
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. |
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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 | |
Who will count the votes? |
Important Notice Regarding the Availability of Proxy Materials
for the Stockholder Meeting to Be Held on December 9, 2013May 19, 2016
The 20132016 Proxy Statement, a form of proxy and Loral’s Annual Report on Form 10-K for the year ended December 31, 2012 and Amendment No. 1 on Form 10-K/A to Loral’s Annual Report on Form 10-K for the year ended December 31, 20122015 are available at:www.loral.com.
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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 directorsdirectorships and Class III consisting of three directors.directorships. The terms of the Class I, II and III directorsdirectorships expire on the date of the Annual Meeting in 2013, 20142016, 2017 and 2015,2018, respectively.
At the Annual Meeting, stockholders will be asked to elect the two current Class I directorsnominees named in this Proxy Statement who have been nominated by the Board of Directors to continue to serve as Class I directors and whose current terms will expire at the Annual Meeting. Mr. Arthur L. Simon and Mr. John P. Stenbit, each of whom is a current Class I director, are the nominees to serve as Class I directors for a new three-year term. One Class III directorship is currently vacant and will be vacant at the time of the Annual Meeting and until the Board either reduces its size or elects a candidate to fill such vacancy. Each nominee, if elected, will serve for a term of three years and will remain in office until a qualified successor director has been elected or until he or she resigns or is removed from the Board. Class I 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 20132016
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.
Nominees for Class I Directorships — Directors Whose Terms ExpireTerm Expiring in 20132019
Arthur L. Simon | ||
Age: | ||
Director Since: | November 2005 | |
Class: | Class I | |
Business Experience: | Mr. Simon is retired. | |
Other (current): | Director and member of the Audit and Nominating/Corporate Governance Committees of L-3 Communications | |
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 | |
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 |
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Other Directorships (current): | Director and member of the | |
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 |
Continuing Members of the Board of Directors
The following are brief biographical sketches of each of our directors whose term continues beyond 20132016 and who is not subject to election this year, including his or her 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—Term Expiring in 20142017
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 Directorships (current): | Director | |
Other Directorships (previous within the last five years): | Director | |
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 |
Michael B. Targoff | ||
Age: | ||
Director Since: | November 2005 | |
Class: | Class II | |
Business Experience: | Mr. Targoff has been Vice Chairman of Loral since November 21, 2005 and a consultant to the Company since December 15, 2012. Mr. Targoff was Chief Executive Officer of Loral from March 1, 2006 to December 14, 2012 and President of Loral from January 8, 2008 to December 14, 2012. Mr. Targoff also has been a Director and member of the Audit Committee ofTelesat Canada (“Telesat”), a subsidiary of Telesat Holdings Inc. (“Telesat Holdings”),since the Company acquired its interest in Telesat Holdings in October 2007. From 1998 to February 2006, Mr. Targoff was founder and principal of Michael B. Targoff & Co., a private investment company. | |
Other Directorships (previous within the last five years): | Director |
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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 —II Directors Whose Terms Expire—Term Expiring in 20152018
Mark H. Rachesky, M.D. | ||
Age: | ||
Director Since: | November 2005 | |
Class: | Class III | |
Business Experience: | Dr. Rachesky has been non-executive Chairman of the Board of | |
Other Directorships (current): | ||
Other Directorships (previous within the last five years): | Director of | |
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 |
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Janet T. Yeung | ||
Age: | 51 | |
Director Since: | May 2015 | |
Class: | Class III | |
Business Experience: | Since May 2012, Ms. Yeung has been Principal and General Counsel of MHR. From July 2008 to May 2012, Ms. Yeung was Principal and Counsel of MHR. From 2000 to June 2008, Ms. Yeung was Vice President and Deputy General Counsel of Loral and its predecessor. | |
Qualifications: | Ms. Yeung’s qualifications for service on our Board include her having previously served as an officer of the Company and, as a result, her familiarity with and extensive knowledge of the Company and the satellite industry. In addition, through her broad and deep experience in structuring, negotiating and implementing a wide variety of corporate transactions and financings during her tenure at the Company and at MHR, she has gained a considerable understanding of the matters that face the Company which enable her to offer the Board a broad perspective and advice on corporate governance, risk management and legal matters facing the Company today. |
Additional Information Concerning the Board of Directors of the Company
During 2012,2015, the Board of Directors held 12 meetings and acted once by unanimous written consent.eight meetings. 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. ThreeTwo members of the Board attended the 20122015 Annual Meeting of Stockholders.Stockholders in person, and four members attended the meeting by telephone.
The Company is listed on the Nasdaq Stock Market and complies with the Nasdaq listing requirements regarding independent directors. Under Nasdaq’s Marketplace Rules, the definition of an “independent director” is a person other than an executive officer or employee of the company or any other individual having a relationship which, in the opinion of the issuer’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our Board of Directors has reviewed such information as the Board has deemed appropriate for purposes of determining whether any of the directors has a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, including the beneficial ownership by our directors of Voting Common Stock (see “Ownership of Voting Common Stock – Voting Common Stock Ownership by Directors and Executive Officers”) and transactions between the Company on the one hand, and our directors and their affiliates, on the other hand (see “Certain Relationships and Related Party Transactions”). Based on such review, the Board of Directors has determined that all of our current directors, as well as directors who served on our Board in 2012, except for Mr. Targoff, were in 2015, and are currently, 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.
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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. Space Systems/Loral, LLC (formerly, Space Systems/Loral, Inc., “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 guarantees 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, 2012 to December 21, 2012, we extended our existing director and officer liability coverage and fiduciary liability coverage, and for the period from December 21, 2012February 1, 2016 to January 31, 2014,2017, we purchased a new director and officer liability policy and a newseparate fiduciary liability policy. Our cost for the annual insurance premiums for these extensions and new policies was $763,756is $567,340 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.
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. Until December 14, 2012, the position of Chief Executive Officer was held by Michael Targoff. In connection withAfter our corporate office restructuring resulting from the SS/sale (the “SS/L Sale,Sale”) in 2012 of our former subsidiary, Space Systems/Loral, LLC (formerly known as Space Systems/Loral, Inc.) (“SS/L”), including the termination of 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 during 2015 was, and currently is, vacant.
Until December 14, 2012, the offices of Chairman of the Board and Chief Executive Officer were separated because the Board believed that it was in the best interests of the Company and its stockholders to structure the leadership of the Company in that way. The Board believed that the separation of those two roles provided the best balance of those 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 served as non-executive Chairman of the Board, and, until December 14, 2012, Mr. Targoff served as Vice Chairman, Chief Executive Officer and President. The Board believed that during 2012 it was 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 also 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 was well suited to focus on development and implementation of both the Company’s strategic initiatives as well as its day-to-day operations and, in particular, on accomplishing the sale of SS/L in 2012. Dr. Rachesky and Mr. Targoff frequently consulted with one another during 2012 with respect to all significant matters affecting the Company.
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.
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Board and Committee Compensation Structure
The compensation structure adopted by the Board of Directors and in effect for 20122015 was designed to achieve the following goals:
The compensation structure in effect for 20122015 was as follows:
Board and Committee Compensation Structure
Telephonic | Telephonic | |||||||||||||||||||||||||||||
Meeting Fee | Meeting Fee | |||||||||||||||||||||||||||||
Annual | In-Person | (over | Annual | Annual | In-Person | (over | ||||||||||||||||||||||||
Fee(1) | Meeting Fee(2) | 30 minutes)(3) | Stock Award(4) | Medical | Fee(1) | Meeting Fee(2) | 30 minutes)(3) | Medical | ||||||||||||||||||||||
Board of Directors | $ | 75,000 | $ | 1,500 | $ | 1,000 | Restricted Stock Units equal in value to $100,000 ($250,000 for non-executive Chairman) | Eligible for Loral Medical Plan at Company’s expense if not otherwise employed full-time | $ | 75,000 | $ | 1,500 | $ | 1,000 | 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 | $ | 70,000 | $ | 1,000 | $ | 500 | ||||||||||||||||||
Member | $ | 10,000 | $ | 1,000 | $ | 500 | $ | 60,000 | $ | 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 employees and consultants; fee is payable in three installments: on or about the date of the Company’s Annual Meeting of Stockholders and four and eight months thereafter. |
(2) | In-person meeting fees are not paid to Company employees or consultants. |
(3) | Telephonic meeting fees are not paid to Company employees or consultants. For meetings of less than 30 minutes in duration, |
Directors Compensation for Fiscal 20122015
For fiscal year 2012,2015, Loral provided the compensation set forth in the table below to its directors.
On May 22, 2012, the Board of Directors approved grants of 11,057 restricted stock units to our non-executive directors as a group as compensation for services rendered during 2012 (4,253 units to Dr. Rachesky and 1,701 units to each of Messrs. Goldstein, Harkey, Simon and Stenbit). These restricted stock units vest on the first 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.
20122015 Director Compensation
Fees | Fees | |||||||||||||||||||||||||||
Earned | All | Earned | All | |||||||||||||||||||||||||
or Paid | Stock | Other | or Paid | Other | ||||||||||||||||||||||||
in Cash | Awards(1) | Compensation | in Cash | Compensation | ||||||||||||||||||||||||
Name | ($) | ($) | ($) | Total | ($) | ($) | Total | |||||||||||||||||||||
Mark H. Rachesky, M.D. | $ | 60,834 | $ | 250,003 | — | $ | 310,837 | $ | 84,000 | — | $ | 84,000 | ||||||||||||||||
Michael B. Targoff | $ | 50,000 | — | $ | 60,000 | $ | 110,000 | $ | 75,000 | $ | 1,514,300 | (1) | $ | 1,589,300 | ||||||||||||||
Sai S. Devabhaktuni(3) | — | — | — | — | ||||||||||||||||||||||||
Hal Goldstein | $ | 56,000 | $ | 99,990 | — | $ | 155,990 | |||||||||||||||||||||
Hal Goldstein(2) | $ | 27,000 | $ | 4,689 | (2) | $ | 31,689 | |||||||||||||||||||||
John D. Harkey, Jr. | $ | 71,334 | $ | 99,990 | — | $ | 171,324 | $ | 149,500 | — | $ | 149,500 | ||||||||||||||||
Arthur L. Simon | $ | 76,334 | (4) | $ | 99,990 | — | $ | 176,324 | $ | 152,500 | — | $ | 152,500 | |||||||||||||||
John P. Stenbit | $ | 67,666 | (5) | $ | 99,990 | — | $ | 167,656 | $ | 187,500 | (3) | — | $ | 187,500 | ||||||||||||||
Janet T. Yeung(4) | $ | 52,000 | — | $ | 52,000 |
(1) | The |
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”Related Transactions — Consulting Agreement” for a description of the Company’s consulting agreement with Mr. Targoff.
(2) | Mr. Goldstein served as a director through the date of our 2015 annual meeting held on May 14, 2015. The amount set forth in the “All Other Compensation” column for Mr. Goldstein represents $4,689 in premiums paid by the Company on Mr. Goldstein’s behalf for participation in our medical plan through May 31, 2015. |
(3) |
(4) | Ms. Yeung commenced service as a director upon her election to the |
Committees of the Board of Directors
The Company’s standing committees of the Board of Directors are the Audit Committee, the Compensation Committee, the Executive Committee and the Nominating Committee. The charters of the Audit Committee, the Compensation Committee and the Nominating Committee are available on the Investor Relations — Corporate Governance section of our website at www.loral.com.www.loral.com. These documents are also available upon written request to: Investor Relations, Loral Space & Communications Inc., 888 Seventh565 Fifth Avenue, New York, New York 10106.10017. The Executive Committee does not have a charter. Information concerning these committees is set out below.
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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 has determined that one of the Committee’s members, Mr. Simon, qualifies as an “audit committee financial expert” as defined by the SEC.
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 Company’s internal audit function, which, after the SS/L Sale, the Company has outsourced to a major certified public accounting firm, and findings from completed outsourced 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”).
In addition, the Audit Committee, with input from management, reviews the Company’s compensation policies and practices for all employees to determine whether such policies and practices encourage excessive or unnecessary risk-taking that could have a material adverse effect on the Company. Based on such review, the Audit Committee believes that such policies and practices are not likely to have a material adverse effect on the Company.
Compensation Committee
Members: | Mark H. Rachesky, M.D. (Chairman), John D. Harkey, Jr. | |
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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 2012,2015, the Compensation Committee did not retain any compensation consultants to assist in general or perform any other compensation analyses or reviews. Independent compensation consultants were, however, retained 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 these consultants, the Compensation Committee or management, as the case may be, considered the reputation and experience of the consultants as well as their independence.
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Compensation Committee Interlocks and Insider Participation
Dr. Mark H. Rachesky and John D. Harkey, Jr. served as members of the Compensation Committee during 2012.2015. 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 on either on the Company’s Board of Directors or Compensation Committee. Dr. Rachesky founded, 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. | |
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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 2014.2017.”
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.
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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, 2013.2016. 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 relatedaudit-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.services and fees. 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 relatedaudit-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 relatedaudit-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 the Company promptly reports such approval to the Audit Committee.
Financial Statements and Reports
The financial statements of the Company for the year ended December 31, 20122015 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 20112014 and 2012,2015, 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 by the Company and its subsidiaries and other pertinent matters. Deloitte also provided other permitted services to the Company in 20112014 and 20122015 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 20112014 and 2012,2015, for the reviews of the condensed consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q for the 20112014 and 20122015 fiscal years for stand-alone audits of our subsidiaries and for accounting research and consultation related to the audits and reviews totaled approximately $3,288,400$815,000 for 20112014 and $3,563,200$949,000 for 2012.2015. These fees were approved by the Audit Committee.
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Audit-Related Fees
The aggregate fees billed by Deloitte for audit-related services for the fiscal years ended 20112014 and 20122015 were $517,100$83,200 and $106,100,$24,700, respectively. These fees related to research and consultation on various filings with the SEC and due diligence services and were approved by the Audit Committee.
Tax Fees
The aggregate fees billed by Deloitte for tax-related services for the fiscal years ended 20112014 and 20122015 were $660,000 and $985,000,$477,500, 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 20112014 and 2012.2015.
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, 2013.2016.
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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 qualityour named executive officers, who are critical to our long-term success; and (ii) motivate and reward our named executive officersthem 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.goals. We believe that in 20122015 our executive compensation program was instrumentalsuccessful in incentivizing our named executive officers to successfully achieve and consummate the SS/L Sale.implementing these objectives.
Stockholders are urged to read the Compensation Discussion and Analysis, compensation tables and narrative discussion in this Proxy Statement, which discussesdiscuss 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.
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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, 2012,2015, which includes the Company��sCompany’s audited consolidated financial statements for the year ended December 31, 2012,2015, 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, 2012.2015.
For 2012,2015, 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 2012,2015, were fulfilled for the year ended December 31, 2012.2015.
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, 2012.2015.
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, 2012.2015.
The Audit Committee
Arthur L. Simon, Chairman
John D. Harkey, Jr.
John P. Stenbit
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 | ||
Avi Katz | President, General Counsel and Secretary | |
John Capogrossi | Vice President, Chief Financial Officer, Treasurer and Controller | |
(1) |
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 qualityour named executive officers, who are critical to our long-term success; and (ii) motivate and reward our named executive officersthem 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.goals.
Compensation for our named executive officers consists of “totaltotal 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. “TotalTotal direct compensation”compensation is comprised of base salary and annual bonus compensation (included in the Summary Compensation Table below for 2012 in the Bonus column and for 2011 and 2010 in the Non-Equity Plan Incentive 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
Prior to attract and retain high quality executive officers,the SS/L Sale, the Committee seekssought to provide compensation for the named executive officers at levels that arewere 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 tohistorically, we set target total direct compensation levels for our named executive officers between the 50th and 75th percentile for comparable positions at our peer companies. With respect to 2015, however, because the Company was engaged in a process to explore potential strategic transactions relating to the Company’s interest in Telesat which could have resulted in the closing of the corporate office, the Committee did not believe it was necessary or appropriate to perform a direct comparative analysis with peer companies if target levels for our performance measures are achieved. In addition, our executivewith respect to compensation program is designedpaid to provide performance-based compensation that rewardsor earned by our named executive officers in 2015. See “The Role of Peer Groups, Compensation Consultants, Surveys and Market Analysis” below.
Since the SS/L Sale in 2012, Loral’s principal asset has been and continues to be its majority ownership interest in Telesat. With the goal of maximizing shareholder value and in order to position the Company for exploration of potential strategic transactions involving the achievementpossible monetization of predeterminedthe Company’s interest in Telesat, including possibly through a sale of the Company itself or combination of the Company and Telesat into a new public entity, the Company, after the SS/L Sale, restructured its corporate office, including reducing the number of employees and personal performance goals.overhead costs. The Committee has sought to retain the remaining executives and employees, including the named executive officers, during the period in which the Company is pursuing its strategic objectives by, among other things, keeping their compensation comparable to that paid in years prior to the SS/L Sale.
Determination of Compensation
The Committee considers a variety of factors when determining target total direct compensation levels for our named executive officers, including:
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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 payable 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 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
ThePrior to the SS/L Sale, the Committee from time-to-time reviewstime to time reviewed market analyses assessing the extent to which the compensation program established for our named executive officers iswas competitive when compared with executive compensation programs established by a group of peer companies to ascertain whether the Company iswas paying its named executive officers in accordance with the Company’s statedthen-stated compensation philosophy (as discussed under “Objectives and Philosophy” above). ForIn 2015, due to the reasons described below, however,significant restructuring of our corporate office and because of the possibility of a strategic transaction involving Loral and the potential closing of our corporate office, each as discussed above, the Committee believed that it was not necessary or appropriate to perform comparative analyses of executive compensation for our named executive officers. Accordingly, for compensation paid to and earned by our named executive officers in 2012,2015, the Committee did not retain any compensation consultants to assist in general compensation analyses or reviews, nor did the Committee review 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 not appropriate to evaluate executive compensation for either executives of SS/L or for the corporate office until the results of the sale process and the post-sale structure of the corporate office were known. Accordingly, for 2012, the Committee did not retain any compensation consultants to assist in general compensation analyses or reviews and no peer groups were developed. Independent compensation consultants were, however, retained in 2012 to render 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 Named Executive Officers – SS/L Severance Policy” below).
Consideration of 20122015 Say-on-Pay Vote
At our 20122015 annual meeting of stockholders, we held a stockholder advisory vote on the compensation of our named executive officers, or say-on-pay, as required by Section 14A of the Exchange Act. Seventy-eightEighty-two percent (78%(82%) of the stockholder votes cast were in favor of our say-on-pay proposal. The Committee considered the non-binding say-on-pay vote as an affirmation of our current executive compensation programs and practices with respect to our named executive officers and made no significant changes to such programs and practices in response to the advisory vote.
Elements of Compensation
Total Direct Compensation – Cash and Stock Incentives
Our total direct compensation consists of threetwo components:
· | base salary; |
· |
In the past, we also provided long-term equity incentive compensation to our named executive officers as a component of total direct compensation. These long-term incentives were provided under our Amended and Restated 2005 Stock Incentive Plan in the form of stock options, restricted stock units or SS/L phantom stock appreciation rights. In 2015, due to the significant restructuring of our corporate office and because of the possibility of a strategic transaction involving Loral and the potential closing of our corporate office, each as discussed above, the Committee believed that it was not necessary or appropriate to, and did not, grant any equity awards to the named executive officers.
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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 2012, Mr. Targoff’s base salary was established by his employment agreement (see “Employment Agreements” below). Effective January 1, 2012, Mr. Targoff’s employment agreement was amended to increase his base salary per year from $1,094,525 to $1,127,361. This 3% increase was approved by the Committee as an ordinary course cost of living adjustment. Base salaries for Messrs. Katz, Rein, Capogrossi and Mastoloni, having been subject to a 3% ordinary course cost of living adjustment effective December 31, 2011, were not adjusted in 2012. Base salary for Mr. Celli, having been adjusted in 2010 based on the findings and recommendations of Aon Hewitt in its 2010 analysis of the compensation levels for SS/L senior executives, was not changed for 2012. Effective April 1, 2013, base salaries for Messrs. Katz and Capogrossi were increased effective as of April 1, 2015 and as of April 1, 2016 by 3% and 1.5%, respectively, as an ordinary course cost of living adjustment, and Mr. Capogrossi also received an additional 15% increase in base salary to reflect his promotion in March 2013 to the positions of Chief Financial Officer and Treasurer and the increased responsibilities associated therewith.adjustments.
Annual Bonus Compensation
We provide a discretionary annual cash bonus incentivesincentive 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, as well as our long-term strategic goals. Each named executive officer has a target bonus opportunity, which in the past was generally payable upon the achievement of certain performance goals at the target level.opportunity. 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.year, which may be more or less than the target opportunity. The table below sets forth the target bonus opportunity for 20122015 for each named executive officer.
Name | Target Bonus Opportunity
| |||
Avi Katz | ||||
60 | ||||
John Capogrossi | ||||
50 | ||||
The target bonus opportunity for Mr. Targoff was set by his employment agreement (see “Employment Agreements” below). The target bonus opportunities for both Messrs. Katz Rein and Mastoloni, having been increasedCapogrossi were the same as those in 2011 to more closely align with those of comparable similarly situated executives at SS/L, were not adjustedeffect in 2012. The target bonus opportunity for Mr. Capogrossi was not adjusted in 2012. The target bonus opportunity for Mr. Celli was unchanged from that set in 2010 based on the findings and recommendations of Aon Hewitt in its 2010 analysis2014. In light of the compensation levels for SS/L senior executives. The target bonus opportunity for Mr. Capogrossi was adjustedprocess to 50% for 2013 to reflect his promotionexplore potential strategic transactions in March 2013 to the positions of Chief Financial Officer and Treasurer and the increased responsibilities associated therewith.
In the past, our MIB program provided that our named executive officers could earn more or less than their target bonus opportunities if actual performance fell within certain ranges above or below the targeted performance. For example, in past years, the program provided the named executive officers with the opportunity to earn up to 130% of their target percentage for performance at the highest performance level of each component and 70% of their target percentage for performance at the minimum or threshold level of performance for each component, below which level no bonus could be earned. Thus, for each named executive officer, the bonus amount paid could increase or decrease proportionately in accordance with performance against our performance measures. In the case of the CEO, for example, performance at the highest level for each component would mean that he could earn up to 162.5% of his base salary as a bonus, and performance at the threshold level for each component would mean that he could earn 87.5% of his base salary as a bonus.
For the reasons described below, our 2012 MIB program did not follow the same structure as was customary in past years. In past years, management presented and recommended to the Committee, and, after review and consideration, the Committee approved, an MIB program structure that included certain formulas, performance targets, metrics and weightings, such as achievement of certain specified levels of EBITDA, new business and year-end cash levels. Specifically, Mr. Targoff’s bonus opportunity was tied to performance at SS/L and Telesat, the bonus opportunity for Messrs. Katz, Rein, Capogrossi and Mastoloni was tied to performance at SS/L and individual objectives, and Mr. Celli’s bonus opportunity was tied solely to performance at SS/L. After the end of the year, in order to determine the amount to be paid to named executive officers under the MIB program, the Committee compared actual performance against target for each goal and bonuses were awarded accordingly.
As discussed above, the Company was involvedengaged in the SS/L sale process throughout 2012,2015 (see “Objectives and therefore,Philosophy” above), the Committee did not believe it would be appropriate or meaningful to setadjust these targets for 2015. In February 2016, the Committee reviewed, on a subjective basis, the individual 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 during 2015, including the named executive officers, (other than Mr. Celli) and specifically noted their contribution towardsexcellent performance in their areas of responsibility, including their work and efforts with respect to a potential strategic transaction. The Committee also noted that the completionCompany’s executives and employees, including the named executive officers, have continued with the Company during the period in which the Company is pursuing its strategic objectives, based, in part, on the reasonable expectation that, absent extraordinary circumstances or events, if they performed as expected they would receive bonuses comparable to those paid in years prior to the SS/L Sale. In addition, the Committee noted that, because of the strategic initiatives undertaken since the SS/L Sale, and their excellentincluding in 2015, individual performance goals were not set for 2015, nor did any executives or employees, including the named executive officers, receive any long-term incentive awards. Based on other matters. He recommended, therefore, andthe foregoing considerations, the Committee approved payment of discretionary bonuses to the named executive officers (other than Mr. Celli) at the same level as in 2011. The Committee also reviewed Mr. Targoff’s performance in 2012 and specifically noted his contribution towards2014 (with the completiononly adjustments relating to the ordinary course cost of the SS/L Sale and his excellent performance on other matters and approved payment of a discretionary bonusliving increase to Mr. Targoff at the same level as in 2011.base salaries). Thus, as in 2011,2014, these 20122015 bonus awards resulted in a bonus payment to Mr. Targoff, at an aggregate of 122.5% of his target, and to each of Messrs. Katz Rein,and Capogrossi and Mastoloni, at an aggregate of 130% of their targets.target bonus opportunities. These bonusesbonus amounts are included in the Bonus column of the Summary Compensation Table. Mr. Celli did not receive a bonus under the Company’s MIB program as SS/L was no longer a subsidiary of the Company on the date that bonuses were awarded.
SS/L Sale Transaction Bonuses
In early 2012, with the commencement of the SS/L sale process, the Committee, based on the recommendation of Mr. Targoff and an independent compensation consultant, Mr. Shekhar Purohit, approved transaction bonus plans relating to the SS/L Sale – the SS/L Change in Control Incentive Plan for SS/L Employees and the SS/L Change in Control Incentive Plan for Corporate Employees. The Committee believed that it was important for the success of any transaction that the SS/L and corporate executives and employees be properly motivated and rewarded for their work in achieving value for the shareholders. Both Change in Control Incentive Plans provided that the Plan Administrator, the Loral CEO, could designate participants for participation in the Plans and determine the bonus amounts to be paid upon a change in control of SS/L. The amounts payable would depend on the aggregate sale price for SS/L. Bonus payments under the Plans were neither mandatory nor guaranteed, and no participant had any vested right under the Plan until so notified by the Plan Administrator. The SS/L Change in Control Incentive Plan for SS/L Employees provided for a pool of 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 Plan (the “Stock Incentive Plan”). We believe that equity-based awards help to align the financial interests of our named executive officers with those of our stockholders by providing our named executive officers with an additional equity stake in the Company. Equity-based awards also reward our named executive officers for increasing stockholder value.
Our Stock Incentive Plan allows us to grant a variety of stock-based awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units. These types of awards measure Company performance over a longer period of time than the other methods of compensation. The Committee administers the Stock Incentive Plan and determines the level and type of awards granted to the named executive officers.
In addition to our Stock Incentive Plan, in 2009, the Company established the SS/L Phantom SAR program to incentivize and reward executives and employees based on an increase in a synthetically designed equity value for SS/L over a defined vesting period – three years for the named executive officers. Because SS/L common stock was not freely tradable on the open market and thus did not have a readily ascertainable market value, SS/L equity value under the program was derived from a formula that calculated equity value based on a multiple of Adjusted EBITDA plus cash on hand less debt at the end of the relevant year. A one-time grant of these SS/L Phantom SARs was made in 2009 to all of the named executive officers, except for Mr. Targoff, and the payout of the final tranche was made to the named executive officers in 2012. See “Executive Compensation – Compensation Tables – Option Exercises and Stock Vested in Fiscal 2012 .”
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 2012, the Committee did not make any equity awards to the named executive officers. The Committee believed that the equity awards granted to the named executive officers in previous years were sufficient to continue to align the financial interests of the named executive officers with those of our stockholders and to incentivize them to increase stockholder value. Specifically, awards granted in 2009 provided for vesting schedules over a period of years, and in the case of certain awards to Mr. Targoff, for delayed settlement dates, which, the Committee believed, would provide for continued motivation and reward the named executive officers in line with our stockholders over the vesting period and through the ultimate settlement date. The Committee also believed that equity-based awards that were fully vested before 2012 or that were scheduled to vest during 2012 would continue to provide long-term stockholder value beyond the vesting dates because of the continued upside financial potential for executives.
Other Benefits and Perquisites
Our named executive officers receive other benefits also available to other salaried employees, 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
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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 declined below $28.441, the corresponding portion of the deferred compensation accounts would have declined accordingly. The deferred compensation accounts for the named executive officers were converted into interest-bearing accounts upon exercise of the related stock options. Pursuant to the terms of the deferred compensation arrangements, vested balances, with applicable accrued interest thereon, were distributed to the named executive officers (except for Mr. Celli) in December 2012. Mr. Celli’s vested balance was distributed to him in November 2012 upon closing of the SS/L Sale.
Retirement Benefits
Retirement benefits are intended both to recognize long-term service with usthe Company and to keeppromote the overall pay packages for our named executive officers comparable to thatretention of our peer group so that we can attract and retain high quality executive officers and compete effectively withthrough retirement. The Committee also believes that providing retirement benefits was critical in initially attracting our peer companies.executive officers to the Company. The Company maintains two types of “tax-qualified”qualified retirement plans covering its executive officers: a defined benefit pension plan and a defined contribution savings plan. Pension benefits are also provided through a “non-qualified” plan. The non-qualified plan, also known as the Supplemental Executive Retirement Plan (“SERP”), is designed to “restore” the benefit levels that may be limited by IRS regulations under the qualified plans. In December 2010, the Company separated its SERP into two separate plans — one covering executives of the corporate office (the “Loral SERP”) and the other covering executives of SS/L (the “SS/L SERP”).
Prior to the closing of the SS/L Sale, our qualified pension plan (the “Loral pension plan”) and our defined contribution savings plan (the “Loral 401(k) plan”) covered both employees of Loral’s corporate office and employees of SS/L, including all of the named executive officers. In connection with the SS/L Sale, a new stand-alone SS/L pension plan (the “SS/L pension plan”) and a new stand-alone SS/L 401(k) plan were established, pension and 401(k) obligations related to SS/L current and former employees were transferred from the Loral pension plan and Loral 401(k) plan to the newly formed SS/L pension plan and SS/L 401(k) plan, and the newly formed SS/L pension plan and SS/L 401(k) were transferred to SS/L.
As of December 31, 2012,2015, the Loralqualified defined benefit pension plan coverscovered all named executive officers, except for Mr. Celli who is covered by the SS/L pension plan.officers. In 2006, the Company changed the qualified pensionthis plan, which for all named executive officers other than Mr. Celli previously had been administered on a non-contributory basis, to require certain contributions by participants thereby having the effect of sharing the cost of providing qualified pension benefits with the named executive officers.
As of December 31, 2012,2015, the Loral 401(k)defined contribution savings plan benefitsbenefited all named executive officers, except for Mr. Celli who participates in the SS/L 401(k) plan.officers. Named executive officers who make contributions to the savingsthis plan receive matching contributions from the Company or SS/L, as the case may be, of up to 6% of a participant’s eligible base salary at a rate of 66⅔%. All Loral named executive officers are eligible to and participate in the Loral 401(k) plan and Mr. Celli is eligible to and participates in the SS/L 401(k) plan.
The Loral and SS/Lqualified defined benefit pension plans areplan is subject to the Internal Revenue Code’s limits on covered compensation and benefits payable. Named executive officers who earnPrior to 2014, pension benefits were also provided through a “non-qualified” plan. The non-qualified plan, also known as the Supplemental Executive Retirement Plan (“SERP”), was designed to “restore” the benefit levels that IRS regulations limited in excess of applicable IRS limits also participate in eitherqualified plans. Under the Loral SERP or the SS/L SERP. Non-qualified excess benefits provided by these SERPs restore the benefits that would be payable to participants under the qualified pension plans but for the limitations imposed on qualified plans under the Internal Revenue Code.
Under both the Loral SERP and the SS/L SERP, each participant iswas entitled to receive the difference, if any, between the full amount of retirement income due under the pension plan formula without application of the IRS limitations and the amount of retirement income payable to the participant under the pension plan formula when applicable Internal Revenue Code limitations are applied.
In connection with the corporate office restructuring as a result of the SS/L Sale, on December 13, 2012, our Our Board approved termination of the Loral SERP.SERP in December 2012, and final lump sum payouts were made to participants in December 2013.
In January 2014, the Board approved annual make-whole payments (the “SERP Make-Whole Payments”) to employees, including Loral’s named executive officers, who would have earned SERP benefits had the SERP not been terminated. Specifically, with respect to periods after the final lump sum payouts to participants in December 2013, each employee who would have qualified for a SERP accrual for that period receives a cash payment equal to such employee’s annual accrued benefit at age 65 that would have been calculated for that period under the SERP (had it not been terminated) multiplied by a present value factor reflecting the employee’s life expectancy and current age and the discount rate used by the Company in its financial statements at the beginning of the year. The Company expectsSERP Make-Whole Payment is paid at the end of the year the benefit is earned, early the following year or upon termination of employment if earlier. Messrs. Katz and Capogrossi received SERP Make-Whole Payments in January 2016 with respect to makethe 2015 fiscal year. SERP Make-Whole Payments are included in the All Other Compensation column of the Summary Compensation Table.
In addition to providing pension and savings plan benefits, we provide certain health care benefits for retired employees and their dependents. Effective January 1, 2015, we discontinued retiree medical coverage for Medicare-eligible retirees and their dependents, and, in 2015, we made discretionary, one-time lump sum payments to thecurrent and potential future participants affected to assist them in the Loral SERP between December 16, 2013purchasing alternate coverage. Messrs. Katz and December 31, 2013 in accordance with the requirements of Section 409A and the regulations promulgated thereunder. All of the named executive officers are eligible to receive benefits from the Loral SERP, except for Mr. Celli who is eligible to receive benefits from the SS/L SERP.
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 included severance arrangements, in order to induce him to assume the position of Chief Executive Officer and to assure him of a degree of certainty relating to his employment situation and thereby secure his dedication notwithstanding any concern he might have regarding his continued employment prior to or following termination or a change in control.
Mr. Targoff’s employment agreement was amended and restated on December 17, 2008 primarily in order to bring it into documentary compliance with Section 409A of the Internal Revenue Code (“Section 409A”) before December 31, 2008 as required by the IRS.
On July 19, 2011, we entered into an amendment to Mr. Targoff’s employment agreement to, among other things, extend the term of his employment to December 31, 2011. This amendment was effective retroactive to December 31, 2010, the expiration of the employment term under the original employment agreement.
On January 11, 2012, we entered into a second amendment to Mr. Targoff’s employment agreement to, among other things, extend the term of his employment to December 31, 2012. This amendment was effective retroactive to December 31, 2011, the expiration of the employment term under the employment agreement, as amended. The amendments to Mr. Targoff’s employment agreement were entered into in order to induce Mr. Targoff to continue in his position as Chief Executive Officer and to lead the Company as it considered strategic alternatives.
In connection with the corporate office restructuring resulting from the SS/L Sale, Mr. Targoff’s employment as Chief Executive Officer and President of the Company was terminated effective as of December 14, 2012.
Under his employment agreement, as amended, Mr. Targoff was entitled to receive an annual base salary of $1,127,361 for 2012. Mr. Targoff’s base salary was subject to annual review by the Board. The employment agreement also provided that Mr. Targoff would participate in our Management Incentive Bonus Program, with a target annual bonus of one hundred twenty-five percent (125%) of his base salary.
Pursuant to his employment agreement, Mr. Targoff was granted in March 2006 five year options to purchase 825,000 shares of our Voting Common Stock with a per-share exercise price equal to $26.915, the fair market value of one share of our Voting Common Stock on the date of grant. This grant served as Mr. Targoff’s equity awards for 2006 and 2007 and was subject to the approval by our stockholders of our Stock Incentive Plan which was obtained on May 22, 2007 at our 2007 annual meeting of stockholders. As of March 28, 2009, Mr. Targoff was fully vested in these options. Mr. Targoff exercised 300,000 of these options in May 2010 and the remaining 525,000 options in January 2011.
Mr. Targoff was also entitled under his employment agreement to participate in all Company benefit plans, including our Stock Incentive Plan, available to our other executive officers. Mr. Targoff’s participation was on the same basis as other executive officers of the Company.
Upon Mr. Targoff’s termination of employment on account of death or permanent disability during the contract term, or if, during the term of the contract, his employment was terminated by Loral without “cause” or if Mr. Targoff resigned for “good reason” (as such terms are defined in his employment agreement), Mr. Targoff was entitled to a severance payment described below and to accelerated vesting of a portion (in the case of death or disability) or all (in the case of termination by Loral without “cause” or resignation for “good reason”) of his options. These arrangements andCapogrossi received lump sum payments to Mr. Targoff in connection with termination of his employment effective December 14, 2012the Medicare-eligible retiree medical benefit; the amounts of these payments are described more fully below under “Compensation Tables – Potential Changeincluded in Control andthe “All Other Post Employment Payments.”Compensation” column of the Summary Compensation Table.
Mr. Targoff’s employment agreement provided that during the term of Mr. Targoff’s employment with Loral and for a twelve-month period (or twenty-four (24) months in the case of termination following a change in control of Loral) following a termination of employment, Mr. Targoff is restricted from (i) engaging in competitive activities, (ii) directly or indirectly soliciting current and certain former employees of Loral or any of its affiliates and (iii) knowingly soliciting, directly or indirectly, any customers or suppliers within the twelve-month period prior to such termination of employment to terminate or diminish their relationship with Loral or any of its affiliates. In addition, the agreement provided that Mr. Targoff is not allowed to disclose confidential information of Loral.
Mr. Targoff’s employment agreement also provided that if any provision of the agreement (or of any award of compensation, including equity compensation or benefits) would cause him to incur any additional tax or interest under Section 409A, the Company would, after consulting with him, reform such provision to comply with Section 409A, but only if, after consultation, such provision could be reformed to so comply, provided that the Company agreed to maintain, to the maximum extent practicable, the original intent and economic benefit to Mr. Targoff of the applicable provision without violating the provisions of Section 409A. In addition, we agreed to indemnify Mr. Targoff, on an after-tax basis, for any additional tax (including interest and penalties with respect thereto) that may be imposed on him by Section 409A as a result of the options being granted subject to the approval by our stockholders of our Stock Incentive Plan.
In addition, Mr. Targoff’s employment agreement provided for the reimbursement of his attorney’s fees in connection with the negotiation of the employment agreement and a tax gross-up payment to cover his taxes for any such reimbursement.
Loral Holdings Corporation and SS/L guaranteed the payment and performance of Loral’s obligations under the employment contract with Mr. Targoff.
On December 14, 2012, Loral entered into a consulting agreement with Mr. Targoff. Pursuant to this agreement, Mr. Targoff is engaged as a part-time consultant to the Board to assist the Board with respect to the oversight of strategic matters relating to Telesat and Xtar and the ViaSat lawsuit. See “Certain Relationships and Related Transactions – Consulting Agreements” for further information about this agreement.
Under the agreement, Mr. Targoff receives consulting fees of $120,000 per month before deduction of certain expenses of $17,000 per month for which he reimburses the Company. Mr. Targoff earned $60,000 (before expenses of $8,500 to be reimbursed) for service performed in the period from December 15, 2012 to December 31, 2012.
Other Named Executive Officers
None of the named executive officers other than Mr. Targoff has an employment agreement with the Company.
Severance PoliciesPolicy for Named Executive Officers
Loral Severance Policy for Corporate Officers
In June 2006, the Company formally adopted a severance policy for corporate officers, including the named executive officers who were designated by the plan administrator (other than Mr. Targoff, whose severance was governed by his employment agreement as described above). This policy was amended and restated on December 17, 2008 primarily in order to bring it into documentary compliance with Section 409A of the Internal Revenue Code before December 31, 2008 as required by the IRS.administrator. The policy was again amended and restated in August 2011 primarily to include a provision for severance benefits payable to certain of Loral’s named executive officers
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in the event of termination of employment in connection with or in contemplation of a Corporate Event (defined to include, among other things, a change of control of Loral a sale or spin-off of SS/L or the closing or cessation or reduction in the scope of operations, in whole or in part, of Loral’s corporate headquarters). The Loral Space & Communications Inc. Severance Policy for Corporate Officers (Amended and Restated as of August 4, 2011) (the “Loral Severance Policy for Corporate Officers”) provides for severance benefits following the termination of an eligible officer’s employment by Loral without cause. Severance benefits will be provided at different levels, depending on the seniority and length of service of the officer when termination occurs. Severance benefits are not provided in the event employment is terminated due to death, disability or retirement.
Loral believed it was important and desirable to adopt a severance policy in order to assure Loral’s officers of a degree of certainty relating to their employment situation and thereby secure their dedication, notwithstanding any concerns they might have regarding their continued employment prior to or following termination or a change in control. The amendments were intended to enhance the policies in contemplation of a potential Corporate Event for retention purposes and to keep executives focused on our business and completion of strategic transactions.
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, may compile and organize information, arrange and attend meetings and provide support for the Committee’s work. Mr. Targoff, our Chief Executive Officer and President until termination of his employment on December 14, 2012, recommended compensation levels and awards to the Committee with respect to the other named executive officers. The Committee determined Mr. Targoff’s compensation without any input from any other executive officer. Ultimately, all compensation decisions for the named executive officers are approved by the Committee.
Tax Aspects of Executive Compensation
Section 162(m) of the Internal Revenue Code generally limits our corporate tax deduction for compensation that is not “performance based” to $1 million annually that is paid to each named executive officer who is a Company employee at year-end. Options granted under our Stock Incentive Plan are designed to meet the Section 162(m) requirements for performance-based compensation, and are, therefore, exempt from the $1 million limitation on tax deductions for a named executive officer’s compensation in any fiscal year. Our other bonus and incentive programs, however, areannual MIB program is not designed to meet the technical Section 162(m) requirements. Accordingly, for 2012,2015, compensation payablepaid to our named executive officers in thean aggregate amount of $949,358$63,649 is not deductible. In addition to these bonus and incentive programs,our annual MIB program, there may be other instances in which the Committee determines that it cannot structure compensation to meet Section 162(m) requirements. In those instances, the Committee may elect to structure elements of compensation (such as certain qualitative factors in annual bonuses) to accomplish business objectives that it believes are in our best interests and those of our stockholders, even though doing so may reduce the amount of our tax deduction for such compensation.
Report of the Compensation Committee
The Compensation Committee has reviewed and discussed with management the above “Compensation Discussion and Analysis” contained in this Proxy Statement and in the Company’s Amendment No. 1 to Annual Report for the year ended December 31, 2012 on Form 10-K/A.Statement. Based upon that review and those discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and in Amendment No. 1 to Annual Report for the year ended December 31, 2012 on Form 10-K/A.Statement.
The Compensation Committee
Mark H. Rachesky, M.D., Chairman
John D. Harkey, Jr.
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Change in | ||||||||||||||||||||||||
Pension | All Other | |||||||||||||||||||||||
Name and Principal | Salary | Bonus | Value(2) | Compensation(3) | Total | |||||||||||||||||||
Position | Year | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||
Avi Katz | 2015 | $ | 567,507 | $ | 444,131 | $ | 40,000 | $ | 206,143 | $ | 1,257,781 | |||||||||||||
President, General Counsel and Secretary | 2014 | $ | 550,978 | $ | 431,196 | $ | 143,000 | $ | 124,081 | $ | 1,249,255 | |||||||||||||
2013 | $ | 534,930 | $ | 418,636 | $ | 65,173 | $ | 18,922 | $ | 1,037,661 | ||||||||||||||
John Capogrossi | 2015 | $ | 393,710 | $ | 256,765 | $ | 62,000 | $ | 135,127 | $ | 847,602 | |||||||||||||
Vice President, Chief Financial Officer, | 2014 | $ | 382,243 | $ | 249,286 | $ | 190,000 | $ | 84,220 | $ | 905,749 | |||||||||||||
Treasurer and Controller(1) | 2013 | $ | 359,798 | $ | 242,026 | $ | 23,302 | $ | 12,326 | $ | 637,452 |
(1) | The |
Compensation Tables
Summary Compensation Table
Non-Equity | ||||||||||||||||||||||||||
Incentive | Change in | |||||||||||||||||||||||||
Plan | Pension | All Other | ||||||||||||||||||||||||
Name and Principal | Salary(3) | Bonus(4) | Compensation(5) | Value(6) | Compensation(7) | Total | ||||||||||||||||||||
Position(1) | Year | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||
Michael B. Targoff | 2012 | $ | 1,084,001 | $ | 1,675,991 | — | $ | 1,521,000 | $ | 5,787,600 | $ | 10,068,592 | ||||||||||||||
Vice Chairman of the Board and | 2011 | $ | 1,094,525 | — | $ | 1,675,991 | $ | 686,000 | $ | 107,371 | $ | 3,563,887 | ||||||||||||||
Former Chief Executive Officer andPresident | 2010 | $ | 953,669 | — | $ | 1,550,250 | $ | 560,000 | $ | 98,683 | $ | 3,162,602 | ||||||||||||||
Avi Katz | 2012 | $ | 523,085 | $ | 756,443 | — | $ | 415,000 | $ | 18,722 | $ | 1,713,250 | ||||||||||||||
President, General Counsel and Secretary | 2011 | $ | 505,904 | — | $ | 406,443 | $ | 225,000 | $ | 18,521 | $ | 1,155,868 | ||||||||||||||
2010 | $ | 489,231 | — | $ | 295,954 | $ | 148,000 | $ | 22,299 | $ | 955,484 | |||||||||||||||
Harvey B. Rein | 2012 | $ | 525,178 | $ | 658,069 | — | $ | 683,000 | $ | 18,207 | $ | 1,884,454 | ||||||||||||||
Senior Vice President and | 2011 | $ | 507,928 | — | $ | 408,069 | $ | 433,000 | $ | 18,006 | $ | 1,367,003 | ||||||||||||||
Chief Financial Officer | 2010 | $ | 491,204 | — | $ | 297,138 | $ | 307,000 | $ | 21,784 | $ | 1,117,126 | ||||||||||||||
John Capogrossi | 2012 | $ | 316,762 | $ | 289,085 | — | $ | 305,000 | $ | 12,126 | $ | 922,973 | ||||||||||||||
Vice President and Controller(2) | ||||||||||||||||||||||||||
Richard P. Mastoloni | 2012 | $ | 513,551 | $ | 1,716,593 | — | $ | 465,000 | $ | 1,528,006 | $ | 4,223,150 | ||||||||||||||
Former Senior Vice President – Finance | 2011 | $ | 518,537 | — | $ | 416,593 | $ | 175,000 | $ | 14,627 | $ | 1,124,757 | ||||||||||||||
and Treasurer | 2010 | $ | 501,544 | — | $ | 303,344 | $ | 108,000 | $ | 18,405 | $ | 931,293 | ||||||||||||||
John Celli | 2012 | $ | 380,769 | — | — | $ | 378,000 | $ | 9,347 | $ | 768,116 | |||||||||||||||
President of SS/L | 2011 | $ | 450,000 | — | $ | 532,125 | $ | 358,000 | $ | 9,693 | $ | 1,349,818 | ||||||||||||||
2010 | $ | 451,363 | — | $ | 529,958 | $ | 289,000 | $ | 8,707 | $ | 1,279,028 |
(2) |
Special discretionary bonuses were awarded by the Company to Messrs. Katz, Rein, Capogrossi and Mastoloni in the amount of $350,000, $250,000, $125,000 and $1,300,000, respectively, in recognition of their performance in connection with the SS/L Sale. Mr. Celli also received a special discretionary bonus in recognition of his performance in connection with the SS/L Sale in the amount of $2,554,739 which was paid by SS/L after closing of the SS/L Sale. See “Compensation Discussion and Analysis — Elements of Compensation — SS/L Sale Transaction Bonuses.”
For |
(3) | The following table describes each component of the “All Other Compensation” column in the Summary Compensation Table above. |
All Other Compensation
Value of | Company | Medical | ||||||||||||||||||||
Insurance | Matching | Executive | ||||||||||||||||||||
Premiums | 401(k) | Reimbursement | ||||||||||||||||||||
Name | Year | Paid | Contributions | Expense | Other | Total | ||||||||||||||||
Michael B. Targoff | 2012 | $ | 25,105 | $ | 10,001 | — | $ | 5,752,494 | $ | 5,787,600 | ||||||||||||
2011 | $ | 25,105 | $ | 9,800 | — | $ | 72,466 | $ | 107,371 | |||||||||||||
2010 | $ | 25,105 | $ | 9,800 | $ | 3,778 | $ | 60,000 | $ | 98,683 | ||||||||||||
Avi Katz | 2012 | $ | 8,721 | $ | 10,001 | — | — | $ | 18,722 | |||||||||||||
2011 | $ | 8,721 | $ | 9,800 | — | — | $ | 18,521 | ||||||||||||||
2010 | $ | 8,721 | $ | 9,800 | $ | 3,778 | — | $ | 22,299 | |||||||||||||
Harvey B. Rein | 2012 | $ | 8,206 | $ | 10,001 | — | — | $ | 18,207 | |||||||||||||
2011 | $ | 8,206 | $ | 9,800 | — | — | $ | 18,006 | ||||||||||||||
2010 | $ | 8,206 | $ | 9,800 | $ | 3,778 | — | $ | 21,784 | |||||||||||||
John Capogrossi | 2012 | $ | 2,125 | $ | 10,001 | — | — | $ | 12,126 | |||||||||||||
Richard P. Mastoloni | 2012 | $ | 4,827 | $ | 10,001 | — | $ | 1,513,178 | $ | 1,528,006 | ||||||||||||
2011 | $ | 4,827 | $ | 9,800 | — | — | $ | 14,627 | ||||||||||||||
2010 | $ | 4,827 | $ | 9,800 | $ | 3,778 | — | $ | 18,405 | |||||||||||||
John Celli | 2012 | — | $ | 9,347 | — | — | $ | 9,347 | ||||||||||||||
2011 | — | $ | 9,693 | — | — | $ | 9,693 | |||||||||||||||
2010 | — | $ | 8,707 | — | — | $ | 8,707 |
The table above identifies and quantifies the compensation items set forth in the “All Other Compensation” column. These items include the value of life insurance premiums paid by the Company, Company 401(k) matching contributions and the expense incurred by us in 2010 with respect to the participation in our medical executive reimbursement program, which program was discontinued effective in 2011.
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 $60,000 for director fees received in 2012, 2011 and 2010, respectively, for his service on the Board of Directors; and (v) $12,466 for reimbursement of legal fees ($6,804) and a tax gross-up ($5,662) in 2011 in connection with the amendment of his employment agreement. Consulting and director fees received by Mr. Targoff in 2012 are also included in the 2012 Director Compensation Table below. See “Executive Compensation – Compensation Tables – Directors Compensation for Fiscal 2012.”
For Mr. Mastoloni, the “Other” column in the table above includes the following payments paid to Mr. Mastoloni in 2012 in connection with the termination of his employment effective December 14, 2012: (i) a $1,484,779 severance payment; (ii) $9,654 in lieu of continuation after termination of employment of his executive life insurance benefits to which he was entitled under our severance policy; (iii) $18,488 for accrued but unused vacation; and (iv) $257 as additional income equal to the value of certain equipment acquired by Mr. Mastoloni upon termination of his employment.
Outstanding Equity Awards at 2012 Fiscal Year-End
There were no outstanding unexercised stock options or other unvested stock awards held by the named executive officers as of December 31, 2012.
Option Exercises and Stock Vested in Fiscal 2012
The following table provides information on the exercise of stock options and vesting of other stock awards held by the named executive officers during 2012.
Option Awards | Stock Awards | |||||||||||||||
Number of | Number of | |||||||||||||||
Shares Acquired | Value Realized | Shares Acquired | Value Realized | |||||||||||||
on Exercise | on Exercise | on Vesting | on Vesting | |||||||||||||
Name | (#) | ($) | (#) | ($) | ||||||||||||
Michael B. Targoff | 93,750 | $ | 4,302,188 | |||||||||||||
37,760 | (1) | $ | 1,377,481 | |||||||||||||
Avi Katz | 50,000 | $ | 2,622,450 | 192 | (3) | $ | 14,192 | |||||||||
8,750 | (2) | $ | 225,488 | |||||||||||||
Harvey B. Rein | 35,000 | $ | 1,835,715 | 192 | (3) | $ | 14,192 | |||||||||
8,750 | (2) | $ | 225,488 | |||||||||||||
John Capogrossi | 20,000 | $ | 1,038,880 | 128 | (3) | $ | 9,461 | |||||||||
6,250 | (2) | $ | 161,063 | |||||||||||||
Richard P. Mastoloni | 10,000 | $ | 519,440 | 192 | (3) | $ | 14,192 | |||||||||
12,083 | (1) | $ | 502,703 | |||||||||||||
8,750 | (2) | $ | 225,488 | |||||||||||||
John Celli | 11,250 | (2) | $ | 289,913 |
Value of | Company | Lump Sum | ||||||||||||||||||||||
Insurance | Matching | SERP | Retiree | |||||||||||||||||||||
Premiums | 401(k) | Make-Whole | Medical | |||||||||||||||||||||
Name | Year | Paid | Contribution s | Payment | Payment | Total | ||||||||||||||||||
Avi Katz | 2015 | $ | 8,721 | $ | 10,601 | $ | 128,621 | $ | 58,200 | $ | 206,143 | |||||||||||||
2014 | $ | 8,721 | $ | 10,401 | $ | 104,959 | — | $ | 124,081 | |||||||||||||||
2013 | $ | 8,721 | $ | 10,201 | — | — | $ | 18,922 | ||||||||||||||||
John Capogrossi | 2015 | $ | 2,125 | $ | 10,601 | $ | 84,301 | $ | 38,100 | $ | 135,127 | |||||||||||||
2014 | $ | 2,125 | $ | 10,401 | $ | 71,694 | — | $ | 84,220 | |||||||||||||||
2013 | $ | 2,125 | $ | 10,201 | — | — | $ | 12,326 |
The table above identifies and quantifies the compensation items set forth in the “All Other Compensation” column. These items include the value of |
For the year ended December 31, 2015, Messrs. Katz and Capogrossi received SERP Make-Whole Payments of $128,621 and $84,301, respectively. For the year ended December 31, 2014, Messrs. Katz and Capogrossi received SERP Make-Whole Payments of $39,462 and $22,302, respectively. In addition, in 2014, Messrs. Katz and Capogrossi received SERP Make-Whole Payments with respect to the year ended December 31, 2013 in the amount of $65,497 and $49,392, respectively; these amounts compensate them with respect to 2013 base salary and management incentive bonuses not included in the calculation of the |
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Pension Benefits in Fiscal Year 20122015
The table below sets forth information on the pension benefits for the named executive officers under each of the followingour qualified pension plansplan (the “Loral pension plan”) as of December 31, 2012:2015.
The Loral pension plan is a funded and tax qualified retirement plan that, as of December 31, 2012,2015, covered 440432 participants, including the named executive officers except for Mr. Celli, who, as of December 31, 2012, is covered by the SS/L pension plan.officers. 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 employeesparticipants in the Loral pension plan 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 to the IRS-prescribed limit 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 under our MIB program in that year. For 2012,2015, the SSWB was $110,100$118,500 and the IRS-prescribed compensation limit was $250,000.$265,000. 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 2012,2015, each named executive officer was required to contribute and contributed $2,500.$2,650 to the Loral pension plan. Prior to July 1, 2006, with the exception of Mr. Celli, there was no contribution requirement for the named executive officersany participant to receive this formula.
The normal retirement age as defined |
In connection with the corporate office restructuring as a result of the SS/L Sale, on December 13, 2012, our Board approved termination of the Loral SERP. The Company expects to make lump sum payments to the participants in the Loral SERP between December 16, 2013pension plan is 65. Eligible employees who have achieved ten years of service by the time they reach age 55 are eligible for an early retirement benefit at 50% of the benefit they would receive at age 65. The early retirement benefit increases incrementally (but not linearly) from 50% at age 55 to 100% at age 65 depending on an employee’s age at the time he or she elects early retirement. Currently, Messrs. Katz and December 31, 2013 in accordance withCapogrossi are eligible for early retirement under the requirementsLoral pension plan. In addition to a life annuity, the plan offers other forms of Section 409Abenefit, including spousal survivor annuity options and the regulations promulgated thereunder.beneficiary period-certain options.
The table below indicates the named executive officers’ years of credited service under our pension plansplan and the present value of their accumulated benefits, in each case as of December 31, 2012 (except for Mr. Celli, values for whom are shown as of November 2, 2012, the date of completion of the SS/L Sale). During 2012, no payments were made to any of the named executive officers.2015.
20122015 Pension Benefits
Present Value of | ||||||||||
Number of Years | Accumulated | |||||||||
of Credited Service(1) | Benefit(2) | |||||||||
Name | Plan Name | (#) | ($) | |||||||
Michael B. Targoff | Loral Pension Plan | 24 | $ | 483,000 | ||||||
Loral SERP | 24 | $ | 4,591,000 | |||||||
Avi Katz | Loral Pension Plan | 16 | $ | 365,000 | ||||||
Loral SERP | 16 | $ | 859,000 | |||||||
Harvey B. Rein | Loral Pension Plan | 33 | $ | 893,000 | ||||||
Loral SERP | 33 | $ | 1,731,000 | |||||||
John Capogrossi | Loral Pension Plan | 24 | $ | 654,000 | ||||||
Loral SERP | 24 | $ | 501,000 | |||||||
Richard P. Mastoloni | Loral Pension Plan | 15 | $ | 271,000 | ||||||
Loral SERP | 15 | $ | 745,000 | |||||||
John Celli | SS/L Pension Plan | 32 | $ | 929,000 | ||||||
SS/L SERP | 32 | $ | 859,000 |
Number of | ||||||||
Years of | Present Value of | |||||||
Credited | Accumulated | |||||||
Service(1) | Benefit(2) | |||||||
Name | (#) | ($) | ||||||
Avi Katz | 19 | $ | 547,000 | |||||
John Capogrossi | 27 | $ | 915,000 |
(1) | The number of years of credited service is rounded to the nearest whole number as of December 31, |
(2) | The accumulated benefit for The present value of accumulated benefit for the qualified pension plan for Messrs. Katz and Capogrossi has been calculated |
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Nonqualified Deferred Compensation in Fiscal 2012
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 declined below $28.441, the corresponding portion of the deferred compensation accounts would have declined accordingly. The deferred compensation accounts for the named executive officers were converted into interest-bearing accounts upon exercise of the related stock options. Pursuant to the terms of the deferred compensation arrangements, vested balances, with applicable accrued interest thereon, were distributed to the named executive officers (except for Mr. Celli) in December 2012. Mr. Celli’s vested balance was distributed to him in November 2012 upon closing of the SS/L Sale.
The table below identifies the aggregate earnings and aggregate withdrawals/distributions during 2012.
2012 Nonqualified Deferred Compensation
Aggregate | ||||||||
Aggregate Earnings | Withdrawals/ | |||||||
in Last FY(1) | Distributions | |||||||
Name | ($) | ($) | ||||||
Michael B. Targoff | $ | 1,621 | $ | 1,012,645 | ||||
Avi Katz | $ | 526 | $ | 472,576 | ||||
Harvey B. Rein | $ | 595 | $ | 472,887 | ||||
John Capogrossi | $ | 282 | $ | 236,389 | ||||
Richard P. Mastoloni | $ | 469 | $ | 378,321 | ||||
John Celli | $ | 553 | $ | 378,828 |
Potential Change in Control and other Post Employment Payments
As discussed above in the Compensation Discussion and Analysis, prior to terminationNone of his employment on December 14, 2012, Michael B. Targoff was the onlyour named executive officer who hadofficers has an employment or other agreement with the Company that providedprovides for potential severance or other post-termination payments. Post-termination
Loral Severance Policy for Corporate Officers
Severance payments for the otherour named executive officers, (other than John Celli), as of December 31, 2012,2015, were governed by Loral’s Severance Policy for Corporate Officers. Post-termination payments for Mr. Celli, as of November 2, 2012, the date of the sale of SS/L by the Company, were governed by SS/L’s Severance Policy. In this section, we provide details of these arrangements.
CEO
Mr. Targoff’s employment agreement provided that, upon Mr. Targoff’s death or disability during the term of his employment agreement, Mr. Targoff would be entitled to, among other payments, his accrued and unpaid bonus for the preceding year, a pro rated annual bonus for the year in which such death or permanent disability occurred, acceleration of vesting of a prorated portion of the next vesting tranche of stock options and deferred compensation units, and, in the case of his death, salary through the end of the month in which he died. In addition, under the agreement, in the event of his death, his dependents would be entitled to continued medical, prescription drug and dental insurance coverage through the end of the term of the agreement.
Mr. Targoff’s employment agreement also provided that, in the event that during the term of his employment agreement Mr. Targoff’s employment were terminated by us without “cause” or Mr. Targoff resigned for “good reason” (as such terms are defined in his employment agreement), Mr. Targoff would be entitled to a severance payment, in a lump sum, equal to two (2) times the sum of his base salary and annual bonus (for the preceding year). In addition, under the agreement, Mr. Targoff would be entitled to any accrued and unpaid annual bonus for the preceding year and a prorated annual bonus for the year in which any such termination of employment occurred. Mr. Targoff and his dependents would also be entitled under the agreement to coverage under Loral’s medical, dental and life insurance in effect immediately prior to such termination for eighteen (18) months following such termination, or until he commenced new employment and became eligible for comparable benefits. In addition, under the agreement, all of Mr. Targoff’s stock options, deferred compensation account and any other equity awards then held by Mr. Targoff would become fully vested. Mr. Targoff’s severance payments and benefits under his employment agreement were contingent upon his execution of a release of claims in our favor. Mr. Targoff was not entitled to a tax gross-up payment in the event that he became 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. Targoff’s employment as Chief Executive Officer and President of the Company was terminated effective as of December 14, 2012, and he received the severance benefits provided for by his employment agreement. See “Executive Compensation – Compensation Tables – Summary Compensation Table.”
Other Named Executive Officers
Messrs. Katz, Rein, Capogrossi and Mastoloni. As noted above in the Compensation Discussion and Analysis, the Company maintains the Loral Severance Policy for Corporate Officers, whichthis policy provides for potential severance benefits for the named executive officers. officers following the termination of an eligible officer’s employment by the Company without cause, including termination without cause in connection with or in contemplation of a Corporate Event (defined to include, among other things, a change of control of Loral or the closing or cessation or reduction in the scope of operations, in whole or in part, of Loral’s corporate headquarters), in each case, subject to the execution of a release of claims against the Company.
Pursuant to this policy, an eligible officer within the titleevent of Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer or Executive Vice President whose severance is not otherwise governed by an employment agreementsuch termination, Messrs. Katz and Capogrossi will be entitled to cash severance payments aggregating to the sum of (x) twelve months’ pay (defined as base salary plus average annual incentive bonus compensation paid over the last two years of employment) and (y) twelve months’ base salary. If such termination is in connection with a Corporate Event, the entire payment will be made in a lump sum within twenty days of termination and will not be subject to mitigation for subsequent employment. To the extent that such termination is not in connection with a Corporate Event, payment will be made in installments as follows. The terminated officer will receive an initial lump sum payment within twenty days of termination, not subject to mitigation, equal to the greater of (A) six months’ pay and (B) 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’shis full years of service with the Company. If the officer is unemployed after six 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 of his cash severance (the “Remainder”) will be paid in biweekly installments over eighteen months beginning on the six-month anniversary of termination, the first thirteen payments, if any, aggregating to the lesser of six months’ pay and such Remainder, and the next twenty-six payments, if any, aggregating to the lesser of one year’s base salary and the excess of the Remainder over six months’ pay. In all events,For terminations not in connection with a Corporate Event, the Remainder is subject to reduction by any amount of compensation then being received by the officer from other employment (including self-employment).
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 atUnder this policy, a rate of pay that is less than his rate of pay immediately prior to termination), the Remainder will be paid in biweekly installments over twelve weeks beginning on the three-month anniversary of the termination, subject to reduction by any amount of compensation then being received by the officer from other employment (including self-employment).
The Loral Severance Policy for Corporate Officers also provides for severance benefits payable to certain of Loral’s named executive officers in the event of termination of employment in connection with or in contemplation of a Corporate Event (defined to include, among other things, a change of control of Loral, a sale or spin-off of SS/L or the closing or cessation or reduction in the scope of operations, in whole or in part, of Loral’s corporate headquarters). In such event, named executive officers who are Senior Vice Presidents of Loral would be entitled to severance benefits that include, among other things, payment in a lump sum of an amount equal to one year’s pay (base salary and average bonus paid over the last two years) plus one year’s base salary, and named executive officers who are Vice Presidents of Loral would be entitled to severance benefits that include, among other things, payment in a lump sum of an amount equal to six months’ pay plus two weeks’ pay for every year of service with the Company plus one twelfth of two weeks’ pay for every month of service with the Company in excess of the officer’s full years of service with the Company.
If a terminated officer has outstanding unvested stock options or other equity or incentive compensation awards that provide for less than 100% vesting upon such a termination, such officer will vest (x) with respect to time-vested awards, in the next full tranche that would have vested on the next vesting date for such awards, and (y) with respect to performance-vested awards, in that portion of such awards that would have vested during the twelve months following such termination based on the actual achievement of the applicable performance thresholds. If such termination occurs within six months following a major corporate transaction, acquisition or divestiture, however, the terminated officer will be entitled to full vesting of his unvested awards, unless the plan administrator determines that such termination is not the result of such corporate transaction, acquisition or divestiture.
A terminated officer will also be entitled to continued participation in the Company’s medical, prescription, dental and vision insurance coverage. The officer may, if eligible, elect to participate in the Company’s Retiree Medical Plan by electing to receive benefits from the Loral pension plan. Alternatively, the officer may elect COBRA continuation coverage, and, during the “severance period,” the Company will pay the officer each month an amount equal to the excess, if any, of the full monthly COBRA premiums for such coverage under the Company’s benefit plans under which such medical and dental coverage is provided, as in effect from time to time, over the amount of the portion of such premiums the officer would pay if the officer were an active employee.employee (the “COBRA Reimbursement”). The term “severance period” for purposes of insurance continuationduring which an officer is entitled to the COBRA Reimbursement means, for each of Messrs. Katz and Capogrossi, the Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, Executive Vice President or, inperiod ending on the eventearlier of termination of employment in connection with or in contemplation of a Corporate Event, a Senior Vice President,the date that is twenty-four months following termination and the date such officer becomes eligible for coverage under the plans offered by a Vice President, six calendar months plus the number of full calendar months equal to (x) two weeks’ pay for every year of service plus one twelfth (1/12th) of two weeks’ pay for every month of service in excess of such Vice President’s years of service divided by (y) the monthly rate of the Vice President’s base salary.subsequent employer. During the “severance period,” the officer will also be entitled to continued company-provided executive life insurance benefits, to the extent the officer was receiving such benefits prior to his termination.
Other Potential Post-Termination Payments
Our named executive officers are eligible to receive a bonus under our MIB plan if they are terminated without cause after six months of service during a bonus year, pro-rated for the period during which they served prior to their termination. In addition, they are entitled to receive any accrued but unpaid SERP Make-Whole Payments with respect to the period during which they served prior to their termination for any reason. The MIB payments and SERP Make-Whole Payments to which Messrs. Katz and Capogrossi were entitled as of December 31, 2015 were paid to them in 2016 and are set forth above in the Bonus column of the Summary Compensation Table and in the SERP Make-Whole Payment column of the All Other Compensation Table, respectively.
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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 Sale, SS/L maintained a severance policy for the named executive officers who are officers of SS/L. Under SS/L’s Severance Policy, separation pay is provided at different levels depending on the seniority and length of service of the officer when termination occurs. Career band employees, of which Mr. Celli is one, may be eligible to receive between 10.8 weeks of pay (for service of one year) and 52 weeks of pay (for service of 20 years or more). Certain employees designated by the plan administrator are eligible for enhanced severance of between 50% and 150% of pay in the event of termination without cause upon or within 12 or 18 months following a change in control. Prior to the sale of SS/L by Loral, Mr. Celli had been designated to be eligible for enhanced severance, and, upon termination without cause upon or within 18 months of a change in control of SS/L, would be entitled to receive 150% of pay. Severance benefits are not provided in the event employment is terminated due to voluntary retirement or involuntarily for poor performance, violation of SS/L policies or for other cause.
Potential Severance Payments
upon TerminationUnder the Loral Severance Policy for Corporate Officers
(As of December 31, 2012)2015)(1)
Severance for | ||||||||
Termination | ||||||||
Without Cause | ||||||||
Severance for | upon a | |||||||
Termination | Change in Control | |||||||
Without Cause(2) | or Corporate Event(3) | |||||||
Name | ($) | ($) | ||||||
Michael B. Targoff | $ | 5,606,704 | (4) | $ | 5,606,704 | |||
Avi Katz | $ | 794,448 | $ | 1,448,605 | ||||
Harvey B. Rein | $ | 1,454,401 | $ | 1,659,509 | (5) | |||
John Capogrossi | $ | 532,103 | $ | 684,092 | ||||
Richard P. Mastoloni | $ | 792,033 | $ | 1,484,779 | (6) | |||
John Celli | $ | 450,000 | $ | 1,304,969 |
Severance for | ||||
Termination | ||||
Without Cause(2) | ||||
Name | ($) | |||
Avi Katz | $ | 1,646,334 | (3) | |
John Capogrossi | $ | 1,047,321 | (4) |
(1) | None of the named executive officers |
(2) |
(3) | |
(4) | Amount for Mr. Capogrossi |
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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 October 28, 2013March 31, 2016 concerning persons who may be deemed beneficial owners of 5% or more of the outstanding shares of Voting Common Stock because they possessed or shared voting or investment power with respect to the shares of Voting Common Stock:Stock.
Amount and Nature | Percent | |||||||
of Beneficial | of | |||||||
Name and Address | Ownership | Class(1) | ||||||
Various funds affiliated with MHR Fund Management LLC and Mark H. Rachesky, M.D.(2) 40 West 57th Street, 24th Floor, New York, NY 10019 | 8,144,719 | 38.0 | %(3) | |||||
Highland Capital Management, L.P., Strand Advisors, Inc. and James D. Dondero(4) 300 Crescent Court, Suite 700 Dallas, TX 75201 | 1,800,000 | 8.4 | % | |||||
Solus Alternative Asset Management LP., Solus GP LLC and Christopher Pucillo(5) 410 Park Avenue, 11th Floor, New York, NY 10022 | 1,585,553 | 7.4 | % |
Amount and Nature | Percent | |||||||
of Beneficial | of | |||||||
Name and Address | Ownership | Class(1) | ||||||
Various funds affiliated with | ||||||||
MHR Fund Management LLC and Mark H. Rachesky, M.D.(2) | ||||||||
1345 Avenue of the Americas, 42nd Floor, New York, NY 10105 | 8,544,419 | (3) | 39.88 | %(3) | ||||
Solus Alternative Asset Management LP., Solus GP LLC and Christopher Pucillo(4) | ||||||||
410 Park Avenue, 11th Floor, New York, NY 10022 | 2,133,891 | 9.96 | % | |||||
Various entities affiliated with Highland Capital Management, L.P. and James D. Dondero(5) | ||||||||
300 Crescent Court, Suite 700 Dallas, TX 75201 | 2,119,329 | 9.89 | % | |||||
Leon G. Cooperman(6) | ||||||||
11431 West Palmetto Park Road, Boca Raton, FL 33428 | 1,659,047 | 7.74 | % | |||||
Soros Fund Management LLC, George Soros and Robert Soros(7) | ||||||||
250 West 55th Street, 38th Floor, New York, NY 10019 | 1,077,127 | 5.03 | % |
(1) | Percent of class refers to percentage of class beneficially owned as the term beneficial ownership is defined in Rule 13d-3 under the Securities Exchange Act of 1934 and is based upon the |
(2) | Information based on Amendment Number MHRC LLC (“MHRC”) is the managing member of Advisors and, in such capacity, may be deemed to beneficially own the shares of Common Stock held for the accounts of each of Master Account II Holdings and Capital Partners (100). MHRC I LLC (“MHRC I”) is the managing member of Institutional Advisors and, in such capacity, may be deemed to beneficially own the shares of Common Stock held for |
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.
27 |
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