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
SC 14D9 — Tender-Offer Solicitation/Recommendation Statement
Document Table of Contents
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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LORAL CORPORATION
(Name of Subject Company)
LORAL CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.25 PER SHARE
(Title of Class of Securities)
543859 10 2
(CUSIP Number of Class of Securities)
----------------
MICHAEL B. TARGOFF
SENIOR VICE PRESIDENT AND SECRETARY
LORAL CORPORATION
600 THIRD AVENUE
NEW YORK, NEW YORK 10016
(212) 697-1105
(Name and address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
with a copy to:
BRUCE R. KRAUS, ESQ.
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 821-8000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Loral Corporation, a New York corporation
(the "Company"), and the address of the principal executive offices of the
Company is 600 Third Avenue, New York, New York 10016. The title of the class
of equity securities to which this statement relates is the common stock (the
"Common Stock"), par value $.25 per share, of the Company, and the associated
preferred stock purchase rights (the "Rights", and together with the Common
Stock, the "Shares"). The Rights will be issued on January 22, 1996 pursuant
to a Rights Agreement, dated as of January 10, 1996, as amended, between the
Company and The Bank of New York, as Rights Agent (the "Rights Agreement"),
and will be evidenced by and trade with certificates evidencing Common Stock.
See Section 3 for a brief description of the Rights Agreement and its
application to the Offer and the Merger (as hereinafter defined).
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to a tender offer (the "Offer") by LAC Acquisition
Corporation, a New York corporation (the "Purchaser") and a wholly-owned
subsidiary of Lockheed Martin Corporation, a Maryland corporation ("Parent"),
disclosed in a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-
1"), dated January 12, 1996, for all outstanding Shares for a per Share
consideration of $38.00 net in cash to the seller, upon the terms and subject
to the conditions set forth in the Agreement and Plan of Merger, dated as of
January 7, 1996 (the "Merger Agreement"), among Parent, the Purchaser and the
Company.
Pursuant to the provisions of the Restructuring, Financing and Distribution
Agreement, dated as of January 7, 1996 (the "Distribution Agreement"), among
the Company, certain of its subsidiaries and Parent, immediately prior to the
consummation of the Offer, the Company intends to (i) transfer the space and
telecommunications businesses of the Company and its subsidiaries, including,
without limitation, the Company's direct and indirect interests in Globalstar,
L.P. ("Globalstar"), Space Systems/Loral, Inc. ("SS/L") and other affiliated
businesses, to Loral Space & Communications Ltd., a newly-formed Bermuda
company and a wholly-owned subsidiary of the Company ("Loral Space"), and (ii)
declare a dividend (conditioned upon consummation of the Offer) of one share
of common stock, par value $.01 per share, of Loral Space (the "Loral Space
Shares"), for each Share held of record as of a date (the "Spin-Off Record
Date") determined by the Board of Directors of the Company (the "Board"). The
transactions referred to in clauses (i) and (ii) of the previous sentence are
hereinafter referred to collectively as the "Spin-Off." In connection with the
Spin-Off, the Distribution Agreement also provides that Parent will contribute
to the Company, simultaneously with the consummation of the Offer, a cash
amount in immediately available funds of $712.4 million (subject to adjustment
under certain circumstances as set forth in the Merger Agreement), which
amount will be transferred to Loral Space. Of the total contributed, $344
million is designated as consideration for preferred stock of Loral Space that
is convertible into 20% of Loral Space's common stock. After giving effect to
the foregoing transactions, the assets of the Company will consist of the
defense electronics and systems integration businesses and other businesses of
the Company not transferred to Loral Space (collectively, the "Retained
Business") and a 20% equity interest in Loral Space in the form of the
preferred stock described above.
The Merger Agreement also provides that, following completion of the Offer
and the approval and adoption of the Merger Agreement by the shareholders of
the Company, if required by applicable law, and the satisfaction or waiver of
the other conditions to the Merger, the Purchaser will be merged (the
"Merger") with and into the Company, with the Company being the corporation
surviving the Merger (the "Surviving Corporation"). The Offer, the Spin-Off
and the Merger are hereinafter referred to collectively as the "Transaction."
Based on the information in the Schedule 14D-1, the principal executive
offices of the Purchaser and Parent are located at 6801 Rockledge Drive,
Bethesda, Maryland 20817.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
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(b) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and (i) the Company, its executive officers,
directors or affiliates or (ii) the Purchaser, its executive officers,
directors or affiliates are described at pages 10 through 13 of the Company's
Proxy Statement, dated June 26, 1995, relating to the Company's 1995 Annual
Meeting of Stockholders (the "1995 Proxy Statement"). Copies of such pages are
filed as Exhibit 1 hereto and are incorporated herein by reference. As of the
date hereof, except as described below or as set forth in either Schedule I to
this Statement or pages 10 through 13 of the 1995 Proxy Statement (each of
which is incorporated herein by reference), there exists no material contract,
agreement, arrangement or understanding and no actual or potential conflict of
interest between the Company or its affiliates and (i) the Company's executive
officers, directors or affiliates, or (ii) Purchaser or Purchaser's executive
officers, directors or affiliates.
COMPENSATORY ARRANGEMENTS WITH EXECUTIVE OFFICERS
Annual Bonus Plan
The Company's executive officers participate in the Loral Corporation
Incentive Compensation Plan for Senior Executives (the "Annual Bonus Plan").
This Annual Bonus Plan was adopted by the Compensation and Stock Option
Committee of the Board (the "Compensation Committee") on June 23, 1994, and
approved by the Company's shareholders on July 26, 1994. The following is a
general description of the Annual Bonus Plan.
The Annual Bonus Plan is administered by the Compensation Committee.
Participants include the Company's executive officers and any other senior
officers of the Company designated by the Compensation Committee.
The Annual Bonus Plan authorizes the Compensation Committee to set such
performance targets as are appropriate relating to one or more of the
following: revenues, earnings per share, profit before or after taxes, net
income, or operating income; return on or growth in shareholders' equity;
return on assets, capital or investment; stock price performance; attainment
of expense reduction levels; and implementation or completion of critical
projects. The goals established by the Committee can be different each year
and different goals may be set for different participants.
The Committee may permit participants to elect that up to 100% of their
annual bonus, which would otherwise be paid in cash, be deferred and used to
fund acquisitions of restricted Common Stock awarded in accordance with the
incentive stock purchase provisions of the 1994 Stock Plan (described below).
The Annual Bonus Plan caps the maximum annual incentive compensation element
for any participant at $9 million, including the fair market value of any
Common Stock awarded under the incentive stock purchase provisions of the 1994
Stock Plan. This limit is adjusted according to changes in the Consumer Price
Index.
1994 Stock Option and Incentive Stock Purchase Plan
The Company's executive officers participate in the Loral Corporation 1994
Stock Option and Incentive Stock Purchase Plan (the "1994 Stock Plan"). This
1994 Stock Plan was adopted by the Compensation Committee on June 23, 1994,
and approved by the Company's shareholders on July 26, 1994. The following is
a general description of the 1994 Stock Plan.
Awards granted under the 1994 Stock Plan may be "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986 (the
"Code"), nonqualified stock options or incentive stock purchase awards. All
options and incentive stock purchase awards relate to Common Stock.
The 1994 Stock Plan is administered by the Compensation Committee, which
selects the participants, determines the number and duration of the options to
be granted and the terms and conditions of option agreements and sets
limitations on the extent to which a participant's earned annual bonus may be
deferred and applied to the funding of restricted stock. The Compensation
Committee may establish performance or other
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conditions which must be satisfied for options to become exercisable or for
incentive stock purchase awards to vest. The Compensation Committee may also
provide for accelerated vesting of options and incentive stock purchase awards
upon certain prescribed events, or in its discretion.
In addition to executive officers, participants may include all other senior
officers of the Company, all group and divisional officers and such other key
employees of the Company and its operating subsidiaries as are designated by
the Compensation Committee. Non-employee directors are not eligible to
participate in the 1994 Stock Plan.
The Compensation Committee may permit participants in the 1994 Stock Plan to
elect that up to 100% of their annual bonus which would otherwise be paid in
cash, either under the Annual Bonus Plan or under any other Company bonus
plan, be deferred into a Restricted Stock Purchase Account which will be used
to fund acquisitions of Common Stock, subject to such maximums as the
Committee may establish from time to time.
Other Stock Plans
In addition to the 1994 Stock Plan, executive officers of the Company hold
stock options granted under the Company's 1983 Stock Option Plan and 1986
Stock Option Plan, as well as shares of restricted stock acquired under the
Company's 1987 Restricted Stock Purchase Plan.
Options and Restricted Stock Held by Executive Officers and Directors
Information describing stock options and shares of restricted stock held by
the Company's five most highly-compensated executive officers as of the last
day of its fiscal year ending March 31, 1995 are set forth in the pages of the
1995 Proxy Statement which are incorporated herein by reference. The following
information gives effect to the two-for-one stock split distributed on
September 29, 1995. On June 6, 1995, the Company granted options to purchase
150,000 shares of Common Stock to Mr. Frank C. Lanza, and options to purchase
70,000 shares of Common Stock to each of Messrs. Michael P. DeBlasio, Robert
V. LaPenta, and Michael B. Targoff. All options were granted under the 1994
Stock Plan at a price of $23.8125 per share, the fair market value of the
Common Stock on the date of grant. On July 25, 1995, the Company granted an
option to purchase 400,000 shares to Mr. Bernard L. Schwartz. The option was
granted under the 1994 Stock Plan at a price of $27.2344 per share, the fair
market value of the Common Stock on the date of grant.
All non-employee directors of the Company other than Messrs. Gittis,
Lazarus, Shinn and Simon hold options to purchase 20,000 shares of the
Company's Common Stock at a price of $8.86 per share.
As of December 31, 1995, the executive officers of the Company held, as a
group, (i) an aggregate of 28,550 shares of restricted stock and (ii) options
to purchase an aggregate of 3,242,728 shares of Common Stock. Exercise prices
applicable to these options range from $3.00 per share to $27.2344 per share.
Treatment of Options and Restricted Stock in the Merger
The treatment of outstanding stock options and shares of restricted stock
upon consummation of the Offer is discussed below under the heading "The
Merger Agreement."
Supplemental Executive Retirement Plan
The Loral Supplemental Executive Retirement Plan (the "SERP"), adopted by
the Board effective April 1, 1995, provides supplemental retirement benefits
to Company employees which generally makes up for certain reductions in
retirement benefits caused by limitations imposed under the Code. Information
concerning the SERP is set forth on page 12 of the 1995 Proxy Statement which
is incorporated herein by reference. All executive officers of the Company
participate in the SERP. The description of the SERP referred to above does
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not purport to be complete and is qualified in its entirety by reference to
the Supplemental Executive Retirement Plan which is attached hereto as Exhibit
2 and incorporated by reference herein.
Supplemental Bonus Program
The Board has adopted the Loral Corporation Supplemental Bonus Program.
Under this program, the Company's Chief Executive Officer, Mr. Bernard L.
Schwartz, may designate key employees of the Company (including executive
officers) to receive bonuses (referred to below in the description of the
Merger Agreement as "Transaction Bonuses") in connection with the successful
consummation of the Offer. The aggregate amount payable under the program may
not exceed the difference between (1) $40 million and (2) the cash amount
payable to Mr. Schwartz pursuant to his Restated Employment Agreement with the
Company dated April 1, 1990, as amended June 14, 1994, as a result of the
consummation of the Offer. The amount so payable to Mr. Schwartz is
approximately $18 million (see discussion below under "The Merger Agreement").
The description of the Supplemental Bonus Program referred to above does not
purport to be complete and is qualified in its entirety by reference to the
Supplemental Bonus Program which is attached hereto as Exhibit 3 and
incorporated by reference herein.
Supplemental Severance Program
The Company has adopted the Loral Corporation Supplemental Severance Program
which will provide enhanced severance benefits for up to 150 Company employees
upon a dismissal without "cause" or a voluntary termination for "good reason"
within twenty-four months after the consummation of the Offer. The benefits
under this program, which are payable in addition to a participant's regular
severance benefits, will generally be equal to one year's base salary and
bonus, plus the cost of acquiring continued welfare benefits coverage for a
period of one year. Also, if a participant's regular severance benefits are
reduced after the consummation of the Offer, the benefits payable under the
program are increased by an equivalent amount. In no event may the payments
made to any participant exceed the maximum amount which can be so paid without
causing the payments to be treated as "excess parachute payments" for purposes
of Section 280G of the Code. The description of the Supplemental Severance
Program referred to above does not purport to be complete and is qualified in
its entirety by reference to the Supplemental Severance Program which is
attached hereto as Exhibit 4 and incorporated by reference herein.
Employment Protection Agreements
Effective as of January 7, 1996, the Company entered into "Employment
Protection Agreements" with each of Messrs. Frank C. Lanza, Michael P.
DeBlasio, Robert V. LaPenta, Michael B. Targoff, Eric J. Zahler, Nicholas C.
Moren, Lawrence H. Schwartz, Stephen L. Jackson, Harvey B. Rein, Frederick W.
Rhodes, Felix W. Fenter, Hugh Bennett, Jay A. Musselman, Arthur E. Johnson and
Jimmie V. Adams. The Employment Protection Agreements provide for certain
payments to be made to the executive in the event of a termination without
"cause" or a voluntary termination for "good reason" which occurs within three
years following a "Change of Control." The definition of "Change of Control"
for this purpose excludes (1) the consummation of the Offer or the
consummation of any transaction approved by the Company's incumbent directors
as a result of which Parent acquires substantially all of the Company's voting
securities or defense electronics and systems integration businesses, and (2)
any other transaction approved by the Company's incumbent directors. The
amount payable to an executive upon a termination without cause, or a
voluntary termination for good reason, is equal to all accrued compensation
and benefits, plus an amount equal to three times the sum of (1) the
executive's base salary and annual bonus, (2) the average annual compensation
received by the executive under the Company's restricted stock plan over the
three fiscal years prior to the Change of Control and (3) the present value of
the cost of obtaining continued welfare benefit coverage for a period of three
years. In addition, in the event such payments (together with any other
payments received by the Executive) would be considered "excess parachute
payments" under Section 280G of the Code subjecting the executive to an excise
tax imposed under Section 4999 of the Code (the "Excise Tax"), the Executive
would be entitled to receive an additional "gross
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up" payment in an amount which, after deduction of all income taxes and excise
taxes applicable thereto, is equal to the Excise Tax so imposed.
The Employment Protection Agreements will terminate upon the consummation of
the Offer or any transaction approved by the Company's incumbent directors as
a result of which Parent acquires substantially all of the Company's voting
securities or defense electronics and systems integration businesses.
The description of the Employment Protection Agreements referred to above
does not purport to be complete and is qualified in its entirety by reference
to the form of Employment Protection Agreement which is attached hereto as
Exhibit 5 and incorporated by reference herein.
Employment Protection Plan
The Company has adopted the Loral Corporation Employment Protection Plan
effective January 7, 1996. The Employment Protection Plan, like the Employment
Protection Agreements, provides for payments to participating employees upon a
termination without "cause" or a voluntary termination for "good reason"
occurring within three years after a "Change of Control." As with the
Employment Protection Agreements, the definition of Change of Control for this
purpose excludes (1) the consummation of the Offer or the consummation of any
transaction approved by the Company's incumbent directors as a result of which
Parent acquires substantially all of the Company's voting securities or
defense electronics and systems integration businesses and (2) any other
transaction approved by the Company's incumbent directors.
The amount payable to participants in the Employment Protection Plan upon an
eligible termination is equal to all accrued compensation and benefits, plus
an amount equal to two times the sum of (1) the employee's annual salary and
bonus and (2) the average annual compensation received by the employee under
the Company's restricted stock plan over the three fiscal years prior to the
change of control. Eligible employees are also entitled to continued welfare
benefits coverage, at the Company's expense, for a period of three years. The
maximum amounts payable to participants under the Employment Protection Plan,
however, may not exceed the maximum amount which can be paid without causing
such payments to be treated as "excess parachute payments" for purposes of
Section 280G of the Code.
The Employment Protection Plan will terminate upon the successful
consummation of the Offer or any transaction approved by the Company's
incumbent directors as a result of which Parent acquires substantially all of
the Company's voting securities or defense electronics and systems integration
businesses.
The description of the Employment Protection Plan referred to above does not
purport to be complete and is qualified in its entirety by reference to the
Employment Protection Plan which is attached hereto as Exhibit 6 and
incorporated by reference herein.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF LORAL SPACE
It is anticipated that the members of the Board, other than Mr. Lanza, will
become members of the Board of Directors of Loral Space, and that Mr. Schwartz
will serve as Chairman and Chief Executive Officer of Loral Space. Mr.
Schwartz's compensation arrangements are expected to be substantially similar
to his existing arrangements with the Company, with such changes as Mr.
Schwartz and the Compensation Committee of the Board of Directors of Loral
Space shall agree. Certain senior executive officers of the Company are
expected to serve in such positions with Loral Space.
INDEMNIFICATION
Pursuant to Section 722 of the New York Business Corporation Law ("NYBCL"),
a corporation incorporated under the laws of the State of New York is
permitted to indemnify its current and former directors, officers, employees
and agents under certain circumstances against certain liabilities and
expenses incurred by
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them by reason of their serving in such capacities, if such persons acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe their conduct was
unlawful.
The Company's Restated Certificate of Incorporation (the "Charter")
provides, among other things, that the Company will indemnify each of its
directors and officers, against all reasonable expenses, including attorneys'
fees, actually and necessarily incurred by him in connection with the defense
of such action, suit or proceeding, or in connection with any appeal therein,
arising by reason of fact that he was a director or officer of the Company,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such officer or director is liable for negligence or
misconduct in the performance of his duties.
EXISTING BUSINESS RELATIONSHIPS BETWEEN PARENT AND THE COMPANY
Parent and the Company regularly engage in arms' length purchases of goods
and services from one another in the ordinary course of their respective
businesses.
THE MERGER AGREEMENT
The following summary of the Merger Agreement does not purport to be
complete and is qualified in its entirety by reference to the text of the
Merger Agreement, a copy of which is filed as Exhibit 7 hereto and
incorporated herein by reference.
The Offer. The Merger Agreement provides for the making of the Offer by the
Purchaser. The Purchaser has agreed to accept for payment and pay for all
Shares tendered pursuant to the Offer as soon as practicable following the
date on which the Offer expires (the "Expiration Date") and to extend the
Offer until immediately following the Spin-Off Record Date and the expiration
or termination of any applicable waiting period under the Antitrust Laws (as
defined below). The obligation of Purchaser to accept for payment and pay for
Shares tendered pursuant to the Offer is subject to (i) the satisfaction or
waiver of all of the conditions to the Spin-Off, (ii) the tender and non-
withdrawal of Shares which, when added to the Shares then beneficially owned
by Parent, constitute two-thirds of the outstanding Shares and represent two-
thirds of the voting power of the outstanding Shares on a fully diluted basis,
and (iii) the satisfaction of certain other conditions described in Section 15
of the Schedule 14D-1. The Purchaser has agreed that, without the written
consent of the Company, no amendment to the Offer may be made which changes
the form of consideration to be paid or decreases the price per Share, the
number of Shares sought in the Offer or which imposes additional conditions to
the Offer other than those described in Section 15 of the Schedule 14D-1 or
amends any other term of the Offer in any manner materially adverse to holders
of Shares.
The Merger. The Merger Agreement provides that, following the purchase of
Shares pursuant to the Offer, and the satisfaction or waiver of the other
conditions to the Merger, the Purchaser will be merged with and into the
Company. The Merger will become effective at such time (the "Effective Time")
as a certificate of merger or, if applicable, a certificate of ownership and
merger, is filed with the Secretary of State of the State of New York in the
manner required by the NYBCL.
At the Effective Time, (i) except as provided in (ii) below, each Share
issued and outstanding immediately prior to the Effective Time will be
converted into the right to receive $38.00 in cash, or any higher price paid
per Share in the Offer, without interest (the "Merger Price"); (ii) (a) each
Share held in the treasury of the Company or held by any subsidiary of the
Company (other than a subsidiary that will be owned directly or indirectly by
the Company following the Spin-Off (each such company a "Retained
Subsidiary")) and each Share held by Parent or any subsidiary of Parent
immediately prior to the Effective Time will be cancelled and retired and
cease to exist; provided, that Shares held beneficially or of record by any
plan, program or arrangement sponsored or maintained for the benefit of
employees of Parent or the Company or any subsidiaries thereof will not be
deemed to be held by Parent or the Company regardless of whether Parent or the
Company has, directly or indirectly, the power to vote or control the
disposition of such shares; (b) each Share held by any
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holder who has not voted in favor of the Merger and has delivered a written
objection to the Merger and demanded fair value with respect to such Share in
accordance with Section 623 of the NYBCL will not be converted into or be
exchangeable for the right to receive the Merger Price (the "Dissenting
Shares"); and (iii) each share of common stock of the Purchaser issued and
outstanding immediately prior to the time of the Effective Time will be
converted into and exchangeable for one share of common stock of the Surviving
Corporation.
The Company will take all actions (including, but not limited to, obtaining
any and all consents from employees to the matters contemplated by Section
2.10 of the Merger Agreement) necessary to provide that all outstanding
options and other rights to acquire Shares ("Stock Options") granted under any
stock option plan, program or similar arrangement of the Company or any
subsidiary of the Company, each as amended (the "Option Plans"), will become
fully exercisable and vested on the date (the "Vesting Date") which will be
set by the Company and which, in any event, shall be not less than 30 days
prior to the consummation of the Offer, whether or not otherwise exercisable
and vested. All Stock Options which are outstanding immediately prior to
Purchaser's acceptance for payment and payment for Shares tendered pursuant to
the Offer will be cancelled as of the consummation of the Offer and the
holders thereof (other than holders who are subject to the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act")) will be entitled to receive from the Company, for each Share
subject to such Stock Option, (1) an amount in cash equal to the difference
between the Merger Price and the exercise price per share of such Stock
Option, which amount will be payable upon consummation of the Offer, plus (2)
one share of common stock, par value $0.01 per share of Loral Space ("Loral
Space Common Stock"), which will be held by an escrow agent pending delivery
on the Distribution Date (as defined below). All applicable withholding taxes
attributable to the payments made hereunder or to distributions contemplated
hereby will be deducted from the amounts payable under clause (1) above and
all such taxes attributable to the exercise of Stock Options on or after the
Vesting Date will be withheld from the proceeds received in the Offer or the
Merger, as the case may be, in respect of the Shares issuable on such
exercise.
The Company will take all actions (including, but not limited to, obtaining
any and all consents from employees to the matters contemplated by the Merger
Agreement) necessary to provide that all restrictions on transferability with
respect to each Share which is granted pursuant to the Company's 1987
Restricted Stock Purchase Plan (the "1987 Plan") and which is outstanding and
not vested on the Vesting Date will lapse, and each such Share will become
free of restrictions as of the Vesting Date. All applicable withholding taxes
attributable to the vesting of restricted Shares will be withheld from the
proceeds received in respect of such Shares in the Offer or the Merger, as the
case may be.
Except as provided in the Merger Agreement or as otherwise agreed to by the
parties and to the extent permitted by the Option Plans and the 1987 Plan, (i)
the Option Plans and the 1987 Plan will terminate as of the Effective Time and
the provisions in any other plan, program or arrangement, providing for the
issuance or grant by the Company or any of its subsidiaries of any interest in
respect of the capital stock of the Company or any of its subsidiaries will be
deleted as of the Effective Time and (ii) the Company will use all reasonable
efforts to ensure that following the Effective Time no holder of Stock Options
or any participant in the Option Plans or any other such plans, programs or
arrangements will have any right thereunder to acquire any equity securities
of the Company, the Surviving Corporation or any subsidiary thereof.
The Merger Agreement provides that the Charter and by-laws of the Company at
the Effective Time will be the certificate of incorporation and by-laws of the
Surviving Corporation until amended in accordance with applicable law;
provided, that promptly following the Effective Time, the certificate of
incorporation of the Company will be amended to change the name of the
Surviving Corporation so that the word "Loral" will be deleted therefrom. The
Merger Agreement also provides that the directors and officers of the
Purchaser at the Effective Time will be the initial directors and officers of
the Surviving Corporation and will hold office from the Effective Time until
their respective successors are duly elected or appointed and qualify in the
manner provided in the certificate of incorporation and by-laws of the
Surviving Corporation, or as otherwise provided by applicable law.
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Recommendation. In the Merger Agreement, the Company states that the Board
has unanimously (i) determined that the Offer, the Merger and the Spin-Off are
fair to and in the best interests of the shareholders of the Company and (ii)
resolved to recommend acceptance of the Offer and approval and adoption of the
Merger Agreement and the Merger by the shareholders of the Company.
Interim Agreements of Parent, Purchaser and the Company. Pursuant to the
Merger Agreement, the Company has covenanted and agreed that, during the
period from the date of the Merger Agreement to the consummation of the Offer
and until such time as the directors designated by Parent in accordance with
the Merger Agreement constitute in their entirety a majority of the Company's
Board (the "Board Reorganization"), the Company and its subsidiaries (other
than Loral Space and the Loral Space Companies (as defined below)) will each
conduct its operations according to its ordinary course of business,
consistent with past practice, and will use commercially reasonable efforts to
(i) preserve intact its business organization, (ii) maintain its material
rights and franchises, (iii) keep available the services of its officers and
key employees, and (iv) keep in full force and effect insurance comparable in
amount and scope of coverage to that maintained as of the date of the Merger
Agreement (collectively the "Ordinary Course Obligations"); provided, that
Loral Space and the Loral Space Companies will comply with the Ordinary Course
Obligations to the extent that non-compliance therewith could adversely affect
the Retained Business or adversely affect (or materially delay) the
consummation of the Offer, the Merger or the Spin-Off. "Loral Space Companies"
means Loral General Partner, Inc., a Delaware corporation ("LGP"), SS/L,
Globalstar, Globalstar Telecommunications Limited, a company organized under
the laws of Bermuda ("GTL"), Loral Globalstar, L.P., a Delaware limited
partnership, Loral Globalstar Limited, a Cayman Islands corporation ("LGL"),
K&F Industries, Inc., a Delaware corporation ("K&F"), Loral/QUALCOMM
Partnership, L.P., a Delaware limited partnership ("LQP"), Loral/QUALCOMM
Satellite Services, L.P., a Delaware limited partnership ("LQSS"), Continental
Satellite Corporation, a California corporation ("Continental"), Loral Travel
Services Inc., a Delaware corporation, Loral Properties Inc., a Delaware
corporation and each of the subsidiaries of such companies.
Without limiting the generality of and in addition to the foregoing, and
except as otherwise contemplated by the Merger Agreement, the Tax Sharing
Agreement (as defined below) or the Distribution Agreement (the Tax Sharing
Agreement together with the Distribution Agreement, the "Ancillary
Agreements"), prior to the consummation of the Offer and the Board
Reorganization, neither the Company nor any of its subsidiaries (other than
Loral Space and the Loral Space Companies insofar as any action of the type
specified below could not adversely affect the Retained Business and could not
adversely affect (or materially delay) the Offer, the Spin-Off or the Merger)
will, without the prior written consent of Parent: (a) amend its charter or
by-laws other than filing a Certificate of Amendment of the Company's Charter
as contemplated by the Rights Agreement; (b) subject to certain exceptions,
authorize for issuance, issue, sell, deliver or agree to commit to issue, sell
or deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class or any other securities or amend any of the terms of any such securities
or agreements (subject to certain exceptions); (c) split, combine or
reclassify any shares of its capital stock, declare, set aside or pay any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock (other than pursuant to
the Rights Agreement) or redeem or otherwise acquire any of its securities or
any securities of its subsidiaries (other than pursuant to the Rights
Agreement); provided, that the Company may declare and pay to holders of
Shares regular quarterly dividends of not more than $0.08 per Share on the
dividend declaration and payment dates normally applicable to the Shares; (d)
(i) pledge or otherwise encumber shares of capital stock of the Company or any
of its subsidiaries; or (ii) except in the ordinary course of business
consistent with past practices, (A) incur, assume or prepay any long-term debt
or incur, assume, or prepay letters of credit or any material short-term debt;
(B) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for any material obligations of
any other person except wholly owned subsidiaries of the Company; (C) make any
material loans, advances or capital contributions to, or investments in, any
other person; (iii) change the practices of the Company and its Retained
Subsidiaries with respect to the timing of payments or collections; or (D)
mortgage or pledge any assets of the Retained Business, or create or permit to
exist any material lien thereupon; (e) except (i) as disclosed in
9
the disclosure schedule to the Merger Agreement and except for arrangements
entered into in the ordinary course of business consistent with past
practices, (ii) as required by law or (iii) as specifically provided for in
the Merger Agreement or Distribution Agreement enter into, adopt or materially
amend any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreements, trusts, plans, funds or other arrangements of or for the
benefit or welfare of any Retained Employee (i.e., all current and former
officers and employees of the Company and its subsidiaries, other than Loral
Space employees) (or any other person for whom the Retained Business will have
liability), or (except for normal increases in the ordinary course of business
that are consistent with past practices) increase in any manner the
compensation or fringe benefits of any Retained Employee (or any other person
for whom the Retained Business will have liability), or pay any benefit not
required by any existing plan and arrangement (including, without limitation,
the granting of stock options, stock appreciation rights, shares of restricted
stock or performance units) or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing; (f) transfer, sell, lease, license
or dispose of any lines of business, subsidiaries, divisions, operating units
or facilities (other than facilities currently closed or currently proposed to
be closed) relating to the Retained Business outside the ordinary course of
business or enter into any material commitment or transaction with respect to
the Retained Business outside the ordinary course of business; (g) acquire or
agree to acquire, by merging or consolidating with, by purchasing an equity
interest in or a portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets of any other person (other than the purchase of assets in the ordinary
course of business and consistent with past practice), in each case where such
action would be material to the Retained Business; (h) except as may be
required by law or as disclosed in the Disclosure Schedule to the Merger
Agreement, take any action to terminate or materially amend any of its pension
or retiree medical plans with respect to or for the benefit of Retained
Employees or any other person for whom the Retained Business will have
liability; (i) materially modify, amend or terminate (1) any significant
contract related to the Retained Business or waive any material rights or
claims of the Retained Business, except in the ordinary course of business
consistent with past practice; or (2) any contract having an aggregate
contract value of $100 million or greater, whether or not in the ordinary
course of business consistent with past practice, unless such modification,
amendment or termination does not materially diminish the projected profit or
materially increase the projected loss anticipated from such contract;
provided, that nothing contained in this clause shall limit the Company and
its subsidiaries in connection with programs or contracts with respect to
which Parent or a subsidiary of Parent has submitted, or is reasonably
expected to submit, a competing bid; provided further, that the provisions of
this clause will not apply to any arrangement, agreement or contract proposal
previously submitted by the Company or a subsidiary thereof which proposal,
upon acceptance thereof, cannot be revised or withdrawn; (j) effect any
material change in any of its methods of accounting in effect as of March 31,
1995, except as may be required by law or generally accepted accounting
principles; (k) except as expressly provided in the Merger Agreement, amend,
modify, or terminate the Rights Agreement or redeem any Rights thereunder;
provided, that if the Board by a majority vote determines in its good faith
judgment, based as to legal matters upon the written opinion of legal counsel,
that the failure to redeem any Rights would likely constitute a breach of the
Board's fiduciary duty, the Rights may be redeemed; (l) enter into any
material arrangement, agreement or contract that individually or in the
aggregate with other material arrangements, agreements and contacts entered
into after the date of the Merger Agreement, the Company reasonably expects
will adversely affect in a significant manner the Retained Business after the
date of the Merger Agreement; provided, that nothing contained in this clause
will limit the Company and its subsidiaries from submitting bids for programs
or contracts with respect to which the Company reasonably expects Parent or a
subsidiary of Parent to submit a bid; and (m) enter into a legally binding
commitment with respect to, or any agreement to take, any of the foregoing
actions.
Acquisition Proposals. In the Merger Agreement, the Company has agreed that
the Company and its officers, directors, employees, representatives and agents
will immediately cease any existing discussions or negotiations with any
parties conducted prior to the date of the Merger Agreement with respect to
any Acquisition Proposal (as defined below). The Company and its subsidiaries
may not, and will use their best efforts to cause their respective officers,
directors, employees and investment bankers, attorneys, accountants or
10
other agents retained by the Company or any of its subsidiaries not to, (i)
initiate or solicit, directly or indirectly, any inquiries with respect to, or
the making of any Acquisition Proposal, or (ii) except as permitted below,
engage in negotiations or discussions with, or furnish any information or data
to any Third Party (as defined below) (other than the transactions
contemplated by the Merger Agreement and by the Ancillary Agreements).
Notwithstanding anything to the contrary contained in the Merger Agreement,
the Company may furnish information to, and participate in discussions or
negotiations (including, as a part thereof, making any counter-proposal) with,
any Third Party which submits an unsolicited written Acquisition Proposal to
the Company if the Board by a majority vote determines in its good faith
judgment, based as to legal matters upon the written opinion of legal counsel,
that the failure to furnish such information or participate in such
discussions or negotiations would likely constitute a breach of the Board's
fiduciary duties under applicable law; provided, that nothing in the Merger
Agreement will prevent the Board from taking, and disclosing to the Company's
shareholders, a position contemplated by Rules 14d-9 and 14e-2 promulgated
under the Exchange Act with regard to any tender offer; provided further, that
the Board will not recommend that the shareholders of the Company tender their
Shares in connection with any such tender offer unless the Board by a majority
vote determines in its good faith judgment, based as to legal matters on the
written opinion of legal counsel, that failing to take such action would
likely constitute a breach of the Board's fiduciary duty; provided further,
that the Company may not enter into any agreement with respect to any
Acquisition Proposal except concurrently with or after the termination of the
Merger Agreement (except with respect to confidentiality and standstill
agreements to the extent expressly permitted below). The Company will promptly
provide Parent with a copy of any written Acquisition Proposal received and a
written statement with respect to any non-written Acquisition Proposal
received, which statement shall include the identity of the parties making the
Acquisition Proposal and the terms thereof. The Company will promptly inform
Parent of the status and content of any discussions regarding any Acquisition
Proposal with a Third Party. In no event will the Company provide non-public
information regarding the Retained Business to any Third Party making an
Acquisition Proposal unless such party enters into a confidentiality agreement
containing provisions designed to reasonably protect the confidentiality of
such information. In the event that following the date of the Merger Agreement
the Company enters into a confidentiality agreement with any Third Party which
does not include terms and conditions which are substantially similar to the
"standstill" provisions of the confidentiality agreement between the Company
and Parent, dated as of December 4, 1995, then Parent and its affiliates will
be released from their obligations under such standstill provisions to the
same extent as such Third Party.
"Acquisition Proposal" means any bona fide proposal, whether in writing or
otherwise, made by a Third Party to acquire beneficial ownership (as defined
in Rule 13(d) under the Exchange Act) of all or a material portion of the
assets of, or any material equity interest in, any of the Company, a Retained
Subsidiary or the Retained Business pursuant to a merger, consolidation or
other business combination, sale of shares of capital stock, sale of assets,
tender offer or exchange offer or similar transaction involving either the
Company, a Retained Subsidiary or the Retained Business, including, without
limitation, any single or multi-step transaction or series of related
transactions which is structured to permit such Third Party to acquire
beneficial ownership of any material portion of the assets of, or any material
portion of the equity interest in, either the Company, a Retained Subsidiary
or the Retained Business (other than the transactions contemplated by the
Merger Agreement and the Ancillary Agreements); provided, however, that the
term "Acquisition Proposal" does not include any transactions which relate
solely to the businesses to be owned by Loral Space and the Loral Space
Companies following the Spin-Off and which do not have a material adverse
effect on the consummation of the Offer, the Merger, the Spin-Off or the
transactions contemplated by the Merger Agreement.
Board Representation. The Merger Agreement provides that in the event that
Purchaser acquires at least a majority of the Shares outstanding pursuant to
the Offer, Parent will be entitled to designate for appointment or election to
the Board upon written notice to the Company, such number of persons so that
such designees of Parent constitute the same percentage (but in no event less
than a majority) of the Board (rounded up to the next whole number) as the
percentage of Shares acquired in connection with the Offer. Prior to the
consummation of the Offer, the Board will obtain the resignation of such
number of directors as is necessary to enable such number of Parent designees
to be so elected. In connection therewith, the Company will mail to the
shareholders of the
11
Company the information required by Section 14(f) of the Exchange Act and Rule
14f-1 thereunder unless such information has previously been provided to such
shareholders in the Schedule 14D-9. Parent and the Purchaser will provide to
the Company in writing, and be solely responsible for, any information with
respect to such companies and their nominees, officers, directors and
affiliates required by such Section and Rule. Notwithstanding the foregoing,
the parties to the Merger Agreement will use their respective best efforts to
ensure that at least three of the members of the Board will, at all times
prior to the Effective Time be, Continuing Directors (as defined in the Merger
Agreement).
Miscellaneous Agreements. Pursuant to the Merger Agreement, the Company has
agreed to amend, and has amended, the Rights Agreement as necessary (i) to
prevent the Merger Agreement or the transactions contemplated by the Merger
Agreement or Distribution Agreement (including, without limitation, the
publication or other announcement of the Offer and the consummation of the
Offer and the Merger) from resulting in the distribution of separate rights
certificates or the occurrence of a "Distribution Date" under the Rights
Agreement or being deemed to be a "Triggering Event" or a "Section 13 Event"
under the Rights Agreement and (ii) to provide that neither Parent nor the
Purchaser will be deemed to be an "Acquiring Person" under the Rights
Agreement by reason of such transactions.
Pursuant to the Merger Agreement, if required under applicable law in order
to consummate the Merger, the Company, acting through its Board, will, in
accordance with applicable law, its Charter and by-laws and the rules and
regulations of the NYSE: (a) duly call, give notice of, convene and hold a
special meeting of its shareholders as soon as practicable following the
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement (the "Stockholders' Meeting"); (b) subject to its
fiduciary duties under applicable laws as advised by counsel, include in the
Information Statement prepared by the Company for distribution to shareholders
of the Company in advance of the Stockholders' Meeting in accordance with
Regulation 14C promulgated under the Exchange Act (the "Information
Statement") the recommendation of its Board referred to above; and (c) use its
best efforts to (i) obtain and furnish the information required to be included
by it in the Information Statement, and, after consultation with Parent,
respond promptly to any comments made by the Commission with respect to the
Information Statement and any preliminary version thereof and cause the
Information Statement to be mailed to its shareholders following the
consummation of the Offer and (ii) obtain the necessary approvals of the
Merger Agreement by its shareholders. Parent will provide the Company with the
information concerning Parent and Purchaser required to be included in the
Information Statement and will vote, or cause to be voted, all Shares owned by
it or its subsidiaries in favor of approval and adoption of the Merger
Agreement.
In accordance with the Merger Agreement, simultaneously with the execution
of the Merger Agreement, the Company and certain of its subsidiaries entered
into the Distribution Agreement. Immediately prior to the Spin-Off Record
Date, the Company, Loral Space and certain other parties will enter into the
Tax Sharing Agreement (as defined below). From and after the Effective Time,
Parent shall cause the Surviving Corporation to perform any and all
obligations and agreements of the Company set forth in the Merger Agreement or
in the Ancillary Agreements or in any other agreements contemplated in the
Merger Agreement or in the Ancillary Agreements. Parent and Purchaser accept
and agree that, subject to the provisions of the Distribution Agreement, the
form of certificate of incorporation and by-laws of Loral Space adopted in
contemplation of the Spin-Off will be as agreed to by the Company and Loral
Space in their sole discretion; provided, that nothing in the certificates of
incorporation and by-laws will adversely affect or otherwise limit (i) Loral
Space's ability to perform its obligations under the Ancillary Agreements or
the other agreements contemplated by the Distribution Agreement or (ii) the
Company's or its affiliates' rights under the Stockholders Agreement. In no
event shall Parent or Purchaser or any of their subsidiaries be entitled to
receive any shares of Loral Space Common Stock as a distribution with respect
to Shares purchased upon consummation of the Offer. If, for any reason, any
shares of Loral Space Common Stock distributed in the Spin-Off are received by
Parent or Purchaser or any of their subsidiaries with respect to Shares
acquired by Purchaser in the Offer, then Parent or Purchaser will convey, on
behalf of the Company, such shares of Loral Space to the shareholders of the
Company who would have otherwise received such shares of Loral Space pursuant
to the Distribution Agreement; provided, that the
12
foregoing provisions will not apply with respect to Shares held by Parent or
any of its subsidiaries prior to the date of the Merger Agreement. If the
Company reasonably determines that the Spin-Off may not be effected without
registering the shares of common stock of Loral Space to be distributed in the
Spin-Off pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), the Company, Parent and Purchaser, as promptly as practicable, will use
their respective best efforts to cause the shares of Loral Space to be
registered pursuant to the Securities Act and thereafter effect the Spin-Off
in accordance with the terms of the Distribution Agreement including, without
limitation, by preparing and filing on an appropriate form a registration
statement under the Securities Act covering the shares of Loral Space and
using their respective best efforts to cause such registration statement to be
declared effective and preparing and making such other filings as may be
required under applicable state securities laws. Parent will, and will cause
the Surviving Corporation to, treat the Spin-Off for purposes of all federal
and state taxes as an integrated transaction with the Offer and the Merger and
thus report the Spin-Off as a constructive redemption of a number of Shares
equal in value to the value of the Loral Space Common Stock distributed in the
Spin-Off.
Employment Agreements. Prior to the Spin-Off, the Company will use its best
efforts to, and will use its best efforts to cause its subsidiaries to, assign
to Loral Space or subsidiaries of Loral Space or terminate all employment
agreements with employees of the Company who are not Retained Employees (the
"Employment Agreements") and all individual severance agreements with
employees of the Company who are not Retained Employees (the "Severance
Agreements"). The parties acknowledge and agree that, whether or not such
Employment Agreements and Severance Agreements are so assigned or terminated,
all liabilities under or arising from such Employment Agreements and Severance
Agreements other than as expressly contemplated in the Distribution Agreement
or the Merger Agreement will be deemed to be Loral Space Liabilities (as
defined in Section 10 of the Schedule 14D-1), with respect to which Loral
Space will indemnify the Company and Parent as provided therein. Parent
acknowledges and agrees that all employment agreements and severance
agreements with the Retained Employees will be binding and enforceable
obligations of the Surviving Corporation, except as the parties thereto may
otherwise agree. The parties to the Merger Agreement acknowledge and agree
that all liabilities under or arising from such agreements with the Retained
Employees from and after the consummation of the Offer will be deemed to be
Company Liabilities (as defined in the Distribution Agreement), with respect
to which the Company and Parent will indemnify Loral Space as provided
therein.
Fiscal Year Ended March 31, 1996 Bonus. Parent agrees to cause the Company
to pay in cash to each Company Bonus Employee (as defined below) to the extent
not previously paid, all bonus compensation payable with respect to the fiscal
year of the Company ending March 31, 1996 under any bonus program of the
Company or its subsidiaries in which such Company Bonus Employee participated
prior to the consummation of the Offer or under any employment agreement. Such
bonus compensation will be paid at the time or times that comparable bonus
compensation was paid to a similarly situated employee after March 31, 1995
with respect to the fiscal year ended March 31, 1995. Bonus compensation which
is based on objective criteria will be calculated and paid in accordance with
such criteria. With respect to bonus compensation which is wholly or partially
discretionary, such bonus compensation will be determined and paid on a basis
consistent with past practices of the Company. Subject to the conditions
regarding the aggregate amount of discretionary bonuses as described below,
the amount of discretionary bonus compensation to be paid to any Company Bonus
Employee will be determined by the Chief Executive Officer of the Company in
office immediately prior to the date of the consummation of the Offer or by
his designee. "Company Bonus Employee" means a person (other than any current
or former officer or employee of Loral Space, any Loral Space Company or the
Loral Space Business (as defined below) (the "Loral Space Employees")),
employed by the Company or any of its subsidiaries immediately prior to the
date the Offer is consummated, who was eligible to receive a bonus under any
bonus program of the Company or any of its subsidiaries in effect at December
31, 1995, or under any employment agreement in effect on such date, with
respect to the fiscal year ending March 31, 1996.
Loral Space agrees to pay in cash to each Loral Space Bonus Employee (as
defined below) to the extent not previously paid, all bonus compensation
payable with respect to the fiscal year of the Company ending March 31, 1996
under any bonus program of the Company or its subsidiaries in which such Loral
Space Bonus
13
Employee participated prior to the consummation of the Offer or under any
employment agreement. Such bonus compensation will be paid at the time or
times that comparable bonus compensation was paid to any similarly situated
employee after March 31, 1995 with respect to the fiscal year ended March 31,
1995. Bonus compensation which is based on objective criteria will be
calculated and paid in accordance with such criteria. With respect to bonus
compensation which is wholly or partially discretionary, such bonus
compensation will be determined and paid on a basis consistent with past
practices of the Company. Subject to the following paragraph, the amount of
discretionary bonus compensation to paid to any Loral Space Bonus Employee
will be determined by Loral Space. "Loral Space Bonus Employee" means any
Loral Space Employee employed by the Company or any of its subsidiaries
immediately prior to the date the Offer is consummated, who was eligible to
receive a bonus under any bonus program of the Company or any of its
subsidiaries in effect at December 31, 1995, or under any employment agreement
in effect on such date, with respect to the fiscal year ending March 31, 1996.
Upon payment of such bonuses to Loral Space Bonus Employees, Loral Space shall
submit to Parent a statement showing the individual and aggregate bonus
amounts paid to Loral Space Bonus Employees, and Parent will thereupon
promptly pay to Loral Space (or cause the Company to pay to Loral Space) the
aggregate amount of bonuses so paid; provided, that if the consummation of the
Offer occurs prior to March 31, 1996, the amount of such reimbursement will be
a prorated amount of the aggregate bonus amounts so paid, based on a fraction,
the numerator of which is the number of days of the Company's fiscal year
ending March 31, 1996 which had elapsed as of the consummation of the Offer,
and the denominator of which is 365.
The aggregate amount of discretionary bonuses payable to all Company Bonus
Employees and Loral Space Bonus Employees as a group for the fiscal year
ending March 31, 1996 will not exceed a dollar amount to be mutually agreed to
by the Chief Executive Officer of Parent and the Chief Executive Officer of
Loral Space; provided, that in the event the Chief Executive Officer of Parent
and the Chief Executive Officer of Loral Space cannot agree on such dollar
amount, the maximum aggregate amount of discretionary bonuses payable to
Company Bonus Employees and Loral Space Bonus Employees shall be based on the
aggregate amount of discretionary bonuses paid to all such employees for the
Company's fiscal year ending March 31, 1995, increased by a percentage equal
to the average of the percentage increases in discretionary bonuses paid to
all such employees over the Company's three fiscal years ending March 31,
1993, 1994 and 1995.
Transaction Bonus. Pursuant to the "change of control" provisions of the
Restated Employment Agreement between the Company and Bernard L. Schwartz
dated April 1, 1990, as amended June 14, 1994, the Company will, subject to
the following sentences of this paragraph, make a cash payment to Mr. Schwartz
upon consummation of or following the Offer, calculated in accordance with
such agreement, less $18 million waived by Mr. Schwartz. The net amount
payable to Mr. Schwartz, taking this waiver into account, is approximately $18
million. The Company also may make a cash payment of a bonus (inclusive of the
amount paid to Mr. Schwartz pursuant to the preceding sentence, the
"Transaction Bonus") to Transaction Bonus Employees (as defined below) other
than Mr. Schwartz; provided, that the aggregate Transaction Bonus paid will
not exceed $40 million; and provided further, that the Transaction Bonus
payable to any Transaction Bonus Employee will not exceed the maximum amount
which can be paid at such time without such amounts being treated as "excess
parachute payments" within the meaning of Section 280G of the Code, taking
into account all payments made on or prior to the time the Transaction Bonus
is paid (including the value of accelerated vesting of stock options or
restricted shares granted under the 1987 Plan determined in accordance with
proposed regulations promulgated under Section 280G of the Code) which
constitute parachute payments for purposes of Section 280G of the Code. The
Transaction Bonus may be paid by the Company, in its discretion, prior to, on
or immediately following, the date the Offer is consummated. "Transaction
Bonus Employee" means Mr. Schwartz and each person employed by the Company or
any of its subsidiaries on or prior to the date the Offer is consummated who
is selected by Mr. Schwartz to receive a Transaction Bonus.
Employment Protection Agreements. The Company may provide for employment
protection payments to be made to certain Company employees upon qualifying
terminations of employment pursuant to "Employment Protection Agreements" and
an "Employment Protection Plan" (each substantially in the forms attached to
the Merger Agreement as Exhibits C and D, respectively; together, the
"Employment Protection Arrangements")
14
occurring after a change in control of the Company; provided that (i) neither
the execution of the Merger Agreement nor the Distribution Agreement, nor any
transaction contemplated thereby, will constitute a change in control of the
Company for any purpose under the Employment Protection Arrangements or give
rise to any rights thereunder and (ii) the Employment Protection Arrangements
will terminate as of the consummation of the Offer and no rights thereunder
will continue after the consummation of the Offer.
Supplemental Severance Program. Prior to the Effective Time, the Company
will adopt a severance plan substantially in the form attached to the Merger
Agreement as Exhibit E (the "Supplemental Severance Plan") covering up to 150
employees of the Company or its subsidiaries selected by the Company prior to
the Effective Time. The Supplemental Severance Program will provide enhanced
severance benefits to Company employees upon a dismissal without "cause" or a
voluntary termination for "good reason" within twenty-four months after the
consummation of the Offer. The benefits under this program, which are payable
in addition to a participant's regular severance benefits, will generally be
equal to one year's base salary and bonus, plus the cost of acquiring
continued welfare benefits coverage for a period of one year. Also, if a
participant's regular severance benefits are reduced after the consummation of
the Offer, the benefits payable under the program are increased by an
equivalent amount. In no event may the payments made to any participant exceed
the maximum amount which can be so paid without causing the payments to be
treated as "excess parachute payments" for purposes of Section 280G of the
Code.
Employee Benefits. Except with respect to accruals under any defined benefit
pension plans, Parent will, or will cause the Company to, give Retained
Employees full credit for purposes of eligibility, vesting and determination
of the level of benefits under any employee benefit plans or arrangements
maintained by the Parent, the Company or any subsidiary of Parent or Company
for such Retained Employees' service with the Company or any subsidiary of the
Company to the same extent recognized by the Company immediately prior to the
Effective Time. Parent will, or will cause the Company to, (i) waive all
limitations as to pre-existing conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Retained
Employees under any welfare plans that such employees may be eligible to
participate in after the Effective Time, other than limitations or waiting
periods that are already in effect with respect to such employees and that
have not been satisfied as of the Effective Time under any welfare plan
maintained for the Retained Employees immediately prior to the Effective Time,
and (ii) provide each Retained Employee with credit for any co-payments and
deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Effective Time.
Subject to the terms and conditions of the Merger Agreement and without
limitation to the provisions below, Parent, Purchaser and the Company agree to
use all reasonable efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by the Merger Agreement and the Ancillary Agreements
(including, without limitation, (i) cooperating in the preparation and filing
of the Offer documents, the Schedule 14D-9, the Form 10, the Information
Statement and any amendments to any thereof; (ii) cooperating in making
available information and personnel in connection with presentations, whether
in writing or otherwise, to prospective lenders to Parent and Purchaser that
may be asked to provide financing for the transactions contemplated by the
Merger Agreement; (iii) taking of all action reasonably necessary, proper or
advisable to secure any necessary consents or waivers under existing debt
obligations of the Company and its subsidiaries or amend the notes, indentures
or agreements relating thereto to the extent required by such notes,
indentures or agreements or redeem or repurchase such debt obligations; (iv)
contesting any pending legal proceeding relating to the Offer, the Merger or
the Spin-Off; and (v) executing any additional instruments necessary to
consummate the transactions contemplated by the Merger Agreement and the
Ancillary Agreements). In case at any time after the Effective Time any
further action is necessary to carry out the purposes of the Merger Agreement,
the proper officers and directors of each party will use all reasonable
efforts to take all such necessary action.
15
Each of the Company, Parent and Purchaser shall cooperate and use their
respective reasonable efforts to make all filings and obtain all consents and
approvals of governmental authorities (including, without limitation, the
Federal Communication Commission ("FCC")) and other third parties necessary to
consummate the transactions contemplated by the Merger Agreement and the
Ancillary Agreements. Each of the parties to the Merger Agreement will furnish
to the other party such necessary information and reasonable assistance as
such other persons may reasonably request in connection with the foregoing.
In addition to and without limiting the agreements of Parent and Purchaser
described in the immediately preceding paragraph, Parent, Purchaser and the
Company will (i) take promptly all actions necessary to make the filings
required of Parent, Purchaser or any of their affiliates under the applicable
Antitrust Laws, (ii) comply at the earliest practicable date with any request
for additional information or documentary material received by Parent,
Purchaser or any of their affiliates from the Federal Trade Commission ("FTC")
or the Antitrust Division of the Department of Justice (the "Antitrust
Division") pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") and from the Commission or other foreign
governmental or regulatory authority pursuant to the Antitrust Laws, and (iii)
cooperate with the Company in connection with any filing of the Company under
applicable Antitrust Laws and in connection with resolving any investigation
or other inquiry concerning the transactions contemplated by the Merger
Agreement or the Ancillary Agreements commenced by any of the FTC, the
Antitrust Division, state attorneys general, the Commission, or other foreign
governmental or regulatory authorities.
In furtherance and not in limitation of the covenants of Parent and
Purchaser described above, Parent, Purchaser and the Company shall each use
all reasonable efforts to resolve such objections, if any, as may be asserted
with respect to the Offer, the Spin-Off, the Merger or any other transactions
contemplated by the Merger Agreement or the Ancillary Agreements under any
Antitrust Law. If any administrative, judicial or legislative action or
proceeding is instituted (or threatened to be instituted) challenging the
Offer, the Spin-Off, the Merger or any other transactions contemplated by the
Merger Agreement or the Ancillary Agreements as violative of any Antitrust
Law, Parent, Purchaser and the Company will each cooperate to contest and
resist any such action or proceeding, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) (any such decree, judgment, injunction or other
order is hereafter referred to as an "Order") that is in effect and that
restricts, prevents or prohibits consummation of the Offer, the Spin-Off, the
Merger or any other transactions contemplated by the Merger Agreement or the
Ancillary Agreements, including, without limitation, by pursuing all
reasonable avenues of administrative and judicial appeal. Parent and Purchaser
will each also use their respective reasonable efforts to take all reasonable
action, including, without limitation, agreeing to hold separate or to divest
any of the businesses or assets of Parent or Purchaser or any of their
affiliates, or, following the consummation of the Offer or the Effective Time,
of the Company or any of the Retained Subsidiaries, as may be required (i) by
the applicable governmental or regulatory authority (including without
limitation the FTC, the Antitrust Division, any state attorney general or any
foreign governmental or regulatory authority) in order to resolve such
objections as such governmental or regulatory authority may have to such
transactions under any Antitrust Law, or (ii) by any domestic or foreign court
or other tribunal, in any action or proceeding brought by a private party or
governmental or regulatory authority challenging such transactions as
violative of any Antitrust Law, in order to avoid the entry of, or to effect
the dissolution, vacating, lifting, altering or reversal of, any Order that
has the effect of restricting, preventing or prohibiting the consummation of
the Offer, the Spin-Off, the Merger or any other transactions contemplated by
the Merger Agreement or the Ancillary Agreements; provided that Parent will
not be required to take any action, divest any asset or enter into any consent
decree if the taking of such action, disposing of such asset or entering into
such decree would have a Significant Adverse Effect. "Significant Adverse
Effect" means any change or effect that, in Parent's judgment, is reasonably
likely to adversely affect in a substantial way the benefits and opportunities
which Parent reasonably expects to receive from the acquisition of the
Retained Business or from Parent's current business.
Each of the Company, Parent and Purchaser will promptly inform the other
party of any material communication received by such party from the FTC, the
Antitrust Division, the Securities and Exchange
16
Commission (the "Commission") or any other governmental or regulatory
authority regarding any of the transactions contemplated by the Merger
Agreement. Parent and/or Purchaser will promptly advise the Company with
respect to any understanding, undertaking or agreement (whether oral or
written) which it proposes to make or enter into with any of the foregoing
parties with regard to any of the transactions contemplated by the Merger
Agreement.
"Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, EC Merger
Regulations and all other federal, state and foreign statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines, and other
laws that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade.
Representations and Warranties. The Merger Agreement contains certain
representations and warranties of the parties including, without limitation,
representations by the Company as to organization, capitalization, authority
relative to the Merger Agreement, consents and approvals, absence of certain
changes concerning the Company's business, undisclosed liabilities, reports,
offer documents, no default, litigation and compliance with law, employee
benefit plans, assets and intellectual property, certain contracts and
arrangements, taxes, Retained Business FCC licenses, labor matters, Rights
Agreement and certain fees.
Conditions to the Merger. Pursuant to the Merger Agreement, the obligations
of each of Parent, the Purchaser and the Company to effect the Merger are
subject to the satisfaction or waiver, at or prior to the Effective Time, of
certain conditions, including: (a) if required by applicable law, the Merger
Agreement will have been adopted by the affirmative vote of the shareholders
of the Company by the requisite vote in accordance with applicable law; (b) no
statute, rule, regulation, order, decree, or injunction will have been
enacted, entered, promulgated or enforced by any court or governmental
authority which prohibits or restricts the consummation of the Merger, (c) any
waiting period applicable to the Merger under the Antitrust Laws will have
terminated or expired and all approvals required under the Antitrust Laws will
have been received; (d) the Spin-Off will have been consummated in all
material respects; and (e) the Offer will not have been terminated in
accordance with its terms prior to the purchase of any Shares.
Except if the Purchaser has accepted for payment and paid for Shares validly
tendered pursuant to the Offer or fails to accept for payment any Shares
pursuant to the Offer in violation of the terms thereof, the obligation of the
Company to effect the Merger is further subject to the satisfaction at or
prior to the Effective Time of the following conditions: (a) the
representations and warranties of Parent and the Purchaser contained in the
Merger Agreement will be true and correct in all material respects at and as
of the Effective Time as if made at and as of such time; and (b) each of
Parent and the Purchaser will have performed in all material respects its
obligations under the Merger Agreement required to be performed by it at or
prior to the Effective Time pursuant to the terms thereof.
Except if the Purchaser has accepted for payment and paid for Shares validly
tendered pursuant to the Offer or fails to accept for payment any Shares
pursuant to the Offer in violation of the terms thereof, the obligations of
Parent and the Purchaser to effect the Merger are further subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) the representations and warranties of the Company contained in the Merger
Agreement will be true and correct in all material respects at and as of the
Effective Time as if made at and as of such time; (b) the Company will have
delivered to Purchaser certain legal opinions in connection with the Company's
public indebtedness; and (c) the Company will have performed in all material
respects each of its obligations under the Merger Agreement required to be
performed by it at or prior to the Effective Time pursuant to the terms
thereof.
Termination. The Merger Agreement may be terminated and the Offer and the
Merger may be abandoned at any time (notwithstanding approval of the Merger by
the shareholders of the Company) prior to the Effective Time: (a) by mutual
written consent of Parent, the Purchaser and the Company; (b) by Parent,
Purchaser or the Company if any court of competent jurisdiction in the United
States or other United States governmental body will have issued a final
order, decree or ruling or taken any other final action restraining, enjoining
or otherwise
17
prohibiting the consummation of the Offer, the Spin-Off or the Merger and such
order, decree, ruling or other action is or shall have become nonappealable;
(c) by Parent or Purchaser if due to an occurrence or circumstance which would
result in a failure to satisfy any of the conditions set forth in Section 15 of
the Schedule 14D-1, Purchaser will have (i) failed to commence the Offer within
the time required by Regulation 14D under the Exchange Act, (ii) terminated the
Offer, or (iii) failed to pay for Shares pursuant to the Offer prior to June
30, 1996; (d) by the Company if (i) there is no material breach of any
representation, warranty, covenant or agreement on the part of the Company and
Purchaser has (A) failed to commence the Offer within the time required by
Regulation 14D under the Exchange Act, (B) terminated the Offer or (C) failed
to pay for Shares pursuant to the Offer prior to June 30, 1996 or (ii) prior to
the purchase of Shares pursuant to the Offer, a Third Party has made a bona
fide offer that the Board by a majority vote determines in its good faith
judgment and in the exercise of its fiduciary duties, based as to legal matters
on the written opinion of legal counsel, is a Higher Offer (as defined below);
provided, that such termination under this clause (ii) will not be effective
until payment of the fee discussed below; (e) by Parent or Purchaser prior to
the purchase of Shares pursuant to the Offer, if (i) there has been a breach of
any representation or warranty on the part of the Company or Loral Space
contained in the Merger Agreement or the Distribution Agreement resulting in a
Material Adverse Effect (as defined in the Merger Agreement) or materially
adversely affecting (or materially delaying) the consummation of the Offer,
(ii) there has been a breach of any covenant or agreement on the part of the
Company or Loral Space under either the Merger Agreement or the Distribution
Agreement resulting in a Material Adverse Effect or materially adversely
affecting (or materially delaying) the consummation of the Offer, which will
not have been cured prior to the earlier of (A) 10 days following notice of
such breach or (B) two business days prior to the date on which the Offer
expires, (iii) the Company engages in Active Negotiations (as defined below)
with a Third Party with respect to a Third Party Acquisition (as defined
below), (iv) the Board has withdrawn or modified (including effecting any
amendment of Schedule 14D-9) in a manner adverse to Purchaser, its approval or
recommendation of the Offer, the Spin-Off, the Merger, the Merger Agreement or
the Distribution Agreement, has recommended to the Company's shareholders
another offer, has authorized the redemption of any Rights (whether or not in
accordance with the Merger Agreement) after the Company's receipt of an
Acquisition Proposal, or has adopted any resolution to effect any of the
foregoing or (v) the number of shares validly tendered and not withdrawn when
added to the shares beneficially owned by Parent, prior to the expiration of
the Offer, does not constitute at least two-thirds of the Shares, determined on
a fully diluted basis, and on or prior to such date an entity or group (other
than Parent or Purchaser) has made and not withdrawn a proposal with respect to
a Third Party Acquisition; or (f) by the Company if (i) there has been a breach
of any representation or warranty in the Merger Agreement or the Distribution
Agreement on the part of Parent or Purchaser which materially adversely affects
(or materially delays) the consummation of the Offer or (ii) there has been a
material breach of any covenant or agreement in the Merger Agreement or the
Distribution Agreement on the part of Parent or Purchaser which materially
adversely affects (or materially delays) the consummation of the Offer which
has not been cured prior to the earlier of (A) 10 days following notice of such
breach or (B) two business days prior to the date on which the Offer expires.
Termination Fee. Pursuant to the Merger Agreement, (a) if: (i) Parent or
Purchaser terminates the Merger Agreement pursuant to Clause (e)(ii), (iii) or
(v) of the immediately preceding paragraph and within 12 months thereafter the
Company enters into an agreement with respect to a Third Party Acquisition, or
a Third Party Acquisition occurs, involving any party (or any affiliate
thereof) (A) with whom the Company (or its agents) had negotiations with a view
to a Third Party Acquisition, (B) to whom the Company (or its agents) furnished
information with a view to a Third Party Acquisition or (C) who had submitted a
proposal or expressed an interest in a Third Party Acquisition, in the case of
each of clauses (A), (B) and (C) after the date of the Merger Agreement and
prior to such termination; or (ii) Parent or Purchaser terminates the Merger
Agreement pursuant to clause (e)(iii) or (v) of the immediately preceding
paragraph and, within 12 months thereafter, a Third Party Acquisition will
occur involving a Higher Offer (as defined below); or (iii) Parent or Purchaser
terminates the Merger Agreement pursuant to Clause (e)(iv) of the immediately
preceding paragraph; or (iv) the Company terminates the Merger Agreement
pursuant to clause (d)(ii) of the immediately preceding paragraph; then, in
each case, the Company will pay to Parent, within one business day following
the execution and delivery of such agreement or such occurrence, as the case
may be, or simultaneously with such determination pursuant to
18
clause (d)(ii) above, a fee, in cash, of $175 million; provided, that the
Company in no event will be obligated to pay more than one such $175 million
fee with respect to all such agreements and occurrences and such termination.
"Active Negotiations" means negotiations with a Third Party that has
proposed a Third Party Acquisition or made an Acquisition Proposal, or with
such Third Party's agents or representatives with respect to the substance of
such Third Party Acquisition or Acquisition Proposal, but will not include (x)
communications in connection with, or constituting, the furnishing of
information pursuant to a confidentiality agreement as contemplated by the
Merger Agreement or (y) communications that include no more than an explicit
bona fide rejection of such proposal and a very brief statement of the reasons
therefor.
"Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of the Company by merger or otherwise by any
person (which includes for these purposes a "person" as such term is defined
in Section 13(d)(3) of the Exchange Act) or entity other than Parent, the
Purchaser or any affiliate thereof (a "Third Party"); (ii) the acquisition by
a Third Party of more than 30% of the total assets of the Company and its
subsidiaries, taken as a whole; (iii) the acquisition by a Third Party of 30%
or more of the outstanding Shares; (iv) the adoption by the Company of a plan
of liquidation or the declaration or payment of an extraordinary dividend; or
(v) the purchase by the Company or any of its subsidiaries of more than 20% of
the outstanding shares.
"Higher Offer" means any Third Party Acquisition which reflects a higher
value for the Shares than the aggregate value being provided pursuant to the
transactions contemplated by the Merger Agreement and the Ancillary Agreements
including, without limitation, the shares of Loral Space Common Stock
distributed in the Spin-Off. Prior to the termination of the Merger Agreement
by the Company pursuant to clause (d)(ii) above, the Board of Directors will
provide a reasonable opportunity to a nationally recognized investment banking
firm selected by Parent, Purchaser or their designee (the "IB") to evaluate
the proposed Third Party Acquisition, to determine whether it is a Higher
Offer and to advise the Board of Directors of the Company of the basis for and
results of its determination. The Company agrees to cooperate and cause the
Company's financial advisors to cooperate with the IB (including, without
limitation, providing the IB with full access to all such information which
the IB deems relevant and which the IB agrees to keep confidential) to the
extent reasonably requested by the IB. The fees and expenses incurred by the
IB shall be paid by Parent. Nothing contained in the definitions of "Active
Negotiations", "Third Party Acquisitions" or "Higher Offer" will prevent
Parent and Purchaser from challenging, by injunction or otherwise, the
termination or attempted termination of the Merger Agreement pursuant to
clause (d)(ii) above.
Pursuant to the Merger Agreement, in the event of the termination and
abandonment of the Merger Agreement, the Merger Agreement will become void and
have no effect, without any liability on the part of any party or its
affiliates, directors, officers or shareholders, other than the provisions
relating to the termination fee, fees and expenses, governing law, brokerage
fees and commissions, indemnification and confidentiality of information,
provided, that a party will not be relieved from liability for any breach of
the Merger Agreement. Notwithstanding anything to the contrary contained in
the Merger Agreement, upon payment by the Company of the fees and expenses
referred to in the Merger Agreement, the Company will be released from all
liability thereunder, including any liability for any claims by Parent, the
Purchaser or any of their affiliates based upon or arising out of any breach
of the Merger Agreement or any Ancillary Agreements.
Fees and Expenses. If the Merger Agreement is terminated pursuant to Clause
(e)(i) or (e)(ii) above (the "Designated Termination Provisions") or Parent is
entitled to receive the $175 million fee under the Merger Agreement, then the
Company will reimburse Parent, Purchaser and their affiliates (not later than
one business day after submission of statements therefor) for actual
documented out-of-pocket fees and expenses, not to exceed $45 million,
actually incurred by any of them or on their behalf in connection with the
Offer, the proposed Merger and the proposed Spin-Off and the transactions
contemplated by the Merger Agreement and the Distribution Agreement
(including, without limitation, fees payable to financing sources, investment
bankers
19
(including to the IB), counsel to any of the foregoing and accountants),
whether incurred prior to or after the date of the Merger Agreement. The
Company will in any event pay the amount requested (not to exceed $45 million)
within one business day of such request, subject to the Company's right to
demand a return of any portion as to which invoices are not received in due
course. Except as specifically provided in Section 8.3 of the Merger Agreement
and except as otherwise specifically provided in the Distribution Agreement,
each party shall bear its own respective expenses incurred in connection with
the Merger Agreement, the Offer and the Merger, including, without limitation,
the preparation, execution and performance of the Merger Agreement and the
Ancillary Agreements and the transactions contemplated thereby, and all fees
and expenses of investment bankers, finders, brokers, agents, representatives,
counsel and accountants.
THE DISTRIBUTION AGREEMENT
The following summary of the Distribution Agreement does not purport to be
complete and is qualified in its entirety by reference to the text of the
Distribution Agreement, a copy of which is filed as Exhibit 8 hereto and
incorporated herein by reference.
Pursuant to the Distribution Agreement, the Company and certain subsidiaries
of the Company, through a series of transactions, will transfer to Loral Space
all of their respective right, title and interest in and to the following
assets (such assets, the "Loral Space Assets"): (a) all shares of capital
stock or partnership interests, as the case may be, then owned in the Loral
Space Companies, (b) the $712,400,000 cash amount being transferred to the
Company pursuant to the Distribution Agreement, (c) the rights to the "Loral"
name, (d) all rights to receive management fees from certain of the Loral
Space Companies, (e) all rights and interests in any prospective domestic or
international direct broadcast satellite projects currently under
consideration, (f) certain service provider operations related to Globalstar,
(g) certain rights and liabilities with respect to certain litigation in which
the Company has an interest, (h) certain corporate aircraft, (i) a portion of
the leasehold interest in the Company's New York corporate offices, (j)
certain FCC license applications, and (k) certain Warrants to be received from
Globalstar in connection with the Company's guarantee of certain Globalstar
bank indebtedness, and (l) certain other assets described in the Distribution
Agreement, in exchange for the issuance by Loral Space to the Company and its
subsidiaries of a certain amount of Loral Space capital stock. Concurrently
with the actions in the immediately preceding sentence, Loral Space will
assume and will in due course pay, perform and discharge (or will cause to be
assumed and cause in due course to be paid, performed and discharged), all of
the various liabilities (the "Loral Space Liabilities") relating to (a) each
business and each former business which is or was conducted by Loral Space or
a Loral Space Company as of the date of the Distribution or which is or was
included within the Loral Space Assets (all such businesses, the "Loral Space
Business"), (b) the employees of Loral Space, and (c) certain other
liabilities relating to the Loral Space Companies or the Loral Space Business
or otherwise.
As promptly as practicable after the date of the Distribution Agreement and
prior to the Distribution Date, the Company and Loral Space will prepare an
Information Statement (which will set forth appropriate disclosure concerning
Loral Space and the Loral Space Companies, the Loral Space Business, the Spin-
Off and certain other matters) and Loral Space will file with the Commission a
registration statement on Form 10 (which will include or incorporate by
reference the Information Statement). The Company and Loral Space will 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 Loral Space Common Stock pursuant to the Securities Act, the
Company shall use its best efforts to cause the Loral Space Common Stock to be
registered pursuant to the Securities Act and thereafter effect the
Distribution in accordance with the terms of the Distribution Agreement,
including, without limitation, by preparing and filing on an appropriate form
of registration statement under the Securities Act covering the Loral Space
Common Stock and using its 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 will mail the
Information Statement to the holders of the Company Common Stock.
Subject to terms and conditions of the Distribution Agreement, the Board (or
any duly appointed committee thereof) will in its reasonable discretion
establish the Spin-Off Record Date and the Distribution Date and any
20
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 of the Distribution Agreement or on such other dates as
Parent may reasonably request; provided that (x) the Spin-Off 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 date on
which this Board takes action to establish the Spin-Off Record Date (the
"Distribution Declaration Date") and (y) the parties hereto will use their
reasonable efforts to cause the Spin-Off 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
will the Spin-Off 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 (as defined below) have been satisfied (or waived, to
the extent expressly permitted by the provisions of the Distribution
Agreement), then the Purchaser will 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). The parties hereto acknowledge and agree that payment
of the Distribution will be conditioned on (x) the satisfaction (or waiver, to
the extent expressly permitted by the provisions of the Distribution
Agreement) of each of the Distribution Conditions on a date which is prior to
the fiftieth (50th) day following the Spin-Off 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 Spin-Off Record Date.
The obligations of each of the Company, its subsidiaries and Loral Space
under the Distribution Agreement are subject to the satisfaction of the
following conditions (the "Distribution Conditions"): (i) the Purchaser will
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 Section 15 of the Schedule 14D-1, (ii) the Spin-Off
Record Date will have been set by the Board, (iii) the Form 10 (or any
registration statement filed in lieu thereof) will have been declared
effective by the Commission, (iv) the Loral Space Common Stock will have been
accepted for listing or quotation in accordance with the Distribution
Agreement, (v) no court order or law will have been enacted, promulgated,
issued or entered against any of the parties which (x) prohibits or materially
restricts consummation of any of the transactions contemplated by the
Distribution Agreement and (y) remains in effect as of the date on which the
satisfaction of this condition is determined, (vi) the Company and each of the
Retained Subsidiaries will have obtained all consents required to be obtained
by the Company as a result of or in connection with the transactions
contemplated by the Distribution Agreement in order to avoid a material
default under any material contract to or by which the Company, Loral Space 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 the Distribution
Agreement, will have been obtained or made (as the case may be), (viii) the
guarantee by the Company of certain bank indebtedness of Globalstar (the
"Globalstar Bank Guarantee") will have been amended so that the provisions
thereof shall, following the transactions described above (the
"Restructuring"), be amended in the manner contemplated pursuant to the
Distribution Agreement (with such changes thereto as Parent and the Company
may approve prior to the Offer Purchase Date), and (ix) certain Merchant
Banking Partnerships affiliated with Lehman Brothers Holdings Inc. (the
"Lehman Partnerships") and all other holders of the preferred stock of Loral
Aerospace Holdings, Inc. ("Holdings") (if any) will have exchanged all issued
and outstanding shares of such preferred stock for shares of capital stock or
other equity securities of either Loral Space, any Loral Space Company or any
subsidiary of Loral Space.
Following the Spin-Off, Loral Space will establish a qualified defined
benefit pension plan and trust ("Loral Space Pension Plan"). Thereafter, the
Company will direct the trustees of the trusts under the Loral Corporation
Pension Plan and the Retirement Plan of Loral Aerospace Corp. (the "Company
Pension Plans") to transfer in
21
cash or in kind, as agreed to by the Company and Loral Space, to the trust
under the Loral Space Pension Plan, an amount determined by the certified
actuary of the Company Pension Plans to 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 Loral Space 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 Loral Space 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.
Following the Distribution Date, Loral Space shall cause SSL to establish a
trust intended to qualify under Section 501(a) of the Code ("Loral Space SSL
Trust") and intended to hold the assets of the Retirement Plan of SSL (the
"SSL Plan"). Thereafter, the Company shall 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 Loral Space SSL
Trust, the assets held by the Master Trust under the SSL Plan. Upon the
transfers described above, Loral Space 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
Loral Space Pension Plan and the SSL Plan, including all benefits accrued by
Loral Space Employees prior to the Distribution Date under the Company Pension
Plans and the SSL Plan.
Loral Space will assume and be solely responsible for all liabilities and
obligations arising under the Company's retiree welfare plans (including
retiree medical plans) with respect to Loral Space Employees. The Company will
retain and be solely responsible for all liabilities and obligations arising
under the Company's retiree welfare plans (including retiree medical plans)
with respect to Retained Employees.
Loral Space represents and warrants to the Company that (i) except as
expressly provided in the Globalstar Bank Guarantee (as amended pursuant to
the Distribution Agreement), 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 assets of the Company other
than the Loral Space Assets (such assets the "Retained Assets") will be bound
by or subject to) any of the Loral Space Liabilities or any Loral Space
indebtedness, (ii) there are no intercompany agreements between the Company
and the Retained Subsidiaries, on the one hand and Loral Space and the Loral
Space Companies on the other in effect as of the date of the Distribution
Agreement, 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 the Distribution Agreement, the Tax Sharing
Agreement (as defined below) or the Stockholders Agreement (as defined below),
(iii) there are no Loral Space Assets which have been used within the Retained
Business within one year prior to the date of the Distribution Agreement,
other than those Loral Space Assets which are listed on the Disclosure
Schedule to the Distribution Agreement, (iv) except as set forth in the
Disclosure Schedule to the Distribution Agreement neither Loral Space nor any
Loral Space Company will, 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 warrants to acquire equity of GTL or Globalstar (as
the case may be), which warrants will be on the terms and conditions described
in 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 (the "Globalstar Warrant Memorandum") and
shall otherwise be on such terms and conditions as are customary to
transactions of a similar nature.
Except as otherwise specified by Loral Space prior to the date on which the
Purchaser accepts for payment and pays for Shares tendered pursuant to the
Offer (the "Offer Purchase Date"), the executive officers of the Company shall
be the executive officers of Loral Space on and after the Distribution Date.
Effective as of the
22
Distribution Date, (a) those current and former officers and employees of the
Company, other than the Loral Space Employees (as defined below) (the
"Retained Employees") who are employed by the Company or any of its
subsidiaries immediately prior to the Distribution Date will become employees
of the Company in the same capacities as then held by such employees (or in
such other capacities as the Company will determine in its sole discretion)
and (b) those persons who are employed as officers or employees of Loral Space
and the Loral Space Companies immediately prior to or effective as of the
Distribution Date and all former officers and employees of Loral Space, any
Loral Space Company or one Loral Space Business ("Loral Space Employees")
together with those persons whose primary employment is with the Loral Space
Business, who are employed by the Company or any of its subsidiaries
immediately prior to the Distribution Date will become employees of Loral
Space in the same capacities as then held by such employees (or in such other
capacities as Loral Space will determine in its sole discretion).
Prior to the Spin-Off, the Company will establish a rabbi trust or trusts
for the benefit of participants in the Company's Supplemental Executive
Retirement Plan ("SERP") and will deposit in such rabbi trust or trusts an
amount at least equal to the present value of the accrued benefits under the
SERP. This amount is not expected to exceed $11 million. The liabilities for
the accrued benefits under the SERP with respect to Loral Space Employees, and
any assets held in the rabbi trust or trusts relating to such liabilities,
will be transferred to Loral Space as soon as practicable after the
Distribution Date.
Each of the parties agrees that except as otherwise expressly provided in
Article IV of the Distribution Agreement, all existing intercompany agreements
in effect immediately prior to the Distribution Date will not be deemed
altered, amended or terminated as a result of the Distribution Agreement or
the consummation of the transactions contemplated by the Distribution
Agreement and will otherwise remain in effect immediately after giving effect
to the Restructuring.
In addition to any indemnification required by Articles II, VI and VIII of
the Distribution Agreement, subject to the terms and conditions set forth
therein, from and after the Distribution Date, Loral Space 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 resulting from, directly or indirectly, (i) any
misrepresentations or breach of warranty made by or on behalf of Loral Space
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 the
Distribution Agreement or the Stockholders Agreement (as defined in this
Section 10), (ii) any breach of any agreement or covenant under the
Distribution Agreement or the Stockholders Agreement on the part of Loral
Space or, on or prior to the Offer Purchase Date, on the part of the Company,
(iii) any and all Loral Space Liabilities, (iv) the conduct of the Loral Space
Business or any part thereof on, prior to or following the Distribution Date,
(v) any transfer of Loral Space Assets to, or assumption of Loral Space
Liabilities by, Loral Space or any Loral Space Company in accordance with the
Distribution 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 the Distribution Agreement), (vi) any
indemnifiable loss resulting from any claims that any statements or omissions
relating to or describing directly or indirectly, Loral Space, any Loral Space
Company, the Loral Space Business, any Loral Space Asset or any Loral Space
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 the Distribution Agreement (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 the Distribution Agreement and the
transactions contemplated thereby), or (B) in any document(s) filed with the
Commission by Loral Space or any Loral Space 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 the Distribution Agreement and the transactions
contemplated thereby), which, in the case of either clause (A) or (B) above,
are false or misleading with respect
23
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 Loral Space to obtain any final order or other consent or
approval of the FCC with respect to any of the transactions contemplated
pursuant to either the Distribution Agreement or the Merger Agreement and
(viii) any Excluded Indemnifiable Losses (as defined below). Notwithstanding
the foregoing, Loral Space's indemnification obligations pursuant to the
Distribution Agreement will not in any event include any indemnifiable losses
arising out of or relating to litigation relating to the Offer and the
transactions contemplated thereby, 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 Loral Space or any of its affiliates in the documents
referred to in clause (vi) above or (b) any business activities, assets or
liabilities of Loral Space, any of the Loral Space Companies or the Loral
Space Business.
Notwithstanding Loral Space's obligations to indemnify Parent Indemnified
Parties described above, Loral Space shall be obligated to indemnify the
Parent Indemnified Parties only for those indemnifiable losses under clauses
(i), (ii) or (vi) of the immediately preceding paragraph as to which the
Parent Indemnified Parties have given Loral Space 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 the immediately preceding paragraph; provided further that claims with
respect to breaches of covenants and agreements set forth in the Distribution
Agreement or in the Stockholders Agreement will 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 Loral Space pursuant to the Distribution Agreement of any
matter which would be the basis for a claim of indemnification by such Parent
Indemnified Party pursuant to the immediately preceding paragraph, such Parent
Indemnified Party will 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.
In addition to any indemnification required by Articles II, VI and VIII of
the Distribution Agreement, subject to the terms and conditions set forth
therein, from and after the Distribution Date, the Company will indemnify,
defend and hold harmless Loral Space, each Loral Space Company and each of
their respective directors, officers, employees, representatives, advisors,
agents and affiliates (collectively, the "Loral Space Indemnified Parties")
from, against and in respect of any and all indemnifiable losses of the Loral
Space Indemnified Parties arising out of, relating to or resulting from,
directly or indirectly, (i) any breach of the Distribution Agreement or any
agreement or covenant set forth in the Distribution 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
liabilities of the Company and the Retained Subsidiaries (such liabilities,
the "Retained Liabilities"), (iii) the conduct of the businesses of the
Company, the Retained Subsidiaries and 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 of the
Distribution Agreement (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, and Retained Subsidiary,
Loral Space, any Loral Space Company or any of their respective affiliates,
representatives or advisors), or (C) in any other document(s) filed after the
date of the Distribution Agreement by Parent or the Purchaser with the
Commission 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 of the Distribution Agreement 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
24
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
litigation relating to the Offer and the transactions contemplated thereby
(other than Excluded Indemnifiable Losses). Notwithstanding the foregoing and
anything to the contrary in the Distribution Agreement or any other agreement
to be entered into pursuant to the Distribution Agreement, the Company shall
not be required to indemnify, defend and hold harmless any Loral Space
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
of the Distribution Agreement (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.
Notwithstanding the Company's obligations to indemnify the Loral Space
Indemnified Parties described in the preceding paragraph, the Company will be
obligated to indemnify the Loral Space Indemnified Parties only for those
Indemnifiable Losses under Clause (i) and (iv) of the immediately preceding
paragraph as to which the Loral Space 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 will be no
corresponding time limitation with respect to any Indemnifiable Losses arising
under clauses (ii) and (iii) of the immediately preceding paragraph).
Notwithstanding the foregoing, if on or before the expiration of such
indemnification period any Loral Space Indemnified Party has given notice to
the Company of any matter which would be the basis for a claim of
indemnification by such Loral Space Indemnified Party pursuant to the
immediately preceding paragraph, such Loral Space Indemnified Party will 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.
THE TAX SHARING AGREEMENT
Pursuant to a tax sharing agreement, to be entered into prior to the
consummation of the Offer, between Parent, Purchaser, the Company and Loral
Space (the "Tax Sharing Agreement"), Parent generally has agreed, among other
things, to file all tax returns with respect to, and to pay all taxes imposed
upon or attributable to, the Company or the Retained Subsidiaries for all
taxable periods, including the taxes incurred in connection with the transfers
of the Loral Space Assets to Loral Space and the Spin-Off Loral Space. Loral
Space generally has agreed, among other things, to file all tax returns with
respect to Loral Space or the Loral Space Companies for all taxable periods
beginning after the Distribution Date and to pay all taxes imposed upon or
attributable to Loral Space or the Loral Space Companies for all taxable
periods. The Tax Sharing Agreement will become effective only upon
consummation of the Offer.
The foregoing summary of the Tax Sharing Agreement does not purport to be
complete and is qualified in its entirety by reference to the text of the Tax
Sharing Agreement, a copy of which is filed as Exhibit 9 hereto and is
incorporated herein by reference.
THE RIGHTS AGREEMENT
Pursuant to the Rights Agreement, on January 7, 1996 the Board of Directors
of the Company declared a dividend distribution of one Right for each share of
Common Stock outstanding at the close of business on January 22, 1996 (the
"Rights Record Date") and with respect to the Common Stock issued thereafter
until the Rights Distribution Date (as defined below) and, in certain
circumstances, with respect to Common Stock issued after the Distribution
Date. Except as set forth below, each Right, when it becomes exercisable,
entitles the registered holder to purchase from the Company a unit consisting
initially of one one-thousandth of a share (a "Unit") of Series A Preferred
Stock, par value $1.00 per share (the "Rights Preferred Stock"), of the
Company at a Purchase Price of $180 per Unit, subject to adjustment (the
"Rights Purchase Price"). The description and terms of the Rights are set
forth in the Rights Agreement.
25
Initially, the Rights were and are attached to all certificates representing
shares of Common Stock then outstanding, and no separate certificates
evidencing the Rights (the "Rights Certificates") were or have been
distributed. The Rights will separate from the Common Stock and a "Rights
Distribution Date" will occur upon the earlier of (i) ten days (or such later
date as the Board shall determine) following public disclosure that a person
or group of affiliated or associated persons has become an "Acquiring Person"
(as defined below), or (ii) ten business days (or such later date as the Board
shall determine) following the commencement of a tender offer or exchange
offer that would result in a person or group becoming an "Acquiring Person".
Except as set forth below, an "Acquiring Person" is a person or group of
affiliated or associated persons who has acquired beneficial ownership of 20%
or more of the outstanding shares of Common Stock. The term "Acquiring Person"
excludes (i) the Company, (ii) any subsidiary of the Company , (iii) any
employee benefit plan of the Company or any subsidiary of the Company or (iv)
any person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan.
Until the occurrence of the Rights Distribution Date, (i) the Rights will be
evidenced by the Common Stock certificates and will be transferred with and
only with such Common Stock certificates, (ii) new Common Stock certificates
issued after the Rights Record Date will contain a notation incorporating the
Rights Agreement by reference, and (iii) the surrender for transfer of any
certificates for Common Stock outstanding will also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate.
Pursuant to the Rights Agreement, the Company reserves the right to require
prior to the occurrence of a Triggering Event (as defined below) that, upon
any exercise of Rights, a number of Rights be exercised so that only whole
shares of Preferred Stock will be issued.
As soon as practicable after the occurrence of the Rights Distribution Date,
Rights Certificates will be mailed to holders of record of Common Stock as of
the close of business on the Rights Distribution Date and, thereafter, the
separate Rights Certificates alone will represent the Rights. Except in
certain circumstances specified in the Rights Agreement or as otherwise
determined by the Board of Directors, only shares of Common Stock issued prior
to the Rights Distribution Date will be issued with Rights.
The Rights are not exercisable until the occurrence of the Rights
Distribution Date. The Rights will expire at the close of business on January
22, 2006, unless extended or earlier redeemed by the Company as described
below.
In the event that, at any time following the Rights Distribution Date, a
person becomes an Acquiring Person, each holder of a Right will thereafter
have the right to receive, upon exercise of the Right, Common Stock (or, in
certain circumstances, cash, property or other securities of the Company)
having a value equal to two times the exercise price of the Right.
Notwithstanding the foregoing, following the occurrence of the event set forth
in this paragraph, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person will be null and void and nontransferable and any holder of any such
Right (including any purported transferee or subsequent holder) will be unable
to exercise or transfer any such Right. For example, at an exercise price of
$200 per Right, each Right not owned by an Acquiring Person (or by certain
related parties) following an event set forth in this paragraph would entitle
its holder to purchase $400 worth of Common Stock (or other consideration, as
noted above) for $200. Assuming that the Common Stock had a per share value of
$40 at such time, the holder of each valid Right would be entitled to purchase
ten shares of Common Stock for $200.
In the event that, at any time following the date on which there has been
public disclosure that, or of facts indicating that, a person has become an
Acquiring Person (the "Stock Acquisition Date"), (i) the Company is acquired
in a merger or other business combination transaction in which the Company is
not the surviving corporation (other than a merger which follows an offer
described in the preceding paragraph), or (ii) 50% or more of the Company's
assets or earning power is sold, mortgaged or transferred, each holder of a
Right (except Rights which previously have been voided as set forth above)
shall thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right. The events set forth in this paragraph and in the preceding paragraph
are referred to as the "Triggering Events."
26
The Purchase Price payable, and the number of Units of Rights Preferred
Stock or other securities or property issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the
event of a stock dividend on, or a subdivision, combination or
reclassification of, the Rights Preferred Stock, (ii) if holders of Rights
Preferred Stock are granted certain rights or warrants to subscribe for Rights
Preferred Stock or convertible securities at less than the current market
price of the Rights Preferred Stock, or (iii) upon the distribution to holders
of the Rights Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Rights Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Rights
Purchase Price. No fractional Units will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Rights
Preferred Stock on the last trading date prior to the date of exercise.
Because of the nature of the Rights Preferred Stock's dividend and
liquidation rights, the value of the one one-thousandth interest in a share of
Rights Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of Common Stock. Shares of Rights Preferred
Stock purchasable upon exercise of the Rights will not be redeemable. Each
share of Rights Preferred Stock will be entitled to a quarterly dividend
payment of 1,000 times the dividend declared per share of Common Stock. In the
event of liquidation, each share of Rights Preferred Stock will be entitled to
a $1.00 preference and, thereafter the holders of the shares of Rights
Preferred Stock will be entitled to an aggregate payment of 1,000 times the
aggregate payment made per share of Common Stock. Each share of Rights
Preferred Stock will have one vote, voting together with the shares of Common
Stock. These rights are protected by customary antidilution provisions.
At any time until ten days following the Stock Acquisition Date, the Company
may redeem the Rights in whole, but not in part, at a price (the "Redemption
Price") of $.0001 per Right (payable in cash Common Stock or other
consideration deemed appropriate by the Board of Directors) by resolution of
the Board of Directors. The redemption of the Rights may be made effective at
such time, on such basis, and with such conditions as the Board of Directors
in its sole discretion may establish. Immediately upon such action of the
Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a shareholder of the Company including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to shareholders or to, shareholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by
resolution of the Company's Board of Directors. After the Rights Distribution
Date, the provisions of the Rights Agreement may be amended by resolution of
the Company's Board of Directors in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person or its affiliates or
associates), or to shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
Because (i) the Offer is an offer to purchase all of the outstanding Shares
and the Board has unanimously determined that the Offer described herein is
fair to and in the best interests of the Company's shareholders and (ii) on
January 7, 1996, the Board approved amending the Rights Agreement in
accordance with the terms of the Merger Agreement, the acquisition of Shares
pursuant to the Offer or the consummation of the Merger will not (a) cause any
person to become an Acquiring Person or, (b) cause a Rights Distribution Date
or a Stock Acquisition Date to occur or cause or require the distribution of
any Rights Certificates to the record holders of Common Stock or, (c) give
rise to a Triggering Event.
27
The foregoing summary of the Rights Agreement does not purport to be
complete and is qualified in its entirety by reference to the text of the
Rights Agreement and Amendment No. 1 thereto, copies of which are filed as
Exhibit 10 and Exhibit 11 hereto, respectively, and is incorporated herein by
reference.
THE STOCKHOLDERS AGREEMENT
On or prior to the Distribution Date, the Company and Loral Space will enter
into a Stockholders Agreement (the "Stockholders Agreement"), which
establishes, among other things, certain conditions with respect to the
relationship between Loral Space, on the one hand, and the Company and its
affiliates (the "Subject Stockholders"), on the other hand. The Stockholders
Agreement limits the ability of the Subject Stockholders, during the term of
the Stockholders Agreement, to acquire any voting securities or assets of, or
solicit proxies or make a public announcement of a proposal for any
extraordinary transaction with respect to, Loral Space. The Stockholders
Agreement provides that, subject to certain exceptions, the Subject
Stockholders are obligated to vote any equity securities of Loral Space, at
the option of the Subject Stockholders, either (i) as recommended by the Board
of Directors or management of Loral Space, or (ii) in the same proportions as
the holders of equity securities of Loral Space vote their securities. The
Stockholders Agreement also limits the ability of the Subject Stockholders to
transfer the equity securities of Loral Space held by the Subject Stockholders
except pursuant to a registered public offering or the provisions of Rule 144
under the Exchange Act or pursuant to certain permitted transfers. The
Stockholders Agreement provides that if, within one year following the date
thereof, the Subject Stockholders vote against certain business combination
transactions, Loral Space shall have the right to purchase from the Subject
Stockholders all of the equity securities of Loral Space held by the Subject
Stockholders at an agreed upon price. The Stockholders Agreement also provides
that if, within one year following the date thereof certain transactions
occur, the Company shall have the right to purchase from Loral Space
(including any successor to the rights and obligations of Loral Space) a
certain number of shares of Loral Space (or such successor) at an agreed upon
price. The Stockholders Agreement also provides that in the event of certain
transactions, the Subject Stockholders shall have the right to require Loral
Space to purchase the Globalstar Warrants (as defined in the Stockholders
Agreement) for an agreed upon price. The Stockholders Agreement further
provides that under certain circumstances and subject to certain conditions
the Subject Stockholders may require Loral Space to register under the
Securities Act any Loral Space securities held by the Subject Stockholders.
The Stockholders Agreement provides, subject to certain exceptions, that, in
the event of a tender offer, if Subject Stockholders wish to sell or transfer
any Loral Space securities pursuant to the tender offer the Subject
Stockholders must first offer the shares for sale to Loral Space. The term of
the Stockholders Agreement will continue until the earlier of (x) the date on
which the voting power of the equity securities owned by the Subject
Stockholders represents, on a fully-diluted basis, less than five percent (5%)
of the total voting power, (y) the seventh anniversary of the date of the
agreement, or (z) a change of control in Loral Space.
The foregoing summary of the Stockholders Agreement does not purport to be
complete and is qualified in its entirety by reference to the text of the
Stockholders Agreement, a copy of which is filed as Exhibit 12 hereto and is
incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has unanimously (i) approved the Merger Agreement,
the Distribution Agreement and the transactions contemplated thereby, (ii)
determined that the Offer, the Merger and the Spin-Off are fair to
and in the best interests of the shareholders of the Company and (iii)
determined to recommend acceptance of the Offer and approval and adoption of
the Merger Agreement and the Merger by the shareholders of the Company.
(b)(1) BACKGROUND
The Company has been able to achieve substantial growth and profitability
over the past ten years through a strategy of strategic acquisitions and
internal growth. This strategy was aided by the consolidation of the defense
industry and the availability of acquisition opportunities at reasonable
prices.
28
As presently constituted, the Company principally depends on sales of
advanced electronic systems, components and services to United States and
foreign governments for defense-related applications. Since the end of the
Cold War, the needs of the Company's primary customer, the United States
Department of Defense, have changed significantly, military budgets have been
sharply reduced and, in the future, expenditures in the defense area are
likely to be inhibited by the same factors. At the same time, the Company's
ability to grow through acquisitions is less certain. Due to rapid
consolidation in the defense industry, the number of suitable potential
acquisition candidates is dwindling while the cost of such potential
acquisitions has increased substantially. As a result, the Company's
opportunities for continued growth through acquisitions are already under
substantial and continuing pressure.
The Company has also been faced with increased competition from larger
competitors, particularly prime contractor suppliers of platform systems such
as aircraft, ships and combat vehicles. In particular, there has been a trend
toward vertical integration in the defense industry, with platform
manufacturers integrating backward through the acquisition of defense
electronics companies, a trend which the Company believes will continue, and
which would have the effect of placing the Company at a competitive
disadvantage as the prime contractors retain more and more subsystem work.
Alongside its strategy of growth through defense and government systems
integration businesses, the Company has pursued a parallel strategy of
leveraging the capabilities of its satellite manufacturing affiliate, SS/L,
and the resources of SS/L's strategic partners to integrate forward into
satellite-based telecommunications operations. The Company's most notable and
advanced effort in this regard is the Globalstar low-earth orbit worldwide
telecommunications system, which to date has raised the majority of its
projected $2 billion in construction financing requirements, in part through
its publicly-traded affiliate, Globalstar Telecommunications Limited.
Over the last several years, the Company has considered how the changing
nature of the defense industry has affected the Company and its markets and
has considered several strategies in order to maximize shareholder value,
maintain and enhance its position within the United States military/industrial
base and maximize the security, career and employment opportunities of its
employees. Recognizing the high growth potential of its space and
telecommunications businesses, their high capital requirements, and the
differing segments of the capital market to which the Company's defense and
communications businesses appealed, the Company developed a long-term
strategic plan to separate these two businesses and thereby unlock for
shareholders the values inherent in Globalstar, SS/L and future possible
satellite telecommunications, direct broadcast and broadband data operating
ventures.
On July 31, 1995, representatives of Bear, Stearns & Co. Inc. ("Bear
Stearns") met with Mr. Bernard L. Schwartz, the Chairman and Chief Executive
Officer of the Company, to review certain recent developments in the defense
industry, including certain current trends and opportunities with respect to
the consolidation of the defense industry. At this meeting, Mr. Schwartz
stated to the Bear Stearns representatives that if Parent were interested in
exploring the possibility of a transaction between the two companies, he would
be interested as well.
On September 14, 1995, Mr. Augustine and Mr. Schwartz were attending a
meeting at the Pentagon with certain government officials on an unrelated
matter. At this September 14th meeting, Mr. Augustine and Mr. Schwartz briefly
discussed the general topic of a possible transaction between Parent and the
Company and agreed to meet at a subsequent date to discuss the matter further.
During the course of discussions between the parties continuing through the
month of October, the parties discussed a stock-for-stock transaction whereby
the Company would combine its defense and systems integration businesses with
Parent. In particular, the parties discussed valuation levels in relation to a
possible acquisition of the Company's defense and systems integration
businesses for Parent stock valued at $32 per share in a stock-for-stock
transaction (assuming pooling-of-interests accounting treatment). During this
time, the Company consulted with its legal advisors as to a variety of issues
29
concerning a possible spin-off to its shareholders of a new company that would
own and manage the Company's space and telecommunications businesses.
At a meeting on October 31, 1995, and at later meetings in early November,
1995, representatives of both parties, including Messrs. Schwartz, Tellep and
Augustine, met to further discuss the possibility of such a transaction. The
parties discussed certain management and organizational issues, as well as
certain broad transaction valuation parameters. Messrs. Schwartz, Tellep and
Augustine agreed that representatives of the two companies should meet to
continue discussions.
At subsequent meetings later in November, members of the management of
Parent and the Company, together with their respective legal counsel and
representatives of Bear Stearns, met to discuss possible transaction
structures and various financial, operational, accounting and legal issues.
The discussions at these meetings focused initially on structuring the
proposed transaction as a stock-for-stock merger, but due to pooling-of-
interests accounting and other concerns raised by the proposed Spin-Off, the
parties agreed to pursue a transaction in which the Company's shareholders
would receive cash and Shares of the company now known as Loral Space. The
parties also discussed the possibility of Parent acquiring a 20% equity
interest in Loral Space.
On December 4, 1995, Parent and the Company entered into a Confidentiality
and Standstill Agreement (the "Confidentiality and Standstill Agreement"),
relating to, among other things, the information to be provided by each
company to the other and limiting the ability of each party for three years to
acquire any voting securities or assets of, or solicit proxies or make a
public announcement of a proposal for any extraordinary transaction with
respect to, the other party. Parent and the Company subsequently obtained
various financial and other information regarding each other's business.
At a meeting on December 5, 1995, Messrs. Schwartz, Tellep, Augustine, and
Mr. Frank C. Lanza, the President and Chief Operating Officer of the Company,
met to further discuss the proposed transaction between Parent and the
Company, and various operational and management issues related thereto. On the
same day, other officers and legal representatives of the two companies and
Bear Stearns met to discuss structure and business issues and commenced
financial due diligence.
On December 7, 1995, at a meeting of the Board, Mr. Schwartz informed the
Board of the current discussions between senior management of the Company and
members of Parent's management. After Mr. Schwartz presented the transaction,
there was a discussion of the transaction's merits. At this meeting the Board
discussed and adopted the Rights Plan and authorized the Executive Committee
to set certain terms thereof and to implement the plan. The Board also
authorized management to approach Lazard Freres & Co. LLC ("Lazard Freres")
regarding an engagement to advise the Company with respect to the proposed
transaction with Parent and to provide a fairness opinion in regard thereto
and also authorized management to approach Lehman Brothers Inc. ("Lehman
Brothers") regarding an engagement to advise the Company with respect to the
proposed transaction, and in particular, with respect to Loral Space and the
proposed Spin-Off. Following the meeting, management contacted Lazard Freres
and Lehman Brothers regarding such engagements.
At meetings held in early December, Messrs. Schwartz, Tellep and Augustine,
together with representatives of Bear Stearns and counsel, continued their
discussions as to specific organizational and operational issues related to
the proposed transaction, but ultimately acknowledged that there were still
very significant issues that were not yet resolved and that it might therefore
be advisable to suspend the current discussions pending further study.
On December 12, 1995, the Board held a regular meeting. Among other items,
the Board discussed the status of negotiations with Parent. Mr. Schwartz
indicated that the parties had not agreed upon price and certain management
and other issues.
Following renewed valuation discussions between Messrs. Schwartz, Tellep and
Augustine and representatives of Bear Stearns, during the week commencing
December 18, 1995, Parent and its legal advisers delivered initial drafts of
the principal transaction documents to the Company and its legal advisers, and
over the next two weeks the parties and their respective legal counsel met to
discuss and negotiate with respect to the principal transaction documents.
30
At subsequent meetings on December 21, 1995 and December 22, 1995 involving
Messrs. Schwartz, Tellep and Augustine and various other members of the
management of both Parent and the Company, along with representatives of Bear
Stearns and certain legal counsel to Parent and the Company, the parties
continued to discuss the structure of the proposed transaction, various
operational and management issues relating to the transaction, and various
price, timing and other significant terms and conditions related thereto.
Although progress was made at these latter meetings with respect to a number
of outstanding issues, many issues remained unresolved.
Commencing on January 2, 1996, members of Parent's management met with
members of the Company's management to review various information relating to
the Company and to conduct a detailed due diligence review of the Company's
defense and systems integration business. In addition, during this period,
legal representatives of each company and various outside financial and
accounting advisors of Parent and the Company met to conduct business,
financial, accounting and legal due diligence, to discuss outstanding legal
and other issues and to continue to negotiate the terms of the Merger
Agreement and the Merger, the Distribution Agreement and the other transaction
documents.
Letter agreements with Lazard Freres and Lehman Brothers formally engaging
them were entered into on January 4 and 5, 1996, respectively.
On January 5, 1996, the Board met to discuss the proposed transaction. At
that meeting, representatives of Lazard Freres gave a presentation analyzing
the financial terms of the proposed transaction, and representatives of Lehman
Brothers gave a presentation analyzing Loral Space and the proposed Spin-Off.
The Company's legal counsel summarized for the Board the legal aspects of the
proposed transaction.
At a special meeting of the Board on January 7, 1996, the Board received
summaries of their earlier presentations from representatives of Lazard Freres
and Lehman Brothers and received the written fairness opinion of Lazard
Freres. The Board deliberated as to the transaction and its merits and
effects. After consideration of the presentations made by the Company's
management and its financial and legal advisers at the January 5 and January 7
meetings of the Board, the Board unanimously (i) approved the Merger
Agreement, the Distribution Agreement and the transactions contemplated
thereby, (ii) determined that the Offer, the Merger and the Spin-Off, taken as
a whole, are fair to and in the best interests of the shareholders of the
Company and (iii) determined to recommend acceptance of the Offer and approval
and adoption of the Merger Agreement and the Merger by the shareholders of the
Company.
On January 7, 1996, the Company was informed that the Parent Board had
unanimously approved the terms and conditions of the proposed transaction with
the Company, including the terms and conditions of the Merger Agreement, the
Distribution Agreement and the other transaction documents contemplated
thereby.
The parties executed the Merger Agreement and the Distribution Agreement as
of January 7, 1996 and publicly announced the transaction on January 8.
On January 12, 1996, Purchaser commenced the Offer.
(b)(2) REASONS FOR THE RECOMMENDATION
In reaching the conclusions and recommendations described above, the Board
considered a number of factors, including, without limitation, the following:
31
The proposed transaction provides a unique opportunity for the Company to
consolidate its defense and systems integration businesses with those of
Parent on very favorable terms, while refocusing the Company's future through
Loral Space on space-based telecommunications services and satellite design,
manufacture and systems integration.
The creation and financing of Loral Space in connection with the transaction
realized the important long-term strategy of the Board described above, and
was, therefore, a significant factor leading to the Board's approval and
recommendation of the transaction. Loral Space will emerge as a company with
the management and the financial and technical resources needed to complete
its current projects and to take advantage of the promising growth
opportunities present in the satellite and telecommunications services
businesses on a world-wide scale. In this regard, the Board considered the
benefits to Loral Space of the technology sharing arrangement included in the
Distribution Agreement. Loral Space will be permitted to purchase at cost
research and development, technological and technical consulting and support
services from all parts of Parent (subject to any applicable legal
constraints). In addition, Loral Space will continue its ongoing access to
certain intellectual property rights of the Company and its defense and
systems integration subsidiaries.
The proposed transaction will allow the Company to accomplish this
fundamental redirection of its business on terms which are very favorable to
the Company's shareholders in a transaction that has also been structured to
take all due account of the interests of Company employees and the communities
in which the Company operates. In addition, the proposed transaction preserves
for Company shareholders the growth potential of Loral Space and enhances its
prospects by affording it sufficient liquidity to ensure the completion of the
Globalstar system and support other satellite telecommunications ventures.
In considering the transaction, the Board considered the presentations of
Lehman Brothers with respect to Loral Space and of Lazard Freres as to the
financial terms of the proposed transaction and the written opinion of Lazard
Freres that the aggregate consideration to be received by holders of Shares in
the Offer, the Merger and the Spin-Off is fair to the holders of Shares from a
financial point of view. Lazard Freres's presentation included a comparative
analysis of the financial terms of the transaction with those of comparable
transactions. A copy of the opinion of Lazard Freres is attached hereto as
Schedule III and filed as Exhibit 14 and incorporated herein by reference.
SHAREHOLDERS ARE URGED TO READ THE OPINION OF LAZARD FRERES IN ITS ENTIRETY.
The Board concluded that the value of the consideration to be received by
the shareholders, including the cash price to be paid to the shareholders of
the Company in connection with the Offer and the Merger, taken together with
the shares of Loral Space stock to be received pursuant to the Spin-Off,
represented a substantial premium over the recent market prices for Shares of
Common Stock of the Company. The Board also concluded that the financial terms
of the proposed transaction were very favorable when compared to the
consideration received by shareholders in recent comparable transactions in
the defense industry.
The Board noted that it is contemplated that, following consummation of the
transaction, Mr. Bernard L. Schwartz would become Vice-Chairman of Parent's
Board of Directors and Mr. Frank C. Lanza would become a director and serve as
one of two executive vice presidents and co-COO's of Parent with
responsibility for the Parent business segment that will comprise Parent's
existing electronics, systems integration, information and technical services
businesses, including those Company businesses to be acquired in the
transaction. The Board concluded that these provisions offered the best
available reasonable assurance that the Company's defense and systems
integration personnel and facilities would be integrated with those of Parent
in a fair and reasonable manner from the point of view of the Company's
transferred employees and the communities in which its defense and systems
integration business operates.
The Board did not assign relative weights to the factors or determine that
any factor was of particular importance. Rather, the Board viewed its position
and recommendations as being based on the totality of the information
presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company entered into a letter agreement (the "Lazard Advisory
Agreement") with Lazard Freres dated January 4, 1996, pursuant to which Lazard
Freres agreed to act as financial advisor to the Company in connection
32
with a potential transaction involving the possible sale of a substantial
interest in the Company or of a substantial portion of the Company's assets to
another corporation or other business entity, which transaction may take the
form of a merger or a sale of assets or equity securities or other interests
and may also include the retention of certain assets and liabilities by the
Company's shareholders (a "transaction"). As financial advisor, Lazard Freres
agreed, among other things, to assist the Company as necessary to analyze the
business and financial condition of the Company, formulate appropriate
strategy and structural alternatives, advise in connection with negotiations
and aid in the consummation of a transaction.
Pursuant to the Lazard Advisory Agreement, the Company agreed to pay Lazard
Freres a cash fee equal to $12 million upon the earlier to occur of (a) the
acquisition by a buyer of beneficial ownership of more than 50% of the
Company's outstanding stock (or other common equity interest equivalent
thereto) or 50% of the Company's assets and (b) consummation of a transaction,
either during the term of the Lazard Advisory Agreement or during the one-year
period following the expiration or termination thereof. 25% of such fee is
payable upon the announcement of a definitive agreement. If a transaction is
not completed, the Company agreed to reimburse Lazard Freres for its out-of-
pocket expenses, including fees and expenses of legal counsel. In addition,
pursuant to a letter agreement dated January 5, 1996, the Company also has
agreed to indemnify Lazard Freres against certain liabilities, including fees
and expenses of legal counsel, whether or not a transaction is completed.
Lazard Freres has provided certain investment banking services to the
Company from time to time for which it has received customary compensation.
Lazard Freres has also in the past provided financial advisory and financing
services to Parent unrelated to the foregoing proposed transactions and has
received fees for the rendering of such services. In the ordinary course of
its business, Lazard Freres may from time to time effect transactions and hold
positions in securities of the Company and Parent.
The Company entered into a letter agreement (the "Lehman Advisory
Agreement") with Lehman Brothers dated January 5, 1996, pursuant to which
Lehman Brothers agreed to provide financial advisory services to the Company
in connection with the possible sale of the Company, or a substantial interest
in the Company or a substantial portion of the Company's assets to another
business entity, and in particular in connection with the transaction. In this
connection, Lehman Brothers agreed, among other things, to provide general
business and financial advice to the Company with regard to the transaction,
consult with and advise the Company concerning the transaction and, if so
requested by the Company, participate on the Company's behalf in negotiations
related thereto, advise the Company and Loral Space generally with respect to
valuation, capital structure and financing for Loral Space and advise the
Company and Loral Space concerning the distribution of Loral Space common
stock to the Company's shareholders.
Pursuant to the Lehman Advisory Agreement, the Company agreed to pay Lehman
Brothers a fee of $12 million payable if a transaction occurs either (i)
during the term of Lehman Brothers' engagement or (ii) at any time during a
period of 12 months following the effective date of termination or expiration
of Lehman Brothers' engagement, with such fee payable 25% upon the
announcement of a definitive agreement with respect to a transaction and the
remaining 75% upon the earlier to occur of (a) the purchase of 50% of the
Company's outstanding common stock or assets and (b) the consummation of a
sale transaction. The 25% of the fee paid upon announcement of a definitive
agreement shall be returned by Lehman Brothers if 50% of the Company's
outstanding stock or assets are not sold and a sale transaction is not
consummated within a period of 12 months following termination or expiration
of Lehman Brothers' engagement. The Company also agreed to reimburse Lehman
Brothers for its reasonable expenses, including professional and legal fees
and disbursements, and to indemnify Lehman Brothers against certain
liabilities, including legal fees and disbursements, whether or not a sale
transaction is completed.
Certain Merchant Banking Partnerships affiliated with Lehman Brothers (the
"Lehman Partnerships") own 731.85 shares of Series S Preferred Stock of Loral
Aerospace Holdings, Inc. ("LAH"), representing approximately an 18% indirect
beneficial interest in LAH's 51%-owned affiliate, SS/L. Each share of Series S
33
Preferred Stock represents a beneficial interest in one share of common stock
of SS/L. If the Lehman Partnerships continue to hold Series S Preferred Stock
after January 1, 1998, or after a change of control of the Company, they will
have the right to request that the Company purchase their Series S Preferred
Stock at an appraised fair market value ("Appraised Value"). In such event,
the Company may elect to purchase such Series S Preferred Stock at Appraised
Value, or, if the Company elects not to purchase the stock, the Lehman
Partnerships may require the combined interests of the Company and the Lehman
Partnerships in SS/L to be sold to a third party. It is a condition to the
transaction that the Lehman Partnerships exchange their shares of Series S
Preferred Stock in LAH for equity securities in Loral Space which will have
terms substantially equivalent to those of the Series S Preferred Stock.
The Lehman Partnerships also have an aggregate equity interest of
approximately 48% in K&F Industries, Inc. ("K&F"), a corporation of which Mr.
Bernard L. Schwartz, Chairman and Chief Executive Officer of the Company, is a
27% stockholder and the Company is a 22% stockholder, and which acquired the
Company's Aircraft Braking Systems and Engineered Fabrics divisions in 1989.
Following the transaction, Loral Space will own the Company's 22% equity
interest in K&F.
From time to time, Lehman Brothers has provided certain investment banking,
underwriting, financial advisory and other services to the Company and its
affiliates (including Globalstar Telecommunications Limited, for which Lehman
Brothers acted as lead managing underwriter for its initial public offering in
February 1995), for which it has received customary compensation. Lehman
Brothers also has in the past provided, and is currently providing, financial
advisory and financing services to Parent unrelated to the foregoing proposed
transactions, and has received, and will receive, fees for the rendering of
such services. Lehman Brothers may trade debt and equity securities of the
Company, Parent, Globalstar and K&F in the ordinary course of its business for
its own account and the account of its customers and, accordingly, may at any
time hold a long or short position in such securities.
Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Spin-Off, the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth in Schedule II hereto, no transactions in the Shares
have been effected during the past 60 days by the Company or, to the best of
the Company's knowledge, by any executive officer, director, affiliate or
subsidiary of the Company.
(b) To the best of the Company's knowledge, except for Shares the sale of
which may trigger liability for the holder(s) under Section 16(b) of the
Exchange Act, each executive officer, director and affiliate of the Company
currently intends to tender all Shares over which he or she has sole
dispositive power to the Purchaser.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth above or in Items 3(b) and 4(b), the Company is not
engaged in any negotiation in response to the Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or
any subsidiary of the Company; (iii) a tender offer for or other acquisition
of securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as set forth above or in Items 3(b) or 4(b) above, there are no
transactions, Board resolutions, agreements in principle or signed contracts
in response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
34
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board other than
at a meeting of the Company's shareholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1. Pages 10 through 13 of Loral Corporation's Proxy Statement dated
June 26, 1995 relating to its 1995 Annual Meeting of Stockholders.
Exhibit 2. Loral Supplemental Executive Retirement Plan.
Exhibit 3. Loral Corporation Supplemental Bonus Program.
Exhibit 4. Loral Corporation Supplemental Severance Program.
Exhibit 5. Form of Employment Protection Agreement between Loral Corporation
and executive officers of Loral.
Exhibit 6. Loral Corporation Employment Protection Plan.
Exhibit 7. Agreement and Plan of Merger dated as of January 7, 1996 among
Lockheed Martin Corporation, LAC Acquisition Corporation and Loral
Corporation.
Exhibit 8. Restructuring, Financing and Distribution Agreement dated as of
January 7, 1996 among Loral Corporation, certain of its
subsidiaries and Lockheed Martin Corporation.
Exhibit 9. Form of Tax Sharing Agreement by and among Loral Corporation,
Loral Space & Communications Ltd., Lockheed Martin Corporation and
LAC Acquisition Corporation.
Exhibit 10. Rights Agreement dated as of January 10, 1996 between Loral
Corporation and The Bank of New York, as Rights Agent.
Exhibit 11. Amendment No. 1 to Rights Agreement dated as of January 10, 1996
between Loral Corporation and The Bank of New York, as Rights
Agent.
Exhibit 12. Form of Stockholders Agreement between Loral Corporation and Loral
Space & Communications Ltd.
Exhibit 13. Confidentiality and Standstill Agreement dated December 4, 1995
between Loral Corporation and Lockheed Martin Corporation.
Exhibit 14. Opinion of Lazard Freres & Co. LLC dated January 7, 1996.*
Exhibit 15. Form of Letter to Shareholders of Loral Corporation dated January
12, 1996.*
Exhibit 16. Press Release issued by Loral Corporation and Lockheed Martin
Corporation on January 8, 1996.
--------
* Included in copies mailed to shareholders.
35
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: January 12, 1996
Loral Corporation
/s/ Michael B. Targoff
By: _________________________________
Name: Michael B. Targoff
Title: Senior Vice President and
Secretary
36
SCHEDULE I
LORAL CORPORATION
600 THIRD AVENUE
36TH FLOOR
NEW YORK, NEW YORK 10016
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
----------------
This Information Statement ("Information Statement") is being mailed on or
about January 12, 1996, as a part of the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record of
Common Stock at the close of business on or about January 12, 1996. You are
receiving this Information Statement in connection with the possible election
of persons designated by Parent to a majority of the seats on the Board of
Directors of the Company.
The Merger Agreement provides that in the event the Purchaser acquires at
least a majority of the Shares on a fully diluted basis pursuant to the Offer,
Parent shall be entitled to designate for appointment or election to the Board
upon written notice to the Company, such number of persons so that the
designees of the Parent (the "Parent Designees") constitute the same
percentage (but in no event less than a majority) of the Company's Board of
Directors (rounded up to the next whole number) as the percentage of Shares
acquired in connection with the Offer. Prior to consummation of the Offer, the
Board of Directors of the Company will obtain the resignation of such number
of directors as is necessary to enable such number of Parent Designees to be
so elected. Notwithstanding the foregoing, the parties have agreed to use
their respective best efforts to ensure that at least three of the members of
the Company's Board of Directors shall, at all times prior to the Effective
Time (as defined in Section 2.2 of the Merger Agreement) be, Continuing
Directors (as defined in Section 8.4 of the Merger Agreement).
The following information is based on the Company's Proxy Statement dated as
of June 26, 1995, and, except as indicated, such information is given as of
such date.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-
9.
The information contained in this Information Statement concerning Parent
has been furnished to the Company by Parent, and the Company assumes no
responsibility for the accuracy or completeness of such information.
INFORMATION WITH RESPECT TO THE COMPANY
OUTSTANDING VOTING STOCK
There were 173,068,379 shares of common stock, par value $.25 per share
("Common Stock"), of the Company outstanding on December 31, 1995 and each
share is entitled to one vote on each matter and provides the holder with
certain preferred stock purchase rights.
As of December 31, 1995, the only officer or Director owning 1% or more of
the Company's Common Stock was Bernard L. Schwartz, Chairman of the Board of
Directors and Chief Executive Officer of the Company, who owned beneficially
3,574,402 shares constituting approximately 2.0% of the Company's outstanding
voting securities. All Directors and current executive officers as a group (27
persons) owned beneficially 5,864,853 shares constituting approximately 3.3%
of outstanding voting securities.
I-1
Based upon filings made with the Company, the only reported 5% Stockholder as
of [June 16, 1995] is Fidelity Investments, FMR Corp. ("FMR") on behalf of
advisory accounts and/or investment companies. FMR reported ownership of
10,710,508 (6.3%) shares of the Company's Common Stock, as adjusted to reflect
the two-for-one stock split distributed on September 29, 1995. FMR represented
that the shares were acquired for investment purposes for managed accounts,
trusts or employee benefit plans.
BOARD OF DIRECTORS
The Company has three classes of Directors serving staggered three-year
terms. Class I currently consists of three Directors and Classes II and III
consist of four Directors. The terms of the Class I, Class II and Class III
Directors expire on the date of the Annual Meeting in 1998, 1996 and 1997,
respectively.
The Company has a standing Audit and Government Compliance Committee (the
"Audit Committee"), Nominating Committee, and Compensation and Stock Option
Committee (the "Compensation Committee"). The Audit Committee, which met three
times during fiscal 1995, is comprised of four members: Messrs. Hodes,
Ruderman, Shapiro and Stanton. The Audit Committee reviews and acts or reports
to the Board with respect to government procurement compliance matters as well
as various auditing and accounting matters, including the selection of the
Company's independent auditors, the accounting and financial practices and
controls of the Company, audit procedures and findings, and the nature of
services performed for the Company by, and the fees paid to, the independent
auditors. The Nominating Committee, which met once in fiscal 1995, is comprised
of Messrs. Kekst, Shapiro and Stanton. The Nominating Committee is chartered to
establish criteria for recommendations for director nominees and in connection
therewith, to consider the participation and contribution of current Directors.
The Nominating Committee does not generally accept nominees randomly received
from third parties, including Stockholders. The Compensation Committee, which
met twice during fiscal 1995, is comprised of four members: Messrs. Gittis,
Hodes, Kekst and Shapiro. The Compensation Committee reviews and provides
recommendations to the Board of Directors regarding executive compensation
matters. The Compensation Committee is also responsible for the administration
of the Company's Stock Option and Incentive Stock Purchase Plans, Restricted
Stock Purchase Plan and the Incentive Compensation Plan for Senior Executives.
The Board of Directors held seven meetings during fiscal 1995. No Director
attended fewer than 75% of the meetings of the Board of Directors and of its
committees. Directors are paid a fixed fee of $25,000 per year. Non-employee
Directors are also paid $6,000 for personal attendance at each meeting. Audit
Committee members are paid $2,000 per year and $1,000 per meeting. Compensation
Committee members are paid $500 per year. The Company provides certain life
insurance and medical benefits to certain non-employee Directors. For fiscal
1995 the value of these benefits was $13,565 for Mr. Gittis, $15,515 for Mr.
Hodes, $14,553 for Mr. Kekst, $14,223 for Mr. Ruderman, $12,928 for Mr. Shapiro
and $14,170 for Mr. Yankelovich. In addition, Mr. Shapiro received compensation
in the amount of $35,570 with respect to early cancellation of a prior life
insurance policy.
The Company has purchased insurance from the Reliance Insurance Company
insuring the Company against obligations it might incur as a result of its
indemnification of its officers and Directors for certain liabilities they
might incur, and insuring such officers and Directors for additional
liabilities against which they might not be indemnified by the Company. The
insurance expires on April 1, 1996, and costs $321,300. Pursuant to the New
York Business Corporation Law, the Company has entered into Indemnity
Agreements with its Directors and executive officers. The Indemnity Agreements
are intended to provide the full indemnity protection authorized by New York
law.
I-2
The following table provides certain relevant information as of June 26,
1995 concerning the Directors and their principal occupations:
[Download Table]
PRINCIPAL OCCUPATION AND SERVED AS DIRECTOR
NAME AGE DIRECTORSHIPS CONTINUOUSLY SINCE
---- --- ------------------------ ------------------
Bernard L. Schwartz(1).. 70 Chairman of the Board of 1972
(Class III) Directors and Chief
Executive Officer
Chairman of the Board of
Directors and Chief
Executive Officer of K&F
Industries, Inc.
Director of Globalstar
Telecommunications Limited,
Reliance Group Holdings,
Inc., and certain
subsidiaries, Sorema
International Holding N.V.,
First Data Corporation, and
Trustee of N.Y. University
Medical Center
Frank C. Lanza.......... 63 President and Chief 1981
Operating Officer
(Class II) Director of Globalstar
Telecommunications Limited
Howard Gittis........... 61 Director, Vice Chairman and 1990
(Class I) Chief Administrative
Officer of MacAndrews &
Forbes Holdings Inc.
Director of Andrews Group
Incorporated, Consolidated
Cigar Corporation, First
Nationwide Holdings, Inc.,
First Nationwide Bank,
Jones Apparel Group, Inc.,
Mafco Worldwide
Corporation, National
Health Laboratories
Holdings, Inc., NWCG
Holdings Corporation, New
World Communications Group
Incorporated, New World
Television Incorporated,
Revlon Consumer Products
Corporation, and Revlon
Worldwide Corporation.
Robert B. Hodes (1)(2).. 70 Of Counsel to Willkie Farr & 1959
(Class II) Gallagher, law firm, New
York, N.Y.
Director of
Aerointernational, Inc.,
W.R. Berkley Corporation,
Crystal Oil Company,
Globalstar
Telecommunications Limited,
R.V.I. Guaranty, Ltd., LCH
Investments N.V., Mueller
Industries, Inc. and
Restructured Capital
Holdings, Ltd.
Gershon Kekst (1)....... 60 President of Kekst and 1972
(Class I) Company Incorporated,
corporate and financial
communications consultants,
New York, N.Y.
Charles Lazarus......... 71 Chairman of Toys "R" Us, 1994
(Class II) Inc.
Director of Automatic Data
Processing, Inc.
Malvin A. Ruderman...... 68 Professor of Physics, 1975
(Class III) Columbia University, New
York, N.Y.
E. Donald Shapiro....... 63 The Joseph Solomon 1973
(Class III) Distinguished Professor of
Law since 1983 and
Dean/Professor of Law
(1973-1983), New York Law
School
Director of Bank Leumi Trust
Co., Eyecare Products PLC,
Vasomedical, Inc., Kranzco
Realty Trust, MacroChem
Corporation and Premier
Laser Systems
Vice Admiral Allen M. 87 Independent Consultant 1973
Shinn, U.S.N. (Ret.).... Director Emeritus of
(Class II) Pennzoil Company
I-3
[Download Table]
PRINCIPAL OCCUPATION AND SERVED AS DIRECTOR
NAME AGE DIRECTORSHIPS CONTINUOUSLY SINCE
---- --- ------------------------ ------------------
Arthur L. Simon......... 63 Independent Consultant 1995
(Class I) Partner, Coopers & Lybrand
L.L.P., Certified Public
Accountants, from 1968 to
1994
Thomas J. Stanton, Jr. 67 Chairman Emeritus of 1988
(2)..................... National Westminster
(Class III) Bancorp NJ
Director of Reliance Group
Holdings, Inc., and
Reliance Insurance Co.
Daniel Yankelovich (2).. 70 Chairman of DYG, Inc., 1982
(Class I) market, consumer and
opinion research, New
York, N.Y.
Director of U.S. West Inc.,
Meredith Corporations and
Arkla, Inc.
--------
(1) Member of Executive Committee.
(2) Member of Pension Advisory Committee.
I-4
SECURITIES OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
The following table presents the number of shares of Common Stock
beneficially owned by the Directors, the named executive officers in the
Summary Compensation Table ("NEOs"), and all Directors and officers as a group
on December 31, 1995. Individuals have sole voting and investment power over
the stock unless otherwise indicated in the footnotes.
[Download Table]
AMOUNT AND NATURE OF PERCENT
NAME OF INDIVIDUAL BENEFICIAL OWNERSHIP(1)(2) OF CLASS
------------------ -------------------------- --------
Bernard L. Schwartz....................... 3,574,402(3) 2.0%
Michael P. DeBlasio....................... 180,926(4) *
Howard Gittis............................. 6,000 *
Robert B. Hodes........................... 28,800(5) *
Gershon Kekst............................. 26,400 *
Frank C. Lanza............................ 1,231,618(6) *
Robert V. LaPenta......................... 206,350(7) *
Charles Lazarus........................... 14,000(8) *
Malvin A. Ruderman........................ 32,000(9) *
E. Donald Shapiro......................... 28,000(10) *
Allen M. Shinn............................ 22,341 *
Arthur L. Simon........................... 2,000 *
Thomas J. Stanton, Jr..................... 24,000 *
Michael B. Targoff........................ 93,264(11) *
Daniel Yankelovich........................ 33,000 *
All Directors and Executive Officers as a
Group (27 persons)....................... 5,864,853(12) 3.3%
--------
* Represents holdings of less than one percent.
(1) Includes shares which, as of December 31, 1995, may be acquired within
sixty days pursuant to the exercise of options (which shares are treated
as outstanding for the purposes of determining beneficial ownership and
computing the percentage set forth); shares held by trusts of which
Directors and their wives are trustees; shares held by a trust in which
an officer and Director is a trustee; and shares held for the benefit of
officers as of March 31, 1995 in the Loral Master Savings Plan (the
"Savings Plan").
(2) Except as noted, all shares are owned directly with sole investment and
voting power. All Directors other than Messrs. Schwartz, Lanza, Gittis,
Lazarus, Shinn and Simon have the right to exercise Loral stock options
for 20,000 shares at $8.86 per share; such exercisable shares are
included in the table.
(3) Includes 160,000 shares held by Mr. Schwartz's wife, 2,400,000 shares
exercisable under Company Stock Option Plans, and 12,224 shares in the
Savings Plan.
(4) Includes 63,428 shares exercisable under Company Stock Option Plans,
7,310 shares in the Savings Plan, and 3,936 shares restricted under the
Company's Restricted Stock Purchase Plan.
(5) Includes 800 shares as to which Mr. Hodes disclaims beneficial ownership
held by Mr. Hodes' minor child.
(6) Includes 525,700 shares exercisable under Company Stock Option Plans,
4,254 shares in the Savings Plan, and 9,362 shares restricted under the
Company's Restricted Stock Purchase Plan.
(7) Includes 6,222 shares in the Savings Plan, and 3,936 shares restricted
under the Company's Restricted Stock Purchase Plan.
(8) Includes 4,000 shares held by Mr. Lazarus' wife.
(9) Includes 12,000 shares owned jointly with Mr. Ruderman's wife.
(10) Includes 8,000 shares as to which Mr. Shapiro disclaims beneficial
ownership held by Mr. Shapiro's wife.
(11) Includes 44 shares in the Savings Plan, and 3,936 shares restricted under
the Company's Restricted Stock Purchase Plan.
(12) Includes 3,242,728 shares exercisable under Company Stock Option Plans,
52,614 shares in the Savings Plan, and 28,550 shares restricted under the
Company's Restricted Stock Purchase Plan.
I-5
FISCAL YEAR 1995
SUMMARY COMPENSATION TABLE
[Enlarge/Download Table]
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------- --------------------------------------
RESTRICTED SECURITIES ALL OTHER
NAME AND STOCK UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS AWARD(a)(b) STOCK OPTIONS(d) SATION(d)
------------------ ---- -------- ---------- ----------- ---------------- ---------
Bernard L. Schwartz..... 1995 $908,300 $5,335,891 -- -- $88,252
Chairman of the Board of
Directors 1994 $884,000 $3,604,237 -- 1,200,000 $97,399
and Chief Executive
Officer 1993 $859,000 $3,525,669 -- 800,000 $86,266
Frank C. Lanza.......... 1995 $635,964 $2,611,215 -- -- $31,965
President and Chief
Operating Officer 1994 $618,925 $1,751,404 -- 300,000 $25,000
1993 $600,924 $1,200,000 $1,623,019 -- $25,000
Michael P. DeBlasio..... 1995 $427,527 $ 527,106 -- -- $ 8,813
Senior Vice President--
Finance 1994 $402,973 $ 355,584 -- 140,000 $ 5,385
1993 $402,973 $ 330,556 $ 682,500 -- $ 5,284
Robert V. LaPenta....... 1995 $357,753 $ 526,226 -- -- $ 7,246
Senior Vice President
and Controller 1994 $337,723 $ 311,069 -- 140,000 $ 8,620
1993 $337,723 $ 290,917 $ 682,500 -- $ 7,881
Michael B. Targoff...... 1995 $347,715 $ 526,712 -- -- $ 9,117
Senior Vice President
and Secretary 1994 $327,684 $ 311,495 -- 140,000 $10,758
1993 $327,684 $ 291,301 $ 682,500 -- $ 9,692
--------
(a) Value of shares awarded under the Restricted Stock Purchase Plan in 1993.
Shares awarded under the plan vest and become freely transferable in
accordance with a formula based upon Loral earnings. The total number of
shares vesting under the plan each year is equal to 3% of the Company's
pre-tax profit divided by the grant value (currently $52.50 per share) of
restricted shares outstanding. Any shares not earned at the earlier of
completion of the seventh year or termination of employment, will be
forfeited. Dividends are paid on the restricted shares awarded. As of
March 31, 1995, the number, as adjusted to reflect the two-for-one stock
split distributed on September 29, 1995, and value of restricted stock
holdings, respectively, were 9,362 shares and $198,357 for Mr. Lanza,
3,936 shares and $83,394 for each of Messrs. DeBlasio, LaPenta, and
Targoff.
(b) Under the 1994 Incentive Stock Purchase Plan, the Compensation Committee
may permit participants to defer up to 100% of their annual bonus into a
Restricted Stock Purchase Account (the "Restricted Account"). The
Restricted Account will be used to purchase Loral Common Stock equal to
150% of the deferred bonus, subject to limits the Committee may establish
from time to time. The shares in the Restricted Account earn dividends and
generally vest 25% per year commencing upon the second anniversary of the
grant date. The Committee may establish specified performance conditions
that, if attained, will result in accelerated vesting. All non-vested
shares are forfeited upon termination of employment and the remaining
balance of the Restricted Account equal to the lesser of the original cost
or the market value of the shares is returned to the participant. No
shares have been issued under this plan.
(c) Stock options, which have been adjusted to reflect a two-for-one stock
split distributed on October 7, 1993 and a two-for-one stock split
distributed on September 29, 1995, generally vest over a four and one-half
to six year period.
(d) Includes annual Board of Directors fee in 1995, 1994 and 1993 of $25,000
for Messrs. Schwartz and Lanza, company matching contributions of $3,100
in 1995, $3,598 in 1994 and $3,722 in 1993 to the Savings Plan for Messrs.
DeBlasio, LaPenta and Targoff and the value of supplemental life insurance
programs attributable to 1995, 1994 and 1993 in the amounts of $63,252,
$72,399 and $61,266 for Mr. Schwartz, $5,713, $1,787 and $1,562 for Mr.
DeBlasio, $4,146, $5,022 and $4,159 for Mr. LaPenta, and $6,017, $7,160
and $5,970 for Mr. Targoff, respectively, and $6,965 attributable to 1995
for Mr. Lanza.
I-6
FISCAL YEAR 1995
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
YEAR-END OPTION VALUES
[Enlarge/Download Table]
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NUMBER OF AT YEAR-END(a) AT YEAR-END(b)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE(a) REALIZED(b) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
Bernard L. Schwartz..... -- -- 2,000,000 -- $23,500,000 --
Frank C. Lanza.......... 112,000 $1,802,500 428,560 391,440 $ 6,672,850 $5,511,525
Michael P. DeBlasio..... -- -- 56,856 190,288 $ 937,785 $2,694,305
Robert V. LaPenta....... 27,996 $ 398,745 8,000 207,448 $ 130,000 $2,986,025
Michael B. Targoff...... -- -- 49,428 218,288 $ 845,205 $3,191,305
--------
(a) As adjusted to reflect the two-for-one stock split distributed on
September 29, 1995.
(b) Market value of underlying securities at exercise date or year-end, as the
case may be, minus the exercise price.
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
The Company has an employment agreement with Mr. Schwartz, which expires on
March 31, 2000. Pursuant to the agreement, Mr. Schwartz's annual base salary
was $908,300 for fiscal 1995, to be increased annually by the percentage
change in a specified consumer price index. Under the agreement, Mr. Schwartz
is entitled to annual incentive compensation equal to 3% of the increase over
9 1/4% in the Company's shareholders' equity as adjusted for stock issuances,
other non-operating charges or credits and before dividends. In accordance
with the incentive bonus provisions, Mr. Schwartz received fiscal 1995
incentive compensation of $5,214,426. The agreement also includes a cap on
maximum annual incentive compensation of $9 million, as adjusted for
inflation.
Pursuant to the agreement, if Mr. Schwartz is removed as Chairman of the
Board of Directors or as Chief Executive Officer other than for cause, or if
his duties, authorities or responsibilities are diminished, or if there is a
change of control (as defined to encompass the Company becoming a subsidiary
of another company, the acquisition of 35% or more of the voting securities of
the Company by a particular stockholder or group, or a change in 35% of the
Company's directors at the insistence of the shareholder group), Mr. Schwartz
may elect to terminate the contract. In any such event, or upon his death or
disability, Mr. Schwartz will be entitled to receive a lump sum payment
discounted at 9% per annum, in an amount equal to his base salary as adjusted
for defined consumer price index changes for the remainder of the term, an
amount of incentive compensation equal to the highest received by Mr. Schwartz
in any of the prior three years, times the number of years (including partial
fiscal years) remaining during the term, and an amount calculated to
approximate the annual compensation element reflected in the difference
between fair market value and exercise price of stock options granted to Mr.
Schwartz. All such sums are further increased to offset any tax due by Mr.
Schwartz under the excise tax and related provisions of Section 4999 of the
Internal Revenue Code but subject to a cap equal to 200% of any such tax.
The Company also has an employment agreement with Mr. Lanza for a five year
term expiring March 31, 1997. Pursuant to the agreement, Mr. Lanza's annual
base salary was $634,500 for fiscal 1995, to be increased annually by the
percentage change in a specified consumer price index. Under the agreement,
Mr. Lanza is entitled to annual incentive compensation under the growth in
shareholders' equity formula applicable under Mr. Schwartz's employment
agreement, but at 1 1/2% of the increase over the 9 1/4% threshold. As a
result, Mr. Lanza received fiscal 1995 incentive compensation of $2,607,213.
If Mr. Lanza becomes disabled, he will receive 50% of his salary for the
remainder of the term.
The Company has established Supplemental Life Insurance Programs for certain
key employees including the executives listed in the Summary Compensation
Table. For Messrs. Schwartz, Lanza, DeBlasio, LaPenta and
I-7
Targoff, the Plans are funded with "Split-Dollar" insurance policies in the
face amounts of $20,500,000, $1,000,000, $1,060,000, $1,200,000 and $1,450,000
respectively. In the event of death, the Company will be entitled to receive
an amount not less than the Company's cumulative contributions. If any of such
officers terminates his employment prior to the time that the Company's
contributions equal the cash value of the insurance policy, he will be
responsible for repayment of the remainder of the Company's contribution to
the extent cash becomes available in the policy. Such officers contribute to
the payment for this program.
PENSION PLANS
The individuals named in the Summary Compensation Table participate in a
pension plan that generally provides an annual benefit for each year of
membership for the first 14 years of Loral service, of 1.2% of such
remuneration up to the Social Security Wage Base and 1.45% of such
remuneration in excess of that Base, and for 15 or more years of Loral
service, 1.5% of such remuneration up to the Social Security Wage Base and
1.75% of such remuneration in excess of that Base, all subject to certain
vesting and other requirements. These individuals also participate in a
supplemental plan which generally makes up for certain reductions in such
benefits caused by Internal Revenue Code limitations. Remuneration covered by
the plans primarily includes salary and bonus.
Estimated annual benefits upon retirement for Messrs. Schwartz, Lanza,
DeBlasio, LaPenta and Targoff under the pension and supplemental plans are
$1,117,000, $486,000, $249,000, $344,000 and $295,000, respectively. The
retirement benefits have been computed assuming that (i) employment will be
continued until normal retirement, or until the expiration of current
employment agreements, if later; and (ii) current levels of creditable
compensation and the Social Security Wage Base will continue without increases
or adjustments throughout the remainder of the computation period.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Schwartz is Chairman, Chief Executive Officer, 27% owner, and
controlling shareholder of K&F Industries, Inc. ("K&F"), which acquired the
Company's Aircraft Braking and Engineered Fabrics businesses in April 1989.
Certain other individuals named in the Summary Compensation Table are
directors of K&F's operating subsidiaries. Mr. Schwartz and the other
individuals named in the Summary Compensation Table receive compensation from
K&F for rendering advisory services to K&F. Such compensation is not included
in the Summary Compensation Table but is considered by the Compensation
Committee regarding compensation from Loral. In September 1994, the Company
exchanged its $30 million 14.75% pay-in-kind subordinated convertible K&F
debenture due in 2004 for $11,514,000 in cash, net of expenses, and a 22.5%
voting equity interest in K&F. Pursuant to agreements between the Company and
K&F, the parties provide services to each other and share certain expenses
relating to a production program, real property occupancy, benefits
administration, treasury, accounting and legal services. The related charges
agreed upon by the parties were established to reimburse each party for the
actual cost incurred without profit or fee. The Company believes that the
arrangements with K&F are as favorable to the Company as could have been
obtained from unaffiliated parties. The Company's billings to and from K&F in
fiscal 1995 were $3,014,000 and $15,000, respectively. The Company's sales to
K&F in fiscal 1995 were $4,181,000.
Mr. Robert B. Hodes, a Director and a member of the Executive, Audit,
Pension Advisory, and Compensation Committees, is of counsel to the law firm
of Willkie Farr & Gallagher, which is general counsel to the Company.
For the fiscal year ended March 31, 1995, the Company paid fees and
disbursements in the amount of $182,000 for corporate communications
consultations to Kekst and Company Incorporated, of which company Mr. Gershon
Kekst, a Director and member of the Executive, Nominating, and Compensation
Committees, is President and the principal stockholder. Kekst and Company
Incorporated continues to render such services to the Company.
I-8
INFORMATION WITH RESPECT TO PARENT
PARENT DESIGNEES
Set forth below are the names, ages, present principal occupations, five year
employment history and other directorships held in public companies of the
Parent Designees.
MARCUS C. BENNETT, 60, Director since 1995; Senior Vice President and Chief
Financial Officer of Parent since March 16, 1995; Vice President and Chief
Financial Officer of Martin Marietta Corporation since 1988; served as Vice
President of Finance of Martin Marietta Corporation from 1984 to 1988; serves
as Chairman of Martin Marietta Materials, Inc., a majority owned subsidiary of
Martin Marietta Corporation, and Orlando Central Park, Inc. and Chesapeake
Park, Inc., wholly owned subsidiaries of Martin Marietta Corporation; director
of Carpenter Technology, Inc.; member of the Financial Executives Institute,
MAPI Finance Council and The Economic Club of Washington; serves as a director
of the Private Sector Council and as a member of its CFO Task Force.
VANCE D. COFFMAN, (51), Director since 1996; Executive Vice President and
Chief Operating Officer since 1996; President and Chief Operating Officer,
Space and Strategic Missiles Sector from March 1995 to December 1995;
previously served in Lockheed Corporation as Executive Vice President, from
1992-1995; and President of Lockheed Space Systems Division from 1988-1992.
JOHN F. EGAN, 60, Vice President, Corporate Development, of Lockheed Martin
Corporation since March 1995, after having served in a similar position at
Lockheed Corporation and served as Vice President for planning and technology
for Lockheed Electronics Group from 1986 to 1993 following the acquisition of
Sanders Associates, Inc., by Lockheed Corporation. Joined Sanders Associates,
Inc. in 1973 as Director of Business Development for the Federal Systems Group;
became General Manager of two product divisions in 1975 and became Vice
President, Corporate Development in 1978. Dr. Egan is a member of the Chief of
Naval Operations Executive Panel and the Naval Studies Board, National Research
Council.
JOHN E. MONTAGUE, 41, Vice President, Financial Strategies, for Lockheed
Martin Corporation since March 1995, after having served as Vice President of
Corporate Development and Investor Relations for Martin Marietta Corporation
from 1991 to 1995; served as Director of Corporate Development prior to being
promoted to Vice President in 1991; served as Manager of Strategic Planning for
Martin Marietta Information & Communications Systems in Denver from 1984 to
1985; and joined Martin Marietta Corporation in 1977 as a member of the
Engineering staff of Martin Marietta Denver Aerospace. Mr. Montague is a member
of the Board of Directors of Martin Marietta Corporation and of Rational
Software Corporation.
FRANK H. MENAKER, JR., 55, Vice President and General Counsel for Lockheed
Martin Corporation since March 1995, after having served in the same capacity
for Martin Marietta Corporation since 1981. He joined Martin Marietta
Corporation in 1970 as an Assistant Division Counsel for aerospace operations
in Baltimore; became a Corporate Assistant General Counsel in 1973 and in 1977
was named General Counsel of that corporation's aerospace operations. Mr.
Menaker is Chair of the ABA Public Contract Law Section, a member of the Board
of Directors of the National Chamber Litigation Center, and a member of the
Steering Committee for the Lawyer's Committee for Human Rights.
LILLIAN M. TRIPPETT, 42, Corporate Secretary and Associate General Counsel of
Lockheed Martin Corporation since March 1995, after having served as Corporate
Secretary and Assistant General Counsel of Martin Marietta Corporation since
April 1993. Ms. Trippett joined Martin Marietta Corporation in July 1989 as a
Director of Washington Operations. Prior to joining Martin Marietta
Corporation, she served for fourteen years on the staff of the Committee on
Science, Space, and Technology in the House of Representatives. From 1983-1989
she served as Counsel to the Subcommittee on Space, Science and Applications,
specializing in space commercialization. Ms. Trippett is a member of the
International Institute of Space Law of the International Astronautical
Federation, American Bar Association and the American Society of Corporate
Secretaries.
ROBERT B. CORLETT, 56, Vice President, Human Resources, of Lockheed Martin
Corporation since March 1995, after having served in the same capacity for
Lockheed Corporation since 1991; served as Vice President, Human Resources, for
the former Lockheed Aeronautical Systems, Company in 1987, after leaving the
Corporation in 1980 and rejoining the Corporation in 1987; served as Director
of Industrial Relations in 1979 and in 1971 transferred to the Lockheed
California Company, where he held a variety of Human Resources
I-9
positions leading to his appointment as Manager of Union Relations in 1975.
Mr. Corlett serves on the Board of Directors and Executive Committee of the
Labor Policy Association, and is a member of the Personnel Roundtable, the
Aerospace Human Resources Council, and the Human Resource Roundtable of the
University of California at Los Angeles.
WALTER E. SKOWRONSKI, 47, Vice President and Treasurer of Lockheed Martin
Corporation since March 1995, after having served in the same capacity for
Lockheed Corporation since 1992, and as its staff Vice President--Investor
Relations since 1990. Prior to joining Lockheed Corporation in 1990, Mr.
Skowronski was Assistant Treasurer of Boston Edison Company and from 1987 to
1990 was an instructor of Corporate Finance and Investor Relations at
Northeastern University's Graduate School of Business Administration. Mr.
Skowronski is a former director of the National Investor Relations Institute
and served as its Chairman and Chief Executive Officer.
SECURITY OWNERSHIP OF NOMINATED DIRECTORS
No Parent Designee directly or beneficially owns shares of Common Stock of
the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no transactions or series of transactions, since April 1,
1995, to which the Company or any of its subsidiaries was or is to be a party
in which the amount involved exceeds $60,000 and in which any of the Parent
Designees had or will have a direct or indirect material interest, nor has any
Parent Designee been indebted to the Company or its subsidiaries in an amount
in excess of $60,000 or been involved in a material business relationship with
the Company or its subsidiaries.
I-10
SCHEDULE II
CERTAIN TRANSACTIONS IN SHARES OF COMMON STOCK OF
LORAL CORPORATION EFFECTED DURING THE PAST 60 DAYS
There have been no transactions in the Shares during the past 60 days by the
Company or, to the best of the Company's knowledge, by any executive officer,
director, affiliate or subsidiary of the Company, except that the following
stock options have been exercised by the Company's executive officers:
[Download Table]
PARTY DATE NUMBER OF PRICE
EFFECTING OF SHARES PER
TRANSACTION TRANSACTION PURCHASED SHARE
----------- ----------- --------- --------
Michael Targoff.............................. 12/19/1995 16,000 $4.43750
Michael Targoff.............................. 12/19/1995 13,976 5.00000
Michael Targoff.............................. 12/19/1995 12,000 2.25000
Michael Targoff.............................. 12/19/1995 2,300 5.00000
Michael Targoff.............................. 12/19/1995 28,000 7.90625
Eric Zahler.................................. 12/26/1995 8,000 3.00000
Eric Zahler.................................. 12/26/1995 10,000 8.00000
Eric Zahler.................................. 12/26/1995 2,400 7.90625
Nicholas Moren............................... 12/28/1995 6,400 7.90625
Nicholas Moren............................... 12/28/1995 7,200 4.28125
Nicholas Moren............................... 12/28/1995 12,000 9.28125
Robert LaPenta............................... 12/28/1995 8,000 4.43750
Robert LaPenta............................... 12/28/1995 8,568 4.25000
Robert LaPenta............................... 12/28/1995 11,428 5.00000
Robert LaPenta............................... 12/28/1995 4,000 5.00000
Robert LaPenta............................... 12/28/1995 4,000 5.00000
Robert LaPenta............................... 12/28/1995 28,000 7.90625
SCHEDULE III
[Letterhead of Lazard Freres & Co. LLC]
January 7, 1996
The Board of Directors
Loral Corporation
600 Third Avenue
New York, NY 10016
Dear Members of the Board:
We understand that Lockheed Martin Corporation (the "Company"), LAC
Acquisition Corporation ("LM Sub") and Loral Corporation ("Loral") have
entered into an Agreement and Plan of Merger, dated as of January 7, 1996 (the
"Agreement"), pursuant to which the Company will commence a tender offer (the
"Offer") to purchase all the issued and outstanding shares of Common Stock of
Loral ("Loral Common Stock") and associated preferred stock purchase rights
for $38.00 per share in cash. Pursuant to the Agreement, following
consummation of the Offer, LM Sub will merge (the "Merger") with and into
Loral, and each remaining outstanding share of Loral Common Stock, with the
exception of holders of dissenting shares, will be converted into the right to
receive $38.00 in cash, all as more fully provided in the Agreement. In
accordance with the Agreement and the Restructuring, Financing and
Distribution Agreement (the "Distribution Agreement") referred to therein,
immediately prior to the consummation of the Offer, Loral will declare a
distribution (the "Distribution") to holders of shares of Loral Common Stock
of shares in a newly formed corporation ("New Loral") which will hold certain
assets, including Loral's investments in Globalstar, L.P., Space
Systems/Loral, Inc. ("SS/L"), and K&F Industries, Inc. and $712 million in
cash to be provided to the Company pursuant to the Agreement, and be subject
to certain liabilities. Such consideration to be received by the holders of
shares of Loral Common Stock in the Offer, the Merger and the Distribution is
hereinafter defined as the "Consideration". Also pursuant to the Agreement,
the Company will retain a preferred stock interest in New Loral convertible
into 20% of the common stock of New Loral, and will assume certain guarantees
of Globalstar, L.P. bank debt. The Merger Agreement and the Distribution
Agreement assume, with respect to the distributions to holders of Loral Common
Stock, that all options, restricted shares and other securities convertible
into or exchangeable for shares of Loral Common Stock are exercised or
otherwise participate in the distributions.
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of shares of Loral Common Stock of the aggregate
Consideration. In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of the proposed form of the
Agreement;
(ii) Reviewed the financial terms and conditions of the proposed form of
the Distribution Agreement;
(iii) Analyzed certain publicly available historical business and financial
information relating to Loral and Globalstar Telecommunications
Limited (together with Loral, a general partner of Globalstar, L.P.)
and certain non-public financial information regarding Loral and the
assets that will comprise New Loral;
(iv) Reviewed certain projected financial information for Loral and New
Loral furnished by Loral and New Loral;
(v) Held discussions with members of the senior management of Loral and New
Loral with respect to the businesses and prospects of Loral and New
Loral;
(vi) Considered certain terms of the agreements which govern the interests
in SS/L and Globalstar, L.P., including certain put rights with
respect to SS/L and certain restrictions on transfers relating to
Globalstar, L.P.;
(vii) Reviewed public information with respect to certain other companies
in lines of businesses we believe to be generally comparable to the
businesses of Loral and New Loral;
(viii) Reviewed the terms of selected transactions in industries generally
comparable to the businesses of Loral and New Loral;
(ix) Reviewed the historical stock prices and trading volumes of Loral
Common Stock and Globalstar Telecommunications Limited common stock;
(x) Reviewed the presentation by Lehman Brothers Inc. to Loral's Board of
Directors dated January 7, 1996 concerning New Loral; and
(xi) Conducted such other financial studies, analyses and investigations as
we deemed appropriate.
We have not had the opportunity to review the final documents that may be
used in connection with the Offer, the Merger or the Distribution, as such
materials have not yet been prepared or, in certain cases, finalized. Neither
have we had the opportunity to review the financial statements, pro forma
financial statements or registration statement for New Loral, which have also
not yet been prepared.
We have relied upon the accuracy and completeness of the foregoing
information, and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of Loral or New Loral. With respect to
financial forecasts, we have assumed that they have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of
management of each of Loral and New Loral as to the future financial
performance of Loral and New Loral. We assume no responsibility for and
express no view as to such forecasts or the assumptions on which they are
based.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. Loral has not authorized us to solicit third party
indications of interest in acquiring Loral, New Loral or portions thereof.
In rendering our opinion, we have assumed that the transactions described
above will be consummated on the terms described in the forms of the
agreements reviewed by us, without any waiver of any material terms or
conditions by Loral, and that obtaining the necessary regulatory approvals for
the transactions will not have an adverse effect on New Loral.
Lazard Freres & Co. LLC is acting as financial advisor to Loral in
connection with the transactions and will receive a fee for our services that
is contingent in part upon the consummation of the transactions. We have in
the past provided investment banking services to Loral, for which we have been
paid customary fees.
Our engagement and the opinion expressed herein are solely for the benefit
of Loral's Board of Directors and the holders of Loral Common Stock. It is
understood that this letter may not be disclosed or otherwise referred to
without our prior consent, except as may otherwise be required by law or by a
court of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the
aggregate Consideration is fair to the holders of Loral Common Stock from a
financial point of view.
Very truly yours, LAZARD FRERES &
CO. LLC
/s/ Felix G. Rohatyn
By___________________________________
Managing Director
2
EXHIBIT INDEX
[Download Table]
PAGE
EXHIBIT NUMBER DOCUMENT NO.
-------------- -------- ----
Exhibit 99.1. Pages 10 through 13 of Loral Corporation's Proxy
Statement dated June 26, 1995 relating to its 1995
Annual Meeting of Stockholders.
Exhibit 99.2. Loral Supplemental Executive Retirement Plan.
Exhibit 99.3. Loral Corporation Supplemental Bonus Program.
Exhibit 99.4. Loral Corporation Supplemental Severance Program.
Exhibit 99.5. Form of Employment Protection Agreement between Loral
Corporation and executive officers of Loral.
Exhibit 99.6. Loral Corporation Employment Protection Plan.
Exhibit 99.7. Agreement and Plan of Merger dated as of January 7, 1996
among Lockheed Martin Corporation, LAC Acquisition
Corporation and Loral Corporation.
Exhibit 99.8. Restructuring, Financing and Distribution Agreement
dated as of January 7, 1996 among Loral Corporation,
certain of its subsidiaries and Lockheed Martin
Corporation.
Exhibit 99.9. Form of Tax Sharing Agreement by and among Loral
Corporation, Loral Space & Communications Ltd., Lockheed
Martin Corporation and LAC Acquisition Corporation.
Exhibit 99.10. Rights Agreement dated as of January 10, 1996 between
Loral Corporation and The Bank of New York, as Rights
Agent.
Exhibit 99.11. Amendment No. 1 to Rights Agreement dated as of January
10, 1996 between Loral Corporation and The Bank of New
York, as Rights Agent.
Exhibit 99.12. Form of Stockholders Agreement between Loral Corporation
and Loral Space & Communications Ltd.
Exhibit 99.13. Confidentiality and Standstill Agreement dated December
4, 1995 between Loral Corporation and Lockheed Martin
Corporation.
Exhibit 99.14. Opinion of Lazard Freres & Co. LLC dated January 7,
1996.*
Exhibit 99.15. Form of Letter to Shareholders of Loral Corporation
dated January 12, 1996.*
Exhibit 99.16. Press Release issued by Loral Corporation and Lockheed
Martin Corporation on January 8, 1996.
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* Included in copies mailed to shareholders.
Dates Referenced Herein and Documents Incorporated by Reference
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