SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
File by the Registrant [x]
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[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only
(as permitted by Rule 14-a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
SKYTERRA COMMUNICATIONS, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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SKYTERRA COMMUNICATIONS, INC.
19 WEST 44TH STREET, SUITE 507
NEW YORK, NEW YORK 10036
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held December 10, 2004
To the holders of common stock and convertible preferred stock of SkyTerra
Communications, Inc., a Delaware corporation:
Please take notice that our annual meeting of stockholders for the year
ended December 31, 2003 will be held in the Concorde Room, 3rd floor, at the
Dylan Hotel, 52 East 41st Street, New York, New York 10017 on December 10,
2004, at 10:00 a.m., local time, for the following purposes, all as more fully
described in the attached Proxy Statement:
1. To elect five (5) Directors;
2. To ratify the appointment of KPMG LLP as the independent auditors of the
Company for the year ending December 31, 2004; and
3. To transact such other business as may come before the annual meeting or any
adjournment or postponement thereof.
Stockholders are urged to read carefully the attached proxy statement for
additional information concerning the matters to be considered at our annual
meeting. The board of directors has fixed the close of business on October 29,
2004 as the record date for the determination of stockholders entitled to vote
at the annual meeting. Only stockholders of record at the close of business on
October 29, 2004 will be entitled to notice of, and to vote at, the meeting or
any postponement or adjournment thereof. The proxy statement is being mailed to
these stockholders on or about November 12, 2004.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, WE RESPECTFULLY URGE
YOU TO COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD OR
VOTING INSTRUCTION CARD. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE MEETING, YOU MAY VOTE IN PERSON, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
By Order of the Board of Directors,
/s/ Robert C. Lewis
--------------------------------------
Robert C. Lewis
Senior Vice President, General Counsel
and Secretary
New York, New York
November 8, 2004
IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY MAIL YOUR PROXY CARD
OR VOTING INSTRUCTION CARD.
TABLE OF CONTENTS
PAGE
----
Questions and Answers about the Annual Meeting 2
Proposal 1 Election of Directors 6
Proposal 2 Ratify the Appointment of KPMG LLP as the Independent
Auditors of the Company for the Year Ended December 31, 2004 11
Security Ownership of Certain Beneficial Owners and Management 12
Executive Compensation 14
Board Audit Committee Report 17
Board Compensation Committee Report on Executive Compensation 17
Performance Graph 19
Forward Looking Statements 20
Other Business 20
Stockholder Proposals 20
Additional Information 20
Annual Report on Form 10-K 20
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
WHEN AND WHERE IS THE ANNUAL MEETING?
The annual meeting will be held on December 10, 2004, beginning at 10:00
a.m., local time, in the Concorde Room, 3rd floor, at the Dylan Hotel, 52 East
41st Street, New York, New York 10017.
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the annual meeting, we will ask you to consider and approve the matters
set forth in the accompanying notice of meeting and described in this proxy
statement, including the election of directors and ratification of our
independent public accountants.
WHY DID I RECEIVE THIS PROXY STATEMENT?
We sent you this proxy statement and the enclosed proxy card or voting
instruction card because our board of directors is soliciting your proxy to
vote at the annual meeting of stockholders.
This proxy statement summarizes the information you need to know to vote
on an informed basis at the annual meeting; however, you do not need to attend
the annual meeting to vote your shares (see "How Do I Vote?"). We began sending
this proxy statement, the attached notice of annual meeting and the enclosed
proxy card on or about November 12, 2004, to all stockholders entitled to vote.
HOW MANY SHARES OF VOTING STOCK ARE OUTSTANDING?
On October 29, 2004, the record date, there were 6,089,809 shares of our
voting common stock outstanding. In addition to this voting common stock, there
were 8,990,212 shares of our non-voting common stock and 1,199,007 shares of
preferred stock outstanding, all of which are owned by Apollo Investment Fund
IV, L.P.; Apollo Overseas Partners IV, L.P.; and AIF IV/RRRR LLC (collectively,
the "Apollo Stockholders").
WHO IS ENTITLED TO VOTE?
If our records show that you are a holder of our common stock or our
preferred stock as of the close of business on October 29, 2004, you are
entitled to receive notice of the annual meeting and to vote such shares of
common stock or preferred stock that you held on the record date. The voting
common stockholders and the preferred stockholders will vote together as a
single class on the ratification of KPMG as our accountants for 2004 and the
election of three director nominees. Only the preferred stockholders are
entitled to vote on the election of the other two director nominees. The
holders of our non-voting common stock are not entitled to vote such shares on
any matters at the annual meeting.
HOW MANY VOTES IS THE COMMON STOCK ENTITLED TO?
Each share of outstanding voting common stock owned as of the record date
entitles the holder to one vote for each matter to be voted upon. Accordingly,
the holders of common stock are entitled to an aggregate of 6,089,809 votes.
2
HOW MANY VOTES IS THE PREFERRED STOCK ENTITLED TO?
When voting with the holders of common stock, the holders of preferred
stock are entitled to an aggregate of 975,000 votes, or 0.813 votes per share
of preferred stock.
HOW MANY VOTES ARE THE HOLDERS OF PREFERRED STOCK ENTITLED TO, BASED ON THEIR
AGGREGATE HOLDINGS?
In addition to being entitled to 975,000 votes with respect to the
preferred stock, the Apollo Stockholders and an affiliate of theirs that
acquired shares of common stock of the company as a result of a tender offer in
2002, also own 1,745,375 shares of our voting common stock and 8,990,212 shares
of our non-voting common stock. Although the Apollo Stockholders and the
affiliate beneficially own 71.2% of our common stock and 38.6% of our
outstanding voting power, they have agreed to cause their affiliate to vote
474,427 common shares pro-rata with all other votes cast by the holders of
voting common stock.
CAN I ATTEND THE ANNUAL MEETING?
If you owned common stock or preferred stock on the record date, you can
attend the annual meeting. You should be prepared to present photo
identification for admittance. In addition, if your shares are held in the name
of your broker, bank or other nominee, you must bring an account statement or
letter from the nominee indicating that you are the beneficial owner of the
shares on the record date.
WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A STOCKHOLDER OF RECORD AND
HOLDING SHARES AS A BENEFICIAL OWNER?
Most of our stockholders hold their shares through a broker or other
nominee, rather than directly in their own name. The following are some
distinctions between shares held of record and those owned beneficially.
o Stockholder of Record: If your shares are registered directly in your
name with our transfer agent, American Stock Transfer & Trust Co., you
are considered, with respect to those shares, the stockholder of
record, and these proxy materials are being sent directly to you by
the transfer agent. As a stockholder of record, you have the right to
grant your voting proxy directly to us or to vote in person at the
annual meeting. The transfer agent has enclosed or sent a proxy card
for you to use.
o Beneficial Owner: If your shares are held in a brokerage account or by
another nominee, you are considered the beneficial owner of the shares
held in "street name," and these proxy materials are being forwarded
to you by your broker or nominee, together with a voting instruction
card. As the beneficial owner, you have the right to direct your
broker or nominee how to vote your shares and are also invited to
attend the annual meeting.
IF I PLAN TO ATTEND THE ANNUAL MEETING, SHOULD I STILL VOTE BY PROXY?
Whether you plan to attend the annual meeting or not, we urge you to vote
by returning the enclosed proxy card or voting instruction card. Returning the
proxy card or voting instruction card will not affect your right to attend the
annual meeting and vote.
HOW DO I VOTE?
o If you are a stockholder of record, you may instruct the proxy holders
named in the enclosed proxy card how to vote your shares of common
stock or shares of preferred stock by signing, dating and mailing the
proxy card in the postage-paid envelope that has been provided to you.
If you are a stockholder of record and attend the annual meeting, you
may deliver your completed proxy card in person.
o If you are a beneficial owner, you will receive a voting instruction
card from your nominee which you must properly execute in order to
have your shares voted by proxy by the nominee. Beneficial owner
stockholders who wish to vote at the meeting will need to obtain a
proxy form from the broker, bank or other nominee that holds their
shares of record.
3
CAN I CHANGE MY VOTE OR REVOKE MY PROXY?
Any stockholder who executes and returns a proxy may revoke such proxy or
change his or her vote at any time before it is voted at the annual meeting by:
(1) filing with the Secretary of the Company, at 19 West 44th Street,
Suite 507, New York, New York 10036, written notice of revocation
bearing a later date than the proxy; or
(2) filing a duly executed proxy bearing a later date; or (3) appearing in
person and voting by ballot at the annual meeting.
Any stockholder of record as of the record date attending the annual
meeting may vote in person whether or not a proxy has been previously given,
but the presence (without further action) of a stockholder at the annual
meeting will not constitute revocation of a previously given proxy. If you are
a beneficial owner who has properly executed and returned a voting instruction
card to your broker or nominee, you may change your vote by submitting new
voting instructions to your broker or nominee, or, if you have obtained a legal
proxy from your broker or nominee giving you the right to vote your shares, by
attending the annual meeting and voting in person.
WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
If your shares are registered differently and are in more than one
account, you will receive more than one proxy card or voting instruction card,
each of which will indicate the number of shares you are entitled to vote on
that particular card. Sign and return all proxy cards or voting instruction
cards to ensure that all your shares are voted.
HOW DOES THE BOARD OF DIRECTORS RECOMMEND I VOTE ON THE PROPOSALS?
The board of directors recommends that you vote in favor of the election
of the director nominees and in favor of the ratification of the appointment of
the independent auditors.
WHAT CONSTITUTES A QUORUM AND WHY IS IT NECESSARY?
In order to carry on the business of the annual meeting, we must have a
quorum. The holders of a majority of the total number of votes of our capital
stock, present in person or represented by proxy, will constitute a quorum for
the transaction of business at the annual meeting. Abstentions and broker
non-votes, if any, will count for quorum purposes. If you submit a properly
executed proxy card or voting instruction card, even if you abstain from
voting, you will be considered part of the quorum.
WHAT IS A BROKER NON-VOTE?
A broker non-vote occurs with respect to any proposal when a broker holds
your shares in its name and is not permitted to vote on that proposal without
instruction from the beneficial owner of the shares and no instruction is given.
WHAT VOTE IS REQUIRED FOR APPROVAL OF THE PROPOSALS?
Our directors will be elected by a plurality of the votes cast at the
annual meeting. In the election of directors, votes to withhold authority,
abstentions from voting and broker non-votes, if any, will be disregarded and
have no effect on the outcome of the vote.
Ratification of the appointment of the independent auditors requires the
affirmative vote of the holders of a majority of the total number of votes of
our capital stock, present in person or represented by proxy. With respect to
the ratification of the appointment of auditors, abstentions from voting will
have the same effect as voting against such matter and broker non-votes, if
any, will be disregarded and have no effect on the outcome of the vote.
4
As of October 29, 2004, our directors, executive officers and affiliates
had the right to vote 1,762,175 shares of our common stock and all of the
shares of our preferred stock (with 975,000 votes). The Apollo Stockholders
have indicated that they will vote, or cause to be voted, 2,245,948 votes that
they control, 31.8% of the votes entitled to be cast at the meeting, in favor
of the election of the director nominees and in favor of the ratification of
the appointment of the independent auditors. As the Apollo Stockholders control
over 29.9% of the vote at the annual meeting, in accordance with an investment
agreement signed in April 2002, the Apollo Stockholders will cause an affiliate
to vote 474,427 shares of common stock pro-rata with all other votes cast by
holders of voting common stock.
WILL OTHER MATTERS BE VOTED ON AT THE ANNUAL MEETING?
We are not aware of any other matters to be presented at the annual
meeting other than those described in this proxy statement. If any other
matters not described in the proxy statement are properly presented at the
meeting, proxies will be voted in accordance with the best judgment of the
proxy holders.
WHAT ARE THE COSTS OF SOLICITING THESE PROXIES AND WHO PAYS THEM?
All expenses of soliciting proxies, including clerical work, printing and
postage, will be paid by us. Our directors, officers and other employees may
solicit proxies in person, by mail, by telephone, by facsimile, through the
Internet or by other means of communication, but such persons will not be
specifically compensated for such services. We will reimburse American Stock
Transfer & Trust Company for forwarding proxy materials to stockholders of
record and serving as inspectors of election and will pay the expenses
associated with forwarding proxy materials to beneficial owners by a third
party agent and various banks and brokers.
5
PROPOSAL 1
ELECTION OF DIRECTORS
INFORMATION WITH RESPECT TO DIRECTOR NOMINEES
Listed below are the nominees for director, with information showing the
principal occupation, business experience and current public directorships, if
any, of each, the age of each as of the date of this proxy statement and the
year each was first elected a director of the Company.
Unless authority is withheld, proxies in the accompanying form will be
voted in favor of electing the individuals identified in the table below as
directors of the Company. If the proxy is executed in such a manner as to
withhold authority to vote for one or more nominees for director, such
instructions will be followed by the persons named as proxies.
All nominees for director to be elected at the annual meeting are
currently members of the board of directors. The Company has no reason to
believe that any of the nominees will be unable to serve. In the event that any
nominee should not be available, the persons named in the proxy will vote for
the others and may vote for a substitute for such nominee.
In accordance with the Amended and Restated Securities Purchase Agreement,
dated June 4, 1999, by and among the Company and Apollo Investment Fund IV,
L.P., Apollo Overseas Partners IV, L.P. and AIF IV/RRRR LLC (the "Securities
Purchase Agreement"), our preferred stockholders are entitled to elect two of
our directors. Michael Gross and Andrew Africk currently are elected by the
preferred stockholders. Marc Rowan is affiliated with our preferred
stockholders but is elected by the common stockholders, voting together with
preferred stockholders on an as converted basis. Because the Company's common
stock was delisted from the NASDAQ National Market in December 2002, an "Event
of Non-Compliance," as defined in our Amended and Restated Certificate of
Incorporation, has occurred. Accordingly, the Company's preferred stockholders
have the right to vote separately as a class to elect a majority of our
directors. In light of the current composition of our Board, which includes a
majority of directors affiliated with our preferred stockholders, the preferred
stockholders have waived their right solely for the purposes of this meeting to
vote separately as a class on Mr. Rowan's reelection to the Board.
NOMINEES TO BE ELECTED BY COMMON STOCKHOLDERS AND PREFERRED STOCKHOLDERS:
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- -----
Jeffrey M. Killeen 50 Director 1998
Marc J. Rowan 42 Director 1999
William Stasior 62 Director 2000
Jeffrey M. Killeen. Mr. Killeen, has been a director of the Company since
October 1998. Since January 1, 2002, Mr. Killeen has been Chairman and Chief
Executive Officer of Globalspec, Inc., an information services company. Mr.
Killeen was the Chief Executive Officer of Forbes.com from August 1999 to March
2001. Prior to that, from January 1998 to March 1999, Mr. Killeen was the Chief
Operating Officer of barnesandnoble.com. Before joining barnesandnoble.com, Mr.
Killeen served as President and Chief Executive Officer of Pacific Bell
Interactive Media from August 1994 to January 1998.
Marc J. Rowan. Mr. Rowan has been a member of the Board of Directors since
June 1999. Mr. Rowan is one of the founding principals of Apollo Advisors,
L.P., a private investment partnership that manages a series of institutional
funds focused on complex equity investments, leveraged buyouts and corporate
reorganizations, including Apollo Investment Fund IV, L.P.. Mr. Rowan is also a
director of AMC Entertainment, Inc., Cablecom GmbH, iesy Hessen GmbH & Co., KG,
National Financial Partners, Inc., Quality Distribution, Inc. and Wyndham
International. Mr. Rowan is active in charitable activities. He is a founding
member and serves on the executive committee of the Youth Renewal Fund and is a
member of the board of directors of the National Jewish Outreach Program,
Riverdale Country School and the Undergraduate Executive Board of The Wharton
School of the University of Pennsylvania. Mr. Rowan holds a B.S. degree and an
M.B.A. degree from The Wharton School of Business at the University of
Pennsylvania.
6
William F. Stasior. Mr. Stasior, joined the Board of Directors in April
2000. Mr. Stasior was the Chairman and Chief Executive Officer of Booz Allen &
Hamilton Inc., a management and technology consulting firm, from 1991 to 1999.
Since October 1999, Mr. Stasior has been the Senior Chairman of Booz Allen. Mr.
Stasior also serves on the Board of Directors of OPNET Technologies, Inc., a
software company that specializes in enhancing network performance for
enterprises and service providers, and Vanu, Inc., a leading developer of
software-defined radio technology.
NOMINEES TO BE ELECTED BY PREFERRED STOCKHOLDERS:
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- -----
Andrew D. Africk 38 Director 1999
Michael S. Gross 43 Director 1999
Andrew D. Africk. Mr. Africk has been a member of the Board of Directors
since June 1999. Mr. Africk is a partner of Apollo Advisors, L.P. Mr. Africk is
also a director of Superior Essex, Inc. and several private venture companies.
Michael S. Gross. Mr. Gross has been a member of the Board of Directors
since August 1999. Mr. Gross is one of the founding principals of Apollo
Advisors, L.P. Mr. Gross is also a director of Apollo Investment Corporation,
Allied Waste Industries, Inc., Pacer International, Inc. and United Rentals,
Inc. He is a founding member, and serves on the executive committee, of the
Youth Renewal Fund, is the chairman of the board of Mt. Sinai Children's Center
Foundation, serves on the Board of Trustees of the Trinity School and on the
corporate advisory board of the University of Michigan Business School. Mr.
Gross graduated with High Distinction, Beta Gamma Sigma, from the University of
Michigan with a B.B.A. in accounting and received an M.B.A. from the Kellogg
Graduate School of Management at Northwestern University.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The board of directors has carefully considered the director nominees and
believes that their election by the stockholders is in the best interests of
SkyTerra Communications and its stockholders and, accordingly, unanimously
recommends that stockholders vote for the director nominees. Each of the
directors will serve a one year term.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE DIRECTOR NOMINEES.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held four meetings during the year ended December
31, 2003. Messrs. Africk, Killeen, and Stasior attended all of the meetings of
the Board of Directors and meetings of committees on which he serves. Mr. Rowan
was unable to attend three of the meetings of the Board of Directors. Mr. Gross
was unable to attend two of the meetings. We do not require members of our
Board of Directors to attend our annual stockholders meeting. None of our
Directors attended our 2003 Annual Meeting of Stockholders.
The Board of Directors has an Audit Committee and a Compensation Committee
which meet as the need arises. In light of, among other things, the size of the
Board of Directors, the Company does not have a nominating committee, and all
nominations are considered by the entire Board. The Audit Committee reviews and
makes recommendations with respect to the Company's internal controls and
financial reports and in connection with such reviews and recommendations,
communicates with and receives information independently from appropriate
Company personnel regarding the Company's financial condition. The Audit
Committee also reviews the scope and results of the annual audit with the
Company's auditors and other activities the auditors perform with the Company.
The Audit Committee met four times during the year ended December 31, 2003. The
Audit Committee met on March 18, 2004, with the Company's auditors to discuss
the results of the 2003 audit. The Audit Committee is currently composed of two
outside directors, Mr. Killeen and Mr. Stasior, both of whom are independent
under Rule 4200(a)(14) of the National Association of Securities Dealers'
("NASD") listing standards, and Mr. Africk, who continues to serve on the Audit
Committee as the Board of Directors determined that exceptional and limited
circumstances exist pursuant to Rule 4350(d)(2)(B) of the NASD listing
standards.
7
The Compensation Committee met twice formally meet during the year ended
December 31, 2003. The Compensation Committee periodically reviews and
evaluates the compensation of the Company's officers and administers grants of
options from the Company's 1998 Long-Term Incentive Plan (the "1998 Plan") and
the Amended and Restated Equity Plan for Directors. The Compensation Committee
is currently composed of Mr. Killeen and Mr. Africk.
COMMUNICATIONS FROM STOCKHOLDERS AND OTHER INTERESTED PARTIES
The Board of Directors will give appropriate attention to written
communications submitted by stockholders and other interested parties, and will
respond if and as appropriate. Absent unusual circumstances the Audit Committee
will, with the assistance of the Company's General Counsel, (1) be primarily
responsible for monitoring communications from stockholders and (2) provide
copies or summaries of such communications to the other directors as he or she
considers appropriate. Communications will be forwarded to all directors if
they relate to substantive matters and include suggestions or comments that any
member of the Audit Committee considers to be important for the directors to
know. In general, communications relating to corporate governance and long-term
corporate strategy are more likely to be forwarded than communications relating
to personal grievances and matters covered by repetitive or duplicative
communications.
Stockholders and other interested parties who wish to send communications
on any topic to the Board of Directors should address such communications to
Audit Committee, c/o General Counsel, SkyTerra Communications, Inc., 19 West
44th Street, Suite 507, New York, New York 10036.
COMPENSATION OF DIRECTORS
Each non-employee director receives a per meeting fee of $1,000 for each
meeting of the Board of Directors and $500 for each committee meeting attended,
along with expenses incurred in connection with each meeting attended.
The Compensation Committee has authority under the Company's 1998 Plan to
make stock option awards to non-employee directors of the Company.
Historically, the Compensation Committee has awarded non-employee directors a
stock option for 7,500 shares, vesting ratably over three years in lieu of an
automatic grant of an option to purchase 2,500 shares of common stock as of the
effective date of the non-employee director's initial election to the Board of
Directors, vesting in one year, and thereafter, at the close of business on the
date of final adjournment of each annual meeting of stockholders as provided in
the 1998 Plan. In general, the exercise price per share of common stock
purchasable upon exercise of a non-employee director's options will be equal to
100% of the fair market value of a share of common stock on the date of grant
of the option.
Upon becoming a director of the Company in 1998, Mr. Killeen was granted
an option to purchase 7,500 shares of common stock on October 28, 1998 under
the Amended and Restated Equity Plan for Directors, exercisable at $19.375 per
share, the fair market value of the common stock on the date of grant.
Subsequently, on December 21, 2001, the exercise price of this option was
repriced at $6.00, the fair market value of the common stock on that date. The
option vested ratably over three years and has expired as of the date hereof.
On October 15, 2002, Mr. Killeen was granted an option to purchase 35,000
shares of common stock under the 1998 Plan, exercisable at $0.85 per share, the
fair market value on the date of grant. This option vests ratably over three
years beginning on the anniversary of Mr. Killeen's service with the Company to
the extent that Mr. Killeen was fully vested in the previously granted option.
Upon becoming directors of the Company on June 4, 1999, each of Mr. Africk
and Mr. Rowan was granted an option to purchase 7,500 shares of common stock
under the 1998 Plan, exercisable at $70.00 per share, both of which vested
ratably over three years and have fully vested as of the date hereof. Upon
becoming a director of the Company as of August 19, 1999, Mr. Gross was granted
an option to purchase 7,500 shares of common stock under the 1998 Plan,
exercisable at $70.00 per share, which vested ratably over three years and has
fully vested as of the date hereof. On December 21, 2001, the exercise prices
of the options granted to Messrs. Africk, Rowan, and Gross were repriced at
$6.00, the fair market value of the common stock on that date. On October 15,
2002, each of Messrs. Africk, Rowan, and Gross was granted an option to
purchase 35,000 shares of common under the 1998 Plan, exercisable at $0.85 per
share, the fair market value on the date of grant. Each of these options vests
ratably over three years beginning on the anniversary of each director's
service with the Company to the extent that the director was fully vested in
previously granted options.
8
Upon becoming a director of the Company in April, 2000, Mr. Stasior was
granted an option to purchase 7,500 shares of common stock on April 26, 2000
under the 1998 Plan exercisable at $210.625 per share, the fair market value of
the common stock on the date of grant. This option vested ratably over three
years and has fully vested as of the date hereof. During the year 2000, Mr.
Stasior served as a consultant to the Company's Internet professional services
subsidiary, Rare Medium, Inc., and pursuant to a consulting agreement Mr.
Stasior received compensation of $10,000 per month for his consulting services.
This consulting agreement was terminated in the spring of 2001. In addition, as
compensation for his consulting services Mr. Stasior received an option to
purchase an additional 7,500 shares of common stock on April 26, 2000 under the
1998 Plan exercisable at $210.625 per share, the fair market value of the
common stock on the date of grant. This option was to vest ratably over three
years; however, upon the termination of Mr. Stasior's consulting agreement with
Rare Medium, Inc. as of July 2, 2001, the unvested portion of the option,
covering 5,000 shares, related to the remaining term of this agreement were
cancelled. The remaining portion of the option, covering 2,500 shares, has
vested as of the date hereof. On December 21, 2001, the exercise prices of
these options were repriced at $6.00, the fair market value of the common stock
on that date. On October 15, 2002, Mr. Stasior was granted an option to
purchase 35,000 shares of common under the 1998 Plan, exercisable at $0.85 per
share, the fair market value on the date of grant. This option vests ratably
over three years beginning on the anniversary of Mr. Stasior's service with the
Company to the extent that Mr. Stasior was fully vested in the previously
granted option.
It is anticipated that future grants of stock options to directors will
principally be made under the Company's 1998 Plan.
EXECUTIVE OFFICERS
The names of the Company's current executive officers and certain
information about them is set forth below.
OFFICER
NAME AGE POSITION SINCE
---- --- -------- -----
Jeffrey A. Leddy 49 Chief Executive Officer and President 2002
Robert C. Lewis 39 Senior Vice President, General 1998
Counsel and Secretary
Erik J. Goldman 44 Vice President 2003
Keith C. Kammer 43 Vice President 2003
Craig J. Kaufmann 29 Controller and Treasurer 2003
Jeffrey A. Leddy - Chief Executive Officer and President. Mr. Leddy has
been the Company's Chief Executive Officer and President since April 2003,
having served as its President and Chief Operating Officer since October 2002
and its Senior Vice President of Operations since June 2002. From September
1980 to December 2001, Mr. Leddy worked for EMS Technologies, most recently as
a Vice President. Mr. Leddy also currently serves as President of Miraxis, LLC,
an affiliate of the Company, a position he has held since September 2001.
Robert C. Lewis - Senior Vice President, General Counsel and Secretary.
Mr. Lewis has been the Company's Vice President and General Counsel since May
1998 and Secretary of the Company since August 1998. Mr. Lewis was appointed
the Company's Senior Vice President on July 26, 2000. Prior to joining the
Company, Mr. Lewis was an associate at the law firm of Fried, Frank, Harris,
Shriver & Jacobson from October 1992.
Erik J. Goldman - Vice President. Mr. Goldman has been a Vice President of
the Company since March 2003. Prior to joining the Company Mr. Goldman
consulted to Global Radio S.A., a European Satellite Digital Audio Radio
start-up. From 1995 to December 2001 Mr. Goldman worked for Leo One Worldwide,
most recently as Vice President of Technology and Business Development.
Previously, Mr. Goldman served as Director of Business Development for dbX
Corporation, a telecom focused investment and management group. Prior to
joining dbX in 1991, Mr. Goldman served as a Member of Technical Staff of Mitre
Corporation and as a Senior Communications Design Engineer of Raytheon
Corporation.
Keith C. Kammer - Vice President. Mr. Kammer has been a Vice President of
the Company since August 2003. From September 2000 to May 2003, Mr. Kammer was
the Chief Financial Officer of Alpha Fund Management, and from October 1980 to
September 2000, Mr. Kammer worked at United Parcel Service, most recently as a
Vice President of Finance.
9
Craig J. Kaufmann - Controller and Treasurer. Mr. Kaufmann has been the
Company's Controller and Treasurer since April 2003, having served as its
Director of Financial Reporting since November 2000. Prior to joining the
Company, Mr. Kaufmann was the Financial Reporting Manager of Kozmo.com since
March 2000 and an associate at PricewaterhouseCoopers from August 1998 to March
2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Investment in Miraxis
In May 2002, the Company acquired Series B Preferred Shares and a warrant
from Miraxis, LLC ("Miraxis") for approximately $0.4 million, representing an
ownership of approximately 30%. Miraxis is a development stage, privately held
telecommunications company that has access to a Ka-band license with which it
intends to provide satellite based multi-channel, broadband data and video
services in North America. The Company entered into a management support
agreement with Miraxis under which the Company's current Chief Executive
Officer and President provided certain services to Miraxis through February
2003 in exchange for additional Series B Preferred Shares and warrants being
issued to the Company. In addition, in December 2002, the Company acquired
Series C Preferred Shares and warrants from Miraxis for approximately $0.1
million.
In February 2003, the Company entered into a consulting agreement with
Miraxis pursuant to which Miraxis personnel provided services to the Company
through May 2003. In addition, Miraxis extended the management support
agreement whereby the Company's current Chief Executive Officer and President
continued to provide certain services to Miraxis through May 2003. In
connection with these agreements, the Company paid Miraxis approximately
$40,000 but also received additional Series C Preferred Shares and warrants.
In April 2003, the Company acquired additional Series C Preferred Shares
and warrants for approximately $40,000. Between June 2003 and September 2003,
the Company purchased promissory notes from Miraxis with an aggregate principal
amount of approximately $0.1 million. In November 2003, the promissory notes
were converted to Series D Preferred Shares. From January 2004 through
September 2004, the Company purchased additional promissory notes with an
aggregate principal balance of approximately $0.1 million. Currently, the
Company holds approximately 40% of the ownership interests of Miraxis. The
Company's President and Chief Executive Officer currently holds an approximate
1% interest in Miraxis.
Miraxis License Holdings, LLC ("MLH"), an entity unaffiliated with
Miraxis, other than as described herein, holds the rights to certain orbital
slots, one of which Miraxis has the ability to use so long as it implements its
business plan. Miraxis issued 10% of its outstanding common equity on a fully
diluted basis to MLH as partial consideration for access to that slot. In
addition, Miraxis expects to pay certain royalties to MLH for use of the slot
should it ever launch satellites. Prior to becoming affiliated with the
Company, its Chief Executive Officer and President acquired a 2% interest in
MLH. In addition, prior to the Company acquiring an interest in Miraxis, an
affiliate of the Company's preferred stockholders acquired an approximate 70%
interest in MLH.
Employment Agreements
For a description of the employment agreements between the Company and
certain executive officers, please see the descriptions under the heading
"Employment Contracts and Change-in-Control Arrangements" on page 16.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
10% of a registered class of the Company's securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the
Company. Officers, directors and greater than 10% stockholders are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company that no other reports were required, the
Company believes that during the year ended December 31, 2003, its officers,
directors and greater-than-10% stockholders complied with all Section 16(a)
filing requirements with the exception of the late filing in May 2003 of a
Statement of Beneficial Ownership of Securities on Form 4 for each of Mr. Leddy
and Mr. Lewis in connection with an option grant in April 2003.
10
PROPOSAL 2
RATIFY THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITORS
OF THE COMPANY FOR THE YEAR ENDED DECEMBER 31, 2004
The firm of KPMG LLP, independent accountants, audited the financial
statements of the Company for the year ended December 31, 2003. The Board of
Directors of the Company has unanimously reappointed, and recommends to the
stockholders the ratification of the appointment of, KPMG LLP as independent
auditors for the Company for the year ended December 31, 2004. If the
stockholders do not ratify the appointment, the Board of Directors may
reconsider its recommendation.
A representative of KPMG LLP is expected to be available at the annual
meeting to respond to appropriate questions and will be given the opportunity
to make a statement if he or she so desires.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the total number of
the votes of capital stock of the Company represented and entitled to vote at
the annual meeting is required to approve this Proposal 2.
FEES
Pursuant to a pre-approval policy adopted during 2003, the Audit Committee
approved all audit and audit related fees and $85,000 (or approximately 92%) of
the tax fees paid to the independent accounts during year ended December 31,
2003. Prior to the adoption of this policy, the Audit Committee only approved
the audit fee. The following table presents the aggregate fees billed by the
independent accountant for services provided to the Company for the fiscal
years ended December 31, 2003 and 2002.
2003 2002
------------- -------------
Audit fees (1) $210,000 $180,000
Audit related fees (2) 45,500 60,400
Tax fees (3) 92,200 144,250
All other fees -- --
------------- -------------
Total $347,700 $384,650
============= =============
(1) Audit fees consisted of professional services rendered for the audit of
the Company's annual financial statements and the reviews of the
financial statements included in the Company's Forms 10-Q.
(2) Audit related fees for the year ended December 31, 2003 consisted of
fees paid for accounting and auditing consultation services and the
review of a Company Form 8-K filing. For the year ended December 31,
2002, audit related fees consisted of fees paid for accounting and
auditing consultation services, the review of and consent issued in
connection with the Company's Form S-3 and audits of the Company's
employee benefit plan.
(3) Tax fees consisted primarily of assistance related to tax compliance and
reporting.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has carefully considered Proposal 2, the proposal
to ratify the appointment of KPMG LLP as independent auditors of the Company,
and believes that its approval by the stockholders is in the best interests of
SkyTerra Communications and its stockholders and, accordingly, unanimously
recommends that stockholders vote for the approval of Proposal 2.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 2.
11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes thereto set forth certain information, as of
November 8, 2004 (except as noted otherwise), regarding beneficial ownership of
the shares of Common Stock of the Company by (i) each person who is known to
the Company to be the beneficial owner of more than 5% of the outstanding
shares of common stock, (ii) each of the Company's named executive officers
under the Summary Compensation Table under the heading "Executive
Compensation," (iii) each director and nominee for director, and (iv) all
executive officers and directors of the Company as a group. Unless otherwise
indicated, the stockholders listed possess sole voting and investment power
with respect to the shares indicated as owned by them.
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY PERCENTAGE
NAME AND ADDRESS POSITION OWNED (1) OF CLASS
---------------- -------- --------- --------
Jeffrey A. Leddy Chief Executive Officer and President 108,333 * (2)
Robert C. Lewis Senior Vice President, General 46,166 * (3)
Counsel and Secretary
Erik J. Goldman Vice President 13,333 * (4)
Keith C. Kammer Vice President 13,333 * (4)
Craig J. Kaufmann Controller and Treasurer 7,300 *
Glenn S. Meyers Former Chairman and Chief Executive 295,000 1.9% (5)
Officer
Craig C. Chesser Former Senior Vice President Finance 37,499 * (6)
and Treasurer
Michael A. Hultberg Former Senior Vice President and 37,500 * (7)
Controller
Jeffrey M. Killeen Director 35,000 * (2)
William F. Stasior Director 33,333 * (2)
Andrew D. Africk Director 13,842,935 76.1% (8)
c/o SkyTerra Communications, Inc.
19 West 44th Street, Suite 507
New York, New York 10036
Marc J. Rowan Director 13,842,935 76.1% (9)
c/o SkyTerra Communications, Inc.
19 West 44th Street, Suite 507
New York, New York 10036
Michael S. Gross Director 13,842,935 76.1% (10)
c/o SkyTerra Communications, Inc.
19 West 44th Street, Suite 507
New York, New York 10036
Apollo Investment Fund IV, L.P. 13,812,102 76.1% (11)
Two Manhattanville Road
Purchase, New York 10577
All executive officers, directors and 14,161,400 76.6% (12)
nominees as a group (10 persons)
__________________________
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership has been determined pursuant to Rule 13d-3 under
the Exchange Act.
(2) Represents options to purchase shares of common stock that are currently
exercisable, but does not include options that become exercisable upon a
change of control and upon termination of employment with the Company.
(3) Includes options to purchase 36,666 shares of common stock that are
currently exercisable, but does not include options that become
exercisable upon a change of control of the Company and upon certain
other conditions.
(4) Represents options to purchase shares of common stock that are currently
exercisable.
12
(5) Represents options to purchase shares of common stock that are currently
exercisable. Mr. Meyers' employment with the Company ceased on April 15,
2003, and he resigned from the Board of Directors on the same day. His
beneficial ownership is stated as of that date.
(6) Includes options to purchase 32,500 shares of common stock that are
currently exercisable. Mr. Chesser's employment with the Company ceased
on April 15, 2003. His beneficial ownership is stated as of that date.
(7) Includes options to purchase 30,000 shares of common stock that are
currently exercisable. Mr. Hultberg's employment with the Company ceased
on April 15, 2003. His beneficial ownership is stated as of that date.
(8) Includes an aggregate of (i) 1,270,948 shares of common stock acquired
through the exercise of Series 1-A warrants, (ii) 474,427 shares of
common stock acquired in a tender offer, (iii) 8,990,212 shares of
non-voting common stock acquired pursuant to the rights offering, and
(iv) 3,076,515 shares of common stock issuable to Apollo Stockholders
upon conversion of the Series A Preferred Stock and exercise of the
Series 1-A warrants and the Series 2-A warrants owned by them. Mr.
Africk is a principal of Apollo Advisors IV, L.P, which together with an
affiliated investment manager, serves as the manager of each of the
Apollo Stockholders. Mr. Africk disclaims beneficial ownership of such
shares. Includes options to purchase 30,833 shares of common stock that
are currently exercisable, but does not include options that become
exercisable upon a change of control.
(9) Includes an aggregate of (i) 1,270,948 shares of common stock acquired
through the exercise of Series 1-A warrants, (ii) 474,427 shares of
common stock acquired in a tender offer, (iii) 8,990,212 shares of
non-voting common stock acquired pursuant to the rights offering, and
(iv) 3,076,515 shares of common stock issuable to Apollo Stockholders
upon conversion of the Series A Preferred Stock and exercise of the
Series 1-A warrants and the Series 2-A warrants owned by them. Mr. Rowan
is a principal of Apollo Advisors IV, L.P, which together with an
affiliated investment manager, serves as the manager of each of the
Apollo Stockholders. Mr. Rowan disclaims beneficial ownership of such
shares. Includes options to purchase 30,833 shares of common stock that
are currently exercisable, but does not include options that become
exercisable upon a change of control.
(10) Includes an aggregate of (i) 1,270,948 shares of common stock acquired
through the exercise of Series 1-A warrants, (ii) 474,427 shares of
common stock acquired in a tender offer, (iii) 8,990,212 shares of
non-voting common stock acquired pursuant to the rights offering, and
(iv) 3,076,515 shares of common stock issuable to Apollo Stockholders
upon conversion of the Series A Preferred Stock and exercise of the
Series 1-A warrants and the Series 2-A warrants owned by them. Mr. Gross
is a principal of Apollo Advisors IV, L.P, which together with an
affiliated investment manager, serves as the manager of each of the
Apollo Stockholders. Mr. Gross disclaims beneficial ownership of such
shares. Includes options to purchase 30,833 shares of common stock that
are currently exercisable, but does not include options that become
exercisable upon a change of control.
(11) Represents the aggregate of (i) 1,270,948 shares of common stock
acquired through the exercise of Series 1-A warrants, (ii) 474,427
shares of common stock acquired in a tender offer, (iii) 8,990,212
shares of non-voting common stock acquired pursuant to the rights
offering, and (iv) 3,076,515 shares of common stock issuable upon
conversion of the aggregate of 1,199,007 shares of our Series A
Preferred Stock and the exercise of an aggregate of 234,633 Series 1-A
warrants and 9,810,033 Series 2-A warrants held by the Apollo
Stockholders. Assuming conversion of all the Series A Preferred Stock
and the exercise of all the Series 1-A warrants and Series 2-A warrants
held by the Apollo Stockholders, such 13,812,102 shares of common stock
would consist of 11,900,084 shares of common stock beneficially owned by
Apollo Investment Fund IV, L.P., 598,160 shares of common stock
beneficially owned by Apollo Overseas Partners IV, L.P., 839,431 shares
of common stock beneficially owned by AIF IV/ RRRR LLC and 474,427
shares of common stock owned by AP/RM Acquisition, LLC. The holders of
our Series A Preferred Stock are only entitled to an aggregate of
975,000 votes with respect to the Series A Preferred Stock, or 0.813
votes per share of Series A Preferred Stock. Messrs. Africk, Rowan and
Gross, members of our Board of Directors and associated with Apollo
Advisors IV, L.P., disclaim beneficial ownership of the shares held by
the Apollo Stockholders.
(12) Messrs. Africk, Rowan and Gross, members of the Board of Directors and
associated with Apollo Advisors IV, L.P., disclaim beneficial ownership
of shares held by the Apollo Stockholders. See footnote numbers 8, 9 and
10 above. Includes options to purchase an aggregate of 332,498 shares of
common stock that are currently exercisable, but does not include
options that become exercisable upon a change of control.
13
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth, for the three years
ended December 31, 2003, the compensation for services in all capacities earned
by the Company's Chief Executive Officer and its next most highly compensated
executive officers.
SECURITIES
OTHER ANNUAL UNDERLYING LTIP
COMPENSATION OPTIONS/SARS PAYOUTS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) (2) (#) ($) COMPENSATION
--------------------------- ---- ------ --------- ------------ ------------ ------- ------------
Jeffrey A. Leddy 2003 $232,950 $168,750 $-- 100,000 $-- $--
Chief Executive Officer 2002 138,462 140,000 -- 100,000 -- --
and President
Robert C. Lewis 2003 187,615 90,000 -- 40,000 -- 3,304 (4)
Senior Vice President, 2002 196,250 90,000 -- 20,000 -- --
General Counsel and 2001 140,000 90,000 6,000 10,000 -- 2,500 (4)
Secretary
Erik J. Goldman 2003 105,769 50,000 -- 40,000 -- 1,060 (4)
Vice President
Keith C. Kammer 2003 75,288 15,000 -- 40,000 -- 754 (4)
Vice President
Craig J. Kaufmann 2003 94,490 37,500 -- 15,000 -- 1,465 (4)
Controller and Treasurer 2002 109,583 25,000 -- -- -- --
2001 74,903 17,500 -- -- -- 1,954 (4)
Glenn S. Meyers (3) 2003 86,832 -- 5,250 -- -- --
Former Chairman and 2002 332,553 375,000 18,000 155,000 -- --
Chief Executive Officer 2001 278,096 -- 18,000 -- -- --
Craig C. Chesser (3) 2003 53,423 -- -- -- -- 253,560 (5)
Former Senior Vice President 2002 196,250 70,000 -- 20,000 -- --
Finance and Treasurer 2001 164,077 90,000 1,500 10,000 -- 2,500 (4)
Michael A. Hultberg (3) 2003 53,615 -- -- -- -- 183,629 (6)
Former Senior Vice President 2002 223,333 70,000 -- 20,000 -- --
and Controller 2001 177,135 90,000 3,000 10,000 -- --
______________________
(1) Bonuses for services provided in the year ended December 31, 2002 for
Messrs. Leddy, Lewis, Kaufmann, Chesser and Hultberg were granted in April
2003 and are reflected in 2002. Bonuses for services provided in the year
ended December 31, 2003 were granted in January 2004 and are reflected in
2003.
(2) Represents non-accountable expense allowance.
(3) Effective April 15, 2003, Messrs. Meyers, Chesser and Hultberg ceased
employment with the Company.
(4) Represents employer matching contributions to retirement accounts.
(5) Represents the following compensation paid to Mr. Chesser: (i) severance
and benefits in accordance with an employment agreement, (ii) a payment
made upon the resolution of an outstanding matter between Mr. Chesser and
the Company, and (iii) employer matching contribution to a retirement
account.
(6) Represents severance and benefits paid in accordance with Mr. Hultberg's
employment agreement and employer matching contribution to a retirement
account.
14
OPTION / SAR GRANTS IN THE LAST YEAR
The following table sets forth information concerning grants of stock
options to purchase common stock during the year ended December 31, 2003 to the
named executive officers.
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS/SARS ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE OR APPRECIATION FOR OPTION TERM
OPTIONS /SARS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ------- ----------- --------- ---------- --------- ----------
Jeffrey A. Leddy 100,000 (1) 42.6% $0.91 4/08/13 $57,229 $145,031
Robert C. Lewis 40,000 (1) 17.0% $0.91 4/08/13 $22,892 $58,012
Erik J. Goldman 40,000 (1) 17.0% $0.91 4/08/13 $22,892 $58,012
Keith C. Kammer 40,000 (2) 17.0% $1.55 8/14/13 $38,991 $98,812
Craig J. Kaufmann 15,000 (1) 6.4% $0.91 4/08/13 $8,584 $21,755
Glenn S. Meyers (3) -- 0.0% N/A N/A N/A N/A
Craig C. Chesser (3) -- 0.0% N/A N/A N/A N/A
Michael A. Hultberg (3) -- 0.0% N/A N/A N/A N/A
________________________
(1) These options were granted on April 8, 2003 at an exercise price of $0.91,
the per share fair market value of the common stock at that time. The
options have a term of ten years. These options are exercisable
cumulatively in three equal annual installments, beginning on April 8,
2004.
(2) This option was granted on August 14, 2003 at an exercise price of $1.55,
the per share fair market value of the common stock at that time. The
option has a term of ten years. The option is exercisable cumulatively in
three equal annual installments, beginning on August 14, 2004.
(3) Effective April 15, 2003, Messrs. Meyers, Hultberg and Chesser ceased
employment with the Company. At such time, all outstanding options held by
each of Messrs. Meyers, Hultberg and Chesser became fully vested.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST YEAR AND YEAR-END OPTION/SAR VALUES
The following table sets forth information concerning the exercise of
options to purchase shares of common stock by the named executive officers
during the year ended December 31, 2003, as well as the number and potential
value of unexercised options (both options which are presently exercisable and
options which are not presently exercisable) as of December 31, 2003.
NUMBER OF VALUE OF
NUMBER OF SECURITIES UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNDERLYING OPTIONS/SARS AT OPTIONS/SARS
OPTIONS/SARS FISCAL Y/E (#) AT FISCAL Y/E ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED UNEXERCISABLE UNEXERCISABLE
---- ------------ -------- ------------- -------------
Jeffrey A. Leddy -- -- 43,750/156,250 16,250/91,500
Robert C. Lewis 3,200 $7,840 22,967/53,333 5,594/32,266
Erik J. Goldman -- -- 0/40,000 0/23,600
Keith C. Kammer -- -- 0/40,000 0/0
Craig J. Kaufmann -- -- 1,000/15,000 200/8,850
Glenn S. Meyers (1) -- -- 295,000/0 191,750/0
Craig C. Chesser (1) 1,167 $2,859 34,666/0 13,933/0
Michael A. Hultberg (1) -- -- 37,500/0 14,500/0
_______________________
(1) Effective April 15, 2003, Messrs. Meyers, Chesser and Hultberg ceased
employment with the Company.
15
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
Expired Meyers Employment Agreement
In connection with the transactions consummated pursuant to the 1998
acquisition by the Company of Rare Medium, Inc., the Company entered into an
Employment Agreement effective April 15, 1998 with Mr. Meyers, as amended (the
"Meyers Employment Agreement"). Pursuant to the Meyers Employment Agreement,
Mr. Meyers was engaged as Chairman, President and Chief Executive Officer of
the Company to serve for a term of five years, expiring April 15, 2003.
Pursuant to the Meyers Employment Agreement, during its last year, Mr. Meyer
received an annual base salary of $292,465, with a minimum annual increase
during the term of not less than 4% per annum. The Meyers Employment Agreement
also contains a covenant not to compete with the Company or any of its
affiliates for the term of the agreement, plus one additional year.
Concurrently with the execution of the Meyers Employment Agreement, Mr. Meyers
was granted options to acquire an aggregate of 200,000 shares of common stock
at exercise prices equal to $23.75 per share (the fair market value at the time
of issuance), which options become exercisable ratably on a monthly basis over
a period of 60 months from the date of grant and expire ten years from the date
of grant. On October 15, 2002, in recognition of Mr. Meyers' contribution to
the Company, among other things, the Compensation Committee approved the
repricing of the exercise prices of Mr. Meyers' outstanding options to purchase
an aggregate of 140,000 shares of common stock to $0.85 per share, the fair
market value at the date of the repricing. Additionally, on that date, Mr.
Meyers received an additional option to purchase 155,000 shares of common stock
at $0.85 per share. On April 15, 2003, the Meyers Employment Agreement expired,
and Mr. Meyers ceased to be employed by the Company and resigned from the Board
of Directors.
Leddy Employment Agreement
The Company is a party to an amended and restated employment agreement
with Mr. Leddy. The term of the agreement is from January 1, 2004 to December
31, 2005 and calls for a base salary of $300,000 per year. Annual increases are
at the sole discretion of the Compensation Committee of the Board of Directors.
In addition, Mr. Leddy is eligible, based upon the achievement of certain
subjective goals established by the Compensation Committee, to receive a bonus
of up to 75% of his base salary following the end of each calendar year during
the term of the agreement. Under this agreement, if Mr. Leddy is terminated for
other than "cause" as such term is defined in the agreement, then Mr. Leddy is
entitled to receive compensation in a lump sum payment consisting of one year
of his then current salary and the right to exercise all vested stock options
and unvested stock options through the option expiration date for such options.
Other Executive Employment Agreements
The Company has or had employment agreements with each of Mr. Chesser, Mr.
Hultberg, and Mr. Lewis, each of who is or was an executive officer. Under
these agreements, if, either (i) after 90 days following a change in control,
the executive terminates his employment or (ii) the executive is terminated for
other than "cause" as such term is defined in his respective agreement, then
the executive is entitled to receive severance compensation and benefits in a
lump sum payment consisting of one year of his then current salary and the
right to exercise all vested stock options and unvested stock options through
the option expiration date for such options. For purposes of these agreements,
a change in control occurs when, among other things, our stockholders approve a
merger.
As part of the Company's efforts to reduce costs, the Company reached
agreements with each of Mr. Hultberg and Mr. Chesser pursuant to which his
employment ceased as of April 15, 2003. At that time, Mr. Hultberg was paid
severance and benefits in accordance with his employment agreement. In
September 2003, Mr. Chesser was paid severance and benefits in accordance with
his employment agreement, concurrent with the resolution of an outstanding
matter between Mr. Chesser and the Company.
The Company is a party to an employment agreement with Mr. Kammer. Under
the agreement, if Mr. Kammer is terminated for other than "cause" as such term
is defined in the agreement, then Mr. Kammer is entitled to receive
compensation in a lump sum payment consisting of six months of his then current
salary.
16
BOARD AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the audited financial
statements with the Company's management. The Audit Committee has discussed
with the Company's independent auditors the matters required to be discussed by
SAS 61 (Codification of Statements on Auditing Standards AU Section 380), as
may be modified or supplemented. The Audit Committee has received the written
disclosures and the letter from the Company's independent accountants required
by the Independence Standards Board Standard No. 1 (Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees), as may
be modified or supplemented, and has discussed with the Company's independent
accountants the independent accountant's independence. Based on the review and
discussions referred to above, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2003.
By the Audit Committee
of the Board of Directors,
/s/ JEFFREY M. KILLEEN
-------------------------
Jeffrey M. Killeen
/s/ WILLIAM F. STASIOR
-------------------------
William F. Stasior
/s/ ANDREW D. AFRICK
-------------------------
Andrew D. Africk
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors reviews, recommends
and approves changes to the Company's compensation policies and benefits
programs, administers the Company's stock option plans, including approving
stock option grants, and otherwise seeks to ensure that the Company's
compensation philosophy is consistent with the Company's best interests and is
properly implemented. The members of the Compensation Committee are Jeffrey M.
Killeen and Andrew D. Africk.
COMPENSATION PHILOSOPHY AND REVIEW
The Company's compensation philosophy for its executive officers serves
two principal purposes: (1) to provide a total compensation package for such
officers that is competitive and enables the Company to attract and retain key
executive and employee talent needed to accomplish the Company's business
objectives, and (2) to directly link compensation to improvements in Company
performance and increases in stockholder value as measured principally by the
trading price of the common stock.
The 2003 compensation levels for the Company's executive officers
generally were determined on an individual basis, including consideration of
employment agreements entered into between the Company and such individuals.
Members of the Compensation Committee approve the material terms of any
employment agreement, and any amendments thereto, entered into between the
Company and an executive officer, as well as any stock option grants to an
executive officer. In determining compensation levels for 2003, the
Compensation Committee primarily relied upon factors relating to
responsibilities of the executive officer and both his current and expected
future contributions to the Company. The Compensation Committee did not
determine it necessary to, and did not attempt to, specifically analyze
compensation levels at companies included in the indexes under the caption,
"Performance Graph."
ELEMENTS OF EXECUTIVE OFFICER COMPENSATION
The Company's executive compensation consists primarily of salary, bonus
and awards of stock options. The Company emphasizes the award of stock options
and makes use of cash incentive bonuses to reward performance and retain its
executive officers. The Compensation Committee believes that in the highly
competitive, emerging markets in which the Company has historically operated,
equity-based compensation provides the greatest incentive for outstanding
executive performance and the greatest alignment of management and stockholder
long-term interests.
17
Officer Salaries. The Compensation Committee reviews each executive
officer's salary annually. Except to the extent that salary increases are
prescribed by written employment agreements, in determining the appropriate
salary levels, the Compensation Committee considers, among other factors, the
officer's scope of responsibility, prior experience and past accomplishments.
Stock Option Grants. As noted above, the Company has relied substantially
on long-term equity compensation as the principal means of providing long-term
incentives for its executive officers and key employees. The Company's practice
has been to set option exercise prices at not less than 100% of fair market
value on the date of grant. Options are generally granted for a term of five to
ten years. Options granted to executive officers and key employees become
exercisable over time and are typically dependent on continuing employment with
the Company or one of its subsidiaries, thus providing incentive to remain in
the Company's employ.
In determining the size of the stock option grants, the Compensation
Committee considers various subjective factors primarily relating to the
responsibilities of the individual officers and key employees, and also their
current and expected future contributions to the Company, as well as the number
of shares owned by the officer or key employee or which remain unvested under
outstanding options. In addition, the Compensation Committee examines the level
of equity incentives held by each officer and key employee relative to the
other officers' and key employees' equity positions and their tenure,
responsibilities, experience and value to the Company.
POLICY OF DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the U.S. Internal Revenue Code limits the tax
deductibility of a corporation of compensation in excess of $1,000,000 paid to
any of its five most highly compensated executive officers. However,
compensation that qualifies as "performance-based" is excluded from the
$1,000,000 limit if, among other requirements, the compensation is payable only
upon attainment of pre-established, objective performance goals under a plan
approved by shareholders.
Total cash compensation paid for salaries and bonuses during 2003 did not
exceed the $1,000,000 limit for any individual executive. In addition, the
Compensation Committee does not anticipate that total cash compensation paid
for salaries and bonuses during 2004 will exceed the $1,000,000 limit for any
individual executive. Stock option grants to date do not meet the requirement
that such grants be "performance based" and are, therefore, not exempt from the
limitations on deductibility. The Compensation Committee will continue to
monitor the compensation levels potentially payable under the Company's cash
and stock option compensation programs, but intends to retain the flexibility
necessary to provide total cash and stock option compensation in line with
competitive practice, the Company's compensation philosophy and the Company's
best interests.
In conclusion, the Compensation Committees believes that the policies and
programs described in this report are competitive and effectively align
executive compensation with the Company's goal of maximizing the return to
stockholders.
By the Compensation Committee
of the Board of Directors,
/s/ JEFFREY M. KILLEEN
-------------------------
Jeffrey M. Killeen
/s/ ANDREW D. AFRICK
-------------------------
Andrew D. Africk
18
PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
shareholder returns for the Company, the Nasdaq Market Index, the CoreData
Internet Software and Services Index, and the CoreData Diversified
Communications Services Index from December 31, 1998 through December 31, 2003.
The cumulative total shareholder returns on the Company's common stock was
measured by dividing the difference between the Company's share price at the
end and the beginning of the measurement period by the share price at the
beginning of the measurement period. The total stockholder return assumes $100
invested at the beginning of the period in common stock, in the Nasdaq Market
Index and the Industry Index. The Company did not pay dividends on its common
stock during the measurement period and the calculations of cumulative total
stockholders return on the common stock did not include dividends. The Company
presents below the Internet Software and Services Index as a comparative
industry index for the Company's Internet professional services business, which
it commenced upon the acquisition of Rare Medium, Inc. in April 1998 and ceased
in September 2001. In addition, the Company presents below the Diversified
Communications Services Index as a comparative industry index for the Company's
business in which it has operated since November 2001 when it became a
participant in the MSV Joint Venture.
COMPARISON OF CUMULATIVE 5-YEAR ANNUAL RETURN AMONG
SKYTERRA COMMUNICATIONS, INC., NASDAQ MARKET INDEX,
INTERNET SOFTWARE AND SERVICES INDEX AND
DIVERSIFIED COMMUNICATIONS SERVICES INDEX
................................................................................
[Chart Graphic omitted]
LEGEND:
(in dollars) FISCAL YEAR ENDING
---------------------------------------------------------------------------
COMPANY/INDEX/MARKET 1998 1999 2000 2001 2002 2003
-------------------- --------- --------- --------- --------- ---------- ----------
SkyTerra Communications, Inc. 100.00 827.27 46.21 17.94 2.79 3.64
CoreData Internet Software &
Services Index 100.00 291.04 64.37 43.44 29.10 58.24
CoreData Diversified
Communications Services Index 100.00 164.26 74.21 45.02 28.22 45.02
Nasdaq Market Index 100.00 176.37 110.86 88.37 61.64 92.68
__________________
(1) Assumes $100 invested on January 1, 1999 and reinvestment of dividends.
(2) The CoreData "Internet Software and Services Index" relates to the primary
business engaged in by the Company from April 1998 through September 2001
through its subsidiary Rare Medium, Inc.
(3) The CoreData "Diversified Communications Services Index" relates to the
primary business engaged in by the Company since November 2001 when it
became a participant in the MSV Joint Venture.
19
FORWARD LOOKING STATEMENTS
This proxy statement contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The words "believe,"
"anticipate," "expect," "estimate," "intent" and similar expressions identify
forward-looking statements. Forward looking statements necessarily involve
risks and uncertainties, and our actual results could differ materially from
those anticipated in the forward-looking statements. Factors that would cause
actual results to differ materially from the Company's current expectations
include but are not limited to those factors set forth in the Company's Annual
Report on Form 10-K for the year ended December 31, 2003 filed with the SEC and
mailed with this proxy statement.
OTHER BUSINESS
The Board of Directors knows of no business other than the matters set
forth herein which will be presented at the annual meeting. Inasmuch as matters
not known at this time may come before the meeting, the enclosed proxy confers
discretionary authority with respect to such matters as may properly come
before the meeting and it is the intention of the persons named in the proxy to
vote in accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS
The Company expects that the date of the 2005 annual meeting of
stockholders will change by more than 30 days from this year's annual meeting.
Stockholders who wish to submit proposals pursuant to Rule 14a-8 of the 1934
Act for inclusion in the Proxy Statement for the Company's 2005 annual meeting
of stockholders must submit the same to the Secretary of the Company within a
reasonable time before the Company begins to print and mail its proxy materials
at the Company's principal executive office, 19 West 44th Street, Suite 507,
New York, New York 10036. In order for a shareholder proposal at the 2005
annual meeting submitted outside of Rule 14a-8 to be considered "timely" within
the meaning of Rule 14a-4(c) of the 1934 Act, such proposal must be received by
the Company within a reasonable time before the Company mails its proxy
materials.
ADDITIONAL INFORMATION
The Company is a reporting company and files annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read and
copy these reports, proxy statements and other information at the SEC public
reference rooms in Washington, DC, New York, NY or Chicago, IL. You can request
copies of these documents by writing to the SEC and paying a fee for the
copying costs. Please call the SEC at 1-800-SEC-0330 for more information about
the operation of the public reference rooms. The Company's SEC filings are also
available at the SEC's Web site at "http://www.sec.gov." In addition, you can
read and copy the Company's SEC filings at the office of the National
Association of Securities Dealers, Inc. at 1735 K Street, Washington, DC 20006.
ANNUAL REPORT ON FORM 10-K
The Company is required to file an Annual Report on Form 10-K with the
SEC. A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2003, filed with the SEC is available without charge by writing to
Robert C. Lewis, Senior Vice President, General Counsel and Secretary, SkyTerra
Communications, Inc., 19 West 44th Street, Suite 507, New York, New York 10036.
IMPORTANT -- MAIL YOUR SIGNED PROXY CARD OR VOTING INSTRUCTION CARD
Please complete, sign, date and mail the enclosed proxy card or voting
instruction card in the enclosed self-addressed envelope.
By Order of the Board of Directors,
/s/ Robert C. Lewis
---------------------------------------
Robert C. Lewis
Senior Vice President, General Counsel
and Secretary
November 8, 2004
New York, New York
20
===============================================================================
COMMON STOCK PROXY
SKYTERRA COMMUNICATIONS, INC.
19 WEST 44TH STREET, SUITE 507, NEW YORK, NEW YORK 10036
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON DECEMBER 10, 2004
The undersigned hereby appoints Jeffrey A. Leddy, Chief Executive Officer and
President of SkyTerra Communications, Inc. and Robert C. Lewis, Senior Vice
President, General Counsel and Secretary of SkyTerra Communications, Inc., and
each of them, with full power of substitution, proxies to represent the
undersigned at the annual meeting of stockholders of SkyTerra Communications,
Inc. to be held at 10:00 a.m., local time, on December 10, 2004, in the
Concorde Room, 3rd floor, at the Dylan Hotel, 52 East 41st Street, New York,
New York 10017, and at any adjournment or postponement thereof and thereat to
vote all of the shares of stock which the undersigned would be entitled to
vote, with all the powers the undersigned would possess if personally present.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SKYTERRA
COMMUNICATIONS, INC. Unless otherwise specified in the boxes provided below,
this Proxy will be a vote FOR the director nominees in Proposal 1 and FOR
Proposal 2, and in the discretion of the above named persons as to any other
matter that may properly come before the annual meeting.
1. The election of Jeffrey M. Killeen, Marc J. Rowan and William F.
Stasior to the Board of Directors.
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY
FOR ALL NOMINEES EXCEPT AS NOTED BELOW:
2. The ratification of the appointment of KPMG LLP as the independent
auditors of the Company for the year ended December 31, 2004.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In the discretion of persons named above, to act upon such other
business as may properly come before the annual meeting or any
adjournment or postponement thereof.
THE PROXY HOLDERS WILL VOTE THE SHARES REPRESENTED BY THIS PROXY IN THE MANNER
INDICATED ON THE REVERSE SIDE HEREOF. UNLESS A CONTRARY DIRECTION IS INDICATED,
THE PROXY HOLDERS WILL VOTE SUCH SHARES "FOR" THE DIRECTOR NOMINEE ON PROPOSAL
1 AND "FOR" PROPOSAL 2 SET FORTH ON THE REVERSE SIDE HEREOF. IF ANY FURTHER
MATTERS PROPERLY COME BEFORE THE ANNUAL MEETING, IT IS THE INTENTION OF THE
PERSONS NAMED ABOVE TO VOTE SUCH PROXIES IN ACCORDANCE WITH THEIR BEST
JUDGMENT.
________________________
Signature
________________________
Signature
Dated: __________________, 2004
In case of joint owners, each joint owner must sign. If signing for a
corporation or partnership or an agent, attorney or fiduciary, indicate the
capacity in which you are signing .
PLEASE MARK, DATE AND SIGN YOUR NAME AS IT APPEARS ON THIS CARD
AND RETURN IN THE ENCLOSED ENVELOPE
===============================================================================
PREFERRED STOCK PROXY
SKYTERRA COMMUNICATIONS, INC.
19 WEST 44TH STREET, SUITE 507, NEW YORK, NEW YORK 10036
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON DECEMBER 10, 2004
The undersigned hereby appoints Jeffrey A. Leddy, Chief Executive Officer and
President of SkyTerra Communications, Inc. and Robert C. Lewis, Senior Vice
President, General Counsel and Secretary of SkyTerra Communications, Inc., and
each of them, with full power of substitution, proxies to represent the
undersigned at the annual meeting of stockholders of SkyTerra Communications,
Inc. to be held at 10:00 a.m., local time, on December 10, 2004, in the
Concorde Room, 3rd floor, at the Dylan Hotel, 52 East 41st Street, New York,
New York 10017, and at any adjournment or postponement thereof and thereat to
vote all of the shares of stock which the undersigned would be entitled to
vote, with all the powers the undersigned would possess if personally present.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SKYTERRA
COMMUNICATIONS, INC. Unless otherwise specified in the boxes provided below,
this Proxy will be a vote FOR the director nominees in Proposal 1 and FOR
Proposal 2, and in the discretion of the above named persons as to any other
matter that may properly come before the annual meeting.
1. The election of Jeffrey M. Killeen, Marc J. Rowan, William F. Stasior,
Andrew D. Africk and Michael S. Gross to the Board of Directors.
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY
FOR ALL NOMINEES EXCEPT AS NOTED BELOW:
2. The ratification of the appointment of KPMG LLP as the independent
auditors of the Company for the year ended December 31, 2004.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In the discretion of persons named above, to act upon such other
business as may properly come before the annual meeting or any
adjournment or postponement thereof.
THE PROXY HOLDERS WILL VOTE THE SHARES REPRESENTED BY THIS PROXY IN THE MANNER
INDICATED ON THE REVERSE SIDE HEREOF. UNLESS A CONTRARY DIRECTION IS INDICATED,
THE PROXY HOLDERS WILL VOTE SUCH SHARES "FOR" THE DIRECTOR NOMINEES ON PROPOSAL
1 AND "FOR" PROPOSAL 2 SET FORTH ON THE REVERSE SIDE HEREOF. IF ANY FURTHER
MATTERS PROPERLY COME BEFORE THE ANNUAL MEETING, IT IS THE INTENTION OF THE
PERSONS NAMED ABOVE TO VOTE SUCH PROXIES IN ACCORDANCE WITH THEIR BEST
JUDGMENT.
________________________
Signature
________________________
Signature
Dated: __________________, 2004
In case of joint owners, each joint owner must sign. If signing for a
corporation or partnership or an agent, attorney or fiduciary, indicate the
capacity in which you are signing.
PLEASE MARK, DATE AND SIGN YOUR NAME AS IT APPEARS ON THIS CARD
AND RETURN IN THE ENCLOSED ENVELOPE