Tender-Offer Solicitation/Recommendation Statement — Schedule 14D-9
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 14D9 Tender-Offer Solicitation/Recommendation Statement 50 271K
2: EX-99.1 Pgs 10 Through 13 of Loral Corp's Proxy Statement 4 23K
11: EX-99.10 Rights Agreement Dtd 1/10/96 Loral Corp & the Bony 69 204K
12: EX-99.11 Amendment No. 1 to Rights Agreement Dtd 1/10/96 5 19K
13: EX-99.12 Form of Stockholders Agreement 39 100K
14: EX-99.13 Confidentiality and Standstill Agrmnt Dtd 12/4/95 5 22K
15: EX-99.14 Opinion of Lazard Freres & Co. LLC Dtd 1/7/96 3 16K
16: EX-99.15 Form of Letter to Shareholder of Loral Corp-1/7/96 1 9K
17: EX-99.16 Press Release Dated 1/8/96 5 19K
3: EX-99.2 Loral Supplemental Executive Retirement Plan 30 69K
4: EX-99.3 Loral Corporation Supplemental Bonus Program 2 10K
5: EX-99.4 Loral Corporation Supplemental Severance Program 9 27K
6: EX-99.5 Form of Employment Protection Plan 15 52K
7: EX-99.6 Loral Corporation Employment Protection Plan 9 31K
8: EX-99.7 Agreement and Plan of Merger Dtd 1/7/96 48 212K
9: EX-99.8 Restructioning, Financing and Distribution 104 283K
Agreement
10: EX-99.9 Form of Tax Sharing Agreement 19 50K
EX-99.8 — Restructioning, Financing and Distribution Agreement
Exhibit Table of Contents
Exhibit 99.8
Conformed Copy
RESTRUCTURING, FINANCING
AND DISTRIBUTION AGREEMENT
dated as of January 7, 1996
by and among
LORAL CORPORATION,
LORAL AEROSPACE HOLDINGS, INC.,
LORAL AEROSPACE CORP.,
LORAL GENERAL PARTNER, INC.,
LORAL GLOBALSTAR, L.P.,
LORAL GLOBALSTAR LIMITED,
LORAL TELECOMMUNICATIONS ACQUISITION, INC.
(TO BE RENAMED "LORAL SPACE & COMMUNICATIONS CORPORATION")
and
LOCKHEED MARTIN CORPORATION
TABLE OF CONTENTS
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RECITALS................................................................... 1
ARTICLE I DEFINITIONS...................................................... 2
Section 1.1. General..................................................... 2
Section 1.2. References to Time.......................................... 19
ARTICLE II THE RESTRUCTURING AND RELATED TRANSACTIONS....................... 19
Section 2.1. Transfers of Assets......................................... 19
Section 2.2. Methods of Transfer and Assumption.......................... 23
Section 2.3. Company Approval of Certain Spinco
Actions; Formation of Spinco............................... 24
Section 2.4. Issuance of Spinco Stock to the Company..................... 25
Section 2.5. Treatment of Globalstar Bank Guarantee...................... 25
Section 2.6. Transfers of Spinco Capital Stock
Subject to Rights of First Offer, Etc...................... 29
Section 2.7. Exchange of Lehman Preferred Stock.......................... 32
ARTICLE III THE DISTRIBUTION................................................. 32
Section 3.1. Cooperation Prior to the Distribution....................... 32
Section 3.2. The Distribution............................................ 35
Section 3.3. Termination of Certain Claims............................... 38
ARTICLE IV INTERCOMPANY BUSINESS RELATIONSHIPS.............................. 39
Section 4.1. Settlement of Intercompany Accounts......................... 39
Section 4.2. Settlements for Cash Collections and
Disbursements After the Distribution Date.................. 40
Section 4.3. Transition Services......................................... 41
Section 4.4. Termination of Intercompany Arrangements.................... 42
ARTICLE V SURVIVAL AND INDEMNIFICATION..................................... 43
Section 5.1. Survival of Agreements...................................... 43
Section 5.2. Spinco's Agreement to Indemnify............................. 43
Section 5.3. The Company's Agreement to Indemnify........................ 45
Section 5.4. Procedure for Indemnification............................... 47
Section 5.5. Miscellaneous Indemnification Provisions.................... 50
Section 5.6. Pending Litigation.......................................... 53
Section 5.7. Construction of Agreements.................................. 54
ARTICLE VI CERTAIN ADDITIONAL MATTERS....................................... 54
Section 6.1. Representations or Warranties; Disclaimers.................. 54
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Section 6.2. Further Assurances; Subsequent Transfers.................... 56
Section 6.3. The Spinco Board............................................ 59
Section 6.4. Use of Names................................................ 59
Section 6.5. Litigation Relating to Transaction.......................... 60
Section 6.6. Spinco Equity Arrangements.................................. 61
Section 6.7. Post-Closing Business Relationships......................... 61
Section 6.8. No Restrictions on Post-Closing
Competitive Activities..................................... 64
Section 6.9. CCD Lawsuit................................................. 65
ARTICLE VII ACCESS TO INFORMATION AND SERVICES............................... 66
Section 7.1. Provision of Corporate Records.............................. 66
Section 7.2. Access to Information....................................... 66
Section 7.3. Production of Witnesses..................................... 67
Section 7.4. Retention of Records........................................ 67
Section 7.5. Confidentiality............................................. 68
ARTICLE VIII EMPLOYEE MATTERS................................................. 69
Section 8.1. Officers and Employees...................................... 69
Section 8.2. Employee Benefits........................................... 69
Section 8.3. Other Liabilities and Obligations........................... 75
Section 8.4. Preservation of Rights to Amend or Terminate Plans.......... 76
Section 8.5. Reimbursement; Indemnification.............................. 76
Section 8.6. Actions By Spinco........................................... 76
ARTICLE IX INSURANCE........................................................ 77
Section 9.1. General..................................................... 77
Section 9.2. Certain Insured Claims...................................... 77
ARTICLE X CONDITIONS; TERMINATION; AMENDMENTS; WAIVERS..................... 78
Section 10.1. Condition to Restructuring and Distribution................. 78
Section 10.2. Termination................................................. 80
Section 10.3. Amendments; Waivers......................................... 80
ARTICLE XI MISCELLANEOUS.................................................... 80
Section 11.1. Survival of Indemnities; Release............................ 80
Section 11.2. Entire Agreement............................................ 81
Section 11.3. Fees and Expenses........................................... 82
Section 11.4. Governing Law............................................... 82
Section 11.5. Notices..................................................... 82
Section 11.6. Successors and Assigns; No Third Party Beneficiaries........ 84
Section 11.7. Counterparts................................................ 85
Section 11.8. Interpretation.............................................. 85
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Section 11.9. Schedules................................................... 85
Section 11.10. Legal Enforceability........................................ 85
Section 11.11. Consent to Jurisdiction..................................... 85
Section 11.12. Specific Performance........................................ 86
Exhibits
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Exhibit A Form of Spinco Stockholders Agreement
Exhibit A-1 Globalstar Warrant Term Sheet
Exhibit B Form of Spinco Preferred Stock Certificate of Designation
Exhibit C Form of Spinco By-Laws
Exhibit D Spinco Shareholder Rights Plan
Exhibit E Spinco Employment Arrangements
RESTRUCTURING, FINANCING
AND DISTRIBUTION AGREEMENT
--------------------------
RESTRUCTURING, FINANCING AND DISTRIBUTION AGREEMENT, dated as of
January 7, 1996, by and among Loral Corporation, a New York corporation
(the "Company"), Loral Aerospace Holdings, Inc., a Delaware corporation and
a wholly-owned subsidiary of the Company ("Holdings"), Loral Aerospace
Corp., a Delaware corporation and a wholly-owned subsidiary of Holdings
("Aerospace"), Loral General Partner, Inc., a Delaware corporation and a
wholly-owned subsidiary of Aerospace ("LGP"), Loral Globalstar, L.P., a
Delaware limited partnership and a wholly-owned, indirect subsidiary of LGP
("LG"), Loral Globalstar Limited, a Cayman Islands corporation and a
wholly-owned subsidiary of LGP ("Cayman"), Loral Telecommunications
Acquisition, Inc. (to be renamed "Loral Space & Communications
Corporation"), a Delaware corporation and a wholly-owned subsidiary of the
Company ("Spinco"), and Lockheed Martin Corporation, a Maryland corporation
("Parent").
RECITALS:
--------
WHEREAS, each of the Boards of Directors of the Company,
Holdings, Aerospace, LGP and Cayman, and the general partner of LG have
determined to cause certain of the transfers and other transactions
contemplated in connection with the Restructuring (as hereafter defined);
WHEREAS, the Board of Directors of the Company has also
determined to cause the distribution of shares of Spinco Common Stock (as
hereafter defined) to the holders as of the Record Date (as hereafter
defined) of the Company Common Stock (as hereafter defined) and to the
holders of certain Cancelled Company Options (as hereafter defined);
WHEREAS, the Company and Spinco and the other parties hereto have
determined that it is desirable to set forth the principal corporate
transactions required to effect such transfers, share issuances and
distribution and to set forth certain other agreements that will govern
certain other matters prior to or following such distribution;
WHEREAS, the Company has entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), with Parent
and LAC Acquisition Corporation, a New York corporation and a wholly-owned
subsidiary of Parent (the "Purchaser"), providing for the Offer and the
Merger (each as hereafter defined), as a result of which the Company, as
the corporation surviving the Merger, will become a wholly-owned subsidiary
of Parent; and
WHEREAS, in order to induce the parties to enter into this
Agreement and in consideration of the Company's willingness to enter into
the Merger Agreement, the parties hereto and certain other parties are
entering or will enter into the Tax Sharing Agreement and the Stockholders
Agreement (such capitalized terms, as hereafter defined) providing for
certain ongoing relationships among the parties;
NOW, THEREFORE, in consideration of the foregoing and the
agreements, provisions and covenants contained herein, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1. General. For convenience and brevity, certain
terms used in various parts of this Agreement (including the Schedules) are
listed in alphabetical order and defined or referred to below (such terms
to be equally applicable to both singular and plural forms of the terms
defined or referred to):
"Action" means any action, claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or
other regulatory or administrative agency or commission or any arbitration
tribunal.
"Adjusted GAAP" means, except as otherwise set forth in Section
1.1(a) of the Disclosure Schedule, U.S. generally accepted accounting
principles as in effect on the date hereof, applied on a basis consistent
with the Company Financial Statements.
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"Aerospace" shall have the meaning set forth in the recitals to
this Agreement.
"Affiliate" of any specified person or entity means (x) any
director or officer of, or any person or entity that beneficially owns at
least 50% of the capital stock or other equity interests of, such specified
person or entity, or (y) any other person or entity directly or indirectly
controlling, controlled by, or under common control with, such specified
person or entity, at any time during the period for which the determination
of affiliation is being made; provided that the Company and the Retained
Subsidiaries, on the one hand, and Spinco and the Spinco Companies, on the
other hand, shall not, after giving effect to the Restructuring, be deemed
to be Affiliates of each other for purposes of this Agreement.
"Agent" means the distribution agent appointed by the Company
(subject to the prior written consent of Parent, which may not be
unreasonably withheld) to distribute shares of Spinco Common Stock pursuant
to the Distribution.
"Agreement" means this Restructuring, Financing and Distribution
Agreement, together with all exhibits and schedules hereto, as the same may
be amended from time to time in accordance with the terms hereof.
"Asset" means, with respect to any party, except as otherwise
provided herein, any and all of such party's right, title and interest in
and to all of the rights, properties, assets, claims, contracts and
businesses of every kind, character and description, whether real, personal
or mixed, whether accrued, contingent or otherwise, and wherever located,
owned or used primarily by such party and its subsidiaries, including,
without limitation, the following: (i) all cash, cash equivalents, notes
and accounts receivable (whether current or non-current); (ii) all
certificates of deposit, banker's acceptances and other investment
securities; (iii) all registered and unregistered trademarks, service
marks, service names, trade styles and trade names (including, without
limitation, trade dress and other names, marks and slogans) and all
associated goodwill; all statutory, common law and registered copyrights;
all patents; all applications for any of the foregoing together with all
rights to use all of the foregoing and all other rights
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in, to, and under the foregoing; all know-how, inventions, discoveries,
improvements, processes, formulae (secret or otherwise), specifications,
trade secrets, whether patentable or not, licenses and other similar
agreements, confidential information, and all drawings, records, books or
other indicia, however evidenced, of the foregoing; (iv) all rights
existing under all Contracts and other business arrangements; (v) all real
estate and all plants, buildings and other improvements thereon; (vi) all
leasehold improvements and all machinery, equipment (including all
transportation and office equipment), fixtures, trade fixtures and
furniture; (vii) all office supplies, production supplies, spare parts,
other miscellaneous supplies and other tangible property of any kind;
(viii) all raw materials, work-in-process, finished goods, consigned goods
and other inventories; (ix) all computer hardware, software, computer
programs and systems and documentation relating thereto; all databases and
reference and resource materials; (x) all prepayments or prepaid expenses;
(xi) all claims, causes of action, choices in action, rights of recovery
and rights of set-off of any kind; (xii) the right to receive mail,
accounts receivable payments and other communications; (xiii) all customer
lists and records pertaining to customers and accounts, personnel records,
all lists and records pertaining to suppliers and agents, and all books,
ledgers, files and business records of every kind; (xiv) all advertising
materials and all other printed or written materials; (xv) all permits,
licenses, approvals and authorizations of governmental authorities or third
parties relating to the ownership, possession or operation of the Assets;
(xvi) all capital stock, partnership interests and other equity or
ownership interests or rights, directly or indirectly, in any subsidiary or
other entity; (xvii) all goodwill as a going concern and all other
intangible properties; and (xviii) all employee contracts, including,
without limitation, the right thereunder to restrict the employee from
competing in certain respects.
"Business Day" means any calendar day which is not a Saturday,
Sunday or public holiday under the Laws of New York.
"Cancelled Company Option" means any option or other right to
acquire shares of Company Common Stock which (i) has been granted by the
Company to any employee
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or director of the Company or any of its Subsidiaries, (ii) is outstanding
immediately prior to, and remains unexercised as of, the Record Date, and
(iii) will be cancelled pursuant to Section 2.10 of the Merger Agreement.
"Capital Contribution" shall mean any capital or other investment
in the Spinco Business, Spinco or any Spinco Company (including, without
limitation, (x) the acquisition of any equity or other interests in Spinco
or any Spinco Company during such time period (except as otherwise
expressly contemplated pursuant to the provisions of Article II hereof),
(y) any contribution of cash, cash equivalents, marketable securities,
receivables, inventory, prepaid expenses, real or personal property or any
other assets to the Spinco Business, Spinco or any Spinco Company (except
as otherwise expressly contemplated pursuant to the provisions of Article
II hereof) and (z) the assumption of or payment by the Company or any
Company Subsidiary of any Spinco Liabilities, and any prepayment,
redemption, purchase or defeasance of Spinco Indebtedness (if any) or any
other Spinco Liabilities) by the Company or any Company Subsidiary;
provided that the term "Capital Contribution" shall not include (1) any
amounts which are transferred following the date hereof and prior to the
Offer Purchase Date and which are either (i) in connection with
administrative and other similar services which are provided to any of the
Spinco Companies in the ordinary course of the Company's business and which
are consistent with the past practices of the Company (provided that the
cost of any such services may only be allocated in a manner consistent with
the past practices of the Company), or (ii) (A) pursuant to the express
terms and conditions of any Existing Intercompany Agreement and (B) in the
ordinary course of business and in a manner consistent with past practice,
(2) the Spinco Guarantee Warrants, or (3) the DBS Investment (as defined in
the definition of Spinco Liabilities).
"Casualty Program" means collectively, the series of programs
pursuant to which various insurance carriers provide insurance coverage to
the Company and its subsidiaries in respect of claims or occurrences
relating to workers' compensation liability, general liability, products
liability, automobile liability and
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employer's liability for all periods up to the Distribution Date.
"Cayman" shall have the meaning set forth in the recitals to this
Agreement.
"CCD Lawsuit" means the litigation entitled Loral Fairchild Corp.
vs. Sony Corporation, et al.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the recitals to
this Agreement.
"Company Common Stock" means the common stock of the Company, par
value $0.25 per share.
"Company Financial Statements" means the audited consolidated
financial statements of the Company and its subsidiaries for the fiscal
year ending March 31, 1995 (a copy of which is set forth in the Company's
Annual Report on Form 10K for the year ended March 31, 1995).
"Confidentiality Agreement" means the confidentiality agreement
dated as of December 4, 1995 between Parent and the Company.
"Continental" means Continental Satellite Corporation, a
California corporation.
"Contract" means any contract, agreement, lease, license, sales
order, purchase order, instrument or other commitment that is binding on
any person or entity or any part of its property under applicable Law.
"Court Order" means any judgment, decree, injunction, order or
ruling of any Governmental Entity that is binding on any person or its
property under applicable Law.
"Disclosure Schedule" means the disclosure schedule dated as of
the date hereof and attached hereto. References to a particular section of
the Disclosure Schedule shall only refer or modify the specific Section of
this Agreement to which such Schedule relates (i.e.,
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Section 6.2(c) of the Disclosure Schedule shall refer to or modify only
Section 6.2(c) of this Agreement), unless otherwise expressly set forth
herein.
"Distribution" means the distribution of the shares of Spinco
Common Stock owned by the Company to holders of Company Common Stock and to
holders of Cancelled Company Options pursuant to the provisions of this
Agreement (including, without limitation, the provisions of Section 3.2(b)
hereof).
"Distribution Conditions" means each of the conditions set forth
in clauses (i) through (ix) of Section 10.1(a) hereof.
"Distribution Date" means the date as of which the Distribution
shall be effected as determined by the Board of Directors of the Company,
subject to the terms and conditions of this Agreement (including, without
limitation, the provisions of Section 3.2(a) hereof).
"Distribution Declaration Date" means the date on which the Board
of Directors of the Company takes action to declare the Distribution and
establish the Record Date.
"Existing Intercompany Agreement" means any written Intercompany
Agreement or regular, established accounting practice, consistently
applied, which is in existence prior to December 31, 1995.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"FCC" means the U.S. Federal Communications Commission.
"Final Order" means any consent, approval or other action of the
FCC (a) relating to any of the transactions contemplated pursuant to either
this Agreement or the Merger Agreement and (b) (i) which has not been
vacated, reversed, stayed, set aside, annulled or suspended, (ii) with
respect to which no timely appeal, request for stay or petition for
rehearing, reconsideration or review by any party or by the FCC on its own
motion, is pending, (iii) as to which the time for filing any such appeal,
request, petition or other similar
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document has expired, and (iv) as to which the time for reconsideration or
review by the FCC on its own motion under the Communications Act (as
defined in the Merger Agreement) and the rules and regulations of the FCC
has expired.
"Form 10" means the registration statement on Form 10 to be filed
by Spinco with the SEC to effect the registration of the Spinco Common
Stock pursuant to the Exchange Act.
"Globalstar" means Globalstar, L.P., a Delaware limited
partnership.
"Globalstar Bank Guarantee" means the Guarantee, dated as of
December 15, 1995, made by Loral in favor of Chemical Bank, as agent for
the lenders from time to time parties to the Globalstar Credit Agreement.
"Globalstar Credit Agreement" means the Credit Agreement, dated
as of December 15, 1995 (as amended, supplemented or otherwise modified
from time to time in accordance with the provisions of Section 2.5 hereof),
among Globalstar, Chemical Bank, as agent for the lenders from time to time
parties thereto and the other parties thereto.
"Globalstar Partners" means those Persons (or any Affiliates
thereof) holding direct or indirect partnership interests in either
Globalstar, LQSS or LQP.
"Guarantee Warrants" means those warrants to purchase shares of
common stock of GTL (or warrants to purchase partnership interests in
Globalstar, as the case may be), which warrants are to be issued in
connection with the Globalstar Bank Guarantee to the Company and, under
certain circumstances, to certain parties which hold partnership interests
in Globalstar, as more fully described in the Globalstar Warrant Memorandum
and the term sheet set forth on Exhibit A-1 attached hereto.
"Globalstar Warrant Memorandum" means the December 21, 1995
memorandum from Michael B. Targoff to Enrique Fernandez relating to, among
other things, the Globalstar Bank Guarantee and the Globalstar Credit
Agreement.
8
"Governmental Entity" means any United States or any foreign,
federal, state or local government, court, administrative agency or
commission or other governmental or regulatory body or authority.
"GTL" means Globalstar Telecommunications Limited, a company
organized under the laws of Bermuda.
"Holdings" shall have the meaning set forth in the recitals to
this Agreement.
"Indemnifiable Losses" means, with respect to any claim by an
Indemnified Party for indemnification pursuant to Articles II, V, VI or
VIII hereof, any and all damages, losses, deficiencies, Liabilities,
obligations, penalties, judgments, settlements, claims, payments, fines,
interest, costs and expenses (including, without limitation, the costs and
expenses of any and all Actions, demands, assessments, judgments,
settlements and compromises relating thereto and the costs and expenses of
attorneys', accountants', consultants' and other professionals' fees and
expenses incurred in the investigation or defense thereof or the
enforcement of rights hereunder), including direct and consequential
damages, but excluding punitive damages (other than punitive damages
awarded to any third party against an Indemnified Party) suffered by such
Indemnified Party with respect to such claim.
"Indemnified Party" means any party which is seeking
indemnification from an Indemnifying Person pursuant to the provisions of
Articles II, V, VI or VIII hereof.
"Indemnifying Party" means any party hereto from which any
Indemnified Party is seeking indemnification pursuant to the provisions of
Articles II, V, VI or VIII hereof.
"Information" shall have the same meaning as defined in Section
7.2 hereof.
"Information Statement" means the information statement to be
sent to the holders of the Company's equity securities in connection with
the Distribution.
9
"Intellectual Property Rights" means all right, title, interest
and all license and other rights, to the extent held by the Company and its
Subsidiaries immediately prior to the Restructuring, with respect to each
of the following items: all patents, patent applications, copyrights,
copyright applications, trademarks, trademark applications and trade names,
in each case as used in the business of the Company and its Subsidiaries as
conducted immediately prior to the Restructuring.
"Intercompany Agreements" means any Contracts between any
entities included within the Retained Business (including, without
limitation, the Company and the Retained Subsidiaries), on the one hand,
and any entities included within the Spinco Business (including, without
limitation, Spinco and the Spinco Companies), on the other hand.
"K&F" means K&F Industries, Inc., a Delaware corporation.
"LG" shall have the meaning set forth in the recitals to this
Agreement.
"LGP" shall have the meaning set forth in the recitals to this
Agreement.
"LQP" means Loral/QUALCOMM Partnership, L.P., a Delaware limited
partnership.
"LQSS" means Loral/QUALCOMM Satellite Services, L.P., a Delaware
limited partnership.
"Law" means any statute, law, rule, regulation, ordinance, order,
decree or judgment of any Governmental Entity, including, without
limitation, those covering environmental, energy, safety, health,
transportation, telecommunications, recordkeeping, zoning,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Lehman Partnerships" means each of Shearson Lehman Brothers
Capital Partners II, L.P., Lehman Brothers Merchant Banking Portfolio
Partnership L.P., Lehman Brothers Offshore Investment Partnership L.P. and
Lehman Brothers Offshore Investment Partnership-Japan L.P.
10
"Lehman Preferred Stock" means the shares of Series S Redeemable
Preferred Stock, par value $.10 per share, of Holdings which are held by
any of the Lehman Partnerships, any of their respective transferees or any
other persons.
"Liability" means, with respect to any party, except as otherwise
expressly provided herein, any direct or indirect liability (whether
absolute, accrued, contingent, reflected on a balance sheet (or in the
notes thereto) or otherwise, and whether known or unknown), indebtedness,
obligation, expense, claim, deficiency, guarantee or endorsement of or by
any person (including, without limitation, those arising under any Law or
Action or under any award of any court, tribunal or arbitrator of any kind,
and those arising under any contract, commitment or undertaking).
"Lien" means any mortgage, pledge, lien, encumbrance, charge,
adverse claim (whether pending or, to the knowledge of the person against
whom the adverse claim is being asserted, threatened), defect of title or
restriction of any nature whatsoever on any property or property interest
(regardless of whether such property or property interest is real or
personal, tangible or intangible, or otherwise), or a security interest of
any kind, including, without limitation, any conditional sale or other
title retention agreement, any third party option or other agreement to
sell and any filing of or agreement to give, any financing statement under
the Uniform Commercial Code (or equivalent statute) of any jurisdiction
(other than a financing statement which is filed or given solely to protect
the interest of a lessor).
"Merger" shall have the meaning set forth in the Merger
Agreement.
"Merger Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"NYSE" means the New York Stock Exchange, Inc.
"Offer" shall have the meaning set forth in the Merger Agreement.
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"Offer Purchase Date" means the date on which the Purchaser accepts for
payment and pays for Shares tendered pursuant to the Offer.
"Parent" shall have the meaning set forth in the recitals to this
Agreement.
"Parent Indemnified Parties" shall have the same meaning as defined in
Section 5.2(a) hereof.
"Person" or "person" means and includes any individual, partnership, joint
venture, corporation, association, joint stock company, trust, unincorporated
organization or similar entity and any Governmental Entity.
"Purchaser" shall have the meaning set forth in the recitals to this
Agreement.
"Record Date" means the date determined by the Board of Directors of the
Company as the record date for the Distribution, subject to the terms and
conditions of this Agreement (including, without limitation, the provisions of
Section 3.2(a) hereof).
"Restructuring" means collectively, the transactions contemplated pursuant
to the provisions of Article II hereof.
"Retained Action" shall have the same meaning as defined in Section 5.6
hereof.
"Retained Assets" means all Assets of the Company and each Retained
Subsidiary (including, without limitation, (A) all shares of capital stock,
partnership interests and other equity or ownership interests or ownership
rights in all subsidiaries and other entities owned directly or indirectly by
the Company or any of the Retained Subsidiaries, (B) all rights to Assets held
by such subsidiaries and entities, (C) except as provided in Sections 4.1 and
4.2 hereof, all cash and cash equivalents held by the Company or any of the
Retained Subsidiaries, (D) the Company Names and Company Proprietary Names (such
terms, as defined in Section 6.4 hereof), (E) the Retained Actions and all other
Actions commenced by the Company or any Retained Subsidiary (to the extent such
Actions constitute Assets), and (F) the licenses of
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Intellectual Property Rights referred to in Section 6.7 hereof to be granted to
Parent, the Company and each of their respective Affiliates), other than the
Spinco Assets.
"Retained Business" means all businesses of the Company and the Retained
Subsidiaries and all businesses included within the Retained Assets (including,
without limitation, the Company's electronic combat business, the Company's
training and simulation business, the Company's tactical weapons business, the
Company's command, control, communications and intelligence (C3I)/reconnaissance
business and the Company's systems integration business (each as described in
the Company's Annual Report on Form 10K for the year ended March 31, 1995)), as
conducted by the Company and its subsidiaries as of the Distribution Date and
all former businesses of the Company and the Retained Subsidiaries; provided
that the term "Retained Business" shall not include the Spinco Business.
"Retained Employees" shall mean all current and former officers and
employees of the Company and its subsidiaries, other than the Spinco Employees.
"Retained Liabilities" means all of the Liabilities of the Company and
each of the Retained Subsidiaries, other than the Spinco Liabilities.
"Retained Subsidiaries" means all of the Subsidiaries of the Company,
other than the Spinco Companies.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Severance Agreement" means any Contract which provides for the payment of
any cash or other consideration to an officer, director or employee of the
Company or any of its Subsidiaries upon the consummation of either the Offer,
the Merger, the Restructuring or the Distribution.
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"Spinco" shall have the meaning set forth in the recitals to this
Agreement.
"Spinco Assets" means all right, title and interest, to the extent held by
the Company and its Subsidiaries or any of the other Spinco Companies
immediately prior to the Restructuring, with respect to each of the following
items: (a) all shares of capital stock of and all partnership interests in (as
the case may be) the Spinco Companies, (b) the Spinco Cash Amount, (c) the
Spinco Names and Spinco Proprietary Name Rights (such terms, as defined in
Section 6.4 hereof), (d) any Actions commenced by a Spinco Company the subject
matter of which is otherwise a Spinco Asset or any Action which relates
primarily to a Spinco Asset (to the extent such Actions constitute Assets), (e)
shares of capital stock of Loral Travel Services Inc. and Loral Properties Inc.,
(f) that portion of the leasehold interest relating to the office space on not
more than two floors reasonably designated by Spinco within 30 days after the
date hereof with respect to the building located at 600 Third Avenue, New York,
New York and such existing furniture, fixtures, and office equipment located on
such floors which is reasonably designated by Spinco within thirty (30) days
after the date hereof, (g) the licenses of Intellectual Property Rights referred
to in Section 6.7 hereof to be granted to Spinco or the Spinco Companies, (h)
the CCD Lawsuit, and (i) the FCC license applications and other Assets listed on
Section 1.1(b) of the Disclosure Schedule. The term "Spinco Assets" shall also
include (A) the Cash Guarantee Fees accruing to the benefit of the Company and
(B) the number of Guarantee Warrants equal to the product of (x) the aggregate
number of Guarantee Warrants which might be issued and (y) a ratio of the Spinco
Assumed Guarantee Amount (as defined in Section 2.5(d) hereof) to the total
amount of Obligations (as defined in Section 2.5 hereof) under the Globalstar
Bank Guarantee in connection with the Globalstar Bank Guarantee, but shall not
include any other Guarantee Warrants which may be issued from time to time to
the Company.
"Spinco Balance Sheet" means the unaudited, pro forma, consolidated balance
sheet (including the related notes) of the Spinco Business as of September 30,
1995 set forth in Section 1.1(d) of the Disclosure Schedule.
14
"Spinco Business" means each business and each former business which is or
was conducted by Spinco or a Spinco Company as of the Distribution Date or which
is or was included within the Spinco Assets.
"Spinco Cash Amount" means the cash amount referred to in Section
2.1(a)(xiv) hereof.
"Spinco Common Stock" means the common stock, par value $0.01 per share, of
Spinco, together with the associated preferred stock purchase rights to be
issued pursuant to a rights agreement to be entered into between Spinco and a
rights agent to be selected by Spinco.
"Spinco Companies" means (a) each of SSL, GTL, K&F, Globalstar, LGP, LG,
Cayman, LQSS, LQP, Continental and the companies referred to in paragraph (e) of
the definition of "Spinco Assets", and (b) all Subsidiaries of any of the
entities listed in paragraph (a) above after giving effect to the Restructuring.
"Spinco Employees" means (x) those persons who are employed as officers or
employees of Spinco and the Spinco Companies or otherwise employed in the
Spinco Business immediately prior to or effective as of the Distribution Date,
and (y) all former officers and employees of Spinco, any Spinco Company or the
Spinco Business who, immediately prior to the termination of their employment,
were employed by Spinco, any Spinco Company or the Spinco Business. In the event
any person shall have been employed by Spinco or any of the Spinco Companies, as
well as by the Company or any of the Retained Subsidiaries, such person shall be
considered a Spinco Employee if at the Distribution Date such person's primary
employment shall be with Spinco, any of the Spinco Companies or the Spinco
Business.
"Spinco Indebtedness" means (a) any and all of the following items which
are incurred or entered into by Spinco or any Spinco Company or otherwise
incurred or entered into in connection with the Spinco Business: (i)
indebtedness for money borrowed, (ii) indebtedness which is evidenced by notes,
debentures, bonds or other similar instruments; (iii) any lease of any property
(whether real, personal or mixed) that, in accordance with generally accepted
accounting principles, either would be required to be classified and accounted
for as a capital
15
lease on a balance sheet or otherwise be disclosed as such in a note to any such
balance sheet; (iv) all obligations issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all obligations under
any title retention agreement; and (v) all obligations for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar credit
transaction; (b) all obligations of the type referred to in clauses (i), (ii),
(iii), (iv) and (v) of paragraph (a) above of which Spinco, any Spinco Company
or the Spinco Business is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise, including any guarantees of such obligations;
and (c) all obligations of the type referred to in clauses (i), (ii), (iii),
(iv) and (v) of paragraph (a) above or referred to in paragraph (b) above, which
are secured by any Lien on any property or asset of Spinco, any Spinco Company,
any Affiliate of Spinco or the Spinco Business.
"Spinco Indemnified Parties" shall have the same meaning as defined in
Section 5.3(a) hereof.
"Spinco Liabilities" means (a) all of the Liabilities of Spinco and the
Spinco Companies to third parties and all Liabilities relating to or arising out
of the Spinco Assets or the conduct of the Spinco Business (in all cases,
whether arising before or after the date hereof); (b) all Liabilities reflected
or reserved against in the Spinco Balance Sheet and all similar Liabilities
arising after the date thereof; (c) any Actions commenced by a Spinco Company
the subject matter of which is otherwise a Spinco Asset or any Action which
relates primarily to a Spinco Asset (to the extent such Actions constitute
Liabilities); (d) except as otherwise provided in Article VIII hereof, the
Liabilities of the Company and its subsidiaries, including, without limitation,
Spinco and the Spinco Companies, in respect of Spinco Employees (in all cases,
whether arising before or after the date hereof) (excluding, however, all wages,
salary, bonus and other similar amounts accrued prior to the Distribution Date
in respect of Spinco New York Employees); (e) all Liabilities relating to or
arising out of the Spinco Assets or the conduct of the Spinco Business (in all
cases, whether arising before or after the date hereof) with respect to which
the Company or any Retained Subsidiary has agreed, prior to the Distribution
Date, to indemnify any third party in any manner with re-
16
spect thereto or has agreed to otherwise be, or is otherwise, liable with
respect thereto; (f) all Company Transfer Expenses (as defined in Section 2.6
hereof) and all other Indemnifiable Losses referred to in Section 2.6 hereof;
(g) all Spinco Excess Costs (as defined in Section 11.3 hereof); and (h) the
amount of any and all consideration paid, and any and all Liabilities incurred,
by the Company, Spinco, any Spinco Company or any Retained Subsidiary or any of
their respective Affiliates, following the date hereof but prior to the
consummation of the Restructuring, in connection with the acquisition of any
securities issued by Continental (whether held by any third party or otherwise)
or any Assets of Continental, but only to the extent that the aggregate fair
market value of such consideration and Liabilities exceeds in the aggregate
$7,500,000.00 (for purposes of this clause (h), the term "Continental" shall
include any other Person, program or business which conducts direct broadcast
satellite operations similar in nature to those operations conducted or proposed
to be conducted by Continental) (the parties hereto acknowledge and agree that,
if the Company acquires any such securities or Assets, that all amounts paid or
Liabilities incurred in connection therewith not in excess of such $7,500,000.00
threshold (the "DBS Investment"), shall not otherwise be included within the
term "Spinco Liabilities"). Notwithstanding the foregoing, the term "Spinco
Liabilities" shall not include any Liabilities of the Company arising pursuant
to the express provisions of the Globalstar Bank Guarantee (as amended pursuant
to the provisions of Section 2.5 hereof), except as otherwise expressly
provided in Section 2.5 hereof.
"Spinco New York Employees" means those Spinco Employees who are located
prior to the date hereof at the office building located at 600 Third Avenue, New
York, New York; provided that the term "Spinco New York Employees" shall not
include any employees whose primary employment is with the Spinco Business and
shall not include senior executive officers of the Company.
"Spinco Preferred Stock" means the Series A Non-Voting Convertible
Preferred Stock, par value $0.01 per share, of Spinco, having the rights,
powers, privileges and other terms set forth in the Certificate of Incorporation
of Spinco (which, pursuant to Section 2.3(a) hereof, shall be in substantially
the same form as
17
the provisions set forth on Exhibit B attached hereto (with such changes thereto
as Parent and the Company may approve prior to the Offer Purchase Date)).
"SSL" means Space Systems/Loral, Inc., a Delaware corporation.
"SSL Lawsuit" means the litigation entitled "Space Systems/Loral, Inc. v.
Martin Marietta Corporation."
"SSL Stockholders Agreements" means each of (a) the Stockholders Agreement
by and among the Company, Holdings, SSL, Aerospatiale Societe Nationale
Industrielle, Alcatel Espace and Alenia Aeritalia & Selenia S.p.A., dated as of
April 22, 1991 (as amended by Amendment No. 1, dated as of November 10 1992),
and (b) the Stockholders Agreement by and among Holdings, Aerospace, the Company
and the Lehman Partnerships, dated as of November 13, 1992.
"Stockholders Agreement" means the Stockholders Agreement to be entered
into between the Company and Spinco following the date hereof, the material
terms of which are set forth on Exhibit A to this Agreement.
"Subsidiary" or "subsidiary" of any party means (a) a corporation, a
majority of the voting or capital stock of which is as of the time in question
directly or indirectly owned by such party and (b) any other partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
similar entity, in which such party, directly or indirectly, owns a majority of
the equity interest thereof or has the power to elect or direct the election of
a majority of the members of the governing body of such entity or otherwise has
control over such entity (e.g., as the managing partner of a partnership).
"Tax Sharing Agreement" means the Tax Sharing Agreement, in the form of
Exhibit A to the Merger Agreement, pursuant to which the Company and Spinco have
provided for certain tax matters, including, without limitation,
indemnification, allocation of tax benefits and filing of tax returns.
18
Section 1.2. References to Time. All references in this Agreement to times
of the day shall be to New York City time.
ARTICLE II
THE RESTRUCTURING AND RELATED TRANSACTIONS
------------------------------------------
Section 2.1. Transfers of Assets.
(a) Subject to the terms and conditions of this Agreement:
(i) prior to the Distribution Date, LG shall transfer to Cayman all of
its right, title and interest in and to all shares of capital stock owned
by LG in GTL, by means of a distribution to Cayman of such equity
securities;
(ii) immediately following the actions referred to in the immediately
preceding clause, Cayman shall transfer to LGP all of its right, title and
interest in and to all shares of capital stock of GTL owned by Cayman and
may transfer all, or a portion of, the partnership interests in LG owned by
Cayman, by means of a dividend to LGP of such equity securities;
(iii) immediately following the actions referred to in the immediately
preceding clause, LGP shall transfer to Aerospace all of its right, title
and interest in and to all shares of capital stock of Cayman and GTL owned
by LGP and may transfer all, or a portion of, the partnership interests in
LG owned by LGP, by means of a dividend to Aerospace of such equity
securities;
(iv) immediately following the actions referred to in the immediately
preceding clause, Aerospace shall transfer to Holdings all of its right,
title and interest in and to all shares of capital stock owned by Aerospace
in Cayman, GTL, LGP and SSL and all partnership interests in LG owned by
it, by means of a dividend to Holdings of such equity securities;
19
(v) immediately following the actions referred to in the immediately
preceding clause, Holdings shall transfer to the Company all of its right,
title and interest in and to (x) all shares of capital stock owned by
Holdings in Cayman, GTL, LGP and Continental, (y) 64.125 percent (64.125%)
of the shares of capital stock owned by Holdings in SSL, and (z) all
partnership interests in LG owned by Holdings, by means of a dividend of
such equity securities;
(vi) immediately following the actions referred to in the immediately
preceding clause, LGP may transfer to Spinco or to any Spinco Subsidiary
designated by Spinco, all (or any other portion thereof reasonably
designated by Spinco) of LGP's right, title and interest in the partnership
interests in LG and LQP;
(vii) immediately following the actions referred to in the preceding
clauses, the Company shall transfer to Spinco all of its right, title and
interest in and to all shares of capital stock owned by the Company in
Cayman, GTL, K&F, LGP, SSL and Continental and all partnership interests in
LG owned by the Company, in exchange for, among other things, the issuance
by Spinco to the Company of the shares of Spinco Common Stock;
(viii) immediately following the actions referred to in the
immediately preceding clause, the Company shall transfer to Spinco (and the
Company shall cause each of its subsidiaries to transfer to Spinco) all of
their right, title and interest in and to all Spinco Assets not otherwise
transferred to Spinco pursuant to the provisions of this Section 2.1(a), in
the case of assets not held directly by the Company, by a distribution to
the Company and, in each case by means of a contribution by the Company to
the capital of Spinco of such Spinco Assets (provided that the foregoing
provisions shall not be construed to constitute a transfer by the Company
to Spinco of any capital stock of Spinco owned at that time by the
Company);
(ix) immediately following the actions referred to in the immediately
preceding
20
clause, Spinco shall transfer to the Company (and Spinco shall cause each
of its Subsidiaries to transfer to the Company) all of its right, title and
interest in and to all Retained Assets not otherwise transferred to the
Company pursuant to the provisions of this Section 2.1(a) (if any), in each
case by means of a dividend of such Retained Assets (provided that the
foregoing provisions shall not be construed to constitute a transfer by the
Spinco to Company of the rights of Spinco under this Agreement);
(x) immediately following the actions referred to in the immediately
preceding clause, the Company shall assume and shall in due course pay,
perform and discharge (or shall cause to be assumed and cause in due course
to be paid, performed and discharged), all of the Retained Liabilities to
which the Spinco Business or the Spinco Assets are then subject or
otherwise liable;
(xi) immediately following the actions referred to in the immediately
preceding clause, Spinco shall assume and shall in due course pay, perform
and discharge (or shall cause to be assumed and cause in due course to be
paid, performed and discharged), all of the Spinco Liabilities to which the
Retained Business or the Retained Assets are then subject or otherwise
liable;
(xii) following, or prior to, the actions referred to in the preceding
clauses, Holdings shall transfer all its right, title and interest in its
shares of capital stock of SSL owned by it that are not transferred
pursuant to clause (v), above, either to Spinco or, pursuant to Section
2.7, to the Lehman Partnerships;
(xiii) in connection with the actions referred to in the preceding
clauses, Spinco shall issue to the Company the shares of Spinco Common
Stock referred to in Section 2.4 hereof; and
(xiv) following the actions referred to in the preceding clauses and
following Parent's acceptance for payment of Shares of Company Common Stock
in connection with the Offer, on or prior to
21
the Distribution Date and prior to the Distribution, Parent shall transfer
to the Company, as a contribution to capital, $712,400,000 in immediately
available funds, less any amount which the parties hereto have at such
time agreed is owed to Parent pursuant to the provisions of Sections
4.1(a) and 4.1(c) hereof (the aggregate of such cash amount being
hereinafter referred to as the "Spinco Cash Amount"), and the Company
shall then immediately contribute the Spinco Cash Amount to Spinco, as a
contribution to capital, of which $344,000,000.00 shall be in exchange for
the Spinco Preferred Stock and the balance shall be treated as additional
consideration for the Spinco Common Stock.
(b) Notwithstanding anything else in this Agreement to the contrary but
subject to the provisions of Section 2.6 hereof, this Agreement shall not
constitute an agreement to assign, convey or transfer any Action, Liability,
Asset or Contract or any claim or right or any benefit arising thereunder or
resulting therefrom as to which (x) a prior right of assignment, conveyance or
transfer exists (including, without limitation, a Third Party Call Right (as
defined in Section 2.6 hereof)) which has not been waived as of the Distribution
Date or (y) consent to assignment, conveyance or transfer thereof is required
but has not been obtained as of the Distribution Date (including, without
limitation, any Asset which has been pledged to any third party creditor and
with respect to which such pledge has not been released prior to the
Distribution Date). Subject to the preceding sentence and the provisions of
Section 6.2 hereof, to the extent that any such contributions and transfers
shall not have been so consummated prior to the Distribution Date, the parties
shall cooperate to effect such consummation as promptly thereafter as shall be
practicable, and as between the Company and Spinco, as of the Distribution Date,
(i) the Company shall be deemed to have contributed to Spinco, and Spinco shall
have and be deemed to have obtained, complete and sole beneficial ownership over
all of the Spinco Assets, together with all of the rights, powers and privileges
incident thereto which are held by the Company and the Retained Subsidiaries,
and Spinco shall be deemed to have assumed in accordance with the terms of this
Agreement all of the Spinco Liabilities and all of the duties, obligations and
22
responsibilities of the Company and the Retained Subsidiaries incident thereto,
whether or not all instruments of transfer and assumption shall have been
executed and delivered, and (ii) Spinco shall be deemed to have transferred to
the Company and the Retained Subsidiaries, and the Company and the Retained
Subsidiaries shall have and be deemed to have obtained, complete and sole
beneficial ownership over all of the Retained Assets which are being transferred
from Spinco and the Spinco Companies pursuant to the provisions of this Section
2.1(a), together with all of the rights, powers and privileges incident thereto
which are held by Spinco and the Spinco Companies, and the Company and the
Retained Subsidiaries shall be deemed to have assumed in accordance with the
terms of this Agreement all of the Retained Liabilities and all of the duties,
obligations and responsibilities of Spinco and the Spinco Companies incident
thereto, whether or not all instruments of transfer and assumption shall have
been executed and delivered.
Section 2.2. Methods of Transfer and Assumption. The parties hereto agree
that (a) the transfers of Assets contemplated pursuant to Section 2.1 hereof
shall be effected by delivery by Spinco to the Company, and by the Company to
Spinco, as the case may be, of (i) with respect to those Assets which are
evidenced by capital stock certificates or similar instruments, certificates
duly endorsed in blank or accompanied by stock powers or other instruments of
assignment executed in blank, (ii) with respect to any real property interest
and/or any improvements thereon, a quitclaim deed or the equivalent thereof in
accordance with local practice, and (iii) with respect to all other Assets, such
good and sufficient instruments of contribution, transfer and delivery, in form
and substance reasonably satisfactory to the Company, Parent and Spinco, as
shall be necessary to vest in the Company or Spinco, as the case may be, all of
the right, title and interest of Spinco or the Company, as the case may be, in
and to any such Assets, (b) the assumption of the Retained Liabilities
contemplated pursuant to Section 2.1(a)(x) hereof shall be effected by delivery
by the Company to Spinco of such good and sufficient instruments of assumption,
in form and substance reasonably satisfactory to the Company, Parent and Spinco,
as shall be necessary for the assumption by the Company of the Retained
Liabilities, and (c) the assumption of the Spinco Liabilities contemplated
pursuant to Section 2.1(a)(xi)
23
hereof shall be effected by delivery by Spinco to the Company of such good and
sufficient instruments of assumption, in form and substance reasonably
satisfactory to the Company, Parent and Spinco, as shall be necessary for the
assumption by Spinco of the Spinco Liabilities. Each of the parties hereto also
agrees to deliver to any other party hereto such other documents, instruments
and writings as may be reasonably requested by such other parties hereto in
connection with the transactions contemplated hereby. Notwithstanding any other
provisions of this Agreement to the contrary, (x) the instruments of transfer or
assumption referred to in this Section 2.2 shall not, without the prior written
consent of Parent, include any separate representations and warranties, and (y)
in the event and to the extent that there is any conflict between the provisions
of this Agreement and the provisions of any of the instruments of transfer or
assumption referred to in this Section 2.2, the provisions of this Agreement
shall prevail and govern.
Section 2.3. Company Approval of Certain Spinco Actions; Formation of
Spinco. Unless otherwise provided in this Agreement, the Company shall cooperate
with Spinco and the Spinco Companies in effecting, and if so requested by Spinco
the Company shall, as the sole stockholder of Spinco, ratify any actions that
are reasonably necessary or desirable to be taken by Spinco to effectuate the
transactions contemplated by this Agreement in a manner consistent with the
terms of this Agreement, including, without limitation, the following: (a)
amending the Certificate of Incorporation of Spinco so that the provisions
thereof shall at the Distribution Date have the provisions set forth on Exhibit
B attached hereto and such other terms and conditions as Parent and Spinco shall
reasonably approve (with such changes thereto as Parent and the Company may
approve prior to the Offer Purchase Date); (b) amending the By-Laws of Spinco so
that the provisions thereof shall at the Distribution Date have the provisions
set forth on Exhibit C attached hereto and such other terms and conditions as
Parent and Spinco shall reasonably approve (with such changes thereto as Parent
and the Company may approve prior to the Offer Purchase Date); (c) adopting a
shareholder rights plan of Spinco having substantially the same provisions, as
of the Distribution Date, as those set forth on Exhibit D attached hereto (with
such changes thereto as the Board of Directors of the Company may approve in its
24
reasonable discretion prior to the Offer Purchase Date); (d) adopting, preparing
and implementing appropriate plans, agreements and arrangements for Spinco
Employees and Spinco non-employee directors (including, without limitation,
employee benefit plans, agreements and arrangements substantially similar to
those set forth on Exhibit E attached hereto (with such changes thereto as the
Board of Directors of the Company may approve in its reasonable discretion prior
to the Offer Purchase Date)); and (e) electing to the Board of Directors of
Spinco those persons referred to in Section 6.3 hereof so that such persons
shall be able to serve as the sole members of Spinco's Board of Directors as of
the Distribution Date.
Section 2.4. Issuance of Spinco Stock to the Company. Spinco agrees to
issue to the Company, (a) contemporaneously with the transfers of Assets and
assumption of Liabilities contemplated in connection with the Restructuring, one
share of Spinco Common Stock for each share of Company Common Stock held of
record as of the Record Date and such number of shares of Spinco Preferred Stock
as may be necessary to satisfy the representations and warranties set forth in
Section 4.1(c) of the Stockholders Agreement (which shares of Spinco Preferred
Stock shall, in the aggregate, be convertible into such number of shares of
Spinco Common Stock as shall equal 20% of the total number of shares of Spinco
Common Stock to be outstanding on a fully-diluted basis, immediately after
giving effect to the Distribution and after giving effect to the conversion of
such Spinco Preferred Stock). In addition, Spinco agrees to issue to the Company
on or prior to the Record Date such additional shares of Spinco Common Stock as
may be required in order for the Company to fulfill its obligations pursuant to
Section 3.2 hereof.
Section 2.5. Treatment of Globalstar Bank Guarantee.
(a) Spinco shall, and prior to the Offer Purchase Date the Company shall,
use their respective reasonable efforts to amend the Globalstar Bank Guarantee
so that, following the Restructuring, (x) the provisions of Section 10 of the
Globalstar Bank Guarantee shall be deleted and shall have no force and effect
against the Company or any of its Affiliates (provided that, in the
25
event that the Globalstar Bank Guarantee is amended in the manner provided in
this Section 2.5, Parent agrees to assume the obligations of the Company as
guarantor under the Globalstar Bank Guarantee), and (y) the aggregate amount of
indebtedness being guaranteed by the Company (or Parent, as the case may be)
under the Globalstar Bank Guarantee shall not exceed $250,000,000; provided that
the amendments contemplated in this sentence shall be in such form and substance
as shall be reasonably acceptable to Parent. Notwithstanding anything to the
contrary contained in this Agreement, except as otherwise expressly provided in
this Section 2.5, neither the Company nor Spinco shall, nor shall they permit
any of their respective Affiliates to, (i) amend or in any way modify either the
Globalstar Bank Guarantee, the Globalstar Credit Agreement, the Guarantee
Warrants or any other Contract, in a manner which adversely affects any of the
benefits, rights or obligations of the Company with respect to either the
Globalstar Bank Guarantee, the Globalstar Credit Agreement or the Guarantee
Warrants, without obtaining the prior written consent of Parent (which consent
may not be unreasonably withheld), or (ii) waive or diminish any rights of
subrogation of the Company with respect to the Globalstar Bank Guarantee or take
any other action which adversely affects any of the benefits, rights or
obligations of the Company with respect to either the Globalstar Bank Guarantee,
the Globalstar Credit Agreement or the Guarantee Warrants, without obtaining the
prior written consent of Parent (provided that the consent of Parent need not be
obtained with respect to the diminution of any rights of subrogation held by the
Company and its Affiliates where (A) Globalstar determines within 90 days to
either issue to the Company subordinated indebtedness of Globalstar having an
aggregate principal amount (the repayment of which, together with interest
thereon, may be deferred for up to 3 years) equal to, or equity interests in
Globalstar having a fair market value equal to, the aggregate of the amounts
paid or incurred or Liabilities assumed by the Company or its Affiliates in
connection with the Globalstar Bank Guarantee, and (B) the Company and its
Affiliates are treated no less favorably with respect to the matters set forth
in this clause (ii) than the manner in which Spinco and those of the Globalstar
Partners who have assumed liability in connection with the Globalstar Bank
Guarantee are treated with respect to such matters.
26
(b) Spinco shall, and prior to the Offer Purchase Date the Company
shall, use its respective reasonable efforts to cause the Globalstar Partners to
assume the obligations of the Company (or Parent, as the case may be) as
guarantor under the Globalstar Bank Guarantee in an aggregate amount of up to
the Maximum Partner Assumed Guarantee Amount (as defined below), and to cause
the Company (or Parent, as the case may be) to be released in respect thereof.
The parties hereto acknowledge that the Guarantee Warrants will be initially
issued to the Company, Spinco and the Globalstar Partners in direct proportion
to the amount of liability in respect of the Globalstar Bank Guarantee for which
each such person has agreed to be liable, that is, 60% to the Company and 40% to
Spinco, and that 100% of the deferred cash fees payable in respect of the
Globalstar Bank Guarantee (the "Cash Guarantee Fee") will be initially payable
solely to Spinco, subject to reallocation to Globalstar Partners assuming such
obligations as provided in Section 2.6(d).
(c) Spinco agrees to indemnify, defend and hold harmless the Company
and each Parent Indemnified Party in accordance with the indemnification
provisions of Article V hereof, from and against any and all Indemnifiable
Losses of the Company and any such Parent Indemnified Party which both (i) arise
out of, relate to or result from the Globalstar Bank Guarantee or any failure by
Globalstar to pay when due any principal, interest or other amounts owing under
the Globalstar Credit Agreement or any failure by Globalstar to perform and
abide by all other obligations, covenants, conditions and agreements applicable
to it under such Globalstar Credit Agreement, and (ii) exceed in the aggregate
$150,000,000.00; provided that in no event shall Spinco's liability in
connection with the Globalstar Bank Guarantee exceed the Spinco Assumed
Guarantee Amount (as defined below). Spinco hereby pledges to the Company, and
grants the Company a security interest in, all Guarantee Warrants held at any
time by Spinco or its Subsidiaries (and all rights, benefits and proceeds in
respect thereof), as collateral in respect of Spinco's indemnity obligations set
forth in the immediately preceding sentence, and the Company shall be entitled
to exercise all of the rights, powers and remedies (whether arising pursuant to
this Agreement, statute, common law, equity or otherwise) for the protection and
enforcement of the Company's
27
rights under this Section 2.5. Spinco hereby agrees to deliver to the Company
all certificates representing Guarantee Warrants promptly following receipt
thereof. Upon receipt from Spinco of any certificates representing Guarantee
Warrants, the Company shall hold such certificates as pledgee thereof. The
Company shall have all rights with respect to the Guarantee Warrants owned by
Spinco and pledged to the Company hereunder as afforded a secured party under
the Uniform Commercial Code. The Company agrees to transfer to Spinco or as
Spinco shall direct and release its security interest in any Guarantee Warrants
of Spinco held by the Company which are required to be transferred pursuant to
Section 2.5(d) hereof. The Company shall also release the Guarantee Warrants
from the lien of the security interest granted hereunder at the later of (i) the
release of the Company from the Globalstar Bank Guarantee and (ii) the
satisfaction in full of Spinco's in full of Spinco's indemnification obligations
hereunder with respect to Globalstar Bank Guarantee. Upon delivery to the
Company by Spinco of the pledged Guarantee Warrants, the Company shall confirm
to Spinco in writing that the Company will be holding such Guarantee Warrants as
pledge thereof.
(d) For purposes of this Section 2.5, (i) the term "Maximum Partner
Assumed Guarantee Amount" shall mean the sum of (A) $150,000,000.00 in principal
amount of indebtedness, plus (B) sixty percent (60%) of the aggregate of all
interest amounts thereon in accordance with the Globalstar Credit Agreement
(other than unpaid principal) which are owed under the Globalstar Credit
Agreement, (ii) the term "Actual Partner Assumed Guarantee Amount" shall mean
the aggregate amount of guarantee obligations with respect to which all
Globalstar Partners have actually guaranteed pursuant to the provisions of this
Section 2.5, and (iii) the term "Spinco Assumed Guarantee Amount" shall mean the
sum of (A) $100,000,000.00 in principal amount of indebtedness, plus (B) forty
percent (40%) of the aggregate of all interest amounts and other Obligations
(such term, as defined in the Globalstar Bank Guarantee)(other than unpaid
principal) which are owed under the Globalstar Credit Agreement; provided that
the Spinco Assumed Guarantee Amount shall be reduced on a dollar-for-dollar
basis by the amount of the Actual Partner Assumed Guarantee Amount (if any)
(provided that the Spinco Assumed Guarantee Amount shall in no event be less
than zero), provided further
28
that (x) Spinco will convey to each Globalstar Partner which assumes a portion
of the Globalstar Bank Guarantee Obligation a pro rata share of the Cash
Guarantee Fees and, with respect to the first $100,000,000 of obligations so
assumed, a pro rata share of the Guarantee Warrants and (y) the Company will
convey to each such Globalstar Partner, with respect to the next $50,000,000 of
obligations so assumed, a pro rata share of the Guarantee Warrants.
Section 2.6. Transfers of Spinco Capital Stock Subject to Rights of
First Offer, Etc.
(a) Third Party Call Rights. In the event that any Spinco Assets
consist of shares of capital stock of a Spinco Company, which shares are subject
to any right of first offer, right of first refusal, call right, third party
option or other similar contractual right (including, without limitation, any
rights of first offer (if any) arising out of the SSL Stockholders Agreements)
on the part of any party (other than the Company, any Retained Subsidiary,
Spinco and any Spinco Company) (such third party, a "Third Party Transferee") to
require that such shares be sold or otherwise transferred to such Third Party
Transferee (any such right, a "Third Party Call Right", and any such shares
subject to such right, the "Restricted Spinco Shares"), then Spinco shall (x)
deliver or cause to be delivered all notice(s) which are required to be
delivered by the Company, Spinco, any Retained Subsidiary or any Spinco Company
in connection with any such Third Party Call Rights (unless delivery of such
notice(s) has been waived by the recipient(s) thereof), and (y) use its
reasonable efforts to cause each such Third Party Transferee to waive all Third
Party Call Rights held by such Third Party Transferee. In the event that Spinco
is unable to obtain any such waiver with respect to any Restricted Spinco Shares
prior to the Distribution Date, then such Restricted Spinco Shares shall not be
assigned, conveyed or transferred to Spinco pursuant to this Agreement unless
and until such Restricted Spinco Shares are no longer subject to acquisition by
any Third Party Transferee pursuant to any Third Party Call Rights (provided
that, prior to such assignment, conveyance or transfer to either the Third Party
Transferee pursuant to this Section 2.6 or to Spinco pursuant to this Agreement,
such Restricted Spinco Shares shall, to the extent applicable, be subject to the
provi-
29
sions of Section 2.1(b) hereof). In the event that a Third Party Transferee
exercises any Third Party Call Right with respect to any Restricted Spinco
Shares, then (i) such Restricted Spinco Shares shall be transferred to such
Third Party Transferee in accordance with the terms and conditions of the Third
Party Call Right relating thereto, and (ii) the Company shall turn over promptly
to Spinco all cash and other amounts if and when received by the Company or any
Retained Subsidiary from such Third Party Transferee in connection therewith.
The parties hereto acknowledge and agree that the amounts referred to in clause
(ii) of the preceding sentence shall be received and held in trust and may not
be set off or reduced by any amounts which may otherwise be owed to any of the
Parent Indemnified Parties pursuant to this Agreement.
(b) Third Party Put Rights. In the event that any party (other than
the Company, any Retained Subsidiary, Spinco and any Spinco Company) (such third
party, a "Third Party Transferor") has any put right or other similar
contractual right (including, without limitation, any put rights (if any)
arising out of the SSL Stockholders Agreements) to require that the Company or
any Retained Subsidiary acquire any shares of capital stock of a Spinco Company
which are then beneficially owned or held by such Third Party Transferor (any
such right, a "Third Party Put Right", and any such shares subject to such
right, the "Spinco Put Shares"), then Spinco shall (x) deliver or cause to be
delivered all notice(s) which are required to be delivered by the Company,
Spinco, any Retained Subsidiary or any Spinco Company in connection with any
such Third Party Put Rights (unless delivery of such notice(s) has been waived
by the recipient(s) thereof), and (y) use its reasonable efforts to cause such
Third Party Transferor to waive all Third Party Put Rights held by such Third
Party Transferor. In the event that Spinco is unable to obtain any such waiver
with respect to any Restricted Spinco Shares and any such Third Party Transferor
exercises any Third Party Put Right with respect to any Spinco Put Shares, then
(i) Spinco shall pay to the Company in immediately available funds (and without
any deductions or setoffs) prior to the date of such acquisition (but in no
event later than the third Business Day prior to the anticipated date of such
acquisition) the sum of (x) the entire amount which is required to be paid to
such Third Party
30
Transferor in connection with such Third Party Put Right, and (y) all Company
Transfer Expenses (as defined below) for which documentation evidencing such
Company Transfer Expenses has been provided to Spinco prior to such date
(except, in the case of either clause (x) or (y) above, for those amounts which
have already been paid in full by Spinco), (ii) the Company or the Retained
Subsidiary which is responsible for acquiring such Spinco Put Shares upon the
exercise of such Third Party Put Right shall acquire such Spinco Put Shares in
accordance with the terms and conditions of the Third Party Put Right relating
thereto, and (iii) following receipt of the amounts payable by Spinco to the
Company pursuant to clause (i) above and following receipt of the certificates
representing any Spinco Put Shares acquired pursuant to clause (ii) above, the
Company (or any Retained Subsidiary which received such certificates) shall
thereafter deliver promptly to Spinco (or any Spinco Company designated by
Spinco) such certificates, accompanied by such endorsements or instruments of
transfer as may be reasonably requested by Spinco.
(c) Payment of Expenses; Indemnification. Spinco agrees that it shall
reimburse the Company and all Parent Indemnified Parties promptly with respect
to all costs and expenses incurred by the Company and all other Parent
Indemnified Parties (including, without limitation, all costs and expenses of
attorneys', accountants', consultants' and other similar persons) in connection
with any Actions relating to (x) the exercise or purported exercise of any Third
Party Call Right or any Third Party Put Right or (y) the consummation of any
transactions contemplated pursuant to the provisions of this Section 2.6 (all
such costs and expenses, the "Company Transfer Expenses"). Spinco agrees that
all Indemnifiable Losses (including, without limitation, all Company Transfer
Expenses) of the Company and all Parent Indemnified Parties arising out of,
relating to or resulting from, directly or indirectly, the performance or
failure to perform by any party hereto of the provisions of this Section 2.6 or
any of the transfers in any way relating thereto (other than as a result of any
willful breach, on or after the Offer Purchase Date, on the part of the Company
or any Retained Subsidiary) shall in each case be deemed to be Spinco
Liabilities, and, in each case, shall be subject to the indemnification
provisions set forth in Article V hereof.
31
Section 2.7. Exchange of Lehman Preferred Stock. Spinco shall, and
prior to the Offer Purchase Date the Company shall, use their respective best
efforts to cause the Lehman Partnerships and all other holders of the Lehman
Preferred Stock (if any) to exchange all issued and outstanding shares of
Lehman Preferred Stock for shares of capital stock or other equity securities of
either Spinco, any Spinco Company or any Subsidiary of Spinco. Spinco agrees to
indemnify, defend and hold harmless the Company and each Parent Indemnified
Party in accordance with the indemnification provisions of Article V hereof,
from and against any and all Indemnifiable Losses of the Company and any such
Parent Indemnified Party arising out of, relating to or resulting from the
ownership of any shares of Lehman Preferred Stock by the Lehman Partnerships and
all other holders of the Lehman Preferred Stock (if any).
ARTICLE III
THE DISTRIBUTION
----------------
Section 3.1. Cooperation Prior to the Distribution. As promptly as
practicable after the date hereof and prior to the Distribution Date:
(a) Subject to the provisions of paragraph (b) below, the Company and
Spinco shall prepare an Information Statement (which shall set forth appropriate
disclosure concerning Spinco and the Spinco Companies, the Spinco Business, the
Distribution and certain other matters) and Spinco shall file with the SEC the
Form 10 (which shall include or incorporate by reference the Information
Statement). The Company and Spinco shall use their respective reasonable efforts
to cause the Form 10 to be declared effective under the Exchange Act or, if
either the Company or Parent reasonably determines that the Distribution may not
be effected without registering the Spinco Common Stock pursuant to the
Securities Act, the Company shall use its best efforts to cause the Spinco
Common Stock to be registered pursuant to the Securities Act and thereafter
effect the Distribution in accordance with the terms of this Agreement,
including, without limitation, by preparing and filing on an appropriate form of
registration statement under the Securities Act covering the Spinco Common Stock
and using its
32
best efforts to cause such registration statement to be declared effective.
Following the effectiveness of such Form 10 (or registration statement, as the
case may be), the Company shall mail the Information Statement to the holders of
the Company Common Stock.
(b) Before filing with the SEC the Form 10, or the registration
statement referred to in Section 3.1(a), as the case may be, or any amendments
or supplements thereto, the Company shall furnish to Parent (or Parent's
counsel) copies of all such documents proposed to be filed, in order to give
Parent (or Parent's counsel) sufficient time to review such documents, and such
documents may thereafter be filed subject to any timely and reasonable comments
of Parent (or Parent's counsel). On or prior to the Offer Purchase Date, the
Company shall (i) deliver to Parent (or Parent's counsel) promptly, following
the receipt thereof, copies of all written communications between the Company
and the SEC relating to either the Information Statement or the Form 10 (or the
registration statement referred to in Section 3.1(a), as the case may be), and
(ii) advise Parent (or Parent's counsel) promptly of, and provide Parent (or
Parent's counsel) with the opportunity to participate in (to the extent
reasonably practicable), all telephonic and other non-written communications
between the Company and the SEC relating to either the Information Statement or
the Form 10 (or the registration statement referred to in Section 3.1(a), as the
case may be). The Company shall respond promptly to any comments from the SEC
with respect thereto, after consultation with Parent (or Parent's counsel), and
shall take such other actions as shall be reasonably required in order to have
the Form 10 declared effective under the Exchange Act, or the registration
statement referred to in Section 3.1(a) hereof declared effective under the
Securities Act, as the case may be, as soon as reasonably practicable following
the date hereof. Before filing with the SEC the Solicitation/Recommendation
Statement on Schedule 14D-9 of the Company to be filed by the Company in
connection with the Offer, and all amendments or supplements thereto, the
Company shall furnish to Parent (or Parent's counsel) copies of all such
documents proposed to be filed, in order to give Parent (or Parent's counsel)
sufficient time to review such documents, and such documents may thereafter be
filed subject to any timely and reasonable comments of Parent (or Parent's
counsel). Following the
33
date hereof, the Company shall, and shall cause its Affiliates to, provide
promptly to Parent, Purchaser and their respective counsel all such information
as such persons may reasonably request in connection with the Tender Offer
Statement on Schedule 14D-1 of the Purchaser or Parent to be filed in connection
with the Offer.
(c) The Company and Spinco shall cooperate in preparing, filing with
the SEC and causing to become effective any registration statements or
amendments thereto which are appropriate to reflect the establishment of, or
amendments to, any employee benefit and other plans contemplated by this
Agreement.
(d) The Company and Spinco shall take all such action as may be
necessary or appropriate under state securities or "Blue Sky" Laws in connection
with the transactions contemplated by this Agreement.
(e) The Company and Spinco shall prepare, and Spinco shall file and
seek to make effective, an application to permit listing of the Spinco Common
Stock either on the NYSE or any other national securities exchange or national
market system as may be selected by Spinco in its sole discretion (to the extent
permitted pursuant to the listing requirements of such exchange or national
market system).
(f) The Company and Spinco shall prepare and file an application with
the FCC (the "FCC Application") requesting the FCC's consent to the transfer of
control of any licenses, permits, approvals or other authorizations issued by
the FCC to the Company and its Subsidiaries in connection with their
telecommunications and space systems business, including those licenses,
permits, approvals and authorizations set forth in Section 3.1(f) of the
Disclosure Schedule.
(g) In addition to the actions specifically provided for elsewhere in
this Agreement and except as otherwise expressly set forth in this Agreement,
each of the parties hereto shall use its respective best efforts to take, or
cause to be taken, all actions, and, to execute and deliver, or cause to be
executed and delivered, such additional documents and instruments, and to do,
or cause to be done, all things, reasonably necessary, proper or advisable under
applicable Laws and
34
agreements to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, using its best efforts to obtain
the consents and approvals, to enter into any amendatory agreements and to make
the filings and applications necessary or desirable to have been obtained,
entered into or made in order to consummate the transactions contemplated by
this Agreement. Without limiting the generality of the foregoing sentence, each
of the parties hereto shall use its respective best efforts to ensure that the
conditions set forth in Article X hereof are satisfied (insofar as such matters
are within the control of such party). Notwithstanding any other provisions set
forth in this Agreement (including, without limitation, the provisions of this
Section 3.1(g)), neither the Company, nor Spinco nor any of their respective
Affiliates shall, without first obtaining the prior written consent of the
Parent, take or commit to take any action, in connection with obtaining any
consent, waiver or approval or effecting any of the transactions contemplated in
connection with the Closing or otherwise, (i) except as otherwise expressly
provided in this Agreement, that would result in the payment of any funds (other
than normal and usual filing fees) or the incurrence of any liability by the
Company or any Retained Subsidiary, (ii) that would result in the divestiture or
holding separate of any assets, businesses or operations of the Company or any
of the Retained Subsidiaries, (iii) that might materially limit or impair
Parent's or the Company's or any Retained Subsidiary's freedom of action with
respect to, or its ability to retain or exercise control over, any assets,
businesses or operations of the Company or any Retained Subsidiaries (other than
any limitations or restrictions expressly set forth in the Merger Agreement, the
Tax Sharing Agreement, the Stockholders Agreement or any other agreement to be
entered into pursuant to this Agreement or the Merger Agreement prior to the
Offer Purchase Date), or (iv) that might otherwise adversely affect Parent, or,
following the Offer Purchase Date, either the Company or any Retained
Subsidiary.
Section 3.2. The Distribution.
(a) Subject to the terms and conditions of this Agreement, the
Company's Board of Directors (or any duly appointed committee thereof) shall in
its reasonable discretion establish the Record Date and the
35
Distribution Date and any appropriate procedures in connection with the
Distribution (subject in each case to the provisions of applicable Law) as soon
as reasonably practicable following the date hereof or on such other dates as
Parent may reasonably request; provided that (x) the Record Date may not be
earlier than the twentieth day following the date on which the Offer is
commenced and also may not be earlier than the tenth day following the
Distribution Declaration Date and (y) the parties hereto shall use their
reasonable efforts to cause the Record Date to be established so as to occur
immediately prior to the acceptance for payment by the Purchaser of the shares
of Common Stock pursuant to the Offer (provided that in no event shall the
Record Date be established so as to occur as of or at any time after the
acceptance for payment by the Purchaser of the shares of Common Stock pursuant
to the Offer); provided further that if all conditions to the Offer have been
satisfied or waived prior to the date on which all of the Distribution
Conditions have been satisfied (or waived, to the extent expressly permitted by
the provisions of Section 10.1 hereof), then the Purchaser shall be permitted,
but not required, to accept for payment at such time the shares of Common Stock
pursuant to the Offer notwithstanding the fact that the Distribution Conditions
have not been satisfied or waived (provided that prior to such acceptance for
payment Purchaser first obtains the consent of the Company, which consent may
not be unreasonably withheld) (as further described in clause (a)(iii) below).
The parties hereto acknowledge and agree that payment of the Distribution shall
be conditioned on (x) the satisfaction (or waiver, to the extent expressly
permitted by the provisions of Section 10.1 hereof) of each of the Distribution
Conditions on a date which is prior to the fiftieth (50th) day following the
Record Date and (y) Parent and Purchaser not having taken any action, on or
after the Distribution Declaration Date, to extend or delay the expiration of
the Offer to a date which is later than the Record Date. The parties hereto
further acknowledge and agree that:
(i) if the Distribution Conditions are satisfied (or waived,
to the extent expressly permitted by the provisions of Section 10.1
hereof) prior to the fiftieth (50th) day following the Record Date,
the conditions to the Distribution shall be deemed to have been
satisfied and, if such
36
date is on or prior to the Offer Purchase Date, the Record Date shall
be deemed to have occurred immediately prior to the time at which the
Purchaser has accepted for payment the shares of Company Common Stock
pursuant to the Offer and the Distribution shall occur one Business
Day thereafter;
(ii) if the Offer Purchase Date has not yet occurred and the
Distribution Conditions are not satisfied or waived prior to the
fiftieth (50th) day following the Record Date, (A) the Distribution
shall not be paid, the declaration of the Distribution shall be null
and void, and no holder of Company Common Stock shall have any rights
whatsoever to receive any part of the Distribution, and (B) the
Company's Board of Directors shall establish a new Record Date in a
manner consistent with the provisions of the first sentence of this
Section 3.2(a); and
(iii) if the Offer Purchase Date has already occurred and
the Distribution Conditions are not expected to be satisfied or waived
prior to the fiftieth (50th) day following the Record Date, the
parties hereto agree to use their respective best efforts to
restructure the Distribution in a manner which shall permit the
holders of Company Common Stock of record immediately prior to the
consummation of the Offer to participate in a distribution of shares
of Spinco capital stock in order to preserve for such holders the
material economic benefits of the Distribution; provided that, in
connection with any such restructuring of the Distribution, the
parties hereto must first obtain the prior consent (which consent may
not be unreasonably withheld of a majority of the remaining
Continuing Directors (such term, as defined in Section 8.4 of the
Merger Agreement), if any (it being understood and agreed that the
consent of the remaining Continuing Directors may be reasonably
withheld by such remaining Continuing Directors in the event that
counsel to such remaining Continuing Directors advises such persons
that, in such counsel's reasonable opinion, any such restructuring of
the Distribution would adversely affect in any material respect the
holders of Company Common Stock of record immediately prior to the
consummation of the Offer
37
with respect to the income tax or securities law consequences of the
Distribution).
(b) Subject to Section 10.1 hereof, following the declaration by
the Company's Board of Directors of the Record Date but prior to the
Distribution Date, the Company shall deliver to the Agent one or more share
certificates representing all of the outstanding shares of Spinco Common Stock
(or other Spinco capital stock if necessary in the circumstances set forth in
paragraph (a)(iii) above) to be distributed in the Distribution and shall
instruct the Agent to distribute on the Distribution Date, (i) one share of
Spinco Common Stock (or other Spinco capital stock if necessary in the
circumstances set forth in paragraph (a)(iii) above) for each share of Company
Common Stock owned to holders of record of Company Common Stock on the Record
Date (subject to the provisions of any restricted stock or other benefit plan of
the Company) and (ii) one share of Spinco Common Stock (or other Spinco capital
stock if necessary in the circumstances set forth in paragraph (a)(iii) above)
for each share of Company Common Stock subject to a Cancelled Company Option to
the respective holders of such Cancelled Company Options (provided that the
Agent shall not distribute the shares referred to in the preceding clause (ii)
until promptly after the effective time of the Merger). Spinco agrees to provide
all share certificates that the Agent shall require in order to effect the
Distribution. All shares of Spinco Common Stock issued in the Distribution shall
be duly authorized, validly issued, fully paid, non-assessable and free of
preemptive rights.
(c) Each of the parties hereto agrees that, immediately upon
consummation of the Distribution, the Company shall not hold or beneficially own
directly or indirectly any shares of Spinco Common Stock.
Section 3.3. Termination of Certain Claims. Following the Distribution
Date, Spinco shall have no claims against the Company, any Retained Subsidiary
or any Affiliate of either based on any breach by the Company, and Retained
Subsidiary or any of their respective Affiliates of any obligations under this
Agreement that occurred on or prior to the Offer Purchase Date, all of such
claims being hereby irrevocably waived and terminated as of the Offer Purchase
Date; provided that the fore-
38
going shall not limit the Company's liability for any breach by the Company or
any Retained Subsidiary of any of their respective obligations under this
Agreement that occurs following the Offer Purchase Date.
ARTICLE IV
INTERCOMPANY BUSINESS RELATIONSHIPS
-----------------------------------
Section 4.1. Settlement of Intercompany Accounts.
(a) Except as expressly provided for in this Article IV, all
intercompany and interdivisional receivables, payables, loans, cash overdrafts
and other accounts in existence as of the Distribution Date between Spinco and
the Spinco Companies, on the one hand, and the Company and the Retained
Subsidiaries, on the other hand, under the Company's cash management program or
otherwise (other than accounts, if any, which (x) are owed to or by any Spinco
Company which is not an Affiliate of Spinco or the Company, (y) arose pursuant
to the express terms and conditions of any Existing Intercompany Agreement and
(z) are not yet payable pursuant to the provisions of such Intercompany
Agreement), shall be settled by payment in full of such amounts effective
immediately prior to the Restructuring. Following the date hereof, (i) no such
intercompany transactions shall be entered into except (x) pursuant to the
express terms and conditions of any Existing Intercompany Agreement and (y) in
the ordinary course of business and in a manner consistent with past practice,
and (ii) except with the prior written consent of the Parent, neither the
Company, any Retained Subsidiary, Spinco or any Spinco Company shall enter into
any Intercompany Agreement following the date hereof and prior to the Offer
Purchase Date, except for any Intercompany Agreement which (x) is on terms and
conditions entered into in the ordinary course of business and in a manner
consistent with past practices and (y) is not otherwise significantly adverse to
(i) the business, properties, operations, prospects, results of operations or
condition (financial or otherwise) of the Company, any Retained Subsidiary or
the Retained Business or (ii) the ability of the Company or any of the Retained
Subsidiaries to perform their respective obligations under this
39
Agreement, the Tax Sharing Agreement or the Stockholders Agreement.
(b) Following the Distribution Date, each of the Company and
Spinco shall give the other party and any independent auditors of such other
party full access at all reasonable times to the books and records of the
Company and Spinco (and each of their respective Subsidiaries) relating to
periods prior to the Distribution Date for purposes of verifying the amounts to
be paid immediately prior to the Restructuring pursuant to Section 4.1(a) above
and for resolving any disputes related thereto. The amounts settled shall, to
the extent applicable, be calculated in accordance with Adjusted GAAP.
(c) Except as otherwise expressly provided in Section 2.1(a)
hereof, the Company and Spinco covenant and agree that no Capital Contributions
may be made following the date hereof and prior to the Offer Purchase Date;
provided that the Company may make a Capital Contribution at any time after (i)
the Company notifies Parent in writing of the details of such Capital
Contribution, and (ii) the parties hereto agree to reduce the Spinco Cash Amount
otherwise payable by Parent as a result of such Capital Contribution (which
shall include interest thereon (calculated at a compounded rate of interest
equal to the commercial paper rate available to the Company as of the date
hereof) following the date of such Capital Contribution) and (iii) the parties
agree at such time as to the appropriate amount of such reduction in the event
of a Capital Contribution which is in a form other than cash.
Section 4.2. Settlements for Cash Collections and Disbursements After
the Distribution Date.
(a) For each calendar month commencing with the month in which
the Distribution Date occurs and, unless sooner terminated by agreement of the
parties, continuing for a period of two (2) years thereafter, (i) within 10
Business Days of the end of the month in question, the Company shall prepare,
and Spinco shall fully cooperate in preparing, a statement of transactions which
shall reflect a complete analysis of any cash collections and cash disbursements
by the Company and the Retained Subsidiaries on behalf of Spinco and the Spinco
Companies (including those relating to the Spinco Business) during
40
the relevant month and (ii) within 10 Business Days of the end of the month in
question, Spinco shall prepare, and the Company shall fully cooperate in
preparing, a statement of transactions which shall reflect a complete analysis
of any cash collections and cash disbursements by Spinco and the Spinco
Companies on behalf of the Company and the Retained Subsidiaries during the
relevant month (including those relating to the Retained Business); provided in
each case that, with respect to the first such monthly period such statement
shall not reflect any cash collections or disbursements occurring prior to the
Distribution Date.
(b) Not later than five Business Days following delivery of each
such monthly statement, Spinco shall pay to the Company or the Company shall pay
to Spinco, as the case may be, in cash an amount necessary to eliminate the
account balance as reflected in each such statement. Payments made pursuant to
this Section 4.2 shall not, for any purposes of this Agreement, constitute
Indemnifiable Losses or be set off against any other payments to be made,
Liabilities asserted or claims made pursuant to this Agreement, including but
not limited to Article V hereof, unless the Company and Spinco otherwise agree
in writing.
(c) Following the end of the two-year period referred to in
Section 4.2(a) above (or such earlier period as the parties hereto may agree),
(i) the Company shall promptly turn over to Spinco all cash and other similar
amounts received by the Company and the Retained Subsidiaries which properly
constitute Assets attributable to the Spinco Business and (ii) Spinco shall
promptly turn over to the Company all cash and other similar amounts received by
Spinco and the Spinco Companies which properly constitute Assets attributable to
the Retained Business.
Section 4.3. Transition Services. Following the Distribution Date and
ending on the later of (i) the sixth month anniversary of the Distribution Date
and (ii) December 31, 1996 (such period, the "Transition Services Period"), the
Company shall provide to Spinco, at such times and in such amounts as may be
reasonably requested by Spinco, those data processing, procurement support,
travel support, communications, tax, accounting, legal, insurance, employee
benefits and similar services which
41
have been customarily provided by the Company and the Retained Subsidiaries to
the Spinco Business during the twelve months prior to the date hereof
(collectively, the "Transition Services"). The Transition Services shall be
provided at a cost calculated in accordance with the cost the Company currently
assesses to the Spinco Companies and the Spinco Business for the same or similar
services. Following the end of the calendar month in which any such Transition
Services are performed, the Company shall provide to Spinco an invoice (the
"Transition Services Invoice") setting forth in summary detail the Transition
Services which were provided during such calendar month and the appropriate cost
thereof. Spinco shall pay to the Company in cash in immediately available funds,
in a reasonably prompt manner following the delivery by the Company of a
Transition Services Invoice, the amounts due with respect to the Transition
Services reflected on such Transition Services Invoice. The Transition Services
Period may be extended for up to two six-month periods in the event that Spinco
notifies the Company at least 30 days prior to the expiration of the then-
current Transition Services Period of its intention to so extend the Transition
Services Period.
Section 4.4. Termination of Intercompany Arrangements. Each of the
parties hereto agrees that, except as otherwise expressly provided in this
Article IV, all Existing Intercompany Agreements in effect immediately prior to
the Distribution Date shall not be deemed altered, amended or terminated as a
result of this Agreement or the consummation of the transactions contemplated
hereby and shall otherwise remain in effect immediately after giving effect to
the Restructuring (provided that nothing contained in this Agreement shall be
deemed to limit any party's ability to terminate any such Intercompany Agreement
following the Distribution Date in accordance with the provisions of such
Intercompany Agreement).
42
ARTICLE V
SURVIVAL AND INDEMNIFICATION
----------------------------
Section 5.1. Survival of Agreements. The obligations under this
Article V of each of Spinco and the Spinco Companies, on the one hand, and the
Company and the Retained Subsidiaries, on the other hand, shall survive the sale
or other transfer by it of any Assets or businesses or the assignment by it of
any Liabilities. To the extent that Spinco or any of the Spinco Companies
transfers directly or indirectly to any other person all or substantially all of
the Spinco Assets or the Spinco Business, Spinco will cause the transferee of
such SpincoAssets or Spinco Business to assume specifically its obligations
under this Agreement with respect thereto and will cause such transferee to
fulfill its obligations related to such Spinco Liabilities. Such assumption will
not relieve Spinco of its obligations in respect thereof. To the extent that the
Company or any of the Retained Subsidiaries transfers directly or indirectly to
any other person all or substantially all of the Retained Assets or the Retained
Business the Company will cause the transferee of such Retained Assets or
Retained Business to assume specifically its obligations under this Agreement
with respect thereto and will cause such transferee to fulfill its obligations
related to such Retained Liabilities. Such assumption will not relieve the
Company of its obligations in respect thereof. Spinco, on the one hand, and the
Company, on the other hand, agree that such transferee may exercise all of
Spinco's or the Company's rights hereunder, as the case may be, with respect to
such Assets or businesses.
Section 5.2. Spinco's Agreement to Indemnify.
(a) In addition to any indemnification required by Articles II,
VI and VIII hereof, subject to the terms and conditions set forth in this
Agreement, from and after the Distribution Date, Spinco shall indemnify, defend
and hold harmless the Company, each Retained Subsidiary, the Purchaser and
Parent and each of their respective directors, officers, employees,
representatives, advisors, agents and Affiliates (collectively, the "Parent
Indemnified Parties") from, against and in respect of any and all Indemnifiable
Losses of the Parent Indemnified Parties arising out of, relating to or re-
43
sulting from, directly or indirectly, (i) any misrepresentation or breach of
warranty made by or on behalf of Spinco or, on or prior to the Offer Purchase
Date, made by or on behalf of the Company, which misrepresentation or breach of
warranty is contained in this Agreement or the Stockholders Agreement, (ii) any
breach of any agreement or covenant under this Agreement or the Stockholders
Agreement on the part of Spinco or, on or prior to the Offer Purchase Date, on
the part of the Company, (iii) any and all Spinco Liabilities, (iv) the conduct
of the Spinco Business or any part thereof on, prior to or following the
Distribution Date, (v) any transfer of Spinco Assets to, or assumption of Spinco
Liabilities by, Spinco or any Spinco Company in accordance with this Agreement
or otherwise in connection with the Restructuring (other than any costs and
expenses which have been expressly assumed by the Company pursuant to the
provisions of this Agreement), (vi) any Indemnifiable Loss resulting from any
claims that any statements or omissions relating to or describing, directly or
indirectly, Spinco, any Spinco Company, the Spinco Business, any Spinco Asset or
any Spinco Liability, and which occur on or prior to the Offer Purchase Date (A)
in the Information Statement, the Form 10 or in any registration statement filed
pursuant to Section 3.1 hereof (in each case other than with respect to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing by Parent, the Purchaser or their Affiliates,
representatives or advisors and other than any statements or omissions which
relate solely to the Merger Agreement and this Agreement and the transactions
contemplated thereby and hereby), or (B) in any document(s) filed with the SEC
by Spinco or any Spinco Company after the date hereof pursuant to either the
Securities Act or the Exchange Act (in each case other than with respect to any
statements or omissions which relate solely to the Merger Agreement and this
Agreement and the transactions contemplated thereby and hereby), which, in the
case of either clause (A) or (B) above, are false or misleading with respect to
any material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, (vii) the failure of
the Company or Spinco to obtain any Final Order or other consent or approval of
the FCC with respect to any of the transactions contemplated pursuant to either
this Agreement or the Merger Agreement and (viii)
44
any Excluded Indemnifiable Losses (as defined below). Notwithstanding the
foregoing, Spinco's indemnification obligations pursuant to this Section 5.2
shall not in any event include any Indemnifiable Losses arising out of or
relating to Transaction Suits (as defined in Section 6.5), except to the extent
of any Indemnifiable Losses (such Indemnifiable Losses, the "Excluded
Indemnifiable Losses") which the Company is able to demonstrate resulted
directly from (a) any statement or omission on the part of Spinco or any of its
Affiliates in the documents referred to in Section 5.2(a)(vi) above or (b) any
business activities, Assets or Liabilities of Spinco, any of the Spinco
Companies or the Spinco Business.
(b) Notwithstanding Spinco's obligations to indemnify Parent
Indemnified Parties pursuant to Section 5.2(a) hereof, Spinco shall be obligated
to indemnify the Parent Indemnified Parties only for those Indemnifiable Losses
under clauses (i), (ii) or (vi) of Section 5.2(a) hereof as to which the Parent
Indemnified Parties have given Spinco written notice thereof on or prior to the
third anniversary of the Distribution Date (it being understood that there shall
be no corresponding time limitation with respect to any Indemnifiable Losses
arising under clauses (iii), (iv), (v), (vii) and (viii) of Section 5.2(a)
hereof); provided further that claims with respect to breaches of covenants and
agreements set forth in this Agreement or the Stockholders Agreement shall
survive for the applicable statute of limitations period. Notwithstanding the
foregoing, if on or before the expiration of such indemnification period any
Parent Indemnified Party has given notice to Spinco pursuant to Section 5.4
hereof of any matter which would be the basis for a claim of indemnification by
such Parent Indemnified Party pursuant to Section 5.2(a), such Parent
Indemnified Party shall have the right after the expiration of such
indemnification period to assert or to continue to assert such claim and to be
indemnified with respect thereto.
Section 5.3. The Company's Agreement to Indemnify.
(a) In addition to any indemnification required by Articles II,
VI and VIII hereof, subject to the terms and conditions set forth in this
Agreement, from and after the Distribution Date, the Company shall indemnify,
defend and hold harmless Spinco, each Spinco
45
Company and each of their respective directors, officers, employees,
representatives, advisors, agents and Affiliates (collectively, the "Spinco
Indemnified Parties") from, against and in respect of any and all Indemnifiable
Losses of the Spinco Indemnified Parties arising out of, relating to or
resulting from, directly or indirectly, (i) any breach of any agreement or
covenant set forth in this Agreement or in the Stockholders Agreement on the
part of Parent or the Purchaser or, following the Offer Purchase Date, on the
part of the Company, (ii) any and all Retained Liabilities, (iii) the conduct of
the Retained Business or any part thereof on, prior to or following the
Distribution Date, (iv) any Indemnifiable Loss resulting from any claims that
any statements or omissions (A) relating to or describing, directly or
indirectly, Parent or the Purchaser, and which occur on or prior to the Offer
Purchase Date in any Solicitation/Recommendation Statement on Schedule 14D-9 of
the Company filed in connection with the Offer, the Information Statement, the
Form 10 or in any registration statement filed pursuant to Section 3.1 or
Section 3.3 hereof (in each case only to the extent of any statements or
omissions made in reliance upon and in conformity with information furnished in
writing by Parent, the Purchaser or their Affiliates, representatives or
advisors), (B) in any Tender Offer Statement on Schedule 14D-1 of the Purchaser
or Parent filed in connection with the Offer (other than any statements or
omissions made in reliance upon and in conformity with information furnished in
writing by the Company, any Retained Subsidiary, Spinco, any Spinco Company or
any of their respective Affiliates, representatives or advisors), or (C) in any
other document(s) filed after the date hereof by Parent or the Purchaser with
the SEC pursuant to either the Securities Act or the Exchange Act (e.g.,
statements or omissions made in a Current Report on Form 8-K filed by either
Parent or the Purchaser after the date hereof pursuant to the Exchange Act),
which, in the case of either clauses (A), (B) or (C) above, are false or
misleading with respect to any material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (v) any Indemnifiable Loss arising out of or resulting from
Transaction Suits (other than Excluded Indemnifiable Losses). Notwithstanding
the foregoing and anything to the contrary in this Agreement or any other
agreement to
46
be entered into pursuant to this Agreement, the Company shall not be required to
indemnify, defend and hold harmless any Spinco Indemnified Party from and
against any Indemnifiable Loss resulting from any claims that the statements
included in the Information Statement, the Form 10 or in any registration
statement filed pursuant to Section 3.1 or Section 3.3 hereof (in each case
other than statements or omissions made in reliance upon and in conformity with
information furnished in writing by Parent, the Purchaser or their Affiliates,
representatives or advisors expressly for use therein) are false or misleading
with respect to any material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) Notwithstanding the Company's obligations to indemnify the
Spinco Indemnified Parties pursuant to Section 5.3(a) hereof, the Company shall
be obligated to indemnify the Spinco Indemnified Parties only for those
Indemnifiable Losses under Sections 5.3(a)(i) and 5.3(a)(iv) hereof as to which
the Spinco Indemnified Parties have given the Company written notice thereof on
or prior to the expiration of any applicable statute of limitations period (it
being understood that there shall be no corresponding time limitation with
respect to any Indemnifiable Losses arising under clauses (ii) and (iii) of
Section 5.3(a) hereof). Notwithstanding the foregoing, if on or before the
expiration of such indemnification period any Spinco Indemnified Party has given
notice to the Company pursuant to Section 5.4 hereof of any matter which would
be the basis for a claim of indemnification by such Spinco Indemnified Party
pursuant to Section 5.3(a), such Spinco Indemnified Party shall have the right
after the expiration of such indemnification period to assert or to continue to
assert such claim and to be indemnified with respect thereto.
Section 5.4. Procedure for Indemnification. All claims for
indemnification under this Article V shall be asserted and resolved as follows:
(a) In the event that any claim or demand, or other circumstance
or state of facts which could give rise to any claim or demand, for which an
Indemnifying Party may be liable to an Indemnified Party hereunder
47
is asserted against or sought to be collected by a third party (an "Asserted
Liability"), the Indemnified Party shall promptly notify the Indemnifying Party
in writing of such Asserted Liability, specifying the nature of such Asserted
Liability and the amount or the estimated amount thereof to the extent then
feasible (which estimate shall not be conclusive of the final amount of such
claim or demand) (the "Claim Notice"); provided that no delay on the part of the
Indemnified Party in giving any such Claim Notice shall relieve the Indemnifying
Party of any indemnification obligation hereunder unless (and then solely to the
extent that) the Indemnifying Party is materially prejudiced by such delay. The
Indemnifying Party shall have 20 days (or less if the nature of the Asserted
Liability requires) from its receipt of the Claim Notice (the "Notice Period")
to notify the Indemnified Party whether or not the Indemnifying Party desires,
at the Indemnifying Party's sole cost and expense and by counsel of its own
choosing, which shall be reasonably satisfactory to the Indemnified Party, to
defend against such Asserted Liability; provided that if, under applicable
standards of professional conduct a conflict on any significant issue between
the Indemnifying Party and any Indemnified Party exists in respect of such
Asserted Liability, then the Indemnifying Party shall reimburse the Indemnified
Party for the reasonable fees and expenses of one additional counsel to be
retained in order to resolve such conflict, promptly upon presentation by the
Indemnified Party of invoices or other documentation evidencing such amounts to
be reimbursed. If the Indemnifying Party undertakes to defend against such
Asserted Liability, the Indemnifying Party shall control the investigation,
defense and settlement thereof; provided that (i) the Indemnifying Party shall
use its reasonable efforts to defend and protect the interests of the
Indemnified Party with respect to such Asserted Liability, (ii) the Indemnified
Party, prior to or during the period in which the Indemnifying Party assumes
control of such matter, may take such reasonable actions as the Indemnified
Party deems necessary to preserve any and all rights with respect to such
matter, without such actions being construed as a waiver of the Indemnified
Party's rights to defense and indemnification pursuant to this Agreement, and
(iii) the Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, consent to any settlement which (A) imposes any Liabilities
on the Indemnified Party (other than those Liabili-
48
ties which the Indemnifying Party agrees to promptly pay or discharge), and (B)
with respect to any non-monetary provision of such settlement, would be likely,
in the Indemnified Party's reasonable judgment, to have an adverse effect on
the business operations, assets, properties or prospects of Parent, the Company
or the Retained Business (in the case of a Parent Indemnified Party), Spinco or
the Spinco Business (in the case of a Spinco Indemnified Party), or such
Indemnified Party. Notwithstanding the foregoing, the Indemnified Party shall
have the right to control, pay or settle any Asserted Liability which the
Indemnifying Party shall have undertaken to defend so long as the Indemnified
Party shall also waive any right to indemnification therefor by the Indemnifying
Party. If the Indemnifying Party undertakes to defend against such Asserted
Liability, the Indemnified Party shall cooperate fully with the Indemnifying
Party and its counsel in the investigation, defense and settlement thereof. If
the Indemnified Party desires to participate in any such defense it may do so at
its sole cost and expense. If the Indemnifying Party does not undertake within
the Notice Period to defend against such Asserted Liability, then the
Indemnifying Party shall have the right to participate in any such defense at
its sole cost and expense, but the Indemnified Party shall control the
investigation, defense and settlement thereof (provided that the Indemnified
Party may not settle any such Asserted Liability without obtaining the prior
written consent of the Indemnifying Party (which consent shall not be
unreasonably withheld by the Indemnifying Party; provided that in the event that
the Indemnifying Party is in material breach at such time of the provisions of
this Section 5.4, then the Indemnified Party shall not be obligated to obtain
such prior written consent of the Indemnifying Party) at the reasonable cost and
expense of the Indemnifying Party (which shall be paid by the Indemnifying Party
promptly upon presentation by the Indemnified Party of invoices or other
documentation evidencing the amounts to be indemnified). The Indemnified Party
and the Indemnifying Party agree to make available to each other, their counsel
and other representatives, all information and documents available to them which
relate to such claim or demand (subject to the confidentiality provisions of
Section 7.5 hereof); provided that no party hereto shall be obligated to
disclose any information which would result in the waiver of any attorney-
client, attorney work product or other
49
similar privileges, if the disclosure of such information would be materially
prejudicial to such disclosing party. The Indemnified Party and the Indemnifying
Party and the Company and its employees also agree to render to each other such
assistance and cooperation as may reasonably be required to ensure the proper
and adequate defense of such claim or demand.
(b) In the event that an Indemnified Party should have a claim
against the Indemnifying Party hereunder which does not involve a claim or
demand being asserted against or sought to be collected from it by a third
party, the Indemnified Party shall send a Claim Notice with respect to such
claim to the Indemnifying Party. The Indemnifying Party shall have 20 days from
the date such Claim Notice is delivered during which to notify the Indemnified
Party in writing of any good faith objections it has to the Indemnified Party's
Claim Notice or claims for indemnification, setting forth in reasonable detail
each of the Indemnifying Party's objections thereto. If the Indemnifying Party
does not deliver such written notice of objection within such 20-day period, the
Indemnifying Party shall be deemed to have accepted responsibility for the
prompt payment of the Indemnified Party's claims for indemnification, and shall
have no further right to contest the validity of such indemnification claims. If
the Indemnifying Party does deliver such written notice of objection within such
20-day period, the Indemnifying Party and the Indemnified Party shall attempt
in good faith to resolve any such dispute within 30 days of the delivery by the
Indemnifying Party of such written notice of objection. If the Indemnifying
Party and the Indemnified Party are unable to resolve any such dispute within
such 30-day period, then either the Indemnifying Party or the Indemnified Party
shall be free to pursue any remedies which may be available to such party under
applicable Law.
Section 5.5. Miscellaneous Indemnification Provisions.
(a) The Indemnifying Party agrees to indemnify any successors of
the Indemnified Party to the same extent and in the same manner and on the same
terms and conditions as the Indemnified Party is indemnified by the Indemnifying
Party under this Article V. In the event that any claim for indemnification
under either
50
Articles II, V, VI or VIII hereof meets the criteria of more than one of the
types of claims for which indemnification is provided for under such provisions,
the Indemnified Party, in its sole discretion, shall classify such claim and
only be required to include such claim, and the recoveries for indemnification
therefrom, in one of such categories. No investigation made by any party hereto
shall affect any representation or warranty of the other party's hereto
contained in this Agreement or in the Schedules attached hereto or any
certificate, document or other instrument delivered in connection herewith. The
consummation by Parent of the Offer pursuant to the terms and conditions of the
Merger Agreement, either with or without knowledge of a breach of warranty or
covenant or misrepresentation by any party hereto, shall not constitute a waiver
of any claim by any Parent Indemnified Party for Indemnifiable Losses with
respect to such breach or misrepresentation. In determining the amount of
Indemnifiable Losses to which a Parent Indemnified Party or Spinco Indemnified
Party (as the case may be) is entitled to indemnification hereunder, an
arbitration panel, court or tribunal may take into consideration, where
appropriate and without duplication, any diminution in the aggregate value of
the Retained Business or the Spinco Business (as the case may be).
Notwithstanding anything to the contrary contained in this Agreement, the
assignment of any party's rights hereunder to any other person or entity shall
not limit, affect or prejudice the ability of the assigning party to continue to
enforce any rights of indemnification hereunder or other rights hereunder in
accordance with the terms and conditions of this Agreement.
(b) In determining the amount of any indemnity payable under this
Article V, such amount shall be reduced by (x) any related tax benefits if and
when actually realized or received (but only after taking into account any tax
benefits (including, without limitation, any net operating losses or other
deductions) to which the Indemnified Party would be entitled without regard to
such item), except to the extent such recovery has already been taken into
account in determining the amount of any indemnity payable under Articles II, V,
VI or VIII hereof, and (y) any insurance recovery if and when actually realized
or received, in each case in respect of such Asserted Liability. Any such
recovery shall be promptly repaid by the Indemnified Party to the Indemni-
51
fying Party following the time at which such recovery is realized or received
pursuant to the previous sentence, minus all reasonably allocable costs, charges
and expenses incurred by the Indemnified Party in obtaining such recovery.
Notwithstanding the foregoing, if (x) the amount of Indemnifiable Losses for
which the Indemnifying Party is obligated to indemnify the Indemnified Party is
reduced by any tax benefit or insurance recovery in accordance with the
provisions of the previous sentence, and (y) the Indemnified Party subsequently
is required to repay the amount of any such tax benefit or insurance recovery or
such tax benefit or insurance recovery is disallowed, then the obligation of the
Indemnifying Party to indemnify with respect to such amounts shall be reinstated
immediately and such amounts shall be paid promptly to the Indemnified Party in
accordance with the provisions of this Agreement.
(c) In the event that a dispute between any Indemnifying Party
and any Indemnified Party concerning the existence of a right or obligation to
indemnity under this Agreement is determined by any arbitration panel or any
court or tribunal, the reasonable fees and expenses of the attorneys for the
party which is principally prevailing in such action shall be paid by the party
which is not principally prevailing in such action.
(d) All amounts owing under this Article V shall bear interest at
a fluctuating rate of interest equal to the rate of interest from time to time
announced by Citibank, N.A. in New York, New York as its prime lending rate,
computed from the time such Damage, cost or expense was incurred or suffered to
the date of payment therefor.
(e) The remedies provided by this Article V shall be the parties'
sole and exclusive remedies for the recovery of any Indemnifiable Losses
resulting, from or arising out of or related to misrepresentations, breaches of
warranties, and non-fulfillment of obligations under this Agreement, except
those arising from or arising out of or related to fraud; provided that the
provisions of this Section 5.5(e) shall not limit the ability of any party to
seek injunctive or similar relief pursuant to Section 11.11 hereof.
52
(f) The parties hereto agree that, notwithstanding any other
provision in this Agreement to the contrary, in the event of any breach of
the representation and warranty set forth in Section 6.1(c)(i) hereof, in
addition to the indemnities provided for in this Article V, Spinco shall
either (a) secure the prompt release of the Company, the Retained
Companies, the Retained Business and any affected Parent Indemnified Party
from all obligations and Liabilities relating to those Spinco Liabilities
or Spinco Indebtedness for which the Company, the Retained Companies, the
Retained Business or any affected Parent Indemnified Party is or has become
liable, directly or indirectly, as borrower, surety, guarantor or otherwise
(or with respect to which any of the Retained Assets is or has become bound
by or subject to) or (b) promptly prepay, redeem, purchase or defease
(pursuant to a trust arrangement reasonably acceptable to Parent) in full
all such Spinco Liabilities or Spinco Indebtedness. Spinco shall take or
cause to be taken all actions, execute such agreements, documents or
instruments, and do or cause to be done all things, necessary, proper or
advisable under the terms of the agreements governing the Spinco Liability
or Spinco Indebtedness in question and under the provisions of applicable
Law, or as Parent may otherwise reasonably request, in connection with the
fulfillment of Spinco's obligations under this Section 5.5(f).
Section 5.6. Pending Litigation. Following the Distribution
Date, (a) Spinco shall have exclusive authority and control over the
investigation, prosecution, defense and appeal of all pending Actions
relating primarily to the Spinco Business, the Spinco Assets or the Spinco
Liabilities (each, a "Spinco Action"), and may settle or compromise, or
consent to the entry of any judgment with respect to, any such Action
without the consent of the Company, and (b) the Company shall have
exclusive authority and control over the investigation, prosecution,
defense and appeal of all pending Actions relating primarily to the
Retained Business, the Retained Assets or the Retained Liabilities (each, a
"Retained Action"), and may settle or compromise, or consent to the entry
of any judgment with respect to, any such Action without the consent of
Spinco; provided that if both the Company and Spinco are named as parties
to any Spinco Action or Retained Action, neither the Company nor Spinco
(nor any of their respective Subsidiaries) may settle or
53
compromise, or consent to the entry of any judgment with respect to, any
such Action without the prior written consent of the other party (which
consent may not be unreasonably withheld) if such settlement, compromise or
consent to such judgment includes any form of injunctive relief binding
upon such other party. Spinco shall indemnify, defend and hold harmless
each of the Parent Indemnified Parties, and the Company shall indemnify and
hold harmless each of the Spinco Indemnified Parties, in the manner
provided in this Article V, from and against all Indemnifiable Losses
arising out of or resulting from each such Action over which such
indemnifying party has authority and control pursuant to this Section 5.6.
Section 5.7. Construction of Agreements. Notwithstanding any
other provision in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this
Article V and the provisions of any other part of this Agreement or any
exhibit or schedule hereto, the provisions of this Article V shall control,
and in the event and to the extent that there shall be a conflict between
the provisions of this Agreement (including, without limitation, the
provisions of this Article V) and the provisions of the Tax Sharing
Agreement, the provisions of the Tax Sharing Agreement shall control.
ARTICLE VI
CERTAIN ADDITIONAL MATTERS
--------------------------
Section 6.1. Representations or Warranties; Disclaimers.
(a) It is the explicit intent of each party hereto that no party
to this Agreement or to the Merger Agreement is making any representation
or warranty whatsoever, express or implied, in this Agreement, the Merger
Agreement, the Tax Sharing Agreement or the Stockholders Agreement or in
any other agreement contemplated hereby or thereby, except those
representations and warranties expressly set forth in this Agreement.
Each of the parties hereto agrees, to the fullest extent permitted by Law,
that none of them nor any of their Affiliates, agents or representatives
shall have any liability or responsibility whatsoever to any such other
party
54
hereto or such other party's Affiliates, agents or representatives on any
basis (including, without limitation, in contract or tort, under federal or
state securities laws or otherwise) based upon any information provided or
made available, or statements made, to any such other party or such other
party's Affiliates, agents or representatives (or any omissions therefrom),
including, without limitation, in respect of the specific representations
and warranties set forth in this Agreement and the Merger Agreement and the
covenants and agreements set forth in the Merger Agreement, except (i) as
and only to the extent expressly set forth in the indemnification
provisions of Article V hereof and as otherwise expressly set forth herein
(subject to the limitations and restrictions contained herein), and (ii)
with respect to breaches of the covenants and agreements set forth in this
Agreement.
(b) Without limiting the generality of the foregoing, it is
understood and agreed (a) that neither Parent, the Company nor any of the
Retained Subsidiaries is, in this Agreement or in any other agreement or
document contemplated by this Agreement, representing or warranting in any
way as to the value or freedom from encumbrance of, or any other matter
concerning, any Spinco Assets, (b) that the Spinco Assets are being
transferred "as is, where is" and (c) that, subject to the obligations of
the Company set forth in Sections 2.1(b) and 6.2 hereof, Spinco shall bear
the risk that any conveyances of the Spinco Assets might be insufficient or
that Spinco's or any of the Spinco Company's title to any Retained Assets
shall be other than good and marketable and free from encumbrances.
Similarly, it is understood and agreed that neither Parent, the Company nor
any of the Retained Subsidiaries is, in this Agreement or in any other
agreement or document contemplated by this Agreement, representing or
warranting to Spinco or any Spinco Indemnified Party in any way that the
obtaining of the consents and approvals, the execution and delivery of any
amendatory agreements and the making of the filings and applications
contemplated by this Agreement shall satisfy the provisions of any or all
applicable agreements or the requirements of all applicable Laws or
judgments.
(c) Spinco represents and warrants to the Company that (i) except
as expressly provided in the
55
Globalstar Bank Guarantee (as amended pursuant to the provisions of Section
2.5 hereof), neither the Company nor any of the Retained Subsidiaries will,
after giving effect to the Restructuring, be liable directly or indirectly,
as borrower, surety, guarantor, indemnitor or otherwise, with respect to
(and that none of the Retained Assets shall be bound by or subject to) any
of the Spinco Liabilities or any Spinco Indebtedness, (ii) there are no
Intercompany Agreements in effect as of the date hereof, which, either
individually or in the aggregate, are materially adverse to (i) the
business, properties, operations, prospects, results of operations or
condition (financial or otherwise) of the Retained Business or (ii) the
ability of the Company or any of the Retained Subsidiaries to perform their
respective obligations under this Agreement, the Tax Sharing Agreement or
the Stockholders Agreement, (iii) there are no Spinco Assets which have
been used within the Retained Business within one year prior to the date
hereof, other than those Spinco Assets which are listed on Section 6.2(c)
of the Disclosure Schedule, (iv) except as set forth in Section 6.1(c)(iv)
of the Disclosure Schedule, neither Spinco nor any Spinco Company shall,
immediately after giving effect to the Restructuring and the Distribution,
own, hold or lease, in whole or in part, any of the assets, properties,
licenses and rights which are reasonably necessary to carry on the Retained
Business as presently conducted, and (v) prior to, on or shortly after the
Distribution Date, GTL or Globalstar (as the case may be) will issue to the
Company the Guarantee Warrants described in the Globalstar Warrant
Memorandum and the term sheet set forth on Exhibit A-1 attached hereto,
which warrants will be on the terms and conditions described in the
Globalstar Warrant Memorandum and shall otherwise be on such terms and
conditions as are customary to transactions of a similar nature.
Section 6.2. Further Assurances; Subsequent Transfers.
(a) To the extent that any of the transfers, distributions and
deliveries required to be made pursuant to Article II shall not have been
so consummated prior to the Distribution Date, the parties shall cooperate
and use their best efforts to effect such consummation as promptly
thereafter as reasonably practicable. Each of the parties hereto will
execute and deliver such
56
further instruments of transfer and distribution and will take such other
actions as any party hereto may reasonably request in order to effectuate
the purposes of this Agreement and to carry out the terms hereof. Without
limiting the generality of the foregoing, at any time and from time to time
after the Distribution Date, at the request of Spinco or any of its
Subsidiaries, each party hereto will, and will cause each of its
Subsidiaries to, execute and deliver such other instruments of transfer and
distribution, and take such action as any party hereto may reasonably
request in order to more effectively transfer, convey and assign to such
requesting party or to the Subsidiaries of such requesting party and to
confirm the right, title or interest held by such requesting party or any
of the Subsidiaries of such requesting party, in the Assets to be
transferred to such requesting party (or its Subsidiaries) pursuant to this
Agreement, to put such requesting party and its Subsidiaries in actual
possession and operating control thereof and to permit such requesting
party and its Subsidiaries to exercise all rights with respect thereto
(including, without limitation, rights under contracts and other
arrangements as to which the consent of any third party to the transfer
thereof shall not have previously been obtained) and to properly assume and
discharge the related Liabilities.
(b) Each of the parties hereto agrees to use its respective best
efforts, at the Company's reasonable expense, to obtain any consents
required to transfer and assign to (i) Spinco all agreements, leases,
licenses and other rights of any nature whatsoever relating to the Spinco
Assets, and (ii) the Company all agreements, leases, licenses and other
rights of any nature whatsoever relating to the Retained Assets. In the
event and to the extent that any party hereto or any of its Subsidiaries is
unable to obtain any such required consents, (i) such party (or any
Subsidiary that is a party to such agreements, leases, licenses and other
rights, as the case may be) shall continue to be bound thereby (such
person, the "Record Holder") and (ii) the party to which such Asset would
otherwise be transferred pursuant to this Agreement (the "Beneficial
Holder") shall pay, perform and discharge fully all the obligations of the
Record Holder thereunder from and after the Distribution Date and indemnify
such Record Holder for all Indemnifiable Losses arising out of such
performance by
57
such Record Holder. The Record Holder shall, without further consideration
therefor, pay, assign and remit to the Beneficial Holder promptly all
monies, rights and other consideration received in respect of such
performance. The Record Holder shall exercise or exploit its rights and
options under all such agreements, leases, licenses and other rights and
commitments referred to in this Section 6.2(b) only as reasonably directed
by the Beneficial Holder and at the Beneficial Holder's expense. If and
when any such consent shall be obtained or such agreement, lease, license
or other right shall otherwise become assignable, the Record Holder shall
promptly assign all its rights and obligations thereunder to the
Beneficial Holder without payment of further consideration and the
Beneficial Holder shall, without the payment of any further consideration
therefor, assume such rights and obligations.
(c) In the event that, subsequent to the Distribution Date, the
Company or any of the Retained Subsidiaries shall either (i) receive
written notice from Spinco or any of the Spinco Companies that certain
specified Assets of the Company or any of the Retained Subsidiaries which
properly constitute Spinco Assets were not transferred to it on or prior to
the Distribution Date or (ii) determine that certain Assets of the Company
or any of the Retained Subsidiaries which constitute Spinco Assets were not
transferred to Spinco or any of the Spinco Companies on or prior to the
Distribution Date, then as promptly as practicable thereafter, the Company
shall, and shall cause its Subsidiaries to, take all steps reasonably
necessary to transfer and deliver any and all of such Assets to Spinco or
its Subsidiaries at the recipient's reasonable expense. In the event that,
subsequent to the Distribution Date, Spinco or any of the Spinco Companies
shall either (i) receive written notice from the Company or any of the
Retained Subsidiaries that certain specified Assets were transferred to
Spinco or its Subsidiaries which properly constitute Retained Assets, or
(ii) determine that certain Assets of Spinco or the Spinco Companies which
constitute Retained Assets were transferred to Spinco or the Spinco
Companies, then as promptly as practicable thereafter, Spinco shall, and
shall cause the Spinco Companies to, take all steps reasonably necessary
to transfer and deliver any and all of such Assets to the Company or the
Company's Subsid-
58
iaries at the recipient's reasonable expense without the payment by the
Company of any consideration therefor.
Section 6.3. The Spinco Board. Spinco and the Company shall
take all actions which may be required to elect or otherwise appoint, on or
prior to the Distribution Date, those individuals that the Board of
Directors of the Company (as in effect prior to the consummation of the
Offer) may designate as directors of Spinco.
Section 6.4. Use of Names. Following the Distribution Date,
Spinco and each of the Spinco Companies shall have the sole and exclusive
ownership of and right to use, as between the Company and each of the
Retained Subsidiaries, on the one hand, and Spinco and each of the Spinco
Companies, on the other hand, the "Loral" name and each of the names used
(or formerly used) in the Spinco Business (the "Spinco Names"), and each of
the trade marks, trade names, service marks and other proprietary rights
related to such Spinco Names as set forth on Section 6.4 of the Disclosure
Schedule (the "Spinco Proprietary Name Rights"); provided that the Company,
the Retained Business and each of the Retained Subsidiaries is hereby
granted a perpetual, fully paid-up, worldwide, non-exclusive license with
respect to such Spinco Names and Spinco Proprietary Name Rights to the
extent necessary to enable the Company, the Retained Business and each of
the Retained Subsidiaries to continue to use such rights in their
respective businesses with respect to (x) those governmental Contracts of
the Retained Business (and any programs thereunder) in existence as of the
Offer Purchase Date or those governmental programs for which a bid has been
submitted prior to the Offer Purchase Date, and (y) those products and
services of the type manufactured or sold by them on the date hereof or at
any time during the last five years or under current development by them as
of the date hereof. Following the Distribution Date, the Company and each
of the Retained Subsidiaries shall have the sole and exclusive ownership of
and right to use, as between Spinco and each of the Spinco Companies, on
the one hand, and the Company and each of the Retained Subsidiaries, on the
other hand, all names used (or formerly used) by the Company or any of the
Retained Subsidiaries as of such date other than the Spinco Names (the
"Company Names"), and all other trade marks, trade names, service marks and
other proprietary rights owned or used by the Company or any of the Retai-
59
ned Subsidiaries as of such date other than the Spinco Proprietary Name
Rights (the "Company Proprietary Name Rights"). Notwithstanding the
foregoing, following the Distribution Date, (x) the Company shall, and
shall cause its Subsidiaries and other Affiliates to, take all action
reasonably necessary to cease using, and change as soon as commercially
practicable (including by amending any charter documents), any corporate or
other names which are the same as or confusingly similar to any of the
Spinco Names or any of the Spinco Proprietary Name Rights, and (y) Spinco
shall, and shall cause its Subsidiaries and other Affiliates to, take all
action reasonably necessary to cease using, and change as soon as
commercially practicable (including by amending any charter documents), any
corporate or other names which are the same as or confusingly similar to
any of the Company Names or any of the Company Proprietary Name Rights.
Section 6.5. Litigation Relating to Transaction.
(a) Following the date hereof, in the event that any Action is
commenced against the Company or any of its Subsidiaries challenging either
the Merger Agreement, this Agreement, the Tax Sharing Agreement or the
Stockholders Agreement or any of the transactions contemplated therein or
herein (any such Action, a "Transaction Suit"), then the Company shall
provide promptly to Parent copies of all material pleadings sent or
received after the date hereof by the Company or its counsel with respect
to any such Transaction Suit(s).
(b) Parent shall be entitled to participate in the defense of
each Transaction Suit and to employ counsel at its own expense to assist
in the handling of each such Transaction Suit. The Company shall not
settle or compromise any Transaction Suit or consent to the entry of any
judgment with respect to any such Transaction Suit, without the prior
written consent of Parent (which consent shall not be unreasonably
withheld).
(c) Following the Distribution Date, Spinco shall be entitled to
participate in the defense of each Transaction Suit to which it or any of
its Affiliates is a party, and to employ counsel at its own expense to
assist in the handling of each such Transaction Suit.
60
Following the Distribution Date, the Company shall not settle or compromise
any Transaction Suit to which Spinco or any of its Affiliates is a party or
consent to the entry of any judgment with respect to any such Transaction
Suit, without the prior written consent of Spinco (which consent shall not
be unreasonably withheld).
Section 6.6. Spinco Equity Arrangements. On or prior to the
Offer Purchase Date, Spinco, the Company and each Retained Subsidiary which
will be a holder of Spinco Preferred Stock immediately after giving effect
to the Restructuring, shall each execute and deliver to the other
counterparts of a stockholders agreement with respect to such Spinco
Preferred Stock in substantially the form set forth in Exhibit A hereto.
Section 6.7. Post-Closing Business Relationships.
(a) License of Existing Intellectual Property Rights. The
Company and the Retained Subsidiaries hereby grant to each of Spinco and
the Spinco Companies, effective as of the Distribution Date, a perpetual,
fully paid-up, worldwide, non-exclusive license with respect to the
Intellectual Property Rights to the extent necessary to enable Spinco and
the Spinco Companies to continue to use the Intellectual Property Rights in
their respective businesses with respect to those products and services
thereof of the type manufactured or sold by them on the date hereof or at
any time during the last five years or under current development by them as
of the date hereof; provided that neither Spinco nor any of the Spinco
Companies shall be permitted to sublicense or otherwise transfer any of the
Intellectual Property Rights referred to in this Section 6.7(a) to any
Person other than an Affiliate of Spinco. Each of Spinco and the Spinco
Companies acknowledges and agrees that neither the Company nor the Retained
Subsidiaries nor any of their respective Affiliates is making any
representations or warranties with respect to the ownership, validity,
efficacy or other matters relating to any of the Intellectual Property
Rights referred to in this Section 6.7(a).
(b) License of Certain Other Intellectual Property Rights.
During the period commencing after the Distribution Date and ending on the
third anniversary
61
thereof, the Company and the Retained Subsidiaries shall, at the request of
Spinco or any Spinco Company, grant to Spinco or such Spinco Company a non-
exclusive license for those applications reasonably related to the Spinco
Business with respect to any Intellectual Property Rights not already
covered by paragraph (a) above, which grant shall be made on terms and
conditions no less favorable than those terms and conditions which may from
time to time be extended generally by Parent to third parties with respect
to similar products, services or applications; provided that neither the
Company nor any of the Retained Subsidiaries shall be obligated to license
to Spinco or any Spinco Company any of the Intellectual Rights referred to
in this Section 6.7(b) if such Intellectual Property Rights relate to any
product or service which competes with or will compete with those products
or services of the type manufactured or sold by Parent, any Subsidiary of
Parent, the Company or any of the Retained Subsidiaries on the date thereof
or at any time during the previous five years or under current development
by them as of the date thereof.
(c) Certain General Licensing Provisions. The license of
Intellectual Property Rights granted pursuant to this Section 6.7 shall
not affect the rights of the Company or any of the Retained Subsidiaries to
use, disclose or otherwise freely deal with any Intellectual Property
Rights licensed hereunder and shall be subject to and limited by (x) all
Contracts and obligations, entered into prior to the date on which the
license in question was granted, in any way affecting the Company's ability
to license the Intellectual Property Rights and (y) the provisions of
applicable Law. Spinco agrees to indemnify, defend and hold harmless the
Company and each Parent Indemnified Party in accordance with the
indemnification provisions of Article V hereof, from and against any and
all Indemnifiable Losses of the Company and any such Parent Indemnified
Party arising out of, relating to or resulting from the license of any
Intellectual Property Rights to Spinco or any Spinco Company pursuant to
the provisions of Section 6.7(a) above or any failure by Spinco or any
Spinco Company to perform and abide by all obligations, restrictions,
conditions and agreements applicable to the Intellectual Property Rights
licensed to Spinco or any Spinco Company pursuant to the provisions of
Section 6.7(a) above.
62
(d) Technical Services. During the period commencing after the
Distribution Date and ending on the third anniversary thereof (and for
successive periods of three years provided that Spinco notifies the Company in
writing, no less than six months nor more than nine months prior to the end of
the three-year period in question, of Spinco's intention to continue seeking the
services set forth in this Section 6.7(d) during the following three-year
period), and subject to existing commitments, obligations and availability, and
upon reasonable notice, Parent and its Subsidiaries shall use their reasonable
efforts to make available to Spinco and the Spinco Companies those personnel and
facilities reasonably designated by Parent or the Company to provide such
research and development, technological and technical consulting and support
services and other similar consulting and support services (such services, the
"Technical Services"), to the extent reasonably requested by Spinco or the
Spinco Companies from time to time. The Technical Services shall be provided at
a cost calculated in accordance with the "fully-allocated" cost (which shall
include all direct and indirect expenses of Parent or the Company or any of
their respective Subsidiaries or any other entity which is providing the
Technical Services in question, and which shall be allocated in a manner
consistent with the Parent's or the Company's past practices (as the case may
be) with respect to the allocation of costs to its Subsidiaries. Following the
end of the calendar month in which any such Technical Services are performed,
the Company shall provide to Spinco or the Spinco Subsidiary in question an
invoice (the "Technical Services Invoice") setting forth in summary detail the
Technical Services which were provided during such calendar month and the
appropriate cost thereof. Spinco or the Spinco Subsidiary in question shall pay
to the Company in cash in a reasonably prompt manner following the delivery by
the Company of a Technical Services Invoice, the amounts due with respect to the
Technical Services reflected on such Technical Services Invoice. The parties
hereto acknowledge and agree that (x) the specific terms and conditions of the
Technical Services to be provided hereunder (to the extent not otherwise
specified and to the extent not inconsistent with the provisions of this Section
6.7(d)) shall be on terms and conditions similar to those terms and conditions
which may from time to time be extended generally by or to Parent to or from
third parties with respect to similar services (except as
63
the parties may otherwise mutually agree) and (y) any Intellectual Property
Rights created primarily in connection with the delivery of Technical Services
to Spinco or the Spinco Subsidiary (as the case may be) shall be the property of
Spinco or the Spinco Subsidiary (as the case may be); provided that Parent, the
Company and each of their respective Affiliates are hereby granted a perpetual,
fully paid-up, worldwide, non-exclusive license with respect to all such
Intellectual Property Rights (provided further that neither Parent nor any of
its Affiliates shall be permitted to sublicense or otherwise transfer any of the
Intellectual Property Rights referred to in this Section 6.7(d) to any Person
other than an Affiliate of such party). Notwithstanding anything to the contrary
contained in this Section 6.7(d), SSL shall not be entitled to request or to
receive, either directly or indirectly, any Technical Services or any
Intellectual Property Rights relating thereto (nor may Spinco, nor any Affiliate
of either Spinco or SSL, request or receive any such Technical Services or
Intellectual Property Rights on behalf of SSL) unless and until SSL shall have
entered into an unconditional release (which shall be in form and substance
reasonably acceptable to Parent) in favor of Parent and its Affiliates with
respect to any and all Liabilities relating to the SSL Lawsuit (provided that
in the event that SSL delivers to Parent a release which satisfies the
provisions of this sentence, Parent agrees to promptly deliver to SSL a similar
release with respect to such SSL Lawsuit).
Section 6.8. No Restrictions on Post-Closing Competitive
Activities. It is the explicit intent of each of the parties hereto that the
provisions of this Agreement shall not include any non-competition or other
similar restrictive arrangements with respect to the range of business
activities which may be conducted by the parties hereto. Accordingly, each of
the parties hereto acknowledges and agrees that nothing set forth in this
Agreement shall be construed to create any explicit or implied restriction or
other limitation on (a) the ability of any party hereto to engage in any
business or other activity which competes with the business of any other party
hereto, or (b) the ability of any party to engage in any specific line of
business or engage in any business activity in any specific geographic area.
64
Section 6.9. CCD Lawsuit.
(a) The parties hereto acknowledge and agree that prior to the
Distribution Date, the Company shall have complete and exclusive control and
management over the CCD Lawsuit. On the Distribution Date, immediately prior to
the Distribution, Spinco shall acquire an interest in the CCD lawsuit pursuant
to the transfers set forth in Section 2.1(a)(viii), which transfers shall be
effected by the Company and its Subsidiaries, with the consent of Parent (which
shall not be unreasonably withheld), entering into any agreements or
stipulations, including, but not limited to, an assignment of the action to
Spinco, as may reasonably be required to (i) grant to Spinco complete and
exclusive control and management of the CCD Lawsuit (including, but not limited
to, the prosecution, defense or settlement of such action) and (ii) grant to
Spinco the exclusive right to any and all proceeds or awards resulting or
derived from the CCD Lawsuit; provided that Spinco shall pay all fees and
expenses relating to the CCD Lawsuit and Spinco hereby agrees to indemnify,
defend and hold harmless the Company and each Parent Indemnified Party in
accordance with the indemnification provisions of Article V hereof, from and
against any and all Indemnifiable Losses of the Company and any such Parent
Indemnified Party with respect to the CCD Lawsuit (including, without
limitation, with respect to any countersuit relating thereto). The Company
agrees that it shall provide reasonable cooperation to Spinco in connection with
the CCD Lawsuit, including, but not limited to, reasonable access to such
books, records and employees of the Company as may be reasonably necessary in
order for Spinco to prosecute or defend the CCD Lawsuit or any other Action
related thereto.
(b) Notwithstanding anything to the contrary contained in this
Section 6.9, Spinco shall not, without the prior written consent of Parent,
consent to any settlement which (A) imposes any Liabilities on Parent (other
than those Liabilities which Spinco agrees to promptly pay or discharge), and
(B) with respect to any non-monetary provision of such settlement, would be
likely, in Parent's reasonable judgment, to have an adverse effect on the
business operations, assets, properties or prospects of Parent, the Company or
the Retained Business. Nothing in this Section 6.9 shall be construed in any
manner to vitiate any of the collective
65
rights of the Company, the Retained Subsidiaries and Spinco under the CCD
Lawsuit and the rights being asserted thereunder in relation to any third
party, and the parties hereto shall take all reasonable actions necessary
to ensure the foregoing.
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
----------------------------------
Section 7.1. Provision of Corporate Records. Except as provided
in the following sentence, on the Distribution Date, the Company shall
deliver to Spinco all corporate books and records (including all active
agreements, active litigation files and government filings) which are
corporate records of Spinco or any of the Spinco Companies and which relate
primarily to the Spinco Assets, the Spinco Business or the Spinco
Liabilities, including, without limitation, original corporate minute
books, stock ledgers and certificates and corporate seals of each
corporation the capital stock of which is included in the Spinco Assets.
Notwithstanding the foregoing, the Company shall have the right to retain
the original copies of any such documents which also relate to the Retained
Assets, the Retained Business or the Retained Liabilities, provided that
it provides Spinco with copies of, and reasonable access to, such materials
after the Distribution Date. Also on the Distribution Date, the Company
shall provide to Spinco lists of trademarks, patents, copyrights and other
intellectual property set forth in clause (iii) of the definition of
"Assets" herein included in the Spinco Assets.
Section 7.2. Access to Information. Subject to the
confidentiality provisions of Section 7.5 hereof, from and after the
Distribution Date (i) Spinco shall afford to the Company and its authorized
accountants, counsel and other designated representatives reasonable access
(including, without limitation, using reasonable efforts to give access to
persons or firms possessing Information (as defined below)) and duplicating
rights during normal business hours to all records, books, contracts,
instruments, computer data and other data and information (collectively,
"Information") within Spinco's possession relating to the Spinco Assets,
the Spinco Business and the Spinco Liabilities, insofar as such
66
access is reasonably required by the Company, and (ii) the Company shall
afford to Spinco and its authorized accountants, counsel and other
designated representatives reasonable access (including, without
limitation, using reasonable efforts to give access to persons or firms
possessing Information) and duplicating rights during normal business hours
to all Information within the Company's possession relating to the
Retained Assets, the Retained Business and the Retained Liabilities,
insofar as such access is reasonably required by Spinco. Information may
be requested under this Article VII for, without limitation, audit,
accounting, claims, litigation and tax purposes, as well as for purposes of
fulfilling disclosure and reporting obligations.
Section 7.3. Production of Witnesses. From and after the
Distribution Date, each party shall use reasonable efforts to make
available to the other party, upon written request, its officers,
directors, employees and agents as witnesses to the extent that any such
person may reasonably be required in connection with any legal,
administrative or other proceedings in which the requesting party may from
time to time be involved.
Section 7.4. Retention of Records. Except as otherwise required
by Law or agreed to in writing, Spinco and the Company shall each retain,
for a period of at least seven years following the Distribution Date, all
significant Information relating to (i) in the case of the Company, the
Spinco Business and (ii) in the case of Spinco, the Retained Business.
Notwithstanding the foregoing, either Spinco or the Company may destroy or
otherwise dispose of any of such Information at any time, provided that,
prior to such destruction or disposal, (a) Spinco or the Company, as the
case may be, shall provide no less than 90 or more than 120 days' prior
written notice to the other party, specifying the Information proposed to
be destroyed or disposed of and (b) if the other party shall request in
writing prior to the scheduled date for such destruction or disposal that
any of the Information proposed to be destroyed or disposed of be delivered
to the other party, Spinco or the Company, as the case may be, shall
promptly arrange for the delivery of such of the Information as was
requested, at the expense of the other party.
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Section 7.5. Confidentiality.
(a) Each party shall hold, and shall cause its officers,
employees, agents, consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or, in
the reasonable opinion of its counsel, by other requirements of Law, all
confidential, proprietary or other non-public information or trade secrets
concerning the other party (or such other party's business operations or
the business operations of such other party's Affiliates) which is
furnished it by such other party or its representatives pursuant to either
the Merger Agreement, this Agreement or the Confidentiality Agreement
(collectively, the "Confidential Information"). None of the parties hereto
nor any of their respective Affiliates shall use for their own benefit or
purposes, or release or disclose to any other person or entity, any such
Confidential Information (except, to the extent reasonably required, for
disclosure to those of such party's auditors, attorneys and other
representatives who agree to be bound by the provisions of this Section
7.5). Notwithstanding the foregoing, in the event any party hereto is
requested to disclose any Confidential Information to any third party
pursuant to any judicial or administrative process or, in the reasonable
opinion of its counsel, any other requirements of Law, the party from whom
such disclosure is sought shall (x) notify the other parties hereto as soon
as reasonably practicable of such request for disclosure, (y) disclose only
that portion of the Confidential Information which it reasonably believes,
following the advice of counsel, is necessary in order to comply with such
judicial or administrative process or other requirements of Law, and (z)
cooperate with the other parties hereto in seeking to narrow the scope of
any such third party request for disclosure).
(b) Notwithstanding the foregoing, the term "Confidential
Information" shall not include information (a) which is or becomes
generally available to the public other than as a result of disclosure of
such information by the disclosing party or any of its Affiliates or
representatives, (b) becomes available to the recipient of such information
on a non-confidential basis from a source which is not, to the recipient's
knowledge, bound by a confidentiality or other similar agreement, or by any
other legal, contractual or fiduciary obligation
68
which prohibits disclosure of such information to the other party hereto,
or (c) which can be demonstrated to have been developed independently by
the representatives of such recipient which representatives have not had
any access to any information which would otherwise be deemed to be
"Confidential Information" pursuant to the provisions of this Section 7.5.
ARTICLE VIII
EMPLOYEE MATTERS
----------------
Section 8.1. Officers and Employees. Except as otherwise
specified by Spinco prior to the Offer Purchase Date, the executive
officers of the Company shall be the executive officers of Spinco on and
after the Distribution Date. Effective as of the Distribution Date, (a)
those Retained Employees who are employed by the Company or any of its
subsidiaries immediately prior to the Distribution Date shall become
employees of the Company in the same capacities as then held by such
employees (or in such other capacities as the Company shall determine in
its sole discretion) and (b) those Spinco Employees, together with those
persons whose primary employment is with the Spinco Business, who are
employed by the Company or any of its subsidiaries immediately prior to the
Distribution Date shall become employees of Spinco in the same capacities
as then held by such employees (or in such other capacities as Spinco
shall determine in its sole discretion).
Section 8.2. Employee Benefits.
(a) As soon as practicable after, and in any event within 90
days after, and effective as of, the Distribution Date, Spinco shall
establish a defined benefit pension plan and trust intended to qualify
under Section 401(a) and Section 501(a) of the Code (the "Spinco Pension
Plan"). The Company shall, within 180 days following the Distribution
Date, but in no event prior to the receipt by the Company of written
evidence of the adoption of the Spinco Pension Plan and the trust
thereunder by Spinco and either (A) the receipt by the Company of a copy of
a favorable determination letter issued by the IRS with respect to the
Spinco Pension Plan or (B) an opinion, satisfactory to the Company's
counsel,
69
of Spinco's counsel to the effect that the terms of the Spinco Pension Plan
and its related trust qualify under Section 401(a) and Section 501(a) of
the Code, direct the Trustees of the Loral Corporation Pension Plan and the
Retirement Plan of Loral Aerospace Corp. (the "Company Pension Plans") to
transfer in cash or in kind, as agreed to by the Company and Spinco, from
the trusts under the Company Pension Plans to the trust under the Spinco
Pension Plan, an amount determined by the certified actuary of the Company
Pension Plans (the "Company Actuary") which shall be equal to, with respect
to each such Company Pension Plan, (A) the product of (i) the fair market
value of the assets held under such Company Pension Plan as of the last day
of the month prior to the month in which the transfer occurs (the
"Valuation Date") and (ii) a fraction, the numerator of which is equal to
the present value of all accrued benefits under such Company Pension Plan
as of the Distribution Date in respect of Spinco Employees and the
denominator of which is equal to the present value of all accrued benefits
under such Company Pension Plan less (B) the payments made by such Company
Pension Plan between the Distribution Date and the date of transfer in
respect of Spinco Employees. From the Valuation Date to the date of
transfer, the assets to be transferred will be credited with interest at
the interest rate available on a 30-day treasury note at the auction date
on or immediately preceding the Valuation Date.
The calculation of the present value of such benefits shall be in
accordance with Section 414(1) of the Code and the regulations promulgated
thereunder and in all cases utilizing the assumptions used by the Company
for reporting accrued benefit obligations under FAS No. 87 in its 1995
Annual Report. For purposes of this calculation, the present value of
accrued benefits shall be determined on a termination basis in accordance
with the standards of Section 414(l) of the Code. The determination by the
Company Actuary shall be final and binding, provided, however, that the
Company Actuary shall provide the actuary selected by Spinco with all the
documentation reasonably necessary for Spinco to verify such determination;
provided, further, that if the Spinco actuary certifies, in writing within
60 days of receiving such supporting documentation, that he disagrees with
the Company Actuary then, first the chief financial officers of the Company
and Spinco shall negotiate, in good faith,
70
to resolve such dispute, and if unable to come to an agreement, then the
Company and Spinco shall agree upon and engage an impartial actuary, who
shall be entitled to the privileges and immunities of an arbitrator, to
resolve any disagreement and whose determination as to any such
disagreement (if not contrary to ERISA) shall be conclusive, final and
binding. The parties shall share equally all costs and fees of such
impartial actuary. At the time of transfer of the amount set forth in this
Section 8.2, Spinco and the Spinco Pension Plan shall assume all
liabilities for all accrued benefits under the Company Pension Plans in
respect of Spinco Employees and each of the Company and the Company Pension
Plans shall be relieved of all liabilities for such benefits. As soon as
practicable after, and in any event within 90 days after, and effective as
of, the Distribution Date, Spinco shall cause SSL to establish a trust
intended to qualify under Section 501(a) of the Code ("Spinco SSL Trust")
and intended to hold the assets of the Retirement Plan of SSL (the "SSL
Plan"). The Company shall, within 180 days following the Distribution Date,
but in no event prior to the receipt by the Company of written evidence of
the adoption of the Spinco SSL Trust, direct the Trustees of the Loral
Master Pension Trust (the "Master Trust") to transfer in cash or in kind as
agreed to by SSL and the Company from the Master Trust to the Spinco SSL
Trust, the assets held by the Master Trust under the SSL Plan. Upon the
transfer of assets in accordance with this Section 8.2(a), Spinco agrees to
indemnify and hold harmless the Company, its officers, directors,
employees, agents and affiliates from and against any and all Indemnifiable
Losses arising out of or related to the Spinco Pension Plan and the SSL
Plan, including all benefits accrued by Spinco Employees prior to the
Distribution Date under the Company Pension Plans and the SSL Plan. Spinco
and the Company shall provide each other with such records and information
as may be necessary or appropriate to carry out their obligations under
this Section or for the purposes of administration of the Spinco Pension
Plan and the SSL Plan, and they shall cooperate in the filing of documents
required by the transfer of assets and liabilities described herein.
Notwithstanding anything contained herein to the contrary, no such transfer
shall take place until the 31st day following the filing of all required
Forms 5310-A in connection therewith.
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(b) Individual Account Plan. As soon as practicable after the
Distribution Date, but in no event later than 90 days after the
Distribution Date, Spinco shall establish a defined contribution plan and
trust intended to qualify under Section 401(a) and Section 501(a) of the
Code (the "Spinco Savings Plan"). The Company shall, within 180 days
following the Distribution Date, but in no event prior to the receipt by
the Company of written evidence of the adoption of the Spinco Savings Plan
and the trust thereunder by Spinco and either (A) the receipt by the
Company of a copy of a favorable determination letter issued by the IRS
with respect to the Spinco Savings Plan or (B) an opinion, satisfactory to
the Company's counsel, of Spinco's counsel to the effect that the terms of
the Spinco Savings Plan and its related trust qualify under Section 401(a)
and Section 501(a) of the Code, direct the trustee of the Loral Master
Savings Plan and the Loral Aerospace Savings Plan (the "Company Savings
Plans") to transfer to the trustee of the Spinco Savings Plan the account
balances under the Company Savings Plans as of the date of transfer in
respect of Spinco Employees in cash or in kind, as agreed to by the Company
and Spinco; provided, however, all outstanding loans shall be transferred
in kind. Upon such transfer, the Spinco Savings Plan shall assume all
liabilities for all accrued benefits under the Company Savings Plans in
respect of Spinco Employees that are transferred to the Spinco Savings Plan
and the Company Savings Plans shall be relieved of all liabilities for such
accrued benefits. The Company and Spinco shall cooperate in the filing of
documents required by the transfer of assets and liabilities described
herein. Notwithstanding anything contained herein to the contrary, no such
transfer shall take place until the 31st day following the filing of all
required Forms 5310-A in connection therewith. Upon the transfer of assets
in accordance with this section 8.2(b), Spinco agrees to indemnify and hold
harmless the Company, its officers, directors, employees, agents and
affiliates from and against any and all Indemnifiable Losses arising out of
or relating to the Spinco Savings Plan, including all benefits accrued by
Spinco Employees prior to the Distribution Date.
(c) Welfare Benefit Plans. As of the Distribution Date, Spinco
Employees shall cease to participate in the employee welfare benefit plans
(as such term
72
in defined in ERISA) maintained or sponsored by the Company (the "Prior
Welfare Plans") and shall commence to participate in welfare benefit plans
of Spinco (the "Replacement Welfare Plans") which Replacement Welfare Plans
shall, in the case of any such plan that is subject to the requirements of
Section 4980B of the Code, provide for substantially identical benefits on
substantially identical terms and conditions that were provided by Prior
Welfare Plans immediately prior to the Distribution Date. Spinco will, (i)
waive all limitations as to pre-existing condition exclusions and waiting
periods with respect to participation and coverage requirements applicable
to Spinco Employees under the Replacement Welfare Plans, other than
limitations or waiting periods that were in effect with respect to such
employees under the Prior Welfare Plans and that have not been satisfied as
of the Distribution Date, and (ii) provide each Spinco Employee with credit
for any co-payments and deductibles paid prior to the Distribution Date in
satisfying any deductible or out-of-pocket requirements under the
Replacement Welfare Plans. After the Distribution Date, Spinco shall be
responsible for any claims by Spinco Employees for benefits relating to
claims incurred but not reported prior to the Distribution Date. The
Company shall use its best efforts to ensure that, except as provided
otherwise in the Merger Agreement or Distribution Agreement, the
consummation of the transactions contemplated by this Distribution
Agreement shall not entitle any employee to severance benefits under any
severance plan or arrangement of the Company or any of its Subsidiaries.
(d) Collective Bargaining Agreements. As of the Distribution
Date, with respect to those collective bargaining agreements to which the
Company or any of its Affiliates is a party and which cover Spinco
Employees, Spinco shall assume all liabilities and obligations of the
Company and each of its Affiliates thereunder, but only to the extent that
such liabilities and obligations relate to any Spinco Employees.
(e) Certain Liabilities. Spinco hereby agrees to indemnify the
Company and its Affiliates against, and agrees to hold them harmless from
any and all Indemnifiable Losses incurred or suffered as a result of any
claim by any Spinco Employee which arises under federal, state or local
statute (including, without
73
limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act
of 1991, the Age Discrimination in Employment Act of 1990, the Equal Pay
Act, the Americans with Disabilities Act of 1990, the Employee Retirement
Income Security Act of 1974 and all other statutes regulating the terms and
conditions of employment), regulation or ordinance, under the common law or
in equity (including any claims for wrongful discharge or otherwise), or
under any policy, agreement, understanding or promise, written or oral,
formal or informal, between the Company and the Spinco Employee, whether
arising out of actions, events or omissions that occurred (or, in the case
of omissions, failed to occur) prior to, or after, the Distribution Date.
The Company hereby agrees to indemnify Spinco and its Affiliates against,
and agrees to hold it harmless from any and all Indemnifiable Losses
incurred or suffered as a result of any claim by any Retained Employee
which arises under federal, state or local statute (including, without
limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act
of 1991, the Age Discrimination in Employment Act of 1990, the Equal Pay
Act, the Americans with Disabilities Act of 1990, the Employee Retirement
Income Security Act of 1974 and all other statutes regulating the terms and
conditions of employment), regulation or ordinance, under the common law or
in equity (including any claims for wrongful discharge or otherwise), or
under any policy, agreement, understanding or promise, written or oral,
formal or informal, between the Company and the Retained Employee, whether
arising out of actions, events or omissions that occurred (or, in the case
of omissions, failed to occur) prior to, or after, the Distribution Date.
The indemnification provided for in this Section 8.2 shall be subject to
the terms and conditions of the indemnification provisions of Article V
hereof.
(f) As of the Distribution Date, with respect to any employee
liabilities or obligations arising under the Company's (i) split dollar
life insurance arrangements with certain executives, (ii) the Loral
Supplemental Executive Retirement Plan (the "SERP"), and (iii) retiree
welfare plans (including retiree medical plans), (all such liabilities in
(i), (ii) and (iii), "Enumerated Liabilities"):
(A) On or prior to the Distribution Date, the Company
shall establish one or
74
more grantor rabbi trusts (the "SERP Trust") of which the
participants in the SERP shall be the beneficiaries and
shall contribute to such trust an amount equal to the
present value of all accrued benefits under the SERP as of
the Distribution Date (the parties hereto acknowledge that
such amount shall not exceed $11 million).
(B) The Company shall retain and be solely responsible
for all liabilities and obligations whatsoever of both the
Retained Business and the Spinco Business for all
Enumerated Liabilities with respect to Retained Employees
and shall retain any assets relating to such liabilities.
(C) Spinco shall assume and be solely responsible for
all liabilities and obligations whatsoever of both the
Retained Business and the Spinco Business for all Enumerated
Liabilities with respect to Spinco Employees and the Company
shall transfer, or allocate, as applicable, to Spinco as
soon as practicable following the Distribution Date any
assets relating to such liabilities. The assets held in the
SERP Trust shall be allocated, to the extent practicable, in
accordance with the principles set forth in Section 8.2(a).
Section 8.3. Other Liabilities and Obligations. As of the
Distribution Date, with respect to claims relating to any employee
liability or obligation not otherwise provided for in this Agreement or
the Merger Agreement, including, without limitation, accrued holiday,
vacation and sick day benefits, (a) the Company shall assume and be solely
responsible for all liabilities and obligations whatsoever of both the
Retained Business and the Spinco Business for all such claims made by
Retained Employees and (b) Spinco shall assume and be solely responsible
for all liabilities and obligations whatsoever of both the Retained
Business and the Spinco Business for all such claims made by all Spinco
Employees. Notwithstanding the foregoing, wages and salary accrued prior
to the Distribution Date in respect of
75
Spinco New York Employees and deferred directors' fees shall be the sole
responsibility of the Retained Business.
Section 8.4. Preservation of Rights to Amend or Terminate Plans.
No provision of this Agreement, shall be construed as a limitation on the
right of the Company or Spinco to amend any plan or terminate its
participation therein which the Company or Spinco would otherwise have
under the terms of such plan or otherwise, and no provision of this
Agreement shall be construed to create a right in any employee or
beneficiary of such employee under a plan that such employee or beneficiary
would not otherwise have under the terms of such plan itself.
Section 8.5. Reimbursement; Indemnification. Spinco and the
Company acknowledge that the Company, on the one hand, and Spinco, on the
other hand, may incur costs and expenses (including, without limitation,
contributions to plans and the payment of insurance premiums) pursuant to
any of the employee benefit or compensation plans, programs or arrangements
which are, as set forth in this Agreement, the responsibility of the other
party. Accordingly, the Company and Spinco agree to reimburse each other,
as soon as practicable but in any event within 30 days of receipt from the
other party of appropriate verification, for all such costs and expenses
reduced by the amount of any tax reduction or recovery of tax benefit
realized by the Company or Spinco, as the case may be, in respect of the
corresponding payment made by it. All Liabilities retained, assumed or
indemnified by Spinco pursuant to this Article VIII shall in each case be
deemed to be Spinco Liabilities, and all Liabilities retained, assumed or
indemnified by the Company pursuant to this Article VIII shall in each case
be deemed to be Retained Liabilities, and, in each case, shall be subject
to the indemnification provisions set forth in Article V hereof.
Section 8.6 Actions By Spinco. Any action required to be
taken under this Article VIII may be taken by a Subsidiary of Spinco, the
Spinco Companies, or a Subsidiary of the Spinco Companies.
76
ARTICLE IX
INSURANCE
---------
Section 9.1. General. Except as otherwise agreed in writing between
the parties, the Company shall maintain until the Distribution Date all policies
of liability, fire, extended coverage, fidelity, fiduciary, workers'
compensation and other forms of insurance in effect as of the date hereof
insuring the products, properties, Assets and operations contemplated to be
transferred to Spinco and each of the Spinco Companies.
Section 9.2. Certain Insured Claims. The Company shall (a) use
reasonable efforts, upon Spinco's written request and at Spinco's sole expense,
to continue to maintain and renew for the benefit of Spinco and each of the
Spinco Companies the insurance policies under the Casualty Program with respect
to claims having an occurrence date (as the term "occurrence date" is
customarily defined) prior to the Distribution Date, relating to, or arising out
of the conduct of, the Spinco Business, the Spinco Assets or the Spinco
Liabilities, and (b) use reasonable efforts and cooperate with Spinco, upon
Spinco's written request and at Spinco's sole expense, to obtain coverage,
recoveries and other benefits under such policies for the benefit of Spinco and
each of the Spinco Companies, including, without limitation, by filing and
pursuing claims with respect to obtaining such coverage, recoveries and other
benefits; provided that in no event shall the Company be obligated to litigate
or pursue any other extra-contractual remedies against any insurer; provided
further that all claims pursuant to this Section 9.2 shall be submitted,
investigated, processed and paid in accordance with the claims handling
procedures used by the Company and its Affiliates from time to time with respect
to other like claims. The Company will reimburse Spinco and each of the Spinco
Companies for any recovery obtained by it pursuant to such claims. The Company
shall make available to Spinco such of its employees as Spinco may reasonably
request as witnesses or deponents in connection with Spinco's pursuit of claims.
77
ARTICLE X
CONDITIONS; TERMINATION;
AMENDMENTS; WAIVERS
------------------------
Section 10.1. Condition to Restructuring and Distribution.
(a) The obligations of each of the Company, Holdings, Aerospace
LGP, LG, Cayman and Spinco to effect the Restructuring and the Distribution
(other than those obligations which are normally expected to precede the
Restructuring or the Distribution) shall be subject to the satisfaction of the
following conditions: (i) the Purchaser shall have notified the Company that it
is prepared to immediately accept for payment shares of Company Common Stock
pursuant to the terms and conditions of the Offer as set forth in the Merger
Agreement, (ii) the Record Date shall have been set by the Company's Board of
Directors, (iii) the Form 10 (or the registration statement referred to in
Section 3.1(a) hereof) shall have been declared effective by the SEC, (iv) the
Spinco Common Stock shall have been accepted for listing or quotation in
accordance with Section 3.1(e) hereof, (v) no Court Order or Law shall have been
enacted, promulgated, issued or entered against any of the parties hereto which
(x) prohibits or materially restricts consummation of any of the transactions
contemplated by this Agreement and (y) remains in effect as of the date on which
the satisfaction of this condition is determined, (vi) the Company and the
Retained Subsidiaries (other than Spinco and the Spinco Companies) shall have
obtained all consents required to be obtained by the Company as a result of or
in connection with the transactions contemplated by this Agreement in order to
avoid a material Default under any material Contract to or by which the Company,
Spinco or any of their respective Subsidiaries is a party or may be bound, or
otherwise necessary to permit the Company and each of the Retained Subsidiaries
to conduct their business in a manner consistent with its past practices, (vii)
all consents and approvals of, and notices to and filings with, any Governmental
Entity or any other person or entity arising out of or relating to the
consummation of the transactions contemplated by this Agreement, shall have been
obtained or made (as the case may be), (viii) the Globalstar Bank Guarantee
shall have been amended pursuant to Section 2.5 hereof so that the provisions
78
thereof shall, following the Restructuring, be amended in the manner
contemplated by Section 2.5 hereof (with such changes thereto as Parent and the
Company may approve prior to the Offer Purchase Date), and (ix) the Lehman
Partnerships and all other holders of the Lehman Preferred Stock (if any) shall
have exchanged all issued and outstanding shares of Lehman Preferred Stock for
shares of capital stock or other equity securities of either Spinco, any Spinco
Company or any Subsidiary of Spinco pursuant to Section 2.7 hereof.
(b) The parties hereto acknowledge and agree that (x) Parent may
waive, on behalf of all parties hereto, the conditions set forth in clauses
(viii) and (ix) of Section 10.1(a) above, (y) Parent may waive, on behalf of all
parties hereto, the condition set forth in clauses (v), (vi) and (vii) of
Section 10.1(a) above so long as (1) Parent reasonably believes that
consummation of the Distribution at such time will have no material adverse
effect on Spinco or the Spinco Business and (2) Parent agrees to indemnify
Spinco pursuant to the provisions of Article V hereof with respect to any
Indemnifiable Losses which result from any material adverse effect on Spinco or
the Spinco Business which results directly from such waiver, and (z) the Company
may not waive any of the conditions set forth in Sections 10.1(a)(i) through
10.1(a)(ix) above without first obtaining the prior written consent of Parent
(which may not be unreasonably withheld). In the event that all of the
Distribution Conditions have been satisfied (or waived, to the extent expressly
permitted by the provisions of the preceding sentence), the Company, Holdings,
Aerospace and Spinco shall consummate the Restructuring and the Distribution,
and all other transactions related thereto, on the date on the date on which
such Distribution Conditions have been so satisfied or waived (or as soon as
practicable following such date in the event that such parties are unable to
consummate the Restructuring and the Distribution, and all other transactions
related thereto, on such date). The respective obligations of each party hereto
to perform those of its obligations which are to be performed following
consummation of the Restructuring and the Distribution, shall be conditioned on
the consummation of the Restructuring and the Distribution in accordance with
the provisions of this Agreement.
79
Section 10.2. Termination. This Agreement (i) may be terminated and
the Distribution abandoned at any time prior to the Offer Purchase Date by the
mutual written agreement of each of the parties hereto or (ii) shall be
terminated automatically and the Distribution abandoned upon any termination of
the Merger Agreement in accordance with the terms and conditions thereof. In the
event that this Agreement shall be terminated pursuant to this Section 10.2, all
obligations of the parties hereto under this Agreement shall terminate without
further liability or obligation of any party hereto to the other parties hereto
under this Agreement or otherwise, except (i) for any breach by such party of
the terms and provisions of this Agreement prior to the date of such termination
and (ii) as stated in Section 11.3 hereof.
Section 10.3. Amendments; Waivers. This Agreement may be amended,
modified or supplemented only by written agreement of each of the parties
hereto. Any term or provision of this Agreement may be waived at any time by the
party entitled to the benefit thereof by a written instrument executed by such
party. Except as provided in the preceding sentence, no action taken pursuant to
this Agreement, including, without limitation, any investigation by or on behalf
of any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants, agreements
or conditions contained herein. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any preceding or succeeding breach and no failure by any party to exercise any
right or privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
ARTICLE XI
MISCELLANEOUS
-------------
Section 11.1. Survival of Indemnities; Release. The representations
and warranties made in Section 6.1 of this Agreement shall survive for a period
of three years from the Distribution Date, but shall not survive any termination
of this Agreement; provided that
80
claims with respect to breaches of covenants and agreements set forth in this
Agreement shall survive for the applicable statute of limitations period. Except
as otherwise expressly provided in this Agreement (including, without
limitation, the indemnification provisions of Article V hereof), each of the
parties (a) agrees that no claims or causes of action may be brought against the
Company, Holdings, Aerospace, Spinco, Parent or the Purchaser or any of their
Affiliates, agents or representatives based upon, directly or indirectly, any of
the representations and warranties contained in this Agreement after three years
following the Distribution Date (other than causes of actions commenced after
such three-year period to seek recourse for claims asserted during such three-
year period that are not resolved by the parties), and (b) hereby waives and
releases all other claims and causes of action, that may be asserted or brought
against the Company, Holdings, Aerospace, Spinco, Parent or the Purchaser or any
of their Affiliates, agents or representatives directly or indirectly based upon
or arising under this Agreement or the Merger Agreement, or the transactions
contemplated hereby or thereby. Notwithstanding the foregoing, this Section 11.1
shall not limit any covenant or agreement of the parties in this Agreement, the
Merger Agreement, the Tax Sharing Agreement or the Stockholders Agreement which
contemplates performance after the Distribution Date (including, without
limitation, the covenants and agreements set forth in Sections 2.1(b) and 6.2
hereof), except for the covenants and agreements in the Merger Agreement to the
extent of their performance prior to the Distribution Date.
Section 11.2. Entire Agreement. This Agreement (including the
schedules and exhibits and the agreements and other documents referred to
herein, including, without limitation, the Merger Agreement, the Tax Sharing
Agreement and the Stockholders Agreement) constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all other
prior negotiations, commitments, agreements and understandings, both written and
oral, between the parties or any of them with respect to the subject matter
hereof (including, without limitation, the provisions of the Confidentiality
Agreement).
81
Section 11.3. Fees and Expenses. Except as otherwise provided in this
Agreement, the Merger Agreement, the Tax Sharing Agreement or the Stockholders
Agreement, and subject to the proviso below, all costs and expenses incurred by
the Company and each of the Retained Subsidiaries and by Spinco in connection
with (x) the preparation, execution and delivery of this Agreement, the Merger
Agreement, the Tax Sharing Agreement and the Stockholders Agreement and (y)
consummating such party's obligations hereunder and thereunder (including,
without limitation, investment banking, legal, accounting, audit and printing
costs and expenses), shall be paid by the Company, upon the submission to the
Company of appropriate documentation detailing such costs and expenses);
provided that the investment banking costs and expenses incurred by the Company
(including any legal or other costs and expenses but excluding any
indemnification-related costs and expenses) incurred by the Company relating to
the provision of such investment banking services) in connection with the
transactions contemplated by this Agreement and the Merger Agreement which
exceed $12,000,000 (such excess amount of such investment banking costs and
expenses, the "Spinco Excess Costs"), shall not be considered to be expenses of
the Company, but shall be deemed to be Spinco Liabilities and shall be paid by
Spinco on or promptly after the Distribution Date.
Section 11.4. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 11.5. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by
a standard overnight carrier or when delivered by hand or (c) the expiration of
five Business Days after the day when mailed by certified or registered mail,
postage prepaid, addressed at the following addresses (or at such other address
for a party as shall be specified by like notice):
82
(a) If to the Company, or Aerospace, to:
Loral Corporation
600 Third Avenue
New York, NY 10016
Telephone: (212) 697-1105
Telecopy No.: (212) 602-9805
Attention: General Counsel
with a copy to:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethedsa, MD 20817
Telephone: (301) 897-6125
Telecopy No.: (301) 897-6333
Attention: General Counsel
and to:
Skadden, Arps, Slate, Meagher
& Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy No.: (212) 735-2000
Attention: Peter Allan Atkins, Esq.
Lou R. Kling, Esq.
and to:
O'Melveny & Myers
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 326-2000
Telecopy No.: (212) 326-2160
Attention: C. Douglas Kranwinkle, Esq.
Jeffrey J. Rosen, Esq.
(b) If to Spinco, to:
Loral Space & Communications Corporation
600 Third Avenue
New York, New York 10016
Telephone: (212) 697-1105
Telecopy No.: (212) 602-9805
Attention: General Counsel
83
with a copy to:
Willkie Farr & Gallagher
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 821-8000
Telecopy No.: (212) 821-8111
Attention: Robert B. Hodes, Esq.
Bruce R. Kraus, Esq.
Section 11.6. Successors and Assigns; No Third Party
Beneficiaries. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties hereto (which consent may not be unreasonably
withheld), except that any party shall have the right, without the consent
of any other party hereto, to assign all or a portion of its rights,
interests and obligations hereunder to one or more direct or indirect
subsidiaries, but no such assignment of obligation shall relieve the
assigning party from its responsibility therefor. Notwithstanding the
foregoing, Spinco shall be permitted to assign its rights and obligations
under this Agreement to one of its Affiliates (the "Spinco Transferee")
prior to the Record Date so long as (x) such assignment shall not relieve
Spinco from its joint responsibility therefor and (y) such assignment does
not adversely affect any of the rights, benefits or obligations of Parent
or any of the Parent Indemnified Parties under this Agreement or the Merger
Agreement; provided that in the event of any such assignment to the Spinco
Transferee, all references to Spinco shall be automatically deemed to be
references to Spinco. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and, except for the provisions
of Sections 8.1 hereof, nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement;
provided, however, that the Indemnified Parties are intended to be third
party beneficiaries of the provisions of Article V hereof, and shall have
the right to enforce such provisions as if they were parties hereto.
84
Section 11.7. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
Section 11.8. Interpretation. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
Section 11.9. Schedules. The Disclosure Schedule shall be
construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
Section 11.10. Legal Enforceability. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without affecting the validity or enforceability of the
remaining provisions hereof. Any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
Section 11.11. Consent to Jurisdiction. Each of the parties
hereto irrevocably and unconditionally (a) agrees that all suits, actions
or other legal proceedings arising out of this Agreement or any of the
transactions contemplated hereby (a "Suit") shall be brought and
adjudicated solely in the United States District Court for the Southern
District of New York, or, if such court will not accept jurisdiction, in
any court of competent civil jurisdiction sitting in New York City, New
York, (b) submits to the non-exclusive jurisdiction of any such court for
the purpose of any such Suit and (c) waives and agrees not to assert by way
of motion, as a defense or otherwise in any such Suit, any claims that it
is not subject to the jurisdiction of the above courts, that such Suit is
brought in an inconvenient forum or that the venue of such Suit is
improper. Each of the parties hereto also irrevocably and unconditionally
consents to the service of any process, summons, pleadings, notices or
other papers in a manner permitted by the notice
85
provisions of Section 11.5 hereof and agrees that any such form of service
shall be effective in connection with any such Suit; provided that nothing
contained in this Section 11.11 shall affect the right of any party to
serve process, pleadings, notices or other papers in any other manner
permitted by applicable Law.
Section 11.12. Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement,
each non-breaching party would be irreparably and immediately harmed and
could not be made whole by monetary damages. It is accordingly agreed that
the parties hereto (a) will waive, in any action for specific performance,
the defense of adequacy of a remedy at law and (b) shall be entitled, in
addition to any other remedy to which they may be entitled at law or in
equity, to compel specific performance of this Agreement in any action
instituted in any court referred to in Section 11.11 hereof.
86
IN WITNESS WHEREOF, each of the parties has caused this
Restructuring, Financing and Distribution Agreement to be executed on its
behalf by its officers thereunto duly authorized, all as of the day and
year first above written.
LORAL CORPORATION
/s/ MICHAEL B. TARGOFF
By:_____________________________
Name: Michael B. Targoff
Title: Senior Vice President
and Secretary
LORAL AEROSPACE HOLDINGS,
INC.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
LORAL AEROSPACE CORP.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
LORAL TELECOMMUNICATIONS
ACQUISITION, INC.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
and Secretary
LOCKHEED MARTIN CORPORATION
/s/ MARCUS C. BENNETT
By:______________________________
Name: Marcus C. Bennett
Title: Senior Vice President
LORAL GLOBALSTAR LIMITED
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
LORAL GENERAL PARTNER, INC.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Vice President
LORAL GLOBALSTAR, L.P.
/s/ MICHAEL B. TARGOFF
By:______________________________
Name: Michael B. Targoff
Title: Senior Vice President
and Secretary
EXHIBIT A-1
-----------
GLOBALSTAR WARRANT - SUMMARY TERM SHEET - PRINCIPAL TERMS
---------------------------------------------------------
Reference is hereby made to (x) the Restructuring, Financing and
Distribution Agreement dated as of January 8, 1996 (the "Restructuring
Agreement") among Lockheed Martin Corporation, Loral Corporation, Spinco and the
other parties thereto, and (y) the Globalstar Warrant Memorandum (as defined in
the Restructuring Agreement). All capitalized terms which are not otherwise
defined herein shall have the meanings ascribed to such terms in the
Restructuring Agreement.
Issuer: Globalstar Telecommunications Limited or, if not available, Globalstar
L.P. (the "Company").
Issued To: Guarantors
No. of Shares: As set forth in the Globalstar Warrant Memorandum, subject to
adjustment based on the antidilution provisions described below. (If issuer is
Globalstar L.P., the term "shares" will refer to L.P. interests.)
Warrant Exercise Price: As set forth in the Globalstar Warrant Memorandum,
subject to adjustment based on the antidilution provisions described below.
Acceleration of Vesting: In the event the Company merges with or into another
company (unless the warrants continue to represent the rights to purchase equity
in the surviving company on the same terms, except for equitable adjustment of
price and number of shares purchasable), sells all or substantially all of its
assets, liquidates, etc., the Company must give notice to the holder prior to
the consummation of the transaction and must give the holder the option of
exercising the warrant prior to consummation of such transaction.
Antidilution Events:
. Stock Splits, Recaps, etc. - will result in increased number of
Warrant Shares (unless reverse split, etc.)
. Rights, Options, Warrants, Convertible Securities - will result in
increased number of Warrant Shares pursuant to a prescribed
formula, but only to the extent that such shares, rights, options,
warrants or convertible securities are issued or distributed
generally to all holders of the Common Stock.
. Issuance of Common Stock at Lower Values - if shares are issued
below the then current fair market value of such shares,
adjustment will be made on a proportionate basis pursuant to a
prescribed formula, but only to the extent that such shares,
rights, options, warrants or
convertible securities are issued or distributed generally to all
holders of the Common Stock.
. Extraordinary Distributions/Stock Dividends -extraordinary cash
dividends (over 10% of current market value on record date),
distributions of properties, assets, etc. in partial liquidation
and stock dividends will result in adjustment.
. Distributions of Debt - Warrant Shares subject to adjustment in
accordance with a prescribed formula.
. Distributions includes repurchases and redemptions.
Registration Rights on Warrant Shares: Customary
-2-
EXHIBIT B
---------
WF&G Draft
1/8/96
CERTIFICATE OF DESIGNATION
OF
SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK
OF
LORAL TELECOMMUNICATIONS ACQUISITION, INC.
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
The undersigned, Senior Vice President of Loral Telecommunications
Acquisition, Inc., a Delaware corporation (the "Corporation"), in accordance
with the provisions of Section 151 of the General Corporation Law of the State
of Delaware, hereby certifies that pursuant to authority vested in the Board of
Directors of the Corporation by the provisions of its Certificate of
Incorporation, the Board of Directors has duly adopted the following resolution
creating a series of Preferred Stock of the Corporation designated as the Series
A Non-Voting Convertible Preferred Stock:
WHEREAS, the Certificate of Incorporation of the Corporation authorizes
__________ shares of capital stock, of which 1,000 shares are authorized as
Common Stock, $.01 par value per share ("Common Stock"), and __________ shares
are authorized as Preferred Stock, $.01 par value per share ("Preferred Stock");
and
WHEREAS, the Certificate of Incorporation of the Corporation authorizes the
Board of Directors to provide for the issuance of shares of Preferred Stock in
series and to establish from time to time the number of shares to be included in
each such series and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations and
restrictions thereof;
NOW, THEREFORE, BE IT RESOLVED, that, pursuant to the Certificate of
Incorporation, the Board of Directors hereby fixes the designation and
preferences and relative rights, qualifications, limitations and restrictions of
a series of Preferred Stock.
RESOLVED, that each share of Preferred Stock described herein shall rank
equally in all respects and shall be subject to the following provisions:
(1) Number and Designation. ______ shares of Preferred Stock of the
Corporation shall be designated as Series
A Non-Voting Convertible Preferred Stock (the "Series A Preferred Stock").
(2) Dividends and Distributions. (a) Subject to paragraphs (2)(b)
and (4) below, the Corporation shall pay, and the holders of shares of Series A
Preferred Stock shall be entitled to receive, and to share equally and ratably,
share for share with the Common Stock, in such dividends and distributions on
the Common Stock or the Series A Preferred Stock as may be declared from time to
time by the Board of Directors, whether payable in cash, property or securities
of the Corporation. The record date for determining the holders of Series A
Preferred Stock entitled to receive dividends and distributions shall be the
same as the record date for determining the holders of Common Stock entitled to
receive dividends and distributions. Dividends and distributions shall be paid
to the holders of Series A Preferred Stock entitled to receive such dividends
and distributions at the close of business on the date on which such dividends
and distributions are paid or made by the Corporation in respect of the Common
Stock.
(b) In the event that the Corporation declares and pays a dividend or
makes any distribution on its Common Stock in the form of (x) shares of
additional Common Stock, (y) options, warrants or rights to acquire Common Stock
or (z) other securities of the Corporation convertible into or exchangeable for
Common Stock, the holders of the Series A Preferred Stock shall receive in lieu
of such securities: (1) an equal number of shares of additional Series A
Preferred Stock, in the case of clause (x) above; (2) options, warrants or
rights to acquire an equal number of additional shares of Series A Preferred
Stock on terms otherwise identical to such options, warrants or rights
distributed to the holders of Common Stock, in the case of clause (y) above; and
(3) securities convertible into or exchangeable for an equal number of shares of
Series A Preferred Stock on terms otherwise identical to the convertible or
exchangeable securities distributed to the holders of Common Stock, in the case
of clause (z) above.
(c) All dividends or distributions paid with respect to shares of the
Series A Preferred Stock shall be paid pro rata to the holders entitled thereto.
(d) Each fractional share of Series A Preferred Stock outstanding
shall be entitled to a ratable proportionate amount of all dividends and other
distributions accruing, paid or made with respect to each outstanding share of
Series A Preferred Stock and all such dividends and other distributions with
respect to such outstanding fractional shares shall be payable in the same
manner and at such times as provided for in paragraphs (2)(a), (2)(b) and (4)
hereof with respect to dividends and other distributions on each outstanding
share of Series A Preferred Stock.
-2-
(3) Voting Rights. (a) Except as otherwise set forth herein and as
otherwise provided by law, the holders of the Series A Preferred Stock shall not
be entitled to vote on any matter relating to the business or affairs of the
Corporation and shall not be included in determining the number of Shares voting
or entitled to vote on any such matters.
(b) Notwithstanding the foregoing, each issued and outstanding share
of Series A Preferred Stock shall be entitled to one vote for each share of
Common Stock into which such share of Series A Preferred Stock is convertible,
and shall be included as aforesaid in the number of shares voting and entitled
to vote with respect to the following matters presented to the stockholders of
the Corporation for their action or consideration:
i) any amendment to or modification or repeal of any provision of the
Corporation's Certificate of Incorporation or By-laws (or similar organizational
documents);
ii) any merger, consolidation, corporate reorganization or similar
transaction involving the Corporation;
iii) any sale, lease, exchange, transfer or other disposition,
directly or indirectly, in a single transaction or series of related
transactions, of all or substantially all of the assets of the Corporation or
any of its Affiliates;
iv) any plan or proposal for the liquidation or dissolution of the
Corporation or any assignment by the Corporation for the benefit of creditors,
or any filing by the Corporation of a petition in bankruptcy; or
v) any restructuring, extension, modification, substitution,
refinancing or amendment of any indebtedness of the Corporation.
Except as otherwise provided herein or by law, the holders of the Series A
Preferred Stock shall vote together with the holders of the Common Stock as a
single class.
(c) In addition to the voting rights set forth above, the consent of
the holders of at least a majority of the shares of the Series A Preferred Stock
at the time outstanding, voting together as a single class, shall be necessary
for any amendment to the Certificate of Incorporation or By-laws of the
Corporation, if such amendment would adversely affect the rights, powers,
privileges or preferences of the Series A Preferred Stock.
(4) Rights on Liquidation. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of the shares of the Series A Preferred Stock then outstanding shall
be entitled
-3-
to receive, prior and in preference to any distribution of any of the assets of
the Corporation to the holders of the Common Stock by reason of their ownership
thereof, an amount equal to $.01 per share for each outstanding share of Series
A Preferred Stock. If upon the occurrence of such event the assets thus
distributed among the holders of the Series A Preferred Stock shall be
insufficient to permit the payment to such holders of the full preferential
amount, the entire assets of the Corporation legally available for distribution
shall be distributed ratably among the holders of the Series A Preferred Stock.
After the payment or distribution to the holders of the Series A Preferred Stock
of such preferential amount, the holders of the Series A Preferred Stock and the
Common Stock then outstanding shall be entitled to receive ratably (based, in
the case of the Series A Preferred Stock, on the number of shares of Common
Stock into which such Series A Preferred Stock was last convertible) all
remaining assets of the Corporation to be distributed.
(5) Conversion. (a) Each share of Series A Preferred Stock may be
converted, at the option of the holder thereof, at any time (i) after the HSR
Clearance Date or (ii) upon the transfer (in accordance with the provisions of
the Stockholders Agreement) of such share of Series A Preferred Stock to a
Person other than a Stockholder or any Affiliate thereof, in the manner
hereinafter provided, into one (subject to any adjustment required below) fully
paid and nonassessable share of Common Stock; provided, however, that on any
liquidation of the Corporation, the right of conversion shall terminate at the
close of business on the business day immediately preceding the date fixed for
the payment of any amounts distributable on liquidation to the holders of the
Series A Preferred Stock.
(b) Each conversion of shares of Series A Preferred Stock into shares of
Common Stock shall be effected by the prior written notice thereof by the holder
of the Series A Preferred Stock and the surrender of the certificates
representing the shares to be converted at the principal office of the
Corporation (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Series A
Preferred Stock as shown on the books of the Corporation) at any time during
normal business hours. Such notice shall state the name or names (with
addresses) and denominations in which the certificate or certificates for such
shares of Common Stock are to be issued and shall include instructions for
reasonable delivery thereof. Each conversion shall be deemed to have been
effected as of the close of business on the date on which such certificates have
been surrendered and such notice has been received. At such time, the rights of
the holder of the surrendered Series A Preferred Stock as such holder shall
cease, and the Person in whose name the certificates for shares of Common Stock
will be issued upon such conversion shall be deemed to have become the holder of
record of the Common Stock represented thereby.
-4-
(c) Promptly after the surrender of the certificates and the receipt of
written notice, the Corporation shall issue and deliver in accordance with the
surrendering holder's instructions (i) the certificates for the shares of Common
Stock issuable upon such conversion and (ii) certificates representing any
surrendered shares of Series A Preferred Stock which were delivered to the
Corporation in connection with such conversion but which were not requested to
be converted and, therefore, were not converted.
(d) The issuance of certificates for Common Stock upon conversion of
Series A Preferred Stock shall be made without charge to the holders of such
shares for any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related issuance of
shares of Common Stock; provided that the Corporation shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the holder
of the Series A Preferred Stock being converted.
(e) The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
issuance upon the conversion of the Series A Preferred Stock, such number of
shares of Common Stock issuable upon conversion of all outstanding Series A
Preferred Stock. All shares of Common Stock which are so issuable shall, when
issued, be duly and validly issued fully paid and nonassessable and free from
all taxes, liens and charges. The Corporation shall take all such actions as
may be necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or governmental regulation or any
requirement of any domestic securities exchange upon which shares of Common
Stock may be listed (except for official notice of issuance which shall be
immediately transmitted by the Corporation upon issuance).
(f) The Corporation shall not close its books against the transfer of
shares of Series A Preferred Stock in any manner which would interfere with the
timely conversion of any shares of Series A Preferred Stock. The Corporation
shall assist and cooperate with any holder of Series A Preferred Stock required
to make any governmental filings or obtain any governmental approval prior to or
in connection with any conversion of Series A Preferred Stock hereunder
(including, without limitation, making any filings required to be made by the
Corporation).
(6) Stock Splits; Adjustments. (a) If the Corporation shall in any manner
subdivide (by stock split, stock dividend or otherwise) or combine (by reverse
stock split or otherwise) the outstanding shares of Common Stock, the
outstanding shares of the Series A Preferred Stock shall be proportionately
subdivided or combined, as the case may be, and effective provision shall be
made for the protection of all
-5-
conversion and voting rights of the Series A Preferred Stock hereunder.
(b) If the Corporation shall issue any shares of its capital stock in
a reclassification of the Common Stock (including any such reclassification in
connection with a merger, consolidation or other business combination involving
the Corporation), or in any other similar transaction affecting the Corporation
or the number or value of Common Stock outstanding, effective provision shall be
made for the protection of all conversion and voting rights of the Series A
Preferred Stock hereunder.
(7) General Provisions. (a) The term "Affiliate" as used herein shall
have the meaning set forth in the Stockholders Agreement.
(b) The term "Antitrust Authority" as used herein shall have the
meaning set forth in the Stockholders Agreement.
(c) The terms "HSR Clearance Date" and "HSR Act" as used herein shall
have the meanings set forth in the Stockholders Agreement.
(d) The term "Person" as used herein means an individual or a
corporation, partnership, association, trust or any other entity or
organization.
(e) The term "outstanding," when used herein with reference to shares
of stock, shall mean issued shares, excluding shares held by the Corporation.
(f) The term "Stockholders Agreement" as used herein means that
certain Stockholders Agreement, dated as of _________, 1996, by and among Loral
Corporation, Loral Aerospace Holdings, Inc., Loral Aerospace Corp. and Loral
Telecommunications Acquisition, Inc.
(g) The term "Stockholders" as used herein shall have the meaning set
forth in the Stockholders Agreement.
(h) The headings of the paragraphs, subparagraphs, clauses and
subclauses of this Certificate of Designation are for convenience of reference
only and shall not define, limit or affect any of the provisions hereof.
(i) Subject to Section 3 hereof, any right, preference, privilege or
power of, or restriction provided for the benefit of, the Series A Preferred
Stock set forth herein may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Corporation and the consent of
the holders of not less than a majority of the shares of Series A Preferred
Stock then outstanding, and any
-6-
amendment or waiver so effected shall be binding upon the Corporation and all
holders of Series A Preferred Stock.
IN WITNESS WHEREOF, the undersigned, Senior Vice President of Loral
Telecommunications Acquisition, Inc., has signed this Certificate of Designation
this ___ day of ____________, 1996 and affirms under penalties of perjury that
it is the act and deed of the Corporation and that the facts stated herein are
true.
LORAL TELECOMMUNICATIONS
ACQUISITION, INC.
By:____________________________
Michael B. Targoff
Senior Vice President
-7-
EXHIBITS B & C
--------------
1. Broad indemnification provisions
2. Limitations on and methods for changing size of the board
3. Limitations on shareholder rights to:
A. act by written consent
B. call special meetings
C. fill board vacancies
D. nominate directors
E. propose actions that would facilitate change of
control
F. remove directors
4. Lock-ins (supermajority provisions for amending charter and by-
laws)
5. Shareholder rights plan (Poison pill)
6. Staggered board
EXHIBIT D
---------
A shareholder rights plan substantially identical to that of the
shareholder rights plan adopted by Loral (as submitted to and approved by the
Board of Directors of Loral prior to the date hereof) except that Loral and its
affiliates and its associates shall not be deemed to be an "Acquiring Person"
unless Loral and its affiliates become the beneficial owner of 25% or more of
the outstanding shares of common stock (including securities convertible or
exercisable into common stock) of the Company, together with such other changes
to the shareholder rights plan as the parties may reasonably agree.
EXHIBIT E TO DISTRIBUTION AGREEMENT
-----------------------------------
1. The Company Pension Plans
2. The Company Savings Plans
3. The Prior Welfare Plans
4. The SERP
Dates Referenced Herein and Documents Incorporated by Reference
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